2018 (9) TMI 192 - AT - FEMA

Guilty of contravention of Section 16(1) of the Foreign Exchange Regulation Act 1973 - failure to realize amount receivable by them from M/s. Erman Electro Echnik (M/s. EEE) during the period 1990-91? - Held that - Dy. Director Enforcement Directorate failed to appreciate that such statement ought not to be relied upon unless there is independent corroboration of certain material aspect of the said statement through independent sources is present. There is no evidence with respect to the alleged transaction which was ever produced by Shri Vinod Kumar and or relied upon by the Respondent. Such statement made by Late Shri Ashok Kumar ought not to be relied upon by the Respondent during the adjudication proceedings in the absence of back-up evidence to some extent. Merely on the complaint by the rival party no penalty can be imposed unless the admission based on some evidences as it is the practice that accuse always alleged that admissions are obtained under threat and pressure. In such situation proper investigation is required in order to prove guilt of accused party. The statements of Shri Vinod Kumar are contradictory and self-defeating. Shri Vinod Kumar in his statement dated 09.04.2002 before the Respondent states that he does not have any role to play in the affairs of Appellant No.1 whereas before the Company Law Board at para 2 of the Judgement dated 18- 04-1999 he takes a completely contrary stand. The benefit of doubt goes in favour of the appellant. The adjudication Order is not sustainable for the lack of evidences. There is no clear and cogent evidence available on record to show that Shri Ashok Kumar has received any payment pertaining to the transaction in question.

Summary

Issues:
1. Violation of Section 16(1) of the Foreign Exchange Regulation Act, 1973.
2. Alleged failure to realize amount due from M/s. EEE.
3. Imposition of penalties on the appellants.
4. Lack of independent evidence supporting charges.
5. Contradictory statements and lack of evidence from complainant.

Analysis:
1. The appeal challenged an order imposing penalties on the appellants for violating Section 16(1) of the Foreign Exchange Regulation Act, 1973. The Dy. Director found the appellants guilty of charges related to non-realization of funds from M/s. EEE and imposed significant penalties. The Respondent relied heavily on statements from the complainant without substantial independent evidence to support the allegations.

2. The case revolved around the failure to realize an amount due from M/s. EEE, with allegations that Late Shri Ashok Kumar collected the funds abroad and transferred them to personal accounts. The Respondent initiated proceedings based on complaints from the brother of Late Shri Ashok Kumar, leading to penalties being imposed without strong corroborative evidence.

3. The appellants contested the penalties imposed, highlighting discrepancies in statements and lack of concrete evidence supporting the charges. The Tribunal framed key differences, questioning the guilt of the appellants in failing to realize the amount from M/s. EEE. The financial status of the appellant company, which had ceased operations, was also considered in the judgment.

4. The judgment emphasized the absence of substantial independent evidence corroborating the allegations against the appellants. It noted the reliance on statements without proper investigation or supporting documentation. The Tribunal found the lack of clear and cogent evidence to establish the guilt of the appellants, leading to the setting aside of the Impugned Order.

5. Contradictory statements from the complainant and lack of consistent evidence raised doubts about the validity of the charges. The Tribunal granted the benefit of doubt to the appellants due to insufficient evidence and inconsistencies in the statements provided. The Impugned Order was ultimately set aside, emphasizing the importance of concrete evidence in such cases.