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Project: Interpretation of Statutes - II

National Law Institute University Bhopal

Interpretation of Statutes II
Purposive Construction of Penal Statutes

Submitted to:

Submitted by:

Prof. Debashree Sarkar

Ananya Thakral
2012 BALLB (H.) 14
A 1162


I take this opportunity to express my profound gratitude and deep regards to Ms. Debashree
Sarkar for her exemplary guidance, monitoring and constant encouragement throughout this
project. So I would like to thank her for giving me the opportunity to work on this topic. She has
given me all the encouragement I needed to complete this project. It is because of her step by
step guidance, correction of errors committed by me during the making of this project and her
method of overall evaluation helped me compose this work with absolute objectivity, gaining
more knowledge about the project topic undertaken by me.

Purposive Construction of Penal Statutes

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Purposive Construction When the material words are capable of bearing two or more
constructions, its established rule for construction was laid down in Heydons1 case. It enables
consideration of four matters in construing an Act: (i) what was the law before the making of the
Act, (ii) what was the defect for which the law did not provide, (iii) what is the remedy that the
Act has provided, and (iv) what is the reason of the remedy. The rule was explained in the
Bengal Immunity Co. v. State of Bihar2 by S.R. Das, CJI as follows: It is a sound rule of
construction of a statute firmly established in England as far back as 1584 when Heydons case
was decided that for the sure and true interpretation of all statutes in general (be they penal or
beneficial, restrictive or enlarging of the common law) four things are to be discerned and
1. What was the common law before the making of the Act,
2. What was the mischief and defect for which the common law did not provide,
3. What remedy the Parliament hath resolved and appointed to cure the disease of the
commonwealth, and
4. The true reason of the remedy;
And then the office of all the judges is always to make such construction as shall suppress the
mischief, and advance the remedy, and to suppress subtle inventions and evasions for
continuance of mischief and to add force and life to the cure and remedy, according to the true
intent of the makers of the Act.
Purposive construction has also been applied to penal statutes to avoid a lacuna and to suppress
the mischief and advance the remedy.
For example, the word owner in Section 60(3) of the Narcotics Drugs and Psychotropic
Substances Act, 1985 which provides or confiscation of any conveyance used for carrying any
narcotic drug or psychotropic substance unless it was so used without the knowledge of the
owner was construed to mean registered owner in case of a motor vehicle sold under a Hire-

1 76 ER 637
2 AIR 1955 SC 661
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Purchase agreement even before installments are fully paid for otherwise such vehicles could
never be confiscated3.
Section 15 of the Terrorists and Disruptive Activities (prevention) Act 1987, having regard to the
object of meeting the menace of terrorists makes a confession recorded by a police officer
admissible and although the confession so recorded is required by Rule 15 to be sent to a judicial
magistrate along with the accused, it has been held that the magistrate is not obliged to make an
enquiry regarding the voluntary nature of the confession before sending it to the designated court
for such an enquiry would frustrate the purpose of Section 15 in authorizing a police officer to
record a confessional statement4.
And, in Sections 340B and 498A of the Penal Code, having regard to the object of preventing
cruelty to women, the expression husband has been construed to cover a person who enters
into marital relationship with the woman concerned whatever may be the legitimacy of the

Baldev Krishna Sahai v. Shipping Corporation of India6:

