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Issues:
- Interpretation of Notification No. FERA 6/74-RB issued by the Reserve Bank of India under section 9(1)(d) of the Foreign Exchange Regulation Act, 1973. - Alleged contravention of section 9(1)(d) by the appellant in making a payment to a person resident outside India. - Imposition of penalty by the Special Director and the Foreign Exchange Regulation Appellate Board. - Appeal against the penalty imposed and the decision of the Board. Analysis: The judgment deals with the interpretation of Notification No. FERA 6/74-RB issued by the Reserve Bank of India under section 9(1)(d) of the Foreign Exchange Regulation Act, 1973. The central issue is whether the appellant is entitled to the benefits of the notification, which permits a person resident in India to make a payment in rupees out of rupee funds provided by the sale of foreign exchange by order or on behalf of a person resident outside India. The appellant, a shoe manufacturer, was approached by a foreign customer to supply shoes, and a payment issue arose regarding a letter of credit. The authorities alleged a contravention of section 9(1)(d) by the appellant in making a payment of Rs. 12,472 to a local agent in Bombay. The Special Director imposed a penalty of Rs. 3,000 for the alleged contravention. The appellant appealed to the Foreign Exchange Regulation Appellate Board, arguing that the payment was made to an agent who received it on behalf of the principal, and any violation was technical in nature and done in good faith. The Board upheld the penalty, considering FI as the appellant's agent. The appellant then appealed to the High Court, challenging the finding of guilt and imposition of penalty. The court analyzed the facts and found that FI was not the appellant's agent, and the payment was made in accordance with the notification, entitling the appellant to make rupee payments out of foreign exchange proceeds. The court emphasized that the penalty imposition in quasi-criminal proceedings should be based on relevant circumstances and exercised judicially. It highlighted that mens rea was not relevant for the offence under section 9(1)(d) but was crucial in determining the quantum of penalty. The court concluded that even if the appellant was found guilty, considering the trivial nature of the offence and lack of mala fide intention, the penalty should not have been imposed. Therefore, the court allowed the appeal, set aside the orders under appeal, and made no order as to costs.
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