ICAI Notes: Interpretation of Statutes | Corporate & Other Laws for CA Intermediate PDF Download

 Page 1


LEARNING OUTCOMES 
a
    
 
CHAPTER 
2 
 
INTERPRETATION 
OF STATUTES 
 
 
 
 
At the end of this chapter, you will be able to: 
?
Gain knowledge about the need for interpretation of 
statutes. 
?
Explain the various Rules of Interpretation of Statutes. 
?
Describe about the various internal and external aids to 
interpretation. 
?
Comprehend the Rules of Interpretation of Deeds and 
Documents. 
 
  
© The Institute of Chartered Accountants of India
Page 2


LEARNING OUTCOMES 
a
    
 
CHAPTER 
2 
 
INTERPRETATION 
OF STATUTES 
 
 
 
 
At the end of this chapter, you will be able to: 
?
Gain knowledge about the need for interpretation of 
statutes. 
?
Explain the various Rules of Interpretation of Statutes. 
?
Describe about the various internal and external aids to 
interpretation. 
?
Comprehend the Rules of Interpretation of Deeds and 
Documents. 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
2.2 
 
 
1. INTRODUCTION 
As a Chartered Accountant in practice or in service, you will be required to read 
various laws and statutes. Often these enactments may be capable of more than 
one interpretation. It is in this context that awareness of interpretation as a skill 
becomes relevant. This chapter will enable you to understand certain rules of 
interpretation as well as the various internal and external aids to interpretation.  
We shall also discuss the art of interpreting deeds and documents. 
This study relates to ‘Interpretation of Statutes, Deeds and Documents’. So, it 
is necessary that we understand what these words and certain other terms 
denote.  
‘Statute’: To the common man the term ‘Statute’ generally means laws and 
regulations of various kinds irrespective of the source from which they emanate. 
Interpretation of 
statutes, deeds and 
documents
Introduction of relevant 
terms
Importance of 
interpretation of 
Statutes
Rules of Interpretation
Primary Rules
Secondary Rules
Aids to interpretation
Internal aids
External aids
Rules of interpretation 
of deeds and 
documents
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
Page 3


LEARNING OUTCOMES 
a
    
 
CHAPTER 
2 
 
INTERPRETATION 
OF STATUTES 
 
 
 
 
At the end of this chapter, you will be able to: 
?
Gain knowledge about the need for interpretation of 
statutes. 
?
Explain the various Rules of Interpretation of Statutes. 
?
Describe about the various internal and external aids to 
interpretation. 
?
Comprehend the Rules of Interpretation of Deeds and 
Documents. 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
2.2 
 
 
1. INTRODUCTION 
As a Chartered Accountant in practice or in service, you will be required to read 
various laws and statutes. Often these enactments may be capable of more than 
one interpretation. It is in this context that awareness of interpretation as a skill 
becomes relevant. This chapter will enable you to understand certain rules of 
interpretation as well as the various internal and external aids to interpretation.  
We shall also discuss the art of interpreting deeds and documents. 
This study relates to ‘Interpretation of Statutes, Deeds and Documents’. So, it 
is necessary that we understand what these words and certain other terms 
denote.  
‘Statute’: To the common man the term ‘Statute’ generally means laws and 
regulations of various kinds irrespective of the source from which they emanate. 
Interpretation of 
statutes, deeds and 
documents
Introduction of relevant 
terms
Importance of 
interpretation of 
Statutes
Rules of Interpretation
Primary Rules
Secondary Rules
Aids to interpretation
Internal aids
External aids
Rules of interpretation 
of deeds and 
documents
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
INTERPRETATION OF STATUTES 
a
    
