Case BriefsHigh Courts

Meghalaya High Court: The Division Bench of Ranjit More, CJ. and H.S.Thangkhiew, J., dismissed a petition which was filed challenging the constitutional validity of Section 3(1)(c) of the Meghalaya Electricity Duty (Assam Act XXX of 1964 as adapted by Meghalaya) as amended vide amendment Act dated 15th October, 2019 (“the Act”).

Before the 2019 amendment, Section 3(1)(c) of the Assam Electricity Duty Act, 1964 (Assam Act XXX of 1964) reads as follows:

“3. (1) There shall be levied and paid to the State Government a duty, to be called the “electricity duty”, at the rate of five paise per unit of energy.

(c) generated by a person or a company or a firm or any organisation for own use or consumption”.

Division Bench of the Gauhati High Court held and declared that the State is not legally competent to levy duty from the cellular phone companies on self-produced and self-consumed electricity. The Division Bench further held that taxable event is generate and that cannot be read as consumption and hence Entry 53 of the State List of the Seventh Schedule does not support the State action. Consequently, Section 3(1)(c) of the Assam Electricity Duty Act, 1964 is declared ultra vires. Sub Section 3 (1) (c), thereafter was subsequently substituted by the State of Assam. Similar action was taken by the State of Meghalaya and Sub Section 3(1) (c) of the Meghalaya Electricity Duty (Assam Act XXX of 1964 as adapted by Meghalaya) was amended. Sub-Section (c) was substituted as follows:

“(c) Consumed by any person or any organization generating energy”.

Mr A.Kumar, AG and Mr K.Khan, Sr. GA appearing for the respondents submitted that the 2019 amendment of the said Act was in consonance with Entry 53 of the State List. Learned AG further submitted that the 2019 amendment to the said Act has made it abundantly clear that taxable event in respect of captive consumption of electricity was when the electricity was “consumed” by the person generating it. Consequently, the duty is not imposed under Section 3 (1) (c) of the said Act on the mere act of “generation” of electricity. He further submitted that levy of electricity duty under the amended Sub Section 3(1) on consumption of electricity was perfectly admissible.

The Court opined that the issue raised in this petition is squarely covered by the two Supreme Court judgments in Jiyageerao Cotton Mills Ltd. v. State of Madhya Pradesh, AIR 1963 SC 414 and State of Andhra Pradesh v. National Thermal Power Corpn. Ltd. (NTPC), AIR 2002 SC 1895 and held that even bare consumption of electricity energy by a person who generates the same is permissible to be taxed by reference to Entry 53 of the State List, thus the petition was declared devoid of merits.

[ATC Telecom Infrastructure (P) Ltd. v. State of Meghalaya, 2021 SCC OnLine Megh 216, decided on 21-10-2021]

Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: The division bench of Dr. DY Chandrachud and MR Shah, JJ has upheld the validity of Section 54(3) of the Central Goods and Services Tax Act, 2017 (CGST Act) which provides for refund of unutilised input tax credit (ITC) in certain cases.

Provisions in question

Section 54[1] of the CGST Act provides for a refund of tax. Under sub-Section (1) of Section 54, a person claiming a refund of “tax and interest, if any, paid on such tax or any other amount paid” has to make an application within two years of the relevant date.

Parliament envisaged a specific situation where the credit has accumulated due to an inverted duty structure, that is where the accumulation of ITC is because the rate of tax on inputs is higher than the rate of tax on output supplies. Taking legislative note of this situation, a provision for refund was provided for in Section 54(3) which embodies for refund of unutilised input tax credit (ITC) in cases involving:

(i) zero rated supplies made without payment of tax; and

(ii) credit accumulation “on account of rate of tax on inputs being higher than rate of tax on output supplies”.

Further, the Central Goods and Service Tax Rules 2017 were formulated in pursuance of the rule making power conferred by Section 164 of the CGST Act. Rule 89(5) provides a formula for the refund of ITC, in “a case of refund on account of inverted duty structure”. The said formula uses the term “Net ITC”. In defining the expression “Net ITC”, Rule 89(5)[2] speaks of “input tax credit availed on inputs”.

Case Trajectory

The petitioners approached the Gujarat High Court and the Madras High Court and made the following submissions:

(i) Section 54(3) allows for a refund of ITC where the accumulation is due to an inverted duty structure;

(ii) ITC includes the credit of input tax charged on the supply of goods as well as services;

(iii) Section 54(3) does not restrict the entitlement of refund only to unutilised ITC which is accumulated due to the rate of tax on inputs being higher than the rate of tax on output supplies. It also allows for refund of unutilised ITC when the rate of tax on input services is higher than the rate of tax on output supplies;

(iv) While Section 54(3) allows for a refund of ITC originating in inputs as well as input services, Rule 89(5) is ultra vires in so far as it excludes tax on input services from the purview of the formula; and

(v) In the event that Section 54(3) is interpreted as a restriction against a claim for refund of accumulated ITC by confining it only to tax on inputs, it would be unconstitutional as it would lead to discrimination between inputs and input services.

