Retrospective Orders: A Question to the Executives

As a matter of law, and as a principle, retrospective law making is not welcomed. This writing will not discuss retrospective law-making, rather it will focus upon executive’s and bureaucratic officer’s ignorance towards upholding the prospective nature of its orders. Retrospective law-making means that a law, when passed, applies to the future as well as the past cases. On the other hand, prospective law-making means that a law will be applicable, with its complete strength, to the future cases, however, it will not be applicable to the cases which were decided or took place in the past. In the similar fashion, the principle applies to the secondary legislation and executive orders.

Pakistan’s legal setup considers the Constitution of the Islamic Republic of Pakistan, 1973 and Parliamentary enactments as its primary legislations. On the other hand, orders, rules, and notifications passed by the government departments are secondary legislations.  Retrospective notifications of the executive often pose difficulty because the officers or the subjects who pass such notification are not legal experts and are often specialists in their relevant departmental fields. They, even at times, are not even aware of retrospective nature of their actions and are prone to pass the retrospective order or notification without knowledge of it being unlawful from the outset.

Rule of law is a pre-requisite and even an aspiration for many legal systems. Most governments, judicial systems, and executives believe that they must follow the rule of law. However, it is a shame that at times, these institutions fail to define what they mean by rule of law. For some, it is limited to religion, for some it is linked with the way a law is made.  For others it can be political, and for some legal. Moreover, even when one tries to define it, the best attempts result in categorization of the rule of law or enlisting its features. Identification of Rule of Law’s core values as described by Dicey and Bingham and other learned scholars is the best definition of rule of law, we obtain from our academics which we then evaluate our legal systems against. Further classification is made on procedural and substantive aspects.

Rule of law, when defined through its characteristics, necessarily include, interalia, that the law, legislations, orders, notifications should be prospective and non-retrospective. Note here that the word ‘should’ is used instead of using the word ‘must’. This means or at least implies that the rule of thumb or the general principle is that the rule of law requires law to be prospective. However, there may be exceptions. In other words, in exceptional circumstances, law may be retrospective. It is quite true as can be seen in numerous instances, for example the Nuremberg trials were conducted on retrospective laws.UK government denied damages for damages caused during the world war by making an Act with retrospective application.[1]

This writing will now focus upon the Pakistani courts’ interpretation of secondary legislations. Specially, when the executive orders or notifications are issued, their retrospective nature is never admired. For example, the Supreme Court of Azad Kashmir decided that notification or an executive order would operate prospectively and not retrospectively unless specifically provided otherwise[2]. This means that if a notification or an order is passed, but in effect is retrospective, then it shall be void, whereas if the same order or notification includes a clause that the instant order or notification will have retrospective effect then it will have such an effect. It is matter of merely a clause, that this principle of rule of law, can be shred into pieces by the executive. This is a clear instant of judiciary’s implied acceptance of retrospective application of executive order. Despite the fact that it seems unfair to naked eye, as retrospective application of an order or policy is against the notion of rule of law, the court seemed to appreciate the separation of powers, and defer such issues to the executive. The jurisprudential reasoning behind such a deference is that the courts should not decide the policy or determine it, rather their duty is to adjudicate and uphold the rule of law. There must be some principles or guidelines as to when can such a retrospective order be upheld or can be challenged.  

In the same year, the Honourable Lahore High Court[3] held that all notifications, instructions and circulars issued by the government or statutory bodies could operate prospectively and not retrospectively. It appears to be a straightforward ban on retrospective secondary legislation or order. This is perhaps better than the approach of the Azad Kashmir’s apex court, which miserably failed to provide a detail of circumstances where such an exception can be applied. However, the approach of the Lahore High Court may seem as an extreme form of the rule of law. Such an approach resembles the approach that all laws ‘must’ be prospective.

In a decision of Sindh High Court[4], the identified ratio reads, interalia, as:

“any vested right could be taken away retrospectively only through an enactment passed by an assembly or parliament but not through subordinate legislation i.e. through issuance of notification by executive”. [5]

The above referred ratio lays down three principles:

1. The laws should generally be prospective.
2. Any executive order, notification, or secondary legislation is valid in expressly provided. However, it shall be invalid when it retrospectively infringes rights.
3. The vested rights can only be taken away through an Act of Parliament.

