2018 (10) TMI 228 - HC - Customs

Claim of damage for loss of job and mental disturbance due to Customs Investigation Proceedings - Company secretary being CFO - Validity of statement made in quasi-judicial proceedings by the MD of the company against the CFO - the Plaintiff alleges a tort of malicious implication, which has no basis. The defendant alleges that the Plaintiff alleges malicious prosecution, the preconditions of which are not satisfied. Obviously, the tort is not well identified in the Plaint - whether there is any tort made out in the present case, the nature of the proceedings needs to be considered? - Section 108 of the Customs Act, 1962. Held that - The pleadings in the amended suit primarily relate to an allegation of malicious implication resulting in loss of reputation. Thus, the allegation is one of defamation and nothing more, though the Plaint is not happily worded. The Plaintiff does not allege malicious prosecution and further, the elements of malicious prosecution are not made out - Malicious implication is nothing but wrongful implication leading to loss of reputation i.e. defamation/libel/slander. There is no other tort of malicious implication which can be separately sued for. The Plaintiff has not been able to show any judgment where the so called tort of malicious implication has resulted in a cause of action. The Plaintiff has merely relied upon judgments to argue that the question of limitation is a mixed question of facts and law. This Court has already held that the suit is not barred by limitation. The question is whether the suit is otherwise barred. In the present case, all the statements which are relied upon which form the basis of cause of action in the suit having been made before DRI officials/Customs Authorities, in statements recorded under Section 108 of the Customs Act, 1962. There is no publication of the said statements. Mr. Oike in fact having also retracted the same, no case of defamation is made out. As per the settled law, statements made in judicial and quasi-judicial proceedings before courts, authorities and tribunals are protected as being privileged. A suit for defamation on the basis of statements in such proceedings is clearly not maintainable. There is yet another dimension to this whole case. The Plaintiff is neither an uneducated nor an illiterate person who is not aware of the consequences of his actions of claiming experience in handling issues before the Customs Authorities and was also quite adept. The CFO of a company has enormous responsibility. The Plaintiff was responsible for legal and secretarial compliances in the Defendant company. Even if the Plaintiff had got wind of an alleged conspiracy by the Japanese officials, as is pleaded in the plaint, he had a duty to warn the Defendant company and its officials that the classification of machinery as dairy machinery instead of capital machinery would be contrary to law. Moreover, the Plaintiff not only did not warn the management of the Defendant but also went ahead and claimed the savings of the customs duty as a feather in his cap in his appraisal report. This shows that to say the least, he was not an innocent bystander. The statements made in quasi-judicial proceedings before the Customs Authorities cannot be held to be defamation/libel/slander. There is no tort made out in the present suit and the suit for compensation is not maintainable, in view of the settled law - plaint is rejected.

Issues Involved:
1. Alleged evasion of customs duty by the Defendant company.
2. Statements made by Mr. Oike implicating the Plaintiff.
3. Penalties imposed by the Commissioner of Customs.
4. CESTAT's decision on penalties.
5. Plaintiff's claim for damages against the Defendant company.
6. Defendant's application for dismissal of the suit under Order VII Rule 11 CPC.
7. Legal principles related to malicious implication and defamation.

Detailed Analysis:

1. Alleged Evasion of Customs Duty:
The Defendant company, a joint venture between Yakult Honsha Company Ltd., Japan, and Danone Probiotics, Singapore, imported machinery in 2007-08. The Directorate of Revenue Intelligence (DRI) issued a show cause notice on 25th April 2012, alleging customs duty evasion of ?4,22,58,706/-. During the investigation, the Defendant's Managing Director, Mr. Kiyoshi Oike, implicated the Plaintiff, who was the CFO and Company Secretary, stating that the Plaintiff advised classifying the machinery as dairy machinery to save customs duty.

2. Statements Made by Mr. Oike:
In statements recorded under Section 108 of the Customs Act, 1962, Mr. Oike claimed that the Plaintiff advised classifying the machinery as dairy machinery, which resulted in significant customs duty savings. Mr. Oike's statements were later retracted, but the Plaintiff was already implicated.

3. Penalties Imposed by the Commissioner of Customs:
The Commissioner of Customs, in an order dated 31st December 2013, held that the goods were liable to confiscation and imposed penalties. The Commissioner noted that Mr. Oike pre-planned the conspiracy and that the Plaintiff was aware of the customs duty evasion but did not inform the authorities, making him equally responsible.

4. CESTAT's Decision on Penalties:
The CESTAT, in an order dated 24th October 2016, upheld the penalty on the Defendant company but set aside the penalties on Mr. Oike and the Plaintiff, stating that the Plaintiff acted on the company's directions and had no personal involvement.

5. Plaintiff's Claim for Damages:
The Plaintiff filed a suit claiming ?5 crores in damages, alleging that Mr. Oike maliciously implicated him, causing immense suffering, including job loss. The Plaintiff argued that he had no role in the document manipulation and that Mr. Oike's false statements led to his distress.

6. Defendant's Application for Dismissal:
The Defendant sought dismissal of the suit under Order VII Rule 11 CPC, arguing that the suit was barred by limitation and that the tort of malicious implication is not recognized in India. The court held that the suit was not barred by limitation as the Plaintiff could not have filed it before the CESTAT's order.

7. Legal Principles Related to Malicious Implication and Defamation:
The court examined whether the Plaintiff's allegations constituted a tort of malicious implication. It noted that the statements made by Mr. Oike were recorded under Section 108 of the Customs Act, 1962, which are quasi-judicial in nature. The court referred to precedents establishing that statements made in judicial or quasi-judicial proceedings are protected by absolute privilege and cannot form the basis for defamation claims. The court concluded that the Plaintiff's allegations amounted to defamation, for which no separate tort of malicious implication exists.

Conclusion:
The court rejected the Plaintiff's suit, holding that statements made in quasi-judicial proceedings before Customs Authorities are protected by absolute privilege and do not constitute defamation. The suit for compensation was deemed not maintainable, and the plaint was accordingly rejected. All pending applications were disposed of.

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