M/S Veekay Leather Industry vs Director Of Enforcement ...
2009 Latest Caselaw 1962 Del

*         IN THE HIGH COURT OF DELHI AT NEW DELHI

+      Criminal Appeal No. 491/2007 & Crl.M.A.9585/2007

%                                  Date of decision: 11.05.2009

       M/S VEEKAY LEATHER INDUSTRY ...APPELLANT
                      Through: Mr.Shashank Deo Sudhi, Advocate

                                Versus

       DIRECTOR OF ENFORCEMENT DIRECTORATE & ANR.
                                      ...RESPONDENTS
                    Through: Ms.Rajdipa Behura, Advocate


CORAM:
HON'BLE MR. JUSTICE MOOL CHAND GARG

1.     Whether the Reporters of local papers
       may be allowed to see the judgment?          Yes

2.     To be referred to Reporter or not?           Yes

3.     Whether the judgment should be
       reported in the Digest?                      Yes

MOOL CHAND GARG, J. (ORAL)

1. This order shall dispose of the second appeal filed under

Section 54 of the Foreign Exchange Regulation Act, 1973 by the

appellant aggrieved from the order dated 20th June, 1980 passed by

the Assistant Director, Enforcement Directorate, Agra, whereby a

penalty was imposed upon the petitioner on account of not taking

adequate steps to recover the money from a foreign buyer. The

Assistant Director imposed a penalty of Rs. 90,000/- which was

reduced to Rs.60,000/- by the first Appellate Authority, that is, the

Appellant Tribunal for Foreign Exchange, New Delhi vide its order

dated 4th June, 2007. This is the order which is the subject matter of

the present appeal.

2. According to the appellant, this appeal raises the following

questions of law:-

(i) What is the scope and ambit of the phrase 'reasonable steps' as appearing under Section 18(3) of the FERA?

(ii) Whether the FERA Appellate Board committed an error in law in holding that steps taken by the appellant were not reasonable considering the fact that the appellant while remaining consistently in touch with the State Bank of India, Kanpur, Reserve Bank of India and Indian High Commission, London took steps on the advice rendered by them?

(iii) Whether the FERA Appellate Board committed an error in law in holding that no liquidation report was filed by the appellants when the fact remains that the report of the JKR Credit Management Bureau, London clearly stipulates that the buyer company was struck off the Registrar of Companies on 03.01.1989 and was dissolved by notice in London Gazzette on 24.01.1989?

3. Various grounds have been taken by the appellant before this

Court in assailing the order of the Appellate Tribunal. It is submitted

that since the name of the buyer company was struck off from the

register of the Registrar of Companies on 3.1.1989 as per the notice

in London Gazette on 24.01.1989 and which fact was reported to

the appellant by an agency under the name and style of M/s JKR

Credit Management Bureau, London, which is the agency

recommended by the Indian High Commission, London, the

appellant was not at fault. Moreso, because the L/C opened by the

buyer expired after the goods were consigned by Air and the

documents for collection were routed through the State Bank of

India, who on their part sent a bill to the Foreign Bank i.e. M/s

Barclays Bank, London, but no payment was received by the State

Bank of India despite writing various letters to the Foreign Bank for

the reason that there was delay in sending the payment and also

about the fate of the goods received by the foreign buyer.

4. I have heard the submissions from both the sides. All the

grounds taken before me have been dealt with by the Appellate

Authority in its order dated 4.6.2007 while deciding Appeal No.

669/1990. It would be appropriate to take note of the following

paragraphs of the aforesaid judgment:-

4. As against it, Shri A.C. Singh vehemently argued

against the contentions raised by the appellant stating

that no documents relating to the liquidation of the

foreign buyer company was filed by the appellant despite

his assurances given to the Adjudicating Officer which is

clear from the perusal of the impugned order. The

appellant could not furnish the report of the official

liquidator. Subsequently the RBI asked the appellant to

obtain a confirmation from Indian High Commission at

London in this regard that the foreign buyer was no more

in business, this requirement the appellant did not

comply. The authorized banker advised the appellant

vide its letter dated 28.8.95 to approach RBI for extension

of time but he failed to approach the RBI for extension of

time for realization of export proceeds. The appellant has

not been able to keep the RBI informed of the

development in his matter and did not take steps as were

expected from a prudent businessmen.

