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TMI Blog2012 (8) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor and an employee of the Company at the relevant time. Further H.S. Rustagi was not a Director in the year 1987-88 when alleged offence took place. The Appellants have discharged their burden by placing on record the annual reports. The defence of an accused has only to be probable and he has not to prove his defence beyond reasonable doubt. Despite annual reports of the Company giving the address of the Company, letters were sent to incorrect addresses, and thus no notice was served on the Appellants. For an offence of the year 1987, for the first time, the Appellants were asked to reply in the year 2001. Since the Appellants Parag Dalmia was only an ex-employee, he had no access to the documents and thus he could not file any document in reply to the opportunity notice. The delay in serving the notice on the Appellants has caused prejudice as the documents relating to their defence are not available with them. Though, initially notices were given to all the 23 Directors, however only a few are being proceeded against. Even the bank records were destroyed thus forbearing the Appellants to prove their innocence. Though Parag Dalima was authorized signatory, Appellant H.S. Rustag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the 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 satisfies 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 affairs 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. Instea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India, Canara Bank and efforts were also made to visit the place personally, however the same were of no avail as notices could not be served and thus, finally the notices were deemed to be served by pasting at the last known address on the 7th May, 2001. Thereafter, legal consultants were heard and statement was recorded who gave the addresses of the Appellants. In view of the statement of K.L. Sethi and the Appellant Parag Dalmia who was dealing with the day-to-day affairs of the Company and the fact that Parag Dalmia has filed the account opening form, the initial burden qua him that the Appellant Parag Dalmia was responsible and in-charge for the day-to-day affairs of the Company stands discharged. Further extensive efforts were made by the Respondents to serve the Appellants, however they continued changing the address without intimitation to the competent authority. 6. I have heard learned counsel for the parties. Both the sides have placed on record the list of dates and events. A perusal of the list of dates filed by the Respondent shows that on 13th June, 1989 a letter was addressed from Reserve Bank of India (RBI) Mumbai to the Respondent on 13th June, 1989 intimating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93 and at Multitech International Ltd. 15-17 Industrial Estate, Dharuhera, Haryana. As regards Dharuhera address, the notice was received back with an endorsement that the Company was lying closed and instead of this a new company ICL was working which has refused to take the notice. On 19th March, 1996 again correspondence was made with the Canara Bank to give the addresses of the Directors and its introducers and a reminder in this regard was sent on 1st February, 2001. In response, the Canara Bank wrote that they had destroyed all records for the period up to 1988 and they were trying to contact the Janpath Branch from where if information received the same would be transferred. On 12th February, 2001 a letter was sent by Canara Bank to the Enforcement Directorate giving the last known address of the Company as per the bank's records to be 5-D, Atmaram house, 1-Tolstoy Marg, New Delhi and works and registered office at 15-17, Industrial Estate, Dharuhera, Haryana. On 1st February, 2001 a notice was sent to Multitech International Ltd. at G-4, 4th Floor, South-Ex.-I which was pasted over there on 7th May, 2001 and a report was prepared regarding the non-availability and whereabou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia stated that he was only a Director on the Board of Multitech International Ltd. and his participation was limited to deliberations at the Board level only. He asked the Respondent to contact the executives of the Company for the information, however gave no name or address of the executives. Thus, a memorandum dated 7th March, 2002 was issued against the Company and its Directors followed by an opportunity notice. To the said opportunity notice replies were filed. The Respondent then passed the order dated 11th December, 2003 after giving hearing to the parties and held noticee No. 2 to 6, 8, 9, 12 & 16, 23, 26, 28, 29, 22, 11, 7, 13, 27, 10, 25 guilty of the contravention in terms of Section 68 of FERA and liable to penalty under Section 50 of FERA. On appeals being filed the matter was remanded back by the Learned Appellate Tribunal directing the adjudicating authority for fresh adjudication by giving specific findings on the points recorded. On remand back again an order was passed by the Special Director on 25th May, 2010 imposing penalty on the Company and noticee numbers 9, 10, 11, 13, 25, 26, 28 & 29 under Section 50 of FERA. On appeals being filed by the Appellants herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1986-87. As per page 2 of the Annual Report of 1986-87 of noticee no.1, it was in the agenda of the AGM to be held on 26.11.87 to appoint Director in place of noticee No.11 & 13, who retired by rotation. This shows that both noticee no.11 & 13 were directors in noticee no.1 when impugned remittance was effected on 26.4.87 (Balance sheet period is at 31.5.87). They have failed to discharge the onus cast on them under proviso to sub-section (1) of Section 68. I am therefore inclined to hold them guilty of alleged contravention." 