Full Judgment Text
IN THE HIGH COURT OF DELHI AT NEW DELHI
W.P.(C) 3897/1998 & CM 8206/1998
rd
Reserved on: 23 September 2010
th
Decision on: 8 October 2010
KASHMIRI LAL ..... Petitioner
Through : Mr. G.L. Rawal, Sr. Advocate with
Mr. Rajesh Rawal, Advocate.
Versus
UNION OF INDIA & ORS ..... Respondents
Through : Mr. Neeraj Chaudhari CGSC with
Mr. Khalid Arshad, Advocates for UOI.
CORAM: JUSTICE S. MURALIDHAR
1. Whether reporters of the local news papers
be allowed to see the judgment? No
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest? Yes
JUDGMENT
08.10.2010
th
1. The challenge in this petition is to an order dated 4 June 1997 passed
by the Additional Director General of Foreign Trade (`ADGFT’) under
Section 4-K of the Imports and Exports (Control) Act, 1947 [`IEC Act’]
read with Section 20(2) of the Foreign Trade (Development & Regulation)
Act, 1992 [the `FTDR Act’] imposing a penalty of Rs. 1 crore on the
Petitioner for utilizing material imported duty free “for a value of
Rs. 48,07,561/- otherwise than in accordance with the conditions of the
st
said licence.” The petition also challenges an order dated 1 May 1998
passed by the Appellate Committee dismissing the Petitioner’s appeal and
st
the consequential order dated 31 July 1998 issued by the Foreign Trade
Development Officer asking the Petitioner to deposit the penalty amount
W.P.(C) No. 3897/98 Page 1 of 10
within 20 days.
th
2. While directing notice to issue in the petition on 12 August 1998, this
Court restrained the Respondents from encashing the bank guarantee
furnished by the Petitioner to the Respondents as a condition for grant of
licence.
3. The Petitioner states that M/s Anil International made an application for
grant of duty free licence and pursuant thereto a Duty Free Licence dated
th
30 October 1989 was issued to the said firm enabling it to import CRCA
coils secondary grade restricted both by value and quantity. The
maximum value that could be imported was Rs.50,00,000/- and the
maximum quantity was 895.400 metric tonnes (MTs). The export
obligation was that the Petitioner should export 814 MTs diesel engine
parts and accessories of the value of Rs.75,00,000/-.
th
4. On 7 September 1993 a notice was issued to M/s Anil International
having its address at 236, Industrial Area, Ludhiana under Section 4 (L) of
the IEC Act asking it to show cause why penalty should not be imposed
on the firm and its partners under Section 4(1)(i)(a) of the IEC Act read
with Section 20(2) of the FTDR Act on the ground that the firm had failed
th
to fulfil its export obligations in terms of the advance licence dated 30
October 1989. The notice stated that the Adjudicating Authority had
reason to believe that the duty free imported goods valued at Rs. 50 lakhs
had been utilized by the firm otherwise than in accordance with the
conditions of the advance licence.
W.P.(C) No. 3897/98 Page 2 of 10
th
5. The firm replied on 6 October 1993 stating that its entire records of
imports and exports with reference to the licence in question were in the
custody of the Central Bureau of Investigation (CBI), New Delhi and,
therefore, it was not possible for the firm to reply to the show cause
notice. It requested that the notice be kept in abeyance and undertook to
send a reply as soon as the records were received back from the CBI.
th th nd
6. Further letters dated 24 January 1994, 28 November 1994 and 22
July 1996 were sent to the firm asking it to reply to the show cause notice.
th
The adjudication order dated 4 June 1997 of the ADGFT notes the fact
th nd
that the last two mentioned letters dated 28 November 1994 and 22
July 1996 sent to the firm were received back with the remarks “No such
person was available at the address.” The subsequent communication
th
dated 17 January 1997 requiring the firm to appear before the ADGFT
th
for a personal hearing on 10 March 1997 “was also received back with
similar remarks of the postal authority.”
7. It appears that in the absence of any one appearing on behalf of the
th
firm, the ADGFT proceeded to pass the adjudication order dated 4 June
1997 on the basis of the records. It was noticed that the firm has been
utilizing the licence almost in full as far as its imports were concerned
leaving a balance of only Rs.1,92,439/- in terms of cif value and 10.780
MTs in terms of weight. It was observed that the firm had failed to
intimate the date of clearance of the first consignment which was a
mandatory condition of the licence. Further the firm had exported only
th
one consignment for free on board (fob) value of Rs. 1,35,000/- as on 12
W.P.(C) No. 3897/98 Page 3 of 10
December 1989. In the above circumstances, it was concluded that the
firm had utilized the material imported duty free for a cif value of Rs.
48,07,561/- without fulfilling the export obligations. By the adjudication
th
order dated 4 June 1997 the ADGFT imposed a penalty of Rs. 2 crores
on the firm and Rs. 1 crore each on its partners, viz., the Petitioner herein
and Smt. Neelam Handa, Delhi and required such amount to be deposited
within six weeks.
8. The Petitioner states that he came to know of the above order only
th
when it was served upon him on 7 June 1997. It is pointed out that at no
point in time was any separate show cause notice issued to the Petitioner.
The Petitioner then appealed to the Appellate Committee Cell. In his
appeal, the Petitioner pointed out that a deed of partnership of the firm
th
M/s. Anil International was executed on 9 August 1985 in which profit
sharing ratio between Mrs. Neelam Handa and the Petitioner was 25:75.
Prior to being inducted as a partner in M/s. Anil International, the
Petitioner was serving M/s Sona Steel Industries, a sole proprietorship
concern of Mr. R.P. Handa, the husband of Mrs. Neelam Handa. It is
stated that the entire funds for the partnership including the share of the
Petitioner were arranged by Mr. R.P. Handa. The premises of the firm at
236, Industrial Area-1, Ludhiana was also owned by Mr. R.P. Handa. The
Petitioner claims to have been trapped by Mr. Handa into becoming a
partner of M/s Anil International. He stated that his retainership charges
continued to be paid by M/s Sona Steel Industries. Since the Petitioner
was an employee with Mr. Handa he was signing all papers under the
direction of Mr. Handa.
W.P.(C) No. 3897/98 Page 4 of 10
9. In his appeal, the Petitioner stated that another partnership deed was
nd
executed on 2 April 1991 and the constitution of the firm was changed.
Mr. R.P. Hnada became one of the partners and the profit sharing ratio
was as under:
1. Petitioner 20%
2. Mrs. Neelam Handa 40%
3. Mr. R.P. Handa 40%
10. Ultimately the Petitioner was removed from the partnership and a deed
th
of dissolution of partnership dated 9 August 1991 was executed. Apart
from enclosing the above documents with the memorandum of appeal, the
Petitioner pointed out that he had never received any notice from the
th
ADGFT and that in any event he was not a partner of the firm after 9
August 1991. He submitted that the time for meeting the export
st
obligations was extended by the DGFT up to 31 December 1992.
Consequently no proceedings could have been initiated even against the
firm prior to that date. Long prior to that date the Petitioner had ceased to
be a partner of M/s. Anil International.
11. It may be mentioned that as a pre-condition to his appeal being
considered the Petitioner was asked to furnish a bank guarantee in the sum
of Rs. 1 crore. This was complied with. The Appellate Committee, by a
st
cryptic order dated 1 May 1998, rejected the Petitioner’s appeal with the
following reasoning:
“We have gone through the appeal in great detail and have also
examined the findings of the Adjudicating Officer. The findings
regarding violation of the licence conditions are clearly
W.P.(C) No. 3897/98 Page 5 of 10
established. It emerges that the defaulting persons have been
deft in manipulating the facility of import licence almost
bordering on a criminal intent. There is no point of law or facts
which deserved fresh scrutiny and the guilty parties must suffer
the consequences of serious misuse of import licence. The
appeal is rejected. The financial bond offered should be
forfeited against the recovery amount. The office of the DGFT
should take further steps for recovery of the amount without
delay.”
12. Thereafter the Petitioner was issued the impugned recovery notice
st
dated 31 July 1998.
13. Mr. G.L. Rawal, the learned Senior counsel appearing for the
Petitioner points out that the fact that no prior show cause notice was
issued to the Petitioner before the adjudication order was passed, is not in
dispute. He referred to the judgments in S.L. Kapoor v. Jagmohan AIR
1981 SC 136 and J.T. (India) Exports v. Union of India 2001 (78) ECC
677 (Del) to urge that without a show cause notice and an opportunity of
being heard, no adjudication order could have been passed against the
Petitioner. He further points out that since the time for fulfilling the export
st
obligation had been extended up to 31 December 1992, no action could
have been taken against the firm itself till the expiry of that time limit.
th
The Petitioner admittedly had retired from the partnership firm on 9
August 2001 itself. Consequently when the liability accrued to the firm,
the Petitioner was no longer a partner and, therefore, even in terms of
Section 32(3) read with Section 72 of the Partnership Act, 1932 (`PA’) no
liability could be fastened on the Petitioner.
W.P.(C) No. 3897/98 Page 6 of 10
14. Appearing for the Respondents, Mr. Khalid Arshad, the learned
Advocate submitted that the liability under Section 32 PA of a retired
partner would cease only if there was a public notice of the retirement
given by such partner. In the instant case, there was no such public notice
given by the Petitioner of the date on which he ceased to be a partner in
M/s Anil International. It is submitted that in the absence of such notice
the Petitioner’s liability as a partner of Anil International continued even
after his retirement. Reliance is placed on the judgments in Syndicate
Bank v. R.S.R. Engineering Works 2003 (6) SCC 265 ; Income Tax
Officer v. Arunagiri Chettiar (1996) 9 SCC 33 and DCM Shriram
Industries v. Indo Organics 2003 (67) DRJ 256 .
15. As regards the issuance of show cause notices to the Petitioner as a
th
partner of Anil International, the impugned adjudication order dated 4
June 1998 itself reveals that all notices were issued only to the firm and
not to the individual partners. Given the context in which the firm got
reconstituted and the Petitioner admittedly ceased to be a partner with
th
effect from 9 August 1991, there was no question of the service of notice
on the firm being construed to be a sufficient service of notice on its
th
partners. With the last two communications dated 28 November 1994
nd
and 22 July 1996 being received back in the office of the ADGFT with
the remarks “no such person was available at the address” it was plain that
not only the firm but none of its former partners were served notices. The
th
subsequent notice of hearing dated 17 January 1997 was also returned
unserved. There is no satisfactory explanation for the non-service of show
cause notices upon the Petitioner before the impugned adjudication order
W.P.(C) No. 3897/98 Page 7 of 10
th
dated 4 June 1997 was passed. On this short ground the impugned
th
adjudication order dated 4 June 1997 should be held to be unsustainable
in law. The Appellate Committee seems to have completely overlooked
the above position which was squarely raised by the Petitioner in the
memorandum of appeal.
16. As regards the liability of the partner continuing in terms of Section 32
PA, it requires to be noticed that the liability of the firm arising out of its
st
failure to meet its export obligations got attracted only after 31 December
1992. This was because the time for fulfilling the export obligations was
extended till that date. In other words, if the firm had been able to fulfil its
th
export obligations between 9 August 1991 when the Petitioner ceased to
st
be a partner of M/s Anil International and 31 December 1992, the
extended date, there would be no continuing liability attached to the firm,
much less to its partners. Therefore, the crucial date for determining as to
when the liability accrued to the firm for failure to meet its export
st
obligations was not earlier than 31 December 1992. Consequently, it
cannot be held that with reference to the failure by the firm to meet its
export obligation, there was a continuing liability attached even to the
th
Petitioner who ceased to be a partner of the firm with effect from 9
August 1991. No liability with the firm having been accrued as of that
date, there was no question of fastening on the Petitioner any continuing
liability in terms of Section 32 PA.
17. The decision in Income Tax Officer v. Arunagiri Chettiar is
rd
distinguishable on facts. There a communication was sent on 23
W.P.(C) No. 3897/98 Page 8 of 10
February 1972 by the Income Tax Officer to the Respondent that he was
jointly and severally liable for the arrears due from the firm for the
assessment years 1962-63 and 1963-64. The defence of the Respondent
th
was that he ceased to be a partner of the firm on 19 April 1963 and was
therefore not liable. Negativing this contention, it was held that Section
25 PA did not make distinction between a continuing partner and an
erstwhile partner and, therefore, the liability of the firm which was already
accrued while the Respondent was still a partner would attach to him even
after he retired as partner. In the present case no liability accrued to the
firm during the time the Petitioner was its partner. Therefore, the above
decision is of no assistance to the Respondents. The facts in Syndicate
Bank as well as in DCM Shriram Industries v. Indo Organics were also
different and those decisions are also of no help to the Respondents.
18. The Appellate Committee does not appear to have considered any of
the submissions made by the Petitioner in his appeal. However,
considering that the present petition has been pending in this Court for
twelve years, little purpose would be served in remanding the matter to
the Appellate Committee at this stage. The Petitioner has been able to
th
satisfactorily demonstrate that the impugned order dated 4 June 1997 of
the ADGFT is bad in law for want of prior show cause notice to him and
further that the Petitioner having ceased to be a partner in M/s Anil
th
International with effect from 9 August 1991 and with no liability having
accrued as of date to the partnership firm in respect of the non-fulfillment
of export obligation, no penalty could possibly be imposed on the
Petitioner.
W.P.(C) No. 3897/98 Page 9 of 10
th
19. For the aforementioned reasons, the impugned order dated 4 June
st
1997 passed by the ADGFT and the order dated 1 May 1998 of the
Appellate Committee are hereby set aside. The bank guarantee furnished
by the Petitioner will stand cancelled.
20. The writ petition is disposed of in the above terms with costs of
Rs. 5,000/- which will be paid to the Petitioner by Respondent No.1
within four weeks. Pending application also stands disposed of.
S. MURALIDHAR, J.
OCTOBER 8, 2010
akg
W.P.(C) No. 3897/98 Page 10 of 10
W.P.(C) 3897/1998 & CM 8206/1998
rd
Reserved on: 23 September 2010
th
Decision on: 8 October 2010
KASHMIRI LAL ..... Petitioner
Through : Mr. G.L. Rawal, Sr. Advocate with
Mr. Rajesh Rawal, Advocate.
Versus
UNION OF INDIA & ORS ..... Respondents
Through : Mr. Neeraj Chaudhari CGSC with
Mr. Khalid Arshad, Advocates for UOI.
CORAM: JUSTICE S. MURALIDHAR
1. Whether reporters of the local news papers
be allowed to see the judgment? No
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest? Yes
JUDGMENT
08.10.2010
th
1. The challenge in this petition is to an order dated 4 June 1997 passed
by the Additional Director General of Foreign Trade (`ADGFT’) under
Section 4-K of the Imports and Exports (Control) Act, 1947 [`IEC Act’]
read with Section 20(2) of the Foreign Trade (Development & Regulation)
Act, 1992 [the `FTDR Act’] imposing a penalty of Rs. 1 crore on the
Petitioner for utilizing material imported duty free “for a value of
Rs. 48,07,561/- otherwise than in accordance with the conditions of the
st
said licence.” The petition also challenges an order dated 1 May 1998
passed by the Appellate Committee dismissing the Petitioner’s appeal and
st
the consequential order dated 31 July 1998 issued by the Foreign Trade
Development Officer asking the Petitioner to deposit the penalty amount
W.P.(C) No. 3897/98 Page 1 of 10
within 20 days.
th
2. While directing notice to issue in the petition on 12 August 1998, this
Court restrained the Respondents from encashing the bank guarantee
furnished by the Petitioner to the Respondents as a condition for grant of
licence.
3. The Petitioner states that M/s Anil International made an application for
grant of duty free licence and pursuant thereto a Duty Free Licence dated
th
30 October 1989 was issued to the said firm enabling it to import CRCA
coils secondary grade restricted both by value and quantity. The
maximum value that could be imported was Rs.50,00,000/- and the
maximum quantity was 895.400 metric tonnes (MTs). The export
obligation was that the Petitioner should export 814 MTs diesel engine
parts and accessories of the value of Rs.75,00,000/-.
th
4. On 7 September 1993 a notice was issued to M/s Anil International
having its address at 236, Industrial Area, Ludhiana under Section 4 (L) of
the IEC Act asking it to show cause why penalty should not be imposed
on the firm and its partners under Section 4(1)(i)(a) of the IEC Act read
with Section 20(2) of the FTDR Act on the ground that the firm had failed
th
to fulfil its export obligations in terms of the advance licence dated 30
October 1989. The notice stated that the Adjudicating Authority had
reason to believe that the duty free imported goods valued at Rs. 50 lakhs
had been utilized by the firm otherwise than in accordance with the
conditions of the advance licence.
W.P.(C) No. 3897/98 Page 2 of 10
th
5. The firm replied on 6 October 1993 stating that its entire records of
imports and exports with reference to the licence in question were in the
custody of the Central Bureau of Investigation (CBI), New Delhi and,
therefore, it was not possible for the firm to reply to the show cause
notice. It requested that the notice be kept in abeyance and undertook to
send a reply as soon as the records were received back from the CBI.
th th nd
6. Further letters dated 24 January 1994, 28 November 1994 and 22
July 1996 were sent to the firm asking it to reply to the show cause notice.
th
The adjudication order dated 4 June 1997 of the ADGFT notes the fact
th nd
that the last two mentioned letters dated 28 November 1994 and 22
July 1996 sent to the firm were received back with the remarks “No such
person was available at the address.” The subsequent communication
th
dated 17 January 1997 requiring the firm to appear before the ADGFT
th
for a personal hearing on 10 March 1997 “was also received back with
similar remarks of the postal authority.”
7. It appears that in the absence of any one appearing on behalf of the
th
firm, the ADGFT proceeded to pass the adjudication order dated 4 June
1997 on the basis of the records. It was noticed that the firm has been
utilizing the licence almost in full as far as its imports were concerned
leaving a balance of only Rs.1,92,439/- in terms of cif value and 10.780
MTs in terms of weight. It was observed that the firm had failed to
intimate the date of clearance of the first consignment which was a
mandatory condition of the licence. Further the firm had exported only
th
one consignment for free on board (fob) value of Rs. 1,35,000/- as on 12
W.P.(C) No. 3897/98 Page 3 of 10
December 1989. In the above circumstances, it was concluded that the
firm had utilized the material imported duty free for a cif value of Rs.
48,07,561/- without fulfilling the export obligations. By the adjudication
th
order dated 4 June 1997 the ADGFT imposed a penalty of Rs. 2 crores
on the firm and Rs. 1 crore each on its partners, viz., the Petitioner herein
and Smt. Neelam Handa, Delhi and required such amount to be deposited
within six weeks.
8. The Petitioner states that he came to know of the above order only
th
when it was served upon him on 7 June 1997. It is pointed out that at no
point in time was any separate show cause notice issued to the Petitioner.
The Petitioner then appealed to the Appellate Committee Cell. In his
appeal, the Petitioner pointed out that a deed of partnership of the firm
th
M/s. Anil International was executed on 9 August 1985 in which profit
sharing ratio between Mrs. Neelam Handa and the Petitioner was 25:75.
Prior to being inducted as a partner in M/s. Anil International, the
Petitioner was serving M/s Sona Steel Industries, a sole proprietorship
concern of Mr. R.P. Handa, the husband of Mrs. Neelam Handa. It is
stated that the entire funds for the partnership including the share of the
Petitioner were arranged by Mr. R.P. Handa. The premises of the firm at
236, Industrial Area-1, Ludhiana was also owned by Mr. R.P. Handa. The
Petitioner claims to have been trapped by Mr. Handa into becoming a
partner of M/s Anil International. He stated that his retainership charges
continued to be paid by M/s Sona Steel Industries. Since the Petitioner
was an employee with Mr. Handa he was signing all papers under the
direction of Mr. Handa.
W.P.(C) No. 3897/98 Page 4 of 10
9. In his appeal, the Petitioner stated that another partnership deed was
nd
executed on 2 April 1991 and the constitution of the firm was changed.
Mr. R.P. Hnada became one of the partners and the profit sharing ratio
was as under:
1. Petitioner 20%
2. Mrs. Neelam Handa 40%
3. Mr. R.P. Handa 40%
10. Ultimately the Petitioner was removed from the partnership and a deed
th
of dissolution of partnership dated 9 August 1991 was executed. Apart
from enclosing the above documents with the memorandum of appeal, the
Petitioner pointed out that he had never received any notice from the
th
ADGFT and that in any event he was not a partner of the firm after 9
August 1991. He submitted that the time for meeting the export
st
obligations was extended by the DGFT up to 31 December 1992.
Consequently no proceedings could have been initiated even against the
firm prior to that date. Long prior to that date the Petitioner had ceased to
be a partner of M/s. Anil International.
11. It may be mentioned that as a pre-condition to his appeal being
considered the Petitioner was asked to furnish a bank guarantee in the sum
of Rs. 1 crore. This was complied with. The Appellate Committee, by a
st
cryptic order dated 1 May 1998, rejected the Petitioner’s appeal with the
following reasoning:
“We have gone through the appeal in great detail and have also
examined the findings of the Adjudicating Officer. The findings
regarding violation of the licence conditions are clearly
W.P.(C) No. 3897/98 Page 5 of 10
established. It emerges that the defaulting persons have been
deft in manipulating the facility of import licence almost
bordering on a criminal intent. There is no point of law or facts
which deserved fresh scrutiny and the guilty parties must suffer
the consequences of serious misuse of import licence. The
appeal is rejected. The financial bond offered should be
forfeited against the recovery amount. The office of the DGFT
should take further steps for recovery of the amount without
delay.”
12. Thereafter the Petitioner was issued the impugned recovery notice
st
dated 31 July 1998.
13. Mr. G.L. Rawal, the learned Senior counsel appearing for the
Petitioner points out that the fact that no prior show cause notice was
issued to the Petitioner before the adjudication order was passed, is not in
dispute. He referred to the judgments in S.L. Kapoor v. Jagmohan AIR
1981 SC 136 and J.T. (India) Exports v. Union of India 2001 (78) ECC
677 (Del) to urge that without a show cause notice and an opportunity of
being heard, no adjudication order could have been passed against the
Petitioner. He further points out that since the time for fulfilling the export
st
obligation had been extended up to 31 December 1992, no action could
have been taken against the firm itself till the expiry of that time limit.
th
The Petitioner admittedly had retired from the partnership firm on 9
August 2001 itself. Consequently when the liability accrued to the firm,
the Petitioner was no longer a partner and, therefore, even in terms of
Section 32(3) read with Section 72 of the Partnership Act, 1932 (`PA’) no
liability could be fastened on the Petitioner.
W.P.(C) No. 3897/98 Page 6 of 10
14. Appearing for the Respondents, Mr. Khalid Arshad, the learned
Advocate submitted that the liability under Section 32 PA of a retired
partner would cease only if there was a public notice of the retirement
given by such partner. In the instant case, there was no such public notice
given by the Petitioner of the date on which he ceased to be a partner in
M/s Anil International. It is submitted that in the absence of such notice
the Petitioner’s liability as a partner of Anil International continued even
after his retirement. Reliance is placed on the judgments in Syndicate
Bank v. R.S.R. Engineering Works 2003 (6) SCC 265 ; Income Tax
Officer v. Arunagiri Chettiar (1996) 9 SCC 33 and DCM Shriram
Industries v. Indo Organics 2003 (67) DRJ 256 .
