On February 24, the Karnataka High Court quashed the Enforcement Directorate’s (ED) notices, issued in 2018, directing banks to freeze accounts of Amnesty International (India) Private Limited (AIIPL) for their alleged violation of the Foreign Exchange Management Act, 1999 (FEMA).
AIIPL claimed that on October 25, 2018, ED conducted a search and seizure operation at their premises wherein the ED seized several documents concerning their financial records and various agreements. Furthermore, ED scrutinised and confiscated cell phones belonging to AIIPL’s employees and officers. Thereafter, ED directed Kotak Mahindra Bank and HDFC Bank to stop operations of AIIPL’s accounts.
AIIPL filed a writ petition seeking to declare that section 37 of FEMA r/w section 132(1) of the Income Tax Act, 1961, is ultra vires of articles 14, 19(1)(g) and 21 of the Constitution of India. The petitioner prayed to declare that ED’s search and seizure conducted on October 25, 2018, is invalid, illegal, and ultra vires of FEMA. Furthermore, the petitioner was seeking the quashing of ED’s notices dated October 25, 2018, issued to Kotak Mahindra Bank, HDFC Bank or any other bank to stop the operations of the petitioner’s bank accounts. The petitioner’s counsel argued that ED’s notices to halt the operations of the petitioner’s bank account violated section 132 of the Income Tax Act, 1961.
Justice KS Hemalekha heard the case and observed that the ED’s notices were valid for sixty days, given section 132 of the Income Tax Act, 1961. The Court said, “In light of the order in Greenpeace India Society stated supra, confirmed in the Writ Appeal No.1090/2019, the questions involved therein is no more res integra. The learned senior counsel for the petitioner has taken this Court to the provisions of limitation clause under the provisions of Sections 132(iii)(3) and (8)A of the Income Tax Act, 1961.” Whereas the respondent’s counsel argued that “this judgment would be applicable only to the present petition and it cannot be a precedent to be applied in all the matters.”
The Court observed, “On perusal of the provisions of Section 132(8A) of the Act, it is evident that order under Sub-Section (3) of Section 132 of the Income Tax Act would not be in force beyond sixty days from the date of the order.” The Court added, “In light of the provisions of Section 132 (8A), the impugned notices dated 25/10/2018 at Annexures-F1 and F2 have lost their efficacy by efflux of time as the period of sixty days has expired. Accordingly, the impugned order at Annexures – F1 and F2 are not sustainable.”
The Court allowed the writ petition and quashed the ED’s notices dated October 25, 2018. The Court said, “(i) The writ petition is allowed. (ii) The impugned notices dated 25/10/2018 in File No. T-3/BGZO/103/2018 at Annexures-F1 and F2 are hereby quashed.”
It is pertinent to note that ED initiated an investigation under FEMA on the basis of information that Amnesty International, UK had been remitting huge amounts of foreign contributions through its Indian entities (non-FCRA companies) following the FDI route, in order to evade the Foreign Contribution Regulation Act (FCRA) to expand its NGO activities in India, despite of denial of prior registration or permissions to Amnesty International India Foundation Trust (AIIFT) and other trusts under FCRA by Ministry of Home Affairs.
On July 8, 2022, the ED issued a show-cause notice to AIIPL and its CEO Aakar Patel for contravening the provisions of FEMA and imposed a penalty of Rs 51.72 crore and Rs 10 crore respectively.
On March 21, 2023, AIIPL protested the National Investigation Agency’s (NIA) arrest of Irfan Mehraj. Aakar Patel said, “Human rights defenders such as Irfan Mehraj should be encouraged and protected, not persecuted. He must be immediately released. The repression must stop. Criminalization of legitimate human rights work is extremely alarming and the authorities must put an end to this immediately.”
It is pertinent to note that Irfan Mehraj was arrested in the NGO terror funding case. The NIA said, “Irfan Mehraj was a close associate of Khurram Parvez and was working with his organisation, Jammu and Kashmir Coalition of Civil Societies (JKCCS). Investigation revealed that the JKCCS was funding terror activities in the valley and had also been in propagation of secessionist agenda in the Valley under the garb of protection of human rights.”