Rai
Bahadur Seth Shreeram Durgaprasad Vs. Director of Enforcement [1987] INSC 146
(1 May 1987)
SEN,
A.P. (J) SEN, A.P. (J) ERADI, V. BALAKRISHNA (J) CITATION: 1987 AIR 1364 1987
SCR (3) 137 1987 SCC (3) 27 JT 1987 (2) 590 1987 SCALE (1)1081
ACT:
Foreign
Exchange Regulation Act, 1947--Section 23 (1)- 'Whoever'--Interpretation
of--Comprehensive enough to include an association of persons such as a
firm--Does not connote a natural person alone.
HEADNOTE:
The
Director of Enforcement initiated adjudication proceedings against the
appellants--a partnership firm, under Section 23(1), as amended, for failure to
repatriate the full value in foreign exchange earned by it against export
shipments of manganese ore made during 1952-1958, and thereby contravening
Section 12(2), as well as Section 4(1) of the Foreign Exchange Regulation Act,
1947. The appellants did not contest the charge under Section 12(2) of the Act
but questioned the liability of the firm on the ground that the amended Section
23(1) as well as Section 23C introduced by the Amendment Act came into force on
September 20, 1957 and were, therefore, inapplicable to the export shipments
from the year 1952 onwards till that date and if at all, the firm could only be
held liable under the amended Section 23(1) read with Section 23C as from that
date. It was con- tended that the word 'whoever' in sub-section (1) of Section
23 of the Act before its amendment denoted only a natural person, and
association of persons, such as a firm, would not fall within the connotation
of the word 'whoever'. The Director of Enforcement held that the firm and its
partners had deliberately under-invoiced shipments at the time of export and
also diverted the undeclared proceeds to their accounts with foreign banks with
an intention not to repatriate the sale proceeds in the prescribed manner
within the prescribed period in respect of each shipment. He also held that the
two persons in-charge of, and responsible for, the conduct of the business of
the partnership firm during the relevant period did not produce any evidence to
show that the contravention in question had taken place without their knowledge
or that they had exercised due diligence to pre- vent such contravention, and
they were accordingly made liable for contravention of Section 12(2) of the Act
for failure to repatriate the foreign exchange earned on the shipments and a
penalty was imposed on the partnership firm.
138
The Foreign Exchange Regulation Appellate Board, however, disagreed with the
Director of Enforcement, accepted the contention of the appellants and
accordingly reduced the amount of penalty.
The
High Court allowed the appeal of the Director of Enforcement and restored the
original order of the Director of Enforcement.
In
appeal to this Court it was submitted on behalf of the appellants that though
Article 20(1) of the Constitution would not in terms apply, the principles
embodied thereto would still govern and that the word 'whoever' in sub-section
(1) of Section 23 before its amendment by Act XXXIX of 1957 connoted only a
natural person i.e. those who actually contravened the provisions of Section
12(1) of the Act by failure to repatriate full value of foreign exchange earned
or exports and would not take in corporate liability and, therefore, association
of persons, such as a firm, would not fall within the connotation of the word
'whoever', that by the Amendment Act, a new Section 23(1) was substituted and
Section 23C was introduced and the effect of these provisions was that after
September 20, 1987 adjudication proceedings or criminal proceedings could be
taken in respect of a contravention mentioned in Section 23(1), while before
the amendment only criminal proceedings before a court could be instituted to
punish the offender.
On
behalf of the respondents it was contended that on a combined reading of
Section 23(1) and 12(2), the only possible construction was that the word
'whoever' includes a person and, therefore, initiation of adjudication
proceedings against the partnership firm was permissible and sub- section (4)
of Section 23 clearly contemplates prosecution of a company or other body
corporate.
Dismissing
the appeal, this Court,
HELD:
1. It is clear from Sections 4(1), 12(2), 23(1), 23(4) and 23C that the word
'whoever' in sub-section (1) of Section 23 of the Act before its amendment was
comprehensive enough to include an association of persons, such as a firm, and
did not connote a natural person alone. The word 'whoever' in the un-amended
Section 23(1) must be read in juxtaposition with Section 12(2) and must mean
any person who commits a contravention of that Section without exception.
That
must be the legal connotation of the word 'whoever' and it necessarily takes in
corporate liability and includes any association of persons such as a
partnership firm. Such a construction is borne out by the plain language of
sub- section (4) of Section 23 inserted by the Act XXXIV of 139 1950 which
provides that if the person committing an offence punishable under sub-section
(1) of Section 23 is a company or other body corporate, every director,
manager, secretary or other officer thereof, unless he proves that the offence
was committed without his knowledge or that he exercised all due diligence to
prevent its commission, be deemed to be guilty of such offence. The Act,
therefore, clearly contemplated that adjudication proceedings under sub-section
(1) of Section 23 prior to its amendment could be initiated not only against
the person who actually commits contravention but also casts vicarious liability
on an association of persons such as a partnership firm or an artificial 'or a
legal entity like a company. [143FH; 144A-C] The High Court was right in
setting aside the order of the Foreign Exchange Regulation Appellate Board and
restoring that of the Director of Enforcement levying a penalty of Rs.
