FPA-FE-88/MUM/2017 of Knight Riders Sports Pvt. Ltd. v/s The Special Director Directorate of Enforcement, Mumbai

APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT AT NEW DELHI

Date of Decision:	20.03.2018
(1) FPA-FE-88/MUM/2017
Knight Riders Sports Pvt. Ltd.	… Appellant
Versus
The Special Director
Directorate of Enforcement, Mumbai	… Respondent
(2) FPA-FE-87/MUM/2017
Knight Riders Sports Pvt. Ltd. & Ors.	… Appellants
Versus
The Special Director Directorate of Enforcement, Mumbai	… Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant : Shri Amit Desai, Sr. Advocate Shri Siddharth Luthra, Sr. Advocate, Ms. Ruby Singh Ahuja, Advocate Shri Utsav Trivedi, Advocate Ms. Akanksha Munjhal, Advocate Shri Jaiber Sehgal, Advocate Shri Shravan Sahny, Advocate
For the Respondent : Shri Rajeev Awasthi, Advocate & Shri Prashant Pandey, Legal Consultant
CORAM
JUSTICE MANMOHAN SINGH : CHAIRMAN SHRI ANAND KISHORE : MEMBER
ORDER BY JUSTICE MANMOHAN SINGH : CHAIRMAN
FPA-FE-87 & 88/MUM/2017
1. It is settled law that discovery of the truth is the essential purpose of

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any trial or enquiry and what people expect is that the court should discharge

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its obligation to where in fact the truth lies. It is held in many judgments delivered by the Apex Court that right from inception of the judicial system, it was accepted that discovery, vindication and establishment of truth are the main purposes underlying the existence of the courts of justice.

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By this common order, we propose to decide the above referred two appeals between the parties.

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(i) Appeal no. 88/2017 was filed against the order dt. 15.11.2017 passed by adjudicating authority where by the application for recalling of witness Mr. Ckokshi whose cross examination was already conducted on 20/09/2017 was rejected.

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(ii) Appeal no. 87/2017 was filed against the order dt. 30/10/2017 passed by adjudicating authority whereby the application for cross examination of two witness was dismissed.

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My extreme brother who is learned Member has handed over the draft order on 16.02.2017 through steno. Having gone through the draft it appears that upto para 15, the learned Member has mentioned the facts and written submissions filed by both parties. In the final paras 16 to 18 of this order, the learned member, held that the appeal is not maintainable due to main reason that it would not prudent for this tribunal to advise/direct/instruct the Adjudicating Authority to follow a specific or particular course of action otherwise it would amount to interference in its functioning. I have a great respect for him, however in view of facts peculiar and legal issues involved in the present appeals, I have my own view/opinion. Therefore, I have written my order.

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4. The adjudicating Authority itself (in view of serious controversy involved in

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the matter) has allowed the main witness Mr. Chokshi to be cross examined on behalf of appellate but the request for recall of same witness was declined, on the reason that the appellate are applying all type of tactics to delay the

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matter.

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Although it was submitted that the valuation assumption/line item sheet appearing at was handed over by the witness on 20^th September 2017 itself. This document which contains 11 “Income” and 61 “Expenditure” different line items was never provided to the Appellant prior to 20^th September 2017. The Statement annexed at page 191 and as duly initialed by the witness, Mr. MitilChokshi was handed over to the Appellant only upon the culmination of proceedings on 20^th September 2017.

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6. Once the said application was rejected to recall the witness the Adjudicating Authority reserves the order without hearing of the appellant‟s counsel who was pressing for an adjournment in order to challenged the said order.

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The facts of the case in both appeals are common and between the same parties. Although appeal no. 88/2017 was heard earlier point of time but later on after hearing of appeal no.-87/2017 on 9^th January, 2018, it was agreed by

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us to pass common order in both appeals.

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The brief facts are that the Appellant company was incorporated on 27^th February 2008. In March 2009, the Appellant decided to increase its paid-up share capital by issuing shares to both non-resident and resident shareholders. The investment by the non-resident shareholder was to the tune of approximately Rs. 5 crores, as per appellant that all necessary documents (including Form FC-GPR) were filed with Citibank N.A. the AD of the Appellant.

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The Appellants have received a noticee under the show cause notice dated 24th March 2017 issued by the Respondent. The Special Director of Enforcement issued a Show Cause Notice bearing No. T-4/01-B/SDE (VA)/WR/2017/1434 to the Appellant on 24th March 2017 (hereinafter referred to as the “said Show Cause Notice”). The said Show Cause Notice is based upon a complaint dated 9th December 2016 filed by one Mrs. V. Kalyani (Assistant Director). The said complaint mainly relies upon the Investigation report dated 10th August 2012 of Mr. D. K. Sinha (Assistant Director).

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While issuance of such shares it was required that the valuation be done in line with the applicable provisions of the Act; being Regulation 5 (1) of the Foreign Exchange Management, (Transfer or Issue of Security by a Person Resident Outside India), Regulations 2000.

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The independent chartered accountant's report dated 28^th February 2009, was obtained about the valuation of the shares “issued” to the non-

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resident. The case of the appellants is that they have issued such shares at a price of Rs.10/- per share based on an independent Chartered Accountant's, (R.M. Ajgaonkar& Company. It is the case of the appellant that the said report dated 28^th February 2009, was issued in consonance with the applicable FEMA Regulations and particularly Regulation 5 (1) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000, read with Schedule I thereof. The said report dated 28^th February 2009, has inter alia also been accepted by the Appellant's authorized dealer viz ; Citibank N.A. at the time of filing of Form FC-GPR pursuant to “issuance” of the shares in March 2009.

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During investigation of the “Indian Premier League”, which commenced in or around 2010, issues were raised by the Respondent in relation to the issuance of the said shares to the non-resident shareholder. Later on in or around October 2014 the Respondent obtained the Opinion of M/s. Chokshi and Chokshi relating to the fair valuation of shares "Issued" by the Appellant. The opinion same was obtained by the Respondent on commercial terms from a private chartered accountant firm, there are many major variance with the Valuation Report dated 28^th February 2009.

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It cannot be disputed that undated, unsigned opinion of M/s. Chokshi and Chokshi in context of the valuation of shares, 'issued' by the Appellant on 7^th March 2009. The Opinion was issued by M/s. Chokshi and Chokshi pursuant to being commissioned by the Respondent to issue such opinion.

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M/s. Chokshi and Chokshi is a private chartered accountant firm in Mumbai which has issued the opinion to the Respondent on mutually agreed commercial terms for a fee.

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In the complaint dated 09/12/2016 Show Cause Notice dated 24^th March 2017 much reliance was placed on the said opinion. The said Opinion concludes that the shares “issued” by the Appellant in March 2009 should have been issued at a price band between Rs. 70/ - and Rs. 86/- per share. In support of its contentions, the Respondent has mainly relied upon on the Opinion given by M/s. Chokshi and Chokshi, it is apparent that there is two reports and opinions contrary to each other. Therefore rightly so the adjudicating authority itself felt necessary to allow cross-examination of choksi is being relevant witness in view of serious controversy involved in the matter.

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The adjudicating authority summoned Chokshi and his cross – examination recorded on 20/09/2017 of the fully in order to test the veracity of the Opinion as against the said Valuation Report dated 28^th February 2009.

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The case of appellants is that the cross examination of Mr. Mitil Chokshi remained incomplete on 20^th September 2017, notwithstanding the word 'concluded' as appearing in the cross-examination transcript of that date.

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It is submitted that upon not hearing further from the Respondent , it was the Appellant who by their letter of 5^th October 2017 sought a further date of hearing and inter alia also recorded that the cross examination of Mr. MitilChokshi had remained incomplete. It is submitted that, other than the word 'concluded' as appearing in the said transcript, there is no Order Sheet and/or Roznama of 20^th September 2017, which

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conclusively establishes that cross-examination was completed on 20^th September 2017.

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It is submitted by the appellant that the cross-examination had inter alia remained incomplete on 20^th September 2017, by reason of the fact that the witness, Mr. MitilChokshi throughout the process took long intervals when responding to any question, during which interruptions/intervals, Mr. MitilChokshi took time to consult his lawyers, (Advocate Ms. DivyaBahl), before responding to the question the right and further cross-examine Mr. MitilChokshi and be granted to the Appellant.

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It is also submitted on behalf of the appellant that there have been no dilatory tactics adopted by the Appellant inasmuch as 20th September 2017 was the first day of hearing and the aforementioned situation arose prior to the second date of hearing. The show cause notice is dated 24th March 2017. Pursuant to the request for inspection, documents were furnished on 14th August 2017. A reply to the said letter of 14th August 2017, was filed by the Appellant on 18th August 2017. On or around 31st August 2017, the Appellant received a notice dated 21st August 2017 fixing the hearing on 20th September 2017.

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The appeal against the order dated 12th October 2017 ,(received on 17th October 2017), was filed before this Tribunal on 30th October 2017 and which was taken up for hearing on 13th November 2017 which was disposed of by giving option to the appellant to move the application if so required to

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recall of witness but the same would be decided by the Adjudicating Authority as per its own merit.

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In view of the direction of this Tribunal an application was moved before the Adjudicating Authority on 15th November 2017. Against the order passed by the Adjudicating Authority on 15th November 2017, an appeal was filed on 17th November 2017 before this Tribunal, which came to be heard on 22nd November 2017. Therefore, there has been no dilatory action adopted by the Appellant.

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In the impugned Order it has been held that, all such questions including those on "discrepancy" have already been covered by the crossexamination transcript of 20^th September 2017.

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The case of appellant is also that it is factually incorrect and can be very easily discerned from the transcript of 20^th September 2017, as inter alia juxtaposed with the above paragraph 15 of the Application dated 14^th November 2017. It is submitted that the reasons for cross-examination as set out in paragraph 15 are broad based and not specific questions; (If specific questions are enlisted and the same made available to the witness in advance, the entire process of further cross-examination would be rendered nugatory). Paragraph 15 (e) specifically refers to the source of assumptions used by Chokshi and Chokshi in forming their Opinion.

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It is stated by the appellant on 20^th September 2017 the Appellant had no opportunity to analyze such 11 “Income” and 61 “Expenditure” line item statement nor the opportunity to cross-examine Mr. MitilChokshi on the

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assumptions contained in the said Statement at page 191 paragraph 15 (a) and 15 (c) refer to various contrary statements as contained in the Opinion as juxtaposed with data in the supporting documents to the Opinion, (which work sheets were separately handed over to the Appellant much after a copy of the Opinion was made available). in also paragraph 5 of the Impugned Order dated 15^th November 2017 which paraphrases some of the submissions in context of these discrepancies as made to the Adjudicating Authority at the time of hearing on 15^th November 2017 as under:

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“ 5. ….. There are discrepancies noticed on various assumptions reflected in the work sheet vis-à-vis the discussion in the Opinion which include the prize money, revenue growth, capitalization rate, etc. The Ld. Counsel also submitted that he wanted to know about the terms of engagement of C&C and the scope of work mandated to them by the ED. These questions, he wanted to raise because the letter of engagement given by ED showed the appointment of C&C was only for giving their opinion on the valuation of KRSPL shares 'Transferred', whereas, the Opinion provided by C&C, was in respect of valuation of KRSPL shares ‗Issued‘' .”

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With reference to paragraph 15 (c) of the said Application dated 14^th November 2017; refers to fair value arrived at by PECV method after applying a 15% capitalization rate in the sensitivity analysis to compute the fair value of shares; the work sheets to the said Opinion, which were separately handed over to the Appellant much later, (on 14^th August 2017), refers to a capitalization rate of 20% being applied and not 15%.

