FEMA — section 37A seizure and overseas investment NOC · F2J-C-2889
Genpact India Pvt. Ltd. v. Assistant Director, Directorate of Enforcement & connected petition
VALIDATED · ACTUAL COURT DOCUMENTSource transparency: The local PDF is an actual court document retained from the complete public source. The official court portal is recorded separately. Verify the official record and subsequent history before reliance.
Holding (ratio)
The legal form of FPI-held rupee debentures did not immunise the wider funding arrangement from examination under FEMA section 37A; however, rejection of a separate overseas-investment NOC required intelligible reasons.
Operative order (extract)
The challenge to the section 37A seizure was dismissed, while the NOC rejection was set aside for fresh, reasoned consideration.
Scope limits
The holding is confined to the issues actually decided in the retained judgment; no view is attributed to the court on questions expressly left open or remanded.
Sources and completeness
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- Complete searchable public court copy, retained unchanged
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- Extracted words
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Complete searchable judgment text
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HC-KAR NC: 2026:KHC:50422
WP No. 16763 of 2026
C/W WP No. 7283 of 2026
CNR: KAHC010371552026
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF SEPTEMBER, 2026
BEFORE
THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
WRIT PETITION NO. 16763 OF 2026 (GM-RES)
C/W
WRIT PETITION NO. 7283 OF 2026 (GM-FE)
IN W.P.NO.16763/2026
BETWEEN
GENPACT INDIA PVT. LTD.,
A COMPANY REGISTERED UNDER
THE PROVISIONS OF THE COMPANIES ACT, 2013,
HAVING ITS REGISTERED OFFICE AT 12A,
GROUND FLOOR, PRAKASH DEEP BUILDING,
7, TOLSTOY MARG, NEW DELHI 110001.
REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE
MR. ATUL DHAWAN
EMAIL: atul.dhawan@genpact.com
Ph.No. +91 9811763063
... PETITIONER
(BY SRI. UDAYA HOLLA, SENIOR COUNSEL FOR
SRI. ANIND THOMAS,
SRI. VIJAYENDRA PRATAPSINGH,
MISS. PRERNA PONNAPPA,
SRI. VINUDEEP K.,
SRI. KUSHAGRA JAIN., ADVOCATES)
AND
1. THE ASSISTANT DIRECTOR
DIRECTORATE OF ENFORCEMENT
BENGALURU ZONAL OFFICE,
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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HMT MACHINE TOOLS LIMITED PREMISES,
BENGALURU COMPLEX,
JALAHALLI,
BENGALURU- 560 013
2. DIRECTORATE OF ENFORCEMENT
HMT MACHINE TOOLS LIMITED PREMISES,
BENGALURU COMPLEX,
JALAHALLI,
BENGALURU- 560 013
REPRESENTED BY ITS
ASSISTANT DIRECTOR
….RESPONDENTS
(BY SRI. N. VENKATARAMAN, ASGI &
SRI. ARVIND KAMATH., ASGI FOR
SRI. MADHU N. RAO., CGC )
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI OR ANY OTHER APPROPRIATE WRIT, ORDER, OR
DIRECTION QUASHING AND SETTING ASIDE THE IMPUGNED
COMMUNICATION DATED 13.01.2026 BEARING NO. T-
3/BGZO/91/2021/11891 ISSUED BY RESPONDENT NO. 1, DENYING
THE NO-OBJECTION CERTIFICATE APPLIED FOR BY THE PETITIONER
UNDER RULE 10 OF THE FOREIGN EXCHANGE MANAGEMENT
(OVERSEAS INVESTMENT) RULES, 2022 (ANNEXURE-A) AND ETC.
IN W.P.NO.7283/2026
BETWEEN
GENPACT INDIA PVT. LTD.,
A COMPANY REGISTERED UNDER
THE PROVISIONS OF THE COMPANIES ACT, 2013,
HAVING ITS REGISTERED OFFICE AT 12A,
GROUND FLOOR, PRAKASH DEEP BUILDING,
7, TOLSTOY MARG, NEW DELHI 110001.
REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE
MR. ATUL DHAWAN
EMAIL: atul.dhawan@genpact.com
Ph.No. +91 9811763063
... PETITIONER
(BY SRI. ARVIND DATAR, SENIOR COUNSEL FOR
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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WP No. 16763 of 2026
C/W WP No. 7283 of 2026
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SRI. ANIND THOMAS,
SRI. VIJAYENDRA PRATAPSINGH,
MISS. PRERNA PONNAPPA,
SRI. VINUDEEP K.,
SRI. KUSHAGRA JAIN., ADVOCATES)
AND
1. THE ASSISTANT DIRECTOR
DIRECTORATE OF ENFORCEMENT
BENGALURU ZONAL OFFICE,
HMT MACHINE TOOLS LIMITED PREMISES,
BENGALURU COMPLEX,
JALAHALLI,
BENGALURU- 560 013
2. DIRECTORATE OF ENFORCEMENT
BENGALURU ZONAL OFFICE,
HMT MACHINE TOOLS LIMITED PREMISES,
BENGALURU COMPLEX,
JALAHALLI,
BENGALURU- 560 013
….RESPONDENTS
(BY SRI. N. VENKATARAMAN, ASGI &
SRI. ARVIND KAMATH., ASGI FOR
SRI. MADHU N. RAO., CGC )
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED
ORDER BEARING NO. 1/2026 DTD. 03.02.2026 PASSED BY THE R-1
ASSISTANT DIRECTOR, DIRECTORATE OF ENFORCEMENT IN FILE
NO. F.NO.T-3/BGZO/91/2021/12050 (ANNX-A).AND ETC.
THESE WRIT PETITIONS COMING ON FOR ORDERS AND
HAVING BEEN RESERVED FOR ORDERS ON 08.09.2026, THIS DAY,
THE COURT PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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CAV ORDER
1. The petitioner in W.P.No.16763/2026 is before this
Court seeking for the following reliefs:
a. Issue a Writ of Certiorari or any other
appropriate writ, order, or direction quashing
and setting aside the impugned communication
dated 13.01.2026 Bearing No. T-
3/BGZO/91/2021/11891 issued by respondent
no. 1, denying the No-Objection Certificate
applied for by the petitioner under rule 10 of
the Foreign Exchange Management (Overseas
Investment) Rules, 2022 (Annexure-A);
b. Issue a Writ of Certiorari or any other
appropriate writ, order, or direction under
Articles 226 and 227 of the Constitution of
India, quashing all proceedings initiated and/or
emanating from File No. F. NO. T-
3/BGZ0/91/2021/12050, (Annexure-K) on
account of inordinate delay, and contrary to
settled principles of law as expounded by the
Hon’ble Supreme Court of India in Union Of
India v. Citi bank, N.A. (2022)19scc 188;
c. Issue a Writ of Mandamus or any other
appropriate writ, order, or direction under
Article 226 of the Constitution of India,
directing the respondents to issue an NOC-
permitting the petitioner to make the proposed
overseas investment of USD 100 million in
Genpact Global (IFSC) pvt. Ltd. for the purpose
of establishing a global/regional corporate
treasury centre;
d. Grant the petitioner such other reliefs as this
Hon’ble Court may deem fit and proper.
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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2. The petitioner in W.P.No.7283/2026 is before this
Court seeking for the following reliefs:
a. Issue a writ of certiorari by quashing the
impugned order bearing no. 1/2026 dtd.
03.02.2026 passed by the R-1 Assistant
Director, Directorate of Enforcement in File No.
F.NO.T-3/BGZO/91/2021/12050 (Annx-A);
b. Issue a writ of prohibition against the
Respondents prohibiting the Respondents from
passing any further seizure orders under section
37A of the Foreign Exchange Management Act,
1999 against the petitioner, i.e. Genpact India
Private Limited;
c. Issue a direction / mandamus directing the
Respondents to release the property situated at
DLF City, Phase V, Sector 53 Gurgaon,
Haryana-122022 owned by the Petitioner.
d. Grant the petitioner such other reliefs as this
Hon’ble Court may deem fit and proper.
3. The facts in both the petitions are more or less the
same, except that they diverge later on depending
on the relief that has been sought for.
4. The facts in WP No.7283 of 2026;
4.1. The petitioner is a Company (hereinafter
referred to, for the sake of convenience,
brevity, and identification, as “Genpact India
or New Genpact India”) registered under the
provisions of the Companies Act, 2013, carrying
on the business of providing advanced
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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technology services, business process
outsourcing services, and solutions to global
clients by reimagining finance, supply chain,
and other operational claims to achieve their
work in a more efficient manner.
4.2. Respondent No.1 is the Assistant Director,
Directorate of Enforcement (hereinafter
referred to, for the sake of convenience,
brevity, and identification, as “Assistant
Director”).
4.3. Respondent No.2 is the Directorate of
Enforcement (hereinafter referred to, for the
sake of convenience, brevity and identification,
as “ED or Enforcement Directorate”).
4.4. Genpact India Ltd., was incorporated on
30.10.1996, as a private company with
unlimited liability till January 2015 (hereinafter
referred to, for the sake of convenience,
brevity, and identification, as “Old Genpact
India”). The equity shares of Old Genpact India
were owned by Headstrong Consulting
(Singapore) Pte. Ltd. (hereinafter referred to,
for the sake of convenience, brevity, and
identification, as “Headstrong Singapore”)
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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[now, Genpact Consulting (Singapore) Pte Ltd.]
(hereinafter referred to, for the sake of
convenience, brevity, and identification, as
“Genpact Singapore”) to an extent of 95% of
the shareholding and Genpact India Holdings,
Mauritius (hereinafter referred to, for the sake
of convenience, brevity, and identification, as
“Genpact Mauritius”) owning approximately
5% of the shares.
4.5. On 10.02.2005, Empower Research Knowledge
Services Pvt. Ltd. (hereinafter referred to, for
the sake of convenience, brevity, and
identification, as “Empower India”) was
incorporated in India as a Private Limited
Company. On 03.10.2011, Empower India was
acquired by the Genpact Group through
Headstrong Singapore (now Genpact
Singapore). It is contended that in 2014,
Genpact Group determined that it should
restructure its Indian operations for a variety of
business reasons, and, given the existence of
multiple Indian subsidiaries, it planned to
consolidate them into a Single Indian Entity
owned by a Singapore Holding Company.
Empower India was identified as an entity for
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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consolidation of Indian operations. For this,
Empower India needed funds to acquire
Genpact India and other Indian entities.
4.6. On 27.01.2015, Headstrong Singapore (now
Genpact Singapore), which is a holding
Company for two Indian Companies. In that,
Headstrong held 95% of the shares in Genpact
India and 100% of shares in Empower India.,
borrowed approximately USD 660 million, from
Morgan Stanley Senior Funding Inc.
(hereinafter referred to, for the sake of
convenience, brevity, and identification, as
“Morgan Stanley”) and another USD 77.50
million approximately INR 476.34 crores from
its holding company.
4.7. The said amount was infused into Empower
India vide subscription of shares under the
100% automatic route for Foreign Direct
Investment (hereinafter referred to, for the
sake of convenience and brevity, as “FDI”). In
pursuance of the receipt of the said capital,
Empower India, from and out of the said funds,
acquired 49% of the shares of Old Genpact
India, namely 44 % of the shares held by
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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Headstrong Singapore and approximately 5%
held by Genpact Mauritius. As regards this,
Empower India remitted total consideration of
USD 737.50 million (approximately INR 4528
crores), with USD 660 million paid to
Headstrong Singapore and USD 77.50 million
paid to Genpact Mauritius.
4.8. Headstrong Singapore repaid the loan taken
from Morgan Stanley on 30.01.2015 from the
funds received from the sale of 45% of shares
of Old Genpact India to Empower India.
4.9. On 09.03.2015, Genpact Luxembourg SARL
(hereinafter referred to, for the sake of
convenience, brevity, and identification, as
“Genpact Luxembourg”) was registered as a
Foreign Portfolio Investor (hereinafter referred
to, for the sake of convenience and brevity, as
“FPI”) by the Securities Exchange Board of
India (hereinafter referred to, for the sake of
convenience and brevity, as “SEBI”).
4.10. On 23.03.2015, Genpact Global Holdings
Bermuda Ltd. (hereinafter referred to, for the
sake of convenience, brevity, and identification,
as “Genpact Bermuda”) borrowed USD
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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737.50 million from Morgan Stanley, which was
infused by Genpact Bermuda into Genpact
Luxembourg as a short-term loan, which was
settled by Genpact Luxembourg to Genpact
Bermuda by issuance of shares.
4.11. On 25.03.2015, Empower India issued 4,600
Series I-rated, listed, redeemable Non-
Convertible Debentures (hereinafter referred to,
for the sake of convenience and brevity, as
“NCDs”) to Genpact Luxembourg at a face
value of INR 1,00,00,000 (Rupees One Crore
only), carrying a coupon rate of 11% per
annum. The amounts in relation thereto,
namely INR 4600 crores were remitted by
Genpact Luxembourg to Empower India in
Indian rupees.
4.12. It is claimed that the investment made by
Genpact Luxembourg was for the acquisition
and merger of Indian Operating Entities into
Empower India. It is further claimed that the
Genpact Group was positioning Empower India
to become a large business with huge potential.
4.13. Empower India acquired the remaining 51% of
the shares of Old Genpact India from
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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Headstrong Singapore from and out of the
amounts received on account of the issuance of
the NCDs, on account of which Old Genpact
India became a wholly owned subsidiary of
Empower India.
4.14. It is on account of the above transactions that
Old Genpact India became a wholly owned
subsidiary of Empower India. Subsequently, the
Indian Entities including Empower India,
Genpact India, and other subsidiaries namely
M/s Felix Software Solutions Private Limited,
M/s Genpact Infrastructure (Bubaneshwar)
Private Limited, M/s Genpact India Business
Processing Private Limited, M/s Genpact
Infrastructure (Jaipur) Private Limited, M/s
NGEN Media Services Private Limited and
Pharmalink Consulting Operations Private
Limited, had filed a scheme for amalgamation
for approval before the High Court of
Telangana, which was approved on 17.08.2015
by the Hon'ble High Court of Telangana and
High Court of Andhra Pradesh. Some of the
companies being registered in Delhi, the
scheme of amalgamation was approved by the
Hon'ble Delhi High Court on 18.03.2016.
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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Thereafter, the name of Empower India, with
whom all the Indian subsidiaries, including Old
Genpact India, were amalgamated, changed its
name from Empower India to Genpact India
Ltd., (i.e., the New Genpact India), which
repaid the amounts covered under the NCDs to
Genpact Luxembourg between 2018 and 2023
against the NCDs.
4.15. In the meanwhile, on 02.08.2017, the
Assessing Officer under the Income Tax
Department (hereinafter referred to, for the
sake of convenience, brevity, and identification,
as “AOIT”) issued a notice to Genpact
Singapore (Earlier Headstrong Singapore)
calling upon Genpact Singapore to submit
copies of the acknowledgement for filing return
of income along with the Income Tax Return
and Form No. 3CEB for the year ending
31.03.2015.
4.16. On 12.10.2018, the merged entity namely New
Genpact India had sought for issuance of an
interpretative letter from the SEBI under
paragraph 5 of the Informal Guidance Scheme,
2003, pertaining to the NCDs issued by
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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erstwhile Empower India to Genpact
Luxembourg, which was replied to on
30.11.2018, stating that there was no violation
of the induced restriction norms for the
proceeds raised on the issues of NCDs.
4.17. On 12.12.2018, the Assistant Commissioner of
Income Tax (hereinafter referred to, for the
sake of convenience, brevity, and identification,
as “ACIT”) passed an Assessment Order,
wherein the returned income was accepted as
NIL. The Assessment Order was adjudicated
over the transaction in question, and a review
was undertaken by the Transfer Pricing Officer
(hereinafter referred to, for the sake of
convenience, brevity, and identification, as
“TPO”), where no adverse inference was drawn
by the TPO in respect of the said transactions.
On 27.09.2019, a letter was issued by Reserve
Bank of India (hereinafter referred to, for the
sake of convenience, brevity, and identification,
as “RBI”) to the ED flagging
importers/exporters who have availed advance
inwards/outward remittances exceeding INR
100 crores. But had failed to submit shipping
bills and documents for over a year.
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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4.18. In pursuance of which, the ED had initiated an
investigation regarding the said import and
export of goods. In the year 2021, the ED
initiated an investigation under the Foreign
Exchange Management Act, 1999 (“FEMA”) in
respect of the petitioner on the basis of the
aforesaid RBI letter dated 27.09.2019.
4.19. On 30.03.2021, an order was passed by the
Commissioner of Income Tax (“CIT”) under
Section 263 of the Income Tax Act, 1961
(hereinafter referred to, for the sake of
convenience, brevity, and identification, as “IT
Act”) holding that the Assessment Order in
respect of Genpact Singapore was erroneous
and prejudicial to the interest of the revenue,
cancelled the Assessment Order, directing the
AO to properly investigate the claims made by
the assessee regarding exemption of
transaction under the IT Act and under the
India-Singapore Double Taxation Avoidance
Agreement (“India-Singapore DTAA”), as
also directing the AO to pass a fresh
Assessment Order after considering all such
heads of income of the assessee.
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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4.20. The said order having been challenged by the
petitioner before the Income Tax Appellate
Tribunal (hereinafter referred to, for the sake of
convenience, brevity, and identification, as
“ITAT”). On 13.06.2022, the ITAT, in ITA
No.501/DEL/2021, set aside the order of the
CIT, dated 30.03.2021 restoring the
Assessment Order of AOIT by holding that the
subject transaction was duly considered and
examined.
4.21. On 31.05.2023, a compounding application was
filed by New Genpact India with the RBI for
compounding of delay in reporting of allotment
of shares in Form FC-GPR, relating to delay in
reporting receipt of foreign inward remittances
towards subscription of equity in the year 2015,
which was allowed by the RBI and compounded
the contravention for delay by way of order
dated 22.11.2023.
4.22. The CIT had challenged the order of the ITAT
before the Hon'ble Delhi High Court in ITA
No.103 of 2023, which came to be dismissed by
the Hon'ble Delhi High Court on 11.12.2024.
The CIT has challenged the order of the Hon'ble
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
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Delhi High Court before the Hon'ble Supreme
Court in SLP(C).No.025934 of 2026 wherein
notice has been ordered, though no stay has
been granted.
4.23. The ED having initiated the investigation, an
order came to be passed on 03.02.2026 by the
Assistant Director, ED, vide order bearing No.1
of 2026, seizing the property of the petitioner
namely, that situated in DLF City, Phase No.V,
Sector 53, Gurgaon, Haryana 122022, owned
by the petitioner under Section 37A of the
FEMA. It is a said order of the Assistant Director
which is challenged in WP No.7283 of 2026.
5. Facts in WP No.16763 of 2026;
5.1. On 22.08.2022, the Foreign Exchange
Management (Overseas Investment) Rules,
2022 (hereinafter referred to, for the sake of
convenience, brevity, and identification, as “OI
Rules”) came to be notified, replacing the
earlier regime under Regulations 6(2)(iii) of the
Foreign Exchange Management (Transfer or
Issue of Any Foreign Security) Regulations,
2004.
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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5.2. In terms of Rule 10 of the OI Rules, a person or
entity under investigation by certain authorities,
including the Directorate of Enforcement, is
required to obtain a No-Objection Certificate
prior to making a financial commitment outside
India.
5.3. In the year 2025, Genpact India incorporated
Genpact Global (IFSC) Private Limited
(hereinafter referred to, for the sake of
convenience, brevity, and identification, as the
”Gift City Entity”) as its wholly owned
subsidiary in the Gujarat International Finance
Tec-City, Special Economic Zone, Gujarat
(hereinafter referred to, for the sake of
convenience, brevity, and identification, as the
”Gift City”), which is managed by the
International Financial Services Centres
Authority (“IFSCA”). On an application made
by New Genpact India, the IFSCA granted the
Gift City Entity provisional registration as a
finance company on 15.09.2025 for carrying
out Global/Regional Corporate Treasury Centre
activities, subject to the entity being capitalised
within six (6) months. The Gift City Entity is
envisaged to be engaged in treasury activities
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
Verified
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such as lending, cash pooling, and investments
for various group entities of Genpact located
outside India.
5.4. Since Genpact India had earlier received
summons from the Enforcement Directorate.
Genpact India on 26.11.2025 made an
application (hereinafter referred to, for the sake
of convenience, brevity, and identification, as
the “NOC application”) under Rule 10 of the
OI Rules seeking for No Objection from the ED
for investment of USD 100 million in Gift City
Entity for the purpose of establishing a global
treasury center to provide cash pooling and
lending services to group entities located
outside India.
5.5. On 13.01.2026, the Assistant Director, ED,
rejected Genpact India’s NOC application, which
is what is challenged in WP No.16763 of 2026.
Petitioner's arguments in WP 7283/2026.
6. Sri.Arvind Datar, Learned Senior Counsel appearing
for Genpact India in WP No. 7283 of 2026, would
submit that:
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:32, Bengaluru
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6.1. At the outset, he submits that the Section 37A
Order relates to the NCD transaction in March
2015 and not the equity transaction in January
2015.
6.2. Section 37A of the FEMA came into force on
09.09.2015, which was much after the
transactions referred to in the notice i.e., from
January to March 2015. The transaction was
completed by 25.03.2015. His submission is
that once the transaction had been completed
by 25.03.2015, Section 37A of FEMA, which
came into force on 09.09.2015, could not have
been retrospectively applied to the petitioner in
respect of those concluded transactions.
6.3. His submission is that Section 37A of FEMA,
being a substantive disability-imposing
provision, cannot have retrospective
application, and in this regard, he relies upon
the decision of a co-ordinate bench of this Court
in Canara Bank Vs. Commissioner of
Customs,1 more particularly paragraphs 2, 3,
6, 15 and 20 thereof which are reproduced
hereunder for easy reference;
1
WP No.10895/2023 dt. 10.06.2024
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2. The material on record discloses that for the purpose of
availing two housing loans in sums of Rs.1,70,00,000/- and
Rs.1,24,00,000/-, from the petitioner – Bank, the 3rd
respondent mortgaged the schedule property along with the
other property on 20.02.2015 by way of registered
Memorandum of Title Deeds and letter handing over title
deeds of the properties. Since the 3rd respondent defaulted
in repayment of loan, the loan accounts were classified as
‘NPA’ by the petitioner – Bank. It is contended that when the
petitioner – Bank was contemplated initiation of proceedings
under the SARFAESI Act, 2002, it learnt that the 2nd
respondent had seized the schedule property for alleged
offences said to have been committed by the 3rd respondent
under the provisions of the Foreign Exchange Management
Act, 1999 (for short ‘the FEMA’) and passed the impugned
order dated 31.03.2022 directing seizure of the schedule
property and other properties of the 3rd respondent.
3. It is contended that the petitioner submitted a
representation dated 29.07.2022 to the 2nd respondent
requesting release / cancellation of the attachment / seizure,
to which, the 2nd respondent issued a reply dated
04.08.2022 intimating the petitioner that a petition under
Section 37A(2) of FEMA had already been filed by the 2nd
respondent before the competent authority and objections
may be submitted by the petitioner before the authority. In
pursuance of the same, petitioner submitted a
representation / objections dated 23.08.2022 to the 1st
respondent – Commissioner and since no decision has been
taken by him and the order of seizure continues to subsist in
respect of the schedule property, petitioner is before this
Court by way of the present petition.
6. In addition to reiterating the various contentions urged in
the petition and referring to the material on record, learned
Senior counsel for the petitioner has made the following
submissions:-
(i) That by virtue of Section 26E of the SARFAESI Act, the
petitioner being a secured creditor, the debt due to the
petitioner shall have priority and prevail over all other debts
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/ dues including all revenues, taxes, cesses and other rates
payable to the respondents 1 and 2 and the provisions of the
SARFAESI Act overrides the provisions of the FEMA, since
both are special laws and SARFAESI Act is a subsequent
enactment, which would prevail over FEMA which was an
earlier enactment.
(ii) That the impugned order was passed under Section 37A
of the FEMA which was inserted vide Central Act No.20 of
2015 w.e.f. 09.09.2015, while the mortgage created in
favour of the petitioner –Bank was prior / earlier thereto i.e.,
on 20.05.2015 and consequently, Section 37A of FEMA was
neither applicable nor could be invoked in relation to the
schedule property which had been mortgaged in favour of
the petitioner –Bank much prior / earlier to Section 37A
being inserted in FEMA and coming into force for the purpose
of the present case.
(iii) That by virtue of Section 31B of the Recovery of Debts
and Bankruptcy Act, 1993 (for short ‘the RDBI Act’), which
applies to proceedings under the SARFAESI Act, the rights of
the secured creditors viz., petitioner – Bank to realise
secured debts due and payable to them by sale of assets,
over which security interest is created shall prevail and shall
be paid in priority over all other debts/ dues including
Government dues viz., revenues, taxes, cesses and rates
due to the respondents 1 and 2.
(iv) That the impugned seizure order dated 31.03.2022
passed under Section 37A(1) of the FEMA is illegal, arbitrary
and without jurisdiction or authority of law and the same
deserves to be quashed.
In support of his submissions, learned Senior counsel relied
upon the following judgments:-
(i) SBICAP Ventures Ltd, Vs. Joint Director, Directorate of
Enforcement (Bengaluru Zonal Office) and others-
W.P.No.1360/2023 dated 20.03.2023(Bombay);
(ii) Solidaire India Ltd., Vs Fairgrowth Financial Services and
others – (2001) 3 SCC 71;
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(iii) Assistant Commissioner vs. Indian Overseas Bank –
2016 SCC Online MAD 10030.
15. A perusal of the material on record will indicate that the
schedule property had been mortgaged in favour of the
petitioner – Bank on 20.02.2015; it is an undisputed fact
that Section 37A of the FEMA came into force w.e.f.
09.09.2015 by virtue of Act No.20 of 2015, under which,
Section 37A was inserted into the FEMA; the said provisions
of Section 37A being substantive in character clearly cannot
be construed or treated as being retrospective or retroactive
in operation and the same cannot be made applicable to the
schedule property which had undisputedly been mortgaged
in favour of the petitioner – Bank prior to Section 37A of the
FEMA coming into force; to put it differently, Section 37A,
under which the impugned order has been passed by the
2nd respondent being prospective in nature and operation,
the said provision could not have been invoked by the 2nd
respondent for the purpose of passing the impugned order of
seizure / attachment in relation to the schedule property
which had undisputedly stood mortgaged in favour of the
petitioner – Bank prior to Section 37A coming into force and
consequently, the said provision was not applicable to the
schedule property and the 2nd respondent did not have
jurisdiction or authority of law to invoke or apply Section
37A of the FEMA for the purpose of passing the impugned
order which deserves to be quashed on this ground also.
20. Insofar as the contention as regards availability of
equally efficacious and alternative remedy by way of an
appeal under Section 37A(5) of the FEMA is concerned, in
the light of the findings recorded by me hereinbefore that
the impugned order is without jurisdiction or authority of law
and the same is not only illegal and arbitrary but also
contrary to the provisions contained in the SARFAESI Act
and RDBI Act and consequently, mere availability of a
remedy by way of an appeal cannot be construed or treated
as denuding this Court of its jurisdiction under Article 226 of
the Constitution of India and the said contention of the
respondents 1 and 2 in this regard cannot be accepted.
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6.4. By relying on Canara Bank, he submits that a
co-ordinate Bench of this Court had set aside
an order passed under Section 37A of the FEMA
insofar as it affected a property which had been
mortgaged in favour of the secured creditor in
February 2015, prior to Section 37A being
brought into force on 09.09.2015. According to
him, the Co-ordinate Bench held that Section
37A, being substantive in character, could not
be applied retrospectively so as to affect a
security interest created prior to the coming
into force of the said provision.
6.5. He further submits that the decision in Canara
Bank has attained finality, the same having not
been challenged by the Directorate of
Enforcement, and consequently the said
decision is binding upon the respondents and is
required to be followed in the present
proceedings.
6.6. It is therefore contended that, in the present
case, since the NCD transaction relating to
Empower India stood completed in March 2015,
i.e. prior to Section 37A of FEMA coming into
force on 09.09.2015, the said provision could
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not subsequently be invoked so as to subject
the property/security interest arising from the
said transaction to seizure or attachment.
According to him, permitting Section 37A to
operate in such circumstances would amount to
giving retrospective operation to a substantive
provision, contrary to the principle recognised
by this Court in Canara Bank.
6.7. He relies upon the decision of the Hon’ble
Supreme Court in Berger Paints India Ltd vs.
CIT,2 more particularly paragraph 14 thereof,
which is reproduced hereunder for easy
reference;
14. The decision in Lakhanpal National Ltd. case [(1986) 162
ITR 240 (Guj)] which clearly laid down the interpretation of
Section 43-B was followed by the judgments of Madras High
Court and Bombay High Court and was again followed by the
decision of the Special Bench of the Income Tax Appellate
Tribunal, none of which have been challenged. In these
circumstances, the principle laid down in Union of India v.
Kaumudini Narayan Dalal , CIT v. Narendra Doshi and CIT v.
Shivsagar Estate clearly applies. We see no “just cause” as
would justify departure from the principle. Hence, in our
view, the Revenue could not have been allowed to challenge
the principle laid down in Lakhanpal National Ltd. case which
was followed by the inspecting Assistant Commissioner in the
case of the assessee in the three assessment years in
question. We are, therefore, of the view that the
Commissioner, the Income Tax Appellate Tribunal and the
Calcutta High Court erred in permitting the Revenue to raise
2
(2004) 12 SCC 42
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a contention contrary to what was laid down by the Gujarat
High Court in Lakhanpal National Ltd. case. This decision has
been subsequently followed by the decisions of the Bombay
High Court in CIT v. Bharat Petroleum Corpn. Ltd. and the
Madras High Court in Chemicals and Plastics India Ltd. v. CIT
as well as the decision of the Special Bench in Indian
Communication Network (P) Ltd. v. CIT which have all
remained unchallenged.
6.8. By relying on Berger Paints, he submits that
where a particular legal principle has been laid
down by the jurisdictional High Court and the
said view has not been challenged before the
higher forum, the ED cannot be permitted to
take a contrary stand in a subsequent matter.
The principle enunciated by the Hon’ble
Supreme Court in Berger Paints assumes
particular significance in the present case, since
the issue of retrospectivity of Section 37A has
already been considered and decided by a Co-
ordinate Bench of this Court in Canara Bank,
and there is no subsequent decision of a
superior Court or any other legally sustainable
basis warranting departure from the said view.
The ED, according to him, cannot adopt a
contrary position in the present proceedings
merely because the factual setting is different.
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6.9. He accordingly submits that both the equity
transaction, which culminated in January 2015,
and the borrowing by way of NCDs, which
culminated in March 2015, stood completed
prior to Section 37A of the FEMA coming into
force on 09.09.2015. Consequently, the rights
and interests arising out of or crystallised
pursuant to the said transactions could not,
according to him, subsequently be subjected to
proceedings under Section 37A by giving the
provision retrospective operation. He therefore
contends that the invocation of Section 37A in
respect of the aforesaid transactions is
impermissible in law and is contrary to the
principle laid down in Canara Bank, which, in
his submission, the ED is bound to follow.
6.10. If at all the allegations by the ED are that the
same was in violation of the FEMA, action is
required to be initiated under Section 4 of the
FEMA and not under Section 37A of FEMA.
There is no cause of action post the issuance of
the NCDs on 25.03.2015. In this regard, he
relies upon the decision of the Hon’ble Supreme
Court in State of Bihar vs. Deokaran
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Nenshi,3 more particularly paragraphs 8, 9 and
10 thereof, which are reproduced hereunder for
easy reference;
8. In Emperor v. Karsandas [AIR 1942 Bom 326 : 203 IC
592 : 44 Cr LJ 120] the question was as to the proper
construction of Section 390 sub-section (1) of the Bombay
City Municipal Act, 1888. That sub-section provided that no
person shall newly establish in any premises any factory, in
which it was intended that steam, water or other
mechanical power should be employed, without the
previous permission of the Commissioner, nor shall any
person work or allow to be worked any such factory without
such permission. The sub-section thus laid down two
distinct offences: (1) establishing a new factory in which
mechanical power was intended to be used without the
permission, and (2) working such a factory in which
mechanical power was intended to be used without
permission. The High Court held that the first offence would
be completed when a new factory was established without
permission, an offence completed once and for all, while the
other offence would be committed whenever such a factory
without the permission was worked, that is, on every day
that it was worked without the permission. The High Court
observed that though the expression “continuing offence”
was not a very happy expression, it was very often used. A
person may not continuously work such a factory. He might
work it one day and not work it the next day, and then
resume its working once again. Therefore, the proper
meaning to be attached to such an offence was that
whenever he worked such a factory he committed an
offence. The distinction between the two kinds of offences
lay between an act which constituted an offence once and
for all and an act which continued, and therefore,
constituted a fresh offence every time on which it
continued. Similarly, in State v. Bhiwandiwala [AIR 1955
Bom 161 : ILR 1955 Bom 192 : 56 Cr LJ 666] three
offences were charged against the respondent: (1) failure
to submit a written notice of occupation of his factory as
3
(1972) 2 SCC 890
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required by Section 7(1) of the Factories Act, 1948, (2)
failure to submit an application for registration and grant of
licence as required by Section 6 of the Act read with Rule 4
of the Bombay Factories Rules, 1950, and (3) for using the
premises as a factory without a licence. The High Court held
that the first two offences were offences completed on
failure to submit the notice and the application for
registration and licence, and a complaint in respect of them
would be barred if it was lodged beyond the period of three
months from the date of the offence under Section 106 of
the Act. But a prosecution in respect of the third offence
would not be so barred as that offence was a continuing
offence in the sense that using the premises as a factory
without registration and licence was an offence committed
every time that the premises were used as a factory.
Likewise, in Bihar v. J.P. Singh [1963 BLJR 782] the High
Court of Patna held that conducting a restaurant without
having it registered and without maintaining registers
required by the Bihar Shops and Establishments Act, 8 of
1954, and the Rules framed thereunder were continuing
offences as every time a restaurant was run without its
being registered and without maintaining the requisite
registers was an offence, and therefore, the period of
limitation under Section 36 of the Act would being to run
from the date of the occurrance of each of the defaults. See
also State v. Laxmi Narain [AIR 1957 All 343 : 1957 Cr LJ
615 : 1958 All WR (HC) 281] .
9. Regulation 3 read with Section 66 of the Mines Act
makes failure to furnish annual returns for the preceding
year by the January 21, of the succeeding year an offence.
The language of Regulation 3 clearly indicates that an
owner, manager etc. of a mine would be liable to the
penalty if he were to commit an infringement of the
Regulation and that infringement consists in the failure to
furnish returns on or before January 21, of the succeeding
year. The infringement, therefore, occurs on January 21, of
the relevant year and is complete on the owner failing to
furnish the annual returns by that day. The Regulation does
not lay down that the owner, manager etc. of the mine
concerned would be guilty of an offence if he continues to
carry on the mine without furnishing the returns or that the
offence continues until the requirement of Regulation 3 is
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complied with. In other words, Regulation 3 does not render
a continued disobedience or non-compliance of it an
offence. As in the case of a construction of a wall in
violation of a rule of a bye-law of a local body, the offence
would be complete once and for all as soon as such
construction is made, a default occurs in furnishing the
returns by the prescribed date. There is nothing in
Regulation 3 or in any other provision in the Act or the
Regulations which renders the continued non-compliance an
offence until its requirement is carried out,
10. The High Court, in our view, was right in holding that
the complaint was time barred as the offence in question
fell within the substantive part of Section 79 of the Act and
not under the Explanation attached to it. The appeal,
therefore, must fail and is dismissed.
6.11. His submission by relying on Deokaran
Nenshi’s case is that where an act constituting
an alleged violation is complete upon the
occurrence of the relevant transaction, such
violation cannot be treated as a continuing
offence merely because its consequences may
continue thereafter. According to him, the
issuance of the NCDs on 25.03.2015
constituted a completed transaction and, if the
allegation of the ED is that the said transaction
was in violation of the FEMA, the alleged
contravention stood complete with the issuance
of the NCDs and cannot be treated as a
continuing contravention so as to attract a
provision which came into force subsequently.
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6.12. He submits that there is, therefore, no cause of
action arising subsequent to 25.03.2015 which
could independently attract the provisions of
Section 37A of the FEMA. The mere continuance
of the consequences of the transaction, or the
continued existence of the rights or obligations
arising therefrom, cannot, according to him,
convert a completed transaction into a
continuing contravention. In the absence of any
subsequent act constituting a fresh or
continuing contravention, the ED cannot rely
upon the subsequent enactment of Section 37A
to initiate proceedings in respect of a
transaction which had already been completed
prior to 09.09.2015.
6.13. He accordingly submits that if the case of the
ED is that the issuance of the NCDs itself
constituted a violation of the FEMA, the alleged
contravention was complete on 25.03.2015 and
the proceedings, if otherwise maintainable,
would have to be founded upon the statutory
provision applicable to such contravention at
that point of time, including Section 4 of the
FEMA, and not upon Section 37A, which was
introduced subsequently. Section 37A,
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according to him, cannot be employed by
characterising the continuing existence or effect
of a completed transaction as a continuing
contravention, in the absence of any statutory
provision making such continued state of affairs
an independent or continuing violation.
6.14. He further submits that the principle laid down
in Deokaran Nenshi is applicable in the
present case because the distinction is not
merely one of limitation but goes to the
existence and timing of the alleged
contravention itself. Where the statutory
obligation is breached by a specific and
identifiable act, and the breach is complete
upon the commission of that act, the
subsequent continuation of its consequences
does not, in the absence of statutory language
to that effect, give rise to a fresh cause of
action on each succeeding day. Applying that
principle, the issuance of the NCDs on
25.03.2015 cannot, according to him, be
converted into a continuing contravention
merely because the NCDs continued to remain
outstanding thereafter.
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6.15. On this basis, he submits that the invocation of
Section 37A of the FEMA in the present case is
unsustainable, both because the transaction in
question preceded the coming into force of
Section 37A and because no subsequent act or
transaction giving rise to an independent
contravention under Section 37A has been
identified by the ED.
6.16. He submits that NCDs borrowing is also akin to
the creation of a mortgage, as was dealt by a
co-ordinate bench of this Court in Canara
Bank’s case, which he reiterates was
completed much prior to 09.09.2015. The
mortgage continued to be with Canara Bank
even on the day the Section 37A of FEMA order
was passed by ED. Despite this, this Court had
quashed the said order, stating that Section
37A of FEMA would not be applicable to a
transaction which occurred prior to 09.09.2015.
Thereby holding that Section 37A of FEMA was
prospective in operation. He reiterates that
once the NCDs borrowing stood completed, ED
had no jurisdiction or authority in law to invoke
and apply Section 37A of the FEMA.
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6.17. His submission is that a jurisdictional fact is a
fact that must exist before an authority can
assume jurisdiction before proceeding with a
particular matter. That is a fact on which an
agency like the ED can exercise jurisdiction. As
the said fact did not exist as on 09.09.2015,
the ED could not have exercised any jurisdiction
retrospectively.
6.18. In this regard, he relies on the decision of the
Hon’ble Supreme Court in Arun Kumar vs.
Union of India,4 more particularly paragraphs
73, 74, 75, 76, 84 and 85 thereon which is
reproduced hereunder for easy reference;
73. It is, therefore, clear that before Section 17(2)(ii) can be
invoked or pressed into service and before calculation of
concession as per Rule 3 is made, the authority exercising
power must come to a positive conclusion that it is a
concession. “Concession”, in our judgment is, thus a
foundational, fundamental or jurisdictional fact.
74. A “jurisdictional fact” is a fact which must exist before a
court, tribunal or an authority assumes jurisdiction over a
particular matter. A jurisdictional fact is one on existence or
non-existence of which depends jurisdiction of a court, a
tribunal or an authority. It is the fact upon which an
administrative agency's power to act depends. If the
jurisdictional fact does not exist, the court, authority or
officer cannot act. If a court or authority wrongly assumes
the existence of such fact, the order can be questioned by a
writ of certiorari. The underlying principle is that by
4
(2007) 1 SCC 732
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erroneously assuming existence of such jurisdictional fact,
no authority can confer upon itself jurisdiction which it
otherwise does not possess.
75. In Halsbury's Laws of England, it has been stated:
“Where the jurisdiction of a tribunal is dependent on the
existence of a particular state of affairs, that state of affairs
may be described as preliminary to, or collateral to the
merits of, the issue. If, at the inception of an inquiry by an
inferior tribunal, a challenge is made to its jurisdiction, the
tribunal has to make up its mind whether to act or not and
can give a ruling on the preliminary or collateral issue; but
that ruling is not conclusive.”
76. The existence of jurisdictional fact is thus sine qua non
or condition precedent for the exercise of power by a court
of limited jurisdiction.
84. From the above decisions, it is clear that existence of
“jurisdictional fact” is sine qua non for the exercise of power.
If the jurisdictional fact exists, the authority can proceed
with the case and take an appropriate decision in accordance
with law. Once the authority has jurisdiction in the matter on
existence of “jurisdictional fact”, it can decide the “fact in
issue” or “adjudicatory fact”. A wrong decision on “fact in
issue” or on “adjudicatory fact” would not make the decision
of the authority without jurisdiction or vulnerable provided
essential or fundamental fact as to existence of jurisdiction
is present.
85. In our opinion, the submission of Mr Salve is well
founded and deserves to be accepted that “concession”
under clause (ii) of sub-section (2) of Section 17 of the Act
is a “jurisdictional fact”. It is only when there is a
“concession” in the matter of rent respecting any
accommodation provided by an employer to his employee
that the mode, method or manner as to how such
concession can be computed arises. In other words,
concession is a “jurisdictional fact”; method of fixation of
amount is “fact in issue” or “adjudicatory fact”. If the
assessee contends that there is no “concession”, the
authority has to decide the said question and record a
finding as to whether there is “concession” and the case is
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covered by Section 17(2)(ii) of the Act. Only thereafter the
authority may proceed to calculate the liability of the
assessee under the Rules. In our considered opinion,
therefore, in spite of the legal position that Rule 3 is intra
vires, valid and is not inconsistent with the provisions of the
parent Act under Section 17(2)(ii) of the Act, it is still open
to the assessee to contend that there is no “concession” in
the matter of accommodation provided by the employer to
the employee and hence the case did not fall within the
mischief of Section 17(2)(ii) of the Act.
6.19. By relying on Arun Kumar, he submits that the
existence of a jurisdictional fact is a condition
precedent to the exercise of statutory power. If
such foundational fact does not exist, the
authority cannot assume jurisdiction merely by
proceeding to determine the merits of the
matter. He submits that the ED was therefore
required, at the threshold, to establish the
existence of the facts necessary to attract
Section 37A of the FEMA before exercising the
power of seizure thereunder.
6.20. He further submits that the question whether
the transactions in question fall within the
scope of Section 37A is a jurisdictional issue
and not merely an adjudicatory or factual issue.
In the absence of the necessary jurisdictional
facts, the ED could not have invoked Section
37A or proceeded to pass an order thereunder.
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6.21. He further submits that Section 37A of the
FEMA requires the authorised officer to record,
in writing, the reasons to believe that the
conditions for invoking the provision are
satisfied before passing an order of seizure.
According to him, the reasons must be
contained in the seizure order itself, and cannot
be supplemented later by oral submissions
made before the Court. Therefore, any ground
or reason not recorded in the seizure order
cannot be treated as forming part of the
reasons to believe, and the oral submissions
advanced by the learned ASGI cannot be relied
upon to sustain the order under Section 37A.
6.22. He relies upon the decision of the Hon’ble
Supreme Court in Sri Nisha vs. Enforcement
Directorate,5 more particularly paragraph 30
thereof, which is reproduced hereunder for easy
reference;
30. The controversy in the present cases is more
appropriately examined within the framework of sub-
sections (1) to (3) of Section 37A. A plain reading of
Section 37A(1) indicates that the power of seizure is
predicated upon the existence of a “reason to believe”
that foreign exchange, foreign security or immovable
5
2026 SCC OnLine SC 517
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property situated outside India is suspected to have
been held in contravention of Section 4. Such
satisfaction by the Authorised Officer at the stage of
preliminary seizure under Sub-section (1) is only
tentative and is expressly subject to scrutiny under
Sub-sections (2) and (3), wherein the Competent
Authority is required to independently examine
whether the reasons recorded justify continuation of
the seizure. The exercise undertaken by the Competent
Authority is thus not an empty formality, but a
substantive evaluation of whether the material on
record is sufficient to sustain even a prima facie
inference of contravention in relation to foreign
exchange. In the present case, upon such evaluation,
the Competent Authority declined to confirm the
seizure by a well-reasoned order, thereby indicating
that the material did not meet even this preliminary
threshold. The refusal to confirm the seizure,
therefore, reflects a considered finding that the
foundational requirement of a “reason to believe” was
not satisfied on the material available.
6.23. By relying on Sri Nisha, he submits that the
power of seizure under Section 37A(1) is
conditional upon the existence of a recorded
“reason to believe” that the property is held in
contravention of Section 4 of the FEMA. Such
satisfaction must be based on the material
available to the Authorised Officer and must
precede the seizure. He submits that the
reasons recorded in the seizure order must
disclose the basis for such satisfaction and
cannot be supplemented by reasons
subsequently advanced before this Court.
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Therefore, the oral submissions made by the
learned ASGI cannot cure any deficiency in the
reasons recorded in the order under Section
37A.
6.24. His submission is also that for the purpose of
this petition, this Court would have to only
examine the reasons contained in the order
passed under Section 37A of FEMA, and nothing
more than that can be looked into, and the
reasons in that order would have to stand the
test of Section 37A of FEMA. On that ground, he
submits that the seizure order fails to disclose
and/or provide reasons to believe satisfying the
ingredients for contravention of Section 4 of
FEMA, and in the absence of valid reasons to
believe, the seizure order, being without
jurisdiction, is required to be set aside by this
Court.
6.25. He relies upon the decision of the Hon’ble
Supreme Court in Ravinder Kumar vs. State
of Haryana,6 more particularly paragraphs 12
to 14 thereof, which are reproduced hereunder
for easy reference;
6
2024 SCC OnLine SC 2495
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12. The question is what meaning can be assigned to
the expression “has reason to believe”. Section 26 of
the Penal Code, 1860 defines the expression “reason
to believe”, which reads thus:
“26. “Reason to believe”.— A person is said to have
“reason to believe” a thing, if he has sufficient cause
to believe that thing but not otherwise.”
In the case of Aslam Mohammad Merchant v.
Competent Authority1, this Court had an occasion to
interpret the same expression. In paragraph 41, this
Court held thus:
“41. It is now a trite law that whenever a statute
provides for “reason to believe”, either the reasons
should appear on the face of the notice or they must
be available on the materials which had been placed
before him.”
However, interpretation of the expression will depend
on the context in which it is used in a particular
legislation. In some statutes like the present one,
there is a power to initiate action under the statute if
the authority has reason to believe that certain facts
exist. The test is whether a reasonable man, under
the circumstances placed before him, would be
propelled to take action under the statute. Considering
the object of the 1994 Act, the expression “reason to
believe” cannot be construed in a manner which would
create a procedural roadblock. The reason is that once
there is any material placed before the Appropriate
Authority based on which action of search is required
to be undertaken, if the action is delayed, the very
object of passing orders of search would be frustrated.
Therefore, what is needed is that the complaint or
other material received by the appropriate authority
or its members should be immediately made available
to all its members. After examining the same, the
Appropriate authority must expeditiously decide
whether there is a reason to believe that an offence
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under the 1994 Act has been or is being committed.
The Appropriate Authority is not required to record
reasons for concluding that it has reason to believe
that an offence under the 1994 Act has been or is
being committed. But, there has to be a rational basis
to form that belief. However, the decision to take
action under sub-section (1) of Section 30 must be of
the Appropriate Authority and not of its individual
members.
13. Under the notification dated 7th November 2013,
the Appropriate Authority for the district consists of
the Civil Surgeon, the District Program Officer of the
Women and Child Development Department, and the
District Attorney. The Civil Surgeon is the Chairman of
the appropriate authority. Looking at the object of
sub-section (1) of Section 30 and the express
language used therein, only the Chairman or any
other member acting alone cannot authorise search
under subsection (1) of Section 30. It must be a
decision of the Appropriate Authority. If a single
member of the Appropriate Authority authorises a
search, it will be completely illegal being contrary to
sub-section (1) of Section 30. If the law requires a
particular thing to be done in a particular manner, the
same shall be done in that manner only. In the
present case, going by the affidavit filed by Dr.
Virender Yadav, the Chairman of the District
Appropriate Authority cum-Civil Surgeon, Gurugram,
the decision to conduct a search by appointing three
officers by order dated 27th April 2017 was only his
decision purportedly taken in his capacity as the
Chairman of the Appropriate Authority. Admittedly,
the other two members of the appropriate authority
are not parties to the said decision. The Civil Surgeon
has given the excuse of urgency. The Appropriate
authority doesn't need to have a physical meeting.
The Civil Surgeon could have held a video meeting
with the other two members. However, when a video
meeting is held, every member must be made aware
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of the complaint or the material on which a decision
will be made. It was a matter of a few minutes.
14. Therefore, in the facts of the case, no legal
decision was made by the Appropriate Authority in
terms of sub-section (1) of Section 30 to search for
the appellant's clinic. As stated earlier, sub-section (1)
of Section 30 provides a safeguard by laying down
that only if the Appropriate Authority has reason to
believe that an offence under the 1994 Act has been
committed or is being committed that a search can be
authorized. In this case, there is no decision of the
Appropriate Authority, and the decision to carry out
the search is an individual decision of the Civil
Surgeon, who was the Chairman of the concerned
Appropriate Authority. Therefore, the action of search
is itself vitiated.
6.26. By relying on Ravinder Kumar, his submission
is that the expression “reason to believe”
requires a rational and sufficient basis in the
material available to the authority. The power
can be exercised only by the authority vested
with such power and not on the basis of the
individual view of an officer, unless the statute
so permits. He therefore submits that, in the
present case, the statutory requirement of a
“reason to believe” must be satisfied by the
competent authority on the basis of the
material before it, and any exercise of power
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without such satisfaction would be without
jurisdiction.
6.27. Without prejudice to the above, he submits that
the seizure order is based substantially on the
findings in the Income Tax proceedings and the
alleged loss of revenue. Since the Hon’ble Delhi
High Court has restored the order of the
Assessing Officer, he submits that the said
findings can no longer form the basis for action
under the FEMA.
6.28. He further submits that, during the hearing, the
ED has sought to rely upon certain flowcharts
to justify the seizure, though these do not form
part of the Section 37A order. According to him,
the validity of the order must be tested on the
reasons recorded therein and cannot be
supplemented or improved upon by way of
affidavits or oral submissions. The ED,
therefore, cannot rely upon grounds which were
not part of the reasons recorded when the
seizure order was passed.
6.29. He relies upon the decision of the Hon’ble
Supreme Court in Mohinder Singh Gill vs.
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Chief Election Commissioner,7 more
particularly paragraph 8 thereof, which is
reproduced hereunder for easy reference;
8. The second equally relevant matter is that when a
statutory functionary makes an order based on certain
grounds, its validity must be judged by the reasons so
mentioned and cannot be supplemented by fresh
reasons in the shape of affidavit or otherwise.
Otherwise, an order bad in the beginning may, by the
time it comes to court on account of a challenge, get
validated by additional grounds later brought out. We
may here draw attention to the observations of Bose,
J. in Gordhandas Bhanji [Commr. of Police, Bombay v.
Gordhandas Bhanji, 1951 SCC 1088 : AIR 1952 SC
16] :
“Public orders, publicly made, in exercise of a
statutory authority cannot be construed in the light of
explanations subsequently given by the officer making
the order of what he meant, or of what was in his
mind, or what he intended to do. Public orders made
by public authorities are meant to have public effect
and are intended to affect the actings and conduct of
those to whom they are addressed and must be
construed objectively with reference to the language
used in the order itself.”
Orders are not like old wine becoming better as they
grow older.
a caveat
6.30. By relying on Mohinder Singh Gill, his
submission is that the validity of the seizure
order has to be tested on the reasons stated
7
AIR 1978 SC 851
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therein and not on reasons subsequently
sought to be supplied by the ED during
arguments. The authority exercising the
statutory power must stand by the reasons
which formed the basis of its decision at the
time the order was passed. It cannot, after the
order is challenged, supplement or improve the
same by referring to additional material, filing
affidavits, producing flowcharts or advancing
new grounds during the course of hearing.
