Circumstantial evidence and burden of proof under foreign exchange law sustained part of the contravention while setting aside one confiscation.

A contravention under section 9(1)(b) could not be sustained because the section 40 statement was insufficiently corroborated, the surrounding circumstances did not reliably establish receipt of the amount from the alleged non-resident source, and the confiscation of the cash was therefore set aside. Under section 9(1)(d), circumstantial evidence was accepted for the alleged payment of Rs. 20,000, so that finding was upheld, but the separate allegation relating to Rs. 9,000 failed for want of proof that the draft was sent on instructions of a non-resident. The section 8(1) finding and confiscation of the foreign currency were maintained because the possessor did not discharge the burden under section 71(3) to show lawful possession.

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Issues: (i) whether the finding of contravention under section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 and the confiscation of Rs. 3,50,000 could be sustained; (ii) whether contravention under section 9(1)(d) was established for the alleged payments of Rs. 20,000 and Rs. 9,000; (iii) whether the finding of contravention under section 8(1) and the confiscation of the seized foreign currency were sustainable.

Issue (i): whether the finding of contravention under section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 and the confiscation of Rs. 3,50,000 could be sustained.

Analysis: The statement recorded under section 40 was found insufficient to support the charge, since the material particulars were not satisfactorily corroborated and the surrounding circumstances did not convincingly establish receipt of the amount from the alleged non-resident source. The absence of reliable supporting evidence, the unexplained gaps in investigation, and the improbability of the seized cash being linked to the alleged transaction weakened the charge.

Conclusion: The finding under section 9(1)(b) was set aside and the confiscation of Rs. 3,50,000 was also set aside.

Issue (ii): whether contravention under section 9(1)(d) was established for the alleged payments of Rs. 20,000 and Rs. 9,000.

Analysis: The seized chits and the surrounding circumstances were sufficient to connect the appellant with the payment of Rs. 20,000, and circumstantial evidence was treated as adequate where direct evidence was unlikely. However, the alleged Rs. 9,000 transaction, being based on an old draft without proof that it was sent on instructions of a non-resident person, did not satisfactorily establish contravention.

Conclusion: The finding under section 9(1)(d) was upheld only to the extent of Rs. 20,000, and the allegation relating to Rs. 9,000 failed.

Issue (iii): whether the finding of contravention under section 8(1) and the confiscation of the seized foreign currency were sustainable.

Analysis: The appellant did not discharge the burden under section 71(3) to show that the foreign exchange came into possession lawfully. In the absence of adequate proof of lawful possession, the adverse finding and confiscation were maintained.

Conclusion: The finding under section 8(1), the penalty imposed, and the confiscation of the foreign currency were sustained.

Final Conclusion: The appeal succeeded only in part, resulting in deletion of the finding and confiscation relating to Rs. 3,50,000, while the remaining liability was substantially maintained with limited modification.

Ratio Decidendi: A contravention may be sustained on circumstantial evidence where it forms a coherent and convincing chain, but a statement lacking reliable corroboration cannot support a serious finding or confiscation; conversely, the burden of proving lawful possession of foreign exchange lies on the possessor under section 71(3).

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