Partly allowed

FPA-FE-35/DLI/1991 of Sh Avinash Chander Gulati v. The Assistant Director, Directorate of Enforcement, Delhi

ATFP3 Jun 2024FPA-FE-35/DLI/1991

Case brief

AI extract

What is this about?

The Appellate Tribunal examined appeals against penalty orders under FERA 1973. While accepting proof of recovered foreign currency and incriminating documents, the court found the allegation of beating unsubstantiated and considered the original Rs. 20 lakh and Rs. 40 thousand penalties disproportionately high for the appellants involved.

What did the court decide?

Penalty reduced to Rs. 1 lakh for Gulati brothers and Rs. 2000 for employees; pre-deposit adjusted; confiscation orders unaffected.

FPA-FE-35/DLI/1991 of Sh Avinash Chander Gulati Vs. The Assistant… — Cheque Dishonour | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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1. FPA-FE-34/DLI/1991 Sh Rakesh Kumar Arora … Appellant

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2. FPA-FE-35/DLI/1991 Sh Avinash Chander Gulati … Appellant

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3. FPA-FE-36/DLI/1991 Sh Rajpal … Appellant

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4. FPA-FE-37/DLI/1991 Sh Subhash Chander Gulati … Appellant Versus

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The Assistant Director, Directorate of Enforcement, Delhi … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellants : Mr. R.K. Handoo, Mr. Aditya Chaudhary, Mr. Medha Gaur, Advocates For the Respondent : Mr.Pankaj Pandey, Advocate

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CORAM JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI BALESH KUMAR : MEMBER

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FINAL ORDER 03.06.2024

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This Order disposes of Appeals No. FPA-FE-34-37/DLI/1991filed by Sarv/Shri Rakesh Kumar Arora, Avinash Chander Gulati, Rajpal and Subhash Chander Gulatirespectively, against the Order No. SDE(R)V/1415/90 dated 05.12.1990 passed by Special Director, Enforcement Directorate, New Delhi. Penalties were imposed on the four Appellants vide the Impugned Orderfor the contravention of Section 8 (1) of the Foreign Exchange Regulation Act 1973 (FERA) .Penalty of Rs. 20 Lakhs was imposed on each of the two Appellants Shri Subhash Chander Gulati and Shri Avinash Chander Gulati. Penalty of Rs. 40 Thousand was imposed on each of the two remaining Appellants Shri Rajpal and Shri Rakesh Kumar Arora. The erstwhile Foreign Exchange Regulation Appellate Board vide Order dated 20.12.1994 had disposed of the waiver application for pre-deposit of penalty by directing Shri

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FPA-FE-34-37/DLI/1991

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Subhash Chander Gulati and Shri Avinash Chander Gulati to deposit a sum of Rs. 1 lakh each by way of pre-deposit. Shri T.N. Kaul then counsel for the Appellant informed in writing on 26.04.1994 that compliance has been made to the Order dated 20.12.1994 passed by the FERA Board.

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Ld. Counsel for the Appellants has challenged the Impugned Order on the grounds of high handedness on the part of the Punjab Police and the Enforcement Directorate. He has alleged that on 02.05.1989 the Punjab Police officials thrashed the employees of M/s Golden Silk Store, Jalandhar, a shop owned by Gulatis for not closing the shop early. They foisted a false case by contriving recovery of US Dollars 2000 and Canadian Dollars 200. The case was handed over to the Enforcement Directorate. He alleged that Shri Avinash Chander Gulati and Shri Rajpal were beaten up. The medical examination conducted on the Orders of the Court revealed injuries. Even the panchnamafor the recovery made at the shop was not supplied to the Appellants in spite of demand for the same. The statements were retracted at the earliest. While the show cause notice alleges contravention of the provisions of FERAfor the period 1984-1989, the Appellant Shri Rakesh Kumar Arora stated in the statement before the Respondent that he worked in the shop only for one and a half years. No statement of the Appellant Shri Subhash Chander Gulati is on record and he was not even on the spot when the shop was searched. There was no opportunity given for the cross examination. Ld. Counsel also argued that the statement of Shri Ramesh Kumar Mittal under Section 40 of FERA could not have been used against the Appellants because he is not a noticee in the Show Cause Notice (SCN) issued to the four Appellants.He further submitted written arguments on 26.04.2024 and pleaded for allowing the Appeals.

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Ld. Counsel for the Respondent argued that besides the foreign currency in the form of international money orders and traveller cheques recovered from the Appellant Shri Rakesh Kumar Arora, Indian currency of Rs.

