J. Sri Nisha v. Special Director, Adjudicating Authority, Directorate of Enforcement 2026 INSC 309 - FEMA - Show Cause - Writ Jurisdiction
Constitution of India - Article 226 ; Foreign Exchange Management Act, 1999 - Section 37A - Although ordinarily a writ petition against a Show Cause Notice (SCN) may not be entertained, however, the said proposition is not an inviolable rule. Interference at the stage of SCN is permissible in exceptional circumstances, such as where the notice suffers from patent lack of jurisdiction, reflects non-application of mind, is issued with a pre-determined or premeditated approach, amounts to an abuse of the process of law, or results in a violation of the principles of natural justice. In such situations, the High Court would be justified in exercising its jurisdiction under Article 226 of the Constitution to prevent manifest injustice. (Para 32)
Foreign Exchange Management Act, 1999 - Section 37A - The provision is in nature of a preventive measure for ensuring that the assets equivalent to the foreign exchange or foreign security may be kept secured for future proceedings pursuant to adjudication. (Para 27)
Case Info
Basic Case Details
Case name: J. Sri Nisha v. The Special Director, Adjudicating Authority, Directorate of Enforcement & Anr. (with connected Civil Appeals arising out of SLP(C) Nos. 34269/2025, 23416/2025, 23417/2025)
Neutral citation: 2026 INSC 309
Coram:Justice Vikram NathJustice Sandeep Mehta
Judgment date: 1 April 2026 (NEW DELHI; APRIL 01, 2026.)
Case Law Cited (with citations)
The judgment expressly cites:
- Union of India v. VICCO Laboratories, (2007) 13 SCC 270 : 2007 SCC OnLine SC 1420
(Other authorities are referred to generally – e.g., “as held by the Hon’ble SC” in the Competent Authority’s order – but only VICCO is specifically named and cited in the judgment text.)
Statutes / Laws Referred
The Court discusses and/or applies:
- Foreign Exchange Management Act, 1999 (FEMA)
- Section 4 (holding/acquiring foreign exchange/foreign security/immovable property outside India)
- Section 16 (adjudication proceedings)
- Section 19 (appeal against adjudication order – mentioned in submissions)
- Section 37A (special provisions relating to assets held outside India) – sub‑sections (1)–(6) analysed in detail
- Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 (sometimes called FEMA 120 Regulations / FEMA Rules in the judgment)
- The Appellate Tribunal under SAFEMA (Appellate Tribunal for FEMA appeals)
- Constitutional provision: Article 226 of the Constitution of India (scope of judicial review against show cause notices)
- RBI framework: Notification No. FEMA 120/RB‑2004 dated 7 July 2004 and RBI FAQs (on acquiring foreign shares without upfront payment or on deferred payment basis)
Three‑Sentence Brief Summary
This judgment concerns whether show cause notice (SCN) proceedings under FEMA could validly continue when the Competent Authority, in seizure proceedings under Section 37A(3), had already refused to confirm seizure on the ground that there was no proof of any foreign security of value being held in contravention of Section 4. The Supreme Court holds that, in these peculiar facts, the Madras High Court erred in treating a writ against the SCN as non‑maintainable and in making observations that effectively neutralised the favourable Section 37A order while an appeal against that order was still pending, and further that the Adjudicating Authority wrongly “overruled” the Competent Authority’s order in its final adjudication. Accordingly, the Court sets aside the High Court’s orders and the final adjudication order dated 26 August 2024, revives the proceedings from the SCN stage, directs the Appellate Authority to first decide the Department’s appeal against the Section 37A order within two months, and only thereafter permits adjudication on the SCN without being prejudiced by prior observations.
