Dismissed

FPA-FE-157/MUM/2009 of Sh Nilesh Trivedi v. The Special Director, Directorate of Enforcement, Mumbai

ATFP8 Jul 2024FPA-FE-157/MUM/2009

Case brief

AI extract

What is this about?

The Appellate Tribunal dismissed appeals against penalty orders under the Foreign Exchange Regulations Act, 1973. Upholding the adjudicating officer's finding of contravention, the Tribunal held that a subsequent Apex Court judgment precluded following an earlier unpublished order of its own. Finding no prejudice from procedural delay and the appellants arguing on merits, the Tribunal rejected pleas regarding natural justice, delay, and abetment by bank officials, holding the penalties valid.

What did the court decide?

The appeals are dismissed accordingly. The penalty orders imposed on the appellants are upheld.

FPA-FE-157/MUM/2009 of Sh Nilesh Trivedi Vs. The Special… — Cheque Dishonour | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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1. FPA-FE-60/MUM/2009 Sh. D.D. Kulkarni	…	Appellant
2. FPA-FE-61/MUM/2009
Sh. B. V. Adsule	…	Appellant
3. FPA-FE-157/MUM/2009
ShNilesh Trivedi	…	Appellant
4. FPA-FE-173/MUM/2009
ShParesh H. Parikh	…	Appellant
5. FPA-FE-59/MUM/2009
M/s. State Bank of Hyderabad	…	Appellant
6. FPA-FE-62/MUM/2009
M/s. Bank of Bikaner & Jaipur	…	Appellant
7. MP-FE-434/MUM/2023 (Misc) FPA-FE-65/MUM/2009
M/s. Bank of Baroda	…	Appellant
8. FPA-FE-66/MUM/2009
M/s. UCO Bank	…	Appellant
Versus
The Special Director,
Directorate of Enforcement, Mumbai	…	Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellants : Mr. Buddy A, Ms. Shefali Tripathi, Advocates For the Respondent : Mr. VivekGurnani, Advocate

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CORAM

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JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI BALESH KUMAR : MEMBER

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 1 of 44

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FINAL ORDER 08.07.2024

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FPA-FE-59-62,65-66, 157&173/MUM/2009

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By these appeals, a challenge has been made to the order dated 09.03.2009 passed by the Special Director, Directorate of Enforcement, Mumbai in reference to different show cause notices issued to several individuals, companies/firms apart from the Banks finding violation of Section 8(1), 8(2) & 8(3) read with Section 8(4) of the Foreign Exchange Regulations Act, 1973 (in short `the Act of 1973’). It was even for the contravention of Section 9(1)(a), 9(1)(f) (i) read with Section 63 and 64 (2) of the aforesaid Act. The Adjudicating Officer imposed the penalty on each noticee for the contravention of the provisions referred to above and to be more specific, separate penalties were imposed in reference to each Show Cause Notice which were five (V) in number. The order sheet reveals that out of number of appeals filed, 13 appeals were dismissed earlier for non-prosecution in old matters of 2009 while the appeals in hand were represented by the counsel thus were kept for final hearing along with other appeals.

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The learned counsel for the appellants submitted that condition of pre-deposit has been satisfied by each appellant by furnishing the bank guarantee however, for the Bank of Bikaner and Jaipur as well as Dena Bank, the Enforcement Directorate FPA-FE-59-62, 65-66, 157 & 173/MUM/2009 Page 2 of 44

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could not make verification. It has also come on record that the appellant Paresh H. Parikhis not alive, rather died long back and no application to implead or bring his legal heirs on record has been filed. Consequently, the appeal of the appellant Paresh H. Parikh bearing No. 173/MUM/2009, stands abated and is dismissed.

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The appeal in reference to other appellants was argued and leading argument for it was made by the counsel appearing for the State Bank of Hyderabad and its employees D.D. Kulkarni and B.V.Adsule. The learned counsel for the appellants submitted that show cause notices were issued to the appellants apart from many others for alleged violation of Sections 8 and 9 apart from Section 64 of the Act of 1973 of which mastermind of the conspiracy is said to be Dinesh Bhuva.

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It is a case where the bank accounts were opened in the State Bank of Hyderabad by Ashish Mehta on 12.10.1993 who was introduced by one Yogesh Mehta, an existing account holder. The allegation against the noticee bank is for the payments towards the imports without verification of documents, rather forged documents were submitted resulting not only in opening of the bank accounts in the name of non-existent persons but huge cash deposits were made in the bank accounts and subsequent payments towards imports which never took place.

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 3 of 44

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It was submitted that M/s JayAmbey Enterprises represented to State Bank of Hyderabad that they are commercially importing computer printers/peripherals from M/s R.P. Import and Export, Hong Kong. Against those imports, payment is to be made in the account held with HSBC Bank in Hong Kong. In pursuance to the aforesaid, M/s JayAmbey Enterprises approached the State Bank of Hyderabad between 27.09.1994 to 22.11.1994 with certain import documents, such asthe commercial invoice, Certificate of Origin, Packing list etc. supported by the Exchange Control of Bills of Entry (B/E). They made a request for urgent remittance of funds to M/s R.P. Import and Export, Hong Kong.

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The counsel further submitted that as per the procedure laid out in the Exchange Control Manual 1993 and RBIGuidelines, foreign exchange remittance was made. Later, it was discovered that the import documents, as well as the Bills of Entry are forged according to the DGFT, Mumbai. The import code number indicated on the said B/E was not genuine. Furthermore, it was found that the exporter itself was a fictitious person, and that no goods were actually imported. This was verified by the Customs Authority. A significant amount of foreign currency was remitted to the bank in Hong Kong without actual import of the goods, which was primarilycomputer printers and peripherals. The remittances effected were utilised for unauthorized purpose. As a

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 4 of 44

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result, the State Bank of Hyderabad along with Branch Manager D.D. Kulkarni and the then Foreign Exchange Officer B.V. Adsuley werecharged for the contravention of Section 8(3) and 8(4) read with Section 64 (2) of the Act of 1973.

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It was alleged that the State Bank of Hyderabad and its officials failed to exercise due care while handling import documents submitted byM/s JayAmbe Enterprises before effecting remittances to M/s R.P. Import and Export, Hong Kong. The Adjudicating Officer found that the State Bank of Hyderbad and its officials failed to follow the procedure laid down in Para 7A:21 of Chapter 7 of the Exchange Control Manual, 1993. Consequently, they abetted the illegal transfer of 50,68,575 US Dollars from two accounts maintained by the bank.

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The learned counsel representing the State Bank of Hyderabad asserts that M/s JayAmbey Enterprises approached the bank with import documents supported by Exchange Control Bills of Entryduly sealed and attested byCustoms Department. These documents were considered towards conclusive evidence of the import of goods. M/s JayAmbey Enterprises requested for early remittance of the foreign exchange to expand their business and the bank promptly processed the remittance. At the relevant time, there was no restriction on importers to directly receive import documents, so there was no reason to suspect the importer when the documents were presented to the bank.

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 5 of 44

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Additionally, there was no requirement for verification of documents to ascertain their genuineness. Furthermore, the importer was introduced by Mr. Yogesh Mehta, who was having bank account since long thus there was no procedural lapse on the part of the bank.

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In the context of Bank officials also, it was argued that the documents were initially given to D.D. Kulkarni who forwarded them to Foreign Exchange Officer B.V. Adsuley for scrutiny. The clarification was sought from the Foreign Exchange Section Officer and theyreceived satisfactory explanation. Subsequently, the dealing clerk prepared the cheques and credit vouchers, which were sent to the current account ledger for posting. Finally, the remittance was carried out through SWIFT.

