Kanwar Natwar Singh v. Directorate of Enforcement & Anr
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
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
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.
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
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
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 -
(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
114 SUPREME COURT REPOR1 S [2010] 13 (ADDL.) S.C.R.
A converted into such deposits;
(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) 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
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.-
(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<ilU.ssue a notice fixing a date
for the appearance of that person either personally or
through 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
ReseNe 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
KANWAR NATWAR SINGH v. DIRECTORATE OF 117
ENFORCEMENT [B. SUDERSHAN REDDY, J.]
not be bound to observe the provisions of the .Indian A
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 8 circumstances of the case to give evidence or to produce
any document which in the opinion of the Adjudicating
Authority may be useful for or relevant to the subject matter
of the inquiry.
(7) If any person fails, neglects or refuses to appear as C
required by sub-rule (3) before the Adjudicating Authority,
the Adjudicating Authority may proceed with the
adjudication proceedings in the absence of such person
after recording the reasons for doing so.
(8) If, upon consideration of the evidence produced before
the Adjudicating Authority, the Adjudicating Authority is
satisfied that the person has committed the contravention,
he may, be order in writing, impose such penalty as he
thinks fit, in accordance with provisions of Sec. 13 of the
Act.
(9) Every order made under sub-rule (8) of the rule 4 shall
specify the provisions of the Act or of the rules, regulations,·
notifications, direction or orders or any condition subject
to which ari authorisation is issued by the Reserve Bank F
of India in respect of which contravention has taken place
and shall contain reasons for such decisions.
(10) Every order made under sub-rule (8) shall be dated
and signed by the Adjudicating Authority.
(11) A copy of the order made under sub-rule (8) of the
rule 4 shall be supplied free of charge to the person
against whom the order is made and all other copies of
proceedings shall be supplied to him on payment of
copying fee @ Rs. 2 per page,
118 SUPREME COURT REPORTS [201 O] 13 (ADDL.) S.C.R.
A (12) The copying fee referred to in sub-rule (11) shall be
paid in cash or in the form of demand draft in favour of the
Adjudicating Authority.
PART IV : DISCUSSION
B Analysis of relevant provisions of FEMA and the Rules
16. The issue that arises for our consideration is to be
resolved in the background of this statutory setting. The FEMA
is a self contained and special legislation dealing with the
c Foreign Exchange management. It essentially deals with
regulation and management of the Foreign Exchange. The
provisions of the Act mandate that save as otherwise provided
in the Act, rules or regulations made thereunder or with the
general or special permission of the Reserve Bank, no person
0 shall deal in or transfer any Foreign Exchange or foreign
security to any person not being an authorised person; make
any payment to or for the credit of any person resident outside
India in any manner; receive otherwise through an authorised
person, any payment by order or on behalf of any person
E resident outside India in any manner; enter into any financial
transaction in India as consideration for or in association with
acquisition or creation or"transfer of a right to acquire, any asset
outside India in any manner. It is further provided that no person
resident in India shall acquire, hold, own, possess or transfer
any Foreign Exchange, foreign security or any immovable
F property situated outside India. That if any person contravenes
any provision of the Act, or contravenes any rule, regulation,
notification, direction or order issued in exercise of the powers
under the Act, or contravenes any condition subject to which
an authorisation is issued, he shall, upon adjudication, be liable
G to a penalty. For the purpose of adjudication, the Central
Government may, by an order, appoint officers of the Central
Government as the Adjudicating Authorities for holding inquiry
in the manner prescribed after giving the person alleged to have
committed contravention against whom a complaint has been
H made, a reasonable opportunity of being heard for the purpose
KANWAR NATWAR SINGH v. DIRECTORATE OF
ENFORCEMENT [B. SUDERSHAN REDD~ ~]
of imposing any penalty.
119
17. That a bare reading of the relevant provisions of the
Act and the Rules makes it abundantly clear that the manner,
method and procedure of adjudication are completely structured
by the statute and the Rules. The Authority is bound to follow B
the prescribed procedure under the statute and the Rules and
is not free and entitled to devise its own procedure for making
inquiry while adjudicating under Section 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 C
to have committed contravention against whom a complaint
has been made, a reasonable opportunity of being heard for
the purpose of imposing any penalty. The discretion of the
Authority is so well structured by the statute and the Rules.
