NDTV Vs RBI FEMA-CAN A HIGH COURT DIRECT RBI TO CONSIDER THE COMPOUNDING...

CAN A HIGH COURT DIRECT RBI
TO CONSIDER THE COMPOUNDING APPLICATION UNDER FEMA ?

The Bombay High Court ON 27
June 2018 directed the Reserve Bank of India (RBI) to consider the compounding
applications filed by news organisation NDTV in a case of alleged violation of
the Foreign Exchange Management Act (FEMA).

A bench of justices set
aside objections raised to the compounding proceedings by the Enforcement
Directorate (ED) under FEMA , which had earlier flagged the alleged FEMA
violations and issued show-cause notices to NDTV in 2015.

In November 2015, the ED had
issued show-cause notices to NDTV for allegedly flouting foreign exchange
regulations while availing of overseas and foreign direct investment facilities
to the tune of over Rs 2,000 crore.

In March 2016, the
broadcasting company had filed an application with the RBI for compounding of
the contraventions alleged in the show-cause notices.

However, a year later, the
RBI told the company that it could not consider its application since the ED
had written a letter to it on December 1, 2017, expressing suspicion and making
further allegations of money laundering against the company and its
subsidiaries in some other cases as well.

NDTV then approached the
high court, challenging, among other things, the ED's December 1 letter to the
RBI.

It told the HC that even
though it was denying all allegations made by the ED in its 2015 show-cause
notices, it had chosen to go for compounding proceedings to save further agony
to its shareholders and other stakeholders in the company.

Compounding under the FEMA
refers to the process of voluntarily admitting a contravention and seeking
redressal

While the RBI is empowered
to compound contraventions under the FEMA, ED's counsel pointed out before the
HC that in February 2007, the Union government had introduced a proviso to the
compounding rules.

The proviso mandated that if
the ED was of the view that the compounding proceeding was related to a serious
contravention involving suspected money laundering, terror financing or
anything affecting the sovereignty and integrity of the nation, such cases
would not be compounded by the RBI.

also submitted some
documents, containing allegations and suspicions of money laundering made by
the ED and the CBI against NDTV and some of its subsidiary companies in several
past cases, including the 2G scam case.

This was vehemently opposed
by NDTV's counsel.

He argued that the statutory
powers vested in the RBI could not be interfered with "on mere
suspicion".

The bench agreed with him.

"We need not refer to
all these details simply because the petitioner has not been made an accused in
the 2G scam case," the court said.

"The investigations in
that case are over long time back...when the petitioner was not an accused at
all in a case which was investigated, tried and concluded, it is futile now to
point out, based on the allegations in the same, that the Enforcement
Directorate can take a view that the petitioner's compounding proceedings
should not be proceeded with further because the compounding proceedings relate
to serious contravention suspected of money laundering," the HC said.

It directed that the
compounding proceedings pending before the RBI should proceed "strictly in
accordance with law" and set aside the ED's letter to the RBI