Unit V

PRINCIPLE OF UTILITY

The principle of utility states that actions or behaviors are right in so far as they promote

happiness or pleasure, wrong as they tend to produce unhappiness or pain. Hence, utility is a

teleological principle. This once again raises some of the same basic issues of associated with

hedonism, as discussed in the earlier section on Teleological Theories. Recall that a hedonist

believes that the good life consists solely in the pursuit and experience of pleasure or happiness.

The feelings of pleasure and pain are biological events involving our central nervous system,

which are controlled by our cerebral cortex. We obviously experience pleasure when we perform

certain acts that fulfill biological functions such as eating, drinking, and having sex. We also

experience pleasure when we perform certain intellectual activities, such as reading a philosophy

textbook, playing guitar, or drawing a picture. We sometimes, but not always, experience

pleasure when we do the right thing. Conversely, we experience pain when these functions are

left unfulfilled.

Many utilitarians believe that pleasure and pain are objective states and can be, more or less,

quantified. Hedonistic terms like intensity, duration, fecundity, and likelihood, imply that

pleasure can be measured quantitatively, perhaps on a scale from 1-10, as part of a hedonistic

calculus.
CLASSICAL UTILITARIANISM

If you are a hedonist, the most important question is: "Whose pleasure counts the most?"

Classical utilitarians are altruists to the extent that they believe that the standard of right or

wrong is not the agent's own greatest happiness, but the greatest amount of happiness for the

greatest number of people. Therefore, the "Good" increases the number of persons experiencing

pleasure among members of a specific group. The "Bad" increases the number of persons

experiencing pain. There are several interesting problems here.

A few years back, Cincinnati government officials had a community vote on whether to use the

proceeds from a proposed sales tax increase to build two new sports stadiums for the Reds and

the Bengals. A classical utilitarian would have to examine how that expenditure would effect

everyone in the community. This determination entailed calculating beforehand the amount of

pleasure and pain that the various members of the community would experience as a result of

building those stadiums; then decide whether the benefits (pleasures) outweigh the costs (pains)?

Of course the primary beneficiaries of the larger more modern stadiums would be the wealthy

team owners, players, perhaps a few downtown restaurant owners, parking lot owners etc. If the

levy fails, at least one of the teams will probably move to another city. That would cause pain to

some members of the community including fans, venders, parking lot attendants etc. Defenders

of the tax argued that even the retailers in the suburban malls would benefit economically from

keeping the sports teams. If they move they will lose customers on game days.
The fundamental problem for utilitarianism is justifying the altruistic principle of self-sacrifice in

order to benefit others. Since, I do not attend the games played at the stadium, and will not

benefit from hot dog revenues, why should I contribute to either project? Under classical

utilitarianism, at least some members of the community must sacrifice his/her own interests for

the interests of others without benefiting personally. Indeed it is often the case that what turns

out to be in the public interest conflicts with the private interests of some individuals. How can

one justify such altruism based on utilitarian principles?

Sometimes, it is possible for an act to provide a large amount of quantifiable pleasure for a few

persons at the cost of a small amount of quantifiable pain for everyone else. Suppose, for

example, we have a small, but significant number of homeless children that could be helped by

imposing a small tax on everyone in Cincinnati. A utilitarian would not be able to justify

imposing that tax, unless it could be shown that more people are helped than harmed. One way to

get around this would be to count not only the number of persons that experience pleasure and

pain, but also weigh the intensity, duration, fruitfulness, and likelihood of the pleasures involved.

Hence, we might argue that if we weigh the amount of pleasure that homeless children

experience, as the result of providing them shelter, against the minimal pain that tax payers

experience, then we might rationally justify building that shelter at public expense.

The problem with this approach is that at any given time, many individuals might benefit from a

specific policy. Suppose that only the wealthy team owners would substantially benefit from

building the stadium and that the tax was very small, wouldn't we be able to justify building the
stadium for that wealthy team owner at the cost of a majority? If so, on what basis could we

justify building the shelter and not the stadium? Therefore, if utilitarianism assigns weight to

particular pleasures and pains, rather than merely merely count heads, then we would be

obligated provide benefits to a host individuals and minorities, regardless of need. How about a

tax to buy a new Volvo for every philosophy professor in Cincinnati? Obviously, the economics

of the debate turn out to be enormously complicated. This inherent complexity undermines at

least one of the major attractions of utilitarianism, its purported simplicity.

Utilitarianism faces five serious puzzles.

First, of all it is by no means clear as to whether pain and pleasure are really as objective and

measurable as the utilitarians claim.

Second, is the fact that we are often faced with moral decisions where we cannot predict how an

action might impact others. We often just don't know whether one act or policy will promote

more pain than pleasure. But what about those cases where we just aren't certain? What do we

do, guess? In cases of uncertainty, like the sports stadiums, it would seem that the utilitarian

would have to resort to intuitionism or some other principle.

Third, most deontological theorists say that utilitarianism often conflicts with our moral

intuitions. For example, if I were an extraordinarily clever shop-lifter, I could justify my theft

based on the fact that I probably would not get caught or that the store might not keep accurate

enough inventory to detect the loss.

Fourth, utilitarians, and all altruists, cannot explain why we should be morally obligated to act in

the public interest at the expense of our private interests. If the utility of moral self-sacrifice is its

only justification, then it would seem to follow that each of us would be more likely to approve

of self sacrifice in others before we would approve of it for ourselves.

Fifth, utilitarianism seems to have a built in bias (or sometimes a preference) against individuals

and minorities. What happens when it seems to be in the public interest to inflict extreme

hardship on an individual or minority in order to advance the public interest? For example, based

on utilitarian reasoning, Japanese Americans were hoarded into detention camps during World

War II because the government feared that some of them might support Japan and perhaps

engage in terrorist activities. Indeed, the greatest happiness principle has often been used in

support of totalitarian schemes in which the price paid for collective happiness has been personal

freedom. That’s why there is a consensus among contemporary philosophers that utilitarianism

cannot operate without other principles, especially justice. But once utilitarians admit this, the

doctrine loses even more of the simplicity that attracted us to it in the first place.
Although the principle of utility is difficult to apply and often leads to immorality, it is,

nevertheless, an important moral principle

RETROSPECTIVE OPERATION OF LAW:

In Maxwell on the Interpretation of Statutes, 12th Edn. the statement of law in this regard is

stated thus:

"Perhaps no rule of construction is more firmly established than thus - that a retrospective

operation is not to be given to a statute so as to impair an existing right or obligation, otherwise

than as regards matters of procedure, unless that effect cannot be avoided without doing violence

to the language of the enactment. If the enactment is expressed in language which is fairly

capable of either interpretation, it ought to be construed as prospective only. The rule has, in fact,

two aspects, for it, "involves another and subordinate rule, to the effect that a statute is not to be

construed so as to have a greater retrospective operation than its language renders necessary. "

In Francis Bennion's Statutory Interpretation, 2nd Edn, the statement of law is stated as follows :

"The essential idea of legal system is that current law should govern current activities.

