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Monday, May 14, 2012

MP AMENDMENT TO THE STAMP ACT RESTRICTING THE EXECTUION OF POWER OF ATTIRNEY TO THIRD PARTIES TO AVOID STAMP DUTY WHEN CHALLANGED IN HIGH COURT IT DECLARES AS VOID, THE APEX COURT SET ASIDE THE HIGH COURT ORDER AND UPHELD THAT THE AMENDMENT IS VALID= While dealing with 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 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 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 greater latitude for classification. 30. 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 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 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 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 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 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. 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 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 present respondents before the High Court stand dismissed. No order as to costs.



                                                                  REPORTABLE



                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION


                        CIVIL  APPEAL NO. 684 OF 2004



State of M.P.                                      …. Appellant

                                   Versus

Rakesh Kohli & Anr.                                    ….Respondents


                                    WITH

                       CIVIL  APPEAL NO. 1270 OF 2004





                                  JUDGMENT


R.M. Lodha, J.


            The only point for consideration here is,  whether  or  not  the
Division Bench of the Madhya Pradesh High Court was justified  in  declaring
Clause (d), Article 45 of Schedule 1-A of the Indian Stamp  Act,  1899  (for
short, ‘1899 Act’) which was brought in by the Indian Stamp (Madhya  Pradesh
Amendment) Act, 2002 (for short, ‘M.P. 2002 Act’) as unconstitutional  being
violative of Article 14 of the Constitution of India.
2.          The above point  arises in this way. Two writ petitions came  to
be filed before the Madhya  Pradesh  High  Court.  In  both  writ  petitions
initially it was prayed that Clauses (f) and (f-1), Article 48, Schedule  1-
A brought in the 1899 Act by Section 3 of the Indian Stamp  (Madhya  Pradesh
Amendment) Act, 1997 (for short, ‘M.P. 1997 Act’) be declared  ultra  vires.
During the pendency of these  petitions,  the  1899  Act  as  applicable  to
Madhya Pradesh was further amended by the M.P. 2002  Act.  The  respondents,
referred to as writ petitioners, amended their  writ  petitions  and  prayed
that Clause (d), Article 45 of Schedule 1-A of the 1899 Act  as  substituted
by M.P. 2002 Act be declared ultra vires. The writ petitioners  set  up  the
case that original Article 48 of  the  1899  Act,  Schedule  1-A  prescribed
stamp duty payable at Rs. 10/-  if  attorney  was  appointed  for  a  single
transaction. By M.P. 1997 Act, Article 48  Clause  (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 immovable property, the stamp duty would  be  leviable   as  if
the transaction is conveyance under Article 23. Explanation II  inserted  by
M.P. 1997 Act provided that where under Clauses  (f)  and  (f-1),  duty  had
been paid on the power  of  attorney  and  a  conveyance  relating  to  that
property was  executed  in  pursuance  of  power  of  attorney  between  the
executant of the power of attorney and the person in  whose  favour  it  was
executed, the duty on conveyance  should  be  the  duty  calculated  on  the
market value of the property reduced by duty paid on the power of  attorney.
By M.P. 2002 Act,  stamp  duty  relating  to  power  of  attorney  has  been
prescribed in Article 45 of Schedule  1-A.  Clause  (d)  thereof  prescribes
stamp duty at two per cent on the market value  of  the  property  which  is
subject matter of power of attorney when power of attorney is given  without
consideration to a person other than father, mother, wife  or  husband,  son
or daughter, brother or sister in relation to the executant and  authorizing
such person to sell immovable property situated in Madhya Pradesh. The  writ
petitioners pleaded, inter alia, that the distinction between an  agent  who
was a blood relation and who was an  outsider  carved  out  in  Article  45,
Clause (d) was legally impermissible. The provision violates Article  14  of
the Constitution as it has sought to create unreasonable classification.
3.          The State of Madhya Pradesh stoutly defended  the  challenge  to
the above provisions and stated before the High Court  that  the  matter  of
rate of stamp duty was solely in the domain of State  Legislature  and  none
of the provisions of the Constitution was offended by the above provisions.
4.           The  Division  Bench  of  the  High  Court  has  accepted   the
constitutional challenge to Clause (d), Article 45 of Schedule  1-A  brought
in the 1899 Act by M.P. 2002 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  that
      postulate [sic]  that when the power of  authority  is  given  without
      consideration to a person other  than  the  father,  mother,  wife  or
      husband, son or  daughter,  brother  or  sister  in  relation  to  the
      executant and authorizing such person to sell immovable  property,  2%
      on the market value of the property is to be collected. Submission  of
      Mr. Agrawal is that this clause is absolutely unreasonable and  smacks
      of arbitrariness, as there is no rationale to include the category  of
      persons who have been included and to leave out to all other  persons.
      Mr. S.K.  Yadav,  learned  Government  Advocate  submitted  that  near
      relatives can constitute a class by itself and all others can fit into
      a different category and,  therefore,  the  said  provision  does  not
      offend  the  concept  of  classification,  as  there  is  intelligible
      differentia. On a first blush the aforesaid submission of the  learned
      counsel for the State appears to be quite attractive, but on a  deeper
      probe it is not what  it  is.  In  the  guise  of  the  classification
      something has been stated in the said provision. One can give  certain
      examples. One may not have kith or kin and intact [sic] even that case
      to deprive him to execute  the  power  of  attorney  for  selling  the
      property, unless 2% is paid on the  market  value  is  arbitrary.  The
      provisions may pass the test of classification but it would  not  pass
      the requirement of the second limb of Article 14 of  the  Constitution
      which ostracises arbitrariness, unreasonable  and  irrationality.  The
      State may have a laudable  purpose  but  the  laudable  purpose  alone
      cannot sustain the provision. The matter would  been  [sic]  different
      had it included a rider that it is executed in favour of any other for
      consideration or some other purposes is not the situation. In view  of
      the same, we are of the considered opinion, the aforesaid provision is
      defiant of Article 14 of the Constitution.  Accordingly,  we  have  no
      hesitation to declare the same as  violative  of  Article  14  of  the
      Constitution.”

