Full Judgment Text
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CASE NO.:
Appeal (civil) 3396 of 2001
PETITIONER:
State Bank’s Staff Union Madras
RESPONDENT:
Union of India & Ors.
DATE OF JUDGMENT: 15/09/2005
BENCH:
ARIJIT PASAYAT & H. K. SEMA
JUDGMENT:
J U D G M E N T
ARIJIT PASAYAT, J.
Challenge in this Appeal is to judgment of a Division
Bench of Madras High Court holding that customary bonus
was not payable by the State Bank of India (in short the
’Bank’) after Banking Laws (Amendment) Act, 1984 (Central
Act No. 64 of 1984) (in short the ’Amendment Act’) was
enacted. Appellant has questioned constitutional validity
of the said amendment before the Madras High Court by
filing a writ petition which was dismissed.
Factual position which is almost undisputed is as
follows:-
By the Amendment Act, State Bank of India Act, 1955 (in
short the ’State Bank Act’) and State Bank of India
(Subsidiary Banks) Act, 1959 (in short the ’Subsidiary
Act’) and Banking Companies (Acquisition and Transfer of
Undertakings) Acts, 1970 and the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1980 (in
short ’the Undertakings Acts’) were amended.
By that amending Act, a new Section 43-A comprising of
three sub sections (1), (2) and (3) and marginal heading
"Bonus" was introduced in the State Bank Act. The said
Section reads as under:-
"(1) No Officer, Adviser or other Employee
(other than an employee within the meaning
of Clause (13) of Section 2 of the Payment
of Bonus Act, 1965 (21 of 1965) of the
State Bank shall be entitled to be paid any
bonus.
(2) No employee of the State Bank, being an
employee within the meaning of Clause (13)
of Section 2 of the Payment of Bonus Act,
1965 (21 of 1965), shall be entitled to be
paid any bonus except in accordance with
the provisions of that Act.
(3) The provisions of this Section shall
have effect notwithstanding any judgment,
decree or order of any Court, Tribunal or
other authority and notwithstanding
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anything contained in any other provision
of this Act or in the Industrial Disputes
Act, 1947 (14 of 1947), or any other law
for the time being in force or any practice
usage or custom or any contract, agreement,
settlement, award or other instrument."
In the Subsidiary Act, a new Section 50A was introduced
in identical language. Similar provisions numbered as
Section 12-A were introduced in the Banking Undertakings
Acts.
The Statement of Objects and Reasons, which accompanied
the Bill which later became the Amending Act, reads thus:
"In an award notified as 14.1.1984, the
Central Government Industrial Tribunal, Madras
held that the employees of the State Bank of
India covered by the award should be paid
bonus at the rate of one month’s substantive
pay every half year on the ground that this
has also along been the custom and practice.
A writ petition filed against this award is
pending in the Madras High Court.
All public Sector banks including the State
Bank of India come under the purview of the
Payment of Bonus Act, 1965, and the intention
is that no bonus other than what is required
to be paid under the Payment of Bonus Act,
1965, shall be paid to the employee of the
State Bank of India or of any other pubic
sector bank. It is proposed to make express
provisions in this behalf in the State Bank of
India Act, 1955 and the enactment relating to
the other public sector banks.
The Bill seeks to achieve the above objects."
That award of the Central Government Industrial
Tribunal was challenged by the Management in a writ
petition filed in the Madras High Court being Writ
Petition No.1273 of 1984. It was during the pendency of
that petition in the High Court, that the State Bank Act
came to be amended by introducing Section 43-A in that
Act. On 24.11.1986, the Writ Petition filed by the Bank
was dismissed. The matter was not further agitated, and
the award attained finality.
Appellant’s primary stand before the High Court was
that the Amendment Act was unconstitutional as it merely
intended to nullify a judicial decision which Parliament
had no competence to do. Other contentions were to the
effect that an award passed under the Industrial Disputes
Act, 1947 (in short ’the Industrial Act’) is entitled to
greater recognition as in the case of conflict between the
provisions of General Law i.e. State Bank Act and the
Industrial Act the latter Act must prevail. The bonus
which was directed to be paid was in the nature of
deferred wages and the impugned legislation had the effect
of freezing wages. Parliament is not vested with the
power to reduce the wages and therefore the legislation is
ultra vires. Effect of an award under the Industrial Act
cannot be wiped out except in the manner provided under
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the Industrial Act and since in the instant case that has
not been done, the award was binding on the parties
concerned. The bonus being a customary bonus was peculiar
to the employees of the Bank and mere fact that other
public sector banks were not being paid such bonus is of
really no consequence. Stand that financial implications
were enormous is also of no consequence. The Union of
India and the Bank took the stand that the Amendment Act
was a valid piece of legislation. It was not merely
intended to invalidate an award by acting as an Appellate
Authority, and it is not a case of any judicial power
being usurped by the legislation. The High Court
negatived the contentions of the appellants and dismissed
the Writ Petition.
