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2009 (12) TMI 1066 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Foreign exchange contravention upheld where retracted confession was corroborated and penalty sustained as justified
Contravention of section 8(1) and section 8(2) of the Foreign Exchange Regulation Act, 1973 was upheld where foreign exchange and Indian currency were recovered from the appellant and his earlier statement was corroborated by seizure records and connected witness statements. The appellant's later retraction was rejected because no evidence showed coercion or threat, and the statement remained supported by independent material and surrounding circumstances. The Tribunal also held that denial of cross-examination did not amount to a natural justice breach, as no specific basis was shown for it. On the evidence, the appellant failed to explain lawful source and possession, and the penalty was sustained as justified and not excessive.

Restriction on dealing in foreign exchange - Conversion at unauthorized rates - Retracted confessional statement - Requirement of independent corroboration - Right to cross-examination - Principles of natural justice and discretion - Assessment of penalty proportionality - Possession and recovery as corroborationRestriction on dealing in foreign exchange - Conversion at unauthorized rates - Possession and recovery as corroboration - Appellant held guilty of contravening sections 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973. - HELD THAT: - The Tribunal found that the appellant was intercepted while travelling with another person and foreign exchange (US $4,500) and Indian currency were recovered; the appellant's statement admitted purchase and sale of foreign exchange to earn livelihood; statements of persons alleged to have sold the dollars to the appellant corroborated the transactions; the panchanama was valid and signed; the appellant failed to explain the source of the foreign exchange and his contention that the currency belonged to the co-traveller was unsupported. On these facts the statutory prohibitions in sections 8(1) and 8(2) were breached and the adjudicating finding of guilt is sustained. [Paras 7, 8, 11, 13, 14]Guilt under sections 8(1) and 8(2) upheld; appeal dismissed on merits.Retracted confessional statement - Requirement of independent corroboration - Retraction of the appellant's confessional statement did not vitiate the case where independent corroboration existed. - HELD THAT: - The Tribunal applied the principle that the maker alleging coercion bears the burden of proof to show duress; the appellant retracted his statement without producing evidence of threat or coercion. The retracted confession was, however, supported by independent material - statements of Hasmukhbhai and Bhanvarlal and the physical recovery of foreign exchange - and by circumstantial evidence. In view of such corroboration the retraction did not render the confessional material inadmissible or fatal to the prosecution's case. [Paras 10, 11, 13]Retraction rejected for want of proof of duress; confession treated as corroborated evidence.Right to cross-examination - Principles of natural justice and discretion - Refusal to permit cross-examination was not a breach of natural justice under the circumstances. - HELD THAT: - The Tribunal noted settled law that cross-examination is not an automatic right on mere demand and may be refused if no sufficient reason is shown. The appellant did not demonstrate any circumstances warranting cross-examination of witnesses; authorities cited indicate denial of cross-examination in similar factual matrices does not constitute violation of natural justice. Hence the adjudication proceeding cannot be faulted on this ground. [Paras 12, 13]Denial of cross-examination held not to vitiate the proceedings.Assessment of penalty proportionality - The penalty imposed (Rs. 20,000) is not excessive and is commensurate with the gravity of the contravention. - HELD THAT: - After upholding the finding of contravention of statutory provisions, the Tribunal considered the quantum of penalty and concluded it to be appropriate in view of the proven breach. No grounds were shown to interfere with the amount imposed by the Adjudicating Officer. [Paras 14]Penalty confirmed; pre-deposit may be appropriated towards penalty.Final Conclusion: The appeal is dismissed; findings of contravention of sections 8(1) and 8(2) of the FER Act are affirmed, the retracted confession is held corroborated, denial of cross-examination is not fatal, and the penalty is confirmed and may be appropriated from the pre-deposit.

2009 (12) TMI 1067 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Unauthorised foreign exchange dealing proved by admitted statement, delayed retraction, and corroborating evidence; penalty upheld.
Unauthorised dealing in foreign exchange was established where the appellant admitted purchase and sale of foreign exchange, then retracted the statement without producing evidence of threat or coercion. The burden to prove coercion lay on the maker of the statement, and the delayed retraction weakened its value. The admission was further corroborated by surrounding circumstances and by the recipient's statement showing conversion at unauthorised rates. Contravention of section 8(1) and section 8(2) of the Foreign Exchange Regulation Act, 1973 was therefore proved, and the penalty was upheld.

Restrictions on dealing in foreign exchange - Admissibility of retracted confessional statement - Burden of proof for coercion in confessional statements - Requirement of corroboration for confession - Penalty under Foreign Exchange Regulation Act for unauthorized dealingRestrictions on dealing in foreign exchange - Admissibility of retracted confessional statement - Burden of proof for coercion in confessional statements - Requirement of corroboration for confession - Appellant was guilty of contravening section 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973 by purchasing and selling foreign exchange without RBI permission. - HELD THAT: - The Tribunal found the appellant's statement dated 8-10-1990 admitting sale of US $500 and US $2,000 to Vasudev Shankarlal Bhambhani. The confessional statement was retracted but the appellant failed to discharge the burden of proving that it was recorded under threat or coercion. The Tribunal applied the principle that the maker who alleges inducement or coercion must establish it and noted that bald assertions of threat, unsupported by corroborative evidence or prompt retraction, are insufficient. The confessional statement was further corroborated by the statement of Vasudev Shankarlal Bhambhani admitting barter in foreign exchange without an RBI licence and by circumstantial evidence of the transactions. On this combined evidence the Tribunal held the confessional statement voluntary and true, and upheld the finding of contravention of section 8(1) and 8(2) of the FER Act. [Paras 5, 6, 7, 8]Findings of guilt for contravention of section 8(1) and 8(2) are upheld.Penalty under Foreign Exchange Regulation Act for unauthorized dealing - Penalty proportionate to offence - Quantum of penalty imposed by the Adjudicating Authority was not excessive and was upheld. - HELD THAT: - Having upheld the finding of contravention, the Tribunal considered the quantum of penalty and concluded that the penalty imposed was commensurate with the gravity of the offence. The Tribunal found no reason to interfere with the adjudicating authority's assessment and allowed appropriation of the pre-deposited amount towards the penalty. [Paras 9]The penalty order is sustained and the appeal is dismissed.Final Conclusion: The appeal is dismissed; the finding of contravention of section 8(1) and 8(2) of the FER Act and the penalty imposed are upheld, and the pre-deposited amount may be appropriated towards the penalty.

2009 (11) TMI 1035 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Issues: (i) Whether receipt of substantial amounts through cheques issued from NRE accounts, supported by gift deeds executed in India when the alleged non-resident donors were not present in India and were unconnected with the recipient, established contravention of foreign exchange law; (ii) Whether the penalty imposed was excessive or unwarranted.

Issue (i): Whether receipt of substantial amounts through cheques issued from NRE accounts, supported by gift deeds executed in India when the alleged non-resident donors were not present in India and were unconnected with the recipient, established contravention of foreign exchange law.

Analysis: The surrounding circumstances showed that the alleged donors were not in India on the dates of execution, were unrelated to the appellant and his son, and no credible explanation was offered for the gift of substantial sums without consideration. The Tribunal applied the principles governing voluntary and retracted statements, circumstantial evidence, burden of proof, presumption arising from human conduct, and the rule that facts especially within the knowledge of a party may attract an adverse inference. On that basis, the claim of genuine gifts was rejected and the transaction was treated as compensatory payment in contravention of the statutory prohibition.

Conclusion: The contravention was established and the finding of violation was upheld, against the appellant.

Issue (ii): Whether the penalty imposed was excessive or unwarranted.

Analysis: The Tribunal compared the quantum of penalty with the nature of the proved contravention and found no basis to treat it as harsh or disproportionate.

Conclusion: The penalty was not found excessive and was sustained, against the appellant.

Final Conclusion: The appeal failed on merits and the impugned order sustaining the penalty was left undisturbed.

Ratio Decidendi: Where the alleged gifts from non-resident sources are unsupported by a credible explanation and the surrounding circumstances are inconsistent with ordinary human conduct, the authority may infer a compensatory transaction and uphold contravention on the basis of circumstantial evidence and adverse inference from facts within the party's special knowledge.

Genuine gift claims under foreign exchange law failed where surrounding facts supported a compensatory transfer and upheld penalty.
Receipt of substantial sums through cheques from NRE accounts, supported by gift deeds executed in India, was treated as a compensatory transaction rather than genuine gifts because the alleged non-resident donors were not present in India, were unrelated to the recipient, and no credible explanation was given for the transfers. Applying principles on voluntary and retracted statements, circumstantial evidence, burden of proof, human conduct, and adverse inference from facts within special knowledge, the Tribunal upheld the finding of contravention of foreign exchange law. It also found no basis to regard the penalty as harsh or disproportionate, and sustained the penalty.

