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TMI Blog2016 (7) TMI 1701X X X X Extracts X X X X X X X X Extracts X X X X ..... that he was only a non-executive director and was not involved in the day to day working of the company and had not attended any board meeting of the company also. Ex parte proceedings and Denial of principles of natural justice - Similar is the plea of the Appellant, but since the proceedings were held exparte there was no occasion for him to take such plea. It may be pointed that by merely issuing notices to a party does not mean that notice was duly served upon that party. Sufficient service of notice as per rules is necessary before the Adjudicating Authority can decide to proceed exparte against such persons. In the instant appeals the case of the Appellant is that he had left his service during the period when the extension granted by the RBI to the company for realization was continuing, no service upon him of the SCN or call notice for personal hearing was effected, has substance because had the appellant knowledge of the proceedings he could have appeared before the Adjudicating Authority and taken the same case/plea upon which proceedings were dropped against the Appellant in the matter of M/s. Geekay Exim (India) Ltd. The impugned Adjudication Orders, in our view are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... showed that the company had failed to realize an amount of US $ 44,91,685.68 against 10 GR forms. It is contended that Rais Ahmed, authorized representative of the company was examined and his statement was recorded under Section 37 of FEMA on 15.04.2014 and 03.08.2015 in which he is stated to have admitted the total outstanding amount in respect of noticee company. The company also vide its letter dated 21.04.2004 confirmed the outstanding amount of export bills for the value alleged, on this basis it appeared that the company had failed to realize the full export value of the goods within the specified time limit and had failed to take reasonable steps for its realization and repatriation without the general or special permission of the RBI. Show-cause notice was issued, however, no replies were filed by the company and its directors, therefore, it was decided to proceed with the adjudication and notices were issued for personal hearing on 01.02.2006, 03.02.2006, 13.03.2007, 07.11.2007 and 16.12.2008, but no noticee turned up. Show-cause notice was issued to six noticees apart from M/s. Aviquipo of India Ltd. It is contended that the company vide its letter dated 12.03.2007 had f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 42 of FEMA, 1999. Facts of the matter bereft of details are that investigations were initiated on the basis of information received from RBI regarding non-realization of export bills by M/s. Tirumala Impex Pvt. Ltd and its sister companies, which were negotiated through different banks. Since the Managing Director failed to respond to the summons, the required information was gathered from the authorized dealer, Oriental Bank of Commerce, formerly known as Global Trust Bank, which informed that the exports were made through 25 GR forms for a value totaling US $20399661.43 equivalent to Rs. 91,79,84,745 approx. 6. Rais Ahmed was examined and his statement under Section 37 of FEMA was recorded on 15.4.2004 and 3.8.2005 in which he admitted that the sale proceeds could not be realized and were outstanding as per the details furnished by the authorized dealer. The company also confirmed the information supplied by the bank. In view of the above, it appeared that the company had failed to realize the full export value of the goods exported and had failed to realize the export proceeds without any general or special permission of RBI. Show-cause notice was acknowledged by the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at due to technical knowledge, commitment and dedication, the Appellant was appointed as Executive Director of the company in the year 1996 for looking after Kolkata operations of the company, however, the Appellant resigned from the post of Executive Director on 12.08.2002. He was during his association with the company on pay rolls of the company and never held shares. Further submission is that the Appellant had no involvement in the export activities of the company and had never remained in-charge of day to day affairs of the company or had any involvement in the business of the company in any way. The Appellant was not in the knowledge of the questioned transactions. It is contended that a show-cause notice was allegedly issued to the company and to all directors at Mumbai address and not at the registered office of the company in Kolkata, based on a complaint. The Appellant had no knowledge of the show-cause notice and regarding the proceedings held by the Adjudicating Authority, neither the company, nor the ED served copy of show-cause notice to him. It was only when the Appellant visited the office of the Directorate of Enforcement in connection with another show-cause noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission is that in both the appeals the impugned orders are erroneous, violative of principles of natural justice and are arbitrary in nature. The Adjudicating Authority before proceeding exparte did not ensure that the show-cause notices were dispatched at the correct address of the Appellant and was duly served upon the Appellant. Similarly, the alleged personal hearing notices were not received at the Appellant, but still the proceedings were held exparte. Submission is that the Adjudicating Authority failed to take into account that the Appellant was a Non-Executive Director and had no role in the day to day management of the company and was not associated with the export of the two companies. There was no specific allegation against the Appellant in the complaint and the impugned order is silent regarding the role of the Appellant. Had the Appellant got an opportunity to defend himself in the two adjudication proceedings held exparte against him and placed correct facts about his non-involvement in the exports or day to day affairs of the companies, the Appellant would have been exonerated, as he already been exonerated in the M/s. Geekey Exim matter. Similarly situated co-n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and the Managing Director and Directors has been rightly fixed and the amount of penalties imposed are reasonable, therefore, the impugned order is liable to be affirmed. The contention of the respondent that he had no concern with the day to day affairs of the company or had no knowledge and could learn about the proceedings when he went to the office of ED and came to know about the proceedings is an afterthought. 13. Similarly in Appeal NO. 21/2011, the Appellant was the Director M/s. Tirumala Impex Pvt. Ltd in which also being a Director his involvement in day to day affairs including in the exports in question cannot be ruled out. The order is perfectly legal, reasoned and speaking and cannot be set aside. The Adjudicating Authority has specifically dealt the roles of each director in both the appeals and has held that they were the Directors of the company at the relevant period as per documents furnished by the noticee company as well as the bank concerned. Submission is that the Adjudication Order in the matter of M/s. Geekay Exim (I) Ltd and Others, which was decided on 28.10.2010 cannot be cited as an exemplar by the Appellant in the instant cases copy of which has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laiming that he was a Non-Executive Director. Further in the matter of ANZ Grindlays Bank v. Directorate of Enforcement MANU/MH/0036/1999, the Hon'ble Bombay High Court has held in para 40 of the judgment that once it is found that there has been a contravention of any of the provisions of the Foreign Exchange Regulation Act read with CSE Customs Act by a firm, the partners of which who are in-charge of its business are responsible for the conduct of the same and cannot escape liability, unless it is proved by them that the contravention took place without their knowledge or they exercised all due diligence to prevent such contravention. 15. In view of the above, it has been submitted by the Ld. Legal Consultant that both the appeals have no merit and deserve to be dismissed. 16. We have considered the submissions of Ld. Counsel for the Appellant as well as Ld. Legal Consultant and have also perused the case laws relied upon by the parties. In our view, the case laws relied upon by the Ld. Legal Consultant do not help the Respondents in the instant appeals as it has neither been contended by the Enforcement that the Appellant was in-charge of the export business or responsible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in this paragraph has also observed that moreover, there is nothing in the complaint to explain how they could said to be in-charge of the affairs of and responsible for conduct of its business at the time of contravention. In the matter of Ajay Bagaria (supra) relied upon by the Ld. Counsel for the Appellant in para-14 of the Judgment, the Hon'ble Delhi High Court has analyzed Section 68 of FERA which is parimateria to Section 42 of FEMA, the Hon'ble High Court has held that averments imposed must contain the two mandatory elements i.e. it would state the person sought to be arraigned as an accused apart from the company was a person in-charge of the affairs of the company and responsible for the conduct of its business and further that such person was in that capacity at the time of commission of offence. Since there is no allegation at all that the appellant was responsible in any way with the management or business activities or the exports relating to disputed transactions in any way, the finding of Adjudicating Authority wherein he has fastened the liability upon all the directors, presuming their involvement merely on the basis that they were directors of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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