J P Morgan India Private Limited v. Special Director, Directorate of Enforcement and Anr.

(vi) In view of the finding recorded by the

Forensic Auditors and fraud unearthed, indicating prima facie violation of the FEMA and other fraudulent activities, money laundering, we direct Enforcement Directorate and concerned authorities to investigate and fix liability on persons responsible for such violation and submit the progress report in the Court and let the police also submit the report of the investigation made by them so far.”

7. Relying upon the above judgment and order of the Supreme Court and certain investigations carried out, the respondent no. 2 filed two complaints, being Complaint No(s). 01/2020 and 02/2020, both dated WP(C)Nos.6239 & 6240/2020 Page 8 08.01.2020, against various persons and companies, including the petitioner herein before the respondent no. 1. As far as the petitioner is concerned, the complaints inter alia allege as under: “14.29 It is further revealed during investigation that no prior approval of RBI was obtained by M/s. JPMIPL & JPMIPM- II for establishing a place of business in India in the name of M/s. JPMIPL thus appears to have contravened the provisions of Regulation 3 of FEM (Establishment in India of a Branch office or a liaison office or a project office or any other place of business) Regulations, 2000. xxxxx

14.32 Investigation has revealed that the JPMIPL has been established by JP Morgan Securities Holding Pvt. Ltd. as WOS and is a group company of JP Morgan Chase USA. The salary of the persons entrusted with the businesses in India by JPMIPL is being paid by the USA based company. Thus JPMIPL is place of business in India of JP Morgan Securities Holding Pvt. Ltd. (foreign company).

15. FEMA Contraventions: The following provisions of Foreign Exchange Management Act, 1999 and Regulations made there-under have been contravened by the Noticees: S.No. Description Amount involved FEMA contraventions WP(C)Nos.6239 & 6240/2020 Page 9

1. xxx

7. Unauthorized place of business in India by the foreign investor group company without RBI permission ROC records, (01.04.2010 to 31.03.2011) of JP Morgan India Pvt. Ltd. (JPMIPL) reveals inter-alia that JP Morgan Chase & Co., USA is the group holding company. • JPMIPL is 96.26% subsidiary of JP Morgan India Securities Holding Limited, Mauritius and part of the JP Morgan group. JP Morgan Chase & Co., USA is the ultimate holding company of all JP Morgan group entities. • JPMIPL is engaged in merchant banking, underwriting, stock broking trading cum xxx Rs.85 Crore xxx Contravention of Section 6(6) of FEMA read with the provisions of Regulation 3 of the FEM (Establishment in India of a Branch office or a Liaison office or a project office or any other place of Business) Regulations, 2000 JP Morgan India Securities Holding Limited, Mauritius & JPMIPL by establishing a place of business in India without prior approval of RBI. WP(C)Nos.6239 & 6240/2020 Page 10 clearing of equity and currency derivatives and providing financial and investment advisory services. • JPMIPL is in transactions with 18 subsidiaries located outside India of the JP Morgan group. • JP Morgan, USA has deputed its employee Hrushikesh Kar in India on deputation, interalia to establish real estate business in India in the name and style of JPMIPL Hrushikesh Kar was receiving salary from JP Morgan, USA. • Thus JPIML is place of business in India of JP Morgan India Securities Holding Limited, Mauritius without prior approval of RBI.

16. Charges under FEMA: WP(C)Nos.6239 & 6240/2020 Page 11 xxxxx e) JPMIPL has contravened the provisions of FEMA and Regulation issued by RBI as mentioned in Para 15 at Sl No.7 of the complaint to the tune of Rs 85 Crore and thus has made itself liable to be proceeded against u/s 13 of FEMA.”

