Holding

Parliament may validly enact retrospective legislation that nullifies the effect of a judicial decision by altering the legal framework, and such legislation does not amount to an unlawful encroachment on judicial power.

Summary

The Central Government Industrial Tribunal awarded a customary bonus to State Bank of India employees, which the bank’s management challenged. While the award was pending, Parliament enacted the Banking Laws (Amendment) Act, 1984, inserting provisions in the State Bank Act and related statutes that prohibited any bonus except under the Payment of Bonus Act, 1965, and declared the amendment to operate notwithstanding any court order. The amendment effectively nullified the tribunal’s award. The management appealed, arguing that the amendment was unconstitutional because it nullified a judicial decision, infringed vested rights, and amounted to an illegal reduction of wages. The Supreme Court held that Parliament may enact retrospective legislation and render a judicial decision ineffective by changing the law within its legislative competence; such action does not constitute an encroachment on judicial power. Consequently, the amendment was upheld as constitutionally valid and the appeal was dismissed.

Issues considered

The constitutionality of the Banking Laws (Amendment) Act, 1984, which retrospectively nullified a judicial award of customary bonus.
Whether Parliament can render a judicial decision ineffective by enacting a law that changes the legal basis of that decision.
Whether the amendment violates the prohibition on retrospective legislation affecting vested rights or encroaches upon judicial power.
Whether the amendment is ultra vires for reducing wages/customary bonus.

Legislation cited

Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970s. 12-A
Constitution of Indias. Part III
Industrial Disputes Act, 1947s. 9A
Payment of Bonus Act, 1965s. 2(13)
State Bank of India Act, 1955s. 43, s. 7(1)

Subjects

customary bonusretrospective legislationparliamentary powerjudicial reviewindustrial disputestatutory interpretationcurative legislationvested rightsseparation of powers

Judgment

A STATE BANK'S STAFF UNION (MADRAS CIRCLE)
v.
UNION OF INDIA AND ORS.

SEPTEMBER I 5, 2005

B [ARIJIT PASAYAT AND H.K. SEMA, JJ.]

Banking laws (Amendment) Act, 1984-Customary bonus abolished-
Provisions added to various Acts-State Bank of India Act, 1955-Section 43-
C A-State Bank ofIndia (Subsidiary Banks) Acts, 1959-Section 50-A-Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1970-Section
12-A-Banking Companies (Acquisition and Transfer of Undertakings) Act,
1980-Section 12-A-Amendment Act enacted during pendency of a writ
petition filed against award of the Central Government Industrial Tribunal,
previously confirming payment of customary bonus-Writ petition dismissed
D and award attained finality-Appellant filed writ petition challenging the
Amendment Act-Dismissed by High Court-On appeal Held, there is
distinction between encroachment on the judicial power and nullification of
the effect of a judicial decision by changing law retrospectively, the former is
outside the competence of legislature but the latter is permissible-Bank
E possessed power to change and determine the terms and conditions ofservices
of its employees-Award under the Industrial Disputes Act cannot have the
effect of preventing the Parliament for all times to come from amending the
law on the foundation of which the award was made-Amended provision
operates notwithstanding anything contained in any other law, including the
Industrial Disputes Act or anything contained in any judgment, decree or
F order of any court or tribunal-Industrial Disputes Act, 1947-Payment of
Bonus Act, 1965-Constitution of India, 1950-Part III.

Interpretation of Statutes-Operation of Amending Act-Objects and
Reasons of a statute to be looked into as an extrinsic aid to find out legislative
intent only when meaning by its ordinary language is obscure or ambiguous-
G Every sovereign legislature possesses right to make retrospective legislation-
Public interest at large is one of the relevant considerations in determining
constitutional validity of a retrospective legislation-Curative statutes are by
their very nature intended to operate upon and affect past transactions.

Words and Phrases-' 'Retroactive'' and ''Retrospective' '-Meaning of
H 200
STATEBANK'S STAFF UNION (MADRASCIRCLE)v. U.0.1. 20 !
The Central Government Industrial Tribunal held that employees A
of the State Bank of India were entitled to payment of bonus at the rate
of one month's substantive pay, every half year. The management of the
bank challenged the said award by filing a writ petition. During the
penden~y of the same the State Bank of India Act, 1955, the State Bank
of ,India (Subsidiary Banks) Act, 1959, the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970 and the Banking B
Companies (Acquisition and Transfer of Undertakings) Act, 1980 were
amended by the Banking Laws (Amendment) Act, 1984 by adding
provisions that denied the appellants of customary bonus as per the award.
The writ petition of the management was dismissed and the award attained
finality. Thereafter, the appellant challenged the said Amendment Act by C
filing a writ petition in the High Court, which was dismissed. Hence this
appeal.

