Proposal To Include Certain Social And Economic Offences In The Indian Penal Code

[Cites 372, Cited by 0]

Law Commission Report

Proposal To Include Certain Social And Economic Offences In The Indian Penal Code

 

LAW COMMISSION OF INDIA

TWENTY NINETH REPORT

ON

PROPOSAL TO INCLUDE CERTAIN SOCIAL
AND ECONOMIC OF FENCES IN
THE INDIAN PENAL CODE

1966



CONTENTS

PARA. I SUB.iECf~MATTlni 'PAGE A
No. ' '
- INTRODUCTORY
1-3 Genesis of the Report' I '
4 Reference to Law Commission 
5 Material studied 
Warts-COLLAR CRIMES I
6 White--coHar crimes 3
7 Relevance of white-cqllar crimes _. ,. . . . . 5;.
8-9 Problem of white-collar crime. 5
I0 Focussing of attention on white-collar crimes in the West 6
11 Reasons why such crimes escape punishment} 6;'
12 Description of white-collar crime" ' ' 
I3 White-coﬂar crimes in I 8th cultury 8
14-16 White-ooﬂar crimes in England _. . 8
I7 Restrictive trade practices _. 9;.
18-19 Conspiracy '95
2o Sutherland's study -. -. ; 16'5"
2: Main species of whitescollar crime '. . 3* 'o5
22 Adulteration of food, etc in" If A;
23 Racketeer.-ing (organised crimes) in the U.S.A 'ii '_
24 White-collar crimes b'y; pmfessionnl people ' . 
25 Price control laws in U.S.A  ' ' 13;',
26 White-co_1l_ar crimes in aﬂiusnt society .. .. .. .. . 51:33
ECONOMIC Cnmss IN Sovnrr Russia 5 «
27-28 Economic crimes in Soviet Russia -. ; ; -. . 
29 Important species of economic crimes '. , 1 
30 Death penalty in Russia for cértainteoonomic crimes . p 
31 Reasons for imposing death  ' 'A K
32 Min.imu_m'pena1i;i_Aes  I -. . '

.. . .
E.) .7»2!i.f'...,

 

(iii)



(iv)

PARA. SUBJBCI-MATTER PA on
No.
33 Some salient points as to the provisions in England, U.S.A. and So-
viet Russia . . . . . . . . . . I7
34 Position in Commonwealth countries . . I 8
MAIN Pomrs TO BE CONSIDERED--GENERAL OBSERVATIONS
35 Main points to be considered . . . . . I8'
36 Addition of new provisions . . . . . . . I8
37 General observations as to proposal for transfer . . . I9
38 Correct approach . . . . . . . . 19
39 Permanent offences and temporary malpractioes 2 . . . 23
40 Example of Guest Control Order cited . 2 I
41-42 Character of special statutes ., 21
[43 Multiplication of oﬁenees . . . . . . . 22
A 44 Criminal Law and Morality . . . . 2 3
45 Line of division thin . . . . . 25
46 Function of criminal law and moral law o0l11Par.¢d ~ 25
47 Analysis of anti-social etc., olfenees . . . . 25
ANALYSIS on SPECIAL BIIACTIIBNTS
48 Analysis of special enactment . . . . 26
49 Special penal provisions . 26
59 Men; rea modiﬁed . . . . i . . . . 27
2 5: Analysis of kind: of men: rea . . . . . . 27
52-53 Strict liability . . . . . . 28
,6 54 Knowledge of illegality whether relevant . . . . . 29
55-56 English cases on mans rea under particular statutes . 29
57 Offences under the Customs Act . . . . 30
53-59 Oﬂences un.der the Foreign Exchange Act . . . ' . 3 I
60 Classiﬁcation of offences in question, with referena to' men: rea . 3 I
6: Companies . . . . . . . . . . 31
 62-65 Liability of officers of companies ' . . . . . . 32
66 Vicarious liability . . . . . . _ . . 34
67-71 Modiﬁcation by statute . . . . . . . . 34
' 72 Vicarious liability-an aspect of strict liability . .. . . . 37
73 Object of the analysis regarding men: m , _ ' . . . . 3 1
' 74-75 Special rules of evidence . . . . . . . . 38 l
76 Importance of delegated legislation in relation to statutory oﬁenoes . 39



( V')

Pam Sumner-Marin PM!
No.
77 Penalties by rules . . . . . .' . . . 43
78 Special powers . . . . . . . . 43
79 Special provisions as to sanction . . . . . . . 43
80 Provisions for publicity . . . , . . . . 43
81 Special character of the enactment: . . . . . . 44. .
S2 Possibility of new oﬁenees in, future . . . . . .
83-84 Likelihood of new devices cotninginto existence . . . . 44
85-89 Genesis of special enactments . . . . . . 45'
90 Alterations in the Indian Penal Code by special enactments . . 47'
91 "Special" enactments and problems dealt with by them . . . ' 
CATEGORY I.---OFPENCES PiuM:N=.rxNo ECONOMIC DEVELOPMENT '
92 Oﬁences preventing economic development (Category I) . . . 47
93 Other economic crimes mentioned by Santhanam Committee . . 48
94-95 Whether adoption of economic crimes from Eastern Europe feasible 4o.
96-97 Points suggested in comments . . . . . . . 49
CATEGORY 2.---EVASION AND Avommcs or 'fax'
98 Evasion, etc. of tax (Category 2) . . . . . . . 55
99-100 "Evasion" and "avoid_u'ice"'l . . . . . . . sf
1o1-106 Attitude towards tax avoidance in  . . . 52
ro7-109 interpretation of taxing Acts . .
no Avoidance not always fraudulent . . . . . . 55
In Views of Courts in India as to  ,. . . . 56
1'12 Methods of checking evasion . . . . . . . 57
113 Existing provisions andysed . . . . . . 
114 Transfer of existing provisions not feasible . . . . . 
115-117 Placing provisions as to evasion in the Penal Code . . . 58;
118 Qudisﬁgtin of enactrnent of genual provision as to tax evasion consi- . 
I19 Addition of new provision . . . . . . . 6}
no Points suggested in comments . . . . . . . Q
111'  

Avoidaneehowtobt-.tackled_ .  . . .

<1 L



(Vi)

PARA. SUIBJBCI'-MA'l'TE'R PAGE
No.
CATEGORY 3.-LM1sUsE or PUBLIC Posr1'IoN BY Punuc Smvmrs
122 Misuse of their position by public servant (Category 3) . 61
123 Existing provisions analysed . . , . . 61'
124' Misuse without beneﬁt . , , , ; , _ . 62.
125 Points raised in comments . . . . . 62.
CATEGORY 4.--DEI.IVERY or Goons N01' nz Aooonmncs
WITH CONTRACT!'
126 Delivery, etc., of goods not in accordance with contract (Category 4)
127 Existing provisions analysed . . .
128-129 "Cheating" and delivery of goods, etc. . 63.
130-131 Meaning of "deception" . . . . . . 64
132 Point of implied representation academic . . 65
133 ' Attempt to cheat . . . 65
134 Complicity of oﬂioers and oifenders - . . 65
135 Position in English Law . . . '. . 65
:36 Kinds of malpractioes . . . . . . 66-
137 Proposed section . . . . . . 67
138 Points suggested in comments . _ . _ 67'
139 Proposed section not to be enacted without  likely reper-
cussions . . . .. . = - . . . . 67
CATEGORY 5.--HonDrNGi AND Pnorrrzanme
14o Hoarding and proﬁteering (Category 5): . . . . , 67
141 Existing provisions analysed . . . . . . 67
142-143 History of legislation relating to control of essential commodities 68'
144 Points suggested in comments . 6'9
:45 West Bengal Act . 69'
I46 Addition of new provisions . . . . / . . . 69-
CATEGORY 5.-H-Anum.-amen
147 Adulteration 70.
:48 Existing provisions . . . 70'
149-150 Transfer not feasible . . 7o
15:' Addition of new provisions

7! '

.. ,......



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PARA SUBJECT-MATTER PAGE
No.

152 Adulteration and public opinion. . . . . . ' . . 71

153-155 Failure of prosecutions. . . . . . . . . 72

CATEGORY 7.--TI-IEFT AND nnsnpxormnon or PUBLIC PROPERTY AND 1-Uuns

156 Theft and misappropriation of public property and funds (Category 7) 72
157 Transfer not feasible . . . 13
158 Addition of new provisions . . . . . . . 73
159-160 Provision proposed for theft of public property . . 73
161 Points suggested in comments . . 73
CATEGORY S.--TRAFFICKING IN LICENCES
162-I63 Traﬂicking in licences, pamits, etc. . 73

164 Meaning of "traﬂicking" and points stggesred in comments . . 74
165-168 Traﬂicking to be dealt with by special enactments

. . . 75

CONCLUSION
169-171 Problem of crime a complex one . . . . . . . 76
172 Appendices . . ., . . . . . . . 75

APPENDICES

APPENDIX I.--Existing_stal1tory provisionsregarding oﬁences calculated 5
l to prevent or obstruct the economic development of the

country and endntger itseconomic health . 78
Appmmrx 2.--Existing tanuory provisions regarding evasion or avoidance
of Tax gr duty and the consequent pemlry thereof . 86,

APPENDIX 3.---Existing statutory "provisions penalising misuse of_posi-
tion by public servauits  than that of Theft, Briberg
Misappropriition and 'Breach of Trust), occurring
various stantes - . - . . . . 7.

. - mo
APPENDIX 4.--Existing staiutory provisiom rear-ding oﬁ'ences_ in the
nature of breaches of qtlltrlcts resulting in delivery of
goods not according to'spociﬁca_tions . . . . :07
AP .--E ' ' isio Hoard' and Black- -
rmmrx 5 Mxéiiigtgmztaunory prov  as to I  I . Id
Apprumx 6.--Pr-ovisions relating to adulteration of food and drugs
and the penalties provided therefor . . . . II4

Arrmmx 7.--Exist' statutory provisions as to Theft andMisappro-
priatilglﬁ of public  and funds . . . IE; .





(Miii)

licences, permits, etc.
.A!-'PENDIX 9.--Provisions of the Defence of India Rules, 1962--re]evant
or analogous to the offences in question . . .
.APPIzND1x Io.--List of Central Acts pertaining to anti--social offences,
other than the offences listed by the Santhanam Com-
mittee . . . . . . . .
.A.PPBNDlX rI.--Provisions of th Income-Tax Act, 1961 (43 of 196:)
referred to in the Report of the Committee on Prevention
of Corruption, page 27:: (middle), as oﬁering scope for
evasion . . . . . . .
APPENDIX I2.---Surnmary of certain points as to tax evasion etc., dis-
cussed in the Report of Income-tax Investigation Com-
mission, I949 presided over by Sﬁri Vardachariar
APPENDIX x3.--Points as to Evasion Avoidance discussed in the
Report of the Taxation uiry Commission (1953-55)

APPENDIX 14.---Summary of the points made in " Indisn'1"ax Reform"
by Mr. Kaldor, Department of Economic Affairs,
Ministry of Finance, Government of India (1956)
APPENDIX 15.--Tax Evasi0n--prosecution in India for---(Extracts 'from
_ Report of the Direct Taxes etc. Committee) .
APPENDIX I6.--Extracts from the Criminal Code of Hungarian People's
Republic, 1962 . . . . . . . .
I-APPENDIX r7.--Exu-acts of_ certain sections of the,Pe,ml Code of Norway
[" Norwegian Peml Code" (rmr) published in the
American Series of Foreign Penal odes . .
APPENDIX I8.----Extracts of certain sections of the Argentina Penal Code,
taken from the translation blished in the American
Series of Foreign Penal &>d£u(r96;) . . . .
.APPENDIx I9.--Eng1ish Law relating to spreading false rumours to aﬁect
- P110382 e¢C- -- . . ~ . . . . . .
APPENDIX 2o.--Position in English Law regarding certain offences (Bri-
bery and Corruption, Conspiracy, Cheating, Ernbezz1e-

PPENDIX 8.--Existing statutory provisions relating to traﬁicking in

ment, etc.). . . .
APPENDIX 2r.--Ec_onomic crimes in certain Eastern-European coun-
tries . . . . . . . . .'
APPENDIX 2a.--Tax Evaiqn provision in U.3.A. (Section 72or,- Inte
Revenue Code) . . . . . .

APP1:NDrx 23.---ah: Penal Code  the' Prevention of Corruption, etc.

C5 - ~ . . . . . . . .
APPaNmx 24--.-----S'ub-Standard goods and digging . .
APPENDIX 25.--§<;'nie provisions of  Law regarding high prices

Amman 25.--agctu1terauo:i laws of   . . . .
APPENDIX '27.---Basic principles for pure food laws . . .
em  an Tamar ."'""'."'""'. «em. aw-
PAPPENDVIX 29.---Can'adian Laws as to, anti-social etc; oifenees . .
APPENDIX 3o.--English law relating no oompiracy . .
APPENDIX' 3I.--I"roposed amendrnents to the Indian Penal Code .

./APPENDIX 32.--Proposed amendments to the Code of Criminal Pro-
ocdure, 1:898 . . . . . . . .

PAGE

136

I37

138

739

14:

I42 .. -

145
145

I47

I61

I62

I62

I63
I69

175

I82
187

I88
189
I94

I96
201
208
211

212



INTRODUCTORY

1. The circumstances in which the preparation of this g'"°51' °f
Report was undertaken may be brieﬂy stated. The Gov- °R°p""
ernment of India appointed in 1962 a Committee to zzcview
the problem of corruption and to make suggestions' on
various matters connected therewith. One of the terms
of reference of the Committee Was, "To su est changes
in the law which would ensure speedy tria of cases of
bribery, corruption and criminal misconduct and make the
law otherwise more eifectiveaf'.

Dealing with this, the Committee3 made the following
observations :--

"7.2. The substantive law relating to bribery, cor-
ruption and criminal misconduct is contained in the
Indian Penal Code and the Prevention, of Corru tion
Act, 1947, the procedural law in the' Criminal Pgoce-
dure Code, Criminal Law Amendment Act, 1958 and
some special rules of evidence relating to such cases
in the Prevention of Cor V ion Act. The Working of
the relevant provisions of se enactments in prosecu-
tions in courts and also at the stage of investigation
have disclosed that certain changes in the law are re-
quired in order to ensure speedy trials and more
effective results. We have examined the existing
provisions in the li ht of experience gained in
numerous cases, and so in the context of social
changes and economic objectives which have created
new problems.

"7.3. Amendments to the Pndian Penal Code

The Indian Papal Code was enacted in 1860,
and though it has been amended here and there,
its main structure hascontinued intact during the
last 100 years andinam.» Itxis an admirable com-
pilation of substantive criminal law, and  of
its provisions are as  today as they were
when they were hrmulhted; But the social and
economic structure of Iztdiatlrts changed Io' such a
large extent, espeeially during the last 17 years of
freedom, that in many fespects the Code does' not
truly reﬂect the needs of the present day. It is
dominated by theinotion that almost all 'major

'See the Report of the Committee on that Prevention of Cenuption,
(1 )pn'g'erp'ara.z-1. Crhecommitteeishéreaft ef dt th
3&1;-mm  er r erre o as e

'See the Report of the Smdaannm  230° 2: 90131-3 and
P389 53: PWQI' V14 ' 1

«man we mm   1-.3-an



Reference: to

Lew Com-
mission.

_ issue of licences

2

crimes consist of offences 'against person, pro-
perty or State. However, the Penal Code does not
deal in any satisfactory manner with acts which
may be described as social oﬁences having regard
to the special circumstances under which they are
committed, and which have now become a domi-
nant feature of certain powerful sections of
modern society)'.

2. The Report1 of the Santhanam Committee broadly
categorised the offences as follows:---

"(1) Offences calculated to prevent or obstruct
the economic development of the country and en
danger its economic health;

(2) Evasion and avoidance of taxes lawfully im-
posed;

(3) Misuse of their position by public servants in
making of contracts and disposal of public property,
and permits and similar other
matters;

(4) Delivery by individuals and industrial and
commercial undertaking of goods not in accordance
with agreed speciﬁcations in-fulﬁlment of contracts
entered into with public authorities; '

(5) Profiteering, black-marketing and hoarding,
(6) Adulteration of foodstuffs and drugs;

(7) Theft and misappropriation of public property
and funds; and -

(8) Trafficking in licences, permits, etc."

3. The Committee their went on to observe":--

"Some of these 'offences have been made punish-
able' by special enactments'. :We are of the opinion
thatit is desirable to' add an new chapter to the Indian
Penal Code bringing together 'all the otfences in such

special enactments and.' supplementing them with new' '

provisions so that allisociili urffences will ﬁnd a promi-

nent place in.- the general -,c1-iminal, law 'of the country.

It is a matter for the-;Gov!2_:nment to consider whether

this_ work should~be undertaken by a special legal
_ committee or referred to the Law Commission".

4. The Government' decided, that the matter should he-
considered by the Law Commission, and-' referred "the-

 isindm -

A.' ,.

     

'REP°n  *1" i. .133 '54!'p;'3-.'-7'_.dr- 'r.--raft'

" ; pages 53. 5g34.n=4rw.v'a.¢€ ': 



3

above proposal of the Santhanam Committee to this Com-
mission', as the revision of the Indian Penal Code was
under the Commission's consideration. That is the genesis
of this Report. In view of the importance of the matter,
we' decided to deal with it separately from the general
revision of the Indian Penal Code.

5. In order to facilitate our consideration of the sub- Material
ject, we have studied the various special enactments re1a- S'"d'°d-
ting to the offences in question2, the penal laws of several
other countries3, and the literature available on the sub-
ject, including the Reports of several Committees'. A
study of the judicial decisions relating to these offences
was also made, in order to ﬁnd out vvhether the existing
provisions relating to these offences are not adequate".

The proposals of the Santhanam Committee were cir-
culated by us for comments to State Governments and
High Courts, and several other persons and bodies. We
have considered each one of these comments in detail. The
important points made' in some of the comments will be
dealt with in the Report under the relevant categories".

WHITE--COLLAR CRIMES

6. From the discussion in another part of the Santha- ¢YiI£:e;_C°lhr

nam Committee's Report', it would appear, that the Com-
mittee attached great importance to the emergence of
offences and mal-practices known as "white-collar" crime.
We quote the relevant portion:---

'2.13. The advance of technological and scientiﬁc
development is contributing to the emergence of
"mass society", with a large rank and ﬁle and a small
controlling elite, encouraging the growth of monopo-
lies, the rise of a managerial classandi intricate institu-
tional mechanisms. Strict adherence to a high stand-
ard of ethical behaviour is necessary for the even and
honest functioning of the' new social, political and
economic processes. The inability of all sections of
society to appreciate in full this need results in the
emergence and growth of white-collar and economic

,.v crimes, renders enforcement of the laws, themselves

ya' " not suﬂiciently deterrent, more difficult. This type of

1Para. 3, supra.
'See Appendices I to 8.

'Particularly, England, Australia, Canada, New Zealand, United States
of America, Soviet Russia, Hungary, Norway, France and Argentina.

4See Appendices 12, 13, 14 and 15. J

'A part of the material studied by us will be found in some of the Ap-
pendices to this Report.
W' 'See paragraphs 38, 76. 96, 97, I20, I25, I36, I38. I44. I64, and 168.
sl 0.

7Report of the: Santhanam    2-I3  2-14.



4

crime is more dangerous, not only because the ﬁnan-
cial stakes are higher but also because they cause irreé
parable damage to public morals. Tax-evasion and
avoidance, share-pushing,' mal--practices in the share
market and administration of companies, monopolis-
tic control, usury, under-invoicing or over-invoicing,
hoarding, proﬁteering, sub-standard performance of
contracts of construction and supply, evasion of
economic laws, bribery and corruption; election
offences and mal-practices are some examples of
white--coIlar c14i.me:.'. A

"2.l4. Corruption can exist only if there is some
one willing to corrupt and capable of corrupting. We
regret to say that both this willingness and capacit
to corrupt is found in a large' measure in the industrial
and commercial classes. The ranks of these classes
have been swelled by the speculators and adventur-
ers of the war period. To these, corruption is not only
an easy method to secure large unearned proﬁts, but
also the necessary means to enable them to be in 1
position to pursue their vocations or retain their posi-
tion among their own competitors. It is these persors
who indulge in evasion and avoidance of taxes, accu-
mulate large amounts of unaccounted money by vari-
ous methods such as obtaining licenses in the names of
bogus ﬁrms and individuals, trafficking in licensec,
suppressing proﬁts by manipulation of accounts to
avoid taxes and other legitimate claims on profits,
accepting money for transactions put through without
accounting for it in bills and accounts (on-money) and
under-valuation of -transactions in immovable pro-A
perty. It is they who have control over large funds
and are in a position to spend considerable sums of
money in entertainment. 'It is they who maintain an
army of liaison and contact men, some of whom live,
spend and entertain ostentatiously. We are unable to
believe' that so much money is being spent only for
the purpose of getting thin s done quickly. It is said
that, as a large majority of he high officials are incor-
ruptible and are liltely to react strongly against any,
direct attempt to -subvert their integrity, the liaison?'
and contact men makea careful study of the charac-
ter, tastes and weakness: of ofﬁcials with whom they'
may have to deal and that these' Weaknesses are. thai,
exploited. Contractors and suppliers who have pers-
fected the art of getting business by under-cutting, of '
making good the loss by passing oﬁ sub~stand '
works and goods generally spare no pain or expen is
ture in creating a favourable' atmosphere. Possession. .
of large amounts of unaccounted money by various
persons including those belonging to the industrial
and commercial classes is a major impediment in
puriﬁcation of public lie. If anti-corruption activit
are to be successful, it" must be recognised that it is as



5

important to ﬁght these unscrupulous agencies of cor-
ruption as to eliminate corruption in the public ser-
vices. In fact they go together.".

7. The above extract' from the Santhanam Com-- Relevance or
mittee's Report seems to indicate, that many of the offen- W*."t°'°°""
ces 'which that Committee had in mind Were crimes usua1- ""m°s'
ly known as white-collar crimes, We, therefore, proceed
to discuss the problem of white-collar crime in detail.

8. In recent times the problem of white-collar crime §fh"i1t';fg'°":ﬂ

has received considerable 'attention. "White-collar c,imes_
crime" has been deﬁned approximately as a crime com-
mitted by a person of respectability and high social status
in the course of his occupation? The emphasis is on the
connection with occupation. The commission of a crime of
this category is facilitated by the oﬁice, calling, profession
or vocation of the individual concerned. White-collar
crimes, thus, exclude crimes like murder, adultery and
intoxication, even if committed by people of the upper
class, since these have nothing to do with their occupation.

9. The object of those who had drawn attention to the»
prevalence of white-collar crime _was to educate the public
about the harm caused to the society by such crime, and to.
point out that these crimes should bear the same moral
stigma as acts regarded as crimes according to the ortho-
dox notions. It was pointed out", that one of the reasons
for the differential implementation of the law in the area.
of white-collar crimes was the "relatively unorganized
resentment of the public" towards such crime, The reasons
for the absence of such resentment were stated to be as.
follows'':--

(a) The violations of law in such cases are com-
plex, and can be appreciated only by experts;

(b) The public agencies of communication (like-
the press) do not express the 0 Cnised moral senti-
ments of 'the community, partly cause the crimes
are complicated and cannot be easily presented as:
news, but probably in a greater degree because these
agencies of communication are themselves controlled
by businessmen involved in the violations of many of '
these laws. T

(c) The laws for the regulation of business belong"
to a relatively new and specialised part of the statutes.

'Para. 6, supra.

2Sutherland, White-Co1lar_Cr_ime, (1949),, page 9. See also Sutherland
and Cressey, Principles of Criminology (1969), page 40.

ssutherland, White-Collar Crime,, (1949);  Q9, '
4See Sutherland, White-Collar Clrime  pages 50-51.



Eocusting of

attention on
white-collar
crimes in the
west.

Reasons why

such crimes
escape
ishment.

Pun'

6

10. Attention was focussed on the problem of white-
collar crime in England and the U.S.A. after
World War, when it was realised that losses resultin from
business frauds far exceeded those from the o ences
against property that were punishable under the orthodox
notions of crime'. It was the ﬁnancier, not the gangster,
who was the greater public enemy'. As deﬁned_by Suther-
land, white-collar crime is a "violation of the criminal law

by a person of the upper socio-economic class in the course'
of his occupational activities".

Later, he seems to have added a reﬁnement to the deﬁ-
nition, by deﬁning a white-collar criminal as "a person of

the upper socio-economic class who violates the criminal
law in the course of
activities?"

He pointed?'-4 out, that white-collar crime was more
dangerous to society than crimes committed by the members
of the lower class, first, because the ﬁnancial losses were

higher, and secondly, because of the damage inﬂicted on
the public morals.

The necessity of revising the social attitude towards such
anti-social behaviour and perceiving its dangers was
pointed out by various other writers also"-".

11. Sutherland also elaborated the reasons why such
crimes went unpunished. "The difference in the implemen.
tation of the criminal law is due principally to the difference
in the social position of the two types of offenders".
Because of their social status," implementation of the crimi-
nal law in 'relation to white-collar criminals becomes difﬁ~
cult. They are more powerful than the traditional criminals
"Consumers, investors and stockholders are unorganised,
lackptechnical knowledge and cannot protect themselves"-'

'Thurman Arnold, Folklore of Capitalism, page 276.

'Sec Dictionary of Sociology edited by Fairchild (Vision Press, London)
E19138), under "criminal White-collar", contributed by Edwin H. Suther-

'See Annals of the American Academy of Political and Social Sciences
(September, 1941), Vol. 217, page 112-

4See. also Sutherland, "White-collar Criminality", (I940). American
Sociological Review, pages I, 4.

'See Annals of the American Academy of Political and Social Sciences.
(September, 1941), Vol. 217, "Crime in the United States".

'See also paras. I2, 19, 24, infra.

"See Sutherland, "White-collar Criminality", American Sociologid
Review, (1940), page I,  page 8.

'Embezzlement is an iaxceptién  tlﬁ_s.

the First '

his occupational or professional '



Y

White-collar crime, it is stated, goes undetected because
it "transcends the visibility of ordinary cheating Practices
of small mercha-ntsl". It can, however, be gathemd fr?!"
reports of investigating committees or from conversation
with intimate friendsz. ' _ .
12. That white-collar crime is essentlally connected with 3°;°h';,,';,'_'°"
social status has been brought out in the following descrip- collar crime.
tion given by a writer on Crimino1ogy":--- -

"White-collar crime is most distinctively deﬁned in
terms of attitudes toward those who commit it. White-
collar crime is deﬁnitely made punishable by law. It is
convictable behaviour. However, it is generally re-
garded by courts and by sections of the general public
as much less revrehensible than crimes usually punished
by our courts, which may be designated "blue-collar
crime". Blue--co1lar crime is the crime of the
under-privileged; whiteecollgr crime is upper
or middle-class crime. Just what proportion
or section. of the population must condone this
type 0.f behaviour to caesﬁtute it as white-collar is not,
and perhaps cannot be. clear. Many courts and other
authorities clearly distinguish between a man who
illegally misrepresents the qualities of his products and
a burglar or robber. Yet the very existence of the law
penalizing the former type of act indicates an adverse
attitude toward it, though ordinarily not of the same
degree. The fact that white-collar crime is punished in
less degrading ways than '-'ordinary crime" does not
imply that the former is petty. Actually society loses
huge sums through white--oollar crime. Some of the
rackets we described in an earlier chapter are white
collar crimes; some are not. As!Sutherland deﬁnes the
term, most racketeering by oﬂicers of a labour union --
would not be white-collar crime; nor, apparently would
the Vice racket be so deﬁned. Thus neither in termsiof
class status, business .activis_ty, attitudes, nor degree of
Seriousness can white'-collar crime be wholly separated
from other crime. Nevertheless, it is the somewhat dis-
tinctive attitudes and policies toward the oﬁender in
such cases which have been given signiﬁcance in discus.
sions of white-collar crime.' It jap _'ars that even out.-
side of business circles, white-co lar crime is less re-
prehensible than ordinary' crime; because low-class
people often aspire to be white-ggllar criminals. Or if
not. they at least accent the same individualism and the
same value of materialism which the middle and upper
classes accept. White-collar crime is attractive because
it brings material rewards with little or no 1055 of
status.' . ~

'Reckless, The Crime Prob1qn,_ (1955), pay 206,

'.Cf.Sth land,"C' i B ' " ' fth '
of Political1 arid Social'  gm;  Agduzny _'
. E . -5- '..'

'Taft and England, Cfirni A 3¢p.zb[ ;
47 Law--2.§  5 ' A '
3 a



White-coﬂar
crimes in
18th century.

White-collar
crimes in

' England.

0

13. Problems similar to white-collar crimes had arisen as
far back as the 18th century. The "South Sea Bubble" led
to the Bubble Act of 1720', which may be cited as example
of an elfort by the Legislature to deal with "and on a big
scale perpetrated by unscruplous persons"-3. Bu'. the varie-
ties of such crimes and their diverse manifest/'ions were
seen more acutely after the First World War.

14. Certain species of white--co1lar crime have received
special attention -in England. One example is, "share-push-.
ing" (victimisation of the public by fraudulent dealings in
stocks and shares)'. Legislation penalising this mal-practice
was enacted in 19395-"#7-8.

There are similar provisions in the Company Law in
India''.

15. Another example of legislation relating to white-
collar crime in England was the Prices of Goods Act, 1939,
under section 1 of which it was unlawful to sell any goods
the price of which was regulated, at a price exceeding the
authorised price".

16. Taxation frauds have been regarded as an impor-'-
tant kind of white-collar crimes,' and Legislatures in all
countries have been constrained to go on adding more and
more stringent provisions in the law relating to taxation,
as so to bring within their net transactions which, under
the pre-existing law,:.were' not taxable. The problem as-
sumed importance in England in the forties. For the
present purpose, it is not necessary to discuss in detail the
difference between "tax-evasion"
The former is a breach of the law, while the latter raises
only ethical questions.' '

'The Bubble Act, 1720 (6 Geo. I, c. 18).

2See Gower, Modern Company Law (1957), (I963 Impression), page
27 to 30. . .2 '

"See also Gower in (1952) 68 L,Q.R. 214.

'See Report of the Deparunentakcommittee on Share-pushing, ap--

pointed by the President of the Board of Trade, (1937), Cmd. 5539.

'Prevention of Fraud nvestments) Act, 1939 -(2 and 3 Geo. 6 c. 16)
later replaced by the Act 0 1958 (6 & 7 Eliz. 2 c. 45).

"See Gower, Modern mpaqy Law, (1957), (1963 Impression) pages
285-286, for the Act of I9 9.

"For a summary of  caseson the Act, see Note in (1961) 24
Modern Law Review 781-784 by B.W.M. Downey.

'See also analysis in R. v. Rmku, (1953) 1 W.L.R. 77, 79, 81 (C.C.A.).

'See section 68_o'f the Companies Act, 1956, (1 of 1956), punishing
false, deceptive or misleadixg statements, etc., made by any person knowingly
or recklessly to induce any other person to buy, etc., shares.

"(The Act was replaced by the Goods and Services (Price Control) Act,
194! 4
Acts, 1950 and 1953. 1

i
1

L
-S

. } ; .
: ; - L Q . 5 ' '
"See para. 99 et seq, A/ﬁa; F 



and "tax-avoidance"11. A

& 5 Geo. 6, c. 31); which, inshs turn, was repealed-by the s.L.B.



8

17. Other types of activities on which attention_has been tI:§S2'i?'i"°
focussed in England 1n._recent times are restrictive trade pmcti¢,_

practices', though the legislation on this "subject2 is _not
so widely framed as "ant1-trust legislation in the Umted
States of America.

18. Apart from these statutory provisions3 there is the Cons

common law offence of "conspiracy", in England, the
scope and application of which may be wide enough to
cover many fraudulent transactions not covered by speci-
ﬁc criminal statutes4.

We may quote the observations of Fitzgerald J. in one
of the leading cases on conspiracy5:----

"A conspiracy consists in the agreement of two
or more to do an unlawful act, or to do a lawful act by
unlawful means. By the terms "illegal" and
"unlawful", it is not intended to conﬁne
the deﬁnition to an act that would be
in itself be a crime. or an offence. They ex-
tend to and may embrace many cases in which the
purpose of a conspiracy, if effected by one person
only, would not be a criminal act; as for instance, if
several persons combined to violate a private right,
the violation of which, if done by one, would be
wrongful but not in itself criminal. If, for instance a
tenant withholds his rent, that is a violation of the
right of his landlord to receive it, but would not be a
criminal act in the tenant, though it would be the
violation of a right. But, if two or more incite him
to do that act, their agreementso to incite him is by
the law of the land an offence".

He further observed, "Conspiracy has been aptly des-
cribed as divisible under three he'ads":t---

"where the end to be attained is in itself a crime;
where the object is to do injury to a third party or to
a class, though if that injury were effected by a single

{For a summary, see Sir David'Cairns "Monopolies and Restrictive
Practices" in Ginsberg (Editor). Law and' Opinion in England in the
20th century, (1959), page II3 et seq. See also " Monopolies, Mergersand
Restrictive Practices", (I964) (Cmd. 2299), and Report of the Royal
Commission on the Press (1962), (Cmd. 1811).

'The Monopolies and Restrictive Practices (Inquiry  Control) Act,
1948 5 _the Monopolies, etc., Commission Act, 1953 (now repealed) ; the
Restrictive Trade Practices _Act, 1956 ; the Rc--sale Prices Act, 1964 (c. 58) ;
and the Monopolies and Mergers Act, 1965 (c. 50).

"Paras. 14 to 17, supra.
4See Appendix 30, for a detailed discussion.

"R. v. Parnell and_ others, (1881) 14 Cox C.C. 508, (Fitzgerald J.)
(Irish Queen's Bench Division). See Turner  Armitage, Cases on Criminal
Law, (I964), page 173-. .

'This ysis was refe (1 ' by 1'
v. Veitch, a?("rl942) 1 All  ' p
.~ S 1'

 

T --  : ~17: (H.r..).

_tin('.'rofterH'arn':.

im-



Suther1and's
study.

Main species
of White-_
collar crime.

10

individual it would be a civil wrong but not a crimi---
nal; and where the object is lawful, but the means to
be resorted to are unlawful . . . . . . .. The law of cons-
piracy is not an invention of modern times. It is part
of our common law; it has existed from time imme-
morial. It is necessary to redress certain classes of
injuries which at times would be intolerable, and which
but for it would go unpunished.". -

19. In the United States of America, the expression
"white-collar crime" was made current by Sutherland'.
Certain other authorities had also pointed out the damage
to society from the -upper socio-economic groups which ex-
ploited the accepted economic system to the detriment of
the masses".

20. In his book "whiteacoller cri_me"' Sutherland exa-
mined the criminal activities of 79 of the biggest corpo-
rations in America, and iocussed attention on the follow---
ing types of law-breaking by theip:---.-

(1) Restraint of trade.
(2) Misrepresentation in advertising.

(3) Infringement of patents. trade marks and
copyrights.

(4) Unfair labour practices.
(5) Frauds in business.

Thereafter, several other studies and reports have come
out in the U.S.A. on the 

21. The main crimes that have attracted attention in
the U-S-A under the head of w_hite--col1ar crimes may be
summarised as follows:--

(a) frauds in business, in relation to sale of bonds
and investments"; ' '

(b) adulteration of food and drugs, and mislead-
ing advertisements'-5;

_'Sutherland, " White--collar Crimilulity", American Sociological

Review (February, 1940), pages re-1.3," '
'See Barnes 81 Testers: Nsw Hwilons incrhninolosy (I959), pane 41.
"See 'also para. 10, supra.

4Edwin H. Sutherland, Whit¢--odhr Crime (1949) (Dryden P1-gsg'.
New York). .

'E. g. Hartung "White-collar Crime ' and its si niﬁcance ' th
and practice" (1953:) I7 Federal Probation'3r. g m 'Cory

'Cf. Barnes & Teeters, New Horizons in Criminology (1959), page 45,
I932;Ka1Iett & Schlink, " Ioo5ooo,ooo Guhea Pigs " (New York, Vanguard,

i935)-

mmh Lamp. The Arnetfcaé  am» (New y.o.x,gi=.m., if 



11

(c) ma1--practices in the medical profession, such
as "illegal sale of alcohol and narcotics, abortion, illegal
services to underworld criminals, fraudulent reports and
testimony in accident cases, extreme cases of unneces-
sary treatment, fake specialists, restriction of compe-
tition and fee-splittingl";

(d) crimes by lawyers, such as guiding the crimi-
nal or quasi-criminal activities of corporations, twist-
ing of testimony to give a false picture, fake claims
(bogus liability in accidents), etc."--3;

(e) trusts, cartels, combines and syndicates, etc.,
formed to combat competition, or to raise prices or other
wise to interfere with the freedom of trade to the detri-

-- mentof honest businessmen or the consuming public.
This has now become a, branch of the law by itself
and is usually dealt with under the topic of "Anti-
trust legislation";

(f) bribery and graft by public officers'.

22. Adulteration of food and drugs has received exten-
sive consideration in the United States of , America",
along with the question (if drug addiction and sale of narco-
tics, such as opium, and several Acts have been enacted on
the subject". The latest of the Acts, the Federal Narcotics
Control Act, 1956, besides penalising the addicts', also
punishes those who handle narcotics 'for proﬁt and exploi-
tation. For sale of heroin' by a person over 18 to a person
under 18, death sentence can be awarded under the Act of
1956.

23. Another topic which has received special attention
in the U.S.A. is "organized crimes", Le. crimes wherein the
traditional criminals join hands with big business for secur-
in% ends harmful to the community. Literature on this
su ject is abundant'. This is popularly known as "racketeer-

'Sutherland, " White-collar' Criminality ", American Sociological
'Review (February, 1940), Vol. 5, page I, at page 2.

8 "Barnes & Teeters, New Horizons in Criminology (1959), pages 47 and
4 - ,

"Kefauvc'r, Crime in America (1952), page 57.

'See " Crime in America " by Esttes Kefauver, Chairman of the Senate
Crime Investigating Committee (May, 1950 to May, 1951). (Gollancz)
(I952), pages 15, 25, and 55-

'See "Federal Food, Drug and Cosmetic Act, (I954) 67 Harward Law
Review 633. '

'See the Harrison Anti-Narcotics Act, 1915 (regarding opium); the
Marihauna Tax Act, 1937 ,- and the Federal Narcotics Control Act, 1956.

7For a summary, see Barnes & Teeters, New Horizons in Criminology,
(1959); Page 85-

"Heroin, it is stated, is 5 times stronger than morphine, and may lead to
-criminal behaviour. See Mabel Elliott, Crime in Modern Society, (Harper)
(I952), page 173.

shed by the"University of

'For an anthology, see wet, 1 rguﬁqect  in America, (I§61),'pubg_'
IC . ' , ' '_ _ ' ' f

a

Adultemtion
of fotti, etc.

Racketeering
(organized
crime!) in
the U.S.A.

,l-

E ., , .-



White-collcr
crimes by
professional
people.

' Price' control

laws 111
U. S .A.

12

mg" (organised conspiracy for exploitation)'. Such activi-
ties, it is stated, may be indulged in by businessmen, leaders

of organised labour, politicians, criminals or even lawyers, 7

but the purpose is exploitation of commerce and the public
through circumscribing the right to work and do business.
These do not, strictly speaking, fall within "white-collar
crime", because the "under-world" takes an active part'.
They might, however, encourage or give rise .to white-collar
crimes (for example, corruption in the police).

24. As regards white-collar crimes by lawyers and other
professional people, the following observations of Senator
Kefauver3 are relevant:----

"In Chicago, too, we gathered evidence of a disturb-
ing phenomenon that we found repeated in other large
cities of the country. I refer to the active participa-
tion----amounting almost to subsidization-in gang aﬁairs
by a certain element of lawyers, accountants, and
tax consultants. As Judge Samuel Leibowitz, of Brook-
lyn, an outstanding jurist, remarked in his testimony
at our ﬁnal hearings many months later, "There are cri-
minal lawyers and lawyer criminals". Judge Leibo-
witz said it was one thing for a criminal lawyer to
defend his client honestly and squarely and to see that
he got his day in court according to our laws and our
Constitution, but it was "another thing to be in the
hire of some gang to advise the gang how to operate,
and to be at the back and call of the gangster or act as
his right-hand man". Nation-'wide disclosures on this
particular problem were so disturbing that the Senate
Committee felt it would be desirable for local bar as-
sociations everywhere to take a new look at how the
canon of ethics _supposedly governing conduct of mem-
bers of the bar was being heeded. On the federal
level, we felt it would be wise to tighten up the regu-
lations regarding standards for admission of attorneys
permitted to practice before federal courts and other
United States judicial bodies".

25. The question of violation of regulations relating to
prices, rents, and rationing has received detailed consi-
deration in the U.S.A.4. ,

Regulations relating to price control were issued in the
U.S.A. extensively during and after the Second World

War.

'Hostetter and Beesley, " zoth Ce
Quarterly Review, No. 3, reproduced in
America ", (1962), page 49.

20f. Mabel Elliott, Crime in Modern Society, (Harper) (1952),
47-

'Kefa"uver, Crime in America (}95_2), page 57.

Crime ", in

(1933) I4 Polit' l'
ler, " Organised 193

Crime in

P389

'See ,Clinard, "Crimino51pgier:l$i  Violations of Wartime lle3|;-- .

, :

lations ", (1946), American Sdcio , 258, 269,? foot-not: Id, 

Page 254- .

r



13

The ofﬁce of Price Administration was the main agency
charged with the implementation of these regulations.
Apart from criminal prosecutions, action in other forms
could be invoked against violators of such regulations in
various forms, such as, warning letters, monetary settle-
ments, damage suits, suits for injunction and license sus-
pension proceedings. Damage suits are of three types,
ﬁrst, suit by the Administrator for violation in the course
of trade or business; secondly, suit by the Administrator
for violation at the retail level; and thirdly, suit by the
consumer himself. In the ﬁrst two cases, money paid as
the result of the monetary settlement or suit is not deducti-
ble as a business expense for income-tax purpose. The
maximum amount of damages is laid down by law.

An interesting feature disclosed as a result of the study
of such crimes was, that the whole-sale dealers considered
imprisonment to be a far more eﬂective penalty than
ﬁnes'.

26. We have dealt with white-collar crimes at length?
with reference to the importance which they have assumed
in some of the Western countries. We are not unmindful
of one important fact, namely, that they are a peculiar
feature of an acquisitive and affluent society. Our society
is by no means affluent, but it is gradually becoming acqi-
sitive, particularly in the urban areas. While white-collar
crime may not exist in this country on the scale on which
it seems to exist in England and in America, it is not
totally absent. Corruption of administrative ofﬁcers, eva-
sion of tax (particularly income,-tax) by persons who fall
in the higher income group, smuggling of goods which are
scarce in this country (such as gold, watches and transis-
tor-radio sets) and deliberate breach of foreign exchange
regulations, may be cited as instances of white-collar crime
in our country.

Further, the problem assumes worse proportions When
town populations pass the million mark. The power to
inﬂuence and the power to corrupt, and all the other evils
associated with those powers, may not, at present, exist
on the same large scale in India as in other more pros-
perous countries. But, with rapid urbanisation, these evils
are bound to grow in intensity. That there is a marked
association netween crime and urbanisation is recognised
in respect of crime generaIly3, and in respect of the crimes
with which we are concerned, it must particularly be so.

'See Cl_inard,: "Criminiological Theories of Violations of Wartime
Regulations", (1946), American Sociological Review 258, 260, foot-note
IO and page 264. _
'Paras. 7 to 25, supra.

"Sutherland and Cressey,

:3

 

:3

.-,,

: in yiliiiéi'

,Prin5iI>las  ' (I960); panel 1s6« ',

White-,c ollat
crimes in
aﬂluent
society.



14

EcoNoMic CRIMES IN SOVIET Russm

Ec9n0m_ic 27. Mal-practices in connection with business, profes~
§§'f;"*;5'" sion and office, thus, seem to have r_eceived special trea_t~
Russ; ment in England' and in the United States of America'.

On the other hand, in Soviet Russia, the subject of econo-G
mic crimes has received special consideration'.

28. Many acts which would not be criminal in other
countries are regarded as crimes in Soviet Russia. The sub-
ject of "economic crimes" has received a most detailed at-
tention in Soviet Russia and in other countries of Eastern
Europe. Criminal law is viewed as political weapon and as
an instrument of policy';

. Apart from "counter-revolutionary crimes", (which are
of a political nature), acts and types of behaviour like in-
efﬁcient management, poor work, neglect of duties by an
employee, non-performance of contracts and ineﬂicient use
of one's property, are penalised. Provisions as to economic
crimes have existed for the last 40 years, and recent legis-
lation increasing the penalty for such offences in certain
cases and even imposing the death penalty', would appear
merely to carry on the policy reﬂected in the earlier pro-
VISIODS. '

\
:;I,Ié1'3:i(>e1'staI'§_ 29. The number of "_economlc crimes" as known to Soviet.
economic penal law is large, and some of them, such as "counter-
crimm revolutionary crimes" and "crirties a%ainst the public

administration" seem to partake of a po itical character.

? As these are not relevant for our present purpose, we
shall conﬁne ourselves only to the species which are purely
of an economic character, of which the following may be
noted: -- --

(i) _Manufac- The prohibition against manufacture of clothes, under~
iggiltlgd 3:3: wear, knit goéud/s, hats, leather footwear goods, and articles
ducts. ma e of non- errous metals, etc., being an essential feature
of the economic policy, provisions were enacted to penalise
the manufacture, etc., or sale of such prohibited products'.

' Paras. I4 to 18, supra.
' Paras. 19 to 25, supra.
3 Paras 28 to 33, infra.

. Gsovski and Gizybowski, Government, Law and Courts in the Soviet ~

Union and Eastern Europe, (1960), Vol.2, page 937. (This will be hereafter
eferred to as " G G, Government, etc., in the Soviet Union"). '

5 Sée G 8: G, Government, etc., in the Soviet Union, pages 947 and 

949-

" See note "Ecoiiomic Crimes in the Soviet Union", Jom-mi of the
International Commission of Jurists, (December, 1964), Vol. 5, No, 1,,
page 3 at pages 6 and I0. _

7 see. G & G, Govemi§eni,'et§.,  Soviet Union, pages 947,-9495 ,
3 G 8: G, Government, etc.,'i ii iii Soviet Union, page 95:. ' 



15

"Speculation"---purchase and sale of goods_ and _othei (32 _S?°°"1"'
-objects with the intention of making a proﬁt----1s punished'.

Dissipation by a leaseholder or trustee of legal entity (iii) cont-
(corporation) of governmental or public property given to $38
him under a contract is punishable. So is failure to per- mean
form an obligation arising from a contract made with
governmental or public office or enterprise, if, during a
civil trial, the malicious character of the failure to perform
is established'-'.

Violation of laws on nationalisation of land, committed in (iv) Pri_V8te
the form of overt or concealed purchase, sale, gift,.etc., of ::'i';'§"n"g"°'t'o
plots or land not allowed by law, and other transactions in land_ '

violation of such laws, are punishable'.-

"Pseudo-co-operative" activities, i.e. founding or dircct- (V) prime
ing the activities of pseudo--co--operatives (organisati-:)ns business
which are disguised under the form of a co-operative in under the
order to secure privileges granted to co-operatives, but which Co_ope,,_
are in fact private enterprises), is punishable'. ﬁve,

Release of products of poor quality, or of products 111- (vi) Ptoducts
efficiently t.-ompleted or released in violation of the estab- °f F°°'
lished standards, is regarded as an anti-State crime equiva- qua 'W'
lent to sabotage. The directors, chief engineers and chiefs
of divisions of technical supervision of industrial establish-
ments are punishable for such offences".

Mismanageinent by a person placed at the head of gov- (vii) Po'o_r
ernmental and public offices and enterprises or of those en- m'3nl'89ﬂ°n"-
trusted by them, based upon a careless or dishonest atti-
tude to the affairs entrusted, resulting in dissipation or
irreparable damage to property of the office or enterprise, is
punishable. So is dissipation of governmental or public pro-
perty, particularly the entry into unproﬁtable business
transactions by a person directing a governmental or public
office or enterprise committed by agreement with the party
to the contract of such oiﬁce or enterprise".

Giving faulty weights or measures to customers, using (viii) Weight

wrong scales or measurement devices or weights, is pur1ish- and m¢8s11!¢6
.able7. '

1 Article 154, R.S.F.S.R. Criminal Code, I960.

* G & G, Government, etc., in the Soviet Union, page 955.

3 G & G, Government, etc., in the Soviet Union, pages 956.

' G & G, Government, etc., in the Soviet Union, pages 957 and 958.
5 G 8: G, Government, etc., in the' Soviet Um'on, pages 957-958.

° G & G, Government, etc.' in tlie:SogiethUnion, pages 958 and 959.

: ' ' ' V §;_ '* ; ,.
'° G & G, Government, etc.,; in anion, page 939.

~

disguise of ap



16

fix) 5°1""$ Selling goods of inferior quality at the price for those of
§§'i'gf  superior quality is punishable as -theft from the customer
q  and fraud of the Soviet State'.

(X). E"¢°SSiV° Violating established retail prices for goods of mass

'mess' consumption in shops, stores, stands, eating places, etc.,
and concealing from customers the prices of goods indi-
cated in the price list, are punishable as theft from the com
sumer and fraud of the Soviet State'. 9

(Xi) Theft Of Theft of public property is dealt with elaborately in
ggghc 9"" Soviet Criminal Law. Broadly speaking, theft of Govern-

y' ment property is punishable more severely than theft of
"public property" (property of collective farms, co-opera~
tives. etc.), and theft of public property is punishable more
severely than theft of private property'-'. Recently, even the
death penalty has been introduced for large-scale theft of
State property or social property committed by dangerous
recidivists or persons serving sentences for special crimes3.
(In fact, even previously under the law of August 7, 1932,
misappropriation of goods shipped by rail or water, Gov
ernment property or property of collective farms and c0~
operatives was punishable with death. This position con-
tinued up to 1947. when the death penalty was generally
abolished on 26th l'./lav, 1947. From that date, conﬁnement
and conﬁscation of property were substituted for theft of

public property') .

1;-;°'i{ﬂsPi°:3f1tY 30. Since the penalty of death can now be awarded for

certain secongf certain offences in Russia, it may be useful to summarise

mic crimes, the important provisions on the subject. The death penalty
was abolished in Russia in 1917, re-introduced some months
later in 1918, re-abolished in 1920. and again re-introduced
in 1920, 12.2. in the same year. In May, 1947, it was abolished
again, but in January, 1950, it was re-introduced for certain
serious crimes (enemies of the regime, traitors, spies and
subversive-diversionists). In 1954, it was extended again
to murder under aggravating circumstances. This position
Was repeated in the General Principles of Criminal Legis-
lation. laid down in 1958. Thereafter, in 1961-62, it was
extended to certain economic crimes'-'.

1

' G & G, Government, etc., in the Soviet Union, page 959.'

' G & G, Government, etc., in the -Soviet Union, page 960,

' Decree of 5th May, 1961, No. 19/207.

