Relief to Air Asia: Karnataka HC Quashes Criminal Proceedings Under Pre-Amendment Companies Act Due to Retrospective Decriminalization [Read Order]

The High Court of Karnataka, granted relief to Air Asia (India) Private Limited by quashing criminal proceedings initiated under the pre-amendment version of Section 197(15) of the Companies Act,2013.

Air Asia (India) Private Limited, petitioner, approached the High Court seeking to quash proceedings initiated before the Special Court of Economic Offences, Bengaluru. The case was based on a complaint filed on 18.06.2022, alleging violations of Sections 197(3), 197(9) of the Companies Act and Rule 7(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. On 22.06.2022, the Special Court took cognizance under Section 197(15) and issued summons to the company and another accused.

GST REFUNDS (Law & Procedure) by CA. (Dr.) SANJIV AGARWAL & CA. NEHA SOMANI! Click here.

The petitioner argued that by the time the complaint was filed, Section 197(15) had already been amended (effective from 02.11.2018), replacing the phrase “punishable with fine” with “penalty,” which meant the alleged violation was no longer a criminal offence. It was submitted that since the complaint came after the amendment, the proceedings could not continue.

The respondent countered that the offence took place before the amendment, and the timing of the complaint was irrelevant.

In reply, the petitioner maintained that the amendment should apply retrospectively, as there was no indication in the law suggesting otherwise. Relevant case law was also cited in support of this argument.

GST REFUNDS (Law & Procedure) by CA. (Dr.) SANJIV AGARWAL & CA. NEHA SOMANI! Click here.

Justice S.R.Krishna Kumar referred to precedents such as Fosroc Chemicals, Indian Tobacco Association, B. Kannan, and T. Barai, which supported the principle that substitution of a penal provision, particularly when it reduces or removes criminal liability, generally applies retrospectively, unless expressly stated otherwise.

Applying this principle, the Court held that the amended Section 197(15), introduced by the Companies (Amendment) Act, 2019 and effective from November 2, 2018, applied retrospectively. Since the amended provision decriminalized the violation and substituted criminal liability with a civil penalty, the complaint filed in 2022 could not invoke the earlier version of the law.

Read More: Whatsapp Chats Revealed Transactions of ₹1 Crore: Rajasthan HC Upholds Income Tax Proceedings

As a result, the bench found that the criminal proceedings against the petitioner were not maintainable and quashed the complaint dated June 18, 2022, and the order of cognizance dated June 22, 2022, passed by the Special Court for Economic Offences in Bengaluru. However, it allowed the authorities to proceed under Section 454 of the Companies Act, if applicable.

In short, the petition was allowed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates