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Economic, Commercial and Intellectual Property Laws · Foreign Trade Policy and Procedure

Penalties, Adjudication and Appeals under the FTDR Act

Updated 11 October 2026 · Fact-checked

The FTDR Act, 1992 punishes wrongful imports and exports mainly through penalties, confiscation and action against the Importer-Exporter Code (IEC). Section 11 sets the penalty, Section 8 allows suspension or cancellation of the IEC, and orders can be appealed. Answer by stating the provision, applying the facts, and concluding.

Understand Penalties, Adjudication and Appeals under the FTDR Act

The FTDR Act, 1992 does not only promote foreign trade. It also controls it. A person may import or export only in line with the Act, its rules and orders, and the Foreign Trade Policy. If you break these, the Act gives the Director General of Foreign Trade (DGFT) and the Adjudicating Authority tools to act against you.

There are three main tools. The first is a monetary penalty under Section 11. The second is confiscation of goods, packages and conveyances, also under Section 11. The third is action on your Importer-Exporter Code Number (IEC) under Section 8, which can be suspended or cancelled. Section 9 separately deals with suspension and cancellation of a licence, certificate, scrip or similar instrument.

The Act insists on fair process. Before an IEC is suspended or cancelled, you must get a written notice stating the grounds, and a reasonable opportunity to reply in writing and, if you wish, to be heard. Before a licence or similar instrument is suspended or cancelled, reasons must be recorded in writing and you must get a reasonable opportunity of being heard.

The Act also provides for recovery of unpaid penalties, including through customs officers and as an arrear of land revenue. It allows settlement when a person admits the contravention after a notice from the Adjudicating Authority. Appeals against orders refusing, suspending or cancelling a licence or similar instrument lie in the manner provided under Section 15, as Section 9(5) states.

For the exam, think in this order: what was the contravention, what action the Act allows, what procedure must be followed, and what remedy the person has.

Key rules to remember

Compliance rule (Section 11(1))
Export or import only as per the Act + rules and orders + Foreign Trade Policy in force
Any export or import outside these is a contravention.
Penalty for contravention (Section 11(2))
Penalty: not less than ₹10,000 and not more than 5 × value of goods, services or technology, whichever is more
Applies to a person who makes, abets or attempts a contravening export or import. ₹10,000 is the minimum, not an alternative upper limit. Where 5 × value is below ₹10,000, apply the Act's 'whichever is more' wording as stated.
Penalty for false documents (Section 11(3))
Penalty: not less than ₹10,000 and not more than 5 × value of goods, services or technology, whichever is more
Applies where a person signs or uses a forged, tampered or materially false document, knowing or having reason to believe so.
Settlement (Section 11(4))
Admission of contravention on notice → Adjudicating Authority may determine an amount by way of settlement
Only in such classes of cases and manner as prescribed.
IEC action (Section 8(1))
Notice in writing + reasonable opportunity (written representation, hearing if desired) → suspend for a specified period or cancel
DGFT or an officer authorised by him acts. They may also call for records or information.
Effect of IEC suspension or cancellation (Section 8(2))
No import or export except under a special licence granted by the DGFT
Special licence is granted in the prescribed manner and subject to prescribed conditions.
Non-payment of penalty (Section 11(7))
IEC may be suspended by the Adjudicating Authority till the penalty is paid or recovered
This is in addition to the recovery modes in Section 11(5).
Confiscation and redemption (Section 11(8) and (9))
Goods, package, covering, receptacle and conveyances liable to confiscation; release on redemption charges equal to market value
Done by the Adjudicating Authority, subject to prescribed conditions.
Licence suspension (Section 9(4)) and appeal (Section 9(5))
Reasons recorded in writing + reasonable opportunity of being heard; appeal as under Section 15
Applies to licence, certificate, scrip or any instrument bestowing financial or fiscal benefits.

How to solve Penalties, Adjudication and Appeals under the FTDR Act questions

Use this method for any problem or theory question on penalties, adjudication and appeals under the FTDR Act.

  1. 1Identify the act complained of: import or export outside the Act, rules, orders or Foreign Trade Policy; use of a false document; failure to pay a penalty; or breach of a licence condition.
  2. 2Name the provision that applies: Section 11 for penalty and confiscation, Section 8 for IEC, Section 9 for licence or scrip.
  3. 3State the consequence in plain words with the exact range or power, such as a penalty of not less than ₹10,000 and not more than 5 times the value, whichever is more.
  4. 4Check procedure: notice, grounds, reasonable opportunity of representation or hearing, and recorded reasons where required.
  5. 5Note any extra consequence: IEC suspension for non-payment, special licence requirement after suspension, confiscation and redemption, or recovery modes.
  6. 6State the remedy: settlement on admission under Section 11(4), or appeal as provided under Section 9(5) read with Section 15 for licence-type orders.
  7. 7Apply numbers if given, then close with a clear conclusion that answers the exact question asked.

Quickest way: Provision, facts, conclusion in three lines

When to use it: Use when time is short, such as a 5-mark short note or a brief case question.

  1. Line 1: write the section and the rule, for example Section 11(2) penalty of not less than ₹10,000 and not more than five times value, whichever is more.
  2. Line 2: apply it to the facts: what was done, value involved, whether notice and hearing were given.
  3. Line 3: conclude with the penalty amount or action, then add one line on the remedy such as appeal or settlement.
  4. For penalty sums, compute 5 × value and compare it with ₹10,000. The minimum is ₹10,000. Where 5 × value is more, that is the maximum. If 5 × value is below ₹10,000, apply the Act's 'whichever is more' wording as stated.

