2019 (8) TMI 266 - AT - FEMA

Imposition of penalty by Special Director - contravention of Sections 8(1) 9(1)(a) of FERA, 1973 and Sections 9(1)(f)(i), 8(1) 9(1)(a) of FERA, 1973 - unlawful detention - initiation of adjudication proceedings as contemplated under Section 51 FERA, 1973. HELD THAT - The Adjudicating Authority has not been taken into account in the Impugned Order that 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. That being the case the necessary ingredients to make out the violations under Sections 8(1), 9(1)(a) and 9(1)(f) of FERA are not made out - It is rightly stated that in the Impugned Order proceeds on the erroneous premise that the foreign exchange deposited in the NRE Accounts of Mr. V.D. Jaiswal were deposited by the Appellant, whereas in fact the deposits of foreign exchange in the said Accounts were made by Mr. V.D. Jaiswal from his earnings abroad. The Impugned Order all the material facts were 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. In the present case, it is the case of the appellant that 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 - the said statement cannot be relied upon to impose any penalty upon the Appellant. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Legality of the penalties imposed for contraventions of Sections 8(1), 9(1)(a), and 9(1)(f)(i) of FERA, 1973.
2. Validity of the Show Cause Notice issued on 04.04.2001.
3. Legitimacy of the Appellant's confessional statement dated 12.12.1995.
4. Impact of judicial precedents on the current case.
5. Admissibility and impact of retracted confessional statements in imposing penalties.

Detailed Analysis:

1. Legality of the penalties imposed for contraventions of Sections 8(1), 9(1)(a), and 9(1)(f)(i) of FERA, 1973:
The Appellant was penalized with ?8,00,000 for contravention of Sections 8(1) & 9(1)(a) and ?1,30,00,000 for contravention of Sections 9(1)(f)(i), 8(1) & 9(1)(a) of FERA, 1973. The Appellant argued that the deposits in the NRE accounts were made by the NRI account holder, Mr. V.D. Jaiswal, from his earnings abroad, and not by the Appellant. The Tribunal noted that the Adjudicating Authority failed to consider that prior to the Notification dated 31.07.1995, foreign currency could be deposited in NRE Accounts by power of attorney holders of NRIs. Thus, the necessary ingredients to make out the violations under Sections 8(1), 9(1)(a), and 9(1)(f) of FERA were not established.

2. Validity of the Show Cause Notice issued on 04.04.2001:
The Show Cause Notice alleged violations of various provisions of FERA and directed the Appellant to show cause why adjudication proceedings should not be initiated. The Tribunal observed that similar Show Cause Notices were quashed by the Delhi High Court in the "Standard Chartered Bank V/s Directorate of Enforcement & Ors." case, which held that prior to the circular dated 31.07.1995, there was no clear stipulation that deposits could not be made in NRE accounts by persons other than the NRI account holders. The Tribunal found that the Show Cause Notice in the present case suffered from the same legal infirmities.

3. Legitimacy of the Appellant's confessional statement dated 12.12.1995:
The Appellant retracted his confessional statement, claiming it was obtained under duress and coercion. The Tribunal noted that the Appellant informed the Enforcement Directorate about his unlawful detention and the coercion used to extract the statement. The Tribunal emphasized that a retracted confession cannot be the sole basis for imposing penalties unless corroborated by independent evidence.

4. Impact of judicial precedents on the current case:
The Tribunal referenced several judgments, including those by the Delhi High Court and the Supreme Court, which quashed similar Show Cause Notices and adjudication orders. The Tribunal highlighted the consistency in judicial decisions that prior to the 31.07.1995 circular, there was no prohibition on deposits in NRE accounts by persons other than the account holders. These precedents significantly influenced the Tribunal's decision to set aside the penalties imposed on the Appellant.

5. Admissibility and impact of retracted confessional statements in imposing penalties:
The Tribunal cited the Supreme Court's rulings in "Vinod Solanki V/s U.O.I." and "State (NCT of Delhi) V/s Navjot Sandhu alias Afsan Guru," which held that retracted confessions must be corroborated by independent evidence to be admissible. The Tribunal found that in the present case, there was no independent evidence corroborating the Appellant's retracted confessional statement. Consequently, the Tribunal concluded that the retracted statement could not be relied upon to impose any penalties on the Appellant.

Conclusion:
In light of the above analysis, the Tribunal allowed the appeal and set aside the Impugned Order dated 28.04.2006, passed by the Special Director, Directorate of Enforcement. The penalties imposed on the Appellant were annulled, and no costs were awarded.

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