The Delhi High Court recently held that women summoned by the Enforcement Directorate (ED) under the Foreign Exchange Management Act (FEMA) cannot invoke Section 160 of the Code of Criminal Procedure (CrPC) to insist that their statements be recorded only at their residence [Smt Poonam Gahlot v Directorate of Enforcement]. 

Justice Neena Bansal Krishna said that powers regarding discovery and production of evidence under Section 37 of FEMA are civil in nature and governed by powers similar to those available under the Income Tax Act, not the CrPC.

“Therefore, it is concluded that “powers regarding discovery and production of evidence” under Section 37 FEMA are analogous to those under Section 131 ITA [Income Tax Act], which is governed by Civil Code and therefore, S.160 CrPC would not be applicable, as argued by the Petitioner,” the Court said. 

The High Court made these observations while dismissing a plea filed by 53-year-old Canadian citizen, Poonam Gahlot, who sought exemption from personally appearing before the ED in connection with a probe under the FEMA. 

Gahllot had challenged three ED summons issued in late 2018 requiring her to appear at its Delhi office for providing documents and recording her statement regarding alleged foreign exchange contraventions. 

Her counsel argued that as a woman, she could not be compelled to attend the ED office and that her statement should instead be recorded at her residence. She also accused authorities of harassment during an earlier Income Tax Department visit to a family property.

However, the Court ruled that Section 37 of FEMA, which outlines the ED’s investigative powers, mirrors Section 131 of the Income Tax Act, granting officers powers equivalent to those of a civil court, such as summoning individuals and compelling document production.

These provisions are distinct from search and seizure powers governed by CrPC, the Court said.

The Court also differentiated FEMA from the Prevention of Money Laundering Act (PMLA) and rejected the ED’s contention, drawing parallels between Section 37 FEMA and PMLA’s Section 50. 

“The PMLA and FEMA have distinct statutory frameworks and nature of proceedings. Section 50 PMLA confers criminal investigative powers on the ED involving summons for inquiries related to money laundering, which is a scheduled offence under PMLA and involves criminal prosecution. In contrast, S 37 FEMA is primarily concerned with civil-administrative investigations of foreign exchange contraventions governed by a regulatory framework distinct from Criminal Law. Secondly, there is a difference in the scope of summons and procedural safeguards,” the Court said.

Advocates Malak Bhatt, Neeha Nagpal and  Samridhi appeared for petitioner Poonam Gahllot.

Senior Advocate Arun Bhardwaj with Special Counsel Anupam S Sharrma and advocates Harpreet Kalsi, Vashisht Rao and Ripudaman Sharma represented the ED. 

[Read Judgment]