M. Vs. Javali V. Mahajan Borewell and Co. and ors. - Court Judgment

Excerpt:
- telecom regulatory authority of india act, 1997. section 13 & telecommunication interconnection usage charge regulation, 2003, regulation 2(xxviii); [s.h. kapadia & b. sudershan reddy, jj] limited mobility service (wll(m) liability to pay access deficit charges (adc) - held, the unlimited cordless service provided by appellant, providing fixed wireless access (fwa) service falls within the definition of limited mobility service (will(m) as defined in regulations of 2003. the appellant is therefore, liable to pay access deficit charges (adc) to b.s.n.l., the plea of the appellant service provider that trai vide its circular dated 4-3-2005 prescribed premises specific restrictions (psr) on fixed wireless access (fwa) service and this amounts to reclassification of wll(f) as limited mobility service (wll(m) is not tenable. every service provider knew the difference between fixed wireline and three types of wireless services, namely, fwa, limited mobility and full mobility. further, these three categories of wireless services constitute a condition of unified access service licence (uasl). the categorization is done in the uasl dated 20-7-2001. the classification has taken place in the licence and the follow up regarding chargeability of interconnection usage charges (iuc) and access deficit charges (adc) is under the regulations made by trai. therefore, there is no merit in the submission by appellant that by the said circular dated 4-3-2005 trai has classified/ reclassified the impugned serviced as wll (m). in services, wireless access is intended as a cheap cable replacement, without additional features. the classic examples of such service is fwa. such system is cost-effective, as the infrastructure is cheaper than laying of new wired connection. the point to be emphasized is that fwa is a service where wireless access is intended as cheaper cable replacement without additional features. mobility is an inherent feature of most wireless systems and has important consequences for system design. it is there in fwa, but if it exceeds the premises of the subscriber for adc purpose it becomes classifiable as wll(m). the uas licence refers to three categories of wireless services, namely, fwa service, limited mobility service and full mobility service. the payability of the adc as per the regulations is directly related to the nature of the service and not to the instrument. in case of fwa, the antenna in the instrument and the end-user termination point location wise remains fixed. the net work access point remains connected to the end-user in fwa.. the test to be applied to distinguish wll(f) from wll(m) is that if the impugned service cannot be restricted to the place of the subscriber then such service has to be classified as wll(m) for the purposes of adc. in the present case, the impugned service cannot be technically confined to the premises of the subscriber. the impugned service cannot comply with psr. therefore, it has to be classified as wll(m) service for adc purposes. both in terms of technology and in terms of policy framework, in the matter of adc payability, the classification of wireless services into three categories, namely, fwa, limited mobility and full mobility was well known to service providers both under iuc regulation, generic requirements, tecs recommendations and even telecommunication technology. the impugned decision of trai dated 4-3-2005 and the decisions of dot dated 23-3-2005 and 26-8-2005 respectively cannot be said to be unilateral decisions regarding classification. the circular dated 4-3-2005 issued by trai is clarificatory and not amendatory. -- telecom regulatory authority of india act, 1997. section 13 & telecommunication interconnection usage charge regulation, 2003, regulation 2(xxviii); limited mobility service (wll(m) liability to pay access deficit charges (adc) - held, the unlimited cordless service provided by appellant, providing fixed wireless access (fwa) service falls within the definition of limited mobility service (will(m) as defined in regulations of 2003. the appellant is therefore, liable to pay access deficit charges (adc) to b.s.n.l., the plea of the appellant service provider that trai vide its circular dated 4-3-2005 prescribed premises specific restrictions (psr) on fixed wireless access (fwa) service and this amounts to reclassification of wll(f) as limited mobility service (wll(m) is not tenable. every service provider knew the difference between fixed wireline and three types of wireless services, namely, fwa, limited mobility and full mobility. further, these three categories of wireless services constitute a condition of unified access service licence (uasl). the categorization is done in the uasl dated 20-7-2001. the classification has taken place in the licence and the follow up regarding chargeability of interconnection usage charges (iuc) and access deficit charges (adc) is under the regulations made by trai. therefore, there is no merit in the submission by appellant that by the said circular dated 4-3-2005 trai has classified/ reclassified the impugned serviced as wll (m). in services, wireless access is intended as a cheap cable replacement, without additional features. the classic examples of such service is fwa. such system is cost-effective, as the infrastructure is cheaper than laying of new wired connection. the point to be emphasized is that fwa is a service where wireless access is intended as cheaper cable replacement without additional features. mobility is an inherent feature of most wireless systems and has important consequences for system design. it is there in fwa, but if it exceeds the premises of the subscriber for adc purpose it becomes classifiable as wll(m). the uas licence refers to three categories of wireless services, namely, fwa service, limited mobility service and full mobility service. the payability of the adc as per the regulations is directly related to the nature of the service and not to the instrument. in case of fwa, the antenna in the instrument and the end-user termination point location wise remains fixed. the net work access point remains connected to the end-user in fwa.. the test to be applied to distinguish wll(f) from wll(m) is