Intersales vs Uoi & Ors.
- Court
- Delhi High Court
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 28.07.2026
Pronounced on: 08.09.2026
Uploaded on: 08.09.2026
+ MISC. APPEAL (FEMA) 40/2025
M/S INTERSALES & ANR. .....Appellants
Through: Mr.Ashim Vachher, Sr. Adv.
along with Ms.Saiba M. Rajpal,
Adv.
versus
UNION OF INDIA & ANR. .....Respondents
Through: Mr.Annirudh Sharma and
Ms.Akanksha Tyagi, Advs. for
ED
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
HON'BLE MR. JUSTICE RAVINDER DUDEJA
J U D G M E N T
NAVIN CHAWLA, J.
1. The present appeal has been filed under Section 54 of the
Foreign Exchange Regulation Act, 1973 (hereinafter referred to as,
„FERA‟) read with Section 35 of the Foreign Exchange Management
Act, 1999 (hereinafter referred to as, „FEMA‟), challenging the order
dated 25.03.2009 passed by the Appellate Tribunal for Foreign
Exchange, New Delhi (hereinafter referred to as, the “Tribunal”) in
Appeals bearing Nos. 935/2004 and 936/2004.
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BRIEF FACTS:
2. It is the case of the appellants that the appellant no. 1, namely,
M/s Intersales, was originally a partnership firm, constituted in 1986
between appellant no. 2- Mr. Rajiv Chachra and his mother- Mrs.
Pushpa Chachra. The firm was engaged in the business of exporting
garments. In August 1998, the partnership was dissolved, and the
business, along with its assets and liabilities, was taken over by
appellant no. 2 as a sole proprietary concern.
3. Investigations were conducted by the Enforcement Directorate,
which revealed that M/s Intersales and its partners- Mr. Rajiv Chachra
and Mrs. Pushpa Chachra had effected shipments of goods valued at
US$ 62256.50 under the cover of Guaranteed Remittance Forms
(hereinafter referred to as, „G.Rs.‟). It was alleged that without
obtaining permission from the Reserve Bank of India (hereinafter
referred to as, „RBI‟), the appellants had refrained from taking
necessary action for securing the export value of certain G.Rs. within
the prescribed time period or within the time period as extended by the
RBI. The details of the said G.Rs. are as follows:
S.No. G.R. No. Amount
1. 7469786 US$ 26,000.00
2. AJ 238449 US$ 6067.35
3. AJ 238443 US$ 8730.00
4. AJ 238446 US$ 2662.65
5. 1102667 US$ 12736.00
6. 1102571 US$ 6060.50
Total US$ 62256.50
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4. Accordingly, it was alleged that the appellants had acted in
contravention of the provisions of Sections 18(2) and 18(3) read with
Section 68(1) of the FERA.
5. A Show Cause Memorandum dated 17.01.2002 was issued
upon the appellants and Mrs. Pushpa Chachra, calling upon them to
show cause as to why adjudication proceedings should not be initiated
against them for the alleged contravention of non-realization of export
proceeds.
6. In response, vide a letter dated 27.11.2003, the appellants, inter
alia, submitted that a write-off had been granted to them by the RBI in
respect of G.R. no. AJ 238446, that is, G.R. at serial no. 4.
7. The learned Adjudicating Authority, vide the Adjudication
Order No. DD/ADJ/84/DZ/2004/SC(JVS)777 dated 04.02.2004, held
that in respect of G.Rs. at serial nos. 1 to 3, 5 and 6, the appellants had
failed to take any effective steps or make serious attempts for
realization of the export proceeds. It was held that though the
appellants had asserted that application seeking write-off of the
amounts covered by G.Rs. at serial nos. 2 and 3 had been submitted to
the RBI, no particulars regarding the same were provided.
Accordingly, it was held that the appellants and Mrs. Pushpa Chachra
were liable to penalty under Section 50 of the FERA, and the
following penalty was imposed on them:
1 M/s Intersales Rs. 25 lakhs
2 Shri Rajiv Chachra Rs. 2.5 lakhs
3 Smt. Pushpa Chachra Rs. 2.5 lakhs
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8. Aggrieved by the said Adjudication Order, the appellants
preferred appeals before the learned Appellate Tribunal for Foreign
Exchange.
