* IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 11.03.2026 Pronounced on: 08.04.2026 + MISC. APPEAL (FEMA) 2/2025 + MISC. APPEAL (FEMA) 3/2025 + MISC. APPEAL (FEMA) 4/2025 SUNITA MEHTA .....Appellant SUBASH MEHTA .....Appellant SANJAY MEHTA .....Appellant Through: Mr.R.K. Handoo, Mr.Yoginder Handoo, Mr.Ashwin Kataria, Mr.Garvit Solanki, Mr.Gaurav Vishwakarma, Mr.Aditya Aggarwal, Advs.

versus SPECIAL DIRECTOR ENFORCEMENT DIRECTORATE .....Respondent Through: Mr.Arkaj Kumar, SC with Mr.Aakarsh Mishra, Ms.Vaishanavi Bhargava, Mr.Akshat Khanna and Mr.Karsh Sarosh Rebelo, Advs.

CORAM:

HON'BLE MR. JUSTICE NAVIN CHAWLA HON'BLE MR. JUSTICE RAVINDER DUDEJA

J U D G M E N T

NAVIN CHAWLA, J.

1. These appeals have been filed by the appellant(s) under Section 35 of the Foreign Exchange Management Act, 1999 (hereinafter referred to as „FEMA‟) challenging the final orders passed by the learned Appellate Tribunal for Foreign Exchange in the appeals, details of which are mentioned in the form of a chart hereinunder for easy reference:

2. As the three appeals arise from the common facts and raise common issues, they are being taken up together for disposal by way of this common judgment.

3. The following Show Cause Notices were issued to the appellant(s), which resulted, first in the Adjudication Order No. ADJ/25-28/B/SDE/RAJ/2010/FEMA dated 17.08.2010 passed by the Adjudicating Authority and thereafter, the impugned order of the Appellate Tribunal. For the sake of easy reference, they are detailed hereinunder in the form of a chart:

4. The show cause notices allege contravention of Section 3(b) of FEMA, read with Section 6(3)(f) of FEMA and Regulation 5(1)(iv) and Schedule 4 of the Foreign Exchange Management (Deposit) Regulations, 2000 (hereinafter referred to as „Regulations‟). All the show cause notices are premised on allegations that the appellant(s) had opened „Non-Resident (Non-Repatriable) Rupee Accounts‟ („NRNR Accounts‟) while they were in Canada. They had, later, in the year 2001, obtained loans against these NRNR Accounts, the proceeds of which were then used by the appellant(s) to open further NRNR Accounts with other banks. It was alleged that the opening of the subsequent NRNR Account with funds which did not come from outside India but were raised in the form of a loan within India, amounted to contravention of provisions of Section 6(3)(f) of FEMA read with Regulation 5(1)(iv) and Schedule 4 of the Regulations.

5. In response to these show cause notices, the appellant(s) had asserted that in the year 2001, they found out that the cooperative banks where they had opened their NRNR Accounts, were in financial trouble. They came to India to withdraw their money from these accounts, however, the banks were not ready to do so and instead advised that the amount be taken by them as a loan. Having no choice, they withdrew the money in form of loan and then reinvested the money in the subsequently opened NRNR Accounts.

6. The Adjudicating Authority, vide its common order dated 17.08.2010, imposed penalties on the appellant(s) and also ordered the confiscation of the amount lying in their NRNR Accounts.

7. Aggrieved by the same, the appellant(s) filed appeals under Section 19 of FEMA before the Appellate Tribunal, however, the same were dismissed by the Appellate Tribunal by way of its common order dated 31.05.2012, impugned in the present set of appeals.

SUBMISSIONS OF THE LEARNED COUNSEL FOR THE APPELLANT(S):

8. Mr.R.K. Handoo, the learned counsel appearing for the appellant(s), submits that the impugned order of the learned Tribunal fails to appreciate that Regulation 5(1)(iv) of the Regulations, violation of which has been alleged against the appellant(s), casts a duty only on the „Authorised Dealer‟ and, therefore, any contravention of the same can only lead to a penalty proceeding against such „Authorised Dealer‟ and not against the appellant(s) who had opened such accounts.

9. He further submits that, in any case, Regulation 5(1)(iv) o