Full Text
JUDGMENT
227. os wp 325-09.doc R.M. AMBERKAR (Private Secretary)
IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. O.O.C.J. WRIT PETITION NO. 325 OF 2009 Meena Anand Suryadutt Bhatt, of Mumbai, Indian Inhabitant, as the legal heir and representative of the Estate of the late Shri. Anand Suryadutt Bhatt, residing at 3rd floor, Shree Sadan, East Wing 4-A, M.L. Dahanukar Marg (Carmichael Road), Mumbai – 400 026... Petitioner
VERSUS
1. Union of India, (through the Ministry of Law, Justice and Company Affairs, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400 020.
2. Jt. Director General of Foreign Trade, having his office at New C.G.O. Bldg, New Marine Lines, Mumbai 400 020... Respondents.................... Mr. Vikram Nankani, Senior Advocate a/w Ms. Kirti Bhoite & Ms. Virangana Wadhawan i/by Economic Law Practice for the Petitioner Mr. Y.R. Mishra a/w Mr. N.R. Prajapati for the Respondents................... CORAM: K. R. SHRIRAM & MILIND N. JADHAV, JJ. DATE: JULY 08, 2022 ORAL JUDGMENT [PER K.R. SHRIRAM, J.]
1. Petitioner is the wife of late Shri. Anand S. Bhatt (hereinafter referred to as “Mr. Bhatt”). Mr. Bhatt was a practicing advocate and partner of M/s. Wadia Ghandy & Co., Advocates and Solicitors. Mr. Bhatt unfortunately was a victim of the terrorist attack on 26.11.2008 at Hotel Oberoi, Mumbai. He succumbed to the bullets fired by the terrorists. 1 of 13
2. After the demise of Mr. Bhatt, petitioner came across a file relating to the orders passed by respondent No. 2 and on legal advice decided to approach this court. Rule was issued on 16.02.2009 and interim relief was granted.
3. Petitioner challenges nine orders dated 25.07.2008, 12.08.2008, 02.09.2008, 05.09.2008, 15.09.2008, 23.09.2008 and 15/30.09.2008, all passed by respondent No. 2 by which penalty has been imposed on one TPI India Ltd, its directors and ex-directors. Petitioner is impugning these orders because Mr. Bhatt's name also appears in the impugned orders.
4. It is stated in the petition that prior to 10.03.1999, Mr. Bhatt was an independent non-executive director of TPI India Ltd (“TPI”). On 10.03.1999, Mr. Bhatt resigned as independent director of TPI. A copy of resignation letter dated 10.03.1999 and Form 32 dated 29.04.1999 were filed with the Registrar of Companies by TPI intimating to the public about resignation of Mr. Bhatt. TPI has been declared a sick industrial company under the provisions of the Sick Industrial Companies (Special Provisions Act), 1955 (“SICA”) by the Board of Industrial and Financial Reconstruction (“BIFR”), New Delhi. The fact that Mr. Bhatt had resigned has not been disputed. The fact that Mr. Bhatt was an independent non-executive director and had nothing to do with the day to day management and business of TPI 2 of 13 has also not been denied.
5. It appears that TPI had been issued Advance Import licences under which TPI was permitted to import certain raw material with respect to which TPI was required to pay import duty. The advance licence facility was granted to TPI on TPI undertaking to export finished products of a certain value within a certain period from the date of import (hereinafter referred to as “export obligation”). It appears TPI had defaulted in its export obligation under the advance licences issued to it by respondent No. 2 by not submitting the required documentation as alleged by respondent No. 2. As a result, respondent No. 2 passed the impugned adjudication orders holding TPI as defaulter under Foreign Trade (Development and Regulation) Act, 1992 (“FTDRA” for short).
6. It seems TPI was receiving notices from respondent No. 2 and those notices were also forwarded by respondent No. 2 to the incorrect residential address on the premise that Mr. Bhatt also continued to be a director of TPI. It appears that no notice was addressed to Mr. Bhatt but all notices were addressed to TPI and TPI was called upon to show cause.
7. In the affidavit in reply, none of the facts averred in the petition are denied. The stand of respondent No. 2 is that the name of Mr. Bhatt was shown as a director and therefore penalty was imposed 3 of 13 on Mr. Bhatt.
8. Mr. Mishra submitted that name of Mr. Bhatt was also appearing on the Import Export Code and if Mr. Bhatt had resigned, after his resignation from the company, he ought to have applied to get his name deleted from the Import Export Code by applying to the concerned Authority for modification. We note that these are bald allegations made in the affidavit-in-reply with no requirement shown for any such application on the part of a person whose name appears at some point of time as a director of a company. In any event Form 32, which is a public document, has been filed by TPI and we would expect a Special Investigating Agency like respondent No. 2 to make an inquiry in the office of the Registrar of Companies and find out who were the directors. We would also expect respondent No. 2 to address a communication to TPI to find out who are the directors and their current addresses and issue separate notices to each of them by identifying the role played by each of the director who can be held responsible for TPI not fulfilling the alleged obligations under FTDRA.
