Repealed Provision Ceases To Operate From The Date Of Repeal, Subject To Specific Statutory Prescription: Supreme Court

“The operation of repeal or substitution of a statutory provision is thus clear, a repealed provision will cease to operate from the date of repeal and the substituted provision will commence to operate from the date of its substitution. This principle is subject to specific statutory prescription. Statute can enable the repealed provision to continue to apply to transactions that have commenced before the repeal. Similarly, a substituted provision which operates prospectively, if it affects vested rights, subject to statutory prescriptions, can also operate retrospectively.,” Justice P S Narasimha authored.

The brief facts for the case are such that the present appellant was the sub-licensee under the M.P. Excise Act, 19151 for manufacture, import and sale of Foreign Liquor. The same was regulated under the Madhya Pradesh Foreign Liquor Rules, 1996. The relevant rules for the present case are Rule 16 and 19. While Rule 16 prescribed the permissible limits of loss of liquor in transit, Rule 19 provided penalty for the breach of this rule.

The breach, in this case, took place during the license period of 2009-10. The penalty for the same was around four times the maximum duty payable on foreign liquor. However, no action against the appellant was taken during this period.

Subsequently, in March 2011, Rule 19 was substituted by an amendment. As a result, the penalty was reduced from four times the maximum duty payable to an amount not exceeding the duty payable on foreign liquor. Following this development, a notice was issued to the appellant for payment of the penalty as per the old Rule 19.

Now, the interesting question for the adjudication was whether the penalty was to be levied as per the old rule or the substituted one.

After various rounds of litigation, the Division bench of the High Court held that the Rule, that existed during that license year, must apply. Apart from this, the Court also reasoned that determination of penalty is a substantive law and thus, cannot operate retrospectively. Against this backdrop, the matter reached to the Supreme Court.

At the outset, the Division Bench of Justices Narasimha and Aravind Kumar observed that that the purpose of the amendment is to achieve a proper balance between crime and punishment. The Court after making the above-mentioned observations also stated that the operation of subordinate legislations is slightly different as they depend on the parent act.

“The principle governing subordinate legislation is slightly different in as much as the operation of a subordinate legislation is determined by the empowerment of the parent act…Without a statutory empowerment, subordinate legislation will always commence to operate only from the date of its issuance and at the same time, cease to exist from the date of its deletion or withdrawal.,” the Court added.

Forming this legal background, the Court referred to Section 63 (Publication of rules and notifications) of the Act. The Court noted that as per this, the repealed provision would not operate for rights and responsibilities that occurred while it was valid.

At the most, Section 63 of the M.P. Excise Act, 1915, only enables the government to issue subordinate legislation with effect from such a date as may be specified., the Court added. In this respect, the Court also pointed out that no other date was notified as to when the substituted Rule 19 is to take effect.

Underscoring the intention behind the amendment, the Court said that the same should be viewed in the context of promoting good governance and efficient management. The Court also stated that liquor regulation requires close monitoring.

“If the amendment by way of a substitution in 2011 is intended to reduce the quantum of penalty for better administration and regulation of foreign liquor, there is no justification to ignore the subject and context of the amendment and permit the State to recover the penalty as per the unamended Rule., the Court stated.

The Court also rejected the State's argument that substituted Rule cannot be given retrospective effect. Reasoning this, the Court said the Rule, amended in March 2011, was applied to the case that started with the issuance of the demand notice in November 2011. The Rule operates retroactively and thus saves it from arbitrarily classifying the offenders into two categories with no purpose to subserve., the Court said.

Before allowing the present appeal, the Court emphasized the importance of a simple and plain understanding of laws, considering their intended purpose. In view of this observation, the Court concluded that the penalty should be imposed on the basis of the substituted law.

Case Title: PERNOD RICARD INDIA (P) LTD. vs. THE STATE OF MADHYA PRADESH., Diary No.- 30175 - 2017

Citation : 2024 LiveLaw (SC) 321

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