Ranchhoddas Atmaram vs The Union Of India

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Petition No. 300 of 1960

Decision Date: 3 February 1961

Coram: A.K. Sarkar, Bhuvneshwar P. Sinha, S.K. Das, N. Rajagopala Ayyangar, J.R. Mudholkar

In the case titled Ranchhoddas Atmaram versus the Union of India, a judgment was delivered on 3 February 1961 by a Bench of the Supreme Court of India consisting of Justice A. K. Sarkar, Justice Bhuvneshwar P. Sinha, Justice S. K. Das, Justice N. Rajagopala Ayyangar and Justice J. R. Mudholkar. The matter was recorded in the reports as 1961 AIR 935 and 1961 SCR (3) 718, with subsequent citations including 1962 SC 1559 (4) RF, 1966 SC 197 (43) and reference to the Sea Customs Act of 1878, specifically section 167 and item 8 of its schedule.

Item 8 of the schedule to section 167 of the Sea Customs Act, 1878, stipulates that any person involved in the importation or exportation of prohibited goods shall be liable to a penalty “not exceeding three times the value of the goods, or not exceeding one thousand rupees.” In the present case, the petitioner was found to have imported gold without authority having a market value of twenty‑five thousand rupees. The customs authorities, acting under the statutory provision, imposed a penalty of five thousand rupees on the petitioner. The petitioner challenged the validity of this penalty, contending that the maximum penalty permissible under item 8 of section 167 could not exceed one thousand rupees.

The Court examined the language of the provision and held that the orders imposing the penalty were valid. It observed that the statute, being framed in an affirmative manner, provides the customs authorities with two alternative penalties and permits the imposition of either one of them. Consequently, it is permissible for the authorities to levy a penalty that exceeds the monetary ceiling of one thousand rupees if they choose the alternative penalty of “three times the value of the goods.” The Court further noted that none of the earlier Supreme Court decisions served as authority for the proposition that the maximum penalty under item 8 of section 167 is limited to one thousand rupees, because that specific question had not arisen in those cases. The plain language of the provision was interpreted to give the customs authorities the option to impose any one of the two alternative penalties, and it could not be read as a prohibition against exceeding three times the value of the goods or exceeding one thousand rupees simultaneously.

In reaching its conclusion, the Court distinguished earlier authorities, namely Maqbool Hussain v. State of Bombay [1953] SCR 730, Babulal Amthalal Mehta v. The Collector of Customs [1957] SCR 1110 and F. N. Roy v. The Collector of Customs, Calcutta [1957] SCR 1151, which were explained and set apart. The Court also referred to the decision in The Metropolitan Board of Works v. Steed (1881) LR 8 QB D 445 as a comparative authority.

The petition was filed as Petition No. 300 of 1960 under Article 32 of the Constitution of India for the enforcement of fundamental rights, and it was accompanied by Criminal Appeal No. 107 of 1958, which was an appeal by special leave from the judgment and order dated 5 April 1957 of the Bombay High Court in Criminal Revision Application No. 1100 of 1956. The petitioners were represented by counsel, while the respondents were represented by the Solicitor‑General of India and other counsel.

