MST. JADAO BAHUJI versus MUNICIPAL COMMITTEE, KHANDWA AND ANOTHER

1 S.C.R. SUPREME COURT REPORTS MST. JADAO BAHUJI v. MUNICIPAL COMMITTEE, KHANDW AND ANOTHER

(S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH,

J.C. SHAH and T. L. VENKATARAMA ArYAR JJ.)

Tax on Trade-Maximum limit imposed by Constitution Act -Validating Act fflr period prior to imposition of limit-If affect-ed by limit-Khandwa Municipality (Validation of Tax) ,Act, r94r (r6 of r94r)-Government of India Act, r935, s. r42·A.

In 1922, the Municipal Committee, Khandwa imposed tax on the trade of ginning and pressing cotton by means of steam or mechanical process. Certain suits were filed challenging the validity of the tax and ultimately in 1937, the Privy Council held that the tax had not been validly imposed. In 1941, the Governor enacted the Khandwa Municipality (Validation of Tax) Act, 1941, which sought to validate the tax imposed in 1922. In the meantime, s. 142-A was introduced in the Government of India Act, 1935, sub-s. (2) of which provided that the 'total amount payable in respect of any one person by way of taxes on professions, trades, callings and employments shall not, after March 31, 1939, exceed Rs. 50 per annum·. The appellant con-tended that the validating Act was hit bys. l42-A(2) and to the extent that it imposed tax above Rs. 50 per person per annum it was invalid.

. Held, that the Validating Act was not hit by s. 142-A (2) Government of India Act, 1935. The powers of the Indian Legislatures included power to pass retrospective and validat-ing Jaws. Section l42-A(2) which put limit on the amount of tax did not affect Ia ws relating to period prior to March 3 r, 1939, but affected only those relatrng to periods after that date. It circumscribed the legislative power by putting date-line after which tax in excess of Rs. 50 for period after the date-line could not be collected unless it came within the proviso. The Validating Act imposed the tax in excess of Rs. 50 not after March 31, Iy39, but before it.

The United Provinces v. Atiqa Begum, [1940] F.C.R. IIO and Piare Dusadh v. King Emperor, [1944] F.C.R. 61, referred to.

CrvrL APPELLATE JuRrsDrcTION: Civil Appe!11 No. 180 of 1959.

Appeal from the judgment and order dated June 30, 1955 of the former Nagpur High Court in Misc. First· Appeal No. 162 of 1949.

March 29.

z9[5]z N. C. Chatterjee and B. P. Maheshwari, for the

z9z M st. J;;;:: Bahttji appellant.

G. C. Mathur, for the respondents.

Municipal Com-mittee Khandwa 1961. March 29. & Another delivered by

The Judgment of the Court was

HmAYATULLAH, J.-This appeal,

by certificate

Hidayatullah J.

under Arts. 132(1) and 133(1)(c) of the Constitution, has been filed against an order of the High Court at Nagpur dated June 30, 1955.

Though the facts necessary to decide the appeal lio within comparatively narrow compass, the case itself has had long and somewhat unique history. In July, 1922, the Municipal Committee, Khandwa, resolved to impose tax on the trade of ginning and pressing cotton by means of steam or mechanical process, and after sundry procedure, notification was published on November 25, 1922 in the Central Pro-vinces and Berar Gazette, imposing the tax. Certain traders including the appellant, affected by the tax, filed suits seeking injunction against the Municipal Committee on the ground that the tax was invalid and illegal. Meanwhile, the Municipal Committee had served notices on the present appellant, and demand-ed and recovered the tax for 1923-24. The appellant then filed second suit for refund of the tax paid by her on the ground that the imposition of the tax was illegal and ultra vires. The suits had varying fortunes in the Courts in India, till they reached the Privy Council. The Judicial Committee by its first decision remitted the cases for additional evidence, while the appeals were kept pending. The decision of the Judicial Committee is reported in Radhakishan Jaikishan v. Khandwa Municipal Committee ([1]). After the additional evidence was received, the Judicial Committee pronounced its decision, which is reported in Radhakishan Jaikishan v. ~Municipal Committee, Khandwa ('). The Judicial Committee hel4_ that the tax was not validly imposed by the Municipal Com-mittee, and reversing the decree of the Judicial Com-missioner, decreed the suits.

(>) (1933) L.R. 61 I.A. 125.

(2) (1937) L.R. 64 I.A. n8.