9. The appellants contended before the learned Appellate Tribunal
that the Adjudication Order had been passed without taking into
consideration a previous Adjudication Order, being Adjudication
Order No. ADJ/7/DD(VS)/DZ/2001 dated 17.05.2001 (hereinafter
referred to as, „previous Adjudication Order‟). It was submitted that
the G.Rs. at serial nos. 2, 3 and 4, to the tune of US$ 17460/-
(equivalent to Rs. 6,16,000 approximately), had already been made the
subject matter of the previous Adjudication Order, wherein appellant
no. 2, the proprietor of appellant M/s Intersales, was held to be guilty
and a penalty of Rs. 1,00,000/- was imposed on him.
10. The learned Appellate Tribunal, in the Impugned Order,
observed that it was not in dispute that the RBI had granted a write-off
in respect of the G.R. at serial no. 4. It was further held that though the
previous Adjudication Order had not been brought to the notice of the
learned Adjudicating Authority, the penalty imposed in respect of
G.Rs. at serial nos. 2 and 3 cannot be sustained as the said two G.Rs.
had already been adjudicated upon, resulting in a penalty on the
appellant no. 2. Insofar as the remaining G.Rs., that is, G.Rs. at serial
nos. 1, 5 and 6 were concerned, the learned Appellate Tribunal held
that the export proceeds for the said G.Rs. were still outstanding and
that the appellants had failed to bring any material on record to
substantiate that they had taken reasonable steps for their realization.
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Accordingly, the penalty of Rs. 25,00,000/- imposed on appellant no.
1 was held to be not harsh or excessive and was, therefore, sustained.
However, in view of the fact that the appellant firm had been taken
over by appellant no. 2 as its sole proprietor, the learned Appellate
Tribunal held that the separate penalties of Rs. 2,50,000/- imposed on
the appellant no. 2 and Mrs. Pushpa Chachra could not be sustained.
11. Aggrieved thereby, the appellants filed the present appeal,
challenging the order of the learned Tribunal upholding the penalty of
Rs. 25,00,000/- on the appellant firm.
SUBMISSIONS OF THE LEARNED SENIOR COUNSEL FOR
THE APPELLANTS:
12. The learned Senior Counsel for the appellants submits that the
learned Appellate Tribunal has imposed a penalty of Rs. 25,00,000/-
upon appellant no. 1 for the alleged non-realisation of export proceeds
to the tune of US$ 44796.50 (equivalent to Rs. 16,80,000/-
approximately), whereas, by the previous Adjudication Order, a
penalty of only Rs. 1,00,000/- had been imposed on the appellant no. 2
for contravention to the tune of US$ 17460/- (equivalent to Rs.
6,16,000 approximately). He submits that, therefore, the impugned
penalty of Rs. 25,00,000/- is manifestly excessive and
disproportionate to the alleged contravention.
13. He submits that the quantum of penalty imposed by the learned
Appellate Tribunal must satisfy the test of proportionality. It cannot be
excessive and has to be proportionate with the contravention. If an
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action taken by the Appellate Tribunal is improper, irrational or
otherwise unreasonable, the Court can interfere with such action while
exercising its power of judicial review.
14. He submits that in the present case, the impugned penalty has
also been imposed without taking into account the previous
Adjudication Order, whereby the contraventions relating to G.R. Nos.
2, 3 and 4 had already been adjudicated, resulting in a penalty of
Rs.1,00,000/-. Once these G.Rs. had been adjudicated upon, a fresh
penalty could not be imposed on the appellants for the contravention
relating to them. He submits that, therefore, the penalty of Rs.
25,00,000/- imposed on the appellant no. 1 is in ignorance of the
already levied penalty and deserves to be set aside, as the appellants
cannot be vexed twice for the same contravention.
15. He submits that Section 50 of the FERA provides for the
maximum penalty that can be levied, that is, five times the amount of
the contravention or five thousand rupees, whichever is more. He
submits that when a provision provides for the maximum penalty, the
authority also has the discretion to impose any penalty that is less than
that. This discretion conferred on the authority has to be exercised in a
judicial manner. In support, he relies on the judgment of the Karnataka
High Court in Mrs. Sudershan Boury & Anr. v. Director of
Enforcement, New Delhi , 1981 SCC OnLine Kar 315.
