J. Sri Nisha Vs Special Director (Supreme Court of India)
FEMA SCN Set Aside – SC Holds Adjudication Cannot Override Competent Authority Findings Pending Appeal
The Supreme Court quashed the FEMA adjudication order, High Court rulings, and revived proceedings from the SCN stage, holding that adjudicating authority cannot disregard findings of the Competent Authority when appeal against such findings is pending.
The case arose from FEMA proceedings alleging violation of Section 4 relating to acquisition/holding of foreign securities. The Competent Authority u/s 37A(3) had already refused to confirm seizure, holding that there was no material to establish even a prima facie contravention.
Despite this:
- The Adjudicating Authority proceeded with SCN and passed final order,
- The High Court refused interference, holding writ against SCN not maintainable.
The Supreme Court held:
1. Competent Authority’s Findings Are Substantive, Not Procedural
Rejection of seizure reflects absence of even “reason to believe”, striking at the very foundation of proceedings.
2. SCN Can Be Challenged in Exceptional Cases
Reiterating VICCO Laboratories, the Court held that writ against SCN is maintainable where there is:
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- Lack of jurisdiction,
- Abuse of process, or
- Foundational facts missing.
3. Adjudicating Authority Cannot Sit in Appeal
The Tribunal strongly disapproved that:
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- Adjudicating Authority effectively overruled Competent Authority,
- Even though appeal against such order was pending,
- This amounts to usurping appellate jurisdiction.
4. High Court Erred in Treating Section 37A Proceedings as Irrelevant
The Court clarified:
