Arunachalam J.
1. The petitioners, the respondent as well as the offences alleged against the petitioners, are the same. The only difference is the assessment year during which the offences are stated to have been committed. The questions urged are common and hence these petitions are disposed of together.
2. Criminal M. P. No. 7309 of 1985 invokes the inherent powers of this court under section 482, Criminal Procedure Code, to call for the records in C. C. No. 140 of 1985, pending on the file of the Sub-Divisional Judicial Magistrate, Nagapattinam, and quash the proceedings therein, as not maintainable and an abuse of process of court. The private complaint instituted by the respondent who is the Income-tax Officer, Circle I(1), Thanjavur, alleges commission of offences by the petitioners punishable under sections 193, 196 and 420 of the Indian Penal Code and under sections 276C(1) and 277 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 1973-74.
3. The prayers in the other criminal miscellaneous petitions are the same, but they relate to C. C. Nos. 141, 142, 158 and 159 of 1985 pending on the file of the same court, the assessment years being 1975-76, 1974-75 1976-77 and 1977-78, respectively.
4. Certain brief facts will have to be narrated for the disposal of these petitions. The first petitioner is a transport company at Thanjavur, now dissolved, which has been described in the complaints as a partnership firm constituted under the Indian Partnership Act, 1932, and assessed to income-tax on the income from passenger bus transport from October 11, 1968. The firm stood dissolved with effect from January 1, 1977. The second petitioner, at the relevant time, was the managing partner of the first accused firm, while the third petitioner, daughter of the second petitioner, was one of the partners of the said firm.
5. The assessee-firm was making purchase of spare parts as well as getting its vehicles repaired and bodies built for its fleet of vehicles by T.V. Sundaram Iyengar and Sons Ltd., Pudukottai. The assessee was having an account with T. V. Sundaram Iyengar and Sons Ltd., Pudukottai, for this purpose. The Income-tax Officer issued a letter dated March 21, 1979, to T.V. Sundaram Iyengar and Sons Ltd., Pudukottai, calling for a copy of the current account of the first accused firm as appearing in their books during the period April 1, 1973, to January 2, 1977. By their letter dated April 13, 1979, T. V. Sundaram Iyengar and Sons Ltd., furnished a statement of accounts as appearing in their books in the name of the first accused firm. On comparing the account copy received from T.V. Sundaram Iyengar and Sons Ltd., with the account appearing in the books of the first accused firm, the Income-tax Officer found wide variation in the closing balance, for the assessment years referable to these prosecutions.
6. The Income-tax Officer issued a letter to the first accused firm on May 26, 1979, requesting it to reconcile the difference in account within 15 days of receipt of that letter and also to furnish an account copy of T.V. Sundaram Iyengar and Sons Ltd., as appearing in its books. In its reply dated June 20, 1979, delivered on June 21, 1979, the second petitioner, as the managing partner of the first accused firm, stated that they had not carefully preserved the records relating to the firm, since the firm had been dissolved, and, therefore, at that point of time, they were not in a position to explain how the difference between the figures shown as due by T. V. Sundaram Iyengar and Sons Ltd., and as shown by them in their accounts as dues, has arisen. Further with a view to purchase peace and also since the entire accounts were not available at that point of time, he (A- 2) was submitting revised returns of income voluntarily, treating cccthe differences for every assessment year as profits during that year. The assessments for the relevant years which had already been completed were reopened under section 147(a) of the Act, to assess the escaped income during every period. The reopened assessments were also completed accepting the revised returns.
7. According to the averments in the complaints, a closer scrutiny of the accounts revealed several omissions and commissions in recording the financial transactions with T.V. Sundaram Iyengar and Sons Ltd. The books of account belonging to the first accused firm impounded by the Department from the residence of the second petitioner (A-2) revealed false entries and deliberate omissions of many remittances made to T.V. Sundaram Iyengar and Sons Ltd. It was under those circumstances that these five complaints were instituted on the ground that the petitioners, with a view to evade income-tax and defraud the exchequer of their legitimate revenue and to mislead and deceive the Income-tax Officer, acting in concert and in furtherance of their common intention, had committed the offences alleged. A further specific allegation has been made in their complaints, that the second petitioner who was the managing partner of the first accused firm had made a false verification in the return of income of the firm for each one of the assessment years and had thus committed an offence punishable under section 277 of the Act.
8. Mr. S. V. Subramaniam learned senior counsel appearing on behalf of the petitioners, in each one of these cases formulated three contentions for scrutiny by this court. Before formulating the three contentions, learned counsel argued that the case against each of the petitioners for each assessment year has to be dealt with separately, since there was a change in law, in between the assessment years, for which the petitioners are sought to be prosecuted. As a corollary, he added that if the charge against the firm (A-1) had to fail, logically the prosecution will have to fail against the two other accused.
9. Contention No. 1 : All sections under which the complaints have been laid provide, on conviction, for a mandatory award of imprisonment and fine as sentence. A firm cannot be imprisoned and hence the firm cannot be prosecuted ;
10. Contention No. 2: The third petitioner was a minor when the partnership deed was entered into on October 11, 1968, her date of birth being October 21, 1952. She attained majority only on October 21, 1970, and hence the firm constituted under the deed of partnership dated October 11, 1968, was illegal and not valid in law. Therefore, when there was no legal or valid firm in the eye of low, the question of prosecuting the said entity would not arise. Further, on the basis that the firm was illegal and not valid in law, the Department refused registration to the firm under the Income-tax Act for the assessment years 1971-72, 1972- 73 and 1973-74 which was upheld by the Income-tax Appellate Tribunal by its order dated January 10, 1987. While so, the respondent cannot proceed on the basis that, for the purpose of prosecution, there was a valid firm in existence, for a firm has to necessarily act through one of its partners. The firm cannot be said to have any guilty mind, since only a human being could have mens rea. Therefore, if mens rea cannot be imputed to the firm in relation to offences for which it was being prosecuted, the prosecution itself will not be maintainable ; and
11. Contention No. 3 : Section 278B of the Income-tax Act, which was inserted by the Taxation Laws (Amendment) Act, 1975 (Central Act 41 of 1975), with effect from October 1, 1975, has been invoked for charging petitioners Nos. 2 and 3 for the alleged commission of an offence under section 276C(1) which itself was brought into the statute book only with effect from October 1, 1975. Since the law in force on the date of the commission of the offence alone will be applicable, and as these sections, which have been invoked for prosecuting petitioners Nos. 2 and 3, were not existing prior to October 1, 1975, these two petitioners cannot be prosecuted for an offence under section 276C(1) of the Act for the three assessment years 1973-74, 1974-75 and 1975-76. Even otherwise, as far as the third petitioner, a lady, is concerned, in the absence of allegations in the complaints that she took active interest and was in charge of and responsible to the company for the conduct of the business of the company, she cannot be made liable for the offences alleged. All the documents and returns have been signed by the second petitioner alone and that was one other ground to exclude this petitioner from these prosecutions. As far as the second petitioner is concerned, if a firm did not exist in law, he cannot be considered as a partner especially when the Department has chosen to christen A-1 as a firm. The respondent was stopped from prosecuting the second petitioner, as the managing director of the firm, after having pleaded before the Tribunal that the firm was not valid in the eye of law. In any event, the revised returns were filed by the second petitioner on the basis of the discussion he had with the officer concerned, when the amounts shown were accepted. Therefore, the question of prosecution would not arise.
