Case: M.V. Javali Vs. Mahajan Borewell and Company and Others

dealing with social and economic offences committed by Corporations (including companies, firms and association of individuals) if observed that though a company has no physical body and traditional punishments might thus prove ineffective, the real penalty could be inflicted upon its respectability, that is, by way of a stigma. Therefore, it was appropriate that the company itself be punished so that in the public mind the offence would be linked with the name of the Corporation and not merely with the name of the director or manager who might be a non-entity. Punishment of fine in substitution of imprisonment could solve the problem in this behalf. The Commission recommended, apart from introduction of a provision in Section 62 of the Indian Penal Code, appropriate amendments in the Central Excise Act, 1944, Wealth Tax Act, 1957 and Income tax Act, 1961 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. Para 8.1 of the Law Commission Report reads as under: "8.1. An important type of while- collar crime is that committed by Corporations, Since a Corporation has no physical body on which the pain of punishment could be inflicted, not 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 acted for the corporation should be punished. But it is appropriate that the corporation itself, should be punished. In the public mind, the offence should be linked with the name of the corporation, and not merely with the name of the Director or Manger, who may be a non-entity. Punishment of fine in substitution of imprisonment in the case of a corporation could solve the problem in one aspect; but, at the same, it is necessary that there should be some procedure, like a judgment of condemnation, available in the case of an anti- social or economic offence committed by a Corporation. This will be analogous to the punishment of public censure proposed for individuals." * 7. And Para 8.3, to the extent it is relevant for our purposes, reads as under: "8.3. In many of the 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." * 8. Coming now to the principles of interpretation of statutes this Court observed in Siraj-ui-Hag Khan vs. The Sunni Central Board of Wakf U.P. as under: "It is well settled that in construing the provisions of a statute, courts should be slow to adopt a construction which tends to make any part of the statute meaningless or ineffective; and 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." * 9. Again in Union of India Vs. Filip Tiago De Gama this Court observed: "The paramount object in statutory interpretation is to discover what the legislature intended. This intention is primarily to be ascertained form the text of enactment in question. That does not mean the text to be construed merely as a piece of prose, without reference to its nature or purpose. A statute is neither a literary text nor a divine revelation. Words are certainly not crystals, transparent and unchanged as Mr. Justice Holmes has wisely and properly warned (Towne v. Eisjher, 1918 (245) US 418, 425. Learned Hand, J. was equally emphatic when he said Statutes should be construed, not as theorems of Euclid, but with some imagination of the purposes which lie behind them. (Lenigh Valley Coal Co. vs. Yensavage: 218 FR 547 at 553)" * 10. It further observed as under: "If there is obvious anomaly in the application of law the Court could shape the law to remove the anomaly. If the strict grammtical interpretation gives rise to absurdity or inconsistency, the Court could discard such interpretation and adopt an interpretation which will give effect to the purpose of the legislature. That could be done, if necessary even by modification of the language used. (See Mahadeolal Kanodia v. The Administrator General of West Bengal. The legislators do not always deal with specific controversies which the Courts decide. They incorporate general purpose behind the statutory words and it is for the court to decide specific cases. If a given case is well within the general purpose of the legislature but not within the literal meaning of the statute, then the Court must strike the balance." * 11. 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 276B is that the mandatory sentence of imprisonment and fine is to be imposed where it can be imposed, 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. 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 dehors Section 278B or wholly inconsistent with its plain language. 12.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]From a plain reading of the above Section it is manifest that if an offence under the Act is committed by a company the persons who a reliable to be proceeded against and punished are: (i) The company, (which includes a firm); (ii) every person, who at the time the offence was committed, was incharge 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 categories (ii) and (iii), who are for all intents and purpose vicariously liable for the offence, are not arraigned, for it is the company which is primarily guilty of thein 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 276B is that the mandatory sentence of imprisonment and fine is to be imposed where it can be imposed, 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. 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 dehors Section 278B or wholly inconsistent with its plain language.