Supreme Court of India
STATE OF M.P.versusRAKESH KOHLI & ANR.
- Citation
- 2012 INSC 234
- Decided
- 11 May 2012
- Disposal
- Appeal(s) allowed
- Bench
- RAJENDRA MAL LODHA
Holding
Clause (d) of Article 45, Schedule 1‑A of the Indian Stamp Act, as amended by the Madhya Pradesh Act, 2002, is a valid classification and does not infringe Article 14 of the Constitution.
Summary
The State of Madhya Pradesh challenged the constitutional validity of clause (d) of Article 45 in Schedule 1‑A of the Indian Stamp Act, 1899, as amended by the Madhya Pradesh Stamp Amendment Act, 2002, which imposes a 2% stamp duty on power‑of‑attorney instruments given without consideration to persons who are not blood relatives of the executant. Rakesh Kohli and another contended that the distinction between blood relatives and outsiders was arbitrary and violated Article 14 of the Constitution. The High Court held the provision unconstitutional, but the Supreme Court reversed that decision, emphasizing the presumption of constitutionality, the limited grounds for striking down legislation, and the need for a clear discriminatory basis. The Court observed that the classification had an intelligible differentia and a rational nexus to the object of collecting stamp duty on indirect transfers of immovable property. Consequently, the provision was held to be a valid exercise of the State's taxing power and not violative of Article 14. The appeals were allowed and the High Court judgment set aside.
Issues considered
- Whether clause (d) of Article 45, Schedule 1‑A of the Indian Stamp Act, as amended by the Madhya Pradesh Amendment Act, 2002, violates Article 14 of the Constitution by creating an arbitrary classification between blood relatives and others.
- Whether a fiscal statute can be struck down on the ground of arbitrariness or irrationality without a finding of discrimination.
- Whether the Madhya Pradesh Legislature has the competence to levy stamp duty on power‑of‑attorney instruments under the Indian Stamp Act.
Legislation cited
- Constitution of Indias. Article 14, s. Article 245, s. Part III
- Indian Stamp Act, 1899s. Article 45, Schedule 1‑A
- Indian Stamp (Madhya Pradesh Amendment) Act, 2002
Subjects
Article 14Stamp dutyPower of attorneyClassificationTaxation lawConstitutional validityMadhya PradeshIndian Stamp ActFiscal statuteEquality clause
Judgment
[2012] 6 S.C.R. 661
STATE OF M.P. A
v.
RAKESH KOHLI & ANR.
(Civil Appeal No. 684 of 2004)
MAY 11, 2012
B
[R.M. LODHA AND H.L. GOKHALE, JJ.]
Stamp Act, 1899 - Article 45(d) of Schedule 1-A [as
introduced by Stamp (Madhya Pradesh Amendment) Act,
2002] - Constitutional validity of - Test of classification - Power C
of Attorney to sell/transfer immovable properly situated in the
State of Madhya Pradesh - Article 45(d) prescribing stamp
duty on market value of property when power of attorney given
without consideration to a person other than the kith and kin
- Distinction carved out in Article 45(d) between an agent who D
was a blood relation and who was an outsider - Challenge to
- High Court held Article 45(d) as violative of Article 14 of the
Constitutiof} - Justification of - Held: Not justified - By creating
two categories, namely, an agent who is a blood relation and
an agent other than the kith and kin, without consideration, the E
Legislature sought to curb inappropriate mode of transfer of
immovable properties - The legislative idea behind Article
45(d) was to curb tendency of transferring immovable
properties through power of attorney and inappropriate
documentation - In effect, by bringing in this law, the Madhya
F
Pradesh State Legislature sought to levy stamp duty on such
ostensible document, the real intention of which was transfer
of immovable properly - Classification between blood relative
and outsider not without any rationale - It has a direct nexus
to the object of the Act - Constitution of India, 1950 - Article G
14.
Constitution of India, 1950 - Part Ill and Article 245 -
Statute enacted by Parliament or State Legislature -
Constitutional validity of - Judicial review - Scope - Held: Sans
661 H
662 SUPREME COURT REPORTS [2012] 6 S.C.R.
A flagrant violation of the constitutional provisions, the law made
by Parliament or a State Legislature cannot be declared bad
- Legislative enactment can be struck down by Court only on
two grounds, namely (i}, that the appropriate Legislature did
not have competency to make the law and (ii}, that it did not
B take away or abridge any of the fundamental rights
enumerated in Part - Ill of the Constitution or any other
constitutional provisions.
