Case Note & Summary
The dispute arose from a show cause notice issued by the Assistant Director, Enforcement Directorate on 31 May 2002, calling upon Star India Private Limited and its director Ajay K. Sharma to show cause why adjudication proceedings under Section 51 of the Foreign Exchange Regulation Act, 1973 (FERA) read with Section 49(3) and (4) of the Foreign Exchange Management Act, 1999 (FEMA) should not be initiated. The notice was dispatched on 5 June 2002 and received by the petitioners on 6 June 2002. FEMA came into force on 1 June 2000, and Section 49(3) thereof provides a two-year window from that date for an adjudicating officer to take notice of contraventions under the repealed FERA; accordingly, the last date to take notice was 31 May 2002. The petitioners raised a preliminary objection that the notice was beyond the period of limitation because it was served after 31 May 2002. The Assistant Director rejected this objection by order dated 20 August 2004, holding that since the notice was signed on 31 May 2002, the adjudicating officer had taken notice within the prescribed period. Aggrieved, the petitioners filed the present writ petition before the Bombay High Court challenging the validity of the notice and the Assistant Director's order. The core legal issue revolved around the interpretation of the phrase 'take notice' in Section 49(3) of FEMA. The petitioners, through senior counsel Dr. Virendra Tulzapurkar, argued that the adjudication process under the Adjudication Proceedings and Appeal Rules, 1974 (the Appeal Rules) occurs in two distinct stages. The first stage involves issuance of a show cause notice under Rule 3(1), giving the noticee an opportunity to respond. The second stage, under Rule 3(3), requires the adjudicating officer to form an opinion after considering the reply, and only then decide whether to proceed with adjudication. Hence, 'taking notice' of the contravention occurs when the officer forms that opinion, not at the point of issuing the initial notice. Since the notice was served on 6 June 2002 and the ten-day reply period expired on 16 June 2002, the adjudicating officer could not have formed an opinion until after that date, well beyond the 31 May 2002 deadline. Therefore, the mere signing of the notice on 31 May 2002 did not constitute taking notice. The petitioners drew support from a Madras High Court decision in R. Sivarajan v. Dy. Director, which analyzed the two-stage process, although acknowledging that the Division Bench in Dy. Director v. Maricair had overruled the Single Judge's conclusion that adjudication commences only upon the second notice. The petitioners maintained that the Maricair decision did not disturb the two-stage analysis but only the point of commencement of adjudication; the question of when the officer 'takes notice' remained open. The respondents, as evident from the impugned order, took the stand that signing the notice on 31 May 2002 was itself an act of taking notice, thus compliance with the statutory limitation. The High Court heard arguments and reserved judgment on 9 December 2010, pronouncing it on 16 December 2010. However, the available text of the judgment only records the factual background and the petitioners' submissions up to paragraph 9; the court's reasoning, findings, and final order are not included. Consequently, the outcome and the ratio decidendi cannot be determined from the provided material. The petition remains pending in the extracted portion, and no final relief has been granted.
Headnote
A) Foreign Exchange Management - Limitation and Adjudication - Interpretation of Section 49(3) FEMA and Rule 3 of Adjudication Proceedings and Appeal Rules, 1974 - Foreign Exchange Management Act, 1999, Section 49(3); Foreign Exchange Regulation Act, 1973, Section 51; Adjudication Proceedings and Appeal Rules, 1974, Rule 3(1), 3(3) - The issue was whether the adjudicating officer had taken notice of the contravention within the two-year period when he merely signed the show cause notice on the last day but it was served after expiry. Petitioners contended that taking notice occurs only after forming an opinion under Rule 3(3) after the notice period expires, not at the stage of issuing the first notice under Rule 3(1). Held: Not mentioned due to incomplete judgment text. (Paras 6-9)
Issue of Consideration
Whether the adjudicating officer had taken notice of the alleged contravention of FERA within two years from the commencement of FEMA when he merely signed the show cause notice on 31 May 2002 but the notice was served after the expiry of the limitation period.
Final Decision
Not mentioned - judgment text incomplete
Law Points
- Section 49(3) of FEMA imposes a two-year limitation for an adjudicating officer to take notice of contraventions under the repealed FERA
- 'taking notice' under Section 49(3) is to be interpreted in the light of the Adjudication Proceedings and Appeal Rules
- 1974
- Rule 3 of the Appeal Rules establishes a two-stage adjudication process where the first stage involves issuance of a show cause notice and the second stage involves formation of an opinion by the officer
- taking notice occurs only at the second stage after the notice period expires and the officer applies his mind.
