The Karnataka High Court deferred a personal hearing for Cafe Coffee Day in a long-pending FEMA case, holding that the company cannot be proceeded against without being furnished with the reasons for adjudication. The order pauses proceedings that were scheduled for January 30, 2026, ensuring that the petitioner’s right to fair hearing is protected.
The matter traces back to a 2022 complaint filed by the Enforcement Directorate alleging violations under the Foreign Exchange Management Act, 1999, related to transactions in 2009. Cafe Coffee Day, represented by senior advocate Sajjan Poovaya, argued that the adjudicating authority failed to provide a written statement of reasons explaining why proceedings were being initiated. The company maintained that under Section 13 of FEMA and the 2014 technical circular, an inquiry without proper notice of reasons would render the process invalid.
The petitioner challenged a 23-11-2022 show cause notice and a subsequent notice dated 7-1-2026 issued under Rule 4(3) of the FEMA Adjudication Rules, asserting that the lack of procedural compliance jeopardized the legitimacy of any penalty proceedings.
Justice B.M. Shyam Prasad noted the absence of a formal explanation to the petitioner, directing the ED to defer the hearing. The Court observed, “…interim order granted calling upon respondent 2 to defer proceedings scheduled to be held on 30-1-2026…,” underlining that due process is fundamental before initiating adjudication. The order emphasizes that the authority must first form and communicate a written opinion explaining its grounds for proceeding before invoking penalties under Section 13 of FEMA.
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