6.31. He submits that, in the present case, the
reasons recorded in the seizure order
substantially proceed on the findings in the
Income Tax proceedings and the alleged loss of
revenue. If those findings no longer survive in
view of the subsequent decision of the Hon’ble
Delhi High Court restoring the order of the
Assessing Officer, the ED cannot replace that
basis by relying upon a different set of facts or
inferences during the hearing. This Court is
required to examine whether the order was
valid on the basis of the reasons and material
which existed and were relied upon when the
order was made.
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6.32. He further submits that the flowcharts now
relied upon by the ED were neither referred to
nor made part of the reasons recorded in the
seizure order. They therefore cannot be treated
as the basis for the “reason to believe” required
under Section 37A. To permit the ED to rely
upon such material at the stage of hearing,
according to him, would amount to permitting
the authority to supplement an otherwise
deficient order and would defeat the
requirement that the statutory satisfaction
must exist at the time of exercise of the power.
6.33. He accordingly submits that the seizure order
must stand or fall on the reasons contained in
it. This Court cannot sustain the order by
accepting an explanation subsequently offered
by the ED as to what the officer intended to
consider, nor can fresh grounds advanced by
the learned ASGI be treated as forming part of
the original order. If the reasons recorded in the
order do not disclose a lawful basis for the
formation of the requisite “reason to believe”,
the subsequent material or explanation cannot
cure that defect.
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6.34. He relies on Section 4 of the FEMA which reads
as under:
4. Holding of foreign exchange, etc.—Save as
otherwise provided in this Act, no person resident in
India shall acquire, hold, own, possess or transfer any
foreign exchange, foreign security or any immovable
property situated outside India.
6.35. Referring to the language of Section 4, he
submits that the provision is directed against
the acquisition, holding, ownership, possession
or transfer of the specified assets by a person
resident in India. According to him, the
provision therefore requires the existence of
such foreign exchange, foreign security or
immovable property outside India and an act of
acquisition, holding, ownership, possession or
transfer in relation to it. A transaction which
does not result in any of these acts cannot,
according to him, by itself constitute a
contravention of Section 4.
6.36. Thus, his submission is that Empower India,
now New Genpact India, did not transfer any
foreign exchange outside India and, therefore,
Section 4 of the FEMA is not attracted. Since
the ED alleges that foreign exchange was
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transferred outside India, the burden is on the
ED to establish such transfer.
6.37. He submits that the NCD transaction involved
payment in Indian Rupees to Genpact
Luxembourg, a SEBI-registered FPI, and the
subsequent payments made by Genpact India
between 2018 and 2023 were also made in
Indian Rupees within India. According to him,
these transactions do not amount to acquiring,
holding, owning, possessing or transferring
foreign exchange, foreign security or
immovable property outside India, as
contemplated by Section 4.
6.38. He further submits that Genpact Luxembourg,
being a Luxembourg entity registered as an FPI
with SEBI, was entitled to invest funds in India
in Indian Rupees and to repatriate the amounts
received in accordance with the applicable
procedure. The fact that Genpact Luxembourg
subsequently repatriated the amounts received
from New Genpact India cannot, according to
him, amount to a transfer of foreign exchange
outside India by either Empower India or New
Genpact India. Consequently, in the absence of
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any act by either of them falling within Section
4, the foundational requirement for invoking
Section 37A is absent and the seizure order
cannot be sustained.
6.39. His submission is also that Section 4 does not
apply to Headstrong Singapore (now ‘Genpact
Singapore’) or Genpact Luxembourg, both of
whom are non-resident entities, since Section 4
applies only to Indian residents. And as such
any transaction involving non-resident with
other non-resident cannot be subject matter of
an alleged Section 4 contravention. There is a
fundamental jurisdictional error in exercise of
jurisdiction by the ED. Be that as it may, he
submits that no action can be taken against the
petitioner for any alleged violation by
Headstrong Singapore(now ‘Genpact
Singapore’) or Genpact Luxembourg against the
petitioner, who is an Indian resident who has
not transferred any foreign exchange outside
India.
6.40. He submits that the seizure order refers to NCD
borrowings of INR 4,600 crores and repayment
of the principal along with interest of INR 3,035
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crores, aggregating to approximately INR 7,635
crores. According to the ED, the transaction
resulted in the creation of an artificial liability of
INR 4,600 crores and a corresponding artificial
liability towards interest. He disputes this
contention and submits that the NCD borrowing
and the subsequent payment of interest were
genuine transactions, duly undertaken and
recorded in the ordinary course. He therefore
submits that there was no artificial liability and,
in any event, the transactions did not involve
any contravention of Section 4 of the FEMA.
6.41. His submission is that borrowing of foreign
exchange is also distinct inasmuch as borrowing
is covered under Section 6(3) of the FEMA,
which is reproduced hereunder for easy
reference:
6. Capital account transactions.
(1) Subject to the provisions of sub-section (2), any
person may sell or draw foreign exchange to or from an
authorised person for a capital account transaction.
(2) The Reserve Bank may, in consultation with the
Central Government, specify
(a) any class or classes of capital account transactions
which are permissible;
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(b) the limit up to which foreign exchange shall be
admissible for such transactions:
Provided that the Reserve Bank shall not impose any
restriction on the drawal of foreign exchange for
payments due on account of amortization of loans or for
depreciation of direct investments in the ordinary course
of business.
(3) Without prejudice to the generality of the provisions
of sub-section (2), the Reserve Bank may, by
regulations, prohibit, restrict or regulate the following
(a) transfer or issue of any foreign security by a person
resident in India;
(b) transfer or issue of any security by a person resident
outside India;
(c) transfer or issue of any security or foreign security by
any branch, office or agency in India of a person resident
outside India;
(d) any borrowing or lending in foreign exchange in
whatever form or by whatever name called;
(e) any borrowing or lending in rupees in whatever form
or by whatever name called between a person resident in
India and a person resident outside India;
(f) deposits between persons resident in India and
persons resident outside India;
(g) export, import or holding of currency or currency
notes;
(h) transfer of immovable property outside India, other
than a lease not exceeding five years, by a person
resident in India;
(i) acquisition or transfer of immovable property in India,
other than a lease not exceeding five years, by a person
resident outside India;
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(j) giving of a guarantee or surety in respect of any debt,
obligation or other liability incurred
(i) by a person resident in India and owed to a
person resident outside India; or
(ii) by a person resident outside India.
(4) A person resident in India may hold, own, transfer or
invest in foreign currency, foreign security or any
immovable property situated outside India if such
currency, security or property was acquired, held or
owned by such person when he was resident outside
India or inherited from a person who was resident
outside India.
(5) A person resident outside India may hold, own,
transfer or invest in Indian currency, security or any
immovable property situated in India if such currency,
security or property was acquired, held or owned by such
person when he was resident in India or inherited from a
person who was resident in India.
(6) Without prejudice to the provisions of this section,
the Reserve Bank may, by regulation, prohibit, restrict,
or regulate establishment in India of a branch, office or
other place of business by a person resident outside
India, for carrying on any activity relating to such
branch, office or other place of business.
6.42. He submits that borrowing in foreign exchange,
as well as borrowing in Indian Rupees between
a person resident in India and a person resident
outside India, is specifically dealt with under
Section 6(3) of the FEMA. In particular, Section
6(3)(e) empowers the Reserve Bank to regulate
or restrict borrowing or lending in Rupees
between a person resident in India and a
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person resident outside India. According to him,
the NCD transaction in question falls within this
specific provision and cannot, therefore, be
treated as a transaction prohibited under
Section 4.
6.43. He submits that although Section 6(3) was
omitted with effect from 15.10.2019, it was in
force when the NCD transaction took place in
March 2015. Section 6(3)(e) did not prohibit
borrowing in Rupees between a resident and a
non-resident; it only contemplated its
regulation by the Reserve Bank. The NCD
borrowing, having been undertaken under the
applicable regulatory framework and RBI
directions, was therefore a transaction
specifically recognised under the FEMA.
6.44. He further submits that Section 4 itself begins
with the words “save as otherwise provided in
this Act”. Thus, where a transaction is
specifically dealt with under another provision
of the FEMA, Section 4 cannot be invoked
independently to prohibit that transaction.
Since borrowing in Rupees between a resident
and a non-resident was specifically provided for
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under Section 6(3)(e), the NCD borrowing,
according to him, cannot constitute a
contravention of Section 4. Consequently, the
foundational requirement for invoking Section
37A is absent.
6.45. He submits that the NCDs were listed on the
Bombay Stock Exchange (“BSE”), were
denominated in Indian Rupees, and the
consideration was received by Empower India,
the predecessor of Genpact India, in Rupees
from an Indian bank account of Genpact
Luxembourg. According to him, the transaction
therefore did not involve any transfer of foreign
exchange outside India and falls outside
Section 4 of the FEMA. He submits that the ED
has incorrectly characterised the borrowing of
INR 4,600 crores as a “transfer” merely to bring
the transaction within Section 4. Borrowing is
separately dealt with under Section 6, and
cannot be treated as a transfer for the purpose
of invoking Section 37A. He therefore submits
that the NCD transaction, having been entirely
carried out in India, does not satisfy the
jurisdictional facts necessary for exercise of
power under Section 37A.
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6.46. Without prejudice, he submits that if any
contravention is alleged, the appropriate
provision is Section 37 of the FEMA, which
contemplates adjudication, and not Section
37A, which permits seizure in the
circumstances specified therein. Since the NCD
borrowing was permissible under the FEMA and
the applicable RBI regulatory framework, there
was no contravention of Section 4 to attract
Section 37A. The ED, according to him, has
invoked a provision which has no application to
the transaction in question and the proceedings
are therefore liable to be quashed.
6.47. He submits that the NCD borrowing was
undertaken in accordance with the applicable
law and the regulatory framework prescribed by
the RBI. Once the transaction was legally
permissible and was carried out in accordance
with the applicable requirements, it cannot
subsequently be characterised as a
contravention of the FEMA so as to invoke the
coercive power under Section 37A.
6.48. He relies on Foreign Exchange Management
(Transfer or Issue of security by a person
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resident outside India) Regulations 2000
[“FEMA 2000”], more particularly Regulations 4
and 5 thereof, which are reproduced hereunder
for easy reference:
4. Restriction on an Indian entity to issue security
to a person resident outside India or to record a
transfer of security from or to such a person in its
books :-
Save as otherwise provided in the Act or Rules or
Regulations made thereunder, an Indian entity shall not
issue any security to a person resident outside India or
shall not record in its books any transfer of security
from or to such person:
Provided that the Reserve Bank may, on an application
made to it and for sufficient reasons, permit an entity to
issue any security to a person resident outside India or
to record in its books transfer of security from or to
such person, subject to such conditions as may be
considered necessary.
5. Permission for purchase of shares by certain
persons resident outside India :-
(1) A person resident outside India (other than a citizen
of Bangladesh or Pakistan or Sri Lanka) or an entity
outside India, whether incorporated or not, (other than
an entity in Bangladesh or Pakistan) , may purchase
shares or convertible debentures of an Indian company
under Foreign Direct Investment Scheme, subject to the
terms and conditions specified in Schedule 1.
(2) A registered Foreign Institutional Investor (FII) may
purchase shares or convertible debentures of an Indian
company under the Portfolio Investment Scheme,
subject to the terms and conditions specified in
Schedule 2.
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(3) A non-resident Indian or an overseas corporate body
may purchase shares or convertible debentures of an
Indian company –
(i) on a stock exchange under the Portfolio
Investment Scheme, subject to the terms and
conditions specified in Schedule 3; or/and
(ii) on non-repatriation basis other than under
Portfolio Investment Scheme, subject to the terms
and conditions specified in Schedule 4.
(4) A non-resident Indian or an overseas corporate body
or a registered FII may purchase securities, other than
shares or convertible debentures of an Indian company,
subject to the terms and conditions specified in
Schedule 5.
6.49. By referring to Regulations 4 and 5 of FEMA
2000, he submits that the regulatory
framework itself permitted a person resident
outside India, including a registered FPI, to
invest in NCD issued by an Indian company,
subject to the prescribed conditions. He
submits that the NCDs issued by Empower
India to Genpact Luxembourg were therefore
not, by their very nature, prohibited
transactions under FEMA. The fact that Genpact
Luxembourg was a registered FPI and invested
in Rupee-denominated securities of an Indian
company supports, according to him, the
legality of the transaction under the applicable
FEMA framework.
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6.50. He further submits that Regulation 4 prohibits
an Indian entity from issuing securities to a
person resident outside India only “ … save as
otherwise provided … 11” under the Act, Rules
or Regulations. Thus, where the issue of
securities to a non-resident is permitted under
the applicable FEMA regulations, such issue
cannot be treated as a contravention merely
because the investor is resident outside India.
The NCD transaction, having been undertaken
within the regulatory framework governing such
investment, therefore cannot be brought within
Section 4 so as to invoke Section 37A.
6.51. He also refers to APDIR Circular No. 89
[1.03.2012], more particularly paragraph 2
thereof which is reproduced hereunder for easy
reference:
2. SEBI has, vide their circular
CIR/IMD/FIIC/18/2010 dated November 26, 2010,
issued instructions on the revised allocation of
investment limits to FIIs. In terms of paragraph 8
of the circular, SEBI has allowed FIIs to invest in
‘to be listed’ debt securities. Accordingly, it has
been decided that SEBI registered FIIs/sub-
accounts of FIIs can now invest in primary issues
of Non-Convertible Debentures (NCDs)/ bonds only
if listing of such bonds / NCDs is committed to be
done within 15 days of such investment. In case
the NCDs/bonds issued to the SEBI registered FIIs
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/ sub-accounts of FIIs are not listed within 15 days
of issuance to the SEBI registered FIIs / sub-
accounts of FIIs, for any reason, then the FII/sub-
account of FII shall immediately dispose of these
bonds/NCDs either by way of sale to a third party
or to the issuer and the terms of offer to FIIs /
sub-accounts should contain a clause that the
issuer of such debt securities shall immediately
redeem / buyback the said securities from the
FIIs/sub-accounts of FIIs in such an eventuality.
6.52. By referring to APDIR Circular No. 89 dated
01.03.2012, he submits that the regulatory
framework expressly permitted SEBI-registered
FIIs to invest in primary issues of NCDs and
bonds, subject to the requirement that the
securities be listed within the prescribed period.
According to him, the circular therefore
recognises and permits investment by a
registered FII in Rupee-denominated NCDs
issued by an Indian entity.
6.53. He submits that Genpact Luxembourg, being a
registered FPI, was entitled to invest in the
NCDs issued by Empower India in accordance
with the applicable FEMA and SEBI framework.
The NCD transaction was thus a permitted
investment transaction and not a prohibited
transfer of foreign exchange outside India.
Consequently, the transaction could not
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constitute a contravention of Section 4 so as to
provide the jurisdictional basis for invoking
Section 37A of the FEMA.
6.54. He refers to APDIR Circular No.7
[16.07.2022], more particularly paragraph 2
thereof, which is reproduced hereunder for easy
reference:
2. In terms of paragraphs 4(b)(i) and 4(b)(ii) of the
Directions, short-term investments by an FPI in
government securities (Central Government
securities, including Treasury Bills and State
Development Loans) and corporate bonds shall not
exceed 30% of the total investment of that FPI in
any category. It has been decided that investments
by FPIs in government securities and corporate
bonds made between July 08, 2022 and October 31,
2022 (both dates included) shall be exempted from
the limit on short-term investments till maturity or
sale of such investments.
6.55. By referring to APDIR Circular No. 7 dated
16.07.2022, he submits that the RBI Directions
expressly recognise and regulate investments
by FPIs in government securities and corporate
bonds, continuing the regulatory framework in
force since 2012. According to him, the circular
reinforces that an FPI's investment in Indian
debt securities is a recognised and regulated
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transaction under FEMA and is not, by itself,
prohibited.
6.56. He submits that the investment made by
Genpact Luxembourg, being an FPI, in the
NCDs issued by Empower India must therefore
be considered in the context of the FEMA and
RBI framework governing FPI investments. The
mere fact that the investor was a non-resident,
or that the amounts were subsequently
repatriated, cannot, according to him, convert
an otherwise permitted investment into a
contravention of Section 4 so as to attract
Section 37A of the FEMA.
6.57. By relying upon the aforesaid provisions and
circulars, he submits that the NCD transaction
satisfied all the applicable requirements. The
NCDs issued by Genpact India were Rupee-
denominated and subscribed by Genpact
Luxembourg, a SEBI-registered FPI. The NCDs
were listed on the stock exchange within 15
days of allotment, on 31.03.2015, and had a
maturity period exceeding three years, as
required under the applicable RBI framework.
The subscription amount was received by
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Empower India and, upon redemption, repaid
by New Genpact India to Genpact Luxembourg
in Indian Rupees. There was no payment or
transfer of foreign currency in the course of the
borrowing or its repayment. He therefore
submits that the transaction was undertaken in
accordance with the applicable FEMA, SEBI and
RBI framework and did not attract Section 4 of
the FEMA or the power of seizure under Section
37A.
6.58. He further submits that the NCD transaction
was examined by the RBI even before it was
undertaken. The petitioner, through its
representatives and consultants, had
approached the RBI on a no-name basis and
placed the particulars of its business and the
proposed NCD issuance before it. In this
regard, he refers to the email dated 05.11.2014
sent by Deloitte to Mr. Mohanty of the RBI,
produced as Annexure-B to the writ petition.
Pursuant thereto, Mr. Mohanty, by his
communication dated 07.01.2015 addressed to
Deloitte, produced as Annexure-D, indicated
that the proposed transaction was permissible
under the applicable framework.
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6.59. He submits that, thereafter, Empower India
sought a name-based clarification from the RBI
regarding the NCD borrowing by its letter dated
12.12.2015. The RBI, by its letter dated
15.02.2016, considered the contours of the
NCD borrowing and clarified, inter alia, that the
NCDs were required to have a minimum
maturity period of three years. According to
him, apart from the said requirement, the
transaction as disclosed by Empower India to
the RBI was accepted as permissible under the
applicable regulatory framework.
6.60. He therefore submits that the NCD borrowing
was undertaken after obtaining regulatory
clarification from the RBI and in accordance
with the FEMA, SEBI and RBI framework
applicable to the transaction. He further
submits that matters concerning regulation of
foreign exchange and capital account
transactions under FEMA fall within the
statutory domain of the RBI. Having placed the
complete contours of the proposed transaction
before the RBI and having received the
aforesaid clarifications, Empower India was
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entitled to proceed on the basis that the
transaction was permissible.
6.61. His submission is that the ED cannot, on the
same set of facts, disregard the clarification and
regulatory position communicated by the RBI
and subsequently contend that the transaction
constituted a contravention of FEMA. According
to him, unless the ED identifies a specific
provision of FEMA or the applicable regulations
which was violated notwithstanding the RBI's
clarification, it cannot substitute its own view
for that of the regulatory authority and invoke
Section 37A. He therefore submits that, the
NCD transaction having been undertaken in
accordance with the applicable law and the
regulatory framework considered by the RBI,
there was no contravention of Section 4 so as
to confer jurisdiction upon the ED to exercise
the power under Section 37A.
6.62. He relies upon the decision of the Hon’ble
Supreme Court in LIC v. Escorts Ltd.,8 more
particularly paragraphs 63, 64 and 84 thereof,
8
(1986) 1 SCC 264
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which are reproduced hereunder for easy
reference:
63. We have already extracted Section 29(1) and we
notice that the expression used is “general or special
permission of the Reserve Bank of India” and that the
expression is not qualified by the word “previous” or
“prior”. While we are conscious that the word “prior” or
“previous” may be implied if the contextual situation or
the object and design of the legislation demands it, we
find no such compelling circumstances justifying reading
any such implication into Section 29(1). On the other
hand, the indications are all to the contrary. We find, on
a perusal of the several, different sections of the very
Act, that the Parliament has not been unmindful of the
need to clearly express its intention by using the
expression “previous permission” whenever it was
thought that “previous permission” was necessary. In
Sections 27(1) and 30, we find that the expression
“permission” is qualified by the word “previous” and in
Sections 8(1), 8(2) and 31, the expression “general or
special permission” is qualified by the word “previous”,
whereas in Sections 13(2), 19(1), 19(4), 20, 21(3), 24,
25, 28(1) and 29, the expressions “permission” and
“general or special permission” remain unqualified. The
distinction made by Parliament between permission
simpliciter and previous permission in the several
provisions of the same Act cannot be ignored or strained
to be explained away by us. That is not the way to
interpret statutes. The proper way is to give due weight
to the use as well as the omission to use the qualifying
words in different provisions of the Act. The significance
of the use of the qualifying word in one provision and its
non-use in another provision may not be disregarded. In
our view, the Parliament deliberately avoided the
qualifying word previous in Section 29(1) so as to invest
the Reserve Bank of India with a certain degree of
elasticity in the matter of granting permission to non-
resident companies to purchase shares in Indian
companies. The object of the Foreign Exchange
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Regulation Act, as already explained by us,
undoubtedly, is to earn, conserve, regulate and store
foreign exchange. The entire scheme and design of the
Act is directed towards that end. Originally the Foreign
Exchange Regulation Act, 1947 was enacted as a
temporary measure, but it was placed permanently on
the Statute Book by the Amendment Act of 1957. The
Statement of Objects and Reasons of the 1957
Amendment Act expressly stated, “India still continues
to be short of foreign exchange and it is necessary to
ensure that our foreign exchange resources are
conserved in the national interest”. In 1973, the old Act
was repealed and replaced by the Foreign Exchange
Regulation Act, 1973, the long title of which reads: “An
Act to consolidate and amend the law regulating certain
payments, dealings in foreign exchange and securities,
transactions indirectly affecting foreign exchange and
the import and export of currency and bullion, for the
conservation of foreign exchange resources of the
country and the proper utilisation thereof in the interest
of the economic development of the country.” We have
already referred to Section 76 which emphasises that
every permission or licence granted by the Central
Government or the Reserve Bank of India should be
animated by a desire to conserve the foreign exchange
resources of the country. The Foreign Exchange
Regulation Act is, therefore, clearly a statute enacted in
the national economic interest. When construing
statutes enacted in the national interest, we have
necessarily to take the broad factual situations
contemplated by the Act and interpret its provisions so
as to advance and not to thwart the particular national
interest whose advancement is proposed by the
legislation. Traditional norms of statutory interpretation
must yield to broader notions of the national interest. If
the legislation is viewed and construed from that
perspective, as indeed it is imperative that we do, we
find no difficulty in interpreting “permission” to mean
“permission”, previous or subsequent, and we find no
justification whatsoever for limiting the expression
“permission” to “previous previous'” only. In our view,
what is necessary is that the permission of the Reserve
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Bank of India should be obtained at some stage for the
purchase of shares by non-resident companies.
64. An argument which was strenuously pressed before
us by Shri F.S. Nariman, learned Senior Advocate for
the company, was that the very schema of the Act
shows that the permission contemplated by Section
29(1) could only be previous permission,
notwithstanding the circumstance that the word
“previous'” does not qualify the expression “general or
special permission” in Section 29(1) though it does in
several other provisions. According to Sri Nariman, the
Act was designed not merely to attract but also to
regulate the inflow of foreign exchange. That was why,
he said, the provisions were very stringent. We have no
hesitation in agreeing with Mr Nariman that while the
inflow of foreign exchange is welcomed by the Act, the
inflow is also subject to stringent checks as otherwise in
no time the economy of the country will be swamped
with foreign money and taken over by giant
multinationals. But that really does not affect the
interpretation of the expression “permission” in Section
29(1). The Reserve Bank of India is not bound to give
ex post facto permission whenever it is found that
business has been started or shares have been
purchased without its previous permission. In such
cases, wherever the Reserve Bank of India suspects an
oblique motive, we presume that the Reserve Bank of
India will not only refuse permission but will further
resort to action under Sections 50, 61 and 63, not
merely punish the offender but also confiscate the
property involved. We do not think that the scheme of
the Act makes previous permission imperative under
Section 29(1) though the failure to obtain prior
permission may expose the foreign investor to
prosecution, penalty, conviction and confiscation if
permission is ultimately refused. Even if permission is
granted, it may be made conditional. The expression
“special permission” is wide enough to take within its
stride a “conditional permission”, the condition being
relevant to the purpose of the statute, in this case, the
conservation and regulation of foreign exchange. For
example, ex post facto permission may be granted
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subject to the condition that the person purchasing the
shares will not be entitled to repatriation benefits.
84. On an overall view of the several statutory
provisions and judicial precedents to which we have
referred we find that a shareholder has an undoubted
interest in a company, an interest which is represented
by his shareholding. Share is movable property, with all
the attributes of such property. The rights of a
shareholder are (i) to elect directors and thus to
participate in the management through them; (ii) to
vote on resolutions at meetings of the company; (iii) to
enjoy the profits of the company in the shape of
dividends; (iv) to apply to the court for relief in the case
of oppression; (v) to apply to the court for relief in the
case of mismanagement; (vi) to apply to the court for
winding up of the company; (vii) to share in the surplus
on winding up. A share is transferable but while a
transfer may be effective between transferor and
transferee from the date of transfer, the transfer is truly
complete and the transferee becomes a shareholder in
the true and full sense of the term, with all the rights of
a shareholder, only when the transfer is registered in
the company's register. A transfer effective between the
transferor and the transferee is not effective as against
the company and persons without notice of the transfer
until the transfer is registered in the company's register.
Indeed until the transfer is registered in the books of
the company the person whose name is found in the
register alone is entitled to receive the dividends,
notwithstanding that he has already parted with his
interest in the shares. However, on the transfer of
shares, the transferee becomes the owner of the
beneficial interest though the legal title continues with
the transferor. The relationship of trustee and “cestui
que trust” is established and the transferor is bound to
comply with all the reasonable directions that the
transferee may give. He also becomes a trustee of the
dividends as also of the right to vote. The right of the
transferee “to get on the register” must be exercised
with due diligence and the principle of equity which
makes the transferor a constructive trustee does not
extend to a case where a transferee takes no active
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interest “to get on the register”. Where the transfer is
regulated by a statute, as in the case of a transfer to a
non-resident which is regulated by the Foreign
Exchange Regulation Act, the permission, if any,
prescribed by the statute must be obtained. In the
absence of the permission, the transfer will not clothe
the transferee with the right “to get on the register”
unless and until the requisite permission is obtained. A
transferee who has the right to get on the register,
where no permission is required or where permission
has been obtained, may ask the company to register the
transfer and the company who is so asked to register
the transfer of shares may not refuse to register the
transfer except for a bona fide reason, neither arbitrarily
nor for any collateral purpose. The paramount
consideration is the interest of the company and the
general interest of the shareholders. On the other hand,
where, for instance, the requisite permission under the
FERA is not obtained, it is open to the company and,
indeed, it is bound to refuse to register the transfer of
shares of an Indian company in favour of a non-
resident. But once permission is obtained, whether
before or after the purchase of the shares, the company
cannot, thereafter, refuse to register the transfer of
shares. Nor is it open to the company or any other
authority or individual to take upon itself or himself,
thereafter, the task of deciding whether the permission
was rightly granted by the Reserve Bank of India. The
provisions of the Foreign Exchange Regulation Act are
so structured and woven as to make it clear that it is for
the Reserve Bank of India alone to consider whether the
requirements of the provisions of the Foreign Exchange
Regulation Act and the various rules, directions and
orders issued from time to time have been fulfilled and
whether permission should be granted or not. The
consequences of non-compliance with the provisions of
the Act and the Rules, orders and directions issued
under the Act are mentioned in Sections 48, 50, 56 and
63 of the Act. There is no provision of the Act which
enables an individual authority outside the Act or
determine for his own or its own purpose whether the
Reserve Bank was right or wrong in granting permission
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under Section 29(1) of the Act. As we said earlier, under
the scheme of the Act, it is the Reserve Bank of India
that is constituted and entrusted with the task of
regulating and conserving foreign exchange. If one may
use such an expression, it is the “custodian-general” of
foreign exchange. The task of enforcement is left to the
Directorate of Enforcement, but it is the Reserve Bank
of India and the Reserve Bank of India alone that has to
decide whether permission may or may not be granted
under Section 29(1) of the Act. The Act makes it its
exclusive privilege and function. No other authority is
vested with any power nor may it assume to itself the
power to decide the question whether permission may
or may not be granted or whether it ought or ought not
to have been granted. The question may not be
permitted to be raised either directly or collaterally. We
do not, however, rule out the limited class of cases
where the grant of permission by the Reserve Bank of
India may be questioned, by an interested party in a
proceeding under Article 226 of the Constitution, on the
ground that it was mala fide or that there was no
application of the mind or that it was opposed to the
national interest as contemplated by the Act, being in
contravention of the provisions of the Act and the Rules,
orders and directions issued under the Act. Once
permission is granted by the Reserve Bank of India,
ordinarily it is not open to anyone to go behind the
permission and seek to question it. It is certainly not
open to a company whose shares have been purchased
by a non-resident company to refuse to register the
shares even after permission is obtained from the
Reserve Bank of India on the ground that permission
ought not to have been granted under the FERA. It is
necessary to remind ourselves that the permission
contemplated by Section 29(1) of the Foreign Exchange
Regulation Act is neither intended to nor does it impinge
in any manner on any legal right of the company or any
of its shareholders. Conversely neither the company nor
any of its shareholders is clothed with any special right
to question any such permission.
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6.63. By relying on LIC v. Escorts Ltd., he submits
that where the statutory scheme entrusts a
particular function to a specified authority,
another authority cannot assume that function
or sit in appeal over its exercise. In the context
of foreign exchange regulation, the Hon’ble
Supreme Court held that the RBI is entrusted
with determining whether the requirements of
the foreign exchange law, rules, directions and
orders have been fulfilled and whether the
requisite permission ought to be granted. Once
such permission is granted, it is ordinarily not
open to another authority to go behind it or
question its correctness collaterally.
6.64. Applying this principle, he submits that the NCD
transaction was placed before the RBI, which
examined its terms and issued the
communications dated 07.01.2015 and
15.02.2016. The ED, being the enforcement
authority, cannot, according to him, assume the
RBI’s regulatory function and independently
conclude that the same transaction was
impermissible under FEMA. The question
whether the transaction complied with the
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applicable FEMA and RBI framework was within
the regulatory domain of the RBI.
6.65. He further submits that LIC v. Escorts Ltd.
recognises only a limited scope for questioning
a permission granted by the RBI, such as where
it is alleged to be mala fide, based on non-
application of mind, or contrary to the Act and
the applicable rules, orders or directions. In the
absence of any such allegation or finding, the
ED cannot disregard the RBI’s clarification and,
on the same facts, treat the NCD transaction as
a contravention of FEMA for the purpose of
invoking Section 37A.
6.66. He submits that the regulatory, clarificatory and
other powers under the FEMA are vested in the
RBI and, once the RBI has considered and
permitted a transaction, the ED cannot go
behind such permission and independently
question its validity. He further submits that the
NCD borrowing was also disclosed to SEBI
through an interpretative letter concerning the
maturity period. SEBI thereafter issued an
informal guidance dated 30.11.2018,
confirming that there was no violation of the
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applicable restriction norms in respect of the
proceeds raised by the petitioner through the
issuance of NCDs to Genpact Luxembourg.
6.67. As regards the issuance of shares, he submits
that the shares do not form part of the seizure
order passed under Section 37A of the FEMA.
Nevertheless, he submits that the petitioner
seeks to place the complete position before this
Court and does not seek to avoid any
proceedings or transaction in which it is
involved. Insofar as the purchase of shares of
Headstrong Singapore in Old Genpact India by
Empower India is concerned, he submits that
the transaction was found to be at arm’s length
and acceptable by the Assessing Officer and the
Transfer Pricing Officer. The same finding was
thereafter affirmed by the ITAT and
subsequently by the Hon’ble Delhi High Court.
6.68. In this regard he relies on the decision of the
Hon'ble Delhi High Court in Commissioner Of
Income Tax (International Taxation) v.
Genpact Consulting Singapore Pte Ltd9 ,
more particularly paragraphs 9, 10, 11 and 12
9
ITA 103/2023 Dated 11.12.2024
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thereof, which are reproduced hereunder for
easy reference:
9. Quite apart from the view which the Tribunal has
come to express, we find that the order of the
Commissioner is clearly rendered unsustainable on a
more fundamental plane. As is evident from the extracts
of the order passed in revision, the principal allegation
appears to have been that the device adopted by
Genpact India was intended to avoid the payment of DDT
as contemplated under Section 115-O. Undisputedly, that
dividend would have to be one which would have been
declared by Genpact India. We are, however, and in the
present case, concerned with an assessment proposed to
be made in the hands of Headstrong HCS, now known as
Genpact Consulting Pte. We thus find ourselves unable to
appreciate how a perceived liability in the hands of
Genpact India could be viewed or considered as being
relevant for the purposes of formation of opinion that the
assessment of Genpact Consulting was erroneous and
prejudicial to the Revenue.
10. Before us, the appellants have failed to establish that
even if the view as expressed by the Commissioner were
assumed to be correct, any additional tax liability would
have been foisted upon Genpact Consulting.
11. We take note of an identical position which obtained
in the case of Genpact Luxembourg S.A.R.L. vs.
Assistant Commissioner of Income Tax, Circle
1(3)(1), International Taxation, New Delhi and Anr.9
and which had assailed the initiation of Section 148
proceedings. Dealing with identical allegations which had
come to be levelled against that assessee, we had while
allowing that writ petition observed as follows: -
"9. As is evident from a reading of the initial notice under
Section 148A(b), the respondents had taken the stand
that the interest income derived from the NCDs floated
by GIPL had not been appropriately offered to tax on
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account of mischaracterization of income. By the time
the Section 148A(d) order came to be passed, the
respondents sought to buttress their case of proposed
reassessment on an order under Section 263 of the Act
passed by the CIT (IT) in the case of Headstrong
Consulting Singapore Pte. Ltd. The principal allegation
now laid was that although the funds were taken out in
the form of interest payments, they were in fact liable to
be declared as dividend and subjected to DDT.
10. It is in the aforesaid backdrop that Mr. Jolly had
contended that there is an evident and manifest variation
between the reasons 2024 SCC OnLine Del 5514 which
had been originally recorded in the notice dated 11
March 2022 and the final order passed by the
respondents disposing of the objections of the petitioner
on 29 March 2022.
11. The ineffaceable connect which must exist between
the reasons initially disclosed proposing reassessment
and which constitute the basis for formation of opinion
with respect to escapement of income and the final
decision to commence reassessment, was an aspect
which was duly highlighted by us in our judgment in ATS
Infrastructure Limited v. Assistant Commissioner of
Income Tax Circle 1(1). We had in that decision observed
as follows:--
xxxx xxxx xxxx
12. Quite apart from the above, the impugned
proceedings are liable to be quashed on a more
fundamental ground. Undisputedly, the petitioner had
offered the interest income to tax in terms of the
provisions contained in Section 194LD of the Act. The
ultimate order under Section 148A(d), however, alleges
that the remittance in fact, constituted dividend and
which was liable to be taxed in terms of Section 115-O of
the Act.
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6.69. By relying on Genpact Consulting Singapore
Pte Ltd he submits that the transaction relating
to the acquisition of shares has already been
examined by the Hon’ble Delhi High Court in
proceedings initiated by the Income Tax
Department against Genpact Consulting
Singapore Pte. Ltd., formerly known as
Headstrong Consulting Singapore. The Hon’ble
Delhi High Court, while examining the
allegation that the transaction was structured
to avoid liability towards Dividend Distribution
Tax (“DDT”), held that a perceived tax liability
in the hands of Genpact India could not be
treated as relevant for forming an opinion that
the assessment of Genpact Consulting
Singapore was erroneous and prejudicial to the
interests of the Revenue.
6.70. He submits that the aforesaid finding is relevant
to the present proceedings since the ED has
relied upon the Income Tax proceedings and
the alleged loss of revenue arising from the
transaction. According to him, when the Hon’ble
Delhi High Court has already held that the
alleged liability of Genpact India could not be
attributed to or used as a basis for action
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against Genpact Consulting Singapore, the
same allegation cannot now be relied upon by
the ED to support the seizure proceedings
under Section 37A of the FEMA.
6.71. He further submits that the Hon’ble Delhi High
Court also took note of the earlier decision
concerning Genpact Luxembourg S.A.R.L.,
where the Income Tax Department had sought
to reopen the assessment on the allegation that
interest paid on the NCDs was, in substance,
dividend liable to DDT. The Court found a
material variation between the reasons initially
recorded and the basis subsequently relied
upon for the proposed reassessment. He
submits that the same principle applies here:
the ED must establish the basis for its action
from the reasons recorded in the Section 37A
order and cannot rely upon a different case
subsequently developed during the
proceedings.
6.72. His submission is that the transaction relating
to shares has been dealt by the Hon'ble Delhi
High Court which related to the proceedings
initiated by the income tax department against
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Genpact Singapore (earlier Headstrong
Singapore) and the Hon'ble Delhi High Court
has come to a categorical conclusion that a
liability in the hands of Genpact India could not
be viewed or considered as being relevant for
the purpose of formation of opinion that the
assessment of Genpact Consulting Singapore
was erroneous and prejudicial to the revenue.
6.73. He submits that the interest paid by Genpact
India to Genpact Luxembourg in respect of the
NCD borrowing was treated as interest payable
to a non-resident entity and tax was
accordingly deducted at source. The relevant
provision, namely Section 194LD of the Income
Tax Act, 1961, is reproduced hereunder for
ease of reference:
194LD. Income by way of interest on certain
bonds and Government securities.
(1) Any person who is responsible for paying to a
person being a Foreign Institutional Investor or a
Qualified Foreign Investor, any income by way of
interest referred to in sub-section (2), shall, at the
time of credit of such income to the account of the
payee or at the time of payment of such income in
cash or by the issue of a cheque or draft or by any
other mode, whichever is earlier, deduct income-tax
thereon at the rate of five per cent.
Digitally Signed By:
SURAJ GOVINDA RAJ
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(2) The income by way of interest referred to in sub-
section (1) shall be the interest payable on or after
the 1st day of June, 2013 but before the 1st day of
June, 2015 in respect of investment made by the
payee in—
(i) a rupee denominated bond of an Indian company
; or
(ii) a Government security:
Provided that the rate of interest in respect of bond
referred to in clause (i) shall not exceed the rate as
may be notified by the Central Government in this
behalf.
Explanation.—For the purpose of this section,—
(a) "Foreign Institutional Investor" shall have the
meaning assigned to it in clause (a) of the
Explanation to section 115AD;
(b) "Government security" shall have the meaning
assigned to it in clause (b) of section 2 of the
Securities Contracts (Regulation) Act, 1956 (42 of
1956);
(c) "Qualified Foreign Investor" shall have the
meaning assigned to it in the Circular No.
Cir/IMD/DF/14/2011, dated the 9th August, 2011,
as amended from time to time, issued by the
Securities and Exchange Board of India, under
section 11 of the Securities and Exchange Board of
India Act, 1992 (15 of 1992).
6.74. He submits that this aspect was dealt with by
the Hon'ble Delhi High Court in the case of
Genpact Luxembourg SARL v. Assistant
Commissioner of Income Tax [WP(C). 7784
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of 2022] vide its decision dated 08.08.2024.
The relevant paragraphs 2, 12, 13, 14, 15 and
16 are reproduced hereunder for easy
reference:
2. As would be evident from the initial notice under
Section 148A(b) dated 11 March 2022, the
respondents had taken the position that on perusal of
the information available with the Department, it
appeared that interest income derived from Non-
convertible Debentures3 floated by Genpact India
Private Limited4 had not been appropriately offered to
tax due to mischaracterization of income. The
petitioner was consequently called upon to show cause
why an amount of INR 5,06,00,00,000/- should not be
treated as income having escaped assessment.
12. Quite apart from the above, the impugned
proceedings are liable to be quashed on a more
fundamental ground. Undisputedly, the petitioner had
offered the interest income to tax in terms of the
provisions contained in Section 194LD of the Act. The
ultimate order under Section 148A(d), however,
alleges that the remittance in fact, constituted
dividend and which was liable to be taxed in terms of
Section 115-O of the Act.
13. Section 115-O, insofar as it is relevant for our
purposes, is extracted hereinbelow:-
"115-O. Tax on distributed profits of domestic
companies.--[(1) Notwithstanding anything contained
in any other provision of this Act and subject to the
provisions of this section, in addition to the income tax
chargeable in respect of the total income of a
domestic company for any assessment year, any
amount declared, distributed or paid by such company
by way of dividends (whether interim or otherwise) on
or after the 1st day of April, 2003 [but on or before
the 31st day of March, 2020], whether out of current
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or accumulated profits shall be charged to additional
income tax (hereafter referred to as tax on distributed
profits) [at the rate of fifteen per cent] : ] [Provided
that in respect of dividend referred to in sub-clause
(e) of clause (22) of Section 2, this sub-section shall
have effect as if for the words "fifteen per cent.", the
words "thirty per cent." Had been substituted;] [(1-A)
The amount referred to in sub-section (1) shall be
reduced by,--
[(i) the amount of dividend, if any, received by the
domestic company during the financial year, if such
dividend is received from its subsidiary and,--
(a) where such subsidiary is a domestic company, the
subsidiary has paid the tax which is payable under this
section on such dividend; or
(b) where such subsidiary is a foreign company, the
tax is payable by the domestic company under Section
115-BBD on such dividend:
Provided that the same amount of dividend shall not
be taken into account for reduction more than once;]
(ii) the amount of dividend, if any, paid to any person
for, or on behalf of, the New Pension System Trust
referred to in clause (44) of Section 10. Explanation.--
For the purposes of this sub-section, a company shall
be a subsidiary of another company, if such other
company, holds more than half in nominal value of the
equity share capital of the company.] [(1-B) For the
purposes of determining the tax on distributed profits
payable in accordance with this section, any amount
by way of dividends referred to in sub-section (1) as
reduced by the amount referred to in sub-section (1-
A) [hereafter referred to as net distributed profits],
shall be increased to such amount as would, after
reduction of the tax on such increased amount at the
rate specified in sub-section (1), be equal to the net
distributed profits:] [Provided that this sub-section
shall not apply in respect of dividend referred to in
sub-clause (e) of clause (22) of Section 2.]"
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SURAJ GOVINDA RAJ
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14. As is plainly evident from a reading of that
provision, DDT is liable to be paid by the company
which declares, distributes or pays the same. The
petitioner herein was merely the recipient of the
interest income and it was thus, clearly not the entity
which had either declared or paid the dividend. Viewed
in that context, even if the payment were to be
assumed to be dividend, the liability to pay tax
thereon could have only been foisted upon the
company which had declared, distributed or paid the
same. That in the facts of the present case and even if
the allegation laid by the respondents were to be
accepted would have been GIPL.
15. We also note that the issues emanating from the
order of the CIT (IT) under Section 263 of the Act
presently forms subject matter of challenge in
Commissioner of Income Tax (International Taxation)-
2 Vs. Genpact Consulting Singapore Pte Ltd. (Earlier
known as Headstrong Consulting Pte. Ltd.)10. While
issues relating to the merits and the validity of the
view taken by the CIT (IT) would have to be examined
in that pending appeal, the same would clearly not
sustain the action for reassessment which is impugned
herein.
16. We accordingly allow the instant writ petition and
quash the impugned notice under Section 148A(b)
dated 11 March 2022, impugned order under Section
148A(d) dated 29 March 2022 and the consequential
notice issued under Section 148 dated 30 March 2022.
6.75. By relying on Genpact Luxembourg SARL he
submits that, in respect of the interest
payments made by New Genpact India to
Genpact Luxembourg for the financial year
2017–2018, the returns were initially accepted
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SURAJ GOVINDA RAJ
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by the Income Tax Department. Subsequently,
the assessment was reopened under Sections
147 and 148 of the Income Tax Act on the
premise that the amount paid by New Genpact
India was not, in substance, interest in the
hands of Genpact Luxembourg and that the
underlying NCD borrowing was a sham
transaction. The amount was consequently
sought to be assessed in the hands of Genpact
Luxembourg under the head “Income from
Other Sources”.
6.76. By relying upon Genpact Luxembourg
S.A.R.L., he submits that the subsequent
proceedings proceeded on a different
characterisation of the very same payment.
While the payment had initially been treated as
interest income and subjected to the applicable
tax treatment under Section 194LD of the
Income Tax Act, the order under Section
148A(d) alleged that the remittance was, in
fact, dividend liable to tax under Section 115-O.
The Hon'ble Delhi High Court held that, under
Section 115-O, the liability to pay DDT is upon
the domestic company which declares,
distributes or pays the dividend. Genpact
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Luxembourg, being merely the recipient, could
not be made liable for such tax. Even assuming
that the payment constituted dividend, the
liability could only be upon the company which
had declared, distributed or paid it, namely,
Genpact India.
6.77. He submits that on this basis the Hon'ble Delhi
High Court quashed the notice under Section
148A(b) dated 11.03.2022, the order under
Section 148A(d) dated 29.03.2022 and the
consequential notice under Section 148 dated
30.03.2022. Thus, the subsequent attempt to
alter the character of the payment from interest
to dividend did not sustain the reassessment
proceedings against Genpact Luxembourg.
6.78. He submits that the decision is material to the
present proceedings since the seizure order
under Section 37A of FEMA also relies, at least
in part, upon the Income Tax proceedings and
the allegations concerning the character of the
NCD transaction and the payments made
thereunder. The Income Tax proceedings relied
upon by the Enforcement Directorate having
been quashed, they cannot, by themselves, be
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SURAJ GOVINDA RAJ
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treated as establishing a contravention of
Section 4 of FEMA or as furnishing the
jurisdictional facts necessary for exercise of
power under Section 37A.
6.79. He further submits that the Income Tax
proceedings themselves proceeded on different
characterisation of the same transaction,
initially treating the payment as interest and
subsequently alleging that the NCD borrowing
was sham and that the payment was, in
substance, dividend. Such subsequent change
in characterisation, particularly when the
reassessment proceedings founded upon it
have been quashed, cannot by itself establish a
contravention of FEMA. The Enforcement
Directorate was required to independently
establish the ingredients of Section 4 and the
jurisdictional facts necessary for invoking
Section 37A, and could not rely merely upon an
Income Tax proceeding which had itself been
quashed.
6.80. The submission of Learned Senior Advocate Sri.
Arvind Datar is that the proceedings initiated
against Genpact Singapore (earlier Headstrong
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Singapore) having been quashed by the ITAT in
ITA No.501/DEL/2021 by order dated
13.06.2022 and the proceedings under Section
263 of the IT Act having been quashed by the
Hon’ble Delhi High Court in Commissioner of
Income Tax(International Taxation) v
Genpact Consulting Singapore Pte Ltd [ITA
103 of 2023] and the proceedings initiated
against Genpact Luxembourg under Section
148A(d) having been quashed by a Division
Bench of the Hon’ble Delhi High Court in
Genpact Luxembourg SARL v Assistant
Commissioner of Income
Tax(International Taxation) [WP 7784 of
2022], those orders are equally applicable to
the present matter and as such, Despite the
orders of the Hon'ble Delhi High Court, the ED
could not have reopened the matters. He
submits that the manner in which the
respondent No.1 has dealt with the orders of a
Constitutional Court, namely the Hon'ble Delhi
High Court, in the impugned order, leaves
much to be desired and in a restrained manner
he submits that the respondent No.1 could not
have made the comments in the Section 37A
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order by stating that the order passed by the
Hon'ble Delhi High Court was on technicality
and not on merits.
6.81. His submission firstly is that it was for the
Income Tax Department to have challenged the
orders of the Hon'ble Delhi High Court, which
was not so challenged. The Income Tax
department accepted the said orders. It is only
after the ED initiated the enquiry that the
Income Tax Department has challenged the
Order of the Hon'ble Delhi High Court before
the Hon'ble Supreme Court.
6.82. His submission is that, as far as he is aware, it
is only the Order relating to Genpact
Consulting Singapore, (earlier Headstrong
Consulting Singapore), which is challenged
before the Hon'ble Supreme Court relating to
the issuance of shares. Insofar as the issuance
of NCD, which was a matter relating to
Genpact Luxembourg SARL, in WP No.7784
of 2022, the said order of the Hon'ble Delhi
High Court has not been challenged by the
Income Tax Department and has been accepted
by the said department.
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17/09/2026, 18:32, Bengaluru
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6.83. Thus, his submission is that only the order
under Section 263 of the IT Act has been
challenged. The orders under Section 148A(d)
have been accepted by the Income Tax
Department, and as such, the ED cannot attack
the said orders of the Hon'ble Delhi High Court
in the Genpact Luxembourg SARL matter
without the IT Department having challenged
them. Thus, he submits that the Order under
Section 37A of FEMA, being related only to the
NCD, that is issued to Genpact Luxembourg
SARL, the order in that matter of the Hon'ble
Delhi High Court not having been challenged by
the IT department, the ED could not have
issued any notice and or taken any action under
Section 37A of FEMA, which would be in
contravention of the decision of the Hon'ble
Delhi High Court in WP No.7784 of 2022.
6.84. His submission is that the ED could not have
taken a contrary stand to the decision of the
Hon'ble Delhi High Court in a transaction which
is 11 years old and has been approved by the
RBI, SEBI and the IT department, by not
challenging the order in WP No.7784 of 2022.
His submission is that the investigation, having
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been commenced on the basis of
communication issued by RBI as regards
reconciliation of exports, which is an offence
under Section 4 of the FEMA, had nothing to do
with the transaction of the petitioner and, as
such, under the guise of the letter issued by
RBI to the ED, the ED would not have
jurisdiction over the transaction of the
petitioner.
6.85. He relies upon the decision of the Hon'ble
Supreme Court in Sivanandan C.T. v. High
Court of Kerala10, more particularly paragraph
44 thereof which is reproduced hereunder for
easy reference:
44. In a constitutional system rooted in the rule of law,
the discretion available with public authorities is confined
within clearly defined limits. The primary principle
underpinning the concept of rule of law is consistency and
predictability in decision-making. A decision of a public
authority taken without any basis in principle or rule is
unpredictable and is, therefore, arbitrary and antithetical
to the rule of law. [S.G. Jaisinghani v. Union of India,
1967 SCC OnLine SC 6] The rule of law promotes fairness
by stabilising the expectations of citizens from public
authorities. This was also considered in a recent decision
of this Court in SEBI v. Sunil Krishna Khaitan [SEBI v.
Sunil Krishna Khaitan, (2023) 2 SCC 643] , wherein it was
observed that regularity and predictability are hallmarks
of good regulation and governance. [SEBI v. Sunil Krishna
10
(2024) 3 SCC 799
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Khaitan, (2023) 2 SCC 643] This Court held that certainty
and consistency are important facets of fairness in action
and non-arbitrariness : (Sunil Krishna Khaitan case [SEBI
v. Sunil Krishna Khaitan, (2023) 2 SCC 643] , SCC pp.
678-79, paragraph59)
“59. … Any good regulatory system must promote and
adhere to principle of certainty and consistency, providing
assurance to the individual as to the consequence of
transactions forming part of his daily affairs. [Union of
India v. Raghubir Singh, (1989) 2 SCC 754. Also see, The
Nature of the Judicial Process, Benjamin N. Cardozo, p.
33:“I am not to mar the symmetry of the legal structure
by the introduction of inconsistencies and irrelevancies
and artificial exceptions unless for some sufficient reason,
which will commonly be some consideration of history or
custom or policy or justice. Lacking such a reason, I must
be logical just as I must be impartial, and upon like
grounds. It will not do to decide the same question one
way between one set of litigants and the opposite way
between another.”(emphasis supplied)] … This does not
mean that the regulator/authorities cannot deviate from
the past practice, albeit any such deviation or change
must be predicated on greater public interest or harm.
This is the mandate of Article 14 of the Constitution of
India which requires fairness in action by the State, and
non-arbitrariness in essence and substance. Therefore, to
examine the question of inconsistency, the analysis is to
ascertain the need and functional value of the change, as
consistency is a matter of operational effectiveness.”
(emphasis supplied)
6.86. By relying on Sivanandan, his submission is
that consistency and predictability in the action
of public authorities are essential facets of the
rule of law and fairness under Article 14 of the
Digitally Signed By:
SURAJ GOVINDA RAJ
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Constitution. A person who undertakes a
transaction in accordance with the regulatory
framework and on the basis of the position
communicated or accepted by the competent
statutory authorities is entitled to expect that
the same transaction will not subsequently be
treated as impermissible by another authority
without a principled basis for such departure.
