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Chandanmal C. JaIn Vs. Special Director, Enforcement Directorate - Court Judgment

LegalCrystal Citation
CourtAppellate Tribunal for foreign Exchange New Delhi
Decided On
Case NumberAPPEAL NOS. 50 TO 54 OF 1999
AppellantChandanmal C. Jain
RespondentSpecial Director, Enforcement Directorate
Advocates:V.S. Thiageswaran for the Appellant. A.C. Singh for the Respondent.
foreign exchange regulation act, 1973 - section 9 - comparative citation: 2009 (96) scl 477 (atffe - new delhi).....shri v.s. thiageswaran then contended that impugned order based on involuntary, uncorroborated and retracted confessional statement of ashok and chandanmal is liable to be set aside and quashed. as regards the appeal nos. 52 to 54/99 ld. advocate vigorously contended that failure to prove any nexus of iqbal of dubai with these appellants is writ large. it is contended that the impugned order is based on inadmissible statement of ashok, devender and navin. 5. per contra shri a.c. singh, dla, contended that based on revelations made by devender, established the role of bhawarlal and searches were conducted at laters business premises of m/s. b.p. jewellers and thereafter at residential premises of ashok. it is contended that confirming the statement of devender, ashok admitted the.....

R.N. Poddar, Member. - These appeals are directed against common adjudication order SDE/PKA/ADJ/181-184/B/98, dated 14-12-1998 passed by Special Director, Directorate of Enforcement emanated front 4 SCNs all dated 8-11-1996 imposing total penalty of Rs. 20 lakhs [Rs. 12 lakhs for contravention of section 9(1)(b) and Rs. 8 lakhs for contravention of section 9(1)(d) of FER Act, 1973] on each of the appellants in appeal Nos. 50 and 51 of 1999 i.e., Chandanmal C. Jain (Chandanmal) and Babulal Jain (Babulal) respectively besides separate total penalty of Rs. 90 lakhs [Rs. 45 lakhs for contravention of section 9(1)(b), Rs. 30 lakhs for contravention of section 9(1)(d) and Rs. 15 lakhs for contravention of section 9(1)(f)(i) of FER Act, 1973] on each of the appellant i.e., appellant Nos. 52, 53 and 54 of 1999 Bhavarlal Jain (Bhavarlal) and Pravin Jain (Pravin) and Ashok K. Jugraj Jain (Ashok) respectively. The impugned adjudication order is emanated from 4 SCNs T-4/77/B/96 (SCN I), T-4/78/B/96(SCN II), T-4/79/B/96 (SCN III) and T-4/80/B/96 (SCN IV) all dated 8-11-1996. However, the charges levelled against the noticees under the SCNs I and II were dropped.

3. Shri V.S. Thiageswaran, ld. advocate appearing for the appellants filed written submissions in appeal Nos. 50 and 51/1999 and appeal Nos. 52 to 54/1999 respectively which are taken on record. At the very outset Ld. advocate contended that the adjudication proceedings based on belated SCNs, after expiry period of six months from the date of seizure without extension of time by the authority concerned is illegal. Secondly, it is contended that the SCN Nos. III and IV dated 8-11-1996 are vague, and contain improbable allegations based on involuntary and uncorroborated statements of Ashok K. Jugraj Jain (Ashok) and Chandanmal C. Jain (Chandanmal) i.e., the appellants in appeal Nos. 54/1999 and 50/1999 respectively. Thirdly, referring to the order dated 14-11-1995 passed by Ld. CMM, Mumbai in R.A. 308 of 1995 the Ld. advocate contended that impugned adjudication order based on involuntary statements is illegal. It is submitted that the said order of Ld. CMM in R.A. 308/95 is evident to show that the statements of the noticees were extracted under duress and physical torture. Fourthly, it is contended that such involuntary statements are inadmissible in evidence. Fifthly, it is contended that, though Ld. adjudicating officer relied on the said observations of Ld. CMM Mumbai in R.A. No. 308 of 1995 while dropping the adjudication proceedings against noticees in SCNs I and II but the appellants were treated by different yardstick and held guilty. In particular the retraction of Ashok on identical facts and circumstances was not accepted in impugned adjudication order without assigning any reason. Sixthly, it is contended that the impugned order failed to establish any nexus between Iqbal of Dubai and the appellants. Seventhly it is argued by Ld. advocate that it is highly improbable that receipts and making of huge payments could be physically executed by 3 persons simultaneously and thus the impugned order is based on mere suspicion and not on any evidence. It is submitted that there is no allegation either in SCN or impugned adjudication order regarding alleged payment/acquisition of US $ 2 lakhs to or by any person in Dubai. Relying on the decision of Honble Supreme Court in the case of Shanti Prasad Jain v. Director of Enforcement, FERA AIR 1962 SC 1764. Ld. counsel further submitted that respondent has failed to prove the charge levelled in the SCNs beyond reasonable doubt.

