Case: Asstt. Commissioner Vs. Velliappa Textiles Ltd

2. The respondent no.1 in the appeal, M/s. Velliappa Textiles Ltd., is a company registered under the provisions of Companies Act and respondent no.2 Shri C. Velliappa is its Managing Director. For the A.Y. 1985-86 the company filed its return of income tax for the period ending 30.6.1984 showing an income of Rs. 43,940/-. The company had claimed deduction of Rs. 9,16,442/- on account of depreciation and investment allowance, etc. on the ground that two new machines worth Rs. 14,79,589/- were purchased and installed during the previous year relevant to A.Y. 1985-86. The company was asked to produce documentary evidence in support of purchase and installation of the machines but it failed to do so and accordingly the assessing officer disallowed theclaim. After the matter had been remanded by the CIT(A) in the appeal preferred by the assessee, the Assessing Officer made inquiries from M/s. Lakshmi Machine Works Ltd., Coimbatore from whom the machines had allegedly been purchased and from M/s. Voltas Ltd. who had allegedly installed the same. The inquiries revealed that the machines had actually been dispatched to the assessee company on 2.7.1984 and 12.7.1984. The documents produced by M/s. Voltas Ltd. showed that the machines had been installed after the close of the accounting period ending 30.6.1984. When the aforesaid facts were brought to the notice of the assessee company, their authorised representative made a statement that the claim made by them regarding depreciation and other allowances be disallowed. Subsequent thereto, the Commissioner of Income Tax, Bangalore, by his order dated 26.3.1992 accorded sanction for filing of a criminal complaint under Section 276C, 277 read with Section 278B of the Act against the company and its Managing Director (respondents in the appeal). The respondents then filed a petition under Section 482 Cr.P.C. in the High Court for quashing the proceedings of the complaint case which had been instituted against them in the Special Court for Economic Offences at Bangalore. Two pleas were raised before the High Court. The first was that the assessee (respondent No.1) being a company which is a juristic person, it is not liable for criminal prosecution. The second plea was that the sanction granted by the Commissioner, Income Tax, under Section 279 of the Act was invalid as the same was given without affording any opportunity of hearing to them. The High Court relying upon an earlier Division Bench decision of the same Court in P.V. Pai vs. R.L. Rinawma ILR 1993 Kar. 709 held that as the company is a juristic person, it cannot be punished with imprisonment and, therefore, its prosecution was unpurposeful. The High Court further held that since the sanction to prosecute the respondents had been granted without affording them any opportunity of hearing, the principles of natural justice were violated and the order granting sanction was invalid. On these findings, the petition was allowed and the proceedings of the complaint case were quashed. However, liberty was given to the appellants to accord fresh sanction for prosecution of respondent no.2 alone after giving him an opportunity of hearing and thereafter to take appropriate action in accordance with law.

Reasoning:
4. It is a basic principle of criminal jurisprudence that a penal statute is to be construed strictly. If the act alleged against the accused does not fall within the parameters of the offence described in the statute the accused cannot be held liable. There is no scope for intendment based on the general purpose or object of law. If the Legislature has left a lacuna, it is not open to the Court to paper it over on some presumed intention of the Legislature.The maxim "Judicis est jus dicere, non dare" pithily expounds the duty of the Court. It is to decide what the law is and apply it; not to make it.6. The question of criminal liability of a juristic person has troubled Legislatures and Judges for long. Though, initially, it was supposed that a Corporation could not be held liable criminally for offences where mens rea was requisite, the current judicial thinking appears to be that the mens rea of the person in-charge of the affairs of the Corporation, the alter ego, is liable to be extrapolated to the Corporation, enabling even an artificial person to be prosecuted for such an offence. I am fully in agreement with the view expressed on this aspect of the matter in the judgment of brother Mathur, J. What troubles me is the question whether a Corporation can be prosecuted for an offence even when the punishment is a mandatory sentence of imprisonment.recommendations focussed on the fact that the law as it exists renders it impossible for a court of law to convict a Corporation where the statute mandates a minimum term of imprisonment plus fine. It would not be open to the court of law to hold that a Corporation would be found guilty and sentenced only to a fine for that would be re-writing the statute and exercising a discretion not vested in the court by the statute. It is precisely for this reason that the Law Commission recommended that where the offence is punishable with imprisonment, or with imprisonment and fine, and the offender is a corporation, the Court should be empowered to sentence such an offender to fine only. These recommendations have not been acted upon, though several other recommendations made by the 47th Report of the Law Commission have been accepted and implemented by Parliament vide the Taxation Laws (Amendment) Act, 1975. Hence, the state of law as noticed by the Law Commission continues.Though, Javali, (supra) refers to the recommendations of 47th report of the Law Commission of India dated 28.2.1972 in support of its view, I find it difficult to agree with its reasoning. The report of the Law Commission indicates a lacuna in the law and suggests a possible remedy by amending the law. Since the function of the court of law is jus dicere and not jus dare, the court of law cannot read the recommendations of the Law Commission as justifying an interpretation of the Section in tune with them, even when the words of the Section are plain and unambiguous. Though Javali (supra) also refers to the general principles of interpretation of statutes, the rule of interpretation of criminal statutes is altogether a different cup of tea. It is not open to the court to add something to or read something in the statute on the basis of some supposed intendment of the statute. It is not the function of this Court to supply the casus omissus, if there be one. As long as the presumption of innocence of the accused prevails in this country, the benefit of any lacuna or casus omissus must be given to the accused. The job of plugging the loopholes must strictly be left to the legislature and not assumed by thethe legislature has granted discretion to the court in the matter of sentencing it is open to the court to use its discretion. Where, however, the legislature, for reasons of policy, has done away with this discretion, it is not open to the court to impose only a part of the sentence prescribed by the legislature, for that would amount re-writing the provisions of the statute.I am of the view that the Court should be slow in interpreting a penal statute in a manner which would amount to virtual re-writing of the statute to prejudice to the accused.A court cannot breach a casus omissus and no canon of construction permits the court to supply a lacuna in a statute; nor can courts of law fill up the lacuna in an ill-drafted and hasty legislation.The observations in Tolaram Relumal & Anr. vs. The State of Bombay (AIR 1954) SC 496 ), Bijawa Kumar Agarwala vs. State of Orissa (1996) 5 SCC 1 , Sanjay Dutt vs. State through CBI, Bombay (II) (1994) 5 SCC 410 , Niranjan Singh Karam Singh Punjabi, Advocate vs. Jitendra Bhimraj Bijjaya & Others (1990) 4 SCC 76 , make it clear that while interpreting a penal statute, if more than one view is possible, the court is obliged to lean in favour of the construction which exempts a citizen from penalty than the one which imposes the penalty. The observations of Lord Esher, M.R. in formulating, "the settled rule of construction of penal Sections", that "if there is a reasonable interpretation which will avoid and penalty in any particular case, we must adopt that construction. If there are two reasonable constructions, we must given the more lenient one". (See Tuck & Sons vs. Priester (1887) 19 QBD 629 and London & Norm Eastern Railway vs. Berriman (1946) 1 All ER 255.For the aforesaid reasons, I am of the view that the first respondent company cannot be prosecuted for offences under Sections 276C, 277 and 278 read with Section 278 since each one of these Sections requires the imposition of a mandatory term of imprisonment coupled with a fine and leave no choice to the Court to impose only a