2023 (2) TMI 16 - HC - FEMA

Court confirms penalties for FERA violations on Indian Overseas Bank; parties directed to seek remedies under FEMA

Indian Overseas Bank Represented by its Deputy General Manager Treasury (Foreign) Department Central Office, Mrs. Banumathy B.,G. Swaminathan Versus Special Director of Enforcement, Indian Overseas Bank Rep. by its Chairman & Managing Director, Chennai

The Court upheld the adjudication order by the Special Director of Enforcement imposing penalties on Indian Overseas Bank and its employees for FERA ... FERA Proceedings - jurisdiction of Special Director of Enforcement - Transaction against exchange control regulations - penalties payable by the petitioners - proceedings were initiated for violation of the provisions of FERA and when the FERA was in force - alternative remedy - Reserve Bank of India (ROB) provided an information to the Enforcement Directorate to the effect that the bank for foreign trade of the USSR had transferred non-convertible rupee funds into convertible Vostro accounts of Bank of Ireland, UK with the IOB, Madras and in turn, the IOB had transferred about rupees four crores from this account to London - HELD THAT:- In the instant case, on going through the materials placed before us and after carefully considering the order passed by the Special Director of Enforcement, we find that we have to necessarily deal with a lot of documents and get into disputed questions of fact. To avoid such a scenario, the enactment itself provides for further remedies under Section 19 of FEMA before the Appellate Tribunal and thereafter, under Section 35 of the Act, by way of filing a further Appeal before the High Court against the order passed by the Appellate Tribunal. These remedies have been provided to enable an aggrieved person to contest the order passed by the Adjudicating Authority, both on facts and on law. These appellate remedies cannot be bypassed and the doors of the High Court cannot be knocked straight away under Article 226 of the Constitution of India. In the present case, there is no lack of jurisdiction for the Special Director of Enforcement to pass the impugned order, there is no violation of principles of natural justice and this Court does not find any special circumstances to disregard the alternative remedy and to decide the dispute in this Writ Petition. Apart from these reasons, we have already held that the case requires determination of disputed facts based on documents and it will be fit and proper if this exercise is done before the Appellate Tribunal. We are inclined to relegate the petitioners to the Appellate Tribunal to work out their remedy in accordance with law and it will be left open to the petitioners to raise all the grounds before the Appellate Tribunal. The petitioners are permitted to file appeal against the order passed by the Special Director of Enforcement in proceedings within a period of 45 days from the date of the receipt of copy of this order. When these Writ Petitions were entertained, interim orders were passed and thereby, the operation of the order of the Special Director of Enforcement dated 12.03.2009 was stayed. Consequently, the penalty amount was not recovered from the petitioners during the pendency of the Writ Petitions. We are inclined to extend this interim protection till the appeal is filed before the Appellate Tribunal. Issues:Challenge to adjudication order imposing penalties under FERA, jurisdiction of Special Director of Enforcement, violation of principles of natural justice, availability of alternative remedy under FEMA, consideration of disputed facts, appropriateness of High Court intervention.Analysis:1. Challenge to Adjudication Order:The Writ Petitions challenged the adjudication order by the Special Director of Enforcement imposing penalties on the Indian Overseas Bank (IOB) and its employees for violations under FERA. The penalties were imposed for contraventions related to foreign exchange transactions not in conformity with exchange control regulations.2. Jurisdiction of Special Director of Enforcement:The Court examined the jurisdiction of the Special Director of Enforcement to adjudicate on the contraventions of FERA. It was established that the Special Director had the power and authority to adjudicate for violations of FERA and impose penalties, as per Section 50 of FERA. The order passed by the Special Director was found to be within the scope of his jurisdiction.3. Violation of Principles of Natural Justice:The Court determined that the adjudication order did not suffer from any violation of principles of natural justice. It was noted that the Adjudicating Authority had provided sufficient opportunity to all parties concerned before passing the order, ensuring procedural fairness.4. Availability of Alternative Remedy under FEMA:Considering the transition from FERA to FEMA, the Court highlighted the availability of an alternative remedy under FEMA for challenging the adjudication order. The order passed under FERA was deemed to be under FEMA, and the appellate remedy under FEMA was applicable, directing the aggrieved parties to approach the Appellate Tribunal.5. Consideration of Disputed Facts:The Court deliberated on the issue of dealing with disputed facts in the case. While acknowledging the discretion of the High Court to enter into disputed questions of fact, the Court emphasized the provision of further remedies under Section 19 of FEMA and the appellate process to address factual and legal issues.6. Appropriateness of High Court Intervention:In conclusion, the Court declined to delve into the merits of the case and decided to relegate the petitioners to the Appellate Tribunal to pursue their remedy in accordance with law. The Court emphasized the importance of availing the appellate remedies provided under FEMA and refrained from intervening through a Writ Petition.7. Final Directions:The Writ Petitions were disposed of with directions permitting the filing of appeals against the adjudication order, extension of interim protection, consideration of time spent during the pendency of the petitions, and clarification on the finality of the order based on the appeal filing. The Court emphasized that the order in the Writ Petitions would not impact the decision of the Appellate Tribunal.In essence, the judgment focused on upholding procedural fairness, respecting the jurisdiction of the Special Director of Enforcement, and emphasizing the importance of availing alternative remedies under FEMA rather than seeking immediate intervention through a Writ Petition.