16. He further submits that imposing a penalty is not automatic.
Levy of penalty is discretionary in nature, but such discretion has to be
exercised by the Adjudicating Authority/Appellate Tribunal after
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taking into consideration the relevant factors. In furtherance, he relies
on the judgment of the Supreme Court in Excel Crop Care Limited. v.
Competition Commission of India & Anr. , (2017) 8 SCC 47.
17. The learned counsel submits that the learned Adjudicating
Authority/Appellate Tribunal exercises quasi-judicial functions and,
therefore, is bound to give reasons for the discretion exercised by it. In
support, he relies on the judgment of this Court in Sunita Mehta and
Others v. Special Director, Enforcement Directorate , 2026 SCC
OnLine Del 1525. He submits that in the present case no reasons have
been given by the learned Appellate Tribunal for imposing the penalty
of Rs. 25,00,000/- on the appellant no. 1. He submits that penalty
imposed by the learned Appellate Tribunal is untenable in law and
deserves to be set aside for being without any reasons. In furtherance,
he places reliance on the judgments of this Court in Marubeni India
P. Ltd. v. The Special Director of Enforcement , 2014 SCC OnLine
Del 639, and Fuji Bank Ltd. v. The Special Director of Enforcement ,
2014 SCC OnLine Del 638, and of the High Court of Bombay in
Special Director, Directorate of Enforcement v. Jaipur IPL Cricket
Pvt. Ltd. & Ors., 2023 SCC OnLine Bom 2657.
SUBMISSIONS OF THE LEARNED COUNSEL FOR THE
RESPONDENTS:
18. The learned counsel for the respondents, on the other hand,
submits that judicial review is not an appeal from a decision, but a
review of the manner in which the decision is made. It is meant to
ensure that an individual receives fair treatment, and is not meant to
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ensure that the conclusion which the authority reaches is necessarily
correct in the eyes of the Court.
19. He submits that the determination of the quantum of penalty
falls within the discretion of the Adjudicating Authority. While a
Court is empowered to alter or interfere with such decision, such
interference can be done only when the penalty imposed is so arbitrary
or disproportionate that it shocks the conscience of the Court. He
submits that, therefore, the Court is not required to examine whether
the penalty is proportionate, but whether the decision is based on some
evidence. In support, he places reliance on the judgments of the
Supreme Court in Coimbatore District Central Cooperative Bank v.
Coimbatore District Central Cooperative Bank Employees
Association and Another , (2007) 4 SCC 669 and in B.C. Chaturvedi
v. Union of India and Others , (1995) 6 SCC 749.
20. He submits that the penalty of Rs. 25,00,000/- imposed on the
appellant no. 1 in the present case, is not an amount which has been
arbitrarily fixed by the Adjudicating Authority/Appellate Tribunal, but
has been decided on the basis of the facts and circumstances of the
case. He relies upon Section 50 of the FERA to submit that the penalty
for contravention of the provisions of the Act, can reach up to five
times the contravention amount. He submits that, therefore, the
penalty imposed on the appellant no. 1 falls within the prescribed
limits of Section 50 of the FERA and is neither arbitrary nor
excessive.
21. He further submits that the previous Adjudication Order
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imposing a penalty of Rs. 1,00,000/-, does not render the imposed
penalty of Rs. 25,00,000/- unsustainable. He submits that the earlier
penalty was not imposed on appellant no. 1, but was imposed upon
appellant no. 2. He contends that, therefore, the penalty of
Rs.25,00,000/- imposed on the appellant no. 1 cannot be said to
amount to the appellants being vexed twice for the same
contravention, and therefore, deserves to be upheld.
22. He also submits that the mens rea is not an essential ingredient
for holding a delinquent liable for penalty under the FERA. He
submits that the proceedings under FERA are adjudicatory in nature
and not criminal proceedings, and the officers of Enforcement
Directorate and other administrative authorities are expressly
empowered to adjudicate. In furtherance, he relies on the judgment of
the Supreme Court in Directorate of Enforcement v. M.C.T.M
Corporation Pvt. Ltd. and Others , (1996) 2 SCC 471.
