The Trial And Punishment Of Social And Economic Offences

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Law Commission Report

The Trial And Punishment Of Social And Economic Offences

LAW COMMISSION
OF INDIA
FORTY-SEVENTH REPORT

THE TRIAL AND PUNI$I-IIMENT OF
SOCIAL AND ECQNOMEIII OFFENCES

GOVERNMENT OF' INDIA
MINISTRY OF LAW AND JUSTICE

'No.F.1(5)/71-LC.

P.B. Gajendragadkar,
Shastri~Bhavan,
New Delhi-1.
Dated 28th February, 1972.

My dear Minister,

I am forwarding herewith the Forty-seventh
Report of the Law Commission on the trial and
punishment of social and_economic offences.

Yours sincerely,

(P.B. GAJENDRAGADKAR)

I-Ion'bl\e Shri H.R. Gokhale,
Minister of Law & Justice,
Government of India,

New Delhi.

CONTENTS

'Cl-{AFTER
No.

. Our approach

. Measures so far adopted

. Introductory
. Scope of the inquiry . . . . .

. Causes of defective enforcement
. Existing position with reference to important enactments .

Desirability of amendment--substantive points common
to all the Acts considered . . . . . .

'8. Corporations and their oﬁicers

.10.
11.
12.
13.
14.
15.

215.6-
17.

18.
19.

Desirability of amend ments as to jurisdiction, procedure and
limitation. . . . . . . .
Desirability of amendment--probation .

Requirement as to sanction or complaint A

,Presumption and evidence

Tender of pardon

Administrative Adjudications
Recommendations as to individual Acts
Preventive detention .
Interference by writs with invesfgation .

Miscellaneous . . . . .
Summary of recommendations. . .
APPENDICES

Appendix I--Recommendatio11s as shown in the form of

draft sections.

Appendix 2----Figures as to convictions and punishments.
Appendix 3----Questionnaire issued by the Commission.

(i)

PAGE

1 8
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39

45
61

70
85
87
96

97_

103
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150
153
155

165
190
194

REPORT ON THE TRIAL AND PUNISHMENT OF
SOCIAL AND ECONOMIC OFFENCES

CHAPTER 1

INTRODUCTORY

1.1. This Report deals with the question of effective imple-
mentation of the material provisions of certain Acts. These
offences may brieﬂy be described as social and economic offences.
The broad question which has been referred to the Commission
can be thus stated'----

"The Government of India had under consideration
the question of effectively dealing with certain anti-social

and economic offences. There are certain special
Acts intended for the beneﬁt of genefal public and
the offences under such Acts are anti-' _ Rial n nature. There

are special legislations as Essential 'mmodities Act. Pre-
vention of Food Adulteration Act, Drugs (control) Act,
Imports & Exports (control) Act. FQmjgn__Excl_1ange Regu-
lation Act, etc. These anti-social offences also extend to
deliberate evasjgglof taxes and the qﬁestidn that arises for
cons] eration is how drastically and swiftly penal action can
be taken to prove a deterrent against commission of such

offences. The present trend of legislation and also
the judicial approach to such offences appears to
be that these offences are treated htly and the

punishments areiinot adequate having re d to the gravity
of such offences. The Government efslndia would like to
have a well-considered opinion of the law Commission as re-
gards desirability of dealing with adequately and swiftly such
anti-social and economic offences."

1.2. This Report accordingly con rns itself with the

"question of dealing adequately and swift "with those offences.

As we point out in a later chapterz, wethoilght it necessary
to widen the scope of our inquiry by including within its pur-
view questions about investigation, : prosecuﬁon, trial and
punishment in respect of proceedings taken under these Acts.
We wish to make it clear that we are not dealing with contents
or structure of these Acts. '

l.3. It may be stated here that the question whether social
and economic offences should be included in the Indian Penal
Code has been considered at length in a Report of one of the

Reference

to the

Commis-

sion.

Scope of
the Report.

Previous
Report.

1. Letter of the Minister of Law and Justice dated 4th October, M19":/ll 1;. the "chair-

man, law Commission.
2, Para. 2.], infra.

Social and
ﬂ?0D0l'l'llC
offences.

Offences
without
individual
victims.

earlier Law Commissionsl,
Report.

1.4. By now, the concept of anti-social acts and economic
offences has become familiar to those acquainted with the
progress of the criminal law and its relationship to the achieve-
ment of social objectives. Still, it may not be out of place
to draw attention to some of the salient features of these
offences.

and it is outside the scope of this

Brieﬂy, these may be thus summarised 2*

(I) Motive of the criminal is avarice or rapaciousness
(not lust or hate).

(2) Background of the crime is non-emotional (unlike
murder, rape, defamation etc.). There is no emotional
reaction as between the victim and the offender.

(3) The Victim is usually the State or a section of the
public, particularly the consuming public (i.e. that portion of
the which consumes goods or services, buys shares or securi-
ties or other intangibles). Even where there is an individual
victim, the more important element of the offence is harm
to society.

(4) Mode of operation of the offender isfraud, not force.
(5) Usually, the act is deliberate and wilful.

(6) Interest protected is two-fold-
(a) Social interest in the preservation of----

(l) the property or wealth or health of its in-
dividual members, and national resources, and

(ii) the general economic system as a whole,
from

(i) exploitation, or
(ii) waste by individuals or groups.

(b) social interest in the augmentation of the wealth
of the country by enforcing the laws relating to taxes
and duties, foreign exchange, foreign commerce, in-
dustries and the like.

1.5. The most important feature of these offences is the
fact that ordinarily they do not involve an individual direct victim
but are punished because they harm the whole society. This
constitutes the primary reason why special efforts have to be
made to enforce them. If a man or woman is robbed. assaulted
or cheated, there is some person who is interested in getting the
offender prosecuted, and because the act is a physical one.

1. 29th Report of the Law Commission (Social and economic offences). 7

having an immediate and direct impact, both individual and so-
cial vengeance are likely to be aroused. This element is, however
absent when, for example essential commodities are hoarded,
or foreign exchange is illegally taken out of the countrv or pro-
hibited goods are imported. No doubt, some social offences
Ado involve a 'victim'. For example, when adulterated food
is sold, the immediate consumer is harmed. But the criminal
act is potentially capable of harming a large number of persons
and that is the principal object behind punishing it.

It is not, of course, suggested that offences falling within
the general criminal law are not to be regarded as anti-social
acts; and in a sense every crime is anti-social because the State,
when it prosecutes, does so on behalf of the society. What is
intended to be emphasised is, that the injury to society predomi-
nates in the case of some acts, while it may be in the case of
others.

1.6. The Law Commission had, in an earlier Report',
occasion to deal with the following categories of offences, while
considering the question whether provisions as to social and
economic offences should be transferred to the Penal Code :--

(1) Offences calculated to prevent or obstruct the eco-
nomic development of the country and endanger its economic
health.

(2) Evasion of taxes.
(3) Misuse of position by public servants.

(4) Offences in the nature of breaches of contracts, re-
sulting in the delivery of goods not according to speciﬁca-
tions.

(5) Hoarding and Black-marketing.
(6) Adulteration of food and drugs.

(7) Theft and Misappropriation of public property and
funds.

(8) Trafficking in licences, permits etc.

For the purposes of the present Report also, it is not neces-
sary to go beyond the above offences. In fact, some of the
categories mentioned above--e.g. categories (3), (4), (7) and (8)
-----do not present problems of enforcement with muchlfrequency
and seriousness was to require much attention.

1.7. It is well known that while most of the offences under
the Penal Code rule out absolute liability, the same is not true of
many offences under the special laws. Considerations of the
need of enforcement have led to the creation of absolute

Categories
of social
and
economic
offences.

Offences
of strict
liability.

1. 29th Report of the Law Commission.

White-
collar
crimes.

Socio-
economic
offences
form
intersecting
circle with
white
collar
crimes and
offences of
absolute
liability.
Special
features of
economic
crimes.

1.7 l'ara.

4
liability. Some of the acts punishable under special laws may be
regarded as "public welfare offences", "regulatory offences"

or "civil offences". while some of the acts can be regarded as
akin to traditional crimes.

l.8. Another aspect to which attention can be usefully
drawn is that many~but not all--of the offences in question are
"white-collar crimes". Without entering into details of the
deﬁnition of "white-collar crime", one may, for the purpose
of the present Report, describe it as a crime committed in the
course of one's occupation by a member of the upper class of
society. A manufacturer of drugs who deliberately supplies
sub-standard drugs is. for example, a white collar criminal.
So is a big corporation guilty of fraudulent evasion of tax. A
person who illegally smuggles (for his personal use) costly tele-
vision sets. is not a white collar criminal in the above sense. there
being no connection between his occupation and the crime
committed by him. Nor is a pensioner who submits a false re-
turns of income. But all of them are guilty of social or economic
offences. In short, social offences are offences which affect
the health or material welfare of the community as a whole.
and not merely of the individual victim. Similarly, economic
offences are those which affect the country's economy, and not
merely the wealth of an individual victim.

L9. Socio-economic offences and white-collar crimes could
thus be intersecting circles.' Again. socio-economic offences
and crimes of strict liability also could be represented by inter-
secting circles.

1.10. The importance of suppressing social and economic
crimes in any modern society is obvious. The transition from
a rural and simple society to an industrialised and complex one
entails regulation by or under law of activities having an econo-
mic import. The same process of transition from a simple to
complex and a rural to urban society also necessitates an in--
creasing attack on malpractices which were previously unknown.
but which now emerge as a result of the process. The process
gives rise to a two-fold increase in such malpractices--increase
in the number of socio-economic malpractices and increase in
their variety. Thus. newer forms of harmful activities not known
previously--such as. unfair competition----raise their heads-
And malpractices which would previously have been of a simple-
recurring. monotonous type, now assume diverse and varying
manifestations. Adulteration of foods and drugs is an example
in point.

i 1.i8.~Siipra.

1.11. This has happened in every modern society. In a
developing economy. it assumes still greater importance. be-
cause conduct which. though criminal, could previously have
been overlooked~e.g. petty smuggling--has now to be dealt
with more seriously. Just as in war, every inch of territory
has to be defended, whatever the risk. so in an economic crisis or
in a massive effort to build up a society with a sound and healthy
social structure. the purity of every grain has to be protected
and every dot of evil has to be wiped out.

The reason why offences against laws enacted to combat
such evils do not ﬁnd adequate response in the social conscious-
ness is psychological. Our minds are familiar with conventional
offences like murder. rape and theft--ol'fences where a tangible
person or property of an individual is attacked. But it takes
time to realise the seriousness of non--conventional crimes where
intangible property. in the sense of economic resources of the
('0/nmuniI_1' are in\'ol\ed. or where the harm caused is indirect
and remote. and there is no immediate tangible object of the harm
visible to the mind. Neither the offender nor the society ade-
quately realises the harm. because ofthe absence of an immediate
victim.

H2. The procedure which we followed in

preparing this
Report vtas in brief, as follows :-

After a preliminary study, we had prepared a Questionnaire
on the subject. setting out the important points arising from the
reference and soliciting views on those points with reference to the
major Acts.'. The questionnaire was sent out to the State
Governments. Bar Associations. Faculties of Law in different
Universities. commercial bodies and other interested persons
and institutions. We also got prepared a draft Report on the
subject. We then held oral discussions with Members of Par-
liament. Government oﬂicers. members of the Bar. commercial
bodies academic lawyers and others interested in the subject.
The discussion were held by the full Commission at Bombay
and Delhi. and one of our Members (Mr. Justice V. R. Krishna
Iyer) held discussions at Madras. Ernakulam and Trivandrum.
Chairman discussed some aspects of the problem under our
inquiry with the representatives of the Indian Chambers of Com-
merce and Industry at Calcutta. Thereafter. a revised draft
Report was prepared and discussed. It was again discussed
and revised. and ﬁnalised.

We wish to express our thanks to all those who helped us by
communicating their views orally or in writing. It is not consi-
dered convenient to refer to each shade of view while discussing
the various points. mainly because the Acts involved are numer-
ous and so are the shades of opinion. But we ought to state
that before formulating our conclusions. we have taken into
account each ofthese shades of view.

As to the major Acts. see para. 2.3. infra.

Procedure
adopted.

Before we conclude this Introductory Chapter, we ought to
place on record our warm appreciation of the assistance which
we have received from our Secretary, Shri P. M. Bakshi. At the
commencement of the inquiry, Mr. Bakshi prepared a Working
Paper in which he posed the major problems which called for our
decision. Then a Questionnaire was drafted and, as we have
already indicated, it was widely circulated. Mr. Bakshi joined
us in our discussions with all persons who helped us by meeting
us, and took very comprehensive notes of the discussions. After
the recording of evidence was over, we discussed the problems
posed in the Working Paper, initially prepared by Mr. Bakshi,
and came to provisional conclusions on the major issues involved
in the inquiry. it was in the light of these conclusions that a
draft was prepared by Shri Bakshi for further discussions. This
draft was considered by us fully and carefully and we reached
and recorded our ﬁnal conclusions on the major issues (involved
in the present inquiry). Then, Mr. Bakshi prepared a ﬁnal draft
for our consideration and acceptance. This draft was again
examined by us before it was ﬁnalised.

We are conscious that some of the major recommendations
we have made in our Report are radical in character and they
constitute a departure from the traditional concept of criminal
jurisprudence. Everyone of the recommendations made by us
has, however, been carefully examined by us and the pros and
cons of the problem involved have been fully scrutinised. In
our view, the implementation of the recommendations we have
made may go a long way in helping our country to face eﬂ"ecti\ie-
ly the challenge posed by the socio-economic offences with which
the Report is concerned.

Whilst we were engaged on this inquiry, the Hon'ble Minister
for Law and Justice indicated to the Chairman that the Union
Government would very much appreciate if the present case
could be forwarded as early as possible, and, on behalf of the
Commission, the Chairman had assured the Hon'ble Minister
that the Commission hoped to be able to make its report by the
end of February, 1972. We would like to add that we have been
able to carry out our assuran mainly because of the very
valuable help which Mr. Bakshiias given us.

CHAPTER 2

Scope or rm: INQUIRY

2.]. Before we proceed to indicate our broad approach in
respect of social and economic offences, and our views as to the
detailed amendments needed in the existing laws on the subject,
we would like to say a few words about the scope of the present

inquiry.

Although we started with the broad object of discussing the
question of trial and punishment of the offences in question, we
felt that justice could not bedone to the subject without also
entering into some consideration of the stages of investigation
and prosecution. These stages are vitally linked up with trial.
It is the material gathered during investigation that forms the
basis of the prosecution. It is obvious, therefore, that defects
in the law affecting the efficiency of the stages preceding trial
would affect the quality of the trial.

Moreover, having regard to the importance of these offences,
it appeared advisable to broaden the scope of our inquiry, so as
to include steps prior to the judicial process. Accordingly, we
have kept before us the entire subject of criminal process, in rela-
tion to the enforcement of the laws in question.

This has enabled us to consider various criticisms in relation
to the enforcement of social and economic legislation, such as,
that the investigation into the commission of such offences is
not prompt or efﬁcient; that the presentation of the case against
the offender in Court is not eﬂ'ective;that, for lack of proper and
adequate evidence, or owing to purely technical objections, con-
victions are often not recorded, and that, in some cases, where
convictions are recorded, the sentences imposed are inadequate.

2.2. At the same time, certain limitations as to the scope of
the present inquiry have also to be emphasised. These limita-
tions flow from the fact that this Report is primarily concerned
with the narrow question of dealing effectively with the speciﬁed
offences through the criminal process. In the ﬁrst place, there-
fore, questions of the content of the substantive provisions of the
various Acts are outside the ambit of this Report. Secondly,
since the emphasis is on the process of a criminal prosecution,
an examination of the imposition of penalties by administrative
adjudication has not been undertaken, except where some point
of importance arose during our oral discussions and appeared to
require special consideration. Thirdly, even as regards the penal
provisions which properly fall within the subject-matter of the

Introduc-
tory.

Scope
of the
inquiry.

Major
Acts dealt
with.

Scope of
the recom-
mendation
as to direct
taxation
laws.

Report, we have dealt with only such matters as appeared to be
of importance from the broad angle of eﬁective implementation
of the laws concerned. Therefore, the fact that we have not
made recommendations for amendment in the penal provisions
in certain points of detail, should not be taken as implying that
they are not capable of improvement in their form or content,
whether on independent considerations of merit or on considera-
tions of uniformity.

2.3. Another limitation which should be pointed out is that
this Report will not go into all the Acts concerning social and
economic offences. For convenience, we shall deal only with
the following major Acts :-- V

(l -The Central Excises and Salt Act, 1944.

2) The Foreign Exchange Regulation Act, 1947.

(3) The Prevention of Food Adulteration Act, 1954.
(4) The Essential Commodities Act, l955.

(5) The Wealth Tax Act, 1957.

(6) The Income-tax Act, 1961.

(7) The Customs Act, 1962.

(8) The Gold Control Act, 1968.

[On one or two points, we have, however, recommended
amendments in some other Acts1.]

This limitation was unavoidable if the inquiry was not to
become cumbersome.

2.4. Having regard to what we state laterz, our recom-
mendations in respect of the direct tax laws (Income-tax Act
and Wealth Tax Act) are conﬁned to certain points which were
specially forwarded to us at Ministerial level.

1. E.g. (a) the Imports and Exports (Control) Act, 1947;

(b) the Drugs Act;

((1) the Indian Penal Code;

(2) the Passports Act;

(I) the Criminal Law Amendment Act, 1952.

2. Paras. 3.35 and 3.36, infra.

CHAPTER 3

OUR APPROACH

3.1. We would, at thisslage, like to indicate broadly the Introduc-
approach which we have adopted in dealing with the subject of 'OW-
the inquiry. ,

3.2. A few general aspects of criminal law need to be advert-
ed to at the outset.

Criminal law, though it is only a part of the system of social
control, is yet an important part. Two of its aspects assume
importance-

(i) it carries a special kind of stigma,

(ii) it carries a distinct range of sanctions. It is these
two aspects which underlie almost all the important safeguards
that are traditionally associated with criminal law.

First, as regards stigma, the word 'crime' has a symbolic
meaning for the public. The criminal law is deeply imbue d
with the idea of stigma; labelling an act as criminal goes beyon d
merely ensuring effectiveness of the law.

3.3. The meaning and shades of "stigma" have varied in
history. It has been stated' that the Greeks originated the term
"s igma" to refer to bodily signs designed to expose something
unusual and bad about the moral status of the signiﬁer. "The
signs were cut or burnt into the body and advertised that the
bearer.was a slave, a criminal, or a traitor--a blemished person,
ritually polluted, to be avoided, especially in public places".
(Later, in Christian times, two layers of metaphor were added to
the term: the ﬁrst referred to the bodily sign of holy grace that
took th form of eruptive blossoms on the skin; the second, a
medical allusion to this religious allusion, referred to bodily signs
of physical disorder). Today, however, the term is widely used
in something like the original literal sense, but is applied more to
the disgrace itself than to the bodily evidence of it.

3.4. Next, as regards the sanctions, the coercive part of the
law----which is reﬂected in the laws, 'sanctions'----ﬁnds its strongest
fulﬁlment in the criminal law, because of the direct use of force
in respect of the liberty or property of the convicted offender.

l. Erving and Goffman, Stigma: Notespn the Management of Spoiled Identity, (1963)
(Prentice Hall, New Jersey), pages 32-39, cited in Radzinowicz and Wolfqang, Crime
and Justice, (1971), Vol. 1, pages 25-26.

3.5. The sanctions of all laws of every kind will be found to
fall under two great heads: those who disobey them may be
forced to indemnify a third person either by damages or by speci-
ﬁc performance, or they may themselves be subjected to some
sufferingl.

3.6. It is the stigma and the sanctions--the likelihood of
loss of reputation and suffering to the persons against whom
they are put into use--which are at the basis of the safegaurdsi
which we have referred to above.

3.7. In a modern industrialized society the regulation of
human conduct by means of the criminal law extends to every
phase of life3. But the ordinary principles apply whether the
crime is traditional or new.

3.8. _One of the illustrations of this approach of the law
is the principle of men: red. "The intent and the act must
both concur to constitute the crime'?

For example, a civil action for assault would rest upon the
invasion of a person's "right to live in society without being
put in fear of personal harm ;" and can often be sustained
by proof of a negligent act resulting in unintentional injury. But
an indictment for the same act could be sustained only upon
satisfactory proof of criminal intention to do personal harm to
another by violence5.

3.9. Again, since the outcome of a criminal trial may result
in the defendant's loss of liberty or even life, the courts evolved
a rule which casts upon the prosecution of heavy burden of proof.
As has been observed'----"No rule of criminal law is of more
importance "than that which requires the prosecution to prove
the accused's guilt beyond reasonable doubt. In the ﬁrst place
this means that it is for the prosecution to prove the defendants
guilt and not for the latter to establish his innocence ; he
is presumed innocent until the contrary is proved. Secondly,
they must satisfy the jury of his guilt beyond reasonable doubt.
In civil cases where a plaintiﬁ' sues a defendant, he who shows
that on a balance of probabilities the evidence is in his favours
wins the day. In criminal cases, however, the Crown cannot
succeed on a mere balance of probabilities. If there is any
reasonable doubt whether the accused is guilty, he must be ac-
quitted. An acquittal therefore either means that the jury be-
lieve the accused and are satisﬁed of his innocence, or that,

Hall and Mueller, Criminal Law and Prooedune, (1965), page 1.
Para. 3.2, supra.
Hall and Mueller, Criminal Law and Procedure, (1965), page 175.

. Hall and Mueller, Criminal Law and Procedure, (1965), page 143.
. Hall and Mueller, Criminal Law and Procedure, (1965), page 181.
. Fitzgerlad, Criminal Law and Punishment, (1962), page 192.

while not satisﬁed that he is innocent, they do not feel sure
of his guilt. In England, there is no middle verdict such
as the Scottish verdict of 'not proven' to_ cover this sort of
situation ; 'not guilty' is the only alternative to a conviction.

3.10. The principle of legality (nullum crimen sine lege),
the rule for construing criminal statutes in favour of the citizen.
and several other rules peculiar to criminal law furnish illustra-
tions of this approach which, as we have said. could be, pri-
marily, attributed to two aspects of the criminal law.---the stigma
attaching to a conviction. and the suffering resulting from punish-
ment.

3.11. Notwithstanding our awareness of the aspects of
criminal law discussed above, we have thought it necessary to
considerwvhether, in the case of social and economic oﬁ'ences
under the major Acts, a diﬁ7:re'1t approach is" not called for,
particularly when the country is in the grip of an economic crisis.
and the fruits of a hard won freedom may be lost if the founda-
tion is not laid for economic stability.

3.12. Two'very important aspects of social and economic
oifences have to be emphasised in this context~--the gravity of
the harm caused to society and the nature of the offences them-
selves. The gravity of the harm is not easily apparent ; but is,
nevertheless, undeniable. The nature of the offences is peculiar,
in the sense that they are planned and executed in secrecy by
shrewd and dexterous persons with sophisticated means. The
public welfare is gravely affected; but detection is unusally
diﬁicult. ~

3.13. These offences, affecting as they do the health and Need for
wealth of the entire community, require to be put down 'with 5'"."g""'
a heavy hand at a time when the country has embarked upon ""0""
a gigantic process of social and economic planning. With its ~
vastness in size, its magnitude of problems and its long history
of poverty and subjugation, our Welfare State needs weapons
of attack on poverty, ill nourishment, and exploitation that are
sharp and effective in contrast with the weapons intended to re-
press other evils. The legislative armoury for ﬁghting socio-
economic crimes, therefore, should be furnished with weapons
which may not be needed for ﬁghting ordinary crimes. The
damage caused by socio-economic offences to a developing so-
ciety could be treated on a level different from ordinary crimes.

3 In a sense, anti-social activities in -the nature of deliberate and

persistent violations of economic laws could be described as
extra-hazardous activities, and it is in_ this light that we'app-
roach the problem.

3.14. Since the casualty is the nation's welfare, it is these Conqeptof

olfences which really deserve the name of 'public welfare' off- P"b"°
ences_ welfare.

]Mo'fLaw172-2.

Sayre's
view as

to 'public
welfare'
offences.

Need For
widening
the concept
of public
welfare
oﬁ'ences.

J ustiﬁca-
tion for
treating
social and
economic
offences
differently
from con-
ventional
crimes.

Hope about
appeal of
above
approach.

Important
changes.

3.15. Long ago, Sayre' cited and classiﬁed a large number
of cases of 'public welfare offences' and concluded that they fall
roughly into subdivisions of (1) illegal sale ofiintoxicating liquor,
(2) sales ofimpure or adulterated food or drugs. (3) sale of mis-
branded articles, (4) violations of antinarcotic Acts. (5) crimi-
nal nuisances, (6) violations of traffic regulations. (7) violations
of motor-vehicles laws, and (8) violations of general police re-
gulations. passed for the safety health or well-being of the com-
munity.

3.16. The time has come when the concept of 'public wel-
fare offences' should be given a new dimension and extended
to cover activities that affect national health or wealth on a
big scale. Demands of the economic prosperity of the nation
have brought into being risks of a volume and variety unheard
of, and if those concerned with the transactions and activities
in this ﬁeld were not to observe new standards ofcare 'and con-
duct. vital damage will be caused to the public welfare. In the
ﬁeld of health. for example, the wide distribution of goods has
become an instrument of wide distribution of harm. When
those who disperse food, drink and drugs, do not comply with
the prescribed standard of quality, integrity. disclosure and
care. public welfare receives a vital blow. ln the economic
ﬁeld, again, freshly discovered sources of harm require the
imposition of a higher type of precautions. without which
there would be vital damage to the fabric of the country and
even to its very survival.

3.17. These cases do not ﬁt neatly in the accepted categories
of crimes. They represent harm of greater magnitude than the
traditional crimes and of a nature different from them. Unlike
the traditional crimes. they are not in the shape of positive aggres-
sions or invasions. They may not result in direct or immediate
injury ; nevertheless. they create a danger which. or the pro-
babilitylof which. the law must seek to minimise. Whatever
the intent ofthe violator, the injury is the same. Hence. if
legislation'applicable to such offences, asa matter of policy.
departs from legislation applicable to ordinary crimes in respect
of the traditional requirements as to mens rea--and the other sub-
stantive matters as well as on points of procedure. the departure
would, we think. be justiﬁable.

3.18. We hope that our approach will appeal'to and to
be shared by all agencies concerned with the investigation. pro-
secution. trial and punishment of these offences.

3.19. It would, we think, be convenient if we, at this stage.
indicate illustrations from some of the important recommenda-
tions which ﬂow from the above approach.

1. Sayre, "Public Welfare Offences",

33 Col. L. Rev. 55, 73, 84, cited in iworiszsette v.

U.S., (1951) 342 U.S. 244, 262, footnote 20.

3.20. First we should refer to an important change pertain-
ing to mens rea. Having regard to the considerations mentioned
above, we have recommended placing the burden of disproving
mens rea on the accused. After very careful consideration,
we have come to the conclusion that the social interest
in the prosecution and conviction of those guilty of anti-social
acts would be protected by the amendment which we propose.
At the same time, the substantive provision would not, in its
formulation be so unreasonable as to attach culpability (and,
consequentfally to impose punishment), where there is no in-
tention to evade its provisions and no want of reasonable care.

3.2l. Departures from the common-law tradition, m_ainly
under statutes in the nature of police regulations were reviewed

and their rationale apprised by Chief Justice Cooley '. in these
terms: -

"I agree that as a rule th/ere can be no crime without
a criminal intent ; but this is not by any means a universal
rule . . . . ..Many statutes which are in the nature of police
regulations. as this, impose criminal penalities irres-
pective of any intent of violate them ; the purpose being to
require a degree of diligence for the protection of the
public which shall render violation impossible."

3.22. In the English Court of Criminal Appeal, Donovan
J. had the following observations to make while dealing with

the Hire-Purchase and Credit Sale Agreement (Control) Order,
19562 :---- '

"The object of the order was to help to defend the currency
against the peril of inflation which: if unchecked, would bring
disaster on the country. There is no need to elaborate
this.' The present generation has witnessed the collapse
of the currency in other countries and the consequent chaos.
misery and widespread ruin. It would not be at all sur-
prising if Parliament. determined to prevent similar calamities
here, enacted measures which it intended to be absolute
prohibition of acts which might increase the risk in. however,
small a degree. Indeed, that would be the natural expectation.
There would be little point in enacting that no one should
breach the defences against a ﬂood, and at the same time
excusing anyone who did it innocently. For these reasons
we think that article I of the order should receive a literal
construction and that the ruling of Diplock, J. was correct."

3.23. Again, Chief Justice Taft, in overruling a contention
that there can be no conviction on an indictment which makes

.MeI1s rea---
Burden of
proof
shifted.

Chief
Justice
Cooley's
observa-
tions.

Chief
Justice
Taft's view.

1. People v. 11512;, 531/lich. 577, 579, 13 N.W. 365, 366 (1884) cited in
11.5., (1951) 342 us. 246, 257.

2. R. V. St. illargarets Ltd. H.0., (1958) 2 All E.R. 289, 293 (_C.C.A.).

.Mo1'1'.sseIre v-

Increase in
maximum
punish-
ment. --

Minimum
punishment
and appeal
on the
question of
sentence.

no charge of criminal intent but alleges only making a sale of ~
a narcotic forbidden by law, wrote' : _

"While the general rule at common law was that the scfenter
was a necessary element in the indictment and proof of every
crime, and this was followed in regard to statutory crimes
even where the statutory deﬁnition did not in terms include
it. . there has been a modiﬁcation of this view in respect
of prosecutions under statutes the purpose of which would
be obstructed by such a requirement. It is a question of
legislative intent to be construed by the Court. . . ."

Of course, he referred to 'regulatory measures' in the exercise
of what is called the police power when: the emphasis of the sta-
tute is evidently upon achievement of some social betterment
rather than the punishment of the crimes as in cases of crime
'mala in Se'. But the common element between regulatory offen-
ces (on the one hand) and the offences' with which this Report
is concerned (on the other hand) is that of public welfare.

3.24. Consistently, with our approach in dealing with the
menace to social health and wealth posedgby socio-economic
offences, we are also recommending an increase in punishment
for the principal offences under most of the Acts. In doing so,
our main object is to give adequate expression to the social dis-
approval of such crimes. One of the objects of punishment
is the emphatic denunciation of the crime by the community,
and we believe that this denunciation could be achieved only if
the gradation of punishments, is so devised as to evoke in the
public mind an intelligent reaction, and this in its turn would
be facilitated if the scales of punishment exhibit a modicum of
uniformity based on rational considerations. Too many scales
and variations in the quantum of punishment lead to a failure
of this object. The increase of the maximum punishments will
also make the offence cognizable and non-bailable and that we
regard as a welcome consequence.

3.25. There is a complaint that courts are not awarding
adequate punishment for many of these offences. This com-
plaint has taken two shapes. First, it is stated, that though
imprisonment is awarded, the term awarded is not apporpriate
to the gravity of the crime, so that a small period (say six months)
is mechanically regarded as sufficient. Secondly, it is stated,
that the discretion to award line only or to award imprisonment
below the minimum, is improperly exercised, so that in a very
large number .of cases the offenders are let oﬁ' with a ﬁne or with
a short term of imprisonment below the minimum. As our
Report will indicate this complaint cannot be rejected as totally
baseless.

1. United States V. Balinf, 258 U.S. 250, 251-252.

15
3.26. Several possible alternatives could be thought of
to solve this problem. For example,-
(i) increase of the maximum punishment;
(ii) increase of the minimum punishment;
(iii) removal of the relaxing power of the court ;

(iv) imposition of restrictions on the discretion of the
court to relax without totally removing it ;

(v) provision for appeal on the ground of inadequacy
of the sentence.

We have made certain proposals in the nature of (iv) above.
Further, in our view, the solution at (v) above, though it may
appear to be mild, is worth trying. No doubt, even after the
insertion of such a provision, appeals praying for enhancement
of sentence under the amended provision may not necessarily
be successful in every case. The very existence of such a pro-
vision, is however, likely to keep in check any tendency of the
lower magistracy to be unduly liberal in sentencing. We are,
therefore, reiterating' the recommendation made in this behalf

by the previous Commission.

3.27. Our next important recommendation is to provide
for the trial of these offences by Special Judges of a senior cadre,
and it is further our intention that'such cases should be assigned
only to one particular Judge in an area, so that he may develop
the expertise necessary for the purpose, also require familiarity
with the special features of these offences. The administration
and enforcement of these offences requires much more than a
knowledge of general criminal law and procedure. It presupposes
an acquaintance with some of the nuisance, a grasp in depth of
the under-currents of the world of racketeers and other special

features of organised crime.

3.28. Appeals from convictions by these courts should lie
to the High Court'. Our object is to secure the speedy dis-
posal of the appeals, as well as to ensure uniformity in the in-
terpretation of the relevant laws. -

3.29. Finally, we should refer to an important recommenda-
tion which we are making, regarding preventive detention.
Our advice has been sought on the question whether persons
suspected of large scale smuggling of goods or violations of
foreign exchange law should be brought within the Act provid-
ing for preventive detentioni'.

l. Para. 7.48, infra.

Special
courts.

Appeals to
lie to the
'High
Court.

Preventive
detention.

2. This is achieved once the offences are brought within the Criminal Law Amendment

Act, 1952. (See section 9 of that Act).
3. The Maintenance of Internal Security Act, 1971.

3.30. While we do not regard--preventive detention as in
harmony with the democratic spirit, we are not unmindful
of the considerations which weighed with the Constitution-
makers when they authorised preventive detention---the par-
amount need of safeguarding certain conditions without which
the country could not survive. The various topics mentioned
in the speciﬁc legislative entries--such as, the defence of India.
foreign affairs, security of India, security of state, maintenance
of public order, and maintenance of supplies and services essen-
tial to the community-'--sh0w the kind of dangers which the Con-
stitution-makers had in mind. The common governing princi-
ple behind the speciﬁcally enumerated dangers was the survival
of the nation.

3.31. That the survival of the nation may be jeopardised
as much by an.acute 'scarcity of essential' goods or services as
by war or rebellion. is evident.

Threats to the national economy arising from a violation
of the restrictions imposed in the interest of conserving foreign
exchange could constitute an equally serious danger to the sur-
vival of the nation. Economic bankruptcy can pose as serious
a problem as political insecurity ; it could. conceivably, be pro-
ductive of distress more severe in magnitude and to a large num-
ber of persons. '

3.32. We are, therefore, of the view that so long as preventive
detention exists as a permissible measure for ﬁghting certain
evils, it would be justiﬁable to use it as a weapon against large-
scale evasion of the Customs Act or the Foreign Exchange Act.
There is reason to believe that smuggling on a large scale is being
carried on by persons against whom, for reasons other than the
inefficiency of the enforcement staﬁ', it has not been and may
not be possible to procure such evidence as would lead to a con-
viction in a court of law.

3.33. Accurate ﬁgures of evasion cannot. in the very nature
of things, be expected, and estimates of evasion of the laws re-
lating to customs duties and foreign exchange are bound to
be imprecise. Nevertheless. having regard to the fact that raids
carried on during the last two years or so have resulted in the
seizure of startingly large stocks of smuggled goods. one can
reasonably imagine the violation of both customs and foreign
exchange laws must be going on in an organised manner, and
that, as against each case detected and proved, there must be many
others which go undetected.

3.34. We should also state here that we understand from
responsible oﬁicers that smuggling carried on systematically
on the borders provides a respectable outfront for espionage.
It would thus appear that the three sinister activities---smuggling.
spying and sabotage-could be found in company with each

other. These considerations have weighed with us in recom-

mending an amendment of the Constitution to make the posi-
tion clear in this respect.

3.35. Before we conclude this chapter, we would like to
mention one matter which formed the subject-matter of our
discussion during the whole of this inquiry.

We have already indicated1 that the problem referred to
us by the Government lay within a very narrow compass. and
we decided to broaden the scope of the enquiry to some extent
in order to do justice even to the narrow problem referred to
us. At the end of the enquiry, we felt that time has now arrived
when Government should take suitable steps to study in depth
the important question of evolving one common code dealing
comprehensively in one place with all social and economic offen-
ces. We venture to think that it would be useful to make a
similar study in regard to different tax laws. As our report in-
dicates. we have evolved a rule of evidence pertaining to the shift-
ing of onus in respect of socio-economic offences, but have re-
frained from recommending that the said rule should be applied
to the tax laws on the ground that the tax laws are far too coin-
plex and complicated and lack stability. We feel that it is neces-
sary that a study in depth of the tax laws should be made with
a view to codifying all the laws in one common code which would
be simple. clear and stable. These questions however fall out-
side the purview of our enquiry. Nevertheless, we thought

it was our duty to invite the attention of the Government to
them.

'3.36. it is also necessary to refer to one matter. namely,
the suggestions referred to us for enhancing the penalties and
punishments leviable under the tax statutes, as we felt that we
ought to make some general observations. We understand
that another Commission headed by Mr. K. N. Wanchoo, for-
mer Chief Justice of India, has been entrusted with the task of
considering in depth and comprehensively the problem pertain-
ing to the amendment of the provisions of the Income-tax Act,
and that the said Commission has already made an exhaustive
report in that behalf. '

The Report has not yet been published. Nevertheless, some
of the questions pertaining to the effective enforcement of the
penal provisions of the tax statutes, which have been referred
to us in a limited form. must have been considered by the Wan-
choo Commission ; and that makes our task in dealing with the
problem referred to us somewhat diﬂicult and embarrassing.
'However, since a reference has been made to us with regard to
the suggestion to enhance the penalties and punishments under
the tax statutes, we shall make our recommendations very
brieﬂy, in respect of the points for our consideration.

1. Chapter 2:, upra.

Desirabi-
lity of
detailed
study
pointed
out.

Observa-
tions as to
taxation
laws~
Points
referred to
Wanchoo
Commis-
sion.

Measures
so far
adopted.

Amend-
ments in
the Foreign
Exchange
Act.

CHAPTER 4

MEASURES so FAR ADOPTED

4.1. The problem of dealing effectively with social and
economic oﬁences is not a new one. From time to time, the
legislature, being concerned with the need for proper enforce-
ment of a particular enactment on the subject, has devoted its
attention to the measures necessary in that connection.

4.2 Thus, in the Foreign Exchange Regulation Act, 1947
several amendments have been made from time to time dealing
with the topics referred to below 1'-

Punishment .'

For contravention of certain sections of the Act, depart-
mental penalty was authorised' by section 23(lA), inserted
by Act 39 of 1957 (amended later by Act 55 of 1964).

Conﬁscation .'

Conﬁscation was provided for, by section 23(lB) inserted
by later amendment.

Higher powers of Magistrates:

Higher powers were conferred on Magistrates in rela-
tion to ﬁne by section 23(2), inserted by Act 34 of 1950.
[Section 23(2) and (3) were re-numbered as (3) and (4) res-
pectivelyl

Search and Similar powers .'

(i) Sections 19A to 19F dealing with various powers

of enforcement oﬂicers (including search-examination' etc.)

_ were inserted by Act 55 of 1964 (Seetions 19A and 19B were
re-numbered as sections 19C-H, of the same Act).

(ii) Sections l9I-19J were inserted by a later amendment.

(iii) Provisions of the Customs Act were applied
by section 2 A (inserted by Act 8 of 1952), which was
amended by Act 55 of 1965 to su titute a reference to sec-
tion 11 of the Customs Act, 1§6 , which had been passed
in the meantime. f

Special rule of evidence :

b (i) Where foreign exchange is acquired by a person
(other than an authorised dealer) for a particular purpose,

under permission granted under the Act, the burden of prov-
ing that it was used for the purpose for which permission to
acquire it was granted, was thrown on that person by section
24(2), inserted by Act 8 of 1952.

(ii) Presumption as to documents in certain cases was
inserted by addition of section 24A, by Act 8 of 1952.

4.3. The History of amendments in the Prevention of Food
Adulteration Act, 1954 is also of interest. As regards punish-
ment extensive amendments were made in the Act, which included
an amendment of section 16(1) which constitutes the main penal
provision in the Act. The maximum punishment was increased
from one to six years, and a minimum of six months imposed.

