TMI Blog2009 (4) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the said company. The party aggrieved should reply to the show-cause notice, and if aggrieved by the order, seek remedies through appeal. In view of these observations, the challenge is insusceptible of scrutiny, under Article 226 of the Constitution of India. W.P. dismissed. - W.P.(C) 6198 OF 2003 - - - Dated:- 27-4-2009 - S. RAVINDRA BHAT, J. Ashok Desai, Rajesh Batra and Jintender Anand for the Petitioner . P.P. Malhotra, N. Matta and Pratap Singh Parmar for the Respondent. ORDER 1. By these proceedings under Article 226 of the Constitution of India, the petitioners seek a quashing order, against the Show-cause Notice/Memorandum for adjudication, dated 21-5-2002 issued under section 51 of Foreign Exchange Regulation Act, 1973 ( FERA ) issued by respondents. 2. The allegations in the impugned show-cause notice, in brief, proceed on the premise that Nestle World Trading Corporation (NWTC) acted so as to raise suspicion that coffee exported by Nestle India Ltd. ( NIL ), was subsequently resold by it (NWTC) and that the petitioners herein being directors/in-charge of NIL, during the relevant period were responsible for the conduct of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, it was submitted that the NIL has not committed any violation of any provision of FERA. 5. The petitioners prefer their petition on the following grounds, inter alia, that the impugned show-cause notice is based on assumptions, without application of mind and is, in a way, a judgment without the support of any provisions of law or precedent to that effect. There was absolutely no material available with the concerned officer against them to justify issuance of the impugned show-cause notice nor has any evidence been placed on record to suggest that the petitioners were involved in day to day business of running of the company. No specific allegations were made against the petitioners in the impugned show-cause notice, it merely sought to proceed against the petitioners on the ground that the relevant time they were amongst the directors of the company. Further, it was submitted that an opportunity notice dated 22-5-2002 (under section 61 of FERA) sought to implicate them and others, by mechanical application of section 68, FERA. 6. The relevant portions of the impugned show-cause notice are extracted below: (16) AND WHEREAS it appears that S/Shri Narender Singh, D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed outside Russia and therefore the goods exported by NIL did not reach Russia as declared by them but actually exported to NWTC from were payment against the exports is unrealized. And M/s. NIL and its directors/officers incharge therefore by not realizing outstanding export payment from NWTC. M/s. NIL appears to have contravened the provisions of section 16(1) and section 18(1), 18(2) read with Central Government Notification No. F/67 Executive Committee/73/1 3 both dated 1-1-1974 and section 18(3) of FERA, 1973 read with Rules 7, 8 and 9 of Foreign Exchange Rules, 1974 and thereby rendered themselves liable to be proceeded against under section 50 of the said Act [except for section 18(1)( a )]. (20) NOW THEREFORE, the said M/s. Nestle India and its directors/officer in charge are hereby required to show cause in writing (in duplicate) within 30 days of receipt of this memorandum as to why adjudication proceedings as contemplated under section 51 of the said Act should not be held against them for the aforesaid contraventions. (21) IN ISSUING this memorandum reliance is placed on documents as mentioned in Annexure to this memorandum inspection of which can be taken by him or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Explanation : For the purposes of this section ( i ) company means any body corporate and includes a firm or other association of individuals; and ( ii ) director , in relation to a firm, means a partner in the firm." [Emphasis supplied] 8. The petitioners argue that neither are the contents of the impugned memorandum, specific in particulars, nor do they particularize their role, if any, as directors of NIL which amount to contravention of provisions of FERA, that they hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r not, it is incumbent upon the respondent to issue notice to the appellants disclosing the circumstances under which proceedings are sought to be initiated against them. Any proceedings taken without such notice would be against the principles of natural justice. In the present case, in our view, the respondent rightly issued such a notice wherein specific acts constituting contraventions of the provisions of the Acts for which action was to be initiated were clearly mentioned. Assuming that a notice could be laconic, in the present case it was a speaking one clearly specifying the alleged act of contravention. If on a reading of the said notice, it is manifest that on the assumption that the facts alleged or allegations made therein were true, none of the conditions laid down in the specified sections was contravened, the respondent would have no jurisdiction to initiate proceedings pursuant to that notice. To state it differently, if on a true construction of the provisions of the said two sections the respondent has no jurisdiction to initiate proceedings or make an inquiry under the said sections in respect of certain acts alleged to have been done by the appellants, the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... role in the company s alleged wrong doing. In these circumstances, the respondents cannot be permitted to continue with the proceedings under section 50 of the Act as is sought to be done. 12. The respondents, who did not file a return, argued that the present writ proceeding should be dismissed, since the petitioners should first submit themselves to the jurisdiction of the adjudicating officer, and then, if aggrieved by his order, seek an appellate remedy. They submit that a somewhat similar case, the ANZ Grindlays Bank v. Director of Enforcement 1999 (105) Crl. LJ 2970 (Bom.) had approached the Bombay High Court, challenging an identical notice, calling upon its officer to respond. Reliance was placed on the judgment of the Bombay High Court ( ANZ Grindlays Bank s case ( supra ); a copy of the judgment was produced by the petitioners as Annexure P-2) in that case, particularly the notice issued: "One of the notice at page 51 (Exh. A1) have been perused. The