{"id":186160,"date":"2002-04-08T00:00:00","date_gmt":"2002-04-07T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/union-of-india-vs-ms-src-exports-pvt-ltd-on-8-april-2002"},"modified":"2017-06-21T20:17:43","modified_gmt":"2017-06-21T14:47:43","slug":"union-of-india-vs-ms-src-exports-pvt-ltd-on-8-april-2002","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/union-of-india-vs-ms-src-exports-pvt-ltd-on-8-april-2002","title":{"rendered":"Union Of India vs M\/S. Src Exports Pvt. Ltd on 8 April, 2002"},"content":{"rendered":"
Madras High Court<\/div>\n
Union Of India vs M\/S. Src Exports Pvt. Ltd on 8 April, 2002<\/div>\n
       \n\n  \n\n  \n\n \n \n IN THE HIGH COURT OF JUDICATURE AT MADRAS           \n\nDated : 08\/04\/2002\n\nCoram \n\nTHE HONOURABLE MR. JUSTICE P. SHANMUGAM             \n\nand \n\nTHE HONOURABLE MR. JUSTICE P. THANGAVEL           \n\n\nC.M.A. Nos.1583 to 1590 of 1999 and C.M.P. Nos.18424 to 18431 of 1999   \n& 22077 to 22084 of 1999 and 1851 to 1858 of 2000 \n\n\nUnion of India, rep. by\nThe Director of Enforcement,\nEnforcement Directorate,                        ..  Appellant in\nNew Delhi-110 003.                                  all the C.M.As.\n\n           Vs.\n\nM\/s. SRC Exports Pvt. Ltd.,\nNo.3, Goomes Street,                    ..  Respondents in\nChennai-1.                                          C.M.A. 1583 of 1999\n\nM\/s. ABC Imports & Exports, \nNo.3, Goomes Street,                    ..  Respondents in\nChennai-1.                                          C.M.A. 1584 of 1999\n\nRattan Kumar                                    ..  Respondents in\n                                                            C.M.A. 1585 of 1999\nRavi Prakash                                    ..  Respondents in\n                                                            C.M.A. 1586 of 1999\n\nM\/s. SRC Industries,\nNo.3, Goomes Street,                    ..  Respondents in\nChennai-1.                                          C.M.A. 1587 of 1999\n\nM\/s. Madras Steel Enterprises,\nNo.3, Goomes Street,                    ..  Respondents in\nChennai-1.                                          C.M.A. 1588 of 1999\n\nM\/s. Engineers & Fabricators,\nNo.3, Goomes Street,                    ..  Respondents in\nChennai-1.                                          C.M.A. 1589 of 1999\n\nM\/s. Arvind Exports,\nNo.3, Goomes Street,                    ..  Respondents in\nChennai-1.                                          C.M.A. 1590 of 1999\n\nPRAYER    The above  Civil  Miscellaneous  Appeals  are  preferred  under       \nSection  54  of  the  Foreign  Exchange  Regulation Act, 1973 against the               \nOrders of the Foreign Exchange Regulation Appellate Board  dated  17.9.19\n99  made in Appeal Nos.614, 615, 616, 617, 618, 619, 620 and 621 of 19 99\nrespectively.\n\n:ORDER  \n<\/pre>\n
                  These Appeals coming on for hearing, upon  perusing  the
\nMemorandum of Appeal, the orders of the Board, and the material papers in
\nthe case, and  upon  hearing  the  arguments  of  Mr.    V.T.    Gopalan,
\nAdditional Solicitor General of  India  assisted  by  Mr.    K.    Kumar,
\nAdditional  Central Government Standing Counsel for the appellant, and of
\nMr.  B.  Kumar, Senior Counsel on behalf of M\/s.    K.G.    Sellar  Khan,
\nCounsel for the respondents, and having stood over for consideration till
\nthis day, the Court passed the following Judgment :-
\nJ U D G M E N T <\/p>\n
P.  SHANMUGAM, J.\n<\/p>\n
        The  respondents before the Foreign Exchange Regulation Appellate
\nBoard are the appellants herein.\n<\/p>\n
        2.   The  Special  Director,  Enforcement  Directorate   (Foreign
\nExchange  Regulation Act), New Delhi, by a common order dated 12.11.1992,
\ni[pmposed a total penalty of Rs.3,14,40,000\/- in pursuance to the  14  show
\ncause  notices  issued  on  the  partnership firms and the partners under
\nSections 9(1)(a), 9(1)(c) and 9(1)(d) of the Foreign Exchange  Regulation
\nAct,  1973  (hereinafter  referred to as the Act) readwith Sections 18(2)
\nand 18(3) of the Act.  The respondents  herein  preferred  eight  appeals
\nbefore  the  Foreign  Exchange  Regulation  Appellate Board ( hereinafter
\nreferred to as the Board) against those orders.  The Board, by its common
\norders dated 17.9.1999, allowed the appeals and set aside the  orders  of
\nthe Special  Director.    The  present  appeals are preferred before this
\nCourt under Section 54 of the Act.\n<\/p>\n
        3.  The appeals were heard in extenso  on  19.2.2002,  26.2.2002,
\n11.3.2 002, 12.3.2002,  145.3.2002,  20.3.2002  and 22.3.2002.  Mr.  V.T.
\nGopalan,  Additional  Solicitor  General  of  India  initially  for   the
\nappellant assisted by  Mr.    K.    Kumar,  Additional Central Government
\nStanding Counsel continued their arguments and learned senior counsel Mr.
\nB.  Kumar argued on behalf of the respondents.  Though at the fag end  of
\nthe arguments, at the stage of winding up, learned senior counsel Mr.  B.
\nKumar  informed us of the alleged desire of the counsel on record for the
\nrespondents to engage some other counsel, it was pointed out that it will
\nnot be permissible at this stage and learned senior counsel concluded his
\narguments and requested this Court to treat as though  the  arguments  on
\nhis side having been  completed.    Mr.   K.  Kumar completed his further
\narguments in his  reply  and  orders  were  reserved  in  the  matter  on
\n22.3.2002.\n<\/p>\n
        4.   We see from the records that as against the eight memorandum
\nof show cause notices dated 9.9.1983 issued under Section 18(2)  readwith
\nSections  9(1)(c)  and  9(1)(d)  of  the Act, counsel for the respondents
\nsubmitted his replies on 18.3.1984 and  personal  hearing  was  given  on
\n4.3.1985 to  the  counsel  for the respondents Sr i D.W.  Stewart and the
\nmatter was adjourned to several dates on 16.7.1985, 5.11.1985, 2.6.19  86
\nand 8.1.1990.    On  the  second  set  of  six show cause notices dated 7
\n.2.1986, considering the replies and after a  personal  hearing  on  22.2
\n.1990,  22.3.1990 and 19.8.1992, the original order dated 12.11.1992 came
\nto be passed in reference to the 14 show cause notices  and  the  charges
\ncontained thereunder.   The eight appeals were preferred in the year 1992
\nand were disposed of by order dated 17.9.1999.  In between, there were  a
\nnumber  of proceedings before the Chief Controller of Imports and Exports
\nand appeals to the Joint Chief Controller of Imports and Exports and also
\nbefore the Additional Metropolitan Magistrate – Econonomic Offences  were
\npursued and the matter has been delayed before several forums.\n<\/p>\n
        5.   The  appeal  under  Section  54  of the Act lies only on the
\nquestion of law from the decision of the authorities  below  and  in  the
\nlight  of the elaborate arguments advanced, the facts of the case are set
\nout below for better  appreciation  of  the  issues  involved  ion  these
\nappeals.\n<\/p>\n
        6.  The following group of industries, namely :\n<\/p>\n
        (i)     M\/s.  S.R.C.  Industries;\n<\/p>\n
        (ii) M\/s.  S.R.C.  Exports Private Limited;\n<\/p>\n
        (iii) M\/s.  Arvind Exports;\n<\/p>\n
        (iv) M\/s.  A.B.C.  Imports and Exports;\n<\/p>\n
        (v) M\/s.  Engineers and Fabricators; and\n<\/p>\n
        (vi) M\/s.  Madras Steel Enterprises,
\nare  firms  of  exporters  composed  of  four partners viz., (i) Sri Ravi
\nPrakash, (ii) Sri Sasi Prakash, (iii) Sri Rattan Kumar, (iv) Sri Surendra
\nKumar, and (v) Sri Mahesh Kumar.  The firm had  been  exporting  handloom
\nclothes  and  engineering items to England, African countries and some of
\nthe south eastern countries since the year 1975.   They  have  failed  to
\nrealise  the  proceeds  thereof for the goods exported by them during the
\nperiod 1978 to 1983 in the prescribed manner within the prescribed period
\nwithout the permission of the Reserve Bank of India and have acknowledged
\nthe debt created in favour of a person who is a Non-Resident  Indian  and
\nthereby  violated Sections 9(1)(a), 9(1)(c), 9(1)(d) and 18(2) of the Act
\nand hence, eight show cause notices were  issued  to  these  firms  dated
\n9.9.1983.  Another set of six notices for failure to realise the value of
\nthe  goods  exported  during the period 1981 and 1982 by these firms were
\nissued dated 7.2.1986.  After considering  their  explanation  and  after
\nhearing  the arguments made by their representatives and the counsel, the
\nSpecial Director, in his common order dated 12.11.1992, imposed  a  total
\npenalty of  Rs.3,14,40,00 0\/-.  The Special Director, in his order, found
\nthat the major part of the notices related to  contravention  of  Section
\n18(2)  readwith  Section  18(3)  of the Act, though the notices relate to
\nexports in reference to different groups and  units  of  their  group  of
\nconcerns.   Since  the  buyers  and the destination had been the same and
\nthat common written submissions were made by  the  consultant,  a  common
\norder  was  passed  for  both  the  groups in pursuance to the show cause
\nnotices namely one set of notices issued  on  9.9.1982  and  another  set
\nissued on  7.2.198  6.  The Special Director, on the preliminary issue as
\nto the liability of the partners, found under Section 68(1)  of  the  Act
\nthat  the  main  person  looking  after  the export business was Sri Ravi
\nPrakash who was managing  the  affairs  of  his  group  of  concerns  and
\ntherefore,  it  was held that Ravi Prakash was the person incharge of the
\nbusiness and thus responsible for the  conduct  of  the  affairs  of  the
\nconcerns.  It was found that it was Ravi Prakash who has made submissions
\nvide  statements,  writ  petitions  and representations in these matters.
