* Author
[2024] 4 S.C.R. 664 : 2024 INSC 327
Pernod Ricard India (P) Ltd.
v.
The State of Madhya Pradesh & Ors.
(Civil Appeal Nos. 5062-5099 of 2024)
19 April 2024
[Pamidighantam Sri Narasimha* and Aravind Kumar, JJ.]
Issue for Consideration
Issue as regards the applicability of the relevant rule for imposition
of penalty. Whether it was the rule that existed when the violation
occurred during the license period of 2009-10 (rule 19 of Madhya
Pradesh Foreign Liquor Rules, 1996, before the amendment) or
the rule 19 that was substituted by an amendment in 2011 when
proceedings for penalty were initiated.
Headnotes
Madhya Pradesh Foreign Liquor Rules, 1996 – r.19 – Penalties
– Permissible limits of loss of liquor in transit due to leakage,
evaporation, wastage etc. – During the relevant license period
of 2009-2010 when the violation occurred, r.19 provided that
if permissible limits of loss of liquor exceeded, imposition of
penalty was to be about four times the maximum duty payable
on foreign liquor – However, no action was initiated against
the appellant during the relevant license period– r.19 was
substituted by an amendment in 2011 reducing penalty to an
amount not exceeding the duty payable on foreign liquor –
Demand notice issued in 2011 – Payment of penalty, if to be
as per the repealed r.19 or the substituted r.19:
Held: Penalty to be imposed on the appellants will be on the basis of
r.19 as substituted on 29.03.2011 – A repealed provision will cease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, subject
to specific statutory prescription – The operation of a subordinate
legislation is determined by the empowerment of the parent act –
The legislative authorization enabling the executive to make rules
prospectively or retrospectively is crucial – 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 – Even
[2024] 4 S.C.R. 665
Pernod Ricard India (P) Ltd. v.
The State of Madhya Pradesh & Ors.
s.63 of the M.P. Excise Act, 1915 does not provide continuation
of a repealed provision to rights and liabilities accrued during its
subsistence – Further, r.19 which was substituted on 29.03.2011 was
not notified to operate from any other date by the Government – If
the amendment by way of a substitution in 2011 was 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 – Purpose of the amendment
was to achieve a proper balance between crime and punishment or
the offence and penalty – Classifying offenders into before or after
the amendment for imposing higher and lower penalties does not
serve any public interest – The substituted Rule alone will apply to
pending proceedings – Impugned order of the Division Bench of the
High Court set aside. [Paras 2.1, 13, 14, 17, 32, 35]
Administrative Law – Subordinate legislation – Operation of –
Prospective/retrospective – Principles governing - Discussed.
Madhya Pradesh General Clauses Act, 1957 – s.10 – Effect
of Repeal – M.P. Excise Act, 1915 – Madhya Pradesh Foreign
Liquor Rules, 1996 – r.19 – General Clauses Act, 1897 – s.6 –
Violation occurred during the license period of 2009-10 – r.19
substituted in 2011 imposed lesser penalty than the repealed
r.19 if permissible limits of loss of liquor exceeded – Demand
notice issued in 2011 – Payment of penalty, if to be as per the
repealed r.19 or the substituted r.19 – Plea of the respondent
that as s.10 states that where any Madhya Pradesh Act repeals
any enactment then, unless a different intention appears,
the repeal shall not affect any right, privilege, obligation or
liability, acquired, accrued or incurred under any enactment
so repealed; State of M.P. can continue to apply the repealed
Rule for the transaction of 2009-2010 by virtue of specific
provisions under the 1957 Act:
Held: s.10 of the MP General Clauses Act by itself would not make any
difference as the Section is applicable only to enactments, i.e. when
any M.P. Act repeals any enactment and not a subordinate legislation
– Interpreting s.6, an identical provision of the General Clauses Act,
1897, this Court has consistently held that s.6 of the 1897 Act, has
no application to subordinate legislation – Further, the subject of
administration of liquor requires close monitoring and the amendment
must be seen in this context of bringing about good governance and
effective management – Seen in this context, the principle of s.10 of
666 [2024] 4 S.C.R.