ANALYSIS AND FINDINGS:
23. We have considered the submissions made by the learned
counsels for the parties.
24. At the outset, we would note that the learned Senior Counsel for
the appellants did not make any submissions regarding the violation of
Sections 18(2) and 18(3) of the FERA by the appellants, as far as
G.Rs. at serial nos. 1, 5, and 6 are concerned. He confined his
challenge to the Impugned Order on a limited plea that the Impugned
Order does not give any reasons for imposing a penalty of
Rs.25,00,000/- on the appellant no. 1. He further submits that the
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penalty imposed is highly disproportionate to the value of the export
proceeds involved in the G.Rs., especially when it is tested on the
parameters of the previous Adjudication Order.
25. We, therefore, are only to consider whether the Impugned Order
is liable to be set aside on the above submissions of the appellants.
26. Section 50 of the FERA provides for penalty for contravention
of Section 18 of the Act, and reads as under:
“ 50. Penalty.- If any person contravenes any
of the provisions of this Act other than section
13, clause (a) of sub-section (1) of section 18,
section 18A and clause (a) of sub-section (1)
of section 19 or of any rule, direction or order
made thereunder, he shall be liable to such
penalty not exceeding five times the amount or
value involved in any such contravention or
five thousand rupees, whichever is more, as
may be adjudged by the Director of
Enforcement or any other officer of
Enforcement not below the rank of an
Assistant Director of Enforcement specially
empowered in this behalf by order of the
Central Government (in either case
hereinafter referred to as the adjudicating
officer).”
27. The above provision, therefore, vests a discretion in the
Adjudicating Authority to impose a penalty “not exceeding five times
the amount or value involved in any such contravention or five
thousand rupees, whichever is more”. It is settled law that when a
discretion is vested in an Authority/State, it must be exercised in a
reasonable manner. Reasonableness in the exercise of such discretion
requires reasons to be given, and the penalty imposed to be
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proportionate to the contravention. In Coimbatore District Central
Cooperative Bank (supra), unlike in the present case where the matter
is being considered in an appeal against the Impugned Order, but was
being considered on the principles applicable to judicial review of a
penalty/punishment, the Supreme Court held as under:
“17. So far as the doctrine of proportionality
is concerned, there is no gainsaying that the
said doctrine has not only arrived in our legal
system but has come to stay. With the rapid
growth of administrative law and the need and
necessity to control possible abuse of
discretionary powers by various
administrative authorities, certain principles
have been evolved by courts. If an action taken
by any authority is contrary to law, improper,
irrational or otherwise unreasonable, a court
of law can interfere with such action by
exercising power of judicial review. One of
such modes of exercising power, known to law
is the "doctrine of proportionality".
18. "Proportionality" is a principle where the
court is concerned with the process, method or
manner in which the decision-maker has
ordered his priorities, reached a conclusion or
arrived at a decision. The very essence of
decision-making consists in the attribution of
relative importance to the factors and
considerations in the case. The doctrine of
proportionality thus steps in focus true nature
of exercise-the elaboration of a rule of
permissible priorities.
19. de Smith states that "proportionality"
involves "balancing test" and "necessity test".
Whereas the former (balancing test) permits
scrutiny of excessive onerous penalties or
infringement of rights or interests and a
manifest imbalance of relevant considerations,
the latter (necessity test) requires infringement
of human rights to the least restrictive
alternative. [Judicial Review of Administrative
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Action (1995), pp. 601-05, para 13.085; see
also Wade & Forsyth: Administrative Law
(2005), p. 366.]”
28. In Jaipur IPL Cricket Pvt. Ltd. (supra), the High Court of
Bombay considered the principles applicable to determine the validity
and reasonableness of imposition of a penalty, and held as under:
“21. We find that in fact no justification has
been recorded by the Special Director to
impose maximum penalty as opposed to the
Tribunal having considered relevant material
has interfered and reduced the penalty. We do
not find it proper to transgress the limits of
this Court's jurisdiction, preferring the view of
the Tribunal or that of the Special Director,
one way or the other, in regard to factual
appreciation of the finding of facts in the
matter.
