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CASE NO.: Appeal (civil)  1748 of 1999

PETITIONER: ANZ Grindlays Bank Limited & Ors., etc.

RESPONDENT: Directorate of Enforcement & Ors., etc.

DATE OF JUDGMENT: 05/05/2005

BENCH: N. Santosh Hegde & B.N. Srikrishna

JUDGMENT: J U D G M E N T

With

Civil Appeal Nos. 1749/99, 1750/99, 1751 & 1944/99,  S.L.P.(Crl.) Nos. 2599/03, 4995/03 and 1940/04,                        Criminal Appeal Nos. 847/04 and 848/04 and  Writ Petition (Crl.) No. 165/04

Srikrishna, J.

       We have had the benefit of reading the opinions expressed by our  esteemed and learned brothers Balakrishnan, Dharmadhikari and Arun  Kumar, JJ.  With great respect, we are unable to persuade myself to the  views expressed therein.

       Brother Balakrishnan, J., has indicated in his judgment the  circumstances under which the reference has been made to this larger Bench   to reconsider the correctness of the view expressed by the majority in  Assistant Commissioner, Assessment \026II, Bangalore & Ors. vs.  Velliappa Textiles Ltd. & Anr.          Velliappa  was concerned with prosecution for an offence under  Sections 276C,  277 and 278 read with Section 278B of the Income Tax Act,  1961.  Each of the punishing sections provides that a person found guilty  shall be punishable with a mandatory term of imprisonment and fine.  The   majority in Velliappa  took the view that since an artificial person like a  company could not be physically punished to a term of imprisonment, such a  section, which makes it mandatory to impose a minimum term of  imprisonment, cannot apply to the case of an artificial person.

       The majority judgment in Velliappa  indicates that the  situation is not  one of an interpretational exercise, but one that calls for rectification of an  irretrievable error in drafting of the concerned statute.  It has noticed the two  Reports of the Law Commission of India of 1941 and 1947 pointing out the  impossibility of implementing such a provision without transgressing the  well established bounds of judicial functions and taking on the role of   legislature.  It was also pointed out that the situation is neither novel, nor  unique. Such  situation has been faced in several other jurisdictions wherein  it was recognised that the only solution to such a problem is by legislative  action.  Instances from the jurisdictions in Australia, France, Canada,  Netherland and Belgium were referred to.   There was also reference made  to the fact that the Indian Parliament was cognizant of the problem and had  proposed the IPC (Amendment) Bill, 1972,  Clause 72(a), which specifically  was intended to take care of a situation where the offender is a company and  the offence is mandatorily punishable with imprisonment in which case the  option was  given to the Court to sentence such a corporate offender to fine  only.  Reference was also made in Velliappa to the fact that the said

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Amendment Bill had lapsed.

       It is unnecessary to make detailed reference to the arguments  presented to the Court in Velliappa  and the view expressed thereupon, as  they are reflected in the judgment itself. We would, therefore, deal with  some of the additional arguments presented before us to persuade us to hold  that Velliappa was wrongly decided.  

LEGISLATIVE INTENT  

       One of the functions of the Court is to ascertain the true intention of  the Parliament in enacting the statute and, as far as permissible on the  language of the statute, to interpret the statute to advance such legislative  intent. If this be the test, there is no doubt that Parliament has accepted  the  view taken in the majority in Velliappa as correct.  Velliappa  interpreted the  situation arising out of a prosecution under Sections 276C, 277, 278 read  with Section 278B of the Income Tax Act, 1961 and the judgment was  delivered on 16th September, 2003. Section 278B was promptly amended by   Parliament by insertion of sub-section (3) by the Finance (No. 2) Act, 2004   w.e.f. 1.10.2004.   The inserted sub-section (3) reads as under: "278B (3)  Where an offence under this Act has  been committed by a person, being a company, and  the punishment for such offence is imprisonment  and fine, then, without prejudice to the provisions  contained in sub-section (1) or sub-section(2), such  company shall be punished with fine and every  person, referred to in  sub-section (1), or the  director, manager, secretary or other officer of the  company referred to in sub-section (2), shall be  liable to be proceeded against and punished in  accordance with the provisions of this Act."                  Similar amendment was made in Wealth Tax Act, 1957 also by  insertion of sub-section (3) in Section 35 HA by the same Finance (No. 2)  Act, 2004. In the face of these Parliamentary amendments, it would be futile  to look  for some presumed intention of  Parliament on a theoretical basis.   When    Parliament has taken note of a situation and resolved the difficulty  by a suitable amendment in legislation, the Court must hold that its decision  has correctly interpreted the law and accords with the Parliamentary intent in  enacting the law as it stood prior to the enactment. (See, Bhimaji Shanker  Kulkarni v. Dundappa Vithappa Udapudi and another ).

