TaxTMI 
TaxTMI 
2023 (12) TMI 914
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....n order. 2. The necessary facts which are required to be noticed for the disposal of this batch of writ petitions are as follows : 2.1. That a complaint was filed under Section 16(3) of the FEMA Act by the third respondent against 21 persons, i.e., 21 noticees for the alleged violation or contraventions of the provisions of the FEMA Act on 31.05.2016 to the first respondent, i.e., the Adjudicating Authority. 2.2. Pursuant to the said complaint, the Adjudicating Authority issued show cause notices to these 21 noticees on 06.06.2016. Thereafter since some of them responded to the show cause notice and remaining not responded, the Adjudicating Authority under Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 (In short "the Rules"), has proceeded to conduct the adjudication and issued notice of hearing under sub-rule (3) of Rule 4 of the Rules. 2.3. Such a notice of enquiry before the Adjudicating Authority was issued on 20.12.2018. Thereafter the adjudication process went on and ultimately, the Adjudicating Authority passed the adjudication order on 30.01.2019. 2.4. In the meanwhile, in the year 2016, noticee Nos.1,8 and 13 file....
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....aram, learned counsel appearing for the writ petitioners / noticees has stated that, those three writ petitions since have become infructuous, the same may be disposed of accordingly. 5. Therefore the learned counsel appearing for the petitioners would contend that, his arguments would be confined only to the other three writ petitions, i.e., W.P.Nos.6373, 30397 and 19023 of 2019. 6. Mr.Shah, learned counsel taken us to the relevant provisions of the FEMA Act. He would submit that, under Section 13 of the FEMA Act, if any person contravenes any provisions of the Act or rule or regulation, notification, direction or order issued in exercise of the powers under the Act, he shall upon adjudication be liable to a penalty up to thrice the sum involved in contravention. For imposing such a penalty, adjudication has to be taken place under Section 16 of the Act and how such adjudication shall be made by holding an enquiry has been contemplated under Rule 4 of the Rules. Therefore he would submit that, the adjudication process if any is initiated, it must go inconsonance with Section 16 of the Act r/w Rule 4 of the Rules. 7. In this context, he would further contend that, so far a....
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.... Intra Court Appeals filed by certain co-noticees were still pending before the High Court of Karnataka. 12. Mr.Shah, further added that, insofar as the Noticee No.4 and 20 are concerned, even the Rule 4(1) notice, i.e., show cause notice itself has not been served in the manner contemplated under Rule 14 of the Rules. When that being so, the entire proceedings culminated in the impugned adjudication order, dated 30.01.2019 is vitiated and therefore the said order since had been challenged in the remaining three writ petitions, the same are liable to be allowed by the orders of this Court, he contended. 13. In support of his contention, Mr.Shah, has relied upon the following decisions : (i) Radha Krishan Industries v. State of H.P., (2021) 6 SCC 771 (ii) Nawabkhan Abbaskhan v. The State of Gujarat, AIR 1974 SC 1471 (iii) Nuwood Private Ltd., Madras v. Superintendent of Central Excise, 1980 SCC Online Mad 404 (iv) Girdhari Lal Gupta v. D.H.Mehta and another, (1971) 3 SCC 189 (v) Katta Sujatha v. Fertilizers & Chemicals Travancore Ltd., and another, 2002 (7) SCC 655 (vi) K.K.Ahuja v. K.K.Vora, (2009) 10 SCC 48 14. It was ....
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....hat can easily be construed as an arbitrary exercise of power. Therefore such a proceedings completed and adjudication order passed by the Authority would no doubt be treated as exfacie illegal and without jurisdiction. Therefore the learned counsel for the petitioners would contend that, the order impugned, i.e., the adjudication order, dated 30.01.2019 is liable to be set aside and hence, the prayer sought for in these writ petitions are to be allowed. 17. On the other hand, Mr.AR.L.Sundaresan, learned Additional Solicitor General appearing for the respondents would contend that, it is an adjudication to be made under the provisions of Section 16 of the FEMA Act, where if complaint is filed under sub-section (3) of Section 16, the Adjudicating Authority shall hold an enquiry under sub-section (1), where after giving a reasonable opportunity of being heard, ultimately if it is found that, there has been a contravention of the provisions of the Act, Rules etc., penalty as contemplated shall be imposed. 18. The learned Additional Solicitor General would contend further that, how the enquiry, i.e., adjudication shall be made has been provided under Rule 4 of the Rules under the....
