ORDER
Ashok A. Desai, J.
1. The 1st petitioners in both the petitions are Banking Company. Others are their officials. The Reserve Bank of India authorised the Companies to deal with foreign exchange under section 6 of the Foreign Exchange Regulation Act, 1973 (Precisely the Act 1973). According to the respondent-Directorate of Enforcement, the Companies by making certain credits contravened sections 8 and 9. The Directorate therefore, resorted to section 68 and served on the petitioners various Notices purported to be under section 50 read with section 51 (Show Cause Notice), and under proviso to section 61 (Opportunity Notice), of the Act 1973. Petitioner claimed Writ of Prohibition against the proceedings to be initiated pursuant to these Notices. Dr. Chandrachud, the learned Additional Solicitor General questioned the tenability of petitions being premature. Having regard to the nature of challenge, we, however, proceed to deal with the grounds on merit.
2. Mr. Venugopal, the learned Counsel for petitioners urged that section 68 is violative of guarantee enshrined under Articles 14 and 21 of the Constitution of India. No doubt, the Act 1973 is included in Schedule IX (Item 100), thereby it has received protection from attack on the constitutional validity in term of Article 31B of the Constitution. Violation complained of however, being to the Basic structure of Constitution, namely Rule of Law, the Court has to quash the impugned legislative provisions.
3. To appreciate the challenge, it would be more appropriate to reproduce the impugned provisions.
'Section 68. Offences by companies---(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, everyperson who, at the time the contravention was committed, was in charge of and was responsible to, the company for the conduct of 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.
(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order, made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. We mention at this stage that analogous provision in section 23-C was available since 1957 in the preceding, Foreign Exchange Regulation Act, 1947 (Precisely Act 1947).
4. Mr. Venugopal, the learned Senior Counsel has stressed that under the impugned provision of section 68, the accusation is by legal fiction and without there being actual act or omission constituting the contravention on the part of person charged of . As a result, every person is liable to be prosecuted under section 61, simply by virtue of his or her position in the Company. Moreover, burden to prove innocence or exercise of due diligence under proviso to sub-section (1) of section 68 is on the person accused of. Article 21 of the Constitution does not permit prosecution on a legal fiction. Impugned provisions are therefore, not just and fair. 'Due process' doctrine has an application with full force to the principle of 'Procedure Established by Law' as envisaged by Article 21 of the Constitution. Learned Counsel made a reference to the following cases:- (1) Menaka Gandhi v. Union of India, reported in : [1978]2SCR621 ; (2) Sunil Batra v. Delhi Administration, reported in : 1978CriLJ1741 ; (3) (In re, Special Courts Bill, 1978), reported in : [1979]2SCR476 ; (4) Bachan Singh v. State of Punjab, reported in : 1980CriLJ636 ; (5) Kanshi Ram v. Mansa Municipality, reported in : AIR1981SC946 ; (6) Mithu v. State of Punjab, reported in : 1983CriLJ811 ; (7) Olga Tellis v. Bombay Municipal Corporation, reported in : AIR1986SC180 ; and (8) Rajatha Enterprises v. S.K. Sharma, reported in : [1989]1SCR457 . Hardly there could be any debate that the procedure envisaged by Article 21, needs to be just, fair and reasonable.
5. According to the learned Counsel, reputation of individual is more precious than the Right to life. Reference is made in the case of (A.P. Board for Water Pollution Control v. A.P. Rayons Ltd.), reported in : AIR1989SC611 and (Board of Trustees of the Port of Bombay v. D.R. Nadkarni & others), reported in : (1983)ILLJ1SC . Impugned and honour of a person by compelling him/her to face expensive, long drawn and unfair trial. Even though there could be acquittal at the end, on establishing want of knowledge, innocent person had to suffer humiliation. Ultimate acquittal could not be a solace in any manner. Moreover, shifting of burden of proof of absence of knowledge has no rational nexus with the act of contravention. Impugned provisions are completely arbitrary and therefore, violative of Article 21.
6. Under the impugned provision only persons incharge and responsible at the relevant time for conduct of business alone are deemed to be held guilty for contravention. So legal fiction comes into operation against the persons indicted only on establishing facts which are appurtenant with the contravention. Article 21 does not prevent indicting persons on such legal fiction. Such persons can successfully resist the prosecution by establishing want of knowledge about the contravention or exercise of due diligence to prevent the same. According to us, such onus on a person is not so heavy. Ordinarily the same could be discharged.
7. Section 61 deals with the cognizance of offence. In view of sub-section (2), any Court cannot suo motu take cognizance. It is only on a complaint lodged by the officers notified therein. Section 62 has made offence punishable under section 56 as non cognizable within the meaning of Code of Criminal Procedure. Further more, proviso to sub-section (2) of section 61 makes the issuing opportunity notice obligatory in case the contravention is owing to absence of permission. Entire scheme under the Act 1973 has provided adequate safeguard. Besides this, the persons are entitled to avail remedies under Code of Criminal Procedure against the prosecution. We therefore, hold, having regard to the nature of the offence, entire procedure and scheme under the impugned provision is just reasonable and fair and do not violate the 'Due process' doctrine.
