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CASE NO.: Appeal (civil)  1785 of 2001

PETITIONER: Sangam Spinners

RESPONDENT: Regional Provident Fund Commissioner-I

DATE OF JUDGMENT: 04/12/2007

BENCH: Dr. ARIJIT PASAYAT & P. SATHASIVAM

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO. 1785 OF 2001

Dr. ARIJIT PASAYAT, J.

1.      Challenge in this appeal is to the judgment rendered by a  Division Bench of the Rajasthan High Court at Jodhpur  dismissing the Special Appeal filed by the appellant.   Challenge in the Special appeal was to the judgment of a  learned Single Judge whereby the writ petition filed by the  appellant was dismissed upholding the decision of the  Regional Provident Fund Commissioner (in short the  ’Commissioner’). It was held that Section 16(1)(d) of the  Employees Provident Funds Act, 1952 (hereinafter referred to  as the ’Act’) was omitted from the statute by Act No.10 of 1998  with retrospective effect i.e. from 22.9.1997.  In other words, it  was held that the infancy protection shall not be available to  the appellant factory after 22.9.1997.   

2.      The factual scenario lies into a very narrow compass.   Appellant started production on 1.9.1995 and according to it,  it was entitled to benefit under Section 16(1)(d) of the Act from  that day.  From August, 1998 appellant started to comply with  the provisions of the Act as the three year fledging period as  envisaged under Section 16(1)(d) of the Act came to an end.   On 26.3.1999 enquiry under Section 7A of the Act was  initiated to secure the compliance of the Act from September,  1995 to July, 1998. By order dated 27.7.2000 the  Commissioner recorded a specific finding that the company  was a new unit and was eligible for exemption under Section  16(1)(d) of the Act but since it was effaced from the statue from  22.9.1997 the benefit was available till that date and not  thereafter.  The writ petition filed was dismissed by the learned  Single Judge, so was the special appeal. 3.      In support of the appeal learned counsel for the appellant  submitted that the view of the High Court is untenable and  even if retrospective effect was given the same was to not in  any way affect the entitlement of the appellant.

4.      Learned counsel from the respondent on the other hand  supported the orders of the Commissioner and the High Court.   

5.      The position of Section 16 at different points of time can  be noticed.  Section 16 as originally enacted read as follows:  

"16. Act not to apply to factories belonging to

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Government or local authority and also to  infant factories.  

This Act shall not apply to-

(a)     any factory belonging to the government  or a local authority, and

(b)     any other factory established whether  before or after the commencement, of this Act  unless three years have elapsed from its  establishment.

6.      Section 16 was amended by the Employees’ Provident  Funds (Amendment) Act, 1958 and sub-section (1) of Section  16 of the Principal Act was substituted as under:

"(1) This Act shall not apply to any  establishment until the expiry of three years  from the date on which the establishment is,  or has been set up.

Explanation: For the removal of doubts it is  hereby declared that an establishment shall  not be deemed to be newly set up merely by  reason of a change in its location".

7.      Section 16(1) was once again amended by the Employees’  Provident Funds (Amendment) Act, 1960 and sub-section (1) of  Section 16 was substituted as under:

"(1)    This Act shall not apply:

(a)     to any establishment registered  under the Co-operative Societies Act, 1912, or  under any other law for the time being in force  in any State relating to Co-operative Societies,  employing less than fifty persons and working  without the aid of power; or

(b)     to any other establishment  employing fifty or more persons or twenty or  more but less than fifty persons until the  expiry of three years in the case of the former  and five years in the case of the latter, from  the date on which the establishment is, or has  been, set up.

Explanation: For the removal of doubts, it is  hereby declared that an establishment shall  not be deemed to be newly set up merely by  reason of a change in its location".

8.      Section 16 was further amended by the Employees’  Provident Funds and Miscellaneous (Amendment) Act, 1988  with effect from 1.8.1988,  and Clause (b) of sub-section (1) of  Section 16 was substituted by clauses (b), (c) and (d) and the  said amendment to Section 16 is as under:

"(b)    to any other establishment belonging to  or under the control of the Central

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Government or the State Government and  whose employees are entitled to the benefit of  contributory provident fund or old age pension  in accordance with any scheme or rule framed  by the Central Government or the State  Government governing such benefit; or  

(c)     to any other establishment set up under  any Central Provincial or State Act and whose  employees are entitled to the benefits of  contributory provident fund or old age pension  in accordance with any scheme or rule framed  under that Act governing such benefits; or

(d)     to any other establishment newly set up,  until the expiry of a period of three years from  the date on which such establishment is, or  has been set up."

