RETROSPECTIVE APPLICATION OF STATUTES AND RULE OF

INTERPRETATION

Submitted by: Submitted to:

Priya Tyagi Dr Ritu Gupta
56LLB15

NATIONAL LAW UNIVERSITY, DELHI

2019

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 TABLE OF CONTENTS

INTRODUCTION.....................................................................................................................3

CONCEPT OF RETROSPECTIVE APPLICATION OF LAW...............................................4

APPLICATION OF RETROSPECTIVITY..............................................................................5

TEST FOR DETERMING “RETROSPECTIVITY”................................................................7

EXISTING RIGHTS USUALLY NOT AFFECTED................................................................9

PRESUMPTION AGAINST RETROSPECTIVITY................................................................9

EXCEPTION...........................................................................................................................10

WHERE TWO INTERPRETATIONS ARE POSSIBLE........................................................11

RECENT INTERPRETATION OF THE COURTS ON THE APPLICATION OF

RETROSPECTIVITY..............................................................................................................11

CONCLUSION........................................................................................................................20

BIBLIOGRAPHY....................................................................................................................21

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 INTRODUCTION

Any kind of statute operates in two ways, i.e. a prospective operation where a statute seeks to
govern current activities and a retrospective operation where a statute seeks to operate on past
events and activities. Though retrospective operation is not favoured in law rather there is a
presumption against retrospective operation of statutes. Acts, enactments and administrative
rules will not be construed to have retrospective effect unless their language requires this
result.
The use of the term ‘retrospective operation’ of statutes is at times bleary & obscure. In a
wider sense it would be right enough to say that statute has retrospective operation when it
purports to operate over those facts or events which took place before the provision come in
to force. It is sometimes used in a divergent sense when vested rights are sought to be
affected. Also, it is at times loosely used in context of certain functions of law which the law
maker deems it necessary to introduce in existing laws for the purpose of setting certain
matters rightly or avoiding certain mischief which might be possible for change in law; and
this is done by penning down that certain facts or things which did not exist. In this project
we have discussed concept of retrospective operation of statutes, general principles relating to
retrospective operation of statutes and retrospectively of other statutes with special reference
to various statutes with the help of recent case laws and with reference to some basic rules
enunciated by prominent authors on the construction of statutes.1
Ordinarily, a legislature has power to make prospective laws, but Art.20 of the Indian
Constitution, 1950 provides certain safeguards to the persons accused of crime and so Art.
20(1) of the Indian constitution imposes a limitation on the law making power of the
constitution. It prohibits the legislature to make retrospective criminal laws however it does
not prohibit a civil liability retrospectively i.e. with effect from a past date. So a tax can be
imposed retrospectively. Clause (1) of the Article 20 of the Indian Constitution guarantees
rights against ex-post facto laws. It provides that “no person shall be convicted of any offence
except for violation of a law in force at the time of the commission of the act charged as an
offence, nor be subjected to a penalty greater than that which might have been inflicted under
the law in force at the time of the commission of the offence.”

1
A.B.Kafaltiya, Interpretation of Statutes (Universal Law Publishing, 2008), pp.216.

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 CONCEPT OF RETROSPECTIVE OPERATION OF STATUTES

Literal meaning of the word ‘retrospective’ is to ‘look backward’; contemplating what is past;
having reference to a state of things existing before the Act in question. Thus a ‘retrospective
law’ would be a law which goes back into the past, contemplates over it, affects acts or facts
occurring, or right occurring before it came into force. The best instances of retrospective
laws are those, in which the date of commencement is earlier than enactment, or which
validates some invalid law; otherwise, every statute affects rights which would have been in
existence but for the statute.
In the case of Nemi Chand vs. State of Rajasthan 2, the court said that a statute does not
become a retrospective one because a part of the requisites for its action is drawn from a time
antecedent to its passing. All what it means is that save in cases where the law creates a new
offence or increases a penalty, a legislature is not prevented from enacting an ex post facto
law but if any such law takes away or impairs any vested right acquired under an existing
law, or creates a new obligation 3, imposes a new duty or attaches a new disability in respect
to transactions on considerations already past, it must so provide in express terms or such
should be a necessary implication from the language ‘employed’.

APPLICATION OF RETROSPECTIVITY

Perhaps no rule of construction is more firmly established than this - that a retrospective
operation is not to be given to a statute so as to impair an existing right or obligation,
otherwise than as regards matters of procedure, unless that effect cannot be avoided without
doing violence to the language of the enactment. If the enactment is expressed in language
which is fairly capable of either interpretation, it ought to be construed as prospective only.
The rule has, in fact, two aspects, for it, "involves another and subordinate rule, to the effect
that a statute is not to be construed so as to have a greater retrospective operation than its
language renders necessary.4

2
(1977) Raj LW 430.
3
Ram Prakash v Savitri Devi, AIR (1958) Punj 87
4
Maxwell on the Interpretation of Statutes, 12th Edn

