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Issues: Whether a non-executive director could be held vicariously liable for contravention of Section 8(3) read with Section 8(4) of the Foreign Exchange Regulation Act, 1973 in the absence of specific averments that he was in charge of and responsible for the conduct of the company's business, and whether he had discharged the burden under Section 68(2) of the Act.
Analysis: Liability under Section 68(1) of the Foreign Exchange Regulation Act, 1973 depends on a person being in charge of and responsible to the company for the conduct of its business at the time of the contravention. The statutory scheme is analogous to the principles governing vicarious liability under Section 141 of the Negotiable Instruments Act, where mere designation as a director is insufficient and specific averments as to role and responsibility are required. The appellant had given a separate reply denying that he was an executive or whole-time director or that he was in charge of day-to-day affairs, but that defence was not dealt with in the adjudication order or by the appellate tribunal. The general cyclostyled recital in the show cause notice did not answer the appellant's specific stand, and the explanation that compliance certificates were placed before the board was found to be a plausible defence that had not been considered.
Conclusion: The appellant could not be fastened with liability merely on the basis of his directorship, and he was entitled to the benefit of Section 68(2); the finding of contravention against him was unsustainable.
Ratio Decidendi: Vicarious liability for company contraventions under Section 68 of the Foreign Exchange Regulation Act, 1973 cannot be imposed on a director unless the record contains specific averments and supporting material showing that he was in charge of and responsible for the company's business, or that the requirements of Section 68(2) are otherwise established.
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