Supreme Court of India
M/S TELESTAR TRAVELS PVT. LTD. & ORS.versusSPECIAL DIRECTOR OF ENFORCEMENT
- Citation
- 2013 INSC 98
- Decided
- 13 February 2013
- Disposal
- Dismissed
- Bench
- T S THAKUR
Holding
The Supreme Court upheld the adjudicating authority's findings, the reliance on voluntary (even retracted) statements, the use of documents without cross‑examination, and the reduced penalty, dismissing the appeals.
Summary
The Supreme Court examined appeals by Telestar Travels Pvt. Ltd. and its directors challenging the adjudication order under the Foreign Exchange Regulation Act (FERA) that found them guilty of dealing in foreign exchange without RBI permission and of using a paper company, Bountiful Ltd., to route funds. The Court held that the findings of fact – that Bountiful was a paper company controlled by the appellants – were supported by ample documentary evidence and voluntary statements, even though the statements were later retracted. It ruled that the delay in pronouncing the adjudication order did not, by itself, invalidate the order, and that the Adjudicating Authority was entitled to rely on documents produced under Section 139 of the Evidence Act without permitting cross‑examination. The Court also found the reduced penalty, after a 50% cut by the Appellate Tribunal, to be appropriate and not excessive. Consequently, the appeals were dismissed.
Issues considered
- Whether delay in pronouncing an adjudication order under FERA warrants setting aside the order.
- Whether retracted statements can be treated as voluntary and thus admissible for imposing penalty under FERA.
- Whether the Adjudicating Authority may rely on documents produced by officials without allowing cross‑examination, in compliance with natural justice and the Evidence Act.
- Whether the finding that Bountiful Ltd. was a paper company controlled by the appellants is a question of fact that can be interfered with by the court.
- Whether the quantum of penalty imposed is disproportionate and can be reduced further.
Legislation cited
- Adjudication Rules under FERAs. Rule 3
- Foreign Exchange Regulation Act, 1973s. 14, s. 51, s. 8
- Indian Evidence Act, 1872s. 139
Subjects
Foreign Exchange Regulation ActFERA penaltyadjudication orderretracted statementspaper companycross‑examinationnatural justicedelay in pronouncementpenalty reduction
Judgment
[2013] 1 $.C.R. 1005
M/S TELESTAR TRAVELS PVT. LTD. & ORS. A
v.
SPECIAL DIRECTOR OF ENFORCEMENT
(Civil Appeal Nos.. 1306-1309 of 2013)
FEBRUARY 13, 2013
B
[T.S. THAKUR AND M.Y. EQBAL, JJ.]
Foreign Exchange Regulation Act, 1973:
ss. 8 and 14 - Dealing in foreign exchange without c
previous permission of Reserve Bank - An Indian company
dealing with a foreign company based in UK. and money
transactions made through another company' based outside
a
India and alleged to be paper company - Held: There is
no reason to interfere with the concurrent findings of fact that D
the company concerned was a paper company controlled by
appellants from India - There appears to be sufficient
evidence on record for the Adjudicating Authority and the
Appellate Tribunal to hold that the appellants were guilty of
violating the provisions of FERA that called for imposition of E
suitable penalty against them. - Appellate Tribunal has
already given relief by reducing the penalty by 50% - Keeping
in view the nature of violations and the means adopted by
appellants to do so, there is no room for any further leniency.
Adjudication Rules under FERA: F
r. 3 - Delay in pronouncement of order - Held: Delay by
itself would not constitute a ground for setting aside an order
that may otherwise be found legally valid and justified - A
careful examination of the adjudication by the Authority and . G
that of the Appellate Tribunal and ·the High. Court indicates
that no illegality or irregularity has been demonstrated -
Foreign Exchange Regulation Act, 1973 - s.51 -
Administrative law.
1005 H
1006 SUPREME COURT REPORTS [2013] 1 S.C.R.
A Evidence:
Retracted statements - Evidentiary value of - Held:
Adjudicating Authority and Appellate Tribunal have both
correctly appreciated the legal position and applied the same
to the case at hand to hold that the statements were voluntary
8
and, therefore, binding upon appellants.
Evidence Act, 1872:
s. 139 - Cross-examination of person called to produce
c a document - Held: The documents relied upon by
Adjudicating Authority produced by two officials of Indian High
Commission in London, were permitted to be inspected -
Therefore, refusal of Adjudicating Authority to permit cross
examination of witnesses producing the documents cannot
0 even on principles of Evidence Act be found fault with.
