2009 (8) TMI 1120 - HC - FEMA

Court sets aside penalty, finds lack of evidence, deems proceedings unfair. Appellant discharged from prosecution.

The court allowed the appeal, setting aside the penalty imposed on the appellant. It found that the respondents failed to prove the voluntariness of the ... Retracted confession - voluntariness of statement - burden on prosecution to prove voluntariness - corroboration of confession - penalty under FERA - quasi-criminal proceedingsRetracted confession - voluntariness of statement - burden on prosecution to prove voluntariness - Legal consequence of the appellant's retraction of his statement and the allocation of burden to prove voluntariness. - HELD THAT: - The Court found that the appellant retracted the statement alleged to have been made on 13-9-1985 by 14-9-1985 alleging force and duress. Once a confession is retracted with such allegations, the onus to establish that the statement was voluntary shifts to the prosecution/Enforcement Directorate. The respondent failed to discharge that onus: investigating officers did not examine themselves before the adjudicating authority, no evidence was led to show the confessional statement was free from threat, inducement or force, and the authorities did not apply their mind to the retraction in the manner required by law. Reliance upon settled precedents (as discussed in the judgment) supports the proposition that a retracted confession may be used only after the prosecution proves voluntariness and truth, and that the tribunal must evaluate the circumstances of retraction (timing, manner and surrounding facts) before acting upon it. [Paras 13, 14]Because the retracted confession was not shown to be voluntary by the respondent, it could not be relied upon to sustain the penalty.Corroboration of confession - penalty under FERA - quasi-criminal proceedings - Whether the adjudicating authority proved the alleged contraventions and thereby justified imposition of penalty under the FERA in the absence of corroborative evidence and opportunity to cross-examine key witnesses. - HELD THAT: - The Court held that the Enforcement Directorate failed to lead independent corroborative evidence of the alleged recovery or of statements attributed to other persons which formed the basis for the proceedings. Punch witnesses and officers who recorded statements were not produced for cross-examination before the adjudicating authority; annexures to the panchnama and documentary particulars allegedly seized were not placed on record to substantiate recovery. Given the quasi criminal character of proceedings under the Act and the failure of the respondent to discharge the lighter preponderance of probability burden (and, in particular, to prove voluntariness and truth of the confessional material), the imposition of penalty could not be sustained. The concurrent criminal proceedings resulted in discharge of the accused, further weighing against reliance on the impugned material for adjudication of penalty. [Paras 14, 15]In absence of requisite corroboration and fair opportunity to test the prosecution evidence, the penalty imposed under the FERA was unsustainable and is set aside.Final Conclusion: The appeal is allowed: the penalty imposed by respondent No.3 (as affirmed in part by respondent No.2) is set aside for failure of the respondent to prove voluntariness of the retracted confession and for absence of independent corroborative evidence; any amounts deposited shall be returned to the appellant and the trial court record is to be sent back. Issues Involved:1. Evidence against the appellant for contravention of Section 8(1) and 8(2) of the FERA, 1973.2. Voluntariness and corroboration of the statements relied upon by the respondents.3. Proof of recovery of foreign currency and corroboration of documents seized.4. Opportunity to cross-examine witnesses and fairness of the adjudicatory proceedings.5. Imposition of penalty based on retracted confession.Issue-wise Detailed Analysis:1. Evidence against the appellant for contravention of Section 8(1) and 8(2) of the FERA, 1973:The appellant challenged the order of the Appellate Tribunal for Foreign Exchange, which reduced the penalty imposed by the Special Director, Enforcement Directorate. The proceedings were initiated based on a statement by Surinder Kumar Dhawan, who was arrested with foreign currency and claimed it was given by the appellant. The respondents conducted searches and claimed to have recovered documents indicating foreign exchange dealings by the appellant. However, the appellant argued there was no evidence of contravention of the FERA provisions.2. Voluntariness and corroboration of the statements relied upon by the respondents:The appellant retracted his statement, alleging it was made under duress. The Supreme Court in K.I. Pavunny v. Asstt. Collector (HQ), Central Excise Collectorate, held that a retracted confession must be tested for voluntariness and truthfulness. The burden of proving the statement was voluntary lies with the prosecution. The appellant also cited Vinod Kumar Solanki v. Union of India, where the court emphasized that the burden of proof shifts to the prosecution once a confession is retracted. The respondents failed to provide corroborative evidence or prove the voluntariness of the appellant's statement.3. Proof of recovery of foreign currency and corroboration of documents seized:The appellant argued that the recovery of foreign currency and documents was not proved according to the law. The respondents did not produce independent witnesses or allow cross-examination of officials who recorded the statements. The Supreme Court in Vinod Kumar Solanki emphasized the need for corroboration of retracted confessions and the importance of examining the circumstances of the confession. The respondents did not refute the appellant's allegations of duress, and the recovery of documents was not substantiated.4. Opportunity to cross-examine witnesses and fairness of the adjudicatory proceedings:The appellant contended that the adjudicatory proceedings were unfair as he was not given the opportunity to cross-examine witnesses, including officials who recorded statements and witnesses to the recovery of foreign exchange. The lack of cross-examination and the failure to produce witnesses weakened the respondents' case. The Supreme Court in Vinod Kumar Solanki highlighted the importance of fair proceedings and the need for the prosecution to prove the voluntariness of confessions.5. Imposition of penalty based on retracted confession:The appellant argued that the imposition of penalty was unjustified as the confession was retracted and not corroborated. The Supreme Court in Vinod Kumar Solanki held that retracted confessions require corroboration and must be voluntary. The respondents did not meet the burden of proving the confession was voluntary, and the criminal prosecution resulted in the discharge of the appellant. The court found no grounds for imposing the penalty and allowed the appeal, directing the return of any deposited amount to the appellant.Conclusion:The court concluded that the respondents failed to prove the voluntariness of the appellant's statement and did not provide corroborative evidence. The adjudicatory proceedings were unfair, and the imposition of penalty was not justified. The appeal was allowed, and the penalty was set aside. Any amount deposited by the appellant was ordered to be returned within three months.