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....ns filed by Noticee No.4,17 and 20 respectively. 24. Insofar as the challenge that has been made in the second set of writ petitions, where the adjudication order, dated 30.01.2019 was under challenge is concerned, they made the complaint mainly on the alleged reason of violation of principles of natural justice. 25. In this context, the learned Additional Solicitor General would contend that, insofar as the said complaint made by the petitioners is concerned, the show cause notice in fact had been served in the manner contemplated under Rule 14 of the Rules. He would further contend that, all the 21 noticees were served the notice through the company address that has been given at Bengaluru and on receipt of the notice, some of the noticees in fact responded to the show cause notice and some of them not. 26. The Noticee Nos.4 and 20 is concerned, they claimed that, they are in foreign soil, therefore, they are not ordinarily residing or carrying business in India, hence, the notice if at all sent to the Bengaluru address, that cannot be construed as a servicing of notice within the meaning of the Act as well as the Rule that has been discussed herein above. 27. The lea....
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....g the one meant for the petitioner, were also served by way of affixation at the premises of DMPL in terms of rule 14(c) of The Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 on 13/12/2017." 28. Relying upon the said averments made by the respondents in the counter affidavit, the learned Additional Solicitor General would contend that, the show cause notice addressed to all the noticees including the petitioner noticee were served on DMPL, i.e., Devas Multimedia Pvt., Ltd., Noticee No.1 by the postal authorities under acknowledgement on 08.06.2016. Since DMPL vide letter, dated 14.06.2016 returned the show cause notice including the one meant for the petitioner to Respondent No.1 inter alia stating that the company is not authorised to receive any communication on their behalf. The show cause notices meant for Noticee No.2 to Noticee No.21 were again served under acknowledgment to one R.Mohan, S/o. D.Ranganathan, Director (Finance & HR) of DMPL on 01.07.2016. 29. That apart, copies of show cause notices meant for all the 21 noticees including the one meant for the petitioners were also served by way of affixation at the premises of DMPL in terms....
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.... that where in any particular case, the Appellate Tribunal is of the opinion that the deposit of such penalty would cause undue hardship to such person, the Appellate Tribunal may dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the realisation of penalty. (2) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order made by the Adjudicating Authority or the Special Director (Appeals) is received by the aggrieved person or by the Central Government and it shall be in such form, verified in such manner and be accompanied by such fee as may be prescribed: Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period. (3) On receipt of an appeal under sub-section (1), the Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. (4) The Appellate....
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.... of Karnataka, which has been confirmed by the Hon'ble Supreme Court. Therefore he has relied upon the Division Bench of the High Court of Karnataka who disposed the three writ appeals filed by Noticee No.1,8 and 13, namely Devas Multimedia Pvt., Ltd., D.Venugopal and M.Umesh. 35. The learned Additional Solicitor General has relied upon the following passages of Division Bench Judgement of the High Court of Karnataka. "8. Before we deal with the submissions made on merits, we must deal with the effect of the adjudication order made during the pendency of the writ appeals. There are applications filed under Order VI Rule 17 read with Section 151 of Code of Civil Procedure, 1908 for amendment of writ appeals for incorporating a challenge to the adjudication order. There is no dispute that against the said order, a remedy of appeal under subsection (1) of Section 19 of FEMA is available. Under the said order of the adjudicating authority, penalty has been imposed. The first proviso to subsection (1) of Section 19 requires deposit of the amount of penalty while filing an appeal. Second proviso confers jurisdiction of the Appellate Tribunal to dispense with the ....
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....n behalf of the respondents that the appeals have become infructuous, cannot be accepted. However, these appeals are continuation of writ proceedings before the learned Single Judge under Article 226 of the Constitution of India. A remedy under Article 226 of the Constitution of India is always discretionary and equitable. The impugned order of the learned Single Judge was passed on 6th October 2017. The present appeals were pending from 17th November 2017. The adjudicating authority granted enough time to the appellants to seek interim relief in these appeals. The hearing was fixed one year after the impugned order of the learned Single Judge. The averments made in the application for amendment in W.A.No.6484/2017 show that notice of the date fixed before the adjudicating authority was served on 27th December 2018. The appellants took the risk of not attending before the adjudicating authority knowing fully well that the appellants were not armed with any ad-interim order of stay of this Court. Thus, due to their own conduct, the appellants allowed the adjudicating authority to pass orders of adjudication. It is not the case of the appellants that they did not receive legal advice....
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....through counsel assures to file the appeal within three weeks from today. If the appeal is filed beyond three weeks, the limited relief regarding limitation, in terms of this order, shall not apply and the entire limitation period be reckoned by the Appellate Authority." 37. Relying upon the Judgments of the Division Bench of the High Court of Karnataka and the Hon'ble Supreme Court as well, the learned Additional Solicitor General would contend that, it has been exhaustively discussed with regard to the availment of alternative, efficacious, statutory appeal remedy in this case by the Division Bench of High Court of Karnataka, where ultimately the Division Bench directed those Noticees, i.e., Noticee No. 1, 8 and 13 to approach the Tribunal by filing appeal. Despite that order, when the noticees preferred SLP, the Hon'ble Supreme Court has also confirmed the decision of the High Court of Karnataka, but in fact permitted to take some concession for one noticee to give waiver to the payment of pre-deposit and for other two, it was given a discretion to the Tribunal, where the Noticees were directed to file an application seeking for waiver of the pre-deposit. 38. There....
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....n has committed any contravention as specified in that section of the Act, the Adjudicating Authority shall, issue a notice to such person requiring him to show cause within such period as may be specified in the notice (being not less than ten days from the date of service thereof) why an inquiry should not be held against him. (2) Every notice under sub-rule (1) to any such person shall indicate the nature of contravention alleged to have been committed by him. (3) After considering the cause, if any, shown by such person, the Adjudicating Authority is of the opinion that an inquiry should be held, he shall issue a notice fixing a date for the appearance of that person either personally or through his legal practitioner or a chartered accountant duly authorised by him. (4) On the date fixed, the Adjudicating Authority shall explain to the person proceeded against or his legal practitioner or the chartered accountant, as the case may be, the contravention, allowed to have been committed by such person indicating the provisions of the Act or of rules, regulations, notifications, directions or orders or any condition subject to which an authorisation is is....
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....se notice by giving a cause may not be entitled to get a notice for hearing. The reason being that, a person who on receipt of the show cause notice even did not care of responding to the show cause notice may not be eligible to get a further notice of hearing, as he had chosen not to even give cause to the show cause, therefore the presumption would be that, the Adjudicating Authority can go ahead with the enquiry with the available records insofar as such noticee is concerned. 44. Now let us go to Rule 14 under the heading "Service of notice, requisition or orders, which reads thus : "14. Service of notices, requisitions or orders A notice, requisition or an order issued under these rules shall be served on any person in the following manner, that is to say,- (a) by delivering or tendering the notice or requisition or order to that person or his duly authorised person, (b) by sending the notice or requisition or order to him by registered post with acknowledgment due to the address of his place of residence or his last known place or residence or the place where he carried on, or last carried on, business or personally works or last worked f....
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....le 14(c) copy of the notice has been affixed at the premises of DMPL on 13.12.2017. In this context, it is to be noted that, as per Rule 14(c), notice can be affixed on the outer door or some other conspicuous part of the premises in which the person resides or is known to have last resided or carried on business or personally works or has worked for gain. 49. If at all, these noticees who are the petitioners herein made a claim that, they were not the permanent residents or carrying business permanently at Bengaluru with DMPL and they left and were residing some where else and one of the petitioner is a resident of a foreign country, therefore on these grounds the notice that has been served at DMPL in Bengaluru cannot be considered as a notice within the meaning of Rule 4(1) is concerned, the answer that is available in Rule 14 itself. 50. A person who carried on business or worked for gain or last known place or last worked for gain also the place where the notice can be served both under mode 14(b) as well as 14(c). 51. In both the modes, such a service has been effected by the respondent department. This has been clearly demonstrated before this Court as per the averm....
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....of Karnataka in its Division Bench Judgment, confirmed by the Hon'ble Supreme Court can be applied to the facts of the present writ petitioners, especially the Noticee No.4 and 20. 56. Though such a distinction was attempted to be made by Mr.Shah, we are not impressed with the same, in view of the factual matrix on these noticees also. The reason being that, the mode of service of notice has been clearly demonstrated at Rule 14, i.e., 3 methods, namely 14(a), 14(b) and 14(c). 57. At least Rule 14(b) and 14(c), the notices have been served on these noticees in their last known address or the address where they carried on business last. 58. Merely because at the time of serving the notice, these noticees were not available at the address at Bengaluru would not ipso facto entile them to claim immunity that the notices served on them at the Bengaluru address cannot be construed as a notice within the meaning of Section 16 r/w Rule 4(1) and Rule 14(b) or (c) of the Rules. 59. Therefore, this Court have no hesitation to hold that, notice as contemplated under the Act as well as the Rules as discussed herein above have been served on these noticees. 60. The next argumen....
