Supreme Court Revisits Textile Nationalization Act: Union of India vs. Nareshkumar Badrikumar Jagad (28 November 2018)

Date of the Judgment: 28 November 2018

Citation: Not Available

Judges: Kurian Joseph, J., A.M. Khanwilkar, J.

Can a subsequent amendment to a law retroactively nullify a Supreme Court judgment? The Supreme Court grappled with this question in a review petition concerning the Textile Undertakings (Nationalisation) Act, 1995. The core issue revolved around whether the leasehold rights of a textile undertaking, which had vested in the Central Government, could be reclaimed by the original owners due to a later amendment. This case highlights the complexities of statutory interpretation and the impact of retrospective legislation on judicial pronouncements. The bench comprised Justices Kurian Joseph and A.M. Khanwilkar, with the judgment authored by Justice Khanwilkar.

Case Background

The case concerns a property in Mumbai, originally leased to Hope Mills Ltd. in 1893 for 99 years. The land was later sold to Harichand Rupchand, and upon his will, it vested in the Seth Harichand Rupchand Charitable Trust. The leasehold rights were eventually transferred to Podar Mills Ltd. The Textile Undertakings (Taking over of Management) Act, 1983, led to the government taking over the management of Podar Mills. The lease expired in 1990, but Podar Mills continued as a statutory tenant under the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. The Textile Undertakings (Nationalisation) Act, 1995, nationalized several textile undertakings, including Podar Mills, with effect from 1st April 1994. The Trust issued a legal notice to the National Textile Corporation (NTC) in 1994, terminating its tenancy.

Timeline

Course of Proceedings

The Trust initially filed a suit for eviction in 1995, which was dismissed for non-prosecution. A second suit was filed in 1997, which was later withdrawn. A fresh suit was filed in 2001 against NTC alone, under the Transfer of Property Act, 1882, seeking eviction. The Small Causes Court decreed the suit in favor of the Trust in 2006. The Division Bench of the Small Causes Court dismissed NTC’s appeal in 2008, and the Bombay High Court dismissed NTC’s civil revision in 2009. The Supreme Court initially dismissed NTC’s appeal on 5th September 2011, which is the subject of this review petition.

Legal Framework

The case involves several key legal provisions:

• The Textile Undertakings (Taking over of Management) Act, 1983: This act allowed the government to take over the management of textile undertakings, including Podar Mills, pending nationalization.
• The Textile Undertakings (Nationalisation) Act, 1995: This act nationalized several textile undertakings, including Podar Mills, with effect from 1st April 1994. Section 3(1) of the act stated that the right, title, and interest of the owners of the textile undertaking would vest absolutely in the Central Government. Section 3(2) stated that the textile undertaking would immediately vest in the National Textile Corporation (NTC).
• The Bombay Rents, Hotel and Lodging House Rates Control Act, 1947: This act provided protection to tenants, including statutory tenants, after the expiry of their lease.
• The Maharashtra Rent Control Act, 1999: This act repealed the 1947 act and introduced new provisions for rent control.
• The Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Act, 2014: This act amended the 1995 act, stating that the leasehold rights of textile undertakings would continue to vest in the Central Government, and no court could order divestment from the NTC. Section 39 of the Act validated the vesting of leasehold rights in the Central Government.

Arguments

Union of India:
✓ The Union of India argued that the right, title, and interest in the suit property had vested absolutely in the Central Government by virtue of Section 3(1) of the 1995 Act.
✓ They contended that the subsequent Validation Act of 2014, retroactively amended the 1995 Act, ensuring that the leasehold rights remained with the Central Government.
✓ They argued that the decree for possession against NTC was unenforceable due to the vesting of rights in the Central Government.
✓ They also stated that the NTC was merely an agent of the Central Government, and the Central Government remained the tenant.

Respondents (Trust):
✓ The Trust argued that the Union of India had no locus standi to file a review petition.
✓ They contended that the grounds urged by the Union of India were already addressed in the original judgment.
✓ They stated that NTC never specifically pleaded in its written statement that the tenancy vested absolutely in the Central Government.
✓ The Trust argued that the tenancy rights of Podar Mills vested in NTC, making NTC the statutory tenant, and the Union of India was not a necessary party.
✓ They argued that the Validation Act of 2014 did not apply to the present case as there was no subsisting leasehold right at the time of vesting.
✓ The Trust also argued that NTC was in defiance of the undertaking given to the court to hand over possession.

