|CITATION||1982 133 ITR 239|
|COURT||Supreme Court of India|
|JUDGES/CORAM||Justice Y Chandrachud, Justice A Gupta, Justice A Sen, Justice P. Bhagwati and Justice SM Ali|
|DATE OF JUDGEMENT||13.11.1981|
In the landmark judgment the Hon’ble Supreme Court in 4:1 ratio while upholding the constitutional validity of Special Bearer Bonds (Immunities and Exemptions) Ordinance, 1981 (Ordinance) and the Special Bearer Bonds (Immunities and Exemptions) Act 1981 (Act) reiterated that principle that in economic matters the Courts should exercise judicial self-restraint if not judicial difference to legislative judgment
The facts of the case are as follows: In the instant case, the petitioners by invoking the extraordinary writ jurisdiction of the Hon’ble Supreme Court assailed the constitutional validity of Ordinance and the Act on the ground that they fall foul of the intransgressible right to equality guaranteed under Article 14 of the Constitution.
The brief facts leading to the enactment of the Ordinance can be traced back to 12th January 1981, when the both Houses of Parliament were not in session and the President, in exercise of the power conferred upon him under Article 123 of the Constitution, issued the Ordinance affording certain immunities and exemptions to holders of Special Bearer Bonds 1991 with the object of canalizing black money for productive purposes. The Ordinance was later replaced by the Act, which received the assent of the President on 27th March 1981, but which was brought into force with retrospective effect from 12th January 1981, being the date of promulgation of the Ordinance.
The main issues in the case were:
- Whether the Ordinance and the Act were ultra vires in view of Article 14 of the Constitution of India.
- Whether the Ordinance was promulgated by the President in excess of the power conferred by Article 123 of the Constitution.
Summary of court decision and judgment
P.N. Bhagwati, J. speaking for the Constitution Bench of Hon’ble Supreme Court upheld the constitutional validity of the Act and Ordinance as being consistent with the provisions of Article 14 of the Constitution. In doing so, the Hon’ble Court held that there was a presumption in favour of constitutionality of a statute and this presumption assumes greater significance in legislations dealing with economic matters as the Courts cannot substitute their social and economic beliefs for the judgment of legislative bodies and more often than not a greater play in the joints has to be allowed to the legislature in view complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts. Re: Special Courts Bill 1978, Morey v. Dond, Munn v. Illinois were referred to. Ergo, the validity of the classification, the Hon’ble Court held that it had to be gauged with the reference to the object of the legislation. Since the object of the Act, as was discernible from the Preamble, was to unearth the black money for being utilized for productive purposes with a view to effective social and economic planning, and though there was no express bar prohibiting investment of white money in special bearer bonds, the Court held that it was difficult to foresee as to why would anyone invest his white money in subscribing to or acquiring special bearer bonds which would yield only 2 per cent simple interest per annum and which were not encashable for a period of not less than ten years, the classification made was held to be rational and intelligible and the operation of the provisions of the Act was rightly held to be confined to persons in possession of black money Though the majority members of Wanchoo Committee besides Shri Chitale had opposed the issuance of special bearer bonds by expressing their concerns of possible abuse, the Court held that the Legislature by providing adequate safeguards had limited the possibility of that abuse. Negativing the second contention of the petitioners, the Hon’ble Court held that since the Act had been brought into force with retrospective effect that is from the date of promulgation of the ordinance and section 9 of the Act explicitly provided that anything done or action taken under the Ordinance would be deemed to have been done or taken under the corresponding provisions of the Act , it was not necessary to dwell into the issue of constitutional validity of the Ordinance because even if it was declared unconstitutional, the validity of anything done or action taken under it could still be justified with reference to the provisions of the Act. Gujarat Pottery Works v. B.P. Sood, Controller of Mining Leases relied upon. Notwithstanding that, it was held that even if the arguments raised by the learned counsels for petitioners were to be considered, it was held that since the power of the President to promulgate an ordinance under Article 123 of the Constitution is co-extensive with the power of the Parliament to make laws, no limitation could be read into his power to alter or amend tax laws.
The dicta of the Hon’ble Court in the present case re-instils the real notion of equality as speaking of not mere formal equality but embodies the concept of real and substantive equality. The problem of black money was an obstinate economic problem which had been defying the Government for quite some time and notwithstanding, stringent laws imposing severe penalties and vigorous steps taken by the tax administration to detect black money and despite various voluntary disclosure schemes introduced by the government from time to time, the government had failed to curb the menace of rampant black money being prevalent and causing havoc to the economy. Ergo, the government was left with only two alternatives, either to allow black money to remain idle which would undeniably lead to a greater burden on the honest tax payers or to use it for productive purposes, by according some undeserved privileges and immunities to induce tax evaders. Thus, with a view to canalize black money, the Act was enacted and the Hon’ble Court after carefully analyzing the provisions of the Act, particularly Sections 3 and 4 rightly upheld the vires of the impugned legislation. Though in his dissenting judgment, A Gupta, J. expressed his concerns over the possible abuse of the legislation and held that the classification does not withstand the scrutiny of Article 14 of the Constitution as the classification and the object of the Act are distinct things and ergo the latter could not be made the basis of distinction, the Hon’ble Court rightly relied upon the Judgment of Hon’ble Supreme Court of US in Metropolis Theater Co. v. City of Chicago wherein it was held that the problems of government are practical ones and may justify, if they do not require, rough accommodations, illogical it may be, and unscientific. Article 14 merely forbids class legislation but it does not forbid reasonable classification for the purpose of legislation. Moreover the immunities afforded to the bearers under the Act were not widely or vaguely framed and if at all there was a possibility of abuse it was open for the Legislature to amend the same and a mere possibility of abuse crudities and inequities in complicated experimental economic legislation cannot be the sole ground for striking down a legislation. The same was held in Secretary of Agriculture v. Central Reig Refining Company.
In this landmark judgment, the Constitution Bench of the Hon’ble Supreme Court after carefully analyzing the provisions of the Act and its possibility of abuse upheld the Act and the Ordinance as intra vires in view of Article 14 of the Constitution.
 Re : Special Courts Bill 1978, AIR 1978 SC 478.
 Morey v. Dond, 354 US 457.
 Munn v. Illinois, 94 U.S. 13.
 Gujarat Pottery Works v. B.P. Sood, Controller of Mining Leases 1967 SCR (1) 695.
 Metropolis Theater Co. v. City of Chicago 57 Lawyers’ Edition 730.
 Secretary of Agriculture v. Central Reig Refining Company 94 Lawyers Edition 3.