4 G & G, Government, etc., in the Soviet Union, 'page 960. For the

text of the law of 1947, see ibid, pages 961 and 962.
4 See-

(i) G 8: G, Government, etc., in Soviet Union, page 939, text corres-
pgéldlﬂg to foot-notes 39 and 40, pages 940, and 94:, para. 5;
3

(ii) "Economic Crimes in the Soviet Union", (December, 1964),
Vol. 5, Journal of the International Commission of Jurists,
No. 'I, p. 3, at pa es , 7. and.8..
"' Generally as to death , ' , see "law in Eastern Europe, .
N°.- 9» 5>"'"°t Cﬂmmalél-a '3 ' .- .eIdbrusae),, (1964). pascaeezsa 3
203-205, 230.   =' ' '  _;

 

E 3,



2'1

17

31. It has been stated', that the extension of the death _Reasopg for
penalty in 1961 and 1962 to various ec0I}0miC Crimes 1'6' g§'a'}'1'1s':ml__
fleets the cleterrnination of the Soviet regime to take ex- ty_
treme measures against those who most ﬂagrantly violate
the tenets of Communist morality. Some of the salient
points that have been emphasised' are, that Soviet law----

(i) regulates all aspects of economic and social life;
(it) remains a law of planned economy; and

(iii) remains a law whose primary function is to
discipline, guide, train and educate Soviet citizens to
become dedicated members of a collectivized and mobi-
lized social order.

32. An interesting feature of the Soviet Criminal Code Minimum
which came into force on the 1st January, 1961, is the d1s- P°"a"'°"
appearance of minimum penalties in many cases''-'*.

33. On the basis of the brief discussion attempted above', 32?': S¢1i¢tI:
we venture to draw certain general conclusions as to fhe"'p'°;°:§_
white-collar and economic crimes in the countries con- sionsin

cerned. England, _
U.S.A. ﬁnds
Soviet
_ _ Russia.

First, in England and in the U.S.A., an emphasis has
been placed on "white-collar crimes" (such as, frauds by
corporations, rnanipulaticns in the stock exchange, com-
mercial bribery, bribery of public officials, tax frauds, pro-
fessional and business rackets, etc.). But, in the Soviet
Russia and other countries of Eastern Europe, the emphasis
placed has been on "economic crimes". In fact, having
regard to the social and economic complex of those coun-
tries, the importance of white-collar crimes (crimes by
persons of the upper strata) , seems to be limited".

Secondly, the importance attached to each species of
white-collar and economic crimes has varied from time to
time. While one species of_ White--collar crime, such as pro-
ﬁteering, assumes importance at one stage, at another stage
it might pale into insigniﬁcance, and another species of
white-collar crime, such as tax fraud, might come into pro-
niinence.

. Third_1y, there is no common factor binding white-.
Collar crimes as known in the West with economic crimes as-
emphasised in Eastern Europe.

1 Harold Berman, " Soviet Law Reform ", Harvard Law Review (March
1963), 929, 948-

' Harold Berman, " Soviet Law Reform ", Harvard Law Review (March
1963), 929, 93.0 and 931-

3 Feldbrugge, " Soviet Criminal Law, The Last Six Years ", Journal of
Criminal Law, Criminology and Police Science (September, 1963), page
249, 255, righthand column.

4 For a g neral view, sec Bo"s  1 ' {' Fundamentals ofsovieg-_.
- «T I. ' '
 i R

  

Criminal Law.', (1960) 23 Mode g Ij
' Para. 6-32, supra. V:  ..



18

Fourthly, there is no common characteristic behind the
economic crimes penalised in Eastern Europe, except that
they share the common characteristic of all crimes, namely,
acts universally clésapproved of by members of. the society

concerned '.
 34. We tried to ascertain, as far as possible, whether
wealth provisions of the nature contained in the Soviet Criminal
iC0unn'iCS- Law? are in force in the Penal Codes of Commonwealth

countries. For this uurpose, we made an attempt to study
in detail the Penal Codes of Canada, Australia3 and New
Zealand, and the material available as to certain other
Commonwealth countries'-''. We were unable to trace such
wide and sweeping provisions in the laws of those countries,

or in the law of England".

Pomrs TO BE CCNSIDERED-'---GENERAL OBSERVATIONS

§g':;'c§${'§f 35. We now proceed to consider the main 130111155 arising

md. from the proposals of the Santhanam Committee. The pro-
posal of the Committee' is to add a new chapter to the
Indian Penal Code bringing together "all the offences in
such special enactments (i.e. enactments telating ' to the
offences in question) and supplementing them with new
provisions". Thus, it seems to contemplate two classes of
changes, namely----- ~

(1') transfer to the Indian Penal Code of the existing
provisions relating to the offences in question, con-
tained in other special 'enactments; and

_ (ii) addition to the Indian Penal Code of new pro-
visions as to social (and economic) offences.

ﬁggltlgovgf 36. So far as the question of adding new provisions is
_sionS_ concerned, no detailed suggestions were forwarded when
the matter was referred to us (except the recommendation
'made by the Santhanam Committee) '3. Butcertain sugges-
tions were made in the comments received by us on the pro-
posals under consideration. The important points made in.
those 'comments will be considered later in this Report,
under each category, at the appropriate place'. '
1 Cf. Durkheim, Division of Labour in Society (Engfish translation by
George _Simpson, 1933), 7D,,ci1ad in Mannheim, Criminal Justice
and Social Reconstruction, (1946), pg 167.
' Para. 28 to 32, supra-
3 The Criminal law is codiﬁed in Queensland, Western Australia and
Tasmania. ' '

4 Sheridan, Malaya and Siqpjaoré----The Development of their Lawn

and Constitution (1961). C
5 S. A. De Smith, The New Commonwealth and its Constitution,

(I964)-
" See also Appendices I9, 20, 26, 28 and 29.
'1 Para. 3, supra.
9Paras,Ito3,supra. gp'; ._',   I
Mr; See paragraphs 3'8, 73. 9H7; -156, £25, :5, :33, :44, :54 an 
. . 1



19

37. We shall, later, discuss in detail'_ how far changes in
the nature of transfer of existingprovisions, as well as addi-
tion of new provisions, is necessary and convenient in re-
latjon to each of the various classes of offences mentioned
by the Committee. But, as to transfer of existing provisions,
there are certain points of a general character which we
would like to state at the outset. In the ﬁrst place, the 991131

General ob-
servatldzs as.
to pro

for tr fer-

provisions contained in various special enactments are, in. A

many cases, linked up with the general structure of those
enactments, and take their colour from them. Their trans»
fer to the Indian Penal Code may be inconvenient, if such
transfer has the effect of disturbing the whole scheme' Of
those enactments and making them unintelligible or in-
complete. Conversely, if transferred to the Indian Penal
Code, these provisions themselves would become incom-
plete, as they would then have to be read without refer-
ence to the main provisions of the special enactments.
 their transfer will not only increase the number

. of sections in the Penal Code and addto its bulk, but also

mar its structure'.

38. The correct approach to the problem seems to us to
have, been well expressed in a comment which we received
from one of the High Courts on the proposals under consi-
deration. We quote the relevant portion in extenso-"-:--

"In their Lordships' opinion, the proposal of the
Committee to include these anti-social offences in the
Indian Penal Code does not a pear to be practicable,
and, if followed, will create ,
apart from marring the structure of the Penal Code.

Their Lordships further observe, that the Indian
Penal Code deals withsuch actsagainst persons and'
their property as are universa,liy' accepted as injurious
in all ciivilized societies: anid_,(With) acts which offend'
against the fundamental principies on which (the)

existence of human beings as a society rests. These'
fundamentals are more or less of a permanent nature,

and will endure fora long time to come. In their Lord-
ships' view, the offences dealt with in the Indian Penal'
Code are of a different nature, and have a different con-
tent, from social offences, and it would not be proper to
include anti-social oﬁences in the Indian Penal Code.

The preamble of the Indian Penal Code also shows

that it was intended to be_ a general Penal Code for'

India. It was never intended, as' section 5 of the Act
shows, to affect any special or local law by the enact~
ment of the Penal Code. The Opium Act, the Gambl-

ing Act and a number of special and local laws were

' Para. 92, et seq, infra.
I C . P . , . .  r 1; I

f ara,38u¢fra E g éjhié 'V t
' Punctuation marks have bee ad atii few places.

nnumerable difﬁculties,.

Correct
approac.l|..



20

and are in force, which not only constitute but also
punish some types of acts under circumstances men-
tioned therein, and that method of dealing with offend-
ing act.s of a special nature or acts which require to be
specially considered and dealt with, has been found to
be working satisfactorily. Sometimes, while dealing
with particular offences, it has been found necessary
to provide for particular procedure or special rules of
evidence also. Provisions for special sanction before
starting investigation and prosecution, for raising pre~
sumption of guilt, for awarding minimum sentences,
etc., have been made in somespecial enactments, e.g.
Prevention of Corruption Act, Prohibition laws, etc.
The Penal Code, besides giving its own general
explanations, deﬁnitions' and general exceptions,
divides into and deals with categories of acts constitut-C'
ing offences on their basiiqﬁtature, e.g. offences against'-
the State, against puﬁblic tranquility, offences relating'
to public servants, affecting public health and morals,"
affecting the human body, offences against property,
etc. Most of the principal offences deﬁned and made
punishable under the Penal 'Code have, unfortunately,
continued to be committed and punished, but, except
in a few cases (ailmost negligible), the occasion to
-delete any of them as obsolete has so far.not arisen. On
the other hand, offences of new and complex types have
come to the forefront, tfhenatureoand the number of the
offences constituting .tl',ieib&§ic structure of the Penal
Code remaining funaffectéd. These offences havenow
assumed such prbportiofis that it has become' necessary
to deal with them on a' rno.r'e scientiﬁc basis and to in-
corporate them into the penal law of the land. But, as
stated before, such offences require special treatment
and procedure in their trial, and,» in their outer forms,
are short-lived, though they reappear in different and
perhaps more complicated guises later on. These
offences being the outcomeof changed and changing
social conditions, would require repeated legislative
-attention, and therefqI'e,\:ii't would be appropriate if
they are made the su-Eject-matter of special legislation
while the penal law of the land, i.e. the Indian Penal
Code, should be left substantially in its present form.".

'Pertmnent 39. As has been pointed,out in one' articlel, some offences

offences go against the fundamental structure of the society. On the , ;
and '°mP°' other hand, there are some activities which are regarded as _ '

 offences becauseof a_ temporary dislocation of the economic

structure. "Statutory offences mainly belong to the second ' »

category. They areintended to counter-act passing pheno-
mena. So long as human life is considered of value-- -and it
be eternally so-----. taking away human life would be consi-
dered a crime. On the other hand, if things return to

If -6) i I W -C); sm.. 
1955 Egi%gi'!ial5n0tf)9-.' ! (no 14 'p.8e'sZ''('  " 7 

2
3''
Q:
7*!"

   



Z1

normal, there will be no necessity for any Guest Control
Order or for the matter of that any Control order.".

40. As regards the argument that courts attach more Example 01
gravity to offences mentioned in the Penal Code, it has been Gulelt Con-
stated1---"An offence of, say, entertaining more than 100 '¥:'°d.0"d°'
guests in violation of the Guest Control Order cannot be
looked upon by anybody as an offence as heinous as rape,
even if it is enacted 'in the Penal' Code as section 376--A".

41. Such offences are better left to be dealt with by Character of
special and self-contained enactments which supplement §§S°°i31"3m*-
the "basic criminal law". We would, in this connection, '
like to quote the following observations of Stephen2:--

"Before undertaking either of these tasks I must
endeavour to deﬁne what I mean by the Criminal Law.
The most obvious meaning of the expression is that
part of the law which relates to crimes and their
punishment----a crime being deﬁned as an act or omis-
sion in respect of which legal punishment may be
inflicted on the person who is in default either by act-
ing or omitting to act.

This deﬁnition is too wide for practical purposes.
If it were applied in its full latitude it would embrace '
all law whatever, for one speciﬁc peculiarity by which
law is distinguished from morality is, that law is coer-
cive, and all coercion at some stage involves the possi-
bility of punishment. This might be shown in relation
to matters altogether unconnected With criminal law,
as the expression is commonly understood, such as legal
maxims and the rules of inheritance. A judge who
wilfully refused to act upon recognised legal maxims
would be liable to impeachment. The proprietory rights
which are protected by laws punishing offences against
property are determined by the application of those
laws. If there were no such crimes as theft, forcible
entry, malicious mischief, and the like, and if there
were no means of forcing people to respect proprietary
rights, there would be no such thing as property by
law.

This is no doubt a remoteand abstract speculation.
The principle on which it depends may be displayed by
more obvious _and important illustrations. It would be a
violation of the common use of language to describe the
law relating to the celebration of marriage, or the Mer-
chant Shipping -Act, or the law relating to the registra-
tion of births, as branches of the criminal law. Yet the
statute on each of these subjects contain a greater or

' (1964-65) 69 Calcutdi Weekly Notes (No. 14), page 57 (8th February
(965 Editorial note). '2

a'ndSt2e'phert, History of     (1853), 'Vo1.jr,   £-



22

less number of sanctioning clauses which it is diﬁic-ult
to understand without reference to the whole of the
acts to which they belong. Thus, for instance, it is
felony to celebrate marriage otherwise than according
to the provisions of certain Acts of Parliament, passed
in 1823 and 1837, and these provisions for'm,.a connected
system which cannot be understood without reference
to the oommon law on theﬁsubject. These illustrations
(which might be indeﬁnitely multiplied) show that the
deﬁnition of criminal law suggested above must either
be considerably narrowed or must conﬂict 'with the
common use of language by including many. parts of
the law to which the expression is not usually applied".

42. The observations of Stephen relating to summary
offences may also be quoted1:--i--i

"Such offences? diﬁer in many particulars from
those gross outrages against the public and against
individuals which -we commonly associate with the
word crime. It would be an abuse of language to apply
such a name to the conduct of a person who does not
sweep the snow from his doors or in whose chimney a
ﬁre occurs.".

£4"1':)I;'i°"§;n_ - 43. Recent years have witnessed a growth in the volume

egg" of criminal law and the intpsive multiplication of
offences. Some of the' offences with which we are concern-
ed seem to belong to a. class which cannot be equated with
the class of offences dealt with in the Indian Penal Code.
This is an aspect well worth elaboration. We quote the
following passage from the Encyclopaedia of Social
Sc_iences3:-- '

'Treason, murder, certain sexual offences and some
serious offences against property are fairly constant in
the criminal laws of the world, with relatively similar
deﬁnitions.

In addition to these A ences however, the increas-
ing complexity _of social li has led to the creation by -
the State of a vast number of laws which strike at
forms of conduct Peculiar to some particular type of
social organisation. Roscoe Pound, in his Criminal
Justice in' America,   f analysing the criminal
laws of Rhode; Iﬁltﬂd  the Revised Public
Laws of 1882 deﬁned _Q5:1:imes, while the title of
"Crimes and.Punishrnq';;t'? of the general laws of 1923
deﬁned 212. More than halt of the offences that may
be prosecuted byrthe State and punished by tine and
imprisonment or both are contained in special laws

lstephen, History of the.Cr'nninai Law of England, (I883), Vol. 1»
Page 4- .
"The reference is to "summary of  offences".

  *f°'= 4 «if

.

1 3 23 passed since 1872. dealing with such problems as the protection of workers, the regulation of motor vehicle trafﬁc, the regulation of selling of securities and of merchandise and the enforcement of liquor prohibition laws. . . ."

"Only the most serious offences against the law cause a stigma to be attached to the offender. Were it otherwise, the psychic burden of criminality carried by the average community. today should be immense, for the multiplication of legal prohibitions has made it diﬂicult for any one of its members to lead a completely law abiding life.'.

44. Even as regards acts of an anti-social character Criminal law belonging to a class which can be regarded as "unethical" @113 Mm' it should be borne in mind that every act which is regarded ' ' as immoral cannot be made criminal. The question of the relation between law and morality is a vexed one, and we need not enter into a detailed discussion thereofl. Stephen's observations on the subject, however, seem to put the sub- ject in a proper perspective, and may be quoted2:--

"The ﬁrst point then to be considered is the nature of the popular and the legal conception of crime in general, their relation to each other and the inference which the existence of that relation suggests as to the nature and objects of punishments.

The great difference between the legal and the popular or moral meaning of the word 'crime' is, that whereas the only perfectly deﬁnite meaning which a lawyer can attach to the word is that of an act or omis- sion punished by law, the popular or moral conception adds to this the notion of moral guilt of a specially deep and degrading kind. By a criminal, people in general understand not only a person who is liable to be punished, but a person who ought to be punished because he has done something at once wicked and obviously injurious in a high degree to the commonest interests of society. Perhaps the most interesting ques- tion connected with the whole subject is how far these views respectively ought to "regulate legislation on the subject of crimes, 'ought', meaning in this instance how far it is for the good of those whose good is con- sidered in legislation that the 'view in question should be adopted, and 'good' meaning the end which the legislator has in view in his legislation. In other words, the question is, what ought to be the relation between criminal law and moral good and evil as understood by the person who imposes the law?

(xiii; a1I?l¢')ir(a)id1.:i)bliograPhy, see Devlin? Morals, (1965), pages V ' Stephen, History of the Crimirpl Lew of'.EnKg1and, (1833),'vo1, ;, , pages 76, 77, 78, 79 and 80. 1 g o : ._,. i j ' 1 -

l 47 j Law----3. ;

. . . . . .In what relation ought criminal law to stand to morality when the effective majority of a great nation legislates for the whole of it, and when there are no other dilferences of moral standard or sentiment than those which inevitably result from individual differences of opinion and unrestricted discussion on religion and morals?

The answer to this question is not quite simple. In the ﬁrst place, criminal law must, from the nature of the case, be far narrower than morality. In no age or nation. at all events, in no age or nation which has anY similarity to our own, has the attempt been made to treat; every moral defect as a crime. In different ages of the world injuries to individuals, to God, to the gods, or to the community, have been treated as crimes, but I Q 1 think that in all cases the idea of crime has involved the idea of some deﬁnite, gross, undeniable injury to , ..

some one. In our own country this is now, and has been from the earliest times, perfectly well-established. No temper of mind, no habit of life, however, pernicious, has ever been treated as a crime, unless it displayed itself in some deﬁnite overt act. It never entered into the head of any English legislator to enact, or of any English court, to hold, that a man could be indicted and punished for ingratitude, for hardheartedness, for the absence of natural aﬁection, for habitual idleness. _ for avarice, sensuality, pride, or, in a word, for any vice whatever as such. Even for purposes of ecc1esias- L; ;' tical censure some deﬁnite act of immorality was requir- . :3, ; ed. Sinful thoughts and disposition of mind might be if 3 the subject of confession and of penance, but they were never punished in this country by ecclesiastical crimi- nal proceedings.

The reasons for imposing this great leading res- triction upon the sphere of criminal law are obvious. If it were not so restricted it would be utterly intoler- able; all mankind would be criminals, and most of their lives would beopassed in , trying and punishing each. other for offences which could never be proved.

Criminal law, then, must be conﬁned within narrow limits, and can be aPD.lied only to deﬁnite overt acts or omissions capable of being distinctly proved, Which act! or omissions inﬂict deﬁnite evils, either on speciﬁc pen» sons or on the community at large. It is within these, 7 limits only that there can be any relation at all between t T criminal law and morality.

The relation between criminal law and morality is ~A :

not in all cases the same. (a) The two may harmonize;

(b) there may be a conﬂict between them, or (c) the may be independent. . In all common cases they do, an ii; .

in my opinion, 'wherovelzi ﬁnd so far as it is possible; i ' thﬁy ought to iiarrndnize with, and support, and " i ot er.".

45. Sometimes, notwithstanding that an act is immoral, it may be necessary to put it outside the _criminal law ,_hin_ because it is difficult to enforce a law punishing it. The observations of an eminent Judge' are of 1nterest:--

"The line that divides the criminal law from the moral is not determinable by the application of any clear-cut principle. It is like a line that divides land and sea, a coastline of irregularities and indentations. There are gaps and promontories, such as adultery and fornication, which the law has for centuries left subs- tantially untouched. Adultery of the sort that breaks up marriage seems to me to be just as harmful to the social fabric as homo-sexuality or bigamy. The only ground for putting it outside the criminal law is that a law which made it a crime would be too difficult to enforce; it is too generally regarded as'a human weak- ness not suitably punished by imprisonment. All that the law can do with fornication is to act against its worst manifestations; there is a general abhorrence of the commercialization of vice, and that sentiment gives strength to the law against brothels and immoral earn- ings. There is no 'logic to be found in this. The boundary between the criminal law and the moral law is ﬁxed by balancing in the case of each particular crime the pros and cons of legal enforcement in accordance with the sort of considerations I have been outlining.".

46. The same eminent Judge? has made the point about Function of the proper function of the criminal law, as compared with Cmmﬁallﬁw the moral law, in these Words: ---- $33321'?! pared.

"I have spoken of the criminal law as dealing with the minimum standards of human conduct and the moral law with the maximum. The instrument of the criminal law is punishment; those of the moral law are teaching, training, and exhortation. If the whole dead weight of sin were ever to be allowed to fall upon the law, it could not take,,the strain.''.

47. In the course of our deliberations, we tried to analyse A"'.'1Y'i'.°' V the common characteristics of the offences in question'. ?c"'°°°"°m,n:e, ; == Many of the offences seem to have the following features in ' "

COITIITIOII I --

(a) the offences are committed by the upper classes of society;

(b) those upper classes themselves set the moral standards of society, and hence a serious view is not taken of these offences:

'Devlin, Enforcement 'of ordsi, '' _gges:_zr and :2, 'Devlin; Enforcement of oralsj I _ 23.

"Para 2, supra. .

i Analvsis of special enactments .

Special penal provisions .

(c) the victims of the offences are unascertainable persons (usually, the State or the community), as contrasted with the majority of the offences Under the Indian Penal Code, where, in most cases, the victim is an ascertained individual.

But all these features are not shared by' each of the offences (e.g. theft of public property and oﬁences relating to taxes). Moreover, some of the offences--e.g. theft of public property--are, even now, punishable under the Indian Penal Code. ' ANALYSIS or SPECIAL ENACTMENTS

48. What we would like to emphasise is, that most of the special enactments dealing with 'these oﬂfencesl possess some special features, and we proceed to state some of these special features. --

These special features are brieﬂy, special penal sions, provisions modifying mens rea, provisions relating to liability of officers of companies, vicarious liability, special rules of evidence, penalties by rules, special powers, special provisions as to sanction, provisions for publicity, and similar provisions which illustrate the special character of the enactments?

49. We begin with one feature found in many of the enactments, namely, the existence of special penal provi- sions. These seem to take various shapes-

(a) There may be "Departmental" penalties (penalties which can be imposed by officers of the Department), as in the Income-tax Act and similar Acts, in the Customs Act and in the Stamp Act.

(b) Again, action byway of conﬁscation of goods can be taken, an example of which is section 3(2) of the Imports and Exports (Control) Act, 1947, read with the relevant provisions in the Customs Act'.

(c) Even in respect of the traditional penalties (such as imprisonment or ﬁne), some of the special enactments "contain special provisions. By way of example, We may refer to provisions relating to conti-

nuing offences'-6, provisibnsenhancin the powers of Magistrates in respect of fines' (for o ences under the special enactments), and provisions for enhanced 'Para. 2, supra. --

'See paragraphs 49 to 81, infra. , 3C6'f. F. N. Roy, v. Collector of Customs, A.I.R. I957 S.C. 648, 650, para. . _ 4See section 24 (I)(:'v), Industries (Development and Regulation) Act, 1951 (65 of 1951). p » _ 7 'As no continuing pire:5¢es,i'_s[ut at' jims in Mutu'c1'p5aICour'uciIv. Rawat Ram, A.I.R. 1965 Ray rabs - gt? it . . '» " nndkesnﬁationynm, it uses section 29A, Ixtdus es 3 § i' (65 of 1931).

.5 provi-

punishment in gegpg-ct of subsequent offences, e.g. section 16, Prevention of Food Adulteration Act'-2.

(d) Then, revocation or amendment of licences may be provided for. An example is section 12(1) of the Industries (Development and Regulation) Act? 1951.

(e) Lastly, penalties may be provided for, not in the enactment. but in the rules made thereunder. Thus, rules made under the Central Excises and Salt Act, 1944, contain extensive penal provision'-5-3. In our opinion, if certain penal provisions of special enact- ments are removed while other provisions are allowed to continue in the special enactments, then the inte- grated scheme of the special enactments would be des- troyed without any compensating advantage.

50. It should also be noted, that the enactments relating Mm.-ea to some of the offences under consideration modify the re- m0diﬁtd- quirements of mens Tea. thus standing in contrast with the Indian Penal Code.

51. Forthe present purpose, it is not necessary to ana- Analysis of lyse in detail the various special Acts in order to show how kind' 01' the mens rea, i.e. "some blameworthy conditions of mind"" """' "'"' has been modiﬁed. But some broad points may be indicated.

While dealing with mens Tea, it would be convenient 'to group" the various crimes into four classes---

. (i) Crimes in _wln'ch the mens tea' is found in an intention to commlt 'in illegal act. (General intention).

_ (ii) Crimes in which 'a particular intention" is re- quired (e.g. in Enghsh Law, burglary is house-.breaking by night with intent to commit a- felony) .11.

'Prevention of Adultezution Act, 1954 (37 of 1954). 'See State v. Badri, A.I.R. 1965 Raj. 152, para.1r2. 3The Industries (Development and Regulation) Act, I95! (65 of 1951) 40f. :11 ct' o (3 d 'th ' p ' Ind ' _ ment and 1%:gSiilatli(<'>Ii11)3 Act? £69291 '(E5 c§§c?9°sn£).24(IXw)' mm" (Develop 'Cf. A. A. Beeravoo v. Collector, ac.,_ (1965) 2 Cr. L. J'. 279 (Kerala). 'See also para 77 infra.

"Cf. Cave 1. in Chisholm v. Doulton, (1889) 22 Q.B.D. 736, 741.

'The grouping is based on that given in Stephen, Commentaries on the Laws Of England (1950), Vol. 4, pages 1o----r2.

' '°Stephen's_criticism of the expression "men: rea" will be found in his Judgment in R. v. Tolson, (1889) 23 Q.B.D. I68, 185, 187.

'°"Knowldg" al b add .0. R. . H , W.L.R. 6<';4,e609§a(l112thsRdagte:h, 1' )_ .f " ('$55) 2 La;ig£_57§'?;i5éc (61%;/Io) 2Fa5t§1'.Q-'§5?f§siﬂi_*$qed_«I'1z E' Strict liability.

(iii) Crimes in which negligence' will suffice (e.g-

management of vehicles in public streets);

(iv) Crimes in which the requirement of mens red is reduced to a minimum (i.e. abducting a girl under 16 from her parents, 'though the girl is believed to be above

16) 2. , '

52. But, beyond these examples3, lie the cases where the legislature has absolutely forbidden the commission of cer- tain acts under penalty of ﬁne (or imprisonment in default of payment of ﬁne), apart. altogether from the question of mens Tea'. That the liability so created is of a quality different from that attaching to ordinary offences requiring mens Tea is now well-recognised by the case-law and ex- tensive literature that has grown around these offences. It is not necessary to deal with these offences of "strict liabi- lity" at length. As has been said, strict responsibility "has been with us so long that it has become accepted as a necessary evil''''. At the same time, a brief discussion is not out of place.

53. In this connection, we may quote the 'following observations of the Privy Council in a recent case":-

"Where the subject-matter of the statute is the re- gulation for the public welfare of a particular activity--- statutes regulating the sale of food and drink are to be found among the earliest examples--it can be and fre~ quently has been inferred that the legislature intended that such activities should be carried out under the conditions of strict liability. The presumption is that the statute or statutory instrument can be effectively enforced only if those in charge of the relevant acti- vities are made responsible for seeing that they are complied with. When such a presumption is to be inferred. it displaces the' ordinary presumption of mens- rea. Thus sellers of meat may be made responsible for Seeing that the meat is ﬁt for human consumption and it is no answer for them to say that they were not aware that it Was polluted. If that were a satisfactory answer, then as Kennedy, L. J ., pointed out in Hobbs 'For the present purpose, R is assumed that negligence is a type of men:

rea. For a contrary view, see Glanvxlie Williams, Criminal Law--The General Part, (1961), pages 10 _and 2.62. 1_?'or a comprehensive discussion, :e6eI P. J. Fitzerald, "Crime, in and Ngigenoe" (1963) 79 L_Q_R_ 35;, 'R. v. Prince, (1875) L.R. 2 C.CaR. I54.

"Para. 51, supra. ' 4C§. Stephen, Commentaries on the Laws of England (1950), Vol, 4, page 1 . V PP. J. Fitzgerald in Block Re 'ew of Golin H d S ' R '- bmty, (1964) 7 Lawéer 4;_ ,V?._ , owat 9 met esponsi 'I-im Chi" 4'7" "- Th? Queten, lxiié) ice; (1953) r' A'1i.E.R. 'nag;

228 (P.(:.)', 29 v. Winchester Corporationl, the distribution of bad meat (and its far-teaching consequences) would not be effec-

tively prevented. So a publican may be made respon- sible for observing the condition of his customerszg".

In other words, these are cases in which--"Intention to commit a breach of the statute need not be shown. The breach in fact is enough"-'.".

54. The passages quoted above' have been discussed at Knowledge length in a recent decision of the Supreme Court of India''-'' ofhlllesahtv which also deals with the question, how far mens rea in xlfggi the sense of actual knowledge that the act done by the ' accused Was contrary to the law, may be requisite. It was pointed out there, that "starting with an initial presumption in favour of the need for mens rea, we have to ascertain whether the presumption is overborne by the language oi the enactment, read in the light of the objects and purposes of the Act, and, particularly, whether the enforcement of the law and the attainment of its purpose would not be rendered futile in the event of such an ingredient being con- sidered necessary".

On the other hand, where it cannot be said that the object of the Act would be defeated if mens rea is read as an ingredient, courts would be slow to dispense with it'.

55. Examples of reduction or elimination of mens rea English case are abundant in the case law in England regarding the Food 011 "WIS 1'00 and Drugs Act,3--°-1°-11 and the Weights and Measures Acts" :'ﬁ';';"sfa"t:ti;_ 'Hobbs, v. Winchester Corporation,' (1910) 2 K.B. 471.

'Candy v. Le Cocq, (1884) L.R. 13 Q.B.D. 207.

"Cf. Lord Wright in McLeod' v. Buchanan, (1940) 2 All. England Reports I79, ;86 (H_.L.) (Case _undet s. 35, Road Traﬂic Act, 1930, requiring insurance against third party risks).

4See also para 59, infra.

'Paragraph 53, supra. .

'State of Maharashtra v. M. H. George, A.I.R. I965 S.C. 722, 736, 737, paragraphs 29 to 32, and 34 (Majority Judgment).

7Cf. Nathulal v. State of M. P. A.I.R. 1966 S.C. 43, 45, para. 4; I966 Cr. L. J. 71, 73. 5 'Williams, Criminal Law, The General Part, (1961), page 218, para. 77.

°Craies, Statute Law (1963), pages 540 and 545.

1°Halsbury, Laws of England, 3rd Edn.,Vol. 17, pages 484,485, para, 900, 901, and page 506, para. 937.

"See case-law reviewed in Hobbs, etc., v. Winchester, (191o)2 K.B. 471, 478, 480- .

"Anglo-American Oil Co.' Ltd' v.1M ' (1903) I K.B I. Channell, 1.). 4 2 : k % :3'? ' 5-36.' 5fx.I'z, \ Oﬂences under the Customs Act.

Judicial construction in -England of certain enactments passed for protection of the revenue also furnishes similar examples.'-2

56. In India, a a prosecution for an offence pertaining to the sale of any adulterated or misbranded article of food, to allege merely ' that the vendor was ignorant of the nature, substance or quality of the food sold by him, or that the purchaser, hav- ing purchased any article for analysis, was not prejudiced by the sale'. It has been held", that under this Act even the sale of any article to a particular customer on the undeI!- _ standing that the customer is to use it only for animals, it '_ - . In England also, provisions of the correspond» 1' -

punishable.

ing statutes are given a wide interpretation'.

57. Another example of a provision dispensing with mens rea is section 167(12A) read with section 52A of the (old) Sea Customs Act'. The net result of these two provi- sions Was, that if a vessel constructed, adapted, etc., for the purpose of concealing goods, under section '52A, 'entered; ' etc., within the limits of India, the vessel would be liable to conﬁscation. The master of the ship was also liable to a penalty not exceeding rupees 1,000. It has been held'; that having regard ,to the fact that this sub-section, as con.» trasted with other sub-sections, did not use the word . .

"knowingly", etc., and having regard to the fact that impor- :1. g ' tation of the requirement of mens 'rea would nullify the .,j .- , object of section 52A (to [put an end to illegal smuggling), ;'- ' the prohibition must be regarded as absolute. The guilty mind could rarely be established against the owners of vcs= sels which are travelling on the high seas, and it may be difficult to prove the guilty knowledge even of the master of the ship. If absence of such knowledge was allowed to be pleaded as a defence. the owners and the master could very well plead that the alleged alteration, etc. was made without their knowledge, and it will be almost impossible to establish mens tea in such cases.

'C.f. Davie: v. Harvey, (I874) L.R. 9 Q.B. 433.

'For an analysis whiéh has nowbecome classic, see Wright, J.'s iud§- ' ment in Sherra: v. De Rﬁtzaa, (I895) 1Q.B. 918, 921. 'The Prevention of Food Adulteration Act, I954 (37 of 1954).

4See Mangalda: v. State of 'Maharashtra A.I.R. 1966 S.C. 128, 133, ' para. I4.

striking example of modiﬁcation of the ordinary rule regarding mens rea is the Prevention of Food ; 2 :

Adulteration Act3, section 19(1) of which provides, _ (subject to certain qualiﬁcations), it shall be no defence up ; g = 'P. P. V. Palanisami, A.I.R. 1965 Mad. 98, 99 para. 3 (Ramakrishna).

I.).

'The English cases are cited in Kenny, Outlines of Criminal Law ( 1962):"

Page 42-

"See, now section its (r)(a), Customs Act, 1962 (52 of 1962)».

1 .;,.do--c1u'na Stedm If 5 " .41. Singh, 4.1.3. am ,s.é.g;

1140, 1150, 1153, £24 ,'33:;§ % 5 Z i i 31

58. A recent decision of the Supreme Court' virtually Qgcnce, establishes the same position in respect of offences under gder the the Foreign Exchange Regulation Act, 19472. N133 39 change Act.

59. Of course, the question whether the liability under a statute is absolute, is ultimately one of construction of the particular statute, and the answer will depend On the language employed in the statute', the policy behind it', and how far 'enforcement of the statute would suffer by adherence to the doctrine of mens rea5.

The examples cited above are merely intended to show that in relation to some of the enactments relating to the olfences in question, it would be proper to say, that they ﬁx their attention on the acts themselves, irrespective of the knowledge or intention".

60. The above discussion' will show, that it cannot be cnassiﬁcationi asserted that all the eight classes of offences with which pfoﬁenqes we are concerned in this Report" stand on the same footing '""l"f:;'°' with reference to mens rea. In fact, the offences seem to woe to e"

belong to four different categories. First, there are offences nnnsraa. in respect of which mans rea_ is undoubtedly required (such as theft of public property). Secondly, there are offences which, though requiring mens rea, possess a special charac- ter of their own (e.g. many offences falling under the cate- gory of black-marketing). Thirdly, there are offences which can, with a fair measure of accuracy, be described as offences of strict liability (such as, some offences regard ing food and dI'ugs)°. And, fourthly, there are acts in res- pect of which their moral culpabiliy is a matter of contro- versy (e.g. tax avoidance)".

61. We may, in this connection, also refer to certain Companies. special provisions concerning companies. The subject of {State v. M. H. George, A.I.l§. 1965 Sl.C. 722, para. 40, 41 (May) (Reviews case-law).

'The Foreign Exchange Regulation Act, 1947 (7 of 1947).

"Cf. Craies, Statute Law (1963), page 539.

4Cf.Mousell Brothers, Ltd. v. L. & N. W. Railways. (1917) 2 K.B. 836, 845 ; (1916-17) All E.R. Rep. I101, 1106 (per Atkin) J.).

'Cf. Lim Chin Aik v. TheQ)um;, (1963) A.C. I69 ; (1063) 2 W.L.R. 42 ; (1963) I A.E.R. 223, (P.C. 3 and note thereon in (1963) 26 Modern Law Review 446.

'See also para 53, supra.

7Para. 50 to 59, supra.

"Para. 2, supra.

"See also para. 73, infra.' E ,1 K :

Ncfogpafls. I00--II,:I, in)fa.: AV *___ 7 ' ____ Liability of oﬁcers of companies.

criminal liability of corporations is interesting one'-', and we need not, for the present purpose, enter into a detailed discussion" of the subject.

discussed in detail in The subject has been England"-5-5-7.

In India, the point was referred to, but not decided, in one case before the Supreme Court".

The question has recently been discussed in a Bombay case".

62. But the provisions that deserve especially to be men-

tioned in the present context are those which (subject to certain qualiﬁcations), treat directors and oﬁicers of the company as liable for the offences committed by the company. . "

63. An example of such a provision is section 17(1) oi the Prevention of Food Adulteration Act"-11, quoted below:

"17(l) 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 ofthe 'offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act if he proves that the olfence was committed without his knowledge or that he exercised all due diligence to prevent the' commission of such 0 ence.".

'Sec Halsbury, 3rd Edn., Vol. Io, page 281, pa_ra._ 521 _; and Vol. 6, pages 440 to 442, paras. 853 and 854, dealing wih the criminal liability of the com- panies and also with the criminal liability of officers, particularly page 441, footnote (f). .

'See also Gower, Modern Company Law, (1957) '(I963 Impression), pages 137 to 138.

'In England, the leading cme is «R. v. I. C. R. Haulage, (I944) K.B. 55! s(I944) .1 A11 Eng. Rep. 691, 693, (C-C_._A-)-

(Prosecution of company for common law conspiracy to defraud).

'Welsh, "Criminal Liability of Corporation" (1946) 62 L.Q.R. 345.

'Russell on Crime, (1964), Vol. 1, page 96.

'Kenny, Outlines of Criminal Law, (1962), page 70, para. 50.

'Glanvi1le Williams, Criminal Law, The General Part, (1961), page 853, et seq.

'Motipur Zamindari Co. v. State of Bihar, (1953) S.C.R. 72o ; A.I.R. 1953 S.C. 320, 323, para. 9.

"State of Maharashtra v. Syndicate Transport Co.; A.I.R. I964 Boin.

195, 200, para. 17. (Paranipe J .). __ 10The P;-evention of Food dultzd ion 1954 (37 of 1954). 11Cf.P.fP. v.K. R. Cooper 'vd _ 'it way, A.I.R.'I964 Magi. 301.' \ 33' Similar provisions are found in many English Acts'.

64. As has been observed', "Recent years have seen a- further development whereby the rule that the acts Off. directors are treated as those of the Company is. in effect. applied in reverse. so that the acts of the company are treated as those of all its directors. Many modern statutes . and regulations provide that if an offence is committed by a company, every director or ofﬁcer shall be guilty of that. offence unless he proves that it was committed Without his consent and that he exercised due diligence to prevent its. commission". Such provisions are so worded as to stop the loophole revealed by certain judicial decisions".

65. The practice of inserting such provisions' has not escaped criticism. The comment "of Upjohn J. in one case may be referred to. There the statutory provision in issue was'~" as fo1lov.'s:----

-A . . . . .Where an offence'under this Act has been. committed by a body corporate (other than a local authority), every person who at the time of commission of the offence was a director, general manager, secre- tary or other similar ofﬁcer of the body corporate, or was purporting to act in any such capacity, shall be deemed to be guilty of that offence, unless he proves that the offence was committed without his consent or connivance and that he exercised all such diligence to »- prevent the commission of the offence as he ought to have exercised having regard to the nature of his func- tions in that capacity and to all the circumstances".

The following observations were made on this . provision5 ; --

"First of all, I have to bear in mind that this is a penal statute. It~ indeed, I suppose, represents the high-water mark of the Parliamentary invasion of the traditional 'rights of the subjects of this realm. Not only does it impose upon offenders substantial penalties.

----no objection could be taken to that----, but what is so serious from the point of view of the subject is, that where a body corporate has been found to be an' _ 'For English Acts containing similar rovicions, see Glanville Williams,... Criminal Law, The General Part, (1961 , pages 866, et seq.

"Gower, Modern Company Law, (1957), (I963 Impression), page 138. 'fE.g. Dean _v. Hiesler, .(I942) 2 All. Rep. 340 (person not duly *- appomted as a director not liable under Regulation 91 of the Defence) (General, Regulations).

'Para. 62, supra.

( )'The Borrowing (Control and Guarantees) Act, 1946. Schedule para.~ 3 4 - ' 'London and Company Co ' r " ' pies Investment, Ltd.,~ v.- Attorney General, (1953) 1 wuivmw 1312, 318, 319, (Ch. D)-V ' ' . 2 . us. = ' i .

Upjohn ]'.).

i i 34 offender, then every director, general manager, secre- tary or other similar oﬂicer of the body corporate, 1n~ cluding a person who was purporting to act in those capacities, is deemed to be guilty unless he proves that the offence was committed without his consent or con- nivance, thereby reversing the usual and traditional rule of English law that a man is innocent until he is proved guilty. But not only that; for proof that he is innocent will not avail an accused person, because he must fur» ther show that he exercised all such diligence to pre» vent the commission of the offence as he ought to have exercised. having regard to the nature of his functions in that capacity, and in all the circumstances. How- ever. that is what Parliament has thought ﬁt to enact, and I abide, of course, by it. Nevertheless it is what Mr. Lindon described as a highly penal statute.".

66. The question of vicarious penal responsibility also Y' falls to be considered, in this context. The rule at common law is that (subject to certain exceptions), a master is not vicariously responsible for the crimes of his servants'-''-".

67. This common law rule' may undergo a modiﬁcation ' Y ' in relation to special enactments. The liability so imposed may be vicarious either in relation to the actus reus. or in relation to the mcns re-oz. ' The method by which such modi- ﬁcation is achieved is two--fold. There may be statutory provisions creating vicarious responsibility, by using words ' such as "no person shall eiﬂierby himself or by anyiservant or agent" do some act~"~'-'.

68. Besides such statutory modiﬁcations"',_ there may be a modiﬁcation as a result of judicial construction. ' A statute may be so construedas to 'render a person criminally liable for the acts of his servants; and, such a construction might 49 'Kenny,' Outlines of Criminal Law (1962), pages 38, 42, 43, 48 and 'See discussion in Glanville Wfiﬂiants, Criminal Law---The General Part, (1961), pags 267 to 269, para. 92.

"See S. Prevezei-'s article in 26 Modern Law Review 236, for a general discussion. ' 'Para. 66, supra.

--» '#'i"*"*"' '----'-~-~'-'~~ ~~»~------v~--

"See examples of English Acts cited in Glanville-'Will' C 'k Law, The General Part, (1961), page 269, footnotes. 1 mm' mm 'Compare section 9B, Opium Act (I of 1878), as inserted by Bengal Act 5 of 1933.

' '§ee para. 67: i 3 i 35 be more easily adopted in relation to special enactments, having regard to their subject-matter'-2-3-4.

This seems to be particularly so in the case of "public"

welfare offences"-5.

Vicarious liability for statutory offences is, in many cases, justiﬁed on the principle, that if a master chooses to- delegate the conduct of his business to a servant, then, if the servant in the course of conducting the business, does an act which is absolutely p'roh1'.uited. the master is liable". On the other hand, where intent is a necessary element_ as in attempt, the doctrine of vicarious liability may be nega- tiveds. The link between vicarious liability and absolute prohibition can be seen in the following observations:---

"A master who is not pdrticipant in the offence can .. only be liable criminally for the acts of his servant if the statute which creates the offence does so in terms which impose an absolute p1'ohibition."."

The following observations of Channell J. with refer- ence to a case under the Weights and Measures Act, 1878", illustrate this aspect" :--

"[The Act] is within the class of statutes under' which persons may be convicted for acts of their ser- vants in respect of which they are not in any real sense culpable. Mens vrea is not an element in the 'For the position in England, seeé--V (1') Cgosss and Jones, Introduction to Criminal Law, 1964, pages. 9 2 9 3

(ii) Kenny, Outlines of Criminal Law (1962), pages 38, 42 and' 48, paras. 28, 32 and 35.

(iii) Glanville Williams, Criminal Law, the General Part (1961),.

pages 27o--285. -

2For the position in Australia, see---- _ (1') Proudman v. Dayman and the judgement of Dixon J. therein,. (I953) 67 Commonwealth Law Reports, 536, 540 ;

(ii) Thomas V. R. (1937) 59 Commonwealth Law Reports 279, 300, 305 (D1xonyJ.);

(iii) Note by Colin Howard in 67 L.Q.R. 547; and

(iv) Colin Howard, Strict Responsibility (1963): Chapter 7.

"For the position in America, see Perkins Criminal Law, (1957), pages . 695 to 697.

'For Indian case Law see Uztam Chand v. Emp; A.I.R. I945 Lah 238, 246 to 248 (F.B.). -

'See Glanville Williams, Criminal Law, The General Part.' (1961), page = 282, middle.

'See also Yeandel v. Fisher (1965) 3 W.L.R. I002, 1007, (per Lord Parker C.J.). .

'Cf. Barker v. Levimon (1951) I K.B. 342 ; (1950) 2 All E. R. 825, 827 (Lord Goddard C.J.).

"Gardner v. Akeroyd, (1952) 2 All Eng. Reports 306, 310, 311. C J )9 Gardner v. Akeroyd (1952) 2 All ER. 306, 310 (per Lord Goddard. . . . -, f If ' v 't "The Weights and Measures " , 1&7

25). , , E 2 %-

"Anglo-American Oil Co., {.td. .

S i 42» Vict. c.49, H _ 1 KB. 5,35, 54%., 36

-offence . . . . . . The offence is within that class where the legislature has absolutely prohibited certain acts being done, with the consequence that if they are done- although by a servant of the er'nployer---done in any sense in the course of the employment, so that for some purposes the maxim qui facit per alium, faéit per se applies---the employer may be convicted although he is not in any way morally culpable". ,

69. As was observed by the House of Lords in a recent «case', the number of statutes which may give rise to the «question of vicarious criminal liability is "regrettably great", and the language "very far from uniform". But the effect of the numerous cases on the subject appears to be, "that (subject to certain exceptions), where the hcope and purpose of the relevant Act is the maintenanceeof proper 'and accepted standards of public order in licensed premises or other comparable establishments, there arises under the legislation what Chan-nell J3 called a "quasi-criminal pﬁence", which renders the licensee or proprietor criminally liable for the acts of his servants, though there may be no rnens rea on his part,

70. An elaborate analysis of the methods whereby the statute itself may create vicarious liability is found in the judgment of Lord Morris":--

"It is open to Parliament to provide that a parti- cular act is wrongful and that a person who does the act is guilty of an offence. In, general our criminal law requires that there should be mens rea in order to;

establish guilt. (i) Parliament may, however, enact that mens Tea is not necessary. There may be strict 'liability. (ii) So also it might be enacted that a person is guilty of an offence if his servant or agent does some act and does it with mens rea. It might be enacted that a person is guilty of an offence if some other per- son not his servant or agent does some act and does it 'with mens rea. it might be enacted that a person is guilty of an offence if there is mens rea either in him or in the person doing the act. (iii) It might be enact- ed that a person is guilty of an offence if an act is done 'by some other person even_ though there is no mens area in anyone". -

7,1. This aspect cf special enactments creating "quasi- .-criminal offences" has been thus put by Lord Devlin':----

"The ﬁrst distinguishing mark of the quasi-criminal law then, is that a breach 'of it does not mean that the 'Vane v. Yiannopoullos, (1964) 3 weekly Law Reports, 1218, 1228 '(H.L.) (per Lord Evershed).

2See para. 72, infra. .

"Vane v. Yiarmopaullpj, (196 3 Weekly Law Reports, 1218, 1230* «Id . , 'Devlin, Enforcement of Morals, (1965), page 30.

9 '_.

l .i; ii.

yglldlag (Per Lord Mm-risgof -y:af'Gest_). (Numerals indicating items i, 37 offender has done anything morally wrong. The second distinguishing mark is that the law frequently (1065 'I101 care whether it catches the actual _ Owners of goods are frequently made absolutely liable for what happens to the goods while they are under their control even if they are in no way responsible for the interference; an example is when food is contami- nated or adulterated. Likewise, they may be made liable for the acts of their agents even if they have ex- pressly forbidden the act which caused the offence. This sort of measure can be justified by the argument that it induces persons: in charge of an organisation to take steps tolsee that the law is enforced in respect of things under their control. In some of our colonies where the police force is sparse and the population scattered, and the detection of crime exceptionally diffi- cult, the law provides for imposing a collective ﬁne on a village where there has been disorderly behaviour. That helps to ensure that the inhabitants will keep order among themselves. In England a more reﬁned form of vicarious liability prevails. The majority of quasi-criminal offences are committed in the course of trade or commerce, and the ﬁnes that are imposed in respect of them fall upon the shareholders of a limited company or the proprietors of the business.".

72. Really speaking, vicarious liability in this context is an aspect of strict liability. As has been observed', "By the general principles of criminal law, if any matter is made '5 a criminal offence, there is imported into it that there must be something in the nature of mens rea. Therefore, in offender or not.

Vi 'ous lllb pact of strid liability .

ordinary cases a corporation cannot be guilty of a criminal .

offence, nor can a master be liable criminally for an offence committed by his servant. But there are exceptions to this rule in the case of quasi-criminal oﬁences, as they may be termed-----acts forbidden by law under a penalty, possibly even under the penalty of imprisonment, at any rate in default of payment of a ﬁne--because the legislature thought it so important to prevent the act being committed that it forbade it absolutely to be done in any case. It seems to me that exactly the same principles apply to a corporation doing such a thing. If it does an act which is absolutely forbidden it is liable for a penalty.".

73. The above analysis of mens Tea', and vicarious crimi- nal liability-3, is not intended to imply that all the enact- ments dealing with the eight categories of the oﬂfences 'Peark:, Gumton and Tee Ltd. v. Ward, (I902) 2 K.B. I, II ; (I902) A.E.R. Reprint 228, 232 (per Channel], J.).

"Para. 50 to 60, supra.

'Para. to 72, l ! Obiect of the analysis regatding Men: rea.

which are the subject-matter of this Reportl, create offences of "strict liability". Many of them do require mens rea".

The analysis is only intended to bring out the position, that at least in respect of some of them, there has been a modi-

ﬁcation of mens rea.

The analysis is also intended to demonstrate, that sta- tutes creating new crimes represent the attempts of the Legislature to give eﬁect to the criminal policy of the moment. "The Legislature is therefore primarily concerned to ﬁnd the best method of dealing with the particular mis- chief which it is, at that moment, seeking to repress, and its decisions, aimed _at a narrow target, are not as a rule reached by any careful regard for general principles of an abstract kind".

Further, it will also show, that "as things are, the sta- tutory crimes, as a whole mass, cannot be brought under a simple schemes of general principles of criminal liability".

Representing, as they do, eﬁorts of the Legislature to repress anti-social conduct of a particular variety prevalent at the particular moment when the Legislature is confront- ed with the problem, these enactments, therefore, may not fit in with the Scheme of the Pe'na1'Code. A synthesis of the principles on which most of the crimes in the Penal Code are based (on the one hand), and the principles on which some of the crimes dealt with by these special enact- ' ments are based (on the other hand), would be difficult to achieve. In so far as mens rea is eliminated or modiﬁed, these special offences are "quasi-criminal" rather than criminal.