that if the impugned service cannot be restricted to the place of the subscriber then such service has to be classified as wll(m) for the purposes of adc. in the present case, the impugned service cannot be technically confined to the premises of the subscriber. the impugned service cannot comply with psr. therefore, it has to be classified as wll(m) service for adc purposes. both in terms of technology and in terms of policy framework, in the matter of adc payability, the classification of wireless services into three categories, namely, fwa, limited mobility and full mobility was well known to service providers both under iuc regulation, generic requirements, tecs recommendations and even telecommunication technology. the impugned decision of trai dated 4-3-2005 and the decisions of dot dated 23-3-2005 and 26-8-2005 respectively cannot be said to be unilateral decisions regarding classification. the circular dated 4-3-2005 issued by trai is clarificatory and not amendatory - (1) where an offence under this act has been committed by a company, 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 offence and shall be liable to be proceeded against and punished accordingly. the words as well as the company appearing in the section also make it unmistakably clear that the company alone can be prosecuted and punished even if the persons mentioned in categories (ii) and (iii), who are for all intents and purposes vicariously liable for the offence, are not arraigned, for it is the company which is primarily guilty of the offence. the commission recommended, apart from introduction of a provision in s. but, at the same time, it is necessary that there should be some procedure, like a judgment of condemnation, available in the case of an anti-social or economic offence committed by a corporation. the sunni central board of wakf air 1959 sc 198 as under :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; if a given case is well within the general purpose of the legislature but not within the literal meaning of the statute, then the court must strike the balance.orderby the court :special leave granted. heard the learned counsel for the parties.2. the appellant, who is an asstt. cit, filed a complaint in the special court for economic offences at bangalore alleging commission of an offence under s. 276b, r/w s. 278b, of the it act, 1961 (act for short) by m/s borewell & co., a registered partnership firm (the respondent no. 1) and its three partners (the respondents nos. 2 to 4). the special court took cognisance of the offence alleged and issued process against the respondents for their attendance. after entering appearance they filed an application praying for their discharge under s. 245(2) of the crpc. the special court allowed the application on the ground that before granting sanction for their prosecution under s. 279(1) of the act, the sanctioning authority did not give the respondents a personal hearing. the other grounds raised by the respondents for their discharge were however, kept open. assailing the order of discharge the appellant filed a revision petition in the high court which was dismissed by the impugned order. hence, this appeal.3. in upholding the order of discharge, the high court did not deal with the ground that found favour with the special court but held - relying upon its earlier judgment in p. v. pai vs. r. l. rinawma, dy. : ilr1993kar709 - that the prosecution of respondent no. 1 under s. 276b was not maintainable for if ultimately the special court found it to be guilty it (the court) could not legally impose a substantive sentence upon it which was mandatory thereunder. as regards the other respondents, though the high court found that the prosecution against them was maintainable for the above offence, it still upheld their discharge.4. to answer the question whether a company, being a juristic person and thus incapable of being sentenced to imprisonment, can be prosecuted and for that matter convicted - for committing an offence under the act which provides for compulsory imprisonment and fine, it will be necessary to refer to the provisions of the act with which we are concerned in this appeal.5. sec. 276b lays down that if a person fails to pay to the credit of the central government, the tds by him as required by or under the provisions of chapter xvii-b [which includes s. 194c(2) for violation of which the prosecution in the instant case was lodged] he shall be punished with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine. sec. 278b reads as under :'278b. (1) where an offence under this act has been committed by a company, 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 offence and shall be liable to be proceeded against and punished accordingly.provided that nothing contained in this sub-section render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.(2) notwithstanding anything contained in sub-s. (1), where an offence under this act has been committed by a company and it is proved that the offence has been committed 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 that offence and shall be liable to be proceeded against and punished accordingly.explanation. - for the purposes of this section -(a) 'company' means a body corporate, and includes -(i) a firm; and(ii) an aop or a boi whether incorporated or not; and(b) 'director', in relation to -(i) a firm, means a partner in the firm,(ii) any aop or a boi, means any member controlling the affairs thereof.'6. from a plain reading of the above section, it is manifest that if an offence under the act is committed by a company, the persons who are liable to be proceeded against and punished are : (i) the company (which includes a firm); (ii) 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; and (iii) any director (who in relation to a firm means a partner), manager, secretary or other officer of the company with whose consent or connivance or because of neglect attributable to whom the offence has been committed. the words as well as the company appearing in the section also make it unmistakably clear that the company alone can be prosecuted and punished even if the persons mentioned in categories (ii) and (iii), who are for all intents and purposes vicariously liable for the offence, are not arraigned, for