1983 (5) TMI 178 - HC - Companies Law

Summary

Issues:
1. Contravention of provisions of sections 10(1) and 12(2) of the Foreign Exchange Regulation Act, 1947.
2. Penalty imposed on the company for alleged contravention.
3. Appeal filed under section 23EE of the Act challenging the penalty.

Analysis:

The judgment by G.C. Jain, J. of the High Court of Delhi dealt with the contravention of provisions of sections 10(1) and 12(2) of the Foreign Exchange Regulation Act, 1947. The case involved a dispute regarding the export of readymade garments to a buyer in New York. The buyer raised issues about the quality of goods and late supply, proposing to pay only 50% of the price. The company sought arbitration with the Reserve Bank of India's permission but faced challenges in appointing an arbitrator. The buyer eventually agreed to pay a reduced amount, which was approved by the Reserve Bank of India. However, a small balance remained unrealized, leading to notices to the appellants for contravention of the Act.

The Special Director of Enforcement found the appellants guilty of contravening the Act and imposed a penalty of Rs. 30,000 on the company. The appellants appealed the decision under section 23E of the Act. The Foreign Exchange Regulation Board member upheld the decision but reduced the penalty to Rs. 3,000, citing that the appellants had taken reasonable steps under the circumstances. Dissatisfied, the appellants filed further appeals under section 23EE of the Act.

In the subsequent legal arguments, the court examined the provisions of the Act aimed at safeguarding foreign exchange and the specific prohibitions under sections 10(1) and 12(2). The charge against the appellants was their failure to take necessary steps for realizing the full export value, as directed by the Reserve Bank of India. However, the court noted that the appellants had made efforts to resolve the dispute through arbitration but found it economically unfeasible due to high costs compared to the unrealized amount. The court emphasized that the appellants had realized over 95% of the consignment value with the Reserve Bank's approval, saving foreign exchange that would have been spent on arbitration.

Ultimately, the court accepted the appeals, setting aside the penalty imposed on the company. The court concluded that the appellants had not contravened the provisions of the Act based on the specific circumstances and actions taken to resolve the export dispute, thereby directing the refund of the fine paid by the company.