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2014 DIGILAW 2872 (MAD)

Ramakrishna Setty v. Special Director

2014-08-25

V.RAMASUBRAMANIAN

body2014
Judgment 1. The petitioner has come up with the above writ petition, seeking the issue of a writ of mandamus to forbear the respondent from proceeding further with the adjudication in pursuance of a show cause notice, without complying with a particular Rule. 2. Heard Mr. S. Ramachandran, learned counsel for the petitioner and Mr. M. Dhandapani, learned Standing Counsel for the respondent. 3. The petitioner was issued with a show cause notice dated 14.02.2011, by the respondent, on the basis of a complaint filed under Section 16(3) of the Foreign Exchange Management Act, 1999. The petitioner filed his reply to the show cause notice, on 27.12.2012. Thereafter, a notice of hearing was issued to the petitioner on 30.06.2014, calling upon him to appear for a personal hearing on 04.08.2014. Challenging the said notice, the petitioner has come up with the above writ petition. 4. The only ground on which the petitioner seeks a mandamus to direct the respondent to forbear from proceeding with the adjudication is that under Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, the adjudicating authority is liable to form an opinion and record the reasons for such opinion, before initiating the enquiry, after the issue of a show cause notice and the receipt of the reply. A Division Bench of the Bombay High Court interpreted Rule 4(3), in Shachank Vyankatesh Manohar vs. Union of India, 2013 (5) ALL MR 551 to mean that after the issue of show cause notice and the receipt of objections, the adjudicating authority is required to apply his mind to the objections by recording his reasons for forming an opinion on the file. This decision was followed by a learned Judge of this Court in Sri Naveen Sriram vs. Special Director in W.P.No.14639 of 2014, by order dated 06.06.2014. Therefore, it is the contention of the petitioner that in the absence of any evidence to show that the respondent applied his mind to the show cause notice and the objections and actually formed an opinion by recording the reasons therefor, the impugned notice of hearing is bad in law. 5. I have carefully considered the above submissions. Before taking up the said legal issue for consideration, it would be useful to have on record certain dates and events which are as follows:- 1. The show cause notice was issued on 14.02.2011. 5. I have carefully considered the above submissions. Before taking up the said legal issue for consideration, it would be useful to have on record certain dates and events which are as follows:- 1. The show cause notice was issued on 14.02.2011. The petitioner did not submit his reply. 2. A call notice was issued on 14.12.2012 for a personal hearing. The petitioner appeared through advocate and sought adjournment to the month of March 2013. 3. A call notice dated 16.01.2013 was issued, listing the case for hearing on 23.03.2013. Though the counsel for the petitioner appeared, the respondent was on camp. 4. Another call notice dated 28.03.2013 was issued for a personal hearing on 18.04.2013. The counsel for the petitioner sought adjournment. 5. On 19.04.2013 another call notice was issued fixing the hearing on 31.06.2013. 6. On 03.06.2013 the counsel for the petitioner appeared and sought permission to cross-examine mahazar witness and the officers who were present at the place of seizure. 7. The order dated 06.06.2013 was challenged by the petitioner in W.P.No.18096 of 2013. But the writ petition was dismissed on 30.08.2013. The petitioner filed a writ appeal in W.A.No.2034 of 2013. 8. Since there was no stay in the writ appeal, a fresh call notice was issued on 23.04.2014 fixing the date of hearing on 20.05.2014. The hearing was later adjourned to 29.05.2014. The petitioner sought adjournment and the hearing got postponed to 30.06.2014. Since an adjournment was sought once again on 30.06.2014, a fresh notice was issued on 30.06.2014 fixing the date of hearing as 04.08.2014. It is against this notice, the petitioner has come up with the above writ petition." 6. Interestingly, the above writ petition was filed on 31.07.2014. But the counsel for the petitioner appeared for the hearing before the respondent on 04.08.2014 and requested adjournment by one day. Therefore, the respondent posted the case to 05.08.2014. On 05.08.2014, the counsel for the petitioner argued the case and the respondent reserved orders. 7. In the meantime, the above writ petition came up for hearing on 04.08.2014. On the said day, the counsel for the respondent took notice. Since he took notice, the respondent has not so far passed any order on the proceeding. 8. On 05.08.2014, the counsel for the petitioner argued the case and the respondent reserved orders. 7. In the meantime, the above writ petition came up for hearing on 04.08.2014. On the said day, the counsel for the respondent took notice. Since he took notice, the respondent has not so far passed any order on the proceeding. 8. Keeping the above consequences and events in mind, let us have a look at Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, which reads as follows:- "4. Holding of inquiry.