Companies Act, 1956: Section 630 - Propertyof company. Whether penalty is allowed to be
imposed on an officer who refused to vacate allotted flat by company after his retirement?
Facts: Sub-section(1) of Section 630 of the Companies Act, 1956 provides for launching of
prosecution against an officer or employee of a company, who (a) wrongfully obtains possession
of any property of a company, or (b) having any such property in his possession wrongfully
withholds or knowingly misapplies the same. The petitioner who was given a flat by the
company for his residence during the period of his employment did not vacate it on his
3 Ganga Hire Purchase Pvt. Ltd v. State of Punjab, AIR 2000 SC 449
4 State of Mahrashtra v. Bharat Raghani, AIR 2002 SC 409
5 Reema Aggarwal v. Anupam, AIR 2004 SC 1418
6 AIR 1987 SC 2245
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retirement. He was granted six months time on humanitarian grounds upon his undertaking to
comply with. Upon his failure to vacate the premises, the company lodged a complaint against
him under the Act for wrongful withholding of its property. [The company initiated proceedings
for his eviction under the Public Premises (Eviction of Unauthorised occupants) Act, 1971.]
In the special leave petition it was contended for the petitioner that the provision contained in
Section 630 of the Act is a penal provision and, therefore, must be subject to a strict construction
and there is no room for intendment, that the term 'officer or employee' occurring in sub-section
(1) of Section 630 refers only to the existing officers and employees of a company, and not the
past officers, and that clause (b) of sub-section (1) does not stand by itself but is interconnected
with clause (a) thereof and therefore clauses (a) and (b) must be read together and when so read
the words any such property' in clause (b) do not qualify the words 'any property of a company'
in clause (a) and only relate to the property of company wrongfully taken possession of by a
present officer.
1. Section 630 of the Companies Act, 1956 plainly makes it an offence if an officer or
employee of the company who was permitted to use any property of the company during
his employment, wrongfully retains or occupies the same after the termination of his
2. The term 'officer or employee' of a company in Section 630(1) applies not only to
existing officers or employees but also to past officers or employees if such officer or
employee either (a) wrongfully obtains possession of any property, or (b) having obtained
such property during the course of his employment, withholds the same after the
termination of his employment, then penal consequences will ensue.
3. The beneficent provision contained in Section 630 of the Companies Act though penal,
has been purposely enacted by the legislature with the object of providing a summary
procedure for retrieving the property of the company. It is the duty of the Court to place a
broad and liberal construction on the provision in furtherance of the object and purpose of
the legislation which would suppress the mischief and advance the remedy.
4. The whole object of enacting the provision is the preservation of the property of a
company by the creation of two distinct offences by clauses (a) and (b) which arise under
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different sets of circumstances, and it would be rendered nugatory by projecting clause

(a) into clause (b).
Normally, it is only the present officers and employees who can secure possession of any
property of a company. It is also possible for such an officer or employee after termination of his
employment to wrongfully take away possession of any such property. This is the function of
clause (a) and although it primarily refers to the existing officers and employees, it may also
take in past officers and employees. In contrast, clause (b) contemplates a case where an officer
or employee of a company having any property of a company in his possession wrongfully
withholds it or knowingly applies it to purposes other than those expressed or directed in
the articles and authorised by the Act. It may well be that an officer or employee may have
lawfully obtained possession of any such property during the course of his employment but
wrongfully withholds it after the termination of his employment. That appears to be one of the
functions of clause (b). That would primarily apply to the present officers and employees and
may also include past officers and employees.

