Muhammad Afzal Vs The State

Judgment Sheet

PESHAWAR HIGH COURT

ABBOTTABAD BENCH

JUDICIAL DEPARTMENT

Criminal Appeal No. 404-A/2019

Muhammad Afzal............... (Appellant) versus The State.......................(Respondents) Present: M/s Junaid Anwar Khan and Wajih ur Rehman Khan Swati, Advocates for the appellant.

Mr. Awais Abbasi, Assistant Attorney General for the state.

Date of hearing: 09.03.2026

JUDGMENT

ABDUL FAYAZ, J.- The appellant has preferred the instant appeal under Section 410 Cr.P.C. against the judgment dated 20.11.2019 passed by the learned Tribunal/Sessions Judge, Abbottabad, whereby he was convicted under Section 4 read with Section 23 of the Foreign Exchange Regulation Act, 1947 and sentenced to undergo rigorous imprisonment for two years with fine of Rs.20,000/-, and in default whereof to further undergo simple imprisonment for

two months. The foreign currency allegedly recovered from the shop of the appellant was also ordered to be confiscated in favour of the State.

2.Briefly stated, the prosecution case is that the State Bank of Pakistan, through letter dated 14.05.2018, requested the Director General, FIA, to initiate legal action against persons allegedly involved in unauthorized foreign exchange business in different parts of the country. The said communication, along with a list of suspects, was transmitted to the concerned FIA authorities. On receipt thereof, Saadat Khan, SI/ACC Abbottabad, conducted a raid at Tanawal Jewellers, Mansehra Trade Centre, near Narri Masjid, Shinkiari Road, Mansehra, where the appellant Muhammad Afzal was found present. During search of the shop, 140,000 Saudi Riyals, 50 Kuwaiti Dinars and Pakistani currency amounting to Rs.350,000/- were allegedly recovered. As the appellant could not furnish any satisfactory explanation regarding the said recovery, he was arrested and, on the basis of murasila prepared by the complainant, formal FIR was registered against him.

3.After completion of investigation, challan was submitted before the learned trial Court.

Upon compliance with legal formalities, the appellant was charge-sheeted, to which he pleaded not guilty and claimed trial. In support of its case, the prosecution examined four witnesses and then closed its evidence. Thereafter, statement of the appellant under Section 342 Cr.P.C. was recorded, wherein he professed innocence. He, however, neither opted to appear as his own witness under Section 340(2) Cr.P.C. nor produced any evidence in defence. On conclusion of trial, the learned Tribunal convicted and sentenced the appellant as noted above; hence this appeal.

4.Arguments heard and record perused.

5.The allegation against the appellant is that he was involved in unauthorized business of hundi/hawala. In order to substantiate this accusation, the prosecution mainly relied upon the testimony of PW-2 Hassan Malik, ASI, and PW-4, the complainant himself. PW-2 stated that in his presence the investigating officer conducted personal search of the appellant and recovered two mobile phones, one driving licence, union card of

jewellers’ association, ATM card of Allied Bank and Pakistani currency of Rs.420/- through memo Ex.PW-2/1. He further stated that search of the shop of the appellant led to recovery of 140,000 Saudi Riyals, 50 Kuwaiti Dinars, Pakistani currency amounting to Rs.350,000/-, along with three receipts, a calculator and visiting cards, through memo Ex.PW-2/2. However, in cross-examination he admitted that no test purchase was conducted, no foreign exchange transaction was witnessed by them, and the alleged foreign currency was recovered from a locker/safe of the shop.

6.PW-4, the complainant, also deposed regarding the raid and recovery, but during cross- examination he admitted that the entire spot investigation had been completed by him prior to registration of the FIR. He further admitted that no test purchase was undertaken and no incriminating material connecting the appellant with the alleged offence of unauthorized foreign exchange business could be recovered.

7.From the evidence brought on record, it is evident that the prosecution has failed to establish the essential ingredient of the charge, namely, that

the appellant was actually engaged in unauthorized dealing or exchange of foreign currency. Mere possession or recovery of foreign currency, in the absence of any evidence showing its sale, purchase, lending, borrowing, exchange or use in unauthorized business, is not sufficient to bring the case within the ambit of Section 4 of the Foreign Exchange Regulation Act, 1947. Significantly, both the material witnesses candidly admitted that no test purchase was conducted and no actual transaction of foreign exchange was seen taking place at the spot.

8.Another circumstance which materially dents the prosecution case is that the alleged recovery was effected from a shop situated in a populated locality, yet no independent witness from the locality was associated in the recovery proceedings, despite their admitted availability. Such omission constitutes non-compliance with the spirit of Section 103 Cr.P.C. and creates serious doubt about the fairness and transparency of the alleged recovery. It is also of significance that no prior search warrant was obtained before conducting the raid and, according to the complainant himself, the spot investigation had already been completed

before the FIR came into existence. This course of conduct clearly reflects procedural impropriety and adversely affects the credibility of the prosecution version.

9.No documentary, electronic or other independent evidence was produced by the prosecution to establish that the appellant was carrying on unauthorized foreign exchange business or facilitating hundi/hawala transactions. The evidence so produced, when examined in its totality, falls short of the standard required to sustain a conviction in a criminal case. At the very least, the circumstances noted above create a reasonable doubt regarding the prosecution story, and such doubt must necessarily be resolved in favour of the accused. In this regard, reference may safely be made to the case of “Ghani ur Rehman vs. The State through Additional Advocate General Khyber Pakhtunkhwa and another” reported as 2015 MLD 1438.

10.For what has been discussed above, it is held that the prosecution failed to prove its case against the appellant beyond shadow of doubt.