Special rules 74. Besides provisions modifying mens rea5, and similar °f°V'd°n°°- provisions there are special rules of evidence laid down in respect of many of the pffences in question. An example is section 14 of the Essential Clorrimodities Act''', which pro- vides that where a person is prosecuted for contravening any order made under section 3 (ot_ the Act), being an order which prohibits him from doi_ ' any act or being in posses- sion of a thing, without lawfu authority or without a per- mit, licence or other document, the burden of proving that he had such authority, permit, licence, or other document shall be on him7. i 'Para. 2, supra.

2See para. 60, supra.

"Russel on Crime, (I964): Vol. 1, page 65.

'Cf. Mousell v. L. N. W. Rly. Co. (1917) 2 K.B. 836 ; (1916-17) All E.R. Rep. 1101, 1106, (see judgment of Viscount Reading C.J.).

'Para. 5o-6o, supra. -

'Section 14, Essential pomp odigclg 3955 (10 of 1955).

7For an exhaustive dis ssioi of >s$t::toty"§ réyersgls of onus, see Glanville Williams, Criminal Law, he pemxri, rag Q3961» Page 896, at say. para. 292 and page 867, para. 2x4.' i 5: ' .

E i i 39

75. Another familiar example of a special. rule of_ 8V1- dence is section 123 of the Customs Act', which applies to "gold, diamonds, manufactures of gold. or diamonds, watches and other notiﬁed goods". Under this Sect!'-my Wh€_Te Such goods are seized under the Act fSeCti0n 110 read Wlth Sec' tion 2(34)], in the reasonable belief that they are smuggled goods, the burden of proving that they are 110t S_m11€81€d goods shall be on thc'person from whose possession they were seized'.

76. It should, next, be noted, that 111811)' of the enactments relating to the oﬂences in question cannot be worked with- out delegated legislation on a large scale contemplated by those enactments. This aspect has been emphasised 111 one of the comments received by us 013 the pI'0P0S3TS under consideration'. We quote the relevant portion:--

"The Indian Penal Code is an enactment which enumerates and deﬁne': a series of oﬂences against the State, society in general, the human body and property, besides providing for punishment for 'each of these offences. Even the codiﬁed social offences like those relating to public tranquility, elections, all offences against public justice, religion. etc-. are capable of an all-timeideﬁvnition. The Code does not provide any delegation of legislative authorityto the executive by way of rule-molding powers 'to nary the deﬁnitions of these offences. Structurally, the Code is quite different from the various other enactments like the Essential Commodities Act, Company Law, Industries (Develop- ment and Regulation) Act and legislation concerning Income Tax, "Customs, Excise, Import and Export, etc., Which Can, in general, be called' social and economic laws. Generally speaking, these enactments, unlike the Indian Penal Code, do not 8iYe complete deﬁnitions of offences. These enact1jx'1ent,s,' besides stating certain social objectives, inc-orporate vast enabling powers to the executive to make rules or is_s'ac orders or "directions to implement the objectives inc situation. Con- traventions of these rules, orders and directions would amount to Offences which are Ir'l,§de'punishab1e under the parent enactments.' It 'i seen that Government and its officers, exercising dele' ted authority, can periodically change the ingrg ten : of what can be social and economic offences, depen ing on' the exigencies and needs of the Situation, by virtue of the delegated legis- lative powers Vested in them. 'With this' structural 'The Customs Act, 1962 (5; 'of Iggz). , 'This corresponds to old section 178A, nghich was enacted in pop uance f we . d T , .. _ . . , ._ .

'{,0,_. ,f¢;°,';;;1=;§t;gg= 313;)? W "*5? axauos Iiesww Qenamesszon, . epon "See Beef Y: at Gems -.I.- 2 S-.9-, 822. 88,0» 4s.No. 54 in the Law.con1m'iui13i",_, ' ' 'j.

47 ; . - . 3 ii 1.. .

l 2 I § Importance of delcjated legislation in relation to statutory offences.

difference, it would be very difficult to deﬁne, codify and incorporate what can be social and economic offences in the Indian Penal Code. For illustration, we may examine black-marketing, hoarding, traiﬁcking in licences and permits, etc. The question of black- marketing arises only when the price of any commodity is ﬁxed statutorily. Similarly, a person can be said to hoard any article and thus commit an oifence only when he hoards more than what he is permitted to. under the law. Necessarily, black-marketing and hoard- ing cannot take place in respect of a commodity when its supply position is comfortable, and when, as a re- sult no restrictions are placed. Such restrictions are usually imposed, when necessary, under speciﬁc enact- ments, and the circumstances of the case are bound to vary with the commodity and the position prevailing at the time. Trafficking in licences and permits takes place when these are transferred without the permis- sion of the competent authority though such transfers . are prohibited by the law, or when a premium is charg-

led on such transfers in spite of a prohibition under the aw.

Here also the circumstances of the case and the severity of the anti-social activity vary with the differ- ent classes of licences , and permits, necessitating punishments varying in %e'v,erity.".

Provisions are left to statutory rules and orders, because varied and recurring action by way of subordinate legisla- tion is required, particularly in connection with essential commodities. The following points seem to be worthy of notice:--

(a) It often becomes necessary to issue more than one order under an Act. 'By way of illustration, we may refer to the large number of orders issued in con-

nection with control _of sugar'-''-'.

These were issued under the Essential Com- modities Act. In 1963, an order on the subject' was issued under the Defence of India Rules, 1962. Reference may also be made to orders issued under the Sugar (Regi1lation'of'Production) Act'.

'The Sugar (Control) ';Ordct,_,1955. ,(S.R.O. I862-Ess. Com., Sugar, dated the 27th August, I955). See Divan Sugar etc. Mill: v. Union of India, (X959) 2 S.C.R. (Supp) 123 ; Af.I.R. 1959 S.AC.' 626.

'The Sugarcane (Control) Order,' 1955, (S.R.O. 1863fEss.' Com.

Sugarcane, dated the 27th August, V1955).

'The Sugarcane Prcssmud Control Order, 1959 :(G.S.R. 551/Eta.-

Com/Press-mud, the zgtlr April, {959).

1963).

"we saw <<=°r*r6v 'The Sugar (Reg1jnauc§n ' iAct. I961 (55 of I961); T' 41

(b) Even more than one Act may have to be en- ' acted to deal with one commodity, e.g. sugar 1-2.

(c) Changing circumstances require frequent amendments in statutory rules and orders. Thus, the Inter-Zonal Wheat Movement Control Order, 1957' was, between 1957 and 1961, amended seventeen times, before it was rescinded'.

Particulars of the amendments are given in the foot- 'note-5.

'See, for example-

(t') the Sugar (Regulation of Production) Act, 1961 (55 of 1961);

(ii) the Sugar Export Promotion Act, 1958 (93 of 1958);

(iii) the Sugarcane Control (Additional Powers) Act, 1962 (39 of h 1962) ; 4

(iv) the Sugarcane Act, 1934 (15 of 1934), which has been repealed in some States by local Acts ;

(1)) section 4, Sugar (Special Excise Duty) Act, 1959 (58 of 1959).

'For history of some of the laws regarding sugar, see Tika Ramji V_ 'State, (r956) S.C.R. 393 ; A.I.R. 1956 S.C. 676.

"The Inter-Zonal Wheat Movement Control Order, 1957, (S.R.O. 1986, dated the 13th June, 1957), (Gazette of" India Extraordinary, Part II, s. 3, page 1985, dated the 13th June, 1957).

4The Order was rescinded by S.R.O. 503, dated the 5th April, 1961. A fresh order--the Inter-Zonal Wheat and' Wheat Products (Movement) Control Order, 1964-was issued later (GSR 511 dated the 23rd March, 1964).

5The notiﬁcations amending the orders were-

SRQ. 2464, 27th July, 1957.

SRO. 2630, 14th August, 1957.

SRO. 4043, 14th December, 1957 (published on 21-12-1957 ). SRO. 399, 25th January, 1958 (published on r-2-58).

'GSR. 346, 5th May,_1958 (published on 10-5-58).

GSR. 242, 15th April, 1958.

GSR. 609, 12th July, 1958.

'GSR. 625,'12th July, 1958 (published on 19-7-58).

'GSR. 171, 7th February, 1959.

GSR. 347, r8th March, 1959.

-GSR. 641, 27th May, 1959.

-GSR. 925, 29th July, 1959 (published on 8-8-59).

GSR. 121, 21st January, 1960 (published on 30-1-60).

GSR. III7, 20th September, 1960 (published on 24-9-60). GSR. I407, 24th November, 1960. I A GSR. 2, 3rd January,-196%. V7 :

GSR. 35, 7th January, 196:.

Penalties by Rules.

Special Powers.

(d) Amendments in an order' may Sometimes become necessary in view of criticism of the order made by the Committee on Subordinate Legislation.

(e) Further, under an order issued in pursuance of the Essential Commodities Act? it may become necessary to issue subsidiary orders. ' .

Thus, under clause 14(b)(2) of the Cotton Control Order, 1955, more than 4,000 orders were issued in 1958"'.

(f) Again, it may become necessary to __add to the very list of essential co'q1.modi_ttes in' the Essential Commodities Act'. ' ' ' This has been done in respect of several com- modities, by notiﬁed orders-'{--°-7-3-9-1°.

The above illustrations .v_vi1l show, that a degree of ﬂexi- bi1ity'is required in" regard to' control over commodities, which cannot be had 2under the Indian Penal Code.

37. In connection with delegated legislation", it may be pointed out, that it may be' neressary to frame rules im- posing different requirements for different situations. An example is a rule mad under 1 . Prevention of Food ct", whereby the speciﬁed i0.IifS' 759 iph "Gh_,ee". must co_n grm were laid down differently for diﬁerent areas, having re- gard to the fact that the "Reichert" value of pure gheeis not constant, but is dependent on several factors, such as------what is the breed of 'the cattle in an area, Whether the cattle are fed on pasture or on stall, and so on"-1'.

78. Another special feature to be noted is the conferment of special powers. An example is section 10 of the Preven-

Sixth Report of the Committee on Subordinate 'See, for example A _ l: Sabha) (9th September, 1959), page 2, para. 7.

Legislation (Second L0 'The Essential Commodities Act, 1955 (to of 1955). ' 'See Committee on Subordinate Legislation, Sixth" Report (Second Lok Sabha) (9th September, 1959), patch -2<_)+2r(Appeni_:lix 3), 4th column. 4Sec section 2 (a) (1'), Essential Ccﬂmodities Act, 1955 (10. of r955). 'SD. 2232, dated the 13th Septeni~b_e'1-,r96o. (Cinema carbons). °s.o. 2395, dated the 8th sep:en'£%'e}, 1962. (Non-ferrous' metals).

d)7N0tiﬁcation No. GSR/Ess. Comm. dated the 15th April, 1959. (Press- mu . ' °S.R.0. 828, dated the 9tl1April,' I956. (drugs). °s.o. 3594, dated' the 24'n:"N9v'm'.ber, 'I962. (Cement).

"The list of orders is illustrative' only. _ "Para. 76, supra.

irrhc Prevention of Foqi Adult,.~rad§$ct,Vr9§4 Q1 of 1959, 7 "Cf. sum of U. P. v.1d_m¢rg ; dig z';§s'£' s.c.'u§5; jam. :1. "See also para.49(¢),r+»ra. 5 ' 'lg' " I " " 7'7""

' i ii.' 5- i 1 ! 43 tion of Food Actl, whereunder, a food inspector has power "to take" samples of any article of food from certain persons. As has been pointed out2, without such a provision, the inspectors cannot carry out the duties assigned to them, and the section, thus, is a "pivotal" 'section.

79. Another type of special provision is a requirement special pro- relating to sanction of a particular authority before prose- "$101,133 *0 cution can be instituted. An example is section 107 of the '°'3"°t'°°' Insurance Act', under which the sanction of the Advocate-

General is required before proceedings could be instituted against insurers or against any director, etc., under the Act'.

There is a similar provision requiring sanction of the speciﬁed authority for prosecutions under the Prevention of Food Adulteration Act5, the Drugs' Act", the Income-tax Act7, the Customs Act", and other special enactments.

80. Special enactments sometimes "contain special provi- Provisio_n§ sions intended to add to their deterrent effect. The most f°' P""1'°"Y' apt illustration in this context is a provision for publicity. 'Thus, the Australian Act regarding black-marketing', makes elaborate provisions for, giving publicity to convic- tions for black-marketing. _When 3 person has been con- victed of the offence of black-marketing, then, under' the Act,--

(i) the court shall require the person convicted to exhibit, outside his place of business, a notice, contain-* ing particulars relating to the conviction and to keep it exhibited continuously for not less than three months;

(-272) the court 'mtg require hi"rh to print on the invoices, accounts and letter-heads to be used' by such person in business, during a period of not less' than three months, a notice regarding his conviction', con- taining such particulars as the court determine;

(iii) the Attorney-General may direct that the ' I particulars regardingthe conviction may be broadcast;

'The Prevention of Food A£iultcr'a'tion 1954 (37 of 1954).

'Narasz'inharaa v. State of Andhra' Pradesh, A.I.R. 1964 Andhra ' :Pradesh 501, 503, para. 14.

"Sectio1'1 107, Insurance Act, 1938 (4 of 1938).

4As to this section, see Raghubar sing»; v. Emp. A.l.R. 1944 RC. .25, 29. ' ' 'Section 20, Prevention of Food Adulteration Act, 1954 (37 of i 1954). 'Section I 5 (2), Drugs (Control) Act, 1950' (26 of 1950). ' 7Section 280, Income-tax Act, 1961 (43 of 1961).

'Section I37, Customs Act, 1962 (52 of 1962).

rfhe (Australian) Black-mazgeting Act (49 of 1942), section," "-1,", ,3, mg

314. 3 2.; V ' 44

(iv) particulars regarding the conviction are to be published in the Gazette,,and, if so dlrected by the.

Attorney-General, also in a newspaper.

Somewhat similar provisions are found in the Act that was in force on the subject in West Bengal'.

Provisions for publicity are found in some Central Acts. also?-3-4.

SP°°i31<=ha- 81. The features enumerated above" amply show, that '"'°a'ft'm°f tthe the enactments in question are of a special character, and en en S' stand apart from the general criminal law of the country embodied in the Indian Penal Code.

P°55ib'g"Y °f 82. While taking a decision about transferring the fgﬂfmmm provisions of special enactments to the Indian Penal Code, ' we should bear in mind a practical aspect, namely, that. with the passage of time, new and fresh offences under the' head "anti-social offences" will come into existence, and those new offences may, in the light of practical needs, necessitate their own special rules of evidence and proce- dure, as well as special provisions as to maximum anch minimum punishment. The manifestations of human ingenuity cannot be predicted, and special provisions may become necessary to tackle them. On the other hand, it. may be that several of the offences dealt with in the special' enactments now in force may, in course of time, become- obsolete or lose their importance. In view of these consi- derations, it would-be' more practicable to keep provisions, relating. to such oﬁences in special enactments, as they; are at present.

In this connection, we may also point out, that besides- the offences listed by the Santhanam Cornmitteeb, there are several other offences which could be regarded of an» anti-social character, and that these are all dealt with in. special laws'.

Like1ih00d_ 83. We' would also point out, that with the passage of' :¢fs':;';ﬁ"°"" time, new and fresh devices to evade the existing taxation into em?' or economic laws might come into being, and the more v.-nee. convenient course would, therefore, be to deal with thenr in the relevant special enactments rather than in the-

Indian Penal Code.

'Sections 20 and 21, West Berna! Black-marketing Act (32 of 1948) (repealed by West Bengal At: 33 of 1954).

)'Sec section 16 (2), Prevention of Food Adultcration Act, I954 (37 of 1954 -

'See also section 287 of the Income-tax Act, I961 (43 of 1961), and the recommendation made in the Report of the Direct Taxes, ctc., Com--- lnlttee, (I958-59), pages 186-187, para 7-87, 7-88.

'See also section 35, Drug: and Cosmetics Act, r940 (23 of 1940).

'Paras. 48 to 8o,supra.

' 'Paragraph 2, supra, 'See Appendix 10. ' 45

84. As has been statedl, "The _race between the evaders of the law and the authorities who enforce the law may, in some ﬁelds (like techniques and methods), be one (continuous process, in which each tries to get the better of the other. In such circumstances, the Legislature and the Government may try to equip the enforcers of the law at any time with powers required at that time, consi- dering the prevailing circumstances, the nature and extent of actvities of evaders and extent of power requi- site for the ofﬁcers enforcing the law, including rules and notiﬁcations to deal with the evaders."

85. We also made an attempt to study the genesis of Genesis of some of the special enactments, and the study bears out Spggtalents what we are endeavouring to emphasise, namely thee" m ' "special" character" of the relevant enactments. Thus, the Prevention of Food Adulteration Bill was introduced, for the following reasons":-

"Adulteration of foodstuffs is so rampant, and the evil has become so widespread and persistent, that nothing short of a somewhat drastic remedy provided for in the Bill can hope to change the situation. Only a concerted and determined onslaught on this most anti-social behaviour can hope to bring relief to the nation."

Notwithstanding the existence in the Indian Penal Code of certain sections punishing adulteration', the enactment of a separate law was proposed, because that Was consider- ed the only adequate Way of dealing with the problem.

86. Similarly, the Prevention of Corruption Act, 1947 Was passed5, because the opportunities for bribery and corruption had been enormously increased by war condi- tions, and because it was anticipated that post-war recons~ truction would involve disbursements of very large sums of Government money. The enactment of a special_provi- sion whereunder, possession of a sudden accretion of wealth should constitute an offence was (apart from proce- dural changes) the main innovation introduced by the Act. The section creating the offence was framed in the terms in which it is now found (section 5), because it was felt that the correct legal course was to create a new offence of "criminal misconduct".

'Shreeram Durgaprasad (Private) Ltd. v. D. C. Customs Department, A.I.R. I965 A.P. 294, 302, para. 33 (per Anantanarayana Ayyar I.) (August). 2Para. 81, supra.

"See Statement of II, section 2, page 522.

4Sections 272-276, Indian Penal Code.

5C]. Statement of Objects and Reasons, Gazette of India, (1946), Part V, page 374.

"Cf. section 9 (1), Criminal Law Amendment Ordinance, 1943, and Iection 2 (x), Criminal Law Amendment Ordinance, 1946.

Objects and Reasons, Gazette of India (1950), Part 46

87. Again, the Railway Stores Act1 was passed in 195_5 to replace the Railway Stores (Unlawful Possession) OI'd1- nancez, and to extend its provisions to Part B States". The Ordinance itself was promulgated on the 13th May, 1944, with a view to preventing persons from having unlawful possession of articles of railway stores, a thing, of frequent occurrence towards the end of the last 'wa7'- Th_€ Act creates a new offence of "unlawful possession of railway stores"". The offence is more drastic than theft and alhed offences, inasmuch as, under the Act,----

' (t) it is enough if there is a reasonable suspicion that the stores are stolen or unlawfully obtained, and (it) it is for the accused to account satisfactorily how he came by such stores.

88. The Telegraph Wires Act.' was enacted5, because thefts of copper wires used in telegraph lines had been so rampant, that tele--communications in several parts of the country were considerably dislocated during the two years preceding the passing of the Act'. Many offenders had escaped only due to the failure to prove in court that the wires found in their possession had been stolen from the Posts and Telegraphs Department. Since copper wires used in telegraph lines were of distinctive gauges, it was felt that it would not be unreasonable to presume that any person found in possession of wires of these gauges came into their possession unlawfully (except in the case of persons who purchased them from the Disposal stock). Later, by an amendment in 19537, sale or purchase of any quantity of telegraph wire [as deﬁned in section 2(b)] was prohibited except with the permission of the prescrib-

ed authority.

89. Similarly, the Imports Act" was enacted, because it was considered" that the measures of control imposed under rule 84 of the Defence of India Rules and subse- quently extended under the Emergency Provisions (Con- tinuance) Ordinance, 1946 (20 of 1946) would have to be continued for some time longer, in order to avoid any dis- turbance to the economy of the country during the transi- tion from war time to peace time conditions. At the same 'The Railway Stores (Unlawful Possession) Act, 1955 (51 of 1955). 2The Railway Stores (Unlawful Possession) Ordinance, 1944 (19 of 1944)-

3See the Statement of Objects and Reasons, Gazette of India, (1954), Part II, section 4, page 374.

4Section 3. 4 "The Telegraph Wires (Unlawful Possession) Act, 1950 (74 of 195o)_ 'Gazette of India, (1950), Part II, section 2, page 402. 7566 Section 4A; Telegraph Wires (Unlawful Possession) Act, 1950 (74 of 1950)-

°The Imports and Exports (Control) Act, I947 (I8 of 1947).

Part €,S'e;at'l:e 8S6tatement of Objects and Reasons, Gazette of India-, (1947),-

time, penalties had been "considerably reduced to Suit peace conditions".

90. In this connection, it may be noted,_ that some of .«=i1teraci'oéi_s the sections of the Indian Penal Code dealing with offences II§::m1lf<"-égdlean relating to trade marks, were repealed or amended by by Special special legislation which dealtcomprehensively with the enactments. subject. Thus, section 478, Indian Penal Code (Deﬁnition of trade--rnark) and section 480, Indian Penal Code (Using a false trade-mark), were repealed by, and sections 482, 483, 485 and 486 were amended by, the Trade and Merchan-

dise Marks Act, 19581.

91. The study of the genesis of many of the special enact- 59.36331 en- ments'-', thus. shows, that they were either enacted to deal actmlents and with problems which arose temporarily -but survived $23-ff'i1:,31 longer than expected, or with problems that were conﬁned bythem to particular trades or industries or particular kinds of public properties, or otherwise to deal with particular species of acts regarded as harmful. These laws are, tnus, properly described as "special". Even though some of the acts proposed to be penalised by them" were already punishable under the Indian Penal Code, Yet 3 Special law had to be passed.

CATEGORY l~-'C3F'FENCF-S PREVENTING ECONOMIC DEVELOPMENT

92. We now proceed to consider, in detail, the various Oﬂ'encgspfe_ categories of offences mentioned in the Report of the San- venting eco- thanam Committee'. The ﬁrst of these is the followinegz--- nmnic development "Offences calculated to prevent or obstruct the (CategOl'Y 1)- economic development of the country and endanger its economic health".

This appears to be a very wide and all-embracing category. The test being the economic development of the country and its economic health, enactments relating to public ﬁnance, control in trade, control on industry, control of power and resources and the like, would all fall under that category. It_fact, it is wide enough to cover many of the offences mentioned in the other categories listed by the Committee, for example, evasion of taxes, and proﬁteering. But, as the other categories have been separately mentioned, the present one would have to be Confined to what is not covered by them.

We have listed separately some of the existing laws that seem to have some bearing on such oi'fences5, that 1Thc Trade and Merchandise Marks Act, 1958 (43 of 1958). 'Paras. 85-90, supra.

3E.g. theft.

4Paia. 2, supra.

'See Appendix I. Other econo-

mic crimes mentioned by Santhanam Committee.

list being illustrative only and not intended to be exhaus- tive. So far as transferring the penal provisions of these laws to the Indian Penal Code is concerned, we think that it would not be a feasible proposition. It would, in the ﬁrst place, tremendously increase the bulk of the Code. Secondly, the penal provisions in these enactments are in- extricably woven with the other provisions or with the statutory rules issued thereunder. By way of example, we may cite the Industries (Development and Regulation) Actl. The penal section in that Act is section 24, which punishes a contravention etc., (i) of the provisions of several sections mentioned therein, or (ii) of directions or orders issued under the sections mentioned therein, or

(iii) of any rule the contravention whereof is made punishable. The Act also contains provisions regarding burden of proof (section 28), and procedure and jurisdic- tion (sections 27, 29, etc.). All these provisions would become incomplete if the penal sections are transferred to the Indian Penal Code. The same can be said of many other Acts, like the Foreign Exchange Regulation Act, 1947 and the Imports and Exports (Control) Act, 1947.

93. We next come to the question whether addition of any new provisions is called for under this category. At another place in the Report', the Santhanarn Committee gave an indication of the white-collar and economic crimes which it had in mind. After observing that such crimes rendered the enforcement of the laws more diﬂicult, and that this type of crime was more dangerous not only because the ﬁnancial stakes were higher but also because irreparable damage to public morals was done, the Com- mittee stated, that tax evasion and avoidance, share- pushing, mal-practices in the share market and administra- tion of companies, monopolistic controls, usury, under- invoicing or over-invoicing', hoarding, proﬁteering, sub- standard performance of contracts of construction and supply, evasion of economic laws, bribery and corruption, election offences and mal-practices, were some examples of white-collar crimes.

Now, of the examples so given by the Committee, most, if not all, would be covered by the existing enactments on the subjects in question', which include certain provi- sions relating to economic offences also5. Monopolistic controls and sub-standard performance of contracts are, of course, important items. But the former has already been ;The Industries (Development and Regulation) Act, 1951 (65 of 1951 .

'Reports of the Santhanam Committee, page 11, para. 2-I3.

'As to under-invoicing, etc., see also Report of the Santhanam Com-

mittee, page 253, item (xxii).

4See Appendices I to 8.

'See Appendix 1.

the subject-matter of consideration by a separate Commis- sion', whose report has been submitted recently, and it is unnecessary to discuss it in detail. The latter will be dealt with separately'.

94. Economic crimes have received elaborate treatment Whether in countries in Eastern Europe"--'. But certain observations adopti°P °f- in relation to the laws in force in those countries penalis- ggﬁﬁgufiomp ing such crimes may not be out of place. First, they seem Eastern ' to incarnate the economic and social philosophy of the Europe group of countries concerned. Secondly, they include feasible- some activities which are, as a rule, not punishable else- where5, e.g. spe-:ulations'»'. Thirdly, many of the formula- tions of the offences are of a sweeping character. The lan- guage employed is general7, so that the provisions may lead to varying interpretations at different times and places.

95. For the reasons given below, we do not think that provisions of the general and sweeping character found in the laws of countries of Eastern Europe8 can be incorporat- ed into the Indian Penal Code:--

(a) The concepts of economic policy and ideology on which they are based have ﬁrst to be accepted, before they can be incorporated into the criminal law.

(b) Even if those concepts and ideology are ac-

cepted, putting such provisions in the criminal law might lead to "bad judicial legislation'', in view of their generality. In a country like India, with numerous High Courts, such provisions are likely to lead to conflicting interpretations and consequent un» certainty in the law,--a risk which should be under- taken only where compelling reasons exist.

(c) Even if such provisions are to be enacted as a part of the Criminal law, they would appear to be of a special or temporary character. It is doubtful if they can be properly put into the Indian Penal Code, which is the basic penal law of the country.

96. One of the comments received by us suggest, that Points sug- under the llI'St category", the following offences should be gestedin

---- _.__;____ .__,__ COIIlIn€ﬂtS..

'The Monopolies Commission.

"See paragraph 126, infra.

'See para. 29-34, supra.

4See also Appendices I6 and 21.

'Cf. Mannheim, Criminal Justice and Social Reconstruction (1946), page 138.

'Tara. 29, supra.

7See Appendix 16, sections 225 and 227 (Hungarian Criminal Code). "Para. 94, supra.

"Para. 9:, supra.

'Evasion, etc. 'Of tax :_(Category 2) .

-made penal by inserting a. Chapter in the Indian Penal Code: --~

(i) smuggling across the Indian border;

(ii) trafficking in foreign currency and bullion;

(iii) any move, open or subtle, purported to obstruct any foreign aid;

(iv) any move to incite the peasants in any area to abstain from cultivation;

(v) inciting strikes calculated to paralyse any transport or communication system, such as Railways, Port or road transport, etc.;

(vi) under-invoicing export import;

(vii) export of manufactured goods, handicrafts or raw materials, in quantities below the speciﬁed stan-

dards, and over-invoicing

97. We are not able to accept the suggestion. Some of the offences, e.g. smuggling. and trafﬁcking in foreign cur- rency, are already covered by special enactments'. A few. like "any move to obstruct any foreign aid" or "any move to incite the peasant to abstain from cultivation" appear to be too wide. Assuming that such provisions would be constitutional----a point on which we do not express any opinion,---they might cover many innocent activities. For example, a person who expresses an honest difference of opinion in regard to the policy followed as to foreign aid may ﬁnd himself within the four corners of the suggested oﬂfence of "any move to obstruct an foreign aid". The rest, such as inciting strikes, etc., can be more appropriately dealt with in legislation relating to industrial disputes.

CATEGORY 2.----EVASION AND AVOIDANCE or TAX

98. The second category of offences mentioned by the Santhanam Committee is----

"Evasion and avoidance of taxes lawfully imposed".

At another place in the Report", the Committee dis- cussed in detail the topic of evasion and avoidance of i-ncome--tax, and enumerated certain sections "of the Income-tax Act, 1961, which appeared to the Committee to offer scope for avoidance and evasion". The Committee observed, that the Department itself should examine and take suitable steps to plug loopholes on these matters; it suggested certain administrative measures, as Well as two 'See Appendix I. '*'Report' of the Santhanam Committee, page 271 and page 272, items (vii) and (viii).

"Those sections are listed in Appendix 10 to this Report.

~ -..r** 51 changes of a legal nature, namely, (1') making the in- come-tax offences of illegal evasion and avoidance cogniz- able and non--compoundable, and (ii) a provision that the punishment should be imprisonment for at least three years, and the amount found to be evaded or avoided. should be liable to forfeiture.

It nay also be noted, that so far as evasion of customs duty is concerned, the Report of the Committee contains a detailed discussion as to smuggling'.

99. It is unnecessary to elaborate here the distinction ordinarily understood between "evasion" and "avoidance". The former denotes a defect in the enforcement of the laws, while the latter denotes a defect in the law itself. The latter has to be tackled by a detailed study of the provisions of the relevant enactments.

100. The following extract from the Report of the Income-tax Investigation Commission', which was pre- sided over by Sir S. Varadachariar, former Judge of the Federal Court, lucidly explains the distinction between the two : --

'It remains to add a few observations relevant to the problem of avoidance and evasion. According to well-established usage, the term "avoidance" denotes the utilisation of loopholes to effect tax saving, Within the letter though perhaps contrary to the spirit of the law. It is rendered possible by defects in the framing of the law or in its drafting, as a result of which cases within the intendmem of the law have not been brought in by clear or apt words, or cases which ought to be fairly comprised within the policy of the law have been omitted by oversight or for other reasons. Leak- age of tax in this way has to be prevented by making the law clearer or wider; but there will never be an end to attempts at income-tax avoidance. Though a Lord Chancellor some years ago referred in terms of disapprobation to the efforts of tax dodgers and to "the professional gentlemen who assisted them in the matter" (Ldtilla V. Inland Revenue Commtss-ioner"-- Law Reports 1943 Appeal Cases at page 381), popular or professional opinion does not seem to share that view but is prepared to regard such attempts as a "commendable exercise of ingenuity". As courts are- slow to construe tax laws according to their "intent" (as distinguished from the letter of the law), occasional 281 'Report of the Santhanam Committee, page 19, para. 3-15 and page alfeport of the Income-tax Investigation Commission, (1949), page 7,.

.8.

i'I-Willa V- Inland Revémw Cotpmissigrierti (19413) I All Eng. Rgpqm 255,.

at page 256 (House of 'I§ords').

' ' Evasion"

and "avoidance""

.Attitude to-

wards tax avoidance in England.

modiﬁcations of the statute Will be necessary 'I0 01055 loopholes that "judicial construction cannot plug".

"/Evasion" is applied to the escape from taxation, accomplished by breaking the letter of the 18W. whether intentionally or through mistake or negli- gence. Most frequently, taxes are evaded because proper administrative machinery has not been pro~ vided or the machinery is not working properly. Evasion has therefore to be combated mainly by "improving" the administration of the advisedly say "improving" though some would prefer to speak of it as "tightening" the administration.

"To the extent to which the weaknesses of the adminis- tration may be traceable to defects in the law (particu- larly in the sanctions piovided by the law), some changes in the law may be necessary even to prevent evasion. Under a system where the assessment of the tax depends to a large extent upon information given by the assessee, he has every opportunity, and, when the rate of tax is high, every temptation, to attempt evasion. This can be met only by improving the efficiency of the administration".

101. Two varying attitudes seem to have been shown towards tax avoidance in England. The traditional at- titude of the judiciary was, that a tax--payer is entitled to avoid the payment of tax so long as he could do so by legal means. There is no rule of law against the subject's making genuine and lawful arrangements to reduce tax'-2.

102. This t.'a1itional attitude is represented by following view expressed by Lord Quickswood"-':----

the "Taxation is prima facie a wrong, for it consists in taking from the taxpayer what belongs to him; and that is prima facie wrong. Taxation is justiﬁed only by the authority of the State, which is expressed in the law. The taxpayer is morally bound to obey the law, but is not bound beyond the law; for, apart from the law, taxation would be blackmail or racketeering, There is not, behind taxing laws, as there is behind laws against crime, an independent moral obligation. When therefore the taxpayer has obeyed the law, he has done all that morality requires.

'Cf. I.R.C. v. _Duke of Westm1'nster, (1936) A.C.r, I9 ; (1935) All Eng. Reports Reprint 259, 267 (H.L.).

'For a detailed discussion on " evasion ", " shifting " and "minimising" of tax, see Encylopaedia of Social Sciences (September 1951 Reprint), Vol. 14, page 535 under "Taxation" (Robert Murray Haig).

'Lord Quickwood, Letter to the Times, February 20, 1943, cited in Mannheim, Criminal Justice and Social Reconstruction (1946), page 146.

'See also Lord Tomlin in I.R.C. v. Westminster, (I936) A.C.I, at page i9; (r935)Al1 E.R. Rep., 259, 267. ' law--we ' 53 It is said, that by avoiding a tax he throws a load On to some other taxpayer. But this is not quite accurate; for the deﬁciency might be met by reducing expenditure. . .. is it not a good thing that there should be this last lawful remedy against oppressive taxation by a majority, that human ingenuity can always ﬁnd a Way by Whlch the minority can escape from tyrannical imposts?".

103. Lord Tomlin's observations may also be cited1:---

'Apart, however, from the question of contract with which I have dealt, it is said that in revenue cases there is a doctrine that the court may ignore the legal position and regard what is called "the substance of the matter", and that here the substance of the matter is that the annuitant was serving the Duke for some- thing equal to his former salary or wages and that, therefore, while he is so serving the annuity must be treated as salary or wages. This supposed doctrine (upon which the commissioners apparently acted) seems to rest for its support upon a misunderstanding of language used in some earlier cases. The sooner this misunderstanding is dispelled and the supposed doctrine given its quietus the better it will be for all concerned, for the doctrine seems to involve substi- tuting "the uncertain and crooked cord of discertion"

for "the golden straight mete wand of the laW".' (4- Inst. 41).

'Every man is entitled, if he can, to order his affairs so that the tax attaching under the appropriate Acts is less that it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreci- ative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax. This so-called doctrine of "the substance" seems to me to be nothing more than an attempt to make a man pay notwithstanding that he has so ordered his affairs that the amount of tax sought from him is not legally claimable.'.

104. The following observations of Viscount Simoni, L.C., however, illustrate a change of attitude";_ 'My Lords, of recent years much ingenuity has been expended in certain quarters in attempting to RepC:I{t.SRi§'§,vé6I;:1I:%80{HI«l7E.t§t1zinster, (1936) A.C. 1, 19; (1935) All Eng, ?Lazilla v. Inland Revenue Commissioners, (I943) A.C. 377, 381; (1943) I All Eng. Reports, 265, 266 ; 25 Tax Cases 107, 117 (H.L.).

"Detailed study as to tax avoidance will be found in---- (z') notes by A. Farnsworth in the Modern Law Review, (1942 page 75, (1943) page 243, and (I944) page 84 ; and

(ii) article by Wheatcroft, "The attitude of the Legislature and tzlgeg Courts to tax avoidance," (I955) 18 Modern Law Review 54 devise methods of disposition of income by which those who were prepared to adopt them might enjoy the beneﬁts of residence in this Country while receiv-

ing the equivalent of such income, without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which point out that, however elaborate and artiﬁcial such methods may be, those who adopt them are "entitled" to do so. There is, of course, no doubt that they are within their legal rights, but that is no reason why their efforts, or those of the professional gentlemen who assist them in the ' matter, should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship. On the contrary, one result of such methods, if they succeed, is, of course, to increase pro tanto the load of tax on the shoulders of the great body of good citizens who do not desire, or do not know how, to adopt these manoeuvres. Another consequence is- that the legislature has made amendments to our income-tax code which aim at nullifying the effective- ness of such schemes.'

105. But it would appear, that there has, again, been a trend in the reverse direction'-'-»--'-'.

106. The following observations of Lord Simonds would be of interest in this conn(-)ction5:-

"The determination of these appeals involves a consideiration of certain sections of two Acts of Par- liament which were designed to bring within the ambit of taxation to income-tax and sur-tax income which would otherwise escape that burden. For that reason and because the ways of those who would avoid liability to tax are often devious and obscure, the sec- tions are framed in language of the widest and most general scope and in the case of one of the Acts [1 refer to the Finance Act, 1936, section 18(4)] the opera- tive sub-sections are reinforced by a provision which appears to exhort the assessing authority, and pre- sumably the court, to let the balance, wherever possible, be weighted against the taxpayer. But, this notwithstanding, I think that it remains the tax- payer': privilege to claim exemption from tax unless his case is fairly brought within the words of the tax- ing section, and it is in this light that I examine the 'Vestey'5 (Lord) Execlltors v. 1. R. C. (1949) 1 All Eng. Rep. 1108, I113, I115, 1124, (per Lord Simonds and Lord Normand).

'Potts Executor: v. I.R.C., (1951) 1 A.C. 443 ; (1951) I All Eng. Reports 76, 81, 82, 88 (H.L.) "I.R.C. v. W/olfson, (1949) I A.E.R. 865, 868. 'Attorney General v. A. W. Gamogo Ltd., (1949) 2 A.E.R. 732, 734- -

"Vestey's(Lord) Executor: v. I.R.C. (1949) I All Eng. Reports nos', I112; I113 (H.L.).

applicability of the Finance Act, 1936, section 18, and the Finance Act, 1938, s. 38, to the circumstances of the late Lord Vestey and his brother Sir Edmund Vestey.".

Reference may be made to the 0bS€I'Vati0I1S Of Lord Norrnandlz---

"Parliament in its attempts t0 keep Pace Wlth the jngem-14._y devoted to tax avoidance may fall short of its purpose. That is a misfortune for the taxpayers who do not try to avoid their share of the burden, and it is disappointing to the Inland Revenues. But the Court will not stretch the terms of taxing Acts in order to improve on the eﬁorts of Parltament and _ to stop gaps which are left open by the statutes._ lax avoidance is an evil, but it would be the begmnmg of much greater evils if the courts were to Overstfetch the language oi.' the statute in order to subject to tax- ation people of whom they disapproved."

:07. We may also refer to the principles adopted _re- I."'°'"P"~'"':

garding interpretation of taxing Acts. The following "°" °f t""""3 observations of Lord Cairns?-3 may be referred to in this connection: ----

" . . . . . .as I understand the principle of all fiscal legislation, it is this:

If the person sought to be taxed comes with- in the letter of the law he must be taxed, how« ever great the hardship may appear to the judi- cial mind to be. On the other hand, if the Crown. seeking to recover the tax, cannot bring the subject within the letter of the law, the sub- ject is free, however apparently within the spirit of tie law the case might otherwise appear to be. In other words, if there be admissible, in any statute, what is called an equitable construction, certainly such a construction is not admissible in a taxing statute, where you can simply adhere to the words of the statute.".

108. Other decisions on the subject are collected in a recent case Of the Andhra Pradesh High Court'. The following observations of the Supreme Court may also be referred to:---

'Vestey's (Lard) Executor: v. I.R.C., (1949), I All Eng. Reports 1108, 1120 (H.L.).

2Partz'ngt0n'V. Attorney General, (1869) Law Reports 4 H.L. I00, I22.

"See, further, Craies, Statute Law (1953), pages 113-116.

4Ramakr:':hna v. State of Andhra Pradesh, A.I.R. 1965 A. P. 420, 42 3(Novembcr).

47 Law--5.

Avoidance not always fraudulent.

Views of Courts in India as to avoidance.

"Sub--section (2) of section 21 (of the Bombay Sales--tax Act 3 of 1953') is a penal provision con- tained in a taxing statute and the Court cannot specu~ late contrary to the plain intendment of the words used about the object of the Legislature. If the Legis- lature has failed to clarify its meaning by the use of appropriate language, the beneﬁt thereof must go to the taxpayer. It is settled law that in case of doubt, that interpretation of a taxing statute which is bene- ﬁcial to the taxpayer must be adopted.".1

109. Legislation passed in England during and after the Second World War illustrates the increasing efforts made by the legislature to check avoidance of taxi.

110. As regards tax avoidance, it has been recognised in the U.S.A._, that every transaction which results in tax avoidance is not always entered into with the sole Object of avoidance of tax. As an example, we may cite the American institution of "foundation". An individual. a family or a corporation may donate a proportion of his or its assets to a permanent institution "established for officially recognised charitable purposes", the donor usually being the controller of an industrial or business empire'. Such donations are exempt from gift tax, and are deductable for purposes of estate tax. So far as the donee organisations are concerned, they would ordinarily be exempt from income-tax, property tax and other taxes. Further. the donor gets a deduction in taxes in respect of the charitable gift inter vivos (within certain limits). By transferring the capital and annual income from his per~ sonal estate, the donor thus reduces his liability to tax. At the same time, the donor sanctiﬁes his name and gives a public proof oﬁ his social responsibility through the establishment of a charitable institution'.

111. In many Indian decisions5-5-7-8--°--1°--" it has been pointed out, that legal avoidance cannot be regarded as reprehensible.

'State of Bombay v. Automobile arid Agricultural Industries Corpn., (I961) 12 S.T.C. 122 (S.C.) (Kapur, Hidayatullah and Shah JJ.).

'See, for example, section 35 (1), Excess Proﬁts Tax Act, 1941 (U.K.).

'See Friedmann, Law in a Changing Society, (1959), pages 86, 290 to

293. 'See also Report of the Select Committee to investigate foundations (Hotase of Representatives, Reports No. 2514, 82nd Congress, 2nd ':Session 1953 -

'In re Bai Sakinabao, A.I.R. 1932 Bom. 116, 117 (Beaumont C.]. and Rangnekar J.).

"In re Central Talkies Circuit, A.I.R. 1941 Born. 2o5, 206, 207 (Beaumont CJ. and Kania J.).

7Devarajulu Co. v. I.T.C., A.I.R. 1950 Mad. 718, 722, para. 10.

'Meyyappa v. I.T.C., A.I.R. 1951 Mad. 506,- 513, 514, para. 17.

°Ganga Sagar v. Emp., A.I.R. 1929 All. 919, 923 (Mukeriee J.).

'°Raim't1' v. C.I.T., I.L.R. 9 Pat. 194; A.I.R. 1930 Pat. 33, 35 (Courtnev- Terrell C.J.).

"See also article in A.I.R. 1953 Joumhl 26.

J' 57 The following passage in the judgment in a Bombay easel puts the matter lucidly:--

"It has also been stated that the same result may be achieved by two entirely different transactions, and it may be that whereas one transaction could be subjected to tax, the other might not be, and it is not open to the Court to tell the assessee that he could rather have entered into a transaction which subjected him to taxation rather than a transaction which per- mitted him to escape taxation. A citizen is perfectly entitled to exercise his ingenuity so as to arrange his affairs as may make it possible for him legally and lawfully not to pay tax, and if his ingenuity succeeds, however reluctant the Court may be to acknowledge the cleverness of the assessee, the Court must give effect to the letter of the taxation law rather than strain that letter against the assessee.".

112. It may also be noted, that besides the imposition of penalities and institution of prosecutions, there are many other methods of preventing illegal evasion of taxes, par- ticularly, strengthening the administrative machinery and streamlining the procedure. We need not repeat what has been said in the valuable reports of the various Com- mittees" that had occasion to go into the subject'.

M3. The existing provisions relating to tax evasion have been listed separately'. Broadly speaking, provisions against evasion can be classiﬁed into--

(i) provisiors which enable the taxing authority to assess income, etc., which has escaped assessment;

(ii) provisions which empower such authority itself to impose a penalty; and

(iii) provisions which create offences for which a prosecution can be instituted in the criminal courts.

An example of the ﬁrst5 is section 34 of the Income-Tax Act, 1922, (now sections 147 to 153 of the Income--'tax Act, 1961)". An example of the second is section 273 of the Income-tax Act, 19617. Strictly spealdng, We are concerned here only with the third class. But it will be necessary to refer to provisions of the second class, for purposes of comparison.

1 Provident Investment Co., v. I. T. Commissioner, A.I.R. 1954 Born. 95, 97, para. 3 (Chag1a C.J.).

"Appendices I2 to I 5 to this Report may be seen in this connection. "See para. 100, supra.

4See Appendix 2.

5For history of section 34, see Radheshyam v. Union of India, A.I.R. 1960. Born. 353, 355, et seq-

°The Income-tax Act, 1961 (43 of 1961). "The Income-tax Act, 1961 (43 of 1961).

Method of checking evasion.

Existing provisi on:

analysed.

Transfer of existing pro-

visions not feasible.

Placing pro-

visions as to evasion in the Penal Code.

114. We have considered the question whether the transfer of the provisions' relating to evasion of tax to the Indian Penal Code would be advantageous. The laws, of which there provisions form part, constitute self-

contained Code. In the ﬁrst place, these Ptovisions con- tain minute and detailed references to the other Sections of the enactment of which they form part--e.g. the section under which a return is to be ﬁled, or a stamp is to be ﬁxed. or the like. They cannot be divorced from those sections. Secondly, if they are to be transferred to the Penal Code, then, whenever laws imposing new kinds of taxes are passed in the future, it may become necessary to amend Indian Penal Code also, and that might prove to be an in- convenient process. Thirdly, there are special procedural provisions2, which require the sanction of a particular authority for instituting a prosecution for an offence under the particular enactment, or which authorise the com- pounding of offences, and so on. If the penal provisions of the taxing enactments are transferred to the Indian Penal Code, then the relevant procedural provisions of the tax- ing enactments----which will then lose their justiﬁcation for being retained in the taxing enactments will have to be transfered to the Code of Criminal Procedure, and that process also would be inconvenient.

115. So far as we could ascertain, there is hardly any country governed by the common law system where the offence of evasion of taxes has been incorporated in the Penal Code. The provisions are found to exist either in the enactments relating to the particular taxes', or in a general Taxation Law'.

116. Further, the administration of these laws requires specialised knowledge and experience, including, par- ticularly, a knowledge of the various classes of income or transactions that are taxable, the various deductions, ex-

emptions and concessions that are permissible, and the departmental practice. Even if these provisions are transferred to the Penal Code,--assuming that such transfer is feasible.-----the need for this special knowledge and experience will always remain. There will be no practical improvement as the police will not possess this special knowledge and experience.

117. So far as we could gather, none of the various Committees or Commissions5 that have gone into the ques- tion of taxation structure or Taxation Laws or the adminis- tration of Taxation Laws, has found fault with the placing of the penal provisions in the taxation enactments.

' Para. I13, supra.

* E.g., section 279, Income-tax Act, I961 (43 of 1961).

3 For example, section 198 of the Tasmania (Australia) Criminal Code Act, (1924), reproduced in Appendix 28.

4 For example, section 201, Internal Revenue Code of the U.S.A., dis- cussed in Appendix 22.

' See Appendices 12, 13, 14 and I5.

118. We also considered at length the question whether Question off it would be desirable to insert a general provision in The ';';:';tr';'1°";rg_ Indian Penal Code, punishing the evasion of taxes. The Vision as to arguments for and against the adoption of such a course tax evasion are summarised below 2 ---- consi dered.

Arguments for and against including in the Indian Penal Code of the oﬂence of lax-e'vasz'o7z For Against (1) A provision in the Indian Penal Code (I) The abhorrence is already will reflect the society's abhorrence indicated by the Incomc--tax of the crime in question and the Act. It IS not necessary to importance which it attaches to it. put it in the Indian Penal Code.

(2) A comprehensive provision applicable (2) The purpose is adequately to all taxes would be desirable. served by existing provision in the law relating to each tax.

(3) Evasion of taxes is a major problem, (3) The defect is not in the law and should be dealt with criminally. but in its enforcement. Even the existing penal provisions are not enforced.

(4) Acts like keeping false accounts, mal<- (4) In practice, filing a false ing false entries, keeping unaccounted return is the usual type of money, should be covered. evasion. This is suﬂiciently provided for by existing laws.

(5) Prosecution for tax-evasion should be (5) Tax evasion is a technical allowed at the instance of any person. subject, requiring special knowledge. Only the De-

partmental Oﬂicers are in a position to understand the technicalities.

I (6) A sweeping provision may, in practice, turn out to be vague, and thus cause hardship.

For Against (7) In particular, the word "evade" is vague, and may be interpreted so as to em-

brace even legitimate avoid-

ance.

(8) Any widening of the penal provisions regarding taxation laws should be undertaken with caution, as it may bring into being a weapon which has great potentialities for abuse.

(9) Prosecution is not the only method of checking evasion.

The real remedy lies in various other non-penal measures, such as a proper tax structure, adequate strength of officers, increased civic conscious-

ness, creation of cordial relations with assessees, and prompt action under the existing laws.

(10) None of the various Com-

mittees that have gone into the subject of taxation in India have recommended such a change.

After a careful consideration of all the issues involved, we have come to the conclusion that the inclusion of a general penal provi. sion of the nature referred to above would not prove to be an improvement in practice, and may even cause hardship by reason of its vagueness. In considering the question of inserting such a penal provision, regard must be had not only to those who are guilty, but also to those who are innocent. .

'($1

119. As to the question of insertion of new p1"0ViSi0I13 Addition of relating to evasion of tax, we do not think it proper to dis- nsw Pto- cuss that question in the abstract. Any speciﬁc recom- "'"°"' mendation must await speciﬁc proposals for amendment.

120. In one of the comments received by us, a SuggeS"Poin[3 gas- tion has been made that the suppression of income, or gested in suppression of information relating to sale and purchase, °°"'"'°'""

should be made an offence, either by including it in a Chapter in the Penal Code intended to deal with social and economic oﬁences, or by inserting a new section 4773.

The matter, however, seems to be amply covered by the provisions in the various enactments relating to taxation', and a new provision does not appear to be called for.

121. Regarding "avoidance", it is obvious that the Avoidance changes, if any, will have to be made not in the penal law {'°':h'° 5' but in the taxing enactmentsl. That is outside the scope ac 3' of this Report.

CATEGORY 3.--MISUSE or PUBLIC PosrrIoN BY PUBLIC SERVANTS

122. The third category of offences mentioned by the Misuse or Santhanarn Committee is the following:-- I,heirbP0si- tion y "Misuse of their position by public servants in public ser- making of contracts and disposal of public property, 3°" ) issue of licences and permits and similar other 'cg Y 3' matters", The Committee observed", that where there was power and discretion, there was always the possibility of abuse, more so when the power and discretion had been exercised in the context of scarcity and controls and pressure to spend public money. It also referred' to dishonest prac- tices like the system of "speed money" (money paid to speed up the process of movement of ﬁles, etc.) and to the corruption prevalent in contracts of construction, pur- chases, sales, etc.5.

123. There are numerous provisions regarding misuse Exist_ix_1a of position by public servants in various enactments? Mis- P"°"'-°"°"' use of such position in the making of contracts or disposal ' of property is not separately dealt with in any of these enactments. If by such misuse the public servant con- cerned obtains any valuable thing or pecuniary advantage, the offence would be covered by section 5(1) (cl) read with ' See Appendix 2.

