9911796707
TMI Blog2024 (12) TMI 1475X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It is not disputed that the Company had 14 directors and the Petitioner was only one of them - the Petitioner s involvement in the license procurement was restricted to signing on a power-of-attorney person on behalf of the company, pursuant to a board resolution passed by the Company. Territorial jurisdiction/forum non conveniens - HELD THAT:- The Respondents have relied on the judgment of the Supreme Court in Kusum Ingots [ 2004 (4) TMI 342 - SUPREME COURT] to submit that this Court cannot entertain the present Petition. This submission of the Respondents is misconceived. The Petitioner had previously challenged an order passed by Respondent No. 2 which challenge was allowed by a Coordinate Bench of this Court by its order dated 06.09.2012. The Respondents participated in these proceedings, thus submitting to the jurisdiction of this Court. The Supreme Court in Kusum Ingots [ 2004 (4) TMI 342 - SUPREME COURT] has held that where an order is passed by a Tribunal in one place and an Appellate Authority is constituted at a different place, a Writ Petition would be maintainable at both places. In addition, it has been held that even if a small part of the cause of action arises wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ANJU, J.: (ORAL) 1. The present Petition has been filed by the Petitioner setting out the following prayers: (a) Set aside the impugned penalty order dated 25.6.2013 in so far as it imposes the penalty on the petitioner. (b) Order payment of cost to the petitioner for forcing him into litigation. (c) Issue any other direction/order as may be deemed just and proper in the interest of justice. 2. The Impugned Order dated 24/25.06.2013 has been passed against a public limited Company, named M/s Orkay Industries Ltd and its 14 Directors, levying a fine in the sum of Rs. 1 Crore pursuant to an Order-in-Original No. 03/02/002/00835/AM03, dated 29.03.2004. The operative part of the Order-in-Original dated 29.03.2004 is set out below: 11. I, in exercise of powers vested in me under Section 13 of Foreign Trade Development Regulation) Act, 1992 do hereby impose fiscal penalty of Rs. 1,00,00,000/- (Rupees One crore only) on the firm M/s. Orkay Industries Ltd. N.K. M. International House, Babubhai Chinai Marg, 178, Backbay Reclamation, Mumbai-400 020 and also its Directors/Partners etc. under Section 11 (2) of Act. [Emphasis supplied] 3. Briefly the facts are that the Petitioner was employed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the Company. 5.2 Learned Counsel for the Petitioner further stated that the Company was directed to be wound up on 14.12.1998 and that all directors had ceased to be directors on that date. The Company was non-operational and the official liquidator was handling all claims and compliances etc., qua the Company. 5.3 Learned Counsel for the Petitioner further submitted that although the Reply to the show case notice was set out in the OIO/order dated 29.03.2004, the same was simply ignored by the Respondents and the Respondents proceeded to impose the fiscal penalty of Rs. 1 Crore on the Company and also its Directors/Partners under the FTDR Act. 5.4 It is further contended that so far as concerns the application for export licence, the same was applied for the Company on 25.05.1994 by one Mr. G.K. Uchil. Thus, the liability, if any, would exist on the said person. 5.5 Learned Counsel for the Petitioner contends that this is a second round of litigation for the Petitioner. Originally the Respondent No. 2 had passed an ex parte order dated 21.03.2012 rejecting the Petitioner s Appeal. Since notice for hearing was never received by the Petitioner, he challenged the same be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 (94) of the Companies Act, 2013 provides that a whole-time director includes a director in the whole-time employment of the company. Learned Counsel for the Respondents contends that since the Petitioner was an Executive/whole-time Director of the Company, he was involved in the day-to-day functioning of the Company and was accordingly liable for all defaults committed by the Company. 6.3 Lastly, it was contended by the learned Counsel for the Respondents that the power-of-attorney which was provided to the authorized signatory of the Company for the advanced export license was signed by the Petitioner, and thus, the Petitioner being the responsible person, delegated power to the said Mr. G.K. Uchil to apply for the advance license making him responsible for the default. Learned Counsel for the Respondent seeks to rely upon the judgment of the Supreme Court in Standard Charted Bank v. State of Maharashtra and Ors. (2016) 6 SCC 62 in this regard. 7. By its order dated 23.02.2016, a Coordinate Bench of this Court had directed the Petitioner to disclose his shareholding in the Company and that of his family, on Affidavit. The Affidavit was filed by the Petitioner on 23.03.2016. Ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 9.95 Crore shares of this company and each share was of Rs. 10 (Ten). My shares in this company were a mere .005 (point zero zero five) per cent of the total shares. My wife and children had no shares at all. 3. The total paid up capital of this company was Rs. 97.96 Crores (Rs. Ninety Seven Crores and Ninety Six Lacs) 4. I was neither in charge of the Import Export division, nor did I have any role in applying for or obtaining the licence(s) referred to in this Petition or import there against, if any. 10.1 The subsequent Affidavit filed by the Petitioner on 29.07.2019 stated: 1) Orkay Industries Limited was originally established in the year 1968 and I was not a promotor of the company. 2) Sometime during the 1980's I was employed as an executive director of the company, my role in the company was limited to project implementation, R D and human resource management. 3) During my employment with the company, I was drawing a salary of Rs. 36,000/- per month. 10.2 A reading of the aforegoing Affidavits shows that the Petitioner was a salaried Director of the Company, who was also in charge of project implementation, Research and Development and human resource management. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bhagat Singh Bugga v. Dewan Jagbir Sawhney [AIR 1941 Cal 670 : ILR (1941) 1 Cal 490], Madanlal Jalan v. Madanlal [(1945) 49 CWN 357 : AIR 1949 Cal 495], Bharat Coking Coal Ltd. v. Jharia Talkies Cold Storage (P) Ltd. [1997 CWN 122], S.S. Jain Co. v. Union of India and New Horizons Ltd. v. Union of India [AIR 1994 Del 126].) [Emphasis supplied] 11.2 In any event, it is settled law that even if part of a cause of action arises within the territorial jurisdiction of this Court, the Court would have jurisdiction to try and entertain this Petition. The order impugned before this Court is a penalty order dated 29.03.2004, which has been upheld, by the Impugned Order, passed by the Respondent No. 2 at New Delhi. Thus, a part of the cause of action has arisen in Delhi and this Court has the jurisdiction to entertain this Petition. 12. A Coordinate Bench of this Court in Krishna Kumar Bangur case, dealt with a similar issue where a show-cause notice was issued under Sections 8 and 11 of the FTDR Act to a company and all its directors, and reasons for arriving at the conclusion that a Director is personally liable, had not been adumbrated therein. It was held that where the authority had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would run counter to the basic tenets of Company law. [Emphasis supplied] 13. A similar view was taken by another Coordinate Bench of this Court in Ved Kapoor case, where the question arose as to whether the penalty imposed upon a company can be recovered from its directors. Relying on Krishna Kumar Bangur case, the Court held that unless the Respondents find that the Director was under a duty or obligation of the company, and consciously failed to do so, the liability cannot be attributed on such Director. It was held that such an obligation cannot be assumed merely by virtue of a person being a Director of such Company. 11. In view of the legal proposition enunciated in the above-referred cases, the respondents would be competent to proceed against the petitioner under Section 11 (2) of the Act, if they are of the opinion that he was under a duty or obligation to fulfil the export obligation of the company and consciously failed to do so. Of course, in such a case, it would be incumbent upon the respondents to issue a notice under Section 14 of the Act to him, stating therein the ground on which such a liability is sought to be fastened on him. Such an obligation cannot be assum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly rendered jobless due to the liquidation and has moved on to other jobs and places. The sudden nature of such an event, after being in existence for 30 years, has put us in this situation. The Books and Records are in the possession of the Official Liquidator at the various Factory locations and Offices as also at the Offices of the Official Liquidator. Also considering the considerable passage of time and absence of any of the managerial or other staff, we have no way of knowing as to what is lying at which place today. Consequently, we do not know how to pinpoint or locate the records to analyse the import export account so as to determine and prove the fulfillment of export obligations. We believe that the captioned license would be lying unutilized or would only have been utilized after the exports had already taken place. [Emphasis supplied] 15. The record reflects that the show-cause notice although was addressed to the Company and its 14 Directors, was not delivered to the Company or the other 13 Directors of the Company. The only person on whom the show-cause notice and the Impugned Order was served upon by the Respondent, was the Petitioner. The Reply of the Petitioner w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and premises itself on the fact that the firm (read Company) had not fulfilled its export obligations, and since it could not produce any document in its support, it was liable for the obligation. It further goes on to hold that the ground of liquidation of the Company could not be a ground for non-submission of export documents or non-payment of custom duty could not be taken as a ground for non-submission by the Petitioner. The discussion on this aspect is limited. There is however no discussion at all as to the personal liability of the Petitioner at any place in the Impugned Order. 17. This Court concurs with the judgments passed in Krishna Kumar Bangur case and Ved Kapoor case , which relying on Santanu Ray vs. Union of India 1988 SCC OnLine Del 169, have held that unless specific allegations have been made which discuss the role of a director in the export performance, there is no question of finding him personally liable for the same. The order impugned has failed to fulfil this or show any adjudication on this aspect. In the absence thereof, the Respondent cannot now by, taking additional grounds and pleas, attempt to go beyond the Impugned Order. 18. There is another aspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Section 15 of the Foreign Trade (D R) Act, 1992 the following order is made. No. 11/2/03-04/ECA-I/1330 dated 25.7.2006 ORDER 1. Only the name of Shri Pankaj K. Mehra is excluded from the proceedings under the above referred Adjudication Orders and accordingly the Orders stand modified to that extent. 2. Since the firm have not filed any appeal against these Adjudication orders and statutory time allowed has already passed, these orders be enforced against them and entire penalty, including Rs. 10 lakhs imposed on Shri Mehra may also be recovered from the company and demand may be raised to the official Liquidator. [Emphasis Supplied] 20. The Respondent has relied upon a judgment of the Supreme Court in the Standard Charted Bank case to submit that a whole time Director or an Executive Director is liable and responsible for the business of the Company. This judgment was in the context of quantification of liability of a Director of a Company under the provisions of Section 138 and 141 of the Negotiable Instrument Act, 1881, where the vicarious liability of the Director of the Company is specifically set out in the provisions of the said Act. Thus, this decision is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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