Kerala High Court
K.A. Rauf vs The Deputy Director on 2 November, 2024
Author: V.G.Arun
Bench: V.G.Arun
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE V.G.ARUN
SATURDAY, THE 2ND DAY OF NOVEMBER 2024 / 11TH KARTHIKA, 1946
WP(C) NO. 20328 OF 2024
PETITIONER:
K.A. RAUF
AGED 67 YEARS
'SHELTER' NO. 30, JAYANTHI NAGAR COLONY,
CALICUT BEACH PO,
CALICUT, PIN - 673032
BY ADVS.
R.SREEJITH
K.KRISHNA
ACHYUTH MENON
PADMANATHAN K.V.
RESPONDENTS:
1 THE DEPUTY DIRECTOR
ADJUDICATING AUTHORITY,
DIRECTORATE OF ENFORCEMENT,
GOVERNMENT OF INDIA,
MINISTRY OF FINANCE, COCHIN ZONAL OFFICE,
KANOOS CASTLE, A.K. SESHADRI ROAD (MULLASSERY
CANAL ROAD WEST), KOCHI, PIN - 682011
2 THE ASSISTANT DIRECTOR
DIRECTORATE OF ENFORCEMENT,
GOVERNMENT OF INDIA, MINISTRY OF FINANCE, COCHIN
ZONAL OFFICE, KANOOS CASTLE,
A.K. SESHADRI ROAD, KOCHI,
PIN - 682011
BY ADV JAISHANKAR V. NAIR
WP(C).No.20328/2024
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OTHER PRESENT:
DSGI IN CHARGE T.C. KRISHNA. SRI. AJITH
VISWANATHAN, GP. SRI. JAISHANKAR. V. NAIR SC FOR
ED.
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 16.10.2024, THE COURT ON 02.11.2024 DELIVERED
THE FOLLOWING:
WP(C).No.20328/2024
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V.G.ARUN, J
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W.P.(C).No.20328 of 2024
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Dated this the 2nd day of November, 2024
JUDGMENT
The writ petition is filed challenging Ext.P2 complaint
filed under Section 16(3) of the Foreign Exchange Management
Act, 1999 (the FEMA for short) and Ext.P2 notice requiring the
petitioner to show cause as to why adjudication proceedings
should not be held against him. The challenge is primarily
based on the delay in initiating the proceedings and filing the
complaint.
2. The facts, as narrated in the writ petition, are as under;
The impugned proceedings is with respect to the import of
electronic goods by the proprietary concern named
'K.A.Reclaims' belonging to the petitioner's daughter way
back in the year 2014. The goods were imported to India
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through airport and the petitioner had cleared the goods
on payment of appropriate customs duty. The import
transactions were supported by valid documents such as
invoices, bill of entry, customs assessment certificates etc.
The petitioner had also submitted necessary documents as
prescribed under the FEMA and the Regulations
thereunder to the ICICI bank. To the petitioner's dismay,
he was served with summons under Section 37 of the
FEMA dated 02.05.2019, calling for his reply to the
deposition made by one Manoj Kumar, proprietor of A-One
Enterprises that he had made outward remittances
totalling Rs.2,11,91,243/- under the cover of import of
memory card and telephone at the petitioner's instance. In
response to the summons, the petitioner appeared before
the officer concerned and gave his statement. Five years
later, Ext.P1 complaint dated 05.03.2024 was filed before
the 1st respondent, alleging that Manoj Kumar and the
petitioner had contravened the provisions of Section 10(6)
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of the FEMA and Regulation 6 of the Foreign Exchange
Management (Realisation, Repatriation and Surrender of
Foreign Exchange) Regulation, 2015 to the tune of
Rs.2,11,91,243/-, and are hence liable to be proceeded
under Section 13 of the FEMA.
3.Heard, Advs. K.Krishna for the petitioner and Jaishankar
V Nair for the respondents ably assisted by Adv.Christy Teresa
Suresh.
4. Learned counsel for the petitioner contended that, in so
far as Ext.P1 complaint is filed ten years after the disputed
transaction, the petitioner is put to extreme prejudice, as he is
not in possession of the documents to prove the transaction. It
is submitted that as per the provisions of the Customs Audit
Regulations, 2018, the auditee is bound to maintain the records
for only five years and under similar circumstances, the Apex
Court has, in Union of India and another v. Citi Bank, N.A.
