Madras HC dismisses Flipkart owners' petitions over FDI violations, issues of foreign investments

The court stated that the petitioners had not availed the alternative remedy available before the adjudicating authority of ED as the ground for dismissing the petitions.
Madras High Court
Madras High Court(File photo)
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CHENNAI: The Madras High Court has dismissed the petitions filed by the owners of the e-commerce platform Flipkart challenging the complaint and the notices issued by the Enforcement Directorate over violations of the Foreign Exchange Management Act (FEMA) and the Transfer or Issue of Security by a Person Resident Outside India Regulations (TISPRO) over receiving foreign direct investments (FDI) and issuing of equity shares.

The court stated that the petitioners - Sachin Bansal and Binny Bansal - had not availed the alternative remedy available before the adjudicating authority of ED as the ground for dismissing the petitions. Under FEMA, the court said that remedy is not available just before the civil court but also before the constitutional court, namely the high court, under section 35 of the Act.

Observing that any order passed by the adjudicating authority in a proceeding initiated under section 16 is liable to be scrutinised by the high court in a second appeal filed by the aggrieved party, Justice S Sounthar, however, reasoned that the remedy before the high court by way of appeal on question of law cannot be treated as “in-effective” remedy by no stretch of imagination.

“Hence I am not inclined to exercise my discretionary jurisdiction under Article 226 of the Constitution, especially when the petitioners failed to make out a case that they come under one of the exceptions to the general rule regarding availability of alternative remedy,” the judge said in the order.

The judge also did not agree with the contentions of the petitioners on the point of delay in issuing notice (in 2021) even though the alleged violations occurred in 2009-11. The judge granted liberty to the petitioners to file their explanations/objections before the adjudicating authority within 30 days.

The ED had registered the complaint against Flipkart owners under sections 6 (3) (b) r/w section 47 of FEMA r/w Regulations 3, 4, 5 and para 3 and para 9(1)(B)(i) of Schedule 1 of TISPRO and annexure-B to para 2 of schedule-1 of TISPRO r/w consolidated FDI policies of 2010.

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