8. We are unable to accept the plea that impugned provisions abrogatesprestige or reputation of the official because he/she had to face prosecution.No person can maintain the dignity or cherish prestige by avoiding due process of law. Law being a guardian, it maintains and protects the dignity andhonour of every person. Dignified and honourable persons have to stand thetest and trial articulated by Law. And in obedience, he or she had to submit to theprocess. Cherishing majesty of law and its process is inner core of the dignity ofindividual in a Democratic World, which runs on the wheel of Rule of Law.
9. Mr. Venugopal then contended that sub-section (1) of section 68 (impugned provisions) holds, every person, incharge and responsible to the company for conduct of business, guilty of the offence. Sub-section (2) however, creates liability for certain persons of specific designation, only when they consented to or connived for or neglected the commission of contravention. For these persons the Enforcement Directorate has to establish particular act of commission or omission on their part. However, such obligation is not cast so far as the accusation against the person under sub-section (1) of section 68 is concerned. Moreover, persons of the category under sub-section (2) could also be persons incharge and responsible to the conduct of business of the Company. The Directorate within its discretion can pick up the persons under category of sub-section (2) and place them under category of sub-section (1) so as to relieve themselves from the obligation to prove positive act on the part of such persons. Discretion is wide and left to the fancy of the Authority. In the absence of guideline statutorily provided, the exercise is prone to gross abuse. The impugned provisions, therefore, are violative of Article 14 of the Constitution.
10. Before examining the challenge of constitutional validity on the touch stone of Article 14, we have to bear in mind certain norms of judicial scrutiny as enunciated by the Supreme Court in the case of The Superintendent & Remembrancer of Legal Affairs v. Girish Kumar Navalkha and others, reported in : 1975CriLJ874 .
'The Court has therefore to ascribe a purpose to the statutory classification and coordinate the purpose with the more general purpose of the Act and with other relevant Acts and public policies.'
How far the Court will go in attributing a purpose which though perhaps not the most probable is at least conceivable and which would allow the classification to stand depends to a certain extent upon its imaginative power and its devotion to the theory of judicial restraint.
The Supreme Court (paragraph 10) has recorded
Mr. Justice Holmes in urging tolerance of under -inclusive classifications, stated that such legislation should not be disturbed by the Court unless it can clearly see that there is no fair reason for the law which would not require with equal force its extension to those whom it leaves untouched.
11. Predominant intendment of the Act of 1973 as explicit is the preservation of National Foreign Exchange and its appropriate apportionment for economic development. The Supreme Court in the case of Renusagar Power Co. Ltd. v. General Electric Co., reported in : AIR1994SC860 has recorded that the Foreign Exchange is very much essential for the economic survival of the Nation. With the marching of time, in judicial exercise, we have to look forward and stare at as to how the interpretation will fortify the legislative intendment. Undisputedly, offences under the Act 1973 owing to contravention has altogether different and of intrinsic character. Both in nature and commission they can hardly be compared with others which are mostly common in day to day affairs of the Nation. The commission of offences under the Act 1973 involves extra-ordinary skill and super technical methodology. The contraventions have a devastating effect on the National Economy. Offences under the Act 1973, are comparatively new and sophisticated pattern of Criminology. Its jurisprudence of Penology cannot have usual and traditional attributes of jurisprudence. As such, fastening of criminal liability of offences under the Act 1973 in a strict sense, cannot maintain parity with other ordinary Code of Crime or of Procedure.
12. The Legislative domain enjoins certain flexibility in sovereign discharge. The Supreme Court in the case of Shanti Prasad Jain v. Director of Enforcement, reported in : [1963]2SCR297 in paragraph 7 has observed:
'Foreign Exchange, has features and problems peculiarly its own, and that it forms a class in itself. A law which prescribes a special procedure for investigation of breaches of foreign exchangeregulations will therefore be not hit by Article 14 as it is based on a classification which has a just and reasonable relation to the object of the legislation.'
The Supreme Court in the case of J.K. Industries v. Inspector of Factories and Boilers, reported in : (1997)ILLJ722SC while considering a challenge of violation of Article 14 has observed that 'the reasonableness of the restrictions depends on circumstances obtaining at a particular time and the urgency of the evil sought to be controlled. The possibility of power being abused is no ground for declaring the provisions unconstitutional'.
13. Section 56 of the Act of 1973 made every person who contravenes on conviction liable to punishment. When such person as envisaged is a company or association of person, then the liability and punishment have to be governed by special provisions which have been provided by section 68. Strictly speaking, it could not be a substantive. The impugned provision comes into action only when the person contravening is a Company. Merely it notifies the biological person who are liable to be prosecuted and punished along with the Company.
14. Company, being a juristic person, functions through human agency. Behind corporate veil, in case of contravention, responsibility could be of group of persons. They may not be identifiable in the ordinary sense of Criminal jurisprudence. Impugned provisions under section 68 therefore, accepts the task to identify them for the purposes of section 56 of the Act 1973. This also promulgates legislative caution to all concerned regarding their liability in case of contravention by the Company. This legislative test for identification is well guided and founded. 'Every person' under the impugned provision do not take within its sweep, 'any person' according to choice of the Directorate. Every person need to be such person, who at the relevant time of contravention, was incharge and responsible to company for the conduct of business. The phraseology for the 'business of the company' has a definite connotation. It indicates such business transactions which involves the act of commission or omission which constitutes the contravention. The Directorate can indict every such person who stands to definite test laid down by the impugned provisions Impugned provisions have no arbitrary mechanism so as to result in violation of Article 14 of the Constitution.
