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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: Arun Kumar

JUDGMENT: J U D G M E N T

Civil Appeal No.1749/1999, CA No.1750/ 1999, CA No.1751 & 1944 of  1999,  SLP(Crl.)No.1940 of 2004, SLP(Crl) No.2599 of 2003, SLP (Crl)No.  4995 of 2003 with W.P.(Crl.)No.165 of 2004 and Appeal (Crl.) No.847 of  2004 and Appeal (Crl) No.848 of 2004.

ARUN KUMAR, J.

C.A.No.1748 of 1999

       I have had the benefit of going through the judgment prepared by my  learned brother K.G. Balakrishnan, J.  I am entirely in agreement with the  view expressed by my learned brother in the said judgment.  However, in  order to highlight certain aspects I have chosen to add the following:         The question for consideration in the appeal is: "Whether a company or a corporation, being a juristic person,  can be prosecuted for an offence for which mandatory  punishment prescribed is imprisonment and fine"?

       The controversy has arisen in the context of provisions of Section 56  of the Foreign Exchange Regulation Act 1973 (for short ’FERA’).  The  appellant Corporation was sought to be prosecuted under said provision for  violation of the relevant provision of the Act.  It was contended on behalf of  the appellant that the appellant being a company cannot be subjected to  criminal action under Section 56 of the FERA because the section prescribes  a minimum sentence of imprisonment and fine and a company cannot be  imprisoned.  Section 56 is reproduced as under: "56. Offences and prosecutions \026 (1) Without prejudice to any  award of penalty by the adjudicating officer under this Act, if  any person contravenes any of the provisions of this Act (other  than Section 13, clause (a) of sub-section (1) of section 18,  Section 18A, clause (a) of sub-section (1) of Section 19, sub- section (2) of Section 44 and Sections 57 and 58, or of any rule,  direction or order made thereunder, he shall, upon conviction  by a court, be punishable,--

(i)     In the case of an offence the amount or value involved in  which exceeds one lakh of rupees, with imprisonment for a  term which shall not be less than six months, but which may  extend to seven years and with fine:

Provided that the court may, for any adequate and special  reasons to be mentioned in the judgment, impose a sentence of  imprisonment for a term of less than six months;

(ii) in any other case, with imprisonment for a term which may  extend to three years or with fine or with both.

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(2)\005. (3)\005. (4)\005. (5)\005 (6)\005"

       The main argument advanced on behalf of the appellant in this behalf  is that the statutes creating criminal liability have to be strictly construed.  When a statute prescribes punishment of imprisonment and fine, it is not  permissible for the court to award punishment of fine alone.   A corporation  being a juristic person cannot be awarded the punishment of imprisonment.   The appellants contend that when a statutory provision cannot be complied  with as per its strict language, the consequence should be that there can be  no prosecution.   There is no sense in prosecuting somebody when the  punishment cannot be awarded as per the mandate of the statute.  The  present reference to a larger Bench for consideration of this question was  made in view of a three-Judge Bench decision of this Court in   Assistant  Commissioner, Assessment-II, Bangalore & Others vs. Velliappa Textiles  Ltd. And another [2003 (11) SCC 405].  In the said judgment two learned  Judges who formed the majority, took the view favouring the proposition  advanced by the appellants, that is, in such a situation a corporation cannot  be prosecuted.           So far the principle regarding strict construction of penal statutes is  concerned there can be no quarrel.  However, we need not misapply the  principle.  This principle has developed only in the context of the provisions  in  statutes which lay down the elements of an offence and the persons who  can be charged with it.  If there is any ambiguity or doubt as to whether in a  given case an offence is made out or not or about who can be an offender  with respect to the given offence, the ambiguity is to be resolved in favour of  the person charged.  In Maxwell on ’The Interpretation of Statutes’, 12th   Edition, the rule is stated as under: "Strict construction of words setting out the elements of an  offence

If there is any ambiguity in the words which set out the  elements of an act or omission declared to be an offence, so that  it is doubtful whether the act or omission in question in the case  falls within the statutory words, the ambiguity will be resolved  in favour of the person charged.  This is, in practice, by far the  most important instance of the strict construction of penal  statutes."

Various illustrations discussed in Maxwell in this connection deal only with  cases where there was ambiguity or doubt regarding ingredients or elements  of an offence as stated in a statute.  Not a single instance has been brought to  our notice  about the above rule being applied in relation to sentencing part  of penal statutes.  Rather in sentencing courts have always enjoyed a certain  amount of discretion.  For instance, inspite of a statute prescribing  punishment for an offence the courts have been empowered to grant  probation to a person  found guilty in certain cases.