12. Mr. K. Ramaswami appearing on behalf of the respondent, conceded that in respect of the assessment years 1973-74, 1974-75 and 1975-76, section 276C of the Act which was inserted with effect from October 1, 1975, was not available to the prosecution and, therefore, to that limited extent the pending prosecutions cannot be maintained. He strenuously contended that the company was not exempted from indictment, although the sentence prescribed was both imprisonment and fine, mandatorily, for the sentence to be imposed on the company can be limited to fine alone, since the artificial juridical person cannot be sent to jail. He urged that, while interpreting the punishment part of the section, 'and' has to be read as 'or' for implementing the intended object of the concerned provision.
13. On the second contention, he referred to sections 183 and 186(3) of the Act to contend that in the event of cancellation of registration of a firm for any assessment year, the Income-tax Officer should amend the assessments of the firm and its partners, for that assessment year, on the footing that the firm was an unregistered firm. According to learned counsel, it was the option of the Income-tax Officer under section 184 of the Act, to treat the firm as registered for, certain special concessions flow out of such registration. He also pointed out that an application for registration under section 184(4) of the Act had to be made before the end of the previous year for the assessment year in respect of which registration was sought. Applications so made had to be signed by all the partners (not being minors) personally under section 184(3)(a) of the Act. Though the third petitioner was a minor on October 11, 1968, she had chosen to sign the application form. The cancellation of registration was on the ground that she could not have signed the concerned applications while she was a minor. Learned counsel went on to add that even after the dissolution of the firm, proceedings can be initiated under the Act as if discontinuance had not taken place and, therefore, there can be no question of estoppel.
14. On the individual liability of the partners referable to the third contention, he urged that when the second petitioner had made the verification, he gets included in the definition of 'person' under section 2(31) of the Act. The individual liability under section 277 of the Act was irrespective of the liability of the company. Even if a revised return had been filed, the original return which had concealed the income was not wiped out and a criminal prosecution can be launched on the basis of the original return. As far as the third petitioner was concerned, he submitted that the allegations in the complaints would be sufficient to put her on trial.
15. In reply, Mr. Subramaniam, learned senior counsel for the petitioners referred to the opening words in section 2, 'unless the context otherwise requires' and urged that the context under section 276C of the Act did not require the firm to be prosecuted, since it cannot be sent to prison. He also pointed out that with effect from April1, 1989, section 276DD, which provided imprisonment as punishment for contravention of section 269SS, had been deleted and the newly inserted section 271D provided only for imposition of a penalty. Similarly, sections 269D(sic) and 276E which provided for imprisonment as punishment for contravention of section 269T were deleted with effect from April 1, 1989, and section 271E inserted, excluding prosecution. Therefore, it must be deemed that the Legislature was aware of the need to exclude prosecution of the firm when imprisonment was mandatory.
16. Both learned counsel have placed certain authorities before me in support of the propositions canvassed by them and they will be considered in the relevant context.
17. It is better to dispose of contentions 2 and 3 initially for, in respect of the first contention, a detailed scrutiny of the divergent views expressed by different High Courts will be needed. This question is not only bound to arise quite often under this Act, but also under various enactments, wherein a company is liable to be prosecuted on a mandatory sentence of imprisonment and fine prescribed has been provided.
18. Contention No. 2:
It is true that when the partnership deed was entered into on October 11, 1968, the third petitioner, who was born on October 21, 1952, was a minor. It is admitted in the petition filed before this court, that in 1973, following the division of family interest in the firm, there was a reconstitution by variation in terms of capital, for which purpose a fresh deed dated March 31, 1973, was once again drawn up, purporting to be a deed of partnership, consisting of the second petitioner and the third petitioner, who had become a major by then, along with two other sons of the second petitioner, who were minors. The question of registration of the firm, contrary to law arises only in respect of C.C.No. 140 of 1985, referable to Crl. M. P. No. 7309 of 1985, for the assessment year in 1973-74, the accounting year ending on March 31, 1973. The cancellation of registration was correctly done, since the partnership itself had not been validly constituted.
19. In CIT v. Dwarkadas Khetan and Co. : [1961]41ITR528(SC) , the Supreme Court, while considering a partnership deed executed by four persons one of whom was a minor who had been admitted as a full partner, he being a signatory as well, though his guardian had also signed it, by which deed, the minor was not only entitled to share in the profits, but also liable for losses including loss of capital, and provided that all four partners were to attend to the business, and if consent was needed, all the partners, including the minor, had to give their consent in writing and that the minor was also entitled to manage the affairs of the firm, including inspection of the account books and was also given the right to vote, if a decision on votes had to be taken, it was held, that the partnership deed in which the minor was admitted as a full partner was not valid and could not be registered under section 26A of the Income-tax Act. Section 30 of the Partnership Act clearly laid down that a minor cannot become a partner though, with the consent of the adult partners, he may be admitted to the benefits of partnership. Any document which went beyond this section cannot be regarded as valid for the purpose of registration under section 26A of the Indian Income- tax Act.
20. In C. A. Abraham v. ITO : [1961]41ITR425(SC) , the Supreme Court, while considering imposition of penalty on a firm after dissolution of partnership, held (at page 430) 'that in effect, the Legislature had enacted by section 44 (present section 189) that the assessment proceedings may be commenced and continued against a firm whose business is discontinued as if discontinuance had not taken place. It is enacted manifestly with a view to ensure continuity in the application of the machinery provided for assessment and imposition of tax liability notwithstanding discontinuance of the business of the firms.'
21. In Choudry Brothers v. CIT : [1986]158ITR224(AP) , a Division Bench of the Andhra Pradesh High Court held that a partnership cannot be brought into existence contrary to the provisions of the Partnership Act. In that case, in the registration of the firm, a minor had been made a partner. It was observed that the partnership was not valid and, therefore, not entitled to registration. It was further stated that though the minor elected to continue as a partner on attaining majority, that would not validate the original partnership deed. It was further held (headnote).
'In the instant case, a group of persons came together and acted together for doing business and earning profits. They, therefore, constituted an association of persons only. Under section 4 of the Income-tax Act, 1961, the unit of assessment in this case could only be an association of persons.'
22. As rightly contended by K. Ramaswami, learned counsel appearing on behalf of the respondent, section 186(3) of the Act would permit the Income-tax Officer to amend the assessment of the firm and its partners for that assessment year where the registration of a firm had been cancelled on the footing that the firm was an unregistered firm. 'Assessment of unregistered firm' is contemplated under section 183 of the Act. Under section 184(4) of the Act, an application has to be made for registration every year, before the end of the previous year for the assessment year in respect of which registration was sought. Section 184(3) also provides that that application shall not be signed by partners who are minors. Therefore, for every assessment year, a fresh application for registration had to be filled and, admittedly, the third petitioner had become a major with effect from October 21, 1970. As stated by the Andhra Pradesh High Court, the original partnership deed cannot be validated, but, however, from March 31, 1973, a new partnership deed had come into existence even on which registration was refused, since it had two other minors as partners. At this stage, there appears to be no impediment in assessments having been made, as though the firm was an unregistered firm. All that we are concerned with in these petitions is whether the firm had been validly registered or not and the possibility of the firm being assessed as an unregistered firm, in the event of invalidity of the registration of the firm under the Act. As long as the firm could be treated as an unregistered firm for the purpose of assessment, I am unable to comprehend any estoppel as contended by learned counsel for the petitioners. The partnership deed as such has not come on record in evidence. The contents of the partnership deed are not known. Under the Partnership Act, though a minor cannot become a partner he can, with the consent of the adult partners, be admitted to the benefits of the partnership. Unless the contents of the partnership deed are noticed, it will be difficult at this stage to hold that the partnership itself was void. It may, of course, be open to the petitioners to contend before the trial court, after the document is marked in evidence, on circumstances flowing out of the deed, which, according to them, may enure in their favour. On the allegations made in the complaint, which is the only evidence available at present, there is no material whatsoever, about the nature of the partnership, its registration by the Department and subsequent cancellation, etc. Therefore, facts will have to be brought on record during evidence and relevant documents marked, before detailed scrutiny could be undertaken. This consideration will have to be relegated to the trial court, after evidence is brought on record.