18. The Rules do not provide and empower the
Adjudicating Authority to straightaway make any inquiry into
allegations of contravention against any person against whom
a complaint has been received by it. Rule 4 of the Rules
mandates that for the purpose of adjudication whether any
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 G
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.
While holding inquiry into allegations of contravention, every
Adjudicating Authority shall have the powers of a Civil Court H
120 SUPREME COURT REPORTS (2010) 13 (ADDL.) S.C.R.
A under the Code of Civil Procedure 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 public record, document or copy of such
B record or document from any office; (e) issuing commissions
for examination of witnesses or documents etc. That all
proceedings before the Adjudicating Authority shall be deemed
to be judicial proceedings within the meaning of Sections 193
and 228 of the Indian Penal Code; shall be deemed to be a
c Civil Court for the purposes of Sections 345 and 346 of the
Code of Crlmina1 Procedure, 1973.
Principles of natural justice : statutory requirement and
fair hearing
D 19. It is true that rule 4 does not require the Adjudicating
Authority to supply copies of any documents along with the show
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. Does
E it mean that the Adjudicating Authority is not required to furnish
the list of documents and copies thereof upon which reliance
has been placed by him to issue notice of show cause to a
person against whom a complaint has been made by the
authorized officer? Whether the principles of natural justice and
F doctrine of fairness require supply of documents upon which
reliance has been placed at the stage of show cause notice?
"It is not possible to lay down rigid rules as to when the
principles of natural justice are to apply; nor as to the scope of
extent. Everything depends on the subject matter" [see R Vs.
G Gaming Board for Great Britain ex p. Benaim and Khaida1].
Observed Lord Denning MR.: "Their application, resting as it
does upon statutory implication, must always be in conformity
with the scheme of the Act and with the subject matter of the
case". Even in the application of the doctrine of fair play there
H 1. (1970) 2 QB 417.
KANWAR NATWAR SINGH v. DIRECTORATE OF 121
ENFORCEMENT [B. SUDERSHAN REDDY, J.)
must be real flexibility. There must also have been caused A
some real prejudice to the complainant; there is no such thing
as a merely technical infringement of natural justice. The
requirements of natural justice must depend on the
circumstances of the case, the nature of the inquiry, the rules
under which the tribunal is acting, the subject matter to be dealt B
with and so forth. Can the Courts supplement the statutory
procedures with requirements over and above those specified?
In order to ensure a fair heanng:'"courts can insist and require
additional steps as long a such steps would not frustrate the
apparent purpose of the legislation. c
20. In Lloyd Vs. McMahon2, Lord Bridge observed:
"My Lords, the so-called rules of natural justice are not
engraved on tablets of stone. To use the phrase which
better expresses the underlying concept, what the D
requirements of fairness demand when any body,
domestic, administrative or judicial, has to make a
decision which will affect the rights of individuals depends
on the character of the decision-making body, the kind of
decision it has to make and the statutory or other E
framework in which it operates. In particular, it is well
established that when a statute has conferred on any body
the power to make decisions affecting
individuals, the courts will not only require the procedure
prescribed by the statute to be followed, but will readily F
imply so much and no more to be introduced by way of
additional procedural safeguards as will ensure the
attainment of fairness".
21. As Lord Reid said in Wiseman Vs. Boardman3:
"For a long time the courts have, without objection from
Parliament, supplemented procedure laid down in
legislation where they have found that to be necessary for
2. [1987] AC 625.
3. [1971] AC 297.
A this purpose ... "
22. It is thus clear that 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
8 out of the decision pursuant to such inquiry.
23. The right to fair hearing is a guaranteed right. Every
person before an Authority exercising the adjudicatory powers
has a right to know the evidence to be used against him. This
principle is firmly established and recognized by this Court in
C Ohakeswari Cotton Mills Ltd. Vs. Commissioner of Income
Tax, West Benga/ 4 • However, disclosure not necessarily
involves supply of the material. A person may be allowed to
inspect the file and take notes. Whatever mode is used, the
fundamental principle remains that nothing should be used
D against the person which has not brought to his notice. 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 after the hearing. The law is fairly well settled
if prejudicial allegations are to be made against a person, he
E must be given particulars of that before hearing so that he can
prepare his defence. 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 confidence or
F 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 [See
R Vs. Secretary of State for Home Department, ex. p. H]5.
G 24. The concept of fairness may require the Adjudicating
Authority to furnish copies of those documents upon which
reliance has been placed by him to issue show cause notice
4. (1955) 1 SCR 941.
