Foreign exchange contravention turns on proof of prescribed payment mode and diverted export routing, with only one penalty upheld.

Delay in adjudication and non-supply of seized documents did not by themselves amount to denial of natural justice, because the appellant had inspected the documents and no disabling prejudice was shown; the natural justice objection was rejected. Contravention of section 12(2)(b) of the Foreign Exchange Regulation Act, 1973 was not proved, as the record did not establish the prescribed mode of payment or a specific departure from it, and rupee realisation had been fulfilled; the penalty on that count was set aside. Contravention of section 10(1)(b) was proved on clear evidence that the goods were routed to West European markets with the appellant's knowledge, defeating lawful realisation of foreign exchange; the penalty on that count was upheld.

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Issues: (i) Whether the delay in adjudication and alleged non-supply of seized documents amounted to denial of natural justice; (ii) Whether contravention of section 12(2)(b) was established; (iii) Whether contravention of section 10(1)(b) was established.

Issue (i): Whether the delay in adjudication and alleged non-supply of seized documents amounted to denial of natural justice.

Analysis: The appellant inspected the seized documents, and there was no showing that copies were sought and refused in a manner that disabled the defence. Mere delay in concluding the adjudication, though regrettable, did not by itself establish denial of natural justice in the absence of special prejudice or other circumstances showing unfairness.

Conclusion: The plea of violation of natural justice was rejected.

Issue (ii): Whether contravention of section 12(2)(b) was established.

Analysis: Section 12(2)(b) deals specifically with payment for exported goods and requires proof that payment was made otherwise than in the prescribed manner. The record did not disclose the prescribed manner or the material showing how the payment arrangement violated that requirement. The admitted position was that the export arrangement contemplated rupee realization, and that condition had been fulfilled. In the absence of evidence demonstrating non-compliance with the prescribed mode of payment, the contravention could not be sustained.

Conclusion: Contravention of section 12(2)(b) was not proved and the penalty on that count could not stand.

Issue (iii): Whether contravention of section 10(1)(b) was established.

Analysis: There was clear material showing that the goods, though ostensibly exported to East European destinations, were in fact routed to West European markets, with knowledge of the appellant. On that evidence, the authorities were justified in holding that the appellant had done acts resulting in foreign exchange becoming receivable in hard-currency areas and not being realized as required.

Conclusion: Contravention of section 10(1)(b) was proved and the penalty on that count was upheld.

Final Conclusion: The appellate order was interfered with only to the extent that the penalty relating to section 12(2)(b) was set aside, while the penalty for section 10(1)(b) was maintained.

Ratio Decidendi: A penal contravention under section 12(2)(b) of the Foreign Exchange Regulation Act, 1973 cannot be sustained unless the prescribed manner of payment and the specific departure from it are proved by material on record; in contrast, a contravention under section 10(1)(b) may be upheld on clear evidence that the foreign exchange transaction was diverted so as to defeat lawful realization.

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