— (1) For the purpose of adjudicating under section 13 of the Act whether any person has committed any contravention as specified in that section of the Act, the Adjudicating Authority shall, issue a notice to such person requiring him to show cause within such period as may be specified in the notice (being not less than ten days from the date of service thereof) why an inquiry should not be held against him. (2) Every notice under sub-rule (1) to any such person shall indicate the nature of contravention alleged to have been committed by him. (3) After considering the cause, if any, shown by such person, the Adjudicating Authority is of the opinion that an inquiry should be held, he shall issue a notice fixing a date for the appearance of that person either personally or through his legal practitioner or a chartered accountant duly authorised by him. (4) On the date fixed, the Adjudicating Authority shall explain to the person proceeded against or his legal practitioner or the chartered accountant, as the case may be, the contravention, alleged to have been committed by such person indicating the provisions of the Actor of rules, regulations, notifications, direction or orders or any condition subject to which an authorisation is issued by the Reserve Bank of India in respect of which contravention is alleged to have taken place. (5) The Adjudicating Authority shall, then, given an opportunity to such person to produce such documents or evidence as he may consider relevant to the inquiry and if necessary, the hearing may be adjourned to future date and in taking such evidence the Adjudicating Authority shall not be bound to observe the provisions of the Indian Evidence Act, 1872 (1 of 1872). (6) While holding an inquiry under this rule the Adjudicating Authority shall have the power to summon and enforce attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document which in the 1 opinion of the Adjudicating Authority may be useful for or relevant to the subject matter of the inquiry. (7) If any person fails, neglects or refuses to appear as required by sub-rule (3) before the Adjudicating Authority, the Adjudicating Authority may proceed with the adjudication proceedings in the absence of such person after recording the reasons for doing so. (8) If, upon consideration of the evidence produced before the Adjudicating Authority, the Adjudicating Authority is satisfied that the person has committed the contravention, he may, be order in writing, impose such penalty as he thinks fit, in accordance with provisions of Sec. 13 of the Act. (9) Every order made under sub-rule (8) of the rule 4 shall specify the provisions of the Act or of the rules, regulations, notifications, direction or orders or any condition subject to which an authorisation is issued by the Reserve Bank of India in respect of which contravention has taken place and shall contain 2[***] reasons for such decisions. (10) Every order made under sub-rule (8) shall be dated and signed by the Adjudicating Authority. (11) A copy of the order made under sub-rule (8) of the rule 4 shall be supplied free of charge to the person against whom the order is made and all other copies of proceedings shall be supplied to him on payment of copying fee @ Rs. 2 per page. (12) The copying fee referred to in sub-rule (11) shall be paid in cash or in the form of demand draft in favour of the Adjudicating Authority." 9. A careful look at the provisions of sub-rules (1) to (12) of Rule 4 would show that the enquiry by the respondent, comprises of five stages, which are as follows:- 1. The issue of show cause notice of a duration of not less than ten days, calling upon the person to show cause as to why an enquiry should not be held, for any contravention. 2. The issue of show cause notice of a duration of not less than ten days, calling upon the person to show cause as to why an enquiry should not be held, for any contravention. 2. The issue of a notice fixing the date for the appearance of the person, if after considering the cause shown by the person to the show cause notice, the adjudicating authority is of the opinion that an enquiry should be held. 3. The explanation by the adjudicating authority in person, either to the noticee or to his authorised representative, the contravention committed by the noticee with reference to the provisions of the Act or the Rules or the Regulations. 4. Giving of an opportunity to the noticee to produce such documents or evidence, and the summoning and enforcing of the attendance of any person. 5. Passing of the orders. 10. Therefore, the scheme of Section 4 actually provides opportunities at the every stage to the noticee. The forming of an opinion at the stage of show cause notice and receipt of reply, as provided in sub-rule (3) of Rule 4, is almost akin to the forming of an opinion by a disciplinary authority to hold or not an enquiry, upon receipt of a reply to a charge memo in a disciplinary proceeding. Therefore, I do not think that there is any scope for expanding Rule 4(3) to mean that the forming of the opinion as required in Rule 4(3) has to be reflected by an order in writing containing reasons. The interpretation given by the Division Bench of the Bombay High Court to the expression “opinion” appears to be very elastic. 11. Be that as it may, the petitioner had allowed several things to pass, before he came up with the above writ petition. When the petitioner came up with the above writ petition, the stage of Rule 4(3) had already been passed. The enquiry had actually come, at the time when the petitioner moved this Court, to the stage of Rule 4(8). Therefore, it is not possible now to put the clock back or rewind the proceedings back to the stage of Rule 4(3). 12. After all, the requirement of Rule 4(3) even if the interpretation given by the Division Bench of the Bombay High Court is taken to be correct, should be seen only as part of the principles of natural justice. 12. After all, the requirement of Rule 4(3) even if the interpretation given by the Division Bench of the Bombay High Court is taken to be correct, should be seen only as part of the principles of natural justice. Since the petitioner had crossed the stage of Rule 4(3) and the entire enquiry is now over and orders reserved, the petitioner should be taken to have waived the requirement. 13. In view of the above, the writ petition is dismissed. No costs. Consequently, M.P.No.1 of 2014 is closed.