RETROSPECTIVE VALIDATION OF A STATUTE

[Mr. M. GOVINDARAJAN]

Retrospective legislation is generally defined as legislation 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’.  It is a general expectation and requirement of the rule of law that legislation should only apply prospectively. Retrospective provisions should only be enacted if they can be fully justified. The most important element in justifying a retrospective provision is to identify the extent (if any) to which people will be adversely affected.

There are a number of different types of retrospective legislation

Retrospective application from an earlier date

An Act may state “this Act is deemed to have come into [X date]” being a date that precedes the date the Act is passed. The Act then applies to matters that have already occurred and potentially alters the rights or obligations of actions those matters that have already occurred.

Retrospective application to events that have already occurred

Legislation can also be made retrospective by applying to things already done. For example, section 10 of the Illegal Contracts Act 1970 provides that it “shall apply to contracts that were made before or after the commencement of this Act”. In this way the Act applies retrospectively to contracts entered into before the Act was passed.

Validating legislation

Actions carried out without lawful authority and situations where there may be doubt about whether an action is lawful are frequently validated using retrospective legislation. The retrospective aspect of the validation is likely to be obvious as the provision will state that certain actions that have already taken place “are hereby validated and deemed to have been lawfully done”. The validation may occur in situations where everyone was acting under the same mistaken assumption that what they were doing was lawful or there may have been some doubt as to the lawfulness of their actions. For example, in 2006 the Auditor-General reported to Parliament that appropriations for Parliamentary services for members of Parliament had been used for election purposes and these were outside the scope of the appropriation. Parliament validated this expenditure in the Appropriation (Parliamentary Expenditure Validation) Act 2006.

Reversing the effects of a court decision

Legislation sometimes reverses the effects of a court decision, although this is usually controversial as it is contrary to the principle that legislation should not deprive individuals of the right to benefit from the judgments they obtain in proceedings brought under earlier law. See for example, section 8 of the Biosecurity Amendment Act, 2008 that reversed the Court of Appeal's decision in National Beekeepers' Association of NZ v Chief Executive of the Ministry of Agriculture and Forestry [2008] NZCA 1.[35]

Retrospective legislation also occurs in tax law.  In recent years retrospective amendment has been a very common incident.

In ‘The Indian Aluminum Company and others V. State of Kerala and others’ – 1996 (2) TMI 526 - SUPREME COURT the Supreme Court has a long discussion coupled with a large number of judgments on validation acts.    The Supreme Court laid down the following principles in this regard, as detailed below:

• The adjudication of the rights of the parties is the essential judicial function.   Legislature has to lay down the norms of conduct or rules which will govern the parties and the transactions and require the court to give effect to them;
• The Constitution delineated delicate balance in the exercise of the sovereign power by the legislature, executive and judiciary;
• In a democracy governed by rule of law, the legislature exercises the power under Articles 245 and 246 and other companion articles read with the entries in the respective lists in the VII^th  Schedule to make the law which includes power to amend the law;
• Courts in their concern and endeavor to preserve judicial power equally must be guarded to maintain the delicate balances devised by the Constitution between the three sovereign functionaries.  In order that rule of law parameters to fulfill constitutional objectives of establishing an egalitarian social order, the respective sovereign functionaries need free play in their joints so that the march of social progress and order remains unimpeded.  The smooth balance built with delicacy must always be maintained;
• In its anxiety to safeguard judicial power, it is unnecessary to be overzealous and conjure up incursion into the judicial preserve invalidating the valid law completely made;
• The court, therefore, needs to carefully scan the law to find out:

• Whether the vice pointed out by the court and invalidity suffered by previous law is cured complying with the legal and constitutional requirements?
• Whether the legislature has competence to validate the law?
• Whether such validation is consistent with the rights guaranteed in Part III of the Constitution?

• The court does not have power to validate an invalid law or to legalize impost of tax illegally made and collected or to remove the norm of invalidation or providing a remedy.   These are not judicial functions but the exclusive provisions of the legislature.   Therefore they are not encroachment on judicial power;
• In exercising legislative power, the legislature by mere declaration, without anything more, cannot directly overrule, revise or override a judicial decision.   It can render judicial decision ineffective by amending valid law on the topic within its legislative field fundamentally altering or changing its character retrospectively.   The changed or altered conditions are such that the previous decision would not have been rendered by the court, if those conditions had existed at the time of declaring the law as invalid.  It is also empowered to give effect to retrospective legislation with a deeming date or with effect from a particular date.   The legislature can change the character of the tax or duty from impermissible to permissible tax but the tax or levy should answer such character and the legislature is competent to recover the invalid tax validating such a tax on removing the invalid base for recovery from the subject or render the recovery from the State ineffectual.  It is competent for the legislature to enact the law with retrospective effect and authorize its agencies to levy and collect the tax on that basis, make the imposition of levy collected and recovery of the tax made valid, notwithstanding the declaration by the court or the direction given for recovery thereof;
• The consistent thread that runs through all the decisions of this court is that the legislature cannot directly overrule the decision or make a direction as not binding on it but has power to make the decision ineffective by removing the base on which the decision was rendered, consistent with the law of the Constitution and the legislature must have competence to do the same.