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PETITIONER: RAI BAHADUR SETH SHREERAM DURGAPRASAD

       Vs.

RESPONDENT: DIRECTOR OF ENFORCEMENT

DATE OF JUDGMENT01/05/1987

BENCH: SEN, A.P. (J) BENCH: SEN, A.P. (J) ERADI, V. BALAKRISHNA (J)

CITATION:  1987 AIR 1364            1987 SCR  (3) 137  1987 SCC  (3)  27        JT 1987 (2)   590  1987 SCALE  (1)1081

ACT:     Foreign Exchange Regulation Act,  1947--Section 23  (1)- ’Whoever’--Interpretation  of--Comprehensive enough  to  in- clude  an  association of persons such as a  firm--Does  not connote a natural person alone.

HEADNOTE:     The  Director  of  Enforcement  initiated   adjudication proceedings  against  the  appellants--a  partnership  firm, under  Section 23(1), as amended, for failure to  repatriate the  full  value in foreign exchange earned  by  it  against export shipments of manganese ore made during 1952-1958, and thereby contravening Section 12(2), as well as Section  4(1) of the Foreign Exchange Regulation Act, 1947. The appellants did  not contest the charge under Section 12(2) of  the  Act but questioned the liability of the firm on the ground  that the amended Section 23(1) as well as Section 23C  introduced by  the Amendment Act came into force on September 20,  1957 and  were, therefore, inapplicable to the  export  shipments from the year 1952 onwards till that date and if at all, the firm  could  only be held liable under the  amended  Section 23(1)  read with Section 23C as from that date. It was  con- tended that the word ’whoever’ in sub-section (1) of Section 23  of the Act before its amendment denoted only  a  natural person,  and association of persons, such as a  firm,  would not  fall within the connotation of the word ’whoever’.  The Director of Enforcement held that the firm and its  partners had  deliberately  underinvoiced shipments at  the  time  of export  and also diverted the undeclared proceeds  to  their accounts  with foreign banks with an intention not to  repa- triate the sale proceeds in the prescribed manner within the prescribed period in respect of each shipment. He also  held that  the two persons incharge of, and responsible for,  the conduct  of the business of the partnership firm during  the relevant  period did not produce any evidence to  show  that the contravention in question had taken place without  their knowledge  or that they had exercised due diligence to  pre- vent  such  contravention, and they  were  accordingly  made liable  for  contravention of Section 12(2) of the  Act  for failure  to  repatriate the foreign exchange earned  on  the shipments and a penalty was imposed on the partnership firm.

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138     The Foreign Exchange Regulation Appellate Board,  howev- er, disagreed with the Director of Enforcement, accepted the contention  of  the appellants and accordingly  reduced  the amount of penalty.     The  High  Court allowed the appeal of the  Director  of Enforcement and restored the original order of the  Director of Enforcement.     In  appeal to this Court it was submitted on  behalf  of the appellants that though Article 20(1) of the Constitution would  not in terms apply, the principles  embodied  thereto would  still govern and that the word ’whoever’ in  sub-sec- tion (1) of Section 23 before its amendment by Act XXXIX  of 1957 connoted only a natural person i.e. those who  actually contravened  the provisions of Section 12(1) of the  Act  by failure to repatriate full value of foreign exchange  earned or  exports and would not take in corporate  liability  and, therefore, association of persons, such as a firm, would not fall  within the connotation of the word ’whoever’, that  by the  Amendment Act, a new Section 23(1) was substituted  and Section  23C was introducted and the effect of these  provi- sions  was that after September 20, 1987  adjudication  pro- ceedings  or criminal proceedings could be taken in  respect of a contravention mentioned in Section 23(1), while  before the amendment only criminal proceedings before a court could be instituted to punish the offender.     On behalf of the respondents it was contended that on  a combined reading of Section 23(1) and 12(2), the only possi- ble  construction  was that the word  ’whoever’  includes  a person  and, therefore, initiation of adjudication  proceed- ings  against the partnership firm was permissible and  sub- section  (4) of Section 23 clearly contemplates  prosecution of a company or other body corporate. Dismissing the appeal, this Court,     HELD:  1. It is clear from Sections 4(1), 12(2),  23(1), 23(4) and 23C that the word ’whoever’ in sub-section (1)  of Section 23 of the Act before its amendment was comprehensive enough to include an association of persons, such as a firm, and did not connote a natural person alone. The word ’whoev- er’ in the unamended Section 23(1) must be read in  juxtapo- sition  with  Section  12(2) and must mean  any  person  who commits  a contravention of that Section without  exception. That must be the legal connotation of the word ’whoever’ and it necessarily takes in corporate liability and includes any association  of persons such as a partnership firm.  Such  a construction  is  borne out by the plain  language  of  sub- section (4) of Section 23 inserted by the Act XXXIV of  139 1950 which provides that if the person committing an offence punishable under sub-section (1) of Section 23 is a  company or other body corporate, every director, manager,  secretary or other officer thereof, unless he proves that the  offence was committed without his knowledge or that he exercised all due  diligence  to prevent its commission, be deemed  to  be guilty of such offence. The Act, therefore, clearly  contem- plated  that adjudication proceedings under sub-section  (1) of Section 23 prior to its amendment could be initiated  not only  against the person who actually commits  contravention but  also  casts vicarious liability on  an  association  of persons  such as a partnership firm or an artificial  ’or  a legal entity like a company. [143FH; 144A-C]     The  High Court was right in setting aside the order  of the Foreign Exchange Regulation Appellate Board and  restor- ing that of the Director of Enforcement levying a penalty of Rs.  15,00,000 on the appellants for failure  to  repatriate

