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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 14th 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  28th 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  Deputy

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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

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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.

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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 an

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order on 29th 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  Foreign

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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 14th 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

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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 argue

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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 delay

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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 the

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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  has

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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  to  

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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 or

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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  the  

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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 in

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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.

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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 with

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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 Adjudication

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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  cross- examine  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  vouchers

Page 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 has  

Page 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  the

Page 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)

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     …………………………..…..…J.              (M.Y. Eqbal)

New Delhi, February 13, 2013