8. It is important here to clarify that Complaint No. 01/2020 is interalia in relation to Rs. 85 crores invested by JP Morgan India Property Mauritius Company-II in M/s Amrapali Zodiac Developers Pvt. Ltd., whereas Complaint No. 02/2020 is inter alia in relation to investment of Rs. 140 crores approximately by IPFII-S Singapore PTE Ltd. in M/s Amrapali Silicon City Pvt. Ltd. The allegations against the petitioner are, however, common in both the complaints.

9. The respondent no. 1 took cognizance of the above complaints and issued the impugned notice(s) dated 29.01.2020 in terms of Rule 4(1) of the Adjudication Rules to the petitioner, inter alia calling upon the petitioner to show cause as to why an inquiry should not be held against it. The petitioner was also called for a personal hearing by the notice dated 14.02.2020.

10. The petitioner filed its reply dated 26.05.2020 to the Show Cause Notice(s). In the reply, the petitioner denied it being a project/branch/liaison office or place of business in India for JPMISHL and further stated that JPMISHL had received all requisite approvals in 1995 and 1996 as per the then applicable law, that is, the Foreign WP(C)Nos.6239 & 6240/2020 Page 12 Exchange Regulation Act, 1973, from the Reserve Bank of India for investment in the petitioner company. The petitioner further stated that violation of Regulation 3 of the Place of Business Regulations cannot be alleged against an Indian entity such as the petitioner. The petitioner avers that it had also obtained the required registrations from the Securities and Exchange Board of India (‘SEBI’).

11. The petitioner thereafter received the notice(s) dated 11.08.2020 informing the petitioner for personal hearing to be conducted on 20.08.2020 by the respondent no. 1. In the said notice, so far as it related to Complaint no. 02/2020 filed by the respondent no. 2, the respondent no. 1 admitted receiving the reply dated 26.05.2020 of the petitioner to the Show Cause Notice on 27.05.2020, however, insofar as Complaint no. 01/2020 is concerned, it was claimed by the notice that no reply to the Show Cause Notice was received by the respondent no. 1 from the petitioner. The respondents, however, now admit that this observation of the respondent no. 1 was a mistake as reply had been duly received and, in fact, considered by the respondent no. 1 before proceeding with the inquiry.

12. The petitioner duly appeared before the respondent no. 1 and claimed violation of Rule 4(3) of the Adjudication Rules by the respondent no. 1.

13. In answer to such objection, by the Impugned Communication(s) dated 03.09.2020, the petitioner was informed as under: WP(C)Nos.6239 & 6240/2020 Page 13 “Attention is invited towards your reply dated 26.05.2020 in response to the captioned show cause notice received in this office on 26.05.2020. In this regard I have been directed to inform you that pursuant to your reply, the Ld. Adjudicating Authority is of the opinion that further proceeding in the matter should be held in terms of sub-rule (3) of Rule 4 of Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. This is for your information please.”

14. Along-with the counter affidavit filed to the present petitions, the respondents have also placed the File Noting(s) of 05.06.2020 which, according to the respondents, is the order/opinion of the respondent no. 1 in accordance with Rule 4(3) of the Adjudication Rules. The File Noting in Complaint No. 02/2020 reads as under: “I have carefully perused the complaint before me. I’ve also gone through the judgment of Hon'ble SC dated 23/07/2019 in WP(C) No. 940/2017 (especially para 91, 92 etc.) which is also referred by the complainant in the complaint before me. I have taken the cognizance of the complaint no. 02/2020 dtd. 08/01/2020 and SCN was issued on 29/01/2020. After due consideration of allegation levelled in the said complaint, judgment of Hon'ble SC dtd. 23/7/19 and replies WP(C)Nos.6239 & 6240/2020 Page 14 received from the noticees, I am of the view that further enquiry is necessary & should be held in terms of Rule 4(3) of FEMA (Adjudication) Rule, 2000. Pl. issue notice to noticees and call for written submissions first considering the current pandemic situation.”

