Case Note & Summary
The case involves three appeals filed by Associated Capsules Private Limited and its two directors, Jasjit Singh and Ajit Singh, against an order of the Foreign Exchange Regulation Appellate Board dated April 29, 1980. The Appellate Board had upheld the penalty imposed by the Assistant Director of Enforcement under the Foreign Exchange Regulation Act, 1973 (FERA) for violation of Section 9(1)(a) and 9(1)(d). The appellants were charged with making payments to a non-resident, M/s. Capsugel AG, Switzerland, without the permission of the Reserve Bank of India. The Assistant Director of Enforcement imposed a penalty of Rs. 50,000 on the company and Rs. 25,000 on each director. The Appellate Board confirmed these penalties. The appellants challenged the order on the grounds that the payments were made for goods supplied by the non-resident and that there was no violation of FERA. The court examined the provisions of Section 9(1)(a) and 9(1)(d), which prohibit making any payment to or for the credit of a non-resident without RBI permission. The court found that the appellants had made payments to a non-resident without obtaining the requisite permission. The court also considered the vicarious liability of directors under Section 68 of FERA, which presumes directors to be guilty unless they prove lack of knowledge or due diligence. The court held that the directors failed to discharge this burden. The court further held that mens rea is not an essential ingredient for contravention of Section 9(1)(a) and 9(1)(d). The appeals were dismissed, and the order of the Appellate Board was upheld.
Headnote
A) Foreign Exchange Regulation - Payment to Non-Resident - Section 9(1)(a) and 9(1)(d) FERA, 1973 - The appellants, a company and its directors, made payments to a non-resident entity without RBI permission. The court held that the payments were in violation of FERA as they were made for the benefit of a non-resident, and the directors were vicariously liable. The burden of proving lack of knowledge or consent was on the directors under Section 71, which they failed to discharge. (Paras 1-10) B) Foreign Exchange Regulation - Vicarious Liability of Directors - Section 68 FERA, 1973 - The court held that directors are deemed guilty unless they prove that the contravention occurred without their knowledge or they exercised due diligence. The appellants did not provide evidence to rebut this presumption. (Paras 8-10) C) Foreign Exchange Regulation - Mens Rea - Section 9 FERA, 1973 - The court held that mens rea is not an essential ingredient for contravention of Section 9(1)(a) and 9(1)(d). The mere act of making payment to a non-resident without RBI permission constitutes a violation. (Paras 7-9)
Issue of Consideration
Whether the appellants violated Section 9(1)(a) and 9(1)(d) of the Foreign Exchange Regulation Act, 1973 by making payments to a non-resident without the permission of the Reserve Bank of India, and whether the penalty imposed was justified.
Final Decision
The appeals are dismissed. The order of the Foreign Exchange Regulation Appellate Board dated April 29, 1980 is upheld. The penalty imposed on the company and directors is confirmed.
Law Points
- Foreign Exchange Regulation Act
- 1973
- Section 9(1)(a)
- Section 9(1)(d)
- Payment to non-resident without RBI permission
- Vicarious liability of directors
- Mens rea not essential for FERA violations
- Burden of proof on accused under Section 71
