Retrospective Overruling

Introduction

This article addresses the issue of the effect of a judgment of a larger Bench of the Supreme Court interpreting a statutory provision contrary to earlier judgments of the Supreme Court.

Proposition

In such a situation what is the effect on judgments delivered earlier on the basis of the view of the law prevailing prior. 

Do such judgments which followed the earlier decisions survive in law after the decision of a larger Bench of the Supreme Court to the contrary.

Position in Law Analysed 

To illustrate this aspect of the law I will consider the effect of the recent judgement of the Supreme Court in Nusli Neville Wadia v. Ivory Properties[1] which held that under Section 9-A of the Civil Procedure Code, 1908 (CPC) (as applicable in Maharashtra) limitation cannot be considered to be an issue of jurisdiction of the Court and consequently no preliminary issue of limitation under Section 9-A CPC could be taken in a suit. The issue of the effect of the amending Acts in relation to Section 9-A is not the subject of this article. A brief summary is contained in the footnote[2].

On 04.10.2019, in Nusli Wadia v. Ivory Properties[3] (Nusli Wadia case) a Bench of three Judges held that the decision in Foreshore Cooperative Housing Society[4] decided by a Bench of twoJudges does not lay down the correct law. In other words the earlier view in Foreshore Co-operative Housing Society v. Praveen Desai[5] holding the question of limitation could be decided as a preliminary issue under Section 9-A was overruled.

However, prior thereto on 16.03.2017 a learned Single Judge of the Bombay High Court in Suit No. 2410 of 2008[6]  following the earlier view in Foreshore Co-operative Housing Society v. Praveen Desai[7], had already decided the question of limitation as a preliminary issue under Section 9-A holding that the suit i.e. Suit No.2410 of 2008 was partly barred by limitation.

On 08.08.2019, a judgment of the Division Bench in appeal held the suit of Messer Holdings Ltd  i.e. Suit No. 2410 of 2008 was within time.

On 30.09.2019, Shyam Ruia  filed an SLP[8] (Shyam Ruia’s SLP) in the  Supreme Court. 

The question that arose in Shyam Ruia’s SLP, after the decision in the Nusli Wadia case was what was its effect on judgments (of the learned Single Judge and  Division Bench) rendered in the meantime by the  Bombay High Court in Suit No. 2410 of 2008 which were decided as per the law that prevailed then.

The Supreme Court in Shyam Ruia’s SLP held that the judgments of both the learned Single Judge and of the Division Bench of the  Bombay High Court were both liable to be set aside as the law had overtaken the said judgments which were both a nullity. The  Supreme Court in Shyam Ruia case[9] held:

“19. In view of judgment passed by the three- Judges Bench reported in Nusli Neville Wadia v. Ivory Properties[10], the question of limitation will have to be considered along with other issues that would arise for adjudication in Suit No. 2410 of 2008 filed by Respondent 1 (MHL). Certain observations have been made by the learned Single Judge as well as by the Division Bench on the merits of the matter and the contention of the parties. In our view, the trial inSuit No. IV-2410 of 2008 has to be proceeded independently on its own merits. In view of the judgment by the three- Judges Bench, the decision rendered by the learned Single Judge as well as by the Division Bench on the issue of limitation by considering that as preliminary issue would become nullity and the matter would have to proceed afresh.

20. The appeal is disposed of with the following directions and observations: (i) The order dated 16.03.2017 passed by the learned Single Judge in Suit No. 2410 of 2008 and the order dated 08.08.2019 (corrected on 19.09.2019) passed by the Division Bench in Commercial Appeal No. 148 of 2017 arising out of Suit No. 2410 of 2008 are set aside.”                        

(emphasis supplied)

The reasoning for the said judgment in Shyam Ruia case stems from the principle that when a Court decides a matter it is not as if it is making any new law but it is as if it is only restating what the law has always been. The decision of the Supreme Court was premised on the basis that decisions of both the learned Single Judge and the learned Division Bench could never have been the law since the decision in Nusli Wadia case retrospectively laid down that limitation cannot be at all raised as a preliminary issue under Section 9-A  CPC in a suit.

