judgement:
Appeal No. 1452 of 1987.
From the Judgment and Order dated 10.7.1986 of the Kamataka High Court in I.T.R.C. No. 198 of 1987.
WITH C.A. Nos. 4462/89, 1822, 1902, 1465/87, 675, 658, 4461/89, 6093/90, 6204/ 90, 6092.
and 6092 A of 1990.
H. Salve, P.H. Parekh, Ms. Meenakshi Grover, R. Nariman, Ms. R. Gill and Ms. Simi Kr.
for the Appellants.
B.B. Ahuja, Ranbir Chandra and Ms. A. Subhasini for the Respondent.
The Judgment of the Court was delivered by B.P. JEEVAN REDDY J.
These appeals are preferred against the judgment of the Karnataka High Court answering the question referred to it, at the instance of the revenue, in favour of the revenue and against the assessee.
The question referred under section 256 of the Income Tax Act, 196 1, read as follows: "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 1, 79, 742 could not be disallowed under section 40 (c) of the Income Tax Act, 1961." (The above question related to Assessment Year 1974 75.
The question referred for A.Y. 1975 76 was identical except in the matter of amount).
Since the facts in all the appeals are identical it would be sufficient to notice the facts in C.A. Nos. 6092 and 6092A/90 (Prakash Beedies (P) Lid.
vs Commr.
of Income Tax.
Karnataka, Bangalore).
Prior to 15.7.1992, a partnership firm called K.M. Anand Prabhu & Sons, Mangalore, consisting of three partners K.M. Vishnudas Prabhu, K.M. Ramdas Prabhu and K.M. Shankar Prabhu was engaged inter alia in the business of manufacturing and sale of beedies under the brand name 'Mangalore Prakash Beedies '.
On May 20, 1972 a Private limited company called Prakash Beedies 609 Limited (the assessee appellant herein), was incorporated with its registered off ice at Manoalore.
One of its objects was to take over business of the aforesaid firm.
Under an agreement dated July 15, 1972 between the firm and the company, the firm sold its rights and assets to the company on the terms and conditions set out therein.
Clause 4(a) of the agreement, which alone is material for the purposes of these appeals reads: "(a) For the use of the trade name the Company shall pay royalty to the Vendor at the rate of 10ps.
for every thousand beedies sold by the Company by using the trade name of the Vendor.
The royalty shall be worked out at the end of each quarter ending on March, June, September and December, on the sales made during each quarter.
The royalty fixed hereby shall not be varied for a period of one year and may be reviewed and/or revised thereafter wards from time to time".
The assessee was making payments to the firm every year on account of royalty in terms of said clause.
The three partners aforesaid of the firm were also the directors of the assessee company.
For the assessment years 1974 75 and 1975 76, the assessee claimed deduction of the amount paid by it to the firm on account of royalty in terms of clause 4(a) of the agreement.
The amounts paid during the accounting years relevant to the said assessment years were Rs. 3, 16, 526 and Rs. 3, 95, 742 respectively.
The I.T.O. allowed the deductions as claimed.
In exercise of the powers conferred on him by Section 263, the Commissioner of Income Tax initiated (suo moto) proceedings for revising the said assessments in so far as the aforesaid deductions were concerned.
After hearing the assessee, he passed orders on September 16, 1976 whereunder he disallowed payments to the firm over and above the ceiling prescribed in Section 40(c).
The assessee preferred appeals to the Tribunal against the orders of the I.T.O, The appeals were allowed and the orders of the I.T.O. restored.
On reference, the High Court answered to question in the negative i.e., in favour of the revenue and against the assessee, on the following reasoning : the three directors of the assessee company were also the partners in the firm to which royalty payments were made.
In law, a firm has no separate legal existence; it is not a juristic person or a distinct legal entity.
It is merely a collection or association of the individuals for carrying 610 on a business.
Merely because the firm is an assessable entity under the Income Tax Act it does not follow that it is a juristic or legal entity.
It must, therefore, be held that the payments made to the firm are in reality payments made to the directors.
Such payments clearly attract and fall within the mischief of Section 40(c).
The Commissioner was right in saying so and the opinion of the Tribunal to the contrary is unsustainable in law.
In these appeals, S/Shri Harish N.Salve and Rohinton Nariman assailed the correctness of the view taken by the High Court.
They submitted firstly that the payments were made not to the directors of the assessee but to a firm which was a separate entity.
A payment to a firm is not ipso facto a payment to the partners, directly or indirectly.
In a firm there may be other partners besides the directors of the assessee company.
It may also happen that the firm has no income to distribute because of the losses incurred by it which are set off against the income so received.
The High Court was in error in holding that payment to a firm is a payment to the partners.
Assuming that a partnership firm is not a separate juristic entity distinct from its partners, even so the payments were made to the said three persons not in their capacity as directors (qua directors) but in consideration of a valuable right parted by them in favour of the assessee company.
Such payments do not and cannot fall within the mischief of Section4O(c).
Section 40(c) was never intended to take in such payments.
A company may take on lease the house of its directors for its legitimate business purposes and pay rent which is reasonable having regard to the market conditions, or it may pay even less than the market rate of rent.
Whether the rent paid by the company to its director in such a case falls within Section 40(c), ask the counsel.
Another illustration given by the counsel is where a director supplies raw material to the assessee company for a price which is the appropriate market price.
Would such payment also fall under section 40(c), they ask.
The Budget speech of the Finance Minister in the Parliament, while introducing the said provision, is relied upon in support of their contention.
It is also argued that the words "remuneration, benefit or amenity" occurring in Section 40(c) must be read having regard to the context in which they occur applying the principle NOSCITORA SPCOOS (recognition of associated words).
If so read, the payments in question can never fall within the ambit of the said words.
Shri Ahuja, the learned counsel for the Revenue justified the reasoning and approach of the High Court having regard to the clear language employed in clause (c).
The genuineness or validity of the agreement between the assessee company and the firm is not disputed.
The factum of payments made on account of royalty in terms of clause 4(a) of the said agreement is also not disputed.
It is also 611 not disputed that in the beedi trade, brand name carries significant business value.
It is necessary to keep this factual context in mind while examining the question at issue.
Section 40(c) read as follows during the relevant assessment years "40.
Notwithstanding anything to the contrary in sections 30 to 39, the following amounts shall not be deducted in computing the income charge able under the head" profits and gains of business or profession", (a). . (b). . (c) in the case of any company (i) any expenditure which results directly or indirectly in the provision of any remuneration of benefit or amenity to director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be, (ii) any expenditure or allowance in respect of any assets of the company used by any person referred to in sub clause (i) either wholly or partly for his own purposes of benefit, if in the opinion of the Income tax Officer any such expenditure or allowance as is mentioned in sub clause (i) and (ii) is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom, so, however, that the deduction in respect of the aggregate of such expenditure and allowance in respect of any one person referred to in sub clause (i) shall, in no case, exceed (A) where such expenditure or allowance relates to a period exceeding eleven months comprised in the previous year, the amount of seventy two thousand rupees; (B) where such expenditure of allowance relates to a period not exceeding eleven months comprised in the previous year, an amount calculated at the rate of six thousand rupees for each month or part thereof comprised in that period: 612 Provided that in case where such person is also and employee of the company for any period comprised in the previous year, expenditure of the nature referred to in clauses (i), (ii), (iii) and (iv) of the second proviso to clause (a) of sub section (5) of section 40A shall not be taken into account for the purposes of sub clause (A) or subclause (B), as the case may be; (iii) * * * * Explanation.
The provisions of this clause shall apply notwithstanding that any amount not to be allowed under this clause is included in the total income of any person referred to in sub clause (i);" The Budget speech of the Finance Minister, in so far as it mentions the reasons for introduction of clause (c) of Section 40, reads as follows: "I am firmly of the view that the fiscal instrument must be deployed to discourage payment of high salaries and remunerations which go ill with the norms of egalitarian society.
I accordingly propose to impose a calling on the remuneration of company employees which would be deductible in the computation of taxable profits.
The ceiling is being set at Rs. 5,000 per month.
Together with the existing ceiling of Rs. 1,000 per month in the case of perquisites, the allowable overall ceiling on remuneration and perquisites, for purposes of taxation, will be at Rs. 6,000 per month. . . " The object behind the provision undoubtedly was to discourage and disallow "payment of high salaries and remunerations which go ill with the norms of egalitarian society".
The provision was, of course, not confined to the directors. ' It took in relatives of directors, persons having substantial interest in the company and their relatives.
The clause vested in the I.T.O. the power to determine whether any such expenditure or allowances as is mentioned in the said clause was excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom.
In addition to it, a ceiling was also prescribed beyond which such expenditure or allowance could not go in any event.