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FPA-FE-34-37/DLI/1991

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57,590/- was seized from the shop. The foreign exchange instruments bore markings on the back. Certain documents which were also recovered from the Appellants Shri Rajpal and Shri Avinash Chander Gulatiwhich depicted foreign exchange transactions in code words. The three Appellants S/Shri Avinash Chander Gulati, Rajpal, Rakesh Kumar Arora were summoned under Section 40 of FERA and their statements were recorded. Shri Avinash Chander Gulati admitted recovery of documents and foreign currencies and their dealings in foreign exchange to the tune of Rs. 4 crores for last five to six years. Shri Rajpal admitted maintaining accounts of foreign exchange transactions and explained the code words.Shri Rakesh Kumar Arora admitted the transactions of foreign exchange indulged-in from the shop as well as, that Shri Rajpal maintained the accounts and he would hand over the foreign currency purchased during the day to the owners of the shop. Shri Ramesh Kumar Mittal admitted having gone to the shop and that he dealt in foreign exchange on instructions of his employer Shri Ramesh Kumar Gupta.

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Ld. Counsel for the Respondent clarified that SCN I was issued to S/Shri Ramesh Kumar Gupta and Ramesh Kumar Mittal and SCN II was issued to the four Appellants here-in. The Annexure to both the SCNs lists seized Indian currency, seized foreign exchange, seized documents and statements of three Appellants (excluding Shri Subhash Chander Gulati) and statement of Shri Ramesh Kumar Mittal. The Ld. Adjudicating Authority passed a common Order disposing of the two SCNs.

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Ld. Counsel for the Respondent argued that the relied upon documents were supplied to the Appellants as is mentioned in paragraph 15 of the Impugned Order. He also stated that atthe time of the hearing before the Ld. Adjudicating Authority only the advocate of Shri Ramesh Kumar Gupta asked for cross examination of Shri Ishwar Singh, an officer of the Respondent Directorate and of the panch witnesses, which was permitted. Shri S.L. Chopra, the advocate of the Appellants did not ask for cross examination. Shri

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FPA-FE-34-37/DLI/1991

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Chopra had argued that the seized Indian currency Rs. 57,590/- was properly accounted for but he failed to submit books of accounts in original because the shop M/s Golden Silk Stores had burnt to ashes. Shri Chopra alsoargued that the statements of the Appellants wererecorded under duress and were retracted.

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Ld. Counsel for the Respondent stated that though the court of the Judicial Magistrate Jalandharordered medical examination of Shri Avinash Chander Gulati on 03.05.1989, his bail was granted on 06.05.1989 on the grounds that the prosecution complaint is likely to take some time and recovery had already been effected, without any mention of the medical examination. Ld. Counsel for the respondent also argued thatthe medical records of Shri Rajpal are contradictory since the report from Pasricha Hospital and Maternity Home Jalandhar dated 22.07.1989 shows his admission in Hospital from 12.05.1989 to 20.05.1989 while the report of Navjeevan Hospital, Jalandhar showed admission from 30.06.1989 to 19.07.1989. He submitted written arguments on 08.05.2024. Ld. Counsel therefore pleaded to dismiss the Appeals.

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We have considered the rival submissions and the material on record. Ld. Adjudicating Authority has disposed of thetwo SCNs through the Impugned Order dated 05.12.1990. He has not found the SCNs to be vague. He has made the following finding in paragraph 16 of the Impugned Order:

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“ The entire case records clearly reveal that Shri Rakesh Kumar and Rajpal, employees of S/Shri Avinash Chander Gulati and Subhash Chander Gulati, partners of M/s. Goldan Silk Store, were present when the search of M/s Golden Silk Storetook place. It is also on record that the personal search of Shri Rakesh Kumar Arora resulted in the recovery of US $ 2,000/and Can.$ 200/-. The search of Shri Rajpal resulted in the recovery of certain documents. Both these persons had clearly revealed as to how they had been helping S/Shri Subhash Chander Gulati and Avinash Chander Gulati in the purchase and sale of foreign exchange. Shri Rajpal used to maintain the accountsand Shri Rakesh Kumar Arora used to received and handover the foreign currencies to the owner of M/s Golden Silk

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FPA-FE-34-37/DLI/1991

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Store. All these facts disclosed by S/Shri Rajpal and Rakesh Kumar Arora were corroborated by Shri Avinash Chander in statement dated 02.05.1989.”

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It is on record that the statements tendered by S/Shri Avinash Kumar Gulati, Rajpal and Rakesh Kumar Arora were denied by the Appellants at the earliest. However, there is no judicial finding on record as to the allegation that the Appellants were beaten up. The statement of Shri Avinash Chander Gulati tendered on 02.05.1989 reveals details that could only have been in his personal knowledge as having studied upto class 12, names of his six servants and explanation to the codes used for foreign exchange transactions. He also identified handwriting of Rajpal on the documents relating to transactions of foreign exchange.

