TMI Blog2022 (11) TMI 1233X X X X Extracts X X X X X X X X Extracts X X X X ..... , in so far as it is not inconsistent with the provisions of FEMA, be deemed to have been done or taken under the corresponding provisions of FEMA. When an Adjudicating Officer had been appointed before the repeal of FERA but, as could be seen from the Notification dated 1st June 2000 read with Office Order dated 20 th November 2002, Mr. A. K. Bal had not been appointed before the repeal of FERA but has been appointed under the provisions of FEMA, therefore, this appointment in our view is not valid in any event to be appointed as an Adjudicating Officer under Section 50 of FERA. Notably, Section 50 FERA refers to an officer of enforcement specifically empowered in this behalf by order of the Central Government. The Impugned Notification states that the Adjudicating Officer was deemed to have been empowered. A plain reading of Section 50 FERA shows that there must be a specific empowerment. A deemed empowerment is impermissible in law. The Impugned Notification is issued in continuation of earlier notification dated 10th July 2001 (appointing Mr. A.K. Bal as the Adjudicating Authority) and also bears reference to Section 49(5)(a) FEMA. It would be pertinent to point out that Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot so empowered as per law. Hence, the show cause notices issued are ex-facie without jurisdiction and illegal. Consequently, the order passed against petitioner/s could not have been passed as the adjudicating authority was not legally empowered to perform such acts under the repealed Foreign Exchange Regulations Act, 1973 (FERA). Moreover, as provided in Section 49(3) of the repealing act, Foreign Exchange Management Act, 1999 (FEMA) no adjudication under the repealed act can now start after the expiry of the limitation of two years since the repeal of FERA. FERA was repealed on 31st May 2000. Some petitioners have approached this court on receipt of the show cause notice itself. 2. For convenience, we are taking up Writ Petition No. 744 of 2005 as the lead petition and the facts narrated herein are from the said petition. 3. Since the issue in the petition is purely legal, we will not go deep into the facts of the matter. At the same time, we would note few dates and events as under : Dates Events (a) 31st May 2000 FERA was repealed subject to some saving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugust 2003 and was appointed to adjudicate violations under FERA. (l) 16th August 2004 Petitioners received a notice for a hearing on 7th September 2004 before Respondent No.1 in respect of the impugned Show Cause Notices. (m) 19th August 2004 Petitioners wrote to respondent no.1, inter alia, challenging his jurisdiction to carry out the functions of an Adjudicating Officer under the provisions of FERA and also requested additional time for hearing. (n) 20th August 2004 Respondent no.1 rejected the request for adjournment made by petitioners and stated that the hearing would be held as scheduled on 24th and 25th August 2004. (o) 21st August 2004 Petitioners once again wrote to respondent no.1 requesting for additional time for hearing, without prejudice to their legal objections to his authority for conducting the proceedings. (p) 9th September 2004 Petitioners filed in this court Wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat relief? 6. It would be useful to reproduce, before we proceed further, the following, viz., Sections 3, 4(1), 50 and 51 of FERA, Sections 2(a), 16(1) and (2) and Section 49 of FEMA and Section 6 of General Clauses Act, 1897 : SECTIONS 3, 50, 51 of FERA 3. Classes of officers of Enforcement:- There shall be the following classes of officers of Enforcement, namely: (a) Directors of Enforcement; (b) Additional Directors of Enforcement; (c) Deputy Directors of Enforcement; (d) Assistant Directors of Enforcement; and (e) Such other class of officers of Enforcement as may be appointed for the purposes of this Act. 4. Appointment and powers of officers of enforcement.- (1) The Central Government may appoint such persons as it thinks fit to be officers of Enforcement. XXXXXXXXX 50 Penalty:- If any person contravenes any of the provisions of this Act [other than section 13, clause (a) of sub-section (1) of [section 18, section 18A] and clause (a) of sub-section (1) of section 19] or of any rule, direction or order made thereunder, he shall be liable to such penalty not exceeding five times the amount or value inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XXXXXX 49. Repeal and saving.