# S. T. SADIQ v. STATE OF KERALA& ORS

- **Citation:** [2015] 3 S.C.R. 287
- **Court:** Supreme Court of India
- **Decided:** 2015-02-04
- **Case number:** Civil Appeal No. 3962 of 2007
- **Bench:** RANJAN GOGOi, ROHINTON FALi NARIMAN
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/s-t-sadiq-v-state-of-kerala-ors-30517
- **Pages:** 34

## Headnote

Kera/a Cashew Factories Acquisition (Amendment)
A
B
c
Act, 1995: s.6 - Constitutional validity of - Notices for
acquisition of 10 factories sent between 1984 and 1986 -
Similar notices sent to 36 other factories in 1988 by which
the said factories a/so acquired under the Act - In case of 36 o
factories, Supreme Court passed directions to handover the
factories to the respective owners - In case of 10 factories,
directions passed to take them over by Amendment Act -
The Amendment Act of 1995 was brought into force to cover
all 46 acquisitions that had been made under the Principal E
Act- Whether s. 6 was bad as it sought to directly nullify the
directions passed by Supreme Court in the two judgments
and whether s. 6 violated Article 14 inasmuch as it gave
discriminatory treatment to the 10 factories and 36 factories
- Held: The legislature cannot directly annul a judgment of F
a court - s. 6 directly sought to upset a final judgment interparties and was bad on this count and is unconstitutional-A
bare reading of the Statement of Objects of the Amendment
Act shows that the Kera/a Legislature wished to interfere with G
two judgments of the Supreme Court making no distinction
between the 36 factories and the 10 factories - The handing
back of only 36 factories would be patently discriminatory as
\
a/146 factories were similarly situate and were treated as such
H
287
288
SUPREME COURT REPORTS
[2015] 3 S.C.R.
A by the state by issuing common notices to all of them uls.3
of the Act - The.se 36 factories are functioning under their
respective owners for the last twenty years -
In the
circumstances, there is no intelligible differentia between the
36 factories and the 10 factories taken over having any
B rational relation with the object sought to be achieved and
on this ground also s.6 of the Amendment Act deserves to
be striJck down as violating Article 14 of the Constitution -
The cashew factories ~nd the land appurtenant thereto taken
C over by the State under the Amending Act must be handed
back - Constitution oflndia, 1950 - Arts. 14, 245 - Kera/a
Cashew Factories Acquisition Act; 1974.
Allowing the appeals, the.Court
D
HELD: 1. The legislature.cannot directly annul a .·
judgment of a court. The legislative function consists in
"making" 18w [see: Article 245) and not in "declaring"
what the law shall be [see: Article 141]. Our Constitution
permits a legislature to make laws retrospectively which
E · 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 .
F Court to apply the law retrospectively so made which
• would then change the verj basis of the earlier decision
so that it would no longer hold good. However, if such is
not the case then legislation whfoh trenches upon the .
judicial power must necessarily be .declared to be
G . unconstitutional. [Para12] [306-8, E-F]
·
StateofT.N. v. M. Rayappa Gounder(1971)3SCC1;.
D. Cawasji and Co. Mysore v. The State of Mysore &
Anr., 1985 (1) SCR.825; State of Haryana v. Kamal
H
Coop. Farrners'Society Ltd. (1993) 2 SCC 363: 1993
S. T. SADIQ v. STATE OF KERALA & ORS.
289
(2) SCR 193; Re Cauvery Water Disputes Tribunal,
A
1993 Supp (1) SCC 96; S.R. Bhagwat v. State of
Mysore, (1995) 6 SCC 16:1995 (3) Suppl. SCR 545;
Delhi Cloth & Genera/ Mills Co. Ltd. v. State of
Rajasthan (1996) 2 sec 449: 1996 (1) SCR 518 -
relied on.
B
2. 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 C
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 sought to upset a final judgment inter-parties and D
is

## Text

_Characters 0–39,790 of 56,855. This is a partial read: ask again with offset=39790 for what follows._

[2015] 3 S.C.R. 287
S. T. SADIQ
v.
STATE OF KERALA& ORS.