9. We have considered the impugned orders and we can safely proceed on the basis that all orders are almost identical except that after the first order, in the subsequent orders, there is reference to BIFR proceedings. It will be useful to reproduce the first adjudication order dated 25.07.2008 which reads as under:- 4 of 13 5 of 13 6 of 13
10. From the order, it is quite clear that (a) It was TPI that was required to fulfill the export obligation within the prescribed period and submit the documents within one month from the date of expiry of 7 of 13 export obligation period towards discharge of its export obligation; (b) It was TPI that did not submit any original documentary evidence in discharge of export obligation;
(c) In view thereof, it was TPI that had received a demand notice dated 13.08.2000;
(d) It was TPI that was given an opportunity of personal hearing by the licencing authority; (e) It was TPI that failed to respond to the demand notice; (f) The licencing authority therefore declared TPI a defaulter; (g) Since TPI did not submit any original documents in reply to the demand notice, it was TPI that was issued a refusal order dated 26.02.2001 followed by a forfeiture order dated 19.06.2003; (h) It was TPI that had received a show-cause-notice dated 17.06.2008 requiring to show cause as to why action to impose fiscal penalty should not be taken against TPI and its directors;
(i) It was TPI that was directed to reply to the show-causenotice and it was TPI that was warned that failure to do would lead to a presumption that it had nothing to say 8 of 13 in its defence and the case will be decided exparte on merits without further reference to TPI; (j) It was TPI that was offered an opportunity of personal hearing on 23.07.2008.
11. Even on the conclusions arrived at in the impugned orders, respondent No. 2 holds that since TPI did not submit the MODVAT reversal certificate, it can be concluded that no export has been made by TPI and TPI was under obligation to complete the export obligation and since there was lapse on the part of TPI (and its directors) penal action has been passed against them. But nowhere it is stated what was the lapse on the part of which director.
12. Here TPI is the accused person primarily. There is nothing in the impugned orders as to what was the role of each director and how Mr. Bhatt was a directing mind or will of TPI. This would run contrary to the principle of vicarious liability which requires detailing the circumstances under which a director of a company can be held liable. No doubt, a corporate entity is an artificial person which acts through its officers, directors, managing director / chairman etc. It is the cardinal principle of criminal jurisprudence that where there are allegations of vicarious liability, then there has to be sufficient evidence of the active role of each director. There has to be a specific act attributed to a director or the person allegedly in control of 9 of 13 management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company. From the impugned orders, it is clear that the entire charge undisputedly, is levelled against TPI for not fulfilling the advance licence obligations. Nowhere it is stated that Mr. Bhatt was in control and management of TPI as a director or that he was personally responsible for the acts committed by or on on behalf of the company. No notice was admittedly issued to petitioner in petitioner's name. That being the case, there was a clear violation of the principles of natural justice. In point of facts, prejudice has been actually caused to Mr. Bhatt. This is so because the show-cause-notice was not issued in the name of Mr. Bhatt or even to his correct address. Even showcause-notice issued to TPI did not contain specific allegation against Mr. Bhatt to which he could reply. No opportunity as such was given to Mr. Bhatt to represent against the proposed imposition of penalty. Obviously, Mr. Bhatt was not heard before the impugned orders were passed whereby penalty has been imposed upon him. The proceedings against Mr. Bhat were void ab initio. If only a notice had been sent to Mr. Bhatt identifying the specific acts attributable to him, Mr. Bhatt could have represented against the imposition of any penalty. He could have placed on record various facts and circumstances to show that even if any offence was committed by TPI, he had no hand in it. All these circumstances, if he were able to establish them, would have 10 of 13 absolved him of the liability of penalty. Even on the question of prejudice, the impugned order imposing the penalty on Mr. Bhatt could not be sustained. It would be useful to quote paragraphs 7 to 9 of a judgment of Gujarat High Court, where facts were almost similar. In the case of Om Vir Singh Vs. Union of India[1] they are as under:- “7. The perusal of show-cause notice which is the starting point of the proposed action, this Court would notice that the show-cause notice reads as under: ‘6. And whereas the above action of the noticee firm contravene the provision of para 4.20 of Chapter 4 the Export and Imports Policy Book 1997-2002 and Sec. 11(1), (2) and (3) of the Foreign Trade (D & R) Act, 1992. Now therefore, in exercise of the powers vested in me under Sec. 8(1)(a)(b) of the Foreign Trade (D & R) Act, 1992, I call upon the noticee firm to show-cause within a period of 30 days from the date of receipt of this notice as to why action should not be taken under Section 11(4) to cancel/suspend the importer/exporter Code NO. 3794000013, if you want to be heard in person to explain the case, appear before the undersigned on 21-10-2003 at 3-00 p.m.’
