RBI write-off limits foreign exchange contravention, but unrecovered export proceeds can still attract liability and reduced penalty.

RBI write-off of a substantial part of unpaid export proceeds displaced penal contravention under the foreign exchange law to that extent, because failure to realise proceeds is actionable only where the exporter has not taken the required steps without RBI permission. The tribunal therefore set aside the finding of contravention for the written-off amount, while sustaining liability for the remaining unrecovered balance where no material rebutted the presumption that reasonable recovery steps had not been shown. It also reduced the penalty on a proportionate basis, confining the adverse finding and monetary consequence to the balance amount still in dispute.

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Issues: (i) Whether RBI's grant of write-off in respect of a substantial part of the export proceeds negated contravention under section 18(2) of the Foreign Exchange Regulation Act, 1973 read with section 18(3); (ii) Whether the penalty required reduction where only a small balance amount remained in dispute.

Issue (i): Whether RBI's grant of write-off in respect of a substantial part of the export proceeds negated contravention under section 18(2) of the Foreign Exchange Regulation Act, 1973 read with section 18(3).

Analysis: The statutory scheme treats failure to realise export proceeds as a contravention only where the exporter, without RBI permission, omits to take the required action to secure realisation. Once RBI had granted write-off for the larger portion of the outstanding amount, that permission covered the relevant part of the default and displaced the basis for penal action to that extent. The adjudication order, insofar as it proceeded as if the write-off did not exist, was therefore unsustainable for the written-off amount.

Conclusion: In favour of the appellants; the finding of contravention could not be sustained for US Dollar 22047.70 and that part of the order was set aside.

Issue (ii): Whether the penalty required reduction where only a small balance amount remained in dispute.

Analysis: The remaining sum of US Dollar 1750 was not treated as negligible in the circumstances. No material was shown to displace the statutory presumption that reasonable steps had not been taken to recover the balance export proceeds. The finding of contravention for that amount was therefore upheld, but the overall penalty was scaled down on a rough proportional basis.

Conclusion: In favour of the appellants in part; the contravention finding for US Dollar 1750 was sustained, while the penalty was reduced to 10 per cent of the original amount.

Final Conclusion: The appeals succeeded only to the extent of excluding the written-off export proceeds from the adverse finding, and the remaining liability was confined to the balance amount with corresponding reduction in penalty.

Ratio Decidendi: Where RBI has granted write-off for the outstanding export proceeds, the statutory default cannot be sustained to that extent, but the exporter remains exposed to the presumption of contravention for any unrecovered balance unless reasonable steps to realise it are shown.

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