Changes in the Scope of expression “known sources of income” by virtue of the Prevention of Corruption (Amendment) Act, 2018 (Act No. 16 of 2018)

That the definition of the key expression “known sources of income” has undergone a substantial change by virtue of the Prevention of Corruption (Amendment) Act, 2018 (Act No. 16 of 2018). For ready reference, the explanation to Section 13(1) of the Prevention of Corruption Act, 1988 (prior to amendment) is reproduced hereinbelow:

“Explanation. —For the purposes of this section, “known sources of income” means income received from any lawful source and such receipt has been intimated in accordance with the provisions of any law, rules or orders for the time being applicable to a public servant.”

Pursuant to the aforesaid amendment, Explanation 2 has been inserted/substituted, which reads as under:

“Explanation 2.- The expression “known sources of income” means income received from any lawful sources.”

It is pertinent to note that a bare perusal of the amended provision reveals that the mandatory requirement of intimation in accordance with any law, rules, or orders applicable to a public servant has been expressly omitted.

The Statement of Objects and Reasons of the Amendment Act, 2018 further clarifies the legislative intent. The relevant extract is reproduced as under:

“2(f). it is proposed to substitute sub-section 1 of section 13 with a new sub-section so as to omit the existing clauses (a),(b), and (d) of sub section 1 as mentioned above; to incorporate the element of intentional enrichment in the existing clause relating to possessions of disproportionate assets by a public servant; and to modify the definition of “known sources of income” as contained in the explanation to mean income received from any lawful source that is, by doing away with the requirement of intimation in accordance with any law, rules or orders applicable to a public servant.”

The Prevention of Corruption (Amendment) Act, 2018: Retrospective Application

It is a well-settled principle of interpretation that where an amendment mollifies the rigour of criminal law, such beneficial provisions must receive retrospective application. This principle is not fettered by Article 20(1) of the Constitution, which prohibits only retrospective penal legislation that creates or enhances liability. Beneficial legislation reducing the rigour of the law stands on a different footing, being inspired by the maxim “Salus Populi Est Suprema Lex” i.e. regard for public welfare is the highest law, and is rooted in justice, equity, and good conscience.

The enactment/amendment which mollifies the rigor of criminal law is to be given retrospective effect” has been held by the Hon’ble Apex Court and Hon’ble High Court in various pronouncement(s). In the landmark judgement of Rattan Lal Versus State of Punjab, 1965 AIR page 444, while dealing with the question of mollifying the rigor of criminal law the Hon’ble Supreme Court has held that “Every law that takes away or impairs a vested right is retrospective. Every ex post facto law is necessarily retrospective. Under Article 20 of the Constitution, no person shall be convicted of any offence except for violation of a law in force at the time of the commission of that act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. But an ex post facto law which only mollifies the rigour of a criminal law does not fall within the said prohibition. If a particular law makes a provision to that effect, though retrospective in operation, it will be valid.”

This principle has also been affirmed by the Hon’ble Gauhati High Court in Mohd. Abdul Haque v. Smt. Jesmina Begum Choudhury (Criminal Petition No. 434/2010, decided on 25.04.2012), wherein, relying on Rattan Lal (supra), it was held that only those enactments which relax existing procedure or mollify the rigour of criminal law can be given retrospective operation, while provisions creating new rights and liabilities must be construed prospectively.

4.90. The Hon’ble Supreme Court, in its recent pronouncement in Trilok Chand v. State of Himachal Pradesh (Criminal Appeal No. 1831/2010, decided on 01.10.2019), reiterated that where an amendment is beneficial to the accused, the same must be extended to pending proceedings as well as earlier cases.

Effect of Prevention of Corruption (Amendment) Act, 2018 in the scope of Expression “Known Sources of income”:

The 2018 amendment unquestionably liberalises the statutory meaning of “known sources of income” by deleting the former requirement of prior intimation. Prior to the Prevention of Corruption (Amendment) Act, 2018, the Explanation appended to Section 13(1)(e) contained two cumulative statutory requirements before a receipt could qualify as part of the public servant's “known sources of income”:

1. the income had to be received from a lawful source; and
2. the receipt had to have been intimated in accordance with the law, rules or orders applicable to the public servant.

The second limb was not merely descriptive. On the literal language of the pre-amendment Explanation, even money genuinely received from a lawful source could potentially be excluded from the statutory computation if the public servant had failed to make the prescribed intimation.

Explanation 2 now provides simply that the expression “known sources of income” means “income received from any lawful sources.” Hence, post amendment, lawfulness of the source of income is now the statutory criterion for determining whether a receipt constitutes a known source of income.

The amendment is substantive and beneficial to the accused. This does not, however, mean that every unexplained receipt automatically becomes a known source of income. The accused must still satisfactorily establish the existence and lawful character of the source. Nor does the amendment dilute the prosecution's obligation to establish the foundational ingredients of disproportionate assets. What disappears is the additional statutory disqualification arising merely from non-intimation. The amended definition does not legitimise unlawful or fictitious income; rather, it prevents an otherwise lawful source from being excluded solely because the receipt had not been formally intimated.

The omission is substantive and significant. An otherwise genuine and lawful receipt does not cease to constitute income from a known source merely because the public servant had omitted to intimate such receipt in the manner contemplated under the applicable service rules. A failure to make such intimation may, where independently prescribed, entail consequences under the relevant service or conduct rules; however, after the 2018 amendment, such failure cannot, by itself, furnish a statutory basis for excluding an otherwise lawful receipt while determining the public servant's known sources of income under Section 13 of the Prevention of Corruption Act.

The aforesaid amendment therefore mollifies the rigour of the erstwhile definition. It removes an additional statutory disability which previously enabled exclusion of even lawfully received income merely on account of non-intimation. Consequently, in determining whether the pecuniary resources or property attributed to a public servant are disproportionate to his known sources of income, the emphasis under the amended definition is upon the genuineness and lawfulness of the source of receipt rather than upon compliance with a separate requirement of disclosure or intimation.