Reasonable steps to realise export proceeds defeated foreign exchange contravention and led to quashing of penalty.

Failure to realise export proceeds under the Foreign Exchange Regulation Act, 1973 did not amount to contravention where the record showed continuous follow-up with the shipping agent and the new buyer to prevent auction of the goods. Permission from the Reserve Bank of India for a 30% discount and extension of time supported the appellant's bona fides, and the balance amount had already been adjusted towards insurance and service charges, leaving no further sum payable. On these facts, the appellant was treated as having taken all reasonable steps to realise the sale proceeds and avoid auction, so no contravention under section 18(2) or section 18(3) was found and the penalty was quashed.

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Issues: Whether the appellant contravened section 18(2) and section 18(3) of the Foreign Exchange Regulation Act, 1973 by failing to take reasonable steps for realisation of export proceeds and by permitting auction of the shipment, warranting imposition of penalty.

Analysis: The correspondence on record showed continuous follow-up with the shipping agent and the new buyer to prevent auction of the goods. The Reserve Bank of India had permitted the requested 30% discount and extension of time for recovery of the export proceeds, which supported the appellant's bona fides. The balance amount was shown to have already been adjusted towards insurance and service charges, leaving nothing further payable by the shipping company. On these facts, the appellant had taken all reasonable steps that could have been taken to realise the sale proceeds and to avoid auction of the shipment.

Conclusion: The appellant was not guilty of contravention of section 18(2) or section 18(3) of the Foreign Exchange Regulation Act, 1973, and the penalty was rightly quashed.

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