23. On the argument that a firm has to necessarily act through one of its partners and, therefore, the firm cannot be said to have any guilty mind, as only a human being could have mens rea, it will be useful to refer to the observations of Krishnaswamy Reddy J., in A. D. Jayaveerapandia Nadar and Co. v. ITO : [1975]101ITR390(Mad) (headnote) :
'The acts of the organs of the corporation are to be attributed to the corporation and treated for legal purposes as though they were acts of the corporation itself. However, when an act or mental state will be imputed to a company as its own is a question that has to be considered by a court upon the facts and circumstances of each case. A company can commit crimes only by its agents who must themselves be responsible for the crime and it is a question in each case whether the act of the agent including his state of mind, intention, knowledge or belief can be imputed to the corporation. It depends upon the nature of the charge, the position of the officer or agent relative to the corporation and other relevant facts and circumstances of the case.
Wherever a duty is imposed by statue in such a way that a breach of the duty amounts to disobedience of the law, then if there is nothing in the statue either expressly or impliedly to the contrary, a breach of the statute is an offence for which a corporation will be indicted, whether or not the statue refers in terms to the corporations.
A statue which creates a criminal offence may expressly or by necessary implication define the particular state of mind which is an element of offence or it may be silent on this point. It is of utmost importance to the protection of the liberty of the subject and of the corporation or company to which such state of mind is imputed by fiction, that a court shall always bear in mind, that unless a statute either clearly or by necessary implication rules out mens rea as a constituent part of a crime, the court should not find a man guilty of an offence against the criminal law unless that person has a guilty mind. This principle will apply to corporations also :
Held, on the facts of the case, that accused No. 2 had submitted a false return knowing or believing such return to be false and that accused No.1, the firm of which accused No. 2 was a partner, would also be liable for the offence as such knowledge or belief can be imputed to the accused No. 1 firm.'
24. Therefore, subject to the feasibility if a firm being prosecuted, when it has to be mandatorily sent to prison also that argument may assume further significance. If the answer to question No. 1 is that the firm cannot be prosecuted, this contention will require no further scrutiny. On the other hand, if the decision were to be that a firm can be prosecuted, the firm will certainly be liable for the offence under section 277 of the Act, in view of the law laid down by Krishnaswamy Reddy J. with which I respectfully agree.
25. Contention No. 3 :
The petitioners are alleged to have committed an offence punishable under section 276C(1) of the Act. This section seeks to punish a person who wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, without prejudice to any penalty that may be imposable on such person under any other provision of this Act. This section and section 276CC were substituted for section 276C, as it originally existed, by the Taxation Laws (Amendment) Act, 1975, with effect from October 1, 1975, section 276S, as it existed prior to October 1, 1975, sought to punish a person who willfully fails to furnish in due time the return of income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148. Such failure to furnish the return of income, after October 1, 1975, is punishable under section 276CC of the Act. Obviously, section 276C(1) has been invoked against all the petitioners in these prosecutions, though the section was not available in the statute book before October 1, 1975, to which period some of these prosecutions relate. There cannot be any dispute that the law in force on the date of the commission of the offence alone will be applicable.
26. In Brij Mohan v. CIT : [1979]120ITR1(SC) , it was stated that in the case of assessment of income and the determination of the consequent tax liability, the relevant law was the law which ruled during the assessment year in respect of which the total income was assessed and the tax liability determined. In the case of penalty, however, it must be remembered that a penalty which had to be imposed on account of the commission of a wrongful act had to be plainly on the law operating on the date on which the wrongful act had been committed. Where penalty is sought to be imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which will be relevant.
27. In ITO v. Sita Ram : [1983]144ITR503(All) , the principle laid down was that, in respect of offences and prosecution, the sentence to be imposed must be according to the law in force on the date of the commission of the offence.
28. In Mohan Lal Agarwalla v. State of Bihar : [1987]167ITR184(Patna) , the prosecution was for offences punishable under sections 276C and 277 of the Income_tax Act, and the assessment years were 1963-64 to 1969-70. Initial returns were filed, but the Sales Tax Department found that the income on the basis of sale was false. Income-tax assessments were reopened under section 148 of the Income-tax Act. It was held that since section 276C came into force with effect from October 1, 1975, for offences committed before that date,section 276C cannot be invoked and, therefore, the prosecution was invalid as far as that offence was concerned. While maintaining the prosecution for the offence under section 277 of the Act, it was stated that this section was independent and not interlinked with section 276C. Therefore, the prosecution of the petitioners for an offence punishable under section 276C(1) of the act in C. C. Nos. 140 of 1985, 141 of 1985 and 142 of 1985 cannot be maintained. (Assessment years 1973-74, 1975-76 and 1974-75). As stated earlier, this position has been conceded by learned counsel appearing for the respondent. The assessment year 1975-76 referable to C. C. No. 141 of 1985 is included in this list, since the assessment relates to the year ending March 31, 1975, six months prior to the introduction of section 276C with effect from October 1, 1975. However, the prosecution for the offence under section 277 of the Act in these calendar cases, will survive, subject to the individual liability of the petitioners, which will be discussed hereafter.
29. Even at this stage, the argument based on section 278B of the Act has to be disposed of. This section was also inserted with effect from October 1, 1975 by the Taxation Laws (Amendment) Act, 1975. This section takes in its fold offences committed by a company. In Such cases, it states that every person who, at the time the offence 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 office and shall be liable to be proceeded against and punished accordingly. There is a proviso attached to this sub-section which reads that nothing contained in that sub-section would render any such person liable to any punishment if he proved that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. Sub-section (20 of section 278B states that where an offence under the Act had been committed by a company and it was proved that the offence had been committed with the consent or connivance of, or was 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 that offence and shall be liable to be proceeded against and punished accordingly notwithstanding anything contained in sub-section (1). Before the introduction of this section, a firm alone could have been proceeded against. Therefore, earlier to the introduction of section 278B, the partners could not be prosecuted, but the firm alone could be prosecuted. In case the partners were to be proceeded against in the absence of section 278B, there was no need for the Legislature to have introduced section 278B, as it had been done in 1975. It must also be mentioned here that, in its wisdom, the Legislature has not allowed the prosecution of partners who may be christened as sleeping partners and who may not, in any way, be connected with the conduct of the business of the firm. Section 278B can have no retrospective effect and can operate only with effect from October 1, 1975. Therefore, petitioners Nos. 2 and 3 cannot be prosecuted with the aid of section 278B for an offence under section 276C of the Act for the assessment years 1973-74, 1974-75 and 1975-76 referable to C. C. Nos. 140, 142 and 141 of 1985, respectively, connected to Crl. M. P. Nos. 7309, 7313 and 7311 of 1985. I derive support for this view,from the decision of the Delhi High Court in Parmeet Singh Sawney v. Dinesh Varma [1988] 1 Crimes 153.
