Ketan V. Parekh Vs.
Special Director, Directorate of Enforcement and Another.
Civil Appeal No. 10301
of 2011
(Arising out .f SLP(C)
No.13932 of 2011)
Kartik K. Parekh Vs.
Special Director, Directorate of Enforcement and Another.
Civil Appeal No.
10302 of 2011
(Arising out of SLP(C)
No.13984 of 2011)
Panther Fincap and
Management Services Ltd. Vs. Special Director, Directorate of Enforcement and
Another.
Civil Appeal No.10303
of 2011
(Arising out of SLP(C)
No.13988 of 2011)
J U D G M E N T
G. S. Singhvi, J.
1.
Leave
granted.
2.
In
these appeals prayer has been made for setting aside the order of the Division
Bench of the Bombay High Court whereby the applications filed by the appellants
for condonation of delay in filing appeals under Section 35 of the Foreign
Exchange Management Act, 1999 (for short, `the Act') were dismissed along with the
appeals filed against order dated 2.8.2007 passed by the Appellate Tribunal for
Foreign Exchange (for short, `the Appellate Tribunal').Background facts
3.
On
an information received from the Reserve Bank of India that M/s. Classic Credit
Ltd. and M/s. Panther Fincap and Management Services Ltd. had taken loan of 25
lakh shares each of DSQ Industries Ltd. on 1.3.2011 from M/s. Greenfield
Investment Ltd, Mauritius and the Indus Ind Bank Ltd with whom
M/s. Greenfield
Investment Ltd. was maintaining NRE Account had informed that records did not indicate
any such transaction, the Directorate of Enforcement, Mumbai conducted enquiries
from different sources including Securities and Exchange Board of India, Shri Ketan
Parekh, M/s. Integrated Enterprises (I) Ltd., Chennai and Indsec Securities and
Finance Ltd.
Thereafter, show
cause notice dated 23.9.2004 was issued to M/s. Greenfield Investments Ltd.,
Mauritius, Shri Pravin Guwalewala, Mauritius, Smt. Neena Guwalewala, Mauritius,
Shri A. K. Sen, Mauritius, M/s. Classic Credit Ltd., Mumbai, M/s. Panther Fincap
and Management Services Ltd., Mumbai, Shri Ketan Parekh, Shri Kartik K. Parekh,
Shri Kirit Kumar N. Parekh and Shri Navinchandra Parekh for taking action
against them for contravention of the provisions of the Act.
After hearing the notices,
the Special Director of Enforcement, Mumbai (for short, `the Special Director')
passed order dated 30.1.2006 and, whereby he held that some of the noticees had
violated Sections 3(d) and 6(3)(e) of the Act and imposed penalty of Rs.40
crores on M/s. Classic Credit Ltd.; Rs.40 crores on
M/s. Panther Fincap
and Management Services Ltd.; Rs.75 crores on M/s. Greenfield Investments Ltd.;
Rs.80 crores on Shri Shri Ketan Parekh; Rs.12 crores on Shri Kartik K. Parekh;
Rs.60 crores on Shri Pravin Guwalewala and Rs.20 crores on Shri A.K. Sen with a
direction that they shall deposit the amount within 45 days from the date of
receipt of the order.
4.
The
appellants challenged the aforesaid order by filing appeals under Section 19 of
the Act. They also filed applications under Rule 10 of the Foreign Exchange
Management (Adjudication Proceedings and Appeal) Rules, 2000 read with Section 19
(1) of the Act for dispensing with the requirement of 4deposit of the amount of
penalty. In paragraphs 4 to 8 of the application filed by him, Shri Ketan V.
Parekh made the following averments:
"4. The
applicant submits that no case is made out against the applicant as Section 3
(d) of the Act is only attracted in case of a transaction in a foreign currency/foreign
security. The appellants case does not attract the provision of Section 3 (d)
of the Act.
5. That impugned
order passed by Special Director is liable to be set aside in view of the grounds
of appeal and the applicant has every hope of succeeding in the matter. As such
the applicant has a very good prima facie case on merits and is likely to
succeed in the appeal.
6. That the applicant
is suffering from a grave financial hardship since all his assets including,
properties, movable and immovable have been attached by an order of Ld. Debt Recovery
Tribunal on 11th April, 2001 (a copy of the order dated 11th April, 2001 is annexed
herewith and marked as Annexure B-1). Moreover the applicant/appellant is a
notified person and all his assets including, properties, movable and immovable
have been attached by the Government of India pursuant to the Notification
dated 6th October, 2001. A copy of the Notification dated 6th October, 2001 is attached
herewith and marked as Annexure B-2.
7. That the appellant
is further suffering due to another order of attachment passed by the Dy. CIT, Central
Cir 40 under Section 281B of the Income Tax Act dated 7th April, 2003 whereby
accounts of the appellant have been attached. A copy of the order dated 07.04.2003
is attached herewith and marked as Annexure-B3.
8. That by order dated
12th December, 2003 passed by SEBI, the applicant has also been prohibited from
carrying out its business activity at buying selling or dealing in securities
in any manner directly or indirectly and have also been debarred from associating
with the Securities market for the period of Fourteen years. A copy of the SEBI
order dated 12th December, 2003 is annexed herewith and marked as
Annexure-B4." In paragraphs 4 to 10 of his application, Kartik Parekh averred
as under:
"4. The
applicant submits that no case is made out against the applicant as Section 3
(d) of the Act is only attracted in case of a transaction in a foreign currency/foreign
security. The appellants case does not attract the provision of Section 3 (d)
of the Act.
5.
The
applicant submits that the appellant was at a same footing as Mr. Kirit Kumar Parekh
and Mr. Naveen Chandra Parekh. While the respondent has exonerated Mr. Kirit
Kumar Parekh and Mr. Naveen Chandra Parekh from all offences, he has perversely
held the applicant/appellant liable for the offences under the Act.
6.
In
any event, Mr. Ketan Parekh in his letter to the adjudicating authority has admitted
that the control and management of the company fully vested in him and that the
applicant is not responsible for the day to day activities of the company and hence
cannot be held liable for the alleged contravention of provisions of the Act.
In any event, even
for the sake of argument it is admitted that the appellant was an executive
director of CCL and Panther, unless it can be proven beyond any scope of doubt
that the appellant was managing the day to day operations of the aforesaid
companies, he cannot be held liable for any offence committed by the Company. The
impugned order will be set aside on this ground itself.
