TaxTMI 
TaxTMI 
2024 (11) TMI 1602
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.....1992 and foreign currencies equivalent to Rs. 17,34,121.26/- were deposited in the said NRE account by persons other than the account-holder during the period 13.05.92 to 30.05.92. Out of this, an amount of Rs. 13,53,176.31/- was deposited by one Sh. Umesh Mendiratta Rs. 3,09,516/- by one Sh. M.K. Jain and Rs. 71,428.95 by unknown persons. 3. On completion of the investigation, a Memorandum dated 23.05.2002 was issued to, (i) Shri S.K. Mittal (the appellant herein) for alleged contravention of Section 8(1) read with Section 71 of FERA, 1973, for otherwise acquiring the foreign exchange equivalent to Rs. 17,34,121.26; (ii) Shri Umesh Mendiratta, Shri M.K. Jain and Shri Shankar Lal Jangid for the contravention of Section 8(1) read with Section 64(2) of FERA, 1973; and (iii) the Manager of Citi Bank NA, for the contravention of Section 6(4) and 6(5) read with Section 73(3) and 49 of FERA, 1973, for accepting foreign exchange in cash equivalent to Rs. 17,34,121.26 tendered by persons other than the account-holder. The noticees were asked to show cause in writing within 30 days of receipt of the said memorandum as to why adjudication proceeding as contemplated under section 51 of th....
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.... the year 2002 and that too just before the sunset period of FERA was to expire, i.e., on 01.06.2002. We are therefore of the considered view that show cause notices and the proceedings continued thereunder are liable to be set aside on this short ground." It is submitted that the present case involves nearly the same period of delay in issue of SCN as in the case before the Hon'ble Supreme Court. 8. The next contention of the appellant is that he was not supplied with a copy of the Relied Upon Documents (RUDs). The impugned Memorandum/Show Cause Notice was issued on 23.05.2002. Vide letters dated 23.06.2002 and 18.01.2005, the appellant requested for copies of the RUDs. However, copies of the same were not supplied to the appellant, let alone allowing inspection of the original RUDs. The decision of the Hon'ble Supreme Court in T Takano vs. Securities and Exchange Board of India and Another (2022) 8 SCC 162 is relied upon wherein, while emphasising on the duty of the prosecuting agency to disclose documents which it wishes to rely upon to the noticee, it has been held that there are three fundamental purposes of disclosure of information: (i) reliability, i.e., the court....
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....nagement (Adjudicating Proceedings and Appeal) Rules, 2000 ("Adjudication Rules"). Rule 4(3) of the Adjudication Rules provides that once the learned adjudicating authority issues the SCN to the noticee, the noticee is permitted to reply to the same. In terms of the Rule 4(3), learned adjudicating authority must then consider the objections raised by the noticee in the reply and apply its mind to form an opinion weather to drop the proceedings or proceed further with the SCN. This formation of opinion must be on the record of the learned adjudicating authority and the same has to be supplied to the appellant. However, it is apparent from the bare perusal of the impugned order that the adjudicating authority has failed to form opinion as per the mandate of Rule 4(3). The decision in Shashank Vyankatesh Manohar vs. Union of India" 2014(1) Mh. L.J) is relied upon. It is pointed out that the decision of the Hon'ble Bombay High Court in that case was challenged before the Hon'ble Supreme Court by ED and the same was dismissed vide order dated 04.07.2014 in SLP(C) No. 8391/2014 titled, U.0.1 vs. Shashank Venkatesh Manohar & Anr. Thereafter, the ED issued a Technical Circular 11/2....
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....nquiry 5. The Adjudicating Authority shall, then, given an opportunity to such person to produce such documents or evidence as he may consider relevant to the inquiry and if necessary, the hearing may be adjourned to a future date and in taking such evidence the Adjudicating Authority shall not be bound to observe the provisions of the Indian Evidence Act, 1872." It is submitted that evidently, the learned adjudicating authority has conducted the inquiry & proceedings in stark violation of Rule 4(5) of the Adjudication Rules. 13. The next contention of the appellant is that exculpatory statement of co-noticee is inadmissible and there is no evidence against the appellant. The learned adjudicating authority, while passing the impugned order, has placed heavy reliance on the letter of the co-noticee Shankar Lal Jangid (the NRI account holder), implicating the appellant. The learned adjudicating authority committed a grave error in law in relying on the letter of the co- noticee Shankar Lal Jangid because the same are exculpatory statements that cannot be relied upon in light of the principle laid down by the Hon'ble Supreme Court in Haricharan Kurmi vis. State of B....
