Discretionary confiscation under FEMA permits penalties without forfeiting securities where adjudicatory discretion is properly exercised.

Confiscation of securities for a FEMA contravention under Section 13(2) is discretionary, not mandatory. The provision uses "may" and "if he thinks fit", allowing the Adjudicating Authority to order confiscation in addition to penalties only after exercising judicial discretion. The notes state that penalties were imposed for unauthorised share transfers and that the authority had considered the material; no non-application of mind, improper exercise of discretion, or miscarriage of justice was established. Accordingly, declining confiscation while imposing penalties was treated as justified.

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Issues: Whether confiscation of securities involved in a FEMA contravention is mandatory under Section 13(2) of the Foreign Exchange Management Act, 1999, where the Adjudicating Authority has imposed penalties but declined confiscation.

Analysis: Section 13(2) uses the expressions "may" and "if he thinks fit", making confiscation additional to penalty and subject to the Adjudicating Authority's judicial discretion. The provision prescribes neither a mandatory confiscation consequence nor a fixed or irreducible penalty. The adjudication order had evaluated the material and imposed penalties for the unauthorised share transfers; no failure to apply mind, improper exercise of discretion, or miscarriage of justice was established.

Conclusion: Confiscation under Section 13(2) of the Foreign Exchange Management Act, 1999 is discretionary and was rightly not directed; the issue is decided in favour of the assessee.

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