7.
That
impugned order passed by Special Director is liable to be set aside in view of the
grounds of appeal and the applicant has every hope of succeeding in the matter.
As such the applicant has a very good prima facie case on merits and is likely
to succeed in the appeal.
8.
That
the applicant company is suffering from grave financial hardship since the assets
of the applicant/appellant have been attached pursuant to the order of the
Hon'ble Debt Recovery Tribunal, Mumbai dated 11th April, 2001 confirmed on 25th
September, 2001 ( a copy of the order dated 11th April, 2001 confirmed on 25th September,
2001 is annexed herewith and marked as Annexure B-1).
9.
That
by order dated 12th December, 2003 passed by SEBI, the appellant has been prohibited
from carrying out its business activity of buying, selling or dealing in securities
in any manner directly or indirectly and have also been debarred from associating
with the Securities market for the period of fourteen years. (A copy of the SEBI
order dated 12th December, 2003 is annexed herewith and marked as Annexure- B4."
10.
In
view of the submissions made above it is respectfully submitted that the applicant/appellant
is not in a position to deposit the penalty amount of Rs.12,00,00,000 (Rupees
Twelve Crores) imposed in the impugned order. The appellant/applicant has
absolutely no means to pay the penalty amount as pre-deposit and such
pre-deposit would cause undue hardship to the applicant/appellant." In the
application filed on behalf of M/s. Panther Fincap and Management Services
Limited, the following averments were made:
"4. The
applicant submits that no case is made out against the applicant as Section 3
(d) of the Act is only attracted in case of a transaction in a foreign currency/foreign
security. The appellants case does not attract the provision of Section 3 (d)
of the Act.
5. That impugned
order passed by Special Director is liable to be set aside in view of the grounds
of appeal and the applicant has every hope of succeeding in the matter. As such
the applicant has a very good prima facie case on merits and is likely to
succeed in the appeal.
6. That the applicant
is suffering from a grave financial hardship since the accounts of the Company have
also been attached by the Income Tax Department under Section 281B of the Income
Tax Act by order dated 7th April, 2003 passed by Dy. CIT, Central Cir. 40, Mumbai.
Further even the Bank accounts and properties of the promoter and managing
director of the Company has also been attached under Section 281B of the Income
Tax Act by order dated 7th April, 2003 passed by Dy. CIT, Central Cir. 40,
Mumbai ( a copy of the order dated 7th April, 2003 is annexed herewith and
marked as Annexure B- 1).
7. That by order dated
12th December, 2003 passed by SEBI, the appellant company as well as its
promoter have been prohibited from carrying out its business activity of buying,
selling or dealing in securities in any manner directly or indirectly and have also
been debarred from associating with the Securities market for the period of
fourteen years. (A copy of the SEBI order dated 12th December, 2003 is annexed herewith
and marked as Annexure-B2.
8. In view of the
submissions made above it is respectfully submitted that the applicant/appellant
is not in a position to deposit the penalty amount of Rs.40,00,00,000 (Rupees Forty
Crores) imposed in the impugned order. The appellant/applicant has absolutely
no means to pay the penalty amount as pre-deposit and such pre-deposit would
cause undue hardship to the applicant/appellant.
"5. After
hearing the counsel for the parties, the Appellate Tribunal passed order dated
2.8.2007 and directed the appellants to deposit 50% of the amount of penalty with
a stipulation that if they fail to do so, the appeals will be dismissed. The
relevant portion of that order is extracted below:
"Without
discussing the merits of these appeals, we are of the view that the adjudication
order is not ex facie bad when the price of the borrowed DSQ shares has not
been discharged but is required to be paid by the appellants which normally can
be at the place where creditor, i.e. GIL, resides or is engaged in business,
i.e. Mauritius. Therefore, allegations of contravention of Section 3(d) cannot be
termed as ex facie bad, hence the appellants have no prima facie case.
They have many
questions to answer. After deciding one factor included in "undue hardship",
we proceed to look to the financial position of the appellants. It is the
burden on the appellants to disclose correct financial position which in these appeals
the appellants have totally failed to disclose.
The appellants are
not candid enough to bring out their correct financial status. Merely because Directorate
of Enforcement has not come out forcefully against the ground of financial
disability, this Tribunal cannot believe that appellants, who were roaring in
crores at one time, are not in a position to make pre-deposit of the penalty, especially
when this Tribunal is simultaneously duty-bound to, as provided in Second
Proviso of Section 19 (1) FEM Act, 1999, to ensure recovery of penalty. However,
we are conscious that this Tribunal may not unwittingly pass an order whereby injustice
can possibly be caused." (emphasis supplied)
6. Shri Ketan Parekh challenged
the aforesaid order in Writ Petition No.8385 of 2007 filed in the Delhi High
Court on 13.11.2007. The other two appellants, namely, Kartik K. Parekh and Panthar
Fincap and Management Services Ltd. filed Writ Petition Nos. 8231 and 8232 of
2007 on 5.11.2007 and prayed for quashing the order of the Appellate Tribunal. After
taking cognizance of the judgment of this Court in Raj Kumar Shivhare v.
Assistant Director, Directorate of Enforcement (2010) 4 SCC 772, the learned Single
9Judge dismissed the writ petitions vide order dated 26.7.2010, the relevant
portions of which are extracted below:
"1. There is a
categorical pronouncement on 12th April 2010 by the Supreme Court in Raj Kumar Shivhare
v. Assistant Director, Directorate of Enforcement (2010) 4 SCC 772 that even an
order passed by the Appellate Tribunal in an application seeking dispensation of
the pre-deposit of the penalty would be appealable under Section 35 of the Foreign
Exchange Management Act 1999 (`FEMA') and that the remedy under Article 226 of the
Constitution is not available against such order.
2. In that view of
the matter, the present petitions cannot be entertained by this Court. It is,
however, open to the Petitioners to avail of the appropriate remedy in terms of
para 45 of the above judgment of the Supreme Court.
3. The petitions are
dismissed."