4. As regards the appeal Nos. 50 and 51/99 Shri V.S. Thiageswaran, Ld. advocate contended that para I of SCN IV implicates only Chandanmal while Babulals name was added in the second page. According to Ld. counsel the SCN and impugned adjudication order failed to establish the nexus either of Iqbal or Amjad of Dubai with any of these appellants. Shri V.S. Thiageswaran then contended that impugned order based on involuntary, uncorroborated and retracted confessional statement of Ashok and Chandanmal is liable to be set aside and quashed. As regards the appeal Nos. 52 to 54/99 Ld. advocate vigorously contended that failure to prove any nexus of Iqbal of Dubai with these appellants is writ large. It is contended that the impugned order is based on inadmissible statement of Ashok, Devender and Navin.

5. Per contra Shri A.C. Singh, DLA, contended that based on revelations made by Devender, established the role of Bhawarlal and searches were conducted at laters business premises of M/s. B.P. Jewellers and thereafter at residential premises of Ashok. It is contended that confirming the statement of Devender, Ashok admitted the connection of his uncles Bhavarlal (alias Juthibhai) with Iqbal of Dubai for indulging hawala transactions. Further it is contended that while explaining the documents seized the aforesaid Ashok also admitted the payment of Rs. 27.5 lakhs to various persons on 7-11-1995 and 8-11-1995 on instructions of Iqbal alias Kaka of Dubai. Shri A.C. Singh, DLA then contended that in his statement Ashok also admitted that for the purpose of transferring US $ 2 lakhs in Bhavarlals account by the said Iqbal of Dubai they had collected Rs. 75,10,000 from Navins N.C. Angadia on 8-11-1995. According to Shri A.C. Singh, DLA the statement of Ashok clearly established contravention of section 9(1)(a), 9(1)(b), 9(1)(d) and 9(1)(f)(i) of FER Act, 1973.

6. As regards appeal Nos. 50 and 51/99 Shri A.C. Singh, Ld. DLA further contended that Chandanmal categorically admitted that he along with Babulal were engaged in receiving and making Hawala payments under instructions of Amjad and Iqbal of Kuwait and earned about Rs. 75,000 as profit which was equally shared by them. According to Shri A.C. Singh Chandanmals statement clearly established the contravention of section 9(1)(b) and 9(1)(d) whereafter subsequent retraction without any material proving contrary is afterthought and cannot be accepted.

7. In these appeals there is a peculiarity in acceptance of admissional statements against the appellants under similar circumstances but rejecting same type of admissional statements against certain other persons to whom SCN No. T-4/77-B/96 and No. T-4/78-B/96 both dated 8-11-1996 were issued. The reasons for acceptance of these admissional statements are described as having been corroborated by the writings of recovered documents. But nothing is found elaborated despite lengthy argument from ld. DLA. The corroboration as such has to be objective and not subjective but no records are made available to this Tribunal. In this situation asking for pre-deposit of penalty by appellants will cause undue hardship. Hence we pass an order granting dispensation of pre-deposit of penalty to these appellants and proceed to dispose off these appeals on merits especially when lengthy arguments are heard from both sides.

