The Central Government enacted the Industrial Regulation Act, 1985. One of the provisions of the Act uses the term 'processing unit', but the term…
CA Intermediate · Corporate and Other Laws · RTP · May 2026
The Central Government enacted the Industrial Regulation Act, 1985. One of the provisions of the Act uses the term 'processing unit', but the term is not specifically defined in the statute. For the last 30 years, licensing authorities across the country have consistently treated small packaging units as “processing units” under the Act. Several industries have been granted licences on this basis. The Legislature has amended the Act multiple times over the years, but has never altered this interpretation. Further, in one case, a High Court also accepted this long-standing practice while deciding a dispute. Recently, a new regulatory authority has taken a different view and denied licence to a packaging unit, arguing that the term 'processing unit' should be interpreted strictly as per its dictionary meaning and not according to past administrative practice. The affected company challenges the decision and contends that long-standing usage and practice should guide the interpretation of the statute. While interpreting a statute, what is the effect of usage, customs and long-standing practice? Explain with reference to relevant principles and Latin maxims.
Suggested Answer and Working Notes:
Effect of usage: Usage or practice developed under the statute is indicative of the meaning recognized to its words by contemporary opinion. A uniform notorious practice continued under an old statute and inaction of the Legislature to amend the same are important factors to show that the practice so followed was based on correct understanding of the law. When the usage or practice receives judicial or legislative approval it gains additional weight. In this connection, we have to bear in mind two Latin maxims: (i) 'Optima Legum interpres est consuetude' (the custom is the best interpreter of the law); and (ii) 'Contemporanea exposito est optima et fortissinia in lege' (the best way to interpret a document is to read it as it would have been read when made). Therefore, the best interpretation/construction of a statute or any other document is that which has been made by the contemporary authority. Simply stated, old statutes and documents should be interpreted as they would have been at the time when they were enacted/written. Contemporary official statements throwing light on the construction of a statute and statutory instruments made under it have been used as contemporanea expositio to interpret not only ancient but even recent statutes in India. Therefore, in the given case, the long-standing and uniform administrative practice, supported by legislative inaction and judicial approval, would carry significant persuasive value in interpreting the term "processing unit."
Topics: Interpretation of Statutes
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