Reverse burden on exporters upheld where classification had rational nexus and Article 14 challenge lacked foundational facts.

A rebuttable reverse burden on exporters under Section 18(2) and Section 18(3) of the Foreign Exchange Regulation Act, 1973 was held not to violate Article 14 because the classification between domestic traders and exporters had a rational nexus with preventing foreign-exchange misuse and ensuring repatriation of export proceeds. Mere hardship to exporters was insufficient to establish unconstitutional discrimination, and the Article 14 challenge also failed for lack of foundational facts showing arbitrariness or confiscatory operation. On the discharge issue, the material then available did not justify interference, and the merits of the alleged offence were left open before the criminal court.

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Issues: Whether sub-sections (2) and (3) of Section 18 of the Foreign Exchange Regulation Act, 1973 are unconstitutional for alleged violation of Article 14 of the Constitution of India; and whether, on the facts, the criminal proceedings and refusal of discharge could be interfered with at the stage reached.

Analysis: The Act was included in the Ninth Schedule and thus enjoyed protection under Article 31B of the Constitution of India. Even apart from that protection, the classification between a domestic trader and an exporter was held to rest on a rational basis connected with the object of preventing foreign-exchange misuse and securing repatriation of export proceeds. Hardship to exporters, by itself, was not enough to establish unconstitutional discrimination. The challenge under Article 14 also failed for want of pleaded foundational facts showing that the provision was confiscatory or otherwise arbitrary in operation. The statutory presumption was treated as rebuttable, and the burden placed on the exporter was regarded as procedural rather than invalid. On the discharge issue, the material then available did not justify interference, leaving the question of ultimate guilt open before the criminal court.

Conclusion: The constitutional challenge to Section 18(2) and Section 18(3) failed, and the refusal to interfere with the criminal proceedings and discharge order was upheld.

Final Conclusion: The appeal was unsuccessful, and the impugned judgment was sustained, while the merits of the alleged offence were left open for determination in the criminal court.

Ratio Decidendi: A statutory provision placing a rebuttable reverse burden on an exporter is not unconstitutional under Article 14 where the classification has a rational nexus with the object sought to be achieved, and a challenge to such a provision must rest on necessary foundational facts showing arbitrariness or discrimination.

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