- (1) The Foreign Exchange Regulation Act, 1973 (46 of 1973) is hereby repealed and the Appellate Board constituted under sub-section (1) of section 52 of the said Act (hereinafter referred to as the repealed Act) shall stand dissolved. (2) On the dissolution of the said Appellate Board, the person appointed as Chairman of the Appellate Board and every other person appointed as Member and holding office as such immediately before such date shall vacate their respective offices and no such Chairman or other person shall be entitled to claim any compensation for the premature termination of the term of his office or of any contract of service. (3) Notwithstanding anything contained in any other law for the time-being in force, no court shall take cognizance of an offence under the repealed Act and no adjudicating officer shall take notice of any contravention under section 51 of the repealed Act after the expiry of a period of two years from the date of the commencement of this Act. (4) Subject to the provisions of sub-section (3) all offences committed under the repealed Act shall continue to be governed by the provisions of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of any offence committed against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed. 7. Mr. Rustomjee submitted as under : 7.1 Section 51 of FERA [referred to in Section 49(3) of FEMA] confers the power to adjudicate contraventions of FERA on an Adjudicating Officer as defined in section 50. This is also evident from multiple other provisions of FERA which refer to the Adjudicating Officer . 7.2 Section 49(3) of FEMA provides for a sunset period of two years (i.e. from 1 June 2000 to 31 May 2002) within which an Adjudicating Officer could, notwithstanding the repeal of FERA, take notice of any contravention under Section 51 of FERA. A proceeding validly initiated by an Adjudicating Officer within the sunset period would therefore be valid and would, under section 49(5)(a), be deemed to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogical and impermissible to read section 49(4) of FEMA in isolation with no regard to section 49(3) of FEMA. 7.7 It was open to the Government to appoint persons as Adjudicating Officers within the sunset period, notwithstanding the repeal of FERA. In fact, in the present case, the Government has issued a notification for appointment of Adjudicating Officers under FERA on 25 August 2003 (Petitioner does not accept the validity of this notification, inter alia, as it was issued beyond the sunset period). The notification of 25 August 2003 specifically and explicitly provides that the officers are appointed under FERA. 7.8 In the present case, Mr. A. K. Bal (Respondent No. 2), who has purported to take notice of the alleged contraventions of FERA on the last day of the sunset period, has been appointed as an Adjudicating Authority under the provisions of FEMA. He has not, at any stage, been appointed as an Adjudicating Officer under FERA. Mr. A. K. Bal therefore had no power or authority to issue the Show Cause Notices. The proceedings impugned in the present proceedings are therefore invalid and entirely without jurisdiction. 8. Mr. Kevic Setalvad submitted as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preserves and instils continuity to appointment, notifications, orders, schemes, rules, bye- laws etc. made or issued under the repealed Act unless they are inconsistent with the provisions of the re-enacted statute. Only such actions which are validly made or issued under the old Act are preserved and continued. If actions under the old act are invalid or unconstitutional, such actions are deemed to have never existed in the eyes of law. (iv) Section 6 (a) of the General Clauses Act, 1897 sets out that the repeal shall not revive anything not in force or existing at the time at which the repeal takes effect. (v) In the absence of anything done or action taken under the repealed act when it was in force, no right will accrue under the repealing enactment. The right must be accrued and not merely an inchoate one. What is unaffected by the repeal is a right acquired or accrued under the repealed statute and not a mere hope or expectation of acquiring a right or liberty to acquire for a right. (vi) In the present case, as nothing was done and no action was taken during the subsistence of FERA; no show cause notice could have been issued under Rule 3(1) of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., before FERA was repealed. (vi) Under Section 49(3) of FEMA, the authority cannot consider whether to adjudge that a contravention has taken place under FERA under Rule 3(1) of the Rules. Under Section 49(3) of FEMA, the authority can only taken notice of a contravention which has already taken place or which has already been adjudged to have taken place under Section 51 of FERA. Notably, Section 49(3) of FEMA does not extend FERA for 2 years. It only keeps alive the ability to take action for a contravention which has already occurred under Section 51 of FERA. (vii) In the present case, Show- Cause Notices dated 30th May 2002 were issued under the provisions of Rule 3(1) of the said Rules, as to whether adjudication proceedings should commence. Clearly, at that time there was no contravention under FERA and the show-cause notices issued on 30th May 2002, are not saved by Section 49(3) of FEMA. (viii) Section 49(6) of FEMA excludes the general saving under Section 6 of the General Clauses Act, with respect to Section 49(3) of FEMA. The provisions of Section 49(3) of FEMA must be strictly construed and applied. 