Unreasonable delay in issuing show cause notices can invalidate proceedings where record-preservation duties had expired.

Show cause notices alleging contraventions from 1989 to 1995 were held liable to be quashed for unreasonable delay, as several notices were issued only in 2002. The court compared the notice dates with the transaction period and relied on the Banking Companies (Period of Preservation of Records) Rules, 1985, noting that records were to be preserved for five or eight years unless extended by written direction. As no written extension was shown, the reasonable period test was applied and the delayed notices and proceedings were quashed, with the appellate orders set aside and bank guarantees directed to be discharged and released.

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Issues: Whether the show-cause notices and the consequent proceedings under the foreign exchange law were liable to be quashed on the ground of inordinate delay, having regard to the period of the transactions, the date of issuance of notices, and the applicable record-preservation rules.

Analysis: The appeals concerned transactions that had occurred years before the show-cause notices were issued, and the notices were served close to the expiry of the sunset period. The governing principle applied was that where no express limitation period is prescribed, proceedings must still be initiated within a reasonable period, the reasonableness of which depends on the facts of each case. The record-preservation framework for banks required preservation only for specified periods, unless a longer period had been directed by the Reserve Bank of India, and no such direction was shown. The gap between the transactions, the initiation of inquiry, and the issuance of the notices was treated as excessive and unfair in the circumstances.

Conclusion: The show-cause notices and the proceedings founded on them were liable to be quashed for delay, and the impugned orders of the Appellate Tribunal could not stand.

Ratio Decidendi: Even where the statute does not prescribe a limitation period, proceedings must be initiated within a reasonable time, and a notice issued after the legally relevant record-preservation period and close to the expiry of the enforcement regime may be struck down as delayed and unreasonable.

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