Reasonable steps to realise export proceeds rebut the FERA presumption, and directors need proof of responsibility for penalty.

Non-realisation of export proceeds under FERA section 18(3) raised a rebuttable presumption of contravention, but it was displaced because the exporter showed persistent and bona fide recovery efforts, including reminders, foreign legal action, a decree, pursuit after liquidation, partial recovery through the liquidator, and an RBI extension of time. The finding of contravention was therefore unsustainable. A consolidated penalty on the company and all directors was also unsustainable because liability under section 68(1) requires proof that each director was in charge of and responsible for the conduct of business at the relevant time, and that foundational requirement was not established against all directors.

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Issues: (i) Whether the appellants had taken all reasonable steps to realise the export proceeds so as to rebut the statutory presumption of contravention under section 18(3) of the Foreign Exchange Regulation Act, 1973. (ii) Whether a consolidated penalty could be sustained against the company and all its directors without establishing the requirements of section 68(1) of the Foreign Exchange Regulation Act, 1973.

Issue (i): Whether the appellants had taken all reasonable steps to realise the export proceeds so as to rebut the statutory presumption of contravention under section 18(3) of the Foreign Exchange Regulation Act, 1973.

Analysis: Non-realisation of export proceeds raises a statutory presumption under section 18(3), but that presumption can be displaced by showing that all reasonable steps were taken. The record showed persistent recovery efforts, including reminders, negotiation through trade channels, institution of legal proceedings abroad, securing a decree, pursuing the debtor after liquidation, partial recovery through the liquidator, and obtaining extension of time from the Reserve Bank of India. The totality of these steps demonstrated conduct expected of a prudent exporter, and the mere fact that the initial efforts did not yield immediate recovery did not justify a finding of failure to take reasonable steps.

Conclusion: The presumption under section 18(3) stood rebutted and the finding of contravention was not sustainable.

Issue (ii): Whether a consolidated penalty could be sustained against the company and all its directors without establishing the requirements of section 68(1) of the Foreign Exchange Regulation Act, 1973.

Analysis: Liability of directors for a company's contravention is not automatic. For a penalty to be imposed on directors, the material must show that they were in charge of, and responsible for, the conduct of the business at the relevant time. The record did not establish this foundational requirement in respect of all the directors against whom the penalty was levied, and the consolidated penalty order did not adequately address their individual responsibility.

Conclusion: The consolidated penalty against the company and all its directors was unsustainable.

Final Conclusion: The penalty order was set aside and the appeal was allowed on merits, the appellants succeeding both on the export-realisation issue and on the legality of the penalty imposed on the directors.

Ratio Decidendi: A statutory presumption arising from non-realisation of export proceeds is rebutted where the exporter proves bona fide and reasonable recovery efforts taken as a prudent businessman, and vicarious penalty on directors cannot be imposed absent proof that they were in charge of and responsible for the company's business at the relevant time.

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