The Karnataka High Court provided relief to Cafe Coffee Day (CCD) in a case brought by the Enforcement Directorate under the Foreign Exchange Management Act, 1999. CCD contested the FEMA proceedings in court, leading to the court’s decision. Justice B.M. Shyam Prasad’s Bench issued the order, instructing the ED to delay CCD’s representatives’ personal hearing scheduled for January 30.
The court specified that its order would be in effect until CCD’s plea is heard on February 23. The Special Officer linked to the ED received the directive. Earlier, CCD’s CEO, Malavika Hegde, received interim relief on January 19, halting the FEMA actions against her. Both matters are set for further review on February 23. Senior Advocate Sajan Poovayya, representing CCD, argued that the ED must not conduct a personal hearing without prior written reasons for initiating an inquiry under FEMA rules.
Poovayya emphasized the necessity of communicating these reasons well in advance to the concerned party, as mandated by FEMA regulations. He contended that the FEMA charges against CCD were unlawful due to the lack of proper procedure. The ED initiated the FEMA proceedings based on Foreign Direct Investment received by Cafe Coffee Day Enterprises Limited in 2010, alleging the improper use of foreign funds for share acquisitions in Indian companies.
CCD petitioned the court after a notice was issued on January 7 under the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. The Court acknowledged Poovayya’s argument that the FEMA case is linked to an Enforcement Directorate matter from 2022, despite the events dating back to around 2009. CCD claimed that this significant delay renders the FEMA proceedings void. Following these initial arguments, the Court requested the ED to present its response.
