2026 (3) TMI 923 - AT - FEMA

Prolonged Delay in Adjudication reduces penalty despite corroborative evidence, resulting in partial allowance and mitigation of sanction.

Proceedings concerned alleged contraventions under foreign exchange law supported by seized documents and statements treated as corroborative; the ... Imposition of penalty - modus operandi involving over-invoicing and unauthorised conversion/transfer of Indian currency to persons outside India - contraventions of Sections 8(1), 8(2) and 9(1)(b) of the Foreign Exchange Regulation Act, 1973 - Establishment of contravention by seized documents and corroborative statements - mitigation of penalty for delay in adjudication Establishment of contravention by seized documents and corroborative statements - HELD THAT:- The Tribunal accepted the Adjudicating Authority's finding that documents seized from the office (Telephone Index Book and export papers) together with the statements of S/Shri Bijay Kumar Agarwal, Lalit Dhanuka and Uma Shankar Karel, and enquiries with the bank, explained the modus operandi and the appellant's role. The appellant failed to produce evidence to contradict the seizure, statements and bank enquiries; the Tribunal therefore upheld the finding of guilt based on the available record and corroboration. [Paras 13] The charge framed under the cited provisions was held to be established against the appellant. Mitigation of penalty for delay in adjudication - HELD THAT: - The Tribunal noted delay in adjudication (partly attributable to the noticees) and that the Adjudicating Authority had already treated delay as a mitigating factor when imposing penalty. Applying mitigation, the Tribunal exercised its discretionary power to reduce the monetary penalty imposed by the Adjudicating Authority. [Paras 12, 14] Penalty reduced to Rs. 50,000 as a mitigated monetary sanction. Final Conclusion: The appeal is partly allowed: the Tribunal upheld the finding of contravention but reduced the penalty to Rs. 50,000; other pending applications, if any, are disposed of. Issues: Whether the penalty of Rs. 2,00,000 imposed for contraventions of Sections 8(1), 8(2) and 9(1)(b) of the Foreign Exchange Regulation Act, 1973 is sustainable and, if not, what relief should be granted.Analysis: The adjudicatory record includes seized documents and statements that, taken together, explain a modus operandi involving over-invoicing and unauthorised conversion/transfer of Indian currency to persons outside India; these materials were treated as corroborative of the contraventions under the cited provisions. The proceedings were, however, subject to very long delay from issuance of the show cause notice to final adjudication; part of the delay is attributable to multiple noticees but significant lapse remains. The adjudicating authority recorded the matter ex parte after notices were returned or parties failed to engage; the Tribunal previously waived pre-deposit of penalty on account of delay but did not dispose of the appeal on that basis. Weighing the sustained corroborative material against the prejudice caused by protracted delay, the ends of justice require reducing the monetary penalty as a mitigating measure while leaving the finding of contravention on record.Conclusion: The penalty is reduced from Rs. 2,00,000 to Rs. 50,000 and the appeal is partly allowed in favour of the appellant.