Full Judgment Text
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PETITIONER:
RAI BAHADUR SETH SHREERAM DURGAPRASAD
Vs.
RESPONDENT:
DIRECTOR OF ENFORCEMENT
DATE OF JUDGMENT01/05/1987
BENCH:
SEN, A.P. (J)
BENCH:
SEN, A.P. (J)
ERADI, V. BALAKRISHNA (J)
CITATION:
1987 AIR 1364 1987 SCR (3) 137
1987 SCC (3) 27 JT 1987 (2) 590
1987 SCALE (1)1081
ACT:
Foreign Exchange Regulation Act, 1947--Section 23 (1)-
’Whoever’--Interpretation of--Comprehensive enough to in-
clude an association of persons such as a firm--Does not
connote a natural person alone.
HEADNOTE:
The Director of Enforcement initiated adjudication
proceedings against the appellants--a partnership firm,
under Section 23(1), as amended, for failure to repatriate
the full value in foreign exchange earned by it against
export shipments of manganese ore made during 1952-1958, and
thereby contravening Section 12(2), as well as Section 4(1)
of the Foreign Exchange Regulation Act, 1947. The appellants
did not contest the charge under Section 12(2) of the Act
but questioned the liability of the firm on the ground that
the amended Section 23(1) as well as Section 23C introduced
by the Amendment Act came into force on September 20, 1957
and were, therefore, inapplicable to the export shipments
from the year 1952 onwards till that date and if at all, the
firm could only be held liable under the amended Section
23(1) read with Section 23C as from that date. It was con-
tended that the word ’whoever’ in sub-section (1) of Section
23 of the Act before its amendment denoted only a natural
person, and association of persons, such as a firm, would
not fall within the connotation of the word ’whoever’. The
Director of Enforcement held that the firm and its partners
had deliberately underinvoiced shipments at the time of
export and also diverted the undeclared proceeds to their
accounts with foreign banks with an intention not to repa-
triate the sale proceeds in the prescribed manner within the
prescribed period in respect of each shipment. He also held
that the two persons incharge of, and responsible for, the
conduct of the business of the partnership firm during the
relevant period did not produce any evidence to show that
the contravention in question had taken place without their
knowledge or that they had exercised due diligence to pre-
vent such contravention, and they were accordingly made
liable for contravention of Section 12(2) of the Act for
failure to repatriate the foreign exchange earned on the
shipments and a penalty was imposed on the partnership firm.
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138
The Foreign Exchange Regulation Appellate Board, howev-
er, disagreed with the Director of Enforcement, accepted the
contention of the appellants and accordingly reduced the
amount of penalty.
The High Court allowed the appeal of the Director of
Enforcement and restored the original order of the Director
of Enforcement.
In appeal to this Court it was submitted on behalf of
the appellants that though Article 20(1) of the Constitution
would not in terms apply, the principles embodied thereto
would still govern and that the word ’whoever’ in sub-sec-
tion (1) of Section 23 before its amendment by Act XXXIX of
1957 connoted only a natural person i.e. those who actually
contravened the provisions of Section 12(1) of the Act by
failure to repatriate full value of foreign exchange earned
or exports and would not take in corporate liability and,
therefore, association of persons, such as a firm, would not
fall within the connotation of the word ’whoever’, that by
the Amendment Act, a new Section 23(1) was substituted and
Section 23C was introducted and the effect of these provi-
sions was that after September 20, 1987 adjudication pro-
ceedings or criminal proceedings could be taken in respect
of a contravention mentioned in Section 23(1), while before
the amendment only criminal proceedings before a court could
be instituted to punish the offender.
On behalf of the respondents it was contended that on a
combined reading of Section 23(1) and 12(2), the only possi-
ble construction was that the word ’whoever’ includes a
person and, therefore, initiation of adjudication proceed-
ings against the partnership firm was permissible and sub-
section (4) of Section 23 clearly contemplates prosecution
of a company or other body corporate.