6.87. He submits that, in the present case, the NCD
transaction was undertaken after approaching
the Reserve Bank of India and complying with
the applicable regulatory framework. The
transaction was also subjected to examination
in the Income Tax proceedings, where the
payments were initially treated as interest
arising from the NCDs. The subsequent attempt
to characterise the same transaction differently,
including as a sham borrowing or as something
other than interest, has already been
considered in the proceedings before the
Hon'ble Delhi High Court referred to
hereinabove.
6.88. He submits that the Enforcement Directorate,
while exercising power under Section 37A of
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FEMA, cannot disregard the regulatory and
factual position that prevailed when the
transaction was undertaken and, without
identifying any intervening change in law or
circumstance, adopt a contrary characterisation
of the very same transaction. Such a departure,
particularly when the transaction had been
disclosed to and considered by the concerned
regulatory authorities, must have a rational and
legally sustainable basis.
6.89. He further submits that Sivanandan C.T. does
not mean that a public authority is forever
bound by its past practice; however, any
departure must be founded on a valid and
discernible basis and cannot be arbitrary. In the
present case, there is no such changed
circumstance or intervening legal development
relied upon in the seizure order which could
justify treating the NCD transaction, earlier
dealt with within the applicable regulatory and
tax framework, as constituting a contravention
of Section 4 of FEMA.
6.90. According to him, the contrary stand adopted
by the Enforcement Directorate, without
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addressing the regulatory permissions,
clarifications and treatment of the transaction
by the concerned authorities, defeats the
requirement of certainty and predictability in
regulatory action. It consequently cannot, by
itself, furnish a rational basis for formation of
the “reason to believe” required under Section
37A of FEMA.
6.91. He submits that the investigation by the
Enforcement Directorate has remained pending
since 2021, pursuant to the letter issued by the
Reserve Bank of India on 27.09.2019, in
respect of a transaction which is more than
eleven years old. Despite the passage of
considerable time, no complaint has been filed
by the Enforcement Directorate seeking
adjudication of any alleged contravention under
FEMA.
6.92. He submits that, in the absence of any
complaint having been filed for adjudication
under FEMA, there was no justification for
resorting to the pre-emptive power of seizure
under Section 37A. According to him, Section
37A cannot be invoked merely to keep the
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property under seizure while the substantive
adjudicatory proceedings contemplated under
FEMA have not even been initiated. In the facts
of the present case, there was no immediate or
imminent circumstance warranting such pre-
emptive action.
6.93. He further submits that the petitioner has at all
times cooperated with the investigation
conducted by the Enforcement Directorate and
has made itself available to the authorities.
There is, therefore, no apprehension that the
petitioner would abscond, remove itself from
the jurisdiction of the authorities or otherwise
frustrate any proceedings that may be initiated
under FEMA.
6.94. He submits that the petitioner has a substantial
and established business presence in India,
involving business operations running into
thousands of crores of rupees and employment
of lakhs of persons. In such circumstances, the
apprehension underlying a pre-emptive seizure
is wholly misplaced. The petitioner is firmly
within the jurisdiction of the Indian authorities
and there is no question of it being beyond the
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reach of any proceedings that may be lawfully
initiated.
6.95. He submits that the seizure of the petitioner's
head office is, therefore, wholly
disproportionate to the object sought to be
achieved. The seizure directly interferes with
the petitioner's business operations and
deprives it of the use of its principal place of
business, despite the investigation relating to a
transaction more than eleven years old and
despite the petitioner having cooperated with
the investigation. Such an exercise, according
to him, assumes a punitive character even
before the alleged contravention has been
adjudicated.
6.96. He accordingly submits that, in the absence of
any immediate necessity for protective or pre-
emptive action, the continued seizure of the
petitioner's head office cannot be justified
merely on the ground that an investigation is
pending. The extraordinary power under
Section 37A must be exercised for the purpose
for which it is conferred and only where its
statutory conditions are satisfied. In the
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present case, the long passage of time, the
absence of adjudication proceedings, the
petitioner's continued cooperation and its
established presence in India demonstrate that
there was neither necessity nor proportionality
in resorting to seizure of the head office.
6.97. He relies on the decision of the Hon’ble
Supreme Court in Standard Chartered Bank
v. Ministry of Home Affairs11, more
particularly paragraphs 30, 31, 32 thereof,
which are reproduced hereunder for easy
reference:
30. Now adverting to the facts of the present case, we
find that this is not a case where the delay can be laid at
the doorstep of the appellants, nor is it a case of mere
passive lapse of time, rather, the record discloses a
chronicle of persistent and unexplained inaction on the
part of the respondent - complainant itself, spanning
virtually the entire life of these proceedings. The
complaint came to be instituted on 30.05.2002 for a
transaction said to have taken place as far back as in
1991-1992, unaccompanied by a single supporting
document, and cognizance was taken and summons
issued on that very date. Yet, remarkably, the summons
so issued were not even collected by the respondent -
complainant for service for almost 2 years thereafter, and
it was only sometime in 2004 that the respondent -
complainant first came forward to collect the summons.
31. Thereafter, for a further period of 8 years, that is,
from 2004 to 2012, the summons, although issued from
11
2026 SCC OnLine SC 1368
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time to time, yet could not be got served upon the
accused by the respondent - complainant, save in the
case of the appellant no. 1, Standard Chartered Bank,
whose counsel had entered an appearance on
16.08.2005. Through this entire decade, the proceedings
remained frozen at the stage of issue of process, with the
respondent - complainant itself remaining absent on
numerous occasions. Notably, the court record entry
dated 12.08.2005 records that even when the summons
returned unserved, the respondent - complainant took no
further steps whatsoever, such as moving an application
for issuance of a non-bailable warrant, a course it
eventually chose to adopt only on 28.05.2012, i.e.,
almost 7-8 years after the summons had first come back
unserved. It was in this backdrop that the High Court, in
the impugned order dated 22.03.2012, was constrained to
describe the delay as “highly deplorable” and directed the
trial court to conclude the entire trial within one-month.
Still, even this direction met the same fate. The court
record entry dated 30.05.2012 records that when fresh
notices were issued by the Magistrate's court, the
respondent - complainant declined to collect the same for
service upon the accused, notwithstanding that it was
already in possession of the accused's updated addresses
from the record of the High Court itself. It was only on
28.05.2012 that the notices were handed over to the
respondent - complainant, and service was thereafter
effected on 05.06.2012.
32. Even thereafter, neither the respondent - complainant
nor the accused appeared before the Magistrate's court,
with the result that the one-month period fixed by the
High Court lapsed without the trial having even
commenced in earnest, compelling the Magistrate to write
to the High Court on 08.06.2012 seeking an extension,
which was duly granted on 29.06.2012, extending the
outer limit to 6-months. Despite this further indulgence,
the respondent - complainant continued to remain absent
right up to the filing of the present appeals. On this
chronology, therefore, the question that the decisions
discussed above require us to ask, namely, who is
responsible for the delay, admits of only one answer - at
every stage at which the proceedings could have been
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carried further, it was virtually the prosecution that failed
to act with even ordinary diligence and failed to take
further steps wherever needed. The respondent -
complainant could have filed the application for issuance
of a non-bailable warrant long back, well before 2012,
since the summons had returned unserved on multiple
occasions over the years, but chose not to do so, and for
what special reasons, nobody knows.
6.98. By relying on Standard Chartered Bank, his
submission is that while mere passage of time
by itself may not invalidate proceedings,
prolonged and unexplained inaction on the part
of the authority is a relevant circumstance in
determining whether the subsequent exercise
of extraordinary statutory power is justified. In
the present case, the transaction in question is
more than eleven years old and the
investigation by the Enforcement Directorate
has been pending since 2021. Despite the
considerable passage of time, no complaint has
been filed for adjudication of the alleged
contravention under FEMA.
6.99. He submits that the very fact that the alleged
contravention relates to a transaction more
than a decade old, while the Enforcement
Directorate has had the matter under
investigation for several years, militates against
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the existence of any immediate or emergent
circumstance warranting seizure under Section
37A. Had there been any genuine apprehension
that the property would be removed, alienated
or otherwise placed beyond the reach of the
authorities, such apprehension ought to have
manifested itself contemporaneously and not
after the lapse of several years.
6.100. He submits that the power of seizure under
Section 37A is a pre-emptive measure and
cannot be exercised as a matter of routine or
merely because an investigation remains
pending. Where the authority has allowed the
matter to remain under investigation for years
without initiating adjudication proceedings, it
cannot, without demonstrating a subsequent
change in circumstances or an immediate
necessity, invoke the extraordinary power of
seizure in respect of an eleven-year-old
transaction.
6.101. He further submits that the petitioner has
throughout cooperated with the investigation
and has remained within the jurisdiction of the
Indian authorities. There is no allegation that
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the petitioner has attempted to alienate the
property, remove itself from the jurisdiction or
otherwise frustrate the proceedings. In these
circumstances, the prolonged delay, absence of
adjudication proceedings and continued
cooperation of the petitioner demonstrate that
there was no necessity for resorting to pre-
emptive seizure.
6.102. He accordingly submits that the chronology of
events itself demonstrates the absence of
urgency which could justify the exercise of
power under Section 37A. The seizure, having
been effected after such prolonged inaction and
in the absence of any intervening circumstance
demonstrating an immediate apprehension of
frustration of the proceedings, is therefore
disproportionate and cannot be sustained
merely on the ground that an investigation is
still pending.
6.103. He relies on the decision of the Hon’ble
Supreme Court in Union of India v. Citi
Bank12, more particularly paragraphs 19 to 24
12
(2022) 19 SCC 188
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thereof, which are reproduced hereunder for
easy reference:
19. It is a settled proposition of law that when the
proceedings are required to be initiated within a particular
period provided under the statute, the same are required
to be initiated within the said period. However, where no
such period has been provided in the statute, the
authorities are required to initiate the said proceeding
within a reasonable period. No doubt that what would be
a reasonable period would depend upon the facts and
circumstances of each case.
20. Reference in this respect could be made to the
judgment given by a three-Judge Bench of this Court in
State of Gujarat v. Patil Raghav Natha [State of Gujarat v.
Patil Raghav Natha, (1969) 2 SCC 187] , wherein this
Court has held thus : (SCC p. 193, paragraph11)
“11. The question arises whether the Commissioner can
revise an order made under Section 65 at any time. It is
true that there is no period of limitation prescribed under
Section 211, but it seems to us plain that this power must
be exercised in reasonable time and the length of the
reasonable time must be determined by the facts of the
case and the nature of the order which is being revised.”
(emphasis supplied)
21. In State of M.P. v. Bani Singh [State of M.P. v. Bani
Singh, 1990 Supp SCC 738 : 1991 SCC (L&S) 638] , this
Court found that the departmental proceedings initiated in
the year 1987 for the alleged irregularities that took place
between the years 1975-1977 could not be permitted to
be continued as it would be unfair and unreasonable.
22. In Union of India v. Citedal Fine Pharmaceuticals
[Union of India v. Citedal Fine Pharmaceuticals, (1989) 3
SCC 483 : 1989 SCC (Tax) 464] , validity of Rule 12 of
the Medicinal and Toilet Preparations (Excise Duties)
Rules, 1956, which did not provide for a period of
limitation for initiating proceedings for recovery of
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escaped duty, was challenged. This Court in the said case
observed [Union of India v. Citedal Fine Pharmaceuticals,
(1989) 3 SCC 483 : 1989 SCC (Tax) 464] thus : (SCC p.
487, paragraph6)
“6. The learned counsel appearing for the respondents
urged that Rule 12 is unreasonable and violative of Article
14 of the Constitution, as it does not provide for any
period of limitation for the recovery of duty. He urged that
in the absence of any prescribed period for recovery of
the duty as contemplated by Rule 12, the officer may act
arbitrarily in recovering the amount after lapse of long
period of time. We find no substance in the submission.
While it is true that Rule 12 does not prescribe any period
within which recovery of any duty as contemplated by the
rule is to be made, but that by itself does not render the
rule unreasonable or violative of Article 14 of the
Constitution. In the absence of any period of limitation it
is settled that every authority is to exercise the power
within a reasonable period. What would be reasonable
period, would depend upon the facts of each case.
Whenever a question regarding the inordinate delay in
issuance of notice of demand is raised, it would be open
to the assessee to contend that it is bad on the ground of
delay and it will be for the relevant officer to consider the
question whether in the facts and circumstances of the
case notice of demand for recovery was made within
reasonable period. No hard-and-fast rules can be laid
down in this regard as the determination of the question
will depend upon the facts of each case.”
(emphasis supplied)
23. In Mohd. Kavi Mohamad Amin v. Fatmabai Ibrahim
[Mohd. Kavi Mohamad Amin v. Fatmabai Ibrahim, (1997)
6 SCC 71] , suo motu proceedings were initiated in
September 1976 by the mamlatdar questioning the
validity of sale deeds executed in December 1972. In the
said case, this Court, after noticing the earlier decisions
on the issue, observed thus : (SCC pp. 72-73,
paragraph2)
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“2. … where no time-limit is prescribed for exercise of a
power under a statute it does not mean that it can be
exercised at any time; such power has to be exercised
within a reasonable time. We are satisfied that in the facts
and circumstances of the present case, the suo motu
power under Section 84-C of the Act was not exercised by
the Mamlatdar within a reasonable time.”
(emphasis supplied)
24. Admittedly, in the present cases, the alleged
transactions had taken place during Financial Years 1992
and 1993. Show-cause notices for the said transactions
were issued in the year 2002 and that too just before the
sunset period of FERA was to expire i.e. on 1-6-2002. We
are therefore of the considered view that show-cause
notices and the proceedings continued thereunder are
liable to be set aside on this short ground.
6.104. By relying upon Citi Bank, he submits that
merely because the statute does not prescribe
a period of limitation for exercise of a particular
power, the authority is not entitled to exercise
such power at any time. The power must be
exercised within a reasonable period, and what
constitutes a reasonable period has to be
determined having regard to the facts and
circumstances of each case. He submits that
the Hon'ble Supreme Court has applied this
principle even in proceedings arising under
FERA and has quashed the proceedings solely
on the ground of inordinate delay, without
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examining the merits of the alleged
contravention.
6.105. He submits that the principle laid down in Citi
Bank squarely applies to the present case. The
transaction alleged to constitute the
contravention is more than eleven years old,
while the investigation by the Enforcement
Directorate has itself remained pending since
2021. Despite having knowledge of the
transaction and having sufficient opportunity to
initiate appropriate proceedings, no complaint
for adjudication of the alleged contravention
under FEMA has been filed till date.
6.106. He submits that there is no explanation in the
seizure order for the extraordinary delay in
proceeding against a transaction of such
vintage, nor is there any material to
demonstrate that any subsequent event created
an apprehension requiring immediate protective
action. The circumstances are therefore
materially different from a case where a recent
transaction or a newly discovered act
necessitates prompt intervention.
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6.107. He further submits that the delay assumes
greater significance in the context of Section
37A, since the power exercised thereunder is
pre-emptive in nature. If the authorities have
permitted the matter to remain under
investigation for several years without initiating
adjudication proceedings, the mere pendency of
investigation cannot, without more, furnish
justification for subsequently resorting to
seizure of property in respect of an eleven-
year-old transaction.
6.108. He submits that the petitioner has throughout
cooperated with the investigation and has
remained within the jurisdiction of the Indian
authorities. There is no allegation that the
petitioner has attempted to alienate the
property, remove itself from the jurisdiction or
otherwise obstruct the proceedings.
Consequently, there was neither any
justification for the delay nor any emergent
circumstance warranting the extraordinary
measure of seizure.
6.109. He accordingly submits that, applying the
principle laid down in Citi Bank, the exercise of
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power under Section 37A after such an
inordinate and unexplained lapse of time, in the
absence of any demonstrated urgency or
intervening circumstance, is not a reasonable
exercise of statutory power. The seizure order
is therefore liable to be set aside on the ground
of delay alone, without it being necessary to
enter into the merits of the alleged FEMA
contravention.
6.110. His submission on the basis of all the above
arguments is that the Writ Petition in WP No.
7283 of 2026 is required to be allowed and the
reliefs sought for to be granted.
Petitioner's arguments in WP 16763/2026.
7. Sri. Udaya Holla, learned Senior Counsel appearing
for the petitioner in WP No.16763/2026, is that:
7.1. Genpact India incorporated a wholly owned
subsidiary, namely, Genpact Global (IFSC)
Private Limited (“Gift City Entity”), on
07.05.2025 in the GIFT Special Economic Zone,
Gujarat (“GIFT City”). He submits that, for the
purposes of FEMA, RBI and the applicable
regulatory framework, the Gift City Entity is
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treated as a non-resident entity. The Gift City
Entity was established to function as the
Genpact group's global treasury centre for cash
pooling and lending to overseas group entities
forming part of the Genpact group. No financing
activity is proposed to be undertaken in relation
to any Indian entity, and its activities are
confined to the overseas group entities.
7.2. He submits that the International Financial
Services Centres Authority (“IFSCA”) granted
provisional registration to the Gift City Entity as
a finance company on 15.09.2025, subject,
inter alia, to infusion of minimum paid-up
capital of USD 0.2 million within six months,
i.e., by March 2026, failing which the
provisional registration would lapse.
7.3. He submits that in terms of Rule 10 of the
Foreign Exchange Management (Overseas
Investment) Rules, 2022 (hereinafter referred
to, for the sake of convenience, brevity, and
identification, as “OI Rules”), a person or
entity under investigation by certain
authorities, including the Directorate of
Enforcement, is required to obtain a No-
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Objection Certificate prior to making a financial
commitment outside India. Rule 10 is
reproduced hereunder for easy reference:
10. No Objection Certificate.– (1) Any person resident in
India who,–
(i) has an account appearing as a non-performing asset; or
(ii) is classified as a wilful defaulter by any bank; or
(iii) is under investigation by a financial service regulator or
by investigative agencies in India, namely, the Central Bureau
of Investigation or Directorate of Enforcement or Serious
Frauds Investigation Office,
shall, before making any financial commitment or undertaking
disinvestment under these rules or the Foreign Exchange
Management (Overseas Investment) Regulations, 2022,
obtain a No Objection Certificate from the lender bank or
regulatory body or investigative agency by making an
application in writing to such bank or regulatory body or
investigative agency concerned:
Provided that where the lender bank or regulatory body or
investigative agency concerned fails to furnish the certificate
within sixty days from the date of receipt of such application,
it may be presumed that there was no objection to the
proposed transaction.
(2) The No Objection Certificate issued under sub-rule (1)
shall be addressed by the lender bank or regulatory body or
investigative agency concerned to the designated AD bank
with an endorsement to the applicant.
7.4. Genpact India made such an application to the
Enforcement Directorate for permission to make
the said investment. Simultaneously, an
application was made to IFSCA for an extension
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of time to make such investment. IFSCA, by its
communication dated 30.03.2026, granted a
one-time extension up to 15.09.2026 for
making the required capital infusion.
7.5. He submits that the said extension is a one-
time extension and that no further extension
would be available. Consequently, if the
required remittance is not made by 15.09.2026,
the provisional registration of the Gift City
Entity would lapse. This would place the very
establishment and functioning of the Gift City
Entity in jeopardy and, in turn, adversely affect
the proposed global cash-pooling and treasury
operations of the Genpact group.
7.6. He further submits that Genpact India is the
sole shareholder of the Gift City Entity and,
therefore, the required paid-up capital can be
infused only by Genpact India. The capital
requirement cannot be satisfied by an infusion
from any other entity of the Genpact group.
The proposed remittance is thus necessary to
preserve the provisional registration and enable
the Gift City Entity to commence and carry on
the activities for which it was established.
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7.7. He accordingly submits that the present
proceedings have an immediate and practical
consequence for the Gift City Entity. Unless
Genpact India is permitted to make the
required capital infusion within the extended
period granted by IFSCA, the provisional
registration would lapse on 15.09.2026,
notwithstanding that the Gift City Entity has
been established and provisionally registered
for the specific purpose of undertaking the
group's global treasury and cash-pooling
activities.
7.8. He refers to regulation 3(5)(i) read with
Schedule Sl.No. 3 of the International
Financial Services Authority (Finance
Company) Regulation, 2021, which is
reproduced hereunder for easy reference:
3(5)(i) In case the applicant is seeking registration as a
„Finance Company‟, it shall have and maintain minimum
owned fund, depending on the activity proposed to be
undertaken by it, as specified in Schedule of these
regulations, or such other higher amount as may be
specified by the Authority.
7.9. The Schedule is reproduced hereunder for easy
reference:
Digitally Signed By:
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SCHEDULE
[See regulation 3(1), 3(4)(i) and 3(4)(ii)]
No. Activity Minimum Exempted
Owned Fund Regulations, if
Requirement any
1 Undertaking only operating USD 0.2 mn or Regulation (4)
lease transactions for equivalent and Regulation
aircraft lease amount in any (8) subject. to
other freely the following:
convertible
currency
(i) To have a
2 Undertaking one or more of USD 0.2 mn or Board approved
the non-core activities equivalent prudential
amount in any policy
other freely
3 Undertaking to act as convertible
facilitators or core activities currency or any
as and when permitted by such amount as (ii) Fit and
the Authority may be required Proper criteria
to seek specific set out by the
registration for Authority
4 Undertaking any of the a proposed non-
permissible activities, if core activity.
operating
5 Undertaking one or more USD 3 mn or
core activities with or equivalent
without non-core activities. amount in any
other freely
convertible
currency.
6 Undertaking specialised USD 5 mn or None
activities with or without equivalent
core or non-core activities amount in any
other freely
convertible
currency.
Digitally Signed By:
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7.10. His submission is that Foreign Exchange
Management (Borrowing and Lending)
Regulation 2018 prohibits a resident in India
from borrowing or lending any foreign exchange
to a person resident in or outside India and in
this regard, he relies upon Regulation 3 thereof,
which is reproduced hereunder for easy
reference:
3. Prohibition to Borrow or Lend.
Save as otherwise provided in the Act, Rules or
Regulations made thereunder, no person resident in
India shall borrow or lend in foreign exchange from or to
a person resident in or outside India and no person
resident in India shall borrow in rupees from, or lend in
rupees to, a person resident outside India:
Provided that the Reserve Bank may, for sufficient
reasons, permit a person resident in India to borrow or
lend in foreign exchange from or to a person resident in
or outside India and/or permit a person resident in India
to borrow in rupees from, or lend in rupees to, a person
resident outside India.
Explanation. - Use of Credit Card (a) in India by a person
resident outside India or (b) outside India by a person
resident in India shall not be deemed as borrowing or
lending in Indian Rupee/foreign exchange.
Digitally Signed By:
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7.11. He submits that, after incorporation of the Gift
City Entity on 07.05.2025, the petitioner
applied to the Enforcement Directorate on
26.11.2025 for a No Objection Certificate
(“NOC”) to make an investment of USD 100
million in the Gift City Entity. The application
was made in compliance with Rule 10 of the
Overseas Investment Rules, which requires a
person resident in India, who is under
investigation by a financial regulator or an
investigating agency, including the Enforcement
Directorate, and who proposes to make a
financial commitment to a foreign entity, to
obtain a written NOC from the concerned
investigating agency.
7.12. He submits that Rule 10 requires the concerned
agency to issue the NOC or communicate its
objection within the prescribed period of 60
days. According to him, the consequence
contemplated under the Rule is that, if no such
response is received within the prescribed
period, the applicant is entitled to proceed on
the basis that there is no objection to the
proposed transaction. The application having
been made on 26.11.2025, the prescribed
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period expired on 25.01.2026. However, shortly
before expiry of the said period, the
Enforcement Directorate, by letter dated
13.01.2026, rejected the NOC application.
7.13. He submits that, despite having retained the
application for the substantial period preceding
the rejection, the Enforcement Directorate
neither sought any clarification from the
petitioner nor called upon it to furnish any
further material before rejecting the
application. And more importantly, the letter
dated 13.01.2026 contains no reasons for such
rejection, his submission is that if any
clarification was required it would have been
provided if only asked for, without seeking and
clarification an order of rejection without reason
ought not to have been passed is his
submission.
7.14. He submits that the rejection is wholly
unreasoned and does not disclose the factual
basis on which the NOC was refused, the
material considered by the Enforcement
Directorate, any finding of risk arising from the
proposed investment, or any nexus between
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the pending investigation and the proposed
investment of USD 100 million in the Gift City
Entity.
7.15. He submits that the requirement of recording
reasons assumes particular significance in the
present case, since the proposed investment is
a substantial financial commitment and the
refusal of the NOC has the direct consequence
of preventing Genpact India from infusing the
capital required for the Gift City Entity. In the
absence of reasons, the petitioner is unable to
ascertain the basis of the decision or effectively
challenge the same.
7.16. He accordingly submits that the absence of
reasons in the rejection letter goes to the root
of the decision-making process. A statutory
authority exercising power which directly
affects the petitioner's right to make a
permitted financial commitment is required to
disclose the basis for its decision. The
unreasoned rejection, according to him, is
therefore arbitrary and contrary to the
principles of natural justice and fair decision-
making.
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:33, Bengaluru
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7.17. He relies upon the decision of the Hon'ble Delhi
High Court in Times Internet Ltd. v.
Enforcement Directorate13 , more particularly
paragraphs 15, 16, 17, 20, 22, 23, 25, 27, 28,
29 and 30 which are reproduced hereunder for
easy reference:
15. On 22nd August, 2022, in exercise of powers under
Sections 46 of FEMA, 1999 the Central Government
notified the new FEMA OI Rules, 2022. This was done to
streamline the existing provisions, expand the scope of
overseas investments as well as simplify the procedures
for obtaining approvals for such transactions. These
Rules superseded the earlier Regulations on overseas
investment - i.e., the Foreign Exchange Management
(Transfer or Issue of any Foreign Security) Regulations,
2004, and Foreign Exchange Management (Acquisition
and Transfer of Immovable Property outside India)
Regulations, 2015.
16. To operationalize these new rules, the RBI, as the
sectoral regulator, issued delegated legislations in the
form of the Foreign Exchange Management (Overseas
Investment) Regulations, 202219 vide Notification no.
FEMA No. 400/2022-RB as well as Foreign Exchange
Management (Overseas Investment) Directions, 202220,
which were issued to all Category-I Authorised Dealer
Banks vide RBI Circular No. 12, dated 22nd August 2022.
These delegated legislations introduced clarity and
uniformity in the overseas investment regime, with an
emphasis on enabling bona fide business activities while
maintaining safeguards against potential misuse.
17. Rule 9 of the FEMA OI Rules, 2022, allows overseas
investment by Indian entities by way of financial
commitments for “bona fide business activity”, either
directly, through a step-down subsidiary or through a
13
2024 SCC OnLine Del 8937
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special purpose vehicle; subject to the limits and
conditions laid down in the applicable FEMA OI Rules,
2022 and FEMA OI Regulations, 2022. Under the
Explanation of sub-rule (1) of Rule 9, the phrase “bona
fide business activity” has been explained to mean, any
business activity permissible under any law in India and
in the host country or jurisdiction, as the case may be.
20. Rule 10 of FEMA OI Rules, 2022, stipulates the
condition for obtaining a No Objection Certificate (NOC)
under specific circumstances such as - the person
resident in India being under investigation by any
financial regulators or investigative agencies such as the
ED, CBI, or SFIO. Specifically, Rule 10(2) mandates that
persons specified in Rule 10(1) must seek an NOC in
writing from the relevant agency. The agency is required
to either furnish the NOC or state its objection within 60
days of receiving the application. In the absence of a
response within this timeframe, the Rules provide for a
presumption of no objection, facilitating the proposed
transaction. Importantly, the NOC is to be addressed to
the designated Authorised Dealer (Bank), with a copy
endorsed to the applicant.
22. In the instant case, since the ED had issued
summons to the Petitioners in the year 2021, in relation
to the alleged violations of FEMA, 1999, the Petitioners
sought to comply with the new FEMA regime and
requirement under Rule 10 of FEMA OI Rules, 2022.
Accordingly, Petitioners applied for the requisite NOC
which was rejected by ED. The reasons attributed for
rejection in the impugned communications issued to the
Petitioners are identically worded and read as follows:
“Sir,
Sub:-Rejection of NoC in respect of M/s Times Internet
Limited (TIL)-reg.
Kind reference is invited to the application dated
28.08.2023 received from M/s Times Internet Limited
(TIL) regarding request to issue NOC under Rule 10 of
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:33, Bengaluru
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Foreign Exchange Management (Overseas Investment)
rules, 2022.
2. In this regard, it is informed that proposal
regarding “Issue NOC” in this case is hereby
rejected by Competent Authority.
Yours truly,
Bedabrata Roy Choudhary
Assistant Director, HIU(2)(1)(2)”
[Emphasis added]
23. The impugned communications do not disclose any
substantive reason for rejecting the NOC. A rejection of
such import, devoid of any rationale or justification, is
arbitrary and falls afoul of the principles of natural
justice. In the opinion of the Court, such a rejection
without disclosing any reasons, is liable to be set aside
on this ground alone. Nonetheless, the Respondents
have, during these proceedings, sought to substantiate
the rejection by citing allegations of irregularities in prior
ODI transactions, particularly concerning overvaluation
and potential siphoning of foreign exchange. Thus, it is
considered appropriate for this Court to examine these
allegations, notwithstanding the absence of reasons in
the impugned communications.
25. While the Respondent's denial of the NOC is
ostensibly rooted in pblic interest - to prevent valuable
foreign exchange from being taken out of the country -
yet this rationale fails to withstand judicial scrutiny. The
issuance of summons under Section 37(1) of FEMA,
1999, over three years ago, without any subsequent
initiation of formal proceedings or adjudication against
TIL or its parent company, Bennet Coleman, raises
serious questions. Investigations lingering in limbo for
such an extended period cannot serve as a tool to
indefinitely impede a company's legitimate business
activities. The justification offered — that the value of the
Land and Building assets of the company, amounting to
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INR 451.96 Crores, falls short of the INR 912 Crores
required under Section 37A of FEMA, 1999 — is
unpersuasive. This explanation does little to excuse the
inaction in advancing the investigation or initiating
proceedings. Nothing prevented the Respondent from
confronting the Petitioners with specific charges and
affording them an opportunity to respond. Thus, the
ongoing investigation, devoid of any tangible progress or
launch of proceedings, cannot ipso facto justify the denial
of an NOC, particularly when the Petitioners have sought
to comply with regulatory requirements in good faith.
27. The refusal to grant an NOC must be predicated on
clear, cogent, and rational reasons. Mere issuance of
summons, absent any formal finding of contravention
under Section 4 of FEMA, 1999, or violations of Sections
131 and 132 of the Income Tax Act, 1961, does not meet
this threshold. Furthermore, the Court also finds merit in
the contention of the Petitioner that the penalty for
violations of the provisions of FEMA, 1999 are fiscal in
nature and under Section 13 of FEMA, the fiscal penalty
would be three times the amount so invested or INR 2
Lakhs in cases where the invested amount is not
quantified. On the other hand, the denial of NOC by ED
in the present case, has completely restricted the
Petitioners from remitting money abroad to its
subsidiaries. The prolonged investigation without any
conclusion, coupled with a lack of action under FEMA, is
insufficient to justify the denial of the Petitioners' right to
make further investments. The Petitioners have a
legitimate expectation of conducting their business
unhindered, particularly in the absence of definitive
findings against them. In sum, mere issuance of
summons under Section 37(1) of FEMA, 1999, without
any finding of contravention under Section 4 of FEMA,
1999, and the alleged non-compliance with the
provisions of Section 131 and 132 of the Income Tax Act,
1961, cannot be a valid ground for denial of the NOC.
28. It must also be noted that it is the Authorised Dealer
(bank) who have to ensure that the person making the
overseas investment has complied with the conditions
prescribed in the FEMA OI Rules, Regulations and
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Directions. In fact, in the FEMA OI Directions, 2022,
under Clause 27, it is provided that the AD shall render
themselves liable for penal action under Section 11 and
13 of FEMA, 1999, in case they facilitate remittances
without obtaining the requisite documents. Furthermore,
it is also important to take note of Section 10(5) of
FEMA, 1999, under which, before undertaking any
transaction in foreign exchange the authorised person
has to reasonably satisfy themselves that the transaction
will not involve and is not designed for contravention of
any provision of the Act/Rules/Regulations. These
regulatory provisions will continue to apply
notwithstanding the issuance of LOC and therefore,
safeguard the interest of the State.
29. The Respondents have thus not demonstrated the
contravention of FEMA, 1999 with clear basis, in order to
deny the NOC. There must be a nexus between the
alleged contravention and the proposing investment
which has not been established in the present case.
Since the Petitioners have, in good faith, complied with
regulatory requirements, it is unreasonable to subject
them to indefinite uncertainty.
30. Accordingly, the present writ petitions are allowed
with the following directions:
(i) In W.P.(C) 15242/2023, the impugned rejection letter
dated 30th October, 2023, is hereby quashed. TIL is free
to approach the Authorised Dealer for remittance of
investment abroad, as sought in their application dated
28th August, 2023 under UIN-NDWAZ20070182. The said
remittance shall be processed on its own merits, as per
the applicable rules and regulations under FEMA, 1999.
(ii) Likewise W.P.(C) 15471/2023, the impugned
rejection letter dated 15th November, 2023, is also
quashed. Bennet Coleman is free to approach the
Authorised Dealer for remittance of investment abroad,
as sought in their application dated 15th September,
2023 under UIN-BYWAZ20150706. The said remittance
shall be processed on its own merits, as per the
applicable rules and regulations under FEMA, 1999.
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:33, Bengaluru
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7.18. By relying on Time's Internet, his submission
is that the Hon'ble Delhi High Court has held
that rejection of an application for NOC under
Rule 10 of the FEMA OI Rules must be
supported by clear, cogent and rational
reasons. A communication which merely states
that the NOC has been rejected by the
competent authority, without disclosing the
basis for such rejection, is arbitrary and
contrary to the principles of natural justice.
7.19. He submits that the Hon'ble Delhi High Court
has further held that there must be a nexus
between the alleged contravention and the
proposed investment. The mere existence of an
investigation, or issuance of summons in
relation to an alleged FEMA contravention,
cannot by itself justify denial of an NOC,
particularly where no finding of contravention
has been recorded and no adjudication
proceedings have been initiated. The Hon'ble
Delhi High Court has also held that a prolonged
investigation without tangible progress or
initiation of proceedings cannot be used to
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indefinitely impede legitimate business
activities.
7.20. He submits that the present case stands on an
even stronger footing. The rejection letter
dated 13.01.2026 contains no reasons
whatsoever. It does not disclose the material
considered by the Enforcement Directorate, the
alleged risk arising from the proposed
investment, any finding of contravention, or the
basis on which the proposed investment of USD
100 million in the Gift City Entity is considered
objectionable. Consequently, there is not
merely an absence of a sufficient nexus; there
is no disclosed reason from which such nexus
can even be ascertained.
7.21. He submits that the absence of nexus is also
apparent from the chronology. The
investigation relates to a transaction of March
2015, whereas the Gift City Entity was
incorporated only on 07.05.2025, more than a
decade thereafter. The proposed investment is
for establishing and capitalising a separate
treasury and cash-pooling entity in GIFT City
for undertaking financing activities exclusively
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with overseas Genpact group entities. There is,
therefore, no disclosed connection between the
proposed investment and the transaction of
March 2015 which is the subject matter of the
investigation.
7.22. He further submits that the Hon'ble Delhi High
Court, in Times Internet Ltd., also took note
of the fact that the concerned petitioners had
sought to comply with the regulatory
requirements in good faith and that the
continuing investigation, without any formal
finding or initiation of adjudication proceedings,
could not be used to indefinitely restrict their
legitimate business activities. The same
principle applies here, particularly when the
petitioner has itself approached the
Enforcement Directorate and sought the
requisite NOC in compliance with Rule 10 of the
FEMA OI Rules.
7.23. He submits that the Enforcement Directorate
was a party to the proceedings in Times
Internet Ltd. and, therefore, cannot adopt a
position inconsistent with the principles laid
down therein without distinguishing the present
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case on facts or demonstrating any material
circumstance warranting a different approach.
While the said decision may have persuasive
value before this Court, the Enforcement
Directorate, having been a party to the said
proceedings, cannot disregard the principles
governing its own exercise of statutory power
merely because the present proceedings are
before a different High Court.
7.24. He accordingly submits that the rejection dated
13.01.2026 is unsustainable on both counts
identified in Times Internet Ltd.: first, it
contains no reasons whatsoever; and second,
there is no disclosed nexus between the alleged
FEMA contravention under investigation and the
proposed investment in the Gift City Entity.
7.25. The rejection is therefore arbitrary and liable to
be set aside, particularly when its consequence
is to prevent the petitioner from making the
capital infusion within the time stipulated by
IFSCA, thereby placing the provisional
registration of the Gift City Entity in jeopardy.
7.26. He submits that the scheme of Rule 10 of the
FEMA OI Rules itself indicates that there is no
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absolute prohibition against an entity under
investigation making an overseas investment.
The requirement is only that, in the
circumstances specified in the Rule, a No
Objection Certificate (“NOC”) be obtained from
the concerned investigating agency. The Rule
further contemplates a deemed no objection
where the application is not acted upon within
the prescribed period. According to him, this
indicates the legislative intent that an
investigation by itself does not operate as a bar
to overseas investment and that the NOC can
be refused only where there are cogent reasons
for doing so or where the proposed investment
is shown to adversely affect the interests of the
country.
7.27. He submits that, in the present case, the
investigation has remained pending since 2021,
when the Reserve Bank of India addressed the
Enforcement Directorate, and has not
culminated in any adjudication or other
proceedings even after nearly five years. There
is no indication as to when the investigation is
likely to be concluded. A pending investigation
of such duration, according to him, cannot by
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itself constitute a ground to prevent Genpact
India from carrying on its legitimate business
activities or from making an investment
otherwise permissible under the FEMA OI Rules.
7.28. He submits that the communication dated
13.01.2026 merely states that “the request
regarding issuance of NOC, has been rejected
by the competent authority, and the same is
being intimated for information and necessary
action”. Such communication discloses no
reason whatsoever for rejection. It does not
identify the alleged contravention, disclose the
material considered, indicate any risk arising
from the proposed investment, or establish any
nexus between the pending investigation and
the investment proposed to be made in the Gift
City Entity. He therefore submits that the
rejection is arbitrary and, having regard to the
complete absence of reasons, is manifestly
arbitrary.
7.29. He further submits that the Enforcement
Directorate cannot seek to cure the absence of
reasons in the rejection letter by supplying
reasons during the course of these proceedings.
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:33, Bengaluru
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The validity of the order has to be examined on
the basis of the reasons contained in the order
itself. Reasons which were not recorded or
communicated when the decision was taken
cannot subsequently be introduced by way of
affidavit, explanation or oral submissions.
7.30. He submits that the attempt on behalf of the
Enforcement Directorate to rely upon the
seizure order dated 03.02.2026 to justify the
earlier rejection dated 13.01.2026 is
impermissible. The two orders arise under
different statutory provisions and operate in
different fields. The application under Rule 10 of
the FEMA OI Rules was required to be
considered independently on the basis of the
material relevant to the proposed overseas
investment, whereas the seizure order under
Section 37A of FEMA concerns the exercise of a
distinct statutory power in relation to the
alleged contravention. The subsequent seizure
order cannot retrospectively supply reasons
which were absent when the NOC application
was rejected.
Digitally Signed By:
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17/09/2026, 18:33, Bengaluru
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7.31. He submits that the distinction is particularly
significant in the present case since the seizure
order under Section 37A was passed only on
03.02.2026, whereas the NOC was rejected on
13.01.2026. The reasons, if any, emerging from
the seizure order were therefore not the
reasons on which the NOC application was
rejected. To read the subsequent seizure order
into the earlier rejection would amount to
permitting the Enforcement Directorate to
retrospectively supplement or antedate the
reasons for its decision, which is impermissible.
7.32. He reiterates that Rule 10 required the
Enforcement Directorate to either issue the
NOC or state its objection within the prescribed
period of 60 days. The application having been
made on 26.11.2025, the said period expired
on 25.01.2026. According to him, an order
merely stating that the NOC application has
been rejected, without communicating the
reasons for such objection, does not satisfy the
statutory requirement of stating the objection
contemplated under Rule 10. The subsequent
attempt to furnish reasons cannot cure that
defect after expiry of the prescribed period.
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7.33. He submits that the consequence is not merely
that the matter should be remitted to the
Enforcement Directorate for passing a fresh
order with reasons. Since the statutory period
contemplated under Rule 10 had expired and
no valid objection setting out reasons had been
communicated within that period, he submits
that the statutory consequence of deemed no
objection must follow. A remand at this stage
would effectively permit the Enforcement
Directorate to defeat the time-bound
mechanism prescribed by Rule 10 by supplying
reasons after the prescribed period.
7.34. He accordingly submits that the rejection dated
13.01.2026 is liable to be set aside as an
unreasoned and arbitrary order. The
subsequent seizure order dated 03.02.2026
cannot be read into or relied upon to sustain
the earlier rejection. Since the statutory period
under Rule 10 has also expired, he submits that
the petitioner is entitled to proceed on the basis
that there is no objection to the proposed
investment in the Gift City Entity.
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:33, Bengaluru
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7.35. He also relies upon the decision of the Hon’ble
Supreme Court in Mohinder Singh Gill v.
Chief Election Commissioner, paragraph 8
thereof, which has been reproduced earlier and
submits that reasons cannot be supplied
through affidavits or otherwise to cure an order
that was initially devoid of reasons.
7.36. He submits that the proposed investment in the
Gift City Entity is a bona fide business
investment and is otherwise permissible under
law. It is neither a prohibited transaction nor an
act constituting an offence. The investment is
proposed for carrying on the petitioner's regular
business activities through the Gift City Entity,
which has been established as the group's
global treasury centre. In the absence of any
material demonstrating that the proposed
investment would prejudice the pending
investigation or facilitate any further
contravention of law, there was no justification
for withholding the NOC.
7.37. He submits that the Enforcement Directorate
has also failed to consider the civil and
commercial consequences flowing from
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rejection of the NOC. The refusal prevents
Genpact India from making the capital infusion
required for the Gift City Entity and
consequently places its provisional registration
and proposed business operations in jeopardy.
The decision therefore has direct civil
consequences for the petitioner. Such
consequences, according to him, attract the
requirement of fair procedure and adherence to
the principles of natural justice,
notwithstanding that Rule 10 of the OI Rules
does not expressly prescribe a separate
opportunity of hearing.
7.38. He further submits that the seizure order dated
03.02.2026 has been stayed by this Court in
W.P. No.7283/2026. The said seizure order,
therefore, cannot be relied upon as an
independent justification for rejection of the
NOC. In any event, the seizure order relates to
an alleged transaction of March 2015 and there
is no nexus between that transaction and the
proposed investment in the Gift City Entity,
which was incorporated only on 07.05.2025.
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7.39. He submits that the NOC application and the
proceedings under Section 37A arise from
distinct factual and statutory considerations and
are required to be independently considered.
The subsequent seizure order cannot be used to
retrospectively supply reasons for the rejection
of the NOC dated 13.01.2026, particularly when
the seizure order itself was passed after the
rejection and has been stayed by this Court.
7.40. He accordingly submits that the rejection of the
NOC cannot be sustained either on the basis of
the pending investigation or by reference to the
subsequent seizure order. There being no
disclosed reason demonstrating that the
proposed investment is unlawful, would
prejudice the investigation, or has any nexus
with the transaction of March 2015, the
petitioner submits that the NOC ought to have
been granted in accordance with the scheme
and object of Rule 10 of the OI Rules.
7.41. He relies upon the decision of the Hon’ble
Supreme Court in A.K. Kraipak v. Union of
India14, more particularly paragraph 17
14
(1969) 2 SCC 262
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thereof, which is reproduced hereunder for easy
reference:
“17. This takes us to the question whether the
principles of natural justice apply to administrative
proceedings similar to that with which we are
concerned in these cases. According to the learned
Attorney General those principles have no bearing
in determining the validity of the impugned
selections. In support of his contention he read to
us several decisions. It is not necessary to examine
those decisions as there is a great deal of fresh
thinking on the subject. The horizon of natural
justice is constantly expanding. The question how
far the principles of natural justice govern
administrative enquiries came up for consideration
before the Queen's Bench Division In re H.K. (An
Infant). [(1967) 2 QB 617 at p. 630] Therein the
validity of the action taken by an Immigration
Officer came up for consideration. In the course of
his judgment Lord Parker C.J. observed thus:
“But at the same time, I myself think that even if
an immigration officer is not in a judicial or quasi-
judicial capacity, he must at any rate give the
immigrant an opportunity of satisfying him of the
matters in the sub-section, and for that purpose let
the immigrant know what his immediate impression
is so that the immigrant can disabuse him. That is
not, as I see it, a question of acting or being
required to act judicially, but of being required to
act fairly. Good administration and an honest or
bona fide decision must, as it seems to me, require
not merely impartiality, nor merely bringing one's
mind to bear on the problem, but acting fairly; and
to the limited extent that the circumstances of any
particular case allow, and within the legislative
framework under which the administrator is
working, only to that limited extent do the so-
called rules of natural justice apply, which in a case
such as this is merely a duty to act fairly. I
appreciate that in saying that it may be said that
one is going further than is permitted on the
decided cases because heretofore at any rate the
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decisions of the courts do seem to have drawn a
strict line in these matters according to whether
there is or is not a duty to act judicially or quasi-
judicially.”
7.42. By relying on A.K. Kraipak, he submits that
the principles of natural justice are not confined
to judicial or quasi-judicial proceedings and
extend to administrative action where the
decision has civil consequences. The essential
requirement is that the authority must act
fairly, having regard to the nature of the power
exercised and the consequences of the decision.
7.43. He submits that the rejection of the NOC in the
present case has direct and substantial civil and
commercial consequences for Genpact India.
The refusal prevents the petitioner from making
the proposed investment in its wholly owned
subsidiary and consequently places the
provisional registration and proposed business
operations of the Gift City Entity in jeopardy.
The decision therefore cannot be regarded as a
purely administrative formality having no
consequence for the petitioner.
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7.44. He submits that, in these circumstances,
fairness required the Enforcement Directorate
to disclose the basis on which the NOC was
proposed to be refused and to afford the
petitioner an opportunity to address any
material or objection which was sought to be
relied upon against the proposed investment.
This requirement assumes greater significance
where, as in the present case, the rejection
letter itself discloses no reason for the decision.
7.45. He accordingly submits that the absence of any
reasons in the rejection dated 13.01.2026,
coupled with the failure to afford the petitioner
an opportunity to address the basis for such
rejection, renders the decision contrary to the
principles of natural justice and fair
administrative action recognised in A.K.
Kraipak.
7.46. He also relies upon the decision in Sivanandan
C.T. v. High Court of Kerala15, more
particularly paragraph 44 thereof which is
reproduced hereunder for easy reference:
15
(2024) 3 SCC 799
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“44. In a constitutional system rooted in the rule of
law, the discretion available with public authorities is
confined within clearly defined limits. The primary
principle underpinning the concept of rule of law is
consistency and predictability in decision-making. A
decision of a public authority taken without any basis in
principle or rule is unpredictable and is, therefore,
arbitrary and antithetical to the rule of law. [S.G.
Jaisinghani v. Union of India, 1967 SCC OnLine SC 6]
The rule of law promotes fairness by stabilising the
expectations of citizens from public authorities. This
was also considered in a recent decision of this Court in
SEBI v. Sunil Krishna Khaitan [SEBI v. Sunil Krishna
Khaitan, (2023) 2 SCC 643] , wherein it was observed
that regularity and predictability are hallmarks of good
regulation and governance. [SEBI v. Sunil Krishna
Khaitan, (2023) 2 SCC 643] This Court held that
certainty and consistency are important facets of
fairness in action and non-arbitrariness : (Sunil Krishna
Khaitan case [SEBI v. Sunil Krishna Khaitan, (2023) 2
SCC 643] , SCC pp. 678-79, paragraph59)
“59. … Any good regulatory system must promote and
adhere to principle of certainty and consistency,
providing assurance to the individual as to the
consequence of transactions forming part of his daily
affairs. [Union of India v. Raghubir Singh, (1989) 2 SCC
754. Also see, The Nature of the Judicial Process,
Benjamin N. Cardozo, p. 33:“I am not to mar the
symmetry of the legal structure by the introduction of
inconsistencies and irrelevancies and artificial
exceptions unless for some sufficient reason, which will
commonly be some consideration of history or custom
or policy or justice. Lacking such a reason, I must be
logical just as I must be impartial, and upon like
grounds. It will not do to decide the same question one
way between one set of litigants and the opposite way
between another.”(emphasis supplied)] … This does not
mean that the regulator/authorities cannot deviate
from the past practice, albeit any such deviation or
change must be predicated on greater public interest or
harm. This is the mandate of Article 14 of the
Constitution of India which requires fairness in action
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by the State, and non-arbitrariness in essence and
substance. Therefore, to examine the question of
inconsistency, the analysis is to ascertain the need and
functional value of the change, as consistency is a
matter of operational effectiveness.”
(emphasis added)”
7.47. By relying on Sivanandan C.T., his submission
is that the exercise of discretion by a public
authority must be founded upon a discernible
principle or rule. A decision taken without any
rational basis is unpredictable and arbitrary and
is consequently contrary to the rule of law and
the requirement of fairness under Article 14 of
the Constitution of India.
7.48. Learned Senior Counsel further submits that
consistency and predictability in decision-
making are essential requirements of non-
arbitrariness. If an authority seeks to depart
from a settled or consistently followed course of
action, such departure must be supported by a
rational basis and cannot be made arbitrarily or
without justification.
7.49. He also reiterates that the earlier transaction in
the year 2015 has been cleared by three
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regulators namely the RBI, SEBI and Income
Tax Department, who are the concerned
regulatory Authorities. The regulatory
authorities, having cleared the transaction, did
not find any fault in the said transaction. The
enforcement Authority, namely ED, cannot find
fault with it since there is nothing which is
required to be enforced in respect of a
transaction approved by the concerned
regulators.
7.50. As regards the investment, he submits that the
proposed investment in Gift City Entity would
provide employment and generate income,
thereby adding to the economic activity of
India, benefiting the citizens of India as well as
the exchequer on account of the tax that it
would generate. Apart from the various income
and other businesses that it would generate.
7.51. He submits that from the year 2015, despite
the payments having been made, which is
sought to be found fault with by the ED and
even after the said payments have been made,
the business of Genpact India has only grown,
adding to the employment generated,
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contribution to the exchequer as well as
increasing the foreign exchange reserves.
7.52. His submission is that Genpact India in the FY
year 2014-15 had 42,000 employees and in FY
2025-26 it has 1,01,000. The revenue in FY
2014-15 was 4,814 crores, and in FY 2025-
2026 it is 15,484 crores, which indicates steady
progress in the business of Genpact India.
When there is a positive contribution by
Genpact India to the economy, he submits that
the contention of learned ASGI that there was
no economic contribution by way of investment
is negated by the facts on record.
7.53. He submits that 100 million dollars would be
invested in Gift City Entity to render Global
Treasury Centre operations serving Genpact
entities outside India by providing cash pooling
and lending services exclusive to overseas
group companies, with no services being
rendered by the said Gift City Entity to Genpact
entities in India. All the services are being
rendered abroad; there is no connection to the
transaction being investigated by ED for the
purpose of rejecting NOC under Rule 10 of the
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OI Rules, there must be a clear link between
the alleged violation being investigated and the
proposed investment now to be made; there
being no such link, the ED could not have
refused the NOC, is his submission.
7.54. His submission is that the manner in which the
Enforcement Directorate has acted amounts to
an exercise of the powers vested in it to
prevent Genpact India from making a business
investment, though no such power is
contemplated either under Rule 10 of the FEMA
OI Rules or under FEMA. The mere fact that an
entity or person is under investigation does not,
according to him, prevent such entity or person
from carrying on its ordinary business activities
or making investments otherwise permissible in
law.
7.55. He submits that Rule 10 itself recognises this
position. The Rule applies precisely in cases
where an investigation is pending and requires
an NOC to be obtained before the proposed
overseas investment is made. It does not
create an absolute prohibition on investment by
a person under investigation. On the contrary,
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the provision contemplates that an NOC may be
granted notwithstanding the pendency of
investigation and further provides for a deemed
no objection where the application is not acted
upon within the prescribed period. Therefore,
according to him, the pendency of the
investigation cannot, by itself, constitute a
ground for rejection of the NOC.
