AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 1492
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....rties, Rule is made returnable forthwith and the writ petition is finally disposed of by this judgment. 3. By this petition under Article 226 of the Constitution of India and prior to its amendment, the petitioner desires that this court should issue a writ of mandamus or any other writ, order or direction analogous to that writ, directing respondent no. 1 to this writ petition to guide the petitioner in making of an application styled as an application for compounding and to take on file and determine the compounding application within the time frame prescribed by the Foreign Exchange (Compounding Proceedings) Rules, 2000 (hereinafter referred to as "the Compounding Rules") or such other time frame as may be prescribed by this court. 4. Then, prayer clause (b) claims the following relief:- "(b) that this Hon'ble Court may be pleased to issue a writ of prohibition, or any writ, order or direction analogous to the writ of prohibition, restraining the Respondent No. 2 from proceeding with adjudication proceedings in the SCN No.F.No.T-4/2D/2015 dated 13 November 2015 until the decision of Respondent No. 1 on the compounding applications which will be filed by the Pe....
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....le Court may be pleased to issue a writ of certiorari, or any writ, order or direction analogous to the writ of certiorari, calling for the records of the case and after going through the same and examining the legality thereof to quash and cancel the letter dated 1 December 2017 issued by Respondent No. 2 to Respondent No. 1 in relation to the compounding applications of the Petitioner;" 6. It would be necessary to set out the factual background, in which this petition has been filed by the petitioner company incorporated under the Companies Act, 1956. The petitioner carries on business of operating news channels. The petitioner company was established by Dr. Prannoy Roy an eminent journalist, claiming to be a pioneer in the introduction of electronic media in the space of news broadcasting. The first respondent is the Reserve Bank of India (RBI) constituted under the Reserve Bank of India Act, 1934. It has been conferred with wide-ranging powers under the Foreign Exchange Management Act, 1999 (hereinafter referred to as "the FEMA"). The second respondent-Directorate of Enforcement is constituted under section 36 of the FEMA. It exercises powers of investigation in relation to ....
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....sts of the petitioner's shareholders and stakeholders, the petitioner took a decision to seek compounding, in the larger interest of the petitioner's stakeholders. Amongst the factors that weighed with the petitioner in arriving at its considered decisions were that apart from adverse publicity on various media platforms, including on social media, the adjudication proceedings would entail several years to complete, which would hamper day to day functioning of the petitioner and also prove to be a significant drain on resources of the petitioner. Even though the petitioner was certain that the end result will eventually be in favour of the petitioner, to avoid the prejudicial effect of such proceedings, including protracted litigation and related legal costs, the petitioner filed two compounding applications bearing C.A.No.3998/2016 and C.A.No.3999/2016, both dated 7th May, 2016 with respondent no. 1. The petitioner filed its compounding applications with respondent no. 1, since as per the said Rules, the jurisdiction for compounding lay with respondent no. 1. The copies of the said compounding applications are annexed as Exhibit 'E' and Exhibit 'F'. These c....
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.... 24th January, 2017 issued by respondent no. 1, the petitioner, acting through its legal counsel, met with the concerned officers in the FID and OID of respondent no. 1 on several occasions to seek guidance in the matter of compounding. During these meetings, the concerned officers informed the petitioner's counsel that all the transactions undertaken by the petitioner, whether FDI or ODI, would be required to be set forth in a simplified manner. 16. Accordingly, vide the petitioner's counsel letters, both dated 11th April, 2017, the details of all such transactions were set forth in a simplified manner, by way of various charts and submitted to the FID and OID. After submission of the said letters dated 11th April, 2017 with FID and OID, neither the FID nor the OID have responded till date to the petitioner. In the meanwhile, vide letter dated 31st March, 2017, respondent no. 2 restarted the adjudication proceedings and fixed the date of hearing on 20th April, 2017. 17. On 20th April, 2017, the petitioner and its Directors' counsel, vide letter dated 20th April, 2017 requested respondent no. 2 to keep the adjudication proceedings in abeyance till respondent no. 1....
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....s in the show cause notice is that the petitioner deposited certain sums with Bank of Baroda, which according to respondent no. 2 amounts to violation of section 3(d) of the FEMA, no corollary show cause notice has been issued by respondent no. 2 to the Bank of Baroda. 22. This writ petition was filed in this court on 1st July, 2017. An affidavit in reply was filed by the Directorate of Enforcementrespondent no. 2 and after the preliminary submissions, it was stated that the adjudication proceedings relating to the show cause notice dated 13th November, 2015 have been initiated against the petitioner for contravention of the provisions of the FEMA and the Rules/Regulations made under the Act, as mentioned in the show cause notice. The petitioner and its Directors have filed replies dated 30th March, 2016 and 18th April, 2016, in which, they have pleaded not guilty to the contraventions alleged in the show cause notice. 23. The petitioner informed the second respondent regarding filing of compounding application with the RBI and requested for keeping the adjudication proceedings in abeyance. The Enforcement Directorate, in para 8 of this affidavit stated that it is not bound t....
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....5th July, 2017. 24. Thereafter, the petitioner filed a rejoinder affidavit on 4th August, 2017 reiterating the legal contentions as raised in the petition as also the factual position narrated in this rejoinder. The petitioner also pointed out that the petitioner's application to keep the proceedings before the second respondent in abeyance Page 14 of 122 should have been granted because there is absolutely nothing, which would indicate contravention of the provisions of the PMLA/FEMA. This is nothing but an unlawful interference in the right of the petitioner to seek compounding and the issue is apparently raised to prejudice the court. The petitioner pointed out that there was no question of the second respondent directing the first respondent, much less by a letter dated 6th March, 2017, not to compound the offence on the ground of the alleged investigation under the PMLA in Aircel's case. The petitioner pointed out that it was summoned by the second respondent in connection with this case as a witness and not as an accused. In any event, before the communication of the second respondent to the RBI dated 6th March, 2017, the learned Special Judge- CBI/PMLA, vide two s....
