Delhi High Court
Case BriefsHigh Courts


Delhi High Court: In a batch of petitions filed assailing proceedings initiated by the respondent- State under the Prohibition of Benami Property Transactions Act, 1988 for attachment and confiscation of properties which were admittedly acquired prior to the enforcement of the Benami Transactions (Prohibition) Amendment Act, 2016, Yashwant Varma, J., quashed all proceedings as in compliance with a judgment rendered by the Supreme Court in Union of India v. Ganpati Dealcom Pvt. Ltd., 2022 SCC OnLine SC 1064, wherein it was categorically held that concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act, viz., 25-10-2016 and thus, all such prosecutions or confiscation proceedings shall stand quashed.

The Supreme Court in Ganpati Dalcom (supra) dealt with the issue of retrospective application of the provisions by virtue of the introduction of Benami Transactions (Prohibition) Amendment Act, 2016. The Supreme Court ruled on the powers of attachment and confiscation in respect of properties acquired and in which interests stood, prior to the 2016 Amendment by stating that the stain of benami transactions is not restricted to the person who is entering into the aforesaid transaction, rather, it attaches itself to the property perpetually and extends itself to all proceeds arising from such a property, unless the defence of innocent ownership is established under Section 27(2) of the 2016 Act. When such a defect is being created not on the individual, but on the property itself, a retroactive law would characterize itself as punitive for condemning the proceeds of sale which may also involve legitimate means of addition of wealth.

Looked at from a different angle, continuation of only the civil provisions under Section 4 of 1988 Act, etc., would mean that the legislative intention was to ensure that the ostensible owner would continue to have full ownership over the property, without allowing the real owner to interfere with the rights of benamidar. If that is the case, then without effective any enforcement proceedings for a long span of time, the rights that have crystallized since 1988, would be in jeopardy. Such implied intrusion into the right to property cannot be permitted to operate retroactively, as that would be unduly harsh and arbitrary.

In light of the judgment on, the Court noted that it is evident that the impugned proceedings cannot be sustained. Thus, the Court quashed various summon notices issued to the petitioners in the present batch of petitions, along with show cause notices, provisional attachment order and all other impugned proceedings.

[Reliance Commodities v. ACIT, WP (C) No. 3139 of 2019 and Satyendar Jain v. UOI, WP (C) No. 5158 of 2017, decided on 10-10-2022]

Advocates who appeared in this case:

In WP (C) No. 3139 of 2019

Mr. Anirudh Bakhru, Mr. Ayush Puri, Mr. Tejaswini, Ms. Umang Tyagi, Mr. Prateek Kumar, Advocates, for the Petitioner;

Ms. Shiva Lakshmi, CGSC with Ms. Srishti Rawat, Ms. Ritwik Sneha, Advocates, for the R-2;

In W.P.(C) 5158/2017

Mr. Dayan Krisyhnan, Sr. Adv. With Mr. Vivek Jain, Mr. Vaibhav Yadav, Mr. Amit Anand and Ms. Devyani, Advocates, for the Petitioner;

Mr. Zoheb Hossain, Sr. Standing Counsel with Mr. Vipul Agarwal and Mr. Parth Semwal, Advocates for the Income Tax Department.

*Arunima Bose, Editorial Assistant has put this report together.

Case BriefsSupreme Court

Supreme Court: While upholding the Constitutional validity of the Payment of Gratuity (Amendment) Act, 2009, the Division Bench of Sanjiv Khanna* and Bela M. Trivedi, JJ., held that the Amendment seeks to bring equality and give fair treatment to the teachers. It can hardly be categorised as an arbitrary and high-handed exercise.

Noticeably, the aforesaid Amendment Act was introduced to extend the benefit of gratuity to the teachers by including them in the definition of “employee”, who were earlier deprived of it. The Court said,

“Private schools, when they claim a vested right arising from the reason of defect, should not succeed, for acceptance would be at the expense of teachers who were denied and deprived of the intended benefit.”

The common question before the Bench was regarding constitutional validity of the amendment to Section 2(e) and insertion of Section 13A to the Payment of Gratuity Act, 1972 (the Act), with retrospective effect from 03-04-1997 vide the Payment of Gratuity (Amendment) Act, 2009.

Government Notification No. S-42013/1/95-SS.(II)

The Act requires payment of gratuity to an employee after he has rendered continuous service for not less than 5 years, on his superannuation, retirement or resignation or on his death or disablement due to accident or disease. Noticeably, by the Notification No. S-42013/1/95-SS.(II) issued by the Ministry of Labour and Employment, Government of India on 03-04-1997, the provisions of the Act have been made applicable to the educational institutions with ten or more employees.

Decision in Ahmedabad Private Primary Teachers’ Association’s case, (2004) 1 SCC 755

Therefore, the private schools being educational institutions, in which ten or more persons are employed, became liable to pay gratuity to their employees as per the provisions of the Act. However, some private schools raised a dispute claiming that the teachers in educational institutions or schools are not “employee” as defined in Section 2(e) of the Act. The Supreme Court in Ahmedabad Private Primary Teachers’ Association v. Administrative Officer, (2004) 1 SCC 755, held that teachers who impart education to students are not “employee” under Section 2(e) of the Act as they do not perform any kind of skilled, unskilled, semi-skilled, manual, supervisory, managerial, administrative, technical or clerical work.