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foreign  exchange in contravention of Section 12(2)  of  the Act. The initiation of adjudication proceedings for  failure to repatriate foreign exchange on shipments of manganese ore prior to September 20, 1957, the date when the Amendment Act came into force, was permissible. [144D; F] Union  of India v. Sukumar Pyne, [1966] 2 SCR  34,  referred to.

JUDGMENT:     CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 627 of 1986.     From  the  Judgment  and Order dated 7.3.  1986  of  the Bombay High Court in Crl. Appeal No. 119 of 1981.     Ashok Sen, Kapil Sibbal, A.K. Sanghi and R.L. Sanghi for the Appellants. M.S. Rao, A.S. Rao and C.V. Subba Rao for the Respondents. The Judgment of the Court was delivered by SEN,  J. The short question involved in this appeal by  spe- cial  leave directed against the judgment and order  of  the High  Court  of ’Bombay dated March 7, 1986 is  whether  the word  ’whoever’  in sub-s. (1) of s. 23 of the  Foreign  Ex- change  Regulation  Act, 1947 before its  amendment  by  Act XXXIX of 1957 denoted only a natural person and  association of persons, such as a firm, would not fall within the conno- tation  of  the word ’whoever’. By the judgment,  a  learned Single Judge 140 of  the  High Court allowed the appeal of  the  Director  of Enforcement  under s. 54 of the Act and set aside the  order of  the Foreign Exchange Regulation Appellate Board,  Bombay dated January 30, 1981 and restored the order of the  Direc- tor of Enforcement dated August 17, 1978 holding the  appel- lants  guilty of contravention of s. 12(2) of the  Act  read with  the notification issued by the Government of India  in the Ministry of Finance, New Delhi dated April 22, 1952  and levying a penalty of Rs. 15,00,000. By its order the Foreign Exchange Regulation Appellate Board held that there could be no  levy  of penalty on the appellants-firm for  failure  to repatriate  foreign exchange on shipments of  manganese  ore made prior to September 20, 1957 i.e. prior to the amendment of s. 23(1) of the Act and the introduction of s. 23C by the Amendment Act and accordingly reduced the amount of  penalty to  Rs.3,  10,000. AS a result of the decision of  the  High Court,  the order of the Director of Enforcement  levying  a penalty  of  Rs. 15,00,000 on the appellants  has  been  re- stored.     The  facts  giving rise to the appeal  are  as  follows. Messrs Rai Bahadur Seth Shreeram Durgaprasad were a partner- ship firm engaged in the business of winning, extracting and getting  manganese ore from their manganese mines at  Tumsar on a very large scale. During the period from 1952 to  1958, the  partnership firm made 52 shipments of manganese ore  to various foreign countries and earned huge amount of  foreign exchange. It however failed to repatriate the full value  in foreign  exchange  against the aforesaid  52  shipments  and thereby  contravened  s. 12(2) of the Act. The  Director  of Enforcement  accordingly initiated adjudication  proceedings against the appellants under s. 23(1) as amended for contra- vention  of  s.  12(2) as well as s. 4(1) of  the  Act.  The appellants  stated before the Director of  Enforcement  that they  did not contest the charge under s. 12(2) of  the  Act but questioned the liability of the firm on the ground  that the  amended  s. 23(1) as well as s. 23C introduced  by  the