Appellant No. 1-travel agency was engaged in the
business of booking of tickets for crew members working
on ships. For the purpose, the appellants had
arrangement with a company based in U.K. {CTL), which
E would send Pre-paid Ticket Advice {PTA) to appellants in
India. The appellants would then secure ticket from the
air line concerned. The money for the tickets would then
be credited into the Swiss bank account of another
company {'B' Ltd.) registered in British Virgin Islands. '8'
F Ltd. would transfer the funds to CTL towards the price
of ticl(ets after realizing 3% of the ticket price towards
commission payable to the appellant company. The
Directorate of Enforcement issued a shows cause notice
for adjudication proceedings as contemplated u/s 51 of
G the Foreign Exchange Regulation Act, 1973 stating that
'B' Ltd. was only a paper company and was entirely a
holding of the appellant company and was being
controlled by it. The Adjudicating Authority, by order
dated 29.3.2001, held the appellant-company guilty of
H
TELESTAR TRAVELS PVT. LTD. & ORS. v. SPECIAL 1007
DIRECTOR OF ENFORCEMENT
violation of provisions of ss. 8 and 14 of FERA, and A
imposed upon it a penalty of Rs.90,000/- for contravening
s.14 and Rs.85,00,000/- for contravention of s.8(1) of
FERA. A consolidated penalty of Rs.20,00,000/- each was
imposed on the remaining appellants. The Appellate
Tribunal for Foreign Exchange, in appeal, reduced the B
penalty by 50%. The further appeals of the appellants
were dismissed in limine by the High Court.
Dismissing the appeals, the Court
HELD: 1.1. Whether or not 'B' Ltd. is a paper C
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 D
the affirmative taking Into consideration the statements
inade by the appellants as also the documents that were·
recovered from their premises. There appears to be
sufficient evidence on record for the Adjudicating
Authority and the Tribunal to hold that the appellants were E·
Indeed guilty of violating the provisions of FERA that
called for imposition of suitable penalty against them.
Therefore, there Is no reason to Interfere with the
concurrent findings of fact that 'B' Ltd. was a paper
company controlled by the appellants from India. [para F.
12 and 15] [1021-c:D; 1023-G-H; 1024-A-BJ
1.2. Delay in the pronouncement of the order by Itself
would not constitute a ground for setting aside the order
that may otherwise be found legally valid and justified. A G
careful examination of the adjudication by the Authority
and that of the Appellate Tribunal and the High Court
Indicates that no Illegality or Irregularity has been
demonstrated. That apart delayed pronouncement of the
order by. the Adjudicating Authority was not urged as a
ground of challenge before the Tribunal or the High H
1008 SUPREME COURT REPORTS [2013) 1 S.C.R.
A Court. The hearing had been concluded by the .
Adjudicating Authority in keeping with the requirement of
s.51 of FERA and s.30 of Adjudication Rules under FERA.
[para 6-7] [1015-B-C; 1016-B-D, F]
B Ram Bali v. State of U.P. 2004 (1) Suppl. SCR 195 =
(2004) 10 sec 598 - relied on.
Bhagwandas Fatechand Daswani and Ors. v. HPA
International and Ors. 2000 (1) SCR 254 = 2000 (2) SCC 13,
Kanhaiyalal and Ors. v. Anupkumar and Ors. 2002 (4) Suppl.
=
C SCR 366 (2003) 1 SCC 430 and Anil Rai v. State of
. Bihar 2001 (1) Suppl. SCR 298 = (2001) 7 SCC 318 -
cited.
1.3. As regards the plea that retracted statements of
0 the appellants were wrongly relied upon by the
Adjudicating Authority, suffice it to say that the
Adjudicating Authority has specifically held that the
statements were voluntary in nature and that the
subsequent retraction is a mere afterthought with a view
E to escaping the consequences of the violations
committed by them. The Appellate Tribunal also held that
retracted statements could furnish a sound basis for
recording a finding against the party making the
statement. The Adjudicating Authority and the Appellate
F Tribunal have both correctly appreciated the legal position
and applied the same to the case at hand, while holding
that the statements were voluntary and, therefore, binding
upon the appellants. [para 9, 11] [1017-A-C; 1019-C-D]
K. T. M. S. Mohd. v. Union of India 1992 (2) SCR 879 =
G (1992) 3 SCC 178, K.I. Pavunny v. Assistant Collector (HQ),
Central Excise Collectorate, Cochin 1997 (1) SCR 797 =
(1997) 3 sec 721 - referred to.
Vinod Solanki v. Union of India & Anr. 2008
H (17) SCR 1070 = (2008) 16 SCC 537 - held inapplicable
TELESTAR TRAVELS PVT. LTD. & ORS. v. SPECIAL 1009
DIRECTOR OF ENFORCEMENT
1.4. In the case at hand, the Adjudicating Authority A
also placed reliance upon documents produced by two
officials of Indian High Commission in London, and the
appellants 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 s. B
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 c
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 a.nd could be no prejudice to the D
appellants. [para 20] [1028-A-D]
Surjeet Singh Chhabra v. Union of India and Ors. 1996
(7) Suppl. SCR 818 = (1997) 1 SCC 508; Mis Kanungo &
Company v. Collector of Customs and Ors. (1973) 2 SCC
438- referred to E
New India Assurance Company Ltd. v. Nusli Neville
Wadia and Anr. 2007 (13) SCR 598 = (2008) 3 SCC 279,
S.C. Girotra v. United 1995 Supp. (3) SCC 212, Lakshman
Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634, F
and Mis Bareilly Electricity Supply Co. Ltd. v. The Workmen
and Ors. 1972 (1) SCR 241 = (1971) 2 sec 617 - cited
1.5. There is no reason much less a compelling one
to interfere with the quantum of penalty imposed upon
the appellants by the Tribunal. The Adjudicating Authority G
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 appellants to do that, there is no room for any
