Karnataka High Court Stays FEMA Proceedings Against Cafe Coffee Day CEO Malavika Hegde

The Karnataka High Court in an interim order on Monday (January 19) stayed proceedings initiated against CEO of popular coffee chain 'Cafe Coffee Day' Malavika Hegde subsequent to a 2022 complaint lodged under the Foreign Exchange Management Act. Appearing for Hegde, senior advocate Sajjan Poovaya argued that Cafe Coffee Day (CCD) was a company started, managed and controlled by the petitioner's deceased husband VG Siddhartha. Poovaya said that in 2010 there were certain transactions in which foreign investments were made into the company. He said that as on the date of the complaint (3-11-2022), her husband having been dead, the complaint could not have been filed in his name with her name as his legal representative.Poovaya said that the complaint is against the company, but it was also lodged against Hegde as legal representative of her husband, because her husband was the CEO when the alleged illegality occurred. Referring to Section 43 FEMA, he said that if her husband had suffered a penalty, then ED could have enforced the penalty on her, but the agency cannot initiate a complaint as initiation of complaint against a dead person is not known to law. "I am the wife. Today summons are being issued to me 'please come answer as legal representative of your husband' as to what he did in 2010 in the company. Whether I have knowledge...I am not to suffer the enormity of these proceedings. I have sought stay of proceedings qua me," Poovaya emphasized. After hearing the matter, Justice BM Shyam Prasad, while issuing notice to the ED, dictated in his order:"...senior counsel is heard on ground of ad interim order. The learned senior counsel arguing in support of stay of further proceedings pursuant to show cause notice dated 23-11-2022 and complaint 3-11-2022, qua the petitioner submits that the petitioner's husband has died in 2019. Proceedings are initiated for adjudication under Section 16 of the FEMA on 3-11-2022 against the petitioner as legal representative of her deceased husband. Learned senior counsel submits that under scheme of the Act the petitioner's liability even if any could only have been only if there was an adjudication under penalty order as contemplated under Section 43 of the Act and not other wise . He submits that a legal representative cannot be called upon to answer a liability to pay penalty for an action that could be by the deceased. In consideration of the submissions interim order is granted staying further proceedings under show cause notice dated 23-11-2022 qua the petitioner until the next date of hearing...".The plea challenges a November 2022 complaint and proceedings initiated subsequent thereto including a show cause notice under the FEMA. As interim relief, the plea seeks stay on all further proceedings in show cause notice dated November 23, 2022 as well as Complaint dated November 3, 2022 pending with the ED. The matter is listed on February 23. Case title: MRS. MALAVIKA HEGDE v/s EDWP 1305/2026

Karnataka High Court Stays FEMA Proceedings Against Cafe Coffee Day CEO Malavika Hegde

Malavika Prasad

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