Praveen Sharma Vs Directorate of Enforcement (Appellate Tribunal under SAFEMA, New Delhi)
Corroborated Retracted Statement Supports FERA Charge; Tribunal Cuts Rs. 1 Crore Penalty to Rs. 15 Lakh
The Appellate Tribunal under SAFEMA at New Delhi upheld a finding of contravention under Section 8(1) of the Foreign Exchange Regulation Act, 1973 (FERA), holding that the appellant’s retracted statement was supported by seized documents and witness statements. However, it reduced the penalty from Rs. 1 crore to Rs. 15 lakh, considering the absence of quantification of the contravention amount and the appellant’s health condition.
The order was passed on October 12, 2026, by Chairman Justice Munishwar Nath Bhandari in Praveen Sharma v. Directorate of Enforcement, Delhi, Appeal No. FPA-FE-3/DLI/2012.
Background of the proceedings
The appeal challenged an order dated October 17, 2011, passed by the Special Director, Directorate of Enforcement, imposing a penalty of Rs. 1 crore.
The investigation began after ED received information that Praveen Sharma was engaged in large-scale sale and purchase of foreign currencies from premises at Motia Khan, Paharganj, New Delhi.
A search conducted on November 29, 1996, resulted in seizure of Indian currency of Rs. 2,60,000 and documents recording foreign currency transactions.
In his statement recorded under Section 40 of FERA, Sharma admitted dealing in gold and foreign currencies with foreign nationals at black-market rates. The seized documents contained coded entries, which, according to the order, he subsequently explained.
ED also recorded statements of persons associated with him and relied on material recovered during further investigation.
Appellant challenges documents and procedure
Sharma argued that the adjudicating authority had failed to decide his requests for forensic examination of the seized documents and summoning of the panch witnesses.
He also relied on medical records, submitting that he had remained bedridden and undergone treatment during the relevant period. He disputed the attribution of the transactions to 1996 and referred to the absence of foreign currency recovery during the search.
The appellant challenged the reliance on witness statements and pointed out that he had promptly retracted his own statement.
He further contended that ED’s case records had subsequently been misplaced, undermining the basis for sustaining the penalty.
Forensic examination not warranted on the facts
The Tribunal rejected the objection concerning the absence of a Central Forensic Science Laboratory report.
It found that the appellant had not raised a substantive dispute that the documents were fabricated or did not belong to him. His signatures on the panchnama were also not disputed.
In those circumstances, the Tribunal held that no issue requiring forensic verification had been established.
It similarly rejected the request concerning panch witnesses, observing that summoning them merely to verify recovery served no purpose when the recovery and the signed panchnama had not been meaningfully disputed.
Foreign currency recovery not a prerequisite
The Tribunal also rejected the medical defence as a ground for overturning the finding of contravention.
It noted that Sharma was present at the premises when the search took place, his statement was recorded and he was taken into custody. The Tribunal considered the seized material sufficient to establish his involvement despite his medical history.
Importantly, it clarified that physical recovery of foreign currency was not a precondition for establishing the contravention. Documents showing foreign currency dealings, considered with the other evidence, could support the charge.
Retracted statement supported by corroboration
The Tribunal acknowledged that Sharma had retracted his statement without delay.
It stated that a retracted statement could not, by itself, establish the allegation unless supported by corroborative evidence. In this case, however, the evidence extended beyond the appellant’s admission.
The seized documents indicated transactions involving foreign currencies and gold. Statements of persons connected with Sharma provided additional corroboration.
The Tribunal therefore held that the adjudication order was not founded solely on the retracted statement.
It separately rejected Surinder Singh’s retraction, noting that his affidavit had been filed approximately 17 years after his statement. The Tribunal treated that delayed retraction as an afterthought.
Misplaced records did not erase earlier evidence
On the missing-record objection, the Tribunal held that subsequent misplacement did not wipe out evidence already placed before and relied upon by the Special Director.
The adjudication order had been passed on the material available at that stage. The later loss of records was therefore not accepted as sufficient to overturn the established contravention.
Penalty reduced substantially
Although the Tribunal rejected the grounds challenging liability, it found the Rs. 1 crore penalty excessive.
It observed that the documents supported involvement in unauthorised transactions, but the contravention amount had not been quantified. It also considered Sharma’s present health condition, recording that he was suffering from cancer.
Taking these circumstances into account, the Tribunal reduced the penalty to Rs. 15 lakh and disposed of the appeal.
The decision preserves the finding of contravention while distinguishing the sufficiency of corroborated evidence from the separate question of an appropriate penalty.
FULL TEXT OF THE ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA
The appellant has preferred this appeal under Section 19 of the Foreign Exchange Management Act, 1999 (in short “the Act of 1999”) to challenge the order dated 17.10.2011 passed by the Special Director, Directorate of Enforcement imposing penalty of Rs.1 Crore for contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973 (in short “the Act of 1973”).
Brief facts of the case:
2. The case was initiated by the respondent on receipt of information that the appellant Praveen Sharma is engaged in sale and purchase of foreign currencies on a large scale at Flat No.203-A, LIG Type, Motia Khan, DDA Flats, Paharganj, New Delhi and his premise was accordingly searched on 29.11.1996. It has resulted in seizure of Indian currency of Rs.2,60,000/- and incriminating documents, inter alia, disclosing transactions in foreign currencies.
3. The statement of appellant Praveen Sharma was recorded on 29.11.1996 under Section 40 of the Act of 1973. The appellant admitted about dealing in sale and purchase of gold and foreign currencies from/to foreign nationals at black-market rates. The documents recovered at the time of search pertains to transactions of foreign currencies undertaken by the appellant and use of code words, which were decoded by him subsequently.
4. The statement of Shri Surinder Singh was recorded on the same date i.e. 29.11.1996 under Section 40 of the Act of 1973. He admitted about his association with the appellant Praveen Sharma as his employee. He further stated to have attended telephone calls, in absence of the appellant Praveen Sharma, of Doctor of Jama Masjid, Manoj of Karol Bagh and Gupta of Raigerpura, Devinder of Kinari Bazar, Purshottam of Katra Khusal Rai and Sandeep of Palace overseas. He stated about involvement of the appellant for purchase of gold from persons coming from Russia and other countries in exchange of dollars and other foreign currencies.
5. The statement of Shri Puran Chand was recorded on 30.11.1996. He has shown his association with the appellant Praveen Sharma and stated about the engagement of the appellant Praveen Sharma in sale and purchase of gold in exchange of foreign currencies. One of the documents seized from the premises of the appellant Praveen Sharma on 29.11.1996 gave details regarding reference no. C-280036 of the company, namely, M/s Lee Design maintained with Allahabad Bank. The said document also indicated an amount of USD 54740 and name of certain foreign banks etc. Further, the material collected during the course of search in the office of M/s Lee Design also revealed involvement of the appellant in purchase and sale of gold in exchange of foreign currencies. The Special Director, after causing notice to the appellant, passed an order imposing the penalty of Rs.1 Crore for contravention of Section 8(1) of the Act of 1973. The detailed facts, in reference to the documents and statements of witnesses, have been given in the impugned order. However, to avoid repetition of the facts, the reference of the documents and statements of witnesses would be made while dealing with the arguments of the appellant.
Arguments of counsel for the appellant:
6. The learned counsel for the appellant submitted that the impugned order has been passed by the Special Director in ignorance of the reply to the show cause notice submitted by the appellant. The appellant made a specific request to obtain opinion of CFSL on the alleged documents seized from the possession of the appellant and requested for a copy of the same, however, no order on the request of the appellant was passed by the Special Director. In a similar manner, in reply to the show cause notice filed on 16.04.2008, the appellant requested for summoning of Panch Witnesses to establish that the alleged seized documents were not recovered from him. However, no order on the aforesaid request was passed and thereupon the entire proceeding was conducted in absence of the required order on the request of the appellant.