9.      Thereafter, Section 16 was again amended by Employees’  Provident Funds and Miscellaneous Provisions (Amendment)  Act, 1988, omitting clause (d) with explanation in sub-section  (1) of Section 16 with effect from 22.9.1997. (The said  omission was initially carried out by Ordinance No.17/1997  promulgated on 22.9.1997 followed by Ordinance No.25/1997  dated 25.12.1997 and Ordinance No.8 of 1998 dated  23.4.1998 followed by Act 10 of 1998.)    

10.     According to the appellants, the un-amended provisions  as it stood after the amendment in 1988 under clause (d),  apply to their cases and they were entitled to the protection  regarding non-application of the Act for a period of 3 years  from the date on which such establishment was set up.   According to the High Court, as clause (d) was deleted with  effect from 22.9.1997, the Act had application to every  establishment and no exemption or ’infancy period’ whatsoever  was available from 22.9.1997.

11.     The crucial question therefore is the effect of the  amendment on the existing rights.  12.     In Jayantilal Amratlal v. Union of India and Others (AIR  1971 SC 1193), it has been laid down as under :  "In order to see whether the rights and  liabilities under the repealed law have been  put to an end by the new enactment, the  proper approach is not to enquire if the new  enactment has by its new provisions kept alive  the rights and liabilities under the repealed  law but whether it has taken away those rights  and liabilities. The absence of a saving clause  in a new enactment preserving the rights and  liabilities under the repeated law is neither  material nor decisive of the question."   13.     In Govinddas and others v. Income Tax Officer and  another (AIR 1977 SC 552), it was laid down that:  "Now it is well settled rule of interpretation  hallowed by time and sanctified by judicial  decisions that unless the terms of a statute  expressly so provide or necessarily require it,  retrospective operation should not be given to  a statute so as to take away or impair an  existing right or create a new obligation or

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impose a new liability otherwise than as  regards matters of procedure. The general-rule  as stated by HALSBURY in Vol. 36 of the  LAWS OF ENGLAND (3rd Edn,) and reiterated  in several decisions of this Court as well as  English Courts is that all statutes other than  those which are merely declaratory or which  relate only to matters of procedure or of  evidence are prima facie prospective and  retrospective operation should not be given to  a statute so as to affect, alter or destroy an  existing right or create a new liability or  obligation unless that effect cannot be avoided  without doing violence to the language of the  enactment. If the enactment is expressed in  language which is fairly capable of either  interpretation, it ought to be construed as  prospective only."  

14.     A Division Bench of Bombay High Court while  considering the earlier amendment to Section 16(1)(d)  curtailing the infancy period from 5 years to 3 years, held  thus, in Magic Wash Industries (P) Ltd v. Assistant Provident  Fund Commissioner, Panaji and Anr. (1999 Lab.I.C. 2197):   "There is no doubt that the vested rights or  benefits under the legislation could be  retrospectively taken away by legislation, but  then the statute taking away such rights or  benefits must expressly reflect its intention to  that effect. The infancy period prior to the  amended provision Section 16(1)(d) was five  years in the case of establishments employing  20 to 50 workers and in the event this infancy  benefit was to be withdrawn, it was necessary  that the intention of the Legislature should  have been clearly reflected in the amended  provision itself that the rights and benefits  which had already accrued stood withdrawn.  The amended clause 16(1)(d) came on the  statute book on June 2, 1988, when it was  assented by the President of India but the  amended Section 16 was put into operation  only with effect from August 1, 1988, which  empowered the Central Government to appoint  different dates for the coming into force of  different provisions of the Act. We find it  difficult in the circumstances, to conclude that  the intention of the Legislature was to take  away the benefit of infancy period which had  already accrued to the existing establishments  and this benefit has not been expressly taken  away or by implication by the amended  provision Section 16(1)(d). In the  circumstances, we are of the opinion that the  infancy period benefit of the petitioner for a  period of five years with effect from May 26,  1986, is not taken away by the amended  provision Section (1)(d) of the Act; and the  petitioner could continue to enjoy the said  infancy benefit for a period of five years till  May, 1991. Therefore, the demand made by  respondent 1 for the period up to May, 1991,  has to be quashed. The petitioners are  complying with the provisions of the Act with  effect from June, 1991."

