http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 20  

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 & K.G. Balakrishnan & D.M. Dharmadikari & Arun Kumar & B.N. Srikrishna  

JUDGMENT: JUDGMENT

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

Delivered by: B.N. Srikrishna,J K.G. Balakrishna, J  Arun Kumar, J

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 20  

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  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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 20  

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  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  ]

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 20  

       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  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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 20  

(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  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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 20  

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  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.  

============================================================== K.G. BALAKRISHNAN, J.

       Leave granted.

       The appellant in Civil Appeal No. 1748 of 1999 filed a writ  petition before the High Court of Bombay challenging  various notices  issued to them under Section 50 read with Section 51 of the Foreign  Exchange Regulation Act, 1973  (for short, the FERA Act) and  contended that the appellant company was not liable to be prosecuted  for the offence under Section 56 of the FERA Act.   In this appeal filed  against the  judgment of the Division Bench of the Bombay High Court,  dated 7th November, 1998,  the appellant contends that  no criminal  proceedings can be  initiated against the  appellant-company for the  offence under Section 56(1) of the FERA Act as the minimum  punishment prescribed under Section 56(1)(i) is imprisonment for a  term which shall not be less than six months and with fine.    Section  56 of the FERA Act, 1973 reads  as  follows :

       "56.   Offences and prosecutions -  (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, --

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 20  

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

       The contention  of the appellants  in   other connected matters  also is to the same effect that in a case where the offence is  punishable with a mandatory sentence of imprisonment, the company  cannot be prosecuted as the sentence of imprisonment  cannot be  enforced against the company.    When the matter came up before the  bench of three learned Judges of this Court,  the decision in   Assistant Commissioner, Assessment-II Bangalore & Ors vs.  Velliappa Textiles Ltd & Anr. (2003) 11 SCC 405 was cited in  support of that contention.    The bench doubted the correctness of the  above decision and by reference order  dated 16.7.2004 reported in  2004(6) SCC 531,  the matter  has thus been placed before this  Court by the learned Chief Justice of India  for our decision.

       The question that arises for consideration is whether a company  or a corporate body could be prosecuted  for offences for which the  sentence of imprisonment is  a mandatory punishment.    In Velliappa  Textiles’ case (supra), by a majority decision it was  held that the  company cannot be prosecuted for offences which require imposition  of a mandatory term of imprisonment coupled with fine.  It was further  held that where punishment provided is imprisonment and fine, the  court cannot impose only a fine.   In  Velliappa Textiles,  prosecution  was launched against the respondent, a  private limited company, for  the offences punishable under Sections 276-C, 277 and 278 read with  Section 278-B of the Income Tax Act.   Under Section 276-C and 277  of the Income Tax Act, the substantive sentence provided  is  the  sentence of imprisonment  and fine.   Speaking for the majority, one  of us, (Srikrishna, J.) held that the first respondent company cannot  be prosecuted for offences under Section 276-C, 277 and 278  read  with Section 278-B since each  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 majority  was of the view that the legislative mandate is to prohibit the courts  from deviating from the minimum mandatory punishment prescribed  by the Statute and 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.   Following the decision in State of  Maharashtra vs. Jugamander Lal    AIR 1966 SC 940, it was held  that the expression used is "imprisonment and fine" and the court is  bound to award sentence of imprisonment as well as fine and that  there is no discretion on the part of the court to impose only a fine and   that  the court cannot interpret the statutory provisions in a way so as  to supply a lacuna in a statute.

       The view expressed in Velliappa Textiles is seriously assailed  before us by the Additional Solicitor General, Mr. Malhotra, who  appeared for the respondents.    Senior Counsel Shri KK Venugopal,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 20  

Shri Andhiyarujina, Shri Ashok Desai and  other counsel supported the  contention that a company cannot be prosecuted for an offence, for  which the mandatory sentence is imprisonment.   Shri Ram Jethmalani  appearing  for the appellant in the appeal arising out of Special Leave  Petition  (Crl.) No. 4995  of 2003 supported the view that the company  is liable to be prosecuted even if  the offence is punishable  both with   a term of imprisonment and fine.   He submitted that in case the  company is found guilty, the sentence of imprisonment cannot be   imposed on the company and then the sentence of fine is to be  imposed and the court has got the  judicial discretion  to do so.   He  further submitted that this course is open  only  in the  case where the  company  is found  guilty  but  if a natural person is so found  guilty,  both sentence of imprisonment and fine  are to be imposed on such  person.    

