S.T. SADIQ Vs. STATE OF KERALA & ORS.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 3962 of 2007, Judgment Date: Feb 04, 2015
-
It is well-settled that if a statute requires an authority to exercise power, when such authority is satisfied that conditions exist for exercise of that power, the satisfaction has to be based on the existence of grounds mentioned in the statute. The grounds must be made out on the basis of the relevant material. If the existence of the conditions required for the exercise of the power is challenged, the courts are entitled to examine whether those conditions existed when the order was made. A person aggrieved by such action can question the satisfaction by showing that it was wholly based on irrelevant grounds and hence amounted to no satisfaction at all. In other words, the existence of the circumstances in question is open to judicial review. -
It is settled law by a catena of decisions of this Court that the legislature cannot directly annul a judgment of a court. The legislative function consists in "making" law [see: Article 245 of the Constitution] and not in "declaring" what the law shall be [see: Article 141 of the Constitution]. If the legislature were at liberty to annul judgments of courts, the ghost of bills of attainder will revisit us to enable legislatures to pass legislative judgments on matters which are inter- parties. -
It is for this reason that our Constitution permits a legislature to make laws retrospectively which may alter the law as it stood when a decision was arrived at. It is in this limited circumstance that a legislature may alter the very basis of a decision given by a court, and if an appeal or other proceeding be pending, enable the Court to apply the law retrospectively so made which would then change the very basis of the earlier decision so that it would no longer hold good. However, if such is not the case then legislation which trenches upon the judicial power must necessarily be declared to be unconstitutional. -
The judgments, decrees and orders of any court or the competent authority which had become final against the State were sought to be done away with by enacting the impugned provisions of sub-section (2) of Section 11. Such an attempt cannot be said to be a permissible legislative exercise. -
It is no doubt true that if any decision was rendered against the State of Karnataka which was pending in appeal and had not become final it could rely upon the relevant provisions of the Act which were given retrospective effect by sub- section (2) of Section 1 of the Act for whatever such reliance was worth. But when such a decision had become final as in the present case when the High Court clearly directed respondent-State to give to the petitioners concerned deemed dates of promotions if they were otherwise found fit and in that eventuality to give all benefits consequential thereon including financial benefits, the State could not invoke its legislative power to displace such a judgment. -
It is clear, therefore, that Section 6 directly seeks to upset a final judgment inter-parties and is bad on this count and is thus declared unconstitutional. -
In the circumstances we hold that there is no intelligible differentia between the 36 factories and the 10 factories taken over having any rational relation with the object sought to be achieved and on this ground also Section 6 of the Amendment Act deserves to be struck down as violating Article 14 of the Constitution. -
The appeals are allowed. The judgment of the High Court is set aside
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.3962 OF 2007
S.T. SADIQ ... APPELLANT
VERSUS
STATE OF KERALA & ORS. ... RESPONDENTS
WITH
CIVIL APPEAL NO.3963 OF 2007
J U D G M E N T
R.F. NARIMAN, J.
1. These petitions raise questions as to the constitutional validity of
the Kerala Cashew Factories (Acquisition) Act, 1974 (hereinafter referred
to as "the said Act"), which has been placed in the 9th Schedule to the
Constitution of India, being entry 148 thereof. This Act came into force
on 19th November, 1974 and Section 3 thereof enabled the State Government
to acquire in public interest cashew factories under certain circumstances.
Section 3 is set out hereunder:
"3. Order of Acquisition:-
(1) The Government may, if they are satisfied -
(a) that the occupier of a cashew factory does not conform to the
provisions of law relating to safety, conditions of service or fixation and
payment of wages to the workers of the factory; or
(b) that raw cashewnuts allotted to a cashew factory by the Cashew
Corporation of India are not being processed in the factory to which
allotment has been made or that such nuts are being transferred to any
other cashew factory; or
(c) that there has been large scale unemployment, other than by way of
lay off or retrenchment, of the workers of a cashew factory by order
published in the Gazette declare that the cashew factory shall stand
transferred to, and vest in the Government.
Provided that before making a declaration under this sub-section in respect
of a cashew factory, the Government shall give the occupier of the factory
and the owner of the factory where he is not the occupier, a notice of
their intention to take action under this sub-section and the grounds
therefore and consider the objections that may be preferred in pursuance of
such notice.
Explanation.- For the purposes of this sub-section, the expressions "lay
off" and "retrenchment" shall have the meanings respectively assigned to
them in the Industrial Disputes Act, 1947 (Central Act 14 of 1947).
(2) The notice referred to in the proviso to sub-section (1) shall also
be published in two newspapers published in the State of Kerala, and such
publication shall be deemed to be sufficient notice to the occupier, to the
owner where he is not the occupier and to all other persons interested in
the cashew factory.
(3) On the making of a declaration under sub-section (1), the cashew
factory to which the declaration relates, together with all machinery,
other accessories and other movable properties as were immediately before
the appointed day in the ownership, possession power or control of the
occupier in relation to the factory and all books of accounts, registers
and other documents relating thereto shall stand transferred to, and vest
in, the Government."
2. Identical notices were sent between 1984 and 1986 to 10 cashew
factories under Section 3 of the Acquisition Act, and the said factories
were acquired under the Act pursuant to those notices. Similar notices
stating identical grounds were sent to 36 other cashew factories in 1988 by
which the said factories were also acquired under the said Act. A specimen
notice is set out hereinbelow.
"No.31033/K3/84/Id 19.9.1985
NOTICE
Notice under rule 3 of the Kerala Cashew Factories (Acquisition) Rules,
1974.