15. Sarvashree Venugopal and Chinoy relying on the decision in the case of Giridharilal Gupta v. D. N. Mehta, reported in : [1971]3SCR748 , urged that single person who is over all incharge of the affairs of the company alone could be held responsible. The Supreme Court while examining section 23-C of the Act of 1947 (Analogous to impugned provision under section 68) in relation to contravention by a firm wherein the partner under section 313 of Criminal Procedure Code stated that he alone looked after the affairs of the firm, has observed : (Para 5)
'It seems to us that in the context a person 'in-charge' must meanthat the person should be in over all control of the day to daybusiness of the company or firm. This inference follows fromthe wording of section 23(2)'
'The Supreme Court has further in para 14 observed:
'Therefore, we must hold that the appellant was in charge of thebusiness of the firm within the meaning of section 23-C(1)'
Impugned provisions unequivocally refers to term 'every person' and that certainly connotes purity of number. We cannot be unmindful of advanced business technology in corporate affairs. They are no longer plain and simple like other business of sale and purchase or giving and taking loans. In such set-up, over all incharge cannot be a single person as the act or omission resulting in contravention involve group or chain of transactions and their various intermingled stages. Each person in such set-up could be over all incharge being responsible for that stage and part of transaction.
16. Every omission or commission leading to contravention has a serious repercussions. Mr. Chandrachud, learned Additional Solicitor General, has rightly pointed out that the provisions have held Senior Executive liable for the guilt. This is certainly with a view to ensure faithful compliance of the Act 1973. Obviously, this is with logic to prevent the process of contravention. Therefore, those officials being incharge and responsible of the business, have to exercise the vigil of highest degree to combat the menace.
17. Sarvashree Venugopal and Chinoy then urged that section 56 of the Act 1973 mandatorily provides for imprisonment which company being juristic person cannot suffer. Company, therefore, in the submission of the learned Counsel, cannot be prosecuted for the offence under section 56 of the Act 1973. As a result, section 56 read with section 68 cannot be resorted against the Company. Consequently, even the persons indicted by section 68 cannot suffer prosecution for the contravention of Company. Reliance is placed on the decision in the case of Esso v. Udharam Bhagwandas Japanwalla, reported in 1975 Company Cases 16. It is observed on pg. 31 that-
'The remarks of L.M. Paranjpe, J., were obiter as the case was decided in the context of the question of liability of a company under section 420 of the Indian Penal Code alone and it was rightly held by L.M. Paranjpe, J., that as section 420, Indian Penal Code, made it necessary for the Court to inflict imprisonment, a company could not be indicted under that section.'
The Court was dealing with the offence of cheating under section 417 and 420 of Indian Penal Code which in its very nature involves the mental element of a natural person. However, the authority cannot be extended to support the proposition as urged by learned Counsel.
18. Section 56 provides for imprisonment and with fine. In case of individual person he or she for contravention has to suffer both the sentences. However, in case of contravention by company being a juristic person has to face, prosecution along with those individuals as indicated by the impugned provisions. This situation is not analogous with trial for any other offences under ordinary Penal statute. Here, under section 56 other natural persons along with the company have to face prosecution because of their inter se relation with the conduct of business of a Company. In view of this, to hold that company cannot be prosecuted under section 56 and consequently their officials as well, would substantially damage the legislative scheme. Such a course of interpretation needs to be avoided.
19. In the case of M.V. Javali v. Mahajan Borewell & Co. and others, reported in : [1998]230ITR1(SC) , the Court observed on page 77 that-
'If there is obvious anomaly in the application of law, the Court could shape the law to remove the anomaly. If the strict grammaticalinterpretation 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.'
Rule of interpretation, as laid down, is a pathfinder in critical situation. To harmonize the scheme and to make its operation purposeful, 'Seven years and with fine' a phraseology as deployed in section 56, in case of contravention by a company, need to be read as seven years or with fine. Such a reading into the language according to us, would also be in consonance with the language used in those provisions. Sub-section (1) and (2) of section 68 provides-
'shall be liable to be proceeded against and punished accordingly.'
'Accordingly' we mean and hold as it is expedient and feasible forimposing punishment.
20. In case of M. V. Javali, cited supra, the Supreme Court was dealing with the offence and prosecution against the company under section 276B of the Income Tax Act. In paragraph 5 Court has extracted section 278B of the Act which is analogous to impugned provisions of section 68 of the Act, 1973. In paragraph 7 it is observed:-
'Even though in view of the above provisions of section 278B, a company can be prosecuted and punished for an offence committed under section 278B (besides other offence under the Act) the sentence of imprisonment which has got to be imposed thereunder cannot be imposed, it being a juristic person. This apparent anomalous situation can be resolved needless to say, only by a proper interpretation of the section.'