Gujarat High Court’s judgment

By its judgment dated 24 July 2020, the Division Bench of the Gujarat High Court, held that:

“Explanation (a) to Rule 89(5) which denies the refund of “unutilised input tax” paid on “input services” as part of “input tax credit” accumulated on account of inverted duty structure is ultra vires the provision of Section 54(3) of the CGST Act, 2017.”

The High Court therefore directed the Union Government to allow the claim for refund made by the petitioners before it, considering unutilised ITC on input services as part of “Net ITC” for the purpose of calculating refund in terms of Rule 89(5), in furtherance of Section 54(3).

Madras High Court’s judgment

The Division Bench of the Madras High Court came to a contrary conclusion, after having noticed the view of the Gujarat High Court, and held;


(1) Section 54(3)(ii) does not infringe Article 14.

(2) Refund is a statutory right and the extension of the benefit of refund only to the unutilised credit that accumulates on account of the rate of tax on input goods being higher than the rate of tax on output supplies by excluding unutilised input tax credit that accumulated on account of input services is a valid classification and a valid exercise of legislative power.”

The divergent views by both the High Courts led to the case before the Supreme Court.

Supreme Court’s verdict

Upholding the constitutional validity of Section 54(3), the Court held that

“A claim to refund is governed by statute. There is no constitutional entitlement to seek a refund.”

The Court explained that Parliament while enacting the provisions of Section 54(3), legislated within the fold of the GST regime to prescribe a refund. While doing so, it has confined the grant of refund in terms of the first proviso to Section 54(3) to the two categories which are governed by clauses (i) and (ii) i.e.

(i) zero rated supplies made without payment of tax; and

(ii) credit accumulation “on account of rate of tax on inputs being higher than rate of tax on output supplies.

Parliament has in clause (i) of the first proviso allowed a refund of the unutilized ITC in the case of zero-rated supplies made without payment of tax. Under clause (ii) of the first proviso, Parliament has envisaged a refund of unutilized ITC, where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies.

“When there is neither a constitutional guarantee nor a statutory entitlement to refund, the submission that goods and services must necessarily be treated at par on a matter of a refund of unutilized ITC cannot be accepted. Such an interpretation, if carried to its logical conclusion would involve unforeseen consequences, circumscribing the legislative discretion of Parliament to fashion the rate of tax, concessions and exemptions. If the judiciary were to do so, it would run the risk of encroaching upon legislative choices, and on policy decisions which are the prerogative of the executive.”

Stating that courts are averse to entering the area of policy matters on fiscal issues, the Court said,

“Many of the considerations which underlie these choices are based on complex balances drawn between political, economic and social needs and aspirations and are a result of careful analysis of the data and information regarding the levy of taxes and their collection.”

The Court also found it impossible to accept the premise that the guiding principles which impart a measure of flexibility to the legislature in designing appropriate classifications for the purpose of a fiscal regime should be confined only to the revenue harvesting measures of a statute.

“The precedents of this Court provide abundant justification for the fundamental principle that a discriminatory provision under tax legislation is not per se invalid. A cause of invalidity arises where equals are treated as unequally and unequals are treated as equals.”

Noticing that both under the Constitution and the CGST Act, goods and services and input goods and input services are not treated as one and the same and they are distinct species, the Court said,

“Parliament engrafted a provision for refund Section 54(3). In enacting such a provision, Parliament is entitled to make policy choices and adopt appropriate classifications, given the latitude which our constitutional jurisprudence allows it in matters involving tax legislation and to provide for exemptions, concessions and benefits on terms, as it considers appropriate.”

[Union of India v. VKC Footsteps, 2021 SCC OnLine SC 706, decided on 13.09.2021]

*Judgment by: Justice Dr. DY Chandrachud

Know Thy Judge| Justice Dr. DY Chandrachud

For UOI: N Venkataraman and Balbir Singh, ASG

For Assessee: Senior Advocates V Sridharan and Arvind Datar; Advocates Sujit Ghosh and Uchit Sheth

For Respondents: Advocate Arvind Poddar

[1] “Section 54. Refund of tax

(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:

Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of Section 49, may claim such refund in the return furnished under section 39 in such manner as may be prescribed.