WHEREAS it has been brought to the notice of the Government that in respect
of Cashew Factory No.AP.11 located in Eruva, Kayamkulam, in Karthikappally
Taluk, Alapuzha District of which Smt. T. Suhara Beevi C/o Masaliar
Industries, Kilikolloor, Kollam is the owner and M/s. Janso Exports
(Private) Ltd., N.N.C., Estates Vadakkevila P.O., Kollam is the occupier
(proposed) there exist grounds as detailed below warranting action under
section 3(1) of the Kerala Cashew Factories (Acquisition) Act, 1974 notice
is hereby given to all concerned of the intention of the Government to take
action under the above said section of the Act. Interested persons are
hereby directed to file their objections, if any, before the Government of
Kerala against the proposed action within seven days of the receipt of this
notice or the publication of this notice in the newspapers, whichever is
earlier or if they no desire, appear before Shri N. Gopalan Nair,
Additional Director of Industries and Commerce and special office for
cashew societies at the District Industries Centre, Kollam at 11 a.m. on
23.9.1985 and state their objections. If no objections are received within
the said period or no persons appears on the said date it will be presumed
that there are no objections against the proposed action and further steps
will be taken.
All concerned are further informed that Shri N. Gopalan Nair,
Additional Director of Industries and Commerce and Special Officer for
Cashew Societies, Vikas Bhavan, Thiruvananthapuram has been authorized to
prepare an inventory of all properties of the cashew factories mentioned
above under section 5(1) of the Act. They are also informed that
commissions of any act by any person which will diminish the value of the
properties and assets of the cashew factory or the removal of any property
or assets from the premises of the factory is punishable under section 13
of the Act.
GROUNDS
It has been reported by the Authorized officer that your factory is
lying closed and that there is no possibility of its starting functioning
within a period of ten days or in the immediate future. The Government are
therefore, of opinion that the said situation will lead to large scale
unemployment of the workers of the Cashew Factory.
By Order of the Governor
Place: Thiruvananthapuram M. Vijayanunni
Dated: 16.9.1985 Special Secretary to Governor
Industries Department
To,
Smt. T. Suhara Beevi, C/o Musaliar Industries
Kilikolloor, Kollam 4.
Copy to:
Shri N. Gopalan Nair, Addl. Director of Industries and Commerce and Spl.
Officer for Cashew Societies, Vikas Bhavan, Thiruvananthapuram.
2. Special Officer for cashew industry, Kollam for necessary action.
3. The Director of Public Relations for immediate publication in any two
leading dailies having wide circulation.
Forwarded/ By order
Sd/- Section Officer."
3. The 10 cashew factories that were acquired filed writ petitions in
the High Court in the year 1985-1986, which were dismissed by a common
judgment dated 20.1.1994. Meanwhile, the 36 factories approached the
Supreme Court directly in writ petitions filed under Article 32 of the
Constitution. These writ petitions were disposed of by a judgment dated
12.5.1994 reported in Indian Nut Products v. Union of India (1994) 4 SCC
269 in the following terms:-
"8. It appears that in the notice, there is only reference to Section 3(1)
of the Act, without disclosing whether the Government was satisfied in
respect of the existence of any of the situations under clause (a), (b) or
(c) thereof. No details have been mentioned in the said notice. Towards the
end of the said notice, under the heading "Grounds" it has been stated that
the factory was lying closed and that there was no possibility of it to
start functioning within a period of ten days or in the immediate future
and, therefore the Government was of the opinion that the said situation
"will lead to a large scale unemployment ...". It need not be impressed
that an order under Section 3(1) on the ground specified in clause (c) of
sub-section (1) can be issued by the State Government only when the State
Government is satisfied that "there has been large scale unemployment,
other than by way of lay off or retrenchment, of the workers of a cashew
nut factory". The grounds do not even state that there has been any
unemployment much less large scale unemployment. The grounds simply state
that the factory was lying closed and there was no possibility of its
starting functioning within a period of ten days or in the immediate
future, which will lead to large scale unemployment. No details have been
mentioned in the said notice as to from what date each of the factories was
lying closed. We are not able to appreciate as to how by a common notice
all the 36 cashew factories could be summoned to show cause without giving
particulars of conditions existing in different factories. The learned
counsel, who appeared on behalf of the State, could not point out, as to
how different occupiers or the owners of the factories could have filed
objections to such common notice which did not refer to any conditions
pertaining to their factories.
9. There is no dispute that the cashew nut factories do not work throughout
the year but work for varying periods depending upon the supply of raw nuts
etc. As such the particulars of the alleged closure of each of the
factories were required to be furnished to the individual owner to meet the
case against him. The object of the Act is to safeguard the interests of
the workers in the cashew factories and it is to safeguard their interests
that the power has been vested in the State Government to issue orders for
the transfer of the factories. The transfer or vesting of the factories has
to be in accordance with the procedure prescribed in the Act. As already
pointed out above, the proviso to sub-section (1) not only requires a
notice to be given to the occupier or the owner of the factory in respect
of the intention of the Government to take action under the said sub-
section, but also requires to furnish the grounds on which such action is
considered necessary. In the present case, according to us, the notice does
not comply with and conform to the requirement of the proviso to sub-
section (1) of Section 3.
