2013 (8) TMI 435 - HC - FEMA

Court affirms jurisdiction under FEMA, BCCI as 'person.' Procedural fairness breached. Special Director directed to provide reasons.

Shashank Vyankatesh Manohar Versus Union of India through Ministry of Finance, The Directorate of Enforcement

Shashank Vyankatesh Manohar Versus Union of India through Ministry of Finance, The Directorate of Enforcement - TMI Issues Involved:1. Jurisdiction under Section 42 of the Foreign Exchange Management Act (FEMA).2. Compliance with Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000.3. Role and responsibility of the petitioner in the alleged FEMA violations.4. Procedural fairness and natural justice in the adjudication process.Detailed Analysis:Jurisdiction under Section 42 of FEMA:The petitioner challenged the 11 show cause notices on the grounds that Section 42 of FEMA does not apply to him as the Board of Control for Cricket in India (BCCI) is not a company, firm, or association of individuals but an association of societies and trusts. The court analyzed the definition of 'person' under Section 2(u) of FEMA, which includes associations of persons or bodies of individuals, whether incorporated or not. The court concluded that BCCI and the IPL Governing Council fall within this definition, making the complaint against BCCI maintainable.Compliance with Adjudication Rules:The petitioner argued that the communication for personal hearing was issued without complying with Rule 4 of the Adjudication Rules, which mandates a two-tier process. The court emphasized that the Adjudicating Authority must consider the objections raised by the noticee and form an opinion on whether to proceed further with the inquiry. This opinion must be recorded in writing and provided to the noticee if requested. The court found that the Special Director had not followed this procedure, thus breaching the Adjudication Rules and principles of natural justice.Role and Responsibility of the Petitioner:The petitioner contended that he had no role in the operational matters of the IPL, which were handled by the Secretary, Treasurer, and Chairman of the IPL Governing Council. The court examined the minutes of various BCCI meetings and statements recorded during the investigation, which supported the petitioner's claim that he was not involved in opening or operating bank accounts or obtaining RBI permissions. The court noted that the petitioner had exercised due diligence by advising the Working Committee to obtain RBI clearance for opening a bank account.Procedural Fairness and Natural Justice:The court highlighted the importance of procedural fairness, especially given the severe penalties under Section 13 of FEMA. The court interpreted Rule 4 of the Adjudication Rules to require the Adjudicating Authority to record reasons for forming an opinion to proceed with the inquiry, ensuring that the noticee can address these reasons during the personal hearing. The court stressed that this process is crucial to prevent arbitrary decisions and to uphold natural justice.Conclusion:The court did not quash the show cause notices but set aside the communication for personal hearing dated 6 June 2013. The Special Director was directed to record reasons for proceeding against the petitioner and provide these reasons to the petitioner at least 15 days before the personal hearing. This judgment ensures compliance with Rule 4 of the Adjudication Rules and principles of natural justice. The cases of other noticees will be decided based on their respective facts. The petition was disposed of with no order as to costs.