Allowed

Mrs Joyce Lynn Peters v. Reserve Bank of India

Karnataka HC21 Oct 2021WP/26425/2017

Case brief

AI extract

What is this about?

This High Court of Karnataka quashed the rejection of a petitioner's application for compounding under the Foreign Exchange Management Act, 1999. The Court held that Rule 11 of the Compounding Rules did not bars compounding due to pendency of appeal, as subordinate legislation cannot override the parent Act's amnesty scheme.

What did the court decide?

Writ of Certiorari issued quashing the impugned letter and communication; matter remitted to Respondents for fresh consideration within eight weeks.

Mrs Joyce Lynn Peters Vs Reserve Bank of… — Contract and Commercial Disputes | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 21^ST DAY OF OCTOBER, 2021

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BEFORE

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THE HON’BLE MR. JUSTICE KRISHNA S.DIXIT

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WRIT PETITION NO.26425 OF 2017 (GM-FE)

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BETWEEN:

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MRS. JOYCE LYNN PETERS, NO.27, 2ND CROSS, BYRAWESHWARA LAYOUT, HENNUR BANDE, KALYAN NAGAR POST, BANGALORE - 560 043. (W/O SHRI. JOHN PETER KIRUBAGARAN) AGED ABOUT 40 YEARS

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…PETITIONER

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(BY SRI. CHIDANANDA URS B.G, ADVOCATE)

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AND:

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RESERVE BANK OF INDIA, FOREIGN EXCHANGE DEPARTMENT, 9TH FLOOR, AMAR BUILDING, SIR P.M. ROAD, FORT, MUMBAI - 400 001.

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ASSISTANT GENERAL MANAGER, RESERVE BANK OF INDIA, 1055, FOREIGN EXCHANGE DEPARTMENT, CENTRAL OFFICE, 5TH FLOOR, AMAR BUILDING, SIR P.M. ROAD, FORT, MUMBAI - 400 001.

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THE SPECIAL DIRECTOR OF ENFORCEMENT, DIRECTORATE OF ENFORCEMENT, 6TH FLOOR, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI -110 003.

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THE DEPUTY DIRECTOR OF ENFORCEMENT, OFFICE OF THE JOINT DIRECTOR, ENFORCEMENT DIRECTORATE BENGALURU ZONAL OFFICE, 3RD FLOOR, B BLOCK, BMTC SHANTHINAGAR, TTMC, K.H. ROAD, SHANTHINAGAR,

…RESPONDENTS

BENGALURU - 560 027.

(BY SRI.R.V.S. NAIK, SR. COUNSEL A/W MISS. ADITHI SHETTY FOR SRI. T. SURYANARAYAN, ADVOCATES FOR R-1 & R2; SRI. H. JAYAKARA SHETTY, CGC FOR R-3 & R-4)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE REJECTION OF APPLICATION FOR COMPOUNDING UNDER SECTION 15 OF THE ACT IN LETTER DTD:17.6.2016 ANNEXURE-K AND COMMUNICATION DTD:24.10.2016 ANNEXURE-P AND ETC.

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THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING - B GROUP THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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Petitioner is knocking at the doors of Writ Court for assailing the Letter dated 17.6.2016 and Communication dated 24.10.2016 made by the first respondent-RBI respectively at Annexures-K & P, whereby his application for compounding of the contravention of provisions of the Foreign Exchange Management Act, 1999 (hereinafter '1999 Act') and the Rules made thereunder, has been negatived quoting Rule 11 of Foreign Exchange Compounding Proceedings Rules, 2000 (hereafter Compounding Rules’).

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After service of notice, the respondent Nos.1 & 2 have entered appearance through their Panel Counsel; similarly, the respondent Nos.3 & 4 are represented by the

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learned Central Govt. Counsel; they have filed separate Statements of Objections resisting the Writ Petition; learned Panel Counsel & the learned CGC together makes submission in justification of the impugned action and the reasons on which the same has been constructed.

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3. FACTS IN BRIEF:

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(a) The petitioner was issued a Show Cause Notice dated 6.4.2011 alleging violation of the provisions of section 6(3)(d) of the Act r/w the provisions of Foreign Exchange (Borrowing or Lending in Foreign Exchange) Regulations, 2000; this was pursuant to the complaint dated 25.2.2011 made by the Deputy Director of Enforcement; the petitioner had applied for compounding of the contravention and that his application came to be returned vide letter dated 22.9.2011 issued by the Respondent Nos.1 & 2 on the ground that compounding was not permissible when adjudicatory proceedings for contravention were being initiated.

