Crl.A. No. 1060/2008 Page 1 of 42 * IN THE HIGH COURT OF DELHI AT NEW DELHI + Crl.Appeal No. 1060/2008 Judgment reserved on: 17.12.2008 % Judgment delivered on: 09.02.2009. Shri V.K. Modi ….Petitioner Through: Mr.L.P.Dhir, Advocate versus The Director, Enforcement Directorate & Anr...... Respondent Through: Mr. Vineet Malhotra, Adv. CORAM: HON'BLE MR. JUSTICE KAILASH GAMBHIR 1. Whether the Reporters of local papers may Yes be allowed to see the judgment? 2. To be referred to Reporter or not? Yes 3. Whether the judgment should be reported Yes in the Digest? KAILASH GAMBHIR, J. * 1 . This order shall dispose of three appeals filed by the appellant under Section 54 of the FERA 1973 r/w Section Crl.A. No. 1060/2008 Page 2 of 42 35 of FEMA 1999, assailing the order passed by the Appellate Tribunal Foreign Exchange, New Delhi under Section 19 (1) of FEMA. Crl. Appeal No. 1059/2008 has been preferred by the company M/s. Modi Rubbers Ltd. while Crl. Appeal No. 1060/2008 and Crl. Appeal No. 1061/2008 have been preferred by the Directors of the said company. 2 . All these appellants had filed appeals before the Appellate Tribunal under Section 19(1) of the Foreign Exchange Management Act challenging the order dated 9.11.2004 passed by the adjudicatory authority whereby the penalty of Rs.1 crore was imposed on the company M/s. Modi Rubbers Ltd. for violating the provisions of Section 8(3) r/w Section 8(4) of FERA, 1973 r/w para 7A, 20(i) of the ECM 1995 r/w Section 68(1) of the FERA and Section 49(3) and (4) of the Foreign Exchange Management Act, and penalty of Rs.5 lacs each on the individual was imposed on the directors under Section 50 of the said Act. Crl.A. No. 1060/2008 Page 3 of 42 3 . Brief facts as set out by the appellants in the present appeals are as under: That M/s Modi Rubber Ltd. (MRL for short) was established in the year 1971. It acquired the latest technology and despite recession in tyre industry, made exports of its well known products to USA, Australia, Italy and Germany etc. It won “CAPEXIL” Award for a record 11 times and also won “National Productivity Award”. In 1995-96 its turnover was Rs. 1020 Crores of which FOB value of exports was Rs. 105.89 Crores, in 1996-97 it was Rs. 128.99 crores, whereas in 1997-98 it was Rs. 101.39 crores. It imported goods and raw material in 1992-93 and 1996-97 etc. and duly submitted each one of the requisite documents for the actual imports in all cases, including the abovementioned items. As a law abiding corporate citizen, it met with all its legal obligations as per the procedure laid down, to the authorixed dealers/banks in good time as required by Para 7A.20 of RBI Exchange Control Manual, 1993. However, it seems Crl.A. No. 1060/2008 Page 4 of 42 somehow that the authorized dealers (Amercian Express and Citibank, in these cases) were inadvertently not able to handle the import documents as required by Para 7A.21 and failed to pass on the documents to RBI which resulted in RBI reporting the 18 so-called items of defaults to the Enforcement Directorate as per the Annexure to Show Cause Notice. The learned Adjudication Officer issued Memorandum dated 29.5.2002 to the appellant and inter alia to its two Directors Shri V.K. Modi and Dr. B.K. Modi charging them all with failure to furnish Exchange Control Copy of the Bills of Entries including items No. 3,4,5,6 & 7 of the Annexure, as proof of confirmation of having imported the goods for which the said amounts were released to the company and held that the company and its aforesaid two directors appear to have contravened the provisions of Section 8(3) and 8(4) read with Section 68(1) of FERA read with Para 7 A 20(i) of Exchange Control Manual and initiated adjudication proceedings u/s 50 of FERA in respect of 18 Crl.A. No. 1060/2008 Page 5 of 42 items. Unfortunately, MRL fell on bad days and simmering labour problem and financial crunch resulted in volcanic labour strike on 7.8.2001 whereby its Plant, Accounts Department and Offices came to be closed. Since then it does not have access to its old records, and the new skeleton staff knows nothing of old records. Its net worth got eroded and it was registered as sick industrial company u/s 3 (1)(o) of Sick Industrial Companies (Special Provisions) Act (SICA for short) with Board for Industrial & Financial Reconstruction (BIFR for short). 4 . The impugned adjudication proceedings have taken place under the shadow of these adverse constraints. 