Air Asia (India) Private Limited Vs Registrar of Companies (Karnataka High Court)
Karnataka High Court held that the provisions of section 197(15) of the Companies Act are amended and made effective from 02.11.2018 hence the amended provisions would not apply to the offences which are said to have been committed in the year 2016.
Facts- The petitioner No.1/accused No.1 was originally Chief Executive Officer and thereafter, became the Managing Director of the petitioner – Company. On 18.06.2022, respondent filed a complaint before the Special Court of Economic Offences, Bengaluru against the petitioner and accused No.2 for the alleged violation of Section 197(3), 197(9) of Companies Act and Rule 7(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
On 22.06.2022, Special Court took cognizance against the petitioner and accused No.2 for the offences punishable u/s. 197(15) of the Companies Act, 2013, pursuant to which, the petitioner-company received summons from the Special Court and as such, the petitioner is before this Court by way of the present petition.
Conclusion- Held that provisions contained in Section 197(15) was amended vide Companies (Amendment) Act, 2019 by Central Act No.22/2019. A bare perusal of the amendment Act is sufficient to come to the conclusion that Section 197(15) has been substituted by the amended provisions. In this context, in the absence of anything to the contrary in the amendment the substitution of Section 197(15) vide amendment w.e.f. 02.11.2018 would relate back to the date of original provision of the year 2013 and in the light of the undisputed fact that the alleged offences are said to have been committed in the year 2016, I am of the considered opinion that the amended provision of Section 197(15) would not apply even in relation to the offences said to have been committed in the year 2016. Thus, having regard to the amendment to Section 197(15) vide amended Act, 2019, Central Act No.22/2019 w.e.f 02.11.2018, the impugned proceedings as against the petitioner clearly are not maintainable and same deserves to be quashed.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
In this petition, petitioner seeks for the following reliefs:
a. Issue any appropriate writ order or direction quashing the complaint dated 18.06.2022, against the petitioner, in C.C.No.69/2022 pending on the file of the Special Court for Economic offences, Bengaluru at Annexure-A.
b. Issue any appropriate writ order or direction quashing the order of cognizance dated 22.06.2022 in C.C.No.69/2022 registered against the petitioner, pending on the file of the Special Court for Economic Offences Bengaluru at Annexure-B.
c. And pass such other orders as this Hon’ble Court deems fit and proper in the interest of justice and equity.
2. A perusal of the material on record will indicate that the petitioner No.1/accused No.1 was originally Chief Executive Officer and thereafter, became the Managing Director of the petitioner – Company. On 18.06.2022, respondent filed a complaint before the Special Court of Economic Offences, Bengaluru against the petitioner and accused No.2 for the alleged violation of Section 197(3), 197(9) of Companies Act and Rule 7(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. On 22.06.2022, Special Court took cognizance against the petitioner and accused No.2 for the offences punishable under Sections 197(15) of the Companies Act, 2013, pursuant to which, the petitioner-company received summons from the Special Court and as such, the petitioner is before this Court by way of the present petition.
3. Heard learned counsel for the petitioner and learned Central Government Counsel for the respondent and perused the material on record.
4. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner has invited my attention to Section197(15) of the Companies Act in order to point out that as on the date of complaint, Section 197(15) had stood amended and the expression “punishable with fine” is substituted with expression “penalty” and the same would not constitute the offences under the said provision. It is also submitted that the said amendment came into force on 02.11.2018 and notwithstanding the fact that the period during which the offences said to have been committed was prior to the said amendment and since the complaint was given subsequent to the amendment referred to supra, which renders in violation entailing and making it an offence, the impugned proceedings deserves to be quashed.
5. Per contra, learned Central Government Counsel submits that since as on the date of the incident, Section 197(15) was not amended and merely because the complaint was instituted subsequently, the impugned proceedings cannot be quashed and the petition is liable to be dismissed.
