Export proceeds recovery and double penalty principles upheld: firm liable, partners relieved from simultaneous penalty

Under the Foreign Exchange Regulation Act, 1973 and the 1974 Rules, an exporter must take reasonable and legally effective steps to realise export proceeds, failing which a rebuttable presumption of contravention arises. The Tribunal found that correspondence, meetings and a civil suit did not amount to sufficient recovery efforts, as there was no effective pursuit before the foreign buyer or relevant authorities abroad and no application for extension or write-off. The presumption of contravention therefore remained unrebutted against the firm. On penalty, the same contravention could not be visited simultaneously on both the partnership firm and its partners; penalty was sustained against the firm but set aside for the partners.

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Issues: (i) Whether the exporters had taken reasonable steps to realise the balance export proceeds so as to rebut the presumption of contravention under the foreign exchange law. (ii) Whether penalty could be sustained against both the partnership firm and its partners for the same contravention.

Issue (i): Whether the exporters had taken reasonable steps to realise the balance export proceeds so as to rebut the presumption of contravention under the foreign exchange law.

Analysis: Under section 18(2) and section 18(3) of the Foreign Exchange Regulation Act, 1973, read with rule 8 of the Foreign Exchange Regulation Rules, 1974, an exporter must make reasonable efforts to realise export proceeds within the prescribed time, failing which a rebuttable presumption of contravention arises. The steps relied upon by the appellants consisted mainly of correspondence, meetings, and a civil suit, but there was no satisfactory material showing effective recovery efforts, no meaningful pursuit before the foreign buyer or relevant authorities abroad, and no application for extension or write-off. The record did not establish that the appellants had taken serious, vigorous, or legally efficacious steps to recover the outstanding amount.

Conclusion: The presumption under section 18(3) was not rebutted and the finding of failure to take reasonable steps was upheld against the firm.

Issue (ii): Whether penalty could be sustained against both the partnership firm and its partners for the same contravention.

Analysis: The contravention was attributable to the firm through the persons managing its affairs, but the partnership firm and its partners could not be penalised simultaneously for the same contravention in the manner imposed. The liability was therefore confined to the firm, while the partners were required to be relieved from the penalty imposed on them.

Conclusion: Penalty was sustained against the firm, but the partners were absolved from penalty.

Final Conclusion: The finding of contravention and the penalty on the firm were maintained, but the penalties imposed on the partners were set aside, resulting in a partial allowance of the appeals.

Ratio Decidendi: In proceedings concerning export proceeds, the statutory presumption of contravention remains unrebutted unless the exporter proves concrete and effective reasonable steps to realise the dues; and the same contravention should not be penalised twice by visiting both the firm and its partners with penalty simultaneously.

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