Final Project

Subject: Interpretation of Statute Project Topic: Proviso and Explanation: Means to Statutory Interpretation

Submitted to: Mr. A. K. Tiwari, Teaching Associate (Law). Department of Legal Studies, Dr. RMLNLU.

Submitted by: Krishna Pratap Singh, Roll No. 071, Sec. (A), 5th Semester, B.A., LL.B. (Hons), Dr. RMLNLU.

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Table of Contents
1. Introduction ..3 2. Proviso..4 3. Explanation ..7 4. Case Study 9 Bibliography... 11

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1. Introduction
By interpretation or construction is meant the process by which the courts seek to ascertain the meaning of the legislative through the medium of authoritative forms in which it is expressed. Salmond

The courts have to interpret the laws and not enact them. The primary function of the courts while interpreting or construing a statute is to see the intention of the legislature. Judiciary is duty bound to act upon the true intention of the legislature. There are two aspects of the intention of the legislature viz. as per the first aspect it carries the concept of meaning i.e. what the words mean and by second aspect it conveys the concept of the object, purpose or the reason and spirit pervading the statute. Therefore the process of construction combines both literal and functional approaches. The intention of the legislature constitutes the law of the statute and the predominant task in interpreting a statute is to ascertain the intention of the legislature. There are three popular methods for the interpretation of the statute viz. (a) Literal Rule; (b) Mischief Rule and (c) Golden Rule The Literal Rule applies when there is no ambiguity. In case of ambiguity or absurdity the Mischief Rule or the Golden Rule might be applied. The Court has to select the most relevant method applicable to the particular legislation to aid the understanding of the meaning of the particular provision. Where the court is required to interpret the statute, it has to rely on different aids for interpretation/construction of both internal and external aids. Internal aids to construction are those, which are within the statute, such as marginal notes, preamble proviso, explanation etc. The external aids to construction are those aids that are external to the statute, such as

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history, reports of select committees etc. This project will mainly be dealing with Proviso and Explanation.

2. Proviso
A.] Nature and Scope:
Odgers in Construction of Deeds and Statutes (First Edn.) while referring to the scope of a proviso mentioned the following ingredients1: Firstly, these are clauses of exception or qualification in an Act, excepting something out of, or qualifying something in, the enactment which, but for the proviso, would be within it. Secondly, though framed as a proviso, such a clause may exceptionally have the effect of a substantive enactment. Thirdly, unless of necessity, a proviso is never construed as enlarging the scope of the enacting words. It must be construed with reference to the preceding parts of the clause to which it is appended and as subordinate to the main clauses of the Act. The normal function of a proviso is to accept something out of the enactment or to qualify something enacted therein which but for the proviso could be within the purview of the enactment. Proviso does not travel beyond the provision to which it is a proviso.2 When one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject matter of the proviso. 3 The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment and its effect is confined to that case.4

B.] Not construed as excluding or adding something by an implication

Odgers Sir Charles Edwin, The Construction Of Deeds And Statutes, 1 edition (1939), Sweet & Maxwell Limited, London. (At page no. 212) 2 Haryana State Cooperative Land Development Bank Ltd. v Haryana State Cooperative Land Development Banks Employees Union and Anr. (2004)1 SCC 574. 3 Justice Lush in Mullins v Treasure of Survey, (1880) 5 QBD 170. 4 Lord Macmillan in Madras & Southern Maharatta Rly. Co, Ltd. v Bezwada Municipality, AIR 1944 PC 71

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Lord Macmillan, in Madras & Southern Maharatta Rly. Co. Ltd. v Bezwala Municipality 5 said, Where the language of the main enactment is clear and unambiguous, a proviso can have no repercussion on the interpretation of the main enactment so as to exclude form it by implication what clearly falls within its express terms.

C.] Use as guide to construction of enactment

Lord Herschell in West Derby Union v Metropolitan Life Assurance Society 6, said Of course a proviso may be used to guide you in the selection of one or other of two possible constructions of the words to be found in the enactment, and show when there is doubt about its scope, when it may reasonably admit doubt as to having this scope of that, which is the proper view to take of it. Justice Mudholkar in Hindustan Ideal Insurance Co. Ltd. v Life Insurance Corporation of India7, said There is no doubt that where the main provision is clear its effect cannot be cut down by the proviso. But where it is not clear, the proviso, which cannot be presumed to be a surplusage, can properly be looked into to ascertain the meaning and scope of the main provision.

D.] At times added to allay fears

The general rule in construing an enactment containing a proviso is to construe them together without making either of them redundant or otiose. Even if the enacting part is clear effort is to be made to give some meaning to the proviso and to justify its necessity. But a clause or a section worded as a proviso, may not be a true proviso and may have been replaced by way of abundant caution. As was pointed out by Lord Herschell: I am satisfied that many instances might be given where proviso could be found in legislation that are meaningless because they have been put in to allay fears when those fears when those fears were absolutely unfounded and no proviso at all was necessary to protect the persons at whose instance they were inserted.8 In such cases the proviso has no effect whatsoever on the enactment and cannot be relied upon on as controlling the operative words. But such a
5 6

AIR 1944 PC 71 (1897) AC 647 (HL). 7 AIR 1963 SC 1083. 8 West Derby Union v Metropolitan Life Assurance Society, 1897) AC 647 (HL).

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construction it appears, will be reached only when the operative words of the enactment are abundantly clear.

E.] At times a fresh enactment

The normal rule is that it is a very dangerous and certainly unusual to import legislation from a proviso wholesale into the body of the statute9, as to do so will be to treat it as if it were an independent enacting clause instead of being dependent on the main enactment. 10 To read a proviso as providing something by way of an addendum or as dealing with a subject not covered by the main enactment or as stating a general rule as distinguished from an exception or qualification is ordinarily foreign to the proper function of a proviso. 11 However, this is only true or a real proviso. The insertion of a proviso by the draftsman is not always strictly adhered to its legitimate use and at times a section worded as a proviso may wholly or partly be in substance a fresh enactment adding to and not merely excepting something out of or qualifying what goes before.12 Moreover, a proviso must be construed with reference to the preceding parts of the clause to which it is appended. Where the proviso is directly repugnant to a section, the proviso shall stand and be held a repeal of the section as the proviso speaks the later intention of the makers. Where the section is doubtful, a proviso may be used as a guide to its interpretation; but when it is clear, a proviso cannot imply the existence of words of which there is no trace in the section. The proviso is subordinate to the main section. A proviso does not enlarge an enactment except for compelling reasons. Sometimes an unnecessary proviso is inserted by way of abundant caution. A construction placed upon a proviso which brings it into general harmony with the terms of section should prevail. When a proviso is repugnant to the enacting part, the proviso will not prevail over the absolute terms of a later Act directed to be read as supplemental to the earlier one. A proviso may sometimes contain a substantive provision. It has been held that in R v Leeds Prison (Governor13) that the main part of an enactment cannot be so interpreted as to render its provision unnecessary and ineffective. In T. Devadasan v UOI14, the petitioner argued that he would have had a chance of promotion if the Union Public Service Commission had adhered to the reserved quota for the
9

West Derby Union v Metropolitan Life Assurance Society, 1897) AC 647 (HL). R. v Dibdin, (1910) p. 57, p. 125 (Fletcher Moulton, L.J.) 11 CIT, Mysore v Indo Mercantile Bank Ltd, AIR 1959 SC 713. 12 Motiram Ghelabhai v Jagannagar (1985) 2 SCC 279. 13 (1964) 2 QB 625. 14 AIR 1964 SC 179.
10

