INDEPENDENT SCHOOLS’ FEDERATION OF INDIA (REGD.) versus UNION OF INDIA AND ANOTHER

[2022] 13 S.C.R.

AINDEPENDENT SCHOOLS’ FEDERATION OF INDIA (REGD.)

UNION OF INDIA AND ANOTHER

(Civil Appeal No. 8162 of 2012)

AUGUST 29, 2022

[SANJIV KHANNA AND BELA M. TRIVEDI, JJ.]

Payment of Gratuity Act, 1972: ss.1(3)(c), 2(e), 13, 13A –Payment of Gratuity (Amendment) Act, 2009 – Amendment to s. 2(e)and insertion of s. 13A to the 1972 Act with retrospective effectCfrom 3.04.1997 vide the Amendment Act of 2009 whereby benefit ofgratuity to the teachers of private schools who have renderedcontinuous service for not less than 5 years, on their superannuation,retirement or resignation, or on their death or disablement due toaccident or disease – Constitutional validity of – High Courtdismissed the petitions of the several private schools challengedDthe constitutional validity of the amendments – In appeal beforethis Court, challenged on the ground that the Amendment Act, 2009overrules the judicial decision in Ahmedabad Private PrimaryTeachers’ Association, 2004 and violates the doctrine of separationof powers; and that the retrospective amendments are unreasonable,Eexcessive and harsh, and thus, unconstitutional – On appeal, Held:Legislature has constitutional powers to amend the language of theprovision that was the subject matter of the court decision, andsuch an amendment does not overrule the court decision –Overruling assumes decision based on the same law – In the instantcase, law is amended, and the defects are removed or cured, theFlaw has changed, and therefore, the earlier interpretation is nolonger applicable and becomes irrelevant – Doctrine of separationof powers demarcates the exclusive domains of the legislature, whichenacts the laws, and the courts which interpret the enacted law –When the legislature acts within its power to usher in valid lawGand rectify legal error, even after court ruling, the legislatureexercises its constitutional power to enact the law and does notoverrule an earlier court decision – As regards the challenge, thatthe retrospective amendments are unreasonable there are upper-cap limits on payment of gratuity –Though gratuity is computedwith reference to years of service, in view of upper cap limit, the

payment towards gratuity cannot exceed the specified amount, evenif the employee would be entitled to higher amount in view of theyears of the service rendered to the employer – Hence, theamendment is not unreasonable or harsh – The teachers werediscriminated to be denied benefit of gratuity, terminal benefit,which was payable to other employees of the private schools/educational institutions, including those engaged in administrativeand managerial work – Amendment with retrospective effect remediesthe injustice and discrimination suffered by the teachers on accountof legislative mistake – Amendment was necessary to ensure thatsomething which was due and payable to the teachers is not deniedto them due to defect in the statute.

Retroactive effect and retrospective operation – Distinctionbetween – Discussed.

Dismissing the appeals, the Court

HELD: 1.1 The first ground should not hold for long, asthe legislation in question rectifies the infirmities and defectspointed out by the Court, and the amended clause (e) to Section2, defining the word “employee” and the newly inserted Section13A with retrospective effect from 3rd April 1997, effectuate andcatalyse the object and purpose of the Notification No. S-42013/1/95-SS.(II). This power to legislate with retrospective effect,which vests in every sovereign legislature, is not taken away bya court decision. However, court decision cannot be overruledby the legislature. The legislature can amend the language of theprovision that was the subject matter of the court decision, andsuch an amendment does not overrule the court decision.Overruling assumes decision based on the same law. Wherethe law, as in the present case, has been amended, and the defectshave been removed or cured, the law changes, and therefore,the earlier interpretation is no longer applicable and becomesirrelevant. Doctrine of separation of powers demarcates theexclusive domains of the legislature, which enacts the laws, andthe courts’, which interpret the law as enacted. The earlierdecision in Ahmedabad Private Primary Teachers’ Association bythis Court had interpreted the law, that is, Section 2(e) of thePAG Act, as it then existed in the statute. The judgment evenacknowledged and prompted the legislature to enact legislation

Agranting the benefit of gratuity to teachers, who had been excludedbecause of the legal flaw. When the legislature acts within itspower to usher in valid law and rectify legal error, even aftera court ruling, the legislature exercises its constitutional powerto enact the law and does not overrule an earlier court decision.[Para 13][791-E-G; 792-A-B]B

1.2 The second ground is again devoid of any merit andsubstance. The legislature, vide the Amendment Act, 2009, hasgiven retrospective effect to the amended provision of Section2(e) and the newly inserted Section 13A with effect from 3rd April1997, which is also the date of the notification issued by theCGovernment under Section 1(3)(c), making the PAG Act applicableto the educational institutions with ten or more employees. Theamendment enforces and gives effect to what was intended bythe notification, but could not be achieved on account of thetechnical and legal defect. The lacuna, distortion in the languageDthat had the unwitting effect of leaving out teachers, has beenrectified so as to achieve the object and purpose behind theissuance of the notification, making the PAG Act applicable to alleducational institutions. The argument of the educationalinstitutions that they have been taken by surprise is incorrectand unacceptable as the legislation had cured the inadvertentEdefect in statute, as pointed out by this Court, through legislativerepair. Private schools, when they claim vested right arisingfrom the reason of defect, should not succeed, for acceptancewould be at the expense of teachers who were denied and deprivedof the intended benefit. Marginal inconvenience in the form ofFfinancial outgo or difficulty is of little weight, when curing of aninadvertent defect is made retrospectively in greater publicinterest, which consideration would overrule the interest of oneor some institutions. The observations of this Court inAhmedabad Private Primary Teachers’ Association were sufficientto indicate that legislation should intervene to grant the benefitGof gratuity to teachers. The contention that the private schoolswere sure to succeed as to deny the teachers the benefit of theNotification No. S-42013/1/95-SS.(II) dated 3rd April 1997, isquestionable and farfetched to be accepted. The challenge wascontested and had remained pending before the High Courts andHthen this Court. The private schools had relied on some

INDEPENDENT SCHOOLS’ FEDERATION OF INDIA (REGD.)v. UNION OF INDIA AND ANOTHER

judgments of this Court, but these judgments have interpretedthe word “employee” under other enactments. The law is subjectto uncertainty ex-ante when two or more views are possible, butthere may be certainty ex-post litigation in view of the law ofprecedents, which reduces uncertainty. [Para 14][792-D-G; 793-A-C]

1.3 secondary argument on behalf of the privateeducational institutions that they would be liable to pay gratuityfor period of service prior to 3rd April 1997, and, therefore, theamendments are unconscionable and tyrannous, is equallyfallacious for several reasons. The argument of unreasonablenessand that the amendment is financially confiscatory, predicated onpast liability, which may pre- date the notification effective from3rd April 1997, apart from the other reasons, is to be rejected asthere are upper-cap limits on payment of gratuity. Therefore,though gratuity is computed with reference to the years of service,in view of the upper-cap limit, the payment towards gratuity cannotexceed the specified amount, even if the employee would beentitled to higher amount in view of the years of the servicerendered to the employer. [Para 15, 16][793-D; 795-E-F]

1.4 The provisions of the PAG Act, even post theretrospective amendments, will apply only to those teachers whowere in service as on 3rd April 1997, and at the time of terminationhave rendered service of not less than 5 years. The period of 5years may be partly before 3rd April 1997, as the date on whichthe person was employed does not determine the applicability ofthe PAG Act. The date of termination of service, in the form ofsuperannuation, retirement, or resignation, or death ordisablement due to accident or disease, should be post theenforcement date, which in the present case is 3rd April 1997.The entire length of service, including the service period priorto 3rd April 1997, is to be counted for the purpose of computingthe entitlement condition of 5 years of service. This is the correcteffect of the ratio and decision in Management of Goodyear IndiaLimited’s case and the decisions explaining retroactive effect ofa statute. This legal position would be equally true and correctwhen the PAG Act was first enforced with effect from 16thSeptember 1972, and when Notification No. S-42013/1/95-SS.(II)

