THE HON’BLE SRI JUSTICE B PRAKASH RAO AND THE HON’BLE SRI JUSTICE SANJAY KUMAR WRIT PETITION NO. 27146 OF 1997 ORDER: (Per Sri Justice B Prakash Rao) The first petitioner herein is the Vice Chairman and petitioners 2 to 5 are Directors of M/s. Ambuja Petrochemicals Limited. They filed the present writ petition under Article 226 of the Constitution of India, interalia seeking a writ of certiorari assailing the entire proceedings and orders passed by the first respondent /first appellate authority dated 30.7.1997 and the recovery notice dated 1.9.1997 and to set aside the order of the adjudicating authority dated 27.7.1995 imposing penalty of Rs.1,29,00,000/- on the petitioners. The case of the petitioners is that the said company is a public limited company engaged in manufacture and sale of ‘Phthalic Anhydride’, having commenced its commercial production in the year 1981 with a licensed capacity of 10,000 Metric tonnes per annum. Being eligible for advance licences under the import export policy, the company obtained six advance licences bearing No. 3287230 dated 26.12.1992 and No.3287231 dated 23.12.1992 during the period October, 1991 to December, 1992, from the Joint Chief Controller of Imports and Exports, Hyderabad. Accordingly, it imported inputs i.e., Orthozylene which is being used in its final products. However, due to ill-luck, the customers from foreign countries backed out from their orders for final products which have been placed with it, therefore the petitioner company had to sell the same in the domestic market. In view of the recession, driven by several financial difficulties, the company was declared sick under the provisions of Sick Industrial Companies (Special Provision) Act, 1986. In spite of the same, a show cause notice dated 7.11.1994 was issued by the Additional Director General of Foreign Trade calling upon the company to explain as to why penalty should not be imposed in view of the fact that barring a small quantity of the final product which was exported, the entire products were sold in the domestic market without discharging its export obligations, therefore there is a violation of the conditions imposed in the advance licenses as well as the Customs Act, 1962, read with notification No. 159 of 1990 dated 30.3.1990. Further, it was alleged that there is violation of Sections 11 and 13 of the Foreign Trade (Development and Regulation) Act, 1992. The said show cause notice contemplates that the company should in turn inform the petitioners herein regarding the allegations. However, the entire grievance revolves in a very narrow compass and the complaint is that there is no due notice specifically addressed to the petitioners herein as Directors, as contemplated under Section 14 of the Act, 1992 which mandates issuance of notice to all the persons concerned viz., owner of the goods or conveyance or other person concerned. Therefore, such a requirement is a mandatory one and same has not been followed and no notice was issued to the petitioners directly. The further complaint of the petitioners herein is that even under Section 14 of the Act, the person against whom the allegations are sought to be made is entitled to make a representation, apart from providing a regular hearing also, neither of which have been followed in the present case. In spite of such gross violation, it is stated that the second respondent who is an adjudicating authority passed the impugned order dated 27.7.1995 imposing the penalty of Rs.1,29,00,000/- against the company and also the petitioners herein fixing joint liability, holding that petitioners are guilty of contravention of Clause 6 (2), 13 (2) and 14 (2) of the Foreign Trade (Regulation) Rules 1993 and Section 11 (2) of the Foreign Trade (Development and Regulation) Act, 1992. The further complaint of the petitioners is that the said order is neither communicated nor served on the petitioners. Aggrieved thereby, the petitioners herein and the company filed two separate appeals before the Appellate Authority viz., first respondent herein, wherein several substantial questions as stated above, apart from the aspects touching the merits as well, were raised. The petitioners herein filed written submissions before the first respondent stating various settled principles relying upon decisions of the Supreme Court and High Courts and under CEGAT. However, petitioners came to know that the appeal filed by the company was rejected and accordingly a notice for recovery of the amount dated 1.9.1997 was issued by the Director General of Foreign Trade on the petitioners personally. The complaint of the petitioners is that the petitioners have not received any orders disposing of their appeal, therefore issuance of recovery proceedings is wholly misconceived and illegal. It is pointed out that several pleas urged on behalf of the petitioners have not been considered in a proper perspective, therefore the entire impugned action on the part of the Adjudicating Authority as well as by the Appellate Authority and issuance of recovery proceedings, is totally in the teeth of the mandate as provided under Section 14 of the Act, 1992. That apart, even fixation of any such liability without duly considering relevant facts and circumstances as mentioned from both the sides is totally perverse and illegal. Hence, the writ petition. Repelling these contentions, the case of the respondents in short is to the effect that having regard to the fact that due notices were issued to the company and the petitioners being none other than the Directors of the company, hence, they could not plead ignorance, nor can be given any special treatment for issuance of notices and other follow up procedure. There is sufficient compliance with Section 14 of the Act, 1992 in issuance of notice and considering the representations filed by the company on merits. The petitioners on their own cannot make any grievance, more so, there is no such objection on behalf of the company. Therefore, there is absolutely no illegality on the part of the authorities. Further, it has been pointed out that admittedly the company has not complied with the mandatory terms and conditions under the licence and obligation arising thereunder in exporting the final product, therefore, there is clear violation of the provisions as contemplated under the show cause notice and final orders have been passed imposing the penalty. Thus, the penalty imposed is justified and perfectly in order and writ petition is liable to be dismissed. On a conspectus of the rival submissions shorn of other details, even on merits the issue boils down to the question as to whether on the facts and circumstances, the entire impugned action is violative