S. Palanivelu, J.@mdashAppeal filed u/s 54 of the Foreign Exchange Regulation Act 1973 read with Sections 35 & 49 of the Foreign Exchange Management Act, 1999 against the order passed in allowing the Appeal and setting aside the charge and order of penalty by the Appellate Tribunal for Foreign Exchange, New Delhi (hereinafter referred to as Appellate Tribunal), dated 09.10.2003 in Appeal No. 137 of 2003.
2.The brief facts of the case are as follows:
2.1. A charge was issued for contravention of Section 82 r/w. Section 18(3) of the Foreign Exchange Regulation Act, 1973 (for short ''FERA'') by the Deputy Director Enforcement, Chennai. The second respondent exported garments in the year 2000 and failed to realise proceeds to the tune of US Dollars 52,739.46 within the prescribed time limit and thereby contravened the provisions of Section 18(2) of the Act. The Director of the Company is liable for the conduct of the business of the Company during the relevant period. A show cause notice was issued to the respondents, however, they did not file any reply statement.
2.2. The adjudication proceedings were held against the notices and on close of the enquiry, the notice Company was found guilty of the charges. The Director was found guilty invoking Section 68(1) of the Act. Hence, a consolidated penalty of Rs. 5/- Lakhs was imposed on them. The respondents carried the matter in appeal before the Appellate Tribunal for Foreign Exchange, New Delhi in Appeal No. 137 of 2003. The Appellate Tribunal allowed the appeal observing that it could not be stated that the provisions of the Act have been contravened, that even though FERA was replaced by Foreign Exchange Management Act (for short ''FEMA''), the offences stated to have been committed during the period covered by the FERA, proceedings could be initiated under FERA and failure to invoke of FEMA cannot be stated to be illegal and that these respondents'' Company has taken sincere steps to realize the proceeds as required by the statute and so, the respondents could maintain appeal. The said order of the Appellate Tribunal has been challenged before this Court in this appeal.
3. In order to have a thorough glance of the matter, it is profitable to extract Sections 18(2) and (3) of FERA.
18.2. Where any export of goods to which a notification under Clause (a) of Sub-section (1) applies, has been made, no person shall, except with the permission of the Reserve Bank, do or refrain from doing anything or take or refrain from taking any action, which has the effect of securing-
(A) in a case falling under Sub-clause (i) or Sub-clause (ii) of Clause (a) of Sub-section (1),
(a) that payment for the goods
(i) is made otherwise than in the prescribed manner, or
(ii) is delayed beyond the period prescribed under Clause (a) of Sub-section (1), or
(b) that the proceeds of sale of the goods exported do not represent the full export value of the goods subject to such deductions, if any, as may be allowed by the Reserve Bank; and
(B) In a case falling under Sub-clause (ii) of Clause (a) of Sub-section (1), also that the sale of the goods is delayed to an extent which is unreasonable having regard to the ordinary course of trade;
Provided that no proceedings in respect of any contravention of the provisions of this Sub-section shall be instituted unless the prescribed period has expired and payment for the goods representing the full export value has not been made in the prescribed manner within the prescribed period.
18(3) Where in relation to any goods to which a notification under Clause (a) of Sub-section (1) applies the prescribed period has expired and payment therefore has not been made as aforesaid, it shall be presumed, unless the contrary is proved by the person who has sold or is entitled to sell the goods or to procure the sale thereof, that such person has not taken all reasonable steps to receive or recover the payment for the goods as aforesaid and he shall accordingly be presumed to have contravened the provisions of Sub-section (2).
4. A preliminary objection was raised by the respondents before the Appellate Tribunal that the export of readymade garments between 02.02.2000 and 23.05.2000 would be covered by FERA and the steps were taken under the Act only after passing of FEMA and hence, it has to be construed that the provisions of FEMA would come to play and since charge was issued under FERA, it is not maintainable. It was also argued before the Tribunal by these respondents that the six months period prescribed in the Central Government notification expired by 22.08.2000 and 23.11.2000 in respect of exports and the FEMA came to effect from 01.06.2000 and that the investigation commenced on 31.07.2001 and the charge under FERA has no enforceability.
