UNIT IV

Presumption in interpreting of Statutes

To "presume" means to suppose that something is probably true.

Thus presumption means an act of presuming, assuming or
imagining something to be true. The legislature is presumed to
use appropriate words to manifest its intention.
The word ‘Interpretation’ is derived from the Latin term
‘interpretari’ which means to explain or expound or to understand
or translate. Interpretation is a process through which one arrives at
the true and correct intention of the law-making body which is laid
in the form of statutes. This helps in finding out the intention of the
author.

Interpretation of any data generally means to analyze the available

data and come out with an opinion which is certain and clear. This
increases the ability of an individual to understand and explain it in
his/her own way. This helps to find out the ways to understand and
analyse the statute, where it leads the interpreter to the whole new
meaning which is completely different from the general meaning.

It is necessary for all law students, lawyers, judges and anyone who
belongs to the legal fraternity to know how to interpret the statute
whenever a legislative house comes up with a new statute or an
amendment because they will be dealing with these legislations on a
day to day basis. The main intention of analyzing is to know the new
changes which are being brought due to the legislation and the
impacts of that legislation in society.

Usually, the interpretation of the statute is done by the judges, it is

the primary function of the judge as a judicial head. As we all know
that our government is divided into three important wings which
are: Legislature, Executive and Judiciary. Here the legislature lays
down the law and intends people to act according to the legislature
and the judiciary, that is judges will come up with the proper
meaning of the law and put the law into operation. This helps in
maintaining checks and balances between the wings.

The term ‘presumption of constitutionality’ is a legal principle that is

used by courts during statutory interpretation — the process by
which courts interpret and apply a law passed by the legislature,
such as Parliament.

On Thursday (January 9/21), the Supreme Court declined urgent

hearing on a plea seeking to declare the citizenship( Amendment)
Act, as constitutional and said that there was already a
“presumption of constitutionality” to a law passed by Parliament.

Chief Justice of India Sharad Arvind Bobde said that the court’s role
was to examine the validity, and not declare a law constitutional.
“How can we declare it constitutional? There is anyway a
presumption of constitutionality. If you had been a student of law,
you would know,” Bobde said while rejecting the plea.
The term ‘presumption of constitutionality’ is a legal principle that is
used by courts during statutory interpretation — the process by
which courts interpret and apply a law passed by the legislature,
such as Parliament.

In the 1992 Supreme Court case ‘ML Kamra v New India Assurance’,
Justice K Ramaswamy said: “The court ought not to interpret the
statutory provisions, unless compelled by their language, in such a
manner as would involve its unconstitutionality, since the
legislature of the rule making authority is presumed to enact a law
which does not contravene or violate the constitutional provisions.
Therefore, there is a presumption in favour of constitutionality of a
legislation or statutory rule unless ex facie it violates the
fundamental rights guaranteed under Part III of the Constitution. If
the provisions of a law or the rule is construed in such a way as
would make it consistent with the Constitution and another
interpretation would render the provision or the rule
unconstitutional, the Court would lean in favour of the former
construction. ” (“ex facie” meaning ‘on the face’)

A Bench of Justices G B Pattanaik and M Srinivasan in the 1998 case

‘K Anjaiah vs K. Chandraiah’, observed: “It is a cardinal principle of
construction that the Statute and the Rule or the Regulation must be
held to be constitutionally valid unless and until it is established
they violate any specific provision of the Constitution. Further it is
the duty of the Court to harmoniously construe different provisions
of any Act or Rule or Regulation, if possible, and to sustain the same
rather than striking down the provisions out right.”
The presumption is not absolute, however, and does not stand when
there is a gross violation of the Constitution.
In ‘Githa Hariharan v RBI’ (1999), Justice U Banerjee said, “…It is to
be noted that validity of a legislation is to be presumed and efforts
should always be there on the part of the law courts in the matter of
retention of the legislation in the statute book rather than scrapping
it and it is only in the event of gross violation of constitutional
sanctions that law courts would be within its jurisdiction to declare
the legislative enactment to be an invalid piece of legislation and not
otherwise…”
A three-judge Bench in ‘NDMC v State of Punjab’ (1996) spoke of the
limitations to the doctrine.
The Bench observed, “The Doctrine of Presumption of
Constitutionality of Legislations is not one of infinite application; it
has recognised limitations… this Court has consistently followed a
policy of not putting an unnatural and forced meaning on the words
that have been used by the legislature in the search for an
interpretation which would save the statutory provisions. We are
not “free to stretch or pervert the language of the enactment in the
interests of any legal or Constitutional theory”…”
1. Presumption as to Validity of statute:

There is a presumption in law that the statutes are valid. The

legislature does not intend to enact a law which ultra-vires the
Constitution.

The acts which are either passed by the Parliament, or by the State
legislature or by their subordinate bodies, should not cross the
constitutional boundaries. No laws can be enacted which are against
the provisions and spirit of the constitution. If there are two
interpretations, one that saves the Act from becoming
unconstitutional and the other that makes the statute void, then in
such a case, the interpretation that renders the Act constitutional
should be followed.

There is a presumption in favor of the constitutionality of an Act. one

who alleges against the constitutionality of an enactment, must
show that there is a transgression(against) of the constitutional
boundaries.

When the validity of the statute made by the competent legislature is

challenged, the court must presume that the statute is valid. Though it
is presumed that the Act is constitutional, if the Act on the face of it
is arbitrary and discriminatory, then the presumption cannot stand.
If there is any doubt about the constitutional validity of any law, the
benefit of doubt should be in the favour of the constitutional validity
of an Act. The Court should assume that the legislature has not
committed a mistake and out-lined the intention in the Act what it
intended. It is presumed that the legislature has expressed its
intention in the Act what it intended. It is presumed that the
legislature has expressed its intention in appropriate words. Every
word used by the legislature, must be given its due importance.
Unless it is proved that the legislation has transgressed the
constitutional limits, it must be presumed to be constitutionally
valid.

When the meaning of the statutory language gives two meanings,

the statute should be construed in such a way so as to give it
constitutional validity, and not to raise any doubts about its
constitutional validity. This rule is applicable even to bye-laws and
constitutional Amendments Act

Govindlalji V. State of Rajasthan-

The constitutional validity of “the Rajasthan Nathdwara Temple

Act” was challenged. Under Section 16 of the said Act, words “affairs
of temple” were construed as restricted to the secular affairs, and as
such had to be constitutionally valid. If a wider construction would
have been given to the said Section, it would have violated Articles
25(Right to practice one’s own religion) &Art 26 (freedom to
manage one’s own religious affairs) of the constitution.

2) Territorial in Operation:

The general rule for an act of parliament is that it is applicable only

within the territories of the Country in which it is enacted, unless
otherwise provided.
Thus, the statutes passed, will bind within boundaries of the country
in which it extends. The extra-territorial operation is forbidden. But
according to Article 245(2) of the constitution of India, No act made
by the Parliament shall be deemed to be invalid on the ground that it
would have extra territorial operation. Courts are bound to enforce
such legislation.
For example, “The Indian penal Code, 1860” is extra territorial in
nature. According to section 3, any person bound by Indian Law,
committing any offence outside India, shall be tried in India, As if he
has committed that offence in India.
Section 4 says that, IPC applies to any offence committed by any
citizen of India in any place without or beyond India, and by any
person on any ship or air-craft registered in India, wherever in the
world it may be.

Various state-legislatures in the country are empowered to enact a

law for the whole of the state or any part of the state. The laws
passed by the state legislatures, are for the purpose of that state only
such law, in the absence of any territorial connection, cannot have any
extra-territorial operations.

In order that a territorial connection is sufficient, two things are to

be considered, they are-

i) the territorial connection should be real and factual, and not

illusory

ii) The liability under the Act sought to be enforced, must be related
to that territorial connection only.