As regards mens rea. section 19(2) was amended by Act 49
of 1964. Under the section, a written warranty is a defence
to the vendor if certain requirements are satisﬁed. Under the
amended section, it is also necessary that the vendor should
have stored the article properly.

4.4. Again, in the Essential Commodities Act, 1955, amend-
ments have been made from time to time to deal effectively
with the various offences under the Act.

A/[ens rea :

Section 7(1) was amended by Act 36 of 1967, so as to
bring in absolute liability.'

Punishment :

Maximum terms of imprisonment was increased frofn
three years to ﬁve years by amendment of section 7(1) (b)
by Act 36 of 1967, and similar amendment of section 7(2)
made by the same Act.

Conﬁscation :

Sections 6A to 6B relating to conﬁscation were added
by Act 25 of 1966.

Stoppage of business 2

Power of the Court regarding stoppage of business was
inserted in section 7 (3) by Act 36 of 1967.

Summary trial :

The Central Government was given power, by section
12 A inserted by Act 47 of 1964, to direct by notiﬁcation
that contravention of the specified orders shall be tried sum-
marily. In a summary trial so authorised, the competent

Amend-
merits in
Food
Adultera-
tion Act.

Amend-
ments in
the
Essential
Commodi-
ties Act.

1. See para. 4.8, infra.

Amend-
ments in
the Income-
tax Act.

Provision
as to
publica-
tion.

Measures
adopted to
far in
various en-
actments.

Magistrate was empowered to pass a sentence of imprison-
ment for a term not exceeding one year.1

Search and similar powers :

Section 3(2) (j) was amended by Act l7 of 1961, to make
certain clariﬁcations regarding the provisions that could be
made in the rules by way of powers of various nature.

Offences to be cog/iizab/e and bailable

All offences under the Act were made cognizable and
bailable by section 10A, inserted by Act 36 of 1967.

4.5. In the Income Tax Act. 1961, the olfence of making
a false statement in any veriﬁcation under the Act or delivering
a false statement or account was. by an amendment in 1964.
subjected to minimum punishment.

4.6. The provision in the Income-tax Act (section 287)
relating to publication of the names of assessees and other parti-
culars relating to proceedings under the same Act, was also
revised in 1964. Similarly. elaborate provisions as to search and
seizure were inserted in the Customs Act, when the law was
revised in 1962.

4.7. A survey of the various enactments relevant to social
and economic offences shows that one or more of the following
provisions of a special character have been made:--

Substantive ingredients of the oﬂence

(1) Elimination or modiﬁcation of the requirement
of mens rea.

Punis/mien!

(2) Imprisonment to be mandatory.

(3) minimum period of imprisonment.

.(4) Public censure.

(5) Conﬁscation.

(6) Stoppage of business or cancellation of licence.

Jurisdiction of courts
(7) Higher powers of Magistrates.

Powers & Procedure
(8) Summary trial .
(9) Search and similar powers.

--.

See paragraphs 4.27 and 4.28, infra.

21.

Evidence :

(10) Special rules of evidence.
A few words about each of these would not be out of place.

4.8. One form in which the legislative desire to secure effec-
tive enforcement of social and economic legislation ﬁnds expres-
sion is a speciﬁc provision which eliminates or modiﬁes the re-
quirement of me/1s rea. in respect of particular offences.

_ has obtained the article of food with a
written warranty in the prescribed form from the manufacturer.
distributor or dealer. and if he further proves that the article.

while in his possession. was properly stored and that he sold it
in the same state as he purchased it. ~

An amendment made in 1967 in the Essential Commodities
Act takes the matter further. Contravention of an order under
the Act is, and has always been. punishable. But the wording
of the relevant sectionl, until I967, was. "if any person contia--
venes any order made under section 3". This was interpreted
as not excluding I7l€I7.)' rea.3 In 1967, the language was altered
so as to read-----"if any person contravenes w/1e!/ier knowingly,
intentionally or otherwise any order made under section 3". The
amended wording appears to be wide enough to eliminate the
requirement of mens rea for all practical purposes. Whether
such a drastic provision is needed in other laws, or whether it
is desirable even in the Essential Commodities Act. is a matter

_____~____________________________
1. Section 19(1), Prevention of Food Adulteration Act, 1954.

2. Section 7(1), Essential Commodities Act, 1955.

3. Natlm Lal v. State of Madhya Pradesh, A.I.R. I966 S.C. 43.
4. Section 7(l)(a), Essential Commodities Act, 1955.

Elimina
tion or

modiﬁca-

tion of

the

req u i re-

ment
of /Ill'/l\
rm.

Manda-
tory

imprison-

ment.

M inim um
punish-
ment.

Instances
of provi-
sions for
minimum
punish-
ment in

other Acts.

Quest ion-
nai re on
Penal
Code .

the punishment of imprisonment mandatory. There is, of
course, the usual proviso, that, for reasons to be recorded, the
court may refrain from imposing the sentence of imprisonment.

4.10. A further provision in connection with punishment is
one for a minimum period of imprisonment which is found in
many enactments dealing with social and economic offences.

There are. in the Penal Code, only ﬁve sections which pres-
cribe a minimum penalty. Waging war against the State
(section 121) and murder (section 302), are punished with death
or imprisonment for life. Under section 303, a person commit-
ting murder while undergoing a life sentence has to be sentenced
to death. A minimum sentence of seven years-' imprisonment
is provided in section 397 for a dacoit or robber using a deadly
weapon, or causing or attempting to cause grievous hurt, and in
section 398 for a dacoit or robber being armed with a deadly

weapon.

But. as noticed by the Law Commission in a previous Report',
"during recent years, several enactments have been passed by the
State Legislature or Parliament providing for minimum sentenc-
es. It is true that in some of these enactments the discretion
of the court has not been completely fettered. Though the sec-
tion provides for a minimum sentence, the court has been given
the liberty, for suﬁicient reasons to be recorded, to award

lower sentence". \

4.11. Instances of such legislation are : section 5 of the Pre-
vention of Corruption Act, 1947 (as amended in 1958), the
Prevention of Food Adulteration Act, 1954. the Suppression of
Immoral Traﬂic in Women.and Girls Act, 1956, and the Bombay
Prohibition Act, 1949. The principal reason for such provisions
"appears to be a feeling that courts seldom award sentences
which would have a deterrent eﬂect, particularly in certain types
of offences which are necessary to be "dealt with sternly in the

interests of society"?

0
4.12. In the questionnaire on the Penal Code issued by the
previous Law Commission,-'* the following question was put :--

"The Code lays down only the maximum punishment
for oﬁences, and no minimum punishment except in Very
few cases. Are you in favour of laying downa minimum
term of imprisonment for any offences? If so, for what

offences?" _
Most of the opinions expressed on the question were strongly

opposed to laying down any minimum punishment. In parti-
cular, members of the judiciary at all levels regarded any such

1. 14th Report (Reform of Judicial Administration), Vol. 2, page 840.

2. 14th Report, Vol. 2, page 838.
3. Questionnaire on the Penal Code (See 42nd Report)

amendment as totally unnecessary. Some of them were not
happy about the Working of the provisions made in special
laws for imposing a minimum sentence.

4.13. The Law Commission had, in aprevious Report',
observed :--

"The determination of what should be the propei sen-
tence in a particular case has always been left to the court _for
the very weighty reason that no two cases would ever be alike
and the circumstances under which the offence was com-
mitted and the moral turpitude attaching to it would be
matters within the special knowledge of the court which has
tried the case. There can be no rule of general application
laying down a speciﬁc quantum of punishment that should
inﬂicted in the case of a particular offence. A sound judicial
discretion on the part of the trial judge in awarding punish-
ment can alone distinguish between case and case and ﬁt the
punishment to the crime infﬂeach individual case.

=!=$=l= *=l=* *** *=l<*

However, the placing of restrictions on judicial discretion
in the matter of the award of a sentence is, on principle, to be
deprecated as a general practice.
Instances might have occurred occasionally where judges have
failed to award sentences proportionate to the gravity of
the offences. This cannot, however, warrant the assumption
that the judiciary as a whole has failed to adequate
sentences or overlooked the need for passing deterrent sen-
tences in appropriate cases."

4.14.
said---

In its Report on the Penal Code? the Commission

"We agree with the above view and consider that, save
in exceptional cases, there should not be any provision for
minimum sentences in the Penal Code."

4.15. To what has been stated above3, we should add that'
where absolute liability is inserted for'an offence, the imposition
of a minimum punishment raises important questions. Where
liability is more likely to be absolute than not, it would be
illogical to compel the court, even if it punishes an accused per-
.son, to impose some ﬁxed or minimum penalty, without allowing
a discretion to the Court not to impose that penalty, for reasons
to be recorded in writing. This reasoning applies to mandatory
imprisonment also. We shall have occasion to refer again to

' this aspect later.5

Recom-
mendation
in 14th
Report as
to mini-
ii-mii
-~punish
ment.

1. 14th Report, Vol. 2, pages 838, 841.

2. 42nd Report (Penal Code), para. 3.30.

3. See paragraphs 4.10 to 4.14, supra. ~
4. See also Chapter 7, infra.

5. Chapter 7, infra.

Public
censure.

Modern

precedents.

Indian
Precedent.

4.16. It is a peculiar feature of white-collar crimes that most
of them are committed by persons belonging to the upper strata
of society. Members of such classes, while they would not mind
a sentence of ﬁne. would certainly be deterred by threats of dam-
age to their reputation. The punishment of public censure has,
therefore, been considered effective in such cases,---there also
being the additional considerations that the exposure of a person
who indulges in malaﬁde practices harmful to the society and
punishable by law---for example, a manufacturer who wilfully
manufactures adulterated articles of food---can affect him in a

pecuniary manner. and also put on guard the members of the
public. .

4.l7. Quite a few penal codes of the present day provide
for the giving of publicity to the fact of conviction and sentence.
Thus, the Colombian Penal Code provides for "special publica-
tion of the sentence as an accessory to penal servitude or impri-
sonment"1. The publication is made in an unofﬁcial periodical
of the township in which the offence was committed or the con-
victed person resides. It is made at the expense of the convicted
or injured person; and if he fails to pay the cost, it is done by
proclamation. .

Social censure is one of the prescribed punishments in the
U.S.S.R. According to the Russian Penal Codez, "social
censure shall consist in a public expression by the court of cen-
sure of the guilty person and, if necessary, in bringing this to the
notice of the public through the press or other means".

4.18. In India, this form of punishment is not unknown.
Under the Prevention of Food Adulteration Act3, "if any person
convicted of an offence under this Act commits a like offence
afterwards, it shall be lawful for the court before which the
second or subsequent conviction takes place to cause the offen-
der's name and place of residence, the offence and the penalty
imposed to be published at the offenders expense in such news-
papers or in such other manner as the court may direct". A
similar provision for publishing the name ofa defaulting assessec
is made in the Income Tax Act'.

4.19. The Foreign Exchange Act-' enacts that rules under
the Act may--

"(c) provide. subject to such conditions as nuy be
prescribed, for the publication of the names and other parti-
culars of persons who have been found guilty of any contra-
vention of the provisions of this Act, or of any rule, order or
direction made thereunder."

-l>I"'."."'

Article 42. 52 and 54. Colombian Penal Code.

Articles 21(9) and 33, R.S.F.S.R. Penal Code.

Section 16(2), Prevention of Food Adulteration Act. 1954.
. Section 287, Incoin:-tax Act, 1961.

5. Section 27(2)(c), Foreign Exchange Regulation Act, I947.

25 "

The Gold Control Act' has a provision for publicity (modelled
on a similar one in the Customs Act).2

4.20. It may also be noted that one of the forms of punish-
ment provided in the Hindu Criminal Law, was social censure
arising out of the wide publication of the guilt of the otTender
and his identity. Thus, in Narada Smriti (about 6th century
A.D.), parading a convict on an ass along public streets was
provided as one of the punishments, for a Brahmin committing
the offence of 'sahasa' (violence). The relevant verse~' can be
translated thus~

"I0. Shaving his head. banishing him from the town,
branding him on the forehead with a mark of the crime of
which he has been convicted, and 'parading him on an ass,
shall be his punishment."

4.21. Though such a punishment would be a 'degrading'
form of punishment which is prohibited by the International
Covenant on Civil and Political Rights,' and is otherwise un-
civilised and barbarous, publicity and social censure can be
achieved by providing for publication of the names of the offend-
ers in respect of certain crimes.

4.22. One meets with a variety of forms of publication of
the particulars of the offence as a punishment. In the Preven-
tion of Food Adulteration Act, for example, it is ordered by the
Court. In the Income-tax Act, on the other hand, the power
is given to the Central Government5. One of the Provincial
Acts' had a provision under which a dealer convicted of black
marketing could be required to ﬁx a board outside his place of
business, announcing the fact of his conviction. In all these cases.
the common element is to bring" to the society's knowledge,
and tojmpress upon the convict, in aforceful manner. the guilt
which led to his conviction. On the other hand. some foreign
Codes employ public censure as a substitute for imprisonment.
The provision in the East German Code7 may be quoted-

"37. ('1) Public reprimand is pronounced if a lesser P".b"° V5'
crime has not caused any major harmful eﬁect or, in spite of immand'
heavy dama e, the offender. Whose guilt is ofa minor nature.
demonstrates that from now on he will conduct himself in a
responsible manner.

. Section 71. Gold Control Act, 1968.

. Section 120. Customs Act, 1962.

. Narada Smriti. Sacred Books of the East,=V0l. XXXIII, Chapter E4, Sloka (I0).
. Article 7, International Covenant on Civil and Political Rights.

. Section 287, Income-tax Act. 1961.

. West Bengal Black Marketing Act, 1948, section 20.

1. The East German Penal Code, section 37. The text is taken from Law and Legisla-
tion in the G.D.R. (1968) No. 2, page 34.

JOVKJI-§'-'lJ>--4

' -26

(2) By means of a public reprimand the court expresses
to the offender its disapproval of his action with a view to
exhorting him conscientiously to fulﬁl his duties towards
socialist society.

(3) The court may state in the sentence that the penalty
is not to be recorded."

So far as the present context is concerned, it is, in our view,
appropriate to employ it as a form of censure, and leave the ques-
tion to the discretion of the Court rather than to the Central
Government.

C_Zonﬁsca- 4.23. Offences involving fraudulent economic gains obvious-

"°"> ly justify a provision for conﬁscation of the property so gained.
The offender should not be allowed to retain the proﬁts of crimi-
nality and this consideration has prevailed with the legislature in
prescribing the punishment of conﬁscation for many economic
offences. '

Under the Gold Control Act, for example, any gold in respect
of which any provision of the Act or any rule made thereunder
has been, or is being, or is attempted to be, contravened, shall
be liable to conﬁscation. There are, in the same Act, speciﬁc
provisions also for conﬁscation.

Thus, conﬁscation of (i) any package etc. which contains gold
liable to conﬁscation, (ii) gold mixed with other goods from
which it cannot be separated, and (iii) gold which has changed
its form (provided the gold itself is liable to conﬁscation) is pro-
vided for.

4.24. We may also refer to the provision in the Foreign
Exchange Regulation Actl, under which, a court trying a contra-
vention of a provision of the Act, as well as an authority adjudg-
ing penalty for such conﬁscation is empowered to direct that any

currency etc. goods or other property in respect of which the T

contravention has taken place, shall be conﬁscated.

k" The Essential Commodities Act? has also a provision for
forfeiture of property by the Court.

Stoppages 4.25. Impelled by the desire to prevent a persistent olfender
busgfess from harming the public by repeating his anti-social act, the
' legislature has, occasionally, provided for prohibiting a person

from carrying on a particular business for a speciﬁed period.

An example is furnished by the Essential Commodities Act,

l955,3 under which, if a person convicted of an offence under

sub-section (1) of section 7 (which relates to contravention of an

' order under section 3), is convicted for a second or subsequent

T. Section 23(1), Foreign Exchange Regulation Act, 1947.
2. Section 7(l)(b) Essential Commodities Act.
3. Section 7(3), Essential Commodities Act, 1955.

time of an offence -constituted by contravention of an order in
respect of an essential commodity, thm the convicting court
shall, in addition to any penalty which may be imposed on him
under that sub-section "by order direct that that person shall
not carry on any business in that essential commodity for such
period, not being less than six months, as may be speciﬁed by the
court in the order".

4.26. One device adopted by the Legislature to speed up Higher
the trial of economic offences is the insertion 'of a provision en- rIv'1°W?"t5 °tf
hancing the powers of Magistrates in relation to punishment. "'5 [3 e'
For example, the Foreign Exchange Regulation Act1 provides
that it shall be lawful for any Magistrate of the ﬁrst class, special-
ly empowered in this behalf by the State Government, and for
any presidency magistrate, to pass a sentence of ﬁne exceeding
rupees two thousand, on any person convicted of an offence

, punishable under section 23 of the Act.

4.27. More important in the context of speeding up of trial Stimmary
is the provision for summary trial which is found, though not '"a'~
very frequently, in socio-economic legislation. The Essential
Commodities Act furnishes an example.' The relevant pro-
vision empowers the Central Government to issue a notiﬁcation
to the effect that contravention of any order made under section
3 of the Act in relation to a particular essential commodity
should be tried summarily.

_.4.28. The number of special orders in respect of which noti- Orders
ﬁcations were so issued by the Central Government authorising issued
summary trial since3 1964 and upto December, 1969 [as mention- ;"C't'i°'
ed in Notiﬁcation GSR 1342, dated 24:11 December, 1964 of the mm'
Ministry of Food & Agriculture (Department of Food)]. [No. Essential
203, Genl. 1881864 by II] exceeds a hundred. There is also Commodi-
another notiﬁcation on the subject, bearing the same No. (GSR "es Ac"
1842), which is quoted below :-

"MINISTRY OF FOOD & AGRICULTURE

(Department of Food)
NOTIFICATION

New Delhi, the 24th December, 1964

G.S.R. l842.--In pursuance of section 12A of the Essential
Commodities Act, 1955 (10 of 1-955) and in supersession of the
notiﬁcation of the Government of India in the Ministry of Home
Affairs No. G.S.R. 1607 dated the 5th November, 1964, the
Central Government hereby speciﬁes all orders made under

1. Section 23(2), Foreign Exchange Regulation Act, 1947.

2. Section 12A, Essential Co.n.n)1ities Act, 1955. _(At present. this provision is in
force upto December, 1971). But it is understood that a Bill has been introduced to make
it permanent.

3. S:-ztion 12A, Essential jCo:nn3:lities 'Act, ]was inserted in,1964.

' 1 M of I_aw;72--3

section 3 of the said Act in relation to foodstuffs, including edi-
ble oilsecds and oils, to be special orders for purposes of summary
trial under the said section 12A.

[No. 203 (Genl) (18)/770/64-PY. 11]" A

[It is rather difficult for an ordinary citizen to keep inptouch
with various notiﬁcations issued under the entire Act; and one
can also appreciate the diﬂiculty that must have been experienced
by the prosecuting staff, particularly in the mufassil, in this res-
pect. That, however, is a separate question.] 1

Search and 4.29. Effective prosecution requirefs effective investigation;
seizure. and effective investigation, in its turn, requires an array of powers.
Since the general powers for Search and seizure contained in the
Code of Criminal Procedure are restrictive in nature, either by
reason of the classes of oﬂicers who can exercise those powers,
or by reason of the conditions. precedent required before the'
powers can be exercised or by reason of other restrictive require-
ments, it has become necessary to: make similar provisions as to
search and seizure in most of theienactments dealing with social
and economic offences. The most comprehensive perhaps is the
group of provisions in the Foreign Emhange Regulation Actz,
conferring power to call for information, to search premises, to
arrest, to examine persons, to summon persons to give evidence,
to produce documents, custody of 'documents, inspection and
connected matters. A recent one is the provision in the Income

tax Act3. A
Special 4.30. Difficulty of proof that exists in respect of some of
$310? the offences has naturally led to the insertion of provisions which
1 RC6.

modify the burden of proof, or create rebuttable presumptions
or enact other special rules of evidence. A striking example of
a presumption is furnished by the Customs Act', which has the
following provision :--

"I23. (1) Where any goods ttrwhich this section applies
are seized under this Act in the reasonable belief that they
are smuggled goods, the burden of proving that they are not
smuggled goods shall be on the person from whose posses-
sion the goods were seized.

(2) This section shall apply to gold, diamonds, manufac-
tures of gold or diamonds, watches, and any other class of
goods which the Central Government may by notiﬁcation in
the Official Gazette specify."

lTiQuestion of publicity of statutory rules and orders.

2. Section 19, 19A, 19B, 19C, 19D, 19E, 19F, 19G, 19H, 191, 19J, Foreign Exchange
Regulation Act, 1947.

3. Section 132, Income-tax Act, 1961. See A.I.R. 1970 S.C. 292, holding that the
Criminal Procedure Code applies.

4. Section 123, Customs Act, 1962.

CHAPTER 5

;

CAUSES OF DEFECTIVE ENFORCEMENT

5.1. As the foregoing survey shows,' the statute book already
contains a variety of provisions' illustrating the attempts made
to deal effectively with social and economic offences. No doubt,
provision of a particular type, while occurring in one enactment,
may not be found in another enactment. The question whether
it should not -be extended to the other enactment could, therefore,
be usefully considered. That is one approach2 adopted in this
Report.3 ,

' 5.3.' The causes of defective enforcement of social and eco-
nomic legislation are manifold. Theymight exist in the parti-
cular law, or they may be found in some other law forming part
of the general legal system,----both tthese are 'legal" causes. But
the causes may sometimes not be concerned with the content of
the legal system, and may be found el'sewhere,----these may be
termed "extra-legal" causes.

'-Again, in so far as the defect is connected with the legal sys-
tem, it may be positive defect,---sometexisting provision which
createsidiiﬁculties; or, it may be.a!inegat:ive:defect,--the absence
of some beneﬁcial provision which could remove a felt diﬂiculty.

Moreover, the legal defect, whether positive or negative, may
concern the substantive law, the procedural law or the rules of
evidence. '

Finally, the stage at which the defect operates may be legis-
lative (in the formulation of the law), executive (in implementa-
tion), judicial (at the stage of trial); or the defect may be connect-
ed with sentencing. In this context. it may be pertinent to state
that one could distinguish between two different meanings of words
used to denote criminal sanctions. "Punishment" should mean the
authorisation by the legislature of the employment of criminal
Sanctions; while "sentencing" should mean the application by
the judiciary of the criminal sanctions authorised by the Legisla-
ture. The Legislature provides the sword for general use, but
the judiciary unsheaths the sword and uses it in particular cases.

Variety of
provisions
made to
deal
effectively
with social
and
economic
offences.

Causes of
defective
enforce-
ment.

1. Para. 4.8, supra.
2. For detailed analysis, See Chapter 6, infra.
3. For recommendations, see Chapter 15, infra.

' 5.3. Taking all these aspects into account, but at the same
time, conﬁning ourselves to important defects only, we could state
that the defects _in the enforcement of a particular piece of social
or economic legislation could assume one of the following shapes:

(a) Absence of a legislative provision punishing the parti-
cular conduct which is considered to be harmful;

(b) Non-applicability of the particular regulatory provi-
sion though contained in the parent Act, because of absence
of the relevant statutory notiﬁcation;

(d) Faulty investigation or delay in investigation.
(e) Inefﬁciency in the actual conduct of the case;

(f) Procedural ﬂaws which cause delay in trial, or even
failure of prosecution (c.g. absence of requisite sanction);

(g) Want of evidence;
(h) Inadequacy of the punishment provided in the law;

(i) Inadequacy of the sentence actually awarded, al-
though the range of punishment as given in the law may be
adequate;

(j) Administrative difficulties, such as want of adequate
enforcement stalf required for detecting investigating, prose-
cuting and otherwise dealing with the offences under the rele-

vant Act.

(a) A few examples will illustrate the categories.

Absence of

:v;°3::g: 5.4. 'A prosecution may fail because the situation is outside
Vision the _Act in point of stage of the criminal activity or in point
punishing of time, or in point of the facts.

the parti-

§""'t1' °'}'l'."h 5.5. Thus, preparation to commit an offence is not, in gene-
isuioxsiic ral, punishable. Seizure of a truck with paddy in the Punjab
dered to be Territory was, _for that reason held to be illegal, as there was no
harmful. "export" within the meaning of the relevant order under the

Essential Commodities Act.'

5.6. In a Madras case', the situation was held to be outside
the substantive provisions of the Foreign Exchange Act, and
hence the prosecution failed. The following observations in the
judgment are of interest :--

"In respect of the third point, namely, whether the pro-
secution of the petitioners under section 4(1) of the Act is

'1. Malkiat Singh V. State of Punjab, A.I.R. 1970 S.C. 713; (1970) Cr.L.J. 750.

2, M.R. Pratap v. Director of Enforcement, (1969) Cr. LJ. 1582 .1594, 13313» 59 (K1'iShI13'
swamy Reddy J.).

untenable, I ﬁnd the same in favour: of the petitioners. We
have already noted that under section 4(1) of the Act, 'acquir-
ing foreign exchange' is made an qﬂbnoe by the Amendment
Act 55 of 1964 which came into effect from 1-4-1965. The
oﬂence, in the complaint, was alleged to have been committed

. before 1-4-1965 when section 4(1) on respect of this offence
was not in force. The enquiry under section 4(1) of the Act
has to be dropped by the lower court."

5.7. Again, in an Allahabad casel, under sections 8 and
3(2)(d), Essential Commodities Act, the truck driver was trans-
porting grain from one place to another place in the same district
without a licence for transport. It was held that unless it was
shown that such transport without licence constituted an offence
under Act, the driver could not be convicted under section 8,
even if he admitted that he had committed the mistake. In
order to convict a person even on his plea of guilty, it is neces-
sary for the prosecution to prove th allegations made against
him, which he is alleged to have admitted as correct, constitute

an offence under the law. A

5.8. A Gujarat case2 under section l6(1)(a), Prevention of

Food Adulteration Act, illustrates failure of prosecution because
of absence of mens rea. It was held that the prosecution must
ﬁrst establish knowledge on the part of the accused that the Food
Inspector is to take the sample of food from him in his capacity
as a Food Inspector and in discharge of his duty as such.

5.9. It may also happen that the relevant notiﬁcation is
not proved in court. In a Kerala' case?' relating to sale of rice
beyond the controlled price, the notiﬁcation ﬁxing the price

was not in proof. It was held that the conviction was not
sustainable.

5.10. A recent Andhra case' illustrates the failure of a pro-

' secution because of failure to produce the notiﬁcation conferring

authority to initiate a prosecution under the Customs Act, sec-
tion 135, and Defence of India Rules, 1962, Rule 126 P (2). (There
were other defects also in the case, but they are not relevant for
our purpose).

(b) non-use
ofthe
particular
'regulatory
provision
though
contained
in the
parent
Act,
because of
absence of
the
relevant
statutory
notiﬁca-
tion.

1. 1965 All. Cri. R. 88; 1965 All. W.R. (H.C.) 71, cited in the Yearly Digest.

2. Teja Mohan v. Mangabhai, A.I.R. 1970 'Guj. 209.

66 3. 1966 Ker. L.T. 638; (1966) Madras L.J. (Cri.) 806, cited in:the Yearly Digest for

4. P.P. V. Babulal, A.l.R. 1971 A.P. 345, 346.

(d) Faulty
investiga-
tion delay
in investi-
gation
(including
administra-
tive ineﬂi-
ciency)

Suspected contraband gold had been seized in that case,
but the notiﬁcation under Rule 126(j)(4) and 126(x), Defence
of India Rules, authorising the person who sanctioned the pro-
secution to do so, was not produced. The acquittal by the Magis-
trate was, therefore, upheld by the High Court.

5.11. Sometimes, there is no detection or investigation
and this may be the principal cause of failure of enforcement.

5.12. Faulty investigation is frequently responsible for
failure of prosecution. For example, the right of the accused
to get a sample examined under section 13(2) and 13(5) of the
Prevention of Food Adulteration Act by the Director of Central
Food Laboratory, may be defeated by inordinate delay in pro-
secution. If the sample becomes decomposed and hence im-
possible of analysis, the accused is deprived of his valuable right,
and the conviction cannot be sustained'.

5.13. The ﬁnality and conclusiveness of the report under
section 13 of the Prevention of Food Adulteration Act
is,only to the extent that the sample as sent to the Central Food
Laboratory contained what the report disclosed and in the pro-
portions stated therein. The accused will still be entitled to
lead evidence to show that the article of food in question is not
adulterated food. The factors which he can rely upon in such
cases, include the delay in analysis of the sample and its impact
on the result obtained 2.

5.14. In an Allahabad case3, it was observed---

"The Prevention of Food Adulteration Act does not
prescribe any time limit within which prosecutions may be
launched. But it cannot be denied that articles of food are
liable to deterioration and decay with lapse of time. More-
over, it is cardinal and fundamental principle of Criminal juris-
prudence that if an offence has been committed the prosecu-
tion must be instituted without the least delay. The Maha-
palika have not invited any attention to anything on the
record to explain the delay. In most of the cases the pro-
secution was launched over a year after the date of the offence.
Ii; some cases, it has been launched more than two years
a ter.

1. Corporation ofDeIhi v. Ghisa Ram, A.I.R. 1967 s.c. 970; (1967) 2 S.C.R. 116.
2. Corporation of Delhi V. Om Prakash, 1970 Cr.I..J. 1047, 1050 (Delhi).
3. C/iarurb/m/' V. The State, A.1.R. 1968 All. 31, 36, para 34 (Satish Chandra J.).

It is reasonable to expect an explanation to explain
such a delay. Even if it may not be possible to hold that
the prosecution is invalid because of delay, this is a material
circumstance on the question of sentence."

5.15. In a Punjab case', the accused was tried under sec-
tion 16(l)(i) of the Prevention of Food Adulteration Act. It
was clear from the evidence that there were a number of shops
in the close proximity of the accused's shop, and there were
also other persons near about the shop at the time when the sam-
ple was taken by the Food Inspector at about 3. P. M. But
the Food Inspector did not even care to ask any of those persons
to witness the transaction, and one of the two persons taken
by the Food Inspector as a witness was his peon, who could not
be said to be an "independent" person, and the other person
stated that he actually reached after the sample had been taken
by the Food Inspector.

It was held that the provisions of sub-section (7) of section
10 had not been complied with. The provision was mandatory,
and therefore, the accused was entitled to an acquittal.

5.16. Prosecution under the Prevention of Food Adultera-
tion Act may thus fail because of defective reports of the public
analystsz, or delay in the examination of samples3, or because
the procedure prescribed by' the Act for taking samples is not
followed'.

5.17. On the other hand, a Bombay case5 illustrates the
success of a prosecution.

The accused/petitioner was a dealer in foodgrains. A sample
of bajari was sent for analysis, and the report of the public analyst
stated that ergot was found. The report was written on form III,
rule 7(3). In the certiﬁcate with which the report began,
the Analyst stated that the sample had been properly sealed,
and that he found the seal intact and unbroken. The accused
was charged under section 16(1)(a)(i) of the Prevention of Food
Adulteration Act read with rule 7(1). He was convicted of the
offence. On revision, before the High Court, it was contended
for the accused that rule 7(1) had not been complied with, in
that there was nothing to indicate that the Analyst compared
the seals on the container with the impression sent separately.
Secondly, it was contended that there was no evidence to show
that the specimen impression of the seal was separately sent by

the Food Inspector.

1. Ram Sarup Tara Cliand v. The--StaIe, A.I.R. 1965 Pun. 366 (J.S. Bedi J.).

2. State v. Gunjilal. A.I.R. 1964 Punj. 475.
3. Municipal Corporation of Delhi v. Surja Ram, (1965) 2 Cr. L.J. 571.
4. Food Inspector v. P. Kannan. A.I.R. 1964 Ker. 261.
. 5. K. Rajaram v. Koramze, A.I.R. 1968 Born. 247, 249.

5.18. As to these points, the court held that since the report
of the public Analyst was in form No. III, it need not mention
that the Analyst had compared the seal on the packet with
the specimen seal sent separately; tile form simply required a
statement to.the eﬂect that the sample was properly sealed and
intact'. '

5.19. The second argument on behalf of the accused was
that the report of the Analyst did not indicate the percentage of
ergot. In this case the prosecution was under section 2(1)(f)
of the Act. Regarding this sub-clause of section 2, the Court
said :

"The expression "otherwise unﬁt for human consump-
tion" is wide and of general character. It is necessary to
note that clause (iii) of A. 18.06 speaks of grain having been
affected internally. It is in this case only that the question
of the percentage becomes relevant. If the damage is due to
internal affection or puriﬁcation, then the question of per-
centage may have signiﬁcance."

It was held that what had happened was that the grains of
ergot, which are similar in size to the grains of bajari and dar-
ker in colour, had got themselves inextricably mixed up with
bajari. Since they were separate from the grains of bajari, there
was no question of any "internal affection". At the same time,
such bajari was unsuitable for human consumption. Hence
the conviction was upheld.

(6) Flaws 5.20. Flaws in the actual conduct of the case may often
22:33:?' result in failure of prosecution. For example, the Director's
Ofthe case_ report under section 13(3), Prevention of Food Adulteration

Act, is ﬁnal. But, if material circumstances in the report are
not put to the accused in the examination of the accused, the trial

is vitiatedz.
Lack of 5.21. It should be noted that in contested cases, where the
legal Inspector of the Department is pitted against a professional

e"F'°'"5° lawyer skilled in the procedure of court work (and perhaps also
more familiar with the particular practices and foibles of the
magistrates before whom the less forensically able inspectors
to incur the displeasure of the court by lack of familiarity with
some of the legal reﬁnements or by the unnecessary labouring
of points which are not in issue. In extreme cases, this lack of
legal expertise may, even result in an unjustiﬁed acquittal, where,
for example, the inspector is temporarily thrown off his step
by a clever if rather specious legal point or procedural
manoeuvre.

1. The court followed State v. Umacharan, A.I.R. 1966 Ori. 81 and disagreed with State
of Gujarat V. Shantaben, A.l.R. 1964 Guj. 136 and Mary Lasrado v. State of Mysore, A.I.R.
1966 Mysore 244.

2. Municipal Committee V. Om Prakash, I.L.R. (1969) 2 Punj. 57, 68 to 72 (Sodhi and
Koshal .lJ.).

5.22. Then, there are procedural ﬂaws which cause delay (f) P1r0<=e-
in trial or even failure of prosecution. Absence of requisite sanc- g;'\':'S
tion1 15 a familiar example. which

Thus, in a Kerala casel, a notiﬁcation under section 20(1) f:;'ssei,(,ie'

of the Prevention of Food Adulteration Act had been issued in trial or
1959, stating 'The Government hereby authorise Food Inspectors even failure
appointed under the Act to institute prosecutions for offences t"if;§'°s'°"'
under the Act'. It was held that the authorisation given under '

the notiﬁcation was only in favour of existing Food Inspectors,

and not also in favour of Food Inspectors to be appointed in

future under the Act. Hence the Food Inspector of M. Pan-

chayat, which came into existence only in 1964, could not be said

to be a person authorised to institute a prosecution under

section 20(1).

5.23. As was held in a Rajasthan case3,_a Magistrate while
taking cognizance of an offence under, the Prevention of Food
Adulteration Act on a complaint ﬁled against speciﬁed indivi-
dual or individuals, cannot issue process andinitiate prosecution
against other persons.

Also, power to institute prosecution under the Prevention
of Food Adulteration Act does not include power to consent to
the ﬁling of a prosecution'. -

5.24. In a Patna case, which went up to the Supreme Court5,
a dealer was charged for storing foodgrains without entering
them in the stock register. There was seizure of the stock-
book and other registers. But there was delay in ﬁling the com-
plaint. Conviction of the accused was mainly on the ground '
of tampering with the record while in, the possession of the
Supply Ofﬁcer. It was not proved that tampering was in the
interest of the dealer or was at his instance. . Other records also
did not prove\the prosecution case. It was held that the convic-
tion was improper. '

5.25. The Supreme Court has held in another case that
although section 6-A, Essential Commodities Act authorises
conﬁscation of the seized foodgrains if the Deputy Commissioner
is satisﬁed that there was a contravention of an order made under
section 3 of the Act, that conﬁscation should be preceded by the
issue of ashow~cause notice under section 6-B, which should
inform the owner of the foodgrains or the person from whom
they were seized, about the grounds on which he proposed to
make the conﬁscation. The Deputy Commissioner should also

1. The position regarding sanction is a matter which furnishes ample scope for study.
See Chapter 11 infra.

2. Abdulla Haji v. Food Inspector, Mul/'_var, (1967) I.L.R. 2 Ker. 340; (1967) Cr.L.J.
1718 (Ker.).

3. Bijai Lal v. Stare, A.I.R. 1965 Raj. 597.
4. Arvindbhai v. Hargovind, A.I.R. 1971, Guj. 20 (January) (review case-law).
5. Ganga Prasad v. State o/'Bihar, (1970) Cr.l.;J. 895; A.I.R. I970 S.C. 989.

give the person to whom that notice is issued, an opportunity of
making a representation in writing within a reasonable t1me to
be speciﬁed in the notice against the grounds of conﬁscation,
and an additional opportunity of being heard in the matter.
These are the three essential preliminary steps which are made
indispensable by section 6-B, and it is plain that some of these
steps were not taken by the Deputy Commissioner before he made
the impugned conﬁscation order'.

5.26. In a case? which went up to the Supreme Court,
there was, under section 132(8), Income~tax Act (as amended by
the Finance Act of 1969), search and seizure of documents. The
documents seized were retained by the authorities for a period
of nineteen months, without recording any reason for retaining
the same beyond the period of 180 days, and without obtaining
the approval of the Commissioner, as required by section 132(8).
It was held that such retention of document was without the
authority of law, and they should be released.

5.27. In another case3 which went up to the Supreme Court,
an enquiry under section 23D(l), Foreign Exchange Act was ins-
tituted by the issue of a show--cause notice, but a complaint was
made to the court without having any material which could lead
to the opinion that the Director of Enforcement would not be in
a position to impose adequate penalty. It was held, that as the
complliaint was ﬁled without complying with the proviso it was
invali .

(2) Want 5.28. A prosecution may fail for want of evidence.

of evidence. , . ,
A Supreme Court Judgment' illustrates how a prosecution

under the Essential Commodities Act may fail for want of
evidence. It was a charge of storage of an essential commodity
for business, in violation of the Manipur Foodgrains Dealers
Licensing Order (1958), clauses 3(2), 3(1). But the fact that the
storage was for the purpose of business, was not proved by inde-
pendent evidence. It was held that there could be no convic-
tion under section 7. on the basis of mere presumption under
clause 3(2) of the Order, without evidence of the purpose of
storage as above.

5.29. Failure to maintain account-books properly was the
subject-matter of the charge in a Rajasthan case5. It was held
that the offence fell under section 3(2)(i) read with section 7(1)(a)(i),
Essential Commodities Act. It was anon-cognizable offence,

WI. iManm* Mad/iva Kamarlz and Co. v. The State of Mysore, (1970) M.L.J. (Cr.) 61,
cited in the yearly Digest 1970, Column 1415-1416.

2. Commi.s'sioner of Income-rax V. Jawaharlal Rastogi, 78 I.T.R. 486; A.I.R. 1970
S.C. 1951.

3. Rayalu Corporation (Prf.) Ltd. v. Director of Enforcement, New Delhi, (1969)
2 S.C.C. 412; (1970) 1 S.C.A. 100; (I970) 1 S.C.R. 639; A.I.R. 1970 S.C. 494.

4. Manipur Admim'stran'on v. 1'14. Nilla Chandra Singh, (1964), 5 S.C.R. 574; (1964)
2 SC]. 444;1964(2)Cr.L.J.495; A.l.R. 1964 S.C. 1533, 1535, 1536.

5. Gyasiram v. The State, A.I.R. 1964 Raj. 237, 239, para. 9.

and must be tried as a summons case. Hence, the trial should
proceed as a summons case. (In this particular case. the trial
had proceeded only upto the stage of charge. Hence the charge
was quashed, and the Magistrate directed to proceed as in a
summons case).

5.30. A Supreme Court case' under section 8(1) and 23-A,
Foreign Exchange Act illustrates the need for suﬂicient evidence.

In that case, adjudication proceedings were quashed for want of
evidence.

