# I -' STANDARD CHARTERED BANK AND ORS. ETC v. DIRECTORATE OF ENFORCEMENT AND ORS. ETC

- **Citation:** [2005] Supp. 1 S.C.R. 49
- **Court:** Supreme Court of India
- **Decided:** 2005-05-05
- **Case number:** Civil Appeal No. 1748of1999
- **Bench:** N. Santosh Hegde, K.G. Balakrishnan, D.M. B Dharmadhikari, Arun Kumar, B.N. Srikrishna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/i-standard-chartered-bank-and-ors-etc-v-directorate-of-enforcement-and-ors-etc-20769
- **Pages:** 42

## Headnote

Company Laws:
Corporate criminal liability-Offence by Company or Corporate body- C
Punishable with mandatory sentence of imprisonment coupled with fineProsecution under-Held: When statute provides for imprisonment and fine
for offence by Company, even though Company being juristic person cannot
be sentenced to imprisonment, Court can impose punishment of fine-Company
is not immuned from any prosecution for serious offence-Such discretion can D
be read into statute-Foreign Exchange Regulation Act, I 97 3-Section 56(1 )(i).
Doctrine of impossibility of performance-Maxim-Lex non cogit ad
impossibilia-Applicability of-Interpretation of Statutes.
Appellant-Company were issued notices for prosecution under
Section 56 of the Foreign Exchange Regulation Act, 1973. Appellants E
contended that being a company no criminal action can be initiated against
them under Section 56 because the section prescribes a minimum sentence
of imprisonment and fine, and a company cannot be imprisoned. The
question which arose for consideration was whether Company or
Corporate body being a juristic person could be prosecuted for offence F
for which mandatory punishment prescribed is imprisonment and fine.
In appeal before the three-Judge-bench of this Court, the Bench
doubted the correctness of Assistant Commissioner, Assessment-11 Bangalore
and Ors. v. Velliappa Textiles Ltd and Anr's case which held that company
cannot be prosecuted for offences for which mandatory sentence is G
imprisonment coupled with fine; and as the Company cannot be
imprisoned being artificial person, the Court cannot impose only fine; and
referred the matter for reconsideration of the correctness of the view
expressed by the majority in Velliappa's case before the present
Constitution Bench.
49
H
-A
50
SUPREME COURT REPORTS [2005] SUPP. I S.C.R.
Answering the reference, the Court
Per Balakrishnan, J. :
HELD: 1.1. There is no blanket immunity for any Company from
any prosecution merely because the prosecution is in respect of offences
B for which the punishment prescribed is mandatory imprisonment. 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
C section 56(1) of Foreign Exchange Regulation Act, 1973 so far as the
juristic person is concerned. This is the intention of the legislature and
there is no difficulty in construing the statute in such a way. 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.
D
(72-H; 73-A; 72-F, G]
Assistant Commissioner, Assessment-II Bangalore and Ors. v. Yelliappa
Textiles Ltd. and Anr., (2003] 11 SCC 405, overruled.
State of Maharash~ra v. Syndicate Transport, (1963) jlom. L;R. 197;
Kusum products Limited v. S.K. Sinha, ITO, Central Circle~}(, Calcutta 126
E ITR.804 . .(19.$0); Badsha v. lncY,me Tax Officer, (1987) 1 K.L.T. 1J2; P. V.
F
Pai v. R.L. Rinawma, Dy. Commissioner, Income Tax, (1993) 2 Comp_. LJ.
314 (K-arn.); State of Mahara~htra v. Jugamander Lal, AI,R (1_966)SC 940;
Delhi Municipality v. J.B. Bottling Comp{Jny, (1975) Crl. LJ. 1148 and Oswal
Vanaspati and,A(!ied Industries v. Stat~ of Uttar Pr.,adesh, (1993) 1. Co~p.
J,-.J.-172 (All.), rel_'erred to.
United Stales v. Union Supply Company, 54 Law. Ed. 87, referred to.
