Mere conscious possession of foreign exchange is not enough to prove unlawful acquisition or sustain confiscation under the law.

Mere conscious possession of foreign exchange was held insufficient to prove that it had been "acquired" within the meaning of section 8(1) of the Foreign Exchange Regulation Act, 1973, where the appellant's explanation for holding the currency was not disproved. As the record did not establish unlawful acquisition, the penalty for contravention could not stand. On the same facts, confiscation was also unjustified because the seized currency was not shown to be illicitly acquired or otherwise liable to seizure. The operative principle is that possession alone does not satisfy the statutory ingredient of unlawful acquisition, and confiscation cannot rest on possession without supporting proof.

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Issues: (i) Whether mere conscious possession of foreign exchange amounted to "acquiring" it within the meaning of section 8(1) of the Foreign Exchange Regulation Act, 1973, so as to sustain the penalty. (ii) Whether confiscation of the seized foreign exchange was justified on the facts.

Issue (i): Whether mere conscious possession of foreign exchange amounted to "acquiring" it within the meaning of section 8(1) of the Foreign Exchange Regulation Act, 1973, so as to sustain the penalty.

Analysis: The finding of contravention was based on the seizure of US $2,000 and the appellant's explanation under section 40 of the Act. The explanation was that the currency had been left with him for the use of family members for travel, which was not disproved. The mere fact that the currency was found in the appellant's pocket did not establish acquisition; conscious possession, by itself, was insufficient to prove the statutory ingredient of "otherwise acquired". The record did not support the conclusion that the foreign exchange had been illicitly acquired or that the burden of explanation remained undischarged.

Conclusion: The penalty under section 8(1) was not sustainable and the finding of contravention failed.

Issue (ii): Whether confiscation of the seized foreign exchange was justified on the facts.

Analysis: Confiscation depends on the currency being shown to have been illicitly acquired or otherwise liable to such consequence under the governing law. On the accepted explanation, the seized amount represented foreign exchange lawfully brought and retained for family travel purposes. The materials on record did not justify an inference of illicit acquisition, and the facts did not warrant confiscation merely because the currency was in the appellant's possession.

Conclusion: The confiscation order was not justified and was liable to be set aside.

Final Conclusion: The appellate order rejected the penalty and confiscation, and directed return of the amount seized, treating the possession as insufficient to establish unlawful acquisition under the Act.

Ratio Decidendi: Mere conscious possession of foreign exchange, without proof of unlawful acquisition, does not establish contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973, and confiscation cannot be sustained on possession alone.

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