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TMI Blog2010 (4) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... -style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin-top:0cm; mso-para-margin-right:0cm; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0cm; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-fareast-language:EN-US;} <![endif]--> JUSTICE S.MURALIDHAR For the Petitioner : Mr. C. Mukund with Ms. Firdouse Q. Wani, Advocate...... For the Respondent : Ms. Rajdipa Behura with Mr. C.S.Chauhan, Advocate. JUDGMENT 1. The challenge in this petition is to an order dated 22nd August 2002, passed by the Special Director, Enforcement Directorate (ED) informing the Petitioner that the adjudication proceedings in respect of the Memo. No. T-4/2-BAN/2000 (SCN I II) dated 28th February 2000 and 27th March 2001 would be held in accordance with the procedure laid down in the Rules of the Adjudication Proceedings and Appeal Rules, 1974 (hereinafter referred to as `APAR ) and accordingly fixing the case for personal hearing before h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levying a penalty of ₹ 50 lakhs on the Petitioner. The appeal filed by the petitioner before the Appellate Tribunal came up for hearing on 2nd January 2006 when the question of pre-deposit of the penalty amount was considered. By the impugned order dated 7th February 2006, the Appellate Tribunal required the Petitioner to furnish an unconditional bank guarantee of ₹ 25 lakhs in favour of the Special Director, ED within 45 days as a condition to the appeal being taken up for hearing. The Petitioner s application for the modification of the above order was dismissed and the appeal itself was dismissed by the Appellate Tribunal on 19th January 2007. According to the Petitioner this was done despite his demonstrating his lack of financial capacity to comply with the order dated 07.02.2006 passed by the Appellate Tribunal. 6. Before this Court it has been contended by the Petitioner that the proceedings against the Petitioner under FERA were initiated only on 22nd August 2002, i.e., after the expiry of the `sunset period on 31st May 2002 in terms of Section 49(3) of FEMA. Therefore, the proceedings against the Petitioner for the alleged contravention of FEMA were withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it was explained that the word commencement connotes take notice of judicially , and that in the context of Section 49 (3) it involves the formation of a prima facie opinion by the court where there was sufficient ground for proceeding in the matter. He also placed reliance on the judgment of this Court in Bachraj Bengani v. A.K. Roy 2009 IV AD (Del) 333. 12. Learned counsel appearing for the ED submitted that the proceedings in the instant case commenced with the issuance of the show cause notice under Section 51 of the Act on 28th February 2000 as regards offence under Section 2(1) of FERA and the show cause notice dated 27.03.2001 as regards the contravention of Section 9(1)(c) of FERA. Both show cause notices were preceded by the formation of a prima facie opinion of the ED and were issued well before the expiry of the sunset period in terms of Section 49(3) of FEMA. Therefore, there was no illegality committed in proceeding with the matter under the FERA and the Rules made thereunder. She refers to the decision of the Single Judge of the Madras High Court in Deputy Director, Enforcement Directorate, Madras v. Naina Maricair AIR 1990 Madras 22. 13. In order to apprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst or his lawyer or authorized representative, the offence alleged to have been committed by such person indicating the provisions of the Act or of the rules, directions or orders made thereunder in respect of which contravention is alleged to have taken place. (5) The adjudicating officer shall then give an opportunity to such person to produce such documents or evidence as he may consider relevant to the inquiry and if necessary, the hearing may be adjourned to a future date; and in taking such evidence the adjudicating officer shall not be bound to observe the provisions of the Indian Evidence Act, 1872. (6) If any person fails, neglects or refuses to appear as required by sub-rule (3) before the adjudicating officer may proceed with the inquiry in the absence of such person after recording the reasons for doing so. (7) If, upon consideration of the evidence produced before the adjudicating officer, the adjudicating officer is satisfied that the person has committed the contravention, he may, by order in writing, impose such penalty as he thinks fit in accordance with the provisions of section 50: Provided that the notice referred to in sub-rule (1), and the personal hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of available evidence, they may intimate their preference, so that without requiring their personal attendance or the attendance of lawyer or other authorised representative. 17. Likewise in the notice dated 27th March 2001, it has been stated as under:- This Memorandum to issued under Rule (3)(1) of the Adjudication Proceedings and Appeal Rules, 1974 read with sub-section 3 4 of Section 49 of FEMA, 1999. In case it is decided to hold adjudication proceedings personal hearing of the case could be waived at their request. In case they prefer the case to be disposed of on the basis of available evidence they may intimate their preference, so that if adjudication proceedings are to be held, the case may be decided without requiring their personal attendance or the attendance of lawyer or other authorised representative. 