Contingent foreign exchange arrangement held outside exchange-control breach until control or title actually vested.

Where foreign exchange is held abroad under a genuine contingent arrangement, no contravention of exchange-control law arises until the person obtains present title or control. On those facts, the commission amount was not immediately due, the appellant had only a contingent right, and there was no acquisition or transfer of foreign exchange in breach of the law. The duty to offer foreign exchange for sale to an authorised dealer also arose only when the appellant obtained a real right of disposal, so no default under the surrender requirement was established. The anti-evasion provision was likewise inapplicable because the agreement was not a device to defeat the statutory scheme.

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Issues: (i) Whether the appellant had, by reason of the foreign commission arrangement, otherwise acquired or transferred foreign exchange in contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973; (ii) whether the appellant failed to offer the foreign exchange for sale to an authorised dealer within the prescribed time in contravention of section 14 of the Foreign Exchange Regulation Act, 1973; (iii) whether the agreement and connected correspondence evaded the operation of sections 8(1) and 14 so as to attract section 47 of the Foreign Exchange Regulation Act, 1973.

Issue (i): Whether the appellant had, by reason of the foreign commission arrangement, otherwise acquired or transferred foreign exchange in contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973.

Analysis: The commission payable under the arrangement was not immediately and unconditionally due to the appellant. The agreement, read with the connected letters, showed that the money was to be held with the foreign third party until the stipulated contingency occurred and clearance was received. The appellant therefore had only a contingent right and no complete domain or right of disposition when the remittances were made to the foreign account. A transfer presupposes actual control and the ability to dispose of the property, which was absent here. The foreign exchange was acquired only when the contingency was satisfied and the remittance was subsequently released in favour of the appellant.

Conclusion: The charge under section 8(1) was not established and the finding is in favour of the appellant.

Issue (ii): Whether the appellant failed to offer the foreign exchange for sale to an authorised dealer within the prescribed time in contravention of section 14 of the Foreign Exchange Regulation Act, 1973.

Analysis: The obligation to offer foreign exchange for conversion arises when the person actually owns or holds it in the sense of having title and control over it. On the facts, the appellant did not own or hold the foreign exchange while it remained with the foreign intermediary under the agreed contingency arrangement. Time for compliance under the notification could begin only when the appellant obtained a real right of disposal, which occurred upon the later clearance and remittance in India through banking channels within the stipulated period.

Conclusion: The charge under section 14 was not made out and is decided in favour of the appellant.

Issue (iii): Whether the agreement and connected correspondence evaded the operation of sections 8(1) and 14 so as to attract section 47 of the Foreign Exchange Regulation Act, 1973.

Analysis: Section 47 is attracted only where an agreement directly or indirectly evades or avoids the operation of the Act. Since the substantive charges under sections 8(1) and 14 failed, the foundation for invoking section 47 also disappeared. The agreement was construed as embodying a contingent commercial arrangement, not a device by which the appellant's own foreign exchange was placed abroad in derogation of the statutory scheme.

Conclusion: The charge under section 47 was not proved and is decided in favour of the appellant.

Final Conclusion: The penalty order could not survive because the appellant's entitlement was contingent, the foreign exchange was not shown to have been acquired or transferred in breach of the Act, and the agreement did not amount to statutory evasion.

Ratio Decidendi: Where foreign exchange is held abroad under a genuine contingent arrangement and the person concerned has no present title or control until the contingency occurs, there is neither acquisition or transfer in breach of the exchange-control law nor a failure to surrender foreign exchange within time, and an agreement embodying such a contingency does not by itself attract the anti-evasion provision.

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