HC Cannot Act as Appellate Authority Under Article 226 Against ED’s Seizure Order | Defenses Must Be Tested by AA

Case Details: PC Financial Services (P.) Ltd. v. Directorate Of Enforcement - [2024] 165 taxmann.com 854 (Delhi)

Judiciary and Counsel Details

• Navin Chawla, J
• S. Ganesh, Arvind Nayar, Sr. Advs., Ajay Bhargava, Atul Pandey, Hirak Mukhopadhyay, Milind Jain & Varun Yadav, Advs. for the Petitioner.
• Anurag Ahluwalia, CGSC, & Abhigyan Siddhant, Advs. for the Respondent.

Facts of the Case

In the instant case, the Petitioner/NBFC was engaged in the business of providing unsecured short-term loans to its customers/borrowers in India. The petitioner engaged a Hong Kong-based company, namely ‘H’ for procurement of an IP license.

Enforcement Directorate (ED), after an investigation, alleged that the petitioner made foreign remittances to different foreign companies under the guise of payments against the bogus import of services and said amounts were held outside India by related foreign companies of petitioner.

Later, ED issued a seizure order seizing a consolidated amount of petitioner – Seizure orders were confirmed by the Competent Authority / Commissioner of Customs vide impugned order. ED filed a complaint before the Adjudicating Authority and said proceedings were at a final stage.

Consequently, the Petitioner filed instant writ petition seeking to issue a writ of certiorari, order or direction quashing impugned order and thereby quash seizure order.

High Court Held

The High Court observed that Court in exercise of its powers under Article 226 of Constitution cannot act as an appellate authority and substitute its own opinion for that of Competent Authority.

Further, petitioner failed to make out such a case which would warrant an interference of instant Court with impugned order and said allegations and defenses were to be tested by Adjudicatory Authority.

The High Court held that it could not be said that action of ED was ultra vires FEMA Act as to warrant an interference of instant Court, when proceedings were pending before Adjudicatory Authority and, thus, instant Court would not exercise its discretionary powers under Article 226 of Constitution. Therefore, the instant petition was to be dismissed.