STANDARD CHARTERED BANK AND ORS. ETC. versus DIRECTORATE OF ENFORCEMENT AND ORS. ETC.

Citation: [2005] SUPP. 1 S.C.R. 49 · Decided: 05-05-2005 · Supreme Court of India · Bench: N. SANTOSH HEGDE
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Judgment (excerpt)

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STANDARD CHARTERED BANK AND ORS. ETC. 
A 
v. 
DIRECTORATE OF ENFORCEMENT AND ORS. ETC. 
MAY 5, 2005 
[N. SANTOSH HEGDE, K.G. BALAKRISHNAN, D.M. 
B 
DHARMADHIKARI, ARUN KUMAR AND B.N. SRIKRISHNA, JJ.] 
Company Laws: 
Corporate criminal liability-Offence by Company or Corporate body- C 
Punishable with mandatory sentence of imprisonment coupled with fine-
Prosecution under-Held: When statute provides for imprisonment and fine 
for offence by Company, even though Company being juristic person cannot 
be sentenced to imprisonment, Court can impose punishment of fine-Company 
is not immuned from any prosecution for serious offence-Such discretion can D 
be read into statute-Foreign Exchange Regulation Act, I 97 3-Section 56(1 )(i). 
Doctrine of impossibility of performance-Maxim-Lex non cogit ad 
impossibilia-Applicability of-Interpretation of Statutes. 
Appellant-Company were issued notices for prosecution under 
Section 56 of the Foreign Exchange Regulation Act, 1973. Appellants E 
contended that being a company no criminal action can be initiated against 
them under Section 56 because the section prescribes a minimum sentence 
of imprisonment and fine, and a company cannot be imprisoned. The 
question which arose for consideration was whether Company or 
Corporate body being a juristic person could be prosecuted for offence F 
for which mandatory punishment prescribed is imprisonment and fine. 
In appeal before the three-Judge-bench of this Court, the Bench 
doubted the correctness of Assistant Commissioner, Assessment-11 Bangalore 
and Ors. v. Velliappa Textiles Ltd and Anr's case which held that company 
cannot be prosecuted for offences for which mandatory sentence is G 
imprisonment coupled with fine; and as the Company cannot be 
imprisoned being artificial person, the Court cannot impose only fine; and 
referred the matter for reconsideration of the correctness of the view 
expressed by the majority in Velliappa's case before the present 
Constitution Bench. 
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SUPREME COURT REPORTS [2005] SUPP. I S.C.R. 
Answering the reference, the Court 
Per Balakrishnan, J. : 
HELD: 1.1. There is no blanket immunity for any Company from 
any prosecution merely because the prosecution is in respect of offences 
B for which the punishment prescribed is mandatory imprisonment. As the 
company cannot be sentenced to imprisonment, the court cannot impose 
that punishment, but when imprisonment and fine is the prescribed 
punishment the court can impose the punishment of fine which could be 
enforced against the company. Such a discretion is to be read into the 
C section 56(1) of Foreign Exchange Regulation Act, 1973 so far as the 
juristic person is concerned. This is the intention of the legislature and 
there is no difficulty in construing the statute in such a way. Of course, 
the court cannot exercise the same discretion as regards a natural person. 
Then the court would not be passing the sentence in accordance with law. 
D 
(72-H; 73-A; 72-F, G] 
Assistant Commissioner, Assessment-II Bangalore and Ors. v. Yelliappa 
Textiles Ltd. and Anr., (2003] 11 SCC 405, overruled. 
State of Maharash~ra v. Syndicate Transport, (1963) jlom. L;R. 197; 
Kusum products Limited v. S.K. Sinha, ITO, Central Circle~}(, Calcutta 126 
E ITR.804 . .(19.$0); Badsha v. lncY,me Tax Officer, (1987) 1 K.L.T. 1J2; P. V. 
F 
Pai v. R.L. Rinawma, Dy. Commissioner, Income Tax, (1993) 2 Comp_. LJ. 
314 (K-arn.); State of Mahara~htra v. Jugamander Lal, AI,R (1_966)SC 940; 
Delhi Municipality v. J.B. Bottling Comp{Jny, (1975) Crl. LJ. 1148 and Oswal 
Vanaspati and,A(!ied Industries v. Stat~ of Uttar Pr.,adesh, (1993) 1. Co~p. 
J,-.J.-172 (All.), rel_'erred to. 
United Stales v. Union Supply Company, 54 Law. Ed. 87, referred to. 
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2.1. A company is liable. to be prosecuted and punished for criminal 
offences. Although there are· earlier authorities to the effect that 
corporations camioi commit a crime, the generally accepted modern rule 
G is that except for such crimes as a corporation is held incapable of 
committing by reason of the fact that they involve personal malicious intent, 
a corporation may be subject to indictment or other criminal process, 
although the criminal act is committed through its agents. (62-G) 
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2.2. In the case of torts, the general rule prevails that the corporation 
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STANDARD CHARTERED BANK 1•. DIRECTORATE OF ENFORCEMENT 
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may be criminally liable for the acts of an officer
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