FEMA Penalties Partly Set Aside: SAFEMA Tribunal Rejects Rs. 4.08 Crore Charge Based on Third-Party Loose Sheets

The Appellate Tribunal under SAFEMA at New Delhi, in M/s. Shukla Forex Pvt. Ltd. & Others v. Joint Director, Directorate of Enforcement, Jalandhar, Appeal Nos. FPA-FE-71 to 74/JL/2015, delivered on 08/10/2026, has significantly modified an adjudication order passed under the Foreign Exchange Management Act, 1999 (FEMA).

While the Tribunal declined to uphold a major charge under Section 3(d) involving Rs. 4,08,01,515 on the ground that it was founded on third-party loose sheets and an uncorroborated statement, it sustained other findings of contravention relating to foreign telegraphic transfers and unauthorized foreign currency purchases. Penalties were substantially reduced, and two directors were completely exonerated.

1. Procedural Background and Initial Penalties

The impugned adjudication order dated 21.09.2015 was passed by the Joint Director, Directorate of Enforcement, pursuant to Show Cause Notice No. T-4/06/JL/2014 dated 31.12.2014. Penalties had originally been imposed under Section 3(d) read with Section 42 and Section 10(4) read with Section 42 of FEMA on:

  • Shukla Forex Pvt. Ltd.
  • Mohinder Pal Shukla
  • Amit Shukla
  • Smt. Raman Bala

In addition, certain individuals (including Deepak Kalia and Gopal Bhushan) were penalised under Section 3(a) of FEMA. The appeals before the Tribunal were filed under Section 19 of FEMA read with the **Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000`.

The proceedings emanated from searches conducted by the Enforcement Directorate (ED) on 01.02.2013 at the premises of M/s Happy Forex Pvt. Ltd. (run by Jeevan Kumar @ Happy) and M/s Chauhan Jewellers (of Pratap Rai @ Laddi), based on information regarding alleged hawala operations and unauthorised foreign remittances. A subsequent search was carried out on 03.12.2013 at the premises of M/s Shukla Forex Pvt. Ltd., an RBI-licensed Full Fledged Money Changer (FFMC), and at the residence of its Managing Director, Mohinder Pal Shukla.

The core allegations were grouped as:

  • A Rs. 4,51,46,775 transaction value under Section 3(d) (split into Rs. 4,08,01,515 and Rs. 43,45,260).
  • Unauthorised purchase of foreign currency amounting to Rs. 1,53,74,072.10, attracting Section 10(4) read with Section 42.
  • Vicarious liability of the other directors under Section 42.

The Tribunal addressed these as four distinct issues.

2. Rejected Charge: Rs. 4.08 Crore Based on Third-Party Loose Sheets

(i) Nature of the Allegation

The first and largest limb of the Section 3(d) charge alleged that:

  • Mohinder Pal Shukla, Managing Director of Shukla Forex Pvt. Ltd., had during 2012–2013 paid Rs. 4,08,01,515 in Indian currency to Jeevan Kumar @ Happy.
  • In return, Jeevan Kumar allegedly arranged corresponding foreign currency abroad (USD and GBP), which was then remitted into the accounts of exporters/importers in India via telegraphic transfers (TTs).
  • This quantum was derived from loose sheets marked “B”, “C” and a writing pad marked “E”, recovered from the premises of Jeevan Kumar @ Happy during the 01.02.2013 search.

The balance value of Rs. 43,45,260 under Section 3(d) related to documents recovered directly from Shukla Forex’s premises and was treated separately.

(ii) Appellants’ Contention

The assessee argued that:

  • Shukla Forex Pvt. Ltd. is an RBI-licensed FFMC with turnover exceeding Rs. 100 crores and has been commended by RBI for compliant operations.
  • The fact that some loose sheets found at another entity’s premises simply mentioned the name “Shukla” did not justify presuming that they referred to Mohinder Pal Shukla, particularly in the absence of address, initials, or any specific identifier.
  • Jeevan Kumar @ Happy and his concerns were not issued any show cause notice nor proceeded against jointly, yet the loose sheets seized from his premises were used against Shukla Forex and its Managing Director.
  • The initial statement attributed to Mohinder Pal Shukla, recording detailed figures concerning payments and TTs alleged to have passed through Jeevan Kumar @ Happy, was not in his handwriting. Later statements recorded by him in his own hand undermined the voluntariness of the earlier one.
  • A retraction letter dated 04.12.2013 had been submitted, challenging the voluntariness and correctness of the 03.12.2013 statement.
  • No corroborative evidence was produced by ED to connect the loose sheets with either the company or its Managing Director, or to establish the identity of the alleged exporters/importers.

On this basis, it was urged that the reliance on such documents was contrary to Section 39 of FEMA.

(iii) ED’s Stand

ED relied heavily on:

  • The seized loose sheets marked “B”, “C” and “E”, which displayed multiple entries featuring the word “Shukla” alongside figures in rupees and foreign currency.
  • Investigation inputs that a “Shukla” from Phagwara involved in foreign exchange business was dealing with Jeevan Kumar @ Happy, which allegedly led them to Mohinder Pal Shukla of M/s Shukla Forex Pvt. Ltd.
  • Statements of Pratap Rai @ Laddi admitting involvement in receipt/distribution of funds on instructions from persons abroad.
  • Statements of Mohinder Pal Shukla recorded on 03.12.2013 and later on 25.11.2014, where he is stated to have admitted:
    • Acquaintance with Jeevan Kumar @ Happy.
    • Payments to him in Indian currency during 2012–2013.
    • Arrangement of TTs in foreign exchange (USD and GBP) amounting to Rs. 4,08,01,515 for exporters/importers in India.
  • ED also highlighted that while a retraction was sent after the first statement, there was allegedly no subsequent retraction of the later, more detailed statement dated 25.11.2014.

(iv) Tribunal’s Application of Section 39 FEMA

Section 39 of FEMA provides for presumptions in respect of certain documents. The Tribunal reproduced the provision and analysed its second limb concerning documents seized from third parties.