[…] (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:

Provided that no refund of unutilized input tax credit shall be allowed in cases other than-

(i) zero rated supplies made without payment of tax;

(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods and services or both as may be notified by the Government on the recommendations of the Council:

Provided further that no refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty:

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.”


[2] “(4) […]

(B) “Net ITC” means input tax credit availed on inputs and input services during the relevant period;


(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under sub-section (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period;

(5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula: – Maximum Refund Amount= {(Turnover of inverted rated supply of goods) x Net ITC ÷ Adjusted Total Turnover} − tax payable on such inverted rated supply of goods

Explanation:- For the purposes of this sub rule, the expressions “Net ITC” and “Adjusted Total turnover” shall have the same meanings as assigned to them in sub-rule (4).”

Case BriefsHigh Courts

Karnataka High Court: P.S. Dinesh Kumar J dismissed the petition being devoid of merits.

The facts of the case are such that the petitioner, Devas Employees’ Mauritius Pvt. Ltd., a Company incorporated under the laws of Republic of Mauritius filed the instant  petition with prayers to declare Section 272(1)(e) of Companies Act, 2013 (‘the Act’ for short) as ultra vires Constitution of India; and to declare that the second proviso to Section 272(3) of the Act, must be read to be applicable to the petitions presented by persons falling under Section 272(1)(e) of the Act; and to issue a writ of certiorari quashing sanction order dated January 18, 2021 and consequently to quash all proceedings before NCLT.

Counsel for the petitioners Mr. Rajiv Nayyar and Mr. C.K. Nanda Kumar submitted that both Registrar of Companies and a ‘person authorized by the Central Government’ stand on the same footing. In the case of Registrar, before according sanction, Central Government is required to give an opportunity to the Company and the same is missing in the case of a ‘person authorized by Central Government.

Counsel for respondents Mr. Venkatraman, Mr. Saji P John, Mr. M.B Naragund and M.N. Kumar  that there is a classic distinction between the Registrar of Companies and a person authorized by the Central Government because Registrar is a regulator and stands on a different footing.

The Court observed that the Registrar falls in a different category as the powers and duties of the Registrar of Companies enumerated in Sections 77, 77(2), 78, 81, 83, 93, 137, 157, 206, 208, 209 and 248 of the Companies Act.

The Court relied on judgment K.B. Nagur v. UOI, (2012)4 SCC 483 wherein it was observed

“20. It is also a settled and deeply-rooted canon of constitutional jurisprudence, that in the process of constitutional adjudication, the courts ought not to pass decisions on questions of constitutionality unless such adjudication is unavoidable. In this sense, the courts have followed a policy of strict necessity in disposing of a constitutional issue. In dealing with the issues of constitutionality, the courts are slow to embark upon an unnecessary, wide or general enquiry and should confine their decision as far as may be reasonably practicable, within the narrow limits required on the facts of a case.”

The Court further relied on judgment Government of Andhra Pradesh v. P. Laxmi Devi, (2008) 4 SCC 720 wherein it was observed

“46. ………….. 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 [(1979) 1 SCC 23 : AIR 1979 SC 83] SCC para 6 : AIR para 6. Also, it is none of the concern of the court whether the legislation I its opinion is wise or unwise.”

The Court observed that It is settled that when a provision of law is challenged, Courts are required to exercise restraint and be cautious in striking down a provision. It was further observed that one of the most profound tenets of Constitutionalism is presumption of Constitutionality assigned to each legislation enacted. Indubitably, Parliament has competence.

The Court held “The sanction accorded by the Central Government does not meet petitioner with any Civil consequence. Devas has not challenged the sanction order. Petitioner has failed to demonstrate infringement of any rights enshrined in Part-III of Constitution of India.”

The Court also held “Registrar and ‘a person authorized by the Central Government’ fall into different categories, it does not warrant reading down Section 272(3) of the Companies Act.”

In view of the above, petition was dismissed.

[Devas Employees Mauritius Private Limited v. Union of India, Writ Petition No.6191 OF 2021, decided on 28-04-2021]

Arunima Bose, Editorial Assistant has put this report together 

Case BriefsSupreme Court

Supreme Court: In a case where the Madras High Court dismissed a writ petition without deciding the validity of Section 40(a)(iib) of the Income Tax Act on the ground that the matter is still sub judice before the Income Tax Authority, the 3-judge bench of Ashok Bhushan, R. Subhash Reddy and MR Shah*, JJ has held

“When the vires of Section 40(a)(iib) of the Income Tax Act were challenged, which can be decided by the High Court alone in exercise of powers under Article 226 of the Constitution of India, the High Court ought to have decided the issue with regard to vires of Section 40(a)(iib) on merits, irrespective of the fact whether the matter was sub judice before the Income Tax Authority. Vires of a relevant provision goes to the root of the matter.”


In the present case, a show cause notice was issued for the Assessment Year 2017-stating that the VAT expense levied on the appellant is an exclusive levy by the State Government and therefore squarely covered by Section 40(a)(iib) of the Income Tax Act and therefore VAT expenditure is not allowable as deduction in accordance with Section 40(a)(iib) of the Income Tax Act, while computing the income of the appellant.

The appellant had argued that the amount which is deductible in computing the income chargeable in terms of the Income Tax Act is not being allowed under the garb of the aforesaid provision and that

“ (…) the said provision is discriminatory and violative of Article 14 of the Constitution of India, inasmuch as there are many Central Government undertakings which have not been subjected to any such computation of income tax and are enjoying exemption.”

The High Court dismissed the said writ petition without deciding the validity of Section 40(a)(iib) of the Income Tax Act by observing that the issue of raising a challenge to the vires of the provision at this stage need not be entertained as the matter is still sub judice before the Income Tax Authority, even though it is open to the aggrieved party to question the same at the appropriate moment.

What the Supreme Court Said

Once the show cause notice was issued by the assessing officer calling upon the appellant – assessee to show cause why the VAT expenditure is not allowable as deduction in accordance with Section 40(a)(iib) of the Income Tax Act, while computing the income of the appellant, it can be said that the cause of action has arisen for the appellant to challenge the vires of Section 40(a)(iib) of the Income Tax Act and the appellant may not have to wait till the assessment proceedings before the Income Tax Authority are finalised.

“The stage at which the appellant approached the High Court and challenged the vires of Section 40(a)(iib) of the Income Tax Act can be said to be an appropriate moment.”

Therefore, it was held that the High Court ought to have decided the issue with respect to the challenge to the vires of Section 40(a)(iib) of the Income Tax Act on merit and has failed to exercise the powers vested in it under Article 226 of the Constitution of India by not doing so.

The Court, hence, without expressing any opinion on merits with respect to legality and validity of Section 40(a)(iib) of the Income Tax Act, remanded matter to the High Court.

[Tamil Nadu State Marketing Corporation v. Union of India,  2020 SCC OnLine SC 953, decided on 25.11.2020]

*Justice MR Shah has penned this judgment 

For appellant: Senior Advocate Rakesh Dwivedi

For Union of India: Additional Solicitor General K.M. Natraj

Case BriefsForeign Courts

Supreme Court of Louisiana: While determining the constitutionality of statutory requisite under La. R.S. 40:1321(J) and La. R.S. 15:542.1.4(C) that, persons convicted of sex offences carry an identification card branded with the words ‘sex offender’, the Court with a ratio of 2:1 held that this requirement constitutes compelled speech and fails to survive the strict scrutiny analysis of First Amendment, hence the requirement is unconstitutional. Observing thusly, Court upheld the decision of the District Court declaring the aforementioned provisions to be unconstitutional.

Facts and Contentions

 As per the law prevailing in State of Louisiana (hereafter the State), La. R.S. 15:542.1.4(C) sets forth the penalties for altering a branded identification card and the ‘obtain-and carry’ provision found under La. R.S. 40:1321(J). The defendant was charged with altering an official identification card to conceal his designation as a registered sex offender in violation of La. R.S. 15:542.1.4(C). Stating that the applicable provisions are unconstitutional, the defendant argued that the impugned provisions violate the First Amendment prohibition against compelled speech. The Defendant also objected to showing others an identification prominently showing the words ‘sex offender’ because of the social consequences of that message rather than for religious or political reasons.

Per contra, the State argued that the defendant lacks locus standi to challenge the requirement that he carries his branded identification card, as he was charged with altering it and not failing to carry it. The State further contended that the defendant’s ID card lacked First Amendment protection due to- the impugned statute regulates conduct, not speech; defendant’s actions fell outside of First Amendment protection because they constituted speech integral to criminal conduct; and, defendant acted fraudulently, and fraud is not protected speech.  The State also argued that imposition of restrictive measures on sex offenders adjudged to be dangerous is a legitimate non-punitive governmental objective.

The District Court upon perusing the arguments, had quashed the State’s bill of information against the defendant and held that the provisions in question are facially unconstitutional.

The First Amendment provides that the ‘Congress shall make no law… abridging the freedom of speech’ and protects against prohibitions of speech, and also against laws or regulations that compel speech.

