Company strike off does not extinguish FEMA liability, while penalties may be reduced on proportionality grounds.

Strike off of a company under the Companies Act, 2013 does not extinguish subsisting FEMA liability, and enforcement may continue against persons legally answerable, including legal representatives where the statutory scheme permits continuation after death. FEMA penalty is a civil consequence for contravention and does not require proof of mens rea unless the statute provides otherwise; however, the quantum must remain proportionate to the nature and gravity of the breach. On that basis, the underlying liability was maintained while the individual penalties were reduced to the amount already deposited.

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Issues: (i) Whether the strike off of the company extinguished the liability arising from the FEMA adjudication and whether the legal representatives remained answerable for the penalty proceedings; (ii) Whether the penalties imposed on the individual appellants warranted reduction on the ground of proportionality.

Issue (i): Whether the strike off of the company extinguished the liability arising from the FEMA adjudication and whether the legal representatives remained answerable for the penalty proceedings.

Analysis: The applicable provisions on removal of a company's name from the register make it clear that dissolution under the Companies Act, 2013 does not wipe out subsisting liabilities. Liability continues after strike off, and enforcement may proceed against persons who remain legally answerable. In the FEMA framework, the adjudicating authority treated the deceased noticee as the person in charge of the company's affairs and proceeded against the legal representatives under the statutory scheme governing continuation of adjudication after death.

Conclusion: The liability was not extinguished by the company's strike off, and the proceedings against the legal representatives were maintainable.

Issue (ii): Whether the penalties imposed on the individual appellants warranted reduction on the ground of proportionality.

Analysis: Penalty under FEMA is attracted on proof of contravention and does not require proof of mens rea unless the statute so indicates. At the same time, the quantum of penalty must fit the nature and gravity of the contravention. On that basis, the adjudicated penalties on the individual appellants were found excessive and the ends of justice were considered satisfied by reducing them to the amount already deposited.

Conclusion: The penalties were reduced to Rs. 30,000 each.

Final Conclusion: The appeals succeeded to the limited extent of reducing the individual penalties, while the underlying FEMA liability was not set aside.

Ratio Decidendi: Liability under FEMA remains enforceable despite the company's strike off, and penalty for statutory contravention is a civil consequence that may be moderated on proportionality even though mens rea is not required.

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