6. By way of reply, learned counsel for the petitioner submits that by virtue of Section 197(15) having come into force w.e.f 02.11.2018, in the absence of contrary intention appearing in the substituted provision or in the amended provision, the amendment would relate back to the date of original provision and the said contention of the respondent cannot be accepted. In support of her submission, learned counsel for the petitioner places reliance to the following judgments:
i) Commissioner of Central Excise and Service Tax Vs. Fosroc Chemicals (India) P. Ltd.; reported in 2014 SCC Online Kar 12806, wherein this Court has held as under:
“xxx
10. What is the effect of “substitution” of a provision in the place of an existing one is no more reintegrate. The Constitution Bench of the Hon’ble Apex Court in the case of SHAMARAO V. PARULEKAR vs. THE DISTRICT MAGISTRATE, THANA, BOMBAY & Others reported in AIR 1952 SC page 324, dealing with the scope of substitution of a provision by way of amendment held as under:-
“When a subsequent Act amends an earlier one in such a way as to incorporate itself or a part of itself into the earlier, then the earlier Act must thereafter be read and construed (except where that would lead to a repugnancy, inconsistency or absurdity) as if the altered words had been written into the earlier Act with pen and ink and the old words scored out so that there is no need to refer to the amending Act at all.
11. Yet another Constitution Bench of the Hon’ble Supreme Court in the case of SHYAM SUNDER & Others vs. RAM KUMAR & Another reported in AIR 2001 SC page 2472, while dealing with the question whether a substituted provision necessarily means the amended provision is retrospective in nature has held as under:
“A substituted section in an Act is the product of an amending Act and all the effects and consequences that follow in the case of an amending Act the same would also follow in the case of a substituted section in an Act.
12. In fact, the Division Bench of this Court in the case of SHA CHUNNILAL SOHANRAJ VS. T. GURUSHANTAPPA reported in 1972(1) MYS.L.J. PAGE327 DB has held as under:
“When an amending Act has stated that the old sub- section has been substituted by the new sub-section the inference is that the Legislature intended that the substituted provision should be deemed to have been part of the Act from the very inception.
13. Recently, the Hon’ble Apex Court in the case of GOVERNMENT OF INDIA VS. INDIAN TOBACCO ASSOCIATION reported in 2005(187) ELT PAGE 162(SC), while dealing with the exemption notification which was issued by way of substitution, held as under:-
“The word ‘substitute’ ordinarily would mean ‘to put (one) in place of another’, or ‘to replace’. In Black’s Law Dictionary, Fifth Edition, at page 1281, the word ‘substitute’ has been defined to mean ‘To put in the place of another person or thing’, or ‘to exchange’. In Collins English Dictionary, the word ‘substitute’ has been defined to mean ‘to serve or cause to serve in place of another person or thing’; ‘to replace (an atom or group in a molecule) with (another atom or group)”; or ‘a person or thing that serves in place of another, such as a player in a game who takes the place of an injured colleague’.
16. By reason of the aforementioned amendment no substantive right has been taken away nor any penal consequence has been imposed. Only an obvious mistake was sought to be removed thereby.
17. There cannot furthermore be any doubt whatsoever that when a person is held to be eligible to obtain the benefits of an exemption notification, the same should be liberally construed.”
