Gujarat High Court
Venkataraman T. Pai vs C.R. Shah on 23 July, 1993
Equivalent citations: 1996(81)ELT467(GUJ)
JUDGMENT
1. Criminal Case No. 441 of 1987 has been pending in the Court of Additional Chief Metropolitan Magistrate, Ahmedabad for offences punishable under Section 9 of the Central Excises and Salt Act, 1944 (hereinafter referred to as "Salt Act") in connection with various alleged breaches. In the said complaint an application was given at mark 5/25 with a prayer that Section 9AA of the Salt Act be permitted to be added to the complaint. This application was heard and decided by the learned Additional Chief Metropolitan Magistrate on 3-11-1989 in favour of the complainant - Department.
2. Being aggrieved by this order, one of the accused of that case, filed Miscellaneous Criminal Application No. 141 of 1989 joining the original complainant as respondent No. 1 and the remaining accused of the said also as respondents No. 2 to 9. Later on, in the year 1992, original accused No. 5 who is respondent No. 4 in 1989 Criminal Misc. Application filed another Misc. Criminal Application No. 4869 of 1992 challenging that very order and hence both the matters are being dealt with together.
3. The 1989 matter being first in point of time and the Department having concentrated right from the beginning on the matter, in the course of hearing whatever reference was made to the position of record, it was in connection with said 1989 matter, though both the matters were heard together and are being disposed of by this common judgment.
4. A copy of the complaint is filed at Annexure F at page 59 onwards going upto page 109, followed by Annexure G, which is the said Application No. 5/28 starting from page 131 going upto page 141.
5. As could be expected, at page 112 of the book, Section 9AA has been quoted in its entirety. Thereafter, detailed argumentative submissions have been made in the application in support of the final prayer of permitting Section 9AA to be added in the caption as well as in the prayer clause of the original complaint.
6. The controversy revolves around the question whether Section 9AA introduced with effect from 27-12-1985 in the Salt Act will have retrospective effect?
7. The reason for the controversy is that the alleged offence/offences which was the result of alleged breach/breaches of different provisions of the Salt Act and Rules framed thereunder are confined to only 3 days, i.e., from 10-7-1983 to 12-7-1983. Original accused Nos. 5 and 6 respectively respondents Nos. 6 and 7 were working as Excise Clerks. Accused No. 1, i.e., respondent No. 2 is the Company. Accused No. 2, i.e., respondent No. 3 is the Chairman and Managing Director. Accused No. 3, i.e., respondent No. 4 is the Executive Director. Accused No. 4 is the petitioner. Accused No. 7, i.e., respondent No. 7 is also Excise Clerk,. Accused Nos. 8 and 9, i.e., respondents Nos. 8 and 9 are Auditors.
7A. The complaint for breaches of various rules and provisions of the Salt Act punishable under Section 9 thereof came to be filed on 3-8-1987 before the said Court. Section 120B of Indian Penal Code was also pressed into service and was to be read with Section 9 of the Salt Act. On behalf of the petitioner, it has been submitted that so far as the complaint dated 3-8-1987 under Section 9 read with Section 120B of Indian Penal Code is concerned, they have no quarrel and they are prepared to face the trial and this is the say of rest of the respondents accused also. No doubt, they all have objected to the order passed by the learned Additional Metropolitan Magistrate whereby section 9AA came to be added. Section 9AA having been added to the 1944 Act with effect from 27-12-[1985], unless it is held to be retrospectively operating, obviously, it would not apply to the offence/offences allegedly committed in the year 1983. That is why, application No. 5/28 has concentrated on the question of retrospective effect and the learned Additional Chief Metropolitan Magistrate also has correctly identified the question and has passed the order under challenge. This can be gathered from the very first paragraph of the order of the learned Magistrate at page 131. Before him, of course, it was argued that Section 9AA brings about change in the substantive law and that, it has the direct result of making the accused responsible for the acts which were innocent at the time when they were performed and only because of the deeming fiction introduced by Section 9AA the respective accused will become answerable for the same. This was met with by an argument on behalf of the Department that the changes brought about by Section 9AA are only of procedural nature and they merely shift the burden of proof and hence, the said Section must be given retrospective effect. This submission has found favour with the Learned Additional Chief Metropolitan Magistrate and hence, the impugned order.
8. In the argument before me the question of retrospectivity was thrashed out elaborately and while doing so, on behalf of the Department, i.e., Respondent No. 1, L. A. Shri K. L. Abichandani had also introduced a new element of continuity sought to be made out on the basis of charge under Section 120B of Indian Penal Code alleged in the complaint right from the beginning. His submission was that conspiracy is a continuing offence and till detection in the year 1987, the offence continued and the investigation was initiated on detection and complaint was filed in the year 1987 itself and Section 9AA having come into force in the year 1985 it would certainly apply and there is, therefore, no question of retrospectivity at all. In other words, Section 9AA could have been included in the complaint right from the beginning because it was in existence when the complaint was filed and as it was left out, the application was given.
9. Either way, the question will still remain whether Section 9AA would have retrospective effect because the alleged instances of breaches are of the year 1983 and Section 9AA was introduced on 27-12-1985. The aspect of continuity of offence under Section 120B may be dealt with separately, but, as will be presently seen, it has no substance. Learned Counsel Shri P. Chidambaram appearing for the petitioner alternatively had gone on an assumption that Section 9AA was there in the complaint right from the beginning, even then, the question of its retrospectivity will remain.
10. So far as continuing offence under Section 120B Indian Penal Code is concerned, the moment it is described as continuing, there is something like offence not having been completed; while the clear case in the complaint is that the offence or the alleged breaches were completed between 10-7-1983 and 12-7-1993. Factually also, there could not have been a continuation of the alleged conspiracy because the alleged breaches related to a Scheme of taking credit of duty which was to be in force only upto 15th of July 1983. Therefore, according to the complainant, between the aforesaid dates credit amounting to Rs. 1,17,00,000/- were claimed by intentionally overdrawing and manipulating the credit of duty in RG-23 Part II without receipt of any goods on which such credit could be claimed.
11. The moment it is realised that on [15-7-1983] the Scheme was to come to an end and that the aforesaid act of false credit was carried out within the period of said two dates, the offence is completed and hence, there is no question of continuity on fact.
12. L. A. Shri Abichandani, for this purpose, has relied on AIR 1984 Bombay 133. However, as could be seen from para 6 of the judgment and other relevant portion thereof, the continuity was held on the ground that in fact, conspiracy had continued for a period of time and all those who were parties to the agreement at the moment of the formation of the conspiracy were not only held liable for the agreement itself, but also, for the acts committed during the period that the conspiracy continued. The aforesaid factual position carved out from the complaint in the present case being to the contrary, obviously, this decision will not help respondent No. 1.
13. AIR 1955 Hyderabad 128 is the second authority relied on for the purpose of the aforesaid submission about continuity in fact. There, it was held that person who had [come] to India from Pakistan and having stayed after 24-7-1950, the date on which an Ordinance for prohibiting the overstaying came to be promulgated, such stay was held to be a continuing offence. Factually, therefore, the present case would not help respondent No. 2.
14. The 3rd decision relied on in 63 SC 1850. This decision also would not be of any help to respondent No. 1 at all. It is about conspiracy itself being a separate and independent offence and therefore, framing of a separate charge in connection therewith.
15. The submission made on behalf of the complainant by L. A. Shri Abichandani on the ground of continuity with reference to Section 120B Indian Penal Code, in my opinion, therefore, is required to be rejected. It is pertinent to note here that Section 9AA confines its operation to the offences under the Salt Act only and Section 120B of Indian Penal Code not being an offence under the Salt Act, Section 9AA will have no effect whatsoever [qua] Section 120B of Indian Penal Code. At this stage I would like to quote Section 9AA to appreciate the remaining contentions :
Section 9AA : Offences by Companies. - (1) Where an offence under this Act has been committed by a Company, every person who at the time the offence was committed was in charge of, and was responsible to the Company for the conduct of the business of the Company, as well as the Company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly :
Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a Company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the Company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation : For the purpose of this section :
(a) "Company" means any body corporate and includes a firm or other association of individuals; and
(b) "Director" in relation to a firm means a partner in the firm.
The Section quoted hereinabove, clearly indicates that what was till then an offence by a Company only would be an offence not only by the Company but also by the persons who are running the affairs of the Company and those persons being one specified in Section 9AA. The moment his aspect is borne in mind it is quite clear that Section 9AA is not a procedural section or a Section describing rule of evidence merely shifting the burden of proof. It introduces criminality in relation to the persons who are incharge of the affairs of the Company alongwith the Company. In other words, it is a substantive law and not a procedural or adjectival law.
16. On analysing the Section the aforesaid conclusion will be borne. In sub-sections 1 and 2 both the last 2 lines clearly indicate that the persons specified "shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly". Now, they are to be deemed guilty along with the Company, which till the introduction of Section 9AA was the only one answerable for the alleged offence. This would be the position in case of a conspiracy that may be alleged against all or any of the persons having connection either with the management of the Company or running of a particular Department, which would be the position in the instant case with regard to original accused Nos. 5, 6 and 7. This is cited only by way of an example to illustrate the point under discussion and these remarks or observations are not to be treated at all as a finding of fact qua accused Nos. 5, 6 and 7.
17. In the aforesaid background, the learned Counsel Shri P. Chidambaram had referred to Article 20(1) of the Constitution of India. A person cannot be tried for an act which was not an offence at the time when it was committed nor can he be awarded penalty higher than the one that was prescribed at the time of commission of offence, that is the essence of the aforesaid constitutional provision. That exactly is the meaning assigned to the terms "ex post facto" as could be seen from Black's Dictionary page 580 defining this term. The Dictionary visualises two possibilities as under :
(1) A law passed after the occurrence of fact or commission of an act which retrospectively changes the legal consequences or relations of such facts or, deed.
(2) A law which provides for the infliction of punishment upon a person for an act done which when it was committed was innocent.
18. Section 9AA quoted hereinabove by deeming fiction makes the person in-charge for the conduct of the business of the Company guilty only because he was in-charge at the time of commission of offence. If Section 9AA is given retrospective effect, obviously, the act of being in-charge which was definitely innocent and had no legal consequence as the one brought in by Section 9AA it will be clearly hit by Article 20(1) of the Constitution of India.
19. AIR 1953 SC 394 para 8 was cited by learned Counsel Shri Abichandani while submitting that enactment of deeming fiction is not prohibited. Strictly speaking, Shri Abichandani is right in submitting this, however, as per paragraph 8 itself, after distinguishing the idea of ex post facto law as available in the English System of Jurisprudence and what has happened in the American System because of its Constitution, the learned Judges were pleased to observe that Article 20 was meant to bring about nothing more than the invalidity of ex post facto laws in the post Constitution period, but the validity of pre-constitution laws in this behalf was not intended to be affected in any way. Obviously, this authority has no application here.
20. Now, turning to Section 9AA, it is quite clear that the language used itself does not make it retrospective. In application 5/28 before the trial Court also, it has been categorically stated in para 3 at page 113 that the bill which contained the said amending provision of Section 9AA and others which eventually became, on passing Act No. 79 of 1985, did not assign any reason for the amendment, nor did it indicate any object that was to be fulfilled by introducing the amendment including Section 9AA. Thus, the position is that, neither is there any indication by way of reasons and objects in the amending Act, nor is there anything in the language of Section 9AA which would warrant its retrospective operation. It is, therefore, clearly hit by Article 20(1) of the Constitution of India.