Ajay Agarwal V. Union of India-

The supreme court held that the offence of criminal conspiracy is in

the nature of continuing offence. Therefore, the acts which
constitute criminal conspiracy whether committed in Dubai or
Chandigarh, is immaterial. The offence can be tried in India
under Section 4 of the IPC.
K.K. Kochari V. The state of Madras-

The Supreme court held that the laws made by the state legislature
apply within the boundaries of the concerned state. It can be
challenged for its extra-territorial operation, because Article 245(2)
of the constitution of India empowers only the Union parliament to
make extra-territorial laws (no law made by the parliament shall
have deemed to have been made in valid on the grounds that it
would have extra territorial operation. .

3) Presumption as to Jurisdiction of the courts:

There is a presumption that, an interpretation that takes away the

jurisdictions of the courts must not be given effect, unless the words of
the statute provide so in clear and explicit terms.

There is strong presumption that civil courts have jurisdiction to all

cases which are civil in nature. The exclusion of jurisdiction of civil
courts is not to be readily inferred. Same is true with criminal cases.

The basis of this presumption is that courts should be accessible to

all those who want justice and the status quo about the state of law
should be maintained. Unless the jurisdiction of the court is ousted
by the legislature in clear words or by necessary implication, the
courts should be presumed to have jurisdiction.

The construction of statute that takes away the jurisdiction of the

superior courts or extends the jurisdiction by giving right to appeal,
should be avoided.

Strict construction should be given to the statutes that confer

jurisdiction on the subordinate courts, tribunals, or government
agencies. If a construction of an act does not clearly say that the
intention of the legislature is to oust the jurisdiction of the court,
then the jurisdiction of the ordinary courts of judicature is not taken
away. When the jurisdiction is conferred by the statute, it is implied
that the act has also given power to do all such acts as necessary for
its execution.

Special powers granted by an Act must be limited to the purpose for

which it is granted. The power of control by the superior courts,
cannot be taken away except by the express provision of the Statute.
Unless the words of a statute provide for it can be inferred from the
words of a statute, there is a presumption that neither new
jurisdiction of the courts are created, nor the existing jurisdiction
enlarged.

Since the legislation gives the jurisdiction to the courts, it is only the
legislation which can take away the jurisdiction. If the interpretation
of an act gives two constructions, one giving jurisdiction to the court
and the other taking away the jurisdiction, then the construction
which gives the jurisdiction to the court, must be given effect. If
there is a dispute between two parties, then by mutual consent they
can neither create a jurisdiction, nor can they take away the same,
from the court in which their dispute can be tried.

There is a general presumption that civil courts have the jurisdiction

to try all the civil matters. The exclusion of civil jurisdiction of the
court must be in express terms or by clear implication. The general
rule is that, there exists a jurisdiction in a court to try all the civil
matters. The burden of proof to prove that the jurisdiction of civil
courts is excluded is on the person who alleges such an exclusion. In
the cases where the jurisdiction of the courts is excluded, the civil
courts have power to examine whether the provisions of the statute
are complied with. Also the civil courts have power to ascertain that
the prescribed procedure of the law has been followed by the
tribunal created by the statute. If the provisions of the statute or the
necessary judicial procedure is not complied with, then such non-
compliance can be challenged in the court of law. This principle is
based on the presumption that a remedy in the ordinary civil courts
must always be available to the aggrieved person. In addition to the
remedies provided by the statute, ordinary remedy must also be
available, except if it is excluded by the express language of the
statute or by necessary implication.

Provincial government of Madras (now Andhra pradesh) V. J.S.

Bassappa-

The Supreme Court held that the exclusion of the jurisdiction of the
civil court must not be construed readily. If the provisions of an act
gives the finality to the orders of the Authority as enacted, civil
courts still have the jurisdiction in the matter, if the provisions of
the Act are not complied with or the statutory tribunal has failed to
follow the principles of judicial procedure.

Bhimsi V. Dundappa-

The Supreme Court held that, if the revenue court is given the
exclusive jurisdiction to try certain matters and the jurisdiction of
the civil court is totally excluded, then the civil court should transfer
such matters to be tried and adjudicated by the revenue court only.