Dismissing the appeal, this Court,
HELD: 1. It is clear from Sections 4(1), 12(2), 23(1),
23(4) and 23C that the word ’whoever’ in sub-section (1) of
Section 23 of the Act before its amendment was comprehensive
enough to include an association of persons, such as a firm,
and did not connote a natural person alone. The word ’whoev-
er’ in the unamended Section 23(1) must be read in juxtapo-
sition with Section 12(2) and must mean any person who
commits a contravention of that Section without exception.
That must be the legal connotation of the word ’whoever’ and
it necessarily takes in corporate liability and includes any
association of persons such as a partnership firm. Such a
construction is borne out by the plain language of sub-
section (4) of Section 23 inserted by the Act XXXIV of
139
1950 which provides that if the person committing an offence
punishable under sub-section (1) of Section 23 is a company
or other body corporate, every director, manager, secretary
or other officer thereof, unless he proves that the offence
was committed without his knowledge or that he exercised all
due diligence to prevent its commission, be deemed to be
guilty of such offence. The Act, therefore, clearly contem-
plated that adjudication proceedings under sub-section (1)
of Section 23 prior to its amendment could be initiated not
only against the person who actually commits contravention
but also casts vicarious liability on an association of
persons such as a partnership firm or an artificial ’or a
legal entity like a company. [143FH; 144A-C]
The High Court was right in setting aside the order of
the Foreign Exchange Regulation Appellate Board and restor-
ing that of the Director of Enforcement levying a penalty of
Rs. 15,00,000 on the appellants for failure to repatriate
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foreign exchange in contravention of Section 12(2) of the
Act. The initiation of adjudication proceedings for failure
to repatriate foreign exchange on shipments of manganese ore
prior to September 20, 1957, the date when the Amendment Act
came into force, was permissible. [144D; F]
Union of India v. Sukumar Pyne, [1966] 2 SCR 34, referred
to.
JUDGMENT:
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 627
of 1986.
From the Judgment and Order dated 7.3. 1986 of the
Bombay High Court in Crl. Appeal No. 119 of 1981.
Ashok Sen, Kapil Sibbal, A.K. Sanghi and R.L. Sanghi for
the Appellants.
M.S. Rao, A.S. Rao and C.V. Subba Rao for the Respondents.
The Judgment of the Court was delivered by
SEN, J. The short question involved in this appeal by spe-
cial leave directed against the judgment and order of the
High Court of ’Bombay dated March 7, 1986 is whether the
word ’whoever’ in sub-s. (1) of s. 23 of the Foreign Ex-
change Regulation Act, 1947 before its amendment by Act
XXXIX of 1957 denoted only a natural person and association
of persons, such as a firm, would not fall within the conno-
tation of the word ’whoever’. By the judgment, a learned
Single Judge
140
of the High Court allowed the appeal of the Director of
Enforcement under s. 54 of the Act and set aside the order
of the Foreign Exchange Regulation Appellate Board, Bombay
dated January 30, 1981 and restored the order of the Direc-
tor of Enforcement dated August 17, 1978 holding the appel-
lants guilty of contravention of s. 12(2) of the Act read
with the notification issued by the Government of India in
the Ministry of Finance, New Delhi dated April 22, 1952 and
levying a penalty of Rs. 15,00,000. By its order the Foreign
Exchange Regulation Appellate Board held that there could be
no levy of penalty on the appellants-firm for failure to
repatriate foreign exchange on shipments of manganese ore
made prior to September 20, 1957 i.e. prior to the amendment
of s. 23(1) of the Act and the introduction of s. 23C by the
Amendment Act and accordingly reduced the amount of penalty
to Rs.3, 10,000. AS a result of the decision of the High
Court, the order of the Director of Enforcement levying a
penalty of Rs. 15,00,000 on the appellants has been re-
stored.
The facts giving rise to the appeal are as follows.
