Proceedings Initiated should be Concluded Within a Reasonable Period: Bombay High Court on 23 years old SCN

Sushitex Exports (India) Ltd. & Ors. vs. The Union of India & Anr.; Writ Petition (L) No. 9641 of 2020; High Court of Bombay; 14.01.2022

Facts:

• The first petitioner is a company incorporated under the Companies Act, 1956. It, inter alia, carries on business of exporting fabrics. The second and the third petitioners are the Directors of the first petitioner (hereafter “the Company”, for short).
• A show-cause notice dated 30th April 1997 (Ext. ‘C’ to the writ petition) was issued to the Company under section 124 read with section 28 of the Customs Act, 1962 (hereafter “the Act”, for short). It was alleged therein that the Company had indulged in fraudulent export of polyester fabrics and duty-free import of Polyester Filament Yarn and other items under D.E.E.C. Scheme in contravention of the provisions of the Act.
• In course of investigation preceding such show-cause notice, a raid had been conducted at the premises of the Company on 9th August 1995. The second and the third petitioners having been arrested, it is alleged by them that they were compelled to pay an amount of Rs.68 lakh on 10th August 1995. It is further alleged that only after such payment, the Department agreed not to oppose their prayers for bail and consequently, the second and the third petitioners were released on bail by an order dated 10th August 1995 of the Additional Chief Metropolitan Magistrate, Mumbai.
• On subsequent occasions too, the petitioners claim to have further been forced to pay Rs.32 lakh and Rs.1 crore. The said show-cause notice, inter alia, sought to recover the sum of Rs.2 crore, which the petitioners allege they were compelled to deposit, and adjust the same against the total demand of Rs.4,99,53,772/- mentioned in the show cause notice.

Issue:

The show-cause notice has not been adjudicated during the 23 years of its existence; accordingly, a prayer has been made to set aside such notice as well as the proceedings that followed and for a direction on the respondents to return to the petitioners the said sum of Rs. 2 crores deposited under protest during the investigation together with accrued interest at the prime lending rate prevalent in 1995-1996, in accordance with the law.

The writ petition refers to several decisions of this Court in support of the contention that proceedings having once been initiated, the same ought to be concluded within a reasonable period and what would be a ‘reasonable period’ ought to depend on the facts of each case.

Observations and Findings:

• Having noted the so-called reasons assigned in the affidavit-in-reply of the respondents for not concluding the proceedings arising out of the impugned show-cause notice, the bench found absolutely no justification to hold that the respondents have acted in the manner law requires them to act.
• It is not in dispute that after the show-cause notice was issued on 30th April 1997, the petitioners were called upon for a hearing in the year 2006. At least, till 2006, it can be inferred that the issue was live. However, why no final order was passed immediately after the hearing was granted to the petitioners is not disclosed in the affidavit-in-reply. The respondents seem to have slipped into deep slumber thereafter.
• While the respondents’ right in law to initiate proceedings for violation of the provisions of the Act can never be disputed, at the same time they do not have the unfettered right to choose a time for its termination and conclude proceedings as per their convenience. Indeed, the words ‘reasonable period’ call for a flexible rather than a rigid construction having regard to the facts of each case, but the period in excess of two decades without the respondents sufficiently explaining as to what prevented them to conclude the proceedings has to be seen as unreasonable and the reasons assigned in the affidavit-in-reply as mere excuses for not adjudicating the show-cause notice according to law.
• It would amount to an arbitrary exercise of power if proceedings initiated in 1997 are not taken to their logical conclusion for over two decades and then a prayer is made for its early conclusion, no sooner than the matter enters the portals of this Court.
• Relying on the decision in Parle International Limited v. Union of India and Others; 26.11.2020 in Writ Petition No.12904 of 2019 of this Court, the Bench held that to the extent it lays down the law that the proceedings should be concluded within a reasonable period and that proceedings that are not concluded within a hearing in the year 2006.
• At least, till 2006, it can be inferred that the issue was live. However, why no final order was passed immediately after the hearing was granted to the petitioners is not disclosed in the affidavit-in-reply. The respondents seem to have slipped into deep slumber thereafter. While the respondents’ right in law to initiate proceedings for violation of the provisions of the Act can never be disputed, at the same time they do not have the unfettered right to choose a time for its termination and conclude proceedings as per their convenience.
• Indeed, the words ‘reasonable period’ call for a flexible rather than a rigid construction having regard to the facts of each case, but the period in excess of two decades without the respondents sufficiently explaining as to what prevented them to conclude the proceedings has to be seen as unreasonable and the reasons assigned in the affidavit-in-reply as mere excuses for not adjudicating the show-cause notice according to law.
• Law is well-settled that when a power is conferred to achieve a particular object, such power has to be exercised reasonably, rationally and with objectivity with the object in view. It would amount to an arbitrary exercise of power if proceedings initiated in 1997 are not taken to their logical conclusion for over two decades and then a prayer is made for its early conclusion, no sooner than the matter enters the portals of this Court.
• The Bench agreed with the decision in Parle International Limited (supra) to the extent it lays down the law that the proceedings should be concluded within a reasonable period and that proceedings that are not concluded within a notice dated 30th April 1997 and all proceedings following the same.
• As far as the issue of consequential relief for returning Rs.2 crore, which the petitioners claim to have paid under protest is concerned, the bench relied on judgments of the Supreme Court in Kuil Fireworks Industries v. Collector of Central Excise & another, reported in (1997) 8 SCC 109, and Commissioner of Central Excise, Hyderabad v. ITC Ltd., reported in (2005) 13 SCC 689, Alok Shanker Pandey vs. Union of India, reported in (2007) 3 SCC 545, it was directed that the sum of Rs.2 crore which the petitioners were required to deposit in course of investigation shall be returned with interest @ 12% per annum.

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