# GIRDHARILAL GUPTA & ANR v. D. N. MEHTA, COLLECTOR OF CUSTOMS & ANR

- **Citation:** [1971] 3 S.C.R. 748
- **Court:** Supreme Court of India
- **Decided:** 1970-08-18
- **Case number:** Criminal Appeal Nos. 211 & 212 of 1969
- **Bench:** S. M. Siicri, I. D. DuA
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/girdharilal-gupta-anr-v-d-n-mehta-collector-of-customs-anr-5404
- **Pages:** 14

## Headnote

· Foreit;n Exchange Regulation Act 7 of 1947-Indian currency sought
to be sen~ out of I,ndia in contravention of .s. 8(2) of Act-Officer making
search of accused's premises does not necessarily need to be cowoboratedAccount .1/ips found in search and tt;l/ying with account books are good
evidence-Firm held guilty of contravention of Act-Partner incharge of
business of firm is guilt;y under s. 23C( 1) of Ac~ unless he i;an prove that
the contraventwn of the Act by. the firm took place without his knowledge
and he had exercised diligence to prevent the contravenlion-Review, justi·
fication for-Reduc1ion of sentence in case of vicarious liability, cqnsidera·
lions /ol'.
An air. parcel declared by the consigner to contain rasogol/as and other
edibles was found to contain Rs. 51,000 worth of Indian currency notes.
The parcel was booked to be sent from Calcutta to Hong Kong.
The
consignor's name as given on the parcel was found to be false and on
investigation the suspicion of the customs authorities fell on the ~?pellants
two of whom were partners in a firm, the third being an employee of the
firm.
The office of the firm was searched. Ce!rtain incriminating document> including account slips and cash books of the firm were seized. In
a complaint ftled by the Assistant Collector of Customs against .the appellants and 1heir firm it was alleged that sending out money in Indian currency was prohibited by s. 8(2) of the Foreign &change Regulation 7 of
1947 and any attempt to do the same was punishable under s. 23B of the
Act. The trial court acquitted the appellants but the High Court in appeal
convicted them under s. 23 ( lA). By special leave appeals were filed in
this Court. Judgment was delivered on August 18, 1970. Thereafter
review petition No. 37 of 1970, was filed. A further judgment in respect
of the contention raised therein as to the interplretation of s. 23C(i) was
delivered on February 18. 1971.
HELD : (i) The proposition thaf if an investigating officer conducts a
search bis evidence cannot be relied on unlesi; it is corroborated is a novel
one with no principle or authority to support it. It all depends on the
facts of each case. In the present case there was the corroborative evidence of P.W. 8 who signed the search document and also the entries themselves in the account books and their tallying with the slips. [755 GJ
(ii) There was no _substance in the. argument that the account slips
couhJ not be taken into consideration because thev. were not evidence. These
were part of the things discovered during search and if the entries therein
were carried into the account books there was no reason why they could
not be looked at [755 HJ
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(iii) In the context of--s, 23C(l) a person 'in-charge' must mean that
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the person •hould be in· over all control of the day to day business of the
company or firm. The inference follows from the wording of s. 23C(2).
It mentions director who may be a party to the policy being followed by
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G, L. GUPTA v. D. N. MEHTA (Sikri, J.)
749
a company and yet not be in charge of the business of the company. Further i! mentions manager who usually is in charge of the business not in
over all charge. Similarly the other officers may be in charge of only some
part of the business. (758 G-759 Al
State v. S. P. Bhadani, A.l.R. 1959 Pat. 9, R. K. Khandelwal v.
State [1964] 62 A.L.J. 625 and Public Pro~ecutor v. R. K. Karuppian,
A.LR. 1958 Mad. 183, referred to.
In the present case the appellant G had himself stated that be alone
looked after the affairs of the firm.
This meant that be was in-charge
within the meaning of the section though there may be a manager working
under him (760 C-Dl
·
When a partner in charge. of a business proceeds abroad it does not
mean that he ceased. to be in charge, unless there is evidence that be gave up
charge in favour of another person. Therefore it must be held that the
appellant wa' in charge of the business of the firm within the meaning of
s.

## Text

748
GIRDHARILAL GUPTA & ANR.
v.
D. N. MEHTA, COLLECTOR OF CUSTOMS & ANR.
August 18, 1970 and February 18, 1971
[S. M. SIICRI AND I. D. DuA, JJ.]
