2015 (8) TMI 1105 - HC - FEMA

Court overturns FERA violation ruling for ex-Director due to lack of evidence

The Court allowed the appeal in favor of the Appellant, a former Director of a company, in a case involving allegations of contravention of Section 18(2) ... Contravention of Section 18 (2) of the Foreign Exchange Regulation Act, 1973 - non-realization of export proceeds - Held that:- Although Section 68 FERA is in the nature of a deeming provision, the proviso thereto contemplates rebuttal of such presumption by a person who is able to show that the contravention took place without his or her knowledge. - memorandum is a cyclostyled form and the averments as regards all the directors is identical. There is no specific mention of the precise role of the Appellant in managing the day-to-day affairs of the company. The case of the Appellant is different from that of Mr. Dinkar Dogra. Prior to Mr. L.R. Sridhar taking over the management of the company, Mr. Dinkar Dogra was the managing director. The order dated 4th June 2008 passed by this Court dismissing Mr. Dinkar Dogra's Criminal Appeal [2008 (6) TMI 579 - DELHI HIGH COURT] discusses in detail the evidence showing Mr. Dogra to be incharge of the day-to-day affairs of the company. There is no evidence to show in what manner the present Appellant, Mrs. Kavita Dogra was responsible to the company for the conduct of its business. As already noticed, neither the adjudication order nor the impugned order of the AT discusses the facts peculiar to the Appellant. - Court is, therefore, satisfied that the DoE failed to make out a case of contravention of Section 18 (2) FERA as far as the Appellant was concerned. Neither the adjudication order nor the order of the AT in her case are sustainable in law. - Decided in favour of appellant. Issues:1. Contravention of Section 18(2) of FERA for non-realization of export proceeds.2. Application of Section 68 of FERA - statutory presumption and rebuttal.3. Interpretation of roles and responsibilities of directors in contravention cases.Analysis:1. The appeal involved a challenge against an order dismissing allegations of contravention of Section 18(2) of FERA against the Appellant, who was a Director of a company until May 1995. The proceedings were initiated by the Directorate of Enforcement for non-realization of export proceeds during the period of 1994-95.2. The key contention revolved around the application of Section 68 of FERA, which deems individuals in charge of a company guilty of contravention. The Court noted that while the provision creates a presumption, it allows for rebuttal if the person can demonstrate lack of knowledge or due diligence. The Court highlighted the importance of specific averments regarding the individual's role and responsibility in the conduct of business.3. The Court emphasized the need for a detailed examination of each director's involvement in contravention cases. It noted that a generic finding without specific consideration of the Appellant's role was insufficient. Drawing parallels with previous judgments, the Court stressed the requirement for clear evidence linking the individual to the contravention.4. The Court found that the DoE failed to establish the Appellant's involvement in the contravention as per Section 18(2) of FERA. It highlighted the lack of specific evidence or discussion regarding the Appellant's responsibilities in the company's affairs. Consequently, both the adjudication order and the appellate order were set aside, and the appeal was allowed in favor of the Appellant.5. As a result of the judgment, any money deposited by the Appellant was to be refunded within a specified timeframe, along with any accrued interest, following proper identification. The Court's decision underscored the importance of individualized assessments in cases of statutory presumptions and the necessity of clear evidence to establish liability in contravention matters.