Aunder Section 1(3)(c) of the PAG Act was issued and enforcedwith effect from 3rd April, 1997. It would be the position in caseof all notifications issued under Section 1(3)(c) of the PAG Act,unless contrary intention is expressed.[Para 19][800-C-F]

1.5 The schools have claimed violation of Articles 14,B19(1)(g), 21 and 300-A of the Constitution of India which, are notviolated as, to deny gratuity benefits to the teachers uponenforcement of the notification No. S-42013/1/95-SS.(II) dated3rd April 1997 was itself an anomaly which mandatedcorrection. The effect of the decision in Ahmedabad PrivatePrimary Teachers’ Association’s case was that although privateCeducational institutions were covered under the PAG Act, gratuitybenefits could not be extended to teachers in view of the legalflaw in the definition, consequent to which they were not treatedas employees. The teachers were discriminated to be deniedbenefit of gratuity, terminal benefit, which was payable to otherDemployees of the private schools/educational institutions,including those engaged in administrative and managerial work.The amendment with retrospective effect remedies the injusticeand discrimination suffered by the teachers on account of alegislative mistake, which was understood after thepronouncement of the judgment in Ahmedabad Private PrimaryETeachers’ Association’s case. The amendment was necessary toensure that something which was due and payable to the teachersis not denied to them due to defect in the statute. Payment ofgratuity cannot be categorized as windfall or bounty payableby the private schools as it is one of the minimal conditions ofFservice.The argument of the private schools that they do not havecapacity and ability to pay gratuity to the teachers is unapt andparsimonious. All establishments are bound to follow the law,including the PAG Act. The private schools were certainly awareof the intent of the Government that the educational institutions,as an establishment, would be covered and must pay gratuity uponGissue of notification No. S-42013/1/95-SS.(II) dated 3rd April 1997.Some schools have raised an argument relying upon decision ofthis Court in T.M.A. Pai Foundation and Others v. State ofKarnataka and Others, which observes that as matter ofprinciple, charging of capitation fee or profiteering by educational

institutions is impermissible. However, the judgment does notstate that the teachers should not be paid gratuity. In fact, thejudgment holds that the educational institutions are entitled toreasonable surplus to meet the cost of expansion andaugmentation of the facilities and this does not amount toprofiteering. It is possible that in some States there are fee fixationlaws which will have to be complied with. But compliance withthese laws does not mean that the teachers should be deprivedand denied gratuity, which they were/ are entitled to receive asother employees of an educational institution. Regulation of feeis to ensure that there is no commercialisation and profiteering,and the effect is not to prohibit school from fixing and collecting“just and permissible school fee”. [Para 20][800-G-H; 801-A-B,D-G]1.6 The submission of the private schools was that thejudgments of this Court upholding retrospective amendmentsare valid only when there is tax implication as the Governmenthas to refund the paid taxes, is unfounded and irrational.Thepower to amend, which includes the power to amend the statutewith retrospective effect, is constitutional power vested withthe legislature, which is not confined and restricted to anyparticular type of statutes, namely, tax statutes. This Court wouldnot accept any attempt to circumscribe and limit the power vestedwith the sovereign legislature, thereby putting fetters when suchfetters are not prescribed by the Constitution. When and whichcases to exercise the power has to be left to the legislature. Incase the constitutional validity of the amendment act is challenged,the court is entitled to examine the relevant circumstances whichprompted the legislature to make retrospective amendment.Judicial review, when validity of an amendment act is challenged,is decided on the grounds of lack of legislative competence,violation of the fundamental rights or any other provisions of theConstitution of India. In the present case, the notification No. S-42013/1/95-SS.(II) dated 3rd April 1997 had ensured that thebenevolent provisions requiring payment of gratuity should beextended to the “employees” of the educational institutions. Theamendment with retrospective effect is to make the benevolentprovisions equally applicable to teachers. The amendment seeksto bring equality and give fair treatment to the teachers. It can

Ahardly be categorised as an arbitrary and high-handed exercise.[Para 22][802-D-H; 803-A]

1.7 The stay orders are vacated. The private schools wouldmake payment to the employees/teachers along with the interestin accordance with the provisions of the PAG Act within periodof 6 weeks from today and in case of default, the employees/teachers may move the appropriate forum to enforce payment inaccordance with the provisions of the PAG Act. [Para 26][807-B-

Management of Goodyear India Limited. v. Shri K.G.Devessar (1985) 4 SCC 45; - Relied (Para 25)

Ahmedabad Private Primary Teachers’ Association v.Administrative Officer and Others, (2004) 1 SCC 755 :[2004] 1 SCR 470; A. Sundarambal v. Government ofGoa, Daman and Diu and Others (1988) 4 SCC 42 :[1988] 1 Suppl. SCR 604; Haryana UnrecognisedSchools’ Association v. State of Haryana (1996) 4 SCC225 : [1996] 1 Suppl. SCR 253; State of Tamil Nadu v.Arooran Sugar Ltd. (1997) 1 SCC 326 : [1996] 8 Suppl.SCR 193; State of Gujarat and Another v. Raman LalKeshav Lal Soni and Others (1983) 2 SCC 33; [1983]2 SCR 287; T.R. Kapur and Others v. State of Haryanaand Others, (1986) Supp SCC 584. Union of India andOthers v. Tushar Ranjan Mohanty and Others (1994) 5SCC 450 : [1994] 1 Suppl. SCR 651; Shri Prithvi CottonMills Ltd. and Another v. Broach Borough Municipalityand Others (1969) 2 SCC 283 : [1970] 1 SCR 388;Ujagar Prints and Others (II) v. Union of India andOthers (1989) 3 SCC 488 : [1988] 3 Suppl. SCR 770;National Agricultural Cooperative Marking Federationof India Ltd. and Another v. Union of India and Others(2003) 5 SCC 23 : [2003] 3 SCR 1; Shanti ConductorsPrivate Limited and Another v. Assam State ElectricityBoard and Others (2019) 19 SCC 529; Vineeta Sharmav. Rakesh Sharma and Others (2020) 9 SCC 1: [2020]10 SCR 135; Darshan Singh v. Ram Pal Singh andAnother 1992 Supp. (1) SCC 191 Bakshish Singh v. M/s Darshan Engineering Works and Others, (1994) 1

INDEPENDENT SCHOOLS’ FEDERATION OF INDIA (REGD.)v. UNION OF INDIA AND ANOTHER

SCC 9 : [1993] 3 Suppl. SCR 178; T.M.A. PaiFoundation and Others v. State of Karnataka and Others(2002) 8 SCC 481 : [2002] 3 Suppl. SCR 587; IndianSchool, Jodhpur and Another v. State of Rajasthan andOthers. (2021) 10 SCC 517 : 2021 (5) JT 432; LohiaMachines Ltd. and Another v. Union of India and Others(1985) 2 SCC 197 : [1985] 2 SCR 686; JethanandBetabv. State of Delhi (1960) 1 SCR 755; Secretary of Statefor India in Council v. Hindusthan Co-operativeInsurance Society, Ltd. 1931 SCC OnLine PC 37;KhudaBux v. Manager, Caledonian Press 1954 SCCOnLine Cal 132; - Referred to.

Case Law Reference

A[1960] 1 SCR 755referred toPara 24(1985) 4 SCC 45relied/followed onPara 25

CIVIL APPELLATE JURISDICTION : Civil Appeal No.8162of 2012.

From the Judgment and Order dated 02.12.2011 of the High CourtBof Delhi at New Delhi in Writ Petition (C) No.6168 of 2010.

With

Civil Appeal Nos.8684 Of 2012, 2229, 9406 of 2013, 6316-6329,6330-6331 Of 2017, 3870, 7457, 7458, 7459, 7460, 7461, 7462 of 2018,SLP (C) Nos.12535 Of 2014, 15069 Of 2015, 19930 of 2017, 3293 ofC2019 2235 of 2020, Writ Petition (Civil) No.44 Of 2016, Writ Petition(Civil) No.1158 of 2019 And Transfer Case (Civil) No.104 of 2015.