The Majority Opinion- 

Genovese and Weimer, JJ., formed part of the majority, with Weimer, J., giving his concurring opinion. The majority found the State’s contentions to be non-persuasive. Referring to the precedents of Wooley v. Maynard, 1977 SCC OnLine US SC 63 and Walker v. Texas Division, Sons of Confederate Veterans, Inc., et al, 2015 SCC OnLine US SC 67, the Court deliberated whether Louisiana’s identification is more like a license plate which can be a hybrid of compelled and government speech, or more like a passport. It was noted that identification card branded with ‘sex offender’ is speech, thus, even though an identification card is government speech, a compelled speech analysis may still be required. Perusing the facts of the case, the majority noted that the defendant is required not only to register his residence, to provide information to the government, but he is also required to display the words ‘sex offender’ on his ID card which he will have to show to the public while performing everyday tasks. Furthermore, the branded ID card is compelled speech, and it is a content-based regulation of speech that consequently must pass strict scrutiny. While the State certainly has a compelling interest in protecting the public and enabling law enforcement to identify a person as a sex offender, Louisiana has not adopted the least restrictive means of doing so. “A symbol, code, or a letter designation would inform law enforcement that they are dealing with a sex offender and thereby reduce the unnecessary disclosure to others during everyday tasks. As Louisiana has not used the least restrictive means of advancing its otherwise compelling interest, the branded ID requirement is unconstitutional”.

The Dissent

 Disagreeing with the majority, Cairn, J., observed that The First Amendment sternly limits a state’s authority to compel a private party to express a view with which the private party disagrees. Referring to Johanns v. Livestock Mktg. Association, 2005 SCC OnLine US SC 36; the Judge deliberated whether in the present case observers would attribute, or actually have attributed, the speech to the individual rather than to the government. It was observed that nothing about the placement or content of the subject speech remotely suggests it is made or endorsed by the defendant. It declares the defendant is a sex offender. It appears on a state-issued ID card and “Persons who observe designs on IDs routinely—and reasonably—interpret them as conveying some message on the issuer’s behalf” [Walker]. “No reasonable observer, when looking at the ID card, will conclude that the defendant chose to promote his status as a convicted sex offender by voluntarily procuring and personalizing a state-issued ID card to declare that information for the world. This case turns on a single determinative question: who is the speaker? Any reasonable observer of the defendant’s state-issued identification card would readily ascertain the speaker is the government, not the defendant”.[State of Louisiana v. Tanzin Ardell Hill, No. 2020-KA-0323, decided on 20-10-2020]

Sucheta Sarkara, Editorial Assistant has put this story together

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Case BriefsSupreme Court

Supreme Court: The 3-judge bench of AM Khanwilkar, Hemant Gupta and Dinesh Maheshwari, JJ has the constitutional validity of clause (f) of Section 43B of the Income Tax Act, 1961 and said,

“clause (f) was enacted to remedy a particular mischief and the concerns of public good, employees’ welfare and prevention of fraud upon revenue is writ large in the said clause.”

On validity of Clause (f) of Section 43B of the IT Act

Clause (f) of Section 43B of the IT Act provides for a tax disincentive in cases of deductions claimed by the assessee from income tax in lieu of liability accrued under the leave encashment scheme but not actually discharged by the employer. This clause made the actual payment of liability to the employees as a condition precedent for extending the benefit of deduction under the 1961 Act.

The Court explained that Section 43B was enacted in 1983 to provide for deductions to be availed by the assessee in lieu of liabilities accruing in previous year without making actual payment to discharge the same.

With the passage of time, the legislature inserted more deductions to Section 43B including cess, bonus or commission payable by employer, interest on loans payable to financial institutions, scheduled banks etc., payment in lieu of leave encashment by the employer and repayment of dues to the railways. Thus understood, there is no oneness or uniformity in the nature of deductions included in Section 43B. It holds no merit to urge that this section only provides for deductions concerning statutory liabilities.

“Section 43B is a mix bag and new and dissimilar entries have been inserted therein from time to time to cater to different fiscal scenarios, which are best determined by the government of the day.  It is not unusual or abnormal for the legislature to create a new liability, exempt an existing liability, create a deduction or subject an existing deduction to override regulations or conditions.”

On legislature’s power to defeat the dictum of Supreme Court

Though the Court noticed that there cannot be any declaration of invalidating a judgment of the Court without altering the legal basis of the judgment ­ as a judgment is delivered with strict regard to the enactment as applicable at the relevant time, however, once the enactment itself stands corrected, the basic cause of adjudication stands altered and necessary effect follows the same.

