DR.A.C.MATHEW v. NONE

4. On receipt of Ext.P1 notice, the petitioner appeared beforethe 1st respondent after submitting Ext.P4 reply. The petitionercontended in Ext.P4 that though he had agreed to become aDirector of the Company with effect from 1.2.1997, it did notmaterialise and that he was never inducted as a Director. The O.P.NO.3328/2003 .3petitioner also pointed out that misrepresenting that he has givenhis consent to be a Director of the Company, respondents 2 to 4manipulated the records to make it appear that he had consentedto become a Director with effect from 21.8.1996. The petitionerfurther pointed out that based on the entires in the return in FormNo.32 submitted by the Company, he was not a Director during theperiod when the letter of permission was in force and hence hecannot be held personally liable for the penalty or otherconsequences that follow the violation of the terms and conditionsof the letter of permission.

Along with Ext.P4 reply, the petitioneralso produced various documents including the return in Form 32. By Ext.P5 order passed on 9.1.2003, the 1st respondent overruledthe petitioner's contentions and held that he is also liable to beproceeded against in his capacity as a Director of the company. The1st respondent did not however adjudicate upon the questionwhether the petitioner was in fact a Director of the Company duringthe period when the letter of permission was in force. In thatview of the matter, the 1st respondent held that the company hasviolated subsections (2) and (5) of Section 11 of the Act andimposed a penalty of Rs.2,00,000/= on the Company and itsDirectors. Ext.P5 is under challenge in this original petition. O.P.NO.3328/2003 .45.I have heard Sri. Premjith Nagendran, the learned counselappearing for the petitioner and Sri. Parameswaran Nair, thelearned Assistant Solicitor General appearing for the respondents.

The learned counsel for the petitioner contended that letter ofpermission was valid only for the period from 9.7.1996 to 8.7.1997and that even going by Ext.P2, the petitioner became a Director ofthe Company only on 14.8.1997. The learned counsel for thepetitioner also contended that the minutes of the meeting of the Board of Directors evidenced by Ext.P3 is a forged document andthat in the light of Ext.P2 no reliance can be placed on Ext.P3. Thelearned counsel further contended that the petitioner was not aDirector of the company during the relevant time and that hecannot therefore be held liable for breach of the conditions of theletter of permission. 6. Per contra, the learned Assistant Solicitor General appearingfor the respondents contended that the petitioner, who was as perthe books of the company, one among its Directors, cannot seekavoidance of the penalty on the ground that he was not a Directorof the company when the letter of permission was in force.

The O.P.NO.3328/2003 .5learned Assistant Solicitor General also contended that an appeal liesfrom Ext.P5 to the Central Government and that as the petitioner hasan effective alternate remedy, this Court may not exercise itsjurisdiction under Article 226 of the Constitution of India andadjudicate on the validity of Ext.P5. 7.I have considered the rival contentions. It is not disputedthat penalty was imposed under Section 11 of the Act forcontravening the terms of the letter of permission. Ext.P1 showcause notice was issued and Ext.P5 order of penalty was imposedon the Company and its Directors for not achieving the exportobligation arising out of the letter of permission issued to thecompany. As per the letter of permission, the company and itsDirectors were bound to achieve export obligation to the tune of1,70,90,238/=. The allegation in Ext.P1 is that the company andits Directors had failed to honour the said obligation.

In Ext.P4reply it was pointed out that even going by the return in Form 32,the petitioner became a Director of the company only on 14.8.1997,after the letter of permission ceased to be in force and that even ifthe company and its Directors are liable for breach of the terms andstipulations therein, in as much as the petitioner became a Director O.P.NO.3328/2003 .6of the company only on 14.8.1997, he cannot be held personallyliable for breach of the export obligation arising out of the letter ofpermission. Though this point was raised in Ext.P4, the 1strespondent did not decide the issue and held that the companyand its Directors including the petitioner are liable for beingproceeded against. It is seen from Ext.P2 that the petitionerbecame a Director of the Company only on 14.8.1997. Ext.P2 is thereturn filed in terms of the provisions of the Companies Act, 1956.The entires therein are not under challenge.

If so no reliance canbe placed on the minutes of the meeting evidenced by Ext.P3, whichrecites that the petitioner and another person were inducted as Directors of the Company in the place of respondents 2 and 3 on21.8.1996. 8. The 1st respondent has in Ext.P5 noticed the contention ofthe petitioner that he was not a Director of the company during therelevant time. The petitioner admittedly became a Director only on14.8.1997. During the period when the letter of permission was inforce namely from 9.7.1996 to 8.7.1997, the petitioner was not aDirector of the Company. Hence he had no duty to meet theobligations arising out of the letter of permission. In that view of O.P.NO.3328/2003 .7the matter finding entered by the 1st respondent in Ext.P5 thatthe petitioner has violated subsections (2) and (5) of Section 11 of Foreign Trade (Development & Regulation) Act is not sustainable inlaw and is liable to be invalidated.