further leniency. [p.~r,a 21] [1028-F] H
1010 SUPREME COURT REPORTS [2013] 1 S.C.R.
A Case Law Reference:
2000 (1) SCR 254 cited para 5
2002 (4) Suppl. SCR 366 cited para 5
2001 (1) Suppl. SCR 298 cited para 5
B
2004 (1) Suppl. SCR 195 relied on para 6
1992 (2) SCR 879 referred to para 11
1997 (1) SCR 797 referred to para 11
c held inapplicable para 11
2008 (17) SCR 1070
2007 (13) SCR 598 cited para 16
1995 (3) Suppl. sec 212 cited para 16
D 2005 (10) sec 634 cited· para 16
1972 (1) SCR 241 cited para 16
1996 (7) Suppl. SCR 818 referred to para 18
E 1973 (2) SCC 438 referred to · para 19
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
1306-1309 of 2013.
From the Judgment & Order dated 14.03.2008 of the High
F Court of Judicature of Bombay in FERA Appeal No. 8, 9, 10 &
11 of 2008.
Shyam Diwan, Tarun Gulati, Neil Hildreth, Shruti Sabharwal,
Nirman Sharma, Praveen Kumar for the Appellants.
G P.P. Malhotra, ASG, Chetan Chawla, Priyanka Mathur, Anll
Katiyar, Shreekant N. Terdal for the Respondent.
The Judgment of the Court was delivered by
T.S. THAKUR, J. 1. Leave granted.
H
TELESTAR TRAVELS PVT. LTD. & ORS. v. SPECIAL 1011
DIRECTOR OF ENFORCEMENT [T.S. THAKUR, J.]
2. These appeals arise out of a common judgment and A
order dated 14th March, 2008 passed by a Division Bench of
the High Court of Judicature at Bombay whereby the High Court
has partly allowed FERA Appeal Nos.8 to 11 of 2008 that
assailed the common order dated 28th November, 2007
passed by the Appellate Tribunal for Foreign Exchange, New B
Delhi and reduced the penalty imposed upon the appellants for
contravention of Sections 14 and 8(1) of the Foreign Exchange
Reg\Jlation Act, 1973 by 50%. The factual matrix in which the
adjudication order came to be passed by the Deputy Director,
Directorate of Enforcement, Mumbai and the appellate order c
. passed by the Tribunal for Foreign Exchange, New Delhi has
been set qut in the order passed by the Tribunal and the order
passed by the High Court of Bombay mentioned earlier. It is,
therefore, unnecessary to reco1:1nt the facts over again except
to the extent it is absolutely· necessary for disposal of these
0
appeals.
3. 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 E
issue instructions to the appellant-company ~o 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 F
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 G
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 H
1012 SUPREME COURT REPORTS [2013) 1 S.C.R.
A 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
B 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,
c however, think so. According to the Directorate, Bountiful Ltd.
was a paper company that held Swiss bank account which was
in turn operated by a person named Mr. Shirish Shah, a
Chartered Accountant, operating from London on the
instructions of Mr. Rajesh Desai, appellant in SLP (C) No.15549
D of 2008 who was none other than the son of Mr. Arun Desai,
Managing Director of Telestar Travels Pvt. ltd. appellant in SLP
(C) No.15547 of 2008. The further case of the Directorate was
that documentary evidence seized from the office of M/s
Telestar and the residence premises of the Managing Director
in the course of investigation conducted under Section 37 of
E 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
F 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
G 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 caus.e 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
H Commission of India, at London and the revised list of
TELESTAR TRAVELS PVT. LTD. & ORS. v. SPECIAL 1013
DIRECTOR OF ENFORCEMENT [T.S. THAKUR, J.]
documents enclosed and communicated to the appellants. The A
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-
exam i ne Mr. Livingstone of CLO and the Indian High B
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 c
holding the appellants gui'lty of violation of provisions of
Sections 8 and 14 of FERA inasmuch the appellants had
received payments from various persons on account of tickets
booked by them for US $ 846116.14 and GB Pounds
156943.16 which were credited to the account No.10975 at 0
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 E
of transferring foreign exchange of GB Pounds 138671.40 and
US$ 672131.85 from the said Geneva Account No.10975 of
M/s Bountiful Ltd. to various persons during the period of
November, 1994 to July, 1995 without the previous general or
special permission of the RBI, thereby contravening Section
8(1) of FERA, 1973. The Adjudicating Authority on that basis F
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 G
Desai and Mr. Sujeet Desai, his sons.