At this juncture, it would be appropriate to notice the provision contained in sub section (2) of Sec 40A. Clause, A provides that where the assessee incurs any expenditure in respect of which payment has been made or is to be made to any 613 person referred to in clause (b) of the sub section, and the Income tax Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction.
Clause (b) mentions the categories of persons to whom the provision in clause (a) applies.
It includes directors of the company and their relatives among others.
Clause b) also takes in any payment to any company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has substantial, interest in the business or profession of the assessee.
In short, the net is cast very wide to ensure that excessive or unreasonable payments are not made to the persons in control of the affairs of the assessee in the name of paying for the goods, services and facilities rendered, supplied or extended by them, as the case may be.
That the payments made by the assessee company to the firm on account of royalty in terms of clause (4) (a) of the agreement fall within the meaning of the expression 'expenditure ' in sub clause (i) of clause (c) is not disputed.
The observations in CIT, Bombay.
vs M/s. Indian Engineering and Commercial Corporation Private Uinited (Civil Appeal Nos. 1583 and 1584 (NT) of 1977 decided on 13.4.1993 by us reported in ; do not say otherwise.
That case arose under Section 40(A) (5).
The payments in question were made to the directors by way of commission on sales.
The question was whether the said payments fell within sub clause (ii) of clause (a) of sub section (5) of section 40(A).
It was held that they did not.
While holding so it was observed that it is difficult to say that payment of certain cash amount by way of commission on sales, directly to an employee, can be said to fall within the words 'where the assessee incurs any expenditure which results directly or indirectly '.
" The said observations were made in response to the Revenue 's argument that the said payment constituted 'perquisites ' within the meaning of sub clause (ii) of clause (a) of Section 40(A) (5).
The observations are clearly confined to the said sub clause and have no relevance to any other provision in the Act.
The observations cannot be read dissociated from their context.
Coming back to the provisions of Section 4O(c) and the facts of the case before us the only question is whether the royalty payments to the firm fell within clause (c).
We assume for the purpose of this argument that in this case, payments to firm were payments to partners.
Even so, we think that the said payments did not fall within clause (C).
The payments were made in consideration of a valuable right parted by the partners/ directors of the assessee company in favour of the assessee.
SO long a,, the agreement whereunder the said payments were made is not held to be a mere 614 device or a mere screen, the said payments cannot be treated as payments made to the directors as directors (qua directors).
The payments were made by way of consideration for allowing the assessee to use a valuable right belonging to them viz., the brand name.
Such a payment may be liable to be scrutinised under subsection (2) of Section 40(A), but it certainly did not fall within the four corners of Section 40(c).
In T. T Ltd. vs LTO., Bangalore 1, a Bench of Karnataka High Court comprising D.M. Chandrashekhar, CJ.
and E.S. Venkataramiah,J. has taken a view which accords with the one taken by us.
Speaking for the Bench, E.S. Venkataramiah, J. (as he then was) observed: "A close reading of the above provision shows that section 40(c) refers to an expenditure in curred by making periodical payments to person mentioned in that clause apparently for any personal service that may be rendered by him.
It cannot have any reference to payments made by the assessee for all kinds of "services or facilities" referred to in section 4OA(2) (a).
It is argued that the proviso thereto suggests that any expenditure incurred for any kind of service which is referred to in the main part of section 40A (2) (a) and the expenditure referred to in section 40(c) belong to the same category.
This contention is not correct.
The expression "services" in section 40A (2) (a) is an expression of wider import. . .
If the remuneration, benefit or amenity referred to in section 40(c) is treated as the same as what is paid in return for "the goods, services or facilities" then irrespective of the fair market value of the goods, services and facilities provided by a person who may be a director or a person who has a substantial interest in the company or a relative of the director or of such person, as the case may be, only a maximum of Rs. 72,000 can be allowed to be deducted in computing the income of the company in any one year.
We do not think that Parliament ever intended that such a result should follow.
The goods, services and facilities referred to in section 40A (2) (a) are those which have a market value and which are commercial in character.
Many of the services and facilities referred to above are those which are nowadays provided by independent organisations. ' The said decision has been followed by the Punjab and Haryana High Court in Commissioner of Income Tax, Patiala vs Avon Cycles (P) Ltd. , The Calcutta High Court has also taken a similar view in India Jute Co. Ltd vs 615 Commr of Income Tax Mr. Ahuja, learned counsel for the Revenue submitted that the argument of the assessee that only the payments made to directors as directors fall within clause (c) and not the other payments, becomes inapt when the payments are made to the relative,,, of the directors or to persons holding substantial interest in the assessee company or their relatives.
The ceilinG prescribed in clause (c) cannot also be applied to such persons says the counsel.
The answer perhaps lies in the clause itself in the power vested in the I.T.O. to determine whether any expenditure or allowance is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by the assessee or accruing therefrom.
Any payment to a relative of a director or other persons mentioned in clause (c) will necessarily be examined applying the above test and if it is found that they are unwarranted, unreasonable or excessive, they will be disallowed.
Since such a situation does not arise herein, we need not pursue the argument further.
For the above reasons, we are of the opinion that the judgment under appeal cannot be sustained.
It must he held that the payments in question did not fall within section 40(c).
Accordingly, the appeals are allowed, the judgment of the High Court is set aside and the question referred to the High Court is answered in the affirmative, i.e., in favour of the assessee and against the revenue.
No costs.
U.J. R. Appeal allowed.

summary:
A partnership firm consisting of three partners was engaged inter alia in the business of manufacturing and sale of beedies under the brand name "Mangalore Prakash Beedies".
On May 20,1972 a private limited company called prakash beedies Ltd. the assessee appellant was incorporated.
One of its objects was to take over the business of the aforesaid firms which it did under an agreement dated 15 July 1972 whereby the firms sold its rights and assets to the company.
For the use of the trade name, a royalty at 10p.
for every 1000 beedies was to be paid by the company to the firm.
This payment was made ever year by the assesse on account of royalty.
The three partners of the firms were also directors of the company.
The relevant assessment years were 1974 75 and 1975 76.
The facts in the other appeals are similar.
The assessee claimed deduction of the amount paid by it as royalty.
The ITO allowed the deductions as claimed.
The CIT in stio motu proceedings disallow the aforesaid deductions.
On appeal, the tribunal restored the order of the ITO.
On reference, the High Court answered in fan,our of the revenue as the three directors of the assessee company were also partners in the firm.
It held that in law, a firm is merely a collection or association of individuals for carrying on a business.
Merely because the firm is an assessable entity, under the Income Tax Act, it does not follow that it is a juristic or legal entity.
It must therefore be held that the payments to the firm were in reality made to the 607 directors, thus attracting section 40 (c).
Before this Court, it was contended for the assessee that payment to a firm is not ipso fact payment to the partners, directly or indirectly.
In any event, the payments were made to the three persons not in their capacity of directors (qua directors).
but in consideration of a valuable right parted by them in favour of the assessee company.
section 40(c) was never intended to take in such payments.
They relied on the budget speech of the Finance Minister and argued that the principle of interpretation noscitor a sociis must be applied to the words "remuneration, benefit or amenity".
The genuineness or validity of the agreement, the factum of payments as royalty, and that the brand name carries significant business value was not disputed.
The question before this Court was whether the royalty payments fail within section 40(c).
Allowing the appeal, this Court, HELD : 1.
Even assuming that the payments to firm were payments to partners, the said payments did not fall within section 40(c).
The payment, . were made In consideration of a valuable right parted by the firm/partners/ directors of the assessee company in favour of the assessee.
So long as the agreement whereunder the said payments were made is not held to be a mere device or a mere screen, the said payments cannot be treated as payments made to the directors (qua directors).
(613 H, 614 A) The payments were made by way of consideration for allowing the to use a valuable right belonging to them viz. the brand name.
Such a payment may be liable to be scrutinised under sub section.
(2) of section 40 (A), but it certainly did not fall within the four corners of section 40(c).
(614 A) T.T. (Pvt.) Ltd. vs ITO Bangalore , approved.
CIT Patiale vs Avon Cycles (p) Ltd. and India Jute Co. Ltd. vs CIT , referred to. 2.
The power vested in the ITO is to determine whether any expenditure of allowance is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by the assessee or 608 accruing therefrom.
Any payment to a relative of a director or other persons mentioned in clause (c) will necessarily be examined applying the above test and if it is found that they are unwarranted, unreasonable or excessive, they will be disallowed.
Such a situation does not arise herein.
(615 C) CIT, Bombay vs M/s. Indian Engineering and Commercial Corporation (p) Ltd. [1983] distinguished.
JT 683.


judgement:
iminal Appeal No '400 of 1993.
From the Judgment land order dated 3.6.