· Foreit;n Exchange Regulation Act 7 of 1947-Indian currency sought
to be sen~ out of I,ndia in contravention of .s. 8(2) of Act-Officer making
search of accused's premises does not necessarily need to be cowoboratedAccount .1/ips found in search and tt;l/ying with account books are good
evidence-Firm held guilty of contravention of Act-Partner incharge of
business of firm is guilt;y under s. 23C( 1) of Ac~ unless he i;an prove that
the contraventwn of the Act by. the firm took place without his knowledge
and he had exercised diligence to prevent the contravenlion-Review, justi·
fication for-Reduc1ion of sentence in case of vicarious liability, cqnsidera·
lions /ol'.
An air. parcel declared by the consigner to contain rasogol/as and other
edibles was found to contain Rs. 51,000 worth of Indian currency notes.
The parcel was booked to be sent from Calcutta to Hong Kong.
The
consignor's name as given on the parcel was found to be false and on
investigation the suspicion of the customs authorities fell on the ~?pellants
two of whom were partners in a firm, the third being an employee of the
firm.
The office of the firm was searched. Ce!rtain incriminating document> including account slips and cash books of the firm were seized. In
a complaint ftled by the Assistant Collector of Customs against .the appellants and 1heir firm it was alleged that sending out money in Indian currency was prohibited by s. 8(2) of the Foreign &change Regulation 7 of
1947 and any attempt to do the same was punishable under s. 23B of the
Act. The trial court acquitted the appellants but the High Court in appeal
convicted them under s. 23 ( lA). By special leave appeals were filed in
this Court. Judgment was delivered on August 18, 1970. Thereafter
review petition No. 37 of 1970, was filed. A further judgment in respect
of the contention raised therein as to the interplretation of s. 23C(i) was
delivered on February 18. 1971.
HELD : (i) The proposition thaf if an investigating officer conducts a
search bis evidence cannot be relied on unlesi; it is corroborated is a novel
one with no principle or authority to support it. It all depends on the
facts of each case. In the present case there was the corroborative evidence of P.W. 8 who signed the search document and also the entries themselves in the account books and their tallying with the slips. [755 GJ
(ii) There was no _substance in the. argument that the account slips
couhJ not be taken into consideration because thev. were not evidence. These
were part of the things discovered during search and if the entries therein
were carried into the account books there was no reason why they could
not be looked at [755 HJ
A
B
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D
E
F
G
(iii) In the context of--s, 23C(l) a person 'in-charge' must mean that
H
the person •hould be in· over all control of the day to day business of the
company or firm. The inference follows from the wording of s. 23C(2).
It mentions director who may be a party to the policy being followed by
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G, L. GUPTA v. D. N. MEHTA (Sikri, J.)
749
a company and yet not be in charge of the business of the company. Further i! mentions manager who usually is in charge of the business not in
over all charge. Similarly the other officers may be in charge of only some
part of the business. (758 G-759 Al
State v. S. P. Bhadani, A.l.R. 1959 Pat. 9, R. K. Khandelwal v.
State [1964] 62 A.L.J. 625 and Public Pro~ecutor v. R. K. Karuppian,
A.LR. 1958 Mad. 183, referred to.
In the present case the appellant G had himself stated that be alone
looked after the affairs of the firm.
This meant that be was in-charge
within the meaning of the section though there may be a manager working
under him (760 C-Dl
·
When a partner in charge. of a business proceeds abroad it does not
mean that he ceased. to be in charge, unless there is evidence that be gave up
charge in favour of another person. Therefore it must be held that the
appellant wa' in charge of the business of the firm within the meaning of
s. 23C(l). [760 E-F] .•
In view of the fact that G was abroad at the time of contravention
it was pos'1ble that the contravention took place without bis knowledge or
lack of diligence. He was being vicariously punished. In such a case a
sentence of imprisonment may not be imposed but a sentence of fine only
would meet the ends of justice. [760 Gl
(iv) As regards appellant P the prosecution bad been unable to prove
by any reliable evidence that he took any active part in the conduct of
the business of the firm. He must therefolre be given the benefit of doubt
and acquitted. [757 Al
(v) The case was fit for review because at the time of arguments the
attention of the court was not drawn specifically to sub-s. 23C(2) and lho
light it throws on the interpretation of sub-s.(1). (76_1 Al
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal Nos.
211 & 212 of 1969 and Review Petitio.n No. 37 of 1970.
