The Karnataka High Court has put on hold enforcement proceedings initiated against Cafe Coffee Day CEO Malavika Hegde under the Foreign Exchange Management Act (FEMA), ruling that she cannot be compelled to face action as the legal representative of her late husband for alleged corporate transactions dating back more than a decade.
Hegde approached the High Court after the Enforcement Directorate initiated adjudication proceedings and issued a show-cause notice in connection with foreign investment transactions undertaken by Cafe Coffee Day in 2010, when the company was led by its founder V.G. Siddhartha. Siddhartha passed away in 2019, but the complaint, filed in 2022, named Hegde as his legal heir, prompting her to challenge the legality of being summoned to answer allegations linked to acts carried out by the company during her husband’s tenure.
Justice B.M. Shyam Prasad found prima facie force in the submission that FEMA does not contemplate initiation of proceedings against a legal representative for alleged violations attributed to a deceased individual. Recording the argument that liability under the Act could arise only after adjudication and imposition of penalty during the lifetime of the alleged offender, the Court noted, “A legal representative cannot be called upon to answer a liability to pay penalty for an action that could be by the deceased.”
Pending further consideration, the Court issued notice to the Enforcement Directorate and stayed all proceedings against Hegde arising from the 2022 complaint and show-cause notice until the next hearing.
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