Rule of Strict interpretation:

 Strict construction refers to a particular legal philosophy of judicial interpretation that limits
or restricts judicial interpretation.
 Strict Construction requires the court to interpreted the statute by letter and no further-
and no regard should be had to the spirit beyond the statute.
 strict interpretation states that a statute must be interpreted literally, i.e the words in which
it is expressed, and should not go beyond the letter of the law.
 In the case of strict interpretation, Courts may prefer the literal rule.
 Taxing and penal statutes are strictly construed.

Strict construction of taxing statutes:

 A tax is imposed for raising general revenue of the State for public purposes.
 Those statutes which are dealing with tax are called taxing statute or fiscal statute.
 Article 265 of the Constitution which states that “No tax can be levied or collected unless it
has the authority of law”.
 It is through this article that the legislature acquires the power to impose tax and prescribe
various conditions under which such tax is applicable.
 How to interpret taxing statutes?
 Justice Rowlatt: In a taxing Act one has to look merely at what is clearly said. There is no
room for any intendment. There is no equity about a tax. There is no presumption as to
tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the
language used.
 Taxing statutes are to be strictly construed- court cannot give meaning to a work which is
not clear by making a presumption or suppositions as to the spirit of the law.
 The words used should be given meaning which is understood by general public and one
which is popular.
 Why?
 Taxes places a monetary burden on the taxpayer imposed under the authority of the
law- unless imposition of tax is clearly backed by law, no tax can be imposed.
 In Harshad Mehta v. custodian (1998) SC held that there are 3 stages of imposing taxes:
 Declaration of liability in respect of persons or property.
 Assessment of tax that quantifies the sum which the person liable has to pay.
 Methods of recovery if the person taxed does not voluntarily pay.
 SC in several cases has settled the following principles in regards to tax:
 in interpreting a taxing statute, equitable considerations are entirely out of place.
Taxing statutes cannot be interpreted on any presumption or assumption. A taxing
statute has to be interpreted in the light of what is clearly expressed. It cannot
import provisions in the statute so as to supply any deficiency. It cannot imply
anything which is not expressed.
 before taxing any person, it must be shown that he falls within the ambit of the
charging section by clear words used in the section, and
 if the words are ambiguous and open to two interpretations, the benefit of
interpretation is to be given to the subject.
 Well settled rule that the construction has to be in favour of the tax payer- If there is any
scope of doubt, benefit of such doubt will go to the citizen, i.e. stockbrokers and not to the
authority (SEBI v Alliance Finstock Ltd, (2015)
  The benefit of this interpretation is applicable only when the words used are
ambiguous and open to two interpretations.
 There is nothing unjust if a tax payer escapes by not being brought under the letter of the
law on account of the legislature’s failure to express itself clearly.
 Lord Simonds: “the subject is not to be taxed unless the words of the taxing statute
unambiguously impose the tax on him”
 The Supreme Court has also stated that before taxing any person it must be shown that he
falls within the ambit of the charging section by clear words used in the section- The court
shall not supply casus omissus.
 Even if it results in absurdity, courts cannot extend the scope of law to give meaning to
words which are unclear or uncertain.
 Justice Bhagwati:
 In construing fiscal statutes and in determining the liability of a subject to tax, one
must have regard to the strict letter of the law. If the revenue department satisfies
the court that the case falls strictly within the provisions of the law, the subject can
be taxed. If, on the other hand, the case is not covered within the four corners of the
provisions of the taxing statutes, no tax can be imposed by an inference or by
analogy or by trying to probe into the intentions of the legislature and by considering
what was the substance of the matter.
 Illustrations:
 Tata sky Ltd. V. State of MP (2013)
ᴏ The state tried to tax DTH under the entertainment tax.
ᴏ Appellant argued that DTH broadcasting is one of the services under the
Finance Act, 1994 which is chargeable only to service tax by the central
government.
ᴏ The appellant got the licence from GoI after paying the fees and further an
annual fee of 10% from gross revenue- licence applicable to the whole of
India.
ᴏ In 2006, appellant launched its operations all over India, including MP.
ᴏ In 2008, MP issued a notification fixing 20% entertainment duty in respect
of any entertainment other than cinema hall, video cassette recorder and
cable service under M.P Entertainment Duty and Advertisements Tax Act,
1936
ᴏ Sent a notice to appellant stating that they are providing entertainment in
the state and directing them to pay 20% of the payment received through
registered users.
ᴏ Appellant replied that under the provision of the 1936 Act, no specific entry
with respect to DTH and in the absence of such, the Act is not applicable to
DTH- notice was illegal and without jurisdiction.
ᴏ The question before the court is whether under the 1936 entertainment
Act, MP can levy tax on DTH? Whether DTH falls within the ambit of
entertainment chargeable to tax?
□ Sec. 2(a) admission to an entertainment- admission to an
entertainment includes admission to any place in which
entertainment is held.
 □ Sec. 2(b) defines entertainment as- entertainment includes any
exhibition, performance, amusement, game or sport to which a
person is admitted to payment
ᴏ Court held after examining the Act that 1936 is applicable only to place-
related entertainment.
ᴏ DTH is not specifically covered- cannot widen tax net.
ᴏ Further, tax collection methods were also incompatible with DTH satellite
television service which is meant for home viewers.
ᴏ On these grounds, it was held that DTH services was beyond tax purview of
statute in question
 Commissioner of Income Tax, Ahmedabad v. Karamchand Premchand Ltd, (1960)
ᴏ The assessee carried business both in British India and Baroda state.
ᴏ The assessee’s business in India showed profit whereas his business in
Baroda suffered loss.
ᴏ The assessee claimed that in computation of his income, his assessable
income in India should be reduced due to the loss suffered in business
carried outside taxable territories-under the Business Profits Tax Act, 1947
ᴏ Income tax officer rejected his claim based on the third proviso of sec. 5 of
Business Profits Tax Act, 1947
□ section 5 provided that the Act was not to apply to any income,
profits or gains of business accruing or arising within any part of
India to which the Act did not extend, unless such income, profits
or gains were received in or brought into the taxable territories
ᴏ the SC construed the section to give the benefit of construction to the
assessee and held that the language of the of the proviso did not exclude
the outside business from consideration, but only exempted income
received in the taxable territories.
 State of Uttar Pradesh v. Kores India Ltd. (1997)
 Issue was pertaining to whether carbon paper falls within the definition of
“paper”
 Petitioner argued that carbon paper is a specialised article used for copying
purposed- not paper and should be taxed under 2% (unclassified goods) and
not 6 %.
 Sales tax officer argued that carbon paper still remains a paper even after
going through certain chemical process.
 The word paper is not defined under the UP sales tax act or rules.
 Court held that therefore, it is necessary to know what paper is commonly
or generally understood.
 Held that paper is generally understood as a substance used for writing,
printing, packing, drawing or covering the walls.
 On the other hand, carbon paper is used in between two sheets of paper
inorder to reproduce on the lower sheet what is written on the upper sheet.
 Held carbon paper is not a paper- no need to interpret the word paper so
as to extend its meaning to include carbon paper.