22. The parameters for imposition of penalty
have also been considered by the Hon'ble
Supreme Court of India in Excel Crop Care
Ltd. (supra) and it has been held as follows:
“42. ….…..Imposition of penalty is not
automatic. Levy of penalty is not only
discretionary in nature but such
discretion is required to be exercised on
the part of the Assessing Officer keeping
relevant factors in mind……..Penalty
proceedings are not to be initiated, as
has been noticed by the Wanchoo
Committee, only to harass the Assessee.
The approach of the Assessing Officer in
this behalf must be fair and objective.”
23. In Hindustan Steel Ltd. (supra), the Apex
Court has held as follows:
“8. ……An order imposing penalty for
failure to carry out statutory obligation
is the result of a quasi-criminal
proceeding and penalty will not
ordinarily be imposed unless the party
obliged either acted deliberately in
defiance of law or was guilty of conduct
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contumacious or dishonest or acted in
conscious disregard of its obligation.
Penalty will also not be imposed because
it is lawful to do so. Whether penalty
should be imposed for failure to perform
a statutory obligation is a matter of
discretion of the authority to be
exercised judicially or on a
consideration of all relevant
circumstances………”
24. In Coimbatore District Central Co-
operative Bank (supra), the Supreme Court
has explained the concept of proportionality in
the following manner:
“18. „Proportionality‟ is a principle
where the Court is concerned with the
process, method or manner in which the
decision maker has ordered is priorities,
reached a conclusion or arrived at a
decision. The very essence of decision
making consists in the attribution of
relative importance to the factors and
considerations in the case………
19………the principle of proportionality
needs to be imbibed in to any penalty
imposed under Section 27 of the Act.
Otherwise excessively high fines may
over-deter, by discouraging potential
investors which is not the intention of
Act………….”
25. We find that the Special Director has
completely failed to apply the doctrine of
proportionality as interpreted and elucidated
by the Apex Court in its various decisions,
while choosing to impose maximum penalty on
Respondents. Having gone through the
impugned order, this Court does not find
anything perverse in the findings, reasoning
and conclusion of the Tribunal. We are in
agreement with the finding of the Tribunal that
in the absence of any discussion or
justification pertaining to the basis for
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imposing the maximum penalty and
juxtaposing this with the alleged acts
attributed to each individual, the order of the
Special Director is unsustainable.”
29. Similarly, while considering Section 50 of the FERA, the
Karnataka High Court in Mrs. Sudershan Boury (supra) held as
under:
“Thus, s. 50 speaks of maximum penalty to be
levied, that being five times the amount or
value involved in any such contravention or
Rs. 5,000 whichever is more. When the section
speaks of the maximum penalty, it is obvious
that the authority has the discretion to impose
any fine less than that also. This discretion
which is conferred on the authority by the
section has to be exercised in a judicial
manner and the exercise of such discretion is a
question of law and it is needless for us to
point out that the Supreme Court of India has
been at pains to point out in recent years that
sentencing is an important branch of law and
that it is a complex process involving intricate
questions of fact and law. That being so, we
are satisfied that the present appeals where
the quantum of penalty and the exercise of
judicial discretion are concerned involve
questions of law and as such the appeals are
entertainable by this court (vide Ramnaresh
Pandey v. State of M.P., AIR 1974 SC 35,
Indo-China Steam Navigation Company Ltd. v.
Jasjit Singh (1964) 34 Comp Cas 435; AIR
1964 SC 1140, at p. 1153).”
30. This Court itself, in Fuji Bank Ltd. (supra), again quashed the
penalty imposed under Section 50 of the FERA where no reason had
been given for the quantification of the same. A similar view was
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taken by this Court in Marubeni India P. Ltd. (supra) and in Sunita
Mehta (supra).
31. We are, therefore, of the opinion that merely because the
imposed penalty falls within the maximum limit prescribed under
Section 50 of the FERA, does not, by itself, validate it. The learned
Adjudicating Authority/Appellate Authority is required to determine
the penalty in a reasonable manner and give at least some reasons for
the exercise of the discretion in imposing such penalty and for
determination of the quantum thereof.
