Madras High Court
Sachin Bansal vs The Directorate Of Enforcement on 29 January, 2025
W.P.Nos.18630 of 2021 etc batches
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 02.01.2025
PRONOUNCED ON :29.01.2025
CORAM:
THE HONOURABLE MR.JUSTICE S.SOUNTHAR
W.P.Nos.18630, 18682, 24511, 24517, 23019, 23013,
23231, 23237, 23235, 23236, 20721 of 2021
and WMP.Nos.25826, 24206, 24208, 24210, 24213,
24214, 24525, 24527, 24530, 24534, 25824, 19869, 19935, 25830
21974, 21984, 19871 and 25829 of 2021
Sachin Bansal ... Petitioner
Vs.
1.The Directorate of Enforcement,
Government of India, Ministry of Finance,
Department of Revenue.
2.The Special Director,
Adjudicating Authority,
Directorate of Enforcement, Government of India,
Ministry of Finance, Department of Revenue,
Southern Regional Office, Shastri Bhavan, HI Floor,
III Block, 26, Haddows Road, Chennai – 600 006.
3.The Deputy Director of Enforcement,
Directorate of Enforcement, Government of India,
Ministry of Finance, Department of Revenue,
3rd Floor, “B” Block, BMTC, Shanthinagar TTMC,
K.H.Road, Shanthinagar, Bengaluru – 560 027.
... Respondents
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Prayer: Writ Petition filed under Article 226 of Constitution of India, to issue
a Writ of Certiorari, to call for the records of the 2nd respondent relating to
impugned notice dated July 1, 2021 bearing reference
No.F.No.T-4/SRO/SDE/BGZO/07/2021 in so far as the petitioner herein is
concerned and to quash the same as illegal and arbitrary.
For Petitioners
in W.P.No.18630 of 2021 : Mr.Arvind Datar
Senior Advocate
for M/s.Edward Jamesh
W.P.No.18682 of 2021 :Mr.P.H.Arvind Pandian
Senior Advocate
W.P.No.24511 of 2021 :Mr.P.S.Raman,
Senior Advocate
W.P.No.24517 of 2021 :Mr.Srinath Sridevan,
Senior Advocate
for M/s.P.J.Rishikesh
W.P.Nos.23019
&23013 of 2021 :Mr.Vijay Narayan
Senior Advocate
for M/s.N.C.Ashok Kumar
W.P.Nos.23231, 23237,
23235 and 23236 of 2021 :Mr.Sajan Poovaya
Senior Advocate
for M/s.Manu Kulkarni
W.P.No.20721 of 2021 :Mr.Harish Narasappa
Senior Advocate
for M/s.P.Giridharan
For Respondents : Mr.S.V.Raju
Additional Solicitor General
Assisted by Mr.N.Ramesh
Special Public Prosecutor
for all Wps.
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COMMON ORDER
These writ petitions are filed challenging the complaint made by
the 3rd respondent against the petitioners complaining violation of Foreign
Exchange Management Act (herein after called FEMA) and Transfer or Issue
of Security by a Person Resident Outside India, Regulations 2000 (herein after
called as TISPRO Regulations) and the show cause notice issued by the
second respondent dated 01.07.2021 against the petitioners based on the
complaint of the 3rd respondent. The writ petitions in W.P.Nos.18682, 24517,
23237, 23235, 23013 of 2021 are filed challenging the complaint of the 3rd
respondent by noticees 2, 3, 6, 7 and 10 respectively. The writ petitions in
W.P.Nos.18630, 24511, 23231, 23236, 20721 and 23019 of 2021 are filed by
noticees 2, 3, 6, 7, 9 and 10 respectively challenging the show cause notice
issued by the second respondent based on the complaint of the 3rd respondent.
2. The main allegation against the petitioners is that they have
contravened the provisions of Section 6 (3) (b) r/w Section 47 of the Foreign
Exchange Management Act, 1999 r/w Regulations 3, 4 and 5 and
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para-3 and para 9(1) (B) (i) of Schedule 1 of TISPRO Regulations 2000 and
annexure – B to para 2 of schedule – 1 of TISPRO Regulations 2000 r/w
consolidated FDI Policies dated 01.04.2010 and 01.10.2010.
3. The noticee No.1 M/s.Flipkart Online Services Private
Limited was incorporated by noticee Nos. 2 and 3 namely Shri Sachin Bansal
and Shri Binny Bansal. It is not in dispute that they were its first Directors
and shareholders. The noticee No.10, M/s.WS Retail Services Limited was
incorporated by very same persons namely noticee Nos.2 and 3 and they were
its first Directors and shareholders. The main complaint of the 3rd respondent
against the noticees was that noticee No.1 was engaged in the business of
wholesale cash and carry and received Foreign Director Investment (FDI)
from Foreign Investors namely noticees Nos.6 and 8 equivalent to
Rs.142,40,38,518/- and issued equity shares without prior approval of
Government of India.