5 . In response to Show Cause Notice issued by Special Director of Enforcement, the MRL submitted requisite documents including Bills of Entry for 16 months, 1 more Bill of Entry was also acceptable to the Special Director. By letter dated 30.06.1993 the MRL proved before the incumbent Special Director that the item Nos. Crl.A. No. 1060/2008 Page 6 of 42 3,4,5 and 6 (American Express) were duly explained to the Bank and Original Bills of Entry were submitted to the Bank. MRL had filed the quadruplicate Bills of Entry in original in respect of all these 4 items vide letter dated 30.06.1993 and also clarified once again by letter dated 30.07.1998. Reference to letter dated 28.10.2003 from American Express to Modi Rubber Ltd. confirms this position. All these documents were placed before the Ld. Special Director but in spite of this conclusive evidence, he was still not satisfied. MRL had been pursuing with the two Banks. Ultimately, American Express Bank sent in letter dated 9.12.2004 to Reserve Bank of India (RBI : for short) enclosing all the requisite documentary evidence, requesting the RBI to regularize the outstanding bills of Entries (for items No.3,4,5 & 6) and delete them from BEF Part-II. In other words, all the four entries No. 3,4,5 & 6 listed for default are now deleted with the Bank or would be deleted with the RBI from BEF Part-II. Similarly in the case of item No.7 ( Citibank), Crl.A. No. 1060/2008 Page 7 of 42 the details were submitted through two Bills of Entry for Ex- Bond Clearance for Home Consumption – one for US $15,000 and other for US$ 10,000. MRL had placed on record copies of the 2 bills of Entry for Ex-Bond Clearance for Home Consumption, first for US$15,000 and the other for US$10,000 evidencing that goods were imported in December, 1996 and Customs duty were paid. Incidentally, the MRL has been able to persuade Citibank to send the requisite documents to RBI which they have done by letter dated 9.12.2004 enclosing copies of the Debit Advice, Bills of Lading. Certificate of Origin, C.A.‟s Certificate and Bill of Entry and Certificate of Origin with Sworn Affidavit etc. etc. for the approval of the RBI, to regularize this particular entry No. 7 for US$25,000. 6 . The learned Special Director, Respondent No.2 levied penalties of Rs.1 Crore on the Company and Rs.5 Lacs each on its two directors. Aggrieved with the order of Special Director, the appellant company and its Directors Crl.A. No. 1060/2008 Page 8 of 42 preferred appeal to the Appellate Tribual. Appellate Tribunal vide impugned order dated 15.9.2008 remanded back the matter to the Special Director. Aggrieved with the said order, the appellants preferred the present appeals. 7 . As would be seen from the above facts, the learned Appellate Tribunal has given the directions to the learned adjudicatory officer to examine the matter afresh to ascertain the veracity of the claims of the appellants. The learned Appellate Tribunal also gave directions for setting aside of the order of the adjudicatory authority with liberty to the appellant to file further proofs/evidence in support of their case. Directions were also given by the Tribunal to the learned adjudicatory authority to give fresh hearing and to decide the matter within a period of six months. This order of remand is under challenge in these appeals. 8 . Mr. Vineet Malhotra, counsel for the respondent took preliminary objection to the maintainability of these appeals on the ground that the Appellate Tribunal has yet Crl.A. No. 1060/2008 Page 9 of 42 not passed any order on merits and has merely remanded the appeals filed by the appellants for fresh consideration by the adjudicatory authority, therefore, such order of remand being totally inconsequential does not merit any interference by this court. Mr. L.P. Dhir, counsel for the appellants refuting such submissions of the counsel for the respondent submitted that no such power of remand vests with the Appellate Tribunal exercising powers under Section 52(3) of the FERA, and therefore, the order of remand being per se illegal merited rejection from this court. In support of his arguments counsel for the appellant contended that plain, simple and literal interpretation of Section 52(3) of FERA would show that no such power of remand has been conferred on the Appellate Board and the only power given to the Appellate Board is either to confirm the order of the adjudicatory authority, modify such an order or set aside the order appealed against. The contention of the counsel for the appellant is that when the legislature never intended to Crl.A. No. 1060/2008 Page 10 of 42 give such power to the Appellate Board, then the power of remand cannot be read into the said statutory provision which is plain and unambiguous. In support of his arguments counsel for the appellant placed reliance on the judgment of Apex Court reported in 2003(6) SCC 659, Shiv Shakti Cooperative Housing Society, Nagpur Vs. Swaraj Developers & Ors., especially paras 17 and 29 of the said judgment. Both the paras are reproduced as under:- 17. Right