1 S.C.R. SUPREME COURT REPORTS

The Provincial Legislature then passed the I96I Khandwa Ginning and Pressing Cotton Tax Validating M 1 1 -a-B 0 .. Act 8 of 1938, validating the tax. The Act contained ' · :,a UJ' only one operative section, which read as follows: Municipal com-

"2. Notwithstanding anything contained in the mittee, Khandwa Central Provinces Municipal Act, 1903, or the Oen-& Another tral Province Municipalities Act, 1922, or any decree H. -u 1 or order of civil court, the tax on the trade of •dayatu ah · ginning and pressing cotton by means of steam or mechanical process within the limits of the Khandwa municipality which was imposed by Notification No. 2639-1298-VIII, dated the 21st November, 1922, shall be deemed to h11.ve been legally imposed from the date of its imposition to the date on which this Act comes into force.

•dayatu ah ·

Explanation.-All decrees or orders of civil court directing refund of the tax already recover-ed by the committee of the said municipality or restraining the committee from recovering the tax shall be deemed to have no legal effect."

The appellant had, in the meanwhile, applied for the execution of the decrees, and the Validating Act was pleaded in bar. This plea was upheld by the execut-ing Court, but the High Court at Nagpur, on appeal, rejected it and ordered the executions to proceed. The decision of the High Court is reported in Firm Radhakishan v. Municipal Gornmittee, Khandwa(1). The reason given by the High Court was that the Explanation, though not the operative part of the Validating Act, conflicted with 0. 45 R. 15 of the Code of Civil Procedure, and that the assent of the Gover-nor-General had not been obtained, as required by s. 107(2) of the Government of India Act, 1935.Meantime, the Provincial Legislature had been dis-solved, and the Governor had assumed all the powers of the Provincial Legislature under s. 93 of the Government of India Act, 1935. The Governor, with the assent of the Governor-General, enacted the second Validating Act intituled the Khandwa Municipality (Validation of Tax) Act, 1941, (16 of 1941), which received the assent of the Governor-General on June (1) (1940) N.L.J. 638.

30, 1941, and was published in the C. the C. C. P. and Berar Berar [[Gazette on ][July ]][[11, ]][[1941. ]][[That ]][[Act, omitting ]][[parts ]]J t ll not re evan evan ere, rea as o ows:

z96z 30, 1941, and was published in the C. the C. C. P. and Berar Berar M st. ]a [-a-ah ]ao u;i [.. ][[Gazette on ][July ]]J [[July ]]t [[11, ]][[1941. ]]d [[That ]]ll [[Act, omitting ]][[parts ]]v. not re evan evan ere, rea as o ows: Municipal Com-"2. The tax the imposition of which purported to mittee, Khandwa be s::mctioned in the Notification of the Local & Another Government (Ministry of Local Self-Government) Hidayatullah ]. No. 2639-1298-VIII, dated the 21st November 1922, dated the 21st November 1922, the 21st November 1922, 21st November 1922,

be s::mctioned in the Notification of the Local Government (Ministry of Local Self-Government) No. 2639-1298-VIII, dated the 21st November 1922, dated the 21st November 1922, the 21st November 1922, 21st November 1922, shall be, and shall be deemed always to have been, validly recoverable by the Municipal Committee of Khandwa in respect of the period from the 21st November 1922 to the 31st March 1938 (both dates inclusive).

3. 'Vhere the net sum recovered from any person

before the commencement of this Act on account of the said tax is less than the aggregate of the sum recoverable from such person, the balance shall be payable to the said Municipal Committee on demand made at any time after the commencement of this Act and, if not paid within fifteen days from the date of the demand, shall be recoverable by any method available under the Central Provinces Municipalities Act, 1922, for the recovery of tax imposed thereunder or by such other method as the Provincial Government may by rule prescribe."

4. For the purposes of section 3 the net sum

recovered from any person means the aggregate sum recovered from such person less any sum refunded to him and less so much of the amount of any decree or order for the payment of money executed by him against the said Municipal Committee as represents an amount previously paid by him on account of the said tax.

5. Nothing in this Act shall preclude the execution

against the said Municipal Committee of any decree or order for the payment of money arising out of payment on account of the said tax but upon the execution of such decree or order so much of the amount thereof as represents sum previously paid on account of the said tax shall be paya'ble to and recoverable by the said Municipal Committee in accordance with section 3.

6. The Khandwa Ginning and Pressing Cotton

Tax Validating Act, 1938, is hereby repealed."

