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Sunday, February 17, 2013

FERA =the High Court has partly allowed FERA Appeal Nos.8 to 11 of 2008 that assailed the common order dated 28 th November, 2007 passed by the Appellate Tribunal for Foreign Exchange, New Delhi and reduced the penalty imposed upon the appellants for contravention of Sections 14 and 8(1) of the Foreign Exchange Regulation Act, 1973 by 50%. The factual matrix in which the adjudication order came to be passed by the DeputyPage 2 Director, Directorate of Enforcement, Mumbai and the appellate order passed by the Tribunal for Foreign Exchange, New Delhi has been set out in the order passed by the Tribunal and the order passed by the High Court of Bombay mentioned earlier. Bountiful Ltd. was a paper company that held Swiss bank account which was in turn operated by a person named Mr. Shirish Shah, a Chartered Accountant, operating from London on the instructions of Mr. Rajesh Desai, appellant in SLP (C) No.15549 of 2008 who was none other than the son of Mr. Arun Desai, Managing Director of Telestar Travels Pvt. Ltd. appellant in SLP (C) No.15547 of 2008. The further case of the Directorate was that documentary evidence seized from the office of M/s Telestar and the residence premises of the Managing Director in the course of investigation conducted under Section 37 of FERA unerringly revealed that Bountiful Ltd. was entirely a holding of the appellant-Telestar Pvt. Ltd.Page 4 and entirely controlled in its operation and financial management by Mr. Arun N. Desai and his two sons Mr. Sujeet A. Desai and Mr. Rajesh A. Desai, appellants in these appeals. It was on the basis of the investigations conducted by the Directorate, the statements of the promoters of Telestar Pvt. Ltd. recorded during the course of such investigation and other material collected by the Directorate, a notice was issued by the Directorate calling upon them to show cause why the adjudication proceedings as contemplated under Section 51 of the FERA should not be filed against them for the contravention pointed out in the show cause notice. In the result, these appeals fail and are, hereby, dismissed with costs assessed at Rs.50,000/- in each appeal. Cost to be deposited within two months with the SCBA Lawyers’ Welfare Fund.


Page 1
 
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.   1306-1309 OF 2013
(Arising out of S.L.P. (C) Nos.15546-15549 of 2008)
M/s Telestar Travels Pvt. Ltd. & Ors. …Appellants
Versus
Special Director of Enforcement …Respondent
J U D G M E N T
T.S. THAKUR, J.
1. Leave granted.
2. These  appeals  arise  out  of  a  common  judgment  and  order
dated 14
th
 March, 2008 passed by a Division Bench of the High Court
of Judicature at Bombay whereby the High Court has partly allowed
FERA  Appeal  Nos.8  to  11  of  2008  that  assailed  the  common  order
dated  28
th
 November,  2007  passed  by  the  Appellate  Tribunal  for
Foreign Exchange, New Delhi and reduced the penalty imposed upon
the  appellants  for  contravention  of  Sections  14  and  8(1)  of  the
Foreign Exchange Regulation Act, 1973 by 50%. The factual matrix in
which  the  adjudication  order  came  to  be  passed  by  the  DeputyPage 2
Director, Directorate of Enforcement, Mumbai and the appellate order
passed by the Tribunal for Foreign Exchange, New Delhi has been set
out in the order passed by the Tribunal  and the order passed by the
High  Court  of  Bombay  mentioned  earlier.   
It  is,  therefore,
unnecessary to recount the facts over again except to the extent it is
absolutely necessary for disposal of these appeals.
3. Appellant-Telestar  Travels  Private  Ltd.  carries  on  a  travel
agency  and  specialises  in  booking  of  tickets  for  crew  members
working on ships. 
Most of the shipping companies are based abroad
with  their  representatives  located  in  Mumbai  who  would  issue
instructions to the appellant-company to arrange air passage for the
crew  from  Bombay  and  other  places  in  India  to  particular  ports
abroad.
The company would then take steps to have tickets issued on
the  basis  of  such  instructions  for  different  destinations.
 The
appellant’s case is that the travel agents in U.K. had of late started
offering cheap fares for seaman/crew travelling to join the ships.
In
order to benefit from such low fare tickets the shipping companies are
said  to  have  desired  that  the  benefit  of  such  low  fare  tickets  be
organized for them by the appellant. 
In order to make that possible
the appellant-company claims to have approached M/s Clyde Travels
Ltd. (CTL) in Glasgow (U.K.) for getting such cheap seaman tickets.
According to this arrangement, the CTL would send a Pre-paid Ticket
Page 3
Advice (PTA) to the appellant in India based on which the appellant
would secure a ticket from the airline concerned. 
The money for the
tickets  would  then  be  credited  into  the  Swiss  bank  account  of
Bountiful  Ltd.,  a  company  registered  in  British  Virgin  Islands.
Bountiful Ltd. would out of money so received transfer funds to CTL
towards the price of the tickets apart from realising 3% of the ticket
price  towards  commission  payable  to  the  appellant-company.