7. The learned counsel for the appellant further submitted that on the date of search, the appellant was bedridden for more than 8 months. He was moving to various hospitals for treatment. The details of the treatment along with the documents were submitted before the Adjudicating Authority. However, the Special Director kept complete silence on the aforesaid while passing the order and made finding that the appellant conducted elicit transactions during the period from 28.09.1996 to 19.11.1996. The dates aforesaid were taken by the Special Director despite no indication of the year 1996 in any of the documents seized from the possession of the appellant.
8. The learned counsel for the appellant further submitted that the impugned order has been passed in complete ignorance of the medical history and documents submitted by the appellant to show his hospitalization on the relevant dates. It was coupled with the order granting bail to the appellant on medical grounds and in absence of recovery of foreign currencies.
9. The learned counsel for the appellant further submitted that the statement of Surinder Singh has been relied by the Special Director while passing the order. The appellant had no relation with Surinder Singh. He is shown to be his employee. In fact, Surinder Singh may have a legitimate business dealing with the appellant and on the date of search, he came to the premises of the appellant for recovery of the amount due to him. Surinder Singh had furnished an affidavit to retract from his statement but aforesaid was ignored by the Special Director thus on the aforesaid ground also, the impugned order deserves to be set aside.
10. The learned counsel for the appellant further submitted that the statement of one Puran Chand, apart from other statements, have been relied by the Special Director, which includes the statement of Maqbool Ahmed. Maqbool Ahmed in his statement denied any business with the appellant for the last 6 months. His statement was recorded on 08.01.1997 and thereby there was no possibility of business during the period starting from 28.09.1996 till 19.11.1996. Thus, the reliance on the statement of Maqbool Ahmed was in ignorance of his specific statement and thereby on the aforesaid ground also, the impugned order deserves to be set aside.
11. The learned counsel for the appellant further submitted that the statement of the appellant was recorded on 29.11.1996 and 30.11.1996 to record elicit transactions with the persons residing in different areas, which includes Doctor of Jama Masjid, Manoj of Karol Bagh, Gupta of Raigerpura, etc, however, the same could not have been relied upon by the Special Director, as the appellant had retracted from his statement on the next day before the Ld. Court. The respondent has failed to conduct investigation qua the persons named above and if any investigation was made, the reference of it has not been given in the impugned order. Therefore, the impugned order was solely based on the statements of few witnesses and recovery of documents in ignorance of the fact that it was not sufficient to prove a case under Section 8(1) of the Act of 1973. The retracted statements could not have been otherwise considered to prove a case against the appellant. The prayer was accordingly made to cause interference in the impugned order.
12. The learned counsel further submitted that a prayer was made to this Tribunal to call for the record to find out as to whether a case has been made out against the appellant. The ED had admitted that the case file and the material appended to it has been misplaced. In view of the above, there remains no reason to endorse the impugned order imposing penalty of Rs.1 Crore on the appellant for contravention of Section 8(1) of the Act of 1973.
13. The learned counsel for the appellant closed his arguments with the aforesaid though called upon to raise any other issue. At that stage, the appellant prayed for time to file written arguments. Permission for it was granted. It was to submit the written arguments, in reference to oral arguments made before this Tribunal. However, while submitting the written arguments, the appellant made a reference of few facts which were not raised at the time of final hearing to call upon the reply from the respondent. Thus, this Tribunal has referred to the arguments raised by the appellant at the time of oral arguments and would be considered while recording finding on the same and that too in reference to pleadings to the appeal. The appellant, however, made a prayer to cause interference in the impugned order.
Arguments of counsel for the respondent:
14. The learned counsel for the respondent contested the appeal. Elaborate arguments were made on each issue raised by the counsel for the appellant and would be referred while recording the finding. It is to avoid repetition of facts and otherwise for the sake of brevity.
Finding of the Tribunal:
15. I have considered the rival submissions of the parties and scanned the record carefully.
16. It is a case where the respondent conducted search on the premises belonging to the appellant on receipt of the information about his involvement in sale and purchase of foreign currencies on large scale. At the time of search, a sum of Rs.2,60,000/- was found and seized, apart from the documents disclosing transactions in foreign currencies. The respondent accordingly initiated the case and recorded the statement of the appellant, apart from others under Section 40 of the Act of 1973. Finding involvement of the appellant for contravention of Section 8(1) of the Act of 1973, the authority below imposed the penalty of Rs.1 Crore. A challenge to the aforesaid has been made by the appellant raising several grounds which have been contested by the respondent and accordingly I would record my finding on each issue raised by the appellant.