5.          Ms. Vibha Datta Makhija, learned counsel for  the  appellant  —
State of Madhya Pradesh – submitted  that the High Court was  in  error  in
declaring Clause (d), Article 45, Schedule 1-A as violative of  Article  14
of the Constitution of India. She would submit that the test  of  challenge
to a legislative  provision  was  completely  different  from  that  of  an
administrative action. A legislative provision cannot  be  struck  down  as
being arbitrary, irrational or unreasonable. She further submitted that the
classification  made  in  Clause  (d)  of  Article  45,  Schedule  1-A  had
intelligible differentia with a direct nexus to the object of the 1899 Act.
The object of the 1899 Act is to collect proper stamp duty on an instrument
or conveyance on which such duty is payable. This is to protect  the  State
revenue.  The legislative wisdom took into consideration that genuine power
of  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  attracts
lower stamp duty than  power  of  attorney  executed  in  favour  of  third
parties/strangers since such  power  of  attorney  document  would  be  for
extraneous reasons.
6.          Learned counsel for the State of M.P. also submitted  that  the
wisdom of the Legislature in protecting the revenue and carving out genuine
classes from others had been well  recognized.  The  court  cannot  sit  in
judgment over their wisdom. She relied upon  decisions  of  this  Court  in
Balaji v. Income Tax  Officer,  Special  Investigation  Circle,  Akola  and
others[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 others[3]; Veena Hasmukh Jain and another v. State of  Maharashtra  and
others[4]; Hanuman Vitamin Foods Private Limited and others   v.  State  of
Maharashtra and another[5]; Karnataka  Bank  Limited  v.  State  of  Andhra
Pradesh and others[6]; 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 Private Limited  v.  State  of
Haryana and another[9].
7.          The respondents despite service have not chosen to appear.
8.          The definition of ‘conveyance’ is contained in Section 2(10) of
the 1899 Act which reads as under:

      “S.2.  Definitions.—In this Act, unless there is  something  repugnant
      in the subject or context,--

      (10) "Conveyance" includes a conveyance on sale and  every  instrument
      by which property, whether movable or immovable, is transferred  inter
      vivos and which is not otherwise specifically provided for by Schedule
      I.