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....ction 72 of the FERA cannot be relied upon as evidence. Furthermore, in the pari materia case being Shri AS Aneja @ Amarjit Singh Aneja v. The Special Director, ED [FPA- FE-05/DLI/2007], this Appellate Tribunal was pleased to observe that firstly, an adjudication order can be set aside on the ground of failure to supply RUDs to a noticee along with failure to hear him, and secondly, no violation under section 8(1) of the FERA, 1973 is made out if foreign currency is deposited in NRE Accounts by persons other than account-holders because prior to 1995 foreign currency could be deposited by power of attorney holders of such account holders. 15. The next contention of the appellant is that the statement of the appellant relied upon by the respondent could not have been relied upon. On 30.09.1994 and 01.09.1994, a search and seizure operation was conducted at the appellant's residence by the officials of the respondent department during Preliminary Enquiry in another proceedings. The statement dated 30.09.1994 and 01.09.1994 of the appellant was recorded and he was, thereafter, arrested and granted bail. It is submitted that the respondent cannot place reliance on statement made....
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.... and an entirely separate set of contraventions. In the present case, the noticee/appellant is an individual Chartered Accountant, who has by his very action of illegally acquiring foreign currency to the extent of Rs. 17,34,121.26/- contravened the provisions of Section 8(1) and 71 of FERA, 1973. 19. The appellant had acquired foreign exchange and the same was deposited in the NRE Account of one Shankar Lal Jangid by his agents (Umesh Mendiratta and MK Jain) from 27.04.1992 till 16.07.1992, which is the period of continuing contravention. Investigation was initiated by the respondent Directorate within a reasonable period of time, as it can be seen that the first statement of Shri S.K. Mittal was itself taken as early as on 13.10.1993. Subsequently several more statements were recorded and inculpatory documentary evidence was unearthed. The statements of the co-noticees were recorded through 1995 and 1996. Several call notices and letter directives were issued to noticees in the years 2000-2002 as well. This entire process eventually culminated in the Memorandum/SCN being issued on 23.05.2002. 20. It is also contended that the submission that the SCN was issued belatedly as ....
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.... that same yardstick cannot be applied to banks and individuals alike. Thus, the judgement in Citibank (supra) is entirely misplaced and cannot be applied to the facts and circumstances of the present case. It is further submitted that the Hon'ble Supreme Court has dealt with the issuance of a SCN within reasonable time in Adjudicating Officer, SEBI v. Bhavesh Pabari, (2019) 5 SCC 90 wherein the Apex Court refused to set aside a SCN issued after 8 years in the following terms: "35. The appellants have also contended that in the absence of any prescribed limitation period, SEBI should have issued show-cause notice within a reasonable time and there being a delay of about 8 years in issuance of show-cause notice in 2014, the proceedings should have been dropped. This contention was not raised before the adjudicating officer in the written submissions or the reply furnished. It is not clear whether this contention was argued before the Appellate Tribunal. There are judgments which hold that when the period of limitation is not prescribed, such power must be exercised within a reasonable time. What would be reasonable time, would depend upon the facts and circumstances of ....
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....Section 79 of FERA, 1973, while the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 have been issued under Section 46 r/w Sections 16, 17 and 19 of FEMA, 1999. It is most pertinent to note that the 2000 Rules have not been issued in supersession or continuation of the Adjudication Proceedings and Appeal Rules, 1974 but are entirely separate. In the present case, the respondent Directorate has carried out the proceedings under challenge in complete consonance with the Adjudication Proceedings and Appeal Rules, 1974. The relevant provisions of the Rules have been extracted herein below: "3. Adjudication proceedings:- (1) In holding an inquiry under section 51 for the purpose of adjudging under section 50 whether any person has committed contravention of specified in section 50, the Adjudicating Officer shall, in the first instance, issue a notice to such person requiring him to show cause within such period as may be specified in the notice (being not less than ten days from the date of service thereof) wiry adjudication proceedings should not be held against him. (2) Every notice under sub-rule (1) to any such person shall ind....
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....ught not to be held against him is entirely misconceived in view of the following excerpt of the Show Cause Notice: "NOW THEREFORE, the said Shri SK Mittal, Umesh Mendiratta, MK Jain. Shankarlal Jangid, Citibank NA New Delhi & its manager-in-charge are hereby required to show cause in writing (in Duplicate) within 30 days of receipt of this Memorandum as to why Adjudication Proceedings are contemplated in Section 31 of the FERA, 1973 read with sub-sections J & 4 of Section 49 of FEMA, 1999 should not be held against them for the said contravention." 27. It is contended that judgments relied upon by the appellant are misplaced and not applicable to the facts of the present case as already pointed out. Further, as regards the decision in S.K. Mittal v. The Director, Enforcement Directorate [Delhi HC-CRLA. 450 of 2010 & CRL MA. 4157 of 2011], it is submitted that the facts and findings of the same are easily distinguishable since the following findings were made in the case before the Delhi HC: (i) Statement made by Shri Umesh Mendiratta was prima- facie exculpatory (ii) Letter of Mr. Sethi dated 07.08.1995 has not been authenticated in terms of Section 7....
