Rai Ramkrishna & Others v. the State of Bihar
GAJENDRAGAllKAR, .J .-The short question which
these two appeals raise for our decision is in regard
to the validity of the retrospective operation of the
Bihar Taxation on Passengers and Goods (Carried
by Public Service Motor Vehicles) Act, 1961
(No. 17 of 1961) (hereinafter called 'The Act').
It is true that the two writ petitions Nos. 916/1961
and 918/1961 filed by the apFellants Rai Ram
krishna & Ors. and M/s. Road Transport Co.,
Dhanbad & Ors. respectively in the High Court at
Patna along with 18 others under Articles 226 and
227 of the Constitution had challenged the validity of
the whole of the Act. The High Co1irt has held that
the Act is valid both in its prospective as well as its
retrospective operation. In their appeals brought to
this Court by special leave against the said judgment,
the appellants do not challenge the conclusion of the
High Court that the Act is valid in so far as its
prospective operation is concerned; they have confi
ned their appeals to its retrospective operation.
Eighteen other petitioners who had joined the appel
lants in the High Court have accepted the decision of
the High Court and have not come to this Court in
appeal.
Before dealing with the points raised by the
appellants, it is necessary to set out briefly the back-
ground of the present dispute : On March, 30, •
1950, the Bihar L~gislature passed the Bihar Finance
Act, 1!):30 (Bihar Act L of 1950); this Act levied
a tax on passengers and goods carried by public
service motor vehicles in Bihar. Nearly a year after
this Act came into force, the appellants challenged
its validity by instituting a suit No. 60/1951 in the
Court of the First Subordinate .Judge at Gay a on
May 6, 1951. In this suit, the appellants prayed
that the provisions of Part III of the said Act were
l s.c.R. SUPREME COURT REPORTS 901
unconstitutional and asked for an injunction rest
raining the respondent, the State of Bihar, from
levying and realising the said tax. It appears that
a similar suit was instituted (No. 57/1951) on behalf
of the passengers and owners of goods for obtaining
similar reliefs against the bus operators. This latter
suit was filed by the passengers and owners of goods
in a representative capacity under O. 1 r. 8. Both
these suits were transferred to the Patna High Court
for disposal. A special Bench of the High Court
which heard the said two suits dismissed them on
May 8, 1952. The High Court found that
the said Act of 1950 did not contravene Art. 301 of
the Constitution and so, its validity was beyond
challenge. The appellants then preferred an
appeal to this Court No. 53/ 1952. Pending the
said appeal in this Court, a similar question had been
decided by this Court in the case of Atiabari Tea
Company Ltd. v. The Stat.e of Assam (1). In
consequence, when the appellants' appeal came for
disposal before this Court, it was conceded by the
respondent that the said appeal was covered by the
decision of this Court in the case of Atiabari Tea Co.
Ltd., and that in accordance with the said decision,
the appeal had to be allowed. That is why the'
appeal was allowed and the appellants were granted
the declaration and injunction claimed by them in
their suit. This judgment was pronounced on
Dec.ember 12, 1960 .
The respondent then issued an Ordinance
(Bihar Ordinance No. II of 1961) on August 1,
1961. By this Ordinance, the material
provisions of the earlier Act of 1950 which had been
struck down by this Court were validated and
brought into force retrospectively from the date when
the earlier Act had purported to come into force.
Subsequently, the provi~ions of the said Ordinance
were incorporated in the Act which was duly passed
by the Bihar Legislature and received the assent of
(I) [1961] I S.Q.R. 809.
1963
Roi Romkrishn"
•• 1 he StaJt •f Bi/iar
Gajend,agadkar, J,
196J
Rai R-.lrishM
•• n. StaU ef Bilwr
Gaj,,.,,.,edUT, J.
002 SUPREME COURT RE'.PoR.ts [1964] Vat.
the President on September 23, 1961. As a
result of the retrospective operation of this Act, its
material provisions are deemed to have come into
force on April 1, 1950, that is to say, the
date' on which the earlier Act of 1950 had come into
force. That, in brief, is the background of the
present legislation.
The appellants and the other petitioners who
had joined by filing several petitions in the Patna
High Court had challenged the validity of the Act
on several grounds. The High Court has rcjccttd
all these grounds and has taken the vi cw that the
Act in its entirety is valid. The High Court has
· found that the provisions of the Act no doubt take it
within the purview of Part XIII of the Constitution;
but it h'as held that the Act has been passed with
the preyious sanction of the President and the restri;
ctions imposed by it arc otherwise reasonable, and
so, it is saved under Art. 304. (b) of the Constitution.
