Delhi District Court
Directorate Of Enforcement vs Mrs. Veena Pathak on 18 July, 2012
IN THE COURT OF MS. NEENA BANSAL KRISHNA
ADDITIONAL SESSIONS JUDGE-01 : NEW DELHI
In re :
Criminal Appeal No. 32/12
Directorate of Enforcement
through Sh. J.P. Kujur
Enforcement Officer
Directorate of Enforcement
Govt. of India,
10-A, Jam Nagar House,
Akbar Road, New Delhi .... Appellant
versus
Mrs. Veena Pathak
Director of M/s. Vinob Exports (P) Ltd.
3020, Neel Kantha Street, Darya Ganj
New Delhi .... Respondent
Date of institution of the petition : 23.11.2010
Date of reserving judgment/order : 17.07.2012
Date of Order/ judgment : 18.07.2012
ORDER:
1. This is revision under Section 397 Cr.P.C. against the order dated 25.08.2010 vide which the learned Trial Court had discharged the respondent for the offence under Section 56 FERA1,973.
2. The complainant/petitioner has filed this complaint under Section 56 FERA against the respondent, wherein it was claimed that during the year 1989-90, the firm M/s. Vinob Exports Pvt. Ltd. FA-33, Vishal Enclave, New Delhi effected shipment of goods valued to the tune of Rs. 70,54,186/- under the cover of GRI Farm but the said firm and its partners Ms. Meena Kathuria and Veena Pathak who were Incharge and CR No. 32/12 Page 1 Dir. Of Enforcement Vs Veena Pathak responsible for the business of the firm, failed to take any action for effecting or securing the payment of the export valued goods within the prescribed period and thereby contravened Section 18(2) and 18(3) of the Act making themselves liable under Section 56 of the Act. An opportunity notice dated 28.10.1994 was duly served upon them and afforded sufficient opportunity to place necessary evidence on record but they failed to do so,hence complaint under Section 56 of the Act against accused Ms. Veena Pathak alone was filed before learned Addl. Chief Metropolitan Magistrate.
3. The respondent was served and thereafter pre charge evidence was led by the complainant. In support of their allegations they examined PW1 S.A. Ali, Assistant Director Enforcement who proved the letter of Bank of Travancore dated 30.11.1992, Ex PW1/A showing that respondent was the Director in M/s. Vinob Exports (P) Ltd. along with G.R. Farm were also Exhibited as Ex PW1/B to Ex PW1/R. Number of summons issued to the M/s. Vinob Exports (P.) Ltd. and Ms. Meena Kathuria, the other Director in said Ltd. Company are Ex PW1/S1 to Ex PW1/S11 and they were duly served upon Company and Ms. Meena Kathuria and the letter dated 05.05.1992 was received from Ms. Meena Kathuria as Ex PW1/T.
4. PW2 Shri B. Hazra, Enforcement Officer had proved the complaint under Section 56 of the Act which is Ex PW2/1 his notification Ex PW2/2. He had also issued the opportunity notice Ex PW2/3.
CR No. 32/12 Page 2 Dir. Of Enforcement Vs Veena Pathak
5. PW3 Shri Satpal, LDC had proved the dispatch register entries at Serial no. 8191,8192and 8193 indicating dispatch of opportunity notice Ex PW2/3.
6. PW4 Sh. Om Parkash Mehra, Assistant Manager State Bank of Travancore proved the letters dated 19.02.1992 and 23.01.1993 which are Ex PW4/1 to Ex PW4/1A which had been written by the Chief Enforcement Officer to M/s. Vinob Exports (P) Ltd. The extract of register is Ex PW4/2A to Ex PW4/2C. Copies of foreign bills collection register have been proved as Ex PW4/3A to Ex PW4/3G.
7. Learned Metropolitan Magistrate after recording pre charge evidence, in his impugned order dated 25.08.2010 observed that there was no averment in the complaint that the respondent was Incharge and responsible for the conduct of the business and also no witness deposed to this effect. The documents proved on record by the prosecution also did not support their case against the respondent. It was also observed that the service of the documents including opportunity notice upon the respondent was also not proved and accordingly, discharged the respondent.