I S.0.R. SUPREME COURT REPORTS

The Provincial Government framed rule, which, '9[6]' shortly stated, provided for the .. recovery of the M s.aaoa;1 1 J-d hu ·• amount by way of execution apphcat10n ma tot v. very Court, which executed the decree. Municipal Com-

s.aaoa;1 1 v.

The Municipal Committee deposited the decretal mittee, I(hanawa amount in Court, which was withdrawn by the appel-& Another lant on furnishing security. On August 7, 1947, the Hiday-;;;-;;llah J. Municipal Committee filed its application under the rule for execution of the decree. Objections were raised by the appellant, but were disallowed, and the Municipal Committee realised the amount of the tax from t,he surety. The appellant had raised many objections, but we are concerned with one only, viz., that the Act was ultra vires the Provincial Legislature and consequently the Governor, being repugnant to s. 142-A, which was introduced in the Government of India Act, 1935, and which imposed limit of Rs. 50 on taxes on professions, trades and callings after March 31, 1939.

On November 16, 1949, an appeal was taken by the present appellant to the High Court at Nagpur. This appeal was heard by Sinha, C. J., and Mudholkar, J. (as they then were). Mudholkar, J. held that by the second Validating Act which was passed after March 31, 1939, the limit of Rs. 50 per annum imposed by the second sub-section of s. 142-A was· exceeded, and that the Act was thus ultra vires, the Governor. Sinha, C. J., was of the contrary opinion. The case was then laid before Deo, J., who agreed with Sinha, C. J., and the appeal was dismissed. The appellant then obtained the certificate, and filed this appeal.

Section 142-A of ,the Government of India Act, 1935, is as follows:

"142-A. (1) Notwithstanding anything in section one hundred of this Act, no Provincial Law relating to taxes for the benefit of Province or of muni-cipality, district board, local board or other local authority therein in respect of professions, trades, callings or employments shall be invalid on the ground that it relates to tax on income.

(2) The total amount payable in respect of any

one person to the Province or to any one municipa-lity, district board, local board, or other local autho-rity in the Province by way of taxes on professions, trades, callings, and employments shall not, after the thirty-first day of March nineteen hundred and thirty-nine, exceed fifty rupees per annum:

Mst. ]adao Bahuji v.

Municipal Coni-mittee, Khandwa & Another Hidayatullah J.

Provided that if in the financial year ending with that date there was in force in the case of any Pro-vince or any such municipality, board or authority tax on professions, trades, callings, or employ-ments the rate, or the maximum rate, of which exceeded fifty rupees per annum, the preceding provisions of this sub-section shall, unless for the time being provision to the contrary is made by law of the Federal Legislature, have effect in rela-tion to that Province, municipality, board or autho-rity as if for the reference to fifty rupees per annum there were substituted reference to the rate or maximum rate, or such lower rate, if any, (being rate greater than fifty rupees per annum) as may for the time being be fixed by law of the Federal Legislature; and any law of the Federal Legisla-ture made for any of the purposes of this proviso may be made either generally or in relation to any specified Provinces, municipalities, boards or authorities.

(3) The fact that the Provincial Legislature has power to make laws as aforesaid with respect to taxes on professions, trades, callings and employ-ments, shall not be construed as limiting, in relation to professions, trades, callings and employments, the generality of the entry in the Federal Legisla-tive List relating to taxes on income."

Simultaneously with the introduction of s. 142,A, Entry No. 46 in the Provincial Legislative List, which had till then stood as "Taxes on professions, trades, callings and employments" was amended by the addi-tion of the words "subject, however, to the provisions of section 142-A of this Act".

The impugned Act was passed by the Governor under s. 90 of the Government of India Act, 1935. Under sub-s. (3) of that section, it had the same force and

l S.C.R. SUPREME COURT REPORTS

effect and was subject to disallowance in the same x96x manner as an Act of the Provincia~ Legislature assent- Mst. Jadao Bahu ·; ed to by the Governor. The impugned Act was v. J enacted with the concurrence and assent of the Municipal com-Governor-General and thus complied with all the mitfre, Khandwa formalities required for such enactment. & Another