Appellant contended that the Amendment Act was unconstitutional
as it nullified a judicial decision; that an award passed under the Industrial
Disputes Act, 1947 was entitled to greater recognition over the State Bank D
of India Act; that Parliament was not vested with the power to reduce
wages, therefore, the legislation was ultra vires; that bonus being a
customary bonus was peculiar to the employees of the bank and a mere
fact that other public sector banks were not paying such bonus was of no
consequence; that bonus was nothing but deferred wage; that customary E
bonus was one which was paid de hors the bonus paid under the payment
of Bonus Act, 1965; that customary bonus was not profit linked; and that
even if the amendment was accepted to be valid it could only have
prospective effect.

Respondents contended that payment of customary bonus was F
creating different yardsticks for different public sector banks; that even
if a custom acquires a force of law, it could be changed as there was no
fundamental right involved in any custom; that bonus cannot be called
deferred wages; that the payments were related to profits and they were
not uniform and so in that sense it was not really a condition of service or
a deferred wage; that the Amendment Act brought in a curative provision, G
and no retrospective effect has been given to the Amendment Act; that
the Industrial Disputes Act had no application as the Parliament had the
power to legislate on that aspect; and that the legislature did not override
a judicial decision but rendered the same ineffective by enacting a valid
law within the legislative field of the legislature. H
202 SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.

A Dismissing the appeal, the Court

HELD: 1.1. It is a cardinal rule of interpretation that Objects and
Reasons of a Statute is to be looked into as an extrinsic aid to find out
legislative intent only when the meaning of the statute by its ordinary
language is obscure or ambiguous. But if the words used in a statute are
B clear and unambiguous then the statute itself declares the intention of the
legislature and in such a case, it would not be permissible for .a court to
interpret the Statute by examining the Objects and Reasons for the Statute
in question. (210-A-B)

1.2. The smooth balance built with delicacy must always be
C maintained, and in the anxiety to safeguard judicial power, it is
unnecessary to be over-zealous and conjure up incursion into the judicial
preserve to invalidate the valid law competently made. (210-B-C)

Chairman, Railway Board and Ors. v. C.R. Rangadhamaiah and Ors.,
D [19971 6 sec 623, followed
Vegetable Products Ltd v. Their Workmen, AIR (1965) SC 1499; Mis
Grahams Trading Co. v. Their Workmen, AIR (1959) SC 1151; Upendra
Chandra Chakraborty and Anr. v. United Bank ofIndia, Am (1985) SC 1010;
S.S. Bola v. B.D. Sardana, AIR (1997) SC 3127; India Aluminium Co. v. State
E ofKera/a, (1996) 7 SCC 637; Jalan Trading Co. v. Mill Mazdoor Sabha, Am
(1967) SC 691; Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality,
(1969) 2 SCC 283 and State of Tamil Nadu v. Arooran Sugars Ltd., (1997] l
sec 326, relied on.
Madan Mohan· Pathak v. Union of India, (1978) 2 SCC 50,
·F distinguished

2.1. Every sovereign legislature possesses the right to make
retrospective legislation. The power to make laws includes power to give
it retrospective effect. (211-G-H)

G 2.2. Public interest at large is one of the relevant considerations in
determining the constitutional validity of a retrospective legislation.
(214-B-C)

The Asstt. Commr. of Urban Land Tax v. The Buckingham and Carnatic
Co. Ltd., [1969] 2 SCC 55 and Virendra Singh Hooda and Ors. v. State of
H Haryana and Anr., (2004] 12 sec 588, relied on.
STATE BANK'S STAFF UNION (MADRAS CIRCLE)v. U.OJ. 203
Stott v. Stott Realty Co., 284 N.W. 635, referred to. A
Craies on Statute Law (7th Edn.); Judicial Dictionary (I 3th Edn.) K.J.
Aiyar, Butterworth; Words and Phrases, Permanent Edn. Vol. 37-A; Advanced
Law Lexicon (3rd Edn., 2005) P. Ramanath Aiyar; Harvard Law Review, Vol.
73, referred to.
B
3.1. Curative Statutes are by their very nature intended to operate
upon and affect past transactions. Curative and validating statutes operate
on conditions already existing and are therefore wholly retrospective and
can have no retrospective operation. (214-C-D-E],

3.2. Legislature cannot by a mere declaration, without anything C
more, directly overrule, reverse.or override a judicia.l decision. However,
.
it may, at any· time in exercise of the plenary powers conferred on it by
the Constitution render a judicial decision ineffective by enacting a valid
law on a topic within its legislative field, fundamentally altering or
changing with retrospective, cura.tive or neutralizing effect the condition D
on which such decision is based. (214-E-F-G]

/.N. Saxena etc. v. State of Madhya Pradesh, [1976] 4 SCC 750, relied
on

Nicol v. Ver/st, (1779) 26 E.R. 751, referred to. E
4. Rendering ineffective the judgments or orders of competent courts
or tribunals by changing their basis by. legislative enactment is a well
known pattern of all validating Acts. Such validating legislation which
removes the causes for ineffectiveness or invalidity of actions or
proceedings is not an encroachment on judicial power. There is a F
distinction between encroachment on the judicial power and nullification
of the effect of a judicial decision by changing the law retrospectively. The
former is outside the competence of the legislature but the latter is within
its permissible limits. (214-G-H; 215-A-BI

Indira Nehru Gandhi v. Raj Narain, (1975) Suppl. SCC 1 and Mis G
Tirath Ram Rajindra Nath, Lucknow v. State of U.P. and Anr., [1973) 3 SCC
585, followed.
5. The legislature, as a body, cannot be accused of having passed a
law for extraneous purpose. If no reasons are stated as appear from the

- H
204 SUPREME COURT REPORTS (2005) SUPP. 3 S.C.R.

A provisions enacted by it, its reasons for passing a law are those stated in
the Objects and Reasons. Even assuming that the Executive, in a given
case, has an. ulterior motive in moving a legislation, that motive cannot
render the passing of the law ma/a fide. This kind of "Transferred malice"
is unknown in the field of legislation. (215-A-B-C]

B K. Nagaraj and Ors. v. State ofAndhra Pradesh and Anr., AIR (1985)
SC 551 and G.C. Kanungo v. State of Orissa, AIR (1995) SCC 1655, relied
on.

6. Whenever any amendment is brought into force retrospectively
or any provision of the Act is deleted retrospectively, in this process rights
C of some are bound to be affected one way or the other. In every case the
exercise by legislature by introducing a new provision or deleting an
existing provision with retrospective effect per se does not amount to
violation of Article 14 of the Constitution. 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
D cannot, however, set aside an individual decision inter parties and affect
their rights and liabilities alone. Such an act on the part of the legislature
amounts to exercising the judicial power by the State and to function as
an appellate court or tribunal, which is against the concept of separation
of powers. (215-C-D-E-FJ
E Cauvery Water Disputes Tribunal, Re, (1993) Supp. 1 SCC 96,
followed.

7. The Bank had power in terms of Section 7(1) of the State Bank
Act to change the conditions of service of those of its employees, who had
F earlier served with Imperial Bank of India. By enforcement of the Act,
the undertaking of Imperial Bank of India was transferred to the Bank.
Employees of erstwhile Imperial Bank of India cannot take the stand that
they have an unalterable right in their terms and conditions of
employment. So far as other employees are concerned, Section 43 of the
Act empowers the Bank to determine terms and conditions of their service.
..
G [215-F-G-H; 216-A)

8.1. The Parliament has power to legislate on the topic of bonus and
it is not precluded from legislating on that topic, other than the Bonus
Act. The mere fact that an award has been made under the Industrial Act

H
cannot have the effect of preventing the Parliament for all times to come,
from amending the law on the foundation of which the award was made.
-
STATE BANK'S STAFF UNION (MADRAS CIRCLE)>'. U.0.l. [PASAYAT,J.] 205

This of course is subject to same being not inconsistent with provision of A
Part III of the Constitution; and also being within the legislative
competence of the Parliament. [216-A-B-C]

8.2. There is nothing to show that the Parliament intended to exercise
appellate powers over the Tribunal or the High Court by enacting the
amending Act. The said Act in clear and unambiguous terms prohibits B
the grant of bonus to the employees of public Sector Banks, except in
accordance with the Bonus Act, and also limits such payment only to those
eligible under the Act. [216-C-D)

8.3. The amended provision operates notwithstanding anything C
contained in any other law, including the Industrial Act, and similarly
notwithstanding anything contained in any judgment, decree or order of
any court or tribunal. (216-D-EJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3396 of 200 I.

From the Judgment and Order dated 14.8.2000 of the Madras· High D
Court in W.P. No. 5475 of 1986.

Jitendra Sharma and Amrish Kumar with him for the Appellant.

R. Mohan, Additional Solicitor General and T.R. Andhyarujina, A,V. E
Rangam, K. Mohandas, A. Ranganadhan and Buddy A. Ranganadhan, Mrs,
Indra Sawhney and Ms. Sushma Suri with them for the Respondents.