15. Except a minor inconsequential change, similar is the File Noting with respect to Complaint No. 01/2020.

16. The learned senior counsel for the petitioner submits that there has been a violation of Rule 4(3) of the Adjudication Rules thereby vitiating the entire proceedings against the petitioner. He submits that Rule 4(3) of the Adjudication Rules requires a two-stage inquiry process. At the first stage, the Adjudicating Authority has to form an opinion, after considering the cause shown by the noticee, if any, as to whether the noticee is to be proceeded against in an inquiry. He submits that such opinion must necessarily be recorded in writing and, in case he seeks a copy of the same, provided to the noticee. The opinion must show application of mind to the objections raised by the noticee and give reasons for the opinion to proceed. Though such reasons need not be elaborate, they must be clear and explicit. They must show application of mind on the representation/objections advanced by the noticee. Such reasons cannot be later supplanted/supplemented by fresh reasons given in the affidavit. In this regard, he places reliance on the judgment(s) of the Supreme Court in Natwar Singh v. Director of Enforcement & Anr., WP(C)Nos.6239 & 6240/2020 Page 15 (2010) 13 SCC 255; Mohindhr Singh Gill & Anr. v. Chief Election Commissioner, New Delhi & Ors., (1978) 1 SCC 405; of the High Court of Bombay in Shashank Vyankatesh Manohar v. Union of India & Anr., 2014 (1) Mh.L.J. 838; as also on the Technical Circular NO. 11/2014, dated 26.09.2014 issued by the Directorate of Enforcement, Government of India.

17. On the general principles of recording of reasons, he places reliance on the renowned judgments of the Supreme Court in S.N. Mukherjee v. Union of India, (1990) 4 SCC 594; and Union of India v. Mohan Lal Capoor & Ors., (1973) 2 SCC 836. He also places reliance on the following judgments: • Bhikhubhai Vithlabhai Patel & Ors. v. State of Gujarat & Anr.,

• Siemens Engineering & Manufacturing Co. of India Ltd. v. Union of India & Anr., (1976) 2 SCC 981; • Nareshbhai Bhagubhai & Ors. v. Union of India & Ors., (2019) 15 SCC 1; • G. Vallikumari v. Andhra Education Society & Ors., (2010) 2 SCC 497;

18. On the other hand, Mr. Sanjay Jain, the learned Additional Solicitor General, and Mr. Amit Mahajan, the learned Central Government Standing Counsel, have submitted that there was no WP(C)Nos.6239 & 6240/2020 Page 16 violation of Rule 4(3) of the Adjudication Rules in the present case. They submit that in the present case, the respondent no. 1 formed his opinion to proceed with the inquiry as required in Rule 4(3) of the Adjudication Rules. The same is duly recorded in form of an Office File Noting(s) dated 05.06.2020. They submit that the expression of the opinion as required in Rule 4(3) of the Adjudication Rules need not be in form of elaborate reasons and as an order; it is a mere formation of an opinion, and in fact, is not even appealable under Section 19 of the FEMA. They further submit that in the present case, the Supreme Court in its judgment and order dated 23.07.2019 has found various violations of the FEMA against the JP Morgan Group of Companies and its officers. The complaint filed by the respondent no. 2 before the respondent no. 1 also makes reference to number of statements recorded during the course of investigation which make out the violation of inter alia the Place of Business Regulations by the petitioner. The respondent no. 1 in his opinion/order dated 05.06.2020 has clearly recorded that he has perused the complaint, the judgment of the Supreme Court as also the reply filed by the petitioner to the Show Cause Notice and formed an opinion that further inquiry is necessary to be held. This shows due application of mind by the respondent no. 1. They submit that such opinion need not give elaborate reasons and, in any case, this Court shall not adopt hypertechnical approach to determine the validity of such order as this Court is not sitting as an Appellate Court to determine the validity of the same. In support of their submissions, they place reliance on the judgments in State of Maharashtra Thr. Central Bureau of Investigation v. Mahesh

WP(C)Nos.6239 & 6240/2020 Page 17 749; and Mansukhlal Vithaldas Chauhan v. State of Gujarat, (1997) 7 SCC 622.

