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Rediff.com  » Business » Firms can be sued for financial irregularities: SC

Firms can be sued for financial irregularities: SC

Source: PTI
May 05, 2005 12:19 IST
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Taking away the immunity of the companies to be prosecuted in financial irregularities, the Supreme Court on Thursday ruled that corporate bodies can always be prosecuted in financial irregularity cases and courts can impose fine on them.

A five-judge constitution Bench headed by Justice N Santosh Hegde gave the ruling while setting aside an earlier ruling of the court that companies cannot be prosecuted in economic offences as they were not a natural person and could not be imprisoned if found guilty.

Justice K G Balakrishnan, writing the judgement, said the courts trying corporate bodies can always impose fine on them, if found guilty, though a sentence of imprisonment cannot be passed against them.

Justice Balakrishnan said there was no blanket immunity to any company only because at the end of the trial they could not be sentenced to imprisonment.

He said in view of the large-scale financial irregularities witnessed in the country and its bad effect on the country's economy as well as the society, it was necessary that companies should also face prosecution along with those who perpetrated the crime.

Justice D M Dharmadhikari, Justice Arun Kumar and B N Srikrishna agreed with Justice Balakrishnan and said once the court comes to a conclusion about the guilt, it was bound to prescribe punishment for the offence which was just like 'day following the night.'

Justice Srikrishna said there was not any exception carved out for the companies in the Income Tax Act or in the Foreign Exchange Regulation Act to avoid their prosecution in case of financial irregularities.

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