Appeals by Special leave from the judgment of the Calcutta
High .Court dated August 18, 1969 in. Criminal Appeal No. 183
of 1961.
by
C. K. Daphtary and S. K. Dholakia, for the petitiooer.
V. A. Seyid Muhammad and S. P. Nayar, for the respondents.
The Judgment of the Court on August 18, 1970 was delivered
Sikri, J. These appeals; by special leave, are directed
against the judgment of the High Coum at Calcutta whereby
the High Court (A. K. Das and K. K. Mitra, JJ.)
set aside
the order of acuittal and convicted the appellants before us
under s. 23(1A) of the Foreign Exchange Regulation Act -(VIl
of 194 7 )-hereinafter refered to as the Act. The apellant
GirdJ.i.arilal Gupta, ood the appellant Puranmall Jain, were sentenced to rigorous imprisonment for six months each and to pw
750
SUPREME COURT REPORTS
[1971] 3 S.C.R.
:a fine of Rs. 2,000/- each, in default, to rigorous imprisonment
for a further period of three months each.
The appel!an·t,
Bhagwandeo Tewari was sentenced to
rigorous
imprisonment
for three months and to pay a fine of Rs. 1,000/-, in default.
to rigorous imprisonment for two months.
The firm was sentenced to pay a fine of Rs. 2,000/-. It does not appear that any
special leave was obtained on behalf of the firm.
In order to appreciate the contentions made before us it is
ncessary to state the relevant fac_ts.
On October 25,
1958,
Customs ,Preventive Officer B. Roy examined a parcel (wooden
•case) which purported to contain Raso go/la, A char, papar and
dried vegetable, bookeci for Hongkong, to be taken. by the Swiss
Air of which the Indian Airlines Corporation was
the
.cargo handling agent.
The articles had been declared to be
worth Rs. 20/- but the freight which had beein paid came to Rs.
127.73 nP.
This excited the suspicion of the Customs Preventive Officer, B. Roy, and on opening the parcel and breaking
·down the case, five hundred ten currency notes of the denomination of hundred rupe<~s each, valuing
Rs. 51,000/-,
were
found. · The name of the consignor was Ramghawan Singh at
Karnani Mansion, Park Street, Calcutta, but on enquiry
no
trace could be found of this Ramghawan Singh at Karnani
Mansion.
In the course of further investigation suspicion fell
-on M/s. Agarwala Trading Corporation of which the appellants
Girdharilal Gupta and F urnanmall Jain were the partn·~rs and
the appellant Bhagwandeo Tewri wes an employee. On January
22, 1959, the office of the firm at 191, Mahatma Gandhi Road
and the alleged residence of the
partners
at
11-B
Jatindra
Mohan Avenue was ~earched.
The
appellant,
Bhagwandeo
Tewari, on being identified by the Traffic
Assistant of
the
Indian Airlines Corporation, Ambar Nath Sen,
P .W. 4,
and
.one loader of Thai Airways, S. K. Battu, P .W. 26, was arrested.
~ertain incriminating documents, including account
slips
and
cash books of the firm were seized.
On June 3, 1959, a complaint was !odgr.d at the instance
of the Assistant Collector of Customs, Calcutta.
After stating
the above facts it was alleged in the complaint that sending
out money in Indian currency was prohibited under s. 8(2) of
'the Act and any attempt to do the same was punishable under
s. 23B of the Act.
At the trial a number of witnesses were examined.
B. Roy.
Customs Preventive Officer. gave evide,nce
regarding the discovery of Rs. 5,1,000/- in Indian currency notes,
apart from
Rasogo/las, pickles, etc. on
October 25,
1958.
No
cross-
·examination was directed to show that this did not happen on
Gctober 25, 1958.
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G. L. GUPTA V. D. N. MEHTA (Sikri, /.)
7~1
S. A. D. Moira, Traffic Assistant of the
Indian Airlines
Corporation, P.W. 2, who checks freight and does other. transhipment work in course of his duties at Dum Dum au-port,
deposed that he received the relevant documents on · October
25 1958 from Calcutta office.
Re said that the
documents
we~e in the handwriting of N. Sen of the Freight Section of the
Calcutta Office.
Armed with the letter of authority, he took
the parcel to the Customs Officer and P.W. 1; B. Roy, asked
him to open the parcel iind currency notes of the value of Rs.
51,000/-, along with other things were discovered.
