NEW DELHI, FEB 19, 2013: APPELLANT - Telestar Travels Private Ltd. carries on a travel agency and specialises in booking of tickets for crew members working on ships. Most of the shipping companies are based abroad with their representatives located in Mumbai who would issue instructions to the appellant-company to arrange air passage for the crew from Bombay and other places in India to particular ports abroad. The company would then take steps to have tickets issued on the basis of such instructions for different destinations.

The appellant's case is that the travel agents in U.K. had of late started offering cheap fares for seaman/crew travelling to join the ships. In order to benefit from such low fare tickets the shipping companies are said to have desired that the benefit of such low fare tickets be organized for them by the appellant. In order to make that possible the appellant-company claims to have approached M/s Clyde Travels Ltd. (CTL) in Glasgow (U.K.) for getting such cheap seaman tickets. According to this arrangement, the CTL would send a Pre-paid Ticket Advice (PTA) to the appellant in India based on which the appellant would secure a ticket from the airline concerned. The money for the tickets would then be credited into the Swiss bank account of Bountiful Ltd., a company registered in British Virgin Islands. Bountiful Ltd. would out of money so received transfer funds to CTL towards the price of the tickets apart from realising 3% of the ticket price towards commission payable to the appellant-company.

The appellant-company claims that the process of purchase of tickets as aforementioned was a commercial arrangement that was legally permissible and did not involve any violation of FERA . The Directorate of Enforcement, Mumbai, did not, however, think so. According to the Directorate, Bountiful Ltd. was a paper company that held Swiss bank account which was in turn operated by a person named Mr. Shirish Shah, a Chartered Accountant, operating from London on the instructions of Mr. Rajesh Desai, who was none other than the son of Mr. Arun Desai, Managing Director of Telestar Travels Pvt. Ltd. The further case of the Directorate was that documentary evidence seized from the office of M/s Telestar and the residence premises of the Managing Director in the course of investigation conducted under Section 37 of FERA unerringly revealed that Bountiful Ltd. was entirely a holding of the appellant- Telestar Pvt. Ltd. and entirely controlled in its operation and financial management by Mr. Arun N. Desai and his two sons Mr. Sujeet A. Desai and Mr. Rajesh A. Desai, appellants in these appeals.

It was on the basis of the investigations conducted by the Directorate, the statements of the promoters of Telestar Pvt. Ltd. recorded during the course of such investigation and other material collected by the Directorate, a notice was issued by the Directorate calling upon them to show cause why the adjudication proceedings as contemplated under Section 51 of the FERA should not be filed against them for the contravention pointed out in the show cause notice. The show cause notice was followed by an addendum by which the Directorate sought to place reliance upon a report dated 15th January, 1997 received from the High Commission of India, at London and the revised list of documents enclosed and communicated to the appellants.

The appellants filed their replies in which they denied the allegations that Bountiful Ltd. was a paper company or that the same was being controlled from India by the appellants. By their letter dated 23rd September, 1997 the appellants sought to cross-examine Mr. Livingstone of CLD and the Indian High Commission officials in London who had met him. He also sought to cross-examine Miss Anita Chotrani and Mr. Deepak Raut upon whose depositions Directorate of Enforcement sought to place reliance in support of its case.

The Adjudicating Authority eventually passed an order on 29th March, 2001 holding the appellants guilty of violation of provisions of Sections 8 and 14 of FERA inasmuch the appellants had received payments from various persons on account of tickets booked by them for USD 846116.14 and GB Pounds 156943.16 which were credited to the account No.10975 at Geneva and which they failed to surrender to an authorised dealer in foreign exchange in India within three months of becoming the owner or holder thereof without the general permission of the RBI as required under Section 14 of FERA . The Adjudicating Authority has further held the appellants guilty of transferring foreign exchange of GB Pounds 138671.40 and USD 672131.85 from the said Geneva Account No.10975 of M/s Bountiful Ltd. to various persons during the period of November, 1994 to July, 1995 without the previous general or special permission of the RBI, thereby contravening Section 8(1) of FERA , 1973. The Adjudicating Authority on that basis levied a penalty of Rs.90 ,00,000 /- for contravening Section 14 and Rs.85,00,000 /- for contravention of Section 8(1) upon M/s Telestar Pvt. Ltd., Mumbai. The Authority further levied a consolidated penalty of Rs.20 ,00,000 /- each upon the remaining appellants Mr. Arun N. Desai, Managing Director, Mr. Rajesh Desai and Mr. Sujeet Desai, his sons.

Aggrieved by the order passed by the Adjudicating Authority, the appellants appealed to the Appellate Tribunal for Foreign Exchange, New Delhi. The Tribunal allowed the said appeals but only in part and to the limited extent of reducing the penalty imposed by the Adjudicating Authority by 50%. The Tribunal, upon reappraisal of the entire material on record, affirmed the findings recorded by the Adjudicating Authority that the appellants had indeed committed violation of Sections 8 and 14 of the FERA 1973 as noticed earlier. The further appeals before the High Court of Judicature at Bombay by the appellants also failed and were dismissed in limine by the High Court by order dated 14th March, 2008.

