STANDARD CHARTERED BANK AND ORS. ETC. v. DIRECTORATE OF ENFORCEMENT AND ORS. ETC

Citation: [2005] SUPP. 1 S.C.R. 49

Court: Supreme Court of India

Bench: N. SANTOSH HEGDE, K.G. BALAKRISHNAN, D.M. DHARMADHIKARI, ARUN KUMAR, B.N. SRIKRISHNA

Case summary

STANDARD CHARTERED BANK AND ORS. ETC. v. DIRECTORATE OF ENFORCEMENT AND ORS. ETC.pdf

Judgment text

STANDARD CHARTERED BANK AND ORS. ETC. v. DIRECTORATE OF ENFORCEMENT AND ORS. ETC. MAY 5, 2005 [N. SANTOSH HEGDE, K. G. BALAKRISHNAN, D. M. DHARMADHIKARI, ARUN KUMAR AND B. N. SRIKRISHNA, JJ. ] Company Laws: Corporate criminal liability-Offence by Company or Corporate body- 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 sentencedto imprisonment, Court can impose punishment offine-Company is not immunedfrom any prosecution for serious offence-Such discretion can be read into statute-Foreign Exchange Regulation Act, I973-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 contended that being a company no criminal action can be initiated against them under Section 56 because the section prescribes a minimum sentence of imprisonment and fine, and a company cannot be imprisoned. The "i question which arose for consideration was whether Company or Corporate body being a juristic person could be prosecuted for offence for which mandatory punishment prescribed is imprisonment and fine. In appeal before the three-Judge-bench of this Court, the Bench doubted the correctness ofAssistant 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 ' 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. -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 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 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] Assistant Commissioner, Assessment-II Bangalore and Ors. v. Yelliappa Textiles Ltd. and Anr. , (2003] 11 SCC 405, overruled. State ofMaharash~ra v. Syndicate Transport, (1963) jlom. L;R. 197; Kusum products Limited v. S. K. Sinha, ITO, Central Circle~}(, Calcutta 126 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 ofMahara~htra v. Jugamander Lal, AI,R (1_966)SC 940; Delhi Municipality v. J. B. Bottling Comp{Jny, (1975) Crl. LJ.

1148 and Oswal Vanaspati and,A(! ied Industries v. Stat~ of Uttar Pr. ,adesh, (1993) 1. Co~p. J,-. J. -172 (All. ), rel_'erred to. United Stales v. Union Supply Company, 54 Law. Ed. 87, referred to. ) .. 2. 1. A company is liable. to be prosecuted and punished for criminal offences. Although there are· earlier authorities to the effect that corporations camioi commit a crime, the generally accepted modern rule 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, 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 STANDARDCHARTEREDBANK1•. DIRECTORATEOF ENFORCEMENT 51 ( .

,-/""' may be criminally liable for the acts of an officer or agent, assumed to be 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 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 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 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] ·- 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 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 ofBombay, [1955) 1 SCR 158 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 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) 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 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 criminal law is essential to have a peaceful society with stable 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] 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 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 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 offences involving an amount or value less than one lakh as the sentence STANDARD CHARTERED BANK"· DIRECTORATEOF ENFORCEMENT 53 prescribed therein is custodial sentence or fine. The intention of the 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 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 Corporation.

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 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 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 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 ofMaharashtra, [1976) 3 SCC 684 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 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 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] 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 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.

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. 'The Interpretation ofStatutes' 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 '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 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 does not exclude corporations, should be enforced strictly and anyone ~ STANDARDCHARTERED BANK'" DIRECTORATEOF ENFORCEMENT 55 rendering itself liable for action under the said section, be it a corporation 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 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 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 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 State ofRajasthan 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 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 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 regarding bringing to book offenders under the FERA. 179-E, F, G, H; 80-AJ ANZ Grindlays Bank Ltd. and Ors. v. Directorate ofEnforcement and Ors. , 12004) 6 SCC 531, relied on. 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 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 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 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 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. 2.

The maxim 'judicis estjust 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) 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 is upheld, it would be impossible to prosecute a number of offenders in STANDARDCHARTEREDBANK 1·. DIRECTORATEOFENFORCEMENT 57 several statutes where strict liability has been imposed by the statute, is 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. Presiding Officer, Labour Court, (1990) 3 SCC 682, referred to. Seaford Court Estates Ltd v. Asher, (1949] 2 All ER 155 and Magor and St. Mel/ons R. D. C. v. Newport Corporation, (1951] 2 All ER 839 (HL), referred to. 4. 1. Reading the words "imprisonment and fine" as "imprisonment or fine" is impermissible. It virtually amounts to rewriting of the section. The Court would be reading the section as applicable to different situations 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 would then become one of putting a fluctuating or varying interpretation on the statute depending upon the circumstances. That is not permissible for the Court, either on principle, or on precedent. While it may be permissible for the court to read the word 'and' as 'or', or vice versa, whatever the interpretation, it must be uniformly applied to all situations. If the conjunction 'and' is read disjunctively as "or", then the intention of Parliament would definitely be defeated as the mandatory term of imprisonment would not be available even in the case of a natural person. [85-A, B, CJ 4. 2. When a statute says the Court shall impose a term of 'imprisonment and a fine', there is no option left in the Court to say that under certain circumstances it would not impose the mandatory term of imprisonment. It is trite principle that punishment must follow the conviction. [85-D] State ofMaharashtra v. Jugamander Lal, (1966) 3 SCR 1; Gui Mahmud Shah v. Emperor, 40 CrL. J.

