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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3962 OF 2007

S.T. SADIQ      … APPELLANT

VERSUS

STATE OF KERALA & ORS.      … RESPONDENTS WITH

CIVIL APPEAL NO.3963 OF 2007

J U D G M E N T

R.F. NARIMAN, J.

1. These  petitions  raise  questions  as  to  the  constitutional  

validity  of  the Kerala Cashew Factories (Acquisition)  Act,  1974  

(hereinafter referred to as “the said Act”), which has been placed  

in the 9th Schedule to the Constitution of India, being entry 148  

thereof.  This Act came into force on 19th November, 1974 and  

Section 3 thereof  enabled the State  Government  to  acquire  in  

public  interest  cashew  factories  under  certain  circumstances.  

Section 3 is set out hereunder:

“3. Order of Acquisition:- (1) The Government may, if they are satisfied –

(a) that the occupier of a cashew factory does not  conform  to  the  provisions  of  law  relating  to  safety,  

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conditions of service or fixation and payment of wages  to the workers of the factory; or

(b) that raw cashewnuts allotted to a cashew factory  by  the  Cashew  Corporation  of  India  are  not  being  processed in the factory to which allotment has been  made or that such nuts are being transferred to any  other cashew factory; or  

(c) that there has been large scale unemployment,  other than by way of lay off or retrenchment, of the  workers of a cashew factory by order published in the  Gazette declare that  the cashew factory shall  stand  transferred to, and vest in the Government.

Provided that before making a declaration under  this  sub-section in  respect  of  a cashew factory,  the  Government shall give the occupier of the factory and  the owner of the factory where he is not the occupier,  a notice of their intention to take action under this sub- section and the grounds therefore and consider  the  objections that may be preferred in pursuance of such  notice.  

Explanation.- For the purposes of this sub-section,  the  expressions  “lay  off”  and  “retrenchment”  shall  have the meanings respectively assigned to them in  the Industrial  Disputes Act,  1947 (Central  Act  14 of  1947).  

(2) The  notice  referred  to  in  the  proviso  to  sub- section (1) shall also be published in two newspapers  published in the State of Kerala, and such publication  shall be deemed to be sufficient notice to the occupier,  to the owner where he is not the occupier and to all  other persons interested in the cashew factory.

(3) On  the  making  of  a  declaration  under  sub- section  (1),  the  cashew  factory  to  which  the  declaration relates, together with all machinery, other  accessories  and  other  movable  properties  as  were  immediately  before  the  appointed  day  in  the  ownership,  possession  power  or  control  of  the  

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occupier  in  relation  to  the  factory  and  all  books  of  accounts,  registers  and  other  documents  relating  thereto  shall  stand  transferred  to,  and  vest  in,  the  Government.”

2. Identical notices were sent between 1984 and 1986 to 10  

cashew factories under Section 3 of the Acquisition Act, and the  

said  factories  were  acquired  under  the  Act  pursuant  to  those  

notices. Similar notices stating identical grounds were sent to 36  

other cashew factories in 1988 by which the said factories were  

also acquired under the said Act.  A specimen notice is set  out  

hereinbelow.   

“No.31033/K3/84/Id 19.9.1985 NOTICE

Notice under rule 3 of the Kerala Cashew Factories  (Acquisition) Rules, 1974.

WHEREAS it  has been brought to the notice of the  Government  that  in  respect  of  Cashew  Factory  No.AP.11  located  in  Eruva,  Kayamkulam,  in  Karthikappally Taluk, Alapuzha District of which Smt.  T.  Suhara  Beevi  C/o  Masaliar  Industries,  Kilikolloor,  Kollam is the owner and M/s. Janso Exports (Private)  Ltd., N.N.C., Estates Vadakkevila P.O., Kollam is the  occupier  (proposed)  there exist  grounds as detailed  below  warranting  action  under  section  3(1)  of  the  Kerala  Cashew  Factories  (Acquisition)  Act,  1974  notice is hereby given to all concerned of the intention  of the Government to take action under the above said  section  of  the  Act.   Interested  persons  are  hereby  directed  to  file  their  objections,  if  any,  before  the  Government  of  Kerala  against  the  proposed  action  within seven days of the receipt of this notice or the  publication of this notice in the newspapers, whichever  is earlier or if  they no desire, appear before Shri N.  Gopalan  Nair,  Additional  Director  of  Industries  and  

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Commerce and special office for cashew societies at  the District  Industries  Centre,  Kollam at  11 a.m.  on  23.9.1985 and state their objections.  If no objections  are  received  within  the  said  period  or  no  persons  appears on the said date it will be presumed that there  are  no  objections  against  the  proposed  action  and  further steps will be taken.

All  concerned are further informed that Shri  N.  Gopalan  Nair,  Additional  Director  of  Industries  and  Commerce and Special Officer for Cashew Societies,  Vikas  Bhavan,  Thiruvananthapuram  has  been  authorized to prepare an inventory of all properties of  the cashew factories mentioned above under section  5(1)  of  the  Act.   They  are  also  informed  that  commissions  of  any  act  by  any  person  which  will  diminish the value of the properties and assets of the  cashew  factory  or  the  removal  of  any  property  or  assets from the premises of the factory is punishable  under section 13 of the Act.  

GROUNDS

It  has  been  reported  by  the  Authorized  officer  that your factory is lying closed and that there is no  possibility of its starting functioning within a period of  ten days or in the immediate future.  The Government  are  therefore,  of  opinion  that  the  said  situation  will  lead to large scale unemployment of the workers of  the Cashew Factory.  

By Order of the Governor Place: Thiruvananthapuram   M. Vijayanunni Dated: 16.9.1985       Special  Secretary  to  Governor

     Industries Department To, Smt. T. Suhara Beevi, C/o Musaliar Industries Kilikolloor, Kollam 4.

Copy to: 1. Shri  N.  Gopalan  Nair,  Addl.  Director  of  

Industries and Commerce and Spl. Officer for  

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Cashew  Societies,  Vikas  Bhavan,  Thiruvananthapuram.

2. Special  Officer  for  cashew  industry,  Kollam  for  necessary action.  

3. The  Director  of  Public  Relations  for  immediate  publication  in  any  two  leading  dailies  having  wide  circulation.  

Forwarded/ By order Sd/- Section Officer.”

3. The  10  cashew  factories  that  were  acquired  filed  writ  

petitions in  the High Court  in  the year  1985-1986,  which were  

dismissed by a common judgment dated 20.1.1994.  Meanwhile,  

the 36 factories approached the Supreme Court  directly in writ  

petitions  filed  under  Article  32  of  the  Constitution.   These  writ  

petitions  were  disposed  of  by  a  judgment  dated  12.5.1994  

reported in Indian Nut Products v. Union of India (1994) 4 SCC  

269 in the following terms:-

“8. It appears that in the notice, there is only reference  to Section 3(1) of the Act, without disclosing whether  the  Government  was  satisfied  in  respect  of  the  existence of any of the situations under clause (a), (b)  or (c) thereof. No details have been mentioned in the  said notice. Towards the end of the said notice, under  the  heading  “Grounds”  it  has  been  stated  that  the  factory  was  lying  closed  and  that  there  was  no  possibility of it  to start  functioning within a period of  ten days or in the immediate future and, therefore the  Government was of the opinion that the said situation  “will lead to a large scale unemployment …”. It need  not be impressed that an order under Section 3(1) on  the ground specified in clause (c) of sub-section (1)  can be issued by the State Government only when the  

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State  Government  is  satisfied  that  “there  has  been  large scale unemployment, other than by way of lay  off or retrenchment, of the workers of a cashew nut  factory”. The grounds do not even state that there has  been  any  unemployment  much  less  large  scale  unemployment.  The  grounds  simply  state  that  the  factory was lying closed and there was no possibility  of its starting functioning within a period of ten days or  in the immediate future, which will lead to large scale  unemployment.  No  details  have  been  mentioned  in  the  said  notice  as  to  from  what  date  each  of  the  factories  was  lying  closed.  We  are  not  able  to  appreciate as to how by a common notice all the 36  cashew factories could be summoned to show cause  without  giving  particulars  of  conditions  existing  in  different  factories.  The  learned  counsel,  who  appeared on behalf of the State, could not point out,  as  to  how different  occupiers  or  the  owners  of  the  factories could have filed objections to such common  notice which did not refer to any conditions pertaining  to their factories.

9. There is no dispute that the cashew nut factories do  not  work  throughout  the  year  but  work  for  varying  periods depending upon the supply of raw nuts etc. As  such the particulars of the alleged closure of each of  the  factories  were  required  to  be  furnished  to  the  individual  owner to meet the case against  him. The  object of the Act is to safeguard the interests of the  workers in the cashew factories and it is to safeguard  their interests that the power has been vested in the  State Government to issue orders for the transfer of  the factories. The transfer or vesting of the factories  has to be in accordance with the procedure prescribed  in the Act. As already pointed out above, the proviso to  sub-section (1) not only requires a notice to be given  to the occupier or the owner of the factory in respect  of  the  intention  of  the  Government  to  take  action  under the said sub-section, but also requires to furnish  the  grounds  on  which  such  action  is  considered  necessary. In the present case, according to us, the  notice  does  not  comply  with  and  conform  to  the  requirement  of  the  proviso  to  sub-section  (1)  of  

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Section 3.

10.  It  is  well-settled  that  if  a  statute  requires  an  authority  to  exercise  power,  when  such  authority  is  satisfied  that  conditions  exist  for  exercise  of  that  power,  the  satisfaction  has  to  be  based  on  the  existence  of  grounds  mentioned in  the  statute.  The  grounds  must  be  made  out  on  the  basis  of  the  relevant  material.  If  the  existence  of  the  conditions  required for the exercise of the power is challenged,  the  courts  are  entitled  to  examine  whether  those  conditions  existed  when  the  order  was  made.  A  person  aggrieved  by  such  action  can  question  the  satisfaction by showing that  it  was wholly based on  irrelevant  grounds  and  hence  amounted  to  no  satisfaction at all. In other words, the existence of the  circumstances in question is open to judicial review.

11. It cannot be disputed that serious consequences  follow  on  the  basis  of  the  order  passed  by  the  Government on grounds mentioned in clauses (a), (b)  and (c).  Hence it  is all  the more necessary that the  Government furnishes the full particulars on the basis  of which the Government claims to be satisfied that  there is a case for taking over the factory. As already  pointed out above, there is not even an assertion in  the  notice  that  there  has  been  any  unemployment  much  less  large  scale  unemployment.  The  ground  simply says that the Government was of the opinion  that the closure of the factory “will lead to a large scale  unemployment”. We are of the view, that in the facts  and  circumstances  of  the  present  case,  the  notice  issued to  the  petitioners  with  the so-called  grounds  was  not  in  accordance  with  the  requirement  of  the  provisions of sub-section (1) of Section 3 of the Act.  The  notices  issued  to  different  petitioners  are,  therefore,  declared to be null  and void.  Consequent  thereto, the order dated 6-7-1988 is also quashed.

12. However, it is made clear that it shall be open to  the Government to exercise the power conferred on it  by sub-section (1) of Section 3, whenever it is satisfied  on the basis of the relevant material, that any of the  

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three conditions mentioned therein exists in individual  factories,  by  following  the  procedure  prescribed  therein.

13. In order to work out the equities and the rights and  liabilities which have arisen between the date of the  transfer of the factories and passing of this order, we  direct:

(i)  The possession of  the factories shall  be handed  over to the respective owners within two weeks from  the  date  of  this  order.  As  and  when  possession  is  given, an inventory of all the materials shall be made.

(ii) The daily workers other than the members of the  staff  engaged  by  the  Kerala  State  Cashew  Development  Corporation  Ltd.,  or  the  State  Government, as the case may be, shall be retained by  the factory owners and shall not be retrenched except  in accordance with law. So far as the members of the  staff are concerned, it shall not be the obligation of the  factory owners to retain them, in view of the interim  order passed by this Court on 19-7-1988.