14.The Parliament has enacted the Special Economic Zones Act 2005 (The SEZ Act for short) to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. Section 53 of the Act declares that a special economic zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. The word “export” has been defined under Act at section 2(m). According to the definition of the word export, vide Section 2(m) (ii) “export” means supplying goods or providing services, from the Domestic Tariff Area to a Unit or Developer. Such exports were exempted from duty of Central Excise under Section 26 of the SEZ Act, 2005 and consequently application of Cenvat Credit Rules. Section 151 of the Special Economic Zones Act 2005, overrides the provision of all other laws for the time being in force, notwithstanding anything inconsistent therein with the provision of the Special Economic Zones Act, 2005. This section therefore overreaches and eclipses the provisions of any other law containing provisions contrary to the SEZ Act, 2005. Though the definition of the word “export” in the SEZ Act, in Sec.2(m) included supply of goods to a “Unit” or “Developer”, in clause (i) of sub-rule (6) of Rule 6 of the Cenvat Credit Rules, 2004 the word “Developer” was conspicuously missing and only “unit” was included before the 2008 amendment. It is in that context the aforesaid amendment by Notification No.50/2008 CE (N.T) dated 31.12.2008 was brought in, to clarify the doubt. As the said amendment is clarificatory in nature, that is the reason why it was brought by way of “substitution”. The effect of the said “substitution” is that the Cenvat Rules 2004 are to be read and construed as if the altered words had been written into the Rules of 2004 with pen and ink and the words “to a developer of the SEZ for their authorized operation” was there from the inception. This is the understanding of the Government as is also clear from the circular issued by the CBEC bearing No.29/2006-Cus., dated 27.12.2006 wherein clause 4 reads as under:-
“4. In the light of the aforesaid provisions, with effect from 14.3.2006, Chapter XA of the Customs Act, 1962, the SEZ Rules, 2003, the SEZ (Customs Procedure) Regulations, 2003, and the exemption Notification No.58/2003-C.E., dated 22.7.2003 regarding the supply of goods to SEZ units & SEZ developers have become redundant. Consequently the supplies from DTA to a SEZ unit, or to SEZ developers for their authorized operations inside a SEZ notified under sub-section (1) of Section 4 of the Act, may be treated as in the nature of exports.”
15. Therefore, it is clear, the said amendment has to be construed as retrospective in nature and the benefit of Rule 6(6)(1) as amended in 2008 has to be extended to the goods cleared to a “developer” of a Special Economic Zone for their authorized operations. Therefore, we do no see any merit in these appeals.”
ii) Government of India and Ors. Vs. Indian Tobacco Association reported in (2005) 7 SCC 396, wherein the Hon’ble Supreme Court has held as under:
“xxx
14. However, the question which arises for consideration in this case is as to what would be the effect of the subsequent notification.
15. The word “substitute” ordinarily would mean “to put (one) in place of another”; or “to replace”. In Black’s Law Dictionary,5th , at p. 1281, the word “substitute” has been defined to mean “to put in the place of another person or thing”, or “to exchange”. In Collins English Dictionary, the word “substitute” has been defined to mean “to serve or cause to serve in place of another person or thing”; “to replace (an atom or group in a molecule) with (another atom or group)”; or “a person or thing that serves in place of another, such as a player in a game who takes the place of an injured colleague”
16. By reason of the aforementioned amendment no substantive right has been taken away nor any penal consequence has been imposed. Only an obvious mistake was sought to be removed thereby.
17.There cannot furthermore be any doubt whatsoever that when a person is held to be eligible to obtain the benefits of an exemption notification, the same should be liberally construed.
18.The notification dated 7-4-1997 is an exemption notification whereby and where under the export and import policy of the Union of India was implemented. Exemption from payment of additional duty leviable under Section 3 of the Customs Tariff Act, was to be granted to an exporter, provided he possessed a duty entitlement pass book which was valid at the ports of registration specified therein.
19. The proviso appended to sub-clause (iv) of clause (2)of the notification dated 7-4-1997 empowers the Commissioner of Customs to permit imports and exports from any other seaport, airport, inland container depot or through a land customs station.
20. The Commissioner of Customs has advisedly not exercised his jurisdiction under the proviso appended to sub-clause (iv) of clause (2) of notification dated 7-4-1997. By reason of the notification dated 27-11-1997, the only amendment made was the words “Tuticorin and Vishakhapatnam” were substituted by the words “Tuticorin, Vishakhapatnam and Kakinada”, which are “seaports” and the words “Ludhiana and Hyderabad” were substituted by the words “Ludhiana, Hyderabad, Nagpur, Agra, Faridabad, Jaipur, Guntur and Varanasi” which are “inland container depots”.
