Nhpc Ltd. vs State of Himachal Pradesh Secretary & Ors.

Held: By enacting the Amendment and Validation Act of 1997, the Himachal Pradesh State Legislature has validly removed the basis of the judgment of the Division Bench of the High Court dated 27.03.1997, inter-alia, by amending the definition of the term ‘business’; defining the terms ‘fare’, ‘freight’ and ‘road’; deleting the Explanation to Section 3(1); and inserting Section 3(1A) which brought non-fare paying passengers at par with fare-paying passengers for the purpose of levying tax under the Act – Thus, the Amendment and Validation Act of 1997 is a valid piece of Legislation – The activity of the appellant in providing gratis transportation to its employees, and their children, would be a taxable activity under Section 3(1-A) of the Amendment and Validation Act of 1997. [Para 23(ii), (iii)] Himachal Pradesh Passengers and Goods Taxation Act, 1955 – Himachal Pradesh Passengers and Goods (Amendment and Validation) Act of 1997 – The Division Bench of the High Court passed a judgment dated 27.03.1997 and pointed out lacunae in the Act of 1955 – By way of the Amendment and Validation Act of 1997, amendments were brought about to the Preamble and various provisions of the Act of 1955 with retrospective effect, viz. date of enforcement of the Act of 1955 – When a competent legislature retrospectively removes the substratum or foundation of a judgment to make it ineffective – Valid legislative exercise or not:

Held: A legislature cannot directly set aside a judicial decision – However, when a competent legislature retrospectively removes the substratum or foundation of a judgment to make the decision ineffective, the same is a valid legislative exercise provided it does not transgress on any other constitutional limitation – Such a legislative device which removes the vice in the previous legislation which has been declared unconstitutional is not considered to be an encroachment on judicial power but an instance of abrogation recognised under the Constitution of India – The various decisions of the Supreme Court show that it is open to the legislature to alter the law retrospectively, provided the alteration is made in such a manner that it would no more be possible for the Court to arrive at the same verdict – In other words, the very premise of the earlier judgment should be removed, thereby resulting in a fundamental change of the circumstances upon which it was founded – It would be permissible for the legislature to remove a defect in an earlier legislation, as pointed out by a constitutional court in exercise of its powers by way of judicial review – This defect can be removed both prospectively and retrospectively by a legislative process and previous actions can also be validated. [Paras 11 and 12] Constitution of India – Alteration of law retrospectively – Separation of powers between legislature, executive and the judiciary – Power of Judicial Review – Power of Legislature – Rule of Law: Held: The role of the judiciary in galvanising constitutional machinery characterised by institutional checks and balances, lies in recognising that while due deference must be shown to the powers and actions of the other two branches of the government, the power of judicial review may be exercised to restrain unconstitutional and arbitrary exercise of power by the legislature and executive organs – The power of judicial review is a part of the basic feature of Constitution which is premised on the rule of law – Unless a judgment has been set aside by a competent court in an appropriate proceeding, finality and binding nature of a judgment are essential facets of the rule of law informing the power of judicial review – In that context, while it may be open to the legislature to alter the law retrospectively, so as to remove the basis of a judgment declaring such law to be invalid, it is essential that the alteration is made only so as to bring the law in line with the decision of the Court – Simply setting at naught a decision of a court without removing the defects pointed out in the said decision, would sound the death knell for the rule of law – The rule of law would cease to have any meaning if the legislature is at liberty to defy a judgment of a court by simply passing a validating legislation, without removing the defects forming the substratum of the judgment by use of a non-obstante clause as a technique to do so. [Para 13]

Constitution of India – Legislative device of abrogation – Retrospective amendments – Permissibility of:

Held: The device of abrogation, by way of introducing retrospective amendments to remove the basis of a judgment, may be employed when a legislature is under the bonafide belief that a defect that crept into the legislation as it initially stood, may be remedied by abrogation – An act of abrogation is permissible only in the interests of justice, effectiveness and good governance, and not to serve the oblique agenda of defying a court’s order, or stripping it of its binding nature. [Para 14] Constitution of India – The power of abrogation is to be exercised following principles:

Held: (i) There is no legal impediment to enacting a law to validate a legislation which has been held by a court to be invalid, provided, such a law removes the basis of the judgment of the court, by curing the defects of the legislation as it stood before the amendment; (ii) The validating legislation may be retrospective – It must have the effect that the judgment pointing out the defect would not have been passed, if the altered position as sought to be brought in by the validating statute existed before the court at the time of rendering its judgment; (iii) Retrospective amendment should be reasonable and not arbitrary and must not be violative of any Constitutional limitations; (iv) Setting at naught a decision of a court without removing the defect pointed out in the said decision is opposed to the rule of law and the scheme of separation of powers under the Constitution of India; (v) Abrogation is not a device to circumvent an unfavourable judicial decision – If enacted solely with the intention to defy a judicial pronouncement, an Amendment and Validation Act of 1997 may be declared as ultra-vires. [Para 15]

Himachal Pradesh Passengers and Goods Taxation Act, 1955 – Himachal Pradesh Passengers and Goods (Amendment and Validation) Act of 1997 – Import of the Act of 1955 Act as amended by the Amendment and Validation act of 1997:

Held: The Preamble which provides that it has been enacted to provide for levying a tax on passengers and goods carried by road in motor vehicles – Such a tax falls within the legislative field governed by Entry

56 of List II of the Seventh Schedule of the Constitution – Simply for the reason that notices have been issued to the owners or assessment orders have been passed against the owners of the vehicles, it cannot be said that the tax is levied on the motor vehicles – If the persons carried happen to be employees of the owners of the buses, such employees should pay the tax – When the employer, i.e., the owner of the vehicle, does not collect the tax from such employees, he should himself pay it, in discharge of the employer’s statutory duty as an agent of the State to collect tax on the basis of the amended provision – Whether to collect the tax payable from the passengers (the employees and their children) or discharge the liability itself is the prerogative of the appellants. [Para 22] LIST OF CITATIONS AND OTHER REFERENCES

Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, A.I.R 1970 SC 192 : [1970] 1 SCR 388; State of Tamil Nadu v. Arooran Sugars Ltd., (1997) 1 SCC 326 : [1996] 8 Suppl. SCR 193 – followed. Indian Aluminium Company Co. v. State of Kerala, A.I.R 1996 SC 1431: [1996] 2 SCR 23; Bakhtawar Trust v. M.D. Narayan, (2003) 5 SCC

298 : [2003] 1 Suppl. SCR 1; Madras Bar Association v. Union of India, (2022) 12 SCC 455; Dr. Jaya Thakur v. Union of India, 2023 SCC OnLine SC 813 – relied on.

A.S. Karthikeyan v. State of Kerala, (1974) 1 SCC 258 : [1974] 2 SCR 321; M/s Tata Engineering and Locomotive Co. v. The Sales Tax Officer, Poona A.I.R. 1979 SC 343 : [1979] 2 SCR 357; J. K. Jute Mills Co. Ltd. v. State of Uttar Pradesh, A.I.R. 1961 SC 1534 : [1962] SCR 1; State of Tamil Nadu v. Board of Trustees of the Port of Madras, (1999) 4 SCC 630 : [1999] 2 SCR 195; Commissioner of Sales Tax v. Sai Publication Fund, (2002) 4 SCC 57 : [2002] 2 SCR 743; National Agricultural Cooperative Marketing Federation of India Ltd. v. Union of India, (2003) 5 SCC 23: [2003] 3 SCR 1; M/s West Ramnad Electric Distribution Co. v. State of Madras, A.I.R. 1962 SC 1753 : [1963] SCR 747; Rai Ramkrishna v. State of Bihar, A.I.R. 1963 SC 1667 : [1964] SCR 897; Lohia Machines Ltd. v. Union of India, (1985) 2 SCC 197 : [1985] 2 SCR 686; State of Himachal Pradesh v. Yash Pal Garg, (2003) 9 SCC 92 : [2003] 3 SCR 1056; Baharul Islam v. Indian Medical Association, 2023 SCC OnLine SC 79; M/s. Tirath Ram Rajendra Nath, Lucknow v. State of Uttar Pradesh, A.I.R. 1973 SC 405; Hindustan Gum and Chemicals Ltd. v. State of Haryana, (1985) 4 SCC 124 : [1985] 2 Suppl. SCR 630; Cheviti Venkanna Yadav v. State of Telangana, (2017) 1 SCC 283 : [2016] 7 SCR 689 – referred to. OTHER CASE DETAILS INCLUDING IMPUGNED

ORDER AND APPEARANCES