Vicarious liability under foreign exchange law turns on proving due diligence; absence of connivance alone is no defence.

Under section 68(1) of the Foreign Exchange Regulation Act, 1973, a person in charge of a company's business is deemed guilty of a contravention committed by the company unless he affirmatively proves absence of knowledge or the exercise of all due diligence to prevent it. The burden of establishing that defence lies on the person proceeded against. A mere lack of connivance or unlawful monetary benefit does not defeat liability under section 68(1), because connivance is relevant to section 68(2) rather than the deeming rule in section 68(1). Assertions of internal compliance or audit processes, without cogent proof of effective preventive measures, are insufficient.

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Issues: Whether the appellants, being persons in charge of and responsible for the conduct of the company's business, had established the defence under the proviso to section 68(1) of the Foreign Exchange Regulation Act, 1973 by proving absence of knowledge or due diligence, so as to avoid vicarious liability for the contraventions found in respect of release of foreign exchange under the BTQ and Business Visit schemes.

Analysis: Under section 68(1), where a contravention is committed by a company, every person who was in charge of and responsible to the company for the conduct of its business is deemed to be guilty. The proviso gives such person a limited defence if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent it. The burden of establishing that defence lies on the person proceeded against. The finding that there was no connivance or unlawful monetary benefit did not answer liability under section 68(1), because connivance is relevant to section 68(2) and not to the deeming rule in section 68(1). Mere assertions of internal compliance, audits, or lack of knowledge were held insufficient; cogent evidence of due diligence and proper internal arrangements was required, and none was produced.

Conclusion: The appellants failed to discharge the burden under the proviso to section 68(1) and remained liable for the contraventions.

Final Conclusion: No substantial question of law arose, and the concurrent findings sustaining the penalties were upheld.

Ratio Decidendi: In a company contravention case under section 68(1) of the Foreign Exchange Regulation Act, 1973, the person in charge is deemed guilty unless he affirmatively proves absence of knowledge or due diligence; absence of connivance is not a defence under that provision.

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