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TMI Blog2017 (1) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... ority? - Held that:- In the present case, the appellate authority has rightly considered only the evidence that was considered by the adjudicating authority and no new material was placed or considered. It is also not the case of the appellant that the appellate authority has based its findings on some evidence, alien to the adjudication proceedings, without granting any opportunity. In the case on hand, the appellate authority had to proceed with the examination of the evidence in accordance with Section 52, as the findings and conclusions arrived at by the adjudicating authority did not logically follow. The appellate authority has also held that the primary burden of the findings rendered by the adjudicating authority would appear to be to deal with the points taken in defence and not to examine the evidence so as to find out as to how the charges can be substantiated on that evidence, and that the adjudicating officer assumed the allegations in the show-cause notice as self-evident of the charges. Hence, on that score, it became necessitated for the appellate authority to deal with the evidence for corroborating the same with the points taken in defence. It is also evident from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Bank of Ireland. There is also a clear finding that none of these acts could be attributed to the company and that there is no evidence that these were done in the course of company's business.Even though the show-cause notice does not spell out as to how the charges can be made out on the basis of the evidence as narrated, that has been done in the inquiry during the adjudication proceedings. In view of the clear finding given by the appellate authority that the various acts done in the name of the company could not be attributed to the company and that there is no evidence that these were done in the course of company's business, it is clear that the appellant is legally liable for those acts. Accordingly, the fourth and final question of law is answered against the appellant. Appeal decided in favour of revenue - C.M.A.No.914 of 2000 - - - Dated:- 6-1-2017 - Sanjay Kishan Kaul, CJ And R. Mahadevan, JJ. For the Appellant : Mr.B.Kumar, Sr.Counsel for Mr.M.A.Jenasenan For the Respondent : Mr.G.Rajagopal, Sr.Counsel for Mr.M.Dhandapani JUDGMENT R. Mahadevan, J. This appeal has been filed challenging the order dated 05.05.2000 made in Appeal No.51/98 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 839) and 06.07.1978 (GSR 996) as amended; (e) transferred and also made payments of foreign exchange of Pound Sterling 43,23,557/- to M/s.Meer, Care and Desai, Pound Sterling 90,000/- to M/s.Westback Limited and Pound Sterling 23,685.90 to an undisclosed account in the Bank of Ireland thereby contravening the provisions of Sections 8(1) and 9(1)(a) of the FERA. (iii) The adjudicating authority found the appellant guilty on all counts in respect of the alleged transactions, but the authority reduced the amount involved in the charge, ie., USD 1,04,93,313/- to USD 62,61,313/- and imposed a penalty of ₹ 25 crores for the first and second charges, ₹ 2.5 crores each for the third and fourth charges respectively, and again a cumulative penalty of ₹ 1 crore for the last charge. The reduction of the amount involved in the charge to USD 62,61,313/- was made for the reason that the material on record does not however, categorically bring out that the other monies included in the enclosure to Barclays Bank's letter dated 04.08.1994 were also credited to Dipper Investment Account. (iv) Being aggrieved against the order imposing penalties as stated supra, the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at after initiation of the adjudication proceedings by issue of the show-cause notice as stated, the appellant was put under detention under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA Act in short). The detention order was challenged before this Court in HCP No.240 of 1996 and this Court rendered its judgment in March 1996, in which it was held that since the adjudication proceedings had already been initiated, the detaining authority had arrived at the subjective satisfaction. There is no whisper about that observation in the order passed by the adjudicating authority, but it had come to the same conclusion on that issue as arrived at by this Court. It was argued on behalf of the respondent that the Board is bound by the findings given by the High Court in respect of the legal status of the appellant by relying on this Court's judgment as a judicial precedent. Refuting the said submission, it was argued on behalf of the appellant that the said judgment of this Court does not constitute a bar or preclude the Board from reaching a conclusion on the legal status of the appellant different from the one arrived by thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituation where a person found to be in possession of any foreign exchange fails to prove that the foreign exchange came into his possession lawfully, it has to be concluded that he acquired the foreign exchange in violation of Section 8(1). Thereafter, the appellate authority observed that the company, ie. Dipper Investments Limited was not floated for the purpose of conducting the business as alleged and that it was merely a shell company with no business activity at all. (v) Finally, it was held that the appellant did acquire the foreign exchange of the draft for his own benefit as owner thereof thereby violating Section 8(1) of the FERA and that he temporarily lent the said foreign exchange to Barclays Bank by depositing the said amount with them thereby contravening Section 8(1); that he assumed the ownership of the said amount again by instructing the bank to transfer the entire amount lying to the credit of that account, in different amounts, to M/s.Meer, Care Desai, M/s.Westback Ltd and to the Bank of Ireland, thereby contravening Section 8(1). It was further held that all these acts have been committed by the appellant only in his individual capacity as owner of