2 Cf. Para. 99-I00, supra.

3 Report of the Santhanam Committee, page 9, para 2-9.

' Report of the Santhanarn Committee, page 9, para. 2-Io.

5 Report of the Santhanam Oo1mu'ttec,.psge IO, pan 2-xx.

" See Appendix 3. ' »"':-' 62 section 5(2) of the Prevention of Corruption Actl-2, the relevant portion of which is quoted below':--

"5(1). A public servant is said to commit the oﬁence of criminal misconduct in the discharge of his duty if he, by corrupt or illegal means or by otherwise abusing his position as public servant, obtains for him- self or for any other person any valuable thing or pecuniary advantage.

5(2). Any public servant who commits criminal misconduct in the discharge of his duty shall be punishable with imprisonment for a t'erm which shall 'not be less than one year but which may extend to seven years and shall also be liable to ﬁne:

Provided that the court may, for any special reasons recorded in writing, impose a sentence of im- prisonment of less than one year.".

agﬁgsst 124. What remains is the misuse of such position with- beneﬁt_ out obtaining any such beneﬁt. Such cases would be rare, and if they do happen, it would be difﬁcult to ascribe a criminal intention to the person concerned in such cases.

fa°i'S';3'in 125 It has been suggested in one of the comments re-

comments. ceived by us, that a new section--section 164A---should be inserted in the Indian Penal Code to penalise the misuse of position by public servants in the making of contracts, etc. The matter, however, seems to be sufﬁciently cover- ed by section 5 of the Prevention of Corruption Act".

CATEGORY 4.--DELIvERY or GOODS NOT IN ACCORDANCE WITH CONTRACT D€1iVe1"Y,etC- 126. The fourth category of the offences listed by the :1: fc%g°:§_"°' Santhanam Committee is the fol1owing:--

ance With "Delivery by individuals and industrial and com- (°g;'g§';'1;y 4)_ mercial undertakings of goods not in accordance with agreed speciﬁcations in fulﬁlment of contracts entered into with public authorities".

At another place in the Report', the Committee observed, that frequently it was the dishonest contractors and suppliers who, having obtained the contract by under- cutting, wanted to deliver inferior goods or get approval for sub-standard work, and, for this purpose, were prepar- ed to spend a portion of their ill-earned proﬁt. In an Annexure to the Report5, the Committee discussed in de- tail how favours could be shown by passing and accepting 1 The Prevention of Corruption Act, I947 (2 of I947).

' For a detailed analysis, see Appendix 23.

3 The Prevention of Corruption Act 1947 (2 of 1947).

' Report of the Santhanam Committee, page IO, para 2-11.

(3. ' Report of the Santhanam Committee, Annexurc VII, page 236, i:e.n 63 goods which were not strictly in accordance with the speciﬁcations laid down in the accepted tenders, or by not applying the penalty clause in respect of rejected goods, or by not strictly applying all the terms of the contract, or by giving wrong certiﬁcates about completion of inspection or actual despatch of goods.

127. We have listed separately1 some of the existing Existilag provisions which have a bearing on the mal-practice in $323"

question the most important of these are sections 415 and ' 420, Indian Penal Code, which run as follows:----

'415. Whoever, by deceiving any person, fraudu-' Cheating.

lently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he Would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".

Expl,anat*ion.--A dishonest concealment of facts is a deception within the meaning of this section.'.

"A120. VVhoever cheats and thereby dishonestly in-- C.h§"""3§"d duces the person deceived to deliver any property to giiugﬁlegs 5' any person, or to make, alter or destroy the whole or delivery of any part of 2. valuable security, or anything which is Property- signed or sealed, and which is capable of being con- verted into a valuable security, shall be punished with imprisonment of either description for a term which %nay"extend to seven years, and shall also be liable to I16. .

128. We considered carefully the question whether the "Cheati_n8" offence in question is covered by section 415-420, Indian agd dfihV°'7 Penal Code. "Cheating", as deﬁned in section 415, 0 gm s'etc' requires-

(a) deception of a person, plus (1)) fraudulently or dishonestly inducing the person so deceived to deliver any property etc. OR

(a) deception of a person, plus

(b) intentionally inducing the person so deceived *0 d0 01" Omit any thing which he would not do or omit if he were not deceived, and which act or omission causes, etc., damage or harm to that person in body, mind, reputation or property.

'See Appendix 4.

'Para. I27, supra.

Meaning of " deception".

The section, thus, falls into two partsl. Under the first part, the act must be done fraudulently, etc., and must re- sult in delivery, etc. Under the second part, there must be intentional inducement, etc., and the act or omission in- duced must cause damage or harm. Deception, is, how- ever, common to both the parts-

129. Deception generally is "to lead into error by caus- ing to believe what is false or to disbelieve what is true"'.

The following observations of Buckley J." as to the meaning of "deceive" are interesting:----

"To deceive is, I apprehend, to induce a man to be- lieve that a thing is true which is false, and which the person practising the deceit knows or believes to be false. To defraud is to deprive by deceit: it is by deceit to induce a man to act to his injury. More tersely it may be put, that to deceive is by falsehood to induce a state of mind; to defraud is by deceit to induce a course of action.".

(The aspect of likelihood of injury, as an ingredient of "intent to defraud", is not relevant for the present purpose)'.

130. The ﬁrst ingredient of cheating is, thus, "deception' . The point whiéh requires consideration is, whether there is "deception" when a person delivers sub-standard goods, without making any express representation that the goods are in accordance with the contract. The argument that may be advanced is, that the contractor does not deceive any person, where he makes no representation that the goods are in accordance with the contract. We are not inclined to accept this argument. Though decided cases dealing with this specific point are few5, it would appear, that in such case a representation to the above effect could be implied. It may be pointed out. that, as provided by the E;z:pZanation to section 415, Indian Penal Codez-", a dishonest concealment of facts is "deception". Illustrations

(h) and (i) to section 415 also emphasise the same aspect.

'Cf. Ramji v. Harshadrai, A.I.R. 1960 Born. 268. I) 'See P. P. v. Vedantam, A.I.R. 1952 Mad. I839 para. 4 (Subba Rao 'Re London an_d Globe Finance Corporation Ltd. (1903) I Ch. 728, 732-733 approved in R. v. Wines, (I953) 2 A11 Eng. Reports 1497, 1498 (Court of Criminal Appeal).

4As to this, see-

(i) R. N. Gooderson, "Prejudice as a test of Intent to defraud ", (1960) Camb. Law Journal 199: 201.

(i0Q. E. v. Abbas, I.L.R. 25 Cal. 512 (F. B.).

(i:'z)Q. E. v. Sushi Bhushan, (1898) I.L.R. 15 All. 210, 217 'See Appendix 24.

'See also para. 127, supra.

'Surendra v. Bat' Narmada, A.I.R. I963 Gui. 239..

131. As has been observed', "The practice of deceptlon implies the practice of fraud and falsehood. For, there can be no deception without fraud, and falsehood 1s a Specles of fraud implied in deceit. Now, fraud 1S hydra-headed, and its ways of attack are insidious and innumerable. It may consist of words, acts or conduct, or all combined.".

132. In practice, the point? may often be academic, as egfw in respect of huge contracts where detailed bills are to be prgsemaﬁon submitted, the bills will have to describe the goods SUP' academic. plied in great detail, So that the contractor cannot avoid making an express representation at some stage or other".

133. Where the defect in the goods is discovered before Attempt to payment, it would be an attempt to cheat'-5-5. Cheat-

134. Another point which we had to consider was, whe- Cfomplicity ther cases Where the officer receiving delivery and the :m§'f§§:§'_ offender are acting in complicity, are covered by sections dew 415-420, Indian Penal Code. We think that they would be covered. In fact, this seems to have been assumed in a recent decision of the Supreme Court', and in cases of cer- tain High Courtss-9.

135. In England, at common law, short delivery was held Position in not to be "cheating" (in the absence of use of false mea- English 1"- sures, etc, as a general course of dealing, or to many cus- tomers, or unless there is a conspiracy to cheat)"-11. The act was regarded only as an unfair dealing. It was stated, that fraud, to be the object of a criminal prosecution, must be calculated to defraud numbers.

1 Gour, Penal Law of India, (1962), Vol. 3, page 2225.

Z Para. 130, supra.

3 (If. Billinghurst v. Emp. A.I.R. 1924 Cal. 18, 41, 43 (Sanderson C. J. and Richardson J.).

and 4R Emp. A.I.R. 1924 Cal. 18, 41, 43 (Sanderson C. J.

(C.C5.§.).v. Light, (1915) 84 L.J.K.B. 865 ,- (1914-15) A1l.E.R. Rep. 659 ' Halsbury's Laws of England, (3rd Edn.), Vol. 10, page 828, footnote (h) and page 931, para. 1602.

'Cf. Bzmwari Lal v. The Union of India, A.I.R. I963 S.C. I620. 8 See in re 9'. S. Dhas, A.I.R. 1940 Mad. 155, 157.

' The decision in Sh . S B' 228, 229, para. 11 (S. K.e%:ga%'3nczlIn beazc:lis(:fi11guz}izsa}:«;dp:irI1'Iihelgffctiat. 225;

1°R.v.Whetl, 6 B , ' ' -~ leadmgs, cm (136; I'g(I1Zl.)I,>p2ara}1r2r°oIIf2s. 1127. cited In Archbold, Criminal " See also Russel on Crime (1964), Vol. 2, pages 1163 and H54_ 66 This rule of the common law was altered, to some ex- tent, by section 32, Larceny Actlr'. The relevant portion of the section runs as follows'.-

"32. Every person who by any false pretence (1) with intent to defraud, obtains from any other per-

son any chattel, money, or valuable security, or causes or procures any money to be paid, or any chattel or valuable security to be delivered, to himself or to any other person for the use or beneﬁt or on account of himself or any other person; . . . . . . . . . . . . . . . . . . . . . . . . -V shall be tgujliy of a misdemeanour and on conviction thereof liable to imprisonment for any term not exceed- ing five years".

The G.'-fp".'f_.'5SlOI] "false pretence" includes a pre- tence by 3131 01- conduct without words spoken".

Kinds of 136. In one of the c:::mnents*' received by us, it has been ma]?-"""<'"'5' stated that there air: three kinds of rnalpractices that have Corrie to notices»-

{a) The contractor, in collusion with the inspectors of Cvoverninent, committed illegal acts in getting stores of an inferior quality passed as if they were of the speciﬁcations speciﬁed in the contract, and supplied the same and induced the Government to part with the value thereof.

(b) The contractor, after getting the stores passed by the inspectors, despatched unpassed stores in place of passed stores, and thus defrauded the GOVe1'nment by inducing it to part with the value of the passed stores.

(C) The contractor, by furnishing false particulan and quoting fictitious numbers of Railway Receipts, cheated the Government and obtained 90 per cent. price of the goods without supplying them.

"lg; section 32,4 Larceny Act, 1916 (6 and 7 Geo. 5, C. so).

9See Russell on Crime (1964), Vol. 2, pages 1165 and 1166.

3Russell on Crime (x964), Vol. 2, page 1x76.

'The comment,-however, adds that practically allthesc are covered by the existing penal provisions in s. 415 and 420, read with sections 109 and 120-3, ndia Penal Code.

137. In View of the fact that the volume of Contracts Proposed' with Government and other public authorities has increased SW10"- tremendously and is likely to increase further, and also having regard to the fact that the point was raised before us, we propose a speciﬁc provision on the subject' though we think that the existing law covers it. Before, however, it is enacted into law, one practical aspect which we have indicated separatelyg, will have to be examined by the Government.

138. Some of the comments received by us objected to Poiflts sug- treating undertakings in public and private sectors diﬁer- cntly in this respect. It has also been stated,-that some- ' times goods are not delivered in accordance with agreed speciﬁcaiions, for reasons beyond the control of the parties concerned, and it has been suggested that it should be clear- ly laid down that mis-delivery or wrong-delivery should be considered an offence only if done deliberately.

So far as the first Doint is concerned, we think that a fraudulent breach of contract with the Government or a public authority can be regarded as standing on a different footing from a fraudulent breach of a private contract. So far as the iecond point is concerned, the provision proposed by us" has been so framed as not to take in any such honest defaulters.

139. We should, however, state here, that we have not Pf°P°5€d considered the question whether the proposed section' :§°'g:" "°' would deter honest contractors from entering into contracts enacted with the Government and other public authorities. An withput_ apprehension to that effect has been expressed in one of the f.'l:"$'d°'1"% comments received by us on the subject. Before the pI'opos- p'er°c'3Ss'i(°;;ls. ed section is enacted, this aspect of the matter, which is a practical one, will have to be examined by the Government.

CATEGORY 5.----HOARDING AND PROFITEERING

140. The ﬁfth category of the offences mentioned by the Hoarding Santhanam Committee is----"Profiteering, black-marketing and Pm' and hoerdinv ﬁ'°°'"'8 °' 0' ' (Category 5).

141. The existing laws relating to these offences are Existing listed separately? As will be seen, the details of the policy provisions laid down in these laws have to be worked out by orders analysed' and rules issued under those laws. The provisions that emerge, as a result of those laws read with such statutory lAppen:lix 31, section 420A, Indian Penal Code (Proposed). 2 Para. 139, infra.

3 Appendix 31, section 420A, Indian Peml Code (Proposed). 4 Para. I37 supra.

5 See Appendix 5.

History of legislation relating to cont'rol of essential commodities.

orders or rules, are bound to vary in respect of each com- modity or group of commodities. There is a whole struc- ture of legislation and sub-legislation which has come into existence as a result of the exercise of various powers by various authorities as to the control of essential commo- dities we do not think that the transfer of the offences against such legislation to the Penal Code would be conve- nient. It should also be noted, that there are Special 1"-1195 of evidence and procedure enacted by some of these enact- ments. For example, section 11 of the Essential C0mm0' dities Act" bars the court from taking cognizance of an offence under that Act, except on a written report of a pub- lic servant. Again, section 14 of that Act enacts a rule as to burden of proof. It is obvious that the Indian Penal Code cannot, be encumbered with these provisions.

142. Another aspect to be emphasized is that these offences are essentially of a temporary and special character. The conditions of scarcity prevailing in respect of each commodity are bound to differ from time to time and from place to place, and for that reason, their transfer to the Indian Penal Code would not lead to any practical beneﬁt. The history of the legislation on the subject may be noted. During the Second World War, provisions on the subject were contained in the Defence of India Rules. In 1946, the Central Legislature passed the Essential Supplies (Tempo- rary Powers) Act" under Entries 27 and 29 of List II of the Government of India Act, 1935, "Trade and Commerce within the Province" and "production, supply and distribu- tion of goods" as altered by the India (Central Government and Legislature) Act. 1946' (hereinafter referred to as the English Act).

143. The effect of the English Act was to empower the Central Legislature to make laws with respect to trade and commerce in, and production, supply and distribution of, certain speciﬁed goods', for a temporary period mentioned in section 4, and the Essential Supplies Act came into force on the 19th November, 1946. .The Act was to expire on the expiry of the period mentioned in section 4 of the English Act. But, by the combined effect of the public notiﬁcation issued by the Governcr--General under section 4 of the English Act, and the resolutions passed from time to time by the Constituent Assembly acting as the Dominion Legisla- ture, the life of ihe Essential Supplies Act was further ex- tended upto the 26th January, 1955. Before the Act expir- ed, the President promulgated the Essential Commodities 1The Essential Commodities Act, 1955 (ro of 1955). ?The Essential Supplies (Temporary Powers) Act, 1946 (24 of 1946).

'The India (Central Government and Legislature) Act, 1946 (9 and 10 Geo. 6 c. 39).

4See Basu, Commentary on the Constitution of India. (I964) Vol. 5, ~ age 504.

Ordinance', which was replaced by the Essential Commo-- dities Actg, which is the Act now in force. Detailed history of the various resolutions of the Constituent Assembly and the notiﬁcation issued by the Governor-General would be found in the under-mentioned decisions"-'-5.

The brief historical resume given above will show the special character of the legislation on the subject.

144. One comment received by us suggests that these 1' 318' offences should be included in a new Chapter i_n_'Che Indlan §ommems_ Penal Code. The comment also offers a deﬁnition _of pro- ﬁteering as "selling a thing at a rate 1n.excess of its con- trolled price", and a deﬁnition of hoarding as "storage in excess of a permissible quantity". It also points out, that the meaning of the term "Black-marketing" is obscure, and emphasises that the deﬁnition of that expression should in- clude suppression of facts relating to the acquisition or dis- posal of things controlled by different special 1aWS- The definitions suggested in this comment, however, themselves postulate the existence of special laws containing the neces- sary substantive provisions. For this very reason, such pro- visions cannot be inserted in the Penal C0de.

145. In this connection, we may refer to the West Bengal Black-marketing Act, 19486 (now repealed). Sec- tion 2 of that gave a very wide deﬁnition of "black- marketing", but almost every clause of that deﬁnition assumed the existence of another (special) law, Le. a law which ﬁxed prices, provided for rationing, or regulated the supply, distribution, sale, disposal, etc., of goods, or their storage, production or manufacture, acquisition or movement, etc. Thus, section 2(a) spoke of ''selling or purchasing for purposes of trade any goods at a greater price than the maximum price ﬁxed by or under any law, notiﬁcation, or order for the time being in force for the sale of goods". Section 2(b) began thus---"otherwise than in accordance with any law, etc. selling or disposing of any articles rationed, etc.".

West Bengal Act.

1=_16. As regards the addition of new provisions con- Addition of cerning the oﬁences of hoarding, black-marketing and new Dro- proﬁteering, an amendment of the Indian Penal Code '"5'°"s' would not be convenient. The details of the' stock which 1The Essential Commodities Ordinance, 1955 (I of 1955).

'The Essential Commodities Act, 1955 (10 of 1955).

'KhoshedAl1'v. The King, A.I.R. 1950 Cal. 202.

4Ramananda v. The State, A.I.R. 1951 Cal. I20.

'State v. Hira Lal, A.I.R. I951 Bom. 369.

I9;'éI)'11(e';l ovvzeiép 12:lIei(gja)1l Black-marketing Act, I948 (Wen Bengal Act 32of 70 can be lawfully possessed (-hoarding), the conditions sub- ject to which transactions may be entered into (black- marketing), and the maximum prices that could be charg- ed (profiteering), would vary in respect of each com- modity, and, therefore, a general and sweeping provision cannot conveniently be incorporated in the Indian Penal Code. We may also point out, that in respect of matters on which the existing provisions are found to be inad- equate, it is open to Government to initiate amendments thereto or to introduce further special legislation, when- ever necessary?

CATEGORY 6.----AnULrE.nAr1oN V Adulteration 147. The sixth category of offences mentioned by the (c'"°8°1'Y 6)- Santhanam Committee is----"Adulteration of food-stuffs and drugs".

EXi5'.",'g 148. The existing provisions as to these oﬁences are p'°"S'°nS' listed separately". Some provisions on the subject are contained in sections 272 to 276, Indian Penal Code. But special enactments on the subject that are now in force,

- are much more important, and prosecutions are usually ﬁled under the special enactments.

Transfer not 149. The Prevention of Food Adulteration Act' contains f°3'"°"" elaborate provisions of a substantive, procedural and evi- denciary character, which cannot possibly be transferred to the Indian Penal Code.

Section 2(1) of the Act contains an elaborate deﬁnition of the expression "adulterated", and clauses (j), (k) and (1') of that deﬁnition refer to the "prescribed" extent of colouring matter or preservative, or the "prescribed" standard of quality or purity, etc. The standard of quality and purity and limits of colouring matter can thus be ascertained only "from the rules made under the' Act. Section 19 bars the raising of certain defences by the vendor to the effect that he was ignorant of the nature, substance or quality of the food sold by him (except in certain cases). Section 16(2) empowers the Court to cause the oﬁender's name, etc., to be published where the offender is a second or subsequent offender. Again, sec- tion 13(5) contains a rule of evidence as to the report of the public analyst. Section 21 confers higher powers upon Magistrates of the First Class in relation to the sentences that they can pass for oﬂences under the Act. It would, obviously, be impracticable to transfer all these sections to the Indian Penal Code. It would not be convenient to léce, for ex:rhp1e, the Supply and Prices of Goods Act, I950 (70 of 1950) which was repealed by the Repealing and Amending Act, 1957.

'See Appendix 6.

'The Prevention tof Food Adulteration Act, 1954 (37 of 1954).

in split them also, that is, to transfer the substantive provi- sions to the Penal Code, and to leave the remaining proce- dural provisions in the Act, as that is bound to create confusion.

150. A study of the Drugs and Cosmetics Act1 will also show, that its penal provisions cannot be transferred to the Indian Penal Code. There are vast rule-making powers under sections 12, 16(2) and 33 of the Act, and breach of the rules may attract penalty under sections 13 and 27(a) read with sections 17(e), 17A(e) 18(a)(i'ii), 18(a)

(vi), 18(b), etc. Then, there are special rules of evidence in sections 19 and 25(3). There are special provisions as to jurisdiction and procedure in sections 15, 32 and 36. There are provisions for enhanced punishment on second or subsequent conviction, in sections 13(2) and 30, and also a provision regarding offences by companies in section 34. Finally, there is provision for publication of particulars relating to sentences in section 35. To transfer the penal provisions to the Indian Penal Code Would, in View of these special provisons, mean a virtual disintegration of the Act.

151. As regards the addition of new provisions, that is Additi°119f a matter concerning amendment of the relevant Acts. :'i'3;s}"°"'

152. The fact that we are not recommending transfer A<_1uIter9t_i0n to the Indian Penal Code of the provisions as to adultera- 3"'? P'."_'1'° tion" does not, of course, mean that we under-rate the gravity of the offence of adulteration. In fact, public opinion on the subject appears to be strong. A comment signed by several citizens residing. in West Bengal has suggested, that persons guilty of adulteration of medicines should be punished with the death sentence along with conﬁscation of property, that persons guilty of adultera-

tion of food should be punished with life imprisonment along with conﬁscation of property, and that in» all cases of conviction, wide publicity through the Press, the cinema and the radio should' be given. Another comment has suggested, that the relevant Acts may be amended so as to provide compulsory rigorous imprisonment and also fine, to be imposed on the convicted persons. One com'-

ment suggests, that sections 272 and 274 of the Indian Penal Code should be suitably amended, and that the maximum punishment for adulteration should be hanging, as such adulteration may sometimes cause death, and that the offence should be made cognizable.

If any amendments pertaining to sentence are requir- ed, those will have to be made to the relevant enactments relating to food and drugs.

1The Drugs and Gosmetics Act; 1941: (23 of 1940);

'Para. I49-I50, supra.

47 Law--6.

Faﬂu,e'°f 153. The failure of prosecutions under the Prevention prosecutions of Food Adulteration Act is often put forth as a matter deserving serious consideration. And no doubt it is so. But such failures are not due to a defect in the' penal provisions or in their being dealt with in special laws. The causes are to be found elsewhere.

154. Thus, prosecutions may fail because of defective reports of the Public Analystl or delay in the examination of samplesi Sometimes, the rules as in force up-to-date are not brought to the notice of the court? Complications may also arise Where the procedure prescribed by the Act for taking samples is not followed''. The' same diﬁiculty may arise if the provisions of the Act requiring complaint by a particular person are not complied With5.

155. In this connection, it must also be pointed out, that higher courts have not failed to impress upon the" magis- tracy the importance of legislation relating to adulteration of food, and the need for ensuring that mere technicalities do not hamper or defeat the cause of justice?

CATEGORY 7.---THEFT AND MISAPPROPRIATION or PUBLIC PRO- FERTY AND FUNDS.

Theft and 156. The seventh category of the offences mentioned by misappro- the Santhanam Committee is--"Theft and misappropria-

Priation of tion of public property and funds". public pro-

Eggs and The existng provisions as to these oﬁences are listed (Category 7). separately7. The offences are mainly dealt with--

(i) in the Indian Penal Code;

(ii) in the Prevention of Corruption Act, 1947; and

(iii) in special enactments relating to particular subjects.

Transfer to the Indian Penal Code of the provisions contained in the Prevention of Corruption Act, 1947, is not practicable, as the Act contains its own rules of evidence and procedure".

1Cf. the cases cited in State v. Gunjlal, A.I.R. 1964 Pun. 475, 476, 477, paras. 2 and 6.

"Municipal Corporation of Delhi v. Surja Ram, (1965) 2 Cr. L. J. 571. "Cf. Mela Singh v. State, A.I.R. I964 Pun. 332, 333.

4Cf. Food Inspector v. P-'.Kannan, A.I.R. I964 Kerala 261.

'Cf. State v. Ishzozr Saran, A.I.R. 1964 'A11. 497.

'See Delhi Munzbipality v. ya; Dayal, A.I.R. x954 Pun. 520, paras. u and 12.

'See Appendix 7.

'Sec sections 3, 4, 5, 5A and 6, Prevention of Corruption Act, 1947 (2 of 1957)» »-

157. Transfer to the Indian Penal Code of the provisions Transfer not of other special enactments under this category does not feasible- appear to be feasible, as the provisions are a part of the integrated schemes of the particular enactments.

158. The addition of new offences under this category Addition of is a matter which need not be considered until any deﬁ- new pro- ciency in the existing provisions is brought to notice. "'51°"5-

159. We, however, think that the punishment for the I'f°V1S1°c'l'f theft of public property should be enhanced, so as to PI'O- $2302? or vide a more stringent check on such thefts. We propose public pm- an amendment to the Indian Penal Code on the subject1.pertY- Theft is punishable under the Indian Penal Code (section

379), and aggravated forms thereof have also been dealt with in the same Code (sections 380, 381). It would not, therefore, be against the scheme of that Code to place the proposed provision in that Codez.

160. As regards misappropriation of public property, the offence, if committed by a public servant, would, in most cases, fall under section 409, Indian Penal Code (Criminal breach of trust by a public servant, or by banker, merchant or agent). The maximum punishment for that offence is imprisonment for life or imprisonment of either description upto ten years, and also ﬁne, which seems to be sufficiently deterrent. We do not, therefore, propose any increase in the punishment.

161. One of the comments received by us also states, P°imS ?"8' that the offence of theft (or misappropriation) of public Egﬁgefm property is much graver than the same offence in respect ' of property of an individual or company, and should be adequately punished.

CATEGORY 8.---TRAFFICKING IN LICENCES

162. We now come to the eighth category of the offences Traﬂickine mentioned by the Santhanam Committee, namely, "Traﬁick- g' 1'°°"°°s:

- - - - n crmit-S etc. mg in licences, permits etc. . (Categog, 8).

There are no direct statutory provisions creating a specific offence of this nature. Some of the important enactments dealing with the control of industries, imports and exports and foreign exchange', seem, however, to imply, that ordinarily a licence, permit or similar other document issued under those enactments cannot be trans- terred for proﬁt, at least where the competent authority imposes such conditions in the licences, etc. 1See Appcn 31, section 379A, I.P.C. (Proposed). 'See also para . I60 infra.

'For details , see Appendix 8.

Meaning of 'Trafficking' points and T4'!

163. The subject has been dealt with in the Report of the Committee at various places. The Committee has d1s- cussed the procedure for the scrutiny of applications receiv- ed under the Industries (Development and Regulation) Act, 1951', and illustrated the unfair practices that may arise in the absence of ﬁeld veriﬁcation of progress reports, e.g., the licensee utilising the services of sub-contractors instead of setting up the factory himself2. The Committee has made certain recommendations"' regarding import and export control also. It has observed, that corruption in that sphere arose from (i) issue of licences or quota certi- ﬁcates in ﬁctitious names, (ii) issue of licences to actual users on forged certiﬁcate and without proper scrutiny of documents, (iii) issue of licences to prospective exporters on the basis of false or forged orders of foreign suppliers,

(iv) theft of blank licences, etc. by the staff and supply of the same to parties for value, (12) theft of issued licences by the staff at the time' of the despatch or when returned by parties for revalidation, etc., and sale to other parties,

(vi) applying for licences even after changes in the cons- titution or ownership of the importer's business, (vii) trafﬁcking in licences, (viii) applying for licences in the name of ﬁctitious ﬁrms, (ix) soliciting of licences, etc*. As regards import licences granted as export incentives, the Committee was told, that they were transferable and this caused serious damage to the domestic market and foreign exchange resources5. (It also referred" to the' mal- practice of material allowed to be imported for use' in manufacturing exportable goods being sold for huge pro- ﬁts, and recommended that such offences should be punishable with imprisonment of at least 3 years and a ﬁne which would be twice the market price of the import- ed goods).

164. The Committee has not suggested any deﬁnition of traﬁicking. A deﬁnition of "trafficking" suggested in suggested in one of the comments is, "the outright sale of licenses and COITIIHCIJIS.

permits and allowing any other person besides 'the one intended, to enjoy the' fruits of such licences and permits".

Another comment states, that "trafﬁcking" takes place when a licence is transferred without the permission of the competent authority, though such transfers are prohibited _by law, or when a premium is charged on such transfers in spite of a prohibition under the law.

'Report of the Santhanam Committee, pages 243 and 245. 'Report of the Santhanam Committee, page 247. 'Report of the Santhanam Committee, pages 247 and 249.

__ 4Report of the Santhanam Committee pages 252 t . '

(m), cm), co), (vii), (win, (xv), (xx). <.m'n-9 and (m§I~.§54' "am 7' "°""

'Report of the Santhanam Committee, page :54; para. 9; 'Report of the Santhanamgcomrnittee, page' 1:58, para. 16 (18);

'15

165 It seems to us that the matter can be more con- ;I'ra)f:ic§iql1ﬂgt

- _ I , . . . 0 veniently dealt with by a Suitable P1'°V151°n lnfthe 13)" with by under which the licenses are issued. When fa} 11CeI1S€b1.S Spgcial issued, a condition can be insertedthat it S1§.lbI10t de enactments- transferable. Breach of the condition cou e ma e punishable under the relevant enactment.

166. So far as licenses for importing or exporting goods are concerned, contravention of a C0ndi'Ci0n in the 11091159 authorising the import or export is an offence under section 5 of the Imports Actl-2-5. And it would appeal', that under clause 5(2) of the Export (Control) Order, 1962, it is deemed to be a condition of every licence that the licensee shall not (except with permission of the licensing authority, etc.) transfer the license, and that the goods for the export of which the licence is granted sha1l_be the licensee's property at the time of export. Similar provision has been made by clause 5 of the Import (Con- trol) Order, 1955.

This being the position, an unauthorised transfer of the license ("trafficking") would seem to be already cover- ed, so far as import and export licenses are concerned'.

167. If there are any practical difficulties in the en- forcement of the relevant condition in the licence, those difficulties would not be solved by making a provision in the Indian Penal Code.

168. We may also state here that, as has been pointed out in one of the comments received on the proposals under consideration, the magnitude of the mal-practice of trafficking may vary with the particular enactment (Le. the enactment which requires that the activity or opera- tion or transaction in question should be licensed). For that reason also, it will be more appropriate to deal with the matter by a suitable provision in the special enact-

'ment concerned, rather than by a general provision in the Indian Penal Code. If a general provision (prohibiting traﬂicking) applicable to all licenses and permits is insert- ed, it might cover even a license or permit which is trans- ferable under the enactment under which it is issued, and thus lead to inconsistency in the law. We do not, therefore, feel inclined to recommend a provision in the Indian Penal Code on the subject.

_ 1ThgO§mports and Exports (Control) Act, I947 (18 of 1947) (as amended in 19 .

2See Best & Co. v. Additional Collector, A.I.R. I965 Cal. 478.

"It is understood that a Bill to provide for minimum penalties under section 5 is to be introduced shortly. ' 'See Mohan Lal V. ffasjit Singh, 1965) I Cr. Law Journal 379, (cqkutta High Court). - .. ' ' » Problem of crime a complex one.

Causes of crime.

Appendices.

CONCLUSION

169. In the end, we should emphasise that the problem of checking crime in general, and of white-collar crimes in particularl, is a complex one. It is much Wider than the form and content of the penal law, or the placing of its provisions. The inhibitions which prevent a person from committing crime generally may have their origin in various factors Which contribute to the emergence of conscience and the creation of a sense of guilta. The sanctions imposed by the penal law constitute only one species of those inhibitions.

170. Crime is not a legal problem; it is a social and economic one. The sanctions which can eﬂfectively operate to check crime are not legal only. As has been observed"---

"Among the basic elements in any culture are social values. These have been developed out of the historical experience of each society. Experiences and behaviour patterns which have brought the group satisfaction are positively valued. Experiences which have brought dissatisfaction are negatively valued. Sanctions are set by the society designed to "encourage approved behaviour and discourage disapproved be- haviour. These sanctions are embodied in the folkways, mores, conventions, religious ideals and taboos, public opinion, and laws of a society, and may be promoted through education. Every society has to decide what kinds of behaviour shall be discouraged through law, and What kinds by appeal to other sanctions. We have seen in our society a great reliance on law and yet a considerable disrespect for many laws. Criminology is, strictly speaking, concerned only with acts which are made punishable under the criminal law.".

171. When we consider the question of preventing the commission of a particular class of crimes, the matter becomes still more complex, because then one has to con- sider not only the criminal instinct in general, but the more detailed question as to why the desire' to commit the crimes of that particular class arises.

172. The Appendices to this Report are intended to fur- nish information regarding provisions of existing laws relevant to the subject-matter of this Report, provisions of the laws of certain other countries which maybe of in- terest, and similar other material. Some of the Appendices also seek to analyse, in detail, the scope of certain provi- sions of existing laws, in order to show how far they cover 'Para. 7, et. seq. supra.

'Cf. Barbara Wooten, Crime and the Criminal Law (The Hamlyn Lectures, 15th series), (1963), page 23.

'Taft and England, Criminology,' (f96'4) page 275.

the offences which, according to the Santhanam Commit- tee's Report, ought to be covered. It should be stated, that the Appendices relating to existing laws are illustrative only, and are not intended to be exhaustive.

A tentative draft of the amendments which we propose in the Indian Penal Code and in the Code of Criminal Pro- cedure, 1398 is given in two of the Appendices'.

1. J. L. KAPUR----Chairman. 1

2. K. G. DATAR 1

3. s. K. HIRANANDANI L In Members'

4. T. K. TOPE I

5. RAMA PRASAD MOOKERJEE J P. M. BAKSHI, Joint Secretary and Draftsm-an.

NEW DELHI;

The 11th February, 1966.

'Appendices 31 and 32.

'The post of Special Secretary, Legislative Department and Member Law Commission has not been ﬁlled up.

APPENDIX 1 EXISTING STATUTORY PROVISICNS REGARDING OFFENCES CAL- CULATED TO PREVENT OR OBSTRUCT THE ECONOMIC DEVELOPMENT OF THE COUNTRY AND ENDANGER ITS ECONOMIC HEALTH_ Acts listed inside----

(1) The Customs Act, 1962 (52 of 1962). (3) The Atomic Energy Act, 1962 (33 of 1962). (3) The Coffee Act, 1942 (7 of 1942).

(4) The Imports and Exports (Control) Act, 1947 (18 of 1947).

(5) The Essential Commodities Act, 1955 (10 of 1955).

(6) The Indian Standards Institution (Certiﬁcation Marks) Act, 1952 (36 of 1952).

(7) The Industries (Development 8: Regulation) Act, 1951 (65 of 1951).

(8) The Tea Act, 1953 (9) The Coir Industry Act, 1953.

(10) The Foreign Exchange Regulation Act, 1947.

(11) The Oilﬁelds (Regulation & Development) Act, 1948 (53 of 1948).

(12) The Reserve Bank of India Act, 1934.

(13) The Forward Contracts (Regulation) Act, 1952 (14 of 1952).

(14) The Mines & Minerals etc. Act, 1957 (67 of 1957) (15) The Securities Contracts etc. Act, 1956 (42 of 1956).

APPENDIX I Name of the Act Section Gist of the Section

- Number (I) (2) (3)

1. The Customs Act, 1962 (52 Without prejudice to any action that may be taken under this Act, if any per-

of PI 962).. ' (As to conﬁscation and penal-

ties, see sections III and 112 et seq. As to false declaration see section 132.

135

son--

(a) is in relation to any goods in any way knowingly concerned in any fraudulent

(b) evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods, or acquires possession of or is in any way concerned in carrying, removing:

depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are liable to conﬁscation under section I I I , he shall be punishable,--

(1') in the case of an offence relating to any of the goods to which section 123 applies and the market price whereof exceeds one lakh of rupees, with imprisonment for a term which may extend to ﬁve years and with ﬁne:

Provided that, in the absence of special and adequate reasons to the contrary, to be recorded in the yudgement of the court, such ini- prisonment shall not be less than six months;

APPENDIX 1 (contd.) (I) (2) (3) The Custom Act, 1962 (com.'d.) (ii) in any other case, with imprisonment for a term which may extend to two years, or with ﬁne, or with both.

(As to offences under the Act being regarded as "economic crimes", and the need for punishing severely such offences, see State v.Kumari Dhrupati Bhawnani, A.I.R. I965 Bombay 6.)

2. The Atomic Energy Act, 1962 24 The section makes contravention of orders made under sections 14, 17 and 18 (33 of 1962). punishable with imprisonment for a term which may extend to 5 years. Section 14, inter alia, provides that the Central Government may, by order, prohibit, except under a licence, the production, possession, use, disposal, export or import of prescribed substances or other minerals, or of any plant designed for development of atomic energy etc.

3. The Coffee Act, 1942 20 Section 20 provides that no coffee shall be exported from India otherwise than (7 of 1942). by the Board or under an authorisation granted by the Board, and the pro- visions of the Sea Customs Act have been made applicable to any violation of this provision. The Board is constituted under section 4. Section 21 deals with import of exported coffee.

4. The Imports and Exports 5 Section 5 makes the contravention or attempts at contravention of any order (Control) Act, 1947 made under the Act punishable with imprisonment for a term which may (18 of 1947). extend to one year.

If any person contravenes or attempts to contravene, or abets a contravention of, any order made or deemed to have been made under this Act, or any condition of. a licence granted under any such order, he shall, without pre- judice to any conﬁscation or penalty to which he may be liable under the The Essential Commodities 7 Act, 1955 (I0 of 1955) I The Indian Standards Insti- 13 tution (Certiﬁcation Marks) Act, 1952 (36 of 1952)-

Industries (Development & 24 Regulation) Act, 1951 (65 of 1951)-

provisions of the Sea Customs Act, 1878, as applied by sub-section (2) of section 3, be punishable with imprisonment for a term which may extend to one year, or with ﬁne, or with both.

(As to the need for punishing such offences severely, see State v. Kumari Dhrupati, A.I.R. I965 Bombay 6).

The section makes contravention of orders made under section 3 as punishable with imprisonment which varies from one year to three years in certain speciﬁed circumstances and also gives discretion to the court to make an order imposing a sentence of ﬁne alone. Section 3 gives powers to the Central Government to control production, supply and distribution of essential commodities.

The section provides penalty for contravention of the provisions of section 5 and section 6 of the Act. Section 5 prohibits improper use of the standard mark or any colourable imitation thereof. Section 6 prohibits the use without previous permission of the Institution, of any name resembling the name of the Indian Standards Institution, etc. This section makes contravention or attempts at contravention of provisions of sections IO, 11, 11A, 13(1), 18B and 18G and 29B(2) or direction or order made thereunder punishable with imprisonment which may extend to 6 months or with ﬁne. Section 3 makes it obligatory for every owner of existing industrial undertaking to have it registered in the prescribed manner. Section 10 requires registration. Section II prohibits every person from establishing a new industrial undertaking except under a licence issued by the Central Government. Section IIA makes it obligatory on every owner of industrial undertaking to obtain a licence for producing or manufacturing a new article, Similar provisions are contained in section 13.

Section 24A punishes false statements.

_ 'APP'.ENDIX 1 (concld.) (I) (2) (3) Industries _(DevelOpment and 18G Section 18G gives powers to the Central Government to control supply, RegU13U0I1) Act, 1951 (contd.) distribution and prices of certain articles.

8- The Tea; Act, 1953. 3 The section makes the breach of the provision of section 18(i) & (ii) punishable as if it were an offence under the Customs Act. Section 18 provides that no consignment of tea shall be exported except under a licence by the Central Government or the Tea Board.

9. The Coir Industry Act, 1953. 20 The section makescontravention of the provision of section 12 punishable with ﬁne which may extend to Rs. 500/-. Section 12 prohibits the export of coir ﬁbre, coir yarn and coir products except under a licence issued by or on behalf of the Coir Board.

I0. Foreign Exchange Regulation 23 The section makes a person contravening the provisions of' sections 4, 5, 9 or

-- Act, 1947.

sub--section (2) of section 12 or of any rule, order, direction made therein, liable to penalty not exceeding three times the value of the foreign exchange in respect of which contravention has taken place, or Rs. 5,ooo/- whichever is more, as also punishable upon conviction with imprisonment for a term which may extend to two years, or with ﬁne, or with both. Contravention of provisions of section I9 is also punishable with imprisonment for a term which may extend to two years, or with ﬁne, or with both. Section 4 places restrictions on persons resident in India on dealing in foreign exchange. Section 5, inter alia, places restrictions on persons resident in India from mak- ing any payment to or for the credit of any person resident outside India.

Section 9 empowers the Central Government to purchase any foreign exchange in the 'possession of any person resident in India at a price ﬁxed by the Govern- ment itself. ' II. The Oilﬁelds (Regulation & Development) Act, 1948.

12. The Reserve Bank of India Act, 1934- 32 Section 19 empowers the Central Government to direct owners of foreign ex- change or foreign securities to make a return thereof to the Reserve Bank within such a period as may be speciﬁed. The Central Government or the Reserve Bank may also require any such person to furnish to the Government or the Bank any information, book or other document as may be required by the order to be so produced or furnished.

Section 9 provides, that the contravention of any rule made under the provisions of the Act, shall be punishable with imprisonment which may extend to six months, or with ﬁne which may extend to one thousand rupees, or with both.

Section 5 empowers the Central Government to make rules for regulating the grant of mining leases, or for prohibiting the grant of such leases, in respect of any mineral oil or any area.

Section 6 empowers the Central Government to make rules for the conservation and development of mineral oils, and, inter alia, for regulating drilling, re- drilling, deepening, plugging and abandoning of oil wells, and for the limitation or prohibition of such operations, and for taking of remedial measures to prevent waste of or damage to oil.

The section makes contravention of provision of section 3I as punishable with ﬁne which may extend to the amount of the bill, hundi, pronote or engagement in respect whereof the offence is committed. Section 31 prohibits any person in India from drawing, accepting or making or issuing any bill of exchange in the promissory note or engagement for the payment of money, payable to bearer on demand.

(I) (2) APPENDIX 1 (ConCld) (3)

13. Forward Contracts (Regulation) 20 Act, 1953 I4. Mines & Minerals (Regulation & 21 Development) Act, 1957.

15. Security Contracts (Regulation) 23 Act, I956.

The section, inter alia, penalises the person who is a member of any association, other than a recognised association to which a certiﬁcate of registration has not been granted under the Act. The penalty pro- vided for the offence is with imprisonment which may extend to one year, or with ﬁne of not less than Rs. I,ooo/-, or with both.

This section makes contravention of provisions of sub-section (1) of section 4 punishable with imprisonment for a term which may extend to six months, or with ﬁne which may extend to one thousand rupees, or with both.

Section 4(1) prohibits any person from undertaking any prospecting or min- ing operation in any area, except under or in accordance with the terms and conditions of a prospecting licence, or a mining licence [granted under the Act.

The section makes it an offence for a person to own or keep a place other than a recognised stock exchange for use for the purposes of entering into any contracts in contravention of the provisions of the Act. It further provides penalties for entering into any contract in contravention or the provisions of sections 13, 16, I7 and I9, and alfor canvassing or advertising for any business connected with con- tracts without being a member of a recognized stock exchange.

13 Section 13 empowers the Central Government to notify that contracts other than between members of a recognized stock exchange, shall be illegal in any area to which the said notiﬁcation may apply. Section 16 empowers the Government to prohibit contracts to prevent undesirable speculation in speciﬁed securities. Section 17 empowers the Government to make it obligatory on persons in areas that may be speciﬁed to take a licence for dealing in securities.

19 Section 19 prohibits persons from being members of any stock exchange other than a recognised one for the purposes of assisting in, entering into/or performing contracts in securities.

_, . 33 APPENDIX 2 EXISTING STATUTORY PROVISIONS _REGARDING EVASION OR AVOIDANCE OF TAX OR DUTY AND THE CONSEQUENT PENALTY THEREOF.

1. The Indian Penal Code s. 177, 181, 191, 192, 198, 199 read with s. 136, Income Tax Act, 1961 etc.

2. Indian Stamp Act, 1899 (2 of 1899) (Section 62).

3. The Central Excises and Salt Act, 1944 (I of 1944). (Section 9, 17 & 24).

4. The Estate Duty Act, 1953 (34 of 1953) Sections 59 and 60.

5. The Terminal Tax on Railway Passengers Act, 1956 (69 of 1956) (No provision).

6. The Central Sales Tax Act, 1956 (74 of 1956) Sec- t1ons 9(3), 10, 13(5).

7. The Wealth Tax Act, 1957 (27 of 1957) Sections 17, 18, 36.

8. '11'lée11%'xp§nditure Tax Act, 1957 (29 of 1957) Sections 7 7 3 '

9. The Gift Tax Act, 1953 (13 of 1953) Sections 16, 17,

35.

10. The Income Tax Act, 1961 (43 of 1961) Sections 276, 277, 273, 231.

11. The Customs Act, 1962 (52 of 1962) Section 135 (This Act repeals the Sea Customs Act, 1878 and the Land Customs Act, 1924).

12. Super Proﬁts Tax Act, 1963 (14 of 1963) Sections 10, 11, 19 and 22.

13. The Companies (Proﬁts) Surtax Act, 1964 (7 of 1964) Sections 8, 20, 21, 22.

1. THE INDIAN PENAL CODE (45 or 1860) The following sections of the Indian Penal Code are relevant in connection with evasion of taxes-

Section 177 Section 181 [' Read with section 136, Income Tax-

Section 191, 192, Act, 1961, and simi- 199 lar provisions in relating to tax K other enactments ation.

APPENDIX 2 (contd.)

2. THE INDIAN STAMP ACT, 1899 (2 or 1899) Section 62.-- Penaity for executing, etc., instrument not duly stamped.

(1) Any person-

(a) drawing, making, issuing, endorsing or trans- ferring or signing otherwise than as a Witness, or pre- senting for acceptance or payment, or accepting, pay- ing or receiving payment of, or in any manner nego- tiating, any bill of exchange payable otherwise than on demand, or promissory note without the same being duly stamped; or

(b) executing or signing otherwise than as a wit- ness any other instrument chargeable with duty with- out the same being duly stamped; or

(c) voting or attempting to vote under any proxy not duly stamped, shall for every such offence be punishable with ﬁne which may extend to ﬁve hundred rupees: Provided that, when any penalty has been paid in respect of any instrument under section 35, section 40 or section 61, the amount of such penalty shall be allowed in reduction of the ﬁne (if any) subsequently imposed under this section in respect of the same instrument upon the person who paid such penalty;

(2) If a share-warrant is issued without being duly stamped, the company issuing the same, and also every person who, at the time when it is issued is the managing director or secretary or other principal officer of the com- pany, shall be punishably with ﬁne which may extend to ﬁve hundred rupees.

3. THE CENTRAL EXCISES AND SALT ACT, 1944 (1 OF 1944) Section 9.--Whoever commits any of the following offen- ces, namely:---

(b) evades the payment of any duty payable under this Act, shall for every such oﬁence be punishable with imprisonment for a term which may extend to six months and with ﬁne which may extend to two thousand rupees or with both.

Section 17.--Any owner or occupier of land or any agent of such owner or occupier in charge of the man- agement of that land, who wilfully connives at any offence against the provisions of this Act or of any rules made thereunder shall for every' such offence be punishable with 'Imprisonment for a term Which may extend to six months, or with ﬁne which may extend to five hundred rupees, or with both. 2 47 Law--7.

APPENDIX 2 (c0ntd.) Section 24 --When any excisable goods are carried bli- sea in any vessel other than a vessel of the burden of three; hundred tons and upwards, the owner and master of Such» vessel shall each be punishable with imprisonment for 3 term which may extend to six months, or with ﬁne which may extend to one thousand rupees, or with both.

4. THE ESTATE DUTY ACT. 1953 (34 OF 1953} Section 56 deals with grant of representation.

Section 59.~--P'rope'rty escaping assessment: If the Con- troller,--

(a) has reason to believe that by reason of the omission or failure on the part of the person account- able to submit an account of the estate of the deceased under section 53 or section 56 or to disclose fully and truly ail material facts necessary for assessment, any property chargeable to estate duty has escaped assess- ment by reason of undervaluation of the property in- cluded in the account or of omission to include therein any property which ought to have been included or of assessment at too low a rate or otherwise, or

(b) has, in consequence of any information in his possession, reason to believe notwithtanding that there has not been such omission or failure as is referred to in clause (a) that any property chargeable to estate duty has escaped assessment, whether by reason of undervaluation of the property included in the account or of omission to include therein any property which ought to have been included, in the or of assessment at too low a rate or otherwise, he may at any 'uric, subject to the provisions of section 73A, require the person accountable to submit an account as required under section 53 and may proceed to assess or re- assess such property as if the provisions of section 58 applied thereto. .

Section 60.--Penal'.ty for default or concealment:

(1) If the Controller, the Appellate Controller or the Appellate Tribunal, in the course of any proceedings under this Act, is satisﬁed that any person--

(a) has without reasonable cause failed to deliver the account of the property of the deceased under section 53 or section 56 or to comply with any requisi-

tion of the Controller under section 55 or section 59 or has without reasonable cause failed to deliver or sub-

mit any of the accounts or statements required under-

any of the sections aforesaid within the time allowed' and in the manner required; or , , .<_ 89 APPENDIX 2 (contd.)

(b) has without reasonable cause failed to comply with a notice under sub-section (2) of section 58; or

(c) has concealed the particulars of the property of the deceased or deliberately furnished inaccurate particulars thereof; or

(d) being a company referred to in section 20A fails without reasonable cause, to pay the amount of estate duty due from the company under that section within the time speciﬁed in this behalf, he or it may, by order in writing, direct that--such person shall pay by way of pe72al1;y----

(i) in the case referred to in clause (a) or clause

(d), in addition to the amount of the estate duty pay- able by him; a sum not exceeding twice the amount of such duty, and

(ii) in the case referred to in clause (b) or clause , (cl in addition to the amount of estate duty payable by him, a sum not exceeding twice the amount of the estate duty, if any, which would hiive been avoided if the principal value shown in the account of such person had been accepted as correct.

(2) No order shall be made under sub--section (1) un- less the person concerned has been given a reasonable opportunity of being heard.

5. THE TERMINAL TAX ON RAILWAY PASSENGERS ACT. 1956 (ACT 69 or 1956) This Act contains no provision as to evasion or avoid- ance of Tax. .