Vikramjeet Banerjee, AAG, S. K. Gupta, Bhuvan Kapoor, Ms.Alka Agrawal, Ms. Swati Ghildiyal, Siddhartha Sinha, Ms. Shruti Agarwal,Shivam Singhania, Nring Chamwibe Zeliang, Prashant Rawat, Ms. JanhviDPrakash, Gurmeet Singh Makker, Navanjay Mahapatra, Tathagat Sharma,Aditya Mishra, Raman Yadav, Amrish Kumar, Avi Singh, Manohar Pratap,Karan Dhalla, Aditya Purohit, Mizba Dhebak, Ranjan Kumar Pandey,Amol Nirmalkumar Suryawanshi, R. P. Gupta, Ashok Mathur, AshwaniKumar, Mishra Saurabh, Ms. Shobha Gupta, Nishant Bahuguna, ShubhamJalan, Ms. Prachi Sharma, Ms. Sakshi Tiwari, Ms. Kamini Jaiswal,ENachiketa Joshi, Ms. Sucheta Joshi, Ms. Himadri Haksar, Ms. MedhaviMishra, Niraj Sharma, Ankit Goel, Kunal Verma, Parmanand Gaur, AjitPravin Wagh, Sudhanshu S. Choudhari, Amrik Singh, Shreekant NeelappaTerdal, Sumeer Sodhi, Dhruv Wadhwa, Ms. Deepanwita Priyanka, Ms.Ruchi Kohli, Ms. Srishti Mishra, Ms. Ranjeeta Rohatgi, Ms. SamtenFDoma, Naresh Kumar, Rajesh Imandar, Shashwat Solanki, Ms. RevantaSolanki, Wasim L. Shaikh, Rauf Rahim, Mrs. Anil Katiyar, Advs. for theappearing parties.

The Judgment of the Court was delivered by

SANJIV KHANNA, J.GLeave granted in the special leave petitions.

2. The civil appeals by way of special leave, which impugn thejudgements of the High Court of Allahabad- Lucknow Bench[1], the High

1 City Montessori School and Another v. Union of India and Others., MiscellaneousBench No. 3075/2015; and City Montessari School v. Appellate Authority, Misc. SingleHNo. 4583/2017.

Court of Gujarat[2], the High Court of Delhi[3], the High Court of Bombay-Aurangabad Bench[4], the High Court of Punjab and Haryana[5], the HighCourt of Chhattisgarh- Bilaspur Bench[6] and the High Court of MadhyaPradesh,-Indore Bench[7], as well as batch of writ petitions under Article32 of the Constitution of India, were heard together as they involve acommon question – constitutional validity of the amendment to Section2(e) and insertion of Section 13A to the Payment of Gratuity Act, 1972[8],with retrospective effect from 3[rd] April 1997 vide the Payment of Gratuity(Amendment) Act, 2009[9].

3. The PAG Act enacted and enforced with effect from 16[th]September 1972, requires payment of gratuity to an employee after hehas rendered continuous service for not less than 5 years, on hissuperannuation, retirement or resignation or on his death or disablementdue to accident or disease.[10 ]However, sub-section (3) to Section 1 ofthe PAG Act restricts its applicability to the following establishments :

“1. Short title, extent, application and commencement. –

xx xx xx

(3) It shall apply to –

2 Saraswati Vidya Mandal v. Ashaben Vinubhai Majmudar and Another, S.C.A. No.17839/ 2011 and 11 other cases; Jain Citizens Education Society, Surendranagar andAnother v. Union of India and Others, S.C.A. No. 9022/2011 and 1 other Case; andNalanda Kelavani Mandal v. Shri Amrutbhai Nathudas Patel and Another, S.C.A. No.18772/2015, and 5 other cases.

3 Independent Schools’ Federation of India (Regd.) v. Union of India & Anr., W.P. (C)No. 6168/2010; and Maharishi Shiksha Sansthan Registered Society v. Union of Indiaand Another., W.P(C) 4696/2012.

4 Saint Xaviers High School v. Shailaja Vishnu Deshpande., Writ Petition No. 15344/2017; and Saint Xaviers High School v. Jayashree Shamal Ghosh, Writ Petition No.15282/2019.

5 The Sonipat Hindu Educational & Charitable Society v. Union of India and Another,C.W.P. No. 17643/2010 (O&M); Maharishi Dayanand Education Society and others v.Union of India and Others, C.W.P.16884/2012; and Independent Schools Association,Chandigarh v. Union of India and Others, C.W.P. No. 23489/2011.

6 The Secretary, Board of Secondary Education and Others v. Union of India andOthers, W.P.L. No. 138/2012 and 1 other case.

7 Bal Niketan Sangh through Smt. Meena Phadke v. State of Madhya Pradesh & Others.,Writ Petition No. 5508/ 2014.

8 For short, “PAG Act”.

9 For short, “Amendment Act, 2009”.

10 Section 4 of the PAG Act.

(a) every factory, mine, oilfield, plantation, port and railwaycompany;

(b) every shop or establishment within the meaning of any law forthe time being in force in relation to shops and establishments in aState, in which ten or more persons are employed, or wereBemployed, on any day of the preceding twelve months;

(c) such other establishments or class of establishments, in whichten or more employees are employed, or were employed, on anyday of the preceding twelve months, as the Central Governmentmay, by notification, specify in this behalf.”

In the present case, we are only concerned with clause (c) andnot clauses (a) and (b) to sub-section (3) to Section 1 of the PAG Act.As per clause (c), the PAG Act applies to an establishment or class ofestablishments in which ten or more employees are employed, as theCentral Government may, by notification, specify on this behalf.[11]

4. In exercise of powers conferred by clause (c) to Section 1(3)of PAG Act vide notification No. S.O. 239, the provisions of the PAGAct were made applicable to the “local bodies” in which ten or morepersons are employed, as class of establishments, with effect from 8[th]January 1982. As result, the schools under the local bodies with ten orEmore employees became liable to pay gratuity to their employees.However, the notification did not apply to private schools.

5. By Notification No. S-42013/1/95-SS.(II) issued by the Ministryof Labour and Employment, Government of India on 3[rd] April, 1997, theprovisions of the PAG Act have been made applicable to the educationalFinstitutions with ten or more employees. The private schools beingeducational institutions, in which ten or more persons are employed,became liable to pay gratuity to their employees as per the provisions ofthe PAG Act.

6. However, some private schools raised dispute claiming thatthe teachers in educational institutions or schools are not “employee” asGdefined in Section 2(e) of the PAG Act. The expression “employee” in

11 Sub-section 3A to Section 1, inserted by the Payment of Gratuity (Second Amendment)Act, 1984 with effect from 18[th] May 1984, states that shop or establishment to whichthe PAG Act applies, shall continue to be governed by the enactment, notwithstandingthe number of persons employed therein, at any time after the PAG Act has becomeHapplicable, falls below ten.

clause (e) to Section 2, post the Payment of Gratuity (Amendment) Act,1994, which came into effect from 24[th] May 1994, at that time, readthus:

“2. Definitions. –

xx xx xx

(e) employee means any person (other than apprentice) employedon wages, in any establishment, factory, mine, oilfield, plantation,port, railway company or shop, to do any skilled, semi-skilled, orunskilled, manual, supervisory, technical or clerical work, whetherthe terms of such employment are express or implied, and whetheror nor such person is employed in managerial or administrativecapacity, but does not include any such person who holds postunder the Central Government or State Government and isgoverned by any other Act or by any rules providing for paymentof gratuity.”

The contention that the teachers did not fulfil the description ofthe employees, who are skilled, semi-skilled or unskilled persons employedon wages, was accepted by the Full Bench of the High Court of Gujaratvide judgment dated 4[th] May 2001[12]. Thus, the teachers were deniedthe benefit of gratuity, but other employees of the private schools, wereentitled to the benefit of gratuity.