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Counsel for the appellant argued that in order to know the truth Mr. MitilChokshi must explain these discrepancies as appearing in his Opinion as against the support work sheets and no prejudice would be caused to the Respondent by the recall of the witness. On the other hand grave injustice and FPA-FE-87 & 88/MUM/2017 Page 9 of 57

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grave prejudice would be caused to the Appellant if the Appellant was not permitted to recall the witness.

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It is evident from the record that the said cross-examination of Mr. Mitil Chokshi held on 20th September, 2017, the appellant was represented by Mr. Dilip K. Sheth, Chartered Accountant. Ms. Saloni Ganesh, (CFO), was also present on behalf of the appellant. When Mr. Mitil Chokshi appeared before the learned Special Director of Enforcement for the purposes of crossexamination; he was accompanies by his assistant, and his lawyer, Ms. Divya Bahl and her associate/assistant.

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The same was conducted at 6.00 p.,m. The copy of the statement was duly signed by counsel for the appellant. It is admitted by the respondent that no separate order for fixing the final date of argument was passed on the file. Counsel for respondent submits that the final date was to be communicated by way letter as per practice of the Adjudicating Authority.

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After cross-examination on 30^th September, 2017 by a letter dated 05th October, 2017, the appellant inter alia sought a further date from the learned Special Director of Enforcement towards continuation of the crossexamination of the witness Mr. Mitil Chokshi.

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By an order dated 12th October, 2017 communicated through letter bearing No. T-4/01-B/SDE(VA)/WR/2017/2418, that the cross-examination of the witness Mr. Mitil Chokshi was concluded on 20th September, 2017 and that the matter was now fixed for “the purpose of recording your oral arguments/written submissions” on 23rd October, 2017.

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As per appellant, the said communication and order was passed without giving the appellant an opportunity to complete the cross-examination of the witness Mr. Mitil Chokshi.

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On 23.10.2017, the matter was adjourned to 30th October, 2017, the appellant with counsel on their behalf, appeared before the learned Special Director, and submitted a letter dated 30th October, 2017 inter alia informing than, an appeal had been filed by the appellant being Appeal No. 83 of 2017 challenging the order dated T-4/01-B/SDE(VA)/WR/2017/2418 before the Appellate Tribunal for Foreign Exchange Management Act, 1999 and appeal being no. 84 of 2017 challenging the said order.

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By the said letter the learned Special Director of Enforcement was also requested that, prior to proceeding any further with the hearing in the matter, the complainant Mrs. V. Kalyani and the Investigating Officer Mr. D.K. Sinha should also be produced for the purpose of cross-examination.

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The Special Director of Enforcement; in the record of the hearing held on 30th October, 2017, reflected the request for cross-examination of the complainant Mrs. V. Kalyani and Assistant Director Mr. D.K. Sinha, signator to the ED Investigation Report.

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In view of above, the appellant sought further time for hearing on the ground that the appeal No. 83 of 2017 and appeal No. 84 of 2017 were listed for hearing before the Appellate Tribunal on 13.11.2017, thus, the ld. Special Director adjourned the hearing to 15.11.2017.

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As far as this contention of the appellant that cross was incomplete, we do not agree to accept the submission of counsel as cross examination conducted on 20/09/2017 would show from the copy supplied that it is signed by the learned counsel for the appellant though it is correct that no separates order for completion of cross was passed and fixing up next date of hearing for final hearing. It was later on communicated to the appellant by way of letter. The only issue remain is whether in view of peculiar facts of the case, is there any need to recall the witness in view of statement made by the appellant in its application.

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The crux of the matter is that in view of two reports, one was obtained by the appellant and another one by the respondent from (private party) and in view such serious controversy, the adjudicating authority felt that cross examination was relevant, however while deciding the application for recalling of same witness, the same was not allowed as it was felt that the appellant was adopting tactics to delay the matter.

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It is stated that time and again appellant has sought a copy of the engagement letter issued by the Respondent to M/s. Chokshi and Chokshi towards giving its opinion on "Issuance of Shares", however the case of the appellant is that as of today only letter/documents provided by the Respondent to the Appellant pertaining to the engagement of M/s. Chokshi and Chokshi are all in the realm of an Opinion towards “sale/ transfer” of shares and not issuance of shares.

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The Appellant relies on the judgment in the case of M/s. Khoday Distilleries Ltd. vs. Commissioner of Income Tax [2009 (1) SCC 256 ] . It is alleged by the counsel for the appellant that the document at page 191 was handed over to the Appellant, at the culmination of proceedings on 20^th September 2017 is set out therein. The Respondent's counsel at the time of hearing on 22^nd November 2017 submitted that, the said document appearing at page 191 had been furnished to the Appellant with other documents under cover of letter dated 14^th August 2017. The line item/assumption sheet at page 191 was never a part of the enclosures to the letter of 14^th August 2017 it was first time handed over to the Appellant on 20^th September 2017, upon culmination of the day's proceedings.

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As already stated, no replies to both appeals were filed on behalf of respondent. Oral submissions were addressed on behalf of respondent. The first objection of Mr. Rajiv Awasthi appearing on behalf of respondent is that the appeal is not maintainable under Foreign Exchange Management Act, 1999. The appeal can only be filed before this Tribunal once the Adjudicating Authority passes the final order imposing penalty as contemplated under Section 19(1). The proceedings before the Adjudicating Authority are in the nature of enquiry as per under Section 16 of the Act. Thus, the impugned order cannot be termed as an order. Therefore the appeal is not maintainable.

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Mr. Awasthi submits that the Hon‟ble Supreme Court in its various pronouncements have clearly held that Adjudicating Authority as well as Tribunals are creation of statutes and therefore, has no power to interpret or exceeds its jurisdiction and they are strictly bound by the provisions of the Act.

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He referred the decision of the following decisions:-

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(i) Hon‟ble Supreme Court in Union of India Vs. Devki Nandan Aggarwal 1992 Supp.(1) SCC -323 has held:-

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―….. It is not the duty of the court either to enlarge the scope of the legislation or the intention of the legislature when the language of the provision is plain and unambiguous. The court cannot rewrite, recast or reframe the legislation for the very good reason that it has no power to legislate. The power to legislate has not been conferred on the courts. The Court cannot add words to a statute or read words into it which are not there. Assuming there is a defect or an omission in the words used by the legislature the court could not go to its aid to correct or make up the deficiency. Courts shall decide what the law is and not what it should be. The court of course adopts a construction which will carry out the obvious intention of the legislature but could not legislate itself. But to invoke judicial activism to set at naught legislative judgment is subversive of the constitutional harmo0ny and comity of instrumentalities. ….‖

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(ii) Hon‟ble Supreme Court in Hintendra Rajeev Pathak and also in case of K.K. Charti Vs. R.M. Seshadri (1973) 1 SCC 761, wherein it has been held:-

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―….A quasi-judicial tribunal acting within jurisdiction may decide rightly or may decide wrongly. If it decides wrongly there are provisions in the Act itself for appeal, revision and ultimately even revision by the High Court under the provisions of Section 115 CPC or even under Article 227 of the Constitution. Of course, by a wrong decision on a jurisdictional fact a quasi-judicial tribunal with a limited jurisdiction cannot confer jurisdiction on itself…..‖

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41 . Mr. Awasthi argues that the courts have deprecated the practice of challenging the proceedings at the initial stage on various small issues and similar view has been taken by the Hon‟ble Division Delhi High Court in Case of Arun Kumar Mishra Vs. UOI & Ors. (2014) 208 DLT 56, wherein the Hon‟ble High Court have held:-

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―9. We have however invited the attention of the senior counsel for the appellant to Cooper Engineering Ltd. Vs. P.P Mundhe (1995) 2 SCC 661 laying down that there is no justification for a party to stall the final adjudication of the dispute by questioning the

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decision on preliminary issues and to S.K. Verma Vs. Mahesh Chandra (1983) 4 SCC 214 deprecating the practice of raising preliminary issues/ objections, to delay and defeat adjudication on merits and to D.P. Maheshwari Vs. Delhi Administration (1883) 4 SCC 293 also laying down that all issues whether preliminary or otherwise should be decided together so as to rule out the possibility of any litigation at interlocutory stage. Attention of the senior counsel for the appellants is also invited to National Council for Cement & Building Materials Vs. State of Haryana (1996) 3 SCC 206 noticing the appalling situation created due to challenge to the decision on preliminary issues in the High Court and during which time the reference is stayed and lies dormant and laying down that the High Court should refuse to intervene in the proceedings before the Tribunals at an interlocutory stage.

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In nut- shell in his first submission is that the appellant must wait for final outcome of the Adjudication proceedings and unless the final order is passed, the present appeal is not maintainable and hence the same is liable to be dismissed.

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On plain reading of section 19 and section 35 it is apparent that the words “an order” contained in Section 19(1) is to be given a wide and liberal interpretation to mean any order which effects valuable rights of a person aggrieved or the Central government. It is not limited to a final order passed under Section 13 read with Section 16.

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The contradiction between the words “any person appealing against the order of the adjudicating authority…levying any penalty…” appearing in the first proviso to section 19(1) and the words “an order” in the body of Section 19(1) is the clearest indication that wide interpretation is to be given to the words “an order” contained in section 19(1) since a species of “an order” i.e. the final order levying penalty is dealt with separately in the first proviso to Section 19(1).

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Counsel for the respondent does not deny that it final order would be passed against the appellant , in appeal the respondent would oppose the prayer for stay of pre-deposit of penalty amount. He argues that in view of proviso, the respondent may press for deposit of entire penalty amount. Thus, it is clear, valuable- rights of the appellants are involved in the matter.

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Section 19(6) empowers the Appellate Tribunal to suomoto examine the “legality, propriety or correctness of any order” made by the adjudicating authority under section 16 and make such order as it thinks fit. The phrase “any order” in 19(6) once again clearly indicates that it is not restricted and limited to the final order. Section 16(3) requires the adjudicating authority to hold an inquiry under sub section (1). Section 16(5) deals with the powers of the Adjudicating Authority during such inquiry. Section 19(6) provides for the Inquiry to be disposed of within a time frame, failing which reasons are to be recorded in writing for not disposing of the complaint within the said period. Therefore there are a variety of orders that could be passed under section 16 and not only a final order. All such orders would be revisable by the Appellate Tribunal in exercise of its powers under section 19(6) if they effect valuable rights.

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Section 35 deals with Appeals to the High Court and provides for an Appeal to the High Court by a person aggrieved by “any decision or order” of the Appellate Tribunal. This section came up for interpretation by the Supreme Court in Rajkumar Shivare v. Directorate of Enforcement (2010) 4 SCC 772, where the Hon‟ble Supreme Court inter alia held that:

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“ 19. The word ―any‖ in this context would mean ―all‖.

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….. Whenever such limitations are imposed, they are to be strictly followed. But in a case where there is no

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limitation on the nature of order or decision to be appealed against, as in this case, the right of appeal cannot be further curtailed by this Court on the basis of an interpretative exercise.

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20. Under Section 35 of FEMA, the legislature has conferred a right of appeal to a person aggrieved from "any" "order" or "decision" of the Appellate Tribunal. Of course such appeal will have to be on a question of law. In this context the word "any" would mean "all".

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24. In Black's Law Dictionary the word "any" has been explained as having a "diversity of meaning" and may be "employed to indicate 'all' and 'every' as well as 'some' or 'one' and its meaning in a given statute depends upon the context and subject-matter of statute". The aforesaid meaning given to the word "any" has been accepted by this Court in LDA v. M.K. Gupta.

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27 . In a case where right of appeal is limited only from a final order or judgment and not from interlocutory order, the statute creating such right makes it clear [see Section 19 of the Family Courts Act, 1984] ……..