5. It is also arged that the Barclays Bank, London

addressed a letter to authorized dealer SBI, Kanpur

indicating that the exporter had directly settled the

matter of payment and export value had been accounted

for to the exporter account The relevant text of the letter

dated 4.8.87 available at page 12 of the paper book as

Annexure-B is quoted below:-

"Further to your letter dated 23.5.1987 we

have now received a reply from the drawee's

bankers on this matter, who state : "we are

unable to trace this item in our own records and

therefore applied to Capital Shoes for

information. We are advised that the goods

relating to this collection were found to be faulty

when received and it was arranged between the

two parties that they would be sold at the best

price. According to Capital Shoes this was done

and the value accounted for to Veekay Leather

Industries".

From above discussion it becomes amply clear

that the matter has been settled bythe parties on their

own and the impugned order was liable to be confirmed.

6. I have heard the rival submission of both the

parties and gone through the record and the law on the

point. The appellant has relied on the letter of JKR Credit

Management Bureau dated 18.6.90 which is page 28 of

the paper book to prove that the foreign buyer company

went into liquidation for which the appellant could not

realize the outstanding dues. The letter hardly helps the

appellant which does not speak of liquidation of the

foreign buyer but mentions of non-traceability of the

foreign buyer where last accounts of the foreign company

were available for year 1985-86 which did not file

accounts for the year 1987 and thereafter. The overseas

company could not enter into trading which would have

amounted to fraud.

7. Under Section 18(2) and 18(3) of the FERA Act,

1973, an exporter is under an obligation to make

reasonable efforts to realize the outstanding export

proceeds within the prescribed period and in prescribed

manner failing which the presumption is raised against

the exporter under Section 18(3) which is rebuttable.

Section 18(2) provides as under:-

Section 18(2): Where any export of goods....has been

made, no person shall, except with the permission of

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) and sub-clause

(ii) of clause (a) of sub-section (1)-

(a) The 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)......

Under Section 18(3) of the FERA Act a presumption

arises where the exporter does not receive the payment

for exports within the prescribed period where it shall be

presumed that contravention of the provisions of sub-

section (3) has taken place unless it is proved by the

appellant that he has taken all reasonable steps to

recover the payments of the exports. Thus the

presumption is rebuttable. But in the present case the

appellants have not been able to prove any sincere

efforts on their part for making repatriation of export

proceeds to rebut this presumption.

8. The appellant did not file the report of liquidation

despite directions of RBI nor got its confirmation from

the High Commission of London. He failed to approach

RBI for advice or extension of time. In view of the

aforesaid discussion it becomes amply clear that the

appellant failed to take reasonable steps to realize the

outstanding export dues rather it settled the matter

directly with the overseas buyer without permission of

RBI which resulted in the loss of foreign exchange

equivalent to Rs.67,200/- to the country. Having

considered the facts, evidence and circumstances of the

case, I come to the conclusion that the appellant has

rightly been held guilty by the Adjudicating Officer.

However, having considered the amount of outstanding

dues against the company, I am of the view that the

amount of penalty should be reduced from Rs.90,000/-

to Rs.60,000/- to achieve the ends of justice.

9. For the reasons mentioned above, the appeal is

partly allowed. The amount of penalty is reduced from

Rs.90,000/- to Rs. 60,000/- where the appellant is

directed to deposit the said amount of penalty within 15

days from the date of receipt of this order failing which

the respondent may recover the same in accordance

with the law.

5. A perusal of this order goes to show that all the submissions

made on behalf of the appellant have been dealt with by the

Appellate Authority and it shows that,

(i) No documents relating to liquidation of

foreign buyer company has been filed by the

appellant despite his assurance given to the

Adjudicating Officer.

(ii) When RBI asked the appellant to obtain the

confirmation from Indian High Commission to

the effect that foreign buyer was no more in

business, this requirement was also not

complied with by the appellant.

(iii) Even the requirement of the authorized

banker to approach RBI for extension of time

was not comply with by the appellant so as

to take time for realization of export

proceeds.

              (iv)    Regarding correspondence between SBI and

                      Barclays    Bank   the   Appellate     Board     has

quoted the relevant text of the letter dated

4.8.1987 which is available at page 12 of the

paper book as Annexure B (supra) also goes

to show that the payments were made not by

the foreign buyer because the goods were

found to be faulty and further it also became

clear that the matter was settled amicably by

the appellant with the foreign buyer.

6. In these circumstances, the Appellate Authority has rightly

held the appellant guilty of the provisions contained under

Sections 18(2) and 18(3) of the Foreign Exchange Regulation

Act, 1973 and has rightly punished the appellant though by

reducing the amount of penalty. No infirmity is found.

7. The appeal is accordingly dismissed. Application also stands

dismissed.

May 11, 2009                                MOOL CHAND GARG, J.
dc