Possession of foreign exchange and failure to prove lawful custody can establish contravention, but specific penalties need conclusive proof.

Possession of postal orders, travellers cheques and other foreign exchange was treated as possession of foreign exchange within the statutory definition, and the appellant's failure to show lawful acquisition or lawful holding justified an inference of contravention under section 8(1) of the Foreign Exchange Regulation Act, 1973; confiscation was upheld. The charge under section 8(2) required positive and conclusive proof, and the material relied on, including recovered chits and a retracted statement, was found insufficient to sustain that specific allegation. The section 8(2) finding was therefore set aside and the penalty was reduced correspondingly.

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Issues: (i) Whether the recovery and possession of postal orders, travellers cheques and other foreign exchange established contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973 and justified confiscation. (ii) Whether the evidence on record was sufficient to sustain contravention of section 8(2) of the Foreign Exchange Regulation Act, 1973 and the corresponding penalty.

Issue (i): Whether the recovery and possession of postal orders, travellers cheques and other foreign exchange established contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973 and justified confiscation.

Analysis: The seized instruments were treated as foreign exchange within the statutory definition. Mere seizure by customs authorities did not invalidate confiscation under section 63. The appellant failed to discharge the burden under section 70(3) of showing lawful acquisition and lawful holding. Possession of the foreign exchange, together with the surrounding circumstances and the absence of any credible claim of custody by another person, was sufficient to infer acquisition and contravention.

Conclusion: Contravention of section 8(1) was proved and the confiscation was upheld.

Issue (ii): Whether the evidence on record was sufficient to sustain contravention of section 8(2) of the Foreign Exchange Regulation Act, 1973 and the corresponding penalty.

Analysis: The charge under section 8(2) was not supported by positive and conclusive evidence. The material relied upon, including chits recovered from the appellant and the retracted statement, was sufficient to show dealings in foreign exchange but not enough to sustain the specific charge under section 8(2). The penalty was therefore liable to be adjusted to reflect the partial failure of the charge.

Conclusion: Contravention of section 8(2) was set aside, and the penalty was reduced from Rs. 70,000 to Rs. 50,000.

Final Conclusion: The appeal succeeded only in part: the finding under section 8(1) and the confiscation were maintained, the section 8(2) finding was vacated, and the monetary penalty was correspondingly reduced.

Ratio Decidendi: Possession of foreign exchange, coupled with surrounding incriminating circumstances and failure to explain lawful custody or acquisition, can establish contravention under the Act, but a specific penal charge must still be supported by positive and conclusive evidence.

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