The powers of the Provincial Legislatures under the Legislative Lists have been the subject of numerous Hidayatullah f. decisions by the Federal Court and also by this Court. It has been pointed out that these powers are as large and plenary as those of Parliament itRelf. These powers, it has been held, include wit.hin themselves the power to make retrospective laws; and as pointed out by Gwyer, C.J. in The United Provinces v. Atiqa Begum('), the burden of proving that Indian Legisla-tures "were subject to strange and unusual prohibi-tion against retrospective legislation lay upon those who asserted it". This has not been asserted in this case, as, indeed, it could not be, after the decision of the case cited by us. In the case before the Allahabad High Court, out of which the appeal before the Federal Court had arisen [sub nom Mst. Atiqa Begum v. U. P. ([2])], it was held that retrospective legislation was not possible in view of the provisions of s. 292 of the Government of India Act, 1935, which continued all law in force in British India immediately before the commencement of Part III of the Act, until alter-ed or repealed or amended by competent Legislature or other competent authority. This view was not accepted by the Federal Court., which held that s. 292 of the Act did not prevent Legislatures in India from giving retrospective effect to measures passed by them. There have been numerous occasions on which retro-spective laws were passed, which were upheld by the Federal Court and also by this Court. It is not neces-sary to cite instances, but we refer only to the deci-sion in M. P. V. Sundararamier & Co. v. The State of Andhra Pradesh('), where this Court approved the dictum of the Federal Court.

Retrospective legislation being thus open to the (1) [1940) F.C.R, IIO. (2) A.I.R. (19401 All, 272.

(3) [1958] S.C.R. 1422.

I96I Provincial Legislatures, the Act of the Governor had Retrospective laws, it has been held, M st. J[-d ]ao [B ]a UJ> [.. ][the ][same force. ]l"d t t h" t . • "t v. can va I an , w JC con ams some e,ect m r s Municipal Com- enactment. Examples of Validating Acts which ren-mittee, Khandwa dered inoperative, decrees or orders of the Court or & Another alternatively made them valid and effective, are . --many, In Atiqa Begum's case ([1]), the power of valida-Hidayatullah f. ting defective laws was held to be ancillary and sub-sidiary to the powers conferred by the Entries and to be included in those powers. Later, the Federal Court in Piare Dusadh, v. King Emperor(') considered the mat-ter fully, and held that the powers of the Governor-General which were conterminous with those of the Central Legislature included the power of validation. The same can be said of the Provincial Legislatures and also of the Governor acting as Legislature.

The only question thus is whether the power to pass retrospective and validating law was taken away by the enactment of s. 142-A and the amend-ment of the Entry in the Government of India Act. It is on this point that the difference in the High Court arose. The amendment of the Entry is of no special significance, because it only subjects the otherwise plenary powers to the provisions of s, 142-A. Apart from the implications arising from that section, the supremacy of the Legislature to pass retrospective and validating laws was unaffected. We have thus to see whats. 142-A enacted and to what extent it tren-ched upon the powers of the Provincial Legislature and the Governor.

Ylr. N. C. Chatterjee, in arguing the case, adopted the line of reasoning of the minority view in the High Court. He pointed out that s. 142-A was enacted to achieve three purposes. The first was that it remov,jd doubts whether the charge of tax on professions, etc., would be regarded as income-tax. The second was that it put limit upon the powers of the Provincial Legislature to enact law imposing tax in excess of rupees fifty after March 31, 1939; and thirdly it pre-served only existing valid laws already in force, which imposed tax in excess of the amount indicated. He (1) [z940] F.C.R. no. (2).[1944) F.C.R. 61.

I S.C.R. SUPREME COURT REPORTS

contended that the second sub.section and the proviso c96r covered the entire field, and law passed after March M 1 1 --;- .. 31, 1939, could not freshly impose tax in excess of s · vao UJ• the limit and this was such law. Municipal Com·

Under the scheme of the Government of India Act, mittee, Khandwa 1935, income-tax, though Central levy, was, under & Another s. 138 (1), distributable among the Provinces and for Hidayatullah ]. which an elaborate scheme prepared by Sir Otto ' Niemyer was accepted and embodied in the Govern-ment of India (Distribution of Revenues) Order in Council, 1936. The Centre could levy surcharge for federal purposes. Taxes on trades, professions and callings, which were taxes already leviable by the Provinces under Schdule II of the Rules made by the Governor-General in Council under s. 80A(3)(a) of the Government of India Act, were also in cl uded in the Provincial Legislative List as source of revenue for the Provinces. It was, however, felt that these taxes might come into clash with tax on income in the Federal List, and also if unlimited in amount, might become second tax on income to be levied by the Provinces. It was to remove these contingencies that s. 142-A was enacted. Sub-section (1) provided that tax on professions, etc., would not be invalid on the ground that it related to tax on income. Sub-sec-tion (3) was counter-part of sub-s. (1), and provided that the generality of the Entry in the Federal Legis-lative List relating to taxes on income would not be construed as in any way limited by the power of the Provincial Legislature to levy tax on professions, etc. The fields of the two taxes were thus demar-cated. No other implication arises from these two sub-sections.

