Interpretation of Statutes, Deeds and Documents – CA Inter Law Notes

Interpretation of Statutes, Deeds and Documents – CA Inter Law Notes is designed strictly as per the latest syllabus and exam pattern.

Interpretation of Statutes, Deeds and Documents – CA Inter Law Notes

Basic

What is Interpretation?

• Interpretation is art of finding real meaning of Act or document.
• It is process of ascertaining intention of legislature in enacting Act.
• It means expanding meaning of written words, making out their meaning, explaining and understanding them in specified manner.

What is Statute?

• The word ‘Statute’ means Act enacted by the legislative authority.
• Generally it means the laws and regulations of every kind.
• It has been defined as the written will of the legislature.
• Law includes any ordinance, order, bye-law, regulation, notification.

Need for Interpretation

Statutory interpretation is the process by which courts interpret and apply legislation. We need interpretation for following reasons:

Ambiguity in Words:

• Some amount of interpretation is always necessary when a case involves a statute.
• Sometimes the words of a statute have a plain and straightforward meaning. But in many cases, there is some ambiguity in the words of the statute that must be resolved by the judge.

Words & Legal Expert not Perfect:

• Statute is drafted by legal expert. It contains rules and provisions by use of words.
• But legal expert and words are not perfect. Word convey different meaning while used in different circumstances and references.
• Intent of legal expert (legislature) has to be gathered not only from words but surrounding circumstances and various references.
• To find the meanings of statutes, judges use various methods of statutory interpretation, including traditional canons of statutory interpretation, legislative history, and purpose.

Uncertainty in Legislation:

• Legislation may contain uncertainties for a variety of reasons:
• Words are imperfect symbols to communicate intent. They are ambiguous and change in meaning over time.
• Unforeseen situations are inevitable, and new technologies and cultures make application of existing laws difficult.
• Uncertainties may be added to the statute in the course of enactment, such as the need for compromise or catering to special interest groups.

Therefore, the court must try to determine how a statute should be enforced. This requires statutory construction.

• If any provision is open to two interpretations, the Court has to choose that interpretation which represents the time intention of the legislature.
• But one should keep in mind that the legislature is supreme when creating law and that the Court is merely an interpreter of the law.
• By interpretation, Court cannot make sweeping changes in the operation of the law.

Interpretation vs Construction

Interpretation	Construction
It is process to find out true sense of any word on certain principle.	It is method by which interpretation is done. To ‘construe’ means to ‘interpret’
Interpretation bring the true meaning and purpose of the legislation.	Construction relates to drawing of conclusion in the given situation before the Court.
Interpretation may be liberal or strict.	Liberal construction may produce absurd and unjust result.
Interpretation is process referring to both spirit and reason of law.	The construction relates to the meaning of the word used in statute.

Types of Interpretation

Types of Interpretation:

• Interpretation can be divided into following two categories:
• Grammatical interpretation; and
• Logical interpretation

Difference Between Grammatical Interpretation and Logical Interpretation

Grammatical Interpretation	Logical Interpretation
It is also called ‘Literal Interpretation’.	It is also called ‘Functional Interpretation’.
It depends upon the ‘letter’ of enacted law.	It depends upon the ‘spirit’ of enacted law.
It interprets only the ‘verbal expression of the law’. It does not go beyond the ‘literal legist’.	It looks beyond the ‘literal legist’. It seeks elsewhere for some other and more satisfactory evidence of the true intention of the legislature.
In grammatical interpretation, the words are construed according to the popular or dictionary meaning of the term. It gives the plain sense.	Where grammatical interpretation fails, in such cases the ‘sentential legist’ may be ascertained from other factors.
Grammatical interpretations are used frequently in Courts.	Rarely, it is used.

GENERAL SCHEME OF ACT

General pattern of any modern Act is more or less uniform and the arrangement of any Act is as follows:

• Preamble
• Title, date and jurisdiction
• Definitions of specific words
• Substantial provisions
• Administrative machinery and powers to the same
• Penalties and punishments
• Rules making authority.
• Appeal provisions
• Schedules to the Act
• Statement of Objects and Reasons

Preamble

• A preamble is an introductory statement in a document that explains the document’s purpose and underlying philosophy.
• When applied to the opening paragraphs of a statute, it may recite historical facts relating to the subject of the statute.
• It is different from the title of Act.
• It give’s brief background of the Act.

Time, Date and Jurisdiction

• The long title is the formal title appearing at the head of a statute (such as an Act of Parliament).
• The long title provides a summary description of the purpose or scope of the Act; it contrasts with the short title, which is merely intended to provide a useful name when referring to it.