4. Aggrieved by the order passed by the Adjudicating
Authority, the appellants appealed to the Appellate Tribunal for
H
1014 SUPREME COURT REPORTS [2013] 1 S.C.R.
A Foreign Exchange, New Delhi. The Tribunal, as already
mentioned, allowed the said appeals but only in part and to the
limited extent of reducing the penalty imposed by the
Adjudicating Authority by 50%. The Tribunal, upon reappraisal
of the entire material on record, affirmed the findings recorded
B 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
c March, 2008. Hence the present appeal.
5. Appearing for the appellants, Mr. Shyam Diwan,
learned senior counsel, made a three-fold submission in
support of the appeals. Firstly, he contended that the judgment
and order passed by the Adjudicating Authority was ex parte
D hence liable to be set aside. Elaborating that submission Mr.
Diwan argued that since the adjudication order had been
passed by the authority concerned nearly 3Yz years after the
matter was finally argued before it, the requirement of affording
an opportunity of being heard to the appellants arising under
E Section 51 of FERA was not satisfied. It is submitted that the
appellants had been prejudiced on account of delayed
pronouncement of the adjudication order as the documents
available with them could not be placed before the said
authority after the hearing of the matter. He further contended
F that Rule 3 of the Adjudication Rules provided for a personal
hearing which was no doubt provided on the date the matter
was finally argued before the Adjudicating Authority but which
hearing ought to have been repeated as the pronouncement
of the order by the Authority had been delayed. Reliance in
G support of the submission was placed by Mr. Diwan upon the
decisions of this Court in Bhagwandas Fatechand Daswani
and Ors. v. HPA International and Ors. (2000) 2 SCC 13,
Kanhaiyalal and Ors. v. Anupkumar and Ors. (2003) 1 SCC
430 and Anil Rai v. State of Bihar (2001) 7 SCC 318.
H
TELESTAR TRAVELS PVT. LTD. & -ORS. v. SPECIAL 1015
DIRECTOR OF ENFORCEMENT [T.S. THAKUR, J.]
6. On behalf of respondent, it was per contra argued by A
Mr. P.P. Malhotra, learned Additional Solicitor General, that the
order passed by the Adjudicating Authority was fully compliant
with the provisions of Section 51 read with Section 30 of the
Rules under FERA and could not be treated as an ex parte
order by any stretch of reasoning. He also contended that mere B
delay in the pronouncement of adjudication order was not
enough to justify setting aside of the order if the same was
otherwise found to be legally valid and unacceptable. No
prejudice was, at any rate, caused to the appellants by the
delay, according to Mr. Malhotra, who placed reliance on the c
decision of this Court in Ram Bali v. State of UP. (2004) 10
sec 598 to argue that delay in the pronouncement was not
itself sufficient to declare the order to be bad in law. This Court
has, according to Mr. Diwan, deprecated the practice of Courts
and Authorities delaying the pronouncement of orders and D
matters that have been heard and reserved for such
pronouncements: There is no gainsaying that any Court or
Authority hearing the matter must within a reasonable time
frame pronounce the orders especially when any misgiving
arising out of inordinate delay which gave rise to unnecessary
apprehensions in the minds of litigants especially in the minds E
of a party that has lost the matter at the hand of.such long delay.
We can only express our respectful agreement with the
observations made by this Court in the decisions relied upon
by Mr. Diwan that have issued guidelines and set out time
frame considered reasonable for pronouncement of order by F
Courts and Authorities. Even so, the question remains whether
delay by itself should constitute a ground for setting aside the
order that may otherwise be found legally valid and justified. Our
answer to that question is in the negative. The decision of this
Court in Ram Bali v. State of UP. (2004) 10 SCC 598 is one G
such case where the Court repelled a similar argument and
declared that delay was not a ground by itself that otherwise
specifically dealt with the matter in issue. The Court at best put
to caution requiring a careful and closer scrutiny of the order
that was pronounced after undue delay but if upon such scrutiny H
1016 SUPREME COURT REPORTS [2013] 1 S.C.R.
A also the order is not found to be wrong in any way it may decline
to set aside the same.
7. We have in the instant case heard the matter at
considerable length for a careful examination of the adjudication
by the Authority and that of the Appellate Tribunal and the High
8
Court to examine whether it suffers from any illegality or material
irregularity causing prejudice to the appellants. We are of the
view that no such illegality or irregularity has been
demonstrated. That apart delayed pronouncement of the order
C by the Adjudicating Authority was not urged as a ground of
challenge before the Tribunal or the High Court both of whom
have remained silent on this aspect. Even on the question of
prejudice we find the contention of Mr. Diwan to be more
imaginary than real. The argument regarding prejudice is
founded on the plea that the appellants could not place some
D of the documents which they have now placed before this Court
for consideration. It is further admitted that no application for
permission to produce these documents was filed by them
before the Adjudicating Authority no matter they could have done
so if they really indeed needed to place reliance on such
E documents. Mr. Malhotra was, in our view, justified in contending
that the hearing had been concluded by the Adjudicating
Authority in keeping with the requirement of Section 51 and
Rule 3 of the Adjudication Rules under FERA. The first limb of
the contention urged by Mr. Diwan, therefore, fails and is hereby
F rejected.
