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Suborno Bose v. Enforcement Directorate & Anr.

Civil Appeal · 2020 INSC 278Decided 5 Mar 2020
Civil Appeal No. 6267 of 2020
Justice A.M. Khanwilkar · Justice Dinesh Maheshwari

Background

A company imported refrigeration equipment from France and the US using foreign exchange but left the goods uncleared in a bonded warehouse for years without completing import formalities (submitting the Bill of Entry). The Enforcement Directorate penalised both the company and its then-Managing Director, Suborno Bose, Rs. 10 lakh each for violating Section 10(6) of the Foreign Exchange Management Act, 1999. Bose argued he only became Managing Director in October 2001, after the original 2000 contravention, and should not be held personally liable for a default that occurred under previous management.

Decision Breakdown

The Supreme Court held that a contravention under Section 10(6) of FEMA, failing to use or surrender foreign exchange for its declared purpose, is a continuing offence that persists until corrective steps are taken. Since the goods remained uncleared and the Bill of Entry unsubmitted even after Bose took charge, and he was demonstrably aware of the default (having himself sought extensions from authorities), he could not escape liability merely because the original import occurred before he took over. The Court also noted that the penalty appeal filed by the company itself had already been dismissed and had attained finality, which further foreclosed re-litigating the underlying contravention. The appeal was dismissed and the penalty upheld.

Lesson Learnt

Directors or managers who take charge of a company after a regulatory violation has occurred are not automatically shielded from liability: if the violation is a "continuing" one and they become aware of it but fail to take corrective action, they can still be held personally responsible.

Official source (sci.gov.in)View Judgment (PDF)

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