Elsewhere in this work a particular Act is likened to a floodlight switched on or off, and

the general body of law to the circumambient air. Clumsy though these images are, they

show the inappropriateness of retrospective laws. If we do something today, we feel that

the law applying to it should be the law in force today, not tomorrow's backward

adjustment of it. Such, we believe, is the nature of law. Dislike of ex-post facto law is
 enshrined in the United States Constitution and in the Constitution of many American

States, which forbid it. The true principle is that lex prospicit non respicit (law looks

forward not back). As Willes, J. said retrospective legislation is 'contrary to the general

principle that legislation by which the conduct of mankind is to be regulated ought, when

introduced for the first time, to deal with future acts, and ought not to change the

character of past transaction carried on upon the faith of the then existing law."

In Garikapati Veeraya v. N. Subbiah Choudhry, AIR 1957 SC 540 the SC observed as thus :

(Para 25 of AIR) "The golden rule of construction is that, in the absence of anything in the

enactment to show that it is to have retrospective operation, it cannot be so construed as to have

the effect of altering the law applicable to a claim in litigation at the time when the Act was

passed."

In Smt. Dayawati v. Inderjit (AIR 1966 SC 1423, in Para 10, it is held thus :

"Now as a general proposition, it, may be admitted that ordinarily a Court of appeal

cannot take into account a new law, brought into existence after the judgment appealed

from has been rendered, because the rights of the litigants in an appeal are determined

under the law in force at the date of the suit. Even before the days of Coke whose maxim

- a new law ought to be prospective, not retrospective in its operation - is off-quoted,

Courts have looked with dis-favour upon laws which take away vested rights or affect

pending cases. Matters of procedure are, however, different and the law affecting

procedure is always retrospective. But it does not mean that there is an absolute rule of

inviolability of substantive rights. If the new law speaks in language, which, expressly or

by clear intendment, takes in even pending matters, the Court of trial as well as the Court
 of appeal must have regard to an intention so expressed, and the Court of appeal may

give effect to such a law even after the judgment of the Court of first instance."

In Hitendra Vishnu Thakur v. State of Maharashtra (1994) 4 SCC 602 : (1994 AIR SCW 3699 :

AIR 1994 SC 2623 : 1995 Cri LJ 517) this Court laid down the ambit and scope of an  amending

Act and its retrospective operation as follows :

"(i) A statute which affects substantive rights is presumed to be prospective in operation

unless made retrospective, either expressly or by necessary intendment, whereas a statute

which merely affects procedure, unless such a construction is textually impossible, is

presumed to be retrospective in its application, should not be given an extended meaning

and should be strictly confined to its clearly defined limits.

(ii) Law relating to forum and limitation is procedural in nature, whereas law relating to

right of action and right of appeal even though remedial is substantive in nature.

(iii) Every litigant has a vested right in substantive law but no such right exists in

procedural law.

(iv) A procedural statute should not generally speaking be applied retrospectively where

the result would be to create new disabilities or obligations or to impose new duties in

respect of transactions already accomplished:

(v) A statute which not only changes the procedure but also creates new rights and

liabilities shall be construed to be prospective in Operation unless otherwise provided,

either expressly or by necessary implication."

In K. S. Paripoornan v. State of Kerala (1994) 5 SCC 593 @ p. 636 : (1995 AIR SCW 1004 :

AIR 1995 SC 1012), this Court while considering the effect of amendment in the Land

Acquisition Act in pending proceedings held thus in Para 47 thereof as:

‘‘...In the instant case we are concerned with the application of the provisions of Sub-sec.

(1-A) of S.23 as introduced by the Amending Act to acquisition proceedings which were

pending on the date of commencement of the Amending Act. In relation pending

proceedings, the approach of the Courts in England is that the same are unaffected by the

changes in the law so far as they relate to the determination of the substantive rights and

in the absence of a clear indication of a contrary intention in an amending enactment, the

substantive rights of the parties to an action fall to be determined by the law as it existed

when the fiction was commenced and this is so whether the law is change before the

hearing of the case at the first instance or while an appeal is pending ( Halsbury's Laws if

England, 4th Edn. Vol. 44, para 922)."

In State of M.P. and another, vs.. G.S. Dall & Flour Mills, AIR 1991 SC 772, The Apex Court in

Para 21 of the judgment the Apex Court has observed that

"the notification of 3/71187 amending the 1981 notification with retrospective effect so

as to exclude what may be described in brief as 'traditional industries' though, like Rule

14 of the deferment rules, the exclusion extends' even to certain other non-traditional

units operating in certain situations. Though this notification purports to be retrospective,

it cannot be given such effect for a simple reason. We have held that the 1981 notification

clearly envisages no exclusion of any industry which fulfils the terms of the notification

from availing of the exemption granted under it. In view of this interpretation, the 1987
 amendment has the effect of rescinding the exemption granted by the 1981 notification in

respect of the industries mentioned by it. S. 12 is clear that, while a notification under it

can be prospective or retrospective, only prospective operation can be given to a

notification rescinding an exemption granted earlier. In the interpretation we have placed

on the notification, the 31, 7 87 notification cannot be treated as one merely clarifying an

ambiguity in the earlier one and hence capable of being retrospective; it enacts the

rescission of the earlier exemption and, hence, can operate only prospectively. It cannot

take away the exemption conferred by the earlier notification".

In the case of Mithilesh Kumari and another, vs. Prem Behari Khare, AIR 1989 SC 1247, the

Apex Court in Para 21 of its judgment as:

"A retrospective operation is not to be given to a statute so as to impair existing right or

obligation, otherwise than as regards matter of procedure unless that effect cannot be

avoided without doing violence to the language of the enactment. Before applying a

statute retrospectively the Court has to be satisfied that the statute is in fact retrospective.

