2018 (3) TMI 1250 - AT - FEMA

Maintainability of Appeal under Section 19 of FEMA Act - Held that - Provisos to Section 19(1) of the Act, an appeal can be maintained/heard only when the issue of pre-deposit of penalty has been examined/addressed. In the instant case, the conditions for filing Appeal has not been satisfied as no penalty has been imposed in the absence of an order . As the provisions laid down in Section 19(1) of the Act have not been fulfilled, the appeal filed by the appellant is pre-mature and hence non- maintainable. As stated earlier, the instant appeal has been filed by the appellant against record of personal hearing held on 15.11.2017 in the office of the Special Director of Enforcement, Mumbai. As would be observed from the above, appeals have been filed at various stages during the course of Adjudication proceedings praying this Tribunal to pass certain directions to the Adjudicating Authority. Even the instant appeal has not been filed against an order of the Adjudicating Authority. The provisions of Section 19 of FEMA entitles the appellant to prefer an appeal only once the order is passed and not against hearings conducted by Adjudicating Authority in adjudication proceedings. The contention of the appellant that Section 19(6) empowers the Tribunal to suo moto examine the legality, propriety or correctness of any order made by the Adjudicating Authority is not restricted and limited to the final order and that the words any order in Section 19(6) and an order in Section 19(1) has to be given the same meaning is misconceived and misleading. This could not have been the intent of the legislature as every notice issued by Adjudicating Authority or hearing/enquiry conducted by Adjudicating Authority in the process of adjudication so as to enable him to pass an order could become a subject matter of appeal. In the instant case, the conditions for filing Appeal has not been satisfied as no penalty has been imposed in the absence of an order . As the provisions laid down in Section 19(1) of the Act have not been fulfilled, the appeal filed by the appellant is pre-mature and hence non- maintainable. It would not be prudent for this Tribunal to entertain the appeal against the record of personal hearing in the office of Adjudicating Authority during the course of Adjudication proceedings. Needles to reiterate, it would also not be prudent for this Tribunal to advice/direct/instruct the Adjudicating Authority to follow a specific or particular course of action in adjudication proceedings as the same would amount to interference in the functioning of the Adjudicating Authority.

Summary

Issues Involved:
1. Maintainability of the appeal under Section 19 of the Foreign Exchange Management Act, 1999.
2. Right to cross-examine witnesses including Mr. Mitil Chokshi, Mrs. V. Kalyani, and Mr. D.K. Sinha.
3. Procedural propriety during adjudication proceedings.

Detailed Analysis:

1. Maintainability of the Appeal under Section 19 of FEMA:

The appellant filed appeals under Section 19 of the Foreign Exchange Management Act, 1999, against various procedural orders during adjudication proceedings. The Tribunal examined the provisions of Section 19, which allows appeals against orders made by the Adjudicating Authority. The Tribunal noted that the appeals were filed against records of personal hearings and not final orders. It emphasized that appeals under Section 19 are maintainable only against final orders imposing penalties, not against procedural steps during adjudication. The Tribunal cited the provisos to Section 19(1) which require the deposit of penalties to maintain an appeal, a condition not met in this case as no penalties were imposed. The Tribunal referred to the Delhi High Court's decision in Arun Kumar Mishra vs. Union of India, which discouraged challenging preliminary issues to delay final adjudication. Consequently, the Tribunal found the appeals premature and non-maintainable.

2. Right to Cross-Examine Witnesses:

The appellant sought the right to cross-examine Mr. Mitil Chokshi, Mrs. V. Kalyani, and Mr. D.K. Sinha. The Tribunal noted that the right to cross-examine is integral to natural justice in adjudication proceedings. The appellant argued that Mr. Chokshi's cross-examination was incomplete and sought further questioning based on new documents provided at the end of the initial cross-examination. The Tribunal found that the issues raised for further cross-examination had already been addressed and concluded in the initial session. Regarding Mrs. V. Kalyani and Mr. D.K. Sinha, the appellant argued their cross-examination was necessary due to their roles in the investigation and complaint. The Tribunal noted that the Adjudicating Authority had already rejected these requests, deeming them delaying tactics. The Tribunal upheld the Adjudicating Authority's decision, finding no merit in further cross-examination requests.

3. Procedural Propriety During Adjudication Proceedings:

The Tribunal examined whether the Adjudicating Authority followed proper procedures during adjudication. The appellant argued that the Authority's actions violated principles of natural justice. The Tribunal found that the Authority had conducted hearings and considered applications as part of the adjudication process, reserving final orders. It emphasized that procedural steps during adjudication are not appealable under Section 19 until a final order is passed. The Tribunal referenced the Supreme Court's decision in The Special Director & Anr. Vs. Mohd. Ghulam Ghouse & Anr., which discouraged intervening in ongoing investigations or adjudications. The Tribunal concluded that it would not interfere with the Adjudicating Authority's procedural decisions and dismissed the appeals as non-maintainable.

Conclusion:

The Tribunal dismissed the appeals as premature and non-maintainable, emphasizing that appeals under Section 19 of FEMA are only permissible against final orders imposing penalties. It upheld the Adjudicating Authority's procedural decisions, including the conclusion of Mr. Chokshi's cross-examination and the rejection of requests to cross-examine Mrs. V. Kalyani and Mr. D.K. Sinha. The Tribunal reiterated the necessity of adhering to procedural propriety and non-interference in ongoing adjudication processes.