Case Law Details
Sunita Agarwal Vs Securities And Exchange Board of India (Gauhati High Court)
Rule 4(3) of Securities and Exchange Board of India (Procedure for holding enquiry and imposing penalties) Rules, 1995 i.e. PR-1995 inter-alia provides that if after considering the cause shown pursuant to the notice under Sub-Rule 1, the adjudicating officer is of the opinion that an enquiry should be held, he may issue a notice fixing a date for appearance of that person either personally or through a lawyer or representative. Further Rule 4(4) provides that on the date so fixed under Rule 4(3), the adjudicating officer shall explain to the person concerned or his lawyer or representative the offence alleged to have been committed by him by indicating the provisions of the Act, Rules or Regulations in respect of which the contravention is alleged to have taken place. It is to be noticed that the further process of issuing a notice for fixing the date of appearance of the person and upon his appearance to explain him the offence that he has been alleged to have been committed by referring to the provisions of the Act, Rules or Regulations can take place only upon the opinion being formed that there is a requirement to hold an enquiry pursuant to the process under Rule 4(1) of PR-1995. In other words, only upon a completion of the process of the notice issued under Rule 4(1) by forming an opinion that an enquiry is required to be held, the further processes under Rule 4(3) and 4(4) can be initiated.
Rule 4 (1) of the FEMA Rules 2000 provides that for the purpose of adjudicating under section 13 of the Foreign Exchange Regulation Act, 1973, the adjudicating authority shall issue notice to such person requiring him to show cause within such period as to why an enquiry should not be held against him. Rule 4(3) of the FEMA Rules, 2000 provides that after considering the cause if any shown by such person, the adjudicating authority is of the opinion that an enquiry should be held, a notice fixing a date for appearance of that person, either personally or through lawyer or authorized chartered accountant, be issued.
While interpreting of the provisions of Rules 4(1) and 4(3) of the FEMA Rules 2000, the Supreme Court in Natwar Singh (supra) arrived at its conclusion in paragraph 23 of its judgment that the Rules do not provide and empower the adjudicating officer to straight away make an enquiry into the allegations of contravention in respect of any person, against whom a complaint had been received. The Supreme Court was of the view that for the purpose of adjudication whether any person has committed any contravention, the adjudicating officer shall issue notice requiring him to show cause as to why an enquiry should not be held and the notice to be issued is not for the purposes of making any adjudication into the alleged contravention, but only for the purpose of deciding whether an enquiry should be held. After taking the cause shown by such person the adjudicating officer is required to form an opinion as to whether any enquiry is required to be held and it is only then the real and substantial enquiry into the allegations of contravention begins.
While examining the provisions of Rule 4(1) of the PR-1995, the Supreme Court in T. Takano (supra), had in paragraph 34 referred to the proposition laid down in paragraph 23 of Natwar Singh (supra). In paragraph 35, the conclusion arrived was that the notice under Rule 4(1) of PR-1995 is not for the purpose of making an adjudication into the alleged contravention, but only for deciding whether an enquiry must be conducted. It was also held that the stage when an enquiry is held is subsequent to the initial stage contemplated by Rule 4(1). In paragraph 36 of T. Takano (supra), it had been held that the Court distinguishes between the initial stage under Rule 4(1) which is only for the purpose of deciding whether an enquiry has to be held and the subsequent stage of adjudication into the allegations of contravention.
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