Example:
Long title – An Act to make provision for the investigation and settlement of industrial disputes, and for certain other purposes.
Short title – Industrial Disputes Act, 1947

• If no date is mentioned, the Act comes into force when President assents the Bill.
• Word ‘Jurisdiction’ is Latin word. Juris meaning ‘law’ and dicere meaning ‘to speak’. It means authority granted to legal body to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility.
• The term is also used to denote the geographical area or subject-matter to which such authority applies.
• Section 1 of an Act gives title of the Act, the extent of area to which the Act is applicable and date on which the Act comes into effect.

Definitions of Specific Words:

• Section 2 is usually a definition section which defines the specific words used in the Act.
• Purpose of defining some specific words is to avoid ambiguity and to provide better clarity.
• Some words may be used differently in different Acts.

Example:
The word ‘wages’ is defined differently for purpose of Income-tax Act, Provident Fund Act, E.S.I. Act, Gratuity Act etc.
The word ‘Consumer’ is defined differently under the Com¬petition Act, 2002 and Consumer Protection Act, 1986.

Substantive Sections:
It specifies the basic provisions of the Act.

Administrative Machinery:

• The Act is passed by Parliament but administered by the Government. It is, therefore, necessary to provide machinery for administering the Act.
• Necessary powers are included under the Act for administering the Act. These powers are administrative in nature. These sections are called ‘machinery sections’.

Punishment and penalties:

• Penalty can be classified as:
  • Monetary Penalty.
  • Criminal Prosecution.
• Monetary penalties include interest, damages, fines, confiscation of goods etc.
• Often, powers are granted to implementing authorities to impose these penalties.
• Criminal prosecution includes imprisonment or imprisonment and fines. These can be imposed only by competent courts.

Delegation of Rule making Power:
Act do not provide in details about routine matters. Routine matters regarding forms, procedures etc., are not prescribed in the Act but powers are given to implementing authority like State Government, Board and Commission etc. to make rules and regulation for the same.

Example : Sections 468-469 of Companies Act, 2013
Sections 468-469 delegate power to Central Government to make rules relating to winding up and other rules under Companies Act, 2013.

Appeal Provisions:
To control over executive powers, appeal provisions are made. The statutes, therefore, provide for appeals against orders of executive authorities.

Example:
Under Companies Act, 2013, NCLT (National Company Law Tribunal)/NCLAT (National Company Law Appellate Tribunal) are set up to adjudicate on Company Law issues.

Company or its member can appeal to NCLT/NCLAT against the order of ROC or Regional Director (RD). Appeal against the order of NCLT/NCLAT can be made to the High Courts or Supreme Court.

Schedules to Act

• Sometimes, Schedules are attached to the Act. This is only for convenience of drafting.
• These Schedules are part of the Act and have same legal force.

Example:
Under Companies Act, 2013 – Schedule II – Useful lives to compute depreciation.

Example:
Under Companies Act, 2013 – Schedule V – Conditions to be fulfilled for the appointment of a Managing or Whole-time Director or a manager without the approval of the Central Government.

Statement of Objects:

• Object of Act or amendment is usually mentioned. Incorporating purpose behind the Act is known as statement of objects. It is useful to Judge in interpretation.
• It is customary.

Primary (Basic) Rules of Interpretation

Following four are primary rules of interpretation:

• Literal rule of interpretation
• Rule of Beneficial construction
• Rule of harmonious construction
• Rule of reasonable construction

Literal rule of interpretation:
When Applied?

• It states that the statute should be interpreted according to clear words used. As long as the language is unambiguous, the literal interpretation should be followed.
• It is now well settled that a literal meaning should be assigned to a statute unless the same leads to ambiguity or abnormality.
• Where the words or the language used in a statute is clear, the statute should be interpreted on the face of language itself, without adding, subtracting or omitting words therefrom. (without any modification or change)
• The Court should determine the intention as expressed by the words used.
• If a word is clear, it must be construed by giving effect to that meaning, irrespective of consequences. If language is precise and unambiguous, it has to be understood in the natural and ordinary sense.

Examples:
Cutter vs. Eagle Star Insurance Co. Ltd. (1997)

• A car park is not a ‘road’ for the purposes of the Road Traffic Act, 1988.
• The purpose of a road is a means for cars to move along it to a destination; the purpose of a car park is for cars to stand still. Parking a car on a road does not make it a car park.
• Driving car across a car park does not make it a road as it is incidental to its main function.

Whiteley vs. Chappell (1868):

• The defendant had impersonated a dead person and voted in an election in his name.
• The relevant statute provided that it was an offence to impersonate ‘any person entitled to vote’ at an election. Since the person impersonated was dead, he was not entitled to vote, and thus Whiteley could not be convicted. Here application of literal rule is against Parliament’s intention.

Rule of Beneficial construction
Also Known:
It is also known as Mischief Rule of Interpretation.

Decided:
This rule was evolved in Heydon’s case over 400 years ago.

When Applied?

