Delhi High Court: A petition was filed under Article 226 and 227 by the petitioner seeking issuance of a direction or an order thereby quashing the impugned proceedings initiated under Section 56 of Foreign Exchange Regulation Act, 1973 (‘FERA’) by the Enforcement Directorate dated 04-04-2002. Tushar Rao Gedela, J., quashed the ex parte proceedings issued by the ED dated 04-04-2022 including the complaint and held that since the show cause notice or opportunity notice was never served upon the petitioner, the consequent proceedings initiated under Section 56 FERA cannot be continued.
A complaint was filed under Section 56 FERA Act by ED before the Trial Court on 04-04-2002, that information was received by the ED from RBI that the accused firm had exported the goods and failed to realize the certain export bills pursuant to which inquiries were made from his bankers i.e., Central Bank of India. Central Bank of India vide various letters reported to the ED that 35 GRs pertaining to the year 1992-93 valued US Dollar 1049426 are export outstanding which the accused had not realized till such time. Thereafter the accused was called upon to explain whether any such permission was granted to accused from RBI for the realization for export proceeds, and he was served with a memorandum and also with opportunity notice dated 25-01-2001 thereby accused was asked to place on record such permission for extension of realization however accused failed to furnish any such permission hence the complaint is filed.
The present petition was filed on the grounds of violation of principles of natural justice as no opportunity was afforded to the petitioner and thus, as a matter of law, the violation of principles of natural justice can and do entail setting aside any order passed by the administrative authority, including one under the FERA. The service of notice as stipulated under proviso to Section 61 (2) of FERA is a necessary concomitant prior to the Adjudicating Authority coming to any conclusion for or against the petitioner and in the present case, such show cause notice or opportunity notice was issued but the same was never received by the petitioner, as alleged.
The issue under consideration is whether the notices under proviso to Clause (ii) of sub section (2) of Section 61 FERA affording an opportunity to show cause was served upon the petitioner or not.
The Court noted that the Central Bank of India vide letter dated 28-02-2001 had addressed certain issues to the petitioner at the same fresh address as the petitioner at Gurugram. The proceedings undertaken by the ED under the FERA were undertaken only after such correspondence at the instance of the Central Bank of India. The Central Bank of India was under an obligation to inform the ED about the correct and proper address of the petitioner on which the responsible officer of the petitioner would have been served with necessary notices/summons, however, the same was not done.
The Court further noted that on perusal of the order dated 12-01-2022 granting anticipatory bail under Section 438 CrPC, 1973 to the authorized officer of the petitioner in the bail application it is made clear that the Central Bank of India had not communicated the said address to the ED. Even after receiving the non-service report, the ED did not try to obtain fresh address from the Central Bank of India or from the RBI. The ED did not have the fresh and correct address of the petitioner which was not disclosed by the Central Bank of India despite being fully aware of the same. Thus, the notice under proviso to Clause (ii) of sub section (2) of Section 61 FERA was never served upon the petitioner.
The Court remarked that though the notice issued under proviso to Clause (ii) of sub section (2) of Section 61 FERA was not served upon the petitioner, the demand notice dated 28-08-2020 was served upon the correct address. There is no explanation as to how and from where the ED obtained this correct address of the petitioner while issuing the demand notice.
The Court held that it is for violation of Section 18(2) and Section 18(3) of the FERA that would entail action under Section 56 FERA, but the intervening threshold of issuance of show cause notice/opportunity notice and hearing the notice before passing the decision upon such mandatory application of principles of natural justice alone that the action under Section 56 could, at all, have been initiated.
[Shilpi Modes v Directorate of Enforcement, 2023 SCC OnLine Del 6816, decided on 16-10-2023]
Advocates who appeared in this case :
Mr. A. M. Dar, Sr. Advocate with Mr. Apoorv Agarwal, Mr. Praveen Kumar, Mr. Gaurav Singh and Mr. Anant Vikram Singh, Advocates for petitioner
Mr. P. V. Yogeswaran, Senior Standing Counsel for ED
