2015 (11) TMI 77 - HC - FEMA

Court sets aside adjudication orders and penalties, discharges appellant under Section 9(1)(b)

The court allowed the appeal, setting aside the orders of adjudication and the final order of the Appellate Tribunal. The appellant was discharged from ... Retracted confession - corroboration of confession - distinction between admission and confession - voluntariness of confession - reliance on unexamined witnesses and undisclosed documents - presumption under Section 114 of the Evidence Act - quasi-criminal nature of proceedings under the Foreign Exchange legislation - confiscation and penalty under the Foreign Exchange Regulation ActConfiscation and penalty under the Foreign Exchange Regulation Act - retracted confession - corroboration of confession - Whether confiscation of the seized amount and imposition of penalty on the appellant were justified in the absence of independent material proving that the amount was obtained by unfair means. - HELD THAT: - The Court found that the adjudicating authority and the Appellate Tribunal relied primarily on an inculpatory statement dated 30.04.1991 which the appellant later retracted. There was no independent or cogent evidence to corroborate the contents of that statement: neither the alleged sender (Mohamed Hilal) nor the person from whose premises the key document was seized (Jahubar Nissar) was examined or their statements recorded; the seized document was not put to the appellant nor were its contents disclosed to him. Given the quasi criminal nature of proceedings under the Foreign Exchange legislation and settled authorities holding that a retracted confession should not be relied upon unless substantially corroborated, the Court held that confiscation and penalty could not be sustained. In view of the failure of the Directorate of Enforcement to produce corroborative material, the Court drew the relevant evidential presumptions in favour of the appellant under Section 114 of the Evidence Act and answered the question in the appellant's favour. [Paras 13, 23, 24, 25, 27]Confiscation and penalty were not justified and are set aside for want of independent corroboration of the retracted statement.Offence under Section 9(1)(b) - retracted confession - corroboration of confession - Whether, on the facts and material on record, any offence under Section 9(1)(b) of the Foreign Exchange Regulation Act was made out against the appellant. - HELD THAT: - The Court examined the material relied upon to establish contravention of Section 9(1)(b) and concluded that the alleged confessional statement, being retracted and uncorroborated, could not bear the weight of proving the offence. No independent evidence connected the appellant to the alleged receipt on behalf of the purported Kuwait resident; essential witnesses were not examined and key documentary evidence was not confronted with the appellant. Applying the principle that retracted confessions are unsafe unless corroborated, the Court held that the offence was not proved to its satisfaction. [Paras 12, 13, 23, 24, 27]No offence under Section 9(1)(b) was established; the appellant is discharged from the charge.Retracted confession - distinction between admission and confession - voluntariness of confession - Whether the alleged inculpatory statement, retracted by the appellant and said to be obtained under duress, could be relied upon as a basis for confiscation or adjudication without corroborative material. - HELD THAT: - The Court emphasised the legal distinction between admission and confession and reiterated that a confession must be a voluntary and direct acknowledgment of guilt. Citing authorities, the Court observed that a retracted confession is unsafe as the sole basis for adverse findings unless corroborated by trustworthy independent evidence. Having found that the statement was retracted and that there was no corroborative material, the Court held that reliance on the statement alone was impermissible. [Paras 21, 23, 24, 25, 27]The retracted statement could not be relied upon in the absence of independent corroboration and voluntariness; it did not justify confiscation or adjudication.Reliance on unexamined witnesses and undisclosed documents - corroboration of confession - Whether proceedings and adverse findings could be validly grounded on documents said to be seized from Jahubar Nissar when those documents were not disclosed to the appellant and Jahubar Nissar was not examined. - HELD THAT: - The Court noted that the principal documentary exhibit relied upon (document serial No.35, sheet No.11 of bunch A) was not put to the appellant nor were its contents disclosed; Jahubar Nissar was neither subjected to penal action nor examined. The absence of examination