8. Aggrieved by the said order, the present revision petition has been filed.
9. The learned counsel on behalf of the petitioner has argued that under Section 59 of the Act there is a presumption of mensrea against all the Directors of a company. Admittedly no permission of Reserve Bank of India for securing the payment of the export goods was obtained. More over, the CR No. 32/12 Page 3 Dir. Of Enforcement Vs Veena Pathak respondent despite due service of summons failed to appear before the petitioner for recording of her statement. More over, the letter of Bank of Travancore, Ex PW4/2 shows that she was the Director in the company. Not only this, it has been specifically avered in the complaint that respondent Ms Meena Kathuria was responsible for the day to day business activities of the Company. Learned counsel, therefore, submitted that the observations made by the learned Trial Court in regard to non- pleading of these material facts or absence of any testimony in this regard is clearly against the record. It was further argued that a separate complaint had been filed against M/s. Vinob Exports (P) Ltd through its Director Ms. Meena Kathuria who has already pleaded guilty and a fine of Rs. 1,00,000/- has been imposed upon her. It is, therefore, argued that the impugned order is liable to be set aside.
10. Learned counsel on behalf of the respondent has argued that no cogent evidence has been led to prove that the Ms. Veena Pathak was responsible Director in the Company or was responsible for the day to day activities of the Company. More over, she has already been discharged in the adjudication proceedings on this ground and, therefore, she has been rightly discharged in this case, in view of the recent judgment of the Hon'ble Supreme Court titled Radhey Shyam Vs State of West Bengal and anothers (2011) 3 S.C.C
581. It was also argued that the Company has not been made a party and in the absence of the company, the present complaint against the Directors simplicitor is not maintainable.
CR No. 32/12 Page 4 Dir. Of Enforcement Vs Veena Pathak It was also argued that there was no service of opportunity upon the respondent. In the end, it was argued that the complaint has not been filed by an authorised person as provided under Section 61(2) of the Act. It was thus, argued that impugned order does not suffers from any illegality or irregularity and the present revision is liable to be dismissed.
11. I have heard arguments and have perused the record. My observations are as under:-
12. During the course of the arguments it had been fairly disclosed by the ld. S.P.P that a separate complaint had been filed against M/s. Vinob Exports (P). Ltd through its Director Ms. Meena Kathuria in which she has already pleaded guilty on behalf of the Company and fine of Rs. 1,00,000/- has been imposed. The question which thus arises is whether this second separate complaint against one Director can be filed and is maintainable. It is the submission on behalf of the respondent as well that a complaint against a Director simplicitor without impleading Company is not maintainable.
13. Section 56 of the Act provides for prosecution in case of contravention of the provisions of the Act. Section 68 of the Act relates to the offence by the companies . Sub section 1 of the Act introduces a provision that the person who was Incharge and was responsible to the company for the conduct of the business of the company, shall also be deemed to be guilty along with Company for the contravention of the provisions of the Act. Section 68 of the Act, therefore, indicates that in case of a Company who all are liable to be proceeded CR No. 32/12 Page 5 Dir. Of Enforcement Vs Veena Pathak against in case of contravention of any of the provision of the Act. It clarifies that whenever there is contravention of any of the provision of the Act by a Company then every person who at the time of contravention was Incharge and was responsible to the Company for the conduct of the business as well as company shall be deemed to be guilty of the contravention. Section 68 of the Act, therefore, specifically provides that in addition to the Company, each Director who was responsible for the conduct of the business in addition shall also be liable for the activities of the Company and ,therefore, liable for prosecution besides the Company, the complaint, therefore, can be filed against individual Directors as well and each shall be independently liable for punishment in case the conviction is proved.
14. However, the other aspects of this arguments is whether the Director(s) and the Company should be impleaded as accused in the same complaint or whether a separate complaint can be filed individually against the company and each Director, as has happened in this case. While one complaint had been filed under Section 56 of the Act against the Company through its Director Ms Meena Kathuria, a separate complaint which is under consideration has been filed in the present case against another Director.
15. Section 68 of FERA is parametria to Section 141 of the Negotiable Instrument Act which fasten criminal liability on the Directors for the acts committed by the Company. The term used by the section is " as well as which is of immense CR No. 32/12 Page 6 Dir. Of Enforcement Vs Veena Pathak significance and bring within its scope the Company as well as the Director and/or other officers who are responsible for the acts of the company. This aspect was considered in the case of Deewan Singh Vs Rajendra Prasad Ardevi and others JT 2007 (1) SC 223 and Sarabjit Rick Singh Vs Uinon of India JT 2007 (1) SC 223 (which was in reference to Section 141 N.I. Act, which is parametria with Section 68 FERA) with doctrine of strict construction, the commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the Section make it absolutely and unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously held liable for the offence avered to in the complaint. Therefore, for maintaining prosecution under Section 141 N.I. Act arraigning of a Company as an accused is imperative. The other categories of offenders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself.