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....end the petition was filed and on that date itself, the chamber summons seeking amendment to the petition was allowed. Thereafter, the petitioner filed a rejoinder affidavit to the counter affidavit of the RBI and it reiterated the contentions raised in the earlier affidavit-in-rejoinder filed to the second respondent's affidavit-in-reply. It also raised additional contentions. An additional counter affidavit on behalf of the RBI was also filed on 22nd August, 2017, in which, it was stated the the compounding applications submitted by the petitioner were returned by the Compounding Authority for the reasons mentioned in the letter dated 24th January, 2017. As on 6th March, 2017, neither there was any old compounding application filed by the petitioner pending before the RBI nor any fresh application has been filed by the petitioner thereafter. In these circumstances, the first respondent reiterated that the writ petition deserves to be dismissed, as the reasons for returning the compounding applications are well founded. 27. Since the amended copy of the petition was supplied, counter affidavit on behalf of the Enforcement Directorate-second respondent came to be filed dated....
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....es (Rs.1.72 crore paid on 30.08.2007 and Rs. 3.39 crore paid on 28.02.2008). These shares were subsequently acquired by AHMPL from NDTV News for the same amount of Rs. 5.1 crores on 23.07.2009 and passed on to the Mauritius based subsidiary of Astro. NDTV News was also a party to the above agreement. The above facts show the connection between NDTV Ltd. with Astro in receiving funds from Mauritius based subsidiary of Astro through AHMPL, in Aircel-Maxis Case. iii) Maxis was to acquire Aircel Limited by purchasing its shares for an amount of about UD$ 800 million. It was to do so through its subsidiary GCSHL. For this purpose GCSHL applied in January 2006 to Foreign Investment Promotion Board (FIPB) for the approval of the Central Government. Under the applicable rules, then Finance Minister was empowered to grant such approval if the amount involved in foreign investment was up to Rs. 600 crores. If the amount involved in foreign investment was more than Rs. 600 crores it was the Cabinet Committee on Economic Affairs ("CCEA") which was competent to grant the approval. Accordingly in such cases then Finance Minister was required to forward the application to CCEA. In the Ai....
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.... the ongoing investigation and to take action thereon in accordance with law. vii) During Financial year 2010-2011, Astro paid an amount of US$ 40 million through its subsidiary South Asia Creative Assets Ltd. (SACAL) to NDTV Lifestyle Holdings (P) Limited ("NLHL"), a subsidiary of NDTV Limited, ostensibly for acquiring 49% stake in the company. Significantly, at that time the worth of NLHL was only a few thousand US dollars. The amount paid by Astro/SACAL was therefore far in excess of the value of the shares. Before receiving the amount of US$ 40 million from Astro, NLHL in the same F. Y. transferred Rs. 183.25 crores to another associate company of NDTV Limited i.e. NDTV Networks Plc., U. K. ("NNPLC") in U. K. Subsequently NNPLC has undergone voluntary liquidation in the same Financial Year. viii) The Enforcement Directorate therefore has a serious suspicion that NDTV Ltd. is involved in money laundering activities and it is possible that the result of the ongoing investigation will establish this fact. ix) The US$ 40 million was paid by NLHL to NNPLC ostensibly towards the acquisition of shares held by NNPLC in various companies forming part of the ND....
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.... submission is that the petition be dismissed. 29. The petitioner filed, on 22nd September, 2017, an additional affidavit-in-rejoinder to the counter affidavit of the second respondent. In both these affidavits, the petitioner prayed that no pending case can interfere with the petitioner's right to seek compounding of the offences and for these reasons, the petition be allowed. 30. With these materials, though the petitioner was heard on subsequent dates by this court, what we have seen is that the petition was listed on 6th November, 2017, but was adjourned to 13th November, 2017. On 13th November, 2017, after hearing both sides, this court passed the following order:- " On the earlier date, we had called upon the learned counsel appearing for the Union of India to produce the file of the decision which is communicated vide communication dated 6th March 2017 addressed by the Special Director of Enforcement Directorate to the Chief General Manager, Foreign Exchange Department, OID, Reserve Bank of India, Mumbai. The learned counsel appearing for the second and third respondents, on instruction from Mr.Kamal Singh, Deputy Director, states that the Enforcement Dire....
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....nces, Mr. Dwarkadas would submit that the petitioner be permitted to amend the petition. 6. After hearing both sides on this limited point, it is evident that by our order on the chamber summons, we are not expressing any opinion on the rival contentions and particularly the merits of the amended pleas. Therefore, the merits have to be gone into at a subsequent stage. All contentions and pleas of the Directorate of Enforcement with regard to the merits of these added paragraphs are, therefore, expressly kept open. Without prejudice to the contentions of all parties on merits, the chamber summons is made absolute. The amendment is allowed. The writ petition stands amended in terms of the Schedule to the chamber summons. There would be no order as to costs. 7. It is also argued by the RBI that any allegations made by the petitioner against it are not admitted. Once the reply filed to the chamber summons is exhaustive and dealing with merits of the amended pleas, they are not filing any additional affidavit. Therefore, the court can proceed on the available material. 8. Let the amendment be formally carried out within a period of one week from today, but we ....
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....under the FEMA postulates that contravention of FEMA is treated as a civil offence. It is amenable to penalty under the FEMA. Mr.Dwarkadas would contend that the Compounding Rules, vide Rule 3, envisage two compounding authorities, namely, the RBI and the Enforcement Directorate, such that the RBI, as statutory regulator and repository of foreign exchange dealings, is vested with powers to compound all contraventions under the FEMA, save and except for contraventions under section 3(a) of the FEMA (vide Rule 4 of the Compounding Rules) and the Enforcement Directorate is the sole repository of powers to compound contraventions under section 3(a) of the FEMA (vide Rule 5 of the Compounding rules. The procedure for compounding is set forth in Rule 8 of the Compounding Rules. It confers power upon the Compounding Authority to call for any information, record or other documents relevant to the compounding proceedings, and stipulates that the compounding authority shall pass an order of compounding after affording an opportunity of hearing, as expeditiously as possible and not later than 180 days from the date of application. 36. Mr. Dwarkadas would submit that the proviso to Rule 8(2....