R. R. Mukherjee, Traffic Officer of the Indian Airlines
Corporation, P.W. 3, ·is another witness to the recovery of the
currency notes.
P.W. 4, Ambare, Nath Sen, was the Traffic
Assistant in the Indian Airlill'~s Corporation, who had typed
out the consignment note in respect of this parcel after seeing
the shipping bill (Ext. 1 ) . He identified the appellant, Bhagwandeo Tewari, as the person who had handed over the shipping
bill to him and the letter of authority, Ext. 11.
He said that
he calculated the freight and received the freight, from this
appellant.
He further said that this appellant signed the consignment notes in Hindi in his presence and he remembered, having seen this appellant writing a postcard on the adjoining
table while he was preparing the consignment notes.
He further stated rhat his immediate superior officer, P. K. ~hatterjee,
was also present at the time this consignment was being booked.
Apparently this is not the first time that his appellant had
gone to the Indian Airlines Corporation becatise P. W. 4 says
that seven days ahead of October 24, 1958, this appellant had
called on him with another shipment although that consignment
was booked by P. K. Chatterji.
Some days after October 25, 1958, this witness-P.W. 4--
was taken by the Customs Officer to some place to find the man
who is alleged to have booked the parcel. Two or three months
thereafter he was again taken by the Customs Officers to another place in Burrabazar area, which was the place of Agarwal
Trading Co¢oration, and he said that he pointed
out
the
G
appellant, Bhagwandeo Tiwari, as the one who had taken the
parcel to him on October 24, 1958.
He was cross-examined
in order to show that be could not remember customers.
He
admitted that it was not always possible for him to remember
all the men who came in contact with him in the course of his
work, but he said that be had told C. R. Basu who was inH
vestiga!ing the case that the person who brought the parcel was
an old1&h man i:md lean one, and had also described his nose.
He further a~tt~ that at the place he
identified appellant
Bbagwandeo T1wan, he was the only oldish man there.
He
4-Ll IOOSupCim
.
~""---
752
SUPREME COURT REPORTS
[1971] 3 S.C.R.
·Said that he did not think that he committed a mistake unless
the man he identified had a double in the shape of a
twin
brother and the like.
He further admitted that he had been try·
ing to recollect the appearance of the man to reconstruct in his
mind the outline of his appearance as far as he could.
A
· The evidence of P .W. 4 impresses us and there is no reason
B
why we should not place reliance on his evidence.
P. K. Chatterjee, P.W. 5, speaks .of the earlier visit of the
appellant Bhagwandeo Tiwari as the person who called on him
with the shipping bill on October 17, 1958.
C. R. Basu, P.W. 6, Officer of the Customs who investigated
the case, said that after making .enquiries he applied for the
issue of search warrant to search the premises No. 191, Maha·
tama Gandhi Road.
He also applied for a search warrant to
search the premises of the partners of the finn at ll·B, Jatindra
Mohan Avenue.
He did not himself search
11-B, Jatindra
Mohan A venue, but went to e~cute the search warrant at 191,
Mahatma Gandhi Road, where on the identification of P.W. 4
he arrested the appellant Bhagwandeo Tiwari.
He then conducted the search of the premises in the presence of the witnesses
and took into possession one Rokar, one khata bahi. on-~ naka/
bahi, the attendance register and three account slips which he
marked ~, 9 and 10 (Ext. 9 and 9/1 and 9/2 respectively).
We may reproduce his evidence regarding the discovery of these
account slips because a great deal of argument has h~en addressed to us on the recovery of these slips. He stated :
"The three slips, about which I have spoken just
now, are in the same condition to-day as I found them
on the day when they were seized.
The witnesses to
the search I conducted are Radhesyam Gupta and
Lalit Kumar Chandu Lal Parekh.
Here is the search
list over my signature and the signature of the witnesses. (Ext. 10)."
In his cross-examined he stated :
"You are right that EXhibits 9, 9 / J and 9 /2 are
included in Serial No. 3 8 of the search list. Ext. 10".
The search list does not mention the slips separately but only
mentions loose sheets in a sealed parcel.
It has
been
urged
that ther'e is no evidence to show when the seal was opened.
It is suggested that these slips have been fabricated and planted.
No such question was put
to
the
witnesses
and
we
are
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G. fl... GtlPl'A v. D. N. MEHTA (Sikri, /,)
753
unable te presume that the investigating officer would go about
fabricating account slips in order to rope in the appellants.