21. It is not in dispute that “Guntur” was one of the inland container depots. It is also not in dispute that such duty exemption had all along been granted for export from “Guntur”. In terms of the policy decision, the tobacco exporters had filed blue shipping bills which having not been accepted and they had no option but to file normal white shipping bills, as tobacco was a perishable item.
22. Had the intention of the Government of India been only to extend the said benefit only to the exporters from any other seaport, airport or inland container depot, recourse to the proviso appended to sub-clause (iv) of clause (2) of the notification dated 7-4-1997 could have been taken. But by reason of the notification dated 27-11-1997, one “seaport” and “six inland container depots” have been added. The last two words in the category of seaport, namely,
“Tuticorin and Vishakhapatnam” had been substituted by the words “Tuticorin, Vishakhapatnam and Kakinada”. Similarly the last two words, namely, “Ludhiana and Hyderabad” in the category of inland container depot had been substituted by the words “Ludhiana, Hyderabad, Nagpur, Agra, Faridabad, Jaipur, Guntur and Varanasi”. It, therefore, cannot be said to be a case where some other seaports or inland container depots have been added for the purpose of extension of the benefit but the newly added seaports or inland container depots had been made a part of the original notification. The Union of India while making a subordinate legislation had advisedly used the word “substitution” in place of the word “addition”. The object and purport of the subsequent notification issued by the Union of India was, thus, to grant the same benefit which had been granted to the exporters who were registered at the other seaports, airports or inland container depots as specified in the notification dated 7-4-1997 but also to those exporters, who had been exporting from such seaports or inland container depots as specified in the amended notification dated 27-11-1997.
23. If the Central Government intended to extend the benefit to the members of the respondent Association only with prospective effect, it could have said so explicitly. Such a benefit could also have been extended by taking recourse to the proviso appended to sub-clause (iv) of clause (2) of the notification dated 7-4-1997. It may, therefore, be safely concluded that by reason of the amended notification, the Central Government only intended to rectify a mistake and, thus, the same will have retrospective effect and retroactive operation.
24. In Ramkanali Colliery of BCCL v. Workmen by Secy., Rashtriya Colliery Mazdoor Sangh [(2001) 4 SCC 236 : 2001 SCC (L&S) 689] a Division Bench of this Court observed: (SCC pp. 240-41, para 8)
“What we are concerned with in the present case is the effect of the expression ‘substituted’ used in the context of deletion of sub-sections of Section 14, as was originally enacted. In Bhagat Ram Sharma v. Union of India [1988 Supp SCC 30 : 1988 SCC (L&S) 404 : (1988) 6 ATC 783] this Court stated that it is a matter of legislative practice to provide while enacting an amending law, that an existing provision shall be deleted and a new provision substituted. If there is both repeal and introduction of another provision in place thereof by a single exercise, the expression ‘substituted’ is used. Such deletion has the effect of the repeal of the existing provision and also provides for introduction of a new provision. In our view there is thus no real distinction between repeal and amendment or substitution in such cases. If that aspect is borne in mind, we have to apply the usual principles of finding out the rights of the parties flowing from an amendment of a provision. If there is a vested right and that right is to be taken away, necessarily the law will have to be retrospective in effect and if such a law retrospectively takes away such a right, it can no longer be contended that the right should be enforced. However, that legal position, in the present case, does not affect the rights of the parties as such.”
25. In Zile Singh v. State of Haryana [(2004) 8 SCC 1] wherein the effect of an amendment in the Haryana Municipal Act, 1973 by Act 15 of 1994 whereby the word “after” was substituted by the word “up to” fell for consideration, wherein Lahoti, C.J. speaking for a three- Judge Bench held the said amendment to have a retrospective effect being declaratory in nature as thereby obvious absurdity occurring in the first amendment and bring the same in conformity with what the legislature really intended to provide was removed, stating: (SCC p. 12, paras 23-25)
“23. The text of Section 2 of the Second Amendment Act provides for the word ‘upto’ being substituted for the word ‘after’. What is the meaning and effect of the expression employed therein — ‘shall be substituted’?
