Vivek Goyal Vs Joint Director (Appellate Tribunal Under SAFEMA Delhi)
SAFEMA Tribunal Deletes FEMA Penalty on Technical Director; Mere Designation Does Not Attract Vicarious Liability Under Section 42
The Appellate Tribunal under SAFEMA allowed the appeal filed by Vivek Goyal, setting aside the ₹10 lakh penalty imposed under Section 42 of the FEMA for the failure of Neomagic Semiconductor India Pvt. Ltd. to fulfil export obligations against export advances of US$ 11,13,769 received from its US parent company. The Enforcement Directorate had alleged that, as a Director, the appellant was vicariously liable for the company’s failure to export goods and services as required under Section 7 of FEMA read with Regulation 16 of the FEMA (Export of Goods and Services) Regulations, 2000.
The Tribunal found that the appellant had consistently maintained that he was primarily a salaried Vice-President (Engineering) and was appointed as a Director only for administrative convenience. His responsibilities were confined to technical operations, software and hardware development, recruitment and general administration, while finance, banking, exports and imports were handled by the Managing Director, H.P. Agarwal. The Tribunal noted that the Adjudicating Authority had imposed the penalty without examining or rebutting these specific explanations or recording any finding as to how the appellant was responsible for the export default.
Relying extensively on the Supreme Court’s decision in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, the Tribunal reiterated that vicarious liability cannot be imposed merely because a person holds the designation of Director. Liability under Section 42 of FEMA arises only where it is established that the individual was in charge of and responsible for the conduct of the company’s business, or that the contravention occurred with his consent, connivance or neglect. As the record showed that the appellant’s role was confined to technical functions and only occasional banking work in the Managing Director’s absence, with no responsibility for export-import operations, the Tribunal held that the essential ingredients of Section 42 were absent. It therefore set aside the penalty and allowed the appeal.
Cases Discussed
- S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla And Anr. (SC), 2005 (8) SCC 89
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
This Order disposes of the Appeal No. FPA-FE-27/DLI/2021 filed by Shri Vivek Goyal against the Order No. ADJ/01/ FEMA/DLZO-II/2019/JD(NKG)/641 dated 23.07.2019 (Impugned Order) passed by the Joint Director, Directorate of Enforcement, Government of India, Delhi. The Ld. Adjudicating Authority (AA) imposed the penalty of Rs. 10,00,000/- on Shri Vivek Goyal for the contravention of Section 7 of the Foreign Exchange Management Act, 1999 (FEMA) read with Regulation 16 of Foreign Exchange Management (Export of Goods and Services) Regulation 2000 in terms of Section 42 of FEMA.