The principles of prospective and retrospective overruling were considered by the Supreme Court for the first time in the famous case of Golak Nath v. State of Punjab[11] (a Bench of elevenJudges) in the following manner:

45. There are two doctrines familiar to American Jurisprudence, one is described as Blackstonian theory and the other as “prospective over-ruling” which may have some relevance to the present enquiry. Blackstone in his Commentaries, 69 (15th Edn., 1809) stated the common law rule that the duty of the Court was “not to pronounce a new rule but to maintain and expound the old one”. It means the Judge does not make law but only discovers or finds the true law. The law has always been the same. If a subsequent decision changes the earlier one, the latter decision does not make law but only discovers the correct principle of law. The result of this view is that it is necessarily retrospective in operation. But Jurists, George F. Canfield, Robert Hill Freeman, John Henry Wigmore and Cardozo have expounded the doctrine of “prospective over-ruling” and suggested it as “a useful judicial tool”. In the words of Canfield the said expression means:

“… a Court should recognise a duty to announce a new and better rule for future transactions whenever the court has reached the conviction that on old rule (as established by the precedents) is unsound even though feeling compelled by stare decisis to apply the old and condemned rule to the instance case and to transactions which had already taken place”.

Cardozo, before he became a Judge of the Supreme Court of the United States of America, when he was the Chief Justice of New York State addressing the Bar Association said thus:

“The rule (the Blackstonian rule) that we are asked to apply is out of tune with the life about us. It has been made discordant by the forces that generate a living law. We apply it to this case because the repeal might work hardship to those who have trusted to its existence. We give notice however that any one trusting to it hereafter will do at his peril.”

The Supreme Court of the United States of America in the year 1932, after Cardozo became an Associate Justice of that Court in Great Northern Railway v. Sunburst Oil & Ref. Co.[12]  , applied the said doctrine to the facts of that case. In that case the Montana Court had adhered to its previous construction of the statute in question but had announced that that interpretation would not be followed in the future. It was contended before the Supreme Court of the United States of America that a decision of a court overruling earlier decision and not giving its ruling retroactive operation violated the due process clause of the 14th Amendment. Rejecting that plea, Cardozo said:

“This is not a case where a Court in overruling an earlier decision has come to the new ruling of retroactive dealing and thereby has made invalid what was followed in the doing. Even that may often be done though litigants not infrequently have argued to the contrary…. This is a case where a Court has refused to make its ruling retroactive, and the novel stand is taken that the Constitution of the United States is infringed by the refusal. We think that the Federal Constitution has no voice upon the subject. A state in defining the elements of adherence to precedent may make a choice for itself between the principle of forward operation and that of relation backward. It may be so that the decision of the highest courts, though later overruled, was law nonetheless for intermediate transactions…. On the other hand, it may hold to the ancient dogma that the law declared by its Courts had a platonic or ideal existence before the act of declaration, in which event, the discredited declaration will be viewed as if it had never been and to reconsider declaration as law from the beginning……The choice for any state may be determined by the juristic philosophy of the Judges of her Courts, their considerations of law, its origin and nature.”

The opinion of Cardozo tried to harmonize the doctrine of prospective over-ruling with that of stare decisis.

