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TMI Blog2003 (7) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... ast aspect are not germane to the issues involved in the present petition. It would be relevant to note that though the aforesaid discussion has proceeded on the assumption that no prejudice has been caused to the petitioner, in point of fact prejudice has actually been caused to the petitioner. This is so because the show cause notice was not issued to the petitioner. Even the show cause notice issued to the company did not contain specific allegations against the petitioner to which he could reply. No opportunity as such was given to the petitioner to represent against the proposed imposition of penalty. Obviously, the petitioner was not heard before the order-in-original was passed whereby the aforesaid penalty was imposed upon him. The mere fact that he filed an appeal and was heard in the appeal would not alter the situation. The proceedings against him were void ab initio. Had the petitioner been issued a notice in terms of Section 4L of the said Act, he could have represented against the imposition of such penalty. He could have placed on record various facts and circumstances to show that no offence was committed by the company and that even if such offence was committed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en no show cause notice was issued to him inasmuch as the show cause notice dated 7-11-1994 was addressed only to the company? It is an admitted position that the said show cause notice was only addressed to the company and no separate show cause notice was either addressed to or served upon the petitioner. The only references to the directors were in Paras 4 and 7 of the said show cause notice which, to the extent relevant, are set out hereunder : 4. I, therefore, in exercise of the power vested in me under Section 4K of the Imports and Exports (Control) Act, 1947 and Clause 8 of the Imports (Control) Order, 1995 require you to show cause under Section 4L of the above Act and under Clause 10(1) of the said Order, within 30 days from the date of receipt of this notice as to why penalty be not imposed on you and your proprietary/partner directors under Section 4-I(l)(a) of the said Act.... You are also advised to bring the contents of this show cause notice individually to all your partners/directors who should be asked to forward their written submissions separately if they so desire, regarding the alleged contravention of the above action is also proposed to be taken against you. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emphasised that no order of adjudication of imposition of a penalty could be made unless and until the person on whom the penalty was sought to be imposed was given a notice in writing. The notice, according to him, was a condition precedent for any adjudication and/or imposition of a penalty. If the notice as contemplated in Section 4L of the said Act was not given, there could be no adjudication and, consequently, no imposition of penalty. He further submitted that the notice was not just any ordinary notice. It had to be a notice in writing informing the person concerned of the grounds on which it was proposed to impose a penalty. From this, it is clear that the notice in writing had to be issued to the person concerned directly and specifically informing him of the grounds on which it was proposed to impose a penalty. Mr. Anand further contended that in terms of Section 4L(ii) the said written notice that is to be given is for the purpose of giving the person concerned a reasonable opportunity of making a representation in writing within such reasonable time (which also has to be specified in the notice itself) against the proposed imposition of penalty. The notice also requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents. Even though the appellant had filed some representations in respect of the matter, it would not absolve the Government from giving notice to the appellant to make the representation against the claim of the respondents. The minimal requirement under Section 77(2) is a notice informing the opponent about the application and affording him an opportunity to make his representation against whatever has been alleged in his petition. It is true that a personal hearing is not obligatory but the minimal requirement of the principles of natural justice which are ingrained in Section 77(2) is that the party whose rights are going to be affected and against whom some allegations are made and some prejudicial orders are claimed should have a written notice of the proceedings from the authority disclosing the grounds of complaint or other objection preferably by furnishing a copy of the petition on which action is contemplated in order that a proper and effective representation may be made. This minimal requirement can on no account be dispensed with by relying upon the principle of absence of prejudice or imputation of certain knowledge to the party against whom action is sought for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. This submission is made in view of the fact that the petitioner is a director of the said company and there is no specific allegation against the petitioner even in the show cause notice dated 7-11-1994 which was issued to the company. It is therefore contended that the petitioner could not be held to be vicariously liable for the alleged offences committed by the said company. In this context, Mr. Anand has placed reliance on the decisions of the Supreme Court in the case of State of Haryana v. Brij Lal Mittal Anr., IV (1998) SLT 796 = II (1998) CCR 246 (S.C.) = (1998) 5 SCC 343, MCD v. Ram Kishan Rohtagi Ors., (1983) 1 SCC 1 and Abdul Aziz Aminudin v. State of Maharashtra, 1999 (110) E.L.T. 225 (S.C.) = AIR 1963 SC1470. In Brij Lal Mittal s case (supra), the Supreme Court held as under : 8. Nonetheless, we find that the impugned judgment of the High Court has got to be upheld for an altogether different reason. Admittedly, the three respondents were being prosecuted as directors of the manufacturers with the aid of Section 34(1) of the Act (Drugs and Cosmetics Act, 1940) which reads as under : 34. Offences by companies. (1) Where an offence under this Act has been committed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere rightly quashed. The third case relied upon by the Senior Counsel appearing on behalf of the petitioner (i.e., Abdul Aziz Aminudin v. State of Maharashtra) (supra), does not appear to be relevant and in support of the aforesaid proposition. 9. Mr. Anand next submitted that a show cause notice issued to the company without specifying any grounds of allegations in respect of the individual directors would, from the stand-point of the liability of the directors, be too vague to be answered and would, therefore, be invalid. In support of this proposition, he has placed reliance on the Supreme Court decision in Sawai Singh v. State of Rajasthan, AIR 1986 SC 995 (Paras 5, 11, 12, 14 and 15). There can be no dispute with the proposition that if the grounds on which an adjudicating authority is seeking to impose a penalty on a person are themselves vague, then such person would be unable to reply to the same and a notice containing such vague grounds would be an illusory notice and would be void. The whole purpose behind the issuance of a notice is to inform the person concerned of the grounds on which it is proposed to impose a penalty. Unless this information is clearly conveyed to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the petitioner. The duty is cast upon the issuing authority. This duty has not been discharged. As such, the mandatory provisions of Section 4L of the said Act have not been complied with and the order of adjudication imposing a penalty on the petitioner would be illegal and is liable to be set aside. 11. Mr. Anand also submitted that while the said company had 14 directors, only 5 directors had been picked up randomly leaving out 9 other directors without any reason. When the question that why only 5 and not all the directors were foisted with the penalty was put to the Counsel for the respondents, no plausible answer was forthcoming. One of the suggestions mooted was that only the names of 5 directors were known to the authorities. This, if it were true, was clearly indicative of the arbitrary manner in which the 5 directors including the petitioner were roped in leaving out the other 9 directors. In any event, no specific acts have been alleged to have been committed by these 5 directors alone and not the others. On this ground also, it appears that the notice was issued in an arbitrary fashion without proper application of mind. 12. Mr. Navin Chawla, the learned Advocate who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the principle of natural justice, audi alterum partem, as such and violation of a facet of the said principle. In other words, distinction is between no notice / no hearing and no adequate hearing or to put it in different words, no opportunity and no adequate opportunity . To illustrate take a case where the person is dismissed from service without hearing him altogether (as in Ridge v. Baldwin [1964 AC 40 : (1963) 2 All ER 66 : (1963) 2 WLR 935]). It would be a case falling under the first category and the order of dismissal would be invalid or void, if one chooses to use that expression (Calvin v. Carr [(1980) AC 574 : (1979) 2 All ER 440]). But where the person is dismissed from service, say, without supplying him a copy of the inquiry officer s report (Managing Director, ECIL v. B. Karunakar [(1993) 4 SCC 727]) or without affording him a due opportunity of cross-examining a witness (K.L. Tripathi [(1984) 1 SCC 43]) it would be a case falling in the latter category of violation of a facet of the said rule of natural justice in which case the validity of the order has to be tested on the touchstone of prejudice, i.e., whether, all in all, the person concerned did or did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which was a mandatory requirement under Section 4L of the said Act, the present case is one of violation of principles of natural justice and, therefore, the question of prejudice caused would not at all arise. It is also pertinent to note that as the petitioner had no notice, obviously he had no opportunity nor was he granted any hearing. 14. The second decision [AMU s case (supra)] relied upon by Mr. Chawla has referred to the aforesaid decision in State Bank of Patiala s case (supra) in the following terms (Page 540) : The above ruling and various other rulings taking the same view have been exhaustively referred to in State Bank of Patiala v. S.K. Sharma [(1996) 3 SCC 364]. In that case, the principle of prejudice has been further elaborated. In view of this, it is not necessary to examine the second case in great detail and the aforesaid discussion as regards the State Bank of Patiala s case (supra) would be sufficient. 15. Mr. Navin Chawla next argued that in the present case if it were to be contended that the said company did not bring the show cause notice to the knowledge of the petitioner, in that event the default would be of the said company and vicariously of its di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was a clear violation of the mandatory statutory provision contained in Section 4L of the said Act. That apart, there was a violation of the principles of natural justice. 16. On behalf of the respondents, Mr. Navin Chawla next submitted that Section 41(l)(a) of the said Act provides for imposition of penalty on any person . The company being an artificial person has to act through its directors and other principal officers. Therefore, in the case of a company, its directors and other principal officers would also be liable for a penalty that may be imposed on a company. He referred to the decision of the Supreme Court in T.J. Stephen v. Parle Bottling Company, 1988 (34) E.L.T. 409 (S.C.) = 1988 (3) SCR 296. This decision, however, does not help the respondents. While it is noted in the said decision that the company does not act by itself and has to act through someone it also records that in the case before it in the petition of the complainant there were clear allegations that the managing director had committed the offence acting on behalf of the company. This decision would have no applicability in the facts of the present case inasmuch as, while it is true that the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Even the show cause notice issued to the company did not contain specific allegations against the petitioner to which he could reply. No opportunity as such was given to the petitioner to represent against the proposed imposition of penalty. Obviously, the petitioner was not heard before the order-in-original was passed whereby the aforesaid penalty was imposed upon him. The mere fact that he filed an appeal and was heard in the appeal would not alter the situation. The proceedings against him were void ab initio. Had the petitioner been issued a notice in terms of Section 4L of the said Act, he could have represented against the imposition of such penalty. He could have placed on record various facts and circumstances to show that no offence was committed by the company and that even if such offence was committed by the company, he had no hand in it. All these circumstances, if he were able to establish them, would have absolved him of the liability of penalty which he now bears like a garroter round his neck. So, even if the question of prejudice were to be taken up, it would be clear that the order-in-original as well as the Appellate Order imposing a penalty on the petitioner c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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