“Prospective-Yet-Trigger-Driven”: Kerala High Court Clarifies that Post-2018 Sanction under S.19 P.C. Act Is Mandatory If Cognizance Is Taken After 26-07-2018—even for Pre-Amendment Offences—and Denies S.197 CrPC Shield to Officers of Government Companies

1. Introduction

The Kerala High Court in R. Chandrasekharan v. Central Bureau of Investigation (decided on 24 July 2024) delivered a detailed composite judgment disposing of three connected matters:

WP(C) No. 25863/2020 – filed by the de facto complainant challenging refusal of prosecution sanction;
Crl.M.C. No. 497/2022 – filed by Accused No.1 (former Managing Director, Kerala State Cashew Development Corporation – “KSCDC”) to quash the final report in CC 45/2021;
Crl.M.C. No. 1634/2022 – filed by Accused No.3 (former Chairman, KSCDC) with identical relief.

At the core lay allegations of a decade-long conspiracy (2006–2015) whereby KSCDC officials (A1 & A3) purportedly favoured a private trader (A4) in awarding fourteen contracts for import of raw cashew nuts, sabotaging State policy on local procurement and causing huge loss to the public exchequer.

Two intertwined statutory questions dominated the adjudication:

Whether, after the 2018 amendments to the Prevention of Corruption Act (“PC Act”), a prosecution launched after 26 July 2018 for offences committed before that date still requires fresh sanction under Section 19;
Whether officers of a Government company (KSCDC) enjoy the protective umbrella of prior sanction under Section 197 of the Code of Criminal Procedure (“CrPC”) for IPC offences (120-B/420) once sanction under the PC Act is declined.

2. Summary of the Judgment

Justice Dr. Kauser Edappagath held:

The 2018 amendment to Section 19 PC Act operates prospectively; however, the relevant “trigger point” is the date of cognizance, not the date of offence. Hence, if cognizance is taken after 26-07-2018—even for pre-2018 misconduct—sanction is mandatory.
The State Government’s order (Ext.P3) refusing sanction was vitiated by non-application of mind and is therefore quashed. The matter is remitted to the competent authority to reconsider sanction within three months.
The allegations and materials disclose a prima facie case against A1 & A3; therefore, their petitions to quash proceedings are dismissed. Section 482 CrPC cannot be invoked merely because sanction is pending.
Officers of a Government company are public servants under IPC S.21 but do not receive the shelter of Section 197 CrPC; accordingly, prosecution for IPC offences may proceed without such sanction.
Further proceedings in CC 45/2021 are stayed pro tem until the State redetermines sanction.

3. Analysis

3.1 Precedents Cited and Their Influence

L. Narayana Swamy v. State of Karnataka (2016) 9 SCC 598 – Recognised that under the unamended PC Act no sanction was needed for retired officials; used to demonstrate the legal position pre-2018.
State of Rajasthan v. Tejmal Choudhari (2022) 2 KHC 49 & State of Telangana v. Managipet Reddy (2019) 19 SCC 87 – Held S.17A (inserted 2018) is prospective; Court distinguished these because S.17A concerns investigation stage whereas S.19 concerns cognizance.
Hitendra Vishnu Thakur v. State of Maharashtra (1994) 4 SCC 602 – Laid down principles of retrospective v. prospective operation of procedural amendments; foundation for holding sanction requirement prospective but tied to cognizance.
Mohd. Hadi Raja v. State Of Bihar (1998) KHC 970 & follow-ups (N.K. Sharma ; BSNL v. Pramod Sawant) – Affirmed that employees of Government companies are not covered by S.197 CrPC; decisive for denying protection to A1 & A3.
A. Srinivasulu 2023 LiveLaw SC 485 – Relied on by defence; Court held it inapposite because that ruling did not address whether Government-company officers need sanction but only whether the act was in discharge of duty.
Deepak Chowdhary (AIR 1996 SC 186) & State v. R.C. Anand – Emphasised duty of sanctioning authority to form prima facie view; Court invoked these to strike down Ext.P3.