Constitution of India, 1950 - Article 14 - Constitutional
validity of a statute - Judicial review - Scope - Held: When
C provision enacted by the State Legislature is not found to be
discriminatory, it cannot be struck down on the ground that it
was arbitrary or irrational.
Tax I Taxation - Constitutional validity of taxation law -
o Scope of Judicial review - Guiding principles stated viz.(i)
presumption in favour of constitutionality of a law made by
Parliament or State Legislature, (ii) no enactment can be
struck down by just saying that it;is arbitrary or unreasonable
or irrational, unless some constitutional infirmity found, (iii)
E Court is not concerned with the wisdom or unwisdom, the
justice or injustice of the law as the Parliament and State
Legislatures are supposed to be alive to the needs of the
people whom they represent, (iv) hardship is not relevant in
pronouncing on the constitutional validity of a fiscal statute
or economic law and (v) in the field of taxation, the Legislature
F
enjoys greater latitude for classification - Interpretation of
Statutes - Fiscal statute.
By the Indian Stamp (Madhya Pradesh Amendment)
Act, 2002 [M.P. 2002 Act], stamp duty relating to power
G of attorney has been prescribed in Article 45 of Schedule
1-A of the Indian Stamp Act, 1899. Clause(d) thereof
prescribes stamp duty @ 2% on the market value of the
property which is subject matter of power of attorney
when power of attorney is given without consideration
H to a person. other than father; mother, wife or husband,
STATE OF M.P. v. RAKESH KOliLI & ANR. 663
son or daughter, brother or sister in relation to the A
executant and authorizing such person to sell immovable
property situated in Madhya Pradesh. The validity of the
said provision was challenged. It was contended that the
distinction carved out in Article 45, Clause (d) between
an agent who was a blood relation and who was an 8
outsider is legally impermissible; and that the impugned
provision violates Article 14 of the Constitution. The High
Court held Article 45,Clause (d) as violative of Article 14
of the Constitution being arbitrary, unreasonable and
irrational. The said decision of the High Court was C
challenged in the instant appeals.
Allowing the appeals, the Court
HELD: 1.1. The High Court was clearly in error in
declaring Clause (d), Article 45 of Schedule 1-A of the o
Indian Stamp Act, 1899 as violative of Article 14 of the
Constitution. 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 E
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
F
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 G
Legislature is not declared bad. 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
H
664 SUPREME COURT REPORTS [2012] 6 S.C.R.
A away or abridge any of the fundamental rights
enumerated in Part - Ill of the Constitution or any other
constitutional provisions. [Paras 13, 14] [676-D-H; 677-A]
1.2. The High Court has not given any reason as to
why the provision contained in clause (d) was arbitrary,
8 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, such enactment could not
C have been struck down on the ground that it was arbitrary
or irrational. [Para 16] [679-A-C]
1.3. Stamp duty is a tax and hardship is not relevant
in interpreting fiscal statutes. While dealing with
o constitutional validity of a taxation law enacted by
Parliament or State Legislature, the court must have
regard to the following principles: (i), there is always
presumption in favour of constitutionality of a law made
by Parliament or a State Legislature (ii), no enactment can
E be struck down by just saying that it is arbitrary or
unreasonable or irrational but some constitutional
infirmity has to be found (iii), the court is not concerned
with the wisdom or unwisdom, the justice or injustice of
the law as the Parliament and State Legislatures are
F supposed to be alive to the needs of the people whom
they represent and they are the best judge of the
community by whose suffrage they come into existence
(iv), hardship is not relevant in pronouncing on the
