Karnataka High Court

Pigeon Education Technology vs Directorate Of Enforcement on 19 September, 2023

Bench: Krishna S.Dixit

                          1

 IN THE HIGH COURT OF KARNATAKA, BENGALURU

  DATED THIS THE 19TH DAY OF SEPTEMBER, 2023

                       BEFORE

    THE HON'BLE MR. JUSTICE KRISHNA S.DIXIT

   WRIT PETITION NO.11532 OF 2023 (GM-RES)
BETWEEN:

PIGEON EDUCATION TECHNOLOGY
INDIA PRIVATE LIMITED.,
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 2013
HAIVNG ITS REGISTERED OFFICE AT
INDIQUBE ALPHA, NO.19/4, 27, ORR
KADUBEESANAHALLI, BENGALURU - 560 103.
REPRESENTED BY ITS DIRECTOR
MR.VEDANT HAMIRWASIA.
                                             ...PETITIONER
(BY SRI.ADITYA SONDHI., SENIOR COUNSEL A/W
    SRI. KARAN JOSEPH., ADVOCATE)

AND:

1. DIRECTORATE OF ENFORCEMENT,
   BANGALORE ZONAL OFFICE, 3RD FLOOR,
   B BLOCK, BMTC SHANTINAGAR TTMC,
   K H ROAD, SHANTINAGAR,
   BENGALURU - 560 027.

2. THE ASSISTANT DIRECTOR,
   DIRECTORATE OF ENFORCEMENT,
   BANGALORE ZONAL OFFICE, 3RD FLOOR,
   B BLOCK, BMTC SHANTINAGAR TTMC,
   K H ROAD, SHANTINAGAR,
   BENGALURU - 560 027.
                                         ...RESPONDENTS
(BY SRI.A R L SUNDARESAN., ASGI A/W
    SRI.MADHUKAR DESHPANDE., ADVOCATE)
                                       2

     THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA, PRAYING TO ISSUE A WRIT OF
MANDAMUS OR ANY OTHER APPROPRIATE WRIT, CALLING FOR
ALLL OF THE RECORDS FROM THE RESPONDENTS IN
CONNECTION WITH F NO T-3/BGZO/112/2023 AT ANNEXURE-A
THAT PERTAIN TO THE PETITIONER AND ETC.,

     THIS PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDER, THIS DAY, THE COURT PRONOUNCED THE
FOLLOWING:
                       ORDER

Petitioner, a Private Limited Company incorporated

on 30.08.2019 under the provisions of the Companies Act,

2013, is complaining before the Writ Court against the

Seizure Order dated 18.05.2023 issued by the

respondents at Annexure-A, whereby the operation of the

bank accounts in question have been stalled. The

operative portion of the order reads as under:

"ORDER

Therefore, I hereby order the seizure of the following movable properties in the name of Pigeon Education Technology India Private Limited as detailed below Name of Bank Account Type of Closing Balance Bank/pay Number/ account as on ment 18th May, 2023 Gateway Merchant (in Rs.) ID/Deposit

ICICI Bank 142205002450 Current 43,53,789 Account

CITI Bank 0557902007 Current 2,48,72,299 Account

HSBC 073-439176-001 Current 15,06,816

Account

073-439176-051 Term 5,00,000 Deposit

Razorpay DXM32kpsdkE9m Merchant 5,18,96,891 ID

Paytm Pigeon52297800 Merchant 1,667 (One 97 147260 ID Communic ation Pigeon63540778 Merchant 3,157 Limited) 692651 ID

Pigeon30965440 Merchant 1,964 091182 ID

Total 8,31,36,583

Issued under my hand and seal on this 18th day of May, 2023.

Sd/-

18.05.2023 (Dileep Mangawa) Assistant Director"

2. Learned Sr. Advocate appearing for the

petitioner sought to falter the impugned order on the

grounds of malafide (factual & legal), abuse of power,

non-application of mind, unbecoming of Article 12 entity,

unfair & unreasonable, etc. He argued that the petitioner

has not violated any extant norm, be it under the Foreign

Exchange Management Act, 1999 and a set of Rules

promulgated thereunder. He passionately submitted that

at least in respect of monies required for defraying the

public levies, periodical rentals and salaries, petitioner

needs to be permitted to operate the bank accounts in

question; hence, the impugned order is made without

opportunity of hearing. In support of his submission, he

pressed into service a few Rulings.

3. After service of notice, respondents have

entered appearance through the learned CGC and have

filed the Statement of Objections resisting the petition.

Learned ASG appearing for the respondents contended

that: petition is not maintainable in view of availability of

alternate remedy u/s 37A(5) of the 1999 Act; petition is

premature; the impugned order is placed before the

competent authority u/s 37A and petitioner can take its

stand there; no sufficient legal injury as would warrant

indulgence in constitutional jurisdiction is demonstrable;

the impugned order is in aid of the final outcome of main

proceedings; there is prima facie material to demonstrate

that the petitioner has made foreign remittances despite

not availing any advertising services in the course of

business; more than 90% of its revenue has been remitted

to the so called advertisement expenses sans vouching;

that amount itself is more than Rs.83 crore. All the

disputed facts may not be adjudicated in the writ

jurisdiction. So contending, he sought for dismissal of the

Writ Petition.