Penal statutes:
  Penal statutes are those which provide for penalties for disobedience of the law and are
directed against the offender in relation to the State by making him liable to imprisonment,
fine, forfeiture or other penalty.
 Any statute enacting an offence or imposing a penalty is called a penal statute.
 Historically, penal statutes were to be strictly construed- These statutes are not permitted to
be construed to include offenses or people other than those expressly defined and
provided for in their wording.
 The principle that that a statute enacting an offence or imposing a penalty is to be strictly
construed is not of universal application which must necessarily be observed in every case.
 It is not an invariable rule- mischief rule or purposive construction is also permissible for
interpretation of penal statutes.
 Where any statute seeks to remedy a great social evil, it should be given fair, pragmatic and
commonsense interpretation so as to fulfil its objects.
 Strict construction and advancement of object of statute concerned are two governing
principles of construction of penal statutes.
 In construing a penal provision, there are two settled rule:
 If there is a reasonable interpretation which will avoid the penalty in any particular
case we must adopt that construction.
 If there are two reasonable constructions, we must give the more lenient one.
 In Tolaram v State to Bombay (1954) CJ Mahajan stated that:
 If two possible and reasonable constructions can be put upon a penal provision,
the Court must lean towards that construction which exempts the subject from
penalty rather than the one which imposes penalty. It is not competent to the
Court to stretch the meaning of an expression used by the Legislature in order to
carry out the intention of the Legislature.
 However, the rule of strict construction does not also prevent the court in interpreting a
statute according to its current meaning and applying the language to cover developments
in science and technology not known at the time of passing of the statute.
 If the prohibitory words in their known signification cover only some class of persons or
some well-defined activity, their import cannot be extended to cover other persons or
other activity on considerations of policy or object of the statute.
 If the literal reading of the prohibitory words produces an unintelligible or non-sensual or
socially harmful result, but the statute read as a whole gives out its meaning clearly, effect
will be given to that meaning by curing a mere defect in phraseology and even by rejecting
words as surplusage.