7.56. He submits that the pre-emptive power of
seizure available to the Enforcement
Directorate under Section 37A of FEMA
operates in a different field and can be
exercised only when the statutory conditions
contained therein are satisfied. Section 37A
cannot be imported into the consideration of an
application under Rule 10, nor can the
pendency of an investigation or the existence of
a seizure order under Section 37A be treated as
an automatic ground for refusing an NOC under
Rule 10. The challenge to the seizure order
itself is the subject matter of W.P.
No.7283/2026, in which the matter has been
argued by Sri Arvind Datar, learned Senior
Counsel.
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7.57. Sri Udaya Holla, learned Senior Counsel,
submits that the Enforcement Directorate has
sought to supplement the reasons for rejection
only through the statement of objections and
during the course of arguments. The contention
that reasons could not be disclosed on the
ground that the investigation is ongoing,
according to him, cannot justify an otherwise
unreasoned order, particularly in view of the
principles laid down by the Hon'ble Delhi High
Court in Times Internet Ltd.
7.58. He submits that the assertion that the proposed
capital investment in the Gift City Entity would
prejudice or endanger the investigation is
unsupported by any material placed before this
Court. Neither the rejection letter nor the
subsequent statement of objections discloses
how the proposed investment would obstruct
the investigation, prejudice recovery, facilitate
any further contravention or otherwise
adversely affect the interests of the State.
There is, therefore, no disclosed nexus between
the pending investigation relating to the
transaction of March 2015 and the proposed
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investment in an entity incorporated only on
07.05.2025.
7.59. He further submits that Genpact India has
succeeded in the proceedings initiated under
Section 263 as well as Sections 147 and 148 of
the Income Tax Act and that there is no
criminal proceeding pending against Genpact
India, apart from the present investigation by
the Enforcement Directorate. The petitioner,
according to him, cannot be treated as having
committed a contravention merely because an
investigation remains pending. The approach of
the Enforcement Directorate, in treating the
petitioner as guilty before completion of the
investigation or any adjudication of the alleged
contravention, is contrary to the principles
governing fair administrative action.
7.60. He submits that no nexus between the
proposed investment and the investigation has
been identified even during the course of the
hearing. The investigation concerns a
transaction of March 2015, whereas the Gift
City Entity was incorporated more than a
decade thereafter on 07.05.2025 for the
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specific purpose of functioning as the Genpact
group's global treasury centre. In the absence
of any material establishing a connection
between the two, the rejection of the NOC is
arbitrary.
7.61. He submits that the consequences of the
rejection are also wholly disproportionate. The
petitioner is required, in the first instance, to
infuse USD 0.2 million as the minimum paid-up
capital and pay the registration fee of USD
12,500 within the time stipulated by IFSCA. The
proposed balance investment of USD 99.8
million need not be made at this stage and,
according to the petitioner, would be made only
after obtaining appropriate orders from this
Court. If even the initial investment is
prevented, the provisional registration of the
Gift City Entity is liable to lapse, thereby
adversely affecting the business interests of
Genpact India and the Genpact group.
7.62. He invokes the doctrine of proportionality and
submits that the adverse consequences of
refusing the NOC bear no reasonable proportion
to the object sought to be achieved by the
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pending investigation. The investigation
concerns a transaction of March 2015, more
than a decade old, whereas the proposed
investment relates to a business entity
incorporated in 2025 for carrying out legitimate
treasury activities. No material has been shown
to demonstrate that permitting the limited
initial investment would prejudice the
investigation.
7.63. He further submits that the proposed initial
payments would be made only towards the
capitalisation and registration of the Gift City
Entity and would be made to the concerned
Government/regulated entity. The amounts
would not be transferred to a third party or
otherwise placed beyond the reach of the
Indian authorities. Further, no business activity
would be undertaken by the Gift City Entity
except in accordance with the permissions and
directions of the competent authorities and the
orders of this Court. The apprehension of
siphoning of funds or detriment to the
exchequer is therefore, according to him,
unfounded.
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7.64. He submits that the present writ petition has to
be considered independently of W.P.
No.7283/2026. The challenge in the present
proceedings is to the rejection of the NOC
under Rule 10 of the FEMA OI Rules, whereas
the seizure order under Section 37A is the
subject matter of the other proceedings. The
validity of the rejection dated 13.01.2026 must
therefore be tested on the basis of Rule 10 and
the reasons, if any, contained in that order, and
not by importing the contents or reasoning of
the subsequent seizure order.
7.65. As regards the suggestion of the learned ASGI
that the matter may be remitted to the
Enforcement Directorate for providing an
opportunity of hearing and passing a reasoned
order, he submits that such a remand would
serve no useful purpose. The Enforcement
Directorate has already taken a position against
the petitioner and has sought, in the present
proceedings, to justify the rejection on grounds
which were not stated in the impugned
communication. According to him, permitting a
remand in these circumstances would enable
the authority to retrospectively formulate
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reasons for an order which was originally
passed without reasons.
7.66. He submits that the petitioner does not seek
permission to make the entire proposed
investment of USD 100 million at this stage. In
view of the approaching deadline of
15.09.2026, the petitioner presently seeks only
to make the minimum capital infusion of USD
0.2 million and pay the registration fee of USD
12,500. The balance investment of USD 99.8
million would be made only upon obtaining
appropriate orders from this Court.
7.67. He accordingly submits that the rejection of the
NOC is an unreasoned and disproportionate
exercise of power, unsupported by any
demonstrated nexus between the proposed
investment and the pending investigation. The
pendency of an investigation cannot, by itself,
be converted into an indefinite restraint on the
petitioner's legitimate business activities. In the
absence of reasons satisfying the requirements
of Rule 10, and having regard to the statutory
scheme, the prolonged pendency of the
investigation and the limited nature of the
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immediate investment proposed, he submits
that the writ petition deserves to be allowed
and the reliefs sought granted.
7.68. In this regard, he relies upon the decision of
the Hon'ble Supreme Court in Siemens Ltd. v.
State of Maharashtra16, more particularly
paragraphs 9, 10 and 11 thereof, which are
reproduced hereunder for easy reference:
“9. Although ordinarily a writ court may not exercise its
discretionary jurisdiction in entertaining a writ petition
questioning a notice to show cause unless the same
inter alia appears to have been without jurisdiction as
has been held by this Court in some decisions including
State of U.P. v. Brahm Datt Sharma , Special Director
v. Mohd. Ghulam Ghouse and Union of India v.
Kunisetty Satyanarayana, but the question herein has
to be considered from a different angle viz. when a
notice is issued with premeditation, a writ petition
would be maintainable. In such an event, even if the
court directs the statutory authority to hear the matter
afresh, ordinarily such hearing would not yield any
fruitful purpose. (See K.I. Shephard v. Union of India.)
It is evident in the instant case that the respondent has
clearly made up its mind. It explicitly said so both in
the counter-affidavit as also in its purported show-
cause notice.
10. The said principle has been followed by this Court
in V.C., Banaras Hindu University v. Shrikant] , stating:
(SCC p. 60, paras 48-49)
“48. The Vice-Chancellor appears to have made up his
mind to impose the punishment of dismissal on the
16
(2006) 12 SCC 33
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respondent herein. A post-decisional hearing given by
the High Court was illusory in this case.
49. In K.I. Shephard v. Union of India this Court held:
(SCC p. 449, paragraph16)
‘It is common experience that once a decision has been
taken, there is a tendency to uphold it and a
representation may not really yield any fruitful
purpose.’ ”
(See also Shekhar Ghosh v. Union of India and Rajesh
Kumar v. D.C.I.T.)
11. A bare perusal of the order impugned before the
High Court as also the statements made before us in
the counter-affidavit filed by the respondents, we are
satisfied that the statutory authority has already
applied its mind and has formed an opinion as regards
the liability or otherwise of the appellant. If in passing
the order the respondent has already determined the
liability of the appellant and the only question which
remains for its consideration is quantification thereof,
the same does not remain in the realm of a show-cause
notice. The writ petition, in our opinion, was
maintainable.”
7.69. By relying on Siemens India, his submission is
that a writ petition is maintainable even at the
stage of a notice or preliminary decision where
the action of the statutory authority is not
merely tentative but reflects a premeditated
decision. The principle is that where the
authority has already made up its mind and the
subsequent opportunity of hearing is only a
formality, remanding the matter for a fresh
hearing would serve no useful purpose. This
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Court is therefore required to examine whether
the authority has approached the matter with
an open mind or has already determined the
issue sought to be reconsidered.
7.70. In the present case, he submits that the
rejection of the petitioner's application dated
26.11.2025 by communication dated
13.01.2026 is not a tentative decision requiring
further consideration. The rejection was made
without disclosing any reasons, without
identifying any material showing how the
proposed investment would prejudice the
investigation, and without pointing out any
nexus between the proposed investment and
the transaction under investigation. When the
matter was challenged, the ED sought to supply
the reasons through its objections and
submissions before this Court, including by
relying upon matters which did not form part of
the impugned communication.
7.71. He submits that, in these circumstances, a
direction to the ED to reconsider the application
after providing a hearing would serve no fruitful
purpose. The ED has already taken the position
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that the investment cannot be permitted and is
now seeking to justify that conclusion by
furnishing reasons which were not contained in
the impugned decision. Such a course would,
according to him, amount to permitting the
authority to make a fresh decision after this
Court has found the original decision to be
unsustainable, rather than reviewing a decision
which was made on the basis of disclosed
reasons.
7.72. He further submits that Siemens Ltd. is
particularly relevant to the submission of the
learned ASGI that the matter may be remitted
to the ED for a fresh hearing and a reasoned
order. Where the circumstances demonstrate
that the authority has already formed its view,
a post-decisional or subsequent hearing cannot
be treated as an adequate substitute for a
decision taken fairly and with an open mind. He
therefore submits that remand in the present
case would be an empty formality and that the
impugned rejection deserves to be set aside
rather than remitted for reconsideration.
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7.73. He also relies upon the decision in K.I.
Shephard v. Union of India17, more
particularly paragraph 16 thereof, which is
reproduced hereunder for easy reference:
“16. We may now point out that the learned Single
Judge of the Kerala High Court had proposed a post-
amalgamation hearing to meet the situation but that
has been vacated by the Division Bench. For the
reasons we have indicated, there is no justification to
think of a post-decisional hearing. On the other hand
the normal rule should apply. It was also contended on
behalf of the respondents that the excluded employees
could now represent and their cases could be
examined. We do not think that would meet the ends of
justice. They have already been thrown out of
employment and having been deprived of livelihood
they must be facing serious difficulties. There is no
justification to throw them out of employment and then
give them an opportunity of representation when the
requirement is that they should have the opportunity
referred to above as a condition precedent to action. It
is common experience that once a decision has been
taken, there is a tendency to uphold it and a
representation may not really yield any fruitful
purpose.”
7.74. By relying on K.I. Shephard, his submission is
that where a decision has already been taken, a
subsequent opportunity to make a
representation cannot ordinarily cure the denial
of a hearing which was required to precede the
decision. The reason is that, once an authority
has formed its view, there is a natural tendency
17
(1987) 4 SCC 431
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to sustain the decision already taken, and a
subsequent representation may therefore serve
no fruitful purpose.
7.75. He submits that the same principle applies in
the present case. The petitioner's application
dated 26.11.2025 was rejected by the ED by
communication dated 13.01.2026 without
disclosing any reasons or material indicating
why the proposed investment would prejudice
the investigation. The ED has thereafter sought
to justify the rejection before this Court by
referring to matters which do not form part of
the impugned communication. Thus, according
to him, the ED has already formed its view
against permitting the investment and is now
attempting to sustain that view by supplying
reasons after the decision.
7.76. He therefore submits that directing the
petitioner to once again approach the same
authority for a hearing would not meet the ends
of justice. Such a course would effectively
permit the ED to formulate and record reasons
after the event and thereafter reconsider a
decision which it has already defended before
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this Court. In the circumstances, a post-
decisional hearing would be an empty formality
and would not cure the fundamental defect in
the manner in which the impugned decision was
taken.
7.77. Lastly, he submits that even according to the
ED, apart from the transactions of the year
2015, there is no other transaction being
enquired into or investigated. Thus, there is a
clear and categorical admission that
investigations are in respect of a 10-year-old
matter which is highly belated, there being no
reason for such delay made out by the ED.
7.78. In this regard, he also relies upon the decision
of the Hon’ble Supreme Court in Union of
India v. Citi Bank18, more particularly
paragraphs 19, 20, 21, 22, 23, 24 thereon,
which are reproduced hereunder for easy
reference:
19. It is a settled proposition of law that when the
proceedings are required to be initiated within a
particular period provided under the statute, the same
are required to be initiated within the said period.
However, where no such period has been provided in
the statute, the authorities are required to initiate the
18
(2022) 19 SCC 188
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said proceeding within a reasonable period. No doubt
that what would be a reasonable period would depend
upon the facts and circumstances of each case.
20. Reference in this respect could be made to the
judgment given by a three-Judge Bench of this Court in
State of Gujarat v. Patil Raghav Natha [State of Gujarat
v. Patil Raghav Natha, (1969) 2 SCC 187] , wherein
this Court has held thus : (SCC p. 193, paragraph11)
“11. The question arises whether the Commissioner can
revise an order made under Section 65 at any time. It
is true that there is no period of limitation prescribed
under Section 211, but it seems to us plain that this
power must be exercised in reasonable time and the
length of the reasonable time must be determined by
the facts of the case and the nature of the order which
is being revised.”
(emphasis supplied)
21. In State of M.P. v. Bani Singh [State of M.P. v. Bani
Singh, 1990 Supp SCC 738 : 1991 SCC (L&S) 638] ,
this Court found that the departmental proceedings
initiated in the year 1987 for the alleged irregularities
that took place between the years 1975-1977 could not
be permitted to be continued as it would be unfair and
unreasonable.
22. In Union of India v. Citedal Fine Pharmaceuticals
[Union of India v. Citedal Fine Pharmaceuticals, (1989)
3 SCC 483 : 1989 SCC (Tax) 464] , validity of Rule 12
of the Medicinal and Toilet Preparations (Excise Duties)
Rules, 1956, which did not provide for a period of
limitation for initiating proceedings for recovery of
escaped duty, was challenged. This Court in the said
case observed [Union of India v. Citedal Fine
Pharmaceuticals, (1989) 3 SCC 483 : 1989 SCC (Tax)
464] thus : (SCC p. 487, paragraph6)
“6. The learned counsel appearing for the respondents
urged that Rule 12 is unreasonable and violative of
Article 14 of the Constitution, as it does not provide for
any period of limitation for the recovery of duty. He
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urged that in the absence of any prescribed period for
recovery of the duty as contemplated by Rule 12, the
officer may act arbitrarily in recovering the amount
after lapse of long period of time. We find no substance
in the submission. While it is true that Rule 12 does not
prescribe any period within which recovery of any duty
as contemplated by the rule is to be made, but that by
itself does not render the rule unreasonable or violative
of Article 14 of the Constitution. In the absence of any
period of limitation it is settled that every authority is
to exercise the power within a reasonable period. What
would be reasonable period, would depend upon the
facts of each case. Whenever a question regarding the
inordinate delay in issuance of notice of demand is
raised, it would be open to the assessee to contend that
it is bad on the ground of delay and it will be for the
relevant officer to consider the question whether in the
facts and circumstances of the case notice of demand
for recovery was made within reasonable period. No
hard-and-fast rules can be laid down in this regard as
the determination of the question will depend upon the
facts of each case.”
(emphasis supplied)
23. In Mohd. Kavi Mohamad Amin v. Fatmabai Ibrahim
[Mohd. Kavi Mohamad Amin v. Fatmabai Ibrahim,
(1997) 6 SCC 71] , suo motu proceedings were initiated
in September 1976 by the mamlatdar questioning the
validity of sale deeds executed in December 1972. In
the said case, this Court, after noticing the earlier
decisions on the issue, observed thus : (SCC pp. 72-73,
paragraph2)
“2. … where no time-limit is prescribed for exercise of a
power under a statute it does not mean that it can be
exercised at any time; such power has to be exercised
within a reasonable time. We are satisfied that in the
facts and circumstances of the present case, the suo
motu power under Section 84-C of the Act was not
exercised by the Mamlatdar within a reasonable time.”
(emphasis supplied)
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24. Admittedly, in the present cases, the alleged
transactions had taken place during Financial Years
1992 and 1993. Show-cause notices for the said
transactions were issued in the year 2002 and that too
just before the sunset period of FERA was to expire i.e.
on 1-6-2002. We are therefore of the considered view
that show-cause notices and the proceedings continued
thereunder are liable to be set aside on this short
ground.
7.79. By relying on Citi Bank, his submission is that
even where no period of limitation is
prescribed, statutory power must be exercised
within a reasonable period, having regard to
the facts of each case. He submits that the
present transaction is more than eleven years
old, the investigation has been pending since
2021 pursuant to the RBI communication dated
27.09.2019, and no adjudication proceedings or
complaint under FEMA have been initiated. The
petitioner has also cooperated with the
investigation.
7.80. He submits that there is no allegation of any
intervening circumstance or imminent risk of
alienation or removal of property warranting
pre-emptive seizure at this stage. In these
circumstances, the prolonged and unexplained
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delay assumes significance, and exercise of the
drastic power under Section 37A, after such
lapse of time, is unreasonable and
disproportionate.
7.81. He also relies upon the decision of the Hon’ble
Supreme Court in Standard Chartered Bank
v. Enforcement Officer, Ministry of Home
Affairs19, more particularly paragraphs 30, 31,
32, 33, 34 and 35, which are reproduced
hereunder for easy reference:
30. Now adverting to the facts of the present case, we
find that this is not a case where the delay can be laid
at the doorstep of the appellants, nor is it a case of
mere passive lapse of time, rather, the record discloses
a chronicle of persistent and unexplained inaction on
the part of the respondent - complainant itself,
spanning virtually the entire life of these proceedings.
The complaint came to be instituted on 30.05.2002 for
a transaction said to have taken place as far back as in
1991-1992, unaccompanied by a single supporting
document, and cognizance was taken and summons
issued on that very date. Yet, remarkably, the
summons so issued were not even collected by the
respondent - complainant for service for almost 2 years
thereafter, and it was only sometime in 2004 that the
respondent - complainant first came forward to collect
the summons.
31. Thereafter, for a further period of 8 years, that is,
from 2004 to 2012, the summons, although issued
from time to time, yet could not be got served upon the
accused by the respondent - complainant, save in the
19
2026 SCC OnLine SC 1368
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case of the appellant no. 1, Standard Chartered Bank,
whose counsel had entered an appearance on
16.08.2005. Through this entire decade, the
proceedings remained frozen at the stage of issue of
process, with the respondent - complainant itself
remaining absent on numerous occasions. Notably, the
court record entry dated 12.08.2005 records that even
when the summons returned unserved, the respondent
- complainant took no further steps whatsoever, such
as moving an application for issuance of a non-bailable
warrant, a course it eventually chose to adopt only on
28.05.2012, i.e., almost 7-8 years after the summons
had first come back unserved. It was in this backdrop
that the High Court, in the impugned order dated
22.03.2012, was constrained to describe the delay as
“highly deplorable” and directed the trial court to
conclude the entire trial within one-month. Still, even
this direction met the same fate. The court record entry
dated 30.05.2012 records that when fresh notices were
issued by the Magistrate's court, the respondent -
complainant declined to collect the same for service
upon the accused, notwithstanding that it was already
in possession of the accused's updated addresses from
the record of the High Court itself. It was only on
28.05.2012 that the notices were handed over to the
respondent - complainant, and service was thereafter
effected on 05.06.2012.
32. Even thereafter, neither the respondent -
complainant nor the accused appeared before the
Magistrate's court, with the result that the one-month
period fixed by the High Court lapsed without the trial
having even commenced in earnest, compelling the
Magistrate to write to the High Court on 08.06.2012
seeking an extension, which was duly granted on
29.06.2012, extending the outer limit to 6-months.
Despite this further indulgence, the respondent -
complainant continued to remain absent right up to the
filing of the present appeals. On this chronology,
therefore, the question that the decisions discussed
above require us to ask, namely, who is responsible for
the delay, admits of only one answer - at every stage
at which the proceedings could have been carried
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further, it was virtually the prosecution that failed to
act with even ordinary diligence and failed to take
further steps wherever needed. The respondent -
complainant could have filed the application for
issuance of a non-bailable warrant long back, well
before 2012, since the summons had returned
unserved on multiple occasions over the years, but
chose not to do so, and for what special reasons,
nobody knows.
33. Equally telling is the conduct of the respondent -
complainant in the period following the High Court's
time-bound directions. Given a clear window of one-
month to conclude the trial, the respondent -
complainant's response was to refuse to even collect
the notices meant for service upon the accused. This
compelled the trial court to seek an extension, which
the High Court granted, allowing a further 6-months.
Yet the record shows that the respondent - complainant
continued to remain absent right through this extended
period, and indeed, right up to the filing of the present
appeals before us. Such conduct, persisting even after
two express directions of the High Court fixing outer
time-limits for completion of the trial, cannot be
explained away as systemic delay or administrative
constraint. In our opinion, it reflects a want of diligence
and unwillingness to prosecute the appellants further.
34. In view of all that is stated above, we are of the
considered view that this is a fit case warranting the
exercise of the inherent powers of this Court to bring
these proceedings to an end. The complaint itself, as
stated earlier, is not supported by any documentary
evidence and rests upon an alleged opportunity notice
under Section 61(2) of FERA. The respondent -
complainant have, till date, not been able to produce
the same or even date it with any precision. It is
pertinent to mention that 23-years have now elapsed
since the institution of the complaint, and over three
decades since the transaction it concerns, without the
trial having progressed beyond the stage of service of
summons. To permit the respondent - complainant to
continue in such circumstances would be to allow the
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appellants to remain, in the words of this Court in
Kailash Chandra Kapri (supra), in a state of suspended
animation indefinitely.
35. We accordingly hold that the complaint bearing
Criminal Case Nos. 1503-1504 of 2002, and the
summoning order dated 30.05.2002 issued therein, are
liable to be quashed as against the appellants herein
only. We accordingly pass such order.
7.82. By relying on Standard Chartered Bank, he
submits that there is prolonged, unexplained
and attributable inaction on the part of the
prosecution or investigating agency, resulting in
the proceedings remaining pending without
meaningful progress, such conduct assumes
significance in considering whether the
proceedings should be permitted to continue.
7.83. Learned Senior Counsel submits that criminal
proceedings cannot be allowed to continue
indefinitely, particularly where the delay is not
attributable to the accused and the prosecuting
agency has failed to act with reasonable
diligence. In such circumstances, continued
pendency keeps the accused in a state of
uncertainty and amounts to keeping the
proceedings in a state of suspended animation.
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7.84. It is therefore submitted that, where the record
demonstrates that the investigating or
prosecuting authority had sufficient opportunity
to take the necessary steps but failed to do so
without any satisfactory explanation, and the
proceedings have consequently remained
pending for an unduly long period, the inherent
jurisdiction of this Court can be exercised to
bring such proceedings to an end.
7.85. He submits that the present case stands on a
similar footing. The transaction in question is
more than eleven years old, the investigation
has been pending since 2021, and no
adjudication proceedings or complaint under
FEMA have been initiated. The petitioner has
also cooperated with the investigation. There is
no allegation of any intervening circumstance
or conduct on the part of the petitioner which
necessitated the exercise of the power under
Section 37A at this stage.
7.86. He therefore submits that, in the absence of
any explanation for the prolonged inaction or
any demonstrated urgency warranting pre-
emptive seizure, the exercise of such drastic
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power at this belated stage is unreasonable and
disproportionate. The continued proceedings, in
such circumstances, would subject the
petitioner to prolonged uncertainty and cannot
be sustained merely on the ground that the
investigation remains pending.
7.87. On the basis of all the above submissions, he
submits that W.P.No.16763/2026 is required to
be allowed and the reliefs sought for are
granted.
Arguments on Behalf of Respondent – Enforcement
Directorate in WP 7283 of 2026.
8. Shri N Venkataraman, Learned Additional Solicitor
General of India, submits as follows:
8.1. It is contended that a writ remedy under Article
226 can be resorted to only when there is a
breach of fundamental right, violation of
principle of natural justice, the Authority has
exercised jurisdiction in excess of its
jurisdiction, there is challenge to the vires of a
statute or delegated legislation.
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8.2. The decision in Radha Krishan Industries v.
State of Himachal Pradesh20, more
particularly paragraphs 27 and 28 thereof has
been relied upon, which is reproduced
hereunder for easy reference:
“27. The principles of law which emerge are that:
27.1. The power under Article 226 of the Constitution to
issue writs can be exercised not only for the
enforcement of fundamental rights, but for any other
purpose as well.
27.2. The High Court has the discretion not to entertain
a writ petition. One of the restrictions placed on the
power of the High Court is where an effective alternate
remedy is available to the aggrieved person.
27.3. Exceptions to the rule of alternate remedy arise
where : (a) the writ petition has been filed for the
enforcement of a fundamental right protected by Part III
of the Constitution; (b) there has been a violation of the
principles of natural justice; (c) the order or proceedings
are wholly without jurisdiction; or (d) the vires of a
legislation is challenged.
27.4. An alternate remedy by itself does not divest the
High Court of its powers under Article 226 of the
Constitution in an appropriate case though ordinarily, a
writ petition should not be entertained when an
efficacious alternate remedy is provided by law.
27.5. When a right is created by a statute, which itself
prescribes the remedy or procedure for enforcing the
right or liability, resort must be had to that particular
statutory remedy before invoking the discretionary
remedy under Article 226 of the Constitution. This rule
of exhaustion of statutory remedies is a rule of policy,
convenience and discretion.
20
2021 SCC OnLine SC 334
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27.6. In cases where there are disputed questions of
fact, the High Court may decide to decline jurisdiction in
a writ petition. However, if the High Court is objectively
of the view that the nature of the controversy requires
the exercise of its writ jurisdiction, such a view would
not readily be interfered with.
28. These principles have been consistently upheld by
this Court in Chand Ratan v. Durga Prasad , Babubhai
Muljibhai Patel v. Nandlal Khodidas Barot and Rajasthan
SEB v. Union of India among other decisions.”
8.3. By relying on Radha Krishan Industries, it is
sought to be contended that the availability of
an alternative statutory remedy bars the
exercise of jurisdiction under Article 226 of the
Constitution. It is only if there is a violation of
the principles of natural justice or the order or
proceedings are wholly without jurisdiction, the
High Court may exercise its writ jurisdiction.
8.4. Reliance is placed on the decision of the Hon’ble
Supreme Court in Titaghur Paper Mills Co.
Ltd. and Another Vs. State of Orissa and
Others21, more particularly paragraph 6
thereof, which is reproduced hereunder for easy
reference:
“6. We are constrained to dismiss these petitions on the
short ground that the petitioners have an equally efficacious
alternative remedy by way of an appeal to the Prescribed
Authority under sub-section (1) of Section 23 of the Act,
21
(1983) 2 SCC 433
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then a second appeal to the Tribunal under sub-section
(3)(a) thereof, and thereafter in the event the petitioners
get no relief, to have the case stated to the High Court
under Section 24 of the Act. In Raleigh Investment
Company Limited v. Governor-General in Council [AIR 1947
PC 78 : (1947) 74 IA 50 : 231 IC 1] Lord Uthwatt, J. in
delivering the judgment of the Board observed that in the
provenance of tax where the Act provided for a complete
machinery which enabled an assessee to effectively raise in
the courts the question of the validity of an assessment
denied an alternative jurisdiction to the High Court to
interfere. It is true that the decision of the Privy Council in
Raleigh Investment Company case [AIR 1947 PC 78 :
(1947) 74 IA 50 : 231 IC 1] was in relation to a suit
brought for a declaration that an assessment made by the
Income Tax Officer was a nullity, and it was held by the
Privy Council that an assessment made under the
machinery provided by the Act, even if based on a provision
subsequently held to be ultra vires, was not a nullity like an
order of a court lacking jurisdiction and that Section 67 of
the Income Tax Act, 1922 operated as a bar to the
maintainability of such a suit. In dealing with the question
whether Section 67 operated as a bar to a suit to set aside
or modify an assessment made under a provision of the Act
which is ultra vires, the Privy Council observed:
“In construing the section it is pertinent, in their Lordships'
opinion, to ascertain whether the Act contains machinery
which enables an assessee effectively to raise in the courts
the question whether a particular provision of the Income
Tax Act bearing on the assessment made is or is not ultra
vires. The presence of such machinery, though by no means
conclusive, marches with a construction of the section which
denies an alternative jurisdiction to inquire into the same
subject-matter.”
8.5. By relying on Titaghur Paper Mills Co. Ltd., it
is sought to be contended that where the
statute provides a complete and efficacious
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mechanism for redressal, the aggrieved party
should ordinarily pursue the statutory remedy
rather than invoke the writ jurisdiction of the
High Court under Article 226 of the
Constitution. The principle of exhaustion of
alternative remedies is therefore sought to be
applied to the present proceedings on the
ground that FEMA provides a statutory remedy
against the impugned order.
8.6. He submits that the issues which arise for
consideration are twofold:
8.6.1. Whether the ED had reasons to believe
to pass the order under Section 37A(1)
of FEMA bearing prima facie findings
indicating contravention of Section 4 of
FEMA. If the answer to that question is
in the affirmative, then the sufficiency of
the reasons cannot be gone into and the
writ petition deserves to be dismissed.
8.6.2. Whether the NOC request by Genpact
India is rightly rejected since it bears a
direct nexus with the scope and ambit of
investigation and prima facie the request
is premised on sending money out of the
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Country, the very same modus operandi
being under investigation.
8.7. He submits that all the submissions made by
him are prima facie and ought not to be taken
as a pre-decided submission on the part of the
ED. The matter being under investigation, the
endeavour through his submission is for the
investigation to go on. The finding would
ultimately depend on the investigation carried
out.
8.8. He relies on Section 37A of the FEMA, which is
reproduced hereunder for easy reference:
37A. Special provisions relating to assets held outside
India in contravention of section 4.—(1) Upon receipt of
any information or otherwise, if the Authorised Officer
prescribed by the Central Government has reason to believe
that any foreign exchange, foreign security, or any
immovable property, situated outside India, is suspected to
have been held in contravention of section 4, he may after
recording the reasons in writing, by an order, seize value
equivalent, situated within India, of such foreign exchange,
foreign security or immovable property:
Provided that no such seizure shall be made in case where
the aggregate value of such foreign exchange, foreign
security or any immovable property, situated outside India,
is less than the value as may be prescribed.
(2) The order of seizure along with relevant material shall
be placed before the Competent Authority, appointed by the
Central Government, who shall be an officer not below the
rank of Joint Secretary to the Government of India by the
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Authorised Officer within a period of thirty days from the
date of such seizure.
(3) The Competent Authority shall dispose of the petition
within a period of one hundred eighty days from the date of
seizure by either confirming or by setting aside such order,
after giving an opportunity of being heard to the
representatives of the Directorate of Enforcement and the
aggrieved person.
Explanation.—While computing the period of one hundred
eighty days, the period of stay granted by court shall be
excluded and a further period of at least thirty days shall be
granted from the date of communication of vacation of such
stay order.
(4) The order of the Competent Authority confirming seizure
of equivalent asset shall continue till the disposal of
adjudication proceedings and thereafter, the Adjudicating
Authority shall pass appropriate directions in the
adjudication order with regard to further action as regards
the seizure made under sub-section (1):
Provided that if, at any stage of the proceedings under this
Act, the aggrieved person discloses the fact of such foreign
exchange, foreign security or immovable property and
brings back the same into India, then the Competent
Authority or the Adjudicating Authority, as the case may be,
on receipt of an application in this regard from the
aggrieved person, and after affording an opportunity of
being heard to the aggrieved person and representatives of
the Directorate of Enforcement, shall pass an appropriate
order as it deems fit, including setting aside of the seizure
made under sub-section (1).
(5) Any person aggrieved by any order passed by the
Competent Authority may prefer an appeal to the Appellate
Tribunal.
(6) Nothing contained in section 15 shall apply to this
section.”
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8.9. By relying upon sub-section (1) of Section 37A
of FEMA, he submits that the provision
empowers the Authorised Officer, upon receipt
of information or otherwise, to exercise the
power of seizure where he has reason to
believe that any foreign exchange, foreign
security or immovable property situated outside
India is suspected to have been held in
contravention of Section 4.
8.10. He submits that the Authorised Officer is
required to record the reasons for such belief in
writing and, upon being so satisfied, may seize
the value equivalent, situated within India, of
such foreign exchange, foreign security or
immovable property.
8.11. He submits that the power under Section
37A(1) is thus exercisable on the basis of the
satisfaction of the Authorised Officer arising
from the information or material available to
him. The provision does not require the alleged
contravention under Section 4 to have been
finally adjudicated before the power of seizure
can be exercised.
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8.12. He further submits that the order of seizure is
subject to the statutory safeguard contained in
sub-section (2). The Authorised Officer is
required to place the order of seizure, along
with the relevant material, before the
Competent Authority appointed by the Central
Government, being an officer not below the
rank of Joint Secretary to the Government of
India, within thirty days from the date of
seizure.
8.13. He submits that sub-section (3) provides for
independent consideration by the Competent
Authority. The Competent Authority is required
to dispose of the matter within 180 days from
the date of seizure, either by confirming or
setting aside the seizure, after affording an
opportunity of hearing to the representatives of
the Directorate of Enforcement as well as the
aggrieved person.
8.14. He submits that the scheme of Section 37A
consequently provides for an initial exercise of
power by the Authorised Officer, followed by
scrutiny and determination by the Competent
Authority. The seizure under Section 37A is
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therefore subject to the safeguards and
subsequent determination contemplated under
sub-sections (2) and (3).
8.15. He submits that an aggrieved person has a
further statutory remedy under sub-section (5),
whereby an appeal may be preferred to the
Appellate Tribunal against an order passed by
the Competent Authority. According to him, the
statutory scheme thus provides successive
safeguards against an erroneous seizure.
8.16. He therefore submits that the writ petition is
premature inasmuch as what is being
challenged is only a seizure order passed under
Sub-Section (1) of Section 37A. This would
have to be confirmed or set aside by the
Competent Authority, while doing so, the
Competent Authority would provide a hearing to
the petitioner.
8.17. His submission is that the entire procedure not
having been completed, the petition has filed is
not only premature but also filed without
availing the remedy provided under the statute
itself which is much more than alternate
remedy. The seizure order is required to be
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automatically placed before the competent
Authority, which he submits has already been
placed, and it is for the competent authority to
pass orders within 180 days, which the
authority could not do since the above
proceedings are pending before this Court and
this Court had stayed the seizure order.
8.18. His submission is that there is a statutory
appeal to the Appellate Tribunal under Sub-
Section (5) of Section 37A in the event of the
competent Authority confirming the order of
seizure. None of these having been availed of
by the petitioner, he again reiterates that the
above petition is premature and the petitioner
ought to be relegated to the remedies provided
under the statute.
8.19. He relies upon a Coordinate Bench decision of
this Court in Xiaomi Technology India
Private Limited V. Union of India22 more
particularly paragraph 23 thereof, which is
reproduced hereunder for easy reference:
“23. Whether the Authorised Officer had reason to
believe that any foreign exchange situated outside India
22
W.P.No.9182/2022 dated 05.07.2022
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is suspected to have been held in contravention of
Section 4 or reasons recorded by the Authorised Officer
would be sufficient to initiate action under Section 37-A
of FEMA, are to be considered by the Competent
Authority. At this stage, examining sufficiency of reason
or otherwise under Article 226 of the Constitution of India
would prejudice the case of either of the parties. It is
best left to the Competent Authority to examine the
same when it considers the entire issue under sub-
Section (3) of Section 37-A of FEMA.”
8.20. By relying on Xiaomi Technology India
Private Limited, his submission is that a
Coordinate Bench of this Court has held that
the question whether the Authorised Officer had
the requisite reason to believe that the
specified foreign asset was suspected to have
been held in contravention of Section 4, as also
whether the reasons recorded by the
Authorised Officer are sufficient to initiate
action under Section 37A, are matters which
are required to be considered by the Competent
Authority under sub-section (3) of Section 37A.
He submits that, at this stage, examination by
this Court under Article 226 of the Constitution
as to the sufficiency of the reasons or the
material relied upon would prejudice the case of
either party and, therefore, such examination is
best left to the Competent Authority.
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8.21. He submits that Section 37A itself provides a
complete statutory mechanism under which the
seizure order, together with the relevant
material, is placed before the Competent
Authority, who is required to independently
consider the matter after affording an
opportunity of hearing to the aggrieved person
and the representatives of the ED and either
confirm or set aside the seizure. The statutory
scheme, according to him, therefore does not
contemplate an examination of the sufficiency
of the reasons recorded by the Authorised
Officer at the initial stage under Article 226.
8.22. He submits that the petitioner cannot seek an
adjudication by this Court on the sufficiency or
adequacy of the material relied upon by the
Authorised Officer when the statute has
specifically entrusted such consideration to the
Competent Authority. The writ jurisdiction,
according to him, ought not to be converted
into a parallel examination of the merits of the
seizure proceedings when the statutory process
under Section 37A(3) is yet to be completed.
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8.23. He further submits that the decision in Xiaomi
Technology India Private Limited is directly
applicable to the present case, as the
Coordinate Bench declined to examine at the
writ stage whether the Authorised Officer had
sufficient reason to believe or whether the
reasons recorded by him were adequate to
initiate action under Section 37A. Following the
said decision, he submits that the present Court
should likewise leave those questions to be
considered by the Competent Authority.
8.24. Without prejudice to his preliminary objection
as to the maintainability of the writ petition, he
submits that the present case does not fall
within the recognised exceptions warranting
interference under Article 226. According to
him, the Authorised Officer had jurisdiction
under Section 37A, the order was passed after
recording reasons in writing, and the same was
based upon relevant material. The dispute
raised by the petitioner is essentially with
regard to the sufficiency, interpretation and
appreciation of that material, which, according
to him, ought to be considered in the statutory
proceedings before the Competent Authority.
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8.25. He therefore submits that the seizure order
should not be interdicted at this stage and that
the petitioner ought to place its objections,
including its challenge to the reasons recorded
and the material relied upon, before the
Competent Authority in terms of Section
37A(3), which is the authority statutorily
entrusted with deciding whether the seizure is
to be confirmed or set aside.
8.26. His submission is that, at this stage, his
endeavour is only to demonstrate that the
action taken by the Authorities is ex facie within
the statutory framework. The question whether
the material relied upon ultimately establishes a
contravention of Section 4, or whether the
seizure is liable to be confirmed or set aside, is
a matter which falls for consideration by the
Competent Authority under sub-section (3) of
Section 37A. According to him, this Court, while
exercising jurisdiction under Article 226, need
not undertake a final examination of the merits
of the allegations at this stage.
8.27. He submits that the power under Section 37A is
available where the Authorised Officer has
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reason to believe that any foreign exchange,
foreign security or immovable property situated
outside India is suspected to have been held in
contravention of Section 4. The exercise of the
power is therefore linked to the statutory
prohibition contained in Section 4 and to the
satisfaction of the Authorised Officer on the
basis of the material available to him.
8.28. By referring to Section 4, he submits that the
prohibition is expressed in terms of the acts of
a person resident in India “acquiring, holding,
owning, possessing or transferring” foreign
exchange, foreign security or immovable
property situated outside India. According to
him, the use of the expressions “hold”, “own”
and “possess” is significant, since these are not
acts confined to the point in time when the
asset was originally acquired or transferred.
Where an asset has been acquired or
transferred in contravention of the statutory
prohibition and continues thereafter to be held,
owned or possessed outside India, the
contravention, according to him, continues so
long as that state of affairs continues.
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8.29. He submits that Section 4 must therefore be
understood not merely with reference to the
original transaction by which the foreign
exchange came to be situated outside India,
but also with reference to its continued holding
or possession thereafter. According to him, the
fact that the initial transaction may have
occurred at an earlier point of time does not, by
itself, bring the matter outside the scope of
Section 4 if the foreign exchange continues to
be held outside India in circumstances
amounting to a contravention.
8.30. He submits that, on this interpretation, the
contravention cannot necessarily be
characterised as a single and completed event.
It may arise from a series of transactions by
which foreign exchange is moved or dealt with
and may continue thereafter by reason of the
foreign exchange being held, owned or
possessed outside India. Consequently,
according to him, the subsequent state of
affairs is relevant while considering the
existence of a contravention for purposes of
Section 37A.
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8.31. Applying the above principle to the present
case, he submits that foreign exchange was
transferred by Empower/Genpact India to
various entities and continues to be held by
those entities outside India. According to him, it
is not necessary, for the purpose of invoking
Section 37A, to confine the examination to the
date of the original transfer. The continued
holding of the foreign exchange outside India
constitutes, according to him, a continuing
contravention of Section 4 and provides the
necessary basis for exercise of the power under
Section 37A.
8.32. He submits that this aspect is also relevant to
the petitioner's contention that the underlying
transactions are of 2015 and that Section 37A
came into force only subsequently. According to
him, if the foreign exchange continues to be
held outside India in contravention of Section 4,
the relevant contravention is not exhausted
with the original transaction and the
subsequent continuance of the prohibited state
of affairs can be taken into consideration while
exercising the power under Section 37A.
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8.33. His submission, however, is that it is not
necessary for this Court, at this stage, to finally
determine whether the alleged transactions in
fact constitute a contravention of Section 4. The
question for consideration, according to him, is
whether the Authorised Officer had the
statutory power and jurisdiction to invoke
Section 37A and whether the seizure order is ex
facie within the scope of that provision. The
final determination as to whether the material
establishes the alleged contravention is,
according to him, required to be left to the
Competent Authority.
8.34. He submits that the distinction between
jurisdiction to initiate the action and ultimate
proof of the alleged contravention is material.
According to him, the existence of material
giving rise to the requisite reason to believe is
sufficient for the Authorised Officer to initiate
action under Section 37A. Whether that
material ultimately warrants confirmation of the
seizure is a matter for consideration under
Section 37A(3). This Court, according to him,
ought not to substitute its assessment of the
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material for that of the statutory authorities at
this preliminary stage.
8.35. He further submits that the seizure order itself
is a detailed order running into 95 pages. It
sets out the transactions examined, the
material relied upon, the conclusions reached
by the Authorised Officer and the reasons for
invoking Section 37A. According to him, the
order is self-contained and the ED is not
seeking to supplement or supplant the reasons
recorded therein through its pleadings or oral
submissions.
8.36. He submits that this Court is therefore not
faced with a case where the Authorised Officer
has acted without recording reasons or without
reference to any material. On the contrary,
according to him, the reasons and material are
contained in the seizure order itself. The
petitioner's challenge, in substance, is to the
manner in which the material has been
appreciated and to the conclusions drawn from
it, which, according to him, are matters
appropriately examined by the Competent
Authority.
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8.37. On the merits of the material, he submits that
the transactions undertaken by the Genpact
group are not merely matters giving rise to a
possible suspicion. According to him, the
sequence, structure, speed and time-frame of
the transactions disclose a concerted
arrangement having the effect of moving funds
outside India in a manner contrary to the
applicable law.
8.38. He submits that the transactions have to be
examined not in isolation but as a connected
series of transactions. According to him, the
manner in which the transactions were
structured, the entities through which they
were routed, the timing of the transactions and
the subsequent movement of funds are relevant
circumstances from which the Authorised
Officer was entitled to draw the requisite
inference under Section 37A.
8.39. He further submits that the structure adopted
resulted in more money ultimately going out of
India than the amount which had initially come
into India. According to him, this could not have
occurred as a consequence of a genuine
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commercial transaction and was achieved by
creating an artificial loan liability. He submits
that the alleged loan did not represent a
genuine commercial liability and that the
transactions purportedly undertaken pursuant
to such liability did not result in any
corresponding benefit to the Indian entities or
to the country.
8.40. According to him, the creation of the artificial
loan and the subsequent movement of funds
pursuant thereto form part of the overall modus
adopted by the Genpact group. The Authorised
Officer was therefore entitled to examine the
substance and effect of the entire arrangement
rather than each transaction as an isolated
event. On that basis, he submits that the
material available before the Authorised Officer
was sufficient to form the requisite reason to
believe for invoking Section 37A.
8.41. He therefore submits that the petitioner's
challenge effectively seeks an adjudication on
the disputed factual and financial aspects of the
transactions at the stage of the initial seizure
itself. Such an exercise, according to him,
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would overlap with the statutory determination
entrusted to the Competent Authority under
Section 37A(3). The appropriate course,
according to him, would be to permit the
statutory process to continue and leave the
petitioner to urge all its objections before the
Competent Authority.
8.42. He submits that on 27.01.2015, Morgan
Stanley extended a loan of USD 660 million to
Headstrong Singapore (now Genpact
Singapore), which is a holding Company for two
Indian Companies. In that, Headstrong
Singapore held 95% of the shares in old
Genpact India and 100% of shares in Empower
India. The remaining 5% of Genpact India was
held by Genpact Mauritius.
8.43. He submits that Old Genpact India was a
Company having substantial business
operations generating significant free reserves.
Empower India was a paper Company with no
business operations, held no assets of
consequence and had a book value of only INR
40 crores.
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8.44. He submits that Genpact Group has taken out
money from India in two phases.
8.45. In the First Phase on 28.01.2015, an amount of
USD 660 million was received by Headstrong
Singapore (now Genpact Singapore) from
Morgan Stanley along with additional USD 77.5
million was infused as Foreign Direct
Investment (FDI) into Empower India by
Headstrong Singapore (now Genpact
Singapore), which in Indian Rupees is
approximately equivalent to INR 4528 crores.
8.46. On the same day i.e. 28.01.2015, Empower
India migrated the entire amount of money
received as FDI from Headstrong Singapore
(now Genpact Singapore) in two tranches of
transactions.
8.46.1. Tranche 1- Empower India paid 660
million USD to Headstrong Singapore
amounting to INR 4050 crores for
purchase of 44% of shares of Old
Genpact India which were held by
Headstrong Singapore.
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8.46.2. Tranche 2- Empower India paid 77.5
million USD to Genpact Mauritius
amounting to approximately INR 476
Crores as regards which Genpact
Mauritius sold 5% of the shares held by
it in Old Genpact India to Empower.
8.47. He submits that the sequence of transactions
assumes significance when the movement of
funds is examined on a day-to-day basis. On
28.01.2015, the very day on which the amount
was received by Empower India, the entire
amount was transferred by Empower India
towards acquisition of 49% shareholding in Old
Genpact India. The said 49% comprised 44%
shares divested by Headstrong Singapore (now
Genpact Singapore) and 5% shares divested by
Genpact Mauritius.
8.48. He submits that the subsequent transaction on
30.01.2015 is equally significant. Within two
days of the aforesaid transfer, Headstrong
Singapore (now Genpact Singapore) repaid USD
660 million to Morgan Stanley from the monies
received from Empower India as consideration
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for the sale of its 44% shareholding in Old
Genpact India.
8.49. He points out that Headstrong Singapore (now
Genpact Singapore) continues to hold 100% of
the shareholding in Empower India.
8.50. According to him, the aforesaid sequence
cannot be viewed as independent and unrelated
transactions. He submits that ex facie the seller
of the 44% shareholding, namely Headstrong
Singapore (now Genpact Singapore), provided
the funds to Empower India, which was the
purchaser of the very same shareholding. Thus,
according to him, the person ultimately
receiving the consideration for the sale of
shares had, in substance, provided the funds
enabling the purchaser to make that payment.
8.51. He submits that this circularity in the
movement of funds raises a serious question as
to whether the amount paid by Empower India
represented genuine consideration arising from
an independent commercial transaction.
According to him, if the seller itself provides the
funds to the purchaser for acquiring the seller's
shares, the apparent payment of consideration
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does not represent an independent infusion of
value but merely facilitates the movement of
the same funds through different entities and
transactions.
8.52. He submits that the chronology is particularly
relevant. The amount was received by Empower
India on 28.01.2015; the entire amount was
utilised on the same day for acquisition of
shares; and, within two days, the seller utilised
the consideration so received to repay its
liability to Morgan Stanley. According to him,
the proximity in time and the inter-connected
nature of these transactions disclose a circular
movement of funds rather than an ordinary
acquisition of shares supported by an
independent source of consideration.
8.53. He therefore submits that the transaction,
viewed as a whole, amounts to round-tripping.
According to him, round-tripping cannot be
understood in a narrow sense as requiring
funds first to leave India and thereafter return
to India. The substance of the transaction,
according to him, is equally relevant where
funds are brought into India in the form of FDI
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and are immediately moved out of India
through another transaction without remaining
in India or resulting in any corresponding
creation of value.
8.54. He submits that, in the present case, although
Headstrong Singapore (now Genpact
Singapore) is stated to have infused FDI into
Empower India, the funds did not remain with
Empower India even for a day. The entire
amount received was utilised on the very same
day for acquiring shares from entities within the
Genpact group, and the consideration received
by Headstrong Singapore was thereafter used
to discharge its liability to Morgan Stanley.
According to him, the economic effect was
therefore materially different from an ordinary
FDI transaction in which foreign capital remains
available to the Indian entity for its business,
capital expenditure, expansion or other
productive purposes.
8.55. He further submits that the transaction must be
considered together with the loan obtained
from Morgan Stanley on 27.01.2015. That loan
was repaid on 30.01.2015, within three to four
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days. According to him, the timing of the
borrowing, the infusion of funds into Empower
India, the immediate utilisation of the funds for
acquisition of shares, and the subsequent
repayment of Morgan Stanley from the sale
proceeds are all connected events and cannot
be examined in isolation.
8.56. He submits that the effect of the arrangement
was that Morgan Stanley's funds were
effectively utilised for a period of only a few
days in facilitating the transaction. According to
him, the funds were presented as FDI upon
being brought into India, but were immediately
deployed towards acquisition of shares and
thereafter found their way back to the foreign
group entity, which used the amount to repay
the external borrowing. He submits that this
sequence is relevant to ascertain the true
nature and purpose of the arrangement.
8.57. He submits that there was, therefore, no
corresponding economic benefit or
augmentation of productive capital in India
commensurate with the amount shown as FDI.
According to him, the transaction did not result
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in the funds being utilised for establishing or
expanding an Indian business, creating capital
assets or strengthening the operations of an
Indian entity. Instead, the immediate
movement of the funds enabled one group
entity to acquire shares from another group
entity and enabled the selling entity to
discharge its borrowing from Morgan Stanley.
8.58. He submits that the fact that the transactions
were undertaken through formally distinct legal
entities cannot, at this stage, prevent the
Authorities from examining the substance and
economic effect of the arrangement. According
to him, the relevant consideration is the
complete flow of funds and the relationship
between the entities involved. When the
transactions are examined together, the
circularity of the funds and the absence of any
corresponding inflow of value into India,
according to him, provide sufficient basis for
the Authorised Officer to entertain the requisite
belief under Section 37A.
8.59. He further submits that the FDI framework is
intended to facilitate genuine investment and
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the inflow of capital into India. It is not
intended, according to him, to permit an
arrangement under which funds are brought
into India only momentarily and are thereafter
moved out through an inter-connected
transaction, without creating any corresponding
economic value in India.
8.60. He submits that, in the present case, the
description of the transaction as FDI cannot, by
itself, conclude the matter. The Authorities are
entitled to examine whether the transaction,
notwithstanding its form, achieved the
substantive object of an investment in India or
was structured merely as a mechanism for
routing funds through an Indian entity.
According to him, the immediate movement of
the entire amount, the commonality of the
group entities, the sale of shares by Headstrong
Singapore, the repayment to Morgan Stanley
within two days and the continued ownership of
Empower India by Headstrong Singapore are
relevant circumstances in this regard.
8.61. He therefore submits that the material relied
upon by the Authorised Officer has to be viewed
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cumulatively. No single transaction, according
to him, is required to be examined in isolation
when the allegation itself concerns a structured
arrangement involving several inter-connected
transactions. The sequence of events, the
timing of the fund movements and the ultimate
destination and utilisation of the funds,
according to him, justify the inference that the
transaction was not a genuine infusion of FDI
but a structured arrangement resulting in
circular movement of funds and removal of
value from India.
8.62. His submission is that the aforesaid
circumstances, taken together, provide a
reasonable basis for the Authorised Officer to
invoke Section 37A. He submits that whether
the petitioner's explanation ultimately
establishes that the transactions were genuine,
commercially justified and compliant with FEMA
is a matter for adjudication by the Competent
Authority. At the present stage, according to
him, this Court needs to only consider whether
the material disclosed in the seizure order was
capable of giving rise to the requisite belief and
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whether the exercise of power was ex facie
within the statutory framework.