6. THE CENTRAL SAI.l~'..S TAX ACT, 1956 (74 or 1956) Sectzon 9--Levy and collection of tax and penalties;

(3) The authorities for the time being empowered to assess, Collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India and subject to any rules made under this Act, assess, collect and enforce pay- ment of any tax, including" any penalty, payable by a dealer under this Act in the same manner as the tax on the sale or purchase of goods under the general sales tax law of the State is assessed, paid and collected; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns. appeals, reviews, revisions, references, penal- ties and compounding of offences, shall apply accordingly:

Provided that if in any State or part thereof there is no general-sales tax law in force, tlie Central Government 90 APPENDIX 2 (contd) may, by rules made in this behalf, make necessary pro- vision for all or any of the matters" speciﬁed in this sub- section, and such rules may provide that a breach of any rule shall be punishable with fine which may extend to ﬁve hundred rupees; and where the offence is a continuing offence, with a daily -ﬁne which may extend to ﬁfty rupees for every day during which the oﬁence continues.

Section 10.---Pcnalt'ée.°.:

If any person----

(a) fails to got himself registered as required by section 7 : or

(b) being a registered dealer, falsely represents.

when purchasing any class of goods that goods of such class are covered by his certiﬁcate of registration; or

(c) not being a registered dealer, falsely repre- sents when purchasing goods in the course of inter- State trade or commerce that he is a registered dealer; 01'

(d) after purchasing any goods for any of the purposes specified in clause _(b) of sub-section (3) of section 8 fails without reasonable excuse. to make use of the goods for any such purpose;

(e) has in his possessio any form prescribed for the purpose of sub-section T4) of section 8 which has not been obtained by him or by his principal or by his agent in accordance with the provisions of this Act or any rules made thereunder;

(f) collects any amount by way of tax in contra- vention of the provisions contained in section 9A,' he shall be punishable with simple imprisonment which may extend to six months, or with ﬁne, or with both; and when the offence is a continuing oﬁence, with a daily ﬁne which may extend to fifty rupees for every day during which the offence continues.

Section 13,----Pow¢*rs to make rules:

(5) In making any rule under this section the State Government may direct that a breach thereof shall be punishable with ﬁne which may extend to five hundred rupees and when the offence is a continuing offence, with a daily ﬁne which may extend to ﬁfty rupees for every day during which the offence continue.

7. THE WEALTH-TAX ACT, 1957 (27 or 1957) Section 17.----Wealth escaping assessment: If the Wealth Tax Ofﬁcer --

_(q) has reason ta believe that by 'reason, of the omission or failure on the part of the assessee to make 91 APPENDIX 2 (contd.) a return of his net wealth under section 14 for any assessment year or to disclose fully and truly all material facts necessary for his assessment for that year, the net wealth chargeable to tax has escaped assessment for that year, whether by reason of under- assessment or assessment at too low a rate or other- wise; or

(b) has, ;n consequence of any information in his possession, reason to believe, notwithstanding that there has been no such omission or failure as is re- ferred to in clause (a), that net wealth chargeable to tax has escaped qssessment for that year, whether by reason of under-assessment or assessment at too low a rate or otherwise he may, in cases falling under clause

(a) at any time Within eight years and in cases falling under clause (b) at any time within four years of the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 14, and may proceed to assess or reassess such net wealth, and the provisions of this Act shall, so far as may be, apply as if the notice had issued under that sub-section.

Section l8.--Penalty for concealment:

(1) If the VVealth-tax Officer, Appellate Assistant Com-

missioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisﬁed that any person --

(:1) has without reasonable cause failed to furnish the return of his net weal-th which he is required to furnish under sub-section (1) or sub-section (2) of section 14 or section 17 or has without reasonable cause failed to furnish it Within the time allowed and in the manner required; or

(b) has without reasonable cause failed to comply with a notice under sub-section (2) or sub-section (4) of section 16; or

(c) has concealed the particulars of his 'assets or deliberately furnished inaccurate particulars of his assets or debts, ' he or it may, by order in writing direct that such person shall pay by way of penalty-

_(i) in the case referred to in clause (a), in addition to the amount of Wea'1'th--tax payable by him, a sum not exgeeding one-and-a-half tiines the amount of such tax, an (it) in the case referfed to in clause (b) or clause (0) in addition to the' amount of Wealth-tax payable by him, a sum not exceeding one:-and-a-half timesihthe amount of the tax, if any, which would have been 92 APPENDIX 2 (contd.) avoided if the net wealth returned by such person had oeen accepted as correct.

(2) No order shall be made under sub-section (1) unless the person concerned has been given reasonable opportu- nity of being heard.

(3) No prosecution for an offence under this Act shall be instituted in respect of the same facts in relation to which a penalty has been imposed under this section.

(4) The Wealth-tax Officer shall not impose any penalty under this section without the previous approval of the Inspecting Assistant Commissioner of Wealth-tax.

Section 36--Pmsecuti0ns:

(1) If a person fails without reasonable cause-

(a) to furnish in due time any return mentioned in section 14;

(b) to produce, or cause to be produced, on or before the date mentioned in any notice under sub-

section (2) or sub-section (4) of section 16 such accounts, records and documents as are referred to in the notice;

(c) to furnish within the time specified any statement or information which such person is bound to furnish to the Wealth-tax Officer under section 38;

he shall, on conviction before a magistrate, be punish- able with ﬁne which may extend to ten rupees for every day during which the default continues.

(2) If a person makes a statement in a veriﬁcation mentioned in section 14 or section 23 or section 24 or sec- tion 26 which is false, and which he either knows or believes to be false, or does not believe to be true, he shall bepunishable with simple imprisonment which may extend to one year, or with fine which may extend to one thousand rupees, or with both.

(3) A person shall not be proceeded against for an offence under this section except at the instance of the Commissioner.

(4) The Commissioner may either before or after the institution of proceedings compound any such oﬁence.

Ea3planatéon.----For the purposes of this section, "Magis- trate" means a Presidency Magistrate, a Magistrate of the ﬁrst class or a Magistrate of the second class specially empowered by the Central Government to try offences under this Act. ' 93 APPENDIX 2 (contd.)

8. THE EXPENDITURE TAX ACT, 1957 (29 or 1957) Section 16.--E3cpendi.tu're escaping assessment:

If the Expenditure-tax Oﬁicer.----

(a) has reason to believe that by reason of the omission or failure on the part of the assessee to make a return of his expenditure under section 13 for any assessment year, or to disclose fully and truly all material facts necessary for his assessment for that year, the expenditure chargeable to tax has escaped assessment for that year, whether by reason of under-

assessment or assessment at too low a rate or other- wise; or

(b) has in consequence of any information in his possession reason to believe, notwithstanding that there has been no such omission or failure as is refer- red to in clause (a), that the expenditure chargeable to tax has escaped assessment for any assessment year, whether by reason of under-assessment or assessment at too low a rate or otherwise, he may, in cases falling under clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 13, and may proceed to assess or reassess such expenditure, and the provisions of this Act shall, so far as may be, apply as if the notice had issued under that sub-section.

Section 17.--Penalty for concealment:

If the Expenditure Tax Ofﬁcer, appellate Assistant Commissioner, Commissioner, or appellate Tribunal in the course of any proceedings under this Act is satisﬁed that any person-

(a) has without reasonable cause failed to furnish the return of his expenditure which he is required to furnish under sub-section (1) or sub-section (2) of section 13 or section 16, or has without reasonable cause failed to furnish it within the time allowed and in the manner required; or

(b) has Without reasonable cause failed to comply with a notice under sub-section (2) or sub-section (4) of section 15 or

(c) has concealed the particulars of any expendi-

ture or deliberately furnished inaccurate particulars thereof, he, may by order in writing direct that such person shall pay by way of penalty. . .. Section 32.-Prosecutions:

-(1) If a person fails withoutreasonable cause-- T

(a) to furnish in due time anyreturn mentioned 'in section 13;

APPENDIX 2 (contd.)

(b) to produce, or cause to be produced on or before the date mentioned in any notice under sub- section (2) or sub-section (4) of section 15 such accounts, records and documents as are referred to in the notice;

(c) to furnish within the time speciﬁed any states ment or information which such person is bound to furnish to the Expenditure-tax Oiﬁcer under section 34;

he shall, on conviction before a Magistrate, be punishable with ﬁne which may extend to ten rupees for every day during which the default continues.

(2) If a person makes a statement in a veriﬁcation mentioned in section 13, section 21, section 22, or section 24, which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable with simple imprisonment which may extend to one year or with ﬁne which may extend to one thousand rupees or with both.

(3) A person shall not be proceeded against for an offence under this section except at the instance of the Commissioner.

(4) The Commissioner may either before or after the institution of proceedings compound any such oﬁence.

Eacpla/nation.--For_the purposes of this section "Magis- trate" means a Presidency Magistrate, a Magistrate of the ﬁrst class, or a Magistrate of the second class specially em- plowezed by the Central Government to try offences under IS ic .

9. THE GIFT-TAX Aer, 1958 (1.8 or 1958) Section 16.--Gift escaping assessment:

(1) If the Gift-tax officer-

. (a) has reason to believe. that by reason of omis- sion or failure on the part of an assessee to make a return under section 13' for any assessment year or'to disclose fully and truly all. material facts necessary for his assessment for that year, any taxable gift has escaped assessment for than year', whether by reason of under-assessment or assessment at too Low 3 rate or otherwise; or »

(b), has, in consequence of any information in his possession, reason to_bb1ieize, notwithstanding that there has been no such omission or failure as is refer_- red to in clause (a), that any taxable gift has escaped assessment for any year,-_vWhet_her by reason of under-

3.S._S.e.55ment 01' assessrqent at too low a. rate or other--

wise;

APPENDIX 2 (contd.) he may, in cases falling under clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 13, and may proceed to assess or reassess any taxable gift which has escaped assessment, and the provisions of this Act shall, so far as may be, apply as if the notice had issued under that sub-section.

(2) Nothing containing in this section limiting the time within which any proceedings for assessment or re-assess- ment may be commenced shall apply to an assessment or re-assessment to be made on the assessee or any person in consequence of or to give effect to any ﬁnding or direction contained in an order under section 22, section 23, section 24, section 26 or section 28.

Section l7.--Penalty for default and Concealment.

(1) If the Gift-tax Officer, Appellate Assistant Com- missioner, Commissioner or Appellate Tribunal, in the course of any proceedings under this Act, is satisﬁed that any person--

(a) has without reasonable cause failed to furnish the return which he is required to furnish under sub- section (1) or sub-section (2) of section 13, or section 16 or has without reasonable cause failed to furnish it within the time allowed and in the manner required; or

(b) has without reasonable cause failed to comply with a notice under sub-section (2) or sub-section (4) of section 15; or (C) has concealed the particulars of any gift or-

deliberately furnished inaccurate particulars thereof, he or It may, by order in writing, direct that such person shall pay by way of penalty---

(11) in the case referred to in clause ((1'), in addi- tion to the amount of gift-tax payable by him, a sum not exceeding one and a half times the amount of such tax, and V

(ii) in the case referred to in clause (b) or clause

(c), in addition to the amount of gift-tax payable by him, a sum not exceeding one and a half times the amount of the tax, if any, which would have been avoided if the return made by such person under sec- t10n 1,3, S€C'€i0n 14'. or section 16, as the case' may be, had been accepted as correct.

(2) No order shall be made under sub-section (1) unless the person co'ncerned has been given a reasonable oppor- -

tunity of being' heard.

APPENDIX 2 (contd.) (3) No prosecution for an offence under this Act shall be instituted in respect of the same facts in relation to which a penalty has been imposed under this section.

(4) The Gift-tax Oﬂicer shall not impose any penalty under this section without the previous approval of the Inspecting Assistant Commissioner of Gift-tax.

Sectirm 35.-----Pr0secution.

(1) If any person fails without reasonable cause--

(a) to furnish in due time any return of gifts under this Act;

(b) to produce, or cause to be produced. on or before the date mentioned in any notice under sub- section (2) or sub-section (4) of section 15, such accounts, records and documents as are referred to in the notice;

(c) to furnish within the time specified any state- ment or information which such person is bound to furnish to the Gift--tax Officer under section 37, he shall, on conviction before a Magistrate, be punishable with ﬁne which may extend to rupees ten for every day during which the default continues.

(2) If a person makes a statement in a veriﬁcation in any return of gifts furnished under this Act or in a veriﬁ- cation mentioned in sections 22, 23 or 25 which is false, and which he either knows or believes to be false, or does not believe to be true, he shall onconviction before a Magis- trate, be punishable with simple imprisonment which may extend to one year, or With ﬁne which may extend to rupees one thousand or with both, (3) A person shall not be proceeded against for an offence under this section except at the instance of the Commissioner.

Explanation For the purposes of this section "Magistrate" means a Presidency Magistrate; a Magistrate of the first class or a Magistrate of the second class specially empowered by the Central Government to try offences under this Act.

10. THE INCOME-TAX ACT, 1961 (43 or 1961) Section 276.--Failure to make payments or deliver returns or statements or allow inspection:

If a person fails without reasonable cause or excuse-

(a) to grant inspection or allow copies to be taken in accordance with the provisions of section 134;

APPENDIX 2 (contd.)

(b) to furnish in due time any of the returns or statements mentioned in section 133, sub-section (2) of section 139, section 206, section 285 or section 286;

(c) to produce, or cause to be produced, On Or before the date mentioned in any notice under sub- section (1) of section 142,. such accounts and docu- ments as are referred to in the notice;

(d) to deduct and pay tax as required by the pro- visions of Chapter XVII-B or under sub-section (2) of section 226; or

(e) to furnish a certiﬁcate required by section 203, he shall be punishable with ﬁne which may extend to ten rupees for every day during which the default continues.

As to penalties imposable by Income Tax Officers, see Sections 270 to 274 Income Tax Act, 1961.

Section 2'77.----False statement in declaration, (As amended by section 41 of the, Finance Act, 1964--Act 5 of 1964):

If a person makes a statement in any veriﬁcation under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable with rigorous imprisonment for a term which may extend to two years;

Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for less than six months.

Section 278.----Abetment of false return, etc. (As amended by the Finance Act, 1964 section 42):

If a person abets or induces in any manner another person to make and deliver an account, statement or declaration relating to any income chargeable to tax which is false and which he either knows to be false or does not believe to be true, he shall be punishable with rigorous imprisonment for a term which may extend to two years:

Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for less than six months.

Section 281.--Transfers to defraud revenue void:

Where, during the pendency of any proceeding under this Act, any assessee creates a charge on or parts with the possession by way of sale, mortgage, exchange or any other mode of transfer whatsoever, of any of. his assets in favour of any other person with the intention to defraud the 98 APPENDIX- 2 (contd.) revenue, such charge or transfer shall be void as against any claim in respect of any tax of any other sum payable by the assessee as a result of the completion of the said proceeding:

Provided that such charge or transfer shall not be void if made for valuable consideration and without notice of the pendency of the proceeding under this Act.

11. THE CUSTOMS ACT, 1962 (52 or 1962) Section 135.----E1:asion of duty or prohibitions:

Without prejudice to any action that may be taken under this Act, if any person--

(a) is in relation to any goods in any way know-

ingly concerned in any fraudulent evasion" or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under this Act or any other law for the time being in force with res- pect to such goods, or

(b) acquires possession of or is in any way con- cerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe are liable to conﬁscation under section 111, he shall be punishable-

(i) in the case of an offence relating to any of the goods to which section 123 applies and the market price whereof exceeds one lakh of rupees, with im- prisonment for a term which may extend to ﬁve years and with ﬁne:

Provided that in the absence of special and ade- quate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be" for less than six months;

(it) in any other case, with imprisonment for a term which may extend to two years, or with fine, or with both.

12. SUPER PROFITS TAX ACT, 1963 (14 or 1963) Sections 10, 19, 21 and 22 may be seen.

13. THE COMPANIES (PROFITS) SURTAX ACT, 1964 (7 or 1964) Section 8.---Proﬁts escaping assessment:

If-

(a) the Income-tax} Ofﬁcer has reason to believe that by reason of the omission or failure on the part 99 APPENDIX 2 (contd.) of the assessee to make a return under Section 5 for any assessment year or to disclose fully and truly all material facts necessary for his assessment for any assessment year, chargeable proﬁts for that year have escaped assessment or have been under-assessed or assessed at too low a rate or have been made the Sub~ ject of excessive relief under this Act, or

(b) notwithstanding that there has been no omis~ sion or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in conse-

quence of information in his possession reason to believe that chargeable proﬁts assessable for any assessment year have escaped assessment or have been under-assessed or assessed at too low a rate or have been the subject of excessive relief under this Act, he may, in cases falling under clause (at at any time, and in cases falling under clause (b) at any time within four years of the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under section 5, and may proceed to assess or re-assess the amount chargeable to surtax, and the provisions of this Act, shall, so far as may be, apply as if the notice were a notice issued under that section.

Section g'0t--Failure to deliver returns etc. If any person fails without reasonable cause to furnish in due time any return under sub-section (2) of section 5, or to produce, or cause to be produced, any accounts or documents required to be produced under section 6, he shall be punishable with fine which may extend to ﬁve hundred rupees. and with a further ﬁne which may ex- tend to ten rupees for every day during which the default continues.

Section 2l.--False statements :

If a person makes in any return furnished under sec- tion 5, any statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable with simple imprisonment which may extend to six months, or with ﬁne which may extend to one thousand rupees, or with both.

Section 22.--Abetment of false returns, etc. If a person makes or induces in any manner another person to make and deliver any account, statement or dec- laration relating to chargeable proﬁts liable to surtax which is false and which he either knows to be false or does not believe to be true, he shall be punishable with simple imprisonment which may extend to six months, or with ﬁne which may extend to one thousand rupees, or with both.

APPENDIX 3 EXISTING STATUTORY PROVISIONS PENALISING MISUSE OF POSITION BY PUBLID SERVANTS (OTHER THAN THEFT, BRIBERY, MISAPPROPRIATION AND BREACH OF TRUSTT, OCCURRING IN VARIOUS STATUTES The Act I I. The Prevention of Corruption Act, 1947 5(i)(d)& 5(2i)ii (2 of 1947)

2. The Indian Penal Code (45 of 1860) . (i)168 » (ii)169 (1'ii)217

(iv)218 Section number Offences regarding misuse of posztion, etc. Gist of the Section 3 If a public servant, by corrupt or illegal means or by otherwise abusing his position as public servant, ob-

tains for himself or for any other person, any valu- able or any other pecuniary advantage, he shall be deemed to have committed the offence of "criminal mis- conduct in the discharge of his duties" as deﬁned in section 5(I)(d) and shall be punishable under section 5(2) with imprisonment for a term which shall not be less than one year, but which may extend to 7 years, and shall also be liable to ﬁne; provided that the court may, for any special. reasons recorded in writing, impose a sentence of imprisonment of less than one year.

Public servant unlawfully engaging in trade.

Public servant unlawfully buying or bidding for pro~ perty.

Public servant disobeying directions of the law with intent to save person from punishment or property from forfeiture, is liable to imprisonment which may extend to two years, or with ﬁne, or with both.

Public servant framing incorrect record or writing with intent to save person from punishment or property from forfeiture.

OOI

3. The Indian Post Otﬁce Act, 1898 (6 of 1898).

M219

(vi)22o

(vii)221

(viii)222 ( ix)22 5A

(i)54(c)

(iv)56 Public servant in judicial proceeding corruptly making report, order, verdict or decision which he knows is contrary to law.

Whoever, having legal authority to commit persons for trial or to conﬁnement, or to keep persons for con- ﬁnement, corruptly or maliciously commits any person for trial or conﬁnement or keeps any person in confine- ment in the exercise of that authority, knowing that in so doing, he is acting contrary to law, is punishable with imprisonment which may extend to seven years, or with ﬁne, or with both.

Intentional omission to apprehend on the part of public servant bound to apprehend.

Intentional omission to apprehend on the part of the public servant, bound to apprehend person under sentence or lawfully committed.

Omission to apprehend, or sufferance of escape on part of public servant, in cases not otherwise provided for in the Indian Penal Code.

Whoever, being an oﬂicer of the Post Oﬂice, being en- trusted with the delivery of any postal article, know- ingly demands or receives any sum of money in respect of the postage thereto which is not chargeable under this Act, shall be punishable with imprisonment for a term which may extend to two years, and shall also be punishable with ﬁne.

An Officer of the Post Oﬂice, who sends by post, or puts into any mail bag, any postal article"'upon'jwhich postage has not been paid or '.'charged in the manner prescribed by this Act, intending thereby to defraud I01 APPENDIX 3 (contd.) I 2 Thandian Post Office Act, 1898 (6 of 1898)» i'ii)56

---c0ntd.

(iii)6o

4. I' he Prison Act, 1894 (9 of 1894) 42 (later part) the Government of the postage on such postal article, is made punishable with imprisonment for a term which may extend to two years, and is also made punishable with ﬁne.

Whoever, being appointed to sell postage stamps --

(:2) takes from any purchaser for any postage stamp or quantity of postage stamps, a price higher than that ﬁxed by any rule made under section 16(3)(a), shall be punishable with imprisonment for a term which may extend to six months, or with ﬁne which may extend to Rs. 200/-, or with both; or

(b) commits a breach of any other rule made under sec- tion 16 (such as regarding ﬁxation of price of postage stamps, regulating the custody, supply and sale of postage stamps and prescribing the duties and remunerations of persons selling pos- tage stamps etc. etc.), shall be punishable with ﬁne which may extend to Rs. 200/-.

An oﬂicer of a prison who, contrary to any rule under section 5940f the Prisons Act, knowingly suﬂers any prohibited article to be introduced into or remove from any prison, to be possessed by any prisoner, or to be supplied to any person outside the limits of the prison, or communicates or attempts to commu- nicate with any person or abets in such an offence, is made liable to imprisonment for a term not ex- ceeding six months, or to ﬁne not exceeding rupees zoo/-, or to both. ' Z01 '3'-MVI Li?

5. The Reformatory Schools Act, 1897 (8 of 1897).

6. The Income-Tax Act, 1961 (43 of 196i) .7. The Customs Ac_t,_ i962 (52.of 1962);, _ ,-'3 Section 27 (later part).

Section 280 read with A section 137(2).

(1) 1332(1) If an 139(2)

(iii) 136(3), Any oﬂicer or person incharge of a reformatory school who, contrary to any rule made under section 26 01 this Act, knowingly suifers any prohibited article' 'to be introduced into or removed from any reformatory school or contrary to any such rule, communicates or attempts to communicate with any youthful offender outside the limits of the reformatory'sch_ool or abets in such offence; is made liable to imprisonment for a term not exceeding six months,-or with'ﬁne?I.1ot exceeding Rs. 220/--, or to both.

public servant who discloses any particulars, the disclosure of which is prohibited by section 1137,' is' made punishable with imprisonmentwhich _' may iex-'3 tend to six months, and also to ﬁne. ' any oﬂicer of Customs enters into or acquiescesyifi any agreement to do, abstain from doing, permits, conceals or connives at any act or thing whereby any duty of customs leviable on any goods or things' pro- hibited for the time being, enforced under this Act,' may be evaded, he is made punishable with imprison'- ment for a term which may extend to two years', or with ﬁne or with both. * if any officer of Customs corruptly requires any 'person:

to be searched for goods 'liable to consﬁcation or any document relating thereto, or wrongfully arrests any person or wrongfully searches or authorises any other officer of Customs to search any place, he'is made"

punishable with inprisonment for a term _ _ which may extend to six months, or Wlth ﬁne, or with both.

If any ofﬁcer of Customs wrongfully discloses any particulars learnt by him in his official capacityrin respect of any goods, he is made punishable with APPENDIX 3 (conc1d.) I '2 3 The Customs Act, 1962 (52 of I 962)--coutd.

8. Theﬁiariipur (Sale of Motor Spirit & 27 Lguébgicants) Taxation Act, 1962 (55 of 1 2 .

9. The Indian Forest Act, 1937 (16 of 1931) 63 to. The Factories Act, 1948 (63 of 1948) . 96 imprisonment for a term 'which may "extend mﬁh months, or with ﬁne, or with both.

If any oﬂicer or person exercising *t1ndét'i!'Iic Act, wrongfully enters or searches, or cattses "tb'-b'e entered or searched, any building, vessel, vehicle or building; or vcxatiously or unnecessarily 'seizes the property of any person; or vatatiouslywind "un- necessarily detains or searches any person, he*is nude punishable with ﬁne-which may extend to R3,:-jedlw.

Any forest oﬁicer or police oﬂioer vého and unnecessarily "seizes any on Tpfﬂﬁnit of seizing property liable to-conﬁscation under this Act, is punishable with imprisonment witch any extend to six months, or with 'ﬁne 'which Why extend to Rs. 500/--, or with both.

Whoever (including a public servant) 'routine: or discloses to any person the results of of the Government Analyst, made 'under 's6ctiI$II'--9I except in so far as they may be neo'essat'y"for7the]3Im- poses of a prosecution for any oﬁeﬂce ' under this Act; 'is made punishable with 'imprison- ment which may extend to three months, 'or Vlilh ﬁne, or with both.

II. The Estate Duty Act, 1953 (34 or 1953) I3; The Wealth Tax Act, 1957 (27 of 1957)

13., The Expenditure Tax Act, 1957 (29 of 1957)-

I4. The Gift Tax Act, 1958 (18 of 1958) The provisions of section 54 of the old 'Indian Income- tax Act, 1922 which made penal the disclosure by any public servant of any particulars contained in any statement made or return furnished or accounts or documents produced under the provisions of that Act or in any evidence given or aﬂidavit or deposition made in the course of any such proceeding under that Act or in any record of any assessment proceed- ing or any proceeding relating to the recovery on demand prepared for the purposes of that Act, had been made applicable to the Estate Duty Act, I 1953- 42(t) This is similar to section 80 of the Estate Duty Act and makes the provisions of section 54 of the (old) Indian Income-tax Act, 13922 applicable to this Act.

38(1) This is similar to section 80 of the Estate Duty Act and makes the provisions cf section 54 of the old Indian Income-tax Act, n922 applicable to this Act.

»4l,(&'7) This is similar to section 80 of the Estate Duty Act and makes the provisions of section 54 of the old Indian Income-tax Act, 1922 applicable to this Act.

' S 7 APPENDIX 4 EXISTING STATUTORY PROVISIONS REGARDING OFFENCES IN THE NATURE BREACHES OF CONTRACTS RESULTING IN DELIVERY OF GOODS NOT ACCORDING TO SPECIFICATIONS.

There are no direct provisions penalising such breaches of contracts for delivery. But these may be noted:----

Section 420, Penal Code ---- Punishes "cheating".

Rule 125(3)(dd), Defence of Authorises the making by the Govern- India Rules, 1962. ment of an order for securing the pro- duction, manufacture, supply or sale, according to the prescribed standards and speciﬁcations of any article or thing which appears to the Govern-

ment as essential to any of the pur-

poses spcciﬁed in Rule 125(2).

The various enactments relating These would be relevant for the use of to weights and measures (listed false weights or measures. in the Second Schedule to the Standards of Weights and Mea-

sures Act, I966).

Section 5, Indian _ Standards This would be relevant for goods falsely Institution Act, 1952 read with bearing the standard mark.

Iection 13. See also the Agri-

cultural Produce (Grading and Marketing) Act, 1937 and the Drugs Act, 1940.

'. Sn B1nwariLal-v.Staze A.'I.R. I963 S.C. 162.

at é"

106

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Soﬁa:

bacon cocoom oﬁmo EU c3&um _..8< 05.8 one Z UZH.HmMm<u>H:MU¢:Hm_ D24. wz.Em<om OH. m< mzoHwH>omm .wmoeP~<am ozﬂmunm m NHQZHmnH< The Essential Conmxodities Act, :95: (:0 of I955)-(an-at) I. The Industries (Devdapnut I5 at;d.Re§u1anon.Act,_3 1.95; (6.5 o 1951 .

1111} APPENDIX 5 (contd-) Section 3(1)---

"If the Central Government is of the opinion that it is necessary to do so for controlling the rise in prices, or preventing the hoarding of any foodstuff in any locality it may, by notiﬁcation, direct that notwithstanding anyting contained in sub-section 3, the price at which.

afoodstnffshaﬂbe soldinthat locality in compliance with an order made with reference to clause (f) of sub-section 2, shall be regulated in accordance with the provision of the sub-section.

Section I 5 empowers the Central Govern- ment to conduct an investigation into the affairs of a scheduled industry under cer- tain speciﬁed contigencies.

Section 16(1) provides that if by virtue of such investigation, the Central Government is satisﬁed that some action is desirable, it may issue directions to the said industries which may include "controlling the prices, or reguhtingthe distribution of any article Section 24 prescribes peuhies for violation of such direc-

tions: imprisonment extending upto six months or with ﬁne extending to Rs. 5,000 or with both An additional ﬁne may be levied for continuing contravention.

901

or class of articles which have been the cubiect--matter of the investigation".

A Sectoin I8-A provides that where such a direction is not complied with or where it is considered to be detrimental to the scheduled industry or to the public inte- rest, the management of the industry may b,e'ta._ken under the control of the Govern- ment.

[I-G (I) The Central Government, if it considers necessary or expendient for securing the eriuitable distribution and availability at fa' r prices of any article or class of articles, may' provide for regulating the supply and distribution thereof and commerce therein.

(a) In particular, the Central Government may order for controlling the prices at which any such article or class thereof may be bought or sold ; for regulating by li-

cences, permits or otherwise the distribu- tjon, transport, disposal, possession of any such article; for prohibiting the with- Vrayygal from sale of any such article or class thereof ordinarily kept for sale ; for requiring any person manufacturing, pro- ducing or holding in stock any such article to sell the whole or part of the article to such persons as may be speciﬁed in the .or.dcr;_ for requiring ex.h.ib_i_I.i9.I! of Q35 P|'iC.€t11§t etc-

" APPENDIX 5 (contd-) I 2 3 4 3- The TeaACt; I953 (29 of 1953) 30 Section 30 of this Act closely follows the Section 41(1) prescribes similar provisions of the Industries (Development punishment as is prescribed & Regulation) Act, 1951 as referred to under section 24 of the Act 65 above. of 1951 referred to above with i this diiference that this Act does not prescribe additional penalty for continuing con-

' . travention.

.1. The Cotton Cloth Act, I918 _,_The "object of the Act is to encourage and (23 0fI9I3)- "* maintain the supply of cloth to poorer classes at reasonable rates.

4(2) Section'4(2) empowers the Collector toiissulc Section 8 prescribes punishment orders inter aiia requiring any person;who for contravention of section 4 ordinarily manufactures cotton cloth, to with imprisonment upto six manufacture standard cloth in such quan-- months or with ﬁne or with t' tity and of such quality as the Collector both.

may direct and ﬁxing the prices to be paid' to the manufacturer for standard "cloth.

9(1) Section 9(1) empowers the State Govern- Section 10(2) punishes those con- mentto .''fix the price at which alone a travening sub-section 10(1) standard cloth or any class of standard with imprisonment which may L. cloth shall be sold to the public". extend to six months or with 4 ﬁne or with both.

I (1) No person shall sell-orkeep or offer ;or ex- 'pose.f'er- sale to the public, standard cloth (7 of it' 5 'ii

5. 'Qof'_f_e_e Act, 1942

6. The Preventive Detention Act, 1950 (4 of 1950).

otherwise than at which price as may be ﬁxed by the State Government. . . ..

The Central Government may ﬁx the prices at which coffee be sold wholesale or retail in the Indian market. No one can sell coffee at a price higher than the one ﬁxed under this section.

'Section 25 provides that any excess coffee produced, shall be delivered to the Board V I for inclusion in the surplus pool.

'V n 3(I)(a)(iii) The Central Government or State Govern- ment may, with a view to prevent a per- son from acting prejudically to "the main- __ tanance of supplies, and services essential Eto the community", direct that such a per- son shall be detained. Section 3(2) enumerates some other competent au- thorities to exercise similar powers.

Section 13 empowers the Government to

7. The Rubber Act, 1947 (24 of 13 V 1947), "i w''.''*} ' ﬁx_ the maximum or minimum prices or I' .2 .4-za . ., .',:--..;t~z.:=.:'?{'.r "tft".si:"' the maximum and minimum prices to be charged in the course of a business of any ' ' ~ * ' class of rubber speciﬁed in the order. Hy"-"":' "<'~r"/t"I'.w- "*1 * =3 r . -\ _ . .;'_ m:

r.

Section 6(1 )» prescribes penalties for violation inter alia sections 1,6-I7. _ The punish:

Inent may ext end upto a ﬁne of Rs. 1,000.

Section 38A prescribes punsish-- ment for violation of section 25(1) : ﬁne upto Rs. 1,000, and the excess produce may also be conﬁscated.

Section 15(3) states that: any person who buys, or sells rub-

ber at a price 'which.is more than the maximum price or less than the minimum price, shall be punishable with im-

prisonment for a' term which may . extend to one year or with ﬁne or with both.

APPENDIX 5 (concl(i.) I .........

"_.:_..a_\

8. The Drug: (Control) Act.

3950 (26 of 1959).

9 1934 Section 4 empowers the Chief Commissioner to ﬁx, in respect of any drug, the maxi- mum price or rate to be charged by a dealer or a producer; the maximum quantity which may, at any time, be possessed by a dealer or a producer.

Section 5 prohibits sale of such drugs at a price higher than the ﬁxed rate or to hold more than the quantity of the drugs ex- ceeding the maximum quantity ﬁxed by the Chief Commissioner under section 4.

Section 7 requires that excess stocks should be reported to the Chief Com- missioner.

Section 8 prohibits the refusal to sell within the quantity prescribed.

Section 3 empowers the State Government to declare any area to be controlled area, ﬁx a minimum or maximum price of su-

85:11.' 03."? etc-

Section I3(t) prescribes that if any one V{.1018.I§a the provision of the Acts shall. be punlahe able with imprisonment for a term which may extend to 3 years, or with ﬁne, or with both.

Section 13(2) further empowers the competent Court to order the forfeiture.

Section 5 states that whoemg pu_rcha§és su/ cane atpa knot price than t_ 'I: one. prescribed.

shall be punished with ﬁne which may extend to R:

2,000.

,- of lnﬁg ﬁg, ﬁcction 3(2)(37) empowers the'Central Gov-

zo. The Ddbv 'K 1*; ($1 qfvggz), emment to frame rules for the preven-

tion of hoarding, proﬁteering, black-mar- keting, adulteration or any other unfair xeqticcs. in relation to any goods procured y, or supplied to the Government or noti- fied by or under the rules as essentialto the life of the community". Rules 125(2)

(a).(b) (bb) (be) (c) of the Defenceof India Rules, 1962 may be seen.

APPENDIX 6 EXISTING STATUTORY PROVISIONS RELATING TO ADULTERATION OF FOOD AND DRUGS

1. Indian Penal Code (45 of 1860) Section Marginal note Relevant text 272 Adulteration of food or Whoever adulterates any article of food drink intended for sale. or drink, so as to make such article noxious as food or drink, intending to sell such article as food or drink, or knowing it to be likely that the same will be sold as food or drink, shall be punished with imprisonment of either description for a term which may extend to six months, or with ﬁne which may extend to one thou-

sand rupees, or with both.

273 Sale of noxious food or Whoever sells, or offers or exposes for drink. sale, as food or drink, any article which has been rendered or «has become noxious, or is in' a state unﬁt for food or drink, 'knowing or having reason to be1_ieve,,thatathe~asame is noxious as fo6d-- or drink,'shall~be punished with imprisonment of either description for a term which may extend to 6 months or with ﬁne which may _extend to one thousand rupees, or with both.

- 274 Adulteration of drugs. Whoever adulterates any drug or ma- dical preparation in such a man' r as to lessen" the efficacy or cha e the operation of such durg or mediggl preparation, or to make it noxioﬁs, intending that it shall be sold 751' used for, any medicinal purposeﬁgs;-if it had not undergone such ad§_té"r- ation, shall 'be punished with~i1§-- prisonment - of either descriﬁiii for a term which may extend to:§§ months, or with ﬁne which ;;m'ay extend to one thousand rupeeg7"_§r with both. i - 4.

114 ' ""

-'.AP:PENDIX 6'('<.=or1Id-D. Section Marginal note Releiiant ' text 275 Sale of adulterated drugs.

:76 Sale of drug as a different drug or preparation.

284 Negligent conduct ewith Whoever, knowing any drug or me-

dical preparation to have been adulé terated in such a manner as to lessen its eﬂicacy, to change its operation or to render it noxious, sells the same, or offers or exposes it for sale, or issues it from any dispensary for medicinal purposes as unadulterated, or causes it to be used for medicinal purposes by any person not knowing of the adulteration, shall be punished with imprisonment of either description for a term which may extend to six months, or with ﬁne which may ex-

tend to one thousand rupees, or with both.

Whoever knowingly sells, or offers or exposes for sale, or issues from a dispensary for medicinal purposes, any drug or medical preparation, as a different drug or medical preparation shall be punished with imprisonment of either description for a term which may extend to six months, or with ﬁne which may extend to one thou-

sand rupees, or with both.

VVV/hoever, does with any poisonous respect to poisonousrsubi substance, any act in a manner so stance.

rash or_ negligent as to endanger human life, or to be likely to cause hurt or injury to any person, or knowingly or negligently omits to take such care with any poisonous substance in his possession as is suﬂicient to guard against any pro- bable danger to human life from such poisonous substance, shall be punished with imprisonment of either description for a term which may extend to six months, or with ﬁne which may extend to one thou-

sand rupees, or with both.

ii! 7 : 3 (ﬂntt)

3. Prwention of Food Adulteration Act, $1,954 (37 of I954) Section Marginal note Relevant text 16 Penalties (<1) (5) (C) (4) (4)

(i) for the first (if) for a (I) If any person-

Whether by himself or by any person on his behalf imports into India or manufactures for sale, or stores, sell: or distribute:

any article of food in contra-

vention of any of the pro-

visions of this Act or of any rule made there under, or XXX XXX xxx xxx being a manufacturer of an article of food, has in his possession, or in any of the premises occupied by him, any material which may be employed for the purpose of adulteration, or being a person in whose safe custody any article of food has been kept under sub-section (Def section 10, tampers or in any other manner interferes with such or an I58 he shall, in addition to the pen-

alty to which he may be liable under the provisions of section 6, be punishable-

olfence , with imprisonment for a term which may extend to one year, or with ﬁne which may extend to two thousand rupees, or with both.

second offence, with imprisonment for a term which may extend to two years and with ﬁne :

m.

APPENDIX 6 (nook!-_) Section Marginal note Relevant text 16 (cantd.) I7 Penaltzies (comd.) Offences by Companies.

Provided that in the absence of special and adequate reasons to the contrary to be mentioned in the judgement of the court, such imprisonment shall not be less than one year and such ﬁne shall not be less than two thou-

sand rupees,

(iii) for a third and subsequent offences, with imprisonment for a term which may extend to four years and with ﬁne:

Provided that in the absence of special and adequate reasons to the contrary to be mention-

ed in the judgement of the court, such imprisonment shall not be less than two years and such ﬁne shall not be less».

than three thousand rupeess.

(2) Ifany person convicted of an Oﬁence under this Act Commits a like oﬂ'ence afterwards it shall be law-

ful for the court before which the second or subsequent conviction takes place to cause the offender's name and lace of residence, the oﬁence and the penalty imposed to be published at the offender's expense in such newspapers or in such other A manner as the court may direct.

The expenses of such publication shall be deemed to be part of the cost attending the conviction and shall be recoverable in the 'same manner as a ﬁne.

(I) Wherever 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 111:.

bnsineesofthe company,-in 'APPENDIX <§€(E£>£§tii."} Section Marginal note Relevant text 17 Offences by " as the company,' shall be deemed '(contd.) companies to be guilty of the offence and (comd.) _. shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub--section shall render any such person liable to any punishment provided in this Act if he proves that the offence was committed without his knowledge or that he exercised all due dili-

gence to prevent the commission of such offence.

(2) Notwithstanding anything con-

tained in sub--section (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 oﬂicer of the company, such director, manager, secretary or other oﬂicer shall be liable to be proceeded against and punished .~ . accordingly. Explanation--For the purposes of this section----

(a) "Company" means any body corporate, and includes a ﬁrm or other association of individuals ; and

(b) "director" in relation to ' a ﬁrm means a partner in the ﬁrm.

1'8 Forfeiture of property. Where any person has been convicted underthis Act for the contravention of any of the provisions of this Act or of any rule thereunder, the article of food in respect of which the contra- vention has been committed may be 1"': _'.i 4 . Z7." : forfeited to the Government.

119

APPENDIX 6 _-(contd.)

3. Dangerous Drugs Act, 1930 (2 of 1930) Section Marginal note Relevant text 6 Control of Central Govem-- (I) No one shall manufacture any manu-

ment over manufacture of manufactured drugs.

12 Punishment for contra-

vention of section 6.

16 Enhanced punishment for certain offences af-

ter previous conviction.

47 LaW--9.

(2) The factured drug, other than prepared opium, save in accordance with rules made under sub-section (2) and with the conditions of any licence for that purpose which he may be re-

quired to obtain under those rules.

Central Government may make rules permitting and regula~ ting the manufacture of manufac-

tured drugs, other than prepared opium, and such rules may prescribe the form and conditions of licences for such manufacture, the autho-

rities, by which such licences may be granted and the fees that may be charged therefor, and any other matter requisite to render effective the control of the Central Govem-

ment over such manufacture.

(3) Nothing in this section shall apply to the» manufacture of medicinal opium.or of preparations containing .m0fPhlI1€, diacetylmorphine or co- caine from materials which the maker is lawfully entitled to possess.

Whoever, in contravention of section 6, or any rule made under that section, or any condition of a licence granted thereunder, manufactures any manu- factured drug, shall be punishable with imprisonment which may extend to three years, with or without ﬁne.

Whoever, having been convicted of an offence punishable under section Io, section 12, section 13, or section 14, is guilty of any offence punishable under any of those sections, shall be subject for every such' subsequent olfence to imprisonment which may efitend to four years, with or without e.

120

APP'ENbrx '6 '(cdntd.)

4. Act, £857 (13 of 1857) Section Marginal note Rielevant text fit Conﬁscation of adulterated When opium delivered by a cultivator opium. either to a receiving oﬂicer, or at the sadar factory, is suspected of being adulterated with any foreign substance it shall be immediately sealed up pending examination by the Opium Examiner, and notice of such intended examination shall be given to the cultivator.

If upon such examination the opium shall be found to be so adulterated the Agent on the report of the Exa-

miner may order that it be conﬁscat- ed, and the order of the Agent shall be ﬁnal and not open to question in any Court.

5. Drugs (Control) Act, 1950 (26 of 1950) None.

6. Poisons Act, 1919 (12 of 1919) None.

7. Drugs Act, 1940 (23 of 194°)

-:2 Power of Central Govern- (I) The Central Government may, after ment to make rules. consultation with the Board and after previous publication by notiﬁca-

tion in the Official Gazette, make rules for the purpose of giving effect to the provisions of this Chapter :

Provided that. . . .said rules.

(2) Without prejudice to the generality of the foregoing power, such rules may----

(a) xxx xxx xxx

(b) prescribe the methods or test or analysis to be employed in determining whether a drug is of standard quality;

, 121 ..

APPENDIX B (c'o'ntd'.) Section mal note Relevant text 52' Power of Central Govern- (c) xxx xxx xxx (contd.) ment to make rules (contd.) (d) xxx xxx xxx

(e) xxx xxx xxx

(f) xxx xxx xxx '/ (g) xxx xxx xxx

(h) xxx xxx xxx (1') xxx xxx xxx

(j) xxx xxx xxx 13 Offences .

(k) prescribe the conditions to be observed in the packing in bot-

tles, packages or other contai-

ners, of imported drugs;

(1) xxx xxx xxx (74) prescribe the maximum propor- tion of any poisonous substance which may be added to or contain-

ed in any imported drugs, prohibit the import of any drug in which that proportion is exceeded, and specify substances which shall be deemed to be poisonous for the purposes of this Chapter and the rules made thereunder;

(n) xxx xxx xxx (0) xxx xxx xxx (1) Whoever contravenes any of the provisions of this Chapter or of any rule made thereunder shall, in ad-

dition to any penalty to which he may be liable under the provision of section II, be punishable with im-

prisonment which may extend to one year, or with ﬁne which may extend to ﬁve hundred rupees, or with both.

(2) Whoever, having been convicted under sub-section (1), is again con- victed under that sub-section shall, in addition to any penalty as afore- said, be punishable with imprison- ment which may extend to two years, or with ﬁne which may extend to one thousand rupees, or with both.

(NOTE :--Section- II relates to powers of Customs Oﬂicers under Sea Customs Act, 1978). « I22 APPENDHIFE 6 (contd.) K 's \ Section Marginal note Relevant text '~~.,' I4 Conﬁscation . . Where any olfence punishable under section 13 has been Committed, the consignment of the drugs in respect of which the offence has been com-

mitted shall be liable to conﬁsca-

tion.

17 Misbranded drugs . For the purposes of this Chapter 21 drug shall be deemed to be misbranded--

(a) if it is an imitation of, or substi-- tute for, or resembles in a manner likely to deceive, another drug or bears upon it or upon its label or container the name of another drug, unless it is plainly and con-

spicuously markcd so as to re veal its true character and its lack of identity with such other drug;

(b) if it purports to be the product of a place or country of which it is not truly a product ; or

longs to another drug ; or

(d) if it is so coloured, coated, powdered or polished that damage is con-

cealed, or if it is made to appear of better or greater therapeutic value than it really is ; or

(e) if it is not labelled in the pres- cribed manner 5 or

(f) if its label or container or anything accompanying the drug bears any statement, design or device which makes any false claim for the drug or which is false or misleading in any particular ; or

(g) if the label or container bears the name of an individual or company purporting to be the manufacturer or producer of the drug which individual or company is ﬁcti-

tious or does not exist.

123

APPENDIX 6 (contd.) Section Marginal note Relevant text 18 Prohibition of manufac- From such date as may be ﬁxed by the ture and sale of certain State Government by notiﬁcation in drugs. the Oﬂicial Gazette in this be-

half, no person shall himself or by any other person on his behalf-

(a) manufacture for sale, or sell, or stock or Cxhlblt for sale, or dis-

tribute----

(2') any drug which is not of stan-

dard quality;

(ii) any misbranded drug;

(iii) any patent or proprietary medi- cine unless there is displayed in the prescribed manner on the label or container thereof the true formula or list of ingre-

dients contained in it in a manner readily intelligible to the members of the medical profession;

(iv) any drug which by means of any statement, design or device ac-

companying it or by any other means, purports or claims to prevent, cure or mitigate any such disease or ailment, or to have any such other effect as may be prescribed;

(12) any drug, in contravention of any of the provisions of this Chap-

ter or any rule made there-

under;

(b) sell, or stock, or exhibit for sale, or distribute any drug which has been imported or manufactured in contravention of any of the pro-

visions of this Act or any rule made thereunder;

Piiovided that. . . .the medicine.

124

APPENDI)E'6 (contd.) Section Marginal note 27 Penalty for manufacture, sale, etc. of drugs in contravention of this Chapter.

28 Penalties for giving false warranty or misuse of warranty.

Relevant text Whoever himself or by any other person on his behalf manufactures for sale, sells, stocks or exhibits for sale or dis-

tributes any drug-

(a) deemed to be misbranded under clause (a), clause (12), clause (c), clause (d), clause (f) or clause (g) of section 17 shall be punishable with imprisonment for a term which shall not be less than' one year, but which may extend to three years and shall also be liable to ﬁne:

Provided that the Court may, for any special reason to be recorded in writ- ing, impose a sentence of imprison- ment of less than one year;

(12) other than a drug referred to in clause (a) in contravention of any of the provisions of this Chapter or any rule made thereunder shall be punishable with imprisonment which may extend to three years, or with ﬁne, or with both.

(1) Whoever in respect of any drug sold by him gives to the purchaser a false warranty that the drug does not in any way contravene the provisions of section 18 shall, unless he proves that when he gave the warranty he had good reason to believe the same to be true, be punishable with imprisonment which may extend to one year, or with ﬁne which may ex-

ltjeng to ﬁve hundred rupees, or with Ot .

(2) Whoever applies or permits to be i applied to any drug sold, or stocked or exhibited for sale, by him, whether on the container or label or in any other manner, a warranty given in respect of any other drug, shall be pu- nishable with imprisonment which may extend to one year, or with ﬁne which may extend to ﬁve hundred rupees, or with both.

APPENDIX 6 (contd.) S ection Marginal note R61€V3ﬂt text 30 Penalty for subsequent (I);Whoever, having been convicted of an offences. offence---

(a) under clause (a) of section 27 is again convicted of an offence under that clause, shall be punishable with imprisonment for a term which shall not be less than two years but which may extend to ﬁve years and shall also be liable to ﬁne.

Provided that the Court may, for any special reasons to be recorded in writing, impose a sentence of less than two years;

(b) under clase (12) of section 27, is again convicted of an offence under that clause shall be punishable with imprisonment for a term which may extend to ﬁve years, or with ﬁne, or with both.

(2) Whoever, having been convicted _of an offence under section 28 or sec- tion 29 is again convicted of an offence under the same section shall be punishable with imprisonment which may extend to two years, or with ﬁne, or with both.

(NoT1=..----Section 29 deals with penalty for use of Govt. analysis report for advertising).

31 Conﬁscation (I) Where any person has been con- victed under this Chapter for con-

travening any such provision of this Chapter or any rule made thereunder as may be speciﬁed by rule made in this behalf, the stock of the drug in respect of which the contravention has been made shall be liable to con-

ﬁscation.

(2) Without prejudice to the provisions contained in sub--section (1), any drug in respect of which the Court is satisﬁed, on the application of an Inspector or otherwise and after such inquiry as may be necessary, that the drug is not of standard quality or is a misbranded drug, shall be liable to conﬁscation.

426

APPENDIX 6 (contd.) Section Marginal note Relevant text 32 Cognizance of oﬁences (I) No prosecution under this Chapter shall be instituted except by an Ins- pector.

(2) No Court inferior to that of a Pre- sidency Magistrate or of a Magistrate of the ﬁrst class shall try an offence punishable under this Chapter.

(3) Nothing contained in this Chapter shall be deemed to prevent any per-

son from being prosecuted under any other law for any act or omission which constitutes an offence against this Chapter. ' 34 Offences by companies Same as section 17 of Food Adulteration Act, 1964.

35 Publication of sentence (I) If any person is convicted of an passed under this Act. offence under this Act, it shall be lawful for the Court before which the conviction takes place to cause the- oﬂ"ender's name, place of residence, the offence of which he has been convicted and the penalty which has been inﬂicted upon him, to be pub-

lished at the expense of such person in such newspapers or in such other manner as the Court may direct.

(2) The expenses of such publication shall be deemed to form part of the costs relating to the conviction and shall be recoverable in the same manner as those costs are recover-

able.

APPENDIX EXISTING STATUTORY PROVISIONS AS TO THEFT AND MISAPPROPRIATION OF PUBLIC PROPERTY AND FUNDS The Prevention of Corruption Act, 1947 Name of the Act Section Gist of the section Penalty number (I) (2) (3) (4) I. The Prevention of Corruption 5 Section 5(I)(c) provides that a public ser-- Section 5(2) punishes such a V Act, 1947 (2 of 1947).

vant will be considered to have com-

mitted the offence or criminal misconduct if he dishonestly or fraudulently mis- appropriates or otherwise converts for his own use any property entrusted to him or under his control or allowing any other person so to do.

person with imprisonment for a term not less than one year but it may extend to seven-

years and shall also be liable to ﬁne. A discretion is, how-

ever, given to the court to award a sentence less than one year for any special reason to be recorded in writing. Accord-

ing to section 5(2)A, the amount involved in such a misappro-

priation, will have to be taken into consideration in ﬁxing the ﬁne.

~..._-u-...'... r V on up ..i-..\.»-:~-~.-..- my I...