21. It can arguable be said that sub-section (1) of Section 9AA contains a proviso whereby lack of knowledge or exercise of due diligency is permitted to be a defence for the person made liable on account of legal fiction contained in sub-section (1). However, as rightly submitted by learned Counsel Shri P. Chidambaram, sub-section (2) does not afford any defence whatsoever provided it is proved that the offence has been committed with the consent or connivance or is attributable to any neglect on the part of any Director, Manager, Secretary or other Officers and he or they shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
22. Even in the proviso to sub-section (1) lack of knowledge might be possible to plead and prove, but the exercise of due diligence introduced by way of defence for the first time in relation to the deeming fiction contained in sub-section (1) could not per se have been exercised as that was not expected of the Director or the person in-charge of the affairs of the Company, because, till then, he did not know that this will be the requirement to escape liability from deeming fiction. A statutory provision introduced in an existing statute by way of amendment may [by] express word be made retrospectively effective or there might be requirement, may be even compelling circumstances, to read it retrospectively. In either event, it will be retrospective qua all the persons likely to be affected and it cannot be retrospective in case of accused of one criminal complaint and not retrospective in case of accused of other complaint. I am referring this aspect because in the course of discussion, as will be seen later on, while requesting the Court to read into Section 9AA the requirement of making it retrospectively effective, Shri Abichandani had requested the Court to take into consideration the circumstances at the time of enacting the amended provision and the factual background from the complaint and submitted that in the instant case, no vested rights are being violated. It was also urged by him that the liability brought in by way of legal fiction under Section 9AA is not vicarious in nature but it is an imputed liability. It was further submitted by learned Counsel Mr. Abichandani that the amending provision is only declaratory and hence, it can operate retrospectively. Shri Abichandani had gone to the extent of submitting that Article 20(1) of the Constitution of India would not apply to deeming fiction. The last mentioned submission is recorded only for the purpose of rejecting it.
23. The factual background which learned Counsel Shri Abichandani had taken me through on reading the complaint is only revealing the position of various statements of various accused having been recorded on different dates in the course of investigation. This may have a bearing on the charge under Section 120B of Indian Penal Code. However so far as applicability of Section 9AA with retrospective effect is concerned it cannot help the complainant.
24. Learned Counsel Shri Abichandani had heavily relied on the work on Interpretation of Statute by the renowned Author G. P. Singh. At page 225 of the 1992 (5th) Edition, legal fiction has been dealt with and in the course of the discussion it has been mentioned that the Court is to ascertain for what purpose the fiction is created and after ascertaining this, the Court is to assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction. Very next is the observation at page 226, where it has been categorically stated that but in so construing the fiction is not to be extended beyond the purpose for which it is created or beyond the language of the Section by which it is created. Moreover a fiction in terms enacted for the purpose of a particular Act is normally restricted to that Act and cannot be extended to cover another Act.
25. Learned Counsel Shri Abichandani had referred to the passage from the judgment of Lord Asquith given in Best End Dwelling Co. Ltd. v. Pinabury Borough Council and the quotation appears at page 226 of that book. I says that once the legal fiction is created the consequences are also to be taken to have been so created and whatever they be, one should not allow one's imagination to boggle when it comes to inevitable corollaries of the state of affairs that ensues.
26. Relying on 1987 (32) E. L. T. 234 (SC) - AIR 1988 SC 191 learned Counsel Shri Abichandani had submitted that Section 11A is operating retrospectively. However, on reading the judgment, it appears that under section 51 of the Finance Act, Rules 9 and 49 were amended and in conjunction with Section 56A the amended Rules were given retrospective effect. Section 11A provides for recovery in ordinary course within a period of 6 months and 5 years if there is short levy, short payment, non-payment or refund on account of fraud, collusion, wilful mis-statement, suppression of fact or contravention of any of the provisions of the Act. The relevant data is defined for the purpose of Section 11A by clause 2 of sub-section 3 thereof. By Section 51 of the Finance Act, Rules 9 and 49 were to operate retrospectively and on the contrary, as per this decision, these Rules were made subject to Section 11A and accordingly, in paragraphs 32, 34, 36 and 37 of the judgment, it is to be found that in the case before the Supreme Court, the period upto which recovery can be had was six months only. Otherwise also, it is a case of recovery and not making something which was not an offence at the time of its occurrence to be an offence because of the amendment.
