Legislature can’t Invalidate any Judgment Retrospectively: SC Upholds Provisions prohibiting payment of Interest in Karnataka Money Lenders Act [Read Judgment]

Money Lenders

While disposing of an appeal filed by the Karnataka Pawn Brokers Assn. & Ors, the Supreme Court held that the Legislature has no power to overturn any judgment by amending provisions of the statute that too retrospectively. A bench comprising Justice Madan B Lokur and Justice Deepak Gupta upheld the constitutional validity of the provisions prohibiting payment of interest in Karnataka Money Lenders Act, 1961 and Karnataka Pawn Brokers Act, 1961 on the number of security deposits.

Section 7A and Section 4A Karnataka Money Lenders Act, 1961 and Karnataka Pawn Brokers Act, 1961 contained provisions, (inserted by an amendment in 1989) which said that security deposit shall not carry any interest. When the petitioners approached the Karnataka High Court for relief, the High Court held that non-payment of interest on security deposits were constitutionally bad and were accordingly set aside.

The Division Bench of the High Court had relied on an earlier judgment in Manakchand Motilal’s case, wherein it had held that the money lenders and pawnbrokers were entitled to interest on the amount of deposit and the said judgment had become final since the SLP against the same was dismissed.

The Supreme Court, after hearing the matter, noticed the decision in Cauvery Water Disputes Tribunal, wherein a division bench of this Court while considering a large number of petitions, held that legislature can bring some changes in the court decision which would affect a class of person or even at large. Such an act from the part of legislature amounts to exercising the judicial power of the state and also functioning as an appellate court or tribunal.

The Court further pressed the decision in the case of State of Tamil Nadu vs. State of Kerala and Another, therein constitution bench referring to a large number of judgments laid down some principles like if the Legislature has the power and competence to make a validating law it can make the law retrospective and also added that It can pass an amending Act to remedy the defects pointed out by a court of law.

In the light of the judicial decisions, the bench noted that the legislature can remove causes of invalidity by validating the law including the power to amend laws with retrospective effect. Likewise, the legislature can correct the errors, remove the basis or foundation out in the judicial pronouncement and the same doesn’t mean that statutory overruling.

Accordingly by making a keen observation on aforementioned judgment bench observed that “The Legislature cannot, by way of introducing an amendment, overturn a judicial pronouncement and declare it to be wrong or a nullity. What the Legislature can do is to amend the provisions of the statute to remove the basis of the judgment”.

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