In the High Court of Judicature at Madras Dated 29.10.2011 Coram The Honourable Mr.Justice R.SUBBIAH Civil Miscellaneous Appeal No.424 of 2010 and M.P.No.1 of 2011 Amichand ..Appellant [Appellant] ..vs.. 1. The Assistant Registrar, Foreign Exchange Regulation Appellate Tribunal, Ministry of Law, Justice and Company Affairs, New Delhi. 2. The Deputy Director, Enforcement Directorate, Shasthri Bhavan, Madras-600 006. .Respondents [Respondents] Civil Miscellaneous Appeal filed under Section 54 of the Foreign Exchange Regulation Act, against the Order passed by the Foreign Exchange Regulation Appellate Tribunal, Janpath Bhawan, New Delhi, in Appeal No.768 of 1993 dated 01.01.2010. For Appellant : Mr.A.Thiagarajan, Senior Counsel for Mr.S.Ramesh Kumar For Respondent : Mr.M.Dhandapani, Special Counsel for No.2 Enforcement Directorate For Respondent-1 : Tribunal JUDGMENT This appeal is filed as against the order dated 01.01.2010 passed by the Foreign Exchange Regulation Appellate Tribunal, New Delhi, in Appeal No.768 of 1993, whereby the Tribunal has upheld the order dated 25.10.1993 passed by the 2nd respondent herein, imposing a penalty of Rs.15,000/- on the appellant on a finding that the appellant has contravened the provisions of Section 9(1)(b) of the https://hcservices.ecourts.gov.in/hcservices/ Foreign Exchange Regulation Act. 2. The case of the appellant, in brief, is as follows: It has been observed from the Adjudication Order No.DD/MAS/144/93 dated 25.10.1993 that on information, the officers of the Directorate of Enforcement searched the premises of one Musadiq Ali at No.4, Maduravasal Lane, Madras-1 on 19.03.1993. During the course of searching, the said Musadiq Ali gave a statement that he had made a payment of Rs.2,30,000/- on 18.03.1993 to the appellant herein residing at No.114, I Floor, Anna Pillai Street, Madras-1 as per the instructions of one Abdul Aziz from abroad. Pursuant to the said statement of Musadiq Ali, the officers of the Enforcement Directorate visited and searched the residence of the appellant herein on 19.03.1993. In the said search, they found Indian currency of Rs.2,30,000/- which was kept by the appellant in contravention of Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973, and seized the same under a mahazar. The appellant gave a voluntary statement to the officers of the 2nd respondent that he knows a person, by name, Pukraj Jain, who is running a textile shop in Serang Road, Singapore. The said Pukraj Jain hails from the appellant village. The said Pukraj came to Chennai 4 to 5 months ago from the date of seizure of the amount and requested the appellant to advance a loan of Rs.2,00,000/- for purchase of silk sarees for his Singapore shop. The said Pukraj Jain had also promised the appellant that he would pay back the money in 3 to 4 months; but the appellant told that he did not have that much of amount and he would raise about Rs.75,000/- from his own funds and for the remaining Rs.1,25,000/-, he would have to borrow from persons in the local market. Accordingly, the appellant arranged Rs.75,000/- by selling his wife's jewels and borrowed Rs.1,25,000/- from the persons in local market on interest and lent Rs.2,00,000/- to Pukraj Jain on 17.03.1993. The said Pukraj Jain contacted from Singapore in the appellant's Telephone No.518400 and told him that he had made arrangements at Singapore, whereby the appellant should contact one Musadiq Ali at No.106, Porchughese Church Street, Madras-1 and collect Rs.2,00,000/- from him towards principal amount and Rs.30,000/- towards interest. Accordingly, on 18.03.1993, the appellant collected Rs.2,30,000/- from the said Musadiq Ali and brought to his home and kept in his Almirah, which was seized on 19.03.1993 by the officers of the 2nd respondent. 3. The appellant gave a written statement on 19.03.1993 to the officers of the Directorate of Enforcement and subsequently on the next day i.e.on 20.03.1993, he sent a telegram stating that the statement given by him on 19.03.1993 was obtained by the officers of the2nd respondent under threat and coercion and that the statement was dictated by the officers, which are contrary to the truth, and that they seized the accounted money. The 2nd respondent looked into the allegations made by the appellant in the telegram as false and baseless vide his office letter dated 24.03.1993. Subsequently, the https://hcservices.ecourts.gov.in/hcservices/ appellant, through his representation dated 27.04.1993, stated that the statement was obtained by the officers of the 2nd respondent according to their convenience and the names of Musadiq Ali, Pukraj Jain are invented by the officers and seized the amount of Rs.2,30,000/-, which is meant for the purchase of flat. There is no evidence to show that the existence of the persons in the above said names. But, the 2nd respondent has rejected the representation of the appellant dated 27.04.1993 vide his office