Adjudication proceedings begin with the initial show cause notice, validating continued retention of seized currency within the statutory period.

For purposes of retaining seized currency or documents beyond one year, proceedings under Section 51 of the Foreign Exchange Regulation Act commence with issuance of the Rule 3(1) show cause notice, because that notice contains the allegations and factual basis of the proposed adjudication and initiates the inquiry. The later notice under Rule 3(3) merely fixes a date for appearance after the cause shown is considered and is only a hearing intimation. The adjudicatory scheme was distinguished from the Customs Act framework, and the earlier Division Bench view was preferred over the contrary later view. On that basis, timely issue of the Rule 3(1) notice within one year validates continued retention under Section 41 until disposal of the adjudication proceedings.

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Issues: Whether adjudication proceedings under Section 51 of the Foreign Exchange Regulation Act, 1973 commence on issuance of a show cause notice under Rule 3(1) of the Adjudication Proceedings and Appeal Rules, 1974 or only on issuance of a notice of hearing under Rule 3(3) of those Rules.

Analysis: Section 41 permits retention of seized currency or documents beyond one year only if proceedings under Section 51 or Section 56 have commenced within that period. Rule 3 sets out the adjudication procedure: the first notice under Rule 3(1) calls upon the person to show cause why adjudication should not be held, while Rule 3(3) merely fixes a date for appearance after the cause shown is considered. The notice under Rule 3(1) contains the allegations and factual basis of the proposed adjudication and is the substantive starting point of the inquiry; the later notice under Rule 3(3) is only an intimation for further hearing. The scheme was contrasted with the Customs Act, where the statutory framework differs. The Court preferred the view that the adjudicatory process begins with the first show cause notice and agreed with the earlier Division Bench view, declining to follow the later contrary view.

Conclusion: Adjudication proceedings commence when the show cause notice under Rule 3(1) is issued, not when the notice of hearing under Rule 3(3) is issued.

Final Conclusion: The seizure having been followed by issuance of the Rule 3(1) notice within one year, the currency could validly be retained under Section 41 until disposal of the adjudication proceedings.

Ratio Decidendi: For purposes of Section 41, proceedings under Section 51 commence with the issuance of the initial show cause notice that initiates the adjudicatory inquiry, and not with the later notice fixing the hearing.

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