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TMI Blog2022 (8) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... to be initiated within a particular period provided under the Statute, the same are required to be initiated within the said period. However, where no such period has been provided in the Statute, the authorities are required to initiate the said proceeding within a reasonable period. No doubt that what would be a reasonable period would depend upon the facts and circumstances of each case. Admittedly, in the present cases, the alleged transactions had taken place during the financial years 1992 and 1993. Show cause notices for the said transactions were issued in the year 2002 and that too just before the sunset period of FERA was to expire, i.e., on 1st June 2002. We are therefore of the considered view that show cause notices and the proceedings continued thereunder are liable to be set aside on this short ground. As per provisions of Rules 2, 3 and 4 of the said Rules every Banking Company to preserve records stated in Rule 2 for five years and eight years for records mentioned in Rule 3 respectively. No doubt that under Rule 4 of the said Rules, the RBI, having regard to the factors specified in subsection (1) of Section 35A, by an order in writing, is empowered to dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) of the FERA. The said show-cause notice was replied by the respondent-Bank on 30th October 2002. It was the contention of the respondent-Bank that the restriction to the effect that only an NRI Account Holder shall deposit foreign currency in his NRE account was added only with effect from 31st July 1995 vide a Circular issued by the Reserve Bank of India ( RBI for short) of the same date. It was therefore submitted that the said Circular dated 31st July 1995 could not be given effect retrospectively. 3. However, vide notice dated 5th January 2005, the Adjudicating Officer held that the adjudication proceedings should be held against the respondent-Bank and fixed the matter for further proceeding on 25th January 2005. Being aggrieved by the decision of the Adjudicating Officer to proceed further, the respondent-Bank filed a petition being Writ Petition (Civil) No.1211 of 2005 before the High Court of Delhi. The learned Single Judge of the High Court, vide order dated 23rd March 2007, directed the Advocate for the respondent therein (appellant herein), i.e., the Enforcement Directorate to take specific instructions as to whether prior to 31st July 1995, foreign currency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in pursuance to similar such show cause notices culminated into adjudicatory orders dated 28th February 2005 and 4th April, 2006 passed by the Adjudicating Authority, thereby imposing penalty on the respondent-Bank. The same were challenged by way of Criminal Appeal Nos. 337 and 338 of 2009 before the High Court of Delhi. The learned Single Judge of the High Court of Delhi vide the impugned judgment and order dated 15th December 2010 allowed the said appeals and set aside the orders imposing penalty. Being aggrieved, the Directorate of Enforcement has filed Criminal Appeal Nos. 169-170 of 2012. 7. We have heard Ms. Aishwarya Bhati, learned Additional Solicitor General ( learned ASG for short) appearing on behalf of the appellants, Mr. Rajeev K. Virmani, learned Senior Counsel and Dr. A.M. Singhvi, learned Senior Counsel appearing on behalf of Citi Bank, Ms. Sonia Mathur, learned Senior Counsel appearing on behalf of the Bank of America and Mr. Sanjay Gupta, learned counsel appearing on behalf of the Standard Chartered Bank. 8. Ms. Aishwarya Bhati, learned ASG appearing on behalf of the appellants would submit that the authorized dealers, who have taken authorization fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of other acts by bankers, authorized dealers, moneychangers, stock brokers, etc. for the purpose of securing compliance with the provisions of the FERA and of any rules, directions or orders made thereunder. 12. Learned ASG further submits that under the Exchange Control Manual, 1987, particularly clause 29 B.8, the authorized dealer is required to be satisfied that the account holder is still normally resident outside India and that the proceeds of foreign currency/bank notes tendered by account holder were during his temporary visit to India. 13. Ms. Aishwarya Bhati, learned ASG, therefore submits that a conjoint reading of the aforesaid provisions of the FERA read with the Exchange Control Manual, 1987 would clearly show that the authorized dealer, before permitting the deposits of foreign currency, was required to satisfy himself that the foreign currency is deposited by the NRI Account Holder himself; that the account holder is on a temporary visit to India; and that the account holder is still normally resident abroad. She submits that the Circular dated 31st July 1995 only clarifies by abundant caution, what was already inherently and implicitly mandated by the FERA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... catory, it cannot have a penal effect. It is submitted that by a Circular, a penal action cannot be provided and it can be done only by a statute. Dr. Singhvi relies on the judgment of this Court in the case of Virtual Soft Systems Ltd. vs. Commissioner of Income Tax, DelhiI (2007) 9 SCC 665 in support of the proposition that unless it is specifically provided in the statute that the amendment is declaratory and applies to all pending cases/proceedings, it cannot be given retrospective operation. 17. Dr. Singhvi, relying on the provisions of the Banking Companies (Period of Preservation of Records) Rules, 1985 (hereinafter referred to as the said Rules ), submits that Rule 3 of the said Rules provides that every banking company is required to preserve the records only for eight years. It is therefore submitted that the notices issued in the year 2002 for the transactions that took place between 1992 and 1993 were untenable, since they pertained to a period which falls beyond the period of eight years from the date of the transactions. 18. Though we have heard the learned counsels for the parties at length on various issues, we find it unnecessary to go into the said issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may act arbitrarily in recovering the amount after lapse of long period of time. We find no substance in the submission. While it is true that Rule 12 does not prescribe any period within which recovery of any duty as contemplated by the rule is to be made, but that by itself does not render the rule unreasonable or violative of Article 14 of the Constitution. In the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. What would be reasonable period, would depend upon the facts of each case. Whenever a question regarding the inordinate delay in issuance of notice of demand is raised, it would be open to the assesee to contend that it is bad on the ground of delay and it will be for the relevant officer to consider the question whether in the facts and circumstances of the case notice of demand for recovery was made within reasonable period. No hard and fast rules can be laid down in this regard as the determination of the question will depend upon the facts of each case. [emphasis supplied] 22. In the case of Mohamad Kavi Mohamad Amin vs. Fatmabai Ibrahim (1997) 6 SCC 71, suo motu proceedings were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied for their preservation, in the said rules. 25. It can thus clearly be seen that the said Rules require every Banking Company to preserve records stated in Rule 2 for five years and eight years for records mentioned in Rule 3 respectively. No doubt that under Rule 4 of the said Rules, the RBI, having regard to the factors specified in subsection (1) of Section 35A, by an order in writing, is empowered to direct any banking company to preserve any of the books, accounts or other documents, etc. for a period longer than the period specified under the said Rules. 26. Undisputedly, no such order has been placed on record which required the respondents-Banks to preserve records concerning the transactions in question for a period longer than eight years. 27. It could thus be seen that even under the said Rules, the Banks are required to preserve the record for five years and eight years respectively. On this ground also, permitting the show cause notices and the proceedings continued thereunder of the transactions which have taken place much prior to eight years would be unfair and unreasonable. 28. In this view of the matter, we find no error in the impugned judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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