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It was, however, admitted that remittance was out of the amount deposited by Yogesh Mehta in cash. The Bank Manager inquired about the huge cash deposits. It was explained that the sale proceeds are collected across the country against the sale of imported goods. It was received in cash and accordingly deposited. In view of the above, all cheques were issued by the bank without violation of either the Exchange Control Manual or any instructions of RBI coupled with the provisions of the Act of 1973. Despite this, the Adjudicating Officer imposed huge penalty on State Bank of Hyderabad apart from other banks and

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 6 of 44

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individuals who were none else other than the employees of the bank.

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The learned counsel submitted that the Adjudicating Officer found contravention of the provisions of the Act of 1973. The bank accounts were opened in fictitious names and addresses. It was found that the accounts were opened without verification. Subsequently, the banksallowed deposit of huge amount in cash and made foreign exchange remittancewithout verifying the import documents. As a result, remittance in foreign exchange was allowed in violation of Section 8(2), 8(3) and 8(4), apart from other provisions of the Act of 1973. It is with the finding that the bank officials in their statements had admitted monetary gain for opening of the bank accounts and cash deposit followed by remittance of foreign exchange. It was also found that successful siphoning off foreign exchange by Dinesh Bhuva and others was facilitated in active connivance and negligence of the Bank and their concerned officials.

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The learned counsel has challenged the order even on the ground of delay in pronouncing the order.Itwas submitted that the arguments were heard by the Adjudicating Officer on 13.12.2006 and the order was kept reserved for pronouncement which was pronounced after two years and four months on 09.03.2009. The delay in pronouncement of the order itself is a ground to quash the order impugned herein with remand of case.

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 7 of 44

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The learned counsel made reference of the order passed by a coordinate Bench of this Tribunal on 25.01.2021 in Appeal No. 58/2009 in case of M/s South Indian Bank Ltd. Vs. The Special Director, Directorate of Enforcement, Mumbai where the matter was remanded back to the Adjudicating Officer for its decision afresh. The reference of the judgments of the Apex Court and Bombay High Court was also given to support the arguments and accordingly the prayer was made to set aside the order by following the view taken by this Tribunal itself.

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The other ground raised by the appellants is denial of the opportunity of cross-examination of witnesses thus the principles of natural justice have been violated. It is also that no case of abetment is made out.

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Coming again to the merit of the case, it was submitted that the account of M/s JayAmbeyEnterprises was opened after following the RBI guidelines. Even for remittance of the amount in foreign exchange, no procedural lapse was committed. The officials rather made due diligence and taken care in respect of the transactions and there was no mala fide or negligence on the part of the bank officials. There was no requirement under the ECM and RBI guidelines to verify the genuineness or authenticity of the Bills of Entry with the Customs authority. The requirement was made mandatory w.e.f. 27.02.1996 and not prior to this. In

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 8 of 44

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the light of the aforesaid argument, prayer was made to set aside the order.

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The leading argument raised by the counsel appearing for the State Bank of Hyderabad has been adopted by the other appellants. The allegations against different banks are similar i.e. remittance of foreign exchange in a similar manner as was done by the State Bank of Hyderabad. It was even for opening of the bank accounts and the deposit of amounts in cash. The prayer was made to set aside the impugned order on the legal grounds raised by the appellant.

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The learned counsel for the appellants made a reference of the judgement of the Apex Court and this Tribunal to seek remand of the case to the Adjudicating Officer on the ground of delay in pronouncement of the order. It wassubmitted that the issue raised in these appeals was before aSingle Member of the Tribunal passed the order on 25.01.2021 in the case of M/s South Indian Bank Ltd. (supra).Therein, the issues were decided without going into merits of the case. The matter was remanded back on the ground of delay in pronouncement of the order.

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The issue of cross-examination was, however, taken into consideration. It was found that the summons were issued to Shri Sanjay Udeshi and Shri A.K. Narayan, however, they did not appear before the Adjudicating Officer thus in absence of their response to the summons, the cross-examination could not be

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 9 of 44

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made. The Tribunal in its order further found that the issue decided by Delhi High Court holding necessity of crossexamination in the case of ShahidBalwa Vs. The Directorate of Enforcement (LPA No. 79/2013), by its order dated 29.05.2013 has been stayed by the Apex Court, rather in the case of M/s

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Telestar Travels Pvt. Ltd. Vs. Special Director of Directorate

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of Enforcement reported in JT (2013) 3 SC167, the right of crossexamination was denied in similar proceedings. It is after finding that principle of natural justice would not warrant crossexamination in each case in quasi-judicial proceedings.

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The Tribunal in its order dated 25.01.2021 had referred the judgment of the Apex Court in the case of M/s Telestar Travels Pvt. Ltd. (supra) where the issue of delay of more than three years after final argument was not accepted to be a ground for quashing of the order. It was mainly for the reason that no prejudice said to have been shown by the appellant on account of delay yet relying on the earlier judgment of the Supreme Court, the case was remanded back to the Adjudicating Officer.

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A reference of the judgment of the Apex Court in the case of

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Standard Chartered Bank&Ors. Vs. Directorate of

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Enforcement reported in AIR 2006 SC 1301 was givenwherein another judgment of the Supreme Court reported in 2005 (4) SCC 513 was referred to deny acceptance of argument of delay, though not applicable to this case.The counsel for the appellants thus

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 10 of 44

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made a prayer to set aside the impugned order not only on merit but also on the ground of delay in pronouncement of the order. The allegation of abetment was seriously contested for the aforesaid and, therefore, we would be dealing with the argument after referring to the rival submissions of the counsel for the respondent.

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The learned counsel for the respondent has seriously contested the appeal not only on merit but even on the ground of delay. It was submitted that no prejudice has been caused to the appellants on account of delay in pronouncement of the order. It is not a case where allegations have been made against the Adjudicating Officer for passing the order without dealing with the argument raised by the appellants. The detailed argument was made even in reference to the facts of the case where serious allegations exist against the appellants for contravention of the provisions of the Act of 1973. It was submitted that in the case in hand, the period of contravention is not of one or two months but of four years where it cannot be accepted that the appellants were not knowing about tendering of fictitious documents to seek remittance of foreign exchange in the bank at Hong Kong. It is also when the Bank and its officials were under obligation to seek verification of documents for opening of the bank account followed by huge cash deposit in those account for the purpose of remittance. If the series of facts involved in the case are taken

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 11 of 44

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into account, not only serious lapse would come out but would further show abetment in the hands of the appellants. They were, therefore, rightly served with the Show Cause Notice for contravention of the provisions of the Act of 1973 followed by a detailed order by the Adjudicating Officer.

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The learned counsel for the respondent contested the argument in reference to abetment by the appellants. The common dictionary meaning of the `abetment’ would be approval, support, permission, encouragement, communication, knowledge, association and the tacit consent. Theabetment would mean failure to take due care and caution in the process of remittance of foreign exchange. The financial gain by the individualshas been admitted for work and thereby the bank officials have assisted in perpetuating the illegal activities.