\nFor convenience, the matters were clubbed together  under  the  following
\nheads :\n<\/p>\n
        (1) Non-realisation of proceeds from the exports made   to
\nFreetown, Sierra Leone;\n<\/p>\n
        (2) Exports to Raxshire Limited, London; and
\n        (3) Exports to Monrovia.<\/p><\/blockquote>\n
        7.   The  main  arguments  advanced  by  the respondent concerns,
\nhereinafter referred to as the “exporter”, before the Special Director in
\nreference to the exports made to Sierra Leone were :\n<\/p>\n
        (a) Mr.  Toufic Huballa was the importer.    However,  the  goods
\nlanded were forcibly taken away by the mafia group and after the visit of
\nthe Managing Partner Ravi Prakash, they were retrieved.\n<\/p>\n
        (b) Mr.    Toufic  Huballa  had  paid  the pending bills in local
\ncurrency and they are waiting in the pipeline for getting clearance.\n<\/p>\n
The Special Director rejected both these submissions on the  ground  that
\nthough the exports were made on D.P.  Terms, the tenors of the bills were
\nchanged to  D.A.    Terms  which  enabled the importer to clear the goods
\nwithout making payments against the goods and without special  permission
\nfrom the  Reserve Bank of India.  The exporter did not pursue the Central
\nBank all these five years to get the value released by making payment  in
\nthe foreign exchange, stating that the amount was waiting in the pipeline
\nand therefore, there is no truth of bonafide in such empty claims.\n<\/p>\n
        8.  With reference to the exports made to M\/s.  Raxshire Limited,
\nLondon,the  argument  on  behalf  of the exporter was that inspite of the
\nrigorous efforts for early release of the foreign exchange  in  order  to
\nfile  a  suit against the overseas buyer, there was a failure on the part
\nof the R.B.I.  to release the foreign exchange for the legal expenses and
\nby that time, the foreign buyer went into liquidation and therefore, they
\nwere not at fault.   The  said  argument  was  rejected  by  the  Special
\nDirector  on  the  findings  that  the  firms  ought to have received the
\npayments in India within six months from the date of export and that  the
\nshipments  made  by  the  firms were disposed of at London itself as cash
\nsales and only a small fraction was sent to Nigeria and that payment that
\nwas made at the old rate in the local currency is not in accordance  with
\nthe normal  procedure  and that R.B.I.  has refused to grant extension of
\ntime and that no credence can be attached to a letter from  the  Bank  of
\nCredit and  Commercial  International  (B.C.C.   I.), London stating that
\nthey have paid the bills to prove that the  exports  had  been  realised.
\nThe non-release  of  foreign exchange by the R.B.I.  is a ruse and has no
\nconnection with the charge.\n<\/p>\n
        9.  With regard to the exports made to  Monrovia,  the  arguments
\nmade  before  the  Special  Director  were that the Board authorities had
\ngiven non-delivery certificate and they have  lodged  a  claim  with  the
\ninsurance  company  and  the importers have permitted the firms to adjust
\nthese amounts received from the insurance company.  The Special  Director
\nrefused to accept this case in the absence of any records in reference to
\nthe  non-delivery  certificate  and the insurance claim preferred and the
\nstatements of the alleged claims.  The Special Director also  found  that
\nM\/s.  S.R.C.    Exports, in their letter dated 19.5.1984 to the B.C.C.I.,
\nthe negotiating bank at London, intimated them that no  legal  action  be
\ninitiated against M\/s.   Raxshire  Limited and that Sri K.  A.  Sekar, an
\nofficer of the Punjab National Bank, in his statement  dated  28.11.1985,
\nhad  initimated  the Enforcement authorities that on his visit to Banjul,
\nhe had contacted the buyer who had informed him that no payment  was  due
\nto  the  exporter  and  in  fact,  it  was the exporter who owned certain
\namounts to them.   The  Special  Director  refrained  from  imposing  any
\npenalty  in  reference  to  the  show  cause  notice T4\/69-M83 No.6 dated
\n9.9.1983, since the said contravention was in reference to the payment of
\nRs.10,000\/- for treatment.  Ultimately, it was found  that  the  offences
\nunder Sections 9(1)(c) and 9(1)(d) readwith Section 18(2) of the Act were
\nestablished  and  a penalty as indicated was imposed on the firms and the
\npartners.\n<\/p>\n
        10.  The Appellate Board also considered the  appeals  under  the
\nthree heads.  The findings of the Board are as follows :\n<\/p>\n
        Exports to Sierra Leone :\n<\/p>\n
        (a)  There  is no prohibition for an exporter to change the terms
\nof payment from D.P.  to D.A.\n<\/p>\n
        (b) It is open to an exporter to sell the goods by way of  export
\non D.A.  terms, D.P.  terms or under L.C.  as per his business decision.\n<\/p>\n
        (c)  The remittance of the amount had not been made so far due to
\nthe sovereign act of the Government  of  Sierra  Leone,  i.e.    pipeline
\nsystem,  on  which neither the foreign buyer nor the respondents have any
\ncontrol.\n<\/p>\n
        (d) Once payments have been made in the local currency, it has to
\nbe treated as good as the payment has been made.\n<\/p>\n
        (e) All reasonable steps in its true import and purport would not
\nnecessarily mean  series  of  action.    Even  a  single   step   towards
\nrealisation of export may amount to taking all reasonable steps.\n<\/p>\n
        (f)  A  business  decision  is  based  on  consideration which is
\nimportant than all reasonable steps towards realisation.\n<\/p>\n
        Exports to M\/s.  Raxshire Limited, London :\n<\/p>\n
        (a) The Board found that the non-repatriation is  solely  due  to
\nthe inaction of the R.B.I.  to release 15,000 to initiate legal action.\n<\/p>\n
        (b) M\/s.    Raxshire  Limited  were unable to get the proceeds of
\ntheir sales to Nigeria in view of the military coup in  that  country  in
\nthe year 1978, a fact which is very well known.\n<\/p>\n
        (c) Cheques endorsed by M\/s.  Raxshire Limited were dishonoured.\n<\/p>\n
        (d)  It  was  permissible,  despite  the  firm’s  letter  to  the
