Writ petition dismissed for FEMA Section 10(6) penalty as alternative remedies under Sections 16(1), 19(1), 35 available

The HC dismissed the writ petition challenging penalty imposed under FEMA Section 10(6) for foreign exchange law contravention. The court held the petition was not maintainable as alternative remedies existed under FEMA Sections 16(1), 19(1), and 35, following SC precedent in Raj Kumar Shivhare. The petitioner failed to establish exceptional circumstances like fundamental rights breach or natural justice violation required for writ jurisdiction. The court found no illegality in the penalty order, noting the petitioner received proper notice and hearing opportunity, and the adjudicating authority had requisite powers.

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Issues Involved:
1. Contravention of FEMA provisions.
2. Maintainability of the writ petition.
3. Immunity under Section 32A of the IBC.
4. Adjudication proceedings and penalties.

Detailed Analysis:

1. Contravention of FEMA Provisions:
The petitioner company was found guilty of contravening Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA) read with Regulation 6(1) of the Foreign Exchange Management (Realization, Repatriation, and Surrender of Foreign Exchange) Regulation, 2000. The first respondent imposed a penalty of Rs. 15,20,00,000/- on the petitioner company for the alleged contraventions. The petitioner company had imported 23 consignments of chemicals in 2010-11, declared at a higher value, and failed to clear nine consignments, which continued to lie at the port. The first respondent initiated an investigation and found that the petitioner company had intentionally imported goods not for clearance but to send foreign exchange out of the country under the guise of importing and trading goods locally.

2. Maintainability of the Writ Petition:
The first respondent argued that the writ petition was not maintainable as there were alternative remedies available under Sections 16(1), 19(1), and 35 of FEMA. The judgment of the Supreme Court in Raj Kumar Shivhare Vs. Assistant Director was cited, emphasizing that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. The court agreed with this argument, stating that the petitioner had not demonstrated why the appellate jurisdiction under Section 35 of FEMA did not provide an efficacious remedy.

3. Immunity under Section 32A of the IBC:
The petitioner argued that under Section 32A of the Insolvency and Bankruptcy Code (IBC), the company was granted immunity from liabilities for offences committed prior to the commencement of the corporate insolvency resolution process. However, the court noted that the immunity provided under Section 32A of the IBC does not extend to adjudication proceedings under FEMA. The proceedings initiated by the show cause notice dated 31.03.2017 were much before the corporate insolvency resolution process, and thus, the petitioner was not granted immunity from these proceedings.

4. Adjudication Proceedings and Penalties:
The adjudication proceedings were conducted as per the due process, and the impugned order was passed after giving the petitioner and the second respondent an opportunity of hearing. The court found no infirmity or illegality in the order passed by the first respondent. The petitioner company was liable for penal action under Section 13(1) read with Section 42(1) of FEMA for the contraventions committed.

Conclusion:
The writ petition was dismissed on the grounds that it was not maintainable due to the availability of alternative remedies under FEMA. The court upheld the penalty imposed by the first respondent, stating that the petitioner was not granted immunity from the adjudication proceedings under FEMA, and the proceedings were initiated before the corporate insolvency resolution process. The court found no breach of fundamental rights, violation of principles of natural justice, or excess of jurisdiction in the proceedings conducted by the first respondent. Consequently, the connected miscellaneous petition was also closed, with no order as to costs.

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