2025 PLP 148 (MLD)

Shams Mehmood Mirza, J.

This judgment shall decide the present writ petition and the connected writ petitions (details whereof are contained in the Schedule 'A' attached hereto) on account of similarity of the subject matter agitated therein. For the purpose of this judgment, only the facts of the present case shall be stated.

2. The petitioners have made multiple prayers one of which relates to the vires of section 23B of the Foreign Exchange Regulation Act, 1974 (the Act). The petitioners, however, on first date of hearing did not press this prayer. The same is the case in all the connected petitions. This Court is, therefore, not required to render any findings on that issue.

3. The petitioners have assailed show-cause notice dated 01.07.2010 and the summons issued in pursuance thereof on 27.12.2022 under section 23B of the Act.

4. The petitioners are shareholders/directors of Messrs Amtex Limited (the Company) which in the course of its business made export of goods in the year 2009 after completing all the process formalities of the Act and Foreign Exchange Manual. The foreign buyer of the goods did not make payment and accordingly the funds were not repatriated. A show-cause notice was issued to the petitioners under section 23B of the Act alleging violation of section 12(1) of the Act. The petitioners duly filed the reply to the show-cause notice on 21.05.2012 whereafter they received no information about the fate of their reply, or the contentions raised therein. After a lapse of more than ten years, the petitioners received the summon for framing of charge on them under the provisions of the Adjudication Proceedings and Appeal Rules, 1998. The petitioners accordingly filed the present writ petition questioning the authority of the respondents to hold them liable under section 23B of the Act.

5. Mr. Shoaib Rashid Advocate, learned counsel for the petitioners, has primarily made two submissions. Firstly, it is stated that there are a number of provisions in the Act which make the directors, managers, secretary and other officers liable if the person guilty of contravention of the provisions of the Act is a company or a body corporate. It is contended that section 23B of the Act which deals specifically with contravention of section 12(1) of the Act does not hold the directors and other officers of a company personally liable for the offence. It is also pleaded that in the absence of any show-cause notice issued to the Company, proceedings cannot be initiated against the petitioners. The next contention of the petitioners is that section 12(1) of the Act only deals with furnishing of a declaration by the exporter to the prescribed authority that the amount of the export value of the goods shall be paid within the stipulated period and in the prescribed manner. It is stated that the provisions contained in section 12(1) of the Act only deal with the failure of the exporter to furnish such a declaration and not the failure to repatriate the amount. In support of his submissions, the learned counsel has relied on the judgments reported as Qassim Shah and others v. The State PLD 1991 SC 893, Superintendent of Police, Federal Investigation Agency, Lahore and another v. Akhtar Hussain Bhutta PLD 1978 SC 193 and Standard Chartered Bank and others v. Directorate of Enforcement and others AIR 2005 SC 2622.

6. Mr. Muhammad Imran Malik Advocate on behalf of petitioners in the connected writ petitions submitted that litigation between petitioners and reporting banks is still pending adjudication before the banking court in which no final decision has been passed as yet and as such the proceedings under section 23B of the Act cannot be initiated against the directors of a Company.

7. Learned counsel for State Bank of Pakistan argued that non-repatriation of funds constitutes an offence under section 12(1) of the Act and, therefore, the show-cause notice was rightly served on the petitioners. In this regard, he has placed reliance on judgments reported as Janan Khan Achakzai v. The State Bank of Pakistan and others PLD 2023 Balochistan 1 and Muhammad Irshad and another v. Deputy Director Adjudication 2003 CLD 917.

8. The Assistant Attorney General also relied on the judgments cited by learned counsel for State Bank of Pakistan to contend that the petitioners ought to raise all the objections before the Adjudicating Officer.

9. The Act creates several offences through its various provisions. The contravention of the provisions contained in section 12(1) have also been made an offence through section 23B(4) which stipulates the punishment of penalty on the terms mentioned in that provision.

