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TMI Blog2024 (7) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... neries, thereafter, for installation and initiating the manufacturing activity at SP-272-A, Matsya Industrial Area, Alwar, Rajasthan. There is nothing on record to show that present appellant was instrumental for not starting the manufacturing of the goods and thereafter making the export for M/s. Grapco Industries Ltd. to fulfil the export obligation. Learned Counsel for the respondent-ED failed to show any single document signed by the present appellant which may point out his role that he was instrumental in conducting the business of M/s. Grapco Industries Ltd. and further he intentionally failed to take any steps for the same and thereby he has vicariously liable for the contravention of provision under FERA. Simply because when the company was going through financial crisis, the then Managing Director R.P. Jhunjhunwala inducted him as Director, does not make him liable for the past act of the company committed during the year 1994-1995. We also find that the appellant s case is well supported by the decision of Satish Kumar Bhalla [ 2009 (2) TMI 929 - DELHI HIGH COURT ] as been cited on behalf of the appellant wherein it was held that Section 68 of FERA, 1973 is parimateria w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted to acquire foreign exchange worth DM. 38,56,114.00 conditionally for the purpose of effecting remittance outside India for importation of Machineries against the Industrial Licence No. PER: 598 (1995) EOB/671/95 dated 25 11.95 issued by Govt. of India Ministry of Industry, Department of Industrial Policy and Promotion, Secretariat for Industrial Approvals, EOU Section, New Delhi. It was further revealed that though the said Machineries were imported and installed in their said manufacturing unit for the purpose of manufacturing goods for exports, but no export was made and thus the said M/s. Grapco Industries Ltd. had failed to fulfil the export obligation and have failed to comply with the conditions subject to which the said licence was issued to them under the EOU Schemes and have thereby utilized the said foreign exchange to the tune of DM. 38,56,114.00 otherwise than for the purpose for which it was acquired. After conclusion of investigations, a Memorandum, referred to hereinabove, was issued to the noticees for their failure to comply with the conditions subject to which the said foreign exchange to wit DM. 38,56,114/- was released and acquired by them and by havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At that time, he was looking after the banking transactions and any other work as assigned to him by the Managing Director of the said company through Sh. R.P. Jhunjhunwala. He pointed out that on or about 20.06.2000 applicant was appointed as a Director of the said company, under the name Mahesh Kumar Nathany, as per direction of Shri R.P. Jhunjhunwala, then Managing Director of the company. He pointed out that since last quarter of 1999, the business of said company started declining and thereafter the company went into financial crisis due to which salary could not be paid for a long time. Applicant resigned as Director on 19.07.2001 and he had no role in the said company after he left. Subsequently, present appellant came to know that Shri R.P. Jhunjhunwala died in August, 2001 and the company went into liquidation. During the period when appellant worked as Director between 20.06.2000 to 19.07.2001, the company had not done any import, export business therefore, applicant has no occasion to sign any document relating to import export business of the said company. Summon u/s 40 of FERA, 1973 was wrongly issued by E.D., Kolkata without appreciating the fact that appellant was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds the proceedings had been initiated against the applicant; vii. That none of the documents relied upon in the said Memorandum whisper about any contravention of the provisions of FERA, 1973 by the applicant. Appellant also filed written submissions on 20.05.2005 and 30.06.2006 which are in Annexure D. In letter dated 30.03.2006 in addition to the above defence, the appellant has submitted that he has not signed any document pertaining to import and export of the company. He was made a director of the company in 2000 and at that time there was no activities like export of goods or import of any goods. After leaving the company on 19.07.2001, he is not aware about the affairs of the company. Being not satisfied with the reply given by appellant Mahesh Kumar Agarwal @ Mahesh Kumar Nathany, the Adjudicating Authority in para no. 6.8 at page 14 of the impugned order held- 6.8 From the case records, I find that Shri Mahesh Kumar Agarwal @ Mahesh Nathany, noticee, appeared on 19.4.2002 in response to the summons and his statement was recorded under Section 40 of the Foreign Exchange Regulation Act, 1973. In his statement Shri Mahesh Kr. Agarwal interalia stated that he joined M/s Grapc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Mahesh Kumar Nathany to Mahesh Kumar Aggarwal when he had to sign as Director of the company. He did that at the behest of then Managing Director Shri R.P Jhunjhunwala. His becoming Director of the company in 2000 is only in continuum of his working for the company since 1994 I am therefore inclined to hold him guilty of aforesaid contravention in terms of section 68 of FERA. 1973 and he is liable to penalty under section 50 of FERA, 1973. Accordingly, penalty of Rs. 5,00,000/- was imposed upon him in individual capacity and the other noticees. Aggrieved by the said order, appellant Mahesh Kumar Agarwal @ Mahesh Kumar Nathany filed the present appeal. 3. During the arguments, learned counsel for the appellant submitted that the Adjudicating Authority failed to appreciate the fact that penalty cannot be imposed upon him just because he was director of the company for a brief period between 20.06.2000 to 19.07.2001, whereas, the machinery was imported by the company during the year 1994-1995. He pointed out that at that time appellant was working as a clerk and was earning a salary of Rs. 5,000/- per month. He contended that at the relevant period, he was not responsible for condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany throughout, till he was elevated as director for the period from 20.06.2000 to 19.07.2001, and hence, he was duty bound to take the steps for affecting exports during his tenure, as director of the company. 5. After hearing the rival submissions, we have given our thoughtful consideration to the same. As per section 68 of FERA, 1973 pertaining to offence by companies states that; 68. Offences by companies .-(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time of the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.(2)Notwithstanding anything contained in sub-section (1), where a contravention of any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1881 in reference to which the Hon ble Supreme Court held in S.M.S. Pharmaceuticals case [2005 Cri. LJ 5150] an averment must be made to the effect that the person was in charge of and responsible for the conduct of the business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in the company. It was further held that the petitioner could not be held responsible for conduct of business of the company only on account of his being a Director. The case for holding the appellant responsible is even weaker in the present case as the appellant only held the post of Director for a short while, many years after the alleged contravention. Therefore, the present appeal needs to be allowed by this Tribunal seeing the fact that present appellant has no role in commission of any contravention being inducted as Director at very late stage when there was no manufacturing activity and import-export business of the company. 6. In sequel to our discussion and findings in the preceding para, the present appeal is hereby allowed and thereby, impugned order passed by the Adjudicating Authority is hereby set aside. Any p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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