Case: M/S. Telestar Travels Pvt. Ltd.  Vs. Special Director Of Enforcement

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 appellants 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 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. 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 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 sons4. Aggrieved by the order passed by the Adjudicating Authority, the appellants appealed to the Appellate Tribunal for Foreign 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.

Court's reasoning:
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 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: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 petitioner19. 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 appellants 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 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 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 appellant20. 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 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 rejected21. 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