19. I have considered the submissions made by the learned counsels for the parties.

20. Section 13 of the FEMA prescribes the penalties that can be imposed on a person who contravenes any provision of the Act, or contravenes any Rule, Regulation, Notification, Direction or Order issued under the Act. Section 16 of the FEMA empowers the Central Government to appoint ‘Adjudicating Authority’ for the purpose of adjudication under Section 13 of the FEMA. An appeal against any order passed by the Adjudicating Authority lies before the Special Director (Appeals) under Section 17 or before the Appellate Tribunal under Section 19 of the FEMA.

21. In exercise of its powers under Section 46 of the FEMA, the Central Government has framed the Adjudication Rules. The present petitions raise issues on interpretation and effect of Rule 4 of the Adjudication Rules, which is reproduced herein below:

22. A reading of the above Rule would clearly show that the adjudication process contemplated under the rules is a two-stage process. In the first stage, the Adjudicating Authority, on receiving a complaint, issues a notice to the person against whom violation of the FEMA or the Rules/Regulations framed thereunder is alleged, to show cause as to why an inquiry be not held against him. Upon receiving such cause, the Adjudicating Authority is to then form an opinion as to whether an inquiry should be held against such noticee. In the second stage, if the Adjudicating Authority has formed an opinion of holding an inquiry against the noticee, the Adjudicating Authority has to fix a date for the appearance of the noticee, either personally or through his legal practitioner or a chartered accountant duly authorised by him, on which date the Adjudicating Authority has to explain to the noticee or his representative, as the case may be, the contravention alleged to have been WP(C)Nos.6239 & 6240/2020 Page 21 committed by such noticee. Thereafter, the noticee has to be given an opportunity to produce documents or evidence in support of his defence. The Adjudicating Authority upon consideration of the evidence so produced, shall then pass an order either exonerating the noticee or finding him guilty of having committed any contravention of the Act or of the Rules/Regulations/Instructions/Direction/Orders, etc. and impose such penalty as he thinks fit. It is only this order which can be challenged by the noticee under Section(s) 17 or 19 of the FEMA.

23. The effect of this two-stage process in Rule 4 of the Adjudication Rules came up for consideration before the Supreme Court in Natwar Singh (supra), wherein the Supreme Court held as under:

24. A reading of the above would highlight the distinction between the two stages of the adjudication process. The Supreme Court has inter alia that it is only where the Adjudicating Authority forms an opinion to proceed with the inquiry under Rule 4(3) of the Adjudication Rules, that the true and substantial inquiry into the allegations/contravention begins. The concept of principles of natural justice and fairness though are inbuilt in the Rules even at the first stage of the initiation of an inquiry, that is, before formation of the opinion by the Adjudicating Authority to proceed with the inquiry, are not of the same rigour as the second stage.

25. The scheme of Rule 4 of the Adjudication Rules has also been considered by the High Court of Bombay in Shashank Vyankatesh Manohar (supra), observing as under:

26. The High Court of Bombay has, while appreciating the uniqueness of the two-staged inquiry process in Rule 4 of the Adjudication Rules, observed that the formation of opinion under Rule 4(3) need not be a detailed consideration of all the submissions but must show application of mind to the objections raised by the noticee. It must give reasons for arriving at the opinion. In case the objections are such as would require detailed consideration, the authority concerned can dispose of the objections by stating that the same would require detailed consideration, which would be done at the disposal of the notice by the final order. However, the File Noting itself must show the due application of mind of the Adjudicating Authority to the cause shown by the noticee.

