– Nigam Nuggehalli
A statute, unlike other forms of legal regulation, can be amended if the legislature is of the opinion that the statute is not serving its purpose. A statutory provision can be added to, subtracted from, substantially rewritten or even repealed. When a statute is amended, the law has to contend with pending litigation in courts that claim under the unamended statute. If the amendments were to apply prospectively, pending litigation will be unaffected by the amendments. On the other hand, if the amendments were to apply retroactively, pending litigation can no longer claim under the unamended statute and will instead be governed by the amendments.
The issue of the retroactive impact of statutory amendments came up recently in light of the amendments made to the Specific Relief Act, 1963 [SRA] in July, 2018. After this amendment, the judges will no longer have discretion in providing a remedy (specific performance or damages) for breach of contract, because section 20 of the SRA, which provided for such discretion, was repealed. Going forward, the default remedy for breach of contract in India is specific performance. Damages can be awarded only in certain enumerated and limited circumstances. An unresolved issue is whether this amendment is applicable to contractual claims that were pending in the courts before the amendment.
In some instances of statutory amendments, whether the amendments are prospective or retroactive is stated clearly in the savings clause appended to the statutory amendment. In all other cases, the general common law rule is that a statutory amendment is not retroactive (and hence, prospective) unless there is an express statement in the amendment endorsing its retroactivity, or where the amendment is retroactive as a necessary implication of the amendment. For example, if the amendment merely clarifies the current law, it will be considered as retroactive in nature.
The SRA amendments do not have a savings clause, neither is there an express statement that points out that the amendments are retroactive in nature. Further, the SRA amendments do not appear to be clarifying amendments as they have taken away discretion in granting a remedy from judges where previously the statute had allowed such a discretion. At first blush, it looks like the SRA amendments are prospective in nature.
However, the rule against retroactivity (RAR) is subject to two exceptions. The RAR applies only to substantive rules and does not apply to any procedural rules applicable to a person (Memon Abdul Karim Haji Tayab Vs. Dy. Custodian-General, AIR 1964 SC 1256). Also, the RAR does not apply to substantive rights that have not been vested yet (ArcelorMittal v Satish Kumar Gupta, 2018 Indlaw SC 919) Let us consider each exception in turn and assess whether these exceptions would apply to the SRA amendments.
Generally, substantive rules lay down rights and liabilities. Procedural rules delineate the mechanisms that determine such rights and duties as well as the mechanisms that enforce such rights and liabilities (Thirumalai Chemicals Ltd. v. Union of India [(2011) 6 SCC 739). Decisions have held that a right to appeal is a substantive right – any amendments to such rights would be prospective where the appeal entitlements were more narrowly drawn (Videocon International Ltd. v SEBI 2015 (4) SCC 33). By extrapolation, if an amendment to the law forced the defendant to offer only one remedy (specific performance rather than either of specific performance or damages), such an amendment would be prospective, rather than retrospective since it affects a substantive rights and liabilities of the parties.
The substantive-procedural divide is relevant in other areas of law as well – for example, private international law [PIL], where a court of law has to often deal with claims that have arisen in foreign countries. In PIL, there is a difference between lex causae and lex fori. The lex causae is the law applicable to the substantive rights and liabilities of the parties before the court, which is usually the law of the country in which the claim arose. The lex fori is the law determining the procedural issues related to the claim which are usually decided according to the law of the court (law of the forum) where the claim is filed. Perhaps the best justification for this divergence is the principle that while the parties’ substantive rights and liabilities ought to be decided under the law with which their claim has the closest connection, the procedural matters must be left to the law of the court in which the parties have decided to litigate their substantive claims. Since this context in PILs differs from that in statutory amendments, one must be cautious in extrapolating decisions from one area to the other.
Decisions by the U.K. Supreme Court in PIL (Harding v Wealands  2 AC 1 and Cox v Ergo Versicherung AG,  UKSC 22) have opined that anything that would impact the liability of the defendant, that is, whether the defendant would be liable for financial loss, non-pecuniary loss, etc would be substantive law as a person’s liability is in question. On the other hand, anything that impacts the quantum of damages (including whether damages or restitution is the appropriate remedy) would be a procedural matter. A reading of the PIL decisions would suggest that the SRA amendments would fall on the procedural side of the divide. However, the law in the PIL domain has proceeded on the basis of dividing up judicial jurisdictions among different countries and in doing so, the distinction between substantive and procedural law in the PIL domain does not take into account the extent to which rights might have vested in parties pending litigation.
For actions under the SRA, it is clear that, post amendment, the defendant loses the possibility of offering damages as a remedy. This could result in hardship for the defendant. For example, in Jayakantham v Abaykumar, (2017) 5 SCC 178, the defendant had breached an agreement for the sale of land. The defendant argued against specific performance claiming that he would lose a valuable resource and that the reason for the agreement to sell the land was to repay debt. The defendant was willing to pay a suitable sum of money as compensation for breach. The Supreme Court agreed with the defendant and denied specific performance. The amendment tries to forestall such decisions. Since the amendment results in the defendant losing his right to offer damages rather than specific performance as a remedy, it does appear that this is a substantial matter that can only be dealt with prospectively. Therefore, an amendment taking away discretion from the hands of the court to order damages ought to be prospective in nature.
However, another question that arises with respect to the pending litigation in the courts is whether a defendant has a vested right to pay damages as remedy. One can argue that since it is the discretion of the judge to award damages or specific performance, there is no vested right in the defendant. Therefore, an amendment that takes away the discretion of the judge in awarding damages does not do away with any vested right of the defendant.
This view is supported by the recent decisions of the Supreme Court in Arcelor Mittal v Satish Kumar Gupta (2018 Indlaw SC 919) and Swiss Ribbons v Union of India (2019 Indlaw SC 77), while interpreting an amendment to the Insolvency and Bankruptcy Act, 2016 that barred the promoters of an insolvent company from bidding for the assets of the insolvent company. In considering the impact of this amendment to existing bids, the SC said that the promoters did not have a vested right to the assets of the company, unless their bid was duly considered and accepted by a statutorily recognised body.
However, one can also argue that the defendant’s right to offer an alternate remedy to specific performance, even if the remedy is at the discretion of the judges, is being taken away. This is a vested right that has been affected by the amendment. It is also important to note that section 6 (c) of the General Clauses Act, 1897 states that a repeal of an enactment will not ‘affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed.’ One can argue that since section 20 of the SRA has been repealed and a new clause has been inserted, the repeal should not affect the rights and privileges of the parties that have pending claims before the court. In conclusion, I believe that the right or, at any rate, the privilege of the defendant to offer damages as a contractual remedy can be abrogated only prospectively.
Nigam Nuggehalli was an Associate Professor at Azim Premji University, and earlier a Principal Lecturer at BPP Law School. London. After graduating from NLSIU in 1996, he worked as an international tax lawyer in New York, USA and has also worked with a Canadian law firm on cross-border tax issues. His expertise and research interests are in legal and political philosophy, commercial law and tax law. He currently teaches tax law, international taxation and statutory interpretation at National Law School of India University, Bengaluru.