The prosecution produced two witnesses who
had signed
the recovery list.
The evidence of Radheshyam Gupta, P.W. 7,
must be discarded because although he was examined before the
Chief Presidency Magistrate he was not made
available
for
cross-examination.
The learned 'counsel,
Mr.
Bhattacharya,
suggested that if this witness had been produced for crossexamination he would have deposed against the prosecution.
We
a:i:e
unable
to
draw
any such presumption.
The
other witness was Lalit C. L. Parekh, P.W. 8.
He had signed
the search list but on cross-examination he stated that "Basu
had taken siips of paper from the 'Aga\ Bagal' of the guddy,
by which I mean from under,neath the Takia on the bed".
He
futther said that ''bits of paper Basu found from a wooden case
as well."
He further stated as follows :
"You are right that Basu placed all these bits of
papers at one and the same place. How many pieces ?
I cannot say.
I did not count.
By guess I can say
that the number of bits of paper would run to 50 or
60. I signed all the pieces of paper which were found
n"
.
The learned counsel fastens on the last line and says that
these slips do not bear the signature of Lalit C. L. Parekh,
and therefore it is clear that these have been fabricated later.
We are unable to sustain this contention. The witness had
signed a number of documents including the search list and he
may well have thought that 'he had signed every piece. of paper
which was seized.
No such question was put to the investigating officer.
P.W. 11, N. R. Paul, who was the assistant attached to the
Appraising Department
of the Calcutta Customs deposed regarding the preparation of the shipping bill.
It appears
that
th~ shipping bill bore the words "Thai Airways Co." and these
words were scored out and "Swiss Air" written in hand.
He
could not
say who corrected the . entry but nothing turns on
this because it may be that the original idea was to
send the
parcel by Thai Airways but later on for some reasons it was
not possible
to send that parcel through
this airways.
The
prosecution led evidence to show that as a matter of fact appellant Bhagwandeo Tiwari had approached some body in Thai
Airways but we need not dwell on this part of the case.
754
SUPREME COURT REPORTS
(1971] 3 S.C.R.
The prosecution also produced Shri.dh.ar Chatterjee, handwriting expert, who examined the signa;ture reading as "Ram
Chandra" writing in Hindi and in pencil in the two way bills,
Ext. 3 and 4, and the specimen writing. He was of the opinion
that the writer of the specimen writing was the writer of the
signature "~am Chandra" appearing in the airway bill.
We
may mention that !lhagwandeo Tiwari is alleged to have signed as "Ram Chandra". The expert also gave the opinion that
the type-written papers, Exts. II aind IX had been typed on the
same machine.
Exhibit 9 /2, one of the seized account slips, is a very important document.
The official translation is
printed in the
records and reads:
''Translation
of EXT.9/2
dated
24-10-58
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A/C 1 -
In Cash (Paper Torn) cases bound
(Pettis)(?) .
2/8/-
4 cases-Godown
/8/-
3 "opened below and
goods brought.
D
(Paper torn) Cases (Pettis)
ble)2 R.B.
(Illegi-
/4/-
Case 'I' (Iilegible)
/2/-
Illegible
-/15/-
for coming
and
goin;i
to I.A.c.
Rs.223/8/-
4/5/-
127/73-Hongkong
Shanghai (torn
&
E
illegible)"
The High Court had to translate it agab and the last line was
translated into "Hongkong Lagaya" in place of "Hongkong
Shanghai".
In the account books of M/s. Agarwala Trading Corporation
(Exts. 21 and 21/1) under the entries dated October 24, 19S8,
on which date the booking is alleged by the prosecution to have
been done, on entry appears a5 follows:
·
''Rs. 4/S/· Through Bhagwan Deo
-f8/- Colli (Janka)
-I 15/- Rickshaw fare
2/14/~Cart Charge
Rs. 1/8/- Through Ghanshyam & Pandey
-/4/- Bus fair
1/4/- Bus Tram"
It will be noticed that the same itetlfs appear in Ext. 9(2). The
breakup in Ex. 9 ( 2) is slightly dilferent but in 'lhe account bl>ell;
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G. L. GUPTA v. D. N. MEHTA (Sikri, ].)
755
A.
the four annas and two annas entries have been added to Rs. 2/8/·
to make Rs. 2/14/- as cart charge.
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Again the entries in Ext. 9 /I are as follows :
"/ 1 / - But hire for going home.
