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The department initiated the enquiry when the accused submitted other application dated 07.02.1983 for the cash assistance of Rs. 12,99,864.52/- on the basis of the export of hand knitted woolen carpets on outright sale basis of the value of Rs. 65,29,587.60/- In the course of enquiry with the Federal Bank, Connaught Circus, Punjab National Bank, Chandni Chowk and Oriental Bank of commerce, Nehru Place regarding the realization of foreign exchange against their export, it was found that foreign exchange amounting to Rs. 81.25 lakh was outstanding to be realized against the total amount of Rs. 1,08,07,002/-. Further, the sum of Rs. 26,82,489/- which was realized on the account of exports purported to have been made by the firm was in the nature of remittance from abroad i.e. West Germany and not from Houston, where the goods were exported.

PW30 Sh. Ramesh Kumar Malhotra deposed that during 1981 to 1983, he was working as staff officer Grade-A in Export IV Section, Exchange Control Department, in Reserve Bank of India, New Delhi. His duty was to follow up the outstanding export proceeds by the defaulter exporter. As per the procedure, the exporter used to furnish the export documents along with the export form with the concerned bank and they were required to give undertaking that the export proceeds will be received within 3 to 6 months from the date of shipment. In cases, export proceeds are not realized within six months, the export proceeds were to be mentioned and reported by the banker in outstanding export statements to RBI. After receiving the report from the bank, the RBI used to issue a letter to the defaulter exporter to realize the export proceeds within the stipulated period. When the export proceeds are not realized within the stipulated period, the exporter could seek extension of time. Failing to do so, the RBI put the exporter in the cautioned list and refer the case to enforcement director. On perusal of the RBI file pertaining to Kay Films Pvt. Ltd (D-177) Ex.PW30/A, the witness stated that the letter bearing no. 4113 dated 26.07.1982 Ex.PW30/B was addressed to Kay Films by the RBI regarding non realization of export proceeds. The letter dated 17.08.1982 Ex.PW23/B was written by Kay Films Pvt. Ltd to RBI. The memorandum dated 09.10.1982 Ex.PW30/C was sent to Kay Films Pvt Ltd as a reminder for non realization of export proceeds. The letter dated 22.12.1982 Ex.PW30/D was sent by RBI to the manager, Federal bank, New Delhi regarding the outstanding export proceeds of the company. The letter dated 22.12.1982 and 03.02.1982 were addressed to Manager, Oriental Bank of Commerce regarding outstanding export proceeds of M/s Kay Films Pvt Ltd and the letters are Ex.PW30/E and Case No. CBI-85/2019 CBI vs. Arun Sood Page No. 16 of 30 Ex.PW30/F respectively. The witness identified his signature on the reminder letters to the company Ex.PW30/G and Ex.PW30/H. The witness also identified the letter dated 09.10.1982 written to Kay Films Pvt. Ltd and the letter dated 02.03.1983 and the same are Ex.PW30/H and Ex.PW30/K. PW-9 Sh.Jai Narain Sharma, deposed that in the capacity of Staff Officer, Grade - I in export division in RBI, he was looking after the work of export promotion. In reference to letter dated 19.03.1982 from OBC, Nehru Place Ex.PW9/1, he forwarded the application of M/s Kay Films Ex.PW9/2 for permission to extend the period of realization of export proceeds. On the request, the period for realization was extended up to 18.03.1982. Vide communication Ex.PW9/3, the extension was granted on the request by M/s Kay Films vide the application Ex.PW9/4.

The witnesses from RBI Bank i.e. PW-30 deposed that he was on duty to follow up of outstanding export proceeds by the defaulter exporters. As per the procedure, for non realization of export proceeds, the exporters were required to furnish the export documents along with the export form with the concerned bank. The exporters were required to give an undertaking that export proceeds would be received within three / six months from the date of shipment. On non realization of the export proceeds the banker was required to mention the same in outstanding Case No. CBI-85/2019 CBI vs. Arun Sood Page No. 25 of 30 export statements in their report to RBI. The witness deposed as to the correspondence between the company of the accused and RBI regarding the non realization of export proceeds.