TaxTMI 
TaxTMI 
2026 (7) TMI 726
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....ctor India Pvt. Ltd. (NSIL) was issued Show Cause Notice (SCN) No. T-4/07/FEMA/DLZO-II/2018/JD (NKG) dated 14.11.2018 for its failure to make exports against 10 export advances totaling US $ 11,13,769 equivalent to Rs.5,01,86,082/- received between 25.04.2006-19.12.2007 from Neomagic Corporation, USA. The SCN was issued on the basis of the Complaint dated 29.10.2018 under Section 16 (3) of FEMA. The SCN and the Complaint had alleged the contravention of Section 7 of the FEMA read with Regulation 16 of Foreign Exchange Management (Export of Goods and Services) Regulation 2000. The SCN was also issued to Shri H P Agarwal, Managing Director, Shri Deep Puar, Director and Shri Vivek Goyal, Director for the alleged contraventions in terms of Section 42 of FEMA. Ld. Counsel submitted that no penalty has been imposed upon the Company since it has been struck off as confirmed from the website of the Ministry of Corporate Affairs, the Government of India. He further stated that penalty of Rs. 20,00,000/- was imposed on Shri H P Agarwal, and Rs. 10,00,000/- each separately on Shri Vivek Goyal and Shri Deepraj Singh Puar. Ld. Counsel for the Appellant pleaded that the Appellant Shri Vivek Goya....
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....about his resignation from the Board. His responsibilities were limited to the planning and management of the technical operations of the Company and technical employees' recruitment. Occasionally, he may have signed a few salary cheques or instructions to the bank to release employee salaries, if the Managing Director, who normally handed these matters, was unavailable. He was made an authorized signatory for the Company's bank accounts and a Director solely for administrative convenience only. In these roles, he always acted only under the guidance of the Managing Director. He was never in a decision-making role nor had any oversight responsibilities. 5. Ld. Counsel for the Appellant drew attention to the statement dated 12.02.2013 of the Appellant Shri Vivek Goyal tendered under Section 37 of FEMA. In particular, the Appellant in response to Question No. 3 stated that Shri H P Agarwal handled that work relating to finance, banking and export/import. The Appellant had stated that in the absence of Shri H P Agarwal, he had handled banking. He was also responsible for creation of design files of software and hardware and transmission to the same of the parent Company. Ld....
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....he company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Explanation.-For the purposes of this section- (i) "company" means anybody corporate and includes a firm or other association of individuals; and (ii) "director", in relation to a firm, means a partner in the firm." In terms of the provisions of the Section it is imperative to make a finding that the person concerned was in-charge of and responsible to the Company for the conduct its business. The proviso allows for the said person to prove that the contravention occurred without his knowledge or alternatively had exercised all due diligence to prevent such contravention. The Sub-Section (2) provides for liability for the contravention if the person is proved to have given the consent or had connived in the indulgence of contravention or had been negligent in the discharge of his duties. We find that in spite of denial by the Appellant of any such responsibility which could have caused the contravention, the Impugned Order has culminated in the imposition of penalty on the App....
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....position of a Director in a company in order to illustrate the point that there is no magic as such in a particular word, be it Director, Manager or Secretary. It all depends upon respective roles assigned to the officers in a company. A company may have Managers or Secretaries for different departments, which means, it may have more than one Manager or Secretary. These officers may also be authorised to issue cheques under their signatures with respect to affairs of their respective departments. Will it be possible to prosecute a Secretary of Department-B regarding a cheque issued by the Secretary of Department-A which is dishonoured ? The Secretary of Department-B may not be knowing anything about issuance of the cheque in question. Therefore, mere use of a particular designation of an officer without more, may not be enough by way of an averment in a complaint. When the requirement in Section 141, which extends the liability to officers of a company, is that such a person should be in charge of and responsible to the company for conduct of business of the company, how can a person be subjected to liability of criminal prosecution without it being averred in the complaint that he....
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....ion 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. A reference to sub-section (2) of Section 141 fortifies the above reasoning because sub-section (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 is attributable to neglect on the part of any of the holders of these offices 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 of their proved involvement. The conclusion is inevitable that the liability arises on account of conduct, act or omission on the part of a person and not merely on account of holding an office or a pos....