7. This decision of the High Court of Gujarat was impugned by anassociation of teachers – Ahmedabad Private Primary Teachers’Association, before this Court, but their challenge was rejected videjudgment dated 13[th] January 2004[13]. Applying the doctrine of parimateria, this Court held that the expression “employee”, as defined videclause (e) to Section 2, is restrictive and not expansive. Relying ondecisions in A. Sundarambalv. Government of Goa, Daman and Diuand Others[14 ]and Haryana Unrecognised Schools’ Associationv. Stateof Haryana[15], while interpreting the definition of an “employee” underthe Minimum Wages Act, 1948, and the Payment of Bonus Act, 1965, asalso the definition of “workmen” under the Industrial Disputes Act, 1947,

12 Shantiben L. Christian v. Administrative Officer, Ahmedabad Municipal SchoolBoard,Special Civil Application No. 5272 of 1987.

13 Ahmedabad Private Primary Teachers’ Association v. Administrative Officer andOthers, (2004) 1 SCC 755.

14 (1988) 4 SCC 42.

15 (1996) 4 SCC 225.

Athis Court pointed to the difference in the definition of word “employee”in the Employees’ Provident Fund and Miscellaneous Provisions Act,1952. Accordingly, teachers who impart education to students were heldnot to be an “employee” under Section 2(e) of the PAG Act as they donot perform any kind of skilled, unskilled, semi-skilled, manual, supervisory,managerial, administrative, technical or clerical work. Reasoning inBAhmedabad Private Primary Teachers’ Association (supra) iscrystalized in paragraph 25 of the judgment, which reads:

“25. The legislature was alive to various kinds of definitions ofthe word “employee” contained in various previous labourenactments when the Act was passed in 1972. If it intended toCcover in the definition of “employee” all kinds of employees, itcould have as well used such wide language as is contained inSection 2(f) of the Employees’ Provident Funds Act, 1952 whichdefines “employee” to mean “any person who is employed forwages in any kind of work, manual or otherwise, in or inDconnection with the work of an establishment …”. Non-useof such wide language in the definition of “employee” in Section2(e) of the Act of 1972 reinforces our conclusion that teachersare clearly not covered in the definition.”

Nevertheless, being conscious that the teachers would be therebyEdeprived of the benefit of gratuity, the Court had observed and clarified:

“26. Our conclusion should not be misunderstood that teachersalthough engaged in very noble profession of educating our younggeneration should not be given any gratuity benefit. There arealready in several States separate statutes, rules and regulationsFgranting gratuity benefits to teachers in educational institutionswhich are more or less beneficial than the gratuity benefits providedunder the Act. It is for the legislature to take cognizance of situationof such teachers in various establishments where gratuity benefitsare not available and think of separate legislation for them inthis regard. That is the subject-matter solely of the legislature toGconsider and decide.”

8. On 26[th] November 2007, the Payment of Gratuity (Amendment)Bill, 2007, was introduced in the Parliament seeking to amend the definitionof the word “employee” and thereby rectify the error or lacuna identifiedby this Court in Ahmedabad Private Primary Teachers’ AssociationH

(supra). The object and reasons, as stated and obvious, were to extendthe benefit of gratuity to teachers of private educational institutions. Thebill was referred to the Standing Committee on 10[th] December 2007.After due deliberations and in-depth consideration, the StandingCommittee deemed it appropriate to suggest changes vide the 26[th]Standing Committee Report. The report, on the aspect of grant of gratuityto teachers with effect from 3[rd] April, 1997 states:

“36…The Committee feel that implementing the law from theyear 2004 will cause irreparable loss to large number of teachersof the country, particularly to those who have already retired. TheCommittee, therefore, call upon the Government to make the lawapplicable with retrospective effect, i.e. from the date ofnotification in the year 1997. This will provide the needed succouras well as justice to all those affected persons who were deniedtheir rightful benefits due to some technical flaw/legal lacuna inthe definition of the term ‘employee’ as contained in Section 2 (e)of the Payment of Gratuity Act, 1972.”

9. Accepting the said recommendation of the 26[th] StandingCommittee Report, the Payment of Gratuity (Amendment) Bill, 2009was introduced in the Parliament on 24[th] February 2009 and was passedon 31[st] December 2009. Clause (e) to Section 2 of the PAG Act wasamended with retrospective effect from 3[rd] April, 1997, and reads:

“2. Definitions. –

xx xx xx

(e) “employee”means any person (other than an apprentice)who is employed for wages, whether the terms of such employmentare express or implied, in any kind of work, manual or otherwise,in or in connection with the work of factory, mine, oilfield,plantation, port, railway company, shop or other establishment towhich this Act applies, but does not include any such person whoholds post under the Central Government or State Governmentand is governed by any other Act or by any rules providing forpayment of gratuity;”

Further, Section 13A was inserted also with effect from 3[rd] April1997 and reads :

“13A. Validation of payment of gratuity.–Notwithstandinganything contained in any judgement, decree or order of any court,

Afor the period commencing on and from the 3rd day of April, 1997and ending on the day on which the Payment of Gratuity(Amendment) Act, 2009, receives the assent of the President, thegratuity shall be payable to an employee in pursuance of thenotification of the Government of India in the Ministry of Labourand Employment vide number S.O. 1080, dated the 3rd day ofBApril, 1997 and the said notification shall be valid and shall bedeemed always to have been valid as if the Payment of Gratuity(Amendment) Act, 2009 had been in force at all material timesand the gratuity shall be payable accordingly:Provided that nothing contained in this section shall extend, orCbe construed to extend, to affect any person with any punishmentor penalty whatsoever by reason of the non-payment by him ofthe gratuity during the period specified in this section which shallbecome due in pursuance of the said notification.”

10. The object and reasons for the Amendment Act, 2009 refersDto the judgment in Ahmedabad Private Primary Teachers’ Association(supra), and states that the legislature, to cover the definition of“employee” to all kinds of employees, has used language similar to thewide language of clause (f) of Section 2 of the Employees’ ProvidentFunds and Miscellaneous Provisions Act, 1952. It is also crystal clearEthat the Parliament has passed and enacted the Amendment Act, 2009to confer, with retrospective effect from the date of the notification on3[rd] April 1997, benefit of gratuity to the teachers who have renderedcontinuous service for not less than 5 years, on their superannuation,retirement or resignation, or on their death or disablement due to accidentor disease.F

11. Several private schools challenged the constitutional validityof the amendments, which writ petitions have been dismissed by sevenHigh Courts, as mentioned in the first paragraph of this judgment. Theseappeals by way of special leave impugn these judgments. Some privateschools have also filed writ petitions under Article 32 of the ConstitutionGof India before us.

12. The power of the Parliament and State Legislatures underArticles 245, 246 and 248 of the Constitution of India, as held by thisCourt in State of Tamil Nadu v. Arooran Sugar Ltd.[16 ]and several

other decisions of this Court, includingState of Gujarat and Another v.Raman Lal Keshav Lal Soni and Others[17], T.R. Kapur and Othersv.State of Haryana and Others[18]and Union of India and Othersv.Tushar Ranjan Mohanty and Others[19], to legislate, embraces the powerto amend, delete or obliterate the statute or enact statute prospectivelyor retrospectively. To be fair, the appellants and the writ petitioners donot contest the competency, and that the legislature has the power toamend an already enacted law or enact new law with retrospectiveeffect. They also do not dispute that the amendment to Section 2(e), andthe insertion of Section 13A have been given retrospective effect. Thetwo main grounds of challenge raised and required to be considered innutshell can be summarised as:

(a) The legislation vide the Amendment Act 2009 overrules thejudicial decision in Ahmedabad Private Primary Teachers’Association (supra) and violates the doctrine of separation ofpowers.

(b) The retrospective amendments are unreasonable, excessiveand harsh, and therefore, unconstitutional.

