Director liability under FEMA requires proof of control or culpable involvement; mere designation alone does not justify penalty.

Director liability under Section 42 of the Foreign Exchange Management Act, 1999 is described as arising only where the person was in charge of and responsible for the company's business at the relevant time, or where consent, connivance or neglect is established. The text states that mere designation as a director is insufficient without proof of responsibility for finance, banking, export-import or compliance functions. It further notes that where explanations limiting the director's role to technical and administrative work are not meaningfully addressed, the statutory basis for penalty is not made out, resulting in the penalty being set aside.

---

---

Issues: Whether the appellant, a director of the company, could be held liable and penalised under Section 42 of the Foreign Exchange Management Act, 1999 for the company's alleged export-related contravention when the record did not establish that he was in charge of and responsible for the company's business in relation to finance, export-import or regulatory compliance.

Analysis: Liability under Section 42 of the Foreign Exchange Management Act, 1999 arises only where the person sought to be penalised is shown to have been in charge of and responsible to the company for the conduct of its business at the relevant time, or where consent, connivance or neglect is proved. The appellant's explanation, statement and reply to the show cause notice showed that his role was confined mainly to technical and administrative work, with finance, banking and export-import being handled by the managing director, and the impugned order did not meaningfully deal with these explanations or record reasons showing how the statutory ingredients were satisfied. Mere designation as director was insufficient to fasten liability absent proof of the required role or active involvement.

Conclusion: The appellant could not be held liable to penalty under Section 42 of the Foreign Exchange Management Act, 1999, and the penalty imposed on him was set aside.

---