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IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
Prakash Shrivastava, Rajarshi Bharadwaj, JJ.
Nillesh Parekh – Appellant
Versus
Union of India & Others – Respondents
MAT. No. 478 of 2022 with CAN 1 of 2022
Decided On : 02-05-2022
FEMA - Challenge to show cause notice under Rule 4(3) of Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - Sections 16(3) of FEMA - Judgment of Natwar Singh vs. Director of Enforcement and Another (2010) 13 SCC 255, State Bank of Patiala and Others vs. S. K. Sharma AIR 1996 SC 1669, Shashank Vyankatesh Manohar vs. Union of India and Another (2014) 1 Mah LJ 838 - Rule 4(1) and 4(2) of the Rules of 2000 were required to be mandatorily followed before issuing the show cause notice. The adjudicating authority is required to form an opinion after giving notice to the petitioner before issuing the impugned show cause notice.
Fact of the Case:
The appellant challenged the show cause notice issued by the Special Director, Eastern Region, Enforcement Directorate under Rule 4(3) of Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 in pursuance to the complaint received under Section 16(3) of the Foreign Exchange Management Act, 1999. The main ground of challenge was the non-compliance with Rule 4(1) and Rule 4(2) of the Rules of 2000.
Finding of the Court:
The court held that the notice in terms of sub-rule (1) and (2) of Rule 4 was necessary and the adjudicating authority is required to form an opinion after giving notice to the petitioner before issuing the impugned show cause notice.
Issues: Challenge to show cause notice under Rule 4(3) of Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000
Ratio Decidendi: Rule 4(1) and 4(2) of the Rules of 2000 were required to be mandatorily followed before issuing the show cause notice. The adjudicating authority is required to form an opinion after giving notice to the petitioner before issuing the impugned show cause notice.
Final Decision: The appeal was disposed of without interfering in the show cause notice dated 06.07.2020 but by directing the Special Director, Eastern Region, Enforcement Directorate to form his opinion after recording reasons in terms of sub-rule (3) of Rule 4.
JUDGMENT :
Prakash Shrivastava, J.
1. This appeal is at the instance of the writ petitioner against the order of the learned Single Judge dated 14.03.2022 whereby WPA 2038 of 2021 has been disposed of with certain directions.
2. The appellant had approached the writ Court challenging the show cause notice dated 06.07.2020 issued by the Special Director, Eastern Region, Enforcement Directorate under Rule 4(3) of Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 (for short, ‘Rules of 2000’) in pursuance to the complaint received under Section 16(3) of the Foreign Exchange Management Act, 1999 (for short, ‘FEMA’).The main ground of challenge was that the impugned notice was issued without complying with the Rule 4(1) and Rule 4(2) of the Rules of 2000.
3. Learned Single Judge has held that the appellant was required to demonstrate prejudice on account of infraction of the procedure and has accordingly disposed of the petition directing the adjudicating authority to submit the brief gist of its satisfaction of prima facie case against the petitioner along with copies of necessary documents and directing the petitioner to show cause to the notice dated 06.07.2020 as well as the gist and thereafter adjudicating authority is to undertake the procedure prescribed under Rule 4(3) of the Rules of 2000.
4. Submission of the learned Counsel for the appellant is that Rule 4(1) and 4(2) of the Rules of 2000 were required to be mandatorily followed. In support of his submission he has placed reliance upon the judgment of the Hon’ble Supreme Court in the matter of Natwar Singh vs. Director of Enforcement and Another reported in (2010) 13 SCC 255 and Bombay High Court judgment in the matter of Shashank Vyankatesh Manohar vs. Union of India and Another reported in (2014) 1 Mah LJ 838 as also the circular issued by the Director of Enforcement. He has also submitted that a reliance on the judgment of the Hon’ble Supreme Court in the matter of State Bank of Patiala and Others vs. S. K. Sharma reported in AIR 1996 SC 1669 for attracting the principle of prejudice, is misplaced and is not applicable in the present case.
5. Learned Counsel for the respondent has supported the order of the learned Single Judge and has submitted that gist in pursuance to the direction of the learned Single Judge has been supplied, therefore, nothing further is required in the matter.
6. We have heard the learned Counsel for the parties and perused the records.
7. Rule 4 of the Rules of 2000 relates to holding of inquiry and sub- Rule (1) to (3) of Rule 4 which are relevant for the present controversy are as under:
(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.”
8. In terms of the aforesaid Rule, the adjudicating authority is required to give the notice under sub-rule (1) to the concerned person requiring him to show cause as to why inquiry should not be held against him indicating the nature of contravention alleged to have been committed by him. After considering the cause, if any shown, and on forming an opinion that an inquiry should be held, the adjudicating authority is required to issue notice under sub-rule (3) fixing th
The adjudicating authority is required to form an opinion after giving notice to the petitioner before issuing the show cause notice.
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