13. The first ground should not hold us for long, as the legislationin question rectifies the infirmities and defects pointed out by the Court,and the amended clause (e) to Section 2, defining the word “employee”and the newly inserted Section 13A with retrospective effect from 3[rd]April 1997, effectuate and catalyse the object and purpose of theNotification No. S-42013/1/95-SS.(II). This power to legislate withretrospective effect, which vests in every sovereign legislature, is nottaken away by court decision. However, court decision cannot beoverruled by the legislature. The legislature can amend the language ofthe provision that was the subject matter of the court decision, and suchan amendment does not overrule the court decision. Overruling assumesa decision based on the same law. Where the law, as in the present case,has been amended, and the defects have been removed or cured, thelaw changes, and therefore, the earlier interpretation is no longerapplicable and becomes irrelevant. Doctrine of separation of powersdemarcates the exclusive domains of the legislature, which enacts thelaws, and the courts’, which interpret the law as enacted. The earlier

17 (1983) 2 SCC 33.

18 (1986) Supp SCC 584.

19 (1994) 5 SCC 450.

Adecision in Ahmedabad Private Primary Teachers’ Association (supra)by this Court had interpreted the law, that is, Section 2(e) of the PAGAct, as it then existed in the statute. The judgment even acknowledgedand prompted the legislature to enact legislation granting the benefit ofgratuity to teachers, who had been excluded because of the legal flaw.When the legislature acts within its power to usher in valid law andBrectify legal error, even after court ruling, the legislature exercisesits constitutional power to enact the law and does not overrule an earliercourt decision. This principle is too well settled to require elaboratequotations, albeit reference can be made amongst other cases to ShriPrithvi Cotton Mills Ltd. and Another v. Broach BoroughCMunicipality and Others[20], Ujagar Prints and Others (II) v. Unionof India and Others[21] and National Agricultural CooperativeMarking Federation of India Ltd. and Anotherv. Union of Indiaand Others[22].

14. The second ground is again devoid of any merit and substance.DThe legislature, vide the Amendment Act, 2009, has given retrospectiveeffect to the amended provision of Section 2(e) and the newly insertedSection 13A with effect from 3[rd] April 1997, which is also the date of thenotification issued by the Government under Section 1(3)(c), making thePAG Act applicable to the educational institutions with ten or moreemployees. The amendment enforces and gives effect to what wasEintended by the notification, but could not be achieved on account of thetechnical and legal defect. The lacuna, distortion in the language thathad the unwitting effect of leaving out teachers, has been rectified so asto achieve the object and purpose behind the issuance of the notification,making the PAG Act applicable to all educational institutions. TheFargument of the educational institutions that they have been taken bysurprise is incorrect and unacceptable as the legislation had cured theinadvertent defect in statute, as pointed out by this Court, throughlegislative repair. Private schools, when they claim vested right arisingfrom the reason of defect, should not succeed, for acceptance would be

at the expense of teachers who were denied and deprived of the intendedGbenefit. Marginal inconvenience in the form of financial outgo or difficultyis of little weight, when curing of an inadvertent defect is maderetrospectively in greater public interest, which consideration will overrule

20 (1969) 2 SCC 28321 (1989) 3 SCC 488.H22 (2003) 5 SCC 23.

the interest of one or some institutions.[23] We find little merit in thisargument also for the reason, that the observations of this Court inAhmedabad Private Primary Teachers’ Association (supra) inparagraph 26 were sufficient to indicate that legislation should interveneto grant the benefit of gratuity to teachers. The contention that the privateschools were sure to succeed as to deny the teachers the benefit of theNotification No. S-42013/1/95-SS.(II) dated 3[rd] April 1997, is questionableand farfetched to be accepted. The challenge was contested and hadremained pending before the High Courts and then this Court. The privateschools had relied on some judgments of this Court, but these judgmentshave interpreted the word “employee” under other enactments. Thelaw is subject to uncertainty ex-ante when two or more views arepossible, but there may be certainty ex-post litigation in view of the lawof precedents, which reduces uncertainty.15. secondary argument on behalf of the private educationalinstitutions that they would be liable to pay gratuity for period of serviceprior to 3[rd] April 1997, and, therefore, the amendments are unconscionableand tyrannous, is equally fallacious for several reasons. somewhatsimilar controversy had arisen in the case of Management of GoodyearIndia Limited. v. Shri K.G. Devessar[24], wherein the employee was inservice from 24[th] January 1961 to 31[st] December 1974. On 16[th]September 1972, the date when the PAG Act came into effect, he wasdrawing salary of more than Rs. 1,000/- per month and hence, in termsof the then definition of the word “employee” under the PAG Act, whichexcluded those drawing salary of more than Rs. 1,000/- per month, asper the employer- management, the employee was not entitled to gratuity.Rejecting the contention, this Court held that the gratuity is payable to anemployee as per the mandate of Section 4[25 ]of the PAG Act, after he

23 See paragraph 69 in Ujagar Prints andOthers (II) v. Union of India and Others,(1989) 3 SCC 488.24 (1985) 4 SCC 45.

25 4. Payment of gratuity.––(1) Gratuity shall be payable to an employee on thetermination of his employment after he has rendered continuous service for not lessthan five years,––

(a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease:

Provided that the completion of continuous service of five years shall not benecessary where the termination of the employment of any employee is due to death ordisablement:

Ahas rendered continuous service for not less than 5 years on hissuperannuation, retirement or resignation or on his death or disablement

Provided further that in the case of death of the employee, gratuity payable tohim shall be paid to his nominee or, if no nomination has been made, to his heirs, andwhere any such nominees or heirs is minor, the share of such minor, shall be depositedwith the controlling authority who shall invest the same for the benefit of such minorBin such bank or other financial institution, as may be prescribed, until such minorattains majority.

Explanation.–– For the purposes of this section, disablement means suchdisablement as incapacitates an employee for the work which he was capable ofperforming before the accident or disease resulting in such disablement. (2) For every completed year of service or part thereof in excess of six months,the employer shall pay gratuity to an employee at the rate of fifteen days’ wages basedCon the rate of wages last drawn by the employee concerned: Provided that in the case of piece-rated employee, daily wages shall becomputed on the average of the total wages received by him for period of threemonths immediately preceding the termination of his employment, and, for this purpose,the wages paid for any overtime work shall not be taken into account: Provided further that in the case of an employee who is employed in seasonalestablishment and who is not so employed throughout the year, the employer shall payDthe gratuity at the rate of seven days’ wages for each season.Explanation.–– In the case of monthly rated employee, the fifteen days’wages shall be calculated by dividing the monthly rate of wages last drawn by him bytwenty-six and multiplying the quotient by fifteen. (3) The amount of gratuity payable to an employee shall not exceed suchamount as may be notified by the Central Government from time to time.

(4) For the purpose of computing the gratuity payable to an employee who isEemployed, after his disablement, on reduced wages, his wages for the period precedinghis disablement shall be taken to be the wages received by him during that period, andhis wages for the period subsequent to his disablement shall be taken to be the wages asso reduced.

(5) Nothing in this section shall affect the right of an employee to receivebetter terms of gratuity under any award or agreement or contract with the employer. (6) Notwithstanding anything contained in sub-section (1),––F (a) the gratuity of an employee, whose services have been terminatedfor any act, wilful omission or negligence causing any damage or loss to,or destruction of, property belonging to the employer shall be forfeitedto the extent of the damage or loss so caused; (b) the gratuity payable to an employee may be wholly or partiallyforfeited

(i) if the services of such employee have been terminated for hisriotous or disorderly conduct or any other act of violence on hispart, or

(ii) if the services of such employee have been terminated for anyact which constitutes an offence involving moral turpitude, providedthat such offence is committed by him in the course of hisemployment.H (7). *********

due to accident or disease, when such event has occurred post theenforcement of the PAG Act. The Court rejected the submission onbehalf of the employer-management that an employee is entitled to gratuityonly when, both on the date when the PAG Act came into force, and onthe date when the employee retired, he/she was drawing wages notexceeding Rs.1,000/- per month. The Court observed that to approvethe submission of the employer-management would render whole classof workers, who were during the course of their employment drawingsalary less than Rs. 1,000/- per month but on the eve of their retirementwere getting wages of Rs. 1,000/- per month, without the benefit ofgratuity. This could not have been the intention of the Parliament. Thereasonable way to construe Section 4 in the light of Section 2(e) of thePAG Act would be to hold that when the employees’ services areterminated for any reason mentioned in Section 4 after coming into forceof the PAG Act, the employee would be entitled to the payment of gratuityif he has rendered continuous service for not less than 5 years and forthat period during which he satisfied the definition of “employee” underSection 2(e). It does not matter whether that period comes before thecommencement of the PAG Act. Once that condition is satisfied, thenext and only question would be regarding the amount of gratuity payable.