of Section 14 of Act, 1992 in not issuing notice and providing opportunity to the petitioners? The facts which are not in dispute as already stated above, the company with an intention to manufacture final products i.e., Phthalic Anhydride has obtained aforesaid licences which, without any demur on the part of the petitioners, contemplate export of the goods. However, according to the petitioners having regard to the recession and due to certain financial difficulties and especially in view of the fact that foreign customers who had booked orders with them, had backed out, the petitioners could not export the goods which is led to selling the final products within the domestic market, therefore, there is no violation as such, nor any intention to violate the rules, thus no penalty could be imposed. Without going into the niceties these aspects on merits, the grievance centres upon the fact that the petitioners were not given notice or opportunity as provided under Section 14 of the Act, 1992. For the sake of convenience, Section 14 of the Act, 1992 reads as under; “14.Giving of opportunity to the owner of the goods, etc:- No order imposing a penalty or of adjudication of confiscation shall be made unless the owner of the goods or conveyance, or other person concerned, has been given a notice in writing:- a) informing him of the grounds on which it is proposed to impose a penalty or to confiscate such goods or conveyance; and b) to make a representation in writing within such reasonable time as may be specified in the notice against the imposition of penalty or confiscation mentioned therein, and, if is he so desires, of being heard in the matter.” We are not going into the merits as already stated, nor deem it proper having regard to the nature of the litigation, the ultimate question is effect of failure on the part of the authorities in following the principles of natural justice and the mandate of provisions of the Act. We are not referring to various other provisions which have been referred to in the proceedings and cited across the bar, especially provisions concerning the allegations of violation including the terms and conditions under the import licence. Coming back to the main question, as pointed out aforesaid, Section 14 bars imposition of penalty or adjudication of confiscation unless the owner of goods or conveyance or other person concerned has been given a notice in writing. Therefore, it is mandatory on the part of the authorities to provide an opportunity to all such persons against whom it seeks to proceed against either by imposing penalty or adjudicating confiscation. So long as there is no imposition or fixation of liability, the question of issue of a notice may or may not arise on the facts of each case. The established canons of basic principles of natural justice, and the above provision contemplates issuance of notice and providing an opportunity. The person, before he is slapped with the penalty, should be allowed to have his say and submit his case through due representation, and if he so desires, as stated in clause (b) thereof, a personal hearing which is mandatory. The aforesaid provision is nothing but only a reiteration of principles of natural justice. It is now well established that even where the law is silent, no authority be it judicial, quasi judicial or administrative can afford to pass an order imposing any liability especially of penal nature without giving any opportunity. Issuance of show cause notice, submission of explanation/representation and further providing opportunity to explain in person are all foundation stones. It is now too late in the day to deny such opportunity to any person. More so, where the authority contemplates fixing the liability upon a person other than the one to whom notice is issued, necessarily notice should go to such persons before fixation of any liability. In the case on hand, it is found that the adjudicating authority has issued notice only to the company and there is no explanation offered in the show cause notice or anywhere in the reasoning text as contained in the orders of the Adjudicating Authority or the Appellate Authority to indicate as to why no notice is issued to the petitioners herein or such other persons who are sought to be multed against. If it is the case of the authorities that there is joint liability or involvement of the directors be it executive or otherwise, co-extensive with the company they have to be put on notice. The very fact that the authorities are trying to extend the liability jointly upon the directors, dehors the company’s liability, necessarily they themselves are drawing a line in between and determining separate liability for penalty on independent entities. In view of the same, the question which is argued across the bar that the Directors cannot claim any separate individuality or identity other than that of the company, does not hold water, nor can be acceptable. Otherwise these persons go condemned unheard. Neither the show cause notice nor the orders of both the authorities indicate any exclusive liability against the company but it sought to extend against the petitioners as well. It is not known as to on what premise the authorities proceeded against the petitioners herein alone who do not have control over day to-day affairs of the company, leaving aside the other directors of the company. These are all aspects which need to be gone into. Be that as it may, since a joint liability is fixed on the petitioners being Directors of the company, be it executive or otherwise, along with the company, they have to be heard necessarily in person, apart from providing them opportunity to submit their due representations after due notice. For the foregoing reasons we hold that the notices and other steps as provided under Section 14 of the Act, 1992 are mandatory. There is no escape for the authorities to simply say that the Directors cannot plead their ignorance since company is provided with opportunity. Therefore the impugned proceedings i.e., order of the appellate authority vide order No. 12013/76/95-ADJ/AC dated 30.7.1997, recovery notice vide No.20/111/96-97/ECA.III/1000 dated 1.9.1997 of and order of the adjudicating authority/respondent no.2 vide order No. 9/43/HQ/94-95/ECA.I/793 dated 27.7.1995 are hereby set aside. Accordingly the writ petition is allowed. We leave it open to the authorities to take appropriate action afresh in accordance with law after following due procedure. No costs. _______________ B PRAKASH RAO,J ______________ SANJAY KUMAR,J DATE: -04-2010 TVK THE HON’BLE SRI JUSTICE B PRAKASH RAO AND THE HON’BLE SRI JUSTICE SANJAY KUMAR WRIT PETITION NO. 27146 OF 1997 Date: -04-2010