26A. Learned Counsel Shri Chidambaram had relied on The Work on Interpretation of Statutes. At page 497, general principles as to the construction of Statutes have been discussed. At page 503, they read as under :
"(1) If the prohibitory words in their known signification cover only some class of persons or some well defined activity, their import cannot be extended to cover other persons or other activity on consideration of policy or object of the statute.
(2) If the prohibitory words are reasonably capable of having a wider as also a narrower meaning and if there is no indication in the statute or in its policy or object that the words used in the wider sense, they could be given the narrower meaning. In other words, where after full consideration it is found that the prohibitory words are equally open to two constructions, one of which covers the subject and the other does not, the benefit of construction will be given to the subject.
(3) If the prohibitory words in their known signification bear a wider meaning which also fits in with the object or policy of the statute, the words will receive that wider meaning and their import will not be restricted even if in some other context they can bear a narrower meaning.
(4) If the literal reading of the prohibitory words produces an unintelligible or non-sensual result, but the statute read as a whole gives out its meaning clearly, effect will be given to that meaning by curing a mere defect in phraseology and even by rejecting words as surplusage."
Based on this, he had submitted that prior to addition of Section 9AA well defined class, namely, Company could have been held guilty and as a result, only punishment of fine could have been imposed. Obviously, when living persons are deemed to be liable because of Section 9AA, imprisonment can also be ordered which was not possible to the Class of offenders till addition of 9AA that were contemplated namely the Company. The aforesaid principles will also, therefore, indicate that Section 9AA cannot be given retrospective effect and there is no internal evidence as to retrospectivity.
27. Learned Counsel Shri Chidambaram has also relied on AIR 1984 SC 87. It is a decision under East Punjab Rent Restriction Act. It lays down that unless legislative intent is clear or language implies necessarily all laws affecting substantive rights are prospective. If language is clear and unambiguous, effect should be given according to its tenure.
28. Discussion on this line can certainly be continued. But coming to the facts of the present case, when amending Act itself does not assign any reason or set out any object, it will not be possible to ascertain the purpose of creation of fiction. If it is taken to be the one as submitted by learned Counsel Shri Abichandani that persons in-charge of the Company should not be allowed to escape, even then, Article 20(1) will have to be borne in mind. The aforesaid discussion in G. P. Singh's Work, in my opinion, therefore, will not help the complainant in any manner. Learned Counsel Shri Abichandani is right in submitting that there is no prohibition of ex post facto laws. However, this submission cannot be accepted in its entirety because it will have to be considered in light of Article 20(1) of the Constitution of India. For this Shri Abichandani had relied on AIR 1956 SC 394 which I have already discussed earlier and as noted, the said decision relates to pre-constitutional and post-constitutional legislation. However, with regard to the latter period, pronouncement is clear that ex post facto legislation as to criminal offences is clearly prohibited. The legislation as to deeming fiction will automatically be restricted to that extent.
29. Learned Counsel Shri Abichandani then relied on AIR 1991 SC 672 where with retrospective effect forest contract which was subsisting was rescinded and the legislation which brought about this result was challenged. No doubt, as per paragraph 15 of the judgment at page 677, this challenge has been repelled and the legislation is held to be valid. In para 11 it could be seen that the text of the amendment was clearly retrospective.
30. Learned Counsel Shri Abichandani had also relied on AIR 1959 Bombay 477. It relates to Section 35(10) of the Income-Tax Act 1922 having retrospective operation. However, from the judgment, it is to be gathered that it was a curative exercise confined to assessment years 1948 to 1955 where granting of a rebate was deemed to be an error apparent on record. Not only the legislation was ex post facto in terms, but while setting certain matters right, it resulted into recovery only. It did not entail any penal consequence. Same is the position in AIR 1991 SC 1289 relating to cancellation of exemption under the Provident Fund Act and it has been held that cancellation is not a penalty.
31. AIR 1965 SC 444 relied on by Shri Abichandani relates to applicability of Probation of Offenders Act. This Act was held to be reducing the rigorous of criminal law as to penology and its retrospective effect cannot be hit by Article 20(1).
