Tag: retrospectiveeffectofstatutes

-Report by Reyanshi Bansal

It has been held by the Hon’ble Supreme Court of India in the case of Independent School Federation v. Union of India that teachers are to be included in the definition of employee and the legal flaw of excluding them from being paid gratuity is to be terminated.

The Payment Gratuity Act, 1972, gave rights to those employees who rendered continuous service for at least five years to be paid gratuity on their retirement due to death or disability due to accident or disease. However, the definition of “employee” was restrictive in such a manner that it excluded private school teachers from receiving such payment.
This definition was rectified after the case of Ahmedabad Private Primary Teachers’ Association v. Administrative Officer via the Payment of Gratuity (Amendment) Bill, 2007 to involve teachers even though the court held that teachers were not “employees” under the Act. The constitutional validity of this amendment was challenged by several private schools.

The petitioners contended that the legislation overrules the judicial decision and goes against the doctrine of separation of powers. Furthermore, they found the amendment unreasonable, excessive and harsh, therefore, unconstitutional. Another argument was that it would be tyrannous and autocratic to make the private institutions liable for payment of gratuity for service before 1997. One of the submissions stated that the amendment should
only be valid if the Government refunds the taxes paid. Finally, the private schools and writ petitioners insisted on the enactment of the Repealing and Amending Act, 2016 by which the Amendment Act 2009 was repealed.

In response to the first ground, the court observes that the legislature can amend the language of a certain provision that was the subject matter of a court decision, and the court (in the case of Ahmedabad Private Primary Teachers’ Association) acknowledged that cognization of the situation of teachers in various establishments where gratuity is not available should be taken by the legislature.

The claim that the amendment is unconstitutional lacks merit and substance. Due to an error in law, teachers were unavailable to get access to rightly deserved gratuity whereas all other employees in the private school were. The purpose of the amendment was to remove such a technical flaw and give effect to what was intended by the Payment of Gratuity Act.

The gratuity is not despotic as argued because the employees are entitled to a gratuity if the conditions of the Act are met and there is an upper cap limit so it can be computed reasonably. This is a right accrued by the teachers and not giving them so, would be unjust. Moreover, the legislature is not confined to the tax statutes thereby making the penultimate argument unfounded and irrational. Onto the last contention of the Repealing Act, section 4 of the act directs that the repealing will not affect the validity, effect or consequence of any liability that has already been incurred. The court held that-

“The private schools would make payment to the employees/teachers along with the interest in accordance with the provisions of the Payment of Gratuity Act within a period of 6 weeks from today and in case of default, the employees/teachers may move the appropriate forum to enforce payment in accordance with the provisions of the Payment of Gratuity Act. In the facts of the case, there will be no orders as to costs.”

For the above-mentioned reasons, the court quashed the writ petitions and the transfer case and aforesaid appeals were dismissed. It was also reaffirmed that the purpose of the legislature was to give retrospective effect to the amendment made in the Payments of Gratuity Act,1972.

-Report by Lynda Mayengbam

The Securities and Exchange Board of India v. Rajkumar Nagpal is an appeal filed in response to the single judge’s ruling on October 28, 2021, which stated that the case concerned a Debenture Trust Agreement between the parties as
issuers and trustees of Debenture Trustees, respectively. The 17 debenture holders had filed a lawsuit to defend their rights and the amount due to them. The case was filed before the Bombay High Court on July 1, 2021.

FACTS

Reliance Commercial Finance Limited as ‘Issuer’ and Vistra ITCL as ‘Debenture Trustee’ executed a Debenture Trust Deed on 3rd May 2017. In response to the first default committed by RCFL, Vistra wrote to SEBI to inform them of the
actions it had taken in its status as Debenture Trustee and to request guidance about the ICA and its implementing mechanisms.

In a circular titled “Standardization of procedure to be followed by Debenture Trustee(s) in case of “Default” by Issuers of Listed Debt Securities,” SEBI published information on October 13, 2020. (“SEBI Circular”). The Plaintiffs, who are 17 Debenture Holders, filed a lawsuit in Bombay High Court on July 1, 2021, seeking an order to restrain RCFL, BoB, and RBI from executing the RBI Circular.

The court ruled that the SEBI circular did not govern the debenture trust deeds and that it could not be allowed to apply retrospectively. The SEBI circular will not precede any of the debenture trust deeds’ specific provisions. Therefore, SEBI challenged the order passed by the Single Judge’s order of the Bombay High Court and submitted an appeal.

RESPONDENT’S ARGUMENTS

The respondents contended that SEBI is not a party to the lawsuit, hence SEBI cannot be deemed an aggrieved party. Any order approving a merger scheme under Section 391 of the 2013 Companies Act is not subjected to appeal by SEBI. The SEBI Circular does not apply to this case because it does not include a scenario in which the holders of the debentures would reach a compromise, settlement, or agreement with the debenture issuer. Given that the SEBI circular has a retrospective application, SEBI’s appeal cannot be upheld. As in Principles of Statutory Interpretation by Justice G.P. Singh, it stated that

‘ The rule against retrospective construction does not apply to a statute merely because a part of the requisites for its action is drawn from a time antecedent to its passing.

APPELLANT’S ARGUMENTS

The Appellant contended that following Section 13 of the Commercial Courts Act of 2015, this appeal has been submitted as according to Section 13 (1A), “Any person aggrieved” by a decision or order of the Commercial, the
Commercial Appellate Division may hear the appeal. Due to specific remarks made by the Ld. Single Judge in the impugned orders to the effect that the ruling will not set a precedent against SEBI, SEBI’s statutory right to initiate an appeal cannot be revoked. The SEBI Circular makes no mention of its application to defaults that occurred before October 13, 2020. Lawfully, any legislation—delegated or otherwise—is regarded as prospective unless it has been
explicitly or obliquely given retrospective effect. If a debt cannot be settled through the compromise or settlement method, SEBI contends that debenture holders are entitled to receive the whole amount that is owed (principal and
interest). The argument, however, is that the solution reached in accordance with the Division Bench’s directive will also bind all the other debenture holders, who weren’t involved in the initial lawsuit brought before the High Court.

COURT’S DECISION

It was held by the hon’ble court that

i. There is no bar to the civil court’s jurisdiction
ii. The SEBI Circular is applicable if debenture holders wish to implement a Resolution Plan to which the lenders are a party
iii. Dissenting ISIN level debenture holders are bound by the ICA /Resolution Plan
iv. The SEBI Circular has retroactive application

For dissenting debenture holders in the present case the court observed:

“The dissenting debenture holders would have been bound by the Resolution Plan if it had been approved in accordance with the Insolvency and Bankruptcy Code, 2016 or under an ICA as acceded to under the SEBI Circular. We accordingly deem it appropriate that dissenting debenture holders should be provided an option to accept the terms of the Resolution Plan. Alternatively, the dissenting debenture holders have a right to stand outside the proposed Resolution Plan framed under the lender‘s ICA and pursue other legal means to recover their entitled dues.”

The appeal was allowed in part, subject to the directions issued in the judgment under Article 142 of the Constitution.