The plea made by the respondent that the taxing
provisions of the Act were compensatory in character
and were, therefore, valid, was rejected by the High
Court. The High Court held that the principle
that a taxing statute which levies a compensatory or
regulatory tax is not invalid which has been laid
down by the majority decision of this Court in the
case of The Automdlile Transport (Rajasthan) Lt,d.
v. The State af Rajasthan ('), was not applicable to
the provisions of the Act. The argument that the
Act was invalid because it required the appellants to
act as the Agents of the respondent for collecting the
tax from the passcngen and from the owners of the
goods without payment of any temuneration, was
.rejected by the High Court. It was also urged that
the Act contraveneg the provisions of Art. 199 (4)
or the Constitution, but the High Court was not
. impressed with this aigument; and the plea that the
matters in dispute between the appellants and the
~dent arc really concluded by res judicOta,
(I) (1963) I 8.0.R, 491.
J.
t s.c.ll. SUPRtME COlJR t. REPOR ts 903
appeared to the High Court without any substance.
Tliat is how the writ petitions filed by the appellants
failed, and so, they have come to this Court confining
their challenge only to the validity of the reatros·
pective operation of the Act.
At this stage, it is necessary to refer to the
material provisions of the earlier Acts. and examine
the scheme of the Act impugned. The Finance ~ct
of 1950 was an amending Act; it was. passed because
it was thought expedient by the Bihar Legislature to
amend the earlier Bihar Sales Tax Act, 1947, and
the Bihar Agricultural Income-Tax Act, 1948.
Section 12 of the said Act levied a tax on passengers.
and goods carried or transported by public service
vehicles and public carriers. Section 12 (1) pres·
cribed the rate of the said taxation @ As.-/2/-in
a rupee on all fares and freights payable to owriers
of such motor cabs, · stage carriages,' contract
carriages or public carriers, as carried the goods and
passenger$ in question. Sub-section (2) dealt with
the cases where any fare or freight was charged in a
lump sum either for carrying goods or by way of
contribution for a season ticket, or otherwise; and
sub-section (3) provided that every owner of the
public vehicle 11hall pay into the Government
Treasury, the full amount of the tax due from him
under sub-section (I) or sub-section (2) in such a
manner and at such intervals as may be prescribed
and shall furnish such returns by such dates and to
1uch authority as may be prescribed.
In 1954, an amending Act was pa!Sed (Bihar
Act 11 of 1954), and section 14 of this amending
Act added an explanation to section 12 of the Act
of 1950. By this explanation, every passenger
carried by the public vehicle and every person whOle
goods were transported by a public carrier was made
liable to pay to the owner of the said carrier 1he
amount of tax payable under sub·aectjODl,(l) .aad (2)
J!J6J
R41 Bo...mm..
v.
· 'Tll4 S1o1 .. / Bilto r
~-..... 1.
/~3
Roi Rami.rUhtt4
v.
TA. Stah of B•h"'
GajmtlragadJ;ar, J.
904 SUPREME COURT REPORTS (1964] VOL.
of section 12, and every owner of the vehicle or
carrier was at1thorised to recover such tax from such
passenger or prrson. In ocher words, whereas before
the passing of the amending Act, the owners of
public vehicles may have been entitled to raise their
fares or freight charges in ord<"r to enable them to
pay the tax levied under s. 12 of the Act of 1950,
after the amending Act was passed, they became
entitled to recover the specific amounts from
passengers and owners of goods by way of tax pay·
able by them under the said section.
After the Act as thus amended was struck down
by this Court on December, 12, 1960 an
Ordinance was passed and its provisions were included
in the impugned Act which ultimately became the
law in Bihar on September 25, 1961. The Act consists
of 26 sections. Section 1 (3) expressly provides that the
Act shall be deemed to have come into force on the
first day of April, 1950. Section 2 defines, inter alia,
goods, owners, passenger and public service motor
vehicle. Section 3 is the charging section. Section 3 ( 1)
provides that on and from the date on which this Act is
deemed to have come into force under sub-section (3) of
section l, there shall be levied and paid to the State
Government a tax on all passenger.> and goods carried
by a public service motor vehicle. Then the sub
section prescribe~ the rate at which the said tax has
to be paid. There is a proviso to this sub-section
which it is unnecessary to set out. Sub-section (2)
lays down that every owner shall, in the manner
prescribed in section 9, pay to the State Government
the amount of tax due under this section, and sub
section (3) adds that every pllSSenger carried by a
public service motor vehicle and every person whose
goods are carried by such vehicle shall be liable to
pay to the owner the amount of tax payable under this
section and every owner shall recover such tax from
such passenger or person, as the case may be. There
are three more sub-sections to this section which need
'
i $.C.R. SUPREME COURT REPORTS 9o~
not detain us. It would be noticed that the effect l!Jf3
of s. 3 is that the passengers and the owners of goods Rai RamkriJ/ina
are made liable to pay the tax to the owner of the v. Th< Stale of Biha r public service motor vehicle and the latter is made
liable to pay the tax to the State Government, and Gaj1ndragaliluu, 1.