5.31. A recent Andhra Pradesh casez illustrates failure
of a prosecution because of want of proof. (There were other
defects also, but they are not material). In that case, suspected
contraband gold had been seized from the accused, but there was
no proof that it was contraband. The prosecution relied on
the presumption in section 123(1), Customs Act, 1962. where-
under where any goods to which the section applies are seized
under the Act "in the reasonable belief" that they are smuggled
goods, the burden of proving that they are not smuggled goods
shall be on the person from whose possession the goods were
seized. In this case. it was not proved that the oﬁicer who had
seized the goods was competent to do so. Apart from that,
however, there was another defect,--the seizing officer had simply
suspected, and did not have reason to believe, that the accused
was carrying smuggled goods. Following a Bombay case3,
which had emphasised that the oﬂicers must have acted in reason-
able belief, the High Court upheld the acquittal.

5.32. The punishment provided in the law may be inade-
quate. Such a situation. of course, requires legislative action.

5.33. The punishment awarded may be mild. Such a situa-
tion. obviously, does not necessitate any statutory amendrpent.

l. Hjlrd Trading Ca. V.
(Certiorari issued).

2. P.P. V. Babulul, A.l.R. 1971 A.P. 345, 346.
3. )lI.G. Abrol V, Amie"/rand, A.l.R. l96l Bom. 227 (Shah,J.).

(h) Inade-
quacy of
the punish-
ment pro-
vided in
the law.

(i) Inade-
quacy of
the sen-
tence
actually
awarded
although.
the range of
punish-
ment as
given in the
Act may be
adequate.

Unirm of India, A.l.R. 1970 s.c. 1858; l863, Para. 'C13-T3

(jv) Admi-
nlStI'3.llVC
difﬁcul-
ties, such
as, want of
adequate
enforce-
ment staff
required,
for
detecting,
investi-
gating, _
prosecuting
and
otherwise
dealing
with the
offences
under the
relevant \
Act.

38?

5.34. There may be administrative difﬁculties in enforcement
of the particular Act such as want of adequate enforcement staﬂ'
required for detecting, investigating, prosecuting and otherwise
dealing with offences under the Act.

5.35. In conclusion, it may be stated that the most signi-
ﬁcant feature of the prosecution process, is undoubtedly the
difference between the Departmental inspector's view of the case
and that which, in the event, he is able to give to the magistrate.
The inspector's view of the case is obviously coloured by his
involvement in what may have been a lengthy series of visits and
discussions with the accused and by his knowledge of the past
history of the dealings with the accused over the previous ﬁve or
six years. The magistrate, on the other hand, is only permitted
to hear the details of the particular incident with which the
proceedings are concerned, and in addition he must pay some
attention at least to the mitigating circumstances which defence
counsel will put before him.

CHAPTER 6

EXISTING POSITION WITH REFERENCE To IMPORTANT
ENACTMENTS

6.1.. _It will now be convenient to analyse the position under
the existing laws. with reference to provisions of the nature
referred to above'.

The analysis will be conﬁned to important enactmentsz, in
order to avoid cumbersomeness.
(1) Elimination or modiﬁcation of mens rea

(a) Central Excises Act, 1944,

(b) Foreign Exchange Regulation
Act, 1947.

--No such provision.

--No legislative provi-
sion. But courts have
modiﬁed the mens rea 3.

----Section 19 (Modi
tion).

Essential Commodities Act, 1955.
(e) Wealth Tax Act, 1957.
(f) Income-tax Act, 1961.
(g) Customs Act, 1962.

tion).
--No such provision.
--No such provision.
----See sections 1l2(a),

114, 117, 134(a), l34(b),

136(l .

(h) Gold Control Act, 1968. --No such provision.

(2) Mandatory imprisonment

(a) Central Excises Act, 1944 --No such provision.

--Section 7( l) (Elimina-

Detailed
discussion
of existing
position
with
reference
to impor-
tanten-
actments.

l. Para. 4.7, supra.

2. (a) Central Excises Act, 1944.

(1)) Foreign Exchange Regulation Act, 1947.
(c) Prevention of Food Adulteration Act, 1954.
(d) Essential Commodities Act, 1955.

(e) Wealth Tax Act, 1957.

(f) Income-tax Act, 1961.

(g) Customs Act, 1962.

(/2) Gold Control Act, 1968.

3. State of Maharashtra v. M. H. George, A.I.R. 1965 S.C. 722, 732 and 740, paras-

15, 40 (Majority view).
39

(b)
(C)
(d)

(e)
(f)
(g)
(h)

(a)
(b)

(0)

(d)
(e)
(f)
(g)
(h)

(3)
(b)

(C)

(d)
(e)
(F)
(g)
(h)

(3)

Foreign Exchange Regulation ----No such provision.
Act, 1947.

Prevention of Food Adulteration ----Section 16.

Act, 1954.

Essential Commodities Act, 1955

--Section 7(l)(a) (i) and
(ii).

Wealth Tax Act, 1957. ----No such provision.

Income-tax Act, 1961. --Section 277.
Customs Act, 1962. --Section 135(1).
Gold Control Act, 1968. --Section 85.

(3) Minimum .ptmishment

Central Excises Act, 1944. ----No such provision.

Foreign Exchange Regulation --No such provision.
Act, 1947.

Prevention of Food Adulteration ~--Section 16(1).1

Act, 1954. 1 H

Essential Commodities Act, 1955. ----No such provision.

Wealth Tax Act, 1957.
Income-tax Act, 1961.
Customs Act, 1962.
Gold Control Act, 1968.

--Section 36(2), proviso.
--Section 277.
----Section 135(1) proviso.

---- (i) Section 85;
(ii)- Sections 86-87;

(iii) Section 891
(Second
conviction).

(4) Public censure

Central Excises Act, 1944. ----No such provision.

Foreign Exchange Regulation --Section 27(2)(c) (By
Act, 1947. rules).

Prevention of Food Adultera- --Section16(2).
tion Act, 1954.

Essential Commodities Act, 1955.
Wealth Tax Act, 1957.
Income-tax Act, 1961.

Customs Act, 1962.

Gold Control Act, 1968

----No such provision.
--Section 42A.
--Section 287.

----No such provision.
----No such provision.

(5) Conﬁscarion

Central Excises Act, 1944. --Section 10 (Forfei-

ture by court), section

1. See City Cur'/1uI'zIIir)I1\'. KJ. Ala!/Jew, A.1.R. 196i§_1Eer. 139.

(b)
(c)
(d)
(6)
(f)
(g)

(h)

(a)
(b)

(e)
(f)
(g)
(h)

(a)
(b)

(C)

(d)
(e)
(f)
(g)
(h)

Foreign Exchange Regulation

Act, 1947.

Prevention of Food Adulteration

Act, 1954.

Essential Commodities Act, 1955

Wealth Tax Act, 1957.
Income-tax Act, 1961.
Customs Act, 1962.

Gold Control Act, 1968.

12 (application of pro-
visions of Customs
Act), section 28, (con-
' ﬁscation), section 23
(adjudication).

---Section 23( l B).

----Section 18.
----Sections 6A to 6D
and section 7(1)(b).

-----No such provision.

---No such provision.

----Sections 111, 113, 115,
118, 119(2).

--'-Section 92 (Forfeiture)
sections 71, 72, 73
(Conﬁscation).

(6) Stoppage of business or cancellarioiz of licence

Central Excises Act, 1944.

Foreign Exchange Regulation

Act, 1947.
Prevention of Food.

Essential Commodities Act, 1955

Wealth Tax Act, 1957.
Income-tax Act. 1961.
Customs Act, 1962.
Gold Control Act, 1968.

---No such provision.
--No such provision.

--Section l6(lD) (Can-
cellation of licence).

----'Scction 7(3) (Stoppage
of business).

---No such provision.

4N0 such provision.

~--No such provision.

---No such power with
the 'court.

(7) Higher powers of Magistrates

Central Excises Act, 1944.

Foreign Exchange
Act, 1947.

Prevention of Food Ad ulteration

Act, 1954.

Essential Commodities Act, 1955.

Wealth Tax Act, 1957.
Income Tax Act, 1961.
Customs Act, 1962.
Gold Control Act, 1968.

Regulation

--No such provision.
--Section 23(2).

----Section 21.

--Section 12.
---No such provision.
--No such provision.

'----No such provision.

-----No such provision.

(8) Summary trial

(a) Central Excises Act, 1944.

Speciﬁc summary trial is not prescribed. But under
section 12. the Customs Act can be applied'.

(b) Foreign Exchange Regulation Act, 1947.
Speciﬁc summary trial is not prescribed.

(d) Essential Commodities Act, 1955.

Section 12A of the Essential Commodities Act deals with
summary trial.

Section 12-A, power to try summarily

(1) If the Central Government is of opinion that a
situation has arisen where, in the interests of production,
supply or distribution of any essential commodity or trade
or commerce therein and other relevant considerations, it
is necessary that the contravention of any order made under
section 3 in relation to such essential commodity should be
tried summarily, the Central Government may, by notiﬁcation
in the Official Gazette specify such order to be a special order
for purposes of summary trial under this section, and every
such notiﬁcation shall be laid, as soon as may be after it is
issued, before both Houses of Parliament.

(2) Where any notiﬁcation issued under sub-section (1)
in relation to a special order is in force, then, notwithstanding
anything contained in the Code of Criminal Procedure, 1898
(5 of 1898), all otfences relating to the contravention of such
special order shall be tried in a summary way and by a Magis-
trate of the ﬁrst class specially empowered in this behalf by
the State Government or by a Presidency Magistrate, and the
provisions of section 262 to 265 (both inclusive) of the said
Code shall, as far as may be, apply to such trial 2

Provided that, in the case of any conviction in a summary
trial under this section, it shall be lawful for the Magistrate
to pass a sentence of imprisonment for a term not exceeding
one year. i

(3) Notwithstanding anything to the contrary contained
in the Code of Criminal Procedure, 1898 (5 of 1898), there shall
be no appeal by a convicted person in any case tried summarily
under this section in which the Magistrate passes a sentence
of imprisonment not exceeding one month, or of ﬁne not
exceeding two hundred rupees, or both, whether or not any

1. See, however, Collector of Customs v. A.S. Bawa, A.I.R. 1968 S.C. 13, 15, 15 Para-
8 and 11 (1968) 1.S.C.R. 82, as to the scope for applying the Customs Act.

(3)
(b)
(C)
(d)
(6)

order of forfeiture of property or an order under section 517
of the said Code is made in addition to such sentence, but an
appeal shall lie where any sentence of imprisonment or_ﬁne in
excess of the aforesaid limits is passed by the Magistrate.

(4) Where any notiﬁcation is issued under sub-section (1)
in relation to special order, all cases relating to the contraven-
-tion of such special order and pending on the date of the issue
of such notiﬁcation shall, if no witnesses have been examined
before the said date, he tried in a summary way under this
section and if such case is pending before a Magistrate who IS
not competent to try the same in a summary way under this
section, it shall be forwarded to a Magistrate so competent.

(e) Wealth Tax Act, 1957.
Speciﬁc summary trial is not prescribed.

(f) Income-tax Act, 1961.
Speciﬁc summary trial is not prescribed.
(g) Customs Act, 1962.
Section 138---0ﬁ'ences to be tried summarily-

Notwithstanding anything contained in the Code of
Criminal Procedure, 1898 (5 of 1898), an offence under this
Chapter other than an offence punishable under clause (i)
of section 135 may be tried summarily by a Magistrate.

(h) Gold Control Act, 1968.

Section 98--0ﬁ"ences to be tried summarily----

Notwithstanding anything contained in the Code of
Criminal Procedure, 1898--

(i) no magistrate other than a Presidency Magistrate
or Magistrate of the ﬁrst class shall try an offence against
this Act;

(ii) every oﬂence against this Act may be tried sum-
marily by a Magistrate.

(9) Search and similar po wers

The Central Excises Act, 1944 ----Sections 13 to 23 and
rules under section 27.

Foreign Exchange Regulation --Sections 19 to 19] and
Act, 1947. section 25A.
Prevention of Food Adulteration --Section 10.
Act, 1954.
Essential Commodities Act, --Section 3(2)(h) and
1955. (j).
Wealth Tax Act, 1957 ----Section 37A.
(f) Income-tax Act, 1961 ----Section 132.

1 M of Law/72-4.

(g)
(h)

(8)

'(*l7)

(0)

(d)
(6)
(f)
(g)
(h)

Customs Act, 1962 ----Sections 100,

103, 105, 106.
--Sections 58 to 70.

101,
Gold Control Act, 1968

(10) Special rules of evidence

Central Excises Act, 1944 --No such provision.

Foreign Exchange Regulation ----Section 24 and 24A.
Act, 1947.

Prevention of Food Adultcration --Section 13.

Act, 1954.

Essential Commodities Act, 1955 ----Section 14.

---No such provision.
------No such provision.
--Section 139.
-----Section 99.

Wealth Tax Act, 1957
Income-tax Act, 1961
Customs Act, 1962
Gold Control Act, 1968

CHAPTER 7

DESIRABILITY OF AMENDMENTS---SUBSTANTIVE POINTS COMMON
TO ALL THE ACTS CONSIDERED

7.1. Before dealing with changes needed in each individual
Act, we should deal with certain matters of the general nature
applicable to all orpmost of the Acts.

7.2. Of such questions, the most important is that of mens
rea.

7.3. Traditional criminal jurisprudence requires that before
criminal liability be imposed, a certain mental element of the
offender must be proved. The most familiar name used to de-
note this mental element in crime is 'mans re-a'. Some vagueness
exists as to the exact range and ambit of this expression. But the
general concept is fairly well established, namely, that a person'/
ought not to be punished for an act in the absence of a culpable;
state of mind with reference to the act. '

7.4. The validity of the general principle of mem rea is not
disputed today. Illustrations could be drawn from some of the
criminal codes of other countries. Thus, the Russian Penal
Code enacts.'

"3. Only a person guilty of committing a crime, that is,
who intentionally or negligently commits a socially dangerous
act provided for by law, shall be subject to criminal responsi-
bility and punishment.

Criminal punishment shall be applied only by judgement
of a court."

7.5. It is also well--established that the burden of proving the
required mental element is on the prosecution which, in accord-
ance with the general rule applicable to criminal proceedings, is
required to prove its case beyond reasonable doubt.

7.6. Necessities of the' time have, however, witnessed the
emergence of a category of oﬂ'enoes~sometimes called 'public
welfare oﬁ"ences'--where the element of mens rea has undergone
modiﬁcation or even suffered elimination. A controversy is
going on amongst academic writers as to how far such a depar-
ture is justiﬁed even in the case of public welfare offences; and

1. Article 3, R.S.F.S.R. Penal Code.

General
matters
common to
all Acts
considered.

M ens rea.

Mens rea
and burden
of proof.

Basis of
criminal
responsi-
bility.

judicial disagreement on the question how far a particular statu-
tory offence requires mens rea to be read into legislative language
silent on the point, has enriched the law reports during recent
years.

7.7. We have already drawn attention to the need for deal-
ing with_ economic offences' in a manner different from tradi-
tional crimes.

7.8. Another aspect of practical importance should also be
emphasised. Although the actual facts of a particular case
relating to an economic offence may appear to possess only a
minor signiﬁcance, there is, behind the curtain, a ring of asso-
ciates engaged in committing a number of crimes. These crimes
it is diﬂicult to prove before the court in conformity with the
traditional standard of proof. The moral conviction of respon-
sible enforcement oﬂicers is diﬂicult to be translated into legal

3"conviction of the minds of the judicial agencies operating in
W the traditional manner. The mental element undoubtedly exists.
'1 But it is ditﬁcult to prove it. The act that has~caused damage
jghas been unearthed; the mind behind it remains unproved.

Such a situation, we think, is productive of grave harm.

7.9. It is for these reasons, that we have thought of a solution
which, while preserving the requirement of mens rea a require-
ment which we would be loth to dispense with? in any act carry-
ing serious punishment----throws the burden of proof on the
accused. Petty cases causing minor injuries are not worth the
trouble of creating a special rule as to burden of proof. But
acts causing substantial damage justify a departure, to the extent
indicated above.

7.10. In formulating the test as to constitutional validity of
presumptions in criminal cases, the Supreme Court of the U.S.A.
has considered, as against the magnitude of the disadvantage
created by the operation of a presumption, the comparative
convenience test. The test was ﬁrst formulated by Justice Car-
dozo in a dictum in Morrison v. CaIifomia3, when he wrote:

. "The decisions are manifold that within limits of reason
and fairness the burden of proof may be lifted from the state
in criminal prosecutions and cast on the defendant. The
limits are in substance these, that the state shall have proved
enough to make it just for the defendant to be required to
repel what has been proved with excuse or explanation, or at
Ieas_t_that upon a balancing of convenience or of the oppor-
tunities for knowledge the shifting of the burden will be found
to be an aid to the accuser without subjecting the accused to
hardship or oppression. ...For a transfer of the burden,

1. Chapter 3, supra.
2. See also para. 4.15, supra.
3_ Morrison v. California, (1933) 291 U.S. 82, 88-91.

experience must teach that the evidence held _to be inculpatory
has at least a sinister signiﬁcance, .... .., or if this at time
lacking, there must be in any event a manifest disparity in
convenience of proof and opportunity for knowledge, as, for

one who is unable to bring himself within the range of an
exception. Greenleaf, Evidence, Vol. 1, Section 79. The I
list is not exhaustive. Other instances may have arisen or

may develop in the future where the balance of convenience ,
can be redressed without oppression to the defendant throughrf
the same procedural expedient. The decisive considerations

are too variable, too much distinctions of degree, too depen-

dentin last analysis upon a common sense estimate of fairness I
or of facilities of proof, to be crowded into a formula onei
can do no more than adumbrate them; sharper deﬁnition
must await the speciﬁc case as it arises." "

instance, where a general prohibition is applicable to every I

7.11. The considerations which have weighed with us are
not dissimilar. Stringent provisions are necessary to deal
effectively with economic offences at the present time. The
same considerations that have justiﬁed the imposition of restric-
tions on the normal business activities, furnish the justification

. for measures aimed at proper enforcement of those restrictions.

The situation is one of a semi-crisis, a general threat to national
wealth and welfare. The balance of convenience therefore
makes it imperative to adopt this approach.

In this context, a recent English provision is of interest1 2--

"(2) Subject to sub-section (3) below, in any proceed-
ings for an offence to which this section applied it shall be
a defence for the accused to prove that he neither knew of
nor suspected nor had reason to suspect the existence of
some fact alleged by the prosecution which it is necessary
for the prosecution to prove if he is to be convicted of the
offence charged."

The effect of this provision is that, in the speciﬁed offence,
the prosecution are required to prove that the accused com-
mitted the actus reus of the particular offence. It is then for
the accused to prove that he committed the actus reus 'inno-
cently'. This method of introducing an element of 'fault' into
drugs offences was discussed in the House of Lords in two
cases.1--3

7.12. In conformity with the aforesaid test, we shall suggest
suitable amendments to the relevant Acts wherever appropri-
ate'. From this amendment, however, we propose to exclude

1. Section 28(2), Misuse of Drugs Act, 1971 (c. 38).

2. Warner v. Metropolitan Police Commissioner, (1969). 2 A.C. 256.
3. Sweet v. Parsley. (1970) A.C. 132; (1969) 1 All E.R. 347.

4. Chapter 15, infra.

Quantum
of punish-
ment.

Principles
as to
grounds for
extra-
ordinary
punish-
ment.

the taxation laws, mainly for two reasons, ﬁrst that they are
far too complex and complicated, and second that they are
changed frequently. After these laws become stable and sim-
ple, the matter may be examined.

7.13. In the United States, Mr. Justice Jackson, himself
once Chief Counsel for the Bureau of Internal Revenue, re-
ferred to federal taxation as "a ﬁeld beset with invisible boom-
erangs". Judge Learned Hand grieved that the provisions
of the income-tax statutes "dance before my eyes in a meaning-
less procession : cross-reference to cross-reference, exception
upon exception couched in abstract terms that offer no handle
to seize hold of--leave in my mind only a confused sense of some
vitally important, but successfully concealed, purport. which
it is my duty to extract, but which is within my power, if at all,
only after the most inordinate expenditure of time."1

Considerations such as these have weighed in our minds in
excluding for the present, tax laws from the operation of the
formula as to onus which we have suggested.

7.14. The question of the quantum of punishment for the
various olfences has engaged our serious attention. The maxi-
mum period of imprisonment for an offence deserving condem-
nation could, in theory, be limitless (and so also could be the
lowest limit). The longest term is life imprisonment--though
not met with in the Acts with which we are concerned. So,
one could come downwards from life imprisonment to any
period, or go upwards from one day to any period. For practi-
cal reasons, however, such a wide range is not met with. Even
life imprisonment, when awarded, works out because of remis-
sions etc., to eight to ten years. For the present purpose, the
possible range of imprisonment can, therefore, be taken as
6 months to ten years.

7.15. Now, the principles are not much in dispute. Ben-
tham has observed? :--

"1l. As to the grounds upon which it may be proper
to have recourse to extraordinary punishment; these herein
before hinted at viz-1. any' extraordinary mischievousness
on the part of the offence, when it is so great as may make
it necessary and worthwhile to hazard an extraordinary
expense in point of punishment for the sake of purchasing
the better chance of combating it with effect ; 2. the deﬁ-
ciency of the punishment in point of certainty as resulting
from the difficulty of detection : which dilﬁculty depends
in great measure, as is evident, upon the nature of the
offence ;3. the presumption which the olfence may afford

1. Ernest J. Brown, "Tax decisions of Judge Magruder", (1958-59), 71 Harvard L.

Rev., 1225.

2. Bentham, Principles of Legislation, (1971). Chapter 17. page 212, paragraph 11.

of the offender's having already been guilty of other offen-
ces of the like nature ; 4. the accidental advantage in point
of quality of punishment not strictly meted in point of quan-
tity; 5. the use of a punishment of a particular quality in
the character of a moral lesson; 6.Lan extraordinary want of
sensibility on the part of the offender to the force of such
standing tutelary motives as are opposed to the offence
whether on the part of the law itself, or on the part of the
other auxiliary sanctions."

7.16. Controversies can arise in the practical application
of these principles. Such controversy could arise because of
the differences in the relative importance which one attaches
to the particular oﬂence as well as because of difference as re-
gards the relative importance which one attaches to the various
objectives of punishment.

7.17. The most satisfactory course from the practical point
of view would be to see if the existing punishments compare
unfavourably with those for analogous offence, or are exces-
sively disproportionate to the permanent public resentment felt
at the particular offence, or reﬂect inadequately the gravity as
represented by the threat to public welfare.

7.18. Now, there is one important direction in which the
punishments under the various Acts require to be altered. At
present, the punishments under most Acts (except the Customs
Act) are expressed in terms which uniformly apply to a con-
travention irrespective of the amount involved. For example,
the punishment for evasion of excise duty under section 9, Ex-
cise Act is the same whether the amount of the duty evaded is
one thousand rupees or one lakh of rupees. We are of the
view that there is a case for rationalisation in this respect}
Since the object in punishing economic offences is to prevent
harm caused to the national economy, a pecuniary test would
be justifiable; and the severity of the maximum punishment
could be made to depend on the relative seriousness of the
harm caused as expressed in monetary term. Of course, this
does not mean that in each individual case, the court should
have regard only to the pecuniary assessment of the damage
caused. Legislative prescription of maximum punishment,
and judicial dispensation of the sentence within that maximum
are not necessarily governed by the same considerations. The
former is general and abstract; the latter is particular and con-
crete; what we are dealing with at the moment is only the for-
mer.

7.19. Fortunately, there is, in this context, a provision avail-
able in the Customs Act? which with one modiﬁcation, furni-
shes a useful precedent. Under that Act, the maximum

Importance
of various
objectives
of punish-
ment.

Compari-
sn with
punish-
ment for'
analogous
offences g
desirable.

Maximmn
punish-
ment-
Recom-
mendation
to intro-
duce
pecuniary
test.

1. Actual amendments will be indicated later under each Act.
2 Section 135, Customs Act, 1962.

Mandatory
imprison-
ment and
minimum
term of
imprison-
mcnt.
Some
aspects of
judicial
attitudes in
Sentencing.

Importance
of reform

punishment is ﬁve years if the amount of duty evaded is Rs. one
lakh or more, and two years in other cases. The maximum of ﬁve
years should, we think be increased to seven years, and the maxi-
mum of two years should be increased to three years. In the
Penal Code, the maximum generally met with are one, two, thr6€,
seven, ten and fourteen years. The classiﬁcation of offences
under the Second Schedule of the Crirriinal Procedure Code is
also framed with reference to the maxima of three years and
seven years. Further, in order that the maximum punishment
may ﬁnd its reﬂection in the public mind, it is. desirable that
the scheme should, as far as possible, be uniform. In the
present case, the increase from ﬁve years to seven years is not
likely to cause hardship, having regard to the nature and gravity
of the harm caused.

7.20. We, therefore, propose to recommend the revision
of the maximum punishment on the above lines, where the
pecuniary test can be appropriately applied having regard to
the subject-matter of the enactment.

We are further of the view that in the case of a second or
subsequent conviction also, minimum punishment should be
provided for.

There is also a question regarding the minimum ﬁne, to be
considered. It has been suggested to us during oral discussions
that where the offence results in ill-gotten gains on the part of
the offender, the minimum ﬁne should be linked up with the
amount of the ill-gotten gains. We agree with this approach,
and recommend that the amount of ﬁne shall not be less than
the amount of such ill-gotten gains, except for reasons to be
recorded.

The actual amendment to be made in each individual Act,
in conformity with the above test, will be indicated later}

7.21. The next important question of general signiﬁcance
is of mandatory imprisonment and minimum term of imprison-
merit.

7.22. During recent times, thinking about sentencing has
assumed signiﬁcance, and, though thought in this respect has
been devoted mainly to the traditional crimes, yet expression
of views about social and economic oﬂences is not totally want-
ing. Realisation of the fact that these crimes affect the wel-
fare of the entire community, and though veiled under the
garb of respectability, in truth reﬁect a dangerous mentality,
is met with in the judgement of some of the appellate courts.

7.23. So far as traditional crimes are concerned, the values
of reform and rehabilitation are gathering increased importance.
With the acceptance of the view that environmental pressures

1. See Chapter 15. b¢|0W-

or disordered states_ of mind might impede the oﬂ"ender's abi- Ertlsitifgllllgg
Iity to calculate rationally the risks _of pleasures and pain in-- traditional
volved in criminal conduct, the Judiciary has come to recognise C,imes_

varying degrees of guilt for the same offence.

7.24. But, in the ﬁeld of anti-social crimes, the deterrent Importance
aspect has been given its due importance. The objective :'efn'g:'°"
sought need not be the same in the case of all offences,--this is aspect in
the assumption made by those who emphasise that the protec- ari_ti-social
tion of society requires an assertion of the deterrent value of crimes.

punishment.

As Judge William J. Campbell, an American federal court
judge, has pointed out,1 where rehabilitation is the prime con-
cern, the treatment should be tailored to the individual; in
extreme cases of anti-social offenders, prolonged conﬁnement
assures the protection of society. Where, however, the vio-
lation of law is a matter of principle, . . . . . . .. "there is
no question of rehabilitation . . . . ..they (offenders) must
be sentenced as examples; otherwise, human nature being
what it is, we would most assuredly be faced with great num-
ber of less stable citizens seeking ways and means to avoid
military service." Even retribution is allowed as an objective
of sentencing where the crime is " . . . . ..revolting and incom-
prehensible to the group."

7.25. At the same time, one has to bear in mind that each Each case
case depends on its own facts. There may be cases requiring dependent
heavy punishment; there may be cases where a light punishment i 011 its
is enough. And there may be cases where practically no punish- f"°ts'
ment is merited. ~<'

7.26. Reported cases furnish examples of each category. R t
To notice a very recent English case ,3 the convicted person, Eﬁggh
aged 67, had pleaded guilty to ﬁve counts for making false case as to
statements with intent to defraud the revenue. He was a tra- false State-
velling salesman, and had over a period of ten years, rnisre- "i"'f'""°
presented his travelling expenses. He had underpaid £420 of tﬁeraud
tax. Now he had paid this tax, and had no previous con- revenue.
victions. He was in poor health, and had been supporting
an aged mother, and an invalid sister. Sentence of nine
months' imprisonment was upheld, and it was also deter-
mined that suspension was not necessary.

1. Judge William J. Campbell, "Developing Systematic Sentencing Procedures",
(September 1954), 18, Federal Probation, pages 3 to 9, cited in Green, Judicial Attitudes to
sentencing (1961), page 2.

2. Judge William J. Campbell. "Developing Systematic Sentencing Procedures",
(September 1954), 18, Federal Probation pages 3 to 9, cited in Green Judicial Attitudes
to sentencing.

3. R. v. Richardes. (1971) Cr. I_.R. 176, cited in (1971) March Current Law, under
"Criminal Law" (Item 62).

English
case as to
export of
cu rrency.

English
case as to
traﬂic in
forged
notes.

Need for
deterrent

7.27. In another English case ,1 the accused was convicted
of attempting to export Bank of England Notes with intend
to evade the prohibition on exportation imposed by section
22 of the Exchange Control Act, 1947, contrary to section 56(2)
of the Customs and Excise Act, 1952. He had been caught
while attempting to export 30,000 pounds; and previously also
he had smuggled one lakh twenty thousand pounds out of the
country. He was sentenced to a term of imprisonment such
as would result in his immediate discharge, and to a fine of
25,000 pounds or 12 months' imprisonment in default.

The Court of Appeal, refusing the application for leave to
appeal against sentence, concluded "This court has paid the
greatest attention to all these matters which have been so per-
suasively urged by counsel on behalf of the applicant. When
all is said and done, however, the olfences to which this man
pleaded guilty are very grave oﬂences carried out on a very
large scale. He must have known the risks which he was run-
ning when he agreed to smuggle and did smuggle large quanti-
ties of currency out of England. He must have known that
otfences of this kind are particularly grave from the public point
of view, because of the injury which they do to this country's
economy, affecting every man, woman and child living there.
It is said that a large part of the money found its way back.
That may be so. £20,000 never left the country, because he
was caught. That may well be so. £68,750 of the amount
that he did take out has, however, never returned. These off-
ences where carried out over a long period and were all part
of a carefully prepared and daringly executed plan. In sen-
tencing the accused. the learned judge, after imposing the ﬁne
of £25,000 said : '

"This is done not only to hurt you, but as an example
to others who may be attempting to do the same thing and
who may well be doing the same thing. in an attempt to
dissuade them.

The learned judge imposed this sentence obviously as
a deterrent sentence. It seems to the court that no one can
criticise the learned judge for considering that offences of
this kind ought to be deterred by the severe sentences which,
in the view of this court, they richly merit."

7.28. In another English case', it was held that four years'
imprisonment was not an excessive sentence for a tralﬁcker in
forged notes, nor was imprisonment for 18 months to two years
excessive for a person who utters one or two forged notes.

7.29. Borrowing what the Court of appeal,3 said in a case
relating to an offence under the Oflicial Secrets Act, one can

;_._.¢

1. R. v. Goswami, (1962) 2 All. E.R. 24, 30-.
2. R. V. Caugie, (1969) 3 All. E.R. 950.
3. R. V. Britten (1968) 1 All. ER. 517 (C.A.).

state that a person who commits many offences in pursuance
of a system or policy, deserves greater punishment than one
who commits only one offence. And further, as the dangers
of mass destruction increase, so does the need for sentences
of deterrent length.

7.30. In an Andhra case,1 the High Court, while allowing
the appeal against acquittal and ﬁnding the accused guilty under
section 16(1)(a)(i) and section 7 read with section 2(i) (a)(1) of
the Prevention of Food Adulteration Act, noted the contention
of the advocate for the accused that the accused was a very
poor man having only one buffalo, and was a petty milk ven-
dor who had no previous conviction. The High Court sen-
tenced him only to Rs. 100/- ﬁne (in default, two months'
rigorous imprisonment).

7.31. In a Kerala easel relating to section l6(l)(a)(i), Pre-
vention of Food Adulteration Act, the Magistrate had, without
assigning any reasons, imposed a sentence below the minimum.
The High Court had to enhance the sentence in revision.

7.32. In an Orissa case3 under section 7(1) (a) (ii) of the
Essential Commodities Act, the Magistrate had imposed a sen-
tence of ﬁne only, stating----"accused is Railway employee aged
55 years and is on verge of retirement and no previous convic-
tion alleged against him, a sentence of ﬁne will meet ends of
justice."

The High Court held that this was not a sufﬁcient just/ﬁcatior:

for not awarding imprisonment.

However, as there was no notice for enhancement, the High
Court did not interfere with the sentence and impose a substantive
sentence of imprisonment. (But the High Court reduced the
ﬁne from Rs. 500/- to Rs 200/'- in default, simple imprisonment
for one month).

7.33. In 1960, the Supreme Court in a case under the Drugs
Act, 1940 observed that where large quantities of spurious drugs
had been manufactured by the accused and passed off as goods
manufactured by a ﬁrm of repute, he was guilty of an anti--social
act of a very serious nature, and the punishment of rigorous im-
prisonment for 3 months with a ﬁne of Rs. 500/-- was more
lenient than severe.'

7.34. Abhyankar, J. observed in a Bombay case5, under sec-
tion 5, Imports and Exports Control Act :

"A serious view must therefore be taken of such offences
which show a distressingly growing tendency. The argument

sentences
where
mass of
people
affected.

Andhra
case under
Prevention
of Food
Adultera-
tion Act.

Madras
case under
the same
Act.

Orissa case
under
Essential
Commo-
dities Act.

Supreme
Court case
under
Drugs Act.

Bombay
case under
Imports
Act.

1. Public Prosecutor v. K. N. Raju Marha Sashyn, (1970) C r.L.J. 393, 396, para. 10

(Annanthanarayana Ayyar, J.). .
2. Subbayyan v. State, A.I.R. 1968 Ker. 330.
3. Gurumurt/1y V. State, (1968) Cr.I..J. 533; A.I.R. 1968 Orissa 72.
4. Chimanlal V. State o_/'Maharashtra. A.I.R. 1963 S.C. 665.
5. State v. Drupadi, A.I.R. 1965 Born. 6, para 11.

Trivial
cases
justifying
no punish-
ment.

Andhra
case under
Food Act.

Mad t-as
case under
Food Act.

that the accused comes from a respectable or high family
rather emphasises the seriousness of the malady. If mem-
bers belonging to high status in life should show scant regards
for the laws of this country which are for public good, for
protecting our foreign trade or exchange position of currency
diiﬁculties, the consequential punishment for the violation
of such laws must be equally deterrent. The offences against
Export and Import restrictions and customs are of the
species of 'economic' crimes which must be curbed effecti-
vely."

7.35. On the other hand, there couid be cases where the case
is so trivial as to justify no punishment.

7.36. In an Andhra case1 of sale of adulterated food to the
Food Inspector, the appeal against acquittal was accepted,
and the respondent was held guilty under section 16(1) read with

section 7 and section 2(1) (a) and (1) of the Prevention of Food Adulteration Act. But the High Court passed a sentence only of ﬁne of Rs. 2001- (in default 3 months' rigorous imprison- ment), because the accused was a first offender and appeared to be a petty milk vendor.

7.37. In a Madras case'. under the Prevention of Food Adulteration Act relating to an aerated water (the complaint being that there was excess of saccharine), the excess was found to be negligible. The High Court said-

"The learned Chief Presidency Magistrate, in relation to the nature of the offence committed by the revision peti- tioner, has observed as follows :-

"The accused must therefore be found guilty in a purely technical sense. In my view this prosecution has served no purpose and is in fact wholly unnecessary. When the report of the Analyst disclosed nothing serious at all, the sanctioning authority at least could have ex- ercised discretion properly and allowed the matter to be dropped instead of launching on a prosecution which is clearly pointless. I am afraid it is prosecutions such as this that create an impression of harassment and con- tribute to bringing the law into disrepute. It is wholly unnecessary to impose any other punishment, in the cir- cumstances of this case, except to admonish the accused. Adrnonished accordingly."

"With these observations, the learned Chief Pre- sidency Magistrate must have applied section 95, Indian Penal Code, and acquitted the petitioner as, even though it may be an offence, it cannot be deemed to be an offence l. Public Prosecutor v. K.."~'. Raju, (1970) Cr.L.I. 388, 3-93, para. 1 (Andhra Pradesh) (Chinnap-pa Rcddy, J.).

2. RX. Varma v. Corporrrtiorr of Madras, (1970) I M.L.J. 407, 409 (Krishnaswamy Redd)', 1.).

under law by virtue of section 95, Indian Penal Code.

In the result, the conviction is set" aside and the revision petitioner is acquitted."

7.38. In a Patna case,1 an appeal had been preferred with Patna special leave under section 417(3) of the Code of Criminal Pro-- 'I3:a(f§d"'At':' cedure against the acquittal of the respondent, who was put on ' trial for an offence under section 16(1) (3) of the Prevention of Food Adulteration Act, 1954. The shopkeeper had been acquit- ted by the Magistrate, but, on appeal the Patna High Court convicted him. However, taking into consideration that it was the respondent's ﬁrst offence under the Act, and that more than 3 1/2 years had elapsed since the date of occurrence, the High Court imposed a ﬁne of Rs. 250,/-, in default three months' simple imprisonment.

7.39. In Patna case, 2 under the Prevention of Food Adultera- Another tion Act, there was an appeal by special leave under section Pam"

417 (3) of the Criminal Procedure Code by the Chairman, case"

Jugsalai Notiﬁed Area Committee, against a judgment and order of a ﬁrst class Magistrate acquitting the respondent of the charge under section 16(1) of the Prevention of Food Adulteration Act, 1954. The accused was a tea vendor, and he had been charged with selling adulterated milk. The Patna High Court set aside the order of acquittal passed by the court below, and the respon- dent was convicted under section 16 (1) (a) (i) of the Act. The . court observed that since the offence was technical in nature a sentence of Rs. 5/- would meet the ends of justice, and in default to undergo simple imprisonment for one week.

The court also observed that though the respondent had been found guilty of an offence and convicted and sentenced, it was not a case at all where the Food Inspector should have insis- ted on taking a sample of milk from the respondent, or the authorities of the Notiﬁed Area Committee should have sanc- tioned the prosecution. It has resulted in nothing but waste of court's time and public money in the hands of the Committee. The money in the hands of the Notiﬁed Area Committee being public money should not be wasted in such a manner.

7.40. In a Madras case,3 the accused was running a grocery Madras shop and was in possession of adulterated groundnut oil, which case under the Food Inspector purchased from him. The _trial court acquit- F°°d AC'.- ted him on the groind that the prosecution had not proved that the groundnut oil was kept as food intended for human con sump- tion. On appeal, the Madras High Court held that on the facts it was intended to be sold for human consumption. So far as the punishment was concerned, the respondent was ﬁned Rs. 250/-

1. Jamshedpur Notiﬁed Area Committee v. Durga Promo', (1969), Cr.L.J. 704 (Patna) (Case of ﬁrst offence).

2. Jugsalai Municipality V. Mukhram. A.I.R. 1969 Pat. 155, 160.

3. Public Prosecutor v. Mayakrishnan, (1970) 1 Mad. L.J. 275 (D.B.).

Applica-

tions for enhance-

ment not f requeht.

Public welfare prime considera-

tion.

Protection of the community requires incarcera-

tion. ' Proper sentence a compro-

mise.

in default to undergo simple imprisonment for six weeks. Time for payment was ﬁxed at three weeks.

7.41. From the paucity of reported cases as to enhancement, it would appear that applications for enhancement are not fre- quent.

It may be noted that the Law Commission has, in its Report1 on the Criminal Procedure Code recommended a provision for an appeal at the instance of the State Government (in case of conviction) on the ground of inadequacy of sentence. One would hope that the prosecuting agencies and the State Governments will make increasing use of this provision when enacted.

7.42. The prime consideration in proper sentencing is the public welfare. Two major problems that 'face the sentencing Judge are--

_ (a) to what extent and for what time does the commu- nity welfare require protection from the offender with respect to the offence; and

(b) what sentence will permit the offender to take his place in society as a useful citizen at the earliest time consis- tent with protection of the public.