7. Thereafter, the appellants
filed appeals under Section 35 of the Act before the Bombay High Court. They
also filed applications for condonation of 1056 days' delay. The Division Bench
of the Bombay High Court dismissed the applications for condonation of delay by
observing that it does not have the power to entertain an appeal filed beyond
120 days and even though in terms of the liberty given by the Delhi High Court,
the appellants could have filed appeals within 30 days, but they failed to do
so and, therefore, delay in filing the appeals cannot be condoned. Arguments
8. Shri Ranjit Kumar,
learned senior counsel appearing for the appellants argued that the impugned order
is liable to be set aside because while dismissing the applications for
condonation of delay, the Division Bench of the High Court did not take
cognizance of Section 14 of the Limitation Act, 1963.
Learned senior counsel
submitted that in terms of that section, entire period during which the writ
petitions filed by the appellants remained pending before the Delhi High Court is
liable to be excluded while computing the period of limitation and if that is done,
the appeals filed under Section 35 cannot be treated as barred by time.
Learned senior
counsel referred to Section 29(2) of the Limitation Act and the judgments of
this Court in State of Goa v. Western Builders (2006) 6 SCC 239, Consolidated
Engineering Enterprises v. Principal Secretary, Irrigation Department and others
(2008) 7 SCC 169, Coal India Limited and another v. Ujjal Transport Agency and
others (2011) 1 SCC 117 and argued that even though the period of limitation
prescribed under Section 35 of the Act is different from the period specified in
Article 137 of the Schedule appended to the Limitation Act, in the absence of
express exclusion of Section 14 of the Limitation Act, the appellants are entitled
to seek exclusion of the time spent by them in bona fide prosecution of remedy before
a wrong forum.
Shri Ranjit Kumar submitted
that at the time of filing writ petitions before the Delhi High Court, all the High
Courts were entertaining such petitions and granting relief to the aggrieved parties
and it is only after the judgment in Raj Kumar Shivhare v. Assistant Director, Directorate
of Enforcement (supra) that the High Courts cannot entertain writ petition
because of the availability of the statutory remedy of appeal under Section 35
of the Act.
Learned senior
counsel further submitted that if the period between 7.11.2007, i.e. the date
on which the writ petitions were filed before the Delhi High Court and
26.7.2010, i.e. the date on which the same were dismissed is excluded, the
appeals filed before the Bombay High Court on 27.8.2010 cannot be treated as
barred by time.
Learned senior
counsel then argued that financial condition of the appellant is extremely precarious
and the Appellate Tribunal committed serious error by directing them to deposit
50% of the penalty imposed by the Special Director as a condition for hearing the
appeals.
He also referred to
affidavit dated 10.10.2008 filed by appellant Ketan V. Parekh before the
Appellate Tribunal to show that he was declared a notified person in terms of
Section 3(2) of the Special Court (Trial of Offences relating to Transactions
in Securities) Act, 1992 and all his moveable and immovable properties
including bank accounts have been attached and he has been prohibited from
operating the same.
9. Shri A. K. Panda,
learned senior counsel appearing for the respondents supported the impugned order
and argued that the Division Bench of the Bombay High Court did not commit any error
by declining the appellants' prayer for condonation of delay because the appeals
were filed beyond the maximum period prescribed under Section 35 and the provisions
of the Limitation Act cannot be invoked for condonation of delay or for
exclusion of the time during which the writ petitions filed by the appellants remained
pending before the Delhi High Court.
Shri Panda emphasized
that even before the judgment of this Court in Raj Kumar Shivhare v. Assistant Director,
Directorate of Enforcement (supra), the legal position was crystal clear and in
terms of Section 35 of the Act an appeal could be filed against any decision or
order of the Appellate Tribunal within 60 days from the date of communication of
the decision or order and in terms of proviso to that section, the High Court
can extend the period by another 60 days and no more.
Learned senior
counsel then submitted that the appellants cannot invoke Section 14 of the
Limitation Act because their action of filing the writ petitions before the
Delhi High Court was not bona fide. He pointed out that vide order dated
7.11.2007, the learned Single Judge of the Delhi High Court had accepted the
request made by counsel appearing for the appellants and treated the writ petition
filed by Kartik K. Parekh as an appeal and similar order appears to have been
passed in the case of M/s. Panther Fincap and Management Services Limited but
those orders were subsequently recalled at the instance of the two appellants.
Shri Panda submitted
that the Appellate Tribunal did not commit any error by directing the appellants
to deposit 50% of the penalty imposed by the Special Director because they had been
found guilty of clandestine monetary transactions and did not disclose their
true financial position. .The relevant provisions :
11.
Section
35 of the Act as also Sections 5, 14 and 29(1) and (2) of the Limitation Act,
which have bearing on the decision of the issue raised in the appeals, read as
under - "35. Appeal to High Court –
Any person aggrieved by
any decision or order of the Appellate Tribunal may file an appeal to the High Court
within sixty days from the date of communication of the decision or order of the
Appellate Tribunal to him on any question of law arising out of such order: Provided
that the High Court may, if it is satisfied that the appellant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be filed
within a further period not exceeding sixty days.
Explanation.In this
section "High Court" means-- (a) the High Court within the jurisdiction
of which the aggrieved party ordinarily resides or carries on business or personally
works for gain; and (b) where the Central Government is the aggrieved party, the
High Court within the jurisdiction of which the respondent, or in a case where
there are more than one respondent, any of the respondents, ordinarily resides or
carries on business or personally works for gain.
"5. Extension of
prescribed period in certain cases - Any appeal or any application, other than
an application under any of the provisions of Order XXI of the Code of Civil
Procedure, 1908 (5 of 1908), may be admitted after the prescribed period, if
the appellant or the applicant satisfies the court that he had sufficient cause
for not preferring the appeal or making the application within such period.
Explanation - The fact that the appellant or the applicant was misled by any
order, practice or judgment of the High Court in ascertaining or computing the prescribed
period may be sufficient cause within the meaning of this section.
14. Exclusion of time
of proceeding bona fide in court without jurisdiction –
(1) In computing the
period of limitation for any suit the time during which the plaintiff has been prosecuting
with due diligence another civil proceeding, whether in a court of first instance
or of the appeal or revision, against the defendant shall be excluded, where
the proceeding relates to the same matter in issue and is prosecuted in good
faith in a court which, from defect of jurisdiction or other cause of a like
nature, is unable to entertain it.
(2) In computing the
period of limitation for any application, the time during which the applicant
has been prosecuting with due diligence another civil proceeding, whether in a court
of first instance or of appeal or revision, against the same party for the same
relief shall be excluded, where such proceeding is prosecuted in good faith in
a court of first instance or of appeal or revision, against the same party for
the same relief shall be excluded, where such proceeding is prosecuted in good
faith in a court which, from defect of jurisdiction or other cause of a like
nature, is unable to entertain it.
