TMI Blog2022 (7) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... of one day between the passing of the two sets of orders, i.e., compounding orders and adjudicating order. Be that as it may, petitioners cannot be faulted and held liable for contravention once the compounding orders are passed by the Compounding Authority. That is the mandate of the statute. As also fairly conceded that respondents though aggrieved with the five compounding orders, have not challenged the said orders. If respondents were indeed aggrieved with the compounding orders, it was open for respondents to challenge the said orders. Having not done so, respondents cannot justify passing the adjudication order once the compounding orders have been passed and complied with by petitioners. Passing of the adjudication order after the offence has been compounded, is thus contrary to the statutory provisions discussed hereinabove, is not maintainable and thus without jurisdiction. The impugned adjudication order passed by respondent No.1 is an appealable order and petitioners should be relegated to the alternate remedy of filing the statutory appeal under section 19 of the said Act before the Appellate Tribunal. This submission deserves to be rejected at the threshold. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of Finance, Government of India issued a consolidated show-cause-notice to petitioner Nos.1 to 5 alleging that petitioners, by remitting US$43.50 million for acquisition of two copper mines in Australia in the year 2000, had contravened the provisions of section 6(3)(a) read with section 42(1) and 42(2) of the Foreign Exchange Management Act, 1999 ( the said Act ) read with Regulations 2, 3, 5, 6 and 9 of the said Regulations. 3. On 23.07.2008, petitioners filed compounding applications before the Chief General Manager, Reserve Bank of India, the Compounding Authority for compounding of the contravention alleged in the show-cause-notice in exercise of powers under section 15(1) of the said Act read with the said Regulations. In the application, it was specifically mentioned that respondent No.1 had issued a show-causenotice dated 11.06.2008 to petitioners on a complaint under subsection (3) of section 16 of the said Act made by the Assistant Director of Enforcement Directorate (FEMA), Ministry of Finance, Government of India. Petitioners were accorded an opportunity of personal hearing by the Compounding Authority, i.e., the Chief General Manager, Reserve Bank of India. Vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounding Proceedings) Rules, 2000 ( the Rules ). Petitioners have asserted that compounding order means an order issued under sub-section (1) of section 15 of the said Act. 6. On 21.11.2008, respondent No.1 passed the adjudication order-in-original determining show-cause-notice dated 11.06.2008 holding that petitioners have contravened the provisions of section 6(3)(a) of the said Act read with Regulations 3, 5, 6 and 9 of the said Regulations as alleged in the show-cause-notice and found them guilty of the said contravention. By the said order, respondent No.1 held the petitioners guilty of contravention and imposed the following penalties: No. Name Penalty imposed i M/s. Sterlite Industries (India) Ltd. Rs.20,00,00,000/- (Rs. Twenty Crores only) ii Shri Anil Agarwal, Chairman Mg. Director Rs.3,00,00,000/- (Rs. Three Crores only) iii Shri Tarun Jain (Director - Finance) Rs.2,00,00,000/- (Rs. Two Crores only) iv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority on 21.11.2008 of the said fact and the deposit of the compounded amounts on the next day, i.e., 21.11.2008; hence it was incumbent upon the Compounding Authority to intimate the Adjudicating Authority issuing the show-cause-notice so as to avoid continuation of any further proceedings in terms of section 15(2) of the said Act and on receiving such information the Adjudicating Authority was required to discharge petitioners; (iv) that in terms of the statutory provisions petitioners stand discharged and no proceedings in relation to the pending show-cause notice can survive after the compounding orders have been passed by the Compounding Authority and petitioners having complied with the same by depositing the compounded amounts; (v) that section 15 of the said Act permitted compounding of contravention and empowered the Compounding Authority to compound any contravention as provided under section 13 of the said Act on an application made by the person committing such contravention either before or after the institution of adjudication proceedings; that in the present case, the allegation made against petitioners in the show-cause-notice was that petitioners had cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Compounding Authority as well as respondent No.1, deserve complete immunity; (vii) that there lies no jurisdiction and/or authority in law for respondent No.1 to pass the impugned order dated 21.11.2008 in respect of proceedings arising out of show-cause-notice dated 11.06.2008 once the Compounding Authority has lawfully compounded the contravention alleged in the show-cause-notice by passing the compounding orders under section 15 (1) of the said Act read with Rule 8 (2) of the said Rules on 20.11.2008 and petitioners having complied with the same by depositing the compounded amounts by demand drafts on 21.11.2008 and informing the Compounding Authority about the same on 21.11.2008 