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High Court of Delhi
D. MURUGESAN & JAYANT NATH, JJ.
Shahid Balwa & Another
Versus
The Directorate of Enforcement
LPA Nos. 79, 80 of 2013 & CM Nos. 2310, 2332 of 2013
Decided On : 29-05-2013
FEMA - Foreign Exchange Management Act - Section 16(3) - Section 6(3)(b) of FEMA, Regulation 5(1) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, and Para 2, 3 and 9(1) (A) & (B) of Schedule 1 of the said Regulation - Summary of Acts and Sections: The court discussed the provisions of Section 16(3) of the Foreign Exchange Management Act, 1999, Section 6(3)(b) of FEMA, Regulation 5(1) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, and Para 2, 3 and 9(1) (A) & (B) of Schedule 1 of the said Regulation. The court emphasized the right to cross-examine witnesses as an integral part of the principle of natural justice and its applicability in the present case.
Fact of the Case:
The complaint was filed under Section 16(3) of the Foreign Exchange Management Act, 1999 for alleged contravention of Section 6(3)(b) of FEMA read with Regulation 5(1) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 and Para 2, 3 and 9(1) (A) & (B) of Schedule 1 of the said Regulation. The appellants sought permission to cross-examine certain persons to establish their innocence as the charges were denied by the appellants.
Finding of the Court:
The court held that the appellants should be entitled to cross-examine the three witnesses whose statements were relied upon by the respondent in the complaint. The court allowed the appellants to cross-examine the witnesses to test the veracity of their statements. However, the request of the appellant to cross-examine the complainant was without merits. The court directed that the cross-examination of the three witnesses should be concluded within a period of 10 working days from commencement.
Issues: The main issue was whether the appellants should be permitted to cross-examine the witnesses whose statements were relied upon by the respondent in the complaint.
Ratio Decidendi: The court emphasized that the right to cross-examine witnesses is an integral part and parcel of the principles of natural justice. The court allowed the appellants to cross-examine the witnesses to test the veracity of their statements.
Final Decision: The court allowed the appellants to cross-examine the three witnesses, namely, Shri Ahmad Shakir, Shri Pratap Ghose, and Shri K. Vasudeva, and directed that the cross-examination should be concluded within a period of 10 working days from commencement.
Jayant Nath, J.
1. By the present appeal, the appellants seek to impugn the order dated 24.01.2013 passed by the learned Single Judge dismissing the writ petitions of the appellants. The present order will dispose of LPA 79/2013 and LPA 80/2013 which are based on common facts. For convenience the facts of LPA 79/2013 are stated here.
2. The brief facts giving rise to the said petitions is that a complaint dated 01.07.2011 was filed under Section 16 (3) of the Foreign Exchange Management Act, 1999 (hereinafter referred to as “FEMA”) for alleged contravention of Section 6(3)(b) of FEMA read with Regulation 5(1) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 and Para 2, 3 and 9(1) (A) & (B) of Schedule 1 of the said Regulation read with Press Note no. 3 (2007 series) issued by Ministry of Commerce and Industry, Department of Industrial Policy and Promotion (SIA) (FC Division) by M/s Etisalat DB Telecom Pvt. (formerly, M/s Swan Telecom Pvt. Ltd.).
3. According to the complaint, it is alleged that M/s Swan Telecom Pvt. Ltd , (M/s Etisalat DB Telecom Pvt. Ltd.) contravened the condition of clause (vi), (vii) and (xxi) of Para-B of Press Note No. 3(2007 series) as aforesaid and thereby contravened the provisions of para 2 of Schedule 1 of Regulation (5) (1) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000 read with section 6(3)(b) of FEMA, 1999 in issuing shares to M/s Etisalat Mauritius under automatic route facility to the tune of Rs.3228.44/- Crores.
4. It was further stated in the complaint that M/s Swan Telecom Pvt. Ltd. (M/s Etisalat DB Telecom Pvt. Ltd) chose to issue 5.27% equity shows to M/s Genex Exim Ventures Pvt. Ltd and 44.73% equity to M/s Etisalat Mauritius without any FIPB approval and thus contravened the provisions of Para 3 of Schedule I of Regulation (5)(1) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations 2000 read with section 6(3) (b) of FEMA, 1999 for the amount of Rs.380 crores plus Rs.3228.44/- crores approx., by issuing shares to M/s Genex Exim and M/s Etisalat Mauritius.
5. It is further stated that M/s Swan Telecom Pvt. Ltd issued shares to M/s Etisalat Mauritius and indulged in over-valuation of its three shares issued to said Etisalat Mauritius so as to remain within the stipulated threshold of 49% equity prescribed for the automatic route. Hence the said M/s Swan Telecom Pvt. Ltd violated the provisions of para 3 of the Schedule 1 of Regulation (5) (1) of the Foreign Exchange Management (Transfer of Issue of Security by a Person Resident outside India) Regulations 2000 read with sections 6(3) (b) of FEA, 99 for the amount of Rs.316.22 crores because the facility of automatic route was already exhausted by the said M/s Swan Telecom Pvt. Ltd in issuing shares to Foreign Investors without FIPB approval.
6. Pursuant to receipt of the said complaint dated 01.07.2011 a show cause notice dated 08.07.2011 was issued against the said M/s Etisalat Mauritius and its Directors including the appellant herein.
7. The appellant thereafter filed a preliminary reply dated 18.02.2012 to the aforesaid show cause notice and reserved the right of filing a detailed reply after receiving the documents as prayed for. On 25.05.2012, the appellants filed three applications i.e. (a) application for non-joinder of parties and for joint adjudication; (b) application under Article 20(3) of the Constitution of India for keeping the adjudication proceedings before the Court in abeyance and; (c) application for keeping in abeyance the proceedings under Rule 4(3) FEMA Rules wherein the appellants have prayed for providing necessary documents for proper adjudication of the matter. On 17.09.2012, the Adjudicating Authority dismissed the said applications filed by the appellants. Aggrieved by the said order the appellants pr
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