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In Garikapati Veeraya v. N. Subbiah Choudhry5, the SC observed as thus : "The golden rule
of construction is that, in the absence of anything in the enactment to show that it is to have
retrospective operation, it cannot be so construed as to have the effect of altering the law
applicable to a claim in litigation at the time when the Act was passed."
In Hitendra Vishnu Thakur v. State of Maharashtra6 this Court laid down the ambit and scope
of an amending Act and its retrospective operation as follows :
 A statute which affects substantive rights is presumed to be prospective in operation
unless made retrospective, either expressly or by necessary intendment, whereas a
statute which merely affects procedure, unless such a construction is textually
impossible, is presumed to be retrospective in its application, should not be given an
extended meaning and should be strictly confined to its clearly defined limits.
 Law relating to forum and limitation is procedural in nature, whereas law relating to
right of action and right of appeal even though remedial is substantive in nature.
 Every litigant has a vested right in substantive law but no such right exists in
procedural law.
 A procedural statute should not generally speaking be applied retrospectively where
the result would be to create new disabilities or obligations or to impose new duties in
respect of transactions already accomplished:
 A statute which not only changes the procedure but also creates new rights and
liabilities shall be construed to be prospective in Operation unless otherwise provided,
either expressly or by necessary implication."

In K. S. Paripoornan v. State of Kerala, this Court while considering the effect of amendment
in the Land Acquisition Act in pending proceedings held thus in thereof as: In the instant case
we are concerned with the application of the provisions of Sub-sec. (1-A) of S.23 as
introduced by the Amending Act to acquisition proceedings which were pending on the date
of commencement of the Amending Act. In relation pending proceedings, the approach of the
Courts in England is that the same are unaffected by the changes in the law so far as they
relate to the determination of the substantive rights and in the absence of a clear indication of
a contrary intention in an amending enactment, the substantive rights of the parties to an
action fall to be determined by the law as it existed when the fiction was commenced and this

5
AIR 1957 SC 540 para 25.
6
(1994) 4 SCC 602

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is so whether the law is change before the hearing of the case at the first instance or while an
appeal is pending.7
In the case of Mithilesh Kumari and another, vs. Prem Behari Khare 8, AIR 1989 SC 1247,
the Apex Court held that: “A retrospective operation is not to be given to a statute so as to
impair existing right or obligation, otherwise than as regards matter of procedure unless that
effect cannot be avoided without doing violence to the language of the enactment. Before
applying a statute retrospectively, the Court has to be satisfied that the statute is in fact
retrospective. The presumption against retrospective operation is strong in cases in which the
statute, if operated retrospectively, would prejudicially affect vested rights or the illegality of
past transaction, or impair contracts, or impose new duty or attach new disability in respect of
past transactions or considerations already passed, However, a statute is not properly called a
retrospective statute because a part of the requisites for its action is drawn from a time
antecedent to its passing. The general scope and purview of the statute and the remedy sought
to be applied must be looked into and what was the former state of law and what the
legislation contemplated has to be considered. Every law that impairs or takes away rights
vested agreeably to existing laws is retrospective, and is generally unjust and may be
oppressive. But laws made justly and for the benefit of individuals and the community as a
whole may relate to a time antecedent to their commencement. The presumption against
retrospectivity may in such cases be rebutted by necessary implications from the language
employed in the statute. It cannot be said to be an invariable rule that a statute could not be
retrospective unless so expressed in the very terms of the section which had to be construed.
The question is whether on a proper construction the legislature may be said to have so
expressed its intention".

TEST FOR DETERMINING ‘RETROSPECTIVITY’

The question whether a statute operates retrospectively or not is one of legislative intent.
Unless it is provided in the statute expressly or impliedly, retrospective operation is generally
presumed to be unjust and oppressive. If, however, the terms of statute do not of themselves
make the intention of legislature certain or clear, the statute will be presumed to operate
prospectively. There are occasions when a law may be held to be retrospective; however,
retrospection of the statute is not to be presumed, for the presumption is in favour of the
7
Halsbury's Laws if England, 4th Edn. Vol. 44, para 922
8
AIR 1989 SC 1247

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prospective operation of law. Conclusively, court will consider following factor if the
retrospective operation is not expressly given in the statute:
 They will look into the general scope and purview of the statute.
 The remedy sought to be applied.
 The former state of law.
 What, it was that the legislature contemplated.
The courts also, while considering the question of the retrospective operation of statute,
considers the nature of the right affected. Where there is no vested right, an amendment will
be considered as prospective so as not to affect the vested right. If the right is merely
procedural, then normally there is no vested right. In case of Shah Bhojraj Mills v Subhas
Chandra9, it was also ruled by the Supreme Court that the statute may be prospective in some
parts and retrospective in other parts.
Generally remedial or curative statutes are always regarded as prospective, but declaratory
statutes are considered as retrospective. Those statutes that only relates to matters of
procedure or of evidence, are prima facie prospective and retrospective operation not to be
given to them unless, by express words or necessary implications it appears that this was the
intention of the legislature.10
In State of Bombay v Vishnu Ram Chandra 11, dealing with the question as to how an
enactment may be construed as retrospective, the Supreme Court states that the question has
to be decided in accordance with the following principles:
 Penal Statutes are always prospective, but can also interpreted retrospectively; of
there is a clear intendment that they are to be applied to past events.
 Statutes, which create new punishments, but authorize some actions based on past
conducts, if expressed in language showing retrospective operation, would be applied
retrospectively.
 Acts designed to protect the public against acts of harmful character may be construed
retrospectively if the language admits such an interpretation, even though it may
equally have prospective meaning.
 Statute which takes away or impairs vested rights under existing laws is presumed not
to have retrospective operation.

