Vicarious Liability under FERA: officer liable unless proving lack of knowledge or due diligence; penalty sustained.

Officer-in-charge of a company engaged in export operations is deemed vicariously liable under Section 68 of the Foreign Exchange Regulation Act, 1973 where the company fails to realize and repatriate export proceeds, unless the officer proves absence of knowledge or that all due diligence was exercised; lack of such proof permits an adverse inference under Section 106 of the Indian Evidence Act, 1872 - liability upheld. The tribunal also found the monetary penalty proportionate to the contravention and declined to interfere with the quantum - penalty sustained.

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Issues: (i) Whether the appellant, being an officer of the company, is vicariously liable under Section 68 of the Foreign Exchange Regulation Act, 1973 for failure of the company to realize and repatriate export proceeds; (ii) Whether the penalty imposed on the appellant is excessive and warrants interference.

Issue (i): Whether the appellant is vicariously liable under Section 68 of the Foreign Exchange Regulation Act, 1973 for the company's failure to realize and repatriate export proceeds.

Analysis: The adjudicating authority's show-cause notice and the record identify the appellant as an executive director responsible for the company's international trading/export operations during the relevant period. Documentary material on record (letter dated 2.4.1988) indicates the appellant was entrusted with export responsibilities. In the absence of contrary material, and given the statutory language of Section 68 which deems every person who at the time of contravention was in charge of and responsible to the company for conduct of its business to be guilty, the requirement for liability is satisfied unless the person proves lack of knowledge or exercise of all due diligence. Section 106 of the Indian Evidence Act, 1872 places on the person special knowledge the burden of proof, permitting an adverse inference where such proof is not produced.

Conclusion: The appellant is vicariously liable under Section 68 of the Foreign Exchange Regulation Act, 1973 for the company's failure to realize and repatriate export proceeds; the appellant's challenge to liability is rejected.

Issue (ii): Whether the penalty imposed on the appellant is excessive and requires interference by the Tribunal.

Analysis: The imposed penalty (Rs. 1 lakh) is considered in relation to the amount involved in the contravention. The tribunal assessed the quantum and found no basis to regard it as excessive or harsh warranting interference.

Conclusion: The penalty imposed on the appellant is not excessive and does not require interference; the appeal against quantum is rejected.

Final Conclusion: The appeal is dismissed in its entirety; the pre-deposited amount, if any, may be appropriated towards realization of the penalty and the appellant is permitted to deposit any balance within the timeframe ordered.

Ratio Decidendi: Where a company commits a contravention under the Foreign Exchange Regulation Act, 1973, every person who at the time of the contravention was in charge of and responsible to the company for conduct of its business is deemed liable under Section 68 unless that person proves lack of knowledge or that all due diligence was exercised to prevent the contravention; absence of proof where the fact is within the person's special knowledge permits an adverse inference under Section 106 of the Indian Evidence Act, 1872.

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