8. The acceptability and credibility of retracted admissional statement is thoroughly discussed by Honble Supreme Court after referring to various judgments on this subject in State (NCT) Delhi v. Navjot Sandhu 2005 (122) DLT 194 as follows :

“27. We start with the confessions. Under the general law of the land as reflected in the Evidence Act, no confession made to a police officer can be proved against an accused. ‘Confessions which is a terminology used in criminal law is a species of ‘admissions as defined in section 17 of the Evidence Act. An admission is a statement, oral or documentary which enables the court to draw an inference as to any fact in issue or irrelevant fact. It is trite to say that every confession must necessarily be an admission, but, every admission does not necessarily amount to a confession. While sections 17 to 23 deal with admissions, the law as to confessions is embodied in sections 24 to 30 of the Evidence Act. Section 25 bars proof of a confession made to a police officer. Section 26 goes a step further and prohibits proof of confession made by any person while he is in the custody of a police officer, unless it be made in the immediate presence of a Magistrate. Section 24 lays down the obvious rule that a confession made under any, inducement, threat or promise becomes irrelevant in a criminal proceedings. Such inducement, threat or promise need not be proved to the hilt. If it appears to the court that the making of the confession was caused by any inducement, threat or promise proceeding from a person in authority, the confession is liable to be excluded from evidence. The expression ‘Appears connotes that the court need not go to the extent of holding that the threat, etc., has in fact been proved. If the facts and circumstances emerging from the evidence adduced make it reasonably probable that the confession could be the result of threat, inducement or pressure, the court will refrain from acting on such confession, even if it be a confession made to a Magistrate or a person other than a police officer. Confessions leading to discovery of a fact which is dealt with under section 27 is an exception to the rule of exclusion of confession made by an accused in the custody of a police officer. Consideration of a proved confession affecting the person making it as well as the co-accused is provided for by section 30. Briefly and broadly, this is the scheme of the law of evidence vis-a-vis confessions. The allied provision which needs to be noticed at this juncture is section 162 Cr. PC. It prohibits the use of any statement made by any person to a police officer in the course of investigation for any purpose at any enquiry or trial in respect of any offence under investigation. However, it can be used to a limited extent to contradict a witness as provided for by section 145 of the Evidence Act. Sub-section (2) of section 162 makes it explicit that the embargo laid down in the section shall not be deemed to apply to any statement falling within clause (1) of section 32 or to affect the provisions of section 27 of the Evidence Act. 28. In the Privy Council decision of Pakala Narayana Swami v. Emperor Lord Atkin (AIR 1939 PC 47:40 Cri. LJ 364) elucidated the meaning and purport of the expression ‘confession in the following words : (AIR p. 52).

‘(A) confession must either admit in terms the offence, or at any rate substantially all the facts which constitute the offence. An admission of a gravely incriminating fact, even a conclusively incriminating fact is not of itself a confession.

29. Confessions are considered highly reliable because no rational person would make admission against his interest unless prompted by his conscience to tell the truth. ‘Deliberate and voluntary confessions of guilt, if clearly proved are among the most effectual proofs in law. (Vide Taylors Treatise on the Law of Evidence, VI. I). However, before acting upon a confession the court must be satisfied that it was freely and voluntarily made. A confession by hope or promise of advantage, reward or immunity or by force or by fear induced by violence or threats of violence cannot constitute evidence against the maker of the confession. The confession should have been made with full knowledge of the nature and consequences of the confession. If any reasonable doubt is entertained by the court that these ingredients are not satisfied, the court should eschew the confession from consideration. So also the authority recording the confession, be it a Magistrate or some other statutory functionary at the pre-trial stage, must address himself to the issue whether the accused has come forward to make the confession in an atmosphere free from fear, duress or hope of some advantage or reward induced by the persons in authority. Recognizing the stark reality of the accused being enveloped in a state of fear and panic, anxiety and despair while in police custody, the Evidence Act has excluded the admissibility of a confession made to the police officer.

30. Section 164 Cr. PC is at salutary provision which lays down certain precautionary rules to be followed by the Magistrate recording a confession so as to ensure the voluntariness of the confession and the accused being placed in a situation free from threat or influence of the police.

31. Before we turn our attention to the more specific aspects of confessions under POTA, we should have a conspectus of the law on the evidentiary value of confessions which are retracted, which is a general feature in our country and elsewhere.

32. As to what should be the legal approach of the court called upon to convict a person primarily in the light of the confession or a retracted confession has been succinctly summarized in Bhart v. State of U.P. [1971] 3 SCC 950 : 1972 SCC (Cri.) 198 Hidayatullah, C.J., speaking for a three Judge Bench observed thus : (SCC p. 953 para 7).