S. Parmar and G. Gupta appeared for the respondents in petition number 300 of 1960, while N. C. Chatterjee and B. L. Aggarwal represented the appellant. H. R. Khanna and R. H. Dhebar were counsel for the respondents in criminal appeal number 107 of 1958. The judgment was delivered on 3 February 1961 by Justice Sarkar. The Court heard these two proceedings together because both raised the same legal question. One proceeding was a petition under article 32 of the Constitution seeking enforcement of fundamental rights; the other was an appeal from a decision of the Bombay High Court. In both cases the Customs authorities, acting under the Sea Customs Act 1878, had determined that the petitioner and the appellant had contravened section 19 of that Act by importing prohibited goods. The petitioner had, without authority, brought in gold valued at Rs 25,000, and the appellant had imported steel pipes valued at Rs 1,28,182. By separate orders the Customs authority imposed a monetary penalty of Rs 5,000 on the petitioner and Rs 25,630 on the appellant, pursuant to item 8 of the schedule to section 167 of the Act. In addition, the authority confiscated the petitioner’s gold under the same provision, but no confiscation order was made against the steel pipes, a fact deemed unnecessary to elaborate. The appellant’s appeal challenged an order that directed the recovery of the penalty through execution of a distress warrant. The petitioner’s petition contested the validity of the order imposing the monetary fine. Neither the petitioner nor the appellant disputed the Customs findings that they had violated section 19 or that penalties under item 8 of section 167 were permissible. The petitioner also did not question the confiscation of the gold. Their sole argument was that the Customs orders were invalid because the penalties exceeded Rs 1,000, which they claimed to be the maximum amount allowed under item 8 of section 167. This argument rested on two premises: first, that the Supreme Court had previously held the same, and second, that a correct construction of item 8 does not permit a penalty above Rs 1,000. To support the first premise, the Court was referred to three earlier decisions, the earliest being Maqbool Hussain v. State of Bombay (1). That case examined whether a person who had already faced confiscation of goods under item 8 of section 167 could later be prosecuted for the same facts under section 23 of the Foreign Exchange Regulation Act 1947, considering the protection against double jeopardy in article 20(2) of the Constitution. The Court held that article 20(2) did not bar such subsequent prosecution.

The Court explained that in the earlier decision of Maqbool Hussain v. The State of Bombay, the issue before the Court was whether a later prosecution under the Foreign Exchange Regulation Act could be instituted after the Sea Customs authority had imposed a penalty under item eight of section 167. The Court held that the Sea Customs authority was not a judicial tribunal and that the proceeding which resulted in the confiscation of goods was therefore not a prosecution for the purposes of the Constitution. The case did not address the question of the maximum amount of penalty that could be imposed under item eight of section 167. While examining whether a customs authority exercising powers of confiscation and penalty levied under section 167 constituted a judicial tribunal, the Court at page 742 observed, “Even though the customs officers are invested with the power of adjudging confiscation, increased rates of duty or penalty the highest penalty which can be inflicted is Rs. 1,000/‑.” The Court stressed that this remark was made in a different context and was not intended to decide the point raised in citation (1) [1953] S.C.R. 730 that the provision prohibited a penalty higher than Rs. 1,000/‑, a question that had never been raised in that case. The Court further noted that even if the highest penalty that customs officers could impose were higher than Rs. 1,000/‑ but subject to another statutory limit, that would not transform the officers into a judicial tribunal. The judgment was therefore not based on the amount of the maximum penalty that customs authorities could impose. The Court observed that the assumption that the maximum penalty was Rs. 1,000/‑ was merely an inference, as the issue of the maximum penalty was neither argued nor discussed in the judgment.

The Court then turned to the decision in Babulal Amthalal Mehta v. The Collector of Customs (1). The sole question in that case concerned the validity of section 178A of the Sea Customs Act, which placed upon a person in possession of goods suspected of being smuggled the burden of proving that the goods were not smuggled, and whether that provision contravened article 14 of the Constitution. While discussing the scheme of the Act, the Court made a brief reference to item eight of section 167, stating, “This Court has held that the minimum is the alternative: see Maqbool Hussain v. The State of Bombay” (2). The Court clarified that this reference was only incidental and did not decide the present question regarding the ceiling of penalty under item eight of section 167. It was not necessary for the decision in Babulal’s case (1) to endorse or reject the observation made in Maqbool Hussain’s case (2), and no explicit view on the maximum penalty was expressed. Finally, the Court mentioned the case of F. N. Roy v. The Collector of Customs, Calcutta (1), noting that in that matter an order under item eight of section 167 had been issued confiscating certain goods imported without authority, but the discussion of that case likewise did not address the issue of the maximum penalty permissible under the provision.

