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CASE NO.: Appeal (crl.)  142 of 1994

PETITIONER: The Assistant Commissioner, Assessment-II,  Bangalore & Ors.                      

RESPONDENT: M/s. Velliappa Textiles Ltd. & Anr.                         

DATE OF JUDGMENT: 16/09/2003

BENCH: B. N. Srikrishna.

JUDGMENT: JUDGMENT  

SRIKRISHNA, J.

       I  have had the benefit of perusing the erudite judgment of  learned brother Mathur, J.  I, however, find myself unable to agree  with one aspect of the judgment and the resultant outcome.   

       The facts have been succinctly stated in the judgment of   brother Mathur, J. Hence it is not necessary to elaborate them, except  to recapitulate them very briefly. The first respondent is a limited  company which, along with its Managing Director, was sought to be  prosecuted under Sections 276C, 277 and 278 read with Section  278B of the Income Tax Act (hereinafter referred to as ’the Act’).   The respondents challenged the prosecution  by a petition under  Section 482 of the Criminal Procedure Code and urged the following  grounds in support:  

(1)     That the  sanction of the Commissioner of Income Tax granted  under Section 279 of the Act is vitiated for failure to observe the  principles of natural justice inasmuch as no opportunity of hearing  was given to the respondents before  the sanction was given.  

(2)     The first respondent is a company, a juristic person, and  therefore, incapable of being punished with a sentence of  imprisonment, which is mandatory under the provisions of Sections  276C and 277.   Hence, the prosecution under these Sections  against a juristic person like a company is  not maintainable, even if  by reason  of Section 278B some other persons connected with it and  responsible for running the business of the company can be held  liable for the offence.   

As far as the first contention is concerned,  I respectfully agree  with the view taken in the judgment of brother Mathur, J and the  reasons given in support.  It is only with regard to the second  contention, that I am unable to agree with the views expressed in the  judgment.           It is a basic principle of criminal jurisprudence that a penal  statute is to be construed strictly.  If the act alleged against the  accused does not fall within the parameters of the offence described  in the statute the accused cannot be held liable. There is no scope for  intendment  based on the general purpose or object of law.  If the  Legislature has left a lacuna, it is not open to the Court to paper it  over on some presumed intention of the Legislature.  The doctrine of   casus omissus, expressed in felicitous language in CST  Vs.  Parson  Tools and  Plants  (1975) 4 SCC 22, is:  "If   the legislature wilfully omits to incorporate  something of an analogous law in a subsequent

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statute, or even if there is a  casus omissus  in a  statute, the language of which is otherwise plain  and unambiguous, the court is not competent to  supply the omission by engraving on it or  introducing in it, under the guise of interpretation,  by analogy or implication, something what it thinks  to be a general principle of justice and equity.  To  do so "would be entrenching upon the preserves of  legislature", (At p 65 in Prem Nath L Ganesh v.  Prem Nath,L. Ram Nath, AIR 1963 Punj 62, Per  Tek Chand,J.). The primary function of a court of  law being  jus  dicere and not jus dare."                                         (Emphasis supplied)      

The maxim "Judicis est jus dicere, non dare" pithily expounds  the duty of the Court. It is to decide what the law is and apply it;    not to make it.           The question of criminal liability of a juristic person has  troubled Legislatures and Judges for long. Though, initially, it was  supposed that a Corporation could not be held liable criminally  for  offences where mens rea  was requisite, the current judicial thinking  appears to be that the mens rea  of the person in-charge  of the affairs  of the Corporation, the alter ego, is liable to be extrapolated to the  Corporation, enabling even an artificial person to be prosecuted for  such an offence.  I am fully in agreement with the view expressed on  this aspect of the matter in the judgment of brother Mathur, J. What  troubles me is the question whether a Corporation can be prosecuted  for an offence even when the punishment is a mandatory sentence of  imprisonment.  

       That in India the situation has not been free from doubt is  evident from two reports of the Law Commission of India which  recommended specific amendments in order to get over this  difficulty.  The Law Commission of India in its 41st report at  paragraph 24.7 recommended as under: - "24.7 â\200\223 As it is impossible to imprison a  corporation practically the only  punishment which  can be imposed on it for committing an offence is  fine.  If the penal law under which a corporation is  to be prosecuted does not provide for a sentence of  fine, there will be a difficulty.  As aptly put by a  learned writer, -  

"Where the only punishment which  the court can impose is death, penal  servitude, imprisonment or whipping,  or a punishment which is otherwise  inappropriate to a body corporate,  such as a declaration that the  offender  is a rogue and a vagabond, the court  will not stultify itself by embarking on  a trial in which, if the verdict of guilt  is returned  no effective order by way  of sentence can be made".

