MUMBAI: The Bombay High Court today 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 S C Dharmadhikari and Bharati Dangre set aside objections raised to the compounding proceedings by the Enforcement Directorate (ED), 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 Hiten Venegaonkar 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.
Venegaonkar 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 Janak Dwarkadas.
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.