Joint bank account deposits can amount to payment to a non-resident, establishing foreign exchange contravention and sustaining penalty.

A deposit of sale proceeds into a joint account in which the non-resident beneficiary can withdraw the amount may be treated as payment to that non-resident under section 9(1)(a) of the Foreign Exchange Regulation Act, 1973. The Madras HC held that the account arrangement did not avoid contravention because the proceeds could still be regarded as paid to the non-resident, and the use of that channel bypassed the regular foreign exchange route. The plea that the breach was merely technical was rejected, and there was no basis for reducing the penalty.

---

---

Issues: Whether the appellant had contravened section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 by depositing the sale proceeds in the joint bank account, and whether the penalty required reduction.

Analysis: The sale proceeds realised from goods brought from Singapore were credited to a savings bank account standing in the name of the non-resident and his resident family members. The Court held that the account arrangement did not negate the effect of the deposit, because the amount could be treated as payment to the non-resident himself. On that basis, the contravention of section 9(1)(a) stood established. The plea that the breach was merely technical was rejected, as the transaction bypassed the regular channel through which foreign exchange could have been brought into the country.

Conclusion: The contravention was proved and there was no justification for reducing the penalty.

Ratio Decidendi: A deposit of sale proceeds into a joint account in which the non-resident beneficiary can withdraw the amount may be treated as payment to that non-resident for the purposes of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973.

---