1992 of the Punjab and Haryana High Court in Criminal Revision No. 443 of 1990.
P. Chadambaram, Mukul Rohtagi, Ms. Bina Gupta and Ms. Monika Mohil for the Appellants.
N.N. Goswamy, Y.D. Mahajan and N.D. Garg for the Respondent.
The Judgments of the Court were delivered by K. RAMASWAMYJ: Special leave granted.
The appellant, accused No. 2 in p.
(CBI) No. 40/2, dated February 18, 1985, F.I.R. No. RC No. 2 to 4/1983 dated March 4,1983 and P.S. SPE/CBI/CTU (E) I/New Delhi, Dist.
Delhi and four other namely, V.P. Anand, Baldev Raj Sharma, Bansi La] and Ranjit KumarMarwah are accused in the said case.
It is the prosecution case that the accused hatched a conspiracy at Chandigarh to cheat Punjab National Bank for short 'PNB '.
In furtherance thereof V.P. Anand floated three New Link Enterprises and M/s. Moonlight Industries in the name of Baldev Raj Sharms, his employee and M/s. Guru Nanak Industries in the name of Bansi Lal, yet another employee.
He opened current accounts in their respective names in the P.N.B. at Chandigarh.
In furtherance of the conspiracy and in confabulation with V.P. Anand, the appellant, Ajay Aggarwal, a non resident Indian at Dubai who is running M/s. Sales International, Dubai, agreed to and got credit facility by way of Foreign Letters of Credit Nos.
4069 p, 4070 p and 4084 p, issued proforma invoices of the said concern and addresses to PNB through Guru Nanak Industries and New Link Enterprises.
Ranjit Marwah, the 5th accused, Manager of P.N.B., In charge, of foreign exchange department confabulated with the accused, issued Foreign Letter of Credit in violation of import policy.
The Bills of Lading were addressed to PNB at Chandigarh.
The cable confirmation of P.N.B. was sent to M/ s Sales International by P.N.B., Chandigarh for confirmation of discrepancy.
The appellant had confirmed correctness thereof in the name of V.P. Anand.
Placing reliance thereon authority letter was issued by P.N.B., Chandigarh and cables were sent subsequent thereto to remit the amounts to Emirates National Bank Ltd. through Irving Trust Company.
V.P. Anand was present on September 16, 1981 at Dubai and at his instance the Emirats National Bank, Dubai informed the 551 P.N.B., Chandigarh that the discrepancy in the document adeptable to V.P. Anand and claimed to have inspected the goods on board in vessel, M.V. Atefeh.
On receipt of the information from the Sales International, Dubai, full amount in US Dollars 4, 39,200 was credited against all the three Letters of Credit on discount basis.
During investigation it was found that Vessel M.V. Atefeh was a nonexistent one and three Foreicn Letters of Credit were fabricated on the basis of false and forged shipping documents submitted by the appellant, Ajay Aggarwal to the Emirates National Bank, Dubai.
Thus the P.N. B. was cheated of an amount of Rs. 40,30,329.
Accordingly charge sheet was laid against the appellant.
and others for offences punishable under sections 120B read with Sections 420 (Cheating), 468 (Forgery) and 471 using as genuine (Forged documents), I.P.C.
The Chief Judicial Magistrate, Chandigarh by his order dated January 11, 1990 discharged all, the accused of the offences on the ground that conspiracy and the acts done in furtherance thereof had taken place outside India and, therefore the sanction under section 188 Criminal Procedure Code, 1973 for short the 'Code ' is mandatory.
Since no such sanction was produced the prosecution is not maintainable.
On revision, the High Court of Punjab and Haryana in Criminal Revision No. 443 of 1990 by order dated June 3, 1992 held, that the conspiracy had taken place at Chandigarh.
The overt acts committed in pursuance of that conspiracy at Dubai constituted offences under sections 420, 467 and 471, I.P.C., are all triable at Chandigarh without previous sanction of the central Govt.
The order of discharge, therefore, was set aside and the appellant and other accused were directed to be present through their counsel in person in the Trial Court on July 17,1992 to enable the court to take further proceedings in accordance with law.
This appeal has been filed by the appellant alone under article 136 of the constitution.
Sri Chidambaram, learned Senior counsel contended that the appellant was not a privy to the conspiracy.
He was an N.I.R. businessman at Dubai.
He never visited Chandigarh.
Even assuming for the sake of argument that conspiracy had taken place and all act committed in furtherance thereof were also at Dubai.
The transaction through, bank is only bank to bank transaction.
Even assuming that some of the offences were committed in India since as per the prosecution case itself that part of the conspiracy and related offences were committed at Dubai, by operation of Section 188 read with the proviso thereto with a non obstanti clause, absence of sanction by the Central Govt.
knocks of the bottom of the jurisdiction of the courts in India to take cognisance of or to enquire into of try the accused.
He placed strong reliance on 1.
Fakhrulla khan and Ors.
vs Emperor AIR 1935 Mad. 326, In re M.L. Verghese AIR 1947 MAD.
352, kailash Sharma vs State [1973] Crl.
Law Journal 1021 and K. Satwant Singh vs State of Punjab ; Sri Goswami, the learned senior counsel for the respondents contended that the conspiracy to cheat.
PNB was hatched at Chandigarh.
All the accused committed 552 overt acts in furtherance.
All the accused committed overt acts in furtherance on the conspiracy at Chandigarh and, therefore, the sanction of the Central Govt.
is not necessary.
The High Court had rightly recorded those findings.
There is no need to obtain sanction under section 188 of the Code.
The diverse contentions give rise to the primary question whether the sanction of the Central Govt.
as required under proviso to section 188 of the Code is necessary.
Section 188 of the Code reads thus "Offence committed outside India when an offence is committed outside India (a) by a citizen of India, whether on the high seas or elsewhere; or (b) by a person, not being such citizen, on any ship or aircraft registered in India, he may be dealt with in respect of such offence asif it had been committed at any place within India at which he may be found: Provided that, notwithstanding anything in any of the preceding sections of this Chapter, no such offence shall be inquired into or tried in India except.
with the previous sanction of the Central Government".
Section 3, IPC prescribes punishment of offences committed beyond, but which by law may be tried with, India, It provided that any person liable, by any Indian law, to be tried for an offence committed beyond India shall be dealt with according to the provisions of this Code for any act committed beyond India in the same manner as if such act had been committed within India.
Section 4 extends its territorial operation postulating that IPC shall apply to any offence committed by (1) any citizen of India in any place without any beyond India; (2) any person on any ship or aircraft registered in India wherever it may be.
Explanation in this section the word offence ' includes every act committed outside India which, if committed in India, would be punishable under this Code. 553 Illustration A, who is a citizen of India, commits a Murder in Uganda.
He can be tried and convicted of murder in any place in India in which he may be found.
The Code of Criminal Procedure extends to whole of India except the State of Jammu & Kashmir and except chapters 8, 10 and 11, the other provisions of the Code shall not apply to the State of Nagaland and to the tribal area.
However, the State Govt. has been empowered, by a notification, to apply all other provisions of the Code or any of them to the whole or part of the State of Nagaland and such other tribal areas, with supplemental, incidental or consequential modifications, as may be specified in the notification.
Therefore, the Code also has territorial operation.
The Code is to consolidate and amend the law relating to criminal procedure.
Section 188 was suitably amended pursuant to the recommendation made by the Law Commission.
Chapter VIII deals with jurisdiction of the courts in inquiries and trials.
Section 177 postulates that every offence shall ordinarily be inquired into and tried by a Court within whose local jurisdiction it was committed but exceptions have been engrafted in subsequent sections in the Chapter.
Section 179 provides venue for trial or enquiry at the place where the act is done or consequences ensued.
So inquiry or trial may be had by a Court within whose local jurisdiction such thing has been done or such consequence has ensued.
Section 188 by fiction dealt offences conumitted by a citizen of India or a foreigner outside India or on high seas or elsewhere or on any ship or aircraft registered in India.
Such person was directed to be dealt with, in respect of such offences, as if be had committed at any place within India at which he may be found.
But the proviso thereto puts and embargo that notwithstanding anything in any of the preceding sections of this Chapter have been done such offences shall not be inquired into or tried in India except with the previous sanction of the Central Govt.
Judicial power of a State extends to the punishment of all offences against the municipal laws of the State by whomsoever committed within the territory.
It also has the power to punish all such offences wherever committed by its citizen.
The general principle of international law is that every person be it a citizen or foreigner who is found within a foreign State is subjected to, and is punishable by, its law.
Otherwise the criminal law could not be administered according to any civilised system of jurisprudence.
Sections 177 to 186 deal with the venue or the place of the enquiry or trial of crimes.