itself; (viii) that proceedings initiated against petitioners by respondent No.1 by issuing the show-cause-notice come to an end on passing of the compounding orders on 20.11.2008; on that date there is no proceeding pending against petitioners in the eyes of law in view of the operation of section 15(2) of the said Act and as such respondent No.1 who has issued show-cause-notice has lost his jurisdiction and/or authority to deal with and determine the show-cause-notice and/or pass any order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vi) that the impugned order dated 21.11.2008 was sustainable in law and enforceable against petitioners; (vii) that there was a clear violation of the provisions of Rule 8(2) of the said Rules by petitioners before the Compounding Authority and it was incumbent upon petitioners to have impleaded the answering respondents as proper and necessary party to the compounding proceedings; (viii) hence, Mr. Patil prays for dismissal of the present petition. 9. We have heard both the learned advocates and perused the pleadings and exhibits. Submissions made by the advocates have received due consideration. 10. It will be appropriate to advert to the relevant statutory provisions and their applicability to the facts of the present case. 11. Chapter IV of the said Act relates to Contravention and Penalties . 11.1. Section 13 refers to penalties for contravention of any of the provisions of the said Act or contravention of said Rules / said regulations / notification / direction or order issued in exercise of the powers under the said Act. Section 14 pertains to enforcement of the order passed by the Adjudicating Authority, in the event if any person fails to make full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on 20.11.2008), no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person committing the contravention. 11.5. In the present case, on perusing of the adjudication order dated 21.11.2008 passed by the respondent No.1, it is seen that the proceedings had arisen out of show-cause-notice dated 11.06.2008, personal hearing was given on 29.9.2008 and petitioners had filed their further written submissions on 31.10.2008. This means that the proceeding/further proceedings, as the case may be, as stated in subsection (2) of section 15 were already initiated before passing of the compounding order on 20.11.2008; hence in terms of sub-section (2) of section 15, it is clear that no proceeding or further proceeding, as the case may be, could be continued once the compounding order is passed; there is a clear mandate by the use of the word shall for any proceeding to not continue once the contravention stands compounded. 12. The said Rules have come into effect on 03.05.2000 in exercise of powers conferred by section 46 read with sub-section (1) of section 15 of the said Act. These Rules relate to contravention unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 5000/- by Demand Draft in favour of compounding authority. 12.2. Rule 3 defines compounding authority as the persons authorised by the Central Government under sub-section (1) of section 15 of the said Act. It further states that the compounding authority could be either an officer of the Enforcement Directorate not below the rank of Deputy Director or Deputy Legal Adviser (DLA) or an officer of the Reserve Bank of India not below the rank of the Assistant General Manager. 12.3. From the reading of the above Rule, it is seen that the Chief General Manager, Reserve Bank of India is the designated Compounding Authority before whom petitioners had filed the compounding applications. 12.4. Rule 4 pertains to the power of the Reserve Bank of India to compound contravention and states that if any person contravenes any provisions of the said Act, except clause (a) of section 3 of the said Act, then under sub-clause (d) of the said Rule the Chief General Manager of the Reserve Bank of India is the Compounding Authority in case the sum involved in such contravention is Rs.100 lakhs or more. The 'proviso' to Rule 4 states that no contravention shall be compounded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authority specified in rule 4 or rule 5 in writing, to the notice of the Adjudicating Authority and on such notice of compounding of the contravention being given, the person in relation to whom the contravention is so compounded shall be discharged. Rule 7 covers the present case. In effect it means that the authority specified in rule 4, i.e., the Reserve Bank of India is required to bring to the notice of the Adjudicating Authority, i.e., the respondent No.1 herein, the fact of compounding of any contravention, and on such notice of the compounding of the contravention is given, the person in relation to whom the contravention is so compounded shall be discharged. Reading of Rule 7 clearly envisages that the authority specified in Rule 4, i.e., Reserve Bank of India is required to bring to the notice of the Adjudicating Authority the fact of compounding of the contravention in the case of petitioners. 13.3. In the present case, compounding orders have been passed on 20.11.2008, whereas the adjudication order levying penalty has been passed by the Adjudicating Authority on 21.11.2008, i.e., on the very next day. Mr. Patil states Rule 7 has not been complied with by the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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