       There is no dispute that  a company is liable to be prosecuted  and punished for criminal offences.     Although there are earlier  authorities  to the effect that  corporations cannot commit a crime, the  generally accepted modern rule is that except for such crimes as a    corporation  is held incapable of committing by reason of the fact that  they involve personal malicious intent,  a corporation may be subject  to indictment or other criminal process, although the criminal act is  committed through  its agents.

       As in the case of torts, the general rule prevails that the  corporation may be criminally liable  for the acts of an officer or agent,  assumed to be done by  him  when exercising authorized powers, and  without proof that his act was expressly authorized or approved by the  corporation.   In the statutes defining crimes, the prohibition is  frequently directed against any "person" who commits the prohibited  act,  and in  many statutes the term "person" is defined.     Even if the  person is not specifically defined, it necessarily includes a corporation.   It is usually construed to include a corporation so as to bring it within  the prohibition of the statute and subject it to  punishment.   In most  of the statutes,  the word  "person" is defined to include a corporation.    In    Section  11   of   the   Indian  Penal Code, the  "person"  is  defined thus :  

"The word "person" includes any Company or Association  or  body of persons, whether incorporated or not."

       Therefore, as regards corporate criminal liability, there is no  doubt that a corporation or company could be prosecuted for any  offence punishable under law, whether it is coming under the strict  liability or under absolute liability.  

       Inasmuch as  all criminal and quasi-criminal offences are  creatures of  statute,  the amenability of the  corporation to  prosecution necessarily depends   upon the terminology employed in  the statute.   In the case of strict liability, the terminology employed  by the legislature is such as  to reveal an intent that guilt shall not be   predicated upon the automatic breach of the statute but on the  establishment of the actus reus. subject to the defence of due  diligence.   The law is primarily based on the terms of the statutes.   In  the case of absolute liability where the legislature by the clearest  intendment establishes an offence where liability arises instantly upon  the breach of the statutory prohibition,  no particular state of mind is a  prerequisite to guilt.   Corporations and individual persons stand on  the same footing in the face of such a statutory offence.       It is a  case of automatic primary responsibility.     It is only  in a case  requiring  mens rea,   a question arises whether a corporation could  be attributed with requisite mens rea to prove the guilt.  But  as we  are not concerned with this question in these proceedings, we  do not  express any opinion  on that issue.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 20  

       In series of offences  punishable under various statutes,  sentence of imprisonment and fine are prescribed as the punishment.    In some of these enactments,  for certain offences a minimum  period  of imprisonment  is prescribed as punishment.   Under Section 56(1)(i)  of the FERA Act,  in respect of certain offences, if  the amount or value   involved  therein  exceeds one lakh of rupees,  the punishment  prescribed is imprisonment for a term which shall not be less than six  months, but which may extend to seven years and with fine.     In any  other case,  the punishment prescribed is  imprisonment for a term  which may extend to three  years or with fine or with both.     

       Going by the provisions in Section 56 of the FERA Act,  if the  view expressed in Velliappa Textiles is accepted as correct law, the  company could be  prosecuted for an offence involving rupees one lakh  or less and  be punished as the option is given to the court to  impose  a sentence of imprisonment or fine, whereas in the case of an offence  involving an amount or value exceeding rupees one lakh, the court is  not given a discretion to impose imprisonment or fine and therefore,  the company cannot be prosecuted as the custodial sentence cannot  be imposed on it.

       The legal difficulty arising out of the above situation was noticed  by the Law Commission and in its 41st  Report,   the Law Commission  suggested amendment to Section 62 of the Indian Penal Code by  adding 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 corporate  or an association of individuals, it shall be competent to  the court to sentence such offender to fine only."

       This recommendation got no response from the Parliament and  again in its 47th Report,  the Law Commission in paragraph 8(3) made  the following recommendation :

"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."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 20  

       But  the Bill  prepared on the basis of the recommendations of  the Law Commission lapsed and it did not become law.     However few  of these recommendations were accepted by the Parliament and by  suitable amendment some of the provisions in the taxation statutes  were amended.

