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TMI Blog2024 (7) TMI 1360X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) unambiguously contemplates that the reason for proceeding with the adjudication must be informed to the persons or to the legal practitioners or to the Chartered Accountants, and the such information should be provided along with the allegations and the provisions of the Act and Rules. The said rules contemplates providing of information to the persons and therefore, Rule 4(3) cannot be construed as violating the Rules of Natural Justice or contravening any of the provisions of law. Rule 4(3) and Rule 4(4) should be read constructively so as to understand that a fair opportunity has been provided. Communicating the opinion of the adjudicating authority under Rule 4(3) may not be required since the adjudicating authority is bound to provide all such information along with the provisions under Rule 4(4) of the Rules. Therefore, Rule 4(3) cannot be read in isolation and it is to be read along with Rule 4(4) for constructively interpreting the procedures so as ensure that fair opportunity has been provided under the Rules and the Rules of Natural Justice has been complied with. Though this Court had an opportunity to consider the Bombay High Court Judgement, relied on by the Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for proceeding with the action, the petitioner would be in a position to defend their cases and therefore, the importance of Rule 4(3) of the Rules is to be considered by this Court. 3. The rules of natural justice to be complied with in this context is of paramount importance. Therefore, violation of Rules 4(3) of the Rules and the consequential technical circulars of the year 2014 would make difference in the proceedings. Thus, the writ petitions are to be considered. 4. The respective Senior counsels would mainly contend that the issues pertaining to Rule 4(3) of the Rules are well enumerated by the Bombay High Court in the case of Shashank Vyankatesh Monohar Vs. Union of India, reported in 2014(1) Maharashtra Law Journal 838 . The said judgement has been confirmed by the Supreme Court in SLP and consequently, Enforcement Directorate issued circular of the year 2014. Cogent reading of the judgement and the circular would reveal that the issues are no more res integra and to be followed scrupulously while taking a decision to proceed with the enquiry under Rule 4 of the Rules. 5. The distinction has been drawn with reference to the judgement of the Bombay High Court and the Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court in the case of Commissioner of Central Exercise, Bhopal Vs. Minwool Rock Fibres Limited, reported in CDJ 2012 SC 141. In the case of Commissioner of Central Excise Vs. Ratan Melting and Wire Industries, reported in 2008(13) SCC 1 , the constitution Bench of the Hon'ble Supreme Court of India held as follows:- 6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him. 19. On a plain reading of the provisions, as already stated, we are unable to cull out a requirement of recording of reasons and communication of such reasons to the noticee, even at the stage of consideration of the reply to the show cause notice. Sub-Rule 4 of Rule 4 imposes an obligation on the adjudicating Authority to explain to the noticee or to his legal practitioner or to his chartered accountant, the contraventions alleged to have been committed with reference to the provisions of the Act, of the Rules, Regulations, notifications or any condition subject to which an authorisation is issued by the Reserve Bank of India, in respect of which the contravention is alleged to have taken place. 20. The primary reason behind the conclusions of the Bombay High Court appear to be the serious consequences, which would be inflicted upon the noticee against whom an adjudication order may be passed under Section 13 of the Act. The consequences of a factual finding relating to contravention that may be reached by the adjudicating Authority after a full fledged enquiry, cannot, in our considered opinion, form the basis for the Court to read into the provision something more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry on the basis of a subjective satisfaction of the adjudicating Authority or the enquiry officer or the Disciplinary Authority would take a stand that those Authorities should also record their reasons for forming an opinion and communicate the same. 10. The learned Additional Solicitor General of India would contend that the judgement of the Madras High Court is the later judgement, which is to be followed since the judgements relied on by the petitioners are referred and the interpretation of Rule 4(3) was considered. The spirit of Rule 4(3) is to be holistically understood with reference to the earlier and subsequent procedures contemplated under Rule 4. Rule 4(3), cannot be read in isolation so as to carve out an additional opportunity, which is otherwise not contemplated under Rule 4(3). 11. Procedures are to be read as it is and the Court cannot expand the scope of the procedures so as to provide any additional opportunity or otherwise. In the absence of any challenge, scope of the procedures contemplated under the Rules are to be followed as it is and any expansion would result in derailing of the procedures, which is otherwise contemplated under the Rules. Inconsistency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority is of the opinion that an inquiry should be held, he shall issue a notice fixing a date for the appearance of that person either personally or through his legal practitioner or a chartered accountant duly authorised by him. 16. Let us examine the spirit and intent of Rule 4(3). On issuance of show cause notice by the adjudicating authority along with the materials relating to contraventions and on receipt of the explanations from the persons/addressee, the adjudicating authority under Rule 4(3) has to consider the cause if any shown by such person. That would indicate that the explanation submitted is to be considered. On such consideration, if the adjudicating authority is of an opinion that an enquiry should be held, then he shall issue notice. Therefore, the opinion under Rule 4(3) is to be construed as personal satisfaction of the authority to proceed further and such personal opinion formed by the adjudicating authority must be recorded in the file so as to ensure that further proceedings are not continued without considering the explanations and the materials available on record. In other words, the show cause notice issued relating to contraventions explanations s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to have taken place. Therefore, the adjudicating authority is duty bound to explain to the person proceeded against or his legal practitioners about the contraventions alleged to have been committed. Communicating the formation of opinion and the reasons will be informed to the person or his legal representative by the adjudicating authority under Rule 4(4) of the Rule. On receipt of such materials from the adjudicating authority on the hearing date the person concerned is at liberty to defend their case by following the procedures as contemplated under Rule 4(5) to 4(12) of the Rules. 20. When Rule 4(4) unambiguously contemplates that the reason for proceeding with the adjudication must be informed to the persons or to the legal practitioners or to the Chartered Accountants, and the such information should be provided along with the allegations and the provisions of the Act and Rules. The said rules contemplates providing of information to the persons and therefore, Rule 4(3) cannot be construed as violating the Rules of Natural Justice or contravening any of the provisions of law. Rule 4(3) and Rule 4(4) should be read constructively so as to understand that a fair opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X
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