The points urged before the High Court was reiterated
by learned counsel for the appellant. Reference was made
to a decision of this Court in Vegetable Products Ltd. v.
Their Workmen (AIR 1965 SCC 1499) to highlight the basic
features of customary bonus.
It was submitted in the case of officers of the Bank
that the quantum representing bonus merged with the basic
pay and consequential increase in Dearness Allowance and
superannuation benefits were granted. That being so, bonus
is nothing but deferred wage. Continued payment of bonus
made it a condition of service and the same could not have
been altered without following the provisions of Section
9A of the Act. Customary bonus is one which is paid
dehors the bonus paid under the Payment of Bonus Act, 1965
(in short the ’Bonus Act’). Customary bonus is untouched
by the Bonus Act. The Industrial Act is a special Act qua
the State Bank Act. Issues relating to continuance of
service and disputes relating thereof are covered by the
Industrial Act. While some of the aspects can be taken to
be covered by the State Bank Act, non compliance with the
special Act i.e. Industrial Act rendered the Amendment Act
invalid. The intention of the Amendment Act was to
invalidate the award as is evident from the Statement of
Objects and Reasons of the Amendment Act. Customary bonus
is not profit linked. Amendment even if accepted to be
valid can only have prospective effect.
In response, learned counsel for the Bank and the Union
of India submitted that the payment of customary bonus was
creating different yardsticks for different public sector
banks. The award was challenged by the Bank in a Writ
Petition. During the pendency of the writ petition, the
amendment was enacted. Unfortunately the High Court did
not take note of the Amendment Act and Custom even if it
acquires a force of law, can be changed as there is no
fundamental right involved in any custom. Bonus cannot be
called deferred wages and even if it is conceded for the
sake of argument that the payment of customary bonus was a
condition of service, after insertion of Section 43A by
the Amendment Act the same has no operation. The
provision brings about uniformity. The payments were
related to profits and they were not uniform, so in that
sense it was not really be a condition of service or a
deferred wage. The High Court has also dealt with the
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Special Act and the deferred wages concept. The Amendment
Act really brought in a curative provision, and no
retrospective effect has been given to the Amendment Act.
Section 9A of the Industrial Act has no application as the
Parliament has the power to legislate on that aspect. A
bare look at the impugned provision makes it clear that it
is not a case of legislature by mere declaration or
without anything more, overriding a judicial decision. On
the other hand it is a case of rendering a judicial
decision ineffective by enacting a valid law within
legislative field of the legislature. Merely because a
reference has been made to the award in the Statement of
Objects and Reasons, that cannot in any way affect the
plain intention in enacting the law under challenge and it
is not correct to say that the intention was to declare
the decision of Tribunal as invalid and as such judicial
power has been usurped by legislation.
Following four circumstances have to be fulfilled in
order to be entitled to payment of customary or
traditional bonus, as was noted in M/s. Grahams Trading
Co. v. Their Workmen (AIR 1959 SC 1151) and in Vegetable
Products case (supra):
"(i) that the payment has been made over an
unbroken series of years;
(ii) that it has been for a sufficiently long
period, the period has to be longer than in
the case of an implied term of employment;
(iii) that it has been paid even in years of
loss and did not depend on the earning of
profits; and
(iv) that the payment has been made at a
uniform rate throughout to justify an
inference that the payment at such and such
rate had become customary and traditional in
the particular concern."
Learned counsel for the appellant submitted that
considering the nature of customary bonus, the Amendment
Act was really taking away a right conferred. This Court
in Upendra Chandra Chakraborty and Anr. v. United Bank of
India (AIR 1985 SC 1010) observed as follows:-
"There is one other aspect of the claim
now put forward, which cannot be lost sight
of, which affords an additional reason to
reject the contention of the appellants. The
respondent is a nationalized bank. Roughly
in all there are 25 nationalised banks. The
concept of any customary bonus is unknown to
nationalized banks. All the nationalized
banks are wholly owned Undertakings of the
Government of India. In the matter of bonus,
the employees of all the nationalized banks
must be dealt with on a common denominator.