..
2.1. A company is liable. to be prosecuted and punished for criminal
offences. Although there are· earlier authorities to the effect that
corporations camioi commit a crime, the generally accepted modern rule
G 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. (6

## Text

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"i
I
I -'
STANDARD CHARTERED BANK AND ORS. ETC.
A
v.
DIRECTORATE OF ENFORCEMENT AND ORS. ETC.
MAY 5, 2005
[N. SANTOSH HEGDE, K.G. BALAKRISHNAN, D.M.
B
DHARMADHIKARI, ARUN KUMAR AND B.N. SRIKRISHNA, JJ.]
Company Laws:
Corporate criminal liability-Offence by Company or Corporate body- C
Punishable with mandatory sentence of imprisonment coupled with fineProsecution under-Held: When statute provides for imprisonment and fine
for offence by Company, even though Company being juristic person cannot
be sentenced to imprisonment, Court can impose punishment of fine-Company
is not immuned from any prosecution for serious offence-Such discretion can D
be read into statute-Foreign Exchange Regulation Act, I 97 3-Section 56(1 )(i).
Doctrine of impossibility of performance-Maxim-Lex non cogit ad
impossibilia-Applicability of-Interpretation of Statutes.
Appellant-Company were issued notices for prosecution under
Section 56 of the Foreign Exchange Regulation Act, 1973. Appellants E
contended that being a company no criminal action can be initiated against
them under Section 56 because the section prescribes a minimum sentence
of imprisonment and fine, and a company cannot be imprisoned. The
question which arose for consideration was whether Company or
Corporate body being a juristic person could be prosecuted for offence F
for which mandatory punishment prescribed is imprisonment and fine.
In appeal before the three-Judge-bench of this Court, the Bench
doubted the correctness of Assistant Commissioner, Assessment-11 Bangalore
and Ors. v. Velliappa Textiles Ltd and Anr's case which held that company
cannot be prosecuted for offences for which mandatory sentence is G
imprisonment coupled with fine; and as the Company cannot be
imprisoned being artificial person, the Court cannot impose only fine; and
referred the matter for reconsideration of the correctness of the view
expressed by the majority in Velliappa's case before the present
Constitution Bench.
49
H
-A
50
SUPREME COURT REPORTS [2005] SUPP. I S.C.R.
Answering the reference, the Court
Per Balakrishnan, J. :
HELD: 1.1. There is no blanket immunity for any Company from
any prosecution merely because the prosecution is in respect of offences
B for which the punishment prescribed is mandatory imprisonment. 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
C section 56(1) of Foreign Exchange Regulation Act, 1973 so far as the
juristic person is concerned. This is the intention of the legislature and
there is no difficulty in construing the statute in such a way. 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.
D
(72-H; 73-A; 72-F, G]
Assistant Commissioner, Assessment-II Bangalore and Ors. v. Yelliappa
Textiles Ltd. and Anr., (2003] 11 SCC 405, overruled.
State of Maharash~ra v. Syndicate Transport, (1963) jlom. L;R. 197;
Kusum products Limited v. S.K. Sinha, ITO, Central Circle~}(, Calcutta 126
E ITR.804 . .(19.$0); Badsha v. lncY,me Tax Officer, (1987) 1 K.L.T. 1J2; P. V.
F
Pai v. R.L. Rinawma, Dy. Commissioner, Income Tax, (1993) 2 Comp_. LJ.
314 (K-arn.); State of Mahara~htra v. Jugamander Lal, AI,R (1_966)SC 940;
Delhi Municipality v. J.B. Bottling Comp{Jny, (1975) Crl. LJ. 1148 and Oswal
Vanaspati and,A(!ied Industries v. Stat~ of Uttar Pr.,adesh, (1993) 1. Co~p.
J,-.J.-172 (All.), rel_'erred to.
United Stales v. Union Supply Company, 54 Law. Ed. 87, referred to.