7.43. The protection of the community from conﬁrmed and habitual criminal not reasonably suspectible or rehabilitation as useful citizens requires the incarceration of such offenders for maximum periods. The protection of the community also requires that, to the extent a given sentence may be expected to serve as an effective deterrent to the commission of similar offences by others, this element should be given great weight in the de- termination of the proper sentence. The public welfare also re- quires, in general, the maximum use of probation and institu- tionalised training in respect to offenders who are not conﬁrmed criminals and who manifest a capacity for probable return to the community as useful citizens.

_ The sentencing judge must, therefore, determine the propor- tionate worth, value and requirements of each of these elements in imposing a sentence in each case.

7.44. A proper sentence is a composite of many factors, in- cluding the nature. of the offence, the circumstances----extenuat- ing or aggravating----of the offence, the prior criminal record, if any, of the offender, the age of the offender, the professional and social record of the offender, the background of the offender with reference to education, home life, sobriety and social adjust- ment, the emotional and mental condition of the offender. the prospects for the rehabilitation of the offender, the possibility of a return of the offender to a normal life in the community, the

1. 41st Report, Vol. 2, page 147, clause 387.

possibility of treatment or of training of the offender, the possi- bility that the sentence may serve as a deterrent to crime by this offender, or by others, and the present community need, if any, for such a deterrent in respect to the particular type of offence involved.

7.45. The variables in each case, including the accused's prior criminal record, his background and the condition of his health, the prospect of rehabilitation and many other factors are unpredictable, and it is for this reason that a discretion should preferably vest with the judicial oﬁicer.

7.46. Sentences which are merely mathematica'ly identical for violations of the same statute are improper, unfair and undesira- ble. Indeed, mathematically identical sentences may in subs- tance be themselves disparate.

7.47. For these reasons, we do not think that the discretion of the court to award a sentence below the minimum should be totally abolished. In fact, even some of the oﬂicers concerned

- with enforcement of the Acts agreed that it was impossible to conceive of every possible situation whiclrmight operate in miti- gation.

7.48. At the same time, and notwithstanding our hesitation to introduce provisionas limiting the discretion of the court to award a punishment below the minimum, we are constrained to recommend provisions as to certain speciﬁc matters, having regard to the general complaint voiced in that regard. It has been represented to us, during the oral discussions which we have held with responsible officers, that a very mild punishment is awarded by the courts on the ground that----

(1) the case is one of ﬁrst conviction, or (2) that the matter has been already dealt with by severe departmental penalty, or (3) that the convicted person is a young man of, say, twentyﬁve years, or (4) that the oﬁender is merely a carrier.

7.49. We are of the View that, by themselves whether singly or together, none of these grounds should be regarded as su- fficient for awarding a punishment below the minimum. The ﬁrst ground', namely, that the case is one of ﬁrst conviction, turns out to be unsatisfactory in the case of social and economic offences, because what has been detected and brought before the court is, more often than not, a surface manifestation of a poi- sonous spring of habitual misconduct running underground. Detection is particularly diﬂicult in the case of social and eco- nomic offences. Gathering of information leading to prosecution is equaily diﬂicult, and conviction in much more so. Whatever may be the position as regards conventional crimes, the odds l. Para. 7.48, Supra.

Factors variable and unpre-

dictable.

Mather matical identity not desirable Discretion to be retained .

Recom-

mendation to exclude certain grounds of mitigation.

here are that it was by sheer luck and the offender has escaped detection for other crimes.

7.50. As regards the second ground prior award of depart- mental penalties,--which is sometimes regarded as suﬂicient in itself to justify a mild punishment in the criminal trial, we wish to point out that the very object of a criminal prosecution is to invoke punishments which could not have been imposed in administrative adjudication. No doubt; successive imposition of administrative penalties and criminal prosecutions may be found to be unnecessary in many cases, and could even be avoided to prevent hardship. But these matters would be taken note of by the appropriate agency when initiating or sanctioning a prosecu- tion. They should not weigh with the court in awarding punish- ment.

7.51. The next ground of mitigation which requires to be dealt with is that of youth of the offender. We have been told that courts have regarded this as a mitigating factor even where the accused-was aged 25 years or so. We are of the view that this ought not to be so. No doubt, where a case falls within the Pro- bation of Offenders Act, 1958, the provisions of that Act are to be complied withl. But, in cases outside the Act, there is justiﬁcation for treating the young of the convicted person as in itself justifying a punishment below the minimum.

7.51 A. We are also of the view that the minimum punishment should not be relaxed merely on the ground that the offender is merely a 'carrier.' Such a plea is often taken, and succeeds in cases under the Customs Act and the like. While it could be argued in general that a person whose contribution to an offence _ is as an originator of the offence should receive a higher punish- ment than a person who is a mere go-between, practical consi- derations as well as the special nature of the offences in question, require that even he should be given a substantial punishment.

7.52. There is another aspect to be discussed. Criminal responsibility attracts "measures" to meet it. If the punishable act has caused no harmful effects, punishment may be mild. If it has caused some harm but the offender can repair the damage done to society, probation would be appropriate. If the harm is serious, imprisonment, would, of course, be required. These considerations are implicit in most codes, and are stated ex- plicitly in some of the foreign Codes'. In the present context, it becomes desirable to provide that if the harm is nominal, the provision for minimum punishment should not be binding.

7.53. _In the light of the above discussion, we recommend the insertion of suitable Explanations on the following lines in the relevant provision in the various Acts.

1. The question whether probation itself should be excluded is dealt with separately (Chapter 10, infra).

2. Eg. articles 25 , 28 , 33 , 38 etc. of the G.D.R. Penal Code.

"Explanation|.--The following are not, by themselves, special and adequate reasons for awarding: 'a sﬁnomof imprisonment for less than six months, namely, the first time of an offence u" it this.

(b) the fact that in proceedings under this Act other than a' prosecution, the accused has been otderedti to pay a penalty or his goods have been ordered to lie ceﬂiseated or other penal action has been taken 'against him for'=!_he same offence, or

(c) youth of the accused :

Provided that nothing in this Explanation shall be construed as a_ﬁ'e_cting in any way the provisions of the Probation of Offen- ders Act', 1958, or of section 562 oi"_the Code of Criminal Pro- cedure or of any enactment 'relating to children or any special provision of law applicable to juvenﬂe olfenders.

(a) the fact that the ace . has been' a A,convictedJ ifor JAcjf' or / Explanation 2.--The fact that the offence has caused no substantial harm to society or to anylindividual is a special and adequate reason for awarding a sentence of imprisonment less than six months." ' 7.54. The speciﬁc amendments which 'we'are recommendingz will meet a few situations. But we would5like to reiterate here our grave concern at some of the grosslydnadequate sentences which we have come across in cases relating to economic offences.

7.55. It is unfortunately true that some courts do not appre-- ciate the gravity of economic crimes. We came across, for example, a case decided by the Chief Presidency Magistrate of a Presidency town, in which a leading businessman and two other directors of a company were convicted, on a charge of violation of the Provisions of the Foreign Exchange Regulation Act, 1947 and awarded a mild punishment.

The charge was of holding shares in a foreign company bet-- ween March 29, 1957 and July 31, 1959, without the nacessary permission of the Reserve Bank. Each of them was sentenced to pay a ﬁne of Rs. 1,000 or, in default, to undergo regorous imprisonment for three months. The company, which was tried for the same offence, was also ﬁned Rs. 1,000/-.

The Magistrate, while sentencing the accused, said that the offence seemed to be rather technical in nature. He said that the shares in question were acquired before the 1957 amendment to the Foreign Exchange Regulation Act, 1947 which for the ﬁrst time introduced the provision about the Reserve Bank's permis- sion. The shares had not been dealt with or disposed of since their acquisition, and their dividends were received through the Inadequacy of senten-

ces--Obser-

vations regarding.

1. This form is suitable for a provision worded like section 135, Proviso (1), Customs Act. The form may require change in other cases.

2. Para. 7.53_ supra.

1 M of Law/72-5 G0 .m1=;.1.- ,;. ~ .!I...

Reserve mi. The intqiiunion were 'also-'ota suhsidihry-

company.

Further, the defence advbcarc '_ stated that the directors failed to obtain the permission after coming into force of the amendment, as they were advised by -their solicitors that.no per-

- mission was necessary as the shares had ,been acquired, before the amendment. As the-shares had not been dealt with or dis- posed for all these years, and as the -accused seem to have failed to obtain the permission of the Reserve Bank of India on account of erroneous legal beliaf, the olfence was regarded as technical. . .

7.56. We are, with respect, constrained to observe that the reasons given for awarding a mild sentence in this case, disclose a failure to appreciate adequately the adverse effect of the viola-_ tions of the Foreign Exchange Act on the national economy. The relevant statutory provision prohibits the acquisition, "hol- ding" and disposal of shares in a foreign company, and' there was no basis for supposing that shares acquired before the amend- ment were exempt from its operation. The fact that the divi-

-dends were received through the Reserve Bank was also not relevant to a charge of holding the shares without its permission. and so were most of the other considerations relied on for awar- ding a mild punishment.

CHAPTER 8 CORPORATIONS AND THEIR OFFICERS 8.1. An important type of white-collar crime is that committed Corpora-

by Corporations. Since a Corporation has no physical body "ODS- on which the pain of punishment could be inﬂicted, nor a mind which can be guilty of a criminal intent, traditional punishments prove ineffective, and new and different punishments have to be devised. The real penalty of a corporation is the diminu- tion of respectability, that is, the stigma. It is now usual to insert provisions to the effect that the Director or Manager who has acted for the corporation shouid ,be punishedl. But it is appropriate that the corporation itself, should be punished. In the public mind, the offence should be linked with the name of the corporation, and not merely with the name of the Director or Manager, who may be a non-entity. Punishment of ﬁne in substitution of imprisonment in the case of a corpo- ration could solve the problem in one aspect'; but, at the same. it is necessary that there should be some procedure, like a judgment of condemnation, available in the case of an anti- social or economic offence committed by a corporation. This will be analogous to the punishment of public censure proposed for individuals3.

8.2. Of course, conﬁscation and similar penalties will con- Attach- tinue. Acquisitive corporate crime, like acquisitive personal $313' ]"f crime, will persist if the criminal is permitted to retain the fruits Prgﬂs of his illegal activity. The criminal law, therefore, generally ' does not tolerate such retention. If acquisitive corporate crime is to be deterred, the corporation, like any other acquisi- tive criminal should be deprived of all the fruits of its illegal activity.

8.3. In many of the Acts relating to economic offences, Punish- imprisonment is mandatory. Where the convicted person is memof a corporation, this provision becomes unworkable, and it is g§;1s°°ra' desirable to provide that in such cases, it shall be competent to ' the court to impose a ﬁne. This difﬁculty can arise under the Penal Code also', but it is likely to arise more frequently in the case of economic laws. We, therefore, recommend

1. Para. 8.4, infra.

2. Para. 8.3, infra.

' 3. Taxation laws are proposed to be excluded from this amendment.

4. See discussion in 41st Report of the Law Commission, (Code of Criminal Procedure), Vol. 1, page 190-191, para. 24.7.

Liability 62 that the following provision should be inserted in the Penal Code as, say, section 62:----

''(I) In every case in which the offence is punishable with imprisonment only or with imprisonment and ﬁne, and the offender is a corporation, it shall be competent to the court to sentence such offender to ﬁne only.

(2) In every case in which the offence is punishable with imprisonment and any other punishment not being ﬁne, and the offender is a corporation, it shall be competent to the court to sentence such offender to ﬁne.

(3) In this section, -'corporation' means an incorpo- rated company or other body corporate, and includes a firm and other association of individuals."

8.4. The question of corporate liability has two aspects;

of principal the liability of the corporation itself and the liability of the offenders.

principal officers. such as Managing Directors. The latter aspect will now be dealt with.

8.5. In England, two formulae havepbeen adopted in this respect. According to the ﬁrst formula, any Director, Manager. Secretary or other officer of the company with whose consent or connivance the offence is committed, is declared to be im- plicated in the offence. The burden of proof in this case lies on the prosecution. In most cases, the officer is also made responsible where the offence is attributable to, or facilitated' by his "neglect" or "negligence" or "culpable neglect" "of duty" or "reckless neglect of duty"1.

8.6. While, in the above formula, the burden lies with the prosecution, the second formula shifts the burden to the officer, to disprove his complicity. There has been some criticism of English formula. For example, the Borrowing etc. Act? has the following provision :-----

"(1)No proceedings for an offence under this Act shall be instituted in England except by or with the consent of the Director of Public Prosecutions . . . . ..

(4) Where an offence under this ﬁct has been committed by a body corporate (other than a. loc authority), every person who at the time of the Commission of the offence was a director.

general manager, secretary 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 connivanoe and that he exercised all such diligence to prevent the com- mission of the offence as he ought to have exercised having regard to the nature of his functions in that capacity and to all the circumstances."

l. The wording varies.

2. The Borrowing (Control and Guarantees) Act, 1946, Schedule, Paragraph 3.

63, This provision came in for the following judicial comment' :-

"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 offender, then every director, general manager, secretary or other similar officer of the body corporate, including 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 '-- connivance, 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 further show that he exercised all such dil' ence to_ prevent the commission of the offence as he on t to have exercised, having regard to the nature of his functions in that capa- city and in all the circumstance. However, that is what Parliament had thought ﬁt to enact, and I abide, of course. by it. Nevertheless it is what Mr. Lindon described as: a highly penal statute."

i l l 8.7. In the, Model'Penal Code of the American Law lnsti- tutel, the wording employed covers (i) persons who "perform or cause to be performed", in the name of the corporation. any conduct, as also (ii) "any agent" of the corporation having "primary responsibility for the discharge of the duty imposed by law upon a corporation". In the former case, positive conduct would be required, while in the latter case, it must be a "reckless" omission to perform the required act. The rele-

vant provisions are as followsf--' "(4) As used in this Section:

(a) "corporation" does not include an entity organised as or by a governmental agency for the execution of a governmental programme;

(b) "agent" means any director, officer, servant.

employee or other person" authorised to act in behalf' of the corporation or association and, in the case of an unincorporated association, a member of such association; '

(c) "high managerial agent" means an officer of' a corporation or an unincorporated association or. in the case of a partnership, a partner, or any other I. London and Country Commercial Properties Mvestment LId..v. .4I!m'm'_1' General (1953) 1 W.L.R. 312, 318 (Chancery Division) (Upjohn J.).

2. Section 2.07, sub-section (4) and (6), Model Penal Code, which are clevant to Corporations.

1. Gold cgm Act. 1968, Section -93.

agent of a corporation or association having duties or such responsibility that his conduct may fairly be assumed to represent the policy of the corporation or association.

(6) (a) A person is legally accountable for any conduct he performs or causes to be performed in the name _of the corporation or an unincorporated association _or in its behalf to the same extent as if it were performed in his own name or behalf.

(b) Whenever a duty to act is imposed by law upon a corporation or an unincorporated association, any agent of the corporation or association having primary respon- sibility for the discharge of the duty is legally accountable for a reckless omission to perform the required act to the same extent as if the duty were imposed by law directly upon himself. '

(c) When a person is convicted of an offence by reason of his legal accountability for the conduct of a corporation or an unincorporated association, he is subject to the sentence authorised by law when a natural person is convicted of an offence of the grade and the degree involved."

8.8. The legislative precedent currently adopted in India. combines two' dilferent kinds of formulae. A recent example is furnished by the provision in the Gold Control Act' quoted below:----

"93. Oﬂences by companies. (1) Where an offence under this Act has been committed by a company, every person who at the time the oﬁbnoe was committed was in charge of, and was responsible to, the company for the, conduct of the business of the company as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished "accordingly:

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

(2) Notwithstanding anything. contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the olfence has been committed with the consent or comivance of, or is attri-

butable to, any neglecteon 1% put of, any director, manager, secretary or other oﬂicer shall hedeemed to be guilty of that offence and shall be liable to he proceeded against and punished accordingly."

V .. Izxplarzation-----For the purpose 9_t'.tl1is section:+_-

(a)' "company" means, a corporate and includes a ﬁrm or other 'assoeia'%io of lndlVidllaiS; and ' '

(b) "director" in relation to 1 ﬁrm, means a partner in the ﬁrm."

8.9. At present, the position as to such provisions in the major Acts with which this Report is concemed is as follows :-

(l) Central Excises Act, 1944.

(2) Foreign Exchange Regulation --Section 23-C. ' Act, 1947.

(3) Prevention of Adulteration Act, 5--Section 17. (4) Essential Commodities Act, --Section 10.

55.

--No such provision.

(5) Wealth Tax Act, 1957.

(6) Income-tax Act, 1961.

(7) Customs Act, 1962.

(8) Gold Control Act, 1968.

----No such provision.

V -----Section 140.

----Section 93 1.

8.10. A small point relating to the Imports and Exports Act may be noted at this stage here. The Act is not one of those listed above, but the point was rlgbd during oral dis- cussions. The Committee' on Hévcntion of Corruption (Santhanam Committee) suggested the following amendments to section 5 of the Imports and Exports (Control) Act, 1947 :--

(a) To make the offenders li;1_>1¢.to he Punished with imprisonment for a term which may gxtend to two years and also with ﬁne, with a further provision that the'1n1prison-

ment shall in no case be for a period of less than six months, unless the court decides, for special alll. ﬂbqnue reasons to be recorded in the judgment, 'to iﬁpolo a shorter term of imprisonment; and »

(b) To make a se arate pf"'visip'n maki principal oﬁiqhbearers also lia le for o' enées commit ed by the company or partnership concern or any other incorporated body or association and to provide that the burden of proving the innocence shall be on them. .

8.1!. Action has already been taken on the ﬁrst recommen- dation.

I. See para. 8.8, supra.

2. Report of the Santhanam Committee, (islsa), gauge 65, para. 7.25.

Points relating to Imports and Exports Act.

Clause recom-

mended.

Applica-

tion for license signed by Chairman or Manag-

ing Director-

liability of those oﬂicers. 1

66. 8.12; As regards the s¢etiiili'|recomme'ndation, the necessary amendment has .not.rbe_en enacted. -Presumably, it must have been felt at that time ﬁlengment may cause hardship, since the day to day handling 0 imported goods is not necessarily looked after by the principal officer. We, however, think that it is necessary to have m ﬁnish look at the matter. Though the absence of such a provision may not lead to any great practical diﬂiculty, because the director or other principal oﬁicer would still be liablefor abetnentl, we are of the view that to impress upon the dinectotaz ihe importance of complying with the relevant Acts, a provision is needed and we recommend an amendment accordingly; ' 8.13. We are-further of -'the,-itiew-t,h,at'in the case of offences "under some of the Acts, namely the Foreign Exchange Regu-

lation Act, the Imports and AE ports Control Act and the Drugs and Cosmetics' Act' licence or permission is granted to a corporation as a ras,11,lt_of an application in writing made on behalf of the corporation, it is desirable that the Chairman or Managing Director of the corporation should undertake criminal liability fbr offences connected with the transaction to which the licen {or rmission, relates. Such a provision might appear to unusual. But we think that it is necessary in' order to prevent contraventions of the regu- latory provisions of the Acts under which such licence or per- mission is granted. ' ' 'I J. , 8.14. This could be achieved;-by, inserting two conclusive ' presumptions.

Under the», ﬁtst,,_§it_ shall be presumed that the offence was committed, witjhthq, consent or connivance of thevChairman or. Mﬂﬂﬁ8% »-uDitegtpr, it} he. has ' signed the 3PP1i¢ation for or: pcrlaittiioa.

Under the second presumption, 'even where the Chairman or Managing Director aasrnot i the application, he should be'd_,ee'r'ned',to have Sign it. ,' sf omes' necessary to cover gysgsgvhere the apphcdtiqn 'sign by a lower oﬁicer of the oigporatioii.' , ' . ' ' ' .' Ac, 1' 'mi 2-" -. ~ 8.15." We do not tll'lll0:1hatIiSl-Idl--'PTOSIllnpti01lS would go beyond the permissible limitsnghdir article .l9(1e)(g) oil the Constitution, with respect to the rightof a person to carry on a business etc, The presgirn _' us, though concl sive,. would, we venture" to suggest,' r as reasonabl restrictions in theinterest of thefen ital pub? .within article 19(6) of the Constitution. ' ' " "" " ' V ' ' ; " .0 Our attention was drawn,>iIt this connection, to a judg- ment of the Supreme Court, relating to a provision of the Gold Control Act. , . ,1, . » L. l. Abdul Aziz v. State of Maharashtra, A.I.R. 1963 SC. 1470; (1964) l S.C.R'. 830

2. Amendment to be drafted. ' _

3. The Imports etc. Act and the Drugsﬂetc. Act ﬁre not included in the general ambit of this Report. But this point is discussed asrbéing f sjiecialhhportance.

Section 88 of the Gold Control ActI1was= challenged' in that case. Section 88 read thus (at that-time): -

"(l) A dealer or refiner who knows or has reason to believe that any provision of this Act or any rule or order made thereunder has been or. is being contravened, by any person employed by him in the course of such employment, shall be deemed to have abetted an offence against this Act.

(2) Whoever abets, or is deemed. under sub-section (1) to have abetted, an offence against this Act, shall be punished with imprisonment for a term which may extend to three years and shall also be liable to ﬁne."

8.16. The Supreme Court observed :--~ ,, , "This section extends the scope of the vicarious liability of the dealer and makes him responsible for the contraven- tion of any provision of the Act or rule or order by any person employed by him in the course of such employment. The rational basis in law for the imposition of vicarious liability is that the person made responsible may prevent commission of the crime and may Selp to bring the actual oﬁender to book. In one sense tli "dealer is punished for the sins committed by his employee. It may perhaps be said if the dealer had been more alert to see that the law was observed the sin might not have been committed. But the section goes further and makes the dealer liable for any past contravantion perpetrated by the employees. It is evident that the dealer cannot reasonably be made liable for any past misconduct of his employee in the course of ' the empolyment and whom 'he ' reasonably be ex- pected to inﬂuence or control. , niaxim qui facit per alium facit per se (he who acts'~thr u'gh another acts the h himself) is not generally appliaca le in criminal law?/Egut .in section 88 it has been extended, beyond rea o'nable limits. We are, therefore, of opiniorrthal section 88 imposes 'an; unreasonable restriction on the fundamental right of the petitioners and is unconstitutional."

I , _ 8.17. In our opinion-, the prov'sion:w_hid: we are proposing' is distinguishable, inasmuch as the~GIaim1an or Managing Director is not to be responsible for the past misconduct of any other person.

8.18. Accordingly, we recommend that in the section relating I to. liability of individual oﬂicers of corporation in the Foreign I

-- l. Harak Chand v. Union of India, A.I.R, .1970 S.C. 1453, 1466, para. 2lﬁ(Ramaswa-mi, J.).

68:

ExchangcAct and- in the Drugs »- A¢r¥,. two Explanationsz should be inserted, as folloWs:---- 1 ' ' -

Explanations to be inserted in "the Foreign Exchange Act and the Drugs Cosmetics Act, 1946 in the section relating to liability of oﬂicers of corporation. ~ ' "Explanation 2.--Where a person, being the Chairman or Managing Director of a company has, on behalf of the company, signed an application~for licence3 under this Act, any contravention of the conditions of that licence shall, so long as such person holds an oﬂice in the company. be conclusively presumed to have been committed with his consent or connivance.

Explanation 3.-----Where an application for licence under ' this Act is signed by an officer of a company other than A , the Chairman or Managing Director, it shall, for the purposes ' of this section, be deemed to have been signed also by the Chairman and the Managing Director of the Company."

8.19. There is one point in. connection with the Directors of Companies, on which a provision is required to be inserted.

Punishment of Directors under the usual provision makingthem individually liable results in their impﬁsonmentyor ﬁne under that provision. But, in addition, it should be permissible for the Court to order that the person convicted shall be disqualiﬁed from holding office as Director of the company, for a speciﬁed period.

A suggestion to that elfect was mad during our oral discus- sions, and we accept the suggation. e point was made with reference to the Foreign Exchange Act and ', the Imports and Exports Control Act, but we think that the amendment could usefully extend to all the major Acts with which this Report is concerned, besides the Imports and Exports Control Act.

8.20. The Companies Act has a variqy of provisions dealing with the disqualiﬁcation imposed on g _ on from holding office as a Director. on his being count' by court of an offence'. Further, under an amendment inserted in 1963, the Central Government has power to make a reference to the High Court of cases against managerial personnel in certain circumstances:

and one of the circumstances in Whisk this power can be exer- cised is the fact that the business of the company is conducted

1. TheiDrugs and Cosmetics Act, 1940.

2. In the imports Act, similar Explanations will, as recommended in para. 8.13, be inserted while adding the new clause under para. 8.] . I ' ' p

3. In the case of the Foreign Exchange Act, the wind "permission" would be appro' priate instead of "licence".

4. Sections 203(l)(a), 267(e), 274(l)(d)- & (f), 28J(l)(e), 336(c) and 385(l)(c) of the Companie s Act, 1956.

and managed for a "fraudulent or unlawful purpose or in a manner prejudicial to public interest"1. It should be noted that the pro- visions as to disqualiﬁcation fall broadly in three categories; first, conviction of an offence in connection with the promotion. formation or management of the company'; secondly, conviction of an offence involving moral turpitude3; and thirdly, carrying on the business of the company for an unlawful purpose'.

8.21. It appears to us that for the present purpose, the most appropriate provision is the one5 under which, where a person is convicted of any offence in connection with the promotion, formation or management of a company, 'the court' may make an order that that person shall not, without the leave of the court, he a director or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or manage- ment of a company, for such period not exce ing ﬁve years as may be speciﬁed in the order. By deﬁnition', the expression 'the court' includes the convicting court, as well as any court having jurisdiction to wind up the company as resppcts which the offence was committed. So far as the leave referred to in the section is concerned, it is provided7 that the expression 'court' means any court having jurisdiction to wind up the company as respects which leave is sought. There are separate provisions' as to the vacation of office held by the convicted person. In order that all these detailed provisions could be availed of without repeating them, it would be convenient if the case of a person convicted of an offence under the various enactments' with which this report is concerned, is included in the main provision' ° in the Companies Act (which at present relates to conviction of an offence in con- nection with the promotion. formation or management of a company).

8.22. We, therefore, recommend that section 203(l)(a) of the Companies Act should be amended by inserting, at the end of clause (a), the following:--

'.'or of any offence under the following Acts punish- able with imprisonment for more than three years. ni.mely.----

[The 8 major Acts and the Imports and Exports Control Act could be mentioned here.]"

. Section 388B(l)(d), Companies Act.

. Section 203(l)(a), Companies Act.

. Section 267(c), Companies Act.

. Section 388B(l)(d), Companies Act.

, . Section 203(l)(a), Companies Act.

6. Section 203(2), Companies Act.

7. Section 203(2)(b), Companies Act.

8. Section 274(l)(b) and sections 283(l)(j), Companies Act. 9 The Imports Act has also to be added.

10. Sections 203(l)(a), Companies Act.

ughb-)?J'-I CHAPTER 9 DESIRABILITY or AMENDMENTS' AS TO JURISDICTION. PROCEDURE AND LIMITATION 1"" 0dU¢- 9.1. A study of the relevant material concerning the prosecu-

"''7' tion of persons for the economic'oﬁ'ences in question, including statistics of convictions and the judgments of the Courts, led us to the tentative belief, even' during our earliest deliberations. that these offences could not 'be dealt with adequately except by special courts constituted more or less exclusively for trying them. A Judge entrusted with the ;rial"of offences generally, we felt.. ﬁnds it difficult to see these dﬂ'en¢es in the proper perspective of their impact on the nation's'life.' Probably, while trying tradi- tional offences against the person or' against property, in the discharge of his duties, when he comes to try an economic offence which does not, after all, result to any speciﬁc individual or his property, it is easy for hinfto lapse into a feeling that he is not confronted with any' serious offence or with one that represents a serious danger to the cbmmunity.

Judicial 9.2. That this has been so, is amply demonstrated by the 81TitUd€S- way in which an otherwise'~'un'accou|itable leniency has often been shown in sentencing pdrso'ns'c"o1}victed for these offences. Even where the law has preicribisdithie minimum sentences for imprisonment, to be waived' onlyin exceptional circumstances in the discretion of the Court, the accdsed have been let off on such grounds' e.g., that the accused 'appears to be' of young age, the accused is only a carrier, this is only his first offence, the accused is ah old man, the accused has already been ﬁned heavily in the Departmental proceedings,'the accused has made a con- fession of his guilt, the accused has incurred considerable expenditure in defending himself, the wcused is a family-man. and so on. It is hardly necessary tomdd that these considera- tions do not constitute judicially valid. grounds for not awarding the minimum sentence prescribed by law.

In the matter of conviction also, there has often been an unduly excessive indulgence in favour of the accused. In one case where the accused, notorious for his record d" economic offences, had concealed and withheld from the Reserve Bank of India infor- mation regarding his ownership of shares in foreign companies and thus committed the offence 9,f,'hoﬁling'. such foreign shares without the knowledge of the Reserve Bank, the Court treated the offence as merely a technical ope and let him off with a ﬁne of Rs. 10,000, which, of course, for him was as good as acquittal.

1. See Chapter 7, supra.

I 70 71

9.3. The appointment of special courts fol the trial of these offences will not only enable the jadges=2who2.t1'y these 0561003 to develop a sense of perspective and expeetisebut will also have several additional advantages. The: veryapgpintment of such courts will highlight the social importance of such prosecutions. It will also enable the judiciary to developa new perception and a new and appropriate attitude of concern for such offences. And, above all, if properly armed with an expeditious procedure. these special courts will be able to create the suitable social cli- mate in which the reprehensible antisociil character of these off- ences will be ore adequately brought home to both the general public and e offenders themselves.

9.4. During our discussions with members «of the public, the Bar, and government oﬂicials, there was almost unanimous sup- port for the general proposition that the economic oﬁences in question should be tried by special courts empowered to follow a special speedy procedure. ' 9.5. We examined various patterns for the establishment of these special courts. One pattern is provided by special tri- bunals which have been constituted from tirm to time for the trial of terrorist crimes or other offences disturbing the security of the country, like the one established under the Criminal Law Amendment Act, 1908. Another is provided by the special tribunals contemplated by the Defence of India Act. The so-called "section 30 Magistrates" (to be replaced by the Chief Judicial Magistrates and Additional Chief Judicial Magistrates under the recent Cr. P.C. Bill', afford yet another pattern of courts specially empowered to try certain class or classes of offencesz. But neither of these patterns appmred to us to be satisfactory for the present purpose.

9.6. We view the economic offences under consideration as constituting a serious new challenge to the economic integrity and well--being of society. We share the View of all those who had to deal with these oifences, that the existing legal weapons as such are not adequate to protect society from those engaging in their commission. We feel that new instruments and pro-

' cedure must inevitably be devised.

9.7. The new instrument which we propose is a special court which will have exclusive jurisdiction to try these offences. In order to be effective, the special court miist not take up any other work, and must develop perception and expertise in the trial of these oﬂences only. In order to be effective, its judgments should be subject to not more than one appeal only, to the High Court, both on questions of fact and on questions of law. The court must have power not only to convict and punish an accused Special Courts--- _ Advantages of .

Various patterns of special courts considered.

Economic oﬁences constituting serious threats.

New Instrument necessary.

1. See---(a) the 41st Report of the Law Commission.

(b) The Cr.P.C. Bill, 1970, Commission.

2. As to the Criminal Law Amendment Act, 1952. see para.

9.8, infra.

Variety of provisions needed.

Right of accused not affected.

person of the offence speciﬁmlly-char ', but also for an offence under'an.Act dealing withisimiilt ces for which he has'n'ot been speciﬁcally charged, provided that the rules of natural jus- tice have been duly observed, andghe is afforded a fair opportunity to defend himself in respect of such charge. It should have power to impose any punishments prescribed by law for the offences of which the accused before it is found guilty. .

9.7A. We suggest that these courts should be manned by senior and experienced Judicial Oﬂicersiof the rank of the Sessions Judge. And, above all, it must follow a spec' I and speedy procedure for the trial of these offences. This rocedure, of course, must satisfy the requirements of a fair and impartial trial. But, subject to this, it should be specially devised to cut down delays and various ingenious forensic stratagems to escape the clutches of law and delay, if not frustrate, the administration of justice. Thus, this procedure shouid avoid the cumbersome and needlessly repetitive process of commital, and should permit the special court to take cognizance of offences without commital. In other words, the special court should follow substantially the procedure for the trial of warrant cases. The procedure should permit the transfer of cases from one special court to another, and should provide that the special court to which a case is transferred shall not be bound to resummon or re-hear witnesses unless it is satisﬁed that such a course is necessary in the interests of justice. It should have power to refuse to summon witnesses. Provision should be made that it will not be bound to adjourn a trial for any reason unless such adjournment is necessary in the interests of justice. The special court should not be required to adjourn proceedings for the purpose of securing the attendance of a legal practitioner if it is of the opinion that such adjourn- ment would cause unreasonable delay. It should have powers to deal with refractory accused, and to proceed with the trial in the absence of an accused who, by his voluntary act, renders him- self incapable of appearing before the court or resists his produc- tion before it or behaves before it in a persistently disorderly manner. It should have power to refuse to' summon any witness if it is satisﬁed that the evidence of such witness will notbe material.

9.7B. The courts trying such offences should have power to direct that proceedings be started against another person not charged before it, if it is satisfied' that he is prima facie guilty of any offence punishable under the act or acts in question, and on such an order being passed, the person concerned will be tried accordingly.

~ 9.8. The above provisions, calculated to make enforcement of law and justice more effective and speedy are, it will be noticed, carefully drawn to steer clear of the right of the accused to a fair trial based upon a full opportunity of making his defence with the help of a lawyer. This right is not only guaranteed to him in

1. This point is developed in Chapter 11, infra.

:73 article 22 of the Constitution,- but is pnediat 9ug_ht to be respect- ed in any ,eivilis_ed.system,of admiIlistr_qtron_9t Jl1stlC¢- 1 Illfact, the procedure outlined above is not novel, nor is it being suggested forthe ﬁrst time. after the -commencement of the Constitution. Many of its features are to be found in the Criminal Law Amend- ment Act passed by Parliament for the trial of offences relating to bribery and corruption'. .

Again, a procedure with all these features had been adopted by the various States for the speedy trial of certain offences in certain cases, presumably because the State Governments felt that "there was an abnormal growth of incidence of certain offences and failure to try them speedily and to punish them effectively would shake the faith of the general public in the administration of justice itself. It is true that the West Bengal Special Courts Act, 1950, which laid down such a procedure, was struck down as unconstitutional by the Supreme Court in Anwar Ali's case'. But, then, the ground on which the Court struck down the West Bengal legislation was not that the procedure was unfair or other- wise reprehensible, but on the ground that the impugned Act authorised the State Government to pick and choose individuals arbitrarily for trial by the special procedure. In later cases-"

where no such arbitrary picking and choosing was involved, the Supreme Court upheld such procedure. In fact, in Kedar Nath's case', the Supreme Court even permitted picking and choosing of individuals and thus considerably watered down the authority of the decision in Anwar Ali 's case, if not altogether destroyed it.

9.9. We, therefore, propose that Parliament should enact a comprehensive law authorising the setting up of special courts and laying down a special procedure for the eifective and speedy prosecution of all the economic offences under reference on the lines indicated above. The proposed law may conveniently be drafted by adopting the pattern and the provisions of the West Bengal. Special Courts Act, 1950, mu tatis mutandis, with the dif- ference that the provisions struck down by the Supreme Court in Anwar Ali's case5 authorising the picking up of individual cases may be dropped, and necessary modiﬁcations may be in- troduced to carry out the suggestions regarding procedure made elsewhere in this Report'. This law may be titled the Special Courts (Economic Offences) Act, and may be left ﬂexible enough to permit additions to the list of the economic offences to be tried by the Special Courts which it authorises to be set up.

It should apply to offences under all the major Acts with which this Act is concerned,--except the Wealth Tax Act and the Income-tax Act. When the taxation laws are simpliﬁed, Recom-

mendation as to Special Courts.

1. The Criminal Law Amendment Act, 1952. '

2. State of West Bengal v. Anwar All, A.I.R. 1952 S.C. 75; (1952) S.C.R. 284.

3. Kathi Raning Rawat v. State of Saurashtra, AIR. 1952 S.C. 123.

4. Kedar Nath Baioria v. The State of West Bengal, A.I.R. 1953 S.C. 404 to 407.

5. State of West Bengal v. Anwar 411', A.I.R. 1952 S.C. 75; (1952) S.C.R. 284.

6. See particularly remaining paragraphs of this Chapter and Chapter ll, infra.

Procedural recom-

mendations common to various Acts how to be implemen-

ted.

Conse-

quential amend-

ment in provisions as to summary trials and other procedural provisions.

Disclosure of case by the accused.

they could be brought within the of thenew Act creating Special Courts which-we have roeotnatnded above.

9.9A. In our discussion of the amendments of a procedural nature' which we have reoolnmentkd ntvarious places in this Report, as amendments common tumor! than one Act, we have stated that the necessary provisions betinserted in the relevant Acts. But, if a Special Courts Act is passed, as recommended by 1153, then that act will include those provisions.

9.9B. The recommendation for the trial of these oﬁences by special Judges appointed under the new Act, will render it necessary to make consequential changes in a few procedural provi- sions; in the various Acts,.and some of them----e.g., the provisions as to summary trials----may even become totally obsolete, framed as they are with reference to trials before Magistrates. It has not been considered necessary to discuss all these changes in this Report; but those will have to be carried out. ' 9.10. One special aspect in which we should like to go beyond the scheme of the West Bengal Act3 in order to secure effective trial of the offences in question, may now be mentioned.

9.11. Under the existing procedure applicable to criminal trials, the prosecution is expected to disclose its case in detail from the very outset,----as is evident from the elaborate legislative provisions governing the form and content of the charge as con- tained in the Code of Criminal Procedure, and from the right conferred by that Code on the accused to a copy of all statements and documents which led to the initiation of the proceedings. But the accused is entitled to keep totally silent until he enters on his defence. The statutory provision requiring the court to question the accused for the purpose of explaining the evidence against him' does not operate until the examination of the pro- secution witnesses is over. Whether this position in general should be disturbed in ordinary criminal trials is not a matter with which we are now concerned; but it is, in our opinion, neces- sary to treat social and economic offences on a dilferent footing. Considerable amount of time, money and energy are usually spent in the investigation and prosecution of these offences, and itis but proper that the prosecution should know the essentials of the case of the accused so that, if necessary, the prosecution can prepare itself to meet the pleas raised by the accused. Fair trial pre-supposes that both parties should be aware of the case which they have to meet. We are not unaware of the balance of ad- vantage which the State has against the accusedin a criminal prosecution. Nor do we under-rate the importance of the _ 1. For a convenient collection, see Summary at the end of this Report, Part reha- tmg to Amendments common to more than one Act.

2. Para. 9.9, supra.

3. Para. 9.9, supra.

4. Section 342, Cr.P.C.

W5 constitutionally guaranteed privilege ' _ gdete./rmination. But we think that a provision ca1hng'a1$'oggft§ese:ccused to _Inake a. statement of his case after the charge is framed and copies of the statements and documents snptiiid arm, would not repugnant to either of these two oqnsikrations. will be neither compulsion not pressure towards self-incrimmatron. There will merely be an opportunity to t _ acﬁused to make a disclosure of his defence, at a stage earlier _ rig: contemplated by section 342, Code of Crinunttl 'Pr 'W,' e.

9.12. It is of interest to note in this colihection that in En- gland, the accused is now required to raise a plea of' alibi at the very outset'.

