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Petitioner: STATE OF M.P. VS Respondent: RAKESH KOHLI and another
Court Name: Supreme Court of India Judge(s): H.L. Gokhale, R. M. Lodha, H. L. Gokhale Title: STATE OF M.P. vs RAKESH KOHLI and another Case No.: Civil Appeals Nos, 684 with 1270 of 2004 Date of Judgment:2012-05-11 Reported As: 2013 SCMR 34 Result: Appeals allowed
JUDGMENT
JUDGMENT R.M. LODHA, J.---The only point for consideration here is, whether or not the Division Bench of the Madhya Pradesh High Court was justified in declaring Clause (d), Article 45 of Schedule I-A of the Indian Stamp Act, 1899 (For short, '1899 Act') which was brought in by the Indian Stamp (Madhya Pradesh Amendment) Act, 2002 (for short, 'M.P. 2002 Act') as unconstitutional being violative of Article 14 of the Constitution of India. 2. The above point arises in this way. Two writ petitions came to be filed before the Madhya Pradesh High Court. In both writ petitions initially it was prayed that Clauses (f) and (f-1), Article 48, Schedule 1-A brought in the 1899 Act by section 3 of the Indian Stamp (Madhya Pradesh Amendment) Act, 1997 (for short, 'M.P. 1997 Act') be declared ultra vires. During the pendency of these petitions, the 1899 Act as applicable to Madhya Pradesh was further amended by the M.P. 2002 Act. The respondents, referred to as writ petitioners, amended their writ petitions and prayed that Clause (d), Article 45 of Schedule 1-A of the 1899 Act as substituted by M.P. 2002 Act be declared ultra vires. The writ petitioners set up the case that original Article 48 of the 1899 Act, Schedule 1-A prescribed stamp duty payable at Rs,10 if attorney was appointed for a single transaction. By M.P. 1997 Act, Article 48 Clause (t) was substituted by Clauses (f) and (f1). Clause (f- 1) provided that where power of attorney was executed without consideration in favour of person who is not his or her spouse or children or mother or father and authorizes him to sell or transfer any immovable property, the stamp duty would be leviable as if the transaction is conveyance under Article 23. Explanation II inserted by M.P. 1997 Act provided that where under Clauses (f) and (f-1), duty had been paid on the power of attorney and a conveyance relating to that property was executed in pursuance of power of attorney between the executant of the power of attorney and
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the person in whose favour it was executed, the duty on conveyance should be the duty calculated on the market value of the property reduced by duty paid on the power of attorney. By M.P. 2002 Act, stamp duty relating to power of attorney has been prescribed in Article 45 of Schedule 1-A. Clause (d) thereof prescribes stamp duty at two per cent on the market value of the property which is subject-matter of power of attorney when power of attorney is given without consideration to a person other than father, mother, wife or husband, son or daughter, brother or sister in relation to the executant and authorizing such person to sell immovable property situated in Madhya Pradesh. The writ petitioners pleaded, inter alia, that the distinction between an agent who was a blood relation and who was an outsider carved out in Article 45, Clause (d) was legally impermissible. The provision violates Article 14 of the Constitution as it has sought to create unreasonable classification. 3. The State of Madhya Pradesh stoutly defended the challenge to the above provisions and stated before the High Court that the matter of rate of stamp duty was solely in the domain of State Legislature and none of the provisions of the Constitution was offended by the above provisions. 4. The Division Bench of the High Court has accepted the constitutional challenge to Clause (d), Article 45 of Schedule 1-A brought in the 1899 Act by M.P. 2002 Abt and held that the said provision was violative of Article 14 of the Constitution of India. The Division Bench gave the following reasoning:- "11. As far as clauses (d) is concerned, it lays a postulate that postulate [sic] that when the power of authority is given without consideration to a person other than the father, mother, wife or husband, son or daughter, brother or sister in relation to the executant and authorizing such person to sell immovable property, 2% on the market value of the property is to be collected. Submission of Mr. Agrawal is that this clause is absolutely unreasonable and smacks of arbitrariness, as there is no rationale to include the category of persons who have been included and to leave out to all other persons. Mr. S.K. Yadav, learned Government Advocate submitted that near relatives can constitute a class by itself and all others can fit into a different category and, therefore, the said provision does not offend the concept of classification, as there is intelligible differentia. On a first blush the aforesaid submission of the learned counsel for the State appears to be quite attractive, but on a deeper probe it is not