(Civil Appeal No. 3962 of 2007)
FEBRUARY 04, 2015
[RANJAN GOGOi AND ROHINTON FALi NARIMAN, JJ.]
Kera/a Cashew Factories Acquisition (Amendment)
A
B
c
Act, 1995: s.6 - Constitutional validity of - Notices for
acquisition of 10 factories sent between 1984 and 1986 -
Similar notices sent to 36 other factories in 1988 by which
the said factories a/so acquired under the Act - In case of 36 o
factories, Supreme Court passed directions to handover the
factories to the respective owners - In case of 10 factories,
directions passed to take them over by Amendment Act -
The Amendment Act of 1995 was brought into force to cover
all 46 acquisitions that had been made under the Principal E
Act- Whether s. 6 was bad as it sought to directly nullify the
directions passed by Supreme Court in the two judgments
and whether s. 6 violated Article 14 inasmuch as it gave
discriminatory treatment to the 10 factories and 36 factories
- Held: The legislature cannot directly annul a judgment of F
a court - s. 6 directly sought to upset a final judgment interparties and was bad on this count and is unconstitutional-A
bare reading of the Statement of Objects of the Amendment
Act shows that the Kera/a Legislature wished to interfere with G
two judgments of the Supreme Court making no distinction
between the 36 factories and the 10 factories - The handing
back of only 36 factories would be patently discriminatory as
\
a/146 factories were similarly situate and were treated as such
H
287
288
SUPREME COURT REPORTS
[2015] 3 S.C.R.
A by the state by issuing common notices to all of them uls.3
of the Act - The.se 36 factories are functioning under their
respective owners for the last twenty years -
In the
circumstances, there is no intelligible differentia between the
36 factories and the 10 factories taken over having any
B rational relation with the object sought to be achieved and
on this ground also s.6 of the Amendment Act deserves to
be striJck down as violating Article 14 of the Constitution -
The cashew factories ~nd the land appurtenant thereto taken
C over by the State under the Amending Act must be handed
back - Constitution oflndia, 1950 - Arts. 14, 245 - Kera/a
Cashew Factories Acquisition Act; 1974.
Allowing the appeals, the.Court
D
HELD: 1. The legislature.cannot directly annul a .·
judgment of a court. The legislative function consists in
"making" 18w [see: Article 245) and not in "declaring"
what the law shall be [see: Article 141]. Our Constitution
permits a legislature to make laws retrospectively which
E · 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 .
F Court to apply the law retrospectively so made which
• would then change the verj basis of the earlier decision
so that it would no longer hold good. However, if such is
not the case then legislation whfoh trenches upon the .
judicial power must necessarily be .declared to be
G . unconstitutional. [Para12] [306-8, E-F]
·
StateofT.N. v. M. Rayappa Gounder(1971)3SCC1;.
D. Cawasji and Co. Mysore v. The State of Mysore &
Anr., 1985 (1) SCR.825; State of Haryana v. Kamal
H
Coop. Farrners'Society Ltd. (1993) 2 SCC 363: 1993
S. T. SADIQ v. STATE OF KERALA & ORS.
289
(2) SCR 193; Re Cauvery Water Disputes Tribunal,
A
1993 Supp (1) SCC 96; S.R. Bhagwat v. State of
Mysore, (1995) 6 SCC 16:1995 (3) Suppl. SCR 545;
Delhi Cloth & Genera/ Mills Co. Ltd. v. State of
Rajasthan (1996) 2 sec 449: 1996 (1) SCR 518 -
relied on.
B
2. 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 C
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 sought to upset a final judgment inter-parties and D
is bad on this count and is thus declared
unconstitutional. A bare reading of the Statement of
Objects of the Amendment Act shows that the Kerala
Legislature wished to interfere with two judgments of E
the Supreme Court making no distinction between
factories that were .managed by the Cashew
Development Corporation (CDC) (the .36 factories) and
CAPEX (the 10 factories). Apart from the Government
suffering financially (if the factories are to be handed F
back), there will be large scale unemploymentamong
·workers in the cashew industry. It is clear thatthe 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. There. · · G
is no difference between factories which post acquisition ·
are run by the CDC or CAPEX regard being had to the
object sought to be achieved - namely to .avoid.
unemployment of cashew workers. Whether 36 factories . H
-: ·'
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SUPREME COURT REPORTS
(2015] 3 S.C.R.
