M/S. Bharat Carpets vs Director, Enforcement Directorate

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

2 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,

3 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

4 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

5 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

7 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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