Foreign exchange penalty upheld against firm and managing partner where business control and RBI permission requirements were breached

Penalty for contravention of foreign exchange law was sustained against both a partnership firm and its managing partner where import-related amounts were adjusted without prior RBI permission. The managing partner was in charge of day-to-day business, and the statutory scheme imposing responsibility on persons in charge supported separate liability for the firm and the responsible partner. The argument that a partnership's collective character barred action against both was rejected, because the contravention and responsibility provisions permitted penalty on the entity and on the person controlling its business. The penalty on the managing partner was upheld along with the penalty on the firms.

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Issues: Whether penalty for contravention of foreign exchange law could be sustained against both the partnership firm and its managing partner for the same default under section 9(1)(c), and whether the managing partner was liable under the statutory provision imposing responsibility on persons in charge of the business.

Analysis: The appellant did not dispute the contravention on merits and relied only on the contention that a firm and its partner could not both be proceeded against. The record showed that the firms had adjusted amounts payable for imported machinery without prior permission of the Reserve Bank of India, and the appellant was the managing partner in charge of their day-to-day affairs. The statutory scheme, including the provision making persons in charge responsible for the conduct of business, supported imposition of penalty on the firm and on the responsible partner. The plea based on the compendium nature of a partnership was therefore rejected.

Conclusion: Penalty on the managing partner was upheld along with the penalty on the firms, and the appeal was dismissed.

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