Hidayatullah ].

It was also apprehended that under the guise of taxes on professions, etc., the Provincial Legislatures might start their own scheme of tax on income, thus subjecting incomes from professions etc., to an additional tax of the nature of income-tax. limit was therefore placed upon the amount which could be collected by way of tax on professions, etc., and that limit was Rs. 50 per annum per person. The second

I96I sub-section achieved this result. It was, however, Mst. Jadao Bahuji realised that the tax being an old tax, there were laws Munici;~1 com- under which the limit of Rs. 50 was already exceeded miltee, Khandwa in relation to Province, municipality, board or like Iii· Another authority, and the imposition of such limit might displace their budgets after March 31, 1939. proviso llidayatullah J. was, therefore, added to the second sub-section that if in the financial year ending with the thirty-first day of March, nineteen hundred and thirty-nine there was in force in the case of any Province, etc., tax on professions, trades, callings or employments the rate or the maximum rate of which exceeded Rs. 50 per annum, the provisions of the second sub-section shall have effect, (unless for the time being provision to the contrary was made by law of the Federal Legisla-ture) as if instead of Rs. 50 per annum there was sub-stituted reference to the rate or maximum rate exceeding Rs. 50. Where no such law was passed by the Federal Legislature, the tax even in excess of Rs. 50 continued to be valid.There can be no doubt that if law was passed after the amendment and sought to impose taxes on professions etc., for any period after March 31, 1939, it had to conform to the limit prescribed by s. 142A (2). The prohibition in the second sub-section opera-ted to circumscribe the legislative power by putting date-line after which tax in excess of Rs. 50 per annum per person for period after the date-line could not be collected unless it came within the proviso. But neither sub-s. (2) nor the proviso speaks of period prior to March 31, 1939. The sub-section speaks only of "the total amount payable ...... after the thirty-first day of March, nineteen hundred and thirty-nine". These words are important. They create limit on the amount leviable as tax for period after that date. But if law was. passed validating another which imposed tax for period prior to the date indicated, it would be taxing professions etc., in excess of Rs. 50 not after March 31, 1939, but before it. Neither the Entry nor the section either directly or indirectly prohibited this, nor did they create any limit for the prior period. The Validating Act, though

t ., """" !-'• J~ • , .

1 S.C.R. SUPREME COURT REPORTS

passed in 1941, can be read only as affecting period r96r for which there was no limit. If"the sub-section saidM R st. 1a -d ao 8 aou;• aou;• , .. t at tax s II not paya bl m excess o [, ]s. 50 . wit -v. out indicating the period or date, the argument would Municipal Com-have some support, but it puts in date, and the mittee, Khandwa operation of the prohibition is confined to period & Another after that date.

, .. st. 1ao 8 aou;• aou;• v. Municipal Com-mittee, Khandwa & Another Hidayatullah ].

The Validating Act, being thus completely within the powers of the Governor, could remove retrospec-tively the defect in the earlier Act. Though it re-imposed the tax from the date of the earlier Act, it took care to impose the tax for period ending with March 31, 1938. The impugned Act did not need the support of the proviso, because it did not fall within the ban of the second sub-section. In our opinion, the Validating Act of 1941 was within the powers of the Governor, and was valid piece of legislation. The appeal fails, and is dismissed with costs.

Appeal dismissed.

SHEW BUX MOHATA AND ANOTHER

Marek 29.

SM. TULSIMANJARI DASI AND ANOTHER

(P. B. GAJENDRAGADKAR and K. N. WANCHOO, JJ.)

Practice-Security for costs-Appeal to Supreme Court-Certificate granted by High Court-Power of High Court to extend time-Code of Civil Procedure, r908 (Act 5 of r908), 0. 45, rr. 7, IO, II-Supreme Court Rules, r950, 0. XII, r. 3.

On an application made by the appellant, the Calcutta High Court granted certificate on May r8, 1956, enabling him to appeal to the Supreme Court against the judgment and decree of the High Court. Under 0. 45, r. 7(r)(a), of the Code of Civil Procedure, i908, the appellant had to deposit the security amount for costs of the respondent within ninety days or such further period, not exceeding sixty days, as the court may upon cause shown allow, from the date of the decree complained of, or within six weeks from the date of the grant of the certifi-cate, whichever was the later date. Being unable to deposit