If therefore the contention of the appellants
were to prevail, the employees of the
respondent, which is only one amongst many
nationalized banks, would enjoy an undeserved
advantage compared to their counterparts in
other nationalized banks and even in the
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other branches of the respondent bank and may
become a cause of disharmony and inequality.
Therefore, in larger public interest also,
the demand for customary bonus otherwise
found to be untenable, must be negatived."
(Underlined for emphasis)
It is a cardinal rule of interpretation that Objects
and Reasons of a Statute is to be looked into as an
extrinsic aid to find out legislative intent only when the
meaning of the statute by its ordinary language is obscure
or ambiguous. But if the words used in a statute are
clear and unambiguous then the statute itself declares the
intention of the legislature and in such a case, it would
not be permissible for a court to interpret the Statute by
examining the Objects and Reasons for the Statute in
question.(See: S.S. Bola vs. B.D. Sardana AIR 1997 SC
3127).
The smooth balance built with delicacy must always be
maintained, and in the anxiety to safeguard judicial
power, it is unnecessary to be over-zealous and conjure up
incursion into the judicial preserve to invalidate the
valid law competently made. (see: Indian Aluminium Co. vs.
State of Kerala 1996(7) SCC 637).
In Jalan Trading Co. vs. Mill Mazdoor Sabha (AIR 1967
SC 691) it was observed as follows:
"It is true that by the impugned
legislation, certain principles declared by
this Court e.g. in Express Newspapers
(Private) Ltd. vs. Union of India, 1959 SCR
12: AIR 1958 SC 578) in respect of grant of
bonus were modified, but on that account it
cannot be said that the legislation operates
as fraud on the Constitution or is a
colourable exercise of legislative power.
Parliament has normally power within the
frame-work of the Constitution to enact
legislation which modified principles
enunciated by this Court as applicable to the
determination of any dispute, and by
exercising that power, the Parliament does
not perpetrate fraud on the Constitution. An
enactment may be charged as colourable, and
on that account valid, only if it be found
that the legislature has by enacting it
trespassed upon a field outside its
competence."
In the Indian Aluminium case (supra) in paragraph 56
certain principles have been set out. Those principles
inter alia include the principles that the Court in its
anxiety to safeguard judicial power must not be over-
zealous and conjure up incursion into the judicial
preserve invalidating the valid law competently made; the
Court should scan the law to find out : (a) whether the
vice pointed out by the court and invalidity suffered by
previous law is cured after complying with the legal and
constitutional requirements; (b) whether the Legislature
has competence to validate the law; (c) whether such
validation is consistent with the rights guaranteed in
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Part III of the Constitution. So far as the legislature is
concerned, it cannot by mere declaration, without anything
more, overrule, revise, or override a judicial decision.
It may, however, render judicial decision ineffective by
enacting valid law on the topic within its legislative
field fundamentally altering or changing its character
retrospectively. The changed or altered conditions should
be such that the previous decision would not have been
rendered by the Court, if those altered or changed
conditions had existed at the time of declaring the law as
invalid.
At this juncture, we may also take note of what was
stated by Hidaytullah, CJI in the case of Shri Prithvi
Cotton Mills Ltd. vs. Broach Borough Municipality (1969
(2) SCC 283):
"A Court’s decision must always bind unless
the conditions on which it is based are so
fundamentally altered that the decision could
not have been given in the altered
circumstances."
The principle was reiterated in State of Tamil Nadu v.
Arooran Sugars Ltd. (1997 (1) SCC 326).
As was noted by the Constitution Bench of this Court in
Chairman, Railway Board & Ors. v. C.R. Rangadhamaiah &
Ors. (1997 (6) SCC 623), once a person joins service under
the Government, the relationship between him and the
Government is in the nature of a status rather than
contractual and the terms of his service while he is in
employment, are governed by statute or statutory rules,
which may be altered without the consent of the employees.
This effect of a non-obstante clause and validating Act
has been examined by this Court from time to time.
Reference has already been made to the decision in Shri
Prithvi Cotton Mills Ltd. (supra). The view expressed by
Hidayatullah, C.J.I. has been reiterated in Arooran Sugars
case (supra).
The decision in Madan Mohan Pathak v. Union of India
(1978 (2) SCC 50) which was one of the major planks of
arguments before the High Court and this Court was
explained in the last named case. It was rendered in the
different factual background. This was categorically
pointed out and the decision was explained in the said
case.