10. It is well-settled that if a statute requires an authority to exercise
power, when such authority is satisfied that conditions exist for exercise
of that power, the satisfaction has to be based on the existence of grounds
mentioned in the statute. The grounds must be made out on the basis of the
relevant material. If the existence of the conditions required for the
exercise of the power is challenged, the courts are entitled to examine
whether those conditions existed when the order was made. A person
aggrieved by such action can question the satisfaction by showing that it
was wholly based on irrelevant grounds and hence amounted to no
satisfaction at all. In other words, the existence of the circumstances in
question is open to judicial review.
11. It cannot be disputed that serious consequences follow on the basis of
the order passed by the Government on grounds mentioned in clauses (a), (b)
and (c). Hence it is all the more necessary that the Government furnishes
the full particulars on the basis of which the Government claims to be
satisfied that there is a case for taking over the factory. As already
pointed out above, there is not even an assertion in the notice that there
has been any unemployment much less large scale unemployment. The ground
simply says that the Government was of the opinion that the closure of the
factory "will lead to a large scale unemployment". We are of the view, that
in the facts and circumstances of the present case, the notice issued to
the petitioners with the so-called grounds was not in accordance with the
requirement of the provisions of sub-section (1) of Section 3 of the Act.
The notices issued to different petitioners are, therefore, declared to be
null and void. Consequent thereto, the order dated 6-7-1988 is also
quashed.
12. However, it is made clear that it shall be open to the Government to
exercise the power conferred on it by sub-section (1) of Section 3,
whenever it is satisfied on the basis of the relevant material, that any of
the three conditions mentioned therein exists in individual factories, by
following the procedure prescribed therein.
13. In order to work out the equities and the rights and liabilities which
have arisen between the date of the transfer of the factories and passing
of this order, we direct:
(i) The possession of the factories shall be handed over to the respective
owners within two weeks from the date of this order. As and when possession
is given, an inventory of all the materials shall be made.
(ii) The daily workers other than the members of the staff engaged by the
Kerala State Cashew Development Corporation Ltd., or the State Government,
as the case may be, shall be retained by the factory owners and shall not
be retrenched except in accordance with law. So far as the members of the
staff are concerned, it shall not be the obligation of the factory owners
to retain them, in view of the interim order passed by this Court on 19-7-
1988.
(iii) The petitioners shall pay the same salary and emoluments which were
being paid by the State Government while the factories were with the State
Government.
(iv) Any claim for compensation in respect of any damage or loss caused to
the machinery, equipments, building etc. during the period of occupation by
the Kerala State Cashew Development Corporation Ltd., shall be assessed by
the District Judge, Quilon. Similarly, any claim in respect of any amount
for an additional construction made or additional machinery installed by
the Kerala State Cashew Development Corporation Ltd., shall be determined
by the District Judge, Quilon, on proper application being filed before it.
(v) The Kerala State Cashew Development Corporation Ltd., shall be entitled
to remove any machinery or materials installed by it within one week of
preparation of the inventory; and
(vi) Any disciplinary enquiry pending against any of the workmen may be
continued by the owner of the factory concerned, if he chooses to do so."
4. Based on the fact that the notice was identical also in the case of
the 10 factories, by a judgment dated 10.3.1995, this Court followed the
judgment in the Indian Nut Products case in the following terms:
"IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO._______ OF 1995
(Arising out of the S.L.P.(C) No.8219/94)
S.T. Sadiq ... Appellant
Vs.
State of Kerala & Ors. ...Respondents
ORDER
It is clear to us that this case is fully covered by a decision
of this court in Indian Nut Products & Ors. Etc. Vs. Union of India & Ors.
1994 (4) SCC 269 and the rights of the Government to exercise power
conferred on it by sub-section (1) of Section 3 of the Kerala Cashew
Factories (Acquisition) Act 1974 stand preserved. In terms of the Judgment
in that case, this petition too is disposed of on identical terms and the
direction given by the Court in paragraph 13 of the said report shall be
operative in so far as this petition is concerned. To formalize it, leave
is granted and the appeal allowed accordingly. No costs.
Sd/-
(M.M. Punchhi...J)
Sd/-
(K. Jayachandra Reddy..J)
New Delhi,
March 10, 1995."
5. It appears that so far as the 36 cashew factories are concerned, the
mandamus of this Court was followed by handing them back to their
respective owners by 20.5.1994. However, the same was not done so far as
the 10 cashew factories are concerned, which then filed contempt petitions
which were disposed of on 12.7.1996 stating:
"The orders of this court passed in C.A. No.343/95 were required to be
obeyed by 24.3.1995 by the respondents. Specific attention was drawn by
the petitioner on 1.4.1995 for compliance with the order but, apparently,
compliance was kept delayed because change of law was contemplated which
ultimately fructified by an Ordinance on 16.8.1995. Though it would have
been desirable for the respondents to carry out the order of this court,
their taking shelter in the contemplated Ordinance is not totally out of
place. They are guilty, though, of contempt for non-compliance for a small
period. Holding so, we accept their apology as tendered in the affidavits
filed in response.
The contempt proceedings are, thus, terminated."
6. The promised Ordinance was then brought in which became the Kerala
Cashew Factories Acquisition (Amendment) Act of 16.8.1995. This Act was
brought into force with effect from 1.5.1984 so as to cover all 46
acquisitions that had been made under the Principal Act. This Act is a
short Act of six Sections and a Schedule. We are concerned with Section 3A
and Section 6 which are set out hereinbelow:
"3A. Power to acquire any cashew factory in public interest.