       Thus, if the interpretative function of the Court be to find out the true  intention of Parliament, then such intention has been manifested the  amendments adopting the manner of resolving the difficulty indicated by  Velliappa.

JUDICIAL FUNCTION         A number of arguments were addressed by learned counsel as to what  is the true function of the Court  in interpreting a statute.  We would prefer  to tread the conventional path that the maxim ’judicis est just dicere, non  dare’ best expounds the role of the court. It is to interpret the law, not to  make it. The Court cannot act as a sympathetic caddie who nudges the ball  into the hole because the putt missed the hole. Even a caddie cannot do so  without inviting censure and more. If the legislation falls short of the mark,  the Court could do nothing more than to declare it to be thus, giving its  reasons, so that the legislature may take notice  and promptly remedy the  situation.  This is precisely what has happened in the present case.  

       We are unable to subscribe to the view that by ’judicial heroics’ it is  open to the Court to remedy an irretrievable legislative error by resort to the  theory of presumed intention of the legislature. It was contended that the  Court should adopt a purposive construction of statutes. The dicta of  Denning L.J. in Seaford Court Estates Ltd.  vs.  Asher  were pressed into  service for emulation. The view of Denning L.J., that ’judicial heroics’ were

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warranted to cope with the difficulties arising in statutory interpretation, was  severely criticized by the House of Lords in Magor & St. Mellons R.D. C.  v. Newport Corporation .  Lord Simonds said, "the duty of the Court is to  interpret the word that the legislature has used. Those words may be  ambiguous, but, even if they are, the power and duty of the court to travel  outside them on a voyage of discovery are strictly limited." "It appears to  me", said Lord Simonds, "to be a naked usurpation of legislative function  under the thin disguise of interpretation".  Lord Morton observed: "these  heroics are out of place". Lord Tucker said, "Your Lordships would be  acting in a legislative rather than a judicial capacity if the view put forward  by Denning, L.J., were to prevail." This disapproval of Denning L.J.’s  approach was cited with approval by this Court in Punjab Land  Development and Reclamation Corporation  Ltd. vs.  Presiding Officer,  Labour Court          The argument of purposive interpretation, therefore, does not appeal  when the statute in plain terms says something.

INTERPRETATIVE EXERCISE          There appears to be a difference of opinion amongst the learned  counsel assailing the correctness of majority view in Valliappa as to whether  the task of the Court in the case on hand is one of statutory interpretation.  Some counsel have argued that it is open to the Court to read the words   "imprisonment and fine" as "imprisonment or fine". In our view, such a  construction is impermissible.  First, it virtually amounts to rewriting of the  section. The Court would be reading the section as applicable to different  situations with different meanings. If the offender is a corporate entity, then  only fine is imposable; if the offender is a natural person, he shall be visited  with both the mandatory term of imprisonment and fine. The exercise  would  then become one of putting a fluctuating or varying interpretation on the  statute depending upon the circumstances.  That is not permissible for the  Court, either on principle, or on precedent. While it may be permissible for  the court to read the word ’and’  as ’or’, or vice versa, whatever the  interpretation, it must be uniformly applied to all situations. If the  conjunction ’and’ is read disjunctively as  "or", then the intention of  Parliament would definitely be defeated as the mandatory term of  imprisonment would not be available even in the case of a natural person.  We have not been shown any authority for the proposition that it is open to  the Court to put an interpretation on a statute which could vary with the  factual matrix.         Secondly,  when a statute says the Court shall impose a term of  ’imprisonment and a fine’, there is no option left in the Court to say that  under certain circumstances it would not impose the mandatory term of  imprisonment.  It is trite principle that punishment must follow the  conviction.          In State of Maharashtra vs. Jugamander Lal  this Court observed:  (at p.5) "By saying that a person convicted of the offence shall  be sentenced to imprisonment of not less than one year  the Legislature has made it clear that its command is to  award a sentence of imprisonment in every case of  conviction."

