SAMUEL AND COMPANY, REPRESENTED BY ITS MANAGING PARTNER M. SAMUEL Vs. FOREIGN EXCHANGE REGULATION APPELLATE BOARD AND ANR.

JUDGEMENT

(1.) THIS appeal has been filed under Section54 of the Foreign Exchange Regulation Act, 1947, hereinafter referred to as the Act against the decision of the Foreign Exchange Regulation Appellate Board in appeal No. 183 of 1968 on its file.

(2.) THE appellant herein, a firm carrying on business in textiles, effected certain shipments of handlooms cotton sarongs to Singapore during the year 1961 -62 for an invoice price of Rs. 1,98,230. However, it realised only a sum of Rs. 20,631.69 leaving a balance of Rs. 1,77,589.31. To a notice issued on 19th August, 1965 by the Director of Enforcement, the firm admitted that the goods were sent to their Branch office at Singapore, that the said branch at Singapore was sold on 1st July, 1963 to Ambika Palayakat Company at No. 44, Coral Merchant Street, Madras -1 as a going concern for a consideration of Rs. 1,55,000, that this sale was duly intimated to the Reserve Bank of India and that the said sum of Rs. 1,55,000 has been adjusted towards certain earlier outstanding export proceeds due from its Singapore branch and that by virtue of this appropriation, it had satisfied the provisions of Section 12(2) of the Act. On the ground that the firm has not realised part of the export sale proceeds, proceedings for violation of Section 12(2) of the Act were intimated against the firm. Those proceedings were resisted by the firm contending that it has realised some further amounts also and the balance of its bills to the tune of Rs. 1,11,970 -55 could not be collected by the Singapore branch which has been sold as a going concern. After giving an oral hearing to the firm's partners and their counsel, the Director of Enforcement found that out of the total invoice value of Rs. 1,98,230 a sum of Rs. 1,11,970 -55 alone remained to be realised. He however did not accept the case put forward by the firm that the firm had written off the same as bad debt, having regard to the fact that apart from the agreement dated 1st July, 1963 between the Ambika Palayakat Company, the purchaser of the Singapore branch as a going concern, there have been the other Tamil agreements dated 29th June, 1963 and 17th June, 1963 and unless those agreements are produced it is not possible to agree with the firm's explanation that at the time of the sale of the Singapore branch the unrealised export sale proceeds were treated as bad debt and written off. He felt that the Tamil agreements which have not been produced in spite of direction to do so by the firm might have dealt with part of the outstanding bills which are realisable from third parties towards the sale of the goods exported. He also found that even if the Singapore branch had been sold as a going concern as it is likely to result in the non -repatriation of the sale proceeds permission should have been obtained from the Reserve Bank of India as contemplated by Section 12(2) of the Act. In this view he held that by non -receipt of the export proceeds the firm had contravened the provisions of Section 12(2) of the Act read with the relevant notification dated 22nd April, 1952. He therefore levied a penalty of Rs. 56,000 under Section 23(1)(a) of the Act by his order dated 30th October, 1968.

(3.) IN this appeal filed by the firm against the decision of the Appellate Board, the non -realisation of a sum of Rs. 1,11,907.35 has not been disputed. However, it is contended that in the circumstances of the case there is no contravention of Section 12(2) of the Act as there is no requisite mens rea and there is no intentional non -repatriation which alone will come within the scope of Section 12(2) of the Act. The question is whether on the facts and circumstances of the case Section 12(2) has been contravened.