TaxTMI 
TaxTMI 
2010 (10) TMI 156
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....consider and decide the issue that arises for our consideration, it is just and necessary to briefly notice the relevant facts : Part I : Background facts 4. A complaint in writing has been filed by an officer authorised against the appellants under sub-section (3) of section 16 of the Foreign Exchange Management Act, 1999 (hereinafter referred to as "FEMA" or "the Act") in which certain serious allegations have been levelled against the appellants which we are not required to notice in detail. The gravamen of the com-plaint is that the appellants along with others, jointly and severally, without general or special permission of the Reserve Bank ofIndiadealt in and acquired foreign exchange totaling US $ 8,98,027.79 in respect of two oil contracts with SOMO of Iraq. Out of the said amount, the appellants and others jointly and severally, without the required permission of the Reserve Bank of India made payment and transferred foreign exchange of US $ 7,48,550 to the credit of specified account with the Jordan National Bank, Jordan, i.e., to persons resident outside India, in fulfillment of precondition imposed by SOMO for allocation of oil under the aforesaid two co....
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....djudicating authority also be supplied before taking any further steps in the matter. 8. The adjudicating authority, by the impugned proceedings, made it clear that the provisions of the FEMA and the Rules provide for supply of the grounds, nature of contravention and copies of documents relied upon only in order to enable the noticee to make effective representation and the said requirement has been met. The adjudicating authority also made it clear that it is bound to conduct proceedings in accordance with the statute and the Rules and the noticees in any case are not entitled to ask the authority to deviate from the said procedure laid down in the FEMA and the Rules. The authority clearly put the appellants on notice that it shall proceed with the inquiry in accordance with the provisions of the Act and the Rules. 9. The appellants promptly challenged the impugned order of the adjudicating authority in petitions filed under article 226 of the Constitution of India resulting in the impugned judgment of the Delhi High Court. Hence these appeals. 10. Leave granted. 11. We have heard Shri U. U. Lalit, learned senior counsel for the appellants and Shri Gopal ....
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....ject and suggest the required changes. The taskforce submitted its report in 1994. On the recommendations of the taskforce and keeping in view the significant developments that had taken place since 1993, the Foreign Exchange Management Bill was introduced in Parliament. The Statement of Objects and Reasons reveals that the provisions of the Bill aim at consolidating and amending the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange markets inIndia. The Foreign Exchange Management Bill having been passed by both the Houses of Parliament, received the assent of the President on December 29, 1999 and it came into force on the first day of June, 2000 as the Foreign Exchange Management Act, 1999 (42 of 1999). 15. Chapter II of the FEMA deals with "Regulation and management of foreign exchange". Chapter III thereof deals with "authorized person". Chapter IV deals with "Contravention and penalties". Section 13 of the FEMA which is relevant for our present purposes reads as under : "13. Penalties-(1) If any person contravenes any provision of this Act....
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....is of opinion that the said person is likely to abscond or is likely to evade in any manner, the payment of penalty, if levied, it may direct the said person to furnish a bond or guarantee for such amount and subject to such conditions as it may deem fit. (2) The Central Government shall, while appointing the adjudicating authorities under sub-section (1), also specify in the order published in the Official Gazette their respective jurisdictions. (3) No adjudicating authority shall hold an enquiry under subsection (1) except upon a complaint in writing made by any officer authorized by a general or special order by the Central Government. (4) The said person may appear either in person or take the assistance of a legal practitioner or a chartered accountant of his choice for presenting his case before the adjudicating authority. (5) Every adjudicating authority shall have the same powers of a civil court which are conferred on the Appellate Tribunal under subsection (2) of section 28 and- (a) all proceedings before it shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code, 1860 (45 of 18....
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.... or any condition subject to which an authorization is issued by the Reserve Bank of India in respect of which the contravention is alleged to have taken place. (5) The adjudicating authority shall, then, give an opportunity to such person to produce such documents or evidence as he may consider relevant to the inquiry and if necessary, the hearing may be adjourned to a future date and in taking such evidence the adjudicating authority shall not be bound to observe the provisions of the Indian Evidence Act, 1872 (1 of 1872). (6) While holding an inquiry under this rule the adjudicating authority shall have the power to summon and enforce attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document which in the opinion of the adjudicating authority may be useful for or relevant to the subject matter of the inquiry. (7) If any person fails, neglects or refuses to appear as required by sub-rule (3) before the adjudicating authority, the adjudicating authority may proceed with the adjudication proceedings in the absence of such person after recording the reasons for doing so. (8) If, upon co....
