SAFEMA Appellate Tribunal Restores Seizure Of DMK MP Jagathrakshakan's Children's Properties In FEMA Case

The Appellate Tribunal under SAFEMA has partly allowed the ED's appeal in the foreign assets case involving DMK MP S. Jagathrakshakan and his family. It restored seizure of properties belonging to his children over shareholdings in a Singaporean company.

It, however, upheld the release of properties belonging to Jagathrakshakan and his late wife. The Tribunal said the same shares could not be used to justify repeated attachment.

The coram of Members Balesh Kumar and Rajesh Malhotra passed the order on May 21. This followed the Supreme Court's April 2026 direction requiring the Appellate Tribunal to first decide the ED's pending appeal before adjudication proceedings could resume.

The dispute arose from an ED investigation into investments disclosed by Jagathrakshakan, then a DMK MP from Arakkonam, in Singapore-incorporated Silver Park International Pte. Ltd. ED alleged that Jagathrakshakan and his family members had acquired and transferred shares in the foreign company without obtaining RBI approval.

This led to seizure of their properties in India, valued at approximately Rs 89 crore, under Section 37A(1) of FEMA. ED alleged contravention of Section 4, which bars acquisition, holding, ownership, possession, or transfer of foreign security by a resident Indian unless permitted.

However, the Competent Authority had, on February 3, 2021, set aside the seizure order. ED then filed the present appeal.

According to ED, Jagathrakshakan had subscribed to 70 lakh equity shares in the Singapore company, each with a nominal value of SGD 1, before transferring them to his wife and children through gift deeds. His late wife Anusuya later transferred her 45 lakh shares equally to their two children.

ED argued that the Competent Authority wrongly interpreted Section 4 of FEMA as applying only to paid-up shares. It also argued that Regulation 2(e) of the 2004 FEMA Regulations expressly treats subscription to the memorandum of association of a foreign entity as direct investment outside India.

The family argued that the shares were merely unpaid subscriptions with no actual value. They said no money had ever been remitted abroad and the company was eventually struck off.

They also claimed they were under a bona fide belief that RBI approval was necessary only if actual capital was sent abroad. Further, they argued that ED had effectively attached equivalent value twice over the same shares.

Rejecting the family's argument that the overseas shares were worthless unpaid subscriptions, the Tribunal held that subscription to shares in the foreign company created valuable rights and could not be dismissed as worthless paper merely because no money had yet been paid.

It observed, “However, it is clear that the subscription of shares or, for that matter, even subscriptions of Memorandum of Association created and conferred a very valuable right upon the allottee. Not only the allotment of subscription of shares bestowed certain rights and privileges on to its holders, but it also paved the way for the future operations of the Company, formed for the purpose to make investments and execute projects in the field of petroleum and mining all over the world.”

The tribunal added, “Therefore, the conclusion that the subscription of shares was a mere piece of paper with zero value is erroneous.”

Refusing to accept ED's argument for repeated equivalent-value seizure, the Tribunal held that the same foreign shares could not justify multiple attachments under Section 37A.

“Therefore, the conclusion that the subscription of shares was mere piece of paper with zero value is erroneous. ” it observed.

The Tribunal rejected ED's argument that acquisition and later transfer of the same shares should be treated as separate contraventions warranting separate attachments.

It observed, “We reject the argument of the Appellant Department that acquisition of foreign security and transfer of foreign security are two independent transactions effected between different persons at different material points of time and hence the contravention under Section 4 of FEMA, needs to be treated separately for each such transaction."

In view of these findings, the tribunal restored seizure only in relation to properties of Jagathrakshakan's daughter Sri Nisha and son Sundeep Aanand. It upheld the release of properties belonging to Jagathrakshakan and his late wife.

Accordingly, the appeal was partly allowed.

For Appellant (ED): Advocates Pranav Mishra, Mohd. Wasay Khan

For Respondent: Advocates R. Venkatesh, K. Suresh