• Heydon’s rule must be applied in those cases where the word of statute is ambiguous and out of that more than two meanings can be emerged.
• This rule can be applied when the law is passed or a previous Act is amended to meet some specific objective.
• In such cases, the judge has to find out what was the mischief that the Act or Amended Act wanted to correct and then interpret the word or sentence accordingly.
• Strict interpretation may occasionally lead to absurd result, which should be avoided.
• The steps in this rule are:
  • What was the law before the making of the Act?
  • What was the mischief and defect for which the law did not provide?
  • What remedy that the Act had provided?
  • What is true reason of the remedy?
• Courts should prevent the mischief and advance the remedy according to the true intentions of makers of Statute. ‘Mischief’ here means ‘wrong’ or ‘harm’.

Examples:
Corkery vs. Carpenter (1951)

• Section 12 of the Licensing Act, 1872 provided that a person drunk in charge of a ‘carriage’ on the highway could be arrested without a warrant.
• The defendant was found drunk in charge of bicycle. Although it could be argued that a bicycle is not a carriage in the normal meaning of the word, the divisional court of UK held that bicycle was a carriage for the purpose of Act; mischief here was prevention of drunken persons on the highway in charge of some form of transportation for the purpose of public order and safety.

Manchester City Council vs. McCann (1999)

• Section 118(1 )(a) of the County Courts Act, 1984 provides that county courts may deal with anyone who ‘wilfully insults the judge….or any juror or witness, or any officer of the court’.
• The court held that threat was an insult for the purpose of Act; the mischief here was protection of various participants in civil process.
• Even though a threat is not necessarily an insult using normal meanings, the ability for the court to deal with insults but not threats was contrary to Parliament’s intention.

Rule of harmonious construction:

When Applied?

• This rule states that Statute has to be read as a whole and interpretation consistent with other provisions in the Act should be adopted.
• Statute should be read as a whole and different provisions in the same act should be consistent with each other. Thus, interpretation which is consistent with other provisions of Act should be preferred.
• Efforts should be made to reconcile different provisions of the same Act. It is duty of the Court to avoid a real clash between two sections of the same Act.
• Interpretation should be harmonious not only with other provisions in same Statute, but other laws as well.
• Where there are in an enactment two or more provisions which cannot be reconciled with each other, they should be so interpreted, wherever possible, as to give effect to all of them.
• This is what is known as the Rule of Harmonious Construction.
• This rule is not to be applied when the words have the clear and one meaning and no alternative construction is possible.

Example:
Smith vs. Hughes – Interpretation of word ‘in a street’ as per Street Offences Act.

• The Act was made to stop prostitutes from inviting in the street. The question arose whether the Act can apply to prostitutes who attracted attention of passers by from balconies.
• Literally speaking, ‘soliciting from balcony’ do not amount as inviting ‘in the street’. It was, however held that inviting from balconies will amount to soliciting ‘in the street’.
• Act was made to enable people to walk in the streets without being harassed and hence the precise place from which the prostitutes addressed solicitations is irrelevant.

Rule of reasonable construction:

Also Known:
It is also known as Golden Rule of Interpretation

When Applied?:

• The rule states that exclusive reliance on dictionary meaning or literal meaning may not indicate proper intention of legislature.
• Sometime literal meaning gives absurd or inconsistent results. In such cases, the Statute should be construed so as to give sensible meaning that is rational and fair, for which, some modification to language and modification in grammatical and ordinary sense of the words may be done.
• When plain literal interpretation produces absurd result, Court may modify the language to achieve the intention of the Legislature and produce a rational construction.

Examples:
Meaning of word ‘coal’
4- Generally it is understood that the term ‘coal’ means coal used as fuel in its natural, ordinary or popular meaning, but in the context of Sales Tax Act, coal is constructed as a mineral product in the context of collar control order.

Meaning of word ‘Profits and gains’

• In the construction of Income Tax Act, 1961, the words ‘profits and gains’ should be understood in commercial sense.
• Likewise borrowed money or capital borrowed has to be interpreted in its ordinary commercial meaning.

Secondary (Subsidiary) Rule of Interpretation or Textual Canons of Interpretation

Following are the secondary rules of interpretation:
Rule of Casus Omissus

• Generally, the Court is bound to harmonize the various provisions of an Act passed by the legislature during interpretation so that conflict is avoided.
• Sometimes certain matters might have been omitted in a statute. In such cases, they cannot be added by construction as it amounts to making of laws or amending which is a function of legislature. A new provision cannot be added in a statute giving it meaning not otherwise found therein.
• A word omitted from the language of the statute, but within the general scope of the statute, and omitted due to inadvertence is known as Casus Omissus.
• In Padma Sundara Rao vs. State of Tamil Nadu, it was held that the casus omissus cannot be applied by the Court except in the case of a clear necessity and when reason for it is found within the four corners of the statute itself.

Contemporanea Expositio:

• Often, circulars and trade notices are issued by respective departments and authorities on the basis of their understanding of the law once the Act is implemented.
• Interpretation stated in the circular and trade notice is called ‘Contemporanea Expositio’. This means ‘contemporary exposition’.
• The principle states that Courts in interpreting the statute will give much weight to the interpretation put upon it at the time of enactment by those whose duty was to construe, execute and apply the said enactment. That circulars issued by the department are in the nature of contemporanea expositio furnishing legitimate aid in the construction of the relevant provisions. Interpretation accepted and acted upon for a long time should not be altered unless there are compelling reasons to do so.

Ejusdem Generis:

• This rule of interpretation is useful tool in construction of general words. It is also known as ‘rule of lord tenders on’.
• Ejusdem Generis means ‘Same kind, Species, class or nature’.
• This rule suggests that general words following specific words should be construed with reference to the previous words and its meaning should be narrowed down.
• However, the specific words must form a distinct genus or category. It is not a universal rule of law, but is only permissible inference in the absence of any indication to the contrary.
• General words, such as ‘etc.’, ‘and the like’ following specific words are limited by such specific words.

Example: AG vs. Brown (1920)
Where ‘arms, ammunitions, or gunpowder or any other goods’
Here, other goods will include any goods similar to arms, ammunitions, or gunpowder.

Example: Royal Hatcheries Pvt. Ltd vs. State of Andhra Pradesh (1993)
Where statute uses word such as oxen, bulls, cows, buffaloes, goats, sheep and horses and then ends with the word ‘etc.’. Here general word ‘etc.’ will not include wild animal or cock or hen.

Example :
Where ‘cars, motor bikes, motor powered vehicles’ are mentioned, the word ‘vehicles’ would be interpreted in a limited sense (therefore vehicles cannot be interpreted as including airplanes).

Example: Devendra Surti vs. State of Gujarat
Under section 2(4) of the Bombay Shops and Establishments Act, 1948 the term commercial establishment means ‘an establishments which carries any trade, business or profession’. Here the word profession is associated to business or trade and hence a private doctor’s clinic cannot be included in the above definitions as under the rule of Ejusdem Generis.

Example: Powell vs. Kempton Park Racecourse (1899)
Does a ‘house, office, room or other place’ include an outdoor betting ring? Since the specific places are all indoors, and outdoor betting ring is not included.

Example: Wood vs. Commissioner of Police of the Metropolis (1986)
Is a piece of (accidentaly broken) glass covered by ‘any gun, pistol, hangar, cutlass, bludgeon’ or other offensive weapon?
The list contains items made or adapted for the purposes of causing harm, so a piece of accidentally broken glass is not included.

The rule applies when:

• The statute contains list of specific words.
• The subjects of list constitute a class or category.
• That class or category is not exhausted by the list.
• The general term follows the list.
• There is no indication of a different legislative intent.

Expressiouniusest exclusion alterius:

• It means express mention of one thing exclude others.
• Items not on the list are assumed not to be covered by the statute. However, sometimes list in a statute is illustrative, not exclusionary. This is usually indicated by a word such
  as ‘includes’ or ‘such as’.

Example: Gilmore vs. Baker (1962)
If statute refers to lands, house and coal-mines’, other mines except coal mines are excluded and ‘other mines’ cannot be made to fall within the general term lands’.

Generalia specialibus non derogant :
It means special provisions prevail over general provisions.

• This rule is applicable in respect of following two situations:
  • Special provision in one Act is against general provision in another Act.
  • Special provision is against general provision within the same Act.
  • In this circumstance a provision in special Act will prevail over provision of any General Act. And any special provision prevails over general provision of same Act.

Noscitur a sociis:

• The rule states that a word is known by its associate words. Words in statute derive meaning from the words surrounding them.
• The meaning of a word is to be judged by the company it keeps. It is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them.
• Thus, if two or more words of analogous (Similar) meaning are coupled together, they should be understood in cognate sense i.e., one derives colour from the other and the general word is restricted to the less general word. This is called ‘Noscitur a sociis’ i.e. meaning of a word should be gathered from its context.
• When some articles are grouped together, each word in the entry draws colour from the other words therein.

Example:
The word ‘plant’ used in ‘plant and machinery’ and same word used in ‘plant and flower’ has obviously different meaning.

Example:
Tractor and Farm Equipment Ltd. vs. CC
If the word ‘drawing’ is used along with the words ‘Work of Art’ in a statute, it indicates only drawings by artists; and the word ‘drawing’ will not include ‘Engineering and Technical Drawings’ for purpose of that statute.

Example:
Commissioner vs. Savoy Hotel
Purchase Tax Act – manufacturing beverages including fruit juices and salted waters and syrups. It was held that description ‘fruit juice’ used in the provision is constructed to mean that orange juice unsweated and freshly pressed was not within preview of section.