8. The show-cause notice therefore does not appear to have been addressed to the petitioners who are the directors nor does it lay down any proposal for imposing of the penalty. So far as the service of notice to the petitioner directors learned Advocate for the petitioner relied upon the judgment of Delhi High Court in case of L.P. Desai v. Union of India, reported in [2003] DLT 334 = 2004 (165) E.L.T. 151 (Del). He submitted that the view taken by the Delhi High Court is in the similar set of circumstances and relied upon particularly Paras 15 and 18, which are reproduced as under: ‘(15) … … Frankly, I do not see how this supports the provision advanced by Mr. Chawla. If it is being suggested that the petitioner cannot make a complaint when the company itself did not inform the petitioner of the receipt of the show-cause notice, this is certainly not borne out by the aforesaid decision. The facts were entirely different. There, information that was sought was not provided by the company. The Supreme Court held that this lapse on the part of the company could not be taken advantage of by its own chairman, vice chairman, managing director and other members of the board of directors. This is certainly 1 2016 (340) E.L.T. 277 (Guj.) 11 of 13 not the situation here. No notice was admittedly issued to the petitioner. Only in the notice issued to the company was it mentioned that the same be brought to the notice of the directors including the petitioner. Whether the company brought the aforesaid notice to the knowledge of the petitioner or not is not a relevant consideration and, therefore, the factum of the company not informing the petitioner cannot be construed as a parallel situation to the one before the Supreme Court in the aforesaid decision. In the present case what is of utmost importance is the fact that no notice to the petitioner was issued by the respondents. That being the case, there was a clear violation of the mandatory statutory provision contained in Section 4L of the said Act. That apart, there was a violation of the principles of Natural justice.
18. Before parting with this case, it would be relevant to note that though the aforesaid discussion has proceeded on the assumption that no prejudice has been caused to the petitioner, in point of fact prejudice has actually been caused to the petitioner. This is so because the show-cause notice was not issued to the petitioner. Even the showcause notice issued to the company did not contain specific allegations against the petitioner to which he could reply. No opportunity as such was given to the petitioner to represent against the proposed imposition of penalty. Obviously, the petitioner was not heard before the orderin-original was passed whereby the aforesaid penalty was imposed upon him. The mere fact that he filed an appeal and was heard in the appeal would not alter the situation. The proceedings against him were void ab initio. Had the petitioner been issued a notice in terms of Section 4L of the said Act, he could have represented against the imposition of such penalty. He could have placed on record various facts and circumstances to show that no offence was committed by the company and that even if such offence was committed by the company, he had no hand in it. All these circumstances, if he were able to establish them, would have absolved him of the liability of penalty which he now bears like a garroter round his neck. So even if the question of prejudice were to be taken up, it would be clear that the order-in-original as well as the Appellate Order imposing a penalty on the petitioner could not be sustained.’
9. In view of the aforementioned this Court come to the conclusion that the show-cause notice dated 9-9-2003 though titled to be a show-cause notice under Sections 14 and 11(2) of the F.T.D.R. Act does not fulfil the requirement of Section 11(2) in as much as it concerns the petitioner-Directors. Firstly as seen from the show-cause notice the same is addressed to the noticee firm. Secondly the show-cause notice is not directed towards the petitioner Directors. Thirdly the proposed action under the show-cause notice is for cancel/suspension the 12 of 13 importer/exporter code and no penalty either on the company or the Directors is proposed. Fourthly no role or act is specified in the show-cause notice by which the directors could be said to have abetted or attempted to make any export or import in contravention of any provisions of the F.T.D.R. or rules and order made thereunder or the Foreign Trade Policy. Fifthly so far as the petitioners are concerned no opportunity of hearing is given therefore there is clear violation of principle of natural justice. By merely providing the notice that the contents be brought to the notice of the directors who may submit their response would not be sufficient notice to them. In the notice no allegations were made against the Directors. In fact the notice itself provided that all directors should be asked to forward their submissions separately "as the action as deemed fit is also proposed to be taken against them after examination of the reply submitted by them". This itself suggests that in the show-cause notice there was no definite proposal against the Directors. In this view of the matter the show-cause notice is no show-cause notice in the eye of law and therefore the consequential orders are also required to be nullified. The impugned order-in-original dated 15-7-2009 and order-in-appeal dated 7-10-2010 are hereby quashed. The petition is allowed. Rule is made absolute.”
13. In the circumstances, rule is made absolute. Petition disposed in terms of prayer clause (a) which reads as under:- “(a) that this Hon’ble Court be pleased to issue a writ in the nature of Certiorari or any other appropriate Writ, Order or direction under Article 226 of the Constitution of India, calling for the records of the Petitioner’s case and after looking into the legality and the propriety thereof to quash and set aside, qua Shri. Anand Bhatt, the ex-parte impugned orders dated 25.07.2008, 12.08.2008, 02.09.2008, 05.09.2008, 15.09.2008, 23.09.2008 and 15/30.09.2008 (Exhibit “E1” to Exhibit “E9” hereto)”. [ MILIND N. JADHAV, J. ] [ K. R. SHRIRAM, J.] 13 of 13 MOHAN AMBERKAR