(3) Notwithstanding anything
contained in rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908),
the provisions of sub-section (1) shall apply in relation to a fresh suit
instituted on permission granted by the court under rule 1 of that Order, where
such permission is granted on the ground that the first suit must fail by reason
of a defect in the jurisdiction of the court of other cause of a like nature. Explanation
- For the purpose of this section, -
(a) In excluding the
time during which a former civil proceeding was pending, the day on which that
proceeding was instituted and the day on which it ended shall both be counted;
(b) a plaintiff or an
applicant resisting an appeal shall be deemed to be prosecuting a proceeding;
(c) Misjoinder of
parties or of causes of action shall be deemed to be a cause of a like nature
with defect of jurisdiction. 29. Savings –
(1) Nothing in this
Act shall affect section 25 of the Indian Contract Act,1872. ( 9 of 1872).
(2) Where any special
or local law prescribes for any suit, appeal or application a period of limitation
different from the period prescribed by the Schedule, the provisions of section
3 shall apply as if such period were the period prescribed by the Schedule and for
the purpose of determining any period of limitation prescribed for any suit,
appeal or application by any special or local law, the provisions contained in
sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent to
which, they are not expressly excluded by such special or local law."
12.
The
question whether the High Court can entertain an appeal under Section 35 of the
Act beyond 120 days does not require much debate and has to be answered against
the appellants in view of the law laid down in Union of India v. Popular
Construction Co. (2001) 8 SCC 470, Singh Enterprises v. CCE 16(2008) 3 SCC 70, Commissioner
of Customs, Central Excise v. Punjab Fibres Ltd. (2008) 3 SCC 73, Consolidated Engineering
Enterprises v. Principal Secretary, Irrigation Department and others (supra), Commissioner
of Customs and Central Excise v. Hongo India Private Limited (2009) 5 SCC 791 and
Chhattisgarh State Electricity Board v. Central Electricity Regulatory
Commission and others (2010) 5 SCC 23.
13.
In
Hukumdev Narain Yadav v. Lalit Narain Mishra (1974) 2 SCC 133, this Court
interpreted Section 29(2) of the Limitation Act in the context of the
provisions of the Representation of the People Act, 1951. It was argued that
the words "expressly excluded" appearing in Section 29(2) would mean
that there must be an explicit mention in the special or local law to the
specific provisions of the Limitation Act of which the operation is to be
excluded. While rejecting the argument, the three-Judge Bench observed: "
... what we have to see is whether the scheme of the special law, that is in
this case the Act, and the nature of the remedy provided therein are such that the
legislature intended it to be a complete code by itself which alone should
govern the several matters provided by it.
If on an examination of
the relevant provisions it is clear that the provisions of the Limitation Act are
necessarily excluded, then the benefits conferred therein cannot be called in
aid to supplement the provisions of the Act. In our view, even in a case where the
special law does not exclude the provisions of Sections 4 to 24 of the
Limitation Act by an express reference, it would nonetheless be open to the court
to examine whether and to what extent the nature of those provisions or the
nature of the subject-matter and scheme of the special law exclude their
operation." (emphasis supplied)
14.
In
Union of India v. Popular Construction Company (supra), this Court considered
the question whether Section 5 of the Limitation Act can be invoked for condonation
of delay in filing an application under Section 34 of the Arbitration and
Conciliation Act, 1996. The two-Judge Bench referred to earlier decisions in Vidyacharan
Shukla v. Khubchand Baghel AIR 1964 SC 1099, Hukumdev Narain Yadav v. Lalit Narain
Mishra (1974) 2 SCC 133, Mangu Ram v. MCD (1976) 1 SCC 392, Patel Naranbhai Marghabhai
v. Dhulabhai Galbabhai (1992) 4 SCC 264 and held: "As far as the language of
Section 34 of the 1996 Act is concerned, the crucial words are `but not
thereafter' used in the proviso to sub-section (3).
In our opinion, this phrase
would amount to an express exclusion within the meaning of Section 29(2) of the
Limitation Act, and would therefore bar the application of Section 5 of that
Act. Parliament did not need to go further. To hold that the court could
entertain an application to set aside the award beyond the extended period under
the proviso, would render the phrase `but not thereafter' wholly otiose.
No principle of
interpretation would justify such a result. Furthermore, Section 34(1) itself provides
that recourse to a court against an arbitral award may be made only by an application
for setting aside such award `in accordance with' sub-section (2) and sub-section
(3). Sub-section (2) relates to grounds for setting aside an award and is not
relevant for our purposes.
But an application
filed beyond the period mentioned in Section 34, sub-section (3) would not be
an application `in accordance with' that sub-section. Consequently by virtue of
Section 34(1), recourse to the court against an arbitral award cannot be made
beyond the period prescribed. The importance of the period fixed under Section 34
is emphasised by the provisions of Section 36 which provide that: `36.
Enforcement.--Where the
time for making an application to set aside the arbitral award under Section 34
has expired ... the award shall be enforced under the Code of Civil Procedure, 1908
(5 of 1908) in the same manner as if it were a decree of the court.' This is a significant
departure from the provisions of the Arbitration Act, 1940. Under the 1940 Act,
after the time to set aside the award expired, the court was required to
`proceed to pronounce judgment according to the award, and upon the judgment so
pronounced a decree shall follow' (Section 17).
Now the consequence
of the time expiring under Section 34 of the 1996 Act is that the award becomes
immediately enforceable without any further act of the court. If there were any
residual doubt on the interpretation of the language used in Section 34, the
scheme of the 1996 Act would resolve the issue in favour of curtailment of the
court's powers by the exclusion of the operation of Section 5 of the Limitation
Act."
15.
In
Singh Enterprises v. CCE (supra), the Court interpreted Section 35 of the
Central Excise Act, 1944 which is pari materia to Section 35 of the Act and
observed: "The Commissioner of Central Excise (Appeals) as also the tribunal
being creatures of statute are not vested with jurisdiction to condone the
delay beyond the permissible period provided under the statute.
The period up to
which the prayer for condonation can be accepted is statutorily provided. It
was submitted that the logic of Section 5 of the Limitation Act, 1963 (in short
`the Limitation Act') can be availed for 19 condonation of delay. The first
proviso to Section 35 makes the position clear that the appeal has to be preferred
within three months from the date of communication to him of the decision or order.
However, if the Commissioner is satisfied that the appellant was prevented by
sufficient cause from presenting the appeal within the aforesaid period of 60
days, he can allow it to be presented within a further period of 30 days.
In other words, this
clearly shows that the appeal has to be filed within 60 days but in terms of
the proviso further 30 days' time can be granted by the appellate authority to
entertain the appeal. The proviso to sub-section (1) of Section 35 makes the position
crystal clear that the appellate authority has no power to allow the appeal to be
presented beyond the period of 30 days.
The language used makes
the position clear that the legislature intended the appellate authority to
entertain the appeal by condoning delay only up to 30 days after the expiry of 60
days which is the normal period for preferring appeal. Therefore, there is complete
exclusion of Section 5 of the Limitation Act. The Commissioner and the High Court
were therefore justified in holding that there was no power to condone the
delay after the expiry of 30 days' period."
16.
In
Consolidated Engineering Enterprises v. Principal Secretary, Irrigation
Department and others (supra), a three-Judge Bench again considered Section 34(3)
of the Arbitration and Conciliation Act, 1996. J.M. Panchal, J., speaking for himself
and Balakrishnan, C.J., referred to the relevant provisions and observed: "....When
any special statute prescribes certain period of limitation as well as provision
for extension up to specified time-limit, on sufficient cause being shown, then
the period of limitation prescribed under the special law shall prevail and to that
extent the provisions of the Limitation Act shall stand excluded.
As the intention of the
legislature in enacting sub- section (3) of Section 34 of the Act is that the
application for 20 setting aside the award should be made within three months
and the period can be further extended on sufficient cause being shown by another
period of 30 days but not thereafter, this Court is of the opinion that the
provisions of Section 5 of the Limitation Act would not be applicable because the
applicability of Section 5 of the Limitation Act stands excluded because of the
provisions of Section 29(2) of the Limitation Act."
17.
In
Commissioner of Customs and Central Excise v. Hongo India (P) Ltd. (supra), another
three-Judge Bench considered the question whether Section 5 of the Limitation Act
can be invoked for condonation of delay in filing an appeal or reference to the
High Court, referred to the judgments in Union of India v. Popular Construction
Co. (supra), Singh Enterprises v. CCE (supra) and observed –
"As pointed out
earlier, the language used in Sections 35, 35-B, 35-EE, 35-G and 35-H makes the
position clear that an appeal and reference to the High Court should be made within
180 days only from the date of communication of the decision or order. In other
words, the language used in other provisions makes the position clear that the legislature
intended the appellate authority to entertain the appeal by condoning the delay
only up to 30 days after expiry of 60 days which is the preliminary limitation period
for preferring an appeal.
In the absence of any
clause condoning the delay by showing sufficient cause after the prescribed period,
there is complete exclusion of Section 5 of the Limitation Act. The High Court was,
therefore, justified in holding that there was no power to condone the delay
after expiry of the prescribed period of 180 days."
18.
In
Chhattisgarh State Electricity Board v. Central Electricity Regulatory
Commission (supra), a two-Judge Bench interpreted Section 125 of the
Electricity Act, 2003, which is substantially similar to Section 35 of the Act
and observed: "Section 125 lays down that any person aggrieved by any decision
or order of the Tribunal can file an appeal to this Court within 60 days from
the date of communication of the decision or order of the Tribunal. Proviso to
Section 125 empowers this Court to entertain an appeal filed within a further
period of 60 days if it is satisfied that there was sufficient cause for not
filing appeal within the initial period of 60 days.
This shows that the period
of limitation prescribed for filing appeals under Sections 111(2) and 125 is substantially
different from the period prescribed under the Limitation Act for filing suits,
etc.
The use of the
expression "within a further period of not exceeding 60 days" in the
proviso to Section 125 makes it clear that the outer limit for filing an appeal
is 120 days. There is no provision in the Act under which this Court can entertain
an appeal filed against the decision or order of the Tribunal after more than
120 days.
The object underlying
establishment of a special adjudicatory forum i.e. the Tribunal to deal with
the grievance of any person who may be aggrieved by an order of an adjudicating
officer or by an appropriate Commission with a provision for further appeal to this
Court and prescription of special limitation for filing appeals under Sections 111
and 125 is to ensure that disputes emanating from the operation and implementation
of different provisions of the Electricity Act are expeditiously decided by an
expert body and no court, except this Court, may entertain challenge to the
decision or order of the Tribunal. The exclusion of the jurisdiction of the civil
courts (Section 145) qua an order made by an adjudicating officer is also a
pointer in that direction.
22 It is thus evident
that the Electricity Act is a special legislation within the meaning of Section
29(2) of the Limitation Act, which lays down that where any special or local
law prescribes for any suit, appeal or application a period of limitation different
from the one prescribed by the Schedule, the provisions of Section 3 shall
apply as if such period were the period prescribed by the Schedule and
provisions contained in Sections 4 to 24 (inclusive) shall apply for the purpose
of determining any period of limitation prescribed for any suit, appeal or
application unless they are not expressly excluded by the special or local
law."
The Court then
referred to some of the precedents and held: "In view of the above
discussion, we hold that Section 5 of the Limitation Act cannot be invoked by
this Court for entertaining an appeal filed against the decision or order of the
Tribunal beyond the period of 120 days specified in Section 125 of the Electricity
Act and its proviso.
Any interpretation of
Section 125 of the Electricity Act which may attract the applicability of Section
5 of the Limitation Act read with Section 29(2) thereof will defeat the object of
the legislation, namely, to provide special limitation for filing an appeal against
the decision or order of the Tribunal and proviso to Section 125 will become nugatory."
19.
The
question whether Section 14 of the Limitation Act can be relied upon for
excluding the time spent in prosecuting remedy before a wrong forum was
considered by a two Judge Bench in State of Goa v. Western Builders (supra) in
the context of the provisions contained in Arbitration and Conciliation Act,
1996. The Bench referred to the provisions of the two Acts and observed: "There
is no provision in the whole of the Act which prohibits discretion of the
court.
