FEMA penalty limits and power of attorney liability clarified: statutory fit and duplicate penalties for same acts were rejected.

FEMA penalties must match the precise statutory precondition invoked: Section 3(b) covered advance remittances to overseas suppliers, so liability under that provision was sustained, but the quantum was reduced. Section 10(6) read with Regulation 6(1) could not be applied to the proprietrix on the footing adopted in the adjudication, because the regulation applies to a person other than an individual resident in India; the corresponding penalty was deleted. Separate penalties on the authorised signatory were also unsustainable where he acted under a power of attorney for the proprietrix, because acts done in that capacity bind the grantor and do not warrant multiple penalties for the same business contraventions.

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Issues: (i) Whether the penalty under Section 3(b) of the Foreign Exchange Management Act, 1999 was sustainable and whether its quantum required reduction; (ii) Whether Section 10(6) read with Regulation 6(1) of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2015 could be invoked against the proprietrix and whether the related penalty was liable to be deleted or reduced; (iii) Whether separate penalties could be sustained against the authorised signatory in addition to the proprietrix for the same contraventions.

Issue (i): Whether the penalty under Section 3(b) of the Foreign Exchange Management Act, 1999 was sustainable and whether its quantum required reduction?

Analysis: Section 3(b) prohibits making any payment to or for the credit of a person resident outside India. The challenge proceeded on the premise that the provision was attracted only where payment was routed otherwise than through an authorised person, but the statutory text contains no such additional requirement. The remittances were made towards overseas import transactions and the appellant did not dispute that advance payments were made to foreign suppliers. The provision was therefore attracted on the facts, but the record supported interference with the quantum.

Conclusion: The penalty under Section 3(b) was upheld in principle, but the amount imposed on the proprietrix was reduced to Rs. 52,00,000, and the separate penalty on the authorised signatory was deleted.

Issue (ii): Whether Section 10(6) read with Regulation 6(1) of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2015 could be invoked against the proprietrix and whether the related penalty was liable to be deleted or reduced?

Analysis: Section 10(6) and Regulation 6(1) apply where foreign exchange acquired for a declared purpose is not used for that purpose and is not surrendered within the stipulated period. Regulation 6(1), by its express language, applies to a person other than an individual resident in India. The proprietorship concern was held to fall within the ambit of an individual for this purpose, and the proprietrix could not be proceeded against under that regulation on the footing adopted in the adjudication order. The penalty could not therefore survive against her.

Conclusion: The penalty under Section 10(6) read with Regulation 6(1) was set aside as against the proprietrix, and the corresponding penalty stood deleted.

Issue (iii): Whether separate penalties could be sustained against the authorised signatory in addition to the proprietrix for the same contraventions?

Analysis: The business was conducted by the authorised signatory under a power of attorney from the proprietrix. The legal effect of a power of attorney is that acts done by the holder bind the grantor as acts of the grantor. On that footing, the same contraventions could not justify a separate penalty on the authorised signatory where the proprietrix had already been penalised for the business acts undertaken through him. The separate treatment as a body of individuals was also rejected.

Conclusion: The separate penalties imposed on the authorised signatory on all three counts were deleted.

Final Conclusion: The impugned order was modified by sustaining only a reduced penalty against the proprietrix on one count and by deleting the remaining penalties, with the appeals disposed of accordingly.

Ratio Decidendi: A penalty under FEMA must conform to the exact statutory precondition invoked, and where a power of attorney holder acts for a proprietrix, separate penalty on the holder is not warranted for the same business contraventions already visited on the grantor.

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