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Issues: (i) whether the appellants had contravened section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 by failing to realise the outstanding export proceeds; (ii) whether the penalty imposed on the first appellant was excessive and required reduction; and (iii) whether the separate penalty imposed on the second appellant under section 68(1) was sustainable.
Issue (i): whether the appellants had contravened section 18(2) read with section 18(3) of the Foreign Exchange Regulation Act, 1973 by failing to realise the outstanding export proceeds.
Analysis: The outstanding export proceeds were not in dispute, so the statutory presumption under section 18(3) operated against the appellants. The explanation that remittance was delayed because of action by the enforcement authorities was not accepted, since part payment had still been received after such action and the appellants had not shown that they took effective legal or other measures to realise the balance. Business prudence could not displace the statutory obligation to take steps to avoid the presumption of violation.
Conclusion: The finding of contravention was upheld against the first appellant.
Issue (ii): whether the penalty imposed on the first appellant was excessive and required reduction.
Analysis: The amount of penalty was considered in the light of the long period of business activity, the substantial foreign exchange earned earlier, the absence of any design to retain funds abroad, the stoppage of business, and the financial hardship shown. These mitigating circumstances made the original penalty harsh, and a lower amount was considered sufficient to secure compliance.
Conclusion: The penalty on the first appellant was reduced from Rs. 1,50,000 to Rs. 35,000.
Issue (iii): whether the separate penalty imposed on the second appellant under section 68(1) was sustainable.
Analysis: The Board followed the consistent view that where a partnership firm is penalised for a contravention, a further penalty on the partners is ordinarily not warranted, especially when the partner has not acted for personal gain in derogation of the partnership business. On that footing, the separate penalty on the second appellant could not stand.
Conclusion: The penalty imposed on the second appellant was set aside.
Final Conclusion: The contravention finding survived, but the monetary consequence was reduced for the firm and eliminated for the partner, resulting in partial relief to the appellants as a whole.
Ratio Decidendi: An exporter must take effective measures to realise outstanding export proceeds to rebut the statutory presumption of contravention, and a partner should ordinarily not suffer a separate penalty where the firm has already been penalised and no personal gain is shown.
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