Consequently, the appellant is entitled to the benefit of doubt as of right and not of grace. Accordingly,

this appeal is allowed, the conviction and sentence recorded by the learned trial Court are set aside and the appellant is acquitted of the charge. He is on bail; therefore, his bail bonds stand cancelled and sureties are discharged from their liabilities thereunder.

11.Coming to the question of confiscation of the foreign currency, the record reveals that the learned trial Court ordered confiscation mainly on the premise that in his statement under Section 342 Cr.P.C. the appellant had disowned the recovered foreign currency by replying to question No. 3, that “it is incorrect. Nothing was recovered except Pakistan currency and foreign currency were planted against me to legalize their illegal act and to show their efficiency”. Such reasoning, by itself, could not furnish lawful basis for confiscation.

However, Section 4 of the Foreign Exchange Regulations Act, 1947 reads as;

“4. Restrictions on dealing in Foreign Exchange.

(1)Except with the previous general or special permission of the State Bank, no person other than an authorised dealer shall in Pakistan, and no person resident in Pakistan other than an authorised dealer shall outside Pakistan, buy or borrow from, or sell or

lend to, or exchange with, any person not being an authorised dealer, any foreign exchange.

(2)Except as may otherwise be directed by the State Bank, authorized dealers, authorized money changers and exchange companies shall be free to determine exchange rates for the conversion of Pakistan currency into any foreign currency or any foreign currency into Pakistan currency.

(3)Where any foreign exchange is acquired by any person other than an authorised dealer of any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or, as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or, as the case may be, the conditions cannot be complied with, the said person shall without delay sell the foreign exchange to an authorised dealer.

(4)Nothing in this section shall be deemed to prevent a person from buying from any post office, in accordance with any law or rules made thereunder for the time being in force, any foreign exchange in the form of postal orders or money orders.”

While sub-Section (1) of Section 23 of the Act of 1947 reads;

23.Penalty and procedure.

(l)Whoever contravenes, attempts to contravene or abets the contravention of any of the provisions of this Act or of any rule, direction or order made thereunder

other than the provisions of section 3, section 3A, section 3AA, section 3B, sub- sections (2) and (3) of section 4, section 10, sub-section (1) of section 12 and clause (c) of sub-section (1) and sub- section (3) of section 20 or any rule, direction or order made thereunder shall notwithstanding anything contained in the Code of Criminal Procedure, 1898, be tried by a Tribunal constituted by Section 23A, and shall be punishable with rigorous imprisonment for a term which may extend to five years or with fine or with both, and any such Tribunal trying any such contravention may, if it thinks fit, and in addition to any sentence which it may impose for such contravention, direct that any currency, security, gold or silver, or goods or other property in respect of which the contravention has taken place shall be confiscated.”

Section 4 of the Foreign Exchange Regulation Act, 1947 regulates unauthorized dealing in foreign exchange and does not render mere possession or holding of foreign currency an offence. The object of the provision is to prohibit unauthorized transactions in foreign exchange and not simple retention thereof, unless it is proved that the currency was being dealt with in violation of law.

Likewise, subsection (1) of Section 23 of the Act provides the penal consequences for contravention of the Act and empowers the Tribunal, in addition to sentence, to direct confiscation of the currency or property in respect of which the contravention has taken place. Thus, confiscation is not an automatic or independent consequence of mere possession;

rather, it is consequential to proof of contravention and conviction therefor. This Court in the case of “Muhammad Jaffar Khan Vs. The State and another” reported as 2020 CLD 950, while referring to the judgment of honourable Supreme Court of Pakistan in the case of Asfandyar Khan Vs. The State and another, has ordered return of foreign currency to the appellant by holding that;

“In view of the above, it has been cleared that in this case too, the appellant has been acquitted from all the charges levelled against him and his Pakistani currency has also been ordered to be disposed of. As for as the foreign currency is concerned, though appellant in his statement recorded under section 342, Cr.P.C. denied the recovery of same, however, we have to see the record and according to recovery memo the foreign currency has rightly been shown recovered from the shop of the appellant also in presence of marginal witnesses of recovery, which authenticates the version of appellant.

9.Apart from the above, there is nothing on record which could suggest

that against the acquittal of the appellant, the State has filed an appeal.

10.So, in view of the above detailed discussion, this appeal is allowed and order/judgment of learned trial Court to the extent of confiscation of foreign currency in favor of State is modified with direction to return the same to the appellant from whose shop/custody, it had been recovered.”

12.Since in the present case the

prosecution has failed to prove that the appellant was involved in unauthorized foreign exchange business and his conviction has not been sustained, the order of confiscation could not legally survive. Mere denial of ownership by the appellant in his statement under Section 342 Cr.P.C. is not sufficient to vest the recovered foreign currency in the State. In the instant case as well, PW-2 and PW-4 categorically deposed that 140,000 Saudi Riyals and 50 Kuwaiti Dinars were recovered from the shop of the appellant through memo Ex.PW-2/2. The said foreign currency was also produced before the learned trial Court and exhibited as Ex.P-1 and Ex.P-2. Therefore, notwithstanding the appellant’s denial in his statement under Section 342 Cr.P.C., the record clearly reflects the place and manner of recovery as set up by the prosecution itself. Since the appellant has been acquitted of the charge and

the Pakistani currency has already been ordered by the learned trial Court to be returned, there remains no lawful justification to maintain the confiscation of the foreign currency.

13.Accordingly, the impugned judgment is also set aside to the extent of confiscation of foreign currency, and it is directed that the appellant shall be entitled to the return of the recovered foreign currency, i.e 140,000 Saudi Riyals and 50 Kuwaiti Dinars, after expiry of the period of appeal/revision.

ANNOUNCED

(Tufail)

JUDGE