A run by the CDC 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 CDC
and CAPEX, along with the Government, will suffer
B 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
C Section 3 of the Act. These 36 factories are functioning
under their respective owners for the last twenty years.
In the circumstances there is no intelligible differentia
b~tween the 36 factories and the 10 factories taken over
having any rational relation with the object sought to be
o achieved and on this ground also Section 6 of the
Amendment Act deserves to b~ struck down as violating
Article 14 of the Constitution. The cashew factories and
the land appurtenant thereto that have been taken over
by the State under the Amending Act must be handed
E back. [Paras 12, 13 and 14] [317-D-F; 319-D-H; 320-A-E]
'
Case Law Reference
(1971) 3 sec 1
relied on.
Para 12
F
1985 (1) SCR 825
relied on.
Para 12
1993 (2) SCR 193
relied on.
Para 12
1993 supp (1) sec 96
relied on.
Para 12
G
1995 (3) Suppl. SCR 545 relied on.
Para 12
1996 (1) SCR 518
relied on.
Para 12
CIVILAPPELLATE JURISDICTION: Civil Appeal No.
H
S. T. SADIQ v. STATE OF KERALA& ORS.
291
3962 of 2007.
A
From the Judgment and Order dated 11.08.2005 of
the High Court of Kerala at Ernakulam in O.P. No. 14084 of
1997(B).
\MTH
C.A. No. 3963 of 2007
B
Krishnan Venugopal, Deepak Prakash, Biju P. Raman,
Subash Chandran K. R., Usha Nandini V., Yogamaya M. G, B. C
V. Deepak (ForT. T. K. Deepak & Co.) for the Appellant.
V. Giri, Bina Madhavan, Somiram Sharma, Vishnu
Sharma, K. R. Sasipratihu, M. Vijaya Bhaskar, G Prakash for
the Respondents.
D
The Judgment of the Court was delivered by
R. F. NARI MAN, J. 1. These petitions raise questions
as to the constitutional validity of the Kerala Cashew Factories E
(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, 197 4 and Section 3 thereof
enabled the State Government to acquire in public interest F
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
G
H
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SUPREME COURT REPORTS
[2015) 3 S.C.R.
A
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
B
made or that such nuts are being transferred to any other
cashew factory; or
(c) thatthere has been large scale unemployment, other
than by way of lay off or retrenchment, of the workers of
c
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
o
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 unde.r this subsection and the grounds therefore and consider the
E
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
F
meanings respectively assigned to them in the Industrial
Disputes Act, 1947 (Central Act 14of1947).
(2) The notice referred to in the proviso to sub-section
(1) shall also be published in two newspapers published
G
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.
H
(3) On the. making of a declaration under sub-section
;/
S. T. SADIQ v. STATE OF KERALA& ORS.
293
[R. F. NARIMAN, J.]
(1 ), the cashew factory to which the declaration relates,
A
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
B
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, C
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 0
notice is set out hereinbelow.
"No.31033/K3/84/ld
19.9.1985
NOTICE
Notice under rule 3 of the Kerala Cashew Factories
(Ac~uisition) 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
Ka1rthikappallyTaluk,Alapuzha District of which Smt. T.
· · Su hara Beevi Clo Masaliar Industries, Kilikolloor,
Kallam is the owner andM/s. Janso Exports (Private)
ltd., N.N.C., Estates Vadakkevila P.J., Kallam is the
occupier (proposed) there exist grounds as detailed
below warranting action under section 3(1) of the Kera la
Cashew Factories (Acquisition) Act, 1974 notice is
hereby given fo all concerned of the intention of the
E
F
G
H
294
A
B
c
D
SUPREME COURT REPORTS
[2015] 3 S.C.R.
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 againstthe 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,
E
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
F
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.