\nB.C.C.I., to secure payment.\n<\/p>\n
        Exports to Monrovia :\n<\/p>\n
        (a) The  Board  found  that  though  the  certificates  used  the
\nexpression  “short  landing”,  the  quantity of goods short landed is the
\nsame as that of the  goods  shipped  and  therefore,  there  is  adequate
\nevidence of non-delivery of the cargo.\n<\/p>\n
        (b) The adjudicating officer had assumed false factual assumption
\ninspite of the suit filed against the insurance company before the Madras
\nHigh Court.\n<\/p>\n
        (c)  The  burden  is on the department under Section 18(2) of the
\nAct to prove that the goods exported by the party have  been  cleared  by
\nthe foreign buyer and that payments, therefore, were not made.\n<\/p>\n
        (d) If the foreign buyer did not clear the goods, the question of
\ncontravention under Section 18(2) of the Act could not have arisen.\n<\/p>\n
        (e) The  Board also found that the statements made by K.A.  Sekar
\nunder Section 40 of the Act are inadmissible in law and  ought  not  have
\nbeen relied on.\n<\/p>\n
        (f) The written  agreement with M\/s.  H.A.  Farag & Sons Limited,
\nBanjul is not conclusive evidence in support of  the  guilt  against  the
\nrespondents.\n<\/p>\n
        11.   Learned  Additional  Solicitor  General  submitted that the
\napproach of the Appellate Board is perverse and the  Board  proceeded  as
\nthough  it  holds  a  special brief for the respondents and it is totally
\nopposed to the provisions of the Act and the Rules.   According  to  him,
\nthe change of  terms  of payment of the bills from D.P.  to D.A.  without
\npermission from the R.B.I.  would clearly  amount  to  violation  of  the
\nprovisions of  Section  18(2)  of  the Act.  The interpretation that ‘all
\nreasonable steps’ embodied in Sub-section (3) to Section  18  would  mean
\nsingle step  is  unreasonable.  The seized letter dated 19.5.1984 written
\nby the respondents to the B.C.C.I.  and also the letter dated  6.6.1  984
\nfrom the Hindustan  Commercial Bank to M\/s.  S.R.C.  Industries show that
\nthe respondents have taken a unilateral decision that no action should be
\ninitiated against M\/s.  Raxshire Limited, London.   The  conduct  of  the
\nrespondents inspite  of  the heavy oustanding from M\/s.  Raxshire Limited
\nshould have been viewed properly and held  that  the  nonrealisation  was
\nonly  due  to  their  unilateral  decision and has nothing to do with the
\nrefusal of the R.B.I.  to sanction the legal  expenses,  which  has  been
\nupheld by  the  High  Court.    According to him, the appellate authority
\nfailed to see that the failure of the importer at London to  realise  the
\nproceeds  or to release the goods to the Nigerian customs have no bearing
\nin these cases and further, it is in evidence that most of the goods were
\nsold at London itself.  He  submits  that  the  ingredients  of  Sections
\n9(1)(c)  and  (d)  of  the Act have been clearly made out in these cases.
\nSri Ravi Prakash, in his statement, has admitted that they have agreed to
\npay compensation of US$ 30,000 to M\/s.   H.A.    Farag  &  Sons  Limited,
\nZambia,  which  is a clear violation without the permission of the R.B.I.
\nHe submitted that the appellate authority placed the burden of proving on
\nthe Directorate of Enforcement wrongly and  inspite  of  the  presumption
\navailable under  Section  59  of  the  Act.    He  has  referred  to  the
\nsubstantial questions of law set out in Groud No.25 of the appeals.\n<\/p>\n
        12.  In reply to these submissions,  Mr.    B.    Kumar,  learned
\nsenior counsel made the following submissions :\n<\/p>\n
        (a)  The  geographic  location  of Sierra Leone in the fareastern
\nAfrican continent makes the export to reach the destination one year.\n<\/p>\n
        (b) M\/s.   S.R.C.    Industries  Group  have  been  awarded   the
\nCertificate of Import for outstanding export.\n<\/p>\n
        (c)  The  goods in question were attempted to be taken possession
\nof by the mafia group and some goods were sold  by  way  of  auction  for
\npaltry sums.\n<\/p>\n
        (d)  Their  importer had to move the High Court to re-possess the<\/p>\n
goods and ultimately, the amounts are in the pipeline, as proved  by  the
\nvarious letters and telex messages.\n<\/p>\n
        (e) The exports were to be considered at three stages –\n<\/p>\n
Stage 1 :  The first stage is in reference to Sierra Leone :-\n<\/p>\n
        (i) The goods were re-exported to Nigeria.\n<\/p>\n
        (ii)  There  was  a  coup in Nigeria in the year 1978 followed by
\nlooting and arson and therefore, there was difficulty in realisation.\n<\/p>\n
        (iii) The importer advised the respondents to have patience.\n<\/p>\n
        (iv) Payments were made in 13  cheques  which  were  subsequently
\ndishonoured.\n<\/p>\n
        (v)  The  partner  visited  London  and  had discussions with the
\nimporter Sri Manmohan Chopra.\n<\/p>\n
Stage 2 :  The second stage is in reference to M\/s.    Raxshire  Limited,
\nLondon from November 1984 onwards :-\n<\/p>\n
        (i)  Sri Manmohan Chopra had an ulterior intention of defalcation
\nand therefore, the respondents obtained legal opinion that suits could be
\nfiled, but requested legal fees of 40,000 to 60,000.\n<\/p>\n
        (ii) Permission was sought for from R.B.I.  on 29.1.1985 to remit
\n15,000 and therefore,  failure  has  resulted  in  liquidation  of  M\/s.
\nRaxshire Limited, London.\n<\/p>\n
Stage 3 :  Claims were sought to be preferred with the liquidator, but no
\nassistance was forthcoming from the R.B.I.\n<\/p>\n
Insofar  as  the  exports to Monrovia are concerned, it is submitted that
\nthe suits were initiated at Madras for insurance  claims  and  they  were
\npermitted to  adjust  the  amounts due.  The suits are pending before the
\nHigh Court of Madras.\n<\/p>\n
        13.  On these legal submissions and the factual basis, the points
\nthat arise for consideration before this Court are :\n<\/p>\n
        (1) Whether there is a violation of Section 18(2) of the Act by –\n<\/p><\/blockquote>\n
                (a) the change of terms of payment of the bill from  D.P.
