Point of Law: Rule of law which is one of the basic features of our Constitution envisages the administration of justice in accordance with law; Courts do this job ordinarily; a purported subordinate legislation which is promulgated without competence or contrary to the parental provisions, cannot be treated as law or as source of law; the constitutional presumption of validity that avails to a legislation vide R.K.DALMIA vs. JUSTICE TENDULKAR, AIR 1958 SC 538 does not much extend to a delegated legislation which is ex-facie incompetent and which is not stated to be treated as a very part of the parent Act; a formal challenge to the same could have been ideal, is beside the point; therefore the endeavour of the answering respondents to sustain the impugned orders by heavily banking upon Rule 11 does not yield fruit; they are only seeking shelter under a leaking umbrella.

ORDER :

Petitioner is knocking at the doors of Writ Court for assailing the Letter dated 17.6.2016 and Communication dated 24.10.2016 made by the first respondent-RBI respectively at Annexures-K & P, whereby his application for compounding of the contravention of provisions of the Foreign Exchange Management Act, 1999 (hereinafter 1999 Act') and the Rules made thereunder, has been negatived quoting Rule 11 of Foreign Exchange Compounding Proceedings Rules, 2000 (hereafter Compounding Rules’).

2. After service of notice, the respondent Nos.1 & 2 have entered appearance through their Panel Counsel; similarly, the respondent Nos.3 & 4 are represented by the learned Central Govt. Counsel; they have filed separate Statements of Objections resisting the Writ Petition; learned Panel Counsel & the learned CGC together makes submission in justification of the impugned action and the reasons on which the same has been constructed.

3. FACTS IN BRIEF:

(a) The petitioner was issued a Show Cause Notice dated 6.4.2011 alleging violation of the provisions of section 6(3)(d) of the Act r/w the provisions of Foreign Exchange (Borrowing or Lending in Foreign Exchange) Regulations, 2000; this was pursuant to the complaint dated 25.2.2011 made by the Deputy Director of Enforcement; the petitioner had applied for compounding of the contravention and that his application came to be returned vide letter dated 22.9.2011 issued by the Respondent Nos.1 & 2 on the ground that compounding was not permissible when adjudicatory proceedings for contravention were being initiated.

(b) Petitioner made a representation contending that the return of his application for compounding is unsustainable inasmuch as the pendency of adjudicatory proceedings cannot be a ground for declining his request for compounding; no decision having been taken thereon, petitioner filed W.P.No.27337/2012 (GM-FE) which came to be disposed off by a Co-ordinate Bench of this Court vide judgment dated 5.11.2015 permitting the petitioner to file another application within two weeks and directing the answering respondents to consider the same; the relevant part of the judgment reads as under:

"... The second respondent is directed to exercise his jurisdiction vested in him under Section 15 of the Act to compound the contraventions alleged against the petitioner, in accordance with law and this exercise shall be carried out with expedition. Since the application submitted by the petitioner has been returned, the petitioner is directed to file an application within two weeks and the second respondent shall consider and dispose of the application..."

(c) Accordingly, petitioner made another application albeit with some delay; even this application came to be rejected vide impugned letter & communication; the answering respondents have stated that Rule 11 of Foreign Exchange (Compounding Proceedings) Rules, 2000 (hereafter ‘Compounding Rules’) would come in the way of application of the kind being treated favourably since petitioner has filed appeal against the adjudicatory order; aggrieved thereby petitioner is before this court; as already mentioned above, the respondents have filed their Statements of Objections.

4. I have heard the learned counsel for the parties and perused the Petition Papers; the following three questions are framed for consideration :

Whether petitioner had made the application for compounding belatedly i.e., beyond the period prescribed by the Coordinate Bench of this Court…?

Whether the pendency of appeal preferred by the contravener bars the compounding of contravention, as provided under Section 15 of the 1999 Act…?

Whether the Respondent Nos. 1 & 2 could have banked upon Rule 11 of the Compounding Rules for rejecting petitioner’s application for compounding…?”

5. My answers to the above questions are framed in the negative for the following reasons:

i) Petitioner had initially applied for compounding way back in the year 2011 is borne out by the judgment of the Coordinate Be