16. In the case of Aneeta Hada Vs M/s. Godfather Travels & Tours Pvt Ltd. J.T (JD) 2012(4) SC 489, the Full Bench of the Supreme Court had extensively discussed the liability of a company under Section 141 N.I. Act viz.a.viz its Director. After referring to the various judgments, it was concluded that the Director cannot be held liable for an offence, in case the company is not impleaded as an accused.
17. In the present case, the respondent Ms Veena CR No. 32/12 Page 7 Dir. Of Enforcement Vs Veena Pathak Pathak had been prosecuted purely in the capacity of Director of M/s. Vinob Exports(P) Ltd and the Company has not been impleaded as a party in the present case. In the absence of company, present complaint against the Director simplicitor is not maintainable. On this ground itself, the complaint is liable to be dismissed.
18. The further arguments in regard to the maintainability of the present complaint is, whether this complaint can be held to be maintainable when admittedly another complaint in which the company and its Director Ms. Meena Kathuria was filed separately in which Ms Meena Kathuria on behalf of the company has already been pleaded guilty and has deposited fine by way of sentence. This aspect was considered by the Hon'ble High Court of Delhi in the matter of S. Nagarajan Vs State in Criminal Revision Petition No. 321/2004 decided on 15.03.2012 by Hon'ble High Court of Delhi. The said judgment was in reference to Prevention of Food Adulteration Act which also contains similar provision in regard to commission of offence by the Companies for which the Directors are also made liable. In the said case, the criminal complaint was filed against the vendor and thereafter the second complaint was filed against the manufacturer and the sole selling agent in respect of the same offence for sale of adulterated food. It was observed that once a complaint was filed against some accused, the second complaint for the same offence against the new accused persons is completely barred and no cognizence can be taken CR No. 32/12 Page 8 Dir. Of Enforcement Vs Veena Pathak on second complaint. The cognizance of the offence against the new accused persons could be taken only during the course of the trial pursuant to Section 319 Cr.P.C, in case the evidence was led against them. Thus, it was held that the second complaint for the same offence is not maintainable. In the present case, as well the offence was allegedly committed by the Company ie M/s Vinob Exports(P) Ltd and its Directors were vicariously held liable for the offence committed by the Company by virtue of Section 68 of FERA. The Department could not have split the complaint against the accused persons and filed a separate complaint against the Company and one Director and a second complaint against the second Director. This spliting of complaint against different accused for the same offence is not maintainable and on this ground also the present complaint was not maintainable.
19. The third aspect of this arguments is that Section 68(1) FERA makes Director responsible for the commission of offence by the Company only if this shown that it was involved in the day to day affairs of the company.
20. The Company though legal entity can act only through its Board of Directors; Managing Director is prima facie incharge and responsible for the company business and affairs and can be prosecuted for offences by the company but in so far as other Directors are concerned, they can be prosecuted only if they were Incharge and responsible for the conduct of the Company's business. The combined reading of Section 5 and 291 of the Company Act 1956 would show that the persons CR No. 32/12 Page 9 Dir. Of Enforcement Vs Veena Pathak considered responsible to the Company for the conduct of the business are; (a) Managing Director, (b)whole time Director,(c) Manager, Secretary or(d) any other persons in accordance with whose direction or instructions the Board of Director is to act or(e) any other officers who may be specified by the Board.
21. In the case of V.S. Gupta Vs Punjab National Bank 2010(1) JCC (NI) 17 Delhi High Court had noted that the criminal liability for the offences committed by a Company is fastened vicariously on the persons referred to in sub section (1) of section 141 Negotiable Instruments Act. It was further observed that the provision of Section 141 were in para materia with the provision of section 68 of FERA, both of which deals with the offence by the Company.
22. In S.M.S. Pharmaceuticals Limited Vs Neeta Bhalla (2005) 8 SCC 90, the Hon'ble Supreme Court has held that to make an officer of company liable there are two mandatory requirement to be fulfilled:
1. it should be stated that the person sought to be arrayed as accused apart from the company is a person incharge of and responsible for the conduct of the company; and
2. such a person was in that capacity at the time of commission of the offence.
