Delhi High Court - Orders
Pc Financial Services Private Limited vs Directorate Of Enforcement & Anr on 31 May, 2022
Author: Yashwant Varma
Bench: Yashwant Varma
$~49
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 8514/2022, CM APPL. 25799/2022 (Stay)
PC FINANCIAL SERVICES PRIVATE LIMITED ..... Petitioner
Through: Mr. S. Ganesh and Mr. Arvind Nayar,
Sr. Advs. with Mr. Ajay Bhargava,
Mrs. Vanita Bhargava, Mr. Atul
Pandey, Mr. Hirak Mukhopadhyaya,
Mr. Karan Gupta and Mr. Milind Jain,
Advs.
versus
DIRECTORATE OF ENFORCEMENT & ANR. ..... Respondents
Through: Mr. Anurag Ahluwalia, CGSC with
Mr. Danish Faraz Khan and Mr.
Shubham Gupta, Advs. for ED.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
ORDER
% 31.05.2022 Notice. Since the respondents are duly represented by learned counsel, let a counter affidavit be filed on or before the next date fixed.
The petitioners assail an order passed by the respondents confirming provisional attachment orders made under the provisions of the Foreign Exchange Management Act, 1999. The total remittances which form subject matter of the impugned orders amount to Rs. 463 crores approximately. Pursuant to the impugned orders, a sum of approximately Rs. 270 crores standing to the credit of the various accounts of the petitioner have come to be attached. The Court is further apprised that the appellate tribunal is non- functional presently.
Prima facie, the Court finds merit in the submission of Mr. Ganesh, Signature Not Verified Digitally Signed By:NEHA Signing Date:31.05.2022 19:15:16 learned Senior Counsel who submits that the impugned order confirming the seizure of bank accounts of the petitioner would not sustain under the provisions of the Act read with the relevant Rules framed thereunder. Learned Senior Counsel contended that the legitimacy or the quantum of an expense which is incurred cannot constitute a ground for penal or coercive action under the Act. It was submitted that the allegation that the petitioner could have availed of similar services from parties in India at a lower price cannot constitute a ground for seizure under the Act. It is further submitted that prior to RBI cancelling its certificate of registration, it could not be said that the petitioner had engaged in a business which was illegal or prohibited.
More importantly it is pointed out that under the Foreign Exchange Management (Current Account Transactions) Rules, 2000, the prohibition against drawl of foreign exchange is limited to transactions falling in Schedule I. It is submitted that the transactions which constitute the basis for seizure would clearly not fall under that Schedule. Turning then to the requirement of prior approval of the Central Government as per Rule 4 in respect of transactions which may fall in Schedule II, it is pointed out that Entry 8 appearing in that Schedule came to be deleted in 2010. The Court notes that Entry 8 in Schedule II as it originally stood had placed a requirement of prior approval being obtained in respect of remittances under technical collaboration agreements where payment of royalty exceeded 5% on local sales, 8% on exports and lump-sum payment in excess of US $ 2 million. It is in the aforesaid backdrop that Mr. Ganesh would submit that there was no statutory obligation placed upon the petitioner to seek approval of the respondents. The Court also notes that till date the respondents have not drawn any proceedings either for adjudication or for levy of penalty Signature Not Verified Digitally Signed By:NEHA Signing Date:31.05.2022 19:15:16 under Section 13 of the Act. Matter requires consideration.
For the purposes of considering the framing of interim directions, the Court notes on a writ petition filed before the Telangana High Court challenging a provisional seizure order, the petitioner had been accorded release of Rs. 15.5 cores as an interim measure to meet exigencies of day to day expenses, salaries of employees and other incidental expenses. Although the aforesaid order of temporary attachment had been assailed by the petitioner in a Special Leave Petition being S.L.P. No. 7551/2022 which is pending consideration before the Supreme Court, undisputedly the said amount has been released in light of the orders passed on that SLP.
The prayer for grant of interim directions was vehemently opposed by Mr. Ahuluwalia, learned CGSC who contended that the Certificate of Registration (COR) of the petitioner already stands cancelled by the Reserve Bank of India (RBI). It was further submitted that bearing in mind the quantum of remittances which are stated to have been made and have resulted in the passing of the impugned seizure orders, no further interim releases are warranted. Learned counsel for the respondent further submits that till date no utilisation details have been placed on the record by the petitioner insofar as the amount of Rs. 15.5 crores is concerned.
Insofar as the question of cancellation of the COR is concerned, the Court notes that the same would have no bearing on the issues which arise in the present writ petition since that constitutes action taken by the RBI under the statutory provisions contained in the Banking Regulation Act, 1949. The said action would only impact the right of the petitioner to continue the business which was permitted. The Court also notes that insofar as the release of Rs. 15.5 crores is concerned, it was Signature Not Verified Digitally Signed By:NEHA Signing Date:31.05.2022 19:15:16 submitted by Mr. Ganesh that the aforesaid sum has not been released in fact and the petitioner has not even been able to utilise the same till date. The Court further notes the submission of Mr. Ganesh who contends that the aforesaid amount which was released was just sufficient to meet the needs of the petitioner for the period between November 2021 to January 2022. Bearing in mind the issues, which stand raised, this Court is of the opinion that in the interim certain amounts would merit being released in favour of the petitioner to enable it to meet its day to day expenses pending final disposal of the present writ petition.
Accordingly, let a sum of Rs. 25 crores be released in the interim, subject to the condition that the petitioner shall utilise the said monies only for the purposes of meeting its day to day essential expenditure as well as towards salaries of employees. The petitioner shall also place on the record of these proceedings an affidavit disclosing details of utilisation of the sum which is being released. The Court further takes on board the undertaking of the petitioner that no part of the monies which stand released in the interim and pursuant to this order shall be remitted overseas. The interim release which has been directed in terms of this order shall be in addition to the amount of Rs 15.5 crores which was released pursuant to the statement of the learned ASG as recorded before the Supreme Court.
List on 08.07.2022.
YASHWANT VARMA, J.
MAY 31, 2022 SU Signature Not Verified Digitally Signed By:NEHA Signing Date:31.05.2022 19:15:16