Receipt of payment from non-resident through NRE accounts and contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 - characterisation of Indian-currency deposits arising from NRE account cheques as foreign exchange transactions - admissibility and evidentiary value of documents received through official channels - retracted confessional statement and its evidentiary weight - circumstantial evidence and burden of proof under section 106, Evidence Act - reasonableness of penalty imposed for contraventionReceipt of payment from non-resident through NRE accounts and contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 - characterisation of Indian-currency deposits arising from NRE account cheques as foreign exchange transactions - Whether the amounts received by the appellant and his son by way of cheques drawn on NRE accounts of persons resident outside India amounted to receipt of payment locally in India by or under instruction of persons resident outside India, thereby contravening section 9(1)(a) of the FER Act, 1973. - HELD THAT: - The Tribunal found that substantial sums were received by the appellant and his son by four cheques issued from NRE accounts of Sohan Lal Marwah and A.D. Agarwal, both persons resident outside India, on dates when those donors were not present in India and none were related to the appellants. The appellants failed to produce any material explaining the genesis of 'love and affection' or any other consideration justifying such high-value gifts. The Tribunal applied principles of circumstantial evidence and the rule in section 106, Evidence Act, observing that where material facts are peculiarly within the knowledge of the recipient, the onus to explain lies on him; absence of satisfactory explanation permits an adverse inference. The Tribunal rejected the contention that Indian-currency cheques drawn from NRE accounts cannot amount to foreign exchange transactions, noting that the Remittances (Immunity and Exemption) Act, 1991 does not shield such receipts and that receiving money on behalf of non-residents is forbidden under sections such as 9(1)(b)/(d). Tested against surrounding circumstances and human conduct, the Tribunal concluded the logical inference was that compensatory payments were made and that contravention of section 9(1)(a) was established. [Paras 4, 7, 8, 9, 10]Contravention of section 9(1)(a) of the FER Act, 1973 was established and the impugned adjudication was sustained.Admissibility and evidentiary value of documents received through official channels - retracted confessional statement and its evidentiary weight - Whether documents and statements (including a retracted inculpatory statement and documents received from Mrs. Meera Bhardwaj) relied on by the Enforcement Directorate were admissible and could be acted upon. - HELD THAT: - The Tribunal considered the appellant's challenge that documents were received in violation of section 72 and were inadmissible. It accepted the respondent's position that documents from Mrs. Meera Bhardwaj and the affidavit/retraction materials of an alleged donor were received through official channels pursuant to enquiries by the Directorate and therefore could not be disregarded on the ground alleged. On retracted statements, the Tribunal followed binding principles that a retracted confessional statement may still be relied upon if shown to be voluntary and corroborated by other evidence or circumstances; mere retraction without proof of inducement, threat or coercion is insufficient to discard the statement. The Tribunal applied these principles in the factual matrix and found the retraction did not render the inculpatory material unusable. [Paras 3, 5, 6]Documents received through official channels and the retracted inculpatory statement were admissible and could be relied upon in the proceedings.Circumstantial evidence and burden of proof under section 106, Evidence Act - Whether, in absence of direct proof, circumstantial evidence and the appellant's failure to explain the transactions justified an adverse inference supporting the finding of contravention. - HELD THAT: - The Tribunal relied on authoritative exposition of circumstantial evidence and the doctrine that where facts are especially within the knowledge of a party, the burden to prove them lies on that party (section 106, Evidence Act). It cited that the prosecution/department need only produce such evidence as is in its power and that where the recipient fails to explain suspicious receipts, a prudent inference against him may arise. Applying these principles to the unexplained high-value gifts from unrelated non-residents, the Tribunal held that the appellants' failure to account for origin and motive warranted drawing an adverse inference and supported the conclusion of compensatory payments in contravention of the Act. [Paras 8, 9, 10]Circumstantial evidence and the appellants' failure to explain the transactions justified an adverse inference supporting the finding of contravention.Reasonableness of penalty imposed for contravention - Whether the quantum of penalty imposed by the adjudicating authority was harsh or excessive in relation to the contravention found. - HELD THAT: - Having upheld the finding of contravention, the Tribunal examined the penalty and concluded that, in view of the nature and scale of the contravention, the penalty could not be characterized as harsh or excessive. No interference with the adjudicated quantum was warranted by the Tribunal. [Paras 11]The penalty imposed was reasonable and not excessive; no interference was called for.Final Conclusion: The appeal is dismissed for lack of merit; the Tribunal upheld the adjudication finding contravention of section 9(1)(a) of the FER Act, 1973, accepted the admissibility and evidentiary weight of material received through official channels (including a retracted statement), and found the penalty imposed to be reasonable.

2009 (10) TMI 1001 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Retraction and corroboration in foreign exchange penalty proceedings: voluntary confession upheld as reliable evidence of contravention.
A penalty for contravention of foreign exchange law was upheld where the appellant's retracted inculpatory statement, recorded under Section 40 of the Foreign Exchange Regulation Act, 1973, was found voluntary and reliable. The tribunal considered the statement together with seized documents and surrounding circumstances, and noted that the retraction was unsupported by any material showing coercion or threat. The admitted contents of the seized papers and the sequence of events corroborated the admission that payments were made in India on behalf of a person resident outside India without Reserve Bank of India permission. A retracted confession can sustain liability when voluntariness and corroboration are established.

Voluntariness of confessional statement - retraction and corroboration of confession - corroboration of confession by documentary and circumstantial evidence - contravention of the prohibition on payments by order or on behalf of a person resident outside India under Section 9(1)(d) of FERA, 1973 - penalty assessment and appropriatenessVoluntariness of confessional statement - retraction and corroboration of confession - The confessional statements recorded under Section 40 of the FERA were voluntary and admissible despite subsequent retraction. - HELD THAT: - The Tribunal examined the appellant's contention that the statements were made under coercion and therefore inadmissible. The appellant had retracted the admissions but produced no evidence to substantiate allegations of inducement, threat or coercion. Reliance was placed on authority that places the burden on the maker of the statement to prove impropriety in recording it, while the adjudicating authority must still subject a retracted confession to scrutiny before accepting it (reference in the judgment to KTMS Mohd. v. UOI ). Where retraction is unaccompanied by supporting evidence the retraction is of little weight. The Tribunal further noted that a retracted confession may be acted upon if found voluntary and corroborated by other evidence (reference in the judgment to K.I. Pavunny ). Applying these principles, the Tribunal found the confessional statements to be voluntary and true.Confessional statements were voluntary, admissible and reliable notwithstanding retraction.Corroboration of confession by documentary and circumstantial evidence - retraction and corroboration of confession - Documentary recoveries and circumstantial evidence sufficiently corroborated the appellant's confessional statements. - HELD THAT: - The Tribunal considered the seizure of documents from the appellant's residence and the appellant's admission that a seized document recorded payments made on instructions from a person resident outside India. The sequence of events, recovery of incriminating documents and attendant circumstantial facts furnished corroborative support for the incriminatory statements. The Tribunal held that such corroboration dispelled the bald and unsupported retraction and rendered the confessional material reliable for adjudicatory purposes.Documentary and circumstantial evidence corroborated the confession and supported reliance on the recorded statements.Contravention of the prohibition on payments by order or on behalf of a person resident outside India under Section 9(1)(d) of FERA, 1973 - penalty assessment and appropriateness - The appellant was guilty of contravening the prohibition in Section 9(1)(d) of FERA by making payments in India on instructions of a person resident outside India, and the penalty imposed was appropriate and sustainable. - HELD THAT: - Applying the established findings that the statements were voluntary and corroborated, the Tribunal concluded that the appellant had made payments in India by order or on behalf of a person resident outside India, thereby contravening the statutory prohibition. Having regard to the evidence and the amount involved in the contravention, the Tribunal found the penalty imposed by the Adjudicating Officer to be commensurate with the offence and justified under the statute. The Tribunal therefore upheld the adjudicating order and confirmed appropriation of seized amounts towards the penalty.Contravention of Section 9(1)(d) established; penalty sustained and order upheld.Final Conclusion: The appeal is dismissed. The Tribunal upheld the voluntariness and corroboration of the confessional statements, found contravention of the prohibition in Section 9(1)(d) of FERA, 1973, and confirmed the penalty and its appropriation from seized amounts.

2009 (10) TMI 1003 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Retractions and foreign exchange contraventions: corroborated admissions and documentary evidence sustained the penalty
A retracted confession can support a finding of foreign exchange contravention when it is corroborated by seized documents, diary entries and surrounding circumstances; the maker must show coercion or threat to displace the statement. On the facts, the appellant's admissions about making payments in India at the instruction of a person resident outside India, and making payment to a person resident outside India, were treated as sufficiently proved, establishing contraventions under Section 9(1)(a) and Section 9(1)(d) of the Foreign Exchange Regulation Act, 1973. The penalty was also upheld as proportionate to the gravity of the offence and the appellant's role, and no reduction was warranted on equitable grounds.

Restrictions on payments to persons resident outside India - Making payments by order or on behalf of persons resident outside India - Corroboration of retracted confessional statement - Burden of proof on accused alleging coercion - Liability of agent/manager who finances and shares profit - Quantum of penalty commensurate with gravity of economic offenceRestrictions on payments to persons resident outside India - Making payments by order or on behalf of persons resident outside India - Corroboration of retracted confessional statement - Whether the appellant committed contraventions of the restrictions on payments to persons resident outside India and whether the charges were proved - HELD THAT: - The appellant, in statements dated 17.1.91 and 18.1.91, admitted distributing specified sums on instructions of a person resident outside India and making a payment to a person resident in Saudi Arabia; these admissions were supported by seized documents and other documentary and circumstantial evidence. The appellant retracted the confessional statement alleging coercion but produced no independent evidence to establish threat or inducement; the Tribunal applied the principle that the burden lies on the maker to prove coercion and noted that a retracted confession may be acted upon if corroborated. On the material before it the Tribunal found the confessions corroborated by documentary entries, admissions of the proprietor regarding profit sharing, and the appellant's own explanations of seized documents, and accordingly held the charges under the relevant provisions restricting payments to persons resident outside India to be proved. [Paras 7, 9]Charges of making payments to and on behalf of persons resident outside India under the restrictions were proved and the adjudication finding of contravention is upheld.Liability of agent/manager who finances and shares profit - Burden of proof on accused alleging employee status - Whether the appellant could be treated as merely an employee or was liable on account of his financing, profit-sharing and conduct - HELD THAT: - Although the appellant pleaded he was merely an employee acting on instructions of the proprietor, the proprietor admitted conscious knowledge of the payments and profit sharing. The appellant himself admitted financing the business, receiving profit share and operating recruitment activity; therefore the onus to prove he was only an employee rested on him and was not discharged. The Tribunal concluded the transactions were predominantly in the appellant's personal capacity and that he was the main actor behind the contraventions. [Paras 5, 8, 9]The appellant is not entitled to protection as a mere employee; his financing and profit-sharing make him liable for the contraventions.Quantum of penalty commensurate with gravity of economic offence - Whether the penalty imposed was excessive and ought to be reduced in view of the appellant's plea of poverty - HELD THAT: - The Tribunal considered the appellant's plea for sympathy based on poverty but, having found the contraventions established and having regard to the nature and gravity of the economic offence and the amounts involved in the transactions, concluded that the penalty imposed by the Adjudicating Officer was commensurate with the offence. The Tribunal therefore declined to interfere with the quantum. [Paras 11]The penalty amount is appropriate and the adjudicating order imposing penalty is confirmed.Final Conclusion: The appeal is dismissed; the Tribunal upholds the finding of contravention regarding prohibited payments to persons resident outside India, rejects the contention that the appellant was merely an employee, and affirms the penalty as commensurate with the offence, directing payment within the stipulated period.

