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2014 (3) TMI 719 - HC - FEMAIllicit sale and purchase of foreign exchange from and to unknown persons. - contravention of Sections 8(1) and Section 8(2) read with Section 64(2). - retraction of statement by the accused as having been given under the duress and coercion. - Held that - for the statement by one noticee under Section 40 FERA to be used as evidence against another co-noticee it must be shown that the said statement inculpates the person making it. Otherwise such statement has no value whatsoever. The statement of Shri Parveen Kumar in the present case does not inculpate him at all. Even when he admits to making the entries in the diaries, he seems to wriggle out by explaining that he did it at the instance of Shri Rikabh Chand Jain. He also does not seem to have been aware of the implications of making of those writings. It is futile for the department in the present case to rely on the statement of Shri Parveen Kumar Mehta as substantive evidence to hold him and the co-noticee guilty of contravention of Sections 8 (1) and 8 (2) of the FERA. The proposition noted by the SD that corroborative evidence is needed to make the retraction meaningful and worthy of credence is also erroneous. In fact, since the said admissional statements were retracted even the admissible portion, if any, of the said statements would require corroboration by other independence evidence. This legal position was entirely missed by both the SD as well as the AT What is also striking in the present case is that while the Indian currency was recovered from the residence and dicky of the scooter, no foreign exchange was recovered. The mere fact that Indian currency was recovered does not establish the violation of the FERA by the Appellants. It had to be shown that the said money was related to illegal transactions falling within the ambit of FERA. For all the aforesaid reasons, the AO dated 30th August 1990 passed by the SD and the impugned order dated 15th June 2007 passed by the AT are hereby set aside. - Decided in favor of appellant.
Issues Involved:
1. Legality of the Appellants' actions under Sections 8(1) and 8(2) read with Section 64 of FERA. 2. Validity of the confessional statements and their retraction. 3. Adequacy of evidence to substantiate the charges. 4. Legitimacy of the penalties and confiscation of the recovered currency. Issue-Wise Detailed Analysis: 1. Legality of the Appellants' actions under Sections 8(1) and 8(2) read with Section 64 of FERA: The Appellants were accused of contravening Sections 8(1) and 8(2) read with Section 64 of the Foreign Exchange Regulation Act, 1973 (FERA), which pertain to the unauthorized acquisition and sale of foreign exchange. The Special Director (SD) of the Enforcement Directorate (ED) issued a Show Cause Notice (SCN) alleging that the Appellants engaged in illicit foreign exchange transactions. The Appellate Tribunal for Foreign Exchange (AT) affirmed the SD's order, imposing a penalty of Rs. 10,00,000 each on the Appellants. 2. Validity of the confessional statements and their retraction: The confessional statements made by the Appellants and co-noticees under Section 40 FERA were later retracted, claiming they were made under duress and coercion. The SD dismissed these retractions as "intriguing" and "meaningless," suggesting they were made to protect someone else. However, the High Court noted that the retractions should have been given due consideration and required corroboration by independent evidence. The Court emphasized that a statement by a co-accused cannot be relied upon against another co-accused if it does not inculpate the person making the statement. 3. Adequacy of evidence to substantiate the charges: The SD and AT relied heavily on the statements recorded by the ED officials, which were considered material evidence. However, the High Court found that the statements of Shri Parveen Kumar Mehta did not implicate himself and were primarily about the actions of Shri Rikhab Chand Jain. The Court cited precedents explaining that statements made by a co-accused cannot be used as substantive evidence against others unless they inculpate the maker of the statement. The Court concluded that there was no substantive evidence to prove the guilt of the Appellants for contravention of Sections 8(1) and 8(2) of FERA. 4. Legitimacy of the penalties and confiscation of the recovered currency: The SCN also questioned the confiscation of Rs. 1,50,000 recovered from the scooter and Rs. 2,50,000 from the residence under Section 63 FERA. The High Court observed that no foreign exchange was recovered, only Indian currency. The Court stated that the mere recovery of Indian currency does not establish a violation of FERA; it must be shown that the money was related to illegal transactions under FERA. Conclusion: The High Court set aside the Adjudication Order dated 30th August 1990 and the impugned order dated 15th June 2007 passed by the AT. The Court ordered the refund of the sums deposited by the Appellants and allowed the appeals, concluding that there was no substantive evidence to prove the Appellants' guilt under FERA.
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