                               *                           *                          *

51. As this Court for the first time has been called upon to apply the doctrine evolved in a different country under different circumstances, we would like to move warily in the beginning. We would lay down the following propositions: (1) The doctrine of prospective overruling can be invoked only in matters arising under our Constitution; (2) it can be applied only by the highest court of the country i.e. the Supreme Court as it has the constitutional jurisdiction to declare law binding on all the courts in India; (3) the scope of the retroactive operation of the law declared by the Supreme Court superseding its ‘earlier decisions’ is left to its discretion to be moulded in accordance with the justice of the cause or matter before it.”                                                            

(emphasis supplied)

The principle of retrospectivity of judgments was again restated in Ramdas Bhikaji Chaudhari v. Sadanand[13] when it was held:

“5. … Lastly it was argued that under Article 141 since the earlier case decided by this Court in Rajal Das Guru Namal Pamanani[14]  held the field, it must be held that it was the law laid down by this Court under Article 141 of the Constitution. It is well settled that whenever a previous decision is overruled by a larger Bench the previous decision is completely wiped out and Article 141 will have no application to the decision which has already been overruled, and the court would have to decide the cases according to law laid down by the latest decision of this Court and not by the decision which has been expressly overruled.”

              (emphasis supplied)

The principle of retrospectivity was again referred to in a judgment of the Supreme Court in Asstt. Commissioner v. Saurashtra Kutch Stock Exchange[15] wherein it is held as under:

35. In our judgment, it is also well settled that a judicial decision acts retrospectively. According to Blackstonian theory, it is not the function of the court to pronounce a “new rule” but to maintain and expound the “old one”. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. To put it differently, even where an earlier decision of the court operated for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood.

36. Salmond in his well- known work states:

“The theory of case law is that a judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicatae or accounts that have been settled in the meantime.

37. It is no doubt true that after a historic decision in Golak Nath v. State of Punjab[16] this Court has accepted the doctrine of “prospective overruling”. It is based on the philosophy:

“The past cannot always be erased by a new judicial declaration.”

It may, however, be stated that this is an exception to the general rule of the doctrine of precedent.”

(emphasis supplied)

The doctrine of “prospective overruling” was first made applicable in constitutional matters. However,  it has subsequently been applied to cases where statutes were involved as well.

By “prospective overruling” the law declared by the Court applies to the cases in future. The application to cases which have attained finality is saved because the repeal would otherwise work hardship on those who had trusted its existence. Invocation of the doctrine of “prospective overruling” is now left to the discretion of the Court but it is the exception.

Courts have taken a view to follow the principles of prospective overruling, however, it is only applied in cases where the need is so felt, as in cases for example where revenue is involved due to the State or Government and in other emergent situations. This has been elaborated in Somaiya Organics (India) Ltd. v. State of U.P.[17] by a Bench of five Judges of the Supreme Court:

Ruma Pal, J. (concurring)—While I respectfully concur with the reasoning and conclusions reached by my learned Brother Kirpal, J., I wish to add my views on an aspect of the “prospective overruling” which was sought to be effected by the decision of the Constitution Bench of this Court in Synthetics and Chemicals Ltd. v. State of U.P. [18]

45. One of the arguments of the appellant as noted by my learned Brother was that the Court in Synthetics case[19]  by resorting to prospective overruling had in fact sought to uphold a law up to the period of the judgment which law had held to have been passed without competence. It is submitted that the finding that the States were not competent to levy tax on industrial alcohol meant that the State Acts were non est and that the Court could not by giving prospective effect to its judgment breathe life into a dead statute up to the date of the judgment. It was also contended by the appellant that even under Article 142, the Court could not whittle down or act in derogation of any constitutional provision. By declaring that the statute was valid up to the date of the judgment, according to the appellant, the specific constitutional provisions, namely, Article 246 and Article 245 were infringed. Reliance has been placed on the decision of this Court in Prem Chand Garg v. Excise Commr., U.P.[20]  and Supreme Court Bar Assn. v. Union of India.[21]

46. The argument of the appellant proceeds on a misunderstanding of the effect of prospective overruling. As has been elaborately stated in my learned Brother’s judgment, by prospective overruling the court does not grant the relief claimed even after holding in the claimant’s favour. In this case, the Court held that the statutory provision imposing vend fee was invalid. Strictly speaking, this would have entitled the appellant to a refund from the respondents of all amounts collected by way of vend fee. But because, as stated in Synthetics  decision[22] itself, over a period of time imposts and levies had been imposed by virtue of the earlier decision and that the States as well as the petitioners and manufacturers had adjusted their rights and their positions on that basis, this relief was denied. The Court did not, by denying the relief, authorise or validate what had been declared to be illegal or void nor did it imbue the legislature with competence up to the date of the judgment.