constitutional validity of a fiscal statute or economic law
and (v), in the field of taxation, the Legislature enjoys
G greater latitude for classification. Had the High Court kept
in view the above well-known and important principles in
law, it would not have declared Clause (d), Article 45 of
Schedule 1-A as violative of Article 14 of the Constitution
being arbitrary, unreasonable and irrational while holding
H
STATE OF M.P. v. RAKESH KOHLI & ANR. 665
that the provision may pass test of classification. By A
creating two categories, namely, an agent who is a blood
relation, i.e. father, mother, wife or husband, son or
daughter, brother or sister and an agent other than the
kith and kin, without consideration, the Legislature has
sought to curb inappropriate mode of transfer of B
immovable properties. Ordinarily, where executant
himself is unable, for any reason, to execute the
document, he would appoint his kith and kin as his power
of attorney to complete the transaction on his behalf. If
one does not have any kith or kin who he can appoint c
as power of attorney, he may execute the conveyance
himself. The legislative idea behind Clause (d), Article 45
of Schedule 1-A is to curb tendency of transferring
immovable properties through power of attorney and
inappropriate documentation. By making a provision like 0
this, the State Government has sought to collect stamp
duty on such indirect and inappropriate mode of transfer
by providing that power of attorney given to a person
other than kith or kin, without consideration, authorizing
such person to sell immovable property situated in E
Madhya Pradesh will attract stamp duty at two per cent
on the market value of the property which is subject
matter of power of attorney. In effect, by bringing in this
law, the Madhya Pradesh State Legislature has sought to
levy stamp duty on such ostensible document, the real
intention of which is the transfer of immovable property. F
The classification, thus, cannot be said to be without any
rationale. It has a direct nexus to the object of the Indian
Stamp Act, 1899. The conclusion of the High Court,
therefore, that the impugned provision is arbitrary,
unreasonable and irrational is unsustainable. [Paras 17, G
29, 30] [679-C-D; 686-A-H; 687 -A-C]
State of A.P. and others v. Mcdowell and Co. and others
(1996) 3 SCC 709: .1996 (3) SCR 721; Government of
Andhra Prade,sh and others v. P. Laxmi Devi (Smt.) (2008) 4 H
666 SUPREME COURT REPORTS [2012] 6 S.C.R.
A SCC 720: 2008 (3) SCR 330; Mohd. Hanif Quareshi and
others v. State of Bihar AIR 1958 SC 731: 1959 SCR 629;
Mahant Moti Das v. S.P. Sahi, AIR 1959 SC 942; Hamdard
Dawakhana and another v. The Union of India and others AIR
1960 SC 554: 1960 SCR 671; Karnataka Bank Limited v.
B State of Andhra Pradesh and others(2008) 2 SCC 254: 2008
(1) SCR 986; Mls.Steelworth Limited v. State of Assam 1962
Supp (2) SCR 589; GopaJ Narain v. State of Uttar Pradesh
and another AIR 1964 SC 370: 1964 SCR 869; Ganga Sugar
Corporation Limited v. State of Uttar Pradesh and others
C (1980) 1 SCC 223: 1980 (1) SCR769; R.K. Garg v. Union
of India and others (1981) 4 sec 675: 1982 (1) SCR 947 and
State of WB. and another v. E.I. T.A. India Limited and others
(2003) 5 sec 239: 2003 (2) SCR 668 - relied on.
State of T.N. and others v. Ananthi Ammal and others
0
(1995) 1 sec 519: 1994 (5) Suppl. SCR 666;
Commissioner of Income Tax, Madras v. R.SV. Sr.
Arunachalam Chettiar AIR 1965 SC 1216: 1965 SCR 815;
Income Tax Officer, Tuticorin v. T. S. Devinatha Nadar etc. AIR
1968 SC 623: 1968 SCR 33; Rt. Rev. Msgr. Mark Netto v.
E State of Kera/a and others (1979) 1 SCC 23: 1979 (1) SCR
609; Bengal Immunity Co.Ltd. v. State of Bihar and others
AIR 1955 SC 661: 1955 SCR 603; Charanjit Lal Chowdhury
v. Union of India and others AIR 1951 SC 41: 1950 SCR 869
and The State of Bombay and another v. F.N. Ba/sara AIR
·F 1951 SC 318: 1951 SCR 682 - referred to.
Balaji v. Income Tax Officer, Special Investigation Circle,
Ako/a andothers AIR 1962 SC 123:- 1962 SCR 983;
Ramesh Chand Bansal andOthers v. District Magistrate!