2009 (10) TMI 1002 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Mandatory pre-deposit under foreign exchange law justified dismissal where the appellant failed to comply after dispensation was refused.
Where the governing foreign exchange statute made pre-deposit of the penalty a condition for entertaining the appeal, the appellate authority could dismiss the matter for non-compliance. The appellant had sought dispensation on undue hardship, but that request was rejected and the appellant still failed to make the required deposit despite opportunity. In these circumstances, the Tribunal applied the statutory scheme and held that it was entitled to reject the appeal without examining the merits. The appeal was therefore not entertained and stood dismissed for failure to satisfy the mandatory pre-deposit requirement.

Obligation to make pre-deposit of penalty pending appeal under the proviso to Section 52(2) of the FERA - dispensation from pre-deposit on grounds of undue hardship and prima facie case - Appellate authority's power to reject/dismiss appeal for non-compliance with statutory pre-deposit requirement - effect of non-compliance with pre-deposit requirement on maintainability of appealObligation to make pre-deposit of penalty pending appeal under the proviso to Section 52(2) of the FERA - Appellate authority's power to reject/dismiss appeal for non-compliance with statutory pre-deposit requirement - dispensation from pre-deposit on grounds of undue hardship and prima facie case - effect of non-compliance with pre-deposit requirement on maintainability of appeal - Whether the appeal should be dismissed for non-compliance with the tribunal's order to make the pre-deposit required under Section 52(2) of the FERA. - HELD THAT: - The statutory scheme places an obligation on an appellant to deposit the penalty prescribed under Section 50 when preferring an appeal unless the Appellate Board, satisfied about prima facie merit and undue hardship, dispenses with such deposit under the second proviso to Section 52(2). The appellant had sought dispensation which was refused by the tribunal; subsequent opportunities to comply with the pre-deposit order were afforded but the appellant failed to comply and is absent. Applying the principle in Navin Chandra Chhotelal (as cited), where a mandatory pre-deposit requirement is not complied with the appellate authority is fully competent to reject or dismiss the appeal because it cannot proceed to hear the appeal on merits. Section 52(2) does not expressly prescribe rejection, but non-compliance with the mandatory deposit and with any order passed thereunder renders the appeal not maintainable. In the present case there was no showing of undue hardship or fresh grounds warranting reconsideration of dispensation, and the tribunal correctly concluded that equity did not favour the appellant and dismissed the appeal for non-compliance with the pre-deposit requirement.Appeal dismissed for non-compliance with the order to make the statutory pre-deposit; tribunal competent to dismiss the appeal under Section 52(2) of the FERA.Final Conclusion: The appeal against the adjudication order imposing penalty was dismissed for failure to comply with the statutory pre-deposit requirement and the tribunal's earlier order refusing dispensation; the appeal record may be consigned to the record room.

2009 (9) TMI 1090 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Issues: (i) Whether the appellant was proved to have abetted contravention of the restriction on making payments to or for the credit of persons resident outside India under the foreign exchange law. (ii) Whether the penalty imposed required reduction on the facts of the case.

Issue (i): Whether the appellant was proved to have abetted contravention of the restriction on making payments to or for the credit of persons resident outside India under the foreign exchange law.

Analysis: The material on record included the appellant's own statements, the statement of his employee, and statements of other recipients who admitted receipt of amounts against payment of premium through the relevant NRE accounts. The Tribunal treated the employee's statement as corroborative, held that the retraction of the appellant's confession was not supported by proof of coercion, and applied the principles governing circumstantial evidence and adverse inference where facts were within the special knowledge of the appellant. It also held that the absence of cross-examination did not nullify the evidence in the circumstances.

Conclusion: The charge of abetment of contravention under Section 9(1)(a) of the foreign exchange law was proved against the appellant.

Issue (ii): Whether the penalty imposed required reduction on the facts of the case.

Analysis: Although the contravention was upheld, the Tribunal considered the appellant's role as an intermediary and the overall circumstances of the transactions. On that basis, it concluded that the penalty imposed was excessive and that justice would be met by limiting the penalty to the amount already pre-deposited in the appeals.

Conclusion: The penalty was reduced to the amount already pre-deposited.

Final Conclusion: The appeals succeeded only to the extent of reduction of penalty, while the finding of contravention was affirmed.

Ratio Decidendi: A retracted confession may be relied upon when sufficiently corroborated by other evidence, and in proceedings involving clandestine financial transactions, adverse inference may be drawn from facts within the special knowledge of the appellant.

Retracted confession and circumstantial evidence sustained foreign exchange contravention, while penalty was reduced as excessive.
The Tribunal held that abetment of contravention of the foreign exchange restriction on making payments to or for the credit of persons resident outside India was proved, relying on the appellant's statement, corroborating employee evidence, and admissions by recipients of amounts routed through NRE accounts. It accepted the retracted confession because no proof of coercion was shown, applied circumstantial evidence principles, and drew adverse inference from matters within the appellant's special knowledge; the lack of cross-examination did not displace the evidence on these facts. The Tribunal also found the penalty excessive in light of the appellant's intermediary role and the transaction circumstances, and reduced it to the amount already pre-deposited.

Contravention of Section 9(1)(a) of the Foreign Exchange Regulation Act - abetment of prohibited payments - admissibility of co-noticee statements as substantive evidence - retracted confessional statement and requirement of corroboration - burden of proof and presumptions under Sections 106 and 114 of the Evidence Act - penalty quantum and reduction by appropriation of pre-depositContravention of Section 9(1)(a) of the Foreign Exchange Regulation Act - abetment of prohibited payments - Liability of the appellant for abetting payments to or for the credit of persons resident outside India in contravention of Section 9(1)(a) of the FERA. - HELD THAT: - The Tribunal found on the material on record that NRE accounts of certain NRIs were used to issue gift cheques which were placed into circulation against payment of a premium. The appellant's employee explained the modus operandi and the appellant admitted the employee was his mandatee. Multiple recipients admitted receipt of such payments subject to premium. The appellant failed to explain the circumstances or establish genuineness of the claimed gifts, and no documentary evidence supported the gift contention. Having regard to the statements, attendant circumstantial evidence and the appellant's inability to discharge the evidential burden as to facts within his special knowledge, the Tribunal concluded that the transactions fell within the mischief of Section 9(1)(a) and that the appellant had abetted the prohibited payments.Charge under Section 9(1)(a) proved against the appellant; guilt upheld.Admissibility of co-noticee statements as substantive evidence - retracted confessional statement and requirement of corroboration - Whether statements of co-noticees and the appellant's retracted confessional statements could be relied upon as substantive evidence. - HELD THAT: - The Tribunal applied precedent that a statement of a co-noticee which inculpates another can be used as substantive evidence where it implicates both, and that a retracted confessional statement may sustain conviction (or liability) if supported by sufficient corroboration. The appellant's assertion of coercion was not substantiated. The co-noticee's account, the appellant's admissions about his mandatee, statements of multiple recipients and attendant circumstantial facts furnished corroboration that, in the Tribunal's view, rendered the retracted statements and co-noticee statements admissible and probative.Co-noticee statements and the appellant's retracted confessions were admissible and sufficiently corroborated to support the findings.Burden of proof and presumptions under Sections 106 and 114 of the Evidence Act - Effect of appellant's failure to explain facts within his special knowledge and the drawing of adverse inferences under Sections 106 and 114 of the Evidence Act. - HELD THAT: - The Tribunal observed that certain facts relating to the illicit use of NRE accounts lay in the appellant's special knowledge. Given the clandestine nature of the transactions and the appellant's failure to furnish documentary proof or satisfactory explanations, the Tribunal held that adverse inferences could be drawn and presumptions of fact taken in favour of the prosecution, thereby lightening the Department's evidential burden in accordance with established principles.Appellant's failure to explain facts in his special knowledge justified adverse inferences and aided the Department's case.Right to cross-examine third-party witnesses - Whether denial of appellant's request to cross-examine third-party recipients rendered the proceedings vitiated. - HELD THAT: - The Tribunal noted that the appellant failed to demonstrate any justifiable ground for cross-examination of the third-party recipients and relied on authority holding that such a request is not an absolute right in these circumstances. The request for cross-examination was therefore properly refused and does not invalidate the use of the recorded statements in the adjudication.Denial of cross-examination of third-party recipients was proper and does not vitiate the proceedings.Penalty quantum and reduction by appropriation of pre-deposit - Appropriateness of the penalty quantum and the Tribunal's power to reduce penalty by directing appropriation of pre-deposit. - HELD THAT: - Although the charge was held proved, the Tribunal found the originally imposed penalties excessive in the appellant's capacity as an intermediary who abetted the actual beneficiaries. Considering the circumstances and equity, the Tribunal reduced the penalty to the amounts already pre-deposited by the appellant in the three appeals and directed that the pre-deposited sums be appropriated towards penalty to achieve ends of justice.Appeals partly allowed only to the extent of reducing penalty to the pre-deposited amounts and permitting appropriation of those sums towards penalty.Final Conclusion: The Tribunal affirmed that the appellant abetted prohibited payments in contravention of Section 9(1)(a) of FERA, upheld the use of co noticee and retracted statements on the basis of corroboration and adverse inferences, rejected the challenge to denial of cross examination of third parties, but found the penalty excessive and reduced it to the amounts already pre deposited by the appellant, directing appropriation of those amounts towards the penalty.

2009 (9) TMI 1085 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Tribunal Upholds Penalties for Violating FEM Act Due to Negligence in Preventing Fraudulent Transactions.
The appeals were dismissed by the Tribunal, affirming the adjudication orders against the appellants for contravening Sections 10(4) and 10(5) read with Section 42 of the FEM Act 1999. The Tribunal underscored the requirement for authorized dealers to exercise due care and caution, finding the penalties imposed neither harsh nor excessive. The appellants' failure to adhere to legal duties warranted the upholding of penalties, with pre-deposit amounts appropriated towards them. The Tribunal directed the remaining penalty amounts to be deposited within one week, reinforcing the legal obligations of licensed money changers to prevent fraudulent transactions.

