Ajit K.Sengupta, J. - (1.) This appeal is directed against the order dated September 6,1990 passed by the Foreign Exchange Regulation Appellate Board rejecting the appeal preferred by the appellant against the order of the Deputy Director, Enforcement Directorate levying a penalty of Rs. 10,000.00 for contravention of Section 9(1)(c) of the Foreign Exchange Regulation Act, 1973. The facts leading to this appeal are stated hereinafter.
(2.) The appellant was required to export certain electrical materials to Doha, Qatar. In connection with the said export, the appellant had to furnish a bank guarantee in favour of the foreign buyer which the appellant duly did through the Central Bank of India. The said bank guarantee was for a value of US Dollars 7415.75 equivalent to Rs. 96,500/-. According to the appellant the entire matter of furnishing of the bank guarantee was routed through the Central Bank of India, an authorised deal er under the said Act. All Rules and Regulations in the matter were duly complied with and the matter was reported also to the Reserve Bank of India. The said guarantee was a performance guarantee. By reason of labour unrest and lockout at the appellant's factory, there was some delay in the supply of materials. According to the appellant's foreign buyer, their principal being the Ministry of Electricity and Water, Doha had deducted an amount from their invoice. The foreign buyer, in its turn, invoked the unconditional performance guarantee and obtained payment thereunder through the Hongkong & Shanghai Banking Corporation and the Central Bank of India. In relation to the said matter, the appellant was served with a show cause notice alleging that the appellant had accepted the claim of the foreign buyer and had acknowledged a debt thereby allegedly contravening Section 9(1)(c) of the said Act. At the hearing before the Adjudication Officer it was, inter alia, contended by the appellant that all requirements of the Reserve Bank of India as laid down in the Guidelines and Manual had been complied in relation to the matter. There was no contravention whatsoever of Section 9(1)(c) of the Act as there could not be. The appellant had not acknowledged any debt so that a right to receive payment is created or transferred in favour of any person resident outside India. The guarantee being an unconditional performance guarantee, the appellant according to well settled legal principles was not in a position to prevent payment thereunder, nor was the appellant responsible in any manner for the said amount. The appellant's contentions, however, were rejected by the Deputy Director and the Appellate Board. The Appellate Board, however, while accepting the contentions of the appellant held that the appellant was responsible merely for the furnishing of the guarantee.
(3.) Two questions call for determination in this appeal are, firstly, (a) Whether the furnishing of guarantee through authorised dealer in relation to export transaction can amount to an acknowledgment of debt and creation of a right to receive payment within the meaning of Section 9(1)(c) of the Act ? and secondly, (b) Whether there can be any contravention of Section 9(1)(c) of the Act where payment is obtained by a foreign buyer against an unconditional performance bank guarantee ? Section 9(1)(c) of the Act provides as follows :- "9. Restrictions on payments. - (1) Save as may be provided in and in accordance with any general or special exemption from the provisions of this sub-section which may be granted conditionally or unconditionally by the Reserve Bank, no person, in or resident in, India shall - (c) draw, issue or negotiate any bill of exchange or promissory note or acknowledge any debt, so that a right (whether actual or contingent) to receive a payment is created or transferred in favour of any person resident outside India." (Emphasis supplied);