(1) Notwithstanding anything contained in section 3, if the Government are
satisfied, in relation to a cashew factory, that it has been closed for a
period of not less than three months and such closure has prejudicially
affected the interest of the majority of the workers engaged in that
factory and that immediate action is necessary to restart the cashew
factory and such restarting is necessary in the public interest, they may,
by order published in the Gazette, declare, that the cashew factory shall
stand transferred to, and vent in, the Government.
Provided that no order under this sub-section shall be published unless the
proposal for such acquisition is supported by a resolution of the
Legislative Assembly."
"6. Declaration as to acquisition of certain cashew factories.
(1) It is hereby declared that it is expedient in the public interest
that the cashew factories specified in the Schedule to this Act shall,
notwithstanding anything contained in any judgment, decree or order of any
court, tribunal or other authority and notwithstanding anything contained
in any other law, agreement or other instrument for the time being in
force, stand transferred to, and vest in, the Government with effect from
the date noted against each.
(2) The provisions of Section 4, Section 7 to 16 (both inclusive) of the
principal Act shall, as far as may be, apply to, or in relation to, the
cashew factory in respect of which sub-section (1) apply, as they apply to
a cashew factory in relation to which a declaration has been made under sub-
section (1) of section 3A.
(3) For removal of doubt it is hereby declared that the dates mentioned in
the Schedule against each factory shall be the 'appointed day' in respect
of that factory for the purposes of the principal Act.
(4) All acts, proceedings or things done or taken by the Government or any
officer or authority in respect of cashew factories mentioned in the
Schedule including all the orders issued under sub-section (1) of Section
8, during the periods commencing on and from the dates noted against each
and ending with the date of publication of this Act in the Gazette, shall,
for all purposes, be, and shall be deemed always to have been, as valid and
effective as if the amendments made to the principal Act by this Act had
been in force at all material times."
7. The schedule to the Act contains only the 10 cashew factories that
had been acquired between 1984 and 1986.
8. Mr. Krishnan Venugopal, learned counsel appearing on behalf of the
some of the petitioners raised three points before us. He argued that
first and foremost Section 6 of the Amendment Act is bad as it seeks to
directly nullify the judgments of this Hon'ble Court dated 12.5.1994 and
10.3.1995 without changing the basis of the law. For this proposition he
cited several judgments including State of T.N. v. M. Rayappa Gounder
(1971) 3 SCC 1, Madan Mohan Pathak & Anr. v. Union of India & Ors. 1978 (2)
SCC 50, Virender Singh Hooda & Ors. v. State of Haryana & Anr. 2004 (12)
SCC 588 and State of Tamil Nadu v. State of Kerala & Anr. 2014 (6) SCALE
380. His second point was that considering that all the notices served
were in identical terms, and considering that the objects and reasons of
the 1995 Amendment Act placed all 46 factories at par, Section 6 of the Act
violated Article 14 inasmuch as it discriminated between the 10 factories
which were sought to be taken over and the 36 factories which were not
sought to be taken over by the Amendment Act. The third point he argued
before us was that in any case Section 6 of the Amendment Act read with
Section 9 of the original Act was an independent stand alone provision.
Section 6 of the Amendment Act was not in the 9th Schedule and since it
referred inter alia to Section 9 of the original Act, it was legislation by
incorporation and, therefore, Section 9 being part of the Amendment Act
would be open to attack on the ground that it violated Article 300 A of the
Constitution of India, in that the basis for awarding compensation for land
that is acquired along with the cashew factories is on a completely
irrelevant and arbitrary date, namely, the market value of the land on the
date of setting up of the cashew factory. He pointed out to us on facts
that some factories were granted as little as Rs.58 as compensation for
acres of land taken over merely because the cashew factory that was set up
on the land may have been set up many many years ago.
9. In fact, he pointed out on his facts that his factory building was
only on 97 cents and 1.86 acres was sought to be taken over despite the
fact that this land was neither used nor was necessary for the working of
the factory.
10. Mr. Giri appearing for the State of Kerala replied to each one of
these three contentions. In his view, so far as the first contention is
concerned, he pointed out the judgment of this Court in the Indian Nut
Products case and said that only a notice had been struck down and the
Court had left it open to the State to take over in future on the basis of
relevant material any cashew factory if the conditions stated in Section
3(1) of the principal Act were satisfied. According to him, there was no
question of retrospectively amending the Act so as to remove the basis of
any earlier decision as the Act had not been touched by the Supreme Court.
He, therefore, argued that Section 6 could be viewed as a provision under
which cashew factories could be acquired in public interest apart from
being acquired under Section 3 or Section 3A of the Act by merely putting
such cashew factories into the Schedule contained in the Amendment Act. So
far as point 2 is concerned, he argued that the High Court was correct in
saying that there is an intelligible differentia between cashew factories
taken over by the Cashew Development Corporation on the one hand (the 36
factories) and the 10 factories taken over by CAPEX, which is an apex body
consisting of cooperative societies of workmen. So far as point 3 is
concerned, he replied by saying that Article 31B would bar any challenge to
the compensation provision that is Section 9 of the main Act. Section 6
merely refers to Section 9 and, therefore, legislation is not by
incorporation but by reference.
11. Having heard learned counsel for both parties, we think Mr. Venugopal
is on firm ground on both points 1 and 2 argued by him. We do not feel it
necessary to enter upon a discussion on point 3 inasmuch as the Civil
Appeals before us have to be allowed on points 1 and 2.
