Constitution of the United States – Evolution of Doctrine of Prospective Overruling – Objectives and Purpose – Factors to be considered for its applicability – Discussed: Held: The doctrine of prospective overruling is applied when a constitutional court overrules a well-established precedent by declaring a new rule but limits its application to future situations – The underlying objective is to avert injustice or hardships, per Great Northern Railway Co. v. Sunburst Oil and Refining Co., 287 US 358 (1932) – Relied on Linkletter v. Walker, 381 US 618 (1965) to hold that the doctrine was applied by the courts in the US on the basis that the US Constitution “neither prohibits nor requires retroactive effect.” – US Supreme Court identified three separate factors to be considered while deciding the applicability of prospective overruling in Chevron Oil Company v. Huson 404 US 97 (1971): (i) the decision to be applied prospectively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied, or by deciding an issue of first impression whose resolution was not foreshadowed; (ii) the court must weigh the merits and demerits in each case by looking to the prior history of the rule in question,its purpose and effect, and whether retrospective operation will further or retard the operation of the rule; and (iii) whether the application of nonretroactivity avoids substantial inequitable results, injustice or hardships. [Paras 5, 6]
Constitution of India – Article 142 – Application of the Doctrine of Prospective Overruling in India – Explained: Held: Relying on Golak Nath v. State of Punjab [1967] 2 SCR 762, held that the doctrine of prospective overruling can be invoked only in matters arising under the Constitution and that it can be applied only by the Supreme Court as it has the constitutional jurisdiction to declare law binding on all the courts in India – The scope of the retroactive operation of the law is left to the discretion of the Supreme Court to be moulded in accordance with the justice of the cause or matter before it – The power of the Supreme Court to mould the relief claimed to meet the justice of the case is derived from Article 142 – It is applied by the Supreme Court while overruling its earlier decision, which was otherwise final – It has also been applied when deciding on an issue for the first time. [Paras 9, 10] Principles emerging from application of Doctrine of Prospective Overruling – Discussed:
Held: The doctrine of prospective overruling has been accepted by the Supreme Court and the following principles emerge from the application of doctrine of prospective overruling – The power of the Supreme Court to mould the relief claimed to meet the justice of the case is derived from Article 142 – It is applied by the Supreme Court while overruling its earlier decision, which was otherwise final – It has also been applied when deciding on an issue for the first time – The object is to validate all the actions taken before the date of declaration in the larger public interest – The doctrine does not validate an invalid law, but the declaration of invalidation takes effect from a future date – Cases that have attained finality are saved because doing otherwise would cause unnecessary and avoidable hardships – It is applied to bring about a smooth transition of the operation of law without unduly affecting the rights of the people who acted upon the overruled law – It is a device innovated to avoid: (i) reopening settled issues, (ii) refund of amounts collected under invalid legislation, and (iii) multiplicity of proceedings – It is applied to avoid social and economic disruptions and give sufficient time to the affected entities and institutions to make appropriate changes and adjustments. [Para 11] Applicability of the Doctrine of Prospective Overruling to Mineral Area Development Authority v. M/s Steel Authority of India & Anr. Etc 2024 INSC 554 – Rejected:
of India & Anr. Etc 2024 INSC 554 (hereinafter “MADA”) has upheld the legislative competence of States under Entries 49 and
50 of List II – If MADA (supra) is given a prospective application, the validity of all relevant legislation enacted before the date of the decision, that is 25 July 2024, will have to be tested on the touchstone of the previous law – The previous law on the aspects of interpretation of Entry 54 of List I and Entries 23 and 50 of List II of the Seventh Schedule was unsettled because of the conflicting decisions in India Cement Ltd. v. State of Tamil Nadu (1990) 1 SCC 12 and State of West Bengal v. Kesoram Industries Ltd (2004) 10 SCC 201 – There is always a presumption of constitutionality in favor of a statutory enactment – If MADA (supra) is applied prospectively, the relevant taxing legislations may conceivably be invalidated, requiring the States to refund the amount collected to the assesses – Since MADA (supra) has answered the reference and resolved the conflict, it would be iniquitous to apply the decision prospectively. [Para 17] Balancing of equities – Outstanding interest accrued on principal payable to the States be waived – Reliefs granted: Held: A pragmatic solution to reconcile the financial interests of the States and the assesses can be achieved by proscribing the States from demanding taxes pertaining to Entries 49 and 50 of List II of the Seventh Schedule for the period before Kesoram (supra) – Taking into consideration the lapse of more than three decades since India Cement (supra) and more than a decade since the matter was referred to a larger Bench, equities will be balanced if the State governments waive the outstanding interest accrued on the principal due from the assesses – This direction applies to all assesses, regardless of whether they have approached the Supreme Court or the High Courts challenging the validity of the relevant statutes – While the States may levy or renew demands of tax, if any, pertaining to Entries 49 and 50 of List II of the Seventh Schedule in terms of the law laid down in the decision in MADA (supra) the demand of tax shall not operate on transactions made prior to 1 April 2005 – The time for payment of the demand of tax shall be staggered in instalments over a period of twelve years commencing from 1 April 2026 – The levy of interest and penalty on demands made for the period before 25 July 2024 shall stand waived for all the assesses [Paras 20, 22, 24, 25]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Mukund P Unny, Hony. Associate Editor (Verified by: Shadan Farasat, Adv.). Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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