9.13. The position in Scotland' is olﬂiifeater interest.

The defence is obliged to give noticmﬁt lés than two days before the second diet (that is, the -trial t) of any special de- fence (alibi, self-defence, insanity, asleep when crime committed, or crime committed by another périorf riimed and designed). If the accused intends to attack the chartibter Elf a person 'whom he iseharged with injuring, say to'aca1se'{5f'ini{norality a woman whom he is alleged to have raped, or to accuse a person whom he is said to have assaulted of quagne , , V ' osition, he must likewise give notice of this lineeof defence, her, three days before the trial the defence must provide particulars of witnesses and productions (other than those on tlmtrown list) on which the ﬁfence intends to rely. ' 1 "V -

[The accused in Scotland-" is cited to appear at two diets, the first not less than six days after service .ol"=the indictment, the second not less than nine days after the (inn: diet. The Tﬁrst diet, 'in any event, in solemn procedure is: al-wxysin the sheriff court when the sheriﬁ' receives the plea of the nel (or accused). A plea in bar of trial should bestated at' is htage. The sheriff notes the plea, recording any pnelinﬁaarypleu, and also whether the accused pleads "guilty" or "not ' ty". If he pleads "guilty" 'there may be resort to special pro ' ' ur ,tq.e dite passing sen- tence. The second diet, according 9 tge' ' of the alleged crime, takes place either in the she ' co it r before the High Court; and if in the latter, the Hi li _ njay review the pro- ceedings of the first diet before the shl'.:t'lﬁ'.' 9.20. Although what we are recommer'idin' goes further than the English' and the Scottish5 provisions, we bflievethat is justified on principle, having regard to theznature of the offences under inquiry and the magnitude of the dang: posed to the national economy by them. *

1. Section 11, Criminal Justice Act. 1961 English). '

2. T.B. Smith, Scotland, The Develoiament of Laws andConstitution (1962), p. 224.

3. TB. Smith Scotland, The Developrmngof itslaws and Cnostitution 1962 page 225-

4. Para. 9.18, supra.

5. Para. 9.19, supra.

Ml M of Law/72--6 Review of judgment.

'-"We, _t ereforc, recommend. tlii5"'i1'1§é'ti(>Jf'I/i(7'f"" 3 pI'0ViSl011 Oil the-follo ing l.ines:-- T' ' "' I' ' C ~ cl') In every trial fotrvitn under this Act, the court i shall, after the charge 'is framed,---

(a) direct the prpsecut,'(_n"(_é> furnish to the accused C (or, where there are more. cc (1 I 'an 0116, 10 @3011 Of them separately), a cppyfgi the charge and of the docu- ments upon which the prosecution proposes_to rely and of which copies have notlpeen already furnished to the accused, and .

i U

(b) for the purpose of ascertaining the case of the accused, call upon the accused to make a statement orally or in writing signedliy him, touching upon all the facts set out in the charge and in the documents of which copies have been furnished to the accused:

Provided that where the has dispensed with the _ personal attendance of the,' aocusednthe court may permit him to present a written statenlengsigned by him through his pleaders. T ~ (2) No oath shall be'admi1*tistered to the accused when he is examined under sub-g':r_.et:ti'(§1'iri' (I).

(3) The accused shall not render himself liable to punishment by refusing to make such statement or by making a false statement. ' (4) The statement made by the accused or the failure to make a statment on a.ll~or,any of the matters referred to sub-section (1) may be taken into consideration in such trial and put in evidence for or against him in any other inquiry into, or trial for any other offence which such statement may tend to show he has committed.

(5) Where the court has called upon the accused to make a statement under this section, the provisions of section 342 of Code of Criminal jProe_e'dpre, 1898, shall not apply, except as regards matters which; in the opinion of the court, had not been raised and communicated to the accused previously and in respect of which the accused should be allowed an opportunity to explain the circumstances appear-

ing against him. .

(6) Where the accused has stated his case under this section, he shall not ordinarily be allowed to go beyond that case except with the leave of the court.

9.21. There is one important question now to be dealt with, . namely, review. Because of the restriction contained in the Criminal Procedure Codel, a criminal court cannot in general

1. Section 369, Code of Criminal Procedure.

review its judgment, except to correct a clerical error. Con_tr_o- versies as to small details about the interpretation of the provision containing the above restriction are not relevant for the present purpose.

The law in England as to the review of criminal convictions is not different in substance. Broadly, the position is that--

(a) A Court has always the power to alter a sentence so long as the Court is in session'.

That is to say, at assizes, the Judge who has passed a sentence may, at any subsequent date till the assizcs are completed by signing of a document delivered to the gaoler as recording the sentence of the Court, alter the sentence either by reduc- ing or even increasing it. Similar power can be exercised at Quarter Sessions.

(b) Once the judgment has been entered on the record, no Court can alter itz.

9.22. We are of the view that this position requires to be changed in relation to the offence under the major Acts with which this Report is concerned. Whether -the provision in the Criminal Procedure Code barring review requires modiﬁcation in respect of other offences also, need not be discussed in the present Report.

9.23. It may be of interest to note that the Supreme Court has, under article 137 of the constitution andsubject to the pro- visions of any law passed by the Parliament or rules made under .article 1453, power to review "'any judgement pronounced or order made by it"4. In pursuance of this article, the Supreme Court had made the following rule5 :-

"l. The Court may review its judgement or order, but no application for review will be entertained in a civil proceeding except on the ground mentioned in Order XLVII, rule 1 of the Code, and in a criminal proceeding except on the ground of an error apparent on the face of the record."

It is to be noted that the application is competent only to correct an error apparent on the face of the record. This would take in only one of the various grounds of review men- tioned in Order 47, rule 1 of the Code of "Civil Procedure, which deals generally with review by civil courts.

1. Archbold (1966), para. 633.

2. R. v. Casey, (1923) 23 'Cr. App. Rep. 193.

3. See Article 145(l)(e) of the Constitution as to rules.

4. See A.I.R. 1957 S.C. 742.

5. Order 40, Rule 1, Supreme Court Rules, 1966.

5 of 1908.

Applica-

tion for review of judgment.

9.24 Order 47, Rule 1, Ciévil Procedure Code, 1908, is as follows :--

"I. (1) Any person considering himself aggrieved----

(a) by a decree or order from which an appeal is allowed, but from which 110- apmal has been preferned,

(b) by a decree or order from which no appeal is allowed, or

(c) by a decision on. arefetence from a Court of Small Causes, and who, from the discovery of new and important matters or" evidence which, after the of due diligence, was _ not within his knowledge or could not be produced by him at the time when the decree was baked or order made, or on account of some mistake or errotapparent on the face of the record, or for any other sufiieiertt reason, desires to ob-

tain a review of the decree passed or order made against him, may apply for a review of judgment to the Court which passed the decree or made the" order.

(2) A party who is not appealing from a decree or order may apply for a review of judﬂnent notwithstanding the pendency of an appeal. hy,somc other party except where the ground of such appeal is connnon to the applicant and the appellant, or when, being EM respondent, he can present to the Appellate Court the case on which he applies for the review." ' 9.25. It would also be of interest. to note that in the U.S.A. a judgment of conviction rendered at the end of a criminal trial does not necessarily dispose of the case. In addition to» permitting recourse to direct revrew ofconvictions for most offen-« ces, all American jurisdictions permit the defendant to attack his. conviction by what have come to be known as "post-conviction"

remedies in some circumstances. Such attack may be by habeas corpus, coram nobis, or some special procedure created by statute. In some cases, motions. for new trial on the discovery of evidence or for correction of sentence, or to vacate judgment, are available after the time limit for appeal has expired.

9.26. While the general position as to the scope of review in criminal cases is outside the a bit of this Report, we are of the- view that in respect of the ogences with which this Report is concerned, there should be a power of review, having regard to the impact of these offences on-» the welfare of the nation.

9.27. We recommend that a provision similar to Order 47, Rule 1, Code of Civil Procedure should be introduced to permit review in respect of judgements in prosecutions under the Acts with which this Report is concerned. In making this recommen- dation, we do not wish to make a distinction between review at the instance of the prosecution and review at the instance of the accused.

The following section is sugpsted :----- "(l) Any person considering hirmelf aggrieved----

(a) by the judgement or order of a criminal court in a prosecution under this Act from which an appeal is allowed, but from which no appeal has been pre-

ferred, or

(b) by a judgment in such prosecution from which no appeal is allowed, and who, from the discovery of new and important matters or evidence which, after the exercise of du_e diligence, was. not within his knowledge or could not be produced by him at the time when the judgment was passed or order made, or on account of some mistake or error appuent on the face of the re- cord, or for any other sulichnt reason, desires to ' obtain a review ot the judgment passed or order made against him, may apply for a review of judgement to the Court which passed the judgment or made the order.

(2) A party who is not ap 'ng from a judgment or order may apply for a review of juxtlﬂent notwithstanding /the pendency of an appeal by, some 0 party, except where the ground of such appeal is common to the applicant and the appellant, or when, being the respondent, he can present to the Appellate Court the case on which he applies for the review.

(3) The Court to which an application is made for review of judgment shall, afier giving the parties a reason- able opportunity of being healrd, pass éich orders as it thinks ﬁt, and may, pending such hearing, stay execution of the judgment or order on such term as it tliinks just."

[The subsequent procedure will, of course, be regulated by provisions which will have to be dralied.] 9.28. While we are dealing with the question of procedural matters, we wish to refer to one point of limitation 'governing appeals against acquittals. Under the a Criminal Procedure Code, an appeal against acquittal can be ﬁled~----

(1) by the Public Prosecutor at the instance of the State Government 1 ;

(2) by the Public Prosecutor at the instance of the Central Government, if the olfence has been investigated by the Delhi Special Police Establishmentl;

(3) by the complainant with special leave of the High Court3.

1. Section 417(1), Criminal Procedure Code.

2. Section 417(2), Criminal Procedure Code.

3. Section 41 7(3), Criminal Procedure Code.

Period of limitation for appeals against acquittals.

[The provisions on the subject, contained in section 41?, Criminal Procedure Code, have been incorporated in the Cri- minal Procedure Code Bill,1 without any modiﬁcations material for the present purpose.] 9.29. While appeal in the ﬁrst two cases,is as of right,_appeal in the third case is only by special leave. An application for the grant of such special leave cannot be entertained by the High Court after the expiry of sixty days from the date of the order of acquittal.' 9.30. Now, this period of limitation (sixty days), while ade« quate for private complaints, is, in practice, likely to be inade- quate for complaints made by public servants in their oiﬁcial capacity. Before a decision to make an application for leave can be taken, a number of formalities has to be undergone, such as, obtaining the administrative sanction of a higher authority, consultation with other officers, re-examination of the papers, and the like. While it is not our intention that any delay in these steps should be encouraged, we must recognise that realities of official routine justify some relaxation of the ordinary periods The problem does not arise where the State Government directs an appeal--as in case (I) above3----or where the case was investi- gated by the Delhi Special Police Establishment and the Central Government directs an appeal----'as in case (2) above.' But there are cases arising out of complaints ﬁled by public officer, not investigated by the Delhi Special Police Establishment, being cases in which the State Government is not interested, where the appeal against acquittal can be ﬁled, if at all, under case (3) above. It is in these cases that the present position causes practical diﬂiculty. We think that it would be better if the ordi- nary period (sixty days) is doubled for such cases. Though we are concerned with offences under speciﬁed Central enactments, we think that the amendment in this respect could usefully be made to cover all cases in which the complaint has been made "by a public servant acting or purporting to act in the discharge of his official duties5."

9.31. Accordingly, we recommend that clause 388(4) of the Criminal Procedure Code Bill should be revised, so as to read as follows':-

"(4) No application under sub-section (3) for the grant of special leave to appeal from an order of acquittal shall be , entertained by the High Court after the expiry of sixty days from the date of that order of acquittal, or, if the order of O\,U-Awnr-A . Para.

. Clause 388, Criminal Procedure Code Bill 1970. . Section 417(4), Criminal Procedure Code. . Para.

9.28, supra.

Cf. the words of section 200, proviso (a), Criminal Procedure Code. . To be carried out in the Criminal Procedure Code.

acquittal is passed in any case instituted upon a complaint made by a. public servant acting or purporting to act in the discharge of his oﬂicial duties, then after the expiry of one hundred and twenty days from the date of that order of acquittal." K 9.32. It is needless to add that the period of limitation for the appeal remains unaffected by the above recommendation. The relevant provision' is as follows: ----

Description of appeal Period Time from of which period limitation begins to run

114. Appeal from an order of acquittal

(a) under sub-section (1) or Ninety days The date of sub-section (2) of sec- the order ap- tion 417 of the Code of -- pealed from. Criminal Procedure, 1898; '

(b) under sub-section (3) of Thirty The date of the section 417 of that Code. days. grant of Spe-

cial leave.

Under the Limitation Actl, the Court has power to con- done the delay. The provision says-

"5. Any appeal or any application, other than an appli- Extension cation under any of the provisions of Order XXI of the Code °f.P'°5' of Civil Procedure, 1908, may be admitted after the prescribed in period if the appellant or the applicant satisﬁes the court certain that he had sufficient cause for not preferring the appeal or cases.

making the application with such period.

ExpIanation--The fact that the appellant or the appli- cant was misled by any order, practice or judgment of the High court in ascertaining or computing the prescribed period may be sufficient cause within the meaning of this section." --

9.33. The class of offences we are dealing with in this Report are grave in themselves, and the Offenders involved are ordina- rily inﬂuential persons who could, if enlarged on bail, interfere with the investigation or could escape from the law. Therefore, suggestions have been made for making these offences non- bailable, which does not mean refusal of bail in all cases, but grant of bail only at the discretion of the court.

1. Limitation Act, 1963, Article 114.

1. Section 5, Limitation Act, 1963.

Provision as to bail in major Acts.

.9.34. Having due regard'to the likelihood of the grant of bail defeating or delaying investi" ion or enabling the accused to obliterate evidence or escape mm the country, the proposal to make these offences non-Bailable appeared to us to be_reason- able. As we are recommending, in this Report, an increase in the maximum punishment for the serious offences, they will become non-bailable, and that will be a welcome change. We are also recommending an amendlnent in the Essential Commodi- ties Act1 to remove the present provision to the effect that the offences under that Act shall be bailable.

9.35. We would also like to point out that the offenders involved in socio-economic crime have a mobility which -beats the law unless the machinery of investigation and the courts are vigilant. It is, therefore, desirable that the courts, when granting bail to this class of offenders, should consider the im- position of a condition that the accused shall not leave the country and that his passport shall be impounded.' We are separately recommending an amendment the effect of which will be that a power will be vested in the passport authorities at the request of higher officers to withhold the issuance of or impound the existing passport of the accused.3 Provisions, somewhat on these lines now exist in sections 6, 10 and 12 of_ the Passports Act, but those sections are restricted in their scope, and would not cover the precise situations to which we have adverted.

9.36. For ready reference, we give below the provisions as to bail as found in the major Acts:--

(1) Central Excises Act, 1944.---Section 20 deals with the procedure to be followed by the oﬂicer-in--charge of police station. The oﬂioer-in-charge of a police station to whom any person is forwarded under section 19 shall either admit him to bail to appear before the magistrate having jurisdic-

tion, or in default of bail forward him in custody to such magistrate.

(2) Foreign Exchange Regulation Act, 1947.---Under section l9B(3), where any oﬂioer of Enforcement has arres- ted any person undcr sub-section (1), he shall, for the purpose of releasing such person on bail or otherwise, have the same powers, and be subject to the same provisions as the officer- in-charge of a police station has, and is subject to, under the Criminal Procedure Code.

. (3) Essential Ccmmadities Act, l955.----Section 10A pro- vides that notwithstanding anything contained in the Code

1. See para 15.52, infra.

2. A power, to impose conditions while granting bail has been recommended in the Law Commission s Report on sections 497-498, Cr.P.C. and also in its 41st Report on the Cr.P.C.

3. Sec para 15.35, infra.

of Criminal Procedure, 1898. every offence punishable under this Act shall be cognizable and bailable. 1 (4), (5) and (6)----The Income-tax Act, the Wealth Tax Act, 1957 and the Prevention of Food Adulteration Act, l954.--These do not contain any speciﬁc provisions regarding bail.

(.7) Customs Act, 1962.---Under section 104(3), where any officer of customs has arrested any person under sub- section (1), he shall, for the purpose of releasing such per- son on bail or otherwise, have the same powers and the subject to the same provisions as the oﬁicer-in-charge of a police station has and is subject to under the Code of Criminal Procedure, 1898.

(8) Gold Control Act, l968.--Under section 68(2) of the Act, any oﬂicer who has arrested any person under this section shall, for the purpose of releasing such person on bail or otherwise, have the same powers and be subject to the sameprovisions as the oﬂioer-in-charge of a police station has, and is subject to, under the Code of Criminal Procedure, 1898.

9.36A. We consider it necessary that in trials for these offences, both the prosecution and the accused should be heard as to the sentence to be passed. The Criminal Procedure Code Bill? provides for hearing the accused; but the provision in the present case should be as above.

9.37. The question of having a period of limitation for pro- secutions for the oﬂences in question has been raised by some (commercial bodies. The reasons in favour of and against prescribing limitation for criminal prosecutions, are well known. The Law Commission had also occasion-3 to consider the ques- tion of limitation with reference to offences under the Penal Code.

9.38. As one author has pointed out', "at one time or an- other, approximately 91 per cent of the adult population have committed crimes punishable with imprisonment. If they have escaped being convicted, it is due partly to their good luck and partly to other circumstances". If', after a speciﬁed period, they are immune from prosecution. they would have peace in mind.

Parties to be heard as {O sentence.

Limitation for_ prose-

cutions.

infra.

2. Cr.P.C. Bill, 1970, clauses 241(2) and 256(2).

3. Sec 42nd Report (Indian Penal Code), page 341 et seq., Chapter 24.

4. James Brands "Criminal Law in the Seventies--Some Suggestions"

New York State Bar Journal.

1. As to amendment of section 10A, Essential Commodities Act, see Chapter 15, (June 1970), Tender of pardon and probation.

The main reasons for the existence of law of prescription for civil actions will apply with equal force for criminal proceed- ings also.

The Law of limitation is essentially a law of peace and re- pose. The person who has committed a crime and is not pro-- secuted for the crime for several years, must have mental peace and repose and should not be under continuous apprehension that at any time he may be criminally prosecuted. After some time, evidence in support of defence may also be lost.

9.39. At present, none of the major Acts with which this Report is concerned, contains a provision for limitation for prosecutions. Provisions as in section 40(2) of the Central Excise Act apply to suits challenging action under the Act, and not to prosecutions. The matters, however, is of some difﬁculty, and could be considered better after a decision is taken about amendment of the Penal Code1 in this respect, and after the working of the amended provisions is observed.

9.40. Besides the above points, a few other questions of a procedural nature arise, which are discussed separately!

1. See 42nd Report Indian Penal Code, page 341, et seq., Chapter 24.

2. (a) Probation, Chapter 10.

(b) Pardon. Chapter 13.

(c) Sanction or complaint, Chapter: 11.

CHAPTER 10 PROBATION 10.1. In this chapter we deal with some speciﬁc points affecting punishment and liability.

10.2. There is a suggestion' that amendments should be introduced either in each of the Acts--the Income-tax Act, Wealth Tax Act, Gold Control Act, Customs Act, Excise Act- or in the Probation of Offenders Act itself, to bar the application of the Probation Act to the olfenders under the above Acts. A concession (it is stated) may be made only in regard to offen- ders under 18 years of age, who may be allowed to be released on probation on bond for three years, subject to the other conditions in sections 4 and 6 of the Probation of Offenders Act. Somewhat similar suggestion has been made regarding the Foreign Exchange Act?

10.3. After careful consideration we are satisﬁed that the suggestion should be accepted and in our view the suggested amendment is desirable in respect of otfences under all the Acts with which this Report is concerned.

We appreciate that the suggested amendment would be in apparent conﬁict with current trends in sentencing. But ulti- mately, the justiﬁcation of all sentencing is the protection of society. There are occasions when an oﬁender is so anti-social that his immediate and sometimes prolonged conﬁnement is the best assurance of society's protection. The consideration of rehabilitation has to give way, because of the paramount need for the protection of society. We are, therefore, recom- mending suitable amendment in all the Acts, to exclude probation in the above cases.

"Whoever abets the commission of an offence punishable with imprisonment by a child under ﬁfteen years of age, whe- ther or not the offence is committed in consequence of the abetment, shall be punished with imprisonment of any descrip- tion provided for that offence for a term which may extend to twice the longest term of imprisonment provided for that olfence and shall also be liable to ﬁne."

We agree with the above recommendation, which is of particular value in the context of economic offences.

Introduc» tory.

1. Suggestion of a Ministry of the Government of India.

2. Letter dated 28-12-1971.

85 86

10.4. Accordingly, we recommend the insertion of the follow- ing section in all the Acts :--

Amendment regarding Probation Act.

Section to be inserted 'in all the Acts.

Section 6 of the Probation of Offenders Act, 1958, shall, in relation to offences under this Act, be read as if for the words "twenty-one years of age", the words "eighteen years of age"

were substituted.

10.5. In the Law Commission's Report on the Indian Penal Code', there is a recommendation for the insertion of a new section in the Code for dealing with abetment of offences by children. The relevant section (as recommended) is as fol- lows:--

1. 42nd Report (Indiah Penal Code), page 123, paragraphs 5.23 and 5.24.

CHAPTER 11 REQUIREMENT AS TO SANCTION OR COMPLAINT

11.1. A study of the provisional restricting the power of the Court to take cognisanoe (or restricting the institution of a prosecution) in the major Acts with which this Report is concerned, shows that these provisions fall into the following broad classes :--

(a) Provisions requiring the sanction of a, speciﬁed authority'.

(b) Provisions requiring the complaint of (or a com-

plaint ﬁled with the consent of) the speciﬁed author1ty3.

(d) Provisions requiring that the Court shall not take cognizance or that a prosecution shall not be instituted except with the consent of specified authority (or substanti- ally to the same etTect)5.

[Within each category, the provisions diﬁ'er in matters of detail; but we are, for the present, concerned with the broad categories].

11.2. Now, the question whether a particular provision falls in one or other of the above categories possesses some practical importance. In cases under category (a), the procedure for trial, once a valid sanction has been obtained, will depend on the manner in which cognizance is taken by the court,--i.e., whether the cognizance was taken on a Police Report or other- wise. The fact that a sanction is required before a prosecu- tion can be instituted is of no consequence in this regard. On Require-

ment as to sanction, complaint or other provisions-

Signiﬁ-

cance of difference as to various require-

ment for taking cognizance-

1. Sec Chart----Para. 11.5, infra.

2. (a) Section 12, Central Excise Act, read with the Customs Act. ([7) Section 23(3), Foreign Exchange Regulation Act.

(d) Section 137, Customs Act.

3. (a) Section 23(3)(a)(b), Foreign, Exchange Regulation Act.

(b) Section 97(1), Gold Control Act. '

4. Section 11, Essential Commodities Act.

5. (a) Section 20, Prevention of Food Adulteration Act.

(b) Section 36(3), Wealth Tax Act.

Position where report of oﬂicer zrequired.

Position 'where prosecu-

tion required to be "at the instance"

of a speciﬁed authority.

'Chart showing previous require-

ment as to sanction or complaint.

the other hand, in cases in category (b), since a complaint is required, the court obviously cannot take cognizance on a police report, and the procedure at the trial will necessarily be the more cumbersome one prescribed for cases instituted otherwise than on a police report.

11.3. What is stated above regarding cases in category (a) applies to category (c) also. except that, where the oﬂicer who made the required 'report' is himself a police oﬂicer, the position could be dilferent. When the report is of a police officer made after investigation, and the court takes cognizance thereon, then the procedure as for cases instituted on police report can be followed'.

11.4. In cases under category (d), the requirement is that the prosecution should be "at the instance of the speciﬁed autho- rity". This is usually complied with by ﬁlling a complaint made with the approval of the speciﬁed authorityz. Whether the wording rules out a report ﬁled with sanction has not been de- cided.

As to the procedure that will govern the trial in cases under

(d), the matter will depend on the manner of taking cognizance.

But it should be noted that the manner of taking cognizance is subject to one important limitation----(l) In the case of a non- cognizable offence, the police cannot (without Magisterial or- ders) investigate, and cannot therefore give a report to the co- urt. Hence cognizance by the court would have to be on a complaint. (2) In the case of a cognizable offence, cognizance can be on a complaint as well as on a police report3.

11.5. The following chart may be of use in this connect-

ion 2--

Provision as to sanction or complaint and allied provisions in the major , Acts.

Act Sanction or plaint required.

Section com-

1. Central Excises See second column. and Salt Act, 1944.

No speciﬁc pro-

vision; but sect-

ion 12 empowers the Central Go-

vernment to apply the Cus-

toms Act.

1. (a) State V. Rugha, A.I.R. 1970 Punj. 502, 565;

(b) Satyadeo v. State, A.I.R. 1970 Pat. 161;

2. See Balia V. Rangachari, A.I.R. 1969 S.C. 700, 70].

3. A Magistrate can take cognizance of an offence of his own, if vested with that power.

But this is a rare case, and can be left out for the present purpose.

Act Section Sanction or com-

plaint required.

2. Foreign Ex- 23(3) change Regu-

lation Act, 1947.

3. Prevention of 20 Fobd Adulter-

ation Act, 1954.

4. Essential Com- 11 modities Act, 1955.

5. Wealth Act, 1957.

Tax 36 (3)

(i) Complaint in writ-

ing of Director of Enforcement is required for of-

fences under section 23 (1).

(ii) Complaint in writ-

ing of Director or authorised person required for offence under section 23 (IA) or section 23 F.

(iii) Previous sanction required for olfence under section 19-I(2).

Consent of Central or State Government or a local authority or a person. autho-

rised in this behalf by general or special order, required.

[No prosecution shall be instituted except by or with written consent of the . . . .] Report in writing of a public servant required, before a Court can take cognizance.

Commissioner, Wea-

lth Tax for an offence under sec-

tion 36 (1), 36(2) or 36(2A). [A person shall not he proceeded against for an offence except at the instance of the Commissioner].

Act

6. Income-tax Act, 1961 .

6. Income-tax Act, 1961 (con!d.).

7. Customs 1962.

Act,

8. Gold Control Act, 1968.

Section 279(1) 280 (2) 137 97(1) Sanction or com-

plaint required.

Commissioner of Income-tax for offences under sections 275A, 276 A, 276B, 277 or

278. [A person shall not be pro-

ceeded against for an offence (under the speci-

ﬁed sections) ex-

cept at the instance of the Commis-

sioner].

Previous sanction of Central Go-

vernment required for an offence un- der section 280 (1)- a

(a) Previous sanction of Collector of Customs required for offences under sections 132 to

135.

(b) Previous sanction of ' customs Collector of or Central Govern-

ment required for offence under sec-

tion 136.

(i) Complaint in writing of compe-

tent Gold Control Officer required generally.-

(ii) Complaint in writing made with previous sanction of Central Govern-

ment required, if the offence was committed by a Gold Control Officer.

9l ll.6. Provisions relating to.sanctio_n sometimes create problems of procedure. This will be discussed under the re- levant Act' wherever the pomt IS of Importance.

ll.7. It may not be out of place to refer to the English pra- ctice. The follwoing is from a note published sometime ago in the Law Times2:--

"The Attorney-General (Sir Hartley Shawcross), went on to state in deciding whether or not to prosecute. the ultimate question was : Would a prosecution be in the public interest irrrlz/ding in that phrase. of course. in 1/18 interests' 0_/ju.rIi('e." Usually it was merely a question of examining the evidence. since it was not in the public interest to put a man on trial whatever the suspicions when the evidence was insuﬁicient to justify his conviction. or even to call upon him for an explanation. In some cases wider considerations were inxolved. For example it was not always in the pub- lic interest to go through the whole process of the criminal law if only a nominal penalty was likely to be imposed. Sometimes the considerations were wider still. A prosecution might involve a question of public policy. or national, or sometimes international, concern. In such cases the At- torney--Gcneral had not to make up his mind as a party poli- tician; he must in a quasi-judicial way consider the effect of prosecution upon the administration of law and of go- vernment in the abstract rather than in any party sense. In considering these matters he had the advice ofthe Director of Public Prosecutions and very often of Treasury counsel as well. _He had to acquaint himself with all the relevant facts includ- ing the effect which a prosecution, if successful. would have upon public' morale and order. and with any other con- siderations affecting public policy. The one consideration which was altogether excluded was the repercussion of a gixen decision upon the Attroney-Generals or his party's or the Go\'ernment's political fortunes. That was a con- sideration which never entered into account. Moreover. if the Attorney-General, the Director of Public Prosecutions. and the police all neglected their duties and did not pros- secute where manifestly a prosecution should take place. there was a safeguard in that any private citizen could set the criminal law in motion."

ll.8. The question which person should have the oﬂicial responsibility for invoking the criminal process. and what de- gree of discretion should be given to him, and whether he should have the exclusive right to initiate a prosecution, is answered in different ways in different countries. In India. the general rule is that any person can make a complaint to the competent l. E..c. as to Customs Act, paragraphs 15.84 to

2. Note in(l95l). 21! Law Times 71-72. I M of L8\\'/72/7 Problems of proce-

dure created by provi-

sions as to sanction.

English practice as to sanction of prosecu-

tions.

Dispensing with sanction for prose-

cution.

ml 2 3 4 . Section 4(l)(h) and section 190, Criminal Procedure Code. . Chapter 15, sections 195 to 199B, Criminal Procedure Code. . Paragraphs 11.1 to ll.7, supra, . Section 537, Criminal Procedure Code.

court' in respect of an offence. This general rule is subject to exceptions in speciﬁed cases. For offences under the gen- eral criminal law. (i.e., the Indian Penal Code). the exceptions are mostly to be found in the Criminal Procedure Code'. For offences under special laws. the exceptions are to be found in the special laws3.

ll.9. in England, private prosecutions are, as a rule, per- missible. though recent trend is in the direction of an emphasis on public prosecutions. On the continent, public prosecution is the rule. and is indeed, in most cases, the only permissible mode.

Il.l0. In theory, thus the Indian system, so far as the gen- eral type of offences is concerned, is similar to the English pattern. In so far as the specially excluded offences are con- cerned, it is nearer to the Continental pattern.

ll.1 I. We are not. at the moment, concerned with the posi~ tion in general in this respect, either for offences under the Penal Code or for offences under the mass of special laws. Even as regards offences under the economic laws (with which this Report is concerned), the provisions requiring sanction of a speciﬁed authority are not intended to be disturbed. But the question which has caused us some anxiety is, should the re- quirement of sanction (whenever it exists) be an imperative, indispensable one, non-compliance with which should invalidate the trial?

ll.l2. The present position is that the absence of the re- quired sanction (or the complaint of the speciﬁed person or Fail- ure to comply with a similar requirement), vitiates the trial whether or not a failure of justice has been occasioned thereby. We think that such defect should be treated on the same lexel as any other irregularily in the trial. Under the general pro- vision in the Criminal Procedure Code', the ﬁnding, order or sentence of a court of competent jurisdiction is not to be invalid merely on the ground of an error, omission or irregularity in the complaint. summons. charge etc. This provision should. in our view, he made applicable to the absence of a sanction for prosecution etc. We are aware that the present view is that the general provision referred to above does not apply to the absence of a sanction for prosecution etc. required by law. be- cause the absence of a sanction takes away the very competence 93 of the Court'. We would, however, like the position in this respect to be changed.

ll.l3. We, therefore. recommend that the following section should be inserted in all the acts with which this Report is concer- ned :--

.7xt>w Section to be inserted in all the Avis.

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1898, no ﬁnding, sentence or order passed by a Court shall be reversed or altered by a Court of appeal, conﬁrmation or revision on account of the absence of, or any error, ommission or irregularity in, the sanction or consent', required for the prosecution for the offence which is the subject matter of the inquiry, trial or other proceedings under that Code for an offence under this Act, unless, in the opinion of that Court, a failure ofjustice has in fact been occasioned thereby.

(2) In determining whether the absence of, or any error, omission or irregularity in, such sanction has occasioned a failure ofjustice the Court shall have regard to the fact whether the objection could and should have been raised at an earlier stage in the proceedings.

Explaizat1'o1i :u~Reference in this section to a sanction or consent required for prosecution includes reference to any requirement that the prosecution shall be at the in- stance of a speciﬁed authority, or that the complaint shall be by a speciﬁed person or with the sanction of a speciﬁed person or any requirement of a similar nature3.

ll.l4. We are also of the view that once a Court has taken P0\\Cr cognizance, it should have power to direct investigation against E0 diiect a person who is not the original accused or to implicate him. I'."e5"ga' The absence of the requisite sanction as regards that accused should not matter. We propose a provision which, of course, another will be conﬁned to the offences with which this Report is con- l"~'V'<'"-

cerned. The subsequent procedure will be governed by section Wl.'(a) A.I.R. 1955 s.c. 237, 292; 1955 S.C.R. 1177]»

(b) A.I.R. 1964 s.c. 221.

to A.I.R. 1962 Bom. 263.

_ . The words "Sanction ' etc. may be suitably changed if the statutory requirement IS differently worded.

_ 3. The Explanation will not be needed in all Acts, but will be needed in Acts in uhich requirements of different types co--exist. See for example, the Income--tax Act.

35], Criminal Procedure Code. Accordingly, the following section be inserted in the Acts concerned :--

Set-I/"rm to be inserted in all the Acts.

Power to direrr investigation or implicate another person.

(1) Where_. in the course of an inquiry into or trial of an offence under this Act, it appears from the evidence that any person not being the accused has committed any oil"-

ence for which such person could be tried together with the accused. the Court may~-

(a) proceed against such person for the olfencc which he appears to have committed. notwithstanding the absence of any sanction or consent for prosecution' or Complaint required in respect of that person: and the provisions of section 351 of the Code of Criminal Procedure. 1898. shall thereupon applyz; or

(b) direct an investigation into the guilt of such other person by the competent ofﬁcer. and thereupon the officer directed by the Court shall proceed to investi- gate into the matter. and shall, for the purpose. have the same powers and follow the same procedure as he had or followed for the investigation into the guilt oi' the accused.

Expla/miion :--Reference in this section to a sanction or consent for prosecution or complaint required includes reference to any requirement that the prosecution shall be at the instance of a speciﬁed authority. or that the comp- laint shall be by a speciﬁed person or with the sanction 01' a speciﬁed person or any requirement of a similar nature'.

ll.l5. With reference to the requirement of the sanction of the Collector of Customs under section I37. Customs Act. a Minister of the Union Government has. during our oral discussions with him. stated that the present rigid provision causes diﬁiculty in cases where the investigation is completed by an oﬂicer of a department diﬂ°erent from the department whose officers are authorised to sanction the prosecution. lt was suggested that this diﬂiculty should be removed by a suitable amendment. Having regard to the high quarter from which the suggestion came to us. we assume that the Government would. as a matter of policy. be in agreement with the suggestion. The object behind the suggestion could be achieved by inserting at the end of section l37(l) of the Customs

1. \\i'herethe requirement iniiternts of complaint etc.. the wording v\«'illiibein1(;litricd'

2. Section 351. Criminal Procedure Code corresponds to Criminal Procedure Code Bill, l970. Clause 326.

3. Th» Explanation will not be needed in all Acts. but will be needed in Acts in which requir cments of different types co-exist.

Act, the words "or of any other officer authorised by the Central Government in this behalf", and we recommend accordingly. After the amendment. the relevant provision will read as follows' :--« "l37(l). No court shall take cognizance of any offence under section l32, section 133, section 134 or section 135, except with the previous sanction of the Collector of Customs or of any other o_/fﬁcer authorised by the Central Go1*er/z- men! in this he/Ia/fl" ' fl. Section l37(l):ETtistoiiis lntr0tlu».'-

tor)'.

Use of presum:*-

tions under the Foreign Exchan-_;c Act for cases under the Customs Act. and View rt'/'~u.

Seizure from a person other than the accused.

Docu-

ments reccixed from a place out-

side lndia.

Insertion of pre-

sumption in Imports:

and Exports "" "wtt'ol') I9-17'.

CHAPTER 12 PkEsuMPrtoN AND EVIDENCE 12.1. We have dealt with a few matters pertaining to evidence in other Chapters'. Here. we propose to deal with the scope of certain presumptions and the changes needed therein.

12.2. Both section 24A. Foreign Exchange Act and section l39. Customs Act. enact a presumption as to the genuincness of documents seized from the custody or control of a person.

But the presumption in respect of a document seized under one Act cannot be availed of when the prosecution is under the other Act. Since. in practice. the need for such use often arises. we think that this gap should be removed. The presump- tion could be made available to seizure under any other law.

l2.3. Both in the Foreign Exchange Act and in the Customs Act, it is also disirable that the presumption should be appli- cable also where the documents are seized from a person other than the accused. We accordingly recommend, an amendment. to widen the scope of the relevant sections in both the Acts. in this regard.

l2.4. We are also ol' the view that these presuniptions should apply also to documents received. from a place outside lndia.

12.5. We are also of the View that in the Imports and Exports (Control) Act. l947. a provision similar to section I39. Customs Act. as proposed to be revised in this Report should be inserted.

1. See Cha_pte.r 7 _(Burden of disproving mans ran) and Chapter 14 (Statements in ad ministrative adiudications).

CHAPTER I3 TL!\'I)I.'R or PARDON 13.1. A matter of procedure relevant to the offences con-

cerned may be mentioned here. That is the question of tender of pardon.

-The following extracts from the Report ot' the previous Law Commission (on the Code of Criminal Procedure) would he of interest' in this connection:---

="»'\"

2 S.C.R.2~2~1.635.

I .2...

'7 "in a recent case3 which came up before the Supreme Court in appeal. a woman who acted as a carrier in a con- spiracy to smuggle gold into India had, in her statements made to the customs othcials investigating the case. ililtnlftcd her role as a participant in the crime. But instead of being included in the array of accused person and sent up for trial, she was examined as a witness against her former associates. The question arose whether she was 21 com-

petent witness. While holding that she was, the Supreme Court observed : « "It is. however. necessary to say that where section 337 or 338 of the Code applies, it is always proper to invoke those sections and follow the procedure there laid down. Where these sections do not apply. there the the procedure of withdrawal of the case ' mplice. ' encourage perjury. Perhaps it will be possible to enlarge section 337 to take in certain special laws dealing with customs, foreign exchange etc. where accomplice testimony will always be useful and wit- nesses will come forward because of the conditional pardon offered to them."

practicable to select from among the large number ot iaws creating socio-economic offences st.-lﬁciently grave to be brought within the

337. The result of such inclusion will be pertaining to such an oﬂence ' special those which are scope of section that every case where tender of pardon is . 4lst Report of the . "#17.

. Lu x'~!'I1.7r C/im'm'i'u V, 97 __..________._.__ __,,,,. , ,,_,W _ Law Commission (Criminal Procedure (1.-dc), Vol. 1, Tender of pardon.

page I94, 7'/re Stale 0_f.~Wt1/mras'fI!!'n, A.l.R. l96\' SC'. 933. 945: (I968) 98 made. will have to be tried by the Court of Session which may not be feasible."

13.2. We have examined this question carefully and have na- turally given due weight to the views expressed by our predecessor Commission. However we have, with respect, come to the conclusion that in respect _of the oﬁences with which we are concerned an amendment in this respect is called for. As a matter of interest, we may note that such a provision has so far been made only in the lncome-tax Act. and there too the pardon is granted by the Government.

The relevant section is quoted below':~ "Z91. (I) The Central Government if, it is of opinion (the reasons for such opinion being recorded in writing) that with a view to obtaining the evidence of any person appearing to have been directly or indirectly concerned in or privy to the concealment of income or to the evasion of payment of tax on income it is necessary or expedient so to do. tender to such person immunity from prosecu- tion for any offence under this Act or under the Indian Penal Code or under any other Central Act for the time being in force and also from the imposition of any penalty under this Act on condition of his making a full and true disclosure of the whole circumstances relating to the con- cealment of income or evasion of payment of tax on income.

(27) A tender of immunity made to, and accepted by. the person concerned, shall, to the extent to which the immunity extends. render him immune from prosecution for any offence in respect of which the tender was made or from the imposition of any penalty under this Act.

(3) If it appears to the Central Government that any person to whom immunity has been tendered under this section has not complied with the condition on which the tender was made or is wilfully concealing anything or is giving false evidence, the Central Government may record a ﬁnding to that effect, and thereupon the immunity shall be deemed to have been withdrawn, and any such person may be tried for the offence in respect of which the tender of immunity was made or for any other offence of which he appears to have been guilty in connection with the same matter and shall also become liable to the imposition of any penalty under this Act to which the would otherwise have been liable."

13.3. If our suggestion regarding trial by Special Judges is acceptedz. it will not be necessary to have an express provi- sion as the Criminal Law Amendment Act3 has an express provision in this regard.

