RBI write-off permission can nullify penalty for non-realisation of export proceeds under foreign exchange law

Penalty for non-realisation of export proceeds under section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 is not sustainable where the Reserve Bank of India later grants permission to write off the unrealised amounts. The operative basis for contravention falls away once the exporter secures the available regularising relief, and the remaining non-realisation cannot be treated as wilful failure when no favourable RBI extension or write-off order had been obtained earlier. On that footing, the exporter is not liable for contravention and the penalty is to be set aside.

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Issues: Whether penalty for non-realisation of export proceeds under section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 was sustainable after the Reserve Bank of India granted permission to write off the unrealised amounts.

Analysis: The appellant's default was founded on non-realisation of export proceeds within the prescribed period. The adjudicating authority imposed penalty because no favourable order had been obtained from the Reserve Bank of India for extension of time or write-off. During the appeal, permission from the Reserve Bank of India to write off the unrealised amounts was produced. Once such permission was granted, the basis of the penalty order no longer survived, since the appellant had taken the steps available to it for regularising the matter and the remaining non-realisation could not be attributed to any wilful failure on its part.

Conclusion: The appellant was not liable for contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973, and the penalty was set aside.

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