FEMA proceedings transfer from Special Director to Additional Director valid for Rs.11.27 crore case

The Madras HC dismissed writ petitions challenging the transfer of FEMA proceedings from Special Director to Additional Director of Enforcement following enhancement of pecuniary jurisdiction via notification dated 27.09.2018. The court held that the transfer was valid as the Additional Director had jurisdiction over cases involving Rs.10-25 crores, and the petitioner's case involved Rs.11.27 crores. The court ruled that notifications conferring jurisdictional powers operate prospectively, requiring pending cases to be transferred to appropriate authorities. No jurisdictional error was found in the continuation of proceedings by the Additional Director.

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Issues Involved:
1. Validity of the Personal Hearing Notice issued by the Additional Director of Enforcement.
2. Jurisdictional authority of the Additional Director of Enforcement post-notification dated 27.09.2018.
3. Retrospective application of the notification enhancing pecuniary jurisdiction.
4. Competence of the authority issuing the Show Cause Notice and continuing the inquiry.
5. Entertaining a writ against a Show Cause Notice.

Detailed Analysis:

1. Validity of the Personal Hearing Notice issued by the Additional Director of Enforcement:
The petitioners sought to quash the personal hearing notice dated 09.09.2020, issued by the Assistant Director (SRO), which directed them to appear before the adjudicating authority, the Additional Director, Directorate of Enforcement. The petitioners argued that the Show Cause Notice issued by the Special Director could not be transferred to the Additional Director, as it was impermissible under the FEMA Rules.

2. Jurisdictional authority of the Additional Director of Enforcement post-notification dated 27.09.2018:
The petitioners contended that the Special Director, being a higher authority, was the original adjudicating authority, and the proceedings could not be transferred to the Additional Director, a lower authority. The respondents argued that the notification issued by the Ministry of Finance on 27.09.2018, which revised the pecuniary jurisdiction of adjudicating authorities, empowered the Additional Director to continue the proceedings.

3. Retrospective application of the notification enhancing pecuniary jurisdiction:
The petitioners argued that the notification dated 27.09.2018, which enhanced the pecuniary jurisdiction, should not have retrospective application to obstruct proceedings already instituted by the Special Director. The respondents countered that the notification was issued under Section 16 of the FEMA Act, and such changes in pecuniary jurisdiction are implemented prospectively, affecting pending cases accordingly.

4. Competence of the authority issuing the Show Cause Notice and continuing the inquiry:
The petitioners relied on several judgments to argue that only the authority that issued the Show Cause Notice (Special Director) could continue the inquiry. However, the court noted that Section 16 of the FEMA Act empowers the Central Government to appoint adjudicating authorities and revise their pecuniary jurisdictions, which was done through the notification dated 27.09.2018. Consequently, the transfer of the case from the Special Director to the Additional Director was valid.

5. Entertaining a writ against a Show Cause Notice:
The court emphasized that a writ against a Show Cause Notice is entertainable only if the notice is issued by an incompetent authority or if there are allegations of malafides. In this case, the court found no jurisdictional error or malafides in the transfer of the case to the Additional Director. The notification issued by the Government of India was within the powers conferred by the FEMA Act, and the Additional Director was competent to continue the proceedings.

Conclusion:
The court dismissed the writ petitions, concluding that the petitioners were not entitled to the relief sought. The transfer of the case from the Special Director to the Additional Director was in accordance with the provisions of the FEMA Act and the notification dated 27.09.2018. The court found no jurisdictional error or other grounds to quash the Personal Hearing Notice. Consequently, the connected miscellaneous petitions were also closed.

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