2009 (4) TMI 1042 - HC - FEMA

Summary

Issues Involved:
1. Maintainability of the appeals.
2. Decision on merits regarding the contravention of Sections 8(1) and 8(2) of FERA.

Summary:

Objection as to Maintainability:

The first issue addressed was the maintainability of the appeals. The respondents' counsel raised a preliminary objection, citing the Supreme Court's decision in *Mohtesham Mohd. Ismail v. Special Director, Enforcement Directorate*, which held that only the Central Government, not the Enforcement Directorate, could file an appeal before the High Court u/s 54 FERA. The appellant's counsel sought adjournments to make submissions, and eventually, a written note of submissions was filed. The court noted the distinction between Section 54 FERA and Section 35 FEMA, concluding that the present appeal, filed by the Central Government represented by the Directorate of Enforcement, was maintainable. The preliminary objection was overruled.

Decision on Merits:

The Enforcement Directorate alleged that the respondents were engaged in unauthorized foreign exchange transactions and seized foreign and Indian currencies from them. The respondents denied the allegations, claiming the seized foreign currency was from legitimate export transactions. The Adjudicating Authority found the respondents guilty of contravening Sections 8(1) and 8(2) FERA and imposed penalties. The respondents appealed to the Appellate Tribunal, which set aside the Adjudicating Authority's order, finding the respondents' explanation sufficient and trustworthy.

The Tribunal noted that the respondents provided evidence of lawful acquisition of foreign exchange through valid export deals, including contracts, receipts, affidavits from buyers, and bank statements. The Tribunal found no merit in the appellant's contention that the respondents had to "prove" lawful acquisition beyond the evidence provided. The Tribunal also found that the initial burden of proving illegal possession of foreign exchange was on the appellant, which was not sufficiently discharged.

The High Court agreed with the Tribunal's findings, stating that the respondents offered a satisfactory explanation for possessing the foreign exchange. The court emphasized that the presumption of culpable mental state and the genuineness of documents under Sections 59 and 72 FERA were rebuttable, and the respondents successfully rebutted these presumptions. The court found no error in the Tribunal's conclusion that the respondents' statements, retracted and alleged to be involuntary, could not solely sustain a finding of contravention.

The court concluded that the appellant failed to raise any question of law, as required for an appeal u/s 54 FERA and Section 35 FEMA, and dismissed the appeals as without merit.