Foreign exchange contravention requires independent corroboration; banking-channel receipts in a rupee account were not treated as prohibited foreign exchange.

Retraction of the appellant's and intermediary's statements, without independent corroboration, was held insufficient to prove contravention of the foreign exchange law under section 8(1) and (2); the charge was set aside. Amounts credited through banking channels into the appellant's rupee account were treated as receipt of money, not prohibited acquisition of foreign exchange, so the alleged contravention under section 7(1) and (2) also failed. The penalty and confiscation were annulled, with consequential refund directed.

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Issues: (i) Whether the charge of contravention of section 8(1) and (2) of the Foreign Exchange Regulation Act, 1973 was sustainable on the basis of the retracted statements and surrounding evidence. (ii) Whether the charge of contravention of section 7(1) and (2) of the Foreign Exchange Regulation Act, 1973 was made out where the amounts were credited through banking channels in the appellant's rupee account.

Issue (i): Whether the charge of contravention of section 8(1) and (2) of the Foreign Exchange Regulation Act, 1973 was sustainable on the basis of the retracted statements and surrounding evidence.

Analysis: The charge rested substantially on the statement of the alleged intermediary and the appellant's own statement, both of which had been retracted. No independent corroboration established the alleged purchase and sale of foreign exchange, and the linked allegation against the intermediary had already failed for want of adequate evidence. The recovery from the bank manager's custody, without proof of the appellant's nexus by reliable material, was insufficient to sustain guilt. The evidentiary foundation was therefore held inadequate to prove the alleged contravention.

Conclusion: The charge under section 8(1) and (2) was not proved and the finding of contravention was set aside in favour of the appellant.

Issue (ii): Whether the charge of contravention of section 7(1) and (2) of the Foreign Exchange Regulation Act, 1973 was made out where the amounts were credited through banking channels in the appellant's rupee account.

Analysis: The drafts were credited into the appellant's bank account through banking channels, and the transaction was treated as receipt of money rather than acquisition of foreign exchange in the relevant context. The statutory definition of foreign exchange was read with its contextual qualifier, and the receipt was viewed as a permissible banking-channel receipt rather than a prohibited foreign exchange transaction. Even if the licence conditions were not strictly complied with, the conduct was found not to amount to a contravention warranting penalty or confiscation.

Conclusion: The charge under section 7(1) and (2) was not sustainable and the finding was set aside in favour of the appellant.

Final Conclusion: The appellant was held not liable for the alleged foreign exchange contraventions, the penalty and confiscation were annulled, and consequential refund was directed.

Ratio Decidendi: A charge of foreign exchange contravention cannot be sustained on retracted statements alone without independent corroboration, and receipt of funds through banking channels, on the facts found, does not constitute acquisition of foreign exchange in the prohibited sense.

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