       The question whether a company could be prosecuted for an  offence for which mandatory sentence of  imprisonment is provided   continued to agitate the minds of the courts and jurists and the law  continued to be the old law despite the recommendations of the Law  Commission and the difficulties were expressed by the superior courts in   many decisions.

       The question under consideration is that where an accused is  found guilty and the punishment to be imposed is  imprisonment and  fine,  whether the court has got the  discretion  to impose the sentence  of fine alone.    Senior counsel  Shri Jethmalani contended that  if a  corporate body is found guilty of the offence committed,  the court,  though bound to impose the sentence prescribed under law, has the  discretion to impose the sentence of imprisonment or fine as in the case  of a company or corporate body the sentence of imprisonment cannot  be imposed on it and as the law never compels to do anything which is  impossible, the court has to follow the alternative and impose the  sentence of fine.   The counsel also hastened to add that this discretion  could be exercised only in respect of juristic persons and not in respect  of  natural persons.    It was contended that by doing so, the court   does not alter the provisions of the law by  interpretation,  but only  carry out the mandate of the legislature.   Senior counsel appearing for  other appellants, on the other hand, contended that the Parliament   enacted  laws knowing fully well that the company cannot be subjected  to custodial sentence and therefore the legislative intention is not to  prosecute the companies or corporate bodies and when the sentence  prescribed cannot be imposed, the very prosecution itself is futile and   meaningless and thus the  majority decision in Velliappa Textiles  has  correctly laid down the law.    The counsel on either side drew our  attention to various decisions on the point.

       Different High Courts have taken different views on this  question.    In State   of Maharasthra   vs. Syndicate Transport  1963 Bom. L.R. 197, it was held that the company cannot be prosecuted  for offences which necessarily entail consequences of a corporal  punishment or imprisonment and prosecuting a company for such  offences would only result in the court stultifying itself by embarking on  a  trial in which the verdict of guilty is returned and no effective order  by way of sentence can be made.

       In Kusum Products Limited vs. S.K. Sinha, ITO, Central  Circle-X, Calcutta 126 ITR 804 (1980),  the Calcutta High Court took  the view that even though the definition of  "person" under Section  232(3)(i)  is wide enough to include a company or a juristic  person, the  word "person" could not have been used by Parliament in Section 277  (Income Tax Act) in the sense given in the definition clause.   It was  further held that the intention of the Parliament is otherwise because  imprisonment has been made compulsory for an offence under Section  277 of the Act and a company being a juristic person cannot possibly be   sent to prison and it is not open to court to impose a sentence of fine or   allow to award any punishment if the court finds the company guilty  under the said Section, and if the court does it, it would be altering the  very scheme of the Act and usurping  the legislative function.

       In  Badsha vs. Income Tax Officer 1987 (1) K.L.T. 112       Justice Thomas, J., as he then was, following the decision of the  Allahabad High Court in Modi Industries Limited vs. B.C. Goel  144  ITR 496 (1983), held   that   "A company registered under the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 20  

Companies Act, 1956 is a juristic person and cannot be awarded the  punishment of imprisonment and  hence cannot be prosecuted for  breach of Sections 277 and 278 of the Act" and therefore the court held  that the first accused  being a firm was not liable to be prosecuted for  offences under Section 277 and 278.

       In P.V. Pai  vs.  R.L. Rinawma, Dy. Commissioner, Income  Tax, (1993) 2 Comp. L.J, 314 (Karn.),  it was held that imprisonment  alone  was the punishment that could be imposed on a person found  guilty and that the legislature intended that the offence under Section  277 should be met with punishment of compulsory imprisonment and  fine, and  courts have no jurisdiction to impose fine only and if that is  done it would be altering the very scheme of the Act.

       It is also pertinent to make reference to the decision of this  Court in State of Maharashtra vs. Jugamander Lal  AIR 1966 SC  940.   That was a case  where the accused was found guilty under  Section  3(1) of Suppression of Immoral Traffic in Women & Girls Act,  1956.   Under  Section 3(1) of that Act, any person found guilty shall be  punishable on his first conviction with rigorous imprisonment for a term  of not less than one year and not more than three years and also with  fine which may extend to two thousand rupees.   The High Court took  the view that the word "punishable" used in the Section postulated a  discretion on the court to impose a sentence of imprisonment or a  sentence of fine or both.    But this Court held that  in the context in  which the word "punishable" has been used in Section 3(1), it is  impossible to construe it as giving any discretion to the court in the  matter of determining the nature of sentences to be passed in respect of  a contravention of the provision.  By using the expression "shall be  punishable" the legislature has made it clear that the offender shall not  escape the penal consequences.   What the consequences  are to be are  then specified in the provision and they are rigorous imprisonment for a  period not less than one year and not more than three years and also a  fine which  may extend to Rs.2,000/-.   These are the punishments with  respect to a first offence and higher punishments are prescribed in  respect of a subsequent offence.  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 the command is to award a  sentence of imprisonment in every case of conviction.   It is difficult to  conceive of clearer language for couching such command.