both these provisions act retrospectively by virtue of
s. 1 (3). In other words, the tax is levied on
passengers and goods carried by the public vehicles,
and the machinery devised is that the tax would be
recovered from the owners of such vehicles. Section 4
requires the owners of public service inotor vehicles
to register their vehicle~. Under s. 5, security has to
be furnished by such owners; and returns have to be
submitted under s. 6. Section 7 deals with the
procedure for the assessment of tax. Section 8
provides for the payment of fixed amount in lieu of
tax, and under s. 9 provision is made for the payment
and recoyery 'of tax. Section 10 deals with the special
mode of recovery. Section 11 deals with cases of
transfer of public service motor vehicle and, makes
both the transferor and the transferee liable for the
tax as prescribed by it. Refund is dealt with by
s. 12 ; and appeal, revision and review are provided
by ss. 13, 14 and 15 respectively. Under s. 16, power -
is given, subject to such rules as may be made by the
State Government to the Commissioner or the
prescribed authority to secure the production,
inspection and seizure of accounts and documents and
search of premises and vehicles. Section 17 makes
the Commissioner and the prescribed authority public
servants ; and section 18 deals with offences and
penalties. Section 19 deals with compounding of
offences. Section 20 prescribes the usual bar to
certain proceedings, and section 21 refers to the
limitation of certain suits and prosecutions. Section 22
confers power on the State Government to make
rules. Section 23 is important. In effect, it provides
that the acts done under Bihar Act 17 of 1950
shall be deemed to have been done under this Act.
006 SuPREME COURt REP61lts [1964] vot.
INS It reads thus :-
Cl t4 I , J.
"Notwithstanding any judgment, decree or
order of any Court, tribunal or authority-
( a) any amount paid, collected or recovered
or purported to have been paid, collected
or recovered as tax or penalty under the
provisions of Part III of the Bihar Finance
Act, 1950 (Bihar Act XVII of 1950), as
amended from time to time (hereinafter
referred to as the "said Act") or the rules
made thereunder during the period
beginning with the first day of April, 1950
and ending on the thirty-first day of July,
1961, shall be deemed to have been validly
levied, paid, collected, or recovered under
the provisions of this Act ; and
(b) any proceeding commenced or purported
to have been commenced for the assessment,
collection or recovery of any amount as
tax or penalty under the provisions of the
said Act or the rules made thereunder
during the period specified in clause (a)
shall be deemed to have been commenced
and conducted in accordance with the
provisions of this Act, and, if not already
completed, shall be continued and com
pleted in accordance with the provisions
of this Act."
There is a proviso to thi~ section which is not relevant
for our purpose. Sections 24 and 25 deal with repeals
and savings; and section 26 provides that if any
difficulty arises in giving effect to the provisions of
the Act, the State Government may pas~ an order in
that behalf, subject to the limitations prescribed by
the said section. That, broadly stated, is the scheme
of the Act.
..
'
'
'
1
1 s.c.R.. SUPREME COUKT REPORTS 001
In order to appreciate the merits of the
contentions raised by Mr. Setalvad on behalf of the
appellants, it is necessary to specify clearly the limited
character of the controversy between the parties in
appeal. The appellants concede that the Act in its
prospective operation is perfectly valid. ·They
also concede that s.23(a) which validates the acts don~
under the earlier Act of 1950 is valid. It would be
noticed that apart from the general retrospective
operation of the Act for which a provision has been
made by s.l (3 ), s. 23 itself makes a clear retrospective
validating provision and it is not disputed that the
acts validated by s.23(a) have been properly validated.
With regard to the validating provision contained
. in s. 23 (b}, it has been ur~ed that the said
provision in so far as it refers to proceedings
commenced under the earlier Act but not completed
before the impugned Act came into force, is invalid.
The rest of the provisions of s. 23 (b)
are also not challenged. In other words, it is not
disputed that in it~ pro~pective operation, the Act
has been validly passed by the Bihar Legislature exer
cising its legislative power under Entry 56 in List II
of the Seventh Schedule of the Constitution. The
argument, however, is that its retro~pective operation
prescribed bys. I (3) and by a part of s. 23 (b) so
completely alters foe character of the tax proposed to
be retrospectively recovered that it introduces a serious
infirmity in the legislative competence of the Bihar
Legislature itself. Alternatively, it is argued that the
.said retrospective operation is so unreasonable that
it cannot be saved either under Art. 304 (b} or /
Art. 19 (5) and (6). It is these two narrow points
which call for our decision in the present appeals.
In dealing with this controversy, it is necessary
to bear in mind some points OD which there ls 00
dispute. The· entries in the Seventh Schedule con•
£erring le~lative power on the legislatures in question·
must receive the widest denotation. This position ii
&i /l.ailrrilr...
•• Tk• S14u ef Bilwr
-GqjtNJr.,odi•, J.
,.,,
11.i R-4ril,,,,.
Y.
,.,~·~•/ Bilw
GtiJ-11.,..., /.
...
008 SUPRt~ COURT REPORTS [1964] VOL.
not disputed. Entry 56 of the Second List refers to
taxes on goods and passengern carried by road or on
inland waterways. It is clear that the State Legis
latures are authorised to levy taxes on goods and
passengers by this entry. It is not on all goods and
passengers that taxes can be imposed under this entry;
1 t is on goods and passengers carried by road or on
inland waterways that taxes can be imposed. The
expression "carried by road or on inland waterways"
is an adjectival clause qualifying goods and passen
gers, that is to say, it is goods and passengers of the
said description that have to be taxed under this entry.
Nevertheless, it is obvious that the goods as such cannpt
pay taxes, and so taxes levied on goods have to be
recovered from some persons, and these persons must
have an intimate or direct connection or nexus with
the goods before they can be called upon to pay the
taxes in respect of the carried goods. Similarly,
passengers who are carried are taxed under the entry.
But, usually, it would be inexpedient, if not impossi
ble, to recover the tax directly from the passengers
and so, it would be expedient and convenient to
provide for the recovery of the said tax from tbe
owners of the vehicles themselves. That is why it is
not disputed by Mr. Setalvad that in enacting a law
under entry 56 in respect of taxes imposed on passen
gers carried by road or on inland waterways, it
would be perfectly competent to the legislature to
devise a machinery for the recovery of the said tax by
requiring the bus operators or bus owners to pay the
said tax.
1
The other point on which there is no dispute
before us is that the legislative power conferred on
the appropriate legislatures to enact laws in respect
of topics covered by the several entries in the three
Lists can be exercised both prospectively and retros
pectively. Where the legislature can make a valid
law, it may provide not only for the prospective ..
operation of the material provlBions of the said law,
4
1 S.C.R. SUPREME COURT REPORTS 909
but it can-also provide for the retrospective opera·
tion of the said provisions. Similarly, there IS no
doubt that the legislative power in question includes
the subsidiary or the auxiliary power to validate laws
which have been found to be invalid. If a law
passed by a legislature is struck down by the Courts
as being invalid for one infirmity or another, if
would be competent to the appropriate legislature to
cure the said infirmity and pass a validating law so
as to make the provisions of the said earlier law
effective from the .date when it was passed. This
position is treated as firmly established since the
decision of the Federal Court in the case of The
· United Provinces v. Mst. At.~qa Begum (1).
It is also trne that though the Legislature can
pass a law and make its provisions retrospective, it
would be relevant to consider the effect of the said
retrospective operation of the law both in respect of
the legislative competence of the legislature and the
re~sonableness of the restrictions imposed by it. In
other words, it may be open to a party affected by
the provisions of the Act to contend that the retros
pective operation :>f the Act so completely alters the
character of the tax imposed by it as to take it out
side the limits of the entry which gives the legislature
competence to enact the law; or, it may be open to it
to contend in the alternative that the restrictions
imposed by the Act are so unrea~onable that they
should be struck down on the ground that they con
travene his fundamental rights guaranteed under
Art. 19 (1) (f) & (g). This position cannot be, and
has not been, disputed by Mr. Sastri who appears for
the respondi:nt, vide The State of West Be;l{Jal v.
SUbodh Gopal Bose ('), and Express Newspaper•
(Private) Ltd. v. The Union of India (').
In view of the recent decisions of this Court
Mr. Sastri also concedes that taxing statutes are not
beyond the pale of the constitutional limitations
(1) [1940) F.O.R. 110. (2) [1954] s.o.R. 587, 626.
(SJ[[19.!+) S.O.R. 12, 139;
-ll4J a.Mrilholl
•• T1" St.11 qf Bi/w
Gqj~,J.
hi -'•lrilhl
Y,
nit s""' fl a11tat
Gojtlldratilbr. J.
'
prcacribed by Articles 19 and 14, and he abo
concedes that the test of reasouableness prescribed
by Art. 304(b) is justiciable. It is, of course, true
that the pawer of taxing the people and their property
it an essential attribute of the Government and
Government may legitimately exercise the said pawer
by reference to the objects to which it is applicable
to the utmost extent to which Government thinks it
expedient to do so. The objects to be taxed so
long as they happen to be .within the legislative
competence of the legislature can be taxed by the
legislature according to the exigencies of its needs,
because there can be no doubt that the State is
entitled to raise revenue by taxation. The quantum
of taic levied bv the taicing statute, the conditions
subject to which it is levied, the manner in which it
is sou~ht to be recovered, are· all matters within the
competence of ihe legisl~ tu re, and in dealing with
the contention raised by a citizen that the taicing
statute contravenes Art. 19, courts would naturally be
circumspect and cautious. Where for instance, it
appears that the taxing statute is plainly discrimina·
tory, or provides no procedural machinery for assess
ment and levy of the tax, or that it is confiscatory,
Courts would be justified in striking down the
impugned statute as unconstitutiona\. In such cases,
the character of the material provisions of the impugn
ed statute is such that the Court would feel justified
in taking t\le view that, in substance, the taxing
statute is a cloak adopted by the legislature for
achieving its confiscatory purposes. This is illustrat
ed by the decision of this Court in the case of
Kunnathet Tlu~thunni 1'tfoopil Nair v. Stale of
Kerala (1 ). where a taicing statute was struck down
because it suffered fmm several fatal infirmities. On
the other hand, we may rder to the case of Raja
.lagannath Baksh Singh v. State of Uttar Pmde.~h ('),
whc:re a challenge to the taxing statute on the ground
that its provisions were unreasonable was rejected
and it was obseNed that unless .the infirmities in the
(t) (19611 S S.C.R. 77. t2) (l96S) l 8.C.R. :UO.