27. The Director of Enforcement, to ensure compliance with the judgment of the High Court of Bombay, issued Technical Circular NO. 11/2014, which reads as under: “The Hon'ble High Court Bombay in the matter of Shashank V. Manohar (W.P. NO. 5305 of 2013) has interpreted the provisions of sub-rule (3) of Rule 4 of the Foreign Exchange Management WP(C)Nos.6239 & 6240/2020 Page 34 (Adjudication Proceedings and Appeal) Rules, 2000 and directed that the Adjudicating Authority while holding an inquiry under FEMA shall form an opinion as to whether the Adjudicating Authority intends to proceed against the noticee(s) further. Such opinion is to be formed in writing stipulating the reasons thereof.

2. If the opinion formed under Rule 4(3) of the said Rules is adverse, such opinion along with the reasons so recorded shall be furnished to the noticee(s) at least 15 days prior to the date of personal hearing.

3. Since the SLP filed by Directorate before the Hon'ble Supreme Court challenging the said Order was dismissed on 04.07.2014, hence the Order of the Hon'ble High Court of Bombay has attained finality and liable to be complied with by all the Adjudicating Authorities appointed under section 16(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).

4. The above is brought to the notice of all the Adjudicating Authorities.

5. This issues with the approval of the Director of Enforcement.”

28. Therefore, the following principles regarding the inquiry procedure under Rule 4 of the Adjudication Rules emerge from the above judgments: (a) Rule 4 contemplates a two-stage inquiry process; WP(C)Nos.6239 & 6240/2020 Page 35 (b) Principles of natural justice and fairness are embodied into both the stages, though the rigours of the same at the first stage are a bit lighter in form of no compulsion to grant personal hearing to the noticee, supply of documents not relied upon, etcetera;

(c) The opinion formed by the Adjudicating Authority under

(d) The opinion formed must also reflect reasons for the same.

Though detailed and elaborate reasons need not be given, the same must satisfy the test of reflecting due application of mind by the Adjudicating Authority.

29. The requirement of giving reasons, as observed by Lord Denning, M.R. in Breen v. Amalgamated Engg. Union, (1971) 1 All ER 1148 (CA), is one of the fundamentals of good administration. In Alexander Machinery (Dudley) Ltd. v. Crabtree, 1974 ICR 120 (NIRC), it was observed that “failure to give reasons amounts to denial of justice.” “Reasons are live links between the mind of the decision-taker to the controversy in question and the decision or conclusion arrived at.” Right to reasons is an indispensable part of a sound judicial system. Reasons substitute subjectivity by objectivity.

30. In S.N. Mukherjee (supra), the Supreme Court emphasized the requirement of giving reasons, in the following words: “35. The decisions of this Court referred to above indicate that with regard to the requirement to WP(C)Nos.6239 & 6240/2020 Page 36 record reasons the approach of this Court is more in line with that of the American courts. An important consideration which has weighed with the court for holding that an administrative authority exercising quasi-judicial functions must record the reasons for its decision, is that such a decision is subject to the appellate jurisdiction of this Court under Article 136 of the Constitution as well as the supervisory jurisdiction of the High Courts under Article 227 of the Constitution and that the reasons, if recorded, would enable this Court or the High Courts to effectively exercise the appellate or supervisory power. But this is not the sole consideration. The other considerations which have also weighed with the Court in taking this view are that the requirement of recording reasons would (i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimise chances of arbitrariness in decision-making. In this regard a distinction has been drawn between ordinary courts of law and tribunals and authorities exercising judicial functions on the ground that a Judge is trained to look at things objectively uninfluenced by considerations of policy or expediency whereas an executive officer generally looks at things from the standpoint of policy and expediency.

36. Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision, are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances of arbitrariness WP(C)Nos.6239 & 6240/2020 Page 37 and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. In our opinion, therefore, the requirement that reasons be recorded should govern the decisions of an administrative authority exercising quasi-judicial functions irrespective of the fact whether the decision is subject to appeal, revision or judicial review. It may, however, be added that it is not required that the reasons should be as elaborate as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge.”

