# 13 (ADDL.) S.C.R. 99 KANWAR NATWAR SINGH v. DIRECTORATE OF ENFORCEMENT & ANR - **Citation:** [2010] 13 S.C.R. 99 - **Court:** Supreme Court of India - **Decided:** 2010-10-05 - **Case number:** Civil Appeal No. 8601 of 2010 - **Bench:** B. Sudershan Reddy!, Surinder Singh Nijjar - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/13-addl-s-c-r-99-kanwar-natwar-singh-v-directorate-of-enforcement-anr-26436 - **Pages:** 35 ## Headnote A B Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - r.4(1) - Show cause C notice by adjudicating authority - For initiating proceedings under Foreign Exchange Management Act - Noticee demanding all the documents in the possession of adjudicating authority - Only the relevant documents furnished and not all - Entitlement of the noticee to demand D all the documents - Held: The provisions of Foreign Exchange Management Act, the Rules or even the principles of natural justice do not require supply of documents upon which no reliance has been placed by the authority to set the law into motion - The concept of fairness may require the E adjudicating authority to furnish copies of only those documents upon which reliance has been placed to issue show cause notice - No court can compel the authority to deviate from the procedure laid down in a statute - On facts, demand of the noticee for supply of all the documents is based on vague, indefinite and irrelevant grounds - Foreign Exchange Management Act, 1999 - s. 16 - Principles of natural justice and concept of fairness - Doctrine of duty of adequate disclosure. F Foreign Exchange Management Act, 1999: Proceedings under the Act - Nature of - Held: The proceedings before the adjudicating authority shall be 99 G H 100 SUPREME COURT REPORTS [2010) 13 (ADDL.) S.C.R A deemed to be judicial proceedings within the meaning of s. 193 and 228 /PC - Penal code, 1860 - ss. 193 and 228. Powers of Adjudicating Authority under the Act - Held: While holding inquiry into allegations of contravention, every 8 adjudicating authority shall have powers of civil court for the purpose of ss. 345 and 346 Cr.P.C. - Code of Criminal Procedure, 1973 - ss.345 and 346. Principles of Natural Justice - Applicability of - Discussed - Principles of natural justice do not supplant the C law of the land, but supplement it. Precedent - Observations in Judicial pronouncement - Precedent value of - Held: Observations not to be read as Euclid's theorems nor as provisions of the statute, but to be 0 read in the context it is made - A line or a word in a judgment not to be read in isolation or as if interpreting statutory provisions - Constitution of India, 1950 - Arlicle 141. Practice and Procedure - Practice in Supreme Courl of including list of judicial authorities in compilation, without the E leave of the Court - Held: Not approved. The question for consideration in the instant appeal was whether a noticee, served with show cause notice ulr. 4(1) of the Foreign Exchange Management F (Adjudication Proceedings and Appeal) Rules, 2000, is entitled to demand to furnish all the documents in possession of the Adjudicating Authority including those documents on which no reliance has been placed for issuing the show cause notice. G H Dismissing the appeals, the Court HELD: 1.1 A reading of the relevant provisions of the Foreign Exchange Management Act, 1999 and Foreign Exchange Management (Adjudication Proceedings and KANWAR NATWAR SINGH v. DIRECTORATE OF 101 ENFORCEMENT Appeal) Rules, 2000 makes it abundantly clear that the A manner, method and procedure of adjudication are completely structured by the statute and the Rules. The Authority is bound to follow the prescribed procedure under the statute and the Rules and is not free and entitled to devise its own procedure for making inquiry B while adjudicating u/s.13 of the Act since it is under legislative mandate to undertake adjudication and hold inquiry in the prescribed manner after giving the person alleged to have committed contravention against whom a complaint has been made, a reasonable opportunity:of C being heard for the purpose of imposing any penalty.. The discretion of the Authority is so well structured by the statute and the Rules. [Para 17) [119-B-C] 1.2 The Rules do not provide and empower the Adjudicating Authority to straightaway make any inquiry D into allegations of contravention against any person against whom a complaint ## Text _Characters 0–39,754 of 68,215. This is a partial read: ask again with offset=39754 for what follows._ [2010] 13 (ADDL.) S.C.R. 99 KANWAR NATWAR SINGH v. DIRECTORATE OF ENFORCEMENT & ANR (Civil Appeal No. 8601 of 2010) OCTOBER 5, 2010 [B. SUDERSHAN REDDY! AND SURINDER SINGH NIJJAR, JJ.] A B Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - r.4(1) - Show cause C notice by adjudicating authority - For initiating proceedings under Foreign Exchange Management Act - Noticee demanding all the documents in the possession of adjudicating authority - Only the relevant documents furnished and not all - Entitlement of the noticee to demand D all the documents - Held: The provisions of Foreign Exchange Management Act, the Rules or even the principles of natural justice do not require supply of documents upon which no reliance has been placed by the authority to set the law into motion - The concept of fairness may require the E adjudicating authority to furnish copies of only those documents upon which reliance has been placed to issue show cause notice - No court can compel the authority to deviate from the procedure laid down in a statute - On facts, demand of the noticee for supply of all the documents is based on vague, indefinite and irrelevant grounds - Foreign Exchange Management Act, 1999 - s. 16 - Principles of natural justice and concept of fairness - Doctrine of duty of adequate disclosure. F Foreign Exchange Management Act, 1999: Proceedings under the Act - Nature of - Held: The proceedings before the adjudicating authority shall be 99 G H 100 SUPREME COURT REPORTS [2010) 13 (ADDL.) S.C.R A deemed to be judicial proceedings within the meaning of s. 193 and 228 /PC - Penal code, 1860 - ss. 193 and 228. Powers of Adjudicating Authority under the Act - Held: While holding inquiry into allegations of contravention, every 8 adjudicating authority shall have powers of civil court for the purpose of ss. 345 and 346 Cr.P.C. - Code of Criminal Procedure, 1973 - ss.345 and 346. Principles of Natural Justice - Applicability of - Discussed - Principles of natural justice do not supplant the C law of the land, but supplement it. Precedent - Observations in Judicial pronouncement - Precedent value of - Held: Observations not to be read as Euclid's theorems nor as provisions of the statute, but to be 0 read in the context it is made - A line or a word in a judgment not to be read in isolation or as if interpreting statutory provisions - Constitution of India, 1950 - Arlicle 141. Practice and Procedure - Practice in Supreme Courl of including list of judicial authorities in compilation, without the E leave of the Court - Held: Not approved. The question for consideration in the instant appeal was whether a noticee, served with show cause notice ulr. 4(1) of the Foreign Exchange Management F (Adjudication Proceedings and Appeal) Rules, 2000, is entitled to demand to furnish all the documents in possession of the Adjudicating Authority including those documents on which no reliance has been placed for issuing the show cause notice. G H Dismissing the appeals, the Court HELD: 1.1 A reading of the relevant provisions of the Foreign Exchange Management Act, 1999 and Foreign Exchange Management (Adjudication Proceedings and KANWAR NATWAR SINGH v. DIRECTORATE OF 101 ENFORCEMENT Appeal) Rules, 2000 makes it abundantly clear that the A manner, method and procedure of adjudication are completely structured by the statute and the Rules. The Authority is bound to follow the prescribed procedure under the statute and the Rules and is not free and entitled to devise its own procedure for making inquiry B while adjudicating u/s.13 of the Act since it is under legislative mandate to undertake adjudication and hold inquiry in the prescribed manner after giving the person alleged to have committed contravention against whom a complaint has been made, a reasonable opportunity:of C being heard for the purpose of imposing any penalty.. The discretion of the Authority is so well structured by the statute and the Rules. [Para 17) [119-B-C] 1.2 The Rules do not provide and empower the Adjudicating Authority to straightaway make any inquiry D into allegations of contravention against any person against whom a complaint has been received by it. It is clear from Rule 4 that show cause notice to be so issued is not for the purposes of making any adjudication into alleged contravention but only for the purpose of E deciding whether an inquiry should be held against him or not. That after taking the cause, if any, shown by such person, the Adjudicating Authority is required to form an opinion as to whether an inquiry is required to be held into the allegations of contravention. It is only then the F real and substantial inquiry into allegations of contravention begins. [Para 18) [119-D-G] 1.3 While holding inquiry into allegations of contravention, every Adjudicating Authority shall have G the powers of a Civil Court under CPC in respect of the matters, namely, (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring discovery and production of documents; (c) receiving evidence on affidavits; (d) requisitioning any H 102 SUPREME COURT REPORTS (2010] 13 (ADDL.) S.C.R. A public record, document or copy of such record or document from any office; (e) issuing commissions for examination of witnesses or documents