Sanjay Jhunjhunwala vs Office Of The Special Director
2023 Latest Caselaw 3528 Cal

18.05.2023
Item No.15
gd/ssd
                              MAT/855/2023
                           IA NO: CAN/1/2023
                         SANJAY JHUNJHUNWALA
                                   VS
                OFFICE OF THE SPECIAL DIRECTOR, EASTERN
                REGION, ENFORMENT DIRECTORATE AND ORS.


                   Mr. S.N. Mookherjee,
                   Mr. Surendra Dube,
                   Mr. Sudip Deb,
                   Mr. Meghajit Mukherjee,
                   Mr. Raju Ghosh,
                   Mr. Yash Singhi,
                   Ms. Vidisha Gupta
                               ..for the Appellant.

                   Mr. Asok Kumar Chakraborti, learned ASG,
                   Mr. Sudumar Bhattacharyya
                              ..for the Union of India.

                   Mr. Arijit Chakrabarti,
                   Mr. Deepak Sharma
                                ..for Enforcement Directorate.



                      1.        This intra court appeal by the writ

             petitioner    is    directed   against   the   order   dated

             10.05.2023 passed by the learned Single Bench in WPA

             10962 of 2023. The said writ petition was filed by the

             appellant challenging the action initiated by the

             Enforcement Directorate which has ultimately laid to

             an opinion being formed by the adjudicating authority

             by order dated 11th April, 2023 in terms of Rule 4(3) of

             the   Foreign      Exchange    Management      (Adjudication

             Proceedings and Appeal) Rules, 2000 (hereinafter

             referred to as the "said Rules").
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         2.    The learned senior advocate for the

appellant would vehemently contend that Rule 4 is

comprehensive and provides for opportunity to the

person alleged to have followed the provisions of the

Foreign Exchange Management Act, 1999 (hereinafter

referred to as the "said Act") to put forth the

submissions at different stages of the matter and that

opportunity should be a meaningful opportunity and

the same cannot be reduced to an empty formality in

this regard. The learned senior advocate elaborately

referred to the findings which were recorded by the

adjudicating authority while forming an opinion in

terms of Rule 4(3) of the Act.

         3.    The learned standing counsel appearing

for the Enforcement Directorate submitted that the

authority has followed the mandate under Rule 4 and

the opportunity contemplated under these various sub-

rules in Rule 4 will be complied with.

         4. Rule 4 of the said Rules deals with holding

of inquiry. Sub-rule (1) states that for the purpose of

adjudicating under section 13 of the Act whether any

person has committed any contravention as specified in

section 13 of the Act, the Adjudicating Authority shall,

issue a notice to such person requiring him to show

cause within such period as may be specified in the

notice (being not less than ten days from the date of

service thereof) why an inquiry should not be held
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against him. Sub-rule (2) states that every notice issued

under sub-rule (1) of Rule 4 to any such person shall

indicate the nature of contravention alleged to have

been committed by him.

           5. Earlier a show cause notice was issued on

20th April, 2022. The appellant had challenged the said

notice by filing WPA 9270 of 2021 on the ground that

the provisions of Rule 4 have not been adhered to.

           6. The learned Writ Court accepted the

submissions of the appellant and by order dated

22.08.2022 the show cause notice was quashed with

liberty to the adjudicating authority to proceed in

accordance with law.       Pursuant to which, the fresh

show cause notice dated 18th November, 2022 was

issued in terms of sub-rule (1) of Rule 4 and the notice

indicated the nature of contravention alleged to have

been committed by the appellant.         The appellant was

granted liberty to show cause and, accordingly, reply

was filed on 20th January, 2023. On the same date the

appellant has also filed an application before the 3rd

respondent for compounding the alleged contravention

under the Act and the said application is stated to be

pending. In the meantime, the present writ petition

has been filed alleging that there has been

contravention of sub-rule (3) of Rule 4. Sub-rule (3) of

Rule 4 states that after considering the cause shown by

the notice in response to the show cause notice issued

by the adjudicating authority, the adjudicating

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

legal practitioner or chartered accountant duly

authorized by him. The appellant alleges that there is

infraction of Rule 4(3) of the Rules.

7. On going through the opinion of the

adjudicating authority as recorded in his order dated

11th April, 2023 in terms of Rule 4(3), we find that there

is no infraction of the said Rule and this is clear on

perusal of Rule 4(4) of the Rules. The said Rules states

that on the date fixed, the Adjudicating Authority shall

explain to the person proceeded against or his legal

practitioner or the chartered accountant, as the case

may be, the contravention alleged to have been

committed by such person indicating the provisions of

the act or of rules, regulations, notifications, direction

or orders or any condition subject to which an

authorization is issued by the Reserve Bank of India in

respect of which contravention is alleged to have taken

place. Thus, sufficient safeguard has been provided to

the appellant under Rule 4 and only when the appellant

appears before the adjudicating authority on the date

fixed by the said authority the adjudicating authority

shall explain about the alleged contravention. In the

light of the opportunity which is provided for under

sub-rule (4) of Rule 4, the question of providing another

opportunity at the stage of the proceedings under sub-

rule (3) of Rule 4 would not arise. Thus, we are

satisfied that Rule 4(4) of the said Rules affords

necessary opportunity to the appellant to put forth

their contentions after the appellant has been explained

about the contravention alleged to have been

committed by the appellant. It is thereafter in terms of

Rule 5 the Adjudicating Authority shall give an

opportunity to the appellant to produce such

documents or evidence as he may consider relevant to

the inquiry and if necessary, the hearing may be

adjourned to future date and in taking such evidence

the Adjudicating Authority shall not be bound to

observe the provisions of Indian Evidence Act, 1872.

Thus, the stage of the proceedings at present is only in

the stage of Rule 4(3) and as and when the date is fixed

by the adjudicating authority if the appellant appears

on the date and time indicated, it goes without saying

that the adjudicating authority will follow sub-rule (4)

of Rule 4 and thereafter proceed with the matter in

accordance with the other sub-rules under Rule 4.

8. Therefore, we are of the view that at this

stage of the matter the appellant cannot seek to

indirect the proceedings and we find no error in the

process adopted by the adjudicating authority.

9. Accordingly, the appeal fails and stands

dismissed.

10. The adjudicating authority is directed to

fix the date on which the appellant shall appear

personally or through his legal practitioner or chartered

accountant duly authorized by him and thereafter the

proceedings shall be taken in accordance with Rules.

11. It is pointed out by the learned senior

advocate appearing for the appellant that learned

Single Bench has imposed costs on the appellant and

directed Rs.14,000/- to be paid to the Enforcement

Directorate.

12. Considering the legal interpretation

which was put forth before us, we are of the view that

costs need not be imposed on the appellant.

13. Accordingly, the costs imposed on the

appellant stands deleted.

14. It is made clear that the observations

made in the judgment and order are to justify our

ultimate conclusion in dismissing this appeal and this

will not in any manner prejudice the rights of the

appellant to pursue the compounding application filed

under law.

15. Learned advocate appearing for the

appellant is directed to serve one set of copies on the

office of the learned Additional Solicitor General by 3

pm. today.

16. The learned standing counsel appearing

for the Enforcement Directorate submitted that the

application for compounding said to have been filed by

the appellant is not maintainable.

17. This submission is placed on record.

18. Affidavit of service is kept on record.

(T. S. SIVAGNANAM) CHIEF JUSTICE

(HIRANMAY BHATTACHARYYA, J.)