Messrs Rai Bahadur Seth Shreeram Durgaprasad were a partner-
ship firm engaged in the business of winning, extracting and
getting manganese ore from their manganese mines at Tumsar
on a very large scale. During the period from 1952 to 1958,
the partnership firm made 52 shipments of manganese ore to
various foreign countries and earned huge amount of foreign
exchange. It however failed to repatriate the full value in
foreign exchange against the aforesaid 52 shipments and
thereby contravened s. 12(2) of the Act. The Director of
Enforcement accordingly initiated adjudication proceedings
against the appellants under s. 23(1) as amended for contra-
vention of s. 12(2) as well as s. 4(1) of the Act. The
appellants stated before the Director of Enforcement that
they did not contest the charge under s. 12(2) of the Act
but questioned the liability of the firm on the ground that
the amended s. 23(1) as well as s. 23C introduced by the
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Amendment Act came into force on September 20, 1957 and were
therefore inapplicable to the export shipments from the year
1952 onwards till that date; and if at all, the firm could
only be held liable under the amended s. 23(1) read with s.
23C as from that date. It was contended that the word ’whoe-
ver’ in sub-s. (1) of s. 23 of the Act before its amendment
denoted only a natural person and association of persons,
such as a firm, would not fail within the connotation of the
word ’whoever’. The Director of Enforcement by his order
dated August 17, 1978 repelled the contention and held that
the firm and its partners had deliberately underinvoiced
shipments at the time of export and also diverted the unde-
clared proceeds to their accounts with foreign banks with an
intention not to repatriate the sale
141
proceeds in the prescribed manner within the prescribed
period in respect of each shipment. He dealt with the evi-
dence in detail with reference to the books of account and
came to the conclusion that both Durgaprasad Saraf and
Umashanker Aggarwal were incharge of, and responsible for,
the conduct of the business of the partnership firm during
the relevant period. Neither of them produced any evidence
to show that the contravention in question had taken place
without their knowledge or that they had exercised due
diligence to prevent such contravention. They were accord-
ingly made liable for contravention of s. 12(2) of the Act
for failure to repatriate the foreign exchange earned on the
aforesaid 52 shipments and were imposed a penalty of Rs.
15,00,000 on the partnership firm. The Foreign Exchange
Regulation Appellate Board however disagreed with the Direc-
tor of Enforcement and accepted the contention of the appel-
lants and accordingly reduced the amount of penalty to Rs.3,
10,000.
Shri Asoke Sen, learned counsel appearing for the appel-
lants with his usual fairness frankly concedes that Art.
20(1) of the Constitution would not in terms apply but, he
contends, the principles embodied therein would still gov-
ern. He has confined his submissions to only one point,
namely, that the word ’whoever’ in sub-s. (1) of s. 23
before its amendment by Act XXXIX of 1957 connoted only a
natural person i.e. those who actually contravened the
provisions of s. 12(1) of the Act by failure to repatriate
full value of foreign exchange earned on exports and would
not take in corporate liability and therefore association of
persons, such as a firm, would not fall within the connota-
tion of the word ’whoever’. The learned counsel further
contends that by the Amendment Act, new s. 23(1) was substi-
tuted and s. 23C introducted w.e.f. September 20, 1957 and
the effect of these provisions was that after that date,
adjudication proceedings or criminal proceedings could be
taken in respect of a contravention mentioned in s. 23(1)
while before the amendment only criminal proceedings before
a Court could be instituted to punish the offender. We are
afraid, the contention cannot prevail. It is not correct to
say that the amended s. 23(1) of the Act does not apply to
contraventions which took place before the Amendment Act
came into force. Shri Madhusudan Rao, learned counsel ap-
pearing for the respondents rightly contends that on a
combined reading of ss. 23(1) and 12(2), the only possible
construction is that the word ’whoever’ includes a person
and therefore initiation of adjudication proceedings against
the partnership firm was permissible. He draws sustenance
from the provision contained in subs. (4) of s. 23 which
clearly contemplates prosecution of a company or other body
corporate. As regards the applicability of the amended
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142
s. 23(1) read with s. 23C with regard to initiation of
adjudication proceedings in respect of contraventions which
took place before the Amendment Act came into force, he
rightly contends that the matter is concluded by the deci-
sion of this Court in Union of India v. Sukumar Pyne, [1966]
2 SCR 34.
In order to appreciate the contentions raised, it is
necessary to set out the statutory provisions insofar as
relevant.