24. The substitution of one text for the other pre-existing text is one of the known and well-recognized practices employed in legislative drafting. ‘Substitution’ has to be distinguished from ‘supersession’ or a mere repeal of an existing provision.
25. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (see Principles of Statutory Interpretation, ibid., p. 565). If any authority is needed in support of the proposition, it is to be found in West P. Sugar Mills Assn. v. State of U.P. [(2002) 2 SCC 645] , State of Rajasthan v. Mangilal Pindwal [(1996) 5 SCC 60] , Koteswar Vittal Kamath v. K. Rangappa Baliga and Co. [(1969) 1 SCC 255] and A.L.V.R.S.T. Veerappa Chettiar v. S. Michael [1963 Supp(2) SCR 244 : AIR 1963 SC 933] . In West U.P. Sugar Mills Assn. case [(2002) 2 SCC 645] a three-Judge Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances cantering around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal case [(1996) 5 SCC 60] this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar case [(1969) 1 SCC 255] a three- Judge Bench of this Court emphasised the distinction between ‘supersession’ of a rule and ‘substitution’ of a rule and held that the process of substitution consists of two steps: first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place.
26. We are not oblivious of the fact that in certain situations, the court having regard to the purport and object sought to be achieved by the legislature may construe the word “substitution” as an “amendment” having a prospective effect but such a question does not arise in the instant case.
27. There is another aspect of the matter which may not be lost sight of. Where a statute is passed for the purpose of supplying an obvious omission in a former statute, the subsequent statute relates back to the time when the prior Act was passed. (See Attorney General v. Pougett [(1816) 2 Price 381 : 146 ER 130] .)
28. The doctrine of fairness also is now considered to be a relevant factor for construing a statute. In a case of this nature where the effect of a beneficent statute was sought to be extended keeping in view the fact that the benefit was already availed of by the agriculturalists of tobacco in Guntur, it would be highly unfair if the benefit granted to them is taken away, although the same was meant to be extended to them For such purposes the statute need not be given retrospective effect by express words but the intent and object of the legislature in relation thereto can be culled out from the background facts.
29. The question has furthermore to be considered having regard to the language and object discernible from the statute read as a whole. The respondents were not ineligible from obtaining the benefit. Once they are held to be eligible for obtaining the benefit, the amended notification being an exemption notification should receive the beneficent construction.
30. It is not a case where the respondents, like the cases of Mahaan Dairies [(2004) 11 SCC 798] and Tata Iron & Steel Co. [(2005) 4 SCC 272] were ineligible from claiming the benefit. The subsequent notification, thus, should receive a beneficent construction.
31. The learned Additional Solicitor General relied upon CCE v. Parle Exports (P) Ltd. [(1989) 1 SCC 345 : 1989 SCC (Tax) 84] for raising the contention that the interpretation of the executive should receive due consideration. It is not a case where the doctrine of contemporanea expositio” can be invoked. The order relied upon by the learned counsel has been impugned by the respondents by filing the writ petition. It, therefore, cannot be said that by reason thereof the notification had been constructed on administrative side.
32. In Parle Exports [(2004) 11 SCC 798] [(2004) 11 SCC798] it was observed: (SCC p. 357, para 17)
“17. … The notification must be read as a whole in the context of the other relevant provisions. When a notification is issued in accordance with power conferred by the statute, it has statutory force and validity and, therefore, the exemption under the notification is as if it were contained in the Act itself. See in this connection the observations of this Court in Orient Wvg. Mills (P) Ltd. v. Union of India [1962 Supp (3) SCR 481 : AIR 1963 SC 98] . See also Kailash Nath v. State of U.P. [AIR 1957 SC 790 : (1957) 8 STC 358] The principle is well settled that when two views of a notification are possible, it should be construed in favour of the subject as notification is part of a fiscal enactment. But in this connection, it is well to remember the observations of the Judicial Committee in Coroline M. Armytage v. Frederick Wilkinson [(1878) 3 AC 355 : 38 LT 185 (PC)] that it is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises. The Judicial Committee reiterated in the said decision at p. 369 of the Report that in a taxing Act provisions establishing (sic enacting) an exception to the general rule of taxation are to be construed strictly against those who invoke its benefit. While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It must, however, be borne in mind that absurd results of construction should be avoided.”
