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Issues: (i) Whether penalty under section 18 of the Foreign Exchange Regulation Act, 1973 could be sustained where the exporter had obtained extension of time for realisation of export proceeds in respect of Iraqi exports and waiver applications remained pending for other outstanding amounts; and (ii) whether personal penalties on the directors could be sustained in the absence of specific averments establishing their responsibility for the company's export business and non-realisation of export proceeds.
Issue (i): Whether penalty under section 18 of the Foreign Exchange Regulation Act, 1973 could be sustained where the exporter had obtained extension of time for realisation of export proceeds in respect of Iraqi exports and waiver applications remained pending for other outstanding amounts.
Analysis: The statutory scheme treated non-realisation of export proceeds as actionable only when the prescribed period, or the period extended by the Reserve Bank, had expired and no effective permission or approval existed. Where extension of time had been granted, no contravention could be fastened during the extended period. Likewise, where applications for write-off or waiver were pending consideration, adjudication on non-realisation was premature. The record showed that the major Iraqi dues were covered by extension of time and that the smaller balance amounts were subject to pending waiver requests, making the penalty unsustainable on the merits and under the governing regulatory framework.
Conclusion: The penalty imposed on the company could not be sustained and was rightly set aside.
Issue (ii): Whether personal penalties on the directors could be sustained in the absence of specific averments establishing their responsibility for the company's export business and non-realisation of export proceeds.
Analysis: Vicarious liability under section 68 required clear pleadings and material showing that the directors were in charge of and responsible for the conduct of the business at the relevant time. Mere mention of their names or a bare reproduction of statutory language was insufficient. The notice and the adjudication order did not contain specific allegations attributing the contravention to each director, and one director was not even in office during the relevant export period. In the absence of the foundational facts necessary to attract vicarious liability, the personal penalties could not stand.
Conclusion: The personal penalties on the directors were unsustainable and were set aside.
Final Conclusion: The appeals succeeded, the impugned order was annulled in full, and no penalty survived against either the company or the directors.
Ratio Decidendi: Where export realisation is protected by extension of time or pending waiver consideration, penalty for non-realisation cannot be imposed, and vicarious liability of directors cannot be fastened without specific pleadings and proof of their responsibility for the contravention.
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