Tribunal Overturns Penalty Due to Lack of Evidence and Delayed Proceedings; Orders Refund to Appellant.

The Tribunal annulled the Impugned Order dated 25.05.2010 by the Special Director, Enforcement Directorate, New Delhi, against the appellant. It determined that the penalty under Section 68 of the Foreign Exchange Regulation Act, 1973, was improperly imposed due to insufficient evidence of the appellant's involvement. The Tribunal acknowledged the prejudicial delay in issuing the Show Cause Notice and the failure to prove the appellant's responsibility for the company's daily operations. The Tribunal ordered the return of the pre-deposited amount to the appellant within two months, concluding the appeal without costs.

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Issues Involved:

1. Validity of penalty imposed on the appellant under Section 68 of the Foreign Exchange Regulation Act, 1973.
2. Delay in issuing the Show Cause Notice.
3. Responsibility of directors for contraventions under the Foreign Exchange Regulation Act.
4. Applicability of previous judgments to the present case.

Detailed Analysis:

1. Validity of Penalty Imposed:

The appellant challenged the imposition of a penalty of Rs. 1,50,000/- under Section 68 of the Foreign Exchange Regulation Act, 1973, arguing that he was not aware of the transaction in question and was not involved in the day-to-day affairs of the company. The appellant emphasized that he was only a director for a short period and that the executive directors were responsible for the company's daily operations. The Tribunal observed that the onus was on the respondent to prove that the appellant was in charge of the company's affairs, which they failed to do. The Tribunal found merit in the appellant's submission that the penalty was wrongly imposed, as there was no evidence to show the appellant's involvement in the contravention.

2. Delay in Issuing the Show Cause Notice:

The appellant argued that the Show Cause Notice was issued after an inordinate delay of 15 years from the date of the transaction, which occurred in 1987. The Tribunal noted that such a delay could cause serious prejudice to the appellant in preparing his defense. The Tribunal referenced the Delhi High Court's observation that a delay of over 14 years was prejudicial to the appellant, thus supporting the appellant's contention regarding the delay.

3. Responsibility of Directors:

The appellant contended that he was not responsible for the contravention as he was not involved in the day-to-day management of the company. The Tribunal referred to the Delhi High Court's decision, which stated that the initial burden was on the prosecution to prove that a director was responsible for the company's daily operations. The Tribunal concluded that the prosecution failed to discharge this burden, and thus, the appellant could not be held liable for the contravention.

4. Applicability of Previous Judgments:

The Tribunal considered the appellant's case in light of previous judgments by the Delhi High Court, which set aside similar penalties imposed on other directors in related cases. The Tribunal found that the facts and issues in the appellant's case were similar to those in the Delhi High Court's judgments. Consequently, the Tribunal applied the reasoning from those judgments to the present case, leading to the setting aside of the penalty against the appellant.

Conclusion:

The Tribunal set aside the Impugned/Adjudicating Order dated 25.05.2010, passed by the Special Director, Enforcement Directorate, New Delhi, against the appellant. The Tribunal directed that the pre-deposited amount be returned to the appellant within two months. The appeal was disposed of with no order as to costs, and both parties were informed accordingly.

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