Proportional penalty under foreign exchange law may be enhanced where the original sanction is unduly lenient

A revisional challenge to the adequacy of penalty under the Foreign Exchange Regulation Act, 1973 focused on whether the original penalty was too lenient in light of the admitted contravention. The Tribunal applied the principle that statutory penalty discretion must be exercised in a manner proportionate to the gravity of the misconduct and the amount involved, because an unduly mild penalty may amount to failure to discharge the statutory duty effectively. On that basis, it treated the original penalty as inadequate and enhanced it to secure effective compliance and reflect the seriousness of the breach.

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Issues: Whether the revision petition challenging the quantum of penalty under the Foreign Exchange Regulation Act, 1973 should be allowed and the penalty enhanced.

Analysis: The respondent had accepted the finding of contravention, and the only matter requiring consideration was the adequacy of the penalty. The revision was filed after an unexplained delay and without proper authorization, but the Tribunal proceeded to examine the matter. It held that where the statutory power to impose penalty is exercised in a manner that is disproportionate to the gravity of the contravention and the amount involved, the adjudicating authority fails to discharge the duty entrusted by the statute. Relying on the principle that discretionary statutory power may, in an appropriate case, be coupled with a duty to act effectively, the Tribunal found that the original penalty was unduly lenient.

Conclusion: The revision petition was allowed and the penalty was enhanced substantially to make it commensurate with the misconduct and the amount involved.

Ratio Decidendi: Where a penal discretion under a fiscal regulatory statute is exercised in a manner that is grossly disproportionate to the proven contravention, the revisional authority may enhance the penalty to ensure effective compliance and to avoid abdication of statutory duty.

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