Retrospective penal provisions cannot apply to pre-amendment deposit defaults; proceedings were redirected to the earlier regulatory framework.

A penal provision enhancing punishment for failure to refund deposits cannot be applied retrospectively to deposits received before the amendment took effect, because Article 20(1) bars conviction for conduct that was not an offence at the time and bars increased punishment for past acts. On that basis, prosecution under section 58A of the Companies Act, 1956 could not be sustained for the earlier deposits. The text also states that, where the default was substantially cured through repayment under a court-framed scheme and the parties were willing to proceed under the earlier regulatory framework, the matter could be redirected to complaint proceedings under the Reserve Bank of India Act and dealt with leniently.

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Issues: (i) Whether prosecution for non-refund of deposits could proceed under section 58A of the Companies Act, 1956 when the deposits had been received before the introduction of that provision; (ii) Whether, in the circumstances, the cases should be treated as complaints under the Reserve Bank of India Act and disposed of leniently.

Issue (i): Whether prosecution for non-refund of deposits could proceed under section 58A of the Companies Act, 1956 when the deposits had been received before the introduction of that provision.

Analysis: Section 58A introduced a punishment of imprisonment for default in refunding deposits. The deposits in question were received before the amendment bringing section 58A into force. Article 20(1) of the Constitution prohibits conviction for an act not constituting an offence at the time of commission and also forbids imposition of a greater penalty than that applicable when the act was done. A custodial sentence under the amended provision could not, therefore, be applied to transactions completed before the amendment.

Conclusion: Prosecution could not be sustained under section 58A of the Companies Act, 1956 for the earlier deposits, and the petitioners could not be exposed to the enhanced punishment under that provision.

Issue (ii): Whether, in the circumstances, the cases should be treated as complaints under the Reserve Bank of India Act and disposed of leniently.

Analysis: The petitioners expressed readiness to face proceedings under the earlier Reserve Bank of India framework and not to contest limitation. The deposits had already been repaid pursuant to a court-framed scheme of administration, showing substantial compliance. In that setting, the default was treated as technical and not warranting the full penal consequences of the monetary provision.

Conclusion: The matters were remitted to the lower court with a direction to treat them as complaints under section 45-0 of the Reserve Bank of India Act, 1934, and to dispose of them in the light of the lenient approach indicated.

Final Conclusion: The decision protected the petitioners from retrospective application of the harsher company-law penal provision and directed reconsideration of the prosecutions under the earlier Reserve Bank regime.

Ratio Decidendi: A penal provision enhancing punishment cannot be applied retrospectively to deposits received before the provision came into force, and where the default is merely technical and the liability has been substantially discharged, the proceeding may be redirected to the earlier applicable regulatory framework.

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