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TMI Blog1996 (9) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... ty with the Central Cottage Industries Emporium, Bombay. The charge against the Central Cottage Industries Emporium is that it violated the provision of para 19 of the Memorandum of Instructions to the Restricted Money Changers available at Appendix V of Vol. II of the Exchange Control Manual, 1987, and thereby contravened the provisions of section 49(1) read with section 7 of the Act. The allegation is that on 11-8-1990 the Emporium sold certain articles under five cash memos to Maxican Naval Officers and accepted the payment therefor of the value of Rs. 1,18,256 in Indian currency in violation of the instructions contained in para 19. The allegation against the first and the second appellant is that by accepting the payment in Indian currency they failed to comply with the instructions contained in para 19 of the said Instructions and thereby contravened the provisions of section 49(1), read with sections 7(1) and 68(2), of the Act. 3. Shri R.K. Handoo, Advocate, appeared for the first appellant. The second appellant has sent an application praying for waiver of pre-deposit and disposal of the case on consideration of his application and Memoramdum of Appeal without personal hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant's statement under section 40 does not speak at all about these remarks. He also submitted that even the statement of the second appellant, which was recorded on 8-8-1991 under section 40, does not say that he was forced or even asked by the first appellant to accept Indian currency in payment of the purchases in question. 6. Shri Handoo vehemently argued that the points brought out by him amply prove that the first appellant is not at all responsible for the alleged contravention even if the Board upholds the finding of contravention on the part of the company. He submitted that if any person is at all responsible, it will be either the second appellate or the Manager (Finance) or both but in no case the first appellant. 7. Shri Handoo further submitted that under para 3 of the Memorandum of Instructions to Restricted Money Changers, the licences are required to forward a list giving full names and designations of their representatives who are authorised to buy foreign currency notes, etc., on their behalf together with their specimen signatures. Para 4 further provides that no person other than the authorised representative should be allowed to transact money c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;admitted that at the relevant time he was the Manager and was responsible for the day-to-day business of the Emporium. Therefore, he was the Manager referred to in section 68(2). since the company in its trade name of the said Emporium has been held guilty of contravention, it was perfectly lawful for the learned Adjudicating Officer to impose penalty on the first appellant by invoking the provision of section 68(2). As to Shri Handoo's argument regarding para 3 of the Instructions, Shri Gadoo submitted that the second appellant has also been penalised for the contravention. He submitted that section 68(2) can be invoked against all those employees with whose consent or connivance any contravention has taken place or can be attributable to any neglect on their part. He submitted that just because the second appellant has been penalised under section 68(2) it does not mean that the other employees if found guilty, cannot be penalised. 10. Shri Gadoo further submitted that it was the first appellant who admittedly was authorised and had in fact given the discount on the bills which show that he was responsible for the contravention of the trans action. In any case, Shri Gadoo s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in that case, went on to say that when a partner in-charge of a business proceeds abroad, it does not mean that he ceases to be in-charge, unless it is proved by evidence that he gave up the charge in favour of another person. Thus, under sub-section (1) the mere relationship of a person with the company, namely, that of being overall in-charge of the company's business, makes him liable for penalty if the company has been found guilty. The liability of a person under sub-section (1) is, therefore, vicarious. On the other hand, the liability under sub-section (2) is primary not vicarious, though sub-section (2) is attracted, as in the case of sub-section (1) only where the company has been held guilty of contravention. The liability is based on the personal acts or neglect of the person specified therein which has to be established by evidence, apart from establishing the contravention on the part of the company. Thus, the liability under subsection (2) is not based on the mere fact of the company being held liable; it has to be independently established as a primary liability. 13. It is also necessary to bear in mind, and this follows from the distinction herein before i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Memorandum of appeal by the second appellant do not find support from the narration of facts by which they are proceeded nor those grounds emanate from the narration. The plea that the Emporium could not be proceeded against as it is not a legal entity has no force as the learned Adjudicating Officer has proceeded against the company through its trade name and it cannot be disputed that the Central Cottage Industries Emporium, Bombay, is the trade name and an integral unit of the company. In the circumstances, I do not find any justification to interfere with the finding of contravention on the part of the second appellant. However, as regards the quantum of penalty, having regard to the fact that the company as a matter of practice was not insisting on the encashment certificates from the naval personnel as the local currency to them is provided by their employers' agents, the action of the second appellant can be said to be bona fide and the violation not a deliberate act for personal gain. He only followed the business practice already prevalent in the company. Moreover, the company has already been penalised. In the circumstances, in my opinion, he does not deserve to be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without production of encashment certificate. In his statement under section 40 the first appellant, on being asked, stated the practice that foreign exchange was being received at the cash counter by the cashier and the cost of goods was deducted from the sale proceeds of the foreign exchange. 17. Shri Gadoo also argued that the first appellant had admitted in his statement under section 40 that 'no foreign exchange was taken by me from them (naval personnel) against the purchase. We also did not enquire the source of Indian currency from them'. Shri Gadoo submitted that it is clear from the first appellant's statement that he was aware that payment against the bill was being made in Indian currency without enquiring about the source of Indian currency. He contended that the omission on the part of the first appellant to direct the second appellant to refuse payment in Indian currency without production of encashment certificate amounts to neglect on his part, which facilitated the contravention. The argument prinia facie has some force but it loses its force on a closer examination of the statement. In the same statement, the first appellant pointed out that payments ..... X X X X Extracts X X X X X X X X Extracts X X X X
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