2014 (5) TMI 1240 - AT - FEMA

Contravention of section 9(1)(b) and section 9(1)(d) of FERA - amounts confiscated by the impugned order - penalties imposed commensurate with the contraventions - amounts alleged to be received from and distributed to persons who are not authorized dealers in foreign exchange by order or on behalf of one Shri Adbul Salan of Abu Dhabi a person resident outside India without the previous general or special exemption of the Reserve Bank of India - submissions of the appellant that the mere confessions of the co-accused were later retracted and the same should not be admissible in evidence HELD THAT - Adjudicating Officer is not bound to observe the provisions of Indian Evidence Act 1872. He may follow the provisions of the Indian Evidence Act 1872 and as he is not bound he may deviate from the provisions of the Indian Evidence Act for the sake of justice under the circumstances Statement of the appellant though retracted is corroborated by the statements of the other witnesses and the documentary evidence which appears not to be doubtful. In such circumstances where the corroborating witnesses have not been cross-examined and there is no doubt appears from the statements which is required to be cross-examined to clarify the veracity such statements should not be condemned. The penalties imposed on the appellant also commensurate with the amounts involved in the contraventions and are not excessive and the confiscation of the amounts appears in accordance with section 63 of FERA. In view of the above this Tribunal finds nothing material to interfere with the Impugned Order

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the appellant contravened Section 9(1)(b) and Section 9(1)(d) of the Foreign Exchange Regulation Act, 1973 (FERA).
• Whether the amounts confiscated by the impugned order are liable to be confiscated under FERA.
• Whether the penalties imposed on the appellant are commensurate with the contraventions and reasonable.
• Whether the appellant's retracted statements and those of co-accused can be relied upon as evidence.
• Whether the denial of cross-examination of witnesses violated the principles of natural justice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Contravention of FERA Sections 9(1)(b) and 9(1)(d)

• Legal Framework and Precedents: Section 9(1)(b) and 9(1)(d) of FERA pertain to unauthorized dealings in foreign exchange and payments outside India without the Reserve Bank of India's permission.
• Court's Interpretation and Reasoning: The Tribunal considered the appellant's admissions in his statements, corroborated by documentary evidence and statements of other witnesses, to conclude that the appellant engaged in unauthorized foreign exchange transactions.
• Key Evidence and Findings: The appellant's handwritten statements, corroborated by bank records and statements from co-accused and bank managers, supported the conclusion of unauthorized transactions.
• Application of Law to Facts: The Tribunal found the appellant's actions violated FERA by receiving and distributing large sums without authorization.
• Treatment of Competing Arguments: The appellant's contention of coercion and unlawful methods in obtaining his statement was rejected due to corroborating evidence from independent sources.
• Conclusions: The Tribunal upheld the findings of contravention of Sections 9(1)(b) and 9(1)(d) of FERA.

Issue 2: Confiscation of Amounts

• Legal Framework and Precedents: Section 63 of FERA allows for confiscation of amounts involved in contraventions.
• Court's Interpretation and Reasoning: The Tribunal found that the confiscated amounts were directly linked to the contraventions, justifying their confiscation.
• Key Evidence and Findings: The amounts seized from various bank accounts and premises were linked to unauthorized transactions.
• Application of Law to Facts: The Tribunal applied Section 63 of FERA to justify the confiscation of amounts involved in the contraventions.
• Treatment of Competing Arguments: The appellant's arguments against confiscation were dismissed due to lack of evidence disproving the link to contraventions.
• Conclusions: The Tribunal upheld the confiscation of amounts as per the impugned order.

Issue 3: Reasonableness of Penalties

• Legal Framework and Precedents: Penalties under FERA should be proportional to the severity of the contraventions.
• Court's Interpretation and Reasoning: The Tribunal found the penalties imposed were commensurate with the magnitude of the unauthorized transactions.
• Key Evidence and Findings: The quantum of transactions and the appellant's role justified the penalties imposed.
• Application of Law to Facts: The penalties were deemed appropriate given the scale of contraventions.
• Treatment of Competing Arguments: The appellant's arguments of excessive penalties were not supported by evidence of disproportionality.
• Conclusions: The penalties were upheld as reasonable and proportionate.

Issue 4: Use of Retracted Statements

• Legal Framework and Precedents: Retracted statements require corroboration by independent evidence to be admissible.
• Court's Interpretation and Reasoning: The Tribunal found sufficient corroboration of the appellant's retracted statements through independent evidence.
• Key Evidence and Findings: Statements of co-accused and documentary evidence supported the appellant's admissions.
• Application of Law to Facts: The corroborated retracted statements were deemed admissible and reliable.
• Treatment of Competing Arguments: The appellant's reliance on Supreme Court precedents was countered by evidence corroborating his statements.
• Conclusions: The retracted statements were upheld as valid evidence.

Issue 5: Denial of Cross-Examination

• Legal Framework and Precedents: Principles of natural justice require cross-examination unless it causes real prejudice.
• Court's Interpretation and Reasoning: The Tribunal found no specific prejudice or unclear information necessitating cross-examination.
• Key Evidence and Findings: The statements and documentary evidence were clear and corroborated, negating the need for cross-examination.
• Application of Law to Facts: The Tribunal determined that the denial of cross-examination did not violate natural justice.
• Treatment of Competing Arguments: The appellant's arguments for cross-examination were dismissed due to lack of specific prejudice.
• Conclusions: The denial of cross-examination was upheld as not infringing on natural justice.

3. SIGNIFICANT HOLDINGS

• Verbatim Quotes of Crucial Legal Reasoning: "The statement of the appellant has been recorded in his own handwriting and is in detail which has been corroborated."
• Core Principles Established: Retracted statements can be reliable if corroborated by independent evidence; penalties must be proportional to contraventions; confiscation is justified if linked to unauthorized transactions.
• Final Determinations on Each Issue: The Tribunal upheld the findings of contravention, penalties, and confiscation, dismissing the appeal.