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1957 Act, relating continuation of a repealed provision to rights and
liabilities that accrued during the subsistence of the Rule does not
subserve the purpose and object of the amendment. [Paras 31, 32]
Administrative law – Subordinate legislation – Rule making
and its enforcement – Madhya Pradesh Foreign Liquor Rules,
1996 – r.19:
Held: The process of identifying a crime and prescribing an
appropriate punishment is a complex and delicate subject that
the State has to handle while making rules and enforcing them
– The gravity of the offence, its impact on society and human
vulnerability are taken into account to provide the required
measure of deterrence and reform – Day to day working of the
Rules, reposing their effectiveness, ineffectiveness, deficiency of
deterrence, disproportionate penalty having a chilling effect on
genuine businesses, are some routine factors which require the
executive to make necessary amendments to the rules – In this
context, depending on the nature of offence, the proportionate
penalty is required to be modulated from time to time – In the present
case, the regulatory process required the Government to deal with
the problem of diversion and unlawful sale of foreign liquor and also
provide an appropriate penalty and punishment – In light of this, the
felt need of the State to amend and substitute r.19 which provided
a higher penalty at four times the duty, with a simple penalty not
exceeding the duty payable can be appreciated. [Para 31]
Madhya Pradesh General Clauses Act, 1957 – s.31 – Application
of Act to Ordinances and Regulations - “unless there is anything
repugnant in the subject and context” – Madhya Pradesh Foreign
Liquor Rules, 1996 – r.19 – By virtue of s.31, the provisions
of the 1957 Act were made applicable to the construction
of rules – By such application, the principle of a repeal of a
provision not affecting any liability incurred thereunder was
also extended to the operation of the subordinate legislations
under the Act – Therefore, the respondent-State submitted that
having incurred the liability of exceeding the prescribed limits
of losses of liquor for the license period 2009-10, the liability
is not affected by the subsequent substitution of r.19:
Held: Conscious of the big leap to extend the 1957 Act, for
construction of subordinate legislations, s.31 took care to provide
that it may be done only when it is not repugnant to the subject and
context – If the amendment of r.19 by way of a substitution in 2011
[2024] 4 S.C.R. 667
Pernod Ricard India (P) Ltd. v.
The State of Madhya Pradesh & Ors.
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. [Paras 23, 32]
Interpretation of Statutes – Interpretation statutes like the
General Clauses Act, 1897 - Purpose:
Held: Are enactments intended to set standards in construction of
statutes – The expression construction is of seminal importance
as it is oriented towards enabling a seeker of the text of a
statute to understand the true meaning of the words and their
intendment – Apart from setting coherent and consistent methods of
understanding enactments, the interpretation statutes also subserve
the purpose of reducing prolixity of legislations – Therefore, the
standard principles formulated in the interpretation statutes must
be read into any and every enactment falling for consideration –
Interpretation statutes or definitions in interpretation clauses are only
internal aids of construction of a statute – Subordinate legislation,
by its very nature, rests upon the executive’s understanding of
the primary legislation – When a Court is of the opinion that such
an understanding is not in consonance with the statute, it sets it
aside for being ultra-vires to the primary statute. [Paras 24, 27, 28]
Madhya Pradesh Foreign Liquor Rules, 1996 – r.19 – Retroactive
operation – Substituted Rule imposed lesser penalty than the
repealed rule if permissible limits of loss of liquor exceeded –
Plea of the respondent-State that the substituted Rule cannot
be given retrospective effect:
Held: Submission rejected – It is wrong to assume that the substituted
Rule is given retrospective effect if its benefits are made available
to pending proceedings or to those that have commenced after the
substitution – r.19 which was substituted on 29.03.2011 was made
applicable to proceedings that commenced 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. [Para 33]
Madhya Pradesh Foreign Liquor Rules, 1996 – r.19 –
Constitution of India – Article 20(1) – Substituted Rule imposed
lesser penalty than the repealed rule if permissible limits of loss
of liquor exceeded – Bar of Article 20(1) imposing a penalty
greater than the one in force at the time of the commission
of the offence, if applicable:
668 [2024] 4 S.C.R.
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Held: No – The substituted penalty only mollifies the rigour of the
law by reducing the penalty from four times the duty to value of
the duty – Therefore, the bar of Article 20(1) of imposing a penalty
greater than the one in force at the time of the commission of the
offence has no application – Single Judge was of the view that
the amendment by way of substitution had the effect of repealing
the law which existed as on the date of repeal – Division Bench
on the other hand, held that levy of penalty was substantive law,
and as such, it cannot operate retrospectively – Reasoning of
both, rejected. [Para 35]
Case Law Cited
Pushpa Devi v. Milkhi Ram [1990] 1 SCR 278 : (1990)
2 SCC 134; Vanguard Fire and General Insurance Co.
Ltd. v. Fraser and Ross [1960] 3 SCR 857 – relied on.
State of Rajasthan v. Mangilal Pindwal [1996] Supp.
3 SCR 98 : (1996) 5 SCC 60; West U.P. Sugar Mills
Association v. State of U.P. [2002] 1 SCR 897 : (2002)
2 SCC 645; Zile Singh, Government of India v. Indian
Tobacco Association [2005] Supp. 2 SCR 859 : (2005) 7
SCC 396; Koteswar Vittal Kamath v. K. Rangappa Baliga
& Co. [1969] 3 SCR 40 : (1969) 1 SCC 255; Zile Singh v.
State of Haryana [2004] Supp. 5 SCR 272 : (2004) 8 SCC
1; Gottumukkala Venkata Krishamraju v. Union of India
[2018] 11 SCR 39 : (2019) 17 SCC 590; Rayala Corp.
v. Director of Enforcement [1970] 1 SCR 639 : (1969) 2
SCC 412; Kolhapur Canesugar Works Ltd. v. Union of
India [2000] 1 SCR 518 : (2000) 2 SCC 536; Keshavji
Ravji & Co. v. Commissioner of Income Tax [1990] 1
SCR 243 : (1990) 2 SCC 231; Dr. Major Meeta Sahai v.