9
AIR 1961 (SC) 1596.
10
Halsbury Laws of England, Vol. 36 (3rd Ed), pp.423
11
AIR 1961 (SC) 307

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Thus, the principles that have to be applied for interpretation of statutory provisions are well
settled. The first of these is that statutory provisions creating substantive rights or taking
away substantive rights are ordinarily perspectives, they are retrospective only if by express
words or by necessary implication, the legislatures has made them retrospective; and the
retrospective operation will be limited only to the extent to which it has been so made by
express words, or necessary implications.
The second rule is that the intention of the legislature has always to be gathered from the
words used by it, giving to the words their plain, normal and grammatical meaning.
The third rule is that if any legislation, the general object of which is to benefit a particular
class of persons, any provision is ambiguous so that it is capable of two meaning, one which
would preserve the benefit and another, which would take it away, the meaning which
preserves the benefit should be adopted.12
The fourth rule is that if strict grammatical interpretation gives rise to an absurdity or
inconsistency, such interpretation should be discarded and an interpretation which gives
effect to the purpose of legislature may reasonably be considered to have had, will be put on
the words, if necessary, and even by modification of the language used.
The fifth rule is that where a statute is not clear as to whether it has retrospective effect and
can be interpreted either way on this point, the court should not give it retrospective effect.
Except where necessary, a statute should not be read retrospectively. Pending actions are not
affected by new statute, unless the latter are expressly made applicable to the former.13

EXISTING RIGHTS USUALLY NOT AFFECTED

A retrospective operation is not to be given to a statute so as to impair an existing right or

obligation otherwise than as regards matter of procedure, unless that effect cannot be avoided
without doing violence to the language of the enactment. A statute which impairs vested
rights or the legality of past transactions or the obligations of contract should not prima facie
be held to be retrospective. Every statute which takes away or impairs vested rights acquired
under existing laws, creates a new obligation, imposes a new duty, attaches a new disability
in respect of transactions already past, must be presumed to be intended not to have
retrospective effect. It is well settled that a statute is not to be construed to operate

12
Govind Das v Income-tax officer, AIR 1977 (SC) 552.
13
Kapen v Provident Investment Co, AIR 1976 (SC) 2910.

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retrospectively so as to take away a vested right, unless that intention is made manifest by
language so plain and unmistakable that there is no possibility of any choice of meaning.14
When the law is altered during the pendency of an action, the rights if the parties are decided
according to law, as it existed when the action was begun, unless the new statute shows a
clear intention to vary such rights. In the case of Khubi Singh Yadava v Dist Judge,
Allahabad15 , no vacancy in the accommodation was created on account of transfer of the
tenant, according to the law in force prior to the commencement of the amending act of 1976.
The amending act did not indicate that any retrospective operation was to be given to sub-s
(3A) of S-12 of the Uttar Pradesh Urban Building (Regulation of Letting, Rent and Eviction)
Act 1972, therefore, it was held that no vacancy was created by the transfer which took place
before the amending Act came into force. The question of prospectively and retrospectivity
might arise in pending suits, suits which were pending on the date when the amendment Act
came into force, to contend that the amending provision would never be applicable even in
future to a sitting tenant would not be a tenable contention.
Whether a person has a right to recover property is a question of substantive law. An
enactment conferring substantive rights cannot be given a retrospective unless the legislature
has made an explicit and express provision to that effect therein or such a consequence
inevitably follows by necessary intendment.16

PRESUMPTION AGAINST RETROSPECTIVITY

As a general rule, every statute is deemed to be prospective, unless by express provision or

necessary implication is to have a prospective effect. Whether a statute is to have
retrospective effect depends upon its interpretation having regard to well-settled rules of
construction.17 A statute is presumed to be prospective in its operation and no further
retrospective effect should be given to the provisions of a statute then is expressly provided
therein. Retrospection is not to be presumed; but many statutes have been regarded as
retrospective without declaring so. The statute would operate retrospectively when the intent
that it should so operate clearly appears from a consideration of the Act as a whole, or from

14
Rao and Dhanda, N S Bindra’s Interpretation of Statutes ( Lexis Nexis Publication, 10th edn, 2012),
pp. 1432.
15
1980 (All) LJ 233
16
T.Bhattacharyya, The Interpretation of Statutes, (Allahabad Law Agency Publication, 4th edn,
2001)
17
Bireswar v Indu Bhusan, AIR 1954 (Cal) 573-74

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the terms thereof, which unqualifiedly gave the statute a retrospective operation or
imperatively require such a consideration, or negate the idea that is to apply only to future
cases. Retrospectivity is liable to be determined on few grounds18;
 The words used must expressly provide, or clearly imply retrospective operation.
 The retrospectivity must be reasonable and not excessive or harsh otherwise it runs
the risk of being struck down as unconstitutional.
 Where the legislation is introduced to overcome a judicial decision, the power cannot
be used to subvert the decision without removing the statutory basis of the decision.