I/ 4 / - Carne from home to Thai (?) Taxi
-/ 12/- Rij<:sha-hire from Thai
-/1/- Coolie
·
-/4/- Thai Office Colie
2/6/-.
Rs. 147/10/- In Cash"
The corresponding entry in the account books are as follows :
"Rs. 2/6/- (Bus fare -/1/-
Taxi fare
Rs. 1/4/- Rickshaw
Rs. -/12/-
Cooli -/5/-"
It is true that the entry of Rs. 127 /73 which exists in Ext. 9 /2
has not been carried over into the account books but perhaps that
would have been even too much for an accountant to do.
He
never dreamt that these entries of Rs. 4/5/- and Rs. 2/6/- in the
account books would be seized upon by the prosecution to comE
plete the case against the appellants.
Be that as it may, the entries in the account books demolish
the case of defence that these slips were fabricated and that they
had nothing to do with the firm.
Ex. 9 /2, on the other hand,
clearly shows that somebody had gone to the l.A.C. office and
F
paid -/15/- for going and coming to the l.A.C. office and paid
the incidental charges.
H
Mr. Bhattacharya, who followed Mr. Chagla for the appellants,
contends that a serious question of law is . involved, the question
being that if an investigatmg officer conducts a search his evidence
cannot be relied on unless it is corroborated.
It is a novel pro·
position and he has not been able to cite any authority or principle in support of it.
It all depends on the facts in each case.
At any rate, here we have the corroborative evidence of P.W. 8,
who signed the search document and also the entries themselves
in the account books and their tallying with the slips.
It was urged on behalf of the defence counsel that these slips
could not be taken into consider;ttion at all because they are not
evi-dence.
We are unable to ap:preciate why they are not evidence. These are part of the things discovered during search and
756
SUPREME COURT REPORTS·
(1971J3 S.C.R.
if the entries therein are carried into the account books there is
no reason why these things could not be looked at.
The learned counsel has taken us through the judgments of
the Chief Presidency Magi~!rate and the High Court.
We are in
agreement with the conclusions arrived at by the High Court. We
have ourselves gone into the evidence as the High Court had
reversed the order of acquittal and in one or two ph1ces made
minor mistakes.
·Mr. Chagla, while arguing on behalf of the partners, said that
there was evidence that one partner was not in Calcutta on the
24th or 25th October, 1958, as he was in Japan.
But even if we
take this fact into consideration, which fact was not brought to the
notice of the Chief Presidency Magistrate or the High Court, it
does not help him at all. Entries were made illl the account books
and it was the firm's mone J which was spent and he being an
active partner is clearly liable under s. 23C(l} of the Act which
read~:
"23C(l) If the person committing a contravention
is a company, every person who, at the time the c0ntravention was committed, was in-charge of, and was responsible to, tile company for the conduct of the business
of the company as well as the company, shall be deemed
to be guilty of the contravention and shall be liable to
be proceeded against and punished accordingly;
Provided that nothing contained in this sub-section
shall render any such person liable to punishment if he
proves that the contravention took place without his
knowledge or that he exercised all due diligence to· preA
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vent such contravention."
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This sub-section deems the appellant Girdhah Lal Gupta guilty.
The question is : Has he proved that the contravention took place
without his knowledge and he exercised due diligence to prevent
such contravention ? What he said in his statement under s. 342,
Cr.P.C., was that he alone looks after the affairs of the firm. There
is also no evidence to show that the contravention took place
G
without his knowledge or that he exercised due diligence to prevent such contravention.
The entries were there in his account
books and the only thing that he had to say about these entries in
his account books is that they pertain to the routine work of the
firm.
Under the circumstances we are unable to exonerate him
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As far as the other partner, Puranmall Jain, is concerned, he
stated that he does not look after the affairs of the firm and further
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G. L. GUPTA V. D. N. MEHTA (Sikri, J.)
757
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that he stays all along at Sriganganagar in Rajasthan and does not
stay in Calcutta. The prosecution has not led· any reliable evidence to prove that he took any active part in the _conduct of the
business of the firm.
In these circumstances we are inclined to
give him the benefit of doubt and acquit him.
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In the result the appeal of Puranmall Jain is allowed and he
is acquitted of the charge.
His bail bond shall' stand cancelled.
The appeals of Girdhari Lal and Bhagwandeo Tewari are
dismissed.
[After the above judgment was delivered Review Petition No.
37 of 1970 was filed.