Under Section 14 of
the Limitation Act 23 if the party has been bona fidely prosecuting his remedy
before the court which has no jurisdiction whether the period spent in that
proceedings shall be excluded or not. Learned counsel for the respondent has taken
us to the provisions of the Act of 1996: like Section 5, Section 8(1),
Section 9, Section
11, sub- sections (4), (6), (9) and sub-section (3) of Section 14, Section 27,
Sections 34, 36, 37, 39(2) and (4), Section 41, sub-section (2), Sections 42
and 43 and tried to emphasise with reference to the aforesaid sections that wherever
the legislature wanted to give power to the court that has been incorporated in
the provisions, therefore, no further power should lie in the hands of the court
so as to enable to exclude the period spent in prosecuting the remedy before
other forum.
It is true but at the
same time there is no prohibition incorporated in the statute for curtailing the
power of the court under Section 14 of the Limitation Act. Much depends upon the
words used in the statute and not general principles applicable. By virtue of Section
43 of the Act of 1996, the Limitation Act applies to the proceedings under the Act
of 1996 and the provisions of the Limitation Act can only stand excluded to the
extent wherever different period has been prescribed under the Act, 1996.
Since there is no prohibition
provided under Section 34, there is no reason why Section 14 of the Limitation
Act (sic not) be read in the Act of 1996, which will advance the cause of
justice. If the statute is silent and there is no specific prohibition then the
statute should be interpreted which advances the cause of justice."
20.
19.
The same issue was again considered by the three-Judge Bench in Consolidated Engineering
Enterprises v. Principal Secretary, Irrigation Department (supra) to which reference
has been made hereinabove. After holding that Section 5 of the Limitation Act
cannot be invoked for condonation of delay, Panchal, J (speaking for himself
and Balakrishnan, C.J.) observed: 24"Section 14 of the Limitation Act
deals with exclusion of time of proceeding bona fide in a court without jurisdiction.
On analysis of the said
section, it becomes evident that the following conditions must be satisfied
before Section 14 can be pressed into service:(1) Both the prior and subsequent
proceedings are civil proceedings prosecuted by the same party;(2) The prior proceeding
had been prosecuted with due diligence and in good faith;(3) The failure of the
prior proceeding was due to defect of jurisdiction or other cause of like
nature;(4) The earlier proceeding and the latter proceeding must relate to the
same matter in issue and;(5) Both the proceedings are in a court.
The policy of the section
is to afford protection to a litigant against the bar of limitation when he institutes
a proceeding which by reason of some technical defect cannot be decided on
merits and is dismissed. While considering the provisions of Section 14 of the
Limitation Act, proper approach will have to be adopted and the provisions will
have to be interpreted so as to advance the cause of justice rather than abort the
proceedings. It will be well to bear in mind that an element of mistake is
inherent in the invocation of Section 14.
In fact, the section
is intended to provide relief against the bar of limitation in cases of mistaken
remedy or selection of a wrong forum. On reading Section 14 of the Act it becomes
clear that the legislature has enacted the said section to exempt a certain
period covered by a bona fide litigious activity.
Upon the words used
in the section, it is not possible to sustain the interpretation that the
principle underlying the said section, namely, that the bar of limitation
should not affect a person honestly doing his best to get his case tried on
merits but failing because the court is unable to give him such a trial, would
not be applicable to an 25application filed under Section 34 of the Act of 1996.
The principle is clearly
applicable not only to a case in which a litigant brings his application in the
court, that is, a court having no jurisdiction to entertain it but also where
he brings the suit or the application in the wrong court in consequence of bona
fide mistake or (sic of) law or defect of procedure.
Having regard to the
intention of the legislature this Court is of the firm opinion that the equity underlying
Section 14 should be applied to its fullest extent and time taken diligently
pursuing a remedy, in a wrong court, should be excluded.
At this stage it
would be relevant to ascertain whether there is any express provision in the
Act of 1996, which excludes the applicability of Section 14 of the Limitation
Act. On review of the provisions of the Act of 1996 this Court finds that there
is no provision in the said Act which excludes the applicability of the provisions
of Section 14 of the Limitation Act to an application submitted under Section
34 of the said Act. On the contrary, this Court finds that Section 43 makes the
provisions of the Limitation Act, 1963 applicable to arbitration proceedings.
The proceedings under
Section 34 are for the purpose of challenging the award whereas the proceeding
referred to under Section 43 are the original proceedings which can be equated with
a suit in a court. Hence, Section 43 incorporating the Limitation Act will
apply to the proceedings in the arbitration as it applies to the proceedings of
a suit in the court.
Sub-section (4) of Section
43, inter alia, provides that where the court orders that an arbitral award be
set aside, the period between the commencement of the arbitration and the date
of the order of the court shall be excluded in computing the time prescribed by
the Limitation Act, 1963, for the commencement of the proceedings with respect
to the dispute so submitted.
If the period between
the commencement of the arbitration proceedings till the award is set aside by
the court, has to be excluded in computing the period of limitation provided
for any proceedings with respect to the dispute, there is no good reason as to why
it should not be held that the provisions of Section 14 of the Limitation Act would
be applicable to an application submitted under Section 34 of the Act of 1996, more
particularly where no provision is to be 26 found in the Act of 1996, which excludes
the applicability of Section 14 of the Limitation Act, to an application made under
Section 34 of the Act.
It is to be noticed
that the powers under Section 34 of the Act can be exercised by the court only
if the aggrieved party makes an application. The jurisdiction under Section 34
of the Act, cannot be exercised suo motu. The total period of four months
within which an application, for setting aside an arbitral award, has to be
made is not unusually long.
Section 34 of the Act
of 1996 would be unduly oppressive, if it is held that the provisions of
Section 14 of the Limitation Act are not applicable to it, because cases are no
doubt conceivable where an aggrieved party, despite exercise of due diligence
and good faith, is unable to make an application within a period of four
months.
From the scheme and
language of Section 34 of the Act of 1996, the intention of the legislature to
exclude the applicability of Section 14 of the Limitation Act is not manifest. It
is well to remember that Section 14 of the Limitation Act does not provide for a
fresh period of limitation but only provides for the exclusion of a certain
period.
Having regard to the
legislative intent, it will have to be held that the provisions of Section 14
of the Limitation Act, 1963 would be applicable to an application submitted
under Section 34 of the Act of 1996 for setting aside an arbitral award."
