1986 (7) TMI 398 - HC - FEMA

Summary

Issues: Contravention of the Foreign Exchange Regulation Act - Sections 5(1)(c) and 9(1)(a) regarding payments made without permission from the Reserve Bank of India.

Analysis:
1. The appellant was found guilty of contravening Sections 5(1)(c) and 9(1)(a) of the Foreign Exchange Regulation Act for making payments without the necessary permissions. The charges included payments made on behalf of foreign companies without the required authorization from the Reserve Bank of India.

2. The appellant admitted to the payments but argued that they were acting as agents for foreign companies and handling funds on their behalf out of freight proceeds. They claimed that all transactions were reflected in their accounts and submitted to the Reserve Bank of India for approval, believing there was no concealment. The original and appellate authorities acknowledged the contraventions but reduced the penalties imposed.

3. The key legal question raised was whether, given the nature of the appellant's business and authorization to handle foreign funds, the authorities were correct in finding a contravention of the Act. The appellant contended that they were following instructions from foreign principals and operating in the normal course of business.

4. The appellate authority recognized that the appellant was acting as an agent for foreign companies, maintaining a running account for freight collection and expenses. It was acknowledged that the appellant had no discretion but to follow instructions from foreign principals, and there was no withholding of information regarding the funds handled.

5. The court emphasized that the appellant was obligated to comply with instructions from foreign entities and had no choice but to carry out transactions as directed. However, it was noted that the appellant could refuse to contravene Indian laws while following foreign instructions.

6. The Tribunal concluded that the appellant had no alternative way of conducting their business and that timely disclosures were made to the Reserve Bank of India. The court agreed that in similar circumstances, permissions were usually granted, and the nominal penalties imposed were not justified. Therefore, the appellant succeeded in the appeal due to the nature of their business operations and compliance with disclosure requirements.

7. Consequently, the appeal was allowed, and no costs were awarded in this matter.