[See also in this connection: Gul Mahmud  Shah vs. Emperor ; Jayaram  Vithoba and another vs. The State of Bombay ; Jagmohan Singh vs.  State of U.P.  and Modi Industries Ltd. Vs. B.C. Goel  ]

       Thirdly, if on the words used by the legislature it is impossible to  effectuate the intention  of the legislation, namely, to punish a company to  imprisonment, it is not possible to read the section in any other manner to  impose any other punishment on the offender.  "We cannot aid the  legislature’s  defective phrasing of an Act, we cannot add and mend, and, by  construction, make up deficiencies which are left there", said the Judicial  Committee in Crawford vs. Spooner . In other words, the language of  Acts of Parliament and more especially of the modern Acts, must neither be  extended beyond  its natural and proper limits, in order to supply omissions

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or defects, nor strained to meet the justice of an individual case.            "If", said Lord Brougham in Gwynne  vs.  Burnell , "we depart from  the plain and obvious meaning on account of such views (as those pressed in  arguments on 43 Geo, 3, C.99), we do not in truth construe the Act, but alter  it. We add words to it, or vary the words in which its provisions are couched.  We supply a defect which the legislature could easily have supplied, and are  making the law, not interpreting it. This  becomes peculiarly improper in  dealing with a modern statute, because the extreme conciseness of the  ancient statutes was the only ground for the sort of legislative interpretation  frequently put upon their words by the judges. The prolixity of modern  statutes, so very remarkable of late, affords no grounds to justify such a sort  of interpretation."  

       The interpretation suggested by the learned counsel arguing against  the majority view taken in Velliappa, which has appealed to our learned  brothers Balakrishnan, Dharmadhikari and Arun Kumar, JJ., would result in  the Court carrying out a legislative exercise thinly disguised as a judicial act.

       The argument of Mr. Jethmalani that Section 11 of  IPC defines the  word ’person’ to include a company, and because of Section 7 it is an  inexorable definition which must permeate and lend colour to construction  of all sections, is an argument of petitio principii and really begs the  question. Irrespective of a declaration in the statute that it shall be applied   ’unless there is anything repugnant in the clause to the context’, such an  interpretation  must necessarily be implied as forming part of all statutes.    [See in this connection, Commissioner of Sales Tax vs. Union Medical  Agency ;Kartick Chandra vs. Harsha M. Dasi ;  Edmund N. Schuster  vs. Assistant Collector of Customs, New Delhi ; State of Maharashtra  vs. Syndicate Transport ; and Knightsbridge Estates Trust Ltd. Vs.  Byrne and others ]  The definition of  any word in a statute must  necessarily depend on the context in which the word is used in the statute. If  the statute says that the ’person’ committing the offence shall be mandatorily  sent to prison, this principle would suggest that such a section would not  apply to a juristic person.

       The maxim  ’lex non cogit ad impossibilia’,  like all maxims, only  tells us that law does not contemplate something which cannot be done. The  maxim applies, in so far as persuading the Court to hold that it is impossible  to send a company to prison.  The maxim by itself does not empower the  Court to break up the section into convenient parts and apply them  selectively. Nor does the maxim ’Impotentia excusat legem’  apply here for  the same reason. Au contraire, the application of these two maxims could  equally persuade the Court to ignore the language of the statutory provision  in the case of a juristic person, there being no warrant for the dissecting of  the section and treating only one part as capable of implementation when the  mandate of the section is to impose the whole of the prescribed punishment.   

       In the written submissions on behalf of  Iridium India Telecom Ltd.-  (the petitioner in Special Leave Petition (Criminal) No. 4995 of 2003), a  fallacious mathematical syllogism is put forward in support.  The argument  is that the statute mandates  (’A + B’); if A is impossible, then A=0. Then,  the statutory mandate would be only (Zero + B), which is really equal to ’B’    (presumably ’A’ = imprisonment and ’B’ = fine). There is no warrant for the  assumption that the value of ’A’ reduces to zero merely because it is  impossible in case of a corporate offender. It could very well be that ’A’ is  indeterminate. In that case, the mathematical logic would break down  (Indeterminate + B) = Indeterminate, which is exactly what has been held by  Velliappa, namely, that the statute would become unworkable in the case of  a juristic person. Ergo, it cannot apply to a juristic person for all the reasons  adumbrated by the majority in Velliappa.  

       The maxim ’ut res magis valeat quam pereat is pressed into service to  contend that the duty of the Court is to construe the enactment in such a way  is to implement rather than defeat the legislative purpose.  In our view, this  maxim can be pressed into service only if it is permissible to extract another

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reasonable meaning from the plain words used in the statute.  There is a  further difficulty in accepting this principle as applicable to the case on  hand. This principle might enable the Court to resolve the difficulty in  construing a statute so that an interpretation is put  on the statute which will  carry forward the intention of the statue. However, it is to be remembered  that the interpretation put on the statute must be of determinative import in  all cases.  This maxim cannot enable the Court to put a variant construction  on the statute,  which would vary with the circumstances of different cases.  For example, if this maxim is applied to construe a section such as Section  56(1)(i) of the Foreign Exchange Regulation Act, 1973, it is not permissible  for the Court to hold that the Section would mean one thing in the case of an  offender, who is a natural person and something else in the case of an  offender, who is a juristic person.  Such a situation can only be brought  about by Parliamentary legislation of the nature cited earlier.  The mandate  of the legislature can be interpreted so as to advance the purpose of the  legislation.  Whatever interpretation is given must be applicable equally in  all situations. Neither this maxim, nor any other maxim, enables a Court to  interpret a statute in different ways under different fact situations.

