Case: State Of H.P Vs. Narain Singh

orders which were struck down by the High Court. Therefore, the assessment order is legislatively valid and the tax demands are also enforceable. [See paras 33 and 35 at page 1925] 30. It is therefore clear where there is a competent legislative provision which retrospectively removes the substratum of foundation of a judgment, the said exercise is a valid legislative exercise provided it does not transgress any other constitutional limitation. Therefore, this Court cannot uphold the reasoning in the High Court judgment that the impugned amendment is invalid just because it nullifies some provisions of the earlier Act. 31. The aforesaid principles have been reiterated by a three-Judge Bench in Meerut Development Authority etc. Vs. Satbir Singh and others - AIR 1997 SC 1467 , Justice Ramaswamy speaking for the Court summed up the position in para 10 as follows:- "10. It is well settled by catena of decisions of this Court that when this Court in exercise of power of judicial review, has declared a particular statute to be invalid, the Legislature has no power to overrule the judgment; however, it has the power to suitably amend the law by use of appropriate phraseology removing the defects pointed out by the Court and by amending the law inconsistent with the law declared by the Court so that the defects which were pointed out were never on statute for effective enforcement of the law. This Court has considered in extenso the case law in a recent judgment in Indian Aluminium Co. V. State of Kerala (1996) 2 JT (SC) 85: (1996 AIR SCW 1051) had held that such an exercise of power to amend a statute is not an incursion on the judicial power of the Court but is a statutory exercise of the constituent power to suitably amend the law and to validate the actions which have been declared to be invalid..." 32. A Constitution Bench of this Court in the case of State of Tamil Nadu Vs. M/s. Arooran Sugars Limited - AIR 1997 SC 1815 , reiterated the same principle after analyzing several cases on the point. The Court has summed up the position as follows:- "16. ...It is open to the legislature to remove the defect pointed out by the court or to amend the definition or any other provision of the Act in question retrospectively. In this process it cannot be said that there has been an encroachment by the legislature over the power of the judiciary. A courts directive must always bind unless the conditions on which it is based are so fundamentally altered that under altered circumstances such decisions could not have been given. This will include removal of the defect in a statute pointed out in the judgment in question, as well as alteration or substitution of provisions of the enactment on which such judgment is based, with retrospective effect..." 33. In Indra Sawhney Vs. Union of India – AIR 2000 SC 498 , Justice Jagannadha Rao speaking for a three-Judge Bench explained the position by saying that it would be permissible for the legislature to remove the defect which is the cause for discrimination and which defect was pointed out by the Court. The learned Judge made it very clear that this defect can be removed both retrospectively and prospectively by legislative action and the previous actions can be validated. But where there is a mere validation without the defect being legislatively removed the legislative action will amount to overruling the judgment by a legislative fiat and that will be invalid. In the instant case the amendment Act has removed the defect of the previous law and therefore, the validation exercise is perfectly sound and cannot be faulted with. 34. In Rai Ramkrishna and others etc. Vs. State of Bihar - AIR 1963 SC 1667 , a Constitution Bench of this Court speaking through Justice Gajendragadkar, as His Lordship then was, explained the principle with characteristic clarity, which is reproduced hereinbelow:- "10. The other point on which there is no dispute before us is that the legislative power conferred on the appropriate Legislatures to enact law in respect of topics covered by the several entries in the three Lists can be exercised both prospectively and retrospectively. Where the Legislature can make a valid law, it may provide not only for the prospective operation of the material provisions of the said law but it can also provide for the retrospective operation of the said provisions. Similarly, there is no doubt that the legislative power in question includes the subsidiary or the auxiliary power to validate laws which have been found to be invalid. If a law passed by a legislature is struck down by the Courts as being invalid for one infirmity or another, it would be competent to the appropriate Legislature to cure the said infirmity and pass a validating law so as to make the provisions of the said earlier law effective from the date when it was passed. This position is treated as firmly established since the decision of the Federal Court in the case of United Provinces v. Mst. Atiqa Begum, 1940 FCR 110: (AIR 1941 FC 16)." 35. See the decision of this Court in Satnam Overseas (Export) and others Vs. State of Haryana and another - (2003) 1 SCC 561 , para 52 where reference was made to the ratio in Rai Ramkrishna (supra). 36. Recently in the case of State of Bihar and others Vs. State Pensioners Samaj - (2006) 5 SCC 65 , this Court reiterated the same position in paragraph 16 at page 71, which is reproduced below:- "16. ......It is always open to the legislature to alter the law retrospectively as long as the very premise on which the earlier judgment declared a certain action as invalid is removed. The situation would be one of a fundamental change in the circumstances and such a validating Act was not open to challenge on the ground that it amounted to usurpation of judicial powers."