The presumption against retrospective operation is strong in cases in which the statute, if

operated retrospectively, would prejudicially affect vested rights or the illegality of past

transaction, or impair contracts, or impose new duty or attach new disability in respect of

past transactions or considerations already passed, However, a statute is not properly

called a retrospective statute because a part of the requisites for its action is drawn from a

time antecedent to its passing. The general scope and purview of the statute and the

remedy sought to be applied must be looked into and what was the former state of law

and what the legislation contemplated has to be considered. Every law that impairs or
 takes away rights vested agreeably to existing laws is retrospective, and is generally

unjust and may be oppressive. But laws made justly and for the benefit of individuals and

the community as a whole may relate to a time antecedent to their commencement. The

presumption against retrospectivity may in such cases be rebutted by necessary

implications from the language employed in the statute. It cannot be said to be an

invariable rule that a statute could not be retrospective unless so expressed in the very

terms of the section which had to be construed. The question is whether on a proper

construction the legislature may be said to have so expressed its intention".

In the case of Hukam Chand etc. vs.. Union of India and others, AIR 1972 SC 2472 the Apex

court had occasion to deal with the following aspects of the subject under context and held:

In the Displaced Persons (Compensation and Rehabilitation) Act (44 of 1954), S.40 & 49

of it. There is nothing in S. 40 from which power of the Central Government to make

retrospective rules may be inferred. In the absence of any such power, the Central

Government acted in excess of its power in so far as it gave retrospective effect to the

Explanation to Rule 49. The Explanation could not operate retrospectively and would be

effective for the future from the date it was added. - Paras 5, 6, 7, 10 of the judgment.

The fact that the rules framed under the Act have to be laid before each House of

Parliament would not confer validity on a rule if it is made not in conformity with S. 40

of the Act. The laying referred to in S. 40 (3) is of the category of 'laying subject to

negative resolution' because the above sub-section contemplates that the rule would have

effect unless modified or annulled by the House of Parliament. The act of the Central

Government in laying the rules before each House of Parliament would not, however,
 prevent the courts from scrutinizing the validity of the rules and holding them to be ultra

vires if on such scrutiny the rules are found to be beyond the rule making power of the

Central Government. - Para 11 of the judgment.

CONSTITUTIONAL PROVISO:

Constitution of India, Art.245 - Subordinate legislation - Extent of power - Rule making

authority has to act within limits of power delegated to it. Unlike Sovereign Legislature which

has power to enact laws with retrospective operation, authority vested with the power of making

subordinate legislation has to act within the limits of its power and cannot transgress the same.

The initial difference between subordinate legislation and the statute laws lies in the fact that a

subordinate law making body is bound by the terms of its delegated or derived authority and that

court of law, as a general rule, will not give effect to the rules, thus made, unless satisfied that all

the conditions precedent to the validity of the rules have been fulfilled. Further, retrospective

effect cannot be given to a subordinate legislation unless it is authorized by the parent statute or a

validating statute.

THE CONCEPT OF ULTRA VIRES: In India, when the Legislature delegates legislative

power to an administrative authority without offering any guide lines, the validity of the relevant

statute may be attacked on following grounds, viz;

a. The statute offends against Arts. 14 & 19 of the Constitution on the ground of

unreasonable or arbitrary on the part of the legislature to confer uncontrolled

discretionary power upon an administrative authority.

 b. That the statute is invalid because of excessive delegation of abdication of legislative

power by the legislature.

c. retrospective effect cannot be given to a subordinate legislation unless it is authorized by

the parent statute or a validating statute

CONCLUSION:

It is crystal clear that the Statutes dealing with substantive rights - is prim facie / generally

prospective unless it is expressly or by necessary implications made to have retrospective

operation. But the rule in general is applicable where the object of the statute is to affect the

vested rights or impose new burdens or to impair existing obligations. Statutes dealing with

procedure - In contrast to statutes dealing with substantive rights, statutes dealing with merely

matters of procedure are presumed to retrospective unless such a construction is textually

inadmissible. According to Lord Dennig:

"The rule that an Act of Parliament is not be given retrospective effect applies only to

statutes which affect vested rights. It does not apply to statutes which only alter the form

of procedure or the admissibility of evidence, or the effect which the courts give to

evidence"

In the light of the above judgments, and the principles laid down therein that the new Act / Rule

affecting, existing rights or creating new obligations, is presumed to be prospective only.

This article is not intended to be a definitive analysis of legislative or other changes and

professional advice should be taken before any course of action is pursued

Prospective Vs. Retrospective” Statutes

Coke Maxim: “A new law ought to be prospective, not retrospective in its operation.”

Ordinarily, a legislature has power to make prospective laws, but Art.20 of the Indian

Constitution, 1950 provides certain safeguards to the persons accused of crime and so Art. 20(1)

of the Indian constitution imposes a limitation on the law making power of the constitution. It

prohibits the legislature to make retrospective criminal laws however it does not prohibit a civil

liability retrospectively i.e. with effect from a past date. So a tax can be imposed retrospectively.

Clause (1) of the Article 20 of the Indian Constitution guarantees rights against ex-post facto

laws. It provides that “ no person shall be convicted of any offence except for violation of a law

in force at the time of the commission of the act charged as an offence, nor be subjected to a

penalty greater than that which might have been inflicted under the law in force at the time of the

commission of the offence.” The American Constitution also constitutes a similar provision

prohibiting ex-post facto laws both by the Central and State legislatures.

