The Supreme Court on Monday ruled against the Enforcement Directorate’s (ED) plea that contested a Bombay High Court directive to the Reserve Bank of India (RBI) to process compounding applications by NDTV concerning alleged violations under the Foreign Exchange Management Act (FEMA).
The bench, comprised of Justice Abhay S Oka and Justice Augustine George Masih, concluded that no sufficient grounds were presented to warrant interference with the high court’s decision from 2018, which dismissed the ED’s objections to the compounding proceedings initiated by NDTV.
In 2015, the ED issued showcause notices to NDTV for purportedly breaching foreign exchange norms, involving transactions amounting to over Rs 2,000 crore in foreign direct and overseas investments. Following this, in March 2016, NDTV sought to compound these allegations through the RBI—a legal mechanism allowing entities to admit to contraventions and seek resolution.
The process hit a snag in December 2017 when the RBI informed NDTV it couldn’t proceed with the compounding application due to additional allegations of money laundering made by the ED. This led NDTV to challenge the ED’s actions in the high court, arguing that the move to compound was intended to alleviate ongoing distress to its shareholders and stakeholders, despite denying all allegations.
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During the proceedings, the ED’s counsel highlighted a 2007 amendment to the FEMA compounding rules. This amendment stipulates that contraventions involving serious concerns such as suspected money laundering or threats to national sovereignty cannot be compounded by the RBI if the ED views them as such. The ED had also presented documents to support claims of NDTV’s involvement in past financial discrepancies, including the infamous 2G scam.