it is the company which is primarily guilty of the offence.7. even though in view of the above provisions of s. 278b, a company can be prosecuted and punished for an offence committed under s. 276b (besides other offences 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. before we proceed to consider the principles governing the interpretation of statutes we may profitably look to the 47th report of the law commission of india, dt. 28th february, 1972. while dealing with social and economic offences committed by corporations (including companies, firms and association of individuals) it observed that though a company had no physical body and traditional punishment might thus prove ineffective, the real penalty could be inflicted upon its respectability, that is, by way of a stigma.therefore, it was appropriate that the company itself be punished so that in the public mind the offence would be linked with the name of the corporation and not merely with the name of the director or manager who might be a non-entity. punishment of fine in substitution of imprisonment could solve the problem in this behalf. the commission recommended, apart from introduction of a provision in s. 62 of the ipc, appropriate amendments in the central excise act, 1944, wt act, 1957, and it act, 1961, on the lines of s. 93 of the gold control act, 1968. the provisions contained in s. 278b of the act appear to be based on the recommendations of the law commission, para 8.1 of the law commission report reads as under :'8.1 an important type of white collar crime is that committed by corporations. since a corporation has no physical body on which the pain of punishment could be inflicted, nor a mind which can be guilty of a criminal intent, traditional punishments prove ineffective, and new and different punishments have to be devised. the real penalty of a corporation is the diminution of respectability, that is, the stigma. it is now usual to insert provisions to the effect that the director or manager who has acted for the corporation should be punished. but, it is appropriate that the corporation itself should be punished. in the public mind, the offence should be linked with the name of the corporation and not merely with the name of the director or manager, who may be a non-entity. punishment of fine in substitution of imprisonment in the case of a corporation could solve the problem in one aspect; but, at the same time, it is necessary that there should be some procedure, like a judgment of condemnation, available in the case of an anti-social or economic offence committed by a corporation. this will be analogous to the punishment of public censure proposed for individuals.'and para 8.3 to the extent it is relevant for our purposes, reads as under :'8.3. in many of the acts relating to economic offences, imprisonment is mandatory. where the convicted person is a corporation, this provision becomes unworkable, and it is desirable to provide that in such cases, it shall be competent to the court to impose a fine. this difficulty can arise under the penal code also, but it is likely to arise more frequently in the case of economic laws.'8. coming now to the principles of interpretation of statutes, this court observed in siraiul haq khan vs. the sunni central board of wakf air 1959 sc 198 as under :'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; an attempt must always be made so as 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.'9. again in union of india vs. filip tiago de gama air 1990 sc 981 this court observed :'the paramount object in statutory interpretation is to discover what the legislature intended. this intention is primarily to be ascertained from the text of enactment in question. that does not mean the text is to be construed merely as a piece of prose, without reference to its nature or purpose. a statute is neither a literary text nor a divine revelation. words are certainly not crystals, transparent and unchanged as mr. justice holmes has wisely and properly warned (towne vs. eisjher (1918) 245 us 418. learned hand, j. was equally emphatic when he said statutes should be construed, not as theorems of euclid, but with some imagination of the purposes which lie behind them. (lenigh valley coal co. vs. yensavage 218 fr 547).'it further observed as under :'if there is obvious anomaly in the application of law the court could shape the law to remove the anomaly. if the strict grammatical interpretation 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. [see mahadeolal kanodia vs. administrator general of west bengal : [1960]3scr578 : [1960]3scr578 . the legislators do not always deal with specific controversies which the courts decide. they incorporate general purpose behind the statutory words and it is for the court to decide specific cases. if a given case is well within the general purpose of the legislature but not within the literal meaning of the statute, then the court must strike the balance.'10. 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 s. 276b is that the mandatory sentence of imprisonment and fine is to be imposed where it can be imposed, namely on persons coming under categories (ii) and (iii) above, but where it cannot be imposed, namely on a company, fine will be the only punishment. we hasten to add, two other alternative interpretations could also be given : (i) that a company cannot be prosecuted (as held in the impugned judgment); or (ii) that a company may be prosecuted and convicted but not punished, but these interpretations will be de hors s. 278b or wholly inconsistent with its plain language.11. for the foregoing discussion we are unable to sustain the impugned order of the high court so far as it held that the prosecution of respondent no. 1 was legally impermissible. equally unsustainable is the order of the high court dismissing the revision petition qua the other respondents in absence of any finding to indicate that it agreed with the reasoning of the trial court for their discharge. we, therefore, allow this appeal, set aside the impugned order of the high court upholding the discharge of the respondents and direct it to hear the revision petition filed by the appellant afresh in accordance with law and in the light of the observations made hereinbefore.

