1993 (3) TMI 263 - HC - Companies Law

Summary

Issues Involved:
1. Contravention of Section 18(2) of the Foreign Exchange Regulation Act, 1973 (FERA).
2. Imposition and reduction of penalties by the Foreign Exchange Regulation Appellate Board (FERA Board).
3. Circumstances leading to non-repatriation of sale proceeds within the prescribed period.
4. Legal proceedings initiated by the appellants against third parties.

Issue-wise Detailed Analysis:

1. Contravention of Section 18(2) of the Foreign Exchange Regulation Act, 1973 (FERA):
The primary issue was whether the appellants contravened Section 18(2) of the FERA by failing to repatriate the sale proceeds of goods exported to Meka Trading Co., Tehran, within six months. The appellants argued that they neither did nor refrained from doing anything that would secure nonpayment or delay the payment of the goods. The court noted that the appellants were victims of unforeseen circumstances beyond their control, such as the unauthorized release of cargo by the local agents of the Shipping Corporation of India based on a personal indemnity bond without the required bank guarantee.

2. Imposition and Reduction of Penalties by the Foreign Exchange Regulation Appellate Board (FERA Board):
The Additional Director of Enforcement initially imposed a penalty of Rs. 25,000 on the company and Rs. 5,000 on each director. The FERA Board upheld this order but reduced the penalties to Rs. 10,000 for the company and Rs. 2,000 for each director. The court reviewed these penalties and found that the appellants had taken all reasonable steps to realize and recover payments, including filing a civil suit against BFDC and the Shipping Corporation of India before the show-cause notice was issued.

3. Circumstances Leading to Non-Repatriation of Sale Proceeds Within the Prescribed Period:
The court acknowledged that the appellants were in a helpless situation due to actions taken by third parties, specifically the BFDC and the Shipping Corporation of India. The cargo was released without the proper documents or bank guarantees, contrary to the normal practice and the appellants' instructions. The court found that these actions were beyond the appellants' control and that they had acted diligently to secure payment.

4. Legal Proceedings Initiated by the Appellants Against Third Parties:
The appellants had filed Civil Suit No. 495 of 1979 against BFDC and the Shipping Corporation of India to recover their dues. The court noted that this legal action was taken well before the show-cause notice was issued, demonstrating the appellants' efforts to recover the sale proceeds. The court also considered additional documents submitted during the appeals, which further supported the appellants' case.

Conclusion:
The court quashed and set aside the impugned judgment of the Appellate Board and the adjudicating authority, concluding that the appellants did not contravene Section 18(2) of the FERA. The proceedings on the show-cause notice were ordered to be dropped, and the penalty amounts, if paid, were to be refunded to the respective appellants. The appeals were allowed with no order as to costs.