Retracted Statement Under FERA Cannot Sustain Liability Without Corroboration and Proof of Statutory Contravention

A retracted statement under FERA cannot, by itself, sustain liability unless it is shown to be voluntary and is independently corroborated by cogent material establishing the statutory ingredients of the contravention. The Delhi HC found that the statement relied upon was retracted the next day, lacked independent support, and was vague as to the alleged flow of funds. It also held that no other substantive material showed receipt of payment by order or on behalf of a person resident outside India, or absence of inward remittance. The penalty and confiscation orders were therefore unsustainable, and return of the seized amount with 6% interest was directed.

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Issues: (i) Whether the appellant could be held guilty of violation of Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 solely on the basis of the retracted statement of Ashish Jain dated 4.10.1995; (ii) whether there was any other material to establish violation of Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973.

Issue (i): Whether the appellant could be held guilty of violation of Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 solely on the basis of the retracted statement of Ashish Jain dated 4.10.1995.

Analysis: The statement relied upon was retracted on the very next day and was not corroborated by any independent or cogent material. It was also vague and did not identify the persons from whom funds were allegedly received or to whom they were allegedly distributed. The authorities below did not apply their minds to the voluntariness of the statement or to the effect of its retraction.

Conclusion: No. The appellant could not be held guilty solely on the basis of the retracted statement.

Issue (ii): Whether there was any other material to establish violation of Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973.

Analysis: Apart from the retracted statement, there was no cogent material on record showing that the appellant had received payment by order or on behalf of a person resident outside India, or that any inward remittance from outside India was absent. The orders of the authorities below did not refer to any substantive evidence establishing the contravention.

Conclusion: No. There was no other material to prove violation of Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973.

Final Conclusion: The penalty and confiscation orders were unsustainable, the seizure amount was directed to be returned, and interest at 6% per annum was directed on the amount seized.

Ratio Decidendi: A retracted statement cannot, by itself, sustain liability under FERA unless it is shown to be voluntary and is independently corroborated by cogent material establishing the statutory ingredients of the contravention.

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