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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) Whether a director could be proceeded against on the basis of the impugned notice without specific averments showing that he was in charge of and responsible for the conduct of the company's business; (ii) Whether the writ petition was barred by the constitutional amendment on the ground of availability of another remedy or absence of substantial injury.
Issue (i): Whether a director could be proceeded against on the basis of the impugned notice without specific averments showing that he was in charge of and responsible for the conduct of the company's business.
Analysis: Liability for a company's contravention under Section 23-C of the Foreign Exchange Regulation Act, 1947 attaches only to persons who, at the time of contravention, were in charge of and responsible to the company for its business, or whose consent, connivance or neglect is specifically shown. A director simpliciter is not, by that status alone, liable to be proceeded against. On the allegations in the notice, the petitioner was sought to be proceeded against merely as a director, without the necessary factual foundation for vicarious liability.
Conclusion: The impugned notice could not validly be issued against the petitioner on the materials disclosed, and the challenge succeeded on this ground.
Issue (ii): Whether the writ petition was barred by the constitutional amendment on the ground of availability of another remedy or absence of substantial injury.
Analysis: The injury complained of was not merely an erroneous adjudication, but exposure to adjudicatory proceedings without any legal basis or supporting material. No effective statutory remedy was shown for preventing such initiation itself. Exposure to quasi-criminal adjudication without foundation was treated as a substantial injury, and the amended Article 226 did not exclude relief in such circumstances.
Conclusion: The writ petition was maintainable and the petitioner was entitled to relief under Article 226 of the Constitution of India.
Final Conclusion: The notice was quashed as against the petitioner, with liberty to the authorities to proceed afresh in accordance with law on proper materials.
Ratio Decidendi: A director cannot be subjected to vicarious liability for a company's contravention unless the notice or record shows the statutory ingredients making him responsible for the company's business, and writ relief remains available against initiation of proceedings without legal foundation where no effective alternative remedy exists.
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