H 5. [1995) QB 43.
KANWAR NATWAR SINGH v. DIRECTORATE OF 123
ENFORCEMENT [B. SUDERSHAN REDDY, J.]
requiring the noticee to explain as to why an inquiry under A
Section 16 of the Act should not 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 B
very documents upon which reliance has been placed do not
make out even a prima facie case requiring any further inquiry.
In such view of the matter, we hold that all such documents
relied on by the Authority are required to be furnished to the
noticee enabling him to show a proper cause as to why an c
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 the apparent purpose of the statute.
PART V : DUTY OF ADEQUATE DISCLOSURE
25. The real question that arises for consideration is
whether the Adjudicating Authority even at the preliminary stage
is required to furnish copies of all the documents in his
possession to a noticee even for the purposes of forming an
opinion as to whether any inquiry at all is required to be held.
In this regard, learned senior counsel for the appellant pressed
into service the doctrine of duty of adequate disclosure which
according to him is an essential part of the principles of natural
justice and doctrine of fairness. A bare reading of the provisions
of the Act and the Rules do not support the plea taken by the
appellants in this regard. Even the principles of n.atural justic8
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 documents based on which the law has been set G
into motion would meet the requirements of principles of 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. As noticed, a reasonable opportunity
of being heard is to be provided by the Adjudicating Authority
in the manner prescribed for the purpose of imposing any H
124 SUPREME COURT REPORTS (2010) 13 (ADDL..) S.C.R.
A penalty as provided for in the Act and not at the stage where
the Adjudicating Authority is required merely to decide as t.o
whether an inquiry at all be held into the matter. Imposing of
penalty after the adjudication is fraught with grave and serious
consequences and therefore, the requirement of providing a
B reasonable opportunity of being heard before imposition of any
such penalty is to be met. In contradistinction, the opinion
formed by the Adjudicating Authority whether an inquiry should
be held into the allegations made in the complaint are not
fraught with such grave consequences and therefore the
c minimum requirement of a show cause notice and
consideration of cause shown would meet the ends of justice.
A proper hearing always include, no doubt, a fair opportunity
to those who are parties in the controversy for correcting or
contradicting anything prejudicial to their view. Lord Denning
0 has added: "If the right to be heard is to be a real right which
is worth anything, it must carry with it a right in the accused man
to know the case which is made against him. He must know
what evidence is given and what statements have been made
affecting him: and then he must be given a fair opportunity to
E correct or contra.diet them" [see Kanda Vs. Government of
Ma/aya]6 .
26. In the present case, the inquiry against the noticee is
yet to commence. The evidence as may be available upon
which the Adjudicating Authority may place reliance,
F undoubtedly, is required to be furnished to the person
proceeded against at the second stage of inquiry into
allegations 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
G 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
H 6. [1962] AC 322.
KANWAR NATWAR SINGH v. DIRECTORATE OF 125
ENFORCEMENT [B. SUDERSHAN REDDY, J.]
of the reports and evidence in the possession of the deciding A
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.
27. However, the learned senior counsel for the appellants 8
in support of his contention that there is a duty cast on the
Adjudicating Authority to disclose and supply copies of all the
documents that may be available with him to the noticee, placed
reliance on State Inspector of Police, Vishakhapatnam Vs.
Surya Sankara'[/ Karri7 which is not an authority for the, C
proposition canvassed. It was a case where the Court found
that investigation into an offence punishable under Section
13(1 )(e) of the Prevention of Corruption Act wa.s undertaken
without the required authorization of the Superintendent of
Police. In that context, this Court observed that the manner in
which "the investigation was conducted, is condemnable. The D
least that a court of law would expect from the prosecution is
that the investigation would be a fair one. It would not only be
carried out from the stand of the prosecution, but also the
defence, particularly, in view of the fact that the onus of proof
may shift to the accused at a later stage". Shri La lit, strongly E
relied upon the observations so made by this Court which in
our considered opinion, are not relevant for our purpose. One
cannot pick a sentence from here and there in the Judgment
and characterize it to be the ratio of the case. The observations
made in that case were in the context of criminal investigation F
which was found to be unfair and illegal.
