Standard Chartered Bank and Ors, etc. Vs. Directorate of Enforcement and Ors, etc.

The Supreme Court deals with the question that whether a company can be prosecuted for offences for which the sentence of imprisonment is a mandatory punishment. Along with this, the Court also goes on further to deal with the concept of ‘Judicial heroism’.

Standard Chartered Bank and Ors. etc. Vs. Directorate of Enforcement and Ors. etc.
AIR 2005 SC 2622
Supreme Court of India

Coram: N. Santosh Hegde, K.G. Balakrishnan, D.M. Dharmaadhikari, Arun Kumar and B.N. Srikrishna, JJ.

Ratio: 3:2

Author of the Judgement: K.G. Balakrishnan and B.N. Srikrishna, JJ.

Date Decided: 05.05.2005

Relevant Acts:

Income-Tax Welfare Fund Rules Rule 11
 Indian Penal Code, 1860 Section 11, Section 7, Section 62, Section 417, Section 420,
Income Tax Act, 1961 Section 232(3), Section 232(3)(1), Section 276B, Section 276C, Section 277, Section 278, Section 278B,
Finance (No. 2) Act, 2004 Section 35HA(3)
Foreign Exchange Regulation Act, 1973 Section 56(1), Section 13, Section 19(1), Section 44(2), Section 18(1), Section 18A, Section 50, Section 51, Section 56, Section 57, Section 58
Monopolies and Restricted Trade Practices Act, 1969 Section 48A
Code of Criminal Procedure, 1973 Section 235
Suppression of Immoral Traffic in Women & Girls Act, 1956 Section 3(1)
General Clauses Act Section 3 (42)
Prevention of Food Adulteration Section 5, Section 6, Section 7 , Section 16, Section 16(1D), Section 18
 Indian Penal Code (IPC) (Amendment) Bill, 1972
Wealth Tax Act, 1957
Companies Act, 1956
Employees Provident Fund Act

Brief Facts: The appellant company filed a writ petition before the High Court of Bombay challenging various notices issued to them under section 50 read with section 51 of the Foreign Exchange Regulation Act, 1973.


  • Whether a company or a corporate body could be prosecuted for offences for which the sentence of imprisonment is a mandatory punishment?

Appellant’s Contention:

  • No criminal proceedings can be initiated against the appellant-company for the offence under Section56(1) of the FERA Act as the minimum punishment prescribed under Section 56(1)(i) is imprisonment for a term which shall not be less than six months and with fine.
  • The Parliament enacted laws knowing fully well that the company cannot be subjected to a custodial sentence and therefore the legislative intention is not to prosecute the companies or corporate bodies and when the sentence prescribed cannot be imposed, the very prosecution itself is futile and meaningless
  • When the Section commands the punishment for imprisonment and fine, the court is not left with any discretionary power to alter the sentence and that would amount to re-writing the provisions of the law.
  • The penal provision in the statute is to be strictly construed.( Girdhari Lal Gupta D.H. Mehta and Anr., Tolaram Relumal and Anr. v. The State of Bombay)


Respondent’s contention:

  • In case the company is found guilty, the sentence of imprisonment cannot be imposed on the company and then the sentence of fine is to be imposed and the court has got the judicial discretion to do so. He further submitted that this course is open only in the case where the company is found guilty but if a natural person is so found guilty, both sentence of imprisonment and fine are to be imposed on such person. n the case of a company or corporate body the sentence of imprisonment cannot be imposed on it and as the law never compels to do anything which is impossible, the court has to follow the alternative and impose the sentence of fine.
  • The counsel also hastened to add that this discretion could be exercised only in respect of juristic persons and not in respect of natural persons. It was contended that by doing so, the court does not alter the provisions of the law by interpretation, but only carry out the mandate of the legislature.

Held: In view of the majority opinion of the Supreme Court in the above appeals, the judgement of this court in Assistant Commissioner, Assessment- II, Bangalore and Ors. v/s. Velliappa Textiles Ltd. and Anr. stands overruled.


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