IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.N.RAVINDRAN WEDNESDAY, THE 20TH FEBRUARY 2008 / 1ST PHALGUNA 1929 OP.No. 3328 of 2003(U) ---------------------- PETITIONER: ------------ DR.A.C.MATHEW, FLAT 205, BLOCK II, KSHB PATTOOR HOUSING SCHEME, KUNNUKUZHI P.O., TRIVANDRUM - 695 037. BY ADV. SRI.PREMJIT NAGENDRAN RESPONDENTS: ------------- THE DEVELOPMENT COMMISSIONER, COCHIN SPECIAL ECONOMIC ZONE (CSEZ) ADMINISTRATIVE BLDG, COCHIN SPECIAL ECONOMIC ZONE P.O., KAKKANAD, COCHIN - 682 037. ADDL. RESPONDENTS IMPLEADED: ADDL.R2 SHRI. GEORGE PANDICHERIL, S/O. PHILIP MATHEN, 'ROHINI', 39/921-B, CARRIER STATION ROAD, KOCHI-682016. ADDL.R3 SMT. SALLY GEORGE, W/O. GEORGE PANDICHERIL, 'ROHINI', 39/921-B, CARRIER STATION ROAD, KOCHI-682016. *ADDL.R4 MR. C.M. CHACKO, S/O. LATE SRI. KORAH MATHEN, 36/2131, 'SHINY VILLA', SHENOY ROAD, COCHIN - 682 0167 IMPLEADED AS ADDL. RESPONDENTS A S PER ORDER DATED 30.1.2003. *ADDL.R4 IS DELETED FROM THE PARTY ARRAY AS PER ORDER DATED 15.2.2008 IN I.A.NO.2159.2008 BY ADV. SRI.ABRAHAM THOMAS,CGSC SRI.JOHN VARGHESE, ASSISTANT SG SRI.P.PARAMESWARAN NAIR,ASST.SOLICITOR THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 20/02/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ORDER ON CMP.NO.5928 IN OP.NO.3328 OF 2003-U DISMISSED 18.2.2008. SD/= P.N. RAVINDRAN, JUDGE. APPENDIX PETITIONER'S EXHIBITS: EXT.P1 COPY OF THE SHOWCAUSE NOTICE NO.31/06/2001 ADJ.CSEZ/423 DTD 14.1.02 ISSUED BY THE RESPONDENT. EXT.P2 COPY OF FORM NO.32 FILED BY THE COMPANY BEFORE THE REGISTRAR OF COMPANIES DTD 11.9.99. EXT.P3 COPY OF THE MINUTES PASSED BY THE COMPANY DTD 24.12.96. EXT.P4 COPY OF THE REPLY TO THE SHOW CAUSE NOTICE NO.31/062001/ADJ/CSEZ/423 SENT BY THE PETITIONER TO THE RESPONDENT DTD 7.2.02. EXT.P5 COPY OF THE ORDER NO.F.NO.31/06/01 ADJ.CSEZ/257 DTD 9.1.03 ISSUED BY THE RESPONDENT. EXT.P6 COPY OF THE SHOW CAUSE NOTICE ISSUED BY THE CUSTODMS DEPARTMENT DTD 20.8.99 AND ALSO INCLUDED ALLENENDUM ISSUED BY THE CUSTOMS OFFICE DTD 8.6.2000. /TRUE COPY/ cl P.N. RAVINDRAN, J. --------------------------------------------------------------- O.P.NO.3328 OF 2003-U -------------------------------------------------------------- Dated this the 20th day of February, 2008. JUDGMENT Exhibit P5 order passed by the 1st respondent herein under Section 11 of the Foreign Trade (Development & Regulation) Act, 1992 (hereinafter referred to as the “Act” for short), levying a penalty of Rs.2,00,000/= on M/s.Cochin Plastics (P) Ltd. and its Directors is under challenge in this original petition. 2. M/s. Cochin Plastics (P) Ltd., is a company incorporated under the Companies Act, 1956. The promoters of the company are Mr. George Pandicheril, his wife Smt. Sally George and Mr. C.M. Chacko, who are respondents 2 to 4, in this original petition. The 4th respondent passed away during the pendency of this original petition and on application filed by the petitioner as I.A.No.2159/2008 the name of the 4th respondent was deleted from the party array at the petitioner's risk by order passed on 15.2.2008. 3. A letter of permission was issued to M/s. Cochin Plastics (P) Ltd, O.P.NO.3328/2003 . 2 (hereinafter referred to as the “Company” for short) for the manufacture and export of Compact Disc, Video Casings, Audio Casings etc. The letter of permission was valid for a period of one year commencing from 9.7.1996 and ending with 8.7.1997. As per the terms of the letter of permission, the Company imported machinery worth Rs. 1,70,90,238/= for execution of the project. The company was bound to achieve export obligation equivalent to the value of the machinery imported by it. Since, the company failed to achieve the stipulated export performance, the 1st respondent issued Ext.P1 show cause notice dated 14.1.2002 to all the Directors of the Company and the petitioner herein calling upon them to show cause why action should not be taken against them for shortfall in export obligation and for imposition of penalty under Section 11(2) of the Act or for confiscation of the goods/materials imported under Section 11(5) of the Act. 4. On receipt of Ext.P1 notice, the petitioner appeared before the 1st respondent after submitting Ext.P4 reply. The petitioner contended in Ext.P4 that though he had agreed to become a Director of the Company with effect from 1.2.1997, it did not materialise and that he was never inducted as a Director. The O.P.NO.3328/2003 . 3 petitioner also pointed out that misrepresenting that he has given his consent to be a Director of the Company, respondents 2 to 4 manipulated the records to make it appear that he had consented to become a Director with effect from 21.8.1996. The petitioner further pointed out that based on the entires in the return in Form No.32 submitted by the Company, he was not a Director during the period when the letter of permission was in force and hence he cannot be held personally liable for the penalty or other consequences that follow the violation of the terms and conditions of the letter of permission. Along with Ext.P4 reply, the petitioner also produced various documents including the return in Form 32. By Ext.P5 order passed on 9.1.2003, the 1st respondent overruled the petitioner's contentions and held that he is also liable to be proceeded against in his capacity as a Director of the company. The 1st respondent did not however adjudicate upon the question whether the petitioner was in fact a Director of the Company during the period when the letter of permission was in force. In that view of the matter, the 1st respondent held that the company has violated subsections (2) and (5) of Section 11 of the Act and imposed a penalty of Rs.2,00,000/= on the Company and its Directors. Ext.P5 is under challenge in this original petition. O.P.NO.3328/2003 . 