2024 (7) TMI 1407 - HC - FEMA

Karnataka HC rules suspension of FCRA registration without personal hearing violates natural justice principles under Section 14(2)

Centre For Wildlife Studies (R) Versus Union of India Ministry of Home Affairs, Ministry of Home Affairs Foreigners Division (FCRA Wing/FCRA-MU) Bengaluru, Deputy Commissioner Urban District Kempegowda Bengaluru.

Centre For Wildlife Studies (R) Versus Union of India Ministry of Home Affairs, Ministry of Home Affairs Foreigners Division (FCRA Wing/FCRA-MU) ... Issues Involved:1. Suspension and cancellation of the petitioner's registration under the Foreign Contribution (Regulation) Act, 2010.2. Whether personal hearing is mandated under Section 14(2) of the Act before cancellation of registration.3. Compliance with principles of natural justice.Detailed Analysis:Issue 1: Suspension and Cancellation of RegistrationThe petitioner challenged the suspension of its registration dated 05-03-2021 and the subsequent cancellation order dated 04-09-2023 under the Foreign Contribution (Regulation) Act, 2010. The petitioner, a trust registered under the Act since 1990, claimed that the funds received were utilized for social and educational purposes in strict compliance with the Act. The suspension order was issued due to alleged mismanagement of foreign funds, followed by a show cause notice on 03-12-2021. Despite a detailed 25-page reply from the petitioner, the registration was canceled without considering the objections, leading to the current petition.Issue 2: Requirement of Personal Hearing under Section 14(2)The petitioner argued that the cancellation order was issued without affording a personal hearing as mandated by Section 14(2) of the Act. The respondents contended that 'reasonable opportunity of being heard' does not necessitate a personal hearing, and the issuance of a show cause notice suffices.The court examined Section 14 of the Act, which stipulates that no order of cancellation shall be made unless the person concerned is given a reasonable opportunity of being heard. The court emphasized that the term 'reasonable opportunity of being heard' must be interpreted in the context of the serious civil and economic consequences that follow a cancellation, as outlined in Section 14(3).Issue 3: Compliance with Principles of Natural JusticeThe court referred to several precedents, including the Division Bench judgments in Dalmia Cement (Bharat) Limited v. Government of Karnataka and State Bank of Mysore v. R. Shamanna, which held that 'opportunity of being heard' implies personal hearing. The court also considered the judgment in Samvad Society for Advocacy and Development v. Union of India, which similarly mandated personal hearing under Section 14(2) of the Act.The respondents' reliance on Union of India v. Jesus Sales Corporation and Patel Engineering Limited v. Union of India was distinguished, as those cases did not involve the same statutory context or the severe consequences of cancellation under the Act.Conclusion:The court concluded that the failure to provide a personal hearing before canceling the petitioner's registration violated Section 14(2) of the Act and principles of natural justice. Consequently, the orders dated 05-03-2021, 10-09-2021, 25-03-2022, and 04-09-2023 were quashed, and the petitioner was entitled to restoration of the status quo ante. However, the Union of India was granted liberty to act in accordance with the law, considering the court's observations.Order:1. Writ Petition is allowed.2. Orders dated 05-03-2021, 10-09-2021, 25-03-2022, and 04-09-2023 are quashed.3. Petitioner is entitled to all consequential benefits, including restoration of status quo ante.4. Liberty reserved for the Union of India to act in accordance with the law.