The judgment .Jf the Court thereon was
delivered on February 18, 1971 by]
Sikri, C.J. We disposed of Criminal Appeals Nos. 211 and
212 of 1959 by our judgment dated August 18, 1970, whereby
the appeals of Girdharilal Gupta, and Bhagwandeo Tewari against
their convictions were dismissed.
Girdharilal Gupta put in this
review petition stating that the counsel had omitted to ~ing to our
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notice the provisions of s. 23C(2) of the Foreign Exchange Regulation Act, 194 7-hereinafter referred to as the Act-which has
a vital bearing on. the case. The judgment in Criminal Appeal
No. 211 of 1959 has, therefore, been re-opened.
We may mention that Bhagwandeo Tiwari.has noUiled a review petition against
his conviction, upheld by this Court.
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Mr. Daphtary contends that on the facts, as found by us, the
appellant, Girdhari Lal Gupta, does not come within the purview
of s. 23C ( 1 ) or s. 23C ( 2) of the Act.
Sections 23C ( 1) and
23C(2) read as follows :
/
"23C. ( 1) . 1f the· person committing a contravention is a company, every person who, at the time the
contravention was committed, was in-charge of, and was
responsible to, the company for the conduct of the business of the company as well as the company, shall be·
deemed to be guilty of the contravention and shall be
liable to be proceeded against and punished accordingly :
Provided that nothing contained in this sub-section
shall render any such person liable to purushment if he
proves that tpe contravention took place without his
knowledge or that he exercised alI due diligence to
prevent such contravention.
23C. (2) Notwithstanding anythiQg ~nfained in
sub-section ( 1), where a contravention under this Act
has been committed by a company and it is proved that
the contravention has taken place with the consent or
connivance of, or is attributable to any neglect on the
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SUPREME COURT REPORTS
[1971] 3 S.C.R.
part of, any director, manager, secretary or other officer
of the 'company, such director, manager, secretary or
other officer shall also be deemed to be guilty of thai
offence and shall be Jiable to be proceeded against anti
punished accordingly.
Explanation.-For the purposes of this section,-
( a) "company" means any
body
corporate and
includes a firm or other association of individuals;
and
(b) "director", in relation to a firm, means a partner
in the firm.
Mr. Daphtary contends that there is no evidence to show that
the appellant was in charge of the conduct of the business of the
firm at th~ relevant time and therefore, s. 23C (I) does not apply.
He further says that as the appeilant was abroad, the contravention took place without his kJ!lowledge.
We may mention, however, that the defence that he was abroad at the relevant time was
not taken in the cou'rts below.
At the time of the last hearing
learned counsel produced the passport of the appellant before us
from which it appears that he was abroad at that time and came
back a few days after the aJleged c?111travention.
Mr. Daphtary further contends that s. 23C ( 2) also does not
apply because there is no evidence that the contravention took
place with the consent or conniv<11nce of, or was attributable to any
neglect on the part of, the appellant.
He referred to us a number
of authorities of the High Courts in India which have interpreted
similar provisions and we shall refer to them later.
It seems to us quite clear that s. 23C (I) is a highly penal
section as it makes a person who was in-charge and responsible
to the company for the condu.:t of its business vicariously liable
for an offence committed by the company. Therefore, in accordance with well-settled principles this section should be construed
strictly.
What then does the expression "a person in-charge ::.nd responsible for the conduct of the affairs of a company mean" ? It will
be noticed that the word 'company• includes a firm or other association and the same test must apply to a director i\[l-charge and
a partner of a firm in-charge of a business.
It seems to us that
in the context a person 'in-charge' must mean that the person
should be in over all control of the day to day business of the
oompany or firm.
This inference follows from the wording of
s. 23C(2).
It mentions director; who may be a party to the
policy being followed by a company and yet not be in-charge of
die business of the company.
Further it mentions manager, who
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G. L. GUPTA V. D. N. MEHTA (Sikri, J.)
759
wually is in charge of the business but not in over-all-charge.
Similarly the other officers may be in charge of only some part ol'
business.
In State v. S. P. Bhadani(' ), Kanhaiya Singh, J., in construing
a similar provision of the Employees Provident fund Act (1952) .
B
Section l 4A-held that the first sub-section would be confined
only to officers in the immediate charge of the management of the
company.
Later he observed that "it is, therefore, manifest that
all the officers of the company not in direct charge of the management of the business are immune from the liability for the offence,
unless they have contributed to its commission by consent, cone nivance or neglect."
