Mrs Joyce Lynn Peters vs Reserve Bank Of India
2021 Latest Caselaw 3459 Kant

                                 1

       IN THE HIGH COURT OF KARNATAKA AT BENGALURU
                                                              R
         DATED THIS THE   21ST   DAY OF OCTOBER, 2021

                           BEFORE

          THE HON'BLE MR. JUSTICE KRISHNA S.DIXIT

          WRIT PETITION NO.26425 OF 2017 (GM-FE)

BETWEEN:
MRS. JOYCE LYNN PETERS,
NO.27, 2ND CROSS, BYRAWESHWARA LAYOUT,
HENNUR BANDE, KALYAN NAGAR POST,
BANGALORE - 560 043.
(W/O SHRI. JOHN PETER KIRUBAGARAN)
AGED ABOUT 40 YEARS
                                                ...PETITIONER
(BY SRI. CHIDANANDA URS B.G, ADVOCATE)

AND:

1.     RESERVE BANK OF INDIA,
       FOREIGN EXCHANGE DEPARTMENT,
       9TH FLOOR, AMAR BUILDING,
       SIR P.M. ROAD, FORT,
       MUMBAI - 400 001.

2.     ASSISTANT GENERAL MANAGER,
       RESERVE BANK OF INDIA,
       1055, FOREIGN EXCHANGE DEPARTMENT,
       CENTRAL OFFICE, 5TH FLOOR,
       AMAR BUILDING, SIR P.M. ROAD, FORT,
       MUMBAI - 400 001.

3.     THE SPECIAL DIRECTOR OF ENFORCEMENT,
       DIRECTORATE OF ENFORCEMENT,
       6TH FLOOR, LOKNAYAK BHAWAN,
       KHAN MARKET,
       NEW DELHI -110 003.

4.     THE DEPUTY DIRECTOR OF ENFORCEMENT,
       OFFICE OF THE JOINT DIRECTOR,
       ENFORCEMENT DIRECTORATE BENGALURU
       ZONAL OFFICE, 3RD FLOOR, B BLOCK,
       BMTC SHANTHINAGAR, TTMC, K.H. ROAD,
       SHANTHINAGAR,
                                    2

        BENGALURU - 560 027.
                                                     ...RESPONDENTS
(BY SRI.R.V.S. NAIK, SR. COUNSEL A/W
    MISS. ADITHI SHETTY FOR
    SRI. T. SURYANARAYAN, ADVOCATES FOR R-1 & R2;
    SRI. H. JAYAKARA SHETTY, CGC FOR R-3 & R-4)

     THIS WRIT PETITION IS FILED UNDER ARTICLES 226 &
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
REJECTION OF APPLICATION FOR COMPOUNDING UNDER
SECTION 15 OF THE ACT IN LETTER DTD:17.6.2016
ANNEXURE-K     AND    COMMUNICATION      DTD:24.10.2016
ANNEXURE-P AND ETC.

    THIS WRIT PETITION COMING ON FOR PRELIMINARY
HEARING - B GROUP THIS DAY, THE COURT MADE THE
FOLLOWING:

                                 ORDER

Petitioner is knocking at the doors of Writ Court for

assailing the Letter dated 17.6.2016 and Communication

dated 24.10.2016 made by the first respondent-RBI

respectively at Annexures-K & P, whereby his application for

compounding of the contravention of provisions of the Foreign

Exchange Management Act, 1999 (hereinafter '1999 Act') and

the Rules made thereunder, has been negatived quoting Rule

11 of Foreign Exchange Compounding Proceedings Rules,

2000 (hereafter Compounding Rules').

2. After service of notice, the respondent Nos.1 & 2

have entered appearance through their Panel Counsel;

similarly, the respondent Nos.3 & 4 are represented by the

learned Central Govt. Counsel; they have filed separate

Statements of Objections resisting the Writ Petition; learned

Panel Counsel & the learned CGC together makes submission

in justification of the impugned action and the reasons on

which the same has been constructed.

3. FACTS IN BRIEF:

(a) The petitioner was issued a Show Cause Notice

dated 6.4.2011 alleging violation of the provisions of section

6(3)(d) of the Act r/w the provisions of Foreign Exchange

(Borrowing or Lending in Foreign Exchange) Regulations,

2000; this was pursuant to the complaint dated 25.2.2011

made by the Deputy Director of Enforcement; the petitioner

had applied for compounding of the contravention and that

his application came to be returned vide letter dated

22.9.2011 issued by the Respondent Nos.1 & 2 on the ground

that compounding was not permissible when adjudicatory

proceedings for contravention were being initiated.

(b) Petitioner made a representation contending that

the return of his application for compounding is

unsustainable inasmuch as the pendency of adjudicatory

proceedings cannot be a ground for declining his request for

compounding; no decision having been taken thereon,

petitioner filed W.P.No.27337/2012 (GM-FE) which came to

be disposed off by a Co-ordinate Bench of this Court vide

judgment dated 5.11.2015 permitting the petitioner to file

another application within two weeks and directing the

answering respondents to consider the same; the relevant

part of the judgment reads as under:

"... The second respondent is directed to exercise his jurisdiction vested in him under Section 15 of the Act to compound the contraventions alleged against the petitioner, in accordance with law and this exercise shall be carried out with expedition. Since the application submitted by the petitioner has been returned, the petitioner is directed to file an application within two weeks and the second respondent shall consider and dispose of the application..."

