2025 (10) TMI 1041 - HC - FEMA

Appeal dismissed: jurisdiction limited to questions of law; factual findings and confiscation upheld on sufficient corroborative evidence

Arjun Patil Versus UOI & Ors.

HC dismissed the appeal, holding its jurisdiction under the statute is limited to questions of law and it cannot reappraise findings of fact by the ... Right to appeal to high court - reference to this Court - Illegal foreign exchange business was being conducted by the Appellant - confiscation of Indian currency - Appellant’s primary contention before the Tribunal was that no reason had been given by the Adjudicating Officer for confiscation of the Indian currency, and there was nothing on record to indicate that the Appellant was making an attempt to illegally purchase foreign exchange and gold from the seized Indian currency - HELD THAT:- A perusal of Section 54 of FEMA makes it evident that the Act provided for a right of appeal to the High Court, albeit circumscribed to questions of law. The finding of facts is exclusively within the domain of Adjudicatory Authority and Appellate Tribunal, and this Court cannot go behind or interfere with the findings on fact arrived at by them. The FERA Appellate Tribunal is the final Court of facts. This circumscribed right to appeal has been retained under FEMA, the successor legislation to FERA. Section 35 of FEMA, under which the present appeal has been filed, restricts the jurisdiction of a High Court to only questions of law. A perusal of the above Sections and the Judgement of the Apex Court in Raj Kumar Shivhare [2010 (4) TMI 432 - SUPREME COURT] makes it apparent that a reference to this Court is maintainable only on a question of law under sub-section (3) and (4) of Section 54 of FERA and Section 35 of FEMA. The term “question of law” has not been defined under the Act, however the meaning of the term can be gathered and understood from a review of case law on the subject found under analogous statutes. The Apex Court has repeatedly re-affirmed that there is no hard and fast rule that can be used as a uniform metric to draw a line between a question of law and a question of fact. However, over time, there are some general principles have been evolved by the Apex Court, which have been used by the Courts below as a yardstick to assess whether a particular issues is a question of law or question of fact. In the opinion of this Court once basic facts have been established and recorded, the Adjudicating Authority is entitled to draw an inference based on those facts. The Appellant has been unable to demonstrate that the inference drawn by the Adjudicating Authority or the Appellate Tribunal is perverse or unsubstantiated, in absence thereof, it cannot be said that the conclusion arrived at by the Adjudicating Authority and the Appellate Tribunal warrants any interference. Even if a statement is retracted it can be relied upon as long as it is voluntary and corroborated. Additionally, if a statement has been redacted by the maker on the grounds that the statement was obtained by illegal means it is only for the maker of the statement who alleges inducement, threat, promise etc. to establish that such improper means were adopted. If we were to apply the dictum of the aforementioned pronouncements of the Apex Court to the facts of this case, it is apparent that there is sufficient corroboration. There has been seizure of unaccounted Indian currency, gold and foreign exchange from the office premises of the Appellant. Even if the statement of the Appellant is not considered, the statement of the two Nepalese Nationals and documentary evidence recovered from the premises of the Appellant clearly establishes the case of the prosecution. Therefore, in the present case the confession of the Appellant is not being uses in isolation, but as a link in the chain of evidence. A perusal of the order passed by the Adjudicating Authority demonstrates that several adjournments had been sought by the Appellant. A perusal of the impugned order also demonstrates that irrespective of seeking repeated adjournments, no witnesses were examined for nearly two and half years. Similarly, with respect to the contention advanced by Appellant that Appellant’s statement had been obtained under coercion and duress is concerned, the Adjudicating Authority has made categorical observations that the medical examination report of the Appellant has not been furnished. Whether Respondent Agency lacked the legal authority to confiscate Indian currency? - A perusal of Section 63 of FERA makes it manifestly clear that the Court or Adjudicating Authority is empowered to confiscate “any currency, security or other money or property in respect of which the contravention has taken place.” Contravention of Section 56 of FEMA operates as the trigger that activates and justifies the exercise of power under Section 63 and the only qualifying, in-built threshold for exercise of the power of confiscation by the Court or the Adjudicating Officer is the application of mind, which is indicative from the use of the words 'if it or he thinks fit'. The language of this Section is wide enough to include Indian currency and unambiguous, clear, and precise in its object. Nowhere does the Section disqualify or prohibit either the Court or Adjudicating Authority from confiscating Indian Currency. In fact, a perusal of clause (b) of the Explanation to Section 63 makes it abundantly clear that property with respect to which contravention has taken place includes Indian currency, where the said property is converted into that currency. Appellant has been unable to provide any proper explanation as to how the Indian currency and contraband which has been seized from his premises were unconnected and the Indian currency had been obtained lawfully. It cannot be said in any manner whatsoever that the Adjudicating Authority incorrectly exercised its jurisdiction in ordering confiscation of Indian currency. Thus, as far as the second contention of the Appellant is concerned this Court cannot evade the legislative intent or give an