(iii)  The  petitioners  shall  pay  the  same  salary  and  emoluments  which  were  being  paid  by  the  State  Government  while  the factories  were with  the State  Government.

(iv)  Any  claim  for  compensation  in  respect  of  any  damage or loss caused to the machinery, equipments,  building etc.  during the period of  occupation by the  Kerala State Cashew Development Corporation Ltd.,  shall  be  assessed  by  the  District  Judge,  Quilon.  Similarly, any claim in respect of any amount for an  additional construction made or additional machinery  installed  by  the  Kerala  State  Cashew Development  Corporation Ltd.,  shall  be determined by the District  Judge, Quilon, on proper application being filed before  it.

(v)  The  Kerala  State  Cashew  Development  Corporation  Ltd.,  shall  be  entitled  to  remove  any  

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machinery or materials installed by it within one week  of preparation of the inventory; and

(vi) Any disciplinary enquiry pending against any of the  workmen  may  be  continued  by  the  owner  of  the  factory concerned, if he chooses to do so.”

4. Based on the fact that the notice was identical also in the  

case  of  the  10  factories,  by  a  judgment  dated  10.3.1995,  this  

Court followed the judgment in the Indian Nut Products case in  

the following terms:

“IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO._______ OF 1995 (Arising out of the S.L.P.(C) No.8219/94)

S.T. Sadiq … Appellant Vs.

State of Kerala & Ors. …Respondents ORDER

It is clear to us that this case is fully covered by a  decision of this court in Indian Nut Products & Ors.  Etc. Vs. Union of India & Ors. 1994 (4) SCC 269 and  the  rights  of  the  Government  to  exercise  power  conferred on it by sub-section (1) of Section 3 of the  Kerala Cashew Factories (Acquisition) Act 1974 stand  preserved.  In terms of the Judgment in that case, this  petition too is disposed of on identical terms and the  direction given by the Court  in paragraph 13 of  the  said report shall be operative in so far as this petition  is concerned.  To formalize it, leave is granted and the  appeal allowed accordingly. No costs.  

Sd/- (M.M. Punchhi…J)

Sd/- (K. Jayachandra Reddy..J)

New Delhi, March 10, 1995.”

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5. It  appears  that  so  far  as  the  36  cashew  factories  are  

concerned, the mandamus of this Court was followed by handing  

them back to their respective owners by 20.5.1994.  However, the  

same  was  not  done  so  far  as  the  10  cashew  factories  are  

concerned,  which  then  filed  contempt  petitions  which  were  

disposed of on 12.7.1996 stating:

   “The orders of this court passed in C.A. No.343/95  were  required  to  be  obeyed  by  24.3.1995  by  the  respondents.   Specific  attention  was  drawn  by  the  petitioner on 1.4.1995 for compliance with the order  but,  apparently,  compliance  was  kept  delayed  because  change  of  law  was  contemplated  which  ultimately  fructified  by  an  Ordinance  on  16.8.1995.  Though  it  would  have  been  desirable  for  the  respondents to carry out the order of this court, their  taking shelter  in  the contemplated Ordinance is  not  totally  out  of  place.   They  are  guilty,  though,  of  contempt  for  non-compliance  for  a  small  period.  Holding so, we accept their apology as tendered in the  affidavits filed in response.  

The  contempt  proceedings  are,  thus,  terminated.”

6. The promised Ordinance was then brought in which became  

the  Kerala  Cashew  Factories  Acquisition  (Amendment)  Act  of  

16.8.1995.   This  Act  was  brought  into  force  with  effect  from  

1.5.1984 so as to cover all 46 acquisitions that had been made  

under the Principal Act.  This Act is a short Act of six Sections and  

a Schedule.  We are concerned with Section 3A and Section 6  

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which are set out hereinbelow:

“3A. Power to acquire any cashew factory in public  interest.

(1) Notwithstanding anything contained in section 3, if  the Government are satisfied, in relation to a cashew  factory, that it has been closed for a period of not less  than three months and such closure has prejudicially  affected  the  interest  of  the  majority  of  the  workers  engaged in that factory and that immediate action is  necessary  to  restart  the  cashew  factory  and  such  restarting is necessary in the public interest, they may,  by order  published in  the Gazette,  declare,  that  the  cashew factory shall stand transferred to, and vent in,  the Government.  

Provided that no order under this sub-section shall be  published unless the proposal for such acquisition is  supported by a resolution of the Legislative Assembly.”  

“6. Declaration as to acquisition of certain cashew  factories.

(1) It is hereby declared that it  is expedient in the  public interest that  the cashew factories specified in  the  Schedule  to  this  Act  shall,  notwithstanding  anything contained in any judgment, decree or order  of  any  court,  tribunal  or  other  authority  and  notwithstanding anything contained in any other law,  agreement or  other instrument for  the time being in  force,  stand  transferred  to,  and  vest  in,  the  Government with effect  from the date noted against  each.

(2)  The provisions of Section 4, Section 7 to 16 (both  inclusive) of the principal Act shall, as far as may be,  apply  to,  or  in  relation  to,  the  cashew  factory  in  respect of which sub-section (1) apply, as they apply  to a cashew factory in relation to which a declaration  has been made under sub-section (1) of section 3A.

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(3) For removal of doubt it is hereby declared that the  dates mentioned in the Schedule against each factory  shall be the 'appointed day' in respect of that factory  for the purposes of the principal Act.

(4) All  acts, proceedings or things done or taken by  the Government or any officer or authority in respect  of  cashew  factories  mentioned  in  the  Schedule  including all the orders issued under sub-section (1) of  Section  8,  during  the  periods  commencing  on  and  from the dates noted against each and ending with the  date of publication of this Act in the Gazette, shall, for  all purposes, be, and shall be deemed always to have  been,  as  valid  and  effective  as  if  the  amendments  made to the principal Act by this Act had been in force  at all material times.”

7. The  schedule  to  the  Act  contains  only  the  10  cashew  

factories that had been acquired between 1984 and 1986.