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Scheduled Caste and Scheduled Tribe candidates. Instead, the Commission adopted the carry forward rule under which such reserved quota not filled in one year were carried to the next year thereby swelling the reserve quota to a stupendous sixty five percent in the next year, and this violated Article 16(1) of the Constitution under which equality of opportunity for all citizens in matters relating to employment or appointment to any officer under the State is guaranteed. The respondent argued that in view of Article 16 (4) of the Constitution which says: Nothing in this Article shall prevent the State from making any provisions for the reservation of appointments or posts in favour of any backward class of citizens which, in the opinion of the State, if not adequately represented in the services of the State, the carry forward rule was legally valid. The Supreme Court held, by a majority, that the posture of the Union of India was untenable because unlimited reservation of appointments under Article 16 (4) would destroy the spirit of Article 16 (1). The court further observed that clause (4) of this Article was a sort of a proviso to the main enactment under clause (1) of the Article and could not be interpreted as to destroy the main provision.

F. Object15: A proviso may serve four different purposes:

(i) qualifying or excepting certain provisions from the main enactment; (ii) it may entirely change the very concept of the intendment of the enactment by insisting on certain mandatory conditions to be fulfilled in order to make the enactment workable; (iii) and (iv)it may be used merely to act as an optional addenda to the enactment with the sole object of explaining the real intendment of the statutory provision. it may be so embedded in the Act itself as to become an integral part of the enactment and thus acquire the tenor and colour of the substantive enactment itself;

3. Explanation
15

S. Sundaram Pillai and Ors. v. R. Pattabiraman and Ors. AIR 1985 SC 582.

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Explanations are inserted with the purpose of explaining the meaning of a particular provision and to remove doubts which might creep up if the explanation had not been inserted. It does not expand the meaning of the provision to which it is added but only ties to remove confusion, if any, in the understanding of the true meaning of the enactment. A large number of Indian Acts have explanation attached to various sections. For instance, Section 108 of the Indian Penal Code which defines the word abettor has five explanations attached to it. Sometimes, explanations are inserted not at the time of enactment of a statue but at a later stage. For instance, the two explanations to Section 405 of the Indian Penal Code, which defines the Criminal Breach of Trust, were inserted in 1973 and 1975 respectively. There may be a case where in spite of many clauses in a section only one explanation is attached to the section as in the case with Section 20 of the Code of Civil Procedure, 1908. In such a case it must be seen as to which clause the explanation is connected with.16 An Explanation is at times appended to a section to explain the meaning of words contained in the section. It becomes a part and parcel of the enactment. 17 The meaning to be given to an Explanation must upon it terms, and no theory of its purpose can be entertained unless it is to be referred from the language used18. But the language of the Explanation shows a purpose and a construction consistent with that purpose can be reasonably placed upon it, that construction will be preferred as against any other construction which does not fit in with the description or the avowed purpose. In Bengal Immunity Co.s Case19 the Explanation appended to Article 286 (1) was restricted to its avowed purpose of explaining an outside sale for purpose of clause (1) and was construed as not conferring any taxing power or as restricting the ban imposed by clause (2) of the same Article. In Hardeo Motor Transport v State of M. P. 20, the Supreme Court observed that the role of an explanation in a statute is well-known. By inserting an explanation 7 in entry 4 (g) in Schedule 1 of Madhya Pradesh Motoryan Karadhan Adhiniyam, 2004 the main provisions of the Act cannot be defeated. By reason of an explanation, even otherwise, the scope and effect of a provision cannot be enlarged.

16 17

Patel Roadways Limited v Prasad Trading Company, AIR 1992 SC 1514. Bengal Immunity Co. Ltd. v State of Bihar AIR 1955 SC 661. 18 Krishna Ayyangar v Nattaperumal Pillai ILR 43 Mad 550 (PC) 19 AIR 1955 SC 661. 20 AIR 2007 SC 839.

