2014 (8) TMI 1105 - HC - FEMA

Complaint filed under Section 16(3) FEMA - Writ of mandamus to forbear the respondent from proceeding further with the adjudication in pursuance of a show cause notice, without complying with a particular Rule - Held that - The scheme of Section 4 actually provides opportunities at the every stage to the noticee. The forming of an opinion at the stage of show cause notice and receipt of reply, as provided in sub-rule (3) of Rule 4, is almost akin to the forming of an opinion by a disciplinary authority to hold or not an enquiry, upon receipt of a reply to a charge memo in a disciplinary proceeding. Therefore, do not think that there is any scope for expanding Rule 4(3) to mean that the forming of the opinion as required in Rule 4(3) has to be reflected by an order in writing containing reasons. Be that as it may, the petitioner had allowed several things to pass, before he came up with the above writ petition. When the petitioner came up with the above writ petition, the stage of Rule 4(3) had already been passed. The enquiry had actually come, at the time when the petitioner moved this Court, to the stage of Rule 4(8). Therefore, it is not possible now to put the clock back or rewind the proceedings back to the stage of Rule 4(3). After all, the requirement of Rule 4(3) even if the interpretation given by the Division Bench of the Bombay High Court 2013 (8) TMI 435 - BOMBAY HIGH COURT is taken to be correct, should be seen only as part of the principles of natural justice. Since the petitioner had crossed the stage of Rule 4(3) and the entire enquiry is now over and orders reserved, the petitioner should be taken to have waived the requirement.

Summary

Issues:
Seeking a writ of mandamus to stop respondent from proceeding without complying with Rule 4(3) of Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000.

Analysis:
The petitioner filed a writ petition to restrain the respondent from continuing with an adjudication without following Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. The petitioner received a show cause notice in 2011, replied in 2012, and was called for a personal hearing in 2014. The petitioner argued that the adjudicating authority must form an opinion and record reasons before initiating an inquiry, as per Rule 4(3). The petitioner cited a Bombay High Court decision and a judgment from the Madras High Court to support the interpretation of Rule 4(3). The petitioner contended that without evidence of the respondent forming an opinion based on the show cause notice and objections, the notice of hearing was legally flawed.

The court reviewed the timeline of events related to the show cause notice and subsequent hearings. The court examined Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, which outlines the process for adjudication. The court highlighted the five stages of the inquiry process, including issuing a show cause notice, fixing a hearing date, explaining the contravention, allowing the noticee to present evidence, and passing orders. The court noted that Rule 4 provides ample opportunities for the noticee at each stage of the inquiry.

The court analyzed the interpretation of Rule 4(3) and emphasized that forming an opinion at the show cause notice stage is similar to a disciplinary authority deciding on holding an inquiry based on a reply to a charge memo. The court disagreed with expanding Rule 4(3) to require a written order with reasons for forming an opinion. The court observed that the petitioner had allowed the proceedings to advance beyond the Rule 4(3) stage before filing the writ petition. As the inquiry had progressed to Rule 4(8) with orders reserved, the court concluded that it was not feasible to revert to the Rule 4(3) stage. The court considered the Rule 4(3) requirement as part of natural justice principles and deemed that the petitioner had waived this requirement by advancing through the inquiry process.

In the final judgment, the court dismissed the writ petition, stating that the petitioner had waived the Rule 4(3) requirement by allowing the inquiry to proceed to the final stages. The court ordered no costs for the petitioner and closed the related miscellaneous petition.