FERA liability requires proof of each statutory ingredient; unsupported remittances and unauthenticated material cannot sustain contravention findings.

Liability under FERA could not be sustained where the statutory ingredients of the alleged contraventions were not established by admissible material within the scope of the notice. The court found that inward remittances into an NRE account did not, without proof of acquisition of foreign exchange in the manner contemplated by Section 8(1), justify liability, and an exculpatory co-noticee statement or an unauthenticated letter could not by itself fasten guilt. It also held that the facts did not disclose payment for the credit of a person outside India under Sections 9(1)(a) and 9(1)(f)(i). The penalty and appellate orders were therefore unsustainable, with refund of any deposited amount.

---

---

Issues: (i) Whether the appellant was liable for contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973 on the basis of the material relied upon in the show cause notice and adjudication proceedings. (ii) Whether the appellant was liable for contravention of Sections 9(1)(a) and 9(1)(f)(i) of the Foreign Exchange Regulation Act, 1973 on the facts alleged in the memorandum.

Issue (i): Whether the appellant was liable for contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973 on the basis of the material relied upon in the show cause notice and adjudication proceedings.

Analysis: Section 8(1) prohibits acquisition or borrowing of foreign exchange without permission, including acquisition outside India through unauthorised channels. The allegations related to inward remittances into the NRE account, but the record did not establish that the appellant purchased or otherwise acquired foreign exchange in the manner contemplated by the provision. The statement of the co-noticee was treated as exculpatory and could not, by itself, fasten liability on the appellant. The letter relied upon from the account holder was not duly authenticated in the manner required by Section 72 of the Act. No independent investigation identified the persons or entities from whom the remittances allegedly originated, and the adjudicating authorities travelled beyond the actual scope of the memorandum by relying on cash deposits not covered by the notice.

Conclusion: The finding of contravention of Section 8(1) against the appellant was unsustainable and was set aside.

Issue (ii): Whether the appellant was liable for contravention of Sections 9(1)(a) and 9(1)(f)(i) of the Foreign Exchange Regulation Act, 1973 on the facts alleged in the memorandum.

Analysis: The provisions attracted by their terms require payment for the credit of a person outside India, and the material on record did not disclose any such transaction in favour of a person resident outside India. The allegations in the memorandum did not make out even a prima facie case that the appellant made any payment for the credit of such a person. On the admitted facts, the asserted transactions in the NRE account did not satisfy the statutory ingredients of the said provisions.

Conclusion: The finding of contravention of Sections 9(1)(a) and 9(1)(f)(i) against the appellant was unsustainable and was set aside.

Final Conclusion: The penalty order and the appellate order could not stand in law, and the appellant was entitled to refund of any amount deposited pursuant to the adjudication.

Ratio Decidendi: Liability under FERA cannot be sustained unless the ingredients of the specific contravention are established by admissible and relevant material within the scope of the notice, and an exculpatory co-noticee statement or unauthenticated document cannot, without more, constitute the substantive basis for fastening guilt.

---