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TMI Blog2024 (6) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... ry is a serious one under law. No facts have been placed before us to indicate that any criminal complaint was filed by the appellant against the shipping company for the alleged forgery and if so, what was the fate of the same. Adjudicating authority has also referred to the fact that delivery of the cargo to Dubai instead of Russia was in fact, against the commercial interest of the shipper as it would result in reduced freight charges, unless, of course, the shipping company, was in collusion with the exporter and benefitted by diverting the cargo to a hard currency area in order to generate hard foreign currency in Dubai on the one hand and at the same time also realised payment in rupees under the state credit scheme for export to Russia. As also taken note of the observation of the learned adjudicating authority that in the event the exporter really intended that the goods should be delivered at Moscow only and the goods in fact did not reach Moscow but were delivered at Dubai, the logical course of action on the part of the exporter (the appellant company) or the importer (M/s Arina, Moscow) ought to have filed a case against the shipping company for claiming damages, but no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly decided in the Board meetings in the presence of all directors. Viewed in this perspective, the culpability for the transactions in question converge at the level of the directors of the company. Accordingly, he held the three directors of the company, namely, Shri Arun Kumar, Shri Prasanta Kumar Ray and Shri Amir Akbar Khan liable for the violations in terms of Section 68 of FERA, 1973 in relation to the appellant company, M/s S.S.K. Exports Ltd. As already stated, in this order, we are only concerned with one of the three directors, namely, Shri Arun Kumar. We find that no separate arguments have been presented challenging the penalty imposed upon Shri Arun Kumar over and above the arguments and contentions raised on behalf of the company which we have already dealt with in detail in this order. Penalty imposed upon the director was a direct consequence of the penalty imposed upon the company. No material has been placed before us to indicate that Shri Arun Kumar, Director, was not in charge of, and was not responsible to the company for the conduct of business of the company at the relevant time. Accordingly, we hold that Shri Arun Kumar, Director of M/s S.S.K. Exports Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e guilty of the contravention and shall be liable to be proceeded against and punished accordingly. 3. The aforementioned SCN was issued based on information gathered by the Directorate that certain exporters were abusing the policies governing exports from India to Russia against repayment of Rupee credits, thereby causing large-scale loss of foreign exchange to the exchequer. The said information also revealed that these exporters resorted to over-invoicing of export consignments with the goods thereafter being offloaded and cleared in Dubai and the same never reaching the ultimate destination in Russia. The proceeds of such exports were realised from the state credits meant for payments against exports to the Russian Federation even though the payments on account of third-country exports were not permitted to be drawn from such funds. Information further revealed that M/s S.S.K. Exports Ltd., Kolkata was one such exporter involved in this form of exports. It was also alleged that the Russian buyers, namely,M/s Arina and M/s Termocostroiwere non-existent. 4. Based upon the said information, enquiries were initiated by the Kolkata office of the Directorate against M/s S.S.K. Expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant, who is a senior citizen, to travel to Delhi from Kolkata, and the subsequent lack of coram in this Appellate Tribunal due the absence of incumbents in the posts of Chairman and Members. 8. After this Appellate Tribunal started functioning in August 2022, the matters were once again listed for hearing on a regular basis on various dates. None appeared for the appellants on 12.09.2022, 05.12.2022, 16.01.2023, 15.03.2023, 16.07.2023, 02.11.2023 and 14.02.2023. However, vide letters dated 12.01.2023, 21.07.2023, and most recently on 21.07.2023, the appellants have expressed their no- objection to the matters being disposed of on the basis of the written submissions sent by them on 03.10.2020. The matter was listed for hearing for the last time on 14.02.2024. None appeared for the appellants on that day also. However, taking note of the difficulty repeatedly expressed by the learned counsel for the appellant in travelling from Kolkata as well as the appellant s request to dispose of the matters on the basis of written submissions filed earlier, the matters were reserved for orders on that day. Arguments on Behalf of the Appellants 9. Detailed submissions have been made on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bills of Lading was duly negotiated with the Bank and it was presented by the United Bank of India to the L/C opening Bank in Moscow after which the L/C opening bank at Moscow endorsed the Bill of Lading (BL) in favour of the transferee at Moscow. This transfer was done. It is submitted by the appellant that these facts are not in dispute. 