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.... and/or undermined by the executive. Accordingly, mere suspicion cannot take the place of relevant circumstances that must exist in order to justify inference, which must demonstrably be the sine qua non for action. 40. Mr. Dwarkadas would submit that it is insufficient in law for the Enforcement Directorate to interdict RBI's compounding powers on mere suspicion as to the commission of one or more out of the category of offences stipulated within the impugned notification vis-a-vis a person seeking to exercise the right of compounding conferred under section 15 of the FEMA. 41. Mr. Dwarkadas would submit that through the impugned notification, civil consequences under the FEMA are at risk of undermining and powers to compound a civil wrong are interfered with through introducing a tenuous link with potential criminal proceedings. Thus, two similarly situated persons, namely, both of whom otherwise have a vested statutory right under section 15 of the FEMA to seek compounding, are exposed to arbitrary and discriminatory treatment. Illustratively, where a person instituting an application under section 15 of the FEMA for compounding were purportedly suspected by the Enforc....
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....g the RBI that a serious contravention involving money laundering is suspected, may, in any event, be questioned on grounds that no circumstances leading to inference of the kind contemplated i.e. where no serious contravention suspected of money laundering exists, the action might be exposed to interference through judicial review, unless the existence of circumstances is made out and in such a case, the onus of proof must lie on the Enforcement Directorate to establish that the facts justify such an inference. The Enforcement Directorate's actions are amenable to judicial review, since it is available to the petitioner to show that either such circumstances do not exist or that they are such that it is impossible for anyone to form an opinion therefrom suggestive of the aforesaid and to challenge any such conclusion/opinion on grounds of (a) nonapplication of mind or (b) perversity or (c) that it was formed on collateral grounds and was beyond the scope of the statute. Formation of opinion is a subjective process, which must be founded on the objective test of existence of circumstances suggesting that the inference is made out. While such an opinion is not subject to a chall....
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.... India. 45. Mr. Dwarkadas further submits that the impugned notification becomes a weapon of unbridled harassment, whereby, its misuse by the executive acting through the Enforcement Directorate cannot be ruled out. In the case of Rameshwar Prasad vs. Union of India (2006) 2 SCC 1 it is held that if the satisfaction is mala fide or is based on wholly extraneous or irrelevant grounds, the court would have the jurisdiction to examine, because in that case there would be no satisfaction in regard to matters on which the concerned authority was required to be satisfied. Exercise of power is subject to judicial review, at least to the extent of examining whether the conditions precedent have been satisfied or not. This examination will necessarily involve the scrutiny as to whether there existed material for the satisfaction that the situation had arisen. When considering the question of material it is not the personal whim, wish, view or opinion or the ipse dixit de hors material placed which is relevant for the purpose. The authority has to be convinced of, or has to have sufficient proof of information with regard to or has to be free from doubt or uncertainty about the state of t....
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....r, 2016, but returned to the petitioner on 20th January, 2017 for guidance by Overseas Investment Division and Foreign Investment Division (both divisions of the RBI), but not rejected. During the pendency of such 'guidance', the amendment notification was issued on 20th February, 2017 and the letter of 6th March, 2017 followed thereafter. Therefore, the impugned notification cannot have any retrospective effect vis-a-vis the compounding applications and is not applicable to the petitioner. 47. Mr. Dwarkadas further submits that the impugned notification was not laid in the manner required in law forthwith after 20th February, 2017 and the explanation of the Enforcement Directorate that it has been tabled in Rajya Sabha on 6th March, 2018 (during the financial year of the writ petition) after the lapse of a mere 61 days (across four parliamentary sessions) renders the notification to the interdict of the salutary principle of administrative law. In the case of Babu Verghese vs. Bar Council of Kerala (1999) 3 SCC 422, it is held that if the statute prescribes a particular procedure to do an act in a particular way, that act must be done in that manner, otherwise, it is no....
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.... to distinguish the use of 'view' against the requirements of 'opinion, the petitioner has nullified such contention through relying on the dictionary meaning of 'view', to be synonymous with that of 'opinion'. The impugned notification lacks criterion to be employed by the Enforcement Directorate in reaching such a view, thus endangering misuse by the Enforcement Directorate through manifest arbitrariness/ unreasonableness, without any accountability whatsoever, as apparent in the present case. Significantly, when the Enforcement Directorate issued its letter of 6th March, 2017 to the RBI purporting to interdict the petitioner's right to seek compounding, no notice or writing whatsoever had been received by the petitioner in relation to any purported investigation ongoing by the Enforcement Directorate. Again, therefore, absent requisite minimum objective safeguards, there can be no subjective satisfaction capable of being recorded; (c) finally, the impugned notification fails to define the contours of suspicion and confers unfettered powers upon the executive without guidance as to degree of suspicion, which must fulfill the minimum requirement of ....
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....which are within the exclusive jurisdiction and power of the RBI. The RBI has not to concern itself with the investigations allegedly commenced and pending by virtue of the proviso to Sub-rule (2) of Rule 8 of the Compounding Rules. The RBI is being directed by the Enforcement Directorate not to proceed with the compounding applications of the petitioner. This act of the Enforcement Directorate is contrary to the FEMA. Assuming without admitting that the Enforcement Directorate can communicate its views to the RBI within the meaning of the proviso to Sub-rule (2) of Rule 8, still, the RBI cannot be directed to abide by that view if that view of the Enforcement Directorate is not in accordance with the proviso. In other words, so long as the view taken and recorded by the Enforcement Directorate does not indicate that it is relating to a serious contravention suspected of money laundering, terror financing or affecting sovereignty and integrity of the nation, the Compounding Authority is not obliged to abide or respect that view. It is then not obliged to remand the case to the appropriate adjudicating authority for adjudication under section 13 of the FEMA. 53. Even otherwise, M....
