2026 (2) TMI 1283 - AT - FEMA

Abetment liability: corroborated retracted statements and statutory presumption can shift burden, leading to conviction and reduced penalty.

The text addresses whether an individual abetted contraventions of foreign exchange provisions and whether the monetary penalty should be reduced. It ... Abetment u/s 64(2) read with Sections 8(3) and 8(4) of FERA - retracted statements under Section 40 of FERA and corroboration - presumption as to culpable mental state u/s 59 of FERA - mens rea and meeting of minds in abetment (Section 107 IPC principles applied) - reduction of penalty and proportionality of administrative penalty - Whether the Appellant abetted and aided M/s Todi Commercial/ Shri Nand Kishore Verma in the contravention of Sections 8(3) and 8(4) of FERA - HELD THAT:- We find that there are a number of statements including that of Shri Nand Kishore Verma, Shri Nirmal Kumar Verma, Shri Rajesh Kumar Agarwal, Shri Rakesh Jain and Shri Sandeep Modi wherein it has been categorically stated that the Appellant was providing funds to Shri Nand Kishore Verma/ M/s Todi Commercial for acquisition of foreign exchange and its remittance abroad. In this regard, deposit slips and draft purchase application form were identified by Shri Sandeep Modi. It cannot also be regarded as mere coincidence that S/Shri Sandeep Modi and Rakesh Jain were working as employees in M/s Set Square Holding (P) Ltd. during the relevant period 1988. It has come on record that S/Shri Sushil Kumar Agarwal and Rajesh Kumar Agarwal were Directors/Promoters of M/s Set Square Holding (P) Ltd. Both S/Shri Sandeep Modi and Rakesh Jain have admitted as having transferred funds to M/s Todi Commercial at the instance of S/Shri Sushil Kumar Agarwal and Rajesh Kumar Agarwal. The Appellant has challenged the admissibility of the statements recorded under Section 40 of FERA in the face of retractions having been made by himself, his brother Shri Rajesh Kumar Agarwal, Shri Rakesh Jain and Shri Sandeep Modi. In this regard, we are guided by the following observations made in the Judgment of the Hon’ble Supreme Court in the case of Vinod Solanki vs. Union of India [(2008) 16 SCC 537] which has laid down the situations where the retracted statement of the Appellant can be relied upon. Besides the independent and cogent evidence in the form of analysis of bank statements, it is on record that those who tendered the statements under Section 40 of FERA were closely connected as employees of the Appellant and the fact that none had the economic capacity being merely employees to fund the remittances amounting to US $ 977776 cannot be ignored. Shri Rakesh Jain in the adjudication proceedings has gone on to maintain that he was under instructions of the Appellant and his brother. There is nothing produced before us other than the bald allegation about the statements having been made under Section 40 of FERA under coercion. It is from the facts and circumstances of a case that the intention, instigation and engagement are to be ascertained. We have already brought out the manner in which the Appellant funded the illegal remittance abroad by Shri Nand Kishore Verma/ M/s Todi Commercial. The facts of the present case thus speak for themselves. Section 59 of FERA 1973 provided for presumption of culpable mental state in any prosecution for any offence under the Act which requires a culpable mental state on the part of the accused, unless the accused proved the fact that he had no such mental state with respect to the charge against a particular offence. Sub-Section 3 of that Section makes such presumption applicable to proceeding before an Adjudicating Officer. The circumstances and the evidence in the present case reverse the burden on to the Appellant which he has failed to discharge. Therefore, the charge of the abetment against the Appellant stands established as he contravened Section 64(2) read with Sections 8(3) and 8(4) of FERA. We find that the ends of justice will be met by reduction of penalty to Rs. 10,00,000/- on the Appellant. The pre- deposit of penalty amount already paid shall be adjusted against the reduced penalty. Issues: (i) Whether the Appellant Shri Sushil Kumar Agarwal abetted and aided M/s Todi Commercial / Shri Nand Kishore Verma in contravention of Sections 8(3) and 8(4) read with Section 64(2) of the Foreign Exchange Regulation Act, 1973; (ii) Whether the penalty imposed (Rs. 1,00,00,000) should be reduced.Issue (i): Whether the Appellant abetted and aided the contraventions of Sections 8(3) and 8(4) of the Foreign Exchange Regulation Act, 1973 read with Section 64(2) of the Act.Analysis: The Tribunal examined statements recorded under Section 40 of the Foreign Exchange Regulation Act, 1973, bank records showing remittances of US$ 977,776 by M/s Todi Commercial, identification of the proprietor as Shri Nand Kishore Verma, handwriting opinion, deposit slips and draft purchase application forms identified by witnesses, and the relationship and roles of employees and directors connected to the transactions. The Tribunal applied authorities on retracted statements and abetment, noting that retracted confessions may be relied on if substantially corroborated by independent evidence and that abetment may be established by acts facilitating the commission of the offence; it further relied on the statutory presumption under Section 59 of the Foreign Exchange Regulation Act, 1973 to hold that the burden shifted to the Appellant to negate culpable mental state, which he failed to discharge.Conclusion: The Appellant was held to have abetted and aided the contraventions and the charge under Section 64(2) read with Sections 8(3) and 8(4) of the Foreign Exchange Regulation Act, 1973 is established against him.Issue (ii): Whether the penalty of Rs. 1,00,00,000 imposed on the Appellant should be reduced.Analysis: Having found the Appellant guilty of abetment, the Tribunal considered proportionality of penalty and the Appellant's submissions for reduction. The Tribunal exercised its discretion to adjust punishment to meet ends of justice, taking into account the nature of the offence as abetment rather than primary contravention and the pre-deposit already made by the Appellant.Conclusion: The penalty is reduced from Rs. 1,00,00,000 to Rs. 10,00,000 and the amount pre-deposited by the Appellant shall be adjusted against the reduced penalty.Final Conclusion: The Appeal is partly allowed: the finding of abetment is affirmed while the monetary penalty is substantially reduced and the pre-deposit adjusted.Ratio Decidendi: Where retracted statutory statements are substantially corroborated by independent documentary and testimonial evidence and the statutory presumption of culpable mental state applies, the burden shifts to the accused to disprove intention, and abetment may be established by proof that the accused facilitated the commission of the contravention.