Foreign exchange gift claim requires corroboration; contravention stood, but penalty was reduced on mitigating factors.

A claimed gift received through an NRE account must be supported by credible surrounding circumstances and corroborative evidence; a bare description of the receipt as a gift is insufficient. On the facts, the absence of proof of close relationship or remitter confirmation, together with a pattern of similar transactions, supported the inference of a counter-payment arrangement, so contravention under section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 was upheld. Mitigating factors, including the recipient's widowhood, limited means, and the solitary nature of the transaction, justified reduction of penalty, which was therefore substantially lowered.

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Issues: (i) Whether the receipt of Rs. 2 lakhs through an NRE account was a genuine gift or amounted to contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973; (ii) Whether the penalty imposed required reduction.

Issue (i): Whether the receipt of Rs. 2 lakhs through an NRE account was a genuine gift or amounted to contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973.

Analysis: The transaction had to be judged on the surrounding facts and circumstances, since direct evidence is seldom available in proceedings of this nature. A mere description of the receipt as a gift was not enough; the surrounding material had to support the ingredients of a genuine gift. On the facts, the explanation of a gift was found unsupported by evidence of close relationship or corroboration from the remitter, while the pattern of similar transactions with other recipients supported the inference that the cheque represented a counter-payment arrangement.

Conclusion: The finding of contravention under section 9(1)(a) was upheld and the appellant was found liable.

Issue (ii): Whether the penalty imposed required reduction.

Analysis: While affirming the contravention, the relevant mitigating factors were the appellant's status as a widow, limited means, and the fact that the transaction was a solitary one. These considerations, together with the absence of any derogation from the object of the Act in the facts of the case, justified interference with the quantum of penalty.

Conclusion: The penalty was reduced from Rs. 60,000 to Rs. 10,000, with refund of the balance deposit.

Final Conclusion: The contravention was sustained, but the monetary penalty was substantially reduced on mitigation grounds.

Ratio Decidendi: In foreign exchange contravention proceedings, a claimed gift must be supported by credible surrounding circumstances and evidence, and the penalty must be proportionate to the gravity of the contravention and relevant mitigating factors.

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