Gold Control Act Repeal: Supreme Court Quashes Proceedings in Sushila N. Rungta vs. Tax Recovery Officer (2018)

Introduction

Date of the Judgment: October 30, 2018
Citation: (2018) INSC 923
Judges: Justice Rohinton Fali Nariman and Justice Navin Sinha.

Can a law that has been repealed without any specific provision to save pending cases still allow those cases to continue? The Supreme Court of India addressed this crucial question in a set of appeals concerning the Gold Control Act, 1968. The court had to determine whether the repeal of the Gold Control Act, 1968, without a saving clause, would nullify the pending proceedings initiated under the Act. The court, in this case, examined whether the general rule under Section 6 of the General Clauses Act would apply or whether the statement of objects and reasons of the repealing act would evince a contrary intention.

The judgment was delivered by a two-judge bench comprising Justice Rohinton Fali Nariman and Justice Navin Sinha. The majority opinion was authored by Justice Rohinton Fali Nariman.

Case Background

The case originated from an order dated 03.01.1970 by the Collector of Central Excise, which granted the benefit of an amnesty scheme to a party who had failed to declare gold, but imposed a penalty of Rs. 25,000 for the failure to declare as per the Gold Control Rules, 1962. The party was given time till 31.05.1966 to invest the gold into gold bonds, but the gold was seized. An appeal against this order was dismissed on 08.02.1971.

Subsequently, on 01.06.1971, a show cause notice was issued under the Defence of India Rules, seeking to confiscate the gold and enhance the penalty. This notice was challenged in a writ petition, which was dismissed by the Delhi High Court on 29.09.1972. The matter reached the Supreme Court in an appeal.

While the Supreme Court’s stay order was in effect, the Gold Control Act, 1968, was repealed by the Gold (Control) Repeal Act, 1990. The Statement of Objects and Reasons for the repeal highlighted that the Act had failed to achieve its objectives and had caused hardship to artisans and small goldsmiths.

Timeline

Legal Framework

The primary legal issue revolves around the interpretation of the repeal of the Gold Control Act, 1968, by the Gold (Control) Repeal Act, 1990. The key question is whether the repeal, which did not include a saving clause, would nullify pending proceedings initiated under the repealed Act.

The court considered the application of Section 6 of the General Clauses Act, which generally provides that the repeal of an enactment does not affect any right, privilege, obligation, or liability acquired or incurred under the repealed enactment. However, this provision does not apply if a different intention appears from the repealing statute.

The relevant provisions are:

• The Gold (Control) Repeal Act, 1990:
  • Section 1: “This Act may be called the Gold (Control) Repeal Act, 1990.”
  • Section 2: “The Gold (Control) Act, 1968 is hereby repealed.”
• Section 6 of the General Clauses Act: This section outlines the effect of repeals, generally preserving rights and liabilities unless a different intention appears.
• Rule 126-I(16) of the Gold Control Rules, 1962: Under which the penalty was imposed.
• Section 74 of the Gold Control Act, 1968: Corresponding to Rule 126-I(16) of the Gold Control Rules, 1962.
• Section 116 of the Gold (Control) Ordinance No.6 of 1968: Which had a saving clause.

Arguments

Appellant’s Arguments (Mr. R. Venkataramani):

• The appellant argued that the repeal of the Gold Control Act, 1968, was without a saving clause, and therefore, Section 6 of the General Clauses Act would not apply.
• The Statement of Objects and Reasons of the repealing Act clearly showed a contrary intention. The reasons stated that the Gold Control Act was “regressive” and had caused “considerable dissatisfaction” and “hardship” to artisans and goldsmiths.
• The appellant contended that the show cause notice issued under the repealed Act would not survive the repeal.

Revenue’s Arguments (Mr. Rupesh Kumar):

• The revenue argued that a repeal simpliciter, without a saving clause, would attract the general rule under Section 6 of the General Clauses Act.
• The revenue relied on the law laid down in State of Punjab vs. Mohar Singh, [1955] 1 SCR 893, which states that a simple repeal would preserve the pending proceedings.
• The revenue argued that the object of a simple repeal is to allow the general rule under Section 6 to apply.

The innovativeness of the appellant’s argument lay in its emphasis on the Statement of Objects and Reasons of the repealing Act to demonstrate a contrary intention, which would negate the application of Section 6 of the General Clauses Act.

Issues Framed by the Supreme Court

The primary issue framed by the Supreme Court was:

1. Whether the repeal of the Gold Control Act, 1968, by the Gold (Control) Repeal Act, 1990, without a saving clause, would nullify the pending proceedings initiated under the repealed Act.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• State of Punjab vs. Mohar Singh, [1955] 1 SCR 893 – The court discussed this case, which generally upholds the application of Section 6 of the General Clauses Act in cases of simple repeal. The Supreme Court distinguished the case on the ground that the Statement of Objects and Reasons of the repealing Act showed a contrary intention.
• New India Assurance Co. Ltd. vs. C. Padma and Another, (2003) 7 SCC 713 – The court cited this case to support its view that a contrary intention expressed in the Statement of Objects and Reasons can negate the application of Section 6 of the General Clauses Act.
• M.S. Shivananda vs. Karnataka State Road Transport Corporation and Others, [1980] 1 SCR 684 – The court cited this case following Director of Public Works & Anr. vs. Ho Po Sang & Ors., [1961] 2 All. ER 721, to show that show cause notices are not saved even if Section 6 were to apply.
• Director of Public Works & Anr. vs. Ho Po Sang & Ors., [1961] 2 All. ER 721– The court cited this case to show that show cause notices are not saved even if Section 6 were to apply.

