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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether penalty under Section 68 of the Foreign Exchange Regulation Act, 1973 could be sustained against a person who was not in charge of, and responsible for, the company's business at the time of the alleged contravention and whose role was only that of a clerk or later a nominal director.
Analysis: Liability of an officer for a company's contravention under Section 68 depends on proof that, at the relevant time, the person was in charge of and responsible to the company for its business, or that the contravention occurred with his consent, connivance, or neglect. The record did not show that the appellant had any role in the import of machinery in 1994-95, in the subsequent export obligation, or in any decision-making connected with the contravention. His later appointment as director, long after the alleged default, did not establish responsibility for the past acts of the company. Mere holding of a designation was held insufficient to attract vicarious liability.
Conclusion: The penalty on the appellant could not be sustained and was set aside.
Ratio Decidendi: Vicarious liability for a company's contravention under Section 68 of the Foreign Exchange Regulation Act, 1973 arises only where the person was in charge of and responsible for the business at the relevant time, or where consent, connivance, or neglect is proved; mere designation as director is not enough.
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