12. Point 1.
It is settled law by a catena of decisions of this Court that the
legislature cannot directly annul a judgment of a court. The legislative
function consists in "making" law [see: Article 245 of the Constitution]
and not in "declaring" what the law shall be [see: Article 141 of the
Constitution]. If the legislature were at liberty to annul judgments of
courts, the ghost of bills of attainder will revisit us to enable
legislatures to pass legislative judgments on matters which are inter-
parties. Interestingly, in England, the last such bill of attainder passing
a legislative judgment against a man called Fenwick was passed as far back
as in 1696. A century later, the US Constitution expressly outlawed bills
of attainder [see: Article 1 Section 9].
It is for this reason that our Constitution permits a legislature to make
laws retrospectively which may alter the law as it stood when a decision
was arrived at. It is in this limited circumstance that a legislature may
alter the very basis of a decision given by a court, and if an appeal or
other proceeding be pending, enable the Court to apply the law
retrospectively so made which would then change the very basis of the
earlier decision so that it would no longer hold good. However, if such is
not the case then legislation which trenches upon the judicial power must
necessarily be declared to be unconstitutional.
This Court has struck down such legislation in a number of judgments. Thus,
in State of T.N. v. M. Rayappa Gounder 1971 (3) SCC page 1, Section 7 of
the Madras Entertainment Tax Act, 1939 was struck down. The Court held:
"3. The question as to the power of the assessing authority to reassess the
receipts that had escaped assessment under the Madras Entertainments Tax
Act, 1939, had come up for consideration before the High Court of Madras
in R. Sundararaja Naidu v. Entertainment Tax Officer [ WP No. 513 of 1963
(Madras)] . Therein the High Court of Madras held that there was no power
to reassess under that Act. Thereafter the State Legislature enacted the
Act. The Act among other provisions contains Section 7, a provision
relating to validation of assessment and collection of certain taxes. That
section reads:
"Notwithstanding anything contained in this Act or in the principal Act or
in any judgment, decree or order of any Court no assessment or reassessment
or collection of any tax due on any payment for admission to any
entertainment or any cinematograph exhibition which has escaped assessment
to tax, or which has been assessed at a rate lower than the rate at which
it is assessable, under Section 4 or 4-A of the principal Act, made at any
time after the date of the commencement of the principal Act and before the
date of the publication of this Act in the Fort St. George Gazette shall be
deemed to be invalid or ever to have been invalid on the ground only that
such assessment or reassessment or collection was not in accordance with
law and such tax assessed or reassessed or collected or purporting to have
been assessed or reassessed or collected, shall, for all purposes, be
deemed to be and to have been always validly assessed or reassessed or
collected and accordingly-
(a) all acts, proceedings or things done or taken by the State Government
or by any officer of the State Government or by any other authority in
connection with the assessment or reassessment or collection of such tax,
shall, for all purposes, be deemed to be and to have always been done or
taken in accordance with law;
(b) no suit or other proceeding shall be maintained or continued in any
court against the State Government or any person or authority whatsoever
for the refund of any tax so paid; and
(c) no Court shall enforce any decree or order directing the refund of any
tax so paid."
4. The reassessments with which we are concerned in these cases were made
prior to the coming into force of the Act. Therefore all that we have to
see is whether those reassessments are validly protected by Section 7. The
High Court of Madras allowed the writ petitions and quashed the
reassessments on the ground that the power to reassess under Section 7(B)
introduced by the Act is incomplete and not exercisable in the absence of
prescription as to limitation contemplated by the section and hence Section
7 of the Act fails to validate the assessments in question. We do not
propose to go into that question as in our opinion Section 7 of the Act is
invalid insofar as it attempts to validate invalid assessments without
removing the basis of its invalidity."
Similarly, in D. Cawasji and Co. Mysore v. The State of Mysore & Anr., 1985
(1) SCR 825, Section 2 and 3 of Mysore Sales Tax (Amendment) Act, 1969 were
struck down in the following terms:
"In the instant case, the State instead of remedying the defect or removing
the lacuna has by the impugned amendment sought to raise the rate of tax
from 6.1/2% to 45% with retrospective effect from the 1st April 1966 to
avoid the liability of refunding the excess amount collected and has
further purported to nullify the judgment and order passed by the High
Court directing the refund of the excess amount illegally collected by
providing that the levy at the higher rate of 45% will have retrospective
effect from 1st of April, 1966, The judgment of the High Court declaring
the levy of sales tax on excise duty, education cess and health cess to be
bad become conclusive and is binding on the parties. It may or may not have
been competent for the State Legislature to validly remove the lacuna and
remedy the defect in the earlier levy by seeking to impose sales tax
through any amendment on excise duty, education cess and health cess; but,
in any event, the State Government has not purported to do so through the
Amending Act. As a result of the judgment of the High Court declaring such
levy illegal, the State became obliged to refund the excess amount
wrongfully and illegally collected by virtue of the specific direction to
that effect in the earlier judgment. It appears that the only object of
enacting the amended provision is to nullify the effect of the judgment
which became conclusive and binding on the parties to enable the State
Government to retain the amount wrongfully and illegally collected as sales
tax and this object has been sought to be achieved by the impugned
amendment which does not even purport or seek to remedy or remove the
defect and lacuna but merely raises the rate of duty from 6.1/2% to 45% and
further proceeds to nullify the judgment and order of the High Court. In
our opinion, the enhancement of the rate of duty from 6.1/2% to 45% with
retrospective effect is in the facts and circumstances of the case clearly
arbitrary and unreasonable. The defect or lacuna is not even sought to be
remedied and the only justification for the steep rise in the rate of duty
by the amended provision is to nullify the effect of the binding judgment.