Hence, the present appeal in Supreme Court.

The Supreme Court observed,

Retracted Statements:A reading of the order passed by the Adjudicating Authority would show that the appellants had in their responses to the show cause notice and the addendum to the same specifically raised a contention that the statements made by them were not voluntary and could not, therefore, be relied upon. That contention was not only noticed by the Adjudicating Authority but specifically dealt with and rejected holding that the statement was voluntary in nature and that the subsequent retraction is a mere after thought with a view to escaping the consequences of the violations committed by them. The Adjudicating Authority was aware of the requirement of examining the voluntary nature of the statements being relied upon by it. It has accordingly examined that aspect and given cogent reasons for holding that the statements were indeed voluntary and incriminating both.

Whether or not Bountiful Ltd. is a paper Company and whether or not it was controlled and operated by the appellants is essentially a question of fact to be determined on the basis of the material collected in the course of the investigation. The Adjudicating Authority and Tribunal have answered that question in the affirmative taking into consideration the statements made by the appellants as also the documents that were recovered from their premises.

Suffice it to say that there may be sufficient evidence on record for the Adjudicating Authority and the Tribunal to hold that the appellants were indeed guilty of violating the provisions of FERA that called for imposition of suitable penalty against them. It was not the case of the appellants that the findings were unsupported by any evidence nor was it their case that the statements made by the appellants were un-corroborated by any independent evidence documentary or otherwise. In the circumstances, therefore, there is no reason to interfere with the concurrent findings of fact on the question whether Bountiful was or was not a paper company controlled by the appellants from India.

Cross Examination:The next limb of attack mounted by the appellants against the impugned orders is that while holding that Bountiful Ltd. was a paper Company and was being controlled and operated from India by the appellants through Shri Sirish Shah, the Adjudicating Authority had relied upon the statements of Miss Anita Chotrani and Mr. Deepak Raut, and a communication received from the Indian High Commission in London. These statements and the report were, according to the appellants, inadmissible in evidence as the appellant's request for an opportunity to cross examine these witness had been unfairly declined, thereby violating the principles of natural justice that must be complied with no matter the strict rules of Evidence Act had been excluded from its application. Inasmuch as evidence that was inadmissible had been relied upon, the order passed by the Adjudicating Authority and the Tribunal were vitiated.

The Supreme Court found no merit even in that submission of the learned counsel. It is evident from Rule 3 of the Adjudication Rules framed under Section 79 of the FERA that the rules of procedure do not apply to adjudicating proceedings. That does not, however, mean that in a given situation, cross examination may not be permitted to test the veracity of a deposition sought to be issued against a party against whom action is proposed to be taken. It is only when a deposition goes through the fire of cross-examination that a Court or Statutory Authority may be able to determine and assess its probative value. Using a deposition that is not so tested, may therefore amount to using evidence, which the party concerned has had no opportunity to question. Such refusal may in turn amount to violation of the rule of a fair hearing and opportunity implicit in any adjudicatory process, affecting the right of the citizen. The question, however, is whether failure to permit the party to cross examine has resulted in any prejudice so as to call for reversal of the orders and a de novo enquiry into the matter. The answer to that question would depend upon the facts and circumstances of each case.

Coming to the case at hand, the Adjudicating Authority has mainly relied upon the statements of the appellants and the documents seized in the course of the search of their premises. But, there is no dispute that apart from what was seized from the business premises of the appellants the Adjudicating Authority also placed reliance upon documents produced by Miss Anita Chotrani and Mr. Raut. These documents were, it is admitted disclosed to the appellants who were permitted to inspect the same. The production of the documents duly confronted to the appellants was in the nature of production in terms of Section 139 of the Evidence Act, where the witness producing the documents is not subjected to cross examination. Such being the case, the refusal of the Adjudicating Authority to permit cross examination of the witnesses producing the documents cannot even on the principles of Evidence Act be found fault with. At any rate, the disclosure of the documents to the appellants and the opportunity given to them to rebut and explain the same was a substantial compliance with the principles of natural justice. That being so, there was and could be no prejudice to the appellants nor was any demonstrated by the appellants.

The appellant lastly argued that the penalty imposed was disproportionate to the nature of the violation and that this Court could at least, interfere to that extent.

The Supreme Court did not see any reason much less a compelling one to interfere with the quantum of penalty imposed upon the appellants by the Tribunal. The Adjudicating Authority had imposed a higher penalty. The Tribunal has already given relief by reducing the same by 50%. Keeping in view the nature of the violations and the means adopted by the respondent to do that, the Court saw no room for any further leniency.

In the result, these appeals fail and are, hereby, dismissed with costs assessed at Rs 50 ,000 /- in each appeal. Cost to be deposited within two months with the SCBA Lawyers' Welfare Fund.

(See 2013-TIOL-17-SC-FEMA)