Today, On 12th August, The Supreme Court has dismissed NDTV’s appeal against a Bombay High Court ruling in the FEMA case involving compounding applications. NDTV had challenged the High Court’s decision that rejected its plea for quashing compounding proceedings under the Foreign Exchange Management Act (FEMA).
New Delhi: The Supreme Court dismissed a petition by the Enforcement Directorate (ED) challenging a Bombay High Court order that directed the Reserve Bank of India (RBI) to review compounding applications submitted by NDTV in relation to an alleged violation of the Foreign Exchange Management Act (FEMA).
The bench, comprising Justice Abhay S Oka and Justice Augustine George Masih, concluded that there was no justification for intervention.
In a 2018 ruling, the Bombay High Court set-aside the ED’s objections to the compounding process, which initially flagged alleged FEMA violations and issued show cause notices to NDTV in November 2015.
These notices related to accusations that NDTV had violated foreign exchange regulations in securing overseas and foreign direct investment worth over Rs 2,000 crore.
In March 2016, NDTV approached the RBI seeking compounding for the alleged violations mentioned in the showcause notices. However, a year later, the RBI declined to consider the application after the ED, on December 1, 2017, expressed further suspicions and made additional money laundering allegations against NDTV and its subsidiaries.
NDTV then moved to challenge, among other things, the ED’s December 1 letter to the RBI in the Bombay High Court. The news organization argued that although it denied all allegations in the 2015 show cause notices, it sought compounding to alleviate the concerns of its shareholders and stakeholders.
Compounding under FEMA involves voluntarily admitting a violation and seeking resolution. While the RBI has the authority to compound violations under FEMA, the ED’s counsel argued that a 2007 proviso introduced by the Union government prohibits the RBI from compounding cases involving serious contraventions such as suspected money laundering or actions affecting national sovereignty and integrity.
The ED also submitted documents to the court containing allegations of money laundering made by both the ED and the Central Bureau of Investigation (CBI) against NDTV and its subsidiaries in various past cases, including the 2G spectrum case, which NDTV’s counsel strongly opposed.
NDTV’s lawyer contended that the statutory powers granted to the RBI could not be overridden by mere suspicion.