Pre-deposit dispensation and recovery proceedings: coercive enforcement should remain in abeyance while the waiver application is undecided.

Where an appeal under the Foreign Exchange Regulation Act was pending with an undecided request for dispensation of pre-deposit, the appellate authority had to determine whether deposit would cause undue hardship and either waive or refuse it. Until that application was decided, the liability to deposit was not finally settled. The recovery direction itself was not treated as illegal, but coercive steps were restrained because the appeal and dispensation request had remained unattended.

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Issues: Whether, while an appeal under Section 52 of the Foreign Exchange Regulation Act, 1973 was pending together with an application for dispensation of pre-deposit under Section 52(2), recovery proceedings for the penalty could continue and whether the appellate authority was bound to decide the dispensation application.

Analysis: The statutory scheme required the appellate authority to consider whether the deposit of penalty would cause undue hardship and to either dispense with the deposit or reject the request. The pending application meant the appellant's liability to make the deposit had not been finally determined by the appellate authority. In those circumstances, although the recovery direction issued by the enforcement authority was not illegal by itself, equitable relief was warranted because the appeal and the dispensation application had remained unattended.

Conclusion: The appellate authority was directed to dispose of the appeal and the recovery authority was restrained from taking coercive steps until then.

Ratio Decidendi: Where an appeal is pending with an undecided application for dispensation of pre-deposit, the appellate authority must decide that application, and coercive recovery should ordinarily be kept in abeyance until such decision.

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