30. The Allahabad High Court in Rajendra Prasad Agarwal v. ITO : [1983]144ITR506(All) held that there could be no vicarious liability under section 277 of the Act prior to October 1, 1975, for there could be no retrospective effect.
31. In CIT v. Jagdish Lal Behl , a Division Bench of the Punjab and Haryana High Court, while considering the liability of directors of a company stated that section 278B had been brought into the statute book only with effect from October 1, 1975, and for offences in 1965-69, the principle enshrined in the said section cannot be applied to create ex post facto offences, because, to do so, would amount to acting contrary to the clear mandate contained in article 20 of the Constitution. The directors of the company could not be prosecuted, but the company can be found guilty.
32. Similarly, Punchhi J., as he then was, in Prem Lata v. ITO observed that section 278B was not applicable, as the return pertained to the assessment year 1965- 66. The prosecution was of a firm and its partners for false statement and verification submitted by one of the partners. Another partner did not sign the return or make any statement or verification. The learned judge observed that the other partner cannot be prosecuted with the aid of section 278B inserted with effect from October 1, 1975, since it cannot have ex post facto application.
33. I have already referred to the decision of the Patna High Court in Mohan Lal Agarwalla v. State of Bihar : [1987]167ITR184(Patna) and the principle enunciated therein in relation to prosecution of an assessee, under section 276C(1) to the effect that no prosecution can be launched under that section prior to its insertion in the statute book. The same will equally apply to the prosecution of partners, with the aid of section 278B. The weighty authority extracted above will indisputably indicate that, with the aid of section 278B, prosecution of the partners for an offence under section 276C(1) even otherwise, cannot be maintained in respect of the assessment years 1973-74, 1974-75 and 1975-76, respectively.
34. It is the definite case of the prosecution in the complaints that the second petitioner, as the managing partner of the first accused firm, had acted on behalf of the firm, as is evident from paragraph 5 of the complaints. In paragraph 14, it has again been made clear, that it was the second petitioner who, as the managing partner of the first accused firm, had made a false verification in the return of income of the first accused firm, for the various assessment years. If that be so, the prosecution will have to be maintained as far as the second petitioner is concerned in respect of an offence under section 277 of the Act, which punishes a person who makes a statement in any verification under the Act or under any rule made thereunder or delivers an account or statement which was false and which he either knew or believed to be false, or did not believe to be true. On the allegations made in the complaints, since section 277 is independent and not interlinked with section 276C, the prosecution against the second petitioner, in all these cases, will have to be proceeded with. The view of Ratnavel Pandyan J., as he then was in M. R. Pratap v. V. M. Muthukrishnan ITO : [1977]110ITR655(Mad) and that of the Patna High Court in Mohan Lal Agarwalla v. State of Bihar : [1987]167ITR184(Patna) referred to earlier, fully support this conclusion. Even if it were to be held that the firm as such was not liable for prosecution it prima facie appears that the second petitioner cannot escape liability for the alleged offence under section 277 of the Act.
35. The argument that the revised returns were filed by the second petitioner on the basis of a discussion with the Income-tax Officer and that the amounts shown by him having been accepted, a prosecution would not arise has to be necessarily negatived at this stage, for it will relate to the realm of appreciation of evidence to be brought on record. In that view, the decision of the Delhi High Court in ITO v. Mohd. Yousuf : [1989]175ITR263(Delhi) will not avail the second petitioner, at this stage.
36. As far as the third petitioner is concerned, on the definite case of the prosecution that all the document's and returns were only signed by the second petitioner, who had not only been described as the managing partner, but also had been shown as the person taking an active interest in the affairs of the business of the company, on the material available at this stage, the prosecution as against this petitioner (third petitioner) cannot be maintained, even for the assessment years 1976-77 and 1977-78 since except for the presumption of the respondent, no specific act has been averred against this petitioner to show that she was, in fact, in charge of and responsible for the conduct of the day-to-day affairs of the firm.
37. The Supreme Court had the following observations to make in Sham Sunder v. State of Haryana : 1989CriLJ2201 :
'More often it is common that some of the partners of a firm may not even be knowing of what is going on day to day in the firm. There may be partners, better knowing a sleeping partners who are not require to take part in the business of the firm. There may be ladies and minors who were admitted for the benefit of partnership. They may not know anything about the business of the firm. It would be a travesty of justice to prosecute all partners and ask them to threw under the proviso to sub-section (1) of section 10, that the offence was committed without their knowledge. The obligation on the accused to prove under the proviso that the offence took place without his knowledge or that he exercised all due diligence to prevent such offence arises only when prosecution establishes that the requisite condition mentioned in sub-section (1) is established.'
38. The observations of the Supreme Court would govern the case against the third petitioner. Since the very foundation of the respondent's case, regarding any act on the part of the third petitioner, in having been responsible for the filing of a false return, not been discernible on the material available at this stage, the consequent offence alleged to have been committed by her under the Indian Penal Code cannot also stain. The prosecution as against the third petitioner in all the calendar cases C. C. Nos. 140, 141, 142, 158 and 159 of 1985, respectively, on the file of the Sub-Divisional Judicial Magistrate, Nagapattinam, will have to be necessarily quashed and they are, accordingly, quashed. The effect is that all the criminal miscellaneous petitions are allowed in so far as it relates to the third petitioner.
39. Contention No. 1.-
40. Some of the High Courts have taken the view that a firm cannot be proceeded against for offences under section 277 and 278 of the Act or for other indictments were a sentences of imprisonment has to the mandatorily awarded, apart from imposition of fine. A few other High Courts have expressed an opinion that, even in such cases, the company was not exempted from indictments, although sentences of both imprisonment and fine were mandatory, for it could be limited to find alone in cases of companies. It will be better, to now note the law laid down by the various High Courts, on the basis of the decision of the Supreme Court in State of Maharashtra v. Jugmander Lal, : [1966]3SCR1 . In this case, the Supreme Court laid not have occasion to consider the question of prosecution of a company for offences were imprisonment was compulsory. The apex court, was deciding the interpretation of the word 'punishable' used in section 3(1) of the suppression of Immoral Traffic in Women and Girls Act, 1956, contra distinguished from the word 'punished' used by the Legislature in certain penal provisions. The High Court of Bombay took the view that the word 'punishable' used in section 3(1) of the Act, instead of 'punished', necessarily postulated a certain discretion on the court to impose a sentences of imprisonment or a sentence of fine or both. The Supreme Court stated (at page 942) :
'If the view of the High court that the word `punishable' imports a discretion in the court were to be accepted, an astonishing result would ensure: it would follow that there is discretion in the court whether to punish a convicted person at all or not..... Once the position is reached that the expression `punishable' does not confer a discretion on the court whether to award a punishment or not, no difficulties arises in construing the section and so the conjunction `and' is not required to be construed to mean the opposite, that is, to mean `or'.'