The Judgment of the Court was delivered by

ARIJIT PASAYAT, J. Challenge in this Appeal is to judgment of a
Division Bench of Madras High Court holding that customary bonus was not F
payable by the State Bank of India (in short the "Bank") after Banking Laws
(Amendment) Act, 1984 (Central Act No. 64 of 1984) (in short the
'Amendment Act') was enacted. Appellant has questioned constitutional
validity of the said amendment before the Madras High Court by filing a wr_it
petition which was dismissed. G
.. Factual position which is almost'undisputed is as follows:-

By the Amendment Act, State Bank of Jndia Act, 1955 (in short the
'State Bank Act') and State Bank of India (Subsidiary Banks) Act, 1959 (in
short the 'Subsidiary Act') and Banking Companies (Acquisition and Transfer H
206 SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.

A of Undertakings) Acts, 1970 and the Banking. Companies (Acquisition and
Transfer of Undertakings) Act, 1980 (in short 'the Undertakings Acts') were
amended.

By that amending Act, a new Section 43-A comprising of three sub
sections (1), (2) and (3) and marginal heading "Bonus" was introduced in the
B State Bank Act. The said Section reads as under:-

"(I) No Officer, Adviser or other Employee (other than an employee
within the meaning of Clause (13) of Section 2 of the Payment of
Bonus Act, 1965 (21 of 1965) of the State Bank shall be entitled to
be paid any bonus.
c
(2) No employee of the State Bank, being an employee within the
meaning of Clause (13) of Section 2 of the Payment of Bonus Act,
1965 (21 of 1965), shall be entitled to be paid any bonus except in I
1'
accordance with the provisions of that Act.

D (3) The provisions of this Section shall have effect notwithstanding ..
any judgment, decree or order of any Court, Tribunal or other authority
and notwithstanding anything contained in any other provision oftffis 1
Act or in the Industrial Disputes Act, 1947 (14of1947), or any lher ;
law for the time being in force or any practice usage or custom -O'r any ,
contract, agreement, settlement, award or other instrument.!1 . °' '
E
I .
In the Subsidiary Act, a new Section 50A was introduced in identical
language. Similar provisions numbered as Section 12-A were introduced in
the Banking Undertakings Acts.

F The Statement of Objects and Reasons, which accompanied the Bill
which later became the Amending Act, reads thus:

"In an award notified as I4.1.1984, the Central Government
Industrial Tribunal, Madras held that the employees of the State Bank
of India covered by the award should be paid bonus at the rate of one
month's substantive pay every half year on the ground that this has
G also along been the custom and practice. A writ petition filed against
this award is pending in the Madras High Court.

All public Sector banks including the State Bank of India come
under the purview of the Payment of Bonus Act, I965, and the
intention is that no bonus other than what is required to be paid under
H
STATEBANK'SSTAFFUNION(MADRASCIRCLE)v.U.0.1.[PASAYAT,J.] 207
the Payment of Bonus Act, 1965, shall be paid to the employee of the A
State Bank of India or of any other pubic sector bank. It is proposed
to make express provisions in this behalf in the State Bank of India
Act, 1955 and the enactment relating to the other public sector banks.

The Bill seeks to achieve the above objects."
B
That award of the Central Government Industrial Tribunal was
challenged by the Management in a writ petition filed in the Madras High
Court being Writ Petition No.1273 of 1984. It was during the pendency of
that petition in the High Court, that the State Bank Act came to be amended
" by introducing Section 43-A in that Act. On 24.11.l 986, the Writ Petition
. filed by the Bank was dismissed. The matter was not further agitated, and the c
a)Vard attained finality.

Appellant's primary stand before the High Court was that the
Amendment Act was unconstitutional as it merely intended to nullify a judicial
decision which Parliament had no competence to do. Other contentions were
to the effect that an award passed under the Industrial Disputes Act, 1947 (in D
short 'the Industrial Act') is entitled to greater recognition as in the case of
conflict between the provisions of General Law i.e. State Bank Act and the
Industrial Act the latter Act must prevail. The bonus which was directed to
be paid was in the nature of deferred wages and the impugned legislation had
the ~ffect of freezing wages. Parliament is not vested with the power to E
reduce the wages and therefore the legislation is ultra vires. Effect of an
award under the Industrial Act cannot be wiped out except in the manner
provided under the Industrial Act and since in the instant case that has not
been done, the award was binding on the parties concerned. The bonus being
a customary bonus was peculiar to the employees of the Bank and mere fact
that other public seetor banks were not being paid such bonus is of really no F
consequence. Stand that financial implications were enormous is also of no
consequence. The Union of India and the Bank took the stand that the
Amendment Act was a valid piece of legislation. It was not merely intended
to invalidate an award by acting as an Appellate Authority, and it is not a
case o!f'11y judicial power being usurped by the legislation. The High Court G
negatived the contentions of the appellants and dismissed the Writ Petition.