In that case the importer was ordered to pay a fine of one thousand rupees for importing goods without authority. The importer subsequently filed a petition in this Court invoking article thirty‑two of the Constitution, seeking to set aside the penalties imposed. The petition cited the precedent reported in the 1937 Supreme Court Reports at pages one thousand one hundred ten and one thousand one hundred sixteen, the 1953 Reports at page seven hundred thirty, and the 1957 Reports at page one thousand one hundred fifty‑one. The principal argument presented by counsel for the petitioner relied on the Imports and Exports (Control) Act, 1947, and raised several issues that were not relevant to the matters presently before the Court. Nonetheless, it was also asserted that item eight of section one hundred sixty‑seven of the Sea Customs Act infringed article fourteen of the Constitution, a contention that likewise did not arise for determination in the present proceedings. This contention was addressed on page one thousand one hundred fifty‑eight of the judgment, where the Court observed that a similar argument had been made, namely that section one hundred sixty‑seven, item eight of the Sea Customs Act violated article fourteen because it purportedly left the Customs authorities with unfettered discretion to determine the quantum of the penalty.

The Court explained that the provision itself fixed the maximum penalty at one thousand rupees, and therefore any discretion granted to the authorities had to be exercised within that prescribed ceiling. Such discretion was not unrestricted or unreasonable, the Court held, because it was vested in senior Customs officers and was subject to appellate review. The imposition of the fine was described as a quasi‑judicial act, with the amount of the fine to be determined by reference to the seriousness of the offence and the purpose of the Act, which was to prevent unauthorised importation of goods. As the fine actually imposed was exactly one thousand rupees, there was no question of a penalty exceeding the statutory maximum, and consequently no issue arose on that point. The substantive question was whether the section contravened article fourteen to the extent that no penalty could be imposed at all. The Court noted that item eight of section one hundred sixty‑seven did not confer unfettered discretion because it imposed a definite ceiling on the penalty. Whether that ceiling was articulated as one thousand rupees or, hypothetically, as three times the value of the goods, was irrelevant; the presence of any limit was sufficient to demonstrate that the discretion was not unlimited and therefore did not offend article fourteen. Some of the High Courts had nevertheless perceived that this Court had ruled that the maximum penalty permissible under the provision was one thousand rupees.

In this part of the judgment, the Court observed that several High Courts had incorrectly concluded that the Supreme Court had previously ruled that the maximum penalty permissible under item 8 of section 167 was exactly one thousand rupees. The Court clarified that such a conclusion was mistaken because the question of the maximum amount of penalty had never been expressly decided in any of the cited cases. The Court referred to the decision in Leo Boy Frey v. The Superintendent, District Jail, Amritsar, where it had plainly stated that “No question I has been raised as to the maximum amount of penalty that can be imposed under s. 167(8) and we are not called upon to express any opinion on that point.” This pronouncement demonstrated that the Supreme Court had taken note of the misinterpretation by the High Courts of the judgment in F. N. Roy’s case and had intended to warn against such a misconception. Consequently, none of those High Court decisions could be regarded as authority for the proposition that the ceiling of the penalty under item 8 of section 167 was one thousand rupees. The argument that the Supreme Court had previously held the maximum penalty to be one thousand rupees therefore failed. The Court then proceeded to analyse the wording of the provision itself. Section 167 listed offences and their associated penalties, and specifically, for the offence described in item 8—importation or exportation of goods prohibited or restricted under Chapter IV—the provision stated: “Any person concerned in any such offence shall be liable to a penalty not exceeding three times the value of the goods, or not exceeding one thousand rupees.” The critical issue was whether, for the imposition of a penalty, the conditions set out in both alternative clauses joined by the word “or” had to be satisfied simultaneously, or whether satisfaction of either clause alone was sufficient. The Court explained that when the words form an affirmative sentence, the presence of “or” creates an alternative, meaning that fulfillment of the condition in either one of the clauses is enough to satisfy the statutory requirement. In such an affirmative context, the phrase “or” therefore provides a choice between the two limits: the penalty may be limited to three times the value of the goods, or it may be limited to one thousand rupees, whichever is applicable. This grammatical interpretation was supported by the definition of “or” as given in the Shorter Oxford Dictionary, which describes it as a coordinating conjunction presenting an alternative between words, phrases, or clauses. Thus, if the sentence is read as affirmative, the Court concluded that a penalty exceeding one thousand rupees could lawfully be imposed, provided it did not exceed three times the value of the goods.

