The Madras High Court has dismissed a writ petition filed by DMK MP S. Jagathrakshakan challenging the proceedings initiated against him and his family members, by the Enforcement Directorate (ED) under the Foreign Exchange Management Act (FEMA) of 1999.
Justice N. Seshasayee also rejected the connected writ petitions filed by the MP’s daughter J. Sri Nisha, his son J. Sundeep Aanand and Accord Distilleries and Breweries Private Limited, in which his son is a director, challenging the same proceedings initiated against them too.
Additional Solicitor General AR.L. Sundaresan, assisted by ED Special Public Prosecutor Rajnish Pathiyil, brought it to the notice of the court that the charge against the MP was that he had subscribed to 70 lakh shares of Singapore-based Silver Park International Private Limited. Since the shares had been purchased without Reserve Bank of India (RBI) approval, on payment of 70 lakh Singapore dollars, equivalent to ₹32.69 crore, he was found to have contravened Sections 3, 4, 8 and 15 of FEMA as well as the statutory regulations framed under the Act.
The ED also found that on September 15, 2018, the MP had transferred 45 lakh shares to his wife J. Anusuya, 22.5 lakh shares to his daughter and the rest of the 2.5 lakh shares to his son. They were also proceeded against for improper acquisition of foreign securities, being Indian citizens.
An authorised officer under FEMA seized certain properties, equivalent to the foreign securities, of the writ petitioners and submitted the order of interim seizure before the competent authority under the Act for approval, as required under Section 37A of FEMA.
On February 3, 2021, the competent authority held that the interim seizure order could not be confirmed since there was no proof of the petitioners having paid any consideration to acquire the shares. The ED took the competent authority’s order on appeal before the appellate tribunal, and it is pending adjudication.
In the meantime, the authorised officer moved the adjudicating authority’ (Special Director of ED) under Section 16 of FEMA and a showcause notice was issued to all the writ petitioners on December 22, 2021, followed by a corrigendum on March 13, 2023.
Challenging the showcause notice as well as the corrigendum, the writ petitioners contended that parallel proceedings could not be initiated against them on same set of facts when the competent authority had already held that there was no material to support the charge levelled against them.
Refusing to accept their argument, the judge said, the finding given by the competent authority was related only to the seizure order whereas the charge as to whether the petitioners had actually violated any provisions of FEMA could be decided only by the adjudicating authority.
“The fact that the statute has created two independent authorities, one for adjudicating on the accusation under Section 16 read with Section 13 and the other for deciding on the seizure of assets of those who face the accusation, does not enable telescoping the effect of what the latter may do into the power vested in the former,” the judge said.
He also observed: “The fact, that both these powers are vested in different authorities, does not make the order passed by the Competent Authority vis-a-vis the seizure of assets any superior as to interfere with the power of adjudication of the Adjudicatory Authority. It is plainly a question on jurisdiction, and it cannot be expanded interpretatively.”