1 S.C.R. SUPREME COURT REPORTS 911
impugned statute were of such a serious nature as to
justify its description as a colourable exercise of
legislative power; the Court would uphold a taxing
statute.
It is in the light of these principles of law which
are not in dispute between the parties before us that
we must proceed to examine the arguments urged
by Mr. Setalvad il1 challenging the validity of the
retrospective operation of the Act. Mr. Seta! vad
contends that one has merely to read the provisions
of s. 3(3) to realise that the character of the tax has
been completely altered by its retrospective operation.
It would be recalled that s. 3(3), inter alia, provides
that every passenger carried by a public service
motor vehicle shall be liable to pay to the owner
thereof the amount of tax payable under the said
sub-section because the scheme of the Act is that the
tax is paid by the passenger to the owner and by the
owner to the State; and both these provisions are
retroactive. However, in respect of passengers carried
by the owner between 1.4.1950 and the date of the
Act, how can the owner recover the tax he is now
bound to pay to the State, asks Mr. Setalvad ?
Prima f acie, the argument appears to be attractive,
but a closer examination would show that the diffi
culty which the owner may experience in recovering
the tax from the passengers will not necessarily alter
the chara.:ter of the tax. If the scheme of s. 3 for
the levy and recovery of the tax is valid under entry
li6 of List II so far as future recoveries are concerned,
it is not easy to see how it can be said that the
character of the tax is radically changed in the pre
sent circumstances, because it would be very diffi
cult, if not impossible, for the owner to recover the
tax from the passengers whom he has carried in the
past. The tax recovered retrospectively like the one
which will be recovered prospectively still continues
to be a tax on passengers and it adopts the same
machinery for the recovery of the tax both as to the
lie
hi ...Wis.\iu
•• Till St.u ef Bilw>r
Gaj-xad/rftr, /.
,..,
.. '
1
kh'
..
11ta6t•.JMU.
Gflt t,/.
Ill! SUPllME COURT REPORTS (1964] VOL.
past as well as to the future. In thi,, connection, we
ought to bear in mind that the incidence of the tax
should not be confused with the machinery adopted
by the statute to recover the said tax. Besides, as we
will point out later, it is only during a comparatively
short period that the owners' difficulties assume a
significant form. Stated generally, it may not be
unreasonable to assume that from the time when the
Act of 1950 was brought into force it was known to
all the owners that the legislature had imposed .a
tax in respect of passengers and goods carried by them
and since then, and particularly after the amendment
of 195i, they may have raised their fares and freights
to absorb their liability to pay the tax to the
State. But apart from that, it seems to us
that the nature of the ·tax in the present case is
the same both in regard to prospective and retros·
pective operations, and so, it is difficult to
entertain the argument that the tax has ceased to be
a tax on passengers and is, therefore, outside Entry
56. The argument that the retrospective operation
of the Act is beyond the legislative competence of
the Bihar Legislature must, therefore, be rejected.
In this coooection, we cannot ignore the fact that
prior to the passing of the impugned Act there was
in operation a similar statute since April I,
1950 which was struck down as unconstitutional on
the ground of want of a~ent of the President. This
aspect of the matter, no doubt, will have to be
further examined in the context of the appellants'
case that the retrospective operation of the Act
intrvduces a restriction which is unreasonable both
under, Art. 19 (1) (f) & (g) and Art. 304 (b); but it
has no validity in challenging the legislative
competence of the Bihar Legislature in that behalf.
We may, in this connection, incidentally refer
to some decisions of this Court where a similar
argument was urged in regard to the retrospective
aperation of some Acts. It appears that in th0$C
1 S.C.R. SUPREME COURT REPORTS 913
cases, the argument proceeded on a distinction
between direct and indirect taxes. It is well·known
that John Stuart Mill made a pointed di,tinction
between -direct and indirect taxation and this
distinction was reflected in s. 92 (II) of the British
North America Act which gave to the Legislatures
of the Provinces exclusive power to make laws in
relation to direct taxation within the Province.