State of Bihar [2019] 15 SCR 273 : (2019) 20 SCC 17;
Rattan Lal v. State of Punjab [1964] 7 SCR 676 : 1964
SCC OnLine SC 40; Basheer v. State of Kerala [2004]
2 SCR 224 : (2004) 3 SCC 609; Nemi Chand v. State of
Rajasthan (2018) 17 SCC 448; Trilok Chand v. State of
Himachal Pradesh (2020) 10 SCC 763; M/s. A.K. Sarkar
& Co. & Anr. v. The State of West Bengal & Ors. [2024]
3 SCR 356 : (2024) SCC OnLine SC 248 – referred to.
Books and Periodicals Cited
Halsbury’s Laws, (5th edn, 2018), vol 96, para 694
[2024] 4 S.C.R. 669
Pernod Ricard India (P) Ltd. v.
The State of Madhya Pradesh & Ors.
List of Acts
Madhya Pradesh Foreign Liquor Rules, 1996; M.P. Excise Act,
1915; Madhya Pradesh General Clauses Act, 1957; General
Clauses Act, 1897; Constitution of India.
List of Keywords
Loss of liquor; Foreign liquor; Penalty; Imposition of penalty;
Quantum of penalty reduced; Lesser penalty; Substitution by
an amendment; Repealed rule; Substituted rule; Subordinate
legislation; Prospective/retrospective/retroactive; Appropriate
punishment; Balance between crime and punishment/offence and
penalty; Interpretation statutes; Construction of statutes; Definitions
in interpretation clauses; Internal aids of construction.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 5062-5099 of
2024
From the Judgment and Order dated 29.06.2017 of the High Court of
M.P. at Gwalior in WA Nos.42, 41, 40, 39, 38, 37, 36, 35, 34, 33, 32,
31, 30, 29, 28, 27, 26, 25, 24, 23, 22, 21, 20, 19, 17, 16, 15, 14, 13,
12, 11, 10, 9, 8, 7, 6 and 100 of 2017 and 425 of 2016
Appearances for Parties
Pratap Venugopal, Sr. Adv., Ms. Surekha Raman, Amarjit Singh
Bedi, Abhishek Anand, Ms. Unnimaya S, Shreyash Kumar, Advs.
for the Appellant.
Saurabh Mishra, A.A.G., Sunny Choudhary, Ajay Singh, Advs. for
the Respondents.
Judgment / Order of the Supreme Court
Judgment
Pamidighantam Sri Narasimha, J.
1. Leave Granted.
2. The short question for our consideration is the applicability of the
relevant rule for imposition of penalty; whether it is the rule that
existed when the violation occurred during the license period of 2009-
10 or the rule that was substituted in 2011 when proceedings for
670 [2024] 4 S.C.R.
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penalty were initiated. As the substituted rule reduced the quantum
of penalty, the appellant insists on its application but the statutory
authorities as well as the Division Bench of the High Court rejected
his case and imposed higher penalty under the old rule.
2.1 For the reasons to follow, we have accepted the contention
of the appellant and, in allowing the appeal, determined that
the purpose of the amendment is to achieve a proper balance
between crime and punishment or the offence and penalty.
In light of this, and recognizing that classifying offenders
into before or after the amendment for imposing higher and
lower penalties does not serve any public interest, we have
directed that the substituted Rule alone will apply to pending
proceedings.
3. Facts:- The appellant is a sub-licensee under the M.P. Excise Act,
19151
for manufacture, import and sale of Foreign Liquor, regulated
under the Madhya Pradesh Foreign Liquor Rules, 19962
.
3.1 Sub-licensees importing Foreign Liquor are granted transit
permits in which the origin, quality, quantity and point of delivery
of the imported liquor are recorded. At the point of destination, the
consignment is verified for quality and quantity, and a certificate
under Rule 13 is granted. Rule 16 prescribes the permissible
limits of loss of liquor in transit due to leakage, evaporation,
wastage etc. The purpose and object of this Rule is to prevent
illegal diversion of liquor for unlawful sale and also to prevent
evasion of excise duty. Relevant portion of Rule 16 is as follows:-
“Rule 16. Permissible limits of losses.-
(1) An allowance shall be made for the actual loss of spirit
by leakage, evaporation etc., and of bottled foreign
liquor by breakage caused by loading, unloading,
handling etc. in transit, at the rate mentioned
hereinafter. The total quantity of bottled foreign
liquor transported or exported shall be the basis for
computation of permissible losses.
1 Hereinafter referred to as “the Act”.
2 Hereinafter referred to as “the 1996 Rules”.
[2024] 4 S.C.R. 671
Pernod Ricard India (P) Ltd. v.
The State of Madhya Pradesh & Ors.
(2) Wastage allowances on the spirit transported to
the premises of FL 9 or FL 9-A licensee shall be
the same as given in sub-rule (4) of Rule 6 of the
Distillery Rules, 1995.
(3) Maximum wastage allowance for all exports of bottled
foreign liquor shall be 0.25% irrespective of distance.
(4) Maximum wastage allowance for all transports of
bottled foreign liquor shall be 0.1% if the selling
licensee and the purchasing licensee belong to the
same district. It shall be 0.25% if they belong to
different districts.
