TMI Blog1998 (11) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... Venugopal, the learned Counsel for petitioners urged that section 68 is violative of guarantee enshrined under Articles 14 and 21 of the Constitution of India. No doubt, the Act 1973 is included in Schedule IX (Item 100), thereby it has received protection from attack on the constitutional validity in term of Article 31B of the Constitution. Violation complained of however, being to the Basic structure of Constitution, namely Rule of Law, the Court has to quash the impugned legislative provisions. 3. To appreciate the challenge, it would be more appropriate to reproduce the impugned provisions. Section 68. Offences by companies---(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time the contravention was committed, was in charge of and was responsible to, the company for the conduct of business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to punish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayons Ltd.), and (Board of Trustees of the Port of Bombay v. D.R. Nadkarni others), . Impugned and honour of a person by compelling him/her to face expensive, long drawn and unfair trial. Even though there could be acquittal at the end, on establishing want of knowledge, innocent person had to suffer humiliation. Ultimate acquittal could not be a solace in any manner. Moreover, shifting of burden of proof of absence of knowledge has no rational nexus with the act of contravention. Impugned provisions are completely arbitrary and therefore, violative of Article 21. 6. Under the impugned provision only persons incharge and responsible at the relevant time for conduct of business alone are deemed to be held guilty for contravention. So legal fiction comes into operation against the persons indicted only on establishing facts which are appurtenant with the contravention. Article 21 does not prevent indicting persons on such legal fiction. Such persons can successfully resist the prosecution by establishing want of knowledge about the contravention or exercise of due diligence to prevent the same. According to us, such onus on a person is not so heavy. Ordinarily the same could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (1) so as to relieve themselves from the obligation to prove positive act on the part of such persons. Discretion is wide and left to the fancy of the Authority. In the absence of guideline statutorily provided, the exercise is prone to gross abuse. The impugned provisions, therefore, are violative of Article 14 of the Constitution. 10. Before examining the challenge of constitutional validity on the touch stone of Article 14, we have to bear in mind certain norms of judicial scrutiny as enunciated by the Supreme Court in the case of The Superintendent Remembrancer of Legal Affairs v. Girish Kumar Navalkha and others, . The Court has therefore to ascribe a purpose to the statutory classification and coordinate the purpose with the more general purpose of the Act and with other relevant Acts and public policies. How far the Court will go in attributing a purpose which though perhaps not the most probable is at least conceivable and which would allow the classification to stand depends to a certain extent upon its imaginative power and its devotion to the theory of judicial restraint. The Supreme Court (paragraph 10) has recorded Mr. Justice Holmes in urging t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vil sought to be controlled. The possibility of power being abused is no ground for declaring the provisions unconstitutional . 13. Section 56 of the Act of 1973 made every person who contravenes on conviction liable to punishment. When such person as envisaged is a company or association of person, then the liability and punishment have to be governed by special provisions which have been provided by section 68. Strictly speaking, it could not be a substantive. The impugned provision comes into action only when the person contravening is a Company. Merely it notifies the biological person who are liable to be prosecuted and punished a longwith the Company. 14. Company, being a juristic person, functions through human agency. Behind corporate veil, in case of contravention, responsibility could be of group of persons. They may not be identifiable in the ordinary sense of Criminal jurisprudence. Impugned provisions under section 68 therefore, accepts the task to identify them for the purposes of section 56 of the Act 1973. This also promulgates legislative caution to all concerned regarding their liability in case of contravention by the Company. This legislative test for iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Additional Solicitor General, has rightly pointed out that the provisions have held Senior Executive liable for the guilt. This is certainly with a view to ensure faithful compliance of the Act 1973. Obviously, this is with logic to prevent the process of contravention. Therefore, those officials being incharge and responsible of the business, have to exercise the vigil of highest degree to combat the menace. 17. Sarvashree Venugopal and Chinoy then urged that section 56 of the Act 1973 mandatorily provides for imprisonment which company being juristic person cannot suffer. Company, therefore, in the submission of the learned Counsel, cannot be prosecuted for the offence under section 56 of the Act 1973. As a result, section 56 read with section 68 cannot be resorted against the Company. Consequently, even the persons indicted by section 68 cannot suffer prosecution for the contravention of Company. Reliance is placed on the decision in the case of Esso v. Udharam Bhagwandas Japanwalla, reported in 1975 Company Cases 16. It is observed on pg. 31 that- The remarks of L.M. Paranjpe, J., were obiter as the case was decided in the context of the question of liability of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old as it is expedient and feasible for imposing punishment. 