LZI (I) (2) The Prevention of Corruption Act, 5(3) 1947 (conzd.)

2.. The Criminal Law (Atne'nd~ 61 ment) Act, 1962.

3. 'The Indian Post Oﬂice "Act, 52 1898 (6 of 1898).

Ditto - t 56 APPENDIX 7 (contd.) (3) Section 5(3) introduces a presumption that where an accused or any person on his behalf is in possession of pecuniary re- sources or property disproportionate to his known source of income, he will be deemed to be guilty of misconduct unless he has satisfactorily explained.

Section 61 empowers the State Govern-- ment to appoint special judges to try cor- ruption and misappropriation cases under sections 161-165 and 165A, Indian Penal Code and section 5(2) of the Prevention of Corruption Act, 1947.

- Section 52 states that any oﬂicer who com-

mits theft or dishonestly misappropriates any postal article shall be punished with imprisonment for a term which may ex- tend to seven years and shall also be punishable with ﬁne. Postal article is deﬁned in s. 2(1).

Section 56 makes it an offence for those postal employees who post or put into any postal article without paying the re- quired charges, intending thereby to de- fraud the Government of the postage.

(4)

The punishment may extend to imprisonment upto two years or with ﬁne or with both.

921

4. The Railway Stores (Unlawful Possession) Act, 1955 (51 of 1955)-

5. The Navy Act, 1957 (62 of 1957).

6. The Air Force Act, 1950 (45 of 1950).

36B 52 Section 3 provides that if any person is found in possession of any article of rail- way stores, reasonably suspected of being stolen or unlawfully obtained and cannot account satisfactorily for the same, shall be punished with imprisonment for a term which may extend to ﬁve years or with ﬁne or with both.

Section 67 prescribes that any person sub- ject to naval law, who breaks bulk on board any vessel taken as a prize, with intent dishonesty to misappropriate any- thing therein, shall be punished with im- prisonment for a term which may extend to two years.

Section 36B states that any person, subject to this act, breaks into any house etc. in search of a plunder, shall be punished with imprisonment for a term which may extend to 14 years or such less pun- ishment as is otherwise provided in this Act. If the offence is committed while not in active service, the maximum pun- ishment that can be awarded is seven years.

Section 52 provides that any person subject to this Act, who commits any of the follow- ing offences, that is to say---

(a) commits theft of any property be- longing to the Government or to any Military, Naval or Air Force mess;

«or sit (I) (2) The Air Force Act, 1950 (45 of 1950) (conta'.) Ditto 67

7. The Army Act, 1950 (46 of I950).

APPENDIX 7 (contd.) (3)

(b) dishonestly misappropriates or con- verts to his own use any such pro-

perty; or

(d) dishonestly receives or retains any such property in respect of which any of the offences referred to above, knowing or having reason to believe the commission of such o1Tence.. .. shall be punished with imprisonment extending upto ten years or such less punishment as in this Act is men-

tionéd.

Section 67 makes an attempt to commit any such offence punishable for a term which may extend to one half of the longest term provided for that offence or such less punishment as is mentioned in this Act. But for an attempt to become an offence, some act should be done towards the commission of the offence.

The Army Act contains almost similar pro-

visions as in the Air Force Act, 1950.

See section _36B, section 52 and section 66, (4)

081..

8. The Assam Riﬂes Act, 1941 (5 of I941)-

9. The Central Reserve Police Force Act, 1949 (66 of 1949).

I0. The Indian Forest Act, 1927 (16 of 1927).

11. The Indian Reserve Force Act, 1888 (4 of 1888).

7 "Q"

9] I4 33(1) Section 7 "Q" makes it an offence if a riﬂe man plunders, destroys or damages any property of any kind.

Section 9] provides, inter alia, that every member of the force on active duty, who breaks into any house or other place for plunder or plunders, destroys or damages property of any kind, shall be punishable with transportation for life etc. Section I4 provides that whenever any wea-

pon, part of the weapon or ammunition is lost or stolen, the Commandant may im- pose a collective ﬁne upon subordinate oﬂicers and men of such unit whom he considers to be responsible for such a loss or theft. -

Section 33(1) provides for certain offences some of which partake of the character of theft and misappropriation of public pro- perty. The punishment may extend to six months' imprisonment or ﬁne up to Rs. 5oo or With both.

Section 6 states that if a person belonging to the Reserve Forces, fraudulently obtains any pay or other sum,[contrary to any rule or order, shall, onﬁconviction by Court-

The punishment may extend to one year or with ﬁne up to Rs. 200 or with both.

Martial, be punishablqasithe court under APPENDIX 7 (contd--.) (I) (2) (3) (4) The Indian Reserve Force Act, I888 (conzd.)

12. Administration of Evacuee Property Act, 1950.

.13. The Indian Electricity Act, 1910 (9 of 1910).

:4. The Indian Penal Code (45 of 1860).

32' 39 49 389 the Army Act can award. But this punishment shall be short of death, transportation. or imprisonment exceeding one year.

Section 32 states that any person who un- lawfully converts to his own use any evacuee property, shall be punishable with imprisonment for a term which may extcltlnd to three years or with ﬁne or with bot .

Section 39 states that whoever dishonestly abstracts, consumes or uses any energy, shall be deemed to have committed theft within the! meaning 'of the Indian Penal Code and the existence of artiﬁcial means for such an abstraction shall be presumed to be evidence of such an abstraction.

Section 49 extends the application of section 39 to cases where the energy is supplied to works belonging to Central or State Governments.

Section 389 provides that whoever, being a clerk or servant, commits theft in respect of any property in the possession of his master or employer, shall be punished with imprisonment of either description for a term which may extend to 7 years and shall also be liable to ﬁne.

405 Section 405 provides that whoever, entrust-- Section 406 prescribes punish- ed with property, dishonestly misappro- ment for criminal breach of priates or converts to his own use that pro trust: imprisonment of either perty or dishonestly uses or disposes of descri'ption for a term which the property in violation of any direction may extend to 3 years, or with of the law etC., he will be deemed to have ﬁne, or with both. committed criminal breach of trust. One of the illustrations given under this secticn is: "A, a revenue officer, is entrusted with public money and he is directed by law, or bound by a contract, expressed or implied, with a Govermnent to pay into certain treasury all the public money which he holds. A dishonestly appropriates the money. A has committed criminal breach of trust."

407 Section 407 provides that whoever, being entrusted with a property as a carrier, wharﬁnger or warehouse-keeper, commits criminal breach of trust in respect of such property, shall be punished with impri- sonment of either description for a term which may extend to seven years and shall also be liable to ﬁne.

408 Section 408 states that whoever, being a clerk or servant, entrusted in such capacity with property commits criminal breach 0t APPENDIX 7 (concld.) (I) (2) (3) (4) The Indian Penal Code (45 of 1860) (contd.) I 5. The Indian Telegraph Act, 1885 (13 of 1885).

409 25

25A 27 trust in respect of that property, shall be punished with imprisonment of either description for a term which may extend go seven years and shall also be liable to ne.

Section 409 provides that whoever, being in any manner entrusted with property in his capacity of a public servant etc., commits criminal breach of trust in respect of that property, shall be punished with impri- sonment for life or imprisonment of either description for a term which may Extend to ten years, shall also be liable to ne.

If any person intending, inter alia, to commit Punishment may extend to im-

mischief, damages, removes, tampers with or touches any battery, machinery tele- graph lmes etc., it is an offence.

Section 25A makes provision for punishment and ﬁne against those who wilfully or negligently damage any telegraph mater- ial.

Section 27 punishes telegraph officers who, with an intention to defraud Government, send messages without paying the required charges.

prisonment upto three years, or with ﬁne, or with both.

The punishment may extend to imprisonment upto three years, or with ﬁne, or with both.

vet 33 Section 33 makes provision for appointment of additional police force in those areas where wrongful damage to telegraph property is repeatedly and maliciously committed. The expenses involved in _the employment of such police force are to be borne by the inhabitants of such place.

Section 5 provides that whosoever is in possession of any quantity of telegraph wires shall be punishable, unless he proves that they are in possession lawfully.

16. The Telegraph Wires (Unlaw- 5 ful Possession) Act, 1950 (74 of 1950)-

The punishment may extend to imprisonment upto 5 years, or with ﬁne, or with both1.

' The oﬁence is regarded as graver than theft. See Banchhanidhi v.

State A.I.R. 1959 Orissa para IO.

177: 179;

APPENDIX 8 Exrsrmc STATUTORY PROVISIONS RELATING TO TRAFFICKING IN LICENCES, PERMITS, ETC.

There are no direct provisions on the subject of traﬂicking in licenses, The provisions of the following enactments, however, may be noted.

Industries etc. Act, 1951 Sections 11, 11 (a), 12 (2'), 13, 18 (G) (I)(b), read with section 24 which is the general penalty section, and section 24A, which is the penal section or false statements. See also section 30 (1), (1'), (j), (k), (I), (m) and (n).

The Imports and Exports (Control) Contravention, etc., of an order made:

Act (18 of 1947) section 3(1) under the Act or any condition:

read with section 5 which is the of a licence granted under any penalty section. such order is an offence 'punish-A able with an imprisonment upto one year or with ﬁne or with both. The previous decisions as to whether a breach of condition of a licence would amount to an offence'-9 are now' obsolete after the amendment Act (4 of 1960). The goods can also be conﬁscated under section 3(2) read' with the Customs Act. See A.I.R. 1957 S.C. 648 on this point.

The Foreign Exchange Regulation Act (7 of 1947) section 4 (1), section 8(1), sections 21 _and 22 (contracts in evasion of the Act, and false statement)- Pergalty is dealt with by section 23 for various situations, and also by section 23 .

NOTE :--Some_times such offences may fall under sections 420, 467, 457 I.I'.C- also, if permit books have been tampered with3.

1A.I.R. 1957 Cal. 83.

'A.I.R. 1957 Cal. 606.

"Cf. State of A. P. v. Subbaiah A. I. R. 196x 136 APPENDIX 9 PROVISIONS or THE DEFENCE or INDIA RULEs----I962 RELEVANT OR ANALOGOUS TO THE OFFENCES IN QUESTION Rule I Gist 2 35(6)00,G)UL(kL(U,OnL(ﬂL

(o) and (s).

36 37 41

I25 Certain "prejudicial acts".

Sabotage.

Receiving of sabotage property.

Prohibition of prejudicial acts, publi- cations and communications (punish- ment is imprisonment) upto ﬁve years or ﬁne, or both. .

General control of industry. Under sub--rule (9), penalty for contravention of an order under thi imprson ment upto three years or ﬁne or both- If the contravention is made by re-

sorting to any corrupt practice or other rnalaﬁde action or by inducing any person to abuse his authority, then imprisonment may extend to seven years. Forfeiture to Govern- ment of the property in respect of which an order passed under the rule is contravened, is allowed for if the order so provides.

Defence of India Rules I26A to I26Z I32 133 Gold Control Rules.

Prohibition regarding coins and notes. This is to be read with s. 13, Indian Coinage Act, 1906 (3 of 1906).

Regulation of dealings in security. (Government securities are deﬁned in section 2 of the Public Debt Act, I944)» 137 APPENDIX 10 LIST or CENTRAL Acrs PERTAINING TO ANTI-SOCIAL OFFENCES, OTHER THAN OFFENCES LISTED BY THE SANTHANAM COMMITTEE . Child Marriage Restraint Act, 1929 (19 of 1929).

. The Children (Pledging of Labour) Act, 1933 (2 of 1933), and other Acts regarding labour.

. The Drugs and Magic Remedies (Objectionable Advertisemens) Act, I954 (21 of I954)-

. The Untouchability (Offences) Act, 1955 (22 of 1955).

. The Spiritous Preparations (Intcr--State Trade and Commerce) Con-

trol Act, 1955 (39 of 1955).

. The Prize Competitions Actl, I955 (42 of 1955).

. The Young Persons (Harmful Publications) Act, 1956 (93 of 1956).

. The Orphanages and other Charitable Homes (Supervisions and Control) Act, 1960 (10 of 1960).

. The Dowry Prohibition Act, I961 (28 of 1961).

' See State V. Bermet Coleman 59' Co. A.I.R. 1954 Born. 213.

138

APPENDIX I I PROVISIONS or THE INCOME-TAX ACT, 1961 (43 OF 1961) REFERRED TO IN REPORT OF THE COMMITTEE ON PREVENTION OF CORR'UPTION----PAGE 271 (MIDDLE) AS OFFERING SCOPE FOR EVASION Section Number Gist of the Section (I) (2) 10(3) Excludes from total income receipts of casual and non--recurring nature (un- less they are capital gains or receipts arising from business or exercise of a profession or receipts by way of addition to the remuneration of an employee).

10(4) Excludes from total income in the case of non--residents income from interest etc. on bonds issued by the Central Government under a loan agreement with the international bank etc. or bonds similarly issued by a Financial Corporation etc. 11 Excludes from total income (subject to the provisions of sections 60 to 63) income from property held for chari- table or religious purposes.

13 Excludes the application of section II in certain cases (roughly speaking in respect of property held for a private religious purpose, where the trust does not ensure for the bene- ﬁt of the public, and trust or charitable institution created for the beneﬁt of any particular religious community or caste or for the author of trust or his relative).

37 Allows expenditure (subject to certain exceptions) laid out or expended wholly and exclusively for the pur- poses of the business or profession.

I3 140 APPENDIX 11 (contd.) (2) 52 54 57 68 69 73 74 92 93

94. m4 Deals with acquisition of capital asset from an assessee, where the person acquiring is directly or indirectly connected with the object of avoidance or reduction of the liability of the assessee under section 45. Section 45 provides for charge of income-tax or capital gains.

Provides that all income--arising by virtue of a transfer whether revo-

- cable or not, shall be chargeable to income-tax as the transferor's income where there is no transfer of the assets (as to the meaning of "transfer", see section 63).

Provides that in computing the total income of any individual, there shall be included all such income as arises directly or indirectly to the spouse or minor child of such in-

dividual through membership of a ﬁrm or from assets transfered to the spouse or minor child.

Deals with method of computing a partner's share in the income of the ﬁrm.

Deals with cash credits.

Deals with unexplained investments. Deals with losses in speculation business.

Deals with losses under capital gains.

Contain special provisions relating to avoidance of tax, mainly in relation to non-residents and in relation to sale or purchase back of securities, and other transactions involving securi- ties.

Deals with super tax on undistributed mcome.

APPENDIX 12 SUMMARY or CERTAIN POINTS AS TO TAX EVASION EIc., DISCUSSED IN THE REPORT or INCOME-TAX INVESTIGATION COMMISSION, 1949 PRESIDED OVER BY SHR1 VARDACHARIAR he Incomc--tax Investigation Commission, constituted under the Taxation on Income (Investigation Commission) Act (30 of 1947); was required to investigate and report on all matters relating to taxa- tion on income, with particular reference to the extent to which the existing law etc.. was adequate to prevent the evasion thereof. Ques- tions 33 to 37 of the Questionnaire issued by the Commission (pages 269 and 270 of the Report) speciﬁcally dealt with certain matters concerning evasion. In its Report the Commission dealt with evasion and avoidance at various places. The important points are sum-

marised below:

Page of the Report Gist 7 . . . . . Distinction between avoidance and " evasion "

>79 to 83 (paragraphs 181 to 183) Avoidance and evasion.

Under-statement of income on re-

turns described as one of the principal ways of practising fraudulent eva-

sion.

See also page 21, paras. 47, 86, and 193.

Z~Pages 103 to 105, paras. 231 to 236 Income-tax offences.

141. APPENDIX I 3 ' POINTS AS TO EvAs1oN AND AVOIDANCE DISCUSSED IN THE REPORT OF THE TAXATION ENQUIRY COMMISSION (1953-54) (1) (2) Report, Vol. II, pages 189 and 190, Evasion i.e. deliberate distortion of paras. I to 6 (contain a general facts after the liability is incurred discussion on the subject), as to and avoidance zle. so arranging One's income tax. affairs before the liability is incurred so as to prevent its occurrence or to reduce the incidence of the tax have been discussed.

Avoidance, though legal, wasregarded, as anti--sOcial. It was suggested, that the Department should keep a vigi-

lant eye on inroads into revenue by avoidance, so that prompt reme-

dial action by legislation is taken by Government.

As regards evasion, it was stated that it could be tackled effectively only by improving and strengthening the enforcement machinery, the existing arrangements were reviewed under the following heads :--

(i) administrative measures adopted' for tracing 'new' assessees (i.e. those who have taxable incomes but fail to send in returns), and for verifying the accuracy of the returns submitted by exist-

ing assessees, by

(a) external survey;

(17) exchange of information collected from the records of existing assessees available in the In-

come-tax Department;

side sources (including infor---- mers);

142 143

APPENDIX 13 (contd) (I) (2) Report, V01. 11, Pages 189 and 190, (ii) Special arrangernems for dealing paras. 1 to 6--(comd.) with cases of substantial eva-

sion; , (iz'z') legal provisions for enforcing 'back duty', z.c., section 34 of the Income-tax Act, etc;

(iv) public censure as a remedy for evasion;

(22) proper representation in income- tax proceedings;

(vi) strict enforcement of collections; and (m'z')vo1untary disclosure of conceal- ments.

Report, Vol. II, page 202, paras. 36 Recommendations were made to in-

and 37 (Income-tax.) crease the maximum limit of penalty to three times the amount of tax.

evaded and to provide that abetment or instigation to evasion should be made an offence punishable as the main offence. It was also observed, that prosecutions under sections 51 and 52 of the Income-tax Act, 1922 were seldom resorted to in actual' practice.

Report, Vol. II, page 320, para. II 'Certain recommendations were made (Customs duties).

Report, Vol. II, pages 353-361, paras. 142 to 197.

I as to the law relating to smug-

gling.

Summarises the various recommenda- tions relating to evasion and avoid- dance. Most of these concern ad-

ministrative matters or topics.

Report, Vol. III, pages 72, 73, 7 , Discusses the reasons for evasion and paras. I9, 20, 21 (Sales Tax).

avoidance of sales-tax. (See also pages 49 and 65, para. 5). At page 72, para. I9, the practice of show-

ing the sales--tax separately in the cash memo is also discussed as a source of evasion. At page 74, the following categories of methods' of evasion are listed:--

(I) Manipulation of accounts; omis-

sion of some of the taxable.-

sales from books and records;

suppression of' other transactions' Report, Vol. III, page 99, para. I2 144 APPENDIX 13 (concld.) (I) Report, Vol. III, pages 72, 73, 74, paras. 19, 20, 21 (sales Tax) (comd.) (2) (Stamp duties).

(2)

(e.g. purchases) in the light of which the sales can be veriﬁed;

under--estimation of production, imports and sales by manufac-

turers and importers ; falsiﬁed, entries in declaration forms and certiﬁcates; showing separately sales of bullion and sales of ser-

vices even when ready--made gold and silver ornaments are sold; and Carrying on business without re-

gistration; splitting up of business so that the turnover may be below the taxable limit;

changing place of business, name of ﬁrm, etc., when assessment becomes due, or disappearing altogether from the jurisdiction of the particular State.

Observes that since stamp duty is levied on the instrument, it is theore- tically possible that the party may refrain from executing the instrument, but the scope of such evasion is very limited, as an instrument would later be required as legal proof. But under-valuing the transaction is a com- mon method of evasion. Another common method was to show a type of instrument which was not in conformity with actual facts (e.g. pro--note instead of a bond). Prac- tice of blank transfers was mentioned as an example of "avoidance".

APPENDIX 14 SUMMARY or THE POINTS MADE IN "INDIAN TAX Rr:roRM" BY MR. KALDOR, DEPARTMENT or ECONOMIC AFFAIRS, MINIS- TRY or FINANCE, GOVERNMENT or INDIA (1956) One of the problems dealt with in the Report of Mr. Kaldor was the problem of tax evasion. The matter' vvas dealt with at pages 103 to 115 of his Report. The possible remedies, considered by him are summarised below:---

(i)_ his proposals or resubmission of a single" per- sonal tax, with a number of diﬁerent taxes which were bound to reduce the "incentive to evade".

(Page 106, para. 189 of the Report).

(ii) Proposal for the submission of a comprehen- sive return concerning the personal income of each tax-payer and the introduction of a reporting system on all capital transactions by means of tax vouchers.

(Page 109, para. 194 of the Report).

(riii) Compulsory auditing of accounts of tax- payers whose income exceeds a certain minimum.

(Page 107, para. 197 of the Report).

(iv) Status and obligations of auditors. (Page 111, para. 198 of the Report).

Mr. Kaldor'-s Report (72) Scrutiny of accounts by the Department. (Page 112, para. 201 of the Report).

(vi) Prevention through deterrents.

(Page 113, para. 202 of the Report). . (mt) Improvement of standards of administra- tion in the Department (Page 114, para. 205 oi the Report). (viiii) Gold hoarding and taxation. (Pages 115 to 120, paragraphs 206 to 218 of the Report). ' APPENDIX 15 T41: §vets.Io.1~1----m1os.::cU":I.oN_-°- In; yon-Egmcgs mm REPORT OF? T138 DIRECT TAXES ADJVIINISTRATION ENQUIRY COMMHTEE (1958-59.), (Pages 150 and 169-170, para. 7.12 and 7.63, 7.64).

_ ''7-12- 009 i1I1P.01.'tant reason for the prevalence of evasion 15 stated to be that in actual actioe no deterrent punish- d ment like imprisonment is bemg. meted out to tax evadérs P 14.5:

Absence of cterrent unishment.

Prosecutions .

146

APPENDIX 15 (contd.) when they are caught. Though the direct taxes Acts pro- vide for prosecution and imprisonment in cases of conceal- ment and false statements in declarations, the Department has not, during the last 10 years, got even a single person convicted for evasion. It is seen that _prior_ to 1939, prose- cutions were being freely resorted to in suitable cases. We feel that unless it is brought home to. the potential tax evader, that attempts at concealment will not only not pay but also actually land him in jail, there could be no effective check against evasion. At present, a tax evader even if caught, has only to pay the tax sought to be evaded and a percentage thereof as penalty. Though the maximum penalty leviable is 150 percent of the tax sought to be evaded such a high penalty is rarely levied. Even the mode- rate penalties levied by the assessing oﬁicers are reduced to nominal sums by appellate authorities. Both these factors, the non-resort to prosecution and the non-levy of deterrent penalties have, no doubt, encouraged the growth of evasion.

"7.63. We have suggested in para. 7.60 that in the matter of levying penalties, a distinction should be made be-« tween the different kinds of defaults and offences, and that the penalties leviable should be speciﬁed in a detailed schedule. In our opinion, a similar distinction 'sho'1'i'Id be made in the matter of requiring the prior approval of the-

Inspecting Assistant Commissioner for levying penalties, and such approval should be obligatory only in cases of more serious offences, where the quanta of penalties levi- able are heavier. Further, the Inspecting Assistant Com- missioner should be statutorily required to give a hearing to the assessees before according his approval to the levy of penalty in such cases. In order to avoid unduly long delays in the ﬁnalisation of penalty proceedings, we also recommend that the law should be amended so as to re- quire such proceedings to be completed within one year of the passing of the relevant assessment order or of the appellate order of the Appellate Assistant Commissioner or the Appellate Tribunal or of the revision order of the Commissioner, as the case may be.

"7.64. Section 51 of the Income-tax Act and the corres-

ponding sections of the other direct taxes Acts provide for the prosecution of a person who fails, without 'reasonable cause or excuse, to deduct taxes at source and pay them to the Government or to furnish such certiﬁcates, returns or statements, or to allow inspections as required under the Acts. He is punishable, on conviction before a magistrate, with ﬁne which may extend to Rs. 10 for every day of de- fault. Under Section 52 of the Income-tax Act, if a person makes a false statement in the veriﬁcation contained in the return of income, the return of dividends, application for registration, 'appeals, etc., he is punishable, on conviction before a Magistrate, with simple imprisonment which may extend to six months or with fine which may extend to» Cf. Sections

427.and 431 Indian Penal Code, Section 126 Railway Act.

147

APPENDIX 15 (concld.) Rs. 1,000 or both. The period of imprisonment. prescribed in the other direct taxes Acts for such offences, is, however, one year."

APPENDIX 16 Exnmcrs FROM THE CRIMINAL Com: or THE HUNGARIAN Proprrjs REPUBLIC, 1962 Section 124 (1) Whoever causes considerable prejudice by his acti- vity in the province of his office, service or public charge in order to undermine or Weaken the state, social or econo- mic order of the Hungarian People's Republic or does so by omission in his duty or by not doing it properly, shall be punished with loss of liberty ranging from ﬁve to twelve years.

(2) Punishment shall be loss of liberty ranging} from ten years to ﬁfteen years, or death, if---

(a) the crime has caused particularly grave pre- judice; ,

(b) the crime has been committed in times of war.

(3) Whoever carries out a preparatory act for sabotage, shall be punished with loss of liberty ranging from six months to ﬁve years and in times of War with loss of liberty ranging from two years to eight years.

Section 125 (1) Whoever destroys, renders useless or damages a public facility, plant, production unit, general trafﬁc, tele- communication plant or equipment, public building or structure, stock of products or produce, war material or other property of similar importance by its purpose, and does so with the aim of weakening the state, social or economic order of the Hungarian People's Republic, shall be punished with loss of liberty ranging from ﬁve years to twelve years.

(2) Punishment shall be loss of liberty ranging from ten years to ﬁfteen years or death, if-

(cz) the crime has caused particularly grave pre- judice;

(b) the crime has been committed causing public danger or in a manner (C) in time: of war.

(3) Whoever carries out a preparatory act for destruc- tion, shall be punished with loss of liberty ranging from six months to ﬁve years and intimes of war with loss of liberty ranging from two years to eight years.

Sabotage.

Destruction.

Abuse of Oﬂicial Power.

Trading in 'inﬂuence.

Crime committed with harmful articles of general consumption.

Traﬂic in drugs.

148

APPENDIX 16 (contd.) Section 144 An ofﬁcial person who infringes his official duty, ex- cf, ceeds his power or abuse his ofﬁcial position in any Way 5 (I)(_ f in order to cause unlawful prejudice or to procure an un- IC":r';upu.°';° lawful advantage for himself or for another, shall be Act, 194;, punished with loss of liberty not exceeding three years. ' and Secuon Section 153 166, Indian Penal Code.

(1) Whoever demands, asks or accepts for himself or for another an advantage for using his real or pretended inﬂu- ence with an oﬂicial person shall be punished with loss of liberty not exceeding three years.

(2) Punishment shall be loss of liberty ranging from six months to ﬁve years if the person trading in such inﬂuence---~

(a) has alleged or pretended that he will bribe an official person or accord an advantage to him;

(b) when committing the act or using his inﬂuence has pretended to be an official person.

Cf. Sections 1637164, Penal Code.

(3) Punishment shall be loss of liberty ranging from two years to eight years if the crime has been committed professionally.

Section 196 (1) Whoever makes or stores with the aim of putting 67- Section into circulation an article for general consumption injurious lﬁﬁfllfclgan to health, shall be punished with loss of liberty not exceed- of Food, ing one year. etc. Act, 1954- (2) Whoever puts into circulation the article deﬁned in para. (1) shall be punished with loss of liberty not exceeding three years.

(3) Whoever Commits by negligence the crime deﬁned in para. (2) shall be punished with loss of liberty or correc- tional-educational work not exceeding one year.

Section 198 (1) Whoever makes, procures, keeps or puts into circula- tion a drug suitable for pathological enjoyment by infring- ing or evading the prescription of the authorities, shall be punished with loss of libel ty not exceeding one year.

(2) Punishment shall be loss of liberty not exceeding three years, if the crime was commi.tted--

(a) professionally,

(b) by a recidivist, or

Cf. Section (35)(5Xi), Defence 0 India Rules 191?}.

149

APPENDIX 16 (contd.) Section 224 (1) Whoever infringes his duty based on law or on a d1s- , . position issued on the strength of law, which duty 11313193 to §§,§',§§;§,-30$ the production, utilization, Cll'CUl8.l'.10I],.d€Cl8.I'3.l210I1, putting with the at disposal, keeping on stock. or handling' of products 01' economy. produce and by doing so causes considerable economic pre- judice, shall be punished with loss of liberty not exceeding three years.

(2) Punishment shall be loss of liberty ranging f1"0m Six f months to ﬁve years if the crime-

(a) was committed by a recidivist,

(b) in respect of a, considerable quantity of products or produce or of products and produce of considerable value.

(3) Punishment shall be loss of liberty ranging from two years to eight years, if the interests of the people's economy were gravely prejudiced by the crime.

(4) Whoever committed the crime by negligence shall be punished with a ﬁne and if the interests of the people's eco- nomy were gravely prejudiced with loss of liberty or correc- tional-educational work not exceeding one year.

Section 225 (1) A worker, authorized to take dispositions indepen- dently, of a state organ, social organization or co-operative, who gravely or systematically infringes the requirements of rational economy, displays an economic activity involving considerable waste of money, material, power or labour, shall be punished with loss of liberty not exceeding three years.

Wasteful Husbandry. .

(2) Punishment shall be loss of liberty ranging from two years to eight years, if the interests of the people's economy were gravely prejudiced by the crime.

(3) Whoever commits the crime by negligence, shall be punished with loss of liberty or correctional-educational work not exceeding one year and, if the interests of the people's economy were gravely prejudiced. with loss of liberty not exceeding three years.

Section 226 (1) Whoever misleads the competent organ of the peo- ple's economy by supplying untrue data, concealing data, Or in 811$' other mé'~nT1€I', in order to obtain the granting of an investment or credit or the approval of the economic plan, or to inﬂuence the distribution of ﬁxed and circulating funds, the ﬁxing of a price 'or to obtain permission of the foreign exchange authority, shall be punished with loss of liberty not exceeding three years.

Misl eading-;, the organs of the people's economy-

Infringement, Obstructing «economic control and collection of economic data.

Misuse of inventions.

'Crime discipline in vinvestments and ﬁnance.

150

APPENDIX 16 (contd.) (2) Punishment shall be loss of liberty ranging from six 'months to live years if considerable economic prejudice was caused by the crime.

(3) Punishment shall be loss of liberty ranging from two years to eight years, if the interests of the people's economy were gravely prejudiced by the crime.

Section 227 (1) Whoever misleads the organ entitled to carry out ' economic control or to collect economic data by supplying untrue data on the management, by concealing data or in any other way, or refuses to comply with the obligatory supply of data or of reports, systematically fails to keep the prescribed accounts and registers or presents in them the prescribed data systematically falsiﬁed, or attempts in any other way to frustrate control, shall be punished with loss of liberty or correctional-educational work not exceeding one year. ' (2) The same punishment shall be inflicted on a person, who takes a hostile measure against a worker for having supplied correct data to the organ mentioned in para. (1).

Section 228 (1) Whoever sends abroad or publishes in Hungary without the permission prescribed by law an invention, or other exploitable technical idea, shall be punished with loss of liberty not exceeding three years, if no graver crime was committed.

(2) Punishment shall be loss of liberty ranging from two years to eight years, if the interests of the people's economy were gravely prejudiced by the crime.

Section 229 (1) Loss of "liberty not exceeding one year shall be in- flicted on ' a person who infringes or evades a duty or prohibition deﬁned in the statutory provisions on the credit system, money circulation and on investment and renewals by--

(a) granting directly or indirectly an unautho- rized credit or making use of such credit,

(b) using for another purpose a credit granted for a deﬁnite purpose or the funds granted for a deﬁ-

-nite investment or renewal,

(c) realizing an investment without permission, 'an investment or renewal with funds from a not per- mitted source or a renewal with funds to be used for :-another purpose, ' 151 APPENDIX 16 (contd.) (0!) diverting totally or partly the cover of the credit, preventing enforcement of the securities of the credit (lien, mortgage, statutory priority to satisfac- tion, assignment, suretyship, etc.) or frustrating in another way satisfaction of the creditor from the cover, .

(e) arranging that wages be paid not to the debit of the wage fund, or that some other payment than wages be made to the debit of the wage fund.

(2) Punishment shall be loss of liberty not exceeding three years. if interests involved in the order _of_ invest- ments and nioney economy were gravely prejudiced by the crime. ! Section 230 (1) A worker in a managerial position or responsible for quality control of an industrial or commercial enter- prise or co-operative, who acts in such a manner that an industrial product of bad quality be put into circulation as a good quality product or does not prevent the putting into circulation of such product in this manner, though obliged so to do by his sphere of activity, shall be punished with loss of liberty not exceeding one year, if no graver crime was committed.

(2) Punishment shall be loss of liberty not exceeding three years, if the crime was committed in respect of a considerable quantity of industrial products or industrial products of considerable value.

(3) Punishment shall be loss of liberty ranging from months to ﬁve years, if the interests of people's economy were gravely prejudiced by the crime.

(4) Whoever commits such a crime by negligence, shall be punished in the case defined in para. (2) with loss of liberty or correctional-educational work not exceeding one year and in the case deﬁned in para. (3) with loss of liberty not exceeding three years.

' "' Section 231 (1) Whoever infringes the rules relating to the ﬁxing of the quality of industrial products, shall be punished with loss of liberty or correctional-educational work not exceed- ing one year, if, as a consequence, a considerable quantity of industrial products or industrial products of consider- able value had been put into circulation included in a higher quality category than laid down by a standard of

-the Hungarian People's Republic or by another binding prescription.

'."'; iv (2) Punishment shall be loss of liberty not exceeding three years, if the interests of the people's economy were gravely 'p'i"ejudiced byvthe crime. P 47 Law--11.

Putting into circulation an industrial product of bad quality.

Putting into cir-

culation an industrial product of bad quality.

152

APPENDIX 16 (contd.) Section 232 """'"8i"'° (1) An industrial product, for which quality require-

Sici;11l?1E:3ia1 ments are ﬁxed by a standard of the Hungarian Peop1e's Product of Republic, shall be deemed to be of bad quality, if it does bad q"3"'Y' not comply even with the lowest quality requirements deﬁned in the standard.

(2) If the quality of an industrial product is not ﬁxed by a standard of the Hungarian People's 'Republic, it shall be deemed to be of bad quality if it does not even comply with the lowest quality requirements deﬁned in the tech- nical speciﬁcation approved by the superior organ or organ otherwise competent for such approval.

(3) If in foreign trade the quality of the industrial pro- duct is ﬁxed not on the basis of the standard of the Hunga- rian People's Republic, such product shall be deemed to be of bad quality if it does not comply with the contrac- tual stipulations, provided that it is for this reason com- pletely unsuitable for performing the conditions of the contract or made suitable only by causing considerable economic prejudice.

(4) In addition to the cases referred to in the above paragraphs such an industrial product shall be deemed to be of bad quality, which cannot be used for its proper purpose or whose usefulness is considerably reduced.

Section 233 False.at- (1) Whoever attests in a quality certiﬁcate or in an- t¢Sta_t10n Of other document guaranteeing quality untrue data on the q""1"Y- quality of products or produce. shall be punished with loss of liberty not exceeding three years.

(2) Whoever commits the crime by negligence shall be punished with loss of liberty or correctional-educational work not exceeding one year.

Section 234 P"'ﬁ"8 ""0 Whoever puts into circulation products or produce with Cf. 8. 5,6 1'§i,0d'°"1auctti;'" a quality mark, standard mark or other mark, with which 13 (produce) the product or produce does not comply or puts into cir- smﬁaﬁnmds, Pr_<t>l'1'id¢<f1al culation or causes to be put into circulation the product or etc. Act, 36 'gaﬁa 3' produce provided not with the mark of the real producer, of 1962- - ' but with that of another, shall be punished with loss of liberty or correctional-educational work not exceeding one year, if no graver crime was committed.

Section 235 Bribersh (1) Whoever asks, demands or accepts an advantage for infringing his duty in his sphere of activity with a state enterprise, other state economic organ or co-operative, shall be punished' with loss 0: libert_y"not exceeding three _ >'ears- , ; ' . - , ' 153 APPENDIX 16 (contd.) (2) Punishment shall be loss of liberty ranging from six months to ﬁve years if----

(a) the perpetrator is a recidivist;

(b) considerable economic prejudice was caused by the crime.

(cl the provisions of section 154 shall also be applied to bribery. ' Section 236 Whoever': Sp6Cl1lRtiOD.

(a) carried on commercial activity or maintains an industrial enterprise without a proper licence, (1)) carried on unjustiﬁed intermediate trade with goods or speculates with them in any manner leading to proﬁteering, shall be punished with loss of liberty not exceeding three years. 'L (2) Punishment shall be loss of liberty ranging from six months to ﬁve years, if speculation was committed-

(a) professionally,

(b) by a recidivist,

(d) in respect of a considerable quantity of goods or of goods of considerable value,

(e) was camouﬂaged to give the impression that the economic activity involved by it had been carried on by a state enterprise, other state economic organ or co-operative within the scope of its regular activity.

(3) Punishment shall be loss of liberty ranging from two years to eight years, if the interests of the people's economy were gravely prejudiced by the speculation and if in this case the crime also falls under para (2), punish- ment shall be loss of liberty ranging from ﬁve years to ﬁfteen years. .

(4) In the cases deﬁned in para (2) and para (3) conﬁs- cation of property may also be applied as supplementary punishment and a recidivist may also be punished with expulsion from certain places of the country.

Section 23 7 (1) Whoever carries on foreign trading activity with- Unauthorised out being properly authorized so to do, shall be punished f°"?'$" mde with loss of liberty not exceeding three years. a°t""ty' (2) Punishment shall be loss of liberty ranging from two years to eight years, if the inerests of the people's economy were gravely préjudiééd b flié crime.

Proﬁteering Defrauding the custo-

mers.

154

APPENDIX 16 (contd.) (3) Whoever commits the crime by negligence shall be punished with a ﬁne and_, if_the interests of the people s economy were gravely prejudiced, with loss of liberty or correctional--educational work not exceeding one year.

Section 238 (1) Wh0ever,----

(a) demands, stipulates or accepts for goods at price higher than that fixed by the authority, or

(b) in the absence of a price ﬁxed by the authori- g ty demands, stipulates or accepts a price including Cf. section proﬁts in excess of an equitable gain, 30X? 3

- 9 . . I04 shall be punished with loss of llberty not exceeding three ;,7(;)§ )%, years. E'I¢n¢ﬂ1_ ' Commodities (2) Punishment shall be loss of liberty ranging from 8'§§.§9I69%5)_ six months to ﬁve years if proﬁteering was committed---- (UL) professionaly,

(b) by a recidivst,

(d) in respect of a considerable quantity of goods or goods of considerable value.

(3) Punishment shall be loss of liberty ranging from two years to eight years, if the interests of people's econo- my were gravely prejudiced by the crime.

(4) In the cases falling under paragraphs (2) and (3) conﬁscation of property may also be inflicted as supple- mentary punishment and if proﬁteering is committed pro- fessionally by a recidivist, he may also be expelled from certain parts of the country.

(5) A person committing the crime by negligence shall be punished with a ﬁne.

(6) The act of a person, who does not exceed the guid- ing price ﬁxed by the authority, shall not be subject to

-para (1) clause (b). .

Section 239 (1) Whoever defrauds the customers in reta-il trade by false weighing, counting or by injuring the quality of goods, shall be punished with loss of liberty not exceeding one year. I (2) Punishment shall be loss of liberty not exceeding three years, if the crime was committed----

(a) professionaly,

(b)_ by a recidivist or P »

(c) if the crime involved considerable loss to the purchaser. ' 155 APPENDIX 16 (contd.) Section 240 (1) Whoever, to the prejudice of public supplies

(a) destroys, makes useless, hides, conceals or utilizes the stock of products or produce at his disposal despite a prohibition by law or by violating the rules of proper economy.

(b) stores, in Felation to his requirements, an excessive quantity of products or produce and there- by creates difficulties for others in obtaining them.

(c) obtains by misleading conduct a licence for the acquisition, putting into circulation or transport of products or produce or speculates with such licence, shall be punished with loss of liberty not exceeding three years.

(2) Punishment shall be loss of liberty ranging from six months to ﬁve years, if the crime was committed---

(a) by a recidivist,

(b) in respect of a considerable quantity or pro- ducts or produce or products or produce of consider- able value.

(3) In the cases falling under para (2) conﬁscation of property may also be applied as supplementary punish- ment.

(4) VVhoever commits the crime by negligence shall be punished with a ﬁne.

Section 241 (1) Whoever,----

(a) counterfeits or_forges money in current tender for the purpose of putting it into circulation,

(b) acquires money counterfeited or forged by an- other for putting it into circulation, or

(c) puts into circulation false or forged money, shall be punished with loss of liberty ranging from two years to eight years.

(2) Punishment shall be loss of liberty ranging from ﬁve years to twelve years, if money forging was committed

(a) in criminal partnership,

(b) in respect of a great quantity of money or money of great value.

(3)Punishment shall be loss of liberty ranging from six months to ﬁve years, if coins were counterfeited or if the quantity or value of the false or forged money is not con- siderable. 9 Crimes relating to public sup-

plies.

Licences.

Money forg-

ing.

Money forg-

mg.

Money forging.

S tamp forging.

156

APPENDIX 16 (Contd.) (4') For money forging, conﬁscation of property may also be inﬂicted as a supplementary punishment.

Section 242 (1) If in the case falling under clause (c), para (1), section 241 the perpetrator had lawfully acquired the false or forged money in the belief that it was genuine, and subsequently recognized that the money was false or forged, punishment shall be loss of liberty or correctional- educational work not exceeding one year.

(2) Punishment shall 'be loss of liberty not exceeding three years, if the crime was committed in respect of a great quantity of money or money of great value.

Section 243 Whoever carries out an act of preparation for money forging, shall be punished with loss of liberty or correc- tional-educational work not exceeding one year.

Section 244 (1) For the application of section 241 such alteration of money withdrawn from circulation, that it should have the appearance of money in circulation, shall be consider- ed counterfeiting of money in circulation, application or removal of a mark serving to show that the money is only valid in a certain country shall be con- sidered money forging, reduction for the precious metal content of money shall also be considered as forging.

(2) In applying sections 241 to 243 money shall mean metal or paper money and bank notes.

(3) Securities issued by the State and other bearer's securities--if in general circulation--shal1 be adjudged in the same way as paper money.

(4) Foreign money and securities shall be granted the same protection, as Hungarian money and securities.

Section 245 (1) Whoever counterfeits or forges stamps with the aim of putting them into, circulation or for use, or acquires stamps counterfeited o_r forged by another person. for the same purpose, shall be punished with loss of liberty not exceeding three years.

(2) The same punishment shall be inﬂicted on a person who puts into circulation or uses false, forged or already used stamps as genuine or unused ones.

(3) Punishment shall be loss of liberty ranging from six months to ﬁve years if stamp forging was committed-

1 F1.) in criminal partnership, 157 APPENDIX 16 (contd.)

(b) in respect of a great quantity of stamps or stamps of great value.

(4) Punishment shall be loss of liberty not exceeding one year, if the quantity or value of the stamps utilized or put into circulation is not considerable.

Secﬂion 246 (1) In applying section 245 the word stamps shall comprise:

(a) stamps intended for postal or ﬁnancial use, which are in circulation, withdrawn from circulation, or not yet put in.to circulation,

(b) stamps in circulation, withdrawn from circu-

Eation, or not yet put into circulation, intended for use in any ﬁeld of activity of the post, postal meter cancellation impressions, special and other overprints, international reply coupons, postal receipts, further any inscription of mark applied by the post in connec- tion with postage, .

(c) state administration prints under strict con- trol, both with stamp impressions and without such impressions, (cl) oiﬁcial marks or seals, serving for taxation, to prove the nature and content of metal, acceptance, quality or quantity of material, or applied by a ﬁnan- cial authority or organ,

(e) sta-mps and seals, used by the office of weights and measures for certifying, gauging, and examination of measuring devices and for marking the volume of barrels.

(2) In applying section 245 putting into circulation shall also mean putting into circulation for stamp collec- tion, and forging shall mean any unauthorized alteration of stamps for collection.

(3) Foreign stamps shall be granted the same protec- tion as Hungarian stamps.

Section 247 (1) Whoever infringes or evades a duty or prohibition deﬁned in statutory provisions on foreign exchange control and in statutory provisions regulating possession and cir- culation of precious metals and objects made from precious metals, shall be punished with loss of liberty not exceeding three years.

_ (2) Punishment shall be loss_ of liberty ranging from SIX months to five years, if the crime was committed.

(a) professionally,

(b) by ac recidivist,

Stamp forging.

Crimes violating foreign exchange control.

Tax Fraud.

Tax evasion.

Custorn_s duty crimes.

158

APPENDIX 16 (contd.) (3) Punishment shall be loss oi liberty ranging from two years to eight years, if foreign exchange control- interests were gravely pI'8]l1dlC€d by the crime.

(4) In the case falling under paragraphs (3) _'c11'1d (3) conﬁscation of property and expulsion from certain parts of the country may also be applied as supplementary punishment.

(5) Whoever commits the crime by negligence in con- nection with considerable value shall be punished with a ﬁne.

Section 248 (1) Whoever,----

(a) presents untruly or conceals before the autho- rity a fact (data) of importance in determining his liability to tax and thereby or by any other type 0}' conduct reduces

(b) by deceiving the authority takes advantage of exemption from taxation or tax allowance, to which he is not entitled,

(c) in the absence of the condition ﬁxed by law, or without official permission, diverts from inland' revenue control, a product or produce reserved to in- land revenue or acquires, hides or helps' to alienate for pecuniary proﬁt a product or produce diverted by another shall be punished with loss of liberty not exceeding three years.

(2) Punishment of the crime shall be loss of liberty ranging from six months to ﬁve years, if committed by a recidivist.

(3) In applying this section, it shall be deemed to in- clude duties.

Section 249 (1) Whoever,----

N (a) diverts dutiable goods from customs duty control or makes to the authority a false declaration relating to circumstances essential for customs of the dutiable goods (smuggling),

(b) acquires, or hides for pecuniary proﬁt smug- gled dutiable goods or co-operates with the same purpose in alienating smuggled dutiable goods (receiv- ing smuggled goods) shall be punished with loss of liberty not exceeding three years.

_ (2) Punishment shall be loss of liberty ranging from six months to five years if the perpetrator is a recidivtst.

159

APPENDIX 16 (coiitd) Section 250 (1) In cases of infringement of duties in connection Conﬁscation. with economy, speculation, proﬁteering, crimes relating to public supplies, crimes violating foreign exchange control and of tax fraud as deﬁned in clause (c), para. (1), Section 248, money or other objects with which the crime was committed and belonging to the perpetrator, shall be con- ﬁscated.

(2) Conﬁscation may also be applied, if the money or other object is not the property or the perpetrator, but the proprietor had previously known that the crime would be committed.

(3) In cases of a customs duty crime the goods in res- pect of which the crime was committed shall be conﬁscated; goods being the property of a state organ or of a co-opera- tive cannot be conﬁscated.

(4) »If the money or other object, in respect of which the crime was committed, cannot be conﬁscated, the perpe- trator shall be obliged to pay the value of the object subject to conﬁscation.

(5) The Court may omit conﬁscation or the obligation on the perpetrator to pay the value subject to conﬁscation. if that would mean for the perpetrator an inequitable prejudice not in proportion with the nature of the crime.

Section 251 Criminal proceedings for the crimes enumerated below Infon:nan'orr.. may only be instituted on information lodged by the organ deﬁned in a statutory provision: infringement of duties in connection with the economy (section 224), wasteful husbandry (section 225), misleading the organs of the people's economy (section 226), obstructing economic control and collection of economic data (section 227), misuse of inventions (section 228), crimes infringing disci- pline in investment and ﬁnance (section 229), putting into circulation and industrial product of bad quality( sections 230 to 232) unauthorized foreign trade activity (section

237), tax fraud (section 248) and customs duty crime (section 249).

Section 252 In applying this chapter---- Explmamry

1. Price ﬁxed by theauthority shall mean the price Provisions. prescribed by the authority or to be applied by virture of a disposition of the authority.

2. Goods shall be deemed also be include industrial or other services of an economic character and price shall be deemed also to include the equivalent (fee) of such services and in general also any valuable consideration of pecuniary value due for the, goods (performance).

Theft Embezzle-

ment.

Fraud Malversation Punishment of theft, embezzle-

ment, fraud and malver--

sation to the prejudice of social property.

Commission to ICDOH a crime to the prejudice of social property.

160

APPENDIX 16 (contd.) Section 291 Whoever removes the property of another with an un- lawful intent commits a theft.

Section 292 Whoever unlawfully appropriates the property of 'another entrusted to him or disposes of it as if it were his own commits an embezzlement.

Section 293 Whoever for unlawful gain induces or keeps another in error or ignorance of the facts and causes thereby prejudice commits a fraud.

Section 294 Whoever being entrusted with the management of another's property causes, violating his duty under such a commission, damaged in such property, commits a malver- sation.

Section 295 ( 1) Whoever commits theft, embezzlement, fraud or malversation to the prejudice of social property shall be punished with loss of liberty ranging from six months to ﬁve years.

(2) Punishment shall be loss of liberty ranging from two years to eight years if the crime was committed

(a) by a recidivist,

(b) in criminal partnership,

Punishment shall be,-

(a) loss of liberty ranging from ﬁve years to twelve years if particularly grave prejudice was caused by the crime;

(b) loss of liberty ranging from ten years to ﬁfteen years or death if particularly grave prejudice was caused by a crime committed in criminal partner- ship or by a recidivist.

Section 308 (1) Whoever obtains credible knowledge that the com- mission Qf a wilful crime to the prejudice of social property is under preparation or that such crime not yet detected has been committed and does not report this to the autho- rities as soon as possible, shall be punished with loss of liberty not exceeding' one year. ' 161 APPENDIX 16 (conc1d.) (2) Under para. (1) a relative of the perpetrator cannot be punished.

Section 298 (1) Whoever, being entrusted with the management §d or supervision of social property infringes or neglects the duty ensuing .f.rom_this commission and thereby causes damage and prejudice to such property, shall be punished with loss of liberty not exceeding one year.

(2) Punishment shall be loss of liberty not exceeding three years, if particularly grave preJud1ce was caused by the crime. ' (3) Whoever manages the property of another by virtue of an ofﬁcial commission or approval (guardian, curator) and while doing so, infringes his duty by negligence, thereby causing a loss in the value of the property, shall be punished with loss of liberty or correctional-educational work not exceeding one year.., APPENDIX 17 EXTRACT or CERTAIN SECTIONS or THE PENAL CoDE or NORWAY ("NORWAGIAN PENAI. Coi)E", 1961) PUBLISHED IN THE AMERICAN SERIES or FOREIGN PENAL CODES.

88. Anybody who, in time of war, fails to fulﬁl a con- tract relating to th-e supplies or the transport of the military forces or a matter of importance to military or civil defence, or is accessory thereto, shall be punished by imprisonment up to ten years. If the act has caused heavy damage to the defence of the country, or the death or serious injury to body or health of another, a maximum of life imprisonment may be imposed.

If the breach of contract results from negligence, the perpetrator shall be punished by ﬁne, or jailing or im- prisonment up to six months.

Anybody who commits such an act against a state allied with Norway, or at war with a- common enemy, shall be similarly punished'. (12-15-1960).

123. If a civil servant misuses his office to violate some- body's rights by undertaking or omitting an official act, he shall be punished by ﬁnes or loss of oﬂice or by imprisonment up to one year.

If he has acted for the purpose of obtaining an unlaw- ful gain for himself or another, or if the felony has pur- posely caused serious injury or a violation of rights, imprisonment up to ﬁve years may be imposed.

