1986 (7) TMI 286 - HC - FEMA

Summary

Issues:
1. Alleged contravention of Section 5(1) and Section 12(2) of the Foreign Exchange Regulation Act, 1947.
2. Interpretation of the provisions of Section 12(2) regarding non-repatriation of export proceeds.

Analysis:
The case involved an exporter of cashewnuts who entered into a contract with a foreign buyer for the sale of cashewnuts. The appellant faced allegations of contravening Section 5(1) and Section 12(2) of the Foreign Exchange Regulation Act, 1947. The Assistant Director of Enforcement initiated proceedings against the appellant for not repatriating an amount from the value of the goods exported within the prescribed period. The Assistant Director imposed a fine on the appellant for the contravention. The appellant appealed before the Foreign Exchange Regulation Appellate Board, arguing that the adjustments made by the agent did not require specific sanction and that no offence was committed. The Appellate Board accepted the appellant's contentions regarding Section 5(1)(a) but found the appellant guilty of contravening Section 12(2) due to non-repatriation of a specific amount.

The appellant challenged the Appellate Board's decision through a Second Appeal, emphasizing that the Board should have followed a Full Bench decision of the Calcutta High Court instead of being bound by an earlier decision of the Madras High Court. The High Court analyzed the interpretations of Section 12(2) by both the Madras and Calcutta High Courts. The Madras High Court's decision highlighted the obligations of a person entitled to sell or procure the sale of goods exported, emphasizing the importance of full payment by the foreign buyer. The High Court agreed with the Madras view, considering the legislative intent and the need for a workable interpretation of the Act to conserve foreign exchange resources.

The High Court dismissed the appellant's appeal, upholding the decision of the Foreign Exchange Regulation Appellate Board. The court preferred the interpretation of Section 12(2) as per the Madras High Court's decision, emphasizing the importance of conserving foreign exchange resources and effective oversight of transactions. The appeal was consequently dismissed, and no costs were awarded.