Retraction and lack of corroboration failed to prove foreign exchange contraventions or support confiscation of seized currency.

Proof of contravention under the Foreign Exchange Regulation Act required reliable evidence of all statutory ingredients, including identification of the non-resident principal and a clear nexus between the appellant and the alleged payments or receipt of funds. A retracted custodial statement, without adequate corroboration, was treated as insufficient to establish either payment on behalf of a person resident outside India or receipt otherwise than through an authorised dealer. Because the substantive foreign exchange contraventions were not proved, the connected confiscation of seized Indian currency also lacked a valid basis and could not be sustained.

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Issues: (i) Whether contravention of section 9(1)(d) read with section 64(2) of the Foreign Exchange Regulation Act, 1973 was proved; (ii) Whether contravention of section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 was proved; (iii) Whether confiscation of the seized Indian currency could be sustained.

Issue (i): Whether contravention of section 9(1)(d) read with section 64(2) of the Foreign Exchange Regulation Act, 1973 was proved.

Analysis: Liability under section 9(1)(d) required proof that the appellant made payment to persons in India by order or on behalf of persons resident outside India. The charge of abetment under section 64(2) also presupposed an actual principal contravention. The alleged non-resident source was not identified, the evidence did not establish that the payments were in fact made by the appellant on behalf of any resident outside India, and the retracted statement was not sufficiently reliable or corroborated. The materials relied on, including the statements of the alleged recipients, did not satisfactorily connect the appellant with the alleged contravention.

Conclusion: The contravention under section 9(1)(d) read with section 64(2) was not proved and the finding was set aside in favour of the appellant.

Issue (ii): Whether contravention of section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 was proved.

Analysis: A finding under section 9(1)(b) required proof that the appellant received the money otherwise than through an authorised dealer, by order or on behalf of a person resident outside India, and without corresponding inward remittance. The department failed to prove the identity and residential status of the alleged non-resident principal, and the appellant's retracted statement, recorded in custody and not as a section 40 statement, was not dependable standing alone. The alleged corroboration was inadequate, and the statements of the other witnesses did not reliably establish the essential ingredients of the charge beyond doubt.

Conclusion: The contravention under section 9(1)(b) was not proved and the finding was set aside in favour of the appellant.

Issue (iii): Whether confiscation of the seized Indian currency could be sustained.

Analysis: The confiscation was founded on the alleged foreign exchange contraventions and on the theory that the currency was meant for compensatory payments. Once the substantive contraventions failed, the basis for confiscation also disappeared. The record did not justify treating the seized Indian currency as liable to confiscation on the facts proved.

Conclusion: The order of confiscation could not be sustained and was set aside in favour of the appellant.

Final Conclusion: The appeal succeeded in full, the adjudication order was annulled, and the seized amount was ordered to be refunded.

Ratio Decidendi: In quasi-criminal enforcement proceedings, contravention must be proved by reliable evidence satisfying all statutory ingredients, and a retracted custodial statement without adequate corroboration cannot sustain penalty or confiscation where the alleged non-resident source and nexus are not established.

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