Section 291. Income-tax A-ct. l96l.

2. See para. 9.ll, supra.

3. Section 8(2), Criminal Law Amendment Act, 1952.

CHAPTER 14 ADMINISTRATIVE ADJUDICATIONS l4.l. Many of the Acts dealing with economic offences empower the enforcement officers to summon and examine witnesses. The statements made by these witnesses before such oﬂicers are not, however, admissible in evidence in the subsequent criminal prosecutions. We e of the view that these statements, if recorded by 0 cers of suﬁiciently high status, to be determined by the Government should be admissible in such prosecutions, since they are very often the earliest officially recorded version of the facts.

14.2. Certain conditions and safeguards will. lio doubt, be necessary. Reference in this connection may be made to the Evidence Act, which has a provision relating to the admis- sibility of a statement made ina previous judicial proceeding.

The relevant provision in the Evidence Act, is as follows :--

"33. Evidence given byawitness in a judicial proceed- ing, or before any person authorised by law to take it. is relevant for the purpose of proving, in a subsequent judicial proceeding, or in a later stage of the same judicial pro- ceeding. the truth of the facts which it states, when the witnessis dead orcannot be found,or is incapable of giving evidence, or is kept out of the way by the adverse party, or if his presence cannot be obtained without an amount of delay orexpense which,under the circumstances of the case, the Court considers unreasonable :

Provided-

that the proceeding was between the same parties or their representatives in interest:

that the adverse party in the ﬁrst proceeding had the right and opportunity to cross-examine;

that the questions in issue were substantially the same in the ﬁrst as in the second proceeding.

ExpIanatz'on.--A criminal trial or inquiry shall be deemed to be a proceeding between the prosecutor and the accused within the meaning of this section."

Statements made in administra-

ti\c adjudi-

cations.

Relevancy of certain evidence for proving, in subse-

quent pro-

ceeding, the truth of facts there in stated.

ll.' Sectionr33, Evidence H V 99 Appeals in adminis-

tralivc adjudica-

tions.

984.

1. Stone. "Exclusion of Similar Fact Evidence, 46. Harvard Law Rcvietv at pa.

100

14.3. We think that the safeguards mentioned in the proviso to section 33 need not appear in the new provision which we contemplate. We are further of the view that the court should have a discretion to admit the statement in evidence, if the cir- cumstances of the case so require, even where the maker of the statement is a witness in the proceedings before the Court.

Though such a discretion is not very frequently met with in Indian statute law, in this case it is necessary for obvious reasons.

Twenty years ago. Stone stressed' the importance of excluding similar conduct evidence (even though it is relevant otherwise than via disposition). where its effect was too prejudicial. in these words--~"where the peg is so small and the linen so bulky and dirty that a jury will never see the peg, but merely yield to indignation at the dirt." Somewhat similar considerations make it desirable that the court should have this power, since the provision which we are recommending is itself new.

14.4. We. therefore. recommend that a provision on the fol- lowing lines may be inserted in the relevant Acts :--

"A statement made and signed by a person in a pro- ceeding under this Act before any olﬁcer authorised by lam to record it, being an oﬂicer of a rank notified by the Central Government in this behalf, shall be relevant. for the purpose of proving. in a prosecution for an offence under this Act. the truth of the facts which it states,--

(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or if his presence cannot be obtained Without an amount of delay or expense which, under the circumstances of the case. the Court considers unreasonable: or

(b) when the person who made the statement is examined as a witness in the case. and the Court is of opinion that having regard to the circumstances of the case. the statement should be admitted in evidence in the interests ofjustice."

14.5. The Acts relating to economic offences confer quasi- judicial powers on departmental agencies. Whether these agencies are individual oﬂicers, Boards or Tribunals is a matter ofdetail; but it is obvious that important points ofdispute between the State and the citizen are decided by them. it is not our intention to go into the structure, powers and procedure of these agencies: but there is onematter of relevance for the present l0l ose which we should mention. It relates to appeals in ect of these adjudications. There are certain points of Jrtance which have emerged during our own consideration he subject as a result of suggestions made at the discussion {rich we held. The first is that the hierarchy of appeals under some of the Acts islikely to cause delay in adjudication, thereby also causing delay in any criminal prosecution that may ultimately have to be initiated. Secondly, the status and composition of the ﬁnal appellate authority under some of the Acts is capable of improvement. And. thirdly. the Central Government has revisional powers under some of the Acts.----a position which is not conducive to inspiring conﬁdence in the public and which does not appear to be inevitably required for the proper ad- ministration of these Acts. We are of the view that there is, in these three respects. need to re--consider the present position. In fact, the working of these agencies has received attention at the hands of several committees. Working Groups, Study Teams and the like. What is required now is an attempt to implement their recommendations.

14.6. To illustrate what we have stated above. "C shall refer to the position under the Customs Act.

ta) Appeals from the orders or decisions ofthe officers below the rank of' Collector of Customs go to an appellate collector'.

(bl Appeals troin the decisions or orders passed by the Collector of Customs lie to the Central Board of Customs and Exc-isesl.

to) The Central Board of Customs and Excises may.

either on the application of the aggrieved person or sun motu. call for and examine the records of any proceeding. in which a customs oﬁicer has passed any decision or order.

for the purpose of satisfying itself as to the legality or propriety of any such decision or order. and may such orders thereon as it deems lit-'. But no order passed on appeal can be revised by the Board'.

(d) Any order passed byan appellate oﬂicer itt appeal. any order passed in revision bythe Board suo mom. and anv order passed in revision by the Board on the application of the aggrieved party where the order envisages enhancement of penalty. ﬁne in lieu of conﬁscation of goods. or duty, may be annulled or modiﬁed by the Central Government on the application of the person aggrieved5. Penalty or . Section l'_'8(b). Customs Act. W"

. Section 12S(a). Customs Act.

. Section l30(Ii. Customs Act.

. Section l30(l). Customs Act.

. Section I31, Customs Act.

'J'«h'»ulJ-I 102 ﬁne in lieu of conﬁscation of goods cannot. however. enhanced by the Central Government in revision, if it already enhanced on appeal or by way of revision'; 2' in any other case, unless the party affected has been gin, notice to show cause against it within one year from the date of the order sought to be annulled or modiﬁedz.

While the number of appeals as of right under the above act is limited there is a multiplicity of proceedings for revision.

14.7. There might be other Acts where there may be multi- plicity in appeals, though the scope for revision is limited. We do not go into a detailed examination of the scheme of each Act's.

But we place it for the consideration of the Government-' whether. in the interests of speedy disposal of these proceedings and of effective and independent adjudication, a uniform scheme should not be adopted whereunder there will be one appeal on facts to an oﬁicer of sufficiently high status. with an application for revision to an independent tribunal on a point oflaw. Where the appeal on facts is itself to a Tribunal, the revision could lie to the High Court. But the ﬁnal revisional authority should. in every case, be totally independent of the executive, and a multiplicity of appeals should be avoided.

-- A V #17.' sectionil3lJ)ai.~Customs Act.

2. Section I3l(4)(b), Customs Act.

3. Matter to be considered by Government.

CHAPTER 15 REComIE\'I)ATIoNs AS TO INDIVIDUAL Acrs l5.I. We may now take up the major points relevant to particular Acts'.

It has been stated thatz under the present Central Excise Law, while unauthorised removal of excisable goods has to be departmentally adjudicated, prosecution under section 9 can be resorted to only for evasion of duty. The suggestion is to amend section 9 ofthe Central Excise and Salt Act. to provide for prosecution in cases of unauthorised removals also.

We accept the principle of the suggestion and recommend an amendment on the subject.

15.2. It has been suggested3 that the present punishment of imprisonment for a term upto six months or ﬁne or both under section 9 of the Central Excise and Salt Act should be enhanced to a maximum term of imprisonment of 3 years and a minimum term of imprisonment of 6 months. and also ﬁne. II1 cases in which the loss of duty is more than one lakh, a higher minimum ofone year with a maximum of 7 years' imprisonment is also proposed to be provided for. In the case of second or subsequent com ictions. higher minimum of two years is proposed. The discretion of the court not to award at least the minimum period of imprisonment will be limited to only such cases in which special circumstances exist and for adequate reasons to be recorded in writing.

We are separately recommending' an increase in the maxi- mum punishment. which should sufﬁce.

15.3. It has been suggested5 that a new section should be inserted to the effect that conﬁscation or penalty imposed in departmental proceedings under the Excise Act shall not prevent the inﬂiction of any other punishment to which the person affected thereby is liable under the provisions of the Act. or under any other law.

. The Acts are discussed in chronological order.

. Suggestion of a Ministry of the Government of India. . Suggestion ofa Ministry of the Government of India. . See para. 15.5. infra.

. Suggestion of a Ministry of the Government of India.

'J! A531.) '--

I03 Central Excise and Salt Act4Addi-

tion of offence as to un- authorised remoxal.

Central Excise Actw punish-

ment.

Central Excise Act~ provision to save power of conﬁscation.

Cc-rnrztl Excise Act"

Public Censure.

Amend-

ment of section 9.

Excise Act as to punish-

rnent.

Section relating to burden of proof recom-

mended.

Conse-

quential amend-

ment of section 9 (cl. Central Excise Act.

Recom-

rnendation as to the Foreign Exchange Act.

~J3\:JI-L\loJlJ--

. Compare section l27, Customs Act.

. Section I27. Customs Act, 1962.

. Suggestion of a Ministry of the Government of India. . Chapter 7.20, supra.

Actual amendment will be indicated separately.

_ Para.!7. 12, .mpI'a.

. Para. 15.6, supra.

l04 We have no objection to such a clariﬁcation'.

[In this connection, it may be noted that under the existing scheme, for a contravention of the provisions of the Customs Act, punishments can be awarded in departmental adjudications which entail conﬁscation of the offending goods etc. and itn-- position of penalty on the persons concerned in the oﬂfence. In addition, the accused can also be prosecuted in court. The Customs Act speciﬁcallyl lays down that the award of any conﬁscation or penalty shall not prevent the infliction of any punishment by the court.] 15.4. It has been suggested3 that a provision should be introduced under section 37 of the Central Excises and Salt Act. to provide speciﬁcally for making rules for giving publicity to the names and other particulars of persons who are guilty of contravention of the provisions of the Act. rules and other orders. We accept the principle of the suggestion.

15.5. In accordance with our general recommendation for increase in the maximum punishment', and provision for minimum imprisonment and ﬁne. it will be necessary to revise section 9 of the Central Excise Act5.

l5.6. In accordance with our general recommendation of shifting the burden of proof', it will be necessary to insert 2 section in the Central Excise Act relating to burden of proof of mens rea.

15.7. In consequence of the above amendment7. i~.«.";llOl'l 9(a) of the Central Excise Act will require amendment, to rem me words which will become redundant. Our recommendation therefore is--ln section 9(c) of the Central Excise and Salt Act, 1944, the words "the burden of proving which shall be upon him". shall be omitted.

15.8. In the Foreign Exchange Regulation Act, the following provisions are absent from the penal and connected sections:--

(i) Modiﬁcation of mens red.

(ii) Mandatory imprisonment.

(iii) Minimum period of imprisonment.

(iv) Stoppage of business.

(V) Summary trial..

105

Of these, No. (i) has been covered by judicial interpretation'. Nos. (ii) and (iii) will be dealt with later'.

It may also be stated that many cases under the Act are dealt with by penalties imposed by the Director of Enforcement or oﬁicers subordinate to him-'.

As regards No. (iv)---Stoppage of business,----the matter will be discussed separately'. .

No. (v)--sumn1ary trial in the sense known to the Criminal Procedure Code----may be inappropriate, as complicated ques- tions of law or fact are often involved in prosecutions under the Foreign Exchange Act. Instead, the procedure which we are recommending would serve the purpose of quick disposa15.

15.9. A few other points may also be dealt with. Section 23, Foreign Exchange Act provides that if the case is adjudi- cated by the Director of Enforcement, the maximum penalty of 3 times the value of the foreign exchange involved or Rs. 5.000/-, whichever is more, may be imposed, and that if the offender is prosecuted before a Court, the punishment that can be awarded is imprisonment upto a maximum of two years. or fine, or both.

It has been suggested' that the punishment in the depart- mental adjudication should be enhanced to a penalty upto 5 times the foreign exchange involved. Further, the section, it has been suggested. should be reworded suitably so as to provide for the imposition of a penalty of more than Rs. 5,000/--. These provisions, it is further stated, should apply equally even when the offence is detected in Indian currency.

We accept the suggestion in principle.

15.10. lt has been stated7 that in the case of offences under the Foreign Exchange Act, tried by a Court, for serious oifences like over-invoicing and under-invoicing of goods, making or receiving compensatory payments, non-repatriation of foreign exchange earned abroad. and maintaining of an account abroad without the Reserve Bank's approval, there should be a minimum imprisonment of 6 months where the amount involved is Rs. 1 lakh or more, with the proviso that a lesser punishment than the minimum so prescribed could be awarded by the Court where the Court is convinced that such action is necessary and for reasons to be recorded in writing.

. See State of i\1uI1ara.\/irra v. .M.G. George, A.I.R. 1965 SC. 722. . See paragraphs 15.10 and 15.33, infra. . Section 23(1), Foreign Exchange Regulation Act, 1947. See paragraph 15.21. infra.

f-II.gu.:1q.--.

speed without being unfair to the accused.

6. Suggestion of a Ministry of the Government of India.

7. Suggestion of a Ministry of the Government of India.

Foreign ljxchange Regulation Act, 1947- lncrease in departmen-

tal penalty considered.

Foreign Exchange Act--

Suggestion for mini-

mum punish-

ment con-

sitlcrctl.

We are separately recommending special courts, which will achieve the object of (Paras. 9.9. and 9.10, supra).

()bscr\'a-

ticns nf Study Team.

Foreign Exchange Act----

Conspiracy and Abetmcnt.

Para." Wl3.33V,i in/T-'a.

2. Report ofthe Study Team on Leakage Manipulation (Ministry of Finance) (1971), page 95. para.

106

We are separately proposing an increase in punishment under the Act', which will suﬂice.

15.1]. The Study Team on Leakage of Foreign Exchange2 has made certain observations relavant to prosecutions, which we quote "9.7. Under the provisions' of the Customs Act, a person involved in under-invoicing of export goods is punishable with imprisonment for a term which may extend to two years or with fine or with both. (A higher punishment is pro- vided for commodities which are notified under section 123 of the Customs Act but those commodities are not the one which are exported). In the Foreign Exchange Regulation Act also the punishment provided is the same. Since the maximum punishment is two years only, and no mini- mum punishment is prescribed. (minimum punishment is for commodities which are notiﬁed under section I23 of the customs Act), it has been noticed that oﬂenders are let off with imprisonment for a small period or with nomi- nal ﬁnes. We would suggest that such offences should be made punishable to sentence of imprisonment in all cases. and any ﬁne imposable by the court should be in addition to imprisonment and not as an alternative to imprisonment. For cases of under-invoicing/over--invoicing' involving loss of foreign exchange of Rs. l lakh or more, a minimum sen- tence of six months' imprisonment should also be prescribed and the maximum, we recommend, should be raised to five years. ln order to ensure that the persons are not prose- cuted in petty cases or for oﬂences ofa technical nature, it would be desirable for the Customs Department and the Enforcement Directorate to lay down certain guidelines for deciding as to the cases in which prosecution should be launched."

The question of laying guidelines for deciding as to the cases in which' prosecution should be launched. requires consi- derati0n3. We think that the recommendation quoted above is a sensible one. and we would invite Government to give effect to it.

15.12. It was stated' in one of the suggestions made to us that the Foreign Exchange Regulation Act, at present. does not take cognizance of the acts of conspiring, counselling or procuring another person to contravene its provisions, and thus leaves out the important category of professional racketeers who are behind most ofthe offences committed. The suggestion.

of Foreign Exchange through Invoice 9.7.

3. The matter could be dealt with by administrative instructions.

. Letter dated 28-I2-1971.

10'?

therefore. is to amend the Act so as to make it an offenceto conspire. counsel or procure another person for contravenmg the provisions of the Act.

lS.l3. The position in this respect has been examined by us.

The main penal provision in the Foreign Exchange Act is in section 23(1) and section 23 (1 A), which punish contravention of various provisions of the Act.

_ Acts amounting to conspiracy with, counselling. or procur- ing another person to commit an offence. are not meciﬁcally dealt with in the Foreign Exchange Act'.

l5.i4. But conduct in the nature of conspiracy. procuring or counselling would almost invariably amount to abetment.

The abettor is liable to be punished under the Penal Code. The relevant sections2 of that Code are not conﬁned to abet- ment of offences under the Code; they are wide enough to apply to abetment of offences under other laws also.-' 15.15. We do not, therefore, as at present advised, see any serious lacuna even in the present law. Since the wording in the Penal Code is clear, an amendment is not needed.

1. Position/as to express provision regarding abetment in the major Acts is as below--

(rz) Central Excise Act . . . . Section 9(d). (12) Foreign Exchange Act . _ _ _ Nil.

tr) Prevention of Food Adulteration Act . Nil But section l6(1)(a) applies whether the act is done by a person "himself or by any other person".

(:1) Essential Commodities Act . . . Section 8.

(e) Wealth Tax Act . . . . . Section 36(2A) (Limited pro-

vision).

(0 Income-tax Act . . . . . Section 287 (Limited provision). (4?) Customs Act . . . . . The main pr0vision--secti0n . l3S(a) applies to a person who is "in any way know-

ingly concerned in any fradu-

lent evasion or attempt at evasion" etc. (/1) Gold Controt Act . . . . Section 88(2) (Limited pro- vision).

2. Sections I09 and 116, Indian Penal Code.

3. See definition of ''offence'' in section 40, Indian Penal Code. I M of Law/72~--8 Prepara-

tion to commit certain oﬁences under the Foreign Exchange Act and the Cus-

toms Act.

108

15.16. Another matter of substantive nature that requires to be considered is that of preparation to commit certain offences. In general, in countries which follow the Anglo-American system, law does not punish preparation for an offence. An attempt to commit an offence is punishable, but the attempt must _be suﬂiciently proximate to the crime intended, and this 'proximity rule' ﬁnds its negative form in the rule that mere preparation is not enough.

Authorities are, no doubt, not very clear as to what is an attempt;1 but it is not necessary for the present purpose to pursue that matter.

15.17. The position taken in some foreign Codes is different in this respect.

It would be of interest to refer to the provision in the Russian Penal Code,2 quoted below:----

''Article 15. Responsibility for preparation of crime and for attempted crime.----Acquiring or arranging the means or instruments, or other intentional creation of conditions for the commission of a crime, shall be deemed preparation of a crime.

An intentional action immediately directed toward the commission of a crime shall be deemed an attempted crime, provided the crime is not brought to completion for reasons independent of the will of the guilty person.

Punishment for preparation of crime and for attempted crime shall be assigned in accordance with the article of the Special Part of the present Code which provides for responsibility for the given crime.

In assigning punishment the court shall take into account the character and degree of social danger of the actions committed by the guilty person, the degree to which the criminal intention is carried out, and the causes by reason of which the crime is not brought to completion."

.l5.l8. Academic opinion on the question is conﬂicting. Some writers support a provision punishing preparatory acts. On the other hand, the remark of Holmes, J. is often emphasised, namely, "As the aim of the law is not to punish sins, but to prevent certain external results, the ct must come pretty near to accomplishing that result before ﬁne law will notice it3." And the query has been raised----"Is it not a cardinal principle of our law that the successful criminal is always more severely

1. See the Law Commission of India, 42nd Report (Indian Penal Code), pages 131 to 138, paras. 5.41 to 5.43.

2. Article 15, R.S.F.S.R. Penal Code.

3. Holmes J. quoted in Book review in (1954), 70 L.Q.R. 551.

109

punished than one who, equally guilty ethically, has fai1ed_in his efforts? And, just as the completed" crime merits a heavier penalty, so an 'attempter' who has got beyond the stage of inci- tement and 'mere preparation is regarded by the law as a worse offender than one who has never been 'on the job' at alll."

15.19. Whatever be the merits of the general rule, it seems to us that in the context of some of the offences with which we are concerned, the law could make a departure from its general approach.

In cases under the Customs Act and the Foreign Exchange Act, having regard to the gravity of the harm, the adoption of a stringent approach is needed. Where an act is done with the ﬁxed intention of committing a crime and by way of preparation for it, it should be treated as criminal. For example, where a person is about to leave the shores of India with Indian currency in his pocket, with the deﬁnite object of violating the Foreign Exchange Act, it is better that he is stopped. An amendment punishing such acts would enable the enforcement authorities to prevent crimes under these Acts before its consummation. -

15.20. Accordingly. we recommend that the following section should be inserted in the Foreign Exchange Act and in the Cust- oms Act:-- ' "If a person makes preparation to commit an oﬁence under this Act, and from the circumstances of the case it may be reasonably inferred that if not prevented by circum- stances independent of his will, he is determined to carry out his intention to commit the offence he shall be punish-

able with imprisonment for three years, or with ﬁne, or with both."

15.21. Besides the punishments provided in the Foreign Exchange Act, we think that the court should have power to order stoppage of a particular business which facilitates viola- tions of the Act.

We think that the power should be exercisable only on second conviction. We, therefore, recommend the insertion of the following section in the Foreign Exchange Act :--

"Where a person having been convicted of an offence under this Act, is again convicted of another oifence under this Act, and the Court by which such person is convicted is satisﬁed that in order to prevent repetition of the offence by him such a direction is necessary, the Court may, in addi- tion to any penalty which may be imposed on him under this Act, by order direct that that person shall not carry on such

1. Book review in (T954), 70 LEE 551.

Foreign Exchange Act--

Stoppage of business recom-

mended.

Prosecu-

tions as well as depart -

mental proceed-

ings.

Foreign Exchange Act----

Recovery of penal-

ties .

110

business which is likely to necessitate or facilitate the com- mission of an oﬂence under this Act. for such period, not exceeding three years as may be speciﬁed by 'the Court in the order'."

15.22. The above points relate to prosecutions proper. The study Team on Leakagel of Foreign Exchange made the following observations regarding adjudications and prosecutions under the Foreign Exchange Act :--

. . .like the Customs Act. there should be a provision that for an offence under the Foreign Exchange Regulation Act. both adjudication by the Director of Enforcement and conviction by a court of law are possible. The two should not be alternatives as at present. We would also suggest that in more and more cases. prosecution should also be launched apart from adjudication so as to have a deterrent effect. At present, the Enforcement Directorate does not have the necessary expertise and staff for pursuing pro- secution cases. Organisational changes in this respect are also therefore, necessary. While some important cases calling for prosecution will get referred to the Economic Offences Wing of the C.B.l., the Enforcement Directorate itself should have the wherewithal to deal with the majority of prosecution cases."

We understand that this question3 is being considered parately. Moreover. we express our agreement with the above recommendation.

l5.23. It appears that some diﬁiculty is felt in the realisation of penalties imposed in administrative adjudications under the Foreign Exchange Act. The problem could arise under other Acts also; but the power to conﬁscate goods is, in practice, suﬁicient for customs and excise cases, and the. Income-tax Act has a self-contained schedule for recovery. so that the pro-

tséem would not be of a serious magnitude under that Act.

To meet any possible difficulty a suitable provision is needed in the Foreign Exchange Act so that the amount ordered to be paid as penalty shall, on an order made in that behalf by a Magistrate on application made to him. be recoverable by the Magistrate as ﬁne. We discuss below this question in some detail.

I524. Three principal types of provisions seem to have been employed in State laws to achieve recovery of state or municipal taxes (or penalties) through proceedings before magistrates.

1. Cjfiscction 7(3iA."Esscntial Commodities Act, 1955.

2. Study Team on Leakage of Foreign Exchange through Invoice Manipulation (Ministry of Finance) Report, (1971), page 97, para.

9.12.

3. Question of providing for simultaneous prosecution and departmental adjudi« cation under the Foreign Exchange Act.

Ill (1) General provision for recovery through Magistrate, (2) provision for recovery through Magistrate by a particular mode, (3) order by Magistrate on conviction.

15.24-A. First. one ﬁnds a general provision under\vh icit the collecting officer has merely to apply to a magistrate, and the magistrate has then to recover the tax or other amount due "as if it were a ﬁne imposed by him". An example of this is furnished by section 13(3) of the Mysore General Sales Tax:

Act'.

15.25. The second type may also be illustrated. While, it the provision of the ﬁrst category, the process of recovery by the magistrate is not limited to a particular mode, there is another type of provision in which the magistrate, on an application being made to him, has jurisdiction to take steps for recovery but only by a particular process---e.g. distress and sale of immov-

able property. Thus. section 234 ofthe Ajmer Mewar Municipali- ties Regulation authorises a machinery to recover all taxes due to the Municipal Committee by an application made to :1 magistrate having jurisdiction, by distress and sale of any immovable property within his jurisdiction'. A provision for distress and sale of movable property is found in section 161(2) of the Bombay District Municipal Act-".

15.26. While. in the above two cases, it is not necessary that there should be a prosecution before the magistrate, there is at third type of provision which operates only when the magistrate convicts a person for contravention of the provision of the parti- cular Act. On such conviction, the Magistrate becomes com- petent to direct recovery of the tax, fee or other amount evade} as ﬁne.. Such a provision is contained in section 19(4) of the Kerala General Sales Tax Act'. A similar provision is contained in section 15(h) of the Madras General Sales Tax Act, 193'), extracted below5 :~--

"Any person who»--

(g) fails to pay the amounts speciﬁed in section 8B sub-section (2), within the prescribed time, or (11) Wilfully acts in contravention of any of the provisions of this Act. shall, on conviction bya Presi-

dency Magistrate or a Magistrate of the First Class, be liable to a ﬁne which may extend to one thousand rupees. and in the case of a conviction under clause

(b), (d). (F) or (g), the Magistrate shall specify in the order the tax. fee or other amount, which the person

1. See $tatAeVV. G}Z"L?'a§,t§a.~ar, (1963) 14 S.T.C. 628.

2. See Dargha ('ommittee V. State ofRajasthan, A.l.R. i962 S.C. 27-1.

3. See In re Din But'. A.I.R. 1919 Bom. 93.

. See Subrammiium V. Conilrziszsiolter of Police, A.l.R. 1964 Madras 185, I87 paragraph 5 (reviews cases).

5. P. V. ."[ll/l0IIlH1(,'(I \'. Collector ofPalg}zat, A.LR. 1967 Kerala 254, 333.

Benami transfers.

Tender of pardon under F orci gn Exchange Act.

112

convicted has failed or evaded to pay or has wrong- fully collected, and the tax, fee or amount so speciﬁed shall be recoverable as if it were a fine."

15.27. The ﬁrst type of provision' which is the most compre- hensive would be useful in the present case. We, therefore, recommend the insertion of a provision on the following lines, in the Foreign 'Exchange Act :--

Section to be inserted in the Foreign Exchange Act "Any tax assessed, penalty levied or any other amount due under this Act from a person may, without prejudice to any other mode of collection, be recovered, on application to any Magistrate, by such Magistrate, as if it were a ﬁne imposed by himz,"

15.28. In order that the suggested remedy concerning reco- very is not thwarted. it may become necessary to check transfers of property benami, in anticipation of recovery proceedings. We do not make any recommendations in this regard, as the sub-

ject requires separate study in relation to the entire ﬁeld of taxa- tion law.

15.29. The Study Team on the Leakage of Foreign Exchange made the following recommendation3 as to the tender of pardon for offences under the Foreign Exchange Act :--

"9.l4. Foreign Exchange contraventions involving invoice manipulations are serious offences, but diﬂicult to establish before a court of law. Quite often, in important and big cases it is diﬂicult to prosecute these cases success- fully without the help of an accomplice who may not be forthcoming to help the authorities, unless they are in a posi- tion to tender pardon to the accomplice. Section 337 of the Criminal Procedure Code, provides for tendering of pardon in the case of any offence punishable with imprisonment extending upto seven years and some of the offences under the Indian Penal Code. Since the contravention of the Foreign Exchange Law, or the Customs Act, do not fall in any of these categories, this provision would not apply to them. We suggest that in the interest of justice, and with a view to making it possible to obtain the evidence of a person who is supposed to have been directly or indirectly concerned in or privy to the olfence, power should be available for ten- dering pardon. to such persons in court cases relating to contravention of Customs and Foreign Exchange laws. Since the Code of Criminal Procedure is otherwise applicable

1. Para. 15.24, supra.

2. This could be inserted as section 23FF, Foreign Exchange Act.

3. Report of the Study Team on Leakage of Foreign Exchange through Invoice Manipulation (Ministry of Finance) (1971), page 98, para. 9.14.

113

to these proceedings, sect ons 337, 338, 339 and 339A may be suitably amended for conferring this power in relation to customs and foreign exchange offences."

We have discussed this question (tender of pardon) generally separately 1, and do not consider necessary to repeat what we have stated already.

15.30. The Study Team on Leakage of Foreign Exchange?

made the following recommendation as to documents :--

"9.18. It has been noticed that in complicated and im- portant cases where prosecutions are launched, documents obtained from abroad from various sources are tendered as evidence. These documents are vital for proving the case. However, according to the provisions of the Evidence Act. the execution of the documents has to be proved ﬁrst, before these are admitted in evidence. For that purpose, it becomes necessary to call for witnesses from abroad, which, apart from being disproportionately expensive, is alone not always practicable. In the matter of establishing the offences of under-invoicing and over-invoicing the evidence which can be collected from abroad will be of particular importance, and if such evidence were to be shut out merely for technical reasons of admissibility, it would make the task of the in- vestigation agencies even more diﬂicult. We, therefore. suggest that the provisions of the Customs Act and Foreign Exchange Regulation Act should be suitably amended to provide for admissibility, as evidence in court, of the docume- nts received from abroad, and for raising similar presumption in respect of them, as are now raised under section 139 of the Customs Act and section 24A of the Foreign Exchange Regulation Act in respect of the documents which are either produced before the Customs Ofﬁcers or Enforcement Ofﬁcers, or are seized by them."

The principle of the suggestion appears to be acceptable.

Further, the relevant section--section 24A,----should apply to documents seized under other laws also-3.

15.31. It has been stated' that Enforcement Oﬂicers under the Foreign Exchange Act may be empowered to seize or con- ﬁscate vehicles or containers except in cases where they have been used without the knowledge or fault of the owner or his agent.

We accept the suggestion, and recommend an amend-

ment accordingly.

1. Chapter 13, supra.-_m pulation (Ministry of Finance)f 1971), page 99, para. 9.18.

3. See para. 12.2, supra.

4. Suggestion of a Ministry of the Government of India.

lfresump-

regarding documents.

Foreign Exchange Act-

Amend-

rnent regarding seizure recom-

mended .

'. Report of the Study Team on Leakage of Foreign Exchange through Invoice Mani-

114

Foreign 15.32. It has been suggested' that the Foreign Exchange i'é't=£'j"3° Act should be amended to provide for conﬁscation where the Suggestion currency in respect of which an offence is committed has been for conﬁs- converted into, say, rupees. We accept the suggestions, which cation appears to be a useful one'.

where _ offence is committed in Indian CIIITBHC)'.

Amend- 15.33. In accordance with our general recommendation F"°".'°f for increase in the maximum punishment3 (on the basis of the ﬁll?" pecuniary test), and for minimum imprisonment and ﬁne. it Foreign will be necessary to revise section 23(1) of the Foreign Exchange Exchange Act. 4 .

Act as to punish-

m€nt- 15.34. We have made a general recommendation as to the Mens rea burden of proof5 regarding mens rea. There is some di- and fﬁculty in giving effect to this recommendation in the Foreign b"'d°" Of Exchange Act, and itis necessa to examine the case law. p'°°f 1' ll dhryff d hF'E under t IS genera y assume t at o ences un er t e oreign x- IEOFSE" change Act do not require mens rea. There is a Supreme Court Aft' ange judgment' dealing with the question how far ignorance of a ' notiﬁcation under the Foreign Exchange Act. is a defence. The accused in that case was charged with being in possession of 34 kilos of gold, which he had not declared as required by a notiﬁcation issued under the Foreign Exchange Regulation Act. The defence plea was that the accused could not have known of the notiﬁcation published in India three days before he left Zurich.

Ayyangar. .l., speaking for the ma'ority, felt that in the in- . . J . .

terpretation of an Act intended to deal with a grave economic situation, the 0b_|CCI of the Act, viz., conservation of foreign exchange, could not be overlooked. He was not prepared to read conditions in the Act if that would frustrate its purpose. The majority view7 was thus elaborated---- _"When one turns to the main provision whose contra- vention is the subject of the penalty imposed by Section 23(l-A) viz._, Section 8(l)_ in the present context. one reaches the conclusion that there is no scope for the invocation of the rule of mens rea. It lays an absolute embargo upon persons who without the special or general permission of the Re- serve Bank and after satisfying the conditions. if any, prescri- bed by the Bank, bring or send into India any gold etc.. the absolute_iie§ _b_ei_ng emphasised, as we have already pointed

1. Suggestion of a Ministry of the Government of India.

2. Amendment to be drafted.

3. Para. 7.20, supra. _ _ .

4. Actual amendment will be indicated separately.

5. Para. 7.12, supra.

6. State v. M.H. George. A.I.R. I965 S.C. 722, paras. 40, 4|.

7. State v. /W.H. George, A.l.R. I965 S.C. 722, para. 35.

115

out, by the terms of Section 24(1) of the Act. No doubt. the very concept of "bringing" or "sending" would exclude an involuntary bringing or an involuntary sending. Thus, for instance, if without the knowledge of the person a packet of gold was slipped into his pocket, it is possible to accept the contention that such a person did not "bring" the gold into India within the meaning of Section 8(1). Similar con- siderations would apply to a case where the aircraft on a through ﬂight which did not include any landing in lndia has to make a forced landing in India---owing. say. to engine trouble. But if the brinigng into India was a conscious act and was done with the intention of bringing it into India. the mere bringing constitutes the offence and there is no other ingredient that is necessary in order to con- stitute a contravention of Section 8(1) than that conscious physical act of bringing. If. then, under Section 8(1) the conscious physical act of "bringing" constitutes the offence. Section 23(l-A) does not import any further condition for the imposition of liability than what is provided for in Section 8(1). On the language, therefore, of Section 8(1) read with Section 240) we are clearly of the opinion that there is no scope for the invocation of the rule that besides the mere act of voluntarily bringing gold into India any further mental condition is postulated as necessary to constitute an offence of the contravention referred to in Section 23(l--A)."

Subba Rao, J.. (in his dissenting judgment) seems to have included within the concept of men: red the ignorance of law.

lt was in the context of ignorance of the notifzratiolz that the question of mens rea was at issue. But the observations in both the majority and in the minority judgments go far, and deal with the concept of mens red in its generality. We ourselves would read the majority judgment as excluding mens rea in its generality, and we agree with it. That is why we do not think it necessary to recommend any rule shifting the burden of proof as to the absence of mem rec: in respect of the Foreign Exchange Act.

15.35. One of the suggestions' made to us with reference to the Foreign Exchange Act related to cancellation of the pass- port of a person convicted of a serious offence under the Act------ the intention. of course. being that such action could be appro- priately used where the offence is one who may repeat such offence if he is permitted to go out of India.

We found the suggestion to be of interest. The matter. however, does not involve an amendment of the Foreign Ex- change Act. The Passports Act itself confers powers on the Passport authority to revoke a passport in the speciﬁed circum- stances. The relevant portion of the provision in the Pass- ports Act is quoted below.'

2. Section l0(3l(c)(_d) and (e), Passports Act, 1967 (16 of 1967).

I. Ofralﬂdisetrssions with snriieiiainﬁtani, Bar Council-otiilndia (4-:-1972).

Foreign Exchange Act-

Cancella-

lation of Passports.

Cancella-

tion of passport during investi-

gation.

Section 19D, Fore-

ign Ex-

change Act.

116

"I0. (3) The passport authority may impound or cause to be impounded or revoke a passport or travel documents-

(c) if the passport authority deems it necessary so to do in the interests of the sovereignty and" integrity of India, the security of India, friendly relations of India with any foreign country, or in the iteresrs of the general public;

(d) if the holder of the passport or travel docu-

ment has, at any time after the issue of the passport or travel document, been convicted by a court in India for any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than two years;

(e) if proceedings in respect of an offence alleged to have been committed by the holder of the passport or travel document, are pending before a criminal court in India.

We recommend that there should be no hesitation in exercis- ing this power in suitable cases.

15.36. In one respect however, the power of cancellation of passports must be augmented. Where the presence of the accused is required for investigation for any offence, there should be a power to cancel the passport.' There should of course, be a certiﬁcate to that effect by a senior oﬂicer, in order to avoid harassment in small cases. We recommend the addi- tion of the following clause in section 10(3), Passports Act to achieve the above object 2-

"(ee) if an ofﬁcer of such rank as the Central Government may notify in this behalf certiﬁes that an investigation in respect of an offence alleged to have been committed by the holder of the passport or travel document is pending before any authority in India and that the continued presence in India of the holder of the passport or travel document is necessary in the interest of the efficient conduct and completion of the investigation."

15.36-A. The Foreign Exchange Act, contains extensive powers of search. We need not discuss them in detail, but some points raised during oral discussions require consideration.

1. Position in England is controversial. See Ghana' v. Jones, (1969), 3 All 1700 (C.A.).

117

First, we shall take up the section relating to power to search consider"-

premises, which is as follows' :---

"l9-D. Power to search premi.swes----(l) If an Officer of Enforcement, not below the rank of Assistant Director of Enforcement, has reason 10 believe that any document which in his opinion will be useful for or relevant to any proceeding under this Act, are secreted in any place he may authorise any Oﬂicer of Enforcement to search for and seize or may himself search for and seize such documents.

(2) The provisions of the Code of Criminal Procedure.

1898, relating to searches under this section subject to the modiﬁcation that sub-section (5) of section 165 of the said Code shall have effect as if for the word 'Magistrate', wherever it occurs, the words "Director of Enforcement or other oliicer, exercising his powers" were substituted."

15.36-B. Some diﬂiculty, it seems, is caused by the words 'reason to believe', which occur in sub-section (1) ; and the question that has arisen is, how far the belief of the concer- ned ofﬁcer is subject to scrutiny by the courts. It has been suggested that the wording should be changed so as to eliminate such scrutiny.

- l5.36--C. It must, however, be stated that questions of constitutional validity of the power of search as granted by provisions containing above expression are, by their nature. difficult ones. This will be apparent from a study of----

1) the rovisions as to searches in other Acts. P (2) Judicial decisions as to the Validity of such provi- sions in other Acts.

(3) The extent to which those decisions hinge on ex- pressions such as 'reason to believe', 'is of opinion', 'has reasonable grounds for believing' and the like.

(4) The extent to which safeguards provided in section 165, Cr. P.C. are to be read into those provisions.

(5) The situation in which and the purpose for which the power of search under the particular provisions is to be exercised.

15.36-D. We, therefore, examined a number of decisions dealing with search. including :

(1) I.T.0. v. Seth Brothers, 74 I.T.R. 836; AIR.

1970 S.C. 292. (Section 132, Income-tax Act).

(2) Balwant Sing/1 v. Director of Inspection, A.I.R. 1969 Delhi 91, 103, 110.

(Section 132. Income-tax Act).

1. Section 19D, Foreign Exchange Act.

118

(3) Gopikislzan V. Assistant Collector, A.l.R.§1967 S.C. 1298, 1301, paras. 10-ll (Section 105, Customs Act).

(4) Pukhraj V. Kohli, A.I.R. 1962 S.C. 1559, (Section 178A, Sea Customs Act, 1878).

(5) State of Rajasthan V. Rehman. A.l.R. 1960 S.C. 210 (Section 18, Central Excise Act).

(6) Durga Prasad V. Gomes. A.I.R. 1966 S.C. 1214. (Gold Control Rules and Sections 105 and 110 ofthe Customs Act).

(7) Board of Revenue V. R.S. Jhaver, A.l.R. 1968 S.C. 59 (Madras General Sales Tax Act).

(8) Bai Radlza V. State of Gujrat. A.[.R. 1970 S.C. 1396 (Section 15. Suppression of Immoral Traﬂic Act).

(9) Nil Ratan V. Lakshmi Narayan, A.I.R. 1965 S.C. 1. (Section 19(3), Foreign Exchange Act before amendments).

