2014 (5) TMI 863 - HC - FEMA

Contravention of Section 9 (1) (d) of Foreign Exchange Regulation Act, 1973 - Payment made on behalf of foreign national without prior approval of RBI - Held that - There can be no doubt that a retracted statement under Section 40 FERA, cannot form the sole basis for determining whether the maker of such a statement is guilty of contravening any of the provisions of FERA. It shall have to be corroborated by other independent evidence. In determining whether such a retracted statement can be relied upon, it will have to be examined whether the statement could be said to have been made voluntarily. Statement made by Mr. Saluja contains a wealth of details on the transactions undertaken by him at the behest of either his brother Dr. R.S Saluja or others. He has explained in minute detail the entries in the loose sheets. The details on every page of the loose sheets could not have been explained by anyone other than one fully conversant with the transactions. It is impossible for such details to have been fabricated by the officials of the ED. There is nothing credible brought on record by Mr. Saluja to persuade the Court to conclude Mr. Saluja was under threat, duress or any form of coercion that at the time when he made the statement and that he did not make it voluntarily. The entries/notings in the loose sheets recovered from his residence as explained by Mr. Saluja in his statement under Section 40 FERA fully substantiated the case of the ED that he had involved himself in transactions in violation of the FERA. Further corroboration was from the details of the STD calls exchanged between Mr. Saluja, Mr. Kedia and Mr. Shah. The fact that the foreign exchange may not have been recovered from the residence of Mr. Saluja does not weaken the case of the ED. According to the ED, the Indian currency paid to Mr. Saluja was for delivery of foreign exchange abroad. As noted in the AO, the details of the foreign bank accounts were available in the documents seized from the residence of Mr. Saluja. The telephone number of Mr. Gopalani was found in the loose sheets recovered from the residence of Mr. Saluja. One of these loose sheets at page 19 contained instructions in writing by Mr. Gopalani. This was confirmed by the report of the hand writing expert. Mr. Gopalani did not challenge the report of the handwriting expert. He did not seek to cross-examine the expert. The report, therefore, corroborated the retracted statement of Mr. Saluja that he had received instructions from Mr. Gopalani to pay USD 50,000 to Geeta Soni. The aforementioned evidence was sufficient to conclude that Mr. Gopalani had contravened Section 9 (1) (f) (i) FERA. - Decided against Appellants.

Summary

Issues Involved:
1. Voluntariness and validity of the statement under Section 40 FERA.
2. Contravention of FERA by making and receiving payments without RBI permission.
3. Confiscation of seized currency.
4. Penalties imposed on the appellants.

Issue-wise Detailed Analysis:

1. Voluntariness and Validity of the Statement under Section 40 FERA:
The appellants contested the voluntariness of the statements recorded under Section 40 FERA, claiming they were made under coercion and threat. The court examined the circumstances under which the statements were made, including cross-examinations of the enforcement officers and the retraction statements. The court found no credible evidence to support the claims of coercion or duress. The decision in Telstar Travels Private Limited v. Enforcement Directorate was cited, emphasizing that a retracted statement could be relied upon if corroborated by other evidence and deemed voluntary. The court concluded that the detailed nature of the statements, which could not have been fabricated by the officials, indicated their voluntariness and truthfulness.

2. Contravention of FERA by Making and Receiving Payments without RBI Permission:
The appellants were found to have contravened Sections 8 (1) and 9 (1) (f) (i) of FERA by making and receiving payments without the requisite permissions from the RBI. The loose sheets recovered from Mr. Saluja's residence contained detailed entries of transactions, which were corroborated by his statement under Section 40 FERA. The court noted that the entries and the seized documents substantiated the ED's case that Mr. Saluja and Mr. Gopalani were involved in unauthorized foreign exchange transactions.

3. Confiscation of Seized Currency:
The court upheld the confiscation of Rs.1.15 crores out of the seized amount of Rs.1.18 crores from Mr. Saluja's residence. It was determined that the money was part of unauthorized transactions and liable for confiscation under Section 63 FERA. The court rejected the claim that the money was declared under the VDIS, noting inconsistencies in the appellant's statements and the lack of evidence supporting the claim.

4. Penalties Imposed on the Appellants:
The penalties imposed by the Special Director (SD) and affirmed by the Appellate Tribunal (AT) were considered reasonable given the amounts involved in the violations. Mr. Saluja was penalized Rs.10 lakhs for SCNs I and V, Rs.10 lakhs for SCN-II, Rs.50,000 for SCN-III, and Rs.25,000 for SCN-IV. Mr. Gopalani was penalized Rs.1 lakh, and Mr. Shah Rs.50,000. The court found no grounds to interfere with the penalties, deeming them appropriate for the contraventions committed.

Conclusion:
The court upheld the common order dated 4th January 2008 passed by the Appellate Tribunal, dismissing the appeals and affirming the adjudication order. The detailed analysis of the evidence and the corroboration of the statements under Section 40 FERA led to the conclusion that the appellants had indeed contravened the provisions of FERA, justifying the penalties and confiscation imposed.