LexUNION OF INDIA & ANR. versus M/S INDUSIND BANK LTD. & ANR.
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A B [2016] l 1 S.C.R. 700 UNION OF INDIA & ANR. v. MIS INDUSIND BANK LTD. & ANR. (Civil Appeal Nos.9087-9089of2016) SEPTEMBER 15, 2016 [C. NAGAPPAN AND R. F. NARIMAN, JJ.] Contract Act, 1872: c s.28 (unamended and as amended w.e.f 08.01.1997) - Applicability of - Applications invited by Textile Commissioner for export of extra-long staple cotton - Contracts executed with exporters by appellant in January,1996 - The exporters furnished bank guarantee on 31.01.1996 - Exporters failed to furnish certain D docu111ents regarding export within stipulated period~ Consequently, Textile Commissioner invoked the bank guarantees - Respondent- bank refused to pay the guarantees stating that the guarantees could be invoked only within extended period of three months i.e up to 30.04.1997 as per contract and not later - Appellant pleaded that E bank was not absolved of its obligation to make payment under bank guarantee u/s.28 in the light of the Amendment to s.28 w.ej 08.01.1997 - Held: Bank guarantees themselves being dated 31.01.1996 would not be affected by an amendment made one year later i.e. on 08.01.1997 -Subject matter of s.28 being ''agreements'', F the unamended s.28 would be the law applicable as on 31.1.1996, which is the date of the agreement of bank guarantee - Amended s.28 being substantive law, operates prospectively, as retrospectivity is not clearly made out by its language - Being remedial in nature, and not clarificatory or declaratory of the law, the amended s.28 G would not apply. H Statutes - Remedial statutes - Prospective application - Discussed. Dismissing the appeals, the Court 700 UNION OF INDIA & ANR. v. MIS lNDUSIND BANK LTD. 701 HELD: 1. On a reading of the Law Commission Report A together with the Statement of Objects and Reasons for the 1997 Amendment to section 28 of the Contract Act,1872, it emerges that the Amendment does not purport to be either declaratory or clarificatory. It seeks to bring about a substantive change in the law by stating, for the first time, that even where an agreement B extinguishes the rights or discharges the liability of any party to an agreement, so as to restrict such party from enforcing his rights on the expiry of a specified period, such agreement would become void to that extent • .The Amendment therefore seeks to set aside the distinction made in t_he case law up to date between agreements which limit the time within which remedies can be availed and agreements which do away with the right altogether in so limiting the time. These are obviously substantive changes in the law which are remedial in nature and cannot have retrospective effect. [Para 19] [711-G-H; H, 712-A-B] 1.2. In the instant case, considering that the subject matter of s.28 of the Contract Act is "agreements", the unamended s.28 would be the law applicable as on 31.1.1996, which is the date of c D the agreement of bank guarantee. Further, on conspectus of E Supreme Court decisions it becomes clear that s.28 being substantive law, operates prospectively as retrospectivity is not clearly made out by its language. Being remedial in nature, and not clarificatory or declaratory of the law, by making certain agreements covered by s.28(b) void for the first time, it is clear F that rights and liabilities that have already accrued as a result of agreements entered into between parties are sought to be taken away. This being the case, the amended s.28 would not apply. [Paras 21, 25] (713-A; 717-F-G] Food Corpn.of India 1~ New India Assurance Co. Ltd. (1994} 3 SCC 324; National Insurance Co. Ltd. v. Sujir Ganesh Nayak & Co. (1997) 4 SCC 366 : 1997 (3) SCR 202; HP. State Forest Co. Ltd. v. United India Insurance Co. Ltd. (2009) 2 SCC 252 : 2008 (17) SCR G H 702 A B c D E F SUPREME COURT REPORTS r2o 16111 S.C.R. 1013 - relied on. Sukhram v. Harbheji [1969) 3 S.C.R. 752; R. Rajagopal !;?.eddy v. PadminiChandrasekharan (1995) 2 SCC 630 : 1995 (1) SCR 715; MithileshKwnari v. Prem Behari Khare (1989) 2 SCC 95 : 1989 (1) SCR 621; Purbanchal Cables & Conductors (P) Ltd. v. Assam SEB (2012) 7 sec 462 : 2012 (6) SCR 905; CIT v. Vatika Township (P) Ltd. (2015) 1 SCC 1 : 2014 (12) SCR 1037 - referred to. JJ'h Report of the Law Commisston of India, 1958; 97th Report of the Law Commission of India, 1984 - referred to. Case I.aw Reference r1969] 3 S.C.R. 752 referred to Para 20 1995 (1.) SCR 715 referred to Para22
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