Every sovereign legislature possesses the right to make
retrospective legislation. The power to make laws includes
power to give it retrospective effect. Craies on Statute
Law (7th Edn.) at p. 387 defines retrospective statutes
in the following words:
"A statute is to be deemed to be
retrospective, which takes away or impairs
any vested right acquired under existing
laws, or creates a new obligation, or imposes
a new duty, or attaches a new disability in
respect to transactions or considerations
already past."
Judicial Dictionary (13th Edn.) K.J. Aiyar,
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Butterworth, p. 857, states that the word "retrospective"
when used with reference to an enactment may mean (i)
affecting an existing contract; or (ii) reopening up of
past, closed and completed transaction; or (iii) affecting
accrued rights and remedies; or (iv) affecting procedure.
Words and Phrases, Permanent Edn., Vol. 37-A, pp. 224-25,
defines a "retrospective or retroactive law" as one which
takes away or impairs vested or accrued rights acquired
under existing laws. A retroactive law takes away or
impairs vested rights acquired under existing laws, or
creates a new obligation, imposes a new duty, or attaches
a new disability, in respect to transaction or
considerations already past.
In Advanced Law Lexicon by P. Ramanath Aiyar (3rd
Edition, 2005) the expressions "retroactive" and
"retrospective" have been defined as follows at page 4124
Vol.4)
"Retroactive- Acting backward; affecting
what is past. (Of a statute, ruling, etc.)
extending in scope or effect to matters that
have occurred in the past. - Also termed
retrospective. (Black, 7th Edn. 1999)
’Retroactivity’ is a term often used by
lawyers but rarely defined. On analysis it
soon becomes apparent, moreover, that it 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).
Retrospective- Looking back; contemplating
what is past.
Having operation from a past time.
’Retrospective’ is somewhat ambiguous and
that good deal of confusion has been caused
by the fact that it is used in more senses
than one. In general however the Courts
regards as retrospective any statute which
operates on cases or facts coming into
existence before its commencement in the
sense that it affects even if for the future
only the character or consequences of
transactions previously entered into or of
other past conduct. Thus, a statute is not
retrospective merely because it affects
existing rights; nor is it retrospective
merely because a part of the requisite for
its action is drawn from a time and
antecedents to its passing. (Vol.44
Halsbury’s Laws of England, Fourth Edition,
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page 570 para 921)."
The question of retrospectively affecting the award is
factually of academic interest. It was admitted before the
High Court that all amount payable under the award for the
prior period has been paid.
In Harvard Law Review, Vol. 73, p. 692 it was observed
that
"it is necessary that the legislature
should be able to cure inadvertent defects in
statutes or their administration by making
what has been aptly called ’small repairs’.
Moreover, the individual who claims that a
vested right has arisen from the defect is
seeking a windfall since had the
legislature’s or administrator’s action had
the effect it was intended to and could have
had, no such right would have arisen. Thus
the interest in the retroactive curing of
such a defect in the administration of
government outweighs the individual’s
interest in benefiting from the defect".
The above passage was quoted with approval by the
Constitution Bench of this Court in the case of The Asstt.
Commr. of Urban Land Tax v. The Buckingham and Carnatic
Co. Ltd. (1969 (2) SCC 55). In considering the question
as to whether the legislative power to amend a provision
with retrospective operation has been reasonably exercised
or not, various factors have to be considered. It was
observed in the case of Stott v. Stott Realty Co. (284
N.W. 635) - as noted in Words and Phrases, Permanent Edn.,
Vol.37-A, p. 2250 that:
"The constitutional prohibition of the
passage of ’retroactive laws’ refers only to
retroactive laws that injuriously affect some
substantial or vested right, and does not
refer to those remedies adopted by a
legislative body for the purpose of providing
a rule to secure for its citizens the
enjoyment of some natural right, equitable and
just in itself, but which they were not able
to enforce on account of defects in the law or
its omission to provide the relief necessary
to secure such right."
Craies on Statute Law (7th Edn.) at p. 396 observes
that:
"If a statute is passed for the purpose
of protecting the public against some evil or
abuse, it may be allowed to operate
retrospectively, although by such operation
it will deprive some person or persons of a
vested right."
Thus public interest at large is one of the relevant
considerations in determining the constitutional validity
of a retrospective legislation.
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The above position was elaborately noted in Virendra
Singh Hooda and Ors. v. State of Haryana & Anr. (2004 (12)
SCC 588).
Curative Statutes are by their very nature intended to
operate upon and affect past transactions. Curative and
validating statutes operate on conditions already existing
and are therefore wholly retrospective and can have no
retrospective operation.
Blackstone J in Nicol v. Verelst (1779 (26) E.R. 751)
held that "declaratory do not prove that law was otherwise
before, but rather the reverse".