1939; Jayaram Vithoba and Anr. v. The State of Bombay, (1955) 2SCR1049; Jagmohan Singh v. State ofU. 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 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. 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 juristic person. [87-A, BJ Commissioner of Sales Tax v.

Union Medical Agency, [1981J 1 SCC 51; Kartick Chandra v. j{arsha M. Dasi, AIR (1943) Cal 35; Edmund N. Schuster v. Assistant Collector ofCustoms, New Delhi AIR (1967) Pun 189; State of Maharashtra v. Syndicate Transport, AIR (1966) 63 Born 197, 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 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 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 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 principle as applicable to the instant case. This principle might enable the STANDARD CHARTERED BANK ,. _DIRECTORATEOF ENFORCEMENT 59 Court to resolve the difficulty in construing a statute so that an interpretation is put on the statute which will carry forward the intention of the statue.

However, it is to be remembered that the interpretation put on the statute must be of determinative import in all cases. 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 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 ofCustoms, New Delhi AIR (1967) Pun 189; State of Maharashtra v. Syndicate Transport, AIR (1966) 63 Born 197, referred to. "The Outlines ofCriminal Law by Kenny I5th 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 in W. P. (C) No. 1972 of 1994. WITH C. A. Nos. 1749, I750, I75 I, I944 of 1999, Crl. A. Nos. 685, 684, 688/ 2005, 847 and 848 of 2004 and W. P. (Crl. ) No. 165 of 2004. 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, 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, 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. 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. 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 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 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 person contravenes any ofthe provisions ofthis' Act (other than Section 13, clause (a) of sub-section (1) of section 18, Section 18A, clause (a) of sub-section (I) of section 19, sub-section (2) of section 44 and sections 57 and 58, or of any rule, direction or order made thereunder, he shall, upon conviction by a court, be punishable, - (i) in the case of an offence the amount or value involved in which exceeds one lakh of rupees, with imprisonment for a term which shall not be less than six months, but which may extend to seven years and with fine: Provided that the court may, for any adequate and special reasons to STANDARDCHARTERED BANK 1·. DIRECTORATEOF ENFORCEMENT (BALAKRJSHNAN, J. ] 61 be mentioned in the judgment, impose a sentence of imprisonment for a term of less than six months. (ii)...... (2)...... (3)...... (4)..... . (5)...... (6)......

" The contention of the appellants in other connected matters also is to the same effect that in a case where the offence is punishable with a mandatory sentence of imprisonment,'the company cannot be prosecuted as the sentence 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 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 our decision. The question that arises for consideration is whether a company or 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 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 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 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 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 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 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. 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 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 done by him when exercising authorized powers, and without proof that i1is --;" .. ... STANDARDCHARTEREDBANK''- DIRECTORATEOF ENFORCEMENT [BALAKRISHNAN,J. ) 63 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 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 of the statutes, the word "person" is defined to include a corporation. In Section 11 of the Indian Penal Code, the "person" is defined thus : "The word "person" includes any Company or Association or body of persons, whether incorporated or not. " Therefore, as regards corporate criminal liability, there is no doubt that a corporation or company could be prosecuted for any offence punishable under Jaw, whether it is coming under the strict liability or under absolute liability. Inasmuch as all criminal. and quasi-criminal offences are creatures of 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 ofthe statute but on •.. the establishment of the actus reus. subject to the defence of due diligence. 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 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 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) ofthe 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 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 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.

The legal difficulty arising out of the above situation was noticed by the Law Commission and in its 41 st Report, the Law Commission suggested amendment to Section 62 of the Indian Penal Code by adding the following lines : "In every case in which the offence is only punishable with imprisonment or with imprisonment and fine and the offender is a company or other body corporate or an association of individuals, it shall be competent to the court to sentence such offender to fine only. " This recommendation got no response from the Parliament and_again in its 47th Report, the Law Commission in paragraph 8(3) made the following recommendation : "In many ofthe Acts relating to economic offences, imprisonment is mandatory. Where the convicted person is a corporation, this provision becomes unworkable, and it is desirable to provide that in such cases, it shall be competent to the court to impose a fine.

