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TMI Blog2009 (4) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... Company for the contravention committed by the NIL, in terms of section 68 of FERA, 1973. 3. The facts in brief, as stated by the petitioners, are that since 1992, NIL was exporting value added Nescafe instant coffee to Russia. From 1993, pursuant to the Indo-Russian Debt Repayment Scheme, NIL entered into some contracts for export of coffee to Russia payable in Rupee Debt Repayment Letters of Credit. For the entire export transactions during 1995 and 1996 the Russian buyers did not claim non-delivery of cargo shipped to them. All transactions were completed in terms and conditions of the Letters of Credit, which were submitted to the Indian Banks; these transactions were exclusively with the Russian Buyers against Rupee payment, which had been received through proper banking channels. It is stated that coffee was exported to Russia through the port of Helsinki, Finland for logistical reasons, to be taken by land and delivered to buyers at Moscow, Russia. The petitioners contend that all documents of export by NIL (including export permit from the Indian Coffee Board, Letters of Credit, Bill of Lading) record the final destination was Russia through Helsinki, Finland. In order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors/incharge of M/s. Nestle India Ltd. during the relevant period and were responsible for the conduct of the said Company. It, therefore, appears that they have also rendered themselves liable to be proceeded against and punished accordingly along with the Company for the contravention committed by the Company in terms of section 68 of FERA, 1973. (17) AND WHEREAS from investigations it appears that NIL by transferring documents of the title to Goods and the property in the form of goods to NWTC got a right to receive payment in foreign exchange equivalent to Rs. 1,99,25,68,631 i.e., the amount as per respective invoice under relevant L/c as mentioned as per NIL letter dated 30-4-2002 but they failed to take any action to recover the said amount in foreign exchange from NWTC. By refraining from taking any action against NWTC from whom foreign exchange equivalent to Rs. 1,99,25,68,631 was due which had the effect of securing that the foreign exchange so due was not received in India in aforesaid manner. M/s. NIL and its directors/officers incharge appear to have contravened section 16(1) of FERA, 1973 read with section 68 of the said Act, and thereby rendered themselves liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Akbar Road, New Delhi-110011, after fixing prior appointment with him on any working day. (22) THEIR ATTENTION in this connection is also invited to the proviso to Rule 3 of the Adjudication Proceedings and Appeal Rules, 1974 read with sub-sections (3) and (4) of section 49 of FEMA, 1999. In case it is decided to hold adjudication proceedings, personal hearing of the case could be waived at his request. In case, they prefer the case to be disposed of on the basis of available evidence, they may intimate their preference in writing so that if adjudication proceedings are to be held, the case may be decided without requiring his personal attendance or the attendance of their lawyer or other authorized representative." 7. Sections 50 and 51 of FERA (which was repealed, and instead of which, the Foreign Exchange Management Act ("FEMA") brought into force, stated as follows: "Penalty.-If any person contravenes any of the provisions of this Act, other than section 13, clause (a) of sub-section (1) of section 18, section 18A and clause (a) of sub-section (1) of section 19 or of any rule, direction or order made thereunder, he shall be liable to such penalty not exceeding five times th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tices to them assigning or attributing specific actions of the company which could - if at all be attributed to each or any of them - the issuance of a general and vague notice, prejudices them and denies them fair opportunity. It is contended that the petitioners were forced to file general replies, denying the allegations; they were also constrained to seek documents, which run into several box files. The compulsion on the respondent to adhere to a fair procedure would imply that where it is in possession, or can indicate the role of each director, in regard to decisions taken by the company, with reference to dates, the nature of the company's decision and action, and the supportive material, it should do so, and not leave the party likely to be affected adversely, guessing about what he has to answer. Counsel submitted that this obligation has to be discharged, if the respondents are to go ahead with the proceeding, because it can possibly result in imposition of a penalty. 9. It was urged by Shri Ashok Desai, learned senior counsel that the petitioners are not bound to respond, and even if they did respond (as they concededly did, in this case) they are not obliged to await t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 1 and submitted that the High Court in exercising its judicial powers is unconstrained by the circumstance that alternative statutory remedies may exist. 10. The petitioners contend that to say that the Director of a company is incharge of and responsible for conduct of business of the company, there should be something more than a stated reference to him in the show-cause notice. They rely upon the three Judge ruling in SMS Pharmaceuti-cals Ltd. v. Neta Bhalla [2005] 63 SCL 93 (SC) and the ruling in Sabitha Ramamurthy v. RBS Channabasavaradhya AIR 2006 SC 3086 and submit-ted that complaint or notices alleging that an individual, in his capacity as director, was in charge of or responsible for the affairs of the company, have to necessarily connect him with some specific role failing which the notice and consequently the entire proceedings are legally vulnerable to challenge. It was lastly contended that the respondents consciously decided to initiate criminal proceedings only against three individuals i.e., M/s. D. E. Ardeshir, Rajat Raj and R.K. Sharma. In the copy of the complaint, it was contended that Shri R.K. Sharma was the head of exports in the NIL and recorded submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, Shri Rajagopalan Ramkumar, Officer-in-charge, Remittance Section, Shri Paul Pereira, the then Customer Service Officer, Shri Sunil Ganpat Sawant, Officer Fund Transfer and Shri N. K. Jetly of ANZ Grindlays Bank, Connaught Place, New Delhi, were also responsible for the proper conduct of the business of the said ANZ Grindlays Bank at the relevant time when the aforesaid alleged contraventions had taken place.' The learned Counsel has pointed out, except Mr. G. P. Pandey in the notice others were not alleged to be incharge of the business. These other persons therefore cannot