BATA INDIA LTD Vs. SPECIAL DIRECTOR ENFORCEMENT DIRECTORATE
LAWS(CAL)-1996-3-2
HIGH COURT OF CALCUTTA
Decided on March 12,1996

BATA INDIA LTD. Appellant
VERSUS
SPECIAL DIRECTOR, ENFORCEMENT DIRECTORATE Respondents





Cited Judgements :-

XEROX MODI CORP LTD. VS. THE SPECIAL DIRECTOR, ENFORCEMENT DIRECTORATE [LAWS(DLH)-2015-1-121] [REFERRED TO]


JUDGEMENT

Ruma Pal, J. - (1.)The question involved in this appeal which has been preferred under Section 54 of the Foreign Exchange Regulation Act, 1973, is whether the appellant is entitled to the benefits of Notification No. FERA 6/74-RB, dated January 1, 1974 (see [1974] 44 Comp Cas (St.) 212), issued by the Reserve Bank of India. The notification in question had been issued by the Reserve Bank of India in exercise of powers under Section 9(1)(d) of the Act.
(2.)Section 9(1)(d) paraphrased, provides for an absolute embargo on any person resident in India from making any payment to any person consequent upon any order or on behalf of any person resident outside India. This embargo may be lifted by any general or special exemption by the Reserve Bank of India. Pursuant to this power the exemption notification in question was issued. The exemption notification provides :
"In pursuance of Clause (d) of Sub-section (1) of Section 9 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), the Reserve Bank is pleased to permit the making of any payment in rupees by order or on behalf of a person resident outside India out of rupee funds provided by sale of foreign exchange, by such person, to an authorised dealer in India."

(3.)The basic facts of the case are not in dispute. The appellant manufactures shoes. It was approached by Fabrics Internationals, Djibouti. (In short FI) for supply of a specified number of sandals to a customer in Somalia. The appellant specified the rates for supplying shoes. The rate was stated by FI to be too high. The appellant agreed to a reduction. In the meantime, however, the Somalian customer had opened a letter of credit covering the price for all the shoes to be sold by the appellant at the rates quoted. FI then informed the appellant of this fact and also stated that the commission as shown in the letter of credit should be 3 per cent, instead of 2 per cent. The appellant informed FI that it would not be possible for the appellant to refund the differential amount. The appellant, however, offered to underdraw the letter of credit to the extent of the reduction and modification of the price. FI then wrote to the appellant-stating that such underdrawing might create problems in negotiating the letter of credit. It was stated by FI that the difference by reason of the subsequent modification of the price could be paid to FI's local representatives at Bombay. This suggestion was accepted by the appellant but it was made clear that the local agent in Bombay could only be paid in rupees. This was agreed to by FI. The appellant accordingly withdrew the entire amount of foreign exchange under the letter of credit and paid the difference out of the rupees from the sale of foreign exchange so earned amounting to Rs. 12,472 to FI's local agent at Bombay. About five years later, in 1985, a show-cause notice was issued by the respondent authorities to the appellant. It was alleged that by making payment of the amount of Rs. 12,472 there was a contravention of Section 9(1)(d) of the Act. The facts, as noted above, were stated in detail by the appellant in its reply to the show-cause notice. The relevant documents were also annexed to the reply. On June 30, 1986, the Special Director passed an order in which it was stated :
"In the reply dated April 9, 1986, to this show-cause notice, Bata India Limited have not disputed the payment. They have explained that their agent, Fabrics Internationale, Djibouti, were negotiating with them one of the orders and the company was inclined to reduce the price for Boys Sandal Model 360 from US $2.80 per pair to US $2.75 per pair."

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