12. It is also submitted that under international law, a transferee of the BL is entitled to deal in the goods by transfer of the same. International law authorizes a transferee and BL holder to also get a Switch BL , from the shipping company. Delivery of BL is delivery of goods. The obligation of the consigner (exporter) is over as soon as the bill of lading is issued under an L/C mentioning the details of the L/C and sent to the foreign buyer. Thereafter, an exporter has no right of any nature whatsoever on the goods. It is further submitted that a shipping company cannot divert any article unless and until another BL is issued and the contract of carriage in the first BL is repudiated by the cancellation of BL. Diversion cannot take place otherwise and it would amount to a breach. 13. It is submitted that in the present case, the shipping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extract from Schmitthoff's Export Trade: The Law and Practice of International Trade 2000 edition has been has been submitted to substantiate the submission, as also a copy of the RTI reply of RBI referred to above. 15. It is submitted that the appellant has fulfilled all its obligations. The liberties of the foreign buyers who purchased the goods under L/C and paid for the same, could not be controlled by the municipal laws of India. There is no reservation under the Sale of Goods Act or under the Contract Act, or under any municipal Act in India under which, after sale, a seller can reserve right on the goods as to its disposal. 16. It is further contended that the RBI Circular, the breach of which is alleged, also does not, in any manner, cast a mandate on the buyer that the goods are required to be consumed in Russia. On the contrary, the circular says, funds from repayment of state credits are to be utilized for export of goods to Russian Federation only. No third country exports are permitted out of the funds from such repayment of state credit . It is also pointed out that the circular has been issued under Section 73(3) of the Foreign Exchange and Regulation Act, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self disowned. 22. It is also contended that the exporter is not liable for any action of the foreign buyer and the shipping company after the negotiation of the documents. The export to Russia is completed when the vessel leaves bound for Russia and it is shown in the manifest, which was the position in the present case. In the subject case, manifest shows that vessel was granted leave to depart from the Indian shores at Cochin with a declaration that the goods were bound for Moscow via Dubai in transit. This is declared in the manifest which is an admitted document. The destination Moscow in transit Dubai having been filed by the shipping company in its manifest, on the basis of which they got the permission to leave Cochin port and got clearance order from customs authorities, it could not have been changed on the basis of such concocted facts or oral communication or otherwise. It would require substitution, i.e., cancellation and reissue of B/L. The B/Ls generated at the time of delivery of the goods have no signature or authentication. 23. It is further contended that under the international covenant, the foreign buyer is entitled to deal in the goods and the Indian seller ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he FEMA was not available (2) The Adjudicating authority gave no finding on the charges made in the show cause notice which were under Sections 8, 68, 72(c) read with Section 68 of FERA. In paragraph 73 of the Order an omnibus statement is made that he finds that both M/s S.S.K. Exports Ltd. and M/s. Greenways Shipping Agencies Pvt. Ltd. contravened the provisions of the FERA, 1973 and RBI notifications as detailed in the SCN. (3) The adjudicating authority has given self-contradictory findings insofar as in paragraph 37 of the order it held that the consignments were diverted but in paragraphs 64, 68 and 69 it held that the story of diversion is a fabricated story. It further contradicts in paragraph 71 (4) The order is based on the conjecture that diversion of consignments in hard currency area would generate hard currency. Arguments on Behalf of the Respondents 29. The respondents have contested the arguments put forward on behalf of the appellant. Firstly, the modus operandi of abuse of the State Credit scheme by certain exporters has been emphasized upon. It is contended that the present appellant, M/s S.S.K. Exports Ltd., was one such exporter involved in the alleged form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y documentary evidence to show that M/s Arina Moscow or M/s Thermoecostroi, Moscow (notified party in the case) received the cargo . As per the export consignments, the LC opener was M/s Arina, Russia and the goods were consigned to M/s Termocostroi, Russia. It is important to note that the existence of the Russian buyers is questionable, the appellant has failed to establish that goods were delivered to the buyers and, therefore, they acted in defiance of the policy/regulation. That, the conduct of the appellant is questionable, and on bare pursuing record it becomes transparent that the appellant colluded with others to gain benefits by changing the route which resulted in causing loss to the exchequer. There is no proof that the alleged cargo reached Moscow, produced before the Ld. AA. 32. It is contended that the fact of offloading of the consignment in Dubai was accepted by both the shipper and shipping agent. The shipping agent issued Bills of Lading as if the goods were to be shipped to Moscow, but covertly delivered the consignments in Dubai thereby facilitating the exporter in the latter's illegal designs. 