what it is. In the guise of the classification something has been stated in the said provision. One can give certain examples., One may not have kith or kin and intact[sic] even that case to deprive him to execute the power of attorney for selling the property, unless 2% is paid on the market value is arbitrary. The provisions may pass the test of classification but it would not pass the requirement of the second limb of Article 14 of the Constitution which ostracises arbitrariness, unreasonable and irrationality. The State may have a laudable purpose but the laudable purpose alone cannot sustain the provision. The matter would have been [sic] different had it included a rider that it is executed in favour of any other for consideration or some other purposes is not the situation. In view of the same, we are of the considered opinion, the aforesaid provision is defiant of Article 14 of the Constitution. Accordingly, we have no hesitation to declare the same as violative of Article 14 of the Constitution." 5. Ms. Vibha Datta Makhija, learned counsel for the appellant - State of Madhya Pradesh - submitted that the High Court was in error in declaring Clause (d), Article 45, Schedule 1-A as violative of Article 14 of the Constitution of India. She would submit that the test of challenge to a legislative provision was completely different from that of an administrative action. A legislative provision cannot be struck down as being arbitrary, irrational or unreasonable. She further submitted that the classification made in Clause (d) of Article 45, Schedule 1-A had intelligible differentia with a direct nexus to the object of the 1899 Act. The object of the 1899 Act is to collect proper stamp duty on an instrument or conveyance on which such duty is payable This is to protect the State revenue. The legislative wisdom took into consideration that genuine power of
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attorney documents would be executed by the executants without consideration mostly in favour of kith and to complete sale transactions on behalf of the executants. The said category attracts lower stamp duty than power of attorney executed in favour of third parties/strangers since such power of attorney document would be for extraneous reasons. 6. Learned counsel for the State of M.P. Also submitted that the wisdom of the Legislature in protecting the revenue and carving out genuine classes from others had been well recognized. The court cannot sit in judgment over their wisdom. She relied upon decisions of this Court in Balaji v, Income Tax Officer, Special Investigation Circle, Akola and others AIR 1962 SC 123: State of A.P. And others v. Mcdowell and Co. And others (1996) 3 SCC 709 : (AIR 1996 SC 1627 : 1996 AIR SCW 1679); Ramesh Chand Bansal and others v. District Magistrate/Collector Ghaziabad and others(1999) 5 SCC 62 : (AIR 1999 SC 2126 : 1999 AIR SCW 1873); Veena Hasmukh Jain and another v. State of Maharashtra and others (1999) 5 SCC 725 : (AIR 1999 SC 807 : 1995 AIR SCW 429); Hanuman Vitamin Foods Private Limited and others v. State of Maharashtra and another (2000) 6 SCC 345 : (AIR 2000 SC 2571: 2000 AIR SCW 2664); Karnataka Bank Limited v. State of Andhra Pradesh and others (2008) 2 SCC 254 : (AIR 2008 SC (Supp) 1377 2008 AIR SCW 1021); Government of Andhra Pradesh and others v. P. Laxmi Devi (Smt.) (2008) 4 SCC 720 : (AIR 2008 SC 1640 2008 AIR SCW 1826); Union of India v. R. Gandhi, President; Madras Bar Association (2010) 11 SCC 1 : (2010 AIR SCW 4004) and Suraj Lamp and Industries Private Limited v. State of Haryana and another (2012) 1 SCC 656 : (AIR 2012 SC 206 : 2011 AIR SCW 6385). 7. The respondents despite service have not chosen to appear. 8. The definition of conveyance' is contained in section. 2(10) of the 1899 Act which reads as under:- - "S.2. Definitions.-In this Act, unless there is something repugnant in the subject or context,- (10) "Conveyance" includes a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule I. 9. Section 2(21) defines 'power of attorney'. It reads as follows:-- "S. 2(21) "Power-of-attorney includes any instrument (not chargeable with a fee under the law relating to court-fees for the time being in force) empowering a specified person to act for and in the name of the person executing it." 10. The 1899 Act has been amended from time to time by the Madhya Pradesh State Legislature insofar as its application to the State of Madhya Pradesh is concerned. The stamp duty on power of attorney was originally prescribed in Article 48, Schedule 1-A of the 1899 Act. Clause (t) in original Article 48, Schedule 1-A read as under:-- {{TABLE}} "SCHEDULE-1A Stamp Duty on Instruments (See section 3) Description of Instruments (1)Proper Stamp Duty (2) 48. Power of Attorney , as defined by section 2(21), not being a Proxy [No,52]
(f) when giving for consideration and authorizing the attorney to seel any immovable property;The same duty as Conveyance (No.23) for a market value equal to the amount of the consideration."
