2023 (6) TMI 546 - HC - FEMA

Non-realization export proceedings of goods - convertible foreign exchange - Reasonable steps u/s 18(3) of FERA - Suit for recovery of the balance of the price of the goods sold and delivered in respect of an export in any court in India - All Reasonable steps to receive or recover the payment for the goods as envisaged u/s 18(3) of the Act of 1973 - whether, filing of the suit by the appellants before the Hon ble High Court at Calcutta and obtaining a decree thereon for realisation of the balance of the price of goods sold and delivered to the importer would constitute reasonable steps to receive or recover the payment for the goods ? HELD THAT - In the facts of the present case, the exporter company exported goods of the invoice value of US 8,37,200 and received payment of a portion thereof leaving a sum of US 6,37,200 outstanding. The exports took place in 1996. Suit was filed for recovery and a decree with regard thereto was obtained. The decree could not be executed in India due to lack of assets of the importer in India. The appellants claimed that, execution of the decree in the foreign country where the importer was situated was not cost effective and feasible. In the facts of the present case, the explanation offered by the appellants with regard to inability to execute the decree obtained is plausible. The appellants adequately explained the steps taken by them to receive or recover the payment of the goods exported. The steps taken by the appellants in filing a suit and obtaining a decree thereon within the extended period is a reasonable step taken to receive and recover the payment of the goods exported within the meaning of Section 18(3) of the Act of 1973. Such facts rebut the statutory presumptions of Section 18(3) of the Act of 1973. The impugned show cause notice, the adjudication order passed thereon and the impugned order of the appellate authority are set aside.

Issues Involved:
1. Applicability of the sunset clause of the Foreign Exchange Amendment Act, 1999.
2. Determination of "reasonable steps" under Section 18(3) of the Foreign Exchange Regulations, 1973.

Summary:

Issue 1: Sunset Clause of Foreign Exchange Amendment Act, 1999

The appellants contended the applicability of the sunset clause of the Foreign Exchange Amendment Act, 1999. Both the adjudicating authority and the appellate authority negated this contention.

Issue 2: Reasonable Steps under Section 18(3) of the Foreign Exchange Regulations, 1973

The appellants argued that they took reasonable steps within the meaning of Section 18(3) of the Foreign Exchange Regulations, 1973 by filing a suit before the Hon'ble High Court at Calcutta for the recovery of the balance price of goods sold and delivered, and obtaining a decree thereon. The adjudicating and appellate authorities rejected this contention, stating that mere filing of a suit and obtaining a decree did not meet the parameters of Section 18(3).

Factual Matrix:

The appellant company exported materials under 3GR on March 29, 1996. The prescribed period under Section 18 of the Act of 1973 expired on September 30, 1996, and was extended by the Reserve Bank of India till May 31, 2000. The company did not receive the full payment and filed a suit (CS/299/1999) on May 17, 1999, which was decreed on July 8, 2002. The adjudication order dated December 30, 2002, was set aside for violation of natural justice and remanded, resulting in a re-adjudication order dated August 28, 2003. The appellants challenged this order, leading to the impugned order dated March 2, 2009.

Legal Analysis:

The core issue was whether filing a suit and obtaining a decree constituted "reasonable steps" to recover payment under Section 18(3) of the Act of 1973. The Court held that Section 18(3) raises a rebuttable presumption that the exporter did not take all reasonable steps to recover the payment unless proven otherwise. The Court found that the appellants' actions of filing a suit and obtaining a decree were reasonable steps within the meaning of Section 18(3), considering the high costs and impracticality of executing the decree in the foreign country where the importer was situated.

Conclusion:

The Court concluded that the appellants adequately explained the steps taken to recover the payment, rebutting the statutory presumption under Section 18(3). Consequently, the show cause notice dated May 3, 2002, the adjudication order dated August 28, 2003, and the appellate order dated March 2, 2009, were set aside. Appeals FEA/13/2009, FEA/16/2009, FEA/17/2009, FEA/18/2009, and FEA/19/2009 were allowed, while FEA/15/2009 and FEA/20/2009 were treated as abated due to the appellants' demise.

[DEBANGSU BASAK, J.]

[MD. SHABBAR RASHIDI, J.]

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