Karnataka HC grants interim relief to Cafe Coffee Day in FEMA case
Bengaluru: The Karnataka High Court on Wednesday granted relief to the Indian retail cafe chain Cafe Coffee Day (CCD) in connection with the case lodged by the Enforcement Directorate (ED) under the provisions of the Foreign Exchange Management Act, 1999 (FEMA).
The CCD had challenged the proceedings under FEMA in court.
The Bench, headed by Justice B.M. Shyam Prasad, passed the order in this regard.
The court has directed the ED to postpone the personal hearing of the representatives of CCD, scheduled to be held on January 30.
The court further stated that the order will be binding on the ED till the court hears CCD’s plea on February 23.
The direction has been given to the Special Officer attached to the ED.
The court had earlier granted interim relief to CCD’s CEO, Malavika Hegde, on January 19 and stayed the FEMA proceedings against her. Both matters have been listed for further consideration on February 23.
Senior Advocate Sajan Poovayya, appearing on behalf of CCD, argued that the Enforcement Directorate cannot conduct a personal hearing unless the FEMA authority first records, in writing, the reasons for deciding that an inquiry is necessary.
He further submitted that these written reasons must be communicated to the person or entity receiving the notice well in advance, as required under FEMA rules and an internal circular.
“This due procedure was not followed, and the framing of charges under the FEMA against the CCD chain is not permissible in law,” he submitted.
The FEMA proceedings were initiated following the receipt of Foreign Direct Investment (FDI) by the Cafe Coffee Day Enterprises Limited (CDEL) in 2010. The FEMA had alleged that foreign funds were utilised for the acquisition of shares in Indian companies in violation of provisions and regulations under the FEMA.
The CCD had filed a petition before the court following the issuance of notice on January 7 under the provisions of Rule 4 (3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000.
The Court noted Advocate Sajan Poovayya’s argument that the FEMA proceedings are connected to an Enforcement Directorate case registered in 2022, even though the alleged events date back to around 2009.
The CCD argued that this long delay makes the FEMA proceedings invalid. After hearing these initial arguments, the Court asked the ED to present its response in the case.