 The
appellant-company claims that the process of purchase of tickets as
aforementioned  was  a  commercial  arrangement  that  was  legally
permissible and did not involve any violation of FERA.
The Directorate
of Enforcement,  Mumbai, did not, however,  think so.
According to
the Directorate, Bountiful Ltd. was a paper company that held Swiss
bank  account  which  was  in  turn  operated  by  a  person  named  Mr.
Shirish Shah, a Chartered Accountant, operating from London on the
instructions  of  Mr.  Rajesh  Desai,  appellant  in  SLP  (C)  No.15549  of
2008 who was none other than the son of Mr. Arun Desai, Managing
Director of Telestar Travels Pvt. Ltd. appellant in SLP (C) No.15547 of
2008.  
The  further  case  of  the  Directorate  was  that  documentary
evidence  seized  from  the  office  of  M/s  Telestar  and  the  residence
premises  of  the  Managing  Director  in  the  course  of  investigation
conducted  under  Section  37  of  FERA  unerringly  revealed  that
Bountiful Ltd. was entirely a holding of the appellant-Telestar Pvt. Ltd.Page 4
and entirely controlled in its operation and financial management by
Mr.  Arun  N.  Desai  and  his  two  sons  Mr.  Sujeet  A.  Desai  and  Mr.
Rajesh A. Desai, appellants in these appeals.  
It was on the basis of
the  investigations  conducted  by  the  Directorate,  the  statements  of
the promoters of Telestar Pvt. Ltd. recorded during the course of such
investigation and other material collected by the Directorate, a notice
was issued by the Directorate calling upon them to show cause why
the adjudication proceedings as contemplated under Section 51 of the
FERA should not be filed against them for the contravention pointed
out in the show cause notice. 
The show cause notice was followed by
an addendum by which the Directorate sought to place reliance upon
a report dated 15th January, 1997 received from the High Commission
of India, at London and the revised list of documents enclosed and
communicated to the appellants.
The appellants filed their replies in
which  they  denied  the  allegations  that  Bountiful  Ltd.  was  a  paper
company  or  that  the  same  was  being  controlled  from  India  by  the
appellants. By their letter dated 23rd September, 1997 the appellants
sought to cross-examine Mr. Livingstone of CLD and the Indian High
Commission officials in London who had met him. He also sought to
cross-examine Miss Anita Chotrani and Mr. Deepak Raut upon whose
depositions  Directorate  of  Enforcement  sought  to  place  reliance  in
support of its case. The Adjudicating Authority eventually passed anPage 5
order on 29
th
 March, 2001 holding the appellants guilty of violation of
provisions of Sections 8 and 14 of FERA inasmuch the appellants had
received payments from various persons on account of tickets booked
by them for US $ 846116.14 and GB Pounds 156943.16 which were
credited to the account No.10975 at Geneva and which they failed to
surrender to an authorised dealer in foreign exchange in India within
three  months of becoming the  owner or holder thereof without the
general permission of the RBI as required under Section 14 of FERA.
The  Adjudicating Authority has  further  held the  appellants  guilty of
transferring  foreign  exchange  of  GB  Pounds  138671.40  and  US  $
672131.85 from the said Geneva Account No.10975 of M/s Bountiful
Ltd. to various persons during the period of November, 1994 to July,
1995 without the previous general or special permission of the RBI,
thereby contravening Section 8(1) of FERA, 1973. The  Adjudicating
Authority  on  that  basis  levied  a  penalty  of  Rs.90,00,000/-  for
contravening  Section  14  and  Rs.85,00,000/-  for  contravention  of
Section  8(1)  upon  M/s  Telestar  Pvt.  Ltd.,  Mumbai.  The  Authority
further levied a consolidated penalty of Rs.20,00,000/- each upon the
remaining  appellants  Mr.  Arun  N.  Desai,  Managing  Director,  Mr.
Rajesh Desai and Mr. Sujeet Desai, his sons.
4. Aggrieved by the order passed by the Adjudicating Authority,
the  appellants  appealed  to  the  Appellate  Tribunal  for  ForeignPage 6
Exchange,  New  Delhi.  The  Tribunal,  as  already  mentioned,  allowed
the said appeals but only in part and to the limited extent of reducing
the  penalty  imposed  by  the  Adjudicating  Authority  by  50%.  The
Tribunal, upon reappraisal of the entire material on record, affirmed
the  findings  recorded  by  the  Adjudicating  Authority  that  the
appellants had indeed committed violation of Sections 8 and 14 of the
FERA 1973 as noticed earlier.  The further appeals before the High
Court of Judicature at Bombay by the appellants also failed and were
dismissed  in  limine by  the  High  Court  by  order  dated  14
th
 March,
2008. Hence the present appeal.
5. Appearing for the appellants, Mr. Shyam Diwan, learned senior
counsel,  made  a  three-fold  submission  in  support  of  the  appeals.
Firstly,  he  contended  that  the  judgment  and  order  passed  by  the
Adjudicating  Authority  was  ex  parte hence  liable  to  be  set  aside.
