Specific pleadings are required to invoke vicarious liability against company directors under foreign exchange law.

Vicarious liability under the Foreign Exchange Regulation Act, 1973 requires specific foundational averments that the directors were, at the relevant time, in charge of and responsible for the company's business; broad or mechanical recitals of statutory language are insufficient. On that footing, adjudication notices against non-executive directors were held unsustainable where the notices lacked particulars and the persons had been dropped from the criminal case on the same basis. The text also states that writ interference at the show-cause stage is justified where the basis for proceeding is absent and the notice reflects non-application of mind.

---

---

Issues: (i) whether the adjudication notices under Section 51 of the Foreign Exchange Regulation Act, 1973 could validly proceed against non-executive directors without specific averments that they were in charge of and responsible to the company for the conduct of its business; (ii) whether the writ court ought to interfere at the show-cause stage where the foundational facts necessary to invoke vicarious liability were absent.

Issue (i): whether the adjudication notices under Section 51 of the Foreign Exchange Regulation Act, 1973 could validly proceed against non-executive directors without specific averments that they were in charge of and responsible to the company for the conduct of its business.

Analysis: Liability under Section 68(1) of the Foreign Exchange Regulation Act, 1973 depends on the person sought to be proceeded against being, at the relevant time, in charge of and responsible to the company for the conduct of its business. The notices contained only broad and mechanical assertions and did not set out the foundational facts showing how the appellants satisfied that requirement. The Court treated this deficiency as material, especially because the appellants were non-executive directors and had already been dropped from the criminal prosecution on the same factual basis.

Conclusion: The notices were unsustainable against the appellants.

Issue (ii): whether the writ court ought to interfere at the show-cause stage where the foundational facts necessary to invoke vicarious liability were absent.

Analysis: Although interference at the stage of notice is ordinarily restrained, that rule is not absolute. Where the very basis for proceeding is missing, forcing the persons concerned to undergo adjudication would serve no purpose. The Court also noted that the subsequent notice was cyclostyled and wrongly stated that the appellants had not replied, which reinforced the absence of application of mind.

Conclusion: Writ interference was justified and the adjudication proceedings could be quashed.

Final Conclusion: The appeals succeeded, the impugned orders were set aside, and the adjudication proceedings initiated against the appellants were quashed.

Ratio Decidendi: A notice seeking to proceed against company directors for a contravention by the company must specifically plead the foundational facts showing that they were in charge of and responsible for the conduct of the company's business at the relevant time; a mechanical repetition of statutory language is insufficient.

---