Full Judgment Text
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CASE NO.:
Appeal (civil) 1748 of 1999
PETITIONER:
ANZ Grindlays Bank Limited & Ors., etc.
RESPONDENT:
Directorate of Enforcement & Ors., etc.
DATE OF JUDGMENT: 05/05/2005
BENCH:
N. Santosh Hegde & B.N. Srikrishna
JUDGMENT:
J U D G M E N T
With
Civil Appeal Nos. 1749/99, 1750/99, 1751 & 1944/99,
S.L.P.(Crl.) Nos. 2599/03, 4995/03 and 1940/04,
Criminal Appeal Nos. 847/04 and 848/04 and
Writ Petition (Crl.) No. 165/04
Srikrishna, J.
We have had the benefit of reading the opinions expressed by our
esteemed and learned brothers Balakrishnan, Dharmadhikari and Arun
Kumar, JJ. With great respect, we are unable to persuade myself to the
views expressed therein.
Brother Balakrishnan, J., has indicated in his judgment the
circumstances under which the reference has been made to this larger Bench
to reconsider the correctness of the view expressed by the majority in
Assistant Commissioner, Assessment \026II, Bangalore & Ors. vs.
Velliappa Textiles Ltd. & Anr.
Velliappa was concerned with prosecution for an offence under
Sections 276C, 277 and 278 read with Section 278B of the Income Tax Act,
1961. Each of the punishing sections provides that a person found guilty
shall be punishable with a mandatory term of imprisonment and fine. The
majority in Velliappa took the view that since an artificial person like a
company could not be physically punished to a term of imprisonment, such a
section, which makes it mandatory to impose a minimum term of
imprisonment, cannot apply to the case of an artificial person.
The majority judgment in Velliappa indicates that the situation is not
one of an interpretational exercise, but one that calls for rectification of an
irretrievable error in drafting of the concerned statute. It has noticed the two
Reports of the Law Commission of India of 1941 and 1947 pointing out the
impossibility of implementing such a provision without transgressing the
well established bounds of judicial functions and taking on the role of
legislature. It was also pointed out that the situation is neither novel, nor
unique. Such situation has been faced in several other jurisdictions wherein
it was recognised that the only solution to such a problem is by legislative
action. Instances from the jurisdictions in Australia, France, Canada,
Netherland and Belgium were referred to. There was also reference made
to the fact that the Indian Parliament was cognizant of the problem and had
proposed the IPC (Amendment) Bill, 1972, Clause 72(a), which specifically
was intended to take care of a situation where the offender is a company and
the offence is mandatorily punishable with imprisonment in which case the
option was given to the Court to sentence such a corporate offender to fine
only. Reference was also made in Velliappa to the fact that the said
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Amendment Bill had lapsed.
It is unnecessary to make detailed reference to the arguments
presented to the Court in Velliappa and the view expressed thereupon, as
they are reflected in the judgment itself. We would, therefore, deal with
some of the additional arguments presented before us to persuade us to hold
that Velliappa was wrongly decided.
LEGISLATIVE INTENT
One of the functions of the Court is to ascertain the true intention of
the Parliament in enacting the statute and, as far as permissible on the
language of the statute, to interpret the statute to advance such legislative
intent. If this be the test, there is no doubt that Parliament has accepted the
view taken in the majority in Velliappa as correct. Velliappa interpreted the
situation arising out of a prosecution under Sections 276C, 277, 278 read
with Section 278B of the Income Tax Act, 1961 and the judgment was
delivered on 16th September, 2003. Section 278B was promptly amended by
Parliament by insertion of sub-section (3) by the Finance (No. 2) Act, 2004
w.e.f. 1.10.2004. The inserted sub-section (3) reads as under:
"278B (3) Where an offence under this Act has
been committed by a person, being a company, and
the punishment for such offence is imprisonment
and fine, then, without prejudice to the provisions
contained in sub-section (1) or sub-section(2), such
company shall be punished with fine and every
person, referred to in sub-section (1), or the
director, manager, secretary or other officer of the
company referred to in sub-section (2), shall be
liable to be proceeded against and punished in
accordance with the provisions of this Act."
Similar amendment was made in Wealth Tax Act, 1957 also by
insertion of sub-section (3) in Section 35 HA by the same Finance (No. 2)
Act, 2004. In the face of these Parliamentary amendments, it would be futile
to look for some presumed intention of Parliament on a theoretical basis.