the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the finding of contravention of Section 9(1) in respect of the amount of Pound Sterling 44,37,242.90 was set aside. (xii) Thus the appeal was dismissed, except as regards the findings of contravention of Section 9(1)(a) and the penalties imposed therefor. The findings in respect of contraventions of Sections 8(1) and 14 in respect of the amount of USD 62,61,313/- were upheld and so the penalties imposed therefor. The finding of contravention of Section 9(1)(a) in respect of the said amount of USD 62,61,313/- and the penalty imposed therefor were set aside. The finding of contravention of Section 8(1) in respect of the total amount of Pound Sterling 44,37,242.90 was upheld, but the finding of contravention of Section 9(1)(a) in respect of the said amount was set aside. Accordingly, the penalty to the extent of ₹ 50 lakhs only for contravention of Section 8(1) in respect of the amount of Pound Sterling 44,37,242.90 was upheld, while the penalty of the remaining amount of ₹ 50 lakhs apportioned for contravention of Section 9(1)(a) was set aside. Accordingly, the order of the adjudicating authority was upheld with the modification only to the effect that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of a company he is the owner of the funds of the company such that it would amount to otherwise acquiringwithin the meaning of Section 8(1) of the Act, is tenable in law? (vi) Is not the order passed by the appellate authority is liable to be set aside solely on the ground that the judgment had been delayed by one year and two months after the arguments are over and consequently the order under appeal could not be valid in the eye of law? 5. The learned senior counsel appearing for the respondent filed objections to the questions of law re-framed by the appellant, in which it is stated that the first question of law is without any substance as the adjudicating authority has rejected the same on the ground that he never investigated the matter. With regard to the second question as to whether the appellant is an Indian Resident or not, he submitted that the appellate authority had relied upon the judgment of this Court in HCP No.240 of 1996, and correctly held that the appellant is a Resident Indian and hence the same does not require any interference. With regard to the other questions of law, the learned counsel submitted that in view of the clear findings of fact reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority has failed to note that enough and proper opportunity for hearing had not been granted by the adjudicating authority. 9. The learned senior counsel appearing for the appellant has contended that the question of bias, put forth by the appellant was not considered by the appellate authority. He further submitted that in respect of the very same subject matter of the memorandum, a criminal complaint has been launched before the Court of Economic Offences, Egmore, Chennai and the said complaint has been taken on file and numbered as C.C.No.27 of 1996. In the said complaint, the 14th witness is shown as Shri.A.P.Kala, to prove the documents received from the foreign country, and that investigations were carried out under his instructions. Thus, Shri.A.P.Kala participated in every facet of investigation and hence he is disqualified from sitting as an adjudicating authority to decide about the validity of the investigation documents gathered. In other words, it is his submission that the proceedings initiated by the authorities is purely a bias and it violates the principles of natural justice, since the person who was the investigating authority, later turned to be the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the appellant further submitted that the appellate authority is primarily concerned with the order of adjudication and if it is found to be erroneous, unreasonable and unsustainable, the only course open to the appellate court is to set aside the same and remit it for de novo enquiry. 12. The learned senior counsel for the appellant relied upon the following judgments: (a) Judgment of the Hon'ble Supreme Court in Bhagwandas Fatechand Daswani and others v. HPA International and others, reported in (2000) 2 SCC 13 and the Division Bench judgment of this Court in Jones Investment Co. Inc. v. Intellectual Property Appellate Board, reported in 2015-4-L.W.30, in support of his contention that long delay in delivery of judgment gives rise to unnecessary speculations in the minds of parties to a case, in which case, the order impugned has to be set aside. (b) Judgments of the Hon'ble Supreme Court in Shivsagar Veg. Restaurant v. Asst. Commissioner of Income-tax and another, reported in 2008 SCC OnLine Bom 1088 and in Devang Rasiklal Vora v. Union of India and others, reported in [2004(2) Mh.L.J. 208], to state that the order passed by the appellate authority suffers fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly failed to establish a single ground of bias. In this regard, the learned senior counsel for the respondent relied on the decision of the Hon'ble Supreme Court in State of Haryana v. Bhajan Lal reported in AIR 1992 SC 604 and submitted that if the allegations are bereft of truth and made maliciously, and when there are only allegations and recriminations with no evidence, the result of the investigation cannot be anticipated, to render a finding on the question of mala fides on the materials available at present. According to the learned senior counsel for the respondent, the appellant claimed not a citizen before the Division Bench of this Court in the Habeas Corpus Petition. In the election petition filed by him, he claimed as an Indian citizen. But before the Foreign Exchange Regulation authorities, he claimed as if he is a non-resident Indian. Thus, dual stand has been taken by the appellant, which is not permissible under law, according to the learned senior counsel for the respondent. 14. In respect of bias, as put forth by the appellant, the learned senior counsel for the respondent submitted that this aspect was already rejected by the adjudicating authority and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant. 17. Stating so, the learned senior counsel for the respondent prayed that this appeal has to be dismissed. 