TMI Blog2014 (2) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement that in the meantime the Special Director, Directorate of Enforcement will not proceed with the hearing pursuant to the impugned notices. This stay will not however, prevent the respondents from proceeding with the matter in accordance with this judgment. - Writ Petition No. 1703 of 2013 - - - Dated:- 6-2-2014 - S. J. Vazifdar And B. P. Colabawalla, JJ. For the Petitioner : Mr.Aspi Chinoy, Senior Counsel with Mr.Swadeep Hora and Mr.Gaurav Gopal i/b Wadia Ghandy Co. For the Respondent : Mr.Kevic Setalvad, Additional Solicitor General with Mr.Sumit Patni and Mr.Som Sinha i/b Mr.Dhiren Shah JUDGMENT (Per S. J. Vazifdar, J.) :- 1. Rule. With the consent of the parties rule is made returnable forthwith and heard finally. 2. Respondent Nos.1 and 2 are the Special Director and the Assistant Director respectively of the Directorate of Enforcement. 3. Mr.Setalvad, the learned Additional Solicitor General, stated that the respondents did not wish to file an affidavit in reply. He reiterated the statement even during the course of the hearing. 4. The petition in effect challenges the opinion of respondent No.1 under rule 4 of the Foreign Exchange Mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are taken by the Governing Council. The petitioner was one of the Vice Presidents of the BCCI and was appointed as the chairman of the Governing Council of the IPL at the relevant time. He continued in this position upto 26.04.2010. 8. Section 13 of the Act provides for penalties for contravention of the provisions of the Act or any rule, regulation, notification, direction or order issued in exercise of the powers under the Act or the contravention of any condition subject to which an authorisation is issued by the Reserve Bank of India (RBI). Section 16(1) of the Act entitles the Central government to appoint as many officers of the Central government as it thinks fit as the Adjudicating Authorities for the purpose of adjudication under section 13. Respondent No.1 is an Adjudicating Authority. Section 16 provides that :- .................................................................................... no Adjudicating Authority shall hold an enquiry under sub-section (1) except upon a complaint in writing made by any officer authorised by a general or special order by the Central Government . The respondents have initiated proceedings against the petitioner on the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reliable information inquiries were initiated by the Directorate of Enforcement regarding the conduct of Twenty20 cricket tournaments known as the IPL organised by the BCCI. On the basis thereof, directives were issued to the BCCI to furnish information and details. Information was also received from various other sources. The same indicated large scale irregularities in the conduct and functioning of the IPL necessitating a comprehensive investigation in respect of IPL and its franchisees. The petitioner s position in BCCI is mentioned. During the course of the investigation it was learnt that International Management group (UK) Limited (hereinafter referred to as IMG) had been appointed by the BCCI for providing consultancy services to the IPL and that BCCI had made payments to it totalling about Rs.30.00 crores. BCCI had made several other payments as well on account of consultancy fees to IMG. The consultancy services were procured from IMG from outside India which required prior approval of the RBI under section 5 of the Act read with rule 5 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000. BCCI had however not made any application to the RBI in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Notice and the Complaint upon which it is based rely upon various documents, some of which have not been supplied to us. Without those documents, we would be seriously prejudiced and handicapped in preparing any meaningful and effective reply. Those documents as evidenced from bare reading of complaint are - (a) The reliable information and order initiating enquiries alongwith scope thereof as relied upon in para 1.1 of the complaint. (b) Directives dated 29.05.2008 and 14.07.2008 issued to the BCCI by ED as relied upon in para 1.1 of the complaint. (c) Letters dated 4.07.2008, 7.08.2008 and 30.10.2009 within by BCCI to ED as relied upon in para 1.1 of the complaint. (d) Print and Electronic Media Reports relied upon by ED as relied upon in para 1.1 of the complaint. (e) Directives requisitioning documents from BCCI, franchisees, media and commercial right holders and the concerned Authorised Dealers as relied upon in para 1.1 of the complaint. (f) Replies and Documents supplied by BCCI, franchisees, media and commercial right holders and the concerned Authorised Dealers in terms of above directives as relied upon in para 1.1 of the complaint. (g) The letters dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticee. If any specific document is relevant to your defense, you may request for the same with specific reasons for such a request. Thereafter further correspondence ensued between the parties in the course of which they raised their rival contentions. As the same were raised before us we would refer to them while dealing with their submissions. 13. The petitioner by a letter dated 25.07.2011 submitted a preliminary reply without prejudice to his contentions regarding the respondent s failure to give him inspection of the said documents. 14. Respondent No.1 did not entertain the application for inspection of documents any further. Instead by his letter dated 21.03.2013, which is also impugned, he informed the petitioner that after considering the cause shown by him he was of the opinion that the adjudication proceedings as contemplated under section 13 of the Act should be held against him in accordance with the procedure laid down in Rule 4 of the Adjudication Rules and fixed a date for personal hearing before him. The petitioner was by the said letter granted an opportunity to appear himself or through a legal practitioner / chartered accountant before respondent No.1 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh his legal practitioner or a chartered accountant duly authorised by him. (4) On the date fixed, the adjudicating authority shall explain to the person proceeded against or his legal practitioner or the chartered accountant, as the case may be, the contravention, alleged to have been committed by such person indicating the provisions of the Act or of rules, regulations, notifications, direction or orders or any condition subject to which an authorisation is issued by the Reserve Bank of India in respect of which contravention is alleged to have taken place. (5) The adjudicating authority shall, then, given an opportunity to such person to produce such documents or evidence as he may consider relevant to the inquiry and if necessary, the hearing may be adjourned to future date and in taking such evidence the adjudicating authority shall not be bound to observe the provisions of the Indian Evidence Act, 1872 (1 of 1872). (6) While holding an inquiry under this rule the adjudicating authority shall have the power to summon and enforce attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document which in the opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person has committed any contravention, the adjudicating authority shall issue a notice to such person requiring him to show cause as to why an inquiry should not be held against him. It is clear from a bare reading of the rule 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 deciding whether an inquiry should be held against him or not. Every such notice is required to indicate the nature of contravention alleged to have been committed by the person concerned. 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 real and substantial inquiry into allegations of contravention begins. 18. The Supreme Court then dealt with the question as to which documents the authority is bound to supply to the said person even at the stage under sub-rule (1), (2) and (3) as under :- 31. The concept of fairness may require the adjudicating authority to furnish copies of those documents upon which reliance has been placed by him to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egations of contravention. It is at that stage, the 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 any document which in its opinion may be useful for or relevant to the subject-matter of the inquiry. It is no doubt true that 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 of the inquiry may have to be furnished unless the scheme of the Act specifically prohibits such disclosure. 44. In our opinion, these decisions do not assist the appellants case in any manner whatsoever because the documents which the appellants wanted in the present case are the documents upon which no reliance was placed by the authority for setting the law into motion. Observations of the courts 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis on which he is proceeding is erroneous. 20. Nor do we find the judgement to support Mr.Chinoy s first alternative submission that in any event a person is entitled to all the documents referred to in the show cause notice. By the words referred to we mean merely mentioned in the show cause notice. If the information or documents are merely mentioned in the show cause notice the person would not be entitled to particulars or inspection thereof. It is only those documents which are relied upon by the Adjudicating Authority in the show cause notice that a person is entitled to inspection of. There is no magic in the expressions referred to and relied upon . A person is entitled at this stage to information or documents relied upon by the Adjudicating Authority meaning thereby information or documents which are the basis on which the show cause notice is issued. In other words they are entitled to information or documents which have led to the Adjudicating Authority to issue the show cause notice. A person would not be entitled to inspection of a document which is merely mentioned in the show cause notice for it played no part in the formation of his opinion that an inquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are used interchangeably. 25. The exercise in each case is to determine whether the documents of which inspection is sought by the person were relied upon by the first respondent or whether they were merely mentioned in the show cause notice. Before we do so, it would be convenient to deal with two broad propositions advanced by Mr.Setalvad. 26. Mr.Setalvad contended that even if some of the documents referred to in the complaint are sufficient to sustain an order directing an inquiry, it is not necessary to furnish all the documents even if they are held to have been relied upon in the show cause notice. 27. The submission is contrary to the judgment in Natwar Singh's case. Every document relied upon in the show cause notice ought to be furnished to the said person. A view to the contrary would involve a cumbersome procedure and hearing before the Court in every case where a party challenges the holding of an inquiry under clause (3) of rule 4. 28. In the present case we are not inclined to accept this submission even assuming it is well founded. As we noted earlier the respondents opted to proceed to the final hearing of this matter without an affidavit in reply. It is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds into Rule 4 of the Adjudication Rules that the objections to the show cause notice would be considered, only if they are of particular type, such as, the noticee is a stranger to the proceedings and no other objection would be considered while deciding whether or not the adjudication must be proceeded with further. 