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TMI Blog2001 (8) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... very case CC No. 1227 of 1995 on 31-10-1995, respondent complainant filed before the said learned Magistrate, what he termed supplementary complaint under Section 200 Cr.P.C. alleging commission of the very offences punishable under Sections 9(1) and 9AA of the Act, but this time, apart from the above said two accused as A-1 and A-2, respondent arrayed A-3 to A-24 several others connected with ITC in various capacities. That very day, i.e. on 31-10-1995, the order-sheet would disclose that the learned Magistrate heard the complainant s counsel, perused the supplementary complaint and the documents produced along with it, referred to the fact that cognizance had already been taken of the offences alleged in the said supplementary complaint, and then concluded that there were grounds to issue process to A-3 to A-24 mentioned in the supplementary complaint, and then directed issuing of summons to the said A-3 to A-24. This was done in the very CC No. 1227 of 1995. 3. The acts of omission and commission attributed to the accused in the main, as well as in the supplementary complaint, related to the same set of acts of commission and omission for one single period, namely for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike the one that was there before the learned Magistrate initiated under Section 200 Cr.P.C., the only course known to law to bring in as accused someone not there at the initial stage, would be by invoking Section 319 Cr.P.C. at the appropriate stage. Entertaining, by the learned Magistrate, of the supplementary complaint, therefore, is not legally sustainable. 6. The offence alleged, by its very nature, can be committed by the Company, namely. ITC. But, the petitioners in these two petitions are now sought, to be arrayed by taking aid of Section 9AA of the Act which reads thus : 9AA. Offences by companies. - (1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence 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 any punishment provided in this Act, if he proves that the offence was committed without his know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 28-2-1983. Sri Aravind Kumar, learned Senior Standing Counsel for the respondent, however would urge that since Section 9AA is only procedural, and it could have retrospective effect. 7. If Section 9AA is substantive law, creating an offence by itself, then, obviously same not having been made retrospective, the said provision, having come into force in December 1985, cannot be applied to the petitioners in respect of the period from 1-10-1975 to 28-2-1983, as that would be violative of Article 20(1) of the Constitution. On the other hand, if the said provision is only procedural, then, same would have retrospective effect, and there would be nothing wrong with application of the said provision in respect of the period prior to the coming into force of the said provision also. 8. If Section 9AA is only procedural and not substantive, there would be no need for the same to be specifically mentioned in the complaint as well as in the order of the learned Magistrate while taking cognizance and directing issuance of the process, as the offence under which the acts of commission and omission of the accused are punishable. The provision in the realm of procedural law only is nei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of the company, would also deemed to be guilty of the offence of which the company is guilty and would be liable to be proceeded against and punished accordingly. What was therefore, an offence merely by the Company earlier is now made an offence by such persons also. It is no defence to say that if the offence was committed without their knowledge, or that they had exercised all due diligence to prevent the commission of such offence, they would escape the net. While prior to introduction of Section 9AA(1), mere knowledge of commission of the offence by the Company still could not make him guilty, after introduction of Section 9AA(1), if a person was in charge and was responsible to the Company for the conduct of the business of the Company at the time the offence was committed, then, mere knowledge of the commission of the offence would render him liable for the offence for which the Company is to be punished. It would be still worse for those covered by sub-section (2), inasmuch as, mere negligence on their part would render them liable for punishment, whereas earlier it was not so. 11. In my opinion, Section 9AA is a substantive law creating, for the first time th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegorically stated in Para 3 at page 113 that the bill which contained the said amending provision of section 9AA and others which eventually became, on passing, Act No. 79 of 1985, did not assign any reason for the amendment, nor did it indicate any object that was to be fulfilled by introducing the amendment including Section 9AA. Thus, the position is that, neither is there any indication by way of reasons and objects in the amending Act, nor is there anything in the language of Section 9AA which would warrant its retrospective operation. It is, therefore, clearly hit by Article 20(1) of the Constitution of India. 21. It can arguably be said that sub-section (1) of Section 9AA contains a proviso whereby lack of knowledge or exercise of, due diligence is permitted to be a defence for the person made liable on account of legal fiction contained in sub-section (1). However, as rightly submitted by learned counsel Shri P. Chidambaram, sub-section (2) does not afford any defence whatsoever provided it is proved that the offence has been committed with the consent or connivance or is attributable to any neglect on the part of any Director, Manager, Secretary or other Officers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sai, learned Counsel appearing on behalf of the Department, submitted that though the Company is legal entity, the functions of the Company are performed in accordance with the desire of the Board of Directors and the Executives and, therefore, the Board of Directors and the Executives are liable for payment of penalty. The submission is only required to be stated to be rejected. It is impossible to accept the claim that the penal liability can be enforced against a person in absence of specific provision under the Statute. Shri Desai then referred to the provisions of Rule 209A. The submission cannot be accepted for more