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TMI Blog2025 (5) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... . and all its Directors, whereby the Four Order(s)-In-Original two dated 08.09.2009 and two dated 17.09.2009 were upheld. These Order(s)-In-Original levied a fine of Rs. 11,50,81,116/- on the Company M/s Poysha Industrial Company Ltd. [hereinafter referred to as "Company"] and its Directors. 3. Briefly the facts are that the Petitioner was appointed as an office assistant of Company and was later promoted to the position of Working Director. During the time period of 1989-1991, the Company obtained certain Advance Licenses for importing Tinplates. As per the terms and conditions of these licenses, the Company was required to fulfil specific export obligations. 4. A reference was filed under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 [hereinafter referred to as "SICA"] by the Company and by an Order dated 26.10.1993, the Board of Industrial and Financial Reconstruction [hereinafter referred to as "BIFR"] had declared the Company to be a Sick Industrial Company within the meaning of Section 3 (1) (o) of the SICA [as it stood at that time]. The BIFR gave its finding in order dated 20.12.1996 that under Section 20 (1) of the SICA Act, it would be ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /02/002/00135/AM09/ECA dated 08.09.2009 For import of 103.73 MTs of Tin plate prime (duty exemption upto 99.22 MTs only). With an obligation to export 11,00,000 Nos. (having 90.20 MTs Tinplate Prime Content) of C.T.S. Cans. 57,75,600/- 3. 03/02/002/00134/AM09/ECA dated 17.09.2009 For import of 20.61 MTs of Tinplate Prime. With an export obligation of 2,40,000 Nos (18.24 MTs) of C.T.S. Cans. 11,60,000/- 4. 03/02/002/00132/AM09/ECA dated 17.09.2009 For import of 1785.95 MTs of Tinplate Prime (Duty exemption upto 1708.2 MTs). With an obligation to export 1538 MTs (91,90,000 Nos) of C.T.S. Cans for packaging of 100gms instant coffee. 10,80,21,664/- 6. It is the case of the Petitioner that the Petitioner was employed as an office assistant in the Company in the year 1952 and was promoted as a Working Director in the year 1980. The Petitioner ceased to be a Director on 09.01.1998 when the Company was ordered to be wound up. 6.1 The Petitioner sent communications dated 19.11.2007 and 17.09.2008 to the Respondent acknowledging the letter of 11.08.2008 addressed to the Company and informing the Respondent that the Company is in liquidation and all assets, accounts, etc. have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat if a Show Cause Notice is issued but no action is taken within a reasonable period, it becomes a dead letter. With respect to the other Show Cause Notices which were issued 14 and 18 years after the date of the transaction it was submitted that it is a settled principle that in the absence of a prescribed limitation period for initiating proceedings the same must be taken within a reasonable timeframe. Reliance is placed on the judgments of the Supreme Court in Godrej and Boyce v. State of Maharashtra (2014) 3 SCC 430 and State of Punjab v. Bhatinda district Cooperative Milk Producers Union Ltd. (2007) 11 SCC 363. 8.3 Learned Senior Counsel contends that the Petitioner cannot be held liable for the alleged non-compliance as the Company was already wound up in 1998, and all records were taken over by the Official Liquidator. The failure to submit documents in compliance with export obligations could not have been attributed to the Petitioner as he had no access or control over Company records after 1998. If at all any notice was to be issued, it ought to have been issued to the Official Liquidator. 8.4 Learned Senior Counsel for the Petitioner further relies on a Judgment pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the Company has been wound up. 10. By an Order dated 30.07.2014, a Coordinate Bench of this Court passed an order directing that no coercive steps for recovery of any payment from the Petitioner shall be taken by the Respondent till further orders. The said position has continued till today. 11. The issue before the Court is whether the Petitioner, who was working at the position of Working Director on the Board of a Company that has violated an export obligation, can be made liable personally and penalized for such violation. 11.1 It is the case of the Respondent that the export obligation imposed by the Advance License(s) were required to be fulfilled by the Company were not fulfilled within the statutory period and that despite show cause notice(s) and an opportunity for personal hearing, the Petitioners and the Company did not comply. 12. It is apposite to extract Section 11 (2) of the FTDR Act which is applicable in the present case and is set out below: "11.....(2) Where any person makes or abets or attempts to make any export or import in contravention of any provision of this Act or any rules or orders made thereunder or the foreign trade policy, he shall be li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no workable proposal for its revival had been put forth. 14.2 The Petitioner has contended that the Official Liquidator had on 06.02.1998 taken possession of books, accounts, and files and business accounts of the Company and sealed the offices of the Company. The Petitioner had no control over the Company and was not even in a position to provide the documents as required by the Respondent. If any notice was to be issued, it ought to have been issued to the Official Liquidator. In these circumstances, the Respondent imposing the penalty on the Petitioner is arbitrary in the given facts. 