Section 177 reiterates the well established common law rule that the proper and ordinary situs for the trial of a crime is the area of jurisdiction in which the acts occurred and are alleged to constitute the crime.
But this rule is subject to several well recognised exceptions and some of those exceptions have been engrafted in subsequent sections in the chapter of the Code.
554 Therefore, the provisions in Chapter VIII are elastic and not peremptory.
In consequence there with Sections 218 to 223 of the code would also deal with exceptions engrafted in the Code.
Therefore, they do permit enquiry or trial of a particular offence along with other offences at a common trial in one court so that the court having jurisdiction to try an offence gets jurisdiction to try other offence committed or consequences thereof has ensued.
The procedure is hand maid to substantive justice, namely, to bring the offenders to justice to meet out punishment under IPC or special law as the case may be, in accordance with the procedure prescribed under the Code or special procedure under that Act constituting the offence.
The question is whether prior sanction of the Central Govt.
Is necessary for the offence of 'conspiracy under proviso to section 188 of the Code to take cognizance of an offence punishable under section 120 B etc.
I.P.C. or to proceed with trial.
In Chapter VA, conspiracy was brought on statute by the Amendment Act, 1913 (8 of 1913).
Section 120 A of the I.P.C. defines 'conspiracy ' to mean that when two or more persons agree to do, or cause to be done an ilegal act, or an act which is not illegal by illegal means such an agreement is designated as "criminal conspiracy".
No agreement except an agreement to commit an offence shall amount to a criminal conspiracy, unless some act besides the agreement is done by one or more parties to such agreement in furtherance thereof.
Section 120 B of the I.P.C. prescribes punishment for criminal conspiracy.
It is not necessary that each conspirator must know all the details or the scheme nor be a participant at every stage.
It is necessary that they should agree for design or object of the conspiracy.
Conspiracy is conceived as having three elements: (1) agreement (2) between two or more persons by whom the agreement is effected , and (3) a criminal object, which may be either the ultimate aim of the agreement, or may constitute the means, or one of the means by which that aim is to be accomplished.
It is immaterial whether this is found in the ultimate objects.
The common law definition of criminal conspiracy was stated first by Lord Denman in jones case that an indictment for conspiracy must "charge a conspiracy to do an unlawful act by unlawful means" and was elaborated by Willies, J. on behalf of the judges while referring the question to the House of Lords in Mulcahy vs Reg and the House of Lords in unanimous decision reiterated in Quinn vs Leathem ; at 528) as under: A conspiracy consists not merely in the intention of two or more, but in the agreement.
of two or more to do ,in unlawful act, or to do a lawful act by unlawful means.
So long as such a design rests in intention only it is not indictable, When two agree to carry it into 555 effect, the very plot is an act in itself, and the act of each of the parties, promise against promise, actus contra actum, capable of being enforced, if lawful, punishable of for a criminal object or for the use of criminal means".
This Court in B. G. Barsay vs The State of Bombay [1962] 2 SCR at 229, held "The (list of the offence is an agreement to break the law.
The parties to such an agreement will be guilty of criminal conspiracy, though the illegal act agreed to be done has not been done.
So too, it is an ingredient of the offence that all the parties should agree to do a single illegal act.
It may comprise the commission of a number of acts.
Under section 43 of the Indian Penal Code, an act would be illegal if fit is an offence or if it is prohibited by law".
In Yashpal vs State of Punjab the rule was laid as follows "The very agreement, concert or league is the ingredient of the offence.
It is not necessary that all the conspirators must know each and every detail of the conspiracy as long as they are co participators in the main object of the conspiracy.
There may be so many devices and techniques adopted to achieve the common goal of the conspiracy and there may be division of performances in the chain of actions with one object to achieve the real end of which every collaborator must be aware and in which each one of them must be interested.
There must be unity of object or purpose but there may be plurality of means sometimes even unknown to one another, amongst the conspirators.
In achieving the goal several offences may be committed by some of the conspirators even unknown to the others.
The only relevant factor is that all means adopted and illegal acts done must be and purported to be in furtherance of the object of the conspiracy even though there may be sometimes misfire or over shooting by some of the conspirators".
In Mohammed Usman.
Mohammad Hussain Manivar & Anr.
vs State of Maharashtra ; , it was held that for an offence under section 120B IPC, the prosecution need not necessarily prove that the conspirators expressly 556 agreed to do or cause to be done the illegal act.
the agreement may be proved by necessary implication.
In Noor Mohammed Yusuf Momin vs State of Maharashtra ; , it was held that section 120 B IPC makes the criminal conspiracy as a substantive offence which offence postulates an agreement between two or more persons to do or cause to be done an act by illegal means.
If the offence itself is to commit an offence, no further steps are needed to be proved to carry the agreement into effect.
In R. K. Dalmia & Anr.
vs The Delhi Administration It 963] 1 SCR 253, it was further held that it is not necessary that each member of a conspiracy must know all the details of the conspiracy.
In Shivanarayan Laxminarayan & Ors.
State of Mahrashtra & Ors. , this court emphasized that a conspiracy is always hatched in secrecy and it is impossible to adduce direct evidence of the same.
The offence can be only proved largely from the inferences drawn from acts or illegal omission committed by the conspirators in pursuance of a common design.
The question then is whether conspiracy is continuing offence.
Conspiracy to commit crime it self is punishable as a substantive offence and every individual offence committed pursuant to the conspiracy is separate and distinct offence to which individual offenders are liable to punishment, independent of the conspiracy.
Yet, in our considered view, the agreement does not come to an end with its making, but would endure till it is accomplished or abandoned or proved abortive.
Being a continuing offence, if any acts or omissions which constitutes an offence, are done in India or outside its territory the conspirators continuing to be parties to the conspiracy and since part of the acts were done in India, they would obviate the need to obtain sanction of the Central Govt.
all of them need not be present in India nor continue to remain in India.
In lennart Schussler & Anr.
vs Director of Enforcement & Anr. ; , a Constitution Bench of this Court was to consider the question of conspiracy in the setting of the facts, stated thus "A. 2 was the Managing Director of the Rayala Corporation Ltd. Which manufactures Halda Typewriters.
A. 1 was an Export Manager of ASSAB.
A. 1 and A.2 conspired that A.2 would purchase material on behalf of his Company from ASSAB instead of M/s Atvidaberos, which provided raw material.
A.2 was to over invoice the value of the goods by 40 per cent of true value and that he should be paid the difference of 40 per cent on account of the aforesaid over invoicing by crediting it to A.2 's personal account at Stockholm in a Swedish Bank and requested A. 1 to help him in opening the account in Swenska Handles Banken, Sweden and to have further 557 deposits to his personal account from ASSAB.
A. 1 agreed to act as requested by A.2 and A.2 made arrangements with ASSAB to intimate to A. 1 the various amounts credited to A.2 's account and asked A. 1 to keep a watch over the correctness of the account and ' to further intimate to him the account position from time to time through unofficial channels and whenever A. 1 come to India.
A. 1 agreed to comply with this request.
This agreement was entered into between the parties in the year 1963 at Stockholm and again in Madras in the year 1965.
The question was whether Sec.
120 B of the Indian Penal Code was attracted to these facts".
Per majority, Jaganmohan Reddy, J. held that the gist of the offence defined in section 120 A IPC, which is itself punishable as a substantive offence is the very agreement between two or more persons to do or cause to be done an illegal act or legal act by illegal means, subject, however, to the proviso that where the agreement is not an agreement to commit an offence, the agreement does not amount to a conspiracy unless it is followed up by an overt act done by one or more persons in pursuance of such an agreement.
There must be a meeting of minds in the doing of the illegal act or the doing of a legal act by illegal means.
in furtherance of the conspiracy, certain persons are induced to do an unlawful act without the knowledge of the conspiracy or the plot they cannot be held to be conspirators, though they may be guilty of an offence pertaining to the specific unlawful act.
The offence of conspiracy is complete when two or more conspirators have agreed to do or cause to be done an act which is itself an offence, in which case no overt act need be established.
It was contended in that regard that several acts which constitute to make an offence under section 120 B may be split up in parts and the criminal liability of A. 1 must only be judged with regard to the part played by him.
He merely agreed to help A.2 to open an account in the Swedish Bank, having the amounts lying to the credit of A.2 with Atvidaberg to that account and to help A.2 by keeping a watch over the account.
Therefore, it does not amount to a criminal conspiracy.
While negating the argument, this court held thus: "It appears to us that this is not a justifiable contention, because what has to be seen is whether the agreement between A. 1 and A.2 is a conspiracy to do or continue to do something which is illegal and, if it is, it is immaterial whether the agreement to do any of the acts in furtherance of the commission of the offence do not strictly amount to an offence.
the entire agreement must be viewed as a whole and it has to be ascertained as to what in fact the conspirators intended to do or the object they wanted to achieve".
