Show Cause Notice can be challenged directly in High Court in exceptional cases: Supreme Court

In J. Sri Nisha  vs. The Special Director, Adjudicating Authority, Directorate of Enforcement & Anr. (2026), Supreme Court’s Division Bench of Justices Vikram Nath and Sandeep Mehta delivered a 26-page long judgement dated April 1, 2026, wherein, it concluded:”....the Adjudicating Authority has undone the order of the Competent Authority even while the appeal against the said order is pending. Such a course of action, in the opinion of this Court, tantamounts to abdicating the powers of the Appellate Authority, even when the order of the Competent Authority was still under challenge in appeal at the instance of the department." The judgement was authored by Justice Mehta.

It added: "39. In wake of the above discussion, we are of the opinion that the impugned order dated 23rd July, 2024 passed by the Division Bench of the High Court and so also the order of the learned Single Judge of the High Court dated 30th November, 2023, rejecting the writ petition preferred by the appellants and as a consequence, the final order dated 26th August, 2024 passed by the Adjudicating Authority imposing penalty and ordering confiscation of the property held by appellants are declared to be arbitrary and contrary to law. The same are hereby set aside. The proceedings are revived from the stage of the SCN." 

The Division Bench concluded: "40. As an upshot, we provide that the Appellate Authority shall first decide the appeal preferred by the Department against the order of the Competent Authority under Section 37A(5) of FEMA after hearing the parties and by passing a reasoned order within a period of two months from today. Pursuant to the disposal of the appeal pending before the Appellate Authority, the proceedings arising out of the SCN may be commenced and shall be taken to their logical conclusion without being prejudiced by any of the observations made hereinabove or in the orders passed by the High Court. 41. The appeals are disposed of in these terms."

These appeals arose out of the common judgment and final order dated July 23, 2024 passed by the Division Bench of the Madras High Court. The appellants had approached the Single Judge of the High Court, assailing the order/show cause notice (SCN) dated December 22, 2021 issued by the Adjudicating Authority under the provisions of the Foreign Exchange Management Act (FEMA), 1999, and the consequential corrigendum dated March 13, 2023. The writ petitions instituted by the appellants assailing the said SCN and corrigendum came to be dismissed by the Single Judge vide common final order dated 30th November, 2023. The intra-Court appeals preferred against the said order was also rejected by the impugned judgment dated July 23, 2024. The appellants approached the Supreme Court.  

The controversy in the present cases is more appropriately examined within the framework of sub-sections (1) to (3) of Section 37A. A plain reading of Section 37A(1) indicates that the power of seizure was predicated upon the existence of a “reason to believe” that foreign exchange, foreign security or immovable property situated outside India was suspected to have been held in contravention of Section 4. Such satisfaction by the Authorised Officer at the stage of preliminary seizure under Sub-section (1) is only tentative and is expressly subject to scrutiny under Sub-sections (2) and (3), wherein the Competent Authority is required to independently examine whether the reasons recorded justify continuation of the seizure. The exercise undertaken by the Competent Authority was thus not an empty formality, but a substantive evaluation of whether the material on record was sufficient to sustain even a prima facie inference of contravention in relation to foreign exchange. In the present case, upon such evaluation, the Competent Authority declined to confirm the seizure by a well-reasoned order, thereby indicating that the material did not meet even this preliminary threshold. The refusal to confirm the seizure, therefore, reflects a considered finding that the foundational requirement of a “reason to believe” was not satisfied on the material available.

The Supreme Court observed: "....a prima facie satisfaction was recorded by the Competent Authority that there was no evidence of the appellants being involved in foreign security transactions having any value. Consequently, it has to be taken that there did not exist the “reasons to believe” referred to in Sub-section (1) of Section 37A. These findings definitely support the cause of the appellants herein. It is not in dispute that the appeal preferred by the Department against the order dated 3rd February, 2021, is still pending consideration. The Division Bench of the High Court, while deciding the writ appeal, observed that the writ petition against the SCN is not entertainable. We feel that the said observation may not be correct in every situation. This Court has consistently held that although ordinarily a writ petition against an 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." 

