1992 (7) TMI 353 - HC - FEMA

Court Upholds Criminal Proceeding Against Director, Emphasizes Factual Establishment of Liability

Raj Kumar Kajaria Versus State of West Bengal and Ors.

The court dismissed the application to quash the criminal proceeding under Section 482 of the Cr. P.C. The decision highlighted the necessity of factual ... - Issues:1. Quashing of criminal proceeding under Section 482, Cr. P.C. based on a complaint filed under Section 56(1)(i) of the Foreign Exchange Regulation Act, 1973 (FERA).2. Interpretation of liability of a Director for the offenses committed by a Company under Section 68 of FERA.3. Comparison with previous judgments regarding quashing of criminal proceedings based on departmental findings.4. Determining the applicability of quashing the criminal proceeding based on the absence of a positive finding by the Appellate Board.Analysis:1. The petitioner sought to quash the criminal proceeding initiated under FERA based on a complaint filed by the Deputy Director of Enforcement Directorate. The petitioner contended that the Appellate Board's decision exonerating him from penalties imposed by the adjudicating officer should render the criminal proceeding untenable.2. The Appellate Board set aside the adjudicating officer's decision as it found that merely being a Director of a Company does not ipso facto make one liable for the Company's offenses under Section 68 of FERA. The Director must be in charge and responsible for the business conduct or consent to the offense for liability to apply. The absence of a specific finding on the petitioner's liability led the Appellate Board to exonerate him, highlighting the necessity of factual establishment of liability.3. Comparisons were drawn with past judgments where departmental findings influenced the quashing of criminal proceedings. However, the court noted that in those cases, positive findings of fact were crucial in determining the legality of the prosecution. In the present case, the absence of a positive finding did not automatically warrant quashing the criminal proceeding.4. The court emphasized that the specific averment in the complaint regarding the Directors' responsibility for the Company's conduct prima facie attracted Section 68 of FERA. The absence of a positive finding on this matter did not conclusively impact the criminal proceeding's validity. The court held that the issue of liability under Section 68 remained open for trial, and the absence of a positive finding did not justify quashing the criminal proceeding.In conclusion, the court dismissed the application for quashing the criminal proceeding, emphasizing the need for factual establishment of liability under FERA's provisions and the importance of trial to determine the veracity of the allegations made in the complaint.