FEMA adjudication orders upheld as show cause notices properly served under Rule 14(b) and 14(c) at business address

Madras HC dismissed writ petitions challenging FEMA adjudication orders, ruling that show cause notices were properly served under Rule 14(b) and 14(c) at the last known business address. The court held that non-availability of noticees at the address during service did not invalidate the notices or violate natural justice principles. Regarding liability of nominee directors under Section 42(1), the court declined to decide on merits, stating such issues should be adjudicated through the statutory appellate hierarchy. The court emphasized that when specific appellate remedies exist under FEMA Sections 19 and 35, writ jurisdiction should not bypass this statutory framework. Petitioners were directed to pursue appeals before the Appellate Tribunal.

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Issues Involved:
1. Service of Show Cause Notice.
2. Violation of Principles of Natural Justice.
3. Applicability of Section 42 of FEMA Act.
4. Availability of Alternative Remedy.

Summary:

Service of Show Cause Notice:
The petitioners contended that the show cause notice under Rule 4(1) was not served properly. The court examined Rule 14 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, which outlines the methods of serving notices. The respondents demonstrated that notices were served at the last known address of the petitioners, fulfilling the requirements of Rule 14(b) and 14(c). Therefore, the court concluded that the notices were served correctly.

Violation of Principles of Natural Justice:
The petitioners argued that the adjudication process violated the principles of natural justice. The court noted that the show cause notice was served, and the adjudicating authority issued notices of hearing as required. The court referred to the Division Bench of the Karnataka High Court and the Supreme Court's decisions, which confirmed that the issues could be raised before the Appellate Tribunal. The court found no violation of natural justice in the adjudication process.

Applicability of Section 42 of FEMA Act:
The petitioners claimed that they were non-executive directors and not responsible for the company's conduct during the alleged contraventions. The court stated that whether the petitioners were responsible under Section 42(1) of the FEMA Act is a matter for adjudication. The court emphasized that these issues should be raised before the Appellate Tribunal, which is the appropriate forum for such determinations.

Availability of Alternative Remedy:
The court highlighted the availability of an alternative remedy under Section 19 of the FEMA Act, which allows appeals to the Appellate Tribunal. The court referred to the Karnataka High Court and Supreme Court's judgments, which directed the petitioners to approach the Appellate Tribunal. The court reiterated that the existence of an alternative remedy does not divest the High Court of its jurisdiction but emphasized that the petitioners should first exhaust the statutory remedy.

Conclusion:
The court dismissed the writ petitions, directing the petitioners to approach the Appellate Tribunal within three weeks. The Tribunal was instructed to entertain the appeals regardless of the limitation period and consider any applications for waiver of pre-deposit on merits. The court followed the Supreme Court's order granting similar relief to co-noticees.

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