The Bank Of Nova Scotia vs Uoi & Anr.
2010 Latest Caselaw 4177 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI

+                             W.P.(CRL) 109/2004

                                                  Decided on 09.09.2010
IN THE MATTER OF :

THE BANK OF NOVA SCOTIA                             ..... Petitioner
                   Through: Mr. Ajay Monga, Advocate

                     versus
UOI & ANR.                                                   ..... Respondents
                           Through: Mr.A.K. Panda, Sr. Advocate with
                           Mr. Jatin Singh, Advocate

CORAM

* HON'BLE MS.JUSTICE HIMA KOHLI

     1. Whether Reporters of Local papers may           No
        be allowed to see the Judgment?

     2. To be referred to the Reporter or not?          No

     3. Whether the judgment should be                  No
        reported in the Digest?

HIMA KOHLI, J. (Oral)

1. The present petition is filed by the petitioner praying inter alia

for issuance of a writ of certiorari for quashing and setting aside the order

dated 13.12.2004 passed by the respondent No.2/Adjudicating Officer and

for dropping of the proceedings against the petitioner. The second relief

sought by the petitioner is for quashing of the proceedings initiated against

it pursuant to the memorandum dated 31.05.2002, issued by the

respondents, pending before respondent No.2.

2. The dates and events, which are relevant to decide the present

petition are as follows. On 26.05.2002, a notice was issued to the

petitioner/bank by the Enforcement Directorate regarding investigation

under the Foreign Exchange Regulation Act, 1973 (hereinafter referred to as

„the FERA‟) read with Section 49(3) and 49(4) of the Foreign Exchange

Management Act, 1999 (hereinafter referred to as „the FEMA‟), which was

received by the petitioner/bank on 28.05.2002. In the said notice,

respondent No.2 sought information in respect of certain expatriate

employees from the petitioner/bank. On 30.05.2002, the petitioner/bank

filed a reply on merits to the aforesaid notice and furnished the necessary

information. On the same date, the Chief Enforcement Officer of the

Directorate required the petitioner/bank to provide him with the details of

the salaries paid abroad to expatriate employees, if any, by 31.05.2002,

which was replied to by the petitioner/bank stating inter alia that the

information had already been furnished under the letter dated 30.05.2002.

3. On 04.06.2002, a memorandum dated 31.05.2002 was issued

by Mr. K.R. Bhargava in his capacity as Adjudicating Officer of the

Directorate, intimating the petitioner/bank and one Mr. Ashok Khanna, of

the violation under Sections 8(1) & 9(1)(C) of the FERA, and calling upon

them to show cause within 30 days of receipt of the said memorandum, as

to why adjudication proceedings should not be held against them. As per

the petitioner/bank, the said memorandum was received by the bank branch

on 04.06.2002. On 13.06.2002, the petitioner/bank wrote to the Directorate

that they had not received Annexure-A, enclosed with the memorandum.

Further, the petitioner/bank sought time to inspect the original documents,

as mentioned in Annexure-B to the memorandum. The petitioner/bank also

informed the Directorate that Mr. Ashok Khanna had expired.

4. On 01.10.2003, a copy of Annexure-A to the memorandum

dated 31.05.2002 was duly handed over to the counsel for the

petitioner/bank. However, the file could not be made available for

inspection and the matter was adjourned for the purposes of inspection of

the file for 13.10.2003. Ultimately on 23.12.2003, the Adjudicating Officer

passed an order stating inter alia that since the original documents had not

been inspected by the counsel for the petitioner/bank as desired, the matter

be adjourned sine die. On 02.01.2004, counsel for the petitioner/bank

received a letter dated 31.12.2003 from the Enforcement Directorate,

directing the petitioner/bank to appear for personal hearing on 13.01.2004.

Pertinently, the aforesaid letter dated 31.12.2003 (Annexure-J) commenced

by stating as follows:-

"This is to inform you that after considering the cause shown by you in/as you have failed to reply to the above mentioned memorandum, the Special Director of Enforcement is of the opinion that Adjudication proceedings as contemplated in Section 51 of the FERA, 1973 should be held against you in accordance with the procedure laid down in Rules of the Adjudication Proceedings and Appeal Rules, 1974, and has accordingly fixed this case for personal hearing before him on 13.1.04 at 10.30 A.M. Hrs. in the office of this Directorate at above mentioned address."

5. It is contended by the petitioner/bank that immediately on

receipt of the aforesaid letter, its counsel carried out an inspection of the file

of the Department on 06.01.2004, i.e., one week prior to the date of hearing

communicated by the respondent and to his surprise, found on record, a

typed copy of an order in the instant case, imposing fine/penalty on the

petitioner/bank and the original letter dated 08.05.2003, which was

allegedly sent to the counsel for the petitioner/bank.

6. On 13.01.2004, proceedings were held before the Adjudicating

Officer, extract of which is enclosed as Annexure-L to the present petition.

