Supreme Court Dismisses ED's SLP Against Bombay HC's Order Favouring NDTV In FEMA Violation Case

The Supreme Court today dismissed a Special Leave Petition (SLP) filed by the Enforcement Directorate (ED) challenging a 2018 Bombay High Court's Judgment that directed the Reserve Bank of India (RBI) to consider compounding applications filed by New Delhi Television Limited (NDTV) in a case involving alleged violations of the Foreign Exchange Management Act (FEMA).

The Bench of Justice Abhay S. Oka and Justice Augustine George Masih ruled that there was no merit in the ED's plea, thus refusing to interfere with the High Court’s decision. The Bench also noted that the case did not warrant any judicial interference.

During the hearing, Advocate Zoheb Hossain appeared for ED and submitted,"The High Court effectively permits compounding. Proceeds on the basis that compounding is a matter of right."

Senior Advocate Arvind Datar appearing for NDTV contended, "Nothing survives now, everything has ended."

Hossain argued that in a Writ Petition seeking compounding, a mini trial has been conducted.

On perusal of the impugned order, Justice Oka said, "You (ED) compelled High Court to record all the findings, in such a simple matter."

"We find no error in the effective order passed by the High Court, Para 109 of the impugned judgment itself refers that the applications for compounding shall be decided in accordance with law. No case of interference. Dismissed," the Bench ordered.

Pertinently, on June 26, 2018, the Bombay High Court had ruled in favour of NDTV, setting aside the objections raised by the ED. The Court had directed the RBI to proceed with the compounding applications without being influenced by the ED’s letter. The Court had found that the ED’s suspicions and subsequent communication to the RBI were not sufficient grounds to derail the compounding process.

"We also proceed to direct the RBI to render the necessary guidance to the petitioner in the matter of compounding of the contraventions under the FEMA. Since it was clearly stated before us by the RBI that it is presently inhibited in considering the compounding applications or proceeding to decide the same in view of the communication/letter of the Enforcement Directorate, then, as a result of quashing of the same, the RBI is free to proceed and decide the same. However, our order does not oblige the RBI to compound the contravention and all aspects and matters, save and except the one decided above, can be taken into consideration by the RBI in deciding the compounding applications, if otherwise permitted by law," the Court had said.

The Court had underscored the RBI’s authority under FEMA to compound contraventions. While the law does allow the ED to flag serious violations that might involve money laundering, terror financing, or issues affecting national sovereignty, the Court had said that the ED’s intervention in this case was premature and based on unsubstantiated suspicions.

Cause Title: Directorate of Enforcement v. New Delhi Television Limited [SLP(C) No. 002771/2019]