20. In case of M. V. Javali, cited supra, the Supreme Court was dealing with the offence and prosecution against the company under section 276B of the Income Tax Act. In paragraph 5 Court has extracted section 278B of the Act which is analogous to impugned provisions of section 68 of the Act, 1973. In paragraph 7 it is observed:- Even though in view of the above provisions of section 278B, a company can be prosecuted and punished for an offence committed under section 278B (besides other offence under the Act) the sentence of imprisonment which has got to be imposed thereunder cannot be imposed, it being a juristic person. This apparent anomalous situation can be resolved needless to say, only by a proper interpretation of the section. The Supreme Court then reproduced the comments of Law Commission and in paragraph-8 recorded the conclusions thus:- 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 278B is that the mandatory sentence of imprisonment and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73. Such has also been Common Law Presumption. Reliance is placed on the following cases (Sriniwas Mall v. Emperor), reported in A.I.R. 1947 Privy Council 135; Nathulal v. State of Madhya Pradesh; State of Gujarat v. Acharya Pande; Kalpnath Rai v. Union of India; Sweet v. Parsley, reported in 1969(1) All. E.L.R. 347. It is submitted that the Mens Rea is an inseparable element of the act of contravention. The Legislature moreover has not excluded the same expressly or by necessary implication. To hold otherwise would result in saddling the person with vicarious penal liability for innocuous acts. Such situation would be disastrous. To fortify, the learned Counsel stressed on (A) Legislative history of section 56(B) inclusion of section 58-59 as a special provisions for the first time in the Act of 1973; and (C) applicability of section 59 to the adjudicating proceedings under section 50 read with section 51. These features, according to learned Counsel, furnish a definite pointer to inclusion of Mens Rea in the commission of offence. 24. It is pointed out that the Supreme Court in the case of State of Maharashtra v. Mayer Hans George, held that Mens Rea is not part of contrave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dictum settled in Mayer Hans George. The elimination being conscious and thoughtful, conveys the legislative intention with entire certainty. In the case of Kalpnath Rai v. State (Through C.B.I.) , the Court has held in paragraph 54: That there is a catena of decisions which has settled the legal proposition that unless the statute clearly excludes mens rea in the commission of an offence the same must be treated as essential ingredient of the criminal act to become punishable. It follows therefrom that the presence or absence of Mens Rea, has to be ascertained from the legislative intention. 26. The Supreme Court in the case of L.I.C. v. Escorts, has also addressed to the situation which could be developed owing to non-compliance of the Act 1973 and observed- Our attention was drawn to the very serious nature of the consequences that follow the failure to obtain the permission of the Reserve Bank, and the circumstance that even the burden of proof that requisite permission had been obtained, was on the person prosecuted or proceeded against for contravening a provision of the Act or Rule or Direction or order made under the Act, thus ruling out Mens Rea as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver in the offence it is required. The learned Counsel gave more stress on sub-section (3) of section 59 which extends the applicability of sub-section (1) (reproduced above) to any proceeding before an adjudicating officer. Section 59, speaks of offences which requires a culpable, mental state. The submission is, the word required has generally been held to mean need . The learned Counsel referred to decisions reported in :- (1) Anglo French Drug Co. v. R.D. Tinaikar; (2) Rekhabohand v. J.R.D Cruz, reported in A.I.R. 1923 Calcutta 223; (3) Basant Lal v. Chakravarty; (4) Subhadran v. Sunder Dass; (5) Arjan Singh v. Kartar Singh; (6) Watney Mann, Ltd., v. Langley, reported in 1963(3) A.U.E.R. 967; and (7) Whitby v. Burt Boulton Ltd., reported in 1947(2) A.U.E.R. 324. As such, Mens Rea is the need of every commission of contravention. Further submission therefore, is Mens Rea though not expressly included in any section, its inclusion is implied in view of incorporation of this section 59. Reliance is placed on a decision in the case of W.R. Bouri v. Chariman Foreign Exchange Regulations Appellate Board, reported in 1985(19) E.L.T. 369 (Punjab Hariyana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while tracing the history of section 56. Section 59 cannot render any aid to include Mens Rea in the provisions whereever it is absent. Section 59 therefore deployed the phraseology- for any offence under this Act which requires a culpable mental state on the part of the accused . It is, therefore, explicit that Mens Rea need to be an ingredient of the offence under the relevant provision. Presence thereof must be inherent. Section 59 cannot sensitive the judicial mind to presume Mens Rea in each offence. Such course would be completely derogatory to very language