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....rectorate's affidavit of 8th February, 2018 cannot supplement reasons or rather the lack of them in the letter of 1st December, 2017, significantly, no fair-minded person can form a view against the petitioner based on the allegations made in the Enforcement Directorate's affidavit of 8th February, 2018: (i) as regards the first of the matters cited in the Enforcement Directorate's affidavit of 8th February, 2018 i.e. the FIR dated 2nd June, 2017, it mainly relates to an interest waiver/reduction that was granted by the ICICI Bank to the promoters and/or a holding company of the petitioner which does not directly concern the petitioner. In any event, the FIR was registered only on 2nd June, 2017 i.e. well subsequent to the Enforcement Directorate's letter dated 6th March, 2017 to the RBI. A writ petition being Writ Petition No.1863 of 2017 was instituted and is currently pending in the Hon'ble Delhi High Court against the FIR. In the writ petition, it was specifically averred by the petitioner that there is no allegation of any offence committed by the petitioner. Pertinently, in response thereto, the Enforcement Directorate in para 26E at page 4 stated that "no....
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....ents demonstrate compliance with this provision, they are not empowered to rely on the proviso. To the extent they are relying upon it and as noted above, that reliance should not be permitted at all as the law is contravened totally. 58. In support of the above contentions, Mr. Dwarkadas placed reliance on the following judgments:- (i) Association of Management of Private Colleges vs. All India Council for Technical Education and Ors., (2013) 8 SCC 271. (ii) Barium Chemicals Ltd. and Anr. vs. Company Law Board and Ors., AIR 1967 SC 295 (V. 54 C 59). (iii) Rameshwar Prasad and Ors. (VI) vs. Union of India and Anr., (2006) 2 SCC 1. (iv) State of T. N. and Anr. vs. P. Krishnamurthy and Ors., (2006) 4 SCC 517. (v) P. Vijayan vs. State of Kerala and Anr., (2010) 2 SCC 398. (vi) Kishan Singh (Dead) through Lrs. vs. Gurpal Singh and Ors., (2010) 8 SCC 775. 59. In answer to Mr. Dwarkadas's arguments, all that Mr.Dhond learned senior counsel appearing on behalf of respondent no. 1- RBI would submit is that the issue now raised is of a wider nature. The issue concerns invocation and application of the proviso below Sub-rule (2)....
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....ubmits that in view of this judgment of this Court, the issue regarding the rules becoming operative, effective and capable of being invoked and applied is concluded. 62. Mr. Venegaonkar submits that the whole petition is founded on erroneous legal basis that compounding of an offence is a right vesting in the petitioner. Rather, according to Mr. Venegaonkar, the position is otherwise in law. None can claim unfettered, unrestricted and absolute right of compounding an offence. It is not for an offender to dictate terms and he cannot decide whether he deserves to be tried for an offence or that the offence should be compounded. The power to take all such decisions vests exclusively in the State or the authority. Therefore, a person like the petitioner, who has contravened the provisions of the Act cannot choose for itself whether to be tried for such contravention and penalised or whether that contravention should be compounded. Precisely, this is what the petitioner has taken upon itself to decide and determine. If that cannot be determined by the petitioner, then, the whole petition must be dismissed solely on this reasoning and conclusion. More so, when the Compounding Authori....
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....res. Mr. Venegaonkar submits that the mandate of Articles 14 and 21 is not violated at all and that argument has no merit. The Act and the Rules have all to be read and construed together and harmoniously. So read, it would be evident that there is parallel mechanism of compounding the contravention and power in that behalf is conferred equally in the Enforcement Directorate. The Enforcement Directorate cannot exercise that power unmindful of the contravention or suspected involvement of the applicant in offences punishable under the PMLA. Equally, the RBI cannot ignore the mandate of the PMLA. A money launderer cannot escape the clutches of law by seeking recourse to the power of compounding the contravention of FEMA. The result would be that he would rely upon such proceedings and outcome or decision thereof to defeat the object of PMLA/FEMA and escape the consequences in law. It is well settled that the power conferred in a statutory authority under an Act cannot be exercised in such a manner so as to defeat and frustrate the object and purpose of a pari materia enactment or an another stringent law. Precisely, that is sought to be achieved in the instant case and therefore, nei....
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....s Coop. Society, Marredpally and Ors., (2003) 12 SCC 738. (vi) K. T. Plantation Private Limited and Anr. vs. State of Karnataka, (2011) 9 SCC 1. (vii)M/s. Brentfield Travels Co. Pvt. Ltd. vs. The Reserve Bank of India and Anr., Writ Petition No. 1777 of 2011, decided on 23rd September, 2011. 66. For properly appreciating the rival contentions, we would refer to the FEMA. The FEMA is an Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. It is a successor legislation to the Foreign Exchange Regulation Act, 1973 (FERA). In the statement of objects and reasons leading to FEMA, it was stated that the FERA was reviewed in 1993 and several amendments were enacted as part of the on going process of economic liberalisation relating to foreign investments and foreign trade for closer interaction with the world economy. At that stage, the Central Government decided that a further review of the FERA would be undertaken in the light of subsequent developments and experience in relation to foreign trade a....
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.... be approached for dealing in foreign exchange or in foreign security are then to be found in the subsequent sections of the Act and particularly sections 10 and 11. There is a power of the RBI to inspect authorised person. Chapter IV is titled as "Contravention and Penalties". Section 13 falling therein reads as under:- "13. Penalties. - (1) If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorisation is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues. (1-A) If any person is found to have acquired any foreign exchange, foreign security or immovable property, situated outside India, of the aggregate value exceeding the threshold prescri....
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.... contravention of the provisions of the Act has to be dealt with and what are the penalties for the same. If the penalties have to be adjudicated, then, the adjudicating authority, as contemplated by law, must adjudicate the contravention and decide upon the penalty. By section 14, the orders of the adjudicating authority can be enforced. By section 14-A power to recover arrears of penalty are conferred and this section was inserted by Act 28 of 2016. Section 15 is relevant for our purpose and it reads as under:- "15. Power to compound contravention. - (1) Any contravention under section 13 may, on an application made by the person committing such contravention, be compounded within one hundred and eighty days from the date of receipt of application by the Director of Enforcement or such other officer of the Directorate of Enforcement and officers of the Reserve Bank as may be authorised in this behalf by the Central Government in such manner as may be prescribed. (2) Where a contravention has been compounded under sub-section (1), no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person commi....