In order to get over this difficulty we recommend  that a provision should be made  in the Indian  Penal Code e.g. as section 62 in Chapter III relating  to punishments, on the following lines:-

"In every case in which the offence is  only punishable with imprisonment or  with imprisonment and fine and the  offender is a company or other body

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corporate or an association of  individuals, it shall be competent to  the Court to sentence such offender to  fine only".  

       Again, the Law Commission of India in its 47th report vide  paragraph 8.3 recommended as under: - "8.3 â\200\223 In many of the Acts relating to economic  offences, imprisonment  is mandatory.  Where  the  convicted person is a corporation, this provision  becomes unworkable, and it is desirable to provide  that in such cases, it shall be competent to the  court to impose a fine.  This difficulty can arise  under the Penal Code also, but it is likely to arise  more frequently in the case of economic laws. We,  therefore, recommend that the following provision  should be inserted in the Penal Code as, say,  Section 62:-  

"(1)  In every case in which the  offence is punishable with  imprisonment only or with  imprisonment and fine, and the  offender is a corporation, it shall be  competent to the court to sentence  such offender to fine only.  

(2)      In every case in which the  offence is punishable with  imprisonment and any other  punishment not being fine, and the  offender is a corporation, it shall be  competent to the court to sentence  such offender to fine.  

(3)     In this section, ’corporation’  means an incorporated company or  other body corporate, and includes a  firm and other association of  individuals."

       The Law Commission’s recommendations focussed on the  fact that the law as it exists renders it impossible for a court of law to  convict a Corporation  where the statute mandates a minimum term  of imprisonment plus fine. It would not be open to the court of law to  hold that a Corporation would be found guilty and sentenced only to  a fine for that would be re-writing the statute and exercising a  discretion  not vested in the court by the statute.  It is precisely  for  this reason that the Law Commission recommended  that where  the  offence is punishable with imprisonment, or with imprisonment and  fine, and the offender is a corporation, the Court  should be  empowered to sentence such an offender to fine only.  These  recommendations have not been acted upon, though several other  recommendations made by the 47th Report of the Law Commission  have been accepted and implemented by Parliament vide the  Taxation Laws (Amendment) Act, 1975. Hence, the state of law as  noticed by the Law Commission continues.   

A number of judgments of High Courts as well as one  judgment of this Court were cited at the bar which render the  situation more complex and perhaps necessitated reference of the  matter to a larger Bench. This Court speaking through a Bench of  two learned Judges  in  M.V. Javali Vs.  Mahajan Borewell &  Company & Ors.  (1997) 8 SCC 72 made the following observations

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vide paragraphs 6 and 8:  "6 â\200\223 From a plain reading of the above section it is  manifest that if an offence under the Act is  committed by a company the persons who are  liable to be proceeded against and punished are: (i)  the company, (which includes a firm); (ii) every  person, who at the time the offence was  committed, was in charge of, and was responsible  to the company for the conduct of the business;  and (iii) any director (who in relation to a firm  means a partner), manager, secretary or other  officer of the company with whose consent or  connivance or because of neglect attributable to  whom the offence has been  committed.  The  words "as well as the company" appearing in the  section also make it unmistakably clear that the  company alone can be prosecuted and punished  even if the persons mentioned in categories (ii) and  (iii), who are for all intents and purposes  vicariously liable for the offence, are not  arraigned, for it is the company which is primarily  guilty of the offence.

xxx     xxx     xxx     xxx      

8. Keeping in view the recommendations of the  Law Commission and the above principles of  interpretation of statutes we are of the opinion that  the only harmonious construction that can be given  to Section 276-B is that the mandatory sentence of  imprisonment and fine is to be imposed  where it  can be imposed, namely on persons coming under  categories (ii) and (iii) above, but where it cannot  be imposed, namely on a company, fine will be   the only punishment.   We hasten to add, two other  alternative interpretations  could also be given : (i)  that a company cannot be prosecuted (as held in  the impugned judgment); or (ii) that a company  may be prosecuted and convicted but not punished,  but these interpretations will be dehors Section  278-B or wholly inconsistent with its plain  language."

       Though,  Javali (supra)  refers to the recommendations  of   47th report of the Law Commission of India dated 28.2.1972 in  support of its view,  I find it difficult to agree with its reasoning.   The report of the Law Commission indicates a lacuna in the law and  suggests a possible  remedy by amending  the law.  Since the  function of the court of law is jus dicere  and not jus dare, the court  of law  cannot read the recommendations of the Law Commission as  justifying an interpretation of the Section in tune with them, even     when the words of the Section  are plain and unambiguous.  Though  Javali (supra) also refers to the general principles of interpretation of  statutes, the rule of interpretation of criminal statutes  is altogether a  different cup of tea.  It is not open to the court to add something to or  read something in the statute on the basis of some supposed  intendment of the statute. It is not the function of this Court to  supply the casus omissus, if there be one. As  long as the  presumption of innocence of the accused prevails in this country, the  benefit of any lacuna or casus omissus must be given to the accused.   The job of plugging the loopholes  must strictly be left to the  legislature and not assumed by the court.  