(10) K.E. V. Vimalbai Deshpamle. 73 l.A. 144 (P. C.) (Rule 129(1). Defence of lndia Rules. 1939).

(11) Himlustan Motors V. T.N. Kaul (decided on 25-3-71) (Unreported) (Calcutta High Court) (D.B.) (Section 19D. Foreign Exchange Act).

(12) Chic Fashions (West Wales Ltd. V. Jones, (1968) 2 Q.B. 299 (C.A.).

(13) G/zani & others V. Jones. (1969) 3 All. E.R. 1700 (C.A.).

(14) N.C.J. Mills C. V. Collector. Central Excise. A.I.R. 1971 S.C. 454.

(Section 12. Central Excise, & Salt Act. 1944, and sections 105(1) and 110(3) of Customs Act, 1962 in matters relating to search of premises).

(15) G.L. Gupta V. Assistant Collector, Customs. A.I.R. 1971 S.C. 29. (Section 23-C(1), Foreign Exchange Regulation Act. 1947).

(16) Jayantlal V. Union of India. A.l.R. 1971 S.C. 1193. (Sections 116(2), Gold (Control) Act. and rule 126(1) of the Gold Control Rules, 1963.) (17) Union oflndia V. Tara Chaml Gupta & Bros.. A.l.R. 1971 S.C. 1559. (Section 3, Imports and Exports (Control) Act, 1947).

(18) Dwarka Nath V. Delhi A/Iunicipality. /\.l.R. 1971 S.C. 1844. (Section 23(1) (c), (f), (g) and (h), Prevention of Food Adulteration Act, 1954).

119

(19) Assn. Collector of Customs V. Charon Das Mallzotra. 1971(1) S.C.C. 697. (Sections 110 and 124 of Customs Act, 1962).

(20) Badriprasad V. Collector of Central Excise. 1971 (2) S.C.C. 1.

(Sections 6. 8 and 16. Gold (Control) Act. 1968).

(21) mi v. Babulal A.I.R. t97t'A.P. 345. (Section 135. Customs Act. 1962) (22) M. Narayana V. S.H. Oﬁicer. A.l.R. 1971 A.P.

29. (Sections 156. 4(1), 5(2) and 173. Criminal Procedure Code. and section 7(l)(a)(ii) and 10A. Essential Com- modities Act, 1955).

(23) K. Laks/mtinarayanan V'. Commissioner of Income- tax, A.1.R. 1971 Mad. 192.

(Section 256(2). income-tax Act, 1961).

(24) iylangilal v. Dy. E.\'cise Oﬂicer. A.l.R. 1971 Raj.

46. (Section 256(2). Income-tax Act. 1961).

(25) T. Jacob v. State. A.l.R. I971 Ker. 166. (Sections 7(1), 8 and 2 (f). and section l5(l) of the Suppression of [mmoral Traﬁic in Women and Girls Act. 1956).

15.36-E. In England also. statutory powers to issue search warrants differ markedly in the conduct which they authorise. For examples, the Theft Act, 1968. enables a cons- table to seize the articles speciﬁed in the warrant or any other articles which he "reasonably believes to be stolen". Similarly. the Firearms Act, 1968, authorises the constable to whom it is issued to seize and detain any ﬁrearm or ammunition which he may ﬁnd on. inter alia. the premises or place and in respect of which he has 'reasonable grounds for suspecting' that a ﬁrearms offence has been. isbeing. or is about to be committed. The like wording is employed in legislation dealing with drugs,' obscene publicationsl, explosives3, and oﬂicial secrets.' 15.36-F. Writing in 1967, Mr. D.A. Thomas, concluded5 that " . . . . . . . . . . . .the law consists of a mass of statutory pro- visions, to which judicial decisions add confusion rather than clarity." The decisions of the Court of Appeal in Chic Fashions Section 14, Dangerous Drugs Act, 1965. Section 3, Obscene Publications Act, 1959.

(a) Section 73, Explosives Act, 1875.

(b) Section 55, Malicious Damage Act. Section 9, Oﬂicial Secrets Act, 1911.

5. D.A. Thomas, "The Law of Search and Seizure", (1970) Crim. LR. 6. cited in L.H. Leigh. "Recent Developments on the Law of Search and Seizure; (1970, May) 33 Modern Law Rev. 268.

:9' I".""."'.

Foreign Exchange Act----lnter-

ception of postal articles.

120

(West Wales) Ltd. v. Jones' and G/mni and others v. Jones' have rendered the law still less certain.

I5.3_6-G. A study of decided cases shows that while the position cannot be asserted deﬁnitely, one could venture to put forth the following propositions as reﬂecting broadly the view taken in most cases.

(a) The expression 'reason to believe', does not mean purely the subjective satisfaction of the officer concerned.

(b) The existence of the belief and the existence of the reasons for the belief are justiciable.

There is no doubt, that in the interests of eﬂicient in- vestigation of these grave offences, the scope for such contro- versies should be reduced to the minimum. Arbitrary, cap- ricious or malaﬁde exercise of the power of search should not be countenanced. At the same time, practical considerations require that the power under the Foreign Exchange Act should be couched in terms less rigid than at present. After careful consideration, we have come to the conclusion that the words 'honestly believes' should be substituted in place of the words 'has reason to believe'.

l5.36--H. We have not overlooked the fact that an amend- mcnt substitutinga milder wording increases the vulnerability of the provision from the point of View of conflict with the fun- damental rights guaranteed by article 19(1) (f) and (g) of the Constitution. But, having regard to the fact that the power is vested in an oﬂicer not below the rank of Assistant Director of Enforcement, we venture to take the View that the restriction will continue to be regarded as reasonable, even after the amend- ment which we have recommended. The provision, more- over, is linked up with usefulness or relevance of the document to proceedings under the Act,----though that requirement is itself indicated in terms which contemplate the subjective opinion of the officer concerned.

We, therefore, recommend an amendment of section 19D, Foreign Exchange Act, accordingly.

15.36-I. There is another question connected with the powers of search under the Foreign Exchange Regulation Act. It relates to postal and telegraphic articles. A point has been made that the collection of important intelligence relating to illegal transactions involving foreign exchange would be facilitated if powers to intercept postal articles were available to senior officers.

1. Chic Fashions (West Wales Ltd. v. Jones, (1968) 2 Q.B. 229.

2. G/ram' and others V. Jones, (1968) 3 All ER. 1700.

121

15.36-J. An examination of ' analogous provisions, in other Acts furnishes two kinds of provisions, on_ the SLll)_]6Ct. First, there are provisions conferring a power to intercept and detain articles in the course of transmission by post or telegraph. Secondly, there are provisions under which the competent oﬂicer can require the postal or telegraph authorities to deliver, to the speciﬁed officer, postal and telegraphic articles (meant for particular persons).

15.36-K. In this connection, two' sections of the Code of Criminal Procedure are quoted below' :--

"94. (1) Whenever any Court or in any place beyond the limits of the towns of Calcutta and Bombay any oﬂicer in charge of a police--station considers that the production of any document or other thing is necessary or desirable for the purpose of any investigation, inquiry, trial or other pro- ceeding under this Code by or before such Court or ofﬁcer, such Court may issue a summons or such oﬁicer a written order, to the person in whose possession or power such do- cument or thing is believed to be, requiring him to attend and produce it. or to produce it, at the time and place stated in the summons or order.

(2) Any person required under this section merely to produce a document or other thing shall be deemed to have complied with the requisition if he causes such document or thing to be produced instead of attending personally to produce the same.

(3) Nothing in this section shall be deemed to affect the Indian Evidence Act, 1872, sections 123 and 124, or to apply to a letter, postcard, telegram or other document or any parcel or thing in the custody of the Postal or Tele-

graph authorities.

95. (1) If any document, parcel or thing in such custody is, in the opinion of any District Magistrate, Chief Presidency Magistrate, High Court or Court of Session, wanted for the purpose of any investigation, inquiry, trial or other pro- ceeding under this Code, such Magistrate or Court may require the Postal or Telegraph authorities as the case may be, to deliver such document, parcel or thing to such person as such Magistrate or Court directs.

_ (2) If any such document, parcel or thing is, in the opi- nion of any other Magistrate, or of any Commissioner of Police or District Superintendent of Police, wanted for any such purpose, he may require the Postal or Telegraph Department, as the case may be, to cause search to be made for and to detain such document, parcel or thing pending the opders of such District Magistrate, Chief Presidency Magistrate 0 Court."

1. Sections 94-95, Code of Criminal Procedure, 1898.

Summons to produce document or other thing.

1 of 1872.

Procedure as to letters and telegrams.

Power to intercept notiﬁed goods during transmis-

sion by post.

1. Section 25, Post Office Act, 1898.

122

15.36-L. The Post Ofﬁce Act has anumber of provisions authorising interception. It is suﬂicient to quote one'.

"25. Where a notiﬁcation has been published under section I9 of the Sea Customs Act, 1878, in respect of any goods of any speciﬁed description or where the import or export into or from India of goods of any speciﬁed descrip- tion has been prohibited or restricted by or under any other enactment for the time being in force, any officer of the Post Oﬂice empowered in this behalf by the Central Government may search or cause search to be made, for any such goods in co- urse of transmission by post, and shall deliver all postal articles reasonably believed or found to contain such goods to such oﬂicer as the Central Government may appoint in this be- half and such goods may be disposed of in such manner as the Central Government may direct. In carrying out any such search, such officer of the Post Oﬁice may open or un- fasten, or cause' to be opened or unfastened, any news- paper or any book, pattern or sample packet in course of transmission by post."

15.36-M. The interception of articles whose import or export is prohibited is thus covered by section 25. Post Oﬂice Act. quoted above. But it does not, unlike the Cr. P.C.3, give power to direct delivery of postal articles. Moreover. the power thereunder does not vest in the Enforcement Officers acting under the Foreign Exchange Act. lf, therefore, it is considered necessary that the Enforcement Ofﬁcers should have the ini- tiative and that the power should extend to directing delivery. then a comprehensive and self-contained provision in the Foreign Exchange Act would be neede .

l5.36--N. We are, clearly. of the view that in the interests of effective enforcement of this important Act. it is desirable to confer this power on appropriate authority. We proceed to discuss bciow a few salient features of the power that could be conferred.

l5.36-O. Any law-maker proposing a power of interception has. in order to create a picture of his proposal. necessarily to go into a few salient features. such as~

(a) the situation in which the power will be exercisable:

(b) the authority who will exercise the power. and the question of subjective or objective satisfaction of that autho-

rity;

tn') the other conditions governing the excercise of the power; and

2. Section 95, Cr. P.C. (quoted supra}. (page 3).

123

(e) the further disposition of the intercepted article.

These features have to considered even where there is no question of fundamental rights.

15.36-P. Further, in view of the fact that the power to intercept letters and telegraphic messages may conceivably raise questions of interference with the freedom of speech and expression, it is advisable as a matter of abundant of caution to ensure that the restrictions are reasonable and in the interest of one of the con- siderations speciﬁed in article 19(2).

15.36-Q. It may be noted that section 25, Post Office Act, 1898', is connected with the restrictions under the Import and Export (Control) Act, 1947 or under section ll, Customs Act, 1962 or under similar laws.

The last sentence of section 25 does authorise the opening of many postal articles, but not letters. Hence, in practice, its coming into conﬂict with the freedom of speech is not likely. So far as the right to hold etc. property is concerned, most of these other Acts would fall within the ambit of the words, 'in the interest of general public' used in article 19(6) of the Cons- titution. In case the restrictions imposed in those other Acts are themselves held to be void, then section 25 of the Post Office Act will be void in relation to those restrictions.

15.36-R. But we are now dealing with a power with a wider ambit.

Since constitutional questions are bound to be raised, arti- cle 19(2) of the Constitution has to be considered. Intercep- tion of letters or telegrams at the instance of executive oﬁicers could be constitutionally justiﬁed with reference to article 19(2), if it amounts to 'incitement to an oifence'. (There are other permissible heads of restriction in article 19(2); but they are not very appropriate for the present purpose).

15.36-S. As far as the reasonableness of the restriction is concerned, a number of points have to be borne in mind in connection with search, interception and similar powers. Chief amongst these are-

(l) nexus between the purpose and object of the section, and the exercise of the power thereunder ;

(2) indication as to_ when and in what circumstances the power IS to be exercised ;

(_3) indication in respect of which persons and whose premises the power in question is to be exercised ;

1. Section 25, Post Oﬂice Act is quoted supra. (page 4). 1 M of Law/72--9 I24 (4) principles, which, according to the Legislature, afford a guidance for exercising the power by the executive ;

(5) opportunity to the persons affected or likely to be affected, to contest the exercise of the power ;

(6) provision to, enable the aggrieved party to make a representation ;

(7) provision for notice before the power is exercisedl;

(8) provision for the return of articles seized, time limit set for any such return, and other connected safeguards.

15.36-T. Bearing these considerations in mind, we think that while it is desirable in the interest of prompt and effective investigation that the power to intercept postal and telegraphic articles should be conferred, certain safeguards are necessary, having regard to the constitutional provision and also having regard to the need to avoid undue harassment. The safeguards which we contemplate will be apparent from the very tentative draft which we give below.

15.36-U. Accordingly, we recommend that the following provision' be inserted in the Foreign Exchange Act :--

"(l) If any document,' parcel or thing in the custody of the Postal or Telegraph authorities is, in the opinionof the Director of Enforcement or any oﬁicer not below the rank of Assistant Director authorised by him. wanted for the purpose of any investigation, inquiry or other proceeding under this Act in respect of an offence relating to foreign exchange the value whereof exceeds rupees one lakh or for the detection of any such offence, such officer may------

(a) require the Postal or Telegraph authorities, as the case may be, to deliver such document, parcel or thing to such person as such ofiicer directs, or

(b) intercept, detain, open and examine any such document, parcel or thing, pending a requisition by him under clause (a). ' (2) If the document consists of any message received for transmission by telegraph by the telegraph authorities, such officer may require the telegraph authorities not to transmit the message to the person to whom it is addressed, pending an order under sub-section (1).

(3) If any such document, parcel or thing is, in the opi-

nion of any other Enforcement oﬂicer, wanted for any such purpose, he may require the Postal or Telegraph Depart- ment, as the case may be, to cause search to be made for _.__._, .,___.,

1. In the present case, No. (5), (6) and (7) would impracticable:

2. This is a very tentative draft.

125

and to detain such document, parcel or thing pending the orders of any such officer as is mentioned in sub-section (1).

(4) The provisions of this section shall not apply in relation to any letter or telegram unless the letter or telegram amounts to incitement to commit an offence under this Act or constitutes evidence of such incitement.

(5) No document, parcel or thing shall be retained in the custody of such oﬂicer for a period exceeding ﬁfteen days (excluding holidays) unless he has obtained the approval . of the Director."

15.37. In the Prevention of Food Adulteration Act, the Prevention following provision is absent :-- <_'\fd1;ﬁ'e7';1a_

(i) Summary trial. igon Act----

, , S mmary In the absence of suggestions to that effect, a change IS not "'1Ja1_ necessary. "

15.38. A doubt has been raised whether sub-standard 5.ub_ foods' are covered by the deﬁnition of adulteration. The ;ta,,d,,,,_, position, however, seems to be fairly clear. For example, in foods. a Madras casel, there was deﬁciency in the 'Reichert value"

of ghee (i.e. value below a particular stipulated ﬁgure) tie. the ghee was of a sub-standard quality, and such sub-standard qua- lity was by deﬁnition, an act of adulteration. It was held that the Court cannot embark on an academic investigation about the Reichert value and its bearing upon the quantum of fat in ghee in different areas in the country. If the quality or purity of ghee falls below the standard prescribed by the rules, or if its constituents are in excess of the prescribed limits of variabi- lity, then the ghee is deemed to be adulterated within the meaning of section 2 of the Act. When the prescribed standard is not attained, the statute treats such ghee. by fiction, as an adul- terated food, though in fact it is not so.

15.39. The Supreme Cour-t3, while dealing with a case of _ Supreme adulteration of butter observed':--~ Court case.

"If the quality or purity of butter falls below the standard prescribed by the rules or its constituents are in excess of the prescribed limits of variability. it shall be deemed to be adul- terated within the meaning of section 2 of the Act. If the prescribed standard is not attained, the statute treats such butter, by fiction as an adulterated food, though in fact it is not adulterated. To put it in other words, by reason of the fiction, it is not permissible for an accused to prove

1. Article on Food Adulteration in Times Weekly, (tiigthbgember, l9Tl)§b').'K Desai.

2. Corporation of Madras v. Armmzglmm, A.l.R. 1966 Mad. 194, 196, paragraphs 6-7.

3. 1l{.V. Joshi v. M. U. Sltimpi, A.I.R. 1961 S.C. 1494, 1496 (Subba Rao, 1.).

4. See also Baborally Sardar V. Corporation of Calcutta, A.l.R. 1966 S.C. 1569.

Cases as to sub-

standard milk and drugs.

Canned Foods Supreme Court case 126 that though the standard prescribed is not attained, the ar- ' ticle of food is in fact not adulterated. The non--oonformity with the standard prescribed makes such butter an adultera- ted food."

15.40. The Bombay High Court', in explaining the provision of section 2(i) (1), has also said that an article in respect of which any standard is prescribed or limits of variability of quantities of its constituents are prescribed shall be deemed to be adul- terated if it does not conform to the standard so prescribed. Accordingly, butter containing more than 16K of moisture and less than 80% of milk fat as prescribed by the rules was deemed to be 'adulterated' within the meaning of the Act. In Chimanlal v. State of Maharashtral, the Supreme Court held that the appellant was guilty of an anti-social act of a very se~ rious nature in manufacturing sub-standard drugs, which was against the object of the Drugs Act, 1940. We think that the position is quite clear, 'and needs no amendment.

15.41. A doubt has been raised-'t, as to the applicability of the Food Adulteration Act to canned or processed food. But we regard the deﬁnition of "food" and the sub-standard provisions as wide enough, to include canned and processed foods. It may be noted that it has been held, that if ghee of S.G. Mark Brand is sold from sealed tins, and the ghee is found to be adulterated, the vendor is guilty of an offence under sec- tion 7. That the vendor was ignorant about the quality of ghee is no defence' under section 19.

15.42. In one case5, the Supreme Court held that the ac- cused persons had stored for sale condensed milk which was adulterated and, therefore they were guilty under section 16(1)

(a) (i) of the Prevention of Food Adulteration Act, 1954. The defence of the appellants was based upon section 19(2) of the Act, namely that they had purchased the tins of condensed milk from another ﬁrm (whose appearance could not be obtained as they could not be traced), and that the goods were in the same condition as when they purchased them. On analysis of the contents of the condensed milk tins, it was found that it was sub--standard, as the fat content was below the minimum pres- cribed.

Therefore, the Court heid that the condensed milk stored by the appellants for sale was adulterated, and there was a

1. Gan: at V. Lingappa, A.I.R. 1962 Born. 104, 105.

2. C157: min,' V. State. (1952) I S.C.R. 344, 347, 348 (Case under the Drugs Act).

3. Article or F331 Aialteration in Times Desai.

::kly, November 28, 1971, by Bhishma

4. S3: (1931) M.P. Law Journal (Notes) 81, cited in the Digest for 1951 to 1965, under section 7(1), Prevention of Food Adulteration Act.

5. Bzrbarally Sardzzr V. Corporation of Calcutta, A.I.R. 1966 S.C. 1569, 1570, followed in Siliclmr Mtnicipal Board V. Mukul Chandra, A.I.R. 1968 A & N 24, 26 (D.B.).

127

breach of the provisions of section 16(1)(a)(i). The Supreme Court held1 :--

"In View of the provisions of section 19(1), it was not open to the appellants to contend that they were ignorant of the nature, substance and quality of the condensed milk sold by them. Sub-section (2) of section 19, however, furnishes a defence to a vendor ignorant of the nature, substance and quality of food sold by him provided he satisﬁes the requirements of that provision."

15.43 In this case, it was found that there was no warranty Madhya in the prescribed form, and neither the label on the tins nor the ggdesh cash-memo contained any warranty that the food was the same ' in nature, substance and quality as demanded by the vendor, and hence the accused has failed to establish the defence under section 19(2) of the Act. The Supreme Court pointed out that the fact that the vendors sold tins of condensed milk "in the same state as they purchased them" was by itself not sufficient to ab- solve them. Therefore, the conviction of the appellants under section 16(1)(a) of the Act by the Calcutta High Court was upheld.

In another easel, the facts were as follows :--

"The accused sold ghee of S.G. Mark Brand which, on analysis was found to be adulterated. The plea of the accused was that he gave to the Food Inspector ghee of the very nature, substance and quality demanded by him, and that the tin from which he supplied the ghee was a sealed tin and he had no reason to think that the ghee contained in the sealed tin was not of the S.G. Mark. The trial Magis- trate found that the ghee was adulterated, but he took the view that the ghee was not of the nature substance or quality which it purported to be or was represented to be. On appeal, the Madhya Pradesh High Court held that under section 2(i) (1) of the Act, an article of food was deemed to be adulterated "if the quality of purity of the article falls below the prescribed standard or the constituents are present in quantities which are in excess of the prescribed limits of variability". Further, it was held that "the Act aimed at prohibition of sale of adulterated food in larger interests of maintenance of public health and with that aim prohibited totally, under section 7, the manufacture, sale, distribution or storage of any adul-

terated food...Section 19 of the Act laid down that it would be no defence to allege merely that the vendor was ignorant of the nature, substance or quality of the food sold by him or that the purchaser was not prejudiced by the sale".

1. Barborally Sardar ,v. Corporation of Calcutta, A.I.R. 1966 s.c. 1569, i§71i)".i

2. Municipa] Council, Durg v. Gujarmal, 1964 M.P.L.J., Note 81 (D.B.) cited in the Yearly Digest.

Tinned foods when mis-

branded.

Maximum punish-

ment under the Prevention of Food Adultera-

tion Act.

Burden of proof of mens rea.

Essential Commodi-

ties Act.

jvlens rea under section 7 considered.

4~_<,;l~J._ . I-'urma v. Corporation ofilladras, (1970), l M.L..l. 407. 408. Jagneswar v. Gopal C/zaudra, A.[.R. 1961 Tripura. l8. 21.

. Para.

128

15.44 In addition to tinned foods being deemed 'adulterated' under section 2(i)(1). they can also be treated as inisbranded under section 2(ix)(ky). 1-2 15.45. The maximum punishment under the Prevention . of Food Adulteration Act does not require any radical change.

There may, however, be scope for rationalisation of the punish- ment under the Act ; but such an inquiry would involve numerous matters of detail outside the scope of this Report.

l5.45A. We have recommended3 in general the insertion of a section relating to burden of proof. So far as the Preven- tion of Food Adulteration Act is concerned, section 19 achieves the object, and no further provision is needed.

15.46. So far as the Essential Commodities Act is concern- ed. the following provisions found in several other enactments dealing with social and economic offences are absent :--

(i) Minimum imprisonment on first convicrion.

(ii) Public censure.

Both these raise questions of mens rea, and as the following paragraphs' will show. the Act is very stringent in that respect at present.

15.47. We now deal with the question of mens rea. After the amendment of l947, the penal provision in the Essential Com- modities Act has acquired a different character. by the elimina- tion of mens rea. The relevant portion of section 7(1), of that Act. now reads---

"7. (1) If any person contravenes, w/zerher knowingly, inremionally or otherwise, any order made under section 3-

(a) he shall be punishable----

(i) in the case of an order madewith reference to clause (h) or clause (i) of sub-section (2) of that, section, with imprisonment for a term which may extend to one year and shall also be liable to ﬁne.

and _ (17) in the case of any other order, with im- prisonment fora term which may extend to ﬁve years and shall also be liable to ﬁne ;

Provided that in the case ofa ﬁrst offence. if the Court is of opinion that a sentence of ﬁne only will meet 7.12, supra.

15.47, et seq.

I29 the ends of justice, it may, for reasons to be recorded, refrain from imposing a sentence of imprisonment and in the case of a second or subsequent offence, the Court shall impose a sentence of imprisonment and such imprisonment shall not be less,than one month ;"

[Clause (b) relates to forfeiture, and is not material for the point under discussion.] l5.48. Even the existing provisions for mandatory imprison- ment contained in the Act', may prove to be harsh where the particular contravention charged was not committed "intention- ally or knowingly", but was committed "otherwisez". One alternative to remedy this hardship would be to re-cast the penal provision in section 7(l)(a) so as to make a distinction between contraventions committed knowingly or intentionally (on the one hand) and other contraventions, (on the other hand). In the former, case, as mandatory imprisonment (as at present) with a minimum term (to be added) would be appropriate, with a relaxing power in the court to take care of exceptional cases. In the latter case, neither mandatory nor minimum term of im- prisonment would be called for.

15.49. However, we do not think it necessary to go to that length at the present stage. Experience of the working of the new section can be awaited for a year or so.

15.50. But we should, at this stage, refer to our general re- commendation for shifting the burden of proof3, and point out that section 7 of the Essential Comm dities Act goes beyond merely throwing the burden of proof on t e accused, and practi- cally eliminates mens rea. Government may consider whether the section should not be brought into line with our general recommendation.

15.51. The maximum period of imprisonment under the Essential Commodities Act requires increase from ﬁve to seven years. Here, of course the pecuniary test cannot be applied. But an increase is needed in view of the increased importance of checking these offences. Of course, the structure of the rele- vant section' is capable of improvement in certain matters of detail also ; but such an inquiry would take us far beyond the scope of this Report.

We. therefore, recommend that in section 7(l)(a)(ii) of the Essential Commodities Act, for the words "ﬁve years", the words "seven years" should be substituted.

l. Section 7, Essential Commodities Act.

2. Paragraph 15.47, supra.

3. Para. 7.l2, supra.

4. Section 7, Essential Commodities Act, 1955.

Alerts rea under the Essential Commodi-

ties Act.

Maximum punish-

ment under the Essential Commodi-

ties Act.

Bailability under Essential Commodi-

ties Act.

Abetment in Wealth Tax Act.

Recom-

mendation as to Income-

tax Act.

Income-tax and Wealth Tax Act-

Increase in---

Punish-

ment considered.

130

15.52. Under section 10A, Essential Commodities Act, the offences under the Act are cognizable and bailable. This provision was not found in the Act as originally enacted and was inserted by a later amendment in 1967. We have not been able to discover, either from the Statement of Objects and Reasons to the Amending Bill of 1967 or from any other source, the reason why a special provision as to bail was considered necessary. Perhaps, it was thought that many offences under the Act would be committed by persons who could be safely released on bail. We are, however, of the view that the matter should be left to be governed by the general provision in the relevant Schedule to the Criminal Procedure Code under which, if the maximum punishment exceeds three years, the offence is non-bailable. We do not see any great hardship as likely to result from such acourse, as the court has always a discretion to release the accused on bail even if the offence is non-bailable. Accordingly, we recommend that section 10A of the Essential Commodities Act should be revised so as to delete the words "and bailable".

15.53. As regards the Wealth Tax Act, we do not consider it necessary to discuss the amendments in detail, as what we are going to say regarding the Income-tax Act' is applicable to the Wealth Tax Act also.

15.54.

absent :--

(I) Elimination or modification of mens rea :

(ii) Conﬁscation ;

In the Income-tax Act, the following provisions are

(iii) Stoppage of business ;

(iv) Higher powers of Magistrates ;

(v) Special rules of evidence.

As regards point (i), no change is proposed as to mens rea,2 or shifting the burden of proof, having regard to the complicated nature of the offences under the Act. For the same reason. provisions as to points (ii) to (v) would also not be appropriate for these offences.

15.55. It has been stated3 that under the Income-tax Act and the Wealth tax Act, the punishment on prosecution for the offence of tax evasion as also for abetment of tax evasion is, at present, rigorous imprisonment for a minimum of 6 months and a maximum of two years. The punishment is less severe for other offences under these Acts, such as, failure to furnish the return of income or produce accounts and documents called for by notice, as also failure to deduct tax at source and pay it

1. See paragraphs 15.54 to 15.76, infra.

2. Para. 7.12, supra.

3. Suggestion of a Ministry of the Government of India.

131

to the credit of the Government. It has been suggested that these provisions may be modiﬁed on the following lines :----

(a) For the offence of tax evasion and abetment of tax evasion under the Income-tax Act and Wealth tax Act, the minimum punishment may be raised to rigorous imprison- ment for one year and the maximum be raised to rigorous imprisonment for 7 years.

(b) For the offence of failure to furnish the return of income or the return of net wealth, where called for by notice, the minimum punishment may be raised to rigorous impri- sonment for one year and the maximum to rigorous impri- sonment for 7 years. It is further stated that in view of the proposed increase in the term of imprisonment, there is no need for continuing the existing provision for the levy of a ﬁne ranging from a minimum of Rs. 4/- to a maximum of Rs. l0/- per day for the period of default. There exist already provisions for penalty for late submission or non- submission of returns.

(c) For the offence of failure to pay, to the Govern- ment, the tax deducted at source under the Income-tax Act, the suggestion made is that the minimum punishment may similarly be increased to rigorous imprisonment for one year and the maximum to rigorous imprisoriement for 7 years. The existing provision for ﬁne at the rate of 15 'X, per annum on the amount of the tax for the period of the delay, need not (if the suggestion is accepted) be continued, in view of the suggested increase in the term of imprisonment. There already exists provision for imposing interest at the rate of 9% and penalty.

15.56. As regards the first pointl, it seems to have been Assump- assumed that a person who makes a false statement in a return tIon_as to of income-tax commits an offence under sections 191 to 193, appl'°"b"

Indian Penal Code. This however, requires examination. §.,'Z,i§f,, While such a person can be prosecuted1 under section 1773, 191-193, Indian Penal Code, the position regarding section 191 is less 195- certain.

]. Paragraph 15.55(a), supra.

2. See Baliah v. Rangachari, A.I.R. 1969 S.C. 701 (On appeal from A.I.R. 1969 Mad. 145).

3. Section 177, Indian Penal Code reads as follows 1--

:'Whoever, being legally bound to furnish information on any subject to any public servant, as such, "fumishes, as true, information on the subject which he knows or has reason to believe to be false, shall be punished with simple imprisonment for a term which may extend to six months or with ﬁne which may extend to one thousand rupees, or with both:

or, if the information which he is legally bound to give respects the commission of an offence, or is required for the purpose of preventing the commission of an offence, or in order to the apprehension of an offender, with imprisonment of either description for a term which may extend to two years, or with fine, or with both."

(Illustrations omitted).

Giving false evidenm.

Punish-

ment for false evidence.

132

15.57. Section 1911 of the Indian Penal Code applies only when there is an obligation to state the truth, imposed by law or by oath or when a declaration is required by law. A veriﬁca--

tron IS not an oath, and the Income-tax Act does not contain a provision requiring the assessee to state the truth in the return. The Act, read with the rules, does require a veriﬁcation, but that is not enough to attract the first part of section 191. Of course, if the assessee makes a false statement on oath before the Income-tax Oﬂicer, sections 191-193 applyz. If the veriﬁca- tion is false, the sanction provided in section 177, Indian Penal Code also applies.

15.58. The latter part of section 191, which relates to a 'declaration'. may apply, though even here the position, is not beyond controversy3.

15.59. Even if section 191 applies, it is not clear which part of section 193 will apply to a false statement in a return 'J l. Section 191', Indian Penal Code reads as follows :-

"l9l. Whoever, being legally bound by an oath or by an express provision of law to state the truth, or being bound by law to make a declaration upon any subject, makes any statement which is false. and which be either knows or believes to be false or does not believe to be true, is said to give false evidence.

Explanation 1.---A statement is within the meaning of this section, whether it is made verbally or otherwise.

Explanation 2.--A false statement as to the belief of thefperson attestingiis with- in the meaning of this section, and a person may be guilty of giving false evidence by stating that he believes a thing which he does not believe, as well as by stating that he knows a thing which he does not know."

(Illustrations omitted).

2. Cf. the discussion in Lalji Haridas V. State of Madras, A.I.R. 1964 S.C. 1154 (On appeal from A.l.R. 1963 Born. 70).

3. Cf. decisions as to veriﬁcation of pleadings.

4. Section 193, Indian Penal Code reads as follows:--

"193. Whoever intentionally gives false evidence in any stage of a judicial pro- ceeding, or fabricates false evidence for the purpose of being used in any stage of a judicial proceeding, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to ﬁne;

and whoever intent_ional_ly gives or fabricates false evidence in any other case, shall be punished with imprisonment of_either description for a term which may extend to three years, and shall also be liable to fine.

Explanation l.----A trial before a Court-martial is a judicial proceeding.

Explanation 2.--/_\n investigation directed by law preliminary to a proceeding before a Court of Justice, is a stage of a judicial proceeding, though that investigation may not take place before a Court of Justice.

(Illustration omitted).

Explanation 3.--An investigation directed by a Court of Justice according to law, and conducted under the authority of a Court of Justice, is a stage of a judicial proceedinr, though that investigation may not take place before a Court of Justice."

(lllustration omitted).

133

15.60. We have ourselves recommended' an increase in punishment based on the pecuniary 'test (and also minimum imprisonment), which will meet the requirements of _|UStlL'C2.

15.61. We should also refer to the Report of the Working Group on Direct Taxes3 of the Administrative Reforms Com- mission as to unnecessary examination of tax-payers :--

''...In this connection, a suggestion was made to us that a provision should be made in the Income-tax Act on the lines of section 7605(b) of the Internal Revenue Code of 1954 of the United States of America. reproduced below. which limits the number oftimes the account-books could be called for and examined--~

(b) Restrictio/m' an Examination of Tax-payers. No Tax-payer shall be subjected to unnecessary examination of investigations, and only one inspection of a tax-payer's books of accounts shall be made for each taxable year un-

less the tax--payer requests otherwise or unless the Secretary or his delegate, after investigation, notiﬁes the tax-payer in writing that an additional inspection is necessary."

We should like to express our agreement with this view.

15.62. In the Report of the Administrative Reforms Commission, have been made as to Working Group4 of the the following observations prosecutions :--

"The performance of the Department has been so poor that the Public Accounts Committee was compelled to re-

mark as follows in its 2lst Report (1963-64)---Third Lok Sabha--~ In para 7.12. of its Report. the Direct Taxes Ad- ministration Enquiry Committee observed that though the Direct Taxes Acts provide for prosecution and impri- sonment in the cases of concealment of income. not a single person has been convicted for evasion during the last ten years, and recommended that unless it was brought home to the potential tax evader that attempts at concealment of income would notonly not pay him but also actually land him in jail. there could be no I. Para. 7.20, \'.'rpI'a.

2. Amendment to be indicated separately.

§. Report of the Working Group on Central Direct Taxes Administration tramc Reforms Commission) (January, 1968) (Pages 24, 25, paragraph 2.25)

4. Report of the Working Group on Central Direct Taxes Administration trativc Reforms Commission) (January, 1968), pages 110-lll.

Recom-

mendation to increase the ' maximum punish-

ment under Income-

tax Act.

Restric-

tion on unneces-

sary exami-

nation of tax-

pa yers.

Paucity of prosecu-

(ions.

(Adminis-

Tax laws-

abetment by creating false vouchers.

Supply of material for com-

mitting a crime how far consti-

tutes abetment.

Lni\J"' 134 effective check against evasion. The Committee are not a little surprised to ﬁnd that even though this recommenda- tion has been accepted, Government sent for prosecu- tion not more than one person in whole of the country during 1961-62 and that case too was compounded."

We understand that the question has been actively taken up and so we do not propose to say anything more about it.

15.63. It has been suggested that' the scope of the term 'abetment' in tax matters should be widened to include the crea- tion of false vouchers, accounts and other records which may facilitate tax evasion by any other person.

We think that under the deﬁnition of 'abetmentz' in the Penal Code, such acts would be covered, provided, of course, it is prov- ed that the person charged has thereby facilirated evasion.

15.64. The question is allied to the question how far supply of tools or materials constitutes abetment of an offence. Though it is not possible to make a very categorical statement of the position in England about certain matters of detail, the case- law3 furnishes sufficient ground for putting forth a view that a person who, with intent to facilitate a crime, supplies materials or tools for the commission of the crime, 'aids its commission'. The distinction between misdemanour and felony has been abo- lished in England', and the provisions as to accessories before the fact are of no legal signiﬁcance now.

Assistance in the crime even at an earlier stage will suﬂice, as where the accused assists someone who subsequently utters forged cheques to open a bank account in a false name5. One man may abet another by helping to set the stage even before the victim has been found. "If a man helps another in prepara- tion for crimes of a certain nature with the intention that the other shall commit crimes of that nature, he may abet those crimes when they come to be committed"".

15.65. Whether a person who' knowingly gives assistance, but hopes that the crime will not be committed is guilty as an abettor, is a question on which the authorities in England are not easy to reconcile. But this much is clear, namely. that if a person intentionally supplies materials for the commission of a crime, he aids and abets the crime.

. Suggestion of a Ministry of the Government of India. . Section 107, clause thirdly, Indian Penal Code. . See paragraphs 15.65 to 15.67, infra.

4. The Criminal Law Act, 1967 (Eng.).

5. Thambiah v. R. (1966) A.C. 37; (1965) 3 All E.R. 661, 665 (P.C.).

6. Tltambiah v. R. (1966) A.C. 37; (1965) 3 All ER. 661, 665 (P.C.).

135

As Devlin J. said' in a case which is often cited :--

"A person who supplies the instruments for a crime or anything essential to its commission aids in the commis- sion of it, and if he does so knowingly, and with intent to aid, he abets as well, and is therefore guilty of aiding and abetting."

15.66. It was observed 200 years agoz, that no man ought to furnish another "with the means of transgressing the law, knowing that he intends to make that use of them".

15.67. The controversy, at present, is only as to whether knowingly facilitating the commission of a crime ought to be sufficient for complicity, if a true purpose to advance the crimi- nal end is absent. There has been a difference of opinion as to the criteria that should measure crimial liability in this respect. According to one view, the abbettor must have "a stake in the outcome". According to another view, however, conduct which knowingly facilitates the commission of crimes is the proper object of preventive effort by the penal law (if there is no affir- mative justiﬁcation for that conduct).

15.68. The position in India, in this respect, should be re- P°5.l"°" l"

garded as more certain than in England, because the Indian I"d'a' Penal Code not only provides3 that a person who "intentionally aids, by any act or illegal omission, the doing" of anything, abets it, but also' makes it clear that whoever "either prior to or, at the time of commission of an act, does anything in order to facilitate the commission of that act, and thereby facilitates the commission thereof", is said to "aid the doing of that doing".

The Code5 has, further, a speciﬁc provision that to constitute the offence of abetment it is not necessary that the act abetted should be committed.

15.69. It is also relevant to refer to a Supreme Court case' in that the point was considered how far the acquittal of a person alleged to have committed the offence in consequence of abet- ment bars the conviction of abettor. It was stated that it cannot be held in law that a person cannot even be convicted of abett- ing a certain offence when the person alleged to have committed that offence in consequence of the abetment has been acquitted. The question of the abettor's guilt depends on the nature of the act abetted, and the manner in which the abetment was made. The offence of abetment is complete when the alleged abettor has institgated another, or engaged with another in a conspiracy to commit the offence. It is not necessary for the offence of . National Coal Board v. Gamble, (1959) 3 All E. R. 200.

. Lightfoot v. Tenant, (1796) 126 E.R. 1059, 1062.

. Section 107, clause thirdly, I.P.C.

. Section 107, Explanation 2, I.P.C.

. Section 107, Explanation, 2, I.P.C.

. Jamuna Singh v. State of Bihar, A.I.R. 1967 S.C. 553 (Raghubar Dayal, J.).

O\(J1AbJ[x)u---

Failure to pay tax-

punish-

ment suggested.

136

abetment that the act abetted must be committed. It is only in the case of a person abetting an offence by intentionally aiding another to commit that offence that the charge of abet- ment against him would be expected to fail when the person alleged to have committed the offence is acquitted of that offence. It is only in this narrow circumstance that the abettor can be exempted from his guilt, otherwise, under the Indian law, for an offence of abetment, it is not necessary that the offence should have been committed.