9.          Section 2(21) defines ‘power of attorney’. It reads as  follows
:

      “S. 2(21) “Power-of-attorney” includes any instrument (not  chargeable
      with a fee under the law relating to court-fees for the time being  in
      force) empowering a specified person to act for and in the name of the
      person executing it;”


10.         The 1899 Act has been amended from time to time by  the  Madhya
Pradesh State Legislature insofar as  its  application  to   the  State  of
Madhya Pradesh is concerned.  The stamp  duty  on  power  of  attorney  was
originally prescribed in Article 48, Schedule  -  1-A   of  the  1899  Act.
Clause (f) in original Article 48, Schedule 1-A read as under:


                                “SCHEDULE-1A
                          Stamp Duty on Instruments
                               (See section 3)

      Description of Instruments        Proper Stamp Duty
1)                                                  (2)

      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
   Conveyance
       and authorizing the attorney  to         (No.  23)  for   a   market
   value
       sell any immovable property;               equal to  the  amount  of
    the
                                            consideration.”







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:-

|(f) when given for consideration |The same duty as a conveyance    |
|and authorizing the attorney to  |under Article 23 on the market   |
|sell or transfer any immovable   |value of the property            |
|property.                        |                                 |
|                                 |                                 |
|(f-1) when given without         |The same duty as a conveyance    |
|consideration in favour of       |under Article 23 on the market   |
|persons who are not his or her   |value of the property            |
|spouse or Children, or mother or |                                 |
|father and authorizing the       |                                 |
|attorney to sell or transfer any |                                 |
|immovable property               |                                 |


  ii) the existing explanation shall be renumbered as explanation I  thereof
      and after explanation I as so renumbered,  the  following  explanation
      shall be inserted, namely :-


“Explanation II:--Where under 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 the duty calculated on the market value of the  property
reduced by duty paid on the power of attorney”.




The Objects and Reasons for the above amendment were to check the  tendency
to execute power of attorney authorising the attorney to sell  or  transfer
immovable property in place of  a  conveyance  deed  and  to  increase  the
revenue of the Government in the State of Madhya Pradesh.

12.         Article 48 in the 1899 Act as amended  by  M.P.  1997  Act  was
substituted by M.P. 2002 Act. The new provision, Article 45 in  respect  of
power of attorney in Schedule 1-A which was brought in  by  M.P.  2002  Act
reads as follows :
                                “SCHEDULE-1A
                          Stamp Duty on Instruments
                               (See section 3)


      Description of Instrument         Proper Stamp Duty
                  (1)
  (2)

|                                     |                                                                                                               |
|45.  Power of attorney [as defined by|                                                                                                               |
|section   2(21)] not being a proxy:- |                                                                                                               |
|when authorizing one person or more  |   Fifty rupees.                                                                                               |
|to act in single transaction,        |                                                                                                               |
|including a power of attorney        |                                                                                                               |
|executed for procuring the           |                                                                                                               |
|registration of one or more documents|                                                                                                               |
|in relation to a single transaction  |                                                                                                               |
|or for admitting execution of one or |                                                                                                               |
|more such documents;                 |                                                                                                               |
|when authorizing one person to act in|One hundred rupees.                                                                                            |
|more than one transaction or         |                                                                                                               |
|generally; or not more than ten      |                                                                                                               |
|persons to act jointly or severally  |                                                                                                               |
|in more than one transaction or      |                                                                                                               |
|generally;                           |                                                                                                               |
|when given for consideration and     |The same duty as a conveyance (No. 22) on the market value of the property.                                    |
|authorizing the agent to sell any    |                                                                                                               |
|immovable property.                  |                                                                                                               |
|when given without consideration to a|Two percent on the market value of the property which is the subject matter of power of attorney.              |
|person other than the father, mother,|                                                                                                               |
|wife or husband, son or daughter,    |                                                                                                               |
|brother or sister in relation to the |                                                                                                               |
|executant and authorizing such person|                                                                                                               |
|to sell immovable property situated  |                                                                                                               |
|in Madhya Pradesh.                   |                                                                                                               |
|In any other case;                   |Fifty rupees for each person authorized                                                                        |


      Explanation-I.—For the purpose of this article, more persons than  one
      when belonging to the same firm shall be deemed to be one person.

      Explanation-II.—The     term     ‘registration’    includes      every
      operation incidental to registration under the Registration Act,  1908
      (16 of 1908).”




