TMI Blog2023 (1) TMI 1195X X X X Extracts X X X X X X X X Extracts X X X X ..... l obligations. Their role and responsibility is thus specific and this is the context against which the liability cast in terms of Section 140 of the Companies Act, has to be tested - While there may be some justification in implicating a nominee director for statutory violations that are current, the violation in question touches upon alleged non-compliance with the terms EPCG licence issued in 2010, long prior to their appointment. No doubt, the terms of the EPCG licence required the assessee to comply with export obligations for a period of eight years after date of licence. However, at the time when such nominee directors were appointed such obligations would not have been at the forefront and there is no justification in expecting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of this benefit is subject to certain conditions that would have to be satisfied by the assessee, in that, the quantum of export would have to be eight times the customs duty saved. This is to ensure that the revenue that is forgone by the Government in duty, is compensated by the inflow of export earnings. The aforesaid export obligation is a pre-condition to the availment of the benefit under the Scheme. 4. It is the case of the first respondent that R2 had not satisfied the export obligation and it is thus the impugned order has been passed as against the present petitioners. The order refers to certain show cause notices that have been issued, presumably to R2 and its directors, invoking the provisions of Section 140 of the Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as nominee directors to oversee the performance of the company and to liquidate the liability of the CDR Banks. They have, admittedly, not received any show cause notice/notice prior to passing of the impugned order by the Deputy Director General of Foreign Trade/R1 fastening liability upon them for non-adherence to the terms and conditions of the EPCG Scheme. 10. Section 140 of the Customs Act, stipulates that, any person, who, at the time of offence was committed by a company, shall be deemed to be guilty of the offence and liable to be proceeded with and punished accordingly. 11. Section 2(13) of the Companies Act, 1956 defines a director to include any person occupying the position of director, by whatever name called. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as executive or nominee/independent directors and their liability, barring Section 408 that provides for the appointment of the latter by the Government, in the specific context of mismanagement or oppression. 16. Circulars/clarifications have been issued from time to time by the Ministry of Corporate Affairs (MCA) to clarify the roles assumed by nominee directors, including in the context of the 1956 Act, and useful reference may be made to a Master Circular issued in regard to prosecution of such directors, being Circular No.1 of 2011 dated 29.07.2011. 17. The Circular is specific to prosecution launched as against directors for violation under the Companies Act, 1956 and refers to an earlier Circular No.6/98 dated 12.11.1998, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l proceedings be initiated as against nominee/independent directors, unless there is sufficient information available by way of evidence to implicate their participation in the acts of omission and commission. This circular also recognizes the position that a nominee/independent director would not be held responsible for normal day to day functioning of company or any acts that were beyond their control. 22. In the present case all directors have been appointed as nominees from among the consortium of banks to oversee the adherence of the company to its financial obligations. Their role and responsibility is thus specific and this is the context against which the liability cast in terms of Section 140 of the Companies Act, has to be test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s. Gangotri Textiles its Directors viz. 1) Shri Manoj Kumar Tibrewal 2) Shri Mohanlal Tibrewal 3) Shri Ullas R. Sangvi 4) Shri R.S. Joshva and 5) J.B.Sivakumar only (In this list, the petitioner Shri Rajani Kanta Naik, Shri P.T.KalaiSelven and Shri R.Elango are excluded), since only these Directors are figuring in the IEC data base till now. If any Directors are nominated by creditor Bank, the Company has to make a request to this Office for deletion of name from Directorship in the IEC data base enclosing supportive documents for the same as per Policy Procedures. As long as any Director name is existing in the IEC data base, they are liable for the action with reference to the Recovery Order. Hence, the Creditor Banker has to take ..... X X X X Extracts X X X X X X X X Extracts X X X X
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