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The argument about innocence of the bank officials was not accepted by the Authority below looking to the period of 4 years of transactions starting from 1991 till the year 1995. During this period, number of transactions and remittances had taken place. The audit in the banks is done quarterly and against these transactions, bank had received commission. Therefore,it was not possible that transactions and commission received by the bank would be without knowledge of the bank thus a case of abetment is made out. A reference of the judgment of the Apex Court in the

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case of Ranjit Singh, Bram Singh Sharma Vs. State of

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 12 of 44

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Maharashtra and Ors. reported in (2005) 5 SCC 295 was given. The judgment has defined the meaning of `abetment’ and applying the principle laid down therein would satisfy that the bank and its officers not only aided illegal act but also abeted it. 23. It is, however, submitted that after recording the facts to this effect by the Single Member of this Tribunal in the case of South Indian Bank (supra) remanded the case on the ground of delay in pronouncement of the order. It is, however,after recording a fact that the bank has deliberately and intentionally did not follow the Exchange Control Manual issued by the RBI and, therefore, a case of abetment of the crime. The bank and its officials cooperated in commission of crime by the individuals and the firms. The Adjudicating Officer found contravention beyond reasonable doubt and the penalty has been imposed considering the gravity of the case. However, the impugned order was set aside on the ground of delay thereafter thus discussion of merits remained only for the purpose of reference and not otherwise.

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We find that appeal has been contested by the counsel for the respondent on all the grounds raised by the appellants. It is not only on the ground of delay in pronouncement of the order but even touching the merit of the case. It is for the reason that the appellant argued the case at length even touching the facts to highlight the merit and accordingly a response to aforesaid has been given.

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 13 of 44

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The learned counsel for the respondent cited the judgement of the Apex Court in reference to delay in pronouncement of the order. After considering the judgments on the issue, the delay in pronouncement of the judgment for quashing of the order was not accepted by Delhi High Court in the case of Smt. SumanTanejaVs. Rakesh Taneja&Ors. reported in 2014 SCC Online Del 468. It is not only after distinguishing the facts but taking note of the issues involved in the earlier judgments of the Apex Court. It was even considering the judgment of the Apex Court in the case of Kanahaiyalal&Ors. Vs. H.P. International &Ors. reported in JT 2002 (10) SC 98 and also the judgment in the case of BhagwandassFatehchandDaswani Vs. H.P. International and Ors. reported in JT 2000(1) SC 266. The elaborate judgment was given by the Delhi High Court in the case of Smt. SumanTaneja (Supra).

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Prior to the judgment of the Delhi High Court (supra), the Apex Court took notice of the issue in the case of ShreeSrimanniranjanaPranavaswarupiSreeShivnandaShiay ogirajendraMahaswamigalu Vs. C.R. Shivananda (Dead) By

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LR &Ors . (Appeal No. 3728-3729/2018) decided by the order dated 11.08.2021 where the appellants had raised a preliminary objection that the High Court has delivered the judgment after one and a half years. The Apex Court refused to cause interference on the ground aforesaid rather kept the issue open.

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 14 of 44

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The judgment of the Delhi High Court in the case of Smt. SumanTaneja (supra) gives elaborate reasons not to accept the delay in pronouncement of the order to be a ground for quashing of the order. The prayer was made accordingly not to accept the ground of delay. It is even in reference to the earlier judgment by a Single Member and otherwise pending before the High Court on its challenge thus it has not attained finality.

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We have considered the rival submissions of the parties and perused the record carefully. It is a case where serious allegations have been levelled against the appellants apart from many others for contravention of Section 8(3) and 8(4) of the Act of 1973. It is for remittance of the foreign exchange without actual import of the goods. It started with opening of the bank accounts in fictitious names and endorsing the import for remittance on the basis of fictitious documents. The connivance of the employees of the banks is substantiated in reference to the statements of the witnesses recorded under Section 40 of the Act of 1973 and Section 108 of the Customs Act. The statements under Section 40 are considered to be judicial in nature thus can be read against the person while if the statements are recorded under Section 39 of the Act of 1973, it cannot be relied without other material to corroborate the statements.

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To demonstrate the seriousness of the allegation, it would be necessary for us to refer the case of individual noticee before us

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 15 of 44

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apart from few others relevant to the case. We would, therefore, be giving brief facts to show the allegation against each noticee and the amount involved therein. The aforesaid would reflect not only the period in which remittance was continuously made but even involvement of different banks and its employees therein. The discussion of the facts are made in view of the arguments by the appellant touching the merit of the case.

¶82

Shri H. M. Kapadia, Proprietor of M/s Pearls International was charged for the contravention of Section 8(3) & 8(4) of FERA 1973. These charges are based in the premise that during the period from 13.5.1995 to 20.6.1995, amounts totalling to US$ 14,39,500/- were remitted to M/s Rint International, Hong Kong and Ostan International, Hong Kong through account No.21265 with UCO Bank, Foreign Exchange Department, D. N. Road Branch, Mumbai maintained by M/s Pearls International, Navjivan Society Building No.3, 9th floor, Room No.11, Lamington Road, Mumbai 400 008 on submission of certain import documents such as certificate of origin, commercial invoice, Bills of Entry, Letters of requisition of H.M. Doshi, Proprietor of the said M/s Pearls International but failed to import the required goods for which the foreign exchange was granted to him without any special or general permission of the RBI. Enquiries revealed that the real name of the Proprietor of M/s Pearls International

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 16 of 44

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was H. M. Kapadia who has assumed the name as H.M. Doshi only with a view to protect his own identity.

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We further find that the employees, namely, S/Shri S.G. Mohile, Ex Officer, Vinod Kumar J. Shah, Additional Officer in foreign exchange, S/shri K.J. Pendse, Dharamdas M. Vaidya, Assistant Manager and Manager, Cash, respectively of UCO Bank, D. N. Road Branch, Mumbai are charged for the contravention of section 8(3) & 8(4) read with section 64(2) ibid. These charges were based in the premise that these officers of UCO Bank have not exercised due care while handling import documents submitted through M/s B. C. Enterprises, Pearls International, Jay Ambe Enterprises and C. K. International to establish the genuineness of import before effecting remittance to the abovesaid M/s R.P. Imports and Exports, M/s Wong Exports, M/s Rint International, Ostan International, Hongkong. They failed to follow the procedures laid down in para 7A:21 of Chapter of Exchange Control Manual (1993 Edition) of the RBI to ensure genuineness of import and thereforeabetted the illegal transfer of amounts to wit US$ 1,46,10,125/- from the aforesaid 4 accounts. 32. S/Shri Dinesh Singh, Mehul N. Mehta, Yogesh Mehta, Paresh @Nilesh Trivedi, DilipDoshi, ParidNanavati, Atul N. Doshiwere charged for the contravention of section 8(1) read with section 64 (2) and section 8(3) & 8(4) read with section 64(2) ibid. These charges are based in the premise that those persons have

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 17 of 44

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abetted the cause by receiving amounts and fake import documents from S/shriHarshad Mehta and Hemant D. Barotand crediting the same/causing unauthorised remittances to the tune of U.S.$ 1,46,10,125/through the accounts of Pearls International, C. K. International, B. C. Enterprises, Jay Ambe Enterprises. It was by abettingthe cause by S/shri Mohan G. Kharde, H. М. Kapadia, J. N. Panchal and Prakash V. Naik in committing contraventions.

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We further find that Shri Yogesh Mehta was directed to show cause as to why the foreign exchange of US$ 99/- seized from his residential premises on 13.2.1996 and the amount of Rs.1,53,549/, Rs.3,62,761.87, Rs.2,09,237/- and Rs.4,22,673/ being the balance amounts held in the bank accounts of M/s Jay Ambe Enterprises, M/s B. C. Enterprises, M/s Pearls International and M/s C. K. International respectively with UCO Bank, D. N. Road Branch and which were surrendered by the said Bank to the Enforcement Directorate, Mumbai being the amounts involved in the contraventions of the FERA 1973 should not be confiscated to the credit of the Central Government account in terms of Section 63 of the said Act.