etc. All proceedings before the Adjudicating Authority shall be deemed to be judicial proceedings within the meaning of B Sections 193 and 228 IPC; and the adjudicating authority shall be deemed to be a civil court for the purposes of Sections 345 and 346 Cr.P.C. [Para 18) [119-H; 120-A-C) 1.4 Rule 4 does not require the Adjudicating Authority to supply copies of any documents along with the show C cause notice. The rule does not require the Adjudicating Authority even to furnish any list of documents upon which reliance has been placed by him to set the law in motion. [Para 19] [120-D-E] D E 1.5 The extent of applicability of principles of natural justice depends upon the nature of inquiry, the consequences that may visit a person after such inquiry from out of the decision pursuant to such inquiry. [Para 22] [122-A-B] R vs. Gaming Board for Great Britain ex p. Benaim and Khaida (1970) 2 QB 417; Lloyd VS. McMahon (1987) AC 625; Wiseman vs. Boardman (1971) AC 297 - referred to. 1.6 The right to fair hearing is a guaranteed right. F Every person before an Authority exercising the adjudicatory powers has a right to know the evidence to be used against him. If relevant material is not disclosed to a party, there is prima facie unfairness irrespective of whether the material in question arose before, during or G after the hearing. If prejudicial allegations are to be made against a person, he must be given particulars of that before hearing so that he can prepare his defence. However, disclosure not necessarily involves supply of the material. A person may be allowed to inspect the file H and take notes. Whatever mode is used, the fundamental KANWAR NATWAR SINGH v. DIRECTORATE OF 103 ENFORCEMENT principle remains that nothing should be used against A the person which has not been brought to his notice. However, there are various exceptions to this general rule where disclosure of evidential material might inflict serious harm on the person directly concerned or other persons or where disclosure would be breach of B confidence or might be injurious to the public interest because it would involve the revelation of official secrets, inhibit frankness of comment and the detection of crime might make it impossible to obtain certain clauses of essential information at all in the future. [Para 23) [122- c C-F] T. Dhakeswari Cotton Mills Ltd. vs. Commissioner of Income TaxWest Bengal (1955) 1 SCR 941 - relied on. R vs. Secretary of State for Home Department, ex. p. H D (1995) QB 43 - referred to. 1.7 The concept of fairness may requi.re the Adjudicating Authority to furnish copies of those documents upon which reliance has been placed by him E to issue show cause notice requiring the noticee to explain as to why an inquiry uls.16 of the Act should not F be initiated. To this extent, the principles of natural justice and concept of fairness are required to be read into Rule 4(1) of the Rules. Fair procedure and the principles of natural justice are in built into the Rules. A noticee is always entitled to satisfy the Adjudicating Authority that those very documents upon which reliance has been placed do not make out even a prima facie case requiring any further inquiry. Thus, all such documents relied on by the Authority are required to be furnished to the G noticee enabling him to show a proper cause as to why an inquiry should not be held against him though the Rules do not provide for the same. Such a fair reading of the provision would not amount to supplanting the procedure laid down and would in no manner frustrate H 104 SUPREME COURT REPORTS [2010) 13 (ADDL.) S.C.R. A the apparent purpose of the statute. [Para 24) [122-G; 1.23A-D] 1.8 The Adjudicating Authority is not required to furnish copies of all the documents in his possession to 8 a noticee even for the purposes of forming an opinion as to whether any inquiry at all is required at the preliminary stage. In this regard, the doctrine of duty of adequate disclosure and doctrine of fairness cannot be pressed into service. A bare reading of the provisions of the Act and the Rules do not support such requirement. Even the C principles of natural justice do not require supply of documents upon which no reliance has been placed by the Authority to set the law into motion. Supply of relied --·on document~ based on which the law has been set into motion would meet the requirements of principles of D natural justice. No court can compel the Authority to deviate from the statute and exercise the power in altogether a different manner than the prescribed one. [Para 25) [123-D-H] E State Inspector of Police, Vishakhapatnam vs. Surya Sankaram Karri (2006) 7 SCC 172; Union of India vs. Ranu Bhandari (2008) 17 SCC 348; Dwarka Prasad Aganti1al (Dead) by LRs. and Anr. vs. B.D. AgaMal and Ors. (2003) 6 SCC 230; Tribhuvandas Bhimji Zaveri and Anr. vs. Collector of F