13.         In our  opinion,  the  High  Court  was  clearly  in  error  in
declaring Clause (d), Article 45 of Schedule 1-A of the 1899 Act  which  as
brought in  by the M.P.  2002  Act  as  violative  of  Article  14  of  the
Constitution of India. It is very difficult to approve the reasoning of the
High Court that the provision may pass the test of  classification  but  it
would not pass the requirement of the second limb  of  Article  14  of  the
Constitution   which    ostracises    arbitrariness,    unreasonable    and
irrationality.  The High Court failed to keep  in  mind  the  well  defined
limitations in consideration of the constitutional validity  of  a  statute
enacted by  Parliament or a  State  Legislature.  The  statute  enacted  by
Parliament or a  State  Legislature  cannot  be  declared  unconstitutional
lightly.  The  court must be able to hold beyond any iota of doubt that the
violation of  the  constitutional  provisions   was  so  glaring  that  the
legislative provision under challenge cannot stand. Sans flagrant violation
of the constitutional provisions,  the law made by  Parliament or  a  State
Legislature is not declared bad.

14.         This Court has repeatedly stated that legislative enactment can
be struck down by  Court  only  on  two  grounds,  namely  (i),   that  the
appropriate Legislature does not have competency to make the law and  (ii),
that it does not take  away  or  abridge  any  of  the  fundamental  rights
enumerated in Part – III of the Constitution or  any  other  constitutional
provisions.
15.         In Mcdowell and Co.2 while dealing with  the  challenge  to  an
enactment based on Article 14, this Court stated in paragraph  43  (at  pg.
737)  of the Report as follows :
      “……..A law made by Parliament or the legislature can be struck down by
      courts on two grounds  and  two  grounds  alone,  viz.,  (1)  lack  of
      legislative competence and (2) violation of  any  of  the  fundamental
      rights guaranteed in Part III of the  Constitution  or  of  any  other
      constitutional provision. There is no third ground……….
      …….. if an enactment is challenged as violative of Article 14, it  can
      be struck down only if it  is  found  that  it  is  violative  of  the
      equality clause/equal protection clause enshrined therein.  Similarly,
      if an enactment is challenged as violative of any of  the  fundamental
      rights guaranteed by clauses (a) to (g) of Article 19(1),  it  can  be
      struck down only if it is found not saved by any of the clauses (2) to
      (6) of Article 19 and so on. No enactment can be struck down  by  just
      saying  that  it  is  arbitrary  or  unreasonable.   Some   or   other
      constitutional infirmity has to be found before invalidating  an  Act.
      An enactment cannot be struck down on the ground that court thinks  it
      unjustified. Parliament and the legislatures, composed as they are  of
      the representatives of the people, are supposed to know and  be  aware
      of the needs of the people and what is good  and  bad  for  them.  The
      court cannot sit in judgment over their wisdom…….”
                                        (Emphasis supplied)



Then dealing with the decision of this Court in State of T.N. and others v.
Ananthi Ammal and others[10], a three-Judge  Bench  in  Mcdowell  and  Co.2
observed in paragraphs  43 and 44 [at pg. 739) 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 Madras High Court  striking  down  the  Tamil
      Nadu Acquisition of Land for Harijan  Welfare  Schemes  Act,  1978  as
      violative of Articles 14, 19 and  300-A  of  the  Constitution.  On  a
      review of the provisions of the Act, this Court found that it provided
      a procedure which was substantially unfair to the owners of  the  land
      as compared to the procedure prescribed by the Land  Acquisition  Act,
      1894, insofar as Section  11  of  the  Act  provided  for  payment  of
      compensation in instalments if it exceeded rupees two thousand.  After
      noticing the several features of the Act including the  one  mentioned
      above, this Court observed: (SCC p. 526, para 7)


        “7. When a statute is impugned under Article 14 what the court  has
        to decide is whether the statute is so  arbitrary  or  unreasonable
        that it must be struck down. At best,  a  statute  upon  a  similar
        subject which derives its authority  from  another  source  can  be
        referred to, if its provisions have been held to be  reasonable  or
        have stood the test of time, only for  the  purpose  of  indicating
        what may be said to be reasonable in the  context.  We  proceed  to
        examine the provisions of the said Act upon this basis.”


