Indian currency can be  seized under FERA: HC

The Delhi High Court has held that Indian currency can be seized and confiscated under the Foreign Exchange Regulation Act, 1973 (FERA), ruling that the law’s language is wide enough to cover all currencies involved in foreign exchange violations. The court upheld the Enforcement Directorate’s (ED) decision to confiscate Rs 12.31 lakh from a trader accused of illegal dealings in gold and foreign exchange.

A Division Bench of Justices Subramonium Prasad and Vimal Kumar Yadav said Section 63 of FERA makes it clear that the court or adjudicating authority is empowered to confiscate “any currency, security or other money or property in respect of which the contravention has taken place.” The judges underlined that the provision leaves no ambiguity as to its scope.

“Nowhere does the Section disqualify or prohibit either the Court or Adjudicating Authority from confiscating Indian Currency. In fact, a perusal of clause (b) of the Explanation to Section 63 makes it abundantly clear that property with respect to which contravention has taken place includes Indian currency, where the said property is converted into that currency,” the Court said.

The judgment, delivered on October 14, further clarified that the right to appeal before the High Court under FERA is limited to questions of law and not facts, which fall within the exclusive domain of the Adjudicating Authority and the Appellate Tribunal.

"This Court cannot go behind or interfere with the findings on fact arrived at by them. The FERA Appellate Tribunal is the final court of facts. This circumscribed right to appeal has been retained under FEMA, the successor legislation to FERA. Section 35 of FEMA, under which the present appeal has been filed, restricts the jurisdiction of a High Court to only questions of law," the Court said.

The Bench made these observations while deciding an appeal filed by one Arjun Patil challenging the orders of the ED and the Appellate Tribunal for Foreign Exchange, which had ordered confiscation of Rs 12.31 lakh in Indian currency and imposed a penalty of Rs 40,000 for violations under FERA.

According to the ED, a search at Patil’s premises in February 1997 led to the recovery of Rs 12.31 lakh, $6,371, four gold biscuits, and several documents. Patil allegedly confessed that he was purchasing gold from Nepal using foreign exchange, in contravention of Sections 81, 82, 63, and 64(2) of FERA. He later retracted his statement, alleging coercion and torture.

In 2003, the Adjudicating Authority found Patil guilty of engaging in unauthorised dealings in gold and foreign exchange and imposed a penalty while ordering confiscation. The Appellate Tribunal upheld the findings in 2006, prompting the present appeal before the high court.

The xourt held that even a retracted confession can be relied upon if it is voluntary and supported by corroborative evidence. It further ruled that the act of attempting an offence begins the moment an individual initiates it with the required intent.

“The appellant’s conduct, as well as the surrounding facts and circumstances of this case establish that the appellant had taken steps for the commission of the offence and had crossed the threshold for ‘attempt’. Therefore, his claim that seizure does not amount to attempt is a facile argument that is in negation of the factual matrix of this case. The recovery, coupled with absence of any lawful explanation and the conduct of the Appellant is a clear attempt for an act that would have amounted to contravention of the provisions of FEMA,” the Court said.

Upholding the findings of the lower authorities, the high court dismissed Patil’s appeal and confirmed both the penalty and confiscation. 

Notably, FERA was repealed in June 2000 and replaced by the Foreign Exchange Management Act, 1999 (FEMA), which retained a limited right of appeal before the high court only on questions of law.