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28. Similarly, under Section 104 of the Code of Civil Procedure read with Order 43 Rule 1 thereof, it has been indicated from which interlocutory order an appeal will lie. But it has been made clear that no second appeal from such order will lie [See Section 104 sub-section (2) of the Code]. But in Debt Recovery Tribunal Act, as in FEMA, an appeal lies from an interlocutory order and this has been made clear in Section 20(1) of the Act.

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29. By referring to the aforesaid schemes under different statutes, this Court wants to underline that the right of appeal, being always a creature of a statute, its nature, ambit and width has to be determined from the Statute itself. When the language of the statute regarding the nature of the order from which right of appeal has been conferred is clear, no statutory interpretation is warranted either to widen or restrict the same ."

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Section 20 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 has been interpreted by the Hon‟ble Delhi High Court in

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MC Mittal vs. Central Bank of India; 61 (1996) DLT 455 (DB) , to mean that

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any order is appealable under the said section. The Hon‟ble Delhi High Court held:

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―(3) A reading of sub-clause (2) of Section 20 shows that the Appellate Tribunal shall exercise its powers in relation to ―any order‖ made or deemed to have been made by the Tribunal. The words ―any order‖ would include interlocutory orders, which substantially affect the rights of the parties, and those words are not confined to the final disposal of the application filed under Section 19. Similarly, sub-clause (1) of Section 20 reads the words ―an order‖ and that would also mean that an appeal lies against interim orders which substantially affect the rights of the parties, and those words are not confined to an order which finally disposes of the application before the Tribunal.

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(4) Inasmuch as the appellant has a wider remedy by way of an appeal, this court will not exercise jurisdiction under Article 226 of the Constitution of India. The learned Judge was, therefore, right in not entertaining the writ petition.” [Emphasis Added].

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49 . Similarly, the Hon‟ble Punjab and Haryana High Court has also upheld the interpretation that the words “an order” is not limited to final orders as erroneously submitted by the ED and in fact, includes any order that affects the rights and liabilities of a party. In Sandeep Singh vs. Debt Recovery

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Tribunal; 1998 SCC Online P&H 1844 , the Hon‟ble High Court held:

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“13…. The next question is – whether the words ―any order‖ occurring in Section 17(2) of the Act and the words ―an order‖ occurring in Section 20(1) of the Act includes every order passed by the Tribunal under the Act which affects the rights or liabilities of the parties, or these relate to only final order passed by the Tribunal. In the context of Sections 17(2) and 20(1) of the Act, I am of the opinion that the words ―any order made, or deemed to have been made, by a Tribunal under this Act‖ occurring in Section 17(2) of the Act and the words ―an order made, or deemed to have been made by a Tribunal under this Act‖ occurring in Section 20(1) relate to every order of the Tribunal made under the Act which affects the rights or liabilities of the parties. Obviously, any interim order passed under Section 19(6) of the Act by the Tribunal, if it affects the rights or liabilities of any party, will be subject to appeal under Section 20(1) of the Act.‖ [Emphasis Added].

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It is pertinent to mention that the ED‟s submissions made in the present Appeals, have been rejected by a three-Judge Bench (headed by Justice Deepak Misra) of the Hon‟ble Madhya Pradesh High Court in PCC FPA-FE-87 & 88/MUM/2017 Page 18 of 57

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Construction Co. vs. DRT; 2003 (1) MPJR 260 . The Hon‟ble High Court

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held:

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“Submission of Mr. Shrivastava is that no procedure has been prescribed for preferring an appeal against interim orders. The aforesaid submission, in our considered view, is comparable to the concept of building a castle in Spain.-Rule 9 deals with respect of an appeal preferred by a person referred to in section 21. Section 21 of the Act clearly postulates deposit of amount of debt due, on filing appeal as determined by the Tribunal under section 19. Thus, it clearly and squarely is applicable to an appeal preferred after final adjudication and determination of the same by the Debts Recovery Tribunal. Rule 8 deals with fee qua an appeal under Section 20. We are not impressed by the submission of Mr. Shrivastava that it is only Section 20 which confers the power on the Tribunal to entertain an appeal. Section 17(2) uses the word “any order made” and Section 20(1) uses the word “an order made”. Though Mr. Shrivastava has made herculean endeavour to point out the difference between the terminology used in Section 17 and Section 20 on the backdrop that in one provision the word „an‟ is used and in another provision the word „any‟ is used. There is no difference between the two terms, namely „an‟ and „any‟. If the words used are understood in proper perspective taking into consideration the text and the context, we are of the considered view that the expressions used in Section 17 and 20 are not repugnant to each other. In fact, they point out to a complete harmonious whole leading to a specific, precise, appropriate destination i.e. the tenability of appeal from an order or any order. The distinction which is sought to be drawn by Mr. Shrivastava on the basis of the use of the word, in our considered opinion, is absolutely fallacious. The High Court of Delhi in the case of M.C., Mittal and Others (Supra) accepted the interpretation that any order would mean interlocutory orders which substantially affect the rights of the parties. The Court presided by the learned Chief Justice M. Jagannatha Rao (as His Lordship then was) has also referred to the term „an orders‟ and held that the same would convey that an appeal lies against the interim order which substantially affects the rights of the parties and those words are not confined to an order which finally disposes an application before the Tribunal. We are in respectful agreement with the meaning given to the terms “an order” and “any order” in the said judgement.”

¶125

In view of our premised reasons, we pigeon-hole and itemise our conclusions as under:

¶126

(a) An appeal against an order which substantially affects the rights or liabilities of a party lies to the Appellate Tribunal.” [Emphasis Added].

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¶129

The Hon‟ble Securities Appellate Tribunal, Mumbai in Bharat Jayantilal

¶130

Patel vs. Sebi: 2010 SCC Online SAT 284 , has in relation to an appeal under Section 15T of SEBI Act (which also contains the words “an order”), held:

¶131

“6. We may now notice an objection raised by the learned senior counsel appearing for the Board. He contended that the present appeal was not maintainable and that the impugned communication dated July 22, 2010 was not “an order” within the meaning of Section 15T of the Act. We do not agree with him.

¶132

The relevant part of Section 15T reads as under: “15T. [(1) Save as provided in sub-section (2), any person

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aggrieved, -

¶134

(a) by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, under this Act , or the rules or regulations made thereunder; or

¶135

(b) by an order made by an adjudicating officer under this Act, may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter .”

¶136

The words “an order” appearing in this provision are comprehensive enough to include every order or decision taken by the Board which adversely affects the rights of the parties .

¶137

Black‘s Law Dictionary (Sixth Edition) defines the word ‗order‘ to mean ―A mandate; command or direction authoritatively given; rule or regulation. Direction of a court or judge made or entered in writing and not included in a judgement, which determines some point or directs some step in the proceedings.‖ One of the issues that arose before the enquiry officer was whether the appellant was entitled to cross examine the persons whose statements are sought to be relied upon and the enquiry officer has decided that issue by denying the right to the appellant. So far as this issue is concerned, the order is final qua the enquiry and its affects the rights of the appellant. We are clearly of the view that it is an order within the meaning of Section 15T of the Act and that the present appeal is maintainable. The Division Bench judgement of the Bombay High Court in Harinarayan G. Bajaj v. Securities Appellate Tribunal, SEBI Appeal No.6 of 2002 decided on October 31, 2002 does not, in our opinion, support the contention of the learned senior counsel for the Board. What has been held in that case is that purely procedural orders which do not affect the substantive rights of the parties are not appealable. We

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¶140

have already held that the impugned communication is not procedural in nature and it affects the substantive right of the appellant.‖ [Emphasis Added].

¶141

Even an order passed by an earlier Bench of this AT in the matter of

¶142

Kailash Ramkishan Gupta vs. The Deputy Director, Director of Enforcement, FPA-PMLA-549/AHD/2014 dated 26^th March 2014. This AT

¶143

while rejecting the ED‟s submissions, held as under:

¶144

“ 16. The learned counsel for the respondent has alleged that an appeal against an order dismissing the application under section 11of PMLA shall not be maintainable under section 26 of the Act. He has placed reliance on Rule 2 (g) of The Prevention of Money Laundering (Appeal) Rules, 2005 which is as under: (g) “order” means an order passed by the Director under sub-section (2) of section 13 of the Act or by the Adjudicating Authority under section 8 of the Act as the case may be;

¶145

Mr. Saud‟s contention is that the appeal shall be maintainable against the orders passed under section 8 of the Act and since the impugned order is passed under section 11 of the Act, the appeal is not maintainable. The plea of the learned counsel for the respondent is to be rejected. Section 26 of the Act stipulates that any person aggrieved by an order made by the Adjudicating Authority may prefer an appeal to the Appellate Tribunal. An „order‟ has not been restricted by the said section and consequently the scope of the section cannot be restricted by the rule. In the circumstances, the appeal from an order made by the Adjudicating Authority shall be maintainable, even if the order is not under section 8 of the Act” [Emphasis Added].

¶146

53 . Therefore, a conspectus of the aforesaid judgements, is that there is no distinction between the words “any order” and “an order” occurring in Sections 26 and 42 of the PMLA, and that every order of the AA, whether final or not, is appealable to the AT under Section 26 of the PMLA. One must bears in its mind that the final order passed by the Adjudicating Authority are executable FPA-FE-87 & 88/MUM/2017 Page 21 of 57

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orders which are enforceable line a decree. At the time of filing the appeal, the respondent has a right to insist for deposits of entire penalty amount, as per the scheme f section 19 of the Act which is almost akin to the provision of order 41 Rule 5 of C.P.C. Though Code of Civil Procedure, 1908 is not applicable to the proceedings but the principles of nature justice are to be considered as it is mandated in the Act that these types of cases, the Adjudicating Authority has to play the role of Civil Court.

¶148

In the case of Shah Babulal Khimji’s case (supra). Paras 113,and 116 of the above said judgment clearly laid down the law in this regard. The said paras are relied upon by the learned senior counsel for the Appellants, is reproduced herein below:-

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113. Thus, under the Code of Civil Procedure, a judgment consists of the reasons and grounds for a decree passed by a court. As a judgment constitutes the reasons for the decree it follows as a matter of course that the judgment must be a formal adjudication which conclusively determines the rights of the parties with regard

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to all or any of the matters in controversy. The concept of a judgment as defined by the Code of Civil Procedure seems to be rather narrow and the limitations engrafted by sub-section (2) of Section 2 cannot be physically imported into the definition of the word ―judgment‖ as used in clause 15 of the letters patent because the letters pat en t has advisedly not used the terms ―order‖ or ―decree‖ anywhere. The intention, therefore, of the givers of the letters patent was that the word ―judgment‖ should receive a much wider and more liberal interpretation than the word ―judgment‖ used in the Code of Civil Procedure. At the same time, it cannot be said that any order passed by a trial Judge would amount to a judgment; otherwise there will be no end to the number of orders which would be appealable under the letters patent. It seems to us that the word ―judgment‖ has undoubtedly a concept of finality in a broader and not a narrower sense. In other words, a judgment can be of three kinds:

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¶153

(1) A final judgment.— A judgment which decides all the questions or issues in controversy so far as the trial Judge is concerned and leaves nothing else to be decided. This would mean that by virtue of the judgment, the suit or action brought by the plaintiff is dismissed or decreed in part or in full. Such an order passed by the trial Judge indisputably and unquestionably is a judgment within the meaning of the letters patent and even amounts to a decree so that an appeal would lie from such a judgment to a Division Bench.

