Ranchhoddas Atmaram vs The Union Of India (Uoi)

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

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 3 February, 1961

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

In this case the Supreme Court noted that two separate proceedings were being considered together because they both involved the same legal question. One of the proceedings was a petition filed under article 32 of the Constitution, while the other was an appeal against a judgment of the High Court at Bombay. Both matters concerned the actions of the Customs authorities under the Sea Customs Act of 1878.

The Court explained that the Customs officials, acting under the Sea Customs Act, had determined that the petitioner and the appellant had violated section 19 of that Act by importing goods without the required authority. The petitioner had imported gold valued at twenty‑five thousand rupees, and the appellant had imported steel pipes valued at one lakh twenty‑eight thousand one hundred eighty‑two rupees. Following separate orders, the Customs authorities imposed a monetary penalty of five thousand rupees on the petitioner and twenty‑five thousand six hundred thirty rupees on the appellant, invoking item eight of the schedule to section 167 of the Act. In addition, the authorities seized the petitioner’s gold under the same provision. No order was made to confiscate the steel pipes, and the Court did not need to discuss the reasons for that omission.

The appeal before the Court concerned an order that directed the recovery of the penalty imposed on the appellant through the execution of a distress warrant. The petitioner’s petition, on the other hand, challenged the legality of the order that imposed the monetary penalty. The Court observed that neither the petitioner nor the appellant questioned the findings of the Customs officials that they had indeed breached section 19, nor did they dispute that penalties could be levied under item eight of section 167. Moreover, the petitioner did not contest the order that confiscated his gold.

The sole ground advanced by both the petitioner and the appellant was that the orders of the Customs authorities were invalid because the penalties exceeded one thousand rupees. They argued that the maximum amount that could be imposed under item eight of section 167 was one thousand rupees. Their argument rested on two premises. First, they claimed that the Supreme Court had previously held that the ceiling was one thousand rupees. Second, they asserted that a proper construction of item eight of section 167 would not allow a penalty greater than one thousand rupees.

The Court then turned to the precedents cited by the parties. The earliest case mentioned was Maqbool Hussain v. State of Bombay, reported in the 1953 Supreme Court Reporter at page 730. In that case, the issue was whether a person who had already been subjected to a confiscation penalty under item eight of section 167 could later be prosecuted for the same facts under section 23 of the Foreign Exchange Regulation Act of 1947, considering the protection against double jeopardy contained in article 20(2) of the Constitution. The Court in that earlier case held that article 20(2) did not bar the later prosecution because the authority that imposed the penalty under the Sea Customs Act was not a judicial tribunal, and the proceeding that resulted in the confiscation was therefore not a prosecution. The earlier judgment did not address the question of the maximum penalty permissible under item eight of section 167. While discussing whether a Customs authority exercising the power to order confiscation and levy a penalty formed a judicial tribunal, the Court had observed at page 742 that “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 clarified that this observation was made in a different context and was not intended to decide that a higher penalty could not be imposed where the statute permitted it.

