The Delhi High Court has held that the enforcement directorate (ED) failed to demonstrate contravention of Foreign Exchange Management (Overseas Investment) Rules, 2022 (FEMA) to deny No Objection Certificates (NOC) to Times Of India.
The bench of Justice Sanjeev Narula has observed that the ED 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.
The petitioner/assessee, Times Internet Limited is a subsidiary of Bennet Coleman & Co. Ltd2, who are widely recognized as the Times of India Group, which is one of India’s largest media conglomerates.
As a digital venture of the Times of India group, TIL is engaged in providing information technology-based internet/digital services, digital content, on-line advertisement services on an international scale, operating diverse portals and websites.
Both the Petitioner companies have Wholly Owned Subsidiaries abroad by the names of Times Internet Inc. and BCCL Worldwide Inc., respectively. These WOSs were established by the Petitioners to facilitate international operations and investments. As part of their business strategy, the Petitioners are required to remit funds to these WOS in the form of overseas direct investments.
Both the Petitioners sought No Objection Certificates from Directorate of Enforcement under Rule 10 of the Foreign Exchange Management (Overseas Investment) Rules, 2022. However, their request was denied. The Petitioners argue that the non-grant of NOC has prevented them from transferring funds to their WOS entities, thereby hampering their investment plans and disrupting global operations. Thus, the Petitioners seek to challenge the communications issued by the Respondent, rejecting their applications for NOCs.
The court held that 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.
The court stated that 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.
The court quashed the rejection letter and held that the TIL is free to approach the Authorised Dealer for remittance of investment abroad, as sought in their application. The remittance shall be processed on its own merits, as per the applicable rules and regulations under FEMA, 1999.
Case Details
Case Title: Times Internet Limited Versus Directorate Of Enforcement
Case No.: W.P.(C) 15242/2023 & CMAPPL. 52797/2024
Date: 17/12/2024
Counsel For Petitioner: R.K. Handoo
Counsel For Respondent: S.V. Raju