23. The said observation were reiterated in the case of Shailendra Swarup Vs The Director, Enforcement Directorate 2010(1) JCC 119( DHC). In K.K. Ahuja Vs V.K. Vora and another,2009(3) JCC(NI)194, the Hon'ble CR No. 32/12 Page 10 Dir. Of Enforcement Vs Veena Pathak Supreme Court after making an reference to S.M.S. Pharmaceuticals case(supra) observed that there was provision to require the complainant to state how a Director who is sought to be made an accused, was incharge of the business of the company, as every Director need not be and is not incharge of the business of the Company. If this is the position in regard to the Director, it is needless to emphasis that in the case of non Director officers, there is all the more the need to state his part with regard to conduct of business of the Company and how and in what manner he is liable. It was further noted that if a person who is responsible to the Company for the conduct of the business of the Company and who is Incharge of the business of the company, then he can be made liable only if the offence was committed with his consent or connivance or as a result of his negligence.
24. It is admitted by the prosecution witnesses in this case that there was not a single document placed on record which had been signed by Ms Veena Pathak in her capacity as a Director. There is not an iota of evidence on record to show that except her name being mentioned as a Director, she ever was involved in the day to day affairs of the Company. The Department has, therefore, failed to show her liability as a Director in the affairs of the Company. The ld. Addl. C.M.M has, therefore, rightly observed that it has not been shown prima facie that Ms. Veena Pathak was involved in the day to day affairs of the company and in the absence of this evidence, she cannot be held liable for the offence under Section 56 FERA.
CR No. 32/12 Page 11 Dir. Of Enforcement Vs Veena Pathak
25. It is also pertinent to mention here that in the adjudication proceedings, objection had been taken by the Ms. Veena Pathak that she was indirectly involved in the affairs of the Company. This contention was accepted in the adjudication proceedings vide order dated 29.11.2004, copy of which has been placed on record and the adjudication proceedings were dropped against her. The question which thus arises is whether prosecution can be continued once adjudication proceedings on same facts has been dropped.
26. In a recent judgment of Radhey Shaym Kejriwal Vs State of West Bengal and another (2011) 3 SCC 581, similar question came up for consideration. In the said case reference was made to the observations of the Supreme Court in the Standard Chartered bank Vs Director of Enforcement(2006) 2 SCC ( Cri) 221, wherein it was observed that there was nothing in the Act to indicate that a finding in an adjudication, is binding on the Court in a prosecution under Section 56 of the Act. It was observed that under the scheme of the Act, the two proceedings were independent and the finding in one was not conclusive viz.a.viz other. A question was raised in Radhey Shyam Kejriwal's case (supra) whether in a case in which the penalty proceedings under Section 51, although commenced simultaneously with prosecution under Section 56, culminate and exonerate the person, whether in such circumstance the continuance of the prosecution would be permissible or not. It was observed, that in case a person is held liable under the CR No. 32/12 Page 12 Dir. Of Enforcement Vs Veena Pathak adjudication proceedings to put the penalty, it must not necessarily to held as binding in the prosecution to hold the person guilty in a criminal trial. Adjudication proceedings are decided on the basis of preponderance of evidence of a little higher degree where as in criminal case the entire burden of proof beyond all reasonable doubt lies on the prosecution. It was concluded as follows:
"The finding in the adjudication proceedings in favour of the person facing trial for identical violation will depend upon the nature of finding. If the exoneration in adjudication proceedings is on technical ground and not on merit, prosecution may continue; and In case of exoneration, however, on merits where the allegation is found to be not sustainable at all and the person held innocent, criminal prosecution on the same set of facts and circumstances cannot be allowed to continue, the underlying principle being the higher standard of proof in criminal cases".
27. It was further observed that the yard stick would be to judge as to whether the allegations in the adjudication proceedings as well as in the prosecution were identical and the exoneration of the person concerned in the adjudication proceedings was on merits. In case it is found on merits that there was no contravention of the provision of the Act in the CR No. 32/12 Page 13 Dir. Of Enforcement Vs Veena Pathak adjudication proceedings, the trial of the person concerned shall be an abuse of the process of the Court.
28. In the adjudication proceedings, the contention of Ms. Veena Pathak that she was not involved in the day to day affairs of the Company and was, therefore, not liable for the act of the Company was accepted and the adjudication proceedings dropped.
29. In this present criminal case as well, in order to attract liability and the prosecution against Ms. Veena Pathak it was incumbent to show that she was involved in day to day affairs of the Company which the prosecution has not been able to show it. In view of the observations of Supreme Court in the case of Radhey Shyam as well, the respondent was entitled to be discharged.