30. We express no opinion regarding cases where the documents though relied upon are not furnished for any special reason such as where granting inspection would prejudice investigations. Such a defence would have to be pleaded and established. The respondents have not even filed an affidavit. That point is therefore, kept open. 31. Mr.Setalvad submitted that in the case before us the complaint relied upon only the documents listed in the Annexure thereto and not to the other documents referred to in the complaint. He contended that even in Natwar Singh's case, the authority had granted inspection only of the documents mentioned in the annexure and had refused inspection of several documents, which were only referred to in the rest of the show cause notice. Neither the submission nor the contention on the reading of Natwar Singh's case is well founded. 32. Mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that in the paragraphs quoted above, the Supreme Court held that fairness required the Adjudicating Authority to furnish the copies of those documents upon which reliance had been placed in the show cause notice. In paragraph 31, it is expressly stated that all the documents relied on by the Adjudicating Authority are required to be furnished to the noticee. In paragraph 33, it is observed that the principles of natural justice do not require supply of documents upon which no reliance has been placed by the Adjudicating Authority. In paragraph 48, it is held that there is no duty of disclosure of all the documents in possession of the Adjudicating Authority. It appears clear therefore, that the 83,000 documents were not even referred to in the show cause notice and were merely in the possession of the Adjudicating Authority. This becomes clearer from the judgment of the learned single Judge and of the Division Bench of the Delhi High Court in that case. 34. From the judgment of the learned single Judge in Natwar Singh's case 2007 Law Suit (Del) 345, relied upon by both the learned counsel, it is clear that what the petitioner sought was the documents, which were in possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the documents produced by the said Dayal from USA and demanded the same on the premise that the documents were in the possession of the respondents and available with them though they had not been specifically relied upon by the petitioner. The petitioner sought inspection though the documents were not specifically relied upon on the ground that they were relevant. In paragraph 12, the learned Judge recorded that the petitioner's counsel insisted that the petitioner was entitled to documents which though have not been relied upon by the respondents, but which are alleged to be in possession of the respondents . It is clear therefore, that in that case what was sought was relevant documents and not documents which were relied upon. 36. This brings us to the judgment of the Division Bench of the Delhi High Court in Natwar Singh's case 149 (2008) DLT 18. Paragraph 15 of the judgment makes it clear that the documents of which inspection was sought by the petitioner were those which were not referred to in the show cause notice but were only in possession of the Directorate of Enforcement. Paragraph 15 of the judgment reads as under :- 15. It is not in dispute that the entire mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which have been taken in the writ petition before us are sufficient to void the order of detention passed against the detenu. In the first place, it was submitted that the endorsement on the file produced before us by the government shows that the documents concerned were examined not by the detaining authority but by the Secretary and there is nothing to show that the note or endorsement of the Secretary was placed and approved by the detaining authority. In these circumstances, therefore, it must be held that there was no decision by the detaining authority that the documents were irrelevant. It was, however, submitted by Mr Phadke that the documents concerned were merely referred to in the grounds of detention but did not form the basis of the subjective satisfaction of the detaining authority at the time when it passed the order of detention. It was, however, conceded by Mr Phadke that before the grounds were served on the petitioner, the documents were placed before the detaining authority and were, therefore, referred to in the grounds of detention. It is manifest, therefore, that the subjective satisfaction could only be ascertained from or reflected in the grounds of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... talvad does not carry his case further. Mr.Setalvad relied upon the following observations in paragraph 4 of the judgment :- ............. However, it is not necessary that each and every document must be supplied to the delinquent government servant facing the charges, instead only material and relevant documents are necessary to be supplied to him. If a document even though mentioned in the memo of charges is not relevant to the charges or if it is not referred to or relied upon by the enquiry officer or the punishing authority in holding the charges proved against the government servant, no exception can be taken to the validity of the proceedings or the order. If the document is not used against the party charged the ground of violation of principles of natural justice cannot successfully be raised. It is not the respondents case that the documents of which inspection is sought by the petitioner are not relevant to the charges. We will assume that the judgment requires the person concerned to be furnished only with the documents relied upon. We have come to the conclusion that the documents, of which the petitioner sought inspection were relied upon by the first responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Twenty-20 cricket tournament organized by the BCCI ; on the basis of the information directives were issued under section 37 of the Act to the BCCI ; the BCCI by their letters furnished certain details and subsequently the information was received from other sources pointing to large scale irregularities. Paragraph 1.1 further states :- In order to conduct a thorough investigation in the matter, documents were requisitioned from the BCCI, the Franchisees, Media and Commercial rights holder of the BCCI and the concerned Authorised Dealers. The documents received from the aforesaid sources were examined in detail. The following paras briefly describe the background of issues covered by the Complaint. (emphasis supplied) 42. A plain reading of paragraph 1.1 indicates that the information and the documents requisitioned from the franchisees were relied upon by the respondents. In fact the documents were examined in detail. What followed in the complaint was obviously based on all the documents referred to in paragraph 1.1. The respondents do not exclude any particular document referred to in paragraph 1.1. 