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It is also found that Shri Raj Kantilal Shah, Proprietor of M/s Raj Impex is charged for the contravention of section 8(3) & 8(4) ibid These charges are based in the premise that during the period from May 1994 to September 1995 Shri Raj Kantilal Shah

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 18 of 44

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acquired foreign exchange to wit US$ 98,78,713/- which were remitted to M/s Tee R. Export, Hongkong through Account No. 21181 with UCO Bank D N Road, Mumbai maintained by M/s Raj Impex, 28 Bombay Samachar Marg, 2nd floor, Mumbai 400 001 against submission of certain import documents but failed to import any such goods nor surrendered the aforesaid foreign exchange to an authorised dealer in foreign exchange in India within 30 days from the date on which he came to know that the foreign exchange cannot be so used for the purpose for which it was granted without any previous general or special permission of the RBI.

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Further, Shri Dinesh C. Bhuva is charged for the contravention of section 8(1) & 8(2) of the FERA 1973. These charges are based in the premise that the noticee Shri Dinesh C. Bhuva during the year 1991 to September 1995 acquired foreign exchange of US $ 9,33,62,570.62 and foreign exchange of USS equivalent to Rs 41,28,85,822/- sent through 9 bank accounts of South Indian Bank on account of M/s S. R. Diamond, M/s Nirmal International, M/s Kumar Export, M/s R. M. International, M/s D. N. Export, M/s RakeshInternational, A1/s P. M. International, M/s Dee Pee International and M/s Chinubhal Patel & Co. M/s RijImpex through UCO Bank, M/s R. S. Enterprises through Dena Bank and transferred the aforesaid foreign exchange at the rates other than rates prescribed by the RBI to Shri Deepak

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 19 of 44

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Kapadia of Hongkong a person resident outside India without any previous general or special permission of the RBI.

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S/Shri Vinod Kumar J. Shah, S. G. Mohile, K.J. Pendse, Dharmadas V Vaidya, officials of UCO Bank, D.N Road Branch are charged for the contravention of section 8(3) read with 8(4) read with section 64(2) ibid. These charges are based on the premise that these officers of UCO Bank did not exercise due care while handling import documents submitted through M/s Raj Impex before effecting remittance to M/s Tee R Exports, Hongkong and failed to follow the procedure laid down in para 7A;21 of Chapter 7 of Exchange Control Manual (1993 Edition) of the RBI to ensure genuineness of import documents and thereby abetted the illegal transfer of foreign exchange to wit US$ 98,78,713/-from the account of M/s Raj Impex to M/s Tee R. Exports, Hongkong as aforesaid.

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S/shri Sanjay Udeshi, Hemant D. Barot, ParidNanavati and sh@ Nilesh Trivedi are charged for the contravention of section 8(3) read wi(4) read with section 64(2) ibid. These charges are based in the premise that they received amounts from S/shri Deepak Melwani, Ramesh S. Nahar, Mahendra D Sanklecha, AtulDoshi, Dinesh C. Bhuva and Hemant Barot and received import documents from S/shri Dinesh Bhuva and Hemant Barot. credited/deposited the same in the above mentioned bank accounts with South Indian Bank, UCO Bank, Dena Bank thus

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 20 of 44

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abetted the cause of S/shri S. R. Madi of M/s S. R Diamonds, Shri Nimesh N. Patel of Nirmal International, Kumar KantilalZaveri of Kumar Export, Rajesh V Mehta and Harshad P. Mehta of R. M. International, DilipNanalal Shah of M/s D. N. Export, Anil Shah of Rakesh International, Ms. Smita Mehta of P. M. International, Prakash Shah of Dee Pee International, C. Patel of Chinubhai Patel & Co. Raj Kantilal Shah of Raj Impex, Ramesh Shah and Sanjay Udeshi of R.S. Enterprises in their contraventions of section 8(3) read with section 8(4) ibid and Dinesh C. Bhuvafor contravention of section 8(1) ibid without any previous general or special permission of the RBI.

¶104

S/shriPradip Kumar V. Jain and Ramji N. Patel, Directors of M/s Windfall Trading Pvt. Ltd. are charged for the contravention of section 8(3) read with Section 8 (4) ibid. The said charge is based in the premise that during the year February 1996, both these persons acquired foreign exchange to wit US $ 25,64,000/for the particular purpose of importing computer peripherals from M/s Taiping Export, Hongkong for which amounts were remitted through their account with the State Bank of Bikaner & Jaipur, Borivali (West) Mumbai maintained by M/s Windfall Trading P. Ltd. 209-A, Churchgate Chambers, 2nd floor, New Marine Lines, Mumbai 400 020 against submission of certain import documents but failed to import any such goods nor surrendered the aforesaid foreign exchange within a period of 30 days from the

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date they came to know that the foreign exchange could not be so used for the purpose for which it was granted to them without any previous general or special permission of the RBI.

¶108

Shri Ashish Mehta, Proprietor of M/s Jay Ambe Enterprises, is charged for the contravention of section 8(3) read with section 8(4) ibid. The said charge is based in the premise that during the period from October 1993 to April, 1995, Shri Ashish Mehta acquired foreign exchange to wit US$ 50,68,575/- for importing computer peripherals from M/s R.P. Import Export, Hong Kong for which amounts were remitted through account no. 20726 with the State Bank of Hyderabad, Sion Branch, Mumbai maintained by M/s Jay Ambe Enterprises, Indira Housing Society, Behind D'souza Compound, Chandivali, Saki Naka, Mumbai 400 072 against submission of certain import documents but failed to import any such goods nor surrendered the aforesaid foreign exchange to an authorised dealer in foreign exchange in India within 30 days from the date he came to know that the foreign exchange could not be so used for the purpose for which it was granted to him without any previous general or special permission of the RBI.

¶109

S/shriParesh @ Nilesh Trivedi, Harshad P. Mehta, Hemant D Barot, Jitendra N. Panchal and Smt. GirijaKaruvan are charged for the contravention of section 8(3) read with section 8(4) read with section 64(2) Ibid. These charges are based on the premise

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that these persons have aided and abetted Shri Mayur K. Shah, Prop. and Shri Prakash Vijay Naik of M/s MahavirImpexfor contravention of section 8(3) read with section 8(4) ibid by remitting the amounts in Indian currency and/or forging the import documents and/or submitting forged import documents in the account of M/s C.K. International with the State Bank of Bikaner & Jaipur, Borivali, Mumbai, without any previous general or special permission of the RBI.

¶113

S/shriParesh @ Nilesh Trivedi, Jitendra N. Panchal, Hemant D. Barot, Jayesh K. Shah and Dilip S Doshi are charged for the contravention of section 8(3) read with section 8(4) read with section 64(2) ibid for having abetted S/shriPradip Kumar Jain and Ramji N. Patel of M/s Windfall Trading P. Ltd. in their contravention of section 8(3) read with section 8(4) ibid by way of remitting the amounts in Indian currency equivalent to US$ 25,64,000/- and/or forging the import documents and/or submitting forged import documents in the account of M/s Windfall Trading P. Ltd. with the State Bank of Bikaner & Jaipur, Borivali, Mumbai without any previous general or special permission of the RBI.

¶114

S/shriParesh @ Nilesh Trivedi, Dinesh S. Singh, Yogesh D Mehta, DilipDoshi, Sunder S Amin, Kishore R. Salian and Kaderbhai Mohamed were charged for the contravention of section 8(3) read with section 8(4) read with section 64(2) ibid for

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having abetted Shri DilipRamji Shah of M/s Pearls International in his contravention of section 8(3) read with section 8(4) ibid by way of remitting the amounts in Indian currency equivalent to US$ 4,94,400/- and/or forging the import documents and/or submitting forged documents in the account of M/s Pearls International with the Saraswat Co-op Bank, Mumbai without any previous general or special permission of the RBI.