(5) If wastages/losses during the export or transport of
bottled foreign liquor exceed the permissible limit
prescribed in sub-rule (3) or (4), the prescribed duty
on such excess wastage of bottled foreign liquor shall
be recovered from the licensee.”
3.2 If the permissible limits of loss of liquor are exceeded, the
1996 Rules prescribe imposition of penalty. Rule 19 providing
for penalty that could be imposed during the relevant license
period of 2009-2010 was about four times the maximum duty
payable on foreign liquor. The relevant portion of Rule 19 is
as follows: -
“Rule 19. Penalties3
. –
(1) Without prejudice to the provisions of the Act, or
condition No. 4 of license in Form F.L. 1, condition
No. 7 of license in Form F.L 2, condition No. 4 of
license in Form F.L 3, the Excise Commissioner or
the Collector may impose a penalty not exceeding
Rs. 50,000 for contravention of any of these rules
or the provisions of the Act or any other rules made
under the Act or the order issued by the Excise
Commissioner.
(2) On all deficiencies in excess of the limits allowed
under Rule 16 and Rule 17, the F.L. 9 or FL 9-A,
3 Hereinafter “the old Rule”.
672 [2024] 4 S.C.R.
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F.L. 10-A or F.L. 10-B licensee shall be liable to
pay penalty at a rate exceeding three times but not
exceeding four times the maximum duty payable on
foreign liquor at that time, as may be imposed by the
Excise Commissioner or any officer authorized by him:
Provided that if it be proved to the satisfaction of the
Excise Commissioner or the authorized officer that
such excess deficiency or loss was due to some
unavoidable cause, like fire or accident and its first
information report was lodged in Police Station, he
may waive the penalty imposable under this sub-rule.
(3) The Excise Commissioner or the Collector may
suspend or cancel the license under Section 31 of
the Act upon a contravention of any of these rules
or provisions of the Act, or any other rules made
under the Act, or the orders issued by the Excise
Commissioner.”
4. Facts reveal that no action was initiated during the license year of
2009-2010.
5. On 29.03.2011, Rule 19 was substituted by an amendment. The
relevant portion of substituted provision is as follows:
“Rule 19. Penalties4
(1) …
(2) On all deficiencies in excess of the limits allowed
under rule 16 and rule 17, the F.L.-9, F.L-9-A, F.L.-
10-B Licensee shall be liable to pay penalty at a
rate not exceeding the duty payable on foreign
liquor at that time, as may be imposed by the Excise
Commissioner or any officer authorized by him:
Provided that if it be proved to the satisfaction of the
Excise Commissioner or the authorized officer that
such excess deficiency or loss was due to some
unavoidable causes like fire or accident and its First
Information Report was lodged in concerned Police
4 Hereinafter, “the substituted Rule”.
[2024] 4 S.C.R. 673
Pernod Ricard India (P) Ltd. v.
The State of Madhya Pradesh & Ors.
Station, he may waive the penalty imposable under
this sub-rule.”
(emphasis supplied)
6. As is evident, the above referred substituted Rule 19 reduces
penalty from four times the maximum duty payable to an amount
not exceeding the duty payable on foreign liquor.
7. Eight months after the amendment, a demand notice dated 22.11.2011
was issued directing payment of penalty for exceeding the permissible
limits during the license year 2009-2010. The notice demanded
penalty of four times the duty as per the old Rule 19. The appellant
replied, inter alia contending that penalty, if any, can only be under
the substituted Rule 19 as the old rule stood repealed, and in fact,
the demand is raised after the substituted Rule came into force.
8. The Deputy Commissioner5
rejected the objections raised by the
appellant and confirmed the demand for payment of penalty at four
times the duty payable. The Deputy Commissioner’s order was
upheld by the Excise Commissioner6
, and thereafter by the Revenue
Board Gwalior7
.
9. Questioning the decisions of the statutory authorities, the appellant
filed a writ petition before the High Court which was heard and
disposed of with 40 other petitions raising a similar issue. The
Single Judge of the High Court was of the view that the new Rule
was introduced by way of a substitution and following the principles
in State of Rajasthan v. Mangilal Pindwal8
, West U.P. Sugar Mills
Association v. State of U.P.9
, Zile Singh, Government of India v. Indian
Tobacco Association10, he held that the old Rule stood repealed
from the statute book and only the substituted Rule applies to all
pending and future proceedings. He, therefore, set aside the orders
of the statutory authorities and remanded the matter back to them
for determining the penalty as per the substituted Rule.
5 By order dated 18.04.2012
6 By order dated 02.05.2013
7 By order dated 10.12.2013
8 [1996] Supp. 3 SCR 98 : (1996) 5 SCC 60
9 [2002] 1 SCR 897 : (2002) 2 SCC 645
10 [2005] Supp. 2 SCR 859 : (2005) 7 SCC 396
674 [2024] 4 S.C.R.
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10. The Division Bench of the High Court, by the order impugned herein,
reversed the decision of the Single Judge on the simple ground that as
the license was granted for one year, the Rule that existed during that
license year must apply. The reason for not applying the substituted
Rule according to the Division Bench is also that determination of
penalty being substantive law, cannot operate retrospectively.
