By TIOL News Service

NEW DELHI, OCT 05, 2018: THE Plaintiff was appointed as a CFO and Company Secretary of the Defendant company on 16th January, 2007. He continued in the employment of the Defendant company until September, 2010.

In respect of the imports of machinery made by the Defendant company in the year 2007-08, the DRI, MZU issued a show cause notice dated 25th April, 2012, to the Defendant company alleging evasion of customs duty to the tune of Rs.4,22,58,706/-.

During the investigation, statements were recorded of the Managing Director of the Defendant company Mr. Oike and who in his statement stated that products such as tanks for culturing, storage and blending, water sterilizer, injection moulding machine, unscrambler selector, filling/sealing machine and refrigeration unit, were described as 'dairy machinery' on the advice of the Plaintiff who was the CFO and Company Secretary and that the plaintiff had in his Performance Appraisal Report for the year 2007-08 claimed to have saved Customs duty to the tune of Rs.362 lakhs for the company by such wrong classification.

In the O-in-O dated 31 st December 2013, the Commissioner of Customs also held that the goods were liable to be confiscated and penalties were liable to be imposed.

Insofar as imposition of penalty on the plaintiff is concerned, the adjudicating authority held –

"(viii) From the investigation carried out and various statements of Shri Anil Chaudhry it is evident that Shri Anil Chaudhry was fully aware of the fact that the importer company was trying to evade the Customs duty and he did not take any action to inform the Customs regarding the planned evasion of Customs Duty. I also note the fact that Shri Anil Choudhary had flagged the issue of wrong availment of benefit of exemption from Payment of due Customs duties for clearance of 2nd and 3rd consignments, vide emails sent to Sr. M.D. of M/s Yakult Honsha Co. Ltd., Japan. However he same was rejected by the Sr. M. D.of M/s Yakult Honsha Co. Ltd., Japan. In such a case Shri. Anil Choudhary had a choice of approaching Customs authorities. This act would have purged him of his own complicity. By not doing so, he has made himself as a party to the misdeclaration. Hence I find that even Shri Anil Chaudhry is equally responsible for the same. Shri Anil Choudhary abetted in the acts of omission and commission of Mr. Kiyoshi Tatsuei Oike and had thus, rendered himself liable for penal action under section 112 (a) of Customs Act, 1962."

In appeal, the CESTAT in its order dated 24th October, 2016 - 2016-TIOL-3101-CESTAT-MUM while dismissing the appeals of the importer company inter alia held -

"10. As regard penalty upon Shri Anil Choudhary is concerned, we find that he was merely an employee who acted on the directions of the company and had no personal involvement. We therefore do not find it fit to impose penalty upon him. The penalty upon Shri Anil Choudhary is, therefore, set aside."

The present suit was thereafter filed by the Plaintiff, claiming damages against the company. The primary grievance in the suit is that he had no role in the alleged manipulation of documents etc. and Mr. Oike had incorrectly implicated him. Resultantly, the Plaintiff avers that he suffered immensely due to the proceedings, which were commenced by DRI, including the loss of his job. It is the Plaintiff's case that Mr. Oike maliciously implicated the Plaintiff in the customs duty evasion case.

The Plaintiff, accordingly, prays for damages at Rs.5 crores, along with interest.

The Defendant company filed an application under Order VII Rule 11 CPC seeking dismissal of the suit on two counts. One, that the suit is barred by limitation and two, that the tort of malicious implication is not recognized in India and that no damages have been suffered.

The High Court considered the submissions made, case laws and observed thus -

27. In the present case, all the statements which are relied upon which form the basis of cause of action in the suit having been made before DRI officials/Customs Authorities, in statements recorded under Section 108 of the Customs Act, 1962. There is no publication of the said statements. Mr. Oike in fact having also retracted the same, no case of defamation is made out. As per the settled law, statements made in judicial and quasi-judicial proceedings before courts, authorities and tribunals are protected as being privileged. A suit for defamation on the basis of statements in such proceedings is clearly not maintainable.

28. … The Plaintiff is neither an uneducated nor an illiterate person who is not aware of the consequences of his actions of claiming experience in handling issues before the Customs Authorities and was also quite adept. The CFO of a company has enormous responsibility. The Plaintiff was responsible for legal and secretarial compliances in the Defendant company. Even if the Plaintiff had got wind of an alleged conspiracy by the Japanese officials, as is pleaded in the plaint, he had a duty to warn the Defendant company and its officials that the classification of machinery as dairy machinery instead of capital machinery would be contrary to law. Moreover, the Plaintiff not only did not warn the management of the Defendant but also went ahead and claimed the savings of the customs duty as a feather in his cap in his appraisal report. This shows that to say the least, he was not an innocent bystander…

Conclusion:

++ The statements made in quasi-judicial proceedings before the Customs Authorities cannot be held to be defamation/libel/slander. There is no tort made out in the present suit and the suit for compensation is not maintainable, in view of the settled law.

The plaint is rejected.

(See 2018-TIOL-2074-HC-DEL-CUS)