Illustration:

 Sanjay Dutt v State, Through CBI, Bombay (1994)

 Mumbai blast on March 1993.
 Implicated Sanjay Dutt due to possession of various arms and ammunitions-
contended that it was for self-defence.
 In this case section 5 of the Terrorist and Disruptive Activities (Prevention) Act,
1987, was construed.
 This section provided that where any person, in possession of any arms and
ammunition specified in columns 2 & 3 of the category I or category III(a) of
Schedule I to the Arms Rules, 1962 or bombs, dynamite or other explosive
substances unauthorisedly in a notified area, he shall notwithstanding anything
contained in any other law for the time being in force, be punishable with
 imprisonment for a term which shall not be less than five years but which may
extend to imprisonment for life and shall also be liable to fine.’
 Section 5 of the Act required three ingredients to be proved for an offence falling
under that section:
 (i) Possession of any of the specified arms and ammunitions etc,
 (ii) Unauthorisedly,
 (iii) In a notified area.
 The section did not in terms provide that the accused could in any way escape
punishment if the aforesaid three ingredients were established.
 SC held that possession of unauthorised arms, etc in a notified area raised a
presumption that the arms, etc were meant to be used for a terrorist or disruptive
act which was in effect the third ingredient therefore, the accused was entitled to
rebut this presumption and escape punishment under section 5 by proving that his
unauthorised possession of arms, etc was wholly unrelated to any terrorist or
disruptive activity and the same was neither used nor available in that area for any
such use and its availability in a notified area was innocent.
 In applying and interpreting a penal statute, public policy is also taken into consideration.
 In regards to strict construction of penal statutes, there are some important guidelines:
 If the prohibitory words in their known signification cover only some class of
persons or some well-defined activity, it cannot be extended to cover other persons
or other activity on considerations of policy or object of the statute.
 If the prohibitory words are reasonably capable of having a wider as also a
narrower meaning and if there is no indication in the statute or in its policy or
object that the words were used in the wider sense, they would be given the
narrower meaning.
 If the prohibitory words in their own signification bear a wider meaning which also
fits in with the object or policy of the statute, the words will receive that wider
meaning and their import will not be restricted even if in some other context they
can bear a narrower meaning.
 If the literal reading of the prohibitory words produces an unintelligible or non-
sensual or socially harmful result, but the statute read as a whole gives out its
meaning clearly, effect will be given to that meaning by curing a mere defect in
phraseology and even by rejecting words as surplusage

Illustration:

 Shanti Prasad Jain v Director of Enforcement (1962)