15. As regards the issuance of show cause notices to the Petitioner as a
th
partner of Anil International, the impugned adjudication order dated 4
June 1998 itself reveals that all notices were issued only to the firm and
not to the individual partners. Given the context in which the firm got
reconstituted and the Petitioner admittedly ceased to be a partner with
th
effect from 9 August 1991, there was no question of the service of notice
on the firm being construed to be a sufficient service of notice on its
th
partners. With the last two communications dated 28 November 1994
nd
and 22 July 1996 being received back in the office of the ADGFT with
the remarks “no such person was available at the address” it was plain that
not only the firm but none of its former partners were served notices. The
th
subsequent notice of hearing dated 17 January 1997 was also returned
unserved. There is no satisfactory explanation for the non-service of show
cause notices upon the Petitioner before the impugned adjudication order
W.P.(C) No. 3897/98 Page 7 of 10
th
dated 4 June 1997 was passed. On this short ground the impugned
th
adjudication order dated 4 June 1997 should be held to be unsustainable
in law. The Appellate Committee seems to have completely overlooked
the above position which was squarely raised by the Petitioner in the
memorandum of appeal.
16. As regards the liability of the partner continuing in terms of Section 32
PA, it requires to be noticed that the liability of the firm arising out of its
st
failure to meet its export obligations got attracted only after 31 December
1992. This was because the time for fulfilling the export obligations was
extended till that date. In other words, if the firm had been able to fulfil its
th
export obligations between 9 August 1991 when the Petitioner ceased to
st
be a partner of M/s Anil International and 31 December 1992, the
extended date, there would be no continuing liability attached to the firm,
much less to its partners. Therefore, the crucial date for determining as to
when the liability accrued to the firm for failure to meet its export
st
obligations was not earlier than 31 December 1992. Consequently, it
cannot be held that with reference to the failure by the firm to meet its
export obligation, there was a continuing liability attached even to the
th
Petitioner who ceased to be a partner of the firm with effect from 9
August 1991. No liability with the firm having been accrued as of that
date, there was no question of fastening on the Petitioner any continuing
liability in terms of Section 32 PA.
17. The decision in Income Tax Officer v. Arunagiri Chettiar is
rd
distinguishable on facts. There a communication was sent on 23
W.P.(C) No. 3897/98 Page 8 of 10
February 1972 by the Income Tax Officer to the Respondent that he was
jointly and severally liable for the arrears due from the firm for the
assessment years 1962-63 and 1963-64. The defence of the Respondent
th
was that he ceased to be a partner of the firm on 19 April 1963 and was
therefore not liable. Negativing this contention, it was held that Section
25 PA did not make distinction between a continuing partner and an
erstwhile partner and, therefore, the liability of the firm which was already
accrued while the Respondent was still a partner would attach to him even
after he retired as partner. In the present case no liability accrued to the
firm during the time the Petitioner was its partner. Therefore, the above
decision is of no assistance to the Respondents. The facts in Syndicate
Bank as well as in DCM Shriram Industries v. Indo Organics were also
different and those decisions are also of no help to the Respondents.
18. The Appellate Committee does not appear to have considered any of
the submissions made by the Petitioner in his appeal. However,
considering that the present petition has been pending in this Court for
twelve years, little purpose would be served in remanding the matter to
the Appellate Committee at this stage. The Petitioner has been able to
th
satisfactorily demonstrate that the impugned order dated 4 June 1997 of
the ADGFT is bad in law for want of prior show cause notice to him and
further that the Petitioner having ceased to be a partner in M/s Anil
th
International with effect from 9 August 1991 and with no liability having
accrued as of date to the partnership firm in respect of the non-fulfillment
of export obligation, no penalty could possibly be imposed on the
Petitioner.
W.P.(C) No. 3897/98 Page 9 of 10
th
19. For the aforementioned reasons, the impugned order dated 4 June
st
1997 passed by the ADGFT and the order dated 1 May 1998 of the
Appellate Committee are hereby set aside. The bank guarantee furnished
by the Petitioner will stand cancelled.
20. The writ petition is disposed of in the above terms with costs of
Rs. 5,000/- which will be paid to the Petitioner by Respondent No.1
within four weeks. Pending application also stands disposed of.
S. MURALIDHAR, J.
OCTOBER 8, 2010
akg
W.P.(C) No. 3897/98 Page 10 of 10