Sadhana Jain vs P. Sudhir
2003 Latest Caselaw 372 Del

ORDER

O.P. Dwivedi, J.

1. Through this petition which is under Section 482, Cr.P.C. the petitioner seeks quashing of the proceedings in a complaint under Sections 132 and 135(2)(a) of the Customs Act, 1962 (for short the "Act") against her instituted by the Director pf Revenue Intelligence.

2. Briefly narrated, the facts leading to this case are that on 28.8.1998, complainant Directorate of Revenue Intelligence filed a complaint under Sections 132 and 135(1)(a) of the Act against M/s.DCP Associates Pvt. Ltd. New Delhi, Ajit Jain and petitioner Sadhana Jain. Ajit Jain, husband of the petitioner was arrayed as accused No. 2 being the Managing Director of the said company and the petitioner herein was cited as accused No. 3 being the director of the said company. It was alleged in the complaint that the accused No. 1 was importing various types of synthetic linings from Taiwan through Chennai Port. A raid was conducted at the premises of the company on 30.1.1996 and some imported synthetic linings were seized. The statement of the petitioner and her husband were also recorded under Section 108 of the Customs Act. On further probe it was found that the said company had evaded import duty to the tune of Rs. 86,30,691/-. In para 13 of the complaint it was pleaded that as per statement of the petitioner and her husband recorded on 26.3.1997 and 9.6.1997 the work of the company was mainly looked after by the petitioner's husband. In para 16 of the complaint it was alleged that petitioner and her husband were Director and Managing Director respectively of the company at the time when the offence was committed and were responsible to the company for the conduct of its business.

3. In departmental adjudication proceedings a show-cause notice dated 18.6.1997 was issued to the company, the petitioner and her husband and after considering a detailed reply and the submissions made on behalf of the company, the petitioner and her husband, the Commissioner of Customs vide his order dated 16.3.2000 held that duty was short levied to the extent of Rs. 53,19,605/-. Accordingly, Commissioner of Customs ordered confiscation of the goods. He also levied a fine of Rs. 26 lakhs in respect of remaining quantity of the imported linings which were not available for the physical confiscation. A penalty of Rs. 53,17,605/- was imposed on the company under Section 114A of the Customs Act and further penalty of Rs. 10 lac was imposed on the petitioner's husband Ajit Jain under Section 112A of the Act. As regards the petitioner, the Commissioner of Customs in para 45 of the order noted that "Sadhana Jain admittedly looked after the affairs of DCP in 1996 much after the imports took place. Hence no penalty on her is warranted". Accordingly, no penalty was imposed on the petitioner Sadhana Jain. Petitioner thereupon filed an application dated 24.2.1999 seeing discharge from the criminal proceedings initiated by the department of Revenue Intelligence on the basis of complaint under Sections 132 and 135(1)(a) of the Act. This application was opposed by the department and after considering respective submissions made by the learned Counsel for the parties, learned ACMM vide impugned order dated 30.1.2001 rejected the application being of the view that question as to whether the petitioner was in-charge or responsible for the conduct of the business of the company can be decided only after the evidence is led by the parties at the trial.

4. Feeling aggrieved, petitioner has preferred this petition under Section 482, Cr.P.C. for quashing criminal prosecution under Sections 132 and 135(1)(a) of the Act.

5. Heard learned Counsel for the parties and perused the record.

6. Section 140 of the Customs Act which imposes vicarious liability on the Directors/Office-bearers of the company who were in-charge and responsible for the conduct of its business of the company, reads as under:

"140. Offences by companies.--(1) If the person committing an offence under this Chapter is a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to such punishment provided in this Chapter if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in Sub-section (1), where an offence under this Chapter has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any negligence on the part of, any Director, Manager, Secretary or other officer of the company, such Director, Manager, Secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly."