41. It was further observed that, by using the expression the 'shall be punishable', the Legislature had made it clear that the offender shall not escape the penal consequences. By saying that a person convicted of the offence shall be sentenced to imprisonment of not less than one year, the Lagislature had made it clear that its command was to avoid a sentence of imprisonment in every case of conviction. It was difficult to conceive of clearer language of couching such command. The logical result would be to pass a sentence of imprisonment upon the respondent for a period not less than one year in respect of the offence under section 3(1) of the Act. Further observations of the supreme court need extraction (p.941) :
'It is no doubt true that the expression `punishable' means `liable to punishment'. `Liable to punishment' only means that a person who has contravened a penal provision will have to be punished. Thus it does not mean anything different from `shall be punished'. Punishment is obligatory in either case. But, as already observed, what the nature of punishment is to be must be ascertained by a consideration of the whole of the penal provisions.... By using the expression `shall be punishable', the Legislature has made it clear that the offender shall not escape the penal consequences. What the consequences are to be are then specified in the provision and they are rigorous imprisonment for a period not less than one year and not more than three years and also a fine which may extend to Rs.20,000. These are the punishments with respect to a first offence and higher punishments are prescribed in respect of a subsequent offence.'
42. A Division Bench of the Allahabad High Court, in Modi Industries Ltd. v. B. C. Goel : [1983]144ITR496(All) , took the view that the word 'person' occurring in sections 277 and 278 of the Income-tax Act, 1961, in view of the definition clause in section 2(31), included a company. The company was hence facie liable to be prosecuted for the commission of an offence under sections 277 and 278. However, the Bench stated, (headnote) ' the law is well- settled that a corporation or a juristic personality cannot be subjected to bodily punishment or imprisonment. Both under sections 277 and 278, as they stood in the relevant assessment year, the offender was, on conviction, bound to be punished with a term of rigorous imprisonment. A company registered under the Companies Act, 1956, is a juristic person and cannot be awarded the punishment of imprisonment and hence cannot be prosecuted for breach of sections 277 and 278 of the Act (during the relevant period)'. The Division Bench distinguished the Full Bench decision of the Delhi High Court, holding a contra view, in Municipal Corporation of Delhi v. J. B. Bottling Co. (P.) Ltd. [1975 Crl. L. J. 1148. The decision of N. Krishnaswamy Reddy J., in A. D. Jayaveerapandia Nadar and Co. v. ITO : [1975]101ITR390(Mad) , was also referred to. The Division Bench further observed that the decision of the Full Bench of the Delhi High Court, seemed to run counter to the view of the Supreme Court in State of Maharashtra v. Jugmander Lal, : [1966]3SCR1 , referred to earlier in this judgment. After extracting the Observations of Stable J. in Rex v. I> C> R> Haulage Ltd. [1944] 1 All ER 691, ' where the only punishment the court can impose is corporal, the basis on which this exception rests being that the court will not stultify itself by embarking on a trial in which, if a verdict of guilty is returned, no effective order by way of sentence can be made,' the Division Bench held that no useful purpose or public interest would be subserved by continuing the prosecution against the company which was a registered company. The period of assessment in the Allahabad High Court case related to the assessment years 1965-66 and 1966-67. The Income-tax Act, between April 1, 1964, and October 1, 1975, provided on conviction a minimum punishment of six months rigorous imprisonment under clause (i) of section 277 and not less than three months under clause (ii) of section 277 of the Act. The question of imposition of fine was not provided and the only punishment which could be awarded was a term of rigorous imprisonment.
43. While referring to the decision of N. Krishnaswamy Reddy J., in A. D. Jayaveerapandia Nadar and Co. v. ITO : [1975]101ITR390(Mad) , the Allahabad Division Bench noticed that, prior to 1964, when the offence was alleged to have been committed in that case, it was punishable with imprisonment or with fine or with both. Since, at that time, such an offence was not punishable only with imprisonment, the firm which was treated as a juristic personality, could be, and in fact, was sentenced to fine and there was hence no difficulty in its having been prosecuted.
44. However, the decision of the Division of the Division Bench of the Allahabad High Court was overruled by a full Bench of the same High Court in Oswal Vanaspati and Allied Industries v. State of U. P. [1985] 1 FAC 201. The questions posed therein were : (1) Whether, in view of the substantive sentence provided in section 16 of the Prevention of food Adulteration Act, while the company is a juristic person, it cannot suffer substantive sentence, section 17(1)(b) is rendered nullified and the company cannot be prosecuted under the Food adulteration Act; and (2) Whether under the rules of interpretation of statutes, the express provision of section 17(1)(b) of the Prevention of Food Adulteration Act, providing for prosecution of the company, can be reconciled with section 16 of the Prevention of Food Adulteration Act, which provides for imposition of fine besides a substantive sentence, by imposing fine, when the company, as a juristic person, cannot suffer imprisonment and it can be held by way of reconciliation of the two provisions that a substantive sentence is to be imposed only where it can be so imposed and admits of execution, hence imposition of fine alone is permissible.
45. The Full Bench took note of the decision of the Supreme Court in State of Maharashtra v. Jugmander Lal, AIR 1966 SC as well as the Full Bench judgment of the Delhi High Court in Municipal Corporation of Delhi v. J. B. Bottling Co. Pvt. Ltd. [1975] Crl. LJ 1148. In answer to the question posed,the view expressed was as follows:
' It appears from a plain reading of section 17(1) of the Act, that, when an offence under the Act has been committed by a company, the persons mentioned therein and also the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished. The word `person' in section 16 of the Act includes a company in view of the definition of person given in section 3(42) of the General Clauses Act. Section 16 of the Act thus applies to companies as well as to natural persons. The punishment for offences provided under section 16 of the Act is both of imprisonment and fine. Both those sentences are mandatory. A company being a juristic person cannot obviously be sentenced to imprisonment as it cannot suffer imprisonment. The question that requires determination is whether a sentence of fine alone can be imposed on it under section 16 of the Act or whether such a sentence would be illegal and hence cannot be awarded to it. It is settled law that a sentence of punishment must follow conviction and if only corporal punishment prescribed, a company which is a juristic person cannot be prosecuted as it cannot be punished. If, however, both sentence of imprisonment and fine are 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. Thus, it cannot be held that, in such a case, the entire sentence prescribed cannot be awarded to a company as a part of the sentence, namely, that of fine can be awarded to it. Legal sentence is the sentence prescribed by law. A sentence which is in excess of the sentence prescribed is always illegal but a sentence which is less than the sentence prescribed may not, in all cases, be illegal. It would depend on whether the entire sentence prescribed can be awarded to the convicted person or only a part of the prescribed sentence can be awarded to him. 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 the sentence cannot be held to be illegal. Thus, if the prescribed sentence is of imprisonment and fine, then both these sentences must be awarded to a natural person as he can suffer both. If part of such a sentence is awarded to a natural person, it would be illegal. In the case of a company, however, awarding only a part of such a prescribed sentence, namely, fine, cannot be held to be illegal as a company cannot suffer imprisonment. We are, therefore, of the opinion that awarding a sentence of fine only to a company under section 16 of the Act wherein both sentences of imprisonment and fine are jointly prescribed for offences committed by a natural person as well as a company is not illegal.