558 Thus, this court, though not in the context of jurisdictional issue, held that the agreement not illegal at its inception would become illegal by subsequent conduct and an agreement to do an illegal act or to do a legal act by illegal means, must be viewed as a whole and not in isolation.
It was also implied that the agreement shall continuing till the object is achieved.
The agreement does not get terminated by merely entering into an agreement but it continues to subsist till the object is either achieved or terminated or abandoned.
In Abdul Kader vs State AIR 1964 Bombay 133, a conspiracy was formed in South Africa by appellants to cheat persons by dishonestly inducing them to deliver money in the Indian currency by using forced documents and the acts of cheating were committed in India.
When the accused were charged with the offence of conspiracy, it was contended that the conspiracy was entered into and was completed in South Africa and, therefore, the Indian Courts had no jurisdiction to try the accused for the offence of conspiracy.
The Division Bench held that though the conspiracy was entered in a foreign country and was completed as soon as the agreement was made, yet it was treated to be a continuous offence and the persons continued to be parties to the conspiracy when they committed acts in India.
Accordingly, it was held that the Indian Courts had jurisdiction to try the offence of conspiracy.
In U.S. vs Kissal ; , Holmes, J. held that conspiracy is a continuous offence and stated "is a perversion of natural thought and of natural language to call such continuous co operation of a cinema to graphic series of distinct conspiracies rather than to call it a single one. a conspiracy is a partnership in criminal purposes.
That as such it may have continuation in time.
is shown by the rule that overt act by one partner may be the act of all without any new agreement specifically directed to that act".
In Ford vs U. section ; at 620 to 622, Tuft, C.J. held that conspiracy is a continuing offence.
In Director of public Prosecutions vs Door and Ors.
1973 Appeal Cases 807 (H.L.), the five respondents hatched a plan abroad, i.e. Belgium and Morocco and worked out the details to import cannabis into the United States via England, In pursuance thereof two vans with cannabis concealed in them were shipped from Morocco to Southampton; the other van was traced at Liverspool, from where the vans were to have been shipped to America and the cannabis in it was found.
They were charged among other offences with conspiracy to import dangerous drugs.
At the trial, the respondents contended that the Courts in England had no jurisdiction to try them on the count of conspiracy since the conspiracy had been entered into abroad.
While rejecting the contention, Lord Wilberforce held (at page 817) "The present case involves international elements the accused are 559 aliens and the conspiracy was initiated abroad but there can be no question here of any breach of any rules of international law if the) are prosecuted in this country.
Under the objective territorial principle ( use the terminology of the Harward Research in Inter national Law) or the principle of University (For the prevention of the trade in narcotics falls within this description)or both, the courts of this country have a clear right, if not a duty, to prosecute in accordance with our municipal law.
The position as it is under the international law it not, however, determinative of the question whether, unde r our municipal law, the acts committed amount to a crime.
That has to be decided on different principles.
If conspiracy to import drugs were a statutory offence, the question whether foreign conspiracies were included would be decided upon the terms of the statute.
Since it is (if at all) a common law offence, this question must be decided upon principle and authority In my opinion, the key to a decision for or against the offence charged can be found in an answer to the question why the common law treats certain actions as crimes.
And one answer must certainly be because the actions in question are a threat to the Queen 's peace or as we would now perhaps say, to society.
Judged by this test, there is every reason for, and none that I can see against, the prosecution.
Con spiracies are intended to be carried into effect, and one reason why, in addition to individual prosecution of each participant, conspiracy charges are brought is because criminal action organised and executed, in concert is more dangerous than an individual breach of law.
Why, then, restrain from prosecution where the relevant concert was, initially, formed outside the United Kingoom?.
The truth is that, in the normal case of a conspiracy carried out, or partly carried out, in this country, the location of the formation of the agreement is irrelevant; the attack upon the laws of this country is identical wherever the conspirators happened to commit; the "conspiracy" is a complex formed indeed, but not separately completed, at the first meeting of the plotters".
Viscount Dilhorne at page 823 laid the rule that: "a conspiracy does not end with the making of the agreement.
It will continue so long as there are two or more parties to it intending to carry out the design.
It would be highly unreal to say that the conspiracy to carry out the Gunpower plot was completed when the conspirators met and agreed to the plot at Catesby".
561 in my view, be considered contrary to the rules of international comity for the forces of law and order in England to protect the Queen 's peace by arresting them and putting them in trial for conspiracy whether they are British subjects or foreigners and whether or not conspiracy is a crime under the law of the country in which the conspiracy was born".
At page 835 it was held that the respondents conspired together in England notwithstanding the fact that they were abroad when they entered into the agreement which was the essence of the conspiracy.
That agreement was and remained a continuing agreement and they continued to conspire until the offence they were conspiring to commit was in fact committed.
Accordingly, it was held that the conspiracy, though entered into abroad, was committed in England and the courts in England and jurisdiction.
The ratio emphasizes that acts done in furtherance of continuing conspiracy constitute part of the cause of action and performance of it gives jurisdiction for English Courts to try the accused.
In Trecy vs Director of Public Prosecutions 1971 Appeal Cases 537 at 563 to ,(H. L.).
the facts of the case were that the appellant therein posted in the Isle of Wright a letter written by him and addressed to Mrs. X in West Germany demanding money with menaces.
The letter was received by Mrs. X in West Germany.
The appellant was charged with black mail indictable section 21 of the Theft Act, 1968.
While denying the offence, it was contended that the courts in England were devoted of jurisdiction.
Over ruling the said objection, Lord Diplock at page 562 observed: "The State is under a correlative duty to those who owe obedience to its laws to protect their interests and one of the purposes of criminal law is to afford such protection by determining by threat of punishment conducted by other persons which is calculated to hand to those interests.
Comity gives no right to a State to insist that any person may with immunity do physical acts in its own territory which have harmful consequences to persons within the territory of another state.
It may be under no obligation in comity to punish those acts itself, but it has no ground from complaint in international law if the State in which the harmful consequences had their effect punishes, when they do enter its territories, persons who did such acts".
Prof. Williams, Glanville in his article "Venue and the Ambit of Criminal Law at 528 stated thus: 562 "Sometimes the problem of determining the place of the crime is assisted by the doctrine of the continuing crime.
Some crimes are regarded as being of a continuing nature, and they may accordingly be prosecuted in any jurisdiction in which they are partly committed the partial commission being, in the eye of the law, a total commission '.
In the context of conspiracy under the caption inchoate crimes" It was stated: "The general principle seems to be that jurisdiction over an inchoate crime appertains to the State that would have had jurisdiction had the crime been consummated".
Commenting upon the ratio laid down in Board of Trade vs Owen [1957] Appeal Cases 602, he stated at page 534 thus "The seems to follow owen as logical corollary that our courts will assume jurisdiction to punish a conspiracy entered into abroad to commit a crime here.
Although the general principle is that crime committed abroad do not become punishable here merely because their evil effects occur here, there may be an exception for inchoate crimes aimed against persons in this country.
Since conspiracy is the widest and vaguest of the inchoate crimes, it seems clearly that the rule for conspiracy must apply to more limited crimes of incitement and attempt also".
At page 535 he further stated that "the rule of inchoate crimes is therefore an exception from the general principle of territorial jurisdiction.
The crime is wholly committed in the State A, yet is justiciable also in State B".
At page 535 he elucidated that "certain exceptions are recognised or suggested".
Lord Tucker in own 's case (supra) illustrated that a conspiracy D 2 England to violate the laws of a foreign country might be justiciable here if the preferments the conspiracy charged would produce a public mischief within the State or injure a person here by causing him damage, abroad".
At page 536 be stated that "as another exception from the rule in Board of, Trade vs Owen (supra it seems from the earlier decision that a conspiracy entered into here will be punishable if the conspirators contem plates that the illegality may be performed either within British jurisdiction or abroad even though, in the event, the illegality is performed abroad".
His statement of law now receives acceptance by House of Lords in Doot 's case.
563 In Halsbury 's Law of England, third edition, vol.
10, page 327, para 602, while dealing with continuing offence it was stated as under: "A criminal enterprise may consist of continuing act which is done in more places than one or of a series of acts which are done in several places.
In such cases, though there is one criminal enterprise, there may be several crimes, and a crime is committed in each place where a complete criminal act is performed although the act may be only a part of the enterprise".
It was further elucidated in para 603 that: "What constitutes a complete criminal act is determined by the nature of the crime.
Thus, as regards continuing acts, in the case of sending by post or otherwise a libellous or threatening letter, or a letter to provoke a breach of the peace, a crime is committed, both where the letter is posted or otherwise sent, and also where it is received, and the venue may be laid in either place.
