2010 (12) TMI 657 - HC - FEMA

Violation FERA - Proceedings under FEMA - taking notice versus issuing notice - period of limitation of 2 years - whether the adjudicating officer has taken notice of the alleged contravention of FERA within the period of two years from the commencement of FEMA so as to adjudicate upon such contravention of FERA under the provisions of FEMA - Held that - the adjudicating officer on taking notice of the alleged contravention of FERA has signed signing the show cause notice on 31-5-2002. Since the adjudicating officer has taken notice of the alleged offence on 31-5-2002 which is within a period of two years from the commencement of FEMA as contemplated under Section 49(3) of FEMA, the adjudicating officer would have jurisdiction to adjudicate the notice dated 31-5-2002. The fact that the said notice was posted on 5-6-2002 and served upon on 6-6-2002 would not invalidate the proceedings initiated by show cause notice dated 31-5-2002, because for the purpose of Section 49(3) of FEMA what is relevant is taking notice and not issuance or service of notice. - Petition dismissed.

Issues Involved:
1. Jurisdiction of the adjudicating officer to initiate adjudication proceedings after the expiry of two years from the commencement of FEMA.
2. Interpretation of the term "take notice" under Section 49(3) of FEMA.
3. Validity of the show cause notice issued on 31-5-2002 and its service after 31-5-2002.

Detailed Analysis:

1. Jurisdiction of the Adjudicating Officer:
The petitioners challenged the jurisdiction of the adjudicating officer to initiate adjudication proceedings after the expiry of two years from the commencement of FEMA. They argued that since the show cause notice dated 31-5-2002 was dispatched on 5-6-2002 and received on 6-6-2002, it was beyond the two-year period from the commencement of FEMA (1-6-2000), thus barred by time.

2. Interpretation of "Take Notice" under Section 49(3) of FEMA:
The core issue was whether the adjudicating officer had taken notice of the alleged contravention of FERA within two years from the commencement of FEMA. The petitioners contended that "taking notice" should be interpreted in the context of the Adjudication Proceedings and Appeal Rules, 1974, which involves two stages: the issuance of the first notice under Rule 3(1) and the formation of an opinion after considering the cause shown by the noticee. They argued that mere signing of the first notice on 31-5-2002 did not amount to "taking notice" as it did not involve forming an opinion.

The petitioners further argued that "take notice" should be interpreted ejusdem generis to "take cognizance" as used in Section 49(3) of FEMA, implying a judicial application of mind to the alleged contravention. They cited various judgments to support their interpretation that "taking notice" involves a judicial act similar to "taking cognizance" in criminal proceedings.

3. Validity of the Show Cause Notice:
The petitioners also argued that even if the issuance of the first notice constituted "taking notice", the notice must be served before 31-5-2002 to keep the action alive under Section 49(5)(a) of FEMA. They relied on several judicial precedents to argue that the terms "made" or "issued" should be strictly construed to mean "served".

Judgment Analysis:

Jurisdiction and Interpretation of "Take Notice":
The court held that the adjudicating officer had taken notice of the alleged contravention of FERA when he formed a prima facie opinion and signed the show cause notice on 31-5-2002. The court emphasized that the adjudication proceedings under Section 51 of FERA and Rule 3 of the Appeal Rules involve two stages, and the first stage begins with the issuance of the show cause notice under Rule 3(1). The court rejected the petitioners' argument that "taking notice" occurs only after considering the cause shown by the noticee and issuing a second notice under Rule 3(3).

The court clarified that "taking notice" under Section 49(3) of FEMA refers to the prima facie opinion formed before the issuance of the first notice under Rule 3(1). The court reasoned that the adjudicating officer must apply his mind to the materials placed before him and form a prima facie belief of contravention before issuing the first notice. Therefore, the signing of the show cause notice on 31-5-2002 constituted "taking notice" under Section 49(3) of FEMA.

Validity of the Show Cause Notice:
The court rejected the petitioners' alternative argument that the notice must be served before 31-5-2002. It held that Section 49(5)(a) of FEMA does not require the notice to be served within the two-year period but only mandates that the adjudicating officer must take notice within that period. The court concluded that since the adjudicating officer had taken notice by signing the show cause notice on 31-5-2002, the proceedings were valid even though the notice was served after 31-5-2002.

Conclusion:
The court dismissed the petition, holding that the adjudicating officer had validly taken notice of the alleged contravention of FERA within the two-year period from the commencement of FEMA by signing the show cause notice on 31-5-2002. The court also directed that the order impugned in the petition be not given effect to for a period of eight weeks from the date of the judgment.

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