M.G. Wagh & Ors vs Jay Engineering Works Ltd7

Facts: The problem posed was whether Section 12(2) of Foreign Exchange Regulation Act, 1947
covers only sale proceeds of goods exported 'for sale', or to sale proceeds of goods exported on
sale in the context of sales completed before export also. The contention of the respondent
company was that Section 12(2) applied only to persons who are entitled to sell or procure the
sale of the said goods and that said goods means the goods which have already been exported.
It was also contended that in so far as completed sales are concerned, they would be governed by
Section 10 and thus there was no lacuna in Section 12(2) according to the interpretation put by
them on this section.
When it is equally possible to take the view which would be conducive to the conclusion that
there is no lacuna in the legislation, it would be unreasonable to take the view that the legislation
has left a lacuna either by negligence or by lack of foresight or because it did not know its job.
7 AIR 1987 SC 670
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The purpose of the legislation is that the nation does not lose foreign exchange which is essential
for the economic survival of the nation, which will not be served if completed transactions are
excluded from Section 12.
Held: Construction of Section 12(2) - The words no person entitled to sell or to procure the sale
of the said goods are merely descriptive of the accountable person and do not restrict the
applicability of FERA to persons who have not yet sold the goods. It appears to us that this
expression does not necessarily induce one to the conclusion that the legislature wanted to
prevent abuse in the context of exports for sale only. The expression is meaningful, relevant,
and can co-exist in the context of abuse arising from exports on sale from completed
transactions as well. The whole purpose is to identify the accountable persons to prevent
malpractices and ensure compliance. In our opinion, the said expression has been employed by
the Legislature merely in order to identify the accountable person and is merely descriptive in
that sense. The said expression does not restrict the operation of the Act to the persons who have
not yet sold the goods.
Legislative intent is not to exclude persons who have exported goods to a foreign buyer but only
to ensure the preservation of foreign exchange and repatriation of earnings front both exports on
sale and for sale. The persons who have exported the goods to a foreign buyer, in our view, are
not sought to be excluded from the operation of Section 12(2). The exporter cannot be allowed to
siphon away a part of the foreign exchange or to deprive the Nation of the foreign exchange
earned by the exports.

Pawan Kumar v. State of Haryana8:

The Court must adopt that construction which, "suppresses the mischief and advances the
remedy." Applying this principle, it is clear that the earlier law was not sufficient to check dowry
deaths hence aforesaid stringent provisions were brought in, so that persons committing such
inhuman crimes on married women should not escape, as evidence of a direct nature is not
readily available except of the circumstantial kind. Hence it is that interpretation which
8 AIR 1998 SC 958
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suppresses the mischief, subserves the objective and advances the remedy, which would be
acceptable. Objective is that men committing such crimes should not escape punishment. Hence
stringent provisions were brought in by shifting the burden onto the accused by bringing in the
deemed clause. As aforesaid, the definition of `dowry' was amended with effect from 19th
November, 1986, to include a period even after the marriage.

Swantraj & Ors v. State Of Maharashtra9

Facts: Section 18(1)(c) of the Drugs and Cosmetics Act, 1940 provides that no person shall
manufacture for sale, or sell, or stock or exhibit for sale or distribute any drug except under a
license and Section 27(b) provides for its punishment if contravened.
The appellant was a wholesale dealer and distributor of drugs and had the necessary licenses
prescribed under the Act. The licenses also included authorization for selling, stocking, or
exhibiting or distributing by wholesale through motor vans. The appellant had booked certain
drugs by lorry but it got delayed, and thereafter the drugs were temporarily kept in the godown of
a local drugs dealer.
The question before the Court was that whether the license covered the brief interval of storage
in the godown before loading the drugs onto the van, and whether the act of appellant in
temporarily storing the drugs, not for immediate sale, but for ultimate sale, is in contravention of
Sections 18 and 27?
Held: If the law requires a license for a place and drugs are kept in such a place without the
license, even as a stop-gap arrangement, then arguments about inconvenience cannot be a
defence. The paramount purpose of regulation through licensing is to set in motion vigilant
medical watch over the proper protection of drugs and medicines, verification of the expiry of
the time of their efficacy and the rejection of spurious products. If godowns, temporary stores,
etc. would be unlicensed, they can become the foci of deceptive, dubious and harmful drugs.
Therefore, every place where storage is made must be licensed.

9 AIR 1974 SC 517

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Moreover, the rules made under the Act, while they visualize wholesale distribution licenses, the
forms have not provided for licenses for mobile vans or distribution depots essential for a
distribution system. Even though the appellant should have obtained a license for temporary
storage, but the Central Government should clarify the rules and provide for appropriate forms.
Therefore, it must be held that the storage, even though for short spells and on ad hoc basis and
without intent to sell at that place, but as part of the sales business, comes within stocking for
sale under Section 18.