¶118

S/Shri Paresh @ Nilesh Trivedi, Hemant D. Barot and MehulN.Mehta are charged with the contravention of section 8(3) read with section 8(4) read with section 64 (2) ibid for having abetted Shri Mayur K. Shah, Proprietor and Shri Prakash Vijay Naik of M/s MahavirImpex in their contravention of section 8(3) read with section 8(4) by way of remitting the amounts in Indian currency equivalent to US$ 16,400/- and/or forging the import documents and/or submitting forged import documents in the account of M/s MahavirImpex with the State Bank of Indore, Worli, Mumbai, without any previous general or specialpermission of the RBI.

¶119

S/shriParesh @ Nilesh Trivedi, Yogesh D. Mehta, Hemant D. Barot and Kamlesh T. Parekh were charged for the contravention of section 8(3) read with section 8(4) read with section 64(2) ibid for having abetted Shri H M Doshi, Proprietor and Shri H. M. Kapadia of M/s Regent Corporation in hisaforesaid contravention of section 8(3) read with section 8(4) by way of remitting the

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amounts in Indian currency equivalent to US$ 3,58,800/- and/or forging the import documents and/or submitting forged import documents in the account of M/s Regent Corporation with Andhra Bank, Opera House Branch, Mumbai 400 004 without any previous general or special permission of the RBI.

¶123

S/Shri Harshad P. Mehta and Hemant D. Barot were charged for the contravention of section 8(1) ibid for having otherwise acquired foreign exchange to wit US$ 1,81,13,440/sent through aforementioned bank accounts of State Bank of Bikaner and Jaipur, Saraswat Co-op: Bank, State Bank of Indore, State Bank of Hyderabad, Dena Bank, Union Bank of India and Andhra Bank and by otherwise transferring the same to S/shri Deepak Kapadia and Asif in Hongkong without any previous general or special permission of the RBI.

¶124

It is further seen that the State Bank of Bikaner and Jaipur and its Manager Shri Sanjay S. Katakı were charged for the contravention of section 8(3) read with 8(4) read with section 64(2) ibid. The said charges arv: based in the premise that these persons have not exercised due care while handling import documents submitted through account of M/s C. K. International and M/s Windfall Trading Pvt. Ltd. before effecting remittances to M/s R. P. Import and Export, Wong Export, Lee Import and Export, Hongkong and failed to follow the procedures laid down in Para 7A.21 of Chapter 7 of Exchange Control Manual 1993 of the

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RBI to ensure genuineness of import and thereby abetted the illegal transfer of amounts to wit US$ 47,71,875/- from the two accounts with the State Bank of Bikaner & Jaipur, Borivali, Mumbai without any previous general or special permission of the RBI.

¶128

The State Bank of Hyderabad, Sion, Mumbai and S/shri D.D. Kulkarni, the then Branch Manager, B. V. Adsule, then Foreign Exchange Officer are charged for the contravention of section 8(3) read with section 8(4) read with section 64(2) ibid for having not exercised due care while handling import documents submitted through M/s Jay Ambe Enterprises before effecting remittances to M/s R.P. Import & Export, Hongkong and thus failed to follow the procedures laid down in Para 7A:21 OF Chapter 7 of Exchange Control Manual 1993 of the RBI to ensure genuineness of import and thereby abetted the illegal transfer of amounts to wit US$ 50,68,575/- from the two accounts with State Bank of Hyderabad, Sion, Mumbai which was erroneously mentioned as State Bank of Bikaner & Jaipur, Borivali and which was then corrected as State Bank of Hyderabad vide podum dated 13 2.2002.

¶129

S/Shri Paresh @ Nilesh Trivedi, Jitendra N. Panchal, Dinesh S Singh, Yogesh D. Mehta, DilipDoshi, Mehul N. Mehta, Kamlesh T. Parekh and Ms Girija Narayan Karuvan were charged for the contravention of section 8(1) read with section 64(2) ibid for

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having received amounts from the aforesaid S/Shri Deepak Melwani, Ramesh S. Nahar, Mahendra D. Sanklecha and Hemant D Barot and crediting the same in the accounts of M/s C. K. International, M/s Windfall Trading Pvt. Ltd. M/s Pearls International, Mumbai-21, M/s MahavirImpex, M/s Pearls International, Mumbai 400 008, M/s R K. Enterprises, M/s Jay Ambe Enterprises, M/s S. H. Impex, M's Regent Corporation with State Bank of Bikaner and Jaipur, Saraswat Cop. Bank, State Bank of Indore, State Bank of Hyderabad, Dena Bank, Union Bank of India, Andhra Bank and receiving and submitting forged import documents in the said bank accounts as instructed by S/shri Hemant D Barot and Harshad P. Mehta without any previous general or special permission of the RBI. They were further directed to show cause as to why the seized amount of Rs 3,56,796/- being the balance amount held in the accounts of M/s Windfall Trading Pvt Ltd with the State Bank of Bikaner & Jaipur, Borivali, Mumbai being the amount involved in the contraventions of the FERA 1973 should not be confiscated to the credit of the Central Government account in terms of section 63 ibid.

¶133

We further find that under the SCN No. T-4/1B/SDE/AKB/2002 (SCN IV), the noticeeShri BameshNaharwas charged for the contravention of section 9(1)(f)(i) of the FERA,1973. The charge is based in the premise that during the

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year 1992-96, the noticee Shri Ramesh S. Nahar made payments totalling Rs.125 Crores to S/shriDhankumar Shah, AtulDoshi, ParidNanavati, Hemant Barot, Sanjay Udeshi, PareshNilesh Trivedi as a consideration for receipt of US$ 400 lakhs from Deepak Kapadia and Asif, persons resident of Hongkong as instructed by 5/shri Dinesh C. Bhuva, Harshad P. Mehta and Hemant D. Barot, persons resident in India for further disposal without any general or special exemption of the RBI.

¶137

S/Shri Dinesh C. Bhuva, Harshad P. Mehta and Hemant D Barot were charged for the contravention of section 9(1)(f)(i) ibid. The said charged is based in the premise that during the year 1992-1996, these persons received amounts totalling Rs.125 Crores from Shri Ramesh S. Nahar through S/shriDhankumar Shah, AtulDoshi, ParidNanavati, Kishore Nahar, Paresh @ Nilesh Trivedi and Sanjay Udeshi as a consideration for receipt of US$ 400 Lakhs from the persons of Shri Ramesh S. Nahar through Shri Deepak Kapadia and Asif, person’s resident in Hongkons, without any general or special exemption of the RBI.

¶138

S/Shri Dhankumar C. Shah, AtulDoshi, ParidNanavati, Kishore 5. Nahar, Paresh @ NileshTrivedi and Sanjay Udeshi were charged for the contravention of section 9(1)(f)(i) read with section 64(2) ibid This charge is based in the premise that these noticees have aided and abetted Shri Ramesh S. Nahar in his aforesaid contravention of section 9(1)(f)(i) by way of receiving Indian

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currency of Rs. 125 Crores and handing over the same to S/shri Dinesh C. Bhuva, Hemant Barot and Harshad P. Mehta, persons other than authorised dealers in foreign exchange in India without any general or special exemption of the RBI.

¶142

We further find that under the SCN No. T-4/1B/SDE/AKB/2002 SCN V dated 4th January 2002, M/s KunalOverseas Ltd and its Director Shri Paresh H. Parekh are charged for the contravention of section 9(1)(f)(1) ibid. This charge is based in the premise that during June 1995, M/s Kunal Overseas Ltd and its Director Shri Paresh H. Parekh made payment of Rs. 17,00,000/- to Shri Hemant D. Barot a person other than an unlocised dealer in foreign exchange in India as a consideration for receipt of SS abroad without any general 5000/or special exemption from the RBI.