28. In Union of India Vs. Ranu Bhandari8 this Court found
that some of the vital documents which have a direct bearing
on the detention order, had not been placed before the G
detaining Authority and the detenu was entitled to question such
omission. It was the case of the detenu that if his representation
anq the writ petition had been placed before the detaining
7. (2006) 7 sec 172.
8. (2008J 17 sec 348. H
126 SUPREME COURT REPORTS (2010) 13 (ADDL.) S.C.R.
A Authority which according to him contained his entire defence
to the allegations made against him, the same may have
weighed with the detaining Authority as to the necessity of
issuing the order of detention at all. It is under those
circumstances, this Court expressed its view that on account
B of non-supply of those documents, the detenu was prevented
from making an effective representation against his detention.
In fact, the said decision is an authority for the proposition that
"when a detention order is passed, copies of all the documents,
both against the detenu and in his f~vour, which had been relied
c upon by the detaining Authority for reaching the satisfaction that
in the interest of the State and its citizens the preventive
detention of the detenu is necessary, must be supplied to the
detenu to enable him to make an effective representation
against the detention order in compliance with Article 22(5) of
0 the Constitution, irrespective of whether he had knowledge of
the same or not.
29. The learned senior counsel further relied upon the
following observations made by this Court in Dwarka Prasad
Agarwal (Dead) by LRs. & Anr. Vs. B.D. Agarwal & Ors.9:
"The very basis upon which a judicial process can be
resorted to is reasonableness and fairness in a trial. Under
our Constitution as also the International Treaties and
Conventions, the right to get a fair trial is a basic
fundamental /human right. Any procedure which comes in
the way of a party in getting a fair trial would be violative
of Article 14 of the Constitution of India. Right to a fair trial
by an independent and impartial Tribunal is part of Article
6(1) of the European Convention for the Protection of
Human Rights and Fundamental Freedoms 1950."
/
We fail to appreciate as to how the above observations are of
any relevance to resolve the issue that arises for our
consideration in the present case. It is not the case of the
H 9. (2003) 6 sec 230.
KANWAR NATWAR SINGH v. DIRECTORATE OF 127
ENFORCEMENT [B. SUDERSHAN REDDY, J.]
appellants that the procedure prescribed under Rule 4 of the A
Rules comes in their way in getting a fair trail and therefore
the said provision is ·violative of Article 14 of the Constitution
of India. It is not the case that the Adjudicating Authority
constituted under the present Act is not an independent and
impartial tribunal. B
30. In Tribhuvandas Bhimji Zaveri & Anr. Vs. Collector
of Central Excise10, Officers of the Income Tax Department
raided the business premises of the appellant and prepared
an inventory of the stock of gold and gold ornaments found in
the premises. This was followed by a show cause notice as to C
why penal action should not be taken against the appellants.
The appellants by their letter had requested the authorities to
furnish a certified copy of the check list prepared at the time of
raid with a view to enabling them to check and verify the
particulars. In reply thereto, the Income Tax Officer expressed D
his inability to provide the required documents on the ground
that they were not readily available with the Officer. It is under
those circumstances, this Court obseNed .that the failure to
supply important piece of info~ation to the appellants has
prejudiced the appellants and to this extent the principles of E
natural justice would stand violated. From the facts in that case,
it is clear that particular documents containing important piece
of information which would have enabled the noticee therein to
offer a proper explanation were required to be made available.
The nature of the document, its relevancy being a document F
prepared at the time of raid and its mention in the show cause
notice were taken into consideration. It was a basic document
based on which the law was set into motion against the
appellants therein. It is for that reason this Court was of the view
that such an important document could not have been withheid G
from the appellants therein.
31. In support of his submissions the learned seni:~
counsel has also referred us to the decision of this Court in
10. (1997) 11 sec 21e H
A State of M.P. Vs. Chintaman Sadashiva Vaishampayan 11 . In
that case, the charged police officer wanted the documents
which were relevant and would have been of invaluable
assistance to him in making his defence and cross-examining
the witness who gave evidence against him in the Departmental
B Enquiry. It is in that context this Court observed that "it is difficult
and inexpedient to lay down any general rules; whether or not
the officer in question has had a reasonable opportunity must
always depend on the facts in each case. The only general
statement that can be safely made in this connection is that the
c departmental enquiries should observe rules of natural justice,
and that if they are fairly and properly conducted the decisions
reached by the enquiry officers on the merits are not open to
be challenged on the ground that the procedure followed was
not exactly in accordance with that which is observed in Courts
0 of law". There is no dispute with this proposition.
