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TMI Blog2010 (12) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of notice. - Petition dismissed. - 3154 of 2004 - - - Dated:- 16-12-2010 - J.P. Devadhar and R.M. Savant, JJ. REPRESENTED BY : S/Shri Dr. Virendra Tulzapurkar, Senior Advocate with Sanjay V. Kadam and Ms. Apeksha Sharma i/b. Kadam Co., for the Petitioner. S/Shri A.J. Rana, Senior Advocate with Mrs. S.V. Bharucha and Rajendra Kumar, for the Respondent. [Judgment per : J.P. Devadhar, J.]. - The petitioners are aggrieved by the order passed by the Assistant Director, Directorate of Enforcement on 20-8-2004, wherein he has rejected the preliminary objections raised by the petitioners and held that the show cause notice dated 31-5-2002 is valid and that the said show-cause notice does not violate the mandate of Section 49(3) of the Foreign Exchange Management Act, 1999 ( FEMA for short). 2. Petitioner No. 1 company incorporated under the Companies Act, 1956 is engaged in the business of television advertisements through the channels of Star TV . Petitioner No. 2 is the Director of petitioner No. 1 - company. 3. On 6-6-2002, the petitioners received a show cause notice dated 31-5-2002 whereby the Assistant Director, Enforcement Directorate called upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings for the alleged contravention of FERA (repealed Act) provided the adjudicating officer takes notice of such contravention within a period of two years from the date of commencement of FEMA. FEMA came in to force with effect from 1-6-2000, therefore, as per Section 49(3) of the FEMA, the adjudicating officer is required to take notice of the alleged contravention of FERA, within a period of two years, that is, on or before 31-5-2002. If the adjudicating officer fails to take notice of the alleged contravention of FERA on or before 31-5-2002, then proceedings in respect of such contravention of FERA cannot be continued under FEMA. The question in the present case is, whether, the adjudicating officer has taken notice of the alleged contravention of FERA within two years from the commencement of FEMA. 7. According to Dr. Tulzapurkar, learned Senior Advocate for the petitioners, the text contained in Section 49(3) of FEMA has to be interpreted in the context of Adjudication Proceedings and Appeal Rules, 1974 ( Appeal Rules for short). He submits that the adjudication proceedings under the Appeal Rules is held in two stages. The first stage is when a notice is issued under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the petitioners submitted that the said Division Bench decision does not in any manner affect the analysis of the Appeal Rules that the adjudication proceedings are held in two stages. He submitted that what was overruled by the Division Bench of the Madras High Court, was the decision of the learned Single Judge that adjudication does not commence until the second notice is issued. He submitted that the issue involved in the present case is not whether the adjudication proceedings commence with the issuance of the first notice or with the second notice, but the issue involved in the present case is as to when during the two stages of adjudication proceedings that the adjudicating officer takes notice of the alleged violation. Accordingly, counsel for the petitioners submitted that though the adjudication proceedings commence with the issuance of the notice under Rule 3(1) of the Appeal Rules, the adjudicating officer can be said to have taken notice only when he forms an opinion after 10 days of service of the notice under Rule 3(1) of the Appeal Rules. 9. Counsel for the petitioners further submitted that the legislative mandate is that the adjudicating officer m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Counsel for the petitioners referred to the decision in the case of S.K. Sinha v. Videocon International Limited (AIR 2008 S.C. 1213), wherein the Apex Court has construed the expression cognizance in Section 49(3) of FEMA and held thus :- 12. The expression cognizance has not been defined in the Code. But the word (cognizance) is of indefinite import. It has not esoteric or mystic significance in criminal law. It merely means become aware of and when used with reference to a Court or a Judge, it connotes to take notice of judicially. It indicates the point when a Court or a Magistrate takes judicial notice of an offence with a view to initiating proceedings in respect of such offence said to have been committed by someone. Taking cognizance does not involve any formal action of any kind. It occurs as soon as a Magistrate applies his mind to the suspected commission of offence. Cognizance is taken prior to commencement of criminal proceedings. Taking of cognizance is thus a sine qua non or condition precedent for holding a valid trial. Cognizance is taken of an offence and not of an offender. Whether or not a Magistrate has taken cognizance of an offence depends on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther or not. Therefore, issuance of the first notice on perusal of the materials placed by the enforcement officer would not amount to taking notice by the adjudicating officer of the alleged violation of FERA. The action of the enforcement officer submitting facts and circumstances to the adjudicating officer to enable the adjudicating officer to issue the first notice is equivalent to filing of a complaint before the Magistrate and, therefore, issuance of first notice or what precedes before first notice is issued cannot be regarded as taking notice equivalent to taking cognizance of an offence by the adjudicating officer. 