¶143

It is further seen that Shri Hemant D. Barot was charged for the contravention of section 9(1)(f)(i) read with section 64(2) ibid. This charge is based in the premise that Shri Hemant D. Barot aided and abetted Shri Paresh H. Parekh in receiving an amount of Rs. 17 lakhs from him ie. Paresh H. Parekh in consideration of receipt of funds of aforesaid US$ 50,000/- without any general or special exemption of the RBI.

¶144

The preceding paras make a mention about brief facts relevant to the case apart from the charges levelled against each appellant with few others not before us. The material to support

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the charges have also been referred therein. However, at this stage, it would be relevant to again refer to the period of contravention which is not of few days or months but of four years. It is otherwise not a simple case of contravention due to the negligence of the bank and their officials but the statement recorded under Section 40 of the Act of 1973 refers to the admission of the bank officials for receipt of the money for doing the favour in remittance of foreign exchange by opening of the bank account in fictitious names. It is forimporting the computer printers and peripherals. On account of the aforesaid, the appellants in connivance with the firms, companies and individuals remitted huge foreign exchange after deposit of Indian currency in cash. It is also a fact that periodical audits in the bank take place. Those all facts contribute towards the abetment and prove serious allegations against the appellants and for which relevant facts of the case have been given. If the plea taken by the appellants is accepted,then they simply work as the post office while they were under obligation to discharge certain duties not only as per the provisions of the Act of 1973 but even as per the guidelines of the RBI followed by Exchange Control Manual. The erroneous plea has been taken that there was no mandate to verify the documents, rather it was issued subsequent to the period involved in this case. Para 7A;21 of Exchange Control Manual (1993 Edition), which is applicable, is quoted thus:

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“ Guidelines for Handling Import Bills-Operating Procedure:

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1. The Operating Procedure is aimed at checking the incidence of fraudulent Import Bills, i.e., Bills which are drawn against non-existent imports and almost all documents notably Invoice(s), Bills of Lading/Airway Bills and Bills of Entry are fake. From the Exchange Control perspective,the risk of fradulent import bills is highest in the case of bills received on collection basis, particularly those relating to new/relatively new customers or customers who do not avail of any credit facilities from the authorised dealer or customers whose business-relationship with the bank is by and large restricted only to the retiring of import bills. Having regard to this, the business bonafides of Importer-customers have to be carefully verified. Instructions on the disposal/payment of import bills should be given at a sufficiently senior level at the branch i.e., by Branch Manager or a Senior Officer in Scale IV. These directions should be given in writing in the Import Bills Register and the reasons for the decision taken should be clearly recorded.

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2. Unless the competent senior officer of the bank i.e., Branch Manager or Senior Scale IV Officer, is fully satisfied about the financial status/standing of the importer by virtue of longestablished track-record, the concerned authorised dealer should arrange to obtain a Banker's Report on the overseas seller. The Report from overseas bankers/reputed credit Agency (like, Dun and Bradstreet) should, inter-alia, specifically comment on whether the seller-firm is ordinarily engaged in purchase/sale of goods sought to be exported to India and whether the seller is good for ordinary business engagements.

¶153

3. As a general rule import bills and documents should be received from the banker of the seller by the banker of the buyer in India. Authorised dealers should not , therefore, make remittances where import bills received directly by the importers from the overseas seller, except in the following cases:

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(a) Where the value of import bill does not exceed U.S.$ 10,000/-

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(b) Import bills received by wholly-owned Indian subsidiaries of foreign companies from their principals

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(c) Import bills received by Super Star Trading Houses, Star Trading Houses, Trading Houses, Export Houses, 100% Export Oriented Units/Units in Free Trade Zones, Public

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Sector Undertakings and Public Limited Companies.

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(d) Where the value of import bill does not exceed U.S.$ 25,000 in respect of import of -

¶161

(i) books and magazines

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(ii) life saving drugs/equipments by Hospitals, etc. and

¶163

(iii) Imports by reputed research and other development institutions like Tata Institute of Fundamental Research, C-DOT, Indian Institute of Technology, Indian Institute of Science & University.

¶164

(e) Import bills received by all limited companies viz. public limited, deemed public limited and private limited companies.

¶165

4. In all other cases, at the request of importer clients, authorised dealers may receive bills direct from the overseas seller up to U.S.$ 25,000 (U.S. Dollars Twenty five thousand only), provided the Competent Officer i.e. Branch Manager or Senior Officer in Scale IV is fully satisfied about the financial standing/status and track record of the importer customer. Beffore extending the facility, authorised dealer should obtain report on each individual overseas seller from the overseas banker or reputed credit agency.

¶166

5. (a) As stated above, instructions on the disposal/payment of import bills should be given at the level of Branch Manager or a Senior Scale IV taking into consideration the following aspects:

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i) Is the Indian customer banking with the concerned branch for a reasonably long period of time.

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ii) Whether the customer has availed of credit facilities from the branch.

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iii) Whether the bank has at any time examined the balance-sheet of the customer.

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iv) Is the customer an established dealer/trader/user of the goods sought to be imported.

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v) Whether the place of business/godowns etc. of the importer have been visited/inspected by the bank.

¶172

vi) Whether sales of the importing firm are regularly credited to its business account or there are only occasional credits to the account. It should be also ascertained whether credits are mostly by way of cash deposits, and also whether non-cash deposits represent mostly pay-orders/drafts/cheques drawn on other branches/branches of other banks by the importer; if so,

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whether credits represent normal business funds or simple transfer of funds from one account to another account.

¶175

Authorised dealers should maintain a separate Import Bills Register to record full particulars in chronological order of import bills received direct from the sellers. Brief comments covering these points must be given in the Import Bills Register so that Inspecting Officials are in a position to suitably cross-check at a later date. The Register should be scrutinised by the internal auditors during the audit and adverse features, if any, noticed should be incorporated in their Report.

¶176

(b) Based on the above, and taking into account the track record and financial position of the importer, the competent officer of the bank should take a decision on the handling/retirement of the import bills. In case of doubt, the authorised dealer should, inter-alia, insist on:

¶177

(i) Detailed verification of the importer's books of accounts.

¶178

(ii) Inspection of importer's place of work.

¶179

(iii) Enquiries with some of the leading customers of the importer for establishing his business bona fides.

¶180

(iv) A comprehensive and wholly satisfactory Opinion Report from the bankers of the overseas seller.

¶181

Authorised dealers may consider the feasibility/desirability of restricting the business of handling import documents toA' and B' category branches only. At centres where authorised dealers have a number of A' and B' category branches, this restriction may not lead to operational inconvenience for customers. In cases where documents are received/handled by C' category branches, the concerned A'/B' category branch which has to effect the remittance must insist on a detailed status Report cum Certificate from the Branch Manager of the C' category branch. Where warranted, the A'/B' category Branch Manager may depute an officer to make detailed enquiries at the `C' category branch to establish bona fides of the customer.

¶182

Authorised dealers should not view the above procedural precautions as being relevant only to import bills received on collection basis. Since fraudulent import bills can be the handiwork of cash-rich persons and their front-firms, it is not difficult for such firms to open Letters of Credit favouring overseas nominees with cash margin even upto 100%. In all such cases, authorised dealers must note to follow the procedural drill detailed above so that the financial antecedents of the Indian importer and the overseas seller are clearly established.