absurd construction of the enactment to the Section, especially where no interpretation is required. Accordingly, the contention of the learned Counsel for the Appellant that the Respondent Agency did not have any legal basis to confiscate Indian currency, cannot be accepted. Allegations against the Appellant do not constitute 'attempt' under Section 64(2) - The moment the Appellant commences to do an act with the necessary intention, he commences his attempt to commit the offence. The Appellant’s conduct, as well as the surrounding facts and circumstances of this case establish that the Appellant had taken steps for the commission of the offence and had crossed the threshold for “attempt”. Therefore, his claim that seizure does not amount to attempt is a facile argument that is in negation of the factual matrix of this case. The recovery, coupled with absence of any lawful explanation and the conduct of the Appellant is a clear attempt for an act that would have amounted to contravention of the provisions of FEMA. It would also be apposite to address another aspect of this contention. It is trite law that once certain foundational facts are established by the prosecution the burden of disproving the same shifts to the accused. The expression “burden of proof” in context of criminal cases is the burden of establishing the bundle of facts constituting the guilt of an accused. In the present case it is not disputed that after receipt of specific information by the Respondent Agency, the premises of the Appellant were raided and Rs. 12,31,000/-, along with USD 6,371/-, 4 gold biscuits, two pieces of gold and certain documents were recovered from the Appellant. Similarly, it is not disputed that similar recoveries were made from the two Nepalese Nationals and Pramod Kumar, who had entered the Appellant’s business premises. The seizure of illegal foreign exchange is not disputed by the Appellant in any manner whatsoever. In this context Section 106 of the Indian Evidence Act comes into play. Once the Respondent Agency has established the factum of recovery of illegal foreign exchange from the Appellant’s premises the onus shifts to the Appellant to demonstrate that the Indian currency recovered from his premises was not intended for illegal purchase of purchase of foreign exchange. After perusing the material on record, orders of the Adjudicating Authority and the Appellate Tribunal as well as having considered the arguments advanced by the parties, this Court is of the view that the Appellant has not been able to offer any satisfactory explanation to explain the source of Indian currency. ISSUES PRESENTED AND CONSIDERED 1. Whether the Adjudicating Authority and Appellate Tribunal could permissibly act upon a retracted confessional statement recorded under statutory provisions where voluntariness was contested. 2. Whether the Adjudicating Authority had statutory power to confiscate Indian currency recovered from the respondent's premises under the confiscation provision of the foreign exchange statute. 3. Whether the facts and conduct found by the Adjudicating Authority and Appellate Tribunal amounted to an 'attempt' under the attempt/attempt-like provisions of the foreign exchange statute, as distinct from mere preparation. 4. Whether the High Court, in entertaining an appeal under the successor statute provision limiting appeals to 'questions of law,' had jurisdiction to re-examine the factual findings of the adjudicatory fora in the present matter. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Reliance on a Retracted Confessional Statement (Voluntariness and Corroboration) Legal framework: Statements recorded under the statutory provision were admissible for adjudicatory purposes only if voluntary; a retracted confession may be acted upon if the court/authority is satisfied as to voluntariness and truth and ordinarily prudence requires corroboration in material particulars. Precedent treatment: The Court applied established principles from higher-court jurisprudence (as relied upon by the adjudicatory fora) that: (i) voluntariness must be shown if coercion is alleged; (ii) mere retraction does not ipso facto render a statement involuntary; (iii) a retracted confession may be relied on if corroborated or if the reasons for retraction appear false; and (iv) the authority acting on inculpatory statements must subject retraction to consideration and record reasons. Interpretation and reasoning: The adjudicatory fora recorded categorical findings after evaluating surrounding circumstances (seizures, documents, visitor statements, alleged medical reports or lack thereof, multiple adjournments and procedural opportunities). The High Court found those findings to be conclusions on appreciation of evidence - not perverse or unsupported - and noted that corroborative material existed (recoveries of foreign currency, gold, and business documents) such that the confessional statement was not the sole basis of adverse findings. Ratio vs. Obiter: Ratio - where voluntariness is challenged, fact-finding on voluntariness is a matter of evidence and not ordinarily reviewable as a pure question of law; a retracted confessional statement can be acted upon when corroborated and when the retraction is examined and rejected in writing. Obiter - observations on the precise extent of required corroboration in every factual matrix. Conclusions: No question of law arose from the challenge to reliance on the retracted statement; the authorities properly applied the legal tests and the findings as to voluntariness and corroboration were sustainable on the record. Issue 2 - Power to Confiscate Indian Currency under the Confiscation Provision Legal framework: The confiscation provision empowers the adjudicator or court, if it thinks fit, to direct confiscation of 'any currency, security or any other money or property in respect of which the contravention has taken place,' with an explanation expressly including Indian currency where conversion has occurred. Precedent treatment: The Court relied upon established statutory-interpretation