REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8601 OF 2010 ARISING OUT OF

SPECIAL LEAVE PETITION (C) NO. 10553 OF 2008

KANWAR NATWAR SINGH … APPELLANT

VERSUS

DIRECTOR OF ENFORCEMENT & ANR. … RESPONDENTS

WITH CIVIL APPEAL NO. 8602 OF 2010

ARISING OUT OF SPECIAL LEAVE PETITION (C) NO. 10554 OF 2008

KANWAR JAGAT SINGH … APPELLANT

VERSUS

DIRECTOR OF ENFORCEMENT & ANR. … RESPONDENTS

JUDGMENT

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  

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notice  under  Rule  4(1)  of  the  Foreign  Exchange  

Management  (Adjudication  Proceedings  and  Appeal)  

Rules,  2000  (hereinafter  referred  to  as  ‘the  Rules’)  is  

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?

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.  

2. In order to consider and decide the issue that arises for  

our consideration, it is just and necessary to briefly notice  

the relevant facts:

PART I : BACKGROUND FACTS

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  

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(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 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  

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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  

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,  

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  

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Virender Dayal from USA in connection with the instant  

case…”  This  seemingly  innocuous  request  ultimately  

turned out to be the origin of this avoidable 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 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  

notice  was submitted by the appellants  but  once again  

insisting  with  the  demand  that  the  copies  of  the  

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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 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  

Authority also made it clear that it is bound to conduct  

proceedings in accordance with the statute and the Rules  

and 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.

7. The appellants promptly challenged the impugned order  

of  the  Adjudicating  Authority  in  petitions  filed  under  

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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 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  

Adjudicating  Authority.  The  learned  senior  counsel  

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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 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 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 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  

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of natural  justice are complied with in the instant case  

since copies of relied on documents were supplied to the  

appellants.

PART III : RELEVANT STATUTE AND RULES

12. As part of the ongoing economic liberalization relating 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 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,  the  Foreign  Exchange  Management  Bill  was  

introduced in the Parliament. The Statement of Objects &  

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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  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 Foreign Exchange Management Act,  1999 (42 of  

1999).

13.Chapter  II  of  FEMA  deals  with  “Regulation  and  

Management  of  Foreign  Exchange”.  Chapter  III  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  

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the  powers  under  this  Act,  or  contravenes  any  condition  subject  to  which  an  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  amount is quantifiable, or up to two lakh rupees  where the amount is not quantifiable, and where  such  contravention  is  a  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  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.

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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  by  any  officer  authorised  by  a  general  or  special  order  by  the  Central  Government.

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(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, 1973 (2 of 1974).  

(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  Government  made  the  Rules  for  holding  

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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 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 service 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 shall  issue 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  

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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 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  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  

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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  an  authorisation  is  issued  by  the  Reserve  Bank  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,

(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

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  Foreign  Exchange  management.  It  essentially  

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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 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 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  property  

situated outside India. That if any person contravenes any  

provision of the Act, or contravenes any rule, regulation,  

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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 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 made, a reasonable opportunity of being heard for  

the purpose of imposing any penalty.  

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  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  

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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  

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  

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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. While holding inquiry  

into  allegations  of  contravention,  every  Adjudicating  

Authority shall have the powers of a Civil Court 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  record  or  document  

from any office; (e) issuing commissions for examination  

of  witnesses  or  documents  etc.  That  all  proceedings  

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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 Civil Court for the purposes of Sections 345 and  

346 of the Code of Criminal Procedure, 1973.

Principles  of  natural  justice  :  statutory  requirement  and fair hearing

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 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  

doctrine  of  fairness  require  supply  of  documents  upon  

2

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. 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 must be real flexibility. There must also have been  

caused 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 with and so forth.  Can the  

Courts  supplement  the  statutory  procedures  with  

requirements over and above those specified? In order to  1 (1970) 2 QB 417

2

ensure  a  fair  hearing,  Courts  can  insist  and  require  

additional steps as long a such steps would not frustrate  

the apparent purpose of the legislation.

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  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  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  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 this purpose…”   

2 [1987] AC 625 3 [1971] AC 297

2

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 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  Dhakeswari  Cotton Mills  

Ltd. Vs. Commissioner of Income Tax, West Bengal4.  