13. Counsel for the petitioners further submitted that if the words take notice is not construed to be equivalent to take cognizance, anomalous situations would arise and result in hostile discrimination. The anomalous situation would be that in a given case, for the same violation the Magistrate would cease to have jurisdiction to take cognizance of the offence after 31-5-2002 where as the adjudicating officer would be entitled to take notice of the alleged violation after 31-5-2002. Such an interpretation which renders the provisions of statute unconstit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, prior to the issuance of show cause notice under Rule 3(1), the adjudicating officer has to take notice of the contravention under Section 51 of FERA. Unless the adjudicating officer takes notice of the alleged contravention of FERA, he cannot issue show cause notice. 16. Counsel for the revenue further submitted that when the enforcement officer places the materials relating to the alleged contravention of FERA, it may be treated as filing complaint before a Magistrate in the criminal proceedings and on the adjudicating officer issuing a show cause notice under Rule 3(1) it can be said that the adjudicating officer had taken cognizance of the alleged contravention of FERA and issued the show cause notice. Counsel for the revenue submitted that there is no provision similar to Section 156(3) of Cr. P.C. in FERA vis a vis adjudication proceedings. As such, according to the counsel for the revenue show cause notice under Rule 3(1) of the Appellate Rules constitutes taking notice of the alleged contravention of FERA. In support of the above contention, he relied upon the decision of the Apex Court in the case of S.K. Sinha (supra). 17. Relying on the decision of the Apex Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials placed by the enforcement officer, the adjudicating officer formed a prima facie opinion that the petitioners have contravened the provisions of FERA and decided to issue a show-cause notice to the petitioners under Rule 3(1) of the Appeal Rules. It is not in dispute that the show-cause notice was in fact prepared and signed by the adjudicating officer on 31-5-2002. The question is, whether signing of the show-cause notice amounts to taking notice under Section 49(3) of FEMA? 23. The adjudication proceedings under Section 51 of FERA read with Rule 3 of the Appeal Rules framed under FERA consists of two stages. First stage is, when the adjudicating officer forms a prima facie opinion the basis of the materials placed before him, that a person has contravened the provisions of FERA and accordingly issues a notice (first notice) calling upon that person to show cause within such period as may be specified (being not less than ten days from the date of service thereof) as to why adjudication proceedings should not be held against him. The second stage is, when the adjudicating officer after considering the cause if any shown by such person forms an opinion that the adjudication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is only when the adjudicating officer takes notice of the alleged contravention of FERA he issues first notice under Rule 3(1) of Appeal Rules. 26. The argument that it is only after the expiry of ten days from the date of service of the first notice, the adjudicating officer can take notice of the alleged contravention of FERA is also without any merit because, where the noticee fails to show-cause within the period specified in the first stage notice, then the adjudicating officer is empowered to continue with the adjudication proceedings by forming an opinion on the basis of the materials placed by the enforcement officer that the noticee has contravened the provisions of FERA. If the adjudicating officer, in the absence of any cause shown, can form an opinion on the basis of the materials placed by the enforcement officer that a person has contravened the provisions of FERA, then there is no reason as to why he cannot form such opinion on the basis of the materials placed by the enforcement officer before issuance of the first notice. Forming an opinion as to the alleged contravention of FERA on the basis of the materials placed by the enforcement officer, obviously means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke notice of judicially . In other words, in criminal proceedings taking cognizance by a Magistrate would mean taking notice of the offence judicially and issue further process. Similarly, in adjudication proceedings the adjudicating officer on taking notice of the alleged contravention of FERA initiates adjudication proceedings through the process of issuing show-cause notice under Rule 3(1) of the Appellate Rules. In criminal proceedings, the Magistrate even after taking cognizance of the alleged offence has the option of ordering the police to investigate the offence under Section 156(3) of the Criminal Procedure Code, where as, the adjudicating officer is not conferred with such power because the two proceedings stand on different footing. Therefore, when the legislature has specifically provided different modes for conducting the criminal proceedings and the adjudication proceedings, in our opinion, it would not be proper to construe the words take notice in adjudication proceedings ejusdem generis with the words take cognizance in the criminal proceedings, so as to hold that the notice under Rule 3(1) amounts to issuing notice for further investigation without taking no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dication proceedings under Section 51 of FERA read with Rule 3 of the Appeal Rules provide that the adjudicating officer must on taking notice of the alleged contravention of FERA issue first notice under Rule 3(1) and if not satisfied with the cause shown, then issue second notice under Rule 3(3) fixing a date of hearing of the show cause notice issued under Rule 3(1). 31. In the present case, 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. 32. For all the aforesaid reasons, we see no merit in the above petition and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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