Vicarious liability under FEMA requires strict proof of control and involvement before fastening penalty for export proceeds default.

Vicarious liability under FEMA for a company's failure to realise export proceeds requires strict proof that the person proceeded against was in charge of, and responsible for, the conduct of the business when the contravention occurred, and that the default is attributable to that person's consent, connivance or neglect. Where the notice and order do not specify the individual's role, and the record shows that substantial exports took place after his resignation as director, liability cannot be fastened without proof linking him to the relevant transactions. On the stated facts, the appellant could not be penalised under Section 42(1) of the Foreign Exchange Management Act, 1999.

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Issues: Whether the appellant could be held vicariously liable under Section 42(1) of the Foreign Exchange Management Act, 1999 for the company's failure to realise export proceeds, in the absence of any specific allegation or proof of his individual role and in view of his resignation before most of the disputed exports.

Analysis: The notice and the impugned order did not specify the appellant's role in the alleged contraventions, while a substantial part of the exports covered by the show cause notice had taken place after his resignation as director. For the remaining exports, one was still within the prescribed realisation period, and the record did not establish that the appellant was in charge of, or responsible for, the conduct of the company's business when the contravention occurred. Vicarious liability under FEMA requires strict proof that the person sought to be proceeded against was in control of the relevant business affairs and that the contravention is attributable to that person's consent, connivance, or neglect.

Conclusion: The appellant could not be penalised under Section 42(1) of the Foreign Exchange Management Act, 1999.

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