10. It may be noted that the first order passed by the Special Director of Enforcement was set aside vide order dated 31st August, 2007 by the Appellate Tribunal for Foreign Exchange, inter alia, on the ground that there was no finding in the order that the Appellants were incharge and responsible for the working of the company which was an artificial person i.e. M/s Multitech International Ltd. Despite the remand back, there is no discussion and the Appellants Jaihari Dalmia and H.S. Rustagi have been held to be responsible merely because they were the Directors of the company when the impugned remittance was effected on 26th April, 1987. Even in the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the 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 satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs 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"..., etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the burden has been discharged by the prosecution and there is no finding that the Appellants Jaihari Dalmia and H.S. Rustagi were incharge and responsible for the day-to-day working of the company. In view of this position, the appeals being Crl.A. Nos. 59/2011 and 53/2011 deserve to be allowed on this short ground itself. 14. As regards Appellant Prag Dalmia, the order of the Special Director of Enforcement reads as under:- "7.19 Shri Parag Dalmia - Noticee no.25 Shri S.K. Dubey, Advocate on behalf of noticee no.23 vide his written submission dated 15.3.2010 and oral submissions at the time of personal hearing submitted that the said noticee was only a delegate director and not a member of the board or even the executive director of the company. I take note of the plea taken by Shri K.L. Sethi Noticee no.15 during the course of earlier adjudication proceedings that Shri Parag Dalmia alongwith S/Shri S.C. Mehta, K.K. Sharma & Kamlesh Gagrani looked after day to day affairs of the company. The copies of Annual Reports of the Company for the year 1986-87 and 1987-88 submitted by Shri Dubey show that Shri Parag Dalmia remained delegate Director for those two years. In this regard, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the adjudication proceedings regarding the remittance relating to the Bank of Tokio with regard to 54750 US Dollars. Though learned Additional Solicitor General has strenuously put forward that extensive efforts were made to trace out the address of the company and various letters were written to the bank, however, it may be noted that the least that was required from the Respondent was to find out from the record of the Registrar of Companies about the address of the company. For the first time, the effort was made in 2001 after 1987 and notices were served to the Appellants. 16. In Government of India v. Citadel Fine Phamaceuticals [1990] 184 ITR 467 (SC) their Lordships while dealing with Rule 12 of the Medicinal and Toilet Preparations (Excise Duties), Rules 1956 held that in the absence of any period of limitation, it is settled that the every authority is to exercise the power within reasonable period and what is a reasonable period would depend upon the facts of each case. It was held:- "6. Learned counsel appearing for the respondents urged that Rule 12 is unreasonable and violative of Article 14 of the Constitution, as it does not provide for any period of limitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted, it would mean that the department can commence adjudication proceedings 10 years, 15 years or 20 years after the original show cause notice which cannot be permitted. The position might have been different if there had been any default on the part of the petitioner or any act of omission or commission on his part which had resulted in this long period of delay. Then in such case, the petitioner could not be permitted to take advantage of his own wrong. This is not the department's case in the present matter." 18. In view of the fact that the alleged offence took place on 28th April, 1987 and for the first time summons were issued to Appellant Parag Dalmia for appearance on 16th July, 2001 i.e. after more than 14 years, I am of the considered view that serious prejudice is caused to the Appellant in leading his defence. This is not a case of delay on account of the acts of the Appellants but because of a casual approach adopted by the Respondent. Hence Crl.A. 52/2011 is required to be allowed on this count. 19. In view of the aforesaid discussion, the impugned order dated 7th October, 2010 passed by the Appellate Tribunal for Foreign Exchange and order dated 25th May, 2010 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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