Proceedings Should Be Initiated Within Reasonable Period When No Period Is Specified In Statute: Supreme Court

The Supreme Court observed that the authorities are required to initiate proceeding within a reasonable period when no such period has been provided in the Statute.

The bench comprising Justices BR Gavai and PS Narasimha quashed show cause notices issued in the year 2002 against some banks to explain certain transactions of  the year 1992-­1993.

In this case, proceedings were initiated under FERA against Citi Bank, Bank of America and Standard Chartered Bank. The Delhi High Court, allowing their writ petitions, had quashed the proceedings against which the Union of India approached the Apex Court.

Though the bench recorded the submissions made by the appellant and respondents, it first noticed that the show causes notices were issued in the year 2002, i.e., after a period of almost one decade from the date of the alleged transactions of 1992-­1993. In this regard, the bench observed,

"It is a settled proposition of law that when the proceedings are required to be initiated within a particular period provided under the Statute, the same are required to be initiated within the said period. However, where no such period has been provided in the Statute, the authorities are required to initiate the said proceeding within a reasonable period. No doubt that what would be a reasonable period would depend upon the facts and circumstances of each case..

..Admittedly, in the present cases, the alleged transactions had taken place during the financial years 1992 and 1993. Show cause notices for the said transactions were issued in the year 2002 and that too just before the sunset period of FERA was to expire, i.e., on 1st June 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."

The court also noted that Banking Companies (Period of Preservation of Records) Rules, 1985 requires the bank to preserve the record for five years and eight years respectively. On this ground also, permitting the show cause notices and the proceedings continued thereunder of the transactions which have taken place much prior to eight years would be unfair and unreasonable, the bench observed while dismissing the appeal.

Case details

Union of India vs Citi Bank NA | 2022 LiveLaw (SC) 704 | CA 9337 OF 2010 | 24 August 2022 | Justices BR Gavai and PS Narasimha

Counsel: ASG Aishwarya Bhatti for appellant - UoI, Sr. Adv Rajeev K. Virmani,  Sr. Adv A.M. Singhvi, Sr. Adv Sonia Mathur, Adv Sanjay Gupta for respondents

Headnotes

Limitation - When the proceedings are required to be initiated within a particular period provided under the Statute, the same are required to be initiated within the said period. However, where no such period has been provided in the Statute, the authorities are required to initiate the said proceeding within a reasonable period. No doubt that what would be a reasonable period would depend upon the facts and circumstances of each case. (Para 19)

Foreign Exchange Regulation Act, 1973 - Banking Companies (Period of Preservation of Records) Rules, 1985 - FERA Proceedings initiated against Banks - Show causes notices issued in the year 2002, i.e., after a period of almost one decade from the date of the alleged transactions of 1992-­1993, were not tenable in law -  The Banks are required to preserve the record for five years and eight years respectively - Permitting the show cause notices and the proceedings continued thereunder of the transactions which have taken place much prior to eight years would be unfair and unreasonable.

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