8.6 No authority under FEMA to retrospecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on dated 20th November 2002 Mr. A.K. Bal, is not appointed as an adjudicating officer but was deemed to have been empowered to adjudicate cases of contravention under FERA. Unless it is shown that Mr. A.K. Bal, is validly appointed as an adjudicating officer by the Central Government before 30th May 2002 (being the date of show cause notices), Mr. A.K. Bal, would not have any power to issue the impugned show cause notices. (iv) Section 50 FERA refers to an officer of enforcement specially empowered in this behalf by order of the Central Government. The Impugned Notification states that the Adjudicating Officer was deemed to have been empowered. A plain reading of Section 50 of FERA shows that there must be a specific empowerment. A deemed empowerment is impermissible in law. (v) The Impugned Notification is issued in continuation of earlier notification dated 10th July 2001 (appointing Mr. A. K. Bal as the Adjudicating Authority) and also bears reference to Section 49(5)(a) of FEMA. It would be pertinent to point out that Section 49(5)(a) seeks to continue the actions under FERA (and not inconsistent with FEMA) under the corresponding provisions of FEMA and not vice v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside. 8.9 No Notice issued to Petitioners before 31st May 2002 as is required under FERA: (i) Alternatively, Section 49(3) of FEMA, inter alia, states that the adjudicating officer can take notice for any violation under the provisions of FERA prior to 31st May 2002. After taking notice under Section 49(3) of FEMA, a show cause notice under Rule 3(1) of the said Rules has to be issued . Such issuance of notice has to be before 31st May 2002. (ii) There is no power to issue show cause notices under Section 49(3) of FEMA. (iii) Therefore, a show-cause notice issued under Rule 3(1) of the said Rules shall be served on such person, as is required under Rule 3(10) of the said Rules. The words issue notice must include service of show cause notice. Therefore, notice of contravention has to be taken; and show-cause notice has to be issued and served before 31st May 2002. The show cause notices dated 30th May 2002 were served upon Petitioner after 31st May 2002. Therefore, not valid. 9. Mr. Prakash Shah submitted as under : 9.1 Petitioners, who he was representing, were issued five Show Cause Notices (SCNs) for the alleged contravention of provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) of Section 49 of FEMA is replica of Section 24 of the General Clauses Act. It only saves past action pending on the date of repeal. It saves, amongst other things, any notification issued, or any appointment made under the repealed FERA prior to its repeal. The period of 2 years provided in section 49(3) of FEMA is to enable the Adjudicating officer to take notice of contravention provisions of FERA and on the expiry of two years, no notice can be taken. The notice of contravention can be taken by an adjudicating officer appointed under FERA and his appointment is being saved by virtue of Section 49(5)(a) of FEMA and not by an officer appointed under section 36 of FEMA. Section 49(3) or (4) or (5) do not empower the Government to issue any notification or make any appointment under FERA after its repeal. There is no jurisdiction or authority for issuing a Notification after the repeal of FERA on 31st May 2000. Thus, Notification dated 10th July 2001, appointing Mr. A. K. Bal as Special Director in the Enforcement Directorate was under section 36 of FEMA and not under FERA. 9.7 Mr. A. K. Bal could not have been appointed a Special Director under Section 5 of FERA on 10t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Bal, as an officer of enforcement post the repeal of FERA, the impugned SCN issued by him under Section 51 of FERA is ex-facie without jurisdiction and liable to set aside. 9.10 In any event, Union of India does not have power to appoint the officers of enforcement under section 4 of FERA or directorate of enforcement under section 5 of FERA with retrospective effect. In Vice-Chancellor, M.D. University, Rohtak v. Jahan Singh (2007) 5 SCC 77, the Hon ble Supreme Court of India considered the resolution of the Executive Council of M.D. University, Rohtak, purporting to amend the Regulations with retrospective effect. The Hon ble Supreme Court held as under:- 19. The Act does not confer any power on the Executive Council to make a regulation with retrospective effect. The purported regulations, thus, could not have been given retrospective effect or retroactive operation as it is now well settled that in absence of any provision contained in the legislative Act, a delegate cannot make a delegated legislation with retrospective effect. In this regard reliance was also placed on Hon ble Supreme Court s Judgement in MRF Ltd. Kottayam v. Assistant Commissioner (Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the stipulated period of two years from the date of commencement of FEMA. It is thus evident that the legal authority to perform duty as Special Director of Enforcement was conferred on Mr. A. K. Bal vide Notification dated 10th July 2001. The order dated 20th November 2002 merely clarifies this position. Therefore, by virtue of Section 49(4) of FEMA, all offences committed under FERA, subject to limitation under Section 49(3) of FEMA, are to be governed by the provisions of FERA as if FERA has not been repealed. 