2025 (1) TMI 14 - HC - FEMA

Court Rules FEMA Section 6(3)(b) Actions Void Due to Omission; Quashes Show Cause Notice and Complaint.

Mrs. Kshithija URS Versus Union Of India, The Special Director Office Of The Special Director Of Enforcement, Basavaraj R. Magadum Assistant Director Directorate Of Enforcement Bengaluru, Directorate Of Enforcement Bengaluru.

Mrs. Kshithija URS Versus Union Of India, The Special Director Office Of The Special Director Of Enforcement, Basavaraj R. Magadum Assistant Director ... 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the proceedings initiated against the petitioner based on Section 6 (3) (b) of the Foreign Exchange Management Act, 1999 (FEMA) were justified, given that this provision was omitted by the Finance Act, 2015.Whether the omission of Section 6 (3) (b) affects the jurisdiction and legality of the actions taken against the petitioner.The applicability of Section 6 of the General Clauses Act in cases of omission as opposed to repeal.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Justification of Proceedings Based on Omitted ProvisionRelevant Legal Framework and Precedents: The proceedings were initiated under Section 6 (3) (b) of FEMA, which was omitted by the Finance Act, 2015, effective from 15.10.2019. The petitioner argued that actions based on an omitted provision are without jurisdiction.Court's Interpretation and Reasoning: The court noted that Section 6 (3) (b) was omitted as of 15.10.2019, prior to the complaint and show cause notice dates. The court emphasized that omissions are distinct from repeals, and Section 6 of the General Clauses Act does not apply to omissions.Key Evidence and Findings: The complaint was filed on 25.10.2019, and the show cause notice was issued on 25.02.2020, both referencing the omitted Section 6 (3) (b).Application of Law to Facts: The court applied the principle that omissions do not invoke Section 6 of the General Clauses Act, thus rendering actions based on an omitted provision void.Treatment of Competing Arguments: The respondents contended that liabilities under FEMA are civil and continuing, unaffected by the omission. However, the court rejected this, citing the Apex Court's distinction between repeals and omissions.Conclusions: The court concluded that the proceedings based on Section 6 (3) (b) were without jurisdiction and unsustainable, as the provision was omitted before the actions were initiated.Issue 2: Applicability of Section 6 of the General Clauses ActRelevant Legal Framework and Precedents: The court referenced the Apex Court's decision in Kolhapur Canesugar Works Ltd. v. Union of India, which clarified that Section 6 applies to repeals, not omissions.Court's Interpretation and Reasoning: The court reiterated that Section 6 of the General Clauses Act does not apply to omissions, aligning with the precedent set by the Apex Court.Key Evidence and Findings: The court found no savings clause in the Finance Act, 2015, to support the continuation of liabilities under the omitted provision.Application of Law to Facts: The court applied the legal principle that omissions do not invoke Section 6, thus nullifying the actions based on the omitted section.Treatment of Competing Arguments: The respondents' argument that civil liabilities continue despite omission was dismissed based on established legal principles.Conclusions: The court concluded that Section 6 of the General Clauses Act does not apply, and the actions against the petitioner were without legal basis.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: 'The Apex Court has clearly held that Section 6 only applies to repeals and not to omissions.'Core Principles Established: The distinction between repeals and omissions is critical, with omissions not invoking Section 6 of the General Clauses Act. Actions based on omitted provisions are void ab initio.Final Determinations on Each Issue: The writ petition was allowed, and the show cause notice and complaint were quashed as they were based on an omitted provision, rendering them without jurisdiction.