32. As noted above, learned Counsel Shri Abichandani had described Section 9AA to be a declaratory statute only. On going through the Section, I do not find any declaration whatsoever. What it contains is a legal fiction. When AIR 1969 (1) SCC 809 cited by Shri Abichandani is referred to, this submission can, to an extent, be understood. In the course of the judgment, it has been stated that declaratory statutes are retrospective. However, later on it is made clear that Statute should declare by its language that it is retrospective. Section 21 of U. P. Jamindari Abolition and Land Reforms Act was made expressly retrospective and to harmonise Section 157 thereof with Section 27, they were considered to be retrospective. Declaratory statutes in the aforesaid position would clearly mean that the language of the statute should itself declare it to be retrospective. This declaration is missing in Section 9AA.
33. AIR 1979 SC 602 relied on by learned' Counsel Shri Abichandani relates to procedural changes that were brought about in Prevention of Corruption Act, 1947. On the contrary in para 7 in the course of discussion while dealing with 1967 Amendment, it has been held that procedural changes can be retrospective, but there is no power given to the Legislature to create new offence with retrospective effect. This will clearly be hit by Article 20(1) of the Constitution of India.
34. This will take me to the other decisions cited by learned Counsel Shri P. Chidambaram. They fall into two different categories. One set of authority relates to Sections which are pari materia to Section 9A, but those different provisions are in different Acts like Section 23(C) of FERA, 1947, corresponding to Section 68 of FERA Act of 1973, Section 17 of the Prevention of Food Adulteration Act, Section 176B of the Income-Tax Act, Section 140 of Customs Act. The decisions are 139 ITR 822 at page [824] Punjab and Haryana D. B., 144 ITR 506 at page 508 Allahabad, 151 ITR 723 at page 725 Punjab and Haryana, 169 ITR 5 at page 7 - Delhi and 191 ITR page 1 at page 6 - Madras, Section 23(C) of FERA corresponding to Section 68 of 1973 Act. Learned Counsel Shri P. Chidambaram had also cited AIR 1971 SC 25 and AIR 1971 SC 2162.
35. Learned Counsel Shri Abichandain had tried to distinguish the judgments under Income-tax Act cited by learned Counsel Shri P. Chidambaram by referring to various provisions of the Income-tax Act and these provisions are Section 2(17) - definition of company, 2(23) - definition of a firm, 2(31) - definition of a person. He then had referred to General Clauses Act Section 3(42) and Indian Penal Code Section 11 defining the person and had sought by comparison to point out that Income-tax Act definition of person is rider. He then referred to Section 271, etc. as to self-assessment and in relation to a Company definition of principal Officer as contained in 3(35). However, in spite of all these attempts in my opinion, it is not possible to hold that Section 278B of Income-tax Act which is pari materia with Section 9AA that has been interpreted to be not operation retrospectively, the authorities cannot be made use of for resolving the controversy about the retrospective effect of Section 9AA.
36. The second category of cases cited by learned Counsel Shri P. Chidambaram relates directly to Section 9AA and they are : (1) 1986 (25) E. L. T. 915 remarks at page 922, (2) 1991 (52) E. L. T. 497 at page 498, (3) 1992 Criminal Law Journal 3187 and (4) an unreported judgment rendered by the Bombay High Court in Shri S. C. Kirloskar v. Union of India. Without any further discussion in connection with these different decisions cited by learned Counsel Shri Chidambaram, and having gone through them, it is quite clear that the findings are that the respective provisions of the respective enactments creating offence for the first time by amendment, cannot operate retrospectively.
37. As mentioned earlier, the learned Magistrate has been led away by the submission that the amendment introduced by Section 9AA is only procedural. I have already held hereinabove that it is not so.
38. The net result, therefore, is that the petitions are required to be allowed. Accordingly, the petitions are allowed. The Order passed by the learned Metropolitan Magistrate is hereby quashed and set aside and the said application stands dismissed. Rule in both the matter is made absolute.