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11. Section 3 of the M.P. 1997 Act brought in amendment in the 1899 Act, inter alias as under:-- ."In Schedule 1-A of the Principal Act, in Article 48,- (i) For clause (0, the following clauses shall be substituted, namely: (f) when given for consideration and authorizing the attorney to seel or transfer any immovable property . The same duty as a conveyance under Article 23 on the market value of the property .
(f-1) when given without consideration in favour of persons who are not his or her spouse or Children, or mother or father and authorizing the attorney to sell or transfer any immovable property .The same duty as a conveyance under Article 23 on the market value of the property . (ii) the existing explanation shall be renumbered as explanation I thereof and after explanation I as so renumbered, the following explanation shall be inserted, namely:- "Explanation II:---Where under clauses (1) and (f-1) duty has been paid on the power of attorney and a 'conveyance relating to that property is executed in pursuance of power of attorney between the executant of power of attorney and the person in whose favour it is executed, the duty on conveyance shall be the duty calculated on the market value of the property reduced by duty paid on the power of attorney". ' The Objects and Reasons for the above 'amendment were to check the tendency to execute power of attorney authorising the attorney to sell or transfer immovable property in place of a conveyance deed and to increase the revenue of the Government in the State of Madhya Pradesh. 12. Article 48 in the 1899 Act as amended by M.P. 1997 Act was substituted by M.P. 2002 Act. The new provision, Article 45 in respect of power of attorney in Schedule 1A which was brought in by M.P. 2002 Act reads as follows:-- {{TABLE}} SCHEDULE-1A Stamp Duty on Instruments (See section 3) Description of Instruments (1)Proper Stamp Duty (2) 45.Power of attorney [as defined by section 2(21)] not being a proxy:- (a) when authorizing one person or more to act in single transaction, including a power of attorney executed for procuring the registration of one or more documents in relation to a single transaction or for admitting execution of one or more such documents; Fifty rupees. (b) when authorizing one person to act in more than one transaction or generally; or not more than ten persons to act jointly or severally in more than oneOne hundred rupees.
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transaction or generally;
(c)when given for consideration and authorizing the agent to sell any immovable property .The same duty as a conveyance (No, 22) on the market value of the property . when given without consideration to a person other than the father , mother , wife or husband, son or daughter , brother or sister in relation to the executant and authorizing such person to sell immovable property situated in Madhya Pradesh.Two per cent on the market value of the property which is the subject matter of power of attorney .
In any other case; Fifty rupees for each person authorized. ' Explanation-I.---For the purpose of this Article, more persons than one when belonging to the same firm shall be deemed to be one person. ' Explanation-II.---The term 'registration' includes every operation incidental to registration under the Registration Act,. 1908 (16 of 1908)." 13. In our opinion, the High Court was clearly in error in declaring Clause (d), Article 45 of Schedule 1-A of the 1899 Act which as brought in by the M.P. 2002 Act as violative of Article 14 of the Constitution of India. It is very difficult to approve the reasoning of the High Court that the provision may pass the test of classification but it would not pass the requirement of the second limb of Article, 14 of the Constitution which ostracises arbitrariness unreasonable and irrationality. The High Court failed to keep in mind the well defined limitations in consideration of the constitutional validity of a statute enacted by Parliament or a State Legislature. The statute enacted by Parliament or a State Legislature cannot be declared unconstitutional lightly The court must be able to hold beyond any iota of doubt that the violation of the constitutional provisions was so glaring that the legislative provision under challenge cannot stand. Sans flagrant violation of the constitutional provisions, the law made by Parliament or a State Legislature is not declared bad. 14. This Court has repeatedly stated that legislative enactment can be struck down by Court only on two grounds, namely (i), that the appropriate Legislature does not have competency to make the law and (ii), that it does not take away or abridge any of the fundamental rights enumerated in Part-III of the Constitution or any other constitutional provisions. 