letter dated 03.06.1993. Based on the above investigation, the appellant was charged under section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 (hereinafter referred to as 'FERA Act'), for having received Rs.2,30,000/- from the said Musadiq Ali, Chennai, during March 1993 as per the instructions of Pukraj Jain, Singapore. As per the Memorandum dated 16.07.1993, the appellant was required to show cause as to why adjudication proceedings should not be held against him for the aforesaid contravention and why the Indian currency of Rs.2,30,000/- seized from him being the amount involved in the aforesaid contravention should not be confiscated to the Central government under section 63 of FERA. For this, the appellant through his counsel sent a reply dated 27.07.1993 that he has not violated any of the provisions of FERA and that he has already retracted the statement given by him and that he has also explained the source of the amount seized and that he requested for an early personal hearing and an opportunity to cross examine Musadiq Ali. The appellant was called upon to appear before the office of the Enforcement Directorate on 17.09.1993 for adjudication proceedings to be held against him before the 2nd respondent. The appellant represented through counsel before the 2nd respondent, the original authority, on 17.09.1993, who has submitted before the 2nd respondent that since the case is based only on the sworn statement of Musadiq Ali, an opportunity should be given for cross examination of the said Musadiq Ali. But his request was turned down by the authorities stating that the said Musadiq Ali was detained under the provisions of COFEPOSA. Moreover, the cross examination in proceedings under FERA cannot be given for the simple reason that as per the Adjudication Proceedings and Appeal Rules, the adjudicating officer shall not be bound to observe the provisions of the Indian Evidence Act, 1972. Thus, the adjudicating authority, after going through the facts of the case, came into the conclusion that the money was received by the appellant from Musadiq Ali through unauthorised channel under instructions of Pukraj Jain of Singapore without through Reserve Bank of India. The said Musadiq Ali got instructions from Abdul Aziz, abroad, to make payment to the appellant and the appellant got instructions over phone from Pukraj Jain of Singapore to receive the payment from Musadiq Ali at Chennai. Hence, the adjudicating officer passed an order in No.DD/MAS/144/93 dated 25.10.1993, imposing a penalty of Rs.15,000/- against the appellant for the contravention of the provisions of Section 9(1)(b) of FERA for having received a sum of Rs.2,30,000/- from Musadiq Ali on behalf of Pukraj Jain of Singapore, a person resident outside India, as per the instructions of Abdul https://hcservices.ecourts.gov.in/hcservices/ Aziz from abroad, without the permission of the Reserve Bank of India. The officers of the Directorate of Enforcement had seized the amount of Rs.2,30,000/- from the residence of the appellant on 19.03.1993 and confiscated the same in terms of section 63 of FERA, 1973 as the amount was involved in contravention of section 9(1)(b) of FERA. Aggrieved over the said order, the appellant filed an appeal before the 1st respondent, wherein the appeal was dismissed on 01.01.2010. Challenging the said finding, the present appeal is filed by the appellant. 4. Learned counsel for the appellant submitted that the appellant herein retracted his statement recorded by the officers of the 2nd respondent on 19.03.1993, the very next day i.e.on 20.03.1993. But, the 2nd respondent has relied upon the retracted statement against the appellant. Though the appellant had retracted the statement recorded by the officers of the 2nd respondent as early as 20.03.1993 and though he had submitted a representation on 27.04.1993, without referring the retracted statement and the contents of the representation, the 2nd respondent issued a show cause notice dated 16.07.1993. Further, the adjudicating officer used the statement of Musadiq Ali to corroborate the retracted statement of the appellant. Further, copies of the documents seized from Musadiq Ali were not furnished to the appellant. Above all, the appellant's request to cross examine Musadiq Ali was turned down by the adjudicating officer. Hence, the order passed by the adjudicating officer is not legally sustainable for the following reasons; (1) retracted statement of the appellant was relied upon by the adjudicating officer; (2) the statement of Musadiq Ali was used to corroborate the retracted statement of the appellant; (3) the documents seized from Musadiq Ali were not given to the appellant and his request for cross examine Musadiq Ali was turned down; (4) the adjudicating officer, based on the seizure of money from the appellant's house, passed the impugned order, without considering the explanation given by the appellant that the money seized from his house was the accounted money. 