32. 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
E 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 a judgment
cannot be read in isolation or as if interpreting a statutory
F provision to impute a different meaning to the observations [see
Haryana Financial Corporation Vs. Jagdamba Oil Mil/s12].
33. One more decision upon which heavy reliance has
been placed by the learned senior counsel is RvH!RvC 13• We
G fail to appreciate as to how the said judgment would render any
assistance and support the case set up by the appellants in the
present proceedings. In that case, the defendants were charged
11. AIR 1961 SC 1623.
12. (2002) 3 sec 496.
H 13 [2004] UKHL 3.
KANWAR NATWAR SINGH v. DIRECTORATE OF 129
ENFORCEMENT [B. SUDERSHAN REDDY, J.]
with criminal conspiracy to supply a class A drug. The
prosecution case was based on police surveillance evidence.
In pre-trial proceedings the defendants made far-reaching
requests for disclosure, including all material relating to any
covert human intelligence sources involved in the investigation.
At a preliminary hearing, it appeared that a public interest
immunity inquiry would be necessary as the prosecution wished
to withhold documents from disclosure to the defence on that
ground. The Judge ruled, without having looked in detail at the
documents provided by the prosecution, that unless
independent counsel were appointed, so as to introduce an
adversarial element into the public interest immunity inquiry,
there was a risk that the trial would be perceived to be unfair
and therefore violate Article 6(1) of the European Convention
for the Protection of Human Rights and Fundamental
Freedoms, 1950 (as set out in Schedule 1 to the Human Rights D
Act 1998) (the convention), which provided for the right to a fair
trial. The Judge, therefore, ordered that special counsel should
be appointed. The Crown's appeal against the Judge's ruling
was successful. The defendants appealed to the House of
Lords contending inter alia that it was incompatible with Article
6 of the convention for a Judge to rule on a claim to public
interest immunity in the absence of adversarial argument on
behalf of the accused where the material which the prosecution
was seeking to withhold was or might be relevant to a disputed
issue of fact which the Judge had to decide in order to rule on
an application which would effectively determine the outcome
of the proceedings. The House of Lords held that there is a
golden rule that full disclosure of any material held by the
prosecution which weakened its case or strengthened that of
the defendants should be disclosed to the defence. In
circumstances where such material could not be disclosed to G
the defence, fully or even at all, without the risk of serious
prejudice to an important public interest, some derogation from
the golden rule could be justified, but such derogation was
always to be the minimum necessary to protect the public
interest in question and had never to impe~ the overall fairness H
A of the trial.
34. This decision was followed by Attorney General's
guidelines and disclosure in which it is clearly explained that
disclosure is one of the most important aspects in the criminal
8 justice system and the application of proper and fair disclosure
is a vital component of a fair criminal justice system. This
amounts to no more and no less than a proper application of
the Criminal Procedure and Investigations Act, 1996 (CPIA},
recently amended by the Criminal Justice Act, 2003. The
C scheme set out in the Criminal Procedure and Investigations
Act, 1996 is held to be designed to ensure that there is fair
disclosure and material which may be relevant to an
investigation and which does not form part of the prosecution
case. The disclosure under the Act should assist the accused
in the timely preparation and presentation of their case and
D assist the case to focus on all the relevant issues in the trial.
35. It appears that those Acts recognize rights of accused
persons in a criminal case to a fair trial. It is clear that disclosure
of unused material in criminal proceedings in United Kingdom
E is regulated by the provisions of those Acts and applicable to
criminal trials where the accused are charged with criminal
offences. Duty of disclosure of unused material is not a definite
concept to be applied in any and every case in this country.
There is no such Act or law as in United Kingdom, nor any
F procedure prescribed for disclosure of unused material in
criminal proceedings. In the present case, the appellants are
not defendants in any criminal trial. The judgment has no
application as to the fact situation and the law applicable in
United Kingdom is not applicable to either the adjudicatory
G proceedings or even criminal trials in this country.
36. On a fair reading of the statute and the Rules suggests
that there is no duty of disclosure of all the documents in
possession of the Adjudicating Authority before forming an
opinion that an inquiry is required to be held into the alleged
H contraventions by a noticee. Even the principles of natural
KANWAR NATWAR SINGH v. DIRECTORATE OF 131
ENFORCEMENT [B. SUDERSHAN REDDY, J.]
justice and concept of fairness do not require the statute and A
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- B
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. Hegde, J.
speaking for the Supreme Court propounded: "In other words,
they (principles of natural justice) do not supplant the law of the c
land but supplement it" [see AK. Kraipak Vs. Union of lndia14].