18. There can be no manner of doubt, therefore, that both notices dated 28th February 2000 and 27th March 2001 were notices relatable to Rule 3(1) of APAR which was the first of the two stages involved in the adjudication proceedings under FERA, 1973. If at this stage, after considering the replies to these notices the adjudicating officer was of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ERA? 21. Section 49 (3) of FEMA reads as under:- (3) Notwithstanding anything contained in any other law for the time being in force, no court shall take cognizance of an offence under the repealed Act and no adjudicating officer shall take notice of any contravention under section 51 of the repealed Act after the expiry of a period of two years from the date of the commencement of this Act. (emphasis supplied) 22. The attempt by learned counsel for the Petitioner here is to draw a parallel between a court taking cognizance of an offence and an adjudicating officer taking notice of any contravention. He submits that the principle of ejusdem generis must apply and the latter act must take colour from the former. Therefore, according to him, first as no `cognizance can be said to be taken by a court till it has applied its mind to the materials on record, no adjudicating officer can take `notice of a contravention till he considers the reply and forms an opinion in terms of Rule 3(3) APAR. 23. In Videocon International Ltd., the Supreme Court had occasion to interpret the word cognizance occurring in Section 49 (3) of FEMA. In the said case, the Chief Enforcemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered view, was not right in equating initiation of proceedings under Chapter XIV with commencement of proceedings under Chapter XVI. 25. In para 36 in Videocon International Ltd., it was explained that taking cognizance of offence was entirely different from initiating proceedings; rather it was the condition precedent to the initiation of the proceedings . 26. There are three distinct stages highlighted by the Supreme Court in Videocon International Ltd. The first is the Magistrate taking judicial notice of the offence with a view to initiating proceedings . Therefore, taking notice judicially of the offence is equated to taking cognizance . In para 36 of Videocon International Ltd., it was explained that taking cognizance of an offence was entirely different from initiating proceedings; rather it was the condition precedent to the initiation of the proceedings . Therefore, following `cognizance , the proceedings were `initiated under Chapter XIV. Then comes the third stage of commencement of judicial proceedings. This is explained from the observation in para 24 of Videocon International Ltd., where it was observed that without initiation of proceedings under Chap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overruled the judgment of the learned Single Judge in R. Sivarajan. The Division Bench referred to the judgment of the Kerala High Court in Bhaskaran Pillai v. Enforcement Directorate 1978 Ker LT 436 and held that adjudication proceedings under Section 51 of the Act commenced, when show cause notice is issued by the Adjudicating Officer under Rule 3(1). 31. The considered view of this Court, is that in the instant case, the Adjudicating Officer took notice of the contravention when he issued the notices on 28th February 2000 and 27th March 2001 to the Petitioner. This was within the sunset period. Therefore, the proceedings were not bad in law on that score. 32. Consequently, there is no error committed by the Adjudicating Officer in communicating on 22nd August 2002 that the proceedings would continue under FERA, 1973. The contention of the learned counsel for the Petitioner on this aspect is accordingly rejected. 33. The challenge to the validity of the orders dated 7th February 2006 and 7th January 2007, passed by the Appellate Tribunal requires to be considered. The plea urged by the Petitioner is essentially one of financial hardship. It is seen in the instant case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not have any liquidity in order to fulfill the bank s requirement for getting Bank Guarantee. No Bank is prepared to stand as Guarantor for a company which is in Bad Financial Shape. 34. In the liquidation proceedings undertaken against M/s Sita Electronics Pvt. Ltd., the High Court of Andhra Pradesh observed that the Petitioner was not involved in the day to day affairs of that company. All the company s properties had been disposed of in 1996 itself. 35. This Court finds that in the order dated 19th January 2007, the Appellate Tribunal has observed that the appellants have not shown any bonafide efforts in complying with the order for furnishing the bank guarantee. The observations do not appear to be justified in view of what was specifically pleaded and the application filed before the Appellate Tribunal, portions of which have been extracted hereinabove. Moreover, in the order dated 7th February 2006, the Tribunal itself has observed that a dismal picture of the financial condition was projected. However, it went on to observe that: it is difficult to believe that the appellants with such an acquisitive instinct cannot make pre-deposit of a partial amount of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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