9911796707
TMI Blog2024 (7) TMI 1360X X X X Extracts X X X X X X X X Extracts X X X X ..... Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules 2000 (herein after referred to as the "Rules"), has not been adhered to and therefore, subsequent proceedings are to be held as null and void. In the event of communicating the reasons recorded for proceeding with the action, the petitioner would be in a position to defend their cases and therefore, the importance of Rule 4(3) of the Rules is to be considered by this Court. 3. The rules of natural justice to be complied with in this context is of paramount importance. Therefore, violation of Rules 4(3) of the Rules and the consequential technical circulars of the year 2014 would make difference in the proceedings. Thus, the writ petitions are to be considered. 4. The respective Senior counsels would mainly contend that the issues pertaining to Rule 4(3) of the Rules are well enumerated by the Bombay High Court in the case of Shashank Vyankatesh Monohar Vs. Union of India, reported in 2014(1) Maharashtra Law Journal 838. The said judgement has been confirmed by the Supreme Court in SLP and consequently, Enforcement Directorate issued circular of the year 2014. Cogent reading of the judgement and the circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be relied upon. The departmental circulars are not binding on the persons or quasi judicial authorities or Courts and therefore, in that view of the matter, the circulars/instructions issued by the Board would not assist them. The said proposition has been laid down by the Hon'ble Supreme Court in the case of Commissioner of Central Exercise, Bhopal Vs. Minwool Rock Fibres Limited, reported in CDJ 2012 SC 141. In the case of Commissioner of Central Excise Vs. Ratan Melting and Wire Industries, reported in 2008(13) SCC 1, the constitution Bench of the Hon'ble Supreme Court of India held as follows:- "6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the cause shown by the noticee, the adjudicating Authority is of the opinion that an enquiry should be held, he shall issue a notice fixing the date for appearance of that person either personally or through legal practitioner or a chartered accountant, duly authorised by him. 19. On a plain reading of the provisions, as already stated, we are unable to cull out a requirement of recording of reasons and communication of such reasons to the noticee, even at the stage of consideration of the reply to the show cause notice. Sub-Rule 4 of Rule 4 imposes an obligation on the adjudicating Authority to explain to the noticee or to his legal practitioner or to his chartered accountant, the contraventions alleged to have been committed with reference to the provisions of the Act, of the Rules, Regulations, notifications or any condition subject to which an authorisation is issued by the Reserve Bank of India, in respect of which the contravention is alleged to have taken place. 20. The primary reason behind the conclusions of the Bombay High Court appear to be the serious consequences, which would be inflicted upon the noticee against whom an adjudication order may be passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(1) of the Prevention of Money-Laundering Act, 2002, do not require the reasons to be recorded in writing. If we are to read into the provision, such a requirement, the same in our considered opinion would lead to disastrous results, where notices under various enactments which provide for enquiry on the basis of a subjective satisfaction of the adjudicating Authority or the enquiry officer or the Disciplinary Authority would take a stand that those Authorities should also record their reasons for forming an opinion and communicate the same." 10. The learned Additional Solicitor General of India would contend that the judgement of the Madras High Court is the later judgement, which is to be followed since the judgements relied on by the petitioners are referred and the interpretation of Rule 4(3) was considered. The spirit of Rule 4(3) is to be holistically understood with reference to the earlier and subsequent procedures contemplated under Rule 4. Rule 4(3), cannot be read in isolation so as to carve out an additional opportunity, which is otherwise not contemplated under Rule 4(3). 11. Procedures are to be read as it is and the Court cannot expand the scope of the procedures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respond to such show cause notices. On receipt of such explanations/objections, documents if any submitted by the addressee, the adjudicating authority has to invoke Rule 4(3) of the Rules. 15. Rule 4(3) commences by stating that " 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." 16. Let us examine the spirit and intent of Rule 4(3). On issuance of show cause notice by the adjudicating authority along with the materials relating to contraventions and on receipt of the explanations from the persons/addressee, the adjudicating authority under Rule 4(3) has to consider the cause if any shown by such person. That would indicate that the explanation submitted is to be considered. On such consideration, if the adjudicating authority is of an opinion that an enquiry should be held, then he shall issue notice. Therefore, the opinion under Rule 4(3) is to be construed as personal satisfaction of the authority to proceed further an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the case may be, the contravention, allowed to have been committed by such person indicating the provisions of the Act or of rules, regulations, notifications, directions or orders or any condition subject to which an authorisation is issued by the Reserve Bank of India in respect of which contravention is alleged to have taken place." Therefore, the adjudicating authority is duty bound to explain to the person proceeded against or his legal practitioners about the contraventions alleged to have been committed. Communicating the formation of opinion and the reasons will be informed to the person or his legal representative by the adjudicating authority under Rule 4(4) of the Rule. On receipt of such materials from the adjudicating authority on the hearing date the person concerned is at liberty to defend their case by following the procedures as contemplated under Rule 4(5) to 4(12) of the Rules. 20. When Rule 4(4) unambiguously contemplates that the reason for proceeding with the adjudication must be informed to the persons or to the legal practitioners or to the Chartered Accountants, and the such information should be provided along with the allegations and the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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