43. The petitioner is therefore, entitled to the documents requisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Wildblood's statement. The relevant portion in Andrew Wildblood's statement pertaining to the present matter i.e. the transaction between the BCCI - IPL and IMG is as under :- Today I have been shown copies of the statements dated 29th and 30th September 2010 tendered by the following IMG officials : 1. Mr. Paul Manning 2. Mr. John Loffhagen 3. Mr.Peter Griffiths I have read the above statements and have put my dated signatures thereon confirmation of their contents. I state that the contents of these statements tendered by the aforesaid IMG officials are true and correct except those portions which are not within my knowledge. However, I confirm that their statements present true and correct facts and I am in agreement with the same. I also confirm that whatever has been attributed to me in the said statements are correct. The statement of Andrew Wildblood by itself contains nothing regarding the contents of paragraph 2.10 of the complaint. The statement affirms the contents of the statements of Paul Manning, John Loffhagen and Peter Griffiths and is therefore, expressly incorporated by him therein. It is clear therefore, that what respondent No.1 relied upon was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause notices were issued including to the noticees in the show cause notices in the case before us. The petitioner therein filed his replies to the show cause notices in which he raised various grounds, including that the notices were issued without jurisdiction. The petitioner also raised various contentions on merits, including that he was only the ordinary President of the Board and had no role in conducting the relevant IPL in South Africa. On 06.06.2013, the Special Director called the noticee in that case for a personal hearing for adjudication. The notice stated that the same was issued after the Special Director considered the cause shown by the petitioner and was of the opinion that the adjudication proceedings as contemplated under section 13 of the Act should be proceeded with in accordance with rule 4 of the Adjudication Rules. The petitioner challenged the show cause notices and the communication dated 06.06.2013. The Division Bench held as under :- 14. ................ Even if one were to proceed on the basis of the submission of the learned Additional Solicitor General that only some type of cases would fall within the mischief of Rule 4(1) and (3) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the preliminary objections. It is also very clear from the provisions of the Act and the Rules that an Appeal which is provided would not lie from an order recording an opinion of the Adjudicating Authority to proceed further with the adjudication of the notice, but the appeal would only be against the final order. 19. ....................... In this case, it has been specifically provided in Rule 4 of the Adjudication Rules that the noticee under the Act is entitled to raise objections to the issuance of the notice and the Adjudicating Authority is obliged to consider those objections and form an opinion whether or not to proceed further with the show cause notice. Formation of opinion itself would pre-suppose an application of mind to the facts and the objections of the party before it is decided to proceed further with the show cause notice. This opinion cannot be arbitrary, but must be supported by reasons, howsoever, minimal those reasons may be, to evidence application of mind to the objections raised by the noticee. 20. The nature of the adjudication proceedings, the nature of the alleged contraventions, the nature of alleged liability and the extent of penalty which may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst him in accordance with the procedure laid down in rule 4 of the Adjudication Rules. The letter thereafter merely fixes the date of the hearing and permits the petitioner to appear himself or through a legal practitioner / chartered accountant. The letter says nothing more except that if the petitioner fails to appear, the matter will be proceeded with on the basis of the material and evidence available. The letter therefore, is merely a communication of an opinion. The opinion is admittedly not in writing. There admittedly are no reasons recorded in respect of the opinion. 51. Contrary to Mr.Setalvad's suggestion, the judgment is clear and leaves no room for doubt. Mr.Setalvad submitted that the judgment in Shashank Manohar's case must be restricted to the facts of that case alone. We do not see how that can be so. The Division Bench has dealt with the question of law viz. the interpretation of the provisions of Act and Adjudication Rules in detail. The interpretation of the statutory provisions can never be restricted to the facts of a case. The application of a judgment to a given case is another matter altogether. Indeed that would depend upon the facts of the case. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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