2024 (2) TMI 1257 - HC - FEMA

Company charges quashed due to unauthorized representation during liquidation proceedings under Section 305 CrPC and Section 457

The Delhi HC quashed charges framed against a company in liquidation under FERA through an unauthorized representative. The court held that under Section ... Violation under FERA - charge u/s. 56 of FERA - Company being in Liquidation - Offences by companies u/s 68 of FERA - As submitted Company being in Liquidation and a Provisional Liquidator having been appointed for it, only the Provisional Liquidator can represent the Company in the proceedings pending before the learned ACMM and not the petitioner herein. Whether the charge against the Company can be framed through the petitioner? - HELD THAT:- As per Section 305 CrPC Procedure when corporation or registered society is an accused would show that where the accused person is a company, it may appoint a representative for the purpose of the trial, and where such representative appears, any requirement of the CrPC that anything shall be done in the presence of the accused or shall be read or stated or explained to the accused, shall be construed as a requirement that that thing shall be done in the presence of the representative or read or stated or explained to such representative. Sub-Section (4) of Section 305 CrPC states that where the representative of a company does not appear, any such requirement as is referred to in sub-Section (3) of Section 305 CrPC shall not apply. In the present case, there is no authorization of the petitioner to represent the Company in the trial. In fact, the Company is in liquidation and a Provisional Liquidator already stands appointed for the Company. In terms of Section 457 of the Companies Act, 1956 (as was then applicable), it is only the Provisional Liquidator or person authorized by the Provisional Liquidator, who could represent the Company in the trial. The petitioner, therefore, cannot be said to be representing the Company. It is another thing to say that he would face the trial in his individual capacity as an accused, but another thing to say that he would also face the trial as a representative of the Company. Though the above issue was flagged before the learned Trial Court, as is reflected in the Orders the learned Trial Court proceeded to frame the charge against the Company taking the petitioner herein to be representing the Company. The same cannot, therefore, be sustained. Conclusion & Directions - Trial Court has clearly erred in framing the charge against the Company through the petitioner. The charge against the Company has to be through the Provisional Liquidator appointed for the Company. The impugned order dated 03.08.2007 shall stand modified to this limited extent. It is clarified that the charges framed against the petitioner in his individual capacity have not been interfered with by this Court. Issues Involved:1. Whether the petitioner can represent the company, M/s Esam India Limited, in the trial.2. Validity of charges framed against the company through the petitioner.3. Validity of charges framed against the petitioner in his individual capacity.Summary:Issue 1: Representation of the CompanyThe petitioner contended that he had resigned from M/s Esam India Limited in 1993, prior to the alleged violations in 1997. He argued that since a Provisional Liquidator was appointed for the company by an order dated 14.05.1999, only the Provisional Liquidator could represent the company in the trial as per Section 305 of CrPC. The respondent countered that the petitioner was in charge of the company during the alleged violations and thus could represent the company.Issue 2: Validity of Charges Against the CompanyThe court analyzed Section 68 of the Foreign Exchange Regulation Act (FERA), which holds individuals in charge of the company at the time of contravention responsible for the violations. The court noted that the petitioner did not dispute the invocation of Section 68 against him and was ready to face trial in his individual capacity. However, the court found that the petitioner was not authorized to represent the company, as the company was in liquidation and only the Provisional Liquidator could represent it in the trial.Issue 3: Validity of Charges Against the Petitioner IndividuallyThe court upheld the charges against the petitioner in his individual capacity, noting that he did not challenge these charges at this stage and was prepared to face the trial.Conclusion & Directions:The court concluded that the trial court erred in framing charges against the company through the petitioner. The charges against the company should be framed through the Provisional Liquidator. The impugned order dated 03.08.2007 was modified to this extent. The charges against the petitioner in his individual capacity were not interfered with. The petition was disposed of accordingly.