17. The learned counsel for the appellant submitted that despite a specific request to seek CFSL report of the alleged documents seized from the possession of the appellant, no order was passed by the Special Director and, therefore, the documents were relied without CFSL report. It is despite a specific request for the aforesaid. Therefore, the challenge to the order has been made, in reference to the argument referred to above. The contest to the argument was made by the counsel for the respondent. It was submitted that there is no provision for sending the documents to CFSL when they were recovered from the possession of the appellant under the Panchnama duly signed by him. The appellant did not deny his signature on the Panchnama or even the documents seized at the time of search. The CFSL was not even warranted in the facts and circumstances of the case.
18. I have considered the submission in reference to the first argument raised by the appellant and find no substance therein. It has not been disputed by the appellant that the documents seized from his possession and relied by the respondent were fabricated or did not belong to him, so as to call for the CFSL report. Without any issue in regard to the verification of the documents, a prayer for CFSL report was just to prolong the proceedings and not for any other purpose. The appellant has even ignored as to when CFSL report is required and as to whether a case of that nature is made out. Thus, the first argument raised by the appellant is not worth acceptance and is accordingly rejected.
19. The learned counsel for the appellant further made a reference to the request for summoning of the Panch Witnesses for verification of the documents as to whether they were recovered from the possession of the appellant. The argument has been raised without alleging that the documents referred by the respondent were not seized from his possession, thus, without a dispute of that nature and when Panchnama was containing the signature of the appellant, calling for the Panch witnesses, who witnessed recovery of the documents from the possession of the appellant would have been for the sake of it. Thus, even the second argument raised by the appellant cannot be accepted.
20. The learned counsel for the appellant further referred to the health condition of the appellant, who is said to have remained hospitalized from time to time. It is with further submission that the Special Director ignored the fact aforesaid while passing the impugned order. It is showing elicit transactions between 29.08.1996 to 19.11.1996. It is coupled with the fact that the material placed on record was not indicative of the year 1996 and, therefore, no basis was made out to the alleged elicit transactions by the appellant between the period referred to above. The argument aforesaid was contested by the counsel for the respondent.
21. I find that the appellant is said to have remained hospitalized from time to time but on the day when the seizure took place coupled with recording of the statement under Section 40 of the Act of 1973, the appellant was present in his premises. In fact, he was taken in custody on the same date, therefore, the plea that the appellant remained hospitalized from time to time is for the sake of it. Even otherwise, the period of operation of elicit transactions was indicative based on the documents recovered from the possession of the appellant. Thus, the third ground raised by the appellant is not made out.
22. The learned counsel proceeded to allege that the impugned order has been passed in ignorance of the medical condition of the appellant which was considered while granting bail to the appellant with the further endorsement that in absence of the recovery of the foreign currency, whether a case for contravention of the provisions of the Act of 1973 would be made out.
23. I have considered the aforesaid submission also and find that on the relevant date when the search was conducted followed by recording of the statement and custody of the appellant, he was not hospitalized, otherwise the allegation for recording the statement under Section 40 of the Act of 1973 after taking him into custody would not have been made. The medical history of the appellant would not be relevant for the present case when the material collected is sufficient to prove contravention of Section 8(1) of the Act of 1973. At this stage, it may be clarified that the recovery of foreign currency is not a pre-condition to make out a case, rather the documents found available were sufficient to show involvement of the appellant in the sale and purchase of the foreign currency as well as the gold. It was otherwise admitted by the appellant in his statement recorded under Section 40 of the Act of 1973.
24. The next question raised by the appellant was in reference to the statement of Surinder Singh who was found available in the premises at the time of search. In the statement made by Surinder Singh under Section 40 of the Act of 1973, he has shown himself to be the employee of the appellant. It is with further admission about involvement of the appellant in sale and purchase of foreign currencies as well as gold. According to the appellant, Surinder Singh was having legitimate business dealing with him and thereby he was present at the time of search. The plea aforesaid has been taken without any proof in the shape of bills/invoices/transaction between the two and otherwise it goes against the admission of the witness Surinder Singh himself who has stated about involvement of the appellant in sale and purchase of foreign currencies and gold.
