The Madras High Court has dismissed the Writ Petitions filed by the owners of Flipkart - Sachin Bansal and Binny Bansal, challenging the complaint made by the Directorate of Enforcement (ED) alleging violation of the Foreign Exchange Management Act, 1999 (FEMA).

The Court was of the view that the said owners failed to make out a case that they come under one of the exceptions to the General rule regarding availability of alternative remedy.

A Single Bench of Justice S. Sounthar observed, “The remedy before this Court by way of appeal on question of law cannot be treated as in-effective remedy by no stretch of imagination. Hence, I am not inclined to exercise my discretionary jurisdiction under Article 226 of Constitution of India especially when the petitioners failed to make out a case that they come under one of the exceptions to the General rule regarding availability of alternative remedy as held in Whirlpool Corporation Vs. Registrar of Trade Marks, cited supra.”

The Bench said that an Appeal remedy available before the High Court on question of law cannot be termed as an in-effective remedy by no stretch of imagination.

Senior Advocates Arvind Datar, P.H. Arvind Pandian, P.S. Raman, Srinath Sridevan, Vijay Narayan, Sajan Poovaya, Harish Narasappa, and Advocate P.J. Rishikesh appeared for the Petitioners while Additional Solicitor General (ASG) S.V. Raju and Special Public Prosecutor (SPP) N. Ramesh appeared for the Respondents.

Brief Facts

The Writ Petitions were filed against the Complaint made by the Deputy Director of ED, complaining violation of FEMA and Transfer or Issue of Security by a Person Resident Outside India, Regulations 2000 (TISPRO Regulations) and the show-cause notice issued by the Special Director, Adjudicating Authority, ED against the Petitioners.

The main allegation against the Petitioners was that they had contravened the provisions of Section 6 (3) (b) read with Section 47 of FEMA read with Regulations 3, 4, and 5 and para-3 and para 9(1) (B) (i) of Schedule 1 of TISPRO Regulations and annexure – B to para 2 of Schedule – 1 of TISPRO Regulations read with consolidated FDI Policies. The noticee was the M/s. Flipkart Online Services Private Limited, incorporated by the Petitioners.

Reasoning

The High Court in the above regard, noted, “Any final order passed by the adjudicating authority under Section 16 is liable to be questioned by filing an appeal under Section 19 of FEMA. Any order passed in appeal by the Tribunal can be questioned by aggrieved party by filing a further appeal before this Court under Section 35 of FEMA. Therefore, the petitioners are not only entitled to file one appeal, the petitioners are also entitled to file further appeal or second appeal before this Court under Section 35 of FEMA, if the petitioners are able to make out a question of law out of the order passed by the Appellate Tribunal.”

The Court elucidated that under the scheme of FEMA, remedy is not just available before the regular Civil Court and the same is available before the Constitutional Court, namely High Court under Section 35 of the said Act, and therefore, any Order passed by adjudicatory authority in a proceeding initiated under Section 16 is liable to be scrutinized by the High Court in a second Appeal filed by the aggrieved party.

“In view of the discussions made earlier, I uphold the preliminary objection raised by the learned Additional Solicitor General regarding maintainability of the writ petitions. … In the case on hand, the petitioners have not even submitted their explanation to the adjudicatory authority and rushed to this Court immediately on receipt of the show cause notice”, it added.

Accordingly, the High Court dismissed the Writ Petitions and granted liberty to the Petitioners to file their explanation/objections before the adjudicating authority within 30 days.

Cause Title- Sachin Bansal v. The Directorate of Enforcement & Ors.

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