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....countant of his choice for presenting his case before the Adjudicating Authority. (5) Every Adjudicating Authority shall have the same powers of a Civil Court which are conferred on the Appellate Tribunal under sub-section (2) of section 28 and- (a) all proceedings before it shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860); (b) shall be deemed to be a Civil Court for the purposes of sections 345 and 346 of the Code of Criminal Procedure, 1973 (2 of 1974). (6) Every Adjudicating Authority shall deal with the complaint under sub-section (2) as expeditiously as possible and endeavour shall be made to dispose of the complaint finally within one year from the date of receipt of the complaint: Provided that where the complaint cannot be disposed of within the said period, the Adjudicating Authority shall record periodically the reasons in writing for not disposing of the complaint within the said period." 72. A perusal of sub-section (1) of section 16 would reveal as to how the Central Government can, for the purpose of adjudication under section 13, appoint as many ....
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.... carry out the provisions of the Act and without prejudice to the generality of this power, the Central Government may make Rules providing for the manner in which the contraventions can be compounded under sub-section (1) of section 15. By section 47, there is a power to make Regulations. Section 48 is necessary to be referred for another aspect of the matter and that section is reproduced hereinbelow:- "48. Rules and regulations to be laid before Parliament. - Every rule and regulation made under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation, or both Houses agree that the rule or regulation should not be made, the rule or regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the....
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....han rupees forty lakhs, by the Deputy General Manager of Reserve Bank of India; (c) in case where the sum involved in the contravention is rupees forty lakhs or more but less than rupees one hundred lakhs by the General Manager of Reserve Bank of India; (d) in case the sum involved in such contravention is rupees one hundred lakhs or more, by the chief General Manager of the Reserve Bank of India; Provided further that no contravention shall be compounded unless the amount involved in such contravention is quantifiable. (2) Nothing contained in sub-section (1) shall apply to a contravention committed by any person within a period of three years from the date on which a similar contravention committed by him was compounded under these rules. Explanation. - For the purposes of this rule, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. (3) Every officer specified under sub-rule (1) of rule 4 of the Reserve Bank of India shall exercise the powers to compound any contravention subject to ....
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....as possible and not later than 180 days from the date of application. Provided that with respect to any proceeding initiated under rule 4, if the Enforcement Directorate is of the view that the said proceeding relates to a serious contravention suspected of money laundering, terror financing or affecting sovereignty and integrity of the nation, the Compounding Authority shall not proceed with the matter and shall remit the case to the appropriate Adjudicating Authority for adjudicating contravention under section 13." 77. A bare perusal of Rule 8, therefore, would indicate that procedure of compounding is that the Compounding Authority has a discretion to call for any information, record or any other documents relating to the compounding proceedings and there is an outer limit to pass an order of compounding a contravention and that order has to be passed not later than 180 days from the date of the application. 78. It is not, therefore, right to urge that the Compounding Authority has to proceed only on the materials brought by the person seeking contravention, but the authority is free to call for any information, record or any other document relevant to the compou....
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....ion of the United Nations General Assembly, details of which are referred in the preamble to the law, it was imperative for the countries world over to take steps so as to prevent money laundering. It is in these circumstances and when international community was geared up and took the steps, in view of a urgent need of an enactment or comprehensive legislation, inter alia, for preventing money laundering of proceeds of drug crimes and other connected activities and confiscation of proceeds derived from such offence, setting up of agencies and mechanisms for coordinating measures for combating money laundering etc., the PMLA Bill 1998 was introduced in the Lok Sabha on 4th August, 1998. Thereafter, it was referred to the Standing Committee on Finance, which presented its report to the Lok Sabha. Thereupon, the Central Government took the steps and the law was enacted. It has been amended by the Amendment Act 20 of 2005, the Amendment Act 21 of 2009 and the Amendment Act 2 of 2013. The Statement of Objects and Reasons leading to the Amendment Act 2 of 2013 states that the problem of money laundering is no longer restricted to the geo political boundaries of any country. It is a glob....
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.... knowingly assist or knowingly is a party or is actually involved in any process or activity connected with the [proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming] it as untainted property shall be guilty of offence of money laundering." 83. Thus, the offence of money laundering has several components. Firstly, directly or indirectly attempting to indulge, secondly, knowingly assisting or knowingly becoming a party or knowingly being a party and thirdly, actually involving in any process or activity connected with the proceeds of crime. That part of the provision and which is bracketed has been substituted by the Act 2 of 2013. Thus, direct or indirect attempt to indulge, knowingly assist or knowingly become a party to, actual involvement in any process or activity connected with the proceeds of crime, including its concealment, possession, acquisition or use and projecting or claiming it as untainted property is an offence and whosoever is guilty of the same is said to be committing an offence of money laundering. Section 4 provides for its punishment. Then, Chapter III titled as "Attachment, Adjudication and Confiscation" co....
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....gnored. It is well settled rule of interpretation that no words in the statute or any statutory provision are to be construed as wastage or surplusage. The legislature is presumed to employ or use words carrying a definite meaning. It does not insert a word or expression without intending to ascribe or attach a meaning to it. Therefore, the words and expressions inserted with definite intention ought to receive the meaning carrying forward the same and not frustrating or defeating it. In the Principles of Statutory Interpretation by Justice G. P. Singh, revised by Justice A. K. Patnaik former Judge of Supreme Court of India, the principles have been summarised as under:- "Avoiding rejection of words. As on the one hand, it is not permissible to add words or to fill in a gap or lacuna, on the other hand effort should be made to give meaning to each and every word used by the Legislature. "It is not a sound principle of construction", said PATANJALI SHASTRY, C.J.I., "to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute" [Aswinin Kumar Ghose v. A....
