Supreme Court’s Lifeline for Distressed Businesses

By Vikash Agarwal

In a landmark decision, Hon’ble Supreme Court has underscored a crucial point for the business community: companies facing financial hardship and unable to meet export obligations should not be penalized.

The case in question involved a company granted an import license for capital goods at a concessional customs duty, with the stipulation of exporting products to earn a specified amount of foreign exchange within five years. When the company, due to its deteriorating financial health, could not fulfill this export obligation, it faced a penalty.

However, the SC observed that there was no attempt by the company to contravene the Foreign Trade Act or the foreign trade policy. The penalty, being a strict liability under the penal provision, was deemed unsustainable. The Court’s decision to set aside the penalty recognizes the challenges businesses may face and provides a precedent for leniency in the face of unforeseen economic distress.

This ruling is a significant relief for companies under rehabilitation, emphasizing the need for compassion in the enforcement of trade obligations.

*CA 6394/24