2014 (10) TMI 367 - SC - FEMA

Violation of Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 - Confiscation of seized amount - Imposition of penalty - Appellate Board set aside confiscation and ordered refund of penalty whereas High Court upheld the same - Held that - There is no doubt whatsoever, that no reliance has been placed on the alleged statement made by the appellant on 20.4.1989 before the officers of the Enforcement Directorate, in the memorandum dated 12.3.1990. Per se, therefore, it was not open to the authorities to place reliance on the aforesaid statement, while proceeding to take penal action against the appellant, in furtherance of the aforesaid memorandum dated 12.3.1990. The mere fact that he was not proceeded against, prima facie establishes, in the absence of any evidence to the contrary, that the assertion made by the appellant to the effect that he never made such statement, had remained unrefuted. Even though the aforesaid excuse may have been valid, if the allegation was, that the record of the statement made on 20.4.1989, was not available with the officers of Enforcement Department at the time of the raid on 25.10.1989, yet to state that the aforesaid record was not available when the second statement was made on 26.10.1989 at the office of the Enforcement Directorate, is quite ununderstandable. It is pertinent to mention, that the second statement was recorded by the Chief Enforcement Officer when the appellant A. - in the absence of having established through cogent evidence, that the appellant had made the above statement dated 20.4.1989, it was not open to the Enforcement Directorate to place reliance on the same, for establishing the charges levelled against the appellant in memorandum dated 12.3.1990. Had the statements of the appellant and his wife been corroborated by independent evidence of the nature indicated hereinabove, there could have been room for accepting the veracity of the statements made by the appellant A. Tajudeen and his wife T. Sahira Banu to the officers of the Enforcement Directorate. Unfortunately, no effort was made by the Enforcement Directorate to gather any independent evidence to establish the veracity of the allegations levelled against the appellant, through the memorandum dated 12.3.1990. We are of the considered view, that the officers of the Enforcement Directorate were seriously negligent in gathering independent evidence of a corroborative nature. We have therefore no hesitation in concluding that the retracted statements made by the appellant and his wife could not constitute the exclusive basis to determine the culpability of the appellant. Charge against the appellant under Section 9(1)(b) of the 1973 Act, cannot be established on the basis of newspaper sheets, in which the money was wrapped. The newspaper sheets relied upon, would not establish that the amount recovered from the residence of the appellant A. Tajudeen was dispatched by Abdul Hameed from Singapore, through a person who was not an authorized dealer. - impugned judgment passed by the High Court deserves to be set aside. The same is accordingly hereby set aside. Resultantly, the entire action taken by the Enforcement Directorate against the appellant in furtherance of the memorandum dated 12.3.1990, is also set aside. As a consequence of the above, the Enforcement Directorate is directed to forthwith refund the confiscated sum of ₹ 8,24,900/-, to the appellant, as also, to return the amount of ₹ 1,00,000/-, which was deposited by the appellant as penalty - Decided in favour of appellant.

Summary

Issues Involved:
1. Alleged violation of Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973.
2. Validity and voluntariness of the appellant's statements to the Enforcement Directorate.
3. Adequacy and reliability of evidence to substantiate the charges.

Issue-Wise Detailed Analysis:

1. Alleged Violation of Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973:
The appellant was accused of receiving Rs. 8,24,900/- in two installments from a local person at the behest of Abdul Hameed, a resident of Singapore, without any general or special exemption from the Reserve Bank of India, thereby violating Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973. The Enforcement Directorate initiated proceedings based on this alleged violation.

2. Validity and Voluntariness of the Appellant's Statements to the Enforcement Directorate:
The appellant and his wife made statements on 25.10.1989 and 26.10.1989 admitting to receiving the money from Abdul Hameed. However, they retracted these statements on 27.10.1989, alleging that they were made under coercion and undue influence. The High Court had relied on these statements, considering them voluntary. The Supreme Court, however, found that the statements could not be relied upon solely to establish guilt, especially given the immediate retraction and lack of independent corroboration. The Court emphasized that the burden was on the Enforcement Directorate to prove the voluntariness of the statements, which they failed to do.

3. Adequacy and Reliability of Evidence to Substantiate the Charges:
The Supreme Court found that the evidence presented by the Enforcement Directorate, including the "mahazar" (recovery memo) and newspaper sheets in which the money was wrapped, was insufficient to establish the appellant's guilt. The Court noted that the "mahazar" was not corroborated by the independent witnesses who signed it, as they were not produced for cross-examination. Additionally, the newspaper sheets did not prove that the money was dispatched by Abdul Hameed from Singapore through an unauthorized dealer. The Court criticized the Enforcement Directorate for not gathering independent corroborative evidence, such as verifying Abdul Hameed's identity and his alleged communication with the appellant.

Conclusion:
The Supreme Court set aside the High Court's judgment and the actions taken by the Enforcement Directorate against the appellant. The Court ordered the refund of the confiscated sum of Rs. 8,24,900/- and the penalty of Rs. 1,00,000/- imposed on the appellant, concluding that the evidence presented was insufficient to prove the charges beyond a reasonable doubt.