1987 (9) TMI 343 - HC - Companies Law

Appellant's Right to Foreign Exchange Upheld, Penalty Reduced

The court held that the appellant, as the legal heir, had the right to receive the foreign exchange, making Section 10(1)(b) of the Foreign Exchange ... Duty of persons entitled to receive foreign exchange Issues Involved:1. Applicability of Section 10(1)(b) of the Foreign Exchange Regulation Act, 1947.2. Right to receive foreign exchange as a legal representative.3. Requirement of Reserve Bank of India's permission.4. Penalty imposition under Section 23(1)(a) of the Act.5. Interpretation of Section 10(2) of the Act.6. Appropriateness of the penalty amount.Detailed Analysis:1. Applicability of Section 10(1)(b) of the Foreign Exchange Regulation Act, 1947:The primary issue was whether Section 10(1)(b) of the Foreign Exchange Regulation Act, 1947, applied to the appellant's case. The appellant contended that this section was not applicable because he received the amount as a legal representative of his deceased brother and not in his own right. The court held that the appellant, as the legal heir, had the right to receive the foreign exchange and thus Section 10(1)(b) was applicable. The court stated, 'Therefore, there could be no hesitation in coming to the conclusion that the appellant had the right to receive the amount as legal heir of his deceased brother.'2. Right to Receive Foreign Exchange as a Legal Representative:The appellant argued that his right to receive the foreign exchange was as a legal representative and not a personal right, and hence Section 10(1)(b) should not apply. The court rejected this argument, stating that the appellant, as the legal heir, had the right to receive the foreign exchange due to his deceased brother. Thus, the appellant's right to receive the foreign exchange was recognized under Section 10(1)(b).3. Requirement of Reserve Bank of India's Permission:The court noted that the appellant failed to obtain the necessary permission from the Reserve Bank of India for receiving the foreign exchange. The judgment emphasized, 'For receiving such amount, the appellant failed to get permission from the Reserve Bank of India.' This failure constituted a contravention of Section 10(1)(b) of the Act.4. Penalty Imposition under Section 23(1)(a) of the Act:The Additional Director, Enforcement Directorate, found the appellant guilty of contravening Section 10(1)(b) and imposed a penalty of Rs. 20,000 under Section 23(1)(a) of the Act. The Appellate Board reduced the penalty to Rs. 10,000. The court upheld the finding of contravention but further reduced the penalty to Rs. 5,000, considering the circumstances of the case.5. Interpretation of Section 10(2) of the Act:The appellant argued that Section 10(2) should be followed for any failure under Section 10(1) and that penalty could be levied only if Section 10(2) was not obeyed. The court found this argument unconvincing, stating that Section 10(1) imposed an obligation on persons entitled to receive foreign exchange to secure its receipt without delay and with the permission of the Reserve Bank of India.6. Appropriateness of the Penalty Amount:The appellant contended that the penalty amount of Rs. 10,000 was unjustified and lacked proper determination of the value of the foreign exchange involved. The court dismissed this contention but reduced the penalty to Rs. 5,000, taking into account the facts and circumstances of the case.Conclusion:The court concluded that the appellant had indeed contravened Section 10(1)(b) of the Foreign Exchange Regulation Act, 1947, by failing to obtain the requisite permission from the Reserve Bank of India and not securing the full receipt of the foreign exchange. The penalty was reduced to Rs. 5,000 considering the circumstances, and the appeal was dismissed in other respects.