2009 (8) TMI 1120 - HC - FEMA

Alleged contravention of the provisions of Section 8(1) and 8 (2) of the FERA, 1973 - peanlty imposed Held that - The learned counsel appearing on behalf of the respondent though submitted a written note opposing the case of the appellant but has not been able to substantiate the proof of alleged statement of Surinder Kumar Dhawan, which is the basis of the involvement of the present appellant in this case. The voluntariness of the statement of the present appellant has also not been proved. No copy of the statement dated 2-7-1986 has been placed on record. Thus, there is no evidence which may prove the role of the appellant in this case. Further in this case the enquiry is not fair inasmuch as no opportunity has been granted to the appellant to cross-examine the witnesses who recorded the statement of the appellant and of other accused persons or the witnesses to the recovery of the incriminating documents or the witnesses to the recovery of the alleged foreign exchange from Surinder Kumar Dhawan and as such even the lighter burden to prove their case by preponderance of probability has not been discharged by the respondent. Moreso, they have also not been able to lead evidence before the adjudicating authority that the alleged confessional statement, on which reliance has been placed by the respondents, was made voluntarily and was not recorded by using any force upon him as alleged by the appellant in his written communication sent on 14-9-1985. Thus no ground for imposition of penalty upon the appellant in this case and consequently, the penalty imposed by respondent No. 3 vide order dated 10-4-1991, upheld by respondent No. 2 though by reducing the penalty amount, is not sustained.

Issues Involved:
1. Evidence against the appellant for contravention of Section 8(1) and 8(2) of the FERA, 1973.
2. Voluntariness and corroboration of the statements relied upon by the respondents.
3. Proof of recovery of foreign currency and corroboration of documents seized.
4. Opportunity to cross-examine witnesses and fairness of the adjudicatory proceedings.
5. Imposition of penalty based on retracted confession.

Issue-wise Detailed Analysis:

1. Evidence against the appellant for contravention of Section 8(1) and 8(2) of the FERA, 1973:
The appellant challenged the order of the Appellate Tribunal for Foreign Exchange, which reduced the penalty imposed by the Special Director, Enforcement Directorate. The proceedings were initiated based on a statement by Surinder Kumar Dhawan, who was arrested with foreign currency and claimed it was given by the appellant. The respondents conducted searches and claimed to have recovered documents indicating foreign exchange dealings by the appellant. However, the appellant argued there was no evidence of contravention of the FERA provisions.

2. Voluntariness and corroboration of the statements relied upon by the respondents:
The appellant retracted his statement, alleging it was made under duress. The Supreme Court in K.I. Pavunny v. Asstt. Collector (HQ), Central Excise Collectorate, held that a retracted confession must be tested for voluntariness and truthfulness. The burden of proving the statement was voluntary lies with the prosecution. The appellant also cited Vinod Kumar Solanki v. Union of India, where the court emphasized that the burden of proof shifts to the prosecution once a confession is retracted. The respondents failed to provide corroborative evidence or prove the voluntariness of the appellant's statement.

3. Proof of recovery of foreign currency and corroboration of documents seized:
The appellant argued that the recovery of foreign currency and documents was not proved according to the law. The respondents did not produce independent witnesses or allow cross-examination of officials who recorded the statements. The Supreme Court in Vinod Kumar Solanki emphasized the need for corroboration of retracted confessions and the importance of examining the circumstances of the confession. The respondents did not refute the appellant's allegations of duress, and the recovery of documents was not substantiated.

4. Opportunity to cross-examine witnesses and fairness of the adjudicatory proceedings:
The appellant contended that the adjudicatory proceedings were unfair as he was not given the opportunity to cross-examine witnesses, including officials who recorded statements and witnesses to the recovery of foreign exchange. The lack of cross-examination and the failure to produce witnesses weakened the respondents' case. The Supreme Court in Vinod Kumar Solanki highlighted the importance of fair proceedings and the need for the prosecution to prove the voluntariness of confessions.

5. Imposition of penalty based on retracted confession:
The appellant argued that the imposition of penalty was unjustified as the confession was retracted and not corroborated. The Supreme Court in Vinod Kumar Solanki held that retracted confessions require corroboration and must be voluntary. The respondents did not meet the burden of proving the confession was voluntary, and the criminal prosecution resulted in the discharge of the appellant. The court found no grounds for imposing the penalty and allowed the appeal, directing the return of any deposited amount to the appellant.

Conclusion:
The court concluded that the respondents failed to prove the voluntariness of the appellant's statement and did not provide corroborative evidence. The adjudicatory proceedings were unfair, and the imposition of penalty was not justified. The appeal was allowed, and the penalty was set aside. Any amount deposited by the appellant was ordered to be returned within three months.

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