4. Presumption against Exceeding Territorial Nexus:

Non-sovereign legislatures are competent to legislate with extra

territorial effect. Law made by such a legislative body bear a real
territorial connection with the subject-matter with which it is
dealing. Article 245 of the Constitution of India provides as follows:
No law made by Parliament shall be deemed to be invalid on the
ground that it would have extraterritorial nexus. 6 Consequently,
legislation made by Parliament cannot be questioned on the ground
that it has extra-territorial operation." Sufficiency of the territorial
connection involves a consideration of two elements: 1) the
connection must be real and not illusory; and 2) the liability sought
to be imposed must be pertinent to that connection.

5. Presumption against Intending Injustice:

When laws are made by elected representative of the people, it is

proper to assume that they enact laws which the society considers
as honest, fair and reasonable. As a result, justice and reason
constitute the great general legislative intent in every piece of
legislation. If this is not there and harsh and ridiculous effect was
actually intended by the legislature, it could not be easily accepted
that it represents the legislative intent.

6. PRESUMPTION AGAINST INCONVENIENCE AND ABSURDITY

It is presumed that the legislature intends that the court, when

considering, in relation to the facts of the instant case, which of the
opposing constructions of an enactment corresponds to its legal
meaning, should find against a construction which produces an
absurd result, since this is unlikely to have been intended by the
legislature. Here 'absurd' means contrary to sense and reason; so in
this context the term 'absurd' is used to include a result which is
unworkable or impracticable .

PRESUMPTION AGAINST INCONVENIENCE

It is presumed that legislature never intends its enactments to work

public inconvenience or private hardship; and if a statute is doubtful
or ambiguous or fairly open to more than one construction, that
construction should be adopted which will avoid such results.

It is always presumed that legislature intends the most reasonable

and beneficial construction of its enactments, when their design is
obscure or not explicitly expressed, and as such will avoid
inconvenience, hardship or public injuries.

Hence, if a law is couched in doubtful or ambiguous phrases or if its

terms are such as to be fairly susceptible of two or more
constructions, the Courts, having this presumption in mind, will
attach weight to arguments which will remove the inconvenient and
absurd.

While it is quite true that where the language of a statute is plain

and admits of but one construction, the Courts have no power to
supply any real or supposed defects in such statute, in order to
avoid inconvenience or injustice yet , where the terms of the statute
are not plain, but admit of more than one construction, one of which
leads to great inconvenience and injustice and possibly to the defeat
or obstruction of the legislature intent, then the Court may, with a
view to avoid such results, adopt some other more in accordance
with the legislative intent.

If words are ambiguous and one leads to enormous inconvenience

and another construction does not, the one which leads to the least
inconvenience is to be preferred.

Thus, if it is apparent that, by a particular construction of a statute in

a doubtful case, great public interests would be endangered or
scarified, it ought not to be presumed that such construction was
intended by the legislature.

But if there is no doubt, obscurity or ambiguity on the face of the

statute, but its meaning is plain and explicit, the argument from
inconvenience has no place. In other word, the inconvenience
created by the statute where its provisions are clear and is capable
of only one interpretation, such inconvenience can be avoided by a
change in law itself i.e., by the legislature and not by judicial action.
Example: where a statute gives to a husband the power, by his last
will, to extinguish the common law rights of his widow and where
the language of the Act is clear and not ambiguous and is sufficiently
include every widow, whether sane or insane and the Act makes no
exception in favour of latter, the Courts cannot make any such
exception, from consideration of the hardship and inconvenience
which may result.