4 5. I have heard Sri. Premjith Nagendran, the learned counsel appearing for the petitioner and Sri. Parameswaran Nair, the learned Assistant Solicitor General appearing for the respondents. The learned counsel for the petitioner contended that letter of permission was valid only for the period from 9.7.1996 to 8.7.1997 and that even going by Ext.P2, the petitioner became a Director of the Company only on 14.8.1997. The learned counsel for the petitioner also contended that the minutes of the meeting of the Board of Directors evidenced by Ext.P3 is a forged document and that in the light of Ext.P2 no reliance can be placed on Ext.P3. The learned counsel further contended that the petitioner was not a Director of the company during the relevant time and that he cannot therefore be held liable for breach of the conditions of the letter of permission. 6. Per contra, the learned Assistant Solicitor General appearing for the respondents contended that the petitioner, who was as per the books of the company, one among its Directors, cannot seek avoidance of the penalty on the ground that he was not a Director of the company when the letter of permission was in force. The O.P.NO.3328/2003 . 5 learned Assistant Solicitor General also contended that an appeal lies from Ext.P5 to the Central Government and that as the petitioner has an effective alternate remedy, this Court may not exercise its jurisdiction under Article 226 of the Constitution of India and adjudicate on the validity of Ext.P5. 7. I have considered the rival contentions. It is not disputed that penalty was imposed under Section 11 of the Act for contravening the terms of the letter of permission. Ext.P1 show cause notice was issued and Ext.P5 order of penalty was imposed on the Company and its Directors for not achieving the export obligation arising out of the letter of permission issued to the company. As per the letter of permission, the company and its Directors were bound to achieve export obligation to the tune of 1,70,90,238/=. The allegation in Ext.P1 is that the company and its Directors had failed to honour the said obligation. In Ext.P4 reply 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 if the company and its Directors are liable for breach of the terms and stipulations therein, in as much as the petitioner became a Director O.P.NO.3328/2003 . 6 of the company only on 14.8.1997, he cannot be held personally liable for breach of the export obligation arising out of the letter of permission. Though this point was raised in Ext.P4, the 1st respondent did not decide the issue and held that the company and its Directors including the petitioner are liable for being proceeded against. It is seen from Ext.P2 that the petitioner became a Director of the Company only on 14.8.1997. Ext.P2 is the return filed in terms of the provisions of the Companies Act, 1956. The entires therein are not under challenge. If so no reliance can be placed on the minutes of the meeting evidenced by Ext.P3, which recites that the petitioner and another person were inducted as Directors of the Company in the place of respondents 2 and 3 on 21.8.1996. 8. The 1st respondent has in Ext.P5 noticed the contention of the petitioner that he was not a Director of the company during the relevant time. The petitioner admittedly became a Director only on 14.8.1997. During the period when the letter of permission was in force namely from 9.7.1996 to 8.7.1997, the petitioner was not a Director of the Company. Hence he had no duty to meet the obligations arising out of the letter of permission. In that view of O.P.NO.3328/2003 . 7 the matter finding entered by the 1st respondent in Ext.P5 that the petitioner has violated subsections (2) and (5) of Section 11 of Foreign Trade (Development & Regulation) Act is not sustainable in law and is liable to be invalidated. As regards the contention of the learned counsel for the respondents that the petitioner should resort to the alternate remedy of appeal, I notice that this original petition was admitted on 30.1.2003 and has been pending for more than five years. The period of limitation for filing an appeal expired long back. Further this Court had by an interim order passed in CMP.No.5928/2003 while staying the recovery proceedings against the petitioner observed that it will open to the 1st respondent to proceed against the company and its other Directors. In that view of the matter, especially having regard to the fact that no adjudication of disputed facts is involved, I am not inclined to relegate the petitioner to invoke the the alternate remedy at this point of time. In the result, the original petition is allowed. Ext.P5 in so far as it relates to the petitioner is quashed. It will be open to the 1st respondent and the other officers concerned to proceed against the Company and its Directors, who were in office during the period O.P.NO.3328/2003 . 8 when the letter of permission was in force. No costs. P.N. RAVINDRAN, JUDGE. cl O.P.NO.3328/2003 . 9 P.N. RAVINDRAN, J. O.P.NO.3328 OF 2003-U JUDGMENT 20th February, 2008.