Directorate therein, after giving details of the contravention has stated: AND WHEREAS it appears that at the relevant time when the alleged contraventions had taken place, Mr. G. P. Pande, G. M. Investment Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the FERA. Again, it is for the appellants to put forward their objections thereto before the concerned authority and it is for that authority to decide the relevant aspects while deciding to impose or not to impose any penalty on the appellants. The appellants have a right of appeal under section 52 of the FERA to the Appellate Board and a further right of appeal to the High Court under section 54 of the FERA. We see no justification for the issue of a writ of prohibition restraining the authority under the FERA from proceeding further with the adjudication. It is for the appellants to put forward their defences, if any available, before the adjudicating authority and pursue it in accordance with law." (p. 14) The respondents contend that in these circumstances, the court should desist from exercising jurisdiction, and relegate the petitioner to its remedies, in case it is aggrieved by an adverse order. 14. It was next urged on behalf of the respondents, by Mr. P.P. Malhotra, learned Additional Solicitor General that the court should give effect to the statutory presumption, under section 71 of the FERA, since the burden of proving that the petitioners did not contravene an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque. Appellant therein had been proceeded against for alleged commission of an offence under section 138 of the Negotiable Instruments Act by the Trial Court. Before the High Court, quashing of proceedings under section 482 of the Code of Criminal Procedure, 1973 was sought. It was contended by the appellant that at the relevant point of time since he was not the Director of the Company, hence no cognizance could be taken as the same does not satisfy the requirements of section 141. The High Court dismissed the petition holding the same as fact in respect thereof was required to be established before the Trial Court. In an appeal to this Court, this Court while referring inter alia to the decisions in S.M.S. Pharmaceuticals Ltd. ( supra ) and Sabitha Ramamurthy ( supra ) held that for showing a vicarious liability of a Director of a Company, it was incumbent to plead that the accused was responsible to the Company for the conduct of the business of the Company in the complaint. The allegation in the complaint petition would not give rise to an inference that the appellant was responsible for day-to-day affairs of the Company. A negotiation for obtaining financial assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a Group of Directors of the Company were in charge of and/or were responsible for the conduct of the business of the company, the burden would shift on the accused to establish the ingredients contained in the proviso appended to section 49A of the Act. 16. Learned Additional Sessions Judge as well as the High Court, in our opinion, therefore, were right in holding that in the absence of any averment made in the complaint petition as also in the absence of any evidence brought on record by the complainant to satisfy the requirements of section 49A of the Act, the respondents could not have been convicted." 18. Earlier, in Food Corpn. of India v. State of Punjab [2001] 1 SCC 291, commenting on this aspect, it was held by the Supreme Court, that: ". . . Notice to the affected person mandated in the section is not an empty formality; it is meant for a purpose. A vague and unspecific notice will not provide reasonable opportunity to the noticee to file objection meeting the reasons/grounds on which the amendment of the assessment list is proposed to be made. Such a notice cannot be taken to be complying with the statutory requirement." (p. 297) "13. We find that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion, however, is not dispositive of this case. The respondents rely upon the decision in Standard Chartered Bank s case ( supra ) where, apart from stating, that the noticees could reply and later appeal, if affected by adverse orders, the Court had observed, earlier: "It is argued that the issue of a notice under section 61 is not a mere formality and that it is a real right given to a person accused of an offence to establish that the proceedings are being initiated without jurisdiction or wholly in violation of the provisions of FERA: Article 20(3) of the Constitution is referred to and it is submitted that many rights including the right against self-incrimination is available to a person accused of an offence. Section 61(2) of FERA makes it clear that no court can take cognizance of an offence except upon a complaint by the officer referred to therein. The proviso to section 61(2) of the Act provides that no complaint regarding the offences referred to in that section shall be made unless an opportunity is given to the person concerned to show that he had the requisite permission where the offence charged is an act which requires permission under the Act. We think tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised before the criminal court when the occasion arises. We find merit in this submission. Obviously, it is open to the appellants to put forward all their defences to the prosecution at the appropriate stage. ****** Once we have held, as the High Court did, that the provisions are constitutional, the basis on which the writ of prohibition is sought for by the appellants disappears. It is settled by the decisions of this Court that a writ of prohibition will issue to prevent a Tribunal or authority from proceeding further when the authority proceeds to act without or in excess of jurisdiction; proceeds to act in violation of the rules of natural justice; or proceeds to act under a law which is itself ultra vires or unconstitutional. Since the basis of the claim for the relief is found not to exist, the High Court rightly refused the prayer for the issue of a writ of prohibition restraining the authorities from continuing the proceedings pursuant to the notices issued. As indicated by this Court in State of U.P. v. Brahm Datt Sharma [1987] 2 SCC 179 when a show-cause notice is issued under statutory provision calling upon the person concerned to show cause, ordinarily that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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