PRESUMPTION AGAINST ABSURDITY

It is presumed that the legislature does not intend an absurdity, or

that absurd consequences shall flow from its enactments. Such a
result will therefore be avoided, if the terms of the Act admit it, by
reasonable construction of the statute.
By an “absurdity” as the term is here used, is meant anything which
is irrational, unnatural or inconvenient that it cannot be supposed to
have been within the intention of men of ordinary intelligence and
discretion.
The presumption against absurd consequences of legislation is
therefore no more than the presumption that legislators are gifted
with ordinary good sense.
It is applicable, like all other presumptions thus, if by applying the
literal rule of interpretation, the construction is being absurd then it
should be avoided.
But it must be observed that if the legislature will enact an absurdity
in clear and specific terms, the Courts are not at liberty to divert the
statute from its intended object by process of construction.
If absurdity is impossibility, the Act will be inoperative.
Thus, when the language is explicit, its consequences are irrelevant
and if the language is plain and unambiguous, the Courts have to
give effect to it regardless of consequences thereof.
Any plea of injustice, hardship, inconvenience or anomaly shall not
be admissible. The Court cannot legislate under grab of
interpretation.
In Om Prakash v. Radhacharan (2009) 15 SCC 66, It was held that
the sentiment or sympathy alone would not be a guiding factor in
determining the rights of the parties which are otherwise clear and
unambiguous.

5. Presumption as to Prospective Operation of Statutes:

The dictionary meaning of the word prospective with reference to

statutes shows that it is concerned with or applying the laws in
future or at least from the date of commencement of the statute. It is
to be noted that the Doctrine of Prospective overruling was evolved
by the Supreme Court for the first time in India in I.C. Golak Nath Vs.
State of Punjab A.I.R. 1967 SC 1643. In this case the Supreme Court
held that the Parliament had no power to amend the fundamental
rights. Chief Justice Subba Rao posed the questions as to when
Parliament could not affect fundamental rights by enacting a bill
under its ordinary legislative process even unanimously, how could
it then abrogate a fundamental right with only a two third majority
and while amendment of less significant Articles of the Constitution
require ratification by a majority of States of the Union, how could a
fundamental right be amended without this requirement being
fulfilled. The learned judge was of the view that the word ‘law’ Art.
13 (2) means both ordinary law as well as constitutional law.
Consequently, the state was not empowered to make any
constitutional amendment which takes away or abridged
fundamental rights as ‘law’ includes ‘amendment’ as well. Thus,
while holding that the Parliament was not empowered to amend
fundamental rights, the five learned judges jointly declared that the
principle would operate only in future and it had no retrospective
effect. Therefore, the name ‘prospective overruling’. The effect of the
decision was that all amendments made with respect to the
fundamental rights till the day of the decision in the case would
continue to remain valid and effective, and after that date the
Parliament would have no power to amend any of the fundamental
rights contained in Part III of the Constitution.

Penal statutes have prospective operation. Article 20 of the

Constitution of India restricts the retrospective operation of the
Penal statutes. An act which is legal when it was done, cannot be
made illegal by enacting a new statute.

Gramma V. Veerupana-

Section 8 of “The Hindu Succession Act, 1956” provides that, if a

Hindu male dies intestate, his property will devolve as per the
provisions of the Act.

The Supreme Court held that the Act is not applicable to those
successions which opened before the Act came into operation (i.e.
successions prior to the year 1956). Thus, it has only prospective
operation.

Govind Das V. Income Tax officer-

“The income tax act, 1961” came into force on 1st april,
1962. Section 171(6) of the Act imposes the joint and several liability
on the members of the HUF to pay tax assessed on the HUF
property, if the assessment is already completed and it is found that
the family has already affected partition.

The Supreme Court held that section 171(6) of the Income Tax Act,
1961 will not apply to assessments which were made prior to 1st
April, 1962.

Exceptions to Prospective operation of statutes:

Procedural statutes are also known as adjunctival statutes. They do

not confer any rights or create any new rights.
Statutes dealing with procedural matters are presumed to have
retrospective operation.

Retrospective operation of statutes means a statute will have effect

on the matters prior to the date on which the Act has come into
force. Retrospective means it will be effective from the date
previous to the date on which the statutes come into force. A statute
may be expressly declared retrospective or it may be implied by the
court as retrospective. When the statute explains or supplies an
omission in an earlier enactment, it is presumed to be retrospective.
A retrospective operation should not be given to an act that will
impair an existing right or an obligation. If an enactment gives two
interpretations, one retrospective and the other prospective, then it
must be construed as prospective only. This rule is based on the
presumption that the legislature never intended what is unjust.
Every new Act should affect only the future and not the past. There
is a presumption that a statute applies to acts or circumstances
which came into existence after the Act came into existence, unless
the legislature intended to apply it retrospectively.

