What Makes the Operation of a Law/Statute Retrospective?

Analyzing the Impact and Implications of Retroactive Legislation

It is a cardinal rule of construction that an Act/Legislation/Statute comes into operation from the date of publication, unless, the contrary is specifically provided for. The said principle also emanates from Section 5 of the General Clause Act, 1897.  

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

However, the said principle of prospective application of the law is not applicable to curative, clarificatory, declaratory, explanatory or retroactive/retrospective statutes. 

Black’s Law Dictionary, 11th Edition, defines curative statute as ‘an act that corrects an error in a statute’s original enactment’ as opposed to an amending statute which is defined as ‘a law that alters the operation of an earlier law, often by inserting or deleting words or provisions of the original text’.

It is assumed that a law which takes away the vested right acquired under the prevailing laws or creates new obligations and duties must not have a retrospective effect. ‘Nova constitution futuris forman imponere debet non praeteritis’ which means a new law shall regulate what is to follow, not the past. Whereas, legislation that clarifies or explains the meaning of the prevailing law is retroactive, i.e., that looks back/writes back. 

The Black’s Law Dictionary, 11th Edition defines Vested Right as ‘Having become a completed, consummated right for present or future enjoyment; not contingent; unconditional; absolute’. 

In Hough v. Windus (1884) 12 Q.B.D. 224, “statutes should be interpreted, if possible, so as to respect vested right.“

There is a plethora of judgements of the Supreme Court which explain when legislation can have a retrospective effect. 

Recently, the Supreme Court in the case of Sree Sankaracharya University of Sanskrit and Others v. Dr. Manu and Another passed on 16.05.2023 in Civil Appeal No. 3752 of 2023, has again propounded on the principle of amendment vis-à-vis clarification. It has been observed that if any subsequent Order is passed clarifying the position of the previous Order, then the subsequent Order may be made applicable retrospectively. Whereas, if the subsequent Order is a modification/amendment of the previous Order its application has to be prospective as ‘retrospective application thereof would result in withdrawal of vested right…’

In Principles of Statutory Interpretation by Justice G.P. Singh (14th edition, 2016 at page 583), it has been stated that “the rule against retrospective construction is not applicable to a statute merely because “a part of the requisites for its action is drawn from a time antecedent to its passing”. If that were not so, every statute will be presumed to apply only to persons born and things which come into existence after its operation and the rule may well result in virtual nullification of most of the statutes.”

In Virtual Soft Systems Ltd. v. CIT, (2007) 9 SCC 665 the Supreme Court has laid emphasis on analysing the nature of the amendment to understand its true scope and meaning and a mere statement describing the nature of the legislation is not sufficient to categorize the legislation as declaratory or clarificatory.

It is necessary to understand the scope and ambit of an act and its retrospective operation as detailed in the case of Sree Sankaracharya University of Sanskrit (supra), where in 4 principles have been laid out by placing reliance on CIT v. Podar Cement Pvt. Ltd. (1997)226 ITR 625 (SC); Allied Motors Pvt. Ltd. v. CIT (1997)224 ITR 677(SC); Bihta Cooperative Development Cane Marketing Union Ltd. v. Bank of Bihar AIR 1967 SC 389; Virtual Soft Systems Ltd. v. CIT, (2007) 9 SCC 665; Union of India v. Martin Lottery Agencies Ltd. (2009) 12 SCC 209, namely,:

1. if a statute is curative/clarificatory of the previous law the said law can operate retrospectively;
2. for a subsequent law to be deemed as clarificatory, there is a need for the previous/pre-amended law to be vague/ambiguous;
3. the explanation or clarification shall not expand or alter the scope of the original position;
4. No court is bound by the statement in the statute describing a provision as a clarification/explanation and the court must proceed to analyse the nature of said provision in order to come to the conclusion as to whether it is in reality a clarificatory or declaratory provision or whether it is a substantive amendment which is intended to change the law and which would apply prospectively.

The Courts have emphasized the significance of thoroughly examining the nature of the legislation in order to analyse its effects on the vested rights that existed prior to the coming of the said legislation. Needless to say, legislations which clarifies or explains the position of the existing law are applicable from the date of enactment of the said existing law, i.e., retrospectively. However, if the vested rights of the party are taken away which existed before the legislation or if a new obligation/duty emerges from the application of the said legislation, the legislation is deemed to be prospective.