Example:
Pengelly vs. Bell Punch Co. Ltd (1964)
The Court has held that ‘floors’ in a statute requiring ‘floors, steps, stairs, passages aging ways’ to be clear did not cover part of floor used for storage. The other words in the list all related to passageways.

Interpretation of Certain Words

‘Subject to’ and ‘Notwithstanding’:
The term ‘subject to’ means the provision does not have priority over other provision, while ‘notwithstanding’ means the provision has over-riding effect.

Example: Section 196(5) of Companies Act, 2013
Subject to the provisions of this Act, where an appointment of M.D., W.T.D. or manager is not approved by the company at a general meeting, any act done by him before such approval shall be deemed to be invalid.

In case of any inconsistency or conflict between non obstante clause and any other provisions, non-obstante clause will prevail. Following table explain the effect in detail:

Example:

Clause	Effect	Example
Notwithstanding anything contained in specific section of the same Act.	Clause override specific section of same Act.	Section 54A-Companies Act, 2013
Notwithstanding anything contained in this Act.	Clause override all provisions of Act.	Section 110-Companies Act, 2013.

Reading ‘and’ as ‘or’ and Vice versa:

• If two provisos are separated by use of conjunction ‘and’, they have to be read conjointly.
• Requirement of both the provisos should be satisfied.
• Word ‘or’ is used as disjunctive. If word ‘or’ is used to divide or separate the provisions.
• If two clauses are separated by use of ‘or’, comply with any of them will be sufficient.
• In ordinary usage, ‘and’ is conjunctive and ‘or’ is disjunctive. Normally, ‘and’ has cumulative effect, requiring fulfilment of all conditions, while ‘or’ is antithesis of ‘and’. However, ‘and’ can be read disjunctively to mean ‘or’ to carry out the intention of legislature.

Reading May, Shall, Must and Vice Versa:

• Normally, ‘may’ is permissive while ‘must’ is imperative.
• ‘May’ indicates discretion and ‘shall’ an obligation.
• The word ‘shall’ does not by itself make provisions of the Act mandatory. It has to be constructed with reference to the context in which it is used.
• The word ‘may’ in a statutory provision would not by itself show the provision is directory in nature. In order to interpret the legal meaning of word ‘may’ various factors have to be considered e.g. object and scheme of the Act, context or background of the Act against which words are used, purpose and advantage of the Act sought to be achieved by use of this word and the like.
• ‘May’ is understood as ‘shall’ or ‘must’, where it provides positive benefit to general class of subjects in an utility Act or where court advances remedy and suppress mischief.
• When statute uses the word ‘shall’ prima facie it is mandatory but it is sometimes not to interpret if the context or intention otherwise demands. Thus, under certain circumstances the expression ‘shall’ is construed as ‘may’.

Example: Section 6A(2) of Essential Commodities Act
If seized commodity is subject to speedy and natural decay, collector ‘may’ dispose of goods to ensure that seized goods do not deteriorate and lost till adjudication process is complete.
It was held that ‘may’ has to be read as ‘shall’, and the Collector must dispose of the seized goods if they are subject to speedy and natural decay.

Interpretation of Definitions

Purpose of Definitions

• Definition serve two purposes :
  • It provide key to proper interpretation of the Act.
  • Shorten the language of enactment.

Types of Definitions:

• Definitions are ‘inclusive’ or ‘exhaustive’.
• If the definition uses the word ‘means’ it means that it is restrictive and exhaustive.
• However, if the word ‘includes’ is used it means that the definition is not exhaustive but it is inclusive. Here there is possibility to expand the meaning.
• Where the word is defined as ‘means and includes’ the definition would be exhaustive.

Example:

Definition of Director under Sec 2(34) Companies Act, 2013	Director means a director appointed to the board of company.	It suggests exhaustive definition.
First Definition of family	Family means wife, sons and unmarried daughters	It suggests exhaustive definition. Other relatives cannot be included.
Second Definition of family	Family includes father and mother.	It suggests inclusive definition. Other relative may be included.

Internal Aid

Internal aids means those contained in the Act itself. It includes:

• Title of Act
• Preamble and object of Act
• Heading and title of chapter
• Marginal notes
• Statement of objects
• Explanation
• Proviso
• Illustration
• Schedules to the Act

Title

• Title of the act is part of the Act. Long title must be distinguished with short title. Long title is an aid to construction while short title is used for the purpose of reference.
• The short title of the Act is purely for reference only. The short title is merely for convenience. E.g. the Indian Penal Code, 1860.
• Long title of the Act follows by the preamble.
• Title may be referred for the purpose of ascertaining its general scope however it could not override the clear provisions of the statute.
• In Kerala Education Bill, the Supreme Court held that the policy and purpose may be deduced from the long title and the preamble.

Example:

• Sick Industrial Companies (Special Provisions) Act, 1985. This title clearly indicates that it contains only special provisions for sick companies.

Example:

• Trade Union Act, 1906 – Title indicates ‘an act to provide for the regulation of trade union and trade dispute’.

Preamble and Object of Act:

• The preamble of the Act can be used to understand the intention of Legislature, if meaning of the word in the Act is not clear.
• Preamble is key to open mind of the maker of act. It is part of act and can be read with other portions of the statute to find out the meaning of the words.
• In older statute, importance of preamble is not considered as significant.
• Kashi Prasad vs. State, the Court held that even though the preamble cannot be used to defeat the enacting clauses of a statute, it can be treated as a key for the interpretation of the statute.

Heading and Title of Chapter:

• Heading and title of chapter in the Act can be used by Court to resolve any doubt regarding any ambiguous words.
• According to the present view of Supreme Court – heading prefix to sections cannot control the plain words of the provisions.
• If there is any doubt in the interpretation of words in a section, the headings help to resolve the doubt.

Example:
Heading – Sections 378-441 of IPC is ‘Offences against property’.
Headings are prefixed to sections. They are treated as preambles. If there is ambiguity in the words of a statute, headings can be referred.

In Durga Thathera vs. Narain Thathera, the Court held that the headings are like a preamble which helps as a key to the mind of the legislature but do not control the substantive section of the enactment.

Marginal Notes:

• Marginal notes means titles to the section.
• In the original Acts, these are printed in margin and hence are called ‘marginal notes’. It summaries the effect of the sections.
• Marginal notes or captions are part and parcel of legislative exercise. It is used as an aid to construction.
• Marginal note can be used to understand the legislative intent, but cannot limit or restrict the clear word used in a section.

Example:
Marginal notes used in the Constitution have been held to be part of the constitution.

Statement of Objects:

• Statement of Objects and Reasons accompanying the bill, when introduced in Parliament, can be used for limited purpose of understanding the background and intent of legislature when there is confusion.
• Statement of objects cannot be used for interpreting a statute. It explains the reasons which induced the Legislature to enact a statute.

Explanation:

• Sometimes, an explanation is added to a section to make the provision clear. Explanation is part and parcel of the act.
• An explanation may be added to include something within section or to exclude something from it.

Example :
Section 4A(1) of Central Excise Act – Excise duty can be levied on the basis of ‘Maximum Retail Price’ printed on carton. An Explanation to this section states – ‘Where on any excisable goods more than one retail sale price is declared, the maximum of such retail sale price shall be considered for purpose of this section’.

• The object of explanation is to explain the meaning of the Act or to clarify certain words in the main enactment and to make it consistent with the main object. Therefore, explanation should be read along with other provisions of act.
• Explanation in act avoids the mischief and advance the object. However, an explanation cannot take away a statutory right given under the Act.

Provison
The function of a proviso is to except something out of the enactment.

Example:
‘All packages for retail sale should be marked with month and year when the commodity was packed, provided that such marking is not necessary on milk bottle, soft drink, bread or ice cream’. This means that if the proviso was not there, marking of month and year of packing would have been compulsory on milk bottle, soft drink, bread or ice-cream.

• Function of a proviso is to except something out of the enactment or to qualify something enacted.
• Proviso removes special cases from the general enactment and provides them separately.
• Proviso to particular provision of a statute is only applicable pertaining to particular provision which provide for it.
• If the portion of section is not clear a proviso appended to it may give an indication as to its true meaning.

Illustrations

• Illustration appended to section is part of statute.
• Even though illustrations given do not form a part of the sections but those are relevant for constructing the text of sections.
• Illustration cannot be used to modify the language of section.
  It can’t override or curtain the meaning of the section.
• Illustration is helpful in working and application of act.

Example:
Section 29 of Contract Act, 1872 states that agreement void for uncertainty. Agreements, the meaning of which is not certain, or capable of being made certain, are void. The illustration is as follows:
(a) A agrees to sell B ‘a hundred tons of oil’. There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.
(b) A, who is a dealer in coconut-oil only, agrees to sell to B ‘one hundred tons of oil’. The nature of A’s trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of coconut-oil.

Schedules to the Act

• The schedules form part of an Act. Therefore it must be read together with the act for all purposes of construction.
• However, schedule cannot control or prevail over the express provisions of the act. If there is any conflict between the act and schedules, act shall prevail.
• Schedules are provided for drafting convenience.

External Aid

• Courts may also consider external factors like history behind the Act, reports of the committees on which the Act was based, reference to other statutes, dictionaries etc.
• These are called external aids for interpretation.
• Most of these external aids can be used with limited purpose of finding out intention of the legislature and that too only if the words in the Act are not clear.

Speech of Mover of Bill:

• Speech made by mover of the bill at the time of introduction of bill at parliament is relevant as it explains reasons for introduction of bill to ascertain the object and purpose of legislation

Report of Expert Committees:

• Expert Committee on whose work or report or recommendation act is based can be looked to understand background for which purpose act is passed.