G Collector Ghaziabad and others (1999)5_ SCC 62: 1999 (3)
SCR 462; Veernr Hasmufsh Jain and a~r v. State of
Maharashtra and others (1999) 5 SCC 725: t9_99 (1) SCR
302; Hanuman Vitamin Foods Private Limited and others v._
State ofMaharashtra and another (2000) 6 SCC-345: 2000
H (1) Suppl. SCR623 ; Union of India v. R. Gandhi, President;
STATE OF M.P. v. RAKESH KOHLI & ANR. 667
Madras Bar Association (2010) 11 SCC 1: 2010 (6) SCR A
857 and Suraj Lamp and Industries Private Limited v. State
of Haryana and another (2012) 1 sec 656: 2011 (11) SCR
848 - cited.
Case Law Reference:
B
1962 SCR 983 cited Para 6
1996 (3) SCR 721 relied on Paras 6, 15
1999 (3) SCR 462 cited Para 6
c
1999 (1) SCR 302 cited Para 6
2000 (1) Suppl. SCR 623cited Para 6
2008 (1) SCR 986 relied on Paras 6, 26
2008 (3) SCR 330 relied on Paras 6, 20 D
2010 (6) SCR 857 cited Para 6
2011 (11) SCR 848 cited Para 6
1994 (5) Suppl. SCR 666referred to Para 15 E
1955 SCR 603 referred to Paras 17, 24
1965 SCR 815 referred to Para 18
1968 SCR 33 referred to Para 19
F
1979 (1) SCR 609 referred to Para 20
1959 SCR 629 relied on Para 23
AIR 1959 SC 942 relied on Para 23
G
1960 SCR 671 relied on Paras 24, 27
1950 SCR 869 · referred to Para 25
1951 SCR 682 referred to Para 25
H
668 SUPREME COURT REPORTS [2012] 6 S.C.R.
A 1962 Supp (2) SCR 589 relied on Para 27
1964 SCR 869 relied on Para 27
1980 (1) SCR 769 relied on Para 27
1982 (1) SCR 947 relied on Paras 27, 28
B
2003 (2) SCR 668 relied on Para 27
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 684
of 2004 etc.
c From the Judgment & Order dated 15.09.2003 of the High
Court of Judicature Jabalpur (M.P.) in Writ Petition No. 4683
of 1999.
WITH
D C.A. No. 1270 of 2004.
Vibha Dattta Makhija, B.S. Banthia for the Appellant.
The Judgment of the Court was delivered by
E R.M. LODHA, J. 1. 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 1-A of the Indian Stamp Act, 1899 (for short, '1899
Act') which was brought in by the Indian Stamp (Madhya
F 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
G 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
H Madhya Pradesh was further amended by the M.P. 2002 Act.
STATE OF M.P. v. RAKESH KOHLI & ANR. 669
[R.M. LODHA, J.]
The respondents, referred to as writ petitioners, amended their A
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 B
single transaction. By M.P. 1997 Act, Article 48 Clause (f) was
substituted by Clauses (f) and (f-1). 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 c
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
0
pursuance of power of attorney between the executant of the
power of attorney and 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 E
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 F
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 G
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 H
670 SUPREME COURT REPORTS [2012] 6 S.C.R.
A 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
8
1-A brought in the 1899 Act by M.P. 2002 Act 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
c 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
D 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
E 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
F submission of the learned counsel for the State appears
to be ~uite 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
G
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.
H
STATE OF M.P. v. RAKESH KOHLI & ANR. 671
[R.M. LODHA, J.]
The State may have a laudable purpose but the laudable A
purpose alone cannot sustain the provision. The matter
would 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 B
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 C
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, D
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 E
is payable. This is to protect the State revenue. The legislative
wisdom took into consideration that genuine power of attorney
documents would be executed by the executants without
consideration mostly in favour of kith and kin to complete sale
transactions on behalf of the executants. The said category F
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 G
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
H
672 SUPREME COURT REPORTS [2012) 6 S.C.R.
A Officer, Special Investigation Circle, Ako/a and others 1; State
of A.P. and others v. Mcdowell and Co. and others 2; Ramesh
Chand Bansal and Others v. District Magistrate/Collector
Ghaziabad and others3; Veena Hasmukh Jain and another v.
