2005 (5) TMI 327 - SC - Companies Law

Whether a company or a corporate body could be prosecuted for offences for which the sentence of imprisonment is a mandatory punishment? 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? Held that - 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. Thus would like to answer the reference accordingly resulting in the appeal being dismissed. The remaining matters be listed before an appropriate Bench for disposal.

Issues Involved:
1. Whether a company or a corporate body can be prosecuted for offences for which the sentence of imprisonment is a mandatory punishment.
2. Interpretation of Section 56 of the Foreign Exchange Regulation Act, 1973 (FERA Act) regarding corporate criminal liability.
3. The impact of the judgment in Asstt. Commissioner v. Velliappa Textiles Ltd. on the prosecution of companies.
4. Legislative intent and judicial function in interpreting penal statutes.
5. Application of legal maxims and principles in the context of corporate criminal liability.

Issue-wise Detailed Analysis:

1. Whether a company or a corporate body can be prosecuted for offences for which the sentence of imprisonment is a mandatory punishment:
The primary question addressed was whether a company could be prosecuted for offences mandating imprisonment. The court examined the precedent set in Velliappa Textiles Ltd., where it was held that companies could not be prosecuted for offences requiring mandatory imprisonment coupled with a fine. The court overruled this view, holding that companies could indeed be prosecuted, and when imprisonment is impossible, a fine should be imposed instead. The court emphasized that law does not compel the impossible, invoking the maxim "impotentia excusat legem."

2. Interpretation of Section 56 of the Foreign Exchange Regulation Act, 1973 (FERA Act) regarding corporate criminal liability:
Section 56 of the FERA Act prescribes imprisonment and fine for offences involving amounts exceeding one lakh rupees. The court interpreted that while companies cannot be imprisoned, they can be fined. The court noted that the legislative intent was not to exempt companies from prosecution for serious offences. Therefore, the court can impose a fine on companies, even if imprisonment is mandated for natural persons.

3. The impact of the judgment in Asstt. Commissioner v. Velliappa Textiles Ltd. on the prosecution of companies:
The court critically analyzed the Velliappa Textiles Ltd. judgment, which had held that companies could not be prosecuted for offences mandating imprisonment. The court found this view untenable, as it would lead to companies escaping liability for serious offences. The judgment was overruled to ensure that companies could be prosecuted and fined, even if they could not be imprisoned.

4. Legislative intent and judicial function in interpreting penal statutes:
The court emphasized that the legislative intent was to hold companies accountable for serious offences. It rejected the argument that the absence of explicit provisions for fining companies in lieu of imprisonment indicated legislative intent to exempt them. The court underscored its role in interpreting, not rewriting, statutes, and held that it was within judicial discretion to impose fines on companies when imprisonment was not feasible.

5. Application of legal maxims and principles in the context of corporate criminal liability:
The court applied the maxim "lex non cogit ad impossibilia" (the law does not compel the impossible) to justify imposing fines on companies instead of imprisonment. It also invoked the principle of purposive construction to ensure that the legislative intent of prosecuting companies for serious offences was fulfilled. The court rejected the notion that penal statutes must be interpreted so strictly as to allow offenders to escape liability due to technicalities.

Conclusion:
The Supreme Court held that companies can be prosecuted for offences under the FERA Act, and when imprisonment is not feasible, fines should be imposed. The court overruled the Velliappa Textiles Ltd. judgment, ensuring that companies could not escape liability for serious offences. The decision emphasized the legislative intent to hold companies accountable and the judicial role in interpreting statutes to fulfill this intent.

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