Earlier Act:

• Often old Act is repealed and it is replaced by new Act. In such cases, later Act can be used to interpret earlier Act, only when both are on same subject and part of earlier Act is ambiguous and capable of different meaning

Use of Dictionaries:

• If word is not defined under the act itself, it is permissible to find out the general sense in which that word is understood in common parlance.
• If the word carries more than one meaning, regard shall be given to the meaning with reference to context.
• For technical terms, reference may be made to technical dictionaries.
• Judicial decisions explaining words will have more weight than the meaning furnished by dictionaries.

Use of Foreign Decisions

• Foreign decisions of countries following the same system of jurisprudence as that of India and given on laws similar to Indian law can be used for construing Indian statute.
• Reference to English decision was common practice in the pre-constitutional period because of historical reasons. In the same way, an Indian Act is based on the model of an English Act; decisions interpreting the provisions of the English Acts are referred to as helpful guide for interpreting corresponding provisions of the Indian Act.
• Where guidance can be obtained from Indian decisions, reference to foreign decisions may become unnecessary.
• In public international law, in cases of international treaties, it is obviously desirable that decision in different jurisdictions should so far possible, be kept in line with each other, and therefore in such cases foreign decision are used for guiding the courts.

Usage:

• Where meaning of the language in a statute is doubtful, usage – i.e. how that language has been interpreted and acted upon over long period – may determine its true meaning.
• Usage is also considered in construing an act.

Interpretation of Deeds and Documents

What is Deed?

• Deed is defined under section 21 (a) of Indian Evidence Act, as an instrument in writing purporting to effect some legal disposition.

What is Document?

• While document is defined under section 3 (18) of the General Clauses Act, 1897 as document include any matter written, expressed or described upon any substance by means of letter, figures or marks, or by more than one of that means which is intended to be used, or which may be used, for the purpose of recording the matter.

Interpretation of Deeds etc.

• Reasonable construction suggests that the words of deeds must be construed so as to lead to a sensible meaning.
• Generally the words or phrases of a statute are to be given their ordinary meaning.
• In case there is a conflict between two or more clauses in the deed, an effort should be made to resolve the conflict by interpreting the clauses so that both the clauses are given effect to.
• An effort should be made to read both the parts of the deed harmoniously, if possible, if that is not possible, then the earlier part will prevail over the latter one which should be disregarded.
• It is rule of construction that the same word cannot have two different meanings in the same document, unless the context compels the adoption of such a course.

Presumption About Interpretation of Statute

Generally following assumptions are made while interpretation of statute to avoid ambiguity:

• Words in statute are used precisely and not loosely.
• Mens rea (Le. guilty mind) is necessary for offence of committing crime.
• Rights once given are not taken away without express words or necessary compensation.
• Statute is consistent with principles of international laws.
• Statute is enacted prospectively unless expressly stated to be applicable with retrospective effect.
• Principle of natural justice is to be followed.
• Legislature confers power necessary to carry out duties imposed by it.
• Statute is constitutional valid.

Past Examination Questions

Question 1
Explain the rule of beneficial construction while interpreting the statutes, quoting an example. (CA May 1992, 2000, June 2009)
Answer:
to know about beneficial construction or Heydon rule.

Question 2.
Explain the internal aids in interpretation of statutes. (CA November 1992)
Answer:
to know about internal aids to interpretation of statute.

Question 3.
‘The preamble of an Act discloses the primary intention of the legislature, but it can’t override the provisions of the act’. Explain (CA November 1993)
Or
In what way can the following be of help in interpreting a statute: (a) the ‘preamble’ to an act, (b) the ‘marginal notes’ appended to a section of the act? (CA May 1998)
Or
Explain the usefulness of ‘heading and title of a chapter in an act and marginal notes of section’ as internal aids in interpreting the provisions of a statute. (CA November 2003)
Or
How far title, preamble and marginal notes are in an enactment helpful in interpretating any of the parts of an enactment? (CA May 2001)
Answer:
to know usefulness of heading, title and marginal notes in interpretation of statute.

Question 4.
The word ‘may’ does not mean ‘shall’, yet the word ‘may’ under certain circumstances mean ‘shall’. Discuss the statement in the context of the interpretation of statutes and point out the importance of distinction between ‘mandatory’ and ‘directory’ provisions. (CA November 1994, June 2009)
Answer:
interpretation of word ‘may’ and ‘shall’

Question 5.
Explain the rule of ‘Ejusdem Generis’ with regard to interpretation of statutes. (CA November 1995, 1999, 2002, 2009, May, 2005)
Or
Explain clearly the rule of ‘ejusdem generis’ as applicable in the inter-pretation of statutes. Do the courts have discretionary power to apply the rules in a given situation? (CA November 1997)
Answer:
to know about rule of ‘‘Ejusdem Generis’ and to know when can court apply rule in specific situation.

