Holding

A company is not immune from prosecution for offences prescribing imprisonment and fine; the court may impose the fine component, reading a limited discretion into the statute for juristic persons.

Summary

The Supreme Court examined whether a company, being a juristic person, can be prosecuted under Section 56 of the Foreign Exchange Regulation Act, 1973 when the statute mandates both imprisonment and fine. The appellants argued that because a company cannot be imprisoned, the provision could not apply to them. The Court held that there is no blanket immunity for companies; while imprisonment cannot be imposed, the court may impose the fine component, reading a limited discretion into the statute for juristic persons. The majority overruled the earlier decision in Assistant Commissioner, Assessment‑II v. Velliappa Textiles Ltd, which had held that companies could not be prosecuted for offences with mandatory imprisonment. The Court emphasized the legislative intent to prosecute corporate bodies and applied principles of statutory interpretation and the maxim lex non cogit ad impossibilia. The appeals were remanded for further hearing, with the Velliappa decision set aside.

Issues considered

Can a company be prosecuted for an offence under a penal statute that prescribes mandatory imprisonment and fine?
Whether the court can read a discretion to impose only fine on a juristic person when imprisonment is impossible?
Is the Velliappa Textiles decision, which barred corporate prosecution for such offences, correct?

Legislation cited

Code of Criminal Procedure, 1973s. 235
Finance (No.2) Act, 2004s. 278B(3)
Foreign Exchange Regulation Act, 1973s. 56(1)(i), s. 56(1)(ii)
General Clauses Acts. 3
Income Tax Act, 1961s. 276C, s. 277, s. 278, s. 278B
Indian Penal Code, 1860s. 11
Monopolies and Restrictive Trade Practices Act, 1969s. 48A
Wealth Tax Act, 1957s. 35HA

Subjects

corporate criminal liabilitymandatory imprisonmentstatutory interpretationlex non cogit ad impossibiliaforeign exchange regulation actjuristic personfineVelliappa Textilesjudicial discretionlegislative intent

Judgment

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 fine-
Prosecution 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 offine-Company
is not immuned from any prosecution for serious offence-Such discretion can D
be read into statute-Foreign Exchange Regulation Act, I 973-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
"i
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
I
and Ors. v. Velliappa Textiles Ltd and Anr's case which held that company
I
-
'
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
50 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

-A 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.
(72-H; 73-A; 72-F, G]
D
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.
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.
F
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)

2.2. In the case of torts, the general rule prevails that the corporation
H
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 ofAndhra Pradesh v. Bathu Prakasa Rao, [1976) 3 SCC 301, relied
on.

Principles of Statutory Interpretation by G. P. Singh 9th Edn p. 754-
756, 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
capable of fulfilling the object of the Act. [74-E, F, G]
B
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
the elements of an offence and the persons who can be charged with it. If
c 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 ofIndia, (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]

3. The mandate of the provision is quite clear. The corporations are
G 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
~
STANDARD CHARTERED BANK'" DIRECTORATE OF ENFORCEMENT 55
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
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)
G 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
STANDARD CHARTERED BANK 1·. DIRECTORATE OF ENFORCEMENT 57

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
c
or fine" is impermissible. It virtually amounts to rewriting of the section.
The Court would be reading the section as applicable to different situations
.
I
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 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
STAND ARD CHARTERED BANK ,._DIRECTORATE OF ENFORCEMENT 59
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. 73, 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, I944 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 :

"56. Offences and prosecutions - (I) Without prejudice to any
award of penalty by the adjudicating officer under this Act, if any
F 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, -
G (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
H
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) .... .. B

(4) ..... .

(5) ..... .

(6) ...... " c
The contention of the appellants in other connected matters also is to
the same effect that in a case where the offence is punishable with a mandatory
sentence of imprisonment,' the company cannot be prosecuted as the sentence
of imprisonment cannot be enforced against the company. When the matter
came up before the bench of three learned Judges of this Court, the decision 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
ar~ to be imposed on such person.
F
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

--;" .. ..
.
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
c
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.

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
t·
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
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 :

D "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."
E 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
F
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
G 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.
H
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
-t 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. to follow the
alternative and impose the sentence of fine. The counsel also hastened to add F
that this discretion could be exercised only in respect of juristic persons and
not in respect of natural persons. It was contended that by doing so, the court
does not alt~r the provisions of the law by interpretation, but only carry out
the mandate of the legislature. Senior counsel appearing for other appellants,
on the other hand, contended that the Parliament enacted laws knowing fully G
well that the company cannot be subjected to custodial sentence and therefore
the legislative intention is not to prosecute the companies or corporate bodies
and when the sentence prescribed cannot be imposed, the very prosecution
itself is futile and meaningless and thus the majority decision in Ve/liappa
Textiles has correctly laid down the law. The counsel on either side drew our
H
66 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A attention to various decisions on the point. ,-,;·•

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

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

E In Badsha v. Income Tax Officer, (1987) 1 K.L.T. 112 Justice Thomas,
J ., as he then was, following the decision of the -Allahabad .High Court in
Modi Industries-Limited v. B.C. Goel, 144 ITR 496 (1983), held that "A
company registered under the Companies Act, 1956 is a juristic person and
cannot be awarded the punishment of imprisonment and hence cannot be
F prosecuted for breach of Sections 277 and 278 of the Act" and therefore the
court h.eld that the first accused being a firm was not liable to be prosecuted
for offences under Section 277 and 278.

In P. V. Paiv. R.L. Rinawma, Dy. Commissioner, Income Tax, (1993)
2 Comp. L.J, 314 (Karn.), it was held that imprisonment alone was the
G punishment that could be imposed on a person found guilty and that the
legislature intended that the offence under Section 277 should be met with \_
1
punishment of compulsory imprisonment and fine, and courts have no _
jurisdiction to impose fine only and if that is done it would be 'altering the
very scheme of the Act.

H
STANDARD CHARTERED BANK '"DIRECTORATE OF ENFORCEMENT [BALAKRISHNAN, J.] 67

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

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

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

A full Bench of the Delhi High <:;ourt in Delhi Municiaplity v. J.B.
Bottling Company, (1975) Cr!. L.J. 1148 considered a similar question. The G
respondent-company was found guilty .under Sect_i.on 7 read with Section 16
of the Prevention of Food Adulteration Act, and . was fined rupees five
thousand. The respondent-company filed "an appeal and contended that for
the offence under Section 16 of the Prevention of Food_ Adulteration Act, the
minimum periou of six months imprisonment is pre~cribed_and the company H
68 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A is immune from prosecution as the sentence contemplated under Jaw cannot
be imposed on it. The Court held that:

"The office of the judges is always to make construction as shall
suppress the mischief and advance the remedy and therefore it will
stay its hand in passing the sentence which will be impossible to
B execute but pass only such sentence which can be executed, namely,
fine. The proviso to Section 16 applies only to the three classes of
offences mentioned therein and as compared to the rest of the offences
contemplated by the Act are of less serious nature and if indictment
of the company is confined to only those offences which are covered
c by the proviso, then not only the intention of the legislature is defeated,
but the provisions of Section 16(1-D) and Section 18 are also to that
extent rendered nugatory, insofar as the offences are committed by
the companies".

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

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

l
STANDARD CHARTERED BANK"· DIRECTORATE OF ENFORCEMENT [BALAKRISHNAN, J.) 69

excess of the sentence prescribed is always illegal; but a sentence A
which is less than the sentence prescribed may not in all cases be
illegal."

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

"It seems to us that a reasonable interpretation of the words used does D
not lead to such a result. If we compare Section 5, the application of
one of the penalties rather than of both is made to depend, not on the
character of the defendant, but on the discretion of the Judge; yet,
there, corporations are mentioned in terms. And if we free our minds
from the notion that criminal statutes must be construed by some
artificial and conventional rule, the natural inference, when a statute E
prescribes two independent penalties, is that it means to inflict them
so far as it can, and that, if one of them is impossible, it does not
mean, on that account, to let the defendant escape."

The Counsel for the appellant contended that the penal provision in the
statute is to be strictly construed. Reference was made to Tolaram Relumal F
and Anr, v. The State of Bombay, [1955] l SCR 158 at 164 and Girdhari Lal
Gupta v. D.H. Mehta and Anr., [1971] 3 SCC 189. It is true that all penal
statutes are to be strictly construed in the sense that the Court must see that
the thing charged as an offence is within the plain meaning of the words used
and must not strain the words on any notion that there has been a slip that G
the thing is so clearly within the mischief that it must have been intended to
be included and would have included if thought of. All penal provisions like
all other statutes are to be fairly construed according to the legislative intent
as expressed in the enactment. Here, the legislative intent to prosecute corporate
bodies for the offence committed by them is clear and explicit and the statute
never intended to exonerate them from being prosecuted. It is sheer violence H
70 SUPREME COURT REPORTS (2005] SUPP. I S.C.R.

A to commonsense that the legislature intended to punish the corporate bodies
for minor and silly offences and extended immunity of prosecution to major
and grave economic crimes.

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

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

At page-532 of the same book, observations of Sedgwick are quoted as
under:

E "The more correct version cf the doctrine appears to be that statutes
of this class are to be fairly construed and faithfully applied according
to the intent of the legislature without unwarrantable severity on the
one hand or unjustifiable Jenity on the other, in cases of doubt the
courts inclining to mercy."