The Supreme Court then reproduced the comments of Law Commission and in paragraph-8 recorded the conclusions thus:-
'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 278B is that the mandatory sentence of imprisonment and fine is to be imposed where it can be imposed, namely on person coming under categories (ii) and (iii) above, but where it cannot be imposed, namely on a company, fine will be the only punishment.'
21. In the submission of Mr. Venugopal dictum laid down by the Supreme Court in case cited supra cannot be extended to the prosecution under section 56 of the Act 1973. The section at different places has thoughtfully used terminology or and and Legislature intendment is therefore obvious. It suggests and with fine cannot therefore be read as or with fine. Otherwise it would obliterate the legislature's intention. Submission cannot receive judicial acceptance. In Clause (ii) of sub-section (1) of section 56, if offence involves less than one lac, the Court can award only fine or both. Legislature suggested alternative having regard to gravity of contravention. However, it would not indict the Court from reading word and in the same provision as or with a view to remove glaring anomaly and to advance the cause of Legislation.
22. The Full Bench of Allahabad High Court in a similar situation while dealing with the provisions of Prevention of Food Adulteration Act, in thecase of Oswal Vanaspati & Allied Industries v. State of U.P., reported in 1992 Comp Cases 770 observed :-
'It is settled law that sentence or punishment must follow conviction and if only corporal punishment is prescribed a company which is a juristic person cannot be prosecuted as it cannot be punished. If, however, both sentence of imprisonment and fine is prescribed for natural persons and juristic persons jointly then though the sentence of imprisonment cannot be awarded to a company, the sentence of fine can be imposed on it. If the entire prescribed sentence can be awarded to a convicted person then awarding only a part of the prescribed sentence is illegal. But if only a part of the prescribed sentence can be imposed on a convicted person and not the entire sentence prescribed then imposition of that part of sentence cannot be held to be illegal.'
23. Sarvashree Venugopal and Chinoy strenuously urged that the Act 1973 is a Penal Statute and proceedings thereunder are quasi criminal. Punishments prescribed therein are severe. Having regard to these incidents and consistent judicial verdicts, 'Mens Rea' has to be an essential ingredient of contravention under the Act 1973. Such has also been Common Law Presumption. Reliance is placed on the following cases (Sriniwas Mall v. Emperor), reported in A.I.R. 1947 P C 135; Nathulal v. State of Madhya Pradesh, reported in : 1966CriLJ71 ; State of Gujarat v. Acharya Pande, reported in : 1971CriLJ760 ; Kalpnath Rai v. Union of India, reported in : 1998CriLJ369 ; Sweet v. Parsley, reported in 1969(1) All. E.L.R. 347. It is submitted that the Mens Rea is an inseparable element of the act of contravention. The Legislature moreover has not excluded the same expressly or by necessary implication. To hold otherwise would result in saddling the person with vicarious penal liability for innocuous acts. Such situation would be disastrous.
To fortify, the learned Counsel stressed on (A) Legislative history of section 56(B) inclusion of section 58-59 as a special provisions for the first time in the Act of 1973; and (C) applicability of section 59 to the adjudicating proceedings under section 50 read with section 51. These features, according to learned Counsel, furnish a definite pointer to inclusion of Mens Rea in the commission of offence.
24. It is pointed out that the Supreme Court in the case of State of Maharashtra v. Mayer Hans George, reported in : [1965]1SCR123 held that Mens Rea is not part of contravention under section 23 of the Act of 1947. However, in a Bill No. 85 of 1992 introduced in the Parliament, under Clause 50, which corresponds to the present section 56, the definite phraseology deployed was thus :
'If any person contravenes whether knowingly, intentionally or otherwise.'
Submission therefore is that the Bill by adding or otherwise intended to exclude Mens Rea in the commission of contravention. However, the presentAct 1973, which has been outcome of the Bill, in section 56, as codified eliminated the said phraseology 'or otherwise'. It is therefore, explicit that theMens Rea is impliedly included in the commission of contravention. In support, reliance is placed in the case of State of Madhya Pradesh v. NarayanSingh and others, reported in : 1989CriLJ2101 and Nathulal v. State of Madhya Pradesh reported in : 1966CriLJ71 . In Nathulal v. Union of India cited supra, Supreme Court held Mens Rea as an ingredient of offence under section 7 of the Essential Commodities Act. In 1967 'Intentionally and knowingly was introduced in section 7. However, in 1974 the same was deleted. It has restored the position of law as explained in Nathulal. The Supreme Court in 1989 in Narayan Singh, has reiterated the dictum laid down in Nathulal. Position of judicial dictum and Legislative precedents of section 56 of Act 1973 are, however, totally different.
25. Legal position earlier to 1973 as laid down by the Supreme Court in Mayer Hens George was that the contravention was an absolute offence without involvement of any element of Mens Rea. Further note to Clause-50 in the Bill has specifically referred to (a) 'specific provision has been made for the exclusion of Mens Rea.....
The Law Commission relying on the decision in Mayer Hans George case has come to the conclusion that no mens rea is necessary for offence under the Act..... Even though, by virtue of this decision, it canbe argued that Mens Rea is not necessary for the offence under the Act, it is considered necessary to put specifically beyond any doubt that it is not necessary to have mens rea for any offence under the Act.'