‘Confessions can be acted upon if the court is satisfied that they are voluntary and that they are true. The voluntary nature of the confession depends upon whether there was any threat, inducement or promise and its truth is judged in the context of the entire prosecution case. The confession must fit into the proved facts and not run counter to them. When the voluntary character of the confession and its truth are accepted, it is safe to rely on it. Indeed a confession, if it is voluntary and true and not made under any inducement or threat or promise, is the most patent piece of evidence against the maker. Retracted confession, however, stands on a slightly different footing. As the Privy Council once stated, in India it is the rule to find a confession and to find it retracted later. A court may take into account the retracted confession, but it must look for the reasons for the making of the confession as well for its retraction, and must weigh the two to determine whether the retraction affects the voluntary nature of the confession or not. If the court is satisfied that it was retracted because of an afterthought or advice, the retraction may not weigh with the court if the general facts proved in the case and the tenor of the confession as made and the circumstances of its making and withdrawal warrant its user. All the same, the courts do not act upon the retracted confession without finding assurance from some other sources as to the guilt of the accused. Therefore, it can be stated that a true confession made voluntarily may be acted upon with slight evidence to corroborate it, but a retracted confession requires the general assurance that the retraction was an afterthought and that the earlier statement was true. This was laid down by this Court in an earlier case reported in Subramani Goundan v. State of Madras [1958 SCR 428 : 1958 Cri. LJ 238]

33. The same learned Judge observed in Haroon Haji Abdulla v. State of Maharashtra [1968] 2 SCR 641 : [1968] Cri. LJ 1017, that a ‘retracted confession must be looked upon with greater concern unless the reasons given for having made it in the first instance are on the face of them false. There was a further observation in the same paragraph that retracted confession is a weak link against the maker and more so against a co-accused. With great respect to the eminent Judge, the comment that the retracted confession is ‘a weak link against the maker goes counter to a series of decisions. The observation must be viewed in the context of the fact that the court was concentrating on the confession of the co-accused rather than the evidentiary value of the retracted confession against the maker.

34. Dealing with retracted confession, a four Judge Bench of this Court speaking through Subba Rao, J., in Pyare Lal Bhargava v. State of Rajasthan [[1963] Supp. (1) SCR 689 : AIR [1963] SC [1994] : [1963] 2 Cri. LJ 178] clarified the legal position thus : (SCR pp. 695-96)

‘A retracted confession may form the legal basis of a conviction if the court is satisfied that it was true and was voluntarily made. But it has been held that a court shall not base a conviction on such a confession without corroboration. It is not a rule of law, but is only rule of prudence. It cannot even be laid down as an inflexible rule of practice or prudence that under no circumstances can such a conviction be made without corroboration, for a court may, in a particular case, be convinced of the absolute truth of a confession and prepared to act upon it without corroboration; but it may be laid down as a general rule of practice that it is unsafe to rely upon a confession, much less on a retracted confession, unless the court is satisfied that the retracted confession is true and voluntarily made and has been corroborated in material particulars.

35. As to the extent of corroboration required, it was observed in Subramani Goundan case that each and every circumstance mentioned in the retracted confession regarding the complicity of the maker need not be separately and independently corroborated. The learned Judges observed : (SCR pp. 440-41)

‘It would be sufficient, in our opinion, that the general trend of the confession is substantiated by some evidence which would tally with what is contained in the confession.

36. Then we have the case of Shankaria v. State of Rajasthan [[1978] 3 SCC 435; [1978] SCC (Cri.) 439] decided by a three Judge Bench. Sarikaria, J., noted the twin tests to be applied to evaluate a confession : (1) whether the confession was perfectly voluntary, and (2) if so, whether it is true and trustworthy. The learned Judge pointed out that if the first test is not satisfied the question of applying the second test does not arise. Then the Court indicated one broad method by which a confession can be evaluated. It was said : (SCC p. 443 para 23)

‘The Court should carefully examine the confession and compare it with the rest of the evidence, in the light of the surrounding circumstances and probabilities of the case. If on such examination and comparison, the confession appears to be a probable catalogue of events and naturally fits in with the rest of the evidence and the surrounding circumstances, it may be taken to have satisfied the second test.