"4. (1) Except with the previous general or
special permission of the Reserve Bank, no
person other than an authorised dealer
shall ...... sell or lend to, or exchange
with, any person not being an authorised
dealer, any foreign exchange.
12.2. Where any export of goods has been made
to which a notification under sub-section (1)
applies, no person entitled to sell, or pro-
cure the sale of, the said goods shall, except
with the permission of the Reserve Bank, do or
refrain from doing any act with intent
to secure that--
(a) the sale of goods is delayed to
an extent which is unreasonable having regard
to the ordinary course of trade, or
(b) payment for the goods is made
otherwise than in the prescribed manner or
does not represent the full amount payable by
the foreign buyer in respect of the goods,
subject to such deductions, if any as may be
allowed by the Reserve Bank, or is delayed to
such extent as aforesaid:
Provided that no proceedings in
respect of any contravention of this sub-
section shall be instituted unless the pre-
scribed period has expired and payment for the
goods representing the full amount as afore-
said has not been made in the prescribed
manner."
Section 23(1) prior to its amendment and
the original sub-s. (3) now renumbered as s.
23(4) are as follows:
"23. (1) Whoever contravenes any of the provi-
sions of this Act or of any rule, direction or
order made thereunder
143
shall be punishable with imprisonment for a
term which may extend to two years or with
fine or with both, and any Court trying any
such contravention may, if it thinks fit and
in addition to any sentence which it may
impose for such contravention, direct that any
currency, security, gold or silver, or goods
or other property in respect of which the
contravention has taken place shall be confis-
cated.
23.(4). If the person committing an offence
punishable under this section is a company or
other body corporate, every director, manager,
secretary or other officer thereof shall,
unless he proves that the offence was commit-
ted without his knowledge or that he exercised
all due diligence to prevent its commission,
be deemed to be guilty of such offence.’’
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Sub-s. (1) of s. 23C is as follows:
"23C. Offences by companies--(1) If the person
committing a contravention is a company, every
person who, at the time the contravention was
committed, was incharge of, and was responsi-
ble to, the company for the conduct of the
business of the company as well as the compa-
ny, shall be deemed to be guilty of the con-
travention 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
prevent such contravention."
It is clear from these provisions that the word ’whoev-
er’ in sub-s. (1) of s. 23 of the Act before its amendment
was comprehensive enough to include an association of per-
sons, such as a firm, and did not connote a natural person
alone. There is no reason why the word ’whoever’ in the
section should not receive its plain and natural meaning.
According to the Shorter Oxford English Dictionary, vol. 2,
p. 2543, ’whoever’ means’ ’any one who. any who’. The mean-
ing given in Webster Comprehensive Dictionary, International
edn., vol. 2 at p. 1437 is ’any one without exception ’any
person who’. In our judgment. the word ’whoever’ in the
unamended s. 23(1) must be read in juxtaposition with s.
12(2) and must mean any person who commits a
144
contravention of that section without exception. That must
be the legal connotation of the word ’whoever’ and it neces-
sarily takes in corporate liability and includes any associ-
ation of persons such as a partnership firm. That construc-
tion of ours is borne out by the plain language of sub-s.
(4) of s. 23 inserted by Act XXXIV of 1950. It provides that
if the person committing an offence punishable under sub-s.