EXCEPTION
Sometimes a statute, although not intended to be retrospective, will, as a matter of fact, have
a retrospective operation. For instance, if two persons enter into a contract, and afterwards a
statute is passed, engrafts an enactment upon an existing contract, and thus operates so as to
produce a result which something quite different from the original intention of the contracting
parties, such a statute has, as a matter of fact, a retrospective operation. It is a familiar rule
that no statute is construed to be of retrospective operation unless the terms of the statute
expressly state that it is retrospective or such a construction arises by necessary implication.
The rule is based on the presumption that the legislature does not intend what is unjust or that
transactions which have already vested title to property should be reopened or thrown into
doubt.
It is well recognised that the canon against retrospective interpretation does not apply to a
statute dealing with an adjective law, i.e., procedure, and we think that a statute abolishing
old legal fictions is so nearly akin to a procedural statute that the canon can have little if any,
application.19

WHERE TWO INTERPRETATIONS ARE POSSIBLE

If an enactment is expressed in language, which is fairly capable of either interpretation, it

ought to be construed as prospective only. Even in construing a section which is to a certain
extent retrospective the maxim must be borne in mind as applicable whenever the line is
reached at which words of the section cease to be plain. The question as to whether a statute
18
G.P. Singh, Principles of Statutory Interpretation, (Lexis Nexis Butterworth’s Publication, 11th edn,
2008).
19
Supra at 14.

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should have a prospective and retrospective as well can only arise only when the words of the
statute are capable of giving the enactment both prospective and retrospective effect. The
question can never arise if the words of the statute make it clear that it should have
prospective effect only. Even admittedly retrospective legislation is limited by the clearness
of its retrospectivity; and, also, rights that have passed from the original contractual or
relational character into rights measured by judicial determination are prima facie, outside
retrospection, which usually applies to rights not yet so determined.20
If the meaning of words used indicates an intention that the Act is to have retrospective
operation, then, no matter, what the consequences this operation must be given to the
provisions. No doubt whenever the intention is clear that the Act shall have retrospective
operation, it must unquestionably be so construed even if the consequences may appear
unjust and hard. If there are words in the enactment which either expressly or by necessary
intendment (eg from the object of the statute) imply that the statute is to be given
retrospective operation even in respect of substantive rights or pending actions, the courts
have no other alternative than to give such operation to the statutes even though the
consequence may appear to be unjust or hard. In determining whether any provisions of an
Act was intended to be retrospective or not, the consequences of holding that it is not
retrospective must be looked at.

RECENT INTERPRETATION OF THE COURTS ON THE APPLICATION OF

RETROSPECTIVITY

RETROSPECTIVE OPERATION CANNOT BE GIVEN TO A PROSPECTIVE

AMENDMENT
1. CIT v. Vatika Township Pvt Limited21 (2017)
Facts: Search and seizure operations carried out on the taxpayer u/s 132 of the IT Act, and
accordingly notice u/s 158BC was issued. The relevant block period: April 1, 1989 - February
10, 2000. The relevant AYs: 1984 – 2003.Assessment completed with no levy of surcharge.
On the insertion of s.113, the CIT opined that surcharge should have been retrospectively
levied u/s 113 for the block period April 1, 1989. On February 10, 2000, Assessee preferred
an appeal before the ITAT and the tribunal allowed the same stating that s.113 was not
declaratory/clarificatory, and therefore not retrospective in nature. The HC also dismissed
20
Daulat Singh v State, AIR 1950 (MB) 112-113
21
(2017) 367 ITR 466 (SC)

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revenue’s appeal and held that, insertion to s.113 (FA 2002) was prospective in nature and
cannot be made applicable in the instant case. Revenue preferred an appeal to the SC.

SC’s Ruling: Held that a legislation cannot be presumed to be intended to have a

retrospective operation. The idea behind the rule is that a current law should govern current
activities. Law passed today cannot apply to the events of the past. If we do something today,
we do it keeping in view the law of today and in force and not tomorrow ‘s backward
adjustment of it. The Constitutional Bench set out the general principles concerning
retrospectively and concluded that of the various rules guiding how a legislation has to be
interpreted, one established rule is that unless a contrary intention appears, a legislation is
presumed not to be intended to have a retrospective operation. The Court held that every
human being is entitled to arrange his affairs by relying on the existing law and should not
find that his plans have been retrospectively upset. This principle of law is known as “lex
prospicit non respicit”. law looks forward not backward. A retrospective legislation is
contrary to the general principle that legislation by which the conduct of mankind is to be
regulated when introduced for the first time to deal with future acts ought not to change the
character of past transactions carried on upon the faith of the then existing law. The obvious
basis of the principle against retrospectively is the principle of fairness ‘, which must be the
basis of every legal rule. Thus, legislations which modified accrued rights or which impose
obligations or impose new duties or attach a new disability have to be treated as prospective
unless the legislative intent is clearly to give the enactment a retrospective effect unless the
legislation is for purpose of supplying an obvious omission in a former legislation or to
explain a former legislation. The Hon‘ble Court held that the rule against a retrospective
construction is different. If a legislation confers a benefit on some persons but 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 a legislation, giving it a purposive construction, would warrant it to be
given a retrospective effect. The doctrine of fairness was held to be relevant factor to construe
a statute conferring a benefit, in the context of it to be given a retrospective operation. The
presumption against retrospective operation is not applicable to declaratory statutes which
remove doubts existing as to the common law, or the meaning or effect of any statute. Such
Acts are usually held to be retrospective. It is well settled that if a statute is curative or merely
declaratory of the previous law retrospective operation is generally intended. In the instant

