TMI Blog2010 (9) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... ishonoured is concerned, he is clearly responsible for the incriminating act and will be covered under subsection (2) of Section 141 - 1 OF 2010 - - - Dated:- 16-9-2010 - CORAM :V. C.DAGA R.M.SAVANT,JJ. Mr. R.G. Sheth i/b R.G. Sheth Co. for the Appellant None for the Respondent JUDGMENT (Per Shri R.M.Savant, J.) 1 The above Appeal raises the following question of law: "Whether the Nominee / Processional Director of a Joint Venture Company can be vicariously held liable for the acts of commission or omission of subordinate of the company ?" 2 The facts necessary to be cited for adjudication of the above Appeal can be stated thus: The Appellant during the relevant period i.e. 1-6-1994 to 28-2-1997 was the paid Managing Director of the Company known as Indian Card Clothing Ltd. (for short ICC), a public limited company. The Appellant was devoting his full time attention to the affairs of the ICC and retired from the said Company in the year ending 2001. The said ICC and one Spifa Germany promoted a Joint Venture Company known as Suessen Asia Ltd. (for short SA Ltd.) wherein Spifa Germany was to hold 60% equity and ICC was to hold 40% equity. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that there was no allegation against the Appellant for alleged infraction of Customs Law or baggage Law nor was he made a party to the said show cause notice. The said show cause notice culminated in the order dated 3-13-1999 passed by the Commissioner of Customs who inter alia held that the employees of S.A. Ltd had failed to declare the contents of their baggage under Section 77 of the Customs Act, 1961 which has led to the evasion of Customs Duty to the tune of Rs.25,99,941/and that the dutiable goods imported in personal baggage were classifiable under the head 98.03 of the Schedule to the Customs Tariff Act, 1975. The Commissioner by the said order refrained from confiscation of the goods, as he was of the view of the penal action under Section 112 of the Customs Act would be sufficient to meet the ends of justice and although the show cause notice demanded the duty of Rs.27,01,755/, the duty adjudicated was lesser i.e. Rs.25,99,941/. It is the case of the Appellant that the customs duty of Rs.26,29,624/had been deposited by the S.A.Ltd before issue of the said show cause notice. It is also stated by the Appellant that the total value of import through baggage was Rs. 33,53, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as his appointment of being the concurrent Managing Director, S.A. Ltd at nil salary was concerned, the same was deferred which was duly recorded in various Board Resolutions of S.A. Ltd. The Respondent No.2 granted a conditional stay to the Appellant vide order dated 2282008, on the Appellant furnishing a bank guarantee of the entire penalty amount of Rs. 2,00,000/through a nationalised Bank. The said Appeal ultimately came to be dismissed. However, in so far as the Appellant was concerned, the penalty against him was reduced from Rs. 2,00,000/to Rs.50,000/for the reasons mentioned in the said order. As indicated above, it is the said Order dated 1082009 which is impugned in the present Appeal. 5 We have heard Mr. R.G.Seth the Learned Counsel appearing for the Appellant. None appears for the Respondent though served. 6 On behalf of the Appellant, the Learned Counsel Shri Sheth made the following submissions. That the Tribunal has proceeded on an erroneous premise that the Appellant was the Director incharge of the day to day operations of S.A. Ltd till July 1997. The said finding according to the Learned Counsel has been recorded without there being any evidence or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment of the Appellant was put on hold and in fact the Appellant never became the Managing Director of S.A. Ltd, as the S.A. Ltd was desirous of having a full time Managing Director who could devote his time whole heartedly to S.A. Ltd. In fact S. A. Ltd appointed a full time Managing Director in the year 1997 itself. Though the said material was on record, the Tribunal has not even adverted to the same and has held against the Appellant only on the ground that the Appellant has not produced Form No.32 to show that he was not the Director of the S.A. Ltd during the relevant period. The question is not as to whether the Appellant was the Director or not during the relevant period but as to whether as postulated in Section 68 whether he was incharge of and was responsible to the Company for the conduct of the business of the Company. It is pertinent to note that, no finding to that effect has been recorded by the Tribunal in its Judgment. It would also be relevant to note that in the instant Appeal, the Appellant has placed the said Form No.32 along with an Affidavit, the said Form No.32 discloses that the Appellant was appointed as Director of S.A. Ltd by way of an ordinary re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provision. It is only those persons who were in charge of and responsible for conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a Company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision . The liability arises from being in charge of and responsible for conduct of 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 a company. Conversely, a person not holding any office or designation in a Company may be liable if he satisfied the main requirement of being in charge of and responsible for conduct of business of a Company at the relevant time. Liability depends on the role one plays in the affair of a company and not on designation or status. If being a Director or Manager or Secretary was enough to cast criminal liability, the Section would have said so. Instead of "every person" the section would have said "every Director" . Manager or Secretary in a Company is liable ........ e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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