Liability of struck-off companies persists; legal representatives face estate-limited FEMA penalties, with courts able to reduce penalties for proportionality.

Sections 248(6) and 250 of the Companies Act preserve a struck-off company's liabilities and permit realisation and enforcement of amounts due, so penalties imposed on the company continue to subsist. Under the FEMA framework the adjudicating authority proceeded under the statute to attach liability to the deceased director's legal representatives, with liability confined to the estate; the Tribunal found partial merit in the representatives' challenge. Civil penalties under FEMA do not require mens rea, but the Tribunal applied proportionality and mitigation principles to reduce individual penalties.

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Issues: (i) Whether penalties and liabilities of a company struck off the register continue to subsist and can be enforced; (ii) Whether the individual appellants, as legal representatives/sons of the deceased managing director, are liable under Section 43 of the Foreign Exchange Management Act, 1999 for contraventions attributed to the struck-off company; (iii) Whether the penalties imposed on the individual appellants should be reduced.

Issue (i): Whether penalties and liabilities of a company struck off the register continue to subsist and can be enforced.

Analysis: Section 248(6) and Section 250 of the Companies Act, 2013 preserve liability and obligations of a struck-off company, require satisfaction that provision has been made for discharge of liabilities, and deem the certificate of incorporation cancelled only for limited purposes while allowing realisation of amounts due and enforcement of liabilities. The impugned penalties imposed on the company therefore remain liabilities despite the company being struck off unless a higher forum orders otherwise.

Conclusion: In favour of Respondent.

Issue (ii): Whether the individual appellants, as legal representatives/sons of the deceased managing director, are liable under Section 43 of the Foreign Exchange Management Act, 1999 for contraventions attributed to the struck-off company.

Analysis: The adjudicating authority relied on findings that the deceased was in-charge of the company and involved in the contraventions and proceeded under section 42(1) and Section 43 of FEMA to hold legal representatives liable; Section 43 permits continuation of adjudication against legal representatives and liability is limited to the estate/inheritance. The Tribunal examined the record of adjudication, the statements and procedural opportunities afforded to the legal representatives, and the statutory framework under FEMA governing penalty imposition for civil contraventions.

Conclusion: Partly in favour of Appellant.

Issue (iii): Whether the penalties imposed on the individual appellants should be reduced.

Analysis: Section 13(1) of FEMA provides for civil penalties without requiring mens rea; however, the Tribunal considered proportionality and circumstances of the individual appellants, including pre-deposits already made and the nature of the failures alleged, and applied discretionary reduction of monetary penalty consistent with precedents permitting mitigation of civil penalties where appropriate.

Conclusion: In favour of Appellant.

Final Conclusion: The appeals are partly allowed by upholding that company liabilities continue despite striking off while recognising limited liability of legal representatives and reducing the individual penalties to Rs.30,000 each with adjustment of pre-deposits.

Ratio Decidendi: Sections 248(6) and 250 of the Companies Act, 2013 preserve the liabilities of a struck-off company for purposes of realisation and enforcement, and civil penalties under FEMA are attractable without proof of mens rea though their quantum may be judicially moderated on principles of proportionality.

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