While holding that the Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993, is prospective in operation, the Supreme Court has delineated the difference in concepts of retrospective and retroactive operation of laws.
The bench comprising Justice AK Sikri, Justice Ashok Bhushan and Justice S Abdul Nazeer was considering these appeals after a bench of Justice V Gopala Gowda and Justice Arun Mishra was split on the question whether the Act is retroactive or not. Justice Gowda had opined that provisions of the Act were retroactive in nature, while Justice Mishra held that it was neither retrospective nor retroactive, but prospective.
The bench considered the issue of whether the Act was applicable when the contract for supply was entered between the parties prior to enforcement of the Act i.e. 23.09.1992. It held that the Act was clearly prospective in operation and it was not necessary to term it as retroactive in operation.
The bench observed that 'retroactivity' in the context of the statute consists of application of new rule of law to an act or transaction which has been completed before the Rule was promulgated.'''
The bench quoted from Jay Mahakali Rolling Mills vs. Union of India: "Retrospective" means looking backward, contemplating what is past, having reference to a statute or things existing before the statute in question. Retrospective law means a law which looks backward or contemplates the past; one, which is made to affect acts or facts occurring, or rights occurring, before it comes into force. Retroactive statute means a statute, which creates a new obligation on transactions or considerations or destroys or impairs vested rights.
It also referred to another judgment in which these concepts were explained by quoting from Advanced Law Lexicon by P. Ramanath Aiyar: