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2017 (4) TMI 930 - MADRAS HIGH COURT

2017 (4) TMI 930 - MADRAS HIGH COURT - TMI - Proceedings under Section 13 of the Foreign Exchange Management Act, 1999 read with Rule 9 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - Held that:- Reasons have been clearly disclosed by the second respondent in the communications dated 04.11.2016 by specifically indicating that the case requires an indepth examination, meaning thereby, the objections raised by the petitioners as against the allegations levell .....

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econd respondent as against the allegations raised against the petitioners. Such communications, in my considered opinion, are also in compliance of the principles of natural justice. By the communications dated 04.11.2016, the second respondent has not determined the case against the petitioners or passed an order adverse to their interest. Therefore, the writ petitions are only liable to be dismissed and the petitioners are not entitled for any relief in these writ petitions. - The second .....

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oners : Mr. P.S. Raman, Senior Advocate for Mr. P.R. Raman For Respondents : Mr. M. Dhandapani ORDER In all these writ petitions, the petitioners have challenged a communication dated 04.11.2016 of the second respondent, in and by which the second respondent called upon the petitioners to be present on 24.11.2016 for an enquiry before the office of the Directorate of Enforcement in connection with the adjudication proceedings under Section 13 of the Foreign Exchange Management Act, 1999 read wit .....

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petitions are taken up for hearing together and are disposed of by this common order. 3. The petitioner in WP No. 1748 of 2017 is a company engaged in the business of manufacturing cement and allied activities. The petitioner in WP Nos. 1749 to 1751 of 2017 are holding the executive post in the above said company at various level. According to the petitioners, in the year 2007, the Board of Control for Cricket in India (BCCI) proposed a private league of 20-20 format of cricket called Indian Pre .....

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in bagging a franchise for the IPL format of cricket game in the year 2009. During the year 2009, BCCI has scheduled the games to be conducted outside India and the venue for the 2009 matches were shifted from India to South Africa. For the purpose of conducting the IPL matches in South Africa, BCCI has also agreed to support the franchisees with respect to additional expenses to be incurred by them while participating in the cricket game outside India at South Africa. The petitioner also state .....

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he petitioners herein and appointed the second respondent as the adjudicating authority under Section 16 of FEMA for having allegedly contravened the provisions of the Act. A show cause notice dated 27.02.2015 was issued by the second respondent to the petitioner company and their officers calling upon them to show cause as to why they cannot be made vicaciously liable for the infractions committed by the company. On receipt of such show cause notice, the petitioners have sent a detailed reply d .....

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already sent a show cause notice to the petitioners on 27.02.2015 for which a reply dated 19.06.2015 was also sent by the petitioners. It is not known as to whether the reply sent by the petitioners on 19.06.2015 to the show cause notice dated 27.02.2015 has been considered by the second respondent or not. Whether the reply dated 19.06.2015 of the petitioners was satisfactory, accepted or entertained is also not known and the petitioners were made to grope in the dark. Even in the impugned comm .....

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ations dated 04.11.2016 have been issued only to comply with an empty formality and they are legally not sustainable. A perusal of the impugned communications would reveal that the second respondent has not assigned any reasons for issuing them. The basis on which the second respondent has issued the impugned communications has not been revealed. Whether the second respondent has accepted the reply dated 19.06.2015 sent by the petitioners or not is not known to the petitioners. In such circumsta .....

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know whether the explanations submitted by them have been considered by the second respondent or not and whether the second respondent has applied his mind before issuing the impugned communications. Thus, according to the learned Senior counsel for the petitioners, the impugned communications are contrary to the well established principles of natural justice and he prayed for allowing the writ petitions. 6. Even though the respondents have not filed any counter affidavit, the learned counsel fo .....

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upon the petitioners to appear for an enquiry and therefore, the writ petitions filed by the petitioners is pre-mature. The learned counsel for the respondents therefore prayed for dismissal of the writ petitions. 7. I heard the learned Senior counsel for the petitioners and the learned counsel for the respondents. I had carefully examined the records made available, including the communications dated 04.11.2016 which are challenged in these writ petitions. The first and foremost submission of .....

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have specifically stated that they may be given an opportunity of personal hearing. In other words, in the reply dated 19.06.2015, a specific request was made for affording a personal hearing before any order is passed against the petitioners. Therefore, it is evident that only on the basis of the request made by the petitioners, the communications dated 04.11.2016 have been sent to them fixing a date for personal hearing. 8. The learned Senior counsel appearing for the petitioners would veheme .....

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tion of the proceedings which formed part of the show cause notices dated 27.02.2015, the present communications dated 04.11.2016 have been sent by the second respondent. It is needless to mention that during the course of personal hearing, the second respondent may or may not drop the proceedings against the petitioners or after hearing the petitioners, the second respondent may take up further proceedings in a manner known to law. In any event, it is evidently clear that the communications dat .....

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given by them or the explanation given by the petitioners have been considered by the second respondent. According to the learned Senior counsel for the petitioners, the petitioners are groping in the dark without knowing the fact as to whether the second respondent has arrived at a subjective satisfaction to proceed against them or to drop the proceedings against them. The learned Senior counsel for the petitioners would therefore contend that the communications dated 04.11.2016 are not only in .....