       We cannot ignore the fact that prosecution, conviction and sentencing  are different stages in a criminal trial.  The stage for sentencing is reached  only after a verdict of guilt is pronounced after a full-fledged trial.  See  Sec.235 Code of Criminal Procedure.  A reference to Section 56 of the Act  itself demonstrates this aspect when the last words in  opening part in sub- section (1) are:

"\005.upon conviction by a court, be punishable \005".   

Thus the section itself refers to two stages, i.e. the stage up to conviction and  thereafter the stage of punishment.  From this it follows that conviction is  not dependant on sentencing.  Rather it is the other way round i.e.   sentencing follows conviction.

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The learned counsel appearing for the respondents have demonstrated  the anomalous situation to which the proposition suggested on behalf of the  appellants would give rise to.  It was pointed out with reference to Section  56 of the FERA that for offences where the amount or value involved does  not exceed Rs.one lakh, the punishment can be imprisonment or fine while  when the amount or value involved exceeds   Rs. One lakh,  punishment by  way of imprisonment and fine is mandatory.  For offences under Section 56  where amount or value does not exceed Rs. One lakh, the argument based on   impossibility of levy of punishment by way of imprisonment on a  corporation does not survive because imprisonment in such a case is not  mandatory.  If we accept this argument of appellants result will be that for  lesser offences Corporations can be prosecuted while for graver offences  exceeding amount of Rs. One lakh the Corporations will escape liability.   This could never be the object of the statute.  Not only with reference to  Section 56 of FERA, this anomaly can be demonstrated with reference to  other statutes.  For instance under the Employees Provident Fund Act, if the  offence is committed second time imprisonment is mandatory.  Corporations  are often the offenders under the said Act.  Second offence is taken more  seriously and that is why punishment of imprisonment has been made  mandatory.  Could it be said that for first offence a Corporation can be  prosecuted and punished while in case of second offence it goes scot free  because imprisonment is a mandatory sentence in that case?

What follows from this is that for difficulty in sentencing we need not  let the offenders escape prosecution.  While laying down criminal liability  the statute does not make any distinction between a natural person and  Corporations.   The Crimninal Procedure Code dealing with trial of offences  contains no provision for exemption of Corporations from prosecution if  there is difficulty in sentencing them as per statute.  How can we allow  Corporations to escape liability on this specious plea?  In such a situation the  Latin maxim Lex Non Cogit Ad Impossibilia  is attracted which means:  law  does not compel a man to do which he cannot possibly perform.  Broom’s  "Legal Maxims" contains several illustrative cases in support of the maxim.   This maxim has been referred with approval by this Court in State of  Rajasthan v. Shamsher Singh (1985) suppl. SCC 416. In the background of above legal position let us consider  Section 56  of the FERA.  First we must find as to who can be the offender.   The key  words are:  "if any person".  The meaning of the word ’person’is to be  gathered.  This word has not been defined in the FERA.  The definition of  the word ’person’ is available in Section 11 of the Indian Penal Code as well  as in Section 3 (42) in the General Clauses Act.  Both the definitions are  similar and show that the word ’person’ includes any company or  association or body of persons whteher incorporated or not.  It follows that  the word ’person’ here will includes corporation, company or association or  body of persons whether incorporated or not.  This makes it clear that a  company or a corporation can be subjected to penal liability under Section  56 of the FERA.  In fact, during the course of hearing none of the counsel  appearing for appellants argued or suggested that Section 56 does not apply  to corporations.  Their entire argument to save the corporations from liability  under Section 56 is based on the difficulty of levying mandatory punishment  of imprisonment on corporations when the amount involved exceeds Rs.  One lakh.       As a matter of fact, it is not disputed that when the amount  involved does not exceed Rs. One lakh, a corporation or a company can be  prosecuted under Section 56.

The question which now arises is can the criminal liability created by  the statute be made dependent on the sentencing part contained in the same  statute.  In my view the mandate of the provision is quite clear, that is, the  corporations are liable to be prosecuted for offences under FERA as per  Section 56 and allowing corporations to escape liability for prosecution on  this specious plea based on difficulty in sentencing as per the Section, will  be doing violence to the statute.  As already noticed principles of strict  interpretation of criminal statutes require that the substantive offences