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4. Case Study
Appellants: Haryana State Cooperative Land Development Bank Ltd. Vs. Respondent: Haryana State Cooperative Land Development Banks Employees Union and Anr. [Decided on: 18/12/2003 by Honble Supreme Court] A.] Facts of the case
The Apex Bank i.e. The Haryana State Cooperative Land Development Bank Limited is governed by the Haryana Cooperative Society Act, 1984 (in short the 'Act'). The appellant transacts its business mainly through Primary Banks i.e. Primary Agricultural Cooperative Banks which are its members. The members of the Apex Bank belonging to the area of operation of the particular Primary Bank automatically become members of the concerned Primary Bank from the date of registration. Staffs of the Primary Banks except class IV employees are drawn from the Apex Bank out of the cadre maintained by it in terms of Clause 70 of the model by-laws applicable to the Primary Banks. The respondent No. 1union raised a demand stating that it is entitled to bonus at the rate applicable to employees of the Apex Bank.

B.] Issue before the Court

The pivotal issue involved in this appeal relates to the question as to whether the employees working with Primary Banks are entitled to bonus at the same rate at which it was paid to employees working in the Apex Bank (also described as 'State Bank').

C.] Applicable Provisions of Law

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Sections 3, 10, 34 and 34A of the Act are as under: "3. Establishment to include departments undertakings and branches:- Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings of branches shall be treated as parts of the same establishment for the purpose of computation of bonus under this Act. Provided that where for any accounting year a separate balance sheet and profit and loss account are prepared and maintained in respondent of any such department or undertaking or branch then, such department or undertaking or branch shall be treated as a separate establishment for the purpose of compensation of bonus under this Act for that year, unless such department or undertaking or branch was immediately before the commencement of that account year treated as part of the establishment for the purpose of computation of Bonus. 34. Employees and employers are to be precluded from entering into agreements for grant of bonus under a different formula - Nothing contained in this Act shall be construed to preclude employees employed in any establishment or class of establishments from entering into agreement with their employer for granting them an amount of bonus under a formula which is different from that under this Act. Provided that no such agreement shall have effect unless it is entered into with the previous approval of the appropriate Government. Provided further that any such agreement whereby the employees relinquish their rights to receive the minimum bonus under Sub-section (23A) of Section 10 shall be null and void and in so far it purports to deprive them of such right; Provided also that such employees shall not be entitled to be paid bonus in excess of(a) 8.33 per cent of the salary or wage earned by them during the accounting year if the employer has no allocable surplus in the accounting year or the amount of such allocable surplus is only so much that, but for the provisions of Sub-section (2A) of Section 10, it would entitle the employees only to receive an amount of bonus which is less than the aforesaid percentage; or (b) Twenty per cent of the salary or wage earned by them during the accounting year".

D.] Decision

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The Primary Banks have independent corporate existence and were undisputedly maintaining separate Balance Sheet and Profit and Loss account. Therefore, proviso to Section 3 of the Act has full application. Unfortunately, the High Court did not take into account the effect of the proviso to Section 3, and third proviso to Section 34. The allocable surplus is an amount calculated out of the available surplus. How the available surplus is to be computed is provided under Section 5 of the Act. It is determined after deducting from the gross profit such amounts as are detailed in Section 6 of the Act. The inevitable result is that the gross profit has to be worked out and therefrom the prior charges mentioned in Clauses (a) to (d) of Section 6 are to be deducted. Gross profit is determined in terms of Section 4 of the Act. In case of non-banking companies, it is calculated in the manner prescribed in the Second Schedule while in case of banking company it is calculated in the manner specified in the First Schedule. The payment of minimum bonus is provided in Section 10 of the Act and is fixed at 8.33% of the salary or wages earned by the employee. The entitlement of higher bonus comes in case the allocable surplus permits payment of higher bonus in terms of the applicable formula. The impugned judgment is indefensible and is set aside and the writ petition filed before the High Court shall stand dismissed. The appeal succeeds, but in the circumstances without any order as to costs.

Bibliography
1. Justice G. P Singh, Principles of Statutory Interpretation, 6th Edition 1996, Wadhwa and Company Nagpur. 2. Sir Charles E. Odgers, The Construction of Deeds And Statutes, 1939, Sweet & Maxwell (London).

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