4. Similarly, noticee No.4 received FDI of Rs.6353,76,36,033/-
from noticee No.5 and issued equity shares without prior approval of
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competent authority. The noticee No.5 also purchased equity shares to the
above mentioned value without prior approval of competent authority and
thereby contravened the above mentioned provisions of FEMA r/w TISPRO
Regulations. Likewise, noticee No.8 and 6 by acquiring equity shares from
noticee No.1 as mentioned above violated the relevant provisions. It is also
stated that noticee No.10 was only a dummy company established by
Shri Sachin Bansal and Shri Binny Bansal, Directors of noticee No.1 holding
100% equity shares of the said company. It was also stated that noticee No.1
sold goods exclusively to noticee No.10, who in turn sold the goods in retail
to the ultimate customer. The noticee Nos.1 and 10 belonged to the same
group of companies and controlled by same persons. It is also stated that
noticee No.10 was created and continued as a corporate entity to bifurcate the
business to customer transactions (of noticee No.1 to retail customers) into
business to business (of noticee No.1 to noticee No.10) transactions and
business to customer (of noticee No.10 to retail customers) transactions. Thus
the noticees were said to have contravened the above mentioned provisions of
FEMA, 1999 r/w Regulations 3, 4 and 5 and para-3 and para 9(1) (B) (i) of
Schedule 1 of TISPRO Regulations 2000.
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5. The complaint of the 3rd respondent was preferred to the
second respondent on 28.06.2021 and pursuant to the same, the second
respondent issued impugned show cause notice dated 01.07.2021 to the
petitioners and other noticees directing them to show cause as to why an
adjudication proceedings as contemplated under Section 16 of FEMA should
not be initiated against them in the manner as provided under Rule 4 of
Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules
2000 for the above mentioned contravention. The notice further read that in
case the second respondent decides to hold adjudication proceedings, the
noticees would be required to appear either in person or through the legal
practitioner/Chartered Accountant during enquiry. Challenging the complaint
of the third respondent and the consequential show cause notice issued by the
second respondent, the petitioners have come before this Court.
6. Heard the arguments of the learned senior counsel appearing
for the petitioners viz., Mr.Arvind Datar, Senior Advocate, for M/s.Edward
Jamesh in W.P.No.18682 of 2021, Mr.P.H.Arvind Pandian, Senior Advocate
in W.P.No.18630 of 2021, Mr.P.S.Raman, Senior Advocate, in
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W.P.No.24511 of 2021, Mr.Srinath Sridevan, Senior Advocate, for
M/s.P.J.Rishikesh in W.P.No.24517 of 2021, Mr.Vijay Narayan, Senior
Advocate, for M/s.N.C.Ashok Kumar, in W.P.Nos.23019 & 23013 of 2021,
Mr.Sajan Poovaya, Senior Advocate, for M/s.Manu Kulkarni, in
W.P.Nos.23231, 23237, 23235 and 23236 of 2021, Mr.Harish Narasappa,
Senior Advocate, for M/s.P.Giridharan in W.P.No.20721 of 2021 and
the learned Senior counsel appearing for the respondent viz., Mr.S.V.Raju,
Additional Solicitor General, Assisted by Mr.N.Ramesh, Special Public
Prosecutor.
7. The learned Senior Counsel appearing for the petitioners
raised the following points:
I. The impugned notice was issued by the second respondent on
01.07.2021 for initiating proceedings against the petitioners/noticees for
alleged contravention of above mentioned provisions of FEMA that had taken
place during the period from 2009-2011 and hence there is an unreasonable
delay of nearly 10 years in initiating proceedings and therefore, the impugned
complaint of the 3rd respondent and the impugned show cause notice issued by
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delay.
In support of the said contention, the learned senior counsel
appearing for the petitioners relied on the following judgments:
(i) Union of India and another Vs. Citi Bank reported in 2022
SCC OnLine SC 1073;
(ii) Government of India Vs. Citedal Fine Pharmaceuticals
reported in (1989) 3 SCC 483;
(iii) State of Punjab and others Vs. Bhatinda District
Co-operative Milk Producers Union Limited reported in (2007) 11 SCC
363;
(iv) The judgment passed in W.A.No.1517 of 2021 and batch
cases by Division Bench of this Court in Commissioner of Income Tax and
others Vs. Roca Bathroom Products Limited and others.
II. The impugned communication was made without authority of
law as the relevant provision of FEMA namely, Section 6(3) of said Act was
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omitted by Section 139 of Finance Act of 2015, w.e.f 15.10.2019 and hence
on the date of complaint as well as impugned show cause notice, Section
6 (3) (b) of FEMA was not available in Statute Book and hence the impugned
notice issued by second respondent alleging contravention of Section 6(3) (b)
is untenable in law. It is submitted by the learned counsel appearing for the
petitioners that omission of a provision in Statute Book would completely
obliterate the effect of the omitted provision even during its existence in the
Statute Book. In other words, he would submit that Section 6 of General
Clauses Act is not applicable to provisions which are omitted by the
legislation and the same is applicable only to the provisions which are
repealed by the legislation. Therefore, it is submitted that no proceedings can
be initiated against the petitioners/noticees in respect of the Act done in the
year 2009-2011 even though the above said provision was very much
available in the Statute Book.
In support of the said contention, the learned Senior Counsel
appearing for the petitioners relied on the following judgments:
(i) Rayala Corporation. (P) Ltd. and another v. Director of
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(ii) Kolhapur Cane Sugar Works Limited and another Vs Union of
India and others reported in (2000) 2 SCC 536.
It is further submitted by the learned counsel appearing for the
petitioners that since there was no saving clause in Finance Act of 2015 which
omitted Section 6(3) of FEMA, the impugned communication issued by the
second respondent has no sanctity of law.
III. It is submitted by the counsel for the petitioners that the
common counter filed by the 3rd respondent on behalf of the respondents 1
and 2 would make it clear that the second respondent/adjudicating authority
already made up his mind against the petitioners and hence no purpose will be
served by filing an explanation to the show cause notice before the
adjudicating authority. In other words, it is the specific submission of the
learned senior counsel appearing for the petitioner that in view of the specific
stand that had been taken by the respondents in the counter affidavit filed
before this Court, the adjudication under Section 16 of FEMA by the second
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respondent is hit by rule against bias and therefore the writ petition against
show cause notice is very well maintainable.
IV. It is submitted by the learned counsel appearing for the
petitioners that relegating the petitioners to go before the adjudicating
authority, who had made up his mind already by taking a definite stand in the
counter affidavit, is violation of principles of natural justice. Further it is
submitted that the impugned notice issued by the second respondent after
omission of Section 6(3) of FEMA has no authority of law and hence the same
is issued without jurisdiction. In view of the same, the writ petition filed by
the petitioners before this Court without offering their explanation to the show
cause notice and availing alternative remedy available under the Act is very
well maintainable.
8. Per contra, the learned Additional Solicitor General appearing
for the Enforcement Directorate raised preliminary objection as regards the
maintainability of writ petitions by contending that no writ petition is
maintainable against mere show cause notice when the petitioners are having
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the option of submitting their explanation to the show cause notice and
participating in the adjudicatory process as contemplated under Section 16 of
FEMA. The learned Additional Solicitor General further submitted that
against the order passed by the adjudicating authority under Section 16 of
FEMA, an appeal shall lie before the Appellate Tribunal under Section 19 of
said Act. Against the order passed by the Appellate Tribunal, a further appeal
will lie before this Court under Section 35 of FEMA. In view of the effective
alternative remedy available to the petitioners including the remedy of appeal
before this Court under Section 35 of FEMA, the writ petitions filed by the
petitioners without exhausting alternative remedy are not maintainable.
9. The learned Additional Solicitor General by taking this Court
to the counter affidavit filed by the 3rd respondent in W.P.Nos.18630 and
18682 of 2021 submitted that the common counter affidavit was sworn by the
3rd respondent and the same is filed only on behalf of the first and third
respondent. He emphasised that the common counter affidavit was not filed
on behalf of the second respondent and the expression common counter was
used to denote the counter was common in two writ petitions in
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W.P.Nos.18630 and 18682 of 2021. Therefore, he submitted that the
allegation made by the petitioners that the second respondent is biased by
taking a definite stand in the counter affidavit is without any substance. The
learned Additional Solicitor General further submitted that under the
provisions of FEMA, no time limit is prescribed for initiating action under
Section 13 of said Act, though he conceded that even in the absence of time
prescribed under the Act, the proceedings shall be initiated within reasonable
time. However, he added that what is reasonable time is a question of fact
and the same shall be left to the decision of the adjudicating authority and the
said question cannot be considered by this Court, while exercising the writ
jurisdiction.
10. The learned Additional Solicitor General appearing for the
Enforcement Directorate by drawing the attention of this Court to judgment of
the Apex Court in Fibre Boards Private Limited Vs. Commissioner of
Income Tax reported in (2015) 10 SCC 333 submitted that there is no
difference between the expression “repeal” and “Omission”. The decision of
the Apex Court in Fibre Board case rendered the earlier
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decisions in Rayala Corporation case and Kolhapur Cane Sugar case as
per incuriam as the effect of Section 6 (A) of General Clauses Act had not
been discussed in those two judgments.
11. The learned Additional Solicitor General further submitted
that Finance Act 20 of 2015 which deleted Section 6 (3) (b) of FEMA re-
enacted the same by introducing Section 6(2) (A) by empowering the Central
Government to issue Regulations regarding capital account transactions. He
has also drawn the attention of this Court to Section 47 (3) of FEMA
introduced by Finance Act 20 of 2015 which saves the Regulations made by
Reserve Bank of India under Sections 6 and 47 of FEMA on capital account
transactions. Therefore, he submitted that Section 47(3) newly introduced by
Finance Act 20 of 2015 is a saving clause which saves the earlier TISPRO
Regulations issued by Reserve Bank of India by exercising the power under
omitted provisions. Therefore, it is the submission of the learned Additional
Solicitor General that TISPRO provisions were saved by Section 47(3) of
FEMA introduced by Finance Act 20 of 2015.
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12. Discussion on Preliminary Objection raised by the
respondents:
Since the learned Additional Solicitor General raised preliminary
objection with regard to the maintainability of the writ petitions by pointing
out the effective alternative remedy available under FEMA, the learned
counsel appearing for the petitioners advanced arguments on the preliminary
objection raised by the Additional Solicitor General. The learned Additional
Solicitor General by taking this Court to Section 19 and 35 of FEMA
submitted that any person aggrieved by the order passed by the adjudicatory
authority under Section 16 of FEMA can file an appeal before Appellate
Tribunal under Section 19 of the said Act. Any person further aggrieved by
the order passed by the Appellate Tribunal may file an appeal before High
Court under Section 35 of FEMA. Therefore, the learned Additional Solicitor
General submitted that the Act provides for effective remedy including appeal
remedy before this Court and hence the petitioners are not entitled to invoke
the extraordinary remedy of writ.
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13. The learned Senior Counsel appearing for the petitioners
submitted that in view of violation of natural justice principles and also the
fact that impugned show cause notice having been issued without jurisdiction,
the petitioners need not be relegated to the alternative remedy of statutory
appeal provided under the Act.