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case, the proviso is not beneficial but onerous to the assessee, and therefore, under the normal
rule of presumption, it did not have a retrospective effect.
It so happened that this very issue about the said proviso to Section 113, viz., whether it is
clarificatory and curative in nature and, therefore, can be applied retrospectively.
No retrospective effect can be given as the proviso is not curative in nature. In the absence of
clear words indicating that the amending Act was declaratory/curative, retrospective effect
could not be resorted to, particularly when the pre-amended provisions were clear and
unambiguous. Further, in the absence of a particular date to levy the surcharge in relation to
the varying rates to be applied, the proviso to s.113 was not clarificatory. Any ambiguity
must be resolved in favour of the assessee, and therefore the lack of clarity regarding the rates
and date, would not make the proviso retrospective. Any amendment to a taxing statute is
intended to remove any hardship caused to taxpayers and not to the tax department. Further,
the amendment explicitly stated that the insertion to s.113 would be prospective in nature.
Held in favour of the assessee

2. Working Friends Cooperative house building society limited v. State of Punjab and
others22 (2015)
Facts: The question for consideration is whether the compulsory acquisition of the
appellant’s land under the Land Acquisition Act, 1894 lapses in view of the provisions of
Section 24(2) of The Right to Fair Compensation and Transparency in Land Acquisition,
Rehabilitation and Resettlement Act, 2013 (for short ‘the Act’). A notification was issued by
the State Government under Section 4 of the Land Acquisition Act, 1894 on 12th November,
1992 proposing to acquire a large chunk of land. The compulsory acquisition of the
appellant’s land led to proceedings for adjudication of the compensation due from the State
Government. Accordingly, an Award was passed by the Land Acquisition Collector on 22nd
February, 1995 and the compensation determined at Rs.35,52,528/-. For reasons that are not
clear, the compensation was not tendered to the appellant but was deposited in the Treasury.
The appellant challenged the quantum of compensation in the Reference Court and when that
was enhanced, the enhanced compensation was deposited in the Reference Court.
Feeling aggrieved by the acquisition of its land, the appellant preferred C.W.P. No. 2996 of
1995 in the Punjab and Haryana High Court wherein the above two notifications were
challenged. As an interim measure, the High Court directed the maintenance of status quo

22
(2015) SCC 936

13
and since the appellant was in actual, physical, vacant and peaceful possession it continued to
remain so in view of the interim orders.
The appellant has challenged the decision of the High Court in this Court and during the
pendency of this appeal, Parliament enacted the Act which came into force with effect from
1st January, 2014. Proceedings in this Court.
As a result of the coming into force of the Act, the appellant moved I.A. No. 4 of 2014 in this
Court being an application for directions to the effect that the acquisition proceedings by
which the appellant’s land was acquired had lapsed.
The Supreme court on the issue of retrospectivity held that “The obvious basis of the
principle against retrospectivity is the principle of “fairness” which must be the basis of every
legal rule as was observed in L’Office Cherifien des Phosphates v. Yamashita-Shinnihon
Steamship Co. Ltd. Thus, legislations which modified accrued rights or which impose
obligations or impose new duties or attach a new disability have to be treated as prospective
unless the legislative intent is clearly to give the enactment a retrospective effect; unless the
legislation is for purpose of supplying an obvious omission in a former legislation or to
explain a former legislation. We need not note the cornucopia of case law available on the
subject because aforesaid legal position clearly emerges from the various decisions and this
legal position was conceded by the counsel for the parties.”
Applying the law laid down by the Constitution Bench, it must be held that the appellant had
an accrued right which must be recognized by Section 24(2) of the Act. The Ordinance which
purported to take away such an accrued right would have to be treated as prospective unless
the legislative intent was clearly to give it retrospective effect.
The deposit was, apart from anything else, made only after the Act came into force and was
perhaps with a view to get over the provisions of Section 24(2) of the Act and the prayer
made in I.A. No. 4. Unfortunately, even the deposit of the compensation amount in the
Reference Court on 26th June, 2014 does not come to the aid of the appellant under any
circumstances and cannot be taken as “deemed payment”.
Taking into account all the facts of the appeal as well as the consistent view taken by this
Court on several occasions, we have no hesitation in coming to the conclusion that
acquisition proceedings in so far as the appellant is concerned lapsed with the enactment of
the Act.

