Reasonable steps to recover export dues defeat penal liability when an exporter declines to sue a foreign buyer.

Where the evidence showed that exporters and their bankers had been pressing the foreign buyer for payment and had also approached the Indian High Commissioner in London, the alleged failure to take effective steps to realise export proceeds was not established. A commercial decision not to sue the foreign buyer, because proceedings were considered inexpedient, amounted at most to an error of judgment and did not attract penal liability under section 12(2) of the Foreign Exchange Regulation Act, 1947. The contravention was therefore not made out and the penalty could not be sustained.

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Issues: Whether the appellants contravened section 12(2) of the Foreign Exchange Regulation Act, 1947 by failing to take sufficient and effective steps to realise the export proceeds, and whether the penalty was therefore sustainable.

Analysis: The correspondence and postal records showed that the appellants, along with their bankers, had been pressing the foreign buyer for payment well before 1970. The material also showed that they had approached the Indian High Commissioner in London as early as November 1967, and that the respondent did not dispute the genuineness of the documents produced. On this material, the basis of the finding that effective steps had not been taken before 1970 was not established. The appellants' decision not to sue the foreign buyer, because they considered it inexpedient, could at most amount to an error of judgment and did not attract penal liability under the provision.

Conclusion: The alleged contravention was not made out and the penalty could not be sustained.

Final Conclusion: The appellants were held to have taken reasonable steps to recover the export dues, and the penalty order was set aside.

Ratio Decidendi: Where the evidence shows that an exporter took reasonable and effective steps to recover export proceeds, a mere commercial decision not to institute suit does not amount to a penal contravention under section 12(2).

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