18. Heard the learned counsel on either side and perused the materials available on record carefully. 19. Even though many points were raised by the appellant challenging the impugned judgment, it is suffice to answer the questions of law framed by this Court. Accordingly, we will take up the questions of law one by one. 20. The first question of law is as to whether the appellate authority was right in relying upon the judgment made in HCP No.240/1996 to conclude that the appellant was a resident within India and whether the Appellate Tribunal ought to have decided the legal status of the appellant independently before charging him under Sections 8(1) and 9 of the FERA. In this regard, it has to be noted that the appellant was put under detention under the provisions of the COFEPOSA Act and the said detention was challenged in HCP No.240 of 1996 before this Court, by his wife. In the judgment rendered in the Habeas Corpus Petition, one of the subjective satisfaction arrived at by the detaining authority was that adjudication proceedings on the charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of FERA, which reads as under: (4) The Appellate Board may, for the purpose of examining the legality, propriety or correctness of any order made by the adjudicating officer under Sec.50 read with Sec.51 in relation to any proceeding, on its own motion or otherwise, call for the records of such proceedings and make such order in the case as it thinks fit. 22. Thus, the appellate authority has powers under Section 52(4) to suo motu modify the order passed by the adjudicating authority under Sections 50 and 51. The appellate authority, viz. the Board is vested with the authority to pass any order that could be passed by the adjudicating authority. As per Section 52(3), the appellate authority can, after making such further inquiry as it deems fit, confirm, modify or set aside the order appealed against. The adjudicating authority as well as the appellate authority have also been granted powers under Section 53 to exercise any of the powers of the civil Court under the Civil Procedure Code to call for records and documents, summoning of witnesses, collect evidence on affidavits, etc. Therefore, it is well within the domain of the appellate authority to consider the evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on all the issues, perused and discussed the evidence meticulously and modified the order by which the appellant has been exonerated of the charges under Section 9(1). One of the clinching finding recorded by the appellate authority is about the so-called meeting between the Directors of M/s.Dipper Investments Limited on 25.06.1994 in Singapore, on which date, the appellant was in India. The modus operandi and the plea of ownership of Mr.Desai over the funds has been negated by the appellate authority by giving its findings in detail at Page Nos.66 to 74 (Paragraph Nos.81 to 89), of the order, based on facts culled out from the documentary evidences. In the backdrop of the said observations, this Court deems it fit to answer the second question of law against the appellant. 23. The third question of law is as to whether the order of the adjudicating authority is vitiated on account of bias, violations of principles of natural justice and fair play as he was a part of the investigating team and a witness in the criminal case initiated by the Department. There is no dispute about the legal point that a witness cannot be the adjudicator and the enquiry must be held by an unbiase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under every circumstances. The doctrine of lifting the corporate veil is not alien to the process of administration of law and dispensation of justice. It is a principle borne out of necessity not only to safeguard the shareholders to the extent of their liability but also to identify the miscreants shielding their illegal acts under the name of a company. In Union of India v. ABN Amro Bank, reported in (2013) 16 SCC 490, the Apex Court has held as under : 43. We are of the view that in a given situation the authorities functioning under FERA find that there are attempts to overreach the provision of Section 29(1)(a), the authority can always lift the veil and examine whether the parties have entered into any fraudulent, sham, circuitous device so as to overcome statutory provisions like Section 29(1)(a). It is trite law that any approval / permission obtained by non-disclosure of all necessary information or making a false representation tantamount to approval / permission obtained by practising fraud and hence a nullity. Reference may be made to the judgment of this Court in Union of India v. Ramesh Gandhi [(2012) 1 SCC 476)]. 44. Even in Escorts case [(1986) 1 SCC 264 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were done in the course of company's business. It has also been further held that all acts of a corporate entity are to be done in the name of that entity, but does not necessarily follow that whatever has been done in the name of a corporate entity must be held to be the acts of that entity. After a threadbare analysis of the evidence on record, the appellate authority has held that there is no evidence of any concrete proposal, much less of commencement of any business abroad by the company. With regard to the plea that the funds in the name of the company belong to the company only and the Directors of the company are not the owners of such funds and that the order challenged before the appellate authority has been made on the basic misconception in failing to distinguish between the company as a legal entity and the character and capacity of the Directors of the company, it has been held by the appellate authority that what the appellant has assumed as Department's case in the show-cause notice is only a narration of the transactions, as appearing on the face of the documentary evidence, and the view that the Department has taken on that evidence is reflected in the cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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