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 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  4 (1955) 1 SCR 941

2

well  settled  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, 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  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.

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 requiring the noticee to explain as to why an  

inquiry  under  Section  16  of  the  Act  should  not  be  

initiated. To this extent, the principles of natural justice  5 [1995) QB 43

2

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. 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 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  

2

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 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 documents based on which the law  

has been set 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  

2

Authority  in  the  manner  prescribed  for  the  purpose  of  

imposing any penalty as provided for in the Act and not at  

the  stage  where  the  Adjudicating  Authority  is  required  

merely to decide as to 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  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  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 has added: “If the  

right  to  be  heard  is  to  be  a  real  right  which  is  worth  

2

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  correct  or  contradict  them”  [see  

Kanda Vs. Government of Malaya]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,  

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 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  6 [1962] AC 322

2

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.

27. However, the learned senior counsel for the appellants 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 Sankaram Karri7 which is  

not an authority for the 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 was 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.  7 (2006) 7 SCC 172

3

The  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  Lalit,  strongly  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 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  detaining  Authority  and  the  detenu  was  

entitled to question such omission. It was the case of the  

detenu that if his representation and the writ petition had  8 (2008) 17 SCC 348

3

been  placed  before  the  detaining  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  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 favour,  which had been relied 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  the  Constitution,  irrespective  of  

whether he had knowledge of the same or not.  

3

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  

appellants that the procedure prescribed under Rule 4 of the  

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  

9 (2003) 6 SCC 230

3

constituted under the present Act is not an independent and  

impartial tribunal.  

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 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 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 observed that the  

failure  to  supply  important  piece  of  information  to  the  

appellants  has  prejudiced  the  appellants  and  to  this  

extent  the  principles  of  natural  justice  would  stand  10 (1997) 11 SCC 276

3

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 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  withheld  from  the  

appellants therein.

31. In support of his submissions the learned senior counsel  

has also referred us to the decision of this Court in State  

of M.P. Vs. Chintaman Sadashiva Vaishampayan11. 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  11 AIR 1961 SC 1623

3

him in the Departmental 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 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 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 Authority for setting the law into motion.  

Observations of the Courts are not to be read as Euclid’s  

3

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  observations  [see  

Haryana  Financial  Corporation  Vs.  Jagdamba  Oil   

Mills12].

33. One more decision upon which heavy reliance has been  

placed by the learned senior counsel is  RvH/RvC13. We  

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  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  

12 (2002) 3 SCC 496 13 [2004] UKHL 3

3

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 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  

3

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 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 imperil the overall fairness of  

the trial.

34. This  decision  was  followed  by  Attorney  General’s  

guidelines and disclosure in which it is clearly explained  

3

that disclosure is one of the most important aspects in the  

criminal 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  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  

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 is regulated by the provisions of  those  

4

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  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  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 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  

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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.  

Hegde, J. speaking for the Supreme Court propounded:  

“In other words, they (principles of natural justice) do not  

supplant the law of the land but supplement it” [see A.K.  

Kraipak  Vs.  Union  of  India14].  Its  essence  is  good  

conscience in a given situation; nothing more but nothing  

less  [see  Mohinder  Singh  Gill  Vs.  Chief  Election  

Commissioner15].

Alternate submission

37.Yet  another  submission  made  by  the  learned  senior  

counsel  requiring  our  consideration  relates  to  

14 (1969) 2 SCC 262 15 (1978) 1 SCC 405

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interpretation of sub-rule (6) of Rule 4. The learned senior  

counsel  contended  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  

opinion  may  be  useful  for  or  relevant  to  the  subject  

matter of inquiry. We find no merit in the submission. 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  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 is always open to a person facing an inquiry to invoke  

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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  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 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  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  

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in  accordance  with  the  provisions  of  the  Act  which  of  

course is not final as it is subject to appeal.

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  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 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 of Criminal Procedure applicable to a criminal trial  

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and they are totally irrelevant for the purposes of deciding  

the  issue  that  had  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 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  

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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 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.

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……………………………………….J. (B. SUDERSHAN REDDY)

………………………………………..J. (SURINDER SINGH NIJJAR)

NEW DELHI, OCTOBER  5, 2010.

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