8. Mr.  Krishnan  Venugopal,  learned  counsel  appearing  on  

behalf of the some of the petitioners raised three points before us.  

He argued that first and foremost Section 6 of the Amendment Act  

is bad as it seeks to directly nullify the judgments of this Hon’ble  

Court dated 12.5.1994 and 10.3.1995 without changing the basis  

of  the  law.   For  this  proposition  he  cited  several  judgments  

including State of T.N. v. M. Rayappa Gounder (1971) 3 SCC 1,  

Madan Mohan Pathak & Anr. v. Union of India & Ors. 1978 (2)  

SCC 50,  Virender Singh Hooda & Ors.  v. State of Haryana &  

Anr.  2004 (12) SCC 588 and  State of Tamil Nadu  v. State of  

Kerala & Anr.  2014 (6) SCALE 380.  His second point was that  

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considering that all the notices served were in identical terms, and  

considering that the objects and reasons of the 1995 Amendment  

Act placed all 46 factories at par, Section 6 of the Act violated  

Article 14 inasmuch as it discriminated between the 10 factories  

which were sought to be taken over and the 36 factories which  

were not sought to be taken over by the Amendment Act.  The  

third point he argued before us was that in any case Section 6 of  

the Amendment Act read with Section 9 of the original Act was an  

independent stand alone provision. Section 6 of the Amendment  

Act was not in the 9th Schedule and since it referred inter alia to  

Section 9 of the original  Act,  it  was legislation by incorporation  

and, therefore, Section 9 being part of the Amendment Act would  

be open to attack on the ground that it violated Article 300 A of the  

Constitution of India, in that the basis for awarding compensation  

for land that is acquired along with the cashew factories is on a  

completely irrelevant and arbitrary date, namely, the market value  

of the land on the date of setting up of the cashew factory.  He  

pointed out to us on facts that some factories were granted as  

little  as  Rs.58  as  compensation  for  acres  of  land  taken  over  

merely because the cashew factory that was set up on the land  

may have been set up many many years ago.  

9. In fact, he pointed out on his facts that his factory building  

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was only on 97 cents and 1.86 acres was sought to be taken over  

despite the fact that this land was neither used nor was necessary  

for the working of the factory.  

10. Mr. Giri appearing for the State of Kerala replied to each one  

of  these  three  contentions.   In  his  view,  so  far  as  the  first  

contention is concerned, he pointed out the judgment of this Court  

in the Indian Nut Products case and said that only a notice had  

been struck down and the Court had left it open to the State to  

take over in future on the basis of relevant material any cashew  

factory if the conditions stated in Section 3(1) of the principal Act  

were  satisfied.  According  to  him,  there  was  no  question  of  

retrospectively amending the Act so as to remove the basis of any  

earlier decision as the Act had not been touched by the Supreme  

Court. He, therefore, argued that Section 6 could be viewed as a  

provision  under  which  cashew  factories  could  be  acquired  in  

public  interest  apart  from  being  acquired  under  Section  3  or  

Section 3A of the Act by merely putting such cashew factories into  

the Schedule contained in the Amendment Act.  So far as point 2  

is concerned, he argued that the High Court was correct in saying  

that there is an intelligible differentia between cashew factories  

taken over by the Cashew Development Corporation on the one  

hand  (the  36  factories)  and  the  10  factories  taken  over  by  

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CAPEX, which is an apex body consisting of cooperative societies  

of workmen. So far as point 3 is concerned, he replied by saying  

that  Article  31B would  bar  any  challenge to  the  compensation  

provision that  is  Section 9 of  the main  Act.   Section 6  merely  

refers  to  Section  9  and,  therefore,  legislation  is  not  by  

incorporation but by reference.  

11. Having heard learned counsel for both parties, we think Mr.  

Venugopal is on firm ground on both points 1 and 2 argued by  

him.  We do not feel it necessary to enter upon a discussion on  

point  3  inasmuch  as  the  Civil  Appeals  before  us  have  to  be  

allowed on points 1 and 2.  

12. Point 1.

It is settled law by a catena of decisions of this Court that  

the legislature cannot directly annul a judgment of a court. The  

legislative function consists in “making” law [see: Article 245 of the  

Constitution]  and not in “declaring” what the law shall  be [see:  

Article 141 of the Constitution]. If the legislature were at liberty to  

annul judgments of courts, the ghost of bills of attainder will revisit  

us to enable legislatures to pass legislative judgments on matters  

which are inter-parties. Interestingly, in England, the last such bill  

of attainder passing a legislative judgment against a man called  

Fenwick was passed as far back as in 1696.  A century later, the  

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US Constitution expressly outlawed bills of attainder [see: Article  

1 Section 9].

It is for this reason that our Constitution permits a legislature  

to make laws retrospectively which may alter the law as it stood  

when a decision was arrived at. It is in this limited circumstance  

that a legislature may alter the very basis of a decision given by a  

court, and if an appeal or other proceeding be pending, enable  

the Court to apply the law retrospectively so made which would  

then change the very basis of the earlier decision so that it would  

no  longer  hold  good.  However,  if  such  is  not  the  case  then  

legislation  which  trenches  upon  the  judicial  power  must  

necessarily be declared to be unconstitutional.  