The Court held that Article 20(2) of the Constitution did not prevent a prosecution under the Foreign Exchange Regulation Act because the authority that imposed the penalty under item 8 of section 167 of the Sea Customs Act was not a judicial tribunal; consequently, the proceeding that resulted in the confiscation penalty was not considered a prosecution. In that earlier case no issue was raised concerning the maximum amount that could be imposed under item 8 of section 167. While examining whether a customs authority exercising the power to order confiscation and to levy a penalty under section 167 was a judicial tribunal, the Court noted at page 742 that “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 explained that this observation was made in a different context and was not intended to determine that the provision barred the imposition of a higher penalty, because no question of a higher limit had been raised at that time. The Court clarified that even if the highest penalty that customs officers could impose were above Rs. 1,000/‑ but subject to another statutory ceiling, that circumstance would not convert the officers into a judicial tribunal. The judgment was therefore not based on the amount of the maximum penalty that customs authorities could levy; rather, it seemed to assume that the maximum penalty was Rs. 1,000/‑, since the question of any higher ceiling was neither argued nor discussed in the decision. The second precedent considered was Babulal Amthalal Mehta v. The Collector of Customs (1957) S.C.R. 1110, 1116. In that case the sole issue was whether section 178A of the Sea Customs Act, which placed on a person in possession of goods suspected of being smuggled the burden of proving that the goods were not smuggled, violated Article 14 of the Constitution. While describing the scheme of the Act, the Court referred to item 8 of section 167 and remarked, “This Court has held that the minimum is the alternative: see Maqbool Hussain v. The State of Bombay” (1953 S.C.R. 730). The Court stressed that it was not deciding the present question about the ceiling of penalty; it merely made a passing reference to the earlier observation. No pronouncement on the correctness of that earlier observation was intended, nor was any view expressed regarding the maximum penalty that could be imposed under item 8 of section 167. The final case mentioned was F. N. Roy v. The Collector of Customs, Calcutta (1957) S.C.R.

In the case reported at page 1151, the Court noted that an order had been issued under item 8 of section 167 that confiscated certain goods which had been imported without authority and that a penalty of rupees 1,000 was imposed on that import. The importer subsequently filed a petition in this Court under article 32 of the Constitution, challenging the validity of the penalties that had been levied. Counsel for the petitioner mainly relied upon the Imports and Exports (Control) Act, 1947, and raised questions that were not pertinent to the matters presently before the Court. It also appeared that the petitioner contended that item 8 of section 167 offended article 14 of the Constitution; that particular contention likewise did not arise in the cases currently under consideration. The Court dealt with that contention at page 1158, observing that the argument that section 167, item 8 of the Sea Customs Act gave “uncontrolled discretion” to customs authorities was misplaced because the statute expressly fixed the maximum penalty that could be imposed at rupees 1,000. The Court explained that the discretion granted by the provision must be exercised within the prescribed limit, that such discretion was neither uncontrolled nor unreasonable, that it was vested in senior customs officers, and that there were appellate remedies against their orders. The imposition of the fine was described as a quasi‑judicial act, the quantum of the fine being determined by the gravity of the offence, and the object of the Act being the prevention of unauthorised importation of goods, with the discretion to be exercised in accordance with that object. The Court further observed that the fine actually imposed was rupees 1,000, and therefore no issue arose as to whether a penalty exceeding that amount could be imposed. The sole issue was whether the provision contravened article 14, thereby precluding any penalty altogether. In this regard, the Court reiterated that because the provision imposed a clear monetary ceiling, the discretion was not unfettered and consequently no violation of article 14 occurred. The reasoning would have been identical even if the ceiling had been expressed as three times the value of the goods or as rupees 1,000; the existence of any limit sufficed to demonstrate that the discretion was not uncontrolled. For that purpose, the precise amount of the limit was irrelevant. Some of the High Courts, however, have...

Some of the High Courts have held that the maximum penalty that may be imposed under the provision is one thousand rupees. The Court observed, however, that the question of a maximum amount was never required to be decided in any of those cases and therefore could not have been, nor can be treated as, decided by this Court. In Leo Roy Frey v. The Superintendent, District Jail, Amritsar [[1958] S.C.R. 822, 827] the Court expressly stated, “No question 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 observation indicates that the Court was aware that the High Courts were interpreting the judgment in F. N. Roy’s case [[1957] S.C.R. 1151] and other authorities in a way that was not intended, and it therefore issued a warning against such a misconception. None of those decisions can be treated as authority for the proposition that the maximum penalty under item 8 of s. 167 is one thousand rupees. Consequently, the contention that this Court has already held the maximum penalty to be one thousand rupees must fail.

