ED proceedings quashed for failing to serve mandatory show cause notice under FERA Section 56

Delhi HC quashed ED proceedings under FERA Section 56 for violating natural justice principles. The petitioner was not served a mandatory show cause notice at their correct address before initiating proceedings, despite ED having the correct address for demand notice service. The court held that no complaint can be filed without giving the accused opportunity to show requisite permission. Following precedents establishing audi alteram partem as fundamental to Indian law, the court ruled that proceedings under Section 56 cannot continue without proper show cause notice and hearing. The writ petition was allowed, issuing certiorari to quash the ex-parte proceedings.

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Issues Involved:

1. Violation of principles of natural justice.
2. Service of notice under Section 61(2) of FERA.
3. Validity of proceedings under Section 56 of FERA.

Summary:

Violation of Principles of Natural Justice:

The petitioner argued that the proceedings initiated under Section 56 of FERA by the Enforcement Directorate were vitiated due to a violation of the principles of natural justice. Relying on Supreme Court judgments, the petitioner emphasized that any authority with the power to make decisions prejudicial to a person must act judicially and provide an opportunity for the affected party to present their case. The petitioner contended that they were never given such an opportunity, which invalidated the proceedings.

Service of Notice under Section 61(2) of FERA:

The petitioner further argued that the service of notice, as required under Section 61(2) of FERA, was not properly executed. Despite informing the Central Bank of India about their new address in Gurugram, the notices were sent to the old address. The petitioner highlighted that the Central Bank of India and the Enforcement Directorate failed to ensure the correct address was used, leading to the notices not being received. This procedural lapse was seen as a critical failure, rendering the proceedings void.

Validity of Proceedings under Section 56 of FERA:

The respondent countered that the proceedings under Section 56 of FERA were distinct and valid, even if the petitioner was not heard by the Adjudicating Authority. They cited a Supreme Court judgment upholding the vires of Section 56 of FERA. However, the court found that the Enforcement Directorate did not have the correct address of the petitioner, as evidenced by judicial records, and thus, the notice was never properly served.

The court emphasized that the mandatory requirement under Section 61(2) of FERA to provide an opportunity to show cause was not met. This failure to serve the notice correctly and provide an opportunity to the petitioner before initiating proceedings under Section 56 was a clear violation of the principles of natural justice.

Conclusion:

The court concluded that the Enforcement Directorate's failure to serve the notice correctly and provide an opportunity to the petitioner invalidated the proceedings. The writ petition was allowed, and the ex parte proceedings initiated by the Enforcement Directorate, including the subsequent complaint, were quashed. The court also disposed of all pending applications in the case.

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