UNITED COMMERCIAL BANK Vs. DIRECTOR ENFORCEMENT DIRECTORATE.

JUDGEMENT

(1.) This Rule is directed against a notice dated 3rd Aug., 1974 issued under sub-rule 3 of the Adjudication Proceedings and Appeal Rules, 1974 informing the petitioner Bank that after considering the cause shown by the Bank to the show cause notice, the Special Director of Enforcement was of the opinion that the adjudication proceedings as contemplated in Sec. 51 of the Foreign Exchange Regulation Act, 1973 (Section 23D of the Repealed Foreign Exchange Regulation Act, 1947) should be held against the petitioner in accordance with the procedure laid down in Rule 3 of the Adjudication Proceedings and Appeal Rules, 1974, and accordingly, the case was fixed for personal hearing before the Special Director of Enforcement on 21st Aug., 1974 in the Office of the Directorate at Calcutta.

(2.) The petitioner-United Commercial Bank is an existing company and has been carrying on banking business. It is a scheduled bank. It has extensive foreign exchange business. Hindustan Motors Limited approached the Main Branch of the petitioner at Calcutta in the last week of May, 1966, with a request to book a forward exchange contract for the sale of foreign currency for imports under import licences worth over Rs. 2 crores hold by them. Although the import licences were for about Rs. 1.82 crores, the petitioner was satisfied considering the document of the evidence produced before it, for booking a forward exchange contract only to the extent of Rs. 1.25 crores i.e. £ 9,32,617. On 4th of June, 1966 the forward exchange contract being contact No. 130/66 for Rs. 1.25 crores i.e. £ 9,32,617 was booked by the petitioner for six months' delivery.

(3.) Hindustan Motors Limited at the material time manufactured commercial vehicles being Bedford Trucks and had collaboration arrangement with M/s. Vauxhall Motors Limited, London for the manufacture of such vehicles. The East India Produce Company Limited were the purchasing agents of the Hindustan Motors Limited in London and the company had obtained the sanction of the Reserve Bank of India, for their appointment and reappointment from time to time. On 22nd of Dec., 1966 the Deputy Controller, Reserve Bank of India, Exchange Control Department informed the Manager of the petitioner-bank that the permission was granted to the bank to take delivery of £ 700.00 under the aforesaid contract dated the 4th of June, 1966. It appears that in view of the certain quieries raised by the Reserve Bank of India regarding the said contract No. 130/66, the Sterling Import Bills received near about the 27th Sept., 1966 or thereafter, from East India Produce Company Ltd. and Vauxhall Motors were provisionally converted by the petitioner at the devalued current rate instead of the agreed rate mentioned in the said contract and corresponding recoveries were made from Hindustan Motors Limited. Such conversion of Sterling pounds at the new rate instead of the contracted rate went on till permission was granted by the Reserve Bank of India by the aforesaid letter dated 22nd Dec., 1966. Upon receipt of such permission on or about 22nd Jan., 1967, the excess recoveries made from the company being the difference between the contract rate and the new rate were refunded and credited to the account of Hindustan Motors Limited. Thereafter, the General Manager and the Manager, Calcutta Main Branch of the petitioner were apprehended by the Enforcement Directorate for the alleged offences under the Repealed Act. They were enlarged on bail by the Chief Presidency Magistrate. The allegations against the said two persons were alleged contravention of Sec. 4 (2) of the Foreign Exchange Regulation Act, 1947 (Since repealed) in respect of the said contract No. 130/66. Ultimately no charges were framed or any complaint was filed against any of the said two persons. By an order dated 8th June, 1974, the Chief Presidency Magistrate, Calcutta discharged the complaint and set them at livery. In the meantime, by a memorandum dated Nov. 3, 1972 a show-cause notice was issued by the respondent No. 1 and served on the petitioner at Calcutta. In that show-cause notice the petitioner was directed to show-cause within 14 days from the date of the receipt of the said memorandum why adjudication proceedings contemplated under Sec. 23D of the Repealed Act should not be held against it for the alleged contravention of Sec. 4(2) of the said Repealed Act in connection with the said contact No. 130/66. On Nov. 18, 1972 the petitioner's Solicitor wrote to the Director asking for inspection of certain documents and prayed for three months time to submit reply. Between Dec. 30, 1972 and Jan. 31, 1974, the petitioner took time for inspection of documents, took photostat copies of some of them and ultimately on the 16th Feb., 1974 the petitioner replied to the said show-cause notice. On 3rd Aug., 1974 the impugned notice was issued wherein the petitioner was informed that after considering the cause shown, the Special Director was of the opinion that adjudication proceedings should be held and fixed 21st of Aug., 1974 for personal hearing. The petitioner being aggrieved by the said notice moved this Court on Aug. 19, 1974 obtained the present Rule and also an interim order of stay. On 11th March, 1976 an application was made by the respondents for vacating the interim order. On June 22, 1976 the aforesaid application came up for hearing. No order was made on the said application. The main Rule was fixed for hearing on 2nd July, 1976. Ultimately, the Rule was heard on 18th of Nov., 1976.