14.3 It is the case of the Petitioner that the notices dated 22.07.2008 and 11.08.2008 were not addressed to the Petitioner nor contained any details as to how the Petitioner was responsible for the alleged violations. However, the Petitioner had sent a communication dated 17.09.2008 explaining the facts in relation to the Company. 15. Four similar orders were passed imposing the penalty, two on 08.09.2009 as well as two on 17.09.2009 and the penalty was imposed on the Company and its Directors. As stated above, these Four O-I-O's are similar to each other, the only difference between being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n) Act, 1992. The firm was directed to reply to the Show Cause Notice along with corroborative documents giving evidence in support of their contentions to reach the undersigned within the stipulated period and were warned that failure to do so will be presumed that they had nothing to say in their defence in the matter and the case will be decided ex-parte on merits, on the basis of information and evidence available on record without making further reference to the firm. The Noticee firm was also offered an opportunity of personal hearing by the said Show Cause Notice, to appear before the Joint Director General of Foreign Trade in this office. Further, the Noticee firm was issued a letter dated 22.07.2008, with another opportunity of personal hearing on 08.08.2008 and copies of the same was sent to all the Directors of the notice firm. By the said letter the licensing authority has advised the licensee to get their case redeemed in terms of Public Notice No.79 dated 2.1.2006 as the noticee firm has not submitted the original DEEC (Exports) and shipping bill for redemption purpose. The summons issued to the noticee came back from the postal authorities with the remark 'left'. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of the Company it is seen that it has been listed as a sick company under the section 3 (1) (o) of SICA Act 1985 and official liquidator has been appointed. IV. A perusal of the Adjudication orders passed by the RA reveals that though it was brought to the notice of the Adjudication Authority that the Company is wound up and official liquidator has been appointed, no documentary proof of the same have been submitted to the Adjudicating Authority. This fact is clearly mentioned in the Adjudication Orders passed in these cases. In the absence of any documentary proof, the Adjudicating Authority cannot merely stay proceedings based on a letter from the Petitioners. Moreover, the Petitioner has never contended before the Adjudicating Authority that the Authority doesn't have power to proceed against the Company or its Directors. 6. Accordingly, the orders passed by the RA suffer from no infirmity. RA has made the order on the basis of records available before it..." [Emphasis supplied] 17.1 However, and as stated above, the Impugned Order does not contain any discussion with regard to the personal liability of the Petitioner. In fact, it is the case of the Petitioner t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder did not disclose any reasons, the order would be set aside. The relevant extract of Krishna Kumar Bangur case is below: "6. The Show Cause Notice under Section 14 for action under Sections 8 and 11 of the Foreign Trade (Development and Regulation) Act, 1992 [hereinafter referred to as Act for short) dated 14.10.2003 had been issued to the said M/s. Hastings Mill as well as all its Directors. The say of the Petitioner is that he did not receive the Show Cause Notice. The Show Cause Notice mentions, inter alia, that it is prima facie established that M/s. Hastings Mill and their Directors have violated the conditions of Licence mentioned above and thereby made themselves liable to penal action under Section 11 of the said Act. The reasons for arriving at the conclusion that the Petitioner as a Director, has personally become liable for such action has not been adumberated. xxx xxx xxx 8. A perusal of the above will disclose that the Authority had not specifically considered the role that was to be played by the Petitioner in the Export Performance. It is completely reticent on the reasons for the finding of personal culpability of any of the Directors, including the Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , though it can certainly be enforced against the company. This order, however, shall not come in the way of the respondents proceeding against the petitioner, under Section 11 (2) of the Act, in terms of this order." [Emphasis supplied]" 20. As stated above, this Court has in Pankaj Mehra case while relying on the judgments passed in Krishan Kumar Bangur case and Ved Kapoor case, and on the judgment of the Supreme Court in the Santanu Ray vs. Union of India 1988 SCC OnLine Del 169, has held that unless specific allegations have been made which discuss the role of a director in the export performance, there is no question of finding the director personally liable for the same. The order impugned or even the Four O-I-O's have failed to fulfil this or show any adjudication on this aspect. In the absence thereof, the Respondent cannot now by, taking additional grounds and pleas, attempt to go beyond the Impugned Order or the Four O-I-O's. 21. There is another aspect which has to be taken into consideration. The export licences were issued during the time period of 1989-1991. Between 27.06.2002 and 11.09.2008, the Respondent issued multiple notices, summons, and orders conc ..... 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