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Issues: (i) Whether the impugned order sustaining penalty under the Foreign Exchange Regulation Act, 1973 could stand when it was founded on a retracted statement and no corroborative evidence was produced; (ii) whether the petitioner was entitled to refund of the seized amount with interest.
Issue (i): Whether the impugned order sustaining penalty under the Foreign Exchange Regulation Act, 1973 could stand when it was founded on a retracted statement and no corroborative evidence was produced.
Analysis: The material relied upon by the enforcement authorities was the statement recorded at the time of raid, but that statement had been promptly retracted. The earlier proceedings arising from the same seizure had already resulted in setting aside of the penalty, and the record did not disclose corroboration from any independent witness or other reliable material to establish receipt or distribution of foreign exchange on the alleged basis. The court also noted that the second notice rested on the same seizure and that the surrounding material, including the income-tax record, did not support the charge.
Conclusion: The impugned order could not be sustained and was liable to be set aside.
Issue (ii): Whether the petitioner was entitled to refund of the seized amount with interest.
Analysis: Once the foundation for retention of the amount failed, the continued withholding of the balance seized sum had no legal basis. The court held that the petitioner had been deprived of his money without authority of law and that the circumstances justified monetary restitution with interest.
Conclusion: The petitioner was entitled to refund of Rs. 1,48,000/- with simple interest at 6% per annum from 12 May 1988.
Final Conclusion: The writ petition succeeded, the adverse foreign exchange penalty order was quashed, and restitution of the seized amount was directed with interest.
Ratio Decidendi: A penalty under foreign exchange law cannot be sustained on a retracted statement unless it is independently corroborated by reliable evidence, and money retained pursuant to such an unsustainable order must be restored with appropriate interest.
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