2019 (2) TMI 1799 - HC - FEMA

Offence under FERA - violation of provisions of Section 9(1)(b) of FERA - seizure of currency office premises - violation of provisions of FERA solely on the basis of the statement of Ashish Jain recorded on 4.10.1995? - penalty imposed - HELD THAT - In the present case, neither the Adjudicating Authority (Deputy Director, Enforcement Directorate) nor the appellate authority (Special Director, Appeals) had applied their minds on the question whether the statement made by Ashish Jain was voluntary in view of its retraction on the very next day. In fact, the Tribunal had proceeded on the basis that it was accepted by the Appellate Authority (Special Director, Appeals) that the statement of Ashish Jain had no evidentiary value. This Court is of the view that the statement of Sh. Ashish Jain could not be relied upon as, first of all, it was retracted on the very next day. And, secondly, the statement was very vague and bereft of any particulars, inasmuch as, it did not name or describe any person from whom funds had been received and whom the said funds had been distributed to. As noticed above, neither the adjudicating authority nor any of the appellate authorities, including the Tribunal, had applied their minds as to whether the said statement was voluntary or not. Thus, the question whether the appellant could be held guilty for violation of provisions of Section 9(1)(b) of FERA, on the sole basis of the statement of Sh. Ashish Jain, must be answered in the negative. Whether there is any material on record to establish that the appellant was guilty of violation of provisions of Section 9(1)(b) of FERA if the statement of Sh. Ashish Jain ? - Clearly, the answer to the above question must also be in the negative as there is no material whatsoever on record to establish the same. None of the orders of the authorities below, namely, the Adjudicating Authority, the Appellate Authority or the Tribunal refer to any cogent material to substantiate the allegation of the commission of an offence under Section 9(1)(b) of FERA. This Court is of the view that confiscation of the amount of ₹ 7,95,000/- from the office of the appellant is unsustainable. Consequently, the present appeal must be allowed. The order dated 17.02.2014 passed by the Adjudicating Authority (Deputy Director, Enforcement Directorate); the order dated 24.09.2014 passed by the Appellate Authority (Special Director, Appeals); and the impugned order passed by the Tribunal are unsustainable and are, accordingly, set aside. The amount seized from the premises of the appellant are liable to be returned to the appellant.

Summary

Issues Involved:
1. Whether the appellant can be held guilty of violation of provisions of FERA solely on the basis of the statement of Ashish Jain recorded on 4.10.1995.
2. Whether there is any other material or evidence to establish that the appellant had violated the provisions of Section 9(1)(b) of FERA.

Issue-Wise Detailed Analysis:

1. Violation of FERA Based on Ashish Jain's Statement:
The court examined whether the appellant could be held guilty of violating FERA solely based on Ashish Jain’s statement recorded on 4.10.1995. The statement alleged that Ashish Jain received a sum of ?68,50,000 at the instance of a person in Dubai. However, Ashish Jain retracted his statement the next day, claiming it was made under coercion. The court noted that the Adjudicating Authority and the Appellate Authority did not consider the voluntariness of the statement, and the Tribunal accepted that the statement had no evidentiary value. The court emphasized that retracted statements have little value unless corroborated by other material evidence, citing the Supreme Court's rulings in Vinod Solanki v. Union of India and Anr. and K.T.M.S. Mohd. v. Union of India. Since Ashish Jain’s statement lacked corroboration and was retracted immediately, the court concluded it could not be relied upon to establish a violation of FERA.

2. Other Material or Evidence for Violation of Section 9(1)(b) of FERA:
The court scrutinized whether any other material or evidence established the appellant's violation of Section 9(1)(b) of FERA, which restricts receiving payments on behalf of persons resident outside India without corresponding inward remittance. The court found no evidence or material to indicate that the appellant received any payment by order or on behalf of any person resident outside India. The original order by the Adjudicating Authority did not mention any names of persons from whom the appellant allegedly received funds. The prosecution's case hinged on documents seized from Satish Kumar Sharma @ Pappu, but no such documents were produced or detailed in the records. Consequently, the court determined that there was no material on record to substantiate the allegation of a FERA violation.

Reasoning and Conclusion:
The court found considerable merit in the appellant's contention that no material evidence established a violation of Section 9(1)(b) of FERA. The Tribunal's acceptance that Ashish Jain's statement had no evidentiary value and the lack of any corroborative material led the court to conclude that the appellant could not be held guilty based on the retracted statement. Additionally, the absence of any other evidence or material to support the prosecution's case further supported the appellant's position. Therefore, the court held that the confiscation of ?7,95,000 from the appellant's office was unsustainable and ordered the amount to be returned with interest at the rate of 6% per annum from the date of seizure till the date of payment. The appeal was allowed, and the orders of the Adjudicating Authority, Appellate Authority, and the Tribunal were set aside.