Retrospective Applicability Of Provisions Relating To Bail Under The Companies Act, 2013

Section 212(6) of the 2013 Act

Section 212(6) requires the court to record 'reasonable grounds' for believing that the accused person is not guilty and is not likely to commit 'any offence' while adjudicating an application for bail. Section 212(6) is similar to Section 37 of the Narcotic Drugs and Psychotropic Substances Act, 1985 and similar provisions exist in some other statutes as well^[1]. Section 212(7) states that the twin conditions of Section 212(6) are in addition to the conditions prescribed under the Code of Criminal Procedure, 1973 (the "CrPC"). As such, Section 212(6) puts a higher threshold of bail than the one prescribed in CrPC. The 1956 Act however contained no provision similar to Section 212(6) and bail under the 1956 Act was adjudicated on the threshold of Sections 437-439 CrPC only.

Whether Section 212(6) applies while adjudicating bail applications of persons accused of having committed offences prior to 26.03.2014 is the question that I propose to discuss in this article. It is seen in a number of cases that Courts have been applying the threshold of Section 212(6) while adjudicating bail applications even where the underlying offence was committed prior to the coming into force of Section 212(6). As such, while Section 212(6) does not create a new offence, it does impose an onerous and harsh condition for grant of bail, which did not exist in the 1956 Act or even after coming into force of the 2013 Act on 29.08.2013 until 26.03.2014 when Section 212(6) was notified. Can the courts then deem this to be a procedural provision, which is applicable retrospectively?

Applicability of Article 20(1)

Pursuant to Article 20(1) of the Constitution of India no person can be convicted of an offence, which as a matter of fact was not in force at the time of its commission. Therefore, a person cannot be convicted (or charged with, as a logical corollary) for offences under the 2013 Act when those offences were committed prior to coming into force of penal provisions of the 2013 Act by way of a gazette notification. Several notifications have been issued under Section 1(3) of the 2013 Act to bring into force the different provisions of the act on different dates. Admittedly, Section 212(6) does not create a new offence.

That said, a complaint by the Serious Fraud Investigation Office (the "SFIO") after the repeal of the 1956 Act in respect of offences committed when the 1956 Act was still in force, is filed in terms of the procedural provisions of the 2013 Act, i.e. Sections 212, 436, 438 and 439. Section 465(2)(i) of the 2013 Act saves only the ongoing prosecutions, which had already commenced before the repeal of the 1956 Act.

Upon filing of a complaint, the accused typically prefers an application for anticipatory bail under Section 438 CrPC or for regular bail, if already in custody, under Section 439 CrPC. The SFIO also has the power u/s 212(8) to arrest a person during the course of investigation prior to filing of a complaint.

Timing of arrest relevant

Courts have applied the test of Section 212(6) while adjudicating bail applications u/s 438 CrPC and u/s 439 CrPC irrespective of whether the arrest was made during investigation or after filing of complaint before the special court. The timing of arrest is relevant since the onerous threshold of Section 212(6) applies to a person 'accused' of an offence u/s 447 of the 2013 Act. SFIO does not record a First Information Report or equivalent at the time of commencement of investigation and acts only after receiving sanction of the central government. Thus, in a SFIO investigation, a person is 'accused' of an offence specifically under Section 447 once s/he is formally named as such in the complaint. Therefore, applying the threshold of Section 212(6) at the stage of adjudicating anticipatory bail applications or regular bail application prior to filing of complaint would fall foul of the provision itself.^[2]

Article 20(1) of the Constitution also provides that no person shall be subjected to a 'penalty' greater than the one which may be inflicted under the law in force at the time of commission of the offence. Imposition of harsher condition for grant of bail, in my opinion, amounts to infliction of a greater penalty. The word 'penalty' in Article 20(1) is dependent upon the predicate offence. Thus, a penalty not prescribed at the time of commission of the offence cannot be imposed retrospectively. As such, for offence of fraud committed when the 1956 Act was in operation, the penalty of harsher bail cannot be imposed retrospectively by filing a complaint under the 2013 Act.

