Unreliable confession cannot prove foreign exchange sale, but unexplained concealed possession can still establish unlawful acquisition.

A retracted and unreliable confession was held insufficient, by itself, to prove sale and purchase of foreign exchange, so the charge under section 8(2) failed. However, where foreign exchange was found concealed in the premises and no lawful source or Reserve Bank permission was shown, unexplained possession supported contravention by otherwise acquiring foreign exchange under section 8(1). The seized Indian currency was not sustainable for confiscation because no independent material linked it to the alleged foreign exchange dealings, and the explanation rejection alone did not establish the necessary nexus. The result was partial success: the Indian currency confiscation and section 8(2) finding were set aside, while the foreign exchange confiscation and penalty based on section 8(1) were maintained.

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Issues: (i) whether the confiscation of the seized Indian currency of Rs. 1,98,000 was sustainable for want of a nexus with the alleged foreign exchange contravention and in the light of the burden under section 71(3); (ii) whether the appellant was liable for contravention of section 8(1) and section 8(2) on the basis of the seized foreign exchange, and whether the charge could be sustained as otherwise acquiring foreign exchange when sale and purchase was not proved.

Issue (i): whether the confiscation of the seized Indian currency of Rs. 1,98,000 was sustainable for want of a nexus with the alleged foreign exchange contravention and in the light of the burden under section 71(3).

Analysis: The seized Indian currency could not be linked to the alleged sale of foreign exchange merely because the appellant's explanation regarding the source of funds was rejected. The material question was whether the money had a nexus with the alleged contravention, not whether it was satisfactorily explained for all other purposes. The alleged incriminating statement was treated as unreliable for this purpose, and there was no independent material showing that the amount represented proceeds of foreign exchange dealings.

Conclusion: The confiscation of the Indian currency was not sustainable and was set aside.

Issue (ii): whether the appellant was liable for contravention of section 8(1) and section 8(2) on the basis of the seized foreign exchange, and whether the charge could be sustained as otherwise acquiring foreign exchange when sale and purchase was not proved.

Analysis: The sale and purchase charge was not established by reliable evidence apart from the retracted statement, but the appellant also failed to prove lawful acquisition or possession of the foreign exchange found concealed in his premises. As to the travellers cheques, the unsigned instruments could not be treated as foreign exchange in the same manner as the signed ones, yet the appellant's custody of them lacked bona fides. Since no general or special permission of the Reserve Bank was shown, the proved possession of foreign exchange supported liability for otherwise acquiring foreign exchange in violation of section 8(1).

Conclusion: The finding of sale and purchase was displaced, but the finding of contravention of section 8(1) was upheld as otherwise acquiring foreign exchange; the finding under section 8(2) was set aside.

Final Conclusion: The appeal succeeded only in part: the Indian currency confiscation and the section 8(2) finding were set aside, while the confiscation of foreign exchange and the penalty based on the modified section 8(1) contravention were maintained.

Ratio Decidendi: A retracted and unreliable confession by itself cannot sustain a charge of sale and purchase of foreign exchange, but unexplained and unlawful possession of concealed foreign exchange, without Reserve Bank permission, is sufficient to establish contravention by otherwise acquiring foreign exchange.

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