37. In Parmananda Pegu v. State of Assam [(2004) 7 SCC 779 : 2004 SCC (Cri.) 2081] this Court while adverting to the expression ‘corroboration of material particulars used in Pyare Lal Bhargava case clarified the position thus : (SCC p. 794), para 20)

‘By the use of the expression ‘corroboration of material particulars the Court has not laid down any proposition contrary to what has been clarified in Subramani Goundan case as regards the extent of corroboration required. The above expression does not imply that there should be meticulous examination of the entire material particulars. It is enough that there is broad corroboration in conformity with the general trend of the confession, as pointed out in Subramani Goundan case.

The analysis of the legal position in paras 18 and 19 is also worth noting : (SCC p. 788).

‘18. Having thus reached a finding as to the voluntary nature of a confession, the truth of the confession should then be tested by the court. The fact that the confession has been made voluntarily, free from threat and inducement, can be regarded us presumptive evidence of its truth. Still, there may be circumstances to indicate that the confession cannot be true wholly or partly in which case it loses much of its evidentiary value.

19. In order to be assured of the truth of confession, this Court, in a series of decisions, has evolved a rule of prudence that the court should look to corroboration from other evidence. However, there need not be corroboration in respect of each and every material particular. Broadly, there should be corroboration so that the confession taken as a whole fits into the facts proved by other evidence, in substance, the court should have assurance from all angles that the retracted confession was, in fact, voluntary and it must have been true.” [Emphasis supplied]

9. From the above discussion it is crystal clear that though there is no prohibition to rely on the retracted confessional statement however the court is required to be satisfied from the evidence that retracted confessional statement was voluntary and true. It is admitted position that out of 4 SCNs SCN I issued to Devender, Bhupender and Mangelal Jain and SCN II issued to Navin were dropped as their respective admissional statement were not considered dependable and admissible after taking into consideration mainly on the observations made by Ld. CMM Mumbai in R.A. 308/95. Though Ashok was also subjected to the same treatment observed in the said order dated 14-11-1995 passed by CMM, Mumbai but his confessional statement has been taken into account. In absence of any material brought on record Ashok cannot be treated differently. Once the statement of Ashok becomes inadmissible then no adjudication order could be based on such evidence without further corroboration. In such a situation the retracted confessional statement of Chandanmal confirming the statement of Ashok cannot accepted in absence of further corroboration. Since no material has been brought on record these confessional statements cannot be termed as voluntary and true. As in the instant case Ld. adjudicating officer failed to consider the factum of retraction of confession of appellants in proper perspective and in the background of exoneration of co-accused whose retraction in the similar circumstances was accepted.

10. The impugned order per internal page 8 has described that the appellants made different admissional statements stating about receipt of payment and further distribution thereof on the instruction of Iqbal of Dubai or Kaka of Dubai. Similar description of two names, i.e., of Iqbal of Dubai or Kaka of Dubai is described at internal page 38 of impugned order where it is stated that appellant in appeal No. 52/1999 made admission in this regard. From this it is amply clear that on whose instructions resident outside India the payment was received or distribute is not specific. In that situation the phrase ‘instructions from abroad looses its significance. When the person on whose instructions money is received and distributed is not known then how it can be specifically said that admissional statement of either of the appellants is truthful and voluntary. The concept of truthfulness of admissional statement conveys differently, the person resident outside India must be specifically described. Otherwise violation of section 9(1)(b) and 9(1)(d) of FER Act, 1973 cannot happen.

11. When we go to the quantum of money described as having been received or distributed the figure goes abnormally high. At page 39 the figure is described as Rs. 231.50 lakhs so far as appellant in appeal No. 52/1999 is concerned. The other appellant in appeal No. 51/1999 makes the figure as described at page 39 of Rs. 40,50,800. With regard to other appellants the description is similar so far as quantum of figures is concerned but wherefrom this figure has arrived at and how corroborated it is difficult to fathom. The impugned order does not specify anything that how this figure has been arrived at except under the imagination of appellants who made different admissional statements.