     44. It is this paragraph which is strongly relied upon by Shri Nariman.
     We are, however, of the opinion  that  the  observations  in  the  said
     paragraph must be understood in the totality of the decision.  The  use
     of the word ‘arbitrary’ in para 7  was  used  in  the  sense  of  being
     discriminatory, as the reading of the very paragraph  in  its  entirety
     discloses. The provisions of the Tamil Nadu Act  were  contrasted  with
     the provisions of the Land Acquisition Act and ultimately it was  found
     that Section 11 insofar as it provided for payment of  compensation  in
     instalments was invalid. The ground of invalidation is clearly  one  of
     discrimination.  It  must  be  remembered  that   an   Act   which   is
     discriminatory is liable to be labelled as arbitrary.  It  is  in  this
     sense that the expression ‘arbitrary’ was used in para 7.”



16.         The High Court has not given any reason as to why the provision
contained in clause (d) was  arbitrary,  unreasonable  or  irrational.  The
basis of such conclusion is not discernible from  the  judgment.  The  High
Court has  not  held  that  the  provision  was  discriminatory.  When  the
provision enacted by the  State  Legislature  has  not  been  found  to  be
discriminatory, we are afraid that  such  enactment  could  not  have  been
struck down on the ground that it was arbitrary  or irrational.
17.         That stamp duty is a  tax  and  hardship  is  not  relevant  in
interpreting fiscal statutes are well known principles. In Bengal  Immunity
Co. Ltd.  v. State of Bihar and others[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 :
      “……….If there is any real hardship of the kind referred to,  there  is
      Parliament which is expressly invested with the power of  lifting  the
      ban under cl. (2) either wholly or to the extent it thinks fit to  do.
      Why should the Court be called upon to discard the  cardinal  rule  of
      interpretation for mitigating a  hardship,  which  after  all  may  be
      entirely fanciful, when the Constitution itself has expressly provided
      for another authority more competent to evaluate the correct  position
      to do the needful?”

18.         In Commissioner of Income Tax, Madras v. R.SV. Sr.  Arunachalam
Chettiar[12], a three-Judge Bench of  this Court, inter alia,  observed  in
paragraph 13 (at pgs. 1220-21) of the 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 :
      “30. From the foregoing decisions it is clear that  the  consideration
      whether a levy is just or unjust, whether it is equitable  or  not,  a
      consideration which appears to have greatly weighed with the majority,
      is wholly irrelevant in considering the validity of a levy. The courts
      have repeatedly observed that  there  is  no  equity  in  a  tax.  The
      observations of Lord Hatherley, L.C. in  (1869) 4 Ch. A 735.  “In fact
      we must look to the general scope and purview of the statute,  and  at
      the remedy sought to be applied, and  consider  what  was  the  former
      state of the law, and what it was that the legislature  contemplated,”
      were made while construing, a non-taxing statute. The  said  rule  has
      only a limited application in the interpretation of a taxing  statute.
      Further, as observed by that learned  Judge  in  that  very  case  the
      question in each case is “whether  the  legislature  had  sufficiently
      expressed its intention” on the point in issue.”



The court  highlighted that the court could not  concern  itself  with  the
intention of the Legislature when the language  expressing  such  intention
was plain and unambiguous.
20 .        In P. Laxmi Devi (Smt.)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 1899 Act as amended by A.P. Act 8 of  1998
that required a party to deposit 50% deficit  stamp  duty  as  a  condition
precedent  for  a   reference   to   a   Collector   under   Section   47-A
unconstitutional. The Court said in P. Laxmi Devi (Smt.)7 as follows :
      “19. It is well settled that stamp duty is a tax, and hardship is  not
      relevant in construing taxing  statutes  which  are  to  be  construed
      strictly. As often said, there is no equity  in  a  tax  vide  CIT  v.
      V.MR.P. Firm Muar. If the words used in a taxing  statute  are  clear,
      one cannot try to find  out  the  intention  and  the  object  of  the
      statute. Hence the High Court fell in error in trying  to  go  by  the
      supposed object and intendment of the Stamp Act,  and  by  seeking  to
      find out the hardship which will be caused to a party by the  impugned
      amendment of 1998.


      20.   xxx   xxx  xxx


      21. It has been held by a Constitution Bench of this Court in  ITO  v.
      T.S. Devinatha Nadar (vide AIR paras 23 to 28) that where the language
      of a taxing provision is plain, the court cannot concern  itself  with
      the intention of the legislature. Hence, in our opinion the High Court
      erred in its approach of trying to  find  out  the  intention  of  the
      legislature in enacting the impugned amendment to the Stamp Act.”