Prospective overruling has also been expressed as a power which is inherent in the Supreme Court as explained in Kailash Chand Sharma v. State of Rajasthan[23]:

40. Arguments were addressed before us on the contours and limitations of the doctrine of prospective overruling applied in our country for the first time in Golak Nath v. State of Punjab[24]  in the context of invalidity of certain constitutional amendments and extended gradually to the laws found unconstitutional or even to the interpretation of ordinary statutes. The sum and substance of this innovative principle is that when the Court finds or lays down the correct law in the process of which the prevalent understanding of the law undergoes a change, the Court, on considerations of justice and fair deal, restricts the operation of the new-found law to the future so that its impact does not fall on the past transactions. The doctrine recognises the discretion of the Court to prescribe the limits of retroactivity of the law declared by it. It is a great harmonising principle equipping the Court with the power to mould the relief to meet the ends of justice. Justification for invoking the doctrine was also found in Articles 141 and 142 which as pointed out in Golak Nath case  are couched in such wide and elastic terms as to enable this Court to formulate legal doctrines to meet the ends of justice. In the aftermath of Golak Nath case  we find quite an illuminating and analytical discussion of the doctrine by Sawant, J. in Managing Director, ECIL v. B. Karunakar[25] . The learned Judge prefaced the discussion with the following enunciation: (SCC p. 760, para 34)

“It is now well settled that the courts can make the law laid down by them prospective in operation to prevent unsettlement of the settled positions, to prevent administrative chaos and to meet the ends of justice.”

The Supreme Court in M.A. Murthy v. State of Karnataka[26] explained the rationale for prospective overruling as under:

8. The learned counsel for the appellant submitted that the approach of the High Court is erroneous as the law declared by this Court is presumed to be the law at all times. Normally, the decision of this Court enunciating a principle of law is applicable to all cases irrespective of its stage of pendency because it is assumed that what is enunciated by the Supreme Court is, in fact, the law from inception. The doctrine of prospective overruling which is a feature of American jurisprudence is an exception to the normal principle of law, was imported and applied for the first time in L.C. Golak Nath v. State of Punjab. In Managing Director, ECIL v. B. Karunakar[27] the view was adopted. Prospective overruling is a part of the principles of constitutional canon of interpretation and can be resorted to by this Court while superseding the law declared by it earlier. It is a device innovated to avoid reopening of settled issues, to prevent multiplicity of proceedings, and to avoid uncertainty and avoidable litigation. In other words, actions taken contrary to the law declared prior to the date of declaration are validated in larger public interest. The law as declared applies to future cases. (See Ashok Kumar Gupta v. State of U.P.[28] and Baburam v. C.C. Jacob[29]) It is for this Court to indicate as to whether the decision in question will operate prospectively. In other words, there shall be no prospective overruling, unless it is so indicated in the particular decision. It is not open to be held that the decision in a particular case will be prospective in its application by application of the doctrine of prospective overruling. The doctrine of binding precedent helps in promoting certainty and consistency in judicial decisions and enables an organic development of the law besides providing assurance to the individual as to the consequences of transactions forming part of the daily affairs. That being the position, the High Court was in error by holding that the judgment which operated on the date of selection was operative and not the review judgment in Ashok Kumar Sharma case No. II[30]  . All the more so when the subsequent judgment is by way of review of the first judgment in which case there are no judgments at all and the subsequent judgment rendered on review petitions is the one and only judgment rendered, effectively and for all purposes, the earlier decision having been erased by countenancing the review applications.                                                                                    

(emphasis supplied)

