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2009 (3) TMI 568 - HC - Companies LawGuilty of charge under section 6(3)(i) of the Foreign Exchange Management Act, 1999 read with Regulation 4 of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulation 2000 on Petitioner - Whether an act which could not be subjected to a penalty on account of contravention of any provisions of the Act, Rules, Regulations or notification etc. could attract penalty on the basis of subsequent enactment by bringing such an act within the sweep of penalty? Held that - The provisions of the FEMA Regulations were made applicable from 1-6-2000 and thus would not apply to the transaction dated 5-11-1999. Under section 31 of the FERA there is no limitation on the purchase of even agricultural land by the Indian Citizen which was the provision applicable at that time. Therefore, the action of the respondents concerning imposition of penalty under section 13(1) of the FEMA, adjudication and framing of charge thereunder are patently against article 20(1) of the Constitution. Once order dated 13-3-2003 (P.1) has attained finality and the proceedings initiated against the petitioner on 18-2-2003 have culminated in a finding that the petitioner did not contravene any provisions of the FEMA then in the absence of any order of the Appellate Authority under section 17 of the FEMA for setting aside the order dated 13-3-2003, the initiation of fresh proceedings on 28-7-2006 were wholly unwarranted. Appeal allowed.
Issues Involved:
1. Applicability of section 31 of the Foreign Exchange Regulation Act (FERA) and section 6(3)(i) of the Foreign Exchange Management Act (FEMA) to the petitioner. 2. Validity of the penalty imposed under FEMA. 3. Finality and reopening of the investigation. 4. Availability and necessity of an alternative remedy of appeal under section 17 of FEMA. Detailed Analysis: 1. Applicability of section 31 of FERA and section 6(3)(i) of FEMA to the petitioner: The petitioner, an Indian citizen at the time of purchasing the plot on 5-11-1999, was charged under section 6(3)(i) of FEMA, read with Regulation 4 of the FEMA Regulations. The petitioner argued that section 31 of FERA, which was applicable at the time of purchase, imposed restrictions only on non-citizens acquiring immovable property in India. Since the petitioner was an Indian citizen at the time, these restrictions did not apply. Furthermore, FEMA and its regulations, which came into effect on 1-6-2000, could not retroactively apply to the transaction dated 5-11-1999. The court upheld this argument, stating that the prohibition under section 31 of FERA did not apply to the petitioner, and the subsequent enactment of FEMA could not penalize an act that was not an offense under the law in force when it was committed. 2. Validity of the penalty imposed under FEMA: The court examined the imposition of a penalty of rupees five lakhs on the petitioner for allegedly contravening section 6(3)(i) of FEMA. It was determined that the action of imposing a penalty was against article 20(1) of the Constitution, which protects individuals from being penalized for acts that were not offenses under the law in force at the time of their commission. Since the petitioner's purchase of the plot occurred before the enactment of FEMA, the penalty was deemed invalid. 3. Finality and reopening of the investigation: The petitioner was informed on 13-3-2003 that there was no violation of FEMA, and this decision was not appealed. However, the investigation was reopened based on a reference from the Reserve Bank of India received on 26-6-2003, leading to the issuance of a show-cause notice on 28-7-2006. The court found that once the initial investigation had concluded with a finding of no violation, and in the absence of an appellate order setting aside this conclusion, the initiation of fresh proceedings in 2006 was unwarranted. 4. Availability and necessity of an alternative remedy of appeal under section 17 of FEMA: The respondents argued that the petitioner had an alternative remedy of appeal under section 17 of FEMA. However, the court held that the violation of the petitioner's fundamental rights justified the exercise of writ jurisdiction. The court cited the Supreme Court's judgment in Chairman Railway Board v. Chandrima Dass, emphasizing that the fundamental rights of the petitioner had been violated, thus negating the necessity to pursue an alternative remedy. Conclusion: The petition was allowed, quashing the order dated 17-11-2008 and the corrigendum dated 2-12-2008. The court also imposed costs of Rs. 10,000 on the respondents for violating the petitioner's fundamental rights.
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