Contravention by companies
Section 42 of the Foreign Exchange Management Act, 1999 deals with contravention by companies. Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the The Act came into force on 01 Jun 2000.
(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised due diligence to prevent such contravention.
(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.
Explanation.--For the purposes of this section--
(i) "company" means any body corporate and includes a firm or other association of individuals; and
(ii) "director", in relation to a firm, means a partner in the firm.
Section 42, The Foreign Exchange Management Act, 1999 (Act 42 of 1999).
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Suborno Bose v. Enforcement Directorate & Anr.
Court's Decision & Legal Precedent
SC held FEMA s.10(6) is a deeming provision: where foreign exchange is not used for the stated purpose or not surrendered within the prescribed period (Regulation 6 sixty-day rule), contravention continues until corrective action; successor MD who knew of uncleared imports/Bill of Entry failure and failed due diligence remains liable for civil penalty without mens rea.
On this section: s.42(1)/(2) supplies the company-officer deeming liability; the Court applies the proviso and holds the MD liable once awareness + failure of diligence are shown on a continuing contravention.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Questions about Section 42
What have the courts held on Section 42 of the Foreign Exchange Management Act?
Suborno Bose v. Enforcement Directorate & Anr. (05 Mar 2020) is the leading judgment on this section among those set out below: s.42(1)/(2) supplies the company-officer deeming liability; the Court applies the proviso and holds the MD liable once awareness + failure of diligence are shown on a continuing contravention.
How do I find court cases under Section 42 of the Foreign Exchange Management Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Fema 42, section 42 Fema, section 42 of the Foreign Exchange Management Act. People searching for it also type foreign exchange management act 1999 42 of 1999. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 1 reported judgment on this section is set out on this page, beginning with Suborno Bose v. Enforcement Directorate & Anr. (05 Mar 2020).
When did Section 42 of the Foreign Exchange Management Act come into force?
Section 42 of the Foreign Exchange Management Act, cited as Fema 42, came into force on 01 Jun 2000, having been enacted on 29 Dec 1999. It is in force as at the date shown on this page.
Other sections of this Act
- 2. Definitions1265 words
- 14. Enforcement of the orders of Adjudicating Authority837 words
- 13. Penalties496 words
- 10. Authorised person489 words
- 49. Repeal and saving475 words
- 19. Appeal to Appellate Tribunal465 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 14 Oct 2026. This page is not a substitute for legal advice.