¶154

(2) A preliminary judgment.—This kind of a judgment may take two forms—(a) where the trial Judge by an order dismisses the suit without going into the merits of the suit but only on a preliminary objection raised by the defendant or the party opposing on the ground that the suit is not maintainable. Here also, as the suit is finally decided one way or the other, the order passed by the trial Judge would be a judgment finally deciding the cause so far as the Trial Judge is concerned and therefore appealable to the larger Bench. (b) Another shape which a preliminary judgment may take is that where the trial Judge passes an order after hearing the preliminary objections raised by the defendant relating to maintainability of the suit, e.g., bar of jurisdiction, res judicata, a manifest defect in the suit, absence of notice under Section 80 and the like, and these objections are decided by the trial Judge against the defendant, the suit is not terminated but continues and has to be tried on merits but the order of the trial Judge rejecting the objections doubtless adversely affects a valuable right of the defendant who, if his objections are valid, is entitled to get the suit dismissed on preliminary grounds. Thus, such an order even though it keeps the suit alive, undoubtedly decides an important aspect of the trial which affects a vital right of the defendant and must,

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therefore, be construed to be a judgment so as to be appealable to a larger Bench.

¶156

Intermediary or interlocutory judgment.— Most of the interlocutory orders which contain the quality of finality are clearly specified in clauses (a) to (w) of Order 43 Rule 1 and have already been held by us to be judgments within the meaning of the letters patent and, therefore, appealable. There may also be interlocutory orders which are not covered by Order 43 Rule 1 but which also possess the

¶157

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¶159

characteristics and trappings of finality in that, the orders may adversely affect a valuable right of the party or decide an important aspect of the trial in an ancillary proceeding. Before such an order can be a judgment the adverse effect on the party concerned must be direct and immediate rather than indirect or remote. For instance, where the trial Judge in a suit under Order 37 of the Code of Civil Procedure refuses the defendant leave to defend the suit, the order directly affects the defendant because he loses a valuable right to defend the suit and his remedy is confined only to contest the plaintiff‗s case on his own evidence without being given a chance to rebut that evidence. As such an order vitally affects a valuable right of the defendant it will undoubtedly be treated as a judgment within the meaning of the letters patent so as to be appealable to a larger Bench. Take the converse case in a similar suit where the trial Judge allows the defendant to defend the suit in which case although the plaintiff is adversely affected but the damage or prejudice caused to him is not direct or immediate but of a minimal nature and rather too remote because the plaintiff still possesses his full right to show that the defence is false and succeed in the suit. Thus, such an order passed by the trial Judge would not amount to a judgment within the meaning of clause 15 of the letters patent but will be purely an interlocutory order. Similarly, suppose the trial Judge passes an order setting aside an ex parte decree against the defendant, which is not appealable under any of the clauses of Order 43 Rule 1 though an order rejecting an application to set aside the decree passed ex parte falls within Order 43 Rule 1 clause ( d) and is appealable, the serious question that arises is whether or not the order first mentioned is a judgment within the meaning of letters patent. The fact, however, remains that the order setting aside the ex parte decree puts the defendant to a great advantage and works serious injustice to the plaintiff because as a consequence of the order, the plaintiff has now to contest the suit and is deprived of the fruits of the decree passed in his favour. In these circumstances, therefore, the order passed by the trial Judge setting aside the ex parte decree vitally affects the valuable rights of the plaintiff and hence amounts to an interlocutory judgment and is therefore, appealable to a larger Bench.

¶160

116. We might give another instance of an interlocutory order which amounts to an exercise of discretion and which may yet

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amount to a judgment within the meaning of the letters patent. Suppose the trial Judge allows the plaintiff to amend his plaint or include a cause of action or a relief as a result of which a vested right of limitation accrued to the defendant is taken away and rendered nugatory. It is manifest that in such cases, although the order passed by the trial Judge is purely discretionary and interlocutory, it causes gross injustice to the defendant who is deprived of a valuable right of defence to the suit. Such an order, therefore, though interlocutory in nature contains the attributes and characteristics of finality and must be treated as a judgment within the meaning of the letters patent. This is what was held by this Court in Shanti Kumar case, as discussed above

¶164

Thus, the argument of Mr. Awasthi has no force that an appeal could only lie against final decision before this Appellate Tribunal and the appellant would only be entitled to raise said issue even it is a serious issue in the appeal against the final order of the Adjudicating Authority and even if intermediary order effects valuable rights of a person aggrieved.

¶165

It is true that every only passed by the Adjudicating Authority is not appealable order, however the order(s) which affects the valuable rights of the Appellant in relation to violation of principles of natural justice. Section 19(1) applies to an order passed against the person aggrieved. There is no restriction or limitation to the words “an order” in Section 19(1).

¶166

The judgement passed by the Delhi High Court in the case of Arun Kumar is not applicable to the facts of the present case for the following reasons.

¶167

(a) The judgement of Arun Kumar is in the context of Prevention of Money Laundering Act, 2002 (" PMLA ") and the various analysis under that FPA-FE-87 & 88/MUM/2017 Page 25 of 57

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judgement is in the context of PMLA. As against this the present Appeal has been filed under FEMA and under the provisions of Section 19 thereof. The scheme of the statutes is entirely different. As aforesaid, the Appellant has filed detailed Written Submissions in the matter relating to the maintainability of the present Appeal under Section 19 of FEMA.

¶169

(b) The appeal provisions of PMLA cannot simplicitor be made applicable to the appeal provision of FEMA which are different as Section 19(6) of FEMA empowers the Appellate Tribunal to suomoto examine the "legality, propriety or correctness of any order" made by an adjudicating authority under Section 16 and make such order as it thinks fit. The phrase "any order" in Section 19(6) once again clearly indicates that it is not restricted and limited to the final order. Section 16(3) requires the adjudicating authority to hold an enquiry under Section 16(1). Section 16(5) deals with the powers of the adjudicating authority during such enquiry. Section 16(6) provides for the enquiry to be disposed of within a timeframe, failing which reasons are to be recorded in writing for not disposing of the complaint within the said period. Thus, there are a variety of orders that could be passed under Section 16 and not only a final order. All such orders would be revisable by the Appellate Tribunal in exercise of its power under Section 19(6) if they effect valuable rights. Consequently, the words “any order” in section 19(6) and an order in 19(1) would be given the same meaning.

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(c ) The Order passed by the Adjudicating Authority on 15^th November 2017 from which the present appeal arises is clearly a final order since the same records that the adjudication proceedings are concluded albeit without any hearing. By paragraph 17 of the said Order dated 15^th November 2017,the Adjudicating Authority has specifically recorded that he has decided to conclude the adjudication proceedings in the matter and has thereafter reserved the same for orders. The present appeal and the grounds of appeal

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deal with the illegality of passing such order without any hearing, without prejudice to the rights and contentions of the Appellant, if indeed the said Order dated 15^th November 2017 is upheld by this Hon'ble Tribunal, then and in those circumstances the Appellant would have no further opportunity to re-agitate the matter before the Adjudicating Authority since he has concluded the proceedings. The case and facts of Arun Kumar is very far away from these facts and for this reason also cannot be relied upon by the Respondent in the present matter.

¶174

The other judgements referred by Mr. Awasthi are concerned, no doubt the correct law land down in the said judgement, however the facts and circumstances in the present appeal are different. In the present case, the Adjudicating Authority itself felt that the cross – examination of chokshi is essential in order to decide the controversy involved in view of two contrary reports. The cross examination was allowed by adjudicating authority itself.

¶175

59 Since the impugned orders affect the substantive rights of the appellant to a fair hearing and therefore, the present appeals are clearly maintainable.

¶176

The second submissions of Mr. Awasthi is that the initial order passed by the Chairman in appeal no. 83/2017 was without jurisdiction wherein the appellant was allowed to file the application for re-calling of witness.

¶177

The Respondent in paragraphs 6 and 7 of their written submissions, has contended that this Hon'ble Tribunal did not have jurisdiction when sitting singly and when it passed an Order dated 13^th November 2017 in Appeal No. 83 of 2017, also filed before this Tribunal.

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Para 6 & 7 of the written submissions are read as under:

¶181

―6. That the order dated 13.11.2017 passed by this Hon‘ble Tribunal allowing the appellants to move application for recall of witness and directing the Adjudicating Authority to dispose of the same in accordance with law. The said order was passed by Hon‘ble Chairperson sitting singally and as per the mandate of the Foreign Exchange Management Act, 1999, Section 20 clearly states that if the penalty is more than Rs. 5 lacs then the matter should be heard Division bench as the Act at that time provides bench by Single Member or Chairperson but in the present case the case under enquiry involves crores of rupees, therefore, the matter could not have been heard by a Single Member or Chairperson as the case may be.

¶182

7. That the order dated 13.11.2017 is without jurisdiction because Section 20 have been omitted by Finance Act, 2017 w.e.f. 01.04.2017, therefore, now the matter cannot be heard by a Single Member or Chairperson hence the order dated 13.11.207 itself is without any jurisdiction and the present appeal is an outcome of the order dated 13.11.2017, therefore, are not maintainable as against the order which is nullity in law.‖

¶183

63. It is not denied by the respondent that the said objection was not raised either in the earlier appeal or hearing of the present appeal. It is taken first time in the written submissions filed by the respondent. As the respondent has raised the objection, it is become necessary to deal with the said objection

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also.

¶185

After examining the provisions of the Act and settled law on this issue, I am of the view that the said objection is without any substance. It is admitted by the respondent that the erstwhile Section 20 of Foreign Exchange Management Act, 1999 (“FEMA”), specifically provided for the constitution of a single member bench in the Appellate Tribunal and this Section has been omitted by the Finance Act, 2017; Section 18 of FEMA is now to be the same FPA-FE-87 & 88/MUM/2017 Page 28 of 57

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as the same as the Appellate Tribunal constituted under sub-Section (1) of Section of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property), Act, 1976.

¶187

The constitution of the Appellate Tribunal under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 is under Section 12 of that Act. Amendment to Section 12(6A) effective from 1^st June 2016 specifically provides that where the Chairman considers it necessary for the expeditious disposal of appeals he may constitute a bench with one or two members and the bench so constituted may exercise and discharge the powers and functions of the Appellate Tribunal. Section 12(6A) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 is reproduced hereunder:

¶188

―(6A) Notwithstanding anything contained in sub-section (6), where the Chairman considers necessary so to do for the expeditious disposal of appeals under this section, he may constitute a Bench with one or two members and a Bench so constituted may exercise and discharge the power and function of the Appellate Tribunal:

¶189

Provided that if the members of a Bench so constituted differ on any point or points, they shall state the point or points on which they differ and refer the same to a third member (to be special by the Chairman) for hearing on such point or points and such point or points shall be decided according to the opinion of that member.‖

¶190

Even as per the recent judgement rendered by the Hon‟ble Division Bench – in W.P.(C) 5320/2017 of the High Court of Delhi in batch of writ petitions wherein the same very issue was raised as to whether the matters of these nature can be heard by the Single Member of the Adjudicating Authority and Appellate Board.

¶191

After discussing various provisions of the Act, the following finding in

¶192

paras

¶193

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Composition of AA and AT

¶196

79. The Court next takes up the question of the composition of the AA on which extensive arguments were advanced by the learned counsel for the Petitioners. In this context, it must be noticed that under Section 6 PMLA, the AA is supposed to consist of the Chairperson and two other members – one of whom shall be a person having experience in the field of law. Section 6(3) further sets out what the qualifications for appointment as a member of an AA should be. One of those qualifications is that the person has to be qualified for appointment as a District Judge or a person in the field of law or a member of an Indian Legal Service. The other qualification is possession of a qualification in the field of finance, accountancy or administration as may be prescribed. It is, therefore, not the case that all the members of the AA should be judicial members.

¶197

80. It is seen that under Section 5 PMLA, the jurisdiction of the AA – may be exercised by the Benches thereof. Under Section 6(5)(b) PMLA, a Bench may be constituted by the Chairperson of the AA – with one or two members of the Chairperson may deem fit. Therefore, it is possible to have single-member benches. The word ‗bench‘ therefore does not connote plurality. There could, even under Section 6(5)(b) PMLA, be a ‗single member bench‘. When Section 6(6) PMLA states that a Chairperson can transfer a member from one bench to another bench, it has to be understood in the above context of there also being single-member benches.