Duty of an authorized person to require declarations and information before undertaking foreign exchange transactions - standard of care and caution expected from a full fledged money changer/authorized dealer - incorporation of Reserve Bank directions into the authorization under section 10(4) - strict regulatory liability under the Foreign Exchange Management Act, 1999 - renewal or continuation of RBI licence does not extinguish proved contraventions or bar adjudicationDuty of an authorized person to require declarations and information before undertaking foreign exchange transactions - standard of care and caution expected from a full fledged money changer/authorized dealer - Whether the appellants, as licensed full fledged money changers, breached duties under the authorization by failing to exercise due care and caution in selling foreign exchange to sponsored persons. - HELD THAT: - The Tribunal held that sub sections (4) and (5) of section 10 impose an obligation on an authorized person to obtain declarations and information sufficient to satisfy that a transaction will not involve contravention or evasion, and to act with due care and caution in all dealings. The pattern of repeated sponsoring for the same persons within short intervals and overlapping dates was a glaring circumstance that should have alerted the appellants. As authorized dealers, a higher standard of vigilance was required; their failure to detect obvious indicia of possible fraud amounted to non performance of the statutory duty. The Tribunal applied purposive construction of the regulatory scheme and relevant precedents on standards of care to conclude that the appellants did not adhere to the legal duty imposed on them. [Paras 10, 12, 18]The appellants breached the duties under section 10(4) and 10(5) by failing to exercise the requisite care and caution in the transactions.Strict regulatory liability under the Foreign Exchange Management Act, 1999 - renewal or continuation of RBI licence does not extinguish proved contraventions or bar adjudication - Whether continuation or renewal of the appellants' RBI licence precludes the Enforcement Directorate from adjudicating alleged contraventions under FEMA, or negates liability. - HELD THAT: - The Tribunal rejected the contention that renewal or continuance of the licence by RBI constitutes a conclusive finding of no contravention. It held that RBI's grant, renewal or non revocation of authorization does not wipe out statutory contraventions otherwise proved. FEMA's regulatory regime imposes strict liability in the sense that mens rea is not material for contraventions; therefore, licence renewal does not bar investigation or adjudication by the Enforcement Directorate, nor does it defeat findings of liability if established on facts. [Paras 8, 13, 14]Renewal or continuation of the RBI licence does not extinguish liability for contraventions or preclude adjudication by the Enforcement Directorate.Incorporation of Reserve Bank directions into the authorization under section 10(4) - strict regulatory liability under the Foreign Exchange Management Act, 1999 - Whether the remand by the Special Director (Appeals) was correct and whether the adjudication order finding contraventions should be upheld. - HELD THAT: - The Tribunal found that the Special Director (Appeals) incorrectly remanded the matter for reconsideration and that the adjudicating authority's findings that the appellants had committed contraventions under the Act were supportable. Applying the regulatory and purposive approach, and having regard to the appellants' failure to discharge the duties imposed by section 10(4) and (5), the Tribunal quashed and set aside the remand order and affirmed and sustained the adjudication order. The Tribunal further observed that the penalties imposed were not excessive. [Paras 3, 21, 22, 23]The remand order by the Special Director (Appeals) was quashed; the adjudicating authority's order finding contraventions is affirmed and the appeals are dismissed.Duty of an authorized person to require declarations and information before undertaking foreign exchange transactions - standard of care and caution expected from a full fledged money changer/authorized dealer - Whether individual persons associated with the appellant company can be held liable under section 42 for the company's contraventions. - HELD THAT: - The Tribunal held that the individual appellants, who were working with the appellant company and responsible for the conduct of its business, may be held responsible for the contraventions. Their roles in the company's operations justified the invocation of section 42 against them in respect of the conduct that led to the adjudicated contraventions. [Paras 22]Individual appellants associated with the company are liable and the invocation of section 42 against them is sustained.Final Conclusion: The appeals are dismissed. The remand order of the Special Director (Appeals) is quashed and set aside, the adjudication order finding contraventions of section 10(4) and 10(5) read with section 42 of the FEMA, 1999 is affirmed and sustained, individual appellants are held liable, and the penalties imposed are maintained.

2009 (9) TMI 1084 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Foreign exchange contravention for crediting funds to a non-resident account without Reserve Bank permission
Crediting funds to the account of a person resident outside India without prior Reserve Bank permission constitutes a contravention of Section 9(1)(e) of the Foreign Exchange Regulation Act, 1973. The record showed that the sum was credited to a non-resident account, no permission had been sought, and the parties were expected to verify the recipient's residential status before dealing with the transaction. On that basis, the contravention was treated as established and the penalty was regarded as proportionate and upheld.

Prohibition on placing sum to the credit of a non-resident without Reserve Bank permission - onus to ascertain the residential status of a person dealing with the company - penalty for contravention of foreign exchange regulations - regulatory mechanism to prevent economic offencesProhibition on placing sum to the credit of a non-resident without Reserve Bank permission - onus to ascertain the residential status of a person dealing with the company - The appellants placed an amount to the credit of a person who was a resident outside India without obtaining permission of the Reserve Bank, thereby contravening Section 9(1)(e) of the FER Act, 1973. - HELD THAT: - The Tribunal found on the record that the appellants had credited Rs. 95,000 to the account of Gurcharan Chawla when he was a person resident outside India and did not seek or obtain permission from the Reserve Bank. The appellants did not show any effort to procure RBI permission nor did they discharge the burden of ascertaining the residential status of the person with whom they transacted. The association between the company and G. Chawla, and absence of evidence of concealment by him, placed the onus on the appellants to verify his status. In these circumstances the contravention of the statutory prohibition contained in Section 9(1)(e) was held to be proved. [Paras 4, 6]Contravention of Section 9(1)(e) established against the appellants.Penalty for contravention of foreign exchange regulations - regulatory mechanism to prevent economic offences - The penalty imposed by the Adjudicating Authority was justified and not excessive. - HELD THAT: - Having found the substantive contravention proved, the Tribunal examined the quantum and character of the penalty. It observed that the statutory regulatory framework exists to deter economic offences and to protect the public interest. Applying these principles to the facts, the Tribunal held the penalty to be moderate in relation to the quantum involved and not arbitrary or excessive. Consequently the impugned penalty order was upheld as sustaining judicial scrutiny. [Paras 5, 6]The penalty confirmed and upheld as neither excessive nor arbitrary.Final Conclusion: The appeals are dismissed; the adjudication finding contravention of Section 9(1)(e) is affirmed and the penalty imposed is confirmed, the appellants directed to deposit the penalty within 15 days or face recovery in accordance with law.

2009 (9) TMI 1083 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Issues:
Non-compliance with pre-deposit order under Section 19(1) of FEM Act, 1999.

The judgment delivered by the Appellate Tribunal for Foreign Exchange pertains to appeals filed against an Adjudication Order imposing penalties for contravention of the Foreign Exchange Management Act, 1999. The penalties were imposed on an appellant company and three other individuals for failure to take reasonable steps for repatriation of export proceeds, as per the Foreign Exchange Management Regulations. Despite being served notice, the appellants did not comply with the pre-deposit order issued on 29.1.2009, leading to the appeal being taken up ex parte for further decision.

The Respondent argued that the appeals should be dismissed due to the non-compliance with the pre-deposit order dated 29.1.2009, as mandated by Section 19(1) of the FEM Act, 1999. This section requires the deposit of the penalty amount while filing an appeal against an order imposing a penalty. The Tribunal is empowered to dispense with such deposit only in cases of undue hardship, subject to conditions it deems fit to impose to ensure penalty realization.

The Tribunal highlighted the statutory obligation under Section 19(1) of the FEM Act, 1999, which necessitates the pre-deposit of penalty while filing an appeal unless the Tribunal permits otherwise based on undue hardship. The Tribunal emphasized that it cannot interpret the law differently to avoid harsh consequences, citing a Supreme Court judgment. The Tribunal reiterated that statutory laws must be applied as prescribed by the legislature without introducing sympathy or leniency.

The judgment concluded that the appellants failed to make the pre-deposit of the penalty within the stipulated period, despite clear consequences outlined in the pre-deposit order. The Tribunal, based on the non-compliance with the pre-deposit order, dismissed the appeals. The decision was made in adherence to the provisions of Section 19(1) of the FEM Act, 1999, emphasizing the importance of complying with legal obligations and orders in such matters.

Appeals Dismissed for Non-Compliance with Pre-Deposit Requirement Under FEM Act 1999; Tribunal Stresses Legal Obligations.
The Appellate Tribunal for Foreign Exchange dismissed the appeals due to non-compliance with the pre-deposit order under Section 19(1) of the FEM Act, 1999. The appellants, including a company and three individuals, failed to deposit the penalty amount required when filing an appeal. The Tribunal emphasized adherence to statutory obligations, rejecting any leniency, and upheld the dismissal based on the appellants' failure to comply with the pre-deposit requirement, underscoring the necessity of fulfilling legal obligations in penalty-related appeals.

2009 (9) TMI 1082 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Issues: (i) Whether, in view of the Reserve Bank of India permission to accept the NRI deposits, contravention of section 9(1)(e) of the Foreign Exchange Regulation Act, 1973 was made out. (ii) Whether the adjudicating authority could rely on facts not set out in the show cause notice and travel beyond its scope.

Issue (i): Whether, in view of the Reserve Bank of India permission to accept the NRI deposits, contravention of section 9(1)(e) of the Foreign Exchange Regulation Act, 1973 was made out.

Analysis: The notice proceeded on the footing that the amounts were placed to the credit of non-resident persons, but the record showed that the Reserve Bank of India had permitted acceptance of the deposits. Transactions covered by general or special permission of the Reserve Bank are outside the prohibition in section 9. Once permission existed for receipt of the deposits from NRIs, the alleged contravention could not be sustained on that basis.

Conclusion: The issue was answered in favour of the appellants, and contravention of section 9(1)(e) was not established.

Issue (ii): Whether the adjudicating authority could rely on facts not set out in the show cause notice and travel beyond its scope.

