FINAL ORDER

18.03.2025

This Order would dispose of the Appeals No. FPA-FE-300/HYD/2009 and FPA-FE-301/HYD/2009 filed by the Appellants Shri M. Ramesh Babu and M/s Sree Sanjay Agro Trading (Pvt.) Ltd. respectively. Ld. Special Director, Enforcement Directorate, New Delhi vide Order No. SDE(PKD)/VI/3/2008 dated 15.09.2008 (Impugned Order) imposed penalty of Rs. 25 lakhs and 5 lakhs on the Appellant Company and the individual Appellant respectively, for the contravention of Section 7 and 8 of the Foreign Exchange Management Act 1999 (FEMA) r/w Regulations 8, 9 & 13 of Foreign Exchange Management (Export of Goods and Services) Regulations 2000 (Regulations). The aforementioned contraventions were r/w Section 42(1) of FEMA with respect to the penalty imposed on the individual Appellant, on account of him being Managing Director of the Appellant Company at the relevant time.

2. Ld. Counsel who appeared for the Appellants pleaded that besides the rejoinder to the reply to the Appeal filed by the Appellants, the additional documents filed by them be considered in disposing of the Appeals. The Application filed for the additional documents has already been allowed. Ld. Counsel also pleaded that the individual Appellant who expired on 26.10.2017 has since been substituted by the legal heirs. He further pleaded that the Appellant Company has become defunct since 2005 and finally discontinued its business operation since the financial year 2011-12 as was brought out by the Balance Sheets, Income Tax Returns, internet copy of the Company Information issued by the Ministry of Corporate Affairs and Certificate dated 15.05.2024 of the Chartered Accountant.

3. Ld. Counsel for the Appellant stated that during the years 1996- 2005 the Appellant Company exported tobacco to the erstwhile USSR and thereafter only to Russia. Till March 2003 all the export proceeds were realized on the due dates. It was only in the year 2003-04 that the Appellant Company encountered certain undue hardships in conducting its business due to adverse economic conditions in Russia. The Appellant Company which had exported 14 consignments to the tune of US $ 3,34,986.05 from January 2004 to March 2005 to MRK Tabak Investprom, Russia, failed to realize US $ 1,42,043.05 (Rs. 64 lakhs) payment for 7 consignments. Further the Company could not realize US $ 1,13,650 (Rs. 52 Lakhs) for 5 consignments exported to Agrofirm Blagodat, Russia.

4. Ld. Counsel for the Appellants argued that the Appellants made sincere efforts to recover the export proceeds. The Appellants obtained extension up to 31.12.2005 through the UCO Bank (the Authorized Dealer-AD) for the period for realization from the Reserve Bank of India (RBI). The Appellants continuously contacted the importer and its Russian representative through phone, post and messages. At the behest of the Export Credit Guarantee Corporation of India (ECGCI), a Debt Collection Agent namely M/s MAH, International, GmbH, Switzerland was appointed who also failed to collect the due amount. The ECGCI settled the Company’s claim at Rs 102.34 lakhs. It was the UCO Bank which had failed to discharge its duty as AD in helping the Company to realize the export proceeds. In fact, as one-time settlement the Appellant Company paid a sum of Rs. 4,01,25,000/- to the Bank in March 2008 by selling the mortgaged property. The UCO Bank sent a letter dated 09.07.2008 to the RBI that in spite of best efforts made by the Appellant Company it could not realize the pending export bills and recommended for write off to the RBI. UCO Bank further sent another letter dated 11.08.2008 to the RBI as a reminder. It was learned by the Appellants that the RBI sent a letter dated 05.09.2008 to the Ld. Adjudicating Authority on the request to write off the pending export proceeds with respect to 12 GR forms. Ld. Special Director failed to respond to the letter of RBI and chose to adjudicate the matter on 15.09.2008. In this regard, attention has been drawn to the additiona