Sanchayita Lahkar

The High Court of Delhi, Division Bench of Justice Subramonium Prasad and Justice Vimal Kumar Yadav held that Indian currency can be seized by the Enforcement Directorate under the erstwhile Foreign Exchange Regulation Act, 1973, if it is intended to be used for the illegal purchase of foreign exchange. Dismissing an appeal against the confiscation of Rs. 12.31 lakh, the Court upheld the Enforcement Directorate’s findings that the appellant was involved in unlawful transactions of foreign exchange and gold. The Bench ruled that the confiscation order was legally sustainable and that no question of law arose under Section 35 of the Foreign Exchange Management Act warranting interference with the adjudicating authorities’ conclusions.

The case arose from a search conducted by the Enforcement Directorate (ED) on 16 February 1997 at the business premises of Arjun Patil in Karol Bagh, New Delhi. Acting on specific information about illegal foreign exchange activities, officials recovered Indian currency worth Rs. 12,31,000, USD 6371, four gold biscuits, and related documents. Two Nepalese nationals, Dukal Bhattarai and Ram Nath Dhukal, were found on the premises and were also searched, resulting in the recovery of USD 9700 and USD 9250 respectively. Another individual, Pramod Kumar, was found in possession of a one-kilogram gold bar bearing foreign markings.

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Statements under Section 40 of the Foreign Exchange Regulation Act, 1973 (FERA) were recorded from all involved individuals, including the appellant, who allegedly admitted to purchasing gold from Nepal in exchange for foreign currency and engaging in unauthorized dealings. The Adjudicating Officer found the appellant guilty under Sections 8(1), 8(2), and 64(2) of FERA, imposed a penalty of Rs. 40,000, and ordered confiscation of the seized Indian and foreign currencies. The Appellate Tribunal affirmed the findings, holding that the appellant had failed to explain the source of the seized cash and that his actions amounted to an attempt to contravene FERA. Arjun Patil challenged these findings, asserting that his statements were extracted under coercion, the confiscation lacked legal basis, and his acts did not constitute an attempt within the meaning of the law.

The Division Bench observed that the Court’s jurisdiction under Section 35 of the Foreign Exchange Management Act, 1999, is restricted to questions of law and does not extend to reappreciation of evidence. The Bench“noted that the findings recorded by the Adjudicating Authority and affirmed by the Appellate Tribunal are based on evidence and do not disclose any question of law.”

Discussing the appellant’s contention regarding coercion in obtaining statements, the Court stated that “merely because a statement is retracted, it cannot automatically be considered involuntary.” It further recorded “that the appellant has not been able to demonstrate that his statement or that of his co-accused was obtained under duress or coercion.”

Turning to the evidence, the Bench observed that “after receipt of specific information by the Respondent Agency, the premises of the Appellant were raided and Rs. 12,31,000/-, along with USD 6,371/-, four gold biscuits, two pieces of gold and certain documents were recovered from the Appellant.” It recorded that “similar recoveries were made from two Nepalese nationals and another individual who had entered the Appellant’s business premises.” The Court noted that “the seizure of illegal foreign exchange was not disputed by the Appellant in any manner whatsoever.”

Referring to the evidentiary burden, the Bench stated that” in this context, Section 106 of the Indian Evidence Act comes into play. Once the Respondent Agency has established the factum of recovery of illegal foreign exchange from the Appellant’s premises, the onus shifts to the Appellant to demonstrate that the Indian currency recovered was not intended for illegal purchase of foreign exchange.”

The Bench held that “Section 63 of the Foreign Exchange Regulation Act empowers the Adjudicating Authority to confiscate any currency, security, or property in respect of which the contravention has taken place” and “found no perversity or illegality in the orders passed by the Adjudicating Authority and the Appellate Tribunal.”

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The Bench Ordered: “After perusing the material on record, orders of the Adjudicating Authority and the Appellate Tribunal as well as having considered the arguments advanced by the parties, this Court is of the view that the Appellant has not been able to offer any satisfactory explanation to explain the source of Indian currency.”

“In the absence of any such explanation, and in view of the recoveries made from the business premises of the Appellant and the evidence on record, this Court is of the view that the inference of the Adjudicating Authority, that the Indian currency was intended for contravention, stands confirmed.”

“Resultantly, the present Appeal is dismissed and pending applications (if any) stand disposed of.”

Advocates Representing the Parties:
For the Appellant: Mr. Jaspreet Singh Kapur, Mr. Wasim Ansari, and Ms. Shweta, Advocates.
For the Respondents: Ms. Bharathi Raju (SPC) with Ms. Divyangi, Advocates for the Union of India; Mr. Vivek Gurnani, Panel Counsel, with Mr. Kanishk Maurya, Advocate for the Enforcement Directorate.

Case Title: Arjun Patil v. Union of India & Others
Neutral Citation: 2025: DHC:9267-DB
Case Number: CRL.A. 407/2007
Bench: Justice Subramonium Prasad and Justice Vimal Kumar Yadav