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]23. An argument was, however, made before the High Court that the aforesaid amendment is actuated by a mala fide motive and is a piece of colourable legislation. The aforesaid contention was, however, not accepted by the High Court in the impugned judgment. In fact such contention is not tenable on principle24. Reference in this connection be made to a decision of this Court in the case of K. Nagaraj & others Vs. State of Andhra Pradesh and another1985 1 SCC 523 , wherein Chief Justice Chandrachud, speaking for ae Bench said that the legislature, as a body, cannot be accused of having passed a law for an extraneous purpose. Learned Chief Justice held that the concept of "transferred malice" is unknown in the field of legislation provided the legislature enacts the law within its powers25. The aforesaid principle in K. Nagaraj (supra) has been accepted by this Court in many cases and a reference in this connection may be made to a decision of this Court in G.C. Kanungo Vs. State of Orissa(1995) 5 SCC 96 26. The power of the Sovereign legislature to legislate within its field, both prospectively and retrospectively cannot be questioned. This position has been settled in many judgments of this Court. Some of them may be considered below27. In Bhubaneshwar Singh & another Vs. Union of India & others(1994) 6 SCC 77 , the Court expressly approved the aforesaid position in Para 9 at page. In so far as validating Acts are concerned, this Court in Bhubaneshwar Singh (supra) also considered the question in para 11 and held that the Court has the powers by virtue of such validating legislation, to "wipe out" judicial pronouncements of the High Court and the Supreme Court by removing the defects in the statute retrospectively when such statutes had been declared ultra vires by Courts in view of its defects. This Court has held that such legislative exercise will not amount to encroachment on the judicial power. This Court has accepted that such legislative device which removes the vice in previous legislation is not considered an encroachment on judicial power. In support of the aforesaid proposition, this Court in Bhubaneshwar Singh (supra) relied on the proposition laid down by the Chief Justice Hidayatullah, speaking for the Constitution Bench in Shri Prithvi Cotton Mills Ltd. and another Vs. Broach Borough Municipality and others(1969) 2 SCC 283 28. Again in the case of Indian Aluminium Company etc. etc. Vs. State of Kerala and othersAIR 1996 SC 1431 , this Court while summarizing the principle held that a legislature cannot directly overrule a judicial decision but it has the power to make the decision ineffective by removing the basis on which the decision is rendered, while at the same time adhering to the constitutional imperatives and the legislature is competent to do so [See para 59a (9) at page 1446.]29. In the case of Comorin Match Industries (Pvt.) Limited Vs. State of Tamil NaduAIR 1996 SC 1916 , the facts were that the assessment orders passed under Central Sales Tax Act were set aside by the High Court and the State was directed to refund the amount to the assessee. As the State failed to carry it out, contempt petitions were filed but the assessment orders were validated by passing the amendment Act of 1969 with retrospective effect and the Court held that the tax demanded became valid and enforceable. The Court held that in such a situation the State will not be precluded from realizing the tax due as subsequently the assessment order was validated by the amending Act of 1969 and the order passed in the contempt proceeding will not have the effect of the writing off the debt which is statutorily owed by the assessee to the State. The learned Judges held that the effect of the amending Act is retrospective validation of the assessment orders which were struck down by the High Court. Therefore, the assessment order is legislatively valid and the tax demands are also enforceable. [See paras 33 and 35 at page 1925]30. It is therefore clear where there is a competent legislative provision which retrospectively removes the substratum of foundation of a judgment, the said exercise is a valid legislative exercise provided it does not transgress any other constitutional limitation. Therefore, this Court cannot uphold the reasoning in the High Court judgment that the impugned amendment is invalid just because it nullifies some provisions of the earlier Act33. In Indra Sawhney Vs. Union of India – AIR 2000 SC 498 , Justice Jagannadha Rao speaking for ae Bench explained the position by saying that it would be permissible for the legislature to remove the defect which is the cause for discrimination and which defect was pointed out by the Court. The learned Judge made it very clear that this defect can be removed both retrospectively and prospectively by legislative action and the previous actions can be validated. But where there is a mere validation without the defect being legislatively removed the legislative action will amount to overruling the judgment by a legislative fiat and that will be invalid. In the instant case the amendment Act has removed the defect of the previous law and therefore, the validation exercise is perfectly sound and cannot be faulted with.