State of Maharashtra and others4; Hanuman Vitamin Foods
B Private Limited and others v. State of Maharashtra and
anothet'; Karnataka Bank Limited v. State of Andhra Pradesh
and others6; Government of Andhra Pradesh and others v. P.
Laxmi Devi (Smt.)7; Union of India v. R. Gandhi, President;
Madras Bar Association 8 and Suraj Lamp and Industries
c Private Limited v. State of Haryana and another6.
7. The respondents despite service have not chosen to
appear.
8. The definition of 'conveyance' is contained in Section
D 2(10) of the 1899 Act which reads as under:
"S.2. Definitions.-ln this Act, unless there is something
repugnant in the subject or context,--
(10) "Conveyance" includes a conveyance on sale and
E 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
F follows:
1. AIR 1962 SC 123.
2. (1996) 3 sec 709.
3. (1999) 5 sec 62.
G 4. (1999) 5 sec 725.
5. (2000) 6 sec 345.
6. (2008) 2 sec 254.
7. (2008) 4 sec 120.
8. (2010) 11 sec 1.
H 9. (2012) 1 sec 656.
STATE OF M.P. v. RAKESH KOHLI & ANR. 673
[R.M. LODHA, J.]
"S. 2(21) "Power-of-attorney" includes any instrument (not A
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 B
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 (f). in original
Article 48, Schedule 1-A read as under:
"SCHEDULE-1A c
Stamp Duty on Instruments
(See section 3)
Description of Instruments Proper Stamp Duty
(1) (2)
D
48.Power of Attorney, as defined
by Section 2(21), not being a
Proxy [No. 52).
(f) when giving for consideration The same duty as E
and authorizing the attorney to Conveyance (No. 23) for
sell any immovable property; a market value equal to
the amount of the
consideration."
F
11. Section 3 of the M.P. 1997 Act brought in amendment
in the 1899 Act, inter alia, as under :
"In Schedule 1-A of the Principal Act, in Article 48,--
(i) For clause (f), the following clauses shall be substituted,
namely:- G
(f) when given for The same duty as a
consideration and conveyance under Article
authorizing the attorney to 23 on the market value of
sell or transfer any the property
H
674 SUPREME COURT REPORTS (2012) 6 S.C.R.
~
A immovable property. The same duty as a
conveyance under
(f-1) when given without Article 23 on the
consideration in favour of market value of the
persons who are not his property
or her spouse or Children,
8
or mother or father and
authorizing the attorney to
sell or transfer any
immovable property
C (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 :-
0 "Explanation 11:--Where under clause (f) 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
E 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
F 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,
G Article 45 in respect of power of attorney in Schedule 1-A which
was brought in by M.P. 2002 Act reads as follows :
H
STATE OF M.P. v. RAKESH KOHLI & ANR. 675
[R.M. LODHA, J.]
"SCHEDULE-1A A
Stamp Duty on Instruments
(See section 3)
Description of Instrument Proper Stamp Duty
(1) (2) B
45. Power of attorney [as
defined by section 2(21 )] not
being a proxy:-
Fifty rupees.
( a )when authorizing one
c
person or more to act in
single transaction, including a
power of attorney executed
for procuring the registration
of one or more documents in D
relation to a single transaction
or for admitting execution of
one or more such documents;
One hundred
(b)when authorizing one rupees. E
person to act in more than
one transaction or generally;
or not more than ten persons
to act jointly or severally in
more than one transaction or F
generally;
The same duty as a
(c)when given for conveyance(No.22)
consideration and authorizing on the market value
the agent to sell any of the property.
immovable property. G
Two percent on the
(d)when given without market value of the
consideration to a person property which is the
other than the father, mother, subject matter of
wife or husband, son or power of attorney. H
676 SUPREME COURT REPORTS [2012] 6 S.C.R.
A daughter, brother or sister in
relation to the executant and
authorizing such person to sell
immovable property situated
in Madhya Pradesh.
B
(e)fn any other case; Fifty rupees for each
person authorized
Explanation-1.-For the purpose of this article, more persons
c than one when belonging to the same firm shall be deemed
to be one person.
Explanation-IL-The term 'registration' includes every
operation incidental to registration under the Registration
Act, 1908 (16 of 1908)."