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....vable property situated outsideIndia. That if any person contravenes any provision of the Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under the Act, or contravenes any condition subject to which an authorization is issued, he shall, upon adjudication, be liable to a penalty. For the purpose of adjudication, the Central Government may, by an order, appoint officers of the Central Government as the adjudicating authorities for holding inquiry in the manner prescribed after giving the person alleged to have committed contravention against whom a complaint has been made, a reasonable opportunity of being heard for the purpose of imposing any penalty. 19. That a bare reading of the relevant provisions of the Act and the Rules makes it abundantly clear that the manner, method and procedure of adjudication are completely structured by the statute and the Rules. The authority is bound to follow the prescribed procedure under the statute and the Rules and is not free and entitled to devise its own procedure for making inquiry while adjudicating under section 13 of the Act since it is under legislative mandate to underta....
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....bsp; 21. It is true that rule 4 does not require the adjudicating authority to supply copies of any documents along with the show-cause notice. The rule does not require the adjudicating authority even to furnish any list of documents upon which reliance has been placed by him to set the law in motion. Does it mean that the adjudicating authority is not required to furnish the list of documents and copies thereof upon which reliance has been placed by him to issue notice of show cause to a person against whom a complaint has been made by the authorized officer ? Whether the principles of natural justice and doctrine of fairness require supply of documents upon which reliance has been placed at the stage of show-cause notice ? "It is not possible to lay down rigid rules as to when the principles of natural justice are to apply : nor as to the scope of extent. Everything depends on the subject-matter"1 (seeReginav. Gaming Board for Great Britain Exparte Benaim and Khaida2). Observed Lord Denning MR. : "Their application, resting as it does upon statutory implication, must always be in conformity with the scheme of the Act and with the subject-matter of the case". Even in the applica....
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....is firmly established and recognized by this court in Dhakeswari Cotton Mills Ltd. v. CIT1. However, disclosure not necessarily involves supply of the material. A person may be allowed to inspect the file and take notes. Whatever mode is used, the fundamental principle remains that nothing should be used against the person which has not brought to his notice. If relevant material is not disclosed to a party, there is prima facie unfairness irrespective of whether the material in question arose before, during or after the hearing. The law is fairly well settled if prejudicial allegations are to be made against a person, he must be given particulars of that before hearing so that he can prepare his defence. However, there are various exceptions to this general rule where disclosure of evidential material might inflict serious harm on the person directly concerned or other persons or where disclosure would be breach of confidence or might be injurious to the public interest because it would involve the revelation of official secrets, inhibit frankness of comment and the detection of crime, might make it impossible to obtain certain classes of essential information at all in the future....
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....ibed one. As noticed, a reason-able opportunity of being heard is to be provided by the adjudicating authority in the manner prescribed for the purpose of imposing any penalty as provided for in the Act and not at the stage where the adjudicating authority is required merely to decide as to whether an inquiry at all be held into the matter. Imposing of penalty after the adjudication is fraught with grave and serious consequences and therefore, the requirement of providing a reasonable opportunity of being heard before imposition of any such penalty is to be met. In contradistinction, the opinion formed by the adjudicating authority whether an inquiry should be held into the allegations made in the complaint are not fraught with such grave consequences and therefore the minimum requirement of a show-cause notice and consideration of cause shown would meet the ends of justice. Aproper hearing always include, no doubt, a fair opportunity to those who are parties in the controversy for correcting or contradicting anything prejudicial to their view. Lord Denning has added : "If the right to be heard is to be a real right which is worth anything, it must carry with it a right in the accu....