Standard Chartered Bank v. Directorate Of Enforcement & Ors.10

Facts: The appellant filed a writ petition before the High Court of Bombay challenging various
notices issued to them under Section 50 read with Section 51 of the Foreign Exchange
Regulation Act, 1973. The appellant contended that it was not liable to be prosecuted for the
offence under Section 56 of the FERA Act.
The main issues for consideration were as follows

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


Where an accused is found guilty and the punishment to be imposed is imprisonment and
fine, whether the court has got the discretion to impose the sentence of fine alone?

Contentions of Appellant:
The statutes creating criminal liability have to be strictly construed. When a statute prescribes
punishment of imprisonment and fine, it is not permissible for the court to award punishment of
fine alone. A corporation being a juristic person cannot be awarded the punishment of
imprisonment. When a statutory provision cannot be complied with as per its strict language, the
consequence should be that there can be no prosecution. There is no sense in prosecuting
somebody when the punishment cannot be awarded as per the mandate of the statute.

10 AIR 2005 SC 2622

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The Parliament enacted laws knowing well that the company cannot be subjected to custodial
sentence and therefore the legislative intention is not to prosecute the companies or corporate
bodies and when the sentence prescribed cannot be imposed, the very prosecution itself is futile
and meaningless.
Contention on Behalf of Respondents:
The main task of the court and the judges is to remove mischief. Strict construction can
sometimes defeat the legislation intent.
Reference was made to Section 11 of the Indian Penal Code in which the person is defined as:
The word person includes any Company or Association or body of persons, whether
incorporated or not.
Reference was also made to the 41 st and 47th Law Commission Report in which the law
commission stated that In every case in which the offence is only punishable with
imprisonment or with imprisonment and fine and the offender is a company or other body
corporate or an association of individuals, it shall be competent to the court to sentence such
offender to fine only.
It is true that all penal statutes are to be strictly construed in the sense that the Court must see that
the thing charged as an offence is within the plain meaning of the words used and must not strain
the words on any notion. Further, all penal provisions like all other statutes are to be fairly
construed according to the legislative intent as expressed in the enactment. In the present matter
the legislative intent to prosecute corporate bodies for the offence committed by them is clear
and explicit and the statute never intended to exonerate them from being prosecuted. According
to them it would be sheer violence to commonsense that the legislature intended to punish the
corporate bodies for minor and silly offences and extended immunity of prosecution to major and
grave economic crimes.
Maxim lex non cogit ad impossibilia was also referred in the judgment which says that the law
compels no impossibility. If an enactment requires what is legally impossible it will be presumed
that Parliament intended it to be modified so as to remove the impossibility element. As the
company cannot be sentenced to imprisonment, the court cannot impose that punishment, but
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when imprisonment and fine is the prescribed punishment the court can impose the punishment
of fine which could be enforced against the company.
In my opinion, corporates will continue to go scot free in such cases and shall always have the
defence of being a juristic person. Our courts need to step forward and just like judicial activism
in environmental matters and matters of public cause, they have to interpret laws so that
companies also realise that they cannot be allowed to take advantage of loopholes in any law.
The corporate vehicle now occupies such a large portion of the industrial, commercial and
sociological sectors, that amenability of the corporation to a criminal law is essential to have a
peaceful society.

It is well-settled rule of construction of penal statutes that if two possible and reasonable
constructions can be put upon a penal provision, the Court must lean towards that construction
which exempts the subject from penalty rather than the one which imposes penalty and it is not
competent for the Court to stretch out the meaning of expression used by the Legislature in order
to carry out the intention of the Legislature. The principle that a statute enacting an offence or
imposing a penalty is to be strictly constructed is not of universal application which must
necessarily be observed in every case. The penal provisions should be construed in a manner
which will suppress the mischief and advance the object which the Legislature had in view. Now,
the statutes are interpreted with respect to legislative intent and not just on the basis of strict
construction because it led to the criminals being scot free.

Principles of Statutory Interpretation, Justice G. P. Singh, Tenth edition, 2006, Wadhwa
Interpretation of Statutes, V. P. Sarathi, Fourth edition, 2006, Eastern Book Company.
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