Judgment:
ORDER

BY THE COURT :

Special Leave granted. Heard the learned counsel for the parties.

2. The appellant, who is an Asstt. CIT, filed a complaint in the Special Court for Economic Offences at Bangalore alleging commission of an offence under S. 276B, r/w S. 278B, of the IT Act, 1961 (Act for short) by M/s Borewell & Co., a registered partnership firm (the respondent No. 1) and its three partners (the respondents Nos. 2 to 4). The Special Court took cognisance of the offence alleged and issued process against the respondents for their attendance. After entering appearance they filed an application praying for their discharge under s. 245(2) of the CRPC. The Special Court allowed the application on the ground that before granting sanction for their prosecution under S. 279(1) of the Act, the sanctioning authority did not give the respondents a personal hearing. The other grounds raised by the respondents for their discharge were however, kept open. Assailing the order of discharge the appellant filed a revision petition in the High Court which was dismissed by the impugned order. Hence, this appeal.

3. In upholding the order of discharge, the High Court did not deal with the ground that found favour with the Special Court but held - relying upon its earlier judgment in P. V. Pai vs. R. L. Rinawma, Dy. : ILR1993KAR709 - that the prosecution of respondent No. 1 under s. 276B was not maintainable for if ultimately the Special Court found it to be guilty it (the Court) could not legally impose a substantive sentence upon it which was mandatory thereunder. As regards the other respondents, though the High Court found that the prosecution against them was maintainable for the above offence, it still upheld their discharge.

4. To answer the question whether a company, being a juristic person and thus incapable of being sentenced to imprisonment, can be prosecuted and for that matter convicted - for committing an offence under the Act which provides for compulsory imprisonment and fine, it will be necessary to refer to the provisions of the Act with which we are concerned in this appeal.

5. Sec. 276B lays down that if a person fails to pay to the credit of the Central Government, the TDS by him as required by or under the provisions of Chapter XVII-B [which includes S. 194C(2) for violation of which the prosecution in the instant case was lodged] he shall be punished with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine. Sec. 278B reads as under :

'278B. (1) Where an offence under this Act has been committed by a company, 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 offence and shall be liable to be proceeded against and punished accordingly.

Provided that nothing contained in this sub-section render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-s. (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed 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 that offence and shall be liable to be proceeded against and punished accordingly.

Explanation. - For the purposes of this section -

(a) 'company' means a body corporate, and includes -

(i) a firm; and

(ii) an AOP or a BOI whether incorporated or not; and

(b) 'director', in relation to -

(i) a firm, means a partner in the firm,

(ii) any AOP or a BOI, means any member controlling the affairs thereof.'

6. From a plain reading of the above section, it is manifest that if an offence under the Act is committed by a company, the persons who are liable to be proceeded against and punished are : (i) the company (which includes a firm); (ii) 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; and (iii) any director (who in relation to a firm means a partner), manager, secretary or other officer of the company with whose consent or connivance or because of neglect attributable to whom the offence has been committed. The words as well as the company appearing in the section also make it unmistakably clear that the company alone can be prosecuted and punished even if the persons mentioned in categories (ii) and (iii), who are for all intents and purposes vicariously liable for the offence, are not arraigned, for it is the company which is primarily guilty of the offence.

7. Even though in view of the above provisions of S. 278B, a company can be prosecuted and punished for an offence committed under S. 276B (besides other offences 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. Before we proceed to consider the principles governing the interpretation of statutes we may profitably look to the 47th report of the Law Commission of India, dt. 28th February, 1972. While dealing with social and economic offences committed by Corporations (including companies, firms and association of individuals) it observed that though a company had no physical body and traditional punishment might thus prove ineffective, the real penalty could be inflicted upon its respectability, that is, by way of a stigma.

