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Jurisdiction for Appeals under FEMA: Supreme Court Ruling in Union of India vs. M/s Premier Limited

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The case of Union of India & Ors. vs. M/s Premier Limited (formerly Premier Automobiles Ltd.) & Ors. involves the interpretation of jurisdictional issues arising from the appeal process under the Foreign Exchange Regulation Act (FERA) and its successor, the Foreign Exchange Management Act (FEMA). The appeal was filed by the Union of India (UOI) against the decision of the High Court of Bombay, which had quashed orders passed by the Special Director (Appeals) under FERA. The main issue in this appeal was whether the Special Director (Appeals) under FEMA had the jurisdiction to hear appeals filed against an order passed by the Deputy Director of Enforcement under Section 51 of FERA, in relation to the foreign exchange contravention during the years 1977-78.

The respondents, M/s Premier Limited, had been issued a show-cause notice for contravention of FERA provisions. After a series of appeals and rulings, the matter reached the Supreme Court, which examined the jurisdiction of the Special Director (Appeals) under FEMA and the procedure to be followed for adjudicating the appeal against an order passed by the Deputy Director of Enforcement under FERA.

Background of the Case

The respondent, M/s Premier Limited, along with its directors, was issued a show-cause notice by the Special Director in 1991, alleging contravention of FERA with respect to imports and exports involving foreign parties. The matter had remained under legal scrutiny for years. In 2003, an adjudication order was passed under FEMA, imposing a penalty of Rs.15,50,000 on M/s Premier Limited and its directors for violating FERA. The company filed an appeal against this order before the Special Director (Appeals) in 2004. However, the Special Director (Appeals) dismissed the appeals on the grounds of jurisdiction, stating that the appeals could only be heard by the Appellate Tribunal under FEMA.

The respondents then filed writ petitions before the High Court of Bombay, which ruled in their favor, allowing the appeals and quashing the orders passed by the Special Director (Appeals). The Union of India, dissatisfied with the ruling, filed a special leave petition, leading to this appeal before the Supreme Court.

Arguments by the Appellant (Union of India)

The appellant, the Union of India, presented the following arguments:

  • The appeals filed under Section 51 of FERA, in relation to adjudication orders passed prior to 01.06.2000, should be heard by the Appellate Tribunal under Section 19 of FEMA and not by the Special Director (Appeals).
  • The High Court erred in allowing the appeals to be heard by the Special Director (Appeals) under Section 17 of FEMA, as the jurisdiction for such appeals lies with the Appellate Tribunal under Section 19 of FEMA.
  • The interpretation of FEMA’s provisions regarding the jurisdiction of the Special Director (Appeals) was incorrect, and the decision of the High Court should be reversed.

Arguments by the Respondent (M/s Premier Limited)

The respondent, M/s Premier Limited, countered with the following points:

  • The appeals filed by the company were validly heard by the Special Director (Appeals) under Section 17 of FEMA, as the Special Director had the jurisdiction to adjudicate appeals filed against the Deputy Director of Enforcement’s orders.
  • The High Court correctly concluded that the appeals were maintainable before the Special Director (Appeals), and the jurisdictional argument raised by the Union of India was unfounded.
  • The repeal of FERA and the introduction of FEMA should not affect the jurisdiction of the Special Director (Appeals), as the cases pertained to violations that occurred under FERA.

Supreme Court’s Observations and Judgment

The Supreme Court carefully considered the arguments and the provisions of both FERA and FEMA, particularly focusing on Sections 17, 19, and 49 of FEMA and the corresponding provisions of FERA. The Court referred to the legislative changes brought about by the repeal of FERA and the subsequent enactment of FEMA. The key issue was whether the Special Director (Appeals) under FEMA had the jurisdiction to hear appeals in matters initiated under FERA before the repeal of FERA in 2000.

The Court noted:

“Under the provisions of FERA and FEMA, the jurisdiction for appeals against orders passed by the Deputy Director of Enforcement under Section 51 of FERA should lie before the Appellate Tribunal under Section 19 of FEMA, rather than the Special Director (Appeals) under Section 17 of FEMA.”

The Court further observed:

“While FERA was repealed, its legal consequences, including the jurisdictional framework for appeals, must be aligned with the provisions of FEMA. The intention of the legislature was to ensure that appeals against orders passed under FERA are addressed uniformly by the Appellate Tribunal under FEMA, thus avoiding unnecessary legal complexities.”

Final Judgment

The Supreme Court ruled in favor of the appellant, the Union of India, and set aside the decision of the High Court. The Court held:

“Appeals filed against the orders of the Deputy Director of Enforcement under Section 51 of FERA, which were initiated prior to 01.06.2000, must be heard by the Appellate Tribunal under Section 19 of FEMA, and not by the Special Director (Appeals) under Section 17 of FEMA.”

The Court directed the transfer of the appeals filed before the Special Director (Appeals) to the Appellate Tribunal for disposal in accordance with the provisions of FEMA. The Court also reiterated that the transition from FERA to FEMA must be interpreted to ensure legal consistency in handling such appeals.

Conclusion

This case clarifies the jurisdictional issues arising from the transition between FERA and FEMA, particularly concerning the appeals process. The Supreme Court reinforced that appeals in matters involving FERA violations should be heard by the Appellate Tribunal under FEMA and not by the Special Director (Appeals). This judgment serves as an important precedent in understanding the application of FEMA provisions to cases that originated under the now-repealed FERA.


Petitioner Name: Union of India.
Respondent Name: M/s Premier Limited.
Judgment By: Justice Abhay Manohar Sapre, Justice Indira Banerjee.
Place Of Incident: Mumbai.
Judgment Date: 29-01-2019.

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