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....I have given careful consideration to the facts on record and the rival contentions of the parties. At the outset, I find that the appellant has raised certain preliminary legal issues which go to the root of the matter and must be addressed before considering the other arguments on merits. In this regard, it is firstly contended that the impugned SCN was issued after almost 10 years from the date of the alleged transaction and was, therefore, bad in law. The alleged transaction took place in 1992 as per the SCN/Memorandum of charge whereas the SCN/Memorandum itself was issued on 23.05.2002. The same cannot be regarded as a reasonable time period. I have considered the rival arguments in this regard and also perused the decisions of the Hon'ble Supreme Court in Union of India and Anr. v. Citibank (supra) as well as in Bhavesh Pabari (supra) cited from the two sides. The legal position that emerges clearly from the two orders is that where the statute does not provide for a limitation period, the action must be initiated by authority concerned within a 'reasonable' period. What is a 'reasonable' period would, however, depend on the facts and circumstances of each case. 32. The re....
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....der, its books, accounts and other documents mentioned below, relating to a period of not less than five years immediately preceding the current calendar year. Ledgers and Registers: (1) Cheque Book Registers xxx xxx xxx xxx xxx xxx (6) Vault Registers. Records other than Registers: (1) Telegraphic Transfer Confirmations (2) Telegrams and Telegram Confirmations 3. Every banking company shall preserve, in good order, its books, accounts and other documents mentioned below, relating to a period of not less than eight years immediately preceding the current calendar year. Ledgers and registers: (1) All personal ledgers xxx xxx xxx (24) Clean cash books Records other than registers: (I) Bank cash scrolls xxx xxx xxx (II) Press-copy books 4. Notwithstanding anything contained in Rules 2 and 3, the Reserve Bank may, having regard to the factors specified in Sub-section (1) of Section 35-A, by an 12-11-2024 (Page 6 of 7) www.manupatra.com Appellate Tribunal (PMLA, PBPTA, FEMA, NDPSA, SAFEMA) order in writing, direct any banking company to preserve any of the books, accounts or other documents mentioned in these rules, for a period longer than the period specified for their preser....
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.... issue of the same just before the expiry of the sunset period. Recording one or two statements once every few years cannot be regarded as diligent pursuit of an investigation. As such, I am of the view that the ratio laid down the Hon'ble Supreme Court in the case of Citibank is squarely applicable to the present case. 36. The next contention of the appellant is that he was not supplied with a copy of the Relied Upon Documents (RUDs). The impugned Memorandum/Show Cause Notice was issued on 23.05.2002. Vide letters dated 23.06.2002 and 18.01.2005, the appellant requested for copies of the RUDs. However, even copies of the same were not supplied to the appellant, let alone inspection of the original RUDs. The decision of the Hon'ble Supreme Court in Takano vs. Securities and Exchange Board of India and Another (2022) 8 SCC162 is relied upon by the appellant. 37. I have perused the said judgment of the Hon'ble Supreme Court. The ratio laid down by the Apex Court after review of the existing judicial precedent on the subject is that the appellant has a right to disclosure of the material relevant to the proceedings. It was also noted that a deviation from the general rule of....
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....ied upon as well as copies of the RUDs. Upon perusal, the relevant paragraph reads as below: "I also request your good office to allow me to cross-examine the concerned banks, N.R.Is. and other co-accused on the basis of principles of natural justice. Your good office is also requested to give me a chance to plead my defense by giving a hearing in this case after furnishing to me all the necessary papers/documents relied upon by your good office in this regard." 40. There is nothing on the file, nor the learned counsel for the respondent could point out any material to indicate that the copies of the relied upon documents were supplied to the appellant at any time during the proceedings. A statement of the appellant himself, recorded on 30.09.94, is no doubt on record and also available with the appellant. However, both sides agreed that the said statement does not pertain to the present case and was recorded in the course of another case against the same appellant. None of the other relied upon documents are available even on the court record. Under the circumstances, I have no hesitation in agreeing with the submission of the appellant that the same were never supplie....