The points urged before the High Court was reiterated by learned counsel
for the appellant. Reference was made to a decision of this Court in Vegetable
Products Ltd. v. Their Workmen, AIR [1965] SCC 1499 to highlight the
-~

basic features of customary bonus. H
208 SUPREME COURT REPORTS (2005] SUPP. 3 S.C.R.

A It was submitted in the case of officers of the Bank that the quantum
representing bonus merged with the basic pay and consequential increase in
Dearness Allowance and superannuation benefits were granted. That being
so, bonus is nothing but deferred wage. Continued payment of bonus made
it a condition of service and the same could not have been altered without
B following the provisions of Section 9A of the Act. Customary bonus is one
which is paid dehors the bonus paid under the Payment of Bonus Act, 1965
(in short the 'Bonus Act'). Customary bonus is untouched by the Bonus Act.
The Industrial Act is a special Act qua the State Bank Act. Issues relating to
continuance of service and disputes relating thereof are covered by the
Industrial Act. While some of the aspects can be taken to be covered by the
C State Bank Act, non - compliance with the special Act i.e. Industrial Act
rendered the Amendment Act invalid. The intention of the Amendment Act
was to invalidate the award as is evident from the Statement of Objects and
Reasons of the Amendment Act. Customary bonus is not profit linked.
Amendment even if accepted to be valid can only have prospective effect. I
D Ir: response, learned counsel for the Bank and the Union of India/
submitted that the payment of customary bonus was creating different
yardsticks for different public sector banks. The award was challenged by t~
I
/
Bank in a Writ Petition. During the pendency of the writ petition, Ahe
amendment was enacted. Unfortunately the High Court did not take nJ°e of
E the Amendment Act and Custom even if it acquires a force of law, ca~ be /
changed as there is no fundamental right involved in any custom. Bonus '
cannot be called deferred wages and even if it is conceded for the sake of
argument that the payment of customary bonus was a condition of service,
after insertion of Section 43A by the Amendment Act the same has no
operation. The provision brings about uniformity. The payments were related
F to profits and they were not uniform, so in that sense it was not really be a
condition of service or a deferred wage. The High Court has also dealt with
the Special Act and the deferred wages concept. The Amendment Act really
brought in a curative provision, and no retrospective effect has been given
to the Amendment Act. Section 9A of the Industrial Act has no application
G as the Parliament has the power to legislate on that aspect. A bare look at the
impugned provision makes it clear that it is not a case of legislature by mere
declaration or without anything more, overriding a judicial decision. On the
other hand it is a case of rendering a judicial decision ineffective by enacting
a valid law within legislative field of the legislature. Merely because a reference
has been made to the award in the Statement of Objects and Reasons, that
H cannot in any way affect the plain intention in enacting the law under challenge
STATE BANK'S STAFFUNION(MADRASCIRCLE)1·. U.0.L [PASAYAT, J.] 209

and it is not correct to say that the intention was to declare the decision of A
Tribunal as invalid and as such judicial power has been usurped by legislation.

Following four circumstances have to be fulfilled in order to be entitled
to payment of customary or traditional bonus, as was noted in Mis. Grahams
Trading Co. v. Their Workmen, AIR (1959) SC 1151 and in Vegetable Products
case (supra): B
"(i) that the payment has been made over an unbroken series of
years;

(ii) that it has been for a sufficiently Jong period, the period has
to be longer than in the· case .of an implied term of employment; C
(iii) that it has been paid even in years of loss and did not depend
on the earning of profits; and

(iv) that the payment has been made at a uniform rate throughout
to justify an inference that the payment at such and such rate had D
become customary and traditional in the particular concern."

Learned counsel for the appellant submitted that considering the nature
. of customary bonus, the Amendment Act was really taking away a right
conferred. This Court in Upendra Chandra Chakraborty and Anr. v. United
Bank of India, AIR ( 1985) SC I 0 I 0 observed as follows:- E
"There is one other aspect of the claim now put forward, which
cannot be lost sight of, which affords an additional reason to reject
the contention of the appellants. The respondent is a nationalized
bank. Roughly in all there are 25 nationalised banks. The concept of
any customary bonus is unknown to nationalized banks. All the F
nationalized banks are wholly owned Undertakings of the Government
oflndia. In the matter of bonus, the employees of all the nationalized
banks must be dealt with on a common denominator. If therefore the
contention of the appellants were to prevail, the employees of the
respondent, which is only one amongst many nationalized banks, G

- would enjoy an undeserved advantage compared to their counterparts
in other nationalized banks and even in the other branches of the
respondent bank and may become a cause of disharmony and
inequality. Therefore, in larger public interest also, the demand for
customary bonus otherwise found to be untenable, must be negatived."
(Underlined for emphasis) H
210 SUPREME COURT REPORTS (2005) SUPP. 3 S.C.R.

