TMI Blog2017 (10) TMI 1129X X X X Extracts X X X X X X X X Extracts X X X X ..... by learned Additional Solicitor General hapter 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 or not to proceed. In case it decides to proceed, full opportunity will have to be provided to petitioners. If it is found that petitioners were guilty, then there is a provision to appeal to the Appellate Tribunal. If any person is aggrieved by any decision or order of the Appellate Tribunal, he may file an appeal to the High court. Thus, it is clear that the Act and the rules framed provide sufficient mechanism for redressing the grievance of petitioners. In such circumstances, merely on the basis of certain allegations of malafides, this Court cannot entertain the writ petition to quash the show cause notice or the complaint exercising jurisdiction under Article 227. It will tantamount to preventing investigation and enquiry into violations of serious nature which may affect the economic fabric of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner Company. On 16.03.2006, petitioner along with other shareholders entered into a share subscription agreement with the subsidiary companies of the two US based investment firms setting out the terms and conditions of their investment. On 18.05.2006, FIPB granted approval to the application filed by the petitioner on 02.02.2006 with certain standard form conditions. The conditions imposed and the correspondence made between the parties, according to the petitioner, made it clear that all the concerned persons had accepted that the agreement shall be subject to Indian law. Petitioner claimed to have made further investments. 4. On 25.02.2011, Antrix terminated the agreement with petitioner. Petitioner invoked pre-arbitration steps and thereafter arbitration proceedings as per arbitration agreement for specific performance thereof and alternatively for damages/compensation in lieu of specific performance. It is alleged by petitioner that with a malafide intention to frustrate and derail the arbitration, Department of Space directed and instructed Department of Revenue and Department of Corporate Affairs to investigate and conduct a roving and fishing enquiry into the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA Vs. TANTIA CONSTRUCTION PRIVATE LIMITED (2011) 5 SCC 697. 10. In support of the contention that impugned show- cause notice is amenable for challenge in the writ jurisdiction as it is not in the realm of a show-cause notice, petitioner has placed reliance on the following judgments: 1. SIEMENS LIMITED Vs. STATE OF MAHARASHTRA OTHERS (2006) 12 SCC 33; 2. K.I.SHEPHARD OTHERS Vs. UNION OF INDIA OTHERS - (1987) 4 SCC 431; 3. ORYX FISHERIES PRIVATE LIMITED Vs. UNION OF INDIA 7 OTHERS (2010) 13 SCC 427. 11. In support of the contention that malice/malafides on the part of the State action enables a party to invoke jurisdiction under Article 226 of the Constitution, petitioner has placed reliance on the following judgments: 1. BAHADURSINGH LAKHUBHAI GOHIL Vs. JAGDISH BHAI M.KAMALAI OTHERS (2004) 2 SCC 65; 2. SIEMENS LIMITED Vs. STATE OF MAHARASHTRA OTHERS (2006) 12 SCC 33; 3. ORYX FISHERIES PRIVATE LIMITED Vs. UNION OF INDIA OTHERS (2010) 13 SCC 427. 12. Sri Sajan Poovayya, learned Senior Counsel appearing for the two Directors of Devas Multimedia Private Limited has, apart from addressing other common arguments referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 SCC 33 and distinguishes the same. He also takes me through various decisions relied upon by the learned counsel for petitioners to point out how the facts involved in those cases were distinct and different from the facts involved in the present case. He strongly refutes the contentions urged by the petitioners regarding alleged malafide intention behind initiation of proceedings, the alleged predetermined approach and the so-called apparently baseless allegations leveled against the petitioners Devas and its Directors. With regard to vicarious liability of some of the Directors, he has urged that adjudication proceedings in Section 16 read with Section 13 were wide, in that, it covered all kinds of contraventions by any person regardless of whether he was a Director or not at the relevant point of time. He contends that the issue of vicarious liability would arise only after adjudication is made as per Section 16 read with Section 13 of FEMA. He invites the attention of the Court to Section 42 which deals with contraventions by companies and also provides protection to those without whose knowledge, consent or connivance such contravention had taken place. He, therefore, urge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. 