Elaborating  that  submission  Mr.  Diwan  argued  that  since  the
adjudication  order  had  been  passed  by  the  authority  concerned
nearly  3½  years  after  the  matter  was  finally argued  before  it,  the
requirement  of  affording  an  opportunity  of  being  heard  to  the
appellants arising under  Section 51 of FERA was not satisfied. It is
submitted  that  the  appellants  had  been  prejudiced  on  account  of
delayed pronouncement of the adjudication order as the documents
available  with  them  could  not  be  placed  before  the  said  authority
Page 7
after the hearing of the matter. He further contended that Rule 3 of
the Adjudication Rules provided for a personal hearing which was no
doubt provided on the date the matter was finally argued before the
Adjudicating  Authority  but  which  hearing  ought  to  have  been
repeated  as  the  pronouncement  of  the  order  by  the  Authority  had
been  delayed.  Reliance  in support of the  submission was placed by
Mr.  Diwan  upon  the  decisions  of  this  Court  in Bhagwandas
Fatechand  Daswani  and  Ors.  v.  HPA  International  and  Ors.
(2000) 2 SCC 13, Kanhaiyalal and Ors. v. Anupkumar and Ors.
(2003) 1 SCC 430 and Anil Rai v. State of Bihar (2001) 7 SCC
318.
6. On behalf of respondent, it was per contra argued by Mr. P.P.
Malhotra, learned Additional Solicitor General, that the order passed
by the Adjudicating Authority was fully compliant with the provisions
of Section 51 read with Section 30 of the Rules under FERA and could
not be treated as an ex parte order by any stretch of reasoning.  He
also contended that mere delay in the pronouncement of adjudication
order was not enough to justify setting aside of the order if the same
was  otherwise  found  to  be  legally  valid  and  unacceptable.  No
prejudice  was,  at  any  rate,  caused  to  the  appellants  by  the  delay,
according to Mr. Malhotra, who placed reliance on the decision of this
Court in  Ram Bali v. State of U.P. (2004) 10 SCC 598 to arguePage 8
that delay in the  pronouncement was not itself sufficient to declare
the order to be bad in law. This Court has, according to Mr. Diwan,
deprecated  the  practice  of  Courts  and  Authorities  delaying  the
pronouncement  of  orders  and  matters  that  have  been  heard  and
reserved for such pronouncements. There is no gainsaying that any
Court or Authority hearing the matter must within a reasonable time
frame pronounce the orders especially when any misgiving arising out
of inordinate delay which gave rise to unnecessary apprehensions in
the minds of litigants especially in the minds of a party that has lost
the matter at the hand of such long delay. We can only express our
respectful agreement with the observations made by this Court in the
decisions relied upon by Mr. Diwan that have issued guidelines and
set out time frame considered reasonable for pronouncement of order
by  Courts  and  Authorities.  Even  so,  the  question  remains  whether
delay by itself should constitute a ground for setting aside the order
that may otherwise be found legally valid and justified.  Our answer
to that question is in the negative.  The decision of this Court in Ram
Bali v. State of U.P. (2004) 10 SCC 598  is one such case where
the  Court  repelled a  similar argument  and  declared  that  delay was
not a ground by itself that otherwise specifically dealt with the matter
in  issue.   The  Court  at  best  put  to  caution  requiring a  careful and
closer scrutiny of the order that was pronounced after undue delayPage 9
but if upon such scrutiny also the order is not found to be wrong in
any way it may decline to set aside the same.
7. We have in the instant case heard the matter at considerable
length for a careful examination of the adjudication by the Authority
and  that  of  the  Appellate  Tribunal  and  the  High  Court  to  examine
whether it suffers from any illegality or material irregularity causing
prejudice to the appellants. We are of the view that no such illegality
or  irregularity  has  been  demonstrated.   That  apart  delayed
pronouncement  of the  order  by  the  Adjudicating  Authority was not
urged as a ground of challenge before the Tribunal or the High Court
both  of  whom  have  remained  silent  on  this  aspect.   Even  on  the
question of prejudice we find the contention of Mr. Diwan to be more
imaginary than real.  The argument regarding prejudice is founded on
the plea that the appellants could not place some of the documents
which they have now placed before this Court for consideration.  It is
further admitted that no application for permission to produce these
documents  was  filed  by  them  before  the  Adjudicating  Authority  no
matter they could have done so if they really indeed needed to place
reliance on such documents.  Mr. Malhotra was, in our view, justified
in  contending  that  the  hearing  had  been  concluded  by  the
Adjudicating Authority in keeping with the requirement of Section 51
and Rule 3 of the Adjudication Rules under FERA. The first limb of thePage 10
contention  urged  by  Mr.  Diwan,  therefore,  fails  and  is  hereby
rejected.
8. It  was  next  argued  by  Mr.  Diwan,  that  the  Adjudicating
Authority had  placed reliance upon  the  retracted  statements  of the
appellants while holding that Bountiful Ltd. was a paper company and
that  its  financial  control  lay  in  their  hands,  so  that  receipt  and
appropriation  of  the  foreign  exchange  by  that  device  was  a  clear
violation of the provisions of FERA.  
9. A  reading of the  order  passed  by the  Adjudicating Authority
would show that the  appellants had in their responses to the  show
cause  notice  and  the  addendum  to  the  same  specifically  raised  a
contention that the statements made by them were not voluntary and
could not, therefore, be relied upon.  That contention was not only
noticed by the Adjudicating Authority but specifically dealt with and
rejected holding that the statement was voluntary in nature and that
the  subsequent  retraction  is  a  mere  after  thought  with  a  view  to
escaping the consequences of the violations committed by them. The
Adjudicating Authority, we are more than satisfied, was aware of the
requirement  of  examining  the  voluntary  nature  of  the  statements
being relied upon by it.  It has accordingly examined that aspect and
given  cogent  reasons  for  holding  that  the  statements  were  indeed
voluntary  and  incriminating  both.   The  Adjudicating  Authority  hasPage 11
observed:
“On  going  through  the  records  of  the  case,  I  find  that  the
statements dated 24.8.95, 25.8.95 and 6.2.96 of Shri Arun N.
Desai, the Noticee No.1 and the statements dated 24/25.8.95
of Rajesh N. Desai and Sujeet Desai, the Noticee Nos. 2 & 3
were  all  given  by  the  respective  notices  in  their  own
handwriting  and in  the language known to them.  Shri Arun
Desai,  in  his  statements,  had  explained  in  detail  the
functioning of M/s Telestar Travels, the Travel Agency, mainly
engaged  in  booking  of  domestic  and  international  air  tickets
for crew members joining foreign ships; the need for entering
into an agreement with agents abroad; the mode of payments
received  ant  eh  commission/profit  earned  on  the  tickets
booked by them through the overseas shipping companies and
also how their commission was being remitted either by draft
or telegraphic transfer into their account No.82886 in Bank of
Baroda, Churchgate Branch etc.  I thus find that the statemtns
of the  notice I contain  such inner  and  minute  details, which
could  have  been  given  out  of  his  personal  knowledge  and
could not have been invented by the officers who recorded the
said statements.  Moreover, the statement of the notice No.1
have  been  confirmed  by  the  statements  of  the  other  two
notices  S/Shri  Rajesh  and  Sujeet  Desai,  in  their  respective
statements  given  before  the  Enforcement  Officers.  Even
otherwise  there  is  nothing  on  record  that  might  cast  the
slightest  doubt  on  the  voluntariness  of  the  statements  in
question.   I am, therefore, of the view that the statements in
question  were  given  by  the  respective  three  notices
voluntarily in explanation of the plethora of documents seized
from  the  business/residential  premises  of  the  notices  and
contain  those  details  which  they  wished  to  state.  The
retraction  subsequently  filed  by  the  notices  S/Shri  Rajesh
Desai and Sujeet Desai are merely an afterthought to escape
from the clutches of law and I reject them in toto.”
10. In the appeal filed by the appellants before the FERA Appellate
Tribunal  also  a  contention  as  to  the  voluntary  nature  of  the
statements  made  by  the  appellants  was  urged  on  their  behalf  but
rejected by the Tribunal in the following words:
“It  is  argued  that  the  statements  given  by  Shri  Arun  Desai,
Rajesh  Desai  and  Sujeet  Desai  were  not  the  voluntary  ones
which  were  dictated  by  the  Enforcement  Officers  and  were
obtained under threats and coercion which were subsequently
retracted  and  that  there  was  no  corroborative  material  toPage 12
support  them.    But  we  find  no  force  in  these  arguments
because the appellants, in their statements, had explained in
detail  the  functioning  of  M/s.  Telstar  Travels,  which  was
engaged  in  booking  of  domestic  and  international  air  tickets
for crew members joining foreign ships, the need for entering
into an agreement with agents abroad, the mode of payments
received and the commission earned on the tickets booked by
them  through  the  Over  Shipping  Companies  and  how  their
commission  was  remitted  through  Banking  channel.
Moreover, they  were written  in their own handwriting and in
the language known to them.  The statements contained such
inner and minute details which could have been given out of
their personal knowledge and could not have been invented by
the officers of the Department.”  
11. The  Tribunal  has  relying  upon  the  decision  of  this  Court  in
K.T.M.S.  Mohd.  v.  Union  of  India  (1992)  3  SCC  178, K.I.
Pavunny  v.  Assistant  Collector  (HQ),  Central  Excise
Collectorate,  Cochin  (1997)  3  SCC  721 held  that  retracted
statements could furnish a sound basis for recording a finding against
the party making the statement. There is, in that view, no gainsaying
that the Adjudicating Authority and the Appellate Tribunal have both
correctly appreciated the legal position and applied the same to the
case at hand, while holding that the statements were voluntary and,
therefore,  binding  upon  the  appellants.   Decision  of  this  Court  in
Vinod  Solanki  v.  Union  of  India  &  Anr.   (2008)  16  SCC  537
relied upon by Mr. Diwan does not lend any help to the appellants.