11. Questioning the legality and validity of the decision of the Division
Bench of the High Court, the present appeals are filed. Mr. Pratap
Venugopal, Ld. Senior Advocate, appearing on behalf of the appellant
argued that the effect of substitution is to repeal the existing provision
from the statute book in its entirety and to enforce the newly substituted
provision. He would further submit that even for incidents which
took place when the old Rule was in force, it is the substituted Rule
that would be applicable, and therefore, the demand notice dated
22.11.2011 seeking payment of penalties under old Rule is illegal.
12. There is no difficulty in accepting the argument of Mr. Pratap
Venugopal on principle. In Koteswar Vittal Kamath v. K. Rangappa
Baliga & Co.11, this Court 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:
“8. On that analogy, it was argued that, if we hold that
the Prohibition Order of 1950, was invalid, the previous
Prohibition Order of 1119, cannot be held to be revived. This
argument ignores the distinction between supersession of
a rule, and substitution of a rule. In the case of Firm A.T.B.
Mehtab Majid & Co., the new Rule 16 was substituted for
the old Rule 16. The process of substitution consists of
two steps. First, the old rule it made to cease to exist and,
next, the new rule is brought into existence in its place.
Even if the new rule be invalid, the first step of the old
rule ceasing to exist comes into effect, and it was for this
reason that the court held that, on declaration of the new
rule as invalid, the old rule could not be held to be revived.”
11 [1969] 3 SCR 40 : (1969) 1 SCC 255
[2024] 4 S.C.R. 675
Pernod Ricard India (P) Ltd. v.
The State of Madhya Pradesh & Ors.
12.1 In Zile Singh v. State of Haryana12, this Court 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.
“24. The substitution of one text for the other pre-existing
text is one of the known and well-recognised 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 U.P. Sugar Mills Assn. v. State of U.P13.,
State of Rajasthan v. Mangilal Pindwal14 , Koteswar Vittal
Kamath v. K. Rangappa Baliga and Co.15 and A.L.V.R.S.T.
Veerappa Chettiar v. I.S. Michael16 . In West U.P. Sugar Mills
Assn.
17 case 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 centring
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 Pindwal18 case 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 case19 a three-Judge
Bench of this Court emphasised the distinction between
12 [2004] Supp. 5 SCR 272 : (2004) 8 SCC 1
13 [2002] 1 SCR 897 : (2002) 2 SCC 645
14 [1996] Supp. 3 SCR 98 : (1996) 5 SCC 60
15 [1969] 3 SCR 40 : (1969) 1 SCC 255
16 1963 Supp (2) SCR 244
17 [2002] 1 SCR 897 : (2002) 2 SCC 645
18 (1996) 5 SCC 60
19 (1969) 1 SCC 255
676 [2024] 4 S.C.R.
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“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.”
12.2 A slight variation is noticed in a recent decision in Gottumukkala
Venkata Krishamraju v. Union of India,
20 where this Court held
that:
“18. Ordinarily wherever the word “substitute” or
“substitution” is used by the legislature, it has the effect
of deleting the old provision and make the new provision
operative. 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.
The rule is that 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 as if the altered words had been written
into the earlier Act with pen and ink and the old words
scored out so that thereafter there is no need to refer to
the amending Act at all. No doubt, 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. Therefore, we do not think that it is a universal
rule that the word “substitution” necessarily or always
connotes two severable steps, that is to say, one of
repeal and another of a fresh enactment even if it implies
two steps. However, the aforesaid general meaning is to
be given effect to, unless it is found that the legislature
intended otherwise. Insofar as present case is concerned,
as discussed hereinafter, the legislative intent was also to
give effect to the amended provision even in respect of
those incumbents who were in service as on 1-9-2016.”
13. The operation of repeal or substitution of a statutory provision is
thus clear, a repealed provision will cease to operate from the date
20 [2018] 11 SCR 39 : (2019) 17 SCC 590
[2024] 4 S.C.R. 677
Pernod Ricard India (P) Ltd. v.
The State of Madhya Pradesh & Ors.
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.
14. 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. The legislative authorization
enabling the executive to make rules prospectively or retrospectively
is crucial. 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 reason for this distinction is in the supremacy of the
Parliament and its control of executive action, being an important
subject of administrative law.
15. We will now refer to the rule making power under the M.P. Excise
Act, 1915. Section 62 of the Act empowers the State to make rules.
Relevant portion of Section 62 is as follows: –
“62. Power to make rules.— (1) The State Government
may make rules for the purpose of carrying out the
provisions of this Act.
(2) In particular, and without prejudice to the generality
of the foregoing provision, the State Government may
make rules—
(a) prescribing the powers and duties of Excise Officers;
(b) to (n) …
(3) The power conferred by this section of making rules
is subject to the condition that the rules made under subsection (2) (a), (b), (c), (e), (f), (i), (l) and (m) shall be
made after previous publication :
Provided that any such rules may be made without previous
publication if the State Government considers that they
should be brought into force at once.”
