Cross-examination and corroboration in FERA adjudication are essential; denial of fair hearing and uncorroborated retracted confessions fail.

FERA adjudication must comply with the statutory requirement of reasonable opportunity, including cross-examination where witness statements are relied upon; denial of that opportunity was treated as a violation of fair hearing and vitiated the proceedings. The penalty also could not be sustained on retracted confessional statements alone, because such statements require proof of voluntariness and material corroboration by reliable independent evidence. Where the alleged recoveries and slips were not independently linked to the noticees and the attribution of seized currency was doubtful, the contravention was held unproved and the orders were set aside.

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Issues: (i) Whether the adjudication proceedings under the Foreign Exchange Regulations Act, 1973 were vitiated for denial of reasonable opportunity, including cross-examination of the Enforcement Directorate witnesses. (ii) Whether the penalty could be sustained on the basis of retracted confessional statements and alleged recoveries in the absence of independent corroborative evidence.

Issue (i): Whether the adjudication proceedings under the Foreign Exchange Regulations Act, 1973 were vitiated for denial of reasonable opportunity, including cross-examination of the Enforcement Directorate witnesses.

Analysis: The proceedings were quasi-judicial and were governed by the statutory requirement of a reasonable opportunity under Section 51. That opportunity included the ability to cross-examine the witnesses whose statements formed part of the material against the noticees. The record showed that the requests for cross-examination were not granted and the witness examination was not completed without recorded reasons. This amounted to denial of a fair hearing and non-compliance with the statutory safeguard.

Conclusion: The denial of cross-examination and the resulting want of fair opportunity vitiated the adjudication, in favour of the Assessee.

Issue (ii): Whether the penalty could be sustained on the basis of retracted confessional statements and alleged recoveries in the absence of independent corroborative evidence.

Analysis: The principal material relied upon was the confessional statements of the noticees, but those statements were promptly retracted. A retracted confession can be acted upon only if its voluntary character is established and it is corroborated in material particulars by reliable independent evidence. The alleged recoveries and slips were not independently connected to the appellants, the valuation and attribution of the seized currency were doubtful, and the presumption under the statute stood rebutted. The evidence was therefore insufficient to sustain the findings of contravention.

Conclusion: The penalty could not be upheld because the retracted statements were uncorroborated and the alleged contraventions were not proved, in favour of the Assessee.

Final Conclusion: The adjudication order and the appellate order were unsustainable and were set aside, with consequential relief to the appellants.

Ratio Decidendi: In adjudication under FERA, a penalty cannot rest on denial of reasonable opportunity or on retracted confessional statements unless the statements are shown to be voluntary and materially corroborated by independent reliable evidence.

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