2010 (10) TMI 156 - SC - FEMA

Entitlement to demand to furnish all the documents in possession of the adjudicating authority including those documents upon which no reliance has been placed to issue a notice - principles of natural justice and concept of fairness - reasonable opportunity of being heard for the purpose of imposing any penalty - Duty of adequate disclosure - Contravention of relevant provisions of the Foreign Exchange Management Act (FEMA) and the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules 2000. HELD THAT - On a fair reading of the statute and the Rules suggests that there is no duty of disclosure of all the documents in possession of the adjudicating authority before forming an opinion that an inquiry is required to be held into the alleged contraventions by a noticee. Even the principles of natural justice and concept of fairness do not require the statute and the Rules to be so read. Any other interpretation may result in defeat of the very object of the Act. Concept of fairness is not a one way street. The principles of natural justice are not intended to operate as roadblocks to obstruct statutory inquiries. Duty of adequate disclosure is only an additional procedural safeguard in order to ensure the attainment of the fairness and it has its own limitations. The extent of its applicability depends upon the statutory framework. A fair reading of rule 4 which is a complete compendium for holding of inquiry suggests that all the evidence and documents which the adjudicating authority may consider relevant for the purpose of inquiry may have to be furnished to a person facing the inquiry on the allegations of contravention of the provisions of the Act etc. alleged to have been committed by him. In addition the authority may require attendance of any person acquainted with the facts and circumstances of the case to give evidence and to produce any documents which in its opinion may be useful for or relevant to the subject-matter of the inquiry. Only upon consideration of the entire evidence produced if the adjudicating authority is satisfied that the person has committed the contravention he may by order in writing accordingly impose such penalty as he thinks fit in accordance with the provisions of the Act which of course is not final as it is subject to appeal. The appellants insisted for supply of all documents in the possession of the authority and such demand is based on vague indefinite and irrelevant grounds. The appellants are not sure as to whether they are asking for the copies of the documents in possession of the adjudicating authority or in possession of the authorized officer who lodged the complaint. The only object in making such demand is obviously to obstruct the proceedings and the appellants to some extent have been able to achieve their object as is evident from the fact that the inquiry initiated as early as in the year 2006 still did not even commence. We are constrained to take note of the fact that it is on account of continuous unreasonable requests on the part of the appellants the adjudicating authority could not deal with the complaint expeditiously which is required to be disposed of within one year from the date of receipt of the complaint. We accordingly direct the adjudicating authority to deal with the complaint as expeditiously as possible and every endeavour shall be made to dispose of the complaint finally at the earliest. No unreasonable request for adjournment shall be entertained by the adjudicating authority. However we make it clear that the authority shall make inquiry into the allegations made in the complaint strictly in accordance with the law and uninfluenced by the observations if any made in this order. We have not expressed any opinion whatsoever on the merits of the case. The appellants are entitled to all the defence that may be available to them in law. Thus the appeals are dismissed with costs.

Summary

Issues Involved:
1. Entitlement of the noticee to demand all documents in possession of the adjudicating authority.
2. Principles of natural justice and fairness in the adjudication process.
3. Interpretation of relevant provisions of the Foreign Exchange Management Act (FEMA) and the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000.
4. Duty of adequate disclosure by the adjudicating authority.
5. Procedural aspects and the role of the adjudicating authority.

Issue-wise Detailed Analysis:

1. Entitlement of the noticee to demand all documents in possession of the adjudicating authority:
The central question was whether a noticee served with a show-cause notice under rule 4(1) of the Rules is entitled to demand all documents in possession of the adjudicating authority, including those not relied upon to issue the notice. The appellants argued that all documents should be provided to enable a fair defense. The adjudicating authority had supplied documents relied upon but refused to provide others, leading to litigation.

2. Principles of natural justice and fairness in the adjudication process:
The appellants contended that natural justice and fairness required the supply of all documents. The court noted that the principles of natural justice depend on the circumstances, the nature of the inquiry, and the statutory framework. The right to a fair hearing includes knowing the evidence against oneself, but this does not necessarily involve the supply of all documents. The court held that the adjudicating authority must provide documents relied upon to issue the show-cause notice, ensuring a fair opportunity to respond.

3. Interpretation of relevant provisions of FEMA and the Rules:
The court examined the statutory framework of FEMA and the Rules. The Rules mandate a structured procedure for adjudication, including issuing a show-cause notice and holding an inquiry if necessary. The adjudicating authority must follow the prescribed procedure and cannot deviate from it. The court emphasized that the Rules do not require the supply of all documents in possession of the adjudicating authority at the preliminary stage.

4. Duty of adequate disclosure by the adjudicating authority:
The court discussed the duty of adequate disclosure, concluding that it does not extend to providing all documents in possession of the adjudicating authority. The principles of natural justice require the supply of documents relied upon to issue the show-cause notice but not all documents. The court held that the adjudicating authority's refusal to provide documents not relied upon was justified and did not violate natural justice.

5. Procedural aspects and the role of the adjudicating authority:
The court noted that the adjudicating authority must conduct proceedings in accordance with the statute and the Rules. The authority is required to provide a reasonable opportunity to be heard and to supply relevant documents during the inquiry stage. The court directed the adjudicating authority to expedite the inquiry and avoid unreasonable adjournments. The court also addressed the practice of including judgments in compilations without citing them at the Bar, emphasizing that only cited judgments should be considered.

Conclusion:
The court dismissed the appeals, holding that the appellants' demand for all documents was based on vague grounds and aimed at obstructing proceedings. The adjudicating authority was directed to proceed with the inquiry expeditiously and in accordance with the law, ensuring a fair hearing for the appellants. The court clarified that it had not expressed any opinion on the merits of the case, and the appellants retained all available defenses. The appeals were dismissed with costs.