 SP Jain- an Indian businessman.
 Left for Europe tour- on his return, search at airport- fount documents in his bag
which showed that he has opened accounts in Germany.
 Section 4(1) of the Foreign Exchange Regulation Act, 1947 provided that:
 Except with the previous general or special permission of Reserve Bank, no
person, resident in India, shall outside India buy or borrow from, or sell or
lend to or exchange with, any person any foreign exchange’
 Section 2 (d) defines foreign exchange as:
 Foreign currency and includes all deposits, credits and balances payable in
any foreign currency and any drafts, travellers’ cheques, letters of credit and
bills of exchange expressed or drawn to Indian currency but payable in any
foreign country.
  SP Jain admitted that he did not obtain prior permission but argued that the deposits
was made by 4 German companies in settlement of claims which his two
companies had against them for delayed and defective supplies of machinery and
equipment under previous contracts.
 And the deposits in question have been made subject to conditions that the
account could only be operated after paying to those German Firms the price of
new machinery to be purchased from them by the Indian, after obtaining import
licence from the Indian Government.
 Supreme Court held that the deposit being a contingent deposit, there was no
present debt and no relationship of creditor and debtor between the Indian and the
German Bank and that the bank held the money as a sort of stake-holder and,
therefore, the transaction did not amount to lending of foreign exchange prohibited
under the Act.
 MN Nambiar v State of Kerala (1962)
 The appellant was convicted under section 5(1)(d) of Prevention of Corruption Act,
1947 on the ground that by abusing his position as a public servant he obtained an
assignment of Government land in the name of his brother-in-law without revealing
the relationship and by undervaluing the trees standing on the land.
 Section 5(1)(d) provided that:
 “a public servant is said to commit the offence of criminal misconduct in the
discharge of his duty, if he, by corrupt or illegal means or by otherwise
abusing his position as a public servant, obtains for himself or for any other
person any valuable things or pecuniary advantage”.
 It was contended that section 5(1)(d) being a penal provision must be construed
strictly- in construing, clause (d) covers only cases of direct benefit obtained by a
public servant for himself or from any other persons from a third party- does not
cover wrongful loss cause to the Government by abuse of power- hence it will not be
applicable.
 The Supreme Court negatived the contention on the ground that comprehensive
language used in the clause covered such a benefit and that the wide meaning of the
language could not be limited by construction as it well accorded with the spirit of
the statute.
 Motibhai FP & Co v Collector, Central Excise (1967):
 A wholesale purchaser of tobacco had received non-duty paid tobacco and had
mixed the same with duty-paid tobacco and then the separation of the two was not
possible.
 The question before the court was whether whole or any part of mixture was liable
to confiscation under the rule.
 Rule 40 of the Central Excise Rules makes it an offence for a wholesale purchaser of
un-manufactured tobacco to receive or to have in his custody or possession non-
duty paid tobacco, and provides that any such wholesale purchaser who receives or
has in his custody or possession any such goods, in contravention of this rule, shall,
in respect of every such offence be liable to pay the duty leviable on such goods and
to a penalty which may extend to two thousand rupees and the goods shall also be
liable to confiscation.
 It was held that the rule being a penal provision, it could not be extended to
authorise confiscation of duty paid tobacco and, therefore, the entire tobacco
mixture was not liable to confiscation. It was also held that as no one should be
 permitted to benefit by his own wrong and as the rule should be construed to
prevent its evasion, it was open to the authorities to confiscate such part of the
mixture which reasonably represented the value of the entire non-duty paid tobacco
 R v Pawlicki (1993):
 In this case, the appellants were arrested in premises where they had allegedly gone
to commit robbery.
 They had parked their car at a distance of 50 yards from the premises in which three
sawn off shot guns and other items consistent with a planned robbery were found.
 The appellants were convicted under section 18(1) for having with them fire-arms
with intent to commit robbery.
 Section 18(1) of Firearms Act, 1968, provided that “it is an offence for a person to
have with him a fire-arm with intent to commit an indictable offence”.
 The appellants contended that considering the distance at which the car was parked,
the fire-arms were not available to the appellants immediately when they were
arrested and it would not be said that they had with them the fire-arms lying in the
car.
 But the Court of Appeal rejected their contention by applying a purposive approach
and held that the emphasis must not be so much on exact distance between the
criminals and their guns but rather on the accessibility of those guns judged in a
common-sense way and it was sufficient that the guns were readily accessible to
them at a time when they were about to commit robbery.

Beneficent/benevolent construction:

 Beneficial and welfare statutes or remedial statutes.