..
2.1. A company is liable. to be prosecuted and punished for criminal
offences. Although there are· earlier authorities to the effect that
corporations camioi commit a crime, the generally accepted modern rule
G 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. (62-G)
H
2.2. In the case of torts, the general rule prevails that the corporation
)
( .
/""'
,-
•
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STANDARD CHARTERED BANK 1•. DIRECTORATE OF ENFORCEMENT
51
may be criminally liable for the acts of an officer or agent, assumed to be A
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 B
necessarily includes a corporation. (62-H; 63-AJ
2.3. 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 C
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. In the case of absolute
liability where the legislature by the clearest intendment establishes an D
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.
(63-C, D, E, F] E
2.4. 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 F
to be fairly construed according to the Legislative intent as expressed in
the enactment. The distinction between a strict construction and a more
free one has disappeared in modern times and now the question is. what
is the intention of the legislature. [69-F, G, H; 70-BJ
Tolaram Relumal and Anr. v. The State of Bombay, [1955) 1 SCR 158 G
and Girdhari Lal Gupta v. D.H. Mehta and Anr., [1971) 3 SCC 189, referred
to.
Craies on Statute Law 7th Edn., referred to.
2.5. lt is an acceptable legal maxim that law does not compel a man H
52
SUPREME COURT REPORTS [2005] SUPP. 1 S.C.R.
A to do that which cannot possibly be performed-impotentia excusat legem.
All civilized systems of law import the principle-lex non cogit ad
impossibilia. The law compels no impossibility'. 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. [71-G, H; 72-A)
B
State of Rajasthan v. Shamsher Singh, [1985] Supp. SCC 416 and
Special Reference No. 1 of 2002 [2002] 8 SCC 237, relied on.
Bennion 's Statutory Interpretation 4th Edn. p. 969, referred to.
3.1. The corporate bodies, such as a firm or company undertake
C 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
D economy. The offences under Section 56(1) of the Foreign Exchange
Regulation Act, 1973 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.
[73-A, B; 72-D]
E
3.2. 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. There are series of
offences punishable under various statutes and also under IPC whereunder
mandatory custodial sentence is prescribed for graver offences committed
by corporate body. The submission that when an offence is punishable with
F
imprisonment and fine, 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 can not be accepted. If the custodial sentence is the only
punishment prescribed for the offence, the plea is acceptable but when
G the custodial sentence and fine are the prescribed mode of punishment,
the court has to resort to the sentence of fine on a company which is found
guilty as the sentence of imprisonment is impossible to be carried out.
Further, if the appellants' plea is accepted, no company or corporate
bodies could be prosecuted for the graver offences involving the amount
or value of more than one lakh whereas they could be prosecuted for minor
H offences involving an amount or value less than one lakh as the sentence
•
STANDARD CHARTERED BANK"· DIRECTORATE OF ENFORCEMENT
53
prescribed therein is custodial sentence or fine. The intention of the A
Legislature was not to give complete immunity from prosecution to the
corporate bodies for these grave offences. [69-H, G; 71-E, F, G; 72-CJ
Per Dharmadhikari, J (Supplementing):
1.1. Section 56 of the Foreign Exchange Regulation Act, 1973 read B
with the aid of the definition of 'person' in General Clauses Act is
applicable for initiating prosecution and conviction, for breach of the
provisions of the Act, rules, directions or orders made under the Act,
against natural persons as also juristic persons like a Company or a
Corporation. It has to be presumed that the legislature has the knowledge
that a juristic person like company or corporation cannot be punished with C
imprisonment. Therefore, a further presumption has to be raised that the
legislature has the knowledge that in case of offences involving amounts
higher than one lakh of rupees, companies and corporations could be
prosecuted and punished with a sentence which is possible of being
imposed on them. The legislature docs not intend an impossible act of D
imposing minimum sentence of imprisonment on companies and
corporations which are not natural persons. (73-E, F, G, HJ
1.2. The rule of interpretation requiring strict construction of penal
statutes does not warrant a narrow and pedantic construction of a
provision so as to leave loopholes for the offender to escape. A penal statute E.