Central Excise (1997) 11 SCC 276; State of M. P. vs. G Chintaman Sadashiva Vaishampayan AIR 1961 SC 1623 - distinguished. R v HI R v C (2004) UKHL 3; Kanda vs. Government of Malaya (1962) AC 322 - referred to. 1.9 In the instant case, the inquiry against the noticee is yet to commence. The evidence as may be available upon which the Adjudicating Authority may place reliance, undoubtedly, is required to be furnished to the H person proceeded against at the second stage of inquiry KANWAR NATWAR SINGH v. DIRECTORATE OF 105 ENFORCEMENT into allegations of contravention. It is at that stage, the A Adjudicating Authority is not only required to give an opportunity to such person to produce such documents as evidence, as he may consider relevant to the inquiry, but also enforce attendance of any person acquainted with the facts of the case to give evidence or to produce B any document which in its opinion may be useful for or relevant to the subject matter of the inquiry. Natural justice often requires the disclosure of the reports and evidence in the possession of the deciding Authority and such reports and evidence relevant to the subject matter c of the inquiry may have to be furnished unless the scheme of the Act specifically prohibits such disclosure. [Para 26) (124-F-H; 125-A) 1.10 A fair reading of the statute and the Rules suggests that there is no duty of disclosure of all the docum_ents 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. The principles of natural justice do not supplant the law of the land but supplement it. [Para 36) (130-G-H; 131-A-C] ,A.K. Kraipak vs. Union of India (1969) 2 SCC 262; Mohinder SinghGill vs. Chief Election Commissioner (1978) 1 sec 405 - referred to. D E F G H 106 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R A 1.11 It cannot be said that the appellants' request to the Adjudicating Authority to furnish the copies of the documents could be treated as one made under sub-rule (6) of Rule 4 which enables the Adjudicating Authority to direct any person to produce any document which in his B opinion may be useful for or relevant to the subject matter of inquiry. A plain reading of sub-rule (6) of Rule 4 makes it abundantly clear that such a power to summon and enforce attendance of any person acquainted with the facts and circumstances of the case to give evidence c or to produce any document which may be relevant to the subject matter of inquiry is only available to the Adjudicating Authority while holding an inquiry into allegations of contravention, but not at the stage where the Authority is merely required to form an opinion as to 0 whether an inquiry should be held into allegations of contraventions. [Para 37] (131-E-GJ 1.12 The appellant's insistence for supply of all documents in possession of the Authority is based on vague, indefinite and irrelevant grounds. The appellants E 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 authorized officer who lodged the complaint. The only object in making such demand is obviously to obstruct the proceedings and the F 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. It is on account of continuous unreasonable requests on the part of the appellants that the G 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. The Adjudicating Authority is directed to deal with the complaint as expeditiously as possible. [Paras 39 and 40] H [133-8-E] KANWAR NATWAR SINGH v. DIRECTORATE OF 107 ENFORCEMENT 2. Observations of the Courts made in the judgments A are not to be read as Euclid's theorems nor as provisions of the statute. The observations must be read in the context in which they appear. A line or a word in a judgment cannot be read in isolation or as if interpreting a statutory provision to impute a different meaning to the 8 observations. [Para 32] [128-E-F] Haryana Financial Corporation vs. Jagdamba Oil Mills (2002) 3 sec 496 - referred to. 3. The Court disapproves the practice and procedure C of including list of authori~ies in the compilation without the leave of the Court. This Court is not required to consider such decisions which are included in the compilation which were not cited at the Bar. In the instant case, number of judgments are included in the o compilation which were not cited at the Bar by any of the counsel. The Court is not required to deal with the same. [Para 38] [132-F-G] Case Law Reference: E (1970) 2 QB 417 Referred to Para 19 (1987) AC 625 Referred to Para 20 (1971) AC 297 Referred to Para 21 (1955) 1 SCR 941 Relied on Para 23 F (1995) QB 43 Referred to Para 23 (1962) AC 322 Referred to Para 25 (2006) 1 sec 112 Distinguished Para 27 G (2008) 11 sec 348 Distinguished Para 28 (2003) 6 sec 230 Distinguished Para 29 (1997) 11 sec 276 Distinguished Para 30 H A B c D 108 SUPREME COURT REPORTS (2010] 13 (ADDL.) S.C.R. AIR 1961 SC 1623 Distinguished Para 31 (2002) 3 sec 496 Referred to. Para 32 (2004) UKHL 3 Referred to Para 33 (1969) 2 sec 262 Referred to Para 36 (1978) 1 sec 405 Referred to Para 36 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8601 of 2010. From the Judgment & Order dated 28.03.2008 of the High Court of Delhi at New Delhi in LPA No. 1072 of 2007. Uday U. Lalit, Sam\rat Nigam, Gaurav Agrawal for the Appellant. ' Gopal Subramanium SG, H.P. Raval, ASG, Rajshekhar Rao, Arijit Prasad, B.V. Balaram Das for the Respondents. The Judgment of the Court was delivered by E B. SUDERSHAN REDDY, J. 1. The central question of law arising on the appeal before this Court is whether a noticee served with show cause notice under Rule 4(1) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 (hereinafter referred to as 'the Rules') is F entitled 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 requiring him to show cause why an inquiry should not be held against him? G The Adjudicating Authority's refusal to supply all the H documents as demanded by the appellants led to filing of writ petitions by the appellants in Delhi High Court which were heard and dismissed. KANWAR NATWAR SINGH v. DIRECTORATE OF 109 ENFORCEMENT [B. SUDERSHAN REDDY, J.] 2. In order to consider and decide the issue that arises for A our consideration, it is just and necessary to briefly notice the relevant facts: PART I : BACKGROUND FACTS B A complaint in writing has been filed by an officer authorized against the appellants under sub-section (3) of Section 16 of the Foreign Exchange Management Act, 1999 (hereinafter referred to as 'FEMA' or 'the Act') in which certain serious allegations have been levelled against the appellants which we are not required to notice in detail. The gravamen of C the complaint is that the appellants along with others, jointly and severally, without general or special permission of the Reserve Bank of India dealt in and acquired Foreign Exchange totaling US $ 8,98,027.79 in respect of two oil contracts with SOMO of Iraq: Out of the said amount, the appellants and others jointly and severally, without the required permission of the Reserve Bank of India made payment and transferred Foreign Exchange of US$ 7,48,550 to the credit of specified account with Jordan National Bank, Jordan i.e., to persons resident outside India, in fulfillment of precondition imposed by SOMO for allocation of oil under aforesaid two contracts, in contravention of the provisions of FEMA. It is further alleged that the appellants and others, jointly and severally, without the required permission of the Reserve Bank of India transferred Foreign Exchange of US $ 1,46,247.23 being the commission amount in respect of two oil contracts with SOMO to the account with the Barclays Bank, London in contravention of the provisions of the Act. The appellants together with others jointly and severally failed to take all reasonable steps to repatriate the aforesaid Foreign Exchange within the stipulated period and in the prescribed manner, in contravention of the provisions of FEMA read with Regulations, 2000. In addition to the above, some other allegations also levelled against appellant No. 2. The Adjudicating Authority having received the said complaint, set the law in motion and accordingly issued a notice to the D E F G H 110 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R. A appellants under the provisions of FEMA read with the Rules, requiring them to show cause why an inquiry should not be held against them. 3. The appellants having received the show cause notice, 8 instead of submitting their reply, required the Adjudicating Authority to furnish "copies of all the documents in ... possession in respect of the instant case, including the 83000 documents allegedly procured by one Virender Dayal from USA in connection with the instant case ... " This seemingly innocuous request ultimately turned out to be the origin of this avoidable C litigation. The fact remains that the copies of all such documents as relied upon by the Adjudicating Authority were furnished. The Authority, however, declined to furnish copies of other documents and decided to hold an inquiry in accordance with the provisions of FEMA and the Rules. D 4. Aggrieved by the communications so sent by the Authority, the appellant No.1 filed writ petition in Delhi High Court which was disposed of with direction extending time to file reply to the show cause notice. As regards the prayer for E supply of copies of the documents, the Court gave liberty to demand such copies but left the issue regarding the entitlement of appellant No.1 to such documents open. 5. Thereafter, a preliminary/short reply to the show cause F notice was submitted by the appellants but once again insisting with the demand that the copies of the documents not otherwise relied upon by the Adjudicating Authority also be supplied before taking any further steps in the matter. 