¶198

81. The Court is unable to agree with the submission that since the Adjudicating Authority (Procedure) Regulations 2013 requires every order-sheet to have the signatures of the Chairperson and members constituting the bench, it necessarily means that every matter has to be heard by a bench comprising the Chairperson and members. This would be an erroneous interpretation which is contrary to the main provision of the PMLA itself, viz., Section 6(5)(b) PMLA. Likewise, under Rule 3 of the Prevention of Money Laundering (Appointment of Conditions of Service of Chairperson and Members of the Adjudicating Authorities) Rules 2007, although it states that the AA should have three members, that has to be read along with Section 6(5)(b) that there can be single-member benches. A contrary interpretation would actually frustrate the working of the AA. The Court, therefore, rejects the contention of the Petitioners that there cannot be any single-member benches of the AA.

¶199

It was then contended on the strength of the decisions in L. Chandrakumar v. Union of India (1997) 3 SCC 261; Eastern Institute for FPA-FE-87 & 88/MUM/2017 Page 30 of 57

¶200

Integrated Learning v. Joint Directorate 2016 Cri LJ 526, Vishal Exports Overseas Ltd. V. Union of India (decision dated 9^th March 2016 of the Gujarat High Court in SCA No.13949 of 2014) and Uday Navinchandra Sanghani v. Union of India (decision dated 1^st April 2016 of the Gujarat High Court SCA No.10076 (2015) that even that Single Member has to necessarily be a Judicial Member (JM) and not an Administrative Member (AM).

¶201

83. The reliance on L. Chandrakumar v. Union of India (supra) is misplaced. There the question was whether the ousting the jurisdiction of the High Court and vesting the powers of the High Court in a Tribunal is constitutionally valid. That is not what is sought to be done under Section 8 PMLA. It is only to provide an internal judicial review of the orders passed by the authorities under Section 5(1) PMLA. The AA under Section 8 PMLA cannot, therefore, be equated with an Administrative Tribunal under the Administrative Tribunals Act 1985 (ATA). The Central Administrative Tribunal under the ATA was vested with the powers originally with a High Court under Article 226 of the Constitution. Those were Tribunals under Article 323-B of the Constitution of India. The AA is not that kind of a Tribunal at all. The Court is, therefore, unable to agree with judgements of the learned Single Judges of the Sikkim and Gujarat High Courts in this context.

¶202

There are other reasons why the Court finds that the aforementioned decisions of the learned Single Judges of the Sikkim and Gujarat High Courts cannot be concurred with. They fail to notice that under Section 25 PMLA, an appeal is provided for from the order of the AA before the AT. Even so, such an AT is not the equivalent to the High Court since an appeal against the order of the AT is provided to the High Court itself. Thus, the hierarchy of judicial review authorities under the PMLA presents a very different scheme from what is found in other statutes, particularly the ATA.

¶203

85. Under the PMLA, however, we first have a decision by an authority under Section 5(1) PMLA. Then we have a review of that decision by the AA under Section 8 PMLA. Then we have an appeal against that decision to the AT under Section 25 PMLA. These authorities, i.e. the AA and the AT, need not be entirely manned only by JMs. They can be AMs as well.

¶204

86. No two Tribunals are alike. The National Company Law Tribunal (NCLT) comprises of both JMs and AMs. The FPA-FE-87 & 88/MUM/2017

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circumstances under which the Supreme Court insisted that a Bench of the NCLT should be presided over by a JM is that the NCLT seeks to exercise the powers earlier vested in a High Court. That is not the case as far as the PMLA is concerned. Neither the AA nor the AT exercises the power that would otherwise be available to a High Court. That power, in fact, remains with the High Court in an expanded capacity. Under Section 42 PMLA, an appeal is provided to the High Court, both on questions of law as well as on facts. That makes it a full-fledged appeal, the scope of which would be wider than the exercise of powers of a judicial review by a High Court under Article 226/227 of the Constitution.

¶207

Summary of conclusions

¶208

87. This court summarizes its conclusions as under:

¶209

(i) The second proviso to Section 5(1) PMLA is not violative of Article 14 of the Constitution of India; the challenge in that regard in these petitions is hereby negative.

¶210

(ii) The expression ‗reason to believe‘ has to meet the safeguards inbuilt in the second proviso to Section 5(1) PMLA read with Section 5(1) PMLA.

¶211

(iii) The expression ‗reason to believe‘ in Section 8(1) PMLA again has to satisfy the requirement of law as explained in this decision.

¶212

(iv) There has to be a communication of the ‗reason to believe‘ at every stage to the notice under Section 8(1) PMLA.

¶213

(v) The notice under Section 8(1) PMLA is entitled access to the materials on record that constituted the basis for ‗reasons to believe‘ subject to redaction in the manner explained hereinbefore, for reasons to be recorded in writing. (vi) If there is a violation of the legal requirements outlined hereinbefore, the order of the provisional attachment would be rendered illegal.

¶214

(vii) There can be single-member benches of the AA and the AT under the PMLA. Such single-member benches need not mandatorily have to be JMs and can be AMs as well.

¶215

88. As already pointed out, the challenge to the maintainability of the writ petitions on other grounds, and to the ECIR and to the OCs, the SCNs, the provisional attachment orders and to all further proceedings arising therefrom which have been challenged in the individual writ

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petitions, shall be decided by the learned single Judge of this High Court. It will be open to the Respondents to raise all pleas, including that of maintainability, before the learned Single Judge. No opinion is expressed with regard thereto.

¶219

In view of above referred Judgement and the provisions of Section 12(6A) it is not fair on the part of the Respondent to contend that the Chairman sitting in this Tribunal was not empowered and have jurisdiction to hear the appeal no. 83 of 2017.

¶220

Despite of specific provisions and settled law, the objection was raised by the respondent in its written submission as well as the time of hearing of appeal no. 87/2017 hold on 09.01.2018. I am of the view that in the manner in which the respondent castigated, humiliated the warning system of this Tribunal in a selective way and without any valid reason which is highly unjustified and uncalled for. The respondent has infact tried to lowered the image of this tribunal and tried to put pressure. It is disrespected the chair as the conduct of the respondent is very unfortunates. I reject the submission of the respondent accordingly.

¶221

The next argument of the respondent is that the document in question available at page no. 191 of the paper book of the appeal file was supplied earlier and not on 20.09.2017 at the time of recording the cross examination. As per record by a letter dated 15th May, 2017, the appellant sought certain essential details, documents and annexures in context of the said show cause notice, which as per appellant did not with the said show cause notice on 08th June, 2017, appellant filed its response to the said show cause notice.

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It was necessary to cross-examine the Investigation Officer who had prepared the said Investigation report complaint dated 09th December, 2016 relied upon the said undated report of Chokshi & Chokshi LLP and even it becomes necessary to cross-examine the Complainant.

¶225

In view of two contrary reports and seriousness of the matter, the respondent itself allowed the appellant on 20th September, 2017, for crossexamination of the witness on behalf of the Enforcement Directorate, viz. Mr. Mitil Chokshi, Partner of M/s. Chokshi & Chokshi LLP, Chartered Accountants, in context of issues relating to the valuation process adopted by M/s. Chokshi & Chokshi LLP which is contrary to the valuation report submitted by the appellant. It is the case of the appellant that the copy supplied to it of report of Mitil Chokshi was unsigned, undated report.

¶226

It is contended by the appellant that the said report of M/s. Chokshi & Chokshi heavily relies upon the said Investigation report, in the course of his ongoing cross-examination, Mr. Mitil Chokshi inter alia hasnot been able to explain as to why the Investigation report was made available to him. He has alleged that he did not seek the report and that the same was made available to him without him seeking the same. However, he has not been able to explain as to how and why the said report came to be handed over to him, although his mandate was to issue an independent valuation report that there were deliberations amongst Mr. Chokshi, the Investigation Officer and the Complainant, presumably they had been in touch with one another. No explanation however has been afforded as to how that influenced each other in the preparation of the said report and/or complaint. In these circumstances, amongst others, it becomes very relevant that the appellant be given an

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opportunity to cross-examine the complainant, Mrs. V. Kalyani and the said Investigation Officer, Mr. D.K. Sinha.

¶230

The appellant filed an appeal before Appellate Tribunal, Foreign Exchange Management Act, 1999 against the said two orders dated 12.10.2017 under Section 19 of the FEMA Act, wherein this Tribunal vide orders dated 13.11.2017 granted liberty to the appellant to move two independent applications (i) for further cross-examination or recall of witness Mitil Chokshi and (ii) towards production of documents and directed that the above mentioned application to be adjudicated by the Adjudication Authority on their merits. The order also stated that the Adjudicating Authority should not proceed with the main matter until the said applications were first decided on merits.

¶231

In view of the order dated 13.11.2017 passed by the Appellate Tribunal, Foreign Exchange Management Act, the Appellant filed two applications both dated 14.11.2017 seeking the following reliefs:

¶232

i. Application No. FPA-FE-83/MUM/2017 (for cross-examination):-

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a. Mr. Mitil Chokshi be recalled by your Honour for crossexamination;

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b. That further dated be fixed by your Honour towards crossexamination of Mr. Mitil Chokshi;

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c. That the present application be heard and decided on merits by your Honour and an order be passed on the present application;

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d. That if your Honour were to rule against this application then the main matter be adjourned by your Honour till such time that an appeal filed by the company from the said order is determined.

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FPA-FE-87 & 88/MUM/2017

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II. Application No. FPA-FE-83/MUM/2017 (for inspection of documents):-

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i. That your honour direct that inspection of the letter/document mandating C&C to give its opinion towards valuation of shares “issued” by the company.

¶241

ii. Alternatively, if no such letter of engagement exists, then we be informed that there is no such letter.

¶242

iii. That the present application be heard and decided on merits by your honour and an order be passed on the present application;

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iv. That if your honour were to rule against this application then the main matter be adjourned by your honour till such time that an appeal filed by the company from the said order is determined.

¶244

On 15^th November, 2017, the appellant together with counsel on their behalf, appeared before the Special Director, and submitted that Mr. Mitil Chokshi be recalled for further cross-examination by the appellant herein and that same dates may be fixed for the purpose of his cross examination and in case the Ld. Special Directorate was not inclined to allow the prayer mode in the application. then till the time the appellant herein has had the opportunity to test the order of dismissal of the application before this Tribunal.

¶245

On 15.11.2017, the Special Director was also informed about pending appeal before the Hon‟ble FEMA Tribunal being appeal No. 87/2017 challenging the order dated 30.10.2017 of the Special Director rejecting the prayer for cross-examination of other vital witnesses and that the matter was listed for hearing on 21.11.2017.

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FPA-FE-87 & 88/MUM/2017

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On 15.11.2017, the Ld. Special Director rejected the prayer made in the said two applications mainly on the reasons that (i) all further questions and issues which were sought to be put to Mitil Chokshi were already part of the cross-examination transcript of 20.09.2017 and have already been addressed and there are no new issues being suggested on which cross-examination is now sought and (ii) that the copy of the engagement letter dated 26.06.2016 had already been supplied by the Enforcement Directorate on 14.08.2017 and that there is no scope of any ambiguity regarding supply of engagement letter of C&C to the appellant.

¶249

After dismissing both applications, Special Director asked the counsel for the appellant to argue the main matter. Upon counsel stating that he was not in a position to do so since, cross-examination according to the appellant was incomplete and in any event, the appellant be given an opportunity to challenge the order of rejecting the applications until such time the matter should be adjourned.