Therefore, it was appropriate that the company itself be punished so that in the public mind the offence would be linked with the name of the Corporation and not merely with the name of the director or manager who might be a non-entity. Punishment of fine in substitution of imprisonment could solve the problem in this behalf. The Commission recommended, apart from introduction of a provision in S. 62 of the IPC, appropriate amendments in the Central Excise Act, 1944, WT Act, 1957, and IT Act, 1961, on the lines of S. 93 of the Gold Control Act, 1968. The provisions contained in S. 278B of the Act appear to be based on the recommendations of the Law Commission, Para 8.1 of the Law Commission Report reads as under :

'8.1 An important type of white collar crime is that committed by Corporations. Since a Corporation has no physical body on which the pain of punishment could be inflicted, nor a mind which can be guilty of a criminal intent, traditional punishments prove ineffective, and new and different punishments have to be devised. The real penalty of a corporation is the diminution of respectability, that is, the stigma. It is now usual to insert provisions to the effect that the director or manager who has acted for the corporation should be punished. But, it is appropriate that the corporation itself should be punished. In the public mind, the offence should be linked with the name of the corporation and not merely with the name of the director or manager, who may be a non-entity. Punishment of fine in substitution of imprisonment in the case of a corporation could solve the problem in one aspect; but, at the same time, it is necessary that there should be some procedure, like a judgment of condemnation, available in the case of an anti-social or economic offence committed by a Corporation. This will be analogous to the punishment of public censure proposed for individuals.'

And Para 8.3 to the extent it is relevant for our purposes, reads as under :

'8.3. In many of the Acts relating to economic offences, imprisonment is mandatory. Where the convicted person is a corporation, this provision becomes unworkable, and it is desirable to provide that in such cases, it shall be competent to the Court to impose a fine. This difficulty can arise under the Penal Code also, but it is likely to arise more frequently in the case of economic laws.'

8. Coming now to the principles of interpretation of statutes, this Court observed in Siraiul Haq Khan vs. The Sunni Central Board of Wakf AIR 1959 SC 198 as under :

'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; an attempt must always be made so as 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.'

9. Again in Union of India vs. Filip Tiago De Gama AIR 1990 SC 981 this Court observed :

'The paramount object in statutory interpretation is to discover what the legislature intended. This intention is primarily to be ascertained from the text of enactment in question. That does not mean the text is to be construed merely as a piece of prose, without reference to its nature or purpose. A statute is neither a literary text nor a divine revelation. Words are certainly not crystals, transparent and unchanged as Mr. Justice Holmes has wisely and properly warned (Towne vs. Eisjher (1918) 245 US 418. Learned Hand, J. was equally emphatic when he said Statutes should be construed, not as theorems of Euclid, but with some imagination of the purposes which lie behind them. (Lenigh Valley Coal Co. vs. Yensavage 218 FR 547).'

It further observed as under :

'If there is obvious anomaly in the application of law the Court could shape the law to remove the anomaly. If the strict grammatical interpretation 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. [See Mahadeolal Kanodia vs. Administrator General of West Bengal : [1960]3SCR578 : [1960]3SCR578 . The legislators do not always deal with specific controversies which the Courts decide. They incorporate general purpose behind the statutory words and it is for the Court to decide specific cases. If a given case is well within the general purpose of the legislature but not within the literal meaning of the statute, then the Court must strike the balance.'

10. 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 S. 276B is that the mandatory sentence of imprisonment and fine is to be imposed where it can be imposed, namely on persons coming under categories (ii) and (iii) above, but where it cannot be imposed, namely on a company, fine will be the only punishment. We hasten to add, two other alternative interpretations could also be given : (i) that a company cannot be prosecuted (as held in the impugned judgment); or (ii) that a company may be prosecuted and convicted but not punished, but these interpretations will be de hors s. 278B or wholly inconsistent with its plain language.

11. For the foregoing discussion we are unable to sustain the impugned order of the High Court so far as it held that the prosecution of respondent No. 1 was legally impermissible. Equally unsustainable is the order of the High Court dismissing the revision petition qua the other respondents in absence of any finding to indicate that it agreed with the reasoning of the trial Court for their discharge. We, therefore, allow this appeal, set aside the impugned order of the High Court upholding the discharge of the respondents and direct it to hear the revision petition filed by the appellant afresh in accordance with law and in the light of the observations made hereinbefore.