In V. George v. State of Kerala[31] it was held that the power for prospective overruling could also be exercised by the High Court:

14. For the views we propose to take, it is not necessary for us to consider all the decisions relied upon by Mr Rajan. The legal position as regards the applicability of doctrine of prospective overruling is no longer res integra. This Court in exercise of its jurisdiction under Article 32 or Article 142 of the Constitution of India may declare a law to have a prospective effect. The Division Bench of the High Court may be correct in opining that having regard to the decision of this Court in Golak Nath v. State of Punjab[32] the power of overruling is vested only in this Court and that too in constitutional matters, but the High Courts in exercise of their jurisdiction under Article 226 of the Constitution of India, even without applying the doctrine of prospective overruling, indisputably may grant a limited relief in exercise of their equity jurisdiction.”

The net effect of the above analysis is that judgements will take effect retrospectively unless specifically provided for to operate prospectively to cater to specific situations and for reasons to be stated therein.


*Advocate, High Court, Bombay. Assisted by Arjun Prabhu, Sheetal Parkash and Mayur Agarwal. Author can be reached at karlshroff@gmail.com

[1] 2019 SCC OnLine SC 1313 

[2] Briefly the State of Maharashtra inserted Section 9-A to the Code of Civil Procedure vide Code of Civil Procedure (Maharashtra Amendment) Act, 1977. Section 9-A provided that where an application has been made for granting or setting aside an order granting interim relief in a suit, if a party challenged the jurisdiction of the Court to entertain the suit, the Court would have to decide the preliminary issue of jurisdiction before deciding the aforesaid application.

The amended Section 9-A came to be repealed by CPC Maharashtra (Amendment) Ordinance, 2018 with effect from 27.06.2018 and Section 9-A of the Code (in its application to the State of Maharashtra) was deleted by Section 3 of the Ordinance.

The above Ordinance was replaced by the Code of Civil Procedure (Maharashtra Amendment) Act, 2018 on 29.10.2018 and it was provided that the preliminary issues framed under Section 9-A shall be treated as an issue under Order XIV CPC and were to be decided by the courts with other issues as the court may deem fit.

On 15.12.2018, the State of Maharashtra enacted the Code of Civil Procedure (Maharashtra Amendment) Act, 2018 which provided for a saving clause. Section 2 of the Amendment Act provided that if the court has ordered to decide an issue as a preliminary issue before the date of deletion of Section 9-A, it shall be decided by the court as a preliminary issue.

[3] 2019 SCC OnLine SC 1313  

[4] (2015) 6 SCC 412

[5] (2015) 6 SCC 412

[6] Messer Holdings Ltd. v. Bombay Oxygen Corporation Ltd., 2017 SCC OnLine Bom 1806 

[7] (2015) 6 SCC 412

[8] Shyam Madam Mohan Ruia v. Messer Holdings Limited, 2019 SCC OnLine SC 1673

[9] Ibid.

[10] 2019 SCC OnLine SC 1313

[11] (1967) 2 SCR 762 

[12] 1932 SCC OnLine US SC 165

[13] (1980) 1 SCC 550

[14] Rajaldas Gurunamal Pamanani v. State of Maharashtra, (1975) 3 SCC 375 

[15] (2008) 14 SCC 171

[16] (1967) 2 SCR 762

[17] (2001) 5 SCC 519

[18] (1990) 1 SCC 109

[19] Ibid.

[20] 1963 Supp (1) SCR 885

[21] (1998) 4 SCC 409

[22] (1990) 1 SCC 109

[23] (2002) 6 SCC 562

[24] (1967) 2 SCR 762

[25] (1993) 4 SCC 727

[26] (2003) 7 SCC 517

[27] (1993) 4 SCC 727

[28] (1997) 5 SCC 201

[29] (1999) 3 SCC 362 

[30] (1997) 4 SCC 18 

[31] (2007) 3 SCC 557

[32] (1967) 2 SCR 762

Join the discussion

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.