Karnataka HC questions ED over 12-year delay in FEMA case against Cafe Coffee Day CEO Malavika Hegde

Bengaluru: The Karnataka High Court on Tuesday questioned the Enforcement Directorate (ED) over initiating proceedings under the Foreign Exchange Management Act (FEMA) against Cafe Coffee Day CEO Malavika Hegde more than 12 years after the transactions under scrutiny took place.

Justice KS Hemalekha asked whether proceedings could be launched after such a long delay, observing that any action under law must be taken within a reasonable timeframe. Hegde, wife of Cafe Coffee Day founder VG Siddhartha, has challenged a FEMA show-cause notice and subsequent hearing notices issued by the agency.

The court had earlier stayed the proceedings against Hegde and extended the interim protection on Tuesday.


During the hearing, the bench examined the applicability of Section 43 of FEMA, which allows certain rights and liabilities to pass on to legal representatives after the death or insolvency of a person. The court, however, questioned whether such proceedings could be initiated after an "unreasonable delay".

Appearing for the ED, Special Public Prosecutor Madhu Rao said the case related to transactions carried out in 2010. According to ED, foreign exchange was allegedly used to purchase shares of companies in violation of Section 6(3)(b) of FEMA. Rao argued that Section 43 permits authorities to proceed against legal heirs for liabilities arising from such transactions and that the proceedings sought recovery and imposition of penalties.

Shristi, the counsel for Hegde, submitted that the proceedings were initiated years after Siddhartha's death and that the present CEO was being asked to defend alleged acts of a deceased person despite having no personal knowledge of the transactions. The counsel further argued that although the show-cause notice was issued in 2022, it reached Hegde only in 2026, and that the case involved vicarious rather than direct liability.

The bench noted that the matter was currently at the show-cause notice stage and that the adjudicating authority would ultimately decide whether any liability could be fastened on Hegde as the legal heir of the former director.

The ED sought three weeks to file its objections. The matter has been posted for further hearing on November 4.