Summary
The Rs.1 lakh FERA penalty imposed on a part-time non-executive director was set aside. Directorship alone did not establish that he was in charge of and responsible for the company’s business when the contravention occurred. His first personal response and supporting company-secretary affidavit were wrongly disregarded, and no proper finding established the statutory basis for liability. The absence of a written-complaint requirement did not remove the obligation to communicate the necessary allegations and provide an effective hearing.
Issues
- Whether directorship alone established liability under Section 68 FERA.
- Whether the appellant’s response and supporting material were properly considered.
- What notice and opportunity were required in penalty adjudication.
Provisions considered
- Sections 51 and 68, Foreign Exchange Regulation Act, 1973Required meaningful opportunity to answer the alleged contravention and proof of the conditions for company-officer liability. (¶¶ 13, 14, 16, 27, 37, 38, 39, 40, 41)
Held
- The appellant’s response to the adjudication hearing notice was his first personal representation, not an afterthought because the company’s earlier reply had omitted the point. The company-secretary affidavit was on record and supported his account; it could not properly be ignored as unfiled. (¶¶ 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22)
- The Section 68 fiction depends on its statutory conditions. Liability under the provision invoked could not arise merely from holding a director’s designation; being in charge of and responsible for the business at the relevant time required a proper basis and finding. The analogous Negotiable Instruments Act authorities were relevant. (¶¶ 25, 26, 27, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 41)
- FERA penalty adjudication does not require the written complaint used for cheque-dishonour prosecution. Nevertheless, Section 51 requires communication of allegations containing the necessary ingredients so the person can make an effective representation. A commercial presumption concerning directors is rebuttable and cannot replace the statutory inquiry. (¶¶ 39, 40)
- No authority properly considered the defence and established the appellant’s relevant responsibility. A recent adjudication concerning another period had accepted his non-executive status, requiring reasons for a contrary view. The penalty and affirming orders therefore could not stand. (¶¶ 21, 22, 25, 26, 41, 42, 43, 44)
Result
Appeal allowed; High Court, Appellate Tribunal and adjudicating officer orders set aside insofar as they imposed and affirmed the appellant’s penalty. Penalty set aside.