Maars Software International Ltd. vs Union Of India

CIVIL APPEAL Nos.4023­4025 OF 2019 (Arising out of S.L.P.(C) Nos.32177­32179 of 2017)

Maars Software International Ltd. & Anr. ….Appellant(s)

VERSUS

Union of India & Ors. ….Respondent(s)

JUDGMENT

Abhay Manohar Sapre, J.

1. Leave granted.

2. These appeals are filed against the final

judgment and order dated 18.04.2017 passed by

Signature Not Verified the High Court of Judicature at Madras in Civil Digitally signed by ANITA MALHOTRA Date: 2019.04.22

Misc. Appeal Nos.1997 & 1998 of 2010 and Writ 17:18:02 IST Reason: 1 1 Petition No.15793 of 2010 whereby the High Court

allowed the Civil Miscellaneous Appeals filed by the

respondents herein and dismissed the writ petition

filed by the appellants herein.

3. A few facts need mention hereinbelow for the

disposal of these appeals, which involve a short

point.

4. Appellant No.1 herein is a Limited company

having its registered office at Chennai and Appellant

No.2 is its Managing Director. The appellant­

Company is engaged in the business of software

exports. The appellant­Company has also

specialized in the area of Enterprises Resources

Planning (ERP) implementation. The appellant­

Company is offering their services to domestic and

overseas customers.

5. The Enforcement Directorate, Mumbai through

its Assistant Director filed a complaint, being

2 2 complaint No.T­3/536­B/2002, under Section 16 (3)

of the Foreign Exchange Management Act, 1999 (for

short “FEMA”) against the appellant­Company

before the Special Director of Enforcement Mumbai

(Adjudicating Authority).

6. The complaint was founded on the material

collected during the course of detailed investigation

made in the affairs and the dealings of the

appellant­Company in their business operations. It

was done pursuant to the directive issued by the

competent authority on 23.11.2001 to the

appellant­Company under FEMA.

7. The aforesaid directive was issued to examine

the genuineness of the internal affairs of the

appellant­Company and also with a view to verify

various international dealings and business

operations which the appellant had executed during

3 3 the relevant period with their overseas customers

involving huge foreign exchequer.

8. The investigation also centered around the

details of the Directors and Promoters; their

holdings; how many groups and associates

companies were formed by the appellants in India

and abroad for doing business; details of the share

transactions between the promoters of the

appellant­Company and OCB/FIIs/Sub­

accounts/NRI; the details of the appellant’s brokers

appointed in the trade for execution of their

business contracts; and lastly, the details of loans

raised by the appellant­Company for their business

purpose etc.

9. The complainant, i.e., the Enforcement

Directorate prayed in the complaint that the

investigation carried out has clearly made out a

case of violation of Section 8 of FEMA read with

4 4 Regulation 3 of the Foreign Exchange Management

(Realization, Repatriation and Surrender of Foreign

Exchange) Regulations, 2000 read with Regulation 9

of the Foreign Exchange Management (Export of

Goods and Services) Regulations, 2000 and also

violation of Section 42 (1) of FEMA by the appellant­

Company. The complainant, therefore, prayed that

action, as contemplated under FEMA, be taken

against the appellant­Company for such violations

as provided under FEMA.

10. It is this issue, which was adjudicated by the

Special Director. By order dated 13.03.2008, the

Special Director allowed the complaint and held

that the appellant­Company has contravened the

provisions of FEMA as prayed in the complaint and

accordingly imposed a penalty of Rs.4 crores on the

appellant No.1­Company and Rs.1 crore on

5 5 appellant No.2­Managing Director­Shri

Varadharajan as provided under FEMA.

11. The appellants felt aggrieved by the

aforementioned order and hence filed two appeals

under Section 13 of FEMA in the Tribunal. By order

dated 07.01.2010, the Tribunal allowed the appeals

and set aside the order dated 13.03.2008 and

directed the authorities to refund the amount which

was deposited by the appellants in these

proceedings for filing the appeals.

12. The Union of India felt aggrieved by the order

of the Tribunal and filed appeals in the High Court

under Section 35 of the FEMA whereas the

appellants herein filed a writ petition in the High

Court against the Union of India and sought therein

a writ of mandamus claiming refund of the pre­

deposit amount.

6 6

13. By impugned order, the High Court allowed

the appeals, set aside the order of the Tribunal and

restored the order of the Adjudicating Authority. As

a consequence thereof, the appellants’ writ petition

was dismissed.

14. It is against this common impugned order of

the High Court, the appellant­Company and its

Managing Director have filed these appeals by way

of special leave in this Court.

15. So, the short question, which arises for

consideration in these appeals, is whether the High

Court was justified in allowing the appeals filed by

the Union of India.

16. Heard Mr. Gopal Shankarnaraynan, learned

senior counsel for the appellants and Mr. B.K.

Satija, learned counsel for the respondents.

17. Having heard the learned counsel for the

parties and on perusal of the record of the case, we

7 7 are inclined to allow these appeals and while setting

aside the impugned order remand the case to the

High Court for deciding the appeals afresh on

merits in accordance with law.

18. The need to remand the case (appeals) to the

High Court is called for because of the observations

made by the High Court in Para 15, which reads as

under:

“………..No material has been produced before this Court as to what steps have been taken to realize the amount within the stipulated period. The company was not able to place any material to show the reason for the failure to realize the said amount within the stipulated period or any permission for extension of period has been obtained from the RBI as contemplated under Section 42 of the FEMA………..”

19. It was, however, brought to our notice from

Para 29 of the Tribunal's order, which was

impugned before the High Court in the appeals filed

by the Union of India, that the appellants had filed

material, which were marked as (Annexures A­15 to

8 8 A­38) in the case, with a view to show as to what

steps they had taken to realize and repatriate the

dues in question.

20. In our considered view, keeping in view the

observations made by the High Court in Para 15, it

is clear that the High Court did not examine the

case of the parties in the context of material placed

by the appellants, though the Tribunal in Para 29 of

its order has considered the said material.

21. In our view, the High Court should have taken

into consideration the said material with a view to

decide as to whether it was relevant or/and

sufficient, and whether it could justify the

appellants’ case as contemplated under Section 8 of

FEMA.

22. Instead, the High Court seemed to have

proceeded on wrong assumption that since the

appellants did not file any material, a case was

9 9 made out against them. This observation of the

High Court, in our view, was contrary to the record

of the case and hence, interference in the impugned

order is called for.

23. In view of the foregoing discussion, we are of

the view that the proper course in such a case

would be to remand the case to the High Court and

request the High Court to decide the appeal afresh

on merits in accordance with law.

24. In view of the foregoing discussion, the appeals

succeed and are accordingly allowed. The

impugned order is set aside. The case is remanded

to the High Court for deciding the appeals afresh on

merits in accordance with law keeping in view the

observations made above.

25. We, however, make it clear that we have not

expressed any opinion on the merits of the

controversy having formed an opinion to remand

10 10 the case to the High Court on the grounds

mentioned above.

26. The High Court will decide the appeals

uninfluenced by any observation made in the

impugned order and in this order.

.………...................................J. [ABHAY MANOHAR SAPRE]

…...……..................................J. [DINESH MAHESHWARI]

New Delhi;

April 22, 2019

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