FEMA export repatriation liability sustained where active participation in firm affairs and default were shown

Earlier proceedings concerning different GRs and a different time period did not bar the present FEMA action, because the prior order had attained finality only in relation to the firm and the relevant default arose after the RBI-extended repatriation date. The res judicata objection therefore failed and the proceedings were held validly taken under FEMA. Liability under section 42 was sustained because both individuals were shown to have actively participated in the firm's export and repatriation process, including signing export-related documents and extension requests, and the record did not show reasonable steps taken to prevent the default or secure repatriation of proceeds.

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Issues: (i) whether the earlier proceedings and the prior order in respect of the export bills barred the present proceedings or rendered them unsustainable, and (ii) whether the individual appellants were liable for the contraventions of foreign exchange law and the penalty imposed under section 42.

Issue (i): whether the earlier proceedings and the prior order in respect of the export bills barred the present proceedings or rendered them unsustainable.

Analysis: The prior order relating to the firm had attained finality and the Tribunal found that the present proceedings concerned different GRs and a different time period, with the relevant default arising only after the RBI-extended date when FEMA was in force. The plea that the matter was hit by res judicata or that action could not be taken under FEMA was rejected because the earlier disposal did not cover the present contraventions and the cause of action arose on expiry of the extended period for repatriation.

Conclusion: The present proceedings were not barred and were validly taken under FEMA; the objection based on the earlier proceedings failed.

Issue (ii): whether the individual appellants were liable for the contraventions of foreign exchange law and the penalty imposed under section 42.

Analysis: Liability under section 42 depended on whether the individuals were responsible for the conduct of the firm's affairs and had participated in the relevant export and repatriation process. The Tribunal noted that one appellant was a partner who personally travelled to Sudan and signed export-related documents and requests for extension, while the other, though described as constituted attorney, also signed letters and participated in the firm's business. The record did not show that either appellant took sufficient steps to prevent the defaults or to secure repatriation of the export proceeds. The finding that the contraventions were established against the firm was therefore extended to the individuals on the basis of their actual role in the affairs of the firm.

Conclusion: Both individual appellants were held liable for the contraventions and the penalty under section 42 was sustained.

Final Conclusion: The Tribunal sustained the finding of foreign exchange contravention, rejected the jurisdictional and merits-based defences, and upheld the penalties against both appellants.

Ratio Decidendi: Where a person is shown to have actively ated in the affairs of a firm and in the export-repatriation process, liability under section 42 of FEMA follows from actual responsibility for the conduct of business and failure to take reasonable steps to secure repatriation of export proceeds.

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