RETROSPECTIVITY STRUCK DOWN

14
 1. Vodafone International Holdings’ v. UOI23 (2012)
Facts: HTIL is situated in Hong Kong and holds 100% share in CGP. CGP is situated in
Cayman island and holds 67% shares in HEL. HEL is situated India and is formed by merger
of HTIL and CGP. VIH is situated in Netherland and is subsidiary of Vodafone group. VIH
acquired HEL from HTIL through CGP, and therefore had zero tax liability. Relevant AYs:
2002-03 & 2003-04. Indian revenue authorities alleged that VIH had failed to deduct tax on
the payment of consideration made to HTIL, and subsequently issued a notice to them. VIH
did not respond to the notice and instead filed a writ petition to the Bombay High Court,
challenging the jurisdiction of the Income Tax Department. The Bombay HC upheld the
matter in favour of the Indian Revenue Authorities. Subsequently, VIH file a special leave
petition before the Supreme Court. SC disposed the case with a direction to the tax authorities
to decide the preliminary issue of jurisdiction. After going through the share purchase
agreement, the tax authorities found that the intention of the parties was ultimately to transfer
the controlling interest in HEL, which was situated in India, and passed an order holding that
they had jurisdiction to proceed against VIH for failure to deduct tax. VIH approached the
Bombay HC again, but they dismissed its writ petition filed against the tax authorities. VIH
filed an SLP and the Supreme Court reversed the decision of the Bombay High Court.

The Indian authorities had no jurisdiction to tax the foreign transactions, as sale of shares was
in Cayman Island. Transfer of shares in CGP does not amount to transfer of capital asset
situated in India, as per s.9(1)(i). Transfer of “controlling interest” is not covered under the
definition of “Capital Assets” u/s 2(14). As the capital asset is not taxable in India, no
question of deducting tax at source arises. Accordingly, the retrospective applicability of the
amendments made to these provisions was struck down and the decision was made in favour
of VIH.

RETROSPECTIVE OPERATION AGREED TO BE GIVEN TO THE AMENDMENT

1. Sony Ericsson Mobile communications India Pvt. Limited .v. CIT24 (2018)
FACTS: - Assessee challenged the retrospective applicability sub-section (2B) of s.92CA
Relevant AYs: 2006-07, 2007-08 & 2008-09. - It was argued by the assessee that the AO had
made no specific reference of the international transaction relating to AMP expenses nor seek
23
(2012) 6 SCC 613 (SC)
24
(2018) 374 ITR 118 (Delhi)

15
the previous approval of the Commissioner, and therefore, the valuation of the contract price
and computation of the arm’s length price, consequent assessments, etc. are without
jurisdiction and authority of law
HC ruling
The insertion of sub-section (2B) by the FA 2012 is squarely applicable to this case and
negates the challenge of the assessee. The constitutional validity of the above provision is not
the concern here and the only thing required to be done here is to interpret the said provision
and apply the retrospective amendment if it is applicable. Under (2B), a TPO to who
reference has been made under sub-section (1) is entitled to apply the provisions of the
Chapter in respect of international transaction for which the assessee has not furnished a
report under s.92E. Thus, where an assessee has failed or not furnished a report u/s 92E, a
specific reference for the said transaction is not required. It is sufficient if the arm’s length
pricing issue of any international transaction has not been referred to the TPO. After the
insertion of sub-section (2B), w.e.f June 1, 2002, we have to give full effect to the said
provision and not negate or curtail the retrospective effect. A retrospective amendment has a
deeming effect and also consequences. The said effect cannot be unwritten or erased. Once
the legislative language is clear and express, we are only required to give effect to the said
retrospective amendment. Held in favour of the Revenue and against the assessee.

2. Rupesh v. Charandas25 (2018)

A Single Judge Bench comprising of M.G. Giratkar, J. allowed revision petition and set aside
appellant’s conviction under Section 497 IPC in light of Supreme Court decision in Joseph
Shine v. Union of India,26
The applicant was alleged to have had sexual relations with complainant’s wife. He was tried
and convicted by the trial court for committing the offence of adultery under Section 497
IPC. His appeal there against before the Additional Session Judge was dismissed. Hence, then
he filed the present application for revision. It was prayed that in light decision in Joseph
Shine where Supreme Court had held Section 497 to be unconstitutional, the present
application ought to be allowed.
The High Court relied on A.S. Gauraya v. S.N. Thakur27, wherein it was held that a law
declared by Supreme Court applies even to pending proceedings with retrospective effect.