       The counsel for the appellant relying on the above decision  contended that when the Section commands the punishment for  imprisonment and fine, the court is not left with any discretionary power  to alter the sentence and that would  amount to  re-writing the  provisions of  the law.

       Contrary view has been taken in series of other decisions to  which our attention was drawn.

       A full Bench of the Delhi High Court in  Delhi Municiaplity  vs.  J.B. Bottling Company 1975 Crl. L.J. 1148  considered a similar  question.   The respondent-company was found guilty under Section 7  read with Section 16 of the Prevention of Food Adulteration Act,  and  was fined  rupees five thousand.   The respondent-company filed  an  appeal and contended that   for the offence under Section 16 of the  Prevention of Food Adulteration Act, the minimum period of six months  imprisonment is prescribed and the company is immune from  prosecution as the sentence contemplated under law cannot be imposed  on it.    The Court held that:

       "The office of the judges is always to make construction  as shall suppress the mischief and advance the remedy  and therefore it will stay its hand in passing the sentence  which will be impossible to execute but pass only such

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 20  

sentence which can be executed, namely, fine.   The  proviso to Section 16 applies only to the three classes of  offences mentioned therein and as compared to the rest of  the offences  contemplated by the Act are of less serious  nature and if indictment of the company is confined to only  those offences which are covered by the proviso, then not  only the intention of the legislature is defeated, but the  provisions of Section 16(1-D) and Section 18 are also to  that extent rendered nugatory, insofar as the offences are  committed by the companies".

       In  Oswal Vanaspati & Allied Industries vs. State of Uttar  Pradesh (1993) 1 Comp. L.J. 172 (All.), the appellant-company sought  to quash the complaint filed against it by the Food Inspector under  various sections of the Act alleging that the company cannot be  prosecuted for an offence under Section  16 of the Act as the sentence  of imprisonment provided under that section after its amendment by the  Prevention of Food Adulteration (Amendment) Act No. 34 of 1976 which  is mandatory cannot be awarded to it.  In paragraph 7, the Full Bench of  the Allahabad High Court held  as follows :  

       "A company being a juristic person cannot obviously be  sentenced to imprisonment as it cannot suffer  imprisonment.  The question that requires determination is  whether a  sentence  of fine alone can be imposed on it  under Section 16 of the Act or whether such a sentence  would be illegal and hence cannot be awarded to it.   It is  settled law that sentence or punishment must follow  conviction; and if only corporal punishment is prescribed, a  company which is a juristic person  cannot be prosecuted  as it cannot be punished.  If, however, both sentence of  imprisonment and fine is prescribed for natural persons  and juristic persons jointly, then, though the sentence of  imprisonment cannot be awarded to a company, the  sentence of fine can be imposed on it.   Thus it cannot be  held that in such a case the entire sentence prescribed  cannot be awarded to a company as a part of the  sentence, namely, that of fine can be awarded to it.   Legal  sentence is the sentence prescribed by law.    A sentence  which is in excess of the sentence prescribed is always  illegal; but a sentence which is less than the sentence  prescribed   may not in all cases be illegal."

                It is also appropriate to make reference to a decision of the  United States Supreme Court.   The judgment was rendered in United  States vs. Union Supply Company 54 Law. Ed.  87 by Justice  Holmes.   There was an indictment of a corporation for willfully  violating the sixth section of the Act of Congress of 1902 and any  person who willfully violates any of the  provisions of this Section shall,   for each such offence, be liable to be punished with fine not less than  fifty dollars and not exceeding five hundred dollars,  and  imprisonment  for not less than 30 days, nor more than six months.   It is interesting  to note that   for the offence under Section 5, the Court had  discretionary power to punish by either fine or imprisonment, whereas  under Section 6, both punishments were to be imposed in all cases.      The plea of the company was rejected and it was held :

"It seems to us that a reasonable interpretation of the  words used does not lead to  such  a result.   If we  compare Section 5, the application of one of the penalties  rather than of both  is made to depend, not on the  character of the defendant, but on the discretion of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 20  

Judge; yet, there, corporations are mentioned in terms\005\005.  And  if we free our minds from the notion that criminal  statutes must be construed by some artificial and  conventional rule, 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."

