Explanation and clarification to a section - Principles enunciated by Supreme Court

Introduction

Explanations and clarifications are often added to a section by an amendment. The addition of explanation and clarification by the legislature gives rise to a number of questions for the practitioners-some of them being is the explanation merely clarificatory or substantive, is it retrospective or prospective.

Recently the Supreme Court in Sree Sankaracharya University of Sanskrit v. Manu [C.A. No. 003752 of 2023, dated 16-5-2023] has laid down and reiterated the principles in this respect which is the subject matter of the write up .

Factual Matrix and question before the Court

The Respondent was a Lecturer . His case being, that in fixing the pay, two advance increments, payable on placement of a Lecturer holding a Ph.D. degree as a Selection Grade Lecturer, as per Clause 6.18 of the UGC Scheme dated 21st December, 1999, were not granted.

The Appellant-University's stand was that he was not eligible to claim any further increments based on his Ph.D. degree, on his placement in the selection grade in light of the Government Order, G.O. (P) No. 44/2001/H. Edn. dated 29th March, 2001 which had clarified that teachers who had already got the benefit of advance increments for having a Ph.D. degree, would not be eligible for advance increments at the time of their placement in the selection grade. That since Respondent had already been granted four advance increments by virtue of holding a Ph.D. degree, he would not be eligible to claim two more advance increments based on his Ph.D. degree, at the time of being placed in the selection grade.

Question before the Hon'ble Court :The matter called for a determination as to whether the 29th March, 2001 was a clarification of Clauses 6.16 to 6.19 of the Government Order dated 21st December, 1999, or whether, it amended or modified the same. If the subsequent Government Order is declared to be in the nature of a clarification of the earlier order, it may be made applicable retrospectively. Conversely, if the subsequent Government Order is held to be a modification/amendment of the earlier order, its application would be prospective as retrospective application thereof would result in withdrawal of vested rights which is impermissible in law and the same may also entail recoveries to be made.

Decision of the Court

Merely because the subsequent Government Order has been described as a clarification/explanation or is said to have been issued following a clarification that was sought in that regard, the Court is not bound to accept that the said order is only clarificatory in nature. On an analysis of the true nature and purport of the subsequent Government Order dated 29th March, 2001, we are of the view that it is not merely clarificatory, but is a substantial amendment which seeks to withdraw the benefit of two advance increments in favour of a certain category of lecturers. The benefit withdrawn was not anticipated under the previously existing scheme. Therefore, such an amendment cannot be given retrospective effect.( Emphasis Supplied )

Legal Principles Laid Down by the Court

1.		It is trite that any legislation or instrument having the force of law, which is clarificatory or explanatory in nature and purport and which seeks to clear doubts or correct an obvious omission in a statute, would generally be retrospective in operation.
2.		This Court in CIT v. Podar Cement (P.) Ltd. [1997] 92/541/226 ITR 625 (SC) noted that circumstances under which an amendment or modification was introduced and the consequences thereof would have to be borne in mind while deciding the issue as to whether the amendment was clarificatory or substantive in its nature and whether it would have retrospective effect or not.
3.		In Allied Motors (P.) Ltd. v. CIT [1997] 91/205/224 ITR 677, this Court found that certain unintended consequences flowed from a provision enacted by the Parliament. There was an obvious omission. In order to cure the defect, a proviso was sought to be introduced through an amendment. The Court held that literal construction was liable to be avoided if it defeated the manifest object and purpose of the Act. This Court held that if the amendment was not read into the relevant provision retrospectively, it would be impossible to reasonably interpret the said provision. That since there was an obvious omission in the provision, an amendment was necessitated which would clarify/declare the law retrospectively.
4.		The proposition of law that a clarificatory provision may be made applicable retrospectively is so well established that we do not wish to burden this judgment by referring to rulings in the same vein. However, it is necessary to dilate on the role of a clarification/explanation to a statute and how the same may be identified and distinguished from a substantive amendment.
5.		An explanation/clarification may not expand or alter the scope of the original provision, vide Bihta Cooperative Development Cane Marketing Union Ltd. v. Bank of Bihar AIR 1967 SC 389. Merely describing a provision as an "Explanation" or a "clarification" is not decisive of its true meaning and import. On this aspect, this Court in Virtual Soft Systems Ltd. v. CIT [2007] 159 /155/289 ITR 83 (SC) observed as under:
		Even if the statute does contain a statement to the effect that the amendment is declaratory or clarificatory, that is not the end of the matter. The Court will not regard itself as being bound by the said statement in the statute itself, but will proceed to analyse the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratory provision or whether it is an amendment which is intended to change the law and which applies to future periods.( Emphasis Supplied )
6.		This position of the law has also been subscribed to in Union of India v. Martin Lottery Agencies Ltd. [2009] 20 STT 203 (SC) wherein it was stated that when a new concept of tax is introduced so as to widen the net, the same cannot be said to be only clarificatory or declaratory and therefore be made applicable retrospectively, even though such a tax was introduced by way of an explanation to an existing provision. It was further held that even though an explanation begins with the expression "for removal of doubts," so long as there was no vagueness or ambiguity in the law prior to introduction of the explanation, the explanation could not be applied retrospectively by stating that it was only clarificatory. ( Emphasis Supplied )

Conclusion

The following principles have been summarised by the Court while interpreting the clarification /explanation :

(i)		If a statute is curative or merely clarificatory of the previous law, retrospective operation thereof may be permitted.
(ii)		In order for a subsequent order/provision/amendment to be considered as clarificatory of the previous law, the pre-amended law ought to have been vague or ambiguous. It is only when it would be impossible to reasonably interpret a provision unless an amendment is read into it, that the amendment is considered to be a clarification or a declaration of the previous law and therefore applied retrospectively.
(iii)		An explanation/clarification may not expand or alter the scope of the original provision.
(iv)		Merely because a provision is described as a clarification/explanation, the Court is not bound by the said statement in the statute itself, but must proceed to analyse the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratory provision or whether it is a substantive amendment which is intended to change the law and which would apply prospectively