In analysing the language of the provision, the Court considered the grammatical function of the word “or”. It quoted a definition that described “or” as “a participle coordinating two (or more)‑words, phrases or clauses between which there is an alternative.” The Court also cited an explanation stating that “the alternative expressed by ‘or’ is emphasised by prefixing to the first member or adding after the last, the associated adverb either.” From these authorities the Court observed that even when the word “either” is omitted, the conjunction “or” alone creates an alternative. Accordingly, if the sentence under consideration is an affirmative sentence, the two alternatives presented by the provision may be chosen independently, and the alternative that is not chosen need not be taken into account. On that basis the Court held that a penalty that exceeds Rs 1,000 could be imposed when the alternative of “three times the value of the goods” was selected. The Court then examined the opposite situation, namely where the sentence might be interpreted as a negative one. It explained that in a negative construction the word “or” would spread the negative effect to the clause that follows it, and that rule of grammar was settled. Under such a reading, both clauses would have to be satisfied simultaneously, and the maximum penalty that could be imposed would never exceed Rs 1,000. Having identified the central issue as whether the provision was negative or affirmative, the Court expressed its view that the provision was affirmative. It noted that the core of the sentence was that a particular person “shall be liable to a penalty,” which is a positive statement. Therefore the sentence did not carry a negative import. Counsel for the petitioner and the appellant argued that the sentence began with a negative phrase, namely the words “not exceeding,” and that this made the whole sentence negative, so that the later “or” would extend the negative effect to the subsequent clause. The Court rejected this argument as untenable. It observed that the word “not” qualified only the word “exceeding” that followed it, forming a phrase that limited the magnitude of the penalty. No broader negative sense was intended to affect the remainder of the sentence. The Court pointed out that if the counsel’s interpretation were correct, the phrase “not exceeding” would not need to be repeated after “or,” because the single negative would already apply to the second alternative. Requiring the repetition of “not exceeding” after “or” demonstrated that the negative qualification was confined to each alternative separately. The Court further noted that accepting the counsel’s reasoning would render the provision nonsensical, as it would effectively read the provision as “shall not be liable to a penalty exceeding three times the value of the goods, or exceeding one thousand rupees,” thereby turning an affirmative provision into a negative one. Such a construction, the Court held, would amount to reenactment rather than interpretation. Finally, the Court concluded that each occurrence of the expression “not exceeding” served to qualify the extent of the penalty applicable to the respective alternative.

In this case the Court observed that the phrase “not exceeding” functions in the same way as the words “up to” and can be substituted by them without altering the meaning of the provision. The Court noted that the provision does not contain a negative construction; rather, it is a purely affirmative provision that offers two alternative penalties, each with its own maximum limit. To illustrate the difference between affirmative and negative sentences, the Court referred to the decision in Metropolitan Board of Works v. Steed (1881) L.R. S Q.B.D. 415. In that case the provision stated that “No existing road, being of less width than forty feet, shall be formed as a street for the purposes of carriage traffic, unless such road be widened to the full width of forty feet … or for the purposes of foot traffic only, unless such road be widened to the full width of twenty feet … or unless … streets respectively shall be open at both ends.” The Court explained that the earlier decision required both conditions to be satisfied because the sentence was negative and the word “or” (the word underlined in the judgment) carried forward the negative effect, thereby making both conditions mandatory. The Court further quoted authorities who explained that when “or” follows a negative or prohibitory clause it often acquires a different sense than when it follows an affirmative clause. For example, an order stating “you must have your house either drained or ventilated” uses “or” to present alternatives, whereas an order stating “you must not have your house undrained or unventilated” couples two negative requirements with “or”, causing the single negative to govern both. The Court emphasized that the present provision contains no negative or prohibitory language; it merely empowers the imposition of either of the two alternative penalties. The limitation that each penalty “shall not exceed” a specified amount does not transform the provision into a negative one; it remains permissive. Consequently, either alternative penalty may be imposed even if its amount exceeds the maximum specified for the other alternative. The Court also indicated that the purpose of the Act supports this interpretation, noting that the Act is

