Separate corporate personality limits foreign exchange liability: a holding company was not liable for a subsidiary's alleged remittance breach.

A holding company cannot be fastened with liability for an alleged foreign exchange remittance contravention said to have arisen in relation to a subsidiary company merely because it holds the majority shareholding. The separate legal personality of the company and its subsidiary must be respected, and any obligation to account for the remittance must attach to the entity to which the remittance is attributable. On the material placed, the statutory breach, if any, lay with the subsidiary company, so proceeding against the holding company under the Foreign Exchange Regulation Act, 1973 was against the wrong person and the adjudication order was unsustainable.

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Issues: Whether the holding company could be held liable for alleged contravention relating to foreign exchange remittance received, if at all, by its subsidiary company under section 8(3) read with section 8(4) of the Foreign Exchange Regulation Act, 1973.

Analysis: A company has a separate legal personality distinct from its shareholders and related corporate entities. On the material placed, the remittance in question was attributable, if at all, to the subsidiary company, and the legal obligation to account for its use could not be fastened on the holding company merely because it held the majority shareholding. The adjudicating authority had therefore proceeded against the wrong person for the alleged statutory breach.

Conclusion: The holding company was not liable for the alleged violation, and the adjudication order was unsustainable.

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