32. In the present case, in the Impugned Order, the learned
Appellate Tribunal, while finding the quantum of penalty imposed on
the appellants to be justified and not excessive, observed as under:
“12. Now on the question of quantum of
penalty it is argued that from 1998 the
business of the appellant firm has been taken
over by the individual appellant as its
proprietor on the basis of deed of dissolution
of partnership deed. Though the fact of
conversion of the appellant firm to the
proprietorship firm has not been established
except by filing a copy of alleged deed of
dissolution of partnership this tribunal cannot
loose sight of fact that in the instant case
partnership firm was constituted by mother
and son while son was solely responsible for
looking after the affairs of the firm which was
subsequently stated to be converted to the
proprietorship firm of the son i.e. individual
appellant. In such a situation separate penalty
imposed on the individual appellant cannot be
sustained but considering the amount of
contravention involved in GR No. 1, 5 and 6
with the amount of penalty imposed on the
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appellant firm cannot be said to be harsh or
excessive. In such a situation the penalty
imposed on the appellant firm is to be
maintained and sustained.”
33. We may note that the Adjudicating Authority, in its order dated
04.02.2004, while imposing a penalty of Rs.25,00,000/- on the
appellant no. 1, had found the appellant to be in contravention of
Section 18 of the FERA, even with respect to G.Rs. at serial nos. 2
and 3. However, this finding has been set aside by the learned
Tribunal in its Impugned Order. The amount of contravention,
therefore, stood reduced by US$ 14797.35. The learned Tribunal also
noted that the RBI had granted a write-off with respect to the G.R. at
serial no. 4. The penalty amount has, however, been retained by the
learned Tribunal at the same amount as imposed by the Adjudicating
Authority, that too without giving any reasons, except for stating that
it does not find the penalty to be harsh or excessive.
34. The learned Senior Counsel for the appellants submits that, by
the previous Adjudication Order, the learned Adjudicating Authority,
for a violation involving a sum of US$ 17460, imposed a penalty of
only Rs.1,00,000/- on the appellant no. 2, as the proprietor of the
appellant no. 1. The violation for G.Rs. at serial nos. 1, 5, and 6 in the
present case amounts to US$ 44796.50. He submits that, therefore, the
penalty imposed should be around Rs.2,50,000/-. He submits that
imposing a penalty of Rs.25,00,000/- on the appellant no. 1 is totally
disproportionate and excessive. We find merit in the said submission,
especially in light of the fact that there are no reasons given by the
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Appellate Authority for the quantification of such penalty.
35. Given the above, the Impugned Order imposing the penalty of
Rs.25,00,000/- on the appellant no. 1 cannot be sustained and is liable
to be set aside.
36. As far as the consequential relief is concerned, we could have
remanded the matter back to the learned Tribunal for fresh
adjudication upon the quantum of penalty, however, we are not
persuaded to do so as the order passed by the Adjudicating Authority
was of the year 2004 and the Impugned Order was passed on
25.03.2009, and more than 15 years have since passed. Moreover, the
transactions forming the subject matter of the said orders had taken
place even prior thereto.
37. For the said reasons, instead of remanding the matter back to
the learned Tribunal, we deem it appropriate to determine the penalty
payable by the appellants and to put a quietus to this case.
38. As noted hereinabove, for a violation of US$ 17460, a penalty
of Rs.1,00,000/- was imposed by the Adjudicating Authority on the
appellant no. 2, as the proprietor of the appellant no. 1, by an order
dated 17.05.2001. Applying the same yardstick, we are of the opinion
that for a violation of US$ 44796.50, the appellants be subjected to a
penalty of Rs.3,00,000/-.
39. Accordingly, while setting aside the Impugned Order only
insofar as it upholds the levy of a penalty of Rs.25,00,000/- on the
appellant no. 1, we modify the same and hold that the appellant no. 1
will be liable to pay a penalty of Rs. 3,00,000/-.
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40. The appeal is partially allowed in the above terms.
41. There shall be no order as to costs.
NAVIN CHAWLA, J
RAVINDER DUDEJA, J
SEPTEMBER 8, 2026/ rv /Yg
Signature Not Verified
Digitally Signed
By:REYMON VASHIST
Signing Date:08.09.2026
16:59:04
MISC. APPEAL (FEMA) 40/2025 Page 18 of 18