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Supreme Court Stays Bombay High Court Order Allowing Lalit Modi's Request For Cross-Examination Of BCCI Officials Over FEMA Violation

Mehal Jain
27 Oct 2020 6:29 AM GMT
Supreme Court Stays Bombay High Court Order Allowing Lalit Modis Request For Cross-Examination Of BCCI Officials Over FEMA Violation
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The Supreme Court on Tuesday stayed the June 20, 2019 Bombay High Court order in favour of fugitive Lalit Modi, who wanted to cross-examine BCCI officials in connection with a case of alleged FEMA violation.

The High Court had also asked ED to consider afresh the request for giving Modi the reply of BCCI to their show cause notice in 2011.
SG Tushar Mehta prayed for a stay on behalf of the ED, which was granted by the bench of Justices R. F. Nariman, Navin Sinha and Krishna Murari.

Modi had moved the Bombay High Court in a Petition under Article 226, challenging the decisions dated 21st August,2017 and 8th January, 2018 of the Director of Enforcement as an adjudicating authority under the Foreign Exchange Management Act, 1999 and Foreign Exchange Management (Adjudication Proceedings and Appeals) Rules, 2000.

His grievance to order dated 21 st August, 2017 was to the extent it rejects his application for copy of the reply filed by BCCI (Board of Control of Cricket in India) i.e. main noticee in the show cause notice dated 20th July, 2011 which is also issued to him. So far as the order dated 8th January, 2018 is concerned, the challenge was to the extent it declines to grant cross examination of 5 persons namely -

(a) Shri N. Srinivasan, (b) Mr. Peter Griffith, (c) Mr. Andrew Wildblood, (d) Shri A. K. Nazeer Khan and (e) Shri D. K. Singh (complainant), whose statements are being relied upon by the ED in adjudication proceedings as was evident from the show cause notice dated 20 th July, 2011 issued to Modi. Further, the challenge to the impugned decision dated 8th January, 2018 was to the extent it does not permit/ grant joint hearing to all the noticee to the notice dated 20 th July, 2011.

The HC had appreciated that the present proceedings commenced consequent to complaint dated 13th July, 2011 under Section 16(3) of the Act made by Mr. D. K. Sinha, the Asst. Directorate Enforcement to Respondent No.1 (Special Director, ED). The Noticees in the complaint were BCCI, Mr. M. P. Pandov, State Bank of Travancore, Mr. Nazeer Khan, Chief Manager of State Bank of Travancore and Modi (the petitioner before the HC). On the basis of the above complaint, the Respondent No.1 issued the show cause notice dated 20 th July, 2011 to the BCCI, Mr. N. Srinivasan, Mr. M. P. Pandov and the Petitioner as noticees. The basis of the notice was that BCCI had hired consultant - International Management Group UK Ltd., (IMG) and payments made to it were in breach of the Act. The Petitioner and others were being proceeded against under Section 42 of the Act, as being persons in-charge/ in control of the Management of BCCI.

Thereafter, the Respondent No.1 (Adjudicating Officer) recorded his prima facie satisfaction under Rule 4(3) of the Adjudication Rules on 26th August, 2017. This enabled him to proceed further with adjudication of the notice. Consequent thereto, during the adjudication proceedings, the Petitioner sought the following directions:-

(a) cross examination of Mr. Srinivasan,Mr. Peter Griffith, Mr. Andrew Wildblood and Mr.D. K. Singh (complainant);

(b) joint hearing of all the notices in respect of show cause notice dated 20th July, 2011; and

(c) copy of the reply filed by the BCCI to the show cause notice dated 20th July, 2011.

"So far as the impugned communication dated 8th January, 2018 iss concerned, it inter alia disposes of the request for cross examination and joint hearing of all parties to the show cause notice by rejecting the same. So far as the issue of cross examination iss concerned, we find that the compliant/ show cause notice relies upon the statement of persons of whose cross examination is sought. Thus, the basic rules of natural justice would require grant of the same, in case, the statements are being relied upon by the Respondent No.1. In any event, this issue stands concluded by the order dated 30 th January, 2018 in Writ Petition No. 2803 of 2015 (supra) in favour of the Petitioner. Therefore, the Respondent No.1 would grant cross examination of the aforesaid five persons in case it seeks to rely upon the same", noted the HC.

So also to the extent the impugned communication dated 8th January, 2018 refuses permission for joint hearing of all the noticees was concerned, the High Court found that it gives no reason for refusing the same. It rejects the requirement only by stating that it would cause prejudice. Therefore, the aforesaid directions in the impugned communication dated 8 th January, 2018 was set aside and the Respondent No.1 was directed to deal with the above request afresh and dispose of the same in accordance with law.

"So far as the impugned communication dated 21 st August, 2017 is concerned, we find that it rejects the request for a copy of the reply filed by BCCI by only stating it would cause prejudice. No reasons in support thereof are indicated therein. Thus, the above communication dated 21st August, 2017 is set aside to the above extent and restored to Respondent No.1 for fresh decision", the High Court had directed.

The division bench of the HC had observed that the Respondent No.1 is entitled to take a view of whether or not the proceedings should be held jointly or separately or whether to give a copy of the reply of BCCI to Respondent No.1, in response to the common show cause notice. However, the bench had opined that when any application is made before him, he is required to consider the application and give reasons for not accepting the same. The court had further said it cannot be rejected by mere use of phrases 'without justification' or 'causes prejudice' unless there is some indication for the same in the communication; that this is a vital part of the decision making process; and that the absence of particulars to support the conclusions of 'causing prejudice' or 'without justification' would evidence non-application of mind to the application made by the Petitioner.

In the result, the HC passed the following order

(a) Communication dated 8th July, 2018 to the extent it refuses to grant cross examination of the persons whose statements are relied upon,is set aside. The Respondent No.1 is directed to offer cross examination of all persons on whose statements, he seeks to rely upon for adjudication;

(b) Communication dated 8th January, 2018 to the extent the prayer for joint hearing is rejected, is set aside. The Respondent No.1 would consider the above prayer and pass an appropriate order thereon in consonance with principles of natural justice; and S.R.JOSHI 5 of 6 wp-624-2018.doc

(c) Communication dated 21st August, 2018 to the extent it refuses to give copy of reply of BCCI to the noticee dated 20 th July, 2011, is set aside. The Respondent No.1 would consider afresh the above request and pass an order in accordance with principle of natural justice.

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