By TIOL News Service

NEW DELHI, OCT 14, 2014: TWENTY five years ago, the officers of the Enforcement Directorate recovered an amount of Rs. 8,24,900/-; must be quite a huge amount of money at that time. The Supreme Court on 10th October 2014 ordered release of the amount.

Through memorandum dated 12.3.1990 it was alleged, that the appellant herein - A. Tajudeen , without any general or special exemption from the Reserve Bank of India, had received an amount of Rs.8,24,900 /- in two installments, at the behest of Abdul Hameed , a person resident in Singapore. The first installment was allegedly received on 23.10.1989 which comprised of Rs.4,00,000 /-. The remaining amount was allegedly received in the second installment on 25.10.1989. As per the memorandum the aforesaid amounts had been received from a local person, who was not an authorised dealer in foreign exchange. Based on this factual position, the allegation against the appellant was, that he had violated Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973.

Having examined the response of the appellant, the Additional Director of Enforcement, Southern Zone, Madras, by an order dated 22.4.1991, arrived at the conclusion, that the appellant was guilty of violating Section 9(1)(b) of the 1973 Act. Having so concluded, the seized amount of Rs.8,24,900 /- was ordered to be confiscated. In addition, the appellant was imposed a penalty of Rs.1,00,000 /- for contravening the provisions of Section 9(1)(b) of the 1973 Act.

Dissatisfied with the order dated 22.4.1991 passed by the Additional Director of Enforcement, the appellant preferred an appeal before the Foreign Exchange Regulation Appellate Board. The appeal was allowed by an order dated 31.12.1993. While allowing the appeal, the Appellate Board directed the refund of penalty of Rs.1,00,000 /- imposed on the appellant. The Appellate board also quashed the direction pertaining to the confiscation of Rs.8,24,900 /- seized from the residence of the appellant.

Aggrieved by the order passed by the Appellate Board, the Union of India through the Director of Enforcement preferred an appeal under Section 54 of the 1973 Act, before the High Court. The High Court allowed the appeal by an order dated 28.9.2006. While allowing the appeal, the High Court placed reliance on the statement made by the appellant, before the officers of the Enforcement Directorate on 20.4.1989. The aforesaid statement was referred to, as having been voluntarily made by the appellant. The High Court expressed the view, that the statements recorded by the appellant on 25.10.1989 and 26.10.1989 were voluntarily made by him, and as such, the retraction of the said statements, was not accepted. Likewise, the High Court accepted the statement of T. Sahira Banu made at the office of the Enforcement Directorate at Madras on 26.10.1989, as voluntary. Her retraction of the said statement was also not accepted by the High Court. The High Court placed reliance on the fact, that the appellant had been produced before the Additional Chief Metropolitan Magistrate, Madras, during the course of his detention, but he had not indicated to the Magistrate during his production, that he and his wife were compelled to make the above statements, by the officers of the Enforcement Directorate. This was the primary reason for the High Court, in rejecting the retractions made by the appellant and his wife.

The matter is in appeal before the Supreme Court.

During the course of hearing, the first contention advanced at the hands of the counsel for the appellant was, that it was not open to the Enforcement Directorate to rely on the alleged statement dated 20.4.1989, which the appellant is stated to have made before the officers of the Enforcement Directorate. Insofar as the instant aspect of the matter is concerned, it was the vehement contention of the counsel for the appellant, that no reference was made to the above statement dated 20.4.1989 in the memorandum dated 12.3.1990. It was further submitted, that a copy of the aforesaid statement dated 20.4.1989 was never furnished to the appellant. In fact it was the vehement contention of the counsel for the appellant, that no such statement was ever made by the appellant - A. Tajudeen , to the officers of the Enforcement Directorate.

The Supreme Court observed,

"There is no doubt whatsoever, that no reliance has been placed on the alleged statement made by the appellant on 20.4.1989 before the officers of the Enforcement Directorate, in the memorandum dated 12.3.1990. Per se, therefore, it was not open to the authorities to place reliance on the aforesaid statement, while proceeding to take penal action against the appellant, in furtherance of the aforesaid memorandum dated 12.3.1990. Additionally, it is apparent from the reply furnished by the appellant to the memorandum dated 12.3.1990, that the appellant clearly and expressly refuted having executed any statement on 20.4.1989. It was, therefore, imperative for the Enforcement Directorate, to establish through cogent evidence, that the appellant had indeed made such a statement on 20.4.1989. It also cannot be overlooked, that no action was initiated against the appellant on the basis of the aforesaid statement dated 20.4.1989. A perusal of the aforesaid statement, in the terms as are apparent from the pleadings of the case, leaves no room for any doubt, that if the appellant had made any such statement, he would have been proceeded against under Section 9(1)(b) of the 1973 Act. The mere fact that he was not proceeded against, prima facie establishes, in the absence of any evidence to the contrary, that the assertion made by the appellant to the effect that he never made such statement, had remained unrefuted .

The reason depicted in the paragraph 16 of the impugned judgment passed by the High Court. Even though the aforesaid excuse may have been valid, if the allegation was, that the record of the statement made on 20.4.1989, was not available with the officers of Enforcement Department at the time of the raid on 25.10.1989, yet to state that the aforesaid record was not available when the second statement was made on 26.10.1989 at the office of the Enforcement Directorate, is quite ununderstandable. It is pertinent to mention, that the second statement was recorded by the Chief Enforcement Officer when the appellant - A. Tajudeen was in custody of the Enforcement Directorate. At that juncture if the record, as alleged, was not available with the authorities, it must lead to the inevitable inference, that the record was not available at all.

For the reasons recorded hereinabove, we are satisfied in holding, firstly, that the statement dated 20.4.1989 could not be relied upon by the Enforcement Directorate to establish the allegations levelled against the appellant through the memorandum dated 12.3.1990. And secondly, in the absence of having established through cogent evidence, that the appellant had made the above statement dated 20.4.1989, it was not open to the Enforcement Directorate to place reliance on the same, for establishing the charges levelled against the appellant in memorandum dated 12.3.1990."

The Supreme Court asked for a copy of the Statement, which was never produced. So the Supreme Court assumed that the alleged statement made by the appellant on 20.4.1989, might well be a fictitious creation of the Enforcement Directorate.

The Supreme Court observed,

"The statements dated 25.10.1989 and 26.10.1989 can under no circumstances constitute the sole basis for recording the finding of guilt against the appellant. If findings could be returned by exclusively relying on such oral statements , such statements could easily be thrust upon the persons who were being proceeded against on account of their actions in conflict with the provisions of the 1973 Act. Such statements ought not to be readily believable, unless there is independent corroboration of certain material aspects of the said statements, through independent sources. The nature of the corroboration required, would depend on the facts of each case.

The nature of the corroboration required, would depend on the facts of each case. In the present case, it is apparent that the appellant - A. Tajudeen and his wife T. Sahira Banu at the first opportunity resiled from the statements which are now sought to be relied upon by the Enforcement Directorate, to substantiate the charges levelled against the appellant."

Order: The impugned judgment passed by the High Court deserves to be set aside. The same is accordingly hereby set aside. Resultantly, the entire action taken by the Enforcement Directorate against the appellant in furtherance of the memorandum dated 12.3.1990, is also set aside. As a consequence of the above, the Enforcement Directorate is directed to forthwith refund the confiscated sum of Rs.8,24,900 /-, to the appellant, as also, to return the amount of Rs.1,00,000 /-, which was deposited by the appellant as penalty.

(See 2014-TIOL-85-SC-FEMA)