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Issues Involved:
1. Whether the show cause notice issued under Rule 3(1) of the Adjudication Proceedings and Appeal Rules, 1974 constitutes the commencement of adjudication proceedings under Section 51 of the Foreign Exchange Regulation Act, 1973. 2. Whether the Enforcement Department can retain seized currency beyond one year without issuing a notice under Rule 3(3) of the Rules. Detailed Analysis: Issue 1: Commencement of Adjudication Proceedings The primary issue in this writ appeal is whether the issuance of a show cause notice under Rule 3(1) of the Adjudication Proceedings and Appeal Rules, 1974 signifies the commencement of adjudication proceedings under Section 51 of the Foreign Exchange Regulation Act, 1973. The respondent argued that adjudication proceedings commence only when a notice of hearing under Rule 3(3) is issued, not when a show cause notice under Rule 3(1) is issued. This argument was supported by the judgment in R. Sivarajan v. Deputy Collector, Madras, where it was held that proceedings under Section 51 of the Act commence only when a notice of hearing under Rule 3(3) is issued. The appellants, on the other hand, contended that the issuance of a show cause notice under Rule 3(1) within one year from the date of seizure is sufficient to commence adjudication proceedings under Section 51. They relied on the earlier decision in K.A. Abdul Khader v. Deputy Director, Enforcement Information Directorate, Madras, and the Division Bench's decision in the appeal against the same, which held that proceedings commence when a show cause notice under Rule 3(1) is issued. The Kerala High Court's decision in Bhaskaran Pillai v. Enforcement Directorate also supported this view. The court analyzed the related provisions of the Act and the Rules. Section 41 of the Act allows the retention of seized documents (including currency) for up to one year unless proceedings under Section 51 or prosecution under Section 56 are commenced. The court noted that the show cause notice under Rule 3(1) indicates the nature of the alleged offense and calls upon the person to show cause why adjudication proceedings should not be held. If the adjudicating officer accepts the cause shown, the proceedings end; otherwise, they continue with a notice under Rule 3(3) for personal appearance. The court concluded that the show cause notice under Rule 3(1) is not merely an office memo but a substantive step in the adjudication process. Therefore, adjudication proceedings under Section 51 of the Act commence when a show cause notice is issued under Rule 3(1). Issue 2: Retention of Seized Currency The respondent filed a writ petition claiming that the Enforcement Officials seized Rs. 1,60,000/- from his residence and that the appellants could no longer retain the currency as no adjudication proceedings under Section 51 or prosecution under Section 56 had commenced within one year. The appellants admitted the seizure but contended that the issuance of a show cause notice under Rule 3(1) within one year justified the retention of the currency. The court examined the facts and found that the show cause notice under Rule 3(1) was issued on 11-5-1987, within one year from the date of seizure (21-5-1986). The court rejected the respondent's contention that the notice was antedated and affixed later, as these were factual allegations that could not be examined in this appeal. The court held that since the show cause notice was issued within the stipulated period, the appellants were entitled to retain the currency until the disposal of the adjudication proceedings, including any proceedings before the Appellate Board and the High Court. Conclusion: The court allowed the writ appeal, holding that adjudication proceedings under Section 51 of the Foreign Exchange Regulation Act, 1973 commence when a show cause notice is issued under Rule 3(1) of the Adjudication Proceedings and Appeal Rules, 1974. Consequently, the Enforcement Department is justified in retaining the seized currency beyond one year from the date of seizure, provided the show cause notice is issued within that period. The writ petition directing the return of the currency to the respondent was thus dismissed.
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