Reasoned inquiry opinion under FEMA adjudication rules was upheld despite limited recorded reasons

Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 requires the Adjudicating Authority to form a reasoned, mindful opinion after considering the noticee's reply on whether an inquiry should proceed. The requirement of reasons supports fairness, transparency, and restraint against arbitrariness in a quasi-judicial function, though the reasons need not be elaborate. On the facts, the file noting referred to the complaint, a Supreme Court judgment, and the reply, but did not expressly connect the material to the decision to proceed. Even so, the court declined to interfere under Article 226 in the circumstances and allowed the inquiry to continue.

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Issues: Whether the opinion recorded under Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 to proceed with an inquiry was invalid for want of recorded reasons and non-application of mind.

Analysis: The adjudication scheme under Rule 4 is a two-stage process. At the first stage, after considering the noticee's reply, the Adjudicating Authority must form an opinion on whether an inquiry should be held. That opinion should reflect due application of mind and contain reasons, though not necessarily elaborate ones. The requirement of reasons serves to ensure fairness, transparency, and restraint against arbitrariness, particularly because the authority performs a quasi-judicial function. On the facts, the file noting referred to the complaint, the Supreme Court judgment, and the reply, but did not expressly set out reasons linking the material with the decision to proceed. Even so, in the peculiar circumstances, including the seriousness of the allegations and the larger inquiry already directed, the Court declined to interfere under Article 226 at this stage.

Conclusion: The challenge to the Rule 4(3) opinion was rejected and the inquiry was permitted to continue.

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