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Amendment Act came into force on September 20, 1957 and were therefore inapplicable to the export shipments from the year 1952  onwards till that date; and if at all, the firm  could only be held liable under the amended s. 23(1) read with  s. 23C as from that date. It was contended that the word ’whoe- ver’ in sub-s. (1) of s. 23 of the Act before its  amendment denoted  only a natural person and association  of  persons, such as a firm, would not fail within the connotation of the word  ’whoever’.  The Director of Enforcement by  his  order dated August 17, 1978 repelled the contention and held  that the  firm  and its partners had  deliberately  underinvoiced shipments at the time of export and also diverted the  unde- clared proceeds to their accounts with foreign banks with an intention not to repatriate the sale 141 proceeds  in  the prescribed manner  within  the  prescribed period  in respect of each shipment. He dealt with the  evi- dence  in detail with reference to the books of account  and came  to  the  conclusion that both  Durgaprasad  Saraf  and Umashanker  Aggarwal were incharge of, and responsible  for, the  conduct of the business of the partnership firm  during the  relevant period. Neither of them produced any  evidence to  show that the contravention in question had taken  place without  their  knowledge  or that they  had  exercised  due diligence  to prevent such contravention. They were  accord- ingly  made liable for contravention of s. 12(2) of the  Act for failure to repatriate the foreign exchange earned on the aforesaid  52  shipments and were imposed a penalty  of  Rs. 15,00,000  on  the partnership firm.  The  Foreign  Exchange Regulation Appellate Board however disagreed with the Direc- tor of Enforcement and accepted the contention of the appel- lants and accordingly reduced the amount of penalty to Rs.3, 10,000.     Shri Asoke Sen, learned counsel appearing for the appel- lants  with  his usual fairness frankly concedes  that  Art. 20(1)  of the Constitution would not in terms apply but,  he contends,  the principles embodied therein would still  gov- ern.  He  has confined his submissions to  only  one  point, namely,  that  the  word ’whoever’ in sub-s. (1)  of  s.  23 before  its amendment by Act XXXIX of 1957 connoted  only  a natural  person  i.e.  those who  actually  contravened  the provisions  of s. 12(1) of the Act by failure to  repatriate full  value of foreign exchange earned on exports and  would not take in corporate liability and therefore association of persons, such as a firm, would not fall within the  connota- tion  of  the word ’whoever’. The  learned  counsel  further contends that by the Amendment Act, new s. 23(1) was substi- tuted  and s. 23C introducted w.e.f. September 20, 1957  and the  effect  of these provisions was that after  that  date, adjudication  proceedings or criminal proceedings  could  be taken  in respect of a contravention mentioned in  s.  23(1) while before the amendment only criminal proceedings  before a  Court could be instituted to punish the offender. We  are afraid, the contention cannot prevail. It is not correct  to say  that the amended s. 23(1) of the Act does not apply  to contraventions  which  took place before the  Amendment  Act came  into force. Shri Madhusudan Rao, learned  counsel  ap- pearing  for  the  respondents rightly contends  that  on  a combined  reading of ss. 23(1) and 12(2), the only  possible construction  is that the word ’whoever’ includes  a  person and therefore initiation of adjudication proceedings against the  partnership firm was permissible. He  draws  sustenance from  the  provision contained in subs. (4) of s.  23  which clearly contemplates prosecution of a company or other  body corporate. As regards the applicability of the amended