'For a study of " White Collar Crime in Norway," see Aubert, " White Collar Crime and Social Structure ". American Journal of Sociology (I952-53), page 265, cited in Reckless, The Crime Problem (1965), page 224.

cm.

162

APPENDIX 17 (contd.)

153. Anybody W ho by breach of assumed obligations or by spreading of false rumours, brings about famine or scarcity of necessities, or is accessory thereto, shall be punished by imprisonment up to eight years.

273. Anybody who spreads incorrect or misleading information in order to influence the prices of goods, securities or other objects, or is accessory thereto, shall be punished by imprisonment up to four years. Fines may be imposed together with imprisonment. Under extreme ly extenuating circumstances, ﬁnes alone may be imposed (5--1l--l95l) APPENDIX 18 EXTRACTS or CERTAIN SECTIONS or THE ARGENTINA PENAI. Coon:

TAKEN FROM THE TRANSLATION PUBLISHED IN THE AMERICAN SERIES or FOREIGN PENAL Cones (1963).

249. Any public ofﬁcial who illegally omits, refuses to do or delays any act of his office, shall be punished by a ﬁne from one hundred to one thousand pesos and special disqualification from one month to one year.

300. Jailing from six months to two years shall be imposed on:

1. anybody who causes the price of any merchandise to be raised or lowered, b~on:l or security to be raised or lowered, by means of false news, ﬁctious negoﬂiations or by connivance or coalition among the principal holders \ of any merchandise or product, with the purpose to sell it only for a ﬁxed price;

2. anybody who, disguising or concealing true facts or circumstances, or affirmatively stating or suggesting false facts or circumstances, offers any bond or security of any corporation or society;

3. any founder, president, manager, or receiver of any corporation or co-operative or any other commercial estab-

lishment, who publishes or authorizes a false or incomplete balance or report regardless of the purpose he had to publish it.

APPENDIX 19 ENGLISH LAW RELATING TO SPREADING FALSE RUMOURS ro AITECT pnrcxs, arc.

At common law, every practice or device by act, cons- piracy, words or news to enhance the price of victuals or other merchandise was held to be unlawful. These prac- tices came under "forestalling" (practices to enhance rices) including ingrossing (buying up standing corn, etc.) for regrating i.e. selling at monopoly prices and 163 APPENDIX 19 (contd.) similar oﬁences. Spreading false rumours was also one example of such practices. The bare ingrossing of a whole commodity in order to sel.l it at an unreasonable price was also an offencel. By a statute of 18443, the several oﬁences of badgering (buying up corn, etc., and carrying them elsewhere for re-sale), ingrossing, forestalling and regrat- ing were abolished. But section 4 of that Act preserved the common law offence of spreading false rumours to enhance or abate the prices of vendible commodities. The section is quoted below :-

"Nothing in this Act contained shall be construed to apply to the offence of knowingly and fraudulently spreading or conspiring to spread, any false rumour, with intent to enhance or decry the price of any goods or merchandise, or to the offence of preventing, or endeavouring to prevent, by force or threats, any goods, wares, or merchandise being brought to any fair or market, but that every such offence may be inquired of, tried. and punished as if this Act had not been made."

APPENDIX 20 POSITION AT ENGLISH LAW REGARDING CERTAIN OFFENCES Bribery and corrupt-,ion.---It is a misdemeanor at com- mon law for an oiﬁcer who has a duty to do something in which the public are interested, to receive a bribe either to act in a manner contrary to his duty or to show favour in the discharge of his functions3. The offence is punishable by fine and imprisonment, whether the bribe is accepted or not. The matter is now provided for in greater detail by several enactments', inc1uding-- .

(i) The Public Bodies Corrupt Practices Act, 188 (52 and 53 Vic., c. '63).

(it) The Prevention of Corruption Act, 1906 (6 Edw. c. 37).

(iii) The Prevention of Corruption Act, 1916 (6 & 7 Geo. 5, c. 64).

(iv) Section 9, Customs and Excise Act, 1952 (15 & 16 Geo. 6, c. 44).

('0) Section 123(2)', Local Government Act, 1933 (23 & 24 Geo. 5, c. 51).

(vi) Sections 171 and 99, Representation of the People Act, 1949 (12. 13 & 14 Geo. 6, C. 68).

zusscn on crimc"{$§é), Vol. 2, page 1688.

orcstalling, regrating, ctc., Act, or Conspiracy Act, 1944 (7 & 8,

24) (now repealed).

chbold (1962), para. 3483. . . .. V =hbold (1962), para 3483, 3484, 3996 and 3953- 164 APPENDIX 20 (contd.) C0nspiracy.--A person may be convicted of "criminal conspiracy" even where the act conspired to be committed would not be an offence if committed by a single person. It is from this point of View that the offence of criminal conspiracy assumes some importance. The generally accepted deﬁnition of conspiracy is that given by Justice Wilkes on behalf of all the Judges, is one case', namely, an agreement of two or more to do an unlawful act or to do a lawful act by unlawful means? The case-law that has developed on this subject has brought out the wide scope of this offence. Of interest for the present purpose are the following conspiracies held to be criminal--

(1') conspiracy to injure the public health, as by selling unwholesome food3;

(ii) conspiracy to combine to violate the provisions. of a statute or statutory rule, etc., where the violation of such statute or statutory rule would be a mis- demeanour at common law or criminally punishable in some speciﬁed manner'.

(iii) conspiracy to do acts contrary to the public amorals. The latest case on the subject is that of Shawi.

Conspiracy to cheat and defraud.--It is stated, that it is really criminal to conspire to commit frauds in trade or public cheats, whether the fraud or cheat, if done by an individual without conspiracy would give only a ground for civil remedies at law or in equity, or would be crimi-

nally punishable. Examples of this conspiracy are combi--

nation of bankers or officers of companies to deceive and defraud their shareholders by publishing false balance- sheets, or'by concealing the insolvency of the bank, and agreements to take part in deceptive schemes in order to raise' the price of stocks and shares above their true value, or to raise the price of commodities by ﬁctious sale'-7.

Conspiracy to prevent, obstruct, pervert or defeat justice.--This falls under three classes: '

(t) conspiracy to make false accusations of C1 imes or unfounded civil claims;

(it) conspiracy to threaten to make false accusa- tions or claims; and 1Mucahy v. R., Law Reports (1868), 3 H.L. 306, 317.

"See discussion in Russell on Crimes (1958), Vol. 1, pages 213 and 215.

'Russell on Crime (1958), Vol. 2, page I703.

4Russell on Crime (1958), Vol. 2, page 1700, and Archbold (1 para 4053.

'Shaw v. Director of Public Prosecugion (1961), 2 W.L.R. 897. case relating to the Ladies Directory).

'Sec cases cited in Russell on Crime (1958), Vol. 2, pages 1712, 17. 1715. I 7See also Archbold (I961), para 4058.

165

APPENDIX 20 (contd.)

(iii) conspiracy to interfere with a fair trial of pending proceedingsl.

Of particular interest is a recent case" where the alleged conspiracy by certain police officers to take rewards to hinder prosecutions by not bringing the offenders before the courts or by warning persons concerned of intended prosecutions was in issue.

Conspiracy or combination affecting trade.--These have been the subject--matter of legislation particularly in rela~ tion to trade disputes. Subject to such legislation, a criminal conspiracy in restraint of trade which has been deﬁned as an agreement between two or more persons to do or procure to be done any unlawful act in restraint of trade (e.g. violence, threats, fraud, or coercion3-4) is punish- able.

How far combinations to monopolise or divert trade would fall within this deﬁnition is a moot question. Criminal prosecutions do not seem to have been under- taken in England in respect of such combinations as being conspiracies in restraint of trade''.

Cheating.--This is an offence at common law in many cases". It is unnecessary to enumerate the various cate- gories. Akin to this offence is an offence of obtaining goods by false pretences governed by section 32 of the zlrceny Act, 19167.. (6 and 7 Geo. 5 c. 50).

Conspiracy.~~See above.

Embezzlement.----Sec section 17 of the Larceny Act, 19163 (fli and 7 Geo. 5, c. 50). These are several other special Acts a so. --

False pretences.--See under cheating.

Food.--At common law it is a misdemeanour to sell food or drink with the knowledge that it is dangerous or -unﬁt for human consumption". The Law on the subject is now contained in Food and Drugs Act, 1955 (4 & 5 Eliz. 2 ch. 16), which consolidates the previous Acts 'Russell on Crimes (1958), Vol. 2, page 1707.

"R. v. Hammersley (I958), 42 Criminal App al R t. ' d ' Archbold (1962), para. 4062. e S epor S' 207 Cue m "Russell on Crime (1958), Vol. 2, page 1719, et seq, 'Russell on Crime (1953), Vol. 2, page 1678.

'Russell on Crime (1958), Vol. 2, page 1679.

"Russell on Crime (1958), Vol. 2, pages 1322 to 1344.

7Russell on Crime (1958), Vol. 2, page 1336 ; Archbold (1962), para I982. ' 9Archbold (1962), para. I7OI.

'Archbold (1962), para. 3735.

166

APPENDIX 20 (contd.) of 1938. 1950 and 1954 and certain other enactments. sec- tions 1 to 12 of the Act are mainly of interest as dealing with otfences committed in the preparation and sale Of injurious food and adulterated drugs, falsity in libel and advertising in food and drugs and sale of goods unﬁt _for human consumption. (The common law offence is classified either as a public nuisance or as a common law cheating).' Fo1'gery.~--Tlie main provisions relating to forgery are contained in section 3 of the Forgery Act, 19132. There are numerous enactments relating to forgery of documents. Of ilicse a few may be noted, namely, section 302 of the Cus- toms and Excise Act, 195-2'. (15 & 16 Geo. 6 c. 44). Sec- tion 36 of the Criminal Justice Act, 1925 (15 & 16 Geo. 5 c. 86) relating to forgery of passport', frauds relating to stamps 1:'-Ie dealt with by section 13 of the Stamp Duties Amend- merit Act, 1891". (54 & 55 Vic. c. 38). Forgery of several public docuinents is specifically dealt with the section 3(2) raid 3(3) of the Forgery Act, 1913 (3 & 4 Geo. 5 c. 27).

Malicious riamage is dealt with in detail by the Mali- cious Damage Act, 1851.

Misconduct by public servants (other than bribery).--- Neglect by public officers' duty imposed on them at com- mon law or /by statute is indictable, and the remedy of criminal information is of interest in this connection".

Misconduct by judicial oiﬁcers in the nature of malfeasance or culpable non-feasance has ﬁgured in several cases'.

Abuses in respect of honours are speciﬁcally dealt with by the Honours (Prevention of Abuses) Act, 19259 (15 & 16 Geo. 5 c. 72).

E'roﬁteering.----Cee Prices of Goods Act (1939) section 1, later Goods and Services (Price Control) Act, 1941 (4 8: 5 Geo. 6 c. 31).

Public mischief.----The offence of conspiracy to commit a public mischief is an offence which has a very wide scope and its deﬁnition is not laid' down by statute. Its exact scope is indeﬁnite, but until the decision in Newland, it was understood that many acts such as dissemination of rumours calculated to cause widespread alarm, and» building 'Russell on Crime, (1958), \lol. 2, pages 1606, 1589, I322. 'ArChb0ld (1962), para. 2166.

"Russell on Crime (1958), Vol. 2, page 1465.

'Ruscll on Crime (1953), Vol. 2, para. I467. ' 5RuSscll on Crime (1958), Vol. 2, page 1463.

°Archboid (1962), paras. 3:1 and 3334.

'Archbold (1962), para. 349x.

*9Archbold (1962), para. 4000.

lo?

APPENDIX 20 (contd.) defective air-raid shelters a1_1d maki1_18 '50 the POFC'? false statements concerning imaginary crimes, fall within the offence of public mischief'.

In the case of Newland", it was held that these offences were part of the law of conspiracy. If the act is committed by an individual and not in c0I1_]LlnCtl0n with others, then it is indictable only if it is an olfence in itself at common law or by statute.

Sabotage.----See "Malicious Damage".

Share pushing.------See section 13 of the Prevention of Fraud (Investments) Act, 1958 (6 & 7 E112. 2 ch. 45). Roughl stated, it punishes a person who, by publishing a mislead}i'ng statement, promise or forecast or by any dis- honest concealment of facts or by reckless statement, etc. induces another person to enter into an agreement for acquiring or subscribing for securities, etc}.

Smuggling.--See the Customs and Excise Act 1952, sec-

tion (45) (1) and section 3044.

Tax.--As various enactments relating to taxation con- tain penal provisions, it would not be possible to summarise them here. But apart from statute, the making of false statements relating to income-tax with intent to defraud the Revenue has been held to amount to a common law misdemeanourt"-'-7. Section 5 of the Perjury Act, 1911 (1 & 2 Geo. 5 c. 6) which is quoted below, is also of interest:------

"5. False statutory declarations and other false statements without oath.--If any person knowingly and wilfully makes (otherwise than on oath) a statement falsie in a material particular, and the statement is ma e----

(a) in a statutory declaration; or

(b) in an abstract, account, balance sheet, book, certiﬁcate, declaratiorr, entry, estimate, inventory, notice. report rctzurn, or other document which he is authorised or required to make, attest, or verify, by any public general Act of Parliament for the time being in force; or 'Arcl'lb()TL'l_(--I§62), para. 3481."

'R. v. Newland (I953), 2 A.E.R. I067 (C.C.A.).

'Sec Report on Share pushing (1982, Cmd. 5539 and (1941) Annual; Of ?JfnCSI'iCan Academy of Political and Social Science, Vol. 217, Crime in the 'See Archbold (I962), paras. 3341-3342. 'R. v. Huon (1966), I A.E.R. 814 (1956), 2 QB. :52, dson_ 'Archbold (1962), para. 3547. .

"Ha1sbuty 3rd Edn., Vol. 20, page 720, para. 1448. 47 M. of Law--12.

Compare ss.

191 and 199 Indian Penal Code.

168

APPENDIX 20 (contd.)

(c) in any oral declaration or oral answer which he 13 required to make by, under, or in pursuance of any public general Act of Parliament for the time being in force;

he shall be guilty of misdcmeanour and shall be liable on conviction thereof on indictment to imprison- ment. . . .for any term not exceeding two years, or to a ﬁne or to both such imprisonment and ﬁnef'.

A false statement on oath before an income--tax Appeal Tribunal consisting of two Commission amounts to per»- jurv. such a tribunal falls within section 1(2), Perjury Act, 1911'.

The provisions of the lncom affect any criminal proceedings for felony, demeanour, under section 503 of the Income (15 & 16 Geo. 6 c. 10).

The following criminal remedies are open against a person for frauds on the taxation law'3:----

(5) Fraud at common law, under the decision in R. v. Hudson",

(ii) Offences under the Perjury Act, 1911 [section 1(1) for false statement on oath at the appellate hear- ing before the Special Commissioner and section 5(h) for false statement not on oath knowingly and wilfully made in a return etc. required by Act of Parliament'.]

(iii) Offence under the Forgery Act, 1913 (3 & 4, Geo. 5, c. 275);

(iv) Conspiracy to defraud':

(2)) Other suitable offence according to the circum-

stances.

In addition. there are penal provisions in the Income- tax Act, 1952, section 43(3) and section 505. As to proﬁt tax, see section 28 of the Finance Act, 1943, and section 44 of the Finance Act, 1946".

Under section 468 of the Income-tax Act, 1952, a person who is knowingly a party to the doing of any act amount- ing to something which is unlawful under the provisions against avoidance of income--t.ax or proﬁt tax liability by a body corporate taking certain steps as to residence in the United Kingdom is punishable with imprisonment up to e-tax Act in U.K. do not etc., or for mis-

-tax Act, 1952 1 R. v. Hood-Bars (1943) K. B. 455, (I943) 1 A.E.R. 665.

1 Cf. Halsbury, 31-d Edn., Vol. 20, page 720, para. I448. 5 R. v. Hudson (1956), 2oB,'|'252 ; A.I.R. 814.

' See also Halsbury, 3rd Edn., Vol. 10, page 623.

' Halsbury, 3rd Edn., Vol. IO, page 840.

' See Halsbury, 3rd Edn., Vol. 10, pages 834-835.

" Sue Halsbury, 3rd Edn., Vol. 20; page 665, and page 722.

189

AiPPEN DIX 20 (conc1d;) 2 years or ﬁne up to £ 10,000. Consent of. the Attorney General is required for prosecution underxthis p1'OV1Sl0n.

There is no general provision creating the offence of evading or avoidance of tax.

APPENDIX 21 ECONOMIC CRIMES IN CERTKIN EASTERN-EUROPEAN counrnnrs Apart from Russia. and: Hungary, provisions relating to economic crimes exist in certain other countries of Eastern Europe. A brief summary of the important provisions is given below.

Albania The Criminal Code, 1952 of Albania" contains Chapters dealing with penalties for theft, waste, misuse and other « forms of destruction of Government or social property (Chapter 2) as well as: detailed provisions relating to economic crimes (Chapter 3).

The economic crimes include crimes in industrial pro- duction and against: the monopoly of'foreign trade, offences against regulations of internal trade and against ﬁnancial regulations, evasion of taxes, and failure to deliver agri- cultural quotas. Certain impontfantf features are--

(a) Death penalty is permissible for economic crimes?

(b) Conﬁscation of property is mandatory in economic crimes, excepting in 3 cases. (Under Article 25, cert_ain'ob_1"ects' like furniture, foodstuffs etc. are not conﬁscated.)

(c) The prosecution can transfer cases relating to economic crimes to military courts.

Bulgaria The Criminal Code of 1951 (Bulgaria), Chapter 4, deals with the crimes against the national economy. Important provisions are quoted below':-

"Section.113.----An oﬁicial who fails to apply suffi- cient care in the direction management or protection of the property entrusted: or the work assigned tovhim, which failure results in considerable damage, destruc- tion or Waste of property, or partial or total non- fulﬁlment of the economic assignments, or in any cther considerable damage to the enterprise, shall be d ligee G. & G. Government Law in the Soviet Union, pages 979, 981 an 9 2.

'*'.- For wilful dcstructionnf State property also, death sentence can be awarded under articles 85 and,89. . ' ' See G. & G. Govemment 'Law in the'Sovict'Union ctc.', pan-99°.' 170 APPENDIX 21 (contd.) published by conﬁnement up to ﬁve years or correc- tional labour. If the act has been committed inten- tionally but does not contain the elements of a grave crime, the punishment shall be conﬁnement from three to ten years.

Section 117.---Whoever fails to carry out a lawful regulation concerning performance of work or deli- very of products in connection with the economic plan or the economic undertakings of the government, shall be punished by conﬁnement up to three years, or, in cases of minor importance, by correctional labour or ﬁne up to 20,000 leva.

Section 119.--Whoever uses agricultural products received from the State for purposes other than those for which they have been issued shall be punished by conﬁnement up to three months or ﬁne up to 50,000 leva.

Section 12l.--Whoever without proper authoriza- tion purchases with the intent to sell or resell agri- cultural products or other goods of mass consumption shall be punished by conﬁnement up to ﬁve years or correctional labour".

Czechoslovakia Sections 85, 135- and 136 of the Criminal Code for Courts (as amended in 1956), are quoted below':-

"85. (1) Whoever fails to discharge; or violates; or evades the duty of his profession, occupation, or service; or commits any other act from hostility toward the People's Democratic order with the intent:

(a) of frustrating or obstructing the carrying out or accomplishment of the Government plan for the development of the national economy in some sector; or _ (b) of causing serious disturbance in the acti-

_vity of a public authority or other agent, national- ized enterprise, people's co-operative, or any other organization of the socialist sector shall be punished by conﬁnement for from 3 to 10 years.

Section 135.---- (1) Whoever, by negligence, frustrates or obstructs the operation or the development of the government, national, communal or other public enter- prise or of a people's co-operative, particularly by failing to discharge or by violating the 'duty of his profession, occupation, or his service by evading the fulﬁlment of such a duty shall be punished by conﬁnement not to 'Based on,G. 8: G, Government Law, etc. in-Soviet Union, ctc., pages 1017 and 1019'. ' ' 171 APPENDIX 21 (contd.) exceed 1 year and by ﬁne or (under aggravating.circum- stances) by conﬁnement for from 3 months to 3 years and by a ﬁne.

Section 136.--If a private businessman or other person who is responsible for the management of his enterprise fails---even through negligence--to discharge an obliga- tion resulting from the uniform economic plan or from required public deliveries or public works, he shall be punished by conﬁnement not to exceed 6 months.".

Poland' Economic crimes in Poland are dealt with in the "Small Criminal Code" of 1946, Chapter III (Articles 39----45) and other special laws? A brief summary of important provi- sions is given below:---

(I) (2) Article 39 . . . . Adversely affecting the level of pro- duction, or lowering the prc ducti:-."' vity of an individual's own work or that of subordinate personnel, or for dereliction of duty either in taking proper care of the technical equipment of the enterprise, of its raw materials, or produced goods or causing deterioration of equip- ment or wattage of raw materials for goods. (Punishment up to 15 years' imprisonment).

Under the amendment of Decree of 4th March, 1953 (penalties for Mar- keting of Goods of defective quality), penalties for introducing into dis- tribution goods unﬁt for consump-

tion or of inferior quality compared with oﬂicial standards have been

- enhanced.

Article 40 . . . . Diverting to a free marke of goods assigned for distribution through Government stores. (Punishment up to 15 years' imprisonment).

'The position as in 1960 has been stated here. Th aft th t for reform, but material about that could not be obtained.erc er' cm W" movgnen ' - . . ~ I _ _ _ ﬁn ' '7 f'°*" me & G, eovsmmenr I-w, swan-.a.. .

I I 1'72 APPENDIX 21 (eontds) (I) \rtic1e 41 . . .

'lrticl: 42 Decree of March 4, I953 (Decree for Protection of Buyers' Interest in Trade).

Wilful or (2) Unintentional transgression by failure to exercise proper control and super- vision is a lesser offence. (Pumsh- ment up to 5 years' Imprisonment)-

Offences against the planned distri-

bution of goods, whether committed with criminal intent or without in- tent. (Punishment up to 15 years' imprisonment).

constant failure by the manager of an enterprise to take proper care of the welfare of subordinate personnel, thus adversely affecting their interests. (Punish- ment up to 5 years' imprisonment).

Section 1 of Article I of the Decree is quoted below :--

" Whoever speculates with articles of everyday consumption or other goods, in particular by buying up _goods in establishments or other places of retail with the purpose of selling them for proﬁt ; hides or hoards goods of everydayIcon-

sumption, with such purpose in excessive amounts charges pri-

ces in such establishments, for any goods, thus gaimlng ex-

cessive proﬁt in cases in which there is no properly ﬁxed price ;

or by any action contributes to difﬁculties in retailing goods, conducted deliberately with spe-

culative purposes shall be puni-

shed by detention (maximum 5 years) and ﬁne or by imprison-

ment up to ﬁve years and ﬁne."

(Under Article 1, section 2 of this decree, Punishment for habitually engaging in speculation for re-

peated conviction is imprison-

ment from 2 to IO years and ﬁne.) I, 1 I301." C335 dxided 011 14th _M8Dd}, 19350 on the =previous aection--Arti¢;-le :0 sec Ion 1» Law of June.4. _lL9S7*01t High P.rices,_.etc., th¢ zsinseme Court explained that 1 person buying up or hoarding goods in excess of his normal needs was guilty.

173

APPENDIX -21 (contd.) _. _._ i_.._..:..., .._. __ (I) (2) Two decrees of March 4, 1953, Under Article 1, section I of the first concerning strengthening of the Decree, stealing, appropriating, ob- protection of socialist property taining without intent to pay or in and concerning the protection of any way seizing socialist goods is socialist property against petty punishable by imprisonment up to theft (b-o.'h a_iieiiJed by the De-- 5 years. On a second conviction, cree ofDecember 23, I954). imprisonment up to 10 years can be awarded under section 2. In aggravating circumstances, the theft of socialist property is punishable by imprisonment up to 10 years and not less than 2 years, under section 3. If the offender has caused major damage to the economic in-

terest or the defence of the State, the punishment cannot be less than 5 years' imprisonment and even im-

prisonment for life can be awarded.

Offences against foreign currency regu- lations can be punished with imprison- ment up to I 5 years or even for life, and there are provisions for a mini- mum sentence of 2 or 5 years' im-

prisonment.

Decree of March 28, 1952 Abuse of power. (This has been now widely interpreted as covering not only cases of dishonesty, but as also

-including negligence and lack of foresight.) ' Article 286, Penal Code of 1932 For several offences, including many economic crimes, "Summary Criminal Proceedings" are permissible under the Polish law, and these offences include crimes committed to the detriment of the State, public authorities, institutions of a public character, co-operatives, enterprises owned or managed by the State or public authorities, and other criminal acts which endanger the economic interests 0! the People's Republic or expose it to considerable losses. For these offences, death sentence or imprisonment for life can be awarded', (irrespective of the punishment prescribed in the statute relating to the particular crime').

1 See G & G, Government Law, etc., in the Soviet Union, pages 1073, item ((9) and 1074, middle.

_ f Law of November 16, I956 (amended in 1949) on summary ~prouedlnp In criminal courts. ' 174 APPENDIX 21 (contd.) Rumania The main articles in the Criminal Code of Rumania relating to economic crimes are articles 268 , 242 and 385 of the Criminal Code (No. 927). Economic crimes are re- gulated under the title of "Offences against the Economic System" and under the sub-title of "offences affecting the public administration".

The main economic crimes are':-

(a) violations of regulations regarding production and distribution of consumer goods;

(b) distribution of products, which do not meet mandatory rules of standardization;

(c) establishing ﬁctitious co-operatives;

(cl) failure to observe legal provisions with "intent to evade", even without criminal intent or negligence;

(e) non-observance of legal provisions regarding State monopolies of foreign commerce;

(f) failure to pay taxes in time;

(g) evasion of tax;

(h) public officer guilty of carelessness, lack or laxity in the performance of his services, thus causing delay or difficulty in the fulﬁlment of the oﬂicial economic plan, disturbance to the proper functioning of collective organization or damage to collective pro-

rty or to the general interests of the citizens (article 242);

(i) failure to deliver agricultural goods reserved for Government stores;

(3') hoarding of goods;

(k) breach of collective labour contracts;

(1) infringement of regulations concerning ration cards.

(m) counterfeiting currency and bonds (article

383). Punishment upto 25 years' imprisonment can be awarded for counterfeiting; and' if the act has caused or would have caused considerable damage to the ﬁnan-- cial system, total conﬁscation of property can be ordered;

(n) Article 536 contains detailed provisions for offences affecting collective property.

_ 'Suxmnarised from material -in G & G, Government Law, etc., in Soviet Union, vases 1093-1096.

175

APPENDIX 21 (concld.) Yugoslavia In Yugoslavia the Criminal _ Code of 1951, sections 213 to 248 (Criminal Offences against the National Economy) deal with economic crimes. The important p1'0VlSl0l'l5 are:----

((1) sellers giving special favours to individual buyers (section 228);

(b) barter (section 229);

236);

(do) owner of land failing to cultivate the land or reducing his livestock (section 238);

(e) members of agricultural cooperatives opposing the management of the affairs of the cooperatives (sec-

tion 240);

(f) illegally carrying on a trade as a professional practice, or illegally selling, purchasing or bartering goods or articles the traffic in which is forbidden or limited; or illegally keeping such goods or articles for commerce or producing or processing goods the produc- tion or processing of which is forbidden (section 226):

(Conﬁscation of the goods can also be ordered), APPENDIX 22 TAX EVASION PROVISION 1N U.S.A. (SECTION 7201, INTERNAL REVENUE Cons) There is a general provision as to tax evasion in section 7201 of the Internal Revenue Code of the United States of America, and it will be of some use to deal with it in detail: The section is quoted below:--

"720l: Any person who wilfully attempts in any manner to evade or defeat any tax imposed by this title' or the payment thereof shall, in addition to other penalties provided by law_, be guilty of a felony, and, upon conviction thereof, shall be ﬁned not more than $10,000:00 or imprisoned not more than 5 years, or both, together with the costs of prosecution."

'Summarised from G & G, Government Law, etc., in Soviet Union, pages' 1120 to I122.

The taxes covered by the various sub-titles of the Internal Revenue Code are-

A. Income Taxes ;

B. Estate & Gift Taxes;

C. Employment Taxes;

D. Miscellaneous Excise Taxes;

E. Alcohol, Tobacco and certain other Excise Taxes.

Section 7201, Internal Revenue Code.

Attempt to evade or defeat taxes .

176

APPENDIX 22 (contd.) There is another section dealing with wilful failure_ to ﬁle return, but we are not concerned with that section here.' This section has replaced section 145 (b) of the In- ternal Revenue Code, 1939, which in its turn had replaced section l017(b), Revenue Act, 1924. The old section was regarded as the "capstone of a system of sanctions which singly or in combination were calculated to induce prompt and forthright fulﬁlment of every duty" under the income tax law? The important words in the section are "wilfully attempts in any manner to evade or defeat any tax". The constitutional validity of the section (with refe- rence to the due process clause) appears to have been upheld'.

Prosecutions under the section have been instituted mainly in the following situations (if the requisite intent is proved) :--

(a) substantial understatement of income;

(b) substantial overstatement of deductions;

(c) attempted evasion of tax by ' evading joint income-taxes of spouses (where the spouse or spouses charged are party to the fraud);

((1) lawyers and accountants participating in tax frauds;

(e) ofﬁcials of corporations attempting evasion of the tax payable by the corporation concerned;

(f) false claims to exemption.

'Section 7203 of the Internal Revenue C' de is quoted below :-

"72r' 3, Wiiful failure to ﬂle return, supply information, or pay tax.--Any person required under this title to pay any estimated tax or tax, or requir- ed by I'Cg11ll1ti0i.S made under authority thereof to make a return (other than a return required under authority of section 6015 or section 6016), keep any records, or supply any information, who wilfully fails to pay such estimated tax, make such return, keep such records, or supply such information, at the time or time required by law or regu- lations, shall, in addition to other penalties provided by law, be guilty of misdemeanor and, upon conviction thereof, shall be ﬁned not more than 3 10,000, or imprisoned not more than 1 year, or both, together with the costs of prosecution."

' Spies v. United States (1943), 317 U. S. 492, 497.

' U.S. v. Skidmore, 123 F. 2d, 604 cert. denied (I942) 315 U.S. Soo.

' A husband and wife can ﬁle a joint return. Tax is computed on half the combined income and multiplied by two. -Sections 2(a) and 6oI3(a), Interenal Revenue Code. I * _ by the United States Supreme Court in the Spies case', .17'?

APPENDIX- 22 (coa1td.) We may first take up the word "wilful" in the section. This requires proof beyond reasonable doubt of a speciﬁc intention to evade or defeat the tax or .1125 payment. bona ﬁcle belief in a particular legal position would take awav the case out of "wilful"1.

Intent The intent must be speciﬁc, that is to say, a mere general intention to perform an illegal act is not sufﬁcient.

"Tor is it presumed or inferred merely from the ﬁling of an incorrect or understated tax return. The concealment of an obligation known to exist, as distinct from a genuine misunderstanding of what the law requires, is essential'. It something more than "intentionally" and requires an evil motive as well as want of justification. Honest mis- take and belief in good faith are complete defences to a prosecution for evasion. And negligence can never amount to wilfulness.

But since intention can never be gathered by direct evidence, all relevant circumstances are taken into account, including the background and education of the accused, the nataure of the acts involved, his professional experience etc .

Mere possession of large amounts of unaccounted cash, while it may be some evidence, does not always establish the taxability of the amounts involved'. It has been held by the Supreme Court that an "affirmative act" is required in proof of "wilful evasion". This, it is stated, is implied from the word "attempt".

Many of the "aiﬁrmative" acts have been enumerated :T"n|tiV' C 8.

though the court took care to observe that what it enun- ciated was merely by way of illustration, and pointed out that Congress had not deﬁned or limited the methods by which a wilful attempt to defeat and evade might be accomplished and, that perhaps the Congress did not deﬁne lest its effort to do so result in "some unexpected limita- tion". The illustrations given by the Supreme Court in the Spies case are quoted below.

" . . . . ..aﬁ'1rmative wilful attempt may be inferred from conduct such as lceeping a double set of books, making false invoices or documents, destruction of 1 Cf. Jame: v. U.S., (1961) 366 U.S. 215. 345 State: v. Martell, 199 Federal 2d .670, cert. denied (1953) 593 ' Captme V- U.S.: 55. Federal 9d 296, cert. denied (1232) 286 us, 353 'If§7fttf;'I1§\State3 V. Nunan, 236 Federal 2d 576, cert, denied (1957) 5 Spies v. U.S. (1943) U.S. 492, 498. 'Sp£esv.U'tdStt . ' , . delivering the hnpienion aoi'S't;1i¢I:943(:o1);n3I)7 Unwed 8?" 49:' 499' O-inn [Wit return.

U nders tate-

m.:nt .

Attempt.

178

APPENDIX 22 (contd.) books or records, concealment of assets or covering up sources of income, handling of one's affairs to avoid making the records usual in transactions of the kind, and any conduct, the likely effect of which would be to mislead or conceal; If the tax-evasion motive plays any part in such conduct the olfence may be made 7! out . . . . . . . .

Besides the enumeration given in the Spies case, the following have been used as evidence of wilful intent to defraud :-

(a) use of large amounts of currency;1

(b) a much visited safety deposit box;2

(c) purchase of property in the names of otherI;'

(d) bank accounts in ﬁctitious names;

(e) diversion of funds from business; and

(f) failure to keep books and records with under statement of income.' coupled Since the illustrative list given in the Spies case does not 'say anything about ﬁling false income-tax return, the question has been raised whether that would amount to attempt to evade tax. The question seems to have been answered in the affirmative by Appellate Courts. The» Supreme Court has also held, that the positive act of wil-

fully ﬁling a false claim in order to defeat the tax supports a charge under this section'. The question, however, cannot be regarded as absolutely settled.

Mere understatement of income does not support an inference of wilfulness, -etc., but a consistent pattern of under-reporting large amounts of income may support it'.

As regards the expression "attempt" to evade tax, it has been decided7 that the attempt need not consist of conduct which would have culminated in a more serious crime but for some impossibility etc. The prosecution can only be for the attempt. The attempt itself is an independent crime. Nothing is added to its criminality by success or consumation. .

ylschuermann v. United States, (1949) 174 F 2d 3975 certiorari denied' 338 U.S. 831.

'Ibid.

'Ibt'd.

'Holland v. U.S., (1954) 348 U.S. 121, 137 & I39. 'Achili v. United States. (1957) 358 U.S. 373. 'Holland v. U.S. (I954) 348 U.S. p 121.

"Spies v. United Stam, (1943) 317 U.S. 492.

179

APPENDIX 22 (c0ntd.) Though both the words "evade" and "defeat" have been used, and they are divided by the conjunction "or", the two are usually treated as synonymous, and indicate cheating on taxes by any devise. It must be added that an attempt to defeat the payment of taxes by obstructing the processes for collection has also been regarded as evasion'.

Failure to pay tax by itself, however, is not "evasion" '.

Similarly, mere failure to file return would not ordi- narily amount to an offence under this section', in the absence of some aﬁirmative act showing "wilfulness". A mere passive neglect of the statutory duty of ﬁling a return does not fall under section 7201. Prior failure is, however, sometimes regarded as evidence of an attempt to evade, though the position on this point is not very clear. Courts usually treat section 7201 as one intended to secure enforce- ment of the substantive provisions of the tax law, and sec- tion 7203 as one intended merely to secure the enforcement of its administrative provisions.

Prosecutions under section 7201 are mostly in respect of income-tax, but prosecutions have been instituted for attempted evasion of the following taxes, namely, excess proﬁts tax, social security taxes, estate duties, admission taxes, etc. The limitation period for prosecution is six years' from the date of the wilful attempt. Ordinarily, the ﬁling of the false return is the mode of evasion charged, and the time therefore runs fr_om the date of the return.

While penalties for making false or fraudulent returns with intent to defeat or evade tax have been there in American law since the ﬁrst Income--tax Law passed on 5th August, 1861, the two World Wars focussed attention on the need for an eﬂicient machinery for investigating tax frauds. The Intelligence Bureau of the Internal Revenue was formed in 1919. In 1924, wilfully attempted tax evasion was changed from a misdemeanour to a felony. The discovery of rackets in business and operations in black-market after the Second [World War led to increased activities in prosecution of offenders for tax evasion also. In recent years, the investigating staff of the Internal Revenue Service has been strengthened.

A prosecution for evasion of tax is not ordinarily insti- tuted, unless (1) there is a proof that the tax-payer is United States v. Bardin, d i d '3 (I956) 350 U.S. 883. en e I Interggaélzléieerfge pcagdteax or file return may however fall under section 7203, 'Spies v. U.S. (1943) 317 U.S. 492. A 'Section 6531 of the Internal Revenue Code.

224 Federal, 2d 225, cert.

"Evade"

and "dcfmt".

Failure to ﬁle a return.

Taxes avoided.

Principle followed .

Administra-

(IVE machinery.

180

APPENDIX 22 (contd.) guilty beyond reasonable doubt, and (ii) there is a reason- able probability of securing a conviction. "Civil" penal- ties charging extra tax can also be imposed, and in most cases only the civil penalty is applied. The distinction between civil and criminal ﬂagrancy of the offence, the available evidence and the Government's burden of proof'.

Administrative Machinery The' Internal Revenue Service (an Agency of the Treasury Department) collects the taxes imposed by the Internal Revenue Code. Its headquarters are in Washing- ton, and it has 9 regional offices, 64 district offices and over 1,200 sub-offices'.

So far as the question of investigation of frauds is concerned, its hierarchy is as follows3:---- (1) National oﬂice Washington Division--

((1) Tax Fraud Branch;

(b) Special Investigations Branch. (2) Oﬂice of the Chief Counsel--

Assistant Chief Counsel (Enforcement).

(3) Office of the Regional Commissioner- Regional Commissioner.

Regional Counsel.

(Chief Counsel's Oﬂice).

at Intelligence Assistant Regional Commissioner (Intelli- gence).

(4) District Director's Office-

(a) District Director;

(b) Assistant District Director, Intelligence Division--

(a) Tax Fraud Branch;

(b) Special Investigation Branch.

Criminal cases relating to tax evasion are investigated by the officers of the' Internal Revenue Service, scrutinis- ed by the Enforcement Division of the Regional Counsel and prosecuted by the Tax Division of the Department of Justice. That Department has a full-ﬂedged Criminal Tax Section, having several Attorneys.

1 Crockett, Federal Tax System of United States, (1955), Page 136. ' Crockett, Federal Tax System of U.S., (1955), page I36.

' Based on information given in Cnockett, Federal Tax System of U.S., (I955). vases 243. 246- ' ' ' -

fraud may depend on the.

181

APPENDIX 22 (contd.) In each district, there is a District Director of Internal Revenue, controlled by the Assistant Regional Commis- sioner, Intelligence. Ordinarily speaking, the District Director, acting through the Chief, Intelligence Division, is in charge of investigation of criminal violations of the Revenue laws. Special oﬂicers of the Intelligence Divi- sion (called "Special Agents") investigate cases of frauds, and the District Director, with the concurrence of the Chief, Intelligence' Division, recommends prosecution and sends the recommendations to the Assistant Regional Commissioner (Intelligence). If the latter agrees with the recommendations, he transmits the papers to the Regional Counsel, and the case is assigned in the latter's office to an Attorney in the Enforcement Division_ who determines whether the evidence shows guilt beyond reasonable doubt and a reasonable probability of convic- tion. He then sends the case to the Criminal Tax Section . of the Department of Justice.

Important cases are scrutinised by the Chief Counsel, Enforcement Division at Washington.

The Tax Division of the Department of Justice, through its Criminal Tax section, is the ﬁnal authority to decide whether to proceed with the prosecution or not': Its attorneys are highly specialised in tax frauds work. If a tax-payer asks for discussion at a conference, the request is granted. The object of this conference is not settle- ment; it is intended to give the tax-payer an opportunity to explain suspicious circumstances. Tax-payers are allowed to appear through Counsel in such conferences.

Actual prosecution is conducted by a United States Attorney5.

Where there is no intent to defeat a tax, a compromise might be entered into; otherwise it is not entered into. The civil liability is discussed only after the criminal case is disposed of, unless the court directs otherwise. The judi- cial determination of the amount of the proposed civil liability is supplied to the tax payer. but settlement of the civil liability is not discussed until the penal case is decided". This course is adopted in order to render futile any attempt to offer to pay the civil tax liability and get the criminal case dropped. It is also believed. that since prosecution is a graver, penalty, it must be disposed of ﬁrst. Lastly, a Drosecution in order to achieve its deter- rent object, must occur at a time close to the date of the offence.

Zrgasey, Federal Tax Practice, (1955), Vol. 4, Paragraph and 15-4.

' Casey, Federal Tax Practice, (1955), Vol. 4, para. I5-5. 3 Casey, Federal Tax Practice, (1955), V01. 4: Data 15'5- Othcf sections .

182

APPENDIX 21 (concld.) Apar-t from section 7201 of the Internal Revenue Code, there are certain other sections in the Internal Revenue Code which deal with wilful failure to collect etc. tax or to ﬁle a return or to pay tax or to keep records etc. Further, section 287 (false claims for refund), section 371 (conspiracy to defraud), section 1001 (false statement) and section 1621 (perjury) of the Criminal Code (U.S. Code 18) can also be used for punishing various types of offences relating to tax. It is not, however, necessary to quote' them here.

APPENDIX 23 THE PENAL, Com: AND THE PREVENTION or CORRUPTION, ETC., ACT The Prevention of Corruption Act, 1947 creates only one substantive offence, namely, "criminal misconduct", which is deﬁned in section 5(1): The main object of the Act was to deal with the kind of "misdemeanour in which Government servants or public ofﬁcers with no ostensible means of support or inadequate support are living ob- viously above their income and are" in a position to invest in property, which it appears on the face of it to be im- possible that they should have had the money to acquire or at any rate that they should have got those resources honestly"1. It was felt that it was difficult to pin down, because in such cases all that the Government or the police could ﬁnd was that the Government servant could have no ostensible source, which could be accounted for as the basis of extravagant expenditure. No speciﬁc action could be alleged against him or proved in the way of accepting a bribe or obtaining the money by corrupt means. The object of section 5 was to make it possible to detect and punish officers who had "managed to evade detection in that way"! The proposal for enacting the Act arose out of the recommendation made by a Committee appointed in Bengal in 1944, which suggested that legislation was necessary to tighten up the law relating to bribery and corruption. The Provincial Government of Bengal referred the matter to the Central Government, suggesting Central legislation'.

The recommendation was, that a new offence should be created to provide, that if a public servant was in possession of accretion of wealth, he should be deemed guilty of the offence of criminal misconduct, etc., unless 'Speech of Mr. Porter, Home Sccreta C '1 f S D b dated 25th Feburary, I947, Vol. I, No. 5, pagenffio ocltmcsleqf) mm C at", 'Ibid.

1947 Vol. I, No. 5, page 180 at scq.

'Speech of Mr. 'Porter, Council. of Static Debates, 25:1: FebruIry'~ 183 APPENDIX -23 (contd.) he could prove that the accretion was honestly obtained. Now, it was not possible to frame a substantive clause creating such an offence. The only way in which the object (of making the unaccountable possession of more money than a public servant ought to have an oifence) could be achieved, was the enactment of the presumption in section 5(3). Clause (c) was put to make it clear, that of the various ways by which a public servant could im- properly acquire wealth, this was one'. It may not be possible to pin a public servant down that he has received a money as a bribe or by misappropriation or by abuse. All that could be proved was, that the public servant had been buying property or acquiring a ﬂeet of motor cars, etc, beyond his means. That explains the form of section

5. While bribery is a form of curruption, the long title of the Act makes it clear that other forms of curruption are also sought to be checked by the Act. As it is a socially useful measure conceived in the public interest, it is to be liberally construed so as to bring about the desired object of preventing corruption among public servants and at the same time, harassment of the honest among themi.

Though four classes of misconduct are mentioned in section 5(1) (:1) to (d), apparently a charge merely under section 5(2) would suﬁices.

The ingredients of the offence are described in section 5(1), and the penal provision is in section 5(2)'.

It would be useful to note the points of difference between the Indian Penal Code and the Prevention etc. Act. The latter Act contains various special rules of evidence, investigation and procedure which show how the provisions of the Act diﬂfer from the Indian Penal Code. The most important provision of the Act is section 5(3), under which possession of pecuniary resources or property disproportionate to the known sources of income raises a rebuttable presumption that the accused is guilty of "criminal misconduct"5. Another presumption is that enacted in section 4 about motive, etc."-7.

1 Ibid.

" M. Narayanan v. State afKerala, (1963), 2 Crim, LJ, 186, 3 Compare Saj;'an Sing}: v. State of Punjab, A.I.R. I964. S.C. 464.

' Ram Sager v. State afB1'har, (1964) 2 Criminal Law Journal 65, 68, para. 8 (Supreme Court).

5 Sajjan Singh v. State of Purjab, A.I.R. 1964 S..C. 4:64. ° See State of Madras v. Vardyanat7'Ian,>A.l'.R. I958 S.C. 61.

7 In r'e P.S. Arrioamudht, A.I.R. I960' Mad. 27 (Ramaswamy J). 47 Law-13.

18% APPENDIX -23 (contd.) [As to section 4(1) of the Prevention etc., Act, it may be pointed out that the presumption under that is obli- gatoryl-2].

The points of difference as to substantive provisions are analysed below.

CHART No. 1

(Obtaining gratiﬁcation) Section 161, Indian Penal Section 5 (I)(a), Prevention Code. etc., Act.

Offence can be committed by Offence can be committed only a person who is or expects to by a public servant. be a public servant.

An isolated act is enough. . There must be habitual accept- ance, etc., of gratiﬁcation.

The punishment is imprison-- The punishment is imprisonment .ment upto 3 years or ﬁne up to 7 years, and also ﬁne. or both. Further, the imprisonment shall not be less than one year in the absence of special reasons to the contrary.

Section 5 (2). As regards ﬁne, the court must take into consideration the various factors mentioned in section 5 (2A).

CHART No. 2

(Obtaining valuable thing without consideration) Section 165, Indian Penal Section 5 (I)(b), Prevention, Code. etc., Act.

An isolated act is enough . There just be habitual accept- ance, etc., of any valuable thing without consideration, etc. Punishment is imprisonment Punishment is imprisonment upto 3 years or ﬁne or upto 7'years, and also ﬁne. both. Imprisonment should not be less than one year in the absence of special reasons to the contrary. Section 5(2).

Regarding ﬁne, the factors mentioned in section 5 (ZA) should be considered.

1 Dharwantrai Desai v. State of Maharashtra A.I.R. 1964 S.C. 575.

' State of Gujarat v. Madhav_Bai, A.I.R. I964 .Guiarat 206.

" On 6S. 5 (X) (a) generally. See Ram Krishna v. State, A.I.R 1944. C: 47 - ' - ' "

185

APPENDIX 23 (c0ntd.) CHART No. 3 (Nlzsappropriation, etc.) Section 405, Indian Penal Code.

Section 5 (I)(c) Prevention, etc. Act.

There must be dishonest "ais-

appropriation or conversion for own use or use or dis-

posal in violation oflaw, etc., under section 405.

Regarding use or disposal, it must be in violation of a direction of law or legal con-

tract.

The public servant must be " entrusted " with property or with any " dominion "

over it.

If the public servant does not commit the misappropriation himself, it is requisite that he must "wilfully suffer"

any other person to do.

Punishment is imprisonment upto 10 years and also ﬁne.

It is enough if there is "dis-

honest " or "fraudulent "

misappropriation' or otherwise conversion for own use'''.

This is not necessary.

The property must be entrusted to the public servant, or must be under his control as a public servant.

is suﬁicient if he allows another person to do so.

Punishment is imprisonment upto 7 years and also ﬁne.

Imprisonment must be for at least one year etc., section 5 (2).

(By corrupt, em, means or abuse of position obtairzing any valuable thing, etc.) No provision in Indian Penal Code.

Section 5 (I)(d) Prevention, etc., Act.

The offence of obtaining etc. a valuable thing or pecuniary, advantage by '-' corrupt or illegal means or by other-

wise abusing his position as a public servant " (and thus com-

mitting criminal misconduct) is new.

1 Cf. Om Prakash v. State of U. P., A.I.R. I957 S.C. 458.

3 Lending Government money to others is also covered. Manna Lalo.

U.P., A.I.R. I964 S.C. 28, para IO.

3 Public Prosecutor v. Pachiripilli. A.I.R.' 1955 Mad. 214.

186

APPENDIX 23 (contd.) No. provision in Indian Section 5 (1)(d) Prevention, Penal Code. etc., Act.

The words " pecuniary ad-

vantage" include cash pay-

ment alsol.

Section 5 (t)(d) is not conﬁned to direct beneﬁt, and covers cases where a public servant causes wrongful loss to the Government by beneﬁting a third party'.

It may be noted that section 5 (I)(d) does not require habitual acceptance of bribe.' The clause has been interpreted in the under-mentioned case'.

Section 5(1) (d) has two main ingredients, ﬁrst, the means adopted, and the second, the end attained. The means adopted are described as-

(i) currupt, or

(ii) illegal means, or

(iii) otherwise abusing his position as public servant.

The expression abuse of position is not deﬁned, but "dishonesty", it has been held," is implicit in the word "abuse".

As regards the end to be obtained, it is provided that the public servant must have obtained-

(a) for himself, or

(b) for any other person, a valuable thing or pecuniary advantage.

It is not necessary that the public servant must do something in connection with his duty.'-"

' Mahfuz Ali v. The State, A.I.R. I953 All. 110 (B. Mukerii I.) (S C') M. Narayanan Nambiar V. State ofKerala (1963) 2 Crim, LJ. 186 3 Mahfuz Ali v. State, A.I.R. 1953 All. 110, 112, para. I5.

' Bhagwan Sakai v. State of Pmﬁab, A.I.R. I960. S.C. 487'.

5 M. Narayanan v. State of Kerala (1963), 2 Ct. L.]'., I86 (S.C.) 5 Dhaneshwar v. Delhi Administration. AIR. 1962 S.C. I965. 7 In reK. V. Ayyaswamy, A.I.R. 1965 AP. xo5._ ' 187 APPENDIX 23 (concld.) Section 5(1) (d) is thus wide enough to cover-

(a) almost all acts which would be offencesunde!' section 5(1) (a) to (c), or the relevant Section of the Indian Penal Code, and

(b) many acts which would not be offences under section 5(1) (a) to (c) APPENDIX 24 SUBSTANDABD ooons um cuurms The point for consideration is whether, where a person has supplied goods of inferior quality, or goods which are not according to speciﬁcation, or of lesser quantity than stipulated, his act comes Within the scope of section 420, Indian Penal Code.

(1) There is only one reported Indian case in which the matter seems to have been directly dealt withl. The facts were these. The accused contracted to deliver to Rau Brothers 260 "dokras" of fully good, machine-ginned cotton. In pursuance of this contract, the accused deliver-

ed 260 "dokras" largely composed of cotton-seed, kapas and rubbish, carefully packed into the middle of the dokras, while all around the sides was placed good ginned cotton. The admixture of inferior stuﬂ? was found in all the "dokras", and it varied from 6 to 15 per cent against the quantity of § or 1% which might be expected ordinarily to be found in dokras. It was held, that the accused was guilty of the offence of cheating under section 420 of the Penal Code. ( (2) Of course, the general rule is2 that a mere breach of contract cannot give rise to a criminal prosecution. The distinction between a case of mere breach of contract and one of cheating depends upon the intention of the accused at the time of the alleged inducement, which may be judged by subsequent acts; but the subsequent act is not the sole criterion of this intention". Where there is no clear and conclusive evidence of the criminal intention of the accused at the time the offence is said to .ave been committed and where the party said to be aggrieved has an altematiive remedy in a civil court, the matter should not be allowed to be fought in the criminal courts".

