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2014 (3) TMI 97 - HC - FEMAViolation of FERA - hawala payments - Retracted confession - Unreasonable and excessive penalties for Violation of FERA - Held that - With the evidence on record clearly pointing to the involvement of BTC and with the involvement of its partners also being demonstrated, there was no error committed by SD in proceeding to hold BTC and its partners guilty of contravention of Sections 9(1)(b)(d) and (f) of the FERA. There was no misapplication of Section 68 of the FERA which, in principle and by analogy, could be extended to contravention by the partnership firms. This is in consonance with Section 25 of the Partnership Act. Once it was established that the illegal acts were committed by the firm itself, then there was no difficulty in applying Section 68 of the FERA. The order of the SD may not have explained the precise basis for arriving at the penalty amount of Rs. 2,00,00,000 imposed on BTC and Rs. 1,00,00,000 each on Mr. Lekh Raj Chopra and Mr. Ramesh Kumar Chopra. However, Section 50 of the FERA does envisage a penalty five times the amount involved in the violation. In the present case, that amount is in excess of Rs. 10,00,00,000 and, therefore, on the basis of the parameters set out in Section 50, it cannot be said that the penalty imposed on BTC and the two Appellants, i.e., Mr. Lekh Raj Chopra and Mr. Ramesh Kumar Chopra is excessive or unreasonable or illegal. The penalty imposed in the order dated 10th April 1986 by the SD did not preclude him, on remand, from determining afresh the penalty amount.
Issues Involved:
1. Compliance with specific directions issued by the Appellate Tribunal for Foreign Exchange (AT). 2. Liability of the firm and its partners under the Foreign Exchange Regulation Act (FERA). 3. Reliability and corroboration of statements made by Mr. Niranjan Singh. 4. Determination and reasonableness of penalties imposed. Issue-wise Detailed Analysis: 1. Compliance with Specific Directions Issued by the AT: The appellants contended that the Special Director (SD), Enforcement Directorate (ED) failed to comply with the specific directions issued by the AT in its order dated 19th May 2003. The AT had remanded the case to the SD to determine "whether the entries relating to illicit transactions were made during the course of the business of the firm and with the concurrence and knowledge of the firm." The SD, in its subsequent order dated 18th May 2004, was found to have exhaustively discussed the role of Brij Trading Co. (BTC) and its partners in the transactions. The SD analyzed the writings on the rukka slips and decodified the writings based on statements made by Mr. Niranjan Singh and Mr. Ganesh Dass Chopra. The court found that the SD had adequately addressed the questions posed by the AT and had provided a detailed analysis of the evidence, thereby complying with the AT's directions. 2. Liability of the Firm and Its Partners Under FERA: The appellants argued that the infractions of the law committed by the partners could result in a penalty on the firm only if such infractions were committed on behalf of the firm. They asserted that there was no indication that the infractions were committed by BTC. The court, however, found that the SD had provided a thorough analysis of the evidence, showing that BTC and its partners were actively involved in hawala transactions. The SD's order detailed the connectivity of the transactions and the involvement of BTC and its partners, including Mr. Ramesh Kumar Chopra, who was a partner since 1st December 1978 and authorized to operate the firm's bank accounts. The court concluded that there was no misapplication of Section 68 of FERA and that the illegal acts were committed by the firm itself, making the firm and its partners liable. 3. Reliability and Corroboration of Statements Made by Mr. Niranjan Singh: The appellants contended that Mr. Niranjan Singh was an alleged accomplice and his statements could only be accepted if reliable and corroborated. They relied on precedents that emphasized the need for corroboration of retracted confessions. The court found that there was adequate corroboration of Mr. Niranjan Singh's statements in the documentary evidence. The SD's order detailed the corroboration of the statements with other evidence, including documents recovered from the briefcase and the firm's accounts. The court agreed with the AT's view that the statements were voluntary and corroborated, thereby justifying their use in determining the guilt of the appellants. 4. Determination and Reasonableness of Penalties Imposed: The appellants argued that the penalties imposed by the SD on remand were excessive and that the SD could not enhance the penalties without an appeal from the ED. The court noted that once the original order dated 10th April 1986 was set aside by the AT, the SD was required to conduct a fresh adjudication, including the determination of penalties. Section 50 of FERA allows for a penalty up to five times the amount involved in the contravention. Given that the amount involved exceeded Rs. 10,00,00,000, the court found that the penalties imposed were neither excessive nor unreasonable. The court upheld the penalties of Rs. 2,00,00,000 on BTC and Rs. 1,00,00,000 each on Mr. Lekh Raj Chopra and Mr. Ramesh Kumar Chopra. Conclusion: The court dismissed the appeals, upholding the order dated 18th May 2004 passed by the SD and the impugned order dated 27th December 2007 passed by the AT. The court found no merit in the grounds urged by the appellants and imposed costs of Rs. 5,000 in each appeal.
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