Analysis: Section 51 of the Foreign Exchange Regulation Act, 1973 read with Rule 3 of the Adjudication Proceedings and Appeal Rules, 1974 requires notice of the alleged offence and a reasonable opportunity to meet that allegation. The adjudication must remain confined to the case pleaded in the show cause notice, and extraneous material not forming part of the notice cannot be used to hold the noticee guilty.

Conclusion: The issue was answered in favour of the appellants, and material beyond the show cause notice could not be relied upon.

Final Conclusion: The reference was resolved against the enforcement case and the appellants were held not liable on the allegations framed in the notice.

Ratio Decidendi: Where Reserve Bank permission covers the impugned foreign exchange transaction, the statutory prohibition does not apply, and an adjudicating authority cannot sustain liability on facts outside the show cause notice.

RBI permission and notice-bound adjudication barred foreign exchange liability beyond the show cause notice.
Where Reserve Bank permission covered the acceptance of NRI deposits, the transaction fell outside the prohibition in section 9(1)(e) of the Foreign Exchange Regulation Act, 1973, so contravention could not be sustained on that basis. The adjudicating authority was also confined to the allegations stated in the show cause notice: under section 51 of the Act read with Rule 3 of the Adjudication Proceedings and Appeal Rules, 1974, it could not rely on facts not pleaded or travel beyond the notice. Liability based on extraneous material was therefore impermissible.

Contravention of section 9(1)(e) of the Foreign Exchange Regulation Act, 1973 - RBI permission as exemption to statutory prohibition - scope of a Show Cause Notice in adjudication - principles of natural justice in adjudication proceedingsContravention of section 9(1)(e) of the Foreign Exchange Regulation Act, 1973 - RBI permission as exemption to statutory prohibition - Whether appellants could be held guilty of contravention of section 9(1)(e) of the FER Act for placing the amount to the credit of non-resident persons despite RBI's letter dated 5.9.1996 permitting acceptance of deposits from NRIs. - HELD THAT: - The adjudicating officer's power to penalise under section 51 is subject to holding an enquiry after giving a reasonable opportunity, and section 9 itself exempts transactions where general or special permission from the Reserve Bank of India is available. The record shows RBI granted permission by letter dated 5.9.1996 to accept deposits from the NRIs in question. Where such permission exists, the prohibition in section 9(1)(e) does not apply to the permitted transactions and, accordingly, no contravention of section 9(1)(e) can be sustained against the appellants on that basis. [Paras 7]Appellants cannot be held guilty of contravention of section 9(1)(e) as RBI permission covered the deposits.Scope of a Show Cause Notice in adjudication - principles of natural justice in adjudication proceedings - Whether background facts or allegations not part of the Show Cause Notice could be taken into account in the adjudication order to hold the appellants guilty. - HELD THAT: - Adjudication must proceed on the basis of the allegations set out in the Show Cause Notice so that the person affected understands the nature of the offence and can meet it; Rule 3 of the Adjudication Proceedings and Appeal Rules, 1974, and the requirements of section 51 require that notice indicate the nature of the alleged offence and provide opportunity to be heard. The adjudicating officer cannot travel beyond the scope of the SCN; material or allegations not pleaded in the SCN cannot be relied upon to convict the respondent without having been the subject of notice and opportunity. [Paras 6, 7]Background facts or allegations not part of the SCN could not be considered to hold the appellants guilty; adjudication must be confined to the SCN.Scope of a Show Cause Notice in adjudication - Whether anything not part and parcel of the Show Cause Notice can be brought into the adjudication order against the appellants. - HELD THAT: - The SCN is the sheet anchor of adjudication; the adjudicating authority may not expand the scope of proceedings by incorporating matters that were not alleged in the SCN, because doing so would violate the duty to furnish particulars of the charge and to afford a proper hearing. Where separate adjudication has been initiated by issuance of another SCN in respect of certain facts, those facts cannot be utilised in the present adjudication absent their inclusion in the present SCN. [Paras 8]Nothing outside the SCN could be introduced into the impugned adjudication order to convict the appellants.Final Conclusion: Reference answered: appellants are not guilty of contravention of section 9(1)(e) insofar as RBI permission applied; adjudication cannot rely on facts or allegations not contained in the Show Cause Notice and any material outside the SCN cannot be considered in the impugned order.

2009 (9) TMI 1080 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Retraction of confessional statement rejected where corroboration supported voluntariness, sustaining foreign exchange contravention and penalty.
A retracted confessional statement may be relied on where the maker fails to prove coercion, inducement, threat or undue influence, and where the retraction is not shown to have been made at the earliest opportunity. Here, the recorded statement was corroborated by surrounding circumstances, including recovery of currency and transactions traced through a co-noticee, so it was treated as voluntary and reliable. On that basis, the finding of contravention of section 9(1)(b) and section 9(1)(d) of the Foreign Exchange Regulation Act, 1973 was sustained, and the penalty was confirmed as proportionate to the misconduct.

Voluntariness of confessional statement - burden of proof for coercion - corroboration of retracted confession - receiving or making payment otherwise than through an authorised dealer - section 9(1)(b) and 9(1)(d) of the FERA, 1973 - penalty proportionality and appropriatenessVoluntariness of confessional statement - burden of proof for coercion - corroboration of retracted confession - Confessional statement recorded from the appellant was voluntary and admissible despite retraction. - HELD THAT: - The Tribunal held that the appellant bore the burden of proving that the statement recorded on 3-6-1992 was obtained by threat, inducement or coercion; that burden was not discharged. Reliance was placed on established authorities recognising that a maker alleging coercion must establish it and that a retracted confession may be acted upon if the court is satisfied of its voluntariness and if there is corroboration. The appellant did not retract the statement at the earliest opportunity nor produce evidence leading to a probability of coercion. The confessional statement therefore stood as voluntary and was further supported by circumstantial evidence, including admissions regarding payments and the undisputed fact of the brother's residence abroad. [Paras 7, 8, 9, 10]The confessional statement was voluntary, reliable and may be relied upon.Receiving or making payment otherwise than through an authorised dealer - section 9(1)(b) and 9(1)(d) of the FERA, 1973 - Appellant was guilty of contravening section 9(1)(b) and 9(1)(d) of the FERA, 1973. - HELD THAT: - Applying the statutory scheme of section 9(1)(b) and 9(1)(d), the Tribunal found that the appellant admitted receipt and transmission of sums on instructions of a person resident outside India without routing through an authorised dealer. The admissions in the statement, corroborated by the attendant circumstantial material (including the recovery from the co-noticee and related evidence), supported the finding of contravention. The Tribunal rejected the contentions challenging the relevance of seized material and the denials asserted in the memorandum of appeal. [Paras 4, 11]The appellant has been rightly held guilty of contravening section 9(1)(b) and 9(1)(d) of the FERA.Penalty proportionality and appropriateness - The quantum of penalty imposed was not excessive and was commensurate with the gravity of the offence; pre-deposit may be appropriated. - HELD THAT: - After upholding the finding of contravention, the Tribunal considered the severity of the offence and the amount involved and concluded that the penalty imposed by the Adjudicating Authority was not excessive. The appeal offered no meritorious basis to disturb the adjudicated penalty. The Tribunal therefore dismissed the appeal and directed that the amount already paid as pre-deposit be appropriated towards the penalty. [Paras 2, 11]Penalty confirmed as appropriate; pre-deposited amount to be appropriated towards the penalty; appeal dismissed.Final Conclusion: The appeal is dismissed. The adjudication finding of contravention of section 9(1)(b) and 9(1)(d) of the FERA, 1973 is upheld, the confessional statement was held voluntary and corroborated, the penalty is sustained as not excessive, and the pre-deposited amount may be appropriated towards the penalty.

2009 (9) TMI 1081 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Retracted confession and corroborating evidence sustained foreign exchange liability, with penalty and confiscation upheld.
Section 9(1)(b) of the Foreign Exchange Regulation Act was held attracted where the appellant received payment on behalf of a person resident outside India without authorisation. The retracted statement was treated as voluntary because the allegation of coercion was unsupported, the retraction was not prompt, and the statement was corroborated by documentary and circumstantial evidence, including recovery of cash and associated papers. The claim that the money belonged to another person was not credibly proved. The contravention was therefore established, and the penalty and confiscation were upheld.

Contravention of section 9(1)(b) of the FERA - unauthorised receipt of payment on behalf of a person resident outside India - requirement of Reserve Bank of India permission for inward payments - retracted confessional statement and voluntariness - corroboration of confession by documentary and circumstantial evidence - penalty assessment and proportionalityContravention of section 9(1)(b) of the FERA - unauthorised receipt of payment on behalf of a person resident outside India - requirement of Reserve Bank of India permission for inward payments - Appellant guilty of receiving payment on behalf of a person resident outside India otherwise than through an authorised dealer in contravention of section 9(1)(b) of the FERA. - HELD THAT: - The show-cause notice alleged receipt of Rs. 3,20,000 in June 1995 on behalf of the appellant's brother resident in Jeddah without RBI permission. A search led to recovery of the substantial sum from the appellant and related documents; the appellant's initial statement admitted receipt from his brother and subsequent retraction was unexplained. The Tribunal noted the statutory prohibition under section 9(1)(b) against receiving payments otherwise than through an authorised dealer on behalf of a person resident outside India without RBI permission. The Tribunal found the appellant failed to explain the four-day gap before the purported claim by the ostensible owner and did not account for the legitimate source of the seized amount. On the materials and surrounding circumstances, the Tribunal concluded the appellant was rightly held guilty of the contravention. [Paras 6, 8, 9]Guilty of contravention of section 9(1)(b); conviction upheld.Retracted confessional statement and voluntariness - corroboration of confession by documentary and circumstantial evidence - Retracted confessional statement was voluntary and could be relied upon as it was corroborated by independent evidence. - HELD THAT: - Although the appellant retracted his earlier statement alleging coercion, the Tribunal placed the burden on him to prove threat or coercion and found no supporting evidence. The Tribunal applied the principle that a retracted confession may be acted upon if the Court is satisfied it was voluntary and corroborated. Here the recovered currency, slips recovered from the appellant's custody and attendant circumstantial facts (including relationship to the person resident abroad) furnished corroboration. The Tribunal rejected the bald allegation of coercion in absence of evidence and noted the delay in retraction, concluding the statement was voluntary and true. [Paras 7, 8]Retracted confessional statement treated as voluntary and admissible as corroborated evidence.Penalty assessment and proportionality - Quantum of penalty imposed under the adjudication order is not excessive and is upheld. - HELD THAT: - Having held the appellant guilty of contravention, the Tribunal examined the penalty imposed by the Adjudicating Authority and found it commensurate with the gravity of the offence. No mitigating material persuaded reduction. The Tribunal therefore concluded the penalty withstands judicial scrutiny and may be confirmed; the pre-deposited amount was directed to be appropriated towards the penalty. [Paras 9]Penalty affirmed; pre-deposit may be appropriated towards penalty.Final Conclusion: Appeal dismissed; conviction for contravention of section 9(1)(b) of the FERA confirmed and penalty upheld, with the pre-deposited amount to be appropriated towards the penalty.