14. It is settled law that existence of alternative remedy is not a
bar for invoking Article 226 of Constitution of India especially in following
cases:
(i) Violation of fundamental rights;
(ii) Violation of natural justice principles;
(iii) Impugned order passed without authority of law or
jurisdiction;
In this regard, reference may be had to Whirlpool Corporation
Vs. Registrar of Trade Marks, reported in (1998) 8 SCC 1, wherein the
Hon’ble Apex Court held as follows:
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W.P.Nos.18630 of 2021 etc batches“15. Under Article 226 of the Constitution, the
High Court, having regard to the facts of the case, has a
discretion to entertain or not to entertain a writ petition. But
the High Court has imposed upon itself certain restrictions one
of which is that if an effective and efficacious remedy is
available, the High Court would not normally exercise its
jurisdiction. But the alternative remedy has been consistently
held by this Court not to operate as a bar in at least three
contingencies, namely, where the writ petition has been filed
for the enforcement of any of the Fundamental Rights or where
there has been a violation of the principle of natural justice or
where the order or proceedings are wholly without jurisdiction
or the vires of an Act is challenged.”
15. It is submitted by the learned counsel appearing for the
petitioners that Section 6(3) of FEMA was omitted by Act 20 of 2015
w.e.f 15.10.2019 and hence impugned show cause notice issued by the second
respondent for alleged violation of Section 6 (3) (b) of FEMA was issued
without authority of law by relying on the Rayala Corporation Vs. Director
of Enforcement Directorate case and Kolhapur Cane Sugar Works Limited
Vs Union of India case.
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16. The learned counsel appearing for the petitioners submitted
that whenever a provision is omitted, it obliterates the same from the Statute
Book and it cannot be equated with repealed provision. Therefore, it is
submitted by the petitioners that Section 6 of General Clauses Act cannot be
resorted to by the respondents for issuing impugned notice on the ground that
at the relevant point of time Section 6 (3) (b) was available. In Rayala
Corporation case while discussing the difference between repeal and
omission, the Apex Court observed as follows:
“17. Reference was next made to a decision of the
Madhya Pradesh High Court in State of M.P. v. Hiralal
Sutwala but, there again, the accused was sought to be
prosecuted for an offence punishable under an Act on the
repeal of which Section 6 of the General Clauses Act had been
made applicable. In the case before us, Section 6 of the
General Clauses Act cannot obviously apply on the omission
of Rule 132-A of the DIRs for the two obvious reasons that
Section 6 only applies to repeals and not to omissions, and
applies when the repeal is of a Central Act or Regulation and
not of a rule. If Section 6 of the General Clauses Act had been
applied, no doubt this complaint against the two accused for
the offence punishable under Rule 132-A of the DIRs could
have been instituted even after the repeal of that rule.”18/44
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17. The above said decision was reiterated by the subsequent
decision of the Apex Court in Kolhapur Cane Sugar Works Limited and
another Vs Union of India reported in (2000) 2 SCC 536, wherein, it was
held as follows:
“37.The position is well known that at common law, the
normal effect of repealing a statute or deleting a provision is to
obliterate it from the statute-book as completely as if it had
never been passed, and the statute must be considered as a law
that never existed. To this rule, an exception is engrafted by the
provisions of Section 6(1). If a provision of a statute is
unconditionally omitted without a saving clause in favour of
pending proceedings, all actions must stop where the omission
finds them, and if final relief has not been granted before the
omission goes into effect, it cannot be granted afterwards.
Savings of the nature contained in Section 6 or in special Acts
may modify the position. Thus the operation of repeal or
deletion as to the future and the past largely depends on the
savings applicable. In a case where a particular provision in a
statute is omitted and in its place another provision dealing
with the same contingency is introduced without a saving
clause in favour of pending proceedings then it can be
reasonably inferred that the intention of the legislature is that19/44
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proceedings for the same purpose may be initiated under the
new provision.
38. In the present case, as noted earlier, Section 6 of the
General Clauses Act has no application. There is no saving
provision in favour of pending proceedings. Therefore action
for realisation of the amount refunded can only be taken under
the new provision in accordance with the terms thereof.”
18. The above two decisions were considered and the contrary
view has been taken by the Apex Court in a subsequent decision in Fibre
Boards Private Limited Vs. Commissioner of Income tax reported in
(2015) 10 SCC 333. The relevant observation of the Apex Court reads as
follows:
32. Secondly, we find no reference to Section 6-A of the General
Clauses Act in either of these Constitution Bench judgments. Section 6-
A reads as follows:
“6-A.Repeal of Act making textual amendment in Act or
Regulation.—Where any Central Act or Regulation made after
the commencement of this Act repeals any enactment by which20/44
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express omission, insertion or substitution of any matter, then,
unless a different intention appears, the repeal shall not affect
the continuance of any such amendment made by the enactment
so repealed and in operation at the time of such repeal.”
33. A reading of this Section would show that a repeal by an
amending Act can be by way of an express omission. This being the
case, obviously the word “repeal” in both Section 6 and Section 24
would, therefore, include repeals by express omission. The absence
of any reference to Section 6-A, therefore, again undoes the
binding effect of these two judgments on an application of the per
incuriam principle. (emphasis supplied)
34.Thirdly, an earlier Constitution Bench judgment referred
to earlier in this judgment, namely, State of Orissa v. M.A. Tulloch
& Co. has also been missed. The Court there stated: (SCR pp. 483-
84 : AIR pp. 1294-95, para 21)
“… Now, if the legislative intent to supersede the earlier law is the
basis upon which the doctrine of implied repeal is founded could
there be any incongruity in attributing to the later legislation the
same intent which Section 6 presumes where the word ‘repeal’ is
expressly used. So far as statutory construction is concerned, it is21/44
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W.P.Nos.18630 of 2021 etc batchesone of the cardinal principles of the law that there is no distinction
or difference between an express provision and a provision which
is necessarily implied, for it is only the form that differs in the two
cases and there is no difference in intention or in substance. A
repeal may be brought about by repugnant legislation, without
even any reference to the Act intended to be repealed, for once
legislative competence to effect a repeal is posited, it matters little
whether this is done expressly or inferentially or by the enactment
of repugnant legislation. If such is the basis upon which repeals
and implied repeals are brought about it appears to us to be both
logical as well as in accordance with the principles upon which the
rule as to implied repeal rests to attribute to that legislature which
effects a repeal by necessary implication the same intention as that
which would attend the case of an express repeal. Where an
intention to effect a repeal is attributed to a legislature then the
same would, in our opinion, attract the incident of the saving found
in Section 6 for the rules of construction embodied in the General
Clauses Act are, so to speak, the basic assumptions on which
statutes are drafted.”