Meaning:

The dictionary meaning of the word prospective with reference to statutes shows that it is

concerned with or applying the laws in future or atleast from the date of commencement of the

statute. Whereas the word retrospective when used with reference to an enactment may mean:
1. Effecting an existing contract or

2. Reopening of the past , closed and completed transactions, or

3. Affecting accrued rights and remedies, or

4. Affecting procedure.

The retrospective operation of an enactment may mean one thing and its affecting the rights of

parties another. Normally, an enactment is prospective in nature. It does not affect that which has

gone, or completed and closed up already. Ordinarily, the presumption with respect to an

enactment is that, unless there is something in it to show that it means otherwise, it deals with

future contingencies, and does not annul or affect existing rights and liabilities or vested rights,

or obligations already acquired under some provisions of law although its effect is that it does

not affect an existing right as well. If an enactment expressly provides that it should be deemed

to have come into effect from a past date, it is retrospective in nature. It then operates to affect

existing rights and obligations, and is construed to take away, impair or curtail, a vested right

which had been acquired under some existing law. If an enactment is intended to be retrospective

in operation, and also in effect, the legislature must expressly, and in clear and unequivocal

language, say so, in the enactment itself. A retrospective operation is not given to a statute, so as

to impair an existing right or obligation, otherwise than as regards matters of procedure unless

that effect cannot be avoided without doing violence to the language of the enactment. If the

enactment is expressed in a language which is capable of either interpretation, it ought to be

construed prospectively.
In Young v. Adams, it was observed that retrospective operation ought not to be given to a

statute, unless an intention to that effect is expressed in plain and unambiguous language.

However, it does not seem probable that the legislature should intent to extinguish by means of a

retrospective enactment, rights and interests which might already have vested. The retrospective

operation should not be favoured, unless the legislature clearly and distinctly authorizes the

doing of something which is physically inconsistent with the existence of an existing right and a

statute is not construed to have a greater retrospective operation than what its language renders it

necessary, because it may be that the retrospective operation may be partial and not full at some

places in the enactment.

In Smt. Dayawati v. Inderjit , It was held that "Now as a general proposition, it, may be

admitted that ordinarily a Court of appeal cannot take into account a new law, brought into

existence after the judgment appealed from has been rendered, because the rights of the litigants

in an appeal are determined under the law in force at the date of the suit. Even before the days of

Coke whose maxim - a new law ought to be prospective, not retrospective in its operation - is

off-quoted, Courts have looked with dis-favour upon laws which take away vested rights or

affect pending cases. Matters of procedure are, however, different and the law affecting

procedure is always retrospective. But it does not mean that there is an absolute rule of

inviolability of substantive rights. If the new law speaks in language, which, expressly or by

clear intendment, takes in even pending matters, the Court of trial as well as the Court of appeal
must have regard to an intention so expressed, and the Court of appeal may give effect to such a

law even after the judgment of the Court of first instance."

Criminal Law:

Article 20 of the Indian Constitution is divided into two parts. Under the first part, no person

shall be convicted of any offence except for violation of ‘law in force’ at the time of the

commission of the act charged as an offence. A person is to be convicted for violating a law in

force when the act charged is committed. A law enacted later making an act done earlier as an

offence, will not make person liable for convicted for violating a law in force when the act

charged is committed. A law enacted later, making an act done earlier as an offence, will not

make person liable for convicted under it. This means that if an act is not an offence at the date

of its commission it cannot be an offence at the date subsequent to its commission. In Prahlad

Krishna vs. State of Bombay, it has been held that an immunity is thus provided to a person from

being tried for an act under a law enacted subsequently, which makes the law unlawful.

In Pareed Lubha Vs. Nilambaram, it has been held that if the non-payment of the Panchayat Tax

was not an offence on the day it fell due, the defaulter could not be convicted for the omission to

pay under a law passed subsequently even if it covered older dues. The protection afforded by

Clause (1) is available only against conviction or sentence for a criminal offence under ex-post

fact law and not against the trial. Under the American law the prohibition applies even in respect

of trial. So the guarantee provided the American constitution is wider than that under the Indian
constitution. A trial under a procedure different from what it was at the time of the commission

of the offence or by a special court constituted after the commission of the offence cannot ipso

facto be held unconstitutional.

The protection of clause (1) of the Article 20 cannot be claimed in case of preventive detention

or demanding security from a person. This immunity extends only against punishment by courts

for a criminal offence under an ex-post facto law and cannot be claimed for acts done before the

relevant law has been passed or demanding a security from a press under the press law. The

prohibition is just for conviction and sentence only and not for prosecution and trial under a

retrospective law. An ex-post facto law which imposes penalty retroactively i.e. upon acts

already done or which increases the penalty for such acts but not retrospective law.

Strictly speaking a retrospective law only looks backward on things that are past and ex-post

facto law is a retroactive law that acts on things that are past, but the terms retroactive and

retrospective are used synonymously. Retrospective law is made to affect acts or facts occurring,

or rights occurring before it came into force. Every statute which 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 transactions or considerations already past. Retroactive statute

means a statute which creates a new obligation on transactions or considerations already part or

destroys or impairs vested rights.

The second part of Article 20(1) protects a person from ‘a penalty greater than that which he

might have been subjected to at the time of the commission of the offence. Thus a person cannot

be made to suffer more by an ex-post facto law than he would be subjected to at the time he

committed the offence. This clause applies to punishment for criminal offences only. In

Kedarnath vs. State of West Bengal, the accused committed an offence under the Prevention of

Corruption Act then in force was punishable by imprisonment or fine or both. The Act was

amended in 1949 which enhanced the punishment for the same offence for an additional fine

equivalent to the amount of money procured by the accused through the offence. The Supreme

Court held that the enhanced punishment prescribed in 1949 could not be applicable to the act

committed by the accused in 1947 and hence set aside the additional fine imposed by the

amended Act.

Taxation:

While tax laws by themselves are complicated, even more so are the provisions of the Income-

Tax Act, 1961. Even after five decades there is uncertainty with regard to interpreting both the

substantive and procedural provisions of the law. The focus and battle lines have shifted from

domestic tax to international tax. Retrospective amendments to the tax law completely upset the

applecart and make a mockery of business models which take into account certain concessions

and incentives. Despite repeated representations not to make retrospective amendments, the

usual quota of amendments are made every year.

Recently, the Special Bench of the Delhi Tribunal, in the ITO New Delhi vs Ekta Promoters

Private Ltd case, had to consider whether the levy of interest under Section 234D of the Act from

June 1, 2003, will have retrospective application to case.

Facts and decision:

The only set of facts in this important case is that the I-T department sought to levy interest

under Section 234D for assessment years (AYs) 1998-99 to 2000-2001 by issuing notices under

Section 148 of the Act. The company contested the levy and the CIT (Appeals) held that interest

under Section 234D could not be charged for AYs before June 1, 2003. The department took the

matter to the Tribunal. The Special Bench of the Tribunal held that levy of interest under Section

234 can be applied only from AYs 2004-2005 onwards and not for the earlier years.

