19 Mar 2010

Prohibition of Ex Post Facto laws not on penalty: Supreme Court

In a recent decision, which can have severe consequences for erring tax-payers, the Supreme Court has declared that the protection available under Article 20(1) of the Constitution against application of ex post facto laws is not applicable in cases of imposition of penalty, meaning thereby that a person can be imposed with penalty for a conduct which was not unlawful or prohibited at the time of commission of the activity but was made unlawful or prohibited subsequent to the activity having been undertaken. 

The Supreme Court was dealing with the validity of the order passed by the Securities Appellate Tribunal holding that it was not permissible for the Chairman of SEBI to pass an order prohibited a person from from buying, selling or dealing in securities for a period of five years under a provision in SEBI Act when no such provision existed at the time an alleged misstatement was made by the person in the prospectus for which such order was passed by SEBI. Holding the stand of SEBI to be correct and setting aside the order of SAT, the Supreme Court observed inter alia as under;
29. The right of a person of not being convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence and not to be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence, is a Fundamental Right guaranteed under our Constitution only in a case where a person is charged of having committed an “offence” and is subjected to a “penalty”. 
30. In the instant case, the respondent has not been held guilty of committing any offence nor has he been subjected to any penalty. He has merely been restrained by an order for a period of five years from associating with any corporate body in accessing the securities market and also has been prohibited from buying, selling or dealing in securities for a period of five years. 
31. The word ‘offence’ under Article 20 sub-clause (1) of the Constitution has not been defined under the Constitution. But Article 367 of the Constitution states that unless the context otherwise requires, the General Clauses Act, 1897 shall apply for the interpretation of the Constitution as it does for the interpretation of an Act.
32. If we look at the definition of ‘offence’ under General Clauses Act, 1897 it shall mean any act or an omission made punishable by any law for the time being in force. Therefore, the order of restrain for a specified period cannot be equated with punishment for an offence as has been defined under the General Clauses Act. 
33. Under Criminal procedure code, ‘offence’ has been defined under Section 2(n) as follows: “2(n) “offence” means any act or omission made punishable by any law for the time being in force and includes any act in respect of which a complaint may be made under Section 20 of the Cattle trespass Act, 1871 (1 of 1871);”
34. On a comparison of the aforesaid two definitions we find that there are common links between the two. An offence would always mean an act of omission or commission which would be punishable by any law for the time being in force.
35. Article 20(1) was interpreted by the Court in Rao Shiv Bahadur Singh and another v. State of Vindhya Pradesh (AIR 1953 SC 394). Justice Jagannadhads speaking for Constitution Bench, on a comparison of similar provisions in English Law and American Constitution, opined that the language used in Article 20 is in much wider terms. This Court held that: “...what is prohibited is the conviction of a person or his subjection to a penalty under ‘ex post facto’ laws. The prohibition under the Article is not confined to the passing or the validity of the law, but extends to the conviction or the sentence and is based on its character as an ‘ex post facto’ law”
36. The ratio of this judgment has again been affirmed in State of West Bengal v. S.K. Ghosh, (AIR 1963 SC 255), wherein another Constitution Bench of this Court speaking through Justice Wanchoo, as His Lordship then was, held that a forfeiture by a District Judge under Section 13(3) of Criminal Laws Amendment Ordinance of 1944 cannot be equated to a forfeiture under Section 53 of IPC inasmuch as forfeiture under Section 13(3) of the Ordinance involved embezzlement of government money or property and the same is not punishment or penalty within the meaning of Article 20(1) of Constitution (See paras 14 and 15 of the judgment).
37. Even if penalty is imposed after an adjudicatory proceeding, persons on whom such penalty is imposed cannot be called an accused. It has been held that proceedings under Section 23(1A) of Foreign Exchange Regulation Act, 1947 are adjudicatory in character and not criminal proceedings (See Director of Enforcement v. M.C.T.M. Corporation Pvt. Ltd. and others, (1996) 2 SCC 471). Persons who are subjected to such penalties are also not entitled to the protection under Article 20(1) of the Constitution. 
38. Following the aforesaid ratio, this Court cannot hold that protection under Article 20(1) of the Constitution in respect of ex-post facto laws is available to the respondent in this case.

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