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TMI Blog2016 (7) TMI 1341X X X X Extracts X X X X X X X X Extracts X X X X ..... . Khambatta were charged for the said contraventions in terms of Section 42 of FEMA, 1999. 3. Investigations were initiated on the basis of information received from RBI regarding non-realization of export bills by M/s. Sashak Noble Metals Ltd. and its sister companies which were negotiated through different banks. As the Managing Director failed to respond to the summons, the required information was collected from the authorized dealers Bank of Punjab which submitted copies of opening GRs in respect of M/s. Sashak Noble Metals Ltd. vide their letter dated 23-2-2005. Co-noticee Rais Ahmed, Managing Director was summoned and his statement under Section 37 of FEMA was recorded on 15-4-2004 who stated that the company was put in caution list of RBI for non-realization of export proceeds and the company had taken extension up to 31-12-2001 but did not apply thereafter for further extension. Total outstanding amount in respect of 6 GRs was disclosed to be 5117000 US$. 4. The company vide its letter dated 21-6-2004 stated that it had made efforts to realize the outstanding dues and has also filed civil suits in Hon'ble Bombay High Court and London Court but could not furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant that the appellant is an engineer and possesses B-Tech Mechanical Engineering degree and was employed with M/s. Sahara Industrial Services Pvt. Ltd. which used to provide manpower assistance to various projects, conceived by the group companies Geekay Exim India Ltd. including Sashak Noble Metals Ltd. Further submission is that around 1999, the company planned to set up a gold refinery at Pithampura, Indore and the appellant was assigned the task of setting up the project due to his engineering background. There were certain liabilities on the land acquired by the company and every department required letters from the directors of the company, therefore, with a view to cut the cost of frequent travel of the appellant to and from Indore to Bombay and for convenience sake the appellant was made a non-executive independent director so that he could sign the required necessary papers. Submission is that the appellant was appointed non-executive independent director of the company for Indore project only in the year 2000. Ld. counsel for the appellant has further contended that due to some unknown reasons the project could not start and was shelved. The appellant had noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess carried out at Bombay and was not involved in any export or in any of the transactions under dispute. The appellant cannot be held vicariously liable under Section 42 of FEMA for the alleged contraventions committed by the company. The Adjudicating Authority has also recorded categorical findings that the Managing Director and co-noticee Rais Ahmed was managing day to day affairs of the company which included the disputed transactions. Further submission is that the appellant resigned before the end of the extended time by RBI for realization, in December, 2010 from his employer Sahara Industrial Services Pvt. Ltd., therefore, also no liability could have been fastened against him. Submission is that though legal action was initiated in Hon'ble Bombay High Court against the buyers but in view of the assurance of the buyers in several meetings held with them to make payments, the legal proceedings were not pursued. However, payments could not be made due to liquidation issues with the buyers. Reliance has been placed on the judgments in Girdhari Lal Gupta v. D.H. Mehta and Another - (1971) 3 SCC 189, Sudeep Jain v. ECE Industries Ltd., 2013 SCC Online Del 1804, HDFC Bank Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to set up the project. It is also clear from the perusal of the impugned order that the co-noticee Rais Ahmed was the Managing Director of the company whose statement under Section 37 of FEMA, 1999 was recorded on 15-4-2004 and the company Sashak Noble Metals Ltd. was put in caution list for non-realization of export proceeds. However, the company had taken extension up to 31-12-2001 from RBI and thereafter the company had not applied for any further extension. 11. It has not come in the impugned order that service of the SCN was effected upon the appellant. No statement of the appellant under Section 37 of FEMA, 1999 was recorded. It has only come in the statement of co-noticee Rais Ahmed dated 3-8-2005 that the appellant was a director along with others during the relevant period, when the goods valued at US $ 5117000 equivalent to Rs. 23,02,65,000/- were exported through 6 GR forms in between 27-7-2000 to 10-8-2000 and Bank of Punjab Ltd. was the authorized dealer of the company. It has also come that the replies were filed before the Adjudicating Authority on behalf of Sashak Noble Metals Ltd., Rais Ahmed, R.K.T. Das, Ravindra B. Wadhwar and Yezdi H. Khambatta on 12-3-200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions and cannot escape their responsibility. 13. It has been categorically stated by the appellant that after he was assigned the task to set up the proposed project it was found that there were certain liabilities on the land acquired by the company and every department with which dealing had to be made for the clearance of the project required letters from the directors and with a view to cut the cost of the frequent visits of the appellant to visit Bombay the appellant was made a non-executive director so that he could sign the required papers and he was appointed a non-executive independent director of the company for the Indore project only. It has also been contended that the project could not start and was given up and the appellant had no role with the exports of the company or realization of the export proceeds and the appellant was not involved in the activities, in any way. He had never remained incharge or responsible for the conduct of business and had also not attended any board meetings and resigned from Sahara Industrial Services Pvt. Ltd. by the year 2000-01. He has also contended that after 5 years of leaving the company the SCN was allegedly issued to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court in National Small Industries Corporation Ltd. v. Harmeet Singh Paintal, 2010 (2) SCALE 372 which also emphasizes that it is necessary to aver that the present accused falls under the category of persons who are responsible to the company for the conduct of business. The provision of Section 141 is pari matiria to Section 42 of FEMA, 1999 regarding liability of the directors. 15. In Natwar Singh v. Director of Enforcement (supra) the Hon'ble Supreme Court in paras 23, 26, 30, 31 and 34 while dealing the case under FEMA, 1999 and also Regulations, 2000 has discussed the obligation of the principles of natural justice and has held that non-adherence to them may result in holding the order void. Much emphasis has been laid upon the doctrine of audi alteram partem i.e. right of the other party to be heard. In Girdhari Lal Gupta v. D.H. Mehta and Another (supra) the Hon'ble Supreme Court has laid down that the criminal liability can be fastened only against the person incharge. In National Small Industries Corporation Ltd. v. Harmeet Singh Paintal and Another (supra) the Hon'ble Supreme Court has dealt with the vicarious liability of the director and has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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