8. It was next argued by Mr. Diwan, that the Adjudicating
Authority had placed reliance upon the retracted statements of
the appellants while holding that Bountiful Ltd. was a paper
G company and that its financial control lay in their hands, so that
receipt and appropriation of the foreign exchange by that
device was a clear violation of the provisions of FERA.
9. A reading of the order passed by the Adjudicating
Authority would show that the appellants had in their responses
H to the show cause notice and the addendum to the same
TELESTAR TRAVELS PVT. LTD. & ORS. v. SPECIAL 1017
DIRECTOR OF ENFORCEMENT [T.S. THAKUR, J.]
specifically raised a contention that the statements made by A
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 B
consequences of the violations committed by them. The
Adjudicating Authority, we are more than satisfied, 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 c
statements were indeed voluntary and incriminating both. The
Adjudicating Authority has observed:
"On going through the records of the case, I find that the
statements dated 24.8.95, 25.8.95 and 6.2.96 of Shri
Arun N. Desai, the Noticee No. 1 and the statements D
dated 24125.8.95 of Rajesh N. Desai and Sujeet Desai,
the Noticee Nos. 2 & 3 were_ all given by the respective
notices in their own handwriting and in the language
known to them. Shri Arun Desai, in his statements, had
explained in detail the functioning of Mis Telestar E
Travels, the Travel Agency, mainly engaged in booking
of domestic and international air tickets for crew members
joining foreign ships; the need for entering into an
agreement with agents abroad; the mode of payments
received ant eh commission/profit earned on the tickets F
booked by them through the overseas shipping
· companies and also how their commission was being
remitted either by draft or telegraphic transfer into their
account No. 82886 in Bank of Baroda, Churchgate
Branch etc. I thus find that the statemtns of the notice I G
contain such inner and minute details, which could have
been given out of his personal knowledge and could not
have been invented by the officers who recorded the said
statements. Moreover, the statement of the notice No. 1
have been confirmed by the statements of the other two H
1018 SUPREME COURT REPORTS [2013] 1 S.C.R.
A notices S!Shri Rajesh and Sujeet Desai, in their
respective statements given before the Enforcement
Officers. Even otherwise there is nothing on record that
might cast the slightest doubt on the voluntariness of the
statements in question. I am, therefore, of the view that
B the statements in question were given by the respective
three notices voluntarily in explanation of the plethora of
documents seized from the business/residential
premises of the notices and contain those details which
they wished to state. The retraction subsequently filed by
c the notices S!Shri Rajesh Desai and Sujeet Desai are
merely an afterthought to escape from the clutches of law
and I reject them in toto."
10. In the appeal filed by the appellants before the FERA
Appellate Tribunal also a contention as to the voluntary nature
D of the statements made by the appellants was urged on their
behalf but rejected by the Tribunal in the following words:
"It is argued that the statements given by Shri Arun Desai,
Rajesh Desai and Sujeet Desai were not the voluntary
E ones which were dictated by the Enforcement Officers
and were obtained under threats and coercion which were
subsequently retracted and that there was no
corroborative material to support them. But we find no
force in these arguments because the appellants, in their
F statements, had explained in detail the functioning of Ml
s. Te/star Travels, which was engaged in booking of
domestic and international air tickets for crew members
joining foreign ships, the need for entering into an
agreement with agents abroad, the mode of payments
received and the commission earned on the tickets
G
booked by them through the Over Shipping Companies
and how their commission was remitted through Banking
channel. Moreover, they were written in their own
handwriting and in the language known to them. The
statements contained such inner and minute details
H
TELESTAR TRAVELS PVT. LTD. & ORS. v. SPECIAL 1019
DIRECTOR OF ENFORCEMENT [T.S. THAKUR, J.]
which could have been given out of their personal A
knowledge and could not have been invented by the
officers of the Department."
