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TMI Blog2022 (5) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule (3) of Rule 4 has been issued which was subject matter of the challenge in the writ petition. 9. The Hon'ble Supreme Court in the matter of Natwar Singh (supra) has considered the similar issue and has held that: "22. That a bare reading of the relevant provisions of the Act and the Rules makes it abundantly clear that the manner, method and procedure of adjudication are completely structured by the statute and the Rules. The authority is bound to follow the prescribed procedure under the statute and the Rules and is not free and entitled to devise its own procedure for making inquiry while adjudicating under Section 13 of the Act since it is under legislative mandate to undertake adjudication and hold inquiry in the prescribed manner after giving the person alleged to have committed contravention against whom a complaint has been made, a reasonable opportunity of being heard for the purpose of imposing any penalty. The discretion of the authority is so well structured by the statute and the Rules. 23. The Rules do not provide and empower the adjudicating authority to straightaway make any inquiry into allegations of contravention against any person against whom a complain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority deals with all the objections of the noticee, be it preliminary as well as any other defence, by passing one common order of adjudication. The fact that the legislature has provided in Rule 4 of the Adjudication Rules that on issue of notice, the noticee can object to the same and this objection has to be considered by the Adjudicating Authority for forming an opinion to proceed further with the show cause notice would require giving some meaning to it, otherwise it would be rendered otiose. 13. According to the learned Additional Solicitor General, the objections which have been raised by the petitioner would be considered and reflected in the final adjudication order which the Adjudicating Authority would pass. It is this final order which is appealable to the Appellate Tribunal for Foreign Exchange. This submission on the part of the respondent would render the entire exercise provided in Rule 4(1) and (3) of Adjudication Rules, a dead provision. The submission of learned Additional Solicitor General was that the objective of receiving objections to the show cause notice and forming an opinion whether or not the inquiry should be conducted further, has been provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 the opinion formed on the preliminary objections which would otherwise never be a subject-matter of discussion/debate before the Adjudicating Authority is also a part of the order to be passed by the Adjudicating Officer. In the absence of the above, the preliminary objections would be dealt with by the Adjudicating Authority possibly only in his mind while deciding to proceed further with the notice and the reasons would never be recorded to evidence consideration of the objections. This would result in great prejudice to the noticee for more than one reason. Firstly, the noticee would have no clue as to what were the considerations which weighed with the Adjudicating Authority to reject the preliminary objections. It is also very clear from the provisions of the Act and the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the present case Rule 4(1) and 4(2) is clear and required to be complied with in view of the judgment of the Hon'ble Supreme Court in the case of Natwar Singh (supra). 16. Learned Advocate for the official respondent has submitted that a gist of satisfaction of prima facie case has been supplied but that is not enough compliance of provision because in terms of Rule 4(3) the adjudicating authority is required to form an opinion that an inquiry should be held, hence we find that the prayer made by the learned Counsel for the appellant to issue the same direction as contained in paragraph 38 of the judgment of the Bombay High Court in the case of Shashank Vyankatesh Manohar (supra) appears to be justified. 17. Hence, we dispose of the appeal 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. If the opinion so formed is adverse to the appellant, such opinion along with the reasons so recorded shall be furnished so as to reach the appellant at least 15 days prior to the date of personal hearing as the same would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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