5. Further, the learned counsel submitted that the burden of proving the allegation as against the appellant was on the department, but they have not discharged the burden beyond reasonable doubt. The department by merely relying upon the inconsistent statement of third parties has passed the order imposing penalty. The learned counsel further submitted that as per section 40 of FERA, the adjudicating officer has a power to summon any person. Therefore, it is deemed to be a quasi-judicial proceeding. Under such circumstances, the finding rendered by the adjudicating officer that he is not bound to observe the provisions of Evidence Act, is not legally sustainable. The proceedings before the adjudicating officer https://hcservices.ecourts.gov.in/hcservices/ is a quasi-judicial proceeding and as such, the appellant is entitled to cross examine Musadiq Ali, whose statement was used by the adjudicating officer to corroborate the retracted statement of the appellant. In support of his submissions, the learned counsel has relied upon the following judgments. K.NARAYANASWAMY .vs. DEPUTY DIRECTOR, ENFORCEMENT DIRECTORATE, MADRAS (AIR 1983 MADRAS 53), SALEEM KHAN .vs. THE DEPUTY DIRECTOR, ENFORCEMENT DIRECTORATE, MADRAS (1985 (5) ECC 146), STATE OF KERALA .vs. K.T.SHADULI YUSUFF (1977 (VOL.39) STC 478), E.V.MARAKKAR .vs. DY.DIRECTOR OF ENFORCEMENT (VOL.21 ECC 164), COMMISSIONER OF INCOME TAX .vs. PRADEEP KUMAR GUPTA (2008 (VOL.303) ITR 95) and PRAKASH CHAND NATHA .vs. COMMISSIONER OF INCOME TAX (2008 ) VOL.301) ITR 134). 6. The learned counsel further relied upon a judgment reported in VINOD SOLANKI .vs. UNION OF INDIA AND ANOTHER (2008) 16 SCC 537) in support of his contention with regard to the retracted statement that the burden of proof is on the prosecution to show that the confession is voluntary in nature and it is out of threat, etc. Thus, the learned counsel submitted that the adjudicating officer has passed the order by giving a go-by to all the cardinal principles of law. Therefore, the orders passed by the respondents are liable to be set aside. 7. Combating the submissions made by the learned counsel for the appellant, the learned Special Counsel for the respondent, by inviting the attention of this Court to section 51 of FERA, which deals about the power to adjudicate, submitted that as per section 51, the adjudicating officer shall hold an enquiry by affording a reasonable opportunity for making a representation and if he is satisfied that a person had committed the contravention he may impose a penalty. Rule 3 of the Adjudication Proceedings and Appeal Rules, 1974, clearly says that the adjudicating officer shall not be bound to observe the provisions of the Indian Evidence Act. Therefore, affording an opportunity to cross examine the person in all cases is not a mandate. As per section 71(3) of FERA, if any person is found or is proved to have been in possession of any foreign exchange exceeding the value of Rs.15,000/-, the burden of proving that the foreign exchange came into his possession lawfully shall be on him. Therefore, if a person is found to be in possession, the presumption is, foreign exchange came into his possession and the burden is on his part to disprove the same. The learned counsel further submitted that it is a common knowledge that it is absolutely unnecessary for the office of the Enforcement Directorate to lodge a false case against the appellant. Moreover, the appellant has not attributed any mala fide intention as against the officers of the Directorate of Enforcement. At the time of hearing, Musadiq Ali, whom the appellant https://hcservices.ecourts.gov.in/hcservices/ wanted to cross examine was detained under the provisions of COFEPOSA. Therefore, he could not be made available for cross examination. In fact, the original authority has observed in his order to the said facts. In these backgrounds, the retracted statement of the appellant has no significance in this case and non- production of Musadiq Ali for cross examination would not vitiate the proceedings. In support of his contentions, the learned Special Counsel has relied on the judgments reported in M/s.KANUNGO & COMPANY .vs. COLLECTOR OF CUSTOMS AND OTHERS ((1973) 2 SCC 438), C.SAMPATH KUMAR .vs. ENFORCEMENT OFFICER, ENFORCEMENT DIRECTORATE, MADRAS ((1997) 8 SCC 358) and IBRAHIM,J .vs. SPECIAL DIRECTOR, ENFORCEMENT DIRECTORATE (2000 (IV) CTC 298). 8. Heard the learned counsel for the parties. 9. In view of the submission made by the learned counsel on either side, the questions that arise for consideration are (1) Whether the orders of the authorities below are bad since they have relied upon the retracted statement of the appellant for imposing penalty ? (2) Is there any violation of principles of natural justice since the documents seized from Musadiq Ali referred to in the show cause notice were not supplied to the appellant and that the appellant was not allowed to cross examine the said Musadiq Ali ? (3) Whether the impugned orders are bad since the penalty was imposed solely based on the seizure of Indian currency of Rs.2,30,000/-, being the properly accounted money ? 