be prosecuted pursuant to the notice. They were merely referred to as the persons responsible for the proper conduct of the business...." Counsel points out that the court negatived the challenge, in the following terms: "41. Obviously, section 68 refers to incharge of and was responsible to. These words are synonymous and in a common parlance are mutually exchangeable. A person incharge of the business has always to be responsible is necessarily to be incharge of the business. Moreover, whether the person is incharge of the conduct of business can conveniently be gathered from his position in the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfair procedure. A reading of the notice shows that the respondents, in the first few paragraphs, describe the transaction of exports, to Russia, then allege that Russian customs authorities took some action. It is later alleged that the consignments of coffee were sold elsewhere. The respondents thereafter sought to implicate the petitioners, in terms of the allegations mentioned in a preceding part of this judgment. 16. There can be no two opinions that in quasi-judicial proceedings (those under FERA, proposing to impose penalties undeniably being such) the authority empowered to issue or make orders that may impact anyone, or institution adversely, the procedure to be adopted has to be fair and reasonable. Fair procedure, non-arbitrariness and regularity of proceedings (apart from following the dictates of law), are immutable and non-derogable standards which such authorities have to measure up to. That no one can be condemned unheard, is unalterably fixed to the "fairness" of such procedure. Unless such person is informed, in an adequate and reasonable manner, what are the facts which connect him, with the alleged illegality, he would be left groping as to what he should possi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. v. Rajvir Industries Ltd. [2008] 1 SCALE 331. In Municipal Corporation of Delhi v. Ram Kishan Rohtagi 1983 (1) SCC 1 the respondent No. 1 was the manager and respondent Nos. 2 to 5 were directors of X company. Respondents were charged for offences under sections 7 and 16 of the Prevention of Food Adulteration Act, 1954 and section 482 of Criminal Procedure Code, 1973 as the Toffees manufactured by X company was found to be not conforming to the standards prescribed for toffees. On appeal, the High Court quashed the proceedings against respondents. It was held by this Court that: So far as the Manager is concerned, we are satisfied that from the very nature of his duties it can be safely inferred that he would undoubtedly be vicariously liable for the offence; vicarious liability being an incident of an offence under the Act. So far as the Directors are concerned, there is not even a whisper nor a shred of evidence nor anything to show, apart from the presumption drawn by the complainant, that there is any act committed by the Directors from which a reasonable inference can be drawn that they could also be vicariously liable. However, as regards the Manager of the Company, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... franchiser). On a perusal of the show-cause notice the stand of the respondents clearly gets established." 19. In CCE v. Brindavan Beverages (P.) Ltd. [2007] 5 SCC 388, the Supreme Court, speaking in a similar vein, said that: "14. There is no allegation of the respondents being parties to any arrangement. In any event, no material in that regard was placed on record. The show-cause notice is the foundation on which the department has to build up its case. If the allegations in the show-cause notice are not specific and are on the contrary vague, lack details and/or unintelligible that is sufficient to hold that the noticee was not given proper opportunity to meet the allegations indicated in the show-cause notice. In the instant case, where the appellant has tried to highlight is the alleged connection between the various concerns. That is not sufficient to proceed against the respondents unless it is shown that they were parties to the arrangements, if any. As no sufficient material much less any material has been placed on record to substantiate the stand of the appellant, the conclusions of the Commissioner as affirmed by the CEGAT cannot be faulted." (p. 392) 20. The relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs 1963 (3) SCR 338 to emphasis that the notice is not a mere formality and should contain the relevant materials based on which the prosecution was being initiated. The following passage was relied on: 'Assuming that a notice could be laconic, in the present case it was a speaking one clearly specifying the alleged act of contravention. If on a reading of the said notice, it is manifest that on the assumption that the facts alleged or allegations made therein were true, none of the conditions laid down in the specified sections was contravened, the respondent would have no jurisdiction to initiate proceedings pursuant to that notice. To state it differently, if on a true construction of the provisions of the said two sections the respondent has no jurisdiction to initiate proceedings or make an inquiry under the said sections in respect of certain acts alleged to have been done by the appellants, the respondent can certainly be prohibited from proceeding with the same.' On a reading of the notices issued under section 61 of the Act, we are of the view that they are in terms of that section and there is no reason to interfere with them in these writ petitions and that it wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation, the appellants cannot successfully challenge the refusal by the High Court of the writ of prohibition prayed for by them." (pp. 13 and 20) 22. The above discussion would show that even though the petitioners have a substantially arguable case, yet, the Supreme Court, in Standard Chartered Bank's case (supra) stated that in such cases, where individuals or concerns are issued show-cause notices, the courts should not interfere, and that the authorities should be left to proceed with the matter, in the following terms: "... We see no justification for the issue of a writ of prohibition restraining the authority under FERA from proceeding further with the adjudication. It is for the appellants to put forward their defences, if any available, before the adjudicating authority and pursue it in accordance with law." The Supreme Court had indicated the same approach, in another case, involving a challenge to proceedings, under FERA, i.e., Special Director v. Mohd. Ghulam Ghouse [2004] 3 SCC 440: "This Court in a large number of cases has deprecated the practice of the High Courts entertaining writ petitions questioning legality of the show-cause notices stalling enquiries as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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