Co-noticee statements need inculpatory value and independent corroboration for retracted admissions in foreign exchange cases

A statement recorded from one noticee may be used against a co-noticee only when it is itself inculpatory of the maker; a merely exculpatory or shifted accusation against another person has no substantive evidentiary value. Retracted statements cannot, by themselves, support findings of contravention unless they are independently corroborated by other material evidence. Recovery of Indian currency alone does not establish illegal foreign exchange dealings, and absence of recovered foreign exchange weakens the evidentiary basis for confiscation or liability under the Foreign Exchange Regulation Act, 1973.

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Issues: (i) Whether a statement recorded under Section 40 of the Foreign Exchange Regulation Act, 1973 could be used against a co-noticee when it did not incriminate the maker; (ii) Whether the adjudication and appellate orders sustaining contravention under Sections 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973 and confiscation under Section 63 of that Act were supported by substantive evidence.

Issue (i): Whether a statement recorded under Section 40 of the Foreign Exchange Regulation Act, 1973 could be used against a co-noticee when it did not incriminate the maker.

Analysis: The statement of one noticee was examined and found not to be inculpatory of the person making it. The legal position applied was that a statement of a co-noticee can be relied upon against another only if it also inculpates the maker, and a merely exculpatory or shifted accusation against another person has no substantive value against the co-noticee.

Conclusion: The statement could not be used as substantive evidence against the co-noticees.

Issue (ii): Whether the adjudication and appellate orders sustaining contravention under Sections 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973 and confiscation under Section 63 of that Act were supported by substantive evidence.

Analysis: The retracted statements required independent corroboration, but no such independent evidence was available. Recovery of Indian currency alone did not establish illegal foreign exchange dealings, and no foreign exchange was recovered. The rejection of the retractions and the finding of guilt were therefore unsupported by legally sufficient evidence.

Conclusion: The findings of contravention and confiscation could not be sustained.

Final Conclusion: The impugned adjudication and appellate orders were set aside and the appeals were allowed, with refund of the deposited amounts in accordance with law.

Ratio Decidendi: A statement recorded from one noticee can be used against a co-noticee only if it is itself inculpatory of the maker, and retracted statements require independent corroboration before they can sustain a finding of contravention.

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