25. The learned counsel for the appellant then made a reference to the affidavit filed by Surinder Singh to retract from his statement. The affidavit was belatedly filed after 17 years of the recording of the statement which itself is sufficient to discard it because retraction from the statement is to be made within a reasonable period of time and not after 17 years. It is otherwise considered to be an afterthought. Thus, the Special Director has rightly relied on the statement of Surinder Singh, apart from others and those statements were corroborated by the documents recovered at the time of search to make out a case of contravention of Section 8(1) of the Act of 1973. So far as the statements of other witnesses, which include Puran Chand, Maqbool Ahmed, etc. are concerned, the appellant has shown his ignorance of such persons despite a fact that Maqbool Ahmed in his statement categorically admitted his business dealing with the appellant. Though referring to the statement, counsel for the appellant submitted that even as per the statement of Maqbool Ahmed, he had no business dealing with the appellant for the last 6 months from 08.01.1997 while the transaction was within the period of 6 months. The argument has been raised in ignorance of the statement of the witnesses, which include Puran Chand and Maqbool Ahmed showing their connection with the appellant. The statements were referred to show an endorsement about the involvement of the appellant in sale and purchase of foreign currencies as well as gold. The period of transaction has been indicated based on the documents recovered at the time of search. At this stage, counsel for the respondent referred to the statement of Shane E Alam who had corroborated the statement of other witnesses and the documents collected at the time of search. Those statements have also endorsed the allegations made against the appellant for contravention of Section 8(1) of the Act of 1973.
26. I may now refer to the statement of the appellant himself recorded under Section 40 of the Act of 1973. It is a fact that the appellant retracted from the statement without delay and thereby the question would be as to whether the retracted statement could have been relied by the respondent. The law on the issue is well settled that the retracted statement cannot be taken as a basis to make out a proof of allegation unless it is supported by corroborative evidence. In the instant case. enough corroborative evidence was available not only in the shape of documents, but the statements of the persons connected with the appellant. Thus, the impugned order has not been passed solely based on the retracted statement of the appellant. It is in the shape of the documents indicative of the transaction of the appellant in sale and purchase of foreign currencies, apart from gold. The findings are further supported by the statements of the witnesses. Thus, the prayer of the appellant to set aside the impugned order solely on the basis of his retracted statement, cannot be accepted.
27. The learned counsel for the appellant lastly submitted that a prayer was made to the Tribunal to call for the records from the respondent. It is, however, given out that the record has been misplaced and there was nothing available with the respondent. I find no force in the aforesaid argument. The impugned order has been passed after relying upon the material placed on record to prove the case against the appellant. The material aforesaid has been relied by the Adjudicating Authority i.e. Special Director, while passing the impugned order. Subsequent misplacement of the records would not wash out the case against the appellant and its proof submitted before the Special Director earlier. Thus, I do not find any substance in any of the arguments raised by the appellant.
28. The learned counsel for the appellant at that stage submitted that if the Tribunal comes to the conclusion that Section 8(1) of the Act of 1973 had been contravened, an interference in the penalty amount may be made. The prayer aforesaid was opposed by the counsel for the respondent. I have considered the aforesaid submission and find that the penalty is far excessive in reference to the facts taken into consideration by the Special Director. It is, however, a fact that an amount of Rs.2,60,000/- was recovered at the time of search and was accordingly seized. The documents recovered and seized at the time of search corroborate involvement of the appellant in sale and purchase of foreign currency and gold. However, the quantification of the contravention amount thereupon was not made and, in any case, the penalty of Rs.1 Crore cannot sustain in this case not only in reference to the facts showing involvement of the appellant but also the present health condition of the appellant who is suffering from Cancer. To make the penalty amount reasonable, I reduce the penalty amount to Rs.15 Lakhs. With the aforesaid, the appeal is disposed of.