Section 6 of the General Clauses Act

Section 6 of the General Clauses Act, 1897 also provides that the repeal of a statute shall not affect any remedy in respect of the penalty or punishment prescribed under the repealed statute. Thus, the remedy of bail under the CrPC (since 1956 Act had no special provision for grant of bail) in respect of offences committed under the 1956 Act or under the 2013 Act prior to 26.03.2014 continues to operate and cannot be superseded by Section 212(6) of the 2013 Act. As such, the remedy of bail in respect of offences under the 1956 Act or 2013 Act prior to 26.03.2014 has crystalized into a vested substantive right of the accused, irrespective of whether the formal prosecution commenced after the coming into force of Section 212(6). Once the right to seek remedy of bail under CrPC vests in the accused, this substantive right cannot be modified subsequently by enhancing the threshold to obtain bail.

Section 6(e) of the General Clauses Act, 1897 makes it clear that any remedy in respect of a punishment shall remain unaltered by the repeal. Thus, the remedy of bail available under the 1956 Act, i.e. in terms of the provisions of CrPC, in respect of penalties and punishments prescribed thereunder remains unaltered by the repealing statute, i.e. the 2013 Act. Therefore, the stringent provision of Section 212(6) under the 2013 Act does not apply in respect of offences committed while the 1956 Act was in force even though the prosecution in respect of such offences may be commenced after the repeal of 1956 Act and under the 2013 Act. By virtue of Section 6(e) a substantive right is vested in a person accused of committing an offence during the operation of the 1956 Act. As such, any change in this substantive right has to operate prospectively unless the repealing statute expressly states that it applies retrospectively. The amendment or repeal of a right sourced to Section 6(e) cannot be termed as a procedural right, which alone applies retrospectively.

Complaint filed in respect of offences under the 1956 Act to be governed by procedure prescribed under the 2013 Act.

Propositions regarding repeal of statues have long been settled now. Firstly, repeal of a statute does not affect pending or ongoing prosecutions, unless the repealing statute is applicable retrospectively and in which case it will have to satisfy the test of Article 20(1). Secondly, amendment or repeal of a substantive provision operates prospectively while amendment of a procedural provision operates retrospectively. Thirdly, a prosecution in respect of same offences under the repealed act when commenced after its repeal, would be governed by the provisions of the new act.^[3]

Thus, filing of a fresh complaint by SFIO for commission of offences under the 1956 Act or under the 2013 Act would be in terms of the provisions of the new act, i.e. under the 2013 Act. However, this does not ipso facto mean that all relevant substantive and procedural provisions of the 2013 Act would become applicable in respect of a complaint, which pertains to offences committed prior to 26.03.2014. While there is no quarrel regarding applicability of the procedural provisions of 2013 Act to such complaints, in my view, the substantive provision regarding grant of bail, i.e. Section 212(6), would not be applicable in such prosecutions.

In Hitendra Vishnu Thakur vs. State of Maharashtra [(1994) 4 SCC 602] the Supreme Court while reiterating that a statute which alters substantive rights is applicable prospectively further held that "a statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided." Although this judgment was pronounced in the context of applicability of amendments to the Terrorist and Disruptive Activities (Prevention) Act, 1987, the above ratio should hold true in case of a repeal as well. Applying the above ratio it emerges that in respect of offences committed under an old act, where the repealing act not only changes the procedure but also creates new liabilities for the accused, the procedure prescribed in such repealing statute would operate prospectively, i.e. in respect of offences committed after its coming into force. In case of 2013 Act, Section 212(6) does create a new liability for the accused since it places an onerous and harsher threshold to obtain bail.

Fraud was an offence under the 1956 Act^[4] as well as under the 2013 Act^[5]. Section 212(6), in its current form, applies only in respect of the offence of Fraud as defined and made punishable in Section 447 of the 2013 Act although its substantive constituents are scattered over several provisions of the 2013 Act^[6]. Thus, a person accused of committing fraud and whose trial had commenced prior to 26.03.2014 would have sought bail u/s 437-439 only however where the complaint in respect of such person was filed after 26.03.2014, the Courts, in my view, are erroneously applying the threshold of Section 212(6) of the 2013 Act. To conclude, the same act or conduct has now been reclassified as that not qualifying for discretionary bail in terms of Sections 437-439 CrPC and additional two conditions have been prescribed by Section 212(6). Thus, fraud or other similar conduct would earlier qualify for bail in terms of Section 437-439 CrPC only but now would attract the additional twin conditions. This should qualify as a harsher penalty in terms of Article 20(1) and accordingly be not applicable in respect of offences committed prior to 26.03.2014 irrespective of whether the complaint by SFIO was filed after this date.