The vice of illegal collection in the absence of the removal of the
illegality which led to the invalidation of the earlier assessments on the
basis of illegal levy, continues to taint the earlier levy. In our opinion,
this is not a proper ground for imposing the levy at the higher rate with
retrospective effect. It may be open to the Legislature to impose the levy
at the higher rate with prospective operation but levy of taxation at
higher rate which really amounts to imposition of tax with retrospective
operation has to be justified on proper and cogent grounds. This aspect of
the matter does not appear to have been properly considered by the High
Court and the High Court in our view was not right in holding that "by the
enactment of Section 2 of the impugned Act the very basis of the complaint
made by the petitioner before this Court in the earlier writ petition as
also the basis of the decision of this Court in Cawasji's case that the
State is collecting amounts by way of tax in excess of what was authorised
under the Act has been removed." We, accordingly, set aside the judgment
and order of the High Court to the extent it upholds the validity of the
impugned amendment with retrospective effect from 1st of April, 1966 and to
the extent it seeks to nullify the earlier judgment of the High Court. We
declare that Section 2 of the impugned amendment to the extent that it
imposes the higher levy of 45% with retrospective effect from the 1st day
of April, 1966 and Section 3 of the impugned Act seeking to nullify the
judgment and order of the High Court are invalid and unconstitutional." (at
page 841-842)
Similarly, in State of Haryana v. Karnal Coop. Farmers' Society Ltd.,
(1993) 2 SCC 363, Section 7 of a Haryana statute was struck down. The court
referred to several earlier judgments and then held:
"37. Thus, it becomes clear that a legislature while has the legislative
power to render ineffective the earlier judicial decisions, by removing or
altering or neutralising the legal basis in the unamended law on which such
decisions were founded, even retrospectively, it does not have the power to
render ineffective the earlier judicial decisions by making a law which
simply declares the earlier judicial decisions as invalid or not binding
for such power if exercised would not be a legislative power but a judicial
power which cannot be encroached upon by a legislature under our
Constitution.
38. In the instant case, the Haryana State Legislature, by the Amendment
Act of 1981, has not made any provision to include the lands and immovable
properties - the subject of the civil court's decrees, in 'shamilatdeh' so
as to bring them within the purview of the principal Act. But, the
provision made therein merely directs the Assistant Collector of first
grade, in effect, to disregard or disobey the earlier civil courts' decrees
and judicial orders by which it had been held that certain lands and
immovable properties fell outside 'shamilatdeh' regulated by the principal
Act. Such provisions inserted by the Amendment Act of 1981 in the principal
Act by a legislature are clearly unconstitutional for they are to be
regarded as provisions made by encroaching upon the judicial power. Hence,
the view of the High Court that the provisions of the Amendment Act of 1981
which merely authorise the Assistant Collector of first grade to decide the
claims to be made before him claiming certain lands or immovable properties
as 'shamilatdeh' vesting in Panchayats ignoring the judicial orders or
decrees, by which any right, title or interest of private parties in such
lands or immovable properties are recognised, are unconstitutional,
requires to be upheld. Consequently, the provisions of the Amendment Act of
1981, insofar as they are intended to operate retrospectively for
nullifying the adjudications made by civil courts prior to that Amendment
Act, are invalid, inoperative and unconstitutional. However, the provisions
in the Amendment Act of 1981, can undoubtedly operate prospectively for
adjudicating upon claims to 'shamilatdeh' in proceedings initiated
subsequent to the commencement of that Act, if they do not, in any way,
disturb the finality of adjudications made earlier."
Equally, in Re Cauvery Water Disputes Tribunal, 1993 Supp (1) SCC 96, this
Court after referring to two earlier judgments stated:
"76. The principle which emerges from these authorities is that the
legislature can change the basis on which a decision is given by the Court
and thus change the law in general, which will affect a class of persons
and events at large. It cannot, however, set aside an individual decision
inter partes and affect their rights and liabilities alone. Such an act on
the part of the legislature amounts to exercising the judicial power of the
State and to functioning as an appellate court or tribunal."
Similarly, in S.R. Bhagwat v. State of Mysore, (1995) 6 SCC 16, this Court
held:
"17. We may recapitulate at this stage that the petitioners have mounted a
limited attack on the impugned provisions of the Act insofar as they
deprive them of the monetary benefits flowing from the deemed promotion to
be given to them pursuant to the orders of the Division Bench of the High
Court which have become final between the parties. We have extracted the
aforesaid section with its relevant sub-sections wherein the impugned
provisions of the clauses concerned have been indicated by underlining
them. Petitioners contend that underlined portions of sub-sections (2), (3)
and (8) of Section 4 clearly fall within the teeth of binding decision of
the Division Bench of the High Court and they are in clear conflict with
the said binding decision. As we are not concerned with other provisions of
the Act except Section 11(2) we may straightaway turn to Section 11. The
said provision deals with overriding effect of the Act. It reads as under:
"Overriding effect.- (1) The provisions of this Act or of any order made
thereunder shall have effect notwithstanding anything inconsistent
therewith contained in any law or order having the force of law or rules
made under the proviso to Article 309 of the Constitution of India for the
time being in force or any provision regulating the conditions of service
of any allottee or in any order made by virtue of any such law, rules or
provisions.
(2) Notwithstanding anything contained in any judgment, decree or order of
any court or other competent authority the rights to which a civil servant
is entitled to in respect of matters to which the provisions of this Act
are applicable, shall be determined in accordance with the provisions of
this Act, and accordingly, any judgment, decree or order directing
promotion or consideration for promotion of civil servants and payment of
salaries and allowances consequent upon such promotion shall be reviewed
and orders made in accordance with the provisions of this Act."