has to also be so construed as to avoid a lacuna and to suppress mischief
and to advance a remedy in the light of the rule in Heydon 's case. A
commonsense approach for solving a question of applicability of a penal
statute is not ruled out by the rule of strict construction. [74-A, B]
Murlidhar Meghraj Loya v. State of Maharashtra, [1976) 3 SCC 684 F
and State of Andhra Pradesh v. Bathu Prakasa Rao, [1976) 3 SCC 301, relied
on.
Principles of Statutory Interpretation by G. P. Singh 9th Edn p. 754756, referred.
1.3. Section 56 of the Act provides for imposition of minimum G
prescribed sentence of imprisonment wherever possible and also fine. Such
a construction of the provisions of section 56 of the Act to make it workable
cannot be said to be a construction impermissible only because the statute
under construction is a penal statute. Section 56 cannot be so construed
;Ai-...
as to make it ineffective against companies and corporations. Merely H
54
SUPREME COURT REPORTS [2005] SUPP. I S.C.R.
A because there is no specific mention in the section that in the event of
......
breach committed by the companies and corporations, the punishment can
only be in the nature of fine is no ground to read into the provision a fatal
lacuna. The provision which is clearly applicable equally to natural and
juristic persons, if construed reasonably, would .be found workable and
B
capable of fulfilling the object of the Act. [74-E, F, G]
Per Arun Kumar, J (Supplementing):
1. The principle regarding strict construction of penal statutes has
developed only in the context of the provisions in statutes which lay down
c
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. There is no single instance brought to the notice of the Court
about the rule being applied in relation to sentencing part of penal statutes.
D Rather in sentencing courts have always enjoyed a certain amount of
discretion. (76-E; 77-A]
Bairam Kumawat v. Union of India, (2003] 7 SCC 628 and M V. Jawali
v. Mahajan Borewe/l & Co. and Ors., 1977 (8) SCC 72, referred to.
E
'The Interpretation of Statutes' by Maxwell 12th Edn., referred to.
2. The meaning of the word 'person' is to be gathered. This word
has not been defined in the FERA. The definition of the word 'person' is
available in section 11 IPC as well as in section 3 (42) in the General
Clauses Act. Both the definitions are similar and show that the word
F 'person' includes any 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.
[78-D, E]
G
3. The mandate of the provision is quite clear. 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. The principles of strict interpretation of criminal
statutes require that the substantive offences created by the statute which
H does not exclude corporations, should be enforced strictly and anyone
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STANDARD CHARTERED BANK'" DIRECTORATE OF ENFORCEMENT
5 5
rendering itself liable for action under the said section, be it a corporation A
or a natural person, should face prosecution, conviction and sentence.
[78-H; 79-A, B]
4. 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. Sub-section (1) of section 56 B
of the Foreign Exchange Regulation Act, 1973 itself states " .... upon
conviction by a court, be punishable ... ".Thus the section 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 C
conviction. [77-B, C, D]
5. No difficulty arises at the stage of sentencing after a finding of
guilt if the amount involved does not exceed Rs. one lakh. The difficulty
arises only in cases where amount involved exceeds Rs. one lakh. What
follows is that for difficulty in sentencing the offenders as per statute, they D
cannot be allowed to escape prosecution. The Cr.P.C. dealing with trial
of offences contains no provision for exemption of Corporations from
prosecution if there is difficulty in sentencing them as per statute. 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. (79-D 78-B, CJ
E
State of Rajasthan v. Shamsher Singh, (1985) suppl. SCC 416, referred
to.
"Legal Maxims" by Broom, referred to.
6. When the statutory intention was to make the graver offences F
punishable more severely, there is no justification 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 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 G
punishment by way of imprisonment as well as fine. 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 H
56
SUPREME COURT REPORTS [2005] SUPP. I S.C.R.
