Duty To Get Sale Proceeds Of Export Repatriated Doesn't Merely Arise After Expiry Of Six Months Statutory Period Under S. 18 FERA: Calcutta High Court

The Calcutta High Court has ruled that the duty to get the sale proceeds of export repatriated does not merely arise after the expiry of six months statutory period, but the last day of the sixth month from the date of export is only the outer limit and end of the timespan.

Justice Rai Chattopadhyay made the observation while rejecting an argument that a company director, who had resigned before the six months statutory period, cannot be held liable for contravention of Section 18 of Foreign Exchange Regulation Act.

Grapco Industries Limited in 1996 had exported goods valued at U.S. $ 2,91,200 but allegedly refrained from taking any action to secure the receipt of the export proceeds of the said amount, in respect of the said shipments.

The export proceeds were not received in India within a period of six months from the date of shipment. The argument before the court was that contravention of the provision of law sets in at the moment when after expiry of the six months period, the sale proceeds are not repatriated as envisaged in law.

The petition before the high court challenged an order of the trial court rejecting the petitioner's prayer for discharge from the case registered in 2002 by the Enforcement Directorate.

The former director told the court that the allegations of non-receipt of export proceeds related to export shipment dating back to months of April and May, 1996. While the statutory period of six months for remittance of the sale proceeds with respect to the shipments expired in the months of October and November, 1996, the petitioner had resigned with effect from August 2, 1996.

The court said: "The words 'within the prescribed period' appearing in section 18(1)(a) would definitely mean the prescribed period of six months, as provided under the statute. Therefore it is the mandate of law that all activities for repatriation of export value would be within the outer limit of sixty days time and in case this goal is not accomplished within sixty days from the export date, the statutory presumption of not taking any reasonable steps by the concerned person for recovery of the same would arise. The argument by the petitioner regarding the date of commission of the alleged offence to be after expiry of the sixty days statutory period is refutable in view of the statutory provisions, as discussed above".

The counsel representing the petitioner contended that he was an honorary non-executive Director of the company and had no role in its day to day affairs during his tenure. The Enforcement Directorate in response submitted that the petitioner was a company director for four months after the shipment of goods.

The central agency argued under Section 18(3) of the Act, the last day of the prescribed six months period is only the outer limit and within that period, the company or any responsible person holding office of the same should not refrain from doing as necessary to repatriate the sale proceeds of exported goods.

Justice Chattopadhyay said the avowed and evident object of Section 18 is to ensure that the nation does not lose foreign exchange which is very much essential for the economic survival of the nation.

"The words finding place in section 18(1)(a) assume immense importance, particularly in the backdrop of the present case, in which the relevant time of 'commission of the offence' is in dispute. A conjoint reading of section 18(1) (c) and (a) would definitely propagate that the duty to get the sale proceeds of export to be repatriated does not merely arise after expiry of six months statutory period, but the last day of the sixth month from the date of export is only the outer limit and end of the timespan," said the court.

The court said the petitioner's role cannot be overlooked as he admittedly was associated with the accused company within the six months of the shipment.

"Probably, in this case the petitioner imagined to take shelter under the proviso to Section 68 (1), projecting his lack of knowledge about the entire thing, after he left the company, but only untriumphantly so, having admitting his association with the company till months after export of the goods. As discussed earlier, extent of his involvement in the affairs of the accused company as a 'Director' thereof, has been specifically mentioned in the complaint dated 18.06.1998. Overall reading of the said complaint speaks of petitioner's involvement and makes out a case against him. At the moment there is no material available to construe that the petitioner rebuts the presumption of law so arises against him."

The court said the petitioner "cannot relinquish his liability" as regards the alleged contravention for the period at the time of and after export of the goods, till the time he remained as company's Director, "taking part in the affairs thereof, as suggested in the complaint, of course unless he rebuts the same with adequate materials".

"Under the circumstances, it cannot be said that the allegations made against the petitioner in the complaint do not prima facie constitute any offence, show the involvement of the petitioner therein, or make out a case against him, or that it do not disclose any cognizable offence at all. It can also not be said that the allegations made in the FIR are only absurd and inherently improbable, or that there is no sufficient ground for proceeding against him," it added.

The court rejected the argument that the petitioner was not entrusted with the management of the company and said the record shows otherwise. Finding no merit in the case, the revision petition was dismissed.

Case: Krishna Murarai Poddar v. State of West Bengal & Anr., CRR 30 of 2016

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