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Thursday, February 5, 2015

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 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 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.

                                                                  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, 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
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  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:
Shri N. Gopalan Nair, Addl. Director of Industries  and  Commerce  and  Spl.
Officer for 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  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 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 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 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."


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 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.

(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 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  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 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 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 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 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
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 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 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:
"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 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  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 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 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.

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 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 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  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.





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 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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