D
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. ft is very difficult to approve
E the reasoning of the High Court tliat 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
F 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
G 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
H enactment can be struck down by Court only on two grounds,
STATE OF M.P. v. RAKESH KOHLI & ANR. 677
[R.M. LODHA, J.]
namely (i), that the appropriate Legislature does not have A
competency to make the law and (ii), that it does not take away
or abridge any of the fundamental rights enumerated in Part -
Ill of the Constitution or any other constitutional provisions.
15. In Mcdowell and Co.2 while dealing with the challenge
8
to an enactment based on Article 14, this Court stated in
paragraph 43 (at pg. 737) of the Report as follows :
" ........ 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) C
violation of any of the fundamental rights guaranteed in Part
Ill of the Constitution or of any other constitutional provision.
There is no third ground ......... .
. . . . . . .. if an enactment is challenged as violative of Article 0
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 E
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 F
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 ....... "
G
(Emphasis supplied)
Then dealing with the decision of this Court in State of T.N. and
others v. Ananthi Ammal and others10, a three-Judge Bench
10. (1995) 1 sec 519 H
678 SUPREME COURT REPORTS [2012] 6 S.C.R.
A in Mcctowell and Co.2 observed in paragraphs 43 and 44 [at
pg. {39) of the Report as under :
'.' ...... 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
B
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
c st,1bstantially 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 instalments if it exceeded
rupees two thousand. After noticing the several features
D of the Act including the one mentioned above, this Court
observed: (SCC p. 526, para 7)
"7. When a statute is impugned under Article 14 what the
court has to decide is whether the statute is so arbitrary
E 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;i been held to be reasonable or have stood the test
oflil'fle, only for the purpose of indicating what may be said
F 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
G 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
H insofar as it provided for payment of compensation in
STATE OF M.P. v. RAKESH KOHLI & ANR. 679
[R.M. LODHA, J.]
instalments was invalid. The ground of invalidation is clearly one A
of discrimination. It must be remembered that an Act whic.h 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
8
the provision contained in clause (d) was arbitrary,
unreasonable or irrational. The basis of such conclusion is riot
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 C
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 D
Bengal Immunity Co. Ltd. v. State of Bihar and others 11 , 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 :
E
" .......... 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 F
fanciful, when the Constitution itself has expressly provided
for another authority more competent to evaluate the
correct position to do the needful?"
18. In Commissioneroflncome Tax, Madras v. R.SV. Sr. G
Arunachalam Chettiar12, a three-Judge Bench of this Court,
inter alia, observed in paragraph 13 (at pgs. 1220-21) of the
11. AIR 1955 SC 661.
12. AIR 1965 SC 1216. H
680 SUPREME COURT REPORTS [2012] 6 S.C.R.
A Report, "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 etc. 13, this Court in paragraph 30 (at pg. 635) of the
Report observed as follows :
8
"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
C considering the validity of a levy. The courts have
repeatedly observed that there is no equity in a tax. The
observations of Lord Hatherley, LC. 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
D 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
E 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
F such intention was plain and unambiguous.
20. In P. Laxmi Devi (Smt.)7, 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
G 1899 Act as amended by AP. 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.)7 as
follows:
H 13. AIR 1968 SC 623.
STATE OF M.P. v. RAKESH KOHLI & ANR. 681
[R.M. LOOHA, J.]
"19. It is well settled that stamp duty is a tax, and hardship A
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. 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 B
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 c
21. It has been held by a Constitution Bench of this Court
in /TO v. TS. Devinatha Nadar (vide Al R paras 23 to 28)
that where the language of a taxing provision is plain, the
court cannot concern itself with the intention of the D
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."
E
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 Kera/a and
others 14 and held in para 46 (at pg. 740) of the Report as under:
F
"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 G
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
14. (1979) 1 sec 23. H
682 SUPREME COURT REPORTS [2012] 6 S.C.R.
A 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
B 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. Rev. Msgr. Mark Netto v. State
c of Kera/a sec 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), the Court stated as
follows:
D
"56. In our opinion adjudication must be done within the
system of historically validated restraints and conscious
minimisation of the judges' personal preferences. The
court must not invalidate a statute lightly, for, as observed
E above, invalidation of a statute made by the legislature
elected by the people is a grave step. As observed by this
Court in State of Bihar v. Kameshwar Singh: (AIR p. 274,
para 52)
"52 .... The legislature is the best judge of what is good
F for the community, by whose suffrage it comes into
existence .... "
57. In our opinion, the court should, therefore, ordinarily
defer to the wisdom of the legislature unless it enacts a
G law about which there can be no manner of doubt about
its unconstitutionality."
