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2024 (12) TMI 1475 - HC - CustomsLevy of penalty on petitioner, an Executive Director in a public limited company - non-fulfilment of its export obligations under the FTDR Act - territorial jurisdiction/forum non conveniens - Petitioner has contended that neither the show-cause notice nor the OIO gave any reasoning for fastening the liability on the Petitioner - violation of principles of natural justice. Whether the Petitioner as a Director of a Company that is in violation of an export obligation, could have been personally penalized therefor? - HELD THAT - Section 11 (2) of the FTDR Act, sets out that where a person makes or abets in the making of export or import in contravention of the provisions of FTDR Act, he shall be liable to a penalty which will not be less than Rs. 10,000/- and shall not exceed five times the value of the goods in respect of which the contravention has been made. Thus, for the provision to be applicable, the person should either have been in contravention of the FTDR Act or abetted in the same. It is not disputed that the Company had 14 directors and the Petitioner was only one of them - the Petitioner s involvement in the license procurement was restricted to signing on a power-of-attorney person on behalf of the company, pursuant to a board resolution passed by the Company. Territorial jurisdiction/forum non conveniens - HELD THAT - The Respondents have relied on the judgment of the Supreme Court in Kusum Ingots 2004 (4) TMI 342 - SUPREME COURT to submit that this Court cannot entertain the present Petition. This submission of the Respondents is misconceived. The Petitioner had previously challenged an order passed by Respondent No. 2 which challenge was allowed by a Coordinate Bench of this Court by its order dated 06.09.2012. The Respondents participated in these proceedings, thus submitting to the jurisdiction of this Court. The Supreme Court in Kusum Ingots 2004 (4) TMI 342 - SUPREME COURT has held that where an order is passed by a Tribunal in one place and an Appellate Authority is constituted at a different place, a Writ Petition would be maintainable at both places. In addition, it has been held that even if a small part of the cause of action arises within the jurisdiction of the High Court, the Court can entertain the Petition. A Coordinate Bench of this Court in Krishna Kumar Bangur 2006 (4) TMI 256 - HIGH COURT OF DELHI , dealt with a similar issue where a show-cause notice was issued under Sections 8 and 11 of the FTDR Act to a company and all its directors, and reasons for arriving at the conclusion that a Director is personally liable, had not been adumbrated therein. It was held that where the authority had not specifically considered the role to be played by the Petitioner therein in the export performance and was reticent on the reasons for personal culpability of any of the directors, it could not be sustained. It was further held that if the show-cause notice or the orders in original and the appellate order did not disclose any reasons, the order would be set aside. Violation of principles of natural justice - HELD THAT - No reference is made in the OIO as to how the directors are personally liable. Given the fact that the Respondent was unable to get the required information, it is unclear as to how the Respondent was able to ascertain and impose fiscal penalty, especially on the Petitioner. The provision of the statute provides for a decision based on an examination of the facts and documents before it and not otherwise - The Impugned Order is passed more than 9 years after the OIO and premises itself on the fact that the firm (read Company) had not fulfilled its export obligations, and since it could not produce any document in its support, it was liable for the obligation. It further goes on to hold that the ground of liquidation of the Company could not be a ground for non-submission of export documents or non-payment of custom duty could not be taken as a ground for non-submission by the Petitioner. The discussion on this aspect is limited. Conclusion - The impugned penalty order against the petitioneris set aside, finding no merit in the respondents' contentions and it is concluded that the orders failed to establish the petitioner's personal liability for the company's defaults. Petition disposed off.
Issues Involved:
1. Personal liability of a director for the company's export obligation defaults. 2. Territorial jurisdiction and forum non conveniens. 3. Delay in proceedings and its implications. 4. Impact of liquidation on director's liability. 5. Applicability of judgments related to director's liability. Detailed Analysis: 1. Personal Liability of a Director: The core issue was whether the petitioner, an Executive Director of the company, could be personally penalized for the company's failure to fulfill export obligations under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act). The petitioner argued that he was not involved in the export obligations and that the show-cause notice and orders did not provide specific reasons for holding him personally liable. The court referenced previous judgments, notably the Krishna Kumar Bangur and Ved Kapoor cases, which established that personal liability of directors requires specific allegations and evidence of a duty or obligation that the director failed to fulfill. The court found that the orders lacked such specific allegations against the petitioner and thus could not sustain the personal penalty imposed. 2. Territorial Jurisdiction and Forum Non Conveniens: The respondents challenged the jurisdiction of the Delhi High Court, arguing that the original order was passed in Mumbai. However, the court noted that the appellate authority was in Delhi, and previous proceedings had been entertained by the Delhi High Court, thus establishing jurisdiction. The court cited the Kusum Ingots case, which allows for writ petitions to be filed where part of the cause of action arises. The court concluded that it had jurisdiction as part of the cause of action arose in Delhi. 3. Delay in Proceedings: The court observed significant delays in the proceedings, with the show-cause notice issued in 2003 for an obligation from 1997, and the penalty order passed in 2013. The court noted the lack of explanation for this delay and highlighted that such delays could impact the fairness of proceedings, especially when records and evidence might no longer be available due to the company's liquidation. 4. Impact of Liquidation on Director's Liability: The petitioner argued that the company's liquidation in 1998 meant that all directors ceased to be directors and that records were with the official liquidator. The court acknowledged these facts and noted that the respondents failed to consider the implications of liquidation on the ability to fulfill export obligations or provide necessary documents. The court found that the orders did not adequately address these issues, further undermining the basis for the petitioner's personal liability. 5. Applicability of Judgments Related to Director's Liability: The respondents relied on the Standard Charted Bank case to argue for the petitioner's liability as a director. However, the court found this case inapplicable as it pertained to the specific context of the Negotiable Instruments Act, which explicitly defines director liability. The court reiterated that without specific allegations and evidence of the petitioner's role in the export obligations, personal liability could not be imposed. Conclusion: The court set aside the impugned penalty order against the petitioner, finding no merit in the respondents' contentions and concluding that the orders failed to establish the petitioner's personal liability for the company's defaults. The petition was disposed of accordingly.
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