Strict construction of foreign exchange penalty law barred liability for trading through a foreign branch office.

A company did not contravene section 27(1) of the Foreign Exchange Regulation Act, 1973 by carrying on trading activity through its foreign branch office without separate Central Government permission. The Calcutta HC held that a branch office is only part of the company and is not a separate concern outside India, so its activities are treated as the company's own acts. Section 73(1)(c) was treated as a limited legal fiction and could not be used to widen the scope of section 27(1). Because the penal provision had clear wording, strict construction applied and the penalty could not be sustained.

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Issues: Whether a company, by conducting trading activities through its foreign branch office without separate permission of the Central Government, contravened section 27(1) of the Foreign Exchange Regulation Act, 1973 and became liable to penalty.

Analysis: Section 27(1) prohibits a person resident in India from associating with or participating in a concern outside India engaged in trading, commercial, or industrial activity without previous permission. The foreign branch office was not a separate concern distinct from the company; a branch is only part of the company, and anything done by it is done by the company itself. Section 73(1)(c) was treated as a legal fiction serving its own statutory purpose and could not be used to expand the reach of section 27(1). As the language of the penal provision was clear, no broader or doubtful construction could be adopted to impose liability.

Conclusion: The company did not contravene section 27(1), and the penalty could not be sustained.

Final Conclusion: The appellate challenge failed, and the order setting aside the penalty was affirmed.

Ratio Decidendi: A foreign branch office of a company is not a separate concern outside India for the purpose of section 27(1) of the Foreign Exchange Regulation Act, 1973, and a penal provision must be construed strictly on its clear language.

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