Archbold in Criminal Pleadings, Evidence and Practice, 42nd edition (1985) Chapter 23, in para 28 32 at p. 2281, Wright on Conspiracies and Agreements at pages 73 74, Smith on Crimes at page 239 and Russel on Crime, 12th edition, page 613 stated that conspiracy is a continuing offence and liable to prosecution at the place of making the agreement and also in the country where the acts are committed.
Thus, an agreement between two or more persons to do an illegal act or legal acts by illegal means is criminal conspiracy.
If the agreement is not an agreement to commit an offence, it does not amount to conspiracy unless it is followed up by an overt act done by one or more persons in furtherance of the agreement.
The offence is complete as soon as there is meeting of minds and unity of purpose between the conspirators to do that illegal act or legal act by illegal means.
Conspiracy itself is a substantive offence and is distinct from the offence to commit which the conspiracy is entered into.
It is undoubted that the general conspiracy is distinct from number of separate offences committed while executing the offence of conspiracy.
Each act constitutes separate offence punishable, independent of the conspiracy.
The law had developed several or different models or technics to broach the scope of conspiracy.
One such model is that of a chain, where each party performs even without knowledge of other a role that aids succeeding parties in accomplishing the criminal objectives of the conspiracy.
An illustration, of a single conspiracy, its parts bound together as links in a chain, is 564 the process of procuring and distributing narcotics or an illegal foreign drug for sale in different parts of the (,lobe.
In such a case, smugglers, middlemen and retailers are privies to a single conspiracy to smuggle and distribute narcotics.
The smugglers knew that the middlemen must sell to retailers , and the retailers knew that the middlemen must buy of importers of someone or another.
Thus the conspirators at one end of the chain knew that the unlawful business would not, and could not, stop with their buyers, and those at the other end knew that it had not begun with their settlers.
The accused embarked upon a venture in all parts of which each was a participant and an abettor in the sense that, the success of the part with which he was immediately concerned, was dependent upon the success of the whole.
It should also be considered as a spoke in the hub.
There is a rim to bind all the spokes to gather in a single conspiracy.
It is not material that a rim is found only when there is proof that each spoke was aware of one another 's existence but that all promoted in furtherance of some single illegal objective.
The traditional concept of single agreement can also accommodate the situation where a well defined group conspires to commit multiple crimes so long as all these crimes are the objects of the same agreement or continuous conspiratorial relationship, and the conspiracy continues to subsist though it was entered in the first instance.
Take for instance that three persons hatched a conspiracy in country 'A ' to kill 'D ' in country 'B ' with explosive substance.
As far as conspiracy is concerned, it is complete in country 'A ' one of them pursuant thereto carried the explosive substance and hands it over to third one in the country 'B ' who implants at a place where 'D ' frequents and got exploded with remote control. 'D ' may be killed or escape or may be diffused.
The conspiracy continues till it is executed in country 'B ' or frustrated.
Therefore, it is a continuing act and all are liable for conspiracy in country 'B ' though first two are liable to murder with aid of section 120 B and the last one is liable under section 302 or 307 IPC, as the case may be.
Conspiracy may be considered to be a march under a banner and a person may join or drop out in the march without the necessity of the change in the text on the banner.
In the comity of International Law, in these days, committing offences on international scale is a common feature.
The offence of conspiracy would be a useful weapon and there would exist no conflict in municipal laws and the doctrine of autrefoes convict or acquit would extend to such offences.
The comity of nations are duty bound to apprehend the conspirators as soon as they set their feet on the country territorial limits and nip the offence in the bud.
A conspiracy thus, is a continuing offence and continues to subsist and committed wherever one of the conspirators does an act or series of acts.
So long aits performance continues, it is a continuing offence till it is executed or rescinded or frustrated by choice or necessity.
A crime is complete as soon as the agreement is made, but it is not a thing of the moment.
It does not end with the making of the 565 agreement.
It will continue so long as there are two or more parties to it intending to carry into effect the design.
Its continuance is a threat to the society against which it was aimed at and would be dealt with as soon as that jurisdiction can properly claim the power to do so.
The conspiracy designed or agreed abroad will have the same effect as in India, when part of the acts, pursuant to the agreement are agreed to be finalised or done, attempted or even frustrated and vice versa.
In K. Satwant Singh vs The State of Punjab ; , a Constitution Bench of this Court was to consider as to when section 188 of the Code would be applicable to a case.
The facts therein was that the appellant had cheated the Govt.
of Burma whose office was at Shimla punishable under section 420 IPC.
The accused contended that the part of the act was done at Kohlapur where payment was to be made and on that basis the court at Shimla had no jurisdiction to try the offence without prior sanction of the political agent.
Considering that question this court held that if the offence of cheating was committed outside British India, the sanction would be necessary but on facts it was held that: "It seems to us, on the facts established in this case, that no part of the offence of cheating was committed by the appellant outside British India.
His false representation to the Govt.
of Burma that money was due to him was at a place in British India which induced that govt.
to order payment of his claims.
In fact, he was paid at Lahore at his own request by means of cheques on the Branch of the Imperial Bank of India at Lahore.
The delivery of the property of the Govt.
of Burma, namely, the money, was made at Lahore, a place in Brithsh India, an d we cannot regard, in the circumstances of the present case, the posting of the cheques at Kohlapur either as delivery of property to the appellant at Kohlapur or payment of his claims at Kohlapur.
The entire argument founded on the provisions of section 188 of the Code, therefore, fails.
Far from helping the appellant the ratio establishes that if an offence was committed in India the need to obtain sanction under section 188 is obviated.
In Purshottamdas Dalmia vs Stale of West Bengal ; , this court, when the appellant was charged with offences punishable under sections 120B, 466 and 477, the appellant contended that offence of conspiracy was entered into at Calcutta the offences of using the forged documents was committed at Madras.
Therefore, the court at Calcutta had no jurisdiction to try the offence under section 471 read with section 466, EPC, even though committed in pursuance of the conspiracy and in course of the same transaction.
This court held that the desirability of trying the offences of alit 566 he overt acts committed in pursuance of a conspiracy together is obvious and sections 177 and 239 of the Code leave no manner of doubt that the court which has the jurisdiction to try the offence of criminal conspiracy has also the jurisdiction to try all the overt acts committed in pursuance of it even though outside its territorial jurisdiction.
In LN.
Mukherjee vs The State of Madras ; , it was further held that the court having jurisdiction to try the offences committed in pursuance of the conspiracy, has also the jurisdiction to try the offence of criminal conspiracy, even though it was committed outside its territorial jurisdiction.
This view was further reiterated in R.K. Dalmia vs Delhi Administration ; at 273 and Banwari Lal Jhunjhunwala and Ors.
vs Union of India and Anr.
1963] supp.
2 SCR 338.
Therein it was held that the court trying an accused for offence of conspiracy is competent to try him for offences committed in pursuance of that conspiracy irrespective of the fact whether or not overt acts have been committed within its territorial jurisdiction.
The charges framed therein under section 409 read with sections 120B, 420, IPC and section 5(1) (D) read with section 5(2) of the Prevention of Corruption Act were upheld.
Thus we hold that sanction under section 188 is not a condition precedent to take cognizance of the offence.
If need be it could be obtained before trial begins.
Conspiracy was initially hatched at Chandigarh and though itself is a completed offence, being continuing offence, even accepting appellant 's case that he was at Dubai and part of conspiracy and overt acts in furtherance thereof had taken place at Dubai and partly at Chandigarh; and in consequence thereof other offences had been ensued.
Since the.
offences have been committed during the continuing course of transaction culminated in cheating P.N.B. at Chandigarh, the need to obtain sanction for various offences under proviso to section 188 is obviated.
Therefore, there is no need to obtain sanction from Central Govt.
The case may be different if the offences were committed out side India and are completed in themselves without conspiracy.
Perhaps that question may be different for which we express no opinion on the facts of this case.
The ratio in Fakhruila Khan has no application to the facts in this case.
Therein the accused were charged for offences under section 420, 419, 467 and 468 and the offences were committed in native State, Mysore.
As a result the courts in British India i.e. Madras province had no jurisdiction to try the offence without prior sanction.
Equally in Verghese 's case the offences charged under section 409, IPC had also, been taken place outside British India.
Therefore, it was held that the sanction under s, 188 was necessary.
The ratio in Kailash Sharma 's case is not good at law.
The appeal is accordingly dismissed.
R.M. SAHAI J.
While agreeing with Brother Ramaswamy, J., I propose to add a few words.
Prosecution of the appellant under Section 120B read with Section 420 and 471 of the Indian Penal Code (in brief 'IPC ') was assailed for 567 absence of sanction under Section 188 of the Criminal Procedure Code (in brief 'Cr. P. C. ').
