Delhi High Court Clarifies Director Liability in Export Violation Cases
ANAND MEHTA …..Petitioner Versus DIRECTOR GENERAL OF FOREIGN TRADE …..Respondent
In a significant ruling, the Delhi High Court held that directors cannot be held personally liable for a company’s export violations unless specific allegations of their involvement are proven. The case involved penalties of Rs. 11.5 crore imposed on M/s Poysha Industrial Company Ltd. and its directors for failing to meet export obligations under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act).
Key Legal Issues
The petitioner, a non-executive director, argued that no personal show-cause notice was served, violating Section 14 of the FTDR Act. The court agreed, noting that notices were only sent to the company, not individual directors. It also highlighted a 17-year delay in adjudication, rendering the proceedings unsustainable.
Court’s Decision
Relying on precedents like Pankaj Mehra v. UOI and Krishan Kumar Bangur v. DGFT, the court ruled that directors cannot be penalized without evidence of their active role. The DGFT’s attempt to lift the corporate veil failed, as no fraud or misconduct was proven. The judgment reinforces that liability under Section 11(2) of the FTDR Act requires proof of direct involvement.
Takeaways
- Authorities must issue specific notices to directors before imposing penalties.
- Delayed proceedings risk being struck down for unreasonableness.
- Non-executive directors without operational control are shielded from vicarious liability.
This ruling provides clarity on director accountability and safeguards against arbitrary penalties in trade compliance cases.
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About the Author: Neeraj Gogia, Advocate, 9891800100, This article is intended for informational purposes only and does not constitute legal advice.
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