 In beneficent construction, if the object of the statute is to benefit a particular class of
persons- but the provisions are ambiguous capable to two meaning, the interpretation
which would preserve the benefit should be adopted.
 Beneficent construction means an interpretation to promote public good and prevent
misuse of power.
 An interpretation which promotes justice and equity should be preferred.
 Remedial statues should receive liberal construction guided by social perspective and be
given widest interpretation
 However, liberal construction does not mean that benefit can be given contrary or in
violation of the provisions- it also cannot be extended beyond the statutory scheme and
sympathy has no role to play.
 Where there is no vagueness in the beneficial legislations, the court cannot go beyond the
scope of the statute on the pretext of extending the statutory benefit to those not covered
by it.

Limitations of the court in application of beneficent legislations:

 There is certain circumstance where court should refrain themselves from applying this rule:
 Judicial precedents have laid down some guidelines on where and when this rule is to be
applied or not to be applied.
 Where the court finds that by application of the rule of benevolent construction it
would be re legislating a provision of statute either by substituting, adding or
altering the words used is the provision of the Act.
  When the words used in a statute are plain, unambiguous and capable of only one
meaning- the rule of beneficent construction cannot apply. But if it is found that
the words used in the statute give rise to more than one meaning in such
circumstances, it is permissible for the courts to apply this rule.
 The court must construe the statutory provision with a view to uphold the object
and purport of Parliament. It is only in a case where there exists a grey area and the
court feels difficulty in interpreting or in construing and applying the statute, the
doctrine of beneficent construction can be taken recourse to.
 Illustrations:
 Jivabhai Purshottam v Chhagan Karson (1961)
 The appellant is the landlord- gave respondent notice of termination of
tenancy on dec. 31st, 1951- notice for 1 year- tenancy was to be terminated
after 31st march, 1953.
 The landlord made an application on 7th April, 1953 under sec. 29(2) of the
Bombay Tenancy and Agricultural Lands Act, 1948 for obtaining possession
of the land.
 In the meantime, an amendment was made to the act under sub-section 2-A
to Sec. 34 which came into effect on 12th Jan, 1953- by this amendment,
further restriction was place on the right of the landlord to evict the
tenant.
 The interpretation of this sub-section along with sub-section (1) of section
34 came up before the Supreme Court.
 The Supreme Court held that though the vested right of the landlord was
not interfered with by the new provision, such a vested right did not arise
until the period of notice expired.
 The Supreme Court said that the Amending Act, being a piece of beneficent
legislation meant for protecting the rights of the tenants, any ambiguity in
the meaning of sub-section (2A) of section 34 of the Act would be removed
in the favour of the tenants.
 Therefore, it was held that the Amending Act would affect all suits for
eviction on notices before the expiry of whose period the Amending Act
had come into force
 Municipal Council of Raipur v State of MP, 1970
 The appellant owned transport vehicles and used those vehicles for the
maintenance of public health in the Municipality by transporting the night
soil and garbage of the town while also sick or wounded to the hospitals-
for free- employs 50 workers.
 Did not register under sec. 3(1) of the Motor Transport Workers Act, 1961
as required- a complaint was filed.
 Municipal argued that they do not fall under the definition of “motor
transport undertaking” under sec. 2(g):
□ “Motor transport undertaking” means a motor transport
undertaking engaged in carrying passengers or goods or both by
road for hire or reward, and includes a private carrier.
 Municipal also argued that the transport vehicles owned by them are
exempted under Sec. 38(1):
□ used for the transport of sick or injured persons
 □ used for any purpose connected with the security of India, or the
security of a State, or the maintenance of public order
 the question before the court was whether the appellant were private
carriers with the meaning of section 3(1) of the Motor Vehicles Act, 1939
and therefore required to register under the Act.
 Sec. 3(1) defines private carrier as:
□ an owner of a transport vehicle other than a public carrier who
uses that vehicle solely for the carriage of goods which are his
property or the carriage of which is necessary for the purposes of
his business not being a business of providing transport.
 The Supreme Court included the appellant in the category of private carriers
and required its registration as Motor Transport Undertakings although it
required stretching the language to the extent of holding night soil or
garbage or sick or wounded to be goods and the property of the appellant.