(c) Accordingly, petitioner made another application

albeit with some delay; even this application came to be

rejected vide impugned letter & communication; the

answering respondents have stated that Rule 11 of Foreign

Exchange (Compounding Proceedings) Rules, 2000 (hereafter

'Compounding Rules') would come in the way of application

of the kind being treated favourably since petitioner has filed

appeal against the adjudicatory order; aggrieved thereby

petitioner is before this court; as already mentioned above,

the respondents have filed their Statements of Objections.

4. I have heard the learned counsel for the parties and

perused the Petition Papers; the following three questions are

framed for consideration:

• Whether petitioner had made the application for compounding belatedly ie., beyond the period prescribed by the Coordinate Bench of this Court...?

• Whether the pendency of appeal preferred by the contravener bars the compounding of contravention, as provided under Section 15 of the 1999 Act...?

• Whether the Respondent Nos. 1 & 2 could have banked upon Rule 11 of the Compounding Rules for rejecting petitioner's application for compounding...?"

5. My answers to the above questions are framed in

the negative for the following reasons:

i) Petitioner had initially applied for compounding way

back in the year 2011 is borne out by the judgment of the

Coordinate Bench, in the earlier round of litigation; that

having been wrongly returned, he had come before this Court

in W.P.No.27337/2012; the learned Coordinate Judge as

already mentioned above, had "directed (the petitioner) to file

an application within two weeks"; petitioner filed one albeit

after the expiry of two weeks is true; however, the said

application came to be rejected not on the ground of delayed

filing; even otherwise, the earlier application having been

wrongly returned, the filing of subsequent application needs

to be treated as having revived the earlier application; a

contra view would offend the sense of justice & reason.

ii) Petitioner had filed the compounding

application although with a bit delay, is true; as already

mentioned above, this application came to be rejected by the

Respondent Nos. 1 & 2 only on the ground of pendency of his

appeal and not on the ground of delayed filing; the impugned

letter and the communication are statutory orders, their form

notwithstanding; the validity of orders made by the statutory

authorities has to be adjudged on the reasons assigned in the

very order itself and that, such reasons cannot be supplied de

hors vide MOHINDER SINGH GILL Vs. CHIEF ELECTION

COMMISSIONER, AIR 1978 SC 851; therefore, the vehement

contention of learned CGC cannot be countenanced.

iii) The answering respondents have rejected petitioner's

application on the sole ground that his appeal against the

adjudicatory order was pending and that, Rule 11 of the

Compounding Rules bars the invocation of Section 15(1) of

the 1999 Act providing for compounding; the text of Rule 11

is as under:

" No contravention shall be compounded if an appeal has been filed under Section 17 or Section 19 of the Act."

This is a piece of subordinate legislation; it has been a settled

position of law that a delegate cannot transcend the

delegation of power; in other words, the rule making authority

cannot promulgate a rule which travels beyond the scope of

delegation.

(iv) Keeping in mind the constitutional limitations

which govern the delegation of legislative power and regulate

its exercise, one has to examine the amnesty scheme enacted

in Section 15 of the 1999 Act; its text is as under:

"15. Power to compound contravention. (1) Any contravention under section 13 may, on an application made by the person committing such contravention, be compounded within one hundred and eighty days from the date of receipt of application by the Director of Enforcement or such other officers of the Directorate of Enforcement and officers of the Reserve Bank as may be authorised in this behalf by the Central Government in such manner as may be prescribed. --(1) Any contravention under section 13 may, on an application made by the person committing such contravention, be compounded within one hundred

and eighty days from the date of receipt of application by the Director of Enforcement or such other officers of the Directorate of Enforcement and officers of the Reserve Bank as may be authorised in this behalf by the Central Government in such manner as may be prescribed.

(2) Where a contravention has been compounded under sub-section (l), no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person committing such contravention under that section, in respect of the contravention so compounded."

In sub-section (1), the Parliament has employed the

expression 'Any contravention'; in Black's Law Dictionary, the

word 'any' is explained as having diversity of meaning and to

indicate 'all' or 'every', depending upon the context and the

subject matter of the Statute; the use of the word 'any' in the

context indicates that it has been used in a wider sense to

mean 'one and all'; if the Parliament intended a restrictive

meaning, it would have indicated the same expressly or by

necessary implication; however, it has not.

