Show Cause Notice (SCN) can’t be issued in respect of transactions which took place more than 8 years back, where law requires record to be maintained for 8 years: SC

 

Here is an interesting case wherein it has been held that the Show Cause Notice (SCN) can’t be issued in respect of transactions which took place more than 8 years back, where law requires record to be maintained for 8 years. The case detail is as under:

Union of India v. Citi Bank

CIVIL APPEAL NOS. 9337 OF 2010 & 4228-4261 OF 2011

Order Dated: AUGUST 24, 2022

The key observation by the Supreme Court was as under:

• Proceedings can’t be initiated in respect of transactions which took place much before the record retention period prescribed under the law.

•  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.

• Therefore, the show cause notices and the proceedings continued thereunder are liable to be set aside on this short ground.

• Further, Records mentioned in Rules 2 and 3 of Banking Companies (Period of Preservation of Records) Rules, 1985 are required to be preserved by bank for 5 years and 8 years respectively and no order in writing had been issued by RBI under Rule 4 directing preservation of records for longer than the said periods.

• 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