Notice Issued By Adjudicating Authority To Initiate Proceedings Under FEMA Not Appealable, Writ Petition Maintainable: Jammu & Kashmir High Court

The Jammu and Kashmir and Ladakh High Court has recently clarified that appeals before the Special Director (Appeals) in FEMA cases are only maintainable against orders passed by the Adjudicating Authority under Rule 4(8) of the 2000 Rules, and not against any prior proceedings initiated by the Authority.

Justice Sanjay Dhar thus held that a notice issued by the adjudicating authority to initiate proceedings against a party under Section 13 FEMA is not an 'order' and is not appealable and thus, a writ petition assailing the same is maintainable.

The bench made these observations while hearing a plea in terms of which the petitioner had challenged a communication issued by ED official opining that adjudication proceedings as contemplated under Section 13(1) FEMA should be held against the petitioners.

In the instant case the petitioners had received a show cause notice from ED stating that a complaint under Section 16(3) of FEMA had been filed against them for contravention of FEMA and the Rules and Regulations framed thereunder. The notice asked the petitioners to show cause why adjudication proceedings should not be held against them, and why the seized foreign currency of 1,00,000/ US Dollars should not be confiscated to the Central Government.

The petitioners filed a reply to the show cause notice, raising preliminary objections with regard to maintainability of the proceedings and contending that the criminal trial and the complaint filed by ED are technically intertwingled. The petitioners also filed a reply on the merits of the complaint and submitted that the documents relied upon were unreadable, blurred, and not legible.

However, the Adjudicating Authority, after considering the petitioners' reply, framed an opinion that adjudication proceedings under Section 13(1) of FEMA should be held against the petitioners.

Challenging the communication the petitioners contended that the Adjudicating Authority, without taking note of the request of the petitioners that they should be allowed to inspect the documents relied upon in the complaint as the same are not legible, issued the impugned communication/notice.

It was also submitted that it was incumbent upon the respondents to provide legible copies of the documents relied upon in the complaint or to allow the petitioners to have inspection of the documents in their office but without doing so, the Adjudicating Authority has, in a mechanical manner, issued the impugned communication/notice.

The respondents contested the petition on the grounds that the impugned communication is appealable before the Court of Special Director (Appeals) under FEMA provisions and hence the petitioners could not have invoked the writ jurisdiction of the court without exhausting this remedy.

Dealing with the preliminary objection, the bench observed that Section 17 of FEMA allows for appeals against orders of the Adjudicating Authorities, which can be heard by a Special Director (Appeals) appointed by the Central Government. However, in the case at hand, the Adjudicating Authority has not yet passed an order against the petitioner but has instead formed an opinion that an enquiry should be held against them, and issued a notice to appear, the bench pointed.

Elaborating further on the matter Justice Dhar observed that according to Rule 4(8) of the Rules of 2000, the Adjudicating Authority can only pass an order and impose a penalty if it is satisfied that a contravention has been committed based on the evidence presented. It is only such an order imposing a penalty that can be appealed before the Special Director (Appeals) in accordance with Section 13 of FEMA, the bench underscored.

Observing that the the contention of counsel for the respondents that the impugned notice issued by the respondents to the petitioners is appealable in nature, is without any merit, the bench recorded,

"Every proceeding initiated by the Adjudicating Authority prior to passing of an order under Rule 4(8) of the Rules of 2000 is not appealable before Special Director (Appeals)"

Accordingly the bench allowed the petition and proceeded to hear the matter on merits.

Case Title: Mushtaq Ahmad Dar Vs Enforcement Directorate & Ors

Citation: 2023 LiveLaw (JKL) 96

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