The Bench reasoned that “there is no dispute to the proposition that a court cannot read anything

into a statutory provision which is plain and unambiguous. A statute is the edict of the

legislature. The language employed in a statute is determinative of the legislative intent and

according to the first and primary rule of construction, the intention of the legislation must be

found in the words used by the legislature itself and the function of the court is only to interpret

the law and the court cannot legislate. If a provision of law is misused and subjected to the abuse

of the process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary.
“Legislative causus omissus cannot be supplied by judicial interpretative course. Thus, on the

basis of argument that legislature has brought this provision just to fill the lacuna in the law and

therefore these provisions should be construed retrospective cannot be accepted more

particularly when these provisions have been inserted on the statute with effect from June 1,

2003, and not with retrospective effect. The legislature has specifically mentioned the date of

applicability, that is, June 1, 2003, and the legislator was not incompetent to make retrospective

provision, if it was so intended. Therefore, merely on the basis of interpretation, retrospective

effect cannot be given to the provisions of Section 234D.”

Accordingly, the Special Bench held that the levy on interest under Section 234D of the Act

would apply prospectively from AY 2004-05 onwards.

Provisions and analysis

Section 234D of the Act was introduced by the Finance Act, 2003 with effect from June 1, 2003,

wherein an assessee getting a refund under the provisional assessment and liable to pay up the

same on the regular assessment is liable to return the same with interest at 18 per cent per annum

from the date of the refund to the date of the regular assessment.

The objective of this levy is to prevent assessees from enjoying free money in their hands

without interest. There is no major concern on the levy per se. The issue became controversial
when the department sought to apply the provision for past assessment years. The general

principle is that provisions in a statute would operate prospectively unless retrospective operation

is expressly provided for. This principle is laid down in Govind Das vs ITO and Sharma vs. ITO.

Courts have on several occasions held that retrospective legislation can be held invalid on the

ground that it is unreasonable or beyond the legislative competence. A new levy of interest is

clearly a substantive provision. It is introduced to achieve a particular objective and take care of

situations where refunds are held by assesses for a period and in the case of a demand returned

without interest, for the period in their custody.

The Finance Act of 2003 made it abundantly clear that it comes into effect from June 1, 2003. It

is also settled law that penal laws cannot generally have retrospective operation. This is

confirmed by CIT vs Hindustan Electro and DCIT vs Ashok Paper. The debate on retrospective

and prospective application of amendment is endless and in a taxing statute the demand for the

earlier years on account of the retrospective application of law can wipe out the net worth of

companies. Assessees typically want the best of both worlds — any new incentive to be

retrospective and a fresh levy, prospective. The solution possibly lies in balancing the two and

making it clear that any new levy or change has to be only prospective.

Rule Of Beneficial Construction

In the Maxwell’s Interpretation of Statutes, 12th Edn. the statement of law relating to its

operation is stated as: "Perhaps no rule of construction is more firmly established than thus - that

a retrospective operation is not to be given to a statute so as to impair an existing right or

obligation, otherwise than as regards matters of procedure, unless that effect cannot be avoided

without doing violence to the language of the enactment. If the enactment is expressed in

language which is fairly capable of either interpretation, it ought to be construed as prospective

only. The rule has, in fact, two aspects, for it, "involves another and subordinate rule, to the

effect that a statute is not to be construed so as to have a greater retrospective operation than its

language renders necessary”.

The rule of beneficial construction requires that ex-post facto law should be applied to reduce the

rigorous sentence of the previous law on the same subject. Such a law is not affected by Article

20(1). The principle is based upon the legal maxim “Salus Populi Est Suprema Lex” which

means the welfare of the people is the supreme for the law. It is inspired by principles of justice,

equity and good conscience.

In Francis Bennion's Statutory Interpretation, 2nd Edn, the statement of law is stated as follows:

"The essential idea of legal system is that current law should govern current activities. Elsewhere

in this work a particular Act is likened to a floodlight switched on or off, and the general body of

law to the circumambient air. Clumsy though these images are, they show the inappropriateness

of retrospective laws. If we do something today, we feel that the law applying to it should be the

law in force today, not tomorrow's backward adjustment of it. Such, we believe, is the nature of

law. Dislike of ex-post facto law is enshrined in the United States Constitution and in the
Constitution of many American States, which forbid it. The true principle is that lex prospicit

non respicit (law looks forward not back). As Willes, J. said retrospective legislation is 'contrary

to the general principle that legislation by which the conduct of mankind is to be regulated ought,

when introduced for the first time, to deal with future acts, and ought not to change the character

of past transaction carried on upon the faith of the then existing law."

In T. Baral Vs. Henry An Hoe a complaint was lodged against the respondent under Sec.16(1)

(a) on August 16, 1975 for having committed an offence punishable under sec.16(1)(a) read with

sec.7 of the Prevention of Food Adulteration Act as amended by the amending Actof 1973. On

the date of the commission of the alleged offence i.e. on 16th August 1975, the law in force in

the State of West Bengal was the Amendment Act which provided that such an offence would be

punishable with imprisonment for life. On 1st April, 1976 enacted the Prevention of Food

Adulteration (Amendment) Act,1976 which reduced the maximum punishment of life

imprisonment as provided by the West Bengal Amendment Act to 3 years imprisonment. The

question for determination was whether the pending proceedings would be governed by the

procedure under sec.16-A as inserted by Central Amendment Act 34 of 1976. The High Court

held that the West Bengal Amendment would be deemed to have been obliterated because of the

central amendment. Confirming the decision of the Supreme Court held:

“Nothing really turns on the language of Section 16(1)(a) because the Central Amendment Act

has not created a new offence thereby but dealt with the same offence. It is only retroactive

criminal legislation that is prohibited under Article 20(1). It is quite clear that in so far as the

central amendment Act creates new offences of enhances punishment for a particular type of
offence no person shall be convicted by such ex-post facto law nor can the enhanced punishment

prescribed by the amendment be applicable. But in so far as the Central amendment Act reduces

the punishment for an offence punishable under section 16(1) (a) of the Act, there is no reasons

why the accused should not have the benefit of such reduced punishment.

The rule of beneficial construction requires that even ex-post facto law of such a type should be

applied to mitigate the rigour of the law. This principle is based both on sound reason and

common sense. This finds support in a passage that “A retrospective Statute is different from an

ex-post facto statute”.