of appeal is statutory. Right of appeal inhered in no one. When conferred by statute it becomes a vested right. In this regard there is essential distinction between right of appeal and right of suit. Where there is inherent right in every person to file a suit and for its maintainability it requires no authority of law, appeal requires so. As was observed in State of Kerala v. K.M. Charia Abdulla and Co.6 the distinction between right of appeal and revision is based on differences implicit in the two expressions. An appeal is continuation of the proceedings; in effect the entire proceedings are before the Appellate Authority and it has the power to review the evidence subject to statutory limitations prescribed. But in the case of revision, whatever powers the revisional authority may or may not have, it has no power to review the evidence, unless the statute expressly confers on it that power. It was noted by the four Judge Bench in Hari Shankar v. Rao Girdhari Lal Chowdhury7 that the distinction between an appeal and a revision is a real one. A right of appeal carries with it a right of rehearing on law as well as fact, unless the statute conferring the right of appeal limits the rehearing in some way, as has been done in second appeals arising under the Crl.A. No. 1060/2008 Page 11 of 42 Code. The power of hearing revision is generally given to a superior court so that it may satisfy itself that a particular case has been decided according to law. Reference was made to Section 115 of the Code to hold that the High Court‟s powers under the said provision are limited to certain particular categories of cases. The right there is confined to jurisdiction and jurisdiction alone. 29. “Appeal”, is defined in the Oxford Dictionary, Vol. 1, p. 398, as the transference of a case from an inferior to a higher court or tribunal in the hope of reversing or modifying the decision of the former. In the Law Dictionary by Sweet, the term “appeal” is defined as a proceeding taken to rectify an erroneous decision of a court by submitting the question to a higher court or Court of Appeal, and it is added that the term, therefore, includes, in addition to the proceedings specifically so called, the cases stated for the opinion of the Queen‟s Bench Division and the Court of Crown Cases reserved, and proceedings in error. In the Law Dictionary by Bouvier an appeal is defined as the removal of a case from a court of inferior to one of superior jurisdiction for the purpose of obtaining a review and retrial, and it is explained that in its technical sense it differs from a writ of error in this, that it subjects both the law and the facts to a review and retrial, while the latter is a common law process which involves matter of law only for re-examination; it is added, however, that the term “appeal” is used in a comprehensive sense so as to include both what is described technically as an appeal and also the common law writ of error. As Mr Justice Subramania Ayyar observes in Chappan v. Moidin Kutti25, ILR at p. 80, the two things which are required to constitute appellate jurisdiction are the existence of the relation of superior and inferior court and the power, on the part of the former, to review decisions of the latter. 9 . Counsel for the appellant also relied upon the decision of the Constitutional Bench reported as 1997 (3) Crl.A. No. 1060/2008 Page 12 of 42 SCC 261 L. Chandra Kumar Vs. Union of India., to buttress his argument that such power of remand has consciously not been conferred by the legislators on these tribunals as these tribunals have failed to inspire confidence of the public. Special attention of this court was drawn to following paras of the said judgment. 89. In the years that have passed since the Report of the Malimath Committee was delivered, the pendency in the High Courts has substantially increased and we are of the view that its recommendation is not suited to our present context. That the various Tribunals have not performed up to the expectations is a self-evident and widely acknowledged truth. However, to draw an inference that their unsatisfactory performance points to their being founded on a fundamentally unsound principle would not be correct. The reasons for which the Tribunals were constituted still persist; indeed, those reasons have become even more pronounced in our times. We have already indicated that our constitutional scheme permits the setting up of such Tribunals. However, drastic measures may have to be resorted to in order to elevate their standards to ensure that they stand up to constitutional scrutiny in the discharge of the power of judicial review conferred upon them. 90. We may first address the issue of exclusion of the power of judicial review of the