This difficulty can arise under the Penal Code also, but it is likely to arise more frequently in the case of economic laws. We, therefore, recommend that the following provision should be inserted in the Penal Code as, say, Section 62: (1) In every case in which the offence is punishable with imprisonment only or with imprisonment and fine, and the offender is a corporation, it shall be competent to the court to sentence such offender to fine only. STANDARDCHARTERED BANK"· DIRECTORATEOFENFORCEMENT[BALAKRISHNAN,J. ] 65 (2) In every case in which the offence is punishable with 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 . •· 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. 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 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 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 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 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 ,-,;·• attention to various decisions on the point. ' Different High Courts have taken different views on this question. In State ofMaharasthra v. Syndicate Transport, (1963) Born. L. R.

197, it was held that the company cannot be prosecuted for offences which necessarily entail consequences ofa corporal punishment or imprisonment and prosecuting 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-}{, 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 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. 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 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 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. STANDARD CHARTEREDBANK '"DIRECTORATEOF ENFORCEMENT [BALAKRISHNAN, J. ] 67 ........ It is also pertinent to make reference to the decision of this Court in S,tate of Maharashtra v. Jugamander Lal, AIR (1966) SC 940. That was 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 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 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 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 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. - 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 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 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 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 ofthe 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 by the proviso, then not only the intention ofthe 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, (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 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 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, 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 sentence is the sentence prescribed by Jaw. A sentence which is in l STANDARDCHARTEREDBANK"· DIRECTORATEOFENFORCEMENT [BALAKRISHNAN, J. ) 69 excess of the sentence prescribed is always illegal; but a sentence 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 ofa 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 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 ofthe words used does 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 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 and Anr, v. The State ofBombay, [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 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 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 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 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 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: "The more correct version cfthe 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. " 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 could be prosecuted as the amount involved is Jess than rupees one lakh and there is no mandatory sentence ofimprisonment 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 is more than rupees one Jak. h. It is not reasonably possible to assume that . . . • STANDARDCHARTEREDBANK1•. DIRECTORATEOF ENFORCEMENT[BALAKRISHNAN,J. ) 71 ... ;-; amendment to the Section was carried out to give immunity to corporate 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 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 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 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 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 ofthem and consequently the company being a juristic person cannot be prosecuted for the offence for which custodial sentence is the mandatory 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 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 '""' 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. 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. 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. The offences mentioned under Section 56(1) of the FERA Act, I973, 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 I9; sub-section (2) of Section 44, for which the minimum sentence ofsix 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 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. 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 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 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 STANDARDCHARTERED BANK'" DIRECTORATEOFENFORCEMENT[DHARMADHIKARI, J. ] 73 • because the prosecution would ultimately entail a sentence of mandatory · 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 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 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. 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 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. Ifthat 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 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 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. 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 ofMaharashtra, (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 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]. 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 ofcompanies 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 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. ARUN KUMAR, J. C. A. No. 1748 of 1999.

Leave Granted I have had the benefit of going through the judgment prepared by my learnd brother K. G. Balakrishnan, J. I am entirely in agreement wit! 1 the STANDARDCHARTERED BANK 1·. DIRECTORATEOF ENFORCEMENT[DHARMADHIKARI, J. ] 75 view expressed by my learned brother in the said judgment. However, in 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"? 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 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 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 ofany rule, direction or order made thereunder, he shall, upon conviction by a court, be punishable,- (i) In the case of an offence the amount or value involved in which exceeds one lakh of rupees, with imprisonment for a term which shall not be less than six months, but which may extend to seven years and with fine: Provided that the court may, for any adequate and special reasons to 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. (2)... (3)... (4)... (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. 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 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 ofa three-Judge Bench decision of this Court in Assistant Commissioner, Assessment-II, Bangalore and Ors. v. Velliappa Textiles Ltd AndAnr. , [2003] 11 SCC 405..

In the said judgment two learned Judges who formed the 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 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 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 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 cases where there was ambiguity or doubt regarding ingredients or elements STANDARDCHARTERED BANK 1·. DIRECTORA1EOFENFORCEMENT[DHARMADHIKARI, J. ] 77 of an offence as stated in a statute. Not a single instance has been brought · 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 ofdiscretion. 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. 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 subsection (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 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 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 ofpunishment by way of imprisonment on a corporation 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 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 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 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 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 ofRajasthan v. Shamsher Singh, [1985] suppl. SCC 416. In. the background of above legal position let us consider Section 56 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 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 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 corporations are liable to be prosecuted for offences under FERA as per STANDARDCHARTERED BANK1·. DIRECTORATEOFENFORCEMENT [DHARMADHIKARI, J. ) 79 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.

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 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 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 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 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 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 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 behalfof 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 · . I 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: "................... 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 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 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 in Bairam Kumawat v. Union ofIndia, 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 ofconviction may be passed against it, but having regard to the fact that it is a juristic person, no punishment of mandatory imprisonment can be 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: "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 STANDARDCHARTERED BANK''-DIRECTORATEOFENFORCEMENT[SRIKRISHNA,J. ) 8} out of the meshes of law. Criminal jurisprudence does not say so. " 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 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 ..

~ 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. " 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 appropriate Bench for disposal. SRIKRISHNA, J. Leave granted. We have had the benefit of reading the opinions expressed by our esteemed and learned bro