Home » Tamil Nadu » Madras Hc Quashes Insolvency Notice Issued By Ed To Ammk Leader Ttv Dhinakaran

Madras High Court quashes insolvency notice issued by ED to AMMK leader TTV Dhinakaran

ED issued an insolvency notice to Dhinakaran in 2001 for not paying the penalty amount of ₹28 crore in a FERA Act violation case.

ByVinodh Arulappan

Published Oct 21, 2023 | 7:31 PM ⚊UpdatedOct 21, 2023 | 7:31 PM

TTV Dhinakaran, Founding General Secretary of Amma Makkal Munneetra Kazagam (AMMK). (Sourced)

The Madras High Court has dismissed an appeal of the Enforcement Directorate (ED) that challenged the order quashing the insolvency notice issued to Amma Makkal Munnetra Kazhagam leader TTV Dhinakaran in 2001 for not having paid the penalty amount of ₹28 crore in a Foreign Exchange Regulation Act (FERA) violation case.

However, the Division Bench, comprising Justices R Subramanian and R Kalaimathi, while dismissing the petition on Friday, 20 October, granted the ED liberty to proceed afresh against Dhinakaran to declare him insolvent.

ED can’t invoke insolvency law: Dhinakaran

Originally, the ED had imposed a penalty of ₹28 lakh on Dhinakaran in connection with a FERA violation case. Since he had failed to pay the penalty amount, the ED had, on 1 March, 2001, issued a notice under Section 9(2) of the Presidency-Towns Insolvency Act of 1909.

Challenging this, Dinakaran filed a petition contending that the ED has no provision to invoke the insolvency law.

He also argued that the notice was totally misconceived, absolutely without basis, and was motivated by the desire to disgrace and humiliate him.

Allowing his plea, a single-judge bench set aside the insolvency notice. Challenging the order, the ED preferred an appeal.

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What the ED said

Rajnish Pathiyil, a special public prosecutor for the ED, said that the court has held that the ED was entitled to initiate proceedings against Dhinakaran under the PTI Act and that the penalty, which was due, was a “debt” within the meaning of the Act.

The bench had upheld the order of the single judge since the earlier insolvency notice was issued when the appeal against the penalty imposition was pending before the high court and the order had not attained finality.

Hence, at that time, the issuance of notice was premature, Rajnish added.

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Background on the case

The Special Director of Enforcement Directorate under FERA issued a show cause notice under Section 50 of the FERA to TTV Dhinakaran on 6 February, 1998.

In the said notice, he has alleged that Dhinakaran was a director of a company registered under the Companies Act of British Virgin Island.

As a director of said company, he had received certain drafts which were in the name of the company — Dipper Investments — when the petitioner was out of India. He had sent the drafts for collection to the accounts maintained by the said company in England.

The show cause notice was issued stating that Dhinakaran had acquired a foreign exchange and, therefore, he had committed a violation of Section 8(1) and 9(1)(d) of the FERA Act.