2004 INSC 0724
                                    SUPREME COURT OF INDIA

                                       Anz Grindlays Bank Limited

                                                      Vs.

                                       Directorate of Enforcement

                                           C.A.No.1748 of 1999

                                 (N. Santosh Hegde and S.B.Sinha JJ.)

                                                 16.07.2004

                                                JUDGMENT

1. The matters are referred to a Constitution Bench for an authoritative pronouncement on
the subject. Records be placed Hon'ble the Chief Justice of India for appropriate orders.

2. Mr. K.K. Venugopal, learned Senior Counsel appearing on behalf of the appellants, raised
several contentions in support of the appeal; one of them being that having regard to the fact
that as the offence is said to have been committed by a Company; and as in terms of Section
56 of the Foreign Exchange Regulation Act, 1973, (for short "the Act") the punishment of
mandatory imprisonment has to be imposed; no criminal proceedings can be initiated against
the Company and in that view of the matter no person referred to in sub-sections (1) and (2)
of Section 68 thereof can also be proceeded with.

3. In support of the said contention therein reliance has been placed on a recent three Judge
Bench decision of this Court in Assistant Commissioner, Assessment-II, Bangalore and
Others Vs. Velliappa Textile Ltd. and Another [ ]. We do not prima facie agree with the ratio
laid down in Velliappa Textile (supra).

4. In this case the company is the 'authorised dealer' within the meaning of Section 2(b) of
the Act. The authorised dealer undisputedly is required to comply with the statutory
requirements contained in Section 8, 9 and 49 of the Act read with Chapter X of the RBI
Manual. The contraventions of the provisions of the Act having been allegedly taken place at
the hands of the authorised dealer, that is, the petitioner no. 1, and, thus, although it is a
company it is liable to be proceeded with. Section 56 of the Act provides for different
punishment for commission of different offences. It is true that in an offence of this nature a
mandatory punishment has been provided for but offences falling under other part of the said
section do not call for mandatory imprisonment. Section 68 of the Act covers both cases
where an offender can be punished with imprisonment or fine and a mandatory provision of
imprisonment and fine. In the event it is held that a case involving graver offence allegedly
committed by a company and consequently the persons who are in charge of the affairs of the
company as also the other persons cannot be proceeded against, only because the company

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cannot be sentenced to imprisonment, in our opinion, would not only lead to reverse
discremination but also go against the legislative intent. The intention of the parliament is to
identify the offender and bring it to the book.

5. In order to make the statute workable, the Court should, thus take recourse to such
principles of interpretation of statute as may be necessary, keeping in view the doctrine of
UT RES MAGIS VALEAT PEREAT.

6. In that view of the matter upon taking recourse to the principle of purposive construction
as has been held by a three Judge Bench of this Court in Balram Kumawat Vs. Union of
India & Ors, , Section 56 of the Act can be made workable. It may, therefore, be possible to
read down the provisions of Section 56 to the effect that when a company is tried for
commission of an offence under the Act the judgment of conviction may be passed against it,
but having regard to the fact that it is a juristic person and thus punishment of mandatory
imprisonment cannot be imposed.

7. Further more, even if the company cannot be punished, the same may not mean that the
other persons referred to under Sub-sections (1) and (2) of Section 68 can also be punished.

8. We may at this juncture notice that Mr. Malhotra, learned ASG appearing for the
respondents submitted that a judgment of conviction and an order of sentence pertain to two
different stages of the trial. Learned counsel in support of the said submission brought our
attention to Section 69 of the Act which provides for certain consequences on passing of an
order of conviction and only because the sentence of imprisonment cannot be imposed upon
the company, the same may not mean that the company cannot be convicted. We are,
therefore, of the opinion that the correctness of the decision of this Court in Assistant
Commissioner, Assessment-II, Bangalore and Others Vs. Velliappa Textile Ltd. and Another1
requires consideration by the Constitution Bench. We are, therefore, of the opinion that the
matter may be referred to a Constitution Bench for an authoritative pronouncement on the
subject and the records be placed before Hon'ble the Chief Justice of India for appropriate
orders.

1(2003) 22 SCC 405

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