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In R. K. Khande/wa/ v. State('), D.S. Mathur, J., in construing s. 27 of the Drugs Act, 1940, a provision similar to the one
we are concerned with, observed :
"There can be directors who merely lay down the
policy and are not concerned with the day to day working ol the Company.
Consequently, the mere fact that
the accused person is a partner or director of the Company, shall not make him criminally liable for the offences
committed by the Company unless the other ingredients
are established which make him criminally liable."
In The Public Prosecutor
v.
R. Karuppian('), Somasundaram, J., while dealing with a case arisiing under the Prevention
of Food Adulteration Act, 1954 (s. 17(1)) observed that the
Secretary of the Co-operative Milk Society, on the facts of the
case, could not be held to be a person in charge of the Society.
On the facts of that case the business of selling milk was done
by the clerk of the Society and the Secretary was only an honorary
Secretary and was not comin,e: to the Society daily.
The only evidence led by the prosecution ou this part of the
case was of one Sohan Lal Gupta who is a broker. He stated in
examination-in-chief :
"Who exactly the proprietors of 'the said firm are. I
cannot say.
But I can say this much that whenever I
had been there I was referred to
Girdharilal
Gupta
(accused No. 2) and Puranmal Jain (accused No. 3) as
the Maliks of the firm. I see accused No. 2 Girdharilal
Gupta in court (identified him).. I know t.hat Bhagwandeo Tewari (accused No. 4) ts the Cas111er of that
firm.
I see him here in court (identifies accused No. 4).
(1) A.1.R. [19591 Pat.9.
(!) 1191\4] ~~ A.l.J. 1:~.
(3) A.1.R.11os~1Mad.1n
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SUPREME COURT REPORTS
[1971] 3 S.C.R.
I know of another employee of the firm; the manager,
Jagdish Prasad. I know another employee of the firm :
the acco11:I1tant, Shyamlal."
.
The appelhμ1t in his statement under s. 342, Cr.P .C. stated
thus:
"You ask me, Sir, if I have to say anyt!Wig about.
the evidence led in this case to the effect that ~ happen.
to be a partner of accused No. 1 firm.
To that, Sir, my
answer is that I am.
The evidence to that end is correct.
I shall only add that I alone look after the affairs
of this firm."
Mr: D\lphtary says that on this evidence it cannot be held that
the appellant was in-charge of the conduct of the business.
We
are unable to agree with him on this point. The appellant has
himself stated that he alone looked after th.e affairs of the firm.
This means that he is in charge of the business of the firm within
the meaning of the section though there may be a Manager working under him.
The question then arises whether the appellant was in charge
of the conduct of the business of the firm at the time the contravention
was
committed.
He was not physically. present in
Calcutta at the time of the commission of the offence and the
prosecution evidence shows that one Jagdish Prasad was
the
manager of the firm.
It ·is true that the onus of proving that the
appellant was in charge of the conduct of the business of the
company at the time the contravention took place lies on the
Prosecution, but when a partner in charge of a business proceeds
abroad it does not mean that he ceases to be in charge, unless there
is evidence that he gave up .charge in favour of another person.
Therefore, we must hold· that the appellant was in charge of the
business of the firm within the meaning of sec. 23C ( 1).
But while imposing sentence a Court might take notice of the
fact that a person is being vicarious!~ punished for an offence and
if he shows that it is possible that ihe contravention of the Act
took place without his knowledge or neglect a sentence of imprisonment may not be imposed.
In this case he was abroad at the
time of contravention and it is possible that the contravention took
place without his knowledge or because of lack of diligence. It
seems to us that on the facts of this case a sentence of fine of
Rs. 2,000/- wi!J meet the ends of justice.
·
The learned counsel for the respondent State urges that this
is not a case fit for review because it is only a case of mistaken
judgment.
But we are unable to agree
with this submission
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0, L. GUPTA v. D, N, MEHTA (Sikri, /.)
761
because at the time of the arguments our attention was not drawn
specifically to sub-s. 23C ( 2) and the light it throws on the interpretation of sub-s. ( 1 ) .
In the result the review petition is partly allowed
and the
judgment of this Court in Criminal Appeal No. 211
of 1969
modified to the extent that the sentence of six months' rigorous
imprisonment imposed on Girdharilal is set aside.
The sentence
of fine of Rs. 2,000/- shall, however, stand.
G.C.
Ordered accordingly.