Final rehabilitation scheme prevails over linked fiscal penalty; recovery cannot defeat revival, and waiver lies with competent authority.

A final BIFR-sanctioned rehabilitation scheme for a sick company had to be given practical effect, and a fiscal penalty arising from the same export-obligation default could not be enforced in a manner that defeated the scheme's revival objective. The recovery action taken by the DGFT was therefore unsustainable, and the impugned orders were quashed. The text also notes that waiver of such penalty had to be examined by the competent authority, such as the Ministry of Finance, rather than by the DGFT.

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Issues: Whether the fiscal penalty imposed under the Foreign Trade (Development and Regulation) Act, 1992 could be sustained when the BIFR-sanctioned rehabilitation scheme had recommended waiver of the customs-related liability and had attained finality.

Analysis: The rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 was intended to revive the sick company and had to be given practical effect. The penalty arose from the same export-obligation default that was linked to the customs duty concession under the import licence. Since the BIFR recommendations were not challenged and had attained finality, the authorities could not defeat the object of the rehabilitation scheme by insisting on recovery of the fiscal penalty. At the same time, the competent authority for waiver of such penalty was the Ministry of Finance or other competent authority, not the DGFT.

Conclusion: The fiscal penalty could not be recovered by the DGFT in the face of the final BIFR rehabilitation scheme, and the impugned orders were quashed. The matter was required to be considered for waiver by the competent authority.

Ratio Decidendi: A final BIFR rehabilitation scheme must be given effect so that the revival objective is not defeated, and a penalty intrinsically connected with the rehabilitated liability cannot be enforced contrary to that sanctioned scheme; waiver must be considered by the competent authority.

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