Two out of the three mentioned principles are relatively clear, whereas the third one is controversial. The first one is the textbook stance on rule of law. The second principle is apparently clear, as it allows secondary legislation and executive orders to have retrospective effect if they are expressly provided to have such an effect. However, this principle poses another important question. The principle states two extremes, and speaks nothing about what ‘vested rights’ are, and how one can prove that a certain right is vested right. ‘Vested Rights’ may overlap with the Constitutional norms, or even the customs as well. The Constitution provides some fundamental rights, and they must be vested rights, as judgment was impliedly in agreement to it. The issue is thus, what other rights are vested rights? Customary rights or contractual rights may pose a controversy here.

Summarizing it, the notification would operate prospectively as same was the outcome of a ‘subordinate legislation’. ‘Vested right’ could be taken away retrospectively but through an enactment only to be passed by the Parliament. ‘Vested right’ could not be taken away retrospectively and adversely through notification[6].  

Here, an interesting tax related case can be cited. The Inland Revenue Appellate Tribunal of Pakistan held that notifications, executive orders and instructions, can have retrospective effect, provided it would go to the benefit of taxpayer, but if it was detrimental or prejudicial to the interest of taxpayer imposing liability or obligation, would always operate prospectively.[7] This is a judgment which is interesting because of two basic reasons.

First is that the taxation area is often linked with major departments such as Federal Board of Revenue (FBR) , Punjab Revenue Authority (PRA), and Department of Customs . Hence, a ruling for such departments is implied that they must not pass retrospective orders, as doing so will be null and void. They must adhere to prospective orders and not retrospective. However, it also provides if such an order is passed, and it beneficial for the taxpayer, it will be upheld[8]. If we read this judgment along with the vested right debate above, it will reveal that perhaps, the definition of vested rights will include taxpayer’s benefit as a vested right. If this is the case, then the definition of vested right will go beyond the rights vested in the Constitution of the Islamic Republic of Pakistan, 1973. The trend of following the prospective effect of secondary legislation was partly visible in another case of 2011[9]. The court held that purchases were made by assessee[10] at the time when supplier was not suspected and his subsequent inclusion in the list of suspected units could not be charged retrospectively.

The retrospective operation debate also made inroads to the Company law when the Securities and Exchange Commission of Pakistan held that a statute relating to remedial law, could properly, in several instances be given retrospective operation. The notification of the amendment was not in field at the time of passing impugned order, but it was in force at the time of passing order[11]. This judgment has three points. One is that not only secondary, but primary legislation can also have retrospective effect. Secondly, this effect can be benefited from, at appellate stage. Thirdly, the exemption right under any Company law can be classified as vested right for the purposes of the above debate.

In the light of the above observations, judgments, discussion and analysis, it can be safely concluded that the Executives, at any stage and department must not pass retrospective laws, policies, notifications, order and instruction. The assessment of the retrospective nature is not done by the terminology or phrasing but by the effect. The retrospective application is an exception which appears to be available when a vested right is jeopardized, and the definition of vested right is lot more than mere constitutional rights and can include many financial or fiscal rights.

[1] Burmah Oil Company Ltd v Lord Advocate [1965] AC 75

[2] Jawaria Maqsood v Joint Admission Committee for Medical Colleges [2017] YLR 1571.

[3] Muhammad Rashid Mansoor v Punjab Labour Appellate Tribunal [2017] PLC 75, also in Malik Muhammad Hashim Awan Versus Chief Secretary Gvernment Of Punjab, Lahore [2017] PLC (CS) 1085.

[4] Mir Hassan v Province of Sindh [2017] PLC (CS) 864.

[5] ibid

[6]  Dr. Basharat Hassan Bashir v Alternative Energy Development Board [2017] PLC (CS)N  7.

[7] Kamal Limited, Khurrianwala, Faisalabad v C.I.R.(A), Faisalabad [2017] PTD 113.

[8] Shama Exports (Pvt.) Ltd., Faisalabad v C.I.R. (A), Faisalabad [2017] PTD 70.

[9] Collector Sales Tax and Federal Excise, Rto, Faisalabad v Kamal Fabrics, Faisalabad [2011] PTD 1143.

[10] An assessee is any individual who is liable to pay taxes to the government against any kind of income earned or any losses incurred by him for an assessment year.

[11] Habib Ahmad v Director (Enforcement) [2015] CLD 1098.