The Madras High Court has rejected a writ petition from DMK MP S. Jagathrakshakan, challenging Enforcement Directorate (ED) proceedings under the Foreign Exchange Management Act (FEMA) of 1999.
The court also dismissed connected writ petitions filed by the MP’s daughter, son, and a company where his son serves as a director, contesting the same proceedings.
The ED alleged that the DMK MP subscribed to 70 lakh shares of Singapore-based Silver Park International Private Limited without Reserve Bank of India (RBI) approval, violating FEMA Sections 3, 4, 8, and 15, along with statutory regulations.
The ED found that the MP had transferred shares to his family members, leading to charges of improper acquisition of foreign securities. An authorised officer under FEMA seized properties equivalent to the foreign securities, prompting the competent authority to hold on February 3, 2021, that the interim seizure order couldn’t be confirmed due to a lack of proof of payment for the shares.
The ED appealed the competent authority’s order to the appellate tribunal, which is pending adjudication. Meanwhile, the authorised officer moved the adjudicating authority (Special Director of ED) under Section 16 of FEMA, issuing a showcause notice on December 22, 2021, followed by a corrigendum on March 13, 2023.
The writ petitioners argued against parallel proceedings, citing the competent authority’s finding that there was no material to support the charges. The judge, however, rejected their argument, emphasizing that the competent authority’s finding was related only to the seizure order, while the question of whether the petitioners violated FEMA provisions could only be decided by the adjudicating authority.
The judge clarified that the existence of two independent authorities—one for accusations and the other for asset seizure—doesn’t allow for conflating their powers. He concluded that the order by the competent authority regarding asset seizure doesn’t supersede the adjudicatory authority’s power and is a matter of jurisdiction that cannot be expansively interpreted.
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