It is obvious the term intentionally, knowingly or otherwise was introduced in the Bill to accord legislative sanction to the judicial dictum laid down in Mayer Hans George by way of extraordinary precaution. The Parliament while passing the Act 1973, however, removed the super imposition and thereby reiterated the dictum settled in Mayer Hans George. The elimination being conscious and thoughtful, conveys the legislative intention with entire certainty. In the case of Kalpnath Rai v. State (Through C.B.I.) reported in : 1998CriLJ369 , the Court has held in paragraph 54:
'That there is a catena of decisions which has settled the legal proposition that unless the statute clearly excludes mens rea in the commission of an offence the same must be treated as essential ingredient of the criminal act to become punishable.'
It follows therefrom that the presence or absence of Mens Rea, has to be ascertained from the legislative intention.
26. The Supreme Court in the case of L.I.C. v. Escorts, reported in : 1986(8)ECC189 has also addressed to the situation which could be developedowing to non-compliance of the Act 1973 and observed-
'Our attention was drawn to the very serious nature of the consequences that follow the failure to obtain the permission of the Reserve Bank, and the circumstance that even the burden of proof that requisite permission had been obtained, was on the person prosecuted or proceeded against for contravening a provision of the Act or Rule or Direction or order made under the Act, thus ruling out Mens Rea as an essential ingredient of the offence. It is true that the consequences of not obtaining the requisite permission where permission is prescribed are serious and even severe. It is also true that the burden of proof is on the person proceeded against and that Mens Rea may consequently be interpreted as ruled out.'
Keeping this ratio and the legislative history of section 56 on which heavy reliance was placed, it is amply clear that the Parliament with definite intendment excluded Mens Rea as an essential element in the commission of contravention under section 56 of the Act 1973. Presuming otherwise would tend to defeat the object of the Act 1973 which has made contravention as strict liability.
27. Another submission of Mr. Venugopal and Mr. Chinoy is that for the first time the Act of 1973 has adopted provisions under sections 58 and 59. The first deals with vexatious search etc., by Officers of Enforcement. What is more pertinent that the second deals with the presumption of culpable mental state. This is a complete departure from the legislative intendment as envisaged by the Act 1947. This measure has brought a drastic change in legislative approach and consequently by necessary implication Mens Rea has become the essential ingredient of the commission of the contravention.
Section 58 is brought to prevent vindictive attitude or venom of the officers of the Enforcement Directorate or any person willfully giving false information. The very nature of the offence clearly involves culpable mental state. Section 59 reads thus :-
'Presumption of culpable mental state. (1) In any prosecution forany offence under this Act which requires a culpable mentalstate on the part of the accused, the Court shall presume theexistence of such mental state but it shall be a defence for theaccused to prove the fact that he had no such mental state withrespect to the act charged as an offence in that prosecution.
Explanation- In this section, 'culpable mental state' includes intention,motive, knowledge of a fact and belief in, or reason to believe, a fact.
(3) The provisions of this section shall, so far as may be, apply inrelation to any proceeding before an adjudicating officer asthey apply in relation to any prosecution for an offence under this Act.'
This section empowers the Court in a prosecution to presume culpable mental state whereever in the offence it is required.
The learned Counsel gave more stress on sub-section (3) of section 59 which extends the applicability of sub-section (1) (reproduced above) to any proceeding before an adjudicating officer. Section 59, speaks of offences which requires a culpable, mental state. The submission is, the word 'required' has generally been held to mean 'need'. The learned Counsel referred to decisions reported in :-
(1) Anglo French Drug Co. v. R.D. Tinaikar, reported in : AIR1959Bom21 ; (2) Rekhabohand v. J.R.D Cruz, reported in A.I.R. 1923 Cal 223 (3) Basant Lal v. Chakravarty, reported in : AIR1950Cal249 ; (4) Subhadran v. Sunder Dass, reported in ; (5) Arjan Singh v. Kartar Singh, reported in : [1951]2SCR258 ; (6) Watney Mann, Ltd., v. Langley, reported in 1963(3) A.U.E.R. 967 and (7) Whitby v. Burt Boulton Ltd., reported in 1947(2) A.U.E.R. 324.
As such, Mens Rea is the need of every commission of contravention. Further submission therefore, is Mens Rea though not expressly included in any section, its inclusion is implied in view of incorporation of this section 59. Reliance is placed on a decision in the case of W.R. Bouri v. CharimanForeign Exchange Regulations Appellate Board, reported in . Observations are 'in any case section 59 of the Act provides for the presumption of culpable mental state. It further inter alia provides that it shall be the defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence'. It appears that the learned Judge was dealing with the provisions of section 9 of the Act 1973. This provision deals with restriction on payment. On close scrutiny, obviously, the contravention thereunder does not involve any mental element or mental state. Reliance is then placed on the decision of this Court in the case of Union of India v. Mohibali Roshanali Naser, reported in : 1992(59)ELT403(Bom) , Bombay. The Court while dealing with the order in adjudication proceedings, posed with the question whether it could be said on the basis of findings recorded by the order of adjudication as to whether the petitioners abetted or aided in contravention of the provisions of the Act. The Court observed thus :-
'It is well settled by the various judgements of the Supreme Court that even under section 59 of the F.E.R.A. which applies to adjudication proceedings under section 59(3) of the Act, a culpable mental state on the part of the accused in required. It is further laid down that the Court shall presume the existence of the mental state but is shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged.'
