Civil penalty liability without mens rea affirmed, with proportionality reduction and pre-deposit adjustment in sanction.

The note addresses civil penalty liability for foreign exchange contraventions, confirming that proof of guilty intention is not required where statutory civil obligations are breached; once contravention is established, mens rea is irrelevant for imposition of penalty. It records an admission of active participation by a company officer which supported establishment of contraventions. The piece emphasises regulator discretion to temper penalties for proportionality and records an operative reduction of the imposed sanction with the pre-deposit to be adjusted against the reduced amount, reflecting mitigation through discretionary relief.

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Issues: (i) Whether the penalty of Rs.10,00,000 and Rs.10,000 imposed on the Appellant under Section 42 of the Foreign Exchange Management Act, 1999 for contraventions by the company is sustainable.

Analysis: The Appellant was the chief financial officer during the relevant period and admitted active participation in the transactions by statements under Section 37 of the Act. The penalty was imposed under Section 42(1) of the Foreign Exchange Management Act, 1999 for contraventions established against the company. The applicable legal framework includes Section 13(1) of the Foreign Exchange Management Act, 1999 which provides for civil penalties where mens rea is not a statutory requirement. The Tribunal applied the principle that once contravention of a statutory civil obligation is established, intention is irrelevant for imposition of penalty, relying on established precedent that civil penalties under regulatory statutes do not require proof of guilty intention. Having found the Appellant's active role and the establishment of contraventions, the Tribunal nevertheless exercised discretion to reduce the penalty to achieve proportionality and adjusted the pre-deposit against the reduced amount.

Conclusion: The penalty imposed on the Appellant is partially set aside by reducing the amount to Rs.1,01,000 and the pre-deposit made shall be adjusted against the reduced penalty; the appeal is partly allowed in favour of the Appellant.

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