2003 (2) TMI 358 - HC - Companies Law

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Imposition of penalty under section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 after invoking bank guarantees.
3. Validity of the appellate order due to alleged improper constitution of the Appellate Committee.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The petitioner argued that it was not granted an opportunity to present its case, amounting to a violation of natural justice. However, the court found no substance in this argument. The petitioner was served a show-cause notice and granted personal hearings on multiple occasions (27th December 1995, 9th February 1996, and 18th April 1996). Despite these opportunities, the petitioner failed to appear, leading the adjudicating authority to proceed ex parte and pass the impugned order on 5th February 1998. Similarly, before the Appellate Committee, the petitioner failed to furnish a bank guarantee of Rs. 2 lakhs despite being given two opportunities. The petitioner did not challenge the interim order at that stage and waited until the appeal was dismissed on 11th June 1999. Therefore, the court concluded that there was no violation of natural justice.

2. Imposition of Penalty under Section 11(2) of the Act:
The petitioner contended that no action could be initiated under section 11(2) of the Act for violation of the EXIM Policy after invoking the bank guarantees. The court dismissed this argument, stating that the bank guarantees only covered the cost of the gold supplied to the petitioner. Penalty proceedings are of a different nature and are authorized under section 11(2) of the Act for failure to fulfill the export obligation. Thus, the invocation of bank guarantees did not preclude the imposition of a penalty.

3. Validity of the Appellate Order:
The petitioner argued that the appellate order was invalid as it was not passed by all four members of the Appellate Committee. The court examined the Notification dated 31st December 1993, which constituted the Appellate Committee. The Notification specified that the Appellate Authority is the Additional Secretary in the Ministry of Commerce, aided by two Joint Secretaries and a Director. The court interpreted the term "aided by" to mean that the presence of the Additional Secretary was mandatory, but the presence of the other three officials was not. The word "aided" implies support or assistance rather than mandatory presence. The court distinguished this from other statutory provisions where the composition of a tribunal is explicitly defined as "shall consist of." Therefore, the appellate order was not vitiated due to the absence of the other three officials.

Conclusion:
The court found all the arguments advanced by the petitioner's counsel to be without merit. The petitioner was given opportunities to present its case and comply with procedural requirements but failed to do so. The imposition of a penalty was within the authority of the respondents, and the appellate order was valid despite the absence of the other three officials. Consequently, the writ petition was dismissed, and no costs were awarded.