DINKAR DOGRA Vs. DIRECTORATE OF ENFORCEMENT

JUDGEMENT

(1.) THIS appeal under Section 35 of Foreign Exchange Management Act, 1999 read with Section 49 thereof and Section 54 of the Foreign Exchange Regulation Act, 1973 (the Act) is directed against the order dated 09. 10. 2007 passed by the appellate Tribunal for Foreign Exchange, New Delhi (Appellate Tribunal), whereby the Appellate Tribunal has dismissed the said appeal preferred by the appellant herein against the adjudication order No. DD/ (AV)/22/dz/03/ 957 dated 28. 10. 2003, passed by the Deputy Director of Enforcement, New Delhi. By the impugned order, the Appellate Tribunal has upheld the imposition of penalty inter alia, against the appellant herein to the tune of Rs. 3 Lacs on account of violation of Section 18 (2) read with Section 18 (3) of the Act.

(2.) THE appellant was one of the Directors of M/s Kwality Jewellers (India) Pvt. Ltd. (the company ). The company exported goods to the tune of Rs. 2,37,700/- and us$ 99,366. 25 to M/s A. K. Diamonds Imports, Houston, USA. The admitted position is that the said importer did not pay the entire price for the goods and substantial amount remained outstanding to be recovered by the company. The respondent, Directorate of Enforcement, issued a show cause notice bearing No. T-4/93/dz/2000/dd (VS) dated 28. 09. 2000 to the company and its Directors, including the appellant herein, for non-realisation of export proceeds of Rs. 2,37,700/-and US$ 99,366. 25 alleging violation of Section 18 (2) and 18 (3) and 68 of the act. It was alleged that the payment for the goods, as aforesaid, was not received within the prescribed period, as extended by the RBI and that the company and its Directors appeared to have contravened Section 18 (2) of the Act read with Central Government Notification No. F-1/67/ec/73-1 and 3 dated 01. 01. 1974, and Section 18 (3) of the Act, and thereby they have rendered themselves liable to be proceeded under Section 50 of the Act. The noticees filed their replies before the Enforcement Directorate. The stand taken by the appellant in response to the show cause notice was that he had ceased to be a director of the company w. e. f. 01. 06. 1995. There was a change of management in the company. It was, therefore, alleged that after 01. 06. 1995, the appellant was not in a position to take any steps to effect recovery, as he was not associated with the business of the company. He neither had the authority nor the requisite papers or knowledge to be able to take any steps in this regard. Reliance was also placed on the communications issued by the RBI to the Union bank of India, Overseas Branch, Connaught Circus, New Delhi, which was the bank through whom the exports have been made to show that the application of the company to seek offset of exports proceeds against the goods received was still pending when the appellant had resigned from the Directorship of the company. On that basis it was further argued that unless the said application was rejected, and till so long as it remained pending, there was no question of violation of Section 18 (2) of the Act, since the company and its Directors were entitled to await the requisite permission from the RBI before initiating any steps to recover the outstanding amount from the importer. The adjudicating authority, however, did not accept the aforesaid submission of the appellant and held that sufficient efforts were not made to realise the amounts either before the company was taken over by the new management or after the new management took over the reigns of the company. No documents were produced regarding the extension granted by the RBI or to demonstrate the efforts made to realize the pending proceeds. Since the exports have taken place at the time when, inter alia, the appellant was a Director of the company, he was responsible to take steps or the realisation of the outstanding proceeds. Therefore, the adjudicating authority imposed penalty of Rs. 3 Lacs on each of the Directors, including the appellants, apart from a penalty of Rs. 5 Lacs on the company. The appeal preferred before the Appellate Tribunal also met the same fate.

(3.) BEFORE me, once again the submission of the appellant is that at the time when the appellant had resigned from the company the issue with regard to offset of export proceeds against the goods received were still pending before the RBI. In this regard reference is made to two communications dated 01. 07. 1995 and 09. 08. 1995 issued by the RBI to the company and the Union Bank of India, overseas Branch, requiring them to furnish certain documents. Reference is made to the Memorandum of Understanding dated 31. 05. 1995 entered between Mr. Kiran chimalwar and Mr. Dinkar Dogra, the appellant herein on one hand, and Mr. L. R. Sridhar, on the other hand, under which the management of the company was taken over by Mr. Sridhar. It is argued that from 01. 06. 1995, inter alia, the appellant walked out of the management of the company. Reference is also made to the copy of Form 32, stated to have been filed before the Registrar of companies, which shows that, inter alia, the appellant resigned from directorship of the company on 05. 10. 1995. Submission of learned counsel for the appellant is that it is well-settled, at least so far as Appellate Tribunal is concerned, that till so long as the application as aforesaid is pending before the RBI, it cannot be said that the exporter has contravened Section 18 (2) of the Act, which reads as follows: