Administrative Law

A.V. Nachane v. Union of India

AIR 1982 SC 1126

Facts

LIC employees were entitled to bonus under earlier settlements.
In LIC v. D.J. Bahadur, the Supreme Court had directed LIC to honour the 1974 settlements until replaced by a fresh settlement, award, or valid law.
Later, Parliament amended the LIC Act and the Government framed 1981 Rules affecting bonus and dearness allowance.
The Rules were made retrospective from 1 July 1979, which would defeat the earlier Supreme Court direction.

Whether delegated rules could operate retrospectively so as to nullify the effect of an earlier Supreme Court order.

Delegated legislation may be retrospective only if authorised by the parent Act.
But even where retrospective power exists, it cannot be used casually to destroy accrued rights or nullify a binding court order.
The legislature may remove the legal basis of a judgment by valid law.
But the executive, through subordinate legislation, cannot simply override a judicial decision retrospectively.

The Court accepted that Parliament could pass relevant legislation affecting LIC employees’ service conditions.
It also accepted that the LIC Act, after amendment, gave rule-making power to the Central Government.
So, the challenge of excessive delegation largely failed.
The Act and Rules were not struck down completely.
But the problem was with the retrospective operation of Rule 3.
The earlier Supreme Court order in D.J. Bahadur had clearly protected the 1974 bonus settlement until superseded by future lawful action.
If the 1981 Rules were allowed to operate from 1 July 1979, they would wipe out the benefit already protected by that writ.
The Court treated this as impermissible.
The Government could make rules for the future, but it could not use delegated legislation to undo the effect of a binding judicial order for the past.
Therefore, the Rules were treated as valid only prospectively from the date of their publication, i.e., 2 February 1981.
Bonus already payable before that date could not be taken away retrospectively.

The Supreme Court partly allowed the petitions.
It upheld the Act and Rules generally.
But it held that Rule 3 could not operate retrospectively from 1 July 1979.
The Rules would operate only prospectively from 2 February 1981.
Use this case for: delegated legislation cannot retrospectively nullify the effect of a court order unless the legal basis is validly and clearly altered.