(v) Sub-section (2) of section 15 intends to give quietus

to the proceedings or further proceedings, once the

contravention is compounded under sub-section (1); the said

provision employs the expression 'no proceeding or further

proceeding'; although these words are not defined in the

dictionary clause of the Act, they need to be assigned

contextual meaning; 'proceeding' means an adjudicatory

proceeding which is triggered pursuant to the complaint

followed by the Show Cause Notice; the term 'further

proceeding' shall mean the appellate proceeding in which the

order made in the adjudicatory proceeding is put in challenge;

the net effect of compounding u/s 15(1) is all pervasive

abatement of any proceeding, adjudicatory or appellate,

involving the contravention of section 13 of the Act; an

argument to the contrary cannot be sustained without

manhandling the text of sub-sections (1) & (2) of section 15;

therefore, the answering respondents could not have rejected

petitioner's application u/s 15 banking upon the text of Rule

11 of the Compounding Rules.

(vi) The above apart there is yet another reason:

admittedly, as on the date the subject application was filed,

the petitioner had not yet filed the appeal; he filed one much

subsequent to filing of this application; one cannot ignore

that there is a limitation period prescribed by law for filing of

appeals; it is a matter of common knowledge that the request

for condoning delay is ordinarily treated in discretion; at

times this discretion is like Chancellor's Foot and foot is not

of 'FPS System' wherein it is always 12 inches; Chancellor's

Foot can be anything between 9 inches to 13 inches

depending upon who the Chancellor is; therefore an anxious

litigant ordinarily does not risk the prospects of his appeal;

added, even the application for compounding is also a matter

of discretion; it may so happen that he may lose the

application and he may be without remedy of appeal too, if

such rejection takes place after long; that being the position,

the subsequent filing of appeal cannot be construed as a bar

under Rule 11 for consideration of compounding application

on its intrinsic merits, u/s.15(1) of 1999 Act; if such a

purposive construction would infuse sense of justice in the

said Rule, assuming its validity.

(vii) The vehement contention of learned Sr. Advocate

Mr.R.V.S.Naik appearing for the respondent Nos.1 & 2 that

Rule 11 having not been put in challenge, it was not open to

his clients to disobey the mandate of this Rule, may arguably

be attractive but unprofitable; however, while deciding the

rights of citizens, Court has to ascertain the correct position

of law by looking to the text of legislation and of the sub-

ordinate legislation, if any; it has long been settled that a

delegated legislation cannot curtail the scope of the parent

legislation; the pendency of adjudicatory proceeding or the

appellate proceeding is not indicated as a bar to the invoking

of the compounding provision, namely section 15 of the Act

which in a sense enacts an amnesty scheme; ordinarily, in

fiscal legislations, the provisions enacting such schemes are

construed with a 'pragmatic leniency', subject to all just

exceptions vide UNION OF INDIA vs. NITDIP TEXTILE

PROCESSERS PVT. LTD., (2012) 1 SCC 226; this aspect has

not animated the impugned orders and therefore they are

infected with legal infirmity.

(viii) The next contention of learned Sr. Counsel

Mr.Naik that the petitioner has not challenged the vires of

Rule 11 does not much come to the rescue of respondents;

despite vociferous arguments, it is not demonstrated that the

said Rule could have been promulgated under the delegating

provision of the 1999 Act; where a sub-ordinate legislation is

shown to have been made incompetently or otherwise

repugnant to the provisions of the parent Act, the same

cannot be taken cognizance of and pressed into service to

defeat a legitimate claim of the citizen; an aggrieved citizen

who is otherwise entitled to relief under the provisions of a

parent legislation ie., Sec.15 of the 1999 Act, cannot be sent

back empty-handed by the Writ Court telling that a sub-

ordinate legislation which literally runs counter to the

Parliamentary intent, comes in his way; a sub-ordinate

legislation has to be subservient to the provisions of the

parent Act and needs to be construed consistent with the

statutory object; if it runs repugnant to the plain text of the

provisions of the parent Act, a Writ Court cannot attach

significance thereto, whether it is put in a formal challenge or

not; such a sub-ordinate legislation cannot hijack the

statutory object.

(ix) The rule of law which is one of the basic features of

our Constitution envisages the administration of justice in

accordance with law; Courts do this job ordinarily; a

purported subordinate legislation which is promulgated

without competence or contrary to the parental provisions,

cannot be treated as law or as source of law; the

constitutional presumption of validity that avails to a

legislation vide R.K.DALMIA vs. JUSTICE TENDULKAR, AIR

1958 SC 538 does not much extend to a delegated legislation

which is ex-facie incompetent and which is not stated to be

treated as a very part of the parent Act; a formal challenge to

the same could have been ideal, is beside the point; therefore

the endeavour of the answering respondents to sustain the

impugned orders by heavily banking upon Rule 11 does not

yield fruit; they are only seeking shelter under a leaking

umbrella.

In the above circumstances, this Writ Petition succeeds;

a Writ of Certiorari issues quashing the impugned letter and

communication; matter is remitted back to the Respondent

Nos.1 & 2 for consideration afresh, in accordance with law

and within a period of eight weeks, all contentions having

been kept open; the outcome of the remand would decide the

fate of adjudicatory/appellate proceedings.

Costs made easy.

Sd/-

JUDGE

Snb/bsv