The ratio of the said decision, therefore, runs counter to the submission of the learned counsel.
33. Reliance was also placed by the learned Additional Solicitor General on H.M. Bags Manufacturer v. CCE [(1997) 11 SCC 696] wherein having regard to the use of the expression “henceforth” the order of the Board was held to have a prospective operation. The said decision, therefore, has no application in the present case.
34. Furthermore, registration at the inland container depot was to remain valid for a period of 12 months only and in that view of the matter too, it cannot be said that the Central Government intended to deprive the respondents herein who were agriculturists from the benefit of the aforementioned notification dated 7-4-1997 only for a limited period viz. between 7-4-1997 and 27-11-1997. We, therefore, are of the opinion that the High Court cannot be said to have committed any error in arriving at the aforementioned conclusion.
35. For the reasons aforementioned, we are of the opinion that the High Court has not committed any error in passing the impugned judgment. The appeal is dismissed. No costs. ”
iii) B. Kannan Vs. The Deputy Registrar of Companies passed in Crl.O.P.No.2735/2017 and Crl.M.P.Nos.1933 and 1934/2017 dated 12.12.2022.
7. In this case, the complaint is of the year The law as stood on the date of complaint for the alleged violation committed by the petitioner is as follows:
“…(6) If a person accepts an appointment as a director in contravention of sub-section (1), he shall be punishable with fine which shall not be less than five thousand rupees but which may extend to twenty-five thousand rupees for every day after the first during which the contravention continues.”
8. At the relevant point of time, contravention was considered as an offence. Further, there was no Explanation II, which specifically clarified for the purpose of reckoning in the limit of Directorship of the 20 companies, the dormant companies shall not be included. By virtue of the Companies (Amendment) Act, 2019 and the Companies (Amendment) Act 2020, the contravention is now liable for penalty by the adjudicating officer appointed by the Central If the contravention is liable for fine, it is triable by a Magistrate and it is an offence and therefore, triable by a Magistrate. Penalty, however, is imposed by the adjudicating officer by the Central Government and hence, the contravention is no longer an offence. The Act not only mollifies the punishment prescribed for contravention, but also the procedure, for determining the penalty.
9. The Hon’ble Apex Court in Barai vs. Henry Ah hoe reported in (1983)1 SCC 177 had an occasion to consider the amendments madeto Section 16(1)(a) of the Prevention of Food Adulteration Act, 1954. The Act originally prescribed punishment of 6 years for the said offence of the Act. In 1975, an amendment was made by the State of West Bengal by the West Bengal Amendment Act, which provided for punishment upto imprisonment for life for the said offence. Thereafter, the Parliament passed the Prevention of Food Adulteration (Amendment) Act, 1976, which provided for reduced punishment for the offence. The question that was raised before the Hon’ble Supreme Court inter alia was whether the amendment would be prospective or would apply to pending prosecutions as well in the State of West Bengal. The amendment not only brought about change in the punishment, but also change in the procedure. By virtue of the amendment, the punishment prescribed was only 3 years, whereas, in the West Bengal Act, the punishment prescribed was life imprisonment. Therefore, the earlier West Bengal Act provided a trial by the Court of Sessions and by virtue of the amendments, the trial was to take place before the Magistrate. The Hon’ble Court held in such circumstances, held as follows:
“22. It is only retroactive criminal legislation that is prohibited under Art. 20(1). The prohibition contained in Art. 20(1) is that no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence prohibits nor shall he be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. It is quite clear that insofar as the Central Amendment Act creates new offences or enhances punishment for a particular type of offence no person can be convicted by such ex post facto law nor can the enhanced punishment prescribed by the amendment be applicable. But insofar as the Central Amendment Act reduces the punishment for an offence punishable under s. 16(1)(a) of the Act, there is no reason why the accused should not have the benefit of such reduced punishment. The rule of beneficial construction requires that even ex post facto law of such a type should be applied to mitigate the rigour of the law. The principle is based both on sound reason and common-sense. This finds support in the following passage from Craies on Statute Law, 7th edn. at pp. 387-88 :
“A retrospective statute is different from an ex post facto statute. “Every ex post facto law … “said Chase J. in the American case of Calder v. Bull(1) “must necessarily be retrospective, but every retrospective law is not an ex post facto law. Every law that takes away or impairs rights vested agreeably to existing laws is retrospective, and is generally unjust and may be oppressive ; it is a good general rule that a law should have no retrospect, but in cases in which the laws may justly and for the benefit of the community and also of individuals relate to a time antecedent to their commencement : as statutes of oblivion or of pardon. They are certainly retrospective, and literally both concerning and after the facts committed. But I do not consider any law ex post facto within the prohibition that mollifies the rigour of the criminal law, but only those that create or aggravate the crime, or increase the punishment or change the rules of evidence for the purpose of conviction There is a great and apparent difference between making an unlawful act lawful and the making an innocent action criminal and punishing it as a crime.
23. To illustrate, if Parliament were to re- enact s. 302 of the Indian Penal Code, 1860 and provide that the punishment for an offence of murder shall be sentence for imprisonment for life, instead of the present sentence of death or imprisonment for life, then it cannot be that the Courts would still award a sentence of death even in pending cases. This dictum was followed by the Hon’ble Apex Court in (2018)17 SCC 448 (cited supra).
10. From the above extracted portion of the Judgment of the Hon’ble Apex Court, the following principles emerge:
(a) It is only retrospective criminal legislation that is prohibited under Article 20(1) of the Constitution of India.
(b) No person can be convicted by such ex post facto law nor can the enhanced punishment prescribed by the amendment be applicable.
(c) However, if the amendment reduces the punishment for an offence, the accused shall have benefit of such reduced punishment notwithstanding the fact that he had committed the offence prior to the amendment.
(d) In order to apply the third principle referred, the offence described under the old Act and the new Act must be one and the same.
If the ingredients are different, then, the principle of awarding reduced punishment after the amendment, would not be applicable.
11.The Judgment in In re Athlumney vs. Exparte Wilson relied to the respondent reported in [1898]2 Q.B 547 does not deal with a case where the Amendment seeks to reduce the rigour of punishment. Hence, it is not applicable to the facts of the instant case.
12. Applying the above principles to the instant case on hand, we find that the Parliament had made amendments for the purpose of easing the doing of business and also for reduction of prosecution that are filed in the Special Court. The relevant portion of the Statement of Objects and Reasons for the amendments for the Amendment Bill 2018 which sought to make the amendment to Section 165(6) of the Companies Act as well, reads as follows:
“…..The Committee recommended that the existing rigour of the law should continue for serious offences, whereas the lapses that are essentially technical or procedural in nature may be shifted to in-house adjudication process. The Committee observed that this would serve the twin purposes of promoting of ease of doing business and better corporate compliance. It would also reduce the number of prosecutions filed in the Special Courts which would in turn facilitate speedier disposal of serious offences and the offenders shall be penalised.”
