Supreme Court Summarizes Principles On Retrospective Application Of Legislations
The Court took note of the glaring anomaly in respect of Section 13(8) of the SARAFESI Act and Rule(s) 8 and 9 of the SARFAESI Rules that persists.
Justice J.B. Pardiwala, Justice R. Mahadevan, Supreme Court
The Supreme Court, in its Judgment, has summarised the principles on the retrospective application of legislations.
The Court was deciding Civil Appeals preferred against the Judgment of the Madras High Court, which allowed a Writ Petition and quashed the Sale Certificate in favour of Auction Purchasers.
The two-Judge Bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan summarised the following principles –
(i) Presumption against retrospectivity is not applicable to enactments which merely affect procedure or change forum or are declaratory;
(ii) Retroactive/retrospective operation can be implicit in a provision construed in the context where it occurs;
(iii) Given the context, a provision can be held to apply to cause of action after such provision comes into force, even though the claim on which the action may be based may be of an anterior date; and
(iv) A remedial statute applies to pending proceedings and such application may not be taken to be retrospective if application is to be in future with reference to a pending cause of action;
(v) SARFAESI Act is a remedial statute intended to deal with problem of pre-existing loan transactions which need speedy recovery.
Advocate K.S. Mahadevan appeared on behalf of the Appellants while Advocate Huzefa Ahmedi appeared on behalf of the Respondents.
Court’s Observations
The Supreme Court in view of the facts of the case, observed, “A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consist of words printed on papers but conceptually, it would be a great deal more than ordinary prose. Of the various rules guiding how a legislation has to be interpreted, the one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have retrospective operation and the idea behind the rule is that a current law should govern current activities.”
The Court said that if legislation confers a benefit on some persons without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant a retrospective effect.
Whether the Amended Section 13(8) of the SARFAESI Act is retrospective in nature?
The Court was of the view that amended provision extinguishes the right of redemption of the borrower in the event he fails to repay his dues and redeem the asset before publication of the Auction Notice and this unambiguous language used in the amended provision of Section 13(8) furthers the object and reasons of the SARFAESI Act for which it was enacted i.e., to ensure that the lender is able to enforce his security interest at the earliest and with least possible intervention of the courts.
“The SARFAESI Act intends to provide a remedy in respect of pre existing loans and the interpretation that it would apply only to future debts would defeat the very purpose of that law, which was to reduce non-performing assets”, it remarked.
“It is no more res-integra that the presumption against retrospection does not apply to the legislation concerned merely with matters of procedure or of evidence ; on the contrary, provisions of that nature are to be construed as retrospective unless there is a clear indication that such was not the intention of Parliament”, it elucidated.
The Court further said that it has been almost twenty-three years, since the SARFAESI Act has remained in force and it is indeed very sad to note that even after these many years procedural issues such as the one involved in the case at hand, have continued to plague the legislation.
Conclusion
The Court took note of the glaring anomaly in respect of Section 13(8) of the SARAFESI Act and Rule(s) 8 and 9 of the SARFAESI Rules that persists.
“The same renders the very mandate of the provision otiose. … We are, however, at our wit’s end to note how the ill-wording of Section 13(8) of the SARFAESI Act has resulted in a glaring inconsistency between the aforesaid provision and the SARFAESI Rules framed in lieu thereof. It is unfortunate that the ambiguities within the statutory provisions of the SARFAESI Act and Rules thereunder have left the interests of secured creditors and auction purchasers high and dry”, it also observed.
The Court remarked that the interpretative deadlock between the provision and the rules has single handedly resulted in a huge mess insofar as enforcement of security interest is concerned, giving birth to an endless pipeline of litigation clogging the specialized forums of the DRT and DRAT, that are expected to expeditiously decide matters of recovery of debt.
The Court, therefore, urged the Ministry of Finance to take a serious look at these provisions and bring about necessary changes, before it is too late in the day.
Accordingly, the Apex Court allowed the Appeals, set aside the High Court’s Judgment, and directed the Registry to forward one copy each of the Judgment to all the High Courts across the country and also to the Principal Secretary, Ministry of Finance and the Principal Secretary, Ministry of Law & Justice.
Cause Title- M. Rajendran & Ors. v. M/S KPK Oils And Protiens India Pvt. Ltd. & Ors. (Neutral Citation: 2025 INSC 1137)
