ORDER

09.12.2024 This appeal has been filed under Section 19(1) of Foreign Exchange Management Act, 1999 (in short “the Act of 1999”) against the order dated 31.03.2000 passed by the Special Director of Enforcement, Kolkata.

The appeal has been filed to challenge the amount of penalty imposed on the respondents despite the contravention of Section 7 and 8 of the Act of 1999 read with Regulations 8, 9, and 13 of Foreign Exchange Management (Export of Goods and Services) Regulation, 2000 ( in short “ the Regulation of

2000”).

It is a case where M/s Ellenbarrie Exim Ltd. made export in the year 2007-2009 to Hong Kong and Saharjah amounting to Rs.93.84 crores through the Oriental Bank of Commerce.The amount of Rs. 93.84 crores was not realized and in fact, no reasonable steps were taken for realization of the amount within the stipulated period or even subsequently. No extension of time was granted to the respondent either by the Reserve Bank of India (RBI) or byAuthorized Dealer i.e. Oriental Bank of Commerce (OBC). The Special Director, Enforcement, Kolkata found contravention of Section 7 & 8 of the Act of 1999 and the Regulations 8, 9 & 13 of the Regulation of 2000 yet imposed the penalty of Rs. 9.3 lakhs only on the Company and an equivalent penalty on the Director, Mr. Mahendra Kumar Patni.

A challenge to the quantum of penalty has been made on the ground that despite non-realization of export proceeds to the tune of Rs. 93.84 crores against the 59 export bills, a meagre penalty has been imposed and therefore a challenge to it has been made with a prayer to quantify the amount of penalty in consonance with the provision of the Act of 1999. It would be obvious by takinginto consideration that the exporter made hardly any effort to realize the export proceeds. The prayer is accordingly made to enhance the amount of the penalty.

The Counsel for the appellant made a reference of the pleadings and the statement of Mr. Mahendra Kumar Patni recorded under section 37 of the Act of 1999 on 15.11.2018 where he literally made an admission about putting hardly any effort to realize the proceeds of export. The prayer was accordingly made to enhance the amount of penalty and with the aforesaid appeal be allowed.

The appeal was contested by the respondent. It is submitted that after the export against the 59 export bills, the respondent made efforts to realize the amount and for that,theyvisited Sharjah on two occasions. The importer of diamond M/s Arabian General Trading had shown its inability to make the payment due to financial crunches, rather, it simply refused to make the payments.

It is, further, submitted that so far as export to Hong Kong, the importer made an offer to supply perfumery compound in lieu of outstanding payments. The respondent applied to the Development Commissioner as their works were located in SEZ. The Development Commissioner was approached to seek permission for arrangement offered by the importer in Hong Kong but the permission sought by the respondent was refused. A challenge to the aforesaid was made before the Calcutta High Court and the matter is still pending. It was thus submitted that there exist no reason to cause interference with the impugned order. Rather there was no contravention by the respondent either of Section 7 & 8 of the Act of 1999 or Regulations 8, 9 & 13 of the Regulation of 2000 yet penalty has been made. The prayer was made to dismiss the appeal.

We have considered the rival submissions and perused the record. The facts on record and which are undisputed are that the respondent – M/s Ellenbarrie Exim Ltd. made export of diamond for a sum of Rs.93.84 crores to the importer at Sharjah and Hongkong. It was against 59 export bills. The export proceeds were not realized by the respondent and in fact, no extension for realization of export proceeds was sought and given either by the RBI or Authorized Dealer i.e. Oriental Bank of Commerce. Thus, we find contravention of Sections 7 & 8 of the Act o