Appellate Tribunal SAFEMA Affirmed Penalties under FERA Despite Acquittal in the Prosecution Case: Held No Right to Cross-Examination in Quasi-Judicial Proceedings

Introduction

In a significant case, Prakash Chandra Yadav v. Special Director, Directorate of Enforcement, Delhi[i], the Appellate Tribunal SAFEMA, New Delhi (‘Tribunal’) decided an appeal which challenged an order passed by the adjudicating authority, imposing penalties on the appellants for alleged contraventions of s. 8(1) of the Foreign Exchange Regulation Act, 1973 (‘FERA’). The appellants disputed the imposition of the penalties on several grounds, which inter-alia included that there was no violation of FERA, their right to cross-examine witnesses was denied and that the ACMM Court acquitted them. The Tribunal examined these contentions to determine the validity of the appeal.

Brief Facts

• The appeals challenged the order dated 30.11.2004 (‘Impugned Order’) passed by the Adjudicating Authority, which imposed penalties on the appellants for contravening s. 8(1) of the FERA.

• The appellants had received certain amounts from a Non-Resident Indian, Akbar Veerji, from his non-resident external account (‘NRE account’), which imposed certain penalties upon the appellants.

• Aggrieved by the same, the appellants challenged the Impugned Order on the following grounds:

• The amounts received by the appellants were in Indian currency, not foreign exchange, and thus should not constitute a violation of FERA.

• The appellants were denied the right to cross-examine witnesses, particularly Akbar Veerji, which they claimed was a violation of natural justice.

• The amount received was a loan/gift in Indian currency, hence not attracting s. 8(1) of the FERA.

• The ACMM Court acquitted the appellants on 30.11.2017, which they claimed should have led to the setting aside of the Impugned Order.

Held

• The Tribunal dismissed the appeals filed by the appellant and upheld the penalties imposed by the Adjudicating Authority.

• The Tribunal observed that receiving money from an NRE account, which initially had foreign currency, constituted a contravention of s. 8(1) of the FERA, regardless of the final form of the currency.

• On the issue of the denial of cross-examination of Akbar Veerji, the Tribunal held that the same was justified due to his non-availability and the nature of the quasi-judicial proceedings. It further held that the respondents sufficiently proved the allegations with documentary evidence, rendering cross-examination unnecessary.

• The Tribunal also concluded that the evidence, including the appellant’s statements under s. 40 of the FERA supported the conclusion that foreign exchange was involved in the transactions.

• The Tribunal placed reliance on the decision of the Hon’ble Supreme Court in the case of Radheshyam Kejriwal v. State of West Bengal & Anr[ii]. and ruled that the acquittal by the ACMM Court did not bind the Tribunal, as adjudication proceedings and criminal prosecution are independent with different standards of proof.

Our Analysis

The ruling underscores the importance of documentary evidence in proving foreign exchange violations. It sets a precedent on the admissibility of documentary evidence over witness testimony in quasi-judicial proceedings, particularly when the witness is unavailable. It highlights the independent nature of adjudication and criminal proceedings, indicating that an acquittal in criminal court does not necessarily impact administrative penalties and vice-versa.

It is noteworthy that a single transaction or act may give rise to both civil and criminal proceedings. The principle of double jeopardy does not bar such multiple proceedings. It is well-established that civil (adjudication) and criminal proceedings are separate and may lead to different outcomes.

In terms of the facts and circumstances of a case arising from the same transaction, the standards of proof differ between the two types of proceedings. Criminal proceedings require a higher degree of certainty, with the standard of proof being ‘beyond a reasonable doubt.’ Conversely, civil proceedings operate on a lower standard of proof, namely ‘preponderance of the evidence’ or ‘balance of probabilities.’ In other words, an individual might be found not guilty in a criminal proceeding but still be held liable in a civil proceeding due to the differing burdens of proof. However, if a person is exonerated in civil proceedings, no criminal liability should generally be attributable to him.

End Notes

[i] [2024] 163 taxmann.com 128 (SAFEMA - New Delhi).

[ii] 2011 (3) SCC 581.

Authored by Prashant Singh, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.