Writ petition challenging Rule 4(3) hearing notices under Foreign Exchange Management dismissed for violating natural justice

The Madras HC dismissed a writ petition challenging the validity of hearing notices under Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. The court held that Rule 4(3) must be read constructively with Rule 4(4), which requires adjudicating authorities to inform parties of contraventions, allegations, and applicable provisions. The court found that fair opportunity is provided when these rules are read together, and Rule 4(3) does not violate natural justice principles. Following the Division Bench precedent in India Cements Limited, the court ruled that judicial review cannot expand procedural requirements beyond what the rules contemplate, and parties must cooperate within existing procedures rather than prolonging proceedings through repeated court challenges.

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Issues Involved:
1. Validity of the notice of hearing.
2. Adherence to Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules 2000.
3. Compliance with the rules of natural justice.
4. Interpretation of Rule 4(3) by different High Courts.
5. Enforceability of departmental circulars issued based on judicial decisions.

Issue-wise Detailed Analysis:

1. Validity of the Notice of Hearing:
The writ petitions challenge the validity of the notice of hearing on the grounds that the spirit of Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules 2000 was not adhered to, rendering subsequent proceedings null and void. The petitioners argue that communicating the reasons recorded for proceeding with the action would enable them to defend their cases effectively.

2. Adherence to Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules 2000:
The petitioners contend that Rule 4(3) was not followed, citing the Bombay High Court judgment in Shashank Vyankatesh Monohar Vs. Union of India, which was confirmed by the Supreme Court. They argue that the Enforcement Directorate's circular of 2014, based on this judgment, mandates strict adherence to Rule 4(3). The Bombay High Court's interpretation requires the adjudicating authority to record and communicate reasons for proceeding with an enquiry, a view supported by the Delhi and Kolkata High Courts.

3. Compliance with the Rules of Natural Justice:
The petitioners emphasize that the rules of natural justice are paramount and that violation of Rule 4(3) and related circulars would affect the proceedings. They argue that the Madras High Court's interpretation is factually distinguishable and should not be equated with the Bombay High Court's interpretation, which they believe should be followed.

4. Interpretation of Rule 4(3) by Different High Courts:
The Madras High Court's Division Bench in India Cements Limited Vs. Union of India disagreed with the Bombay High Court's interpretation, stating that Rule 4(3) does not require recording and communicating reasons for forming an opinion to conduct an enquiry. The Madras High Court held that Rule 4(3) should be read in conjunction with Rule 4(4), which mandates explaining the contraventions to the noticee during the enquiry. The court concluded that the adjudicating authority's opinion under Rule 4(3) is a procedural step, not a decision that needs to be communicated.

5. Enforceability of Departmental Circulars Issued Based on Judicial Decisions:
The respondents, represented by the Additional Solicitor General, argue that departmental circulars are not binding on courts or quasi-judicial authorities. They cite the Supreme Court's decisions in Commissioner of Central Exercise, Bhopal Vs. Minwool Rock Fibres Limited and Commissioner of Central Excise Vs. Ratan Melting and Wire Industries, which state that circulars represent the executive's understanding of statutory provisions and are not binding on courts. The court should declare the law, not the executive.

Conclusion:
The Madras High Court, bound by its Division Bench's later judgment in India Cements Limited, dismissed the writ petitions. The court held that Rule 4(3) does not require the adjudicating authority to record and communicate reasons for forming an opinion to conduct an enquiry. The opinion under Rule 4(3) is a procedural step, and the adjudicating authority is required to provide all necessary information during the enquiry as per Rule 4(4). The court emphasized that procedures should be followed as they are, without expanding their scope, to avoid prolonging proceedings and ensure fair opportunity. The writ petitions were dismissed, and there was no order as to costs.

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