It Is Permissible For Legislature To Remove Defect In Earlier Legislation Both Prospectively And Retrospectively In Accordance With Constitution: SC
While reminding the powers allotted by the Indian Constitution and stating that it would be permissible for the legislature to remove a defect in an earlier legislation, the Supreme Court held that such kind of defect can be removed prospectively and retrospectively by a legislative process and previous actions can also be validated.
The Apex Court held so while deciding a question as to whether by enacting the Amendment and Validation Act of 1997, the Himachal Pradesh State Legislature has validly removed the basis of the judgment of the Division Bench of the High Court dated Mar 27, 1997, whereby it was held not to include within its scope, the activity of the appellants in providing gratis transport facilities for their employees and their children.
A Two Judge Bench of Justice B. V. Nagarathna and Justice Ujjal Bhuyan however observed that “where a legislature merely seeks to validate the acts carried out under a previous legislation which has been struck down or rendered inoperative by a Court, by a subsequent legislation without curing the defects in such legislation, the subsequent legislation would also be ultra-vires.”
“The enactment of the Amendment and Validation Act of 1997, that is about twenty-six years till date and by now there would have been the replacement of the motor vehicles or buses by the appellants and their liability to pay the said taxes, being at large, and now set at rest, we think that in the exercise of our powers under Article 142 of the Constitution, the appellants should be made liable to pay the tax w.e.f. 01.04.2023, the current financial year onwards, and not for the period prior thereto”, added the Bench.
Advocate S.B. Upadhyay appeared for the Petitioner whereas Advocate Anup Kumar Rattan appeared for the Respondent.
The brief facts of the case were that the petitioner (NHPC Ltd.) is engaged in the generation of electricity and has various projects in the State of Himachal Pradesh. The petitioner provides free of cost transport facilities to his employees and their children which is completely owned and operated by the petitioner, as they were residing far away from the project sites. The Assessing Authority under the Act of 1955, levied taxes on the petitioner, which was challenged before the Commissioner, Excise and Taxation. The same was however dismissed on the ground that a revision application would not be maintainable and it would be appropriate to instead, file an appeal.
As per the direction, the petitioner filed a writ before the High Court challenging the Vires of the Act of 1955. The High Court allowed the petition and directed the Respondents to refund the tax collected under the provisions of the Act of 1955. Thereafter, the Himachal Pradesh Passengers and Gods (Amendment and Validation) Ordinance was promulgated which was passed by the Legislative assembly by introducing new terms and amending some pre-defined terms. Accordingly, the Authorities constituted under the Act, issued notices to the appellant for recovery of tax under the provisions of the Amendment and Validation Act of 1997. The petitioner filed a writ petition before the High Court to validate the constitutionality of the Act of 1955 as well as the Amendment and Validation Act of 1997. But the same was rejected opining that the State Legislature has the competence to enact and amend the said Act.
After considering the submission, the Bench reiterated that a legislature cannot directly set aside a judicial decision. However, when a competent legislature retrospectively removes the substratum or foundation of a judgment to make the decision ineffective, the same is a valid legislative exercise provided it does not transgress on any other constitutional limitation.
The Bench pointed that such a legislative device which removes the vice in the previous legislation which has been declared unconstitutional is not considered to be an encroachment on judicial power but an instance of abrogation recognized under the Constitution of India.
The Bench therefore clarified that it is open to the legislature to alter the law retrospectively, provided the alteration is made in such a manner that it would no more be possible for the Court to arrive at the same verdict.
The power of a legislature to legislate within its field, both prospectively and to a permissible extent, retrospectively, cannot be interfered with by Courts provided it is in accordance with the Constitution, added the Bench.
The Bench further elucidated that the legislative device of abrogation by enacting retrospective amendments to a legislation, as means to remove the basis of a judgment and validate the legislation set aside or declared inoperative by a Court, must be employed only with a view to bring the law in line with the judicial pronouncement.
However, “An act of abrogation is permissible only in the interests of justice, effectiveness and good governance, and not to serve the oblique agenda of defying a court’s order, or stripping it of its binding nature”, added the Bench.
Accordingly, the Supreme Court dismissed the appeal, holding that the Amendment and Validation Act of 1997 is a valid piece of Legislation.
Cause Title: NHPC Ltd. v. State of Himachal Pradesh and Ors. [Neutral Citation: 2023: INSC: 810]