Prospective criminal liability for non-repayment of deposits upheld where default continued after the statutory amendment.

Section 58A of the Companies Act, 1956 was treated as validly prospective where the penal liability arose from the later non-repayment of deposits, not from their earlier lawful acceptance. The Court distinguished acceptance of deposits from the distinct statutory duty to repay them after the amended due date, and held that Article 20 was not offended because the offence was constituted by continued default after the amendment. It further held that prosecution under section 58A(3)(a) read with section 629A was properly laid where the complaint concerned unpaid deposits accepted in accordance with Reserve Bank of India directions and remaining unpaid beyond the prescribed time.

---

---

Issues: (i) Whether section 58A of the Companies Act, 1956, insofar as it creates liability for non-repayment of deposits accepted before the commencement of the amending Act, violates Article 20 of the Constitution of India by imposing a greater punishment or by operating retrospectively. (ii) Whether the prosecution for non-repayment of deposits accepted in accordance with the directions of the Reserve Bank of India was properly launched under section 58A(3)(a) read with section 629A of the Companies Act, 1956.

Issue (i): Whether section 58A of the Companies Act, 1956, insofar as it creates liability for non-repayment of deposits accepted before the commencement of the amending Act, violates Article 20 of the Constitution of India by imposing a greater punishment or by operating retrospectively.

Analysis: The liability under section 58A(3)(a) attached not to the original acceptance of deposits, but to the subsequent failure to repay deposits that were lawfully accepted before the amendment. The Court distinguished between acceptance of deposits and repayment of deposits, and held that Article 20 does not prohibit the creation of a new offence so long as it operates prospectively. The offence of non-repayment was treated as arising when the deposits remained unpaid after the dates specified in the amended provision, which were subsequent to the amendment.

Conclusion: Section 58A, insofar as it penalises non-repayment of deposits after the statutory due date, is not hit by Article 20 and is validly prospective in operation.

Issue (ii): Whether the prosecution for non-repayment of deposits accepted in accordance with the directions of the Reserve Bank of India was properly launched under section 58A(3)(a) read with section 629A of the Companies Act, 1956.

Analysis: The complaint alleged non-repayment of deposits accepted in accordance with the Reserve Bank of India directions, and not deposits taken in contravention of those directions. The Court held that section 58A did not punish the acceptance of such deposits in violation of Reserve Bank directions under Chapter III-B of the Reserve Bank of India Act, 1934, and that the case fell within the statutory obligation to repay lawful pre-amendment deposits. Since the deposits remained unpaid beyond the prescribed time and were not renewed, the residual penal provision under section 629A was attracted.

Conclusion: The prosecution was rightly laid under section 58A(3)(a) read with section 629A of the Companies Act, 1956.

Final Conclusion: The challenge to the criminal proceedings failed because the statutory liability for non-repayment of deposits was held to be constitutionally valid and applicable to the facts alleged, leaving no ground to quash the prosecution.

Ratio Decidendi: A statute may validly impose prospective criminal liability for the continued failure to comply with a post-amendment duty to repay deposits, even where the deposits were accepted before the amendment, and such liability does not offend Article 20 if the offence is constituted by the later non-repayment rather than the earlier acceptance.

---