The discussion now turns to the construction of the provision itself. The relevant portion of s. 167 reads as follows: “The offences mentioned in the first column of the following schedule shall be punishable to the extent mentioned in the third column of the same with reference to such offences respectively.” The schedule contains, among other entries, the following clause numbered 8: “If any goods, the importation or exportation of which is prohibited or restricted by this Act, be confiscated; and 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 words that are material to the present case are therefore: “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 legal question that arises is whether, when a penalty is imposed, the conditions set out in both alternative clauses joined by the word “or” must be satisfied together, or whether satisfaction of either clause alone is sufficient. It is clear that if the words form an affirmative sentence, then the condition of one of the clauses only need be fulfilled.

In examining the meaning of the word “or” in the provision, the Court explained that when “or” joins two alternative clauses in an affirmative sentence, it functions like the word “either.” The Shorter Oxford Dictionary defines “or” as a coordinating particle that connects two or more words, phrases, or clauses offering an alternative, and notes that the alternative may be emphasized by placing “either” before the first element or after the last. Consequently, if the sentence under consideration is affirmative, the two alternatives are independent, and the authority may impose a penalty that satisfies either one of them without regard to the other. Under this interpretation, a penalty exceeding one thousand rupees may be imposed if the alternative of “three times the value of the goods” applies. By contrast, if the sentence were negative, the presence of “or” would extend the negative effect to the clause that follows, requiring both conditions to be satisfied and thereby limiting the penalty to a maximum of one thousand rupees. This grammatical rule is settled and not disputed.

The Court then turned to the decisive question of whether the provision is negative or affirmative. It concluded that the provision is affirmative because its substance imposes liability for a penalty; it expresses a positive concept rather than a prohibition. The petitioner’s counsel argued that the sentence began with the words “not exceeding,” making it negative and that the later occurrence of “or” should therefore spread the negative influence forward. The Court rejected this contention, observing that the word “not” modifies only the word “exceeding” that follows it, forming a qualifying phrase that limits the amount of the penalty. There is no broader negative sense that can extend over the remainder of the sentence. If the counsel’s view were correct, the repetition of “not exceeding” after “or” would be unnecessary, because the negative influence of “or” would already apply. Accepting that view would render the language nonsensical. The Court noted that the counsel seemed to want to read the provision as “shall not be liable to a penalty exceeding three times the value of the goods, or exceeding one thousand rupees,” which would turn the provision into a negative sentence and force the “or” to carry the negative forward. The Court held that such a reading would amount to re‑enacting the provision rather than interpreting it, and clarified that each occurrence of “not exceeding” functions as a qualifier equivalent to “up to,” establishing two separate alternative maxima for the penalty.

The Court explained that the phrase indicating the extent of the punishment functions in the same way as the words “up to.” It can be replaced by “up to” without altering the meaning of the provision. The Court emphasized that the provision does not contain any negative language; rather, it is a purely affirmative rule that offers two separate penalties, each with its own maximum limit.

To illustrate the difference between affirmative and negative sentences, the Court referred to the case of The Metropolitan Board of Works v. Steed [(1881) L.R. 8 Q.B.D. 445]. In that case the provision read: “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 such streets respectively shall be open at both ends.” The Court held that both conditions had to be satisfied; the road had to be of the prescribed width and also open at both ends. One reason for this interpretation was that the sentence was negative, and the word “or” (underlined by the Court) carried the negative effect forward, thereby requiring the fulfillment of both conditions.

The Court quoted the discussion on pages 447‑48 of the judgment, observing that authorities have noted that when the word “or” follows a negative or prohibitory provision, it often acquires a different sense than when it follows an affirmative provision. Illustrative examples were given: an order stating “you must have your house either drained or ventilated” uses “or” in an alternative sense; an order stating “you must have your house drained or ventilated” still conveys an alternative choice; but an order stating “you must not have your house undrained or unventilated” couples two negative words with “or,” so that the preceding negative governs both. The Court also noted that Section 98 contains a negative introductory phrase, “no existing road,” which illustrates this principle.

