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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 ..... /(SCN-VIII) dated 29.01.1996. In addition to the imposition of a penalty of Rs. 31 crores, the appellant was directed to repatriate to India and offer for sale to an authorised dealer in India, the foreign exchange amounting to USD 62,61,313/- held by him outside India together with interest and any other income that might have accrued thereon. (ii) The said show-cause notice was issued on the allegations that a person resident in India other than an authorised dealer in foreign exchange, without the general or special permission of the Reserve Bank of India - (a) otherwise acquired foreign exchange totalling to USD 1,04,93,313/- from persons other than authorised dealer in foreign exchange and thereby contravening the provisions of Section 8(1) of the FERA; (b) deposited the said foreign exchange amount of USD.1,04,93,313/- in the current account No.3001-8937 of M/s.Dipper Investments Ltd., a company incorporated in the British Virgin Islands, with Barclays Bank, Sutton, United Kingdom and thereby lent the said foreign exchange to a person not being authorised dealer, thus violating Section 8(1) of the FERA. (c) made payments totalling to USD 1,04,93,313/- to the credit of Dip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court. This suggestion was made in view of the contentious stand taken by the parties as to the applicability, relevancy and effect of this Court's judgment on the issue whether the appellant, at the relevant point of time, was a person resident in India, which was also a crucial issue before the adjudicating authority. The appellate authority was of the view that the necessity of dealing with that issue has arisen in view of the fact that the findings of the judgment on the said issue have not been referred to in the order passed by the adjudicating authority, though the High Court rendered its judgment much earlier. But no action was taken by the parties as to the suggestions put forth by the appellate authority. (ii) Before the appellate authority, it was argued on behalf of the appellant herein that all the charges framed against the appellant are based on the premise that the appellant was, during the relevant point of time, a person resident in India. Therefore, it was argued that if he is not found to be a person resident in India during the relevant period, he will have to be exonerated of all the charges and consequently, the order passed by the adjudicating auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot proceed to redetermine that issue. Further, the appellate authority held that the only question that remains to be examined is whether the High Court has expressed its opinion on the question of legal status of the appellant or not. It was finally observed by the Board that in the judgment made by this Court in the HCP, it was concluded by this Court that the appellant was not a non-resident Indian at the relevant point of time. Stating that the Board is bound to go by the opinion of this Court in the HCP, the appellate authority upheld the findings of the adjudicating authority in that respect. With regard to other acts and omissions attributed to the appellant, the appellate authority has examined the provisions of sections 8(1) and 9(1)(a) of the FERA and came to the conclusion that if the allegations emanate from the fact that the appellant had received 21 drafts totalling to USD 1,04,93,313/-, then the reason recorded by the adjudicating authority for reducing the said amount would not be tenable, since the adjudicating authority has not separately considered the evidence and has made no attempt to separately arrive at its findings in respect of every charge. With regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntravention of Section 8(1) on the allegation that he transferred the said foreign exchange, it was held that since there is no factual allegation in the show-cause notice in that regard to show any independent transaction, the said charge has not been made out. (viii) Further, having considered the legal position of Section 9(1)(a), it was held that the charge of contravention of Section 9(1) on the allegation of making payment of the said foreign exchange to the credit of Dipper Investments Limited, is totally misconceived and hence the findings of contravention of Section 9(1) on the part of the appellant were set aside. (ix) It was also held that since the appellant did acquire the foreign exchange of USD 62,61,313/- in violation of Section 8(1), the contravention of Section 14 on the part of the appellant stands proved as it was not disputed that the said foreign exchange was not brought into India as required by the notification referred to in the show-cause notice. (x) As regards the charge of contravention of Section 8(1) on the allegation that the appellant transferred a total amount of Pound Sterling 44,37,242.90, in view of the evidence of the two letters written by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India pointed out that no question of law has been framed in the appeal, even though the appeal is maintainable only on a question of law, for which the learned senior counsel appearing for the appellant submitted that he is placing the proposed questions of law. But, on a perusal of the same, this Court was of the view that they were not really the questions of law. Thereafter, the learned senior counsel for the appellant suggested the questions of law as under: (i) Has not the Appellate Board committed serious error of law in stating that even if the adjudicating authority had investigated the large portion of the case and is shown as a prosecution witness in the criminal complaint filed by the department on the same set of facts, still its adjudication order would not stand vitiated on account of bias? (ii) Has not the Appellate Tribunal abdicated its primary duty by not deciding the crucial question of whether at the relevant time, the appellant was a non-resident Indian? (iii) If the appellant was a non-resident Indian, then the charge under Section 8(1) of FERA would become unsustainable? (iv) Has not the Appellate Board committed error in law that after stating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 52 and reframe the charges sitting in appeal and whether new evidence can be accepted by the Tribunal? (c) 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? (d) Whether Section 3(1) of the Companies Act, which confers a separate legal entity to the company, absolutely dissolves the liability of the Director of a company under every circumstances? 