11. The Tribunal has relying upon the decision of this Court
in K. T.M.S. Mohd. v. Union of India (1992) 3 SCC 178, K.I. B
Pavunny v. Assistant Collector (HQ), Central Excise
Col/ectorate, Cochin (1997) 3 SCC 721 held that retracted
statements could furnish a sound basis for recording a finding
against the party making the statement. There is, in that view,
no gainsaying that the Adjudicating Authority and the Appellate
Tribunal have both correctly appreciated the legal position and C
applied the same to the case at hand, while holding that the
statements were voluntary and, therefore, binding upon the
appellants. Decision of this Court in Vinod Solanki v. Union
of India & Anr. (2008) 16 SCC 537 relied upon by Mr. Diwan
does not lend any help to the appellants. The decision is an D
authority for the proposition that a person accused of
commission of an offence is not expected to prove to the hilt
that confession had been obtained from him by an inducement,
threat or promise by a person in authority. The burden is on the
authority/prosecution to show that the statement sought to be E
relied upon was voluntary and that the Court while examining
the voluntariness of the statement is required to consider the
attending circumstances and all dther relevant facts. The
decision does not hold that even when a statement is founded
upon consideration of the relevant facts and circumstances and F
also found to be voluntary, it cannot be relied upon because
the same was retracted. We may usefully refer to the legal
position stated in the following paragraph by this Court in
K. T.M.S. Mohd. & Anr. (supra):
"34. We think it is not necessary to recapitulate and recite G
all the decisions on this legal aspect. But suffice to say that
the core of all the decisions of this Court is to the effect
that the voluntary nature of any statement made either
before the Custom Authorities or the officers of
H
1020 SUPREME COURT REPORTS [2013] 1 S.C.R.
A Enforcement under the relevant provisions of the
respective Acts is a sine quo non to act on it for any
purpose and if the statement appears to have been
obtained by any inducement, threat, coercion or by any
improper means that statement must be rejected brevi
B manu. At the same time. it is to be noted that merely
pecause a statement is retracted. it cannot be recorded
as involuntary or unlawfully obtained. It is only for the maker
of the statement who alleges inducement, threat, promise
etc. to establish that such improper means has been
adopted. However, even if the maker of the statement fails
c to establish his allegations of inducement, threat etc.
against the officer who recorded the statement, the
authority while acting on the inculpatory statement of the
maker is not completely relieved of his obligations in at
least subjectivelf applying its mind to the subsequent
D retraction to hold that the inculpatory statement was not
extorted. It thus boils down that the authority or any Court
intending to act upon the inculpatory statement as a
voluntary one should apply its mind to the retraction and
reject the same in writing. It is only on this principle of law.
E this Court in several decisions has ruled that even in
gassing a detention order on the basis of an inculpatory
statement of a detenu who has violated the provisions of
the FERA or the Customs Act etc. the detaining authority
should consider the subsequent retraction and record its
F opinion before accepting the inculpatory statement lest the
order will be vitiated ... "
(emphasis supplied)
12. That brings us to the submission of Mr. Diwan that the
G arrangement arrived at between the Appellant Company, on the
one hand, and Clyde Travels Ltd. and Bountiful Ltd., on the
other, was commercial in nature which the Adjudicating
Authority and the Tribunal had failed to appreciate in its true
and correct perspective. There was, according to Mr. Diwan,
H
TELESTAR TRAVELS PVT. LTD. & ORS. v. SPECIAL 1021
DIRECTOR OF ENFORCEMENT [T.S. THAKUR, J.]
no real basis for the Adjudicating Authority and the Tribunal to A
hold that Bountiful was a paper company and that it was being
controlled by the Desais from India. Mr. Diwan made a
strenuous attempt to persuade us to reverse the findings of fact
recorded by the Adjudicating Authority and the Tribunal on this
aspect. We regret our inability to do so. Whether or not B
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 c
affirmative taking into consideration the statements made by
the appellants as also the documents that were recovered from
their premises. All these documents and incriminatory
circumstances have been discussed in the following passage
by the Adjudicating Authority: D
"... A perusal of the records indicate that various
incriminating documents together with the Indian
currencies were seized from the office premises of Mis
Te/star Travels and a/so from the residence of Shri Arun
Desai, the Managing Director of the said company. All E
the three noticees S/Shri Arun Desai and his two sons
Rajesh and Sujeet Desai, have given their statements
before the Enforcement Officer, in explanation of the said
seized documents. It is a/so noticed that the seizure of
documents and currencies had not been disputed by the F
notices at any point of time. Shri Rajesh Desai, son of
the said Shri Arun N. Desai and one of the noticees in
the impugned SCN, while explaining page No. 18 of the
bunch of documents marked 'G', had clearly admitted that
it was the message from Shri Sirish Shah from London G
informing that US$ 33884 has been credited on 14.11.94
to the account of Bountiful. Similarly page Nos.30 & 34
of file marked '/', contain instructions to transfer certain
amounts to the account of Clyde Travels Ltd. Glasgow.
When Shri Rajesh Desai was questioned as to how could H
1022 SUPREME COURT REPORTS [2013] 1 S.C.R.
A issue such instructions in respect of the account of
Bountiful Ltd., he clearly explained in his statement dated
24.8.95 that the account No.10975 of Bountiful at Geneva
was an account of a paper company held by him for the
sole purpose of receiving and making payments in
8 respect of seamen airline tickets which were obtained at
the very cheap rates from Mis Clyde Travels, Glasgow,
with whom Mis Te/star had a tie up since August 1994;
that Shri Sirish Shah was a Chartered Accountant in
London, who was known to both Mis. Clyde Travels and
c Te/star; that the said Shri Sirish Shah was used by him
for giving instructions to the bank for operating the
account of Bountiful Ltd. At Switzerland that the last
balance for the said account of Bountiful was US$
98761.70. Shri Rajesh Desai further explained the page
Nos. at 111 to 125 of file marked 'E' seized from the office
D
of Mis. Te/star Travels. P. Ltd., in his statement dated
24.8.95, admitting the same to be the statement of
account of Bountiful Ltd. with Banque De Financement,
Geneva, which showed credits of amounts remitted by
various overseas shipping companies against PTA
E
tickets purchased for their crew; that the said credits
mpresented amounts transferred from the bank accounts
of their overseas shipping companies; that the debits
represented the amounts transferred to the Bank of
Scotland Glasgow which is the account of Mis. Clyde
F Travels Ltd. in Glasgow; that he was the person giving
instructions to Shri Sirish Shah, Chartered Accountant of
P. S.J. Alexandar & Co, London to transfer funds from the
account in Geneva of Mis. Bountiful to various places
which included transfer of funds to Mis Clyde Travels Ltd,
G Glasgow which forms a major portion of transfer for PTA
tickets."