This authority can not render support to a proposition that in every contravention, Mens Rea is necessarily to be presumed. Clause(ii) of section 49 has made abetment as an offence which is made punishable under section 64 of the Act of 1973. The very nature of offence of abetment involves culpable mental state. However, that cannot impliedly be read in every offence or contravention under the Act 1973. The learned Counsel tried to assert that any other construction which will lead to a conclusion of absence of Mens Rea shall make section 59, nugatory, which is not permissible in view of the decision in the case of State of West Bengal v. Anwar Ali Sarkar, reported in : 1952CriLJ510 and Ram Narain v. The State of U.P., reported in : [1956]1SCR664 .
More pertinent question, according to us, is by sensing Mens Rea in every contravention, do we promote or defeat the legislative intendment
28. Exclusion of Mens Rea by definite and necessary implication has been revealed while tracing the history of section 56. Section 59 cannot render any aid to include Mens Rea in the provisions whereever it is absent. Section 59 therefore deployed the phraseology-
'for any offence under this Act which requires a culpable mental state on the part of the accused'.
It is, therefore, explicit that Mens Rea need to be an ingredient of the offence under the relevant provision. Presence thereof must be inherent. Section 59 cannot sensitive the judicial mind to presume Mens Rea in each offence. Such course would be completely derogatory to very language of section. In the case of Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh, reported in : 1964CriLJ234 , the Supreme Court construed offences under Sea Custom Act are of strict liability, since it is extremely difficult to prove Mens Rea. The submission, however, is that the offencesunder the Act 1973 are otherwise, since section 59 cast burden on the accused to establish absence of Mens Rea. In view of our discussion the submission is untenable and dictum can be extended to govern the issue before us.
29. The learned Counsel then contended that there is no provision under the Act 1973 which expressly include Mens Rea or Culpable Mental State. Implied inclusion of Mens Rea is therefore necessary in every offence or contravention, otherwise it would completely frustrate the scheme of section 59. Submission is not well-founded. Presence of Mens Rea as an essential ingredient of commission depends on very nature of the offence. For instance, section 30 refers to, where such national desires to acquire any foreign exchange. Section 47 refers directly or indirectly evade or avoid in any way the provisions of the Act. Section 48 refers to making a false statement, section 49 refers to abetting non compliance and section 58 refers to making a vexatious search or willfully and maliciously giving false information. These are certain contraventions or offences which inherently involve the ingredient of the culpable state of mind. In such or similar circumstances, the Court is Obliged to presume the culpable state of mind of the accused, as envisaged by section 59. Rightly it is contended by Mr. Chandrachud that the offence under section 8 and 9 of the Act of 1973 are absolute when any person without necessary permission commits any of the prohibitive acts.
30. Then it is contended by the learned counsel for the petitioners, that the Company cannot be indicted in an offence which involves Mens Rea unless it is charged with that the offending act or contravention was according to the directive mind and will of the company. Impugned notices do not make any allegation in this regard, and hence they are without any authority. Reliance is placed on a decision in the case of ESSO Standard Inc. v. Udharam Bhagwandas Japanwalla, reported in 1975(45) Comp Cas 16. The submission needs to be rejected since runs on a premise that Mens Rea is a necessary ingredient of commission of every contravention, which we could not approve.
31. In the case of offence of abetment particularly as envisaged by section 49(ii) Mens Rea could be a necessary ingredient. However, the impugned notices do not become invalid or without authority if stipulation in that behalf is absent. As per the scheme of section 59, in a set of circumstances, the Court has to presume the same in the prosecution of the offence. It therefore need not be a matter of accusation in the notices.
32. Learned Counsel Mr. Diwan appearing for the petitioner-Standard & Chartered Bank submitted that unless adjudication under section 50 reads with section 51 of the Act 1973 is complete, the Directorate cannot invoke section 61 to prosecute for the same contravention. Reliance is placed on a decision in the case of (M/s. Rayala Corporation (P) Ltd., and another v. The Director of Enforcement), reported in A.I.R. 1970 S ourt 494. The Apex Court was dealing with the scheme under section 23 of the Act of 1947. The Apex Court in para-4 extracted entire section 23 and observed in para-6 that the 'F.E.R.A. amendment Act of 1957 amended section 23(1) and also introduced section 23-D. It was this amendment that two alternative proceedings for same contravention were provided in section 23(1). In thus, introducing two different proceedings the Parliament put in the forefront proceedings for the penalty to be taken by the Directorate of Enforcement by taking up adjudication, while the punishment to be awarded by the Court upon conviction was mentioned as a second type of proceedings that could be resorted to. Section 23-D(1) is also divisible in two parts. The first part lays down what the Director of Enforcement has to do in order to adjudge a penalty under section 23(1), and the second part contained in the proviso, gives the power to the Director of Enforcement to file a complaint instead of imposing a penalty himself. In our opinion, these two sections 23(1) and 23 D(1) must be read together, so that the procedure laid down in section 23-D(1) is to be followed in all cases in which proceedings are intended to be taken under section 23(1).'
