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TMI Blog1997 (9) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ed:- 26-9-1997 - M. JAGANNADHA RAO. and M. K. MUKHERJEE. JUDGMENT Special leave granted. Heard learned counsel for the parties. The appellant, who is an Assistant Commissioner of Income-tax, filed a complaint in the Special Court for Economic Offences at Bangalore alleging commission of an offence under section 276B, read with section 278B, of the Income-tax Act, 1961 (" the Act " for short), by Borewell and Co., a registered partnership firm (respondent No. 1), and its three partners (respondents Nos. 2 to 4). The Special Court took cognizance of the offence alleged and issued process against the respondents for their attendance. After entering appearance they filed an application praying for their discharge under section 245(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal. Section 276B lays down that if a person fails to pay to the credit of the Central Government, the tax deducted at source by him as required by or under the provisions of Chapter XVII-B [which includes section 194C(2) for violation of which the prosecution in the instant case was lodged] he shall be punished with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine. Section 278B reads as under : " 278B. (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 deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which includes a firm); (ii) 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; and (iii) any director (who in relation to a firm means a partner), manager, secretary or other officer of the company with whose consent or connivance or because of neglect attributable to whom the offence has been committed. The words " as well as the company " appearing in the section also make it unmistakably clear that the company alone can be prosecuted and punished even if the persons mentioned in the categories (ii) and (iii), who are for all intents and purposes vicariously liable for the offence, are not arraigned, for it is the company which is primarily guilt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961, on the lines of section 93 of the Gold (Control) Act, 1968. The provisions contained in section 278B of the Act appear to be based on the recommendations of the Law Commission. Paragraph 8.1 of the Law Commission Report reads as under : " 8.1. An important type of white-collar crime is that committed by corporations. Since a corporation has no physical body on which the pain of punishment could be inflicted, nor a mind which can be guilty of a criminal intent, traditional punishments prove ineffective, and new and different punishments have to be devised. The real penalty of a corporation is the diminution of respectability, that is, the stigma. It is now usual to insert provisions to the effect that the director or manager who has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or ineffective; an attempt must always be made so to reconcile the relevant provisions as to advance the remedy intended by the statute. In such a case, it is legitimate and even necessary to adopt the rule of liberal construction so as to give meaning to all parts of the provision and to make the whole of it effective and operative. " Again in Union of India v. Filip Tiago De Gama of Vedem Vasco De Gama, AIR 1990 SC 981, this court observed : " The paramount object in statutory interpretation is to discover what the Legislature intended. This intention is primarily to be ascertained from the text of the enactment in question. That does not mean the text is to be construed merely as a piece of prose, without reference to its nature or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the only harmonious construction that can be given to section 276B is that the mandatory sentence of imprisonment and fine is to be imposed where it can be imposed, namely, on persons coming under the categories (ii) and (iii) above, but where it cannot be imposed, namely, on a company, fine will be the only punishment. We hasten to add, two other alternative interpretations could also be given : (i) that a company cannot be prosecuted (as held in the impugned judgment); or (ii) that a company may be prosecuted and convicted but not punished, but these interpretations will be de hors section 278B or wholly inconsistent with its plain language. For the foregoing discussion, we are unable to sustain the impugned order of the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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