2010 (9) TMI 463 - HC - FEMA

Foreign Exchange violations Non receipt of consideration - Initiation of proceedings - initiation of proceedings under the FERA in terms of Section 49(3) FEMA read with the Rules - Held that in the instant case, been able to show that the Petitioner No. 1 took all reasonable steps to receive back the goods that had been despatched for export. The Petitioner No. 1 wrote to TCIL asking it to re-book the consignment for the delivery back atNew Delhi. TCIL, for reasons best known to it, was unable to do so. It first stated that all the six consignments were in its custody. Later it contradicted this by stating that four of the consignments had been delivered to the consignee. There is already a finding rendered by the NCDRC on this aspect. - The Petitioners have been able to show that the essential ingredient of Section 18(2) read with Section 18(3) FERA has not been satisfied in the present case. It will not be in the interests of justice after nearly eight years, to require the Petitioners to face the entire proceedings before the Adjudicating Authority to demonstrate that the notice issued to them on28th February 2002was without jurisdiction. The facts necessary to even prima facie draw the inference of violation of Section 18(2) FERA by the Petitioners do not exist in the present case. - SCN issued by DoE set aside.

Summary

Issues Involved:
1. Validity of the show cause notice dated 28th February 2002.
2. Authorization of the Adjudicating Officer.
3. Compliance with Section 18(2) of the Foreign Exchange Regulation Act, 1973 (FERA).
4. Availability of alternative remedy.
5. Jurisdiction and procedural compliance under Section 49(3) of the Foreign Exchange Management Act, 1999 (FEMA).

Detailed Analysis:

1. Validity of the Show Cause Notice Dated 28th February 2002:
The petitioners challenged the show cause notice issued on 28th February 2002 by the Deputy Director, Directorate of Enforcement (DoE), alleging contravention of Section 18(2) FERA. The petitioners argued that the notice was not issued by a properly authorized Adjudicating Officer within the meaning of Section 49(3) FEMA. The court noted that the notice dated 28th February 2002 was issued by Shri A.K. Lawande, who was not shown to be authorized as an Adjudicating Officer before the sunset period ended on 31st May 2002. The absence of such authorization vitiated the proceedings initiated by the notice.

2. Authorization of the Adjudicating Officer:
The court required the respondents to place on record the notification authorizing the officer who issued the memorandum dated 28th February 2002. The respondents failed to comply with this order. The court emphasized that for the purpose of Section 49(3) FEMA, there must be proper authorization of the Adjudicating Officer who issues the notice of contravention. Since no such notification was produced, the court concluded that the officer who issued the notice lacked proper authorization, rendering the proceedings invalid.

3. Compliance with Section 18(2) of FERA:
Section 18(2) FERA mandates that exporters take reasonable steps to receive or recover payment for exported goods. The court found that the petitioners had taken all reasonable steps to receive back the goods that had been dispatched for export. The petitioners wrote to the carrier, TCIL, asking it to re-book the consignment for delivery back to New Delhi. Despite TCIL's contradictory statements about the custody of the consignments, the petitioners' efforts were deemed sufficient to rebut the presumption of non-compliance under Section 18(2) FERA. The court held that there was no contravention by the petitioners of Section 18(2) FERA.

4. Availability of Alternative Remedy:
The DoE raised a preliminary objection that the petitioners should have exhausted the alternative remedy of approaching the Appellate Authority. The court dismissed this objection, noting that there was no adjudication order for the petitioners to appeal against. Additionally, the court found that the essential ingredient of Section 18(2) read with Section 18(3) FERA was not satisfied, making it unnecessary for the petitioners to face further proceedings before the Adjudicating Authority.

5. Jurisdiction and Procedural Compliance under Section 49(3) FEMA:
The court referred to its previous judgment in S. Ramakrishna v. Enforcement Directorate, which held that a notice like the one issued on 28th February 2002 constitutes initiation of proceedings under FERA in terms of Section 49(3) FEMA read with the Rules. However, the court reiterated that the Adjudicating Officer who takes notice of the contravention must be properly authorized. Since no notification authorizing the officer was produced, the proceedings were deemed to lack jurisdiction and procedural compliance.

Conclusion:
The court set aside the impugned show cause notice dated 28th February 2002 and the consequent memorandum dated 4th December 2003, allowing the writ petition without any orders as to costs. The court emphasized that the petitioners had taken all reasonable steps to comply with Section 18(2) FERA and that the proceedings were invalid due to the lack of proper authorization of the Adjudicating Officer.