Export realisation defaults and director liability under FEMA sustained where recovery steps and due diligence were not proved.

Prolonged non-realisation of export proceeds without proof of effective recovery steps, sanctioned extension, or pursuit of foreign remedies was treated as contravention of the export realisation framework under FEMA and the Export Regulations, and the finding was sustained against the responsible appellants. Failure to ship goods against advance payments within one year also constituted contravention because the shipment obligation remained primary and the refund proviso did not dilute it. Under the company liability provision, directors in charge of and responsible for the business were liable unless they proved lack of knowledge or due diligence; liability was upheld for the directors shown to be involved, while the appellant who was not shown to participate in day-to-day affairs was excluded.

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Issues: (i) Whether non-realisation of export proceeds and failure to take reasonable steps to recover them constituted contravention of the export realisation framework under FEMA and the Export Regulations; (ii) Whether failure to ship goods against advance payments within one year attracted contravention under the advance payment regulation; (iii) Whether the directors were liable under the company liability provision, and whether one appellant director had established absence of responsibility.

Issue (i): Whether non-realisation of export proceeds and failure to take reasonable steps to recover them constituted contravention of the export realisation framework under FEMA and the Export Regulations.

Analysis: The export proceeds remained unrealised for a prolonged period, and the appellants did not produce satisfactory material showing effective recovery measures, extension of time, or claims pursued before appropriate foreign recovery fora. The regulatory framework required realisation and repatriation of export value within the prescribed period, with extension available only on sufficient cause. The record did not establish that such cause was substantiated or that proper steps were taken to secure recovery.

Conclusion: The finding of contravention for non-realisation of export proceeds was upheld against the appellants other than the appellant who was found not responsible.

Issue (ii): Whether failure to ship goods against advance payments within one year attracted contravention under the advance payment regulation.

Analysis: The regulation imposed a primary obligation to ensure shipment within one year from receipt of advance payment. The proviso concerning refund with prior approval did not dilute that obligation. The material on record, including the statement of a director, showed that certain exports were not effected against the advances received, and no satisfactory explanation was furnished for the default.

Conclusion: The contravention relating to advance payments was sustained.

Issue (iii): Whether the directors were liable under the company liability provision, and whether one appellant director had established absence of responsibility.

Analysis: The company liability provision deems persons in charge of and responsible for the conduct of the business to be guilty unless they prove lack of knowledge or due diligence. The evidence showed that the relevant directors were concerned with the conduct of the company and no contrary material or due diligence defence was established. However, as regards one appellant director, the record showed that she was only a housewife and there was nothing to show her involvement in day-to-day affairs or knowledge of the default.

Conclusion: Liability was affirmed against all appellant directors except the appellant who was held not responsible and whose appeal was allowed.

Final Conclusion: The impugned order was sustained against the directors found responsible for the contraventions, while the appeal of the appellant found uninvolved in the company's affairs was allowed.

Ratio Decidendi: In export realisation matters, prolonged non-recovery without proof of effective recovery efforts or granted extension constitutes contravention, and company liability attaches to directors only if they were in charge of and responsible for the business or fail to establish lack of knowledge or due diligence.

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