HC to hear an appeal related to Enforcement Directorate’s insolvency notice to Dhinakaran next month

The notice had been issued on March 1, 2001 after he failed to pay penalty of ₹28 crore imposed under the Foreign Exchange Regulation Act (FERA) of 1973

The Madras High Court on Friday decided to hear next month an appeal preferred by the Enforcement Directorate (ED) in 2005 against a single judge’s 2002 order quashing an insolvency notice issued to Amma Makkal Munnetra Kazhagam (AMMK) leader T.T.V. Dhinakaran for not having paid the penalty imposed in a Foreign Exchange Regulation Act (FERA) case.

A Division Bench of Justices S.S. Sundar and P.B. Balaji directed the High Court Registry to list the appeal, along with a connected writ petition filed by Mr. Dhinakaran in 2008, for a final hearing in April since a counsel representing the ED had requested a short accommodation for the appearance of the Additional Solicitor General to argue the original side appeal.

On March 1, 2001, the ED had issued the notice under Section 9 (2) of the Presidency Towns Insolvency Act of 1909. According to the agency, he had to pay ₹31 crore towards penalties imposed under the FERA of 1973, which subsequently got replaced with the Foreign Exchange Management Act (FEMA) of 1999.

However, on appeal, the Foreign Exchange Regulation Appellate Board in New Delhi modified the penalty amount to ₹28 crore on May 5, 2000. Mr. Dhinakaran took the matter on further appeal before the Madras High Court and argued that the matter at length, seeking a stay of the order passed by the FERA Board, the ED said.

When a Division Bench of the High Court indicated that an interim stay could be ordered only if the appellant pays 50% of the demand and furnishes bank guarantee for the rest, his counsel chose to withdraw the stay petition. Since then, the amount had become due, leading to the issuance of the insolvency notice, the agency said.

Mr. Dhinakaran had challenged the notice before the High Court in 2001 on the ground of misuse and abuse of power by the ED, claiming that the agency could not invoke the insolvency law. He contended that the notice was totally misconceived, absolutely without basis and was motivated to disgrace and humiliate him.

Allowing his application on September 17, 2002, Justice P. Sathasivam (then, a judge of the Madras High Court) had set aside the insolvency notice, after holding that it had been issued with an ulterior motive to humiliate the applicant and it was not a recourse adopted for bona fide realistion of the penalty amount, and hence, the 2005 appeal.