No such distinction can be made in regard to the
legislative power conferred on the appropriate
legislatures by the respective entries in the Seventh
Schedule of our Constitution, and so, it is unnecessary
for us to consider any argument based on the said
distinction in the present case. However, this
argumeut was urged before this Court in challeng
ing the validity of some Acts by reference to-their
retrospective operation. In the Tata Iron ,[;Steel
Co. Ltd. v. The State of Bihnr, (1 ), where this Court
was called upon to examine the validity of the
Bihar Sales Tax Act, 1947 as amended by the
Amendment Act of 19J8, one of the points urged
before this Court was that whereas sales-tax is an
indirect tax on the consumer inasmuch as the idea
in imposing the said tax on the seller is that he
should pass it on to his purchaser and collect it from ,
him, the retrospective operation of the Act made
the imposition of the said tax a direct tax on the
seller and so, it was invalid. This argument was
rejected. A similar objection against the retrospec
tive operation of the Madras General
Sales Tax Act, 193[) as adapted to Andhra by the
Sales Tax Laws Validation Act, 1956 was rejected
in the case M. P. V. Sundararam£er & Co. v. The
St.ate of Andhra Pmdesh (').
In M/s. J. K. Jute Mills Co. Ltd. v. Stc~te of
Uttar Pradesh ('),the argument that the character
of the sales· tax as enacted by the U. P. Sales Tax
Act, 1948, was radically altered in its retrospective
operation, was likewise rejected. The same argument
(I) [1958) S,C.R, 1355, 1377. (2) [1958] S.C.R. 1422.
(3) (19621 2 s.c.R. 1.
•• The ·'tat1 a/ !Jihar
G1j1nira1cilar, I.
/ffS
RfiR.Mrir.Au
v.
; J., S:.Je of Bo ha•
G•jmira1otlJ.a1, J.
914 SUPREME COURT REPORTS[I964] VOL.
in respect of an excise tax raised before this Court
in the case of 11!/s. Chholablwi Jethabhai Patel"' Co.
v. Union of India('), was for similar reasons reject
ed. The position, therefore, appears to be well
settled that if in its essential features a taxing statute
is within the legislative competence of the lrgisla
ture which passed it by reference to the relevant
entry in the List, its character is not '.Jecessarily
changed merely by its retrospective operation so as to
make the said retrospcrdve operation outside the
legislative competence of the said legislature, and so,
we must hold that th~ challenge to the validity of
the retrospective operation of the Act on the ground
that the provision in that behalf is beyond the
legislative competence of the Bihar Legislature, must
be rejected.
That takes us to the question as to whether
the restriction imposed on the appellants' right under
Art. HJ (I) (f) and (g) by the retrospective operation
of the Act is reasonable so as to attract the pro
visions of Art. 19 (5) and (6). The same question
arises in regard to the test of reasonableness pre
scribed by Art. 304 (b). .Mr. Setalvad contends
that since it is not disputed that the retrospective
opera!ion of a taxing statute is a relevant fact tu
consider in determining its reasonableness, it may
not be unfair to suggest that if the retrospective
operation covers a long period like ten years, it
should be held to impose a restriction which is un
rea•onable and as such, 'llust be struck down as
being unconstitutional. In support of this plea,
Mr. Setalvad has referred us to the observations (')
made by Sutherland. "Tax statutes", says
Sutherland, "may be retrospective if the legislature
clearly so intends. If the retrospective feature of a
law is arbitrary and burdensome, the statute will
not be sustained. The reasonableness of each
retroactive tax statute will depend on the
circumstances of each case. A statute retroactively
(I) (1962] Supp. 2 S.C.R. I.
(2) Sutherland on Statutes and Statutory Con1tnctlon, 190 JW,
yPI. 2 Panf'aplj 1211 pp. 1'1·1".
i
I
r
..
1 S.C.R. SUPREME COURT REPORTS 915
imposing a tax on income earned between the adop
tion of an amendment making income taxt;S legal and
the passage of the income-tax act is not unreasonable.
Likewise, an income-tax not retroactive beyond
the year of its passage, is clearly valid. ·The
lor,igest period'bf r.e.troactivity yet sustained has been
three years. In general, income taxes arc valid
although retroactive,. if they affect prior bu~ recent
transaction." Basing himself on these obServations,
Mr. Setalvad contends that since the period covered
by the retroactive operation of. the -Act-is-
between April. I, 1950 and September 25, 1961, it
should be held that the restrictions impo,scd by such
retroactive operation are unreasonable, ·and so, the
Act should be struck cfown.in regard to its retrospcc-
ti ve operation.
We do not think that such a mechanical test.
can be applied in determining the validity of the
retrospective operation of the Act. I l is conceivable
that cases may arise in which the rrtrospective
operation of a taxing or other statute may introdu<'e
such an ekment of unreasonableness that the restric
tions imposed by it may b~ open to serious cha llengc
as unconstitutional; but the test of the len!(th nf
time-covered by the retrospective operntio11 cannor,
by itself, necessarily be a decisiv1: tr:st. \\'e may
have a statute whose retrospective.operation rovers a
comparatively short period and yet it is possible that
the nature of the restrictio11 imposed by it may lw
o_f such a c}Jaracter as to .intro<lnce a serious infirmity
in the retrospective operation. On the other hand.
we may get cases where the period covcr('d by the
retrospective operation of the statute, thow~h l11ng,
will not introduce any such infirmity. Take the
case of~ Validating Act, If~ statute passed by tbf'.
kgislature is challenged in procei;dings before~ Court,
and the challenge is, ultimately sustained and the
statute is struck down, it is not unlikely. that the
judicial proceedin~s may occupy a fairly long perioc!