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created by the statute which does not exclude corporations, should be  enforced strictly and anyone rendering itself liable for action under the said  Section, be it a corporation or a natural person, should face prosecution,  conviction and sentence.  The charging provision contained in Section 56  lays down the ingredients of the offence in very clear and unambiguous  terms. There is no scope for any doubt that corporations are subject to  provision of Section 56 of FERA.  The statutory mandate is loud and clear.   Any interpretation which leads to results contrary to the statutory mandate  will be in violation of the statute.         No difficulty arises when we come to the stage of sentencing after a  finding of guilt if the amount involved does not exceed Rs.one lakh.  This  difficulty arises only in cases where amount involved exceeds Rs. One lakh.   Here it may be worthwhile to mention that the original FERA of 1947 did  not prescribe a mandatory punishment of imprisonment and fine and  therefore, such a situation was never faced.  The 1973 Act sought to make  the penal provision more severe and, therefore, prescribed that in case of  high valuation cases punishment by way of imprisonment and fine, both will  be necessary.  When  the statutory intention was to make the graver offences  punishable more severely, are we justified in holding that in such a situation  the offender totally escapes liability?  The law cannot be allowed to result in  such absurdity.  Such a view in my judgment will neither  be just nor fair nor  in accordance with the law.  By a purely technical process of reasoning  Corporations should not be allowed to go scot free. There are several statutes  making corporations liable for conviction which prescribe punishment by  way of imprisonment as well as fine.  An interpretation as suggested on  behalf of the appellant will result in corporations escaping liability in all  cases.  Here we may point out that Section 48 A of the Monopolies and  Restrictive Trade Practices Act 1969 specifically makes corporations liable  for prosecution while at the same time providing that in case of conviction  they will be liable to imprisonment and also fine.  In the face of this specific  provision will corporations be allowed to escape liability on same reasoning  as is being advanced here on behalf of appellants.  In my view allowing  corporations to escape prosecution for offences under Section 56 FERA for  the only reason that corporations cannot be punished with imprisonment  even though the punishment by way of fine which is also prescribed under  the Section can be levied on them, will be defeating the statutory mandate  regarding bringing to book offenders under the FERA.  For the view  I am  taking I find support from the view expressed by the three-Judge  Bench in  the referring order in this case which is reported as  ANZ Grindlays Bank  Ltd. and Others vs. Directorate of Enforcement and Others [ 2004 (6) SCC  531] wherein it is observed: "..Section 56 of the Act provides for different  punishments for commission of different offences.  It is  true that in an offence of this nature a mandatory  punishment has been provided for but offences falling  under other part of the said section do not call for  mandatory imprisonment.  Section 56 of the Act covers  both cases where an offender can be punished with  imprisonment or fine and a mandatory provision of  imprisonment and fine.  In the event it is held that a case  involving graver offence allegedly committed by a  company and consequently, the persons who are in  charge of the affairs of the company as also the other  persons, cannot be proceeded against, only because the  company cannot be sentenced to imprisonment, in our  opinion, the same would not only lead to reverse  discrimination but also go against the legislative intent.   The intention of Parliament is to identify the offender and  bring him to book."

"..upon taking recourse to the principle of purposive  construction as has been held by a three-Judge Bench of  this Court in Balram Kumawat v. Union of India an  attempt should be made to make Section 56 of the Act  workable.  It is possible to read down the provisions of

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Section 56 to the effect that when a company is tried for  commission of an offence under the Act, a judgment of  conviction may be passed against it, but having regard to  the fact that it is a juristic person, no punishment of  mandatory imprisonment can be imposed."

Another three-Judge Bench of this Court in a judgment in Balram  Kumawat vs. Union of India 2003 (7) SCC 628, to which I was a party,  observed in the context of principles of statutory interpretation: "23.  Furthermore, even in relation to a penal statute any  narrow and pedantic, literal and lexical construction may  not always be given effect to.  The law would have to be  interpreted having regard to the subject-matter of the  offence and the object of the law it seeks to achieve.  The  purpose of the law is not to allow the offender to sneak  out of the meshes of law.  Criminal jurisprudence does  not say so."

       In M.V. Jawali  v. Mahajan Borewell & Co. and Others [1977 (8)  SCC 72] this Court was considering  a similar situation as in the present  case.  Under Section 278 B of the Income Tax Act a company can be  prosecuted and punished for offence committed under Section 276-B,  sentence of imprisonment is required to be imposed under the provision of  the statute and a company being a juristic person cannot be subjected to it.  It  was held that the apparent anomalous situation can be resolved only by a  proper interpretation of the section.  The Court observed: "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."

       For the above reasons I reject the argument on behalf of the appellants  that Corporations cannot be prosecuted under Section 56 of the FERA for  the reason that mandatory punishment of imprisonment cannot be imposed  on Corporations.  I would like to answer the reference accordingly resulting  in the appeal being dismissed.  The remaining matters be listed before an  appropriate Bench for disposal.