In this matter the Court observed that the provision under review is essential for the economic stability of the nation and that its purpose is to prevent the smuggling of goods, which may be of considerable value. The Court noted that a nominal fine of one thousand rupees would often be insufficient to accomplish that purpose. Accordingly, it would be consistent with the object of the statute to give the authorities concerned the power to impose a higher penalty whenever the circumstances of a case justify a stronger sanction. The Court further recorded that the petitioner's counsel, as well as the appellant’s counsel, referred to Webster’s New International Dictionary, second edition, citing a definition of the word “nor” as “or not”. Those counsel argued that the words “or” followed by “not” in the statutory language should be read together and, relying on Webster, should be replaced by the word “nor” in order to reveal the legislature’s intention. The Court replied that the word “nor” does not appear in the provision and that no authority in Webster’s dictionary permits a wholesale substitution of “nor” for the phrase “or not”. Moreover, the Court found that the phrase “or not” is not present in a form that could be replaced without distorting the sentence. The term “not”, which follows “or”, actually qualifies the word “exceeding” that follows it and cannot be linked to the preceding “or”. To treat the two words as a single unit and substitute them with “nor” would alter the structure and meaning of the clause, an interpretation the Court could not accept. These were the principal arguments put forward by the counsel for the petitioner and the appellant.

The Court then turned to the remaining points raised by the same counsel. They contended that the existence of two alternative penalties in the statute implied that one of them represented the maximum amount, and they sought a finding that the maximum penalty was one thousand rupees. The Court found this argument difficult to accept, noting that the provision itself does not identify a single maximum penalty of that amount. The Court reiterated its earlier finding that the authorities may select either of the two penalties as they deem appropriate. For example, if three times the value of the goods involved in the offence exceeds one thousand rupees, that larger amount would become the greater of the two penalties that could be awarded, and the counsel’s argument does not preclude the imposition of that larger penalty. The determination of which penalty is the maximum in a given case depends on the value of the goods concerned. The Court also observed that there is a rational basis for providing two alternative penalties. When the value of the goods is very large, a fixed penalty of one thousand rupees might be inadequate, whereas the alternative penalty, which could be based on a multiple of the goods’ value, allows the authorities to impose a sanction proportionate to the seriousness of the offence.