principles that where the statutory language is clear and unambiguous, the literal meaning governs; prior judicial exposition of the confiscation provision confirms its breadth and the discretionary nature of its exercise upon application of mind. Interpretation and reasoning: The provision's text is wide and expressly contemplates Indian currency within its ambit. The only statutory threshold is that the property be 'in respect of which the contravention has taken place' and that the adjudicator exercise discretion ('if it or he thinks fit'). The factual question whether seized Indian currency was connected to contravention is for the adjudicatory fora to determine; on the record the authorities found no satisfactory explanation for possession of large unaccounted sums and were entitled to infer involvement in contravention. Ratio vs. Obiter: Ratio - Sectional language authorizes confiscation of Indian currency where such currency is in respect of a contravention; the scope is a matter of statutory construction and is unambiguous. Obiter - comments on broader principles of interpretation when statutory language is ambiguous. Conclusions: Confiscation of Indian currency under the provision was legally permissible; no question of law arose from the challenge to the statutory power and the exercise of that power on the facts was sustainable. Issue 3 - Whether Conduct Constituted 'Attempt' under the Statute Legal framework: The statute's attempt/preparation provisions deem preparatory acts or attempts to contravene the Act to amount to contravention for statutory purposes where, from the circumstances, it may be reasonably inferred that, absent external prevention, the contravention would have occurred. General criminal-law principles distinguish intention, preparation and attempt; attempt requires a direct movement towards commission after preparations are made and involves acts amounting to more than mere preparation. Precedent treatment: The Court applied authoritative formulations for distinguishing preparation and attempt, including that the dividing line is factual and depends on the degree of steps taken towards consummation; judicial tests identify the commencement of attempt when the accused commences acts with necessary intention which are steps towards commission. Interpretation and reasoning: The adjudicatory fora evaluated the totality - inculpatory statements, recoveries of foreign exchange and gold, documents evidencing transactional activity, and large unaccounted Indian currency - and drew the inference that the respondent had crossed from preparation into attempt. The High Court treated this as a mixed question of law and fact; it accepted the primary facts found by the authorities and saw no basis to hold that the legal application (that those facts amounted to attempt) was erroneous, perverse, or unsupportable. Ratio vs. Obiter: Ratio - whether conduct constitutes an attempt under the statute is fact-sensitive and often a mixed question; when primary facts are established, the tribunal's inference that those facts amount to attempt will stand unless legally untenable or perverse. Obiter - observations on theoretical lines between attempt and preparation in abstract. Conclusions: The adjudicatory findings that the conduct amounted to an attempt were supportable on the evidence and did not raise a question of law warranting interference; the inference of attempt was sustained. Issue 4 - Scope of High Court Review under the Statutory Limitation to Questions of Law Legal framework: The statutory right of appeal to the High Court under the successor provision is expressly limited to 'questions of law' and subject to prescribed timelines; factual findings and appreciation ordinarily remain within the domain of the adjudicatory authority and appellate tribunal established under the statute. Precedent treatment: The Court applied orthodox principles distinguishing questions of law, questions of fact, and mixed questions; authorities provide that questions dependent on appreciation of evidence are factual, inferences from facts are factual unless the inference is without evidence, perverse, or involves misapplication of legal principles. Interpretation and reasoning: Each core contention advanced by the appellant was analysed against this boundary. Challenges to voluntariness, to the factual nexus between seized currency and contravention, and to the characterization of conduct as attempt were all found to be primarily evidentiary or mixed questions; the High Court therefore had no free-standing jurisdiction to reappraise facts except within narrow legal limits (e.g., perverse findings, conclusions unsupported by any evidence, misapplication of legal principle). Ratio vs. Obiter: Ratio - appeals under the statutory provision are confined to questions of law; courts may not ordinarily re-examine pure factual findings or reweigh evidence save where findings are unsupported, perverse, or the result of legal misapplication. Obiter - elaborations on the classification of mixed questions. Conclusions: The appeal did not raise questions of law amenable to review under the statutory limitation; accordingly, factual findings and their legal consequences as drawn by the adjudicatory fora were not susceptible to interference on the present record. Ancillary Point - Burden and Standard of Proof in the Statutory Scheme Legal framework and reasoning: The statutory scheme contemplates civil-standard adjudication (preponderance of probabilities) for adjudication/penalty/confiscation proceedings under the Act; once recoveries of contraband are established, evidential burden shifts to the respondent to account for the property (Section 106-type allocation in analogous jurisprudence). The adjudicatory fora applied these principles in assessing the appellant's inability to explain large unaccounted currency and related recoveries. Conclusions: The burden-shifting and standard of proof principles were properly applied; absence of satisfactory explanation justified inferential findings supporting penalty and confiscation.