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Shri Rajpal in his statement stated that he used to write all the transactions pertaining to foreign exchange dealings on a paper which would be given to the owners in the evening.He explained the codes used for foreign transactions which matched the explanation given by Shri Avinash Chander Gulati. He also stated that on that day after purchase and sale of foreign exchange, a balance of Rs. 60430/- remained. The statement of Shri Rakesh Kumar Arora revealed that Shri Ramesh Kumar Mittal hailing from Hoshiarpur had come to the shop and given 2000 US $ and 200 Canadian $. Shri Ramesh Kumar Mittal admitted having carried the US $ and the Canadian $ to the shop. He also after bail,corroborated on 30.06.1989 his statement tendered on 02.05.1989 as true. His employer Shri Ramesh Kumar Gupta has signed on the statement dated 30.06.1989 of Shri Mittal as being present when the statement was made. These statements are therefore in corroboration and explanatory of the contextual situation and of recoveries made. Recovery memodated 02.05.1989 is also on record. There is no statement on record of Shri Subhash Chander Gulati.

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FPA-FE-34-37/DLI/1991

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Ld. Counsel for the Appellants has cited the judgement Union of India Vs Abdul Mohamed dated 11.03.1999 of the Hon’ble Supreme Court [(2000)10 Supreme Court Cases 169]. The Judgement (Supra) passed in the context of FERA 1947 has stated that the expression ‘acquire’ must have a definite connotation and it must indicate something more than mere possession. Unless there is positive material to show how accused could be said to have acquired foreign exchange in contravention of Section 4 (1) (of FERA 1947), it cannot be established that accused had ‘otherwise acquired’ the confiscated foreign exchange in violation of Section 4 (1). In the present case the seized foreign currency has been explained as having been acquired from Shri Ramesh Kumar Mittal who had visited the shop owned by Gulatis to sell the said currency. Shri Mittal in his statement corroborated this and accepted as having bought from one Surinder Kumar. Ld. Counsel for the Appellants further cited the Judgement in A. Tajudeen Vs Union of India passed by the Hon’ble Supreme Court on 10.10.2014 [(2015) 4 SCC 435]. It is held that the retracted statement cannot constitute the exclusive basis to determine the culpability. In K.T. M. S. Mohamed Vs. Union of India [(1992) 3 SCC 178],the Apex Court held that merely because a statement is retracted, it cannot be regarded as involuntary or unlawfully obtained.

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While allegations of coercion have been made in the present case, as recorded in the preceding paragraph,there is no judicial finding on record as to the Appellants having been beaten by those who recorded the statements. Moreover, the statements have details which could have been only known to those who tendered the statements. These statements corroborate and explain the recoveries made as well as the context in which the said recoveries were made.

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Ld. Counsel for the Appellants has also relied upon the Judgement dated 31.07.2018 of the Hon’ble Supreme Court in the case of Surinder Kumar Khanna Vs Intelligence Officer, Directorate of Revenue Intelligence. It is held

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FPA-FE-34-37/DLI/1991

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that in the absence of any substantive evidence, it would be inappropriate to base the conviction purely of the statements of co-accused. The said Judgement was passed in a case of NDPS wherein the Appellant was alleged to be involved in a drug racket without any recovery from him. In the present case under FERA 1973, there is evidence on record of recovery of foreign exchange and of incriminating documents. The statements of the coaccused are explanatory in nature with respect to the recoveries made.

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The recovery of US $ 2000 and Canadian $ 200 as well as the explanation of their source are thus on record and explained. The seized Indian currency of Rs. 57,590/- could not be explained by the Appellants, except that Shri Rajpal has stated that balance of Rs. 60,430/- remained in the shop that day after purchase and sale of foreign exchange. The documents recovered show that foreign exchange transactions were being indulged-in by the Appellants. However, except for the statement made by Shri Avinash Chander Gulati there is nothing on record to corroborate that they had done business of sale and purchase of foreign exchange worth Rs. 4 crores. In fact, in that very statement he has stated that he had been doing such business at small scale occasionally and it was only in last one year that he had indulged heavily in this business. Hence, we cannot rely on this part of the statement of Shri Avinash Chander Gulati, as it remains uncorroborated. Without any such corroboration the business of dealing in foreign exchange worth Rs. 4 crore cannot be regarded as accurate and correct.

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In view of the aforementioned discussions, we find that the penalties imposed on the four Appellants are disproportionately higher. We therefore reduce the penalty amount on S/Shri Subhash Chander Gulati and Avinash Chander Gulati to Rs. 1 lakh each which is the amount of pre-deposit of penalty that they have already made. The pre-deposit already made is to be adjusted against the reduced penalty amounts.Since, S/Shri Rajpal and

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FPA-FE-34-37/DLI/1991

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Rakesh Kumar Arora were employees in M/s Golden Silk Store, which has since burnt andthey were working under instructions of the two Appellants S/Shri Subhash Chander Gulati and Avinash Chander Gulatifor low salaries we reduce their penalty to Rs. 2000 each.We do not interfere with the Order relating to the confiscation of the foreign currency and the Indian currency.

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