16. The argument of unreasonableness and that the amendmentis financially confiscatory, predicated on past liability, which may pre-date the notification effective from 3[rd] April 1997, apart from the otherreasons, is to be rejected as there are upper-cap limits on payment ofgratuity. Therefore, though gratuity is computed with reference to theyears of service, in view of the upper-cap limit, the payment towardsgratuity cannot exceed the specified amount, even if the employee wouldbe entitled to higher amount in view of the years of the service renderedto the employer.

17. In the context of applicability of an enactment, the courtshave drawn difference between retroactive effect and retrospectiveoperation. Shanti Conductors Private Limited and Another v. AssamState Electricity Board and Others[26 ]refers to earlier case law andelucidates:

“64. The opinion of Gowda, J. dated 31-8-2016 although holdsthat the Act is not retrospective but he holds the Act retroactive.The word “retroactive” has been defined in Black’s LawDictionary in the following words:

“Retroactive, adj.(17c) (Of statute, ruling, etc.) extending inscope or effect to matters that have occurred in the past. —Also termed retrospective. Cf. Prospective (1).–retroact, vb.”

65. The two-Judge Bench of this Court in State Bank’s StaffUnion (Madras Circle) v. Union of India, had occasion toBexamine the concept of retroactive and retrospective. In paras 20and 21 of the judgment the following has been laid down: (SCC p.593)

“20. Judicial Dictionary (13th Edn.) by K.J. Aiyar,Butterworth, p. 857, states that the word “retrospective” whenCused with reference to an enactment may mean (i) affectingan existing contract; or (ii) reopening up of past, closed andcompleted transaction; or (iii) affecting accrued rights andremedies; or (iv) affecting procedure. Words and Phrases,Permanent Edn., Vol. 37-A, pp. 224-25, defines “retrospectiveor retroactive law” as one which takes away or impairs vestedDor accrued rights acquired under existing laws. retroactivelaw takes away or impairs vested rights acquired under existinglaws, or creates new obligation, imposes new duty, orattaches new disability, in respect to transactions orconsiderations already past.

21. In Advanced Law Lexicon by P. Ramanatha Aiyar (3rd Edn.,2005) the expressions “retroactive” and “retrospective” have beendefined as follows at p. 4124, Vol. 4:

‘Retroactive.—Acting backward; affecting what is past.

(Of statute, ruling, etc.) extending in scope or effect to mattersthat have occurred in the past. —Also termed retrospective.(Black’s Law Dictionary, 7th Edn., 1999)

“Retroactivity” is term often used by lawyers but rarely defined.On analysis it soon becomes apparent, moreover, that it is used tocover at least two distinct concepts. The first, which may be calledG“true retroactivity”, consists in the application of new rule oflaw to an act or transaction which was completed before the rulewas promulgated. The second concept, which will be referred toas “quasi-retroactivity”, occurs when new rule of law is appliedto an act or transaction in the process of completion … TheHfoundation of these concepts is the distinction between completed

and pending transactions … [T.C. Hartley, The Foundations ofEuropean Community Law, p. 129 (1981)].

xx xx xx

Retrospective.—Looking back; contemplating what is past.

Having operation from past time.

“Retrospective” is somewhat ambiguous and that good deal ofconfusion has been caused by the fact that it is used in moresenses than one. In general, however, the courts regard asretrospective any statute which operates on cases or factscoming into existence before its commencement in the sensethat it affects, even if for the future only, the character orconsequences of transactions previously entered into or of otherpast conduct. Thus, statute is not retrospective merelybecause it affects existing rights; nor is it retrospective merelybecause part of the requisite for its action is drawn from atime antecedent to its passing.’ (Vol. 44, Halsbury’s Laws ofEngland, 4th Edn., p. 570, para 921.)”

66. Further in Jay Mahakali Rolling Mills v. Union of India,explaining retroactive and retrospective the following has beenlaid down: (SCC p. 200, para 8)

“8. “Retrospective” means looking backward, contemplatingwhat is past, having reference to statute or things existingbefore the statute in question. Retrospective law means lawwhich looks backward or contemplates the past; one, which ismade to affect acts or facts occurring, or rights occurring,before it comes into force. Retroactive statute means statute,which creates new obligation on transactions or considerationsor destroys or impairs vested rights.”

67. Retroactivity in the context of the statute consists of applicationof new rule of law to an act or transaction which has beencompleted before the rule was promulgated.”

18. Vineeta Sharma v. Rakesh Sharma and Others[27]observesthat retrospective statute operates backwards and takes away vestedrights accrued under law. The retroactive statute does not operateretrospectively, but it operates in future, albeit it does not become

27 (2020) 9 SCC 1.

Aretrospective in operation when the operation is based on the characterand status that arose earlier. Character or event which has happened inpast or requisites which have been drawn from antecedent events cannotbe necessarily construed as having retrospective effect. retrospectivestatute means statute which creates new obligation on transactionsor considerations already past or destroyed or impaired vested rights onBand from the retrospective date.[28] The judgment in Vineeta Sharma(supra) relies on and quotes from an earlier decision in Darshan Singhv. Ram Pal Singh and Another,[29] which portion we would also like toquote:

C“35. Mr Sachar relies on Gokal Chand v. Parvin Kumari,Garikapati Veeraya v. N. Subbiah Choudhry , Jose Da Costav. Bascora Sadasiva Sinai Narcornim , Govind Das v. CIT ,Henshall v. Porter , United Provinces v. Atiqa Begum, in supportof his submission that the Amendment Act was not maderetrospective by the legislature either expressly or by necessaryDimplication as the Act itself expressly provided that it shall bedeemed to have come into force on 23-1-1973; and thereforethere would be no justification to giving it retrospective operation.The vested right to contest which was created on the alienationhaving taken place and which had been litigated in the court, arguesMr Sachar, could not be taken away. In other words, the vestedEright to contest in appeal was not affected by the AmendmentAct. However, to appreciate this argument we have to analyseand distinguish between the two rights involved, namely, the rightto contest and the right to appeal against the lower court’s decision.Of these two rights, while the right to contest is customary right,Fthe right to appeal is always creature of statute. The change ofthe forum for appeal by enactment may not affect the right ofappeal itself. In the instant case we are concerned with the rightto contest and not with the right to appeal as such. There is alsono dispute as to the propositions of law regarding vested rightsbeing not taken away by an enactment which is ex facie or byGimplication not retrospective. But merely because an Act envisagesa past act or event in the sweep of its operation, it may notnecessarily be said to be retrospective. Retrospective, according

28 In the present case, the constitutional mandate of Article 20(1) is not required to beexamined and considered.29 1992 Supp. (1) SCC 191.H

to Black’s Law Dictionary, means looking backward;contemplating what is past; having reference to statute or thingsexisting before the Act in question. Retrospective law, accordingto the same dictionary, means law which looks backwards orcontemplates the past; one which is made to affect acts or factsoccurring, or rights occurring, before it came into force. Everystatute which takes away or impairs vested rights acquired underexisting laws, or creates new obligation, imposes new duty, orattaches new disability in respect to transactions or considerationsalready past. Retroactive statute means statute which creates anew obligation on transactions or considerations already past ordestroys or impairs vested rights.

