2009 (11) TMI 507 - HC - FEMA

Whether there was not an iota of evidence before the Appellate Tribunal to draw the conclusion that at the time when the contravention was committed the petitioner was incharge of and was responsible to the company for the conduct of the business of the company? Held that - In the present case, the record reveals that this was an admission by the company itself through its Company Secretary in the reply dated 26-3-2001 wherein it was stated that the present petitioner is a director of the company. This was an answer to the specific averment made in the show-cause notice that Shailendra Swarup was incharge of the affairs of the company and responsible to it for the conduct of its business. This finding of the Adjudicating Authority was not faulted with by the Appellate Tribunal and rightly so. Appeal dismissed.

Summary

Issues:
1. Alleged violation of Foreign Exchange Regulation Act, 1958 by a company and its directors.
2. Adjudication proceedings initiated against the directors for contravention of provisions of FERA.
3. Dispute regarding the role and liability of a director in the company's affairs.
4. Applicability of legal provisions and judgments related to liability of directors in company offences.

Issue 1: Alleged violation of Foreign Exchange Regulation Act, 1958 by a company and its directors.
The case involves M/s. Modi Xerox Limited, which made remittances through Standard Chartered Bank without submitting the required documentation to the authorized dealer or RBI during 1985. The Enforcement Directorate issued show-cause notices to 21 individuals, including the present petitioner, for initiating adjudication proceedings under FERA.

Issue 2: Adjudication proceedings initiated against the directors for contravention of provisions of FERA.
The company's reply to the show-cause notice refuted the allegations, requesting to drop the proceedings due to the age of transactions. The petitioner was initially identified as a director without specifying his role. Subsequently, it was claimed that he was only a part-time director and had no day-to-day involvement in the company's operations.

Issue 3: Dispute regarding the role and liability of a director in the company's affairs.
The petitioner argued that there was no evidence to establish his responsibility for the company's business during the contravention period. He contended that being a practicing Advocate and a part-time director, he should not be held liable. The Enforcement Directorate maintained that the petitioner was identified as a director responsible for the company's conduct during the relevant period.

Issue 4: Applicability of legal provisions and judgments related to liability of directors in company offences.
The petitioner cited Supreme Court judgments emphasizing the need for specific allegations against directors to establish liability. The court analyzed the company's admission of the petitioner's directorship and his role during the contravention period. It was concluded that the petitioner was rightly held liable under FERA, dismissing the appeal against the Appellate Tribunal's decision.

In conclusion, the court upheld the decision holding the petitioner liable for contravention of FERA provisions, emphasizing the importance of specific allegations against directors in establishing liability in company offenses.