3.2 Legal Reasoning

(a) Prospectivity with Cognizance-Linked Trigger

Section 19(1) (post-2018) extends sanction requirement to “who is or was” a public servant—adding retired officials. Although purely procedural amendments typically have retrospective effect, the Court reasoned:

The amendment imposed a new obligation on prosecution and conferred new protection on retired public servants; by the Hitendra Vishnu Thakur test, such amendments are prospective.
However, the statute’s text makes sanction necessary at the moment of cognizance. Hence, if cognizance occurs post-26-07-2018, sanction is mandatory—even if investigation or offence predates the amendment.

(b) Invalidity of Ext.P3 (Refusal of Sanction)

The Government rejected sanction on four grounds. The Court meticulously dismantled each, finding factual errors and non-consideration of record, e.g.:

KSCDC is bound by CVC guidelines and the Store Purchase Manual (SPM); Board Freedom-with-Responsibility was misused.
Accused officers exercised dominant influence over Board decisions; therefore, Board approval does not absolve abuse.
Evidence of diversion of grants and false utilisation certificates was ignored.

Consequently, order lacked “application of mind” and was quashed with direction to reconsider within three months.

(c) No Shield of Section 197 CrPC for KSCDC Officials

Though KSCDC officers are “public servants” under IPC 21(12), the remaining limbs of S.197 are absent: they are not “employed in connection with the affairs of the Union/State” and are removable by the company’s shareholders, not the Government. Relying on Mohd. Hadi Raja, the Court reiterated that Section 197 applies to civil servants, not PSU employees. Therefore, the CJM rightly took cognizance of 120-B/420 IPC without sanction.

(d) No Ground for Quash under S.482 CrPC

Because a prima facie case emerged and sanction question is pending fresh consideration, the “rarest of rare” threshold for quashing was not met.

3.3 Impact of the Decision

Sanction Jurisprudence Reset: High Courts nationwide now possess a clear yardstick: for offences under PC Act, look at date of cognizance. If post-26-07-2018, sanction is non-negotiable—even if investigation or offence is older.
Sanction Orders under Increased Scrutiny: The Court’s robust analysis signals that perfunctory refusal of sanction will not withstand judicial review; sanction authorities must record rational basis.
Government-Company Officers Warned: The reiteration that the S.197 CrPC umbrella does not cover PSU officers will embolden investigative agencies to proceed directly for IPC cheating/conspiracy charges where PC Act sanction fails or is delayed.
Practical Effect on Pending Caseload: Trials already in progress (where cognizance was taken pre-26-07-2018) remain unaffected—thus avoiding chaos—yet many post-2018 cognizance cases may be remanded for sanction reconsideration.

4. Complex Concepts Simplified

Sanction (Under PC Act v. CrPC): Sanction is official permission allowing prosecution of public servants. Section 19 PC Act applies specifically to corruption charges; Section 197 CrPC is a general protection for acts done while performing official duties.
Prospective vs. Retrospective Operation: A prospective law applies only to future events; a retrospective (retroactive) law reaches past acts. However, procedural changes sometimes apply to ongoing cases—unless they create new rights/obligations.
‘Date of Cognizance’: The date on which a criminal court formally takes notice of an offence upon perusal of a charge-sheet or complaint. It is distinct from dates of offence, FIR, or investigation.
Government Company vs. Government Department: A Government company (like KSCDC) is a separate legal entity incorporated under Companies Act with ≥51% Government shareholding. Its employees are not State civil servants; hence different rules (e.g., no S.197 shield).

5. Conclusion

The Kerala High Court has drawn two crisp lines:

Amended Section 19 PC Act operates prospectively but is triggered by the stage of cognizance. Thus, sanction now travels with the case, not the calendar of the crime.
Section 197 CrPC remains the prerogative of core Government service; officers of Government companies cannot claim it.

By striking down a sanction refusal grounded in misapprehension, the Court re-emphasised that sanction is neither a bureaucratic shield nor a mechanical ritual, but a reasoned gateway. Investigators, sanctioning authorities, and corporate-public officers alike must recalibrate their strategies in light of this precedent. The ruling balances anti-corruption objectives with procedural safeguards—fortifying accountability without sacrificing fairness.