TaxTMI 
TaxTMI 
2017 (10) TMI 1129
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....er has filed this writ petition under Articles 226 & 227 of Constitution of India seeking a declaration that proceedings initiated by the respondents herein under the provisions of Foreign Exchange Management Act, 1999 (for short, 'FEMA') are without jurisdiction. Petitioner has also sought for quashing the complaint dated 31.05.2016 filed against it under Section 16(3) of FEMA vide Annexure-B and the show-cause notice dated 06.06.2016 issued by the Special Director, Directorate of Enforcement, Government of India, Ministry of Finance, Chennai, vide Annexure-A. 3. Facts leading to this writ petition, briefly stated are that petitioner was engaged in the business of developing, operating and marketing integrated hybrid satellite terrestrial communication system and providing internet based multimedia and interactive data services. Petitioner entered into an agreement dated 28.01.2005 with Antrix Corporation Limited, a Government of India undertaking set up under the Department of Space. Petitioner applied to the Foreign Investment Promotion Board (for short, 'FIPB') on 02.02.2006 for approval of contemplated investments to be made by two US based investment firms and their subsid....
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....a preliminary question regarding maintainability of the writ petitions. 8. Learned senior counsel for petitioners have contended that writ petitions are maintainable for the following reasons: (a) action of respondent - authorities is demonstrably actuated by malafides; (b) the so-called show-cause notice is not actually a show-cause notice as the respondents have already premeditated and predetermined the liability of the petitioners; (c) that the alleged violations of provisions of FEMA by the petitioners is baseless; (d) the vicarious liability cannot be made applicable against the Directors; (d) existence of alternative remedy in the above circumstances was no bar for maintainability of the writ petitions. 9. In support of the contention that existence of alternative remedy is not a bar for invoking writ jurisdiction, learned Senior Counsel for the petitioners have placed reliance on the following judgments: 1. WHIRLPOOL CORPORATION Vs. REGISTRAR OF TRADE MARKS, MUMBAI 7 OTHERS - (1998) 8 SCC 1; 2. BAHADURSINGH LAKHUBHAI GOHIL Vs. JAGDISHBHAI M.KAMALIA & OTHERS - (2004) 2 SCC 65 3. A.V.VENKATESHWARAN Vs. RAMCHAND SOBHRAJ WADHWA....
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....as placed reliance on the judgment in the case of S.M.S.PHARMACEUTICALS LIMITED VS. NEETA BHALLA AND ANOTHER - (2005) 8 SCC 89 to contend that it was necessary to state that at the time offence was committed, the person who was in- charge and responsible for conduct of business of the company, could be proceeded against under Section 141 of the Negotiable Instruments Act, 1881. He draws the same analogy in respect of the facts of the present case, to urge that the two Directors cannot be subjected to criminal process and vicarious liability cannot be fastened on all persons connected with the company as the principal accused in such case would be the company itself. Reliance is also placed on the judgment in the case of K.K. AHUJA VS. V.K.VORA AND ANOTHER - (2009) 10 SCC 48 to the same effect. It is also urged with the help of this decision that a person may be a Director, but to be vicariously liable, a person should fulfill legal requirement of being a person responsible to the company for the conduct of the business and in-charge of the business of the company. 15. Sri Nataraj, learned ASG has referred to the scheme of FEMA and the Rules framed thereunder. He refers to the ju....
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....es framed provides a complete network of provisions adequately structuring the rights and remedies available to a person who is aggrieved by any adjudication under FEMA. Reliance is also placed on the judgment of the Division Bench of this Court in the case of KARNATAKA SILK INDUSTRIES CORPORATION LIMITED, BANGALORE Vs. Y.N.KRISHNA MURTHY - (2006) 2 Kar.L.J. 143 to contend that writ petition against show-cause notice should not be entertained in a routine manner. Reliance is also placed on the judgment in the case of EXECUTIVE ENGINEER, BIHAR STATE HOUSING BOARD Vs. RAMESH KUMAR SINGH AND OTHERS - (1996) 1 SCC 327 in this regard. Judgment in the case of UNION OF INDIA AND ANOTHER Vs. KUNISETTY SATYANARAYANA - AIR 2007 SC 906 has been relied upon particularly on the observations made in paragraph 14 to contend that a mere show-cause notice does not infringe the right of any one. 17. Learned Additional Solicitor General has also relied on the judgment of the Apex Court in the case of SPECIAL DIRECTOR AND ANOTHER Vs. MOHD. GHULAM GHOUSE AND ANOTHER - (2004) 3 SCC 440. Attention is drawn to the observations in paragraph 5. Similarly, judgment in the case of COMMISSIONER OF CUSTOMS (....
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....aged in telecommunication related services, a sector requiring FIPB approval for foreign direct investment and had not followed conditions prescribed in the approval given by the FIPB and also not followed its guidelines thereby foreign direct investment totalling to Rs. 578,53,63,207/- was without valid approval of the Government of India and thus petitioner appeared to have contravened the provisions of Section 6(3)(b) of FEMA read with Regulations 4, 5(1) and Schedule-1 of the Foreign Exchange Managements (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 and rendered themselves liable for penalty under Section 13(1) of FEMA, 1999. 21. Similar such allegations in connection with issuance of equity shares allegedly in contravention of the provisions of the Act have been made. Reference is made to Section 42 of the Act, which stipulates that where a person committing contravention of the provisions of the Act or the Rules was a company, every person, who at the time the contravention was committed, was in charge of and was responsible to the company for the conduct of business of the company as well as the company shall be deemed to be guilty o....
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....e. They also point out that after arbitration award was passed on 14.09.2015, show cause notice was issued on 06.06.2016 based on a complaint lodged on 31.05.2016 in great haste. 25. It is apparent from the materials on record that adjudication process has not yet started. It is well established by a catena of decisions of the Apex Court that High Court will not entertain a petition under Article 226 of the Constitution, if an effective alternative remedy is available to the aggrieved person or the statute under which action complained of has been taken, itself contains a mechanism for redressal of the grievance. This principle is well enunciated in the case of NIVEDITA SHARMA Vs. CELLULAR OPERATORS ASSOCIATION OF INDIA - (2011) 14 SCC 337. In fact, the Apex Court in the case of SPECIAL DIRECTOR AND ANOTHER Vs. MOHD. GHULAM GHOUSE AND ANOTHER - (2004) 3 SCC 440, has deprecated the practice of High Courts entertaining writ petitions questioning the legality of the show-cause notices, thereby stalling enquiries retarding investigative process initiated to find actual facts with the participation and in the presence of the parties unless the petitioner established absolute want of ....
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....rnment regarding alleged breach of contract entered into between the Government and the Company. Alleged breach of contract is one thing and violation of FEMA is totally another thing. This Court cannot interfere in the matter to stall the investigation and enquiry by the adjudicating authority. In such matters all such allegations can be pleaded, demonstrated and proved by way of reply to show cause notice. Prima facie I am of the view that such bare allegations cannot form basis for stalling investigation and enquiry into violation of FEMA and the Rules and Regulations framed thereunder. 28. As rightly contended by learned Additional Solicitor General placing reliance on several judgments of the Apex Court including the judgment in the case of RAJKUMAR SHIVHARE Vs. ASSISANT DIRECTOR, DIRECTORATE OF ENFORCEMENT AND ANOTHER - (2010) 4 SCC 772 Chapter V of FEMA read with Rules framed, provides a complete network of provisions adequately structuring rights and remedies available to a person who is aggrieved by any adjudication under FEMA. In the instant case once a reply is submitted to the show cause notice, the adjudicating authority may take a decision to proceed in the matter ....