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

Even ~or offences under Section 56(l)(ii) FERA· Act, the company
G could be prosecuted as the amount involved is Jess than rupees one lakh and
there is no mandatory sentence of imprisonment and the prescribed punishment
is imprisonment for a term which may extend to three years or with fine or
with both. It is also pertinent to note that the object of the amendment was
to have more stringent provisions where the amount involved in the offence
H is more than rupees one Jak.h. It is not reasonably possible to assume that

.
..•
STANDARD CHARTERED BANK 1•. DIRECTORATE OF ENFORCEMENT [BALAKRISHNAN, J.) 71

...;-;
amendment to the Section was carried out to give immunity to corporate A
bodies from prosecution for serious offences, The scheme of the Indian Penal
Code also would show that for serious and graver offences, mandatory sentence
~
of imprisonment is prescribed and for less serious offences the court is given
a discretionary power of imprisonment or fine.

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

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

The contention of the appellants is that when an offence is punishable
with imprisonment and fine, the court is not left with'any discretion to impose
any one of them and consequently the company being a juristic person cannot
be prosecuted for the offence for which custodial sentence is the mandatory F
punishment. If the custodial sentence is the only punishment prescribed for
the offence, this plea is acceptable, but when the custodial sentence and fine
are the prescribed mode of punishment, the court' can impose the sentence of
fine on a company which is found guilty as the sentence of imprisonment is
· impossible to be carried out. It is an acceptable legal maxim that law does G
not compel a man to do that which cannot possibly be performed [impotentia
excusat legem}. This principle can be found in Bennion's Statutory
Interpretation 4th Edn. At page 969. "All civilized systems of law import the
principle that lex non cogit ad impossibilia." As Patternson, J. said "the law
compels no impossibility". Bennion discussing about legal impossibility at
H
'""'
72 SUPREME COURT REPORTS [2005) SUPP. l S.C.R.

A page 970 states that, "If an enactment requires what is legally impossible it
will be presumed that Parliament intended it to be modified so as to remove
the impossibility element. This Court applied the doctrine of impossibility of
performance [Lex non cogit ad impossibilia} in numerous cases [State of
Rajasthan v. Shamsher Singh, [1985] Supp SCC 416; Special Reference No.
B 1 of 2002 reported in [20021 8 sec 237].

As the company cannot be sentenced to imprisonment, the court has to
resort to punishment of imposition of fine which is also a prescribed
punishment.· As per the scheme of various enactments and aJso the Indian
Penal Code, mandatory custodial sentence is prescribed for graver offences.
C If the appellants' plea is accepted, no company or corporate bodies could be
prosecuted for the graver offences whereas they could be prosecuted for
minor offences as the sentence prescribed therein is custodial sentence or
fine. We do not think that the intention of the Legislature is to give complete
immunity from prosecution to the corporate bodies for these grave offences.
D The offences mentioned under Section 56(1) of the FERA Act, I 973, namely
those under Section 13, clause (a) of sub-section {I) of Section 18; Section
l 8A: clause (a) of sub-section {I) of Section I 9; sub-section (2) of Section
44, for which the minimum sentence of six months' imprisonment is prescribed,
are serious offences and if committed would have serious financial
consequences affectit~g the economy of the country. All those offences could
E b~ 'committed by company or corporate bodies. We do not think that the
legislative intent is not to prosecute the companies for these serious offences,
if these offences involve the amount or value of more than one lakh, and that
th.ey could be prosecuted only when the offences involve an amount or value
less than one lakh.
F
As the company cannot be sentenced to imprisonment, the court cannot
impose that punishment, but when imprisonment and fine is the prescribed
punishment the court can impose the punishment Of fine which could be
enforced against the company. Such a discretion is to be read into the Section
so far as the juristic person is concerned. Of course, the court cannot exercise
G the same discretion as regards a natural person. Then the court would not be
passing the sentence in accordance with law. As regards company, the court
can always impose a sentence of fine and the sentence of imprisonment can
be ignored as it is impossible to be carried out in respect of a company. This
appears to be the intention of the legislature and we find no difficulty in
H construing the statute in such a way. We do not think that there is a blanket
immunity for any company from any prosecution for serious offences merely
STANDARD CHARTERED BANK'" DIRECTORATE OF ENFORCEMENT [DHARMADHIKARI, J.] 73
•
because the prosecution would ultimately entail a sentence of mandatory A
· imprisonment. The corporate bodies, such as a firm or company undertake
series of activities that affect the life, liberty and property of the citizens.
Large scale financial irregularities are done by various corporations. The
corporate vehicle now occupies such a large portion of the industrial,
commercial and sociological sectors that amenability of the corporation to a
B
criminal law is essential to have a peaceful society with stable economy .

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

DHARMADHIKARI J. Leave Granted.
D
I am in respectful agreement with the opinions of my learned Brothers
Balakrishnan and Arun Kumar JJ. would, however, like to support their
conclusion with additional reasons.