The Full Bench observed that the Supreme Court in State of Maharashtra v. Jugmander Lal, : [1966]3SCR1 , was considering the case of a natural person convicted under section 3(1) of the Suppression of Immoral Traffic in Women and Girls Act under which a sentence of Imprisonment and fine were provided. It was not considering the case of a juristic person. It was, therefore, held in that case, that the court was bound to award the sentence of imprisonment and fine provided under section 3(1) of the said Act, to the accused. Therefore, that case was not an authority for the proposition that if a mandatory sentence of imprisonment and fine was prescribed jointly for a natural person and a juristic person, then the sentence of fine only cannot be awarded to a company. The said case, therefore, did not run counter to the Full Bench decision of the Delhi High Court in Municipal Corporation of Delhi v. J. B. Bottling Co. P. Ltd. [1975] Crl. LJ 1148. Agreeing with the Full Bench decision of the Delhi Court, the Allahabad Full Bench concluded that a sentence of fine alone can be awarded to a company under section 16 of the Act.
A Division Bench of the Delhi High Court in the case of Rameshwar Chotte Lal v. Union of India, ILR 1969, observed 'that the definition of `company' has been enlarged by the explanation to include a firm or other association of individuals and of `director' to include in relation to a firm a partner in the firm. It, therefore, clearly appears that firms and companies have been expressly brought within the purview of the penal provisions of the statute. It, cannot, therefore, be said that firms and companies are completely outside section 16.' The Division Bench then went on to observe as hereunder :
'A different question, however, arises where the punishment of imprisonment, is compulsory. The learned counsel for the respondents suggested two alternatives : (1) in such cases, a company or a firm may be prosecuted but since it is not possible to imprison a company, the court may dispense with the punishment of imprisonment even under the substantive provision of section 16 and award fine only, and (2) a firm may be prosecuted but not punished. As to the point raised by the first contention, the argument does not sound plausible. Under the substantive provision of section 16, punishment by way of imprisonment is mandatory and I do not think the courts are competent to perform a surgical operation on the section and say that though punishment prescribed is cumulative yet in case of a company it may be punished with fine only. As to the second argument I do not think that the courts can stultify themselves by permitting indictment, if it cannot ultimately result in conviction.'
46. The latter observations were made since the Division Bench felt bound by the dicta laid down by the Supreme Court in State of Maharashtra v. Jugmander Lal, : [1966]3SCR1 . Let us now look into the decision of the Full Bench of the Delhi High Court in Delhi Municipality v. J. B. Bottling Co P. Ltd. [1975] Crl. LJ 1148.
47. The Delhi Full Bench after an elaborate discussion, taking note of the available law on the subject, English as well as Indian, held that, by the simple rule of interpretation, a company, as contemplated by section 17, was covered for the purposes of prosecution under section 7 read with section 16(1) of the Act. The history of section 16 also showed the legislative intent, that the idea of the Legislature was to make punishment more stringent. The legislative history did not show that the idea was to create an exemption in favour of the company which was already liable under the old section 16(1). There was no difficulty in the court passing the sentence of imprisonment and fine in the case of a company but ex facie such an order which was contemplated by the section cannot be passed as the sentence, so far as imprisonment is concerned, cannot be executed, but that does not mean that the company was granted exemption from indictment. It was true that the sentence of both imprisonment and fine was mandatory in the sense that it has to be imposed where it can be imposed, but it will be limited to fine, where it cannot be imposed as a corporal punishment in the case of companies becomes impossible of execution. Thus, a company does not enjoy immunity from prosecution and in case in a company is found guilty of such an offence which provides a sentence of imprisonment and fine, it can be punished with fine. The Division Bench judgment in Rameshwar Chotte Lal v. Union of India, was overruled. The Full Bench also observed that, in prosecution for offences for which only corporal punishment was prescribed, a company cannot be prosecuted since it cannot be punished. Punishment must follow conviction, but this was subject to the condition of exceptional provision of law.
48. While considering the decision of the Supreme Court in State of Maharashtra v. Jugmander Lal, : [1966]3SCR1 , the Full Bench stated as hereunder :
'This decision was given by the Supreme Court in view of the submission made by the respondent therein who desired the court to exercise choice as to the nature of punishment. The accused involved in that case could suffer both the corporal punishment and the fine. The Supreme Court held that the accused was liable to suffer both types of punishments. The Supreme court in this case was not considering the question where the minimum sentence prescribed is both corporal and fine, whether it can be awarded to an artifical person and, if they could not be awarded cumulatively, whether the sentence, in so far as it was possible, could be awarded or not.'
49. S. Natarajan J., as he then was in Rayala Corporation P. Ltd. v. ITO : [1981]129ITR675(Mad) , while construing the feasibility of a prosecution being launched for delay in making payment of tax deducted from salaries payable to the employees, to the credit of Central Government, within the prescribed time, observed as hereunder (headnote) :
'The words `a person' occurring in section 276B must be construed in juxtaposition to the word `person' mentioned in section 192 and section 200 of the Act. If so construed, there is no scope for saying that the words `a person' occurring in section 276B have reference only to a proprietary concern and not to a company or its principal officer. Similarly, it cannot be said that since a company cannot be punished with imprisonment, a prosecution under section 276B will not lie against a company, because none of the sections, namely, sections 192, 200 and 276B uses the word `company'. They only use the words `a person'. Nor can it be contended that, since a company cannot be punished as indicated in section 276B, that section will have no application to contraventions committed by a company.'
50. K. T. Thomas J., of the Kerala High Court, in S. M. Badsha v. ITO [1987]168 ITR 332, held as follows (headnote) :
'Prior to the amendment with effect from October 1, 1975, the punishment for offences under sections 277 and 278 of the Income- tax Act was imprisonment only. Hence, a firm which is a juristic entity cannot be proceeded against under sections 277 and 278 in respect of returns furnished in 1971. Similarly, section 193 of the Indian Penal Code, 1860, deals with punishment for intentionally giving false evidence. Section 196 deals with corruptly using any evidence as genuine which he knows to be false or fabricated. Section 420 is the offence of cheating. The definition of the offence involves fraudulent or dishonest inducement to be made by the offender. All those offences could only be committed by natural persons. A firm cannot be proceeded against for offences under sections 193, 196 and 420 of the Indian Penal Code.'
51. In conclusion, the learned judge stated that the prosecution proceedings against the firm were not valid and were liable to be quashed though the proceedings could, however, continue against the other accused.
52. The decisions of S. Natarajan J. and K. T. Thomas J. did not take note of the Full Bench decisions of the Allahabad and Delhi High Courts as well as the decision of the apex court in State of Maharashtra v. Jugmander Lal, : [1966]3SCR1 .
53. The Punjab and Haryana High Courts in CIT v. Jagdish Lal Behl , while excluding the directors of the company from prosecution, since section 278B had been brought into the statute book with effect from October 1, 1975, and the offences had been committed before that date, in the years 1965 to 1969, held that the principle enshrined in the section could not be applied to create ex post facto offences because, to do so, would amount to acting contrary to the clear mandate continued in article 20 of the Constitution. It was further held that the company, however, was guilty under section 276(b) and (d) read with section 276B and was liable to pay a fine. There is no discussion in this case, if the sentence imposable on the company was imprisonment as well as fine or fine alone.
