2020 Supreme(SC) 455

SUPREME COURT OF INDIA
Ashok Bhushan, R. Subhash Reddy, JJ.
SHAILENDRA SWARUP – Appellant
Versus
THE DEPUTY DIRECTOR, ENFORCEMENT DIRECTORATE – Respondent
Criminal Appeal No. 2463 of 2014
Decided on : 27-07-2020

IMPORTANT POINTS
(1) Section 68 of FERA, 1973 as well as Section 141 of Negotiable Instruments Act, 1881 deals with offences by companies in same manner.
(2) When a person is proceeded with for committing an offence and is to be punished, necessary ingredients of offence alleged should be present.
(3) FERA violations – Directors can be prosecuted only if they were in-charge and responsible for conduct of business of company.

Headnote:

(A) Foreign Exchange Regulation Act, 1973 – Sections 8(3), 8(4) and 68 read with Section 51 – FERA violations – Adjudication proceedings – Provisions of Section 51 oblige adjudicating officer to hold an inquiry in prescribed manner after giving that person a reasonable opportunity for making a representation in the matter – When notice was given for adjudication proceedings it was obligatory for adjudicating officer to give opportunity for making representation – When Deputy Director decided to hold adjudication proceedings under Section 51 reply given in response to notice was statutorily required to be considered under Section 51 – Said reply could not have been ignored or knocked down by an erroneous assumption that it was an afterthought as has been done by High Court – Written representation submitted by appellant required due consideration and High Court erred in discarding it as an afterthought. (Paras 14, 15 and 16)

(B) Negotiable Instruments Act , 1881 – Section 141 – Foreign Exchange Regulation Act, 1973 – Section 68 – FERA violations – Offence by company – Section 68 of FERA, 1973 as well as Section 141 of Negotiable Instruments Act deals with offences by companies in same manner – For proceeding against a Director of a company for contravention of provisions of FERA, 1973, necessary ingredient for proceeding shall be that at the time offence was committed, Director was in charge of and was responsible to company for conduct of business of company – Liability to be proceeded with for offence under Section 68 of FERA, 1973 depends on role one plays in affairs of company and not on mere designation or status – Even though, FERA, 1973 does not contemplate filing of a written complaint but in proceedings as contemplated by Section 51, person, who has to be proceeded with has to be informed of contravention for which penalty proceedings are initiated – FERA, 1973 does not contemplate any complaint but Scheme of Act indicate that a person, who is to be proceeded with has to be made aware of necessary allegations which may constitute an offence on his part – In charge of affairs of the company – Presumption of a person in commercial world is a rebuttable presumption and when adjudicating authority proceeds to impose a penalty for a contravention of FERA, 1973, essential ingredients constituting an offence under the FERA read with Section 68 has to be communicated to person proceeded with to enable him to make effective representation in the matter. (Paras 38, 39 and 40)

(C) Foreign Exchange Regulation Act, 1973 – Sections 8(3), 8(4) and 68 read with Section 51 – FERA violations – Material brought by appellant on record that he was a part-time, non-executive Director not incharge of affairs of Company at relevant time, was erroneously refused to be considered – There was nothing on record brought on behalf of Department that plea of appellant was incorrect and it was appellant who was responsible for conduct of business of Company at relevant time – Adjudicating officer has not even held that pleas taken by appellant were untenable – Adjudicating officer has imposed penalty without returning a finding that it was appellant who was liable for contravention of provisions of Section 8(3), 8(4) and Section 68 of FERA, 1973 – Order of adjudicating officer is unsustainable – No finding has been returned by Appellate Tribunal that appellant was not a part-time, non-executive Director and was responsible for conduct of business of Company at relevant time – Criminal liability arises from being incharge of and responsible for conduct of Company at relevant time – Directors can be prosecuted only if they were in-charge and responsible for conduct of business of company – Section 68 cannot be read to mean that whosoever was a Director of a company at relevant time when contravention took place, shall be deemed to be guilty of contravention – When a person is proceeded with for committing an offence and is to be punished, necessary ingredients of offence as required by Section 68 should be present – Present is a case where liability has been fastened on appellant without there being necessary basis for any such conclusion – Adjudicating officer has erroneously imposed penalty on appellant for alleged offence under Section 8(3), 8(4) and 68 of FERA, 1973 which order was erroneously affirmed both by Appellate Tribunal and High Court – Penalty imposed on appellant set aside. (Paras 21, 22, 25, 26, 30, 36, 37, 41, 43 and 44)

Facts of the case:

Present appeal has been filed against the judgment of Delhi High Court dated 18.11.2009 dismissing the Criminal Appeal filed by the appellant by which appeal the judgment dated 26.03.2008 of the Appellate Tribunal for Foreign Exchange in Appeal No.622 of 2004 filed by the appellant was challenged.

Findings of Court:

Plea of appellant that he was part-time, non-executive Director not incharge of the conduct of business of the Company at the relevant time was erroneously discarded by the authorities and the High Court and there is no finding by any of the authorities after considering the material that it was the appellant who was responsible for the conduct of business of the Company at the relevant time.

Result : Appeal allowed