\nto D.A.  ?\n<\/p><\/blockquote>\n
                (b)  whether  there  were  reasonable  steps taken by the
\nexporter ?\n<\/p><\/blockquote>\n
                (c) whether the availability of  funds  in  the  pipeline
\nsystem would amount to reasonable steps ?\n<\/p><\/blockquote>\n
        (2)  Whether  the  burden  of  proving reasonable steps is on the
\nrespondents or the appellants and is there a legal presumption  available
\nunder Section 59 of the Act ?\n<\/p><\/blockquote>\n
        (3) Whether the statement made under Section 40 of the Act can be
\nrelied upon ?\n<\/p><\/blockquote>\n
        (4)  Whether  the  payments  made  by one non-resident to another
\nnonresident on the instruction of a  resident  is  violative  of  Section
\n9(1)( a) of the Act ?\n<\/p><\/blockquote>\n
        14.  M\/s.   S.R.C.   Industries and its sister concerns have been
\nexporting Madras Handkerchieves to Sierra Leone after  availing  pre  and
\npost shipment facility from Punjab National Bank.  They have also availed
\ncash assistance to the tune of Rs.39,57,566\/- and export replenishment of
\nRs.22,13,263\/-.   The  respondents are also facing criminal charges under
\nSection 18(2) readwith Section 18(3) readwith Section 16(1)  of  the  Act
\npunishable under Section 56(l)(i) of the Act.<\/p><\/blockquote>\n
        15.   From  the statements filed by the appellants describing the
\nvarious documents, the total amount of export outstanding culled out from
\nthe 14 show cause notices are not disputed by the respondents.    As  per
\nthese  statements,  the  eight  show  causes  notices  were  issued dated
\n9.9.1983 and six show cause notices were issued on 7.2.1986 for violation
\nof Section 18(2) readwith Section 9(1)(c) of the Act.  The  total  amount
\nwhich  has  been  failed  to  be  repatriated as per these notices at the
\npresent rate of exchange amounts to Rs.42,32,68,043\/-.   The  details  of
\nshow  cause  notices  and the corresponding forms, their bills, its value
\nand the date of export necessary for the purpose of the case are found in
\nthe “Statement filed by the Appellant”, which to be treated  as  part  of
\nthis judgment for the factual appreciation of the material facts.\n<\/p>\n
        16.   The show cause notices refer to the G.R.1 Form issued under
\nRule 9 of the Foreign Exchange Regulation Rules,  1974  with  the  serial
\nnumber, the  date  of the export and the amount due for realisation.  The
\nG.R.1 Form is a declaration form to be furnished by  every  exporter  for
\nexporting the commodities, setting out the name of the exporter, name and
\naddress  of  the  buyer\/consignee, the customs assessible value, shipping
\nbill number, country or destination of  the  goods,  description  of  the
\ngoods,  name  of  the  steamer, date of actual shipment and the port, the
\nunits or quantity of the goods and the value of the export.  The exporter
\nundertakes that he  will  deliver  to  the  bank,  the  foreign  exchange
\nrepresenting  the  full  export  value  of the goods within six months as
\nprescribed in Rule 9 of the Foreign Exchange Regulation Rules, 1974.  The
\nperiod of six months has been specified in the G.R.1 Forms.  A reading of
\nthe statements will reveal that exports were made  as  evidenced  by  the
\nG.R.1 Forms in the years 1978, 1978, 1980, 198 1, 1982 and 1983.  The two
\nsets of show cause notices deal with the exports of goods to M\/s.  Toufic
\nHuballa, Freetown,  Sierra  Leone,  to M\/s.  Raxshire Limited, London, to
\nthe buyers in Monrovia, to Huballa, Freetown, Sierra Leone  and  to  M\/s.
\nH.A.  Farag & Sons Limited.\n<\/p>\n
        17.   Written submissions were made by the representatives of the
\nrespondents before the Special Director and the appellate  authority  and
\nthe  authorities  below  have  considered  the  issues mainly under three
\nheads.  Therefore, for  the  sake  of  convenience,  the  issues  can  be
\ndiscussed in the light of the legal questions arising under those heads.\n<\/p>\n
        18.  Exports to Sierra Leone :\n<\/p>\n
        Six show  cause notices relate to these exports.  The importer is
\nToufic Huballa, Free Town, Sierra Leone.  It is not in dispute  that  all
\nthe  exports  were made as per the Exchange Control G.R.1 Forms submitted
\nto the Customs along with the  duplicate  and  triplicate  copies.    The
\nduplicate  copy  of  every Exchange Control Form requires the exporter to
\nindicate whether the bills drawn are on D.A.  or D.P.   terms  (D.A.    =
\nDocuments against acceptance  and D.P.  = Documents against payment).  In
\nother words, under D.A.  terms, the goods can be cleared by the  importer
\nwithout making  payment  for  the  goods.    The  exporter, having made a
\ndeclaration and undertaking under Rule 6 of the  Foreign  Exchange  Rules
\nthat he  would  negotiate  the  bills under D.P.  terms and that he would
\nundertake to deliver to the bank, the foreign exchange  representing  the
\nfull export value of the goods within six months as prescribed in Rule 9,
\nhas  clearly contravened the said rule and the undertaking made under the
\nsaid rule by changing the tenor of the bills from D.P.  to D.A.    terms.
\nThe  direct  result  of  this  change is the nonrealisation of the export
\nproceeds.  As could be seen from the detailed statements now furnished by
\nthe appellant along with the annexures to the  two  sets  of  show  cause
\nnotices,  exports  to  Freetown, Sierra Leone were made from 1978 onwards
\nand the bills were pending unrealised.  If the exporter had not  conceded
\nfor  the  change  of  terms, there was no possibility for the importer to
\ntake the goods without paying the value.  This practice had been going on
\ncon tinuously from the year 19 78 onwards.  The dates of the G.R.1  Forms
\nand  the  invoice of the dates would clearly indicate that the goods were
\ncontinuously in the process of export every  month  from  the  year  1978
\nonwards.  If the amount was not paid from the year 1978 onwards, there is
\nno  reason  as  to  why the exporter was continuously exporting the goods
\nwithout their being a corresponding payment  for  the  goods  which  were
\nshipped earlier.    Though the learned senior counsel for the respondents
\nassured this Court that he would find out the reasons for the  continuous
\nexports  from  1978 to 1983 inspite of the non-payment, he did not submit
\nthe reasons or explanation for the same.   In  other  words,  if  for  an
\nexport  made  in  August  1978  the  amounts  were  not remitted, why the
\nrespondents continued to export the goods in October  1978,  April  1980,
\nMay  1980,  June  1981, July 1981, August 1981 and like this, upto 1983 ?
\nThe view of the Board that there is no rule  prohibiting  the  change  of
\ntenor of  the  bill  is  incorrect.  The further finding of the Appellate
\nBoard, that it was a business decision and that R.B.I.  was aware of  the
\nfact, cannot be accepted.\n<\/p>\n
        19.  A  Division  Bench of this court in UNION OF INDIA VS.  S.K.
\nSENJAN CHETTIAR & SONS [I.L.R.  1996 (2) MADRAS 1569] has taken the  view
\nthat  the  change  of  the terms of payment without the permission of the
\nR.B.I.  is illegal and in such a situation, the provisions of Section  18
\n(2)  of the Act get attracted and mens rea is not at all required, and if
\nany act or omission had taken place, there was violation of the concerned
\nSection, justifying the penalty.  Section 18(2)  of  the  Act  says  that
\nwhere  any  export  of goods has been made, no person shall do or refrain
\nfrom doing anything which has the effect of delaying the  payment  beyond
\nthe prescribed  period.    By the conduct of the exporter in altering the
\nmode of payment, he had, in effect, allowed the  goods  to  be  released,
\nresulting  in  failure to pay for the value of the goods all these years.
\nRule 9 of the Rules says that  unless  or  otherwise  authorised  by  the
\nR.B.I.,  the amount representing the full export value of the goods shall
\nbe paid through the authorised dealer and in the manner specified in  the
\nSecond Schedule.    Therefore, the view of the Appellate Board, reversing
\nthe order of the Special Director holding that there is no  contravention
\nof Section  18(2)   of    the  Act  is  clearly  illegal.    The  further
\nof Section  18(2)  of  the Act is clearly illegal.  The further reasoning
\nthat the change of terms is a business decision is unacceptable since the
\nsaid decision continues to  be  operated  upon  for  nearly  three  years
\nwithout  realising  the foreign exchange for the subsequent exports also.
\nThere is absolutely no justification to take such a business decision  if
\nthe  value  of  the earlier exports has not been realised and the exports
\ncontinued to be negotiated on D.A.  terms inspite of the failure  of  the
\nimporter to pay the value of the goods.\n<\/p>\n
        20.   The  justification  by  the respondents for their action is
\nthat remittance of export value was made in the local  currency  and  the
\nsaid  payment  is  as good as actual realisation and that the respondents
\nhave no responsibility once it is seen that there is  a  pipeline  system
\nprevailing in  Sierra  Leone.  The said stand is on the basis of a letter
\nof the B.C.C.I.  of the year 1987.      From the documents filed  by  the
\nrespondents,  there  is  no  factual  basis  for  the contention that the
\namounts were available in the pipeline.  Page 11  of  Volume  II  of  the
\ntyped  set  of papers contains a letter of Toufic Huballa dated 18.9.1981
\nwherein he says that  instructions  have  been  given  to  M\/s.    S.R.C.
\nIndustries telegraphically to stop all shipment of goods to him until all
\noutstanding bills are  settled.    By  a  reply  letter  of  M\/s.  S.R.C.