36. In Halsbury’s Laws of England (4th Edn., Vol. 44, at para921) we find:

“921. Meaning of “retrospective”.—It has been said that“retrospective” is somewhat ambiguous and that good dealof confusion has been caused by the fact that it is used in moresenses than one. In general, however, the courts regard asretrospective any statute which operates on cases or factscoming into existence before its commencement in the sensethat it affects, even if for the future only, the character orconsequences of transactions previously entered into or of otherpast conduct. Thus statute is not retrospective merely becauseit affects existing rights; or is it retrospective merely becausea part of the requisites for its action is drawn from timeantecedent to its passing.’

37. We are inclined to take the view that in the instant case thelegislature looked back to 23-1-1973 and not beyond to put an endto the custom and merely because on that cut-off date somecontests were brought to abrupt end would not make theAmendment Act retrospective. In other words, it would not beretrospective merely because part of the requisites for its actionwas drawn from time antecedent to the Amendment Act cominginto force. We are also of the view that while providing that “noperson shall contest any alienation of immovable property whetherancestral or non-ancestral or any appointment of an heir to suchproperty”, without preserving any right to contest such alienationsor appointments as were made after the coming into force of the

APrincipal Act and before the coming into force of the AmendmentAct, the intention of the legislature was to cut off even the vestedright; and that it was so by implication as well. There is no disputeas to the proposition that retrospective effect is not to be given toan Act unless, the legislature made it so by express words ornecessary implication. But in the instant case it appears that thisBwas the intention of the legislature. Similarly courts will construea provision as conferring power to act retroactively when clearwords are used. We find both the intention and language of theAmendment Act clear in these respects.”19. The provisions of the PAG Act, even post the retrospectiveCamendments, will apply only to those teachers who were in service ason 3[rd] April 1997, and at the time of termination have rendered serviceof not less than 5 years. The period of 5 years may be partly before 3[rd]April 1997, as the date on which the person was employed does notdetermine the applicability of the PAG Act. The date of termination ofDservice, in the form of superannuation, retirement, or resignation, or deathor disablement due to accident or disease, should be post the enforcementdate, which in the present case is 3[rd] April 1997. The entire length ofservice, including the service period prior to 3[rd] April 1997, is to be countedfor the purpose of computing the entitlement condition of 5 years ofservice. This is the correct effect of the ratio and decision in ManagementEof Goodyear India Limited. (supra) and the decisions explainingretroactive effect of statute. This legal position would be equally trueand correct when the PAG Act was first enforced with effect from 16[th]September 1972, and when Notification No. S-42013/1/95-SS.(II) underSection 1(3)(c) of the PAG Act was issued and enforced with effectFfrom 3[rd] April, 1997. It would be the position in case of all notificationsissued under Section 1(3)(c) of the PAG Act, unless contrary intentionis expressed, which is not the situation in the present case and thus neednot be examined.

20. The schools have claimed violation of Articles 14, 19(1)(g), 21Gand 300-A of the Constitution of India which, in our opinion, are notviolated as, to deny gratuity benefits to the teachers upon enforcementof the notification No. S-42013/1/95-SS.(II) dated 3[rd] April 1997 wasitself an anomaly which mandated correction. The effect of the decisionin Ahmedabad Private Primary Teachers’ Association (supra) wasthat although private educational institutions were covered under theH

PAG Act, gratuity benefits could not be extended to teachers in view ofthe legal flaw in the definition, consequent to which they were not treatedas employees. The teachers were discriminated to be denied benefit ofgratuity, terminal benefit, which was payable to other employees ofthe private schools/educational institutions, including those engaged inadministrative and managerial work. The amendment with retrospectiveeffect remedies the injustice and discrimination suffered by the teacherson account of legislative mistake, which was understood after thepronouncement of the judgment in Ahmedabad Private PrimaryTeachers’ Association (supra). The amendment was necessary toensure that something which was due and payable to the teachers is notdenied to them due to defect in the statute. Payment of gratuity cannotbe categorized as windfall or bounty payable by the private schoolsas it is one of the minimal conditions of service.[30] In this background, theargument of the private schools that they do not have capacity and abilityto pay gratuity to the teachers is unapt and parsimonious. Allestablishments are bound to follow the law, including the PAG Act. Asobserved earlier, the private schools were certainly aware of the intentof the Government that the educational institutions, as an establishment,would be covered and must pay gratuity upon issue of notification No.S-42013/1/95-SS.(II) dated 3[rd] April 1997. Some schools have raised anargument relying upon decision of this Court in T.M.A. Pai Foundationand Others v. State of Karnataka and Others[31], which observes thatas matter of principle, charging of capitation fee or profiteering byeducational institutions is impermissible. However, the judgment doesnot state that the teachers should not be paid gratuity. In fact, the judgmentholds that the educational institutions are entitled to reasonable surplusto meet the cost of expansion and augmentation of the facilities and thisdoes not amount to profiteering. It is possible that in some States thereare fee fixation laws which will have to be complied with. But compliancewith these laws does not mean that the teachers should be deprived anddenied gratuity, which they were/ are entitled to receive as otheremployees of an educational institution. Regulation of fee is to ensurethat there is no commercialisation and profiteering, and the effect is notto prohibit school from fixing and collecting “just and permissible schoolfee”, as has been held by this Court in Indian School, Jodhpur andAnotherv. State of Rajasthan and Others.[32]

30 See Bakshish Singh v. M/s Darshan Engineering Works and Others, (1994) 1 SCC 9.31 (2002) 8 SCC 481.

32 (2021) 10 SCC 517.

ABC

DEF

A21. Reliance placed on the dissenting opinion of Amarendra NathSen, J. in Lohia Machines Ltd. and Another v. Union of India andOthers[33] is misplaced. The majority opinion of the Constitution BenchJudgment of Five Judges, authored by P.N. Bhagwati, J., had upheld theconstitutional validity of Rule 19-A of the Income Tax Rules, 1962, enactedvide Finance Act (No.2 of 1980) with retrospective effect from 1stBApril 1972, thereby restricting the deduction available under Section 80-J of the Income Tax Act, 1961. In paragraph 78, Amarendra Nath Sen,J., in his dissenting opinion, has observed that validating act validatingany fiscal provision with retrospective operation is usually held not to beunreasonable and arbitrary, as they are generally made to clarify anCambiguity or rectify some flaw or defect. Such validating act should notbe construed as having the effect to impose fresh tax with retrospectiveeffect. Thereafter, Amarendra Nath Sen, J., in the context of theamendment, observed that it had the effect of withdrawal of benefit,unequivocally granted by the main provision, which reason has not beenaccepted and did not find favour with the majority judgment. In the presentDcase, there is no withdrawal of benefit unequivocally granted.

22. supplementary submission of the private schools was thatthe judgments of this Court upholding retrospective amendments arevalid only when there is tax implication as the Government has torefund the paid taxes, is unfounded and irrational. The power to amend,Ewhich includes the power to amend the statute with retrospective effect,is constitutional power vested with the legislature, which is not confinedand restricted to any particular type of statutes, namely, tax statutes. Wewould not accept any attempt to circumscribe and limit the power vestedwith the sovereign legislature, thereby putting fetters when such fettersFare not prescribed by the Constitution. When and which cases to exercisethe power has to be left to the legislature. In case the constitutionalvalidity of the amendment act is challenged, the court is entitled to examinethe relevant circumstances which prompted the legislature to makeretrospective amendment. Judicial review, when validity of an amendmentact is challenged, is decided on the grounds of lack of legislativeGcompetence, violation of the fundamental rights or any other provisionsof the Constitution of India. In the present case, the notification No. S-42013/1/95-SS.(II) dated 3[rd] April 1997 had ensured that the benevolentprovisions requiring payment of gratuity should be extended to the“employees” of the educational institutions. The amendment withH33 (1985) 2 SCC 197.

retrospective effect is to make the benevolent provisions equally applicableto teachers. The amendment seeks to bring equality and give fairtreatment to the teachers. It can hardly be categorised as an arbitraryand high-handed exercise.