The innovativeness in the argument by the Union of India was that it relied on the retrospective effect of the Validation Act 2014, which was enacted during the pendency of the review petition, to claim that the leasehold rights continued to vest with the Central Government and not with the NTC, thereby rendering the decree against NTC unenforceable.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues:

1. Whether the Union of India has the locus to file a review petition against the judgment of this Court dated 5th September, 2011.
2. Whether the subsequent legislation i.e. Validation Act 2014, has completely altered the status of the parties retrospectively qua the suit property.
3. Whether the decree passed against NTC or for that matter, an undertaking filed by NTC in any court or tribunal has been rendered unenforceable by operation of law.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court:

• Raja Shatrunji Vs. Mohammad Azmal Azim Khan and Ors. [(1971) 2 SCC 200]*: The Court followed this authority to emphasize that full effect must be given to a statutory fiction, even in review jurisdiction.
• State of Bombay v. Pandurang Vinayak Chaphalkar [AIR 1953 SC 244]*: The Court followed this authority to state that a statutory fiction should be carried to its logical conclusion.
• East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952 AC 109]*: The Court followed this authority to explain that when treating an imaginary state of affairs as real, one must also imagine the consequences that would flow from it.
• Rajah Kotagiri Venkata Subbamma Rao v. Rajah Vellanki Venkatrama Rao*: The Court referred to this case to clarify that review cannot be based on subsequent events.
• S. Bagirathi Ammal Vs. Palani Roman Catholic Mission [(2009) 10 SCC 464]*: The Court considered this authority on the scope of review jurisdiction.
• Union of India Vs. Sandur Manganese and Iron Ores Limited and Ors. [(2013) 8 SCC 337]*: The Court considered this authority on the scope of review jurisdiction.
• Champsey Bhara and Company Vs. Jivraj Balloo Spinning and Weaving Company Limited [(1923) Vol. L (IA) 324]*: The Court considered this authority on the scope of review jurisdiction.
• B. Arvind Kumar Vs. Govt. of India and Others [(2007) 5 SCC 745]*: The Court referred to this case to explain the essential ingredients of a lease under Section 105 of the Transfer of Property Act, 1882.
• Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras [(1992) 3 SCC 158]*: The Court distinguished this case, clarifying that the present case involved an involuntary transfer of rights to the Central Government.
• Bhoolchand and Another Vs. Kay Pee Cee Investments and Another [(1991) 1 SCC 343]*: The Court distinguished this case, clarifying that the present case involved an involuntary transfer of rights to the Central Government, not subletting.
• T. Sudhakar Prasad Vs. Govt. of A.P. and Ors. [(2001) 1 SCC 516]*: The Court did not find this case applicable as the basis for the original direction had become non-existent due to the Validation Act.
• Firm Ganpat Ram Rajkumar Vs. Kalu Ram and Ors. [(1989) Supp. (2) SCC 418]*: The Court did not find this case applicable as the basis for the original direction had become non-existent due to the Validation Act.
• Noorali Babul Thanewala Vs. K.M.M. Shetty and Ors. [(1990) 1 SCC 259]*: The Court did not find this case applicable as the basis for the original direction had become non-existent due to the Validation Act.
• Office of The Chief Post Master General and Ors.Vs. Living Media India Ltd. and Ors. [(2012) 3 SCC 563]*: The Court did not find this case applicable as the legal fiction introduced by the amendment act rendered the delay irrelevant.
• State of Tamil Nadu Vs. State of Kerala and Another [(2014) 12 SCC 696]*: The Court distinguished this case, clarifying that the present case was not about a factual finding but about the effect of a validating law.
• Madan Mohan Pathak and Ors. Vs. Union of India (UOI) and Ors. [(1978) 2 SCC 50]*: The Court distinguished this case, clarifying that the present case was about the effect of a validating law.
• Shri Prithvi Cotton Mills Ltd. and Ors. Vs. Broach Borough Municipality and Ors. [(1969) 2 SCC 283]*: The Court distinguished this case, clarifying that the present case was about the effect of a validating law.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the retrospective effect of the Validation Act, 2014. The court emphasized that the amendment to the 1995 Act, which was deemed to be in force from 1st April 1994, altered the legal status of the parties. This meant that the leasehold rights of the textile undertaking continued to vest with the Central Government, and not with the NTC, as was previously considered. The court also noted that the legislative intent behind the Validation Act was to protect the public investment in textile undertakings and clarify the status of leasehold rights. The court was also influenced by the fact that the original decree was against NTC, while the real tenant, as per the amended law, was the Central Government.