15,00,000 on the appellants for failure to repatriate foreign exchange in
contravention of Section 12(2) of the Act. The initiation of adjudication
proceedings for failure to repatriate foreign exchange on shipments of
manganese ore prior to September 20, 1957, the date when the Amendment Act came
into force, was permissible. [144D; F] Union of India v. Sukumar Pyne, [1966] 2
SCR 34, referred to.
Criminal
Appellate Jurisdiction: Criminal Appeal No. 627 of 1986.
From
the Judgment and Order dated 7.3. 1986 of the Bombay High Court in CRL. Appeal
No. 119 of 1981.
Ashok
Sen, Kapil Sibbal, A.K. Sanghi and R.L. Sanghi for the Appellants. M.S. Rao,
A.S. Rao and C.V. Subba Rao for the Respondents.
The
Judgment of the Court was delivered by SEN, J. The short question involved in
this appeal by special leave directed against the judgment and order of the
High Court of 'Bombay dated March 7, 1986 is whether the word 'whoever' in
sub-s. (1) of s. 23 of the Foreign Ex- change Regulation Act, 1947 before its
amendment by Act XXXIX of 1957 denoted only a natural person and association of
persons, such as a firm, would not fall within the connotation of the word
'whoever'. By the judgment, a learned Single Judge 140 of the High Court
allowed the appeal of the Director of Enforcement under s. 54 of the Act and
set aside the order of the Foreign Exchange Regulation Appellate Board, Bombay
dated January 30, 1981 and restored the order of the Director of Enforcement
dated August 17, 1978 holding the appellants guilty of contravention of s.
12(2) of the Act read with the notification issued by the Government of India
in the Ministry of Finance, New Delhi dated April 22, 1952 and levying a
penalty of Rs. 15,00,000. By its order the Foreign Exchange Regulation
Appellate Board held that there could be no levy of penalty on the
appellants-firm for failure to repatriate foreign exchange on shipments of
manganese ore made prior to September 20, 1957 i.e. prior to the amendment of s.
23(1) of the Act and the introduction of s. 23C by the Amendment Act and
accordingly reduced the amount of penalty to Rs.3, 10,000. AS a result of the
decision of the High Court, the order of the Director of Enforcement levying a
penalty of Rs. 15,00,000 on the appellants has been re- stored. The facts
giving rise to the appeal are as follows.
Messrs
Rai Bahadur Seth Shreeram Durgaprasad were a partner- ship firm engaged in the
business of winning, extracting and getting manganese ore from their manganese mines
at Tumsar on a very large scale. During the period from 1952 to 1958, the
partnership firm made 52 shipments of manganese ore to various foreign
countries and earned huge amount of foreign exchange. It however failed to
repatriate the full value in foreign exchange against the aforesaid 52
shipments and thereby contravened s. 12(2) of the Act. The Director of
Enforcement accordingly initiated adjudication proceedings against the
appellants under s. 23(1) as amended for contravention of s. 12(2) as well as
s. 4(1) of the Act. The appellants stated before the Director of Enforcement
that they did not contest the charge under s. 12(2) of the Act but questioned
the liability of the firm on the ground that the amended s. 23(1) as well as s.
23C introduced by the Amendment Act came into force on September 20, 1957 and
were therefore inapplicable to the export shipments from the year 1952 onwards
till that date; and if at all, the firm could only be held liable under the
amended s. 23(1) read with s. 23C as from that date. It was contended that the
word 'whoever' in sub-s. (1) of s. 23 of the Act before its amendment denoted
only a natural person and association of persons, such as a firm, would not
fail within the connotation of the word 'whoever'. The Director of Enforcement
by his order dated August 17, 1978 repelled the contention and held that the
firm and its partners had deliberately under invoiced shipments at the time of
export and also diverted the undeclared proceeds to their accounts with foreign
banks with an intention not to repatriate the sale 141 proceeds in the
prescribed manner within the prescribed period in respect of each shipment. He
dealt with the evidence in detail with reference to the books of account and
came to the conclusion that both Durgaprasad Saraf and Umashanker Aggarwal were
in-charge of, and responsible for, the conduct of the business of the
partnership firm during the relevant period. Neither of them produced any
evidence to show that the contravention in question had taken place without
their knowledge or that they had exercised due diligence to prevent such contravention.