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(b) Petitioner made a representation contending that the return of his application for compounding is unsustainable inasmuch as the pendency of adjudicatory

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proceedings cannot be a ground for declining his request for compounding; no decision having been taken thereon, petitioner filed W.P.No.27337/2012 (GM-FE) which came to be disposed off by a Co-ordinate Bench of this Court vide judgment dated 5.11.2015 permitting the petitioner to file another application within two weeks and directing the answering respondents to consider the same; the relevant part of the judgment reads as under:

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"... The second respondent is directed to exercise his jurisdiction vested in him under Section 15 of the Act to compound the contraventions alleged against the petitioner, in accordance with law and this exercise shall be carried out with expedition. Since the application submitted by the petitioner has been returned, the petitioner is directed to file an application within two weeks and the second respondent shall consider and dispose of the application..."

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(c) Accordingly, petitioner made another application albeit with some delay; even this application came to be rejected vide impugned letter & communication; the answering respondents have stated that Rule 11 of Foreign Exchange (Compounding Proceedings) Rules, 2000 (hereafter ‘Compounding Rules’) would come in the way of application of the kind being treated favourably since petitioner has filed appeal against the adjudicatory order; aggrieved thereby

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petitioner is before this court; as already mentioned above,

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the respondents have filed their Statements of Objections.

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I have heard the learned counsel for the parties and

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perused the Petition Papers; the following three questions are framed for consideration:

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Whether petitioner had made the application for compounding belatedly ie., beyond the period prescribed by the Coordinate Bench of this Court…?

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Whether the pendency of appeal preferred by the contravener bars the compounding of contravention, as provided under Section 15 of the 1999 Act…?

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Whether the Respondent Nos. 1 & 2 could have banked upon Rule 11 of the Compounding Rules for rejecting petitioner’s application for compounding…?”

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My answers to the above questions are framed in

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the negative for the following reasons:

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i) Petitioner had initially applied for compounding way back in the year 2011 is borne out by the judgment of the Coordinate Bench, in the earlier round of litigation; that having been wrongly returned, he had come before this Court in W.P.No.27337/2012; the learned Coordinate Judge as already mentioned above, had "directed (the petitioner) to file an application within two weeks"; petitioner filed one albeit

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after the expiry of two weeks is true; however, the said application came to be rejected not on the ground of delayed filing; even otherwise, the earlier application having been wrongly returned, the filing of subsequent application needs to be treated as having revived the earlier application; a contra view would offend the sense of justice & reason.

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ii) Petitioner had filed the compounding

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application although with a bit delay, is true; as already mentioned above, this application came to be rejected by the Respondent Nos. 1 & 2 only on the ground of pendency of his appeal and not on the ground of delayed filing; the impugned letter and the communication are statutory orders, their form notwithstanding; the validity of orders made by the statutory authorities has to be adjudged on the reasons assigned in the very order itself and that, such reasons cannot be supplied de

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hors vide MOHINDER SINGH GILL Vs. CHIEF ELECTION COMMISSIONER , AIR 1978 SC 851; therefore, the vehement contention of learned CGC cannot be countenanced.

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iii) The answering respondents have rejected petitioner's application on the sole ground that his appeal against the adjudicatory order was pending and that, Rule 11 of the

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Compounding Rules bars the invocation of Section 15(1) of the 1999 Act providing for compounding; the text of Rule 11 is as under:

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" No contravention shall be compounded if an appeal has been filed under Section 17 or Section 19 of the Act."

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This is a piece of subordinate legislation; it has been a settled position of law that a delegate cannot transcend the delegation of power; in other words, the rule making authority cannot promulgate a rule which travels beyond the scope of delegation.

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(iv) Keeping in mind the constitutional limitations

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which govern the delegation of legislative power and regulate its exercise, one has to examine the amnesty scheme enacted

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in Section 15 of the 1999 Act; its text is as under:

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"15. Power to compound contravention .

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(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 officers 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. —(1) Any contravention under section 13 may, on an application made by the person committing such contravention, be compounded within one hundred

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and eighty days from the date of receipt of application by the Director of Enforcement or such other officers 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.

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(2) Where a contravention has been compounded under sub-section (l), no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person committing such contravention under that section, in respect of the contravention so compounded."

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In sub-section (1), the Parliament has employed the expression 'Any contravention'; in Black's Law Dictionary, the word 'any' is explained as having diversity of meaning and to indicate 'all' or 'every', depending upon the context and the subject matter of the Statute; the use of the word 'any' in the context indicates that it has been used in a wider sense to mean 'one and all'; if the Parliament intended a restrictive meaning, it would have indicated the same expressly or by necessary implication; however, it has not.

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(v) Sub-section (2) of section 15 intends to give quietus to the proceedings or further proceedings, once the contravention is compounded under sub-section (1); the said provision employs the expression 'no proceeding or further proceeding'; although these words are not defined in the

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dictionary clause of the Act, they need to be assigned contextual meaning; 'proceeding' means an adjudicatory proceeding which is triggered pursuant to the complaint followed by the Show Cause Notice; the term 'further proceeding' shall mean the appellate proceeding in which the order made in the adjudicatory proceeding is put in challenge; the net effect of compounding u/s 15(1) is all pervasive abatement of any proceeding, adjudicatory or appellate, involving the contravention of section 13 of the Act; an argument to the contrary cannot be sustained without manhandling the text of sub-sections (1) & (2) of section 15; therefore, the answering respondents could not have rejected petitioner's application u/s 15 banking upon the text of Rule 11 of the Compounding Rules.

