FEMA adjudication proceedings can continue despite Competent Authority's decision not to seize assets under Section 37-A

The HC dismissed petitions challenging FEMA proceedings against parties who allegedly held shares in a Singapore company. Petitioners argued that the Competent Authority's order not to seize their assets under Section 37-A precluded adjudication proceedings. The court held that FEMA creates independent authorities for seizure and adjudication, and the Competent Authority's decision cannot interfere with the Adjudicating Authority's jurisdiction. The court found no prejudice from the corrigendum altering provisions from Section 13(2) to 13(1A), as it merely clarified potential consequences without changing the underlying accusation. The petitions were deemed non-entertainable, allowing the adjudication proceedings to continue.

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Issues Involved:
1. Alleged contravention of Section 4 of FEMA by petitioners.
2. Challenge to the order of the Competent Authority under Section 37A of FEMA.
3. Validity of the show-cause notice and corrigendum issued under Section 16 of FEMA.

Summary:

1. Alleged Contravention of Section 4 of FEMA:
The petitioners, a company and its directors, allegedly subscribed to and transferred shares of a Singapore-based company, violating Section 4 of FEMA. The Enforcement Directorate initiated proceedings under Section 16, issuing a show-cause notice for violations of Sections 3, 4, and 8 of FEMA.

2. Challenge to the Order of the Competent Authority under Section 37A:
The Competent Authority, after an inquiry under Section 37A(3), concluded there was no proof of payment for shares by the petitioners. This order was challenged by the Enforcement Directorate before the Appellate Authority (ATFE). Petitioners argued that the Competent Authority's finding negated the basis for further proceedings under Section 16.

3. Validity of the Show-Cause Notice and Corrigendum:
The petitioners contended that the Adjudicating Authority erred in issuing a show-cause notice and later a corrigendum altering the applicable section from 13(2) to 13(1A) of FEMA. They argued this indicated non-application of mind and was prejudicial. The court, however, found that the corrigendum did not introduce new allegations but merely clarified potential consequences under Section 13(1A) if found guilty, thus not prejudicing the petitioners.

Decision:
The court dismissed the writ petitions, stating that the Competent Authority's findings under Section 37A do not preclude the Adjudicating Authority from proceeding under Section 16. The court emphasized that FEMA is a self-contained code, and the petitioners could raise their defenses during the ongoing adjudication process. The petitions were dismissed, and the connected writ miscellaneous petitions were closed.

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