¶183

Authorised dealers must instruct the operating staff to scrutinise the Bills of Entry presented by importers with particular care. Though it is unlikely that a prima-facie scrutiny can reveal the authenticity or

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otherwise of a Bill of Entry, yet on occasions obvious inconsistencies/inaccuracies can be noticed which should put the bank-staff on further enquiry. Branch Manager/Senior Scale IV Officer may also, at his discretion and particularly in respect of new/relatively new accounts through which import bills are being routed, send copies of a few Bills of Entry at random basis for verification to the concerned office of Customs and follow up promptly for confirmation or report from them. All such correspondence should be kept on records for verification by the internal auditors and inspecting officials of Reserve Bank”.

¶186

The relevant paras quoted above is to show the requirement of certain compliances by bank officials which have not been made. It is despite the fact that remittance was of more than 10,000 US Dollars and even 25,000 US Dollars in many cases. It is thus not correct to state that obligation to verify the documents was brought in effect by issuing a fresh circular by the RBI in the year 1996. To analyse the issue further, we may refer Section 8(1), (2),(3),(4), 9(1)(a), 9(1)(f) (i) read with Section 63 and 64 (2) of the Act of 1973 which are quoted thus:

¶187

“ 8. Restrictions on dealing in foreign exchange.

¶188

(1) Except with the previous general or special permission of the Reserve Bank, no person other than an authorised dealer shall in India, and no person resident in India other than an authorised dealer shall outside India, purchase or otherwise acquire or borrow from, or sell, or otherwise transfer or lend to or exchange with, any person not being an authorised dealer, any foreign exchange:

¶189

Provided that nothing in this sub-section shall apply to any purchase or sale of foreign currency effected in India between any person and a money-changer.Explanation .-For the purposes of this sub-section, a person, who deposits foreign exchange with another person or opens an account in foreign exchange with another person, shall be deemed to lend foreign exchange to such other person.

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(2)Except with the previous general or special permission of the Reserve Bank, no person, whether an authorised dealer or a money-changer or otherwise, shall enter into any transaction which provides for the conversion of Indian currency into foreign currency or foreign currency into Indian currency at rates of exchange other than the rates for the time being authorised by the Reserve Bank.

¶193

(3)Where any foreign exchange is acquired by any person, other than an authorised dealer or a money-changer, for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or, as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or the conditions cannot be complied with, the said person shall, within a period of thirty days from the date on which he comes to know that such foreign exchange cannot be so used or the conditions cannot be complied with, sell the foreign exchange to an authorised dealer or to a money-changer.

¶194

(4)For the avoidance of doubt, it is hereby declared that where a person acquires foreign exchange for sending or bringing into India any goods but sends or brings no such goods or does not send or bring goods of a value representing the foreign exchange acquired, within a reasonable time or sends or brings any goods of a kind, quality or quantity different from that specified by him at the time of acquisition of the foreign exchange, such person shall, unless the contrary is proved, be presumed not to have been able to use the foreign exchange for the purpose for which he acquired it or, as the case may be, to have used the foreign exchange so acquired otherwise than for the purposes for which it was acquired.

¶195

9. Restrictions on payment.-

¶196

(1) Save as may be provided in, and in accordance with, any general or special exemption from the provisions of this subsection which may be granted conditionally or unconditionally by the Reserve Bank, no person in, or resident in, India shall-

¶197

(a) make any payment to or for the credit of any person resident outside India;

¶198

(f) make any payment to, or for the credit of, any person or receive any payment for, or by order or on behalf of, any person as consideration for or in association with,

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(i) the receipt by any person of a payment or the acquisition by any person of property outside India….

¶202

63. Confiscation of currency, security, etc .-

¶203

Any Court trying a contravention under section 56 and the adjudicating officer adjudging any contravention under section 51 may, if it or he thinks fit and in addition to any sentence or penalty which it or he may impose for such contravention, direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government and further direct that the foreign exchange holdings, if any, of the person committing the contravention or any part thereof, shall be brought back into India or shall be retained outside India in accordance with the directions made in this behalf.

¶204

Explanation .-For the purposes of this section, property in respect of which contravention has taken place shall include-

¶205

(a)deposits in a bank, where the said property is converted into such deposits;

¶206

(b)Indian currency, where the said property is converted into that currency;

¶207

(c)any other property which has resulted out of the conversion of that property.

¶208

64. Preparation, attempt, etc.

¶209

(1) Whoever makes preparation to contravene any of the provisions of this Act other than section 13, clause (a) of subsection (1) of [section 18, section 18-A], clause (a) of sub-section (1) of section 19, sub-section (2) of section 44 and sections 57 and 58 or of any rule, direction or order made thereunder and from the circumstances of the case, it may be reasonably inferred that if not prevented by circumstances independent of his will, the contravention as aforesaid would have taken place, shall, for the purposes of section 56, be deemed to have contravened that provision, rule, direction or order, as the case may be.

¶210

(2)Whoever attempts to contravene, or abets any contravention of any of the provisions of this Act other than section 13, clause (a) of sub-section (1) of section 18, section 18-A, clause (a) of subsection (1) of section 19, sub-section (2) of section 44 and sections 57 and 58 or of any rule, direction or order made thereunder, shall, for the purposes of this Act, be deemed to have contravened that provision, rule, direction or order, as the case may be”.

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¶213

The provisions have been referred to indicate not only the mandate of the Act of 1973 but the contravention of those provisions by the appellants. It was revealed even in the inquiry conducted by the bank at their instance in the year 1995 itself though the incidence took place from the year 1991 onwards.

¶214

It would not be out of place to mention that a letter dated 08.08.1995 was addressed to the Chief General Manager, Department of Banking Operations and Developments, Mumbai, the Assistant Manager, UCO Bank, Mumbai. The purpose of this letter was to verify the Challan and Bills of Entry in respect of M/s C.K. International by conducting enquiries by Chief Manager of SBI on 03.08.1995. Therein, it was found that the rubber stamps/signatures on the challan were fake and no tax has been deposited and further enquiries were made with the Chief Manager, Bank of Baroda where the customs duty alleged to have been deposited by the clearing agents as per the Bills of Entry revealed that no duty was deposited with them.

¶215

The further enquiries were made about the clearing agents viz. M/s National Cargos, whose full address available on the Bills of Entry revealed that the same was also bogus and the address given was existent but no such firm had functioned at that place. The similar exercise was taken up again at the level of UCO Bank and it was found that M/s Pearls International, which had shown the clearance of Cargo at Indore Airport as per Bills of Entry

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received through the bank but it was found that the bank was not even authorized for it and the address of the Cargo Clearing Agents appeared on the Bills of Entry were non-existent. Similar exercise was taken in respect to other banks which include Bank of Baroda, etc.

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On collection of information, it was intimated to the Directorate of Enforcement, Mumbai on 13.02.1996. The show cause notices were issued thereupon. The Adjudicating Officer found a case against the appellant and thus imposed the penalty in reference to the contravention by each of the appellant. The statements of witnesses which include the statement of Dinesh Bhuva, the main conspirator, under Section 40 of the Act of 1973 were considered.It was submitted that the statements of the witnesses were rightly relied by the Adjudicating Officer to draw conclusions.

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The statements of the witnesses recorded under Section 40 are considered to be on the judicial side thuscan be read against the noticee. The statements recorded under Section 40 have been referred by the Adjudicating Officer to find out as to whether a case of contravention of the provisions of the Act of 1973 is made out or not. We are not giving reference of those statements elaborately because the facts along with the charges against thenoticee and the relevant material to prove the charges have been given. However, at the cost of repetition, we may take note of

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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the statement of the bank officials who admitted acceptance of money for doing the favour. It was for the transaction started from opening of the bank account without proper verification. It could not have been merely on the introduction of the account by the present account holder and thereupon deposit of huge cash in the bank account for the purpose of remittance. The Bank Manager initially made inquiry but appellant has failed to show any material to record its satisfaction for acceptance of cash in bulk. No explanation to it has been given even during the course of arguments. It is coupled with the other documents which include the Bill of Entry having fictitious stamping apart from other documents. The way appellants have acted shows nothing but contravention of the mandate of the Act of 1973 and Exchange Control Manual apart from the RBI guidelines. The serious allegation cannot be ignored casually and that too when contravention of the provision was made by the bank officials on consideration for their personal gain.