Though this Bill lapsed, the subsequent Act in the year 2019, 2020 brought about the same amendment in Section 165(6) of the Act. In the 2019 Amendment Act, penalty was fixed at Rs.5,000/- for each day the contravention continues. However, the 2020 Amendment Act further mollifies it by fixing Rs.2000/- per day as penalty, subject to a maximus of Rs.2,00,000/-. Therefore, the object and reason in 2018 Bill are relevant, though it had lapsed. When that being the intention of the Legislature, we find that there is no reason why the said Amendment cannot be applied in favour of the accused in the pending prosecution. The accused shall also be entitled to the benefit of Explanation-II to Section 165(1) of the Companies Act.
13. The Hon’ble Apex Court in the case of Mannavs. State of West Bengal reported in AIR 1955 SC 84, which was quoted with approval by the Hon’ble Apex Court in T.Barai’s case (cited supra), held that where the fresh legislation is brought on the same subject, the line of enquiry would be not whether the new Act expressly keeps alive, old rights and liabilities but whether it manifests an intention to destroy them. The new Act in the instant case i.e., the Companies (Amendment) Act, 2019 clearly manifestly an intent to treat the violations which are only technical to be adjudicated by a in-house process. Further, Section 454 of the Companies Act also makes it clear that where after adjudication and person either does not pay penalty or fails to comply with the order of adjudication, he is liable for punishment, either fine or imprisonment. Therefore, the object of the amendment Act is to give an opportunity to the person to comply with the provision and only after the order of adjudicating officer directing the compliance or his payment of penalty is violated, it would become an offence.
14. Therefore, we are of the view that the intention of the Parliament is very clear and the since of the Amendment Act 2020 mollifies the rigour of punishment the beneficial construction has to be applied in favour of the accused in pending prosecutions and all the prosecution has to be withdrawn and transferred to the adjudicating authority appointed under Section 454 of the Companies Act for further proceedings in terms of the said provision.
15. In the light above decision, this Court is of the view that it may not be necessary to deal with the other contentions of the parties.
16. In fine, the complaint in EOCC No.46 of 2016 Additional Chief Metropolitan Magistrate Economic Offences No.I, at Eg more, Chennai is transferred to the adjudicating authority appointed under the Companies Act to adjudicate the contravention committed by the petitioner in terms of Section 454 r/w 165(6) of the Companies Act.
17. With the above observations, this Criminal Original Petition is disposed of. Consequently, connected miscellaneous petitions are closed.
7. A perusal of the material on record will indicate that prior to amendment Section 197(15) reads as under:
197(15) If any person contravenes the provisions of this Section, he shall be punishable with fine which shall not be less than one lakh rupees, but which may extend to five lakh rupees.
8. Subsequent to the amendment, Section 197(15) reads as under:
197(15) If any person makes any default in complying with the provisions of this Section, he shall be liable to a penalty of one lakh rupees and where any default has been made by a company, the company shall be liable to a penalty of five lakh rupees.”
9. The aforesaid provisions contained in Section 197(15) was amended vide Companies (Amendment) Act, 2019 by Central Act No.22/2019. A bare perusal of the amendment Act is sufficient to come to the conclusion that Section 197(15) has been substituted by the amended provisions. In this context, in the absence of anything to the contrary in the amendment the substitution of Section 197(15) vide amendment w.e.f. 02.11.2018 would relate back to the date of original provision of the year 2013 and in the light of the undisputed fact that the alleged offences are said to have been committed in the year 2016, I am of the considered opinion that the amended provision of Section 197(15) would not apply even in relation to the offences said to have been committed in the year 2016.
10. Under these circumstances, having regard to the amendment to Section 197(15) vide amended Act, 2019, Central Act No.22/2019 w.e.f 02.11.2018, the impugned proceedings as against the petitioner clearly are not maintainable and same deserves to be quashed.
11. In the result, I pass the following:
ORDER
i) The petition is hereby allowed.
ii) The complaint dated 18.06.2022 and order of cognizance dated 22.06.2022 against the petitioner in C.C.No.69/2022 on the file of the Special Court for Economic Offences, Bengaluru are hereby quashed.
iii) However, liberty is reserved in favour of the respondent to take appropriate action in accordance with Section 454 of Companies Act.