33. Section 23(1) of the Act of 1947 which is partly equivalent to section 56 of the Act of 1973 dealt with penalty and procedure. It laid down under Clause-A, if any person contravenes shall be liable to such a penalty as prescribed therein and under Clause-B upon conviction by a Court punishable with imprisonment.....Section 23(1)A, additionally provided that if for the contravention, penalty is not expressly prescribed, such person upon conviction is liable to be punished with imprisonment. Section 23-D deal with the power to adjudicate which is analogous to section- 51 of the Act of 1973. Crystally, it is therefore, clear that adjudication of a penalty and prosecution for punishment for contravention under the Act of 1947 was one composite scheme. Moreover, one proceeding was made alternative of other. In view of the scheme under the Act 1947 the learned Counsel could have some justification to contend that the prosecution for offence could not be initiated unless the penalty proceedings are complete. But now such a justification is no longer available, in view of drastic change under the Act 1973.
34. The scheme under the Act of 1973 is without any alternative. Preventative measures are more stringent, regard having to growing menace of foreign exchange violation. Section 56 deals with offences and prosecutions. This section opens with the phraseology 'Without prejudice to any award of penalty by the adjudicating officer under this Act, if any person contravenes any of the provisions.....he shall be, upon conviction by a Court, be punishable'. Under the present scheme of the Act, 1973 prosecutions for offences are totally independent from the penalty proceedings. The Prosecutions are not made subject to the result of those proceedings. Further section 53 and 55 independently provide for procedure and power of the Adjudicating Authority. Moreover, in case of penalty, independent remedy of appeal is provided by section 52 and 54 of the Act of 1973. However, in case of punishment on conviction remedy can be availed under Code of Criminal Procedure. In view of this, the submission of the learned Counsel that the Directorate could not invoke section 61 for launching prosecution till the completion of adjudication of penalty is totally untenable.
35. Mr. Diwan, learned Counsel attempted to contend that if the Directorate simultaneously is permitted to invoke section 61 for launching prosecution, it would lead to multiplicity of proceedings. If the person is not held responsible for contravention in adjudication proceedings, he had to face prosecution on the same set of facts. Moreover exercise of the Directorate is without any guideline. Reliance is placed on decision in the case of Ramana Dayaram Shetty v. I.A. Authority of India, reported in A.I.R. 1979 B.C. 1628 which dealt the matter of tender of the Government. Submissions are totally untenable in view of the scheme of Act 1973 as discussed above. Mandate of section 56 is clear and absolute and does not leave any scope for the discretion of the Authority. Both the proceedings are statutory permissible and they are not in any manner unjust. Mr. Chandrachud rightly asserted that the parallel proceedings are legally admissible. Learned Counsel sought support from the following cases : Manohar Lal Bhogilal Shah v. The State of Maharastra, reported in : 1971CriLJ1157 ; P. Jayappan v. S. K. Perumal, reported in : [1984]149ITR696(SC) , Collector of Customs & C.Ex. v. Paradip Port Trust & another, reported in : 1990CriLJ2673 ; and in the case of Tukaram G. Gaokar v. R. N. Shulka, reported in : 1968CriLJ1234 .
36. Next, it is contended by Mr. Diwan, the learned Counsel that the Company is entitled to be heard pursuant to the opportunity notice under section 61 of the Act of 1973. This submission is also devoid of logic. Opportunity of being heard before launching a prosecution is not ordinarily known to any penal jurisprudence. Proviso to sub-section (2) of section 61 has a special feature. This, it appears, has been incorporated having regard to the nature of offence. Opportunity as envisaged is for a limited purpose. In case any prohibitive act is done without permission, it has been made obligatory on the part of the Directorate to give an opportunity to such a person of furnishing such requisite permission if available. The intendment of giving such opportunity is that the person infact having the requisite permission need not suffer the prosecution. However, it does not and cannot any way envisage any hearing or addressing the authority.
37. Mr. Diwan, thereafter contended that the company is an authorised dealer under section 6 of the Act 1973. Sub-section (3) of section 6 provides necessary safeguard, such as revoking of authorisation in public interest or on non-compliance of any of the condition. As such, in the submission of learned Counsel, prosecution for contravention is totally unnecessary. Submission has hardly any merit. Revocation of authorisation for the grounds shall in future dis-entitle the dealer from further dealing in foreign exchange. However, it is neither a penalty nor a punishment for commission of contravention. For such contravention, the person concerned is liable to be penalised in addition to revocation of the authorisation.
38. Contention of Mr. Venugopal, learned Counsel, is that the phrase 'responsible to and incharge of in section 68 need to be read conjunctively and not distinctively. As such to indict the officer of the company he/she has to be responsible as well incharge of the conduct of business of company. The allegations in the notices are not in compliance with the requirement of section 68 and they are therefore, liable to be quashed.
One of the notice at pg. 51 (Exh. A-1) have been perused. The Directorate therein, after giving details of the contravention has stated :
'And WHEREAS it appears that at the relevant time when the alleged contraventions had taken place, Mr. G.P. Pande, G.M. Investment Banking Division of ANZ Grindlays Bank, Bombay, was in charge of and was responsible to the Bank for the conduct of the business of the said Bank in whole of India and Mrs. Preetha Sundaram, Country Manager, Correspondent Banking Services, Shri Rajagopalan Ramkumar, officer-in-charge, Remittance section Shri Paul Pereira, the then Customer Services Officer, Shri Sunil Ganpat Sawant, Officer Fund Transfer and Shri N.K.Jetly of ANZ Grindlays Bank, Connaught Place, New Delhi, were also responsible for the proper conduct of the business of the said ANZ Grindlays Bank at the relevant time when the aforesaid alleged contraventions had taken place.'
The learned Counsel has pointed out, except Mr. G.P. Pandey in the notice others were not alleged to be incharge of the business. These other persons therefore cannot be prosecuted pursuant to the notice. They were merely referred to as the persons responsible for the proper conduct of the business.
39. Further it is submitted, a decision in the case of Agarwal Trading Company v. Assistant Collector, Customs, Calcutta, reporter in : 1973CriLJ474 as relied by the respondent, has no application. This judgment according to learned Counsel cannot throw any light on the interpretation of section 68(1) of the Act of 1973, since the only issue before the Court was relating to the adjudication proceedings against the firm.
40. True it is, however, the Supreme Court in case cited supra in para-7 has considered the scheme of erstwhile provisions under section 23-C of the Act of 1947 which are analogous to the present section 68. It recorded thus :-'In our view, the explanation to section 23-C clearly negatives this contention, in that a company for the purposes of that section is defined to mean any body corporate and includes a firm or other association of individuals and a Director in relation to a firm means a partner in the firm. The High Court was clearly right in holding that once it is found that there has been a contravention of any of the provisions of the Foreign Exchange Regulation Act read with Sea Customs Act by a firm, the partners of it who are in charge of its business or are responsible for the conduct of the same, cannot escape liability, unless it is proved by them that the contravention took place without their knowledge or they exercised all due diligence to prevent such contravention.'
41. Obviously, section 68 refers to incharge of and was responsible to. These words are synonymous and in a common parlance are mutually exchangeable. A person incharge of the business has always to be responsible therefor. And the person responsible is necessarily to be incharge of the business. Moreover, whether the person is incharge of the conduct of business can conveniently be gathered from his position in the company. It can be seen that in the notice the position of each person in relation to the business of the Bank at the relevant time of contravention, has specifically been stipulated. At the dose of the paragraph of the notice reproduced above, it is further alleged that they were responsible for the proper conduct of the business of the bank. We, therefore, do not feel any latent or patent detect in the notice.
42. Section 68 of the Act of 1973, it is contended by Sarvashree Venugopal and Chinoy, has no application to the penalty proceedings under section 50 'read with section 51 of the Act 1973. Section 68 as caption indicates, deals with the offences by a company. As such, section 68 cannot be invoked for the levy of penalty on the persons indicated by therein. We find considerable force in this submission..
43. Mr. Chandrachud, learned Additional Solicitor General, made endeavour to resist the submission. According to him, having regard to the placement of section 68 under the legislative scheme of the Act of 1973, the same is equally applicable to penalty proceedings. Caption or title of section in the submission of the learned Counsel is not a part of the provision and cannot be an aid to interpret the provisions. There was a considerable debate on this aspect. We, however, need not detain ourselves. As we get sufficient indication from the provision itself to ascertain its legislative intend. Apart from the caption, subsections (1) and (2) of section 68 specifically record that 'shall be liable to be proceeded against and punished accordingly'. Besides this proviso to sub-section (1) also refers to any such person liable to be punished. These indicators make it apparent that section 68 can be availed only when there is an offence by a company where the person indicated are liable to be punished. As such, its application cannot be extended to the penalty proceedings.
44. There is another reason for its non-application. Provision under section 68 has a special task. Section 56 which deals with the offences and prosecution against any person whoever contravenes. Such person is liable to be imprisoned on conviction. Company, being a juristic person, cannot suffer the imprisonment. Section 68 therefore, springs into operation to identify every person who is liable to be punished of imprisonment for the contravention by the company. However, penalty can be saddled on the company (being any person) if it has contravened. Section 50 does not refer to every person as envisaged by section 68. As such, section 68 cannot be availed to indict the officials of the company for the purposes of penalty. Further more, section 50 lays down the outer limit of penalty. Such penalty can be imposed against the company being a person contravening the Act of 1973. Such penalty, if section 68 is extended would be leviable against each person so indicted. And this will create a serious anomaly. Mr. Chandrachud tried to urge, even if section 68 ipso facto is not applicable to the penalty proceedings, principle therein can be extended being a procedural. We are unable to agree.
45. Even if notices so issued purported to be under section 68 for the purposes of penalty under section 50 and 51, the proceedings do hot become bad or illegal. The authorities shall have a due regard to the provisions under section 50 and 51 while imposing penalty against the company, being the only person contravening the Act.
46. In view of this, we do not find any merit or substance in these petitions. Hence they are hereby dismissed. Rule is discharged. P.C.
On the oral prayer of the learned Counsel for the petitioners, the interim relief, as granted earlier, to continue for a period of four weeks from today. Certified copy expedited.
47. Petitions dismissed.