Realisation of export proceeds defeats FERA contravention and prevents penalty where RBI extension and proof of payment exist

Subsequent realisation of export proceeds through banking channels and an RBI extension can negate a proposed contravention under section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 where the department itself confirms that no amount remains outstanding. The adjudicating authority must consider later documentary proof of payment and not rely only on the position existing on an earlier date; if the factual foundation for the charge does not survive, penalty under section 68(1) cannot be sustained. Once the principal contravention fails, any consequential vicarious liability of directors also falls away.

---

---

Issues: Whether the show-cause notice and adjudication proceedings were misconceived in view of the subsequent realisation of the export proceeds and the RBI extension, and whether contravention of section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 was made out so as to sustain penalty under section 68(1) of that Act.

Analysis: The record showed that the appellant had sought and obtained extension of time from the RBI in respect of a substantial number of GRIs and that the outstanding export proceeds were thereafter realised through banking channels. The department itself verified and confirmed that no amount remained outstanding in respect of the GRIs covered by the show-cause notice. The adjudicating authority erred in proceeding only on the basis of the position as it stood on an earlier date and in ignoring the later documentary evidence of realisation that had been placed before it. In these circumstances, the foundation of the charge itself was defective and the factual basis for alleging contravention did not survive. Once the principal contravention failed, the basis for fastening vicarious liability on the directors also fell away.

Conclusion: The contravention under section 18(2) read with section 18(3) was not established, and the penalty and consequential liability under section 68(1) could not be sustained.

---