1986 (7) TMI 346 - HC - Companies Law

Court interprets Foreign Exchange Regulation Act to protect resources, upholding contravention for non-repatriation in export transaction.

Ajantha Cashew Company Versus Assistant Director of Enforcement

Ajantha Cashew Company Versus Assistant Director of Enforcement - [1989] 66 COMP. CAS. 673 (KER.) Issues:Violation of section 5(1) and section 12(2) of the Foreign Exchange Regulation Act, 1947 - Non-repatriation of export proceeds - Interpretation of statutory provisions.Analysis:The case involved an exporter of cashew-nuts who entered into a contract with a foreign buyer for the sale of cashewnuts. The appellant faced allegations of contravening section 5(1) and section 12(2) of the Foreign Exchange Regulation Act, 1947, for not repatriating an amount from the value of goods exported within the prescribed period. The Assistant Director of Enforcement initiated proceedings against the appellant, leading to a fine imposed by an order dated December 7, 1977. The appellant appealed to the Foreign Exchange Regulation Appellate Board, arguing that adjustments made by the agent did not require specific sanction and that no offence was committed. The Appellate Board accepted the appellant's contentions regarding section 5(1)(a) but found a contravention of section 12(2) due to non-repatriation of a specific amount.The key contention of the appellant was that the Appellate Board erred in affirming the findings under section 12(2) of the Act. The appellant argued that the Madras High Court's interpretation, emphasizing the need for full repatriation in completed sales, should have been preferred over the Calcutta High Court's view. The court analyzed the Madras High Court's decision in Venkata Subbu v. Director of Enforcement, which clarified the application of section 12(2) to both export on sale and export for sale scenarios. The court highlighted the legislative intent and the importance of interpreting economic offences in a manner that conserves foreign exchange resources.The court ultimately upheld the decision of the Foreign Exchange Regulation Appellate Board, emphasizing the need to interpret the Foreign Exchange Regulation Act in a manner that safeguards the country's foreign exchange resources. The court preferred the interpretation provided by the Madras High Court over the Calcutta High Court's view, concluding that the appeal was rightly decided. Consequently, the appellant's appeal was dismissed, and no costs were awarded.