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In the case of Shailendra Swarup vs. the Deputy Director, Enforcement Directorate, the Supreme Court bench comprising of Justice Ashok Bhushan, and Justice R. Subhash Reddy delivered a judgment stating that the proceedings compyling with section 68 of Foreign Exchange Regulation Act, 1973 (FERA) depends upon the nature of role one plays in the affairs of the company or an organization and not only upon the designation or status in the company.
The Enforcement Directorate filed a notice against all the Directors including Mr. Shailendra Swarup, a former practicing advocate of the Supreme Court of the company which goes by the name of Modi Xerox Ltd.(MXL). The appellant, Shailendra Swarup, argued against the notice of the Enforcement Directorate by stating that he was not associated completely with the aforementioned company, he was only the part-time non-executive Director of MXL Ltd. hence, neither he was the employee of the company nor he held any executive position in the same.
Further, the Deputy Director, Enforcement Directorate imposed a penalty of Rs. 1 lakh on all the Directors including Mr. Shailendra Swarup. Further the order issued by the Enforcement Directorate was validated in the Appellate Tribunal and the High Court. Thus, the matter was appealed before the Supreme Court of India by Mr. Shailendra Swarup against the Deputy Director, Enforcement Directorate.
The Supreme Court bench observed that all the adjudicating authorities failed to consider the fact that Mr. Shailendra Swarup was only a part-time, non-executive not in charge of the Company’s affairs at that specified time. The bench also took into account the case of S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla.
The judgment in this case stated that the section 141 of the Negotiable Instrument Act, 1981 is a pari materia provision to the Section 68 of the FERA Act, 1973, that the liability of a personnel arises only out of his/her conduct, act or omissions in the operations of an organization and not merely on the position or status one held in an organization.
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