Applying this reasoning, the Court found that the present provision contains no negative or prohibitory language. It is a positive provision that authorises the imposition of either of the two alternative penalties specified. The requirement that each penalty “not exceed” a specified amount does not transform the provision into a negative one; the provision remains permissive rather than prohibitive. Consequently, either alternative penalty may be imposed, even if the amount of one exceeds the maximum amount of the other. The Court further observed that the object of the Act—to safeguard the nation’s economic stability by preventing smuggling—supports this interpretation, as a modest fine of one thousand rupees would often be insufficient to achieve the legislative purpose.

In this case, the Court observed that goods subject to the offence could be of very high value and that a modest fine of one thousand rupees would often be insufficient to achieve the legislative purpose. Accordingly, the Court held that it would be appropriate to empower the relevant authorities to impose a higher penalty where the circumstances required a more stringent punishment. The learned counsel for both the petitioner and the appellant then cited Webster’s New International Dictionary, second edition, pointing to a definition of the word “nor” as “or not.” The counsel argued that the words “or” and “not,” when appearing together, should be read as a single unit and, relying on Webster, should be replaced by the word “nor” to reflect the legislature’s intention. The Court replied that the word “nor” does not appear in the provision under consideration and that no passage in Webster’s dictionary authorises a wholesale substitution of “nor” for the phrase “or not.” It further noted that the phrase “or not” is not present in the sentence and that the word “not,” following “or,” actually modifies the term “exceeding” that follows it; it does not attach to the preceding “or.” Consequently, treating “or not” as a combined expression and substituting it with “nor” would distort the structure of the entire clause and alter its meaning, a result the Court said could not be accepted. The Court then turned to the other arguments raised by the counsel. One contention was that the presence of two alternative penalties suggested that one of them must be the maximum, an interpretation the Court found difficult to sustain. The mere existence of two options did not, in the Court’s view, demonstrate that the lower penalty of one thousand rupees was intended to be the ceiling. The Court reaffirmed its earlier conclusion that the authorities may select either of the two penalties according to what they deem appropriate. For example, if three times the value of the goods involved in the offence exceeded one thousand rupees, that larger amount would become the applicable penalty, and the argument that the higher penalty could not be imposed was unpersuasive. The Court explained that which penalty is higher in a particular case depends on the value of the goods. Moreover, the Court found good reason for providing two alternative penalties. When the value of the goods is very large, a fine of one thousand rupees may be grossly inadequate, whereas in cases where three times the value of the goods is considerably less than one thousand rupees, the lower fine may be appropriate. The Court recognized that in certain circumstances, such as when the offender has previously committed the same offence or exhibits a determined intent, a penalty higher than three times the value may be justified, and that sometimes the exact value of the goods may be uncertain, in which case the lower alternative penalty of up to one thousand rupees would be necessary to impose any sanction at all.

The Court noted that where a person had previously committed the same offence or had manifested a determined intention to commit the offence, the authority could impose a penalty higher than three times the value of the goods. The Court added that in some conceivable situations the value of the thing involved might not be properly ascertainable; in such cases, the alternative penalty of up to Rs. 1,000/‑ had to be applied if any monetary penalty was to be imposed. The Court then addressed the contention raised by counsel that the existence of two alternative penalties gave the authority a wholly arbitrary discretion, which might offend Article 14 of the Constitution. The Court rejected this argument, observing that each of the two alternatives was subject to a specific ceiling, and therefore the discretion was neither unlimited nor arbitrary. The Court explained that if three times the value of the goods resulted in a very large sum, that would happen only because the goods themselves were of high value, and in such circumstances the Legislature clearly intended that a penalty equal to three times that value could be imposed. Next, the Court considered another submission advanced on behalf of the petitioner and the appellant. Counsel argued that no other provision in section 167 authorized a monetary penalty greater than Rs. 1,000/‑, and that this indicated the Legislature’s intention not to allow a higher pecuniary penalty. The Court responded that the intention to be ascertained must arise from the language of item 8 itself; when the language is clear, it must be given effect even if other provisions suggested a different intention. The Court held that the wording of item 8 was clear and permitted a penalty exceeding Rs. 1,000/‑, so there was no need to read the intention from other items. The Court further rejected the claim that other items did not provide for penalties above Rs. 1,000/‑. For example, under item 29, if goods were found in a boat without the required boat‑note under section 76 of the Act, the person in charge of the boat could face a penalty not exceeding twice the duty leviable on the goods, and such duty could easily be more than Rs. 1,000/‑. Similar provisions existed in items 17, 31, 38, 48 and others, all of which allowed penalties that could surpass the Rs. 1,000/‑ limit.