A regarding bringing to book offenders under the FERA.
179-E, F, G, H; 80-AJ
ANZ Grindlays Bank Ltd. and Ors. v. Directorate of Enforcement and
Ors., 12004) 6 SCC 531, relied on.
B
Per Srikrishna, J (For N. Santosh Hegde; J and himself) (Dissenting):
1.1. 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
C the majority view in Velliappa's case 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, as correct.
Parliament promptly amended section 278B of the Income Tax Act. That
D 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's case. The majority view of this Court
in Velliappa 's case is correct and does not require any consideration.
182-G, H; 83-AJ
E
Assistant Commissioner, Assessment-I! Bangalore and Ors. v. Velliappa
Textiles Ltd and Anr., 12003) 11 SCC 405, upheld.
Bhimaji Shanker Kulkarni v. Dundappa Vithappa Udapudi and Anr.,
119661 1 SCR 145, relied on.
F
2. The maxim 'judicis est just dicere, non dare' best expounds the role
G
of the court. It is to interpret the law, not to make it. If the legislation
falls short of the mark, the Court could do nothing more than to declare
it to be thus, giving its reasons, so that the legislature may take notice and
. promptly remedy the situation. [83-G; 84-A)
3. 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 cannot be accepted. The submission of
purposive interpretation does not appeal when the statute in plain terms
says something. The contention that if the majority view in Ve/liappa 's case
H is upheld, it would be impossible to prosecute a number of offenders in
I ..
STANDARD CHARTERED BANK 1·. DIRECTORATE OF ENFORCEMENT
5 7
several statutes where strict liability has been imposed by the statute, is A
more in terrorem than based on reason. 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'.
f84-B, FJ
Punjab Land Development and Reclamation Corporation Ltd. v. B
Presiding Officer, Labour Court, (1990) 3 SCC 682, referred to.
Seaford Court Estates Ltd v. Asher, (1949] 2 All ER 155 and Magor
and St. Mel/ons R.D. C. v. Newport Corporation, (1951] 2 All ER 839 (HL),
referred to.
4.1. Reading the words "imprisonment and fine" as "imprisonment
or fine" is impermissible. 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
c
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 D
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. E
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.
[85-A, B, CJ
4.2. When a statute says the Court shall impose a term of F
'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. [85-D]
State of Maharashtra v. Jugamander Lal, (1966) 3 SCR 1; Gui Mahmud G
Shah v. Emperor, 40 CrL.J. 1939; Jayaram Vithoba and Anr. v. The State of
Bombay, (1955) 2SCR1049; Jagmohan Singh v. State of U.P., (1973) 1 SCC
20 and Modi Industries Ltd. v. B.C. Goel, (1983) ITR 496 (All), relied on.
4.3. If on the words used by the legislature it is impossible to
effectuate the intention of the legislation, namely, to punish a company to H
58
SUPREME COURT REPORTS [2005) SUPP. I S.C.R.
A imprisonment, it is not possible to read the section in any other manner
to impose any other punishment on the offender. [85-A)
CraHford v. Spoone, [1948) 2 All E.R. 825 and Gll-ynne v. Burnell,
(1840) 7 CI and Fin 572, 696, referred to.
B
Craies on Statute Law, 7th Ed. p. 70-71, referred to.
4.4. The definition of any word 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
C juristic person. [87-A, BJ
Commissioner of Sales Tax v. Union Medical Agency, [ 1981 J 1 SCC
51; Kartick Chandra v. j{arsha M. Dasi, AIR (1943) Cal 35; Edmund N.
Schuster v. Assistant Collector of Customs, New Delhi AIR (1967) Pun 189;
State of Maharashtra v. Syndicate Transport, AIR (1966) 63 Born 197,
D referred to.
Knightsbridge Estates Trust Ltd. v. Byrne and Ors., [ 1940) 2 All ER
401, referred to.