25
2018 SCC OnLine Bom 6292
26
2018 SCC OnLine SC 1676.
27
(1986) 2 SCC 709

16
Hence, the Court gave retrospective effect to the law laid down in Joseph Shine to the
proceeding pending before it. The Supreme Court in Joseph Shine held Section 497 IPC and
Section 198 (2) CrPC to be violative of Articles 14, 15(1) and 21 and therefore
unconstitutional. Therefore, in view of Joseph Shine, the conviction and punishment awarded
to the applicant under Section 497 was quashed and set aside.
3. Air and Sea trading Company v. State of Andhra Pradesh28 (2017)
In the present case, petitioners filed writ petitions seeking to set aside the rejection orders for
transfer of lease passed by Director of Mines and Geology by retrospectively applying the
amended Rule 12(5)(h)(viii) of the Andhra Pradesh Minor Concession Rules, 1966.
The issues are: Whether the applications for transfer of lease should be considered, as per un-
amended Rule which was in force at the time of submission of application or, as per amended
Rule at the time of disposing off the application? Will there be any vested right to prevent the
authorities to apply the rule retrospectively? Director of Mines and Geology, Andhra Pradesh
granted quarry lease for color granites to M/s Maruthi Granites (original lessee) for a period
of twenty years (12.07.2007 to 11.07.2027). Managing Director of the original lessee along
with petitioner filed joint applications for transfer of quarry leases in favour of the petitioner
on 16.07.2015 under Rule 12(5)(h)(viii) of the Andhra Pradesh Minor Concession Rules,
1966.
Unamended Rule 12(5)(h)(viii): “The licensee or lessee shall not assign, sub-let, transfer or
otherwise dispose of the under license or lease without obtaining the previous sanction in
writing of the Director.”
Royalty Inspector and surveyor inspected the mining lease and recommended to accord
permissions for transfers of quarry leases for unexpired periods i.e. up to 11.07.2027 in
favour of the petitioner. All formalities required under the rules and executive instructions
have been complied by both the petitioners and respondents. Rule 12(5)(h)(viii) was
amended.
Amended Rule 12(5)(h)(viii): “The prospecting licenses and quarry leases granted for the
purpose of non-captive consumption are not transferable.”
Director of Mines and Geology, Andhra Pradesh rejected the joint applications for transfers
of the leases on 29.05.2017, on the ground that Rule 12(5)(h)(viii) has been amended and that
the subject quarry leases are not transferable in view of the said amended provision.

28
Writ Petition Nos. 37319 and 38948 of 2017

17
The counsel for respondents contended that the orders of rejection by applying the amended
Rule 12(5)(h)(viii) of the Rules is in accordance with law as there is no dispute that the
amended Rule is in force and is holding the field as on the date of rejection of the
applications. He relied on State of Tamil Nadu v. Hind Stone29, in which it was held that in the
absence of vested rights in anyone, an application for lease has to decided according to the
rules in force on the date of disposal of application but not on the basis of rules in force at the
time of making the application.
The learned Senior Counsel Sri K.G. Krishna Murthy contended that the above case has no
relevance to the present facts of the case as the Apex Court was dealing with the grant of
lease for a fresh period whereas in the case on hand, the original lessee is having subsisting
lease period and hence, there is a vested right. It was also contended that the amended Rule
cannot be applied retrospectively which would amount to changing the lease conditions
unilaterally to the detriment of the petitioner.
The High Court held that there is a vested right as the original lessee is having subsisting
lease period and the amended rule cannot be applied retrospectively as the lease holder
entered into lease on the belief that he will be entitled to proceed in accordance with law and
might have arranged his affairs by relying upon then existing law and made plans
accordingly. Therefore, High Court directed to consider the applications for transfer as per
the un-amended Rule which was in force at the time of submission of applications without
reference to the amended Rule.

4. The Hassan Co Operative Society V. state of Karnataka30 (2018)

Whether Section-28-A (4) of the Karnataka Cooperative Societies Act, 1959, as substituted
by the amended Act dated 11.02.2013, is prospective or retrospective in nature? The Division
Bench, was considering the question whether the term of committee, which was elected on
12-6-2009 for five co-operative years would stand extended in view of the amendment of
Section 28-A of the Act, in particular, sub-section (4) whereby the words "five co-operative
years" were substituted by the words "five years from the date of election".
Hassan Milk Union and 13 members of its Managing Committee, in this writ petition,
impugned the communication dated 29-1-2014 issued by the State Government addressed to
the Election Commission, informing that in respect of such of the Managing Committees of
the Societies whose term comes to end by 31-3-2014, the election could be held to elect the
29
2016 SCC OnLine SC 1166
30
2018 2 SCC 205

18
new managing Committee after the expiry of the present term (five co-operative years) but,
until the elections are held, an Administrator could be appointed to enable him to conduct the
elections, and therefore, there was no need to resort to removal of difficulty clause as
suggested by the Election Commission.
The Managing Committee of Hassan Milk Union was elected on 1-7-2009 for a period of five
co-operative years as contemplated by Section 28-A(4) of the Act, i.e. till the end of 31-3-
2014. Even before expiry of their term on 31-3-2014, an amendment was introduced
whereby, the words 'five co- operative' years, as occurred in sub-section (4) of Section 28-A
of the Act, were substituted by the words "five years from the date of election". In this view
of the matter, Hassan Milk Union and members of its Managing Committee approached this
Court by way of writ petition, apprehending the appointment of an Administrator in view of
the communication dated 29-1-2014.
Though retrospectivity is not to be presumed and rather there is presumption against
retrospectivity, it is open for the legislature to enact laws having retrospective operation. This
can be achieved by express enactment or by necessary implication from the language
employed. If it is a necessary implication from the language employed that the legislature
intended a particular section to have a retrospective operation, the Courts will give it such an
operation. In the absence of a retrospective operation having been expressly given, the Courts
may be called upon to construe the provisions and answer the question whether the legislature
had sufficiently expressed that intention giving the Statute retrospectivity. Four factors are
suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to
be applied; (iii) the former state of the law; and (iv) what it was the legislature contemplated.
As to the effect of the amending Act, the language will have to be examined to find out the
intendment of the legislature. Every statute is prima facie prospective unless it is expressly or
by necessary implications or intendment made to have retrospective operation. This rule,
however, is applicable where the object of the statute is to affect vested rights or to impose
new burden or to impair existing obligations. As observed by the Supreme Court in Zile
Singh, unless there are words in the statute sufficient to show the intention of the legislature
to affect the existing rights, it is deemed to be prospective. It is open for the legislature to
enact laws having retrospective operation. This can be achieved by express enactment or by
necessary implication from the language employed. As observed by the Supreme Court, in
the absence of a retrospective operation having been expressly given, it is necessary to
construe the provisions and answer the question whether the legislature had sufficiently
expressed that intention giving the statute retrospectivity.