A It is a cardinal rule of interpretation that Objects and Reasons of a
Statute is to be looked into as an extrinsic aid to find out legislative intent
only when the meaning of the statute by its ordinary language is obscure or
ambiguous. But ift~e words used in a statute are clear and unambiguous then
the statute itself declares the intention of the legislature and in such a case,
B it would not be permissible for a court to interpret the Statute by examining
the Objects and Reasons for the Statute in question. (See: S.S. Bola v. B.D.
Sardana, AIR (1997) SC 3127).

The smooth balance built with delicacy must always be maintained,
and in the anxiety to safeguard judicial power, it is unnecessary to be over-
C zealous and conjure up incursion into the judicial preserve to invalidate the
valid law competently made. (see: Indian Aluminium Co. v. State of Kera/a,
rI 996] 7 sec 63 7).

In Jalan Trading Co. v. Mill Mazdoor Sabha, AIR (1967) SC 691 it
was observed as follows:
D
· "It is true that by the impugned legislation, certain principles declared ,
by this Court e.g. in Express Newspapers (Private) ltd. v. Union of
India, [1959] SCR 12: AIR (1958) SC 578 in respect of grant,of, ; • ; •
bonus were modified, but on that account it cannot be said thaMhe · · ··
legislation operates as fraud on the Constitution or is a colour<.i>le'
E exercise of legislative power. Parliament has normally powef within
the frame-work of the Constitution to enact legislation which modified
principles enunciated by this Court as applicable to the determination
of any dispute, and by exercising that power, the Parliament does not
perpetrate fraud on the Constitution. An enactment may be charged
as colourable, and on that account valid, only if it be found that the
F legislature has by enacting it trespassed upon a field outside its
competence."

In the Indian Alumi,nium, case (supra) in paragraph 56 certain principles
have been set out. Those principles inter alia include the principles that the
G Court in its anxiety to safeguard judicial power must not be over-zealous and
conjure up incursion into the judicial preserve invalidating the valid law
competently made; the Court should scan the law to find out : (a) whether
the vice pointed out by the court and invalidity suffered by previous law is
cured after complying with the legal and constitutional requirements; (b)
whether the Legislature has competence to validate the law; (c) whether such
H validation is consistent with the rights guaranteed in Part III of the Constitution.
STATEBANK'SSTAFFUNION (MADRASCIRCLE)v.U.0.1. [PASAYAT,J.J 211

So far as the legislature is concerned, it cannot by mere declaration, without A
anything more, overrule, revise, or override a judicial decision. It may,
however, render judicial decision ineffective by enacting valid law on the
topic within its legislative field fundamentally altering or changing its character
retrospectively. The changed or altered conditions should be such that the
previous decision would not have been rendered by the _Court, if those altered
or changed conditions had existed at the time of declaring the law as invalid. B
At this juncture, we may also take note of what was stated by
Hidaytullah, CJI in the case of Shri Prithvi Cotton Mills Ltd. v. Broach
Borough Municipality, [1969] 2 SCC 283:

"A Court's decision must always bind unless the conditions on which C
it is based are so fundamentally altered that the decision could not
. have been given in the altered circumstances."

The principle was reiterated in State of Tamil Nadu v. Arooran Sugars
Ltd., [ 1997] 1 sec 326.
D
As was noted by the Constitution Bench of this Court in Chairman,
Railway Board and Ors. v. C.R. Rangadhamaiah and Ors., [1997] 6 SCC
623, once a person joins service under the Government, the relationship
between him and the Government is in the nature of a status rather than
contractual and the terms of his service while he is in employment, are E
governed by statute or statutory rules, which may be altered without the
consent of the employees. This effect of a non-obstante clause and validating
Act has been examined by this Court from time to time. Reference has
already been made to the decision in Shri Prithvi Cotton Mills Ltd., (supra).
The view expressed by Hidayatullah, CJ.I. has been reiterated in Arooran
Sugars case (supra). F
The decision in Madan Mohan Pathak v. Union of India, [ 1978] 2 SCC
50 which was one of the major planks of arguments before the High Court
and this Court was explained in the last named case. It was rendered in the
different factual background. This was categorically pointed out and the G
decision was explained in the said case.

Every sovereign legislature possesses the right to make retrospective
legislation. The power to make laws includes power to give it retrospective
effect. Craies on Statute Law (7th Edn.) at p. 387 defines retrospective statutes
in the following words:
H
212 SUPREME COURT REPORTS (2005] SUPP. 3 S.C.R.

A "A statute is to be deemed to be retrospective, which takes away
or impairs any vested right acquired under existing laws, or creates
a new obligation, or imposes a new duty, or attaches a new disability
irr respect to transactions or considerations already past."

Judicial Dictionary (13th Edn.) K.J. Aiyar, Butterworth, p. 857, states
B that the word "retrospective" when used with reference to an enactment may
mean (i) affecting an existing contract; or (ii) reopening up of past, closed
and completed transaction; or (iii) affecting accrued rights and remedies; or
(iv) affecting procedure. Words and Phrases, Permanent Edn., Vol. 37-A, pp.
224-25, defines a "retrospective or retroactive law" as one which takes away
C or impairs vested or accrued rights acquired under existing laws. A retroactive
law 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 transaction or considerations already past. ..
In Advanced Law Lexicon by P. Ramanath Aiyar (3rd Edition, 2005)
D the expressions "retroactive" and "retrospective" have been defined as follows
at page 4124 Vol. 4.

·"Retroactive - Acting backward; affecting what is past. (Of a st\ltute,
ruling, etc.) extending in scope or effect to matters that have occurred
in the past. - Also termed retrospective. (Black, 7th Edn. 1999)
E
'Retroactivity' is a term often used by lawyers but rarely defined. On
analysis it soon becomes apparent, moreover, that it is used to cover
at least two distinct concepts. The first, which may be called 'true
retroactivity', consists in the application of a new rule of law to an
act or transaction which was completed before the rule was
F promulgated. The second concept, which will be referred to as 'quasi-
retroactivity', occurs when a new rule of law is applied to an act or
transaction in the process of completion ...... The foundation of these
concepts is the distinction between completed and pending
transactions .... " (T.C. Hartley, The Foundations of European
Community Law 129 (1981).
G
Retrospective- Looking back; contemplating what is past.

Having operation from a past time.

'Retrospective' is somewhat ambiguous and that good deal of
H confusion has been caused by the fact that it is used in more senses
STATEBANK'S STAFF UNION (MADRASCIRCLE)v. U.0.1. [PASAYAT,J.] 213
than one. In general however the Courts regards as retrospective any A
statute which operates on cases or facts coming into existence before
its commencement in the sense that it affects even if for the future
only the character or consequences of transactions previously entered
into or of other past conduct. Thus, a statute is not retrospective
merely because it affects existing rights; nor is it retrospective merely B
because a part of the requisite for its action is drawn from a time and
antecedents to its passing. (Vol.44 Halsbury's Laws of England, Fourth
Edition, page 570 para 921)."

The question of retrospectively affecting the award is factually of
academic interest. It was admitted before the High Court that all amount C
payable under the award for the prior period has been paid.

.... In Harvard Law Review, Vol. 73, p. 692 it was observed that

"it is necessary that the legislature should be able to cure
inadvertent defects in statutes or their administration by making what D
has been aptly called 'small repairs'. Moreover, the individual who
claims that a vested right has arisen from the defect is seeking a
windfall since had the legislature's or administrator's action had the
effect it was intended to and could have had, no such right would
have arisen. Thus the interest in the retroactive curing of such a
defect in the administration of government outweighs the individual's E
interest in. benefitting from the defect".

The above passage was quoted with approval by the Constitution Bench
of this Court in the case of The Asstt. Commr. of Urban Land Tax v. The
Buckingham and Carnatic Co. Ltd., [1969] 2 SCC 55. In considering the
question as to whether the legislative power to amend a provision with F
retrospective operation has been reasonably exercised or not, various factors
have to be considered. It was observed in the case of Stott v. Stott Realty Co.
(284 N.W. 635) - as noted in Words and Phrases, Permanent Edn., Vol.37-
A, p. 2250 that:

"The constitutional prohibition of the passage of 'retroactive laws' G
refers only to retroactive laws that injuriously affect some substantial
or vested right, and does not refer to those remedies adopted by a
legislative body for the purpose of providing a rule to secure for its
citizens the enjoyment of some natural right, equitable and just in
itself, but which they were not able to enforce on account of defects H
214 SUPREME COURT REPORTS (2005) SUPP. 3 S.C.R.

A in the law or its omission to provide the relief necessary to secure
such right."

Craies on Statute Law (7th Edn.) at p. 396 observes that:

"If a statute is passed for the purpose of protecting the public
B against some evil or abuse, it may be allowed to operate retrospectively,
although by such operation it will deprive some person or persons of
a, vested right."

Thus public interest at large is one of the relevant considerations in
determining the constitutional validity of a retrospective legislation.
c
The above position was elaborately noted in Virendra Singh Hooda
and Ors. v. State of Haryana and Anr., [2004] 12 SCC 588.

Curative Statutes are by their very nature intended to operate upon and
affect past transactions. Curative and validating statutes operate on conditions
D already existing and are therefore wholly retrospective and can have no
retrospective operation.