This Court has struck down such legislation in a number of  

judgments. Thus, in State of T.N. v. M. Rayappa Gounder 1971  

(3) SCC page 1, Section 7 of the Madras Entertainment Tax Act,  

1939 was struck down. The Court held:

“3. The  question  as  to  the  power  of  the  assessing  authority  to  reassess the receipts that  had escaped  assessment  under  the  Madras  Entertainments  Tax  Act, 1939, had come up for consideration before the  High  Court  of  Madras  in R.  Sundararaja  Naidu v.  Entertainment  Tax  Officer [  WP  No.  513  of  1963  (Madras)] . Therein the High Court of Madras held that  there  was  no  power  to  reassess  under  that  Act.  Thereafter the State Legislature enacted the Act. The  Act  among  other  provisions  contains  Section  7,  a  provision  relating  to  validation  of  assessment  and  

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collection of certain taxes. That section reads: “Notwithstanding anything contained in this Act or  

in the principal Act or in any judgment, decree or order  of  any  Court  no  assessment  or  reassessment  or  collection  of  any  tax  due  on  any  payment  for  admission to any entertainment or any cinematograph  exhibition which has escaped assessment to tax,  or  which has been assessed at a rate lower than the rate  at which it is assessable, under Section 4 or 4-A of the  principal Act, made at any time after the date of the  commencement  of  the  principal  Act  and  before  the  date  of  the  publication  of  this  Act  in  the  Fort  St.  George Gazette shall be deemed to be invalid or ever  to  have  been  invalid  on  the  ground  only  that  such  assessment or reassessment or collection was not in  accordance  with  law  and  such  tax  assessed  or  reassessed or  collected or  purporting to  have been  assessed  or  reassessed  or  collected,  shall,  for  all  purposes, be deemed to be and to have been always  validly  assessed  or  reassessed  or  collected  and  accordingly—

(a) all acts, proceedings or things done or taken by  the State Government or by any officer of the State  Government or  by any other authority in connection  with the assessment or reassessment or collection of  such tax, shall, for all purposes, be deemed to be and  to have always been done or taken in accordance with  law;

(b) no suit or other proceeding shall be maintained  or  continued  in  any  court  against  the  State  Government or any person or authority whatsoever for  the refund of any tax so paid; and

(c)  no  Court  shall  enforce  any  decree  or  order  directing the refund of any tax so paid.”

4. The  reassessments  with  which  we  are  concerned  in  these  cases  were  made  prior  to  the  coming  into  force  of  the  Act.  Therefore  all  that  we  have  to  see  is  whether  those  reassessments  are  validly  protected  by  Section  7.  The  High  Court  of  Madras  allowed  the  writ  petitions  and  quashed  the  reassessments  on  the  ground  that  the  power  to  reassess under Section 7(B) introduced by the Act is  

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incomplete  and  not  exercisable  in  the  absence  of  prescription  as  to  limitation  contemplated  by  the  section and hence Section 7 of the Act fails to validate  the assessments in question. We do not propose to go  into that question as in our opinion Section 7 of the Act  is  invalid  insofar  as  it  attempts  to  validate  invalid  assessments  without  removing  the  basis  of  its  invalidity.”

Similarly, in  D. Cawasji and Co. Mysore v.  The State of  

Mysore & Anr.,  1985 (1) SCR 825, Section 2 and 3 of Mysore  

Sales  Tax  (Amendment)  Act,  1969  were  struck  down  in  the  

following terms:

“In the instant  case, the State instead of remedying  the  defect  or  removing  the  lacuna  has  by  the  impugned amendment sought to raise the rate of tax  from 6.1/2% to 45% with retrospective effect from the  1st  April  1966 to  avoid  the  liability  of  refunding  the  excess amount collected and has further purported to  nullify  the  judgment  and  order  passed  by  the  High  Court  directing  the  refund  of  the  excess  amount  illegally  collected  by  providing  that  the  levy  at  the  higher rate of 45% will have retrospective effect from  1st  of  April,  1966,  The  judgment  of  the  High  Court  declaring  the  levy  of  sales  tax  on  excise  duty,  education  cess  and  health  cess  to  be bad  become  conclusive and is binding on the parties. It may or may  not have been competent for the State Legislature to  validly remove the lacuna and remedy the defect in  the earlier levy by seeking to impose sales tax through  any amendment on excise duty, education cess and  health cess; but, in any event, the State Government  has not purported to do so through the Amending Act.  As a result of the judgment of the High Court declaring  such levy illegal, the State became obliged to refund  the excess amount  wrongfully  and illegally  collected  by virtue of the specific direction to that effect in the  earlier  judgment.  It  appears  that  the  only  object  of  

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enacting the amended provision is to nullify the effect  of the judgment which became conclusive and binding  on  the  parties  to  enable  the  State  Government  to  retain the amount wrongfully and illegally collected as  sales  tax  and  this  object  has  been  sought  to  be  achieved  by  the  impugned  amendment  which  does  not  even  purport  or  seek to  remedy or  remove the  defect and lacuna but merely raises the rate of duty  from 6.1/2% to 45% and further proceeds to nullify the  judgment and order of the High Court. In our opinion,  the enhancement of the rate of duty from 6.1/2% to  45%  with  retrospective  effect  is  in  the  facts  and  circumstances  of  the  case  clearly  arbitrary  and  unreasonable. The defect or lacuna is not even sought  to be remedied and the only justification for the steep  rise in the rate of duty by the amended provision is to  nullify the effect of the binding judgment. The vice of  illegal collection in the absence of the removal of the  illegality  which  led  to  the  invalidation  of  the  earlier  assessments on the basis of illegal levy, continues to  taint the earlier levy. In our opinion, this is not a proper  ground for imposing the levy at the higher rate with  retrospective effect. It may be open to the Legislature  to impose the levy at the higher rate with prospective  operation  but  levy  of  taxation  at  higher  rate  which  really amounts to imposition of tax with retrospective  operation  has  to  be  justified  on  proper  and  cogent  grounds. This aspect of the matter does not appear to  have been properly considered by the High Court and  the High Court in our view was not right in holding that  "by the enactment of Section 2 of the impugned Act  the very basis of the complaint made by the petitioner  before this Court in the earlier writ petition as also the  basis of the decision of this Court in Cawasji's case  that the State is collecting amounts by way of tax in  excess  of  what  was  authorised  under  the  Act  has  been  removed."  We,  accordingly,  set  aside  the  judgment and order of the High Court to the extent it  upholds the validity of the impugned amendment with  retrospective effect from 1st of April, 1966 and to the  extent  it  seeks to nullify  the earlier  judgment of  the  High  Court.  We  declare  that  Section  2  of  the  impugned amendment to the extent that it imposes the  

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higher levy of 45% with retrospective effect from the  1st day of April, 1966 and Section 3 of the impugned  Act seeking to nullify the judgment and order of the  High Court are invalid and unconstitutional.” (at page  841-842)

Similarly,  in  State of Haryana v. Karnal Coop. Farmers'  

Society Ltd.,  (1993) 2 SCC 363, Section 7 of a Haryana statute  

was struck down. The court referred to several earlier judgments  

and then held:

“37. Thus,  it  becomes clear  that  a  legislature  while  has  the  legislative  power  to  render  ineffective  the  earlier  judicial  decisions,  by  removing  or  altering or  neutralising the legal basis in the unamended law on  which  such  decisions  were  founded,  even  retrospectively, it does not have the power to render  ineffective the earlier  judicial  decisions by making a  law which simply declares the earlier judicial decisions  as invalid or not binding for such power if exercised  would not be a legislative power but a judicial power  which  cannot  be  encroached  upon  by  a  legislature  under our Constitution.