\nIndustries dated 19.10.1981, they have acknowledged that since May  1981,
\nnone of  their bills have been paid at all.  They say, in that letter, as
\nfollows :\n<\/p>\n
        “On your promise, we have converted the bills for US$ 20,000 also
\ninto D.A.  so that you will honour old outstanding  bills  of  that  much
\namount.   But, you have honoured bills only for about 50,000 which comes
\nto US$ 80,000 only.  Apart from this, out of new shipments, you have  not
\npaid any  of  the  bills.    Shipping  companies  are  informing  us that
\nshipments made upto August  1981  from  here  have  already  reached  the
\ndestination.”\n<\/p>\n
In their further telex message dated 3.11.1981, they have informed Toufic
\nHuballa  (TH)  that  they will transfer documents to other buyers who are
\ninterested.  In their registered letter dated  25.12.1981,  they  say  as
\nfollows :\n<\/p>\n
        “Lastly,  we  have received your telex stating payments cannot be
\nmade since the market is very bad and to stop all the shipments, which we
\nhave stopped immediately on receipt of your telex and we have not shipped
\nanything after that.”\n<\/p>\n
Toufic Huballa writes to the President of India in  his  letter  dated  1
\n7.10.1983  that  for  the  first  time, they had problems about the goods
\nwhich had arrived in Freetown that few mafia type of  persons  have  done
\nsome  mischief and taken away the goods from the port without any payment
\nor legal process.  They also say that they are ready to pay the country’s
\nexporters M\/s.  S.R.C.  Industries  for  their  total  outstanding  bills
\nwhich  amount  to  about  US$  3.4  million and thus take delivery of the
\ngoods.  By this time, the first set of show cause notices had been issued
\ndated 9.9.1983.  There is no mention in the  correspondence  referred  to
\nabove by  the  respondents  that the amounts were in the pipeline.  It is
\nonly long thereafter, i.e.  on 23.5.1987 they inform the Joint Controller
\nthat the buyer had paid their group concerns the entire pending bills  to
\nthe  tune  of  rupees  4.5  crores  through  the  B.C.C.I.,  who  are the
\ncorrespondents of Punjab National Bank.    As  rightly  pointed  out,  no
\ncredence  can be attached to this letter, which obviously is made for the
\npurpose of the case.  From the correspondence referred to  above,  it  is
\nclear  that  inspite of Toufic Huballa requesting to stop further exports
\nand inspite of his failure to pay the bills, good were being exported  on
\naltered terms and monies were not officially received through the foreign
\nexchange.   The  stand  of  the exporter that the goods did not reach the
\ndestination because of mafia action and that some  goods  were  auctioned
\ncannot  be  correct  in  the  light  of the letter of Toufic Huballa that
\nproblems arose for the first time only in the year 1983.    There  is  no
\nexplanation for all the exports made from the year 1978.\n<\/p>\n
        21.   There  is no acceptable explanation which is opposed to the
\ntenets of business prudence as to why the exporter continued to  maintain
\nthe  same  tempo  of export if their amounts had not been realised and if
\nreally the whole amounts were paid  in  the  year  1987  in  their  local
\ncurrency, as  to  why since 1987 the amount had not been repatriated.  We
\nare unable to appreciate the stand of the Board that a  prudent  business
\ndecision  had  been  taken  by  the  exporter  and  that the exporter was
\nsatisfied with the payment of outstanding bills in  the  local  currency.
\nThe  view  of the Board that remittance of the amount was a sovereign act
\nof the Government and that the respondents could do little in  the  above
\nmatter  and  that  there  was  exchange  problem and that the view of the
\nadjudicating  authority  is  an  erroneous  perception  are  all  special
\npleadings  without  any  basis made on behalf of the defaulting exporter.
\nEven in reference to the payment, which is alleged to have been  made  in
\nthe  local  currency, the R.B.I.’s letter dated 21.7.198 8 finds that the
\nrepresentation that the amount in the  local  currency  to  the  tune  of
\nrupees 4.5  crores  on  9.7.1987  has  been remitted is not correct.  The
\ntotal amount paid in the local currency on that date  amounts  to  Leones
\n350912\/709,  which  as  per the US = Leone exchange rate prevailing as on
\nthat date, works out only to US$ 81,691, i.e.  about  rupees  10.5  lakhs
\nand not rupees 4.5 crores as claimed by the exporter.  The overseas buyer
\nin  Sierra  Leone  has paid the bills pertaining to 1981-1982-1983 at the
\nrate of 1 $ = 1 Leone, when the official rate of exchange as on the  date
\nof  the  payment  was  around 1 $ = 43 Leones, which is not in accordance
\nwith the normal procedure.  The buyer should have made the payment as per
\nthe rate prevailing on the date of payment and not  as  reported  by  the
\nexporter  as  per the rate as on the date of bills, which in these cases,
\nis about 4 to 6 months prior to the date of  payment.    It  was  further
\npointed out by  the R.B.  I.  that enquiries with the Indian Embassy have
\nrevealed that there are no official instructions  in  Sierra  Leone  that
\nbills  have to be paid at the exchange rate prevailing on the date of the
\nbills and if the bills are in  US  dollars,  the  importer  has  to  make
\navailable to the supplier, the actual amount in foreign exchange.  By not
\nprotesting  against  the  highly  arbitrary  and  unfavourable  terms  of
\npayment, the exporter has acted in a manner detrimental  to  the  foreign
\nexchange interests of  the  country.   Ultimately, the R.B.I.  refused to
\ngrant extension of time, which  was  confirmed  by  this  court  in  Writ
\nPetition  No.9295  of  1988 by an order dated 31.7.1997, which has become
\nfinal.\n<\/p>\n
        22.  The view of the Board that  the  alleged  payment  in  local
\ncurrency would absolve the liability of the exporter is patently illegal.
\nThe  Board  proceeded on the basis that the Special Director has lost the
\nbusiness perspective and  that  a  single  step  in  getting  the  amount
\ndeposited  in  local  currency  would be sufficient to establish that all
\nreasonable steps have been taken by the exporter.  The conclusion of  the
\nBoard  that such an act will constitute all reasonable steps is basically
\nillegal.  Section 18(3) of the Act draws an inference on the  failure  to
\nrepatriate  the  value of the exported goods within the prescribed period
\nunless the contrary is proved by the  exporter  that  he  had  taken  all
\nreasonable steps  to  receive  or recover payments for the goods.  As per
\nthis provision, we do not find any reasonable step taken by the  exporter
\nduring  the period 1978-83 except claiming the deposit in local currency,
\nthat too after the receipt of the show cause notice.  On the contrary, it
\nis seen that the exporter had changed D.P.  terms to that of D.A.  terms;
\nsecondly, even the alleged payment in local currency  is  far  less  than
\nwhat is required; and thirdly, no amount has been repatriated till date.\n<\/p>\n
        23.   It  is seen from the records that the total export proceeds
\noutstandings in respect of the exports to Sierra  Leone,  United  Kingdom
\nand  other  countries  against  the  exporter  firms amounted to Rs.11.66
\ncrores.  The exporter claimed that payments were  made  by  the  overseas
\nparty  at  Sierra  Leone  in local currency to the tune of Rs.4.5 crores.
\nWhereas, the payment alleged to have been made some time in  the  year  1
\n981-83  in  local currency is a sum of Rs.10.5 lakhs as against the total
\ndue ot Rs.4.5 crores.  The exporter had not produced the records to  show
\neven as  regards  as  this  payment.  Further, the exporter ought to have
\nprotested as to the unfavourable terms of payment  at  the  old  exchange
\nrates.   The  Joint Controller of Imports and Exports, therefore, has, in
\nour view, rightly taken the stand in the affidavit filed in December 1998
\nin W.P.  No.9295 of 1988 as follows :\n<\/p>\n
        “This respondent has reason to believe that  the  petitioner  has
\ncolluded  with  the foreign buyers in an attempt to defraud the country’s
\nforeign exchange interests and to deprive its valuable foreign exchange.”\n<\/p>\n
        …..\n<\/p>\n
        “The foregoing would make it abundantly clear that the petitioner
\nwas not serious about realisation of the export  proceeds  and  that  his
\napplication for extension of time was not made bonafide.  This respondent
\nhas  reason  to  believe  that  this application for extension of time to
\nrealise the export proceeds has only been filed with a view  to  protract
\nthe  proceedings  or  delay any action that may be taken by the first and
\nsecond  respondents  herein  with  regard  to  the  withdrawal  of   cash
\nassistance for  non-repatriation  of  exports.    Thus,  the exporter has
\nclearly contravened the provisions of Sect ion 18(2) of the Act.”\n<\/p>\n
        24.  Exports to M\/s.  Raxshire Limited, London :\n<\/p>\n
        Two sets of show cause notices issued in the year 1983  and  1986
\nalso deal  with export of goods to M\/s.  Raxshire Limited, London and the
\nfailure to repatriate the value of the goods.  From the written arguments
\nof the representative of the exporter as found in Volume I of  the  typed
\nset  of  papers,  it  is  seen  that  the alleged violation in respect of
\nexports to M\/s.  Raxshire Limited figure in seven notices and  the  total
\ninvoice value of outstanding is shown at
\n  27,38,195.45  and  Rs.10,69,000\/-  and  after  certain remittance, the
\nbalance  according  to  them  was    25,87,214.28   and   Rs.7,96,500\/-.