7. Mr.B.Kumar, learned senior counsel appearing for the appellant submitted that the order passed by the appellate authority is against law and materially irregular and the same has resulted in serious miscarriage of justice. He submitted that 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 were over and hence the order under appeal is not valid in the eye of law. 8. The learned senior counsel appearing for the appellant further submitted that the appellate authority has not decided the main question, ie., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is also his submission that the appellate authority had failed to see that the judgment given in the habeas corpus proceedings could never ever be relied upon in an adjudication proceedings which requires decision on objective standards and on evaluation of the evidence before it. Thus, according to the learned senior counsel appearing for the appellant, the order passed in a habeas corpus proceedings will not form part of the case on hand, and that with regard to preventive detention, no adjudication had happened so far. In other words, it is his contention that for a case relating to violation of Foreign Exchange Regulation Act, placing reliance upon a preventive detention order will not be sufficient and proper. With regard to the finding that M/s.Dipper Investments Limited is in no way connected to the appellant and the dispute raised with regard to the registration of the company and the further allegation that for claiming non-resident Indian, no application was filed, the learned senior counsel for the appellant submitted that it is a jurisdictional fact and it is in no way connected to the offence framed under the Foreign Exchange Regulation Act. The learned senior couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 adjudicating the issue on hand. (d) Judgment of the Hon'ble Supreme Court in State of U.P. vs. Mohammad Nooh, reported in AIR 1958 SC 86, in support of his contention that two roles could not obviously be played by one and the same person. In the present case, the 14th witness before the investigating authority, later turned to be the adjudicating authority. Therefore, according to the learned senior counsel, it violates the principle of unconnected persons cannot be permitted to participate in the adjudication proceedings. (e) Judgment of the Hon'ble Supreme Court in Union of India and others v. Sanjay Jethi and another, reported in (2013) 16 SCC 116, in which it has been held that rational approach has to be adopted by the Court keeping in view the basic concept of legitimacy of interdiction in such matters, since challenge of bias, when sustained, makes the whole proceeding or order in question a nullity, same being coram non judice. 13. The learned senior counsel appearing f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y interference. 15. In respect of the issue as to whether the appellant is an Indian citizen or not, it is submitted by the learned senior counsel for the respondent that the appellate authority had correctly relied upon the judgment of the Division Bench of this Court in HCP No.240 of 1996, wherein it was held that the appellant is a resident Indian. With regard to the so-called transactions referred to in the show-cause notice, and the contention that the said transactions were done only as a Director of M/s.Dipper Investments Limited and not as individual capacity, it is submitted that only after examining the entire evidence on record, the adjudicating authority came to the conclusion that the monies belonged to the appellant and therefore, the argument of the appellant in this respect, is without any substance. 16. The learned senior counsel appearing for the respondent further submitted that the appellate authority being the first forum of appeal, has suo motu powers under Section 52(4) of the FERA and the appellate authority-Board may consider the charges that could be made and sustain if any on the basis of evidence on record and give its own finding. This submission has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also seen from the records that 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, the appellant has taken different stands, which are not permissible under law. In such view of the matter, this Court deems it fit only to hold that the order passed by the appellate authority in this respect does not require any interference. Accordingly the first question of law is answered against the appellant. 21. The second question of law is as to whether the appellate authority, having found that on evidence, the charges held to be not proved, can exercise the suo motu powers under Section 52 and re-frame the charges sitting in appeal and whether new evidence can be accepted by the appellate authority. It is no doubt true that the appellate authority has observed that the findings and conclusions arrived at by the adjudicating authority do not logically follow, on several crucial matters, and that no reasons have been stated as to how those conclusions woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 Page-96 of the order of the appellate authority that the learned counsel for the appellant also rightly admitted that the Board has the authority to consider the matter afresh based on the evidence already collected. Therefore, the appellant cannot now question the authority, which even otherwise, is well protected under Section 52(3) and (4). The reason for such appreciation of the evidence was necessitated because of the failure of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement or participated in any searches. He only monitored the investigation and exchanged correspondences, as is evident from the records. It also cannot be said that the adjudicating authority had some vested interest against the interest of the appellant so as to divert himself from the evidence to decide against the appellant. There is nothing on record to show that the adjudicating officer was prejudiced on the subject matter, which reflected in the adjudication process or in the decision. Upon perusal of the records, we find that the appellant was given a fair opportunity. As found by the appellate authority, the guilt of the appellant was culled out only from the documentary evidence, and the entire statements of the other witnesses were discarded. Thus the plea of bias put forth by the learned senior counsel appearing for the appellant, will not hold any water. Though the principles enunciated in the other judgments relied on by the learned senior counsel for the appellant, in respect of bias, are not in dispute, the same will not apply to the case on hand. Further, the plea of bias looses its significance in the present case, since the appellate authority had independently e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia [(2012) 6 SCC 613)], this Court has taken the view that: 277. ... Once the transaction is shown to be fraudulent, sham, circuitous or a device designed to defeat the interests of the shareholders, investors, parties to the contract and also for tax evasion, the court can always lift the corporate veil and examine the substance of the transaction. This Court further held: "280. Lifting the corporate veil doctrine can, therefore, be applied in tax matters even in the absence of any statutory authorisation to that effect. FERA (Amendment) Act 29 of 1993 has no effect on the principle of lifting the corporate veil and the question as to whether it was established so as to circumvent the provision of Section 29(1)(a) can always be examined." Therefore, the protection given to a company is not an absolute bar to proceed against the directors and it is to be decided on the facts of the each case put to test. In this regard, the appellate authority, after analysing the matter in detail, and also considering the evidence placed on record, came to the conclusion that the name of the company Dipper Investments Limited was used for obtaining the bank drafts, opening an account in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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