Question 6.
In what ways is ‘usage’ helpful in the interpretation of statute? (CA May 1996)
Answer:
to know about usage and its utility in interpretation of statute.

Question 7.
In what ways are definitional sections helpful in the interpretation of a statute? (CA May 1996)
Or
How will you interpret the definitions in a statute if the following words are used: (a) and includes; (b) means denotes? (CA May 1995)
Or
While drafting the text of different sections in an act, it is normally noticed that the section is supported by certain illustrations, provisos, explanation and schedules. Explain the relevance of supporting the text of the section by the above. (CA May 1997)
Answer:
to understand how definitional sectionis helpful in interpretation of statute.

Question 8.
In the Companies Act, 2013, there are several provisions which start with the words ‘without prejudice’ and ‘not with standing’. Explain (in not more than 10 lines each) the nature and significance thereof, applying the principles of statutory interpretation. (CA November 1998)
Answer:
to interpretation of certain words – first part – notwithstanding and without prejudice

Question 9.
How would you reconcile in case one part of the executed lease deed is in conflict with the other part? (CA May 1999)
Answer:
to interpretation of deeds and documents

Question 10.
Explain the rule of ‘reasonable construction’ while interpreting the statute. (CA May 1999)
Or
Explain the Rule of ‘Reasonable construction under the interpretation of Statute, Deeds etc.’ (CA November 2010)
Answer:
to know about reasonable construction rule.

Question 11.
Explain the significance of definition clause in a statute. The definition of a word may be either restrictive or extensive. Elaborate this with particular reference to the following definition of ‘book and paper’ as contained in the Companies Act, 2013: ‘Book and paper’ include accounts, deeds, vouchers, writings, and documents. (CA May 2002 Modified)
Answer:
Section 2(12) of Companies Act, 2013 – ‘Books and paper’ and ‘book or paper’ include accounts, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form. From the above definition, following points can be concluded and explained:

• It is inclusive and wide definition.
• Apart from deeds, vouchers, writing and documents, other kind of records and papers can be included. It includes registers, minute book and other books.

Question 12.
Section 102(1) of the Companies Act, 2013 stipulates that in the case of an annual general meeting to transact business of special nature, a statement setting out all material facts concerning such matter shall be annexed to the notice of the meeting. You are required to advise as to the scope of the words ‘material facts’ briefly outlining the rules of interpretation. (CA November 2002 Modified)
Answer:
Section 102(1) of Companies Act, 2013:
‘Where any items of business to be transacted at the meeting are deemed to be special as aforesaid, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each such item of business, including in particular, the nature of the concern or interest, if any, therein, of every director, KMP and manager, if any’.

Section 102(1) of Companies Act, 2013 incorporate the provision regarding disclosing all material facts regarding the special business propose to be passed at the ensuing annual general meeting to the members of company. From the above provision, it can be understood that:

• Material facts means all important facts which is affecting and likely to affect the decision of members of company for taking rational decision for the proposal to be placed before meeting.
• Material facts mean fact relating to propose business to be passed at meeting. It includes the disclosure of concern and interest of the directors and management in the proposed business.
• Material facts should enable shareholders to understand the nature of business proposed to be passed at meeting.
• It should disclose direct and indirect interest or concern.
• It should disclose financial as well as non-financial interest or concern.
• Provision is mandatory in nature. Non-compliance or omission of proper disclosure leads to resolution as null and void.

Question 13.
Explain the meaning of the word ‘statute’ and discuss the need for interpretation of statutes. (CA May 2002)
Answer:
to understand the meaning of word ‘statute’. to know about need for interpretation of statute.

Question 14.
Explain the importance of ‘Preamble’ and ‘Proviso’ being internal aids to interpretation. (CA November 2011)
Or
Many a time a proviso is added to a section of the enactment. Explain the function of such a proviso while carrying out the interpretation. (CA November 2009)
Or
What is effect of a proviso ? Does it qualify main provisions of an enactment ? (CA May 2007, November 2002)
Or
What do you understand by the term ‘preamble’ and how does it held in interpretation of statute? (CA May 2004)
Or
Explain effects of a proviso of a section in a statute (CA May 2004)
Or
What are the rules to be followed in the interpretation of a proviso in a statute? (CA May 1994)
Answer:
to understand importance of ‘preamble’ and ‘proviso’ as internal aids to interpretation.

Question 15.
‘Associate words should be understood in common sense manner’. Explain the statement in the light of rules of interpretation of statutes. (CA May 2011)
Answer:
Noscitur a sociis to know that associated words should be understood in common sense manner.

Question 16.
Briefly explain the meaning and application of the rule of ‘Harmonious Construction’ in the interpretation of statutes. (CA November 2012)
Answer:
to know meaning and application of the rule of harmonious construction.