Sanjay Jain Vs Directorate of Enforcement (Appellate Tribunal under SAFEMA, New Delhi)
Gifts and Travel Leftovers Do Not Automatically Justify Foreign-Currency Retention: FEMA Contravention Upheld, Penalty Reduced
Background of the Dispute
The appellant challenged an order of the Special Director (Appeals), FEMA, dated 25 June 2025, which upheld a penalty of ₹10 lakh and confiscation of foreign currency equivalent to ₹18,21,871.38.
The proceedings originated from a search at the appellant’s residential premises, during which different foreign currencies were recovered. These included €14,645 and US$17,645, besides Australian dollars and Singapore dollars.
The appellant’s statement was recorded on 18 August 2011 under section 37 of FEMA, read with section 131 of the Income-tax Act, 1961. He acknowledged acquiring and accumulating the currency, explaining that it represented gifts or amounts left over from foreign travel.
The adjudicating authority found contraventions of FEMA and the applicable regulations. The first appellate authority upheld that finding, leading to the appeal before the Tribunal.
Explanation Offered for the Currency
The appellant sought to explain the recovered currency by reference to its source and ownership.
The Singapore dollars, he submitted, belonged to his aged father and had been retained over a period of time. The euros, US dollars and Australian dollars were stated to have been lawfully purchased from an authorised dealer.
His earlier statement also referred to currency received as gifts and unspent amounts remaining after foreign visits.
However, the Tribunal noted that no documents were produced to substantiate the claimed purchases from an authorised dealer. Nor was sufficient material furnished to establish that possession and continued retention of the recovered currency were authorised.
The explanation concerning the father’s Singapore dollars was also found insufficient to warrant interference with the findings below.
Acquisition and Continued Retention Required Justification
The contraventions recorded by the authorities concerned sections 3 and 9 of FEMA, read with Regulation 3 of the Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000, and Regulations 6 and 7 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000.
The dispute therefore extended beyond whether the appellant had originally obtained currency during foreign travel or through gifts. It also concerned whether the currency could lawfully remain in his possession under the applicable regulatory framework.
The Tribunal found that the appellant had failed to produce material establishing authorised possession of the foreign currency. Merely stating that it was acquired lawfully did not supply the missing documentary foundation.
Consequently, the Tribunal declined to interfere with the finding of contravention.
Unsupported Purchase Claim Did Not Displace the Findings
The appellant’s assertion that the currency was purchased from an authorised dealer was central to his defence concerning several currencies.
Nevertheless, the Tribunal noted that no document proving that assertion had been furnished. The claimed source therefore remained unsupported.
Similarly, attributing part of the currency to a family member did not satisfactorily establish compliance with the possession and retention requirements.
The order thus turned on failure to substantiate lawful possession and retention, rather than on a conclusion that every gift or every unspent travel balance necessarily violates FEMA.
This distinction matters because the Tribunal did not formulate a general prohibition against those sources. It found that the appellant had not justified the particular holdings recovered from his residence.
Passage of Time Supported Reduction of Penalty
Unable to establish a basis for setting aside the contravention, the appellant sought a liberal approach, pointing out that the incident was more than fifteen years old.
The Tribunal considered this submission while determining the appropriate penalty. It maintained the finding concerning violation of FEMA and the regulations, but reduced the monetary penalty from ₹10 lakh to ₹5 lakh, having regard to the period when the currency had been seized.
The appeal was disposed of with that modification.
The Tribunal did not set aside the confiscation of foreign currency equivalent to ₹18,21,871.38. The relief granted was therefore confined to reducing the penalty; it did not amount to exoneration or a direction to return the currency.
Author’s Comments
Lawful acquisition and lawful continued retention are separate questions. Currency purchased for a foreign trip does not become indefinitely retainable merely because its original purchase was legitimate. The applicable retention and surrender requirements must also be satisfied.
The same applies to an explanation based on gifts. Describing currency as a gift identifies a claimed source, but does not establish that all conditions governing its possession have been met.
The practical difficulty in this case was the absence of supporting records. Authorised-dealer receipts, travel records and evidence explaining gifts or ownership could have provided a factual basis for examining the defence. Without them, the Tribunal was left with assertions that did not displace the findings below.
The penalty reduction should also be read carefully. The age of the incident influenced the quantum of punishment, not the validity of the contravention finding. The order does not establish that delay automatically extinguishes FEMA liability.
For practitioners, the distinction is useful when framing relief: a challenge to the contravention requires evidence of compliance, while a request for mitigation addresses the appropriate consequence after the contravention has been sustained. Here, the appellant obtained the latter relief alone.
FULL TEXT OF THE ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA
By this appeal under Section 19 of the Foreign Exchange Management Act, 1999 (in short “the Act of 1999”), a challenge has been made to the order dated 25.06.2025 passed by the Special Director (Appeals)-FEMA. The penalty imposed upon the appellant for a sum of Rs.10 lakhs by the Adjudicating Authority was upheld, including confiscation of the foreign currency equivalent to Rs.18,21,871.38/-.
2. It is a case where the appellant was found in possession of different foreign currencies at the time of search and accordingly, the appellant’s statement was recorded under Section 131 of the Income Tax Act, 1961 and Section 37 of the Act of 1999. The penalty was imposed, finding contravention of Sections 3 and 9 of the Act of 1999, read with Regulation 3 of the Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000 and Regulations 6 and 7 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 (hereinafter referred to as “Regulations of 2000”). In the statement made by the appellant under Section 37 of the Act of 1999 read with Section 131 of the Income Tax Act, 1961 on 18.08.2011, an admission was made about the acquisition and accumulation of foreign currency recovered from his residential premises. It was stated that the currency had been received as a gift or the leftover from the foreign currency obtained for foreign visits. The details of the explanation of different foreign currencies were given, which includes 14645 Euro and 17645 US Dollars. The recovery of the currency of Australian Dollars and Singapore Dollars was also made. The Adjudicating Authority found a contravention of the provisions referred to above and accordingly imposed the penalty of Rs.10 lakhs. In the appeal preferred by the appellant before the Special Director (Appeals), no interference was made in the order passed by the Adjudicating Authority. Aggrieved by the impugned order passed by the authority below, this appeal has been preferred.
3. The learned counsel for the appellant could not give justification for possession of the foreign currency in contravention of the Act of 1999 and Regulations of 2000. The Special Director (Appeals) found contravention of the Act of 1999. Thus, the plea cannot be accepted on the ground that Singapore dollar was belonging to his aged father and was retained over a period of time. So far as the possession of Euros, US Dollars and Australian Dollars is concerned, it was submitted to be a lawful purchase from an authorized dealer. However, no document to prove the statement aforesaid could be produced and, therefore, finding foreign currency amounting to Rs.18,21,871.38/-, a penalty of Rs.10 lakhs was imposed. No justification as such could be given by the appellant other than to refer the event to be old by more than 15 years. Thus, a prayer for liberal approach was made.
4. I have considered the submission and find that so far as the finding in regard to the contravention of the provisions of Sections 3 and 9 of the Act of 1999 and Regulations of 2000 is concerned, a case is not made out to cause interference. The appellant could not give and produce any material in regard to authorized possession of the foreign currency. However, looking to the period when the currency was seized, I reduce the penalty of Rs.10 lakhs to Rs.5 lakhs and with the aforesaid the appeal is disposed of.