15.70. A mere giving an aid by itself will not. of course. constitute an abetment of an offence', if the person who gave the aid did not know that an offence was being committed or contemplated. The intention should be to aid an offence or to facilitate the commission of an offence'.

15.7]. It may be stated that the word 'offence' (as deﬁned in section 40 of the Indian Penal Code) denotes a thing punish- able under the Penal Code or under any special law or local law. Therefore, in the absence of any special provision regard- ing abetment in the special enactments, in view of section 40 of the Penal Code, the provisions of the Penal Code would apply.

15.72. We may now refer to another suggestion relevant to taxation laws. It has been suggested3 that for the offence of failure, wilfully or without reasonable cause, to pay taxes which are assessed, provision may be made for a minimum punish- ment by way of imprisonment of the defaulter. This provision will (it is suggested) apply to all direct taxes except estate duty (for which a special procedure for consultation with the States will have to be undertaken according to the provisions of the Constitution). We see no objection in prinicple to the suggestion. But we do think that the provision should be con- ﬁned to cases where the failure is wilful and without reasonable cause'-5. Further, we do not think that a minimum period of imprisonment is desirable for this offence.

15.73. In a Madras case', relevant to section 23F, Act. were made :--

the following observations Foreign Exchange Regulation "Whether section 23F can stand as it is in the Statute, is not a question raised in this case. It may be that this pro- vision wkich makes mere failure to pay a penalty an oﬂence with- out mens rea, (is) bad .' but we are not concerned with it in these

1. Ram Nat/I V. King-Emperor, A.l.R. 1925 All. 230.

2. State v. Abdul Aziz, A.l.R. 1962 Born. 243 (Case under the Import and Export Control Act). (The case went on appeal to the Supreme Court. But this point was not disputed).

3. Suggestion of a Ministry of the Government of India.

4. Amendment to be drafted.

5. See also para.

6. A/LR. Pratap v. Director ofE/vfarcement, (1969) Cr.L.J. 1582, 1589, para. 35 (Mad-

l5.76, infra.

137

petitions. The intention of the Legislature is clear, that a new offence has been introduced under section 23F probably con- sidering the gravity of the offences committed in res- pect of foreign exchange. I am, therefore, of the view that the nature and the characteristic of proceedings provided under sections 23(l)(a) and 23D are civil proceedings, and that their nature and character were not changed by virtue of the introduction of section 23F of the Act and section 23(l)(a) does not become a criminal proceeding."

15.74. We have examined the matter at some length. A proposal that default in payment of tax should be treated as a cri- rninal offence, does not, in our opinion, hit any particular pro- visions of the Constitution.

15.75. We have considered the position with reference to article 14 of the Constitution also. Though the proposed pro- vision will put Government dues in a preferred position, the classiﬁcation would appear to be reasonable, it being in the pub- lic interest to secure due payment of taxes. It is true that the legislation at issue in State ofRajast/ran v. Mukan C/rand', while providing for the reduction of the Jagirdar's debts (in view of the inability of the Jagirdar to pay debts in full after resumption) had made the provisions inapplicable to certain categories of debts due from the Jagirdars including debts due to the govern- ment or local aut/rarity. The court struck down the provision with regard to the exclusion of certain debts, as based on a dis- crimination not supported by any intelligible point.

15.76. But the position here is different. Decisions uphold- ing the application of a special procedure for the recovery of government dues are well-known'. Prima facie, a provision by which non-payment of the State dues alone' is made a criminal offence, could, we think, be defended, with some force in the present state of the case-law.

The proposed provision should not, however, treat all de- faulters alike. It would be difﬁcult to justify the equal treatment of those who have deliberately refused to pay their tax-dues and those who, owing to misfortune, are unable to pay it.

We are accordingiy recommending a provision penalising deliberate defaulters.

15.77. We may now take up the Customs Act. It has been stated-3 that section 135, Customs Act, which provides for punishment by the court for offences of fraudulent evasion of duty or of any prohibition, has two parts :--

_(a) for offences relating to goods to which section 123 applies such as gold, watches, diamonds, the punishment Customs, Act, sec-

tion 135.

7. State»ofRaj.m/ithz v. Mat-an Chand, A.1.R. 1964 s.c. 1633.

2. Manna La! V. Collector oflhalawar, (1961), 2 S.C.R. 962, A.I.R. l96l S.C. 803.

3. Suggestion of a Ministry of the Government of India.

138

provided, in section 135(1) is a minimum of six months' imprisonment and a maximum of 5 years, and ﬁne, when the value of such goods involved in the case exceeds Rupees one lakh. The Court has discretion to award a lesser sentence than the prescribed minimum, for special and adequate reasons to be recorded in writing;

(b) for other olfences, the punishment provided in section 135(ii) is imprisonment extending upto two years or ﬁne or both.

Now, it has been suggested that the section should be amended as follows :---

"For offences punishable under section l35(i), the maxi- mum period of imprisonment be raised from 5 years to 7 years, and the minimum from 6 months to one year.

(ii) For offences punishable under section l35(ii), the maximum period of imprisonment be raised from two years to three years, and it may also be provided that the ﬁne, if any, imposed by the Court shall be in addition to the sentence of imprisonment and not as an alternative to it. The Court will have the discretion not to award the sentence of imprison-

ment, if it considers proper.

(iii) In addition, it is proposed to provide for longer period of imprisonment for second and subseqeunt offences under' the Customs Act on the following lines :--

When a person who is prosecuted for an oﬁence punishable under section 135(1) has been convicted earlier whether under section 135(1) or l35(ii), then the minimum sentence of imprisonment shall be for two years instead of one year.

When a person, who is prosecuted for an offence punish- able under section l35(ii), has been convicted earlier whether under section l35(i) or section 13507), there will be minimum sentence of imprisonment of 6 months.

In both these cases, the Court will have the discretion to order imprisonment for a lesser period than the prescribed minimum, but only in special circumstances and for adequate reasons to be recorded.

$::1°t"gf' 15.78. In_ accordance with our_ general recommendation' section for increase in_ the maximum punishment and for minimum 135, Cug- imprisonment, it will be necessary to revise section 135 of the toms Act Customs Act.

as t0 punish_ . . . .

mm'. That is, in our view, sufficient.

l. Para. 7.20, supra.

139

15.79. It has been suggested' that section 156, Customs 'Act, should be amended to provided for making rules for giving publicity to the names and other particulars of persons who are guilty of contraventions of the provisions of the Customs Act or of any rule or order or directions made thereunder, be intro-

duced. Such a provision would be on the samedines as in section 27(2)(c) of the Foreign Exchange Regulation Act, 1947. This provision (it is stated) will put beyond doubt the authority al- ready exercised on executive basis, by which the ﬁeld formations have been instructed to give publicity to 'offences, including the names and particulars of offenders.

15.80. The Study Team on Leakage? of Foreign Exchange has made the following suggestion :--

"9.17. In the ﬁght against ﬁscal and economic offence s, it is not enough that the methods and machinery for detection of such offences should be improved and the punishment for proved cases made deterrent; it is' also necessary that there is greater social awareness of the evils of such crimes, and as much social stigma attaches to -them-as to other crimes against society. The names of the persons who are proved to be guilty of under--invoicing/,over-invoicing should be widely publicised. In the sphere of foreign exchange, by virtue of the powers conferred under section 27 of the Foreign Exchange Regulation Act, the Government have published rules which are called the Foreign Bmhange Regulation (Publication of Names) Rules, 1970. These rules provide that the Director shall cause to be published in the oﬂicial gazette the names and addresses and other particulars of persons of certain categories mentioned in the rules. These include persons who have been convicted by a court for contravention of any of the provisions speciﬁed in sub-section (1) of section 23, and also persons who have been adjudged by the Director for contravention of these provisions, pro-

vided the exchange involved is Rs. l0,000/- or more, or there has been a previous adjudication by the Director or conviction by a court in respect of the same person. In addition, the Government has been empowered to publish the names of any other persons who have been found guilty of any contra- ventions of the provisions of the Foreign Exchange Regulation Act or of any rule, order or direction made thereunder. if it is satisﬁed that it is necessary or expedient in the public interest so to do. We recommend that similarly rules should also be framed for publication of the names of offenders * in customs cases relating to under-invoicing or over-invoicing in imports and exports. Further, we are also of the view that such persons should be debarred, for a specified period, from getting any facilities or concessions which are given Customs Act-

Suggestion about public censure.

l. Suggestion of a Ministry of the Government of India.

2. Report of the Study Team on Leakage of Foreign Exchange through Invoice Mani-

pulation, Ministry of Finance, (1971), page 99, Para. 1 M of Law/72-10 9.17.

Recoin-

niendation to add public censure.

Prepara-

tion in certain cases under the Customs Act to be an offence.

Recom-

mendation regarding section 123, Cus-

toms Act.

Burden of proof of mens rea under Customs Act.

Procedure for trial under Cus-

toms Act.

140

to importers or exporters under certain schemes, such as those relating to export cash assistance, and import entitlements ,1 under the Registered Exporters scheme." \ 15.81. An amendment to the Customs Act of a general nature may be inserted to provide for public censure'.

15.82. We have already recommended2 the insertion of a provision punishing preparation. to commit an offence under the Customs Act in certain cases.

15.83. We wish to refer to a small point concerning section 123(1), Customs Act, which throws on the accused the burden of proving that goods seized from him are, not smuggled goods. We wish to point out that it does not cover cases where goods are not seized from the possession of a person, though they are proved to have been in his possession previously. We think that such a situation should also be covered because the principle behind the existing provision is equally applicable.

We, therefore, recommend that section 123(1), 'Customs Act, should be revised as follows :--

"123. (1) Where any goods to which this section applies--

(a) are seized under this Act in the reasonable belief that they are smuggled goods; or

(b) are proved to have been in the possession of any person before such seizure, the burden of proving that they are not smuggled goods shall be on the person from whose possession the goods were seized or in whose possession they are proved to have been before the seizure, as the case may be."

15.83A. As recommended alrea y3', a provision shifting the burden of proof may be inserted in the Customs Act. This will be in addition to section 123.

15.84. We shall now refer to a few procedural points rele- vant to the Customs Act. Cognizance in Customs Cases is taken on complaint. As the Supreme Court has observed' 2--

"The Customs Act (52 of 1962) invests the Custom Oﬁicer with the power to search premises, to stop and Search conveyances and to examine persons, and also with the poxs er . Amendment to be drafted. ' 1

2. Para. 15.20, supra.

3. Para. 7.12, supra.

.4'-

Ramesli Chandra V. U,P. State, A.l.R. 1970 S.C. 940, para. 24.

141

to summon persons. to give evidence and to produce docu- ments and (sic) seizure of goods, documents and things which are liable for conﬁscation. He is also invested with the power to release a person on bail. He is entitled to order conﬁscation of smuggled goods and impose penalty on persons proved to be guilty» of infringing the provisions of section l37...the proceedings before a Magistrate can only be commenced by way of a complaint and not on a report made by a Customs Officer."

15.85. A suggestion' made with reference to the Customs Act states that even where a regular trial has to be adopted, the law should be simpliﬁed as is done in the cases reported by the police where the trial starts with the ﬁling of the charge-sheet. Under the Customs Act evidence has to be led before a Magistrate before the charges are framed. This itself takes a pretty long time, which should be changed by change of procedure suggested above.

A somewhat similar point was made by an Inspector-General of Police, during oral discussionsz.

The matter may, therefore. be dealt with at some length.

15.86. Under the Criminal Procedure Code (as amended in 1955), two different procedures are provided for cases instituted'on police report (on the one hand) and other cases3 .(on the other hand). In the Report of the Law Commission' on the Code of Criminal Procedure. 21 change has been proposed in the deﬁnition of 'complaint' in section 4(l)(h) of the Code, by proposing substitution of the words 'police report' for the words 'the report of a police oﬁicer', and a deﬁnition of "police report" has been proposed to be added as 'the report made by the police ofﬁcer under section 173 (of the Code)'. This change has been proposed in order to dispel the existing confusion in respect of those reports which the police oﬂicers have submitted in cases of un- authorised investigation (e.g. on non-cognizable oﬁences). But this would not alter the status of complaints made by public .s'er't'tlnts.

15.87. For reports submitted to courts under section 173 of the Code of Criminal Procedure, there is a shorter procedure of trial. According to it, the court is authorised to frame a charge immediately on the basis ofthe 'report' made to it under section 173, after examination of the documents submitted the re- with. The reasoning behind this is that in such cases, after 1, Collector of Customs. Madras (Letter dated l7-ll-1971).

1971).

3. Contrast section 251A with sections 252 to 259, Criminal Procedure Code.

4. 41st Report of the Law Commission (Criminal Procedure Code), Vol. 1.

-. Discussions at Madras with the Inspector General of Police, Madras (November .

Amend-

ment of section

139. 142 <' , the rigorous investigation and recording of statements by the police, there is little necessity of examining witnesses before the charge.

There are many departments of the Government apart from the police having powers of search and seizure, powers of record- ing statements and investigation as have been conferred upon the police under the Code of Criminal Procedure. Under some Acts like the Customs Act, the powers of the departmental officers are even wider. But, if a prosecution is launched by them in respect of any olfence under the respective Acts, the procedure of trial applicable to cases instituted on their 'com- laint' (a departmental 'challan', as it is called) is the longer and more elaborate one given in sections 252 to 259 of the Code of Criminal Procedure. This procedure is much elaborate, as the court cannot frame charges in such cases unless witnesses are examined whose evidence, if not rebutted, would otherwise ~ be sufﬁcient to warrant a conviction to the accused. There is no doubt some justiﬁcation for treating these complaints on a different footing from those ﬁled by private individuals. They are more akin to the police "challans" under section 173 of the Code. Having been made after proper investigation by the public servants concerned--public servants exercising the same powers as the police----they can, with some justification. be treated as police reports, and the procedural advantage of section 251A should be made available to them. At the same time . the proposed change' might involve numerous consequen- tial changes in the Criminal Procedure Code and cannot be con- veniently drafted in this Report.

I 15.88. One practical aspect deserves to be considered, that statements made to such public servants may (if the complaints are treated as police reports) come to be regarded as 'confession to a police officer' within section 25, Evidence Act. It is to be noted that judicial decision on section 25, Evidence Act, have, while holding that confessions made to Customs Oﬂicers or Excise Officers, are not made to a police officer, relied, inter alia, on the fact that the concerned officers have no power to submit a report on which the Court can take cognizance. That. how-

ever, is a matter to be considered separately under the Evidence Act'.

15.89. As already stated3, it is desirable to introduce a pre- sumption as to foreign documents. This affects section 139 of the Customs Act. The section should apply to documents under other laws also'.

1. Department can raise the point separately.

2. To be considered under section 25, Evidence Act.

3. Para. 15.30, supra, "'_ gee para_ 12.3, supra.

143

15.90. It has been suggested1_ that tampering with documents which are relevant to evidene under the Customs Act should be made a speciﬁc offence under the law. It appears that one of the sub-clauses of clause (72) of section 167 of the Sea Customs Act, 1878, speciﬁcally dealt with counterfeiting, falsifying, fraudulently altering or destroying any document, or any seal, signature or initials or other marks made or impressed by any officer of Customs in the transaction of any business relating to customs.

Section 132 of the Customs Act, 1962 has replaced the ﬁrst sub-clause of clause (72) of section l67 of the Sea Customs Act, 1878 (with some modiﬁcations). Section 132 makes a false dec- laration, false statement or ﬁling false documents or a betment thereof, an offence.

It is, however, seen that the previous provision relating to fraudulent alteration etc. has been dropped under the Act of 1962.

15.9]. It is understood2 that the relevant sub-clauses of section 167, clause (72) were deleted, as they were considered to be offences under the general provision in the Penal Code.

15.92. The law with regard to tampering with documents is contained in the Penal Code3. The deﬁnition of 'forgery' in the Code covers all possible situations. Further, the punish- ment in respect of forgery has, in the Law Commission's Report' on the revision of the Penal Code, been proposed to be raised to three years' imprisonment or ﬁne or both. In the circumstances, there is no need to make any provision in the Customs Act as to tampering with documents.

15.93. The Gold (Control) Act is the last of the Acts with which this Report is concerned. It has been stated5 that sec- tion 85 of the Gold (Control) Act covers a wide range of offences punishable with imprisonment of a minimum of six months and maximum of 3 years. and also with ﬁne. It has been suggested that this section should be split up, and for oﬁ'enes relating to the manufacture, possession, acquisition and sale of primary gold punishable under section 85(i) to (iv), enhanced minimum and maximum punishments on the lines proposed for section 135 of the Customs Act, where the value of the primary gold involved is Rs. one lakh or more, should be provided. The punishment in those cases would be minimum of one year and maximum of 7 years' imprisonment, and also ﬁne. Likewise, it has been sug- gested that the punishment for contravention of section 53(3) Tampering with Cus-

toms docu-

ments.

Gold (Control) Act, 196 Punish-

ment.

. Collector of Customs, Madras. (Letter dated 17-11-1971). . Customs Bill (No. 56 of 1962)~Notes on Clauses.

I Z

3. Chapter 18, section 463, et. seq., Indian Penal Code.

. 42nd Report of the Law Commission (Indian Penal Code), Chapter 18 under section

463.

5. Suggestion of a Ministry of the Government of India.

Amend-

mentof section 85, Gold (Control) Act as to punish-

rnent.

Amend-

ment of Gold (Control) Act as to burden of proof.

Gold (Control) Act--

Publicity.

False statements in applica-

tions etc. 144 [which enjoins that no licensed dealer, reﬁner or goldsmith. shall own or possess any 89:16, (Primary gold, articles'; ornaments which have not been included in the prescribed account)] should be stepped up. The suggested enhanced punishment is minimum imprisonment of one year and maximum of 7 years' imprison- ment when the value of such unaccounted gold is Rs. one lakh or more.

15.94. We think that it would be enough if, in accordance with our general recommendation for increase in the maximum punishment', (and for minimum imprisonment and fine ) section 85 is amended.

15.95. In accordance with our general recommendation1 for shifting the burden of proof as to mens rear, it will be neces- sary to insert a section in the Gold (Control) Act relating to the burden of proof of mens rea.

15.96. It has been suggested?' that a provision be introduced under section 114 of the Gold (Control) Act for giving publicity to names and other particulars of persons found guilty of the contravention of the provisions of the Act, on the lines proposed under section 156 of the Customs Act, 1952.

We accept the principle of the suggestion'.

l5.97. With reference to the making of false statements in an application. it was suggested during our oral discussions that it should be convenient if a speciﬁc provision on the subject is made in the Imports and Exports Control Act, instead ofleaving the matter to be regulated by the relevant provision in the Indian Penal Code. We do not see any objection to such a provision. It may be stated that such a provision occurs in many Acts, though the maximum punishment varies from Act to Act. We list below a few of the pertinent provisions :~« Section 9(c). Central Excises Act, 1944-Supplying false information--~six months.

Section 22 read with section 23(lA). Foreign Exchange Act--two years.

Section l6(l)(g). Prevention of Food Adulteration Act--False warranty.

Section 9. Essential Commodities Ac1----five years.

1. Para. 7.20. supra.

2. Para. 7.12, supra.

3. Suggestion of a Ministry of the Government of India.

4. Amendment is indicated separately.

145

Section 277, Income-tax Act.1 Section 132, Customs Act.

Sections 86 and 87, Gold (Control) Act.

We recommend the insertion of a suitable provision on the subject. in the Imports and Exports (Control) Act.

1. See para.klS.60, supra.

Introduc-

tory.

Desirabi-

lity of pre-

Ventive detention.

Preventive detention and the rules of law.

CHAPTER 16 PREVENTIVE DETENTION i 16.1 We now proceed to consider a politically and consti- tutionally sensitive subject which has been referred to us 'by Government. It relates to the problem of invoking the Preventive Detention Act against persons guilty of social and economic offences 16.2. Government have from time to time considered the desirability of subjecting to preventive detention persons habi- .

tually engaged in offences against the laws relating to customs, excise and foreign exchange. It has been realised. and rightly in our opinion, that the Preventive Detention Act, as it now stands, may not justify the detention of such persons. "Maintenance of supplies and services essential to the community" may not cover the cases of such persons unless a 'proximate relation' were to be established to the satisfaction of the court between the maintenance of such supplies and services on the one hand and the activities of these persons, say, for instance. smuggling, on the other. A further problem that has caused anxiety from time to time has been whether an amendment of the Pre- ventive Detention Act will be sufficient for the purpose or whether nothing short of a constitutional amendment will suffice.

16.3. We believe that preventive detention is an anachro- nism in a democratic society like ours, based on the principle of the rule of law. The detention of individuals without trial for any length of time, howsoever short, is thoroughly inconsis- tent with the basic ideals of our Government. The Constitution indeed does not countenance any general power of preventive detention and both the Union and the State Governments have been empowered to make laws authorising such detention only for speciﬁed purposes. These powers have been given by way of necessity because it was felt that, howsoever repugnant the idea of preventive detention may be, in certain situations and for certain purposes it was advisable to resort to this extreme power rather than take the grave risks which the State will have to face in the absence of such power. We would naturally be re- luctant to recommend extension of that power to any new areas. But, after careful consideration, we have come to the conclusion that, if preventive detention were ever justiﬁed, it would be for the purpose of preventing some of the offences under considera- tion, namely, offences against the regulations of foreign exchange. excise and customs. These offences acquire an ominous character 146 147 because of the immense impact they have on the well-being of the entire nation by virtue of their pernicious effect on vital national policies. In times of war and other emergencies they acquire a further and even more dangerous dimension because of the usual association of smuggling with espionage. We are, therefore, satisﬁed that the Union Government should not be without power to detain preventively hardened offenders against the laws of customs, excise and foreign exchange.

16.4. The:next question is whether any statutory or con- stitutional amendment is required to give the Central Govern- ment such power. We are of opinion that the Preventive Deten- tion Act as it now stands will be inadequate to cover the detention of such offenders. Obviously, such persons are not covered under the rubrics of defence, foreign affairs, security of India, security of State, maintenance of public order or the maintenance of supplies and services essential to the community. Although activities like smuggling may have an indirect impact on any or some of these matters, it is diﬁicult to see how such relation can be regarded a direct and proximate relation in terms of the judicial standard laid down in Rex v. Basudeiﬂ and subsequent cases. The Preventive Detention Act, therefore, may have to be amended in order to give express authority for the detention of persons habitually engaged in anti-social activities in violation of the laws of customs, imports and exports, foreign exchange and the like.

16.5. That raises the further question about the legislative competence of Parliament to make such an amendment. Before the recent judgment of the Supreme Court in Union Q/r]I1t1'I'(l v. 17.5. Dhillonz, doubts would have been entertained about the competence of Parliament to extend preventive detention beyond the categories enumerated in Item 9 of List I and Item 3 of List 111 of the Seventh Scheduie to the Constitution. It could have been argued that no such power could be read into entry 97 of List 1, relating to residuary power, and clause (2) of article 248 relating to the same power. It could also have been ar- gued that the residuary power does not cover preventive deten- tion, inasmuch as the subject has been dealt with in express items in the two aforesaid entries.

16.6. However the majority opinion in the Supreme Court decision, above referred to3 makes that argument untenable since it lays down the proposition that item 97 of List I and article 248 cover not only those powers which are not expressly included in the Second and Third Lists, but also powers which are either not stated in any of the three Lists, or, even those which have been expressly withheld from Items in List I but not conferred in Lists II and III. Thus, the Court has held that the power to Need for constitu-

tioiial amend-

rnent.

Legislative compe-

tence.

Judgement in Union of India v.

H.S. Dhillon.

1. Rex v. Basudev, A.I.R. 1950 F.C. 67; (1949) F.C.R. 657.

2. Union oflndia v. H.S. Dhillon, (1971) 2 S.C.C. 779.

3. Union of Imlia v. H.S. Dhillan, (supra).

Majority View analysed.

Opposite view consideed.

148

impose a tax on the capital value of agricultural land is avail- able to Parliament as a residuary power, although. entry 86 of List 1 expressly excludes such power from the grant it makes to Parliament. The Court has also held that, since the power to impose a tax on agricultural land is not conferred in either List [I or in List II L it must be read in the residuary power, notwith- standing the fact that Item 86 of List I expressly withholds it from the grant it makes.

The basic philosophy of the majority opinion is that there ran be no vacuum of legislative power. and therefore any power not covered by all the three Lists taken together must be found in item 97 of List I as a residuary power. We are in general agreement with this philosophy of interpretation of the provi- sions of the Constitution dealing with the federal distribution of powers. There is ample support for it. as the majority opi-

' nion itself has pointed out, in the precedents ofthe other Common-

wealth countries.

16.7. This decision would apparently lend support to the view that Parliament, under its residuary powers, may authorise preventive detention for reason not enumerated in item 9 of List I and Item 3 of List II. In fact. the majority opinion has illustrated its point directly with the help of the provisions relating to preventive detention, and has expressed the opinion that entry 9 of List I and entry 3 of List III do not exhaust the legislative power over the subject of preventive detention. The Court has observed:

"We may illustrate this point with reference to some otherentries. In Entry 9. List I, 'Preventive Detention for reasonsconnected withdefence, foreign affairs or the security of India' the matter is not Preventive Detention but the whole entry. Similarly, in Entry 3 , List Ill. 'Preventive De- tention for reasons connected with the security of the State. the maintenance of public order or the maintenance of supplies and services essential to the community' the matter is not Preventive Detention but the whole entry. It would be erroneous to say that Entry 9. List I and Entry 3. List [ll deal with the same matter."

16.8. There would. thus, seem to be basis in the majority opinion for the view that Parliament has the legislative compe- tence to legislate on preventive detention for reasons not indicat- ed in Item 9 of List I and Item 3 of List Ill.

l6.9. It is possible, however. to argue that there is a radical difference between wealth tax on agricultural land and preventive detention for smuggling. Taxation is a normal power inherent in Governments and it may be legitimately read as a residuary power ; and that is what the majority decision in Dhillon's case has done. If the minority decision in the said case were accepted. it would lead to the constitutionally anomalous position that the power of taxation, which is inherent in every sovereign state.

149

is not available to Parliament or the State Legislatures in respect of income on agricultural land and the said income would stand outside the reach of the legislative power of Indian Republic. That clearly is an untenable position. That is why we are in agreement with the majority view.

16.10. But, preventive detention is not a power of that kind; in view of the provisions of clauses (I) and (2) of Article. 22, neither Parliament nor the Legislature of a State would have any power to legislate on preventive detention but for the ex- press provisions in the respective entries in the Seventh Sche- dule. Whereas, even if there had been no express entries about the wealth tax, the power to legislative on wealth tax could be legitimately read in the residuary power. Such an interpretation of a residuary power in respect of preventive detention is. in our opinion. impermissible. because preventive detention attributable to Entry 97 would directly violate clauses (1) and (2) of Article 22 and these clauses represent fundamental rights guaranteed to the citizens of lndia.

lo.ll. ln fairness to the majority decision. we Ought to add that the observations from the majority judgment. which we have quoted above. are obirer dicta, and the constitutional aspect of the matter pertaining to preventive detention does not appear to have been brought to thqnotice of the Court and has, therefore. not been considered. Thus, in our view, the position with regard to the power to legislate on preventive de-

tention is substantially and radically diﬂerent from the power to low wealth tax.

l6.l2. We have carefully considered this question and have given due consideration to the general tenor of the majority de- cision in D/zi//onlv Case and the obiter observations made by Chief Justice Sikri who spoke for the majority in the said case. Our considered opinion is that. on the whole, it would be advis- able for the Government to secure a constitutional amendment enlarging the contents of Item 9 in List I of the Seventh Schedule.

We accordingly suggest that Item 9 of List I may be amended so as to read as follows :~ "Preventive Detention for reaons connected with Defences. Foreign Affairs. the security of India, the ellectve realisation ofduties of Customs and Excise. or the conservation of Foreign Exchange; persons subjected to such detention"

Recom-

nicndaiio r.

introduc-

tory.

Categories of orders.

1. Criminal Procedure Code Bill. 1970, Clause 407(1).

CHAPTER 17 INTERFERENCE BY WRITS WITH INVESTIGATION l7.l. In some of the replies to the Questionnaire issued by the Commission, as also during oral discussions with some offi- cers, it was stated that the investigation of economic offences is sometimes hampered by writs issued by the High Courts which stay the proceedings of the investigating agencies until the matter is disposed of.

17.2. A study of summaries of sample cases forwarded by some of the officers at the request of the Commission. as also of a few reported decisions, relevant to the subject, shows that orders of Courts which were supposed to hamper im'e.stigation fell into the following main categories :----

(a) orders passed by the High Courts or Courts of Ses-

sion on an interlocutory revision ;

(b) writs issued by the High Courts under article 226. not staying investigation as such, but restraining the executive officers from taking certain steps, such as search and the like;

(d) orders issuedjby the trial court itself, staying the trial until decision of some question of law in the High Court, being a question which would affect the proceedings in the trial court itself.

17.3. So far as category (a) is concerned, it should be stated that the question does not pertain to economic offences alone. but to the entire ﬁeld of criminal procedure. It may be of in- terest to note that in the recent Bill on Criminal Procedure Code' there is a proposal to' bar revision in respect of interlocutory orders.

So far as category (b) is concerned. the usual type of case presented is a petition questioning the leglity of search. Since seizure of a document or other property and search of premises frequently involves questions of fundamental rights, it has been possible for the parties affected by the seizure or search to app- roach the High Court for the issue of appropriate writs on the basis of violation of this or that fundamental right.

150 151

Interference with the whole process of investigation----cate-- gory (c) above--~one should think, should be a very rare situation. The situation has. however. arisen in one or two cases, not yet ﬁnally decided. and the following paragraphs seek to deal with the legal position in brief.

[Category (d) need not be discussed in detail] 17.4. Attempts made in the past to invoke interference by the Court with the process of investigation by the police have not usually succeeded.

Rulings' under Chapter 14 of the Crirqinal Procedure Code--~ particularly, section 159----have made it clear that the court cannot control or interfere with investigation by the police.

Same has been the fate of attempts to invoke the inherent power? of the court (section 561A, Criminal Procedure Code).

17.5. However, it is pertainent to refer to a recent Supreme Court 3'adgement3. The actual decision was concerned with section 159. Criminal Procedure Code and was as follows :--

"The scheme of these sections'.... clearly is that the power of the police to investigate any cognizable olfence is uncontrolled by the.Magistrate,_ and 'it is only in cases case. The power of the police to investigate has been made independent of any control by the But, dealing with the malaﬁde police, the Supreme Court made obiterm exercise of the power by the the following observations oﬁicer mala ﬁde, the High Court can always issue a writ of mam/amus restraining the police oﬁicer from misusing his legal powers."

Khwcija Nazi!' A/imad, A.l.R. 1945 P.C. 18. X/iwaja Nazir Ahmad, A.l.R. 1945 RC. 18. SN. S/rarma 1'. Bipirz Kimtar A.I.R. 1970 S.C. 786, 788, 789. Sections 156, I57 and 159, Criminal Proced ="re Code.

P 5*' P 7'' Inter-

ference with invest iga-

tion.

Case-la"

exa mined.

Amend-

ment not T960111- mended.

Need for hearing in mind importance of economic offences.

l. ta) A.l.R. 1966 S.C. 1209;

I52 The Court added-----

j'_The fact that the Code does not contain any other provision giving power to a Magistrate to stop investigation by the police cannot be a ground for holding that such a power must be read in secti6'n 159 of the Code."

17.6. We have also examined a number of decisions whicli relate to writs issued in connection with steps taken towards invetigation or administrative adjudication. These decisions relate to search and seizure', admissibility of certain statementsl. custody of documents3 or extension of time'.

17.7. In almost all these cases, writs were applied or issued on the ground that some fundamental right or other of the pe- titioner was violated or threatened to be violated. The writ was not directed at the process of investigation as such,gbut at particular steps forming part of the process. No doubt, the blocking of one step blocks the prompt completion of the in- vestigation. But in a Constitution which gurantees fundamental rights, such situations are unavoidable. We do not think that a constitutional amendment to prohibit the issue of writs in such cases is called for.

17.8. Nevertheless, we must note that there is a complaint that the issue of writs prohibiting the taking or continuance of some steps necessary for completion of the investigatory pro- cess hampers investigation. We are free to confess that this complaint cannot be regarded as baseless. It is not for us to comment on the legality or propriety of the judicial orders passed in such cases. But we hope that while exercising their extraordi- nary jurisdiction to issue writs in these cases. courts will not over- look the need for speedy and unhampered investigation of these offences which cause grave harm to the whole nation. We would also like to emphasise that, in dealing with proceedings initiated before them by parties mainly not solely for stalling or delaying the investigation of offences alleged to have been com- mitted by them, courts should bear in mind what the Privy Council laid down in a very pithy and emphatic manner when it observed that the function of the courts begins after the investigation is complete5.

(/1) A.1.R.1967 S.C. 1298;

iv) (1967) 71 Cal. W.N. 814;

(d) A.l.R. 1970 Cal. 212.

_la la) A.l.R. 1970 S.C. 1065;

(/2) A.l.R. 1970 S.C. 940.

3. A.l.R. 1962 S.C. 759.

A.[.R. 1968 Mysore 89.

Nazir Ahmed's case.

CHAPTER 18 MISCELLANEOUS l8.l. We have now. come to the end_of our Report. and Conclu- shall mention a few miscellaneous matters. S'''"' 18.2. Suggestions are often made that in order that the lower Scnlencing Magistracy may realise the seriousness of some of the social :,;"fe'°"' and economic offences. some method should be evolved of mak-- "

ing the judiciary conscious of the grave damage Caused to the country's economy and health by such anti-social crimes. The frequency and emphasis with which these suggestions have been made, and the support which they have received from very high officers has caused some anxiety to us. But we hope that the higher courts are fully alive to the harm, and we have no doubt that on appropriate occasions, such as, judicial conferences, the subject will receive attention. It is of utmost importance that all State instrumentalities involved in the investigation. prosecu- tion and trial of these offences must be oriented to the philosophy which treats these economic offences as a source of grave challenge to the material wealth of the nation.

18.3. We hope we shall not be misunderstood if we suggest that even the holding of periodical meetings on sentencing may be_beneﬁcial. not in the context of economic offences only, but in the evolution of a rational and consistent policy of sentencing. Experience of England is, by now. familiar to those interested in the subject.

A meeting of over l0Ojudges was held in the Royal Courts of Justice in London on January 7-8, 1965 to take part in exer- cises designed to increase the uniformity of sentencing. The Lord Chief Justice expressed the hope that the meeting would be a model for similar ones throughout the countryl.

Conferences between judges, magistrates and penal adminis- trators are, in England, organised with increasing frequency in many partsgof the country with an annual conference in London for judges of the Supreme Courtsl.

18.4. Besides holding councils on sentencing. it may be worthwhile to hold 'workshops' which would be less formal but equally useful and likely to give concrete results. Such workshops could, for example, be attended by all Special Judges or other officers concerned with economic offences.

1. Graham Parker, "Education of the Sentencing Judge". (1965) 15 206, 25l.A

2. Mclean and Wood, Criminal Justice and the Treatment of Offenders. (1969). page 90.

I53 Publicity.

Other sister Acts.

Appendi-

ces.

154

18.5. We need not emphasise that ultimately, the success of enforcement depends on the intergrity and efficiency of the staﬁ' employed for the purpose. In making these observations we are stating the obvious. But we have gathered an impression that the number of officers in charge of enforcement of some of the laws in question is not adequate. Financial considerations, no doubt, come in the way, but increased expenditure in the direction of augmentation of the quality and number of the staff is likely to repay itself, if not likely to bring greater returns. In any case, as an experienmental measure, it is worth trying in selected areas where_ the enforcement staff is found to be in- adequate. Besides, for detecting offences of smuggling, parti- cularly in the coastal areas and border areas, the Administration must employ more eﬂicient and modern methods.

18.6. Since some of the amendments which we are propos- ing (e. g. the amendment in relation to recovery of penalities under the Foreign Exchange Act)' will involve additional administrative work, it is desirable that the strength of the staff at the appropriate level should be augmented, so that the reforms 'in the law may be adequately implemented.

18.7. Publicity is also of importance. To quote from ' the Report of a Working Groups2---- -

"apart from the integrity of ofﬁcials entrusted with the responsibility of taking decisions in such matters as the grant of a permit to travel etc. the best safeguard against harass ment, patronage and corruption, we feel, is inadequate publicity being given to the rules, regulations and procedure as also to the decisions taken both to grant and to reject. It is not enough to give fair decisions but it is equally necessary that the fairness of the decisions should be made well known and acknowledged. We recommend,' therefore, that a satis- factory scheme for the publicity to the general rules and pro- cedures and to individual decisions in this ﬁeld should be worked out and adopted."

18.8. Our recommendations and discussions have been conﬁned to the major Acts, and we have not dealt with sister Acts relating to subjects allied to these major Acts. It is needless to say that much of what we have said above could apply to them. We do not consider it necessary how far the other Acts could be amended on the lirps of the amendments suggested by us in the major Acts. Wherever necessary, that question can be dealt with by the Ministry concerned.

18.9. The Appendices to this Report contain detailed data on various aspects3.

1. Para.

15.27, supra.

2. Report of the Working Group of the Administrative Reforms Commission on Customs 6: Excise Administration, (1968), (October), page 74, para.

12.14.

3. One ofthe Appmzlicz s shows our recommendations in the form of draft amendments. These are very tentative.

155

SUMMARY OF MAJOR RECOMMENDATIONS

1. Central Excises and Salt Act, 1944.

(1) Section 9 should be amended to increase the punishment. There should be a provision for minimum imprisomentl and minimum ﬁne.

(2) A new section-----section 9A----should be inserted to punish the unauthorised removal of excisable goodsz.

(3) Another section---section 9B----should be inserted to make it clear that conﬁscation shall not prevent punishment3.

(4) A new section section--l0A»---should be inserted to pro- vide for public censure'.

2. Foreign Exchange Regu'a/ionAct, 1947.

(1) ln section l9 D(l) of the Act. for the words 'has reason to believe' the words 'honestly believes' should be substituted5.

(2) A new section should be inserted in the Act to provide interception of postal articles and telegraphsﬁ (3) By inserting section l9DD, power to seize containers7 should be provided for.

(4) In section 23(1). punishment should be increased." There should be a provision for minimum imprisonment, and minimum fine.

(5) By adding an Explanation under section 23C, a provision should be inserted to make the Chairman and Managing Direc- tor of a company criminally liable for transactions connected with a permission under the Act, applied for and obtained in the name of the Company.' ((3) A new section----section 23CC--should be inserted to provide for public condemnation of corporations convicted of oﬂ"ences under the Act."

I. Paras. 15.5 and 15.7.

2. Para. l5.1.

3. Para. 15.3.

4. Para. 15.4.

5. Para. 15.36H.

1. Para.

2. Para.

'Tu-q 156 (7) The departmental penalties under section 23(1) should be increased to ﬁve times the amount of foreign exchange involved (instead of three times, as at present). 1 (8) Another new section-----section 23CCC--shou1d be in_- creased to give the court power to order the stoppage of a parti- cular business on second conviction?

(9) Another new section----section 23FF--should be inserted to provide that any tax, penalty etc. due under the Act may be recovered by a Magistrate as if it was a ﬁne imposed by him.3 (10) Under another new section----section 23FFF----prepara- tion to commit an offence under the Act should be punished in certaion circumstances.' (11) Section 24A of the Act should be extended to foreign documents and to documents seized under other laws, and to cases where the document was seized from a person other than the accused.5 (12) Guide-lines should be laid down as to the cases in which prosecutions may be instituted under the Foreign Exchange Act.' (13) There should be no hesitation in exercising the powe impound or revoke a passport under section 10(3), Passports Act,7 in serious cases under the Foreign Exchange Act.

III. Prevention of Food Adulteration Act, 1954 (1) A new section--section 2lB--should be inserted to pro-

vide for public condemnation of corporations convicted of offences under the Act."

IV. Essential Commodities Act, 1955 (1) The maximum term of imprisonment under section 7(l)(a)

(ii)should be increased from ﬁve to seven years.9 (2) In section 10A, the words "and bailable" should be pro- vided.1° _ (3) A new section----section 10B--should be inserted to pro- vide for the public condemnation of corporations convicted of offences under the Act. 11 15.9.

15.21.

15.27.

' 15.30.

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