Its essence is good conscience in a given situation; nothing
more but nothing less [see Mohinder Singh Gill Vs. Chief
Election Commissioner 15].
Alternate submission D
37. Yet another submission made by the learned senior
counsel requiring our consideration relates to interpretation of
sub-rule (6) of Rule 4. The learned senior counsel contended
that the appellants' request to the Adjudicating Authority to E
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 opinion may be useful for or relevant to
the subject matter of inquiry. We find no merit in the submission. F
. 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 or to produce any document which may
be relevant to the subject matter of inquiry is only available to G
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 whether
an inquiry should be held into allegations of contraventions. It
15. (1978) 2 sec 2a2. H
132 SUPREME COURT REPORTS (2010] 13 (ADDL.) S.C.R.
A is always open to a person facing an inquiry to invoke the
jurisdiction of the Adjudicating Authority requiring any person
to produce any document which may be useful for or relevant
to the subject matter of inquiry. Such request may have to be
considered upon its own merits. A fair reading of rule 4 which
B is a complete compendium for holding of inquiry suggests that
all the evidence and documents which the Adjudicating Authority
may consider relevant for the purpose of inquiry may have to
be furnished to a person facing the inquiry on the allegations
of contravention of the provisions of the Act etc., alleged to have
c been committed by him. In addition, the Authority may require
attendance of any person acquainted with the facts and
circumstances of the case to give evidence and to produce any
documents which in its opinion, may be useful for or relevant
to the subject matter of the inquiry. Only upon consideration of
0 the entire evidence produced, if the Adjudicating Authority is
satisfied that the person has committed the contravention, he
may by order in writing accordingly impose such penalty as he
thinks fit in accordance with the provisions of the Act which of
course is not final as it is subject to appeal.
E Practice of inclusion of list of judgments in compilations
not cited at the bar :
38. Before parting with the judgment, we are constrained
to observe with some reluctance about the recent practice and
F procedure of including list of authorities in the compilation
without the leave of the Court. In many a case, even the senior
counsel may not be aware of inclusion of such authorities in the
compilation. In our considered opinion, this Court is not required
to consider such decisions which are included in the
G compilation which were not cited at the Bar. In the present
case, number of judgments are included in the compilation
which were not cited at the Bar by any of the counsel. We have
not dealt with them as we are not required to do so. At any rate,
all those judgments deal with the procedural aspects and
concern the interpretation for various provisions of the Code
H of Criminal Procedure applicable to a criminal trial and they are
KANWAR NATWAR SINGH v. DIRECTORATE OF 133
ENFORCEMENT [B. SUDERSHAN REDDY, J.]
totally irrelevant for the purposes of deciding the issue that had A
arisen for our consideration in the present case.
CONCLUSIONS:
39. The appellants insisted for supply of all documents in
possession of the Authority and such demand is based on
vague, indefinite and irrelevant grounds. The appellants are not
sure as to whether they are asking for the copies of the
documents in possession of the Adjudicating Authority or in
possession of authorized officer who lodged the complaint. The
only object in making such demand is obviously to obstruct the C
proceedings and the appellants, to some extent, have been
able to achieve their object as is evident from the fact that the
inquiry initiated as early as in the year 2006 still did not even
commence.
40. We are constrained to take note of the fact that it is
on account of continuous unreasonable requests on the part of
the appellants, the Adjudicating Authority could not deal with the
complaint expeditiously which is required to be disposed of
within one year from the date of receipt of the complaint. We
accordingly direct the Adjudicating Authority to deal with the
complaint as expeditiously as possible and every endeavor
shall be made to dispose of the complaint finally at the earliest.
No unreasonable request for adjournment shall be entertained
by the Adjudicating Authority.
However, we make it clear that the Authority shall make
inquiry into the allegations made in the complaint strictly in
accordance with the law and uninfluenced ,by the observations
if any made in this order. We have not expressed any opinion
whatsoever on the merits of the case. The appellants are G
entitled to all the defence that may be available to them in law.
41. For all the aforesaid reasons, the appeals are
dismissed with costs.
K.K.T. Appeals dismissed. H