4.5 The maxim 'lex non cogit ad impossibilia', like all maxims, only
E states 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 '/mpotentia excusat legem' apply here
for the same reason. Au contraire, the application of these two maxims
F 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 ~he prescribed punishment. [87-C, DJ
G
Iridium India Telecom Ltd. Special Leave Petition (Cr/.) No.4995 of
2003, referred to.
4.6. The maxim 'ut res magis valeat quam pereat' can be pressed into
service only if it is permissible to extract another reasonable meaning from
the plain words used in the sfatute. There is a difficulty in accepting this
H principle as applicable to the instant case. This principle might enable the
... ,
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ST AND ARD CHARTERED BANK ,._DIRECTORATE OF ENFORCEMENT
5 9
Court to resolve the difficulty in construing a statute so that an A
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. 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 .B
in all situations. Neither this maxim, nor any other maxim, enables a Court
to interpret a statute in different ways under different fact situations.
[88-B, C, D, E]
5. The submission that Cr.P.C. recognises different stages of
cognizance, prosecution, conviction and punishment and that it is open to C
the court to abandon its duty midway without imposition of punishment
on the offender, is without merit. [89-F)
Kartick Chandra v. Harsha M Dasi, AIR (1943) Cal 35; Edmund N.
Schuster v. Assistant Collector of Customs, New Delhi AIR (1967) Pun 189;
State of Maharashtra v. Syndicate Transport, AIR (1966) 63 Born 197, D
referred to.
"The Outlines of Criminal Law by Kenny I 5th edn. 7 3, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1748of1999.
From the Judgment and Order dated 7.11.98 of the Bombay High Court E
in W.P. (C) No. 1972 of 1994.
WITH
C.A. Nos. 1749, I 750, I 75 I, I 944 of 1999, Crl. A. Nos. 685, 684, 688/
2005, 847 and 848 of 2004 and W.P. (Crl.) No. 165 of 2004.
F
P.P. Malhotra, Additional Solicitor General, K.K. Venugopal, Jaideep
Gupta, Ram Jethmalani, Mukul Rohtagi. T.R. Andhvarujina, A.K.Panda, Ashok
H.Desai, U.U. Lalit, C.A. Sundram, S.Balakrishnan, P.S.Mishra, Aspi Chenoy,
Rakesh Dwivedi, Ms. B.Vijayalakshmi Menon, Ms.Indu Malhotra, Ms. Ekta
Kail, Ms. Liz Mathew, Mahesh Jethmalani, V.R. Dhaud, Pranav Badekha, G
E.C.Agrawala, Mahesh Agarwal, Rishi Agrawal, Manu Krishnan, Gourav
Shah, B.R. Malla, U.A. Rana, H.D. Petit, Sadeep Khare!, S. Chatterjee, Santosh
Paul, Rajeev Sharma, Sandeep Chhabara, M.J.Paul, Ms.Radha Rangaswamy,
Ms. Bharti Tyagi, Tarun Kumar, Anand Jha, R.K. Handoo, K.V. Mohan,
~.Ramesh Kumar, N.K. Matta, P. Panneswaran, B. Krishna Prasad, V.K.
Verma, Ms. Ratika Mehrotra, Rajeev, Amit Desai, Jai Munim, Ranjit Shetty, H
60
SUPREME COURT REPORTS [2005] SUPP. I S.C.R.
A R.B. Phookan, Ms. Priya Rao, Ms. Meenakshi Arora, B.Vikas, Mrs. D.Bharathi
Reddy, Anip Sachthey, Ghanshyam Joshi, Sanjiv Kumar Saxena, Partha Sil,
Ms. Mamta Tiwari, Kapil Chaudhary, R.K. Adsure, Mrs. Purnima Bhar Kak,
Gourav Shah, Shyam Diwan, Ashish Chugh, Sudarsh Menon, Jay Kishor
Singh, Subramonium Prasad, D.Srinivas Prasad, Tathagat Harsvardhan, Dhru
Jha, S.Chandra Shekhar, Guntur Prabhakar, Amit Desai, Ranjit Shetty, Ms.