18. A mere look at sub-section (2) of Section 11 shows that the respondent
State of Karnataka, which was a party to the decision of the Division Bench
of the High Court against it had tried to get out of the binding effect of
the decision by resorting to its legislative power. The judgments, decrees
and orders of any court or the competent authority which had become final
against the State were sought to be done away with by enacting the impugned
provisions of sub-section (2) of Section 11. Such an attempt cannot be said
to be a permissible legislative exercise. Section 11(2), therefore, must be
held to be an attempt on the part of the State Legislature to legislatively
overrule binding decisions of competent courts against the State. It is no
doubt true that if any decision was rendered against the State of Karnataka
which was pending in appeal and had not become final it could rely upon the
relevant provisions of the Act which were given retrospective effect by sub-
section (2) of Section 1 of the Act for whatever such reliance was worth.
But when such a decision had become final as in the present case when the
High Court clearly directed respondent-State to give to the petitioners
concerned deemed dates of promotions if they were otherwise found fit and
in that eventuality to give all benefits consequential thereon including
financial benefits, the State could not invoke its legislative power to
displace such a judgment. Once this decision had become final and the State
of Karnataka had not thought it fit to challenge it before this Court
presumably because in other identical matters this Court had upheld other
decisions of the Karnataka High Court taking the same view, it passes one's
comprehension how the legislative power can be pressed in service to undo
the binding effects of such mandamus. It is also pertinent to note that not
only sub-section (2) of Section 11 seeks to bypass and override the binding
effect of the judgments but also seeks to empower the State to review such
judgments and orders and pass fresh orders in accordance with provisions of
the impugned Act. The respondent-State in the present case by enacting sub-
section (2) of Section 11 of the impugned Act has clearly sought to nullify
or abrogate the binding decision of the High Court and has encroached upon
the judicial power entrusted to the various authorities functioning under
the relevant statutes and the Constitution. Such an exercise of legislative
power cannot be countenanced."
In Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan, (1996) 2 SCC
449, this Court struck down The Kota Municipal Limits (Continued Existence)
Validating Act, in the following terms:
"15. In the case of the village of Raipura there was a preliminary
notification calling for objections to the extension of the limits of the
Kota Municipality to include it, but it was not followed by a final
notification. In the case of the village of Ummedganj there was a
notification extending the limits of the Kota Municipality to include it,
but it had not been preceded by a notification inviting the objections of
the public thereto. Later, another notification was published whereby the
village of Ummedganj was excluded from the limits of the Kota Municipality.
The provisions of Sections 4 to 7 of the 1959 Act and the earlier
provisions of the 1951 Act in the same behalf were, therefore, not met in
the case of either the village of Raipura or the village of Ummedganj. The
Full Bench of the Rajasthan High Court has held that these provisions were
mandatory and that judgment has become final.
16. The Validating Act provides that, notwithstanding anything contained in
Sections 4 to 7 of the 1959 Act or in any judgment, decree, order or
direction of any court, the villages of Raipura and Ummedganj should be
deemed always to have continued to exist and they continue to exist within
the limits of the Kota Municipality, to all intents and for all purposes.
This provision requires the deeming of the legal position that the villages
of Raipura and Ummedganj fall within the limits of the Kota Municipality,
not the deeming of facts from which this legal consequence would flow. A
legal consequence cannot be deemed nor, therefrom, can the events that
should have preceded it. Facts may be deemed and, therefrom, the legal
consequences that follow.
17. Sections 4 to 7 remained on the statute book unamended when the
Validating Act was passed. Their provisions were mandatory. They had
admittedly not been followed. The defect of not following these mandatory
provisions in the case of the villages of Raipura and Ummedganj was not
cured by the Validating Act. The curing of the defect was an essential
requirement for the passing of a valid validating statute, as held by the
Constitution Bench in the case of Prithvi Cotton Mills Ltd. [(1969) 2 SCC
283 : (1970) 1 SCR 388] It must, therefore, be held that the Validating Act
is bad in law and it must be struck down."
Mr. Giri, learned counsel appearing for the State is correct in
saying that no Section of the principal Act had been struck down and hence
Section 6 of the Amendment Act did not need to remove the basis of any
earlier decision striking down an Act. We repeatedly asked him if action
had been taken under Section 3(1) or 3A of the Amendment Act to acquire any
of the cashew factories before us. His candid answer was "no". The
argument that Section 6 contains a third source of power to acquire cashew
factories merely by putting them in a schedule has to be rejected on two
fundamental grounds. First, no notice or hearing is provided as in Section
3 or Section 5A of the Land Acquisition Act or any other safeguard such as
a resolution of the legislative assembly supporting such acquisition as in
Section 3A. If acquisition is to take place in conformity with law rules
of natural justice cannot be bypassed. Further, Section 6 is aimed only at
directly upsetting a final judgment of a final court namely the Supreme
Court of India. This is clear from two things - (1) the non obstante
clause wiping out "any judgment" and (2) the reference to the schedule of
the Amendment Act which contains only the 10 cashew factories that were
ordered to be handed back by a final judgment of this Court dated
10.3.1995. It is clear, therefore, that Section 6 directly seeks to upset
a final judgment inter-parties and is bad on this count and is thus
declared unconstitutional.
13. Point 2.
The Statement of Objects and Reasons for the 1995 Amendment Act reads
as follows:-
"STATEMENT OF OBJECTS AND REASONS
The Kerala Cashew Factories (Acquisition) Act, 1974 empowers the
Government in the public interest to acquire certain cashew factories and
to provide employment to the workers who have been rendered unemployed and
to secure to them just conditions of service.