8.63. He submits that the second Phase has to be
examined not merely with reference to the fact
that approximately INR 4,600 crores were
received by Empower India under the NCDs,
but with reference to the manner in which the
funds were immediately utilised and ultimately
moved out of India.
8.64. On 25.03.2015, Morgan Stanley advanced USD
737.5 million to Genpact Bermuda as an
interest-bearing dollar loan at 2% per annum.
The entire amount was transferred on the same
day by Genpact Bermuda to Genpact
Luxembourg, which, in turn, subscribed to
4,600 NCDs issued by Empower India, each
having a face value of INR 1 crore.
8.65. He submits that, therefore, the funds
originating from the Morgan Stanley loan
entered India in the form of a subscription to
the NCDs issued by Empower India. Empower
India thereby became liable to Genpact
Luxembourg for approximately INR 4,600
crores, together with the interest payable on
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the NCDs. However, the funds did not remain
with Empower India or get deployed in its
business.
8.66. He submits that on the very same day, i.e.
25.03.2015, the entire INR 4,600 crores
received by Empower India was transferred to
Headstrong Singapore (now Genpact
Singapore) towards acquisition of the remaining
51% shareholding in Genpact India. Thus,
according to him, the entire amount which had
entered India under the NCD transaction left
the possession of Empower India on the same
day.
8.67. He further submits that the movement of the
funds thereafter completes the circular chain.
On 26.03.2015, Headstrong Singapore
transferred the entire amount received from
Empower India to Genpact Bermuda, which, on
the same day, utilised the amount towards
repayment of the USD 737.5 million loan
obtained from Morgan Stanley.
8.68. According to him, the same funds which had
originated as a foreign loan, and which had
thereafter been brought into India as an NCD
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investment, ultimately went back towards
repayment of the very foreign borrowing from
which the funds had originated, within two
days.
8.69. He submits that, viewed in this manner, there
was no substantive retention of the NCD
proceeds in India. The amount came into India,
remained with Empower India only for the time
required to complete the share acquisition, and
immediately moved out of India. The
transaction therefore, according to him, created
the appearance of an inflow of approximately
INR 4,600 crores into India without the
corresponding economic benefit ordinarily
associated with such an inflow.
8.70. He submits that the consequence of the
transaction for Empower India was materially
different. While the NCD proceeds themselves
were immediately transferred out, Empower
India was left with a liability of approximately
INR 4,600 crores in favour of Genpact
Luxembourg. The liability was not extinguished
merely because the proceeds had been utilised
for the acquisition of shares. According to him,
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Empower India continued to remain liable for
repayment of the NCD principal and, in the
meantime, for payment of interest thereon @
11% per annum, which was later on reduced to
9.5% per annum.
8.71. He submits that this distinction between the
movement of the funds and the liability created
in India is important. According to him, the
money raised through the NCDs was not
utilised by Empower India for expansion of its
business, acquisition of productive assets,
working capital, capital expenditure or any
other activity which would result in a
corresponding benefit to the Indian entity.
Instead, the entire amount was transferred to a
foreign group entity towards acquisition of
shares.
8.72. He submits that, consequently, the NCD
transaction did not result in Empower India
having the benefit of the INR 4,600 crores
which it had ostensibly borrowed. The amount
was immediately passed on, whereas the
liability arising from the borrowing continued to
remain on the books of Empower India.
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According to him, the only continuing economic
consequence to Empower India was the debt
obligation and the interest liability arising from
the NCDs.
8.73. He submits that the payment of interest
assumes significance in this context. According
to him, while the principal amount raised under
the NCDs was immediately moved out of India,
Empower India was thereafter required to make
periodic payments towards principal and
interest on that principal. Thus, according to
him, the transaction had the effect of leaving
the Indian entity with a continuing financial
liability in respect of funds which had not been
retained or utilised by it in India.
8.74. He submits that the transaction therefore
cannot be viewed as a conventional foreign
investment or borrowing merely by looking at
the initial receipt of money in India. According
to him, this Court must also consider what
happened to the money immediately thereafter.
In the present case, the entire amount was
transferred on the same day towards
acquisition of shares, and the consideration
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thereafter moved through the group structure
and was ultimately used to repay the Morgan
Stanley borrowing.
8.75. He further submits that the immediate outflow
assumes greater significance because the
recipient of the consideration for the acquisition
of shares was itself a foreign group entity.
Thus, according to him, the funds which came
into India from Genpact Luxembourg did not
represent capital which was retained by
Empower India, but were immediately
transferred to another foreign group entity in
connection with the acquisition of shares in
Genpact India.
8.76. He submits that the transaction consequently
produced two distinct results: first, the funds
which were shown as having been brought into
India did not remain in India; and second,
Empower India was left with a substantial
liability towards the NCD subscriber. According
to him, the combination of these two features is
relevant in determining the substance of the
arrangement.
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8.77. He submits that the same feature is also
evident from the first phase. There too,
according to him, the amount received by
Empower India was immediately utilised for
acquisition of shares and thereafter the funds
moved back to the foreign group. In the second
phase, the pattern was repeated through the
NCD structure, with the additional feature that
the Indian entity was left with the NCD principal
and interest liability.
8.78. He submits that the two phases must therefore
be examined as parts of one overall
arrangement by which Empower India acquired
100% of Old Genpact India. Empower India,
according to him, had a net worth of
approximately INR 40 crores, whereas Genpact
India had a turnover exceeding INR 4,724
crores. According to him, the financial position
of Empower India demonstrates that it did not
possess independent resources to undertake
such acquisition and that the funds required for
the acquisition were arranged through the
interconnected transactions described above.
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8.79. He submits that the fact that the NCD proceeds
were received in Indian currency does not, by
itself, answer the question as to the substance
of the transaction. According to him, the
relevant consideration is the origin of the funds,
the entities through which they moved, the
purpose for which they were brought into India,
the immediate utilisation thereof, their
subsequent movement outside India and the
liability ultimately left with the Indian entity.
8.80. According to him, the entire chain
demonstrates that the funds were effectively
brought into India for the limited purpose of
facilitating the acquisition of the remaining
shares of Genpact India and were thereafter
moved out to discharge the foreign borrowing.
The NCD structure, according to him, therefore
served as an intermediate mechanism for
routing the funds through Empower India while
simultaneously creating a substantial loan
liability in India.
8.81. He submits that the transaction must also be
considered from the standpoint of the benefit, if
any, that accrued to India. According to him,
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merely routing funds through an Indian entity
cannot be equated with a genuine inflow of
capital where the entire amount is immediately
transferred outside India and no corresponding
capital or productive asset is created or
retained in India. The relevant question,
according to him, is the ultimate economic
effect of the transaction and not merely the
form in which the funds entered India.
8.82. He therefore submits that the fact that
approximately INR 4,600 crores came into India
cannot be considered in isolation. According to
him, the material circumstances are that the
amount came into India, was immediately
transferred out towards acquisition of shares,
subsequently moved through the foreign group
structure, and ultimately went towards
repayment of the Morgan Stanley loan, while
Empower India continued to bear the NCD
principal and interest liability.
8.83. He submits that this pattern, coupled with the
absence of any substantive utilisation of the
NCD proceeds in India, provides the basis for
the ED's allegation that the NCD liability was
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artificial and formed part of the overall
arrangement for movement of funds. According
to him, the transaction therefore cannot be
characterised merely on the basis of its
documentation as a genuine borrowing without
examining the actual flow and end-use of the
funds.
8.84. He submits that these circumstances, taken
cumulatively with the first phase, provided
relevant material before the Authorised Officer
for forming the requisite belief under Section
37A. Whether the petitioner's explanation
ultimately establishes the genuineness and
commercial substance of the transactions,
according to him, is a matter for consideration
by the Competent Authority in the proceedings
under Section 37A(3).
8.85. He submits that, after completion of the second
phase of the transaction, a scheme of
amalgamation was proposed, which was
sanctioned by the High Court of Telangana and
Andhra Pradesh vide order dated 17.08.2015
and subsequently by the Delhi High Court vide
order dated 18.03.2016. Pursuant to the
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scheme, the entities, including Old Genpact
India, were amalgamated into Empower India
and the resultant company was named Genpact
India.
8.86. He submits that the amalgamation assumes
significance in examining the ultimate effect of
the transactions. Prior to the aforesaid
transactions, the free reserves of Old Genpact
India were available with Old Genpact India
itself. Following the amalgamation, those free
reserves became available to the resultant
Genpact India, which also inherited the liability
arising from the NCD transaction undertaken by
Empower India. According to him, the
transaction therefore resulted in an entity which
had substantial free reserves without any
liability being placed in a position to discharge a
liability which had been created in the course of
the acquisition of its own shares.
8.87. He submits that Empower India had a book
value of approximately INR 40 crores and was
not carrying on any substantial business
operations or holding assets of consequence,
whereas Genpact India had substantial business
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operations and free reserves of approximately
INR 8,000 crores. According to him, Empower
India did not have the independent financial
capacity to acquire Genpact India and the
acquisition was made possible only through the
interconnected funding arrangements forming
the subject matter of the two phases.
8.88. He submits that, pursuant to the second phase,
Empower India incurred an NCD liability of
approximately INR 4,600 crores in favour of
Genpact Luxembourg. The liability carried
interest at 11% per annum, subsequently
reduced to 9.5% with effect from 01.12.2020.
According to him, the significance of the
transaction is that the NCD proceeds
themselves were not retained or deployed by
Empower India for its business in India. The
entire amount was immediately transferred
towards acquisition of the remaining 51%
shareholding in Genpact India.
8.89. He submits that, after the amalgamation, the
free reserves of old Genpact India became
available to Empower India on amalgamation
and this to new Genpact India after the name
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change, which thereafter discharged the NCD
liability. According to him, this resulted in the
free reserves which were already available in
India being utilised over a period of time to
repay a liability which had been created as part
of the arrangement by which Empower India
acquired old Genpact India.
8.90. He further submits that the liability was not
confined to repayment of the principal amount.
Genpact India was also required to make
substantial interest payments to Genpact
Luxembourg. According to him, between 2018
and 2023, approximately INR 7,800 crores
were paid by Genpact India to Genpact
Luxembourg towards repayment of the NCD
principal and interest. Thus, according to him,
the consequence of the arrangement was the
eventual movement of substantial amounts of
the free reserves of the Indian company to the
foreign group entity, thus foreign exchange.
8.91. He submits that the economic effect of the
transaction has to be considered against the
manner in which the funds had originally
moved. Approximately INR 4,600 crores came
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into India through the NCD subscription by
Genpact Luxembourg. However, the entire
amount was immediately transferred by
Empower India towards acquisition of the
remaining 51% shares of Genpact India. The
funds therefore did not remain available to
Empower India for any business purpose in
India.
8.92. He submits that the subsequent movement of
the same funds completes the chain. The
amount paid by Empower India to Headstrong
Singapore (now Genpact Singapore) was
transferred on the following day to Genpact
Bermuda and was thereafter utilised to repay
the USD 737.5 million borrowing obtained from
Morgan Stanley. Thus, according to him, the
money which originated from Morgan Stanley
passed through the various Genpact entities,
came into India through the NCD structure,
immediately left India towards acquisition of
shares and ultimately returned to Morgan
Stanley.
8.93. He submits that the Morgan Stanley borrowing
and the NCD subscription cannot therefore be
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viewed as two independent commercial
transactions. According to him, they were
successive stages in the movement of the same
funds and formed part of one integrated
arrangement.
8.94. The sequence was: Morgan Stanley to Genpact
Bermuda; Genpact Bermuda to Genpact
Luxembourg; Genpact Luxembourg to Empower
India against subscription to NCDs; Empower
India to Headstrong Singapore towards
acquisition of shares; Headstrong Singapore to
Genpact Bermuda; and Genpact Bermuda back
to Morgan Stanley.
8.95. According to him, the fact that different legal
entities and different financial instruments were
used at the various stages does not alter the
actual movement of the money. He submits
that the funds remained within the same group
of interconnected entities and, within a period
of approximately two days, travelled through
the entire chain and the world and returned to
the original lender. He therefore characterises
the arrangement as round-tripping of funds.
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8.96. He submits that the same pattern is evident in
the first phase. In that phase also, funds were
brought into Empower India and were
immediately utilised for acquisition of 49% of
the shareholding in Genpact India. According to
him, the consideration thereafter reached the
foreign group entity. The second phase
substantially replicated the same structure,
except that the funds were introduced through
the NCD mechanism and resulted in the
creation of a substantial liability in India.
8.97. He submits that the two phases must therefore
be viewed cumulatively. In the first phase,
Empower India acquired 49% of Genpact India;
in the second phase, it acquired the remaining
51%. Thus, through the two phases, Empower
India became the 100% shareholder of Genpact
India. According to him, neither acquisition was
funded from any substantial independent
financial resources of Empower India.
8.98. He submits that the financial disparity between
the entities is itself a relevant circumstance.
Empower India had a book value of
approximately INR 40 crores, whereas Genpact
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India had a turnover exceeding INR 4,724
crores and free reserves of approximately INR
8,000 crores. According to him, an entity with
such limited financial capacity acquiring the
entirety of a substantially larger operating
company demonstrates the importance of
examining the source, movement and ultimate
utilisation of the funds used for the acquisition.
8.99. He submits that the NCD transaction assumes
further significance because the funds received
against the NCDs were not utilised for the
purposes ordinarily associated with borrowing
by an Indian operating entity. The amount was
transferred on the same day towards
acquisition of shares, and the Indian entity was
thereafter left with the repayment and interest
obligations under the NCDs. According to him,
the borrowing therefore created a liability in
India without the corresponding borrowing
proceeds being retained or deployed for the
benefit of the Indian business.
8.100. He submits that this is also reflected in the
subsequent repayment. The principal amount of
approximately INR 4,600 crores and the
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interest payable thereon were ultimately
discharged from the resources of the resultant
Genpact India. Genpact Luxembourg, upon
receiving the repayment, was able to repatriate
the amounts in foreign currency. According to
him, the ultimate consequence was that funds
which had been available as free reserves in
India were transferred to the foreign entity and
were ultimately repatriated as US dollars.
8.101. He submits that, therefore, the arrangement
had a two-fold effect. Firstly, the funds which
came into India under the NCD transaction did
not remain in India but were immediately
utilised for acquisition of shares and thereafter
moved out of India. Secondly, the transaction
left behind a substantial liability in India, which
was subsequently discharged from the free
reserves of the resultant Genpact India
together with interest.
8.102. He submits that, but for the NCD liability, the
free reserves of the erstwhile Genpact India
would have continued to remain available in
India for deployment or investment within
India. According to him, the creation of the
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NCD liability provided the mechanism through
which those reserves could subsequently be
transferred to Genpact Luxembourg under the
description of repayment of a loan and payment
of interest.
8.103. He therefore submits that the transaction
cannot be examined merely by asking whether
the NCDs were formally issued or whether
money was formally received in India.
According to him, the relevant enquiry is into
the complete chain of transactions, including
the source of the funds, their immediate
utilisation, the repayment of the original foreign
borrowing, the creation of the NCD liability, the
amalgamation and the subsequent discharge of
that liability from the free reserves of the
Indian company.
8.104. He submits that the fact that the Morgan
Stanley loan was repaid within a few days,
while the NCD liability continued for several
years, is a further circumstance supporting the
ED's case. According to him, a short-term
foreign borrowing was effectively replaced by a
long-term liability in India, even though the
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funds raised through the NCDs were
immediately transferred out of India and were
not retained for any independent business
purpose.
8.105. He submits that the subsequent payment of
approximately INR 7,800 crores between 2018
and 2023 cannot be divorced from the manner
in which the liability was originally created.
According to him, the subsequent payments
represent the eventual economic consequence
of the arrangement put in place in March 2015.
The fact that the outflow occurred over several
years does not, according to him, sever the
connection between the original transaction and
the eventual movement of funds.
8.106. He submits that the two phases, viewed as a
whole, therefore disclose a common pattern:
funds were brought into India, immediately
deployed towards acquisition of old Genpact
India, the funds thereafter moved out of India,
while the Indian entity was left with a
substantial liability; following amalgamation,
that liability was ultimately discharged from the
free reserves of the Indian operating company,
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resulting in substantial remittances to Genpact
Luxembourg.
8.107. He submits that this structure, according to the
ED, resulted in the appearance of an inflow of
foreign capital into India without the
corresponding retention or deployment of that
capital in India. Instead, the funds facilitated
the acquisition of an Indian company and the
subsequent liability enabled the movement of
substantial amounts of the Indian company's
free reserves to the foreign group entity.
8.108. He submits that these circumstances, taken
cumulatively, constitute sufficient material to
warrant investigation into whether the
transactions resulted in a contravention of
Section 4 of FEMA. According to him, the
investigation is not confined to the formal
documentation of the individual transactions
but necessarily extends to their inter se
relationship, source and destination of funds
and ultimate economic effect.
8.109. He submits that, at the present stage, this
Court is not required to finally determine
whether the transactions constitute a
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contravention of Section 4. The limited
question, according to him, is whether the
material discloses ex facie circumstances
warranting investigation and whether the
Authorised Officer had jurisdiction to invoke
Section 37A. All explanations and defences of
the petitioner, according to him, remain
available for consideration in the statutory
proceedings.
8.110. He therefore submits that the investigation
ought not to be interdicted at this stage.
According to him, the transactions involve
substantial movement of funds, an
interconnected series of transactions across
jurisdictions, creation of a significant liability in
India and subsequent remittance of substantial
amounts to a foreign entity. In such
circumstances, according to him, the ED is
required to complete its investigation and this
Court ought not to substitute its assessment of
the transactions for that of the statutory
authorities at the threshold stage.
8.111. He refers to Section 4 of FEMA which has been
reproduced hereunder for easy reference;
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4. Holding of foreign exchange, etc.—Save as
otherwise provided in this Act, no person resident
in India shall acquire, hold, own, possess or
transfer any foreign exchange, foreign security or
any immovable property situated outside India.
8.112. By relying on Section 4, he submits that the
requirement of Section 4 of FEMA has been
satisfied by the fact that Genpact India is a
resident of India and foreign exchange
payments have been made outside India. An
amount equivalent to INR 7800 crores was
remitted out of India between 2018 and 2023
by Genpact India to Genpact Luxembourg that
payment has been taken outside India, and
now Foreign Exchange is situated outside India.
Genpact Luxembourg having received the
remittances from Genpact India for a fictitious
purpose, having no commercial substance,
continues to represent and hold the assets of
Genpact India outside India. All of them belong
to the same group, his submission is also that
Genpact India continues to hold foreign
exchange situate outside India through Genpact
Luxembourg both of which entities cannot be
treated as two different entities. Genpact
Luxembourg being used as a device to
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circumvent the statutory prohibition under
Section 4 of FEMA.
8.113. He refers to Form 8-K filed by Genpact Ltd.
before the Securities and Exchange Commission
USA on 27.01.2015, more particularly Item
No.1.01 and Item No.2.03 which are extracted
hereunder for easy reference;
Item 1.01. Entry into a Material Definitive
Agreement.
On January 27, 2015, Genpact Limited ("Gerard"), and its
indirect, wholly-owned subsidiaries Headstrong
Consulting (Singapore) Pre Ltd. a limited Liability
corporation incorporated under the laws of Singapore
("Headstrong Singapore"), and Genpact Global Holdings
(Bermuda) Limited, an exempted limited liability company
organized under the laws of Bermuda ("Genpact
Bermuda" and, together with Headstrong Singapore, the
"Borrowers"), entered into a credit agreement (the
"Credit Agreement") an borrowers with Morgan Stanley
Senior Funding Inc, as lender, The Credit Agreement
provides for new credit facilities in an aggregate amount
of $672.5 million, consisting of a $660 million term loan
facility with Headstrong Singapore and a $12.5 million
term loan facility with Genpact Bermuda. Each of the
facilities was repaid on January 30, 2015.
Borrowings under the Credit Agreement (together with
currently expected additional borrowings to be made on
substantially similar terms under a separate credit
agreement with Morgan Stanley Senior Funding, Inc.,
including with respect to interest rate and maturity are
being used in in connection with the consummation of
certain internal reorganization transactions.
Borrowings under the Credit Agreement bore interest rate
equal to 2.00% per annum.
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The Credit Agreement was guaranteed by Genpact and
certain of its subsidiaries. The obligations under the
Credit Agreement were secured by the proceeds of the
loans held by Genpact and certain of its subsidiaries.
The foregoing description of the Credit Agreement is
qualified in its entirety by the full text of the Credit
Agreement, which is attached hereto as Exhibit 10.1 and
is incorporated herein by reference.
The foregoing description includes forward-looking
statements and information that involves risks,
uncertainties and assumptions, including but not limited
to those listed under "Risk Factors" in our Quarterly
Report on Form 10-Q for the quarter ended September
30, 2014, and in our Annual Report on Form 10-K for the
year ended December 31, 2013.
Item 2.03. Creation of a Direct Financial Obligation
or Obligations under an Off Balance Sheet
Arrangement of a Registrant.
The disclosure required by this item is included in Item
1.01 of this Current Report on Form 8-K and is
incorporated herein by reference
8.114. He also submits that a similar disclosure was
made by Genpact Ltd. regarding the second
tranche on 23.03.2015 at Item No.1.01 and
Item No.2.03 which are extracted hereunder for
easy reference;
Item 1.01. Entry into a Material Definitive
Agreement.
On March 23, 2015, Genpact Limited ("Genpact") and
its indirect, wholly-owned subsidiary Genpact Global
Holdings (Bermuda) Limited, an exempted limited
liability company organized under the laws of
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Bermuda ("Genpact Bermuda"), entered into a credit
agreement (the "Credit Agreement") with Genpact
Bermuda as borrower and Morgan Stanley Senior
Funding, Inc., as lender, under which Genpact
Bermuda borrowed $737.5 million, the full principal
amount available under the new credit facility. The
full amount of the borrowings under the new credit
facility was repaid on March 26, 2015.
Borrowings under the Credit Agreement (together
with borrowings made on substantially similar terms
under a separate credit agreement with Morgan
Stanley Senior Funding, Inc. dated as of January 27,
2015, which borrowings were repaid on January 30,
2015) were used in connection with the
consummation of certain internal reorganization
transactions.
Borrowings under the Credit Agreement bore interest
at a rate equal to 2.00% per annum.
The Credit Agreement was guaranteed by Genpact
and certain of its subsidiaries. The obligations under
the Credit Agreement were secured by the proceeds
of the loans held by Genpact and certain of its
subsidiaries.
The foregoing description of the Credit Agreement is
qualified in its entirety by the full text of the Credit
Agreement, which is attached hereto as Exhibit 10.1
and is incorporated herein by reference.
The foregoing description includes forward-looking
statements and information that involves risks,
uncertainties and assumptions, including but not
limited to those listed under "Risk Factors" in our
Annual Report on Form 10-K for the year ended
December 31, 2014.
Item 2.03. Creation of a Direct Financial
Obligation or Obligations under an Off Balance
Sheet Arrangement of a Registrant.
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The disclosure required by this item is included in
Item 1.01 of this Current Report on Form 8-K and is
incorporated herein by reference.
8.115. By referring to the disclosures made by
Genpact Ltd., in Form 8-K filed by Genpact Ltd.
before the Securities and Exchange
Commission, USA, on 27.01.2015, he submits
that, under Item 1.01, Genpact Ltd. disclosed
that Genpact Limited, Headstrong Singapore
Pte. Ltd. (now Genpact Singapore) and Genpact
Global Holdings (Bermuda) Limited (Genpact
Bermuda) had entered into a Credit Agreement
with Morgan Stanley Senior Funding Inc. The
disclosure records that the Credit Agreement
provided for credit facilities aggregating USD
672.5 million, comprising a USD 660 million
term loan facility with Headstrong Singapore
and a USD 12.5 million term loan facility with
Genpact Bermuda, and that the facilities were
repaid on 30.01.2015.
8.116. He submits that the same disclosure records
that the borrowings were made in connection
with the consummation of certain internal
reorganisation transactions and that the
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borrowings carried interest at 2% per annum.
The disclosure further records that the credit
facilities were guaranteed by Genpact and
certain of its subsidiaries and that the
obligations were secured by the proceeds of the
loans held by Genpact and certain of its
subsidiaries.
8.117. He submits that Item 2.03 of the Form 8-K,
dealing with creation of a direct financial
obligation or obligations under an off-balance-
sheet arrangement of the registrant, specifically
incorporates the disclosure contained in Item
1.01. According to him, the filing therefore
contemporaneously records both the borrowing
and its stated purpose in connection with the
internal reorganisation transactions.
8.118. He further refers to the Form 8-K filed by
Genpact Ltd. on 23.03.2015 in relation to the
second phase. He submits that, under Item
1.01, Genpact Ltd. disclosed that Genpact
Bermuda had entered into a Credit Agreement
with Morgan Stanley Senior Funding Inc. and
had borrowed USD 737.5 million, being the full
principal amount available under the facility.
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The disclosure expressly records that the entire
borrowing was repaid on 26.03.2015.
8.119. He submits that the second Form 8-K further
records that the borrowing was made in
connection with the consummation of certain
internal reorganisation transactions and that it
carried interest at 2% per annum. It also
records that the Credit Agreement was
guaranteed by Genpact and certain of its
subsidiaries and that the obligations were
secured by the proceeds of the loans held by
Genpact and its subsidiaries.
8.120. He submits that Item 2.03 of the second Form
8-K likewise incorporates the disclosure made
under Item 1.01. Thus, according to him,
Genpact Ltd.'s own contemporaneous
disclosures before the SEC establish the
existence, quantum, interest rate, purpose and
extremely short duration of the two borrowings.
8.121. By referring to these disclosures, he submits
that Genpact Ltd. has itself disclosed that
Headstrong Singapore (now Genpact
Singapore) and Genpact Bermuda were its
indirect, wholly-owned subsidiaries and that the
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borrowings were undertaken as part of internal
reorganisation transactions. According to him,
the disclosures are therefore relevant while
examining the relationship between the entities
and the manner in which the funds moved
through the group.
8.122. He submits that the first borrowing was entered
into on 27.01.2015 and was repaid on
30.01.2015, while the second borrowing was
entered into on 23.03.2015 and the entire
amount was repaid on 26.03.2015. According
to him, the contemporaneous disclosures thus
demonstrate that both borrowings were of
exceptionally short duration and were
specifically undertaken in connection with the
internal reorganisation.
8.123. He submits that these disclosures are
significant when considered alongside the
actual movement of funds in the two phases.
According to him, the first borrowing was
followed by the movement of funds through the
Genpact entities and the acquisition of 49%
shareholding in Genpact India, while the second
borrowing was followed by the NCD
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subscription by Genpact Luxembourg, the
transfer of the NCD proceeds by Empower India
towards acquisition of the remaining 51%
shareholding and the subsequent repayment of
the Morgan Stanley borrowing.
8.124. He submits that the disclosures before the SEC
therefore provide contemporaneous
documentary evidence of the borrowing
arrangements and their connection with the
internal reorganisation. According to him, they
are not subsequent explanations developed
during the FEMA proceedings, but disclosures
made by Genpact Ltd. itself at the relevant
point of time.
8.125. He submits that the first Form 8-K records the
USD 660 million and USD 12.5 million facilities
and their repayment on 30.01.2015, while the
second Form 8-K records the USD 737.5 million
facility and its repayment on 26.03.2015. Both
disclosures state that the borrowings were used
in connection with internal reorganisation
transactions and carried interest at 2% per
annum.
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8.126. According to him, these disclosures assume
importance when the ED's case regarding the
circular movement of funds is considered. The
very short duration of the borrowings, their
stated connection with internal reorganisation
and their repayment immediately after the
funds had passed through the various group
entities, according to him, support the ED's
contention that the borrowings and the
subsequent transactions were successive steps
in an integrated arrangement.
8.127. He submits that the disclosures must therefore
be read together with the banking records, the
NCD documents, the share acquisition
documents and the subsequent remittances.
According to him, when the contemporaneous
SEC disclosures are considered with the actual
fund trail, they provide further material for
examining whether the transactions were
independent commercial transactions or
successive steps forming part of a common
arrangement.
8.128. He therefore submits that the Form 8-K
disclosures constitute relevant
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contemporaneous material which was available
for consideration while examining the
transactions. According to him, they
corroborate the existence and timing of the
Morgan Stanley borrowings and their stated
connection with the internal reorganisation, and
when read with the subsequent movement of
funds, support the need for investigation into
the substance and effect of the entire
arrangement.
8.129. His submission is that the loan availed from
Morgan Stanley by Headstrong
Singapore(Genpact Singapore) on 27.01.2015
was repaid on 30.01.2015 which is the very
amount which in the meantime was routed by
Headstrong Singapore(now, Genpact
Singapore) to Empower India as alleged FDI
and which was immediately paid back to
Headstrong Singapore (now, Genpact
Singapore) on the same day for procuring 49%
of the shares of Genpact India and thereafter
Headstrong Singapore (now, Genpact
Singapore) repaid the loan to Morgan Stanley.
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8.130. He submits that the loan availed from Morgan
Stanley by Genpact Bermuda on 25.03.2015
was repaid by Genpact Bermuda on the very
next day, i.e., 26.03.2015 and that, in the
intervening period of one day, the very same
amount was routed through Genpact
Luxembourg to Empower India as a Rupee loan,
against which Empower India issued NCDs of
approximately INR 4,600 crore to Genpact
Luxembourg carrying interest at 11% per
annum, subsequently reduced to 9.5%. He
submits that the amount so lent to Empower
India was immediately paid to Headstrong
Singapore (now Genpact Singapore) towards
acquisition of the remaining 51% shares in
Genpact India, whereafter Headstrong
Singapore routed the very same funds back to
Genpact Bermuda, which in turn repaid the
Morgan Stanley loan. According to him, the
entire movement of funds demonstrates that
the amount borrowed from Morgan Stanley was
not brought into India as an independent
investment, but was routed through the Indian
entity only as an intermediate step in an
internal reorganisation. He further submits that
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the disclosures made by Genpact Ltd. before
the Securities and Exchange Commission, USA,
contemporaneously described these borrowings
as being utilised in connection with “internal
reorganisation transactions” and disclosed them
as “off-balance sheet arrangements”. According
to him, these disclosures are inconsistent with
the characterisation of the transaction as a
genuine Foreign Direct Investment intended to
bring capital into India for use in the business
of the Indian entity.
8.131. He submits that the manner in which the
transactions were structured and implemented
also indicates that they proceeded pursuant to
a predetermined plan. He refers to the
communication dated 05.12.2014 addressed by
the advisors of Empower India to the officials of
the RBI, without disclosing that the query was
being raised on behalf of Empower India.
According to him, the query was framed
generally as to the circumstances in which an
Indian company could issue NCDs to a qualified
foreign investor. The RBI, by its communication
dated 07.01.2015, clarified that an Indian
company could issue Rupee denominated
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bonds/NCDs to an FPI/FII/QFI, within the
prescribed limit of INR 51 billion, for any
general legitimate corporate purpose. He
submits that this clarification has to be
understood in the context in which it was
sought, namely, an issuance of NCDs for a
legitimate corporate purpose, and cannot be
treated as an unconditional approval for routing
foreign funds through an Indian entity for an
internal acquisition arrangement.
8.132. His submission is that the expression “general
legitimate corporate purpose” necessarily
requires that the proceeds of the NCDs be
utilised for a lawful corporate purpose of the
Indian company and cannot extend to an
arrangement whose real object was merely to
facilitate the acquisition of the remaining 51%
shares in Genpact India through a circular
movement of funds. According to him,
Empower India had no independent financial
capacity to fund such acquisition and the funds
received from Genpact Luxembourg were not
deployed in India for carrying on or expanding
the business of Empower India. Instead, the
very same funds were immediately transferred
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to Headstrong Singapore towards acquisition of
the shares, and were thereafter routed back to
Genpact Bermuda for repayment of the Morgan
Stanley borrowing. He submits that the NCD
therefore served only as the mechanism
through which the short-term Morgan Stanley
borrowing was passed through the Indian entity
and converted into a long-term liability of
Empower India, while simultaneously enabling
the acquisition of the remaining shares in
Genpact India.
8.133. He submits that, consequently, the description
of the NCD as a Rupee loan cannot be
examined in isolation from the purpose for
which the funds were raised and the manner in
which they were immediately deployed.
According to him, the substance of the
arrangement was not an independent lending
transaction between Genpact Luxembourg and
Empower India, but a pre-arranged funding
structure forming part of the larger internal
reorganisation. He submits that the subsequent
creation of a long-term NCD liability in India,
carrying substantial interest, was the
consequence of this arrangement, while the
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funds themselves passed through India and
ultimately returned to the foreign group
entities. It is therefore his contention that the
transaction cannot be brought within the RBI
clarification merely by relying upon the formal
issuance of NCDs to a registered FPI, since the
actual deployment of the proceeds was,
according to him, outside the legitimate
corporate purpose for which such issuance was
contemplated.
8.134. After Empower India issued the NCDs and after
disclosures were made to the Security and
Exchange Commission, USA, Empower India
addressed one more communication to the
General Manager of RBI on 12.12.2015 seeking
for a clarification at 1.3 of the said letter as
under;
1.3 The Debentures carry a fixed coupon rate
and have tenure of 8 years from the date of
allotment (i.e. from March 25, 2015). The issue
proceeds were intended to meet the funding
requirements for the operations of the
Company, making further downstream
investment and for general corporate purposes.
8.135. By referring to the aforesaid representation, he
submits that the basis on which clarification
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was sought from and furnished by the RBI was
that the proceeds of the NCDs were intended to
meet the operational funding requirements of
Empower India, to make further downstream
investments and for general corporate
purposes. He submits that the actual
deployment of the funds does not correspond
with any of these stated purposes. According to
him, the proceeds were not utilised for meeting
the operational requirements of Empower India,
nor were they utilised for making any
downstream investment. Instead, the entire
amount was immediately transferred to
Headstrong Singapore (now Genpact
Singapore) towards acquisition of the remaining
51% shares in Genpact India. He submits that
acquisition of shares in one group company
from another group company cannot, in the
circumstances be characterised as a
downstream investment by Empower India or
as a general legitimate corporate purpose for
which the NCD proceeds were represented to
the RBI as having been raised.
8.136. He submits that the sequence of events
assumes significance when the representation
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made by Empower India to the RBI is
juxtaposed with the contemporaneous
disclosure made by Genpact Ltd. before the
Securities and Exchange Commission, USA.
According to the SEC disclosure, the USD 737.5
million borrowing by Genpact Bermuda from
Morgan Stanley on 25.03.2015 was repaid in
full on 26.03.2015. Thus, according to him,
while the transaction was represented to the
RBI as an eight-year NCD issuance intended to
fund the operations of Empower India, make
downstream investments and meet general
corporate purposes, the underlying foreign
borrowing was itself only of one day's duration
and the corresponding funds, after being routed
through Genpact Luxembourg and Empower
India, were transferred out of India towards the
acquisition of shares in Genpact India and
ultimately returned to Genpact Bermuda for
repayment of the Morgan Stanley borrowing.
8.137. He submits that the immediate movement of
the entire amount out of India is inconsistent
with the stated purpose of providing funds for
the operations of Empower India. According to
him, if the NCD proceeds had genuinely been
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raised for the operational requirements of
Empower India or for making downstream
investments, the funds would ordinarily have
remained available for deployment for those
purposes. Instead, the entire amount was
transferred immediately to Headstrong
Singapore towards acquisition of shares within
the same group. He submits that this
circumstance, when considered together with
the one-day Morgan Stanley borrowing and its
immediate repayment, demonstrates that the
NCD transaction cannot be viewed as an
isolated lending transaction but forms part of a
pre-arranged sequence of transactions.
8.138. His submission, therefore, is that the NCD
transaction was structured as the mechanism
through which the short-term foreign borrowing
was routed through Empower India and
converted into a long-term liability of the Indian
entity. According to him, the transaction
enabled the acquisition of the remaining 51%
shares in Genpact India without Empower India
having independent financial resources for such
acquisition, while the funds ultimately returned
to the foreign group entities and the Morgan
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Stanley borrowing was discharged. He submits
that the subsequent liability of Empower India
to Genpact Luxembourg, carrying interest for a
period of eight years, provided the means for
the amounts to be repatriated from India over
time under the guise of repayment of principal
and interest.
8.139. He further submits that the different
descriptions given by the Genpact entities to
the SEC in the USA and to the RBI in India
assume significance in determining the true
nature and purpose of the arrangement.
According to him, before the SEC, the
borrowing was disclosed as part of an internal
reorganisation transaction and the foreign
borrowing was shown to have been repaid
within one day. Before the RBI, however, the
NCD proceeds were represented as being
required for the operations of Empower India,
further downstream investment and general
corporate purposes. He submits that these
descriptions cannot be reconciled with the
actual movement and deployment of the funds
and, according to him, demonstrate that the
NCD issuance was used as a pre-arranged
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mechanism for round-tripping the funds and for
creating the long-term liability through which
the free reserves of Genpact India could
ultimately be moved outside India.
8.140. He accordingly submits that the relevant
question is not merely whether Empower India
formally issued NCDs to a registered FPI, but
whether the transaction, viewed in its entirety
and having regard to the actual use of the
proceeds, satisfied the purpose for which such
issuance was represented to the RBI. According
to him, the formal compliance with the mode of
investment cannot, by itself, legitimise a
transaction which, in substance, was designed
and implemented for a different purpose.
8.141. His submission is that similar correspondence
had been exchanged with the SEBI, Empower
India had addressed a communication to the
Executive Director, Department of Debt and
Hybrid Securities, SEBI on 12.10.2018, wherein
at paragraph 1.5, is stated as under;
1.5 It is submitted that the NCD’s so issued by
Applicant to FPI have maturity period (including
residual maturity) of more than three years and
were utilized for meeting the funding
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requirements for day-to-day operations,
downstream investment and for general
corporate purposes. Further, in terms of
repayment schedule, the first tranche of
principal repayment amounting to INR
6,000,000,000/- has been effected on April 26,
2018.
8.142. By relying upon the aforesaid representation,
he submits that Empower India represented to
SEBI that the NCDs issued to the FPI, namely
Genpact Luxembourg, had a maturity period of
more than three years and that the proceeds
thereof had been utilised for meeting the
funding requirements of its day-to-day
operations, making downstream investments
and for general corporate purposes. It was
further represented that, in accordance with the
repayment schedule, the principal amounting to
INR 600 crore had been repaid on 26.04.2018.
His submission is that, while the maturity and
repayment particulars may be borne out by the
documents, the representation regarding the
utilisation of the NCD proceeds is contrary to
the actual movement of funds.
8.143. He submits that none of the amounts received
by Empower India from Genpact Luxembourg
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were utilised for meeting its day-to-day
operational requirements, for making any
downstream investment or for any other
general corporate purpose. According to him,
the entire amount of approximately INR 4,600
crore received against the NCD issuance was
exhausted on the very same day by Empower
India by transferring the funds to Headstrong
Singapore (now Genpact Singapore), an entity
situated outside India, towards acquisition of
the remaining 51% shares in Genpact India.
8.144. He submits that the expression “downstream
investment” cannot be applied to the
transaction merely because the ultimate
acquisition resulted in Empower India acquiring
the remaining shares of Genpact India.
According to him, the relevant consideration is
the actual deployment of the NCD proceeds by
Empower India. The funds were not retained by
Empower India for investment in its business or
deployed as capital into another entity in the
manner contemplated by the representation
made to SEBI; rather, they were immediately
transferred to an overseas group entity as
consideration for acquisition of shares from that
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entity. He therefore submits that the
representation that the NCD proceeds were
utilised for day-to-day operations, downstream
investment and general corporate purposes
does not correspond with the actual utilisation
of the funds.
8.145. He submits that the representation made to
SEBI assumes significance when considered
along with the earlier representation made to
the RBI and the contemporaneous disclosures
made by Genpact Ltd. before the SEC, USA.
According to him, the RBI was informed that
the NCD proceeds were intended for the
operations of Empower India, downstream
investment and general corporate purposes;
SEBI was subsequently informed that the
proceeds had in fact been utilised for those
purposes; whereas the SEC disclosures
recorded that the underlying Morgan Stanley
borrowing formed part of an internal
reorganisation and was repaid within one day.
He submits that the contemporaneous banking
trail, when considered alongside these
representations, shows that the funds were
routed through Empower India and immediately
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transferred outside India for acquisition of
shares within the Genpact group.
8.146. His submission, therefore, is that the issue
cannot be examined merely on the basis of the
form of the transaction, namely, the issuance of
NCDs to an FPI having a maturity exceeding
three years. According to him, the actual
purpose for which the proceeds were raised and
their immediate deployment are material to
determine whether the transaction was
genuinely undertaken for the legitimate
corporate purposes represented to the
regulatory authorities. He submits that the fact
that the entire proceeds were transferred out of
India on the very day on which they were
received, towards acquisition of the remaining
51% shares in Genpact India, is a material
circumstance which, according to him, supports
the allegation that the NCD arrangement was
part of a predetermined structure for routing
funds through India and subsequently creating
a long-term liability in India.
8.147. His submission is that the amount received
from the FPI served no other purpose other
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than such purchase it only created a fictitious
loan with interest liability and a repayment
schedule so as to migrate the free reserves of
Genpact India outside the country. His
submission is that the purchase of shares of
Genpact India by Empower India will not
amount to a downstream investment, since the
purchase is from an entity located outside
India. He submits that there are discrepancies
in the various disclosures made inasmuch as
Genpact Ltd., has informed the SEC, USA that
they have borrowed funds from Morgan Stanley
for purpose of interim reorganization. The
Indian Regulators RBI and SEBI were informed
that the very same funds were required for
operation of the Indian company for
downstream investment and for general
corporate purposes and on the basis of the
manner in which the money has been used, his
submission is that the disclosure made for the
Indian Regulators is contrary to what actually
happened.
8.148. His submission is that these facts constitute
reasons to believe that there is a violation of
the FEMA which has been recorded in the
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seizure order. The seizure order being interim
order, the culpability is not being decided. What
is required to be shown is only the reason to
believe which according to him has been
adequately denoted in the seizure order.
8.149. He refers to the decision of the Hon'ble
Supreme Court in Vodafone International
Holdings BV vs. Union of India & Anr.23,
more particularly paragraphs 79, 80, 81 and
249 thereof, which are reproduced hereunder
for easy reference;
79. When it comes to taxation of a holding structure, at
the threshold, the burden is on the Revenue to allege and
establish abuse, in the sense of tax avoidance in the
creation and/or use of such structure(s). In the
application of a judicial anti-avoidance rule, the Revenue
may invoke the “substance over form” principle or
“piercing the corporate veil” test only after it is able to
establish on the basis of the facts and circumstances
surrounding the transaction that the impugned
transaction is a sham or tax avoidant. To give an
example, if a structure is used for circular trading or
round tripping or to pay bribes then such transactions,
though having a legal form, should be discarded by
applying the test of fiscal nullity. Similarly, in a case
where the Revenue finds that in a holding structure an
entity which has no commercial/business substance has
been interposed only to avoid tax then in such cases
applying the test of fiscal nullity it would be open to the
Revenue to discard such interpositioning of that entity.
However, this has to be done at the threshold.
23
(2012) 6 SCC 613
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80. In this connection, we may reiterate the “look at”
principle enunciated in Ramsay [1982 AC 300 : (1981) 2
WLR 449 : (1981) 1 All ER 865 (HL)] in which it was held
that the Revenue or the Court must look at a document
or a transaction in a context to which it properly belongs
to. It is the task of the Revenue/Court to ascertain the
legal nature of the transaction and while doing so it has
to look at the entire transaction as a whole and not to
adopt a dissecting approach. The Revenue cannot start
with the question as to whether the impugned transaction
is a tax deferment/saving device but that it should apply
the “look at” test to ascertain its true legal nature [see
Craven v. White (Stephen) [1989 AC 398 : (1988) 3 WLR
423 : (1988) 3 All ER 495 (HL)] which further observed
that genuine strategic tax planning has not been
abandoned by any decision of the English Courts till
date].
81. Applying the above tests, we are of the view that
every strategic foreign direct investment coming to India,
as an investment destination, should be seen in a holistic
manner. While doing so, the Revenue/courts should keep
in mind the following factors: the concept of participation
in investment, the duration of time during which the
holding structure exists; the period of business
operations in India; the generation of taxable revenues
in India; the timing of the exit; the continuity of business
on such exit.
249. Moving offshore or using an OFC does not
necessarily lead to the conclusion that they involve in the
activities of tax evasion or other criminal activities.
Multinational companies are attracted to offshore
financial centres mainly due to the reason of providing
attractive facilities for investment. Many corporate
conglomerates employ a large number of holding
companies and often high-risk assets are parked in
separate companies so as to avoid legal and technical
risks to the main group. Instances are also there when
individuals form offshore vehicles to engage in risky
investments, through the use of derivatives trading, etc.
Many of such companies do, of course, involve in
manipulation of the market, money laundering and also
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indulge in corrupt activities like round tripping, parking
black money or offering, accepting, etc., directly or
indirectly bribe or any other undue advantage or
prospect thereof.
8.150. By relying on vodafone, his submission is that
the Hon'ble Supreme Court has recognised that
where a transaction, though clothed in a legally
permissible form, is in substance a sham or is
undertaken for circular trading or round-
tripping, the legal form of the transaction
cannot, by itself, be determinative of its true
character. He submits that the Hon'ble Supreme
Court has specifically held that the “substance
over form” principle or the test of piercing the
corporate veil may be invoked where the
Revenue is able to establish, from the facts and
circumstances surrounding the transaction, that
the structure is sham or tax avoidant, and has
expressly referred to circular trading and
round-tripping as instances where the legal
form may have to be discarded by applying the
test of fiscal nullity.
8.151. He submits that Vodafone also requires the
transaction to be examined as a whole and not
by dissecting its individual components.
According to him, the fact that the individual
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steps comprising the present transaction may,
when viewed separately, bear the form of a
Morgan Stanley loan, an investment by Genpact
Luxembourg in NCDs issued by Empower India,
a payment towards acquisition of shares and
repayment of the Morgan Stanley borrowing,
cannot conclude the matter. This Court is
required to “look at” the entire transaction in its
proper context and ascertain its true legal and
commercial character. He submits that, when
the present transaction is examined in that
manner, the temporal proximity, identical
quantum of funds, movement of the funds
through the different Genpact entities and their
ultimate return to Genpact Bermuda for
repayment of the Morgan Stanley borrowing
disclose, according to him, a single integrated
arrangement rather than a series of
independent commercial transactions.
8.152. He further submits that paragraph 81 of
Vodafone identifies, inter alia, the duration of
the holding structure, the period of business
operations in India, the generation of taxable
revenues in India, the timing of exit and the
continuity of business on exit as relevant
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factors while examining the substance of a
strategic foreign direct investment. According to
him, these factors are particularly significant in
the present case. The funds were introduced
into India and transferred out on the same day;
Empower India did not utilise the funds for its
own business operations; no corresponding
productive capital remained deployed in India;
and the immediate deployment was towards
acquisition of shares of Genpact India from
another group entity. He submits that the
transaction must therefore be assessed having
regard to its entire structure, its purpose and
the actual movement of funds, rather than
merely by reference to the formal status of
Genpact Luxembourg as an FPI or the formal
issuance of NCDs by Empower India.
8.153. He submits that paragraph 249 of Vodafone
also recognises that the use of offshore
financial centres or offshore corporate vehicles
does not, by itself, establish illegality, but that
such structures can also be used for activities
including round-tripping and other
impermissible purposes. According to him,
therefore, the mere fact that Genpact
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Luxembourg was incorporated outside India or
was a registered FPI cannot by itself validate
the transaction. What is material is the manner
in which the offshore entity was used in the
overall arrangement and the movement of
funds between the foreign and Indian entities.
8.154. Applying the aforesaid principles, he submits
that the transaction in the present case cannot
be considered merely by asking whether
Genpact Luxembourg was legally capable of
subscribing to NCDs issued by Empower India.
The question, according to him, is whether the
NCD issuance, viewed together with the Morgan
Stanley borrowing, the transfer of funds to
Empower India, the immediate payment to
Headstrong Singapore for acquisition of the
remaining 51% shares in Genpact India and the
subsequent repayment of the Morgan Stanley
borrowing, constituted a genuine investment
transaction or was merely a component of a
pre-arranged round-tripping structure. He
submits that the sequence of transactions, their
timing, the substantially identical quantum of
funds and the absence of any meaningful
deployment of the funds in India constitute
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circumstances which, according to him, require
the transaction to be viewed as one integrated
arrangement.
8.155. He reiterates that the funds passed through
India within a very short period and were not
retained or deployed for the operations of
Empower India or for productive investment in
India. According to him, the consequence of the
arrangement was that India was left with a
substantial and continuing NCD liability, while
the funds themselves ultimately returned to the
foreign group entities. He submits that what
was described in form as Foreign Direct
Investment and a Rupee-denominated NCD
transaction therefore did not result in
corresponding capital being brought into India
for business deployment, but facilitated the
acquisition of the Indian operating company
and thereafter created the liability through
which substantial amounts could subsequently
be remitted outside India. He submits that, on
a holistic examination of the transaction in
accordance with the principles in Vodafone,
these circumstances support the allegation of
round-tripping and demonstrate why the formal
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legal character of the individual steps cannot,
by itself, constitute an answer to the alleged
FEMA contravention.
8.156. Insofar as the decision of the Hon'ble Delhi High
Court in ITA No.103 of 2023 is concerned, he
submits that, though the decision was rendered
in favour of Genpact Singapore (earlier,
Headstrong Singapore), the Income Tax
Department has carried the matter in appeal
before the Hon'ble Supreme Court in SLP (C)
No.025934 of 2026, wherein notice has been
issued in relation to the delay in filing the
Special Leave Petition. He submits that,
although no stay of the judgment of the Hon'ble
Delhi High Court has been granted, the
pendency of the Special Leave Petition and
issuance of notice demonstrate that the matter
remains pending consideration before the
Hon'ble Supreme Court. He therefore submits
that the decision of the Hon'ble Delhi High
Court cannot, at this stage, be treated as
having finally concluded the controversy
between the parties.
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8.157. He submits that the proceedings before the
Income Tax authorities arose in a distinct
statutory context and concerned the exercise of
revisionary jurisdiction under Section 263 of the
Income Tax Act. For Assessment Year 2016-17,
Genpact Consulting Singapore transferred
14,86,025 shares held by it in Genpact India to
Empower India. Though the transfer constituted
a transfer of a capital asset, exemption from
capital gains was claimed under Section 47(o)
of the Income Tax Act and was accepted by the
Assessing Officer. The Commissioner, exercising
powers under Section 263, by order dated
31.03.2021 held that the Assessing Officer had
failed to conduct basic enquiries and that there
was a lack of enquiry. The Commissioner
further concluded that the overall scheme had
been designed in a manner which resulted in
avoidance of Dividend Distribution Tax under
Section 115-O of the Income Tax Act.
8.158. He submits that the aforesaid order of the
Commissioner was challenged before the ITAT
and that the ITAT, by its order dated
13.06.2022, did not adjudicate upon the
substantive legality or commercial purpose of
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the entire transaction. According to him, the
ITAT proceeded on the jurisdictional
requirements of Section 263 and held that the
twin conditions, namely, that the order of the
Assessing Officer must be erroneous and that it
must also be prejudicial to the interests of the
Revenue, were not satisfied in the
circumstances of that case. The Income Tax
Department thereafter carried the matter to the
Hon'ble Delhi High Court in ITA No.103 of 2023,
which upheld the decision of the ITAT.
8.159. His submission is that the issue before the ITAT
and the Hon'ble Delhi High Court was therefore
whether the statutory conditions for exercise of
revisionary jurisdiction under Section 263 were
satisfied and not whether the entire Genpact
group structure, the Morgan Stanley
borrowings, the NCD issuance, the movement
of funds, the subsequent repayment of the NCD
liability or the alleged round-tripping
constituted a contravention of FEMA. He
submits that the Income Tax proceedings were
thus confined to the statutory question arising
under Section 263 and cannot be treated as an
adjudication upon the FEMA issues now being
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examined by the Enforcement Directorate.
According to him, the ED is not seeking to rely
upon the findings in those proceedings as
concluding the FEMA controversy, and the fact
that the Income Tax authorities did not
ultimately sustain the revisionary proceedings
does not prevent the ED from independently
examining the same underlying transactions
under FEMA.