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.... 13 (9th Edition of this book is referred)]. ....."Though a parliamentary enactment (like parliamentary eloquence) is capable of saying the same thing twice over without adding anything to what has already been said once, this repetition in the case of any Act of Parliament is not to be assumed. When the Legislature enacts a particular phrase in a statute the presumption is that it is saying something which has not been said immediately before. The rule that a meaning should, if possible, be given to every word in the statute implies that, unless there is good reason to the contrary, the words add something which would not be there if the words were left out" [Hill v. Williams Hhill (Park Lane) Ltd. supra, p. 461; referred to in Umed v. Raj Singh, AIR 1975 SC 43, p. 63 : (1975) 1 SCC 76]." 85. Therefore, we must start with a presumption that the legislature employs and uses every word as in this proviso with a purpose. That purpose is that the Compounding Authority should not compound contravention of the provision of the FEMA if the compounding proceedings have a relation to a serious contravention suspected of money laundering, terror financing etc. for that would totally defe....
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....nd ultra vires the parent Act as that fails to conform to the parent legislation. With all this, Mr. Dwarkadas does not argue that the proviso be declared unconstitutional straight away, but should be read and interpreted in such a way so as to not to interfere or unduly control the independent exercise of powers by the RBI. Thus, a balance will have to be struck so as to save the proviso from the vice of unconstitutionality. 87. Mr. Venegaonkar's arguments have already been noted by us and to be fair, he also did not suggest that in the absence of cogent and satisfactory material, a mere letter or communication from the Enforcement Directorate recording its view in terms of the proviso would suffice or that is beyond judicial review. He agreed that in the event the view taken by the Enforcement Directorate is questioned before a writ court exercising powers of judicial review, then, but for the adequacy or sufficiency of the material, the court is not prohibited from probing and finding out whether there was any material at all to arrive at that view. All that Mr. Venegaonkar would argue is that there is a difference between recording a view and forming an opinion. More so,....
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....but during its pendency, a communication from the Enforcement Directorate to the above effect prevents it from proceeding further, then, that course adopted by the RBI and its remittance of the proceedings straight away to the adjudicating authority can be questioned by the applicant seeking compounding of the contravention under the FEMA, by making an application to the RBI. Thus, the applicant invoking the RBI's power of compounding can then approach a court of law and challenge both, the refusal or reluctance on the part of RBI to proceed further as also the Enforcement Directorate's communication or view to the aforesaid effect. If that is the constitutional safeguard and protection ensured to every aggrieved applicant, then, it is not necessary to declare the proviso unconstitutional. 89. We agree with Mr. Dwarkadas that no interpretation which totally takes away the power to compound contravention vesting in the RBI be placed on the proviso. We must, on a harmonious and complete reading of the statutory scheme, together with the rules, hold as above and that would ensure that the contravention can be compounded by resort to section 15 and the requisite rules by the....
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.... the wrongdoer or the person contravening the laws and he may as well avoid the consequences that the law visits him/her in the event he/she contravenes it. Then, the adjudication proceedings under the FEMA would also not commence and would be unnecessarily and unjustifiably delayed and equally when the Enforcement Directorate's views are questioned in order to find out whether there is a serious contravention suspected of money laundering etc., then, offences having cross border repercussions and effect cannot be investigated and probed further. That surely is not the intent of the law makers. In these circumstances, it would not be proper to contend that the RBI has an authority to question the view of the Enforcement Directorate and that, in every case, it can seek a clarification from the Enforcement Directorate on receipt of its view as above. In a given case, of course, it would be open for the RBI to seek the details, but we expect from the RBI that it will not assist a wrongdoer or a law breaker to such an extent that he avoids the compliance and possibly consequences of the breach and of both, FEMA and a statute like the PMLA. Therefore, this will not be a rule, but an....
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.... and unless a firm and clear meaning is assigned to them, there is a possibility that a mere communication of a view without any material to support it would be enough to stall the compounding proceedings. He would submit that this court should not allow the Enforcement Directorate to play with words and even if there is no material supporting before the communication or regarding the view, as in this case, later on, the Enforcement Directorate will fish out something so as to try and convince the court particularly when its action or that of the RBI, as in this case, is challenged. That is how he would submit that we must apply the test laid down in several decisions of the Hon'ble Supreme Court right from Barium Chemicals (supra) and holding that there should be definite material and nothing should be in the realm of speculation and guesswork. That would negate the purpose of the proviso. Though Mr.Dwarkadas has relied upon several decisions in this behalf, we are of the clear view that the judgment of the Hon'ble Supreme Court in the case of Bhikhubhai Vithlabhai Patel and Ors. vs. State of Gujarat and Anr. (2008) 4 SCC 144 would guide all concerned. In the judgment befo....
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....opinion. But there must be material based on which alone the State Government could form its opinion that it has become necessary to make substantial modification in the draft development plan. 23. The power conferred by Section 17(1)(a)(ii) read with proviso is a conditional power. It is not an absolute power to be exercised in the discretion of the State Government. The condition is formation of opinion subjective, no doubt that it had become necessary to make substantial modifications in the draft development plan. This opinion may be formed on the basis of material sent along with the draft development plan or on the basis of relevant information that may be available with the State Government. The existence of relevant material is a precondition to the formation of opinion. The use of word "may" indicates not only a discretion but an obligation to consider that a necessity has arisen to make substantial modifications in the draft development plan. It also involves an obligation to consider which are of the several steps specified in sub-clauses (i), (ii) and (iii) should be taken. 24. Proviso opens with the words "where the State Government is of opinion that....
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....on of the Government as it would be in a better position to know the requirement. Further, the discretion conferred upon the Government is not absolute. It is in the nature of a statutory obligation or duty. It is the requirement which would necessitate exercise of power by the Government. When a necessity would arise and of what type being uncertain the legislature could not have laid down any other guideline except the guidance of necessity. It is really for that reason that the legislature while conferring discretion upon the Government has provided that the Government shall appoint as many Special Judges as may be necessary. The words "as may be necessary" in our opinion is the guideline according to which the Government has to exercise its discretion to achieve the object of speedy trial. The term necessary means what is indispensable, needful or essential." 28. In the case in hand, was there any material before the State Government for its consideration that it had become necessary to make substantial modifications to the draft development plan? The emphatic answer is, none. The record does not reveal that there has been any consideration by the State Government that....