The Court observed that several provisions in the statute authorised a penalty that was calculated on a per‑package basis at amounts such as Rs. 500/- and Rs. 1,000/-. In those provisions the total penalty could readily exceed Rs. 1,000/-, as illustrated by items 17, 36, 49 and 56. The Court further noted that another set of provisions authorised a penalty based on the monetary value of the goods themselves, and that such a valuation‑based penalty could, of course, be far greater than Rs. 1,000/-, as shown by items 58, 59 and 73. The Court considered it unreasonable to suppose that a comprehensive statute such as the Sea Customs Act, which underpins the nation’s finances and commerce, would deem a fixed pecuniary penalty of only Rs. 1,000/- to be sufficient for any breach of its provisions. Accordingly, the Court concluded that the legislature had not intended to limit penalties to that amount.

The Court then addressed the argument that, because the statute was penal in nature, it should be interpreted in favour of the citizen, thereby limiting item 8 to a maximum penalty of Rs. 1,000/-. The Court explained that the rule of construing penal statutes narrowly applies only when the language of the statute is ambiguous. In the present case the language of item 8 was clear, and therefore the appellant and the petitioner could not rely on that rule for assistance. The Court also considered the submission that the Sea Customs Act was modelled on the English statute 39 and 40 Vict., Ch. 36, particularly section 186 which corresponds to section 167 of the Indian Act. It was argued that the English provision expressly gave the authority the option to choose among specified punishments and that the Indian statute deliberately omitted the phrase “at the election of” used in the English text. The Court held that, even without those words, the meaning of the Indian provision remained plain. The Court observed that the English phrase “at the election of” was employed as a precautionary measure and that the effect of the English provision would have been the same without it. The Court suggested that the omission of those words in the Indian statute may simply reflect a different drafting approach, and that the English statute offers a choice between two fixed penalties – “treble the value of the goods” and “one hundred pounds” – whereas the Indian statute provides two alternative, flexible penalties, each subject to an upper limit. Finally, the Court rejected the contention that the word “extent” in the main part of section 167 indicated that the third column of the schedule defined the extent of the punishment. The Court reasoned that, regardless of which of the two competing interpretations of the provision is adopted, the schedule already specifies the extent of the punishment, and the word “extent” does not assist in resolving the interpretative dispute.

Considering the reasons set out in the preceding discussion, the Court found that the language of item 8 of section 167 authorises the imposition of a penalty that exceeds the amount of one thousand rupees, and consequently the orders made by the Customs authorities in the matters before the Court cannot be questioned on that ground. The Court further observed that there is no dispute that the penalties which had been levied did not go beyond three times the value of the goods involved, and that this limitation had been respected in each case. Because the statutory ceiling was not breached and the procedural orders of the Customs officials were therefore valid, the Court concluded that there was no basis for granting the relief claimed in the petition. In the same vein, the appeal filed against those orders was also found to lack merit. As a result, the Court dismissed both the petition and the appeal. The Court expressly declined to make any order as to costs, indicating that no party would be required to bear the expenses of the proceedings. The operative part of the judgment therefore states that the petition and the appeal are dismissed, with no further directions issued.