FEMA penalty reassessment turned on revised bank figures and absence of the director's role at the relevant time.

Penalties for FEMA-linked export realisation and import remittance contraventions were reconsidered where a later bank report showed the outstanding exposure was materially lower than the figures used in adjudication, so the company's penalty was proportionately reassessed and reduced. The director's penalty was not sustained because he was not holding or operating the relevant position during the material period, leaving no basis to fasten personal liability. The impugned order was modified accordingly, with the company's penalty reduced and the director exonerated.

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Issues: (i) whether the penalty imposed for contravention of foreign exchange export-realisation and import-remittance obligations required modification in light of the latest bank report; (ii) whether the penalty imposed on the director could be sustained when he was not holding or operating the relevant position at the material time.

Issue (i): whether the penalty imposed for contravention of foreign exchange export-realisation and import-remittance obligations required modification in light of the latest bank report.

Analysis: The liability for contravention under FEMA and the connected regulations was not disputed, but the quantum of unrealised export proceeds and outstanding import remittances had materially changed on the basis of the bank's later report. The adjudication had proceeded on much larger figures, while the updated record showed a substantially reduced amount in issue. In that situation, the penalty had to be aligned with the revised monetary exposure and the delay in obtaining and producing records was also taken into account. The penalty therefore required proportional reassessment rather than affirmation in its original form.

Conclusion: The penalty on the company was modified and reduced to a consolidated amount of Rs. 80 lakhs.

Issue (ii): whether the penalty imposed on the director could be sustained when he was not holding or operating the relevant position at the material time.

Analysis: The director's involvement was considered in the light of his position at the time when the alleged contraventions occurred. Since he was not holding or operating the relevant position during the material period, the basis for fastening penalty on him was absent. On that footing, the impugned penalty against him could not stand.

Conclusion: The penalty imposed on the director was quashed.

Final Conclusion: The appeals succeeded in part: the company's penalty was reduced, and the director was exonerated from the penalty, with the impugned order modified accordingly.

Ratio Decidendi: Where the underlying contravention is not disputed but the monetary extent is later shown to be lower, the penalty may be proportionately reassessed; penalty on a director cannot be sustained absent material showing his role at the relevant time.

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