4. Having heard the learned counsel for the

parties and having perused the Petition papers, this court

is inclined to grant a limited indulgence in the matter as

under and it is for the following reasons:

(a) AS TO THE CONTENTION OF ALTERNATE REMEDY AND RELEGATION OF PETITIONER THERETO:

The preliminary issue as to the maintainability of Writ

Petition raised by the respondents needs to be answered

in favour of the petitioner inasmuch as the alternate

remedy suggested by the learned ASG does not appear to

be efficacious in the fitness of things. It hardly needs to be

stated that the rule of alternate remedy is not a Thumb

Rule to non-suit every litigant approaching the Writ Court.

It all depends upon facts & circumstances of each case

and the requirement of doing justice to the aggrieved.

This view gains support from the Apex Court decision in

GODREJ SARA LEE LTD. vs. EXCISE & TAXATION OFFICER,

2023 SCC OnLine SC 95 wherein it is observed that

availability of alternative remedy does not operate as an

absolute bar to the 'maintainability' of a writ petition and

that the rule, which requires a party to pursue such

remedy provided by a statute, is a rule of policy,

convenience and discretion evolved by the judiciary rather

than a rule of law. Therefore, in all cases, the entities

answering Article 12 of the Constitution of India cannot

press into service the doctrine of alternate remedy as the

China Wall against the invocation of writ jurisdiction.

Justice Oliver Wendell Holmes of U.S. Supreme Court

in DAVIS vs. MILLS, 194 U.S. 451 (1904) had observed:

"Constitutions are intended to preserve practical and substantial rights, not to maintain theories...".

This view gains support from the decision of a Coordinate

Bench in XIAOMI TECHNOLOGIES vs. UNION OF INDIA,

2023 SCC OnLine KAR 24. The said question is being

debated before the Division Bench in Writ Appeal

No.697/2023, arising from an order of another learned

Single Judge, does not come to the rescue of respondents

in the absence of any interim order of stay or the like

being shown.

(b) The above being said, the limited indulgence of

this court is eminently warranted at least to the extent of

permitting the petitioner to operate the bank accounts for

making payment of statutory dues such as the taxes,

levies, etc., in view of Apex Court decision in OPTO

CIRCUIT INDIA LTD vs. AXIS BANK, 2021 SCC OnLine SC

55, which had almost identical fact matrix and the Apex

Court has permitted the petitioner therein to operate its

bank account that was freezed so that the remittances to

be made would go to the Public Exchequer. At para 15, it

is observed: "...What has also engaged the attention of

this court is with regard to the plea put forth on behalf of

the appellant regarding the need to defreeze the account

to enable the appellant to pay the statutory dues..." It is

not that by virtue of this concession, one can siphon off

the funds to the foreign entities. In fact, in his Written

Submissions dated 21.8.2023 (at para 8.8) and in the

petitioner's affidavit dated 18.7.2023, Petitioner has

undertaken not to make any remittances to any foreign

entities. The apprehension of the respondents thus stands

addressed.

the vehement contention of learned ASG that the case

involves disputed fact matrix that cannot be adjudged on

the evidentiary material on record and therefore, Writ

Court should decline interference. The amount involved is

huge i.e., about Rs.83 crore admittedly remitted to foreign

entities; that constitutes arguably about 90% of the

revenue of the petitioner-Company. Whether this amount

was paid for defraying the advertisement expenditure

undertaken in the course of business, is a pure question of

fact on which parties are at loggerheads. Hence this court

should abstain from adjudicating on such pure questions of

facts since it involves a host of intricacies of facts, which

ordinarily the Judges are not much familiar with. After all,

what the Writ Courts address is the decision making

process and not the decision itself vide SUSHIL KUMAR vs.

STATE OF HARYANA, AIR 1988 SC 419. Ordinarily, the

Writ Courts should not undertake adjudication of hotly

disputed questions of facts, subject to all just exceptions.

Case of the petitioner fits into one of the exceptions only

to the extent of relaxing the account freezer for the

payment of public levies, as indicated in the immediately

preceding paragraph above. In respect of the rest, case of

the petitioner answers the Rule. There is an added reason

for declining indulgence: as rightly submitted by learned

ASG, the Parliament in its legislative wisdom has enacted

the provisions like section 37A by way of Amendment to

the 1999 Act with effect from 9.9.2015 and special

machinery and the process are created for considering

disputes of the kind. There is a lot of support for this view

in the observations of the Apex Court in RAJ KUMAR

SHIVHARE vs. ASSISTANT DIRECTOR, DIRECTORATE OF

ENFORCEMENT, (2010) 4 SCC 772, wherein paragraph 19

reads as under:

"It is thus clear that Chapter V of FEMA, read with the aforesaid rules, provides a complete network of provisions adequately structuring the rights and remedies available to a person who is aggrieved by any adjudication under FEMA."

The 2015 Amendment made after the said decision gives

added weightage to the submission of learned ASG.

Already, the matter is placed at the hands of the

Confirmation Authority which is bound to accomplish its

disposal in a statutory time bound manner after giving a

reasonable opportunity to the petitioner to ventilate its

grievances, with all the contentions as are urged in this

petition.

5. There is force in the submission of learned ASG

that if the money lying in the bank accounts in question

are allowed to be drawn, the very purpose of proceedings

instituted under the provisions of 1999 Act may be