\nAccording  to  them,  Manmohan  Chopra  floated a company called Raxshire
\nLimited with the help of his father S.L.  Chopra who was the Chairman  of
\nPunjab National  Bank  in  the  year  1980.  They further state that S.L.
\nChopra promised them to help as Chairman of Punjab National Bank in  many
\nways  provided  they exported the goods to his son’s company at London on
\nuse-and-collect basis.  They have entered into this kind  of  arrangement
\non the basis  of  the  assurance of S.L.  Chopra.  According to them, the
\nfirst consignment was exported on 23.8.1980 and the last  consignment  on
\n12.5.1983.  They also admit that they were not getting the bills paid and
\nthat  the 13 cheques presented to the tune of  6,12,759.51 issued by the
\nNigerian buyer were dishonoured and that as a prudent businessman,  their
\nDirector Mr.  Ravi Prakash visited United Kingdom in May 1984 to find out
\nthe  exact position and also to explore the possibility of realisation of
\ndues and thereafter, he gave a letter to the Bank namely B.C.C.I.  not to
\ninitiate any legal action and that they have learnt in November  1984  on
\nfurther  enquiries  that  it  is  better to take legal action in order to
\nsecure the dues.   Learned  senior  counsel  Mr.    B.    Kumar  for  the
\nrespondents referred to the report of a private detective in reference to
\nManmohan  Chopra  dated  28.6.1990  , wherein the detective agency namely
\nThames  Investigation  Services,  while  reporting  their   enquiry,   in
\nreference to  the  Punjab  National Bank, submitted that they met Mr.  M.
\nChopra and made enquiries.  According  to  the  report,  Mr.    and  Mrs.
\nManmohan  and  his  family  were  residing  temporarily at 75, Nottingham
\nTerraince.  Excepting the said residence, he has no other property.    It
\nis  curious  to  see  that  the investigating agency did not say anything
\nabout the liquidation of Raxshire Limited owned by Sri Manmohan Chopra.\n<\/p>\n
        25.  The explanation as well as the argument advanced  on  behalf
\nof the exporter is made in reference to three stages:\n<\/p>\n
        – In  the  first  stage,  the  goods  exported  to M\/s.  Raxshire
\nLimited were re-exported to Nigeria by them  and  there  was  a  coup  in
\nNigeria  in  the  year  1978 followed by looting and arson and therefore,
\nthere was difficulty in realisation.  The importer requested the exporter
\nto have patience.  The Nigerian buyer had made  payments  by  way  of  13
\ncheques   for      6,77,759   which  were  subsequently  dishonoured  on
\npresentation.\n<\/p>\n
        – The second stage is from November 1984 onwards.   According  to
\nthe exporter, they found out that the foreign buyer, i.e.  M\/s.  Raxshire
\nLimited  and  its  Director Shri Man Mohan Chopra, in connivance with his
\nfather Cham Lal Chopra, the foreign  buyer’s  father,  was  making  false
\nexcuses  about  the  matter  and  they  contacted the legal solicitors in
\nLondon and on their assurance that there is possibility to trace Raxshire
\nfunds in the hands of the Director of the company, they sought permission
\nof the R.B.I.  for release of foreign exchange of  15,000 for initiating
\nlegal action.  They have enclosed confidential documents to  show  as  to
\nhow  the  assets  of  Manmohan  Chopra  are available for taking emergent
\nsteps.  Inspite of this, the R.B.I.  took its own  time  and  refused  to
\nrelease the fund for taking legal action.\n<\/p>\n
        –  The third stage involves their claims to be preferred with the
\nliquidator, but the R.B.I.  has not assisted them by releasing the funds.\n<\/p>\n
It is true that the R.B.I., in their communication dated 27.2.1987,  have
\ninformed the buyer in reference to their request for release of funds for
\ntaking legal  action  that  M\/s.   Raxshire Limited has been placed under
\nliquidation and M\/s.  Ian Franses Associates have been appointed  as  the
\nLiquidator.  But, the crucial question is that the bills were outstanding
\nfor the  exports  made  from  21.6.1979 to 21.3.1983.  The letter of M\/s.
\nS.R.C.  Exports for and on behalf of S.R.C.  Group of Industries  to  the
\nB.C.C.I.,  London,  their  negotiating bank, dated 19.5.1984, is found at
\npage 44 of Volume I.  In this letter, the exporter says as follows :\n<\/p>\n
        “For various reasons, these bills  have  not  been  paid  by  the
\ndrawees, which  fact  is very well known to our bankers in India.  Due to
\nbad economic situation in Nigeria, which is the ultimate  destination  of
\nour  products,  our  buyers from that country did not honour our drawees,
\nnor are they in a position to order further import of our  product.    We
\nare,  therefore,  in  a helpless situation, as a group as is our importer
\nM\/s.  Raxshire Limited.\n<\/p>\n
                        We have no intention of raising any dispute  with
\nM\/s.   Raxshire  Limited because we know fully well their good intentions
\nand helplessness and we are sure that whenever they are in a position  to
\nget money from Nigeria, they will honour our drawees.\n<\/p>\n
                        We  have  already  told  our bankers here in this<\/p>\n
respect and we did not want any kind of legal action against  our  drawee
\nM\/s.  Raxshire  Limited.    It is therefore requested that no such action
\nneed be initiated without reference to us.”\n<\/p>\n
M\/s.  Hindustan Commercial Bank, Madras has  written  a  letterto  S.R.C.
\nIndustries dated 6.6.1984 which is as follows :\n<\/p>\n
        “All the  above  bills  have become overdue for payment.  We have
\nbeen informed by B.C.C.I.  that you have agreed to wait until the  drawee
\nis in a position to make the payment.”\n<\/p>\n
The  stand  of the exporter that no legal action need be taken is inspite
\nof the fact that 13 cheques issued  in  June  1983  by  the  third  party
\ntowards the dues  have been dishonoured.  Mr.  Ravi Prakash, the Managing
\nPartner of the exporter, in his letter to the Director of Central  Bureau
\nof  Investigation found at page 69 of Volume I, says that Manmohan Chopra
\nsold most of the goods at London itself as  counter  cash  sales  through
\nbrokers  and  only  a  small fraction of goods have been sent to Nigerian
\nparties by M\/s.  Raxshire Limited.\n<\/p>\n
        26.  From the above, it is clear that the exporter has not  taken
\nreasonable  steps  for  repatriating the value of the goods exported from
\nthe year 1978 to 1983 and that they have decided not to  take  any  legal
\naction.   It  appears  that only after receipt of the show cause notices,
\nthey have changed their stand stating that M\/s.    Raxshire  Limited  are
\ntrying  to  defraud them and that they want to initiate legal proceedings
\nand also requested the R.B.I.  for release of  15,000.  The  refusal  of
\nthe R.B.I.   to respond to their request is taken advantage of and argued
\nthat but for the rejection by the R.B.I., they would  have  realised  the
\nfunds.   We  are  totally unable to agree with the stand of the exporter.
\nIt is their further case that they came to know  of  the  liquidation  of
\nM\/s.   Raxshire Limited only from the information furnished by the R.B.I.