2009 (9) TMI 1089 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Issues: (i) Whether the appellants could be held liable for contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 for failure to repatriate export proceeds. (ii) Whether appellant J.B.S. Bakshi could be held liable for contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973 for alleged unauthorized acquisition and transfer of foreign currency.

Issue (i): Whether the appellants could be held liable for contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 for failure to repatriate export proceeds.

Analysis: Liability under section 18 rests on the exporter who files the undertaking in relation to export value and receipt of sale proceeds. The statutory presumption under section 18(3) arises only against the person who has sold the goods or is entitled to sell them and fails to receive payment within the prescribed period. On the facts, the shipping documents, GRI forms, invoices and export-related formalities stood in the name of MMTC Ltd., which also held the export code, received export benefits, and was the entity entitled to receive the export price in its bank account. The appellants were found to be manufacturers acting under MMTC Ltd.'s arrangement and had not themselves assumed the statutory role of exporter. In the absence of an undertaking under section 18(1) by the appellants, and with no evidence of any omission by them amounting to non-realisation of export proceeds, the presumption under section 18(3) could not be invoked against them.

Conclusion: The appellants were not liable for contravention of section 18(2) read with section 18(3), and the penalty was unsustainable.

Issue (ii): Whether appellant J.B.S. Bakshi could be held liable for contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973 for alleged unauthorized acquisition and transfer of foreign currency.

Analysis: Section 8(1) prohibits acquisition, transfer, or dealing in foreign exchange without prior permission of the Reserve Bank. The allegation against the appellant was that he had acquired foreign currency and transferred it to another foreign entity. The material on record showed that the foreign amount was paid by one foreign buyer to another for release of shipment, with the appellant acting only as a conduit for the transaction. Mere possession or carriage without beneficial interest or capacity to appropriate the money does not amount to acquisition within the meaning of the provision. The enforcement case was not established to the standard required in foreign exchange proceedings, where the burden remains on the department and the allegation must be proved beyond reasonable doubt.

Conclusion: The charge under section 8(1) was not made out against appellant J.B.S. Bakshi.

Final Conclusion: The impugned penalty order could not survive, and the appeals succeeded on merits with the penalties set aside.

Ratio Decidendi: The statutory presumption for non-realisation of export proceeds applies only against the person who is the exporter or is entitled to sell the goods, and foreign exchange liability under section 8(1) requires proof of real acquisition or transfer with beneficial interest, not mere conduit possession.

Export proceeds liability attaches to the statutory exporter, while conduit possession alone does not establish unauthorised foreign-exchange acquisition.
Failure to repatriate export proceeds under the Foreign Exchange Regulation Act attaches to the exporter who gives the statutory undertaking or is entitled to receive the export price. Where export documents, export code, benefits and payment entitlement belong to another entity, manufacturers acting under its arrangement do not attract the presumption for non-realisation. Unauthorised foreign-exchange acquisition or transfer also requires proof of real acquisition or dealing with beneficial interest; mere conduit possession or carriage for a payment between foreign entities is insufficient. The alleged contraventions were not established, so the penalties were set aside.

Reasonable steps for repatriation of export proceeds - presumption under section 18(3) of the Foreign Exchange Regulation Act - liability of exporter as distinct from agent/manufacturer under section 18 - rebuttable presumption - unauthorised acquisition of foreign exchange under section 8(1) of the Foreign Exchange Regulation ActReasonable steps for repatriation of export proceeds - presumption under section 18(3) of the Foreign Exchange Regulation Act - liability of exporter as distinct from agent/manufacturer under section 18 - rebuttable presumption - Validity of penalty imposed under section 18(2) read with section 18(3) of the FER Act on the appellants for failure to repatriate export proceeds - HELD THAT: - The Tribunal examined the statutory scheme of section 18 and rule 8 of the Foreign Exchange Regulation Rules and held that the statutory obligation to take reasonable steps for repatriation is cast on the exporter who files the undertaking under section 18(1). The presumption in section 18(3) that reasonable steps were not taken arises against the person who sold or is entitled to sell the goods (i.e., the exporter) and is rebuttable. What constitutes "reasonable steps" depends on the facts and circumstances of each case. On the facts, MMTC Ltd. signed the GRI forms, obtained the export code, issued invoices and shipping bills, received export benefits and had the contractual and practical role of exporter; it therefore could not shift the statutory liability of an exporter onto the appellants who acted as manufacturers. The appellants had not filed the undertaking under section 18(1), and the adjudication order did not produce evidence showing appellants had done or refrained from doing anything that would delay or prevent receipt of payment. Accordingly, the imposition of penalty under section 18(2) read with section 18(3) on the appellants was held unsustainable and was quashed. [Paras 12, 13, 14, 15, 16]Penalty under section 18(2) read with section 18(3) quashed as against the appellants; statutory presumption did not arise against them and MMTC Ltd. was the exporter liable under section 18.Unauthorised acquisition of foreign exchange under section 8(1) of the Foreign Exchange Regulation Act - Validity of penalty imposed under section 8(1) of the FER Act against appellant J.B.S. Bakshi for alleged acquisition and transfer of foreign currency - HELD THAT: - The Tribunal construed "otherwise acquired" in section 8(1) to require possession plus capacity of appropriation and a beneficial interest in the foreign exchange. Mere physical possession as a carrier or for another's benefit does not amount to acquisition. The appellant produced correspondence showing that monies were paid by a new buyer to the former buyer and that the appellant acted as an intermediary to effect release of shipment without acquiring beneficial ownership or capacity to appropriate the funds. Given the lack of evidence proving acquisition and transfer and the higher standard of proof in FER proceedings, the adjudicating authority's findings were based on assumptions and not sustainable. Consequently, the penalty under section 8(1) could not be upheld. [Paras 17, 18, 19, 20, 21]Penalty under section 8(1) quashed as against appellant J.B.S. Bakshi for lack of proof of acquisition or transfer of foreign exchange.Final Conclusion: The appeals are allowed; the adjudication order is quashed insofar as it imposes penalties on the appellants under section 18(2) read with section 18(3) and on appellant J.B.S. Bakshi under section 8(1), the impugned penalties being unsustainable on the facts and law.

2009 (9) TMI 1088 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Mandatory pre-deposit requirement defeats appeal where penalty deposit was not made and no dispensation was obtained.
Under Section 52(2) of the Foreign Exchange Regulation Act, 1973, pre-deposit of the penalty was a mandatory for maintaining an appeal unless dispensation was granted on sufficient cause and undue hardship. Where the appellant failed to comply with the directed 20% deposit despite ample time and also did not appear or seek further relief, the appellate authority was entitled to reject the appeal as not maintainable without examining the merits. The operative effect is that non-compliance with a statutory pre-deposit requirement defeats the appeal itself.

Pre-deposit requirement under Section 52(2) of the FERA, 1973 - discretion to dispense with pre-deposit on grounds of undue hardship and prima facie case - appellate authority's power to reject or dismiss appeal for non-compliance with mandatory pre-deposit - inability to proceed to merits where statutory pre-deposit requirement is not complied withPre-deposit requirement under Section 52(2) of the FERA, 1973 - appellate authority's power to reject or dismiss appeal for non-compliance with mandatory pre-deposit - discretion to dispense with pre-deposit on grounds of undue hardship and prima facie case - Whether the appeal must be dismissed for non-compliance with the Tribunal's pre-deposit order. - HELD THAT: - Under the statutory scheme of Section 52(2) the appellant is obliged to deposit the penalty imposed when preferring an appeal unless the Appellate Board in exercise of its discretion dispenses with such deposit upon being satisfied of prima facie case and undue hardship. Reliance is placed on the principle that where the pre-deposit required by a provision analogous to Section 52(2) is not made, the appellate authority is competent to reject the appeal and cannot proceed to hear it on merits. The Tribunal had earlier directed a limited pre-deposit (20% of the penalty) but the appellant failed to comply with that order for over three years and has not offered justification or sought further dispensation; the appellant also did not appear despite service of notice. Given the non-compliance despite leniency and opportunity, equity does not favour the appellant and the appeal must be dismissed for failure to comply with the pre-deposit requirement, thereby precluding consideration of merits.The appeal is dismissed for non-compliance with the Tribunal's pre-deposit order and will not be heard on merits.Final Conclusion: The Tribunal dismissed the appeal for failure to make the directed pre-deposit (20% of the penalty) and for non-compliance and non-appearance, holding that non-compliance with the statutory pre-deposit requirement permits rejection of the appeal and precludes hearing on merits.

2009 (9) TMI 1087 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

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Uncorroborated admission and denied cross-examination cannot sustain foreign exchange penalty where mistake of fact is available.
Penalty under foreign exchange law cannot be sustained on an uncorroborated admission where the charge is not supported by material particulars and requested cross-examination of the co-noticee is denied. The evidentiary foundation was found insufficient because the adjudication relied mainly on the appellant's admission and a co-noticee's statement without independent corroboration. A bona fide mistake of fact was also recognised as a legally available defence capable of negating culpability. The penalty order was therefore quashed insofar as it related to the appellant.