When the procedural law is amended, the amendment has a

retrospective effect. A declaratory Act is given a retrospective
operation, because a declaratory act removes the doubts as to
meaning and effect of the statute. The intention behind passing the
declaratory Act, is to set aside the Judicial error.

The rule that, generally the statutes will not give a retrospective
operation, is a rebuttable presumption. It can be rebutted with
strong contrary evidence. A statute should not be given greater
retrospective operation than what is intended by the legislature in
the words of the statute.

If a court declares an Act as void, then the parliament can pass the
validating act having retrospective effect to revive the void Act.
Retrospective operation of penal law is prohibited. It has to be
prohibited expressly by Article 20(1) of the constitution of India.
But if the Penal law benefits the accused, it can be given
retrospective effect.

Balumar Jamnadas Batra V. State of Maharashtra-

Section 123 of the customs Act, 1962, dealt with the burden of proof.
The Supreme Court held that section 123 deals with matters of
procedure, and therefore, it will have retrospective operation.

Reliance Jute and Industries limited V. Commissioner of Income

Tax-

The Supreme Court held that while the Taxing statute is interpreted,
the law in force in the relevant assessment year, has to be applied,
unless there is an express contrary provision or contrary intention
that appears from necessary implications.

Collector of Central Excise, Ahmedabad V. Ashoka Mills Limited-

The supreme court held that, the date on which the goods are
cleared, the rate at which the excise duty is prevalent on that date, is
to be applied. If after the goods are cleared, there is any change in
the rate of excise duty, then the changed rate of excise duty cannot
be applied to the goods which have been already cleared i.e. it will
not have retrospective effect.

Union of India V. L. Ramaswamy-

The Supreme Court held that if a rule “x” is substituted by rule “y”,
then the old rule “x” which is substituted by a new rule “y” will not
be applicable under any circumstances from the date on which it
ceased to have forced a law.
Punjab Traders V. State of Punjab-

The Supreme Court held that if in any statute the meaning of an

existing provision is already implied, and such implied meaning is
subsequently clarified by the legislature by amending the statute,
then the amending statute will have retrospective operation.

Landmark judgments:

The Supreme Court repeatedly made it clear that in order to give

effect to an amendment retrospectively, it should be clearly
mentioned in the enactment that the Act is supposed to have
retrospective operation.

In the case of P.Mahendran and Others v. State of Karnataka and

others, the apex court observed that the amended set of
Recruitment Rules, 1987 was not of a retrospective nature and was
instead of a prospective one. Therefore, the Karnataka Public
Service Commission was not supposed to make any kind of
regulation or determination of selection of members on the basis of
the rules after the commencement of the same. If such selection was
made, the same would be declared as illegal. The court made its
judgment on the grounds that there were no provisions for making a
retrospective effect in the Rules, 1987.

In the absence of similar provision, the Rules were to prospective

effect only. In the recognised case of CIT Mumbai v. M/s Essar
Teleholdings Ltd, the Supreme Court mentioned that the legislature
wing of the government has been vested with plenary powers to
decide whether an amendment is to operate prospectively or
retrospectively. Further, in general observation, the legislature
considers any statute prima facie to be prospective only unless the
statute has been expressly by necessary implication made to
operate retrospectively.

In National Agricultural Cooperative Marketing Federation of

India v Union of India, the Supreme Court was of the opinion that
retrospective amendments will amount to be unconstitutional if
there is less clarification on the part of the enactment which intends
to overturn the previous decisions of the court or bring in a change
in the existing law.

In the case of Rohtas Bhankhar and Others v. Union of India and

Another, the court declared that whenever a retrospective
amendment is to be made, it should be taken into concern that the
amendment does not have an adverse effect on the public at large. In
this case, a relaxation was provided to the candidates belonging to
the category of Scheduled Caste and Scheduled Tribe for a
competitive exam giving a retrospective effect to an existing statute.

