Article (August-2016)

Articles

Retrospectivity Paradigm

Shanti Mal Jain & P. C. Chaturvedi

Designation : -   Advocate & Consultant, Tripti Banda Road, Bhawanimandi (Raj.) & Sr. Manager (IR), Rajasthan Textile Mills,Bhawanimandi (Raj.)

Organization : -  

01-Aug-2016

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The Payment of Bonus (Amendment) Bill 2015 was passed by Lok Sabha on 22.12.2015 and after it has been assented to it because an Act which had become effective retrospectively from 01-04-2014. It created a stir in industries because retrospective effect would have disastrous effect on industries who had already paid bonus-exgratia or performance bonus or under any nomenclature would now be required to pay statutory bonus also. Similarly recently in Rajasthan minimum wages have been revised and increased retrospectively from 1st Jan. 2015. Ordinarily financial lability would not be fastened retrospectively and doing this may not stand the judicial scrutiny.


However Hon'ble High Court of Kerala, Karnataka, Allahabed and Rajasthan have stayed the retrospective operation of the Payment of Bonus (Amendment) Act 2015 so far its operation related to financial year 2014-15 holding that retrospectivity is the sworn enemy of fairness. The Hon'ble Supreme Court of India way back in the early 70's in Golak Nath's case propounded that the enactment should not be applicable with retrospective effect. The Apex Court has also in the case of Remigation Rand of India V/s Workmen reported in AIR 1974 SC 1420 held that Payment Of Bonus Act did not have retrospective effect. The question of applicability of a proposition retrospectively caught the attention of our Supreme Court and it laid down a novel principle of law in the case of Employees State Insurance Corporation V/s Hyderabad Race club 2004 (102) FLR 1036 (SC).


However to be best at the game and to walk the talk on the issue of retrospectivity and to comprehend it in its conceptual clarity we should only rely on as to how our Supreme Court treats it as we all know our Supreme Court is probably the strongest in the world in giving verdicts that display a rare jurisprudential vision. This is what it has done and dissected the entire anatomy and chemistry of this proposition in the cases of CIT (New Delhi) V/s Vatika Township Pvt. Ltd. 2015 (1) SCC 1 and Director General of Forgien Trade & Another V/s Kanak Exports and Another 2016 (2) SCC 226.


Chronologically speaking there is a technique required to draft legislation either in the form of a statutory Act, statutory rule or statutory notification and similarly a technique is required to understand it. One is legislative drafting and the other is interpretation of statutes. In this regards the ordinary rule is that unless a specific contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea is based on a simple and a common rule is that a current law should govern the current activities. The law passed to day can not and should not apply to the events of the past. It is again a very small common sense that we usually plan out our affairs in accordance with the existing laws and can not take into account the laws that would be hence forth passed and would govern ours affairs of today. To put it all simply law looks forward not back ward and the conduct of man kind should be regulated by the law as is in existence. Then again the obvious basis of the principle against retrospectivity is the principle of fairness. The law which modified accrued rights or which imposed obligations, duties or new disabilities have to be prospective unless there are specified compelling reasons or that the law is for the purpose of supplying an obvious omission in a formal legislation or to explain an earlier legislation. Here a distinction is to be drawn that where a benefit is conferred by a legislation the rule against a retrospective interpretation is slightly different but the conferring of such a benefit on some person should be without inflicting a corresponding detriment on some other person or the public. It is so circumscribed.


Similarly in some circumstances a procedural provision can be given a retrospective effect but in this process also the rule and principle of fairness shall not be ignored. To make this discussion all complete and exhaustive, it is submitted that sometimes and in certain circumstances a particular amendment could be conceived as classificatory or declaratory in nature. Such amendment could be termed as declaratory statutes. For the sake of brevity a declaratory Act may be defined as an Act to remove doubts existing in the present law.


It now seems to be well settled rule of interpretation followed by time and sanctified by judicial verdict that retrospective operations should not be given to a statute so to take away or impair an existing right or create a new obligation or impose new liability and that all statutes other than those which are merely declaratory or which relate to matter of procedure or evidence or primafacie prospective. This position and legal dicta has been reiterated in the supracited two recent cases with all possible legal brilliance routed literally.


In one of the above case it so happened that the rate of surcharge applicable on the block assessment on disclosed income was a difficult proposition. The charge in respect of surcharge was created for the first time by insersion of the proviso to section 113 which became effective from 01.06.2002. In the circumstance a retrospective amendment to section 113 was suggested but the legislature did not do it. This was precisely the core question before the Hon'ble Supreme Court whether the amendment was to be given a retrospective effect. Incidentally in this case the Apex Court handed over to us a clearcut guide line for interpreting the fiscal statutes and held that if the interpretation is onerous to the assessee then it  should never be given retrospective operation because there can not be imposition of any tax with out the authority of law. Such a law has to be unambiguous and must prescribe the liability to pay taxes in clear terms and such a provision of taxing statute which is vague and susceptible to two interpretation the interpretation which favours citizen as against the Revenue has to be preferred. This is well established principle. The Supreme Court in the case of Trilok Chand Prasan Kumar V/s State of U.P. AIR 1973 SC 1034 observed that where the legislature could make a valid law, it provides not only for the prospective operation of the material provisions of the said law but it could also provide for the retrospective operation of the said provisions. This was recently referred by the High Court of Madhya Pradesh in the case of Association of Industries Dewas V/s State of Madhya Pradesh and others 2016 (1) CLR 237 when it held that Minimum Wages could be made effective retrospectively. We respectfully submit that this ratio-decidendi is not a final word. If case goes to the Apex Court, we could be handed over a more structured position.      

    
Here we are inclined to submit that certainty is an ideal that law must never cease to aim at but it is also one that it can never be realized all completely for the main cause of uncertainty in any kind of law is the uncertainty of the facts to which it has to be applied.  


Our Supreme Court has also observed in some cases that even a social legislation cant not be given retrospective operation. We can therefore conclude that as the rules of interpretation of statues are useful servants but difficult masters and that way all the statutes are prospective in operations except those which are declaratory,  and explanatorily or those of statutes which seek to explain any pre existing ambiguity or supply obvious omissions or clear up doubts. In so interpreting even public interest would not be a supervening equity. The position is now after the supreme Court verdict is perfectly and conceptually clear.


It seems that concept of retrospectivity belonged to the old jurisprudence  which took a tunnel vision that the legislature was competent enough to make a provision effective retrospective but now the untidy creases that flowed from such a approach have been thrown out by this recent verdict although earlier also it was so. It is very often said that courage, conviction, commitment and craftmanship are four qualities but very many verdicts of our Supreme Court display all these qualities at one time.