of section. In the case of Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh, the Supreme Court construed offences under Sea Custom Act are of strict liability, since it is extremely difficult to prove Mens Rea. The submission, however, is that the offences under the Act 1973 are otherwise, since section 59 cast burden on the accused to establish absence of Mens Rea. In view of our discussion the submission is untenable and dictum can be extended to govern the issue before us. 29. The learned Counsel then contended that there is no provision under the Act 1973 which expressly include Mens Rea or Culpable Mental S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 51 of the Act 1973 is complete, the Directorate cannot invoke section 61 to prosecute for the same contravention. Reliance is placed on a decision in the case of (M/s. Rayala Corporation (P) Ltd., and another v. The Director of Enforcement), reported in A.I.R. 1970 Supreme Court 494. The Apex Court was dealing with the scheme under section 23 of the Act of 1947. The Apex Court in para-4 extracted entire section 23 and observed in para-6 that the F.E.R.A. amendment Act of 1957 amended section 23(1) and also introduced section 23-D. It was this amendment that two alternative proceedings for same contravention were provided in section 23(1). In thus, introducing two different proceedings the Parliament put in the forefront proceedings for the penalty to be taken by the Directorate of Enforcement by taking up adjudication, while the punishment to be awarded by the Court upon conviction was mentioned as a second type of proceedings that could be resorted to. Section 23-D(1) is also divisible in two parts. The first part lays down what the Director of Enforcement has to do in order to adjudge a penalty under section 23(1), and the second part contained in the proviso, gives the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Procedure. In view of this, the submission of the learned Counsel that the Directorate could not invoke section 61 for launching prosecution till the completion of adjudication of penalty is totally untenable. 35. Mr. Diwan, learned Counsel attempted to contend that if the Directorate simultaneously is permitted to invoke section 61 for launching prosecution, it would lead to multiplicity of proceedings. If the person is not held responsible for contravention in adjudication proceedings, he had to face prosecution on the same set of facts. Moreover exercise of the Directorate is without any guideline. Reliance is placed on decision in the case of Ramana Dayaram Shetty v. I.A. Authority of India, reported in A.I.R. 1979 B.C. 1628 which dealt the matter of tender of the Government. Submissions are totally untenable in view of the scheme of Act 1973 as discussed above. Mandate of section 56 is clear and absolute and does not leave any scope for the discretion of the Authority. Both the proceedings are statutory permissible and they are not in any manner unjust. Mr. Chandrachud rightly asserted that the parallel proceedings are legally admissible. Learned Counsel sought support fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een perused. The Directorate therein, after giving details of the contravention has stated : And WHEREAS it appears that at the relevant time when the alleged contraventions had taken place, Mr. G.P. Pande, G.M. Investment Banking Division of ANZ Grindlays Bank, Bombay, was in charge of and was responsible to the Bank for the conduct of the business of the said Bank in whole of India and Mrs. Preetha Sundaram, Country Manager, Correspondent Banking Services, Shri Rajagopalan Ramkumar, officer-in-charge, Remittance section Shri Paul Pereira, the then Customer Services Officer, Shri Sunil Ganpat Sawant, Officer Fund Transfer and Shri N.K. Jetly of ANZ Grindlays Bank, Connaught Place, New Delhi, were also responsible for the proper conduct of the business of the said ANZ Grindlays Bank at the relevant time when the aforesaid alleged contraventions had taken place. The learned Counsel has pointed out, except Mr. G.P. Pandey in the notice others were not alleged to be incharge of the business. These other persons therefore cannot be prosecuted pursuant to the notice. They were merely referred to as the persons responsible for the proper conduct of the business. 39. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with section 51 of the Act 1973. Section 68 as caption indicates, deals with the offences by a company. As such, section 68 cannot be invoked for the levy of penalty on the persons indicated by therein. We find considerable force in this submission.. 43. Mr. Chandrachud, learned Additional Solicitor General, made endeavour to resist the submission. According to him, having regard to the placement of section 68 under the legislative scheme of the Act of 1973, the same is equally applicable to penalty proceedings. Caption or title of section in the submission of the learned Counsel is not a part of the provision and cannot be an aid to interpret the provisions. There was a considerable debate on this aspect. We, however, need not detain ourselves. As we get sufficient indication from the provision itself to ascertain its legislative intend. Apart from the caption, subsections (1) and (2) of section 68 specifically record that shall be liable to be proceeded against and punished accordingly . Besides this proviso to sub-section (1) also refers to any such person liable to be punished. These indicators make it apparent that section 68 can be availed only when there is an offence by ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
