Delhi High Court Upholds FEMA Summons, Rejects Petitioner's Gender-Based Exemption Claim

Court rules that FEMA investigations fall under Civil Procedure Code, dismissing the plea for territorial and gender safeguards under the Criminal Procedure Code.

In a significant judgment, the Delhi High Court, presided over by Justice Neena Bansal Krishna, has dismissed a writ petition filed by Smt. Poonam Gahllot challenging the summons issued by the Directorate of Enforcement (ED) under Section 37 of the Foreign Exchange Management Act, 1999 (FEMA). The petitioner contended that as a woman, she should not be compelled to appear in person at the ED office, citing procedural safeguards available under the Criminal Procedure Code (Cr.P.C.).

The petitioner, a Canadian citizen residing in Delhi, argued that the summons violated Section 160 of the Cr.P.C., which provides that no woman should be required to attend any place other than where she resides. The petitioner further asserted that the FEMA proceedings should be governed by the Cr.P.C. due to its investigative nature akin to criminal investigations.

The court, however, clarified that the powers under Section 37 of FEMA are analogous to those under Section 131 of the Income Tax Act, which are governed by the Civil Procedure Code (CPC). Justice Krishna highlighted that FEMA proceedings are civil-administrative in nature, distinct from the criminal proceedings under the Prevention of Money Laundering Act (PMLA), thereby not attracting the territorial or gender safeguards under the Cr.P.C.

The court further elaborated that the issuance of summons under Section 37 FEMA is akin to a civil process for the production of documents and personal appearance, and does not equate to criminal summons that would invoke Cr.P.C. protections. The insistence on the petitioner's personal appearance was deemed necessary for the investigation into foreign exchange contraventions.

The court also distinguished between the statutory frameworks of FEMA and PMLA, noting that while PMLA involves criminal prosecution, FEMA concerns civil-regulatory contraventions. Therefore, procedural safeguards under Cr.P.C. do not apply to FEMA proceedings.

In light of these observations, the court dismissed the writ petition, reinforcing that FEMA investigations are to be conducted under the CPC, thereby negating the applicability of Section 160 Cr.P.C. The judgment underscores the court's stance on maintaining the distinction between civil and criminal procedural applications in regulatory investigations.

Bottom Line:

FEMA Investigations - Summons issued under Section 37 FEMA for production of evidence and recording of statements are governed by Civil Procedure Code, and not Criminal Procedure Code. Section 160 Cr.P.C., which provides territorial and gender safeguards, is not applicable to FEMA proceedings.

Statutory provision(s):  

• - Foreign Exchange Management Act, 1999, Section 37  
• - Income Tax Act, 1961, Section 131  
• - Code of Civil Procedure, 1908  
• - Code of Criminal Procedure, 1973, Section 160

Smt. Poonam Gahllot v. Directorate of Enforcement, (Delhi) : Law Finder Doc Id # 2815843