of material witnesses and non disclosure of critical documentary material meant there was no independent corroboration of the prosecution case. Consequently, the Court found that proceedings could not be sustained on such undisclosed and untested material. [Paras 12, 13, 24, 27]Proceedings could not be maintained on the basis of undisclosed documents and unexamined witnesses; such material did not substantiate the case against the appellant.Penalty under the Foreign Exchange legislation - corroboration of confession - Whether the Appellate Tribunal was justified in imposing penalty on the appellant. - HELD THAT: - Since the foundational evidence (the retracted statement and the undisclosed document) failed to prove the contravention, the Court concluded that the Appellate Tribunal ought not to have imposed penalty. The lack of corroboration and failure of the Directorate of Enforcement to produce requisite independent evidence made the penalty unsustainable. The Court therefore set aside the penalty and directed refund where paid. [Paras 23, 24, 27, 28]The penalty imposed by the Appellate Tribunal was unjustified and is set aside; amounts paid and confiscated are to be refunded.Final Conclusion: The appeal is allowed; the adjudication order dated 12.11.1992 and the Appellate Tribunal's order dated 04.02.2010 are set aside. The appellant is discharged of the charge under Section 9(1)(b) of the Foreign Exchange Regulation Act for want of proof; penalty and confiscated amount, if paid, are to be refunded. Issues Involved:1. Justification for confiscation of the seized amount and imposition of penalty.2. Establishment of any offense under the F.E.R. Act, particularly under Section 9(1)(b).3. Validity of relying on a retracted inculpatory statement without corroborative material.4. Proceedings based on documents seized from a third party without the opportunity to examine that party.5. Appropriateness of the penalty imposed by the Appellate Tribunal.Issue-wise Detailed Analysis:1. Justification for Confiscation and Penalty:The appellant challenged the final order dated 04.02.2010, which confirmed the adjudication order dated 12.11.1992, ordering the confiscation of Rs. 1,20,000 and imposing a penalty. The court noted that the appellant's statement, which was the basis for the adjudication, was allegedly obtained under duress and subsequently retracted. The appellant argued that the statement had no value without independent corroboration. The court found that the Directorate of Enforcement failed to provide independent evidence corroborating the appellant's statement.2. Establishment of Offense under F.E.R. Act:The court examined whether the facts and material on record established any offense under the F.E.R. Act, specifically Section 9(1)(b). The appellant's statement, which was retracted, was the primary evidence against him. The court emphasized that a retracted confession needs substantial corroboration by independent and cogent evidence, which was lacking in this case. Therefore, the court concluded that no offense under the F.E.R. Act was established.3. Validity of Relying on Retracted Statement:The court discussed the nature of the appellant's statement, distinguishing between 'confession' and 'admission.' It was noted that a confession must be a voluntary acknowledgment of guilt. The court referred to precedents, stating that a retracted confession is unreliable unless corroborated by trustworthy evidence. The court found that the appellant's retracted statement was not corroborated by any independent witness or material, making it unsafe to rely on it for conviction.4. Proceedings Based on Third-Party Documents:The court addressed the issue of documents seized from the premises of one Mr. Jahubar Nissar, which were not disclosed to the appellant. The appellant was not given an opportunity to examine Mr. Nissar or challenge the documents' authenticity. The court found that no penal action or statement was taken from Mr. Nissar, and the documents were not proven to be reliable evidence against the appellant.5. Appropriateness of Penalty by Appellate Tribunal:The court reviewed the penalty imposed by the Appellate Tribunal. Given the lack of corroborative evidence and the unreliable nature of the retracted statement, the court concluded that the penalty was unjustified. The court ordered the refund of the penalty amount and the confiscated sum to the appellant.Conclusion:The appeal was allowed, and the orders of adjudication and the final order of the Appellate Tribunal were set aside. The appellant was discharged from the charges under Section 9(1)(b) of the Foreign Exchange Regulation Act, 1999. The court directed the refund of the penalty and the confiscated amount to the appellant.