2. The Government have acquired certain cashew factories by invoking
section 3 of the Kerala Cashew Factories (Acquisition) Act, 1974. The
above action of the Government was challenged by the original owners. In
Indian Nut Product-Vs-Union of India reported in 1994 (2) KLT 598 the
Supreme Court had upheld the validity of the Kerala Cashew Factories
(Acquisition) Act, 1974 however the Court declared certain notifications
issued by the Government under Section 5(1) of the aforesaid Act as null
and void. Based on the above decision of the Supreme Court, the Kerala
High Court disposed of certain petitions pending in the High Court against
acquisition under the said Act and directed the Government to hand over the
factories to the original owners.
3. The main ground for quashing the notifications was that the
Government had not given proper notice as required under section 3 of the
Act and that the parties were not given sufficient opportunity of being
heard before final orders were passed by the Government.
4. These factories are now under the management of the Cashew
Development Corporation and also CAPEX. In case the factories are to be
handed over to the petitioners in the OP's as stipulated by the Court, the
above mentioned institutions and Government will suffer financially,
amounting to crores of rupees.
5. If the cashew factories are handed over to its previous owners based
on the directions of the Court, owners may not be in a position to start
work in the near future for the reason that they are not in Cashew trade
for a long period and due to paucity of raw cashew in the world market.
There will be large scale unemployment among the workers in Cashew
Industry. There will also be scored economic disorders in the Southern
Districts of the State. Where there is concentration of Cashew Factories.
6. Therefore to tide over the situation Government intends to arm with a
new legislation to acquire certain factories from the date of original
notification for acquisition.
7. The Bill seeks to amend the Kerala Cashew Factories (Acquisition)
Act, 1974, to achieve the above objects."
A bare reading of the Statement of Objects of the Amendment Act shows that
the Kerala Legislature wished to interfere with two judgments of the
Supreme Court making no distinction between factories that were managed by
the Cashew Development Corporation (the 36 factories) and CAPEX (the 10
factories). It is interesting to note that apart from the Government
suffering financially (if the factories are to be handed back), there will
be large scale unemployment among workers in the cashew industry.
It is clear that the objects and reasons for the Amendment Act makes
no differentiation between the 36 factories handed back and the 10
factories taken over by the Amendment Act. The High Court was in error in
saying that there was an intelligible differentia between the two.
Further, even otherwise, there is no difference between factories which
post acquisition are run by the Cashew Development Corporation or CAPEX
regard being had to the object sought to be achieved - namely to avoid
unemployment of cashew workers. Whether 36 factories run by the Cashew
Development Corporation are to be acquired or 10 factories run by CAPEX are
to be acquired makes not the least difference to the object sought to be
achieved. Large scale unemployment is there in both cases. And both the
Cashew Development Corporation and CAPEX, along with the Government, will
suffer financially. In fact, the handing back of only 36 factories would be
patently discriminatory as all 46 factories are similarly situate and have
been treated as such by the State by issuing common notices to all of them
under Section 3 of the Act. We have been reliably informed that these 36
factories are functioning under their respective owners for the last twenty
years. In the circumstances we hold that there is no intelligible
differentia between the 36 factories and the 10 factories taken over having
any rational relation with the object sought to be achieved and on this
ground also Section 6 of the Amendment Act deserves to be struck down as
violating Article 14 of the Constitution.
14. The appeals are allowed. The judgment of the High Court is set aside
and it is ordered that the cashew factories and the land appurtenant
thereto that have been taken over by the State under the Amending Act must
be handed back within a period of eight weeks from the date on which this
judgment is pronounced.
........................J.
(Ranjan Gogoi)
........................J.
(R.F. Nariman)
New Delhi;
February 04, 2015.
ITEM NO.1A COURT NO.7 SECTION XIA
(for Judgment)
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 3962/2007
S.T. SADIQ Appellant(s)
VERSUS
STATE OF KERALA & ORS. Respondent(s)
WITH
C.A. No. 3963/2007
Date : 04/02/2015 These appeals were called on for pronouncement
of judgment today.
For Appellant(s) Mr. Krishnan Venugopal, Sr. Adv.
Mr. Deepak Prakash, Adv.
Mr. Biju P. Raman, Adv.
Mr. Subhash Chandran K.R. Adv.,
Ms. Shruti Srivastava, Adv.
Ms. Yogamaya M.G., Adv.
For M/s. T. T. K. Deepak & Co., Advs.
For Respondent(s) Mr. V. Giri, Sr. Adv.
Ms. Bina Madhavan, Adv.
Mr. Somiram Sharma,Adv.
Mr. Vishnu Sharma,Adv.
Mr. G. Prakash, Adv.
Mr. K. R. Sasiprabhu, Adv.
Mr. M. Vijaya Bhaskar, Adv.
Hon'ble Mr. Justice Rohinton Fali Nariman pronounced the reportable
judgment of the Bench comprising Hon'ble Mr. Justice Ranjan Gogoi and His
Lordship.
The appeals are allowed. The judgment of the High Court is set aside
and it is ordered that the cashew factories and the land appurtenant
thereto that have been taken over by the State under the Amending Act must
be handed back within a period of eight weeks from the date on which this
judgment is pronounced in terms of the signed reportable judgment.
(R.NATARAJAN) (INDU BALA KAPUR)
Court Master Court Master
(Signed reportable judgment is placed on the file)