The decision is an authority for the proposition that a person accused
of commission of an offence is not expected to prove to the hilt that
confession had been obtained from him by an inducement, threat orPage 13
promise  by  a  person  in  authority.  The  burden  is  on  the
authority/prosecution to show that the statement sought to be relied
upon  was  voluntary  and  that  the  Court  while  examining  the
voluntariness of the statement is required to consider the attending
circumstances and all other relevant facts. The decision does not hold
that  even  when  a  statement  is  founded  upon  consideration  of  the
relevant facts and circumstances and also found to be voluntary, it
cannot  be  relied  upon  because  the  same  was  retracted.  We  may
usefully refer to the legal position stated in the following paragraph
by this Court in K.T.M.S. Mohd. & Anr. (supra):
“34.  We think it is not necessary to recapitulate and recite all
the decisions on this legal aspect. But suffice to say that  the
core of all the decisions of this Court is to the effect that the
voluntary  nature  of  any  statement  made  either  before  the
Custom  Authorities  or  the  officers  of  Enforcement  under  the
relevant provisions of the respective Acts is a sine quo non to
act on it for any purpose and if the statement appears to have
been obtained by any inducement, threat, coercion or by any
improper means that statement must be rejected brevi manu.
At  the  same  time,  it  is  to  be  noted  that  merely  because  a
statement is retracted, it cannot be recorded as involuntary or
unlawfully obtained. It is only for the maker of the statement
who alleges inducement, threat, promise etc. to establish that
such improper means has been adopted. However, even if the
maker  of  the  statement  fails  to  establish  his  allegations  of
inducement,  threat  etc.  against  the  officer  who  recorded  the
statement,  the  authority  while  acting  on  the  inculpatory
statement  of  the  maker  is  not  completely  relieved  of  his
obligations  in  at  least  subjectively  applying  its  mind  to  the
subsequent  retraction  to  hold  that  the  inculpatory  statement
was not extorted. It thus boils down that the authority or any
Court  intending  to  act  upon  the  inculpatory  statement  as  a
voluntary one should apply its mind to the retraction and reject
the  same  in  writing. It  is  only  on  this  principle  of  law,  this
Court  in  several  decisions  has  ruled  that  even  in  passing  a
detention order on the basis of an inculpatory statement of a
detenu  who  has  violated  the  provisions  of  the  FERA  or  thePage 14
Customs  Act  etc.  the  detaining  authority  should  consider  the
subsequent  retraction  and record its opinion  before accepting
the inculpatory statement lest the order will be vitiated...”
(emphasis supplied)
12. That  brings  us  to  the  submission  of  Mr.  Diwan  that  the
arrangement arrived at between the Appellant Company, on the one
hand, and  Clyde Travels Ltd.  and  Bountiful Ltd., on  the  other, was
commercial  in  nature  which  the  Adjudicating  Authority  and  the
Tribunal had failed to appreciate in its true and correct perspective.
There was, according to Mr. Diwan, no real basis for the Adjudicating
Authority  and  the  Tribunal  to  hold  that  Bountiful  was  a  paper
company and that it was being controlled by the Desais from India.
Mr. Diwan made a strenuous attempt to persuade us to reverse the
findings  of  fact  recorded  by  the  Adjudicating  Authority  and  the
Tribunal on this aspect. We regret our inability to do so.  Whether or
not  Bountiful  Ltd.  is  a  paper  Company  and  whether  or  not  it  was
controlled and operated by the appellants is essentially a question of
fact  to  be  determined  on  the  basis of the  material collected  in  the
course of the investigation.  The Adjudicating Authority and Tribunal
have  answered  that  question  in  the  affirmative  taking  into
consideration  the  statements  made  by  the  appellants  as  also  the
documents  that  were  recovered  from  their  premises.  All  these
documents and  incriminatory circumstances  have  been  discussed  inPage 15
the following passage by the Adjudicating Authority:
“...A perusal of the records indicate that various incriminating
documents  together  with  the  Indian  currencies  were  seized
from the office premises of M/s Telstar Travels and also from
the residence of Shri Arun Desai, the Managing Director of the
said company. All the three noticees S/Shri Arun Desai and his
two  sons  Rajesh  and  Sujeet  Desai,  have  given  their
statements before the Enforcement  Officer, in explanation  of
the said seized documents.  It is also noticed that the seizure
of  documents  and  currencies  had  not  been  disputed  by  the
notices  at  any  point  of  time.   Shri  Rajesh  Desai, son of  the
said  Shri  Arun  N.  Desai  and  one  of  the  noticees  in  the
impugned SCN, while explaining page No.18 of the bunch  of
documents  marked  ‘G’,  had  clearly  admitted  that  it  was  the
message from Shri Sirish Shah from London informing that US
$  33884  has  been  credited  on  14.11.94  to  the  account  of
Bountiful.   Similarly  page  Nos.30  &  34  of  file  marked  ‘I’,
contain instructions to transfer certain amounts to the account
of Clyde Travels Ltd. Glasgow.  When Shri Rajesh Desai was
questioned as to how could issue such instructions in respect
of  the  account  of  Bountiful  Ltd.,  he  clearly  explained  in  his
statement  dated  24.8.95  that  the  account  No.10975  of
Bountiful at Geneva was an account of a paper company held
by him for the sole purpose of receiving and making payments
in respect of seamen airline tickets which were obtained at the
very cheap rates from M/s Clyde Travels, Glasgow, with whom
M/s Telstar had a tie up since August  1994;  that  Shri Sirish
Shah was a Chartered Accountant in London, who was known
to  both  M/s.  Clyde  Travels  and  Telstar;  that  the  said  Shri
Sirish  Shah  was  used  by  him  for  giving  instructions  to  the
bank for operating the account of Bountiful Ltd. At Switzerland
that the last balance for the said account of Bountiful was US$
98761.70.  Shri Rajesh Desai further explained the page Nos.
at 111 to 125 of file marked ‘E’ seized from the office of M/s.
Telstar  Travels.  P.  Ltd.,  in  his  statement  dated  24.8.95,
admitting  the  same  to  be  the  statement  of  account  of
Bountiful  Ltd.  with  Banque  De  Financement,  Geneva,  which
showed  credits  of  amounts  remitted  by  various  overseas
shipping  companies  against  PTA  tickets  purchased  for  their
crew;  that  the  said  credits  represented  amounts  transferred
from the bank accounts of their overseas shipping companies;
that  the  debits  represented  the  amounts  transferred  to  the
Bank of Scotland Glasgow which is the account of M/s. Clyde
Travels  Ltd.  in  Glasgow;  that  he  was  the  person  giving
instructions  to  Shri  Sirish  Shah,  Chartered  Accountant  of
P.S.J.  Alexandar  &  Co,  London  to  transfer  funds  from  the
account  in  Geneva  of M/s.  Bountiful  to various places  which
included transfer of funds to M/s Clyde Travels Ltd, Glasgow
which forms a major portion of transfer for PTA tickets.”Page 16
13. Dealing  with  the  invoices  issued  by  Bountiful  Ltd.  to  M/s.
Ocean Air Ltd. and M/s Scot Travel Ltd., Hong Kong, the Adjudicating
Authority held that appellant Telestar Pvt. Ltd. had issued directions
that the amount payable be deposited to the credit of M/s Bountiful
Ltd. The Adjudicating Authority observed:
“…  I also find  from the records, certain  invoices  of Bountiful
ltd. Drawn on M/s. Ocean Air Ltd. and on M/s. Scot Travel Ltd,
Hong  Kong,  which  were  produced  by  Miss  Anita  Chotrani
Travel Co-ordinator of M/s. Denklau Marine Services, Mumbai,
which contain directions of M/s Telstar to credit the amount of
the bill to the A/c No.10975 of M/s Bountiful Ltd, at Geneva.
A  scrutiny  of  the  bills  produced  by  the  said  Miss  Anita
Chotrani, given by Telstar, it was found that several air tickets
of  Air  India  booked  by  Telstar  were  also  billed  in  these
Bountiful invoices and payment of these Air India tickets have
been directed to the Geneva  Account.  Moreover the bills do
not  bear  any  signatures  nor  the  identity  of  the  person
allegedly managing the billing on behalf of Bountiful Ltd.”
14. The  Adjudicating  Authority  has  also  noticed  and  relied  upon
incriminating  circumstances  like  instructions  issued  by  appellant
Telestar  to  Bountiful  to  remit  an  amount  of  Rs.4,74,033/-  to  M/s
Aarnav  Shipping  Company  towards  repairs  of  MV  Rizcun  Trader,  a
ship owned by one of their principals M/s United Ship Management,
Hongkong.  Similarly a payment of US$ 12500/- made from Bountiful
Account to Mustaq Ali Najumden is also evidenced and was made on
the  instructions  of  appellant-Shri  Rajesh  Desai,  which  the  latter
explained  to  be  kickbacks  paid  to  overseas  shipping  company  for
giving ticketing business to Telestar.Page 17
15. Suffice  it  to  say  that  there  may  be  sufficient  evidence  on
record for the Adjudicating Authority and the Tribunal to hold that the
appellants were indeed guilty of violating the provisions of FERA that
called for imposition of suitable penalty against them.  It was not the
case  of  the  appellants  that  the  findings  were  unsupported  by  any
evidence  nor  was  it  their  case  that  the  statements  made  by  the
appellants  were  un-corroborated  by  any  independent  evidence
documentary or otherwise.  In the circumstances, therefore, we see
no  reason  to  interfere  with  the  concurrent  findings  of  fact  on  the
question  whether  Bountiful  was  or  was  not  a  paper  company
controlled by the appellants from India.
