Unauthorised foreign remittance before RBI permission can trigger contravention and director liability on a vicarious basis.

A foreign remittance made before RBI permission, and for the importer's benefit in discharge of its contractual liability, was treated as an unauthorised acquisition or transfer of foreign currency under section 4(1) of the Foreign Exchange Regulation Act, 1947. The surrounding facts supported an implied agency, so the payment was regarded as made on behalf of the appellants and the statutory prohibition was attracted. The director, being in charge of and responsible for the company at the relevant time, was also liable for penalty under section 23C(1) on a vicarious-liability basis once the company's contravention was established.

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Issues: (i) Whether the appellants' foreign-currency transaction amounted to contravention of section 4(1) of the Foreign Exchange Regulation Act, 1947; (ii) Whether the director was liable for penalty under section 23C(1) of the Foreign Exchange Regulation Act, 1947.

Issue (i): Whether the appellants' foreign-currency transaction amounted to contravention of section 4(1) of the Foreign Exchange Regulation Act, 1947.

Analysis: The payment to the overseas supplier was made before RBI permission was obtained and was made for the appellants' benefit in discharge of their contractual liability. On the facts, the foreign remittance was treated as a payment on behalf of the appellants, and an implied agency could be inferred from the surrounding circumstances. The absence of prior RBI approval meant that the acquisition or transfer of foreign currency was not authorised under the statutory scheme.

Conclusion: The contravention under section 4(1) was established against the appellants.

Issue (ii): Whether the director was liable for penalty under section 23C(1) of the Foreign Exchange Regulation Act, 1947.

Analysis: The director was found to be in charge of and responsible for the company at the relevant time. Once the company's contravention was made out, penalty could be imposed on the director on the basis of vicarious liability. The same transaction was also treated as capable of attracting separate violations under the regulatory scheme.

Conclusion: The director was liable for penalty under section 23C(1).

Final Conclusion: The impugned penalty order was upheld and the appeals failed.

Ratio Decidendi: A foreign remittance made for the benefit of an importer before obtaining the required RBI permission can amount to unauthorised acquisition or transfer of foreign currency, and a company director in charge of the company may be penalised on a vicarious-liability basis for the company's contravention.

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