12. As the admissional statements by their own nature and character cast doubt on the correctness so necessity of corroboration automatically arises. This Tribunal has to assure before agreeing with the argument advanced on behalf of Enforcement Directorate that the figure or names mentioned in the impugned order can be taken as correct.

13. Reference may also be made to the recent decision of the Honble Supreme Court in Mohtesham Mohd. Ismail v. Special Director, Enforcement Directorate [2007] 79 SCL 611 where the Honble Court observed as under :—

“15. Apart therefrom the High Court was bound to take into consideration the factum of retraction of the confession by the appellant. It is now a well settled principle of law that a confession of a co-accused person cannot be treated as substantive evidence and can be pressed into service only when the Court is inclined to accept other evidence and feels the necessity of seeking for an assurance in support of the conclusion deducible therefrom, (see Haricharan Kurmi v. State of Bihar AIR 1964 SC 1184, Haroom Haji Abdulla v. State of Maharashtra AIR 1968 SC 832; and Prakash Kumar alias Prakash Bhutto v. State of Gujarat [2007] 4 SCC 266.

16. We may, however, notice that recently in Francis Stanly alias Stalin v. Intelligence Officer, Narcotic Control Bureau Thiruvanthapuram JT 2006 (13) SC 531, this Court has emphasized that confession only if found to be voluntary and free from pressure, can be accepted. A confession purported to have been made before an authority would require a closure scrutiny. It is furthermore now well settled that the Court must seek corroboration of the purported confession from independent sources.” (p. 619)

14. We also cannot lose sight of the fact that while turning down the proposal of confiscation of Rs. 70,000 recovered and seized from the business premises of M/s. B.P. Jewellers as balance amount of the hawala transaction the adjudicating officer himself observed that it would be absurd to be termed as balance amount as part of hawala transaction when the charge contained in the SCN is for making payments of the same amount which had been received by the noticees. This clearly indicates the inconsistency in the charges made against the appellants.

15. Omission on the part of the Enforcement Directorate to establish the existence of alleged telephonic conversation with persons abroad by any of the appellants leads to drawing of an adverse inference. No material has also been brought on record showing that any of the recipients admitted the fact of receiving payments by or under instructions of any of the alleged persons residents outside India. Omission on the part of Department to produce evidence in this behalf is fatal.

16. Moreover it is also well established that while the order of conviction cannot be made on mere suspicion. In Palvinder Kaur v. State of Punjab AIR 1952 SC 354 the Honble Supreme Court has observed that it is absolutely necessary for the court to safeguard itself against the danger of basing their conclusion on suspicions howsoever strong. In the said judgment the Honble Court referring to its earlier decision in the case of Hanumant Govind Nargundkar v. State of Madhya Pradesh AIR 1952 SC 343 cited following warning given by Baron Alderson in Reg. Hodge, 1838 2 Lewin 227.

“The mind was apt to take a pleasure in adapting circumstances to one another and even in straining them a little, if need be, to force them to form parts of one connected whole; and the more ingenious the mind of the individual, the more likely was it, considering such matters, to overreach and mislead itself to supply some little link that is wanting, to take for granted some fact consistent with its previous theories and necessary to render them complete.” (p. 345)

17. In the said case the Honble Court thereafter observed :—

“Therefore, it is well settled legal principle that a Judge is not justified in deciding a case on his own suspicions or upon mere suspicions when there is no evidence to support his finding.”

18. In the instant case it is noticed that the alleged confessional statements of exonerated noticees in SCNs I and II and appellants are closely connected. The exoneration of noticees in SCN I and II i.e., Devender, Navin, Bhupindra and Mangilal have not been challenged or termed as bad. In such a situation the alleged confessional statements of the appellants lost significance in absence of corroborative evidence. Thus the charges under section 9(1)(b) and 9(1)(d) cannot be sustained. The impugned order has failed to discuss and establish the alleged payment/transfer of US $ 2 lakh in Dubai/abroad. Therefore, the charge of contravention of section 9(1)(f)(i) cannot be sustained. In short it is difficult to sustain the impugned order. In that view of the matter other argument advanced by Shri V.S. Thiageswaran need not be considered.

19. For the reasons stated above the impugned order is set aside and quashed. These appeals are therefore allowed.

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