 According to the Supreme Court, the basis of the decision was that the
Motor Transport Workers Act being a welfare legislation regulating the
conditions of service for the benefit of motor transport workers had to be
construed beneficially.
 Manohar Lal v State of Punjab, 1961.
 In this case, section 7 of the Punjab Trade Employees Act, 1949 was
challenged.
 Sec. 7 of the Act states that “every shop of commercial establishment shall
remain closed on a close day” - day to be chosen by the owner of the shop.
 The appellant chosen Friday as his closed day.
 When the inspector came for inspection on a Friday- found his shop open-
appellant son was selling articles.
 Appellant was convicted.
 Appellant admitted to the facts but pleaded that the Act would not apply to
him because he does not employ anybody- the business is run by him and
his family- if it were to apply it would be violative of Art. 19(1)(g) of the
constitution.
 Court held that the main object of this act is the welfare of the employees
and to protect theirs as well as the employers from overwork.
 Held the provision is constitutionally valid and a reasonable restriction on
the fundamental right because it was necessary for ensuring health and
efficiency of workers
 Also, even when the business is being conducted by the owner and his
family members, the provisions would apply to them also in the same
manner and for the same reason.
 All India Reporter Karamchari Sangh v All India Reporter Ltd (1988)
 A land mark judgment was given by the Supreme Court in this case when it
held that law reports are newspapers within the meaning of the Working
Journalists and Other Newspaper Employees (Conditions of Service) and
Miscellaneous Provisions Act, 1955 and that the employees employed in
production/publication of law reports are entitled to the benefits of Palekar
award.
 According to the court, law reports contain judicial decisions which are of
public importance and their contents constitute news in so far as their
 subscribers and readers are concerned because, inter alia, they contain
information about the latest legal position prevailing in the country on
specific issues. The decisions reported in the law reports may cease to be
items of news after sometime and become books but when they are
received by the subscribers and readers they do possess the character of
works containing news.
 This Act is a beneficial legislation enacted mainly for the purpose of
improving the conditions of service of employees of newspaper
establishments and even if it is possible to have two opinions on the
construction of the provisions of the Act, the one which advances the
object of the Act has to be accepted
 U Unichoyi v State of Kerala:
 In this case, the validity of the Minimum Wages Act, 1948 was challenged.
 The question was whether this Act under which the State Government is
empowered to fix minimum wages in an industry is violative of Article
19(1)(g) of the Constitution of India inasmuch as the Act did not define what
is minimum wage and also made no provision for taking into consideration
the capacity of the employer to pay.
 The Supreme Court found the Act to be valid and held that the Act being a
beneficial legislation, it must be construed in favour of the workers.
 The Supreme Court further held that in an underdeveloped country facing
the wide spread problem of unemployment, it is not unlikely that labour
may offer to work even on starvation wages but that should not be allowed
to happen.

Rule of liberal interpretation:

 Liberal or beneficial Construction means the interpretation should be made liberally with the
intention to advance the purpose or object of the statute.
 In liberal construction courts may prefer the golden rule or mischief rule.
 Remedial statutes generally receive liberal construction.
 In construing courts ought to give to it “the widest operation which its language will permit.
They have only to see that the particular case is within the mischief to be remedied and
falls within the language of the enactment”
 The labour and welfare legislations should be broadly and liberally construed and while
construing them due regard to the Directive Principles of State Policy (Pt IV) and to any
international convention on the said subject must be given by the courts.
 In case of social benefit-oriented legislation like the Consumer Protection Act, 1986, the
provisions of the Act have to be construed in favour of the consumer to achieve the purpose
of the enactment but without doing violence to the language.
 If a section of a remedial statute is capable of two constructions, that construction should be
preferred which furthers the object of the Act and is more beneficial to those in whose
interest the Act may have been passed.
 The liberal construction must flow from the language used and the rule does not permit
placing of an unnatural interpretation on the words contained in the enactment nor it
permit raising of any presumption that protection of widest amplitude must be deemed to
have been conferred upon those for whose benefit the legislation may have been enacted.