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TMI Blog2019 (9) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 474/2014 is filed by five Appellants (who are also Appellants 2 to 6 in LPA 339/2009) and is directed against a judgement dated 2nd May, 2014 passed by the learned Single Judge dismissing W.P. (C) No. 2724/2014 filed by them challenging a notice dated 2nd September, 2003 issued by the ED under Section 51 of the FERA. 4. The factual background is that the six Appellants in LPA 339 of 2009 were non-executive directors of Nestle India Limited ('NIL'). NIL exported value added Nescafe Instant Coffee to Russia payable in Rupees Debt Repayment Letters of Credit. It is stated that Nescafe Instant Coffee was being manufactured in other countries as well and was also being imported into Russia from those countries. In order to standardize the product sold by various companies, Nestle World Trade Corporation ('NWTC') was incorporated in Switzerland to act as a facilitating organization and to ensure standardized supply of Nestle products to Russia. 5. The Directorate of Revenue Intelligence ('DRI') is stated to have undertaken a search of the premises of NIL on 19th November, 1996. Thereafter on 22nd May, 2002 an 'Opportunity Notice' was issued both to NIL and its directors and offici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SCN/MFA, the ED decided to proceed in the matter. It must be noticed at this stage that each of the present Appellants submitted a separate reply to the aforementioned SCN/MFA dated 21st May, 2002 pointing out that each of them fell outside the scope of Section 68 FERA. In other words, each of them pointed out that he was a Non-Executive Director of NIL and not in charge of or responsible to the NIL for the conduct of its business. Secondly, it was pointed out that each of them was dropped from the criminal proceedings following the 'Opportunity Notice' dated 22nd May, 2002. Thirdly, it was pointed out that each of them had ceased to be the Director of NIL at the time of filing of the reply. Accordingly, each of the Appellants requested discharge from the adjudication proceedings. 10. Notwithstanding the aforementioned replies, on 2nd September, 2003, the ED decided to proceed with the adjudication proceedings fixed on 26th September, 2003 as the date in such proceedings calling upon each of the Appellants to appear before the Adjudication Officer. 11. The Appellants filed W.P. (C) No.6198/2003 challenging the SCN/MFA dated 21st May, 2002. In the said writ petition an interim o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... July, 2009, this Court continued the interim relief granted by the learned Single Judge on 24th September, 2003 in W.P. (C) No.6198/2003, to the effect that no final adjudication order shall be passed. That interim order has continued till date. 16. The second writ petition i.e. W.P. (C) No. 2724/2014, which challenged the ED's notice dated 2nd September 2003, came to be dismissed by the learned Single Judge by an order dated 2nd May, 2014, which reads as under: "Present writ petition has been filed challenging the notice dated 2nd September, 2003 issued under Section 51 of the Foreign Exchange Regulations Act, 1973 (for short 'FERA 1973') Mr. Maninder Singh, learned senior counsel for petitioners submits that the criminal prosecution as well as the adjudicatory proceeding proceed on the same basis, namely, that the accused had to be in charge of and responsible to the company for the conduct of business of the company. Mr. Maninder Singh, learned senior counsel states that petitioners on the same factual matrix have been dropped/excluded as accused in the criminal proceedings. He consequently submits that the notice under Section 51 of FERA 1973 is without jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) in the following words: "There does not appear to be any reason to confine the operation of Section 68 only to a prosecution and to exclude its operation from a penalty proceeding under Section 50 of the Act, since the essential ingredient of both is the contravention of the provisions of the Act. A company is liable to be proceeded against under both the provisions. Section 68 is only a provision indicating who all in addition can be proceeded against when the contravention is by a company or who all should or can be roped in, in a contravention by a company. Section 68 only clarifies the nature and mode of proceeding when the contravention of any of the provisions of the Act is by a company, whether it be by way of adjudication to impose a penalty or by way of prosecution leading to imprisonment and a fine." 21. Therefore, the foundational fact that requires to be shown to exist for proceeding against a person under Section 51 of the FERA read with Section 68 (1) thereof is that such a person was at the relevant time, when the contravention occurred, "in-charge of" and "responsible to" NIL for the conduct of its business. A perusal of the adjudication notice in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of a director in such cases. (c) The answer to question (c) has to be in affirmative. The question notes that the Managing Director or Joint Managing Director would be admittedly in charge of the company and responsible to the company for conduct of its business. When that is so, holders of such positions in a company become liable under Section 141 of the Act. By virtue of the office they hold as Managing Director or Joint Managing Director, these persons are in charge of and responsible for the conduct of business of the company. Therefore, they get covered under Section 141. So far as signatory of a cheque which is dishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under Sub-section (2) of Section 141." 23. The above legal position has been reiterated in Pooja Ravinder Devidasani v State of Maharashtra (2014) 16 SCC 1. Importantly, the Supreme Court has emphasized that it is not sufficient for the authority that seeks to proceed against such a person to merely repeat, in the SCN or notice, the language of the statute, as that would not satisfy the requirement of law. 24. While as a broad proposition, the Courts exercising ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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