Thus, the teachers were denied the benefit of gratuity, but other employees of the private schools, were entitled to the benefit of gratuity.

Payment of Gratuity (Amendment) Act, 2009

Referring the judgment in Ahmedabad Private Primary Teachers’ Association (supra) in the object and reasons for Amendment, the Government introduced the Payment of Gratuity (Amendment) Act, 2009 to cover the definition of “employee” to all kinds of employees. The Amendment Act inserted a new Section 13A and also Clause (e) to Section 2 of the Act with retrospective effect from 03-04-1997 to confer, with retrospective effect, benefit of gratuity to the teachers who have rendered continuous service for not less than 5 years.

Analysis and Findings

Whether the government empowered overrule judicial decisions by introducing Statutory Amendments?

The petitioners contended that the legislation vide the Amendment Act 2009 overrules the judicial decision in Ahmedabad Private Primary Teachers’ Association (supra) and violates the doctrine of separation of powers. Rejecting the aforesaid argument, the Court observed that the legislation in question rather rectifies the infirmities and defects pointed out by the Court in the aforesaid decision, and the amended clause (e) to Section 2, defining the word “employee” and the newly inserted Section 13A with retrospective effect, effectuate and catalyse the object and purpose of the Notification No. S-42013/1/95-SS.(II).

The Court opined that though a court decision cannot be overruled by the legislature, the legislature can amend the language of the provision that was the subject matter of the court decision, and such an amendment does not overrule the court decision. The Court said,

“Overruling assumes a decision based on the same law. Where the law, as in the present case, has been amended, and the defects have been removed or cured, the law changes, and therefore, the earlier interpretation is no longer applicable and becomes irrelevant.”

Noting that the decision in Ahmedabad Private Primary Teachers’ Association (supra) even acknowledged and prompted the legislature to enact a legislation granting the benefit of gratuity to teachers, who had been excluded because of the legal flaw, the Court held that the amendment enforces and gives effect to what was intended by the notification, but could not be achieved on account of the technical and legal defect. The lacuna, a distortion in the language that had the unwitting effect of leaving out teachers, has been rectified so as to achieve the object and purpose behind the issuance of the notification, making the Act applicable to all educational institutions.

Whether the Amendment financially confiscatory?

The private educational institutions also assailed the Amendment on the ground that they would be liable to pay gratuity for a period of service prior to 03-04-1997, and, therefore, the amendments are unconscionable and tyrannous, equally fallacious and financially confiscatory.  The Court, calling the aforesaid argument fallacious, observed that the argument, predicated on past liability, deserved to be rejected as there are upper-cap limits on payment of gratuity; i.e., the payment towards gratuity cannot exceed the specified amount, even if the employee would be entitled to higher amount in view of the years of the service rendered to the employer.

Relying on T.M.A. Pai Foundation v. State of Karnataka, (2002) 8 SCC 481, some schools argued that charging of capitation fee or profiteering by educational institutions is impermissible and they do not have capacity and ability to pay gratuity to the teachers.

Finding the aforesaid argument unapt and parsimonious, the Court clarified the decision in T.M.A. Pai Foundation (supra) by holding that the judgment does not state that the teachers should not be paid gratuity; in fact, the judgment holds that the educational institutions are entitled to reasonable surplus to meet the cost of expansion and augmentation of the facilities and this does not amount to profiteering.

The Court noted that though it is possible that in some States there are fee fixation laws which will have to be complied with, but compliance with these laws does not mean that the teachers should be deprived and denied gratuity, which they were/are entitled to receive as other employees of an educational institution. The Court said that regulation of fee is to ensure that there is no commercialisation and profiteering, and the effect is not to prohibit a school from fixing and collecting ‘just and permissible school fee’. The Court added,

“We would not accept any attempt to circumscribe and limit the power vested with the sovereign legislature, thereby putting fetters when such fetters are not prescribed by the Constitution. When and which cases to exercise the power has to be left to the legislature.”

Applicability: Retrospective v. Retroactive

The Court, while holding that the Amendment retroactive, observed that the provisions of the Act, even post the retrospective amendments, will apply only to those teachers who were in service as on 03-04-1997, and at the time of termination have rendered service of not less than 5 years. The Court said that the period of 5 years may be partly before 03-04-1997, as the date on which the person was employed does not determine the applicability of the PAG Act.

However, the date of termination of service, should be post the enforcement date. The entire length of service, including the service period prior to 03-04-1997, is to be counted for the purpose of computing the entitlement condition of 5 years of service.

Whether the Amendment violative of Fundamental Rights?

The schools had claimed violation of Articles 14, 19(1)(g), 21 and 300-A of the Constitution. Holding that the Constitutional provisions are not violated, the Court said that to deny gratuity benefits to the teachers upon enforcement of the notification No. S-42013/1/95-SS.(II) was itself an anomaly which mandated correction.