¶250

The Special Director had decided to closing the opportunity for personal hearing and treating conclude the hearing of the main matter. Thereafter reserved the main matter for orders.

¶251

It is evident from the order dated 15.11.2017 that the Special Director has the said order imputed dilatory and delay tactics to the appellant and its advocates. In para 15 of the said order the Special Director has listed some dates in order to justified the remarks made.

¶252

As already mentioned that it is the case of the appellant that the document appearing at page 191, Folder III of the Memo of Appeal, being the FPA-FE-87 & 88/MUM/2017 Page 37 of 57

¶253

72 line items/assumption sheet, (hereinafter referred to as the said “Assumption Sheet”), bearing the initials of Mr. Mitil Chokshi was handed over to the appellant at the culmination of the day‟s proceedings on 20^th September, 2017. Thus, the opportunity be granted for re-examination of witness.

¶254

Since, the submission of the appellant is disputed by the respondent who stated that the said document was already available with the appellant. By the order dated 22^nd November 2017, this Hon‟ble Tribunal has inter alia recorded and directed as follows:

¶255

―One of the submissions out of many made by the appellant is that further cross examination is necessary/required as certain documents were produced by the witness at the end of recording the crossexamination including the document available at page no. 191 which has been filed in the appeal and is available in the document file. The counsel for the respondent denies the submissions of learned counsel for the appellant. He seeks time to file the affidavit in this regard within one week to the effect the copy of the said document was supplied to the counsel much earlier point of time. Let the affidavit be filed within one week with an advance copy to the learned counsel for the appellant who may file the response, if any, within one week thereafter.‖ (emphasis supplied)

¶256

In view said order, the Respondent has filed an affidavit, of MR. Joseph George, Deputy Director, Directorate of Enforcement.

¶257

The appellant after the receipt of a copy of the said affidavit has also filed the response by stating that supplied on 12.12.2017 it is apparent that the “affidavit” travels far beyond the reasons and/or the purpose for which the same was directed to be filed by this Tribunal.

¶258

It is stated by the appellant that the limited purpose for which the Respondent was to file an affidavit, was as to whether the said Assumption FPA-FE-87 & 88/MUM/2017 Page 38 of 57

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Sheet had been handed over on 20^th September, 2017 or on a date prior to that, as submitted by the Respondent at the time of the hearing on 22^nd November, 2017. It is stated that the said Assumption Sheet was handed over on 20^th September, 2017 and not on any date prior thereto and the fact is also clearly confirmed in the said “affidavit” of Mr. Joseph George.

¶261

It is evident that in the present appeal as well as in the application in the body of the application dated 14^th November, 2017 filed by the appellant before the Adjudicating Authority; it has been clear contended by the appellant that it is only the document appearing at page 191, Folder III of the Memo of Appeal. (the said Assumption Sheet), which was handed over on 20^th September, 2017, and not any other document.

¶262

The text of both the application and appeal are reproduced.

¶263

In the application dated 14^th November, 2017, the following submission

¶264

appears at paragraph 15 (e) at internal page 5 of the Application (appearing at page 170 of Folder III of the Memo of Appeal):

¶265

―15 (e) Questions are to be asked about the basis and source of assumption made by C&C in forming its opinion in as much as on 20^th September, 2017 at the culmination of that day‘s proceedings, Mr. Chokshi handed over a ―Valuation Assumption/Line item Sheet‖ (which sheet is attached as the last page to the witnesses transcriptAnnexure 2 above). The Company has not had any opportunity to question the witness about the contents of the said sheet since it was handed over at the culmination of proceedings on 20^th September, 2017.‖ (emphasis supplied)

¶266

In the present appeal no. 88 of 2017, the following submission appears at Ground H appearing at page 15 of Folder I of the Memo of Appeal:

¶267

―H. The Ld. Special Director erred and failed to consider that the reasons set out in detail in the application for recalling the witness; included a request to question the FPA-FE-87 & 88/MUM/2017

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witness on the ‗Valuation Assumption/Line Item Sheet, which was only provided to the appellant at the culmination of that day‘s proceedings on 20.09.2017 and, as such, the appellant did not have any opportunity to question Mr. Mitil Chokshi about the contents of the said statement.‖ (emphasis supplied)

¶270

In the affidavit of Joseph George raising the same objection. Para 6 & 7 of his affidavit re-reproduced hereunder:

¶271

―6. I sate that under question No. 40, a specific query was raised by the Counsel for KRSPL regarding the underlying assumptions made by C&C in their Opinion for the unusual high growth rate of 12% on the total income of KRSPL for the FY 2013-14 as against its income for the FY 2012-13. While answering Question No.40, Mr. Chokshi referred to an internal paper ( Page 191 of the appeal paper book and as recorded in order dated 22.11.2017). The Counsel for KRSPL sought a copy of that paper, which was provided to them as duly recorded in the relevant transcript of the cross examination. Thereafter, the Counsel for KRSPL started asking questions from the said sheet of paper provided to them. The Question Nos. 41 to 45 relate to that internal reference paper of C&C. With regard to the Question No. 40, it was stated by Sh Mitil Chokshi that they had identified 11 line items of Income and 61 lined items of Expenditure from the balance sheet of KRSPL, to justify the increase of 12% growth rate. The Question No. 41 is linked up to the prize money which is at sl No.2 of the 11 line items of Income, mentioned in the said sheet. The subsequent Question Nos. 42 & 43 pertain to the participation fee - which is at sl. No. 9 of the 11 line items of Income, mentioned in the said sheet. Similarly Question No. 44 was linked to the bad/doubtful debts written off and to the donation which are referred at sl. Nos.41&42 respectively, of the 61 line items of Expenditure mentioned in the said Sheet. Also, the Question No. 45 has a reference to Sl. No. 42 of the 61 line items of Expenditure mentioned in the said sheet. It is thus seen that Question Nos. 41 to 45 were all linked to the entries figured in the line items of Income & Expenditure listed in the Sheet provided by Shri Chokshi during the course of cross examination and the counsel did not their after asked any question relating to that sheet (Page 191) hence the cross examination concluded as recorded by the Adjudicating Authority at the end of the cross examination and counter singed by the counsel of the appellants without making any request for further cross examination.

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7. I sate that as far as the contention of the appellant that further cross examination is necessary/required as certain documents were produced by the witness at the end of recording the cross examination including the document

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FPA-FE-87 & 88/MUM/2017

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available at page No.191 which has been filed in the Appeal and is available in the document file, it is to submit that page No.191 refers to in appeal records is the sheet containing the details of 11 line items of Income and 61 lined items of Expenditure submitted by Shri Mitil Chokshi, while answering to Question No. 40. Excepting this sheet, no other sheet/document was either produced or taken from the witness Shri Mitil Chokshi, during the course of his entire cross examination . Hence, it is incorrect to say that ‗certain documents‘ including the sheet were given by the witness at the end of his cross examination.

¶276

It is stated in para 8 of the affidavit that the said Valuation Assumption/Line item sheet was not mentioned is not a new document which was neither provided to the department and actually in support of his statement Mr. Chokshi is relying upon but the department has not relied upon in the show cause notice. It is not denied that after the cross in concluded but no separate order for fixing the final date was passed on that date as per both counsel for the parties.

¶277

It is evident that the said Assumption Sheet was only handed over the appellant either during cross or at the culmination of proceedings on 20^th September, 2017. Even the Respondent has nowhere denied the said contention of the appellant. Therefore the statement made before us on 22.11.2017 without verifying the factual position.

¶278

It is implicit from para 8 of the said affidavit which reproduced below:-

¶279

It is also noticed that the Sheet produced by Shri Mitil Chokshi during the course of cross examination is not a new document but an internal paper for reference of C&C, which was neither provided to the department nor relied upon in the Show Cause Notice. No new fact was brought out through this paper and it contains various lines items of Income and Expenditure, showing the trend of increase/decrease in percentage (%), the details of which are available as figures in the Work Sheet, provided to KRSPL earlier. It is also worthwhile to note that this office, while providing the said worksheet to KRSPL, has informed

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them that if they required any clarifications on the said documents, the same should be communicated on or before 19.08.2017 i.e. before the cross examination. However, no clarification on the documents forwarded under letter dt. 14.08.2017 was sought by KRSPL. The cross examination thus was concluded on 20.09.2017 as duly recorded in the transcript of the cross examination which was countersigned by Counsel for KRSPL. The demand for extra time for going through that page was not felt by the Defense Counsel and the cross examination was concluded. The issue is raked-up again for the purpose of delaying the adjudication process.

¶283

Learned counsel for the appellant has submitted that on perusal of the Working Sheets and the Assumption Sheet would show that of the 11 income/revenue line items appearing in the said Assumption Sheet, other than line item No. 11 “other non-operating income”; no specific amounts attributable to any of the other line item Nos. 1 to 10 can be discerned and/or individually identified from the Working Sheets and the percentage variation attributable to none of these 11 income/revenue items is mentioned/indicated in the Working Sheets and 61 expenditure line items, appearing in the said Assumption Sheet other than line item Nos. 1 (Franchise Fee), 2 (Cost of Players) and 61 (Depreciation/Amortization); no specific amounts attributable to any of the other 58 items can be discerned and/or individually identified from the Working Sheets and the percentage variation attributable to none of these 61 expenditure items is mentioned/indicated in the Working Sheets.

¶284

It is denied on behalf of the appellant that Q. 41 to 45 of the crossexamination of Mr. Mitil Chokshi, (held on 20^th September, 2017), covers the case of the appellant. It is clarified that infact question 41 to 45 put forth by the Appellant‟s authorized representative were with a reference to the audited accounts of the appellant and the C&C Working Sheets provided to the Appellant by the Respondent under cover of their letter dated 14^th August, 2017.

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FPA-FE-87 & 88/MUM/2017

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The said Questions 41 to 45 were not asked form the Assumption Sheet. In order to verify the same, the questions are reproduced when asked from the time of cross-examination.

¶288

(i) Q.41 - this is with the reference to the audited accounts of the Appellant for F.Y. 2012-13. ―Revenue from the Prize money‖ which appears as the 6^th line item in Note 13: ―Revenue from Operations of the audited accounts for F.Y. 2012-13‖ From the answer to Question 41, it is apparent that it was culled out from the audited accounts. The Assumption Sheet makes no reference to the sum of Rs. 10 Crore nor to the sum of Rs. 4.98 Crore. This clearly shows that the question was not asked from the Assumption Sheet.

¶289

(ii) Q. 42 - ―Revenue from participation fee‖ appears as the 5^th line item in Note 13: ―Revenue from Operations of the audited accounts for F.Y. 2012-13‖. This question on the ―estimate‖ was not asked from the Assumption Sheet. Also, the question was not about the percentage increase based on the revenue from this fee.

¶290

(iii) Q. 43 - this is a statement made on the basis of the audited accounts. This was a follow up question based on the answer to question no. 42. The answer to question no. 43 is with a reference to the actual numbers till 31^st March, 2013 contained in the audited accounts and not from the Assumption Sheet. This question was not asked from the Assumption Sheet.

¶291

(iv) Q. 44 - this is with reference to the audited accounts of the Appellant for F.Y. 2012-13 read with one of the Working Sheets provided to the appellant under cover of the letter dated 14^th August, 2017. The answer is also from the audited accounts of FY 2012-13 and not from the Assumption Sheet. In fact, the Assumption Sheet makes no reference to ―Administrative & Other Expenses‖. This question was not asked from the Assumption Sheet.

¶292

(v) Q. 45 - this is a follow up question to Q. 44. It was asked with a reference to the audited accounts of March, 2012, March 2013 and not asked from the Assumption Sheet.

¶293

It is apparent from the same that the appellant did not have any opportunity to question the witness about the contents of the said Assumption Sheet, as per appellant it was handed over at the Culmination of proceedings on 20^th September, 2017.