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....not exist? The legislature no doubt has used the expression "circumstances suggesting". But that expression means that the circumstances need not be such as would conclusively establish an intent to defraud or a fraudulent or illegal purpose. The proof of such an intent or purpose is still to be adduced through an investigation. But the expression "circumstances suggesting" cannot support the construction that even the existence of circumstances is a matter of subjective opinion. That expression points out that there must exist circumstances from which the Authority forms an opinion that they are suggestive of the crucial matters set out in the three sub-clauses. It is hard to contemplate that the legislature could have left to the subjective process both the formation of opinion and also the existence of circumstances on which it is to be founded. It is also not reasonable to say that the clause permitted the Authority to say that it has formed the opinion on circumstances which in its opinion exist and which in its opinion suggest an intent to defraud or a fraudulent or unlawful purpose. It is equally unreasonable to think that the legislature could have abandoned even the small ....
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....e notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully or truly all material facts. It is not any or every material, howsoever vague and indefinite or distant which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. 32. We are of the view that the construction placed on the expression reason to believe will equally be applicable to the expression "is of opinion" employed in the proviso to Section 17(1)(a) (ii) of the Act. The expression "is of opinion", that substantial modifications in the draft development plan and regulations, "are necessary", in our considered opinion, does not confer any unlimited discretion on the Government. The discretion, if any, conferred upon the State Government to make substantial modifications in the draft development plan is not unfettered. There is nothing like absolute or unfettered discretion and at any rate in the case of statutory p....
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....t proceeding with the compounding proceedings, but dropping them or returning the compounding applications, are challenged, then, it is futile to urge that the right to compound the contravention conferred by the statute is not absolute or mere insertion of a provision like section 15 would not enable the parties like the petitioner as of right to seek compounding a contravention. Here, we are dealing with a case where no extreme proposition, as is sought to be met by Mr.Venegaonkar, is canvassed, but what is pointed out is that once a compounding application is made and is being sincerely and bonafide pursued by the petitioner, they were advised to approach different cells and departments within the RBI and to seek their guidance, then, suddenly the compounding applications are returned and while returning them, the initial reason assigned is that the petitioner should seek proper guidance from the above referred cells/departments. Thereafter, the Enforcement Directorate interdicted the proceedings and did not allow the RBI to proceed by communicating its view. That initial communication also was withdrawn when this court desired to know the material which enabled the Enforcement ....
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....hat letter is annexed at page 127.525 (Exhibit 'EE' to the petition). That letter reads as under:- "GOVT. OF INDIA DIRECTORATE OF Enforcement 6th Floor, Lok Nayak Bhawan, Khan Market, New Delhi-110 003 (Tel. No. 011-24629633, Fax No. 24631847, 24640760) F. No. T-4/2-D/2015 (Part) Dated: 01.12.2017 To The Chief General Manager, Foreign Exchange Department, Reserve Bank of India, Central Office Building, Shahid Bhagt Singh Road, Fort, Mumbai-400 001. Subject - M/s. NDTV Ltd. and others - reg. (Your ref: EF.CO.CEFA/15678/ 15.20.67/2016-17 dated 05.12.2016) Please refer to Show Cause Notice No. T-4/2-D/2015 dated 13.11.2015 in respect of NDTV Ltd. and others which is pending adjudication before Adjudicating Authority. 2. In this regard, it is stated that the contraventions invoked against the noticees under Foreign Exchange Management Act, 1999 (FEMA) which are subject matter of compounding proceedings before RBI also part and....
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....cation. Z. The Respondent No. 1 acting under the influence of the Respondent No. 2 and in complete dereliction of its statutory duty is trying to drag its feet from considering the compounding applications. The aforesaid is clear from the fact that whereas before the Respondent No. 2 issued the 6 March 2017 letter, the Respondent No. 1 informed the Petitioner that its departments will give guidance on the matter of compounding but after the 6 March 2017 letter and finally after 1 December 2017 letter of Respondent No. 2 it has completely changed its stand. Despite the Petitioner complying with the directions/ guidance of the Respondent No. 1 communicated to the Petitioner during the personal meeting and confirming the same vide its letter dated 2 December 2017, the Respondent No. 1 instead of guiding the Petitioner for filing of the compounding application has now vide its letter dated 15 December 2017 directed the Petitioner to approach the AD Bank. It is submitted that the Respondent No. 1 is undertaking an exercise without which also the contraventions the compounding as has been sought can be compounded. As already mentioned above, substantially the Contraventions for ....
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....he petition, in which as well, the only statement made is that the letter dated 1st December, 2017 has been issued by the Directorate to the RBI after the withdrawal of the letter dated 6th March, 2017 pursuance to the directions of this court dated 13th November, 2017. It is stated that there is a wrong claim made by the petitioner that the letter dated 1st December, 2017 was to cure the lacuna in the letter dated 6th March, 2017 and constitutes unlawful interference on the right of the petitioner to seek compounding. The statutory duty of the RBI is to compound only those cases which are not covered by the notification dated 20th February, 2017. Meaning thereby, the amended proviso. The case before the RBI is the subject matter of ongoing investigation under the PMLA, of which, the investigation file was shown to this court to find out application of mind to the issuance of the letter dated 1st December, 2017. 97. Then, it is stated that the allegation that the mandate of Articles 14, 19 and 21 is violated, is bald, without any merit and basis. That is how the Enforcement Directorate deals purportedly with the amended paragraphs reproduced above. It is stated that the petition....