The Court observed that the teachers were discriminated to be denied benefit of gratuity, a terminal benefit, which was payable to other employees of the private schools/educational institutions, including those engaged in administrative and managerial work. The amendment with retrospective effect remedies the injustice and discrimination suffered by the teachers on account of a legislative mistake.

Whether the Amendment violated other enactments?

The last contention raised by the private schools and writ petitioners was predicated on the enactment of the Repealing and Amending Act 2016, by virtue of which the Amendment Act 2009 was repealed. Once again, rejecting such contention, the Court opined that the argument overlooked Section 6A of the General Clauses Act, 1897 and Section 4 of the Repealing and Amendment Act, which states that the repeal shall not affect any of the enactment in which the repealed enactment has been applied, incorporated or referred to. It also states that the Repealing Act shall not affect the validity, invalidity, effect or consequences of anything already done or suffered, or any right, title, obligation or liability already acquired, accrued or incurred etc.


In the light of aforesaid, the Court upheld the validity of the Amendment Act and directed that the private schools would make payment to the employees/teachers along with the interest in accordance with the provisions of the Act within a period of 6 weeks and in case of default, the employees/teachers may move the appropriate forum to enforce payment in accordance with the provisions of the Act.

Hence, the Court vacated the partial stay on the Amendment Act in the order dated 31-01-2020 passed in Saint Xaviers High School v. Jayashree Shamal Ghosh, (SLP (C) No. 2235 of 2020) or in any other case. The appeals and the petition were dismissed.

[Independent Schools’ Federation of India (Regd.) v. Union of India, 2022 SCC OnLine SC 1113, decided on 29-08-2022]

*Judgment by: Justice Sanjiv Khanna

Kamini Sharma, Editorial Assistant has put this report together

Case BriefsSupreme Court

Supreme Court: While adjudicating a case related to the Reliance Commercial Finance resolution, the 3-judges Bench comprising Dr. D Y Chandrachud*, Surya Kant, and A S Bopanna, JJ., was posed with a question as to whether the SEBI Standardisation of procedure Circular (13-10-2020) has retroactive application. The Court clarified,

“Many decisions of this Court define ‘retroactivity’ to mean laws that destroy or impair vested rights, in real terms, this is the definition of ‘retrospectivity’ or ‘true retroactivity’.”

On one hand, SEBI argued that the circular will have a retroactive application, on the other, Reliance Commercial Finance Ltd., argued that applying the circular on the instant case would make its application retrospective. The Court held that the SEBI Circular has retroactive application by relying on the following definitions:

In Principles of Statutory Interpretation by Justice G.P. Singh (14th Edn., 2016 at p. 583), it is stated that the rule against retrospective construction is not applicable to a statute merely because “a part of the requisites for its action is drawn from a time antecedent to its passing.” If that were not so, every statute will be presumed to apply only to persons born and things which come into existence after its operation and the rule may well result in virtual nullification of most of the statutes.

Significant Precedents

In Vineeta Sharma v. Rakesh Sharma, 2020 (9) SCC 1, the Court described the nature of prospective, retrospective, and retroactive laws as follows:

“The prospective statute operates from the date of its enactment conferring new rights. The retrospective statute operates backwards and takes away or impairs vested rights acquired under existing laws. A retroactive statute is the one that does not operate retrospectively. It operates in futuro. However, its operation is based upon the character or status that arose earlier. Characteristic or event which happened in the past or requisites which had been drawn from antecedent events.”

Noticing that the terms “retrospective” and “retroactive” are often used interchangeably, though their meanings are distinct, the Court referred to State Bank’s Staff Union (Madras Circle) v. Union of India, (2005) 7 SCC 584, where this difference was succinctly appreciated in the following words:

“’Retroactivity’ is used to cover at least two distinct concepts. The first, which may be called ‘true retroactivity’, consists in the application of a new rule of law to an act or transaction which was completed before the rule was promulgated. The second concept, which will be referred to as ‘quasi-retroactivity’, occurs when a new rule of law is applied to an act or transaction in the process of completion…the foundation of these concepts is the distinction between completed and pending transactions….” (T.C. Hartley, The Foundations of European Community Law 129 (1981)


The Court clarified that though many decisions of the Court define “retroactivity” to mean laws that destroy or impair vested rights, in real terms, this is the definition of “retrospectivity” or “true retroactivity”. “Quasi-retroactivity” or simply “retroactivity” on the other hand is a law that is applicable to an act or transaction that is still underway. Such an act or transaction has not been completed and is in the process of completion. Retroactive laws also apply where the status or character of a thing or situation arose prior to the passage of the law.

[SEBI v. Rajkumar Nagpal, 2022 SCC OnLine SC 1119, decided on 30-08-2022]

*Judgment by: Justice Dr. D Y Chandrachud


For SEBI: N Venkataraman, Senior Counsel & Additional Solicitor General

For RCFL: Darius Khambata, Senior Counsel

For Bank of Baroda: KV Viswanathan, Senior Counsel

For Authum Investment and Infrastructure Ltd.: Dhruv Mehta, Senior Counsel

*Kamini Sharma, Editorial Assistant has put this report together.

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