When Parliament has taken note of a situation and resolved the difficulty
by a suitable amendment in legislation, the Court must hold that its decision
has correctly interpreted the law and accords with the Parliamentary intent in
enacting the law as it stood prior to the enactment. (See, Bhimaji Shanker
Kulkarni v. Dundappa Vithappa Udapudi and another ).
Thus, if the interpretative function of the Court be to find out the true
intention of Parliament, then such intention has been manifested the
amendments adopting the manner of resolving the difficulty indicated by
Velliappa.
JUDICIAL FUNCTION
A number of arguments were addressed by learned counsel as to what
is the true function of the Court in interpreting a statute. We would prefer
to tread the conventional path that the maxim ’judicis est just dicere, non
dare’ best expounds the role of the court. It is to interpret the law, not to
make it. The Court cannot act as a sympathetic caddie who nudges the ball
into the hole because the putt missed the hole. Even a caddie cannot do so
without inviting censure and more. If the legislation falls short of the mark,
the Court could do nothing more than to declare it to be thus, giving its
reasons, so that the legislature may take notice and promptly remedy the
situation. This is precisely what has happened in the present case.
We are unable to subscribe to the view that by ’judicial heroics’ it is
open to the Court to remedy an irretrievable legislative error by resort to the
theory of presumed intention of the legislature. It was contended that the
Court should adopt a purposive construction of statutes. The dicta of
Denning L.J. in Seaford Court Estates Ltd. vs. Asher were pressed into
service for emulation. The view of Denning L.J., that ’judicial heroics’ were
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warranted to cope with the difficulties arising in statutory interpretation, was
severely criticized by the House of Lords in Magor & St. Mellons R.D. C.
v. Newport Corporation . Lord Simonds said, "the duty of the Court is to
interpret the word that the legislature has used. Those words may be
ambiguous, but, even if they are, the power and duty of the court to travel
outside them on a voyage of discovery are strictly limited." "It appears to
me", said Lord Simonds, "to be a naked usurpation of legislative function
under the thin disguise of interpretation". Lord Morton observed: "these
heroics are out of place". Lord Tucker said, "Your Lordships would be
acting in a legislative rather than a judicial capacity if the view put forward
by Denning, L.J., were to prevail." This disapproval of Denning L.J.’s
approach was cited with approval by this Court in Punjab Land
Development and Reclamation Corporation Ltd. vs. Presiding Officer,
Labour Court
The argument of purposive interpretation, therefore, does not appeal
when the statute in plain terms says something.
INTERPRETATIVE EXERCISE
There appears to be a difference of opinion amongst the learned
counsel assailing the correctness of majority view in Valliappa as to whether
the task of the Court in the case on hand is one of statutory interpretation.
Some counsel have argued that it is open to the Court to read the words
"imprisonment and fine" as "imprisonment or fine". In our view, such a
construction is impermissible. First, it virtually amounts to rewriting of the
section. The Court would be reading the section as applicable to different
situations with different meanings. If the offender is a corporate entity, then
only fine is imposable; if the offender is a natural person, he shall be visited
with both the mandatory term of imprisonment and fine. The exercise would
then become one of putting a fluctuating or varying interpretation on the
statute depending upon the circumstances. That is not permissible for the
Court, either on principle, or on precedent. While it may be permissible for
the court to read the word ’and’ as ’or’, or vice versa, whatever the
interpretation, it must be uniformly applied to all situations. If the
conjunction ’and’ is read disjunctively as "or", then the intention of
Parliament would definitely be defeated as the mandatory term of
imprisonment would not be available even in the case of a natural person.
We have not been shown any authority for the proposition that it is open to
the Court to put an interpretation on a statute which could vary with the
factual matrix.
Secondly, when a statute says the Court shall impose a term of
’imprisonment and a fine’, there is no option left in the Court to say that
under certain circumstances it would not impose the mandatory term of
imprisonment. It is trite principle that punishment must follow the
conviction.
In State of Maharashtra vs. Jugamander Lal this Court observed:
(at p.5)
"By saying that a person convicted of the offence shall
be sentenced to imprisonment of not less than one year
the Legislature has made it clear that its command is to
award a sentence of imprisonment in every case of
conviction."
[See also in this connection: Gul Mahmud Shah vs. Emperor ; Jayaram
Vithoba and another vs. The State of Bombay ; Jagmohan Singh vs.