Section 56 of the Act read with the aid of the definition of 'person' in
E
General Clause 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. If that is the clear legislative intention, it cannot be inferred that
for an offence involving higher amount, under clause (i) of sub-section (I)
of section 56 of the Act, the company or Corporation will escape from its F
liability only because the punishment provided is 'not less than six months
imprisonment and also fine.' It has to be presumed that the legislature has the
knowledge that a juristic person like company or corporation cannot be
punished with imprisonment. Therefore, a further presumption has to be raised
that the legislature has the knowledge that in case of offences involving G
amounts higher that one lakh of rupees, companies and corporation can be
prosecuted and punished with a sentence which is possible of being imposed
on them. The legislature does not intend an impossible act of imposing
minimum sentence of imprisonment on companies and corporations which
~
are not natural persons.
H
74 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A The rule of interpretation 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 [See : Murlidhar Meghraj Loya v. State
of Maharashtra, (1976] 3 SCC 684. A penal statute has to also be so construed
as to avoid a lacuna and to suppress mischief and to advance a remedy in the
B light of the rule Heydon 's case. A commonsense approach for solving a
question of applicability of a penal statutes is not ruled out by the rule of
strict construction. [See : State of Andhra Pradesh v. Bathu Prakasa Rao,
(1976] 3 SCC 30 I and also G.P. Singh on Principle ofStatut01y Interpretation,
9th Edition, 2004, Chapter 11, Synopsis 3 at pgs. 754 to 756].

C The argument advanced on behalf of the company and corporate bodies
that as the minimum prescribed punishment of imprisonment cannot be
imposed on juristic person like company or ~orporation, section 56 of the Act
cannot be invoked against the company or corporation cannot be accepted.
It is to be noted that there are other provisions in the Act, where on conviction
D of companies or corporations, adverse consequences flow against the offending
companies and corporations such as under Section 69 blacklisting them and
under Section 50 penalising them. The prosecution of the companies and
corporations under section 56 of the Act and imposing on them the punishment
of fine which is possible to be imposed, therefore, is not ruled out. Section
56 of the Act provides for imposition of minimum prescribed sentence of
E 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 statutes. Section 56 cannot be so con~trued as to make it ineffective
against companies and corporations. Merely because there is no specific_
p mention in the section that in the even of breach committed by the companies
and corporations, the punish!Jl.ent 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 in the manner indicated above, would be found workab~e and
capable of fulfilling the object of the Act.
G
ARUN KUMAR, J. C.A.No.1748 of 1999.

Leave Granted

I have had the benefit of going through the judgment prepared by my
H learnd brother K.G. Balakrishnan, J. I am entirely in agreement wit!1 the
-
STANDARD CHARTERED BANK 1·. DIRECTORATE OF ENFORCEMENT [DHARMADHIKARI, J.] 75

view expressed by my learned brother in the said judgment. However, in A
order to highlight certain aspects I have chosen to add the following:

The question for consideration in the appeal is: "Whether a company
or a corporation, being a juristic person, can be prosecuted for an
offence for which mandatory punishment prescribed is imprisonment
and fine"? B
The controversy has arisen in the context of provisions of Section 56
of the Foreign Exchange Regulation Act l 973 (for short 'FERA'). The
appellant Corporation was sought to be prosecuted under said provision for
violation of the relevant provision of the Act. It was contended on behalf of C
the appellant that the appellant being a company cannot be subjected to
criminal action under Section 56 of the FERA because the section prescribes
a minimum sentence of imprisonment and fine and a company cannot be
imprisoned. Section 56 is reproduced as under:

"56. Offences and prosecutions (I) Without prejudice to any award D
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 (I) of section 18, Section l 8A, 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,- E
(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:
F
Provided that the court may, for any adequate and special reasons to
be mentioned in the judgment, impose a sentence of imprisonment
for a term .of less than six months;

(ii) in any other case, with imprisonment for a term which may extend
to three years or with fine or with both. G
(2) .. .

(3) .. .

(4) .. .
H
76 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A (5) .. .

(6) ... "

The main argument advanced on behalf of the appellant in this behalf
is that the statutes creating criminal liability have to be strictly construed.
B When a statute prescribes punishment of imprisonment and fine, it is not
permissible for the court to award punishment of fine alone. A corporation
being a juristic person cannot be awarded the punishment of imprisonment.
The appellants contend that when a statutory provision cannot be complied
with as per its strict language, the consequence should be that there can be
no prosecution. There is no sense in prosecuting somebody when the
C punishment cannot be awarded as per the mandate of the statute. The present
reference to a larger Bench for consideration of this question was made in
view of a three-Judge Bench decision of this Court in Assistant Commissioner,
Assessment-II, Bangalore and Ors. v. Velliappa Textiles Ltd And Anr., [2003]
11 SCC 405 .. In the said judgment two learned Judges who formed the
D majority, took the view favouring the proposition advanced by the appellants,
that is, in such a situation a corporation cannot be prosecuted.