B Priya Rao, Sandeep Narain, Shri Narain, Ms.Anjali Jha, B. Vikas, Pranab
Kumar Mullick, Rajesh Srivastava and Ms. Ruby Singh Ahuja with them for
the appearing parties.
c
The Judgment of the Court was delivered by
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
D 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
E 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 :
F
G
H
"56. Offences and prosecutions - (I) 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 (I) 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
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STANDARD CHARTERED BANK 1·. DIRECTORATE OF ENFORCEMENT (BALAKRJSHNAN, J.] 61
be mentioned in the judgment, impose a sentence of imprisonment A
for a term of less than six months.
(ii) ......
(2) .... ..
(3) .... ..
(4) ..... .
(5) ..... .
(6) ...... "
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
B
c
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 D
in Assistant Commissioner, Assessment-II Bangalore and Ors v. Velliappa
Textiles Ltd and 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 sec 531, the matter has
thus been placed before this Court by the learned Chief Justice of India for E
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 p
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 G
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 manda:ory term of imp1'\sonment H
62
SUPREME COURT REPORTS [2005) SUPP. I S.C.R.
A 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
B which exempts a citizen from penalty than the one which imposes the penalty.
Following the decision in State of Maharashtra v. Jugamander Lal, AIR
(1966) SC 940, it was held that the expression us~d 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
C 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, Shri Andhiyarujina, Shri
Ashok Desai and other counsel supported the contention that a company
D cannot be prosecuted for an offence, for which the mandatory sentence is
imprisonment. Shri Ram Jethmalani appeariJJg for the appellant in the appe~I
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
E ca:w the company is found guilty, the sentence of imprisonment cannot be
imposed on the company and then the sentence of fine is to be irnposed and
the court has got the judicial discretion to do so. He further submitted th!!t
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
F
ar~ to be imposed on such person.
Th.~re is no dispute that a company is liable to be prosecuted and
punished;for criminal offerces. Although tl)ere are earlier authorities to the
effect that corporations cannot commit a crin1e, the generally accepted modem
rule is that except for such crimes as a corporation is held incapable of
G 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
H done by him when exercising authorized powers, and without proof that i1is
--;" ..
. ..
( • '
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STANDARD CHARTERED BANK''- DIRECTORATE OF ENFORCEMENT [BALAKRISHNAN, J.) 63
act was expressly authorized or approved by the corporation. In the statutes A
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 subje~t it to punishment. In most B
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 Jaw, whether it is coming under the strict liability or under absolute
liability.
c
Inasmuch as all criminal. and quasi-criminal offences are creatures of D
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 predicate~ upon the automatic breach of the statute but on
the establishment of the actus reus. subject to the defence of due diligence. E
The Jaw 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 r-1 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 F
mens rea, a question arises. whether a corporation could be attributed with
requisite me~s rea to prove the gu_ilt. But as we a_i:e not concerned with this
question in these proceedings, we do not express any opinion on that issue.
ln series of offences punishable under various statutes, sentence of G
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 Jakh
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 H
64
SUPREME COURT REPORTS [2005] SUPP. I S.C.R.
A 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
B 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.
c
D
E
F
G
H
The legal difficulty arising out of the above situation was noticed by
the Law Commission and in its 41 st 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.
.•·
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STANDARD CHARTERED BANK"· DIRECTORATE OFENFORCEMENT [BALAKRISHNAN, J.] 65
(2) In every case in which the offence is punishable with A
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 B
individuals."
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.
C
The question whether a company could be prosecuted for an offence
for which mandafory sentence of imprisonment is provided continued to
agitate the minds of the courts andjuristS and the law continued to be the old
law despite the recommendations of the Law Commission and the difficulties D
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 E
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.