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98. The only issue in hand is whether the witness can be recalled for further

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cross examination or not in view of contents mentioned in the application.

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FPA-FE-87 & 88/MUM/2017

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99. Order 18 Rule 17 reads as under:

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17. Court may recall and examine witness :- The Court may at any stage of a suit recall any witness who has been examined and may (subject to the law of evidence for the time being in force) put such questions to him as the Court thinks fit.

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100. It is not denied on behalf of respondent that as per provisions of Act that

¶301

all cases will have to be considered in the manner as civil court. It is also not denied that the cross examination of witness can be allowed if serious controversy of issue is involved though code of civil procedures is not applicable but its principals are applicable. It is also not in dispute that the doors of natural justice can never be closed. In the present case the authority itself felt the cross examination is necessary in view of controversy involved. It

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is not denied that number of matters are pending before Adjudicating authority for the last more than many years.

¶303

101. The case of the appellant was that the crucial document was not given

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prior to 20^th September, 2017.

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102. Many judgements are relied upon by Mr. Rajiv Awasthi learned counsel

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appearing on behalf of respondent on the issue of procedural part and non grant of opportunity of cross but those issues are not applicable in the facts of this case as the opportunity for cross was allowed by the authority itself in

¶307

view seriousness of the issue involved.

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FPA-FE-87 & 88/MUM/2017

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103. When it was pointed out to him, his argument was the witness should not re-called as in the cross the appellate has already put all questions and nothing remains to be crossed as appellant has covered all its case in cross and it is deliberate more to delay the matter. Actually he was referring the conduct of the appellate and has submitted that all the relevant documents supplied earlier. It is argued by Mr. Awasthi that the appellant is adopted the policy of hide and seek policy in filing these frivolous applications. The appeal

¶311

is not maintainable and it should be dismissed with heavy costs. He has referred the proceedings pending before Adjudicating Authority.

¶312

104. Law on power to recall any witness for cross examination has been laid

¶313

down by time to time. It has been decided by the Apex Court in the case of P.Sanjeeva Rao vs State of Andhra Pradesh in Crl. Appeal no. 874-875 of 2012

¶314

decided on 2^nd July, 2012 reported in paras 12 to 17 are read as under:

¶315

12. The nature and extent of the power vested in the Courts under Section 311 Cr.P.C. to recall witnesses was examined by this Court in Hanuman Ram v. The State of Rajasthan & Ors. (2008) 15 SCC 652. This Court held that the object underlying Section 311 was to prevent failure of justice on account of a mistake of either party to bring on record valuable evidence or leaving an ambiguity in the statements of the witnesses. This Court observed:

¶316

―This is a supplementary provision enabling, and in certain circumstances imposing on the Court, the duty of examining a material witness who would not be otherwise brought before it. It is couched in the widest possible terms and calls for no limitation, either with regard to the stage at which the powers of the Court should be exercised, or with regard to the manner in which it should be exercised. It is not only the prerogative but also the plain duty of a Court to examine such of those witnesses as it considers absolutely

¶317

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¶319

necessary for doing justice between the State and the subject. There is a duty cast upon the Court to arrive at the truth by all lawful means and one of such means is the examination of witnesses of its own accord when for certain obvious reasons either party is not prepared to call witnesses who are known to be in a position to speak important relevant facts. The object underlying Section 311 of the Code is that there may not be failure of justice on account of mistake of either party in bringing the valuable evidence on record or leaving ambiguity in the statements of the witnesses examined from either side. The determinative factor is whether it is essential to the just decision of the case. The section is not limited only for the benefit of the accused, and it will not be an improper exercise of the powers of the Court to summon a witness under the Section merely because the evidence supports the case of the prosecution and not that of the accused. The section is a general section which applies to all proceedings, enquires and trials under the Code and empowers the Magistrate to issue summons to any witness at any stage of such proceedings, trial or enquiry. In Section 311 the significant expression that occurs is "at any stage of inquiry or trial or other proceeding under this Code". It is, however, to be borne in mind that whereas the section confers a very wide power on the Court on summoning witnesses, the discretion conferred is to be exercised judiciously, as the wider the power the greater is the necessity for application of judicial mind.‖ (emphasis supplied)

¶320

13. Grant of fairest opportunity to the accused to prove his innocence was the object of every fair trial, observed this Court in Hoffman Andreas v. Inspector of Customs, Amritsar (2000) 10 SCC 430 . The following passage is in this regard apposite:

¶321

―In such circumstances, if the new Counsel thought to have the material witnesses further examined, the Court could adopt latitude and a liberal view in the interest of justice, particularly when the Court has unbridled powers in the matter as enshrined in Section 311 of the Code. After all the trial is basically for the prisoners and courts should afford the opportunity to them in the fairest manner possible.‖

¶322

(emphasis supplied)

¶323

14. The extent and the scope of the power of the Court to recall witnesses was examined by this Court in Mohanlal Shamji Soni v. Union of India & Anr. 1991 Supp (1) 271, where this Court observed:

¶324

―The principle of law that emerges from the views expressed by this Court in the above decisions is that the criminal court has ample power to summon any person as a witness or recall and re-examine any such person even if the evidence on both sides is closed and the jurisdiction of

¶325

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the court must obviously be dictated by exigency of the situation, and fair-play and good sense appear to be the only safe guides and that only the requirements of justice command and examination of any person which would depend on the facts and circumstances of each case. ‖

¶328

(emphasis supplied)

¶329

15. Discovery of the truth is the essential purpose of any trial or enquiry, observed a three-Judge Bench of this Court in Maria Margarida Sequeria Fernandes v. Erasmo Jack de Sequeria through LRs. 2012 (3) SCALE 550

¶330

A timely reminder of that solemn duty was given, in the following words:

¶331

―What people expect is that the Court should discharge its obligation to find out where in fact the truth lies. Right from inception of the judicial system it has been accepted that discovery, vindication and establishment of truth are the main purposes underlying the existence of the courts of justice.‖

¶332

16. We are conscious of the fact that recall of the witnesses is being directed nearly four years after they were examined in chief about an incident that is nearly seven years old. Delay takes a heavy toll on the human memory apart from breeding cynicism about the efficacy of the judicial system to decide cases within a reasonably foreseeable time period. To that extent the apprehension expressed by Mr. Rawal, that the prosecution may suffer prejudice on account of a belated recall, may not be wholly without any basis. Having said that, we are of the opinion that on a parity of reasoning and looking to the consequences of denial of opportunity to cross-examine the witnesses, we would prefer to err in favour of the appellant getting an opportunity rather than protecting the prosecution against a possible prejudice at his cost. Fairness of the trial is a virtue that is sacrosanct in our judicial system and no price is too heavy to protect that virtue. A possible prejudice to prosecution is not even a price, leave alone one that would justify denial of a fair opportunity to the accused to defend himself.

¶333

17. In the result, we allow these appeals, set aside the orders passed by the Trial Court as also the High Court and direct that the prosecution witnesses No.1 and 2 shall be recalled by the Trial Court and an opportunity to cross examine the said witnesses afforded to the appellant. In fairness to the counsel for the appellant, we must record that he assured us that given an opportunity to examine the witnesses the needful shall be done on two dates of hearing, one each for each witness without causing any unnecessary delay or procrastination. The Trial Court shall endeavour to conclude the examination of the two witnesses expeditiously and without unnecessary delay. The parties shall appear before the Trial Court on 6^th August, 2012.

¶334

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¶336

Under these circumstances, without going into controversy raised by both sides. It is the interest of justice, equity and fairplay, let Mt. Chokshi be further cross-examined on this aspect. The argument of the respondent has no forced that the appellant has covered entire case on 20.09.2017 if when the question of 41-45 were put to Mr. Chokshi.

¶337

Thus, I am of the view that the findings given in the impugned orders are contrary to facts and law and are not sustainable. The prayer for recall of witness ought to have been allowed in view of peculiar facts of the matter. The appeal is liable to be allowed. The impugned order is set-aside.

¶338

Appeal No. FPA-FE-87/MUM/2017

¶339

Now coming to the second above mentioned appeal being no. FPA-FE87-MUM/2017 which is filed in order to seek the cross examination of the other witnesses on behalf of the Respondent i.e. the Complainant Ms. V. Kalyani and the Investigating Officer, Mr. D.K. Sinha.

¶340

As far as relief about the cross-examination of complaint Mr. V. Kalyani is concerned, the said prayer is not pressed during the course of hearing of appeal. However, the appellant is pressing the prayer with regard to Mr. D.K. Sinha (Investigating Officer) and the need to cross-examine him.

¶341

By an application dated 30^th October 2017, the Appellant requested the Ld. Adjudicating Authority to grant to them the right to cross-examine the Complainant, Smt. V. Kalyani and the Investigating Officer, Mr. D. K. Sinha.

¶342

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¶344

By the Impugned Order dated 30^th October 2017, the Ld. Adjudicating Authority summarily rejected the application of the Appellant towards crossexamining the said Smt. V. Kalyani and Mr. D. K. Sinha. The impugned order of rejection was passed without giving any reasons.

¶345

In the Order dated 15^th November 2017, (which is the Impugned Order in Appeal No. 88 of 2017), by and under paragraph 13 thereof, the Ld. Adjudicating Authority inter alia recorded that in his view, the application/request towards cross-examination of the said Smt. V. Kalyani and Mr. D. K. Sinha was a delaying tactic adopted by the Appellant and therefore the Ld. Adjudicating Authority had decided to proceed with the main matter without granting to the Appellant the right to cross-examine the said two officers.

¶346

It is submitted on behalf of the respondent that the foundation for the cross-examination of Mr. D. K. Sinha was laid in question nos. 19 – 21 of the cross-examination of Mr. Mitil Chokshi

¶347

It is submitted on behalf of the appellant that the primary foundation of the present adjudication proceedings is the Investigation Report dated 10^th August 2012, made by Mr. D. K. Sinha. It is on the basis of this report that the private agency of M/s. Chokshi & Chokshi, (chartered accountants), were engaged on mutually agreed commercial terms by the Enforcement Directorate to give their opinion on the valuation of shares as the respondent has heavily replied upon Opinion on valuation issued M/s. Chokshi & Chokshi, and the conclusions drawn in the said Investigation Report dated 10^th August 2012. It is stated that in the course of his part cross-examination held on 20^th

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September 2017, Mr. Mitil Chokshi had inter alia been unable to explain as to how and why the said Investigation Report was made available to M/s. Chokshi & Chokshi towards giving their “independent” opinion on valuation to be based on the erstwhile CCI Guidelines (only); and not to be based upon any other conclusions or findings. In Q.19 to Q.21 of his cross-examination, Mr. Chokshi confirms that M/s. Chokshi & Chokshi had not asked for the said Investigation Report but the same had been made available to them.

¶351

It is also submitted on behalf of the appellant that no prejudice would be caused to the Respondent by reason of the cross-examination of Mr. D. K. Sinha; grave injustice and grave prejudice would be caused to the Appellant if the Appellant is not permitted to cross-examine Mr. D. K. Sinha.

¶352

It is argued on behalf of the respondent that the submissions of the appellants are baseless and contrary to the facts. The service of M/s C&C was required by the Department to secure their opinion on the fairness of valuation of shares done by the auditors of M/s KRSPL. To enable M/s C&C to discharge this specific task, certain inputs were provided by the then Investigating officer ( viz. Sh. D.K.Sinha, AD) to get an overview of facts related to the enquiries. It is also submitted that the appellant has not approached this Tribunal with clean hands and made all attempts to mislead and misguide this tribunal by making wrong submissions and improving the case by raising pleas which are not substantiated from the record of the Adjudicating Authority.