30. In the end, it would be relevant to refer to another important aspect for dropping liability under Section 56 of the Act which is the service of opportunity notice. In the present case, the perusal of the entire record shows that the opportunity notice Ex PW2/3 was marked to be sent to M/s. Vinob Exports(P) Ltd. through Smt. Meena Kathuria, Director as well as Mrs. Veena Pathak as the Partner of the Company but there is not a single document on record to show that the said notice were ever dispatched at her address or it was ever served upon her. The opportunity notices and other show cause notices have all been sent to Smt. Meena Kathuria. As per State Bank Travancore document Ex PW4/2, Ms. Veena Pathak's residence was 3020, Neel Kanth Street, Darya Ganj, CR No. 32/12 Page 14 Dir. Of Enforcement Vs Veena Pathak New Delhi, but admittedly no notice was sent to her at that address. It is, therefore, shown that opportunity notice was never served upon her.
31. The scope of opportunity notice has been discussed at length by the Hon'ble Supreme Court in Standard Chartered Bank Vs Directorate Enforcement 2006(4) SCC 278; wherein it was noted that the scope of the ambit of the notice is mentioned in section 61 of the Act. On receipt of such notice it was for the appellant to show that they had necessary permission from the concerned authority under the Act. Therefore, if the notice sets out the alleged contravention and calls upon the person accused for the offences whether he had the requisite permission for the transaction, that will satisfy the requirement of the Section.
32. Delhi High Court in Crl. M.C. 5138/2006 in the matter of Ranjit Raj and others Vs Sanjay Mishra and another decided on 27.11.2009 made a reference to the case of Standard Chartered Bank( supra) and observed that section 61(2) of the Act would show that the notice envisaged under this provisio is not a show cause notice. It is not based on the principles of audi altrem partem. The principle of "audi altrem partem" normally does not apply to criminal prosecutions, at pre-prosecution stage. It, therefore, does not require the complainant to give a notice to the accused persons, giving them an opportunity to show cause as to why he be not prosecuted. This provision applies only to such offences which are committed by contravening any provision of the Act or of CR No. 32/12 Page 15 Dir. Of Enforcement Vs Veena Pathak any rule, direction or order whereby doing of an act is prohibited without permission. If requisite permission is obtained, the impugned act would not constitute an offence. Therefore, the purpose of the notice is to enable the accused to show that he had the requisite permission with him and ,therefore, the act committed by him does not constitute an offence. The person served with opportunity notice cannot seek to justify the act complained of. The limited purpose of this notice is to show the permission, if any, is available with him.
33. It is, therefore, not disputed that section 61(2) of the Act talks about an opportunity to be given to the accused to furnish the requisite permission from the Reserve Bank of India, because it is an offence is stated to be committed only if the requisite permission has not been obtained.
34. In a recent case of Sudhir Goel Vs. U.O.I in Cri. M.C. No. 2668/2004 our Hon'ble Delhi High Court has held that:
" No complaint against any person can be filed under Foreign Exchange Regulation Act,1973 unless and until the person who is alleged to have committed the offence is given an opportunity of showing that he had a requisite permission of doing the act alleged to be done by him. Meaning thereby, the service of notice on the offending person is a pre condition and it is a mandatory provision.
Non compliance of the said CR No. 32/12 Page 16 Dir. Of Enforcement Vs Veena Pathak provision therefore, is fatal"
35. In view of this judgment, it is clear that in case the notice has not served the respondent has to be discharged. In the present case as well, service of opportunity notice on Ms. Veena Pathak the respondent has not been proved and she is entitled to be discharged on this ground as well.
36. To conclude, the Department has not been able to show that the respondent was involved in day to day affairs of the Company or was liable for the affairs of the Company. It is also shown that the present complaint was not maintainable against the Director in the absence of the Company being made an accused and also a complaint having already being filed against the Company and the other Director Smt Meena Kathuria, the second complaint against the present respondent was not maintainable. The opportunity notice is also not shown to have been served upon the respondent. The order of the learned Additional Chief Metropolitan Magistrate discharging the respondent for the reasons stated above does not suffer from any illegality or infirmity and does not call for any interference. The revision is hereby dismissed.
37. Trial court record be sent back along with the copy of this order.
38. Revision file be consigned to record room.
Announced in the open Court
on 18.07.2012
( Neena Bansal Krishna )
ASJ-01/PHC/New Delhi
CR No. 32/12 Page 17
Dir. Of Enforcement Vs Veena Pathak