13. Dealing with the invoices issued by Bountiful Ltd. to
Mis. Ocean Air Ltd. and M/s Scot Travel Ltd., Hong Kong, the
H Adjudicating Authority held that appellant Telestar Pvt. Ltd. had
TELESTAR TRAVELS PVT. LTD. & ORS. v. SPECIAL 1023
DIRECTOR OF ENFORCEMENT [T.S. THAKUR, J.]
issued directions that the amount payable be deposited to the A
credit of Mis Bountiful Ltd. The Adjudicating Authority observed:
"... I also find from the records, certain invoices of
Bountiful ltd. Drawn on Mis. Ocean Air Ltd. and on Mis.
Scot Travel Ltd, Hong Kong, which were produced by
Miss Anita Chotrani Travel Co-ordinator of Mis. Denk/au B
Marine Services, Mumbai, which contain directions of Ml
s Te/star to credit the amount of the bill to the Ale
No.10975 of Mis Bountiful Ltd, at Geneva. A scrutiny of
the bills produced by the said Miss Anita Chotrani, given
by Te/star, it was found that several air tickets of Air India C
booked by Te/star were also billed in these Bountiful
invoices and payment of these Air India tickets have
been directed to the Geneva Account. Moreover the bills
do not bear any signatures nor the identity of the person
allegedly managing the billing on behalf of Bountiful Ltd." D
14. The Adjudicating Authority has also noticed and relied
upon incriminating circumstances like instructions issued by
appellant Telestar to Bountiful to remit an amount of
Rs.4,74,033/- to M/s Aarnav Shipping Company towards E
repairs of MV Rizcun Trader, a ship owned by one of their
principals M/s United Ship Management, Hongkong. Similarly
a payment of US$ 12500/- made from Bountiful Account to
. Mustaq Ali Najumden is also evidenced and was made on the
instructions of appellant-Shri Rajesh Desai, which the latter
F
explained to be kickbacks paid to overseas shipping company
for giving ticketing business to Telestar.
15. 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 G
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
stcitements made by the appellants were un-corroborated by
any independent evidence documentary or otherwise. In the H
1024 SUPREME COURT REPORTS [2013] 1 S.C.R.
A circumstances, therefore, we see 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.
16. That brings us to the third limb of attack mounted by
B the appellants against the impugned orders. It was argued by
Mr. Diwan 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
C and Mr. Deepak Raut, and a communication received from the
Indian High Commission in London. These statements and the
report were, according to Mr. Diwan, inadmissible in evidence
as the appellant's request for an opportunity to cross examine
these witness had been unfairly declined, thereby violating the
D 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. Reliance in support was
E placed by Mr. Diwan upon the decisions of this Court in New
India Assurance Company Ltd. v. Nusli Neville Wadia and
Anr. (2008) 3 SCC 279, S. C. Girotra v. United 1995 Supp. (3)
SCC 212, Lakshman Exports Ltd. v. Collector of Central
Excise (2005) 10 SCC 634, and Mis Barei/ly Electricity Supply
F Co. Ltd. v. The Workmen and Ors. (1971) 2 SCC 617.
17. Mr. Malhotra, on the other hand, argued that the right
of cross-examination was available to a party under the
Evidence Act which had no application to adjudication
proceedings under FERA. He relied upon the provisions of
G Section 51 of the Act and Adjudication Rules framed thereunder
in this regard. He also placed reliance upon a decision of this
Court in Surjeet Singh Chhabra v. Union of India and Ors.
(1997) 1 sec 508 to argue that cross-examination was,
unnecessary in certain circumstances such as the one at hand
H
TELESTAR TRAVELS PVT. LTD. & ORS. v. SPECIAL 1025
DIRECTOR OF ENFORCEMENT [T.S. THAKUR, J.]
where all material facts were admitted by appellants in their A
statements before the concerned authority.