Legal Provisions:

• Section 6 of the General Clauses Act – The court analyzed the applicability of this section, which generally preserves rights and liabilities upon repeal. The court ultimately held that the contrary intention expressed in the statement of objects and reasons of the repealing act would negate the application of this section.
• Section 116 of the Gold (Control) Ordinance No.6 of 1968 – The court noted that this section had an inbuilt savings clause, which was not present in the repealing act of 1990.

Judgment

How each authority was viewed by the Court:

• State of Punjab vs. Mohar Singh, [1955] 1 SCR 893: The court distinguished this case, stating that the Statement of Objects and Reasons of the repealing Act showed a contrary intention, thus, not applying the ratio of this case.
• New India Assurance Co. Ltd. vs. C. Padma and Another, (2003) 7 SCC 713: The court followed this case, using it to support its view that a contrary intention expressed in the Statement of Objects and Reasons can negate the application of Section 6 of the General Clauses Act.
• M.S. Shivananda vs. Karnataka State Road Transport Corporation and Others, [1980] 1 SCR 684: The court followed this case to show that show cause notices are not saved even if Section 6 were to apply.
• Director of Public Works & Anr. vs. Ho Po Sang & Ors., [1961] 2 All. ER 721: The court followed this case to show that show cause notices are not saved even if Section 6 were to apply.

The Supreme Court noted that the Gold Control Act had been repealed due to its failure to achieve its objectives and the hardship it caused to artisans and goldsmiths. The court emphasized that the Statement of Objects and Reasons of the repealing Act clearly indicated that the Act was “regressive” and had caused “considerable dissatisfaction.”

The court observed that unlike previous amendments and repeals of the Defence of India Rules, the Gold (Control) Repeal Act, 1990, did not include a saving clause.

The court concluded that the show cause notice dated 01.06.1971, which was the subject matter of the appeal, no longer survived due to the repeal of the Gold Control Act.

The court stated, “Having heard learned counsel for both sides, we are of the view that the statement of objects and reasons makes it clear that over 22 years, the results achieved under the Act have not been encouraging and the desired objectives for which the Act has been introduced have failed.”

The court further stated, “This being the case, we are of the opinion that the repeal simpliciter, in the present case, does not attract the provisions of Section 6 of the General Clauses Act as a contrary intention is very clearly expressed in the statement of objects and reasons to the 1990 repeal Act.”

The court also noted that, “In point of fact, on going through the impugned judgment, it is clear that every time an amendment was made to the Defence of India Rules and/or repeal of the said rules had taken place, there was always an inbuilt savings clause.”

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the clear expression of a contrary intention in the Statement of Objects and Reasons of the Gold (Control) Repeal Act, 1990. The court noted that the Act was deemed “regressive” and had caused “considerable dissatisfaction” and “hardship,” indicating that the legislature did not intend to preserve pending proceedings under the repealed Act. The absence of a saving clause in the repealing Act, in contrast to previous amendments and repeals, further supported the court’s conclusion.

Fact:Law Ratio:

The court’s reasoning was primarily based on the interpretation of the law and the legislative intent, with a lesser emphasis on the specific facts of the case.

Key Takeaways

• A repeal of a law without a saving clause does not automatically mean that pending proceedings under the repealed law will continue.
• The Statement of Objects and Reasons of a repealing Act can be crucial in determining whether Section 6 of the General Clauses Act applies.
• If the Statement of Objects and Reasons clearly indicates a contrary intention, then pending proceedings under the repealed Act may not survive.
• The absence of a saving clause in a repealing act can indicate a legislative intent to nullify pending proceedings.

Directions

The Supreme Court granted liberty to both parties to add, amend, or delete questions in the Wealth Tax Reference within eight weeks. The court also requested the High Court to hear the writ petitions expeditiously, noting that they were from 2005.

Development of Law

The ratio decidendi of this case is that the Statement of Objects and Reasons of a repealing Act can demonstrate a contrary intention that negates the application of Section 6 of the General Clauses Act, thereby nullifying pending proceedings under the repealed Act. This decision clarifies that a simple repeal of a law without a saving clause does not automatically preserve pending proceedings, and the legislative intent as expressed in the Statement of Objects and Reasons is a crucial factor.

This case changes the previous position of law by emphasizing that the Statement of Objects and Reasons of a repealing Act can override the general rule under Section 6 of the General Clauses Act. This is a departure from the earlier understanding that a simple repeal would generally preserve pending proceedings.

Conclusion

The Supreme Court’s decision in Sushila N. Rungta vs. Tax Recovery Officer clarifies the effect of repealing a law without a saving clause. The court held that the repeal of the Gold Control Act, 1968, without a saving clause, nullified pending proceedings under the Act because the Statement of Objects and Reasons of the repealing Act showed a clear contrary intention. This judgment emphasizes the importance of legislative intent and the role of the Statement of Objects and Reasons in interpreting repealing statutes.