Mistake of fact - defence of mistake of fact under section 76 Indian Penal Code - reliance on admissional statement without corroboration - failure to allow cross-examination of co-noticee - penalty under Foreign Exchange Regulation Act - quashing of penalty order for want of corroborationReliance on admissional statement without corroboration - failure to allow cross-examination of co-noticee - quashing of penalty order for want of corroboration - Validity of the adjudication order imposing penalties when based solely on the appellant's admissional statement and that of a co-noticee without independent corroboration and without permitting cross-examination of the co-noticee. - HELD THAT: - The Tribunal found that the impugned adjudication order rested only on admissional statements of the appellant and a co-noticee and that no corroboration in material particulars was placed on record. The demanded cross-examination of the co-noticee was not permitted, and the adjudication order did not describe the contents of the recovered documents alleged to provide corroboration. In these circumstances, reliance solely on the admissional statements was held to be unsustainable. The Tribunal applied the principle that a conviction or adjudication cannot properly be founded on uncorroborated admissions where corroborative material is absent or not explained, and relied upon the Supreme Court decision cited in the order to support quashing. Consequently the penalty order could not be sustained and had to be set aside as against the appellant. [Paras 3, 5]The adjudication order imposing penalties is quashed insofar as it concerns the appellant for lack of corroboration and denial of cross-examination.Mistake of fact - defence of mistake of fact under section 76 Indian Penal Code - Availability of mistake of fact as a defence to the appellant's admission that he delivered money on instructions of a person outside India. - HELD THAT: - The Tribunal accepted the appellant's plea that when he delivered the cash he did not know that the distributions were being made on instructions of a person outside India and treated this as a claim of mistake of fact. The Tribunal noted the established principle that a bona fide mistake of fact is a valid defence and invoked the general exception in section 76 Indian Penal Code to observe that such a mistake, when established, affords a defence. Given that the order under challenge was founded on uncorroborated admissions and that the appellant asserted mistake of fact, the Tribunal found that the defence materially undermined the basis for the penalties. [Paras 4, 5]The appellant's plea of mistake of fact is recognised as a valid defence and contributes to the conclusion that the penalties cannot be sustained on the existing record.Final Conclusion: The appeal is allowed; the adjudication order imposing penalties under the Foreign Exchange Regulation Act is quashed as against the appellant because it was founded solely on uncorroborated admissional statements, cross-examination of the co-noticee was not permitted, and the appellant's plea of bona fide mistake of fact was not adequately addressed.

2009 (9) TMI 1086 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

AI TextQuick Glance (AI)Headnote

Issues:
1. Reduction of penalty imposed under FEM Act, 1999.
2. Interpretation of Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000.
3. Claim of ownership and possession of seized foreign currency.
4. Residency status of the appellant under FEM Act, 1999.
5. Contravention of section 4 of FEM Act, 1999.
6. Quantum of penalty imposed and its justification.

Analysis:

1. The appeal was against the reduction of penalty from Rs. 15,000 to Rs. 5,000 under the FEM Act, 1999. The tribunal directed the appellant to deposit 40% of the reduced penalty amount within 45 days, which was complied with. The appeal was taken up for final disposal on merit.

2. The appellant argued that the seized foreign currency was within the permissible limit as per the Foreign Exchange Management Regulations, 2000, allowing residents of India to retain foreign currency worth not exceeding USD 2000. The appellant claimed joint ownership with his wife, citing his work history abroad and the absence of a currency declaration form during entry to India.

3. The respondent contended that the appellant's statements indicated sole ownership of the seized foreign currency, acquired abroad and declared as his hard-earned money, despite initial claims of joint ownership with family members. This established contravention of the FEM Act, 1999, leading to justified confiscation.

4. The appellant's residency status was confirmed under the FEM Act, 1999, as a resident of India based on the duration of stay prior to the search date. The regulations allowed possession of foreign currency not exceeding USD 2000, with no evidence presented to prove ownership by family members.

5. The possession of foreign currency beyond the statutory limit of USD 2000 was deemed a contravention of the FEM Act, 1999, as confirmed by the appellant's admission of ownership of the seized currency. The confiscation of the foreign currency was upheld by both adjudicating authorities.

6. The quantum of penalty imposed was reduced to Rs. 5000 by the first appellate authority, considered reasonable compared to the contravention involved. The tribunal dismissed the appeal, directing the appellant to deposit the balance penalty amount within 7 days, failing which the Enforcement Directorate would realize it in accordance with the law.

Tribunal Confirms Currency Confiscation; Reduces Penalty to Rs. 5,000 for Breach of Foreign Exchange Management Act.
The tribunal upheld the confiscation of foreign currency exceeding USD 2000, confirming contravention of the FEM Act, 1999. The appellant's residency status was affirmed, and joint ownership claims were dismissed. The penalty was reduced from Rs. 15,000 to Rs. 5,000. The appeal was dismissed, with a directive to deposit the balance penalty within seven days, failing which the Enforcement Directorate would enforce collection.

Possession and retention limit for foreign currency under Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000 - residency for FEMA purposes (stay exceeding 180 days) - confiscation for contravention of foreign exchange regulations - penalty proportionality in appeals against adjudication orders - Currency Declaration Form threshold (USD 10,000) and non-requirement of declarationPossession and retention limit for foreign currency under Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000 - residency for FEMA purposes (stay exceeding 180 days) - confiscation for contravention of foreign exchange regulations - Whether the foreign currency seized from the appellant, being in excess of the permissible retention limit while he was a resident of India, amounted to contravention justifying confiscation - HELD THAT: - The Tribunal found that the appellant was a resident of India for the purpose of the FEMA provisions because he had been staying in India for more than 180 days prior to the search on 22.4.2003. The Regulations permit a person to retain foreign currency not exceeding USD 2000 (or equivalent) in aggregate. The appellant, by his letter dated 19.12.2004, admitted that the seized foreign currency represented his earnings from salary and allowances and produced no evidence to show that any part belonged to his wife or other family members. In the absence of material establishing joint entitlement or any other exemption, possession of foreign currency beyond the statutory limit constituted a contravention of section 4 of the FEMA, 1999, and the concurrent findings of the adjudicating authority and first appellate authority upholding confiscation were held to be correct. [Paras 5]Confiscation of the seized foreign currency upheld as justified for contravention of the retention limit by a resident.Penalty proportionality in appeals against adjudication orders - Whether the reduced penalty imposed by the first appellate authority was excessive and required interference - HELD THAT: - The Tribunal noted that the first appellate authority had already reduced the original penalty to a lesser amount. Having regard to the extent of contravention found, the Tribunal held that the reduced penalty could not be characterised as harsh or excessive. The amount already deposited pursuant to an earlier direction was to be appropriated towards the penalty and the appellant was directed to pay the balance within the stipulated time, failing which the Enforcement Directorate could recover it according to law. [Paras 6, 7]No interference with the reduced penalty; appeal dismissed and balance penalty directed to be paid.Final Conclusion: The appeals are dismissed: confiscation of the seized foreign currency is sustained for possession beyond the permissible retention limit by a resident, and the reduced penalty imposed on appeal is not interfered with; deposited amount to be appropriated and balance paid within the directed time.

2009 (8) TMI 1297 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

AI TextQuick Glance (AI)Headnote

Issues: (i) Whether the appellant placed a sum to the credit of a person resident outside India in contravention of section 9(1)(e) of the Foreign Exchange Regulation Act, 1973. (ii) Whether the appellant acquired and transferred foreign exchange in contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973.

Issue (i): Whether the appellant placed a sum to the credit of a person resident outside India in contravention of section 9(1)(e) of the Foreign Exchange Regulation Act, 1973.

Analysis: The audited accounts and seized documents showed a substantial amount standing in the name of a foreign company under sundry creditors. The unilateral write-off relied upon by the appellant did not displace the documentary entry, and there was no evidence of permission from the Reserve Bank of India or of any prior intimation to it. On the material on record, the credit entry remained attributable to a sum placed to the credit of a person resident outside India.

Conclusion: The issue was decided against the appellant and in favour of the Revenue.

Issue (ii): Whether the appellant acquired and transferred foreign exchange in contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973.

Analysis: The seized documents and the appellant's own statements established instructions for remittances to persons and entities outside India, including payments for personal benefit. The explanation that the transactions were only in the capacity of an agent was found unacceptable in view of the admissions and surrounding circumstances. The evidence showed acquisition and transfer of foreign exchange without the previous permission required by law.

Conclusion: The issue was decided against the appellant and in favour of the Revenue.

Final Conclusion: The impugned penalty order was sustained, and the appeals failed on merits.

Ratio Decidendi: Documentary entries in audited accounts, supported by seized material and admissions, are sufficient to establish contravention of foreign exchange restrictions where there is no RBI permission and the contrary explanation is not substantiated.

Documentary evidence and admissions establish foreign exchange contravention where no Reserve Bank permission was shown.
Documentary entries in audited accounts, supported by seized material and admissions, were treated as sufficient evidence of contravention where no Reserve Bank permission or prior intimation was shown. A foreign company's credit balance recorded in sundry creditors was not displaced by a unilateral write-off, so the entry was attributed to a sum placed to the credit of a person resident outside India. The material also established instructions for remittances and foreign exchange transfers abroad, including payments for personal benefit, and the agency explanation was rejected as unsupported. The penalty was therefore sustained and the foreign exchange contraventions were affirmed on the recorded material.