State of U.P. and Modi Industries Ltd. Vs. B.C. Goel ]
Thirdly, if on the words used by the legislature it is impossible to
effectuate the intention of the legislation, namely, to punish a company to
imprisonment, it is not possible to read the section in any other manner to
impose any other punishment on the offender. "We cannot aid the
legislature’s defective phrasing of an Act, we cannot add and mend, and, by
construction, make up deficiencies which are left there", said the Judicial
Committee in Crawford vs. Spooner . In other words, the language of
Acts of Parliament and more especially of the modern Acts, must neither be
extended beyond its natural and proper limits, in order to supply omissions
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or defects, nor strained to meet the justice of an individual case.
"If", said Lord Brougham in Gwynne vs. Burnell , "we depart from
the plain and obvious meaning on account of such views (as those pressed in
arguments on 43 Geo, 3, C.99), we do not in truth construe the Act, but alter
it. We add words to it, or vary the words in which its provisions are couched.
We supply a defect which the legislature could easily have supplied, and are
making the law, not interpreting it. This becomes peculiarly improper in
dealing with a modern statute, because the extreme conciseness of the
ancient statutes was the only ground for the sort of legislative interpretation
frequently put upon their words by the judges. The prolixity of modern
statutes, so very remarkable of late, affords no grounds to justify such a sort
of interpretation."
The interpretation suggested by the learned counsel arguing against
the majority view taken in Velliappa, which has appealed to our learned
brothers Balakrishnan, Dharmadhikari and Arun Kumar, JJ., would result in
the Court carrying out a legislative exercise thinly disguised as a judicial act.
The argument of Mr. Jethmalani that Section 11 of IPC defines the
word ’person’ to include a company, and because of Section 7 it is an
inexorable definition which must permeate and lend colour to construction
of all sections, is an argument of petitio principii and really begs the
question. Irrespective of a declaration in the statute that it shall be applied
’unless there is anything repugnant in the clause to the context’, such an
interpretation must necessarily be implied as forming part of all statutes.
[See in this connection, Commissioner of Sales Tax vs. Union Medical
Agency ;Kartick Chandra vs. Harsha M. Dasi ; Edmund N. Schuster
vs. Assistant Collector of Customs, New Delhi ; State of Maharashtra
vs. Syndicate Transport ; and Knightsbridge Estates Trust Ltd. Vs.
Byrne and others ] The definition of any word in a statute must
necessarily depend on the context in which the word is used in the statute. If
the statute says that the ’person’ committing the offence shall be mandatorily
sent to prison, this principle would suggest that such a section would not
apply to a juristic person.
The maxim ’lex non cogit ad impossibilia’, like all maxims, only
tells us that law does not contemplate something which cannot be done. The
maxim applies, in so far as persuading the Court to hold that it is impossible
to send a company to prison. The maxim by itself does not empower the
Court to break up the section into convenient parts and apply them
selectively. Nor does the maxim ’Impotentia excusat legem’ apply here for
the same reason. Au contraire, the application of these two maxims could
equally persuade the Court to ignore the language of the statutory provision
in the case of a juristic person, there being no warrant for the dissecting of
the section and treating only one part as capable of implementation when the
mandate of the section is to impose the whole of the prescribed punishment.
In the written submissions on behalf of Iridium India Telecom Ltd.-
(the petitioner in Special Leave Petition (Criminal) No. 4995 of 2003), a
fallacious mathematical syllogism is put forward in support. The argument
is that the statute mandates (’A + B’); if A is impossible, then A=0. Then,
the statutory mandate would be only (Zero + B), which is really equal to ’B’
(presumably ’A’ = imprisonment and ’B’ = fine). There is no warrant for the
assumption that the value of ’A’ reduces to zero merely because it is
impossible in case of a corporate offender. It could very well be that ’A’ is
indeterminate. In that case, the mathematical logic would break down
(Indeterminate + B) = Indeterminate, which is exactly what has been held by
Velliappa, namely, that the statute would become unworkable in the case of
a juristic person. Ergo, it cannot apply to a juristic person for all the reasons
adumbrated by the majority in Velliappa.
The maxim ’ut res magis valeat quam pereat is pressed into service to
contend that the duty of the Court is to construe the enactment in such a way
is to implement rather than defeat the legislative purpose. In our view, this
maxim can be pressed into service only if it is permissible to extract another
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reasonable meaning from the plain words used in the statute. There is a
further difficulty in accepting this principle as applicable to the case on
hand. This principle might enable the Court to resolve the difficulty in
construing a statute so that an interpretation is put on the statute which will
carry forward the intention of the statue. However, it is to be remembered
that the interpretation put on the statute must be of determinative import in
all cases. This maxim cannot enable the Court to put a variant construction
on the statute, which would vary with the circumstances of different cases.
