2014 (5) TMI 784 - HC - FEMA

Contravention of Sections 8(1) and 8(2) of the Foreign Exchange Regulation Act 1973 - Penalty - recovery and seizure of Indian currency - No opportunity for cross examination granted - Held that - there was miscarriage of justice in denying the request of the Appellants for cross-examination of the ED officials. Allowing the request would have enabled the SD to determine whether the claim that the confessional statements were recorded under threat and coercion was credible - Although the mere discharge of the Appellants in the criminal proceedings will not ipso facto result in their being exonerated in the adjudication proceedings it is significant that even in the criminal proceedings the ED was unable to prove the so-called confessional statements of the Appellants under Section 40 FERA in accordance with law. A perusal of the original records shows that only the photocopies of the loose handwritten sheets are available. The originals of the Section 40 statements have not been marked as exhibits by examining the persons who recorded them. The AT also erred in proceeding on the basis that the failure to supply English translations of the seized documents was not violative of natural justice since the author of the documents was Prem Singh. The writings on the loose sheets were in Gurmukhi and not Pushto as thought by the ED during the adjudication proceedings. If reliance was going to be placed on the said loose sheets then surely they ought to have been translated if they had to corroborate the retracted statements of Prem Singh and Tarlochan Singh - Order set aside - Decided in favour of appellant.

Issues Involved:
1. Validity of reliance on retracted confessional statements.
2. Denial of cross-examination of ED officials.
3. Non-translation of documents in Gurmukhi.
4. Admissibility of loose sheets as evidence.
5. Impact of discharge in criminal proceedings on adjudication proceedings.

Detailed Analysis:

1. Validity of reliance on retracted confessional statements:
The court examined whether the Enforcement Directorate (ED) could rely on the retracted confessional statements of Prem Singh and Tarlochan Singh. The Supreme Court in KTMS Mohamed v. Union of India stated that retracted statements could be used if corroborated by other evidence. The court noted that the ED failed to provide credible corroborative material beyond the notings on untranslated loose sheets. The reliance on retracted statements as substantive evidence without corroboration was a serious legal infirmity, vitiating the adjudication order (AO) and the Appellate Tribunal's (AT) order.

2. Denial of cross-examination of ED officials:
The court criticized the Special Director (SD) for denying the appellants' request to cross-examine ED officials who recorded the statements. The SD's reasoning that cross-examination would delay proceedings was deemed unjustified. The court emphasized that cross-examination was crucial to determine the credibility of the appellants' claims of coercion and torture. The denial of cross-examination caused severe prejudice to the appellants, as the ED relied on the statements as substantive evidence.

3. Non-translation of documents in Gurmukhi:
The court highlighted that the loose sheets, which were central to the ED's case, were in Gurmukhi and not translated into Hindi or English. The AT's assumption that non-translation did not violate natural justice was incorrect. The court stressed that if the loose sheets were to corroborate the retracted statements, they should have been translated. The failure to provide translations undermined the ED's case.

4. Admissibility of loose sheets as evidence:
The court found that the loose sheets were not properly translated and thus could not be reliably used as evidence. The ED's reliance on these sheets without translation was insufficient to substantiate the charges. The court noted that the originals of the Section 40 statements were not marked as exhibits, and only photocopies were available, further weakening the ED's position.

5. Impact of discharge in criminal proceedings on adjudication proceedings:
The court acknowledged that the discharge of the appellants in criminal proceedings did not automatically exonerate them in adjudication proceedings. However, it was significant that the ED failed to prove the so-called confessional statements in the criminal case. The learned Additional Chief Metropolitan Magistrate (ACMM) had noted that the writings on the loose sheets did not signify foreign exchange transactions, and the ED did not produce translations to show their relevance. This failure in the criminal case influenced the court's decision in the adjudication proceedings.

Conclusion:
The court set aside the impugned common order dated 30th November 2007 of the AT and the AO dated 13th June 2005 of the SD. The appeals were allowed with no orders as to costs. The amounts deposited by the appellants and money seized by the ED and confiscated under Section 63 FERA were ordered to be refunded to the appellants within eight weeks.

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