Placing any sum to the credit of a person resident outside India - restrictions on dealing in foreign exchange - acquisition and transfer of foreign exchange by a person other than an authorised dealer - penalty for contravention of FERA provisions - relevance of seized documents and admissions in proving contraventionPlacing any sum to the credit of a person resident outside India - penalty for contravention of FERA provisions - relevance of seized documents and admissions in proving contravention - Whether the appellant company contravened section 9(1)(e) of the FERA by placing a sum to the credit of M/s. Farlin Timbers (P.) Ltd., a person resident outside India - HELD THAT: - The seized audited accounts and director's report showed an entry of US$ 2,00,26,245.22 in the name of M/s. Farlin Timbers under 'sundry creditors'. The Tribunal held that section 9(1)(e) prohibits placing any sum to the credit of a person resident outside India without RBI permission. The appellant's contention that the entry represented a written-off amount and was not payable did not negate the documentary record; no prior permission from or approach to the RBI was shown. The unilateral write-off and lack of communication with RBI, together with the audited entry, warranted an adverse inference and established contravention of section 9(1)(e). [Paras 5, 6, 7, 9]Contravention of section 9(1)(e) proved; penalty upheld against the appellant company.Acquisition and transfer of foreign exchange by a person other than an authorised dealer - restrictions on dealing in foreign exchange - relevance of seized documents and admissions in proving contravention - Whether the director, Narotam Sayal, contravened section 8(1) of the FERA by acquiring and transferring foreign exchange on instructions and for personal use - HELD THAT: - The seized documents and the statements of the director showed instructions given by him that resulted in remittances abroad (including admissions as to specific remittances). The Tribunal rejected the defence that the transactions were undertaken solely in the capacity of an agent, finding the explanation to be an afterthought and inconsistent with the documentary evidence. While remittance of the maturity amount of an insurance policy was repatriated and given relief, the balance transactions were held to demonstrate acquisition and transfer of foreign exchange in contravention of section 8(1). [Paras 4, 12, 13, 14]Contravention of section 8(1) proved against Narotam Sayal; penalty (with partial relief for the repatriated insurance maturity proceeds) upheld.Final Conclusion: Appeals dismissed; the Adjudicating Authority's order confirming penalties under sections 9(1)(e) and 8(1) of the FERA is upheld. The pre-deposited amount may be appropriated towards the penalty and the appellants are directed to deposit the balance within 15 days, failing which recovery may follow in accordance with law.

2009 (8) TMI 1296 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

AI TextQuick Glance (AI)Headnote

Issues:
Dismissal of appeals for non-compliance with pre-deposit order under Section 19(1) FEM Act, 1999.

Analysis:
The judgment by the Appellate Tribunal for Foreign Exchange involved the dismissal of six review petitions filed for recalling an order dated 26.3.2008 due to non-compliance with a pre-deposit order. The appeals were against Adjudication Orders imposing penalties under the Foreign Exchange Management Act, 1999. The Tribunal dismissed the appeals for failing to comply with the pre-deposit order, which was modified by the High Court of Madras. The appeals were filed under Section 19 FEM Act, 1999, and the Tribunal noted a typographical error in quoting Section 52(2) FER Act, 1973, instead of Section 19(1) FEM Act, 1999. The Tribunal highlighted the stringent pre-deposit scheme under Section 19(1) FEM Act, 1999, emphasizing the need to safeguard penalty realization.

The statutory scheme under Section 19(1) FEM Act, 1999, mandates every appellant to make a pre-deposit of penalty unless dispensation is granted by the Tribunal to prevent undue hardship. The Tribunal is empowered to allow dispensation with or without conditions. The judgment referenced legal precedents emphasizing that dispensation should be granted when the impugned order is legally flawed or when the appellant faces financial constraints. The Tribunal's duty is to ensure penalty recovery by imposing suitable conditions as per the Second Proviso of Section 19(1) FEM Act, 1999.

The factual scenario revealed that the appellants failed to comply with the pre-deposit order dated 14.3.2007, despite opportunities granted by the High Court of Madras and subsequent legal proceedings. The appellants did not make any pre-deposit as required, leading to the dismissal of their appeals. The Tribunal found no grounds for review, as the appellants failed to establish any errors apparent on the face of the record or present fresh evidence with a substantial impact on the decision. The dismissal of the review petitions was upheld, and the order was passed accordingly, maintaining the original decision to dismiss the appeals for non-compliance with the pre-deposit order.

In conclusion, the judgment underscores the importance of compliance with pre-deposit orders under the FEM Act, 1999, and the Tribunal's authority to grant dispensation in cases of undue hardship. The appellants' failure to adhere to the pre-deposit requirements resulted in the dismissal of their appeals, highlighting the significance of procedural compliance in legal proceedings before the Appellate Tribunal for Foreign Exchange.

Appeals Dismissed for Non-Compliance with Pre-Deposit Order, Emphasizing Strict Adherence to Legal Procedures.
The Appellate Tribunal for Foreign Exchange dismissed six review petitions due to non-compliance with a pre-deposit order under Section 19(1) of the FEM Act, 1999. Despite opportunities provided by the High Court of Madras, the appellants failed to make the required pre-deposit, leading to the dismissal of their appeals. The Tribunal found no grounds for review, as no errors or new evidence were presented. The decision emphasizes the necessity of adhering to pre-deposit requirements and the Tribunal's discretion to grant dispensation only in cases of undue hardship, underscoring the importance of procedural compliance in legal proceedings.

Obligation to make pre-deposit of penalty while preferring an appeal - dispensation of pre-deposit on grounds of undue hardship - Second Proviso to Section 19(1) empowering Tribunal to impose conditions to safeguard realization of penalty - dismissal of appeal for non-compliance with pre-deposit direction - grounds for review: error apparent on face of record and fresh evidenceObligation to make pre-deposit of penalty while preferring an appeal - dismissal of appeal for non-compliance with pre-deposit direction - dispensation of pre-deposit on grounds of undue hardship - Validity of dismissal of appeals for non-compliance with the Tribunal's pre-deposit direction - HELD THAT: - The Tribunal held that under the statutory scheme appellants are obliged to make the pre-deposit of the penalty at the time of filing the appeal, subject only to the Tribunal's discretionary power to dispense with such deposit where deposit would cause undue hardship and subject to conditions to safeguard recovery. The Tribunal found that the appellants had been granted conditional relief by the Tribunal's order of 14.3.2007 (permitting pre-deposit within 45 days) and subsequently obtained limited modification from the High Court, but ultimately failed to make any pre-deposit despite opportunities and dismissal of intermediate remedies. The typographical reference in the earlier dismissal order to Section 52(2) of the FER Act, 1973 instead of Section 19(1) of the FEM Act, 1999 was held to be a clerical error which did not vitiate the dismissal because the pre-deposit scheme and the requirement for safeguarding recovery were applied in substance. In these circumstances the Tribunal's dismissal of the appeals for non-compliance with the pre-deposit direction was affirmed as valid. [Paras 3, 4, 5, 6]Dismissal of the appeals for non-compliance with the pre-deposit direction is valid and is not vitiated by the typographical error.Grounds for review: error apparent on face of record and fresh evidence - Whether the review petitions disclosed any valid ground for recall of the dismissal - HELD THAT: - The Tribunal applied the settled tests for review, noting that permissible grounds include an error apparent on the face of the record or availability of fresh evidence with substantial bearing which was not earlier available despite due diligence. The Tribunal found that the review petitions did not establish any such ground; the only pointed irregularity was a typographical misreference to a statutory provision which did not affect the substance of the order. No error of the kind warranting review or any fresh evidence was shown. Consequently, the review petitions were rejected as devoid of merit. [Paras 7]Review petitions dismissed for failure to establish any ground for review.Final Conclusion: The review petitions were dismissed. The Tribunal affirmed that appellants were under a statutory obligation to make the pre-deposit of penalty when preferring appeals, that the Tribunal's power to dispense with pre-deposit is limited to cases of undue hardship subject to conditions to safeguard recovery, and that the appellants failed to comply with the pre-deposit direction; no valid ground for review was made out.

2009 (8) TMI 1295 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI FEMA

AI TextQuick Glance (AI)Headnote

Foreign exchange contravention upheld, but penalty reduced where retracted confession was corroborated and coercion was unproved.
Contravention of foreign exchange restrictions was upheld where payment to or for the credit of a person resident outside India was made without Reserve Bank permission. The Tribunal treated the appellant's admission, corroborating statements, and surrounding circumstances as sufficient proof, and held that the retraction failed because coercion, threat, or inducement was not established. The finding of guilt was therefore maintained. Although the contravention stood proved, the Tribunal considered the nature of the transaction, the long pendency, and the case circumstances and held the penalty excessive. The monetary penalty was reduced to the amount already deposited.

Prohibition on making payment to or for the credit of a person resident outside India - Admissibility and corroboration of a retracted confessional statement - Burden of proof on person alleging coercion in statement - Reduction of penalty in exercise of appellate discretionProhibition on making payment to or for the credit of a person resident outside India - Whether the ingredients of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 were established against the appellant - HELD THAT: - The Tribunal found on the material on record that the appellant received a demand draft for Rs. 5,00,000 from the NRE account of a person resident outside India and had admitted in his statement that he purchased the draft after making a payment of Rs. 5,50,000 through an intermediary. Statements of co-notice parties and other witnesses corroborated the appellant's statement, and circumstantial evidence supported the prosecution case. The Tribunal held that these facts established that a payment was made to or for the credit of a person resident outside India contrary to the statutory prohibition in section 9(1)(a).Ingredients of section 9(1)(a) are proved and the appellant was rightly held guilty under that provision.Admissibility and corroboration of a retracted confessional statement - Burden of proof on person alleging coercion in statement - Whether the appellant's retracted confessional statement could be relied upon - HELD THAT: - The Tribunal noted that the appellant retracted his earlier statement but did not produce evidence to substantiate allegations of coercion or threat. Citing the principle that the person alleging inducement or coercion bears the burden of proof, the Tribunal observed that the retracted confession was corroborated by independent witness statements and circumstantial evidence. Relying on established authorities that a retracted confessional statement may be acted upon if voluntary and corroborated, the Tribunal accepted the confession as part of the evidentiary matrix.The retracted confessional statement is admissible and its corroboration permits it to be acted upon.Reduction of penalty in exercise of appellate discretion - Whether the penalty imposed by the Adjudicating Officer required modification - HELD THAT: - Although the Tribunal sustained the finding of contravention, it took a lenient view on sentence considering that there was a single, old transaction, the appellant had already deposited fifty per cent of the penalty pursuant to an earlier Tribunal order, and the long pendency and hardship suffered. Exercising appellate discretion, the Tribunal found the originally imposed penalty excessive and directed that the penalty be reduced to the amount already deposited by the appellant and that the pre-deposited amount be appropriated towards the penalty.Penalty reduced to the amount already deposited by the appellant; pre-deposit to be appropriated towards penalty.Final Conclusion: The Tribunal upheld the finding of contravention of section 9(1)(a) of the FERA, held that the retracted confession was corroborated and admissible, but in exercise of appellate discretion reduced the penalty to the amount already deposited by the appellant and ordered appropriation of the pre-deposit towards the penalty.

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