Logical Reasoning:

The Court considered alternative interpretations but rejected them in favor of a literal interpretation of the Validation Act and its retrospective effect. The court emphasized that the decree against NTC was rendered unenforceable due to the legal fiction created by the amendment, which vested the leasehold rights with the Central Government.

The Court’s decision was based on the following reasons:

• The Validation Act of 2014, by its retrospective effect, altered the legal status of the parties.
• The leasehold rights of the textile undertaking continued to vest with the Central Government, not the NTC.
• The decree against NTC was rendered unenforceable due to the vesting of rights in the Central Government.
• The undertaking given by NTC was also unenforceable.
• The Trust was obligated to take recourse against the Central Government under the relevant rent legislation.

“Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority…”

“the provisions of this Act, as amended by the Textile Undertakings (Nationalisation) Laws (Amendment and Validation) Act, 2014, shall have and shall be deemed always to have effect for all purposes as if the provisions of this Act, as amended by the said Act, had been in force at all material times.”

“no suit or other proceedings shall,be maintained or continued in any court, tribunal or other authority against the National Textile Corporation Limited or any other person for the purpose of divesting the National Textile Corporation Limited or any other person of any such right, title and interest in any such textile undertaking.”

Final Order

The Supreme Court disposed of the review petition filed by the Union of India, holding that the decree passed against NTC was unenforceable due to the retrospective effect of the Validation Act of 2014. The court clarified that the leasehold rights of the textile undertaking continued to vest with the Central Government, and not with the NTC. The court also held that the undertaking given by NTC to hand over possession was unenforceable. The Trust was directed to take recourse against the Central Government under the relevant rent legislation. The court did not pass any order on the contempt petition filed by the respondents, stating that the basis for the original direction had become non-existent due to the Validation Act.

Impact of the Judgment

The judgment has several significant implications:

• Retrospective Legislation: The case highlights the power of retrospective legislation to alter the legal status of parties and nullify judicial pronouncements. The Validation Act of 2014 retroactively changed the interpretation of the 1995 Act, effectively overturning the Supreme Court’s earlier judgment.
• Vesting of Rights: The judgment clarified that the leasehold rights of nationalized textile undertakings vested with the Central Government, not the NTC, due to the retrospective effect of the Validation Act.
• Enforceability of Decrees: The case established that a decree against a party can become unenforceable if a subsequent law alters the legal status of the parties retrospectively.
• Impact on Tenants: The decision clarified that the Trust had to take recourse against the Central Government under the relevant rent legislation, indicating that the Central Government was the new tenant.
• Judicial Review: The Court emphasized that while review jurisdiction is limited, it must give full effect to a statutory fiction.

The judgment serves as a strong reminder of the legislative power to amend laws retrospectively and its potential impact on judicial decisions. It also underscores the importance of understanding the interplay between legislation and judicial pronouncements in property disputes.

Conclusion

The Supreme Court’s decision in Union of India vs. Nareshkumar Badrikumar Jagad (2018) underscores the complexities of statutory interpretation and the implications of retrospective legislation. The case demonstrates how a subsequent amendment to a law can retroactively nullify a Supreme Court judgment, highlighting the power of the legislature to alter the legal landscape. The judgment clarifies the vesting of leasehold rights in the Central Government and the unenforceability of decrees against the NTC due to the retrospective effect of the Validation Act of 2014. This case is a significant example of the interplay between judicial pronouncements and legislative actions, and it emphasizes the need for careful consideration of the impact of retrospective laws on legal disputes.