1963
R•i RfJmkriJhna
•• Th< Slate of Biba'
Gojtndrd.fatlknr, V
/963
~•i Ram~i.J/1111
v.
TA. Stat1 1/ Bih'Jr
G•j1ndr1114D, J.
910 ~UPREME COURT REPORTS [1964] VOL.
and the legislature may well decide to await the
final decision in the said proceedings before it uses
its legislative power to cure the alleged infirmity in
the earlier Act. In such a case, if after the linal
judicial verdict is pronounced in the matter the
legislature passes a validating Act, it may well cover
a long period taken by the judicial proceedings in
Court and yet it would lie inappropriate to hold that
because the retrospective operation covers a long
period, therefore, the restriction imposed by it is
unreasonable. That is why we think the test of the
length of time covered by the retrospective operation
cannot by itself be treated as a decisive test.
Take the persent oase. The earlier Act was
passed in 1950 and came into force on April I,
l !l;iO, and the t;u imposed by it was being collec
ted until an order of injunction was passed in
the two suits to which we have already referred.
The said suits were dismissed on May 8, l952,
but the appeals preferred by the appellants were
pending in this Court until December 12, HHJO.
In other words, between 1950 and Hl60 proceedings
were pending in court in which the validity of the
Act was being examined, and if a Validating
Act had to be passed, the legislature cannot
be blamed for having awaited the final decision of
this Court in the said proceedings. Thus the period
covered between the institution of the said two suits
and their final disposal by this Court cannot be
pressed into service for challenging the ;easonablc
ncss of the retrospective operation of the Act.
It is, however, urged that the retrospective
operation of the Act cl.iring the period covered by
the orders of injunction issued by the trial Court
in the said two suits must be held to be unreasonable,
anti the argument is that in regard to the said period
the retrospective operation should be struck down.
Similarly, it is urged that the said retrospective
'
..
I S.C.R. ·SUPREME COURT REPORTS 917
operation should be struck down for the period
between December 12, 1960 when this Court
struck down the earlier Act and August I, 1961
when Ordinance II of 1961 was issued. We do not
think it would be appropriate in the present case to
examine the validity of the retrospective operation
by reference to particular periods of time covered
by it in the manner suggested by Mr. Setalvad; and
so, we are not prepared to accept his argument that
the retrospective operation of the Act is invalid so
far as the period between December 12, 1960, when
the earlier Act was struck down by this Court,
and August 1, 1961, when the Ordinance was
issued, is concerned. It. would be realised that in
such a situation there would always be some time
lag between the date when a particular Act is struck
down as unconstitutional and the date on which a
retrospective validating Act is passed. Besides, the
circumstances under which the orders of injunction
were passed by the trial Court cannot be altogether
ignored. Mr. Sastri contends that the two suits
filed by the appellants and the passengers and the
owners of g-0ods respectively disclose a common
design and can be treated as friendly suits actuated
by the same motive, and we do not think that this
contention. can be rejected as wholly unjustified.
Apart f'rom it, when the injunction was issued against
the respondent in the appellants' suit, the appellants
gave an undertaking in writing to pay the taxes pay
able on the fares and freights as provided by the law
in case their suit failed. As we have already seen
their suit was dismissed by the High Court on
May 8, 1952, so that it was then open to the
respondent to call upon the appellants to pay the
taxes for the period covered by the orders of injuction
and to require them to pay future taxes because the
earlier Act under which the taxes were recovered was
held to be valid by the High Court. It is no doubt
suggested by Mr. Setalvad that the spirit of the
un<lertaking required that no recovery should be mad~
1§63
v,
Tht St1Jtt of /Ji/tar
GajmJra1adk1Jr1 J.
1963
R.i Rmnkris/Jna
v.
1 h1 SI<!• ef "Bihm
Uls .SUPREME ~OUR1' REP.Oll'l'S [1964] VOL.
until the final disposal ·of the proceedings between the
parties. We do not see how this argument about the
spirit of the undertaking can avail the appellants.
As soon as their suit against the respondent was
dismissc:'d, the respondent was at liberty to enforce
the provisions of the j\ct and the dismissal of the
suit made it possible for the respondent to claim the
taxes even jar the period covered by the order of
injunction-'. We do not think that in the context, the
dismiss;d of rhc suil c;an legitimately refer to the final
dispos"I of the appeal filed by the appellants before
this Court. -lq any event, having regard' to the"
~cnesis ur the two:suits, tlfe nature of the orders of
.injunction issued in them and the ·character of,the
undcnakini; given by th{'. appellants, we do not think
it would be possible to sustain Mr. Se1aLvJ1d's "'1rgu·
mcnt that for the perioa of the ~njunction the restros
pcclivc operation of the Act should be held to be
invalid. "
In this connection, it would be relevant to
rcfrr lo another fact wl11ch appears on the record.
