RAJ KUMAR KAJARIA Vs. STATE OF WEST BENGAL

JUDGEMENT

(1.) The opposite party No. 2, who is the Deputy Director, Enforcement Directorate (Foreign Exchange Regulation Act), Government of India, filed a complaint against the petitioner in the Court of the Chief Metropolitan Magistrate, Calcutta for an offence punishable under S. 56(1)(i) of the Foreign Exchange Regulation Act, 1973 (FERA, for short) on certain allegations contained therein. The petitioner has filed this application under S. 482, Cr. P.C. for quashing the proceeding started in the Court below on the basis of the said complaint. The complaint was filed against the Company, M/s. Paharimata Iron Works (Pvt.) Ltd. And its two Directors of which the present petitioner is one. A departmental proceeding was also started and in that proceeding the adjudicating officer found the petitioner and others guilty and imposed a fine of Rupees 10,000/- upon the present petitioner by his order dated 23-12-82. Against that order of the adjudicating officer an appeal was preferred by the present petitioner before the Appellate Board under the provisions of the FERA and the said Appellate Board by order dated 23-5-1991 set aside the order of the adjudicating officer so far as the present petitioner Shri Raj Kumar Kajaria is concerned and exonerated the petitioner from the penalty imposed by the adjudicating officer on him. In view of such decision of the Appellate Board the petitioner now contends that the criminal proceeding started on the basis of the complaint in respect of the selfsame mater is no more tenable and therefore the same should be quashed.

(2.) It appears from a perusal of the concerned order of the Appellate Board that the adjudicating officer had recorded a finding that the petitioner was a Director of the Company at the relevant time but there was no finding that he was also individually responsible for the contravention of S. 18(2) of the FERA. The Appellate Board therefore was of the opinion that the adjudicating officer was wrong in holding the petitioner guilty of contravention of S. 18(2) on the mere finding that he was a Director at the relevant time. Indeed, the Appellate Board was correct in setting aside the order of the adjudicating officer relating to the petitioner. The mere fact that a person is a Director of a Company does not make him liable ipso facto for the offence committed by the Company. A Director becomes liable for the offence committed by the Company under S. 68(1) if it is shown that at the relevant time he was in-charge of and was responsible to the company for the conduct of the business of the company. Under S. 68(2) also a Director becomes liable for the offence committed by the Company if it is proved that the alleged contravention of any provision of the Act or of any Rule, direction or order made thereunder has taken place with the consent or connivance of or is attributable to any neglect on the part of the Director. Therefore the mere fact that a person was a Director of the Company does not make him liable for the offence committed by the Company unless such Director factually comes within the mischief of S. 68. The adjudicating officer found the present petitioner guilty simply on the ground that he was a Director which is not tenable and therefore the Appellate Board rightly interfered with the order of the adjudicating officer pro tanto.

(3.) The question now is whether in view of the order of the Appellate Board the criminal proceeding pending against the present petitioner is liable to be quashed. In support of his contention the learned Advocate for the petitioner attracted my attention to a decision of the Supreme Court reported in (1982) 133 ITR 909, Uttam Chand v. I.-T.O. That was a case under the Income-tax Act, 1961. There the I.-T.O. cancelled the registration of a partnership firm on the ground that the firm was not genuine, on the basis of the statement of J, one of the alleged partners that the signatures in the record were not hers and she was not a partner. The Income-tax Appellate Tribunal on an appraisal of the materials on record found that J was a partner of the firm and the firm was genuine and set aside the cancellation order of the I.-T.O. In the meantime, the I.-T.O. had initiated prosecution of the partners of the firm under S. 227 of the Income-tax Act. In that background, the Supreme Court held that in view of the finding recorded by the Income-tax Appellate Tribunal on appraisal of the entire materials on record that J was a partner of the assessee firm and that the firm was a genuine one, the assessee cannot be prosecuted for filing false returns and accordingly the prosecution was quashed. It may be noticed that in the said case there was a positive finding on the basis of the materials on record about the existence of a fact, namely, that certain person was a partner of a firm and the firm was a genuine one. In view of such positive finding of fact the Supreme Court held the prosecution untenable. In our present case there is no positive finding of the Appellate Board in respect of the relevant matter. Here the Appellate Board set aside the order of the adjudicating officer relating to the petitioner only on the ground that there was no finding that the petitioner could be made liable under S. 68 of the FERA. The learned Advocate for the petitioner also attracted my attention to an unreported decision of a Division Bench of this Court passed on 17-9-91 in Criminal Revision No. 593 of 1991 Janardhan Thakur, Jeena and Co. v. Uday Biswas. That was a case under the Customs Act, 1962. There also, there was a departmental proceeding and a parallel criminal proceeding. In the departmental proceeding on a threadbare discussion of the materials placed before them the appropriate authorities came to a conclusion that the allegations were unsustainable. In that background the Division Bench held that it would not be proper to allow the Customs authorities to proceed with the complaint which was admittedly based on the self-same allegations. Accordingly, the Division Bench quashed the criminal proceeding. In that case also, as we find, the departmental authorities came to a conclusion of fact on threadbare discus ion of the materials placed before them that the allegations were unsustainable. In that background the criminal proceeding was quashed. Even then the Division Bench observed that when the allegations were found unsustainable by the departmental authorities, 'it will not be proper - though it may be legally permissible to allow the Customs authorities to proceed with the complaint which admittedly is based on the self-same allegations.' It is therefore evident that even where the departmental authorities come to a conclusion of fact that the allegations are unsustainable the prosecution does not become illegal for that reason alone, although it may be improper thereafter to continue the same. In our present case, as I have already mentioned, there is no positive finding that S.68 of the FERA is not attracted in this case. As a matter of fact the Appellate Board set aside the order of the adjudicating officer not because of any positive finding but because of absence of a positive finding. When the departmental proceeding against the petitioner and the order passed against him in that proceeding became fruitless simply because of absence of a positive finding and not because of any positive finding the criminal prosecution, in my opinion, should not be quashed for that reason. The decisions relied upon by the learned Advocate for the petitioner were all based on positive finding of facts and are therefore distinguishable from the facts of our present case. Consequently those decisions are not applicable here. In the present case the petition of complainant contains a specific averment in paragraph 9 that the two Directors including the present petitioner were responsible to the company for the conduct of the business of the company and that therefore they are deemed to be guilty of the offence committed by the Company. This averment prima facie attracts S. 68 of the FERA for prosecuting a Director for the offence committed by the Company. The question whether this averment can be substantiated at the time of trial by evidence is indeed entirely a different matter. Since there is no positive finding either of the adjudicating officer or of the Appellate Board that S. 68 has not been factually established in this case or that the said Section cannot be attracted and rather the departmental proceeding and the order passed therein could not be sustained because of absence of a finding on the matter or better I should say because of non-consideration of the said provision of S. 68 by the adjudicating officer, that question which arises for consideration in the criminal proceeding in view of the specific averment made in the complaint remains open to be decided at the trial of the case. Therefore, I find that this is not a fit case where the criminal proceeding is liable to be quashed simply because the petitioner has been found not guilty by the Appellate Board on the ground of absence of a finding by the adjudicating officer.