Show Cause Notice (SCN)

It is the usual opening step of formal enforcement in many jurisdictions, including India, where regulators, tax and customs authorities and employers all use it. The notice states the facts, the rule said to be broken and the action that may follow, and gives a deadline for a written reply. Recipients can often ask for documents and a personal hearing. A fair hearing is the point of the document: nothing is decided before the party has been heard. The authority then considers the reply and issues an order, which may drop the case, impose a penalty or direct corrective steps. Orders can usually be appealed. Orders passed without giving the party a fair chance to reply are open to challenge, so the written reply is where a defence is built.

During an inspection, a regulator finds that a lender disbursed loans without required income checks. It issues a show cause notice listing 120 accounts and giving the lender 21 days to reply. The lender submits evidence for 90 of the accounts, admits control gaps on the rest and attends a hearing. The regulator then issues a penalty order covering only the 30 accounts.