10.2 The adjudicating authority had taken notice of the contravention by petitioners within the period specified in Section 49(3) of FEMA and issued the show cause notices on 30th / 31st May 2002. Section 49(4) of FEMA empowers the continuance of all proceedings initiated against the offence committed under FERA. The proceedings, therefore, were initiated against petitioners within the frame work of the statutory provisions of Section 49(3) and (4) of FEMA. 10.3 Section 2(a) of FEMA defines the term adjudicating authority as an officer authorized under sub-section (1) of section 16 of FEMA. 10.4 The Supreme Court of India in the case of P.V.Mohammad Barm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 2(44) of the Act did not grant the State Authority the power to invest the authority with powers with retrospective effect. As compared to the above, in the present case, as stated earlier, since Special Directors were already empowered vide General Order dated 1st June 2000 it cannot be said that at the time of issue of notice there was no power. 10.7 Under Section 50 of FERA If any person contravenes any of the provisions of this Act [other than section 13, clause (a) of sub-section(1) of 1 [section 18, section 18A] and clause (a) of sub-section (1) of section 19] or of any rule, direction or order made there under, he shall be liable to such penalty not exceeding five times the amount or value involved in any such contravention or five thousand rupees, whichever is more, as may be adjudged by the Director of Enforcement or any other officer of Enforcement not below the rank of an Assistant Director of Enforcement specially empowered in this behalf by order of the Central Government (in either case hereinafter referred to as the adjudicating officer). Although the offences/contraventions under FERA continue to be governed by FERA, the procedure to be followed is governe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shish Agrawal 444 ITR 1(SC). Hence, even if on an interpretation of the relevant provisions of FEMA and FERA alongwith the notifications no 11 of 2000 (F.NO.1/2/2000Ad.I.C), 5/2001(F.N.4/5/2000-Ad.IC) dated 10th July 2001 and order dated 20th November 2002, it is concluded that Mr.A.K.Bal did not have jurisdiction due to retrospective appointment, the notification No. 11/2000/ (F. No. 1/2/2000 - Ad. I-C ) dated 1st June 2000 may, in the interest of justice, be construed to empower the officers to also adjudicate in respect of contraventions under FERA. 10.11 The term take notice as used in section 49(3) of FEMA would only mean to note whether a contravention under FERA is likely to have been committed and does not require that the actual notice has to be issued within two years of commencement of FEMA. 10.12 As held by the Allahabad High Court in the case of Fiserv India Pvt. Ltd. vs. Assistant Director and Ors. Manu/UP/0273 /2021 reasonable period for issue of notice commences from the date of receipt of information. The adjudication proceedings commenced upon the adjudicating authority taking notice of any contravention. Rule 3(1) of the Adjudication Proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81. The relevant excerpts of Section 81 of FERA, 1973 read as follows: (1) The Foreign Exchange Regulation Act, 1947 (7 of 1947), is hereby repealed. (2) Notwithstanding such repeal (a) anything done under the Act hereby repealed shall, insofar as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act; . (3) The mention of particular matters in sub-section (2) shallnot be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal. Section 6 of the General Clauses Act, 1897 provides the effect of repeal thus: 6. Effect of repeal.- Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not- (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (A) The sunset period of two years from the date of repeal of FERA contained in Section 49(3) of FEMA is missing in Section 81 of FERA. This is a fundamental distinction between the two enactments; (B) Under Section 81(3) of FERA, 1947, the application of section 6 of the General Clauses Act is not restricted with respect to the effect of repeal of FERA, 1947. However, under Section 49(6) of FEMA, the application of section 6 of the General Clauses Act is restricted with respect to the effect of the repeal of FERA in the following manner: (i) the phrase Save as otherwise provided in sub-section (3) contained in section 49(6) of FEMA, by which the application of the General Clauses Act is made subject to the sunset period mentioned in section 49(3); and (ii) by the non-obstante clause contained in section 49(3) of FEMA, 2000, the language of which supersedes any other law for the time being in force, thus including the provisions of the General Clauses Act. (C) The language of the provisions makes it clear that both Section 49(4) as well as Section 49(5) are subject to Section 49(3) of FEMA. 18. In the light of the above, the two enactments and thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before 31st May 2000 for there to be any contravention under Section 51 of FERA so as to attract Section 49(3) of FEMA. For the same reasons we also disagree with Mr. Setalvad s submissions that (a) at the very least the stage of Rule 3(3) must have been reached on or before 31st May 2000, i.e., before FERA was repealed and (b) Show Cause Notices under Rule 3(1) of the said Rules had to be issued before 31st May 2002. 22. Under Section 50 of FERA, if any person contravenes any of the provisions of the Act other than those referred to in that Section, he shall be liable to such penalty as may be adjudged by the Director of Enforcement or any other officer of Enforcement not below the rank of Assistant Director of Enforcement specially empowered in this behalf by order of the Central Government. Therefore, the person to adjudge whether any person who has contravened any of the provisions is liable to penalty, is the Director of Enforcement or any officer from the rank of Assistant Director of Enforcement or above, who is specially empowered in this behalf . Therefore, the officer has to be specially empowered to adjudge. 