In his concurring
judgment, Raveendran, J. referred to the judgment in State of Goa v. Western
Builders (supra) and observed: "On the other hand, Section 14 contained in
Part III of the Limitation Act does not relate to extension of the period of limitation,
but relates to exclusion of certain period while computing the period of limitation.
Neither sub-section (3)
of Section 34 of the AC Act nor any other provision of the AC Act exclude the
applicability of Section 14 of the Limitation Act to applications under Section
34(1) of the AC Act. Nor will the proviso to Section 34(3) exclude the
application of Section 14, as Section 14 is not a provision for extension of period
of limitation, but for exclusion of certain period while computing the period
of limitation.
Having regard to
Section 29(2) of the Limitation Act, Section 14 of that Act will be applicable
to an application under Section 34(1) of the AC Act. Even when there is cause to
apply Section 14, the limitation period continues to be three months and not more,
but in computing the limitation period of three months for the application
under Section 34(1) of the AC Act, the time during which the applicant was prosecuting
such application before the wrong court is excluded, provided the proceeding in
the wrong court was prosecuted bona fide, with due diligence. Western Builders therefore
lays down the correct legal position."
21.
The
same view was reiterated in Coal India Limited v. Ujjal Transport Agency
(supra).
22.
The
aforesaid three judgments do support the argument of Shri Ranjit Kumar that
even though Section 5 of the Limitation Act cannot be invoked for condonation of
delay in filing an appeal under the Act because that would tantamount to
amendment of the legislative mandate by which special period of limitation has
been prescribed, Section 14 can be invoked in an appropriate case for exclusion
of the time during which the aggrieved person may have prosecuted with due
diligence remedy before a wrong forum, but on a careful scrutiny of the record of
these cases, we are satisfied that Section 14 of the Limitation Act cannot be
relied upon for exclusion of the period during which the writ petitions filed by
the appellants remained pending before the Delhi High Court.
In the applications
filed by them before the Bombay High Court, the appellants had sought
condonation of 1056 days' delay by stating that after 28receiving copy of the order
passed by the Appellate Tribunal, they had filed writ petitions before the Delhi
High Court, which were disposed of on 26.7.2010 and, thereafter, they filed appeals
before the Bombay High Court under Section 35 of the Act. Paragraphs 1, 2 and 3
of the applications for condonation of delay which are identical in all the
cases were as under:
"1. The Appellant
above named has preferred an Appeal against the order dated 2nd August 2007
(hereinafter referred to as the "impugned order") passed by the Respondent
No.1 against the Appellant above named. The Appellant states that the impugned order
was received by the Appellant on 5th October 2007.
The Appellant states that
there is a delay of 1056 days in filing the above appeal, the reasons for which
are being stated in detail hereunder and, therefore, the Appellant above named prays
that the delay in filing the present appeal may please be condoned. 2. RELIEFS
SOUGHT : (a) That this Hon'ble Court be pleased to condoned the delay of 1056
days in filing the said Appeal; (b) That such further and other reliefs as the facts
and circumstances may require.
3. REASONS FOR THE
DELAY : 3.1 The Appellant declares that there is delay of 1056 days in filing
the appeal as prescribed in the Limitation Act, 1963. 3.2 The Appellant further
states that the delay occurred as the Writ Petition was filed before Delhi High
Court on 5th November, 2007.
The said writ was
filed under the provisions of Articles 226 and 227 of the Constitution of India
seeking 29 issuance of a writ order or direction in the nature of Mandamus or
any other writ for setting aside the impugned order dated 2nd August, 2007, passed
by the Appellate Tribunal for Foreign Exchange under Rule 10 of the
Adjudicating Proceedings and Appeal, 2000 for Dispensation. In the said Writ proceedings
Hon'ble High Court of Delhi had passed an order on 26th July 2010.
Vide the said order
dated 26th July, 2010, while relying on the judgment of the Hon'ble Supreme
Court, it was held by the Hon'ble Delhi High Court that even an order passed by
the Appellate Tribunal in an application seeking dispensation of pre-deposit of
the penalty would be appealable under section 35 of the FEMA and that remedy
under Article 226 is not available against such an order.
Further, Hon'ble Delhi
High Court also held that the present petition cannot be entertained by this Court.
It is, however, open to the Appellant's to avail of the appropriate remedy in terms
of para 45 of the above judgment of the Supreme Court. 3.3 Hence, pursuant to the
said order passed by Hon'ble Delhi High Court the Appellant above named prefers
an appeal before this Hon'ble Bombay High Court.
3.4 Under the said
circumstances the Appellant most humbly prays that this Hon'ble Court may be pleased
to condone the delay.
3.5 It is submitted that
the delay, in filing of the present Appeal has not prejudiced the Respondent in
any manner, whatsoever, and, therefore, this Hon'ble Court be pleased to condone
the said delay.
3.6 It is, further submitted
that the delay of 1056 days in filing the present Appeal was bonafide, unintentional
and inadvertent."
23.
A
careful reading of the above reproduced averments shows that there was not even
a whisper in the applications field by the appellants that they had 30been
prosecuting remedy before a wrong forum, i.e. the Delhi High Court with due diligence
and in good faith. Not only this, the prayer made in the applications was for
condonation of 1056 days' delay and not for exclusion of the time spent in prosecuting
the writ petitions before the Delhi High Court.
This shows that the appellants
were seeking to invoke Section 5 of the Limitation Act, which, as mentioned above,
cannot be pressed into service in view of the language of Section 35 of the Act
and interpretation of similar provisions by this Court.
24.
There
is another reason why the benefit of Section 14 of the Limitation Act cannot be
extended to the appellants. All of them are well conversant with various statutory
provisions including FEMA. One of them was declared a notified person under Section
3(2) of the Special Court (Trial of Offences relating to Transactions in Securities)
Act, 1992 and several civil and criminal cases are pending against him.
The very fact that
they had engaged a group of eminent Advocates to present their cause before the
Delhi and the Bombay High Courts shows that they have the assistance of legal
experts and this seems to the reason why they invoked the jurisdiction of the
Delhi High Court and not of the Bombay High Court despite the fact that they
are residents of Bombay and have been contesting other matters including the proceedings
pending 31before the Special Court at Bombay.
It also appears that
the appellants were sure that keeping in view their past conduct, the Bombay
High Court may not interfere with the order of the Appellate Tribunal. Therefore,
they took a chance before the Delhi High Court and succeeded in persuading
learned Single Judge of the Court to entertain their prayer for stay of further
proceedings before the Appellate Tribunal.
