IMPORTANT POINT
Hardship, by itself, may not be a ground for holding the said provision to be unconstitutional.

JUDGMENT

S.B. Sinha, J. —

1. Leave granted.

2. Constitutionality of Sub-sections (2) and (3) of Section 18 of the Foreign Exchange Regulation Act, 1973 (for short “the Act”) is in question in this appeal which arises out of a judgment and order dated 30.07.2007 passed by the High Court of Judicature at Bombay in Criminal Writ Petition No. 336 of 2007.

3. Appellant No. 1 herein is a partnership firm and Appellant No. 2 is its partner. Appellant No. 1 used to export garments and textiles to various countries. It allegedly could not repatriate the value of goods from the export proceeds. According to the appellants, whereas export to developed economies like US, UK, Europe and Japan, on credit basis, does not undergo severe competition and very minimal profit margin can be maintained, export to the less developed countries or the countries with poor legal system earn greater profit margin.

4. Appellants’ business allegedly came to a standstill because of its inability to repatriate export proceeds to the tune of 16.5 crores from a few overseas buyers. A notice was issued by the Enforcement Directorate under Sections 18(2) and 18(3) of the Act alleging that in view of their failure to repatriate the entire sale proceeds of the exports which the appellants have made during 1997-98, the said provision is attracted. They, in the cause shown, allegedly furnished details of repatriation they could bring about as also the steps taken by them in that behalf. They applied for extension of time through the authorized dealer, viz., the Canara Bank. However, with the passage of time, the Branch Manager of the Bank did not grant any extension of time for repatriation of the export proceeds. A suit was also filed by the Canara Bank before the Debt Recovery Tribunal, Mumbai.

5. The Enforcement Director, in the aforementioned proceedings, imposed a penalty of Rupees One Crore on the firm and Rs.25 lakhs each on the partners. An appeal preferred by the appellants before the Appellate Tribunal was allowed holding that the appellants have taken all reasonable steps for repatriation. A further appeal was taken by the Enforcement Directorate before the High Court which was marked as FA Nos. 8 and 9 of 2005. However, the High Court although entertained the appeal, did not pass any order of stay.

6. A criminal case was also initiated. Cognizance thereon was taken and the appellants were summoned by an order dated 19.06.2004 by the Chief Metropolitan Magistrate, Esplanade Court, Mumbai. Appellants thereafter filed a criminal application bearing No. 6901 of 2005 for quashing of the criminal proceedings pending against them. The said application was disposed of by an order dated 26.07.2006 observing that as the appellants had already filed application for discharge, the learned Magistrate may pass appropriate order thereupon. By an order dated 10.10.2006, the said application for discharge was dismissed. It was inter alia contended by the appellants in the said discharge application that the order of Tribunal being civil in nature, the same was binding on the criminal court and, thus, the prosecution against them under Section 56 of the Act for was not maintainable. The order taking cognizance having been passed on 27.05.2002, the same was contended to be bad in law.

7. Appellants preferred writ petition thereagainst questioning the constitutionality of Sections 18(2) and 18(3) of the Act as also constitutional validity of the Constitution 39th Amendment Act. By reason of the impugned judgment, the said writ petition has been dismissed.

8. Mr. Mathews J. Nedumpara, learned counsel appearing on behalf of the appellants, would submit that Sections 18(2) and 18(3) of the Act placing the burden of proof upon the accused must be held to be a law having draconian character and, thus, is unconstitutional. It was submitted that by reason of the said provision, discrimination has been made between a domestic trader and an exporter and, thus, the same is violative