(3) As has been held', the representation can be implied from conduct5.

'Emp. V. Kauji Sbévaji (1912), I4 Bom. L.R. 137, 14 Indian 559 (Chandavarkar and Bntchclor 15). "*8 I 'Sbeosqgar V. Em_9., (I936) 37 Cr. L]. 38, (Patna High C I) F 1.

Ah J.) (Money taken for arransinsmar-riage). our ( 32 "SecA.I.R. 1959 Txipun 8. _ W v. Babsya A£.da1,I.L.R. 32 Ca. 941 947 (Paging; and C . .

50!. tbs has in M.A.Ko1uh v. Em. A.I.R. 1927 Mad. 544.

188

APPENDIX 25 F HINDU LAW REGARDING HIGH PRICES AND ADULTERATION SOME PROVISIONS 0 Provisions penalising adulteration and high prices were known to ancient Hindu law-givers. By way of ex- ample one may refer to certain texts of "Yajnava1kya1"--

False weights He who abstracts one-eighth share (of an article sold) by a (false) measure or balance, shall be ﬁned two hundred (panas). Where a greater or lower (share is abstracted), a proportionately (higher or lower ﬁne should be imposed).

Adulteration He who adulterates with inferior (articles) vendible medicines, oils, salt, perfumes, corn, coarse sugar and the like, shall be made to pay sixteen panas.

When (by some operation) inferior earth, hide, gem, yarn, iron, wood, bark, or cloth is made (to appear to be of) a superior kind, the ﬁne is eight-fold of the (commo-

dity) to be sold.

Palming 01)' He who pledges or sells a sealed casket (fraudulently) substituted (for a superior casket shewn) or the counter- feit of a natural vessel shall be ﬁned (in the following manner) .

"(When the value of the thing palmed on the buyer, or a pledge is) less than a pana, the ﬁne is ﬁfty (panas) (when) a pana one hundred (panas), (when) two panas, two hundred (panas) 'when the value is higher, (the ﬁne is) higher.

Prices For those knowing whether (the price set by them) is higher or lower (than the maximum rates ﬁxed by the kind) unite in ﬁxing a price too heavy for Karus (workmen) and Siplins (artisans) the ﬁne is the highest.

For those traders who conspire to obstruct (the sale of a commodity by demanding it), or selling it at an im- proper price, the highest ﬁne is laid down.

The sale or purchase (of articles) should every day be made at the rates ﬁxed by the king, the proﬁt derived in this manner is declared (to be) propitious for traders.

'Sen-Gupta, Evolution of Ancient Indian Law, (1953), page 316. { 189 APPENDIX 25 (concld.) A trader shall make ﬁve per cent as proﬁt on commo- dities of the same country, and ten (per cent) on the foreign, if the purchase and sale take place immediately, (i.e. on the same day as that of the purchase).

The rates should be so ﬁxed (by the king) as to be advantageous both to the buyer and the seller after add- ing to be (cost) value of the commodity, the expenses in- curred."

APPENDIX 26 F001) ADULTERATION LAvJs¥?bF SOME COUNTRIES A list of the laws relating to adulteration of food (food legislation) in some of the countries of the world is given below:--

Australia In Australia each State has its own Pure Food Act. But uniformity is secured after the creation of the Na- tional Health and Medical Research Council which makes recommendations for» uniformity in legislation?

Burma Food and Drugs Act, 1928 is the main law. Canada The present law in Canada regarding pure food is con- tained in the Food and Drugs Act, 1953, which, is a federal statute. The Department of National Health and Wel- fare is responsible for the administration of the Act through the Food and Drugs Directorate. The Directo- rate, besides its headqua-rters establishment, maintains district and regional offices. High priority is given to activities involving a hazard to health; second priority is given to hygienic violations relating to ﬁlth, decomposi- tion of foods etc. and third priority to mere frauds and other economic violations.

The validity of the Act as falling under "criminal law"

'has been upheld".

Ceylon A Food and Drugs Act, 1949 is the main law.

'Note prepared mainly on the basis of information contained in (a) Food and Agriculture Organization (United Nations) pamphlets relating to "Food Additive Control" in Canada Denmark, Germany, U.K. and France, and (b) in the Report of the F.A.O. Regional Seminar on Food Legislation for Asia and Far East (27th August to 3rd September, 1962), F.A.O. Report No. 1582 (Rome 1962).

"See "Pure Food and Pure Food Legislation"--edited by Amos (But- gerworth). ' - V .

3Stan:l-ard Sausage Co. v. Lee, (1934) I l3,L.R. 706.

1190

APPENDIX 26 (contd.) Denmark As far back as 22nd October, 1701, an Order concerning the Administration of the Police directed that the Com- missioner of Police should not permit the offering for sale of food or beverages that were tainted or unwholesome or might cause sickness. Later Ordinances and Regula- tions covered certain aspects of purity of food. On 1st May, 1860, a Milk Control Order was issued. First law on the examination of food was passed on 9th April, 189]. In 1910 an Act for the examination of food was passed. Subsequent amendmen dealt with certain aspects of food purity. 1' 5 Enforcement of focid 'laws is by the local health autho- rities, the local public health medical oﬂicer, the police, the customs, the National Veterinary Service etc., and the National Control Board for Dairy Products. The National Health Service deals with the subject. A National Food Institute was established under an Act of 5th June, 1959. The Institute is to look after the Work of the various laboratories and also have a Central Laboratory for food control and an independent labouratory for food toxico- logical research. ' England It is said that England was the ﬁrst country in the English speaking world to have a separate law for Adul- teration of Food in 1860'. In fact, in the 15th Century, steps to deal with adulteration of food were initiated not by the Government but by the important Merchant com- panies of London who managed to obtain oﬂlcial regula- tions or 'slation to check frauds in the particular arti- cles handl by them. In the 18th Century, the excise authorities took interest in the matter and legislation regarding purity of food was enacted in the interest of the revenue. It was the extensive application of the microscope to the examination of food by A. H. Hassall that gave a new' turn to the subject. Parliament a. inted a Com- mission to consider the question of adu teration and its report in 1860 led to an Act for the Prevention of Adul- teration of articles of Food and Drugs in 1880. The Act of 1875 (Sale of Food and Drugs Act, 1875) made compulsory the appointment of public analysts by local authorities, Thereafter a number of enactments dealing with special articles of food followed. The main Act now in force is the Food and Drugs Act, 1955 (for England), and it consolidates almost all the previous enactments.

In England, the Food and Drugs Act, 1955 (4 E112 2c.

16) is the main Act dealing with adulteration of food and "Pm: Food ' and Pure Legislation"--editcd by Amos (Enter. wmh) CP¢P=u of the 1960 oclcbutxonn for centenary ofthc Act).

mi APPENDIX 26 (contd.) drugs. The general penal sections are sections 106. and 107 in the 1955 Act. There are certain special punishments provided for in sections 5(3), 18(4), 22(1), 23(1). (3), 27(1), 52(4), 55(1), 57(1), (3), 59, _60, 69(2), 100(5) 'and 105(1), (3). Certain additional punishments are provided for in sections 8(4), 12 (2), 68(3), and Schedule II, para- graph 5.

(There are separate Acts for Scotland etc.) Duties of administering and enforcing the Act are en- trusted to the local "Food and Drugs authorities" i.e. the Common Council of the City of London, the Councils of many larger boroughs and urban districts and the country councils. Each food and drug authority has to appoint a duly qualiﬁed public analyst with the approval of the appropriate Minister. Sampling ofﬁcers are also appointed by these authorities. In matters of general interests of consumers, the Minister of Agriculture and Food may also direct a departmental officer to procure samples. Samples are divided into three parts, one part being given to the seller, the other part being given to the Public Analyst and the third retained for possible future com- parison. The Public Analyst analyses with all due expe- dition the samples, and gives to the sampling oﬁicers a certiﬁcate showing the result of the analysis. The seller is entitled to a copy of the certiﬁcate on nominal fee. A certiﬁcate showing that the sample does not comply with the law does not necessarily lead to a prosecution, as the public health inspector (under whose instructions the sampling oﬂicer usually acts) may ask the seller or manu- facturer for observations on an adverse report, and the explanation offered may be considered before a prosecu- tion is undertaken.

The decision to take proceedings usually lies with the public health committee or the medical officer of health of the local authority. On the request of a party, the court may cause the retained part of the sample to be sent to the Government Chemist for analysis and his certiﬁcate can be used in evidence.

Besides the Act of 1955, the Therapeutic Substances Act, 1956 is also of interest.

France The basic law in France is the law of 1st August, 1905 for the prevention of fraudulent practices. The purpose of this law is to check frauds perpetrated in connection with all merchandise, i.e., all deception or attempt at deception intended to mislead the buyer as to essentials. It also provides for checking adulteration of foods, drinks and drugs etc. As early as the year 1268, a Code was drawn up by the trade guilds of Paris containing regula-

tions applicable to producers and dealers. of foods. The-

1542

APPENDIX 26 (contd.) Code was approved by Provost Etiennee Boileau. Addi- tion of unauthorised seeds injurious to the human body to spices from the East was also prohibited. Fines, conﬁsca- tion, whipping, pillorying of a vendor of rotten eggs and of the seller of adulterated butter was ordered. A person who sold watered milk was to have a funnel placed in his throat, and the watered milk was to be poured down until a doctor or a barber declared that the man could not rsvialloxv any more without danger.

Articles 423, 318 and 475 of the French Penal Code of 1810 contain somewhat scanty provisions regarding adul- teration. But, towards the middle of 19th Century, adul- {oration and falsiﬁcation of food became increasingly frequent, as fraudulent operators learnt to exploit skil- full;/' the progress made by chemistry to cover their un- lawful activities. Numerous international congresses on public health, medicine etc. discussed the question of adulteration of foodstuffs. Ultimately in 1905, it Was decided to intensify and centralise the controls of foods, which had been left for long to the mercies of insufficient- ly skilled municipal officials.

Enforcement of the law is mainly under the charge of the Technical Activities Division of the Ministry of Agri- culture whose Inspectors carry out inspection- There are speciﬁed contingents whose jurisdiction is nation-wide. They exercise special and very strict control over certain products, such as fruits and vegetables for export, wines, ﬂour. textiles etc. Laboratory service is extensive, con- sisting of three Government laboratories and about 100 other approved laboratories, the latter doing part-time work for prevention of fraud. There are specialised labo- ratories for dairy products, wines, fertilizers, seeds, etc. The inspection branch has 270 officials and 110 agents, and about 200 scientiﬁc personnel. In addition, in Paris, the Police Department has the Inspection Corps (70 persons) and there is the Paris Municipal Laboratory (25 persons). Control of medicine and drugs is exercised by the phar- macy inspectors; military supplies are checked by special staff; wholesomeness of water is checked by departmental inspectors of public health and so on.

The perfects are responsible for transmitting to the Public Prosecutor ﬁles containing reports of violations and ofﬁcial laboratory results indicating frauds, adulteration, or a breach of regulation. The Public Prosecutor may-

(i) ﬁle the matter, if there is no offence; or

(ii) place it before the court, if the evidence is sufﬁcient, or

(iii) send it to the Examining Magistrate if further information is necessary or if the party concerned claims the right to submit expert counter-evidence.

193

APPENDIX 26 (c0ntd.) Fraud and adulteration are punishablenwith imprison- ment (three months to 2 years) or by ﬁnes. Where adulteration is injurious to health, imprisonment is mandatory.

Germany In the Federal Republic of Germany, the Food Act of 1927 and the Colour Act of 1887 are the two main laws; the former has been extensively amended by the Food Act of 21st December, 1958. Various rules (called Ordinances) under the two Acts deal with matters of detail. Apart from the Federal Health Department, the German Research Association (through its Food Additive Commissions) and the Federation of Food Law and Food Science do useful work in preparation of relevant legislation. The German Research Association has done considerable Work on Food colouring and food preservatives. The Federation for Food Law and Food Science consists of members of major food producing and food trading corporations, and holds a "mediatory" position between the "stringent demands" of the Government and the interests of the food industry.

The Amendment of 1955, section 4(b), sub-section 4 speciﬁcally prohibits sale of foods in which there are resi- dues of insecticide, pesticides, herbicides etc. exceeding the maximum permissible amount.

There are institutes ﬁnanced by the Federal Ministry of Food which analyse food and determine food additives. There are such separate institutes for grain, ﬁsh, food pro- ducts, dairy fat, etc. Honglcong Public Health and Urban Service Ordinance, 1960 is the main law. 7 India.

In addition to the Prevention of Food Adulteration Act, 1954, reference may be made to the Agricultural Products (Grading and Marketing) Act, 1937. The Fruit Products Order of 1955 and Vegetable Oil Products Control Order also regulate the concerned products.

i Japan Main laws are Farm Products Inspection Law, Agricul- tural Standard Law and Export Inspection Law; Law for the Control of Food and other Articles, 1900; Food Sanita- tion Law, 1947. Food legislation is administered by the Ministry of Health and Welfare. Fraudulent sale in any commodity, including foodstuffs, is dealt with by the Fair Trade Commission under the Anti-Monopoly Law, -1947.

194

APPENDIX 26 (concld.) Korea Food Sanitation Law (20th January, 1962), is the main law.

Malaya Sale of Food and Drugs Ordinance, 1952 is the main law.

APPENDIX 27 BASIC pnmcrpms non runs roon uws The two main objectives of food legislation are----

(i) to check adulteration; and

(ii) to prevent frauds.

in the minds of the public, "pure food" means food that is wholesome and free from anything that is in any way harmful to health and free from the addition or substrac- tion of anything which might impair wholesomeness, and present to the public in a forthright and factual mannerl. The consumer has to be safeguarded against dangers to his health as well as against commercial frauds.

Foods are by their very nature products of many differ- ent varieties, composition and degrees of purity, and are subject, with respect to production, transportation and distribution, to many diﬁerent nutritional, hygienic and labelling requirements. Therefore, the basic law can only lay down broad general principles, while regulations must contain detailed provisions governing different categories of products?

In modern times, the minimum standards below which food should not be sold have also been emphasised, as these grade standards are important in featuring the produce of a country and thus gaining a reputation for it.

Thus pure food laws deal with (1') health, (ii) frauds,

(iii) marketing.

At the Regional Seminar on Food Legislation', the important requirements for facilitating enforcement were thus described:--

"(a) deﬁnitions of such key words as food, label, advertisement, adulteration, sale, package, misbranding, warranty and unsanitary conditions, etc., rather than rely on the common or dictionary meaning of such words; ,

(b) procedures for sampling and analyses;

'F.A.O. Regional Seminar on Food etc. Report, (1962), pagg 7, "Ibid, page 7. _ 3F.A.O. Regional Seminar on Food etc. Report, (x962), page 8- 195 APPENDIX 27 (contd.) (C) powers of inspection and the procedures to be followed;

(d) penalties;

(e) Warranties and guarantees;

(f) prohibition of the importation of articles not complying with the law.".

The Seminar recommended 1 that each country should have same law on the basis of basic principles given in its Report, that maximum and minimum penalties be prescribed depending on the nature and gravity of the offence; that detailed standards for new, traditional and processed foods may be prescribed; and that each Government should set up a Statutory Co-ordinating Committee on Food Control, consisting of representatives of the various Government Departments responsible for the many aspects of food legis- lation (Agriculture, Industry, Trade, Health etc.) and of trade and manufacturing interests. The Seminar also stressed the need for immediate steps in establishing appro- priate training programmes for the ﬁeld staff, laboratory technicians and other personnel.

As regards enforcement, its recommendations may be quoted in detail":--

"6. Governments should pay attention to the enforce- ment of food legislation in places where food is produced or manufactured in order to ensure at the source that food is not exposed to health hazards or subjected to adultera- tion or fraud.

7. Governments should take steps at an early date to set up or strengthen their marketing organizations, taking the necessary legislative action so as to be able to progressively grade and quality--mark according to well-deﬁned standards, all important food articles produced or manufactured in the country for sale or distribution, and thus facilitate the enforcement of food laws and make them effective.

8. In view of the important role of the consumers and consumers' association in the enforcement of food legisla- tion, Governments provide for the education of consumers and of those involved in the handling of foods, and assist consumers' associations in becoming acquainted with the food legislation and control measures.

9. Governments keep the Legislation Research Branch, F.A.O. Headquarters, Rome, Italy, regularly informed on any new food legislation enacted or rules framed there-' -

under or any amendments to existing laws or regulations and supply, when possible, English or French translations 0'. the texts. This would enable the F.A.O. to act as the 'F.A.O. Regional Seminar on Food, etc, Report, (I962), page 17.

'F.A.O. Regional Siminat on Food; em, Report, (3962), page 19, Paras. 6-9.

196 ' APPENDIX 27 (concld.) Central body for the exchange of information on food legis- lation between the countries in the Region With the aid of promoting further improvement and harmonisation of their food legislation".

The variety and complexity of food legislation justify these observations:----

"Sound food legislation must depend upon know- ledge in several different ﬁelds.".

Of these ﬁelds, three are of outstanding importance- the agricultural and veterinary sciences concerned with raw materials, the chemical sciences concerned with prepa- ratory measures, and the biological sciences concerned with the effects of food.' It should be realised, that "the price of pure food is, eternal vigilance on the part of the Food Chemists in indus- try and the Public Analyst"?

APPENDIX 28 PROVISIONS IN TASMANIA (AUSTRALIA) VREGARDING ANTI- SOCIAL, ETC., OFFENCES I 2 Evasion and avoidance of (1) Stamp Duties Act, 1931 taxes lawfully imposed. Section 23, subascction.

(5) (<1), (6) and (f)-

(2) Deceased Persons' Estates Duties Act, r9311 Section 38.

(3) Land and Income Taxation Act, 1910.

Sections 195, 197 and 198- (Extracts attached).

Adulteration of foodstuffs Public Health Act, 1962. and drugs. Sections 90 to 98, and 100 (Not copied).

Theft, etc. Sections 226 to 234 Criminat Code Act 1924.

Misuse of their position by Criminal 'Code Act, 1924. public servants in making of Sections 83 to 87, I00, 115,. contracts and disposal of 265, 266 and 297. public property, issue of (Extracts attached). licences and permits and similar other matters.

1A.C. Frazer in "Pure Food and Pure Food Laws" (Edited by Amos) I53, 155- 2 - . ~ V D "_[.H. I,-Iamence, in "Pure Food and:Pure- Food Laws" etc. (Edited by Amos), 5, at page 20. -

197

APPENDIX 28 (contd.) Copy of sections 195, 197 and 198 from the Land and InCOme Taxation Act, 1910.

"195. (1) Any person who--

(a) fails or neglects to duly furnish any return or information, or to comply with any requirement of the Commissioner as and when required by this Act, or by the Commissioner;

(b) without just cause shown by him, refuses or neglects to duly attend and give evidence when requir-

ed by the Commissioner or any officer duly authorised by him, or to truly and fully answer any questions put to him, or to produce any book or papers required oi him by the Commissioner or any such officer;

(c) makes or delivers a return which is false in any particular, or makes any false answer, whether verbally or in writing; or

(d) aids or assists any other person in any manner whatsoever to commit an offence against paragraph (c) of this sub--section, shall be guilty of an offence.

Penalty.---Not less than two pounds nor more than one hundred pounds.

(2) A prosecution in respect of an offence against para- graphs (a), (c), or (d) of sub--section (1) of this section may be commenced at any time.

(3) Any person who, after conviction for an offence against this section, continues to fail to comply with the requirements of this Act, or of the Commissioner, in respect of which he was convicted, shall be guilty of an offence and p.ur}11i+shable as provided in section one hundred and ninety. eig ..

(4) It shall be a defence to a prosecution for an offence against paragraph (c) of sub--section (1) of this section if the defendant proves that the false particulars were given, or the false statement was made, through ignorance or inadvertence.

197. If, in any prosecution under paragraph (c) of sub- section (1) of section 195, it is proved that the tax-payer has wilfully made or delivered a false return with intent to defraud. the amount by which his actual income for the year in respect of which such return was made. exceeds the amount of income shown in such return, shall be deemed to be income tax payable by the tax-payer; and may be recovered accordingly. ' O ﬂence 5-, Under-

stat ement of income. .

"Avoiding 'taxation.

Corruption

-0!' public officers.

Extortion by public officer :

Oppression.

Public oﬁiccrs Interested .1: contract.

198

APPENDIX 28 (Contd.)

198. Any person who, by any wilful act, default, or neglect, or by any fraud, art, or contrivance whatever, avoids. or attempts to avoid, assessment or taxation, shall be guilty of an offence.

Penaltgt/.----Not less than ﬁfty pounds nor more than ﬁve hundred pounds, and in addition an amount not exceeding double the amount of tax payment whereof he has avoided or attempted to avoid."

Copy of sections 83 to 87, 110, 115, 265, 266 and 297 of the Criminal Code Act, 1924.

"83. Any person who--

(a) being a public officer, corruptly solicits, re-

ceives, or obtains, or agrees to receive or obtain, any property or beneﬁt of any kind for himself or any other person on account of anything done or omitted, or to be done or omitted, by him in or about the discharge of the duties of his office; or

(b) corruptly gives, confers, or procures, or pro- mises or offers to give, confer, or procure, or attempt to procure, to, upon, or for any public officer, or any other person, any property or beneﬁt of any kind on account of anything done or omitted, or to be done or omitted, by such ofiicer in or about the discharge of the duties of his office, is guilty of a crime.

Charge:--

Under (a): Ofﬁcial corruption.

Under (b): Bribery of a public Officer. Tasmania

84. (1) Any public officer who, under colour of office and otherwise than in good faith, demands, takes, or accepts from any person for the performance of his duty as such officer, any reward beyond his proper pay and emoluments, is guilty of a crime.

Charge:----Extortion as a public officer.

(2) Any public officer who, in the exercise or under colour of exercising his office, wilfully and unlawfully in- flicts upon any person any bodily harm, imprisonment, 0 other injury is guilty of a crime. A Charge : --Oppression.

85. (1) Any public officer who knowingly holds. directly or indirectly, any personal interest in any con-

tract made by or on behalf of the Government of this State concerning any public matter is guilty of a crime.

199

APPENDIX 28 (Contd.) Charge:~ «Being interested in a contract as a public officer.

(2) A person is not deemed to be interested in any such contract as aforesaid because he is a shareholder in a company of more than twenty members Which IS a party thereto, unless he is a director of such company.

86. Any person appointed to act as a Valuator or a1"bi- o(§(§$§:,°:_1 trator to determine the Value of any land, or of any in- jury done to any property Wh0----

(a) having to his knowledge any substantial in- terest in such property acts as such Valuator or arbi- trator "without disclosing the fact that he holds such interest to the person appointing him; or

(b) acts corruptly or dishonestly as such Valuator or arbitrator, { is guilty of a crime.

Charge:---Dishonest dealing as a valuator or as an arbi- trator. A 1

87. Where by any statute any person is authorised or Iialtfft required to certify to any fact, any such person who gives ieam-.0"

a certiﬁcate which to his knowledge is false in any ﬁcates. material particular is guilty of a crime.

ChaTge:--Giving a false certiﬁcate.

110. Any public ofﬁcer who discloses (except to some Disclos person to whom he is authorised to publish 'or communi- ° ° "' cate the same) any fact which comes to his possession, Secmm by virtue of his office and which it is his duty to keep secret, is guilty of a crime.

Charge:--Disclosing oﬁicial secrets.

115. (1) Any public officer who wilfully and without Omission lawful excuse omits to do any act which it is his duty to by Public do as such ofﬁcer is guilty of a crime. °ﬂi°e"° perform d .

(2) No person shall be prosecuted under this section my without the consent in writing of the Attorney--General.

Chm-ge:--Omitting to perform duty as a public oﬂicer.

265. Any public ofﬁcer charged with the receipt, cus- False idy, or management of any part of the public revenue accou ng property who knowingly furnishes any false state- 133' Pub C 't or return of any money or property received by him °m°°' entrusted to his care, or of any balance of money in possession or under his control, is guilty of a crime.

;'harge:--Falsely accounting as a public oiﬁcer. ,5 , 200 APPENDIX 28 (contd.l S°°"' , 266. (1) Any person who--

communi-

°aﬁGﬂ5' (ca) corruptly gives or agrees to give, or offers to an agent, or to any other person on his behalf; or

(b) being an agent, corruptly solicits, receives, obtains, or agrees to accept for himself or any person other than his principal, any gift or consideration as an inducement or reward for '1'' ~-_,, doing or iorbearing to do, or for having done or forborne . I to do, any act in relation to the principal's affairs or busi- ness, or for showing or forbearing to show favour or dis- favour to any person in relation to the same, is guilty of a crime.

C'h.a.rge:--Corruption in relation to business.

(2) Any person who knowingly gives to an agent, or any agent who knowingly receives or uses with intent to deceive his principal, any receipt, account, or other do- cument in respect of which his principal is interested or which relates t.o any dealing, transaction, or matter in which his principal is interested, and which contains any statement which is false or erroneous, or defective in any material particular, is guilty of a crime.

Cho'.rge:=~Corruptly using a false document. (3) For the purposes of this section-

(cz) "agent" includes any person employed by or acting for another, and' any person serving under the Crown or under any corporation or public body;

(1)) "consideration" means any kind of valuable consideration;

(4) In any proceedings under this section, where it is proved that any consideration has been solicited or re- ceived by an agent from, or given or offered to an agent by, any person having business relations with the prin- cipal, the burden of proving that such consideration was not solicited, received, given, or offered in contravention of the provisions of this section shall be on the accused. In any such proceedings as aforesaid it shall be a defence to prove that the consideration was solicited, received, given, or offered with the principal's knowledge, and Eat he was aware of all factsmaterial to the transaction.

Canspiract? 297. (1) Any person who conspires with another---

(c) to kill any person, whether a subject of ' His Majesty or not, and whether he is in this State .01' elsewhere, under circumstances which, if he were killed in this State, would constitute murder;

201

APPENDIX 23 {(:onc:1d.j (F3) to obstruct. prevent, pervert, or defeat the due course of justice, or the adrninistrati-on of the law, whether such purpose is to he eﬁected in this State or elsewhere;

(ti) to cheat or defraud the public, or any porti- oulor person, or class -of persons;

(2) to extort, by any means, any property what.- ever from any person;

(f) to inﬂict by any unlawful means any injury or harm upon the public, or any particular person or class of persons;

(9) to facilitate the seduction of a woman;

U2.) to do any act involving, and known to he likely to involve, public mischief; or

(i) to do any act Without lawful justification or excuse with intent thereby to injure any person, is guilty of a crime.

Charge: --Conspiracy.

(2} A husband and wife are not criminally resppnsible for any conspiracy between themselves only.

{3} Nothing in this section shall affect the provisions of the Trades Unions Act, 1839, or of the Conspiracy and Protection of Property Act, 1389."

APPENDIX 29 Cananian Laws as T0 Ania-sociat, me. oneness (1) Economic Crimes (17; Revised Statutes of Canada, 1952, Ch. 314, The Combines Investigation Act.

(3) Evasion of Taxes (if) Revised Statutes of Canada, 1952, Ch. 53, The Customs Act. '

(ii) Revised Statutes of Canada, 1952, Ch. 6!}, The Customs Tariff Act.

(iii) Revised Statutes of Canada, 195-2, Ch. 99, The Excise Act.

(in) Revised Statutes of Canada, 1952, Ch. 148. Income-tax Act.

(3) Misuse of position by public servants

(i) Canadian Criminal Code---Sections '-103' (extracts attao-bed) - -

I, )( / /' 21.32 APPENDIX 29 (contd.J (4) Delivery of sub-standard goods (71) Canadian Criminal Code--se-ction 2, sub- section (36), sections 36El----363. (extracts attached] (5) P-rofiteeri-rig etc. Not cognizable as offences in Canada.

(6) Adultemtion of food etc.

(i) Revised Statutes of Canada, 1952, Ch. 123, Food and Drugs Act.

(ii) Revised Statutes of Canada, 1952, Ch. '[26, Fruit, Vegetables and Honey Act.

(iii) Revised Statutes of Canada, 1952, Ch. 177, The Meat and Canned Goods Act.

(These Statutes deal with the processing, packaging, inspection and control of sanitary conditions as well as purity of the products concerned).

(3?) Theft, etc. Canadian Criminal Code--section 269, 280, 283. (8) Trafficking in licences, etc. No speciﬁc provision exists except general provi- sions as to misuse of position by public servants.

Exmscrs FROM CANADIAN CRIMINAL Cons, 1955 Sections 99-103

99. In this Part, (:1) "Evidence" means an assertion of fact, opinion, belief or knowledge Whether material or not and whether admissible or not;

(to) "Government" means

(i) the Government of Canada,

(ii) the Government of a province, or

(iii) Her Majesty in right of Canada or in right of a province;

(i) in or under the authority of a court oi justice or before a grand jury,

(ii) before the Senate or House of Commons of Canada or a Committee of the Senate or House of Commons, or before a legislative council, legis- lative assembly or house of assembly or a com-

. mittee thereof that is authorized by law to admi- bister an oath, of-{iii} before a court, judge, justice, rriaglstrate VQPEY, , l '\ 'x .4 293 APPENDIX 29 lcontdfl

(iv) before an arbitrator or umpire, or a person or bodv of persons authorised by law to make an inquiry and take evidence therein under oath, or ' l to) before a tribunal by which a legal right or legal liability may be established, whether or not the proceeding is invalid for want of jurisdic- tion or for any other reason;

(cl) "Ofﬁce" includes

(i) an oﬁice or appointment under the govern- ment, (iii a civil or military commission, and

(iii) a position or employment in at public department; 5

(e) "Ofﬁcial" means a- person who (71) holds an oﬂice, or

(ii) is appointed to discharge a public duty:

and .

(fl "Witness" means a person who gives evidence orally under oath orby affidavit in a judicial proceedu ing, whether or not he is competent to be a witness, and includes a child of tender years who gives evidence but does not give it under oath, because, in the opinion of the person presiding, the child does not understand the nature of an oath.

100. (1) Bribery of Judicial Oﬂicers, etc.--Every one who l (ct) being the holder of a judicial oiﬁce, or being a member of the Parliament of Canada or of a legis- lature, corruptly

(i) accepts or obtains, (it) agrees to accept, or

(iii) attempts to obtain, any money, valuable consideration, oﬁice, place or employment for him- self or another person in respect of anything done or omitted or to' be done or omitted by him in his official capacity; or

(b) gives or offers corruptly to a person who holds a judicial office, or is a member of the Parliament of Canada or of a legislature, any money, valuable con- sideration, oﬂice, place or employment in respect of anything done or omitted or to be done or omitted by him in his official capacity for himself or another person, is guilty of an indictable offence and is liable to irnprison ment for fourteen years.

(2) Consent of Attorney Genera].--.N0 procernggs against a person who holds a judicial oﬁice shall {in 1"

tuted under this section without, the consent in g of the Attorney General of Canada.

204

APPENDIX 29 (Contd.}

101. Every one who . .

(aft B'rii:~e:y of O_ﬁicers--bein_g a justice, police commissioner, peace officer, public officer, or officer of a juvenile court, or being employed in the adminis- tration of criminal law, corruptly

(i) accepts or obtains, (it) agrees to accept, or

(iii) attempts to obtain, for himself _ or any other person any money, valuable consideration. office, place or employment with intent I (in) to interfere with the administration of.

justice, , t (15) to procure or facilitate the commission of r an oﬁence, or , .

(vi) to protect from detection or punishment a person who has committed or who intends to commit an oﬁence; or

(ii) Icle-m----gives or offers, corruptly, to a person mentioned in paragraph (a) any money, valua-ble con- sideration, oﬁice, place or employment with intent that the person should do anything mentioned in sub-para- graph (in), [11] or (vi) of paragraph (ct), is guilty of an indictable oifence and is liable to imprison. ment for fourteen years.

102. (1) Frauds upon the Gooemment--Every one com- mits an offence who (ct) Offer or gift to inﬂuence oﬂicia.l»--directl3* or indirectly {i} gives, offers, or agrees to give or offer to an oiiicial or to any member of his family, or to any one for the beneﬁt of an oflicial, or ﬂit) being an official, demands, accepts or oﬁers or agrees to accept from any person for him- self or another -person, a loan, reward, advantage or beneﬁt of any kind as consideration for co- operation, assistan-::e,~ exercise of inﬂuence or an act or omission in connection with

(iii) the transaction of business with or any matter of business relating to the government, or (iv] a claim against Her Majesty or any bene- ﬁt that Her Majesty is authorised or is entitled to bestow, whether or not, in fact, the official is able to co-operate, render assistance, exercise inﬂuence or do or omit to do What is proposed, as the case may be; _ Dufig) Giving reward oi-acommission to oﬂicial with- 'sent-----hav1ng-dealmgs of any kind -with thg 205 APPENDIX 29 (C01'1'Ld.) government, pays a commission or reward to or con- fers an advantage or beneﬁt of any kind upon an em- ployee or official of the government with which he deals, or to any member of his family, or to any one for the beneﬁt of the employee or ofﬁcial, with respect to those dealings, unless he has the consent in writing of the head of the branch of government with which he deals, the proof of which lies upon him;

(c) Acceptance of Commission or Gift without co:rtsent----beiI1g an ofﬁcial or employee of the govern- ment, demands, accepts or offers or agrees to accept from a person who has dealings with the govern- ment a commission, reward, advantage or beneﬁt of any kind directly or indirectly, by himself or through a member of his family or through any one for his bene- ﬁt, unless he has the consent in writin of the head of the branch of government that emp oys him or of which he is an oﬁicial, the proof of which lies upon him; _

(d)_ Compensation for procuring settlement of claim, etc.--ha-ving or pretending to have influence with the government or with a minister of the gov- ernment or an official, demands, accepts or offers or agrees to accept for himself or another person a re- ward, advantage or beneﬁt? ofany kind as consider- ation for co-operation, assistance, exercise of inﬂu- ence or an act or omission in connection with

(i) anything mentioned in sub-paragraph

(iii) or (to) of paragraph (a), _ (ii) the appointment of any person, including himself, to an ofﬁce; or '52) Offer of reward for-cppointment---offers, gives or agrees to offer or give to a- minister of the govern- ment or an official a reward, advantage or beneﬁt of any kind as consideration for co-operation, assistance, exercise of inﬂuence or a-n act or omission in connec- tion with

(i) anything mentionedin sub-para-graph (iii) or (in) of paragraph (:1), or I (ii) the appointment of any person, including himself, to an oﬂice; or if} Reward for Iwithdmwal of tender----having made a tender to obtain a contract with the government ti) gives, offers or agrees to give to another person who has made a tender, or to a member In his f«'iIT1i1?}r'. 01' f0 another person for the bene L that person, a reward, advantage or beneﬁt 0%,':

kind as consideration for withdrawal"

tender of that person, or ' 266 APPENDIX 29 [c0ntd.) (it) demands, accepts or agrees to accept from another person who has made a tender 3, reward, advantage or beneﬁt of any kind as consideration for the withdrawal of his tender.

{2} Contractor subscribing to election fimd.--Every one commits an oﬁence who, in order to obtain or retain a contract with the government or as a term of any such contract, azhether express or implied, directly or indirectly subscribes, gives, or agrees to subscribe or give, to any person any valuable consideration

(a) for the purpose of promoting the election of a candidate or a class or party of candidates to the Par- liament of Canada or legislature, or [b) with intent to inﬂuence or affect in any way the result of an election conducted for the purpose of electing persons to serve in the Parliament of Canada or a legislature.

(3) Pun.ishment.---Every one who commits an oﬁence under this section is guilty of an indictable offence and is liable to imprisonment for ﬁve years.

103. Breach of Trust cry Public 0ﬁicer.--Every official who, in connection with the duties of his oﬂice, commits fraud or a breach of trust is guilty of an indictable oﬁence and IS liable to imprisonment for ﬁve years, whether or not the fraud or breach of trust would be an oiience if it were committed in relation to a private person.

EXTRACTS FROM CANADIAN CRIMINAL CODE Section 2(36) and sections 360-363.

2. (36) "Public stores" includes any movable property that is under the care, supervision, administration or con- trol of a public department or of any person in the service of a public department;

360. (1) Applying or removing marks without autho- ?'ify.------Every one who,

(a) 'without lawful authority, the proof of which lies upon him, applies a distinguishing mark to any thing. or e

(b) with intent to conceal the property' of Her Majesty in public stores, removes, destroys or obli- terates, in whole or in part, -a distinguishing mark, is guilty of an indictable offence and is liable to" imprison- ment for two years. _ _ Wig} Unlawful tra-nsactions in public stores.+--Every one himwithout lawful authority, the proof of which lies upon Stofesseives, possesses, keeps, sells or delivers public of '-t' he knows bear a distinguishing mark is guilty 29'?

APPENDIX 253] (contd.)

(a) an indictable oitence and is liable to imprison- ment for two Years, or (5) an .;_:ﬁ«__=]f1_Ce punishable on summary conviction.

(3) "Distinguishing trnm-lc".--Fo1~ the purposes of this section, "distinguishing mark" means a distinguishing mark that is appropriated for use on public stores pursuant to section 359.

361. {1} Selling defective stores to Her Majesty.----Every one who knowingly sells or delivers defective stores to Her Majesty or commits fraud in connection with the sale, lease or delivery of stores to Her 1'-Iajest:-V or the manufacture of stores for Her Majesty is guilty of an indictable offence and is liable to imprisonment for fourteen years.

(2) Oﬁences by officers and employees of corporations.-- Every one who being a director, oﬂicer, agent or employee of a corporation that commits, 'off fraud, an offence under sub-section (1), (ct) knowingly takes part in the fraud, or {b} knows or has reason to suspect that the fraud is being committed or has been or is about to be com- mitted and does not in;Eorm the responsible government or a department thereof, of Her Majesty, is guilty of an indictable oﬂence and is liable to imprison- ment for fourteen years.

362-. Unlawful use of military uniforms or cer1:iﬁcates.~-- Every one who without lawful authority, the proof of which lies upon him, to) wears a uniforrn of the Canadian Forces or any other naval, army or air tome or a unﬁorm that is so similar to the uniform of anyof those forces that it is likely to be mistaken therefor.

{hi wears a distinctive mark relating to wounds re- ceived or service performed in war, or a military medal, ribbon, badge, chevron or any decoration or order that is awarded for war services, or any imitation thereof_ or any mark or device or thing that is likely to be mis- taken for any such mark, medal, ribbon, badge, chevron, decoration or order, (Cl has in his possessiﬁn a certiﬁcate of discharge, certiﬁcate of release, statement of service or identity card from the Canadian Forces or any other naval, army or air force that has not been issued to and does nr belong to him, or m .41

(d) has in his possession arommission or ,)a:at¢.-.-- or a certiﬁcate of discharge, certi ate of releizcer or ment of service or identity card ssued to 39/ / / /.

APPE NDIX 29 [concld.) person in or who has been in the Canadian Forces or any other naval, army or air force, that contains any alteration that is not veriﬁed by the initials of the oiﬁcer thereto lawfully authorised, is guilty of an offence punishable on summary conviction.

363. (I) Mﬂitary sto'res.--Every one who buys, receives or detains from a member of the Canadian Forces or a deserter or absentee Without leave from those forces any military stores that are owned by Her Majesty or for which the member, deserter or absentee without leave is account- able to Her Majesty' is guilt)' of (05) an indictable offence and is liable to imprison- ment for ﬁve years, or

(b) an olience punishable on summary conviction.

(2) E:cception.--No person shall be convicted of an offence under this section where he establishes that he did not know and had no reason" to suspect that the military stores in respect of which the offence was committed were owned by Her Majesty or were military stores for which the member, deserter or absentee without leave was accountable to Her Majesty.

APPENDIX 30 CONSPIRACY -ro COMMIT PUBLIC MISCHIEF'--ENGLISH LAW'.

1. A brief discussion of the offence of conspiracy as known to English law appears to be useful, first, because it has been used often to punish a conspiracy to defraud, and secondly, because its wide scone is illustrated by certain recent decisions'.

2. The following statement in one text-book" seems to sum up the law neatly: --

"An agreement by two or more persons :--

T (I) To commit a crime; or {2} Subject to possible qualiﬁcations mentioned in the explanationi, to commit any other unlawful act; or (3) To do any act which is (:1) immoral or (li) tends to the public mischief;

is a common law niisdemeanour punishable with .a ﬁne and imprisonment.''.

"ee Shaw 2;. D.P.P. (I96!) 2 AER. 446 (1961) 2 W.L.R. 897 (I-LL.) 9'1-:_& Jones, Introduction to Criminal Law (1964), 297: article 90. Pﬂrhalm '- ' tion stated is to the effect that the second head would, Crﬁsi 3" rmly to tortsjnvolving the ﬂﬁts of fraud and of malice. Introduction to C1-iniinal (1964); page 299.

209

.-'-'I. PPE NDIX 30 (contd.)

3. The offence covers not only a conspiracy to commit a breach of statute, but also an agreement to contravene a law, whether statute-made or otherwise'-2.

4. That the offence has not become obsolete, will be shown by the charges of conspiracy framed in connection with the recent Great Train Robberjﬁ, and the charges of "conspiracy to pervert the course of justice" framed against Detective Sergeant Challenor' (later found to be insane and unﬁt to plead), and the case-law relating to conspiracy to commit summary offences'.

5. Certain species of the offence of conspiracy in crimi- nal law have become controversial". Of these, the cons- piracy "to corrupt the public morals" and to commit a pub- lic mischief is one'.

The recent decision of the House of Lords'?-9 leaves no doubt that the law recognises such a conspir'aoy1"-'1,

6. Some important instance of conspiracy to defraud"? may be noted. Agreements to do the following things have been regarded as punishable as conspiracy to de- fraud-

1See R. v. Jacobs. 1944 I All Eng. Rep. 435- (:9 ) K.B, » 33 S 1' _ citors' Journal, 188; and discussion thereof in .éabu.l:14V. King4.IE?rr.;p., Aflli. I945 Nag. 218, 221 (Vivian Bose ].).

"See also R. V. Sorsky (1944) 2 All Eng. ' Rep. 333 (C.C.A.) and Haas bury, 3rd Edn., Vol. 10, page 31:, para. 569(m1dd1c).

'Sec R. v. Field (1964), 3 W.L.R. 6o5, 607, 603 {C.C.A.).

'R. v. Pedr-im', (September, I964), r Cur-run: Law, 366-2, Notes of recent cases {C.C.A.).

'See R. V. Blamfrss Transport Sa-r-vices Ltd. (1963) 3. A.E.R. 1:70; (1963) 3 W.L.R. 496 (C.C.A.). _ "See the discussion in G-lamrille 'Williams, Ctinlinal Law, The Genera] Part (1961), Chapter 15.

S "'Fo-r earlier cases, see Stallybrass, 'Public lvﬁschicf' (I933) 49 L.Q.R 3, 191.

"Show v. D.lf'.P. (1961) 12 A._E.R. 466; E1961) 2. W. L.R. 897 (I-LL) discussed exhaustively by Goodhard. "The Show case; the law and public morals" (19-51) 77 Modern Law Review 560.

"See also (3.0 Turpin, "Conspirac5r_Uo Corrupt Public Morals"(I96I) Camb L.]'. 144.

"Other cases relevant to this are-

(a) R. v. Newlcmd (I933) I2 All Eng. Rep. 1067 (C.C.A.).

(b)Baczrd of'TragTe v. {I957}, A.C. '60:; (I957) I All E' Rep. 411 {I-l.L.; (Discusses history of the offence in detail), - _ {-

l1For earlier cases see Stallybrass "Public Mischief" (1933), 4:"

I83, 191. 3 e Haisbmy, 3rd ads, Vol. .m, page sggsomas cu).

I /, 210 APPENDIX 30 (concldjl (ii to raise the price of. public funds on a parti-

-cular day by false rurnoursl;

(vi) to make and publish a false balance--sheet, the shares of a company on the official list of stock exchange, in order to give a fictitious value to such share";

(iii) to induce a false belief among investors that there is a bona fide market for certain shares; by making sham sales, etc., at high prlces".

(iv) to make and publish a false balance-sheet, misrepresenting the ﬁnancial condition of Company'.

(v) to defraud a railway by obtaining non-trans- ferable excursion tickets and selling them to other'?

7. The common law olfence of conspiracy can be used

-'.;'or frauds in relation to passports, it seems".

8. As to conspiracies and strikes, see discussion in the * under--rnentioned study'. -

9. In New Zealand3-", the offence of conspiracy has been narrowed down to speciﬁc classes of conspiracy.

An important feature of the crime of conspiracy to defraud is that it does not require "false pretence". As has been pointed out", the crime of obtaining by false pretences requires a false pretence, but conspiracy to de- fraud does not. ' Another feature worth noting is that the obtaining i of property or the "execution: of some kind of document, which is necessary 'for the offence" obtaining by false pretences in English law, is not necessary for conspiracy".

' Thus, where the buyer of a mare entered into plan with another person to deceive the seller into supposing that the mate was unsound (so that the seller agreed to accept less than the price originally; ﬁxed), the plan was held to be punishable as conspiracy to defraud the seller of the balance of price, though no property was obtained".

De Bmmger (1814), 3 M 5: S. 67. See Turner and Armitagc;

- Cages on Criminal Law (1964), page 161 (as explained in R. v. Aspinal, _. in a.).

= R. v. Aspimzzi (1876), 2 Q.a.n. 43, 'so (C. EL).

"Scott v. Brown etc. Co.' (1892), 2 QB. 124 (C.A.J.

-11%'. v. Burch (1855), 4 F'.& 'F. 407 "R. v. Absoloné-' Clark (1859), I. F 8: F. 493. "See I-Ialsbury, 3rd Edn Vol. 7, page 265. 7K. W. Wdderburn, "Intimidation and the right to strike" (I964), 27 Modern Law Review 25?. 257.

"Sec sections 355, I16, :57, 309. 31:: (New Zcalanci) Crimes Act, 196:.

- ". 1_See also sections 43, 1'34, :35, 4:2, 558 to 561, Criminal Code of Western '*3 1a.

- 59°' ;LGlanville Wiliiarns, Criminal Law, The General Part (1961), page 1'C07'N¥ille Williams," Criminal Law, The General Part, pages 690, -591. ' H9'5""'*"'3 'mi, Dca1's_.'C-.C.' 337; 169 112.1: 7'50. (com. See V01;-Iﬂgﬁaﬁ-E 835. _, I 31,5 of 1360.

Section 339 A. '-'1'. Sectior.

3 oflgjo.

1' Cf. Section 25, Indian Pe 1 Code f3'::i'l.l.ltf:l1TZlj.«' I K t 5 5 211 APPENDIX 30 [c:oncld.) These two features also show that a conspiracy to' defraud is criminal even if the act which it is agreed to do may not be Criminal if done by only one personl-".

In a recent case". an agreement by a debtor (entering into a scheme of arrangement) to confer a fraudulent preference upon one creditor was regarded as punishable as conspiracy. Though the actual decision does not go to the length of holding that it was a conspiracy to def-rauol, the cases cited in the arguments for the Crown" throw a good deal of light on the subject, and also show that ultimately such agreements are "bottomed in fraud, which is a species of irnmora]ity""'.

..--.._4.

APPENDIX 31 Pnoeo-sass AS snows IN THE FORM or DRAFT AI\'IE1'-1D1\u1EN'l.'S to THE INDIAN PENAL Conn (This is a tentative draft only}

1. After section 3TB of the lntlien Penal Code (herein- after called "the Code"), the following section shall be inserted, naInely:--

'_'37Q.='L Whoever commits theft in respect of G.rL'y Th'-'ft Of public property shall be punished with imp-risonment gﬂjpecny or either descrtption which may extend to 3e1_:en(New)_ years, and shall also be liable to ﬁne. Explanation.--In. this section. "public property" means (If. section the property of the Government, and' includes the propeaty :1': T""3'fih' ' HUSE,-,.

0-fa * Indian (or: o, corporation esiiol:-lisfied by or under a Cen-- P533' tral, Provincial or State Act; 333; by

(b) a Government company as deﬁned -in section AC! 40 T 61'? of the Companies Act, 1.956; and Of 1954-

(c] :1 local authority."

2. After section 420 of the Code, the following section shall be inserted, nan1el{r:_---

H "4.-2.{lA. Whoetver, int pursuance for the delivery of any goods, the construction of any huzldmg or eacec-utéon of other work, cheats the Goo- ernment or other public outhori.ty-- .

{9} in the case of a contract for the delivery m'"') 0f 90945, by Supplying goods which are less in q'u~tmftt*y than, or *mfen'm~ in quoiity to, those be contracted to deliver, or which are otherwise -not in accordance with the contract, or of any contract Section sung public 'R~V- W7u'rr=Fi='r (19143. 3 KJ3. I233 {C.('_.'.[-1.}.

Bﬁalsburgr, std Edn. Vol. 10, page 313, para 579.

3R. v Potter, (1953), I All Eng. Reports, 295, 'See the :a.rg-urne;nts of Veale, Q. C. for the C,mw_n_ , 'Cf. Cockshott v. Banner: (1733), 2. Term Re, 755,- me English 3,.

ports 4 I1.

7 /"

authorities. , ' 212 APPENDIX 31 (c0ncld._'J

(b) in the case of 'a contract for the construc-

tion of a building or execution of other work, by using goods which are less in quantity than, or inferior in quality to, those he contracted to use, or -which are otherwise not in accordance with the contract,

- shall be punished with imprisonment of either des- Cf. _ cription for a term which may extend to seven years, Sﬁctlﬁnd. and shalt be also liable to ﬁne. Iﬁjggilgoﬁf E:-tplanatic-n.----In this section, '''public authority"

means---

(a) a corporation established by or under a Central, Provincial or State Act;

(b) a Government company as deﬁned in 1 0f 1955-

CJ'- Section section 617 of the Companies Act, 1955; and ' ::1,Tweifth, clause (c) a local authority.

Indian Penal ' Code: as APPENDIX 32 amended 5, 4 PROPOSED AMENDMENTS TO THE Coma OF CHIMINAI b Act o A of 1964. PROCEDURE, 1898.

[This is a tentative draft only) In the Second Schedule to the Code of Criminal Pro« 5 °'5'139~3= cedure, 18981,-

(i) after the entry relating to section 379, the following entry shall be inserted, namely:----

I 2 3 4 5 6 . 7 3 3799; Theft of May Warrant No! Not com- Irnprison- 2-'£113.' public arrest hail- p0und- ment of Magis- property without able able either des- tratc warrant cription for 7 '_l'EE.l'5 and line

(ii) a-fter theentryr relating to section 420, the following entry shall be inserted, nan.'1e1y:--

I 2 3 4 5 5 7 3 420A Chcati--g Ma:-' Warrant Bail- Not Imprison- Court of public arrest able oo1-n- ment of Session authori- without pound- either Presidency ties. warrant ab}: de3cr1p- Magistrate tion for or Magis-

7 years mate of the and ﬁne. first class.

1Thcse-u-nzetldments are consequential on those proposed in the Indian Penal Code.

GMG11=ND--T.s.s ,_.4-,r M. of Law---3--I-6B--1,85o.

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