2026 (3) TMI 851 - AT - FEMA

Reasoned finding requirement for penalties in foreign exchange enforcement: absence of evidence-linked findings overturns penalty.

Penalty under the Foreign Exchange Regulation framework requires explicit, reasoned findings linking evidentiary material to the accused; a conclusory ... Imposition of penalty - contraventions of Sections 9(1)(b) and 9(1)(d) read with Section 64(ii) - aiding and abetting - reasoned findings - Failure to consider and discuss evidence - requirement of reasons supporting adverse findings. Whether the impugned order sustained an adverse finding against the appellant on a basis that was supported by discussion of the evidence - HELD THAT:- The Appellate Tribunal found that the Impugned Order contained an adverse finding against the appellant but did not record any discussion of the evidence supporting that finding. The only material in the Impugned Order relating to the appellant was a conclusory statement that he received and transferred money and aided the transactions of another person, yet no particulars of evidence or reasoning were set out to justify that conclusion. Because the adjudicating authority failed to articulate the evidentiary basis or engage with the material facts underpinning the adverse finding, the Tribunal treated the defect as fatal to the impugned determination and remitted relief by setting aside the order qua the appellant. [Paras 6] Final Conclusion: The appeal is allowed and the impugned order, insofar as it imposes penalty on the appellant, is set aside because the adjudicating authority failed to discuss or justify the adverse finding on the evidence. Issues: Whether the penalty imposed under Sections 9(1)(b) and 9(1)(d) read with Section 64(ii) of the Foreign Exchange Regulation Act, 1973 on the appellant is sustainable in the absence of any reasoned discussion of evidence against the appellant.Analysis: The Tribunal examined the Impugned Order and found that the only substantive finding against the appellant was a conclusory statement that the appellant had aided and abetted specified transactions and received and remitted a sum of money. The Impugned Order, however, contains no discussion or evaluation of the evidence specifically adduced against the appellant that would justify that finding. The Tribunal noted the legal framework under the cited provisions of the Foreign Exchange Regulation Act, 1973 which penalise aiding and abetting unauthorized foreign exchange transactions, and observed that imposition of penalty under those provisions requires reasoned findings supported by evidence. In the absence of any assessment of the evidentiary material against the appellant, and given the lack of discussion linking the cited evidence to the appellant personally, the Tribunal concluded that the finding in the Impugned Order is not justified.Conclusion: The appeal is allowed and the Impugned Order insofar as it imposes penalty on the appellant is set aside.Ratio Decidendi: An adjudicatory order imposing penalty under the Foreign Exchange Regulation Act, 1973 must contain reasoned findings linking the evidence to the accused; absence of such evidence-based discussion renders the penalty unsustainable.