23. Where any person has committed contravention of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Act, 1872. (6) If any person fails, neglects or refuses to appear as required by sub-rule (3) before the Adjudicating Officer, the Adjudicating Officer may proceed with the inquiry in the absence of such person after recording the reasons for doing so. (7) If, upon consideration of the evidence produced before the Adjudicating Officer, the Adjudicating Officer is satisfied that the person has committed the contravention, he may, by order in writing, impose such penalty as he thinks fit in accordance with the provisions of section 50: Provided that the notice referred to in sub-rule (1), and the personal hearing referred to in sub-rules (3), (4) and (5) may, at the request of the person concerned, be waived. This was the position till 31st May 2000 when FERA was repealed subject to certain Savings provisions. 24. To get over the difficulty of contraventions under FERA coming to light after FEMA came into force on 1st June 2000, Section 49(3) read with Section 49(4) and Section 49(5)(a) of FEMA took into account such situations. Under Sub Section (3) of Section 49 of FEMA, starting with a non-obstante clause, an adjudicating officer could take notice of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 5 of section 49 of the Foreign Exchange Management Act, 1999 (42 of 1999), Shri A. K. Bal, Special Director of Enforcement is deemed to have been empowered to adjudicate cases of contravention of any of the provisions thereof (other than section 13 clause (a) of sub section (1) of section 18, section 18A and clause (a) of sub-section (1) of section 19) or any rule, direction or order made thereunder in exercise of his powers under sections 50 and 51 of the repealed Act by virtue of sub-section (4) of section 49 of the said Foreign Exchange Management Act, from the date of the said notification. (Emphasis supplied) 26. In our opinion, this would not save the situation for respondents because deem , as per Black s Law Dictionary means to Treat (something) as if it were really something else or it has qualities that it does not have. It was submitted that it was actually a clarification and not fresh Notification because if it was to be taken as fresh Notification, it being issued after 31st May 2002 will be invalid as beyond the sunset period provided. In our view, even such a clarification cannot be issued because Section 50 of FERA requires the officer of Enforceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under FERA after its repeal. There is no jurisdiction or authority for issuing a Notification after the repeal of FERA on 31st May 2000. Thus, Notification dated 10th July 2001, appointing Mr. A. K. Bal as Special Director in the Enforcement Directorate was under section 36 of FEMA and not under FERA. Mr. A. K. Bal could not have been appointed a Special Director under section 5 of FERA on 10th July 2001 since as on that date FERA stood repealed and was not in existence. The office order dated 20th November 2002, purports to clarify the notification dated 10th July 2001. It is not appointing Mr. A. K. Bal as Special Director. The purported clarification vide office order dated 20th November 2002 is ex-facie beyond the notification dated 10th July 2001. In any event, the office order purported to have been issued under sub-section (4) of Section 49 of FEMA cannot empower Mr. A. K. Bal to adjudicate cases of contravention of provisions of FERA under Sections 50 and 51 of FERA, when notification dated 10th July 2001 does not empower Mr. A. K. Bal to adjudicate cases under Section 50 of FERA. The said office order is claimed to have been issued in purported exercise of powers under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice of contravention under his powers to adjudicate provided under Section 49 of the repealed Act for a period of upto two years. In such a situation, all offences committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if that Act had not been repealed. Anything done or any action taken or purported to have been taken or done under repealed Act shall, in so far as it is not inconsistent with the provisions of FEMA, be deemed to have been done or taken under the corresponding provisions of FEMA. When an Adjudicating Officer had been appointed before the repeal of FERA but, as could be seen from the Notification dated 1st June 2000 read with Office Order dated 20 th November 2002, Mr. A. K. Bal had not been appointed before the repeal of FERA but has been appointed under the provisions of FEMA, therefore, this appointment in our view is not valid in any event to be appointed as an Adjudicating Officer under Section 50 of FERA. 34. Notably, Section 50 FERA refers to an officer of enforcement specifically empowered in this behalf by order of the Central Government. The Impugned Notification states that the Adjudicating Officer w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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