There is no quarrel and in fact in our opinion rightly
that legislature cannot by a mere declaration, without
anything more, directly overrule, reverse or override a
judicial decision. However, it may, at any time in
exercise of the plenary powers conferred on it by the
Constitution render a judicial decision ineffective by
enacting a valid law on a topic within its legislative
field, fundamentally altering or changing with
retrospective, curative or neutralizing effect the
condition on which such decision is based (see: I.N.
Saxena etc. v. State of Madhya Pradesh (1976 (4) SCC 750).
As noted in Indira Nehru Gandhi v. Raj Narain (1975
(suppl.) SCC 1) rendering ineffective of judgments or
orders of competent Courts or Tribunals by changing their
basis by legislative enactment is a well known pattern of
all validating Acts. Such validating legislation which
removes the causes for ineffectiveness or invalidity of
actions or proceedings is not an encroachment on judicial
power. There is a distinction between encroachment on the
judicial power and nullification of the effect of a
judicial decision by changing the law retrospectively. As
noted by this Court in M/s. Tirath Ram Rajindra Nath,
Lucknow v. State of U.P. and Anr. (1973 (3) SCC 585) the
former is outside the competence of the legislature but
the latter is within its permissible limits.
It has to be noted that the legislature, as a body,
cannot be accused of having passed a law for extraneous
purpose. If no reasons are stated as appear from the
provisions enacted by it, its reasons for passing a law
are those stated in the Objects and Reasons. Even assuming
that the Executive, in a given case, has an ulterior
motive in moving a legislation, that motive cannot render
the passing of the law mala fide. This kind of
"Transferred malice" is unknown in the field of
legislation. (See K. Nagaraj and Ors. v. State of Andhra
Pradesh and Anr. (AIR 1985 SC 551) and G.C. Kanungo v.
State of Orissa (AIR 1995 SC 1655).
Learned counsel for the appellant submitted that vested
rights cannot be taken away by the legislation by way of
retrospective legislation. The plea is without substance.
Whenever any amendment is brought in force retrospectively
or any provision of the Act is deleted retrospectively, in
this process rights of some are bound to be effective one
way or the other. In every case the exercise by
legislature by introducing a new provision or deleting an
existing provision with retrospective effect per se does
not amount to violation of Article 14 of the Constitution.
The legislature can change, as observed by this Court in
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Cauvery Water Disputes Tribunal, Re (1993 Supp. (1) SCC 96
(II)), the basis on which a decision is given by the Court
and thus change the law in general, which will affect a
class of persons and events at large. It cannot, however,
set aside an individual decision inter parties and affect
their rights and liabilities alone. Such an act on the
part of the legislature amounts to exercising the judicial
power by the State and to function as an appellate Court
or Tribunal, which is against the concept of separation of
powers.
The amendment made by the impugned enactments is to the
State Bank Act and other statutes relating to some other
Banks. The Bank undoubtedly has power in terms of Section
7(1) of the State Bank Act to change the conditions of
service of those of its employees, who had earlier served
with Imperial Bank of India. By enforcement of the Act, the
undertaking of Imperial Bank of India was transferred to the
Bank. Employees of erstwhile Imperial Bank of India cannot
take the stand that they have an unalterable right in their
terms and conditions of employment. So far as other
employees are concerned, Section 43 of the Act empowers the
Bank to determine terms and conditions of their service.
The Parliament has power to legislate on the topic of
bonus and it is not precluded from legislating on that
topic, other than the Bonus Act. The mere fact that an award
has been made under the Industrial Act cannot have the
effect of preventing the Parliament for all times to come
from amending the law on the foundation of which the award
was made. This of course is subject to same being not
inconsistent with provision of Part III of the Constitution;
and also being within the legislative competence of the
Parliament.
As noted above, the impugned Act did not merely declare
the Tribunal’s award inoperative. There is nothing to show
that the Parliament intended to exercise appellate powers
over the Tribunal or the High Court by enacting the amending
Act. The said Act in clear and unambiguous terms prohibits
the grant of bonus to the employees of public Sector Banks,
except in accordance with the Bonus Act, and also limits
such payment only to those eligible under the Act.
The amended provision operates notwithstanding anything
contained in any other law, including the Industrial Act,
and similarly notwithstanding anything contained in any
judgment, decree or order of any Court or Tribunal.
In view of what has been stated above, the conclusion
is inevitable that the High Court’s judgment does not
suffer from any infirmity to warrant interference. The
appeal is accordingly dismissed with no orders as to
costs.