2010 (10) TMI 944 - AT - FEMA

Summary

Issues Involved: Alleged contravention of Section 9(1)(a), 9(1)(b), and 9(1)(d) of FERA, violation of principles of natural justice, reliance on confessional statements, burden of proof on prosecution, lack of independent witnesses, cross-examination of witnesses.

Summary:

Alleged Contravention of FERA:
The appellant, along with co-accused, faced allegations of contravening Section 9(1)(a), 9(1)(b), and 9(1)(d) of FERA. Transactions involving payments and drafts were scrutinized, leading to a penalty of Rs. 2 lakhs imposed by the adjudicating authority, which was upheld in appeals dismissed by the Director, Enforcement Directorate.

Principles of Natural Justice:
The appellant contended that the denial of the opportunity to cross-examine witnesses violated principles of natural justice. It was argued that the prosecution must prove the case beyond doubt, ensuring the voluntariness of confessions without coercion. Lack of independent witnesses supporting the prosecution's case was highlighted.

Reliance on Confessional Statements:
While the defense emphasized the need for independent corroborative evidence, the prosecution relied on confessional statements recorded under Section 40 of FERA. The defense argued that the impugned orders were supported by material evidence, including seized documents, and were not solely based on confessions.

Burden of Proof and Lack of Evidence:
Citing a Supreme Court judgment, it was clarified that the burden of proof lies with the prosecution to establish charges beyond suspicion. The absence of evidence demonstrating the voluntary nature of confessions raised doubts about the basis for imposing penalties. The appellant's alleged violations of Sections 9(1)(a) and 9(1)(b) required concrete proof of transactions with non-residents, which was lacking.

Judgment and Conclusion:
Upon review, it was found that the reliance on confessions without evidence of voluntariness and the lack of legal support for the findings undermined the penalty imposition. Consequently, the appeal was allowed, and the penalty of Rs. 2,00,000 was set aside due to the absence of substantial legal evidence supporting the charges.