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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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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 a nominee or provisional director of a joint venture company can be vicariously held liable under Section 68 of the Foreign Exchange Regulation Act, 1973 merely by reason of holding that office.
Analysis: Liability under Section 68 arises only where the person was in charge of and responsible for the conduct of the business of the company at the relevant time. Mere designation as director is not enough. The material on record, including the board resolutions, showed that the appellant's proposed appointment as managing director of the joint venture company was deferred and that he was not shown to be in charge of its day-to-day business. The Tribunal's finding was not supported by evidence and did not record the statutory satisfaction required by Section 68. The principle applied was consistent with the rule that vicarious criminal liability cannot rest on status alone and must be founded on specific responsibility for the conduct of business.
Conclusion: The appellant could not be made liable under Section 68 on the facts found, and the penalty was unsustainable.
Final Conclusion: The appeal succeeded and the impugned penalty was set aside.
Ratio Decidendi: Vicarious liability under Section 68 of the Foreign Exchange Regulation Act, 1973 attaches only to a person who is specifically shown to have been in charge of and responsible for the company's business at the relevant time, and not to a director by designation alone.
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