TMI Blog2014 (8) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... held liable. In light of the reply dated 9th April 2001 sent by the Appellant it was possible to discern the distinction between those directors who were in-charge of the day-to-day affairs of the company and those were not. The explanation offered by the Appellant is that the Company Secretary of XML placed before the Board of Directors of MXL compliance certificates at every meeting held during the relevant period, which led the directors, including the Appellant, to believe that there were no contravention of any of the statutory provisions, appears to be a plausible one. This explanation has not been considered either by the DD or the AT Appellant on his part discharged the burden in terms of Section 68 (2) of the FERA and was entitled to the benefit of doubt. - Court sets aside the impugned order dated 26th March 2008 of the AT and the impugned AO dated 31st March 2004 of the DD insofar as the Appellant is concerned and exonerates the charge of contravention of Section 8 (3) read with Section 8 (4) and Section 68 of the FERA. - Decided in favour of appellant. - CRL A No. 568 of 2008 - - - Dated:- 31-7-2014 - Justice S. Muralidhar,JJ. For the Appellant : Mr. Akhil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gement Act, 1999 ( FEMA ) became effective from 1st June 2000. However, in terms of Section 49 FEMA there was a window of two years, i.e., between 1st June 2000 and 31st May 2002, for the ED to issue show cause notices ( SCNs ) in respect of transactions which were in contravention of the provisions of FERA . This led to a spat of the SCNs being issued by the ED in cases that had not been proceeded with for more than eight or ten years, including that of MXL. 6. On 19th February 2001 the ED issued a Memorandum-cum-SCN to MXL and its directors, including the Appellant herein, stating that they appeared to have violated Section 8 (3) read with Section 8 (4) of FERA. As regards the particular role of the Appellant, the SCN included the following standard cyclostyled paragraph which reads as under: And whereas it further appears that S/Shri As per Annexure B Proprietor/Partner(s)/Director(s)/ Manger/ Secretary of the said company firm has been responsible/supervisor/in-charge of the said company/ firm for the conduct of business of the company/firm at the relevant time when the aforesaid import was made and as such he/she/they has/have rendered himself/ herself/themselves liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 26th March 2001. The AO dropped the charges against the nominee directors of the financial institutions. 11. Aggrieved by the AO, the appeals were filed by XML and the directors including the Appellant. By the common impugned order dated 26th March 2008 the said appeals were dismissed. Relying on the decision of the Supreme Court in N. Rangachary v. Bharat Sanchar Nigam Limited (2007) 5 SCC 108 the AT held that the Appellants could not be absolved of the responsibility on the ground that violation were a mere technical breach. It was held that there was nothing on record to show that any restriction had been placed on the powers of the directors with reference to subject transaction. 12. This Court has heard the submissions of Mr. Akhil Sibal, learned counsel for the Appellant. Despite the appeal being heard over two days, none appeared for the Respondent. Nevertheless its reply on record has been considered. 13. The basis on which the proceedings against the Appellant were initiated for alleged violation by MXL of Section 8 (3) read with Section 8 (4) of FERA, is Section 68 of FERA which reads as under: 68. Offences by companies (1) Where a person committing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would know what is the case which is alleged against him. It was observed that it is necessary to specifically aver in a complaint that at the time the offence was committed, the person accused was in charge of, or responsible for the conduct of business of the company. 15. Later in Saroj Kumar Poddar v. State (NCT of Delhi) (2007) 3 SCC 693 the Court emphasized that it was necessary to make specific allegations to show as to how and in what manner the director is liable. In SMS Pharmaceuticals Limited (2) v. Neeta Bhalla (2007) 4 SCC 70 it was observed that there may be a large number of directors but all of them could not be held to be responsible for the conduct of the business of the company. It was pointed out that the averments should state that the persons who were liable for the commission of the offence of the company were both in charge of and was responsible for the conduct of the business of the company. 16. In National Small Industries Corporation Limited v. Harmeet Singh Paintal (2010) 3 SCC 330, the Supreme Court discussed the entire case law and noted that the decision in N. Rangachari v. Bharat Sanchar Nigam Limited (supra) cannot be said to have overlo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it was possible to discern the distinction between those directors who were in-charge of the day-to-day affairs of the company and those were not. The explanation offered by the Appellant is that the Company Secretary of XML placed before the Board of Directors of MXL compliance certificates at every meeting held during the relevant period, which led the directors, including the Appellant, to believe that there were no contravention of any of the statutory provisions, appears to be a plausible one. This explanation has not been considered either by the DD or the AT. 19. In the considered view of the Court, the Appellant on his part discharged the burden in terms of Section 68 (2) of the FERA and was entitled to the benefit of doubt. 20. Consequently, this Court sets aside the impugned order dated 26th March 2008 of the AT and the impugned AO dated 31st March 2004 of the DD insofar as the Appellant is concerned and exonerates the charge of contravention of Section 8 (3) read with Section 8 (4) and Section 68 of the FERA. 21. The appeal is allowed in the above terms, but in the facts and circumstances of the case, with no order as to costs. 22. The amount, if any, depos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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