23. The last contention raised by the private schools and writpetitioners is predicated on the enactment of the Repealing and AmendingAct 2016[34],by virtue of which the Amendment Act 2009 was repealed.The argument, in our opinion, overlooks Section 6A of the General ClausesAct, 1897 and Section 4 of the Repealing and Amendment Act, whichread thus:

“Section 6A of The General Clauses Act, 1897

6A. Repeal of Act making textual amendment in Act orRegulation.–– Where any Central Act or Regulation made afterthe commencement of this Act repeals any enactment by whichthe text of any Central Act or Regulation was amended by theexpress omission, insertion or substitution of any matter, then,unless different intention appears, the repeal shall not affect thecontinuance of any such amendment made by the enactment sorepealed and in operation at the time of such repeal.

xx xx xx

Section 4 of The Repealing and Amendment Act, 2016

4. Savings.–– The repeal by this Act of any enactment shall notaffect any other enactment in which the repealed enactment hasbeen applied, incorporated or referred to,

and this Act shall not affect the validity, invalidity, effect orconsequences of anything already done or suffered, or any right,title, obligation or liability already acquired, accrued or incurred,or any remedy or proceeding in respect thereof, or any release ordischarge of or from any debt, penalty, obligation, liability, claim ordemand, or any indemnity already granted, or the proof of anypast act or thing;

nor shall this Act affect any principle or rule of law, or establishedjurisdiction, form or course of pleading, practice or procedure, orexisting usage, custom, privilege, restriction, exemption, office orappointment, notwithstanding that the same respectively may have

34 For short, “Repealing and Amendment Act”.

[2022] 13 S.C.R.

Abeen in any manner affirmed or recognised or derived by, in orfrom any enactment hereby repealed;

nor shall the repeal by this Act of any enactment revive or restoreany jurisdiction, office, custom, liability, right, title, privilege,restriction, exemption, usage, practice, procedure or other matterBor thing not now existing or in force.”

24. Section 4 of the Repealing and Amendment Act states thatthe repeal shall not affect any of the enactment in which the repealedenactment has been applied, incorporated or referred to. It also statesthat the Repealing Act shall not affect the validity, invalidity, effect orconsequences of anything already done or suffered, or any right, title,Cobligation or liability already acquired, accrued or incurred etc. This Courtin Jethanand Betab v. State of Delhi[35 ]had examined similar provisionof the Repealing and Amendment Act, 1952, whereby the Indian WirelessTelegraph (Amendment) Act, 1949 was repealed in its entirety. Referencewas made to the decision of the Judicial Committee in Secretary ofDState for India in Council v. Hindusthan Co-operative InsuranceSociety, Ltd.[36 ]and the principle that, where the repealing act states thatthe enactment thereof shall not affect any act in which the enactmenthas been applied, incorporated or referred to, means that there is anindependent existence of the two acts and, therefore, even on the deathof the amending act, its offspring survives in the incorporating act. This

ECourt also referred to Halsbury’s Law of England on the said aspectand the decision of the Calcutta High Court in Khuda Buxv. Manager,Caledonian Press[37]. Relevant extract from the judgment in JethanandBetab (supra) reads thus:

“6. The general object of repealing and amending Act is statedFin Halsbury’s Laws of England, 2nd Edn., Vol. 31, at p. 563,thus:

“A statute Law Revision Act does not alter the law, but simplystrikes out certain enactments which have becomeunnecessary. It invariably contains elaborate provisos.”

GIn Khuda Bux v. Manager, Caledonian Press, Chakravartti, C.J.,neatly brings out the purpose and scope of such Acts. The learnedChief Justice says at p. 486:

35 (1960) 1 SCR 755.36 1931 SCC OnLine PC 37.37 1954 SCC OnLine Cal 132.H

“Such Acts have no Legislative effect, but are designed foreditorial revision, being intended only to excise dead matterfrom the statute book and to reduce its volume. Mostly, theyexpurgate amending Acts, because having imparted theamendments to the main Acts, those Acts have served theirpurpose and have no further reason for their existence. Attimes, inconsistencies are also removed by repealing andamending Acts. The only object of such Acts, which in Englandare called Statute Law Revision Acts, is legislative spring-cleaning and they are not intended to make any change in thelaw. Even so, they are guarded by saving clauses drawn withelaborate care,….”It is, therefore, clear that the main object of the 1952 Act wasonly to strike out the unnecessary Acts and excise dead matterfrom the statute book in order to lighten the burden of everincreasing spate of legislation and to remove confusion from thepublic mind. The object of the Repealing and Amending Act of1952 was only to expurgate the amending Act of 1949, along withsimilar Acts, which had served its purpose.

7. The next question is whether Section 4 of the Act of 1952saved the operation of the amendments that had been inserted inthe Act of 1933 by the repealed Act. The relevant part of Section4 only saved other enactments in which the repealed enactmentshave been applied, incorporated or referred to. Can it be said thatthe amendments are covered by the language of the crucial wordsin Section 4 of the Act of 1952, namely, “applied, incorporated orreferred to”. We think not. Section 4 of the said Act is designed toprovide for different situation, namely, the repeal of an earlierAct which has been applied, incorporated or referred to in laterAct. Under that section the repeal of the earlier Act does notaffect the subsequent Act. The said principle has been succinctlystated in Maxwell on Interpretation of Statutes, 10th Edn., p.406:

“Where the provisions of one statute are, by reference,incorporated in another and the earlier statute is afterwardsrepealed the provisions so incorporated obviously continue inforce so far as they form part of the second enactment.”

So too, in Craies on Statute Law, 3rd Edn., the sama idea isexpressed in the following words, at p. 349:

“Sometimes an Act of Parliament, instead of expressly repeatingthe words of section contained in former Act, merely refersto it, and by relation applies its provisions to some new state ofthings created by the subsequent Act. In such case the ruleof construction is that where statute is incorporated byreference into second statute, the repeal of the first statuteby third does not affect the second”.

The Judicial Committee in Secretary of State for India in Councilv. Hindusthan Co-operative Insurance Society, Ltd. endorsedthe said principle and restated the same, at p. 267, thus:

“This doctrine finds expression in common-form section whichregularly appears in the amending and repealing Acts whichare passed from time to time in India. The section runs: “TheDrepeal by this Act of any enactment shall not affect any Act….in which such enactment has been applied, incorporated orreferred to”. The independent existence of the two Acts istherefore recognized; despite the death of the parent Act, itsoffspring survives in the incorporating Act. Though no suchsaving clause appears in the General clauses Act, TheirELordships think that the principle involved is as applicable inIndia as it is in this country.”

It is, therefore, manifest that Section 4 of the 1952 Act has noapplication to case of later amending Act inserting newprovisions in an earlier Act, for, where an earlier Act is amendedFby later Act, it cannot be said that the earlier Act applies,incorporates or refers to the amending Act. The earlier Act cannotincorporate the later Act, but can only be amended by it. Wecannot, therefore, agree with the view expressed by the PunjabHigh Court in Mohinder Singh v. Mst. Harbhajan Kaur andGDarbara Singh v. Shrimati Karnail Kaur that Section 4 of theRepealing and Amending Act of 1952 applies to case of repealof an amending Act.

25. In most cases, the prayer for stay, as in Civil Appeal No. 8162of 2012, was not accepted, albeit in some cases, stay has been grantedfor payment of gratuity for the period prior to 3[rd] April 1997. As explainedH

above and applying the principle of retroactivity and as also followingthe judgment of this Court in Management of Goodyear India Limited.(supra), this argument raised on behalf of the private schools should failand is rejected. The partial stay order dated 31[st] January 2020 passed inSLP (C) No. 2235 of 2020, titled Saint Xaviers High Schoolv. JayashreeShamal Ghosh, or in any other case, is vacated.

26. For the reasons mentioned above, the aforesaid appeals,transfer case and the writ petitions are dismissed. The stay orders, asstated above, are vacated. The private schools would make payment tothe employees/teachers along with the interest in accordance with theprovisions of the PAG Act within period of 6 weeks from today and incase of default, the employees/teachers may move the appropriate forumto enforce payment in accordance with the provisions of the PAG Act.In the facts of the case, there will be no orders as to costs.

Nidhi Jain(Assisted by : Shashwat Jain, LCRA)

Appeals dismissed.