Blackstone J in Nicol v. Vere/st, (1779) 26 E.R. 751 held that
"declaratory do not prove that law was otherwise before, but rather the
reverse".
E
There is no quarrel and in fact in our opinion rightly that legislature
cannot by a mere declaration, without anything more, directly overrule, reverse
or override a judicial decision. However, it may, at any time in exercise of
the plenary powers conferred on it by the Constitution render a judicial
F decision ineffective by enacting a valid law on a topic within its legislative
field, fundamentally altering or' changing with retrospective, curative or
neutralizing effect the condition on which such decision is based (see: J.N.
Saxena etc. v. State of Madhya Pradesh, (1976 (4) SCC 750).

As noted in Indira Nehru Gandhi v. Raj Narain, [1975) (suppl.) SCC
G I) rendering ineffective of judgments or orders of competent Courts or
Tribunals by changing their basis by legislative enactment is a well known
pattern of all validating Acts. Such validating legislation which removes the
causes for ineffectiveness or invalidity of actions or proceedings is not an
encroachment on judicial power. There is a distinction between encroachment
on the judicial power and nullification of the effect of a judicial decision by
H changing the law retrospectively. As noted by this Court in Mis. Tirath Ram
STATE BANK'S STAFF UNION (MADRAS CIRCLE) v. U.O.I. [PASAYAT, l.] 2 J5
Rajindra Nath, Lucknow v. State of U.P. and Anr., [1973] 3 SCC 585 the A
fonner is outside the competence of the legislature but the latter is within its
pennissible limits.

It has to be noted that the legislature, as a body, cannot be accused of
having passed a law for extraneous purpose. If no reasons are stated as
appear from the provisions enacted by it, its reasons for passing a law are B
those stated in the Objects and Reasons. Even assuming that the Executive,
in a given case, has an ulterior motive in moving a legislation, that motive
cannot render the passing of the law ma/a fide. This kind of ''Transferred
malice" is unknown in the field· of legislation. (See K. Nagaraj and Ors. v..
State of Andhra Pradesh and Anr., AIR (1985) SC 551 and G.C. Kanungo C
v. State of Orissa, AIR (1995) SC 1655).

Learned counsel for the appellant submitted that vested rights cannot
be taken away by the legislation by way of retrospective legislation. The plea
is without substance. Whenever any amendment is brought in force
retrospectively or any provision of the Act is deleted retrospectively, in this D
process rights of some are bound to be effective one way or the other. In
every case the exercise by legislature by introducing a new provision or
deleting an existing provision with retrospective effect per se does not amount
to violation of Article 14 of the Constitution. The legislature can change, as
observed by this Court in Cauvery Water Disputes Tribunal, Re, [1993] Supp.
1 sec 96 (II)), the basis on which a decision is given by the Court and thus E
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 parties and
affect their rights and liabilities alone. Such an act on the part of the legislature
amounts to exercising the judicial power by the State and to function as an
appellate Court or Tribunal, which is against the concept of separation of p
powers.

The amendment made by the impugned enactments is to the State Bank
Act and other statutes relating to some other Banks. The Bank undoubtedly
has power in tenns of Section 7(1) of the State Bank Act to change the
conditions of service of those of its employees, who had earlier served with G
Imperial Bank oflndia. By enforcement of the Act, the undertaking oflmperial
Bank of India was transferred to the Bank. Employees of erstwhile Imperial
Bank of India cannot take the stand that they have an unalterable right in
their terms and conditions of employmen't. So far as other employees are
concerned, Section 43 of the Act empowers the Bank to determine terms and H
216 SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.

A conditions of their service.
The Parliament has power to legislate on the topic of bonus and it is
not precluded from legislating on that topic, other than the Bonus Act. The
mere fact that an award has been made under the Industrial Act cannot have
the effect of preventing the Parliament for all times to come from amending
B the law on the foundation of which the award was made. This of course is
subject to same being not inconsistent with provision of Part III of the
Constitution; and also being within the legislative competence of the
Parliament.

As noted above, the impugned Act did not merely declare the Tribunal's
C award inoperative. There is nothing to show that the Parliament intended to
exercise appellate powers over the Tribunal or the High Court by enacting
the amending Act. The said Act in clear and unambiguous tenns prohibits the
grant of bonus to the employees of public Sector Banks, except in accordance
with the Bonus Act, and also limits such payment only to those eligible under
D the Act.
The amended provision operates notwithstanding anything contained in
any other law, including the Industrial Act, and similarly notwithstanding
anything contained in any judgment, decree or order of any Court or Tribunal.

E In view of what has been stated above, the conclusion is inevitable that
the High Court's judgment does not suffer from any infirmity to warrant
interference. The appeal is accordingly dismissed with no orders as to costs. ·

AQ Appeal dismissed.