10. It is the case of the respondents that by receiving Indian currency of Rs.2,30,000/- through unauthorised channel without the permission of the Reserve Bank of India, in contravention of section 9(1)(b) of FERA, the appellant had caused loss to the foreign exchange. The officers of the Directorate of Enforcement seized the money from the house of the appellant on 19.03.1993 based on the statement of Musadiq Ali. It is the statement of Musadiq Ali that the appellant had advanced a sum of Rs.2,00,000/- to one Pukraj Jain of one Singapore for purchasing silk sarees on 17.03.1993. The said Pukraj Jain made arrangements for the repayment of the said amount with interest through Musadiq Ali. As per the instructions of one Abdul Aziz from abroad, the amount was paid to the appellant, which money was seized by the officers of the respondents on 19.03.1993 through mahazar. The appellant has also given a statement to the officers of the Enforcement on 19.03.1993; but on the very next day, he has retracted the statement by sending a telegram and the retracted statement sent by the appellant is as follows: https://hcservices.ecourts.gov.in/hcservices/ "On 19.3.93 by 9 a.m. I was arrested by your Officers detained illegally till 8.p.m.and was seriously beaten. Statement was dictated by your Officers which are contrary to truth. The money seized from me by the Officers are accounted money kept for purchasing a flat. The contents of the statement are dictation given by your officers and not mine. Prays enquiry and release of the Currency. Detailed letter follows". Now, it is the grievance of the appellant that though the statement was retracted, the appellant has relied upon the said statement and the statement of Musadiq Ali was used as a tool to corroborate the retracted statement without affording an opportunity to the appellant to cross examine the said Musadiq Ali. 11. A perusal of the retracted statement would show that the appellant has made an allegation to the extent of saying that he was seriously beaten by the officers of Director of Enforcement. Thereafter, the appellant had kept quiet for a period of one month. The retracted statement sent by the appellant is not a simple retraction or by merely saying that the statement was obtained by him by coercion or threat. On the other hand, the said statement shows that he was physically tortured. But, absolutely, there is no complaint as against the officers either to the police officials or to the superior officers by the appellant. Had the retracted statement been simplicitor-in- nature, there may not be any dispute in accepting the statement made by the learned counsel for the appellant that the burden of proof lies on the prosecution to prove that they have obtained the statement voluntarily from the appellant. The peculiar circumstances and the tone and tenor of the retracted statement of the case would show that the allegation of the appellant is serious; but subsequently, there is no follow-up action by the appellant till he sent a representation after a month. In this background, in my opinion, not much significance could be attached to the representation in this case, which was sent by the appellant subsequent to the retracted statement. The case relied on by the learned counsel for the appellant reported in (2008) 16 SCC 537 (supra) in support of his contention that the burden of proof is on the prosecution and that the retraction of confession made by a person on threat and coercion need not be proved by the accused cannot be made applicable to the facts of the case. Moreover, in that case, the accused was produced before the Magistrate and on production, he filed an application retracting the statement and only in that background, the Hon'ble Apex Court has held that since he has retracted the confession statement, the prosecution has to show that the confession was voluntarily in nature and not from out of threat. In the instant case, such a situation does not arise. Moreover, I find that in the representation dated 27.04.1993, the appellant had stated that a sum of Rs.75,000/- seized by the officers was the amount raised by him by selling his wife's jewels and he had also enclosed the copies of the bills Nos. 14 and 68 dated 14.03.1993 and Bill No.149 dated 07.03.1993, which were prior to the date of the https://hcservices.ecourts.gov.in/hcservices/ seizure of the amount. But absolutely there is no whisper about these bills in his retracted statement dated 20.03.1993. Hence, these aspects cumulatively would show that the explanation given by the appellant in his representation dated 27.04.1993 subsequent to the retracted statement is only an after-thought. Under such circumstances, no credence could be given to the retracted statement. Hence, I am of the opinion that as per section 71(3) of FERA, the burden of proving that the foreign exchange came into his possession lawfully is only on the shoulder of the appellant. 