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CA Intermediate · Corporate and Other Laws · Interpretation of Statutes

A statute provides that a penalty of ₹10,000 'shall be imposed' on a company failing to file a return within 30 days. Two readings are argued: that the penalty is mandatory, or that the authority has discretion. A proviso says the authority 'may, for reasons recorded, reduce the penalty where default is unintentional'. Applying the rule that a statute should be read as a whole and every part given effect, which conclusion is best?

The penalty is mandatory in principle, with the proviso allowing only a limited reduction for unintentional default and for recorded reasons. Reading the statute as a whole gives effect to both the main clause and the proviso without either defeating the other.

  1. AThe penalty is mandatory in principle, but the proviso gives a limited power of reduction for unintentional defaultCorrect
  2. BThe proviso is meaningless and must be ignored
  3. CThe authority may waive the penalty entirely for any default
  4. DThe proviso overrides the main section completely

Explanation

Reading the statute harmoniously, the main clause fixes the penalty and the proviso carves out a limited exception allowing reduction, only for unintentional default and with recorded reasons. Ignoring the proviso or letting it swallow the section violates the rule of harmonious construction.

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