       The Counsel for the appellant contended that the penal provision  in the statute is to be strictly construed.  Reference was made to  Tolaram Relumal and another Vs. The State of Bombay 1955(1)  SCR 158 at 164 and Girdhari Lal Gupta Vs. D.H. Mehta and another  1971(3) SCC 189.  It is true that all penal statutes are to be strictly  construed in the sense that the Court must see that the thing charged  as an offence is within the plain meaning of the words used and must  not strain the words on any notion that there has been a slip that the  thing is so clearly within the mischief that it must have been intended to  be included and would have included if thought of.  All penal provisions  like all other statutes are to be fairly construed according to the  legislative intent as expressed in the enactment.  Here, the legislative  intent to prosecute corporate bodies for the offence committed by them  is clear and explicit and the statute never intended to exonerate them  from being prosecuted.  It is sheer violence to commonsense that the  legislature intended to punish the corporate bodies for minor and silly  offences and  extended immunity of prosecution to major and grave  economic crimes.

       The distinction between  a strict construction and a more free  one has disappeared in modern times and now  mostly the question is  "what is true construction of the statute?"   A passage in  Craies on  Statue Law  7th Edn. reads to the following effect :

"The distinction between a strict and a liberal construction  has almost disappeared with regard to all classes of  statutes, so that all statutes, whether penal or not, are   now construed by  substantially the same rules.  ’All  modern Acts are framed with regard to equitable as well as  legal principles.’    "A hundred years ago",  said the court  in Lyons’ case, "statutes were required to  be perfectly  precise and resort was not had to a reasonable  construction of the Act,  and thereby criminals were often  allowed to escape.   This is not  the present mode of  construing Acts of Parliament.    They are construed now  with reference to the true meaning and real intention of  the legislature."   

               At page-532 of the same book, observations of   Sedgwick  are quoted as under:            "The more correct version of the doctrine  appears to be that statutes of this class are  to  be fairly construed and faithfully applied  according to the  intent of the legislature without  unwarrantable severity on the one hand or  unjustifiable  lenity on the other, in cases of  doubt the courts inclining to mercy."

       The  question, therefore, is what is the intention of the  legislature.  It is an undisputed fact that for all the statutory offences,  company also could be  prosecuted as  the "person" defined   in these  Acts includes "company, or corporation or other incorporated body."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 20  

Even for offences under Section 56(1)(ii) FERA Act, the company  could be prosecuted as  the amount involved is less than rupees one  lakh and there is no mandatory sentence of imprisonment and the   prescribed punishment is imprisonment for a term which may extend  to three years  or with fine or with both.    It is also pertinent to note  that the object of the  amendment was to  have  more stringent  provisions where the amount involved in the offence is more than  rupees one lakh.   It is not reasonably possible to assume that     amendment to the Section was carried out to give immunity to  corporate bodies from prosecution for serious offences.    The scheme  of the Indian Penal Code also would show that for serious and graver   offences,  mandatory sentence of imprisonment is prescribed and for  less serious offences the court is given a discretionary power of  imprisonment or fine.     

In the case of penal code offences,  for example under Section  420 of the Indian Penal Code,  for cheating and dishonestly inducing  delivery of property, the punishment prescribed is imprisonment of  either description for a term which may extend to seven years and  shall also be liable to fine;  and for the offence under Section 417,   that is, simple cheating, the punishment prescribed is imprisonment of  either description for a   term  which may extend to one year or with  fine or with both.    If the appellants’ plea is accepted  that for the  offence under Section 417 IPC,  which is an offence of minor nature,  a  company could be prosecuted and punished with fine  whereas  for the  offence under Section 420,  which is an  aggravated form of cheating  by which the victim is dishonestly induced to deliver property, the  company cannot be prosecuted as there is a mandatory   sentence of  imprisonment.

       So also there are several other offences  in the Indian Penal  Code which describe offences of serious nature  whereunder a  corporate body  also may be found guilty,   and the punishment   prescribed is  mandatory custodial sentence.    There are series of  other offences under various statutes  where accused are also liable to  punished with custodial sentence and fine.

       The contention of the appellants is that when an offence is  punishable with imprisonment and fine, the court  is not left with any  discretion to impose any one of them and consequently the company  being a juristic person cannot be prosecuted for the offence for which  custodial sentence is the mandatory punishment.    If the custodial  sentence is the only punishment prescribed for the offence, this plea is  acceptable, but when the custodial sentence and fine are  the prescribed  mode of punishment, the court can impose the sentence of fine on  a  company which is found guilty as the sentence of imprisonment is  impossible to be carried out.   It is an acceptable legal maxim that law  does not  compel a man to do that which cannot possibly be performed  [impotentia excusat legem]      .  This principle  can be found in  Bennion’s Statutory Interpretation 4th Edn. At page 969.     "All civilized  systems of law import the principle that lex non cogit ad impossibilia\005."    As Patternson, J. said "the law compels no impossibility".   Bennion  discussing about legal impossibility at page 970 states that, "If an  enactment requires what is legally impossible it will be presumed that  Parliament intended it to be modified so as to remove the impossibility  element.   This Court applied the  doctrine of  impossibility of  performance [Lex non cogit ad impossibilia]  in numerous cases  [State of Rajasthan vs. Shamsher Singh, 1985(Supp.) SCC 416;   Special Reference No. 1 of 2002   reported in 2002(8) SCC 237].

       As the company cannot be sentenced to imprisonment, the court  has to  resort to punishment of imposition of  fine which is also a  prescribed punishment.   As per the scheme of  various enactments and  also the Indian Penal Code, mandatory custodial sentence is prescribed

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 20  

for graver offences.  If  the  appellants’ plea is accepted, no company or  corporate bodies could be prosecuted for  the graver offences whereas  they could be prosecuted for minor offences  as the sentence prescribed  therein is custodial sentence or fine.   We do not think that the intention  of the Legislature is to give complete immunity from prosecution to the  corporate bodies for these grave offences.   The offences mentioned  under Section 56(1) of the FERA Act, 1973, namely those under 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, for   which  the minimum sentence of six months’ imprisonment is  prescribed, are serious offences and if committed would have serious  financial consequences  affecting the economy of the country.  All those  offences could be committed by company or corporate bodies.   We do  not think that the legislative intent  is not to prosecute the companies  for these serious offences, if  these offences involve the amount or  value of more than one lakh,   and that they could be prosecuted only  when the offences involve an amount or value less than  one lakh.

       As the company cannot be sentenced to imprisonment, the court   cannot impose that punishment, but when imprisonment and fine is the  prescribed punishment the  court can impose the  punishment  of fine  which could be enforced against the company.   Such a discretion is to  be read into the Section so  far as the  juristic person is concerned.   Of  course, the court cannot exercise the same discretion as regards a  natural person.    Then  the court would not be passing the sentence in  accordance with law.   As regards company, the court can always  impose a sentence of fine and the sentence of imprisonment can be  ignored as it is impossible to be carried out in respect of a company.    This appears to be  the intention of the legislature and we find no  difficulty in construing the statute in such a way.   We do not think that  there is a blanket immunity for any company from any prosecution for  serious offences merely because the prosecution would ultimately entail  a sentence of mandatory imprisonment.  The corporate bodies, such as  a firm or company undertake series of activities that affect the life,  liberty and property of the citizens.   Large scale financial irregularities  are done by various corporations.   The  corporate vehicle now occupies  such a large portion of the industrial, commercial and  sociological  sectors that amenability of the corporation to a criminal law is  essential   to  have a peaceful society with stable economy .

       We hold that there is no immunity to the companies from  prosecution merely because the prosecution is in respect of offences for  which the punishment prescribed is mandatory imprisonment.  We  overrule the views expressed by the majority in Velliappa Textiles on  this point and answer the reference accordingly.  Various other  contentions have been urged in all appeals, including this appeal, they  be posted for hearing before appropriate bench. ===================================================================

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 20  

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. (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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 20  

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.

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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 20  

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  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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 20  

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  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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 20  

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.