In this case, the Court observed that a penalty of rupees one thousand could be insufficient when the goods involved were of very high value. Conversely, when three times the value of the goods was much smaller than rupees one thousand, the Court explained that a higher penalty might still be justified if the offender had previously committed the same offence or had demonstrated a determined intention to repeat it. The Court further noted that there could be situations where the exact value of the goods could not be properly ascertained; in such circumstances, the only practicable option would be to apply the alternative penalty of up to rupees one thousand, provided any penalty was to be imposed at all. Counsel for the petitioner and the appellant argued that allowing authorities to choose between the two alternatives gave rise to an arbitrary discretion, which might offend Article 14 of the Constitution and was not intended by the Legislature. The Court rejected that argument, stating that each alternative penalty carried its own specified limit, so the discretion was neither unlimited nor arbitrary. The Court clarified that an amount equal to three times the value of the goods could become very large only when the goods themselves were of high value, and in such cases there was no reason to conclude that the Legislature did not intend the provision for a penalty of three times that value. The petitioner further contended that no other provision in section 167 authorised a monetary penalty exceeding rupees one thousand, except for confiscation, and that this demonstrated the Legislature’s intention not to allow a higher pecuniary penalty. The Court responded first by stating that the intention of the Legislature must be derived from the language of item 8 itself; since the wording was clear and permitted a penalty exceeding rupees one thousand, that language governed regardless of the purpose of other provisions. Second, the Court pointed out that the counsel’s assertion was incorrect because other items did provide for penalties greater than rupees one thousand. For example, item 29 prescribed that when goods were found on a vessel without the required boat‑note under section 76, the person in charge of the vessel would be liable to a penalty not exceeding twice the amount of duty payable on the goods, which could easily be above rupees one thousand. The Court therefore concluded that the Act contained multiple provisions allowing penalties higher than rupees one thousand and that item 8 was consistent with this broader legislative scheme.

It could be imagined that the duty referred to might itself be greater than one thousand rupees. Similar provisions authorising penalties that exceed one thousand rupees appear in items 17, 29, 31, 38, 48 and other clauses. In addition, a number of items allow a penalty to be fixed at relatively large sums such as five hundred rupees or one thousand rupees for each package involved. Under those provisions the total penalty can easily surpass one thousand rupees, as is evident from items 17, 36, 49 and 56. There is also a further category of items that stipulate penalties based on the value of the goods; those penalties, by their very nature, may be far higher than one thousand rupees, for example items 58, 59 and 73. It would be odd if a statute such as the Sea Customs Act, which underpins the nation’s finances and commerce, considered a penalty of only one thousand rupees to be sufficient for any breach of its provisions. The Court therefore concluded that the Act was not intended to limit penalties to that amount. The petitioners also argued that, because the statute is penal in nature, it should be interpreted in favour of the citizen, meaning item 8 should be read as allowing a maximum penalty of one thousand rupees. However, that rule of construction applies only when the meaning of a penal statute is unclear, which is not the case here, and therefore the parties could not rely on it. The counsel for both sides further contended that the Sea Customs Act was modeled on the English statute 39 and 40 Vict., Ch. 36, whose section 186 corresponds to section 167 of the Indian Act. They pointed out that the English provision explicitly gave the authority the option to choose any of the specified punishments, using the words “at the election of,” which are absent from our statute. The Court observed that, even without those words, the meaning of the Indian provision is clear. The English wording was a precautionary measure, and the effect would have been the same without it. The Indian statute simply does not use those words, perhaps because its drafting differed. The English law offers a choice between two fixed penalties – either three times the value of the goods or one hundred pounds. In contrast, each of the two alternative penalties in the Indian provision is flexible, each subject to an upper limit. The final argument relied on the term “extent” appearing in the main part of section 167, suggesting that the third column of the schedule defined the extent of the punishment that could be awarded.

In this case the Court observed that the argument raised by the petitioners did not advance the discussion at all. The Court explained that irrespective of which of the two rival constructions of the provision was adopted, each construction led to a situation in which the magnitude of the punishment was already fixed by the language of the statute. Consequently, the particular word that the petitioners had pointed to could not be used as a tool for selecting the correct construction. For these reasons the Court concluded that under item eight of section 167 a penalty greater than one thousand rupees could be lawfully imposed. Because the statutory provision permitted such a higher amount, the orders issued by the Customs authorities in the matters before the Court were deemed to be lawful and could not be disturbed by the petition. The Court also noted that there was no genuine dispute regarding the quantum of the penalties that had been levied; the amounts imposed did not exceed three times the value of the goods involved. Accordingly, the Court dismissed both the petition and the accompanying appeal. No order for costs was made, and the dismissal of the petition and the appeal was confirmed.