Case Note & Summary
The writ petition was filed by Lalit Kumar Modi, a former Vice President of the Board of Control for Cricket in India (BCCI) and Chairman of the Indian Premier League (IPL) Governing Council, challenging the opinion of the Special Director, Directorate of Enforcement, to hold an inquiry against him under Section 13 of the Foreign Exchange Management Act, 1999 (FEMA). The proceedings arose from a complaint filed by the Assistant Director alleging that BCCI had made payments to International Management Group (UK) Limited for consultancy services obtained from outside India without prior approval of the Reserve Bank of India, in violation of Section 5 of FEMA. Modi was sought to be held vicariously liable under Section 42 of FEMA by virtue of his position in BCCI. A show cause notice was issued on 20 July 2011, but the notice did not itself refer to any documents. Modi requested inspection and copies of documents referred to in the complaint, but the respondents refused to supply certain documents, including the reliable information that triggered the investigation, directives issued to BCCI, statements of certain individuals, and correspondence. The Special Director had earlier agreed to supply copies but later refused. The opinion to hold an inquiry was communicated by letter dated 21 March 2013 without any recorded reasons. The petitioner contended that non-supply of documents violated principles of natural justice and prejudiced his ability to reply effectively, and that the opinion was unreasoned and thus invalid. The respondents did not file an affidavit and argued that not all documents needed to be supplied and that the opinion need not be separately reasoned. The High Court allowed the petition, holding that the adjudicating authority must furnish copies of all documents relied upon in the complaint and show cause notice, and that the opinion under Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 must be a reasoned order. The court set aside the impugned decisions and directed the respondents to supply the documents and record a reasoned opinion before proceeding with the inquiry.
Headnote
A) Foreign Exchange Management Act, 1999 - Adjudication Proceedings - Right to Documents - Section 16, FEMA and Rule 4, Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - The adjudicating authority must supply copies of documents relied upon in the complaint and show cause notice to the person against whom inquiry is proposed, as failure to do so violates principles of natural justice and the right to make an effective representation (Paras 4, 9-11). B) Foreign Exchange Management Act, 1999 - Adjudication Proceedings - Reasoned Opinion - Section 16, FEMA and Rule 4, Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - The opinion of the adjudicating authority to initiate an inquiry under Rule 4 must be a reasoned order recording the grounds for such opinion; an unreasoned opinion is invalid and liable to be set aside (Paras 4, 8).
Issue of Consideration
Whether the adjudicating authority under FEMA is required to supply copies of documents relied upon in the complaint/show cause notice to the noticee; Whether the opinion under Rule 4 of the Adjudication Rules must be a reasoned order
Final Decision
The writ petition is allowed. The decision of the Special Director refusing to supply documents is set aside. The respondents are directed to furnish to the petitioner copies of all documents referred to in the complaint and to record a reasoned opinion before holding an inquiry. Rule made absolute.
Law Points
- Adjudicating authority must furnish copies of documents relied upon in complaint and show cause notice
- opinion under Rule 4 of Adjudication Rules must be reasoned
- non-supply of documents violates natural justice