[2022 LiveLaw (SC) 704], set aside the show cause notices and
further proceedings, on the ground of delay.
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5. Learned Standing Counsel contended that the writ
petition is not maintainable in view of the alternative remedy
available to the petitioner. It is pointed out that Ext.P2 is only a
show cause notice and cannot therefore be subjected to
challenge in a writ petition under Article 226. It is for the
petitioner to offer his explanation to the show cause notice and
if warranted raise the contention regarding delay in the
proceedings before the Adjudicating Authority. Even if the
decision of the adjudicating authority goes against the
petitioner, he can challenge that order by filing an appeal under
Section 17 before the Special Director (Appeals) and can also
take the matter in further appeal before the Appellate Tribunal
under Section 19 of the FEMA. To buttress the contention that
the power under Article 226 should not be invoked when
efficacious alternative remedy is available, reliance is placed
on the decisions of the Apex Court in Whirlpool Corporation
v. Registrar of Trademarks, Mumbai and others [(1998) 8
SCC 1] and the Special Director and others v. Ghulam
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Ghouse and others [(2004) 3 SCC 440]. It is further
contended that FEMA does not prescribe any specific time
frame within which proceedings are to be initiated. Moreover,
initiation of proceeding in the year 2019, with request to a
transaction of 2014, cannot be termed as inordinate delay.
6. From the above arguments, the short question arising
for consideration is whether this Court would be justified in
quashing the complaint and show cause notice on the sole
ground that the proceedings were initiated belatedly, when the
statute itself provides an effective alternative remedy. In this
regard it has to be borne in mind that in the absence of
extraordinary circumstances, the writ courts should not
interfere with the self working mechanism under a statute like
the FEMA. As held by the Apex Court in Central Council for
Research in Ayurvedic Sciences and others v. Bikartan
Das and others [AIR 2023 SC 4011], the first cardinal
principle of law that governs the exercise of extraordinary
jurisdiction under Article 226, more particularly, in issuing a
writ of certiorari is that, the High Court should not exercise the
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powers of the tribunal, unless the proceedings are so patently
asburd and illegal. Here, the challenge to the complaint and
show cause notice is solely on the ground of delay. Indisputedly
the FEMA does not prescribe any time limit for initiating the
proceedings. No doubt, even in the absence of any prescription
regarding time in a statute, proceedings are bound to be
initiated within a reasonable period. In Citi bank (supra), the
Apex Court had found that show cause notices issued in the
year 2002 in respect of transactions pertaining to the financial
years 1992-1993 were liable to be set aside on the ground of
delay. One of the factors which prompted the Apex Court to
hold so was that the show cause notices were issued that prior
to the sunset period of the Foreign Exchange Regulation Act,
1973. In the case at hand the proceedings commenced with the
issuance of summons to the petitioner in 2019, followed by the
complaint and show cause notice in 2024. In such
circumstances, the delay, by itself, does not constitute
sufficient reason for this Court to quash the complaint.
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For the aforementioned reasons, the writ petition is
dismissed, without prejudice to the petitioner's right to raise
the contention regarding delay before the authorities under the
FEMA.
sd/-
V.G.ARUN, JUDGE
sj
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APPENDIX OF WP(C) 20328/2024
PETITIONER EXHIBITS
Exhibit P1 COPY OF COMPLAINT FILED BY THE 2ND
RESPONDENT DTD. 05-03-2024
Exhibit P2 COPY OF SHOW CAUSE NOTICE ISSUED BY THE
1ST RESPONDENT DTD. 14-03-2024
Exhibit P3 COPY OF JUDGMENT IN CIVIL APPEAL NO.
9337/2010 OF THE HON'BLE SUPREME
COURT,/ NEW DELHI DTD. 24-08-2022
EXHIBIT P4 COPY OF LETTER SUBMITTED BY THE
PETITIONER BEFORE THE ASSISTANT
DIRECTOR, ENFORCEMENT DIRECTORATE,
CALICUT DTD. 23-12-2023