5. The adjudicating authority, namely, the Deputy Director of Enforcement had not furnished any reasons on this aspect. However, the Tribunal has handed down a fitting reply stating that it is clear that any offence committed under the repealed Act would continue be governed by the provisions and the repealed Act, as if that Act has not been repealed, subject to the provisions of Sub-section 3 of Section 49. Section 49(3) and (4) goes thus:
49(3) - Notwithstanding anything contained in any other law for the time being in force, no court shall take cognizance of an offence under the repealed Act and no adjudicating officer shall take notice of any contravention u/s 51 of the repealed Act after the expiry of a period of two years from the date of commencement of this Act. 49(4) - Subject to the provisions of Sub-section (3) all offences committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if that Act had not been repealed.
6. Concededly, the exports were made in February and May 2000. So the export proceeds were due from the afore-said periods. The outer time limit of six months would expire in August and November, 2000, which would fall after FEMA came to force. The dates of invoice of various exports are 20.04.2000, 11.05.2000, 22.02.2000, 23.05.2000, 28.03.2000 and 20.05.2000. Since within six months from the date of export, the respondents had not initiated steps to realize the proceeds, it has to be necessarily held that they have violated the provisions of FERA. Even though starting date of investigation was 31.07.2001, the contravention of the provisions of FERA occured much earlier to the passing of FEMA. Hence, observations of the Tribunal that there is no illegality in the proceedings under the provisions of FEMA, holds good.
7. Yet another contention was put forth before the Appellate Tribunal that the respondents had taken reasonable and sincere efforts to realize the export proceeds within the stipulated period and the said contention was accepted by the Appellate Tribunal and they were absolved from the liability of paying the penalty.
8. The Tribunal has observed that even though it was stated that the Company did not address Reserve Bank of India or concerned authorities till expiry of six months period, the first letter from the Company emanated only in December, 2000, and it was only due to the reasonable belief of calculation of the amounts in time that the exporter did not address the concerned authorities till expiry of six months time. Admittedly, a letter of correspondence originated only in December, 2000 much later the expiry of six months stipulated period after the export was made.
9. There is no material to show that the respondents had been taking sincere and reasonable efforts to realise the proceeds. It is only after the expiry period, the respondents addressed the concerned authorities. In this regard, the phraseology employed in Sub-section 3 of 18 of the Act has to be borne in mind which goes to show "that such person has not taken all reasonable steps to receive or recover the payment for the goods".
10. It is the intention of the legislature that the person concerned, who takes all reasonable steps to recover the payment of goods with sufficient materials, if it is stated that he took such steps, it is of no avail. The term ''reasonable'' has been demonstrated in the Law Lexicon, written by P. Ramanatha Aiyer, Reprint in 2004, as follows:
(i) Reasonable: It would be hard to give an exact definition of the word ''Reasonable'', Reason varies in its conclusions according to the idiosyncrasy of the individual and the times and circumstances in which he thinks. The reasoning which built up the old scholastic logic, sounds now like the jingling of a child''s toy. But mankind must be satisfied with the reasonableness within reach; and in cases not covered by authority, the verdict of a jury (for the decision of a judge) usually determines what is ''reasonable'' in each particular case; but frequently reasonableness ''belong to the knowledge of the law, and therefore to be decided by the Courts.'' (ii) ''Reasonable'' means prima facie in law reasonable in regard to those circumstances of which the actor, called upon the act reasonably, knows or ought to know.
(iii) Reasonable cannot mean equally convenient or luxurious, though it may not necessarily exclude idea of convenience and comfort.
(iv) The expression ''reasonable'' is so wide and elastic that a Court should not ordinarily strike down any restrictive provision as void as being not reasonable unless it appears to the court that a different view could not be taken with any jurisdiction.
(v) ''Reasonable is a relative term, and the facts of the particular controversy must be considered before the question as to what constitutes a reasonable delay can be determined.
11. The learned Standing Counsel for the Central Government Mr. M. Dhandapani appearing for the appellant would contend that since the respondents had not taken steps to recover or realize or receive export proceeds within the prescribed time and the alleged reasonableness attributed to them by the Tribunal is not at all valid observation and that the order challenged before the Court has to be nullified in view of the contravention of provisions of the Act.