(1) of s. 23 is a company or other body corporate, every
director, manager, secretary or other officer thereof shall,
unless he proves that the offence was committed without his
knowledge or that he exercised all due diligence to prevent
its commission, be deemed to be guilty of such offence. The
Act therefore clearly contemplated that adjudication pro-
ceedings under sub-s. (1) of s. 23 prior to its amendment
could be initiated not only against the person who actually
commits contravention but also casts vicarious liability on
an association of persons such as a partnership firm or an
artificial or a legal entity like a company. It is therefore
idle to contend that the appellants were not liable to pay’
penalty for failure to repatriate foreign exchange on 52
shipments of manganese ore effected through the years 1952
to 1958. Upon that view, the learned Single Judge was right
in setting aside the order of the Foreign Exchange Regula-
tion Appellate Board and restoring that of the Director of
Enforcement levying a penalty of Rs. 15,00,000 on the appel-
lants for failure to repatriate foreign exchange in contra-
vention of s. 12(2) of the Act.
The contention of the learned counsel that recourse
could not be had to the amended s. 23(1) read with s. 23C of
the Act in respect of the contravention of s. 12(2) for
failure on the part of the appellants to repatriate foreign
exchange on shipments of manganese ore made prior to Septem-
ber 20, 1957, and there could be no initiation of adjudica-
tion proceedings under the amended s. 23(1) read with s. 23C
or levy of penalty on the appellants must also fail for
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another reason. In Sukumar Pyne’s case the Court reversed
the decision of the Calcutta High Court in Sukumar Pyne v.
Union of India & Ors., AIR (1962) Cal. 590 striking down s.
23(1)(a) as being violative of Art. 14 of the Constitution.
Regarding the point, namely, whether s. 23(1)(a) having been
substituted by Amendment Act XXXIX of 1957 would have retro-
spective operation in respect of the alleged offence which
took place in 1954, the High Court came to the conclusion
that the petitioner had a vested right to be tried by an
ordinary court of the land with such rights of appeal as
were open to all and although s. 23(1)(a) was procedural,
where a vested right was affected, prima facie, it was not a
question of procedure. Therefore, the High Court came to the
conclusion that the provision as to adjudication by the
145
Director of Enforcement could not have any retrospective
operation. It was held that ’the impairment of a fight by
putting a new restriction thereupon is not a matter of
procedure only’. It impairs a substantive right and an
enactment that does so is not retrospective unless it says
so expressly or by necessary intendment. The Court reversed
the High Court and held that effect of these provisions was
that after the amendment of 1957, adjudication or criminal
proceedings could be taken up in respect of a contravention
mentioned in s. 23(1) while before the amendment only crimi-
nal proceedings before a Court could be instituted to punish
the offender. In repelling the contention advanced by Shri
N.C. Chatterjee that the new amendments did not apply to
contraventions which took place before the Act came into
force, the Court observed:
"In our opinion, there is force in the conten-
tion of the learned Solicitor-General. As
observed by this Court in Rao Shiv Bahadur
Singh v. The State of Vindhya Pradesh, [1953]
SCR 1188, a person accused of the commission
of an offence has no vested right to be tried
by a particular court or a particular proce-
dure except in so far as there is any consti-
tutional objection by way of discrimination or
the violation of any other fundamental right
is involved. It is well recognised that "no
person has a vested right in any course of
procedure "(vide Maxwell 11th Edition, p.
216), and we see no reason why this ordinary
rule should not prevail in the present case.
There is no principle underlying Art. 20 of
the Constitution which makes a right to any
course of procedure a vested right."
These principles are clearly attracted to the facts and
circumstances of the present case and therefore the initia-
tion of adjudication proceedings for failure to repatriate
foreign exchange on shipments of manganese ore prior to
September 20, 1957, the date when the Amendment Act came
into force, was permissible.
The appeal must therefore fail and is dismissed with costs.
N.P.V. Appeal dis-
missed.
146