Two submissions were advanced, one that even though criminal conspiracy was itself an offence but if another offence was committed in pursuance of it outside India then sanction was necessary; second an offence is constituted of a number of ingredients and even if one of them was committed outside the country Section 188 of the Cr.
P.C. was attracted.
Language of the section is plain and simple.
It operates where an offence is committed by a citizen of India outside the country.
Requirements are, therefore, one commission of an offence; second by an Indian citizen; and third that it should have been committed outside the country.
Out of the three there is no dispute that the appellant is an Indian citizen.
But so far the other two are concerned the allegations in the complaint are that the conspiracy to forge and cheat the bank was hatched by the appellant and others in India.
Whether it was so or not, cannot be gone into at this stage.
What is the claim then? Two fold one the appellant was in Dubai at the relevant time when the offence is alleged to have been committed.
Second, since the bills of lading and exchange were prepared and were submitted to the Emirates National Bank at Dubai and the Payment too was received at Emirates National Bank in Dubai, the alleged offence of forgery and cheating were committed outside India.
Is that so? Can the offence of conspiracy or cheating or forgery on these allegations be said to have been committed outside the country? Substantive law of extra territory in respect of criminal offences is provided for by Section 4 of the IPC and the procedure to inquire and try it is contained the Section 188 Cr.
P.C. Effect of these sections is that an offence committed by an Indian citizen, outside the country is deemed to have been committed in India.
Proviso to Section 188 Cr.
P.C. however provides the safeguard for the NRI to guard against any unwarranted harassment by directing, "that, notwithstanding anything in any of the preceding sections of this Chapter, no such offence shall be inquired into or tried in India except with the previous sanction of the Central Government.
" Since the proviso begins with a non obstinate clause its observance is mandatory.
But is would come into play only if the principal clause is applicable, namely, it is established that an offence as defined in clause 'n ' of Section 2 of the Cr.
P.C. has been committed and it has been committed outside the country.
What has to be examined at this stage is if the claim of the appellant that the offence under Section 120B read with Section 420 and Section 471 of the IPC were committed outside the country.
An offence is defined in the Cr.
P.C. to mean an 568 act or omission made punishable by any law for the time being in force.
None of the offences for which the appellant has been charged has residence as one of its ingredients.
The jurisdiction to inquire or try vests under Section 177 in the Court in whose local jurisdiction the offence is committed.
It is thus the commission of offence and not the residence of the accused which is decisive of jurisdiction.
When two or more persons agree to do or cause to be done an illegal act or an act which is illegal by illegal means such agreement is designated a criminal conspiracy under Section 120A of the IPC.
The ingredients of the offence is agreement and not the residence.
meeting of minds of more than two persons is the primary requirement.
Even if it is assumed that the appellant was at Dubai and he entered into an agreement with his counterpart sitting in India to do an illegal act in India the offence of conspiracy came into being when agreement was reached between the two.
The two minds met when talks oral or in writing took place in India.
Therefore, the offence of conspiracy cannot be said to have been committed outside the country.
In Mobarik Ali Ahmed vs The State of Bombay. ; this court while dealing with the question of jurisdiction of the Courts to try an offence of cheating committed by a foreign national held that the offence of cheating took place only when representation was made by the accused sitting in Karachi to the complaints sitting in Bombay.
The argument founded on corporeal presence was rejected and it was observed: "What is, therefore, to be seen is whether there is any reason to think that a foreigner not corporeally present at the time of the commission of the commission of the offence does not fall within the range of persons punishable therefor under the Code.
It appears to us that the answer must be in the negative unless there is any recognised legal principle on which such exclusion can be founded or the language of the Code compels such a construction".
If a foreign national is amenable to jurisdiction under Section 179 of the Cr.
P.C. a NRI cannot claim that the offence shall be deemed to have been committed outside the country merely because he was not physically present.
Preparation of bill of lading at Dubai or payment at Dubai were not isolated acts.
They were part of chain activities between the appellant and his associates with whom he entered into agreement to cheat the bank at Chandigarh.
Any isolated act or omission committed at Dubai was insufficient to constitute an offence.
The illegal act of dishonestly inducing the bank at Chandigarh was committed not by preparation of bill at Dubai but its presentation in pursuance of agreement to cheat.
The submission thus founded was on residence or on preparation of bills of lading or encashment at Dubai are of no consequence.
569 Nor is there any merit in the submission that even part of the offence would attract Section 189 as the section operates when offence is committed outside India.
An offence is committed when all the ingredients are satisfied.
The section having used the word offence it cannot be understood as part of the offence.
Section 179 Cr.
P.C. empowers a court to try an offence either at a place where the offence is committed or the consequences ensue.
On the allegations in the complaint the act or omissions were committed in India.
In any case the consequence of conspiracy, cheating and forging having taken place at Chandigarh the offence was not committed outside the country therefore the provisions of Sec.
188 Cr.
P.C. were not attracted.
ORDER For reasons given by us in our concurring but separate orders the appeal fails and is dismissed.
Parties shall bear their own costs.
Appeal dismissed.

dataset_name: IN-Abs

summary:
The prosecution case was that the appellant, a non resident Indian at Dubai, hatched a conspiracy along with four others to cheat the Bank at Chandigarh.
in furtherance of the conspiracy, the appellant got credit facility by way of Foreign Letters of Credit and issued proforma invoices of his concern and addressed to the Bank through the establishments of other accused.
The Manager of the Bank, another accused, in confabulation with 544 the appellant and other accused, being in charge of foreign exchange department, issued Foreign letter of Credit in violation of import policy.
The Bills of Lading were addressed to the Bank.
The cable confirmation of the Bank was sent to appellant 's concern at Dubai for confirmation of discrepancy.
The appellant confirmed correctness thereof.
Placing reliance thereon, authority letter was issued by the Bank and cables were sent subsequent thereto to remit the amount .
to the Dubai Bank through one Irving Trust Company, At the instance of accused Anand, The Dubai Bank informed the Bankat Chandigarh that the discrepancy in the document adaptable to accused Anand and claimed to have inspected the goods on board in the vessel.
On receipt of the information from the appellant 's concern at Dubai, full amount is US Dollars 4,39,200 was credited against all the three Letters of Credit on discount basis.
The investigation established that the vessel was a non existent one and three Foreign Letters of Credit were fabricated on the basis of false and forged shipping documents submitted by the appellant to the Dubai Bank.
Thus the Bank at Chandigarh was cheated of an amount of Rs. 40,30,329.
The accused were charge sheeted under section read with sections 420, 468, and 471, IPC.
The Trial Court discharged all the accused of the offenses on the ground that conspiracy and the acts done in furtherance thereof had taken place outside India and as no sanction under section 188, Code of Criminal Procedure 1973 was produced, the prosecution was not maintainable.
The High Court in revision held that the conspiracy took place at Chandigarh and the overt acts committed In pursuance of that conspiracy at Dubai constituted offences under sections 420,467 and 471 IPC., and they were triable at Chandigarh without previous sanction of the Central Govt.
The High Court setting aside the order of discharge of the trial Court, directed to continue further proceedings in accordance with law.
That order of the High Court was challenged under this appeal under Article 136 of the Constitution.
The appellant contended that he was not a privy to the conspiracy and the conspiracy did not take place at Chandigarh; and that even assuming that some of the offences were committed in India, by operation of section 188 read with the proviso thereto with a non obstanti clause, absence of sanction by the 545 Central Govt.
barred the jurisdiction of the Courts in India to take cognisance of or to enquire into or try the accused.
The respondents submitted that the conspiracy to cheat the Bank was hatched at Chandigarh; that all the accused committed over acts in furtherance of the conspiracy at Chandigarh and therefore, the sanction of the Central Govt.
was not necessary.
Dismissing the appeal, this Court, HELD: Per K. Ramaswarmy, J. 1.01.
Judicial power of a State extends to the punishment of all offences against the municipal laws of the State by whomsoever committed within the territory.
It also has the power to punish all such offences wherever committed by its citizen.
The general principle of international law is that every person be it a citizen or foreigner who is found within a foreign State is subjected to, and is punishable by, its law.
Otherwise the criminal law could not be administered according to any civilised system of jurisprudence.
(553F) 1.02.
Conspiracy may he considered to be a march under a banner and a person may join or drop out in the march without the necessity of the change in the text on the banner.
In the comity of International Law, in these days, commiting offences on international scale is a common feature.
The offence of conspiracy would be a useful weapon and there would exist no contact in municipal laws and the doctrine of autrefois convict or acquit would extend to such offences.
The comity of nations are duty bound to apprehend the conspirators as soon as they set their feet on the country territorial limits and nip the offence in the bud.