¶353

But it is also a matter of fact if one would read para 56 of the report the Investigating Officer which inter alia states the „Franchise Agreement‟ had not been reviewed by the valuer, who made the Valuation Report on behalf of the Appellant, prior to issuance of shares to a non-resident. This statement is not FPA-FE-87 & 88/MUM/2017 Page 50 of 57

¶354

incorrect as the concerned Chartered Accountant, Mr. R. Ajgaonkar who issued the Valuation Report, (dated 28^th February 2009), during his statement given to the Enforcement Directorate on 10^th January 2012 has clearly stated that he had reviewed a copy of the Franchise Agreement in making his valuation report.

¶355

Thus on the face of report, there are discrepancies that the Investigating Officer, Mr. D. K. Sinha, and he is to be cross-examined to explain his Investigation Report, particularly since the Opinion of M/s. Chokshi & Chokshi relies on this Investigation Report.

¶356

Law on the issue of cross-examination of relevant witnesses (if the serious issues are involved) before the Adjudicating Authority. The Hon‟ble Supreme Court of India in the case of Ayaaubkhan Noorkhan Pathan v. State of Maharashtra & others reported in (2013) 4 SCC 465, has inter alia held that not only should be opportunity of cross-examination be made available, but it should be one of effective cross-examination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross-examination is an integral part and parcel of the principles of natural justice.”

¶357

The Constitution Bench of the Hon‟ble Supreme Court of India in State of M.P. v. Sadashiuva Vishampayan reported in AIR 1961 SC 1623, has also confirmed the principle that, the rules of natural justice require that a party should be given the opportunity of cross-examining a witness. The following decisions are referred:-

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i) In Prem Singh Vs. Special Director, Enforcement Directorate, CRL A. 276 of 2008, Delhi High Court, decided on 24.04.2014 , whereby it was held

¶361

that the denial of right to cross examine the witnesses would cause prejudice to the accused as statements of witnesses are not substantive evidence in themselves. It was held in the said judgement that delay is not a ground for disallowing the opportunity to cross examine witnesses. The court laid down

¶362

that:

¶363

―18. The impugned order of the AO fails to discuss this aspect although it has noticed the submission of learned counsel for the appellants that the said statements had been retracted as they had been given under threat and coercion. In order to determine whether the claim of the appellants that they were subjected to torture, threat and coercion was a credible one, the SD sought to have permitted the appellants to cross-examine the officers of the ED who recorded the statements. As regards Prem Singh, his statement is stated to have been recorded by A.K. Narang, Assistant Director. The statement of Rajendra Singh was recorded by Devender Malhotra. Neither of these officers was tendered for cross-examination. In the considered view of the Court, in the context of the specific allegation that the retracted confessional statements were obtained under torture and coercion, that aspect ought to have been examined by the SD. In the circumstances, the reasons given by the SD in the impugned AO for disallowing the request of the appellants for cross-examination of the ED officials only because it would tantamount to “further delay in finalising the proceeding” were not tenable or justified. The denial of cross examination of the ED officials by the appellants indeed has caused them severe prejudice since the ED was relying on the said statements as if they were by themselves substantive evidence.”

¶364

(iii) The Hon‘ble High Court of Delhi in Devashis Bhattacharya Vs. Union

¶365

of India 159 (2009) DLT 780 , while deciding a case under Foreign Exchange Regulation Act, 1973 had observed that:

¶366

―18. It is well settled that where an action under the statute entails civil consequences, then even if an opportunity of being heard may not be explicitly set out in the applicable legal provisions, the adherence to the principles of natural justice has to be read into such a statute. 19. There can be no dispute that the action permitted under section 61 of the FERA, 1973 certainly results in drastic penal consequences…‖

¶367

(iv) The Hon‘ble Supreme Court of India in Ramesh Ahluwalia Vs. State of Punjab & Ors. 2012 (10) SCALE 46 had observed that:

¶368

―18. This is in conformity with the principle that justice must not only be done. Actual and demonstrable fair play must be the hallmark of the proceedings and the decisions of the administrative and quasi judicial courts. In particular, when the decisions taken by these bodies are likely to cause

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adverse civil consequences to the persons against whom such decision are taken.‖

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IV-A The Hon‘ble Supreme Court of India in Ashiwin S. Mehta and Anr. Vs. Union of India (UOI) and Ors. (2012) 1 SCC 83 had observed that:

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―27. It is thus, trite that requirement of giving reasonable opportunity of being heard before an order is made by an administrative, quasi judicial or judicial authority, particularly when such an order entails adverse civil consequences, which would include infraction of property, personal rights and material deprivation for the party affected, cannot be sacrificed at the alter of administrative exigency or celerity.‖

¶374

IV-B The Constitutional Bench of the Hon‘ble Supreme Court of India in Khem Chand Vs. Union of India AIR 1958 SC 300 has defined the meaning of the term ―reasonable opportunity‖ to include an opportunity to defined by cross-examining the witnesses produced against the accused. The Hon‘ble court held that:

¶375

―To summarize: the reasonable opportunity envisaged by the provision under consideration includes-

¶376

(a) An opportunity to deny his guilt and establish his innocence, which he can only do if he is told what the charges levelled against him are and the allegations on which such charges are based;

¶377

(b) An opportunity to defend himself by cross-examining the witnesses produced against him and by examining himself or any other witnesses in support of his defense; and finally

¶378

(c ) An opportunity to make his representation as to why the proposed punishment should not be inflicted on him.‖

¶379

iv). The Hon‟ble Supreme Court of India in Ayubkhan Noorkhan Pathan

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Vs. The State of Maharashtra & Ors. Decided on 08.11.2012, Civil Appeal

¶381

No. 7728 of 2012 , after relying upon various authoritative judgments, has observed that cross-examination is an integral part and parcel of the Principles of Natural Justice. It held that”

¶382

―Cross-examination is one part of the principles of natural justice.‖

¶383

(v) A Constitution Bench of the Hon‟ble Supreme Court in State of M.P. v.

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Chintaman Sadashiva Vaishampayan, AIR 1961 SC 1623, has held that the Principle of Natural Justice require that a party be given the opportunity to adduce all FPA-FE-87 & 88/MUM/2017 Page 53 of 57

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relevant evidence upon which it relies, that evidence of the opposite party be taken in his presence, and that he be given the opportunity to cross-examine the witnesses examined by that party. Not providing the said opportunity to cross-examine is violative of the Principles of Natural Justice.

¶386

(vi). In Lakshman Exports Ltd. v. Collector of Central Excise, (2005) 10 SCC 634, the Apex Court, while dealing with a case under the Central Excise Act, 1944, considered whether to grant permission for cross-examination of a witness. In that case, the assessee had specifically asked to be allowed to cross-examine the representatives of the concerned firm, in order to establish that the goods in question had been accounted for in the firm‟s books of accounts and excise duty had been paid thereof. The Court held that such a request could not be turned down, as the denial of the right to cross-examine, would amount to a denial of the right to be heard i.e. audi alteram partem.

¶387

(vii). In K.L. Tripathi v. State Bank of India & Ors., AIR 1984 SC 273, the Hon‟ble Supreme Court has held that in order to sustain a complaint of violation of the Principles of Natural Justice on the ground of denial of opportunity to crossexamine, it must be established that some prejudice has been caused to the party by the procedure followed. A party which does not want to controvert the veracity of the evidence on record or does not want to controvert the testimony gathered behind its back cannot expect to succeed in any subsequent grievance raised by him on the ground that no opportunity of cross-examination was provided to him especially when the same was not requested and especially when there was no dispute regarding the veracity of the statement.

¶388

(viii). In Rajiv Arora v. Union of India & Ors. , AIR 2009 SC 1100, the Apex Court held:

¶389

―Effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the

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¶392

maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for crossexamination or similar situation. The High Court in its impugned judgment proceeded to consider the issue on a technical plea, namely, no prejudice has been caused to the appellant by such nonexamination. If the basic principles of law have not been complied with or there has been a gross violation of the principles of natural justice, the High Court should have exercised its jurisdiction of judicial review.”

¶393

(ix). The Hon‟ble Supreme Court of India in New India Assurance Company Ltd., v. Nusli Neville Wadia & Anr., AIR 2008 SC 876, while considering a case under the Public Premises (Eviction of Unauthorised Occu pants) Act, 1971, held that though the statute may not provide for cross-examination, the same being a part of Principles of Natural Justice should be held to be an indefeasible right. It was held as follows:-

¶394

―If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine. The witness who intends to prove the said fact has the right to cross-examine the witness. This may not be provided by under the statute, but it being a part of the principle of natural justice should be held to be indefeasible right”

¶395

(x). The Hon‟ble Supreme Court in Needle Industries (India) Ltd. & Ors. v. N.I.N.I.H. Ltd. & Ors., AIR 1981 SC 1298, considered a case under the Indian Companies Act, and observed that:

¶396

―It is generally unsatisfactory to record a finding involving grave consequences with respect to a person, on the basis of affidavits and documents alone, without asking that person to submit to cross-examination‖

¶397

(xi). Hon‟ble High Court in Mehar Singh Vs. The Appellate Board Foreign Exchange 1986 (10) DRJ 19, while dealing with a case under the Foreign Exchange Regulation Act, 1973, decided the appeal in favour of the Appellants on the short ground that the applications made to the Director of Enforcement and before the Appellate Board during the pendency of the appeal to summon four witnesses for cross-examination, were not dealt with by the authorities below. It was held:

¶398

―5. Non-summoning of the said witnesses for purposes of cross-examination has resulted in miscarriage of justice.‖

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¶401

From the entire gamut of the matter, I am of the considered opinion that where the results in penal consequences and where an action under the statue entails civil consequences, the plea of delay by civil not allowing the request in order to finalizing the proceedings get the truth is not tainable or justified and particularly in a matter where indeed injustice would cause to the party in view of severe prejudice.

¶402

The refusal may amount to violation of the principles of fair hearing and affecting the rights of the appellants. The argument of the respondent can be accepted simply saying that cross-examination was un-necessary particularly.

¶403

There is no material in record to show that the appellants have admitted the all allegation of the Complaint and investigation report in their statement recorded. The decision referred by Mr. Awasthi in the case of Telestar Pvt. Ltd. Vs. ED passed on 13.02.2013 by the Supreme Court in SLP no. 15546-49 of 2008 is not applicable to the facts of the present case.

¶404

Even, the respondent is not able to show about the its prejudice except it is stated that the appellants are adopting the tactics to delay the determination of the matters.

¶405

For the reasons above and in the light of facts in the appeals the prayer made in the appeal no. 87/2018 is allowed to extent that the appellant is allowed to cross-examine. Mr. D.K. Sinha in order to avoid grave injustice cause to the appellant. The impugned order dated 30.10.2017 is set-aside.

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¶408

The appellants to complete the cross-examination of D.K. Sinha further cross-examination of Mr. Chokshi within the period of two months from today after and argue the matter on merit within the next two months from the date of majority order passed by this tribunal.

¶409

Both appeals and pending applications are disposed of.

¶410

The draft order prepared and handed over by learned member on 16.02.2018 is kept on the record of appeal no. FPA-FE-88/MUM/2017.

¶411

No costs.

¶412

(Justice Manmohan Singh) Chairman

¶413

Note:- Since a strong difference of opinion between the Chairman and member about the maintainabilities of appeal under section 19 of the Act, as per the scheme of the statue, now the majority view would prevail upon. The matter would now be listed before another member bench which is to be constituted. After passing the said order, majority view would be prevailed upon. Till the order is passed status quo order already passed will continue.

¶414

(Justice Manmohan Singh) Chairman

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New Delhi, 20^th March, 2018

¶416

„D‟

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FPA-FE-88/MUM/2017 of Knight Riders Sports Pvt. Ltd. v/s The Special Director Directorate of Enforcement, Mumbai

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