ENFORCEMENT DIRECTORATE Vs. T.T.V. DHINAKARAN

JUDGEMENT

(1.) The Enforcement Directorate is on Appeal against the Order of the Hon'ble Single Judge allowing the Application under Sec. 9(5) of the Presidency Towns Insolvency Act, 1909, thereby setting aside the Insolvency Notice issued to the Respondent herein. The facts that are necessary for disposal of the Appeal are:

(2.) The Respondent was Accused of violation of the provisions of the Foreign Exchange Regulation Act, 1973. Since the violation amounted to an offence under the provisions of the said Act and it also made him liable for Penalty, proceedings were initiated by the Appropriate Authority under the Foreign Exchange Regulation Act, 1973 for adjudication of the Penalty. The Adjudicating Authority viz., the Special Director of Enforcement by its Order in Original, dtd. 6/2/1998 imposed a Penalty of Rs.31.00 Crores. Aggrieved the Respondent preferred an Appeal in A. No.51 of 1998 before the Appellate Authority viz., the Foreign Exchange Regulation Appellate Board. The Appellate Board modified the Order, dtd. 5/5/2002 and reduced the Penalty as Rs.28.00 Crores. The Respondent had preferred an Appeal in C.M.A. No.914 of 2000 questioning the Order of the Appellate Board. Even during the pendency of the CMA, the Enforcement Directorate invoked subsec. (2) of Sec. 9 of the Presidency Towns Insolvency Act, 1909 and got a Notice of Insolvency issued on 28/2/2001. On receipt of the said Notice, an Application was filed by the Respondent in A. No.177 of 2001 seeking to set aside the Insolvency Notice under sub-sec. (5) of Sec. 9 of the Presidency Towns Insolvency Act, 1909. Several grounds of attack were made by the Respondent in impugning the Insolvency Notice. Prominent among them are : (1) There is no Statutorily enforceable Debt within the meaning of Sec. 2(b) of the Act and the Applicant is not a Debtor within the meaning of Sec. 2(b) of the Act; (2) The Enforcement Directorate is not a Creditor within the meaning of Sec. 2(a) of the said Act; (3) The Order imposing Penalty has not become final; and (4) The Enforcement Directorate is not the Authority vested with the power of execution of the orders of the Adjudicating Authorities and therefore the Application at the instance of Enforcement Directorate is not maintainable.

(3.) The learned Single Judge, who heard the Application agreed with the contentions of the Respondent herein on the first three questions. He however held that the Enforcement Directorate could represent the Union of India and therefore, the Application filed by the Assistant Director of Enforcement Directorate is maintainable. Upon the conclusion that there is no legally enforceable Debt and the Enforcement Directorate is not a Creditor within the meaning of Sec. 2(a) of the Presidency Towns Insolvency Act, 1909, the Hon'ble Judge set aside the Insolvency Notice. The third ground was that the Order imposing Penalty has not become final, since the Appeal against the Order of the Appellate Authority in C.M.A. No.914 of 2000 was pending. For the sake of completion of the narration of facts we could add that the said Civil Miscellaneous Appeal in C.M.A. No.914 of 2000 came to be dismissed by this Court on 6/1/2017 and the attempted S.L.P.(Civil) No.17700 of 2017 against that Order has also been dismissed on 21/7/2017. Therefore, the Order imposing Penalty has now become final.