16. That  brings  us  to  the  third  limb  of  attack  mounted  by  the
appellants against the impugned orders.  It was argued by Mr. Diwan
that while holding that Bountiful Ltd. was a paper Company and was
being controlled and operated from India by the appellants through
Shri  Sirish  Shah,  the  Adjudicating  Authority  had  relied  upon  the
statements  of  Miss  Anita  Chotrani  and  Mr.  Deepak  Raut,  and  a
communication received from the Indian High Commission in London.
These  statements  and  the  report  were,  according  to  Mr.  Diwan,
inadmissible in evidence as the appellant’s request for an opportunity
to cross examine these witness had been  unfairly declined, thereby
violating the principles of natural justice that must be complied withPage 18
no matter the strict rules of Evidence Act had been excluded from its
application.  Inasmuch as evidence  that was inadmissible had been
relied upon, the order passed by the Adjudicating Authority and the
Tribunal were vitiated. Reliance in support was placed by Mr. Diwan
upon the decisions of this Court in New India Assurance Company
Ltd.  v.  Nusli  Neville  Wadia  and  Anr.  (2008) 3  SCC  279,  S.C.
Girotra v. United 1995 Supp. (3) SCC 212, Lakshman Exports
Ltd. v. Collector of Central Excise (2005) 10 SCC 634, and M/s
Bareilly Electricity Supply Co.  Ltd. v.  The  Workmen and  Ors.
(1971) 2 SCC 617.    
17. Mr.  Malhotra,  on  the  other  hand,  argued  that  the  right  of
cross-examination  was  available  to  a  party  under  the  Evidence  Act
which had no application to adjudication proceedings under FERA. He
relied upon the provisions of Section 51 of the Act and Adjudication
Rules framed thereunder in this regard.  He also placed reliance upon
a  decision  of  this  Court  in  Surjeet  Singh  Chhabra  v.  Union  of
India and Ors. (1997) 1 SCC 508  to argue that cross-examination
was unnecessary in certain circumstances  such as the  one  at  hand
where  all  material  facts  were  admitted  by  appellants  in  their
statements before the concerned authority.      
18. There is, in our opinion, no merit even in that submission of
the  learned  counsel.  It  is  evident  from  Rule  3  of  the  AdjudicationPage 19
Rules  framed  under  Section  79  of  the  FERA  that  the  rules  of
procedure do not apply to adjudicating proceedings.  That does not,
however, mean that in a given situation, cross examination may not
be permitted to test the veracity of a deposition sought to be issued
against  a  party against whom action  is proposed to  be  taken.  It is
only  when  a  deposition  goes  through  the  fire  of  cross-examination
that  a  Court  or  Statutory  Authority  may be  able  to  determine  and
assess its probative value. Using a deposition that is not so tested,
may therefore amount to using evidence, which the party concerned
has had no opportunity to question.  Such refusal may in turn amount
to violation of the rule of a fair hearing and opportunity implicit in any
adjudicatory process, affecting the right of the citizen.  The question,
however, is whether failure to permit the party to cross examine has
resulted in any prejudice so as to call for reversal of the orders and a
de novo enquiry into the matter. The answer to that question would
depend upon the facts and circumstances of each case. For instance,
a similar plea raised in  Surjeet Singh Chhabra v. Union of India
and Ors. (1997) 1 SCC 508 before this Court did not cut much ice,
as this Court felt that cross examination of the witness would make
no  material  difference  in  the  facts  and  circumstances  of  that  case.
The Court observed:Page 20
“3. It  is  true  that  the  petitioner  had  confessed  that  he
purchased the gold and had brought it. He admitted  that  he
purchased  the  gold  and  converted  it  as  a  kara. In  this
situation, bringing the gold without permission of the authority
is  in  contravention  of  the  Customs  Duty  Act  and  also  FERA.
When  the  petitioner  seeks  for  cross-examination  of  the
witnesses who have said that the recovery was made from the
petitioner, necessarily an opportunity requires to be given for
the cross-examination of the witnesses as regards the place at
which  recovery  was  made.  Since  the  dispute  concerns  the
confiscation  of the  jewellery,  whether  at  conveyor  belt  or at
the green channel, perhaps the witnesses were required to be
called.  But  in  view  of  confession  made  by  him,  it  binds him
and, therefore, in the facts and circumstances of this case the
failure  to  give  him  the  opportunity  to  cross-examine  the
witnesses  is not  violative  of principle of  natural  justice.  It is
contended  that  the  petitioner  had  retracted  within  six  days
from  the  confession.  Therefore,  he  is  entitled  to  crossexamine  the  panch  witnesses  before  the  authority  takes  a
decision  on  proof  of  the  offence.  We  find  no  force  in  this
contention.  The  customs  officials  are not  police  officers.  The
confession,  though  retracted,  is  an  admission  and  binds  the
petitioner.  So  there  is  no  need  to  call  panch  witnesses  for
examination and cross-examination by the petitioner.”
19. We  may  also  refer  to  the  decision  of  this  Court  in  M/s
Kanungo & Company v. Collector of Customs and Ors. (1973)
2 SCC 438.  The appellant in that case was carrying on business as a
dealer, importer and repairer of watches in Calcutta. In the course of
a  search  conducted  by  Customs  Authorities  on  the  appellant's
premises, 280 wrist watches of foreign make were confiscated. When
asked to show cause against the seizure of these wrist watches, the
appellants  produced  vouchers  to  prove  that  the  watches  had  been
lawfully purchased by them between 1956 and 1957. However, upon
certain  enquiries,  the  Customs  Authorities  found  the  vouchersPage 21
produced  to  be  false  and  fictitious.  The  results  of  these  enquiries
were  made  known to  the  appellant,  after  which  they  were  given  a
personal  hearing  before  the  adjudicating  officer,  the  Additional
Collector of Customs. Citing that  the  appellant made no attempt in
the personal hearing to substantiate their claim of lawful importation,
the  Additional  Collector  passed  an  order  confiscating  the  watches
under Section 167(8), Sea Customs Act, read with Section 3(2) of the
Imports and Exports (Control) Act, 1947. The writ petition filed by the
appellant to set aside the said order was allowed by a Single Judge of
the  High  Court  on  the  ground  that  the  burden  of  proof  on  the
Customs Authorities had not been discharged by them. The Division
Bench  of the  High  Court reversed this order on appeal stating that
the  burden  of proving lawful importation  had  shifted  upon  the  firm
after  the  Customs  Authorities  had  informed  them  of  the  results  of
their  enquiries.  In  appeal  before  this  Court,  one  of  the  four
arguments  advanced  on  behalf  of  the  appellant  was  that  the
adjudicating officer had breached the principles of natural justice by
denying  them  the  opportunity  to  cross-examine  the  persons  from
whom enquiries were made by the Customs Authorities. The Supreme
Court rejected this argument stating as follows:
“12. We may first deal with the question of breach of natural
justice. On the  material  on record, in  our opinion, there hasPage 22
been  no  such  breach.  In  the  show-cause  notice  issued  on
August  21,  1961,  all  the  material  on  which  the  Customs
Authorities  have  relied  was  set  out  and  it  was  then  for  the
appellant to give a suitable explanation. The complaint of the
appellant  now  is  that  all  the  persons  from  whom  enquiries
were  alleged  to  have  been  made  by  the  authorities  should
have  been  produced  to  enable  it  to  cross-examine  them.  In
our-opinion,  the  principles  of  natural  justice  do  not  require
that  in  matters  like  this  the  persons  who  have  given
information  should  be  examined  in  the  presence  of  the
appellant or should be allowed to be cross-examined by them
on  the  statements  made  before  the  Customs  Authorities.
Accordingly  we  hold  that  there  is  no  force  in  the  third
contention of the appellant.”
   
20. Coming to  the  case  at  hand,  the  Adjudicating  Authority  has
mainly  relied  upon  the  statements  of  the  appellants  and  the
documents seized in the course of the search of their premises.  But,
there is no dispute that apart from what was seized from the business
premises  of  the  appellants  the  Adjudicating  Authority  also  placed
reliance  upon  documents  produced  by  Miss  Anita  Chotrani  and  Mr.
Raut.  These  documents  were,  it  is  admitted  disclosed  to  the
appellants who were permitted to inspect the same. The production of
the documents duly confronted to the appellants was in the nature of
production  in terms of Section  139  of the  Evidence  Act,  where  the
witness  producing  the  documents  is  not  subjected  to  cross
examination.  Such  being  the  case,  the  refusal  of  the  Adjudicating
Authority to permit cross examination of the witnesses producing the
documents  cannot  even  on  the  principles of Evidence  Act  be  found
fault  with.   At  any  rate,  the  disclosure  of  the  documents  to  thePage 23
appellants and the opportunity given to them to rebut and explain the
same  was  a  substantial  compliance  with  the  principles  of  natural
justice.  That  being so, there  was and  could be  no prejudice  to the
appellants nor was any demonstrated by the appellants before us or
before the Courts below.  The third limb of the case of the appellants
also in that view fails and is rejected.
21. Mr.  Diwan  lastly  argued  that  the  penalty  imposed  was
disproportionate  to  the  nature  of  the  violation  and  that  this  Court
could at least, interfere  to that extent.  We do not see  any reason
much less a compelling one to interfere with the quantum of penalty
imposed  upon  the  appellants  by  the  Tribunal.   The  Adjudicating
Authority  had,  as  noticed  earlier,  imposed  a  higher  penalty.  The
Tribunal  has  already  given  relief  by  reducing  the  same  by  50%.
Keeping in view the nature of the violations and the means adopted
by  the  respondent  to  do  that,  we  see  no  room  for  any  further
leniency.
22. In  the  result,  these  appeals  fail  and  are,  hereby,  dismissed
with  costs  assessed  at  Rs.50,000/-  in  each  appeal.  Cost  to  be
deposited within two months with the SCBA Lawyers’ Welfare Fund.
                
               ……..………….……….
…..…J.
         (T.S. Thakur)Page 24
      …………………………..…..…J.
             (M.Y. Eqbal)
New Delhi,
February 13, 2013