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....pon the observations so made by this court which in our considered opinion, are not relevant for our purpose. One cannot pick a sentence from here and there in the judgment and characterize it to be the ratio of the case. The observations made in that case were in the context of criminal investigation which was found to be unfair and illegal. [1. See [2006] 7 SCC 172. 2. See page 178 of [2006] 7 SCC. 3.See [2008] 17 SCC 348.] 30. In Union of India v. Ranu Bhandari3 this court found that some of the vital documents which have a direct bearing on the detention order, had not been placed before the detaining authority and the detenu was entitled to question such omission. It was the case of the detenu that if his representation and the writ petition had been placed before the detaining authority which according to him contained his entire defence to the allegations made against him, the same may have weighed with the detaining authority as to the necessity of issuing the order of detention at all. It is under those circumstances, this court expressed its view that on account of non-supply of those documents, the detenu was prevented from making an effective representation a....
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....culars. In reply thereto, the Income-tax Officer expressed his inability to provide the required documents on the ground that they were not readily available with the officer. It is under those circumstances, this court observed that the failure to supply important piece of information to the appellants has prejudiced the appellants and to this extent the principles of natural justice would stand violated. From the facts in that case, it is clear that particular documents containing important piece of information which would have enabled the noticee therein to offer a proper explanation were required to be made available. The nature of the document, its relevancy being a document prepared at the time of raid and its mention in the show-cause notice were taken into consideration. It was a basic document based on which the law was set into motion against the appellants therein. It is for that reason this court was of the view that such an important document could not have been withheld from the appellants therein. [1. See headnote of [2008] 17 SCC. 2. See [2003] 117 Comp Cas 1, 17 ; [2003] 6 SCC 230. 3. See [1997] 11 SCC 276.] 34. In support of his submissions learned seni....
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.... hearing, it appeared that a public interest immunity inquiry would be necessary as the prosecution wished to withhold documents from disclosure to the defence on that ground. The judge ruled, without having looked in detail at the documents provided by the prosecution, that unless independent counsel were appointed, so as to introduce an adversarial element into the public interest immunity inquiry, there was a risk that the trial would be perceived to be unfair and therefore violate article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms, 1950 (as set out in Schedule 1 to the Human Rights Act 1998) (the Convention), which provided for the right to a fair trial. The judge, therefore, ordered that special counsel should be appointed. The Crown's appeal against the judge's ruling was successful. The defendants appealed to the House of Lords contending inter alia that it was incompatible with article 6 of the Convention for a judge to rule on a claim to public interest immunity in the absence of adversarial argument on behalf of the accused where the material which the prosecution was seeking to withhold was or might be relevant to a disput....
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....s in any criminal trial. The judgment has no application as to the fact situation and the law applicable in theUnited Kingdomis not applicable to either the adjudicatory proceedings or even criminal trials in this country. 39. On a fair reading of the statute and the Rules suggests that there is no duty of disclosure of all the documents in possession of the adjudicating authority before forming an opinion that an inquiry is required to be held into the alleged contraventions by a noticee. Even the principles of natural justice and concept of fairness do not require the statute and the Rules to be so read. Any other interpretation may result in defeat of the very object of the Act. Concept of fairness is not a one way street. The principles of natural justice are not intended to operate as roadblocks to obstruct statutory inquiries. Duty of adequate disclosure is only an additional procedural safeguard in order to ensure the attainment of the fairness and it has its own limitations. The extent of its applicability depends upon the statutory framework. Hegde J. speaking for the Supreme Court propounded: "In other words, they (principles of natural justice) do not supplant th....
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....ority is satisfied that the person has committed the contravention, he may by order in writing accordingly impose such penalty as he thinks fit in accordance with the provisions of the Act which of course is not final as it is subject to appeal. Practice of inclusion of list of judgments in compilations not cited at the Bar 41. Before parting with the judgment, we are constrained to observe with some reluctance about the recent practice and procedure of including list of authorities in the compilation without the leave of the court. In many a case, even senior counsel may not be aware of inclusion of such authorities in the compilation. In our considered opinion, this court is not required to consider such decisions which are included in the compilation which were not cited at the Bar. In the present case, a number of judgments are included in the compilation which were not cited at the Bar by any of counsel. We have not dealt with them as we are not required to do so. At any rate, all those judgments deal with the procedural aspects and concern the interpretation for various provisions of the Code of Criminal Procedure applicable to a criminal trial and they are totally irreleva....