\nin the year 1987.  It is too difficult to accept their case  that  though
\nthey  had  been  corresponding  with  their solicitors and that they have
\ninvestigated about the activities of M\/s.  Raxshire  Limited,  they  were
\nnot informed of its liquidation proceedings.\n<\/p>\n
        27.   Yet  another  curious  aspect  is  that  the exporters have
\nwritten a letter dated 28.7.1989 to M\/s.  C.G.  Adams Associates  who  is
\nsaid to be one of the joint liquidators, requesting him to make a trip to
\nIndia and that they are ready to bear all his expenses such as his to and
\nfro air fair, his stay in India and also arrange for his meeting with all
\nthe  connected officers of various departments of the Government of India
\netc., for which M\/s.  C.G.  Adams Associates agreed to come,  subject  to
\nthe payment  of  a  fees of  5,000.  Thereafter, they wrote to the Joint
\nController, R.B.I.  on 14.10.1989 referring to their earlier  failure  to
\nsanction   15,000 and that they want a further permission for  5,000 in
\nforeign exchange.  The stand of the exporter in the year 1984 was not  to
\ninitiate  legal  proceedings,  but  his  subsequent  request for funds to
\nenable him to take  legal  action,  therefore,  cannot  be  construed  as
\nefforts  to  realise  the  export  proceeds within the stipulated period.
\nBesides, no credence can be attached to the letter dated  26.8.1983  from
\nthe  B.C.C.I., London that they had paid bills totalling  2,57,722.63 on
\naccount of S.R.C.  Group of Companies.\n<\/p>\n
        28.  It is an admitted  fact  that  Ravi  Prakash,  the  Managing
\nPartner  of  the group of export concerns had been making personal visits
\nto  London  quite  often  as  could  be  evidenced   from   the   various
\ncorrespondence  and  he  having categorically informed the drawee bank on
\n19.5.1984 that no legal action need be taken against  the  importer,  his
\nsudden  discovery that there was a collusion between Man Mohan Chopra and
\nhis father Cham Lal Chopra and that therefore they wanted to  take  legal
\naction is  hardly convincing.  It is further astonishing to find that the
\nexport concern is not aware of  the  liquidation  proceedings  until  the
\nR.B.I.  had  informed  them  about it in the year 1987.  Their stand that
\nfrom 1985 to 1987, during the period of  their  request  for  release  of
\nfunds  for  taking  legal  action, they were not aware of the liquidation
\nproceedings against M\/s.   Raxshire  Limited  cannot  be  accepted  as  a
\ngenuine stand.    We are clear that such a request made some time in June
\n1985 and the intimation of the liquidation proceedings, which  are  taken
\nadvantage of, have emanated only after the legal proceedings initiated by
\nthe Enforcement  Directorate  and  R.B.I.    and their attempt is only to
\nbuild up a case of their aborted attempt to get the  funds  and  put  the
\nblame on R.B.I.    for  non-release  of funds.  It is obvious that when a
\nliquidator is appointed in the year 1987, the proceedings of  liquidation
\ncould  have commenced long prior and the exporter should be aware of what
\nis happening in that company.  The findings of  the  appellate  authority
\nthat  the  exporters were prevented from taking effective timely steps by
\ninitiating legal action which was solely  due  to  the  inaction  of  the
\nR.B.I.  are  perverse  findings  and  without  any basis.  As a matter of
\nfact, the learned senior counsel for the respondents could not even  give
\nus  the  date  on  which  they have sought for the permission of grant of
\ntheir legal expenses and while referring to the letter  dated  22.5.1985,
\nthey have made a reference to the letters from June to May 1985.  None of
\nthe  copies  of  those letters referred were furnished or produced before
\nus.  It is admitted by M\/s.  Raxshire Limited that problem arose only  in
\nthe year  1981  for  the first time.  Their earlier plea that there was a
\ncoup in Nigeria in 1978 which is a well known fact and  that  there  were
\ndifficulties  in  getting the sale proceeds and that there is justifiable
\nreason for the delay of these have  all  fallen  to  the  ground  on  the
\nexporter’s  own  admission  that  it was found out that most of the goods
\nhave been sold in London itself and only a small fraction  of  the  goods
\nwere exported  to  Nigeria.   Therefore, it is a clear case of failure on
\nthe part of the exporter in not realising the proceeds from 1978 to 1983.
\nTheir subsequent attempt is only to justify their inaction.\n<\/p>\n
        29.  Exports to Monrovia :\n<\/p>\n
        The case of the exporter is that the goods sent  to  M\/s.    West
\nCoast  Enterprises,  the main importer in Monrovia did not reach Monrovia
\nand therefore, they refused to pay the amount.  They have also claimed to
\nhave furnished non-delivery certificate issued by  the  port  authorities
\nand  therefore,  they  state  that  they  have  lodged  a  claim with the
\ninsurance company and they are pending settlement.  One of the consignees
\nM\/s.  K.  Niam Brothers and P.G.  International had disappeared and  they
\ncould  not  realise  from  them  and  therefore, they have applied to the
\nR.B.I.  to waive this amount because it was impossible  to  recover  this
\namount.   In  reference to certain co nsignments, it was claimed that the
\ngoods were not taken delivery of because of the  delay  in  arrivals  and
\ntherefore, they requested for re-shipment and the same had not been done.
\nThey  have also taken certain actions in reference to some of the cheques
\ndishonoured for filing civil suits in Monrovia.   The  Board  found  that
\nthey  are  satisfied  that  though the certificates were available in the
\nfile and though they used the expression “short landed”, it  is  same  as
\nthough  the  shipped  goods  were landed and therefore, there is adequate
\nevidence of delivery of the goods.  The Board  also  proceeded  to  state
\nthat  the burden is on the department to prove that the goods exported by
\nthe party have been cleared by the foreign buyer and the burden  has  not
\nbeen discharged.  The Board also referred to the request for re-shipment.
\nWe  are  unable  to  see as to how ‘short landing’ is the same as that of
\nlanding of shipped goods.  The terminology used for short landing  refers
\nto the incomplete landing of shipped goods.  It is ununderstandable as to
\nhow  the  burden is on the department to prove that the goods exported by
\nthe party have been cleared by the foreign buyer.  The burden  is  placed
\non the  exporter  under  Section  18(3)  and  Section 59 of the Act.  The
\nconclusion of the Board, therefore, is clearly illegal.\n<\/p>\n
        30.  In this context, it is seen that Sri K.A.  Sekar, an Officer
\nof the Punjab National Bank, in his statement dated 28.11.1985 before the
\nEnforcement authorities, had stated  that  during  his  visit  to  Banjul
\n(Monrovia),  he had contacted the buyer who informed him that no payments
\nwere due to the exporter and that it was the  exporter  who  had  to  pay
\ncertain amounts  to  them.    Sri  Sekar  had  also given extracts of the
\naccounts of M\/s.  S.R.C.  Industries maintained by M\/s.  H.A.    Farag  &
\nSons  Limited, Banjul which revealed that goods to the extent of  36,800
\nhad been exported from Banjul to Taufic Huballa on instructions from  Sri
\nRavi Prakash.    The  statement  of the Bank official is admissible under
\nSection 40 of the Act and there is no reason  as  to  why  it  cannot  be
\nrelied upon.  Therefore, the case of the exporter that the goods were not
\ncleared  and  hence  they could not repatriate its value is unacceptable.
\nThe conclusion of the Board in  disregarding  this  important  aspect  is
\nillegal.\n<\/p>\n
        31.   In  reference  to  the show cause notice T-4\/69-M\/83, it is
\nseen that that an agreement was seized during the raid whereby it is seen
\nthat the said agreement was  written  in  the  handwriting  of  Sri  Ravi
\nPrakash agreeing to pay a compensation of US$ 3,000 to the buyer M\/s.  H.