38. In the instant case, the Haryana State Legislature,  by  the Amendment  Act  of  1981,  has not  made any  provision  to  include  the  lands  and  immovable  properties — the subject of the civil court's decrees, in  ‘shamilatdeh’ so as to bring them within the purview of  the  principal  Act.  But,  the  provision  made  therein  merely directs the Assistant Collector of first grade, in  effect, to disregard or disobey the earlier civil courts'  decrees and judicial orders by which it had been held  that  certain  lands  and  immovable  properties  fell  outside ‘shamilatdeh’ regulated by the principal  Act.  Such  provisions  inserted  by  the  Amendment  Act  of  1981 in the principal Act by a legislature are clearly  unconstitutional  for  they  are  to  be  regarded  as  provisions  made  by  encroaching  upon  the  judicial  power.  Hence,  the  view of  the  High  Court  that  the  

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provisions  of  the  Amendment  Act  of  1981  which  merely authorise the Assistant Collector of first grade  to decide the claims to be made before him claiming  certain lands or immovable properties as ‘shamilatdeh’  vesting in Panchayats ignoring the judicial orders or  decrees, by which any right, title or interest of private  parties  in  such  lands  or  immovable  properties  are  recognised,  are  unconstitutional,  requires  to  be  upheld.  Consequently,  the  provisions  of  the  Amendment Act of 1981, insofar as they are intended  to  operate  retrospectively  for  nullifying  the  adjudications  made  by  civil  courts  prior  to  that  Amendment  Act,  are  invalid,  inoperative  and  unconstitutional.  However,  the  provisions  in  the  Amendment  Act  of  1981,  can  undoubtedly  operate  prospectively  for  adjudicating  upon  claims  to  ‘shamilatdeh’ in  proceedings  initiated  subsequent  to  the commencement of that Act, if they do not, in any  way, disturb the finality of adjudications made earlier.”

Equally,  in  Re  Cauvery  Water  Disputes  Tribunal,  1993  

Supp  (1)  SCC  96,  this  Court  after  referring  to  two  earlier  

judgments stated:

“76. The  principle  which  emerges  from  these  authorities is that the legislature can change 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  partes  and  affect  their  rights and liabilities alone. Such an act  on the  part  of  the  legislature  amounts  to  exercising  the  judicial  power of the State and to functioning as an  appellate court or tribunal.”

Similarly,  in  S.R.  Bhagwat  v. State  of  Mysore,  (1995)  6  

SCC 16, this Court held:

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“17. We  may  recapitulate  at  this  stage  that  the  petitioners  have  mounted  a  limited  attack  on  the  impugned provisions of the Act insofar as they deprive  them  of  the  monetary  benefits  flowing  from  the  deemed promotion to be given to them pursuant to the  orders of the Division Bench of the High Court which  have  become  final  between  the  parties.  We  have  extracted the aforesaid section with its relevant sub- sections  wherein  the  impugned  provisions  of  the  clauses concerned have been indicated by underlining  them. Petitioners contend that underlined portions of  sub-sections (2), (3) and (8) of Section 4 clearly fall  within  the  teeth  of  binding  decision  of  the  Division  Bench of the High Court and they are in clear conflict  with  the  said  binding  decision.  As  we  are  not  concerned  with  other  provisions  of  the  Act  except  Section 11(2) we may straightaway turn to Section 11.  The said provision deals with overriding effect of the  Act. It reads as under:

“Overriding effect.— (1) The provisions of this Act or of  any  order  made  thereunder  shall  have  effect  notwithstanding  anything  inconsistent  therewith  contained in any law or order having the force of law  or rules made under the proviso to Article 309 of the  Constitution of India for the time being in force or any  provision regulating the conditions of  service of  any  allottee or in any order made by virtue of any such  law, rules or provisions.

(2)  Notwithstanding  anything  contained  in  any  judgment,  decree  or  order  of  any  court  or  other  competent authority the rights to which a civil servant  is  entitled  to  in  respect  of  matters  to  which  the  provisions  of  this  Act  are  applicable,  shall  be  determined in accordance with the provisions of this  Act,  and accordingly, any judgment, decree or order  directing promotion or consideration for promotion of  civil servants and payment of salaries and allowances  consequent  upon such promotion shall  be reviewed  and orders made in accordance with the provisions of  this Act.”

