FEMA – INSHIGHTS ON FEMA VIOLATION
Important judgment – Madras Hight Court Challenging ED’s Show Cause Notice for Alleged FEMA Violation – reasonable time for initiating proceedingsย
๐๐ฒ๐ ๐ฃ๐ผ๐ถ๐ป๐:
Court addressed writ petitions challenging complaints and show cause notices related to alleged ๐๐ถ๐ผ๐น๐ฎ๐๐ถ๐ผ๐ป๐ ๐ผ๐ณ ๐๐ต๐ฒ ๐๐ผ๐ฟ๐ฒ๐ถ๐ด๐ป ๐๐ ๐ฐ๐ต๐ฎ๐ป๐ด๐ฒ ๐ ๐ฎ๐ป๐ฎ๐ด๐ฒ๐บ๐ฒ๐ป๐ ๐๐ฐ๐ (FEMA) and TISPRO. The ED initiated the proceedings in 2021 for the alleged violation of Foreign Direct Investment policy between 2009 and 2014.
๐๐ฎ๐๐ฒ ๐ฆ๐๐๐ฑ๐:
The primary allegation was that Flipkart Online Services Private Limited engaged in wholesale cash and carry business and received ๐๐ผ๐ฟ๐ฒ๐ถ๐ด๐ป ๐๐ถ๐ฟ๐ฒ๐ฐ๐ ๐๐ป๐๐ฒ๐๐๐บ๐ฒ๐ป๐ (๐๐๐) ๐ณ๐ฟ๐ผ๐บ ๐ณ๐ผ๐ฟ๐ฒ๐ถ๐ด๐ป ๐ถ๐ป๐๐ฒ๐๐๐ผ๐ฟ๐ ๐๐ถ๐๐ต๐ผ๐๐ ๐๐ต๐ฒ ๐ป๐ฒ๐ฐ๐ฒ๐๐๐ฎ๐ฟ๐ ๐ฝ๐ฟ๐ถ๐ผ๐ฟ ๐ฎ๐ฝ๐ฝ๐ฟ๐ผ๐๐ฎ๐น ๐ณ๐ฟ๐ผ๐บ ๐๐ต๐ฒ ๐๐ป๐ฑ๐ถ๐ฎ๐ป ๐ด๐ผ๐๐ฒ๐ฟ๐ป๐บ๐ฒ๐ป๐. It was further alleged that M/s.WS Retail Services Limited was a dummy company created by Schain and Binney Bansal to route transactions to retail customers, thus ๐ฐ๐ถ๐ฟ๐ฐ๐๐บ๐๐ฒ๐ป๐๐ถ๐ป๐ด ๐๐๐ ๐ฟ๐ฒ๐ด๐๐น๐ฎ๐๐ถ๐ผ๐ป๐.
๐ ๐ฎ๐ถ๐ป ๐๐๐๐๐ฒ๐:
- Delay in initiating proceedings: Petitioners argued unreasonable delay in initiating proceedings for alleged contraventions that occurred between 2009-2011.
- Omission of Section 6(3) of FEMA: Petitioners contended that the show cause notice was invalid because it was issued after Section 6(3) of FEMA was omitted.
Court Findings :
The court concluded that the omission of Section 6(3) of FEMAย could be treated as a repeal, ๐ฎ๐น๐น๐ผ๐๐ถ๐ป๐ด ๐๐ผ ๐ถ๐๐๐๐ฒ ๐ป๐ผ๐๐ถ๐ฐ๐ฒ๐ ๐ณ๐ผ๐ฟ ๐ฐ๐ผ๐ป๐๐ฟ๐ฎ๐๐ฒ๐ป๐๐ถ๐ผ๐ป๐ ๐๐ต๐ฎ๐ ๐ผ๐ฐ๐ฐ๐๐ฟ๐ฟ๐ฒ๐ฑ ๐๐ต๐ฒ๐ป ๐๐ต๐ฒ ๐ฝ๐ฟ๐ผ๐๐ถ๐๐ถ๐ผ๐ป ๐๐ฎ๐ ๐๐๐ถ๐น๐น ๐ถ๐ป ๐ฒ๐ณ๐ณ๐ฒ๐ฐ๐. The court held that the maximum period of five years fixed as a ๐ฟ๐ฒ๐ฎ๐๐ผ๐ป๐ฎ๐ฏ๐น๐ฒ ๐ฝ๐ฒ๐ฟ๐ถ๐ผ๐ฑ ๐ถ๐ป ๐๐ต๐ฒ ๐๐ฎ๐ถ๐ฑ ๐ฐ๐ฎ๐๐ฒ ๐น๐ฎ๐ ๐ฐ๐ฎ๐ป๐ป๐ผ๐ ๐ฏ๐ฒ ๐บ๐ฎ๐ฑ๐ฒ ๐ฎ๐ฝ๐ฝ๐น๐ถ๐ฐ๐ฎ๐ฏ๐น๐ฒ ๐ฎ๐ ๐ฎ ๐ด๐ฒ๐ป๐ฒ๐ฟ๐ฎ๐น ๐ฟ๐๐น๐ฒ ๐๐ผ ๐ฎ๐น๐น ๐๐ต๐ฒ ๐ฐ๐ฎ๐๐ฒ๐. Hence, all the writ petitions are dismissed accordingly.
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