Report No. 47
7.54. Inadequacy of sentence-Observations regarding.-
The specific amendments which we are recommending1 will meet a few situations. But we would like to reiterate here our grave concern at some of the grossly inadequate sentences which we have come across in cases relating to economic offences.
1. Para. 7.53, supra.
7.55. It is unfortunately true that some courts do not appreciate the gravity of economic crimes. We came across, for example, a case decided by the Chief Presidency Magistrate of a Presidency town, in which a leading businessman and two other directors of a company were convicted, on a charge of violation of the Provisions of the Foreign Exchange Regulation Act, 1947 and awarded a mild punishment.
The charge was of holding shares in a foreign company between March 29, 1957 and July 31, 1959, without the necessary permission of the Reserve Bank. Each of them was sentenced to pay a fine of Rs. 1,000 or, in default, to undergo regorous imprisonment for three months. The company, which was tried for the same offence, was also fined Rs. 1,000.
The Magistrate, while sentencing the accused, said that the offence seemed to be rather technical in nature. He said that the shares in question were acquired before the 1957 amendment to the Foreign Exchange Regulation Act, 1947 which for the first time introduced the provision about the Reserve Bank's permission. The shares had not been dealt with or disposed of since their acquisition, and their dividends were received through the Reserve Bank. The shares in question were also of a subsidiary company.
Further, the defence advocate had stated that the directors failed to obtain the permission after the coming into force of the amendment, as they were advised by their solicitors that no permission was necessary as the shares had been acquired before the amendment. As the shares had not been dealt with or disposed for all these years, and as the accused seem to have failed to obtain the permission of the Reserve Bank of India on account of erroneous legal belief, the offence was regarded as technical.
7.56. We are, with respect, constrained to observe that the reasons given for awarding a mild sentence in this case, disclose a failure to appreciate adequately the adverse effect of the violations of the Foreign Exchange Act on the national economy. The relevant statutory provision prohibits the acquisition, "holding" and disposal of shares in a foreign company, and there was no basis for supposing that shares acquired before the amendment were exempt from its operation. The fact that the dividends were received through the Reserve Bank was also not relevant to a charge of holding the shares without its permission, and so were most of the other considerations relied on for awarding a mild punishment.