G
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
H
ten days or in the immediate future. The Government
S. T. SADIQ v. STATE OF KERALA& ORS.
295
[R. F. NARIMAN, J.]
are therefore, of opinion that the said situation will lead
A
to large scale unemployment of the workers of the
Cashew Factory.
By Order of the Governor
Place: Thiruvananthapuram M. Vijayanunni
B
Dated: 16.9.1985
Special Secretary to Governor
Industries Department
To,
Smt. T. Suhara Beevi, Clo Musaliar Industries
Kilikolloor, Kollam 4.
Copy to:
1.
Shri N. Gopalan Nair, Addi. Director of Industries
and Commerce and Spl. Officer fer 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
c
D
E
Sd/- Section Officer."
F
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 G
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 sec 269 in the following terms:-
H
~-.
296'
,
A
B
c
D
E
F
G
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SUPREME COURT REPORTS
[2015] 3 S.C.R.
"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 axistence ·
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 often days or in
the immediate future, which will lead to large scale
unemp!oyment. 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 counse.1, 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.
S. T. SADIQ v. STATE OF KERALA & ORS.
297
[R. F. NARIMAN, J.]
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 exer·.:ise 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 reievant 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
A
B
c
D
E
F
G
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298
A
B
c
D
E
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[2015] 3 S.C.R
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
thatthere 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 !herein.
13. In order to work out the equities and the rights and
liabilities which have arisen between the date of the
S. T. SADIQ v. STATE OF KERALA & ORS.
299
[R. F. NARIMAN, J.)
transfer of the factories and passing of this order, we
A
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
B
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
c
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 19-7D
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
E
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 Kera la 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
F
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[2015) 3 S.C.R.
A
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
B
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,
c this Court followed the judgment in the Indian Nut Products
case in the following terms:
D
E
F
G
H
"IN THE SUPREME COURT OF INDIA
CIVILAPPELLATE 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
S. T. SADIQ v. STATE OF KERALA & ORS.
301
[R. F. NARIMAN, J.]
accordingly. No costs.
A
Sd/-
(M.M. Punch hi. .. J)
8
Sd/-
(K. Jayachandra Reddy .. J)
New Delhi,
March 10, 1995."
c
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 0
factories are concerned, which then filed coritempt 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
E
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
F
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
G
in the affidavits filed in response.
The contempt proceedings are, thus, terminated."
6. The promised Ordinance was then brought in which H
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A 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
B with Section 3A and Section 6 which are set out hereinbelow:
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"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
G
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
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303
[R. F. NARIMAN, J.)
for the time being in force, stand transferred to, and vest
A
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,
B
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 ypSchedule 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
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A 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 ofT.N.
v. M. Rayappa Gounder (1971) 3 SCC 1, Madan Mohan
Pathak & Anr. v. Union of India & Ors. 1978 (2) SCC 50,
B 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
C · 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
o 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
E 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
co~pensation for land that is acquired along with the cashew
F 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
G 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
H building was only on 97 cents and 1.86 acres was sought to
S. T. SADIQ v. STATE OF KERALA & ORS.
305
[R. F. NARIMAN, J.]
be taken over despite the fact that this land was neither used A
nor was necessary for the working of the factory.
10. Mr. Giri appearing forthe 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 B
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 C
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 D
from being acquired under Section 3 or Section 3AoftheAct
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 E
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 F
replied by saying that Article 31 B 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
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A
us have to be allowed on points 1 and 2.
12. Point1.
It is settled law by a catena of decisions of this Court
8
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
c 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
D 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
E 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
F 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
G 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
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[R. F. NARIMAN, J.)
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 ot 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
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A
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
(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
(c) no Court shall enforce any decree or orde·r directing
the refund of any tax so paid."
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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
G Mysore Sales Tax (Amendment) Act, 1969 were struck down
in the following terms:
H
"In the instant case, the State instead of remedying the
defect or removing the lacuna has by the impugned
S. T. SADIQ v. STATE OF KERALA & ORS.
[R. F. NARIMAN, J.)
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
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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 io 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)
S. T. SADIQ v. STATE OF KERALA& ORS.
311
[R. F. NARIMAN, J.]
Similarly, in State of Haryana v. Karnal Coop. A
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.