21. The Constitution Bench of this Court in Mohd. Hanif
Quareshi and others v. State of Bihar15, while dealing with the
H 15. AIR 1958 SC 731.
STATE OF M.P. v. RAKESH KOl/lU & ANR. 683
[R;M. LODHA, J.]
meaning, scope and effect of Article 14, reiterated what was A
already explained in earlier decisions that to pass the test of
permissible classification, two conditions must be fulfilled,
namely, (i) the classification~rnust be founded on an intelligible
differentia which distinguishes persons or things that are
grouped together from others left out of the group and (ii) such B
differentia must have rational relation to the object sought to be
achieved by the statute in question. The Court further stated that
classification might be founded on different basis, namely,
geographical, or according to objects or occupations or the like
and what is necessary is that there must be a nexus between c
the basis of classification and the object of the Act under
consideration.
22. In Mohd. Hanif Quaresh1' 5 , the Constitution Bench
further observed that there was always a presumption in favour
of constitutionality of an enactment and the burden is upon him, D
who attacks it, to show that there has been a clear violation of
the constitutional principles. It stated in paragraph 15 (at pgs.
740-741) of the Report as under:
" ....... .The courts, it is accepted, must presume that the E
legislature understands and correctly appreciates the
needs of its own people, that its laws are directed to
problems made manifest by experience and that its
discriminations are based on adequate grounds. It must
be borne in mind that the legislature is free to recognise F
degrees of harm and may confine its restrictions to those
cases where the need is deemed to be the clearest and
finally that in order to sustain the presumption of
constitutionality the Court may take into consideration
matters of common knowledge, matters of common report, G
the history of the times and may assume every state of
facts which can be conceived existing at the time of
legislation ......... "
23. The above legal position has been reiterated by a
H
684 SUPREME COURT REPORTS [2012] 6 S.C.R.
A Constitution Bench of this Court in Mahant Moti Das v. S.P.
Sahi 16 .
24. In Hamdard Dawakhana and another v. The Union
of India and others 17, inter alia, while referring to the earlier two
decisions, namely, Bengal Immunity Company Ltd. 11 and
8
Mahant Moti Das 16 , it was observed in paragraph 8 (at pg.
559) of the Report as follows:
"8. Therefore, when the constitutionality of an enactment
is challenged on the ground of violation of any of the
C articles in Part Ill of the Constitution, the ascertainment of
its true nature and character becomes necessary i.e. its
subject-matter, the area in which it is intended to operate,
its purport and intent have to be determined. In order to
do so it is legitimate to take into consideration all the
D factors such as history of the legislation, the purpose
thereof, the surrounding circumstances and conditions, the
mischief which it intended to suppress, the remedy for the
disease which the legislature resolved to cure and the true
reason for the remedy."
E
25. In Hamdard Dawakhana 17 , the Court also followed the
statement of law in Mahant Moti Das16 and the two earlier
decisions, namely, Charanjit Lal Chowdhury v. Union of India
and others 18 and The State of Bombay and another v. F.N.
F Balsara 19 and reiterated the principle that presumption was
always in favour of constitutionality of an enactment.
26. In one of the recent cases in Kamataka Bank Limitecf,
while referring to some of the above decisions, in para 19 (at
pgs. 262-263) of the Report, this Court held as under :
G
"19. The rules that guide the constitutional courts in
16. AIR 1959 SC 942.
17. AIR 1960 SC 554.
18. AIR 1951 SC 41.
H 19. AIR 1951 SC 318.
STATE OF M.P. v. RAKESH KOHLI & ANR. 685
[R.M. LODHA, J.]
discharging their solemn duty to declare laws passed by A
a legislature unconstitutional are well known. There is
always a presumption in favour of constitutionality, and a
law will not be declared unconstitutional unless the case
is so clear as to be free from doubt; "to doubt the
constitutionality of a law is to resolve it in favour of its B
validity". Where the validity of a statute is questioned and
there are two interpretations, one of which would make the
law valid and the other void, the former must be preferred
and the validity of law upheld. In pronouncing on the
constitutional validity of a statute, the court is not concerned C
with the wisdom or unwisdom, the justice or injustice of the
law. If that which is passed into law is within the scope of
the power conferred on a legislature and violates no
restrictions on that power, the law must be upheld whatever
a court may think of it. (See State of Bombay v. F.N.
