Export proceeds recovery under FERA requires all reasonable steps; vicarious and related penalties fail without a proven contravention.
An exporter is liable for failure to realise export proceeds under FERA section 18(2) only where it has not taken all reasonable steps to recover payment; mere non-realisation is insufficient. On the facts, pursuit of buyers, banks and the Reserve Bank, requests for extension, and evidence of non-delivery or local-currency payment showed no sustainable contravention, so the related penalties fell. Penalties under section 68(1) could not survive once the principal contravention failed, and responsibility had not been fixed on all partners. The alleged breaches under sections 9(1)(a) and 9(1)(c) also were not made out, as the disputed payment, acknowledgement and agreement did not establish a prohibited act by the appellants.
Issues: (i) Whether the appellants had contravened section 18(2) of the Foreign Exchange Regulation Act, 1973 by failing to realise export proceeds, despite the evidence of non-delivery in some consignments, payment in local currency in Sierra Leone, and the steps taken to recover the dues from Raxshire, Monrovia and other buyers; (ii) Whether penalties under section 68(1) of the Foreign Exchange Regulation Act, 1973 could survive against the partners and managing personnel when the principal finding on section 18(2) could not be sustained, and whether the penalty on Rattan Kumar was justified; (iii) Whether the charges under sections 9(1)(a) and 9(1)(c) of the Foreign Exchange Regulation Act, 1973 were made out on the facts relating to the alleged payment through Toufic Habulla, the alleged acknowledgement in favour of Toufic Habulla, and the agreement with Farage & Sons, Banjul.
Issue (i): Whether the appellants had contravened section 18(2) of the Foreign Exchange Regulation Act, 1973 by failing to realise export proceeds, despite the evidence of non-delivery in some consignments, payment in local currency in Sierra Leone, and the steps taken to recover the dues from Raxshire, Monrovia and other buyers.
Analysis: The governing test was whether the exporter had taken all reasonable steps to receive or recover payment. The mere fact that amounts remained unrealised did not, by itself, establish contravention. On the evidence, the appellants had pursued the buyers, banks and the Reserve Bank of India, had sought extension of time, had initiated or pursued legal and other remedial steps where feasible, and had shown that in several instances the goods were not delivered at all or that payment had been made in local currency and was only awaiting externalisation. The findings of the adjudicating authority were held to rest on factual errors and selective appreciation of the record.
Conclusion: The charge under section 18(2) was not sustainable and the related penalties were set aside.
Issue (ii): Whether penalties under section 68(1) of the Foreign Exchange Regulation Act, 1973 could survive against the partners and managing personnel when the principal finding on section 18(2) could not be sustained, and whether the penalty on Rattan Kumar was justified.
Analysis: Liability under section 68(1) depended on the substantive contravention and, separately, on the finding as to who was in charge of and responsible for the conduct of the business. Since the foundation for the section 18(2) contravention disappeared, the vicarious penalties could not stand. In any event, the adjudication order itself attributed responsibility only to Ravi Prakash, not to the other partners, so there was no basis for fastening penalty on Rattan Kumar.
Conclusion: The penalties under section 68(1) were not sustainable, and the penalty imposed on Rattan Kumar was specifically set aside.
Issue (iii): Whether the charges under sections 9(1)(a) and 9(1)(c) of the Foreign Exchange Regulation Act, 1973 were made out on the facts relating to the alleged payment through Toufic Habulla, the alleged acknowledgement in favour of Toufic Habulla, and the agreement with Farage & Sons, Banjul.
Analysis: The alleged payment through Toufic Habulla did not amount to a contravention by the appellant, since the act attributed was that of a non-resident intermediary and not a prohibited primary act by the appellant. The alleged acknowledgement in favour of Toufic Habulla was not of a character that could itself create an enforceable right to receive payment, and in any event the matter was trivial and caused no foreign exchange outflow. As to the agreement with Farage & Sons, the evidence did not show that it was ever acted upon, and, in any case, section 47(2) read with the statute imported the Reserve Bank's permission as an implied condition, preventing the agreement itself from constituting the alleged contravention.
Conclusion: The findings under sections 9(1)(a) and 9(1)(c) were unsustainable and the penalties thereunder were set aside.
Final Conclusion: The common adjudication order could not be sustained on any of the charges examined, and all the appeals succeeded with the impugned penalties annulled.
Ratio Decidendi: An exporter is liable under section 18(2) only when he fails to take all reasonable steps to recover export proceeds, and a vicarious or ancillary penalty cannot survive once the principal contravention is not established; similarly, a transaction cannot be penalised under sections 9(1)(a) or 9(1)(c) unless the prohibited act is clearly made out on the appellant's own conduct and legal effect.
TaxTMI 
AI Drafter ✕
TaxTMI 