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(vi) The above apart there is yet another reason: admittedly, as on the date the subject application was filed, the petitioner had not yet filed the appeal; he filed one much subsequent to filing of this application; one cannot ignore that there is a limitation period prescribed by law for filing of appeals; it is a matter of common knowledge that the request for condoning delay is ordinarily treated in discretion; at

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times this discretion is like Chancellor’s Foot and foot is not

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of ‘FPS System’ wherein it is always 12 inches; Chancellor’s Foot can be anything between 9 inches to 13 inches depending upon who the Chancellor is; therefore an anxious litigant ordinarily does not risk the prospects of his appeal; added, even the application for compounding is also a matter of discretion; it may so happen that he may lose the application and he may be without remedy of appeal too, if such rejection takes place after long; that being the position, the subsequent filing of appeal cannot be construed as a bar under Rule 11 for consideration of compounding application on its intrinsic merits, u/s.15(1) of 1999 Act; if such a purposive construction would infuse sense of justice in the said Rule, assuming its validity.

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(vii) The vehement contention of learned Sr. Advocate Mr.R.V.S.Naik appearing for the respondent Nos.1 & 2 that Rule 11 having not been put in challenge, it was not open to his clients to disobey the mandate of this Rule, may arguably be attractive but unprofitable; however, while deciding the rights of citizens, Court has to ascertain the correct position of law by looking to the text of legislation and of the sub-

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ordinate legislation, if any; it has long been settled that a delegated legislation cannot curtail the scope of the parent legislation; the pendency of adjudicatory proceeding or the appellate proceeding is not indicated as a bar to the invoking of the compounding provision, namely section 15 of the Act which in a sense enacts an amnesty scheme; ordinarily, in fiscal legislations, the provisions enacting such schemes are construed with a ' pragmatic leniency' , subject to all just exceptions vide UNION OF INDIA vs. NITDIP TEXTILE PROCESSERS PVT. LTD., (2012) 1 SCC 226; this aspect has not animated the impugned orders and therefore they are infected with legal infirmity.

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(viii) The next contention of learned Sr. Counsel Mr.Naik that the petitioner has not challenged the vires of Rule 11 does not much come to the rescue of respondents; despite vociferous arguments, it is not demonstrated that the said Rule could have been promulgated under the delegating provision of the 1999 Act; where a sub-ordinate legislation is shown to have been made incompetently or otherwise repugnant to the provisions of the parent Act, the same cannot be taken cognizance of and pressed into service to

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defeat a legitimate claim of the citizen; an aggrieved citizen who is otherwise entitled to relief under the provisions of a parent legislation ie., Sec.15 of the 1999 Act, cannot be sent back empty-handed by the Writ Court telling that a subordinate legislation which literally runs counter to the Parliamentary intent, comes in his way; a sub-ordinate legislation has to be subservient to the provisions of the parent Act and needs to be construed consistent with the statutory object; if it runs repugnant to the plain text of the provisions of the parent Act, a Writ Court cannot attach significance thereto, whether it is put in a formal challenge or not; such a sub-ordinate legislation cannot hijack the statutory object.

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(ix) The rule of law which is one of the basic features of

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our Constitution envisages the administration of justice in accordance with law; Courts do this job ordinarily; a purported subordinate legislation which is promulgated without competence or contrary to the parental provisions, cannot be treated as law or as source of law; the constitutional presumption of validity that avails to a legislation vide R.K.DALMIA vs. JUSTICE TENDULKAR , AIR

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1958 SC 538 does not much extend to a delegated legislation which is ex-facie incompetent and which is not stated to be treated as a very part of the parent Act; a formal challenge to the same could have been ideal, is beside the point; therefore the endeavour of the answering respondents to sustain the impugned orders by heavily banking upon Rule 11 does not yield fruit; they are only seeking shelter under a leaking umbrella.

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In the above circumstances, this Writ Petition succeeds; a Writ of Certiorari issues quashing the impugned letter and communication; matter is remitted back to the Respondent Nos.1 & 2 for consideration afresh, in accordance with law and within a period of eight weeks, all contentions having been kept open; the outcome of the remand would decide the fate of adjudicatory/appellate proceedings.

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Costs made easy.

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Sd/JUDGE

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Snb/bsv

Mrs Joyce Lynn Peters v. Reserve Bank of India

Case brief

What is this about?

What did the court decide?

Mrs Joyce Lynn Peters v. Reserve Bank of India

Case brief

What is this about?

What did the court decide?

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