In the said proceedings, the objection of the counsel for the petitioner/bank

was recorded to the effect that the show cause notice did not constitute

dispatch on the same date. It was admitted by the Department that the

letter dated 08/09.05.2003 was not dispatched to the petitioner/bank. The

objection taken by the counsel for the petitioner as to the maintainability of

the proceedings in the light of the provisions of Section 49(3) of the FEMA

was turned down by the Adjudicating Officer by holding that the notice

issued to the petitioner/bank was in accordance with the requirements of

Section 49(3). Lastly, the objection taken by the counsel for the

petitioner/bank to the effect that there was already a draft order placed on

the record, when there was no hearing granted by the department at all,

was dealt with by the Adjudicating Officer by simply noting that the said

draft was not a "relied upon document" or "any official communication", and

was a "mere piece of paper". Hence, the request of the counsel for the

petitioner/bank for a copy of the said document/inspection was turned down.

7. Counsel for the respondents submits that the issues arising in

the present petition were summarized in the order dated 09.01.2006, which

is reproduced hereinbelow:-

"The main controversy in this case is whether the notice dated 31.5.2002 issued by Mr.H.R.Bhargava, Special Director, Enforcement Directorate was issued by him in the capacity of an adjudicating authority in exercise of its powers in terms of Section 51 and Rule 3 of the Adjudication Proceedings and Appeal Rules 1974 or was merely a show cause notice issued by him simply as an officer of the Enforcement Directorate. There is also a dispute about the dispatch of the said notice on the said

date. Mr. A.K. Panda, learned senior advocate representing the respondent seeks time to clarify the above aspects by filing an additional counter affidavit of the concerned officer. Let the same be done within 4 weeks with copy to the counsel for the petitioner. Rejoinder, if any, may be filed within 2 weeks thereafter.

List on 26.4.2006.

Copy of the order be given dasti to counsel for the parties."

8. He submits that pursuant to the aforesaid order, an additional

affidavit was filed by the Department on 16.02.2006, wherein it was averred

that the memorandum dated 31.05.2002 was issued by Mr.K.R.Bhargava,

Special Director, Enforcement Directorate in his capacity as an Adjudicating

Officer in exercise of his powers in terms of Section 51 of the FERA and Rule

3 of the Adjudication Proceedings and Appeals Rules, 1974. A copy of the

relevant notification dated 16.04.1999 issued under Section 50 of the FERA

by the Central Government, appointing Shri K.R. Bhargava, Special Director,

Directorate of Enforcement as an adjudicating authority is enclosed with the

aforesaid affidavit. In the light of the photocopy of the gazette published by

the Government, placed on the record by the respondents, the point in

controversy with regard to the capacity of Mr. K.R. Bhargava to act as

adjudicating authority is set at rest in favour of the respondent.

9. Insofar as the issue of dispatch of the aforesaid memorandum

dated 31.05.2002 is concerned, it was stated in the aforesaid affidavit dated

16.02.2006, that the same was dispatched to the petitioner/bank on the

very same day, i.e., on 31.05.2002. Counsel for the respondents has also

produced the original records, which reflects that the same was dispatched

to the petitioner/bank by courier on 31.05.2002 and was duly received by

the petitioner/bank against an endorsement dated 03.06.2002.

10. Counsel for the petitioner/bank seeks to place reliance on Rule

10 of the Adjudication Proceedings and Appeals Rules, 1974, to state that

the service of the notice on the petitioner was to be effected either by

delivering or tendering the notice or order to the petitioner/bank in person

or through its duly authorized agent or by sending notice or order to the

addressee by registered post with acknowledgement due at the address of

his place of residence or his last known place of residence or the place of

work and if the notice could not be served in either of the aforesaid

manners, by affixation at the last place of residence or work. He submits

that the dispatch of notice by courier is, therefore, not in accordance with

terms of the aforesaid Rules and cannot be considered as a recognized mode

for effecting service on the petitioner/bank. He further states that this

position was duly brought to the notice of the Adjudicating Officer, who

turned down the said submission in the proceedings dated 13.01.2004,

without giving any reason therefor.

11. Counsel for the petitioner/bank further submits that without

prejudice to the aforesaid submission, on an assumption that the notice

dated 31.05.2002 having been dispatched on even date by courier, was

proper service, the same could not be acted upon in view of the provisions of

Section 49(3) of the FEMA. His last submission is that the notice dated

31.12.2003 issued by the respondent, calling upon the petitioner/bank to

present itself before the Special Director of Enforcement for a personal

hearing on 13.01.2004, is liable to be quashed as the proceedings had been

adjourned sine die one week prior thereto, i.e., on 23.12.2003, and no

opportunity to show cause was afforded to his client, nor was any order

passed, reviving the proceedings.