8.160. He submits that FEMA is an independent
statutory enactment containing a distinct
regulatory scheme and conferring independent
powers upon the Enforcement Directorate to
examine transactions from the perspective of
foreign exchange regulation. According to him,
the fact that a transaction may have been
accepted for the purposes of the Income Tax
Act does not immunise it from scrutiny under
FEMA. He submits that the nature and purpose
of a transaction, its movement of funds and its
effect upon foreign exchange are matters which
fall for consideration under FEMA independently
of the questions which arose before the Income
Tax authorities.
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8.161. He submits that the contention of the petitioner
that the ED is precluded from examining the
transaction merely because the foundational
events occurred in January and March 2015,
prior to the coming into force of Section 37A on
09.09.2015, proceeds on an incorrect
understanding of the transaction under
investigation. According to him, the events of
January and March 2015 were not the end of
the transaction but constituted the initial steps
in a larger arrangement, the consequences of
which continued and were implemented after
Section 37A came into force.
8.162. He submits that the transactions undertaken in
January and March 2015 were only the
foundation stones of the larger arrangement.
According to him, the first phase involving the
Morgan Stanley borrowing and the acquisition
of 49% shares and the second phase involving
the USD 737.5 million borrowing, the NCD
issuance by Empower India and the acquisition
of the remaining 51% shares were structured to
ultimately create a substantial liability in the
Indian entity. It was this liability which,
according to him, was subsequently discharged
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from the funds of the resultant Genpact India
after the amalgamation. The repayment of the
NCD principal and interest commenced in 2018
and continued until 2023, resulting, according
to the ED, in remittances aggregating to
approximately INR 7,800 crore to Genpact
Luxembourg, which amounts were thereafter
repatriated outside India.
8.163. His submission is that, consequently, the
relevant post-09.09.2015 conduct cannot be
regarded as merely the continuing consequence
of a transaction completed in 2015. According
to him, the alleged contravention manifested
itself through subsequent acts of payment and
transfer which occurred after Section 37A had
come into force. He submits that the foreign
exchange was, according to the ED's case,
ultimately moved outside India during the
period from 2018 to 2023 and that these
subsequent transfers constitute independent
acts attracting the provisions of FEMA as they
stood at the relevant time.
8.164. He submits that Section 4 of FEMA prohibits a
person resident in India from, inter alia,
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acquiring, holding, owning, possessing or
transferring any foreign exchange, foreign
security or immovable property situated outside
India, save as otherwise provided under the
Act. According to him, the expressions “hold”,
“own” and “possess” are significant because the
alleged FEMA contravention is not confined to
the original act by which the arrangement was
created. His submission is that where the
consequence of the arrangement is that foreign
exchange or foreign assets are subsequently
held, possessed or transferred outside India in
circumstances contrary to Section 4, the
subsequent acts fall for examination under
FEMA notwithstanding that the original
arrangement may have been entered into
before 09.09.2015.
8.165. He submits that Section 37A does not itself
create the substantive prohibition contained in
Section 4. According to him, Section 4 was
already part of FEMA and Section 37A,
introduced with effect from 09.09.2015,
provides an additional statutory mechanism for
dealing with the value equivalent in India of
foreign exchange, foreign security or
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immovable property situated outside India
which is suspected to have been held in
contravention of Section 4. Therefore,
according to him, the introduction of Section
37A does not alter the substantive prohibition
contained in Section 4; it provides an additional
enforcement mechanism which became
available from 09.09.2015.
8.166. He submits that the decision in Deokaran
Nenshi does not assist the petitioner because
the ED's case is not that a completed act of
January or March 2015 became retrospectively
punishable merely because Section 37A was
subsequently enacted. His submission is that
the January and March 2015 transactions and
the subsequent payments from 2018 to 2023
form part of one integrated arrangement and
that the alleged FEMA contravention continued
to be effectuated through subsequent acts after
09.09.2015. According to him, the investigation
commenced in 2021, at a time when the
alleged remittances and discharge of the NCD
liability were still continuing. He therefore
submits that the principle relating to a
completed offence and a continuing offence laid
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down in Deokaran Nenshi has no application
to the facts as alleged by the ED.
8.167. He further distinguishes Canara Bank. He
submits that in that case the relevant mortgage
and the corresponding security interest had
been created before the introduction of Section
37A and that the act which was sought to be
subjected to Section 37A had itself been
completed before the provision came into force.
According to him, there was no subsequent act
after 09.09.2015 which independently attracted
the statutory mechanism. The present case,
according to him, stands on a different footing
because the alleged arrangement resulted in
actual payments and transfers commencing
from 2018 and continuing until 2023. He
therefore submits that the ratio of Canara
Bank, which concerned the retrospective
application of Section 37A to a pre-existing
completed transaction, cannot be mechanically
extended to subsequent acts alleged to have
occurred after Section 37A came into force.
8.168. He submits that the investigation commenced
in 2021, during the period in which the alleged
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repayment of the NCD liability was still being
made. According to him, the investigation was
therefore not directed merely at a transaction
which had become complete in March 2015, but
at the continuing implementation and
consequences of the alleged arrangement,
including the subsequent transfer of substantial
amounts outside India. He submits that, on this
basis, the contention that the ED has acted
after an inordinate delay or has sought to apply
Section 37A retrospectively is misconceived.
8.169. He submits that the two streams of funding,
namely, the alleged FDI infusion in the first
phase and the NCD-based funding in the
second phase, have to be considered together.
According to him, neither stream resulted in
any corresponding infusion of capital into the
Indian operating business. No part of the
amounts, according to him, was utilised to
augment the capital, assets or operations of
Genpact India or Empower India. Instead, the
first phase enabled Empower India to acquire
49% of Genpact India, while the second phase
enabled it to acquire the remaining 51% from
Headstrong Singapore. Thus, according to him,
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the ultimate consequence of the two
arrangements was only that Empower India
became the owner of Genpact India, without
the alleged foreign funds being deployed as
productive capital in any Indian entity.
8.170. He submits that this circumstance is material to
the ED's case because the formal
characterisation of the individual transactions
as FDI, NCD subscription, intra-group share
acquisition or repayment of borrowing does not
explain the economic effect of the arrangement
when the transactions are considered as a
whole. According to him, the structure enabled
the acquisition of the entire shareholding of
Genpact India by Empower India without
Empower India possessing independent
financial resources to fund such acquisition,
while simultaneously creating a substantial
liability in the Indian entity. It was thereafter,
according to him, the discharge of that liability
from the Indian entity's resources which
resulted in the movement of approximately INR
7,800 crore to Genpact Luxembourg during
2018–2023. He submits that these subsequent
movements of funds, and not merely the
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original acts of January and March 2015, form a
material part of the FEMA contravention alleged
by the ED.
8.171. He submits that the NCDs were issued by
Empower India to Genpact Luxembourg in
March 2015 and that the RBI circular relied
upon by the petitioner, dated 30.03.2016, is
subsequent to the issuance of the NCDs and
therefore cannot govern the legality of the
transaction as on the date of its issuance. He
submits that the applicable policy at the
relevant time was the FDI Policy issued by the
Department of Industrial Policy and Promotion
with effect from 17.04.2014. Paragraph 3.3.2
thereof provided that non-convertible,
optionally convertible or partially convertible
preference shares/debentures, for which funds
had been received on or after 01.05.2007,
would be treated as debt and that the norms
applicable to External Commercial Borrowings
(ECB), including those relating to eligible
borrowers, recognised lenders, amount and
maturity, end-use stipulations and other
applicable conditions, would apply. The relevant
portion reads as under:
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3.3.2 Other types of Preference shares/Debentures i.e.
non-convertible, optionally convertible or partially
convertible for issue of which funds have been received
on or after May 1, 2007 are considered as debt.
Accordingly all norms applicable for ECBs relating to
eligible borrowers, recognized lenders, amount and
maturity, end-use stipulations, etc. shall apply. Since
these instruments would be denominated in rupees, the
rupee interest rate will be based on the swap equivalent
of London Interbank Offered Rate (LIBOR) plus the
spread as permissible for ECBs of corresponding
maturity.
8.172. By relying upon the aforesaid FDI Policy, he
submits that the NCDs were required to be
denominated in Indian Rupees and that the
Rupee interest was required to be based on the
swap equivalent of LIBOR, together with the
spread permissible for ECBs of the
corresponding maturity. He therefore submits
that, at the time when the NCDs were issued,
the ECB framework was applicable to the
transaction and that the petitioner was required
to comply with the norms applicable to ECBs,
including the requirements relating to end-use
and other conditions. According to him, the
alleged manner in which the NCD proceeds
were deployed demonstrates non-compliance
with the applicable ECB framework.
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8.173. He submits that there are no reasons relied
upon by the Enforcement Directorate in the
present proceedings which were not already
contained in the order passed under Section
37A of FEMA. According to him, the sum and
substance of the allegations and the prima facie
conclusions recorded in the impugned order
disclose the very features which constitute
round-tripping, even if the expression “round-
tripping” has not been used at every place in
the order.
8.174. He refers to page 101 of the impugned order,
where respondent No.1 has recorded that the
funds were routed in a circular manner and
thereafter paid back to Morgan Stanley within
three days, without any commercial substance.
According to him, this is the factual description
of a round-tripping arrangement. He further
refers to page 151, where the order records
that the inflow and outflow of funds clearly
demonstrated that the alleged FDI was merely
a routing mechanism and did not constitute
genuine capital infusion into India. He submits
that page 112 records that the structure
involving the infusion of money in the guise of
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FDI, NCD borrowings and downstream
investment operated as a closed-loop
arrangement which ultimately cycled back to
the original source through intra-group routing,
resulting, according to the order, in there being
no genuine foreign exchange inflow into India.
He also refers to the diagram at page 120,
which, according to him, depicts a coordinated,
multi-jurisdictional and closed-loop movement
of funds within the Genpact group.
8.175. He submits that the allegation of round-tripping
was therefore not introduced for the first time
during the hearing of the writ petition.
According to him, the factual basis for that
allegation is expressly contained in the Section
37A order itself. He submits that there is no
requirement that the particular expression
“round-tripping” must be used as a matter of
form, so long as the reasons recorded describe
the essential features of such an arrangement,
namely, the circular movement of funds, the
absence of genuine capital infusion, the closed-
loop nature of the transactions and the return
of the funds to the original source. He therefore
submits that the contention that the ED is
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attempting to supplement the reasons in the
impugned order is unfounded.
8.176. On that basis, he submits that W.P. No.7283 of
2026 ought to be dismissed and the Section
37A order permitted to proceed before the
Competent Authority. He submits that the
statutory scheme itself requires the seizure
order and the material relied upon to be placed
before the Competent Authority, which is
required to consider the matter after affording
an opportunity of hearing to the Enforcement
Directorate as well as the aggrieved person. If
the Competent Authority confirms the seizure,
the petitioner has a statutory appellate remedy
under Section 37A(5) of FEMA. According to
him, the petitioner cannot short-circuit this
statutory mechanism by invoking the
extraordinary jurisdiction of the High Court
under Articles 226 and 227, particularly when
the statutory adjudicatory process has not yet
been completed.
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Arguments on Behalf of Respondent –
Enforcement Directorate in WP 16763 of 2026
8.177. Insofar as W.P. No.16763 of 2026 is concerned,
he submits that it is admitted that the
petitioner is under investigation by the
Enforcement Directorate and is therefore
required to obtain a “No Objection Certificate”
under Rule 10 of the Overseas Investment
Rules before making the proposed financial
commitment or undertaking the proposed
investment. He submits that the requirement of
an NOC is a statutory safeguard intended to
ensure that a person under investigation does
not, during the pendency of such investigation,
undertake a financial commitment which may
have consequences for recovery, enforcement
or foreign exchange regulation.
8.178. He submits that the Gift City Entity is a wholly
owned subsidiary of Genpact India established
within the GIFT Special Economic Zone and that
it has been established for obtaining a finance
company/global or regional treasury centre
licence under the applicable IFSCA regulatory
framework. According to him, the entity is
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proposed to operate as a global treasury centre
for the Genpact group and would provide cash-
pooling and lending facilities to Genpact group
entities situated outside India.
8.179. He submits that, as admitted by the petitioner,
the Gift City Entity is not intended to service
Indian entities. Instead, the funds invested by
Genpact India in the Gift City Entity would be
utilised by it for providing loans and other
financial facilities to Genpact group entities
located outside India. According to him, the
proposed structure would therefore provide
another channel through which funds of
Genpact India could be moved outside India. He
submits that, particularly in the background of
the FEMA investigation and the allegations
regarding the earlier movement of funds, the
proposed investment cannot be treated as an
ordinary intra-group investment without
examining the ultimate destination and
utilisation of the funds.
8.180. He submits that the provisional registration of
the Gift City Entity was granted on 15.09.2025,
whereas the application under Rule 10 of the
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Overseas Investment Rules was filed only on
26.11.2025, approximately two months
thereafter. According to him, the petitioner was
aware of the requirement of obtaining
regulatory approval before making the
proposed financial commitment and ought to
have initiated the Rule 10 process at the
appropriate stage. He submits that the
subsequent filing of the application cannot
create an entitlement to make the financial
commitment without the statutory NOC.
8.181. He submits that the decision in Assistance
Commissioner, Comercial Tax Department,
Works Contract and Leasing, Kota v.
Shukla and Brothers24 case would not apply
to the facts of the present case. According to
him, the relevant distinction is that the funds
proposed to be lent by the Gift City Entity
would themselves originate from Genpact India
and there is no independent source of funds
flowing into the Gift City Entity which would
thereafter be deployed abroad. He submits
that, for the purposes of the Overseas
Investment Rules, the Gift City Entity is treated
24
(2010) 4 SCC 785
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as a foreign entity and, consequently, the
immediate regulatory concern is the proposed
financial commitment by Genpact India in that
entity. According to him, the fact that the Gift
City Entity would subsequently deploy those
funds in lending to foreign group entities does
not take the initial financial commitment
outside the scope of Rule 10 or the regulatory
scrutiny contemplated thereunder.
8.182. Insofar as the urgency pleaded on account of
15.09.2026 is concerned, he submits that there
is no compulsion upon Genpact India to be the
entity which provides the proposed funding to
the Gift City Entity. According to him, the
petitioner has not established that the Gift City
Entity cannot be funded by another Genpact
group entity situated outside India. He submits
that the petitioner is therefore attempting to
create an artificial urgency by contending that
15.09.2026 is the last date by which the funds
must necessarily be deposited by Genpact
India. He submits that, if the Gift City Entity
requires capital, the Genpact group can explore
funding it through its other overseas entities,
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subject of course to the applicable regulatory
framework.
8.183. He submits that the petitioner has also not
established that the provisional registration
necessarily requires Genpact India to transfer
the entire proposed USD 100 million. According
to him, the petitioner could have demonstrated
either that an extension of the period had been
sought and refused or that no other entity of
the Genpact group could provide the requisite
funding. In the absence of such material, he
submits that the insistence upon funding by
Genpact India is significant, particularly when
the proposed Gift City Entity is intended to
deploy its funds in providing loans and financial
facilities to foreign group entities. According to
him, the proposed transaction must therefore
be examined in the context of the ongoing
FEMA investigation and the previous allegations
concerning movement of funds outside India.
8.184. He submits that, having regard to the fact that
the matter remains under investigation, the
petitioner ought not to be permitted to mobilise
its funds in a manner which may result in
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substantial reserves of Genpact India being
placed outside India. He submits that the
proposed commitment was initially stated to be
USD 100 million and that, if an interim order
were granted permitting the investment, it may
not remain confined to the immediate amount
of USD 0.2 million and the registration-related
payment of USD 12,500, but could ultimately
facilitate the proposed USD 100 million
investment. According to him, this Court ought
therefore not to grant an interim arrangement
which would have the effect of permitting the
very transaction which is required to be
subjected to scrutiny under Rule 10.
8.185. Lastly, he submits that the entire transaction
has to be examined holistically and not by
viewing the individual steps in isolation.
According to him, the arrangement was a
make-believe transaction which did not create
corresponding productive value in India but
created an obligation upon an Indian entity to
make payments to entities outside India. He
submits that, although the classical conception
of round-tripping ordinarily involves money
moving from India to a foreign jurisdiction and
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thereafter returning to India, the same
principle, according to him, must be applied to
a structure where funds are brought into India
and thereafter returned outside India through
an arrangement which creates a substantial
liability in India and enables further funds to be
remitted abroad. He submits that the substance
of the transaction, rather than the direction of
each individual movement of funds, is therefore
material.
8.186. He submits that the transactions undertaken in
2015 and the proposed transaction in 2026
form part of the same broad objective, namely,
according to him, to facilitate the transfer of the
free reserves of Genpact India outside India
without complying with the statutory
requirements applicable to such movement of
funds. He submits that the earlier transactions
resulted in the creation of the NCD liability,
which was thereafter discharged through
payments made from the Indian entity to
Genpact Luxembourg, while the proposed GIFT
City structure would provide a further
mechanism for deploying funds of Genpact
India through an entity whose proposed
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activities are directed towards lending to
overseas group entities. On this basis, he
submits that both writ petitions ought to be
dismissed.
Submissions in Rejoinder of Shri Arvind Datar WP
No. 7283/2026
9. Shri Arvind Datar Learned Senior Counsel in
rejoinder would submit as follows
9.1. As regards the allegation of round-tripping, he
submits that the petitioner and its group
companies have not engaged in any round-
tripping. Without prejudice to the aforesaid
submission, he submits that the allegation of
round-tripping, as now sought to be projected
by the Enforcement Directorate, was not the
basis upon which the seizure under Section 37A
of FEMA was founded. According to him, the ED
cannot improve upon the reasons recorded in
the seizure order by introducing, during the
course of the writ proceedings, a new or
enlarged theory as to why the statutory
jurisdiction under Section 37A was attracted.
He submits that the question is not whether the
expression “round-tripping” was expressly used
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in the order, but whether the material facts and
the jurisdictional basis necessary to sustain
such an allegation were actually recorded and
relied upon by the Authorised Officer at the
time of passing the seizure order.
9.2. He relies on the decision of the Hon'ble
Supreme Court in Celir LLP v. Sumati Prasad
Bafna25, more particularly paragraphs 135 to
147, which are reproduced hereunder for easy
reference:
135. The ‘Henderson Principle’ is a foundational doctrine in
common law that addresses the issue of multiplicity in
litigation. It embodies the broader concept of procedural
fairness, abuse of process and judicial efficiency by
mandating that all claims and issues that could and ought
to have been raised in a previous litigation should not be
relitigated in subsequent proceedings. The extended form
of res-judicata more popularly known as ‘Constructive Res
Judicata’ contained in Section 11, Explanation VII of the
CPC originates from this principle.
136. In Henderson v. Henderson, [1843] 3 Hare 999, the
English Court of Chancery speaking through Sir James
Wigram, V.C. held that where a given matter becomes the
subject of litigation and the adjudication of a court of
competent jurisdiction, the parties so litigating are
required to bring forward their whole case. Once the
litigation has been adjudicated by a court of competent
jurisdiction, the same parties will not be permitted to
reopen the lis in respect of issues which might have been
brought forward as part of the subject in contest but were
not, irrespective of whether the same was due to any form
25
2024 SCC OnLine SC 3727
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of negligence, inadvertence, accident or omission. It was
further held, that principle of res judicata applies not only
to points upon which the Court was called upon by the
parties to adjudicate and pronounce a judgment but to
every possible or probable point or issue that properly
belonged to the subject of litigation and the parties ought
to have brought forward at the time. The relevant
observations read as under:—
“In trying this question I believe I state the rule of the
Court correctly when I say that, where a given matter
becomes the subject of litigation in, and of adjudication by,
a Court of competent jurisdiction, the Court requires the
parties to that litigation to bring forward their whole case,
and will not (except under special circumstances) permit
the same parties to open the same subject of litigation in
respect of matter which might have been brought forward
as part of the subject in contest, but which was not
brought forward, only because they have, from negligence,
inadvertence, or even accident, omitted part of their case.
The plea of res judicata applies, except in special cases,
not only to points upon which the Court was actually
required by the parties to form an opinion and pronounce a
judgment, but to every point which properly belonged to
the subject of litigation, and which the parties, exercising
reasonable diligence, might have brought forward at the
time. […]”
(Emphasis supplied)
137. The above proposition of law came to be known as
the ‘Henderson Principle’ and underwent significant
evolution, adapting to changing judicial landscapes and
procedural requirements. The House of Lords in Johnson v.
Gore Wood & Co, [2002] 2 A.C. 1, upon examining the
‘Henderson Principle’ authoritatively approved it with the
following observations:—
(i) Lord Bingham of Cornhill integrated the principle with
the broader doctrine of abuse of process and held that the
bringing of a claim or the raising of a defence in later
proceedings which ought to have been raised earlier will
not always be hit by this principle, but rather will apply
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where such point is sought to be raised as an additional or
collateral attack on a previous decision and the bringing
forth of such ground amounts to misusing or abusing the
process of the court or as a means for unjust harassment
of a party. The relevant observations read as under:—
“Henderson v. Henderson abuse of process, as now
understood, although separate and distinct from cause of
action estoppel and issue estoppel, has much in common
with them. The underlying public interest is the same :
that there should be finality in litigation and that a party
should not be twice vexed in the same matter. This public
interest is reinforced by the current emphasis on efficiency
and economy in the conduct of litigation, in the interests of
the parties and the public as a whole. The bringing of a
claim or the raising of a defence in later proceedings may,
without more, amount to abuse if the court is satisfied (the
onus being on the party alleging abuse) that the claim or
defence should have been raised in the earlier proceedings
if it was to be raised at all. I would not accept that it is
necessary, before abuse may be found, to identify any
additional element such as a collateral attack on a previous
decision or some dishonesty, but where those elements
are present the later proceedings will be much more
obviously abusive, and there will rarely be a finding of
abuse unless the later proceeding involves what the court
regards as unjust harassment of a party. It is, however,
wrong to hold that because a matter could have been
raised in earlier proceedings it should have been, so as to
render the raising of it in later proceedings necessarily
abusive. That is to adopt too dogmatic an approach to
what should in my opinion be a broad, merits-based
judgment which takes account of the public and private
interests involved and also takes account of all the facts of
the case, focusing attention on the crucial question
whether, in all the circumstances, a party is misusing or
abusing the process of the court by seeking to raise before
it the issue which could have been raised before. As one
cannot comprehensively list all possible forms of abuse, so
one cannot formulate any hard and fast rule to determine
whether, on given facts, abuse is to be found or not […]”
(Emphasis supplied)
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(ii) Lord Millett construing the Principle held that it does
not belong to the doctrine of res-judicata in the strict
sense but rather was analogous to the doctrine, as it goes
a step further to encompass even those proceedings that
either culminated into a settlement or issues which had
never been adjudicated previously in order to protect the
process of the court from abuse and the defendant from
oppression. The relevant observations read as under:—
“As the passages which I have emphasised indicate, Sir
James Wigram V-C did not consider that he was laying
down a new principle, but rather that he was explaining
the true extent of the existing plea of res judicata. Thus he
was careful to limit what he was saying to cases which had
proceeded to judgment, and not, as in the present case, to
an out of court settlement. Later decisions have doubted
the correctness of treating the principle as an application
of the doctrine of res judicata, while describing it as an
extension of the doctrine or analogous to it … But these
various defences [res judicata, issue or cause of action
estoppel] are all designed to serve the same purpose : to
bring finality to litigation and avoid the oppression of
subjecting a defendant unnecessarily to successive actions.
While the exact relationship between the principle
expounded by Sir James Wigram V-C and the defences of
res judicata and cause of action and issue estoppel may be
obscure, I am inclined to regard it as primarily an ancillary
and salutary principle necessary to protect the integrity of
those defences and prevent them from being deliberately
or inadvertently circumvented.
In one respect, however, the principle goes further than
the strict doctrine of res judicata or the formulation
adopted by Sir James Wigram V-C, for I agree that it is
capable of applying even where the first action concluded
in a settlement. Here it is necessary to protect the integrity
of the settlement and to prevent the defendant from being
misled into believing that he was achieving a complete
settlement of the matter in dispute when an unsuspected
part remained outstanding.
However this may be, the difference to which I have drawn
attention is of critical importance. It is one thing to refuse
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to allow a party to relitigate a question which has already
been decided; it is quite another to deny him the
opportunity of litigating for the first time a question which
has not previously been adjudicated upon. This latter
(though not the former) is prima facie a denial of the
citizen's right of access to the court conferred by the
common law and guaranteed by article 6 … While,
therefore, the doctrine of res judicata in all its branches
may properly be regarded as a rule of substantive law,
applicable in all save exceptional circumstances, the
doctrine now under consideration can be no more than a
procedural rule based on the need to protect the process of
the court from abuse and the defendant from oppression
[…]”
(Emphasis supplied)
138. In Virgin Atlantic Airways Ltd. v. Zodiac Seats UK
Ltd., [2014] A.C. 160 Lord Sumption JSC further
expounded the ‘Henderson Principle’ as although separate
and distinct from cause of action estoppel or res judicata
yet having the same underlying public interest that there
should be finality in litigation and that a party should not
be twice vexed in the same matter. The relevant
observations read as under:—
“The principle in Henderson v. Henderson has always been
thought to be directed against the abuse of process
involved in seeking to raise in subsequent litigation points
which could and should have been raised before. There
was nothing controversial or new about this notion when it
was expressed by Lord Kilbrandon in the Yat Tung case
[1975] A.C. 581. The point has been taken up in a large
number of subsequent decisions, but for present purposes
it is enough to refer to the most important of them,
Johnson v. Gore-Wood & Co [2002] 2 A.C. 1, in which the
House of Lords considered their effect. This appeal arose
out of an application to strike out proceedings on the
ground that the plaintiffs claim should have been made in
an earlier action on the same subject matter brought by a
company under his control. Lord Bingham of Cornhill took
up the earlier suggestion of Lord Hailsham of St
Marylebone LC in Vervaeke (formerly Messina) v. Smith
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[1983] 1 A.C. 145, 157 that the principle in Henderson v.
Henderson was “both a rule of public policy and an
application of the law of res judicata”. He expressed his
own view of the relationship between the two at p. 31 as
follows: “Henderson v. Henderson abuse of process, as
now understood, although separate and distinct from
cause of action estoppel and issue estoppel, has much in
common with them. The underlying public interest is the
same : that there should be finality in litigation and that a
party should not be twice vexed in the same matter. This
public interest is reinforced by the current emphasis on
efficiency and economy in the conduct of litigation, in the
interests of the parties and the public as a whole”.”
(Emphasis supplied)
139. Even in a common law action it was said by
Blackburn, J.:“I incline to think that the doctrine of res
judicata applies to all matters which existed at the time of
giving of the judgment, and which the party had an
opportunity of bringing before the Court.” [See :
Newington v. Levy, [L.R.] 6 C.P. 180 (J)].
140. The fundamental policy of the law is that there must
be finality to litigation. Multiplicity of litigation benefits not
the litigants whose rights have been determined, but those
who seek to delay the enforcement of those rights and
prevent them from reaching the rightful beneficiaries of
the adjudication. The Henderson Principle, in the same
manner as the principles underlying res judicata, is
intended to ensure that grounds of attack or defence in
litigation must be taken in one of the same proceeding. A
party which avoids doing so does it at its own peril. In
deciding as to whether a matter might have been urged in
the earlier proceedings, the court must ask itself as to
whether it could have been urged. In deciding whether the
matter ought to have been urged in the earlier
proceedings, the court will have due regard to the ambit of
the earlier proceedings and the nexus which the matter
bears to the nature of the controversy. In holding that a
matter ought to have been taken as a ground of attack or
defence in the earlier proceedings, the court is indicating
that the matter is of such a nature and character and
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bears such a connection with the controversy in the earlier
case that the failure to raise it in that proceeding would
debar the party from agitating it in the future. The doctrine
itself is based on public policy flowing from the age-old
legal maxim interest reipublicae ut sit finis litium which
means that in the interest of the State there should be an
end to litigation and no party ought to be vexed twice in a
litigation for one and the same cause.
141. The Henderson Principle was approvingly referred to
and applied by this Court in State of U.P. v. Nawab
Hussain, (1977) 2 SCC 806 as the underlying principle for
res-judicata and constructive res-judicata for assuring
finality to litigation. The relevant observations read as
under:—
“3. The principle of estoppel per rem judicatam is a rule of
evidence. As has been stated in Marginson v. Blackburn
Borough Council [[1939] 2 K.B. 426 at p. 437], it may be
said to be “the broader rule of evidence which prohibits the
reassertion of a cause of action”. This doctrine is based on
two theories : (i) the finality and conclusiveness of judicial
decisions for the final termination of disputes in the
general interest of the community as a matter of public
policy, and (ii) the interest of the individual that he should
be protected from multiplication of litigation. It therefore
serves not only a public but also a private purpose by
obstructing the reopening of matters which have once
been adjudicated upon. It is thus not permissible to obtain
a second judgment for the same civil relief on the same
cause of action, for otherwise the spirit of contentiousness
may give rise to conflicting judgments of equal authority,
lead to multiplicity of actions and bring the administration
of justice into disrepute. It is the cause of action which
gives rise to an action, and that is why it is necessary for
the courts to recognise that a cause of action which results
in a judgment must lose its identity and vitality and merge
in the judgment when pronounced. It cannot therefore
survive the judgment, or give rise to another cause of
action on the same facts. This is what is known as the
general principle of res judicata.
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4. But it may be that the same set of facts may give rise to
two or more causes of action. If in such a case a person is
allowed to choose and sue upon one cause of action at one
time and to reserve the other for subsequent litigation,
that would aggravate the burden of litigation. Courts have
therefore treated such a course of action as an abuse of its
process and Somervell, L.J., has answered it as follows in
Greenhalgh v. Mallard [[1947] All ER 255 at p. 257]:“I
think that on the authorities to which I will refer it would
be accurate to say that res judicata for this purpose is not
confined to the issues which the court is actually asked to
decide, but that it covers issues or facts which are so
clearly part of the subject-matter of the litigation and so
clearly could have been raised that it would be an abuse of
the process of the court to allow a new proceeding to be
started in respect of them.
This is therefore another and an equally necessary and
efficacious aspect of the same principle, for it helps in
raising the bar of res judicata by suitably construing the
general principle of subduing a cantankerous litigant. That
is why this other rule has some times been referred to as
constructive res judicata which, in reality, is an aspect or
amplification of the general principle.”
(Emphasis supplied)
142. This Court in Devilal Modi v. Sales Tax Officer,
Ratlam, AIR 1965 SC 1150, held that if the underlying rule
of constructive res judicata is not applied to writ
proceedings, it would be open to the party to take one
proceeding after another and urge new grounds every
time, and would be inconsistent with considerations of
public policy. The relevant observations read as under:—
“8. […] the rule of constructive res judicata which is
pleaded against him in the present appeal is in a sense a
somewhat technical or artificial rule prescribed by the Code
of Civil Procedure. This rule postulates that if a plea could
have been taken by a party in a proceeding between him
and his opponent, he would not be permitted to take that
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plea against the same party in a subsequent proceeding
which is based on the same cause of action; but basically,
even this view is founded on the same considerations of
public policy, because if the doctrine of constructive res
judicata is not applied to writ proceedings, it would be
open to the party to take one proceeding after another and
urge new grounds every time; and that plainly is
inconsistent with considerations of public policy […]”
(Emphasis supplied)
143. In Shankara Coop. Housing Society Ltd. v. M.
Prabhakar, (2011) 5 SCC 607, this Court held that the
ground of non-compliance of statutory provision which was
very much available to the parties to raise but did not raise
it as one of the grounds, cannot be raised later on and
would be hit by the principles analogous to constructive res
judicata. The relevant observations read as under:—
“89. In the present case, it is admitted fact that when the
contesting respondents filed WP No. 1051 of 1966, the
ground of non-compliance with statutory provision was
very much available to them, but for the reasons best
known to them, they did not raise it as one of the grounds
while challenging the Notification dated 11-12-1952 issued
under the Evacuee Property Act. In the subsequent writ
petition filed in the year 1990, initially, they had not
questioned the legality of the notification, but raised it by
filing an application, which is no doubt true, allowed by the
High Court. In our view, the High Court was not justified in
permitting the petitioners therein to raise that ground and
answer the same since the same is hit by the principles
analogous to constructive res judicata.”
(Emphasis supplied)
144. From the above exposition of law, it is clear that the
‘Henderson Principle’ is a core component of the broader
doctrine of abuse of process, aimed at enthusing in the
parties a sense of sanctity towards judicial adjudications
and determinations. It ensures that litigants are not
subjected to repetitive and vexatious legal challenges. At
its core, the principle stipulates that all claims and issues
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that could and should have been raised in an earlier
proceeding are barred from being raised in subsequent
litigation, except in exceptional circumstances. This rule
not only supports the finality of judgments but also
underscores the ideals of judicial propriety and fairness.
145. There are, four situations where in second
proceedings between the same parties doctrine res
judicata as a corollary of the principle of abuse of process
may be invoked : (i) cause of action estoppel, where the
entirety of a decided cause of action is sought to be
relitigated; (ii) issue estoppel or, “decided issue estoppel,”
where an issue is sought to be relitigated which has been
raised and decided as a fundamental step in arriving at the
earlier judicial decision; (iii) extended or constructive res
judicata i.e., “unraised issue estoppel,” where an issue is
sought to be litigated which could, and should, have been
raised in a previous action but was not raised; (iv) a
further extension of the aforesaid to points not raised in
relation to an issue in the earlier decision, as opposed to
issues not raised in relation to the decision itself.
146. As part of the broader rule against abuse of process,
the Henderson principle is rooted in the idea of preventing
the judicial process from being exploited in any manner
that tends to undermine its integrity. This idea of
preventing abuse of judicial process is not confined to
specific procedure rules, but rather aligned to a broader
purport of giving quietus to litigation and finality to judicial
decisions. The essence of this rule is that litigation must be
conducted in good faith, and parties should not engage in
procedural tactics that fragment disputes, prolong
litigation, or undermine the outcomes of such litigation. It
is not a rigid rule but rather a flexible principle to prevent
oppressive, unfair, or detrimental litigation.
147. We are conscious of the fact, that ordinarily this
principle has been applied to instances where a particular
plea or ground was not raised at any stage of the
proceedings, but were later sought to be raised. However,
it must be borne in mind that construing this rule in a
hyper-technical manner or through any strait-jacket
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formula will amount to taking a reductive view of this
broad and comprehensive principle.
9.3. By relying on Celir, he submits that the Hon'ble
Supreme Court has applied the Henderson
principle as an aspect of the broader doctrine
against abuse of process. He submits that the
principle requires parties to bring forward, in
the appropriate proceeding, the grounds which
properly belong to the controversy and
prevents successive proceedings or successive
attempts to advance grounds which ought to
have been raised earlier. The principle is
founded upon finality, procedural fairness and
protection against fragmented litigation.
9.4. He submits that Celir makes it clear that the
Henderson principle is not confined to the strict
doctrine of res judicata, but is concerned more
broadly with preventing abuse of the judicial
process and successive attempts to advance
matters which ought to have been raised at the
appropriate stage. He submits that, in the
present case, the ED cannot, having passed a
seizure order on stated reasons, subsequently
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reconstruct the foundation of that order during
the writ proceedings by presenting a more
elaborate theory of round-tripping than what
was actually recorded by the Authorised Officer.
He submits that this is particularly important in
proceedings under Section 37A, where the
existence of the statutory “reason to believe” is
a condition precedent to the exercise of the
seizure power.
9.5. He submits that the ED's present contention
that the word “round-tripping” need not have
been used in the seizure order does not answer
the petitioner's objection. According to him, the
issue is not one of terminology. If the ED seeks
to sustain the seizure on the basis that the
entire transaction constituted round-tripping,
the order must disclose the factual foundation
upon which such conclusion was reached. The
Authorised Officer was required, at the time of
exercising the power under Section 37A, to
record the reasons which led him to believe
that the statutory conditions were satisfied. The
subsequent identification of additional
circumstances, re-characterisation of
transactions or elaboration of the alleged
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circular flow during arguments cannot
retrospectively supply the reasons which were
absent when the power was exercised.
9.6. He submits that the references made by the ED
to various pages of the seizure order do not
establish otherwise. According to him, merely
describing the movement of funds as “circular”,
“closed-loop” or as a “routing mechanism” does
not amount to recording a reasoned finding that
the transactions constituted round-tripping in
the legal sense asserted by the ED. The
distinction is material because the petitioner's
challenge is that the impugned order did not
proceed upon the presently advanced theory
and that the reasons now urged in Court are
being relied upon to supplement the original
reasons to believe.
9.7. He submits that the ED cannot simultaneously
contend that the sufficiency or validity of the
reasons recorded in the seizure order is a
matter for the Competent Authority and, in the
same proceedings, seek to supplement those
reasons by placing before the Writ Court
material or explanations which did not form
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part of the decision-making process of the
Authorised Officer. According to him, if the
impugned order is required to be tested on the
basis of the reasons recorded therein, the ED
must stand or fall on those reasons and cannot
improve the order by means of subsequent
pleadings or oral submissions.
9.8. He submits that the petitioner's case is not that
the ED is barred by res judicata from examining
a FEMA violation; rather, the submission is that
the ED cannot retrospectively alter or enlarge
the reasons upon which the Section 37A power
was exercised.
9.9. He therefore submits that the principal issue in
the present proceedings remains whether the
Authorised Officer had, on the material
available to him and on the reasons actually
recorded, a lawful basis to form the “reason to
believe” required under Section 37A of FEMA.
According to him, that statutory question
cannot be answered by introducing, for the first
time in the writ proceedings, a broader theory
of round-tripping or by supplementing the
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reasons contained in the seizure order with
subsequent explanations.
9.10. He submits that the ED's reliance upon the
expression “round-tripping” also cannot
overcome the substantive objection arising
from the decision in Canara Bank's case. His
submission is that the original transactions
relied upon by the ED were undertaken in
January and March 2015, whereas Section 37A
came into force only on 09.09.2015. If the ED's
case is that those transactions themselves
constituted the contravention which attracted
Section 37A, the provision cannot be
retrospectively applied to them. The attempt to
describe the subsequent repayment of a
contractual NCD liability as a continuation of
the original transaction, according to him, does
not alter the date on which the underlying
transaction was completed.
9.11. He reiterates that the mere fact that payments
under the NCDs continued after 09.09.2015
does not convert the March 2015 issuance of
the NCDs into a transaction entered into after
Section 37A came into force. According to him,
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the subsequent discharge of a liability created
under a transaction completed in March 2015
cannot, without identifying a separate post-
09.09.2015 contravention satisfying the
statutory requirements, retrospectively bring
the original transaction within Section 37A.
9.12. He therefore submits that the ED's attempt to
sustain the seizure by characterising the entire
arrangement as a continuing round-tripping
transaction cannot substitute for establishing
the statutory jurisdictional facts under Section
37A. According to him, unless the reasons
recorded contemporaneously establish the
necessary nexus between the foreign exchange
or foreign asset alleged to have been held in
contravention of Section 4 and the exercise of
the seizure power, the subsequent description
of the transaction as a “closed loop” or “round-
tripping” cannot cure the defect in the original
exercise of jurisdiction.
9.13. His submission, therefore, is that the allegation
of round-tripping, insofar as it is sought to be
relied upon as an independent or enlarged basis
for the seizure, cannot be introduced or
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developed for the first time in the writ
proceedings. This Court is required to examine
the legality of the seizure on the reasons which
existed when the order was made and not on
reasons subsequently formulated to defend it.
He accordingly submits that the Section 37A
seizure order cannot be sustained by
supplementation of its reasons through the
present proceedings.
9.14. The submission of learned ASGI, insofar as it
seeks to rely upon the loan and credit
arrangements between non-resident entities,
proceeds on transactions which are themselves
outside the regulatory field of FEMA insofar as
the present petitioner is concerned. He submits
that the borrowing in January 2015 by
Headstrong Singapore (now Genpact
Singapore) of USD 660 million from Morgan
Stanley, together with USD 77.5 million
borrowed from a group company, for the
purpose of acquiring shares worth
approximately INR 4,050 crore in Genpact
India, and the subsequent borrowing in March
2015 by Genpact Bermuda of USD 737.5 million
from Morgan Stanley, followed by its lending of
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the said amount to Genpact Luxembourg, were
transactions between non-resident entities.
Genpact Luxembourg, which was a registered
FPI, thereafter subscribed to the Rupee-
denominated NCDs issued by Empower India
for approximately INR 4,600 crore.
9.15. He submits that none of the aforesaid foreign
borrowings involved the petitioner or any
resident Indian entity as a borrower or lender.
The borrowing by Headstrong Singapore from
Morgan Stanley, the borrowing by Genpact
Bermuda from Morgan Stanley, and the
subsequent lending between Genpact Bermuda
and Genpact Luxembourg were transactions
between non-resident entities and were
undertaken outside India. According to him,
those transactions cannot, merely because they
subsequently formed part of the factual
background to a transaction in India, be
brought within the scope of Section 37A of
FEMA. He submits that the jurisdiction under
Section 37A has to be founded upon the
statutory conditions contained therein and
cannot arise merely because funds originating
from a transaction between non-residents were
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subsequently utilised in connection with an
Indian transaction.
9.16. He submits that the petitioner, being a resident
Indian entity, was not a party to the Morgan
Stanley loan arrangements and did not borrow
any foreign exchange from Morgan Stanley. The
petitioner neither received USD 737.5 million
from Morgan Stanley nor entered into any
foreign currency borrowing with Morgan
Stanley. According to him, the fact that Genpact
Bermuda subsequently transferred the
borrowed amount to Genpact Luxembourg
cannot, by itself, create a FEMA contravention
on the part of the petitioner. He therefore
submits that the foreign borrowing transactions
cannot be treated as the jurisdictional
foundation for exercising the drastic power
under Section 37A against the petitioner.
9.17. He submits that the allegation regarding the
difference between the interest rate of 2%
payable by Genpact Bermuda to Morgan
Stanley and the 11% interest payable by
Empower India on the NCDs is equally
incapable of constituting a ground for invoking
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Section 37A. According to him, the two
transactions were entered into between
different commercial entities, in different
capacities and at different stages of the overall
arrangement. The mere fact that one borrowing
carried interest at 2% while the NCDs carried
interest at 11%, subsequently reduced to
9.5%, does not establish that either transaction
was fictitious or that there was a FEMA
contravention. He submits that commercial
terms, including the rate of interest, cannot be
treated as inherently suspicious merely because
they differ from one another.
9.18. He further submits that the fact that the
January 2015 and March 2015 transactions
were completed within a short period cannot,
by itself, constitute a circumstance giving rise
to a “reason to believe” under Section 37A.
According to him, commercial transactions are
frequently structured and completed with speed
where the parties have already negotiated the
relevant documentation and obtained the
necessary approvals. The January transaction
being completed within approximately three
days and the March transaction being
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completed within a similarly short period
therefore does not, without more, establish that
the transactions lacked commercial substance.
9.19. He submits that the transactions were
undertaken in the ordinary course pursuant to
the corporate reorganisation of the Genpact
group and were accompanied by
contemporaneous documentation and
disclosures. He submits that the relevant
regulatory authorities in the respective
jurisdictions had the opportunity to examine the
transactions and that the transactions were not
clandestine arrangements concealed from the
regulatory authorities. According to him, the ED
cannot convert the speed with which the
transactions were implemented into a
circumstance of suspicion merely by looking at
the transactions retrospectively and without
identifying any specific violation of FEMA.
9.20. As regards the contention that Empower India,
being a comparatively smaller company,
became the holding company of the
substantially larger Genpact India, he submits
that the relative size or turnover of the two
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companies has no bearing upon the legality of
the acquisition. The fact that Empower India
had a smaller turnover or asset base than
Genpact India does not prevent it from
acquiring the shares of Genpact India if it is
able to lawfully raise the necessary funds. He
submits that Empower India raised the requisite
resources, the shareholders of Genpact India
received the agreed consideration and the
shares were thereafter transferred to Empower
India. According to him, the relative size of the
acquiring company and the company whose
shares were acquired cannot, by itself, establish
a FEMA violation or demonstrate that the
transaction was fictitious.
9.21. He submits that the commercial rationale of an
acquisition also cannot be tested merely by
comparing the turnover or reserves of the
acquiring and acquired entities. Corporate
groups may reorganise their shareholding
structures for a variety of legitimate
commercial, legal and organisational reasons.
According to him, unless the ED establishes
that the acquisition was prohibited by law or
that the consideration was not genuinely paid,
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the fact that a smaller entity acquired a larger
operating company cannot constitute a
jurisdictional fact for exercise of power under
Section 37A.
9.22. As regards the submission that the transaction
did not generate any economic benefit either
for Genpact India or for India, he submits that
economic benefit is not the statutory test under
FEMA for determining whether a transaction is
permissible. He submits that the fact that funds
were utilised for acquisition of shares rather
than for expansion of the existing business
does not render the transaction unlawful.
Acquisition of shares pursuant to a corporate
reorganisation is itself a commercial transaction
and the absence of an immediate increase in
the assets or operations of the Indian company
cannot, without more, establish a FEMA
contravention.
9.23. He submits that the same principle applies to
the Morgan Stanley borrowing. The question
whether a corporate group derived an economic
advantage from borrowing at a particular rate
or whether the funds were deployed in a
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manner which, in hindsight, appears
commercially unnecessary is not a substitute
for establishing a contravention of FEMA.
According to him, corporate entities are entitled
to structure their affairs, including their
financing and holding structures, in the manner
they consider commercially appropriate,
provided the structure complies with the
governing law and regulatory framework.
9.24. He submits that the ED's case effectively seeks
to treat the commercial structure and
movement of funds as sufficient to establish
illegality, without first identifying the specific
statutory prohibition which was violated by the
petitioner. According to him, Section 37A
cannot be invoked merely because the ED
considers the transaction commercially unusual,
because the funds moved quickly, because the
interest rates differed, or because a smaller
entity acquired a larger entity. The statutory
requirement is that the conditions prescribed
under Section 37A must first be satisfied,
including the existence of the requisite reason
to believe in relation to foreign exchange,
foreign security or immovable property situated
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outside India being held in contravention of
Section 4.
9.25. His submission therefore is that the foreign
borrowings between Morgan Stanley and the
non-resident Genpact entities, the subsequent
inter se lending between such non-resident
entities, and the commercial terms governing
those transactions cannot, without establishing
the necessary statutory nexus, furnish the
jurisdictional basis for seizure under Section
37A against the petitioner. According to him,
the ED is required to establish a specific FEMA
contravention attributable to the petitioner and
cannot substitute an assessment of the
commercial desirability or economic substance
of the overall corporate restructuring for the
jurisdictional requirements imposed by Section
37A.
9.26. As regards avoidance of Dividend Distribution
Tax, firstly, his submission is that the same has
been upheld by the Hon'ble Delhi High Court in
Genpact Luxembourg SARL v. Assistant
Commissioner of Income Tax [WP(C). 7784
of 2022] and the same cannot be reopened. He
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again reiterates that at best the allegations if
true would attract Section 6 of the FEMA, which
has to be proceeded under Section 37 and not
under Section 37A by contending that Section 4
is attracted. He relies on the decision of the
Hon'ble Supreme Court in Vodafone
International Holdings BV v. Union of
India26, more particularly paragraphs 79, 81,
320, 321 and 423 which are reproduced
hereunder for easy reference:
79. When it comes to taxation of a holding structure, at
the threshold, the burden is on the Revenue to allege
and establish abuse, in the sense of tax avoidance in the
creation and/or use of such structure(s). In the
application of a judicial anti-avoidance rule, the Revenue
may invoke the “substance over form” principle or
“piercing the corporate veil” test only after it is able to
establish on the basis of the facts and circumstances
surrounding the transaction that the impugned
transaction is a sham or tax avoidant. To give an
example, if a structure is used for circular trading or
round tripping or to pay bribes then such transactions,
though having a legal form, should be discarded by
applying the test of fiscal nullity. Similarly, in a case
where the Revenue finds that in a holding structure an
entity which has no commercial/business substance has
been interposed only to avoid tax then in such cases
applying the test of fiscal nullity it would be open to the
Revenue to discard such interpositioning of that entity.
However, this has to be done at the threshold.
81. Applying the above tests, we are of the view that
every strategic foreign direct investment coming to India,
26
(2012) 6 SCC 613
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as an investment destination, should be seen in a holistic
manner. While doing so, the Revenue/courts should keep
in mind the following factors: the concept of participation
in investment, the duration of time during which the
holding structure exists; the period of business
operations in India; the generation of taxable revenues
in India; the timing of the exit; the continuity of business
on such exit.
320. India is considered to be the most attractive
investment destinations and, it is known, has received
$37.763 billion in FDI and $29.048 billion in FII
investment in the year to 31-3-2010. FDI inflows it is
reported were of $22.958 billion between April 2010 and
January 2011 and FII investment were $31.031 billion.
Reports are afloat that million of rupees go out of the
country only to be returned as FDI or FII.
321. Round-tripping can take many formats like under-
invoicing and over-invoicing of exports and imports.
Round-tripping involves getting the money out of India,
say to Mauritius, and then come to India like FDI or FII.
Article 4 of the Indo-Mauritius DTAA defines a “resident”
to mean any person, who under the laws of the
contracting State is liable to taxation therein by reason of
his domicile, residence, place of business or any other
similar criteria. An Indian company, with the idea of tax
evasion can also incorporate a company offshore, say in
a tax haven, and then create a WOS in Mauritius and
after obtaining a TRC may invest in India. Large
amounts, therefore, can be routed back to India using
TRC as a defence, but once it is established that such an
investment is black money or capital that is hidden, it is
nothing but circular movement of capital known as
round-tripping; then TRC can be ignored, since the
transaction is fraudulent and against national interest.
423. I, therefore, find it difficult to agree with the
conclusions arrived at by the High Court that the sale of
the CGP share by HTIL to Vodafone would amount to
transfer of a capital asset within the meaning of Section
2(14) of the Income Tax Act and the rights and
entitlements that flow from FWAs, SHAs, term sheet,
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loan assignments, brand licence, etc. form an integral
part of the CGP share attracting capital gains tax.
Consequently, the demand of nearly Rs 12,000 crores by
way of capital gains tax, in my view, would amount to
imposing capital punishment for capital investment since
it lacks authority of law and, therefore, stands quashed
and I also concur with all the other directions given in
the judgment delivered by the Lord Chief Justice.
9.27. By relying on Vodafone, he submits that round
tripping would arise only where funds first went
out of India as overseas investment and then
were routed back into a resident Indian entity.
In the present case, there is no allegation of
any funds having gone out of India and being
brought back into India. Even as per the
allegations made by the ED, the funds were
sourced from Morgan Stanley by Genpact
Luxembourg, who invested that money by
subscribing to NCDs issued by Empower India
and that money was repaid back.
9.28. There is no money from India which went out
and came back to India and as such, he
submits that round tripping would not apply. He
reiterates that the flow of funds, both in equity
and debt were from non-residents, who
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borrowed the funds from another non-resident
namely Morgan Stanley, which is contrary to
the allegations made. He submits that the
merger of Genpact India, the largest Genpact
entity in India into Empower India, a relatively
smaller company was because Genpact India
was an unlimited liability company and
Empower India was a limited liability company.
Empower India was the second largest Genpact
entity in India and had commercial substance
and existence.
9.29. The NCD borrowing from Genpact Luxembourg
helped consolidate share holdings and finances
to regulate management in order to effectively
compete in the market and enhance the net
worth by reducing the overall cost, which is a
business call by the Genpact group of which
Empower India and Genpact India are
constituents. His submission is that when
Genpact India and/or its shareholders had no
objection to a smaller company like Empower
India becoming the holding company and,
subsequently, the merger of Genpact India into
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Empower India, the question of ED having any
objection thereto would not arise.
9.30. His submission is that post the Purchase of the
shares of Genpact India by Empower India and
the merger of Genpact India into Empower
India, the name of Empower India was also
changed to Genpact India, with all entities of
Genpact India being merged into Empower
India and thereafter the business of Genpact
India has grown by metes and bounds.
9.31. He contends that the total empolyess grew
from 42,000 in FY 2014-25 to 1,01,000 in FY
2025-26, total revenue grew from 4,814 crores
in FY 2014-15 to 15,484 crores in FY 2025-26,
total taxes which have been paid grew from
543 crores in FY 2014-2015 to 1,443 crores in
FY 2025-2026 and Foreign Direct Investment
(‘FDI’) contributed by petitioner grew from USD
797 million in FY 2014-15 to USD 1583 million.
