Strict proof for foreign exchange contraventions: vague letters and incomplete evidence cannot establish debt, payment, or penalty liability.

Strict proof is required for penal foreign exchange contraventions: liability under section 9(1)(a) was not established because the evidence did not show that the appellant-companies themselves made or arranged the alleged DM payment, and the provision could not be extended by construction. Section 9(1)(c) also failed because the unsigned letter was only a vague contractual proposal, not a binding acknowledgment of an existing debt or an enforceable right in favour of the non-resident. Contravention under section 16(1) was not proved on the incomplete material relied upon, so the connected penalty under section 68(1) could not stand.

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Issues: (i) Whether the alleged payment of DM 57,500 attracted contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973. (ii) Whether the unsigned letter constituted an acknowledgment of debt creating a right in favour of the non-resident so as to attract section 9(1)(c) of the Foreign Exchange Regulation Act, 1973. (iii) Whether contravention of section 16(1) of the Foreign Exchange Regulation Act, 1973 was established against the partnership firm and the connected penalty under section 68(1) could stand.

Issue (i): Whether the alleged payment of DM 57,500 attracted contravention of section 9(1)(a) of the Foreign Exchange Regulation Act, 1973.

Analysis: The evidence showed, at best, that a payment of DM 57,500 was made through an intermediary to the non-resident. The material did not establish that the appellant-companies themselves made the payment, arranged it within the meaning of the provision, or that the same act could legally be fastened on both companies as one composite contravention. As the provision is penal in character, it had to be construed strictly and could not be expanded to cover acts not expressly within its language.

Conclusion: The contravention of section 9(1)(a) was not made out against the appellant-companies, and the related penalty was unsustainable.

Issue (ii): Whether the unsigned letter constituted an acknowledgment of debt creating a right in favour of the non-resident so as to attract section 9(1)(c) of the Foreign Exchange Regulation Act, 1973.

Analysis: The alleged letter was not shown to be a binding and enforceable agreement, nor did it establish an existing debt capable of acknowledgment. The obligations recorded in it were contractual proposals relating to collaboration and payments under proposed arrangements, not a present debt. The document was also found to be vague and incapable of creating a legally enforceable right in favour of the non-resident. On the evidence, no debt of DM 5,31,000 was proved, and therefore there could be no acknowledgment of such debt within section 9(1)(c).

Conclusion: The contravention of section 9(1)(c) was not established, and the finding against the appellant-companies could not stand.

Issue (iii): Whether contravention of section 16(1) of the Foreign Exchange Regulation Act, 1973 was established against the partnership firm and the connected penalty under section 68(1) could stand.

Analysis: The only material relied upon was an incomplete loose sheet and a statement of J.J. Dalai, neither of which proved that any commission amount had actually remained unreceived in contravention of the provision. The statement, properly read, denied that old commission was outstanding. The evidence did not support the finding that the firm had failed to receive foreign exchange commission, and the consequential personal penalty could not survive once the substantive contravention failed.

Conclusion: The finding of contravention under section 16(1) was not sustainable, and the penalty under section 68(1) also failed.

Final Conclusion: The impugned order could not be sustained on the evidence or in law, and the appellants were entitled to relief in all the connected appeals.

Ratio Decidendi: A penal foreign exchange contravention cannot be upheld unless the evidence strictly establishes each statutory ingredient, and an unenforceable or vague document cannot by itself constitute a debt or an acknowledgment creating a legal right in favour of a non-resident.

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