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TMI Blog2025 (2) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... tive 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 Section 197 (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 "pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. PAGE 327 DB has held as under: "When an amending Act has stated that the old subsection 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&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 [(200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d '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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 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 conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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