Crl. A. No. 575/2008

Provisions Involved

Section 51 , 8(3), 8(4) of Foreign Exchange Regulation Act,1973


Modi Xerox Ltd.(MXL) was a Company registered under the Companies Act 1956 in the year 1983. Between the period 12.06.1985-21.11.1985, 20 remittances were made by the Company-MXL through its banker Standard Chartered Bank. The Reserve Bank of India issued a letter stating that despite reminder issued by the Authorised Dealer, MXL had not submitted the Exchange Control copy of the custom bills of Entry/Postal Wrappers as evidence of import of goods into India. Enforcement Directorate wrote to MXL for supplying invoices as well as purchase orders. MXL on 09.07.1993 provided for four transactions and Chartered Accountant's Certificates for balance 16 amounts for which MXL's Bankers were unable to trace old records dating back to 1985. MXL amalgamated and merged into Xerox Modi corp Ltd. A show cause notice was issued by the Deputy Director, Enforcement Directorate to MXL and its Directors, including the appellant and it required to show cause in writing as to why adjudication proceedings as contemplated in Section 51 of Foreign Exchange Regulation Act,1973 (hereinafter referred to as “FERA, 1973") should not be held for contravention. Xerox Modi Corporation Ltd. (successor of MXL) replied the show cause notice dated 19.02.2001 vide its letter dated 26.03.2001. The Directorate of Enforcement decided to hold proceedings as contemplated in Section 51 of the FERA, 1973 read with Section 3 and 4 of Section 49 of FEMA and fixed 22.10.2003 for personal hearing. Notice dated 08.10.2003 was sent to MXL and its Directors. Notice dated 08.10.2003 was replied by the appellant vide its detailed reply dated 29.10.2003. In the reply the appellant stated that he is a practicing Advocate of the SC and was only apart-time, non executive Director of MXL and he was never in the employment of the Company nor had executive role in the functions of the Company and appellant was never in charge of nor ever responsible for the conduct of business of the Company. Along with the reply an affidavit of the Company Secretary dated 04.07.2003 that the appellant who was the Director of erstwhile Company-XML was only a part-time, Director of the said Company and never in charge of day to day 4 business of the Company was also filed. The MXL has also submitted a reply dated 29.10.2003. The Deputy Director, Enforcement Directorate after hearing the appellant, other Directors of the Company passed an order dated 31.03.2004 imposing a penalty of Rs.1,00,000/- on the appellant for contravention of Section 8(3) read with 8(4) and Section 68 of FERA, 1973.  Appeal was filed by the appellant before the Appellate Tribunal for Foreign Exchange which appeal came to be dismissed.Against the order of the Appellate Tribunal was filed by the appellant in Delhi High. The Delhi High Court by the impugned judgment has dismissed the appeal of the appellant, questioning which judgment this appeal has been filed. The High Court, in Criminal Appeal, during pendency of the appeal has stayed the order of penalty. This Court while issuing notice on 19.02.2010 in the present appeal had also stayed the order of penalty imposed on the appellant. OBSERVATIONS: It is relevant to notice that an order which was passed on 13.02.2004 by the Deputy Director in adjudication proceedings although with regard to different period, the plea of the appellant that he was only a part-time, non executive Director and not responsible of the conduct of business of the Company was accepted and notice was discharged against the appellant. The order dated 13.02.2004 although related to different period but has categorically noticed the status of the appellant as part time non-executive Director. There being decision of Adjudicating Authority, in the recent past, passed on 13.02.2004,that the appellant was only a part-time non executive Director of MXL, there has to be some reasons for taking a contrary view by the adjudicating officer in order dated 31.03.2004 with regard to affairs of the same company, i.e., MXL. We are of the view that the adjudicating officer has erroneously imposed penalty on the appellant for the alleged offence under Section 8(3), 8(4) and 68 of the FERA, 1973 which order was erroneously affirmed both by the Appellate Tribunal and the High Court.




The judgments of the High Court as well as those of the adjudicating officer and the Appellate Tribunal are set aside. The appeal is allowed and the penalty imposed on the appellant is set aside.


Ishika Sahay