Karnataka High Court quashed a FEMA NOC rejection for an overseas investment, holding that the denial must be grounded in reasoned nexus to investigation, not mere pendency.
Karnataka HC Quashes FEMA NOC Rejection Over Unreasoned Denial
The Karnataka High Court has set aside the Directorate of Enforcement’s (ED) rejection of a No Objection Certificate (NOC) for an overseas investment under FEMA, ruling that the denial lacked a reasoned connection to any ongoing investigation.
The petitioner sought approval for an overseas direct investment (ODI), which was denied citing a pending ED probe. The Court held that
"a blanket reference to pendency of investigation, without demonstrating a tangible nexus between the proposed transaction and the subject matter of probe, renders the decision arbitrary and contrary to principles of natural justice."The ED could not establish how the proposed investment posed a risk to foreign exchange interests.
The ruling reinforces the requirement for reasoned orders in FEMA adjudication. Practitioners must ensure that regulatory objections are substantiated with specific findings, not procedural references. This decision may impact future ODI and LRS-related approvals.
Citations
- FEMA v. [Petitioner Name], W.P. No. XXXX/2026