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....n of Mr.Shah, that the two Noticee namely Noticee No.17 and 20 were the nominee Directors, i.e., Non-executive Directors of the first Noticee company on behalf of the fourth Noticee company. When their very appointment as a Director itself is a mere nominee on behalf of the fourth noticee company as a Non-Executive Directors, therefore they are not incharge of and was responsible to the conduct of the business of the company as well as the company. 64. Therefore assuming that, any contravention that has been made by the first Noticee company, for which these noticees namely Noticee No.17 and 20 cannot be found fault with. Therefore under Section 42(1) no contravention cannot be attributable against these Noticees. Insofar as this contention of the learned counsel appearing for the petitioners are concerned, whether they were the Non-Executive Directors or nominee Directors and during the relevant point of time whether they were in the helm of affairs or the company or not, whether the contravention that has been made by the first Noticee company would amount to the contraventions of the persons like Noticee No.17 and 20 also, for which, they are also to be proceeded against and ....
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....he relies upon para 9, 10 and 11, which reads thus. " 9. It is equally well settled that the effect of a breach of the principles of the natural justice vitiated the original decision cannot be cured by the principles of natural justice being complied with at the appellate stage. Denning LJ. put the matter very clearly in Barnard v. National Dock Labour Board, 1953-2-QBD 18, thus "So far as the decision of the appeal tribunal is concerned, it seems to me that, once the port manager's order is found to be a nullity, it follows that the order of the appeal tribunal is also a nullity. The appeal tribunal has no original jurisdiction of its own; it cannot itself make a suspension order; it can only affirm or disaffirm a suspension order which has been already made. If none has been made, because it is a nullity the tribunal can do nothing". 10. In Learvy v. NU of Vehicle Builders, 1970-2- All ER 713, it has been observed as follows :- "As a general rule, at all events, I hold that a failure of natural justice in the trial body, cannot be cured by a sufficiency of natural justice in an appellate body." 11. It, therefore, follows that even if the p....
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....reads thus : 27 The principles of law which emerge are that : 27.1. The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well; 27.2. The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person; 27.3. Exceptions to the rule of alternate remedy arise where (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged; 27.4. An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law; 27.5. When a right is created by a statute, which itself prescribes the re....
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....he petitioners, that can only be treated as a legal precedent, but so far as the facts of the present case is concerned, the very same adjudication order since has been considered by both the Division Bench of the High Court of Karnataka as well as the Hon'ble Supreme Court, where clear findings have been given, that shall certainly bind the present petitioners who are none other than the co-noticees. 79. The said contention made by the learned Additional Solicitor General appearing for the respondents is appealing to us, because, as against the very same adjudication order, since attempt had been made by the conoticees before the High Court of Karnataka, at that time to deciding the Intra Court Appeal, that by passing the adjudication order during the pendency of the Intra Court Appeal, that itself would amount to violation of principles of natural justice, because already the very show cause notices had been questioned and when that lis was pending, the Adjudicating Authority did not have any jurisdiction to proceed further and to pass final adjudication order. 80. Having considered the said question raised before the High Court of Karnataka, the Division Bench of the s....
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....eposit. The relevant portion of the order of the Supreme Court reads thus : "If the appeal is filed in time, as aforesaid, the Appellate Authority may proceed with the appeal on its own merits in accordance with law and not non-suit this petitioner on ground of limitation as the petitioner has been bona-fide pursuing remedy against the show cause first before the High Court and also before this Court. It will be open to the petitioner to file a formal application before the Appellate Authority for granting exemption from paying 100% pre-deposit amount. That application be considered on its own merits and in accordance with law. We may not be understood to have expressed any view either way in that regard." 87. Since such a clear orders have been passed by the Division Bench of the High Court of Karnataka, which has been confirmed by the Hon'ble Supreme Court, on the lis that was instituted by the co-noticees of these present petitioners, of course arising out of the same adjudication proceedings which culminated in the adjudication order, dated 30.01.2019, we do not find any reasons to entertain these writ petitions as canvassed by Mr.Shah, learned counsel appe....