Partner penalty under foreign exchange law set aside where firm's export realisation was substantial and separate liability was unjustified.

Penalty under section 68(1) of the Foreign Exchange Regulation Act, 1973 is not necessarily sustainable against a partner where the Tribunal finds that the firm has already made substantial export realisation and the surrounding facts do not justify separate penal liability. On the same facts, the quantum of penalty on the firm may be moderated where only the balance export proceeds remain unrealised and the circumstances explain the shortfall. The discussed order granted partial relief by setting aside the partner's penalty, reducing the firm's penalty, and directing refund of the excess deposit.

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Issues: (i) whether penalty could be sustained on the partner under section 68(1) of the Foreign Exchange Regulation Act, 1973 once penalty had been imposed on the firm; (ii) whether the penalty imposed on the firm required reduction on the facts found.

Issue (i): whether penalty could be sustained on the partner under section 68(1) of the Foreign Exchange Regulation Act, 1973 once penalty had been imposed on the firm.

Analysis: The order proceeded on the basis that substantial export realisation had already been made and that the remaining amount had not been realised. In the circumstances, the Tribunal accepted the contention that the partner's liability for penalty was not warranted on the facts before it, and treated the penalty on the partner as unsustainable.

Conclusion: The penalty imposed on the partner was set aside.

Issue (ii): whether the penalty imposed on the firm required reduction on the facts found.

Analysis: The Tribunal took note of the extent of realisation already achieved and the circumstances surrounding the non-realisation of the balance. On that basis, the quantum of penalty on the firm was moderated.

Conclusion: The penalty on the firm was reduced.

Final Conclusion: The Tribunal granted partial relief by removing the partner's penalty and reducing the firm's penalty, and directed consequential refund of the excess amount deposited.

Ratio Decidendi: Penalty under section 68(1) of the Foreign Exchange Regulation Act, 1973 cannot be sustained against the partner on the facts of the case where the Tribunal finds the penalty on the firm and the surrounding circumstances do not justify separate penal liability, and the quantum of penalty may be reduced in light of substantial export realisation.

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