Article 20 bar on harsher penal prosecution for prior deposit transactions led to quashing of criminal proceedings.

Article 20 of the Constitution barred prosecution under a later and harsher penal provision for deposits received before the relevant statutory restrictions and enhanced punishment came into force. The alleged transactions occurred while the earlier RBI directions were operative, when the maximum penal consequence was imprisonment up to three years. Proceeding under section 58A of the Companies Act, 1956 would have exposed the accused to imprisonment up to five years for the same prior conduct, which amounted to an impermissible increase in punishment for an act already completed. The Madras High Court therefore held that the prosecution was hit by Article 20 and the criminal proceedings were liable to be quashed.

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Issues: Whether prosecution for alleged contravention of deposit restrictions could be sustained when the deposits were received before the relevant statutory restrictions and enhanced punishment under the Companies Act came into force, in view of Article 20 of the Constitution of India.

Analysis: The alleged receipts of deposits had taken place while the Reserve Bank of India directions were still in force. For such prior conduct, the penal consequence under the earlier regulatory regime was imprisonment up to three years, whereas prosecution under section 58A of the Companies Act, 1956 exposed the accused to a higher punishment of imprisonment up to five years. Since Article 20 prohibits conviction for an act not punishable under the law in force at the time of its commission and also bars imposition of a greater penalty than that then prescribed, the prosecution could not proceed on the basis of the later and more severe provision for the earlier transactions.

Conclusion: The prosecution was hit by Article 20 and the criminal proceedings were liable to be quashed in favour of the petitioners.

Ratio Decidendi: A person cannot be prosecuted under a later penal provision imposing a greater punishment for conduct completed before that provision came into force, where the earlier law in force at the time of the act prescribed a lesser penalty.

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