Seized electronic evidence and management liability upheld in foreign exchange contravention case, with one penalty set aside

Seized documents, admissions and corroborative inquiry material established unauthorised foreign exchange transfers, receipt of funds in India for remittance abroad, and receipt of payments in India for persons resident outside India, so liability was upheld against the company and its directors under the management-liability provision. The pen-drive evidence was treated as primary evidence because the device itself was seized, so a certificate under the electronic-evidence rule was not required and admissibility was maintained. The finding on the separate foreign-exchange contravention was set aside for lack of supporting discussion, while penalties on the sustained contraventions were reduced and confiscation of the seized currencies was left undisturbed.

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Issues: (i) whether the contraventions under sections 3(a), 3(b) and 3(c) of the Foreign Exchange Management Act, 1999 were established against the company and its directors, and whether section 42 of the Act fastened liability on the directors; (ii) whether the electronic material recovered from the pen-drive required a certificate under section 65B(4) of the Indian Evidence Act, 1872 and whether it was admissible; (iii) whether contravention under section 3(d) of the Foreign Exchange Management Act, 1999 was made out and the monetary penalties and confiscation orders required interference.

Issue (i): whether the contraventions under sections 3(a), 3(b) and 3(c) of the Foreign Exchange Management Act, 1999 were established against the company and its directors, and whether section 42 of the Act fastened liability on the directors

Analysis: The company's foreign exchange activity was carried on through its managing director and director, and their own statements showed that the transactions were undertaken on behalf of the company rather than in a separate individual capacity. The seized documents, the statements of the persons concerned, and the corroborative material from follow-up inquiries established unauthorized transfer of foreign exchange, receipt of funds in India for remittance abroad, and receipt of payments in India on behalf of persons resident outside India. The record also supported the application of section 42 because the company was the principal actor and the directors were in charge of its business at the material time.

Conclusion: The contraventions under sections 3(a), 3(b) and 3(c) were sustained against the company and the directors, and liability under section 42 was upheld.

Issue (ii): whether the electronic material recovered from the pen-drive required a certificate under section 65B(4) of the Indian Evidence Act, 1872 and whether it was admissible

Analysis: The pen-drive itself had been seized from the appellants' premises and was treated as primary evidence. On that basis, compliance with section 65B(4) was not necessary. The search record, seizure memo, retrieval process, contemporaneous signatures, and later confrontations with the contents supported authenticity, and the tribunal also relied on the statutory presumption attached to documents seized in enforcement proceedings. The request for cross-examination did not dislodge the evidentiary value of the material, particularly when no prejudice was demonstrated.

Conclusion: The electronic evidence was held admissible and the challenge based on section 65B failed.

Issue (iii): whether contravention under section 3(d) of the Foreign Exchange Management Act, 1999 was made out and the monetary penalties and confiscation orders required interference

Analysis: The record supported contraventions under sections 3(a), 3(b) and 3(c), but the tribunal found no specific discussion or finding sufficient to sustain section 3(d). In consequence, the penalties imposed for section 3(d) were deleted. For the remaining contraventions, the tribunal reduced the monetary penalties to fifty per cent, while declining to interfere with confiscation of the seized Indian and foreign currencies.

Conclusion: The finding under section 3(d) was set aside, the remaining penalties were reduced, and the confiscation orders were left undisturbed.

Final Conclusion: The appeals succeeded only to a limited extent by reducing the penalties on the sustained contraventions and deleting the penalty based on section 3(d), while the confiscation of the seized currencies was maintained.

Ratio Decidendi: Where seized electronic data itself is produced as primary evidence, a certificate under section 65B(4) is not required, and liability under section 42 of FEMA can be fastened on persons in charge of a company's business when the company's unlawful foreign exchange transactions are proved by admissions and corroborative seizure material.

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