\nA.  Farag  &  Sons  Limited  of  Africa.  The finding of the adjudicating
\nofficer is that the charge is clearly proved in the light of the  written
\nagreement by  Ravi  Prakash himself.  The Board has accepted the stand of
\nthe exporter that this agreement was not intended to be acted upon.   The
\nBoard  has  held  that  since  there  was  a  pre-condition  for R.B.I.’s
\npermission, the agreement has  to  be  read  as  one  contingent  on  the
\npermission of  the  R.B.I.    and  therefore, the exporter cannot be held
\nguilty under Section 9(1)(c) of the Act.  This agreement has to  be  read
\nwith the  statement  of  Sri K.A.  Sekar, former Assistant Zonal Manager,
\nPunjab National Bank, given under Section 40 of the Act, disclosing  that
\nthere was an overt action on the part of the exporter in pursuance to the
\nsaid agreement  seized  by the department.  According to him, the account
\nof M\/s.  H.A.  Farag & Sons Limited, Banjul, Zambia showed that there was
\nstill a sum of  4,793.87 remaining to be paid to M\/s.   H.A.    Farag  &
\nSons Limited in  connection  with the export and that M\/s.  H.A.  Farag &
\nSons Limited wrote a letter dated 25.5.1983 to the exporter  asking  them
\nto credit  the amount to their account.  The Board erred in accepting the
\ncase of the exporter that the agreement was not acted upon.\n<\/p>\n
        32.  A Division Bench of this Court in M\/S.  SAMUEL &  CO.    VS.
\nFOREIGN  EXCHANGE  REGULATION APPELLATE BOARD (1993 LAW WEEKLY 633), held
\nthat when a person, knowing fully well the legal consequences of  any  of
\nhis act or omission, does or refrain from doing that thing, his action or
\nomission should be taken to be willful unless it is shown that the act or
\nomission is  due  to  mistake  or  inadvertence.  The only defence of the
\nexporter in all these three  sets  of  cases  is  that  they  have  acted
\ncontrary to  the  provisions  firstly  by  converting D.P.  terms to D.A.
\nterms insofar as the  exports  to  Sierra  Leone  are  concerned  and  by
\nagreeing not to take legal action in reference to M\/s.  Raxshire Limited,
\nLondon.   The  exporter has clearly contravened the provisions of Section
\n18(2) of the Act.  In ARCOT EXPORTERS VS.  DIRECTOR OF ENFORCEMENT  [2001
\n(4) C.T.C.    609],  this Court, in which one of us is a party, has taken
\nthe view that the belated attempt on the part of the exporter  by  filing
\nsuits after the notice by the Special Director of Enforcement is complete
\nby non-securing  the  foreign  exchange.  In that case also, no extension
\nwas granted and therefore, there is a legal presumption  subject  to  the
\ncontrary being proved that the exporter had not taken reasonable steps to
\nreceive  or  recover  the  amount, thereby contravening the provisions of
\nSection 18(2) of the Act.  In K.L.   PAVUNNY  VS.    ASSISTANT  COLLECTOR
\n[1997 (3)  S.C.C.    721],  the  Supreme  Court  held  that  a confession
\nstatement,  recorded  by  reason  of  statutory   compulsion   or   given
\nvoluntarily  by  the  accused  pursuant to his appearing against summons,
\ncannot be said to have been obtained by threat, inducement or promise and
\ntherefore, is admissible in evidence.  Even if  the  statement  had  been
\nretracted,  if  on facts it is found to be voluntary and truthful, it can
\nform the exclusive basis for conviction and it need not  be  corroborated
\nby independent evidence.\n<\/p>\n
        33.  Section 68(1) of the Act says that where a person committing
\na  contravention  of  any  of  the  provisions  of  the Act or Rules or a
\ndirection or order made thereunder is a company, every person who, at the
\ntime of the contravention was incharge of and who was responsible for the
\nconduct of the business of the company as well as the  company  shall  be
\ndeemed  to  be  guilty  of  the  contravention  and shall be liable to be
\nproceeded against and punished accordingly.   The  proviso  to  the  said
\nsection says that such person is entitled to prove that the contravention
\nhas  taken  place  without  his  knowledge  or  that he exercised all due
\ndiligence to prevent such contravention.  The  explanation  to  the  said
\nproviso  says  that  a  company  includes  a firm or other association of
\nindividuals.  In this case, it is seen that the main person looking after
\nthe export business of all the sister concerns was Sri Ravi Prakash.  The
\nstatement of Sri Rattan Kumar  and  the  documents  show  that  Sri  Ravi
\nPrakash, who  was  the  Managing  Partner  of  S.R.C.    Export  Group of
\nCompanies, was responsible for the affairs of  the  company.    Even  the
\nwritten submissions  were  made  as  submitted  by Sri Ravi Prakash.  The
\nSpecial Director has accepted that it is Ravi Prakash  who  was  managing
\nthe affairs  of  the group concern.  Even as per Section 68, every person
\nwho was incharge of and who was responsible to the company as well as the
\ncompany shall be deemed to be guilty of the  contravention.    Therefore,
\nthe  firm  as  well  as  the  other partners also are not absolved of the
\nliabilities.\n<\/p>\n
        34.  In the light of the above, we have no hesitation in  holding
\nas follows :\n<\/p>\n
        (a)  The  exporters have violated the provisions of Section 18(2)
\nof the Act by changing the terms of the bill.\n<\/p>\n
        (b)  The  exporters  had  not  taken  all  reasonable  steps  for
\nreleasing the dues within the meaning of section 18(3) of the Act.\n<\/p>\n
        (c)  The  failure  on  the  part  of  the exporters in not taking
\nreasonable steps within the prescribed period  of  six  months  which  is
\nallowed by the R.B.I.  will clearly amount to violation of the provisions
\nof Section 18(2) readwith Section 18(3) of the Act and that the exporters
\nhave failed to prove their case beyond reasonable doubt.\n<\/p>\n
        (d) The  statements  given by Sri K.A.  Sekar under Section 40 of
\nthe Act can be relied upon and it is for the exporters to establish  that
\nthey  have taken all reasonable steps for releasing the sale proceeds and
\nthey have failed to discharge the burden.\n<\/p>\n
        (e) The Board has failed to apply the legal presumption available
\nunder Section 59 of the Act in favour of the department, resulting in the
\nillegal and perverse finding on fact and on law.\n<\/p>\n
        (f) The payment made by one non-resident namely M\/s.  H.A.  Farag
\n& Sons Limited, Banjul to M\/s.  Toufic Huballa, another non-resident,  on
\ninstructions of  a resident without the permission from the R.B.I.  would
\namount to contravention of the provisions of Section 9(1)(a) of the  Act,
\nsince the said payment was made at the instance of the exporters.\n<\/p>\n
        35.   It  is  seen  that  the  exporter  had been dragging on the
\nproceedings and prolonging even the hearing of the case for a  number  of
\nyears.   Their  attempt to put the blame on the Reserve Bank of India and
\ntheir failure to submit the crucial documents required and their  further
\nstand in not coming forward with the explanation cannot be appreciated.\n<\/p>\n
        36.   For  all  the  above  reasons, we are inclined to allow the
\nappeals with exemplary costs.  We record our appreciation for the efforts
\ntaken by Mr.  K.  Kumar, Additional Central Government  Standing  Counsel
\nin placing  before  us the case effectively.  The statements filed by the
\nappellants dated 6.3.2002 shall form part of this judgment.\n<\/p>\n
        37.  All the above appeals are allowed with a cost of  Rs.1,500\/-
\neach.  We direct that the interim orders, if any, passed pending disposal
\nof these  appeals,  shall  stand vacated.  The appellants are entitled to
\nproceed against the exporter in accordance with law and there  would  not
\nbe any impediment in reference to any of the proceedings by virtue of the
\norders in question.\n<\/p>\n
Index :  Yes                                    (P.S.M.J.) (P.T.J.)\nInternet :  Yes                         08\/04\/2002 \n\nNOTE TO OFFICE :  Issue by 10.4.2002.   \n\nab\n\nSd\/..\n\n\nAssistant Registrar\n\n\n\/\/ TRUE COPY \/\/  \n\n\nSub Assistant Registrar (C.S.)\n\n\nTo\n\nThe Director of Enforcement,\nUnion of India,\nEnforcement Directorate,\nNew Delhi-110 003. \n\nP.  SHANMUGAM, J.    \nand \nP.  THANGAVEL, J.   \n\nJudgment in \nC.M.A.  Nos.1583 to 1590 \nof 1999\n\nDelivered on\n08\/04\/2002 \n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Madras High Court Union Of India vs M\/S. Src Exports Pvt. Ltd on 8 April, 2002 IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 08\/04\/2002 Coram THE HONOURABLE MR. JUSTICE P. SHANMUGAM and THE HONOURABLE MR. JUSTICE P. THANGAVEL C.M.A. Nos.1583 to 1590 of 1999 and C.M.P. Nos.18424 to 18431 of 1999 & […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,13],"tags":[],"class_list":["post-186160","post","type-post","status-publish","format-standard","hentry","category-high-court","category-madras-high-court"],"yoast_head":"\nUnion Of India vs M\/S. Src Exports Pvt. 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