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Issues: (i) Whether the appellant had, on the facts and terms of the agreement and connected correspondence, acquired or otherwise transferred foreign exchange in contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973, and failed to offer it for sale within the prescribed time under section 14 of that Act read with the relevant RBI notification; (ii) Whether the agreement entered into by the appellant with the non-resident company directly or indirectly evaded the operation of sections 8(1) and 14 so as to attract section 47 of the Foreign Exchange Regulation Act, 1973.
Issue (i): Whether the appellant had, on the facts and terms of the agreement and connected correspondence, acquired or otherwise transferred foreign exchange in contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973, and failed to offer it for sale within the prescribed time under section 14 of that Act read with the relevant RBI notification.
Analysis: The commission payable to the appellant was held under a contingent arrangement. The agreement, read with the exchanged letters, showed that remittance to the overseas account was only a temporary holding arrangement pending completion of the contract and clearance by the foreign principal. The appellant did not obtain complete dominion, title, or right of disposition when the amounts were first remitted abroad. In such circumstances, mere crediting of the sums to the foreign account of the intermediary did not amount to acquisition by the appellant, nor could it amount to transfer by the appellant of its own foreign exchange. The obligation to offer the foreign exchange for sale to an authorised dealer arose only when the appellant actually acquired and held the money with power of disposition, which occurred after final clearance and subsequent remittance to India through banking channels within the permitted period.
Conclusion: The charges under sections 8(1) and 14 were not made out against the appellant.
Issue (ii): Whether the agreement entered into by the appellant with the non-resident company directly or indirectly evaded the operation of sections 8(1) and 14 so as to attract section 47 of the Foreign Exchange Regulation Act, 1973.
Analysis: Section 47 could operate only if the underlying arrangement had the direct or indirect effect of defeating the substantive provisions of the Act. Since the appellant had not contravened sections 8(1) or 14, the foundation for invoking section 47 disappeared. The agreement, when read with the surrounding correspondence, reflected a conditional commercial arrangement and not an unlawful device to put the appellant's foreign exchange beyond the statutory scheme. The absence of a culpable design and the voluntary remittance of the money before enforcement action also negatived the alleged evasion.
Conclusion: The charge under section 47 was also not established against the appellant.
Final Conclusion: The appellate authority set aside the findings of contravention and held that the appellant was not liable for the alleged foreign exchange violations.
Ratio Decidendi: Where foreign exchange is kept abroad only as a contingent holding arrangement and the claimant has no present dominion or right of disposition until final contractual clearance, there is no acquisition or transfer in breach of the exchange control provisions, and no evasion clause can be invoked without an underlying substantive contravention.
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