2013 (2) TMI 396 - SC - FEMA

Appeals dismissed for FERA violations; evidence shows offshore paper company control and directed payments; Section 51 and Rule 3 complied

SC dismissed the appeals, finding sufficient evidence of FERA violations, including control of an offshore paper company and payments directed by the ... Violation of FERA - Ex parte Adjudication Order and Delay in Pronouncement - compliance with the principles of natural justice - Whether process of purchase of tickets of appellant was a commercial arrangement that was legally permissible? - Appellant carries on a travel agency and specialises in booking of tickets for crew members working on ships - assessee contested for suffering from any illegality or material irregularity causing prejudice - Held 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 it is find that the contention of assessee appeleant 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. 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 thus no irregularity causing prejudice proved. Bountiful Ltd. was a paper company and its financial control lay in their hands - clear violation of the provisions of FERA - Held that:- The Adjudicating Authority has noticed and relied upon incriminating circumstances like instructions issued by appellant Telestar to Bountiful to remit an amount of ₹ 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. 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, 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. Non granting of opportunity to cross examine the witness - violating the principles of natural justice - Held that:- 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 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. The Adjudicating Authority had 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, no room for any further leniency. These appeals fail and are, hereby, dismissed with costs assessed at ₹ 50,000/- in each appeal to be deposited within two months with the SCBA Lawyers’ Welfare Fund. Issues: (i) Whether delayed pronouncement of the adjudication order rendered it ex parte or invalid; (ii) Whether retracted statements of the appellants could be acted upon by the Adjudicating Authority and Tribunal; (iii) Whether reliance on documents/written communications produced by third parties without permitting cross-examination vitiated the adjudication for breach of natural justice; (iv) Whether findings that Bountiful Ltd. was a paper company controlled from India were unsupported by evidence; (v) Whether the penalty imposed was disproportionate.Issue (i): Whether delayed pronouncement of the adjudication order rendered it ex parte or invalid.Analysis: The question of delay was examined on whether prejudice flowed from the delay and whether statutory requirements for hearing under Section 51 and Rule 3 were complied with. The appellate fora had not accepted delay as ground earlier and appellants did not seek relief on delay before them. The appellants did not apply to place additional documents before the Adjudicating Authority when the hearing had concluded.Conclusion: Delay in pronouncement, absent demonstrated prejudice or failure of statutory hearing, does not vitiate the adjudication; this ground fails in favour of the respondent.Issue (ii): Whether retracted statements of the appellants could be acted upon.Analysis: Authorities were applied holding that voluntariness is a precondition to acting upon inculpatory statements and that mere retraction does not automatically render a statement involuntary. The adjudicating authorities examined voluntariness and the subsequent retractions and gave reasoned findings rejecting retraction based on surrounding circumstances and corroborative material.Conclusion: Retracted statements, if found voluntary and considered with corroborative material, may be relied upon; this conclusion is in favour of the respondent.Issue (iii): Whether reliance on documents produced by third parties without permitting cross-examination violated natural justice.Analysis: The adjudicatory regime under the Adjudication Rules excludes strict application of Evidence Act procedures, but cross-examination may be granted when necessary. Here documents produced by third parties were disclosed to appellants and available for inspection; production was in the nature of Section 139 of the Evidence Act and opportunity to rebut was afforded. The Court evaluated whether non-permission to cross-examine caused prejudice.Conclusion: Non-permission to cross-examine the third-party producers did not cause demonstrable prejudice where documents were disclosed and opportunity to rebut was given; this conclusion is in favour of the respondent.Issue (iv): Whether findings that Bountiful Ltd. was a paper company controlled from India were unsupported by evidence.Analysis: The factual finding was based on appellants' statements, seized documents, invoices, remittance instructions and other incriminating material. The Tribunal and Adjudicating Authority assessed these materials and reached concurrent findings of fact.Conclusion: Concurrent findings that Bountiful Ltd. was a paper company controlled by the appellants are supported by evidence and are sustained; this conclusion is in favour of the respondent.Issue (v): Whether the penalty imposed was disproportionate.Analysis: The Tribunal had already reduced the Adjudicating Authority's higher penalty by 50% after reappraisal. The Court considered nature and means of violations and the relief already granted by the Tribunal.Conclusion: No further interference with quantum of penalty is warranted; this conclusion is in favour of the respondent.Final Conclusion: The substantive challenges to the adjudication, evidentiary reliance and penalty have been examined and rejected after scrutiny of voluntariness, corroboration and absence of prejudice; no interference with the concurrent findings or reduced penalty is warranted.Ratio Decidendi: Where inculpatory statements are found to be voluntary and are corroborated by independent documents or circumstances, retraction alone does not preclude reliance on them; non-admission of cross-examination of third-party producers does not vitiate adjudication if documents are disclosed, opportunity to rebut is given and no prejudice is shown.