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142 s.  23(1)  read  with s. 23C with regard  to  initiation  of adjudication proceedings in respect of contraventions  which took  place  before the Amendment Act came  into  force,  he rightly  contends that the matter is concluded by the  deci- sion of this Court in Union of India v. Sukumar Pyne, [1966] 2 SCR 34.     In  order  to appreciate the contentions raised,  it  is necessary  to  set out the statutory provisions  insofar  as relevant.               "4.  (1) Except with the previous  general  or               special  permission  of the Reserve  Bank,  no               person   other  than  an   authorised   dealer               shall   ......  sell or lend to,  or  exchange               with,  any  person  not  being  an  authorised               dealer, any foreign exchange.               12.2. Where any export of goods has been  made               to which a notification under sub-section  (1)               applies,  no person entitled to sell, or  pro-               cure the sale of, the said goods shall, except               with the permission of the Reserve Bank, do or               refrain  from  doing any act  with  intent               to secure that--                         (a) the sale of goods is delayed  to               an extent which is unreasonable having  regard               to the ordinary course of trade, or                        (b)  payment  for the goods  is  made               otherwise  than  in the prescribed  manner  or               does not represent the full amount payable  by               the  foreign  buyer in respect of  the  goods,               subject  to such deductions, if any as may  be               allowed by the Reserve Bank, or is delayed  to               such extent as aforesaid:                        Provided   that  no  proceedings   in               respect  of  any contravention  of  this  sub-               section  shall be instituted unless  the  pre-               scribed period has expired and payment for the               goods  representing the full amount as  afore-               said  has  not  been made  in  the  prescribed               manner."                   Section  23(1) prior to its amendment  and               the  original sub-s. (3) now renumbered as  s.               23(4) are as follows:               "23. (1) Whoever contravenes any of the provi-               sions of this Act or of any rule, direction or               order made thereunder                143               shall  be punishable with imprisonment  for  a               term  which  may extend to two years  or  with               fine  or with both, and any Court  trying  any               such  contravention may, if it thinks fit  and               in  addition  to  any sentence  which  it  may               impose for such contravention, direct that any               currency,  security, gold or silver, or  goods               or  other  property in respect  of  which  the               contravention has taken place shall be confis-               cated.               23.(4).  If the person committing  an  offence               punishable under this section is a company  or               other body corporate, every director, manager,               secretary  or  other  officer  thereof  shall,               unless he proves that the offence was  commit-               ted without his knowledge or that he exercised               all  due diligence to prevent its  commission,               be deemed to be guilty of such offence.’’

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             Sub-s. (1) of s. 23C is as follows:               "23C. Offences by companies--(1) If the person               committing a contravention is a company, every               person who, at the time the contravention  was               committed, was incharge of, and was  responsi-               ble  to,  the company for the conduct  of  the               business of the company as well as the  compa-               ny,  shall be deemed to be guilty of the  con-               travention and shall be liable to be proceeded               against and punished accordingly:                        Provided  that nothing  contained  in               this sub-section shall render any such  person               liable  to  punishment if he proves  that  the               contravention took place without his knowledge               or  that  he exercised all  due  diligence  to               prevent such contravention."     It is clear from these provisions that the word  ’whoev- er’  in sub-s. (1) of s. 23 of the Act before its  amendment was  comprehensive enough to include an association of  per- sons,  such as a firm, and did not connote a natural  person alone.  There  is no reason why the word  ’whoever’  in  the section  should not receive its plain and  natural  meaning. According to the Shorter Oxford English Dictionary, vol.  2, p. 2543, ’whoever’ means’ ’any one who. any who’. The  mean- ing given in Webster Comprehensive Dictionary, International edn.,  vol. 2 at p. 1437 is ’any one without exception  ’any person  who’.  In our judgment. the word  ’whoever’  in  the unamended  s.  23(1) must be read in juxtaposition  with  s. 12(2) and must mean any person who commits a 144 contravention  of that section without exception. That  must be the legal connotation of the word ’whoever’ and it neces- sarily takes in corporate liability and includes any associ- ation of persons such as a partnership firm. That  construc- tion  of ours is borne out by the plain language  of  sub-s. (4) of s. 23 inserted by Act XXXIV of 1950. It provides that if the person committing an offence punishable under  sub-s. (1)  of  s. 23 is a company or other body  corporate,  every director, manager, secretary or other officer thereof shall, unless he proves that the offence was committed without  his knowledge or that he exercised all due diligence to  prevent its commission, be deemed to be guilty of such offence.  The Act  therefore clearly contemplated that  adjudication  pro- ceedings  under sub-s. (1) of s. 23 prior to  its  amendment could be initiated not only against the person who  actually commits contravention but also casts vicarious liability  on an  association of persons such as a partnership firm or  an artificial or a legal entity like a company. It is therefore idle to contend that the appellants were not liable to  pay’ penalty  for  failure to repatriate foreign exchange  on  52 shipments  of manganese ore effected through the years  1952 to 1958. Upon that view, the learned Single Judge was  right in  setting aside the order of the Foreign Exchange  Regula- tion  Appellate Board and restoring that of the Director  of Enforcement levying a penalty of Rs. 15,00,000 on the appel- lants for failure to repatriate foreign exchange in  contra- vention of s. 12(2) of the Act.     The  contention  of the learned  counsel  that  recourse could not be had to the amended s. 23(1) read with s. 23C of the  Act  in respect of the contravention of  s.  12(2)  for failure on the part of the appellants to repatriate  foreign exchange on shipments of manganese ore made prior to Septem- ber 20, 1957, and there could be no initiation of  adjudica- tion proceedings under the amended s. 23(1) read with s. 23C or  levy  of penalty on the appellants must  also  fail  for

