SHAILENDRA SWARUP versus THE DEPUTY DIRECTOR, ENFORCEMENT DIRECTORATE

Citation: [2020] 7 S.C.R. 89 · Decided: 27-07-2020 · Supreme Court of India · Bench: ASHOK BHUSHAN · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SHAILENDRA SWARUP
v.
THE DEPUTY DIRECTOR, ENFORCEMENT DIRECTORATE
(Criminal Appeal No. 2463 of 2014)
JULY 27, 2020
[ASHOK BHUSHAN AND R. SUBHASH REDDY, JJ.]
Foreign Exchange Regulation Act, 1973:
ss.8(3), 8(4), 50, 51 and 68 – Show cause notice for initiation
for proceedings u/s. 51 against Company and its Directors for
contravention of ss. 8(3) r/w 8(4) and 68 – Reply by the Company –
Initiation of proceedings – Appellant (one of the Directors) replied
that he was a part-time, non-executive Director and was not
responsible for the conduct of business of the Company at the relevant
time – Penalty imposed by Enforcement Directorate – Appeal before
Appellate Tribunal for Foreign Exchange dismissed – High Court
also dismissed the appeal – Appeal to Supreme Court – Held: The
liability to proceed with for the offence u/s. 68 depends on the role
played in the affairs of the Company and not on mere designation
or status – For proceeding against Director of a Company for
contravention of provisions of the Act, the necessary ingredient for
proceeding shall be that the Director was incharge of and was
responsible for the conduct of the business of the Company at the
relevant time – Penalty was imposed on the appellant-Director
without returning a finding that it was he who was liable for
contravention of the provisions of ss. 8(3), 8(4) and 68 – Therefore,
the penalty imposed on the appellant is set aside.
Allowing the appeal, the Court
HELD: 1. The High Court committed error in observing
that plea taken by the appellant in its reply dated 29.10.2003 was
afterthought, since, no such plea was taken in reply to the show
cause notice dated 19.02.2001. The notice dated 19.02.2001
although was addressed to the Company and all its Directors,
the reply was given only by the Company Secretary and none of
the Directors has given any reply. The notice dated 19.02.2001
was issued by the Deputy Director, Enforcement Directorate to
[2020] 7 S.C.R. 89
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SUPREME COURT REPORTS
[2020] 7 S.C.R.
decide as to whether the adjudication proceedings as
contemplated in Section 51, of Foreign Exchange Regulation Act,
1973 (FERA, 1973) should be held against the Directors for
contravention. When the Deputy Director decided to hold the
adjudication proceedings under Section 51 reply given in response
to the notice dated 08.10.2003 was statutorily required to be
considered under Section 51 and the said reply could not have
been ignored or knocked down by an erroneous assumption that
it was an afterthought. 29.10.2003 was the date fixed by the
adjudicating officer for personal hearing of the Directors. The
appellant had not submitted any reply to show cause notice dated
19.02.2001 which though was addressed to the Company and all
Directors and the reply was sent only by the Company Secretary
on 26.03.2001. The representation dated 29.10.2003 was the first
representation submitted by the appellant before the adjudicating
officer during course of personal hearing. What is said by a person
who is called for personal hearing even though given in the form
of written representation dated 29.10.2003 required to be
considered by the adjudicating officer otherwise the personal
hearing shall become an empty formality and meaningless,
specially when what was said by the appellant in his representation
dated 29.10.2003 in no manner contradicted the reply 26.03.2001
sent by the Company Secretary. Thus, the written representation
dated 29.10.2003 submitted by appellant required due
consideration and the High Court erred in discarding it as an
afterthought. [Para 16][101-G-H; 102-A-E]
2. The view of the High Court that the affidavit dated
04.07.2003 of the Company Secretary had not been filed either
before the Adjudicating Authority or the Appellate Tribunal nor
any such plea was taken in the earlier communications is neither
correct nor based on materials on the record. The adjudicating
officer in its order dated 31.03.2004 has noted the reply dated
29.10.2003 on behalf of the appellant. The reply dated 29.10.2003
has been brought on the record of the paper book as Annexure
P-4. In paragraph 10(1) of the reply dated 29.10.2003, the affidavit
filed by the Company Secretary has been relied which was also
enclosed with the reply as Annexure “C”. Thus, the affidavit of
Company Secretary dated 04.07.2003 clearly stating that the
appellant who was Director of the erstwhile Company was only a
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part time Director of the s

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