10. Section 12(1) is the relevant provision which reads as under: Payment for exported floods. (1) The Federal Government may, by notification in the official Gazette, prohibit the export of any goods or class of goods specified in the notification from Pakistan directly or indirectly to any place so specified unless a declaration supported by such evidence as may be prescribed or so specified, is furnished by the exporter to the prescribed authority that the amount representing the full export value of the goods has been, or will within the prescribed period be, paid in the prescribed manner. This provision requires a declaration from the exporter to the prescribed authority that the amount representing the full export value of the goods shall be paid within the prescribed period and manner.

11. Section 23 and section 23K of the Act are the two provisions where the directors and other officers are also held accountable along with the company. Section 23(4) reads as follows (4) Where the person guilty of an offense under this Act is a company or other body corporate every director, manager, secretary and other officer thereof who is knowingly a party to the offence shall also be guilty of the same offense and liable to the same punishment. The provision contained in section 23K provides that: (2) Where the person guilty of such contravention is a company or a body corporate, every director, manager, secretary or other officer or agent thereof shall be deemed guilty of such contravention, if the contravention was committed with his knowledge or consent or if he did not exercise due diligence to prevent the commission of the offence.

12. The primary question requiring determination is whether section 23B(4) visits the penalty for failure to provide the declaration contemplated by section 12(1) or in case declaration is furnished the failure to repatriate the funds is the trigger for commission of the offence. Although learned Assistant Advocate General and the learned counsel for State Bank of Pakistan relied upon the judgments rendered by the learned Sindh High Court and Balochistan High Court as noted above, a careful perusal of these judgments show that the question posed in the form before this Court was not adjudicated upon.

13. The petitioners contend that only a declaration is contemplated by section 12(1) and that failure to repatriate the funds does not come within the ambit of the said provision. The reasoning of the petitioners for placing such a construction on section 12(1) cannot be accepted. It is undisputed that the furnishing of declaration is a condition prededent for allowing the exporter to export the goods. The process of granting permission is not completed in the absence of such a declaration and thus an exporter without fulfilling this requirement cannot export the goods. On this premise, section 23B (4) shall be taken to deal with a situation where exports have been made after compliance with the conditions attached by the Act and the Foreign Exchange Manual and that funds in lieu thereof have not been repatriated. The language of the clause "...liable to such penalty not exceeding five times the amount or value involved..." and the further provision that if the contravention persists or the contravention or default is continuing negate the argument of the petitioners.

14. The only question left to be answered relates to the liability of the petitioners. The proposition put forward by the petitioners that the directors and other officials of the company or a body corporate were made liable for offences where the legislature deemed it necessary as in the case of sections 23 and 23K and that the absence of such a stipulation in section 23B would absolve them from prosecution appears to be tenable.

15. A cursory look at the Act makes it evident that section 23 makes contravention of any provision of the Act [excluding sections 3, 3A, 3AA, 3B, 4(2) and (3), 10, 12(1) and clause (c) of subsection (1) and subsection (3) of section 20] punishable with rigorous imprisonment for a term which may extend to five years or with fine or with both. The offence contemplated by this provision is triable by a Tribunal created under section 23A of the Act. Section 23 by its terms excludes, amongst others, section 12(1) from its operation. The show-cause notice and the summons (impugned herein) mention section 12(1) and make no reference to any other provision of the Act. The respondents, therefore, cannot resort to section 23 for initiating prosecution against the petitioners.

16. Section 23B provides for the appointment of Adjudicating Officers by the Federal Government who are in service of the State Bank of Pakistan to exercise the powers and discharge the duties conferred or imposed on him by the Act. Of all the excluded provisions of the Act from the ambit of section 23, the contravention of section 12(1) [including sections 4(3), 10, or 20(3)] is specifically covered by section 23B. Subsection (4) of section 23B makes the contravention liable to such penalty not exceeding five times the amount or value involved in such contravention or five thousand rupees, whichever is more, or where the contravention or default is a continuing one, to a further penalty which may extend to two thousand rupees for every day during which the offence continues, as may be adjudged by the Adjudicating Officer having jurisdiction. The remedy against the penalty by the Adjudicating Officer is through an appeal before the Appellate Board constituted under section 23C of the Act.