The promptness with
which the learned senior counsel appearing for appellant - Kartik K. Parekh made
a statement before the Delhi High Court on 7.11.2007 that the writ petition may
be converted into an appeal and considered on merits is a clear indication of the
appellant's unwillingness to avail remedy before the High Court, i.e. the Bombay
High Court which had the exclusive jurisdiction to entertain an appeal under
Section 35 of the Act.
It is not possible to
believe that as on 7.11.2007, the appellants and their Advocates were not aware
of the judgment of this Court in Ambica Industries v. Commissioner of Central Excise
(2007) 6 SCC 769 whereby dismissal of the writ petition by the Delhi High Court
on the ground of lack of territorial jurisdiction was confirmed and it was
observed that the parties cannot be allowed to indulge in forum shopping. It
has not at all surprised us that after having made a prayer that the writ
petitions filed by them be treated as appeals under Section 35, two of the
appellants filed applications for recall of that order.
No doubt, the learned
Single Judge accepted their prayer and the Division Bench confirmed the order
of the learned Single Judge but the manner in which the appellants prosecuted
the writ petitions before the Delhi High Court leaves no room for doubt that they
had done so with the sole object of delaying compliance of the direction given
by the Appellate Tribunal and, by no stretch of imagination, it can be said that
they were bona fide prosecuting remedy before a wrong forum. Rather, there was
total absence of good faith, which is sine qua non for invoking Section 14 of
the Limitation Act.
25.
The
issue deserves to be considered from another angle. By taking advantage of the
liberty given by the learned Single Judge of the Delhi High Court, the
appellants invoked the jurisdiction of the Bombay High Court under Section 35
of the Act. However, while doing so, they violated the time limit specified in
order dated 26.7.2010 which, in turn, is based on paragraph 45 of the judgment of
this Court in Raj Kumar Shivhare v. Assistant Director, Directorate of Enforcement
(supra).
Indeed, it is not even
the case of the appellants that they had filed appeals under Section 35 of the Act
within 30 days computed from 26.7.2010. Therefore, the Division Bench of the
Bombay High Court rightly observed that even though the issue relating to
jurisdiction of the Delhi High Court to grant time to the appellants to file
appeals is highly 33debatable, the time specified in the order passed by the
Delhi High Court cannot be extended.
26.
In
view of the above discussion, we hold that the impugned order does not suffer
from any legal infirmity.
27.
Notwithstanding
the above conclusion, we have considered the submission of Shri Ranjit Kumar
that the appellants are facing huge financial crises and the Appellate Tribunal
committed serious error by not entertaining their prayer to dispense with the requirement
of deposit of the amount of penalty in its entirety, but have not felt
convinced.
In our considered
view, the appellants miserably failed to make out a case, which could justify
an order by the Appellate Tribunal to relieve them of the statutory obligation
to deposit the amount of penalty. The appellants have the exclusive knowledge of
their financial condition/status and it was their duty to candidly disclose all
their assets, movable and immovable including those in respect of which orders
of attachment may have been passed by the judicial and quasi judicial forums.
However, instead of
coming clean, they tried to paint a gloomy picture about their financial
position, which the Appellate Tribunal rightly refused to accept. If what was
stated in the applications filed by the appellants and affidavit dated 10.10.2008
is correct, then the appellants must be in a state of begging which not even a
man of ordinary prudence will be prepared to accept. To us, it is clear that the
appellants deliberately concealed the facts relating to their financial
condition. Therefore, the Appellate Tribunal did not commit any error by
refusing to entertain their prayer for total exemption.
28.
In
this context, reference can usefully be made to the judgment of this Court in
Benara Values Ltd. v. Commissioner of Central Excise (2006) 13 SCC 347. In that
case, a two Judge Bench interpreted Section 35-F of the Central Excise Act,
1944, which is pari materia to Section 19(1) of the Act, referred to the judgments
in Siliguri Municipality v. Amalendu Das (1984) 2 SCC 436, Samarias Trading Co.
(P) Ltd. v. S. Samuel (1984) 4 SCC 666, Commissioner of Central Excise v.
Dunlop India Ltd. (1985) 1 SCC 260 and observed:
"Two significant
expressions used in the provisions are "undue hardship to such person"
and "safeguard the interests of the Revenue". Therefore, while dealing
with the application twin requirements of considerations i.e. consideration of undue
hardship aspect and imposition of conditions to safeguard the interests of the
Revenue have to be kept in view. As noted above there are two important
expressions in Section 35-F.
One is undue
hardship. This is a matter within the special knowledge of the applicant for
waiver and has to be established by him. A mere assertion about undue hardship
would not be sufficient. It was noted by this Court in S. Vasudeva v. State of Karnataka
that under Indian conditions expression "undue hardship" is normally related
to economic hardship. "Undue" which means something which is not
merited by the conduct of 35 the claimant, or is very much disproportionate to it.
Undue hardship is caused
when the hardship is not warranted by the circumstances. For a hardship to be "undue"
it must be shown that the particular burden to observe or perform the
requirement is out of proportion to the nature of the requirement itself, and the
benefit which the applicant would derive from compliance with it. The word
"undue" adds something more than just hardship. It means an excessive
hardship or a hardship greater than the circumstances warrant.
The other aspect
relates to imposition of condition to safeguard the interests of the Revenue. This
is an aspect which the Tribunal has to bring into focus. It is for the Tribunal
to impose such conditions as are deemed proper to safeguard the interests of
the Revenue. Therefore, the Tribunal while dealing with the application has to consider
materials to be placed by the assessee relating to undue hardship and also to stipulate
conditions as required to safeguard the interests of the Revenue."
29.
The
same view was reiterated in Indu Nissan Oxo Chemicals Industries Ltd. v. Union
of India (2007) 13 SCC 487 by considering proviso to Section 129-E of the
Customs Act, 1962, which is almost identical to Section 19 of the Act.
30.
In
the result, the appeals are dismissed. Four weeks' further time is allowed to
the appellants to comply with the direction given by the Appellate Tribunal, failing
which the appeals filed by them shall stand automatically dismissed. The
parties are left to bear their own costs.
............................................J.
[G.S. Singhvi]
............................................J.
[Sudhansu Jyoti Mukhopadhaya]
New
Delhi
November
29, 2011.
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