35. The two later Constitution Bench judgments, also did not have
the benefit of the aforesaid exposition of the law. It is clear that
even an implied repeal of a statute would fall within the expression22/44
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W.P.Nos.18630 of 2021 etc batches“repeal” in Section 6 of the General Clauses Act. This is for the
reason given by the Constitution Bench in M.A. Tulloch Co. that
only the form of repeal differs but there is no difference in intent or
substance. If even an implied repeal is covered by the expression
“repeal”, it is clear that repeals may take any form and so long as
a statute or part of it is obliterated, such obliteration would be
covered by the expression “repeal” in Section 6 of the General
Clauses Act.”
19. Thus the Apex Court in Fibre Board case cited supra by
referring to Section 6(A) of General Clauses Act came to the conclusion that
the expression ‘repeal’ would include ‘omission’. In Fibre Board case, the
Apex Court has gone to the extent of saying that the earlier two judgments in
Royala Corporation and Kolhapur Cane Sugar Vs Union of India were
rendered without considering the effect of Section 6(A) of General Clauses
Act and therefore, those two judgments shall be treated as per incuriam.
20. The law laid down by the Apex Court in Fibre Board was
reiterated in subsequent judgment of Apex Court in Shree Bhagwati Steel
Rolling Mills Vs Commissioner of Central excise and another reported in
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(2016) 3 SCC 643.
21. The relevant observation of the Apex Court reads as follows:
“15. It is clear, therefore, that when this Court
referred to Section 6-A of the General Clauses Act in Fibre
Board case and held that Section 6-A shows that a repeal can be
by way of an express omission, obviously what was meant was
that an amendment which repealed a provision could do so by
way of an express omission. This being the case, it is clear that
Section 6-A undisputedly leads to the conclusion that a repeal
would include a repeal by way of an express omission. (emphasis
supplied)……….23.Fibre Board case is a recent judgment
which, as has correctly been argued by Shri Radhakrishnan,
learned Senior Counsel on behalf of the Revenue, clarifies the
law in holding that an omission would amount to a repeal. The
converse view of the law has led to an omitted provision being
treated as if it never existed, as Section 6 of the General
Clauses Act would not then apply to allow the previous
operation of the provision so omitted or anything duly done or
suffered thereunder. Nor may a legal proceeding in respect of
any right or liability be instituted, continued or enforced in24/44
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W.P.Nos.18630 of 2021 etc batchesrespect of rights and liabilities acquired or incurred under the
enactment so omitted. In the vast majority of cases, this would
cause great public mischief, and the decision of Fibre Board
case is therefore clearly delivered by this Court for the public
good, being, at the very least a reasonably possible view. Also,
no aspect of the question at hand has remained unnoticed. For
this reason also we decline to accept Shri Aggarwal’s
persuasive plea to reconsider the judgment in Fibre Board
case. This being the case, it is clear that on point one the
present appeal would have to be dismissed as being concluded
by the decision in Fibre Board case.”
22. A Division Bench of this Court after referring to all the
above mentioned judgments of the Apex Court came to the conclusion that
really there is no difference between the word ‘repeal’ and ‘omission’ by taking
into consideration the effect of Section 6 (A) of General Clauses Act in The
South Indian Sugar Mills Association Vs. The Union of India and others
in W.A.1850 of 2019. The relevant observation of the Division Bench reads
as follows:
“16. One of the earliest authorities which brought up
the question of interpretation between ‘repeal’ and ‘omission’ is the
five-Judge Bench judgment of the Supreme Court in Rayala25/44
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W.P.Nos.18630 of 2021 etc batchesCorporation (P) Ltd. v. Director of Enforcement, New Delhi
[(1969) 2 SCC 412]. The Apex Court brought to the fore Section 6
of the General Clauses Act, 1897 (the GC Act) for the purpose of
distinguishing between the terms ‘repeal’ and ‘omission’ since
Section 6 saves the power of prosecution and punishment for acts
committed in a repealed legislation. The Court while differentiating
the two terms held that:
“Section 6 of the General Clauses Act cannot obviously
apply on the omission of Rule 132-A of the DI Rules for the
two obvious reasons that Section 6 only applies to repeals
and not to omissions, and applies when the repeal is of a
Central Act or Regulation and not of a Rule.”