So far the principle regarding strict construction of penal statutes is
concerned there can be no quarrel. However, we need not misapply the
principle. This principle has developed only in the context of the provisions
E in statutes which lay down the elements of an offence and the persons who
can be charged with it. If there is any ambiguity or doubt as to whether in
a given case an offence is made out or not or about who can be an offender
with respect to the given offence, the ambiguity is to be resolved in favour
of the person charged. In Maxwell on 'The Interpretation of Statutes', 12th
F Edition, the rule is stated as under:

"Strict construction of words setting out the elements of an offence

If there is any ambiguity in the words which set out the elements of
an act or omission declared to be an offence, so that it is doubtful
G whether the act or omission in question in the case falls within the
statutory words, the ambiguity will be resolved in favour of the person
charged. This is, in practice, by far the most important instance of
the strict construction of penal statutes."

Various illustrations discussed in Maxwell in this connection deal only with
H cases where there was ambiguity or doubt regarding ingredients or elements
STANDARD CHARTERED BANK 1·. DIRECTORA1E OF ENFORCEMENT [DHARMADHIKARI, J.] 77

of an offence as stated in a statute. Not a single instance has been brought A·
to our notice about the above rule being applied in relation to sentencing part
of penal statutes. Rather in sentencing courts have always enjoyed a certain
amount of discretion. For instance, inspite of a statute prescribing punishment
for an offence the courts have been empowered to grant probation to a person
found guilty in certain cases.
B
We cannot ignore the fact that prosecution, conviction and sentencing
are different stages in a criminal trial. The stage for sentencing is reached
only after a verdict of guilt is pronounced after a full-fledged trial. See
Sec.235 Code of Criminal Procedure. A reference to Section 56 of the Act
itself demonstrates this aspect when the last words in opening part in sub- C
section (I) are:

" .... upon conviction by a court, be punishable ".

Thus the section itself refers to two stages, i.e. the stage up to conviction and
thereafter the stage of punishment. From this it follows that conviction is not D
dependant on sentencing. Rather it is the other way round i.e. sentencing
follows conviction.

The learned counsel appearing for the respondents have demonstrated
the anomalous situation to which the proposition suggested on behalf of the
appellants would give rise to. It was pointed out with reference to Section E
56 of the FERA that for offences where the amount or value involved does
not exceed Rs.one lakh, the punishment can be imprisonment or fine while
when the amount or value involved exceeds Rs. One lakh, punishment by
way of imprisonment and fine is mandatory. For offences under Section 56
where amount or value does not exceed Rs. One lakh, the argument based on
impossibility of levy of punishment by way of imprisonment on a corporation F
does not survive because imprisonment in such a ~ase is not mandatory. If
we accept this argument of appellants result will be that for lesser offences
Corporations can be prosecuted while for graver offences exceeding amount
of Rs. One lakh the Corporations will escape liability. This could never be
the object of the statute. Not only with reference to Section 56 of FERA, this G
anomaly can be demonstrated with reference to other statutes. For instance
under the Employees Provident Fund Act, if the offence is committed second
time imprisonment is mandatory. Corporations are often the offenders under
the said Act. Second offence is taken more seriously and that is why
punishment of imprisonment has been made mandatory. Could it be said that
for first offence a Corporation can be prosecuted and punished while in case H
78 SUPREME COURT REPORTS [2005) SUPP. 1 S.C.R.

A of second offence it goes scot free because imprisonment is a mandatory
sentence in that case?

What follows from this is that for difficulty in sentencing we need not
let the offenders escape prosecution. While laying down criminal liability
the statute does not make any distinction between a natural person and
B Corporations. The Crimninal Procedure Code dealing with trial of offences
contains no provision for exemption of Corporations from prosecution if
there is difficulty in sentencing them as per statute. How can we allow
Corporations to escape liability on this specious plea? In such a situation the
Latin maxim Lex Non Cogit Ad Impossibilia is attracted which means: law
C does not compel a man to do which he cannot possibly perform. Broom's
"Legal Maxims" contains several illustrative cases in support of the maxim.
This maxim has been referred with approval by this Court in State of Rajasthan
v. Shamsher Singh, [1985] suppl. SCC 416.