18. A mere look at sub-section (2) of Section 11 shows  

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that the respondent State of Karnataka, which was a  party to the decision of the Division Bench of the High  Court  against  it  had  tried  to  get  out  of  the  binding  effect  of  the  decision  by  resorting  to  its  legislative  power.  The  judgments,  decrees  and  orders  of  any  court  or  the competent authority which had become  final against the State were sought to be done away  with  by  enacting  the  impugned  provisions  of  sub- section (2) of Section 11. Such an attempt cannot be  said to be a permissible legislative exercise. Section  11(2), therefore, must be held to be an attempt on the  part  of  the State Legislature to legislatively  overrule  binding  decisions  of  competent  courts  against  the  State.  It  is  no  doubt  true  that  if  any  decision  was  rendered against  the State of  Karnataka which was  pending in appeal and had not become final it could  rely upon the relevant provisions of the Act which were  given retrospective effect by sub-section (2) of Section  1 of the Act for whatever such reliance was worth. But  when  such  a  decision  had  become  final  as  in  the  present  case  when  the  High  Court  clearly  directed  respondent-State to give to the petitioners concerned  deemed dates of  promotions if  they were otherwise  found fit  and  in  that  eventuality  to  give  all  benefits  consequential thereon including financial benefits, the  State could not invoke its legislative power to displace  such a judgment. Once this decision had become final  and the State of  Karnataka had not thought it  fit  to  challenge it before this Court presumably because in  other  identical  matters  this  Court  had  upheld  other  decisions  of  the  Karnataka  High  Court  taking  the  same view, it  passes one's comprehension how the  legislative power can be pressed in service to undo  the  binding  effects  of  such  mandamus.  It  is  also  pertinent  to  note  that  not  only  sub-section  (2)  of  Section 11 seeks to bypass and override the binding  effect of the judgments but also seeks to empower the  State to review such judgments and orders and pass  fresh  orders  in  accordance  with  provisions  of  the  impugned Act.  The  respondent-State  in  the  present  case by enacting sub-section (2) of Section 11 of the  impugned Act has clearly sought to nullify or abrogate  the  binding  decision  of  the  High  Court  and  has  

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encroached upon the judicial power entrusted to the  various  authorities  functioning  under  the  relevant  statutes  and  the  Constitution.  Such  an  exercise  of  legislative power cannot be countenanced.”

In  Delhi  Cloth  &  General  Mills  Co.  Ltd.  v.  State  of  

Rajasthan, (1996) 2 SCC 449, this Court struck down The Kota  

Municipal  Limits  (Continued  Existence)  Validating  Act,  in  the  

following terms:

“15. In the case of the village of Raipura there was a  preliminary  notification  calling  for  objections  to  the  extension  of  the  limits  of  the  Kota  Municipality  to  include it, but it was not followed by a final notification.  In the case of the village of Ummedganj there was a  notification  extending  the  limits  of  the  Kota  Municipality to include it, but it had not been preceded  by a notification inviting the objections of  the public  thereto.  Later,  another  notification  was  published  whereby the village of Ummedganj was excluded from  the limits of the Kota Municipality.  The provisions of  Sections  4  to  7  of  the  1959  Act  and  the  earlier  provisions of the 1951 Act in the same behalf were,  therefore, not met in the case of either the village of  Raipura or the village of Ummedganj. The Full Bench  of  the  Rajasthan  High  Court  has  held  that  these  provisions  were  mandatory  and  that  judgment  has  become final.

16. The Validating Act  provides that,  notwithstanding  anything contained in Sections 4 to 7 of the 1959 Act  or in any judgment, decree, order or direction of any  court, the villages of Raipura and Ummedganj should  be deemed always to have continued to exist and they  continue  to  exist  within  the  limits  of  the  Kota  Municipality,  to all  intents and for  all  purposes. This  provision requires the deeming of  the legal  position  that the villages of Raipura and Ummedganj fall within  the limits of the Kota Municipality, not the deeming of  

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facts from which this legal consequence would flow. A  legal consequence cannot be deemed nor, therefrom,  can the events that  should have preceded it.  Facts  may  be  deemed  and,  therefrom,  the  legal  consequences that follow.

17. Sections  4  to  7  remained  on  the  statute  book  unamended  when  the  Validating  Act  was  passed.  Their provisions were mandatory. They had admittedly  not been followed. The defect of not following these  mandatory  provisions  in  the  case  of  the  villages  of  Raipura  and  Ummedganj  was  not  cured  by  the  Validating  Act.  The  curing  of  the  defect  was  an  essential  requirement  for  the  passing  of  a  valid  validating statute, as held by the Constitution Bench in  the case of Prithvi Cotton Mills Ltd. [(1969) 2 SCC 283  : (1970) 1 SCR 388] It must, therefore, be held that  the Validating Act is bad in law and it must be struck  down.”

Mr. Giri, learned counsel appearing for the State is correct in  

saying that no Section of the principal Act had been struck down  

and  hence  Section  6  of  the  Amendment  Act  did  not  need  to  

remove the basis of any earlier decision striking down an Act.  We  

repeatedly asked him if action had been taken under Section 3(1)  

or  3A of  the  Amendment  Act  to  acquire  any  of  the  cashew  

factories before us.  His candid answer was “no”. The argument  

that Section 6 contains a third source of power to acquire cashew  

factories merely by putting them in a schedule has to be rejected  

on  two  fundamental  grounds.  First,  no  notice  or  hearing  is  

provided as in Section 3 or Section 5A of the Land Acquisition Act  

or  any  other  safeguard  such  as  a  resolution  of  the  legislative  

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assembly  supporting  such  acquisition  as  in  Section  3A.   If  

acquisition is to take place in conformity with law rules of natural  

justice cannot be bypassed.  Further, Section 6 is aimed only at  

directly  upsetting  a  final  judgment  of  a  final  court  namely  the  

Supreme Court of India.  This is clear from two things – (1) the  

non  obstante clause  wiping  out  “any  judgment”  and  (2)   the  

reference to the schedule of the Amendment Act which contains  

only the 10 cashew factories that were ordered to be handed back  

by a final  judgment  of  this  Court  dated 10.3.1995.   It  is  clear,  

therefore, that Section 6 directly seeks to upset a final judgment  

inter-parties  and  is  bad  on  this  count  and  is  thus  declared  

unconstitutional.  

13. Point 2.

The  Statement  of  Objects  and  Reasons  for  the  1995  

Amendment Act reads as follows:-

“STATEMENT OF OBJECTS AND REASONS

The Kerala Cashew Factories (Acquisition) Act,  1974 empowers the Government in the public interest  to  acquire  certain  cashew  factories  and  to  provide  employment to the workers who have been rendered  unemployed and to secure to them just conditions of  service.  