       The judgment of the Karnataka High Court under appeal  

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relies on its earlier judgment in P.V.Pai  Vs.  R.L. Rinawma  ILR  (1993)  KAR 709. To similar effect are the views of the Calcutta  High Court in  Kusum Products Ltd. Vs.  S.K.Sinha, ITO,Central  Circle-X,Calcutta (1980) 126 ITR 804, Modi Industries Ltd. Vs.   B.C. Goel (1983) 144 ITR 496.  

       The judgment of the Full Bench of the Delhi  High Court in  Municipal Corporation of Delhi Vs. J.B. Bottling Company  (1975) Crl.L.J. 1148 followed by the judgment of the Full Bench of  the Allahabad High Court  in Oswal Vanaspati & Allied Industries   Vs. State of U.P. (1993) 1 CLJ 172 take the view that where a  statute imposes  a minimum sentence of imprisonment plus fine,  since the court cannot imprison a juristic person like company, it has  the option of imposing fine only. With great respect, I am unable to  subscribe to this view.  Where the legislature has   granted discretion  to the court in the matter of sentencing, it is open to the court to use  its discretion.  Where, however, the legislature, for reasons of policy,   has done away with this discretion, it is not open to the court to  impose only a part of the sentence prescribed by the legislature, for  that would amount re-writing  the provisions of the statute.   

Prior to the substitution of Section 276C, 277  and 278 by the  Taxation Laws (Amendment) Act, 1975 with effect from 1.10.1975  in the present form, there was no minimum sentence of  imprisonment provided for.  The intention of the legislature in  imposing a minimum term of imprisonment for offences punishable  thereunder was to do away with the Court’s discretion of  only  imposing of a fine  and make the punishment more stringent.

The Law Commission  in its 47th Report recommended  (Chapter 18, pg. 157) that the punishment under sections 276B,  276C, 276E, 277 and 278 should be increased. It further  recommended, "there should be a provision for minimum  imprisonment and minimum fine’.  These recommendations were  implemented vide the Taxation Laws (Amendment) Act, 1975.  In  fact, at the time of introduction of the amendment bill, the Finance  Minister Shri C. Subramaniam stated: "To those who make a lot of money  through infringement of laws, monetary  penalties do not really serve as deterrents. The  provisions relating to prosecutions for tax  offences are, therefore, proposed to be  tightened up.  The Select Committee has further  recommended that in order to make the  provisions relating to prosecution more  effective, the discretion vested in courts to  award monetary punishment as an alternative to  rigorous imprisonment or to reduce the term fo  imprisonment below  the prescribed minimum  should be taken away. I welcome these changes  and commend them to the house."

Hence, it is apparent that the legislative mandate is to prohibit  the Courts from deviating from the minimum mandatory punishment  prescribed by the statute. If, in spite of the amendment, the situation  is seen as before, then I fail to see the purpose of the amendments  made by the Taxation Laws (Amendment) Act, 1975.   

I am of the view that the Court should be slow in interpreting  a penal statute in a manner which would amount to virtual re-writing  of the statute to prejudice to the accused.  

       As Loreburn,J. observed in Bristol Guardians Vs. Bristol  Waterworks Company (1914) AC 379, 388:

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"After all, it is not our function to repair the  blunders that are to be found in legislation.   They must be corrected by the legislature."  

A court cannot breach a casus omissus and no canon of  construction permits the court to supply a lacuna in a statute; nor can  courts of law fill up the lacuna in an ill-drafted and hasty legislation.         This was echoed by the Full Bench of the Calcutta High Court in  Tarak Chandra Vs.  Ratanlal  [AIR (1957) Cal. 257 thus:  "It is true that one must not expect in a  statute the completeness and elaboration of a  deed, and where the minimum required to  make a particular meaning which is  obviously intended is found, effect must be  given to such meaning.  But courts cannot  dispense with even the minimum.  Even  where such minimum is absent, courts must  declare the deficiency and let it have its  effect rather than strain themselves to make  it good.  Thereby, not only will the courts  prevent themselves from taking up the  functions of the legislature but the  legislature may also profit because it may  take care to avoid such deficiencies in  future."

       Whether the omission is intentional or inadvertent is no  concern of the court.  The observations in Tolaram Relumal  & Anr. Vs. The  State of Bombay  [AIR (1954) SC 496] , Bijaya Kumar Agarwala   Vs. State of Orissa (1996) 5 SCC 1, Sanjay Dutt Vs. State  through CBI, Bombay(II)  (1994) 5 SCC 410, Niranjan Singh   Karam Singh Punjabi,Advocate Vs. Jitendra Bhimraj Bijjaya  &  Ors. (1990) 4 SCC 76 make it clear that while interpreting a penal  statute, if more than one view is possible, the court is obliged to lean  in favour of the construction which exempts a citizen from penalty  than the  one which imposes the penalty. The observations of Lord  Esher, MR in formulating, "the settled rule of construction of penal  Sections", that "if there is a reasonable interpretation which will  avoid the penalty in any particular case, we must adopt that  construction .  If there are two reasonable constructions, we must  give the more lenient one."  (See Tuck & Sons Vs. Priester (1887)  19 QBD 629 and London & Norm Eastern Railway Vs. Berriman  (1946) 1 ALL ER 255.            In State of Maharashtra Vs. Jugmander Lal [AIR (1966)  SC 940]  this court held that the expression, "shall be punishable  for  imprisonment and also for fine" means that the court is bound to  award a sentence comprising both imprisonment and fine and the  word "punishable" does not mean anything different from "shall be  punished", punishment being obligatory in either case.   The  judgment of the Bombay High court in State of Maharashtra Vs.  Syndicate Transport Company Pvt. Ltd. [AIR (1964) Bom. 195]   also supports this view.

The view taken by me also finds support from the Australian   jurisdiction.  Faced with the same situation, the legislature  in  Australia enacted Part 2.5 of the Commonwealth Criminal Code Act,  1995 to specifically provide: "a body corporate may be found guilty  of any offence, including one punishable by imprisonment." This  provision has to be read with Section 4B(3) of the Crimes Act, 1914  which provides : "where a body corporate is convicted of an offence  against a law of the Commonwealth, the court may, if the contrary  intention does not appear and the court thinks fit, impose a pecuniary  penalty not exceeding an amount equal to  5 times the amount of the

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maximum pecuniary penalty that could be imposed by the court on a  natural person convicted of the same offence."  This was a case of  the legislature stepping in to supply the casus omissus. The  legislature in Australia has expressly empowered the court to  exercise a discretion to impose only fine even where a mandatory  term of imprisonment is prescribed, if the accused is a Corporation.

       Contrasting the situation in India, against he background of  the two reports of the Law Commission referred to, with the  situation in Australia, drives home the  point. I am of this view that  this Court cannot, in the  garb  of construction of the penal  provisions of Section 276 (C), 277 and 278, impose a punishment of  fine in a situation which calls for no punishment by a virtual re- writing of the statute.

       The argument that the term "person" has been defined in  Section 2 (31) of the Act, so as to  include a company, does not  impress me. All definitions in the Act apply "unless the context  otherwise requires". For reasons which I have indicated, the context  does indicate to the contrary, while reading of the word "person" in  the concerned Sections.                   The judgment of the U. S. Supreme Court in United States  Vs.  Union Supply Company 54 Lawyers Ed. 87 (215 U.S.50)   referred to in the judgment of brother Mathur, J  seems to support the  view that "the natural inference, when a statute prescribes two  independent penalties, is that it means to inflict them so far as it can,  and that, if one of them is impossible, it does not mean, on that  account, to let the defendant escape." Apart from this, I see no other  reasoning contained therein.   With respect, I am unable to agree  with the view taken in the judgment in  United States Vs.  Union  Supply Company (supra).  The situation in India was considered by  two Law Commissions whose recommendations I have referred to  earlier.  I have already discussed that import.           For the aforesaid reasons, I am of the view that the first  respondent company cannot be prosecuted for offences under  Sections 276C, 277 and 278 read with Section 278 since each one of  these Sections requires the imposition of a mandatory term of  imprisonment coupled with a fine and leaves no choice to the Court  to impose only a fine.   

       The following observations of Stable, J. in R. Vs. I.C. R.  Haulage, Ltd. (1944) 1 All. E.R. 691 made in similar situation are  of relevance:-  "Where the only punishment which the court  can impose  is death,  for this purpose the  basis of this exception  is being that  the  court will not stultify itself by embarking on  a trial in which, if the verdict of guilt is  returned, no effective order by way of  sentence can be made."

Hence, in my judgment, the High Court was justified in  quashing the prosecution as far as the first respondent is concerned.   I would therefore, dismiss the appeal as far as the first respondent is  concerned and allow the appeal with regard to the prosecution  against the second respondent.