In. the background of above legal position let us consider Section 56
D of the FERA. First we must find as to who can be the offender. The key
words are: "if any person". The meaning of the word 'person'is to be
gathered. This word has not been defined in the FERA. The definition of
the word 'person' is available in Section 11 of the Indian Penal Code as well
as in Section 3 (42} in the General Clauses Act. Both the definitions are
similar and show that the word 'person' includes any company or association
E or body of persons whether incorporated or not. It follows that the word
'person' here will includes corporation, company or association or body of
persons whether incorporated or not. This makes it clear that a company or
a corporation can bs: subjected to penal liability under Section 56 of the
FERA. In fact, during the course of hearing none of the counsel appearing
p for appellants argued or suggested that Section 56 does not apply to
corporations. Their entire argument to save the corporations from liability
under Section 56 is based on the difficulty of levying mandatory punishment
of imprisonment on corporations when the amount involved exceeds Rs. One
lakh. As a matter of fact, it is not disputed that when the amount involved
does not exceed Rs. One.lakh, a corporation or a company can be prosecuted
G under Section 56.

The question which now arises is can t~e criminal liability created by
the statute be made dependent on the sentencing part contained in the same
statute. In my view the mandate of the provision is quite clear, that is, the
H corporations are liable to be prosecuted for offences under FERA as per
STANDARD CHARTERED BANK 1·. DIRECTORATE OF ENFORCEMENT [DHARMADHIKARI, J.) 79

Section 56 and allowing corporations to escape liability for-prosecution on A
this specious plea based on difficulty in sentencing as per the Section, will
be doing violence to the statute. As already noticed principles of strict
interpretation of criminal statutes require that the substantive offences created
by the statute which does not exclude corporations, should be enforced strictly
and anyone rendering itself liable for action under the said Section, be it a B
corporation or a natural person, should face prosecution, conviction and
sentence. The charging provision contained in Section 56 lays down the
ingredients of the offence in very clear and unambiguous terms. There is no
scope for any doubt that corporations are subject to provision of Section 56
of FERA. The statutory mandate is loud and clear. Any interpretation which
leads to results contrary to the statutory mandate will be in violation of the C
statute.

No difficulty arises when we come to the stage of sentencing after a
finding of guilt if the amount involved does not exceed Rs.one lakh. This
difficulty arises only in cases where amount involved exceeds Rs. One lakh.
Here it may be worthwhile to mention that the original FERA of 1947 did not D
prescribe a mandatory puni"shment ()f imprisonment and fine and therefore,
such a situation was never faced. The 1973 Act sought to make the penal
provision more severe and, therefore, prescribed that in case of high valuation
cases punishment by way of imprisonment and fine, both will be necessary.
When the statutory intention was to make the graver offences punishable E
more severely, are we justified in holding that in such a situation the offender
totally escapes liability? The law cannot be allowed to result in such absurdity.
Such a view in my judgment will -neither be just nor fair nor in accordance
with the law. By a purely technical process of reasoning Corporations should
not be allowed to go scot free._There are several statutes.making corporations
liable for conviction which prescribe punishment by way of imprisonment as F
well as fine. An interpretation as suggested on behalf of the appellant will
result in corporations escaping liability in all cases. Here we may point out
that Section 48 A of the Monopolies and Restrictive Trade Practices Act
1969 specifically makes corporations liablef.or prosecution while at the same
time providing that in case of conviction they;.'ry'.ill be liable to imprisonment G
and also fine. In the face of this specific provision will corporations be
allowed to escape liability on same reasoning as is being advanced here on
behalf of appellants. In my view allowing corporations to escape prosecution
for offences under Section 56 FERA for the only reason that corporations
cannot be punished with imprisonment even though the punishment by way
of fine which is also prescribed under the Section can be levied on them, will · H
. I

80 SUPREME COURT REPORTS [2005] SUPP. t S.C.R.

A be defeating the statutory tnandate regarding bringing to book offenders under
the FERA. For the view I am taking I find support from the view expressed
by the three-Judge Bench in the referring order in this case which is reported
as ANZ Grindlays Bank Ltd and Ors. v. Directorate of Enforcement and
Ors., [2004] 6 SCC 531 wherein it is observed:

B "................... Section 56 of the Act provides for different punishments
for commission of different offences. It is true that in an offence of
this nature a mandatory punishment has been provided for but offences
falling under other part of the said section do not call for mandatory
imprisonment. Section 56 of the Act· covers both cases where an
offender can be punished with imprisonment or fine and a mandatory
c provision of imprisonment and fine. In the event it is held that a case
involving graver offence allegedly committed by a company and
consequently, the persons who are in charge of the affairs of the
company as also the other persons, cannot be proceeded against, only
because the company cannot be sentenced to imprisonment, in our
D opinion, the same would not only lead to reverse discrimination but
also go against the legislative intent. The intention of Parliament is
to identify the offender and bring him to book."

" ................ upon taking recourse to the principle of purposive
construction as has been held by a three-Judge Bench of this Court
E in Bairam Kumawat v. Union of India, an attempt should be made to
make Section 56 of the Act workable. It is possible to read down the
provisions of Section 56 to the effect that when a company is tried
for commission of an offence under the Act, a judgment of conviction
may be passed against it, but having regard to the fact that it is a
juristic person, no punishment of mandatory imprisonment can be
F
imposed."

