LexUNION OF INDIA & ANR. versus CITI BANK, N. A.
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A B C D E F G H 279 UNION OF INDIA & ANR. v. CITI BANK, N. A. (Civil Appeal No. 9337 of 2010) AUGUST 24, 2022 [B. R. GAVAI AND PAMIDIGHANTAM SRI NARASIMHA, JJ.] Foreign Exchange Regulation Act, 1973(FERA) – ss.6(4)(5), 8(1), 64(2)(4)(5) & 73(3) – Foreign Currency Deposit in Non- Resident External Account – Respondent-Bank was granted license to act as an authorized dealer, had accepted cash in foreign currency, equivalent to Rs.23,17,630/- during the period from October 1992 to January 1993 to the credit of NRE (Non-Resident External) Account of a Non- Resident Indian (NRI) – RBI issued circular dated 31.07.1995, imposing restriction to the effect that only an NRI Account Holder shall deposit foreign currency in his NRE account – Show Cause notice issued on 25.09.2002 to the Bank – Thereafter, the Adjudicating Officer held that the adjudication proceedings should be held against the Bank – Single Judge of the High Court in Writ Petition filed by the Bank, set aside the show cause notice – Single Judge held by taking into account that prior to 31st July 1995, foreign currency deposits could be made by individuals other than the NRI Account Holders in the NRE accounts of such NRIs – Division Bench dismissed the Letter Patent Appeal – On appeal, held: 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 – The 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 and that too just before the sunset period of FERA was to expire, i.e., on 1st June 2002 – Therefore, show cause notices and proceedings continued thereunder are liable to be set aside on this short ground – Banking Companies (Period of Preservation of Records) Rules, 1985. [2022] 10 S.C.R. 279 279 A B C D E F G H 280 SUPREME COURT REPORTS [2022] 10 S.C.R. Dismissing the appeals, the Court HELD: 1. 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. This Court is therefore of the considered view that show cause notices and the proceedings continued thereunder are liable to be set aside on this short ground. It can thus clearly be seen that the Banking Companies (Period of Preservation of Records) Rules, 1985 require every Banking Company to preserve records stated in Rule 2 for five years and eight years for records mentioned in Rule 3 respectively. No doubt that under Rule 4 of the said Rules, the RBI, having regard to the factors specified in sub-section (1) of Section 35-A, by an order in writing, is empowered to direct any banking company to preserve any of the books, accounts or other documents, etc. for a period longer than the period specified under the said Rules. Undisputedly, no such order has been placed on record which required the respondents-Banks to preserve records concerning the transactions in question for a period longer than eight years. It could thus be seen that even under the said Rules, the Banks are required 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. [Paras 19, 23, 25-27][287-C-D; 289-B-C; 290-C-F] The State of Gujarat v. Patil Raghav Natha and Others (1969) 2 SCC 187 : [1970] 1 SCR 335; Mohamad Kavi Mohamad Amin v. Fatmabai Ibrahim (1997) 6 SCC 71; A B C D E F G H 281 Government of India v. Citedal Fine Pharmaceuticals, Madras and Others (1989) 3
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