For example, if this maxim is applied to construe a section such as Section
56(1)(i) of the Foreign Exchange Regulation Act, 1973, it is not permissible
for the Court to hold that the Section would mean one thing in the case of an
offender, who is a natural person and something else in the case of an
offender, who is a juristic person. Such a situation can only be brought
about by Parliamentary legislation of the nature cited earlier. The mandate
of the legislature can be interpreted so as to advance the purpose of the
legislation. Whatever interpretation is given must be applicable equally in
all situations. Neither this maxim, nor any other maxim, enables a Court to
interpret a statute in different ways under different fact situations.
ARGUMENT OF CONSEQUENCE
A final argument, more in terrorem than based on reason, put forward
was that, if the majority view in Velliappa is upheld, it would be impossible
to prosecute a number of offenders in several statutes where strict liability
has been imposed by the statute. If that be so, so be it. As already pointed
out, the judicial function is limited to finding solutions within specified
parameters. Anything more than that would be ’judicial heroics’ and ’naked
usurpation of legislative function’.
JURISPRUDENTIAL PRINCIPLE
Kenny in "The Outlines of Criminal Law" observes as under:
"Moreover a corporation is devoid not only of mind,
but also of body; and therefore incapable of the usual
criminal punishments. "Can you hang its common
seal?" asked an advocate in James KK’s days
(8St.Tr.1138)."
"Thus the fact that a corporation cannot be hanged or
imprisoned sets a limit to the range of its criminal
liability. A corporation can only be prosecuted, as
such, for offences which can be punished by a fine."
Para 57 of the judgment in Velliappa specifically notices that
corporate criminal liability cannot be imposed without making
corresponding legislative changes such as the imposition of fine in lieu of
imprisonment. That such requisite legislative changes were introduced in
Australia, France (Penal Code of 1992), Netherlands (the Economic
Offences Act, 1950 and Article 51 of the Criminal Code) and Belgium (in
1934 Cour de Cassation) is already referred to in Velliappa.
We see nothing special in the Indian context which requires us to take
a different view. In all these jurisdictions, the view that prevailed was that,
where a statute imposes mandatory imprisonment plus fine, such a provision
would not enable the punishment of a corporate offender. If the legislatures
of these countries stepped in to resolve the problem by appropriate
legislative enactments giving option to the Courts to impose fine in lieu of
imprisonment in the case of a corporate offender, we see nothing special in
the Indian context as to why such a course cannot be adopted. Merely
because the situation confronts the Courts in a number of statutes, the Court
need not feel deterred in construing the statute in accordance with reason.
The argument that the Criminal Procedure Code, 1973 recognises
different stages of cognizance, prosecution, conviction and punishment and
that it is open to the Court to stop short of actual imposition of punishment,
is opposed to the law laid down by this Court in a series of cases. In State of
Maharashtra vs. Syndicate Transport (supra); Edmund N. Schuster vs.
Assistant Collector of Customs, New Delhi (supra) and Kartick Chandra
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vs. Harsha M. Dasi (supra) it has been held that once the court after trial in
accordance with the prescribed procedure comes to a finding of guilt and
convicts an offender, the court is bound to sentence the offender with the
punishment prescribed in law. In other words, sentence must inexorably
follow conviction, as night follows the day. The argument that it is open to
the court to abandon its duty midway without imposition of punishment of
the offender, is one without merit.
The reliance on Section 48A of the Monopolies and Restricted Trade
Practices Act, 1969, which was inserted by the 1984 amendment, is of no
consequence. The section merely says "any person or body corporate’ or
which "does or omits to do what is mentioned in the Act shall be punishable
with 2 years imprisonment and also with fine which may exceed to
Rs.10000/-." We do not think that reliance on this section in any way
advances the contention canvassed by the counsel in favour of overruling the
view taken by the majority in Velliappa. It is obvious that notwithstanding
such an amendment made in 1984, a body corporate cannot be visited with
imprisonment for any term. This section, therefore, is of the same nature as
the ones which were the subject matters in the fiscal statutes like Income
Tax Act and Wealth Tax Act or Foreign Exchange Regulation Act. That the
Parliament is alive to the situation and has remedied the difficulty with
alacrity is really indicative of its recognition of the correctness of the
majority view taken in Velliappa.
For all these reasons, we are of the opinion that the majority view of
this Court in Velliappa is correct and does not require any reconsideration
by this Bench. All the matters comprised in this group be placed before
appropriate Benches for disposal in accordance with law.