From the above discussions and observation, it can be inferred that

constitutional legitimacy with respect to the retrospective
amendment is still under a hold. On some grounds, it is held to be
valid while majorly it is considered to be inconsistent with the
judgments delivered by the courts. Courts, therefore, directed that it
is only in exceptional cases that the retrospective amendments will
have an effect. Judgments made by the apex court in concern with
these amendments have sought clarity and fairness from the same
because it is not correct to take away the rights and obligations that
have already been conferred to an individual based on the existing
law for the sake of the implementation of a retrospective
amendment. This by itself stands against the Constitution of India in
several ways.
Therefore, the necessity to keep a check on the retrospective
amendments is necessary to maintain the integrity of the
Constitution. As far as the conflict between the legislature and the
judiciary is concerned, the legislature must make sure that it allows
a legislature to operate retrospectively only when it is extremely
necessary and in a way help the judiciary to deliver pending
judgments. Similarly, the judiciary should carry the responsibility to
keep the movement of the legislature in check thereby keeping the
Constitution of India intact. Therefore, both these organs must work
interdependently for better regulation of statutes in the country.

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EVASION OF STATUTES

Evasion of law (fraus legis, fraude à la loi, Gesetzesumgehung, frode alle

legge, fraude de ley) is committed either if law is used for purposes for which it is
not designed (evasion, Gesetzeserschleichung) or if the application of law is
avoided by intentionally not fulfilling the necessary requirements for its
application (avoidance, Gesetzesvermeidung). Both cases come down to a related
question whether a legal norm still applies where the normal requirements of
application are, respectively, fulfilled or not fulfilled. The problem of evasion of
law is essentially a problem of construction of legal norms (interpretation of
statutes) and in most cases a problem of interpretation of mandatory legal
provisions.

Most jurisdictions do not have a general prohibition on evasion of law. Such a

prohibition is, however, contained in the Spanish Código civil Art 6 No 4. There it
reads: ‘Los actos realizados al amparo del texto de una norma que persigan un
resultado prohibido por el ordenamiento jurídico, o contrario a él, se
considerará n ejecutados en fraude de ley y no impedirá n la debida aplicació n de
la norma que se hubiere tratado de eludir.’ (‘Acts realized under the protection of
the text of a norm that seek a result prohibited by the legal order, or which is
contrary thereto, shall be considered in fraud of the law [en fraude de ley] and
shall not prevent the appropriate application of the law sought to be evaded.’)
Most jurisdictions do not contain a general prohibition but provide specific
indications when a legal norm or structure of norms otherwise demands
application by certain means.
It is notable that evasion of law appears to be a private law concept, because in
public law—notwithstanding the rules of tax law and the problem of tax fraud
and tax avoidance—there are very few cases of evasion of law. This observation
can be explained. The state is subject to the rule of law (Gesetzmässigkeit der
Verwaltung), ie public authorities are only permitted to act against the citizen if
there is a statute authorizing such an act. The application of law by analogy is
prohibited. On the other hand, private citizens frequently seek to abuse public
law (especially immigration law) by misusing private law (marriage, adoption,
acknowledgment of paternity). In order to prevent this, benefits conferred by the
public law should either be made independent of private law actions, or such
private law actions should be negated as an evasion of law.

This contrast between private law and public law may also be expressed in the
following manner: while in private law judges may amend deficient statutes and
laws through expansive interpretation or by creating new rules of case law,
public law is strict and courts are not allowed to correct deficient law but instead
have to wait until the legislature reacts to such inadequacies.

Evasion of law is a special instance of the much broader concept of abuse of

law (abus de droit, Rechtsmissbrauch, abuso del diritto, misbruik van
rechten, abuso del derecho). Law is evaded where there is no statute that is fully
applicable to the situation, whereas law is abused in cases where there is a fully-
fledged statute but it is applied beyond its normal field of application. There are
jurisdictions that prohibit such an abuse of law in general (Art 2 Swiss Civil Code:
‘The open misuse of a right finds no protection in the law’) or in specific
situations that are often abused (eg § 1353(2) German Bürgerliches
Gesetzbuch (BGB): abuse of matrimonial rights) and thereby also prohibit any
evasion of law (Hans Merz in Berner Kommentar zum Schweizerischen
Zivilrecht (1962), Art 2 Swiss Civil Code (ZGB) margin notes 88 ff). In general it
can be said that in many civil law countries the abuse of law is sanctioned as a
failure to act in good faith and may even be qualified as tortious behaviour which
obliges the tortfeasor as the person abusing the law to pay damages (see
§ 1295(2) Austrian ABGB).

