1981 (11) TMI 57 - SC - Indian Laws

Whether the Special Bearer Bonds (Immunities and Exemptions) Ordinance, 1981 and the Special Bearer Bonds (Immunities and Exemptions) Act, 1981 are violative of the equality clause contained in art. 14 of the Constitution? Held that - The immunities provided by the impugned Act are clearly for the benefit of those who have acquired the bonds with black money. Clauses (a), (b) and (c) of s. 3(1) provide for these immunities notwithstanding anything contained in any other law for the time being in force . Clause (a) states that no holder of Special Bearer Bonds shall be required to disclose for any purpose the nature and source of acquisition of the bonds. Clause (b) forbids commencement of any enquiry or investigation under any law against a person on the ground that he has subscribed to or otherwise acquired the bonds. Under cl. (c) the fact that a person has subscribed to or otherwise acquired the Special Bearer Bonds shall be inadmissible in evidence and cannot be taken into account in any proceeding relating to any offence or to the imposition of any penalty under any law. None of these immunities is required by a person who has paid white money, that is, money that has been accounted for, to acquire the bonds. To a person who has disclosed the source of acquisition of the bonds, these immunities are of no use. Section 4 makes it clear that the immunities conferred by the Act are of use only to those who have acquired the Bonds with unaccounted money. Having held that the Special Bearer Bonds (Immunities and Exemptions) Ordinance, 1981, and the Special Bearer Bonds (Immunities and Exemptions) Act, 1981, are invalid on the ground that they infringe art. 14 of the Constitution, do not find it necessary to consider whether the Special Bearer Bonds (Immunities and Exemptions) Ordinance, 1981, is outside the Ordinance making power of the President under art. 123 of the Constitution.

Summary

Issues Involved:
1. Constitutional validity of the Special Bearer Bonds (Immunities and Exemptions) Ordinance, 1981, and the Special Bearer Bonds (Immunities and Exemptions) Act, 1981.
2. Violation of Article 14 of the Constitution.
3. President's power under Article 123 of the Constitution to issue the Ordinance.

Analysis:

1. Constitutional Validity of the Ordinance and the Act:
The writ petitions challenged the constitutional validity of the Special Bearer Bonds (Immunities and Exemptions) Ordinance, 1981, and the Special Bearer Bonds (Immunities and Exemptions) Act, 1981, primarily on the grounds of violating the equality clause in Article 14 of the Constitution. The Act and the Ordinance were intended to canalize black money for productive purposes by providing certain immunities and exemptions to the holders of Special Bearer Bonds, 1991. The Act replaced the Ordinance and was brought into force retrospectively from January 12, 1981.

2. Violation of Article 14 of the Constitution:
The principal ground of challenge was that the Act and the Ordinance were violative of Article 14, which ensures equality before the law. The petitioners argued that the Act discriminated between honest taxpayers and tax-evaders by providing immunities and exemptions to those who invested black money in Special Bearer Bonds. The court examined whether the classification made by the Act was rational and had a reasonable relation to the object sought to be achieved by the legislation.

The court noted that Article 14 does not forbid reasonable classification but requires that the classification must be based on an intelligible differentia and must have a rational relation to the object of the Act. The court found that the classification made by the Act was rational and intelligible, as it aimed to unearth black money and channel it into productive uses. The immunities and exemptions were necessary to induce those holding black money to disclose it and invest it in the bonds.

3. President's Power Under Article 123:
The petitioners also argued that the President had no power under Article 123 of the Constitution to issue the Ordinance, as it effectively amended tax laws and was in the nature of a Money Bill, which could only be introduced in the House of the People. The court rejected this argument, stating that the President's legislative power under Article 123 is co-extensive with the power of Parliament to make laws. The court held that the President could issue an Ordinance amending or altering tax laws, and such an Ordinance would have the same force and effect as an Act of Parliament.

Separate Judgment by Gupta J.:
Justice Gupta dissented, holding that the Act violated Article 14 of the Constitution. He argued that the classification between honest taxpayers and tax-evaders was arbitrary and had no rational relation to the object of the Act. He emphasized that the Act provided undue benefits to tax-evaders, which was unfair to honest taxpayers. He also noted that the Act did not effectively address the problem of black money and could lead to further generation of black money.

Conclusion:
The majority judgment upheld the constitutional validity of the Special Bearer Bonds (Immunities and Exemptions) Ordinance, 1981, and the Special Bearer Bonds (Immunities and Exemptions) Act, 1981, rejecting the challenge based on Article 14 and the President's power under Article 123. Justice Gupta, however, dissented, finding the Act violative of Article 14 due to its arbitrary classification and undue benefits to tax-evaders.