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....s to interest waiver/reduction granted by the ICICI Bank to the Promoters or holding companies of the petitioner, directly does not concern the petitioner. The FIR was registered only on 2nd June, 2017, which is subsequent to the Enforcement Directorate's letter dated 6th March, 2017. As far as the second of the matters, namely, ECIR of 7th August, 2017, the petitioner has no record of having received intimation in relation thereto. In the Aircel Maxis case, the petitioner was summoned as a witness and not an accused. The petitioner has also relied upon the order of discharge of the accused persons dated 2nd February, 2017. 100. Thus, the petitioner's categoric assertion is that what is subject matter of their earlier letter of 6th March, 2017, which is expressly withdrawn and given up, cannot be now reintroduced either by filing an additional affidavit or by supplementing the reasons. 101. In order to test the correctness of these assertions by the parties, we called upon Mr. Venegaonkar to produce before us the relevant record. He was fair enough to handover a sealed cover in this court and that sealed cover contains, according to Mr.Venegaonkar, the requisite mater....
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.... who are beneficiary parties to the money laundering, tax evasion and corruption and are exerting efforts to suppress the investigation and the rights of Shri. S. K. Srivastava and are also attempting to influence the inalienable jurisdiction of the High Courts under Article 226 and 227 of the Constitution of India. Thus, this is an attempt to cover up the misdeeds as alleged above and there is a conspiracy allegedly engineered by M/s. NDTV Ltd. and Shri. P.Chidambaram to incapacitate an honest officer in his pursuit of the cases of the loot and plunder of public money. The allegations then proceed to set out particulars received of the bribes received by Shri. P. Chidambaram in the 2G scam. Thus, this is a complaint which narrates essentially the alleged misdeeds of Shri. P. Chidambaram and he was assisted, according to this complaint, in these misdeeds, by certain officers of the Indian Revenue Service and the petitioner and its holding companies. A copy of this complaint was forwarded to the Prime Minister of India, Central Vigilance Commissioner. After a copy of this complaint, what the record contains, is the details of ECIR, which we have referred above dated 7th August, 2017....
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....tity called AHMPL from NDTV News for the same amount and passed on to the Mauritius based subsidiary of Astro. It shows the axis between NDTV Ltd. and with Astro in receiving funds from Mauritius based subsidiary of Astro. 105. We need not refer to all these details simply because the petitioner has not been made an accused in the 2G scam case. The investigations in that case are over long time back. Those who had to be tried as accused have been put to trial already. The trial has already ended, as is very widely reported. It is in these circumstances and when the petitioner was not an accused at all in a case which was investigated, tried and concluded, it is futile now to point out, based on the allegations in the same, that the Enforcement Directorate can take a view that the petitioner's compounding proceedings should not be proceeded further because the compounding proceedings relate to serious contravention suspected of money laundering. Therefore, this note and the material referred therein is of absolutely no assistance in forming a view and communicating it to the RBI. It is clear from the plain language of the proviso that it comes into play when with respect to a....
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....uting its statutory authority or undermining its position would not be conducive and proper management of foreign exchange. We cannot presume that the RBI, unmindful of its role and the trust and confidence reposed in it under the two parliamentary statutes, will compound every contravention of the FEMA very lightly and casually. It would definitely exercise its discretionary power bearing in mind the expectations of the general public, particularly as a guardian of the foreign exchange. It will appropriately advise the applicants seeking contravention and if compounding of contravention is not in larger public interest, then, definitely the RBI will refuse to grant the compounding application. Thus, on such a vague and general materials, as are contained in the original record, we do not find that we should allow the Enforcement Directorate to interdict the compounding proceedings in the present case. Most of the materials in the record pertain to the Aircel Maxis case, the result of which, as observed above, known to all. 106. As a result of the above discussion, we hold that the view communicated by the impugned communication/letter dated 1st December, 2017 could not brought ....
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....y, it can still consider whether in the facts and circumstances of the present case, the proviso could have been invoked by the Enforcement Directorate at all. Once we have rendered our findings on these lines, then, the argument on the point as to whether compliance with section 48 is mandatory or directory need not be considered and rather is not required to be considered in this case. The arguments of both sides on this point are left open. We clarify that we have not rendered any opinion insofar as this aspect is concerned. 109. Thus, the above discussion concludes this judgment. Rule is made absolute by quashing and setting aside the communication dated 1st December, 2017 and further directing the RBI to consider the compounding applications in accordance with law uninfluenced by the communication of the Enforcement Directorate dated 1st December, 2017 or any prior letters/communications, which are quashed and set aside by this judgment. There would be no order as to costs. 110. The original record produced by Mr. Venegaonkar shall be returned to him after he replaces it with a certified true copy of the same. 111. We also proceed to direct the RBI to render the neces....
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....rtheless, that opinion has to be based upon some relevant materials in order to pass the test which courts do impose. That test basically is: Was the authority concerned acting within the scope of its powers or in the sphere where its opinion and discretion must be permitted to have full play? Once the court comes to the conclusion that the authority concerned was acting within the scope of its powers and had some material, however meagre, on which it could reasonably base its opinion, the courts should not and will not interfere. There might, however be cases in which the power is exercised in such an obviously arbitrary or perverse fashion, without regard to the actual and undeniable facts, or, in other words, so unreasonably as to leave no doubt whatsoever in the mind of a court that there has been an excess of power. There may also be cases where the mind of the authority concerned has not been applied at all, due to misunderstanding of the law or some other reason, to what was legally imperative for it to consider." 113. To our mind, we have not departed from this test in coming to the above conclusion. 114. Then, his reliance upon a decision of the United States Supreme....
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...., ought to be allowed to function with full autonomy, independence and impartiality. Their strength lies in such functioning and whenever that is disrupted or disturbed so also interfered with, invariably, the public interest suffers. In their prestige, reputation and dignity lies that of the nation. Mr. Dwarkadas submits that the Hon'ble Supreme Court has emphasised time and again the institutional integrity and that is paramount. If such high functionaries surrender their authority, power and jurisdiction and act as per the dictates of the political bosses, then, the rule of law is a casualty. Mr. Dwarkadas submits that we must not forget and overlook the fact that the petitioner is a company engaged in the business of electronic media. It is running a news channel and is a prominent player on the national television network, particularly in the field of dissemination of news. If an attempt is made to embarrass and harass it with such proceedings, then, we will have to pay a heavy price as the freedom of press and electronic media will be in jeopardy. 118. Though we are not in agreement with Mr. Dwarkadas and the material on record does not lead to this inference leave alo....