The Court further explained that the legislative body is not supposed to be in possession of a heavenly wisdom so as to contemplate all possible exigencies of their enactment. As and when the legislature decides to solve a problem, it has multiple solutions on the table. At this stage, the Parliament exercises its legislative wisdom to shortlist the most desirable solution and enacts a law to that effect. It is in the nature of a ‘trial and error’ exercise and a law­making body, particularly in statutes of fiscal nature, is duly empowered to undertake such an exercise as long as the concern of legislative competence does not come into doubt.

Upon the law coming into force, it becomes operative in the public domain and opens itself to any review under Part III as and when it is found to be plagued with infirmities. Upon being invalidated by the Court, the legislature is free to diagnose such law and alter the invalid elements thereof. In doing so, the legislature is not declaring the opinion of the Court to be invalid.

Defeating the dictum in Bharat Earth Movers case

It was argued before the Court that by inserting clause (f) to Section 43B of IT Act, the legislature defeated the ruling of Supreme Court in Bharat Earth Movers v. Commissioner of Income Tax, Karnataka, (2000) 6 SCC 645. The said judgment, while dealing with the principles of accounting under Section 37, conclusively holds that if a business liability has arisen definitely, deduction may be claimed against the same in the previous year in which such liability has accrued, even if it has not been finally discharged. The Court further held that the liability in lieu of leave encashment scheme is a present and definite liability and not a contingent liability.

The Court, in the present case, noticed that the decision in Bharat Earth Movers was rendered in light of general dispensation of autonomy of the assessee to follow cash or mercantile system of accounting prevailing at the relevant time, in absence of an express statutory provision to do so differently. It is an authority on the nature of the liability of leave encashment in terms of the earlier dispensation. In absence of any such provision, the sole operative provision was Section 145(1) of the 1961 Act that allowed complete autonomy to the assessee to follow the mercantile system.

The Court further said that a limited change was brought about by the insertion of clause (f) in Section 43B and nothing more which applies prospectively.

“Merely because a liability has been held to be a present liability qualifying for instant deduction in terms of the applicable provisions at the relevant time does not ipso facto signify that deduction against such liability cannot be regulated by a law made by Parliament prospectively. In matter of statutory deductions, it is open to the legislature to withdraw the same prospectively.”

The Court, hence, held that insertion of clause (f) has not extinguished the autonomy of the assessee to follow the mercantile system. It merely defers the benefit of deduction to be availed by the assessee for the purpose of computing his taxable income and links it to the date of actual payment thereof to the employee concerned.  Thus, the only effect of the insertion of clause (f) is to regulate the stated deduction by putting it in a special provision.

[Union of India v. Exide Industries Limited, 2020 SCC OnLine SC 399 , decided on 24.04.2020]

Case BriefsHigh Courts

Bombay High Court: A Division Bench of S.C. Dharmadhikari and G.S. Patel, JJ. dismissed a criminal writ petition challenging the constitutionality of the Guidelines for Registration of Sales Contract for Import of Poppy Seeds from Turkey, dated 25-06-2019, issued by the Central Bureau of Narcotics (“CBN”).

Poppy Seeds import into India is regulated by the CBN. The petitioners were registered importers. They have the necessary licenses. There is an annual cap or quota on poppy seed import from various points of origin. There is a cap on the quantity that may be imported for each foreign exporter country. Until recently, import permissions were by the sale of lots. On 25-06-2019, CBN issued the impugned Public Notice notifying the Guidelines. The petitioners decried the Guidelines as according to them the Guidelines are an unconstitutional restriction on their right to trade and carry on business.

The High Court disagreed. It was observed: “There is no fundamental right to be an importer. There is no fundamental right to import poppy seeds. There is no fundamental right to import anything without restrictions, or only on terms beneficial to a particular person. In mounting such a challenge, the burden on the petitioner is to show that the notification is manifestly arbitrary, i.e. that a patent arbitrariness exists on the face of it, without requiring any convoluted argumentation. It must, alternatively, be shown to be ex facie discriminatory, and not just discriminatory, but invidiously so. If a classification is challenged, it must be shown that it bears no nexus to the object of the impugned law. The petitioners are able to none of this.”

It was further observed: “The presently impugned Guidelines are but a step towards implementing a policy that has not only been in place in some form for many years previously, but is in furtherance of a policy to promote the larger public interest, then the narrow commercial interests of the Petitioners must yield.”

In such view of the matter, it was held that the writ petition was sans merit, and it was resultantly dismissed.[Chailbihari Trading (P) Ltd. v. Union of India, 2019 SCC OnLine Bom 1691, decided on 28-08-2019]

Case BriefsHigh Courts

Bombay High Court at Goa: The Division Bench of M.S. Sonak & Prithviraj K. Chavan, JJ. dismissed a set of petitions holding that the present was not an appropriate case to entertain a constitutional challenge to Section 33(3) of Goa Land Revenue Code, 1968.

Vires of Section 33(3) were challenged in the present petition. The petitioners claimed to be agricultural tenants of the properties subject to demolition by State Authorities. He had earlier prayed for an interim relief in the matter which was refused by the High Court.

Presently, the Court was informed that the structures in question had been already demolished. It was noted that the petitioners failed to state with clarity as to who had put up the structures and whether they were put up by permission of Authorities. The Court was of the view that it was incumbent on the petitioners, claiming to be agricultural tenants to disclose the genesis of such structures. It was held that in the absence of such disclosures, the Court was not in a position to exercise extraordinary jurisdiction under Article 226 and Article 227 to extend any relief to the petitioners.

Insofar as a challenge to Section 33(3) was concerned, the Court observed that, “it is settled position in law that issues on the constitutionality of a statute are not to be decided for mere academic purpose.” In the present case, the petitioners made out no case whatsoever for grant of any reliefs or for extending any protection to the structures in question. As such the Court held that it will not be appropriate to entertain any constitutional challenge to Section 33(3) at the behest of present petitioners. Such challenge can perhaps be considered in the appropriate case instituted by appropriate petitioner. Consequently, the petitions were dismissed. [Jose Manuel Monteiro v. State of Goa, 2019 SCC OnLine Bom 121, dated 29-01-2019]

Hot Off The PressNews

After hearing the much-debated Aadhaar matter for 38 days, the 5-judge bench of Dipak Misra, CJ and Dr. AK Sikri, AM Khanwilkar, Dr. DY Chandrachud and Ashok Bhushan, JJ has reserved the judgment. The hearing had begun on January 17, 2018.

Below are the highlights from the arguments advanced on the last day of the Aadhaar Hearing:

  • Senior Advocate Gopal Subramanium: 
    • Is Aadhaar really affirmative action? Is the act an enabler or is it in the guise of enabler? The act is not an instrumentality to deliver services. It is only a means of identification. We have to read the true purpose of law and whether the law seeks to achieve that purpose. Dignity and autonomy is not preserved by section 7 of the Aadhaar Act.
    • Aadhaar Act does not have a proper purpose. A claim to a proper purpose is not proper purpose. Authentication is at the heart of the Act. Failure of authentication is a ground for denial of services.
  • Chandrachud, J: An act like Aadhaar needs a regulator which is absent.
  • Gopal Subramanium: The state seeks to take away our data without the backing of a strong data protection framework. Words like “grant of subsidies, benefits and services” are expressions of condescension in Section 7. They are not treated like an entitlement. The burden is on the people to authenticate and establish their identity. Should the State logically be the holder of such information?
  • Chandrachud, J: Is “subsidy” a benefit or a right, that has to be decided.
  • Gopal Subramanium: 
    • Private players have access to Aadhaar data. There is no regime of protection. There is no vertical protection.
    • Section 7 has been interpreted to be mandatory. Can’t make citizens subservient under section 7 and call rights, benefits.
    • The Act is to be struck down completely as it fails all three tests laid down in Puttaswamy. There’s no legitimate state aim as the real aim is different from the purported aim. There was no law when Aadhaar was implemented and there’s no proportionality.
    • This Court consciously overruled ADM Jabalpur. The doctrine of possibility of misuse does not apply here because there is actual denial of rights in the case of Aadhaar.
    • Aadhaar Act should be completely struck down and the architecture and database must be destroyed.


  • Senior Advocate Arvind P. Datar:
    • Aadhaar cannot be a money bill. At most, it can be a financial bill of category 3 under Article 117(3) of the Constitution.
    • Doctrine of severability will not apply to Aadhaar, since the doctrine is only applicable to validly enacted laws.
    • Mohd.Saeed Siddiqui and Yogendra Jaiswal should be overruled. Finality of speaker’s decision doesn’t mean that the bill cannot be subject to judicial review.
    • Under PMLA, Aadhaar is not just confined to banks but has gone beyond it’s scope. Aadhaar is needed for mutual funds, insurance policies and credit cards as well, among other things.
    • Only magic words like black money, national security and terrorism are being thrown around by the State. The justification of a law for proportionality cannot be a ritualistic exercise. Aadhaar is not justified under Article 300A of the Constitution.
    • Linking Aadhaar will never solve problems of money laundering and black money because the source of such money is different. This is colorable exercise of power. Black money and money laundering is being used as a ruse to collect people’s biometrics.
    • Section 57 should go completely. Anything outside Section 7 is completely violative of the Puttaswamy judgement. S.139AA of the income tax act is inconsistent with the Aadhaar Act.
    • There should be an option of opting out of Aadhaar.