In Garikapati Veeraya v. N. Subbiah Choudhry, the SC stated that "The golden rule of

construction is that, in the absence of anything in the enactment to show that it is to have

retrospective operation, it cannot be so construed as to have the effect of altering the law

applicable to a claim in litigation at the time when the Act was passed."

In the American case Calder Vs. Bull , Chase,J., said “Every Ex-post facto law must necessarily

be retrospective, but every retrospective law is not an ex-post facto law”.

In R. Vs. Youle, Matin,B. said in the oft quoted passage: “ If a statute deals with a particular

clause of offences, and a subsequent Act is passed which deals with precisely the same offences,

and a different punishment is imposed by the later Act, I think that, in effect, the legislature had

declared that the new Act shall be substituted for the earlier Act.

This rule is however subject to the limitation contained in Article 20(1) against ex-post facto law

providing for a greater punishment and has also no application where the offence described in

the later Act is not the same as in the earlier Act i.e. when the essential ingredients of the two

offences are different”.

In Ratan Lal Vs.State of Punjab, a boy of 16 years was convicted for committing an offence of

house-trespass and outraging the modesty of a girl aged 7 years. The magistrate sentenced him

for six months rigorous imprisonment and also imposed fine. After the judgment of magistrate,

the Probation of Offenders Act, 1958 came into force. It provided that a person below 21 years

of age should not ordinarily be sentenced to imprisonment. The Supreme Court by a majority of

2 to 1 held that the rule of beneficial interpretation required that ex-post facto could be applied to

reduce the punishment. So an ex-post facto law which beneficial to the accused is not prohibited

by clause (1) of Article 20.

Important Judicial Decisions:

In K. S. Paripoornan v. State of Kerala, this Court while considering the effect of amendment in

the Land Acquisition Act in pending proceedings held thus in Para 47 thereof as: ''...In the instant

case we are concerned with the application of the provisions of Sub-sec. (1-A) of S.23 as

introduced by the Amending Act to acquisition proceedings which were pending on the date of

commencement of the Amending Act. In relation pending proceedings, the approach of the

Courts in England is that the same are unaffected by the changes in the law so far as they relate

to the determination of the substantive rights and in the absence of a clear indication of a

contrary intention in an amending enactment, the substantive rights of the parties to an action fall

to be determined by the law as it existed when the fiction was commenced and this is so whether

the law is change before the hearing of the case at the first instance or while an appeal is

pending"

In State of M.P. and another, vs.. G.S. Dall & Flour Mills, The Apex Court in Para 21 of the

judgment the Apex Court has observed that "the notification of 3/71187 amending the 1981

notification with retrospective effect so as to exclude what may be described in brief as

'traditional industries' though, like Rule 14 of the deferment rules, the exclusion extends' even to

certain other non-traditional units operating in certain situations. Though this notification

purports to be retrospective, it cannot be given such effect for a simple reason. We have held that

the 1981 notification clearly envisages no exclusion of any industry which fulfils the terms of the

notification from availing of the exemption granted under it. In view of this interpretation, the

1987 amendment has the effect of rescinding the exemption granted by the 1981 notification in

respect of the industries mentioned by it. S. 12 is clear that, while a notification under it.”
In Hitendra Vishnu Thakur v. State of Maharashtra,it was stated that the ambit and scope of an

amending Act and its retrospective operation as follows :

"(i) A statute which affects substantive rights is presumed to be prospective in operation unless

made retrospective, either expressly or by necessary intendment, whereas a statute which merely

affects procedure, unless such a construction is textually impossible, is presumed to be

retrospective in its application, should not be given an extended meaning and should be strictly

confined to its clearly defined limits.

(ii) Law relating to forum and limitation is procedural in nature, whereas law relating to right of

action and right of appeal even though remedial is substantive in nature.

(iii) Every litigant has a vested right in substantive law but no such right exists in procedural law.

(iv) A procedural statute should not generally speaking be applied retrospectively where the

result would be to create new disabilities or obligations or to impose new duties in respect of

transactions already accomplished.

(v) A statute which not only changes the procedure but also creates new rights and liabilities

shall be construed to be prospective in Operation unless otherwise provided, either expressly or

by necessary implication."

Conclusion:

The Cardinal Principle of construction of a statute is that every statute was prima facie a

prospective “unless it is expressly or by necessary implication made to have retrospective

operation”. When a procedural law is considered it is always retroactive i.e. came into effect
from past date so the question of retrospective operation shall arise in substantive laws only.

Also a criminal law shall always have retroactive operation whereas the civil law may have

retrospective or retroactive operation. So by observing the different opinions of jurists and

experts in India on retrospective and retroactive laws, a conclusion may be drawn in such a way

that only substantive civil laws can be operated retrospectively if the statute specifically

prescribes it or there exists large interest of the public as whole otherwise all statutes shall be

operated retrospectively.

PRESUMPTION AS TO VALIDITY AND TERRITORIAL OPERATION

Presumption against Extra-territorial Effect

Law presumes that legislation has effect only within the territory of the State. The presumption

was applied in Chemical Bank v McCormack which concerned the making of orders, which

purported to have extra-territorial effect, under the Bankers Books (Evidence) Act, 1879 . Carroll

J held that, in the absence of clear words supporting an extra-territorial application of the Act, it

should not be interpreted as applying outside the jurisdiction. The presumption against extra-

territorial effect was also at issue in Keane v An Bord Pleanála, which points out some of the

limits to the presumption. The case concerned the interpretation of the Planning Acts. It was

argued before the High Court that since the Planning Acts did not have any express extra-

territorial effect, the effects which a development had beyond the limits of the territorial seas

could not be taken into account in the granting of planning permission. This argument was

rejected by Carroll J in the High Court. She held that the concept of the "common good" which
was referred to in the long title of the 1963 Act was a broad one, and included the effects which

the development would have outside the national territory. She gave the example of sea pollution

which might arise from a grant of planning permission. Such pollution would have an effect on

the common good and would therefore have to be taken into account in ascertaining whether or

not to grant planning permission. In the instant case, the Board could take into account the

benefits of the development outside territorial waters, and this should not be equated with

extending the operation of a statute beyond the jurisdiction.Statutory Drafting and Interpretation,

Consultation Paper on: Plain Language and the Law (LRC CP14-1999) [1999] IELRC 1 (1st

July, 1999)

The same was observed by the Circuit Court of Virginia. The following was observed in this

connection:

"The jurisdiction of the legislature of any state, however, generally is limited to the geographical

area governed by that state. Therefore, "legislative enactments apply only to persons or things

within the territory over which the enacting legislature exercises jurisdiction."9 Furthermore, as a

general rule, the statutory law of a state can have no effect outside the territorial limits of that

state, unless it is given effect in a foreign jurisdiction by courtesy or comity. The Supreme Court

of Virginia notes that "[s]tatutes derive their force from the authority of the Legislature, and as a

necessary consequence their effect will be limited to the boundaries of the State."