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The retrospectivity is liable to be decided on a few touchstones such as the words used must
expressly provide or clearly imply retrospective operation and the retrospectivity must be
reasonable and not excessive or harsh.
Thus, the absence of a provision expressly giving retrospective operation to the legislation is
not determinative of its prospectively or retrospectivity. The other factors will have to be seen
to find out whether the amendment was necessarily intended to have retrospective effect and
if one can unhesitatingly conclude in favour of retrospectivity there is no reason why the
Court should hesitate in giving the Act or the relevant provision that operation unless
prevented from doing so by any mandate contained in law or an established principle of
interpretation of statute. We do not find any such mandate in the amending Act.

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 CONCLUSION
The Cardinal Principle of construction of a statute is that every statute was prima facie a
prospective “unless it is expressly or by necessary implication made to have retrospective
operation”.
It is crystal clear that the Statutes dealing with substantive rights - is prima facie / generally
prospective unless it is expressly or by necessary implications made to have retrospective
operation. But the rule in general is applicable where the object of the statute is to affect the
vested rights or impose new burdens or to impair existing obligations. Statutes dealing with
procedure - In contrast to statutes dealing with substantive rights, statutes dealing with merely
matters of procedure are presumed to retrospective unless such a construction is textually
inadmissible. According to Lord Denning:
"The rule that an Act of Parliament is not be given retrospective effect applies only to statutes
which affect vested rights. It does not apply to statutes which only alter the form of procedure
or the admissibility of evidence, or the effect which the courts give to evidence"
Every other statutes leaving those which are merely declaratory or which relate only to
procedural laws or in which evidence are prima facie prospective and retrospective operation
should not be given to a statute so as to affect, alter or destroy an existing right or create a
new liability or obligation unless the effect cannot be avoided without doing violence to the
language of the enactment. If the enactment is expressed in language which is fairly capable
of either interpretation, it ought to be construed as prospective only. Where the language of
statutes is susceptible of both interpretation then prospective interpretation must be preferred
which provide for moderate & harmonious position.
The presumption against retrospective operation and the requirement of express language is
more rigorously implemented in relation to penal statutes. In India there is a right to
protection to the person in our society against the retrospectivity. In that case the statute can
be construed prospective which leads to the enforcement of protection of fundamental rights.
There should be prospective interpretation to ensure a harmonious and moderate position.
Fortunately, art 20(1) is such a blessing for all the persons because it does not allow the
retrospective interpretation of any statute and hence ensures protection against the ex post
facto law. it can be inferred that having penal statutes with retrospective effects are against
the principle of natural justice and are unfair.

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In the light of the above judgments, and the principles laid down therein that the new Act /
Rule affecting, existing rights or creating new obligations, is presumed to be prospective
only.
BIBLIOGRAPHY

Books

 Halsbury Laws of England, Vol. 36 (3rd Ed).

 T.Bhattacharyya, The Interpretation of Statutes, (Allahabad Law Agency Publication,
4th edn, 2001).
 Rao and Dhanda, N S Bindra’s Interpretation of Statutes (Lexis Nexis Publication,
10th edn, 2012).
 D.N. Mathur, Introduction to Interpretation of Statutes, (Wadhwa publication, 2 nd edn,
2005).
 G.P. Singh, Principles of Statutory Interpretation, (Lexis Nexis Butterworth’s
Publication, 11th edn, 2008).
 Maxwell on the Interpretation of Statutes, 12th Edn

 A.B.Kafaltiya, Interpretation of Statutes (Universal Law Publishing, 2008).

Case laws

 The Hassan Co Operative Society V. state of Karnataka (2018)

 Air and Sea trading Company v. State of Andhra Pradesh (2017)

 Rupesh v. Charandas (2018)

 Sony Ericsson Mobile communications India Pvt Limited. V. CIT (2017)

 Vodafone International Holdings’ v. UOI (2012)

 Working Friends Cooperative house building society limited v. State of Punjab and

others (2015)

 CIT v. Vatika Township Pvt Limited (2017)

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