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TMI Blog1990 (3) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 27(1) of the Foreign Exchange Regulation Act, 1973, for which the said company was liable to pay penalty under section 50 of the said Act. The facts of the case in brief are as follows : The said company was engaged in the export of tea and applied to the Reserve Bank of India for permission to establish a branch office at Dubai. In the said application, the said company stated, inter alia , as follows : ' "Dubai (United Arab Emirates). The proposed branch will be set up to sell our goods directly to the retailers ; thus it will be possible for us not only to realise a higher unit price but to substantially expand our exports to the West Asia/Gulf region." "We expect the proposed Dubai office to be self-supporting within two years. The recurring expenses of Rs. 1,25,000 will be met by the increased sale of our goods in Dubai. Although the establishment of our proposed office will not result in a saving of foreign exchange which would otherwise have to be expended, it will result in more foreign exchange earnings for the country." On the basis of the said application, the Reserve Bank of India granted permits for recurring remittances on account of maintena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of the materials placed before the Adjudicating Officer, the said Adjudicating Officer came to the conclusion that the charges levelled in Memorandum No. T-4/15-C/83 (CSN I) dated December 1, 1983, were not established but the charges mentioned in Memorandum No. 11 of 1984 (SCN II), dated April 30, 1982, under section 27(1) of the Foreign Exchange Regulation Act were fully established against the appellants and, accordingly, the said Adjudicating Officer imposed a penalty of Rs. 10,000 on the said company and Rs. 1,000 each on the managing director and the executive director of the said company. Being aggrieved by and dissatisfied with the order of the said Adjudicating Officer in respect of the charges contained in Memo No. 11 /84/(SCN II), dated 30th January, 1984, under section 27(1), the said company preferred an appeal before the Foreign Exchange Regulation Appellate Board in Appeals Nos. 106 and 107 which were filed on July 14, 1986. Both these appeals were disposed of by the said Board on 5th May, 1986, by passing, inter alia , the following order : "A perusal of the said provisions of para 21.7 leaves no room for doubt that they applied to the establishment of a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant, Union of India, preferred this appeal to this court under section 54 of the Foreign Exchange Regulation Act, 1973. Mr. R. N. Das, learned counsel appearing on behalf of the appellant, contended that the said company violated the provisions of section 27(1) of the Foreign Exchange Regulation Act because the said company had, without previous permission of the Central Government, associated itself with or participated in a concern outside India and engaged in or intended to engage in activity of trading or commercial in nature outside India. It is the contention of Mr. Das that the said company, by allowing its branch office to perform trading activities, had violated the provisions of section 27(1) of the said Act. It was submitted by Mr. Das that, under the provisions of section 27(1) of the said Act, a restriction has been imposed upon persons resident in India from carrying on trading activities outside India. According to him, if such a trading activity is being carried on by the firm, in that event, it would attract the provisions of section 27 of the said Act and the consequential penalty under section 50 of the said Act would be attracted. It was submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in all respects as if such firm or branch were a body corporate resident where it is situated." Relying on the provisions of that section, Mr. Das submitted that the said branch office should be treated for all practical purposes as a separate body corporate, resident in foreign countries and, by doing trading activities through the branch office, the said company had in fact entered into trading activity with a foreign concern. We are unable to accept, such an argument in view of the fact that the provisions of section 73 of the said Act are supplementary provisions of the said Act that such a firm or a branch of company shall be a body corporate where the branch is situated is a matter of legal fiction. The purpose is clear that, for the purpose of income and other statutory obligations, such a firm should be treated as a resident where it is situated. These provisions cannot come in aid of the appellants for the purpose of construing the provisions of section 27(1) of the said Act to hold that the head office, by entering into trading activities with its branch office, had associated itself or participated in any concern outside India. In this connection, it may be mention ..... X X X X Extracts X X X X X X X X Extracts X X X X
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