12. In support of his contention, he garnered support from a decision of the Apex Court in Bharat Carpets v. Director Enforcement Directorate reported in (2008) 8 SCC 142, wherein Their Lordships were pleased to observe as follows:
According to Section 18(2) of FERA, without general or special permission of Reserve Bank of India, the exporter is required to repatriate the sale proceeds within the prescribed period of six months. Whenever the prescribed period expires without repatriation of the export proceeds, Section 18(3) creates a rebuttable legal presumption against the exporter to the effect that the exporter had not taken requisite steps to obtain repatriation of the payment. The appellant had placed no material whatsoever as to what steps were taken for repatriation of the amount involved. Hence, the impugned judgment is not liable to be interfered with.
13. In
14. In the said decision, while discussing about the intention of the legislature at that time of legislating statute, the Supreme Court has dealt with the legal importance of Sections 10 and 23 of FERA, which are as follows:
10. Duty of person entitled to receive foreign exchange etc - (1) No person who has a right to receive any foreign exchange or to receive from a person resident outside India a payment in rupees shall, except with the general or special permission of the Reserve Bank, do or refrain from doing anything or take or refrain from taking any action which has effect of securing -
(a) that the receipt by him of the whole or part of that foreign exchange or payment is delayed, or
(b) that the foreign exchange or payment ceases in whole or in part to be receivable by him.
(2) Where a person has failed to comply with the requirements of Sub-section (1) in relation to any foreign exchange or payment in rupees, the Reserve Bank may give to him such directions as appear to be expedient for the purpose of securing the receipt of the foreign exchange or payment as the case may be.
23. Penalty and procedure (1) If any person contravenes the provisions of Section 4, Section 5, Section 9, Section 10, Sub-section (2) of Section 12, Section 17, Section 18A or Section 18-B or of any rule, direction or order made thereunder, he shall-
(a) be liable to such penalty not exceeding three times the value of the foreign exchange in respect of which the contravention has taken place or five thousand rupees, whichever is more, as may be adjudged by the Director of Enforcement in the manner hereinafter provided or
(b) *****
23(1-A)-23 EEE
23-F. If any person fails to pay the penalty imposed by the Director of Enforcement or the Appellate Board or fails to comply with any of their directions or orders, he shall, on conviction before a court, be punishable with imprisonment for a term which may extend to two years, or with fine, or with both.
14.1. In para 15 of the said order, Their Lordships have further held as follows:
15. ...The default is complete on the failure to get the foreign exchange, receivable in India, repatriated, within a reasonable time after the right to receive the same accrues. What is ''reasonable time'' would depend upon the facts and circumstances of each case and it is neither possible nor desirable to lay down any general formula in that behalf. Where the delay in repatriation is not unreasonable no contravention of Section 10(1)(a) can be said to have been committed.
15. A Division Bench of this Court in
16. The following points are discernible as regards the circumstances and facts of the case and on the legal implication on the subject:
(i) The goods were exported in March and May 2000.
(ii) The statutory limit of six months got expired in August and November, 2000.
(iii) No communication within the prescribed period of six months to the authorities concerned by the respondents.
(iv) Only in December, 2000, the Company wrote a letter outside the period of limitation.
(v) No material to show that reasonable steps were taken to recover export proceeds.
(vi) In order to make a person liable for charge under Sections 18(2) and (3) presence of element of mens rea is not a criterion and once contravention is noticed then he may be clamped with penalty.
17. The factual circumstances would indicate that there was no sincere nor reasonable steps initiated on the part of the respondents which make them liable to attract the provisions in Section 18(2) and (3) of the Act. Following the principles laid down in the decisions of the Apex Court, it has to be held that this is a classical instance of contravention of provision of FERA.
18. In such view of the matter, this Court has to necessarily upset the upshot of the Tribunal with regard to the contravention of the provisions of the Act and the same is hereby set aside. The Civil Miscellaneous Appeal deserves to be allowed and the charge made by the Deputy Director of Enforcement against the respondents dated 22.04.2003, in Order No. DD/MAS/32/2003(VS) is upheld and the same be implemented.
In fine, the Civil Miscellaneous Appeal stands allowed with the observations afore-mentioned. No costs.