 
2.3 
The word “statute” is now synonymous with an Act of Parliament. Broadly 
speaking it is the written law that the legislature establishes directly. Maxwell 
defines “statute” as the will of the legislature. In India ‘statute’ means an enacted 
law i.e. the law either enacted by the Parliament or by the state legislature.   
In India the constitution provides for the passing of a bill in Lok Sabha and Rajya 
Sabha and finally after obtaining the assent of the President of India to it, it 
becomes an Act of Parliament or Statute.  
Thus, that which originates through legislation is called “enacted law” or statute 
as against “unenacted” or “unwritten law”. 
However, the Constitution does not use the terms ‘statute’ though one finds the 
terms ‘law’ used in many places. The term ‘law’ is defined as including any 
ordinance, order, bye- law, rule, regulation, notification, and the like. 
In short ‘statute’ signifies written law as against unwritten law. 
‘Document’: Generally understood, a document is a paper or other material thing 
giving information, proof or evidence of anything. The Law defines ‘document’ in 
a more technical form. Section 3 of the Indian Evidence Act, 1872 states that 
‘document’ means any matter expressed or described upon any substance by 
means of letters, figures or marks or by more than one of those means, intended 
to be used, or which may be used, for the purpose of recording that matter.  
Example 1: A writing is a document; any words printed, photographed are 
documents.  
Section 3(18) of the General Clauses Act, 1897 states that the term ‘document’ shall 
include any matter written, expressed or described upon any substance by means of 
letters, figures or marks, or by more than one of those means which is intended to be 
used, or which may be used, for the purpose of recording this matter. 
Generally, documents comprise of following four elements: 
 
Elements of documents
Matter Record Substance means
© The Institute of Chartered Accountants of India
Page 4


LEARNING OUTCOMES 
a
    
 
CHAPTER 
2 
 
INTERPRETATION 
OF STATUTES 
 
 
 
 
At the end of this chapter, you will be able to: 
?
Gain knowledge about the need for interpretation of 
statutes. 
?
Explain the various Rules of Interpretation of Statutes. 
?
Describe about the various internal and external aids to 
interpretation. 
?
Comprehend the Rules of Interpretation of Deeds and 
Documents. 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
2.2 
 
 
1. INTRODUCTION 
As a Chartered Accountant in practice or in service, you will be required to read 
various laws and statutes. Often these enactments may be capable of more than 
one interpretation. It is in this context that awareness of interpretation as a skill 
becomes relevant. This chapter will enable you to understand certain rules of 
interpretation as well as the various internal and external aids to interpretation.  
We shall also discuss the art of interpreting deeds and documents. 
This study relates to ‘Interpretation of Statutes, Deeds and Documents’. So, it 
is necessary that we understand what these words and certain other terms 
denote.  
‘Statute’: To the common man the term ‘Statute’ generally means laws and 
regulations of various kinds irrespective of the source from which they emanate. 
Interpretation of 
statutes, deeds and 
documents
Introduction of relevant 
terms
Importance of 
interpretation of 
Statutes
Rules of Interpretation
Primary Rules
Secondary Rules
Aids to interpretation
Internal aids
External aids
Rules of interpretation 
of deeds and 
documents
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
INTERPRETATION OF STATUTES 
a
    
 
2.3 
The word “statute” is now synonymous with an Act of Parliament. Broadly 
speaking it is the written law that the legislature establishes directly. Maxwell 
defines “statute” as the will of the legislature. In India ‘statute’ means an enacted 
law i.e. the law either enacted by the Parliament or by the state legislature.   
In India the constitution provides for the passing of a bill in Lok Sabha and Rajya 
Sabha and finally after obtaining the assent of the President of India to it, it 
becomes an Act of Parliament or Statute.  
Thus, that which originates through legislation is called “enacted law” or statute 
as against “unenacted” or “unwritten law”. 
However, the Constitution does not use the terms ‘statute’ though one finds the 
terms ‘law’ used in many places. The term ‘law’ is defined as including any 
ordinance, order, bye- law, rule, regulation, notification, and the like. 
In short ‘statute’ signifies written law as against unwritten law. 
‘Document’: Generally understood, a document is a paper or other material thing 
giving information, proof or evidence of anything. The Law defines ‘document’ in 
a more technical form. Section 3 of the Indian Evidence Act, 1872 states that 
‘document’ means any matter expressed or described upon any substance by 
means of letters, figures or marks or by more than one of those means, intended 
to be used, or which may be used, for the purpose of recording that matter.  
Example 1: A writing is a document; any words printed, photographed are 
documents.  
Section 3(18) of the General Clauses Act, 1897 states that the term ‘document’ shall 
include any matter written, expressed or described upon any substance by means of 
letters, figures or marks, or by more than one of those means which is intended to be 
used, or which may be used, for the purpose of recording this matter. 
Generally, documents comprise of following four elements: 
 
