Proceedings for violation of FERA provisions cannot be initiated after 2 years from commencement of FEMA: Karnataka HC

Read Judgement: UoI & Ors. vs. Atul Lall

LE Staff

Bengaluru, August 17, 2021: The Karnataka High Court has ruled that proceedings for violation of provisions of the Foreign Exchange Regulation Act, 1973 cannot be initiated after two years from commencement of the Foreign Exchange Management Act, 1999.

While dismissing the appeal, a Division Bench of Justice Alok Aradhe & Justice Hemant Chandangoudar observed that when the show cause notice (SCN) issued under FERA was itself held to be without jurisdiction by the Single Judge, then the question of relegating the Respondent to alternative remedy did not arise. 

The Respondent in the present case was one of the directors of M/s. Entel (Pvt.) Ltd., who was issued a show cause as to why proceedings under section 13(1) of FEMA for violation of sec. 7(1) of FERA should not be initiated against him. When the Respondent challenged the validity of such order contending that SCN was per se without jurisdiction, the same was quashed by the Single Judge’s order. 

The present intra-court appeal was filed under section 4 of the Karnataka High Court Act, assailing the validity of the order.

Justice Aradhe observed that the High Court may exercise its writ jurisdiction, in spite of availability of alternative remedy. 

In instant case, it was evident that an adjudicating officer shall not take any notice of any contravention u/s 51 of the repealed Act after expiry of 2 years from date of commencement of FEMA, noted Justice Aradhe. 

However, the High Court found that the proceeding was initiated against Respondent in respect of an offence under the repealed Foreign Exchange Regulation Act and SCN was issued to the Respondent on February 05, 2010. 

Therefore, Justice Aradhe concluded the SCN to be per se without jurisdiction, as had been issued in violation of bar contained u/s 49(3) of FEMA.