Another three-Judge Bench of this Court in a judgment in Bairam
Kumawat v. Union of India, [2003] 7 SCC 628, to which I was a party,
observed in the context of principles of statutory interpretation:
G "23. Furthermore, even in relation to a penal statute any narrow and
pedantic, literal and lexical construction may not always be given
effect to. The law would have to be interpreted having regard to the
subject-matter of the offence and the object of the law it seeks to
achieve. The purpose of the law is not to allow the offender to sneak
H
STANDARD CHARTERED BANK''- DIRECTORATE OF ENFORCEMENT [SRIKRISHNA, J.) 8}

out of the meshes of law. Criminal jurisprudence does not say so." A
In M V. Jawali v. Mahajan Borewe/l & Co. and Ors., [1977l 8 SCC
72 this Court was considering a similar situation as in the present case.
Under Section 278 B of the Income Tax Act a company can be prosecuted
and punished for offence committed under Section 276-B, sentence of
imprisonment is required to be imposed under the provision of the statute and B
a company being a juristic person cannot be subjected to it. It was held that
the apparent anomalous situation can be resolved only by a proper
interpretation of the section. The Court observed:

"8. Keeping in view the recommendations of the Law Commission
and the above principles of interpretation of statutes we are..of the
~
C
opinion that the only harmonious construction that can be given to
Section 276-B is that the mandatory sentence of imprisonment "and
fine is to be imposed where it can be imp9sed, namely· on persons
coming under categories (ii) and (iii) above, but where it cannot be
imposed, namely on a company, fine will be the only punishment." D
For the above reasons I reject the argument on behalf of the appellants
that Corporations cannot be prosecuted under Section 56 of the FERA for the
reason that mandatory punishment of imprisonment 'cannot be imposed on
Corporations. I would like to answer the reference accordingly resulting in
the appeal being dismissed. The remaining matters be listed before an E
appropriate Bench for disposal.

SRIKRISHNA, J. Leave granted.

We have had the benefit of reading the opinions expressed by our
esteemed and learned brothers Biilakrishnan, Dharmadhikari and Arun Kumar, F
JJ. With great respect, we are unable to persuade myself to the views expressed
therein.

Brother Balakrishnan, J., has indicated in his judgment the circumstan~es
under which the reference has been made to this larger Bench to reconsider
the correctness of the view expressed by the majority in Assistant G
Commissioner, Assessment "If, Bangalore and Ors. v. Velliappa Textiles Ltd
and Anr. 1

[20031 11 sec 405.
1
H
82 SUPREME COURT REPORTS [2005) SUPP. l S.C.R.
,.....
A Ve/liappa 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
Vel/iappa 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
B 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 .
c 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
D 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 thp offender is a company and
E 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 Vel/iappa to the fact that the said Amendment
Bill had lapsed.

F 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.

G 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 Joubt that Parliament has accepted the view taken in _.,,,
H
STANDARD CHARTERED BANK 1·. DIRECTORATE OF ENFORCEMENT [SRIKRISHNA, J.) 83

the majority in Vel/iappa as correct. Velliappa interpreted the situation arising A
out of a prosecution under Sections 276C, 277, 278 read with Section 2788
of the Income Tax Act, 1961 and the judgment was delivered on 16th
September, 2003. Section 2788 was promptly amended by Parliament by
1
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:
B
"2788 (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
II' 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), C
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
or'sub-section (3) in Section 35 HA by the same Finance (No. 2) Act, 2004. D
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. E
Dundappa Vithappa Udapudi and Anr2).

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 F
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" G
best expounds the role of the court. It is to interpret the law, not to make it.

2[1966] l SCR 145.

H
84 SUPREME COURT REPORTS [2005) SUPP. I S.C.R.

A 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
B 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
C L.J. in Seaford Court Estates ltd. v. Asher3 were pressed into service for
emulation. The view of Denning L.J., that "judicial heroics" were warranted
to cope with the difficulties arising in statutory interpretation, was severely
criticized by the House of Lords in Magor and 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
D 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 '
1
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 Lordship; would be acting in a leg,lslative
E rather than a judicial capacity ifthe 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. v. Presiding Officer, labour Court. 5

The argument of purposive interpretation, therefore, does not appeal
F when the statute in plain terms says :;omething.

INTERPRETATIVE EXERCISE

There aP.pears to be a difference of opinion amongst the learned counsel
assailing the correctness of majority view in Veiliappa as to whether the task
G 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

;[1949) 2 All ER 155 p 164.
4
[1951) 2 All ER 839 (HL).

