Inquiry To Be Continued By Adjudicating Authority As Per Notification In Vogue And Not Under Superseded Notification: Madras High Court

The Madras High Court has held that the inquiry will have to be continued by the adjudicating authority as per the notification in vogue and not by the adjudicating authority under the superseded notification.

The bench of Chief Justice Sanjay V. Gangapurwala and Justice Bharatha Chakravarthy has observed that the phrase “except as respects things done or omitted to be done before such supersession...” would mean that whatever acts are done till the date of issuance of the notification superseding the earlier notification are saved.

On the basis of a complaint lodged under Section 16(3) of the Foreign Exchange Management Act, 1999, by the Assistant Director, Directorate of Enforcement, Hyderabad, the Special Director, Directorate of Enforcement, Southern Regional Office, Chennai, issued a show cause notice to the appellants under Section 7 of the Act of 1999, read with Regulations 8, 9(1), and 13 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000, for non-repatriation of the export proceeds.

Subsequent to the issuance of the show cause notice, the Assistant Director (SRO), Directorate of Enforcement, Southern Regional Office, Chennai, directed the appellants to appear on 19.2.2020 before the Additional Director for adjudication proceedings. Thereafter, the appellants sought further time and copies of the documents relied upon by the respondents. There was an exchange of communication between the parties, and, ultimately, by the notice issued by the Assistant Director (SRO), Directorate of Enforcement, Southern Regional Office, Chennai, the appellants were required to be present for a hearing before the Additional Director, Directorate of Enforcement.

The show cause notice has been issued by the Special Director, Directorate of Enforcement; he is “the adjudicating authority,” and the proceedings are required to be conducted by him alone and not by the Additional Director. Therefore, the appellants filed writ petitions, inter alia, praying for the issuance of a writ of certiorari and seeking quashing of the notice dated 9.9.2020.

The Single Judge dismissed the writ petitions, holding that the case was transferred from the Special Director to the Additional Director in view of the enhancement of pecuniary jurisdiction and that the same is well within the provisions of the Act of 1999.

The appellant contended that, by virtue of Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, the authority that issues the show cause notice under Rule 4(1) of the Rules of 2000 alone is competent to adjudicate the case of the appellants. The show cause notice was issued by the second respondent, the Special Director, and, hence, no other authority can adjudicate the case of the appellants. The notification dated September 27, 2018 issued by the Central Government exercising the power under Section 16 of the Act of 1999, revising the pecuniary jurisdiction of the officers of the Enforcement Directorate, and transferring the cases is prospective in nature, but in the case on hand, the said notification is given retrospective effect. The Special Director issued notice way back on 23.2.2018, to wit, prior to the issuance of a notification revising the pecuniary jurisdiction, and hence the savings clause contained in the notification to the effect that “except as respects things done or omitted to be done before such supersession...” comes to the aid of the appellants.

The court held that the show cause notice issued under Rule 4(1) of the Rules of 2000 before the issuance of the notification dated September 27, 2018 was saved. The proceedings cannot proceed before the person who was an adjudicating authority under the notification has already been superseded. The inquiry will have to be continued by the adjudicating authority as per the notification in vogue and not by the adjudicating authority under the superseded notification.

The court stated that the single judge has not committed any error while dismissing the writ petitions.

Counsel For Petitioner: Jayant Mehta

Case Title: Auro Logistics Ltd Versus The Assistant Director (SRO)

Citation: 2024 LiveLaw (Mad) 137

Case No.: W.A.Nos.795 and 796 of 2024

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