Common mistakes in Penalties, Adjudication and Appeals under the FTDR Act

  • Saying the penalty is a fixed ₹10,000.

    Students remember only the first number in the section.

    Fix: Remember it is a range: minimum ₹10,000, maximum five times the value, whichever is more.

  • Suspending or cancelling an IEC without notice in the answer.

    Students focus on the power and forget the safeguards.

    Fix: Always mention the written notice with grounds and the reasonable opportunity of representation and hearing under Section 8(1).

  • Mixing Section 8 with Section 9.

    Both deal with suspension and cancellation.

    Fix: Section 8 concerns the IEC. Section 9 concerns licence, certificate, scrip or similar instruments, with reasons recorded in writing.

  • Forgetting what happens after IEC suspension.

    Students stop at the suspension order.

    Fix: Add Section 8(2): the person cannot import or export except under a special licence from the DGFT.

  • Ignoring confiscation and redemption.

    Students treat penalty as the only consequence.

    Fix: Mention Section 11(8) and (9): goods and conveyances are liable to confiscation and can be released on payment of redemption charges equal to market value.

  • Citing an appeal section for every order.

    Students over-generalise the appeal route.

    Fix: Cite Section 9(5) for orders refusing, renewing, suspending or cancelling a licence-type instrument, which lies as an appeal would under Section 15. Do not add details you are unsure of.

Worked examples

Example 1

Sharma Exports Pvt Ltd exported goods worth ₹4,00,000 in breach of the Foreign Trade Policy. State the maximum penalty and the minimum penalty that can be imposed under the FTDR Act, 1992.

Show the solution
  1. The act is an export in contravention of the Foreign Trade Policy, so Section 11(2) applies.
  2. The minimum penalty is ₹10,000.
  3. Five times the value of the goods: 5 × ₹4,00,000 = ₹20,00,000.
  4. The Act says the penalty is not less than ₹10,000 and not more than five times the value, whichever is more. Here ₹20,00,000 is more than ₹10,000, so the maximum is ₹20,00,000.
  5. So the penalty range is ₹10,000 to ₹20,00,000.

Answer: Under Section 11(2), the penalty is not less than ₹10,000 and up to ₹20,00,000 (five times ₹4,00,000). The goods and conveyance are also liable to confiscation under Section 11(8).

Example 2

The DGFT proposes to cancel the IEC of Kaveri Traders for contravening the Foreign Trade Policy. No notice was given to the firm. Is the action valid? What follows if the IEC is validly cancelled?

Show the solution
  1. Provision: Section 8(1) allows the DGFT or an authorised officer to suspend or cancel the IEC where a person has contravened the Act, rules, orders or the Foreign Trade Policy.
  2. Procedure: the power can be used only after a written notice stating the grounds, and after giving a reasonable opportunity to make a written representation and, if the person desires, to be heard.
  3. Facts: no notice was given to Kaveri Traders, so the mandatory procedure was not followed.
  4. Conclusion on validity: the cancellation without notice is not in accordance with Section 8(1) and is open to challenge.
  5. Consequence of a valid cancellation: under Section 8(2), the firm cannot import or export except under a special licence granted by the DGFT in the prescribed manner and subject to prescribed conditions.

Answer: The proposed cancellation is not valid as it stands because Section 8(1) requires a written notice with grounds and a reasonable opportunity to be heard. If the IEC is cancelled after following this process, Section 8(2) bars imports and exports except under a special licence from the DGFT.

Exam tips

  • Learn the Section 11(2) penalty wording exactly: not less than ₹10,000 and up to five times the value, whichever is more.
  • Write the safeguard of notice and hearing in every answer on suspension or cancellation. Examiners look for it.
  • Keep Section 8 (IEC), Section 9 (licence, scrip) and Section 11 (penalty, confiscation) separate in your answer structure.
  • For case questions, follow provision, facts, conclusion, and give the final amount or outcome clearly.
  • Mention related consequences briefly: special licence after IEC action, IEC suspension for unpaid penalty, and redemption of confiscated goods.

Practice questions from Foreign Trade Policy and Procedure

Penalties, Adjudication and Appeals under the FTDR Act in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Penalties, Adjudication and Appeals under the FTDR Act: frequently asked questions

What is the penalty under the FTDR Act for contravention?

Under Section 11(2), the penalty is not less than ₹10,000 and not more than five times the value of the goods, services or technology involved, whichever is more. It applies to a person who makes, abets or attempts a contravening export or import.

Can the IEC be suspended or cancelled without a hearing?

No. Section 8(1) requires a written notice stating the grounds and a reasonable opportunity to make a written representation and, if the person wishes, to be heard. Only then can the DGFT or an authorised officer suspend or cancel.

What can a person do after IEC cancellation?

Under Section 8(2), the person cannot import or export except under a special licence granted by the DGFT, in the prescribed manner and subject to prescribed conditions.

How do I appeal against a DGFT order?

For an order refusing to grant or renew, or suspending or cancelling, a licence, certificate, scrip or similar instrument, Section 9(5) says the appeal lies in the same manner as under Section 15. Study Section 15 and the rules for the appellate authorities.

What if a penalty is not paid?

Section 11(5) lists recovery modes, including deduction from money owed, recovery through customs officers and recovery as an arrear of land revenue. Under Section 11(7), the Adjudicating Authority may also suspend the IEC until the penalty is paid or recovered.