In the above judgment, the Hon’ble Supreme Court did not discussthe two terms ‘repeal’ and ‘omission’ before coming to the said
conclusion. There is no discussion on how the two terms are
separate and whether they can be used interchangeably. (emphasis
supplied)
17. Rayala Corporation case (cited supra) came for consideration
before the five-Judge Bench of Supreme Court in Kolhapur
Canesugar Works Ltd. v. Union of India (2000) 2 SCC 536. wherein26/44
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W.P.Nos.18630 of 2021 etc batchesthe Apex Court dealt with the definitions of ‘Central Act’,
‘enactment’, ‘regulation’, ‘rule’ as defined in Sections 3(7), 3(19),
3(50) and 3(51) respectively in the General Clauses Act and held that
Section 6 only applies to Central Act and regulations. The Apex
Court further stated that:
“When the Legislature by clear and unambiguous language
has extended the provision of Section 6 to cases of repeal of a
‘Central Act’ or ‘regulation’, it is not possible to apply the
provision to a case of repeal of a ‘rule’ …. Section 6 is
applicable where any Central Act or Regulation made after
commencement of the General Clauses Act repeals any
enactment. It is not applicable in the case of omission of a
“rule”.”The aforesaid judgment neither deals with the distinction between
the terms omission and repeal, nor were any arguments regarding
the same were raised before the Bench. It simply dealt with the
applicability of Section 6 of the General Clauses Act in context of the
rules and upholds Rayala Corporation judgment. But reading
between the lines of Kolhapur Cane sugar judgment, it can be said
that it makes no distinction between repeal and omission. In para 37
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W.P.Nos.18630 of 2021 etc batchesof the judgment, the Apex Court states that:
“37. The position is well known that at common law, the normal
effect of repealing a statute or deleting a provision is to obliterate
it from the statute book as completely as if it had never been
passed, and the statute must be considered as a law that never
existed. To this rule, an exception is engrafted by the provisions of
Section 6(1). If a provision of a statute is unconditionally omitted
without a saving clause in favor of pending proceedings, all
actions must stop where the omission finds them, and if final relief
has not been granted before the omission goes into effect, it
cannot be granted afterwards. Savings of the nature contained in
Section 6 or in special Acts may modify the position. Thus the
operation of repeal or deletion as to the future and the past
largely depends on the savings applicable.” (emphasis supplied)From the emphasised lines above, it can be seen that the Court
uses the term repeal, omission and deletion interchangeably
(emphasis supplied). This is also inferable that in case a
provision is omitted, Section 6 may change the position which is
contrary to Rayala Corporation judgment. Rayala Corporation
supra clearly states that Section 6 of GCA is only applicable to28/44
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W.P.Nos.18630 of 2021 etc batchesthe matters of repeal. So even though it upheld Rayala
Corporation judgment, it did not distinctly lay out the distinction
between the two terms. Further, both the cases (Kohlapur
Canesugar and Rayala Corporation) have not considered Section
6-A of the General Clauses Act, which has been reproduced
hereinafter (emphasis supplied):
“6-A. Repeal of Act making textual amendment in Act or Regulation.—
Where any [Central Act] or Regulation made after the commencement
of this Act repeals any enactment by which the text of any [Central
Act] or Regulation was amended by the express omission, insertion or
substitution of any matter, then, unless a different intention appears,
the repeal shall not affect the continuance of any such amendment
made by the enactment so repealed and in operation at the time of
such repeal.”
18. In General Finance Co. v. Assistant Commissioner of
Income Tax, Punjab [(2002) 7 SCC 1], an argument was raised
stating that the earlier two judgments neither discussed the
distinction between the two terms, nor they considered Section 6-A of
the General Clauses Act. It was further argued that the “use of the29/44
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W.P.Nos.18630 of 2021 etc batcheswords ‘repeals by express omission, insertion or substitution’ will
cover different aspects of repeal; that this is a further legislative
indication that ‘omission’ also amounts to a ‘repeal’ of an
enactment.” However, the Court rejected the argument in light of the
above two five-Judge Bench judgments of the Supreme Court and
also refused to refer the matter to a larger Bench.
19. The matter was however finally dealt in length by a two-Judge
Bench judgment of the Hon’ble Apex Court in Fibre Boards (P) Ltd.,
Bangalore v. Commissioner of Income Tax, Bangalore,[(2015)
10SCC 333] where the view was that Rayala Corporation supra
needs a reconsideration for omission of a provision results in
abrogation or obliteration of that provision in the same way as it
happens in repeal. The Court discussed the two terms and
concluded that “it is clear that repeals may take any form and so
long as a statute or part of it is obliterated, such obliteration would
be covered by the expression “repeal” in Section 6 of the General
Clauses Act.” The Apex Court then went ahead and nullified the
effect of the above five-Judge Bench judgment with respect to
difference between repeal and omission. The Apex Court held that:
“31… once it is found that Section 6 itself would not
apply, it would be wholly superfluous to further state that
on an interpretation of the word “repeal”, an “omission”30/44
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W.P.Nos.18630 of 2021 etc batcheswould not be included. We are, therefore, of the view that
the second so-called ratio of the Constitution Bench in
Rayala Corporation (P) Ltd. cannot be said to be a ratio
decidendi at all and is really in the nature of obiter
dicta.”(emphasis supplied)The Apex Court even declared that the above two five-Judge
Bench decisions in Rayala Corporation case and Kolhapur Canesugar
case were per incuriam (emphasis supplied), as they did not consider
Section 6-A of the General Clauses Act. The Apex Court with this effect
held that:
“33. A reading of this section would show that a repeal by an
amending Act can be by way of an express omission. This being the
case, obviously the word “repeal” in both Section 6 and Section 24
would, therefore, include repeals by express omission. The absence
of any reference to Section 6-A, therefore, again undoes the binding
effect of these two judgments on an application of the ‘per incuriam’
principle.”