The Court relied to its earlier decision in Union of India vs. VICCO Laboratories (2007) 13 SCC 270 : 2007 SCC OnLine SC 1420. The relevant pragraph reads:"“31. Normally, the writ court should not interfere at the stage of issuance of show-cause notice by the authorities. In such a case, the parties get ample opportunity to put forth their contentions before the authorities concerned and to satisfy the authorities concerned about the absence of case for proceeding against the person against whom the show-cause notices have been issued. Abstinence from interference at the stage of issuance of show-cause notice in order to relegate the parties to the proceedings before the authorities concerned is the normal rule. However, the said rule is not without exceptions. Where a show-cause notice is issued either without jurisdiction or in an abuse of process of law, certainly in that case, the writ court would not hesitate to interfere even
at the stage of issuance of show-cause notice. The interference at the show-cause notice stage should be rare and not in a routine manner. Mere assertion by the writ petitioner that notice was without jurisdiction and/or abuse of process of law would not suffice. It should be prima facie established to be so. Where factual adjudication would be necessary, interference is ruled out.”

Justice Mehta observed: "33. Thus, the rejection of challenge laid by the appellants to the SCN on the ground of non-maintainability was not justified in the peculiar facts of the case at hand."

Justice Pancholi led Division Bench upholds judgment of acquittal by Additional District & Sessions Judge-I, Sherghati, Gaya

In his 19-page long 20th judgement of the year dated June 17, 2025 in Munni Devi vs. The State of Bihar through the District Magistrate, Gaya & Ors. (2025), Justice Pancholi led Division Bench dismissed the appeal saying, "we are of the view that while passing the impugned order of acquittal, the learned Trial Court has not committed any error, as the prosecution has failed to prove the case against respondent/accused beyond reasonable doubt." It was not inclined to entertain the acquittal appeal filed by the informant. The appellant/original informant had filed the appeal against the judgment of acquittal dated September 9, 2024 rendered by the Additional District & Sessions Judge-I, Sherghati, Gaya in Sessions Trial No.138/2022/950/2023, which arose out of Gurua P.S. case of 2020, whereby the respondents-accused, the residents of Auradih, Gurua, Gaya were acquitted by the Trial Court. The three private respondents who were acquitted were: Akhilesh Chaudhary Arjun Chaudhary and Pratima Kumari.

The Court's judgement records that APP submitted that "the Trial Court has not committed any error while passing the impugned judgment of acquittal and, therefore, in the present acquittal appeal filed by the informant, no interference is required. It is also submitted that State has not preferred any appeal against the impugned judgment of acquittal."  

Justice Pancholi led bench relied on in paragraph no. 42 of the Supreme Court's decision in the case of Chandrappa and Ors. vs. State of Karnataka, reported in (2007) 4 SCC 415. It reads: “42. From the above decisions, in our considered view, the following general principles regarding powers of appellate Court while dealing with an appeal against an order of acquittal emerge;
(1) An appellate Court has full power to review, reappreciate and reconsider the evidence upon which the order of acquittal is founded; 
(2) The Code of Criminal Procedure, 1973 puts no limitation, restriction or condition on exercise of such power and an appellate Court on the evidence before it may reach its own conclusion, both on questions of fact and of law;
(3) Various expressions, such as, 'substantial and compelling reasons', 'good and sufficient grounds', 'very strong circumstances', 'glaring mistakes', etc. are not intended to curtail extensive powers of an appellate Court in an appeal against acquittal. Such phraseologies are more in the nature of 'flourishes of language' to emphasize the reluctance of an appellate Court to interfere with acquittal than to curtail the power of the Court to review the evidence and to come to its own conclusion.
(4) An appellate Court, however, must bear in mind that in case of acquittal, there is double presumption in favour of the accused. Firstly, the presumption of innocence available to him under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent court of law. Secondly, the accused having secured his acquittal, the presumption of his innocence is further reinforced, reaffirmed and strengthened by the trial court.
(5) If two reasonable conclusions are possible on the basis of the evidence on record, the appellate court should not disturb the finding of acquittal recorded by the trial court.”