Elements of documents
Matter Record Substance means
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
2.4 
(i) Matter—This is the first element. Its usage with the word “any” shows that the 
definition of document is comprehensive. 
(ii) Record—This second element must be certain mutual or mechanical device 
employed on the substance. It must be by writing, expression or description. 
(iii) Substance—This is the third element on which a mental or intellectual 
elements comes to find a permanent form. 
(iv) Means—This represents forth element by which such permanent form is 
acquired and those can be letters, any figures, marks, symbols which can be 
used to communicate between two persons. 
‘Instrument’: In common parlance, ‘instrument’ means a formal legal document 
which creates or confirms a right or records a fact. It is a formal writing of any 
kind, such as an agreement, deed, charter or record, drawn up and executed in a 
technical form. It also means a formal legal document having legal effect, either 
as creating a right or liability or as affording evidence of it.  
Section 2(14) of the Indian Stamp Act, 1899 states that ‘instrument’ includes every 
document by which any right or liability is or purports to be created, transferred, 
extended, extinguished or recorded. 
‘Deed’: The Legal Glossary defines ‘deed’ as an instrument in writing (or other 
legible representation or words on parchment or paper) purporting to effect 
some legal disposition. Simply stated deeds are instruments though all 
instruments may not be deeds. However, in India no distinction seems to be made 
between instruments and deeds. 
‘Interpretation’: By interpretation is meant the process by which the Courts seek 
to ascertain the meaning of the legislature through the medium of the words in 
which it is expressed. Simply stated, ‘interpretation’ is the process by which the 
real meaning of an Act (or a document) and the intention of the legislature in 
enacting it (or of the parties executing the document) is ascertained.  
Interpretation is resorted to in order to resolve any ambiguity in the statute. It is 
the art of finding out the true sense of words that is to say the sense in which 
their author intended to convey the subject matter.  
Importance of Interpretation: Interpretation, thus, process of considerable 
significance. In relation to statute law, interpretation is of importance because of 
the inherent nature of legislation as a source of law.  The process of statute 
making and the process of interpretation of statutes take place separately from 
© The Institute of Chartered Accountants of India
Page 5


LEARNING OUTCOMES 
a
    
 
CHAPTER 
2 
 
INTERPRETATION 
OF STATUTES 
 
 
 
 
At the end of this chapter, you will be able to: 
?
Gain knowledge about the need for interpretation of 
statutes. 
?
Explain the various Rules of Interpretation of Statutes. 
?
Describe about the various internal and external aids to 
interpretation. 
?
Comprehend the Rules of Interpretation of Deeds and 
Documents. 
 
  
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
2.2 
 
 
1. INTRODUCTION 
As a Chartered Accountant in practice or in service, you will be required to read 
various laws and statutes. Often these enactments may be capable of more than 
one interpretation. It is in this context that awareness of interpretation as a skill 
becomes relevant. This chapter will enable you to understand certain rules of 
interpretation as well as the various internal and external aids to interpretation.  
We shall also discuss the art of interpreting deeds and documents. 
This study relates to ‘Interpretation of Statutes, Deeds and Documents’. So, it 
is necessary that we understand what these words and certain other terms 
denote.  
‘Statute’: To the common man the term ‘Statute’ generally means laws and 
regulations of various kinds irrespective of the source from which they emanate. 
Interpretation of 
statutes, deeds and 
documents
Introduction of relevant 
terms
Importance of 
interpretation of 
Statutes
Rules of Interpretation
Primary Rules
Secondary Rules
Aids to interpretation
Internal aids
External aids
Rules of interpretation 
of deeds and 
documents
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
 
 
INTERPRETATION OF STATUTES 
a
    
 
2.3 
The word “statute” is now synonymous with an Act of Parliament. Broadly 
speaking it is the written law that the legislature establishes directly. Maxwell 
defines “statute” as the will of the legislature. In India ‘statute’ means an enacted 
law i.e. the law either enacted by the Parliament or by the state legislature.   
In India the constitution provides for the passing of a bill in Lok Sabha and Rajya 
Sabha and finally after obtaining the assent of the President of India to it, it 
becomes an Act of Parliament or Statute.  
Thus, that which originates through legislation is called “enacted law” or statute 
as against “unenacted” or “unwritten law”. 
However, the Constitution does not use the terms ‘statute’ though one finds the 
terms ‘law’ used in many places. The term ‘law’ is defined as including any 
ordinance, order, bye- law, rule, regulation, notification, and the like. 
In short ‘statute’ signifies written law as against unwritten law. 
‘Document’: Generally understood, a document is a paper or other material thing 
giving information, proof or evidence of anything. The Law defines ‘document’ in 
a more technical form. Section 3 of the Indian Evidence Act, 1872 states that 
‘document’ means any matter expressed or described upon any substance by 
means of letters, figures or marks or by more than one of those means, intended 
to be used, or which may be used, for the purpose of recording that matter.  
Example 1: A writing is a document; any words printed, photographed are 
documents.  
Section 3(18) of the General Clauses Act, 1897 states that the term ‘document’ shall 
include any matter written, expressed or described upon any substance by means of 
letters, figures or marks, or by more than one of those means which is intended to be 
used, or which may be used, for the purpose of recording this matter. 
Generally, documents comprise of following four elements: 
 