H 5[1990) 3 sec 682.
STANDARD CHARTERED BANK 1•.DIRECTORATEOFENFORCEMENT[SRIKRISHNA,J.) 85
"imprisonment and fine" as "imprisonment or fine". In our view, such a 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 B
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 "r", then the intention of Parliament would C
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 D'
'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 v. Jugamander La/6 this Court observed: (at
p.5) E

"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."
F
[See also in this connection: Gui Mahmud Shah v. Emperor1 ; Jayaram
Vithoba and Anr v. The State of Bombal; Jagmohan Singh v. State of U.P. 9
and Modi Industries Ltd. v. B.C. Goe/10]

6
(1966] 3 SCR I. G
7
40 Cr.L.J. 1939.

•[1955] 2 SCR 1049 at 1054.

'(1973] l sec 20.
10
( 1983) ITR 496 (Allahabad). H
86 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A Thirdly, if OI) the words used by the legislatu·re 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,
B make up deficiencies which are left there", said the Judicial Committee in
Crawford v. Spooner". In other words, the language of Acts of Parliament
and more especially of the modern Acts, must neithet be extended beyond its
natural and proper limits, in order to supply omissions or defects, nor strained
to meet the justice of an individual case. 12

C "If', said Lord Brougham in Gwynne v. Burnell, 13 '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
D 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 oflate, affords no grounds to justify such a sort of interpretation." 14

The interpretation suggested by the learned counsel arguing against the
E 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
F 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
G
11 (1948) 2 ALL E.R. 825, 830.
12Craies on Statute Law, 7tb Ed. Pp70-71.

13(1840) 7CL and Fin 572, 696.

H 14 (1939) L.R. 66 Ind. App. I, 10 Lord Wright.
STANDARD CHARTERED BANK 1•, DIRECTORATE OF ENFORCEMENT [SRIKRISHNA, J.) 87
connection, Commissioner of Sales Tax v. Union Medical Agency; 15 Kartick A
Chandra v. Harsha M. Dasi; 16 Edmund N. Schuster v. Assistant Collector of
Customs, New Delhi ; 17 State of Maharashtra v. Syndicate Transport, 18 and
Knightsbridge Estates Trust Ltd v. Byrne and Ors., 19] 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 B
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 C
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 'Jmpotentia 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 D
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 E
fallacious mathematical syllogism is put forward in support. The argument is
that the statute mandates ('A + B'); if A is impossible, then A::o. 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. F
In that case, the mathematical logic would break down (Indeterminate + B)
= Iitdeterminate, 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

1
sc19s11 1 sec 51 G
16
AlR 1943 Calcutta 35 at 354
17
AIR 1967 Punjab 189 at 190
18
AIR 63 (1966) Bom 197
19
(1940] 2 ALL ER 401 H
88 SUPREME COURT REPORTS [2005] SUPP. I S.C.R.

A 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 anoth.er
·'B 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
C 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 differenr-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
D 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.
Whateyer i~~erpretation' is given must be.applicable equally in all situations.
E Neith~r this' inaxim, nor any other maxim, enables a Court to interpret a
statute in different ways under different fact situati~ns .•

ARGUMENT OF CONSEQUENCE . 1

A final argument, more .in terrorem than based on reason, put forward
F 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'.
G
JURISPRUDENTIAL PRINCIPLE

Kenny in "The Outlines of Criminal Law" 20 observes as under:

H l0 The Outlines of Criminal Law by Kenny IS 1h ed. Pgs. 73 to 75.
STANDARD CHARTERED BANK'" DIRECTORATE OF ENFORCEMENT (SRJKRISHNA, J.) 89

"Moreover a corporation is devoid not only of mind, but also of A
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 B
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 C
requi5ite legislative changes were introduced in Australia, France (Penal Code
of 1992), Netherlands (the Economic Offences Act, 1950 and Article 5 I of
the Criminal Code) and Belgium (in 1934 Cour de Cassation) is already
referred to in Ve/liappa.

We see nothing special in the Indian context which requires us to take D
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 E
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, l 973 recognises F
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 v. Syndicate Transport, (supra); Edmund N. Schuster v.
Assistant Collector of Customs, New Delhi, (supra) and Kartick Chandra v. G
·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, H
90 SUPREME COURT REPORTS [2005] SUPP. 1 S.C.R.

A 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
B 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 Vel/iappa. It is obvious that notwithstanding such an
amendment made in 1984, a body corporate cannot be visited with
C 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.
D
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.

JUDGMENT

In view of the majority opinion of this Court in the above appeals, the
judgments of this Court in Assistant Commissioner, Assessment-JI, Bangalore
and Ors. v. Ve//iappa Textiles Ltd and Anr., (2003] 11 SCC 405 stands
overruled. All the above appeals and writ petition be now placed for further
hearing before the respective benches.

N.J. Listed for dispo_sed.