While dealing with the aspect as to how and when the power of the  court  to
declare the statute unconstitutional can be exercised, this Court   referred
to the earlier decision of this Court in Rt. Rev. Msgr. Mark Netto v.  State
of Kerala and others[14] and held in para 46 (at pg. 740) of the  Report  as
under :

      “46. In our opinion, there is one and only one ground for declaring an
      Act of the legislature (or a provision in the Act) to be invalid,  and
      that is if it clearly violates some provision of the  Constitution  in
      so evident a manner as to leave no manner  of  doubt.  This  violation
      can, of course, be in different ways e.g. if a State Legislature makes
      a law which only Parliament can make  under  List  I  to  the  Seventh
      Schedule, in  which  case  it  will  violate  Article  246(1)  of  the
      Constitution, or the law  violates  some  specific  provision  of  the
      Constitution  (other  than  the  directive  principles).  But   before
      declaring the statute  to  be  unconstitutional,  the  court  must  be
      absolutely sure that there can be no manner of doubt that it  violates
      a provision of the Constitution. If two views are possible, one making
      the statute constitutional and the other making  it  unconstitutional,
      the former view must always be preferred. Also, the  court  must  make
      every effort to uphold the constitutional validity of a statute,  even
      if that requires giving a strained construction or narrowing down  its
      scope vide Rt. Rev. Msgr. Mark Netto v. State of Kerala SCC para  6  :
      AIR para 6. Also, it is none of the concern of the court  whether  the
      legislation in its opinion is wise or unwise.”





Then in paras 56 and 57 (at pg. 744), the Court stated as follows:

      “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 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  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 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 Bihar[15], while dealing with the meaning, scope and
effect of Article 14, reiterated what  was  already  explained  in  earlier
decisions  that  to  pass  the  test  of  permissible  classification,  two
conditions must be  fulfilled,  namely,  (i)  the  classification  must  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 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 the  basis  of  classification  and  the
object of the Act under consideration.
22.         In Mohd.  Hanif  Quareshi15,  the  Constitution  Bench  further
observed that there was always a presumption in favour of constitutionality
of an enactment and the burden is upon him, 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  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  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, 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  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  Mahant  Moti  Das16  ,  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 articles  in  Part
      III 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 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.”




25.         In Hamdard Dawakhana17, 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. 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  Karnataka  Bank  Limited6,  while
referring to some of the above decisions, in para 19 (at  pgs.  262-263)  of
the Report, this Court held as under :
      “19. The rules that guide the  constitutional  courts  in  discharging
      their  solemn  duty  to  declare  laws   passed   by   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 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 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. 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  :  M/s.
Steelworth Limited v. State of Assam[20]; Gopal Narain  v.  State  of  Uttar
Pradesh and another.[21]; Ganga Sugar Corporation Limited v. State of  Uttar
Pradesh and others[22]; R.K. Garg v.  Union  of  India  and  others[23]  and
State of W.B. and another v. E.I.T.A. India Limited and others[24].
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.
29.         While dealing with 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 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 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  greater  latitude   for
classification.
30.         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 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  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 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 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 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. 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  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 present  respondents  before  the  High  Court  stand
dismissed. No order as to costs.


                             …………………….J.
                                                     (R.M. Lodha)


                                             …………………….J.
                                                   (H.L. Gokhale)
NEW DELHI.
MAY  11, 2012.
-----------------------
[1]
       AIR 1962 SC 123

[2]
       (1996) 3 SCC 709

[3]
       (1999) 5 SCC 62

[4]
       (1999) 5 SCC 725

[5]
       (2000) 6 SCC 345

[6]
       (2008) 2 SCC 254

[7]
       (2008) 4 SCC 720

[8]
       (2010) 11 SCC 1

[9]
       (2012) 1 SCC 656

[10]
       (1995) 1 SCC 519

[11]
       AIR 1955 SC 661

[12]
       AIR 1965 SC 1216

[13]
       AIR 1968 SC 623

[14]
       (1979) 1 SCC 23

[15]
       AIR 1958 SC 731

[16]
       AIR 1959 SC 942

[17]
       AIR 1960 SC 554

[18]
       AIR 1951 SC 41

[19]
       AIR 1951 SC 318

[20]
       1962 Supp (2) SCR 589

[21]
       AIR 1964 SC 370

[22]
       (1980) 1 SCC 223

[23]
       (1981) 4 SCC 675

[24]
       (2003) 5 SCC 239