An individual who attempts to evade the law wants his actions to have legal
effect to avoid concluding a sham transaction
(simulation, Scheingeschäft, simulazione). A sham transaction only aims to
simulate a valid transaction although the valid transaction itself is not intended.
It is void (eg § 117(1) BGB, Art 138 Greek Civil Code; Art 1414(1) Italian Codice
civile; § 916(1) s 1 ABGB).
Legal transactions that evade the law are null and void, see eg § 134 BGB;
Art 1344 Codice civile on contracts that are concluded in frode alla legge.

SION OF STATUTES – CONSTRUCTION TO

PREVENT EVASION :
EVASION OF STATUTES – CONSTRUCTION TO PREVENT EVASION :

It is permissible to evade an Act of Parliament in the sense that a person may not
do that

which the Act prohibits but he is free to do anything which though equally
advantageous to him

as that which is prohibited is nevertheless outside the prohibition, penalty or

burden imposed by

the Act. It is well established that penal and taxing laws are not to be extended by
analogy to

cover acts and situations not within the words of the state on any doctrine of
substance of the

matter. But this principle has no application where what is done is really the
thing prohibited

although under colour or cloak of different transaction not prohibited by the

statute. It is not

permissible to evade an Act of Parliament by resorting to a fraudulent device or

by covering the

reality by a non-genuine transaction. The word ‘evade’ is thus ambiguous and is

used in two

senses, and in spite of various explanations given by the courts as to the two
different meanings

of that word, the position is not very much different from what Lord Cranworth,
LC found in
1855. Lord Chancellor said “I never understood what is meant by an evasion of
an Act of

Parliament; either you are within the Act or you are not within it; if you are not
within it you have

a right to avoid, to keep out of prohibition. A citizen is free to so arrange his

business that he is

able to avoid a law and its evil consequences so long as he does not break that or
any other

law. A blatant tax avoidance scheme which brings profit to a person cannot lead
to the taxation

of the person on the ground that he has earned profit by trade unless his
activities an the part

played by him in furtherance of the scheme amount to trade in the accepted

sense or unless the

legislature enacts a special definition or provision to tax such activities. The

taxing laws have

constantly been the subject of evasion in the sense of avoiding something

disagreeable and

there are many dicta to the effect that a citizen is entitled to so arrange his affairs
that the tax

burden does not fall on him and that there is nothing illegal or immoral in
adopting such a

course.

Section 195, Code of Criminal Procedure, 1898, which provides that cognizance
of

certain offences is not to be taken except on the complaint in writing made by the
relevant court,
cannot be evaded by the device of charging a person with an offence to which
that section does

not apply and then convicting him of an offence to which it does apply on the
ground that the

latter offence is a minor one of the same character or by describing the offence as
punishable

under some other section of the Penal Code, though in reality the offence falls in
the category of

offences mentioned in Section 195.

The principle, that the courts can go behind the form and reach the reality, has to
be

applied with certain reservations in determining correct amount of duty payable

on documents

under the Indian Stamps Act, 1899. The duty being imposed on instruments and
not upon

transactions, court can only construe the document as it stands for determining
the proper

amount of duty, and although the name given to the document by the parties may
not be

decisive of its character, it is not permissible to go behind the document and to

hold an enquiry

as to the real nature of the transaction as distinguished from the real nature of
the document.

On the general principle that when alternative constructions are open, a statute
should be so

construed as to give effect to its object or policy, the courts to the extent the
language permits,

will be slow to adopt such a construction which may lead to large scale evasion of
the Act

resulting in its object being defeated.