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another  reason. In Sukumar Pyne’s case the  Court  reversed the  decision of the Calcutta High Court in Sukumar Pyne  v. Union of India & Ors., AIR (1962) Cal. 590 striking down  s. 23(1)(a) as being violative of Art. 14 of the  Constitution. Regarding the point, namely, whether s. 23(1)(a) having been substituted by Amendment Act XXXIX of 1957 would have retro- spective  operation in respect of the alleged offence  which took  place in 1954, the High Court came to  the  conclusion that  the  petitioner had a vested right to be tried  by  an ordinary  court  of the land with such rights of  appeal  as were  open to all and although s. 23(1)(a)  was  procedural, where a vested right was affected, prima facie, it was not a question of procedure. Therefore, the High Court came to the conclusion that the provision as to adjudication by the 145 Director  of  Enforcement could not have  any  retrospective operation.  It was held that ’the impairment of a  fight  by putting  a  new  restriction thereupon is not  a  matter  of procedure  only’.  It  impairs a substantive  right  and  an enactment  that does so is not retrospective unless it  says so expressly or by necessary intendment. The Court  reversed the High Court and held that effect of these provisions  was that  after the amendment of 1957, adjudication or  criminal proceedings could be taken up in respect of a  contravention mentioned in s. 23(1) while before the amendment only crimi- nal proceedings before a Court could be instituted to punish the  offender. In repelling the contention advanced by  Shri N.C.  Chatterjee  that the new amendments did not  apply  to contraventions  which  took place before the Act  came  into force, the Court observed:               "In our opinion, there is force in the conten-               tion  of  the  learned  Solicitor-General.  As               observed  by  this Court in Rao  Shiv  Bahadur               Singh v. The State of Vindhya Pradesh,  [1953]               SCR  1188, a person accused of the  commission               of an offence has no vested right to be  tried               by  a particular court or a particular  proce-               dure except in so far as there is any  consti-               tutional objection by way of discrimination or               the  violation of any other fundamental  right               is  involved. It is well recognised  that  "no               person  has  a vested right in any  course  of               procedure  "(vide  Maxwell  11th  Edition,  p.               216),  and we see no reason why this  ordinary               rule  should not prevail in the present  case.               There  is no principle underlying Art.  20  of               the  Constitution which makes a right  to  any               course of procedure a vested right." These  principles  are clearly attracted to  the  facts  and circumstances of the present case and therefore the  initia- tion  of adjudication proceedings for failure to  repatriate foreign  exchange  on shipments of manganese  ore  prior  to September  20,  1957, the date when the Amendment  Act  came into force, was permissible. The appeal must therefore fail and is dismissed with costs. N.P.V.                                         Appeal   dis- missed. 146