Thus, he submits that the present day financial
position of the petitioner and its contribution to
the tax exchequer, foreign exchange reserves
and employment in India is substantial.
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9.32. His submission is that the credit was raised
from Morgan Stanley for a short duration to
enable the buying of 100% share in Genpact
India through a mix of debt and equity and the
same was done within a short period of time so
as to ensure proper running of the companies.
His submission is that though Morgan Stanley
had lent the funds, ultimately the shareholders
were Genpact entities, who received the
shareholding in the various entities by purchase
from and out of the said funds advanced by
Morgan Stanley. The shareholding of all foreign
entities of Genpact group in Genpact India was
purchased by Empower India, which has been
subsequently merged with other entities which
has no adverse impact on the country. It is a
manner of foreign direct investment by foreign
companies which the country is endeavouring
to secure and no fault can be found therewith.
His submission is that if closed transactions are
reopened by entities like ED, there is a
possibility of foreign direct investment not
coming into India.
9.33. He submits that the first Morgan Stanley loan
was taken by Headstrong Singapore (now
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Genpact Singapore) to infuse funds into
Empower India, Empower India thereafter used
the said funds to purchase 49% shares of
Genpact India, this loan and the share purchase
were subject to detailed scrutiny by the AO and
the TPO, both of whom approved it. The CIT
having invoked Section 263 of the IT Act,
treated the loan as a sham transaction
contending that there is a violation of the
capital gains provisions.
9.34. During those proceedings there was no
allegation made of round tripping, it is for the
first time now that allegation of round tripping
has been made which is also not found in the
reasons to believe in the order issued under
Section 37A of FEMA.
9.35. The Hon'ble Delhi High Court has said that
there is no violation, ED cannot raise the issue
now is his submission. Insofar as the loan
raised by Headstrong Singapore (now Genpact
Singapore), relating to equity investment, has
no connection or relevance to the NCDs, which
are subject matter of seizure order. He,
however, submits that any borrowing and
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repayment within 3 days were also approved by
TPO, AO, ITAT and the Hon'ble Delhi High
Court. Thus, even in regard thereto allegation
of round tripping is baseless.
9.36. As regard the NCD borrowing, he submits that
the same was required as Empower India had
to acquire 100% shareholding of Genpact India.
However, the equity infusion from Headstrong
Singapore(now Genpact Singapore) was not
sufficient and as such, Empower India had to
issue the NCDs to Genpact Luxembourg to raise
capital for the purpose of purchasing the rest of
51% of Genpact India, since even according to
the ED, Genpact India was a bigger entity.
9.37. The borrowing and repayment were completed
in 3 days, as these funds were necessary and
critical to complete the internal reorganisation;
no fault can be found with the speed of the
transaction. Mere speed cannot be a ground for
initiation of action by the ED and for the
attachment sought to be done. His submission
is that the entire action taken for borrowing, as
also for investment in equity, is genuine, bona
fide corporate transactions, as part of corporate
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restructuring of the Genpact group. There is no
mala fide intent in any of the transactions that
would warrant penal action against any
member of the Genpact group, including the
petitioner.
9.38. His submission is that the reliance placed by
the ED on the framework applicable to External
Commercial Borrowing is also misplaced. He
submits that this has been clarified by the RBI
in APDIR Circular No. 56 dated 3.03.2016 that
the ECB framework will not be applicable to
denominated NCDs. The NCD borrowing was
undertaken as per APDIR, Circular No. 89 dated
1.03.2012 and Circular No. 7 dated 16.07.2012
and not in terms of the ECB framework.
9.39. On all the above basis, he submits that the writ
petition in W.P. No. 7283/2026 and WP No.
16763 of 2026 are required to be allowed and
the reliefs sought for granted.
10. Heard Shri Arvind Datar, Learned Senior Counsel for
the Petitioner in WP No. 7283 of 2026; Shri Udaya
Holla, Learned Senior Counsel for the Petitioner in
WP No. 16763 of 2026; Shri N Venkataraman,
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Learned ASGI for the Respondents in both matters.
Perused papers.
11. The Points that would arise for determination are:
(i) Whether the present writ petitions are
maintainable under Articles 226 and 227
of the Constitution of India,
notwithstanding the alternate statutory
remedy available under FEMA?
(ii) If the writ petition challenging the seizure
is maintainable, whether Section 37A of
FEMA could be invoked in respect of the
transactions undertaken in January and
March 2015, having regard to the fact that
Section 37A came into force only on
09.09.2015; and, in particular, whether
the subsequent subsistence of the NCD
liability and payments made thereunder
between 2018 and 2023 constitute a
continuing or independent contravention
so as to attract Section 37A?
(iii) Whether the transactions relied upon by
the Enforcement Directorate, including the
borrowings by the non-resident entities,
the transfer of funds to Empower India,
acquisition of the shares of Genpact India,
issuance of the NCDs to Genpact
Luxembourg and the subsequent
repayment thereof, disclose a
contravention of Section 4 of FEMA so as
to constitute the jurisdictional facts
necessary for exercise of power under
Section 37A?
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(iv) Whether, on the material available to the
Authorised Officer at the time of passing
the seizure order, there existed the
requisite “reason to believe” under Section
37A(1) that the property in question was
held in contravention of Section 4 of FEMA;
and whether the validity of the seizure
order can be supported by reasons or
material subsequently relied upon by the
Enforcement Directorate before this Court?
(v) What is the effect, if any, of the regulatory
treatment of the transactions by the
Reserve Bank of India, SEBI and the
Income Tax authorities, including the
clarifications, permissions, assessments or
orders relied upon by the parties, on the
legality of the action taken under Section
37A?
(vi) In W.P. No.16763/2026, whether the
rejection dated 13.01.2026 of the
petitioner's application for No-Objection
Certificate under Rule 10 of the Foreign
Exchange Management (Overseas
Investment) Rules, 2022 is sustainable in
the absence of reasons disclosing the basis
for such rejection and the nexus between
the pending investigation and the
proposed overseas investment?
(vii) Whether the mere pendency of an
investigation by the Enforcement
Directorate is sufficient to refuse an NOC
under Rule 10, or whether such refusal
must be founded upon relevant, rational
and disclosed reasons having a
demonstrable nexus with the proposed
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investment; and whether the subsequent
seizure order dated 03.02.2026 can be
relied upon to sustain the earlier rejection
dated 13.01.2026?
(viii)What Order?
12. This Court answers the above points as follows:
13. Answer to Point No. (i): Whether the present
writ petitions are maintainable under Articles
226 and 227 of the Constitution of India,
notwithstanding the alternate statutory remedy
available under FEMA?
13.1. Sri Arvind Datar, learned Senior Counsel for the
petitioner in W.P. No.7283/2026, submits that
the existence of an alternate remedy does not,
by itself, bar the jurisdiction of this Court under
Article 226 of the Constitution. He submits that
the challenge in the petition is not based on
disputed questions of fact. The principal
questions are whether the Authorised Officer
had the power to invoke Section 37A in respect
of the transactions undertaken in January and
March 2015, when Section 37A was not in
force, and whether the seizure order records
the material necessary to satisfy the
requirement of “reason to believe” under
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Section 37A(1). According to him, these are
questions of law and jurisdiction which can be
examined by this Court in exercise of its writ
jurisdiction.
13.2. He further submits that where the very exercise
of statutory power is questioned, the existence
of an alternate remedy cannot compel a person
to first undergo the statutory process.
According to him, the petitioner is entitled to
seek examination of the jurisdictional objection
directly by this Court.
13.3. Shri Udaya Holla, learned Senior Counsel for
the petitioner in W.P. No.16763/2026, submits
that the rejection of the application for No-
Objection Certificate under Rule 10 of the
Foreign Exchange Management (Overseas
Investment) Rules, 2022 contains no reasons.
He submits that the absence of reasons,
coupled with the absence of an appellate
remedy against such rejection, attracts the
exception to the rule of alternate remedy. The
petitioner, therefore, cannot be required to
pursue a remedy which is not available under
the Rules.
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13.4. Shri N. Venkataraman, Learned ASGI, relies
upon Radha Krishan Industries v. State of
Himachal Pradesh [2021 SCC Online SC 334],
particularly paragraphs 27 and 28, and submits
that where a statute provides a complete and
efficacious remedy, the aggrieved party should
ordinarily pursue that remedy before
approaching this Court under Article 226.
13.5. He submits that Section 37A provides a
complete mechanism. The seizure order is
required to be placed before the Competent
Authority within thirty days. The Competent
Authority is then required to hear the
concerned parties and pass an order under
Section 37A(3), against which an appeal is
provided under Section 37A(5). According to
him, the petitioner has not exhausted this
statutory remedy.
13.6. Shri N. Venkataraman, Learned ASGI, also
relies upon Titaghur Paper Mills Co. Ltd. v.
State of Orissa [(1983) 2 SCC 433]
(paragraph 6), for the proposition that where a
statute provides a complete machinery for
examining the validity of an action, the party
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should ordinarily pursue that remedy instead of
approaching the High Court directly. He submits
that the issues raised in W.P. No.7283/2026
require examination of the cross-border loans,
share acquisitions, NCD transactions and
movement of funds between several entities.
These matters involve appreciation of facts and
material and should first be considered by the
Competent Authority under Section 37A(3). The
writ petition is, therefore, premature.
13.7. The rule that a writ petition should ordinarily
not be entertained where an effective alternate
remedy is available is a rule of judicial
discretion. It is not an absolute bar on the
exercise of jurisdiction under Article 226.
13.8. In Radha Krishan Industries, the Hon’ble
Supreme Court has considered the scope of this
rule in paragraphs 27 and 28. In paragraph
27.3, the Hon’ble Supreme Court has
recognised, among other circumstances, cases
involving breach of natural justice and cases
where the proceedings are wholly without
jurisdiction as exceptions to the rule of
alternate remedy.
Digitally Signed By:
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13.9. Thus, the existence of an alternate remedy is
only the starting point of the enquiry. This
Court must also consider the nature of the
challenge and the relief sought. If the challenge
falls within a recognised exception, this Court
may exercise its writ jurisdiction
notwithstanding the existence of a statutory
remedy.
13.10. In W.P. No.7283/2026, the nature of the
challenge is important. The petition does not
merely ask this Court to re-appreciate the
evidence or to substitute its view for that of the
Competent Authority. The petitioner raises a
threshold objection to the exercise of power
under Section 37A.
13.11. The first objection is based on time. The
transactions relied upon by the Enforcement
Directorate were undertaken in January and
March 2015, whereas Section 37A came into
force only on 09.09.2015. The question,
therefore, is whether Section 37A could legally
be invoked in respect of the transactions in
question.
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13.12. The second objection concerns the seizure
order itself. The petitioner contends that the
reasons now relied upon by the Enforcement
Directorate were not the reasons recorded by
the Authorised Officer when the seizure order
was passed. This question concerns the legality
of the decision-making process and the record
on which the statutory power was exercised.
13.13. These questions are different from the question
whether the underlying transactions were, in
fact, in contravention of Section 4 of FEMA.
13.14. The distinction between jurisdiction and merits
is also important. In Arun Kumar v. Union of
India [(2007) 1 SCC 732], (paragraphs 73 to
76 and 84 to 85), the Hon’ble Supreme Court
explained the concept of a jurisdictional fact. A
jurisdictional fact is a fact upon the existence of
which the authority’s power to act depends. If
such a foundational requirement is absent, the
authority cannot acquire jurisdiction merely by
assuming that it exists.
13.15. In the present case, the question whether
Section 37A could be invoked in respect of
transactions undertaken before the provision
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came into force goes to the statutory power of
the Authorised Officer. This Court can examine
that question without deciding the entire
dispute on merits.
13.16. The same approach must be adopted in relation
to the requirement of “reason to believe” under
Section 37A(1). There is a distinction between
examining whether the Authorised Officer
recorded reasons as required by law and
examining whether those reasons are sufficient,
on a detailed assessment of the material, to
establish a contravention of Section 4.
13.17. The latter exercise may require examination of
the underlying transactions, the movement of
funds, the corporate relationships, the NCDs,
the share acquisitions and the explanations
offered by the parties. Such an exercise is not
appropriate at this stage by this Court.
13.18. Shri N. Venkataraman, Learned ASGI, has
relied upon the decision of a coordinate Bench
of this Court in Xiaomi Technology India
Private Limited v. Union of India,
[W.P.No.9182/2022 dated 05.07.2022],
(paragraph 23). In that case, the coordinate
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Bench held that whether the Authorised Officer
had the requisite “reason to believe” and
whether the reasons recorded were sufficient to
sustain action under Section 37A were matters
for consideration by the Competent Authority.
The coordinate Bench observed that examining
the sufficiency of the reasons under Article 226
at that stage could prejudice either party.
13.19. This Court respectfully follows the said
principle. It would not be appropriate for this
Court to examine, at this stage, whether the
material relied upon by the Enforcement
Directorate is sufficient to establish a
contravention of Section 4. That question is left
to the Competent Authority in accordance with
Section 37A(3).
13.20. There is, however, a clear distinction between
the sufficiency of the recorded reasons and the
question whether the reasons now relied upon
were recorded at all. If a particular ground did
not form part of the reasons recorded by the
Authorised Officer, the question whether that
ground can subsequently be relied upon to
sustain the seizure order is a question
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concerning the decision-making process.
Examining that question does not require this
Court to decide whether the material itself is
sufficient.
13.21. The submission of Shri N. Venkataraman,
Learned ASGI, that the entire challenge must
first be taken before the Competent Authority
cannot, therefore, be accepted in that broad
form. The statutory mechanism under Section
37A is intended to enable the Competent
Authority to examine the seizure, consider the
material and decide whether the seizure should
be confirmed or set aside. That statutory
process must be respected. At the same time,
the existence of that process does not prevent
this Court from examining a challenge which
goes to the very authority to invoke Section
37A or to the legality of the decision-making
process.
13.22. This Court must, however, avoid converting the
writ proceedings into a full adjudication of the
FEMA dispute. Questions which require
appreciation of evidence and determination of
the substantive contravention should ordinarily
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be left to the authority entrusted with that
function.
13.23. The decision in Titaghur Paper Mills Co. Ltd.,
(paragraph 6), relied upon by Shri N.
Venkataraman, Learned ASGI, does not require
a different conclusion. The principle that where
a statute provides a complete machinery for
redressal of a grievance, the statutory remedy
should ordinarily be followed, is not in dispute.
The question is whether the present challenge
falls within the recognised exceptions to that
rule.
13.24. For the reasons stated above, the challenge to
the seizure order raises questions which
cannot, merely because an alternate remedy
exists, be excluded from consideration under
Article 226.
13.25. Accordingly, W.P. No.7283/2026 is maintainable
to the limited extent that it raises questions
concerning the statutory power to invoke
Section 37A and the legality of the decision-
making process reflected in the seizure order.
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13.26. In W.P. No.16763/2026, the position is
different. The challenge is to the rejection dated
13.01.2026 of the petitioner’s application for
No-Objection Certificate under Rule 10 of the
Overseas Investment Rules. The petitioner’s
specific grievance is that the application was
rejected without reasons.
13.27. A statutory authority exercising administrative
power is required to act fairly. Reasons are
important because they show that the authority
has applied its mind to the application and the
material placed before it. Reasons also enable
the affected party to understand why the
application has been rejected and enable the
Court to examine whether the decision is
lawful.
13.28. The absence of an appellate remedy is also
relevant. If the Rules do not provide an appeal
against rejection of a Rule 10 application, the
petitioner cannot be directed to pursue a
statutory remedy which does not exist. More
importantly, the challenge is based on the
alleged failure to follow a basic requirement of
fair administrative decision-making.
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13.29. The case therefore falls within the recognised
exception relating to natural justice referred to
by the Hon’ble Supreme Court in Radha
Krishan Industries, (paragraph 27.3).
13.30. This Court is, therefore, satisfied that W.P.
No.16763/2026 is maintainable under Article
226. The question whether the rejection dated
13.01.2026 is otherwise lawful, including
whether the decision contains proper reasons
and whether there is a rational nexus between
the pending investigation and the proposed
investment, will be considered separately.
13.31. For the above reasons, this Court answers Point
No. (i) by holding that both the present writ
petitions are maintainable under Articles 226
and 227 of the Constitution of India,
notwithstanding the alternate statutory remedy
available under FEMA in so far as WP No. 7283
of 2026 is concerned and in so far as WP 16763
of 2026, admittedly, there is no alternate
remedy available.
14. Answer to Point No. (ii): If the writ petition
challenging the seizure is maintainable,
whether Section 37A of FEMA could be invoked
in respect of the transactions undertaken in
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January and March 2015, having regard to the
fact that Section 37A came into force only on
09.09.2015; and, in particular, whether the
subsequent subsistence of the NCD liability and
payments made thereunder between 2018 and
2023 constitute a continuing or independent
contravention so as to attract Section 37A?
14.1. Sri Arvind Datar, learned Senior Counsel,
submits that the seizure order under Section
37A concerns the NCD transaction of March
2015 and not the equity transaction of January
2015. Sri Arvind Datar, learned Senior Counsel,
submits that the two transactions are separate
and that the January 2015 transaction had
already been examined by the Assessing Officer
and the Transfer Pricing Officer.
14.2. Sri Arvind Datar, learned Senior Counsel,
submits that the borrowing by Headstrong
Singapore in January 2015, the subsequent
repayment, the borrowing by Genpact Bermuda
in March 2015 and the issue of NCDs by
Empower India to Genpact Luxembourg on
25.03.2015 were all completed before Section
37A came into force on 09.09.2015.
14.3. Relying upon State of Bihar v. Deokaran
Nenshi, [(1972) 2 SCC 890], (paragraphs 8 to
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10), Sri Arvind Datar, learned Senior Counsel,
submits that a completed act does not become
a continuing wrong merely because its
consequences continue. The NCDs were issued
on 25.03.2015. The fact that the NCD liability
remained outstanding and was later discharged
cannot, according to Sri Arvind Datar, learned
Senior Counsel, give retrospective operation to
Section 37A.
14.4. The petitioner also rely upon Canara Bank v.
Commissioner of Customs, [WP
No.10895/2023] dt. 10.06.2024 particularly
paragraphs 2, 3, 6, 15 and 20. In that case, the
property had been mortgaged before Section
37A came into force and was subsequently
sought to be seized under Section 37A. At
paragraph 15, the coordinate Bench held that
Section 37A, being substantive in character,
could not be construed or treated as
retrospective or retroactive in operation. Sri
Arvind Datar, learned Senior Counsel, submits
that the decision has not been challenged by
the Enforcement Directorate and has attained
finality.
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14.5. Reliance is also placed upon Berger Paints
India Ltd. v. CIT, [(2004) 12 SCC 42]
(paragraph 14), in support of the principle that
a settled position should not be departed from
without a proper reason.
14.6. Sri Arvind Datar, learned Senior Counsel,
further relies upon Arun Kumar, (paragraphs
73 to 76 and 84 to 85). The submission is that
the existence of the conditions necessary for
exercise of statutory power goes to jurisdiction.
Since the transactions were completed before
09.09.2015, Section 37A could not, according
to Sri Arvind Datar, learned Senior Counsel, be
invoked in respect of those transactions.
14.7. Shri N. Venkataraman, Learned ASGI, submits
that the Enforcement Directorate is not seeking
to apply Section 37A retrospectively to a
completed transaction of 2015. The case is that
the transactions of January and March 2015
formed part of a larger arrangement which
continued to be implemented after Section 37A
came into force.
14.8. Shri N. Venkataraman, Learned ASGI, submits
that the NCD liability was subsequently
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discharged through payments made between
2018 and 2023, involving approximately INR
7,800 crore paid to Genpact Luxembourg. The
subsequent payments are not merely the
continued existence of a liability. They are
actual transactions which took place after
09.09.2015 and are relied upon by the
Enforcement Directorate as part of the
arrangement under investigation.
14.9. Sri N. Venkataraman, Learned ASGI, submits
that Section 4 of FEMA was already in force and
that Section 37A merely provides the
machinery for taking action where the
conditions prescribed by Section 37A are
satisfied.
14.10. As regards Canara Bank, Shri N.
Venkataraman, Learned ASGI, submits that the
facts are materially different. The case
concerned a mortgage created before Section
37A came into force and a subsequent seizure
affecting a third-party bank. There was no
allegation of a later act or acts forming part of
the contravention.
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14.11. The present case, according to Shri N.
Venkataraman, Learned ASGI, involves actual
payments and transfers between 2018 and
2023. Those acts occurred after Section 37A
came into force and form part of the case of the
Enforcement Directorate.
14.12. There is no dispute that Section 37A came into
force on 09.09.2015. The provision cannot be
applied retrospectively to a transaction which
was completely concluded before that date.
This is the principle laid down by the coordinate
Bench in Canara Bank, particularly paragraphs
2, 3, 6, 15 and 20. At paragraph 15, the
coordinate Bench held that Section 37A, being
substantive in character, cannot be construed
or treated as retrospective or retroactive in
operation. This Court follows the said principle.
14.13. The question, however, is whether the present
case is confined to transactions which were
completed before 09.09.2015. Ex facie it is not.
14.14. The Enforcement Directorate does not rely only
upon the creation of the NCD liability on
25.03.2015. Reliance is also placed upon
payments made between 2018 and 2023
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towards discharge of that liability. These
payments took place several years after Section
37A came into force.
14.15. The question, therefore, is not whether Section
37A could have been invoked in March 2015. It
plainly could not. The question is whether
subsequent acts, occurring after 09.09.2015
and alleged to form part of the same
arrangement, can be taken into account while
exercising the power under Section 37A. The
answer is yes.
14.16. The principle in State of Bihar v. Deokaran
Nenshi, (paragraphs 8 to 10), does not require
a different conclusion. The Hon'ble Supreme
Court held that a completed act does not
become a continuing wrong merely because the
consequences of that act continue. Thus, the
mere fact that the NCD liability remained
outstanding after 09.09.2015 would not, by
itself, make the issue of the NCDs a continuing
contravention. That, however, is not the case
relied upon by the Enforcement Directorate.
14.17. The Enforcement Directorate relies upon actual
payments made between 2018 and 2023. A
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payment made years after the original
transaction is a subsequent act. It is different
from the mere continuation of an existing
liability.
14.18. Whether those payments ultimately amount to
a contravention of Section 4 is a matter to be
considered under Point No. (iii). For the
purpose of the present point, the material fact
is that the payments took place after Section
37A came into force. This distinction also
answers the reliance placed upon Canara
Bank.
14.19. The coordinate Bench in Canara Bank was
concerned with a pre-existing security interest
created before Section 37A came into force.
The subsequent seizure sought to operate
against that pre-existing interest. There was no
allegation of any later act which itself formed
part of the alleged FEMA contravention.
14.20. The present case stands on a different footing.
The Enforcement Directorate relies upon actual
subsequent payments made between 2018 and
2023 and alleges that those payments were
part of the same arrangement.
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14.21. The ratio of Canara Bank, therefore, continues
to apply. Section 37A cannot be given
retrospective operation to the completed
transaction of 2015. But Canara Bank does
not prevent the Enforcement Directorate from
examining subsequent acts which occurred
after Section 37A came into force.
14.22. The principle in Berger Paints, (paragraph
14), does not alter this position. Consistency in
the application of law is important. At the same
time, this Court has to examine whether the
facts of the two cases are the same. There is no
departure from Canara Bank in the present
case. The principle laid down in paragraph 15 is
accepted and applied. The distinction is factual:
in Canara Bank, there was no subsequent act
of the nature relied upon in the present case.
14.23. The principle stated in Arun Kumar v. Union
of India, (paragraphs 73 to 76 and 84 to 85),
also requires the statutory conditions for
exercise of power to be satisfied. Those
conditions, however, cannot be examined only
by looking at the date on which the NCDs were
issued. The Enforcement Directorate relies upon
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subsequent acts which occurred after
09.09.2015. Such acts are part of the factual
basis for the action under Section 37A. The fact
that those acts arose out of an arrangement
which began in 2015 does not make the later
acts pre-09.09.2015 transactions.
14.24. The petitioner have also contended that the
NCD transaction, at the highest, concerns a
capital account transaction and would have to
be dealt with under the provisions governing
such transactions and the ordinary adjudicatory
machinery under Section 37. That issue
concerns the nature of the alleged FEMA
contravention and is more appropriately
considered under Point No. (iii). It does not
answer the present question.
14.25. For the present purpose, it is sufficient to hold
that the Enforcement Directorate was entitled
to take into account conduct which occurred
after Section 37A came into force while
examining whether the conditions of Section
37A were satisfied. The January 2015
transaction also cannot be said to become
irrelevant merely because Section 37A was not
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then in force. The January transaction cannot
itself be subjected to Section 37A
retrospectively. It may, however, be considered
as part of the factual background while
examining the March 2015 transaction and the
subsequent conduct. The relevance of the
January transaction is therefore to the factual
history of the arrangement and not to the
retrospective application of Section 37A.
14.26. This Court accordingly finds that the present
case is not one where Section 37A is sought to
be applied only to a transaction completed
before 09.09.2015. The original NCD
transaction took place in March 2015. The
liability arising from that transaction continued
thereafter. More importantly, actual payments
were made between 2018 and 2023. The
Enforcement Directorate relies upon those
payments as acts forming part of the
arrangement under investigation. Those
subsequent acts took place when Section 37A
was already in force. They can therefore be
taken into account while considering the
exercise of power under Section 37A.
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14.27. For the reasons stated above, this Court
answers Point No. (ii) in favour of the
Enforcement Directorate. Section 37A cannot
be applied retrospectively to the completed
transactions of January and March 2015 merely
because the consequences of those
transactions continued after 09.09.2015. The
principle stated in Canara Bank, particularly
paragraphs 2, 3, 6, 15 and 20, applies to that
extent. However, the action in the present case
is not based only upon the completion of the
transactions in 2015 or the mere subsistence of
the NCD liability. The Enforcement Directorate
relies upon actual payments made between
2018 and 2023, which occurred after Section
37A came into force and which are alleged to
form part of the arrangement under
investigation.
14.28. The fact that the arrangement originated in
2015 does not prevent subsequent acts forming
part of that arrangement from being examined
under the law in force when those acts
occurred. Accordingly, the invocation of Section
37A cannot be held invalid on the ground that
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the underlying arrangement commenced before
09.09.2015.
15. Answer to Point No. (iii): Whether the
transactions relied upon by the Enforcement
Directorate, including the borrowings by the
non-resident entities, the transfer of funds to
Empower India, acquisition of the shares of
Genpact India, issuance of the NCDs to Genpact
Luxembourg and the subsequent repayment
thereof, disclose a contravention of Section 4 of
FEMA so as to constitute the jurisdictional facts
necessary for exercise of power under Section
37A?
15.1. Sri Arvind Datar, learned Senior Counsel,
submits that the basic requirement for invoking
Section 37A is not satisfied. Section 37A can be
invoked only where the authorised officer has
reason to believe that foreign exchange,
security or immovable property situated outside
India is suspected to have been acquired or
held in contravention of Section 4 of FEMA.
According to Sri Arvind Datar, learned Senior
Counsel, the material relied upon by the
Enforcement Directorate does not disclose such
a contravention.
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15.2. Sri Arvind Datar, learned Senior Counsel,
submits that the borrowings from Morgan
Stanley were undertaken by non-resident
entities. The petitioner was not the borrower
under those facilities. The subsequent
movement of funds between non-resident
entities, according to Sri Arvind Datar, learned
Senior Counsel, cannot by itself amount to a
contravention of Section 4 by a person resident
in India.
15.3. Sri Arvind Datar, learned Senior Counsel,
submits that the NCD transaction was a
separate and regulated transaction. The NCDs
were denominated in Indian Rupees and were
subscribed to in India by Genpact Luxembourg,
a SEBI-registered Foreign Portfolio Investor.
The NCDs were listed within the prescribed
period, had a maturity exceeding three years,
and the subscription as well as subsequent
redemption and payment of interest were made
in Indian Rupees.
15.4. Sri Arvind Datar, learned Senior Counsel,
further submits that Empower India and the
resultant new Genpact India did not transfer
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any foreign exchange outside India in
connection with the subscription to or
repayment of the NCDs. The subsequent
repatriation by Genpact Luxembourg was
undertaken by a non-resident FPI under the
applicable regulatory framework. According to
Sri Arvind Datar, learned Senior Counsel, such
repatriation cannot retrospectively convert a
rupee transaction in India into a contravention
of Section 4.
15.5. Sri Arvind Datar, learned Senior Counsel, also
relies upon Section 6(3)(e) of FEMA, as it stood
at the relevant time. The submission is that the
provision specifically dealt with borrowing or
lending in Indian Rupees between a person
resident in India and a person resident outside
India. Therefore, if the allegation concerns the
NCD borrowing, the transaction has to be
examined under the specific statutory provision
governing such borrowing and cannot be
brought within Section 4 merely by describing
the transaction as part of a larger arrangement.
15.6. Reliance is placed upon APDIR Circular No.89
dated 1 March 2012, particularly paragraph 2,
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which permitted SEBI-registered FIIs and sub-
accounts to invest in primary issues of NCDs
and bonds subject to the prescribed conditions.
Sri Arvind Datar, learned Senior Counsel,
submits that the NCDs in question satisfied the
applicable listing requirement.
15.7. Reliance is also placed upon APDIR Circular
No.7 dated 16 July 2022, which expressly
recognises and regulates FPI investment in
Government securities and corporate bonds.
15.8. Sri Arvind Datar, learned Senior Counsel,
submits that the Reserve Bank of India was
approached regarding the transaction. Reliance
is placed upon the correspondence exchanged
with the Reserve Bank of India, including the
communication dated 15 February 2016, to
contend that the transaction, as disclosed to
the Reserve Bank of India, was accepted
subject to the applicable requirements.
15.9. Reliance is placed upon LIC v. Escorts Ltd.,
[(1986) 1 SCC 264], particularly paragraphs
63, 64 and 84, in support of the submission
that the Reserve Bank of India is the authority
entrusted with determining compliance with the
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foreign exchange regulatory framework and
that the Enforcement Directorate cannot
disregard such regulatory treatment in the
absence of legally recognised grounds.
15.10. Sri Arvind Datar, learned Senior Counsel, also
submits that the allegation of round-tripping is
misconceived. Reliance is placed upon
Vodafone International Holdings BV v.
Union of India [(2012) 6 SCC 613],
particularly paragraph 321. It is submitted that
round-tripping ordinarily involves money first
leaving India and thereafter returning to India
as foreign investment. In the present case,
according to Sri Arvind Datar, learned Senior
Counsel, the funds originated from Morgan
Stanley, an independent third-party lender. The
funds were thereafter brought into India and
subsequently moved out in the course of the
transactions relied upon by the Enforcement
Directorate. The funds had not first left India.
15.11. On this basis, Sri Arvind Datar, learned Senior
Counsel, submits that even if the transactions
are considered together, the material does not
disclose that the Indian resident acquired or
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held foreign exchange, foreign securities or
immovable property outside India in
contravention of Section 4.
15.12. Shri N. Venkataraman, Learned ASGI, submits
that the petitioner’s case proceeds by
separating transactions which, when viewed in
their proper sequence, formed part of a single
financial arrangement. He also places reliance
upon Vodafone International Holdings BV
v. Union of India, particularly paragraphs 79,
80, 81 and 249, to submit that the substance of
the arrangement and its commercial effect may
be examined rather than each formal step
being considered in isolation.
15.13. Shri N. Venkataraman, Learned ASGI, submits
that the material discloses two phases.
15.14. In the first phase, on 27 January 2015, Morgan
Stanley lent USD 660 million to Headstrong
Singapore and USD 12.5 million to Genpact
Global Holdings Bermuda. On 28 January 2015,
the funds were transferred to Empower India.
Empower India thereafter acquired 49% of the
shares in Old Genpact India, with Headstrong
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Singapore divesting 44% and Genpact
Mauritius divesting 5%.
15.15. On 30 January 2015, Headstrong Singapore
repaid the USD 660 million borrowed from
Morgan Stanley from the monies received from
Empower India as consideration for the sale of
shares.
15.16. Shri N. Venkataraman, Learned ASGI, submits
that the sequence of events is material. The
non-resident entity which sold the shares had,
according to the Enforcement Directorate,
provided the funds which enabled Empower
India to acquire those shares. The
consideration received by the seller was then
used to repay the very borrowing which had
financed the acquisition. The Enforcement
Directorate therefore contends that the
transaction was not an independent acquisition
funded by the purchaser, but part of a pre-
arranged circular movement of funds.
15.17. Shri N. Venkataraman, Learned ASGI, submits
that the second phase followed a similar
pattern. On 25 March 2015, Morgan Stanley
extended a USD 737.5 million loan to Genpact
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Global Holdings Bermuda. The amount was
transferred to Genpact Luxembourg. Genpact
Luxembourg subscribed to 4,600 NCDs issued
by Empower India, each having a face value of
INR 1 crore, aggregating to approximately INR
4,600 crore. Empower India thereafter
transferred the entire amount to Headstrong
Singapore towards acquisition of the remaining
51% of the shares in Old Genpact India. On 26
March 2015, Headstrong Singapore transferred
the amount to Genpact Global Holdings
Bermuda, which used the amount to repay the
Morgan Stanley borrowing.
15.18. The movement in the second phase may
therefore be summarised as:
Morgan Stanley to Genpact Bermuda to
Genpact Luxembourg to Empower India to
Headstrong Singapore to Genpact
Bermuda to Morgan Stanley.
15.19. Shri N. Venkataraman, Learned ASGI, submits
that the second phase cannot therefore be
treated merely as an isolated investment by
Genpact Luxembourg. The funds came into
India and were immediately transferred out.
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What remained in India was a substantial and
long-term NCD liability of Empower India.
According to the Enforcement Directorate, the
funds were not retained by Empower India for
its business operations. The economic burden
of the NCD liability remained with the Indian
business and was subsequently discharged
from Indian resources.
15.20. Shri N. Venkataraman, Learned ASGI, further
submits that the financial position of Empower
India is also relevant. Empower India had a
book value of approximately INR 40 crore and
did not possess substantial business operations
or meaningful assets capable of independently
funding the acquisition of Old Genpact India.
Old Genpact India, on the other hand, had
turnover exceeding INR 4,724 crore and free
reserves of approximately INR 8,000 crore.
15.21. According to the Enforcement Directorate,
following the amalgamation, the free reserves
of Old Genpact India became available to the
resultant New Genpact India, while the
resultant entity also assumed the NCD liability.
That liability was thereafter discharged between
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2018 and 2023, involving payments of
approximately INR 7,800 crore towards
principal and interest to Genpact Luxembourg.
15.22. Shri N. Venkataraman, Learned ASGI, submits
that the substance of the arrangement cannot
therefore be determined merely by looking at
the NCD documentation. The relevant question
is whether the NCD was an independent
investment or whether it formed one step in a
pre-arranged structure by which funds
originating from foreign borrowings were routed
through the Indian entity and thereafter
returned to the foreign group entities using the
free reserves of Old Genpact India, thus
amounting to a methodology of taking out the
profits and free reserves of Old Genpact India.
15.23. Reliance is also placed upon Xiaomi
Technology India Private Limited v. Union
of India, [W.P.No.9182/2022 dated
05.07.2022], particularly paragraph 23, to
submit that the Court should not undertake a
final examination of the sufficiency of the
material at this stage. The statutory scheme
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contemplates examination by the Competent
Authority under Section 37A(3).
15.24. The rival submissions have to be considered by
looking at the transactions in their proper
sequence. At the same time, Section 37A does
not permit seizure merely because a
transaction appears unusual or commercially
inconvenient. There must be material which
provides the statutory foundation for examining
whether foreign exchange, security or
immovable property situated outside India was
acquired or held in suspected contravention of
Section 4.
15.25. The question at this stage is therefore not
whether the Enforcement Directorate has finally
established the alleged FEMA contravention.
The question is whether the material relied
upon provides the jurisdictional foundation for
invoking Section 37A and examining the
transaction under Section 4.
15.26. In determining that question, the Court cannot
examine every movement of money as though
it had occurred independently of the other
transactions. Where a series of transactions
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takes place within a short period, involves the
same or connected entities and is alleged to
have been undertaken pursuant to a common
arrangement, the transactions can be
considered together.
15.27. The principle relied upon from Vodafone
International Holdings BV v. Union of
India, particularly paragraphs 79, 80, 81 and
249, is relevant in this regard. The Court can
examine the substance and commercial effect
of an arrangement where the formal structure
is alleged to conceal the real nature of the
transaction. At the same time, paragraph 321
relied upon by the petitioner also has to be kept
in view. The issue is therefore not to apply a
label such as "round-tripping", but to examine
the actual movement of funds and the purpose
and effect of the connected transactions. In the
present case, the material discloses a close
sequence of events in both phases.
15.28. In the first phase, the foreign borrowing was
raised by non-resident entities, the proceeds
were made available to Empower India,
Empower India acquired shares in the Indian
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company, and the consideration received by the
non-resident seller was thereafter used to
repay the foreign borrowing.
15.29. In the second phase, Morgan Stanley advanced
USD 737.5 million to Genpact Bermuda. The
amount moved to Genpact Luxembourg and
was thereafter invested in approximately INR
4,600 crore of NCDs issued by Empower India.
Empower India immediately transferred the
entire amount to Headstrong Singapore for
acquisition of the remaining shares in Old
Genpact India. Headstrong Singapore
thereafter transferred the amount to Genpact
Bermuda, which repaid the Morgan Stanley
borrowing.
15.30. This Court is conscious that each step was
supported by formal documentation. That,
however, does not prevent the Enforcement
Directorate from examining the transactions
together. The short interval between the
successive transfers, the identity and
relationship of the entities involved, the
financial position of Empower India, the
immediate onward transfer of the NCD
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proceeds, the purpose for which the NCD
structure was used, the subsequent
amalgamation and the later discharge of the
NCD liability are all relevant circumstances.
15.31. These circumstances, taken together, provide a
factual basis for the Enforcement Directorate to
examine whether the NCD investment was an
independent financial transaction or one
component of a larger arrangement.
15.32. The fact that the NCDs were denominated in
Indian Rupees does not, by itself, conclude the
issue under Section 4 or Section 37A. This
Court has to look at the transaction as a whole
and not only at the currency in which one
component of the arrangement was
denominated. Similarly, the fact that Genpact
Luxembourg was a SEBI-registered FPI and was
permitted to invest in NCDs does not make
every transaction undertaken by the FPI
immune from examination under FEMA. The
relevant question is whether the particular
transaction, viewed in its surrounding
circumstances, formed part of an arrangement
giving rise to the statutory consequences
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contemplated by FEMA. The submission that
Empower India or the resultant new Genpact
India did not itself transfer foreign exchange
outside India is a relevant consideration, but it
is not conclusive at this stage. The case of the
Enforcement Directorate is based on the entire
sequence of transactions, including the foreign
borrowings, the movement of the funds into
India, the NCD investment, the immediate
transfer of the NCD proceeds out of India and
the subsequent repayment of the foreign
borrowing.
15.33. The fact that the funds came into India and
thereafter left India does not, by itself, answer
the question. What is material is the manner in
which the entire arrangement operated and the
rights and liabilities created as a result.
15.34. This Court also finds significance in the fact
that, in the second phase, the funds introduced
into India were not retained by Empower India
for carrying on its business. The entire NCD
proceeds were transferred out towards
acquisition of the shares. The arrangement
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therefore left behind in India a substantial NCD
liability.
15.35. The liability was subsequently assumed by the
resultant Genpact India and was discharged
from the resources of the Indian business. The
payments made between 2018 and 2023,
aggregating approximately INR 7,800 crore
towards principal and interest, are therefore
relevant circumstances while examining the
manner in which the original arrangement
operated.
15.36. The financial capacity of Empower India is also
relevant. An entity with a book value of
approximately INR 40 crore acquiring an Indian
business having turnover exceeding INR 4,724
crore and free reserves of approximately INR
8,000 crore is a circumstance which the
Enforcement Directorate was entitled to
examine. The disparity does not, by itself,
establish a contravention. It does, however,
provide relevant material for considering
whether Empower India was the real economic
purchaser or was being used as an
intermediary in the arrangement.
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15.37. The subsequent discharge of the NCD liability
also cannot be completely separated from the
earlier transactions merely because the NCDs
were issued in 2015. The payments between
2018 and 2023 are actual subsequent acts.
They may ultimately be found either to
constitute part of the alleged contravention or
to provide evidence of the manner in which the
original arrangement operated. At the present
stage, they are relevant material which the
Enforcement Directorate was entitled to
consider.
15.38. Round Tripping: The submission that there
can be no round-tripping merely because the
funds originated with Morgan Stanley and did
not first leave India before being brought into
India cannot be accepted at this stage. Round-
tripping cannot be understood only in the
narrow sense of funds first leaving India and
thereafter returning to India as foreign
investment. What is required to be examined is
the movement of the funds as a whole,
including whether the funds travelled through a
circuitous route and ultimately returned to, or
came back under the control of, the entity from
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which the funds had originated, and whether,
during that movement, the funds were used in
a manner contrary to the applicable law.
15.39. In the present case, the fact that the initial
funds were advanced by Morgan Stanley, an
independent third-party lender, is certainly a
relevant circumstance. However, that fact by
itself does not conclude the question. The
material relied upon by the Enforcement
Directorate indicates that the funds advanced
by Morgan Stanley were routed through various
Genpact entities, brought into India, deployed
in the transactions involving Empower India
and the NCDs, and thereafter moved back
through the Genpact entities to Morgan Stanley
towards repayment of the very borrowings from
which the funds had originated.
15.40. Thus, even though the funds did not initially
leave India and thereafter return to India, the
relevant question is whether the funds, after
passing through the various entities and
transactions, ultimately travelled back to the
original source. If the answer to that question
is in the affirmative, the transaction cannot, at
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this stage, be taken outside the scope of an
allegation of “round-tripping” merely on the
ground that the initial source of the funds was a
foreign lender.
15.41. The expression "round-tripping" is, therefore,
required to be understood by reference to the
substance and movement of the funds rather
than by applying a fixed requirement that the
funds must necessarily have first originated in
India, left India and thereafter returned to
India. What is relevant is the circuit in which
the funds travelled, the entities through which
the funds moved, the purpose for which the
funds were deployed during that journey, and
whether the funds ultimately returned to the
source from which they had originated.
15.42. This is particularly relevant in the present case
because the Enforcement Directorate's
allegation is not merely that foreign funds were
brought into India. The allegation is that the
funds moved through a connected series of
transactions involving Morgan Stanley, the
Genpact entities, Empower India and the NCDs
and ultimately returned to Morgan Stanley
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through the Genpact entities. The fact that the
funds originated with Morgan Stanley,
therefore, does not by itself establish that the
transactions were genuine, nor does it, at this
stage, rule out the possibility of a circular or
round-tripping arrangement.
15.43. Whether the entire movement of funds
constituted a legitimate financing arrangement
or was structured in a manner resulting in a
contravention of FEMA or any other applicable
law is a matter which requires examination on
the basis of the complete transaction. At the
stage of examining the jurisdictional foundation
for action under Section 37A, this Court cannot
accept the narrower proposition that there can
be no round-tripping unless the funds first
leave India and subsequently return to India.
15.44. Accordingly, the fact that the funds originated
from Morgan Stanley and were thereafter
routed through foreign Genpact entities into
India does not, by itself, take the transaction
outside the scope of the Enforcement
Directorate's allegation. Since the material
indicates that the funds ultimately moved back
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to Morgan Stanley through the Genpact
entities, it cannot, at this stage, be held that
there was no “round-tripping” merely because
the initial funds were not Indian funds which
had first travelled outside India.
15.45. Section 6(3)(e): The reliance placed by Sri
Arvind Datar, learned Senior Counsel, upon
Section 6(3)(e), as it stood during the relevant
period, also requires consideration. That
provision specifically dealt with borrowing or
lending in Indian Rupees between a person
resident in India and a person resident outside
India. The provision is relevant because the
NCD transaction was denominated in Indian
Rupees. However, the existence of a specific
provision regulating rupee borrowing does not,
at this stage, conclude the inquiry under
Section 4 where the allegation of the
Enforcement Directorate extends beyond the
mere creation of a rupee liability.
15.46. The Enforcement Directorate does not rest the
entire case on the proposition that the NCD
borrowing, viewed in isolation, was prohibited.
The case is that the NCD formed one step in a
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larger arrangement involving foreign
borrowings, acquisition of the Indian company,
movement of funds through connected non-
resident entities and the eventual return of the
funds for discharge of the foreign borrowing.
15.47. Section 6(3)(e), therefore, cannot be treated as
excluding examination of the connected
transactions under Section 4 merely because
one component of the arrangement was a
rupee-denominated NCD.
15.48. Whether a particular act ultimately attracts
Section 4, Section 6 or any other provision of
FEMA is a matter for determination in the
statutory proceedings. For present purposes,
the existence of a regulated rupee transaction
does not prevent the Enforcement Directorate
from examining the connected transactions and
the substance of the arrangement.
15.49. Effect of RBI and SEBI Regulatory
Treatment: The regulatory history relied upon
by the petitioner is undoubtedly relevant. The
NCDs were listed securities, Genpact
Luxembourg was a SEBI-registered FPI, and
APDIR Circular No.89 dated 1 March 2012,
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particularly paragraph 2, recognised investment
by SEBI-registered FIIs and sub-accounts in
primary issues of NCDs and bonds subject to
the prescribed conditions. The NCDs were listed
within the stipulated period and had a maturity
exceeding three years. The Reserve Bank of
India was also approached regarding the
transaction. The correspondence relied upon by
the petitioner, including the communication
dated 15 February 2016, has to be taken into
account. These circumstances, however, do not
conclude the present issue. Compliance with
the formal requirements governing an FPI's
investment in NCDs does not necessarily
determine whether the transaction, when
viewed together with the surrounding
transactions, was undertaken for a purpose or
in a manner prohibited by FEMA.
15.50. The principle stated in LIC v. Escorts Ltd.,
particularly paragraphs 63, 64 and 84, is
relevant to the role of the Reserve Bank of
India in the foreign exchange regulatory
framework. That principle does not, however,
prevent the Enforcement Directorate from
examining material showing that a formally
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permissible transaction was used as one
component of a larger arrangement which is
alleged to have a different substantive
character.
15.51. The regulatory correspondence with the
Reserve Bank of India and the SEBI status of
Genpact Luxembourg are therefore relevant
circumstances, but they do not, at the
threshold, extinguish the jurisdiction of the
Enforcement Directorate to examine the
connected transactions.
15.52. This Court also does not accept the submission
that the FPI status of Genpact Luxembourg, by
itself, places the NCD transaction beyond
examination under FEMA. The regulatory
permission to undertake a particular category
of investment cannot be treated as an
immunity from examination of the manner in
which a particular transaction was structured
and implemented.
15.53. Income-Tax Proceedings: The decisions of
the Hon’ble Delhi High Court relied upon by the
petitioner also require consideration. Reliance is
placed upon Commissioner of Income Tax
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(International Taxation) v. Genpact
Consulting Singapore Pte Ltd., [ITA
No.103/2023], decided on 11 December 2024,
particularly paragraphs 9 to 12, and Genpact
Luxembourg S.A.R.L. v. Assistant
Commissioner of Income Tax, [W.P.(C)
No.7784/2022], decided on 8 August 2024,
particularly paragraphs 2, 12, 13, 14, 15 and
16.
15.54. The fact that certain tax proceedings or tax
characterisations did not survive judicial
scrutiny cannot be ignored. At the same time,
those proceedings arose under the Income Tax
Act and involved questions which are distinct
from the issues arising under FEMA.
15.55. The proceedings before the Hon’ble Delhi High
Court concerned the liability of foreign
companies. The question was whether a liability
which, according to the tax authorities, arose in
relation to the Indian company could be
fastened upon the foreign companies. The
Hon’ble Delhi High Court held, in substance,
that such liability could not, on the facts and
under the statutory scheme applicable to those
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proceedings, be imposed upon the foreign
companies, and the proceedings were
accordingly quashed.
15.56. The present proceedings stand on a different
footing. The transactions under consideration
involve an Indian company. The question before
this Court is not whether a liability of an Indian
company can be imposed upon a foreign
company. The question is whether the
transactions involving the Indian company,
when considered along with the connected
transactions involving the non-resident entities,
disclose the jurisdictional facts necessary for
action under Section 37A read with Section 4 of
FEMA.
15.57. The distinction is material. The decisions of the
Hon’ble Delhi High Court cannot be treated as
determining the FEMA issue in the present
case. At the same time, the findings recorded
by the Hon’ble Delhi High Court, including the
findings which resulted in the tax proceedings
being set aside, cannot be disregarded. Those
findings form part of the material which the
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Competent Authority would have to consider
while examining the case under FEMA.
15.58. The Petitioner would be entitled to place before
the Competent Authority the response of the
petitioner to the allegations of the Enforcement
Directorate, the explanation regarding the
transactions and the effect which, according to
Sri Arvind Datar, learned Senior Counsel, the
decisions of the Hon’ble Delhi High Court have
on the allegations made in the present
proceedings. These matters require
consideration by the Competent Authority in
accordance with the statutory scheme.
15.59. The statutory process, therefore, cannot be
short-circuited merely on the basis of the
decisions of the Hon’ble Delhi High Court in a
different but related proceedings. Equally, those
decisions cannot be treated as establishing the
FEMA position in favour of the petitioner. The
effect of the decisions, the explanation of the
petitioner and the material relied upon by the
Enforcement Directorate have to be considered
together by the Competent Authority.
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15.60. This Court accordingly holds that the decisions
of the Hon’ble Delhi High Court do not, by
themselves, either invalidate the proceedings
under FEMA or establish the alleged FEMA
contravention. The FEMA issue has to be
independently examined under the applicable
statutory framework, after considering the
material relied upon by the Enforcement
Directorate and the response of the petitioner.
15.61. On a cumulative consideration of the material,
this Court is satisfied that the Enforcement
Directorate had material which disclosed the
requisite jurisdictional foundation for examining
the transactions under Section 4 read with
Section 37A.
15.62. The conclusion rests not upon any single
transaction or circumstance, but upon the
combined effect of the two phases, the
connected movement of funds, the immediate
onward transfer of the amounts introduced into
India, the financial position of Empower India,
the NCD structure, the subsequent
amalgamation and the eventual discharge of
the substantial NCD liability.
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15.63. The two phases and/or their individual
components cannot, at this stage, be artificially
separated into unrelated transactions. The fund
movements ex-facie disclose a closely
connected structure involving the same group
of entities and successive steps undertaken
within a short period.
15.64. In particular, the second phase shows that the
USD 737.5 million borrowed from Morgan
Stanley moved to Genpact Luxembourg, was
deployed through the NCD investment in
Empower India, was immediately transferred by
Empower India towards acquisition of the
Indian company and thereafter moved through
the non-resident entities for repayment of the
Morgan Stanley borrowing. The NCD structure
also resulted in a substantial liability being left
in India. The funds were not retained by
Empower India for its business. They came into
India and were transferred out, while the
Indian entity was left with the NCD liability.
That liability was subsequently discharged from
the resources of the Indian business. Ex facie,
it appears that the fund movement was to
create a liability with the Indian Company,
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without the Indian Company receiving any
benefits. The later payments between 2018 and
2023 are therefore relevant to the examination
of the arrangement and cannot be excluded
merely because the NCDs were originally issued
in 2015.
15.65. This Court also takes into account the
substantial disparity between the financial
position of Empower India and the value of the
Indian business acquired. This was a
circumstance which the Enforcement
Directorate was entitled to consider in
examining whether Empower India was acting
as the real purchaser or as an intermediary
within the larger arrangement.
15.66. The formal regulatory features of the NCD
transaction do not lead to a different
conclusion. The listing of the NCDs, the FPI
status of Genpact Luxembourg, the applicable
APDIR Circulars and the correspondence with
the Reserve Bank of India are all relevant. They
may bear upon the ultimate determination of
the legality of particular steps. They do not,
however, prevent examination of the larger
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arrangement when the Enforcement Directorate
relies upon material beyond the mere fact of an
NCD investment.
15.67. The reliance upon Section 6(3)(e) also does not
defeat the jurisdictional foundation at this
stage. The Enforcement Directorate's case is
not confined to the proposition that a rupee-
denominated NCD was, by itself, prohibited.
The allegation concerns the manner in which
the NCD was used in conjunction with the
foreign borrowings, the acquisition of the
Indian company and the subsequent movement
and repayment of the funds.