17. The contravention of the other provisions excluded from the operation of section 23 [which are not mentioned in section 23B (4)] are covered by section 23K of the Act. As is the case in section 23B(4), this provision too makes an offender liable to a penalty to be imposed by an officer of the State Bank not below the rank of Senior Joint Director authorized by the State Bank in this behalf, up to five hundred thousand rupees for each contravention, and where the contravention is a continuing one with a further penalty which may extend to ten thousand rupees for each day during which such contravention continues.

18. The pivotal point to note is that sections 23 and 23K of the Act contain stipulations that to the effect that where the person guilty of an offense or contravention is a company or other body corporate, every director, manager, secretary and other officer shall also be liable. The only difference in the two provisions is that in the case of section 23K only such officers have been made liable who had knowledge of and gave their consent for the contravention or if they did not exercise due diligence to prevent the commission of the offence.

19. The contention of the respondents' against the case of the petitioners falter for the most basic of the reasons. The legislature consciously attached liability to the directors and other officers of the company under sections 23 and 23K but did not make it part of section 23B and thus it may be presumed that such liability was not intended. Having intentionally kept the directors and other officers of the company or body corporate immune from liability on the infraction covered by section 23B, the Act did not extend to the respondents any authority to proceed against them. It is vitally important to note that the contravention of the provisions of section 12(1) can only result in imposition of penalty and no punishment of sentence is prescribed. On this analysis, the issue of whether such a punishment can be awarded to a company does not arise in the case of section 23B read with section 12(1) of the Act. Similarly, the ancillary question that a prior verdict against the company is necessary for initiating proceeding against its directors or officers is also not required to be answered in this case.

20. It is trite that any statute which visits penal consequences on a person for his conduct must be construed strictly. Keeping in view the scheme of the Act and the provisions dealing with the offences, it becomes clear that the legislature did not intend to make the directors and other officials of the company liable in case of violation/contravention of the provisions of section 12(1) of the Act. The action of the respondents in sending show-cause notices and summons in pursuance thereof for the alleged contravention of the provisions of section 12(1) of the Act by the Company cannot be sustained under section 23B which by its terms does not attach any penalty to the petitioners being the directors of the Company.

21. This writ petition is accordingly allowed and show-cause notice dated 01.07.2010 and the summons issued in pursuance thereof on 27.12.2022 are declared to be without lawful authority and of no legal effect. The connected writ petitions are also allowed on the same terms. Schedule 'A' Sr. No. W.P. Numbers Title of the cases 1. 3868 of 2023 Azhar Majeed Sheikh and others v. Federation of Pakistan and others 2. 38769 of 2023 Tanveer Ahmad and others v. Federation of Pakistan and others 3. 40739 of 2023 Tanveer Ahmad and others v. Federation of Pakistan and others 4. 46936 of 2023 Zahid Tauseef and others v. Federation of Pakistan and others 5. 53988 of 2023 AkmalImdad Sheikh v. Federation of Pakistan and others 6. 64098 of 2023 Imran Aslam and others v. Federation of Pakistan and others 7. 64101 of 2023 Hassan Akbar andothers v. Federation of Pakistan and others 8. 66784 of 2023 Muhammad Umar and others v. Federation of Pakistan and others 9. 67036 of 2023 Sheikh Masood Hussain and others v. Federation of Pakistan and others 10. 21450 of 2024 Riaz Arshad Chawla and others v. Federation of Pakistan and others 11. 6303 of 2023 Shamshad Ali Cheema v. Federation of Pakistan and others 12. 83129 of 2023 Zahid Tauseef and others v. Federation of Pakistan and others 13. 176 of 2023 Mian Muhammad Latif and others v. Federation of Pakistan and others 14. 4244 of 2023 Asad Majeed Sheikh and others v. Federation of Pakistan and others 15. 6346 of 2023 Sheikh Akbar Ali Mujahid v. Federation of Pakistan and others 16. 35754 of 2023 Faraz Azhar and others v. Federation of Pakistan and others 17. 49013 of 2024 Sajjad Haider Cheema and others v. Federation of Pakistan and others MH/K-15/L Petitions allowed.