54. In State of Maharashtra v. Syndicate Transport Co. Pvt. Ltd. : AIR1964Bom195 , Paranjpe J. observed as hereunder (at page 200) :
'A company cannot be indictable for offences like treason, murder, bigamy, perjury, rape, etc., which can only be committed by a human individual or for offences punishable with imprisonment or corporal punishment. Barring these exceptions, a corporate body ought to be indictable for criminal acts or omissions of its directors, or authorised agents or servants, whether they involve mens rea or not, provided they have acted or have purported to act under authority of the corporate body or in pursuance of the aims or objects of the corporate body. The question whether a corporate body should or should not be liable for criminal action resulting from the acts of some individual must depend on the nature of the offence disclosed by the allegations in the complaint or in the charge-sheet, the relative position of the officer or agent vis-a-vis the corporate body and other relevant facts and circumstances which could show that the corporate body, as such, meant or intended to commit that act. Each case will have necessarily to depend on its own facts which will have to be considered by the Magistrate or judge before deciding whether to proceed against a corporate body or not.'
55. That was a case where a private limited company along with its officers was prosecuted for offences under sections 403, 406 and 420, Indian Penal Code. The learned judge referred to the definition of the word 'person' in sections 2 and 11 of the Indian Penal Code and section 3(42) of the General Clauses Act, and held that despite the generality of the definition of a 'person' given in section 11 of the Indian Penal Code, a corporate body or a company shall not be indictable for offences which can be committed only by a human individual or for offences which must be punished with imprisonment. The learned judge had no occasion to consider the feasibility of indicting a company when a special Act provided for its prosecution and sentence of both imprisonment and fine.
56. The Bombay High Court in State of Maharashtra v. Joseph Anthony Pereira : (1971)73BOMLR613 , while considering the provisions of sections 27 and 34 of the Drugs and Cosmetics Act, stated that the words 'punished accordingly' in clause (2) of section 34 of the Drugs and Cosmetics Act, 1940, meant that can guilty person referred to therein can be punished in the same way as a company would be punishable under clause (1) of section 34 of the Act, i.e., only with fine and not imprisonment. It was observed, after quoting section 34 of the Act, as hereunder :
'It is clear from the section that clause (1) makes the company liable to be punished accordingly. The word `punish' with reference to a company would only mean to be punished under section 27, not with imprisonment as a company can in no case be punished with imprisonment.'
57. However, this view of the Bombay High Court, on the meaning of the words 'punished accordingly', was overruled by the Supreme Court in Rajasthan Pharmaceutical Laboratory v. State of Karnataka. : 1981CriLJ348 .
58. A similar view of the Karnataka High Court as that of Bombay in State of Karnataka v. Rajasthan Pharmaceuticals Laboratory [1975] MLJ (Crl.) 331 was reversed by the Supreme Court in Rajasthan Pharmaceuticals Laboratory v. State of Karnataka, : 1981CriLJ348 , on the interpretation of the words 'punished accordingly'. The case was remanded to the Karnataka High Court for passing of appropriate sentences. The Karnataka High Court had imposed a sentence of fine of Rs. 2,000 on the firm as well as its partner and manager. The argument before the Karnataka High Court was that the sentence of imprisonment, though made mandatory by a statute, cannot be imposed on a company or a partnership firm and, therefore, by virtue of section 34(1) of the Drugs and Cosmetics Act no sentence of imprisonment can be imposed on the partner and manager for having committed those offences. The High Court arrived at a conclusion, while setting aside the acquittal of all the accused, that the partner and manager must be deemed to be guilty of the offences committed by the firm and were liable to be punished accordingly. The Supreme Court, while reversing that part of the judgment referable to the sentence imposed on the partner and manager under section 27(a)(ii) of the Act, which made a sentence of imprisonment of not less than one year compulsory for such offence in addition to fine, unless for special reasons a sentence of imprisonment for a lesser period was warranted directed the High Court of Karnataka to pass an appropriate sentence. While so, it will be significant to notice the following observations of the Supreme Court (at Page 812) :
'Of course in the nature of things a company or a firm could not be sent to jail but that does not apply to the other two appellants.'
59. This observation of the Supreme Court makes it abundantly clear, as a legitimate inference, that even in cases where the statute prescribed a mandatory sentence of imprisonment and fine, a company or a firm which could not be sent to jail could be punished with sentence of fine, while such imposition of fine only would not apply to a natural person, who would have to be necessarily sentenced to imprisonment as mandated by the statute.
60. The decision of the Calcutta High Court in Anath Bandhu v. Corporation of Calcutta, : AIR1952Cal759 , was referred to by the Karnataka High Court in State of Karnataka v. Rajasthan Pharmaceutical Laboratory [1975] MLJ (Crl.) 331. Chunder J. of the Calcutta High Court, while considering the provisions of the Calcutta Municipal Act and the liability of a limited company being proceeded against observed as follows (at page 760) :
'The contention of Mr. Chakravarthy that, under the Indian criminal law a limited company cannot be proceeded against does not appear to me to state the correct position in law. It is said in Ratanlal's edition of the Indian Penal Code in connection with the comments on the word `person' used in section 11, Indian Penal Code, that it will not include a limited company and the authority is given of an English case. I have not been able to find out any Indian decision on the point. It is quite clear that if there is anything in the definition or context of a particular section in the statute which will prevent the application of the section to a limited company, certainly a limited company cannot be proceeded against. For example, rape cannot be committed by a limited company. There are heaps of other sections in which it will be physically impossible by a limited company to commit the offences. Then again it is quite clear that a limited company cannot generally be tried when mens rea is essential. Again it cannot be tried where the only punishment for the offence is imprisonment because it is not possible to send a limited company to prison by way of a sentence. If we leave these classes of cases aside, it is not clear why under the indian law a limited liability company cannot be proceeded against.
Under the General Clauses Act as also the Bengal General Clauses Act `person' includes a limited liability company. There is no doubt about the same. We are dealing with a case under the `Calcutta Municipal Act and section 3(32), Bengal General Clauses Act (Bengal Act i(1) of 1899) applies and it is definitely stated that a `person' shall `include any company or association or body of individuals whether incorporated or not'. As far as the interpretation of the word `person' in any of the sections of the Bengal Act or of an Indian Act is concerned, unless there is any repugnancy in the context a person may be interpreted so as to include a limited company.' Further, after noticing the decision in King v. Daily Mirror Newspapers Ltd. [1922] 2 KB 530, the learned judge held that the reason given why a limited liability company could not be tried in England cannot be applied to the case of a limited liability company in India. Therefore, so long as the difficulties that has been pointed out in connection with the trial of a limited company or commitment of an offence by a limited company do not prevent a limited company from being put on trial by the court, there was nothing in the Indian law which precluded a trial where possible. The further observation of the learned judge has to be quoted (p. 761) :
'The question of sentence also need not generally stand in the way of a trial of this kind because, as I have pointed out, except in the case where no other sentence than imprisonment or transportation or death is provided, there is nothing to prevent a court from inflicting a suitable fine and a sentence of fine need not carry with it any direction of imprisonment in default. There may be fine alone and sections 386 and 388, Criminal Procedure Code, will show how such fines can be realised and there is nothing to prevent the application of those sections to the case of a limited liability company in realising fines. In certain Acts definite provision is made that a fine will be the only sentence and it has been already decided in these courts that in such cases there can be no imprisonment in default of fine.'