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The appellants have questioned the order in reference to cross examination of the witnesses in ignorance of the fact that summons to the witnesses were sent but they did not turn up and in absence of the witnesses, they could not have been crossexamined. It is not that the authority has denied the opportunity simpliciter, rather efforts on its part are available on record. It issued the summons to persons relevant to the case who did not

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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turn up. It is apart from the fact that in the proceeding before quasi-judicial authority, cross-examination is not pre-empted as a right rather it can be only in a given case. The appellants have failed to show any prejudice on account of alleged denial of crossexamination.

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The Adjudicating Officer has relied upon the judgment in the case of State of Madhya Pradesh Vs. ChintamanSadashiva

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reported in AIR 1961 SC 1623. The issue was in regard to the denial of cross-examination. The argument was not accepted by the Apex Court finding that a fair reasonable opportunity was given in the proceedings and otherwise the cross-examination cannot be sought as a right before a quasi-judicial authority. It can be only in a given case.

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We may now address the issue of delay in pronouncement of the order. It is a fact that after hearing the noticees, the order was pronounced with the delay of more than 2 years. The Single Bench of this Tribunal has set aside the order on the aforesaid ground itself in the case of M/s South Indian Bank Ltd. (supra). The prayer was accordingly made to set aside the order by maintaining the earlier order of the Tribunal. To analyse the issue, we have gone through the earlier judgment of the Tribunal and find it to be of a Single Bench while this matter is being heard by the Division Bench. It is further a fact that the earlier order of the Tribunal has not attained finality because it was

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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challenged before the High Court and the petition is still pending. Apart from the aforesaid, we find subsequent judgment of the Supreme Court as well as of Delhi High Court in reference to the issue of delay in pronouncement of the order. In the case of Smt. SumanTaneja (supra), the Delhi High Court has referred to the judgment relied upon by the appellant. Para 14 and 15 of the said judgment are quoted hereunder for ready reference.

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“14. So far as passing of the judgment after a period of three years is concerned, at the outset I was inclined to favourably consider this aspect, however, I note that the Supreme Court in the judgment in the case of Kunwar Singh and Ors. Vs. Sri ThakurjiMaharaj 1995 Supp. (4) SCC 125 has allowed the appeal because of delay in passing the judgment leaving the question open whether only because of delay in passing of the judgment the same can be set aside on that count itself. In the judgment relied upon on behalf of the appellant in the case of Kanhaiyalal and Ors. Vs. Anupkumar and Ors. AIR 2003 SC 689 the judgment of the court below was set aside no doubt because it was passed with delay, but more importantly because of the fact that judgment was passed in a second appeal and the judgment was passed without formulating the necessary questions of law which are required to be framed as per Section 100 of CPC. Even the in the case judgment of BhagwandasFatechandDaswani&Ors. Vs. HPA International &Ors. (2000) 2 SCC 13 does not lay down a general proposition that a judgment passed with delay is to be set aside only on the count of delay in passing of the same. Therefore, the facts of the cases cited on behalf of the appellant are different and they cannot be applied more so because I put it to the counsel for the appellant that what is the argument or the issue which the appellant wanted for the first appellate court to consider but the appellate court had not considered that argument/issue and which has resulted in prejudice to the appellant. Counsel for the appellant could not show me any ground urged in this Regular Second Appeal as to which specific ground the appellant had urged before the first appellate court and which was not considered by the first appellate court. The only ground which is urged before this court is the ground contained in para 10 of the present

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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appeal, and which ground is really ground on merits that the first appellate court has wrongly decided the issue. Therefore, it is not the case of the appellant that any ground urged before the first appellate court has not been decided by the first appellate court or how is the appellant in any manner prejudiced by the long delay.

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I have already observed above that this litigation has gone on for about 10 years although right at the outset the suit should have been forthwith decreed and which is one aspect which further persuades me not to unnecessarily remand the case back for a fresh judgment by the first appellate court on account of the judgment having been passed with delay.

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15. In view of the above, no substantial question of law arises. The appeal is therefore dismissed, leaving the parties to bear their own costs”.

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We may further make a reference of the judgment of the

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Apex Court in the case of Ram Bali Vs. State of UP reported in AIR 2004 SC 2329. The plea of delay in delivering the judgment was raised taking it to be rendering appellant vulnerable but the Apex Court did not accept the plea. A reference of the earlier judgment of the Apex Court in the case of Anil Rai Vs. State of Bihar reported in AIR 2001 SC 3173 was given to clarify that the Court earlier stressed upon the desirability of early delivery of judgment. However, the judgment impugned therein was not set aside on the ground of delay in delivery of the judgment. The option to raise the issue was however given to a party in case judgment is not delivered for considerably long time. The Apex Court, however, refused to accept the finding of Delhi High Court in the case of Ram Bali (supra) as no detriment as such was

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FPA-FE-59-62, 65-66, 157 & 173/MUM/2009

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Page 42 of 44

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caused to the appellant on account of delay. The relevant paras of the judgment are quoted hereunder:

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“We also find that the plea of delayed delivery of judgment and the same rendering it vulnerable is without any substance. In Anil Rai's case (supra) this Court has only stressed upon the desirability of early delivery of judgments. In fact, the judgment impugned before this Court in the said case was not set-aside on the ground of delayed delivery of judgment and was dealt on merits. In paras 10 and 45 of the judgment this Court had indicated options to a party in case judgment is not delivered for considerably long time. We are unable to appreciate that any detriment as such was caused to the appellant on that account alone, on the peculiar facts of the case, as well.

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There is no scope for reappraisal of evidence and interference with the concurrent findings of fact. This Court is not ordinarily to go into the credibility of the findings and interference is permissible only when exceptional and special circumstances exist which resulted in injustice to the accused. This is not a case of that nature and the evidence seems to be not only creditworthy but the conclusions arrived at also are well merited and sufficiently supported by overwhelming material on record. We, therefore, find no merit in this appeal, which is dismissed.”

¶247

In the light of the judgment of the Apex Court, we are unable to follow the earlier order of this Tribunal which has not otherwise attained finality. It is also relevant to mention that the appeal was argued even on merit and thus the Tribunal is under an obligation to deal with the factual and legal issues and once it is dealt with, remand of the case would be for the sake of it.

¶248

The finding recorded by the Tribunal on merit is after considering the rival submissions of the parties. The appellants have otherwise failed to show any prejudice on account of delay in passing the order by the Adjudicating Officer. In the light of the FPA-FE-59-62, 65-66, 157 & 173/MUM/2009 Page 43 of 44

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peculiarity aforesaid, we have dealt with the issue of delay also in delivering the judgment and it is after referring to the subsequent judgments of the Apex Court after the judgments in the case of BhagwandassFatehchandDaswani (supra) and

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Kanahaiyalal (supra). Thus, for all the reasons given above and finding no substance in any of the arguments raised by the

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counsel, the appeals would fail and are dismissed accordingly.

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(JUSTICE MUNISHWAR NATH BHANDARI) CHAIRMAN

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(BALESH KUMAR) MEMBER

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New Delhi 8^th July, 2024

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‘SRD’