1995 (7) TMI 314 - HC - Companies Law

Court affirms power to waive penalties under Foreign Exchange Regulation Act

Union of India Versus Auto & General Engg. Co.

The Court upheld the Foreign Exchange Regulation Appellate Board's power to review and waive pre-deposit of penalty amounts under Section 52 of the ... Appeals to Appellate Board Issues:- Challenge to orders of the Foreign Exchange Regulation Appellate Board- Power of the Board to dispense with pre-deposit of penalty amount- Judicial review of Board's orders- Waiver of penalty amount by the BoardAnalysis:The judgment involves a challenge to the orders of the Foreign Exchange Regulation Appellate Board regarding the pre-deposit of penalty amounts in an appeal under the Foreign Exchange Regulation Act, 1973. The respondents, exporters of agricultural equipment, failed to realize export proceeds, leading to penalties imposed by the Special Director. The Board directed them to deposit specific amounts as a condition for hearing their appeal against the penalties. The petitioner, Union of India, challenged the subsequent orders of the Board extending time and reducing the deposit amount, alleging patent illegality. The key issue was whether the Board had the power to review its earlier order and dispense with the pre-deposit of penalty amounts.The judgment delves into the legal provisions under Section 52 of the FERA, which empower the Board to dispense with the pre-deposit of penalty amounts if it would cause undue hardship to the appellant. The Court emphasized that such discretion must be exercised judiciously and in the interest of justice. The order to waive the pre-deposit is considered an interim procedural step, not a decision on the merits of the case. The Court highlighted that the Board can modify or alter interlocutory orders to prevent hardship and ensure the appellant's right to appeal is not lost due to uncontrollable circumstances. Therefore, the order under Section 52(2) is deemed interlocutory, aiding the final adjudication of the appeal.Regarding the waiver of the penalty amount by the Board, the Court analyzed the circumstances presented by the respondents. The Board's decision to waive a portion of the penalty was based on the respondents' financial constraints and efforts to raise funds. The Court found the Board's decision reasonable, considering the deposit already made by the respondents and the potential undue hardship of further deposits. The Court dismissed the petition, concluding that the Board's actions were not arbitrary or perverse, and the petition lacked merit based on the detailed analysis of the legal provisions and circumstances surrounding the case.