Op, Va. Att'y. Gen. 04-080, (2004),

See Also: it will be presumed ...that a legislative body... did not intend to give its enactments an

impermissible extraterritorial operation. 82 C.J.S. Statutes § 310 (1999). Enacting a statute with

an impermissible extraterritorial effect would violate due process. "

Allstate Ins. Co. v. Hague, 449 U.S. 302 (1981).

Bennoin's View

In Bennion's 'Statutory Interpretation ' Fourth Edition, a distinction is drawn between the

territorial extent of an enactment and the territorial application of an enactment. At Page 306 of

Bennion, it states that an Act does not usually apply to acts or omissions taking place outside its

territory. The basic principle is that words of written or unwritten law expressed in general terms

are taken to be subject to an implied limitation which confines their effect to the territorial

jurisdiction At Page 308, Bennion states 'similarly the territory of a sovereign state may be

divided into areas each having a different system of law.

This principle is also stated in Halsburys 4th Edition Volume 44(1) at Paragraph 1319 which

states: "The person on whom a particular Act is intended to operate are described as the persons

to whom it 'applies'. Who these are is to be gathered from the language and purview of the Act,

but the presumption (the presumption of applicability) is that Parliament is concerned with all

conduct taking place within the territories to which the Act extends and with no other conduct".

The territorial extent of enactments was also an issue in Serco Ltd v Lawson [2006] UKHL3

where the Lords were considering Section 94(1) of the Employment Rights Act 1996. At

Paragraph 6 Lord Hoffman stated:

"The general principle of construction is, of course, that legislation is prima facie territorial. The

United Kingdom rarely purports to legislate for the whole world. Some international cases like

torture are an exception, but usually such an exorbitant exercise of legislative power would be

both ineffectual and contrary to the comity of nations. That is why all the parties are agreed that

the scope of Section 94(1) must have implied territorial limits. More difficult is to say exactly

what they are".Faulkner & Ors v BT Northern Ireland & Ors [2005] NIIT 3933_01 (24 October

2005) ,

Article 245- Doctrine of Territorial Nexus

Cases- State of Bombay vs. R.M.D.C( AIR 1957 SC 699)

Tata Iron and Steel Company vs. Bihar State( AIR 1958 SC 482)

State of Bihar Vs. Sm. Charusila Dasi,( AIR 1959 SC 1002)

Article 245-Extent of laws made by parliament and by the legislatures of states-

1) Subject to the provisions of this constitution, Parliament may make laws for the whole or any

part of the territory of India,and the legislature of a state may make laws for the whole or any

part of the state.

2) No law made by parliament shall be deemed to be invalid on the ground that it would have

extra-territorial operation.

Subject to the provisions of this constitution, this phrase means that the power enjoyed by the

parliament to make laws for the whole or any part of the territory of India will be read in subject

to other provisions of the constitution. In other words, this power is not absolute.Other

provisions like the distribution of powers, fundamental rights and other provisions of the

constitution as interpreted by the courts.

“Extra- territorial operation” – Law made to operate outside territorial limits of India.

State laws would be void if it has extra- territorial operation i.e., takes effect outside the

state.However,there is one exception to this general rule.A state law of extra-territorial operation

will be valid if there is sufficient nexus between the object and the state. This is clarified by the

case State of Bombay vs. R.M.D.C.

The Doctrine of Territorial nexus can be invoked under the following circumstances-

• Whether a particular state has extra-territorial operation.

• If there is a territorial nexus between the subject- matter of the Act and the state making the

law.
It signifies that the object to which the law applies need not be physically located within the

territorial boundaries of the state,but must have a sufficient territorial connection with the state.

A state may levy a tax on a person, property ,object or transaction not only when it is situated

within its territorial limits,but also when it has a sufficient and real territorial connection with it.

State of Bombay vs RMDC- The Respondent was not residing in Bombay but he conducted

Competitions with prize money through a newspaper printed and published from Banglore

having a wide circulation in Bombay. All the essential activities like filling up of the forms,entry

fees etc for the competition took place in Bombay.The state govt. sought to levy tax the

respondent for carrying on business in the state.

The question for decision before the Supreme Court was if the respondent,the organiser of the

competition,who was outside the state of Bombay, could be validly taxed under the Act.

Decision-It was held that there existed a sufficient territorial nexus to enable the Bombay

Legislature to tax the respondent as all the activities which the competitor is ordinarily expected

to undertake took place mostly within Bombay.

Tata Iron And Steel Company vs. Bihar State- The state of Bihar passed a Sales

Tax Act for levy of sales tax whether the sale was concluded within the state or outside if the

goods were produced,found and manufactured in the state .The court held there was sufficient
territorial nexus and upheld the Act as valid.Whether there is sufficient nexus between the law

and the object sought to be taxed will depend upon the facts and circumstances of a particular

case.

It was pointed out that sufficiency of the territorial connection involved a consideration of two

elements- a) the connection must be real and not illusory b) the liability sought to be imposed

must be pertinent to that connection.

State of Bihar vs Charusila Dasi-

- Bihar legislature enacted the Bihar Hindu Religious Trusts Act,1950, for the protection and

preservation of properties appertaining to the Hindu religious trusts.

- The Act applied to all trusts any part of which was situated in the state of Bihar.

- The Respondent created a trust deed of her properties of several houses and land in Bihar and

Calcutta.The trust being situated in Bihar.

- The main question for decision was whether the Act apply to trust properties which are situated

outside the state of Bihar.

- The court had to decide whether the trust thus created was a private trust or public trust.

- Can the legislature of Bihar make a law with respect to such a trust situated in bihar and other

properties appertaining to such trust which are situated outside Bihar?

