2024 (7) TMI 1407 - HC - FEMA

Non-affording of personal hearing to the petitioner - Suspension of registration under the Foreign Contribution (Regulation) Act 2010 - allegation that there has been mis-management of funds of foreign contributors - whether the petitioner should have been afforded a personal hearing in terms of sub-section (2) of Section 14 of the Act prior to passing of the order dated 04-09-2023? HELD THAT - The words reasonable opportunity of being heard cannot be read in isolation. They have to be read along with sub-section (3) of Section 14 of the Act the consequences of passing of an order of cancellation. Sub-section (2) of Section 14 of the Act permits cancellation of registration. The consequence thereof is found in sub-section (3) which permits no registration under the Act for an entity which suffered cancellation for a period of three years. This is the dire civil and economic consequence that would ensue. Therefore it cannot be said that sub-(2) of Section 14 of the Act is restricted only to hearing hearing would mean only issuance of a show cause notice. Therefore the contention of the learned Central Government Counsel is to be repelled and is accordingly repelled. I am in respectful agreement with what the learned single Judge of the High Court of Madhya Pradesh has held interpreting sub-section (2) of Section 14 of the Act. Principles of natural justice is trite cannot be stretched to unlimited extent. But it is equally trite that when consequences thereof are grave it should be complied with in its entirety even stretching in a little further. Therefore the words depicted in the Act reasonable opportunity of being heard cannot be restricted to issuance of a show cause notice but a personal hearing in the peculiar facts of the case owing to the peculiarity of sub-section (3) of Section 14 of the Act must have been afforded to the petitioner. Non-affording of personal hearing to the petitioner has rendered the order unsustainable and the unsustainability of it would lead to its obliteration. Let there be no confusion that there can always be a fusion between hearing and personal hearing.

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 Registration
The 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 Justice
The 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.

← Previous Next →