ARGUMENT OF CONSEQUENCE         A final argument, more in terrorem than based on reason, put forward  was that, if the majority view in Velliappa is upheld, it would be impossible  to prosecute a number of offenders in several statutes where strict liability  has been imposed by the statute.  If that be so, so be it. As already pointed  out, the judicial function is limited to finding solutions within specified  parameters.  Anything more than that would be ’judicial heroics’  and ’naked  usurpation of legislative function’.

JURISPRUDENTIAL PRINCIPLE         Kenny  in "The Outlines of Criminal Law"   observes as under: "Moreover a corporation is devoid not only of mind,  but also of body; and therefore incapable of the usual  criminal punishments. "Can you hang its common  seal?" asked an advocate in James KK’s days  (8St.Tr.1138)." "Thus the fact that a corporation cannot be hanged or  imprisoned sets a limit to the range of its criminal  liability. A corporation can only be prosecuted, as  such, for offences which can be punished by a fine."

       Para 57 of the judgment in Velliappa specifically notices that  corporate criminal liability cannot be imposed without making  corresponding legislative changes such as the imposition of fine in lieu of  imprisonment. That such requisite legislative changes were introduced in  Australia, France (Penal Code of 1992), Netherlands (the Economic  Offences Act, 1950 and Article 51 of the Criminal Code) and Belgium (in  1934 Cour de Cassation) is already referred to in Velliappa.

       We see nothing special in the Indian context which requires us to take  a different view. In all these jurisdictions, the view that prevailed was that,  where a statute imposes mandatory imprisonment plus fine, such a provision  would not enable the punishment of a corporate offender. If the legislatures  of these countries stepped in to resolve the problem by appropriate  legislative enactments giving  option to the Courts to impose fine in lieu of  imprisonment in the case of a corporate offender, we see nothing special in  the Indian context as to why such a course cannot be adopted. Merely  because the situation confronts the Courts in a number of statutes, the Court  need not feel deterred in construing the statute in accordance with reason.

       The argument that the Criminal Procedure Code, 1973 recognises  different stages  of cognizance, prosecution, conviction and punishment and  that it is open to the Court to stop short of actual imposition of punishment,  is opposed to the law laid down by this Court in a series of cases. In State of  Maharashtra vs. Syndicate Transport (supra); Edmund N. Schuster vs.  Assistant Collector of Customs, New Delhi (supra) and Kartick Chandra

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vs. Harsha M. Dasi (supra) it has been  held that once the court after trial in  accordance with the prescribed procedure comes to a finding of guilt and  convicts an offender, the court is bound to sentence the offender with the  punishment prescribed in law.  In other words, sentence must inexorably  follow conviction, as night follows the day. The argument  that it is open to  the court to abandon its duty midway without imposition of punishment of  the offender, is one without merit.

       The reliance on  Section 48A  of the Monopolies and Restricted Trade  Practices Act, 1969, which was inserted by  the 1984 amendment, is of no  consequence.  The section merely says "any person or body corporate’ or  which "does or omits to do what is mentioned in the Act shall be punishable  with 2 years imprisonment and also with fine which may exceed to  Rs.10000/-."  We do not think that reliance on this section in any way  advances the contention canvassed by the counsel in favour of overruling the  view taken by the majority in Velliappa.  It is obvious that notwithstanding  such an amendment made in 1984, a body corporate cannot be visited with  imprisonment for any term.  This section, therefore, is of the same nature as  the ones which were the subject matters in the fiscal statutes like Income  Tax Act and Wealth Tax Act or Foreign Exchange Regulation Act.   That the  Parliament is alive to the situation and has remedied the difficulty  with   alacrity is really indicative of its recognition of the correctness of the  majority view taken in Velliappa.         For all these reasons,  we are of the opinion that the majority view of  this Court in Velliappa is correct and does not require any reconsideration  by this Bench.  All the matters comprised in this group be placed before  appropriate Benches for disposal in accordance with law.