Contravention under FEMA upheld, but penalty quantum reduced where accused played minor role and evidence was weak.

Alleged contraventions of the Foreign Exchange Management Act are sustained on the basis of un retracted statements corroborated by investigative material and transaction traces, finding illegal acquisition/transfer of foreign exchange. The tribunal accepted that the appellants had a limited role and that incriminating evidence against them was comparatively weak; consequently the monetary penalties imposed by the adjudicating authority were reduced and the reduced amounts deposited were accepted as full satisfaction. Appeals were partly allowed accordingly.

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Issues: (i) Whether the appellants committed contraventions of the Foreign Exchange Management Act, 1999 by illegal acquisition/transfer of foreign exchange; (ii) Whether the penalties imposed by the Adjudicating Authority require modification.

Issue (i): Whether the appellants committed contraventions of the Foreign Exchange Management Act, 1999 by illegal acquisition/transfer of foreign exchange.

Analysis: Material on record includes statements, seizure of foreign currency, telephone call traces linking various dealers and intermediaries, and admissions recorded by certain alleged participants. An un-retracted statement of an intermediary identifying the appellant as a source for a portion of the seized currency was considered together with surrounding circumstances and investigative findings showing transfers among licensed and unlicensed dealers.

Conclusion: The contravention under Section 3(1)(a) and Section 4 of the Foreign Exchange Management Act, 1999 as applied to the appellants is upheld.

Issue (ii): Whether the penalties imposed by the Adjudicating Authority require modification.

Analysis: The role of the appellants in the overall transaction was assessed as limited and the incriminating material against them as comparatively weak. In view of the minor role and mitigating circumstances, reduction of monetary sanction was considered appropriate while maintaining the finding of contravention.

Conclusion: The penalty amounts imposed by the Adjudicating Authority are reduced; the original penalties are modified downward and the reduced amounts already deposited are accepted as satisfaction of the penalty requirement.

Final Conclusion: The appeals are partly allowed by upholding the findings of contravention against the appellants but reducing the quantum of penalty imposed; the reduced penalties deposited by the appellants are accepted and the appeals are disposed of accordingly.

Ratio Decidendi: A finding of contravention under FEMA may be sustained on the basis of un-retracted statements corroborated by investigative material and circumstances, but penalty quantum is amenable to reduction where the role of the accused is minor and incriminating evidence is weak.

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