They were accordingly made liable for contravention of s. 12(2) of the Act for
failure to repatriate the foreign exchange earned on the aforesaid 52 shipments
and were imposed a penalty of Rs. 15,00,000 on the partnership firm. The
Foreign Exchange Regulation Appellate Board however disagreed with the Director
of Enforcement and accepted the contention of the appellants and accordingly
reduced the amount of penalty to Rs.3, 10,000.
Shri
Asoke Sen, learned counsel appearing for the appellants with his usual fairness
frankly concedes that Art.
20(1)
of the Constitution would not in terms apply but, he contends, the principles
embodied therein would still govern. He has confined his submissions to only
one point, namely, that the word 'whoever' in sub-s. (1) of s. 23 before its
amendment by Act XXXIX of 1957 connoted only a natural person i.e. those who
actually contravened the provisions of s. 12(1) of the Act by failure to
repatriate full value of foreign exchange earned on exports and would not take
in corporate liability and therefore association of persons, such as a firm, would
not fall within the connotation of the word 'whoever'. The learned counsel
further contends that by the Amendment Act, new s. 23(1) was substituted and s.
23C introduced with effect from September 20, 1957 and the effect of these
provisions was that after that date, adjudication proceedings or criminal
proceedings could be taken in respect of a contravention mentioned in s. 23(1)
while before the amendment only criminal proceedings before a Court could be
instituted to punish the offender. We are afraid, the contention cannot
prevail. It is not correct to say that the amended s. 23(1) of the Act does not
apply to contraventions which took place before the Amendment Act came into
force. Shri Madhusudan Rao, learned counsel appearing for the respondents
rightly contends that on a combined reading of ss. 23(1) and 12(2), the only
possible construction is that the word 'whoever' includes a person and
therefore initiation of adjudication proceedings against the partnership firm
was permissible. He draws sustenance from the provision contained in subs. (4)
of s. 23 which clearly contemplates prosecution of a company or other body
corporate. As regards the applicability of the amended 142 s. 23(1) read with
s. 23C with regard to initiation of adjudication proceedings in respect of
contraventions which took place before the Amendment Act came into force, he
rightly contends that the matter is concluded by the decision of this Court in
Union of India v. Sukumar Pyne, [1966] 2 SCR 34.
In
order to appreciate the contentions raised, it is necessary to set out the
statutory provisions insofar as relevant.
"4.
(1) Except with the previous general or special permission of the Reserve Bank,
no person other than an authorised dealer shall ...... sell or lend to, or
exchange with, any person not being an authorised dealer, any foreign exchange.
12.2.
Where any export of goods has been made to which a notification under
sub-section (1) applies, no person entitled to sell, or pro- cure the sale of,
the said goods shall, except with the permission of the Reserve Bank, do or
refrain from doing any act with intent to secure that-- (a) the sale of goods
is delayed to an extent which is unreasonable having regard to the ordinary
course of trade, or (b) payment for the goods is made otherwise than in the
prescribed manner or does not represent the full amount payable by the foreign
buyer in respect of the goods, subject to such deductions, if any as may be
allowed by the Reserve Bank, or is delayed to such extent as aforesaid:
Provided
that no proceedings in respect of any contravention of this sub- section shall
be instituted unless the pre- scribed period has expired and payment for the
goods representing the full amount as afore- said has not been made in the
prescribed manner." Section 23(1) prior to its amendment and the original
sub-s. (3) now renumbered as s.
23(4)
are as follows:
"23.
(1) Whoever contravenes any of the provisions of this Act or of any rule,
direction or order made there under 143 shall be punishable with imprisonment
for a term which may extend to two years or with fine or with both, and any
Court trying any such contravention may, if it thinks fit and in addition to
any sentence which it may impose for such contravention, direct that any
currency, security, gold or silver, or goods or other property in respect of
which the contravention has taken place shall be confiscated.
23.(4).
If the person committing an offence punishable under this section is a company
or other body corporate, every director, manager, secretary or other officer
thereof shall, unless he proves that the offence was commit- ted without his
knowledge or that he exercised all due diligence to prevent its commission, be
deemed to be guilty of such offence.'' Sub-s. (1) of s. 23C is as follows:
"23C.
Offences by companies--(1) If the person committing a contravention is a
company, every person who, at the time the contravention 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 contravention 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 punishment if he proves that the contravention took place without his
knowledge or that he exercised all due diligence to prevent such
contravention." It is clear from these provisions that the word 'whoever'
in sub-s. (1) of s. 23 of the Act before its amendment was comprehensive enough
to include an association of per- sons, such as a firm, and did not connote a
natural person alone. There is no reason why the word 'whoever' in the section
should not receive its plain and natural meaning.