than one reason. In the first instance, Rule 209A was enacted with effect from April 14, 1986. Being a rule for levy of penalty, the rule cannot be construed with retrospective effect. The show cause notice, in the present case, is in respect of evasion of excise duty for the period between January 1, 1981 and November 30, 1985. Rule 209A which came on the statute book for the first time in April, 1986 cannot be attracted to make Directors and Executives liable. What the Bombay High Court said in respect of making the Directors liable for penalty by taking rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly notwithstanding anything contained in sub-section (1). The Madras High Court in the above background, said thus : Before the introduction of this section, a firm alone could have been proceeded against. Therefore, earlier to the introduction of section 278B, the partners could not be prosecuted, but the firm alone could be prosecuted. In case the partners were to be proceeded against in the absence of section 278B, there was no need for the Legislature to have introduced section 278B, as it had been done in 1975. It must also be mentioned here that, in its wisdom, the Legislature has not allowed the prosecution of partners who may be christened as sleeping partners and who may not, in any way, be connected with the conduct of the business of the firm. Section 278B can have no retrospective effect and can operate only with effect from October 1, 1975. Therefore, petitioners Nos. 2 and 3 cannot be prosecuted with the aid of section 278B for an offence under Section 276C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the statute book, would be violative of Article 20(1) of the Constitution. Since the provision concerned is a substantive law, unless it is made retrospective, there is also no scope to apply it to what is done or not done during 1975-1983, since the provision itself came on the Statute Book in 1985. As already noticed, it is not provided to be retrospective. The argument that it is merely procedural and therefore should have retrospective effect, should fail. I am, therefore, of the opinion that, Section 9AA of the Act cannot be pressed into service as against the petitioners. 17. A Full Bench decision of the Patna High Court no doubt supports the submission that Sri Aravind Kumar, learned counsel for the respondent, is making with regard to Section 9AA of the Act being only a procedural law and not substantive law and therefore operates retrospectively. In respect of provisions similar to Section 9AA of the Act, viz., in respect of Section 47 of the Water (Prevention Control of Pollution) Act, 1974, the Patna High Court took a view that the said provision is a rule of evidence. With great respect to the learned judges, I am unable to agree with the said view. The minorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been provided. The Supreme Court referred to what had been said earlier in Satwant Singh case (AIR 1960 SC 266) by the Constitutional Bench to the effect that what is prohibited under Article 20 of the Constitution was the imposition of a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence, and that a law which provides that a minimum sentence of fine on conviction cannot be read as one which imposes a greater penalty than that which might have been inflicted under the law at the time of the commission of the offence where for such an offence there was no limit as to the extent of fine which might be imposed. We are not concerned herein with a provision which, after amendment, deals with imposition of a minimum penalty which was not there prior to amendment. 20. Sri Aravind Kumar, learned counsel for the respondent, then refers to another decision of the Supreme Court in Gurbachan Singh v. Satpal Singh and Others (AIR 1990 SC 209), to the effect that Section 113A of the Evidence Act is procedural and therefore has retrospective application. No support can be derived from this, decision by Sri Aravind Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a retroactive intention to the Legislature when the Amendment Act of 1964 was enacted. The Supreme Court said that, if a statute is curative or merely declares the previous law, retroactive operation would be more rightly ascribed to it than the legislation which may prejudicially affect past rights and transactions. The Supreme Court concluded that the respondent therein, i.e., Smt. Jaikaur was entitled to exercise her right of pre-emption under the first paragraph of clause (b) of sub-section (2) of Section 15 even before the amendment made in 1964, and that, at any rate, whatever doubts that existed were removed by the Amendment Act of 1964 which must be given retrospective operation. If this decision were to be made applicable to the facts of the present case with an understanding as urged by Sri Aravind Kumar, learned counsel for the respondent, then, it must be possible to say that, even without the aid of Section 9AA of the Act, it was possible for all these petitioners to be brought in within the purview of Section 9(1) of the Act, and that, such possibility having been there, all that has now happened is of a clarificatory or a declaratory nature by bringing in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect to the learned Judges who have decided the said case, I am unable to agree with the view taken by the Full Bench of the Patna High Court. The other decisions that are referred to by Sri Aravind Kumar, learned counsel for the respondent, as explained at each stage, are not applicable to the question that has arisen herein. 24. For two reasons I hold that the impugned proceeding needs to be quashed. One is, that the taking of cognizance by the learned Magistrate on what is called supplementary complaint is not permissible in law since, in a case like the present one, the only manner in which additional accused can be brought in is by taking recourse to Section 319 Cr.P.C. at the appropriate stage. The second reason is that, Section 9AA, brought in in the year 1985, is substantive law creating specific offence against two categories of persons specified in sub-sections (1) and (2) of the said Section 9AA for the first time, and is not retrospective in operation, and invoking of the same as against the petitioners in respect of their acts of commission and omission during the period from 1-10-1975 to 28-2-1983 would be violative of Article 20(1) of the Constitution. 25. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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