12. As regards the grievance of the petitioner with regard to

issuance of letter dated 31.12.2003 by the Department is concerned, it is an

admitted position that on 23.12.2003, the Adjudicating Officer had

adjourned the matter sine die since the Department had not given inspection

of the original documents mentioned in Annexure-B to the memorandum

dated 31.05.2002, to the petitioner/bank, inspite of repeated request to the

said effect made by it. As a result, the petitioner/bank was not in a position

to file its reply to the notice to show cause dated 31.05.2002. However, a

perusal of the file shows that despite the aforesaid position, the

petitioner/bank had filed a detailed reply to the notice to show cause

Annexure-K (colly) running into 38 pages.

13. Rule 3(3) of the Adjudication Proceedings and Appeal Rules,

1974 requires the Adjudicating Officer to consider the cause, if any, shown

to the addressee and only thereafter, if he is of the opinion that the

adjudication proceedings should be held that the officer is required to issue a

notice fixing a date of appearance of the addressee, personally or through

counsel. In the present case, the aforesaid notice dated 31.12.2003 was

premature as on the said date, no reply could have been filed by the

petitioner/bank in the absence of inspection of the records and further, the

proceedings had been adjourned sine die on 23.12.2003, by the Adjudicating

Officer himself. In view of the aforesaid circumstances, the aforesaid notice

is vitiated and has to be side aside. If the notice itself is set aside, then the

consequent proceedings, recorded on a subsequent date, i.e., on 13.01.2004

have also to go as the said proceedings were a step in furtherance to the

notice to show cause, which could not have been taken place in the absence

of the Adjudicating Officer having arrived at any conclusion, one way or the

other as to whether he was satisfied with the cause shown by the

petitioner/bank before proceeding further with the adjudication. As a result,

both, the notice to show cause dated 31.05.2002 and the proceedings held

on 13.01.2004 are quashed and set aside.

14. This Court is also inclined to agree with the submission of the

learned counsel for the petitioner that it is rather curious that there exists a

draft order, on the record of the Department, as produced by the counsel for

the respondent and examined by this Court. There is no explanation, much

less plausible explanation offered by the other side as to how a draft order

came on the file of the respondent on 06.01.2004, the date on which the

counsel for the petitioner/bank carried out an inspection of the file of the

Department, when by then only a notice to show cause had been issued to

the petitioner/bank and a hearing had to take place on 13.01.2004, the date

mentioned in the notice. It appears from the above that the respondents

were only performing a formality of granting a hearing to the petitioner,

when in fact, the fate of the case was a foregone conclusion. The

apprehension of the petitioner/bank of getting a genuine opportunity of

setting forth its case and being granted an unbiased hearing was therefore

not misplaced.

15. Counsel for the respondents has opposed the petition on the

ground of its maintainability and submits that this Court ought not to

entertain the present petition as it questions the legality of a show cause

notice, which is impermissible. Pertinently, in the present case, on the very

first date of hearing, i.e., on 30.01.2004, the petitioner was directed to

continue to cooperate with the respondent to facilitate the progress of the

proceedings before the Adjudication Officer. The aforesaid order dated

30.01.2004 was reiterated on 04.12.2007. However, on enquiry, counsel for

the petitioner submits that the respondent never called upon the

petitioner/bank for further adjudication of the proceedings. In these

circumstances, it does not lie in the mouth of the respondent to allege that

the adjudication proceedings got delayed on account of the pendency of the

present petition. If despite the orders passed by the Court on 30.1.2004

and 4.12.2007, the Department did not proceed further with the

adjudicatory process, it has none else to blame but, itself.

16. In any case, the fact of the matter is that it is six years down the

line and the case is still at the stage of notice to show cause. However, now

that it is stated that the earlier Adjudicating Officer has changed, the

apprehension of the petitioner of not getting an unbiased hearing stands

allayed. In these circumstances, without wasting any further time, the

present petition is disposed of with the following directions:-

(i) The Adjudicating Officer of the respondent shall apply his mind afresh

to the reply filed by the petitioner/bank to the notice to show cause, in

accordance with Rule 3(3) of Adjudication Proceedings and Appeal

Rules, 1974.

(ii) After perusal of the reply, if the Adjudicating Officer is of the opinion

that adjudication proceedings should be held, he shall issue a fresh

notice to the petitioner/bank, fixing a date for its appearance, either

directly or through its counsel.

(iii) In case, such a notice for holding the adjudication proceedings is

issued by the Adjudicating Officer, the petitioner shall be entitled to

raise all the legal pleas as taken by it in the reply to notice to show

cause and the same shall be considered and decided by the

Adjudicating Officer in accordance with law.

17. In the event, the petitioner/bank is aggrieved by the orders that

may be passed by the respondents, it shall be entitled to seek its remedies,

as may be available to it in law. Given the facts and circumstances of the

present case, there shall be no orders as to costs.

                                                              (HIMA KOHLI)
SEPTEMBER 09, 2010                                               JUDGE
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