IPL in FEMA violation; Special Director had to form an opinion before calling BCCI President for personal hearing

Special Director was directed to first form his opinion whether to proceed against petitioner President of BCCI, for remittances in violation of FEMA before calling petitioner for personal hearing as per rule 4 of Adjudication Rules

Facts:

a) The petitioner was President of BCCI during years 2008 to 2011. In 2009, after the second edition of IPL at South Africa, the Assistant Director, Directorate of Enforcement filed a complaint with Special Director alleging that the provisions of FEMA had been violated by the Board and its officers while conducting second edition of IPL;

b) On basis of the complaint, show-cause notices were issued to the Board and its office bearers calling upon the Board to show cause in respect of a particular conduct/transaction amounting to violation of the Act;

c) The petitioner was also called upon in each of the notices to show cause as to why penalty should not be imposed upon him in his capacity as the President of the Board in terms of section 42. Special Director issued notice to petitioner for personal hearing according to rule 4 of Adjudication Rules;

d) Petitioner filed writ petition contending that he had no role in remittances and receipts of foreign exchange in 2009 and a separate committee had been constituted to administer IPL with a separate bank account to be operated by Treasurer, BCCI.

The High Court held as under:

1) The petitioner was not in charge of and responsible to BCCI for aforesaid matters, as far as opening and operating of bank account of IPL or obtaining permission of Reserve Bank of India for making remittances or receipts of foreign exchange was concerned;

2) It would be necessary for adjudicating authority to form an opinion whether petitioner could at all be considered as covered by substantive part of section 42(1), since petitioner himself was not in charge for opening and operating bank accounts involving receipts and remittances of foreign exchange to parties outside India;

3) That communication calling petitioner for personal hearing was to be set aside since adjudicating authority had not considered aforesaid aspects before forming an opinion to proceed further with inquiry under sub-rule (4) of rule 4 of Adjudication Rules;

4) The Special Director was to be directed to first form his opinion, after recording reasons before proceeding against petitioner with regard to impugned show-cause notices in accordance with rule 4(3) of Adjudication Rules – SHASHANK VYANKATESH MANOHAR V. UNION OF INDIA (2013) 37 taxman 151 (Bombay)