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second respondent need not verbatim reproduce the allegations which formed part of the show cause notice or the reply given by the petitioners. In fact, a perusal of the communication dated 04.11.2016 of the second respondent would reveal that the second respondent has considered the explanation of the petitioners and specifically used the word "an indepth examination and an inquiry should be held in this case" meaning thereby apart from the explanations offered by the petitioners, th .....

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use notice and the replies to SCN referred to above. On the basis of the same, I am of the opinion that the allegations made in the complaint and the defense reply, need in depth examination and an inquiry should be held in this case...." 11. This has clearly exposed the application of mind on the part of the second respondent who wanted to examine in detail the allegations levelled against the petitioners in the light of the reply given by them. For such examination, the second respondent .....

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petitioners to appear for an enquiry. It is needless to mention that by the communications dated 04.11.2016, the second respondent has not finally adjudicated the case against the petitioners or an adverse order has been passed against them and the adjudication is in the preliminary stage. 12. The learned counsel for the respondents relied on the order dated 25.08.2014 passed by this Court in WP No. 20592 of 2014 (Ramakrishna Settu vs. The Special Director, Directorate of Enforcement, Southern .....

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:- "1. The issue of show caue 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 of the adjudicating authority in person, either to the noticee or t .....

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of reply, as provided under sub-rule (3) or 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 in .....

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in compliance with the principles of natural justice while conducting an enquiry against the petitioners and it does not call for any interference by this Court. 14. In yet another order dated 09.12.2014 passed by this Court in WP No. 18857 of 2010 (KIBS Hoisery Mills Pvt Ltd., vs. The Special Director, Directorate of Enforcement Foreign Exchange Management Act) relied on by the learned counsel for the respondents, it has been held in para-18 as follows:- "18. On a bare reading of the show .....

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d to submit reply to the show cause notice in writing within thirty days from the date of notice as to why adjudicating proceedings as contemplated under Section 13 of FEMA should not be held against them for contravention of the provisions of Section 3 (c) of FEMA as mentioned in the complaint, which was enclosed along with the show cause notice. The attention of the petitioners was invited to Rule 4 of the Rules. Further, the petitioners were directed to appear either in person or through thei .....

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etitioners has been drawn to Rule 4 of the Rules. Therefore, the plea raised by the petitioner that the show cause notice is vitiated for having not following the procedure under Rule 4 of the Rules, deserves to be rejected." 15. The learned Senior counsel for the petitioners would mainly contend that after the show cause notice dated 27.02.2015 issued by the second respondent, the petitioners have sent a detailed reply dated 19.06.2015 repudiating the allegations made therein. Thereafter, .....

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rtain aspects required to be investigated in-depth and therefore the communications dated 04.11.2016 was issued. 16. The learned Senior counsel for the petitioner relied on the Division Bench decision of the Bombay High Court passed on 07.08.2013 in WP No. 5305 of 2013 (Shashank Vyankatesh Manohar vs. Union of India through Ministry of Finance, New Delhi and another) wherein in para No.15 and 21, it was held as follows:- "15. However, this formation of opinion by the adjudicating authority .....

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re has been a due application of mind to the objections raised by the noticee. This would be a necessary safeguard against forming arbitrary opinions. These recorded reasons must be furnished to the noticee, when asked for by the noticee at the time of granting a personal hearing to the noticee. This would give an opportunity to the noticee during the personal hearing to correct any erroneous view taken in forming the opinion to proceed further with the show cause notice. This would ensure that .....

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d result in great prejudice to the noticee for more than one reason. Firstly, the noticee would have no clue as to what were the consideration which weighed with the Adjudicating Authority to reject the preliminary objections. It is also very clear from the provisions of the Act and the Rules that an Appeal which is provided would not lie from an order recording an opinion of the Adjudicating Authority to proceed further with the adjudication of the notice, but the appeal would only be against t .....

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by the noticee and the opinion formed by the Adjudicating Authority. The recording of the opinion of the Adjudicating Authority would be given to the noticee when the proceedings are dropped in the form of an order. However, in cases where the opinion is formed to proceed further with the show cause notice, then a notice for personal hearing is required to be given to the party in terms of Rule 4 of the Adjudication Rules. However, if on receipt of the notice for personal hearing, the recorded r .....

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; 17. The above decision of the Division Bench of the Bombay High Court clearly indicates that before arriving at a conclusion by the adjudicating authority, notice should be given, opportunity should be afforded to the noticee before proceeding further. Precisely, the impugned communications are in compliance with the directives of the Division Bench of the Bombay High Court, relied on by the learned Senior Counsel for the petitioners. The communications which are impugned in these writ petitio .....

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016 by specifically indicating that the case requires an indepth examination, meaning thereby, the objections raised by the petitioners as against the allegations levelled against them are required to be considered further and for such consideration, the petitioner must appear in person to putforth their case. Therefore, the reliance placed by the learned Senior counsel for the petitioners on the Division Bench decision of the Bombay High Court will not lend support to his case. 19. For all the .....

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