678 [2024] 4 S.C.R.
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16. Section 62 does not enable the executive to continue the application of
a repealed rule to events that have commenced during the subsistence
of the Rule. However, Section 63 is of some importance. It enables
the executive to operate the Rule from a date as may be specified
in that behalf. Section 63 is reproduced as below:-
“63. Publication of rules and notifications.— All rules
made and notifications issued under this Act shall be
published in the Official Gazette, and shall have effect
from the date of such publication or from such other date
as may be specified in that behalf.”
17. It is clear that even Section 63 of the Act does not provide continuation
of a repealed provision to rights and liabilities accrued during its
subsistence. 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. We may mention
at this very stage that Rule 19 which has been substituted on
29.03.2011 has not been notified to operate from any other date
by the Government.
18. Faced with this situation, Mr. Saurabh Mishra, learned A.A.G. for the
State, came up with an attractive argument that the State of M.P. can
continue to apply the repealed Rule for the transaction of 2009-2010
by virtue of specific provisions under the Madhya Pradesh General
Clauses Act, 1957. He brought to our notice Section 10 of the Act
which is as follows:-
“10. Effect of Repeal. Where any Madhya Pradesh Act
repeals any enactment then, unless a different intention
appears, the repeal shall not-
(a) revive anything not in force or existing at the time at
which the repeal takes effect; or
(b) affect the previous operation of any enactment so
repealed or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability, acquired,
accrued or incurred under any enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in
respect of any offence committed against any enactment
so repealed; or
[2024] 4 S.C.R. 679
Pernod Ricard India (P) Ltd. v.
The State of Madhya Pradesh & Ors.
(e) affect any investigation, legal proceeding or remedy
in respect of any such right, privilege, obligation, liability,
penalty, forfeiture or punishment as aforesaid;
and any such investigation, legal proceeding or remedy
may be instituted, continued or enforced, and any such
penalty, forfeiture or punishment may be imposed, as
if the repealing Madhya Pradesh Act had not been
passed.”
19. The above-referred Section of the MP General Clauses Act by
itself would not make any difference as the Section is applicable
only to enactments, i.e. when any M.P. Act repeals any enactment
and not a subordinate legislation. Interpreting an identical provision
of the General Clauses Act, 1897, i.e. Section 6, this Court has
consistently held that Section 6 of the General Clauses Act, 1897,
has no application to subordinate legislation.21
20. Mr. Saurabh Mishra then referred to Section 31 of Madhya Pradesh
General Clauses Act, 1957, which is as under:
“31. Application of Act to Ordinances and Regulations.-
The provisions of this Act shall apply, unless there is
anything repugnant in the subject or context-
(a) to any Ordinance or Regulation as they apply in relation
to Madhya Pradesh Acts:
Provided that sub-section (1) of section 3 of this Act shall
apply to any Ordinance or Regulation as if for the reference
in the said sub-section (1) to the day of the first publication
of the assent to an Act in the Official Gazette there were
substituted a reference to the day of the first publication
of the Ordinance or the Regulation, as the case may be,
in that Gazette;
(b) to the construction of rules, regulations, bye-laws,
orders, notifications, schemes or forms made or issued
under a Madhya Pradesh Act.”
21 Rayala Corp. v. Director of Enforcement [1970] 1 SCR 639 : (1969) 2 SCC 412; Kolhapur Canesugar
Works Ltd. v. Union of India [2000] 1 SCR 518 : (2000) 2 SCC 536
680 [2024] 4 S.C.R.
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21. By virtue of Section 31, the provisions of the Madhya Pradesh
General Clauses Act, 1957 are made applicable to the construction
of rules. By such application, the principle of a repeal of a provision
not affecting any liability incurred thereunder is also extended to
the operation of the subordinate legislations under the Act. It is,
therefore, submitted that having incurred the liability of exceeding
the prescribed limits of losses of liquor for the license period 2009-
10, the liability is not affected by the subsequent substitution of
Rule 19.
22. This submission was not raised before the Single Judge or the
Division Bench. However, as law operates irrespective of the choices
of parties or their counsels in raising and referring to it in a court of
law, we have permitted him to argue this question of law. We will
now examine the application of Section 31 and its operation.
23. Section 31 of the M.P. General Clauses Act, 1957, relating to
extension of its provisions to subordinate legislation is thus, distinct
and more ambitious than that of its big sister, the General Clauses
Act, 1897, the Central Legislation which extends its provisions to
Ordinances and Regulations which are in the nature of legislation.22
Conscious of the big leap to extend the M.P. General Clauses Act,
1957, for construction of subordinate legislations, Section 31 takes
care to provide that it may be done only when it is not repugnant to
the subject and context. In its own words – unless there is anything
g repugnant in the subject and context.
24. Interpretation statutes such as the General Clauses Act, 1897, are
enactments intended to set standards in construction of statutes. The
expression construction is of seminal importance as it is oriented
towards enabling a seeker of the text of a statute to understand the
true meaning of the words and their intendment. Apart from setting
coherent and consistent methods of understanding enactments,
the interpretation statutes also subserve the purpose of reducing
prolixity of legislations. The standard principles formulated in the
interpretation statutes must, therefore, be read into any and every
enactment falling for consideration.
