TaxTMI 
TaxTMI 
2010 (9) TMI 33
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.... Ltd. (for short SA Ltd.) wherein Spifa Germany was to hold 60% equity and ICC was to hold 40% equity. By a resolution dated 27-6-1994 passed by the S A Ltd., the Appellant was to be concurrently appointed as the Managing Director of S.A. Ltd effective from 1-8-1994 at nil salary for a period of 5 years on the terms and conditions as mentioned in the contract which was tabled at the meeting. However, the said contract did not fructify as the ICC Board was not in favour of having concurrent Managing Directors for two companies and, therefore, by further resolution dated 2991994, the Appellant's appointment as the Managing Director of S.A. Ltd, was deferred till further notice. By further resolution passed by the Board of S.A. Ltd. dated 971997, it was reiterated that the Appellant was not appointed as Managing Director of S. A. Ltd and that his appointment was deferred, since the Appellant could only periodically visit the factory of S.A. Ltd as a nominee Director of ICC Ltd. The S. A. Ltd appointed one Mr. Oberoi as the Managing Director of S.A. Ltd. In 1997. Since the Appellant has been held to be responsible for the evasion of customs duty, by the said S.A. Ltd, it would be neces....
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....cause notice. It is also stated by the Appellant that the total value of import through baggage was Rs. 33,53,590/and that the sum of Rs.33,53,590/was credited to the account of Spifa maintained by the S.A. Ltd in its books of accounts. However, according to the Appellant the said amounts were not paid to Spifa as S.A. Ltd was facing financial difficulties and Spifa agreed to not to insist on payment being made by S.A. Ltd. 4 Thereafter some time in August 1999, the Appellant received a show cause notice dated 25-6-1999, a similar show cause notice has also issued to S.A. Ltd, to one Shri Venkatramani and Shri Traubel who were the nominee Directors, Deputy General Manager (Materials) and Resident Representative of Spifa, the collaborator of S.A. Ltd. respectively. It was alleged in the said show cause notice that by placing sums to the credit of Spifa in the manner which was set out in the show cause notice, the S.A. Ltd. appeared to have contravened the provisions of Section 9(1)(e) of the Foreign Exchange Regulation Act (FERA for short) and, thereby rendered themselves liable to be proceeded against under Section 50 of the FERA Act. The said show cause notice also calle....
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....erations of S.A. Ltd till July 1997. The said finding according to the Learned Counsel has been recorded without there being any evidence or material on record to the said effect. The Learned Counsel further submitted that the Tribunal notwithstanding the documentary evidence on record adversely held against the Appellant on the ground that the Appellant had not produced the copy of Form No.32 from the Registrar of Companies which could have been filed by him to show that the Appellant was not a Director of the Company during the relevant period. The Learned Counsel lastly submitted that under Section 68 the liability arises only if the Director is in charge of and responsible for the conduct of the business of the Company at the relevant time when the offence was committed. To buttress of his submission, the Learned Counsel relied upon the Judgment of the Apex Court reported in AIR 2005 Supreme Court 3512 in the matter of SMS Pharmaceuticals Ltd. Vs. Neeta Bhalla & Anr. 7 We have heard the Learned Counsel for the Appellant and have bestowed our anxious consideration to the contentions urged by him. It is pertinent to note that the Tribunal thought it fit to reduce the pe....
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....said Form No.32 along with an Affidavit, the said Form No.32 discloses that the Appellant was appointed as Director of S.A. Ltd by way of an ordinary resolution for the relevant period and was not the Managing Director of S.A.Ltd. That apart, since no finding has been recorded by the Tribunal in terms of Section 68 as regards the role of the Appellant qua the S.A.Ltd., in our view, the penalty imposed on the Appellant is wholly unsustainable. It is pertinent to note that the Appellant was not a party to the proceedings under the Customs Act, against the said S.A.Ltd. Which proceedings are the genesis in so far as the penalty proceedings against the Appellant are concerned. The Learned Counsel for the Appellant has rightly relied upon the Judgment of the Apex Court in SMS Pharmaceuticals Ltd. (Supra). In the said case the Apex Court was concerned with the interpretation of Section 141 of the Negotiable Instrument Act, which is in terms para materia to Section 68 of the FERA Act, under which a Director can be made responsible for the contravention for the said Act. In the said Judgment, the Apex Court has held that the liability under Section 141 arises only if th....
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....liability, the Section would have said so. Instead of "every person" the section would have said "every Director" . Manager or Secretary in a Company is liable ........ etc. The legislature is aware that it is a case of criminal liability which means serious consequences so far as the person sought to be made liable is concerned. Therefore, only persons who can be said to be connected with the commission of a crime at the relevant time have been subjected to action. 13. A reference to sub-section (2) of Section 141 fortifies the above reasoning because subsection (2) envisages direct involvement of any Director, Manager, Secretary or other officer of a company in commission of an offence. This section operates when in a trial it is proved that the offence has been committed with the consent or connivance or its attributable to neglect on the part of any of the holders of these officers in a company. In such a case, such persons are to be held liable. Provision has been made for Directors, Managers, Secretaries and other officers of a company to cover them in cases in their proved involvement. 14. The conclusion is inevitable that the liability arises on account ....