Decision- Applying the doctrine of territorial nexus ,the Supreme court held that the Act could

affect the trust property situated outside Bihar, but appertaining to a trust situated in Bihar where
the trustees functioned. The Act aims to provide for the better administration of Hindu religious

trusts in the state of Bihar.The trust being situated in Bihar the state has legislative power over it

and also over its trustees or their servants and agents who must be in Bihar to administer the

trust.

What is necessary is that the connection between the trust and the property appertaining thereto

is real and not illusory and that the religious institution and the property appertaining thereto

form one integrated whole as one cannot be dissociated from the other.

The court has applied the doctrine of territorial connection or nexus to income-tax legislation,

sales tax legislation and also to legislation imposing a tax on gambling

PRESUMPTION REGARDING JURISDICTION:

There is a strong presumption that a statute should not be given such an interpretation as takes

away the jurisdiction of the courts unless the language of the statute unambiguously so states.

The presumption is that since the legislature ordinarily does not intend that justice should be out

of bounds for the subjects, the courts must be presumed to have jurisdiction unless the legislature

by clear words or by clear necessary implications have ousted jurisdiction.

Since jurisdiction is bestowed in a court by legislation, legislation alone can take away the same.

The parties to a dispute can neither create by mutual consent jurisdiction of a court to try their

dispute nor can they take it away by mutual consent if in fact a court is vested with jurisdiction in

the matter. Mutual consent of parties, however, can create an arbitrator and the arbitrator may be

a judge also.
There is a strong presumption that civil courts have jurisdiction to decide all questions of civil

nature. The exclusion of jurisdiction of civil courts is therefore not to be readily inferred and

such exclusion must either be explicitly expressed or clearly implied. It is a principle by no

means to be whittled down and has been referred to as a fundamental rule. As a necessary

corollary of this rule, provisions excluding jurisdiction of civil courts and provisions conferring

jurisdiction on authorities and tribunals other than civil courts are strictly construed. The rule that

the exclusion of jurisdiction of civil courts is not to be readily inferred is based on the theory that

civil courts are courts of general jurisdiction and the people have a right, unless expressly or

implicitly debarred, to insist for free access to the courts of general jurisdiction of the State.

Indeed, the principle is not limited to civil courts alone, but applies to all courts of general

jurisdiction including criminal courts. Exclusion of jurisdiction of ordinary criminal courts can

be brought about by setting up courts of limited jurisdiction in respect of the limited field, only if

the vesting and the exercise of that limited jurisdiction is clear and operative and there is an

adequate machinery for the exercise of the limited jurisdiction. But the rule against exclusion of

jurisdiction of courts like other rules of construction is attached only where two or more

reasonably possible construction are open on the language of the statute and not where the

legislative intent is plain and manifest to oust the jurisdiction.

The Supreme Court stated that the first and the primary rule of construction is that the intention

of the legislature must be found in the words used by the legislature itself. If the word used are

capable of one construction only then it would not been open for the courts to adopt any other

hypothetical construction on the ground that such a construction is more consistent with the

alleged object and policy of the Act. The words used in the material provisions of the statue must

be interpreted in their plain grammatical meaning and it is only when such words are capable of
two constructions that the question of giving effect to the policy, or object of the Act can

legitimately arise. When the material words are capable of two constructions, one of which is

likely to defeat or impair the policy of the Act whilst the other is likely to assist the achievement

of the said policy, then the courts would prefer to adopt the latter construction. It is only in such

cases that it becomes relevant to consider the mischief and defect which the Act purposes, to

remedy and correct.

The superior court can in a proper case exercise its jurisdiction even in favour of a petitioner who

has allowed the time to appeal to expire or has not perfected his appeal, for example, by

furnishing security required by the statute, when an inferior court or tribunal by discarding all

principles of natural justice and all accepted rules of procedure arrived at a conclusion which

shocks the sense of justice and fairly or the inferior court or tribunal acts wholly without

jurisdiction or patently in excess of jurisdiction.

The Supreme Court has held the jurisdiction of the Court was not excluded and laid down the

following principles:

1. Where the state gives finality to the orders of the special tribunals the jurisdiction of the civil

court must be held to be excluded if there is adequate remedy to do what the civil courts would

normally do in a suit. Such provision, however, does not exclude those cases where the

provisions of the particular Act have not been complied with or the statutory tribunal has not

acted in conformity with the fundamental principles of judicial procedure.

2. Where there is an express bar of the jurisdiction of the court, an examination of the scheme of

the particular Act to find the adequacy or the sufficiency of the remedies provided may be

relevant but is not decisive to sustain the jurisdiction of the civil court, where there is no express
exclusion, the examination of the remedies and the scheme of the particular Act to find out the

amendment becomes necessary and the result of the inquiry may be decisive. In the latter case, it

is necessary to see if the statute creates a special right or a liability and provides for the

determination of the right or the liability and further lays down that all questions about the said

right and liability shall be determined by tribunals so constituted, and whether remedies normally

associated with actions in civil courts are prescribed by the said statute or not.

3. Challenge to the provisions of the particular Act as ultra vires cannot be brought before the

tribunals constituted under that Act. Even the High Court cannot go into that question on a

revision or reference from the decision of the tribunals.

4. Where a provision is already declared unconstitutional or the constitutionality of any provision

is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the

claim is clearly within the time prescribed by the Limitation Act, but it is not a compulsory

remedy to replace a suit.

5. Where the particular Act contains no machinery for refund of tax collected in excess of the

constitutional limits or illegally collected, a suit lies.

6. Questions of the correctness of the assessment apart from its constitutionalties are the

decisions of the authorities and a civil suit does not lie if the orders of the authorities are declared

to be final or there is an express prohibition in the particular Act in either case, the scheme of the

particular Act must be examined because it is a relevant inquiry.

7. An exclusion of the jurisdiction of the civil court is not to be readily inferred unless the

conditions above set down apply.

The Industrial Disputes Act, 1947 also furnishes an example of an Act which creates new rights

and obligations and provides machinery for adjudication of disputes pertaining to them. The

Supreme Court has held that if an industrial dispute relates to the enforcement of a right or an

obligation created under the Act then the only remedy available to the suit is to get adjudication

under the Act. This case was followed in holding that for wrongs created by the Act the only

remedy is what is provided in the Act.