2006 (12) TMI 231 - HC - Companies Law

Summary

Issues Involved:
The judgment involves a challenge to an order directing deposit of penalty u/s 18(2) read with 18(3) of the Foreign Exchange Regulation Act, 1973, against a company and its directors for non-recovery of export proceeds. The issues include consideration of financial hardship, merits of the case, and liability of directors.

Merits of the Case:
The petitioner challenged the order based on financial hardship and lack of consideration of merits, citing the judgment in Mehsana Distt. Co-op. Milk P.U. Ltd. v. Union of India. The Appellate Tribunal's order was criticized for not addressing the prima facie merits of the case as required by the Supreme Court's ruling. However, the Tribunal reduced the pre-deposit amount to 15% after considering the case details, including the value of GRIs, satisfying the Supreme Court's requirement.

Liability of Directors:
The petitioner argued that the directors should not be held responsible as they were not involved in the relevant business transactions. The judgment differentiated the liability of directors, exempting one director from pre-deposit but upholding the requirement for others who were directors at the time of the alleged violation. The authority imposing the penalty was not mandated to delve into intricate details of business subdivisions.

Conclusion:
The writ petition challenging the order directing deposit of penalty was dismissed, with the court extending the time for deposit in one instance. The judgment emphasized that observations on the case's merits were avoided to prevent prejudice in the pending hearing before the Appellate Tribunal. Costs were imposed on the petitioner to be paid before the next hearing before the Tribunal.