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 in the year 1991-1993 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 Modicorp Ltd. (hereinafter referred to as “XMC”) on 10.01.2000. A show-cause notice dated 19.02.2001 was issued by the Deputy Director, Enforcement Directorate to MXL and its Directors, including the appellant. The show cause notice required to show cause in writing as to why adjudication proceedings as contemplated in Section 51 of FERA should not be held against them. 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.

In the reply the appellant stated that he is a practicing Advocate of the Supreme Court and was only a part-time, nonexecutive Director of MXL and he was never in the employment of the Company nor had executive role in the functions of the Company. It was further stated that the appellant was never in charge of nor ever responsible for the conduct of business of the Company. 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 by the Appellate Tribunal on 26.03.2008. Criminal Appeal was filed by the appellant in Delhi High. The Delhi High Court by the impugned judgment dated 18.11.2009 has dismissed the appeal of the appellant.

The Hon’ble Supreme Court held that for proceeding against a Director of a company for contravention of provisions of FERA, 1973, the necessary ingredient for proceeding shall be that at the time offence was committed, the Director was in charge of and was responsible to the company for the conduct of the business of the company. The liability to be proceeded with for offence under Section 68 of FERA, 1973 depends on the role one plays in the affairs of the company and not on mere designation or status.  (CA No. 2463 of 2014 dt 27 -07 -2020 )