20. The same two-Judge Bench of the Hon’ble Supreme Court in
Fibre Boards case, once again decided the issue in detail in Shree
Bhagwati Steel Rolling v. Commissioner of Central Excise and held31/44
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W.P.Nos.18630 of 2021 etc batchesthat delete and omit are used interchangeably, so that when the
expression repeal refers to delete, it would necessarily take within its
ken an omission as well. The Court further observed that all these
expressions only go to form and not to substance.(emphasis
supplied). It also reiterated its stand in Fibre Boards case and held
that “This again does not take us further as this statement of the law
in Rayala Corporation is no longer the law declared by the Supreme
Court after the decision in the Fibre Boards case.”
21. The decision in Fibre Boards and Shri Bhagwati Mills though
rendered by two-Judge Benches of the Hon’ble Supreme Court,
nullified the earlier Constitution Bench judgments by routing through
the principle of per incuriam. (emphasis supplied). It is a welcoming
judgment as it finally clarifies that practically there exist no
difference between the two terms. A plain reading of these words
repeal, omission and substitute will convey more or less the same
meaning – that it is a form of ‘amendment’.
23. A close scrutiny of the above mentioned judgments would
make it clear that there is no real difference between the word ‘repeal’ and
‘omission’ especially in the light of Section 6 (A) of General Clauses Act.
Therefore, this Court has no difficulty in coming to the conclusion that the
word repeal includes the word omission. Therefore, omission of Section 6 (3)
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W.P.Nos.18630 of 2021 etc batches
of FEMA by Finance Act 20 of 2015 can be treated as a repeal and as a
necessary consequence Section 6 of General Clauses Act comes into play.
Once we have come to the conclusion that Section 6 of General Clauses Act is
applicable in case of omission of Section 6(3) of FEMA, the second
respondent is entitled to issue notice for alleged contravention of Section 6(3)
(b) that existed at the relevant point of FDI transactions in the years
2009-2011. Hence, I hold omission of Section 6 (3) by Finance Act 20 of
2015 will not make the impugned show cause notice issued by the second
respondent as the one without sanctity of law. Therefore, the said submission
made by the learned counsel appearing for the petitioners is rejected.
24. It is also vehemently contended by the learned counsel
appearing for the petitioners that the 3rd respondent filed a counter taking a
definite stand against the petitioner and hence no purpose will be served by
relegating the petitioner to approach the adjudicating authority namely the
second respondent who had already made up his mind by filing a counter.
25. A reading of the counter affidavit filed by the 3 rd respondent
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would suggest that he raised a preliminary objection with regard to the
maintainability of the writ petition due to the availability of appeal remedy
under Section 19 (1) and Section 35 of FEMA. The 3 rd respondent in his
counter has only stated that the delay in issuing show cause notice is a factual
issue and the same cannot be agitated in this writ petition. It is further stated
by him that FEMA is a self contained code providing efficacious remedy and
it also prescribed limitation for certain actions. It is further submitted that in
the absence of any limitation prescribed under FEMA for initiation of action
for contravention of the above mentioned provisions of the TISPRO
Regulations, the reasonableness of delay in initiating proceedings can also be
agitated before the concerned authority. Any reference in the counter with
regard to contravention of Section 6(3) (b) of FEMA r/w Section 47 of FEMA
and TISPRO Regulations cannot be equated with pre-determination of mind
by the second respondent. First of all, the counter has not been signed by the
second respondent and it is being signed by the 3rd respondent.
26. In W.P.Nos.18630, 18682, 23231 and 20721 of 2021, the
counter affidavit has been sworn by the 3rd respondent and filed on behalf of
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W.P.Nos.18630 of 2021 etc batches
the respondents 1 and 3. Therefore, counter affidavit has not been filed on
behalf of the second respondent in those cases. In W.P.Nos.23236, 23235,
24511, 24517, 23013 and 23019 of 2021, the counter affidavit has been sworn
by the Subordinate Officer of the 3rd respondent Office (Assistant Director)
and in the first paragraph, it is stated that counter affidavit has been filed on
behalf of all the respondents. Merely, because a Subordinate Officer of 3 rd
respondent has sworn affidavit and filed it on behalf of the second respondent
also in some of the writ petitions, we cannot come to a conclusion that the
second respondent has made up his mind. Further under the scheme of the
Act, the order passed by the second respondent is not final and the same is
subject to the appeal before the Appellate Tribunal under Section 19(1) and
also subject to further appeal before this Court under Section 35 of FEMA.
27. In view of the appellate remedy available before Tribunal as
well as before this Court, we cannot say that relegating the party to submit his
explanation before the second respondent would violate natural justice
principles. First of all, the second respondent has not signed the counter
affidavit and in some of the cases, counter affidavit was filed only for
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W.P.Nos.18630 of 2021 etc batches
respondents 1 and 3 and no counter affidavit was filed on behalf of the second
respondent. In some of the writ petitions, the counter affidavit was sworn by
one of the Subordinate Officers in the Cadre of Assistant Director working in
the office of the third respondent and the same is not binding on the Superior
Officer namely the second respondent. Therefore, I am not impressed by the
arguments advanced on behalf of the petitioners that the second respondent
has already made up his mind regarding the delay in issuing show cause
notice and the contravention of provisions of FEMA and accordingly, the
arguments regarding violation of natural justice principles is also rejected.
28. As mentioned earlier, the impugned show cause notice has
been issued to petitioners by directing them to offer an explanation why
adjudicatory proceedings shall not be initiated against them. After
considering the explanation offered by the petitioner, the second respondent
will decide whether to initiate the adjudicatory proceedings under Section 16
or not. In case he decides to go ahead with adjudication process, the
petitioner shall be given reasonable opportunity to put forth his case. Any
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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.
29. An appeal remedy available before this Court on question of
law cannot be termed as an in-effective remedy by no stretch of imagination.
In fact, the Apex Court in Virudhunagar Hindu Nadargal Dharma
Paribalana Sabai & Ors. Vs. Tuticorin Educational Society & Ors.
reported in (2019) 9 SCC 538) held that existence of alternative remedy
before the regular Civil Court is near total bar for invoking remedy under
Article 227 of Constitution of India. The ratio in the said decision can be
equally applicable to remedy under Art 226 of Constitution of India also in
view of following reason. Under the scheme of FEMA, remedy is not just
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W.P.Nos.18630 of 2021 etc batches
available before the regular Civil Court and the same is available before the
Constitutional Court, namely High Court under Section 35 of said Act.
Therefore, any order passed by adjudicatory authority/second respondent in a
proceeding initiated under Section 16 is liable to be scrutinized by this Court
in a second appeal filed by the aggrieved party. 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.
30. 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.
31. The learned counsel appearing for the petitioners vehemently
contended that when there is no limitation prescribed under the Act for
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initiating proceedings under Section 16, the show cause notice should have
been issued within reasonable time as held in Union of India and others v.
Citi Bank, reported in 2022 SCC OnLine SC 1073 and State of Punjab and
others v. Bhatinda District Coop. Milk Producers Union Ltd., reported in
(2007) 11 SCC 363.
32. A close scrutiny of Citi Bank case would suggest in the said
case, the petitioners submitted a reply to the show cause notice and not
satisfied with the same, the adjudicatory authority proceeded with the
adjudicatory process and challenging the same, writ petitions were filed. 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. Therefore, the ratio laid down in Citi Bank case
cannot be made applicable to the facts of the present case.
33. A reading of Bhatinda case cited supra would indicate that
the same arises out of revisional proceedings initiated for re-opening the
assessment order under Punjab General Sales Tax Act, 1948. Section 11(3)
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W.P.Nos.18630 of 2021 etc batches
of said Act prescribed three years limitation for completing the assessment
from the last date of filing return. Section 11(6) prescribed a limitation of
five years. In the light of the said provisions, the Apex Court observed as
follows:
“17. A bare reading of Section 21 of the Act would
reveal that although no period of limitation has been prescribed
therefor, the same would not mean that the suo motu power can be
exercised at any time.
18. It is trite that if no period of limitation has been
prescribed, statutory authority must exercise its jurisdiction within
a reasonable period. What, however, shall be the reasonable period
would depend upon the nature of the statute, rights and liabilities
thereunder and other relevant factors.”
34. Therefore, the maximum period of five years of limitation
for the revisional authority to exercise its jurisdiction was fixed by taking into
consideration the scheme of the said Act. Therefore, the maximum period of
five years fixed as a reasonable period in the said case law cannot be made
applicable as a general rule to all the cases.
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35. As discussed earlier, the reasonable necessary delay in
issuing show cause notice depends on facts and circumstances of the case and
the said factual aspect can also be raised by the petitioners before the second
respondent.
36. In case, the second respondent holds against the petitioner,
they are entitled to avail remedy of appeal before the Appellate Tribunal as
well as this Court as mentioned earlier. In view of the fact that any decision
by the second respondent on the question of delay is liable to be scrutinized
by this Court under regular statutory appeal, this Court is not inclined to go
into the question at this stage.
37. The learned counsel appearing for the petitioner in
W.P.No.23231 and 23237 of 2021 submitted that the petitioner is a company
incorporated in Mauritius and as per the law governing the companies in that
country, the records of the company need to be preserved only for a period of
seven years. Since the show cause notice being issued beyond the said
period, the petitioners find it difficult to offer the explanation to the show
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W.P.Nos.18630 of 2021 etc batches
cause notice.
38. It is not in dispute that noticee No.6, the petitioner in
W.P.No.23231 and 23237 of 2021 acquired shares of noticee No.1. When the
fact of acquisition of shares by petitioner in W.P.No.23231 and 23237 of 2021
is not disputed, the alleged prejudice argued by the counsel for the petitioner
is not appealable to this Court. In any event, this Court is not inclined to give
any categorical finding on that aspect and it is open to the petitioner to raise
objections and give its explanation before the adjudicatory authority and
whose order is liable to be scrutinized by this Court in a regular appeal under
Section 35 of FEMA.
39. In view of the discussions made earlier, all the writ petitions
are dismissed with liberty to the petitioners to file their explanation/objections
before the second respondent within 30 days from the date of receipt of copy
of this order. If any such objection is received by the second respondent, the
same shall be considered by him in accordance with law. No costs.
Consequently, connected miscellaneous petitions are closed.
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29.01.2025
Index : Yes / No
Speaking order : Yes / No
Neutral Citation : Yes / No
ub
To
1.The Directorate of Enforcement,
Government of India, Ministry of Finance,
Department of Revenue.
2.The Special Director,
Adjudicating Authority,
Directorate of Enforcement, Government of India,
Ministry of Finance, Department of Revenue,
Southern Regional Office, Shastri Bhavan, HI Floor,
III Block, 26, Haddows Road, Chennai – 600 006.
3.The Deputy Director of Enforcement,
Directorate of Enforcement, Government of India,
Ministry of Finance, Department of Revenue,
3rd Floor, “B” Block, BMTC, Shanthinagar TTMC,
K.H.Road, Shanthinagar, Bengaluru – 560 027.
S.SOUNTHAR, J.
ub
Pre-Delivery Order made in
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W.P.Nos.18630, 18682, 24511, 24517, 23019, 23013,
23231, 23237, 23235, 23236, 20721 of 2021
29.01.2025
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