According
to the Shorter Oxford English Dictionary, vol. 2, p. 2543, 'whoever' means' 'any
one who. any who'. The meaning given in Webster Comprehensive Dictionary,
International edn, vol. 2 at p. 1437 is 'any one without exception 'any person
who'. In our judgment. the word 'whoever' in the un-amended s. 23(1) must be
read in juxtaposition with s.
12(2)
and must mean any person who commits a 144 contravention of that section
without exception. That must be the legal connotation of the word 'whoever' and
it necessarily takes in corporate liability and includes any association of
persons such as a partnership firm. That construction of ours is borne out by
the plain language of sub-s.
(4)
of s. 23 inserted by Act XXXIV of 1950. It provides that if the person
committing an offence punishable under sub-s.
(1)
of s. 23 is a company or other body corporate, every director, manager,
secretary or other officer thereof shall, unless he proves that the offence was
committed without his knowledge or that he exercised all due diligence to
prevent its commission, be deemed to be guilty of such offence. The Act therefore
clearly contemplated that adjudication proceedings under sub-s. (1) of s. 23
prior to its amendment could be initiated not only against the person who
actually commits contravention but also casts vicarious liability on an
association of persons such as a partnership firm or an artificial or a legal
entity like a company. It is therefore idle to contend that the appellants were
not liable to pay' penalty for failure to repatriate foreign exchange on 52
shipments of manganese ore effected through the years 1952 to 1958. Upon that
view, the learned Single Judge was right in setting aside the order of the
Foreign Exchange Regulation Appellate Board and restoring that of the Director
of Enforcement levying a penalty of Rs. 15,00,000 on the appellants for failure
to repatriate foreign exchange in contravention of s. 12(2) of the Act.
The
contention of the learned counsel that recourse could not be had to the amended
s. 23(1) read with s. 23C of the Act in respect of the contravention of s.
12(2) for failure on the part of the appellants to repatriate foreign exchange
on shipments of manganese ore made prior to September 20, 1957, and there could
be no initiation of adjudication proceedings under the amended s. 23(1) read
with s. 23C or levy of penalty on the appellants must also fail for another
reason. In Sukumar Pyne's case the Court reversed the decision of the Calcutta
High Court in Sukumar Pyne v. Union of India & Ors., AIR (1962) Cal. 590
striking down s. 23(1)(a) as being violative of Art. 14 of the Constitution.
Regarding
the point, namely, whether s. 23(1)(a) having been substituted by Amendment Act
XXXIX of 1957 would have retrospective operation in respect of the alleged
offence which took place in 1954, the High Court came to the conclusion that the
petitioner had a vested right to be tried by an ordinary court of the land with
such rights of appeal as were open to all and although s. 23(1)(a) was
procedural, where a vested right was affected, prima facie, it was not a
question of procedure. Therefore, the High Court came to the conclusion that
the provision as to adjudication by the 145 Director of Enforcement could not
have any retrospective operation. It was held that 'the impairment of a fight
by putting a new restriction thereupon is not a matter of procedure only'. It
impairs a substantive right and an enactment that does so is not retrospective
unless it says so expressly or by necessary intendment. The Court reversed the
High Court and held that effect of these provisions was that after the amendment
of 1957, adjudication or criminal proceedings could be taken up in respect of a
contravention mentioned in s. 23(1) while before the amendment only criminal
proceedings before a Court could be instituted to punish the offender. In
repelling the contention advanced by Shri N.C. Chatterjee that the new
amendments did not apply to contraventions which took place before the Act came
into force, the Court observed:
"In
our opinion, there is force in the contention of the learned Solicitor-General.
As observed by this Court in Rao Shiv Bahadur Singh v. The State of Vindhya
Pradesh, [1953] SCR 1188, a person accused of the commission of an offence has
no vested right to be tried by a particular court or a particular procedure
except in so far as there is any constitutional objection by way of
discrimination or the violation of any other fundamental right is involved. It
is well recognised that "no person has a vested right in any course of
procedure "(vide Maxwell 11th Edition, p.
216),
and we see no reason why this ordinary rule should not prevail in the present
case.
There
is no principle underlying Art. 20 of the Constitution which makes a right to
any course of procedure a vested right." These principles are clearly
attracted to the facts and circumstances of the present case and therefore the
initiation of adjudication proceedings for failure to repatriate foreign
exchange on shipments of manganese ore prior to September 20, 1957, the date
when the Amendment Act came into force, was permissible.
The
appeal must therefore fail and is dismissed with costs.
N.P.V.
Appeal dismissed.
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