1986 (9) TMI 281 - HC - FEMA

Summary

Issues:
1. Allegations under Foreign Exchange Regulation Act, 1947
2. Contraventions related to receipt and payments of funds
3. Reliance on seized letters as evidence
4. Imposition of penalty and confiscation
5. Interpretation of incriminating circumstances in letters
6. Burden of proof on the respondent
7. Appellant's defense against charges

Analysis:

1. The appellant faced allegations under Sections 54(1)(aa) and (c) and 9(1)(b) and (d) of the Foreign Exchange Regulation Act, 1947. The show cause notices dated 5.1.1977 accused him of contraventions and proposed confiscation of Rs. 1,500/- in Indian currency surrendered by him. The appellant denied the charges, claiming coercion in his statements made to the Enforcement Officer.

2. The respondent asserted that the appellant received funds from a local person under orders from R. Muthuswamy of Colombo, leading to payments to various parties in India. The appellant was accused of contraventions based on transactions between 1974 to 1976 and 1966 to 1973, as detailed in the show cause notices.

3. The respondent relied on seized letters, particularly from the appellant's father-in-law, to establish the nature of transactions. The letters dated 2.9.1975, 12.5.1976, and 20.5.1976 indicated the appellant's involvement in fund transfers, supporting the charges against him.

4. The Deputy Director imposed a penalty of Rs. 50,000/- and ordered the confiscation of the surrendered amount. The Appellate Authority upheld this decision, leading to the appellant's appeal challenging the legal question of the respondent's reliance on unsupported statements.

5. The appellant contested the incriminating nature of the letters seized, highlighting that they indicated funds received through authorized channels. The contents of the letters did not align with the contraventions alleged, undermining the basis for the charges against him.

6. The burden of proof rested on the respondent to establish the appellant's contraventions based on the seized letters. The appellant's defense emphasized the lack of incriminating evidence in the letters and the discrepancy between the amounts mentioned in the letters and the show cause notices.

7. Ultimately, the court found that the seized letters did not support the allegations of contraventions against the appellant. The authorities misinterpreted the contents of the letters, leading to the appeal being allowed, costs awarded to the appellant, and the confiscated amount ordered to be returned within six weeks.