61. The observations of Chunder J., that the question of sentence also need not stand in the way when there was nothing to prevent a court from inflicting a suitable fine and the sentence of fine need not carry with it any direction of imprisonment in default was before the Supreme Court when it considered the judgment of the Karnataka High Court in State of Karnataka v. Rajasthan Pharmaceutical Laboratory [1975] MLJ (Cr.) 331, and reversed it, on a limited issue. The observations of the Supreme Court that, in the nature of things, a company or a firm could not be sent to jail, but that does not apply to the other tow natural persons, must be taken to have affixed the seal of approval on the position of law enunciated by Chunder J. Though in the case considered by Chunder J., only a sentence of fine was provided for, that cannot erase the principle of law enunciated.
62. Krishnaswamy Reddy J., in A. D. Jayaveerapandia Nadar and Co. v. ITO : [1975]101ITR390(Mad) , had summarised the law on the subject as follows (p. 420) :
'A corporation could not be subjected to bodily punishment. It could however, be fined, and to this day fine remains the only mode of punishment applicable to a corporation. Since fine only is a type of punishment appropriate to a corporation, if a crime is not punishable with fine, a corporation cannot be convicted of it.'
63. Though on facts in the batch of cases decided by Krishnaswamy Reddy J., the offences for which the company was indicted were punishable only with fine, as the law existed when the offences stood committed, the principle laid down would certainly be relevant.
64. Courts will have to carry out the intention of the Legislature, while construing the relevant section. The observations of the Supreme Court in Shivanarayan Kabra v. State of Madras, : 1967CriLJ946 will be significant (p.989) :
'It is a sound rule of interpretation that a statute should be so construed as to prevent the mischief and to advance the remedy according to the true intention of the makers of the statute. In construing, therefore, section 2(c) of the Act and in determining its true scope it is permissible to have regard to all such factors as can legitimately be taken into account in ascertaining the intention of the Legislature, such as the history of the statute, the reason which led to its being passed, the mischief which it intended to suppress and the remedy provided by the statute for curing the mischief.'
65. In Siraj-ul-Haq-Khan v. Sunni Central Board of Waaf, U. P., : [1959]1SCR1287 , speaking for the Bench, Gajendragadkar J., observed (headnote) :
'It is well-settled that in construing the provisions of a statute, courts should be slow to adopt a construction which tends to make any part of the statute meaningless or ineffective ; and attempt must always be made so to reconcile the relevant provisions as to advance the remedy intended by the statute. In such a case, it is legitimate and even necessary to adopt the rule of liberal construction so as to give meaning to all parts of the provision and to make the whole of it effective and operative.'
66. At this stage, it will be relevant to extract the observations of the Full Bench of the Delhi High Court in Delhi Municipality v. J. B. Bottling Co. P. Ltd. [1975] Crl. L. J. 1148:
'The offence of the judges is always to make such construction as shall suppress the mischief, and advance the remedy and, therefore, it will stay its hands in passing the sentence which will be impossible to execute but pass only such sentence which can be executed, namely, fine. The proviso to section 16 applies only to the three classes of offences mentioned therein and as compared to the rest of the offences contemplated by the Act are of less serious nature and if indictment of the company is confined to only those offences which are covered by the proviso then not only the intention of the legislature is defeated but the provisions of section 16(D) and section 18 are also to that extent rendered nugatory, in so far as the offences are committed by the companies.
Section 16(D) contemplates that if any person is convicted of an offence under the Act and commits a like offence afterwards, then, without prejudice to the provisions of sub-section (2), the court before which the second or subsequent conviction takes place, may order the cancellation of the licence, if any, granted to him under this Act and thereupon such licence shall stand cancelled. It was not intended that the court should take recourse to section 16(1D) if the offences were only of the nature mentioned in the proviso to section 16(1), so far as the companies are concerned. Nor was it intended that the courts should merely convict the company and not pass any sentence. It is true that the sentence of both imprisonment and fine is mandatory in the sense that it has to be imposed where it can be imposed but it will be limited to fine where it cannot be imposed, as corporal punishment in the case of companies becomes impossible of execution.'
67. The question is not whether the word 'and' has to be read as 'or', but of the need to make such construction as shall suppress the mischief and advance the remedy to carry out the intention of the Legislature, whenever it is found necessary.
68. The argument of learned counsel for the petitioners that, since section 2 of the Act states, unless the context otherwise required, that the meaning of the words used in the Act were defined thereunder, it must be held that the word 'person' in the relevant sections, where imprisonment is compulsory, should be read as excluding the company, since the context would so require, has to be stated only to be rejected, especially when the company can be guilty of both statutory and common law offences, although the latter involves mens rea and further the object of the legislature was to make the company liable.
69. The further argument that the introduction of section 271D and 271E with effect from April 1, 1989, excluding prosecution provided under sections 269SS(sic) and 276DD, 269T and 276E, are indicative of the intention of the legislature not the prosecute a firm when imprisonment was mandatory, has no merit. The prosecution which could be launched prior to April 1, 1989, do not get erased. The existence of other sections in the Act which contemplate such a contingence would be sufficient to repel this submission.
70. The answer to contention No. 1 is that the first petitioner does not enjoy immunity from prosecution and, if it were to be found guilty of the offences alleged, it can be punished with fine alone. I concur with such of those decisions which take this view.
71. Before parting with these cases, I am constrained to observe that the Legislature could have made it clear in the statute itself, that in cases where the sentence prescribed was mandatory, namely, imprisonment as well as fine, the company would be liable to be sentenced to be fine alone, obviously because it cannot be imprisonment. Such approach is necessary, since it can normally be presumed that the Legislature, while loosing the words 'and' or 'or' in the penal provisions referable to sentence of imprisonment and fine, it had thought it fit to draw a distinction between offences which will entail imprisonment or fine or imprisonment as well as fine. That the Legislature in aware of such a distinction is clear from the provisions of section 58A(5) and (6) of the companies Act, 1956. Under sub- section (5), where company omitted or failed to make repayment of a deposit in accordance with the provisions of clause (c) of sub- section (3), or in the case of a deposit referred to in sub- section (4), within the time specified in that sub-section the company liable to be punished with fine alone, the quantum of such fine being linked with the amount to be repaid, while every officer of the company, who was in default, shall be punishable with imprisonment for a term, which may extent to five years and shall also be liable to fine. Similar distinction is noticeable in sub-section (6), as well. If only the Legislature had made this commendable approach, the need for going into intricate nuances of law, based on interpretation of statutes, would not have arisen.
72. The net result is, the prosecution as against the third petitioner is quashed in all the calendar cases and in so far as she is concerned all these criminals miscellaneous petitions shall stand allowed. In so far as the offence under section 276C(1) of the Act is concerned, the prosecution against petitioners Nos. 1 and 2 also stand quashed in C. C. Nos. 140, 141 and 142 of 1985 referable to Crl. M. P. Nos. 7309, 7313 and 7311 of 1985, respectively. In respect of the other offences in the same calendar cases, as far as petitioners Nos. 1 and 2 are concerned the prosecutions shall survive. The prosecutions in C. C. Nos. 158 and 159 of 1985, referable to Crl. M. P. Nos. 7315 and 7317 of 1985, respectively, against the petitioners have to be maintained and the trials will have to be proceeded with. The offences under the Indian Penal Code have their foundation in the offences committed under the Income_tax Act and naturally trials for those offences will also have to be proceeded with. Thus, the petitions shall stand partly allowed in accordance with the details aforestated.