15. In Mcdowell and Co., (AIR 1996 SC 1627: 1996 AIR SCW 1679) while dealing with the challenge to an enactment based on Article 14, this Court stated in paragraph 43 (at pg. 737) of the Report as follows (Para 45 of AIR, AIR SCW):-- " A law made by Parliament or the legislature can be struck down by courts on two grounds and two grounds alone, viz., (1) lack of legislative competence and (2) violation of any of the .Fundamental rights guaranteed in Part III of the Constitution or of any other constitutional provision. There is no third ground" ..If an enactment is challenged as violative of Article 14, it can be struck down only if it is found that it is violative of the equality clause/equal protection clause enshrined therein. Similarly, if an enactment is challenged as violative of any of the fundamental rights guaranteed by clauses (a) to (g) of Article 19(1), it can be struck down only if it is found not saved by any of the clauses (2) to (6) of Article 19 and so on. No enactment can be struck down by just saying that it is arbitrary or unreasonable. Some or other constitutional infirmity has to be found before invalidating an Act. An enactment cannot be struck down on the ground that court thinks it unjustified. Parliament and the
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legislatures, composed as they are of the representatives of the people, are supposed to know and be aware of the needs of the people and what is good and bad for them. The court cannot sit in judgment over their wisdom (Emphasis supplied) ' Then dealing with the decision of this Court in State of T.N. And others v. Ananthi Ammal and others (1995) 1 SCC 519 : (AIR 1995 SC 2114: 1995 AIR SCW 3553, a three-Judge Bench, in Mcdowell' and Co., (AIR 1996 SC 1627 : 1996 AIR SCW 1679) observed in paragraphs 43 and 44 [at pg. 739) of the Report as under (Paras 45 and 46 of AIR,AIR SCW):-- "Now, coming to the decision in Ananthi Ammal, we are of the opinion that it does not lay down a different proposition. It was an appeal from the decision of the Madras High Court striking down the Tamil Nadu Acquisition of Land for Harijan Welfare Schemes Act, 1978 as violative of Articles 14, 19 and 300-A of the Constitution. On a review of the provisions of the Act, this Court found that it provided a procedure which was substantially unfair to the owners of the land as compared to the procedure prescribed by the Land Acquisition Act, 1894, insofar as Section 11 of the Act provided for payment of compensation. in installments if it exceeded rupees two thousand. After noticing the several features of the Act including the one mentioned above, this Court observed: (SCC p. 526, para 7) (Para 7 of AIR, AIR SCW):-- "7. When a statute is impugned under Article 14 what the court has to decide is whether the statute is so arbitrary or unreasonable that it must be struck down. At best, a statute upon a similar subject which derives its authority from another source can be referred to, if its provisions have been held to be reasonable or have stood the test of time, only for the purpose of indicating what may be said to be reasonable in the context. We proceed to examine the provisions of the said Act upon this basis." 44. It is this paragraph which is strongly relied upon by Shri Nariman. We are, however, of the opinion that the observations in the said paragraph must be understood in the totality of the decision. The use of the word 'arbitrary' in para 7 was used in the sense of being discriminatory, as the reading of the very paragraph in its entirety discloses. The provisions of the Tamil Nadu Act were contrasted with the provisions of the Land Acquisition Act and ultimately it was found that section 11 insofar as it provided for payment of compensation in instalments was invalid. The ground of invalidation is clearly one of discrimination. It must be remembered that an Act which is discriminatory is liable to be labelled as arbitrary. It is in this sense that the expression 'arbitrary' was used in para 7." 16. The High Court has not given any reason as to why the provision contained in clause (d) was arbitrary, unreasonable or irrational. The basis of such conclusion is not discernible from the judgment. The High Court has not held that the provision was discriminatory. When the provision enacted by the State Legislature has not been found to be discriminatory, we are afraid that such enactment could not have been struck down on the ground that it was arbitrary or irrational. 17. That stamp duty is a tax and hardship is not relevant in interpreting fiscal statutes are well known principles. In Bengal Immunity Co. Ltd. v. State of Bihar and others", a seven-Judge Bench speaking through majority in paragraph 43 (at pg. 685) of the Report while dealing with hardship in the statutes stated as follows:- ' t If there is any real hardship of the kind referred to, there is Parliament which is expressly invested with the power of lifting the ban under cl. (2) either wholly or to the extent it thinks fit to do. Why should the Court be called upon to discard the cardinal rule of interpretation for mitigating a hardship, which after all may be entirely fanciful, when the Constitution itself has expressly provided for another authority more competent to evaluate the correct position to do the needful?" 18. In Commissioner of Income Tax, Madras v. R.SV. Sr. Arunachalam Chettiar AIR 1965 SC 1216, a three-Judge Bench of this Court, inter alia, observed in paragraph 13 (at pgs. 1220-21) of the Report,
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"equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not." 19. In the Income Tax Officer, Tuticorin v. T.S. Devinatha Nadar and others AIR 1968 SC 623, this Court in paragraph 30 (at pg. 635) of the Report observed as follows:-- "30. From the foregoing decisions it is clear that the consideration whether a levy is just or unjust, whether it is equitable or not, a consideration which appears to have greatly weighed with the majority, is wholly irrelevant in considering the validity of a levy. The courts have repeatedly observed that there is no equity in a tax. The observations of Lord Hatherley, L.C. In (1869) 4 Ch. A 735. "In fact we must look to the general scope and purview of the statute, and at the remedy sought to be applied, and consider what was the former State of the law, and what it was that the legislature contemplated," were made while construing, a non-taxing statute. The said rule has only a limited application in the interpretation of a taxing statute. Further, as observed by that learned Judge in that very case the question in each case is "whether the legislature had sufficiently expressed its intention" on the point in issue." ' The court highlighted that the court could not concern itself with the intention of the Legislature when the language expressing such intention was plain and unambiguous. 20. In P. Laxmi Devi (Smt.), (AIR 2008 SC 1640: 2008 AIR SCW 1826) a two- Judge Bench of this Court was concerned with a judgment of the Andhra Pradesh High Court. The High Court had declared section 47-A of the 1899 Act as amended by A.P. Act 8 of 1998 that required a party to deposit 50% deficit stamp duty as a condition precedent for a reference to a Collector under Section 47-A unconstitutional. The Court said in P. Laxmi Devi (Smt.) as follows:- "19. It is well settled that stamp duty is a tax, and hardship is not relevant in construing taxing statutes which are to be construed strictly. As often said, there is no equity in a tax vide CIT v. V.MR.P. Firm Muar, (AIR 1965 SC 1216). If the words used in a taxing statute are clear, one cannot try to find out the intention and the object of the statute. Hence the High Court fell in error in trying to go by the supposed object and intendment of the Stamp Act, and by seeking to find out the hardship which will be caused to a party by the impugned amendment of 1998. 20. Xxx xxx xxx 21. It has been held by a Constitution Bench of this Court in ITO v. T.S. Devinatha Nadar, (AIR 1968 SC 623) (vide AIR paras 23 to 28) that where the language of a taxing provision is plain, the court cannot concern itself with the intention of the legislature. Hence, in our opinion the High Court erred in its approach of trying to find out the intention of the legislature in enacting the impugned amendment to the Stamp Act." ' While dealing with the aspect as to how and when the power of the court to declare the statute unconstitutional can be exercised, this Court referred to the earlier decision of this Court in Rt. Rev. Msgr. Mark Netto v. State of Kerala and others (1979) 1. SCC 23 : (AIR 1979 SC 83)and held in para 46 (at pg. 740) of the Report as under (para 44 of AIR,. AIR SCW):-- "46. In our opinion, there is one and only one ground for declaring an Act of the legislature (or a provision in the Act) to be invalid, and that is if it clearly violates some provision of the Constitution in so evident a manner as to leave no manner of doubt. This violation can, of course, be in different ways e.g. If a State Legislature makes a law which only Parliament can make under List-I to the Seventh Schedule, in which case it will violate Article 246(1) of the Constitution, or the law violates some specific provision of the Constitution (other than the directive principles). But before declaring the statute to be unconstitutional, the court must be absolutely sure that there can be no manner of doubt that it violates a provision of the Constitution. If two views are possible, one making the statute constitutional and the other making it unconstitutional, the former view must always be preferred. Also, the court must make every effort to uphold the constitutional validity of a statute, even if that requires giving a strained construction or narrowing down its scope vide Rt.
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Rev. Msgr. Mark Netto v. State of Kerala SCC para 6 : AIR para 6: Also, it is none of the concern of the court whether the legislation in its opinion is wise or unwise." ' Then in paras 56 and 57 (at pg. 744), (Paras 54 and 55 of AIR, AIR SCW) the Court stated as follows:-- "56. In…
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