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1984 (12) TMI 268 - HC - Companies Law
Issues: Interpretation of "owns or holds" in section 9 of the Foreign Exchange Regulation Act, 1947; Alleged contravention of sections 9, 10, and 5 of FERA; Validity of penalties imposed by the Appellate Board; Application of section 9 to the case based on credit notes; Interpretation of credit notes as contingent debts.
In this judgment delivered by Bharucha, J., the primary issue revolves around the interpretation of the phrase "owns or holds" in section 9 of the Foreign Exchange Regulation Act, 1947. The case involves a petition seeking to quash an order by the Foreign Exchange Regulation Appellate Board, where the petitioners were alleged to have contravened sections 9, 10, and 5 of FERA. The petitioners, acting as indenting agents for foreign manufacturers, received commission payments which were subject to scrutiny. The Appellate Board found the petitioners guilty of not surrendering foreign exchange earned as commission within the specified time, leading to penalties being imposed. The petitioners challenged the penalties, specifically focusing on the interpretation of "owns or holds" in section 9 regarding the commission amounts received. The Appellate Board's decision was based on the understanding that the petitioners had full control and ownership over the commission amounts credited to them, as evidenced by credit notes received from foreign manufacturers. Regarding the application of section 9 to the case based on credit notes, the Appellate Board concluded that the petitioners effectively owned and held the commission amounts mentioned in the credit notes, thus failing to comply with the surrender requirements under FERA. The judgment delves into the nature of credit notes, defining them as documents indicating entitlement to a certain amount credited by the issuer. However, the court disagreed with the Board's interpretation, stating that the petitioners did not have actual control or ownership over the foreign exchange mentioned in the credit notes. The court emphasized that the petitioners merely had a right to receive the funds, which did not amount to ownership or holding as required by section 9. Furthermore, the judgment addresses the argument regarding credit notes as contingent debts due to potential deductions by foreign manufacturers in case of non-payment by Indian buyers. Ultimately, the court ruled in favor of the petitioners, quashing the Appellate Board's decision upholding the contravention of section 9 and the penalties imposed. The court held that section 9 did not apply to the case based on the nature of credit notes and lack of actual ownership or control by the petitioners over the foreign exchange. As a result, the penalties of Rs. 50,000 and Rs. 4,000 imposed on the first and second petitioners, respectively, were set aside. In conclusion, the court ordered the quashing of the Appellate Board's decision regarding the contravention of section 9 and the associated penalties. Additionally, the court directed the respondents to return any excess amount deposited by the petitioners within a specified period and discharged the bank guarantee provided by the petitioners. The judgment concluded with no order as to costs, bringing an end to the legal proceedings in this matter.
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