It also relied on paragraph no. 22 of the Supreme Court's decision in Nikhil Chandra Mondal vs. State of West Bengal, reported in (2023) 6 SCC 605. It reads: “22. Recently, a three-Judges Bench of this Court in the case of Rajesh Prasad v. State of Bihar has considered various earlier judgments on the scope of interference in a case of acquittal. It held that there is double presumption in favour of the accused. Firstly, the presumption of innocence that is available to him under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent court of law. Secondly, the accused having secured his acquittal, the presumption of his innocence is further reinforced, reaffirmed and strengthened by the court. It has been further held that if two reasonable conclusions are possible on the basis of the evidence on record, the Appellate Court should
not disturb the finding of acquittal recorded by the trial court.”

Drawing decisions rendered by the Supreme Court, Justice Pancholi observed:"it can be said that there is double presumption in favour of the accused, when the order of acquittal has been accorded by the Trial Court: Firstly, the presumption of innocence that is available to him under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent court of law; Secondly, the accused having secured his acquittal, the presumption of his innocence is further reinforced, reaffirmed and strengthened by the court. Further, if two reasonable conclusions are possible on the basis of the evidence on record, the Appellate Court should not disturb the finding of acquittal recorded by the trial court.” 

The case began on August 3, 2020, at about 04:15 p.m., informant, Munni Devi's daughter Nirmala Kumar was returning from a Devi temple after offering her prayer. Pratima Kumari of her village started abusing her daughter. When her daughter forbade Pratima Kumari to do so, she caught hold of her hair and pulled her down. Arjun Choudhary, Akhilesh Choudhary and Phulesh Devi came and started assaulting her daughter. When the informant and Sarjun Chaudhary, her husband came there after hearing the alarm, Phulesh Devi caught her, pulled her down and started assaulting her on her breast by leg and assaulted her on her ear by means of iron rod due to which the ear of the informant was torn and started bleeding. Akhilesh Choudhary assaulted her husband on his head by means of iron rod due to which her husband fell down there and started vomiting blood and became unconscious. Thereafter, the accused persons had fled. The local people gathered there after hearing alarm and brought her husband to Gaya Hospital from where he was referred to Blue Diamond Hospital, Patna where her husband died during the course of treatment after two days.  Fardbeyan was given by the informant on August 5, 2020. After recording the fardbeyan of the informant, the concerned police officer, Agamkuan Police Station, Patna sent the same to Gurua Police Station, Gaya. 

The fardbeyan was recorded as formal FIR on August 12, 2020, at 11:00 a.m. The High Court noted that there was "delay in lodging the FIR and there is delay in lodging the formal FIR. No explanation has been rendered by the prosecution with regard to the same." The FIR was registered under Sections 341/323/302/504/34 of the Indian Penal Code as well as under Sections 3/4 of the Prevention of Witch Practices Act against the respondents-accused as Gurua P.S. Case No.178/2020. The High Court observed:"Thus, there are serious lapses on the part of the concerned police authorities." The Investigating Officer, PW-7 in his deposition "specifically admitted that rod was not recovered or discovered. He did not find any blood at the place of occurrence."

During the trial, PW-1, Nirmala Kumari, who is daughter of the informant as well as the deceased, has mainly deposed in her examination-in-chief that Pratima Kumari, the fourth respondent/accused was standing on the way and telling that her mother was a dain (witch) and she obstructed fixing of her marriage. 

Notably, PW-3, Tetri Devi, mother of Sarjun Choudhary, the deceased deposed in her examination-in-chief that Sarjun Choudhary was her son who fell after consuming liquor and due to fall he died. The accused persons did not kill her son. The accused Akhilesh Choudhary and Pratima Kumari were her grandson and granddaughter. The police recorded her statement. She had given the same statement before the police saying her son fell in a drunken state and died. The Court noted that PW-3 "was not declared hostile and, therefore, the deposition given by the said witness is required to be considered as it is."

 

Also read: Justice Vipul Pancholi to take over as Patna High Court Chief Justice, dismissed State Government Appeals against acquittal of 1997, 1998, 1999 and 2024, set aside judgment of 1991