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2019 (8) TMI 213 - AT - FEMAImposition of penalty by Special Director - contravention of Sections 6(4), 6(5), 49, 73(3) of FERA, 1973 r/w NRE Account Rules 1970 - initiation of adjudication proceedings as contemplated under Section 51 FERA, 1973 within 30 days - HELD THAT - In the Impugned Order the factum of prior to the Notification dated 31.07.1995, the position was that foreign currency could be deposited in NRE Accounts by power of attorney holders of NRIs. The same was requisite requirement to make out the violations under Sections 8(1), 9(1)(a) and 9(1)(f) of FERA are not made out - In the Impugned Order, the Adjudicating Authority has not taken into account the fact that the Adjudicating Authority has in 52 cases against the Appellant, quashed penalty imposed against him and the same have till date not been challenged by the Respondent before the Appellate authorities. The present proceedings, which are based on factually parallel route, atleast all the said orders and facts ought to have been considered in the impugned at the time of passing the order. Repatriation of statement after two days - HELD THAT - It is well settled law that a retracted confession can never be the basis of any penalty to be imposed upon a person, unless substantially corroborated by independent sources. In the present case, apart from the retracted confessional statement of the Appellant, there is no independent evidence on record to corroborate the retracted confessional statement of the Appellant - Therefore, the said statement cannot be relied upon to impose any penalty upon the Appellant. Appeal allowed.
Issues Involved:
1. Legality of the Show Cause Notice and Adjudication Order. 2. Validity of the Appellant's retracted confessional statement. 3. Compliance with Reserve Bank of India guidelines. 4. Applicability of FERA provisions to the case. 5. Relevance of previous judicial precedents. Issue-wise Detailed Analysis: 1. Legality of the Show Cause Notice and Adjudication Order: The Appellant challenged the Show Cause Notice dated 27.05.2002, issued under Section 49(3) & (4) read with Appeal Rules, 1974, alleging violations of FERA provisions. The Appellant received the final Show Cause Notice on 20.07.2004 and denied all allegations. The Respondent relied on the Appellant's confessional statement dated 12.12.1995, which the Appellant claimed was coerced. The High Court of Delhi quashed similar Show Cause Notices in "Standard Chartered Bank V/s Directorate of Enforcement & Ors." and "S.K. Mittal V/s The Director, Enforcement Directorate," noting the lack of clear stipulations before the RBI's circular dated 31.07.1995. 2. Validity of the Appellant's Retracted Confessional Statement: The Appellant retracted his confessional statement, alleging it was made under duress. The Supreme Court in "Vinod Solanki V/s U.O.I." and "State (NCT of Delhi) V/s Navjot Sandhu alias Afsan Guru" held that retracted confessions must be corroborated by independent evidence. In this case, no independent evidence supported the retracted confession, rendering it unreliable for imposing penalties. 3. Compliance with Reserve Bank of India Guidelines: The Show Cause Notice alleged non-compliance with RBI guidelines by accepting foreign remittances into the NRE account without adhering to the guidelines. However, the High Court of Delhi in "Citi Bank v. Union of India" and "Standard Chartered Bank V/s Directorate of Enforcement & Ors." held that prior to the RBI's circular dated 31.07.1995, there were no clear instructions prohibiting deposits by persons other than the account holder. 4. Applicability of FERA Provisions to the Case: The allegations involved contraventions of Sections 6(4), 6(5), 49, 73(3) of FERA, 1973 r/w NRE Account Rules 1970. The High Court of Delhi in similar cases ruled that deposits made by persons other than the account holder before 31.07.1995 did not violate FERA provisions. The Appellant's case, involving actions before this date, fell under this precedent. 5. Relevance of Previous Judicial Precedents: The High Court of Delhi's judgments in "Standard Chartered Bank V/s Directorate of Enforcement & Ors." and "S.K. Mittal V/s The Director, Enforcement Directorate" set a precedent that Show Cause Notices issued for actions before 31.07.1995 were invalid. The Supreme Court's dismissal of the Civil Appeal in "Directorate of Enforcement V/s Standard Chartered Bank" further reinforced this position. Conclusion: The appeal is allowed, and the impugned order dated 10.09.2004 is set aside. The Tribunal found that the Show Cause Notice and Adjudication Order were invalid due to the lack of clear RBI guidelines before 31.07.1995, the unreliability of the retracted confessional statement, and the precedents set by the High Court of Delhi and the Supreme Court. No costs were imposed.
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