22 Thus, this Court has held in a number of cases that the General Clauses Act, 1897 is only applicable to
statutes.
[2024] 4 S.C.R. 681
Pernod Ricard India (P) Ltd. v.
The State of Madhya Pradesh & Ors.
25. In Pushpa Devi v. Milkhi Ram23 while explaining the purpose and object
of prefacing a definition or an interpretation with the phrase- “unless
there is anything repugnant in the subject or context”- this court held :-
“19. The opening sentence in the definition of the section
states “unless there is anything repugnant in the subject
or context”. In view of this qualification, the court has not
only to look at the words but also to examine the context
and collocation in the light of the object of the Act and the
purpose for which a particular provision was made by the
legislature. Reference may be made to the observations of
Wanchoo, J. in Vanguard Fire and General Insurance Co.
Ltd. v. M/s Fraser and Ross [(1960) 3 SCR 857, 863: AIR
1960 SC 971: (1960) 30 Com Cas 13] where the learned
Judge said that even where the definition is exhaustive
inasmuch as the word defined is said to mean a certain
thing, it is possible for the word to have a somewhat different
meaning in different sections of the Act depending upon
the subject or context…
20. Great artistry on the bench as elsewhere is, therefore,
needed before we accept, reject or modify any theory
or principle. Law as creative response should be so
interpreted to meet the different fact situations coming
before the court. For, Acts of Parliament were not drafted
with divine prescience and perfect clarity. It is not possible
for the legislators to foresee the manifold sets of facts
and controversies which may arise while giving effect to
a particular provision. Indeed, the legislators do not deal
with the specific controversies. When conflicting interests
arise or defect appears from the language of the statute,
the court by consideration of the legislative intent must
supplement the written word with ‘force and life’. See, the
observation of Lord Denning in Seaford Court Estate Ltd.
v. Asher [(1949) 2 KB 481, 498].”
26. In Vanguard Fire and General Insurance Co. Ltd. v. Fraser and
Ross24 this Court held that:
23 [1990] 1 SCR 278 : (1990) 2 SCC 134
24 [1960] 3 SCR 857 : (1960) 3 SCR 857
682 [2024] 4 S.C.R.
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“6. …That is why all definitions in statutes generally begin
with the qualifying words similar to the words used in the
present case, namely, unless there is anything repugnant
in the subject or context. Therefore in finding out the
meaning of the word ‘insurer’ in various sections of the
Act, the meaning to be ordinarily given to it is that given
in the definition clause. But this is not inflexible and there
may be sections in the Act where the meaning may have
to be departed from on account of the subject or context
in which the word has been used and that will be giving
effect to the opening sentence in the definition section,
namely, unless there is anything repugnant in the subject
or context. In view of this qualification, the court has not
only to look at the words but also to look at the context, the
collocation and the object of such words relating to such
matter and interpret the meaning intended to be conveyed
by the use of the words under the circumstances…”
27. In the ultimate analysis, interpretation statutes or definitions in
interpretation clauses are only internal aids of construction of a
statute. Who do they aid? Interpretation is the exclusive domain of
the Court.25 A Constitutional Court is tasked with the sacred duty of
interpreting the Constitution, Acts of Parliament or States, subordinate
legislations, regulations, instructions and even to practices having
force of law. Whichever or wherever the instrument, interpretation
is the exclusive province of the Court.26 The principle is aptly
enunciated as:
“The Court has the function of authoritatively construing
legislation, that is, determining its legal meaning so far as
is necessary to decide a case before it. This function is
exclusive to the Court, and a meaning found by any other
person, for example an authorising agency, an investigating
agency, an executing agency, a prosecuting agency, or
even the legislature itself, except when intending to declare
or amend the law, is always subject to the determination
of the court.
25 Keshavji Ravji & Co. v. Commissioner of Income Tax, [1990] 1 SCR 243 : (1990) 2 SCC 231
26 Dr. Major Meeta Sahai v. State of Bihar [2019] 15 SCR 273 : (2019) 20 SCC 17
[2024] 4 S.C.R. 683
Pernod Ricard India (P) Ltd. v.
The State of Madhya Pradesh & Ors.
It is usually said that the making of law, as opposed to
its interpretation, is a matter for the legislature, and not
for the courts, but, in so far as that legislature does not
convey its intention clearly, expressly and completely,
it is taken to require the court to spell out that intention
where necessary. This may be done either by finding and
declaring implications in the words used by the legislator, or
by regarding the breadth or other obscurity of the express
language as conferring a delegated legislative power to
elaborate its meaning in accordance with public policy
(including legal policy) and the purpose of the legislation.
Whichever course is adopted, in accordance with the
doctrine of precedent the court’s operation influences the
future legal meaning of the enactment by producing what
may be called sub-rules, which are implied or expressed
in the court’s judgment.”27
28. Subordinate legislation, by its very nature, rests upon the executive’s
understanding of the primary legislation. When a Court is of the
opinion that such an understanding is not in consonance with the
statute, it sets it aside for being ultra-vires to the primary statute.