6. The Adjudicating Authority, by the impugned G proceedings, made it clear that the provisions of FEMA and the Rules provide for supply of the grounds, nature of contravention and copies of relied upon documents only in order to enable the noticee to make effective representation and the said requirement has been met. The Adjudicating Ii Authority also made it clear that it is bound to conduct KANWAR NATWAR SINGH v. DIRECTORATE OF 111 ENFORCEMENT [B. SUDERSHAN REDDY, J.] proceedings in accordance with the statute and the Rules and A the noticees in any case are not entitled to ask the Authority to deviate from the said procedure laid down in FEMA and the Rules. The Authority clearly put the appellants on notice that it shall proceed with the inquiry in accordance with the provisions of the Act and the Rules. B 7. The appellants promptly challenged the impugned order of the Adjudicating Authority in petitions filed under Article 226 of the Constitution of India resulting in the impugned judgment of the Delhi High Court. Hence these appeals. 8. Leave granted. 9. We have heard Shri U.U. Lalit, learned senior counsel for the appellants and Shri Gopal Subramanium, learned Solicitor General of India for the respondents. PART II : LEGAL SUBMISSIONS 10. Learned senior counsel for the appellants strenuously contended that there is a duty cast on the Adjudicating Authority c D to disclose and supply copies of all the documents that may E be available with him enabling the noticee to effectively defend and rebut the allegations mentioned in the show cause notice. The submission was that the noticee is not only entitled to the documents referred to and relied upon to set the law in motion but all such other documents that may be in possession of the F Adjudicating Authority. The learned senior counsel submitted that principles of natural justice and concept of fairness require supply to the noticee all such documents whether relied on or not by the Adjudicating Authority. 11. The learned Solicitor General of India, on the other G hand, submitted that rule 4 of the Rules is a comprehensive self contained code and that the Adjudicating Authority is to follow and proceed step by step in accordance with the said Rules. The learned Solicitor General submitted that it is a H 112 SUPREME COURT REPORTS [2010] 13 (ADDL.) S.C.R A normal rule of construction that when a statute vests certain power in an Authority to be exercised in a particular manner, then the said Authority has to exercise it only in the manner provided in the statute itself. Hence the Adjudicating Authority cannot deviate from the mandate of the statute and the Rules B to do something which is not provided for either in the statute or in the Rules. The submission was that the Rules do not provide for furnishing all the documents that may be in possession of the Adjudicating Authority as prayed for by the appellants. It was alternatively contended that principles of c natural justice are complied with in the instant case since copies of relied on documents were supplied to the appellants. PART Ill : RELEVANT STATUTE AND RULES 12. As part of the ongoing economic liberalization relating D to foreign investments and foreign trade, a review of the Foreign Exchange Regulation Act, 1973 was made in the year 1993 and several amendments were enacted subsequently. The Government of India felt that Foreign Exchange Regulation Act, 1973 must be repealed and to be replaced by a E comprehensive legislation and for that purpose, a taskforce was constituted to have overall look on the subject and suggest the required changes. The taskforce submitted its report in 1994. On the recommendations of the taskforce and keeping in view the significant developments that had taken place since 1993, F the Foreign Exchange Management Bill was introduced in the Parliament. The Statement of Objects & Reasons reveals that the provisions of the Bill aim at consolidating and amending the law relating to Foreign Exchange with the objective of facilitating external trade and payments and for promoting the G orderly development and maintenance of Foreign Exchange markets in India. The Foreign Exchange Management Bill having been passed by both the Houses of Parliament, received the assent of the President on 29th December, 1999 and it came into force on the first day of June, 2000 as the H Foreign Exchange Management Act, 1999 (42 of 1999). KANWAR NATWAR SINGH v. DIRECTORATE OF 113 ENFORCEMENT [B. SUDERSHAN REDDY, J.] 13. Chapter II of FEMA deals with "Regulation and A Management of Foreign Exchange". Chapter Ill thereof deals with "Authorized Person". Chapter IV deals with "Contravention and Penalties". Section 13 of FEMA which is relevant for our present purposes reads as under: 13. Penalties - B (1) If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an C authorisation is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such 5imount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a D continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues. (2) Any Adjudicating Authority adjudging any contravention under sub-section (1 ), may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government and further direct that the Foreign exchange holdings, if any of the persons committing the contraventions or any part thereof, shall be brought back into India or shall be retained outside India in accordance with the directions made in this behalf. Explanation.