18. There is, in our opinion, no merit even in that
submission of the learned counsel. It is evident from Rule 3 of
the Adjudication Rules framed under Section 79 of the FERA
that the rules of procedure do not apply to adjudicating 8
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 C
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 D
opportunity implicit in any adjudicatory process, affecting the
right of the citizen. The question, however, is whether failure to
permit the party to cross examine has resulted in any prejudice
so as to call for reversal of the orders and a de novo enquiry
into the matter. The answer to that question would depend upon
the facts and circumstances of each case. For instance, a
similar plea raised in Surjeet Singh Chhabra v. Union of India
and Ors. (1997) 1 sec 508 before this Court did not cut much
ice, as this Court felt that cross examination of the witness would
make no material difference in the facts and circumstances of
that case. The Court observed:
"3. It is true that the petitioner had confessed that he
purchased the gold and had brought it. He admitted that
he purchased the gold and converted it as a kara. In this
situation, bringing the gold without permission of the
authority is in contravention of the Customs Duty Act and
also FERA. When the petitioner seeks for cross-
examination of the witnesses who have said that the
recovery was made from the petitioner, necessarily an
opportunity requires to be given for the cross-
1026 SUPREME COURT REPORTS [2013] 1 S.C.R.
A examination of the witnesses as regards the place at
which recovery was made. Since the dispute concerns the
confiscation of the jewellery, whether at conveyor belt or
at the green channel, perhaps the witnesses were
required to be called. But in view of confession made by
B him, it binds him and, therefore, in the facts and
circumstances of this case the failure to give him the
opportunity to cross-examine the witnesses is not
violative of principle of natural justice. It is contended that
the petitioner had retracted within six days from the
c confession. Therefore, he is entitled to cross-examine the
panch witnesses before the authority takes a decision on
proof of the offence. We find no force in this contention.
The customs officials are not police officers. The
confession, though retracted, is an admission and binds
the petitioner. So there is no need to call panch witnesses
D
for examination and cross-examination by the petitioner."
19. We may also refer to the decision of this Court in M/s
Kanungo & Company v. Collector of Customs and Ors.
(1973) 2 sec 438. The appellant in that case was carrying on
E business as a dealer, importer and repairer of watches in
Calcutta. In the course of a search conducted by Customs
Authorities on the appellant's premises, 280 wrist watches of
foreign make were confiscated. When asked to show cause
against the seizure of these wrist watches, the appellants
F produced vouchers to prove that the watches had been lawfully
purchased by them between 1956 and 1957. However, upon
certain enquiries, the Customs Authorities found the vouchers
produced to be false and fictitious. The results of these
enquiries were made known to the appellant, after which they
G were given a personal hearing before the adjudicating officer,
the Additional Collector of Customs. Citing that the appellant
made no attempt in the personal hearing to substantiate their
claim of lawful importation, the Additional Collector passed an
order confiscating the watches under Section 167(8), Sea
H Customs Act, read with Section 3(2) of the Imports and Exports
TELESTAR TRAVELS PVT. LTD. & ORS. v. SPECIAL 1027
DIRECTOR OF ENFORCEMENT [T.S. THAKUR, J.]
(Control) Act, 1947. The writ petition filed by the appellant to A
set aside the said order was allowed by a Single Judge of the
High Court on the ground that the burden of proof on the
Customs Authorities had not been discharged by them. The
Division Bench of the High Court reversed this order on appeal
stating that the burden of proving lawful importation had shifted B
upon the firm after the Customs Authorities had informed them
of the results of their enquiries. In appeal before this Court, one
of the four arguments advanced on behalf of the appellant was
that the adjudicating officer had breached the principles of
natural justice by denying them the opportunity to cross- c
examine the persons from whom enquiries were made by the
Customs Authorities. The Supreme Court rejected this
argument stating as follows:
"12. We may first deal with the question of breach of
natural justice. On the material on record, in our opinion, D
there has been no such breach. In the show-cause notice
issued on August 21, 1961, all the material on which the
Customs Authorities have relied was set out and it was
then for the appellant to give a suitable explanation. The
complaint of the appellant now is that all the persons from E
whom enquiries were alleged to have been made by the
authorities should have been produced to enable it to
cross-examine them. In our-opinion, the principles of
natural justice do not require that in matters like this the
persons who have given information should be examined F
in the presence of the appellant or should be allowed to
be cross-examined by them on the statements made
before the Customs Authorities. Accordingly we hold that
there is no force in the third contention of the appellant."
20. Coming to the case at hand, the Adjudicating Authority G
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 H
1028 SUPREME COURT REPORTS [2013] 1 S.C.R.
A 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
B 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
c the appellants and the opportunity given to them to rebut and
explain the same was a substantial compliance with the
principles of natural justice. That being so, there was and could
be no prejudice to the appellants nor was any demonstrated
by the appellants before us or before the Courts below. The
third limb of the case of the appellants also in that view fails
0
and is rejected.
21. Mr. Diwan lastly argued that the penalty imposed was
disproportionate to the nature of the violation and that this Co.urt
could at least, interfere to that extent. We do not see any reason
E much less a compelling one to interfere with the quantum of
penalty imposed upon the appellants by the Tribunal. The
Adjudicating Authority had, as noticed earlier, imposed a
higher penalty. The Tribunal has already given relief by reducing
the same by 50%. Keeping in view the nature of the violations
F and the means adopted by the respondent to do that, we see
no room for any further leniency.
22. 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
G Lawyers' Welfare Fund.
R.P. Appeals dismissed.
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