15.68. The distinction between jurisdictional facts and
proof of the substantive contravention is
important. This Court is not, at this stage,
recording a final finding that every allegation
made by the Enforcement Directorate has been
established, in fact it does not. The question is
whether there was sufficient material to invoke
the statutory process under Section 37A, which
is answered in the affirmative.
15.69. As observed in Xiaomi Technology India
Private Limited v. Union of India,
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[W.P.No.9182/2022], (paragraph 23), the
statutory scheme contemplates examination by
the Competent Authority under Section 37A(3).
This Court, while exercising judicial review at
this stage, is not required to finally determine
the sufficiency of the material for confirmation
of the seizure as though it were conducting the
statutory adjudication itself.
15.70. The contention that Section 37A is without
jurisdiction merely because the NCDs were
denominated in Indian Rupees, because
Genpact Luxembourg was an FPI, or because
individual steps were supported by the
regulatory framework, therefore cannot be
accepted.
15.71. The Enforcement Directorate was entitled to
examine whether the NCD transaction, together
with the surrounding transactions, formed part
of an arrangement resulting in a contravention
of Section 4. The material relating to the two
phases and their individual components, the
connected fund flows, the financial position of
Empower India, the immediate onward transfer
of the funds, the subsequent amalgamation and
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the eventual discharge of the NCD liability
provides a sufficient factual foundation for such
examination.
15.72. This Court answers Point No. (iii) in favour of
the Enforcement Directorate by holding that the
material relied upon by the Enforcement
Directorate discloses the jurisdictional facts
necessary to invoke Section 37A and to
examine the transactions under Section 4 of
FEMA.
15.73. The transactions cannot, at this stage, be
viewed only as isolated borrowings, share
acquisitions or an independent NCD
investment. The connected sequence of
transactions, the movement of funds, the
immediate onward transfer of the NCD
proceeds, the financial position of Empower
India and the subsequent discharge of the NCD
liability provide sufficient material for the
exercise of jurisdiction under Section 37A.
15.74. This finding does not amount to a final
determination that the alleged contravention of
FEMA has been proved. The ultimate question
as to the precise nature of the contravention,
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the provision attracted and the consequences
flowing from it remain subject to the statutory
process contemplated under Section 37A,
including consideration by the Competent
Authority under Section 37A(3).
15.75. The challenge to the jurisdiction of the
Enforcement Directorate on the ground that the
NCD transaction was rupee-denominated,
formally regulated or undertaken by a SEBI-
registered FPI is, therefore, rejected at this
stage directing the Competent Authority to
examine all aspects in detail.
16. Answer to Point No. (iv): Whether, on the
material available to the Authorised Officer at
the time of passing the seizure order, there
existed the requisite "reason to believe" under
Section 37A(1) that the property in question
was held in contravention of Section 4 of FEMA;
and whether the validity of the seizure order
can be supported by reasons or material
subsequently relied upon by the Enforcement
Directorate before this Court?
16.1. Sri Arvind Datar, learned Senior Counsel,
submits that the belief formed by the
Authorised Officer under Section 37A(1) is
tentative and is required to be examined by the
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Competent Authority under sub-sections (2)
and (3). However, such belief must be based on
the material available to the Authorised Officer
at the time of seizure, and the reasons for
forming such belief must find place in the
seizure order.
16.2. Reliance is placed upon Sri Nisha v.
Enforcement Directorate, [2026 SCC OnLine
SC 517] (paragraph 30), in support of the
submission that the satisfaction of the
Authorised Officer at the stage of seizure is
preliminary and is subject to examination by
the Competent Authority. Sri Arvind Datar,
learned Senior Counsel, submits that the
preliminary nature of the satisfaction does not
permit the Enforcement Directorate to supply a
new basis for the seizure at a later stage.
16.3. Reliance is also placed upon Ravinder Kumar
v. State of Haryana, [2024 SCC OnLine SC
2495] (paragraphs 12 to 14), to submit that
"reason to believe" must have a rational and
sufficient basis in the material available to the
authority competent to take the decision. Sri
Arvind Datar, learned Senior Counsel, submits
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that the expression "round-tripping" and the
detailed theory of a circular movement of funds
now advanced before this Court do not appear
in the seizure order. According to Sri Arvind
Datar, learned Senior Counsel, the Enforcement
Directorate cannot improve the order by
supplying reasons which were not recorded
when the power was exercised.
16.4. Sri Arvind Datar, learned Senior Counsel,
further submits that the seizure order
substantially relies upon findings made in the
Income Tax proceedings and the alleged loss of
revenue on account of avoidance of Dividend
Distribution Tax. It is submitted that those
findings can no longer provide a valid
foundation after the Hon’ble Delhi High Court
upheld the order of the ITAT and restored the
original order of the Assessing Officer.
16.5. Reliance is placed upon Mohinder Singh Gill
v. Chief Election Commissioner, [AIR 1978
SC 851] (paragraph 8), to submit that an
administrative order has to stand on the
reasons contained in the order itself and cannot
subsequently be supported by a different basis.
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Sri Arvind Datar, learned Senior Counsel,
submits that the Enforcement Directorate
cannot now replace the basis recorded in the
seizure order with the round-tripping theory
advanced before this Court.
16.6. Reliance is also placed upon Celir LLP v.
Sumati Prasad Bafna, [2024 SCC OnLine SC
3727] (paragraphs 135 to 147), particularly the
discussion relating to the Henderson principle.
Sri Arvind Datar, learned Senior Counsel,
submits that a party is ordinarily expected to
present the complete case at the appropriate
stage and cannot substantially enlarge the case
at a later stage.
16.7. Sri Arvind Datar, learned Senior Counsel,
further relies upon Standard Chartered Bank
v. Enforcement Officer, Ministry of Home
Affairs, [2026 SCC OnLine SC 1368]
(paragraphs 30 to 35), and Union of India v.
Citi Bank, [(2022) 19 SCC 188] (paragraphs
19 to 24), to submit that even where no
specific limitation period is prescribed, statutory
power must be exercised within a reasonable
time.
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16.8. It is submitted that the seizure was made in
2026 in respect of transactions which took
place in 2015, while the investigation had been
pending since 2021. No adjudication complaint
had been filed during the intervening period.
According to Sri Arvind Datar, learned Senior
Counsel, the petitioner has cooperated
throughout, and there is no material to suggest
any attempt to place assets beyond the reach
of the authorities.
16.9. Sri Arvind Datar, learned Senior Counsel,
submits that the property seized is the
petitioner's head office at Gurgaon and that
seizure of the principal place of business of an
established company is disproportionate,
particularly when there is no demonstrated risk
of dissipation or removal of assets. It is
therefore submitted that a power intended to
be pre-emptive and protective cannot, after
such a long period, be permitted to operate in a
punitive manner.
16.10. Shri N. Venkataraman, Learned ASGI, submits
that the issue before the Income Tax Appellate
Tribunal and the Hon’ble Delhi High Court was
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different from the question arising under FEMA.
The tax proceedings concerned the exercise of
revisionary jurisdiction under Section 263 of
the Income Tax Act and the liability of the
foreign companies under that statutory
framework. Those proceedings did not
determine whether the connected borrowings,
NCD issuance, movement of funds and
subsequent repayments constituted a
contravention of FEMA.
16.11. Shri N. Venkataraman, Learned ASGI, submits
that the Enforcement Directorate does not rely
upon the Income Tax proceedings as
establishing the FEMA contravention. The case
under FEMA rests upon the fund movements
and the connected transactions which were
independently examined by the Enforcement
Directorate.
16.12. Shri N. Venkataraman, Learned ASGI, submits
that the allegation now described as "round-
tripping" is not a new case. The underlying
facts were already recorded in the seizure
order. At page 101, the order records that
funds were routed in a circular manner and
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returned to Morgan Stanley within three days
without commercial substance. At page 151,
the order records that the inflow and outflow of
funds showed that the FDI was being used as a
routing mechanism rather than as genuine
capital infusion. At page 112, the order records
that the FDI, NCD borrowing and downstream
investment operated as a closed-loop
arrangement returning to the original source.
Further, Page 120 contains a diagram depicting
the same movement of funds within the
Genpact group.
16.13. Shri N. Venkataraman, Learned ASGI, submits
that the expression "round-tripping" is only a
description of the facts already recorded in the
seizure order. The use of a different expression
before this Court does not amount to
introducing a new factual foundation.
16.14. As regards delay, Shri N. Venkataraman,
Learned ASGI, submits that the investigation
commenced in 2021 when the NCD liability was
still being discharged. The investigation
concerns multiple entities, jurisdictions and
financial transactions extending over a
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considerable period. The time taken must
therefore be considered in the context of the
complexity of the investigation and cannot, by
itself, be treated as evidence that the requisite
belief was absent.
16.15. On the seizure of the head office, Shri N.
Venkataraman, Learned ASGI, submits that
Section 37A permits seizure of property
representing the value involved in the alleged
contravention. The choice of the property to be
seized is within the assessment of the
Authorised Officer and does not, by itself, affect
jurisdiction. Shri N. Venkataraman, Learned
ASGI, submits that the petitioner has not
established that the value of the property
seized is disproportionate to the value involved
in the alleged contravention.
16.16. The objections raised under this point concern
two separate matters. The first is whether the
seizure order itself contained the material
forming the basis for the "reason to believe"
under Section 37A(1), or whether the
Enforcement Directorate is attempting to
introduce a new basis before this Court. The
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second concerns the delay between the
transactions and the seizure. These questions
have to be considered separately.
16.17. Whether the seizure order contains the
material relied upon by the Enforcement
Directorate: The law is clear that the validity
of a statutory order has to be examined on the
basis of the reasons disclosed in the order. The
authority cannot ordinarily supplement an order
by introducing an entirely new reason after the
decision has been made. This principle assumes
particular importance where the power
exercised is the power of seizure under Section
37A.
16.18. The question, therefore, is whether the
Enforcement Directorate is now relying upon a
new factual foundation or is merely explaining
the facts already recorded in the seizure order.
16.19. Having examined the portions of the seizure
order referred to by Shri N. Venkataraman,
Learned ASGI, this Court finds that the
essential facts relating to the alleged circular
movement of funds were already recorded in
the order. The seizure order records the
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movement of funds to and from the entities
concerned, the return of funds to Morgan
Stanley within a short period, the absence of
what the Enforcement Directorate considered to
be genuine capital infusion, and the closed-loop
nature of the transactions. The order also
contains a diagram depicting the movement of
funds.
16.20. The fact that the expression "round-tripping"
may not have been used in the same form at
every place does not alter the position. A
statutory order is required to disclose the
material facts and the basis of the satisfaction.
It is not necessary for the order to use a
particular expression or legal label to describe
those facts.
16.21. The charts and diagrams relied upon before this
Court stand on the same footing. The charts
and diagrams are only a depiction of the
transactions and fund movements already
recorded in the seizure order. They do not
contain any new transaction, new fact or new
allegation. They have only been used as a tool
to present the sequence of transactions in a
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simple and easily understandable manner to
this Court, considering that this Court would
have to understand the complex nature of
transactions forming part of these proceedings.
A complicated movement of funds through
several entities can be difficult to understand
when the transactions are spread across
different paragraphs and documents. A chart
merely brings the same transactions together
and presents them in a connected form. The
use of such a chart does not amount to
supplementing the reasons in the seizure order.
16.22. This Court has therefore examined the
underlying transactions and fund movements as
recorded in the seizure order. The charts are
only a convenient mode of explaining that
material and do not constitute an independent
basis for sustaining the seizure order.
16.23. This conclusion is consistent with Mohinder
Singh Gill v. Chief Election Commissioner,
(paragraph 8). The principle in that decision
prevents an authority from supplying an
entirely new reason for an order after the
event. It does not prevent the authority from
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explaining or presenting more clearly the facts
which were already considered and recorded
when the order was passed.
16.24. The same distinction answers the reliance
placed upon Celir LLP v. Sumati Prasad
Bafna, (paragraphs 135 to 147). The
Enforcement Directorate cannot be permitted to
substitute an entirely different foundation for
the seizure order. However, that is not what has
occurred in the present case. The underlying
facts relied upon before this Court are already
reflected in the seizure order, and the
subsequent submissions merely explain the
manner in which those facts are connected.
16.25. Whether the delay invalidates the seizure:
The next question is whether the lapse of time
between the transactions and the seizure is, by
itself, sufficient to invalidate the seizure order.
16.26. Reliance has been placed upon Standard
Chartered Bank v. Enforcement Officer,
Ministry of Home Affairs, (paragraphs 30 to
35), and Union of India v. Citi Bank,
(paragraphs 19 to 24), is relevant. Those
decisions recognise that even where the statute
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does not prescribe a limitation period, statutory
power must be exercised within a reasonable
time having regard to the circumstances of the
case.
16.27. The delay in the present case is undoubtedly
substantial. The principal transactions took
place in 2015 and the seizure was made in
2026. The investigation commenced in 2021.
These circumstances require consideration.
16.28. However, the delay cannot be considered in
isolation. The case of the Enforcement
Directorate is that the investigation concerns a
complex series of transactions involving several
entities, more than one jurisdiction and
financial records extending over a considerable
period. The investigation also continued while
the NCD liability was being discharged between
2018 and 2023.
16.29. This distinguishes the present case, at least at
the threshold, from a case of unexplained
inaction where nothing occurred during the
entire intervening period. A long investigation
into a complicated cross-border financial
arrangement cannot, without more, be equated
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with a complete failure to act. This Court
therefore does not consider the delay, by itself,
sufficient to invalidate the seizure order.
16.30. At the same time, the age of the transactions,
the period for which the investigation has
remained pending, the cooperation extended by
the petitioner and the absence of any material
suggesting that the petitioner has attempted to
place assets beyond the reach of the authorities
are relevant circumstances. These matters will
have to be considered by the Competent
Authority while deciding whether continuation
of the seizure remains justified under Section
37A(2) and (3). The fact that delay does not
destroy jurisdiction at the threshold does not
mean that delay is irrelevant to the
continuation of the seizure.
16.31. Seizure of the Head Office: The petitioner
has also objected to the seizure of the head
office at Gurgaon.
16.32. Section 37A permits seizure of property
representing the value involved in the alleged
contravention. The provision does not, at the
threshold, confine the power of seizure to
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property which has no operational use. The
choice of the property to be seized is ordinarily
a matter for the Authorised Officer, having
regard to the material available and the
statutory purpose of securing the property.
16.33. No material has been placed before this Court
at this stage to establish that the value of the
property seized is so disproportionate to the
value alleged to have been involved as to
render the seizure arbitrary.
16.34. This Court is nevertheless conscious that the
property seized is the principal place of
business of an established company. The
practical effect of such seizure, particularly
where the company has continued its business
and there is no material suggesting an attempt
to dissipate or remove assets, is a relevant
consideration.
16.35. That consideration, however, goes primarily to
whether the seizure should continue and on
what terms. Section 37A(2) and (3) provide the
statutory mechanism through which the
Competent Authority can consider these
matters.
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16.36. This Court therefore does not find the seizure of
the head office, by itself, sufficient to invalidate
the seizure order at the threshold. However, the
fact that the property has been seized cannot
be understood as preventing the petitioner
from continuing to carry on its business
activities from the said premises. The purpose
of seizure under Section 37A is to secure the
property and to prevent the person concerned
from dealing with, transferring, alienating or
otherwise disposing of the property contrary to
the order of seizure. The seizure is not, by
itself, intended to bring the business operations
of the petitioner to a standstill or to prevent the
petitioner from using the premises for carrying
on its ordinary business activities.
16.37. The petitioner would therefore be entitled to
continue its lawful business operations from the
said premises, subject of course to the seizure
and without creating any third-party rights in,
transferring, alienating, encumbering or
otherwise dealing with the property in a
manner inconsistent with the seizure. The
protection afforded by the seizure is against
dealing with the property; it does not, by itself,
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extend to restricting the petitioner's lawful use
of the premises for carrying on its business.
16.38. This distinction is important, particularly
because the property seized is the head office
from which the petitioner carries on its
business. Any interpretation of the seizure
which prevents the petitioner from using the
premises for its ordinary business operations
would travel beyond the immediate purpose of
securing the property and would have
consequences which are distinct from the
seizure itself. Such consequences would require
separate justification in law.
16.39. Finding on "Reason to Believe": The
question ultimately is whether, on the material
available to the Authorised Officer when the
seizure order was passed, there existed a basis
for the requisite "reason to believe" under
Section 37A(1).
16.40. Section 37A requires the existence of such
belief before the power of seizure can be
exercised. Sri Nisha v. Enforcement
Directorate, (paragraph 30), makes it clear
that the satisfaction at this stage is preliminary
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and is subject to consideration by the
Competent Authority under Section 37A(2) and
(3). The fact that the satisfaction is preliminary
does not mean that this Court can disregard
the material which was actually before the
Authorised Officer.
16.41. In the present case, the seizure order, when
read as a whole, records the material relating
to the movement of funds, the circular flow
alleged by the Enforcement Directorate, the
return of funds to Morgan Stanley, the absence
of genuine capital infusion as alleged, the
relationship between the entities, the NCD
transaction and the connected movement of
funds.
16.42. This Court is also unable, at this stage, to hold
that the subsequent Income Tax decisions
automatically nullify the independent FEMA
inquiry. The tax proceedings and the FEMA
proceedings operate under different statutory
frameworks and concern different questions.
The effect of the tax decisions will have to be
considered by the Competent Authority along
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with the petitioner’s response and the other
material.
16.43. This Court is not, while deciding this point,
required to determine whether the material
ultimately establishes the alleged FEMA
contravention. That is the statutory function of
the Competent Authority under Section 37A(3).
The question before this Court is narrower:
whether the seizure order had a sufficient
factual basis for the Authorised Officer to form
the requisite belief under Section 37A(1). On
that question, this Court finds in favour of the
Enforcement Directorate.
16.44. This Court answers Point No. (iv) by holding
that the seizure order, read as a whole and with
reference to the material recorded and relied
upon in the order, contains the factual basis on
which the Authorised Officer could form the
requisite "reason to believe" under Section
37A(1). The Enforcement Directorate has not,
in the present case, sought to sustain the
seizure by introducing an entirely new factual
foundation before this Court. The charts and
diagrams relied upon by the Enforcement
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Directorate are only a depiction of the
transactions and fund movements already
recorded in the seizure order. They contain no
new transaction, fact or allegation. They have
only been used as a tool for explaining the
sequence of transactions in an easy and
understandable manner. The use of such charts
does not amount to supplementing the reasons
in the seizure order.
16.45. The ultimate question of whether the material
is sufficient to establish the alleged
contravention of Section 4, whether the seizure
should be confirmed and whether the seizure
should continue is left to the Competent
Authority in accordance with Section 37A(2)
and (3), after considering the response of the
petitioner and all relevant material.
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17. Answer to Point No. (v): What is the effect, if
any, of the regulatory treatment of the
transactions by the Reserve Bank of India, SEBI
and the Income Tax authorities, including the
clarifications, permissions, assessments or
orders relied upon by the parties, on the
legality of the action taken under Section 37A?
17.1. It is submitted that the NCD transaction was
placed before the Reserve Bank of India even
before it was undertaken. Sri Arvind Datar,
learned Senior Counsel, submits that the
proposed transaction was discussed with the
RBI on a no-name basis in late 2014 through
the petitioner’s consultants and that the RBI's
response dated 07.01.2015 indicated that the
proposed transaction was permissible.
17.2. It is further submitted that, after the
transaction, Empower India sought a
clarification from the RBI by letter dated
12.12.2015, disclosing the names of the
entities involved. By letter dated 15.02.2016,
the RBI considered the NCD borrowing and
indicated that the transaction was acceptable
subject to the NCDs having a minimum
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maturity of three years, which requirement was
satisfied. SEBI is also stated to have provided
guidance on 30.11.2018 regarding compliance
with the applicable restrictions.
17.3. Relying upon LIC v. Escorts Ltd., (paragraphs
63, 64 and 84), Sri Arvind Datar, learned Senior
Counsel, submits that the RBI is the statutory
authority entrusted with determining
compliance with foreign exchange law. Once
the competent regulator has considered and
accepted a transaction, another authority
cannot subsequently take a contrary view on
the same matter, except in circumstances such
as mala fides, non-application of mind or action
contrary to law. None of those circumstances,
according to Sri Arvind Datar, learned Senior
Counsel, exists in the present case.
17.4. Sri Arvind Datar, learned Senior Counsel,
further submits that the transaction was
examined in the Income Tax proceedings and
that the petitioner succeeded in those
proceedings. The ITAT, in ITA
No.501/DEL/2021, by order dated 13.06.2022,
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set aside the reassessment proceedings against
Genpact Singapore.
17.5. The Hon’ble Delhi High Court, Commissioner
of Income Tax (International Taxation) v.
Genpact Consulting Singapore Pte Ltd.,
[ITA No.103/2023], decided on 11 December
2024.
17.6. It is also submitted that the Hon’ble Delhi High
Court in Genpact Luxembourg S.A.R.L. v.
Assistant Commissioner of Income Tax,
[W.P.(C) No.7784/2022], decided on 8 August
2024, quashed the proceedings initiated against
Genpact Luxembourg under Sections 148A and
148 of the Income Tax Act.
17.7. By placing reliance upon Commissioner of
Income Tax (International Taxation) v.
Genpact Consulting Singapore Pte Ltd.,
particularly paragraphs 9 to 12. It is submitted
that the Hon’ble Delhi High Court held that a
DDT liability alleged to arise in the hands of
Genpact India could not, on that basis, make
the assessment of Genpact Singapore
erroneous or prejudicial to the Revenue, since
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such liability, if attracted, would be that of
Genpact India and not the foreign assessee.
17.8. According to Sri Arvind Datar, learned Senior
Counsel, these decisions, together with the RBI
and SEBI regulatory treatment, demonstrate
that the transactions were repeatedly examined
by competent authorities and were not found to
be unlawful. Reliance is also placed upon the
RBI's compounding order dated 22.11.2023.
17.9. Sri Arvind Datar, learned Senior Counsel,
submits that the Enforcement Directorate
cannot now take a contrary position in respect
of the same transactions without identifying
any changed circumstance or new legal basis.
Reliance is placed upon Sivanandan C.T. v.
High Court of Kerala, [(2024) 3 SCC 799]
(paragraph 44), for the principle that
consistency and predictability in the actions of
public authorities are important aspects of the
rule of law and fairness under Article 14.
17.10. Sri Arvind Datar, learned Senior Counsel,
further points out that the pending SLP in
SLP(C) No.025934/2026 concerns ITA
No.103/2023, relating to the equity/share
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transaction and Genpact Consulting Singapore.
The decision in Genpact Luxembourg SARL
v. Assistant Commissioner of Income Tax,
which concerns the NCD transaction, has not
been challenged. Since the seizure order
concerns the NCD transaction, Sri Arvind Datar,
learned Senior Counsel, submits that the
decision directly relevant to the seizure has
attained finality.
17.11. Shri N. Venkataraman, Learned ASGI, submits
that the RBI and SEBI correspondence does not
amount to a statutory permission of the kind
considered in LIC v. Escorts Ltd. As regards
the 2014 correspondence, Shri N.
Venkataraman, Learned ASGI, points out that
the transaction was discussed on a no-name
basis. The RBI was not informed of the identity
of the parties or the complete relationship
between the entities involved. The subsequent
correspondence was concerned with specific
aspects of the NCD transaction, including the
maturity requirement. Similarly, the SEBI
guidance dealt with the applicable restrictions
relating to NCDs.
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17.12. It is submitted that neither the RBI nor SEBI
was asked to consider whether the entire
arrangement, including the movement of funds
through the various Genpact entities, was
structured in a manner which resulted in value
being moved out of India. Compliance with the
requirements applicable to an NCD, therefore,
cannot be treated as an approval of the entire
arrangement.
17.13. On the Income Tax proceedings, Shri N.
Venkataraman, Learned ASGI, submits that
those proceedings arose under a different
statute and concerned different questions. The
proceedings relating to Genpact Luxembourg
concerned the proposed recharacterisation of
interest income as dividend income for the
purpose of reopening the assessment. The ITAT
proceedings concerned the requirements for
exercise of revisionary jurisdiction under
Section 263.
17.14. According to Shri N. Venkataraman, Learned
ASGI, though those proceedings are related
and relevant neither proceeding examined
whether the entire funding arrangement
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constituted round-tripping or contravened
Section 4 of FEMA. A decision under the Income
Tax Act therefore cannot prevent an
independent examination under FEMA.
17.15. As regards Sivanandan C.T. v High Court of
Kerala, (paragraph 44), Shri N. Venkataraman,
Learned ASGI, submits that consistency can be
required only where an earlier authority has
actually decided the same issue. Since the RBI,
SEBI and Income Tax authorities did not
determine whether the arrangement as a whole
contravened Section 4 of FEMA, there is no
earlier determination from which the
Enforcement Directorate has departed.
17.16. Shri N. Venkataraman, Learned ASGI, further
submits that the RBI's compounding order
dated 22.11.2023 concerned a specific delay in
filing Form FC-GPR and did not amount to a
finding that the entire transaction was
compliant with FEMA.
17.17. The regulatory and tax history of the
transactions is undoubtedly relevant. The fact
that the petitioner approached the RBI,
obtained correspondence concerning the NCDs,
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dealt with SEBI and succeeded in certain
Income Tax proceedings cannot simply be
ignored. The question, however, is what those
proceedings actually decided.
17.18. The principle in LIC v. Escorts Ltd.,
(paragraphs 63, 64 and 84), has to be applied
having regard to the nature of the decision
taken by the regulator. Where a statutory
authority has considered the very question
entrusted to it and granted the requisite
permission, another authority cannot ordinarily
reopen that decision merely because another
view is possible. That is not the position here.
17.19. The 2014 correspondence was admittedly on a
no-name basis. The RBI was therefore not
considering the transaction with knowledge of
the identity of the parties or the complete
arrangement between them. Empower India
subsequently sought a name-based clarification
from the RBI regarding the NCD borrowing by
letter dated 12.12.2015. The RBI, by letter
dated 15.02.2016, considered the terms of the
NCD borrowing and clarified, inter alia, that the
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NCDs were required to have a minimum
maturity period of three years.
17.20. The question placed before the RBI was
therefore principally whether the NCD
borrowing satisfied the applicable regulatory
requirements, including the requirement
relating to its maturity. The RBI was not called
upon to examine the entire movement of funds
forming part of the arrangement, namely, the
flow from Morgan Stanley through the Genpact
entities into India and the subsequent
movement of the funds through the Genpact
entities back to Morgan Stanley. The RBI's
clarification regarding the NCD borrowing
cannot, therefore, be treated as an examination
or approval of the entire transaction from
Morgan Stanley back to Morgan Stanley.
17.21. The same applies to the SEBI guidance relied
upon by the petitioner. The material placed
before this Court does not show that SEBI
examined whether the entire sequence of
transactions, viewed as one arrangement, was
structured to move value out of India.
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17.22. There is a distinction between examining
whether an NCD satisfies the regulatory
requirements applicable to that instrument and
examining whether the NCD formed part of a
larger arrangement which, in substance, may
have resulted in a contravention of Section 4 of
FEMA. The RBI and SEBI correspondence is
therefore relevant, but it does not conclude the
larger question now raised by the Enforcement
Directorate.
17.23. The Income Tax proceedings stand on a similar
footing. The decisions of the Hon’ble Delhi High
Court in Genpact Luxembourg SARL v.
Assistant Commissioner of Income Tax and
Commissioner of Income Tax
(International Taxation) v. Genpact
Consulting Singapore Pte Ltd., have to be
understood in the context of the proceedings
before that Court.
17.24. Those proceedings concerned the tax liability of
the foreign Genpact entities under the Income
Tax Act. In substance, the Hon’ble Delhi High
Court was considering whether the statutory
requirements for reopening or revising the
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assessments of those foreign entities had been
satisfied. The Hon’ble Delhi High Court was not
deciding whether the overall transaction
contravened Section 4 of FEMA.
17.25. This distinction is important. The Hon’ble Delhi
High Court was dealing with foreign companies,
whereas the present proceedings concern the
transactions involving the Indian company and
the consequences alleged to arise under FEMA.
17.26. The finding that a tax liability of Genpact India
could not be fastened upon Genpact Singapore
does not determine whether the same
underlying transactions can be examined under
FEMA in proceedings concerning Genpact India.
The two questions arise under different statutes
and serve different purposes.
17.27. The fact that the decision in Genpact
Luxembourg SARL concerning the NCD
transaction has not been challenged does not
alter this position. The decision is final as to the
tax issue decided in that proceeding. It does
not constitute a final determination of the FEMA
question, which was not before the Hon’ble
Delhi High Court.
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17.28. The petitioner is, of course, entitled to rely
upon the reasoning and findings in those
decisions before the Competent Authority. The
decisions cannot be ignored merely because
they arose under the Income Tax Act. Equally,
they cannot be treated as having decided a
question which was never before the Hon’ble
Delhi High Court.
17.29. The RBI's compounding order dated 22.11.2023
does not conclude the issue. The compounding
was confined to the specific lapse concerning
filing of Form FC-GPR and cannot be treated as
approval of the entire arrangement under
FEMA.
17.30. The NCD liability had already been discharged
before the compounding order, through
payments made between the financial years
2018 and 2023. The chronology of these
payments may nevertheless be relevant while
considering the subsequent conduct of Genpact
India and the course of the Enforcement
Directorate's investigation. These
circumstances may be considered by the
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Competent Authority while examining the
matter under Section 37A.
17.31. The principle of consistency relied upon from
Sivanandan C.T., (paragraph 44), does not
assist the petitioner to the extent contended.
Consistency requires an earlier decision on the
same question. There is no material to show
that the RBI, SEBI or the Income Tax
authorities examined and decided whether the
entire funding arrangement, taken as a whole,
contravened Section 4 of FEMA. This Court
therefore does not find any inconsistency in the
Enforcement Directorate examining a question
which those authorities had not decided.
17.32. This does not mean that the earlier regulatory
treatment has no relevance. On the contrary, it
is an important circumstance which the
Competent Authority must take into account.
The fact that the petitioner sought clarification
from the RBI before and after the transaction,
the regulatory treatment of the NCDs, the SEBI
correspondence, the Income Tax proceedings
and the RBI compounding order are all matters
which form part of the factual background.
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17.33. This Court has already found that, at the
threshold, the transactions cannot be
considered only by looking at the individual
instruments or individual steps in isolation. The
question whether the arrangement, viewed as a
whole, resulted in a contravention of Section 4
is a separate question.
17.34. This Court makes it clear that the earlier
regulatory and judicial proceedings must be
considered fairly and in their proper
perspective. The Competent Authority shall
consider the explanation of the petitioner,
including the effect which the Hon’ble Delhi
High Court decisions are said to have on the
allegations made by the Enforcement
Directorate, before taking a final decision under
Section 37A.
17.35. The RBI and SEBI communications establish
that particular aspects of the NCD transaction
were placed before and considered by the
respective authorities. They do not, however,
establish that the entire arrangement, including
the movement of funds through the various
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entities, was examined and approved from the
standpoint of Section 4 of FEMA.
17.36. This Court answers Point No. (v) by holding
that the earlier regulatory and tax proceedings
do not invalidate the action taken under Section
37A. The RBI and SEBI communications
establish that particular aspects of the NCD
transaction were placed before and considered
by the respective authorities. They do not,
however, establish that the entire arrangement,
including the movement of funds through the
various entities, was examined and approved
from the standpoint of Section 4 of FEMA.
Likewise, the decisions of the Delhi High Court
under the Income Tax Act concern the liability
and assessment of the foreign Genpact entities
and do not determine the separate question
arising under FEMA in relation to the Indian
company. The earlier proceedings are therefore
relevant material, but they do not foreclose the
Enforcement Directorate's examination of the
transaction under Section 4.
18. Answer to Point No. (vi): In W.P.
No.16763/2026, whether the rejection dated
13.01.2026 of the petitioner's application for
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No-Objection Certificate under Rule 10 of the
Foreign Exchange Management (Overseas
Investment) Rules, 2022 is sustainable in the
absence of reasons disclosing the basis for such
rejection and the nexus between the pending
investigation and the proposed overseas
investment?
18.1. Shri Udaya Holla, Learned Senior Counsel for
the petitioner, submits that the letter dated
13.01.2026 rejecting the petitioner's
application for issuance of a No Objection
Certificate under Rule 10 of the Foreign
Exchange Management (Overseas Investment)
Rules, 2022 is wholly unreasoned. The
communication does not disclose the material
considered by the Competent Authority, the
basis for rejection or the manner in which the
proposed investment in Genpact Global (IFSC)
Private Limited is connected with the pending
investigation.
18.2. Reliance is placed on Times Internet Ltd. v.
Enforcement Directorate, [2024 SCC OnLine
Del 8937] (paragraphs 15–17, 20, 22, 23 and
25–30), as also on A.K. Kraipak v. Union of
India, [(1969) 2 SCC 262] (paragraph 17),
Mohinder Singh Gill v. Chief Election
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Commissioner, [AIR 1978 SC 851] (paragraph
8), Siemens Ltd. v. State of Maharashtra,
[(2006) 12 SCC 33] (paragraphs 9–11), and
K.I. Shephard v. Union of India, [(1987) 4
SCC 431] (paragraph 16).
18.3. Shri Udaya Holla, Learned Senior Counsel,
submits that the reasons now sought to be
advanced on behalf of the Enforcement
Directorate cannot cure the defect in the
impugned communication. The decision must
stand on the reasons recorded at the time
when the decision was made.
18.4. Shri N. Venkataraman, Learned ASGI, submits
that the proposed investment cannot be
considered in isolation from the transactions
which are the subject matter of the pending
investigation. The proposed Gift City Entity is
wholly owned by the petitioner and is intended
to function as a global treasury centre for the
Genpact group, including by providing financial
facilities to entities situated outside India.
18.5. It is submitted that the proposed investment
would therefore place funds of the petitioner
with an entity whose activities are directed
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towards financing overseas entities. Having
regard to the transactions already under
investigation, the Enforcement Directorate was
justified in examining whether the proposed
investment has a nexus with the matters under
investigation.
18.6. Shri N. Venkataraman, Learned ASGI, further
submits that the investigation involves sensitive
material and that the Enforcement Directorate
could not be expected to disclose every aspect
of the investigation while communicating the
decision under Rule 10. It is also submitted that
the petitioner is aware of the investigation and
the circumstances which led to the refusal of
the NOC. Shri N. Venkataraman, Learned ASGI,
has further submitted that this Court could
issue an appropriate direction enabling the time
available for receiving the investment to be
extended by the concerned authority.
18.7. The issue before this Court at this stage is not
whether the petitioner has a substantive right
to obtain the No Objection Certificate. The
question is whether the rejection
communicated on 13.01.2026 can be sustained
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when the communication itself discloses no
reason for the decision.
18.8. The letter dated 13.01.2026 merely states that
the request for issuance of the NOC has been
rejected by the Competent Authority and that
the same is being intimated for information and
necessary action. The communication does not
disclose the basis of the rejection.
18.9. This Court accepts that an investigating agency
may, in an appropriate case, be required to
protect sensitive information. Rule 10 cannot be
understood as requiring disclosure of material
which may prejudice an ongoing investigation.
Confidentiality of investigation, however, does
not dispense with the requirement of a
reasoned decision. The authority may withhold
sensitive particulars, but the substance of the
ground for refusal must still be communicated.
18.10. The submission of Shri N. Venkataraman,
Learned ASGI, regarding the proposed Gift City
Entity cannot be said to be without substance.
The proposed entity is intended to operate as a
global treasury centre and to provide financial
facilities to overseas Genpact entities. The
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proposed investment would therefore result in
funds being placed with an entity whose
activities are directed towards financing entities
outside India. When this circumstance is
considered together with the transactions which
are the subject matter of the pending
investigation, the Enforcement Directorate
cannot be said to have been wholly without
basis in examining the proposed investment.
18.11. This Court is therefore not holding that the
Enforcement Directorate had no basis to
examine or object to the proposed investment.
Nor is this Court expressing any final opinion as
to whether the proposed investment in the Gift
City Entity in fact has a nexus with the
transactions under investigation. That question
must be considered by the Competent Authority
in the first instance.
18.12. The difficulty, however, is that none of these
matters finds place in the communication dated
13.01.2026. The reasons now advanced during
the hearing may explain why the application
was considered objectionable, but those
reasons cannot convert an otherwise
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unreasoned decision into a reasoned one. The
principle stated by the Hon’ble Supreme Court
in Mohinder Singh Gill v. Chief Election
Commissioner, paragraph 8, therefore
applies.
18.13. The decision in Times Internet Ltd. v.
Enforcement Directorate, is also relevant. In
paragraphs 22 and 23, the Hon’ble Delhi High
Court considered a similarly bare rejection
under Rule 10 and held that a decision of that
nature could not be sustained when substantive
reasons were not disclosed. Paragraphs 25 to
30 further emphasise the requirement that the
decision must disclose a clear, cogent and
rational basis and that the existence of an
investigation cannot, by itself, result in an
indefinite restraint upon legitimate business
activity.
18.14. This Court is conscious that Times Internet
Ltd. does not mean that the Enforcement
Directorate is precluded from refusing an NOC
merely because an investigation is pending.
The facts and circumstances of each case have
to be considered and an order of rejection if
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passed has to be accompanied by sufficient
reasons for the purposes of effective Judicial
review. This Court is also not holding that the
petitioner is entitled to the NOC. The defect lies
in the manner in which the decision has been
made and communicated.
18.15. The petitioner must therefore be given an
effective opportunity to place before the
Competent Authority all relevant facts,
documents and material, including the
explanation regarding the transactions which
are the subject matter of the investigation and
the proposed investment in Genpact Global
(IFSC) Private Limited. The Competent
Authority must thereafter consider the material
placed by the petitioner together with the
material otherwise available on record and take
a fresh decision in accordance with Rule 10 and
the applicable law.
18.16. Accordingly, the communication dated
13.01.2026 is set aside and the matter is
remitted to the Competent Authority for fresh
consideration.
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18.17. This Court answers Point No. (vi) by holding
that in W.P. No.16763/2026, the rejection dated
13.01.2026 of the petitioner's application for
No-Objection Certificate under Rule 10 of the
Foreign Exchange Management (Overseas
Investment) Rules, 2022 is not sustainable in
the absence of reasons disclosing the basis for
such rejection and the nexus between the
pending investigation and the proposed
overseas investment.
19. Answer to Point No. (vii): Whether the mere
pendency of an investigation by the
Enforcement Directorate is sufficient to refuse
an NOC under Rule 10, or whether such refusal
must be founded upon relevant, rational and
disclosed reasons having a demonstrable nexus
with the proposed investment; and whether the
subsequent seizure order dated 03.02.2026 can
be relied upon to sustain the earlier rejection
dated 13.01.2026?
19.1. Shri Udaya Holla, Learned Senior Counsel for
the petitioner, submits that the mere pendency
of an investigation by the Enforcement
Directorate cannot, by itself, be a ground to
refuse a No Objection Certificate under Rule 10
of the Foreign Exchange Management
(Overseas Investment) Rules, 2022. Rule 10
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itself contemplates an application by a person
who is under investigation. If the pendency of
an investigation were sufficient by itself to
justify refusal, there would be little purpose in
having such a provision.
19.2. It is submitted that there must be a connection
between the investigation and the particular
investment for which the NOC is sought. The
Gift City Entity is a separate entity incorporated
for a specific purpose, namely, global treasury
and cash-pooling activities. It had no role in the
transactions of 2015 which are under
investigation.
19.3. It is further submitted that the seizure order
dated 03.02.2026 cannot be relied upon to
justify the rejection dated 13.01.2026 since the
seizure order came into existence subsequently.
Reliance is placed on Mohinder Singh Gill v.
Chief Election Commissioner, particularly
paragraph 8.
19.4. Shri Udaya Holla, Learned Senior Counsel, also
submits that remitting the matter to the same
authority would serve no useful purpose.
Reliance is placed on Siemens Ltd. v. State of
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Maharashtra, [(2006) 12 SCC 33], paragraphs
9 to 11) and K.I. Shephard v. Union of
India, [(1987) 4 SCC 431], paragraph 16. It is
submitted that the Enforcement Directorate has
already taken a clear position in these
proceedings and has relied upon grounds which
were not stated in the rejection letter.
19.5. It is therefore submitted that the rejection
should be set aside without remanding the
matter and that the petitioner should be
permitted to make the limited investment
necessary to preserve the registration of the
Gift City Entity, namely USD 0.2 million towards
capital and USD 12,500 towards the
registration fee. The balance investment of USD
99.8 million, it is submitted, can await further
orders.
19.6. Shri N. Venkataraman, Learned ASGI, submits
that the Enforcement Directorate is not treating
the pendency of the investigation as an
automatic bar. The objection is to the particular
investment proposed by the petitioner. It is
submitted that the Gift City Entity is proposed
to function as a global treasury centre and to
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provide treasury and lending facilities to
Genpact group entities outside India. The
proposed investment would therefore place
funds of Genpact India with an entity whose
activities are intended to facilitate financial
transactions with overseas entities. According
to the Enforcement Directorate, this has a
direct connection with the subject matter of the
investigation, which includes the alleged
movement of value generated in India through
overseas group entities.
19.7. Shri N. Venkataraman, Learned ASGI, submits
that Genpact India is not required to provide
the funds and that other Genpact entities could
fund the Gift City Entity. It is therefore
submitted that the approaching deadline for
making the investment does not justify allowing
the investment without a proper consideration
under Rule 10.
19.8. As regards remand, Shri N. Venkataraman,
Learned ASGI, submits that defending the
rejection order before this Court does not mean
that the matter has been finally decided or that
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the Competent Authority will not consider the
matter afresh.
19.9. Shri N. Venkataraman, Learned ASGI, has also
submitted that this Court may issue an
appropriate direction enabling the concerned
regulatory authority to extend the time
available for making the investment and for the
Gift City Entity to receive the investment.
19.10. The first question is whether the mere
pendency of an investigation is sufficient to
refuse an NOC under Rule 10. In the opinion of
this Court, it is not. Rule 10 specifically
provides a mechanism by which a person who
is under investigation can seek an NOC for an
overseas investment. The existence of an
investigation, therefore, cannot by itself be
treated as a ground for refusal. The authority
must consider whether there is a reasonable
connection between the investigation and the
investment proposed. That, however, does not
mean that the proposed investment in the
present case is wholly unrelated to the
investigation. The Gift City Entity is proposed to
function as a global treasury centre and to
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provide financial facilities to overseas Genpact
entities. The proposed investment would
consequently involve funds of Genpact India
being placed with an entity whose activities are
directed towards financing entities outside
India.
19.11. The investigation concerns, among other
matters, the alleged movement of value from
India through overseas entities. In that
background, the proposed investment cannot
be said to have no connection at all with the
subject matter of the investigation. The
Enforcement Directorate is entitled to examine
whether the proposed investment has any
bearing on the matters under investigation. The
difficulty is that this connection does not appear
from the rejection dated 13.01.2026. The
communication simply states that the request
for the NOC has been rejected. It does not
explain why the proposed investment was
considered objectionable or how it was
connected with the investigation.
19.12. The subsequent seizure order dated 03.02.2026
cannot cure this defect. The seizure order was
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passed after the rejection of the NOC
application. The validity of the decision dated
13.01.2026 has to be examined on the basis of
the reasons and material which were available
when that decision was made. A subsequent
order cannot supply reasons which were absent
from the earlier decision. The principle laid
down in Mohinder Singh Gill v. Chief
Election Commissioner, paragraph 8, applies.
19.13. The position is different when the matter is
considered afresh. The seizure order dated
03.02.2026 is now part of the record. The
Competent Authority, while reconsidering the
application, may take into account that order
and any other material which is relevant and
can lawfully be considered. The subsequent
seizure order cannot, however, be used to
retrospectively validate the rejection dated
13.01.2026.
19.14. The petitioner has also contended that the NOC
should be deemed to have been granted
because the period of sixty days under Rule 10
has expired. This submission cannot be
accepted.
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19.15. The application was made on 26.11.2025. The
sixty-day period had not expired when the
Enforcement Directorate communicated the
rejection on 13.01.2026. Rule 10 provides for a
presumption of no objection where the
concerned agency fails to furnish the certificate
within sixty days. In the present case, there
was a response within that period. The fact that
the response is found to be inadequate because
it did not disclose reasons does not make it a
failure to respond for the purpose of the
deeming provision. The defect in the present
case is the absence of adequate reasons and
not the absence of a response within the
prescribed period.
19.16. This Court has also considered the submission
that a remand would be an empty formality in
view of Siemens Ltd. v. State of
Maharashtra, [(2006) 12 SCC 33]
(paragraphs 9 to 11) and K.I. Shephard v.
Union of India, [(1987) 4 SCC 431],
(paragraph 16).
19.17. Those decisions apply where the circumstances
show that the authority has already made up
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its mind and that a further hearing would serve
no real purpose. The material before this Court
does not establish such a situation. The
Enforcement Directorate has defended the
rejection in these proceedings and has
explained the connection which, according to
the Enforcement Directorate, exists between
the proposed investment and the investigation.
That, by itself, does not establish that the
Competent Authority will refuse to consider the
matter afresh. There is no statement or
material showing that the Competent Authority
has closed its mind to the petitioner's
explanation or documents.
19.18. There is another reason why the matter should
be remitted. This Court has found that the
connection relied upon by the Enforcement
Directorate is not wholly without substance.
The problem is that the connection was not
stated in the rejection letter. It would therefore
not be appropriate to direct the investment to
proceed without first giving the Competent
Authority an opportunity to consider the matter
and pass a proper order.
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19.19. A short, time-bound remand will serve both
purposes. It will give the petitioner an
opportunity to place the relevant material
before the Competent Authority and will enable
the Enforcement Directorate to take a fresh
decision by applying its mind to that material.
19.20. This Court is also conscious of the time limit
attached to the regulatory approval of the Gift
City Entity. The existing extension is stated to
be valid only up to 15.09.2026. If the matter is
remitted without addressing this time limit, the
petitioner may lose the benefit of the
regulatory approval for no reason other than
the time taken in reconsidering the NOC
application.
19.21. Shri N. Venkataraman, Learned ASGI, has
submitted that an appropriate direction may be
issued to enable the concerned regulatory
authority to extend the time for making and
receiving the investment. In view of this
submission, the concerned regulatory authority
shall consider such request in accordance with
the applicable regulatory framework.
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19.22. This Court, however, is not inclined to permit
the investment to be made before the
Competent Authority takes a fresh decision
under Rule 10. Whether the petitioner should
be permitted to make the investment is a
matter for the Competent Authority to consider
in the first instance. Accordingly, the
communication dated 13.01.2026 is set aside
and the matter is remitted to the Competent
Authority for fresh consideration.
19.23. The petitioner shall be at liberty to place before
the Competent Authority all relevant facts,
documents and material on which the petitioner
seeks to rely in support of the application for
issuance of the NOC, within ten days from the
date of receipt of a certified copy of this order.
The petitioner shall also be entitled to place the
petitioner's explanation concerning the
transactions under investigation and the
proposed investment in the Gift City Entity.
19.24. The Competent Authority shall consider the
material placed by the petitioner, together with
the material otherwise available on record, and
shall take a fresh decision within ten days from
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the date on which the petitioner places the
complete material before the Competent
Authority.
19.25. The Competent Authority shall communicate a
reasoned decision to the petitioner. If any
material or part of the reasons cannot lawfully
be disclosed because disclosure would prejudice
the ongoing investigation or compromise
matters required to be kept confidential, the
Competent Authority may withhold such
sensitive particulars. This shall not prevent the
Competent Authority from communicating the
substance of the ground on which the
application is accepted or rejected.
19.26. The remand is not a direction to issue the NOC.
The Competent Authority shall independently
consider whether the requirements of Rule 10
are satisfied and whether there is any lawful
ground for withholding the NOC. All contentions
of the parties regarding the merits of the
proposed investment and its alleged nexus with
the transactions under investigation are left
open for consideration by the Competent
Authority.
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19.27. This Court has taken note of the submission of
Shri N. Venkataraman, Learned ASGI, that an
appropriate direction may be issued to enable
the time available to the petitioner for making
the investment and for Genpact Global (IFSC)
Private Limited to receive the investment to be
extended.
19.28. Since the present extension is stated to be valid
only up to 15.09.2026, the concerned
regulatory authority shall consider, in
accordance with the applicable regulatory
framework, the request for extension of the
time available to the petitioner for making, and
to Genpact Global (IFSC) Private Limited for
receiving, the proposed investment. If, upon
fresh consideration, the Competent Authority
decides the application in favour of the
petitioner and issues the requisite NOC,
Genpact Global (IFSC) Private Limited shall be
permitted to receive the proposed investment,
subject to the applicable FEMA, RBI, IFSCA and
other regulatory requirements and the terms
and conditions of the NOC, within ten days from
the date of such favourable decision.
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19.29. The direction regarding extension of time shall
not be construed as a direction to make or
receive the proposed investment without the
requisite statutory and regulatory approvals.
The investment shall be made and received
only after the requisite NOC and all other
applicable permissions are in place.
19.30. This court answers Point No. (vii) by holding
that the mere pendency of an investigation by
the Enforcement Directorate is not sufficient to
refuse an NOC under Rule 10, such refusal
must be founded upon relevant, rational and
disclosed reasons having a demonstrable nexus
with the proposed investment, the subsequent
seizure order dated 03.02.2026 cannot be
relied upon to sustain the earlier rejection
dated 13.01.2026 and sets aside the rejection
order dated 13.01.2026 and remands the
matter to the competent authority subject to
the above directions.
20. Answer to Point No. (viii): What Order?
20.1. In view of the answers to Points No. (i) to (vii),
this Court passes the following
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ORDER
(i) W.P. No.7283/2026 is dismissed.
(ii) The interim order staying the operation of the
seizure order dated 03.02.2026 is vacated.
However, the seizure of the head-office
premises shall not prevent the petitioner from
continuing its lawful business operations from
the said premises. The petitioner shall not
create any third-party rights in the property or
transfer, alienate, encumber or otherwise deal
with the property in any manner inconsistent
with the seizure order.
(iii) W.P. No.16763/2026 is allowed in part.
(iv) The communication dated 13.01.2026 rejecting
the petitioner's application dated 26.11.2025
for issuance of NOC under Rule 10 of the
Foreign Exchange Management (Overseas
Investment) Rules, 2022, is set aside. The
matter is remitted to the Competent Authority
for fresh consideration.
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(v) The petitioner shall be at liberty to place all
relevant facts, documents and material before
the Competent Authority within ten days from
the date of receipt of a certified copy of this
order. The Competent Authority shall consider
the material placed by the petitioner and pass a
fresh, reasoned and speaking order within ten
days from the date of receipt of the complete
submission.
(vi) If the application is rejected, the order shall
disclose the basis for such rejection and, to the
extent permissible in law, the nexus between
the pending investigation and the proposed
investment. Sensitive or confidential material
need not be disclosed in full, but the substance
of the grounds relied upon shall be
communicated sufficiently to enable the
petitioner to understand the basis of the
decision.
(vii) The concerned regulatory authority shall
consider, in accordance with the applicable
regulatory framework, the extension of the time
available to the petitioner to make, and to the
Gift City Entity to receive, the proposed
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investment, particularly since the existing
extension is stated to expire on 15.09.2026.
(viii) In the event a favourable NOC is issued, the
Gift City Entity may receive the proposed
investment within ten days from the date of
such favourable decision, subject to compliance
with FEMA, RBI, IFSCA and all other applicable
statutory and regulatory requirements and the
terms of the NOC.
(ix) The direction for consideration of extension of
time shall not be construed as permission to
make or receive the proposed investment in the
absence of the NOC or any other approval,
permission or compliance required under law.
(x) All contentions on the substantive merits of the
pending investigation, the alleged transactions,
the alleged contravention of FEMA and the
nexus between the investigation and the
proposed investment are left open for
consideration by the appropriate authority in
accordance with law.
(xi) Nothing stated in this order shall be construed
as an expression of opinion on the ultimate
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merits of the pending proceedings or on the
petitioner's entitlement to the proposed
investment.
(xii) There shall be no order as to costs.
This Court has been assisted by Mr. Sourav, Law Clerk, in
the formulation of this Judgement.
Digitally Signed By:
SURAJ GOVINDA RAJ
17/09/2026, 18:35, Bengaluru
Verified
(SURAJ GOVINDARAJ)
JUDGE
SR/LN/KTY
List No.: 3 Sl No.: 1
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