31. The necessity of giving reasons was re-emphasized by the Supreme Court in Kranti Associates (P) Ltd. & Anr. v. Masood Ahmed Khan & Ors., (2010) 9 SCC 496, observing as under:

32. In Bhikhubhai Vithlabhai Patel (supra), the Supreme Court held that though the opinion of the authority may be to its subjective satisfaction, it should reflect application of mind with reference to the material available on record. It was observed as under: “22. Any opinion of the Government to be formed is not subject to objective test. The language leaves no room for the relevance of a judicial examination as to the sufficiency of the grounds on which the Government acted in forming its opinion. But there must be material based on which alone the State Government could form its opinion that it has become necessary to make substantial modification in the draft development plan.

23. The power conferred by Section 17(1)(a)(ii) read with proviso is a conditional power. It is not an absolute power to be exercised in the discretion of the State Government. The condition is formation of opinion–– subjective, no doubt–– that it had become WP(C)Nos.6239 & 6240/2020 Page 41 necessary to make substantial modifications in the draft development plan. This opinion may be formed on the basis of material sent along with the draft development plan or on the basis of relevant information that may be available with the State Government. The existence of relevant material is a precondition to the formation of opinion. The use of word "may" indicates not only a discretion but an obligation to consider that a necessity has arisen to make substantial modifications in the draft development plan. It also involves an obligation to consider which of the several steps specified in subclauses (i), (ii) and (iii) should be taken.

24. The proviso opens with the words "where the State Government is of opinion that substantial modifications in the draft development plan and regulations are necessary,... ". These words are indicative of the satisfaction being subjective one but there must exist circumstances stated in the proviso which are conditions precedent for the formation of the opinion. Opinion to be formed by the State Government cannot be on imaginary grounds, wishful thinking, however laudable that may be. Such a course is impermissible in law. The formation of the opinion, though subjective, must be based on the material disclosing that a necessity had arisen to make substantial modifications in the draft development plan.

25. The formation of the opinion by the State Government is with reference to the necessity that may have had arisen to make substantial modifications in the draft development plan. The expression: "as considered necessary" is again of crucial importance. The term "consider" means to think over; it connotes that there should be active application of the mind. In other words the term "consider" postulates consideration of all the WP(C)Nos.6239 & 6240/2020 Page 42 relevant aspects of the matter. A plain reading of the relevant provision suggests that the State Government may publish the modifications only after consideration that such modifications have become necessary. The word "necessary" means indispensable, requisite, indispensably requisite, useful, incidental or conducive, essential, unavoidable, impossible to be otherwise, not to be avoided, inevitable. The word "necessary" must be construed in the connection in which it is used. (See Advanced Law Lexicon, P. Ramanatha Aiyar, 3rd Edn., 2005.)

26. The formation of the opinion by the State Government should reflect intense application of mind with reference to the material available on record that it had become necessary to propose substantial modifications to the draft development plan.”

33. The Adjudicating Authority, under the Scheme of the FEMA, performs a quasi-judicial function as opposed to a purely administrative function. The requirement of giving reasons therefore cannot be undermined and must be insisted upon from the Adjudicating Authority. The reasons to be given for its opinion under Rule 4(3) of the Adjudication Rules to proceed with the inquiry though need not be as elaborate as in a Court decision or let’s say an order passed by the Adjudicating Authority under Rule 4(8) of the Adjudication Rules, but have to be adequate, proper and intelligible, sufficiently clear and explicit. They must reasonably deal with the substantial points raised in the matter and show that they were taken into consideration. However, WP(C)Nos.6239 & 6240/2020 Page 43 the extent and nature of reasons depend upon specific facts and circumstances of each case.

34. The Impugned Opinion/Order dated 05.06.2020, in my opinion, does not satisfy the test of giving reasons by the respondent no. 1 for the formation of opinion to proceed with the inquiry against the petitioner.