High Courts. We have already held that in respect of the power of judicial review, the jurisdiction of the High Courts under Articles 226/227 cannot wholly be excluded. It has been contended before us that the Tribunals should not be allowed to adjudicate upon matters where the vires of legislations is questioned, and that they should restrict themselves to handling matters where constitutional issues are not raised. We cannot Crl.A. No. 1060/2008 Page 13 of 42 bring ourselves to agree to this proposition as that may result in splitting up proceedings and may cause avoidable delay. If such a view were to be adopted, it would be open for litigants to raise constitutional issues, many of which may be quite frivolous, to directly approach the High Courts and thus subvert the jurisdiction of the Tribunals. Moreover, even in these special branches of law, some areas do involve the consideration of constitutional questions on a regular basis; for instance, in service law matters, a large majority of cases involve an interpretation of Articles 14, 15 and 16 of the Constitution. To hold that the Tribunals have no power to handle matters involving constitutional issues would not serve the purpose for which they were constituted. On the other hand, to hold that all such decisions will be subject to the jurisdiction of the High Courts under Articles 226/227 of the Constitution before a Division Bench of the High Court within whose territorial jurisdiction the Tribunal concerned falls will serve two purposes. While saving the power of judicial review of legislative action vested in the High Courts under Articles 226/227 of the Constitution, it will ensure that frivolous claims are filtered out through the process of adjudication in the Tribunal. The High Court will also have the benefit of a reasoned decision on merits which will be of use to it in finally deciding the matter. 91. It has also been contended before us that even in dealing with cases which are properly before the Tribunals, the manner in which justice is dispensed by them leaves much to be desired. Moreover, the remedy provided in the parent statutes, by way of an appeal by special leave under Article 136 of the Constitution, is too costly and inaccessible for it to be real and effective. Furthermore, the result of providing such a remedy is that the docket of the Supreme Court is crowded with decisions of Tribunals that are challenged on relatively trivial grounds and it is forced to perform the role of a first appellate court. We have already emphasised the necessity for ensuring that the High Courts are able to exercise judicial superintendence over the decisions of the Tribunals under Article 227 of the Constitution. In R.K. Jain case6, after taking note of these facts, it was Crl.A. No. 1060/2008 Page 14 of 42 suggested that the possibility of an appeal from the Tribunal on questions of law to a Division Bench of a High Court within whose territorial jurisdiction the Tribunal falls, be pursued. It appears that no follow- up action has been taken pursuant to the suggestion. Such a measure would have improved matters considerably. Having regard to both the aforestated contentions, we hold that all decisions of Tribunals, whether created pursuant to Article 323-A or Article 323-B of the Constitution, will be subject to the High Court‟s writ jurisdiction under Articles 226/227 of the Constitution, before a Division Bench of the High Court within whose territorial jurisdiction the particular Tribunal falls. 92. We may add here that under the existing system, direct appeals have been provided from the decisions of all Tribunals to the Supreme Court under Article 136 of the Constitution. In view of our above- mentioned observations, this situation will also stand modified. In the view that we have taken, no appeal from the decision of a Tribunal will directly lie before the Supreme Court under Article 136 of the Constitution; but instead, the aggrieved party will be entitled to move the High Court under Articles 226/227 of the Constitution and from the decision of the Division Bench of the High Court the aggrieved party could move this Court under Article 136 of the Constitution. 