D
Balsara.)" .
27. A well-known principle that in the field of taxation, the
Legislature enjoys a greater latitude for classification, has been
noted by this Court in long line of cases. Some of these
decisions are : Mis. Steelworth Limited v. State of Assam 20; E
Gopal Narain v. State of Uttar Pradesh and another. 21; Ganga
Sugar Corporation Limited v. State of Uttar Pradesh and
others22; R.K. Garg v. Union of India and others23 and State
of WB. and another v. E.I. TA. India Limited and others24 •
F
28. In R.K. Garg23 , the Constitution Bench of this Court
stated that laws relating to economic activities should be viewed
with greater latitude than laws touching civil rights such as
freedom of speech, religion, etc.
G
20. 1962 Supp (2) SCR 589.
21. AIR 1964 SC 370.
22. (1980) 1 sec 223.
23. (1981) 4 sec 675.
24. (2003) 5 sec 239.
H
686 SUPREME COURT REPORTS [2012] 6 S.C.R.
A 29. While dealing with constitutional valittity of a taxation
law enacted by Parliament or State Legislature, the court must
have regard to the following principles: (i}, th~re is always
presumption in favour of constitutionality of a law made by
Parliament or a State Legislature (ii), no enactment can be
8 struck down by just saying that it is arbitrary or unreasonable
or irrational but some constitutional infirmity has to be found
(iii), the court is not concerned with the wisdom or unwisdom,
the justice or injustice of the law as the Parliament and State
Legislatures are supposed to be alive to the needs of the
C people whom they represent and they are the best judge of the
community by whose suffrage they come into existence (iv),
hardship is not relevant in pronouncing on the constitutional
validity of a fiscal statute or economic law and (v), in the field
of taxation, the Legislature enjoys greater latitude for
classification.
D
30. Had the High Court kept in view the above well-known
and important principles 1in law, it would not have declared
Clause (d), Article 45 of Schedule 1-A as violative of Article
14 of the Constitution being arbitrary, unreasonable and
E irrational while holding that the provision may pass test of
classification. By creating two categories, namely, an agent who
is a blood relation,. i.e. father, mother, wife or husband, son or
daughter, brother or sister and an agent other than the kith and
kin, without consideration, the Legislature has sought to curb
F inappropriate mode of transfer of immovable properties.
Ordinarily, where executant himself is unable, for any reason,
to execute the document, he would appoint his kith and kin as
his power of attorney to complete the transaction on his behalf.
If one does not have any kith or kin who he can appoint as
G power of attorney, he may execute the conveyance himself. The
legislative idea behind Clause (d), Article 45 of Schedule 1-A
is to curb tendency of transferring immovable properties
through power of attorney and inappropriate documentation. By
making a provision like this, the State Government has sought
H to collect stamp duty on such indirect and inappropriate mode
STATE OF M.P. v. RAKESH KOHLI & ANR. 687
[R.M. LODHA, J.]
of transfer by providing that power of attorney given to a person A
other than kith or kin, without consideration, authorizing such
person to sell immovable property situated in Madhya Pradesh
will attract stamp duty at two per cent on the market value of
the property which is subject matter of power of attorney. In
effect, by bringing in this law, the Madhya Pradesh State B
Legislature has sought to levy stamp duty on such ostensible
document, the real intention of which is the transfer of
immovable property. The classification, thus, cannot be said to
be without any rationale. It has a direct nexus to the object of
the 1899 Act. The conclusion of the High Court, therefore, that c
the impugned provision is arbitrary, unreasonable and irrational
is unsustainable.
31. Consequently, these appeals are allowed and the
judgment of the Madhya Pradesh High Court passed on
September 15, 2003 is set aside. Writ petitions filed by the D
present respondents before the High Court stand dismissed.
No order as to costs.
B.B.B. Appeals allowed.
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