35. The Impugned Order records the material considered by the respondent no. 1, that is the Complaint, the judgment/order dated 23.07.2019 of the Supreme Court, and the replies to the Show Cause Notice(s), and then proceeds to give a conclusion that further enquiry is necessary and should be held. However, the Impugned Order does not give any reasons for forming the above opinion.

36. The reasons are the bridge between the material on record and the final decision. Therefore, after considering the judgment of the Supreme Court, the Complaint and the reply of the petitioner to show cause, that is the material on record, the Adjudicating Authority is to give reasons, howsoever brief, at least showing that he is alive to the contentions raised in the reply to the Show Cause Notice and why he is of the opinion that inquiry must still be held. In the present case, this bridge is missing.

37. However, having said the above, it is also to be seen as to whether the inquiry deserves to be set aside only for the above violation. In the present case, as noted herein above, the Supreme Court has passed a detailed judgment finding various acts of violation of the FEMA and the Rules/Regulations framed there-under inter alia against the JP Morgan group of companies, may not be specifically by name against the WP(C)Nos.6239 & 6240/2020 Page 44 petitioner. The present inquiry has been initiated on the direction of the Supreme Court in the said judgment. The allegations against the petitioner also cannot be said to be such that do not warrant any inquiry given the above factual background. The role of the petitioner and its employees and the capacity in which they acted in the transactions in question need a detailed inquiry as such allegations form part of a larger whole which is being inquired into.

38. In Maharashtra State Board of Secondary and Higher Secondary Education v. K.S. Gandhi & Ors., (1991) 2 SCC 716, the Supreme Court while reiterating the requirement of giving reasons, observed that “the applicability of the principles of natural justice is not a rule of thumb or a strait-jacket formula as an abstract proposition of law. It depends on the facts of the case, nature of the inquiry and the effect of the order/decision on the rights of the person and attendant circumstances.”

39. Following the above judgment, in Hanuman Prasad & Ors. v. Union of India & Anr., (1996) 10 SCC 742, the Supreme Court held that even though the order may not contain the reasons, the record may indicate the same. In the facts of that case, it was observed that as the action of cancellation of the Select List was based on the preliminary report submitted by the CBI which indicated that malpractices have been committed in writing the examination, it cannot be said that the order of cancellation does not contain any reasons.

40. Applying the above principle and especially considering that at the stage of Rule 4(3) of the Adjudication Rules, the Adjudicating Authority was merely to form an opinion whether to proceed with the inquiry; and WP(C)Nos.6239 & 6240/2020 Page 45 as held by the Supreme Court in Natwar Singh (supra), it is only thereafter that the “real and substantial inquiry into allegations of contravention begins”; and that unlike the final order imposing penalty, “the opinion formed by the Adjudicating Authority whether an inquiry should be held into the allegations made in the complaint are not fraught with such grave consequences”, and as held by the High Court of Bombay in Shashank Vyankatesh Manohar (supra) that “in case the objections are such as would require detailed consideration, the authority concerned can dispose of the objections by stating that the same would require detailed consideration, which would be done at the disposal of the notice by the final order”, it is held that there was enough reason for the respondent no. 1 to form an opinion to proceed with the inquiry against the petitioner and no useful purpose would be served by quashing the impugned Opinion and insisting on the reasons to be first recorded. Exercise of powers under Article 226 being discretionary in nature, this court, in the peculiar facts of the present petitions, does not find it fit to exercise the same.

41. Therefore, in the peculiar facts of the present case, even though the Impugned Opinion of the Adjudicating Authority does not record any reasons for the same, the same is sustained. This shall, however, not be considered as an affirmation of this Court to the manner in which such opinion is to be recorded. It is also made clear that this Court has not expressed any opinion on the merit of the allegations made against the petitioner in the Show Cause Notice or the inquiry. WP(C)Nos.6239 & 6240/2020 Page 46

42. In view of the above discussion, the present petitions are dismissed with no order as to costs.

NAVIN CHAWLA, J MAY 25, 2021 RN/P/US