Current Affairs

Source: Supreme Court

Why in News?

Recently, the Supreme Court held that “The operation of repeal or substitution of a statutory provision is thus clear, a repealed provision will cease to operate from the date of repeal and the substituted provision will commence to operate from the date of its substitution”.

• The court gave this observation in the case of Pernod Ricard India (P) LTD. v. The State of Madhya Pradesh.

What was the Background of Pernod Ricard India (P) LTD. v. The State of Madhya Pradesh Case?

• The appellant was a sub-licensee under the Madhya Pradesh Excise Act, 1915 for manufacture, import and sale of Foreign Liquor, regulated under the Madhya Pradesh Foreign Liquor Rules, 1996.
• Sub-licensees importing Foreign Liquor were granted transit permits recording details like origin, quality, quantity and delivery point of the imported liquor. At the destination, the consignment was verified for quality and quantity, and a certificate under Rule 13 was granted. Rule 16 prescribed permissible limits of loss due to leakage, evaporation, wastage etc. to prevent illegal diversion and evasion of excise duty.
• If the permissible limits were exceeded, Rule 19 provided for imposition of penalty up to four times the maximum duty payable during the 2009-2010 license period.
• No action was initiated against the appellant during 2009-2010. On 29^th March 2011, Rule 19 was substituted, reducing the penalty from four times to an amount not exceeding the duty payable.
• Eight months after the amendment, on 22^nd November 2011, a demand notice was issued to the appellant seeking penalty as per the old Rule 19 for exceeding permissible limits in 2009-2010.
• The appellant objected, stating the substituted Rule 19 should apply.
• The appellant's objections were rejected by the statutory authorities.
• The Single Judge set aside these orders, holding the substituted Rule applied to pending proceedings.
• However, the Division Bench reversed this, stating the Rule existing during the license year must apply as penalty determination is substantive law.

What are the Court’s Observations?

• The court held that interpretation of laws is the exclusive domain of the courts, not defined by statutes or executive agencies.
• In examining whether a repealed rule on liquor license penalties should apply, the court looked to the subject and context.
  • If disapplying the repealed harsher penalty of four times the duty furthered the intent of better regulation, the court would not extend the repeal's effect.
• The court found the 2011 substitution reducing the penalty to just the duty amount was meant to improve governance and management of foreign liquor.
  • Applying the harsher repealed penalty did not serve this purpose. The substituted lower penalty applied retroactively to pending proceedings, not improperly retrospectively.
• The court allowed the appeals, set aside the High Court's judgment, and held the substituted Rule 19 with just the duty as penalty applied to the appellants for the 2009-10 license year.

What were the Landmark Judgments Cited in this Case?

• Koteswar Vittal Kamath v. K. Rangappa Baliga & Co. (1969):
  • The SC brought out 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 repealed, and next, a new rule is brought into existence in its place.
• Pushpa Devi v. Milkhi Ram (1990):
  • The SC explained the purpose and object of prefacing a definition or an interpretation with the phrase unless there is anything repugnant in the subject or context.
  • The court held that it must examine the context and collocation in light of the object of the Act and the purpose for which a particular provision was made by the legislature.
• Zile Singh v. State of Haryana (2004):
  • The SC referred to the legislative practice of an amendment by substitution and held that substitution would have the effect of amending the operation of law during the period in which it was in force.
• Gottumukkala Venkata Krishamraju v. Union of India (2019):
  • The SC held that ordinarily, wherever the word "substitute" or "substitution" is used by the legislature, it has the effect of deleting the old provision and making the new provision operative.
  • However, the court also stated that in certain situations, it may construe the word "substitution" as an "amendment" having a prospective effect.