Banyantree Growth Capital, L.L.C vs Axiom Cordages Ltd. And 2 Ors on 30 April, 2020
(viii) The respondents reliance on the decision of the Supreme
Court in Dropti Devi versus Union of India (supra) to question the
correctness of POL India Projects Limited versus Aurelia (supra), Cruz
City I Mauritius Holdings (supra) is misplaced. Dropti Devi was the
case which dealt with a renewed challenge to the constitutional
validity of the Conservation of Foreign Exchange and Prevention of
Smuggling Activities Act, 1974 (COFEPOSA) on the ground that FEMA
had no provision for prosecution and punishment like Section 56 of
the FERA and that under FEMA violations were compoundable civil
offences. It is in this context, the Supreme Court observed that the
conservation and augmentation of foreign exchange continues to be as
important as it was under FERA (para 66), although contravention of
its provisions is not regarded as a criminal offence (para 67). The
Court rejected the challenge to the legality of COFEPOSA and held
that there is no constitutional mandate that preventive detention
cannot exist for an act where such act is not a criminal offence and
does not provide for punishment (para 70). These observations of the
Supreme Court while stressing the continued importance of FEMA, do
not detract from the said decisions of the High Court that the foreign
award in favour of a foreign investor, cannot be assailed as being
contrary to the fundamental policy of Indian law on the ground that
the contract under which investment was made and received by the
Indian entity, was allegedly contrary to and in breach of FEMA.