Supreme Court hints at staying all money-laundering cases till tribunal vacancies filled

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The Supreme Court has hinted at staying all the proceedings in money-laundering cases till the government fills vacancies in the FEMA Appellate Tribunal.

A Bench led by Justice Sanjay K Kaul while hearing an appeal by PC Financial Services, a non-banking financial company, said “no purpose is being subserved by relegating the petitioner to a tribunal as there is no tribunal for the last two years”.

“The aforesaid being the position, not only in this matter but in different matters, the result is the parties are compelled to approach the High Courts in the absence of the FEMA Appellate Tribunal. Once the Tribunal, as envisaged, not filling the vacancies for a period of two years frustrates the judicial remedy. Thus, it may require an order that till the tribunal vacancies are filled up, proceedings across the Board should be kept in abeyance to obviate the possibility of the High Courts being flooded with such an issue,” the apex court said, while seeking a reply from the government.

The case is listed for further hearing on Friday, when the government will clarify its stand.

PC Financial, which has been providing unsecured short-term loans via digital app-based platform CashBean since 2019, had challenged a February judgment of the Telangana High Court’s division bench. The bench had stayed its single-judge order that directed the Enforcement Directorate to release `15.35 crore to the company to meet its day-to-day expenses.

Challenging the division bench’s order that stopped any release of money, the appeal said the single judge had on February 11 passed the release order after taking into account the fact that the FEMA appellate tribunal was not functional.

“The single judge had not just taken the humanitarian view but has adopted a pragmatic approach in order to balance the rights and contentions of both the parties and ensure that both are able to avail the legal remedies available to them in law,” the appeal filed through counsel Ajay Bhargava said.

The NBFC had entered into agreements with various foreign companies like Mobimagic and Hong Kong Fintango in 2019 for software and technical support, and marketing and management services. Foreign remittances were made to these companies upon completion of the official transfer pricing benchmarking report as advised by consultancy firm E&Y, the company said.

The ED had passed seizure orders in 2021 under Section 37A of the FEMA and seized over `270 crore allegedly for making foreign payments of around `430 crore. The directorate had frozen all bank accounts for bogus import of services, thus bringing its business to complete standstill, Bhargava argued.

The company then moved the HC challenging the ED’s orders and the RBI’s direction cancelling its registration in February. The NBFC in March also moved the FEMA apellate tribunal against the ED’s seizure orders. However, due to insufficient quorum, the tribunal was not functional and therefore, its appeal had not been taken up, the petition said.