- For the purposes of this sub-section, "property" in respect of which contravention has taken place, shall include ;- (a) Deposits in a bank, where the said property is E F G H 114 SUPREME COURT REPOR1 S [2010] 13 (ADDL.) S.C.R. A converted into such deposits; B c D E F G H (b) Indian currency, where the said property is converted into that currency; and (c) Any other property which has resulted out of the conversion of that property. 14. Chapter V deals with "Adjudication and Appeal". Section 16 is relevant which is reproduced hereinbelow: 16. Appointment of Adjudicating Authority - (1) For the purpose of adjudication under section 13, the Central Government may, by an order published in the Official Gazette, appoint as many officers of the Central Government as it may think fit, as the Adjudicating Authorities for holding an inquiry in the manner prescribed after giving the person alleged to have committed contravention under section 13, against whom a complaint has been made under sub-section (2) (hereinafter in this section referred to as the said person) a reasonable opportunity of being heard for the purpose of imposing any penalty: Provided that where the Adjudicating Authority is of opinion that the said person is likely to abscond or is likely to evade in any manner, the payment of penalty, if levied, it may direct the said person to furnish a bond or guarantee for such amount and subject to such conditions as it may deem fit. (2) The Central Government shall, while appointing the Adjudicating Authorities under sub-section (1 ), also specify in the order published in the Official Gazette their respective jurisdiction. (3) No Adjudicating Authority shall hold an enquiry under sub-section (1) except upon a complaint in writing made KANWAR NATWAR SINGH v. DIRECTORATE OF 115 ENFORCEMENT [B. SUDERSHAN REDDY, J.] by any officer authorised by a general or special order by A the Central Government. (4) The said person may appear either in person or take the assistance of a legal practitioner or a chartered accountant of his choice for presenting his case before the Adjudicating Authority. (5) Every Adjudicating Authority shall have the same powers of a civil court which are conferred on the Appellate Tribunal under sub-section (2) of section 28 and;- (a) All proceedings before it shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code, 1860 (45 of 1860); B c (b) Shall be deemed to be a civil court for the purposes of sections 345 and 346 of the Code of Criminal Procedure, D 1973 (2of1974). (6) Every Adjudicating Authority shall deal with the compliant under sub-section (2) as expeditiously as possible and endeavor shall be made to dispose off the complaint finally within one year from the date of receipt of the complaint: Provided that where the complaint cannot be disposed off within the said period, the Adjudicating Authority shall record periodically the reasons in writing for not disposing off the complaint within the said period. 15. In exercise of the powers conferred by Section 4 read with sub-section (1) of Section 16, sub-section (3) of Section E F 17 and sub-section (2) of Section 19 of the Act, the Central G Government made the Rules for holding inquiry for the purpose of imposing penalty and appeals under Chapter V of the said Act. The rules are called the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. Rule 4 of the said Rules which prescribes the procedure for holding of H 116 SUPREME COURT REPORTS (2010] 13 (ADDL.) S.C.R. A inquiry which is material for our present purposes is as under: 4. Holding of inquiry.- B c D E F G H (1) For the purpose of Adjudicating under section 13 of the Act whether any person has committed any contravention as specified in that section of the Act, the Adjudicating Authority shall, issue a notice to such person requiring him to show cause within such period as may be specified in the notice (being not less than ten days from the date of seNice thereof) why an inquiry should not be held against him. (2) Every notice under sub-rule (1) to any such person shall indicate the nature of contravention alleged to have been committed by him. (3) After considering the cause, if any, shown by such person, the Adjudicating Authority is of the opinion that an inquiry should be held, he_i:;h