Standard Chartered Bank v. Directorate of Enforcement (2005)
In easy English: Can a company be prosecuted when the law prescribes mandatory imprisonment and fine? The Court said Yes — fine can be imposed.
Quick Summary
Main point: A company can be prosecuted for offences under FERA even when the section prescribes mandatory imprisonment and fine. Since a company cannot be jailed, the court imposes the fine to give effect to the law.
- Supreme Court
- 2005
- (2005) 4 SCC 530
Issues
- Can a company/corporation be prosecuted for FERA offences where the statute mandates imprisonment and fine?
- If yes, can the court impose only the fine since imprisonment cannot be executed on a company?
Rules
- A company is liable to be prosecuted and punished for criminal offences.
- Where the statute prescribes imprisonment and fine, courts may impose the fine on a company because imprisonment is impossible to carry out against a juristic person.
- Section 56 FERA (minimum imprisonment + fine): read to remain workable; penal statutes can be construed to avoid futility.
Facts (Timeline)
Arguments
Appellant (Company)
- Impossibility: imprisonment cannot be applied to a company.
- Where punishment is fixed as “imprisonment and fine”, prosecution cannot proceed against a juristic person.
Respondent (Directorate of Enforcement)
- Corporate liability is recognized; statute must be read to avoid defeat of enforcement.
- Court can impose fine where jail is impossible, preserving deterrence.
Judgment
Majority (Concurring): Companies can be prosecuted for FERA offences. If the statute mandates jail and fine, courts impose the fine on companies since jail is inapplicable. No immunity arises from impossibility of imprisonment. The Court also overruled Velliappa Textiles on this point.
Dissent: Courts must not rewrite “imprisonment and fine” as “imprisonment or fine”. Alteration is for the legislature; hence, a company should not be liable where jail is mandatory.
Ratio Decidendi
Penal provisions are construed to be workable. For corporate offenders, fine is the effective part of a composite sentence of “imprisonment and fine”. Corporate criminal liability is affirmed.
Why It Matters
- Confirms that companies are prosecutable under penal statutes.
- Prevents statutory defeat where jail is impossible for juristic persons.
- A key citation for corporate crime & compliance exams and practice.
Key Takeaways
- Company ≠ Jail → Fine applies.
- Workability guides construction of penal statutes.
- Velliappa view on corporate non-prosecutability is overruled.
Mnemonic + 3-Step Hook
Mnemonic: “C.A.F.E.” — Company • Accused • Fine works • to keep law Effective.
- Check the statute: jail + fine?
- Ask if offender is a company.
- Impose the fine to keep the provision working.
IRAC Outline
| Issue | Whether a company can be prosecuted under FERA where imprisonment and fine are mandatory. |
|---|---|
| Rule | Companies are prosecutable; when jail is impossible, courts impose the fine to give effect to the statute (Section 56 FERA). |
| Application | FERA notices issued; argument of impossibility of imprisonment rejected; workable reading preserves enforcement against corporate bodies. |
| Conclusion | Prosecution maintainable; fine can be imposed on the company despite mandatory imprisonment language. |
Glossary
- Corporate Criminal Liability
- The principle that a company can be prosecuted and punished for criminal offences.
- FERA
- Foreign Exchange Regulation Act, 1973—penal provisions for foreign exchange violations.
- Workability Doctrine
- Courts interpret statutes to avoid making them ineffective or impossible to enforce.
FAQs
Related Cases
- Assistant Commissioner v. Velliappa Textiles — earlier view on corporate prosecution (overruled on this point).
- Iridium India Telecom v. Motorola — mens rea and corporate criminal liability.
- Sunil Bharti Mittal v. CBI — attribution of intent in corporate offences.
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