REPORTABLE IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 38  OF 2003

M/s. Bharat Carpets ... Appellant

Vs.

Director, Enforcement Directorate       ...Respondent

JUDGMENT

Dr. ARIJIT PASAYAT, J.

1. Challenge  in  this  appeal  is  to  the  judgment  of  the

Appellate Tribunal for Foreign Exchange, New Delhi (in short

the ‘Tribunal’).   In  the appeal  before  the Tribunal challenge

was made by three appellants i.e. the present appellant and

two of its partners to the adjudication order dated 15.6.1999

passed  by  the  Assistant  Director,  Enforcement  Directorate

imposing  total  penalty  of  Rs.1,00,000/-  i.e.  Rs.80,000/-

against the appellant firm and Rs.10,000/- each against the

two partners for alleged violation of Section 18(2) and 18(3) of

the Foreign Exchange Regulation Act, 1973 (in short the ‘Act’).

2. Background facts in a nutshell are as follows:

A  Show  Cause  Notice  (in  short  ‘SCN’)  No.T--

4/340/D/94-SCN/DD/8097  to  8100  dated  30.9.1994  was

issued to Appellant M/s Bharat Carpets (a Partnership Firm)

and two of its partners, i.e., (1) Abdul Rasheed; and (2) Abdul

Waheed  asking  them  to  show  cause  why  adjudication

proceedings under Section 51 of the Act should not be held

against them for non-realisation of export proceeds under GR

(1) PP No. AA-677411 dated 2.4.1992 of the value equivalent

to Indian Rs.2,18,833/- and (2) GP-576895 dated 13.5.1991

of  the  value  equivalent  to  Indian  Rs.2,93,338/-,  i.e.  a  sum

total  of  Rs.5,12,171/-,  within  the  stipulated  period  of  six

months or the extended period of RBI, if any, in contravention

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of the provisions of Section 18(2) read with 18(3) of the Act

and Notification No.F/67/EC/73-1 &3 both dated 1.1.1974.

The noticees gave written reply to the SCN stating that

with regard to GP No. 576895 dated 13.5.1991 they have been

continuously  in correspondence  with the authorized  banker

for the remittance of export proceeds from foreign buyer and

final reply will  be submitted after receipt of the same. With

regard to other GR/PP No.AA-676411 dated 2.4.1992, it was

replied  that  the  shipment  through  Japanese  Airlines  was

dispatched to the original consignee, i.e., M/s Rose Carpets.

But within a short period but before delivery (either of goods

or  Bill  of  Lading);  the  appellants  came  to  know  the  weak

financial  position  of  consignee;  so  they  requested  through

their  banker  to  intimate  the  foreign  bank  not  to  deliver

documents of title of goods to M/s Rose carpets but to change

such document delivery to new buyer M/s Roman -Inc., 100,

Park Plaza  Drives.  The  authorized  dealer/banker  instead  of

sending  the  requested  communication  dated  16/17th April,

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1992,  to the correct  office  of  the  foreign bank,  sent  it  to  a

wrong place and that is why the title documents were wrongly

handed over despite clear instructions to the contrary whereby

the consignment was delivered to original consignee M/s Rose

Carpets. In this way, the appellants cannot be held guilty of

the  non-realisation  of  the  export  proceeds  of  PP  No.  AA-

677411 dated 2.4.1992 inasmuch as that the wrong delivery,

despite appellant's timely action, cannot only be attributed to

the  authorized  dealer  against  whom  the  appellants  are

pursuing their remedies before the Civil Court and Consumer

Disputes  Redressal  Forum.  Because  the  financially  weak

original consignee did not pay, the appellants cannot be held

guilty of the violations.

3. The stand of the appellants before the Tribunal was that

consignment  exported  initially  in  the  name  of  M/s  Rose

Carpets was directed to fresh/new consignee  M/s Roman Inc.

and  intimation  to  this  effect  was  given  to  the  authorized

banker well within time to hand over the Bill of Lading to the

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new  consignee.  It  is  because  of  the  misfeasance  and

malfeasance or negligence of the authorized banker, the Bill of

Lading was handed over to old consignee enabling him to take

delivery of the goods. The appellants changed the consignee

because of the anticipated non-payment by M/s Rose Carpets

due to its weak financial position, and the negligence of the

authorized banker cannot be a factor against the appellants

and their  conduct cannot be faulted. It  was also contended

that the exported goods never reached the intended consignee

and,  therefore,  goods  in  question  cannot  be  termed  as

exported  goods  under  Section  18  of  the  Act.  Further,  the

initiation  of  legal  proceedings  against  M/s  Rose  Carpets,

whose financial position is too bad, can be of little use except

to  add  to  the  total  loss  of  the  appellants  who  had  already

suffered badly.

4. On the other hand, learned counsel for the respondent

contended that the appellants exported the goods in the year

1991-92 and what to say of  repatriation of export  proceeds

within  six  months  the  export  proceeds  have  not  been

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repatriated  even  long  after.  No  extension  from  RBI  was

obtained either, so the impugned order is perfectly correct and

requires to be maintained.

5. So far as the consignment dated 2.4.1992 is concerned,

the Tribunal accepted the stand of the appellants before it and

exonerated them. It was noted, however, by the Tribunal that

the  appellants  did  not  place  any  material  so  far  as  the

repatriation of Rs.2,93,338/- relating to goods exported by PP-

576895 dated 13.5.1991 and no arguments was advanced in

the facts of the individual liability of the partners.  In that view

of the matter, the Tribunal held that the appellants have been

rightly held as guilty for having committed violation of Section

18(2) of the Act.  The penalty amount was, however, reduced

to Rs.60,000/- so far as present appellant is concerned. Since

deposit  of  Rs.80,000/-had  been  made  by  it,  the  remaining

amount of Rs.20,000/- was directed to be refunded.

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6. In  support  of  the  appeal,  learned  counsel  for  the

appellants submitted that because of the deficiency in services

of  the  bank,  action  has  been  taken  and,  therefore,  the

appellant should not have been held guilty.

7. Learned counsel  for the respondent on the other hand

submitted  that  so  far  as  the  goods  sent  by  GR/PP  No.  AA

677411 dated 2.4.1992 is concerned, material was placed by

the appellants to show that it had taken for all possible score.

Therefore, the Tribunal has held that the appellants are not

guilty.   So  far  as  the  other  consignment  is  concerned,  as

rightly noted by the Tribunal, no material was placed relating

to  repatriation  of  the  amount  involved.  He,  therefore,

submitted that no interference is called for.  Additionally, it is

submitted that the appellant had an alternative remedy under

Section  54  of  the  Act  which  has  not  been  availed  and,

therefore,  the  appeal  should  be  dismissed.  We  need  not  go

into the question relating to the alternative remedy. Appellants

had  placed  no  material  whatsoever  as  to  what  steps  were

taken for repatriation of the amount involved.  According to

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Section  18(2)  without  general  or  special  permission  of  the

Reserve Bank of India, the exporter is required to repatriate

the sale proceeds within the prescribed period of six months.

Section 18(3)  creates  a rebutable  legal  presumption against

the exporter whenever the prescribed period expires without

repatriation of the export proceeds to the effect that exporter

had  not  taken  requisite  steps  to  obtain  repatriation  of  the

payment.   

8. Above being the position, we find no merit in the appeal

which is accordingly dismissed.

……………………………J. (Dr. ARIJIT PASAYAT)

……………………………J. (G.S. SINGHVI)

New Delhi, July 7, 2008

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