Retracted statements need corroboration, and combining investigative and adjudicatory roles can vitiate enforcement proceedings.

A retracted inculpatory statement under the Foreign Exchange Regulation Act, 1973 could not safely sustain a finding of contravention without independent corroboration. The alleged diary was not relied on in the show-cause notice, was not disclosed to the appellant, and the surrounding evidence was not independently supported, so the adverse finding was unsustainable. Adjudication was also vitiated where the same officer participated in the investigation, issued the notice and then passed the order, because this created a serious risk of bias and breached natural justice. The impugned orders were therefore held unsustainable and the penalties and charges were set aside.

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Issues: (i) Whether the appellant's retracted statement could be relied upon to sustain the finding of contravention under the Foreign Exchange Regulation Act, 1973 in the absence of corroboration and where the alleged diary was neither relied upon in the show-cause notice nor disclosed to the appellant; (ii) Whether the adjudication proceedings were vitiated because the same officer participated in the investigation, issued the show-cause notice and passed the adjudication order.

Issue (i): Whether the appellant's retracted statement could be relied upon to sustain the finding of contravention under the Foreign Exchange Regulation Act, 1973 in the absence of corroboration and where the alleged diary was neither relied upon in the show-cause notice nor disclosed to the appellant.

Analysis: A retracted inculpatory statement requires corroboration by trustworthy material before it can safely be acted upon. The record showed material gaps: the alleged diary was not referred to in the show-cause notice, its contents were not communicated to the appellant, the recipients and alleged foreign residents were not properly examined, and the investigating version was not independently supported by oral or documentary evidence. In these circumstances, the finding of contravention rested on an unsafe basis.

Conclusion: The issue was answered in favour of the appellant; the finding of contravention based on the retracted statement could not be sustained.

Issue (ii): Whether the adjudication proceedings were vitiated because the same officer participated in the investigation, issued the show-cause notice and passed the adjudication order.

Analysis: An adjudicating authority must act independently and with fairness. Where the same officer is involved in the investigative stage, issues the notice and then adjudicates the matter, there is a serious risk of bias and failure of the requirements of natural justice. The proceedings in the present case were found to suffer from this defect.

Conclusion: The issue was answered in favour of the appellant; the adjudication was vitiated by bias and could not stand.

Final Conclusion: The impugned orders were unsustainable and the appellant was relieved of the penalties and charges imposed under the statutory proceedings.

Ratio Decidendi: A retracted inculpatory statement cannot, by itself, sustain adverse findings unless it is independently corroborated by reliable evidence, and adjudication is invalid where the same authority combines investigative and adjudicatory functions in a manner giving rise to bias.

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