FEMA case against Flipkart founders: Madras HC dismisses cases filed by Sachin and Binny Bansal

Madras High Court has dismissed a batch of writ petitions filed by popular e-commerce platform Flipkart’s founders Sachin Bansal and Binny Bansal and a few others in connection with an alleged violation of the FDI policy involving ₹23,451 crore.

The Madras High Court has dismissed a batch of writ petitions filed by popular e-commerce platform Flipkart’s founders Sachin Bansal and Binny Bansal and a few others in connection with an alleged violation of the Foreign Direct Investment (FDI) policy involving ₹23,451 crore.

Justice S. Sounthar rejected all the writ petitions pending since 2021, with liberty to the petitioners to submit their explanations within 30 days from the receipt of his order to the show cause notices issued to them by the Special Director of the Directorate of Enforcement (ED) in Chennai.

The judge agreed with Additional Solicitor General S.V. Raju and ED Special Public Prosecutor N. Ramesh that the petitioners ought not to have rushed to the High Court without submitting their explanation to the notices issued by the Special Director, who was the adjudicating authority under the Foreign Exchange Management Act (FEMA) of 1999.

Making it clear that the petitioners would be entitled to raise all grounds in their defence before the adjudicating authority, the judge ordered that the officer concerned should consider the explanations, if any, filed by the petitioners within the stipulated time, strictly in accordance with law.

The judge pointed out that the show cause notices had been issued seeking an explanation as to why adjudicatory proceedings should not be initiated against the petitioners. Therefore, only after the receipt of the explanation, the officer would decide whether such proceedings, under Section 16 of FEMA, should be initiated or not.

If a decision was taken to go ahead with the adjudication process, the petitioners would have to be given a reasonable opportunity to put forth their case before passing final orders under Section 16. Any such order passed by the adjudicating authority could be questioned by filing an appeal before the special tribunal for FEMA cases.

The orders passed by the tribunal could be challenged further by filing a second appeal before the High Court under Section 35 of FEMA. Such an appeal remedy provided under the Act, by no stretch of imagination, could be termed as an ineffective remedy in order to entertain the present writ petitions, Justice Sounthar added.