Along with the appellants, 18 other bus owners had
filed writ petitions challenging the validity of the
Act. These petitioners have not appealed to this
-Court presumably because their cases fall under the
provisiuns of s. 23 (a) of the Act. It is likely that
thev had paid the amoums, and since the amounts
paid undn the provisions of the earlier Act are now
deemed to have been paid under the provisions of
this Act, they did not think it worthwhile to come to
this Court against tl]e decision of the High Court.
Apart" from that, it· is not unlikely that other bus
O\yners may have rn_ade similar payments and the
appel_lants hli.ve, theref6re, come to this Court because
they have ;made no payments and so, their cases do
not fail under s. 23 (a), or may be; their cases fall
under.s. 23 (b ). The position, therefore, is that the
retrospective operation of s. 23 (a) & (b) cover
respectively cases of payments actually made under
J
-I
I
'
1 s.c.R. SUPREN1E COURT REPORTS 919
the provisions of the earlier Act, and cases pending
inquiry, and the retrospective operation of s. 3 (3)
read withs. l (:l) only applies to cases offersons who
did not pay the tax during the whole o the period,
or whose cases were not pending ; and it is this limited
class of persons whose interests are represented by the
appellants before us. Having regard to the some
what unusual circumstances which furnish the back
ground for the enactment of the impugned statute,
we do hot think that we could accept Mr. Setalvad's
argument that the retrospective operation of the Act
imposes restrictions on the appellants which contra
vene the proyi_sions of Art. 19 (1) (f) & (g). In our
opinion, having regard to all the relevant facts of
Lhis ca~e, the restrictions imposed by the said retros
pccti ve operation must be held to be reasonable and
in the public interest under Art. 19 (5) and (6) and
also reasonable m;1der Art. 304 (b ).
There is only one more point to which reference
must be made. We have already noticed that the
High Court has rejected the argument urged on
behalf of the State that the tax imposed by the Act
is of a compensatory or regulatory character and
therefore, is valid. Mr. Sastri wanted to press that
part of the case of the State before us. He urged
that according to the majority decision of this Court
in the case of the Automobile Transport (Rajasthan)
Ltd. (1), it must now be taken to be settled that
"regulatory measures or measures imposing com
pensatory taxes for the use of trading facilities do
not come within the purview of the restrictions con
templated by Article 301 and such measures need not
comply with the requirements of the proviso to
Art. 304 (b) of the Constitution." (p. 1424). On the
other hand, Mr. Setalvad has argued that this doc
trine of compensatory or regulatory or taxation which
is mainly based on Australian decisions cannot be ex
tended to the present case, and he contends that if the
doctrine of regulatory or compensatory taxes is very
I
(I) [1963] I S.C.R. 491,
Rai Rsmkriskna
v.
Thi S1111uf Biluir
Gajrrukot•dl.ar, J,
1963
R~ Jtar!rlislura
v.
1 !u StUIOf Bih•r
1963
F16ruttr,y, 11.
liberally construed, it would tend to cover a11 taxes,
because in a loose sense, all taxes raised by the State
can ultimately_ be said to be compensatory in a far
fetched manner, and in that way, the well-recognised
constit11tional difference between a tax and a fee will
be obliterated and the provisions of Part XIII of the
Constitution will lose all their significance. Part XIII
contains provisions which constitute a sel,f-contained
code and we need not really travel outside the said pro
\'ision in determining the validity of the tax imposed
bv the Act. Since we have come to the conclusion that
tlic challenge to the valirlity of the retrospective opera
! ion of the \ct cannot be sustained, we do not think it
necessary to pursue this matter any further.
In the result, the appeals fail aad are dismissed
with costs.
Appeal dismissed.
JANAPAREDDY LATCHAN NAIDU
v.
JANAPAREDDY SANYASAMMA
(P. B. GAJENDRAGADKAR, K. ~. WANCHOO,
M. HrnAYATULLAH, K. C. D.t.s GUPTA and
j. C. SHAH, .JJ-)
Jfaintf.11a1tce-/)ecree by court charging certain propertie1-
.\-,1lun of •uch decru-lf oon be e.tecutf.d aq~in•t other prop<l'
ti<3--Code of Civil Procedure, 1908 (Act 5 of 1908), •· 47.
The respondent, wife of the appellant, filed an execution
~tition for execution of a 1naintenance dcc:rcc obtained by her
,._.hich, in addition to the personal liability, created a charge for f
past and future maintenance on three lots of properties. After
obtaining the pcrmi5sion of the Court she purchased two item..
pf the properties subjoct to her 11\~intenance charge. Later •hi:,