12. On going through the facts, I am of the view that the retracted statement has been sent by the appellant only for the purpose of creating a defence. It is a well settled principle that each case has to be decided in the background of that case. Therefore, in the present case, no weightage can be given on the retracted statement made by the appellant in the circumstances when the appellant has not come forward to prove that the money came into his possession lawfully. 13. So far as the next fold of submission is concerned, it is the case of the appellant that he has not been given an opportunity to cross examine Musadiq Ali. But, on the other hand, it is the finding of the adjudicating officer that at the relevant point of time, Musadiq Ali was under the detention of COFEPOSA. Moreover, it is the contention of the department that there is no need to give an opportunity to the appellant in the FERA proceedings as per Rule 3(5) of the Adjudication Proceedings and Appeal Rules. The learned counsel for the appellant has relied on number of judgments in support of his contention that he is entitled to cross examine Musadiq Ali, whose statement was relied upon by the adjudicating officer. In AIR 1983 MADRAS 53(supra), it has been held as follows: "...The mere receipt of an amount on the instructions of a person resident in India cannot constitute the contravention of Section 5(1)(aa) of the Act. The essential ingredient which can constitute the contravention of S.5(1)(aa) of the Act is the receipt of the amount by the person resident in India on the instructions of or on behalf of a person resident outside India. Before it could be found that there is a contravention of S.5(1) (aa) of the Act, we must know as to who is the person on whose instructions or on whose behalf the amount was received and whether he is resident outside India. In this case, we know the person who has received the amount. But, we do not know the person resident outside India on whose instructions and on whose behalf the amount is said to have been received. The statement of the appellant merely indicates that he received the amount by order or on behalf of Manickam Reddiar. Manickam Reddiar is, admittedly, a person resident in India and, therefore, any amount received on his instructions cannot amount to https://hcservices.ecourts.gov.in/hcservices/ contravention of S.5(1)(aa) of the Act". 14. The factual aspect in that case would show that there is no evidence to show as to whose instructions, Manickam Reddiar paid the amount to the appellant in that case. So far as this case is concerned, it has been clearly stated that one Pukraj Jain from Singapore received amount a sum of Rs.2 lakhs from the appellant as a loan on a promise that he would pay back the amount with interest. Subsequently, on instructions, one Abdul Aziz instructed Musadiq Ali to pay the amount to the appellant. on 17.03.1993, the said Pukraj Jain contacted the appellant from Singapore in Telephone No.518400. Therefore, the judgment relied on by the learned counsel for the appellant cannot be made applicable to the facts of the case. 15. Learned counsel for the appellant has relied on another judgment reported in 1985(VOL.5) ECC 146 (supra) in support of his contention that there may not be any need for corroboration in law, wherein it has been held as follows: "The case of the Enforcement Directorate was that the appellant received a certain sum of money on the account of his brother-in-law, who was residing in Colombo and distributed the amount to certain persons in India in accordance with the directions of his brother-in-law in Colombo. Both the original as well as the appellate authority, in finding the appellant guilty, relied on the statement of the appellant dated 25th October, 1979, which he had later on retracted on 31st October, 1979. On appeal to the High Court: Held, on the facts, that apart from the statement of the appellant dated 25th October, 1979, there was no other evidence on which the authorities could have relied on in finding him guilty. That statement was retracted and though there was enough scope for a detailed enquiry and proving that the retraction was not justified, the department did not take any step to prove that the statement originally given by the appellant was true. The burden was on the department to prove contravention of the provisions of the Act. In the circumstances of the case, therefore, the uncorroborated statement could not be accepted as enough for finding the appellant guilty, and the orders levying penalty were liable to be set aside. So far as retracted statements are concerned, though strictly