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2. The Government have acquired certain cashew  factories by invoking section 3 of the Kerala Cashew  Factories (Acquisition) Act, 1974.  The above action of  the  Government  was  challenged  by  the  original  owners.   In  Indian  Nut  Product-Vs-Union  of  India  reported in 1994 (2) KLT 598 the Supreme Court had  upheld  the  validity  of  the  Kerala  Cashew Factories  (Acquisition)  Act,  1974  however  the  Court  declared  certain notifications issued by the Government under  Section  5(1)  of  the  aforesaid  Act  as  null  and  void.  Based on the above decision of the Supreme Court,  the  Kerala  High  Court  disposed  of  certain  petitions  pending in  the High Court  against  acquisition under  the  said  Act  and  directed  the  Government  to  hand  over the factories to the original owners.  

3. The main ground for quashing the notifications  was that the Government had not given proper notice  as required under section 3 of  the Act  and that  the  parties were not given sufficient opportunity of being  heard  before  final  orders  were  passed  by  the  Government.  

4. These factories are now under the management  of  the  Cashew  Development  Corporation  and  also  CAPEX.  In case the factories are to be handed over  to  the  petitioners  in  the  OP’s  as  stipulated  by  the  Court,  the  above  mentioned  institutions  and  Government will suffer financially, amounting to crores  of rupees.  

5. If  the cashew factories are handed over  to  its  previous owners based on the directions of the Court,  owners may not be in a position to start work in the  near future for the reason that they are not in Cashew  trade  for  a  long  period  and  due  to  paucity  of  raw  cashew in the world market.  There will be large scale  unemployment  among  the  workers  in  Cashew  Industry.   There  will  also  be  scored  economic  disorders  in  the  Southern  Districts  of  the  State.  Where there is concentration of Cashew Factories.

6. Therefore to tide over the situation Government  

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intends to arm with a new legislation to acquire certain  factories  from  the  date  of  original  notification  for  acquisition.  

7. The  Bill  seeks  to  amend  the  Kerala  Cashew  Factories (Acquisition) Act, 1974, to achieve the above  objects.”

A  bare  reading  of  the  Statement  of  Objects  of  the  

Amendment  Act  shows  that  the  Kerala  Legislature  wished  to  

interfere  with  two judgments  of  the Supreme Court  making no  

distinction between factories that were managed by the Cashew  

Development Corporation (the 36 factories) and CAPEX (the 10  

factories).  It is interesting to note that apart from the Government  

suffering financially (if the factories are to be handed back), there  

will be large scale unemployment among workers in the cashew  

industry.  

It is clear that the objects and reasons for the Amendment  

Act  makes  no  differentiation  between  the  36  factories  handed  

back and the 10 factories taken over by the Amendment Act. The  

High Court was in error  in saying that there was an intelligible  

differentia between the two.  Further, even otherwise, there is no  

difference between factories which post acquisition are run by the  

Cashew Development Corporation or CAPEX regard being had to  

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the  object  sought  to  be  achieved  –  namely  to  avoid  

unemployment of cashew workers. Whether 36 factories run by  

the Cashew Development Corporation are to be acquired or 10  

factories run by CAPEX are to be acquired makes not the least  

difference  to  the  object  sought  to  be  achieved.   Large  scale  

unemployment  is  there  in  both  cases.   And  both  the  Cashew  

Development  Corporation  and  CAPEX,  along  with  the  

Government,  will  suffer  financially.  In fact,  the handing back of  

only  36  factories  would  be  patently  discriminatory  as  all  46  

factories are similarly situate and have been treated as such by  

the State by issuing common notices to all of them under Section  

3  of  the  Act.   We  have  been  reliably  informed  that  these  36  

factories are functioning under their respective owners for the last  

twenty  years.   In  the  circumstances  we  hold  that  there  is  no  

intelligible differentia between the 36 factories and the 10 factories  

taken over having any rational relation with the object sought to  

be achieved and on this ground also Section 6 of the Amendment  

Act  deserves  to  be  struck  down  as  violating  Article  14  of  the  

Constitution.   

14. The appeals are allowed.  The judgment of the High Court is  

set aside and it is ordered that the cashew factories and the land  

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appurtenant thereto that have been taken over by the State under  

the Amending Act must be handed back within a period of eight  

weeks from the date on which this judgment is pronounced.  

…………………...J. (Ranjan Gogoi)

…………………...J. (R.F. Nariman)

New Delhi; February 04, 2015.  

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ITEM NO.1A               COURT NO.7               SECTION XIA (for Judgment)                S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS

Civil Appeal  No(s).  3962/2007 S.T. SADIQ                                         Appellant(s)                                 VERSUS STATE OF KERALA & ORS.                             Respondent(s)

WITH C.A. No. 3963/2007   Date : 04/02/2015 These appeals were called on for pronouncement  

of judgment today. For Appellant(s) Mr. Krishnan Venugopal, Sr. Adv.

Mr. Deepak Prakash, Adv. Mr. Biju P. Raman, Adv. Mr. Subhash Chandran K.R. Adv.,  Ms. Shruti Srivastava, Adv. Ms. Yogamaya M.G., Adv.

                  For M/s. T. T. K. Deepak & Co., Advs.                       For Respondent(s) Mr. V. Giri, Sr. Adv.                    Ms. Bina Madhavan, Adv.

Mr. Somiram Sharma,Adv. Mr. Vishnu Sharma,Adv.

                 Mr. G. Prakash, Adv.                   Mr. K. R. Sasiprabhu, Adv.

Mr. M. Vijaya Bhaskar, Adv.                        

Hon'ble  Mr.  Justice  Rohinton  Fali  Nariman  pronounced  the  reportable judgment of the Bench comprising Hon'ble Mr. Justice  Ranjan Gogoi and His Lordship.

The appeals are allowed.  The judgment of the High Court is  set aside and it is ordered that the cashew factories and the land  appurtenant thereto that have been taken over by the State under  

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the Amending Act must be handed back within a period of eight  weeks from the date on which this judgment is pronounced in terms  of the signed reportable judgment.

(R.NATARAJAN)         (INDU BALA KAPUR)  Court Master       Court Master

(Signed reportable judgment is placed on the file)

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