2024 (9) TMI 69 - AT - FEMA

Penalties imposed for contravention of different provisions of FERA - reliance on retracted statement - case made out by the respondent is that the appellant had transferred a sum of 70000 pounds to purchase a house in UK which was purchased in his name and transfer of money and purchase of the house outside India was in contravention of different provisions of the Act of 1973 - appellant submits that the alleged contravention of different provisions of the Act of 1973 is nothing but an outcome of the information given by his brother-in-law and it was due to dispute with his wife (appellant s sister) and ongoing court litigation in UK. - HELD THAT - In the instant case, retraction of the statement was made on the next date of the statement itself thus was without delay. The respondent, however, failed to produce any material to prove transfer of 70000 pounds. It could not have been in reference to the person with whom there was ongoing litigation with the appellant s sister. The respondent heavily relied upon the statement of the appellant to explain the documents of 4 pages recorded at the time of search to indicate that it was for the purchase of one house property at London from his sister and brother-in-law for 70000 pounds. The impugned order, however, does not disclose as to what was written on the document seized and explained. It is more so when the appellant had retracted from his statement on the next date. In any case, it was necessary to prove the transfer of the amount which respondent utterly failed because bare statement of brother-in-law for receipt of the amount cannot be taken as a proof when their relations were not cordial. When the statement of brother-in-law was not specific because he said to have received the amount on few occasions through other parties without naming any one herein. The purchase and even transfer of the property cannot be without execution of documents. The appellant never visited UK thus how transfer of property took place. Even otherwise, the execution of power of attorney for its use in UK was required to be notarized as per the British Law which does not exist in the present matter. It could have been even in India but for its use required through the Embassy which does not exist. The currency of a sum of Rs.36000/- cannot be taken to be a clinching evidence to prove the case. The respondent have even ignored the document executed by the brother-in-law showing the house to be his own property. The document aforesaid was submitted in the High Court of Justice Family Division Princely registered in UK in the case of Ms. Mariam Vs. Mohd. Ibrahim Achhala. The affidavit given by the informant specifically makes a reference of the immovable property to be belonging to him and not of the brother-in-law i.e. appellant. The statement of appellant s father has also been relied on though it is not so specific, rather based on hearsay information but it cannot be read as against the affidavit filed by appellant s brother-in-law. The respondent failed to prove case for contravention of the provisions of the Act of 1973. The penalty could not have been imposed without proof to show contravention of the provisions of the Act. The Special Director failed to appreciate that respondent could not prove transfer of 70000 pounds to U.K and produce valid document to prove purchase of a house by the appellant. Appeal allowed.

Summary

Issues:
Appeal against penalties imposed under Foreign Exchange Regulation Act, 1973 for contravention of various provisions.

Analysis:
1. The appellant challenged penalties imposed for contravention of provisions of the Foreign Exchange Regulation Act, 1973. The major penalty of Rs.16 lakhs was for violating Section 8(1), 9(1)(a), and 25(1) of the Act, with Rs.36000 also confiscated under Section 63.
2. The appellant's defense centered on false information provided by his brother-in-law, alleging purchase of a property in London. The appellant denied transferring funds for the property, highlighting lack of evidence and his non-visit to the UK.
3. The appellant presented documents and explanations to refute the allegations, citing ongoing family disputes and lack of motive for the supposed transfer of funds.
4. The respondent's case relied on the brother-in-law's claims and a purported power of attorney, which the appellant disputed as invalid and not notarized for use in the UK.
5. The appellant's father's statement and seized documents were used against him, but the lack of concrete evidence of fund transfer or property purchase weakened the respondent's case.
6. The tribunal found the respondent failed to substantiate the allegations, noting discrepancies in evidence and lack of proof for the claimed transactions.
7. Ultimately, the tribunal set aside the penalties, ruling that the impugned order was unsustainable due to the lack of evidence supporting the contraventions alleged under the Act.

This detailed analysis covers the appellant's defense, respondent's arguments, evidentiary issues, and the tribunal's reasoning leading to the decision to set aside the penalties imposed under the Foreign Exchange Regulation Act, 1973.