93. Before moving on to other aspects, we may summarise our conclusions on the jurisdictional powers of these Tribunals. The Tribunals are competent to hear matters where the vires of statutory provisions are questioned. However, in discharging this duty, they cannot act as substitutes for the High Courts and the Supreme Court which have, under our constitutional set-up, been specifically entrusted with such an obligation. Their function in this respect is only supplementary and all such decisions of the Tribunals will be subject to scrutiny before a Division Bench of the respective High Courts. The Tribunals will consequently also have the power to test the vires of subordinate legislations and rules. However, this power of the Tribunals will be subject to one important exception. The Tribunals shall not entertain any question regarding the vires of their parent statutes following Crl.A. No. 1060/2008 Page 15 of 42 the settled principle that a Tribunal which is a creature of an Act cannot declare that very Act to be unconstitutional. In such cases alone, the High Court concerned may be approached directly. All other decisions of these Tribunals, rendered in cases that they are specifically empowered to adjudicate upon by virtue of their parent statutes, will also be subject to scrutiny before a Division Bench of their respective High Courts. We may add that the Tribunals will, however, continue to act as the only courts of first instance in respect of the areas of law for which they have been constituted. By this, we mean that it will not be open for litigants to directly approach the High Courts even in cases where they question the vires of statutory legislations (except, as mentioned, where the legislation which creates the particular Tribunal is challenged) by overlooking the jurisdiction of the Tribunal concerned. 94. The directions issued by us in respect of making the decisions of Tribunals amenable to scrutiny before a Division Bench of the respective High Courts will, however, come into effect prospectively i.e. will apply to decisions rendered hereafter. To maintain the sanctity of judicial proceedings, we have invoked the doctrine of prospective overruling so as not to disturb the procedure in relation to decisions already rendered. 95. We are also required to address the issue of the competence of those who man the Tribunals and the question of who is to exercise administrative supervision over them. It has been urged that only those who have had judicial experience should be appointed to such Tribunals. In the case of Administrative Tribunals, it has been pointed out that the Administrative Members who have been appointed have little or no experience in adjudicating such disputes; the Malimath Committee has noted that at times IPS Officers have been appointed to these Tribunals. It is stated that in the short tenures that these Administrative Members are on the Tribunal, they are unable to attain enough experience in adjudication and in cases where they do acquire the ability, it is invariably on the eve of the expiry of their tenures. For these reasons, it has been urged that the appointment of Administrative Members to Crl.A. No. 1060/2008 Page 16 of 42 Administrative Tribunals be stopped. We find it difficult to accept such a contention. It must be remembered that the setting up of these Tribunals is founded on the premise that specialist bodies comprising both trained administrators and those with judicial experience would, by virtue of their specialised knowledge, be better equipped to dispense speedy and efficient justice. It was expected that a judicious mix of Judicial Members and those with grassroot experience would best serve this purpose. To hold that the Tribunal should consist only of Judicial Members would attack the primary basis of the theory pursuant to which they have been constituted. Since the Selection Committee is now headed by a Judge of the Supreme Court, nominated by the Chief Justice of India, we have reason to believe that the Committee would take care to ensure that Administrative Members are chosen from amongst those who have some background to deal with such cases. 96. It has been brought to our notice that one reason why these Tribunals have been functioning inefficiently is because there is no authority charged with supervising and fulfilling their administrative requirements. To this end, it is suggested that the Tribunals be made subject to the supervisory jurisdiction of the High Courts within whose territorial jurisdiction they fall. We are, however, of the view that this may not be the best way of solving the problem. We do not think that our constitutional scheme requires that all adjudicatory bodies which fall within the territorial jurisdiction of the High Courts should be subject to their supervisory jurisdiction. If the idea is to divest the High Courts of their onerous burdens, then adding to their supervisory functions cannot, in any manner, be of assistance to them. The situation at present is that different Tribunals constituted under different enactments are administered by different administrative departments of the Central and the State Governments. The problem is compounded by the fact that some Tribunals have been created pursuant to Central Legislations and some others have been created by