7. The contention of the petitioner is that on the basis of averments made in the complaint the petitioner cannot be made vicariously liable under Section 140 of the Act for offence committed by the company. Moreover, in the adjudication proceedings she has been exonerated by the Commissioner of Customs, therefore, proceedings arising out of complaint under Sections 132 and 135(1)(a) of the Customs Act against her should be quashed. As against this, Mr. Satish Aggarwal, learned Counsel for the department contended that averments made in the complaint are sufficient to make petitioner vicariously liable of the offence committed by the company, and the finding arrived at during the adjudication proceedings do not bar criminal prosecution. In the case of Assistant Collector of Customs v. L.R. Malwani, 1999 (110) E.L.T. 317 (SC), the Apex Court held that departmental authorities are not a Court within the meaning of Article 20(2) of the Constitution of India. So their findings neither operate as a bar to prosecution under Sections 132 and 135(1)(a) of the Customs Act nor for the same reason it can operate as an issue estopple in a criminal case. There is no dispute with this preposition of law. The findings of the adjudication authority will not operate as a bar to the prosecution. The question to be considered is when departmental authority have not imposed any penalty against the petitioner, will her prosecution or, the same allegation be desirable and should be allowed to continue ? In the case of S.K. Sinha v. S.K. Shingal and Anr., and in the case of Shri Willi Lemback v. Rajan Mathur and Anr., 1993 (1) C.C, Cases 92 (HC), this Court has taken the view that if the department has no good case for the purpose of adjudication it will be unjust to require the petitioner to go through the entire process of prosecution. In both these cases this High Court quashed the criminal proceedings against the petitioners who were exonerated in the departmental proceedings. In the case of P.S. Rajya v. State of Bihar, 1996 SC Cases (Cri.) 897, the appellant an Income Tax Officer was prosecuted by the CBI for being found in possession of disproportionate assets. Later on the Central Vigilance Commissioner exonerated the appellant in the departmental proceedings and this was concurred by the UPSC. The appellant then filed a petition under Section 482, Cr.P.C in the High Court for quashing prosecution but the High Court rejected the petition being of the view that issues raised had to be gone into in the final proceedings. The appellant then approached the Supreme Court, Apex Court allowed the appeal and held that when on the same allegation appellant has been exonerated in the departmental inquiry there was no justification in continuing the prosecution. In the case of Uttam Chand v. Income Tax Officer, Central Circle, Amritsar Income Tax Reports, Vol. 133 para 909 (SC), the Income Tax Department had launched prosecution against the petitioner for filing false return. In the departmental proceedings the Tribunal exonerated the petitioner. Supreme Court held that after the petitioner has been exonerated by the department's Appellate Authority, he could not be prosecuted in a Criminal Court on the same facts. Likewise, in the case of G.L. Didwania v. Income Tax Officer, 1999 (108) ELT 16 (SC), the petitioner was prosecuted by the Income Tax Department for concealment of income under the Income Tax Act. But the Tribunal who is the final fact finding authority under the Act decided the question in favor of the assesseds. The Supreme Court held that prosecution on the same charges cannot be continued. This Court also took the same view in the case of Munnalal Khandelwal v. Director of Revenue Intelligence, Petition (Crl.) 952/99 decided by DB of this Court on 12.9.2002, Criminal Revision 420/1998 decided on 31.10.2000, .

8. In the present case there is no specific averment against the petitioner indicating her active participation in the conduct of the business of the company. She had been arrayed as the accused only because she is the Director of the company. The position of her husband accused No. 2 is different because being Managing Director of the company he is supposed to be in the control of day-to-day business. But the same cannot be said about petitioner who is lady. In her statement before the customs authority she had stated that she is a sleeping Director. In fact in para 13 of the complaint itself it was pleaded "as per the statement of accused Nos. 2 and 3 recorded on 26.3.1997 and 9.6.1997 the work of the accused No. 1 is/was mainly looked after by accused No. 2 and a few persons were employed to lookafter the local sales. This indicates that petitioner has been arrayed as accused No. 3 only because of her position as Director in the company whereas it is her husband accused No. 2 who used to take active part and had control over affairs of the day-to-day business of the company. The department seems to have conceded this position before the Commissioner of Customs. This is clear from following observations contained at the end of para 45 of the order of the Commissioner of Customs "Smt. Sadhana Jain admittedly looked after the affairs of DCP in 1996 much after the imports took place. Hence no penalty on her is warranted." The use of the word "admittedly" here indicates that before the Commissioner the department admitted the position that the petitioner started looking after the affairs of the company only in 1996 i.e. much after the alleged imports took place. It is because of this admission made by the department that the Commissioner did not impose any penalty on the petitioner. In the case of Sham Sundar and Ors. v. State of Haryana, , it was held that it is only the partner who actively participated in the business during the relevant time who can be convicted for the offence committed by the company/firm. The Apex Court observed that it is common that some of the partners of the firm may even be not knowing what is going on in the firm on day-to-day basis. There may be partners better known as sleeping partners who are not required to take part in the business of the firm. There may be ladies and children who were admitted for the benefit of the partnership. They may not be knowing about the business of the firm. It would be a travesty of justice to prosecute all partners and ask them to prove that the offence was committed without their knowledge. The obligation of the accused to prove that the offence took place without his knowledge or that he/she exercised all due diligence to prevent such offence arises only when the prosecution establishes that he was responsible for carrying on business and was during the relevant time in-charge of the business. In absence of any such proof, no partner can be convicted. Thus where the evidence produced by the department did not indicate that all the partners were actively participating in the business of the firm, it could not be said that when the offence was committed all the partners were conducting the business of the firm. Therefore, they will not be liable for conviction. As already stated in the present case, there is no specific averment to the effect that the petitioner actively participated and was in control of the day-to-day business of the company. From the averments made in the complaint, it appears that she was imp leaded as accused No. 3 only because she was the Director of the company. From the observation made by the Commissioner at the end of para 45 of his order it is clear that the department had admitted the position that the petitioner started looking after the affairs of the company in 1996 much after the alleged offence took place.

9. For these reasons, I am of the view that it is a fit case for exercising inherent powers under Section 482, Cr.P.C. for quashing the proceedings against the petitioner. Accordingly, this petition is allowed and the criminal proceeding arising out of the complaint against the petitioner under Sections 132 and 135(1)(a) of the Customs Act are hereby quashed.