2017 (4) TMI 930 - HC - FEMA

Proceedings under Section 13 of the Foreign Exchange Management Act, 1999 read with Rule 9 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - Held that - Reasons have been clearly disclosed by the second respondent in the communications dated 04.11.2016 by specifically indicating that the case requires an indepth examination, meaning thereby, the objections raised by the petitioners as against the allegations levelled against them are required to be considered further and for such consideration, the petitioner must appear in person to putforth their case. Therefore, the reliance placed by the learned Senior counsel for the petitioners on the Division Bench decision of the Bombay High Court will not lend support to his case. For all the above reasons, hold that the communications dated 04.11.2016, which are impugned in these writ petitions, are intended for carrying out an indepth examination by the second respondent as against the allegations raised against the petitioners. Such communications, in my considered opinion, are also in compliance of the principles of natural justice. By the communications dated 04.11.2016, the second respondent has not determined the case against the petitioners or passed an order adverse to their interest. Therefore, the writ petitions are only liable to be dismissed and the petitioners are not entitled for any relief in these writ petitions. The second respondent is hereby directed to issue a fresh notice to the petitioners indicating the date, time and venue for the personal hearing to be given to the petitioners and if any such notice is received, the petitioners are at liberty to appear before the second respondent either in person or through an authorised representative to putforth their defence.

Issues Involved:
1. Validity of the communication dated 04.11.2016.
2. Alleged violation of principles of natural justice.
3. Requirement of reasons in administrative communications.
4. Stages and procedural requirements of an adjudication proceeding under FEMA.

Detailed Analysis:

1. Validity of the Communication Dated 04.11.2016:
The petitioners challenged the communication dated 04.11.2016 from the second respondent, which called them to appear for an enquiry related to adjudication proceedings under Section 13 of FEMA. The court noted that this communication was a continuation of the show cause notice dated 27.02.2015, and it was issued to provide a personal hearing as requested by the petitioners in their reply dated 19.06.2015. The court held that the communication was not a final adjudication but a procedural step to ensure an in-depth examination of the allegations, thus validating the communication.

2. Alleged Violation of Principles of Natural Justice:
The petitioners contended that the impugned communication was arbitrary and violated principles of natural justice as it did not disclose whether their reply had been considered. The court found that the communication was issued to comply with the petitioners' request for a personal hearing, and it was part of the procedural steps outlined in Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. The court concluded that the communication did not violate natural justice principles as it was intended to provide an opportunity for the petitioners to present their case.

3. Requirement of Reasons in Administrative Communications:
The petitioners argued that the communication lacked reasons, making it vague and unsustainable. The court emphasized that reasons are essential for any conclusion by state instrumentalities. However, it clarified that the impugned communication was not a final order but a notice for a personal hearing. The court noted that the second respondent had indicated the need for an in-depth examination, which constituted sufficient reasoning for issuing the notice. The court referenced the decision of the Bombay High Court, which highlighted that reasons must be recorded but need not be elaborate at the preliminary stage.

4. Stages and Procedural Requirements of an Adjudication Proceeding under FEMA:
The court referred to previous judgments, outlining the five stages of an enquiry under Rule 4, including issuing a show cause notice, fixing a date for appearance, explaining the contravention, allowing the production of evidence, and passing orders. The court observed that the impugned communication was part of these procedural stages, ensuring compliance with natural justice. The court also cited similar cases where the procedural requirements were upheld, reinforcing that the communication was a necessary step in the adjudication process.

Conclusion:
The court dismissed the writ petitions, holding that the communication dated 04.11.2016 was valid, procedural, and in compliance with principles of natural justice. The court directed the second respondent to issue a fresh notice for a personal hearing, allowing the petitioners to present their defense. The decision emphasized the importance of procedural steps in ensuring fair adjudication under FEMA.

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