(564 F G) 2.01.
Section 120 A of the I.P.C. defines 'conspiracy ' to mean that when two or more persons agree to do, or cause to be done an illegal act, or an act which is not illegal by illegal means such an agreement is designated as criminal conspiracy".
No agreement except an agreement to commit an offence shall amount to a criminal conspiracy, unless some act besides the agreement is done by one or more parties to such agreement in furtherance thereof.
(557 C) 546 2.02.
Section 120 B of the I.P.C. prescribes punishment for criminal conspiracy.
It is not necessary that each conspirator must know all the details of the scheme nor be a participant at every state.
It is necessary that they should agree for design or object of the conspiracy.
Conspiracy is conceived as having three elements: (1) agreement (2) between two or more persons by whom the agreement is effected; and (3) a criminal object, which may be either the ultimate aim of the agreement, or may constitute the means, or one of the means by which that aim is to be accomplished.
It is immaterial whether this is found in the ultimate objects.
(554 E) 2.03.
Conspiracy to commit a crime itself is punishable as a substantive offence and every individual offence committed pursuant to the conspiracy is separate and distinct offence to which individual offenders are liable to punishment, independent of the conspiracy.
(556 D) 2.04.
The agreement does not come to an end with it .
making, but would endure till it is accomplished or abandoned or proved abortive.
Being a continuing offence, if any acts or omissions which constitute an offence are done in India or outside its territory the conspirators continuing to be parties to the conspiracy and since part of the acts were done in India, they would obviate the need to obtain sanction of the Central Govt.
All of them need not he present in India nor continue to remain in India.
(556 E) 2.05.
An agreement between two or more persons to do an illegal act or legal acts by illegal means is criminal conspiracy.
If the agreement is not an agreement to commit an offence, it does not amount to conspiracy unless it is followed up by an overt act done by one or more persons in furtherance of the agreement.
The offence is complete as soon as there is meeting of minds and unity of purpose between the conspirators to de that illegal act or legal act by illegal means.
Conspiracy itself is a substantive offence and is distinct from the offence to commit which the conspiracy is entered into.
It is undoubted that the general conspiracy is distinct from number of separate offences committed while executing the offence of conspiracy.
Each act constitutes separate offence punishable, independent of the conspiracy.
(563 F G) "Jones 'Case, 1832 B & A D 345; Mulcahy vs Reg., (1868) L.R. ; Quinn vs Leathem, ; at 528; B.G. Barsay.
vs The State of Bombay, ; Yashpal vs The State of Punjab, ; Mohammed Usman, Mohamned Hussain Manivar & Anr.v.
State of Maharashtra, [1981] 3SCR 68;Noor 547 Mohammad Yasuf Monin vs State of Maharashtra, ; ; R.K. Dalmia & Anr.
vs The Delhi Administration, ; ; Shivanarayan Laxminarayan & Ors.
vs State of Maharashtra & Ors.
and Lennari Schussler & Anr.
vs Director of Enforcement & Anr., 1197012SCR 760, referred to. 2.06.
A conspiracy is a continuing offence and continues to subsist and committed wherever one of the conspirators does an act or series of facts.
So long as it ; performance continues, it is a continuing offence till it is executed or rescinded or frustrated by choice or necessity A crime is complete as soon as the agreement is made, but it is not a thing of the moment It does not end with the making of the agreement.
It will continue so long as there are two or more parties to it intending to carry into effect the design.
Its continuance is a threat to the society against which it was aimed at and would be dealt with as soon as that jurisdiction can properly claim the power to do so.
The conspiracy designed or agreed abroad will have the same effect as in India,.
when part of the acts, pursuant to the agreement are agreed to be finalised or done, attempted or even frustrated and vice versa.
(564 H, 565 A) Abdul Kader vs State.
AIR 1964 Bombay 133; U.S. vs Kissal, ; ; Ford vs U.S., ; at 620 to 622; Director of Public Prosecutions vs Doot and Ors., (1973) Appeal Cases 807 (H.L); Treacy vs Director of Public Prosecutions, (1971) Appeal Cases 537 at 563 (H.L.) and Board of Trade vs Owen.
(1957) Appeal Cases 602, referred to.
Prof. Williams, Glanville: "Vanue and the Ambit of Criminal Law", at 528; Halsbury 's Law of England, third edition Vol.
page 327, Para 6O2; Archobold:Criminal pleadings.
Evidence and Practice 42nd edition, [1985] Chapter 23, In para 28 32 at page 2281; Writ: Conspiracies and Agreements, at pages 73 74; Smith: Crimes, at page 239 and Russel; Crime, 12th edition, page 613, referred to. 2.07.
Sanction under section 188 is not a condition precedent to take cognizance of the offence.
If need be it could he obtained before trial begins.
Conspiracy was initially hatcher at Chandigarh and though its elf is a completed offence, being continuing offence, even accepting appellant 's case that he was at Dubai and part of conspiracy and overt acts in furtherance 548 thereof had taken place at Dubai and partly at Chandigar and in consequence thereof other offences had been ensued.
Since the offences have been committed during the continuing course of transaction culminates in cheating P.N.B. at Chandigarh, the need to obtain sanction for various officer under proviso to section 188 is obviated.
Therefore, there is no need to obtain sanction from Central Govt.
The case may he different if the offences were committed out side India and are completed in themselves without conspiracy.
(566 D E) K. Satwant Singh vs The State of Punjab, ; ; In Re M. L Verghese, AIR 1947 Mad. 352; T. Fakhulla Khan and Ors.
vs Emperor, AIR 1935 Mad. 326; Kailash Sharma vs State, 1973 Crl.
law journal 1021, distinguished.
Purshottamdas Dalmia vs State of Bengal, ; ; L.N. Mukherjee vs The State of Madras, ; ; R.K. Dalmia vs Delhi Administration ; at 273; Banwari Lal Jhunjhunwala and Ors vs Union of India and Anr., [1963] Supp. 2 SCR 338, referred to.
Per R.M. Sahai, J. (Concurring) 1.1.
Language of the section 188, Code of Criminal Procedure is plain and simple.
It operates where an offence is committed by a citizen of India outside the country.
Requirements are, therefore, one commission of an offence; second by an Indian citizen; and third that it should have been committed outside the country.
(567 D) 1.2.
Substantive law of extra territory in respect of criminal offences is provided for by Section 4 of the IPC and the procedure to inquire and try it is contained in Section 1 88 Cr.
P.C. Effect of these sections is that an offence committed by an Indian citizen outside the country is deemed to have been committed in India.
(567 E) 1.3.
Since the proviso to Section 188, Cr.
P.C. begin .
with a non obstinate clause its observance is mandatory.
But it would come into play only if the principal clause is applicable, namely, it is established that an offence as defined in dause 'n 'of Section 2 of the Cr.
P.C. has been committed and it has been committed outside the country.
(567 G) 549 1.4.
What has to be examined at this stage is if the claim of the appellant that the offence under Section 120B read with Section 420 and Section 471 of the IPC were committed outside the country.
An offence is deemed in the Cr.
P.C. to mean an Act or omission made punishable by any law for the time being in force.
None of the offences for which the appellant has been charged has residence as one of its ingredients.
(567 H, 568 A) 1.5.
The jurisdiction to inquire or try vests under Section 177 in the Court in whose local jurisdiction the offence is committed.
It is thus the commission of offence and not the residence of the accused which is decisive of jurisdiction.
When two or more persons agree to do or cause to be done an illegal act or an act which is illegal by illegal means such agreement is designated a criminal conspiracy under Section 120A of the IPC.
The ingredients of the offence is agreement and not the residence.
Meeting of minds of more than two persons is the primary requirement Even if it is assumed that the appellant was at Dubai and he entered into an agreement with his counterpart sifting in India to do an illegal act in India the offence of conspiracy came into being when agreement was reached between the two.
The two minds met when talks oral or in writing took place in India.
Therefore, the offence of conspiracy cannot be said to have been committed outside the country.
(568 B C) 1.6.
If a foreign national is amenable to jurisdiction under Section 179 of the Cr.
P.C. a NRI cannot claim that the offence shall be deemed to have been committed outside the country merely because he was not physically present (568 F) Mobarik Ali Ahmed vs The State of Bombay, ; , referred to.
An offence is committed when all the ingredients are satisfied.
The section having used the word 'offence ' it cannot be understood as part of the offence.
Section 179 Cr.
P.C. empowers a court to try an offence either at a place where the offence is committed or the consequences ensue.
On the allegations in the complaint the act or omissions were committed in India.
In any case the consequence of conspiracy, cheating and forging having taken place at Chandigarh the offence was not committed outside the country therefore the provisions of Sec.
188 Cr.
P.C. were not attracted.
(569 B)