257 (S.C.) is relied upon to urge that reading of the show-cause notice para wise and confining it in a water tight manner would not be a correct way of construing a notice because it had to be read as a whole to understand whether the person concerned was made aware of the various grounds on the basis of which action was proposed to be taken as well as the nature of the action. Reliance is also placed on the decision in the case of ASSISTANT COLLECTOR OF CENTRAL EXCISE, WEST BENGAL Vs DUNLOP INDIA LIMITED AND OTHERS 1985 (19) E.L.T. 22 (S.C.). 18. In the light of the challenge made to the show cause notice and the complaint filed against petitioners and in the wake of preliminary objections raised by the learned Additional Solicitor General regarding the maintainability of the writ petitions, this Court has to decide whether the writ petition is maintainable. 19. Show cause notice assailed in the writ petition is produced at Annexure-A. A careful perusal of the same discloses that based on a complaint dated 31.05.2016 filed under Sub-section 3 of Section 16 of FEMA, Special Director and Adjudicating Authority has issued show cause notice placing reliance on the averment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d punished accordingly. Section 42 is referred to proceed against two directors viz., D. Venugopal and M.Umesh along with certain others stating that they were responsible for conduct of business at the appropriate period, in addition to being signatories to the relevant share subscription agreements. 22. In issuing the show cause notice, adjudicating authority has placed reliance on several documents annexed to the complaint. In paragraph 35, it is specifically stated that in case it was decided to hold adjudication proceedings, personal hearing of the case could be waived at their request. However, in paragraph 36 of show cause notice, petitioners have been notified that they would be required to appear either in person or through legal practitioner duly authorised by them to explain and produce such documents or evidences, as may be useful for or relevant to the subject matter of enquiry, and in case, any of the noticees fail, neglect or refuse to appear before the undersigned on the appointed date and time, the adjudication proceedings shall proceed against such noticee ex-parte. 23. Therefore, sum and substance of the notice makes it very clear that specific allegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observed in this context that writ petitions should not be entertained and the petitioner should invariably be directed to respond to the show-cause notice. 26. Perusal of the impugned notice does not disclose that respondent adjudicating authority has predetermined the issue. Unless show cause notice contains all specific details regarding the nature of violation, quantum of violation alleged, it will suffer from want of details so as to enable effective reply from petitioner. Therefore, when full details are given regarding the allegations made based on complaint and documents produced, show cause notice cannot be characterized as one that predetermines the issue. 27. Regarding the background in which action is initiated under FEMA against petitioners and allegation of malafides, it has to be noticed that there cannot be any dispute that jurisdiction under Article 226 and 227 of the Constitution of India can be invoked if there is absolute want of jurisdiction or if the action is malafide. There can be no difficulty in appreciating this contention which finds support from several decisions. However, at the same time it has to be pointed out that merely because petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity will have to be provided to petitioners. If it is found that petitioners were guilty, then there is a provision to appeal to the Appellate Tribunal. If any person is aggrieved by any decision or order of the Appellate Tribunal, he may file an appeal to the High court. 29. Thus, it is clear that the Act and the rules framed provide sufficient mechanism for redressing the grievance of petitioners. In such circumstances, merely on the basis of certain allegations of malafides, this Court cannot entertain the writ petition to quash the show cause notice or the complaint exercising jurisdiction under Article 227. It will tantamount to preventing investigation and enquiry into violations of serious nature which may affect the economic fabric of the Country. Truth will, in anyway, ultimately emerge. 30. Though several judgments have been relied upon by learned Senior counsel for petitioners, facts involved in the present case being distinct and different, ratio laid down in those judgments are not applicable to the case of petitioners. Petitioners have adequate safeguards in the form of effective remedies within the four corners of FEMA to seek redressal. The same process of re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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