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15.     The matter can be looked at from another angle. Section  6 of the General Clauses Act, 1897 (in short ’General Clauses  Act’) deals with effect of repeal. The said provision so far  relevant reads as follows:

"6. Effect of repeal.- Where this Act, or any  (Central Act) or Regulation made after the  commencement of this Act, repeals any  enactment hitherto made or hereafter to be  made, then, unless a different intention  appears, the repeal shall not \026

(a)     revive anything not in force or  existing at the time at which the  repeal takes effect; or (b)     affect the previous operation of any  enactment so repealed or anything  duly done or suffered thereunder; or

(c)     affect any right, privilege, obligation  or liability acquired, accrued or  incurred under any enactment so  repealed; or

(d)     affect any penalty, forfeiture or  punishment incurred in respect of  any offence committed against any  enactment so repealed; or

(e)     affect any investigation, legal  proceeding or remedy in respect of  any such right, privilege, obligation,  liability, penalty, forfeiture or   punishment as aforesaid;

and any such investigation, legal proceeding or  remedy may be instituted, continued or  enforced, and any such penalty, forfeiture or  punishment may be imposed as if the  repealing Act or Regulation had not been  passed."      

16.     In terms of Clause (c) of Section 6 as quoted above,  unless a different intention appears the repeal shall not affect  any right, privilege or liability acquired, accrued or incurred  under the enactment repeal. The effect of the amendment in  the instant case is the same.  

17.     It is a cardinal principle of construction that every  statute is prima facie prospective unless it is expressly or by  necessary implication made to have retrospective operation  (See Keshvan Madhavan Memon v. State of Bombay AIR 1951  SC 128). But the rule in general is applicable where the object  of the statute is to affect vested rights or to impose new  burdens or to impair existing obligations.  Unless there are  words in the statute sufficient to show the intention of the  Legislature to affect existing rights, it is deemed to be  prospective only ’nova constitutio futuris formam imponere  debet non praeteritis’.  In the words of LORD BLANESBURG,  "provisions which touch a right in existence at the passing of  the statute are not to be applied retrospectively in the absence  of express enactment or necessary intendment." (See Delhi  Cloth Mills & General Co. Ltd. v. CIT, Delhi AIR 1927 PC 242).

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"Every statute, it has been said", observed LOPES, L.J., "which  takes away or impairs vested rights acquired under existing  laws, or creates a new obligation or imposes a new duty, or  attaches a new disability in respect of transactions already  past, must be presumed to be intended not to have a  retrospective effect."(See Amireddi Raja Gopala Rao v.  Amireddi Sitharamamma AIR 1965 SC 1970).  As a logical  corollary of the general rule, that retrospective operation is not  taken to be intended unless that intention is manifested by  express words or necessary implication, there is a subordinate  rule to the effect that a statute or a section in it is not to be  construed so as to have larger retrospective operation than its  language renders necessary.  (See Reid v. Reid, (1886) 31 Ch D  402).  In other words close attention must be paid to the  language of the statutory provision for determining the scope  of the retrospectivity intended by Parliament. (See Union of  India v. Raghubir Singh (AIR 1989 SC 1933). The above  position has been highlighted in "Principles of Statutory  Interpretation" by Justice G.P. Singh. (Tenth Edition, 2006) at  PP. 474 and 475)               18.     In The State of Jammu and Kashmir v. Shri Triloki Nath  Khosa & Others. (1974 (1) SCC 19) and in Chairman, Railway  Board & Ors.  v. C.R. Rangadhamaiah & Ors. (1997 (6) SCC  623), this Court held that provision which operates to affect  only the future rights without affecting the benefits or rights  which have already accrued or enjoyed, till the deletion, is not  retrospective in operation.

19.     The above position was highlighted by this court in S.L.  Srinivasa Jute Twine Mills (P) Ltd. v. Union of India and Anr.  [2006(2) SCC 740].

20.     In view of the above position in law, the judgments of the  Commissioner and the High Court are indefensible and are set  aside.  The appellant shall be entitled to the protection for the  period of three years starting from the date the establishment  was set up irrespective of the repeal of the provision for such  infancy protection.

21.     Appeal is allowed.  No costs.