33.As regards the appellant s allegation of forgery, Also, our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the rules under FERA, 1973 with the company. Analysis and Findings 35. We have given careful consideration to the material before us and the rival contentions of the parties. The undisputed facts emerging from the record as well the arguments presented from both sides are, firstly, that during the relevant period, the appellant company was exporting tea to Moscow against the L/Cs opened by the Bank of Foreign Economic Affairs (BFEA), Moscow in the appellant s favour against the State Rupee Credit Scheme. It is also indisputable that as per the RBI Circular, funds from the repayment of state credits under the Scheme were to be utilized for the export of goods to the Russian Federation only and no third- country exports are permitted to be financed out of the funds from such repayments of state credits. It is also not in dispute that in the case of the 15 consignments exported by the appellant company which are under dispute, goods were in fact, diverted from their original destination of Moscow to Dubai, which is a hard currency area. There is no evidence on record to show that it was further shipped from Dubai to Moscow or any other destination in the Russian Federation.It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter-head alongwith complete details of the shipment container nos., voyage no., name of the like vessel etc. appear sufficient enough to impart credibility or authenticity to these letters. The handwriting expert's opinion would have assumed relevance only if the writer of the document was identifiable and such person's handwriting thereafter examined with reference to the questioned documents. In this case, the writer of the letter being not identified, the question of doubting the authenticity of the letters as disputed by the exporter and suspecting the genuineness thereof does not arise more so, because by diversion of cargo to Dubai instead of the original destination, Moscow, the shipping company suffered loss due to reduced collection of freight amount. In this context, the shipping agent has furnished copies of documents furnished before the Income Tax authorities and RBI, indicating, inter alia, that freights collected in respect of the said containers were only for Cochin Dubai and that the freight amounts were collected in Dubai as the consignments were on FOB basis. On the contrary, M/s S.S.K. Exporters Ltd., by diverting consignments to Dubai, a hard currency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The dispute is to the effect that while the shipping agent claimed that the cargo, eventhough initially booked for Moscow, was subsequently ordered to be unloaded in Dubai on the shipper s directions, the shipper s defence is that it had booked the cargo for Moscow but, however, during transhipment, the containers were off-loaded by the shipping agent in Dubai. Nevertheless, the fact remains that the exporter failed to furnish any documentary evidence to show that M/s Arina, Moscow or M/s Termoecostrol, Moscow, (notified party in the case) received the cargo. I am amazed to find that, in spite of non-delivery of goods, the proceeds have been drawn against the L/C from the Rupee Credit Fund. Even after assuming without necessarily conceding the exporter s claim that the goods did nto reach buyers in Moscow inspite of booking for Moscow, the normal logical course of action ought to have been for either of the parties, viz. M/s S.S.K. Exports Ltd. or M/s Arina, Moscow, to file a case against the shipping company for claiming damages. No such action has been taken in this case. All the three parties involved in the transactions the shipper, the shipping agent and the consignee did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40. We have also taken note of the observation of the learned adjudicating authority that in the event the exporter really intended that the goods should be delivered at Moscow only and the goods in fact did not reach Moscow but were delivered at Dubai, the logical course of action on the part of the exporter (the appellant company) or the importer (M/s Arina, Moscow) ought to have filed a case against the shipping company for claiming damages, but no such action was taken by either of them in this case. He has further observed that all the three parties involved, namely, the shipper/exporter, the shipping agent, and the consignee appear to have had no grievances or complaints against one another until the initiation of enquiries by the respondent Directorate. From all these facts, it cannot be ruled out in our view that all three parties were complicit in the entire episode. Alternately, it is also possible that the Russian importers, whose very existence has been doubted by the respondent Directorate, are not even genuine parties and were mere paper entities. It is evident that the blame game between the exporter and the shipping agent started only after investigations were initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took place without his knowledge or that he exercised all due diligence to prevent such contravention. (2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Explanation. For the purposes of this section-- (i) company means any body corporate and includes a firm or other association of individuals; and (ii) director , in relation to a firm, means a partner in the firm. 45. We find that in the impugned order, the learned adjudicating authority has recorded that no attempt was made on behalf of the exporter company, at any stage, neither during the course of investigations nor at the time of adjudication proceedings, to identify the functionary who negotiated the e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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