29. We will now examine if there is anything repugnant to the subject
or context to disapply the mandate of Section 31 of M.P. General
Clauses Act, 1957, to the construction of the 1996 Rules. If the
subject and context guide us in coming to that conclusion, we will
not extend the effect of repeal in Section 10 of the MP General
Clauses Act, 1957 to the repealed Rule 19. On the other hand, if
the subject and context have no bearing on the construction of the
Rule, then we will give effect to Section 10 and apply the repealed
Rule to the liability incurred by the appellant during the license year
2009-10 and allow the imposition of four times the duty as penalty.
30. The 1996 Rules regulate the grant of license for manufacture and
bottling of foreign liquor, procurement of spirit, storage, quality and
control, sale, export, verification etc. Rule 19 provides for penalties
for contravention of any of the Rules or provision of the Act. There
are different penalties for violation of different rules.
27 Halsbury’s Laws, (5th edn, 2018), vol 96, para 694
684 [2024] 4 S.C.R.
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31. The regulatory process requires the Government to deal with the
problem of diversion and unlawful sale of foreign liquor and also
provide an appropriate penalty and punishment. The process of
identifying a crime and prescribing an appropriate punishment is
a complex and delicate subject that the State has to handle while
making rules and enforcing them. The gravity of the offence, its
impact on society and human vulnerability are taken into account to
provide the required measure of deterrence and reform. Day to day
working of the Rules, reposing their effectiveness, ineffectiveness,
deficiency of deterrence, disproportionate penalty having a chilling
effect on genuine businesses, are some routine factors which require
the executive to make necessary amendments to the rules. In this
context, depending on the nature of offence, the proportionate penalty
is required to be modulated from time to time. In light of this, we can
appreciate that the felt need of the State to amend and substitute
Rule 19 which provided a higher penalty at four times the duty, with
a simple penalty not exceeding the duty payable.
32. 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 subject of administration of liquor requires
close monitoring and the amendment must be seen in this context of
bringing about good governance and effective management. Seen
in this context, the principle of Section 10 of MP General Clauses
Act, 1957, relating continuation of a repealed provision to rights and
liabilities that accrued during the subsistence of the Rule does not
subserve the purpose and object of the amendment.
33. It is also submitted on behalf of the State that the substituted Rule
cannot be given retrospective effect. We are not in agreement with
this submission either. It is wrong to assume that the substituted
Rule is given retrospective effect if its benefits are made available
to pending proceedings or to those that have commenced after the
substitution. Rule 19 which was substituted on 29.03.2011 is made
applicable to proceedings that have commenced 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.
[2024] 4 S.C.R. 685
Pernod Ricard India (P) Ltd. v.
The State of Madhya Pradesh & Ors.
34. The single Judge as well as the Division Bench have adopted two
different approaches and we have not agreed with either of them.
The single Judge was of the view that the amendment by way of
substitution has the effect of repealing the law which existed as
on the date of repeal. We have already explained the limitation
in this approach. The Division Bench on the other hand, held that
levy of penalty is substantive law, and as such, it cannot operate
retrospectively. This again is a wrong approach. The substituted
penalty only mollifies the rigour of the law by reducing the penalty
from four times the duty to value of the duty. Therefore, the bar of
Article 20(1)28 of imposing a penalty greater than the one in force at
the time of the commission of the offence has no application. While
rejecting the reasoning of the single Judge as well as the Division
Bench, we seek to underscore the importance of a simple and plain
understanding of laws and its processes, keeping in mind the purpose
and object for which they seek to govern and regulate us.
35. For the reasons stated above, we allow the appeals and set aside
the judgment of the Division Bench of the High Court in Writ Appeals
Nos. 425/2016, 6/2017, 7/2017, 8/2017, 9/2017, 10/2017, 11/2017,
12/2017, 13/2017, 14/2017, 15/2017, 16/2017, 17/2017, 19/2017,
20/2017, 21/2017, 22/2017, 23/2017, 24/2017, 25/2017, 26/2017,
27/2017, 28/2017, 29/2017, 30/2017, 31/2017, 32/2017, 33/2017,
34/2017, 35/2017, 36/2017, 37/2017, 38/2017, 39/2017, 40/2017,
41/2017, 42/2017 and 100/2017 dated 29.06.2017. We further hold
that the penalty to be imposed on the appellants will be on the basis
of Rule 19 as substituted on 29.03.2011. There shall be no order
as to costs.
Headnotes prepared by: Divya Pandey Result of the case:
Appeals allowed.
28 Rattan Lal v. State of Punjab [1964] 7 SCR 676 : 1964 SCC OnLine SC 40; Basheer v. State of Kerala,
[2004] 2 SCR 224 : (2004) 3 SCC 609; Nemi Chand v. State of Rajasthan, (2018) 17 SCC 448; Trilok
Chand v. State of Himachal Pradesh, (2020) 10 SCC 763; M/s. A.K. Sarkar & Co. & Anr. v. The State of
West Bengal & Ors. [2024] 3 SCR 356 : 2024 SCC OnLine SC 248