Elements of documents
Matter Record Substance means
© The Institute of Chartered Accountants of India
a
 
 
 
CORPORATE AND OTHER LAWS 
2.4 
(i) Matter—This is the first element. Its usage with the word “any” shows that the 
definition of document is comprehensive. 
(ii) Record—This second element must be certain mutual or mechanical device 
employed on the substance. It must be by writing, expression or description. 
(iii) Substance—This is the third element on which a mental or intellectual 
elements comes to find a permanent form. 
(iv) Means—This represents forth element by which such permanent form is 
acquired and those can be letters, any figures, marks, symbols which can be 
used to communicate between two persons. 
‘Instrument’: In common parlance, ‘instrument’ means a formal legal document 
which creates or confirms a right or records a fact. It is a formal writing of any 
kind, such as an agreement, deed, charter or record, drawn up and executed in a 
technical form. It also means a formal legal document having legal effect, either 
as creating a right or liability or as affording evidence of it.  
Section 2(14) of the Indian Stamp Act, 1899 states that ‘instrument’ includes every 
document by which any right or liability is or purports to be created, transferred, 
extended, extinguished or recorded. 
‘Deed’: The Legal Glossary defines ‘deed’ as an instrument in writing (or other 
legible representation or words on parchment or paper) purporting to effect 
some legal disposition. Simply stated deeds are instruments though all 
instruments may not be deeds. However, in India no distinction seems to be made 
between instruments and deeds. 
‘Interpretation’: By interpretation is meant the process by which the Courts seek 
to ascertain the meaning of the legislature through the medium of the words in 
which it is expressed. Simply stated, ‘interpretation’ is the process by which the 
real meaning of an Act (or a document) and the intention of the legislature in 
enacting it (or of the parties executing the document) is ascertained.  
Interpretation is resorted to in order to resolve any ambiguity in the statute. It is 
the art of finding out the true sense of words that is to say the sense in which 
their author intended to convey the subject matter.  
Importance of Interpretation: Interpretation, thus, process of considerable 
significance. In relation to statute law, interpretation is of importance because of 
the inherent nature of legislation as a source of law.  The process of statute 
making and the process of interpretation of statutes take place separately from 
© The Institute of Chartered Accountants of India
 
 
INTERPRETATION OF STATUTES 
a
    
 
2.5 
General Classification of Interpretation
Legal 
Authentic 
when rule of 
interpretation 
is derived from 
the legislator 
himself
Usual
when rule of 
interpretation 
is derived from 
some other 
source such as 
custom or case 
law
Doctrinal
Grammatical
when the court 
applies only 
the ordinary 
rules of speech
Logical
when the court 
goes beyond 
the words and 
tries to 
discover the 
intention of 
the statute in 
some other 
way 
each other, and two different agencies are concerned.  Interpretation serves as 
the bridge of understanding between the two. 
Classification of Interpretation: 
 
Jolowicz, in his Lectures on Jurisprudence (1963 ed., p. 280) speaks of 
interpretation thus:  
Interpretation is usually said to be either ‘legal’ or ‘doctrinal’. It is ‘legal’ when 
there is an actual rule of law which binds the Judge to place a certain 
interpretation of the statute. It is ‘doctrinal’ when its purpose is to discover ‘real’ 
and ‘true’ meaning of the statute.  
‘Legal’ interpretation is sub-divided into ‘authentic’ and ‘usual’. It is ‘authentic’ 
when rule of interpretation is derived from the legislator himself; it is ‘ usual’ when 
it comes from some other source such as custom or case law. Thus, when 
Justinian ordered that all the difficulties arising out of his legislation should be 
© The Institute of Chartered Accountants of India