Foreign exchange penalty confined to proved contravention; unverified loose papers could not sustain the larger allegation.

Penalty for alleged foreign exchange contravention could not rest on an unproved disbursement figure supported only by loose sheets and a diary, because such papers were not treated as books of account kept in the regular course of business and lacked evidentiary value under section 34 of the Evidence Act. The complaint of denial of cross-examination also failed, as no specific request had been made and the adjudication rules were not found breached. Liability was therefore confined to the extent of Rs. 8,37,000, where the material, including an unretracted statement and corroboration, proved unauthorised dealing in foreign exchange; the larger allegation was rejected and the penalty reduced accordingly.

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Issues: (i) Whether the penalty based on alleged disbursement of Rs. 1,35,28,275 could be sustained in the absence of reliable evidence and whether the recovered loose sheets and diary were admissible evidence. (ii) Whether denial of cross-examination vitiated the adjudication. (iii) Whether the material on record proved contravention to the limited extent of Rs. 8,37,000 and justified reduction of penalty.

Issue (i): Whether the penalty based on alleged disbursement of Rs. 1,35,28,275 could be sustained in the absence of reliable evidence and whether the recovered loose sheets and diary were admissible evidence.

Analysis: The record did not establish the alleged disbursement of Rs. 1,35,28,275. The loose sheets and diary recovered from the premises were not treated as books of account kept in the regular course of business, and therefore they did not attract the evidentiary value contemplated by section 34 of the Evidence Act. On the material available, the larger figure could not be accepted as proved.

Conclusion: The penalty could not be sustained to the extent it rested on the alleged disbursement of Rs. 1,35,28,275.

Issue (ii): Whether denial of cross-examination vitiated the adjudication.

Analysis: The appellant had not specifically sought cross-examination of the witness whose statement was relied upon. In the circumstances, the procedural complaint was not accepted as a ground to invalidate the adjudication, particularly in view of the applicable adjudication rules governing foreign exchange proceedings.

Conclusion: The adjudication was not held vitiated on the ground of denial of cross-examination.

Issue (iii): Whether the material on record proved contravention to the limited extent of Rs. 8,37,000 and justified reduction of penalty.

Analysis: The statement of Smt. Gurmej Kaur was not retracted and was corroborated to the extent of receipt of money. Additional statements on record supported the finding that the appellant had dealt in foreign exchange without permission of the Reserve Bank of India to the extent of Rs. 8,37,000. The proved contravention justified sustaining liability only to that extent, while rejecting the larger alleged amount.

Conclusion: Contravention was proved only to the extent of Rs. 8,37,000, and the penalty was reduced accordingly.

Final Conclusion: The appeal succeeded in part. The finding of liability was confined to the proved amount, the penalty based on the unproved larger allegation was set aside, and the remaining penalty and confiscation were maintained with adjustment of the confiscated amount against the penalty.

Ratio Decidendi: In foreign exchange adjudication, a penalty cannot rest on unproved allegations supported only by inadmissible loose papers, and liability must be confined to the extent proved by reliable and corroborated evidence.

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