  • Senior Advocate P. Chidambaram:
    • AG’s reading of the word “only” in Article 110(g) is erroneous. There is no need to tamper the language of the Article.
    • Section 57 travels beyond Article 110 of the Constitution. Clause (g) of 110 (1) must be read very restrictively. The provision has to be incidental to (a) to (f) to come under (g). Clause (g) is not a substantive provision.
    • The implications of passing a non money bill as a money bill are very serious: One half of the parliament is virtually disabled from making any amendments. It denudes the highest constitutional authority of the country, the President of India.
    • There is no provision in the Constitution which gives the court the power of severability in case of an invalidly enacted legislation. The Australian constitution has such a provision.
    • The bill was passed without the effective participation of the Rajya Sabha and without assent from the President. The court cannot save a legislation that is fundamentally unconstitutional.
    • Pith and Substance doctrine cannot be applied in cases where the applicability of Article 110 is being interpreted. Only limited to entries of legislative lists.
    • The Court must strike down the Aadhaar Act as it is not a money bill. It is a mockery of Article 110.


  • Senior Advocate K.V Vishwanathan: 
    • Respondents’ argument that the least intrusive method is not a facet of proportionality is completely erroneous. You can’t balance your own bundle of rights. Balancing Right to food and right to privacy is wrong.
    • Section 59 doesn’t protect Aadhaar during the time it was not an Act. Its a wrong submission made by the state. To rely on the exception handling mechanism is ultra vires the Act.
    • If it’s my rights and their duty, then they cannot discharge their duty by subjecting the poor and downtrodden of this country to a technological menace.
    • There can be no data collection and digitalization of records. The underpinning of the Aadhaar Act is authentication of individuals.
    • Harmonization of rights is being mis-applied by the respondents.


To read the highlights from the rejoinder submitted by the petitioners, click here and here.

To read the highlights from the submissions of AG KK Venugopal on the issue of money bill, click here.

To read the highlights from the submissions of Advocate Zoheb Hossain, click here.

To read the highlights from the submissions of Advocate Gopal Sankarnarayanan and Senior Advocate Neeraj Kishan Kaul, click here.

To read the highlights from the submissions of Senior Advocate Rakesh Dwivedi, click here , here , here , here and here.

To read the highlights from the submissions by ASG Tushar Mehta, click here and here.

To read the highlights from the submissions by the Attorney General, click here, here , here and here.

To read the highlights from the PowerPoint Presentation made by the CEO of UIDAI, click here.

To read the highlights from submissions of Senior Advocates Meenakshi Arora, Sajan Poovayya, CU Singh, Sanjay Hegde and Counsel Jayna Kothari, click here.

To read the highlights from submissions of Senior Advocates KV Viswanathan and Anand Grover, click here.

To read the highlights from Senior Advocate Arvind Datar’s submissions, click here, here and here.

To read the highlights from Senior Advocate Gopal Subramanium’s submissions, click herehere and here.

To read the highlights from Senior Advocate Kapil Sibal’s arguments, click here, here and here.

Looking for the detailed submissions of Senior Advocate Shyam Divan? Read the highlights from Day 1Day 2, Day 3, Day 4 , Day 5, Day 6 and Day 7 of the hearing.


Case BriefsHigh Courts

Gujarat High Court: The Court  heard a petition filed by two Chartered Accountants, challenging the constitutionality of the National and State/ Regional Goods and Services Tax (GST) Appellate Tribunals, which are to be established as per guidelines in Section 109 of the Central GST Act. It was argued by the petitioners that the section in question and the constitution of the Tribunals the section seeks to create infringe upon the independence of the judiciary and are hence unconstitutional.

Section 109 (3) of the CGST Act reads:

“The National Bench of the Appellate Tribunal shall be situated at New Delhi which shall be presided over by the President and shall consist of one Technical Member (Centre) and one Technical Member (State).”

The following sub-section makes a similar provision for regional Benches of the Tribunal. Further, Section 109 (11) of the same Act states:

“If the Members of the National Bench, Regional Benches, State Bench or Area Benches differ in opinion on any point or points, it shall be decided according to the opinion of the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President or as the case may be, State President for hearing on such point or points to one or more of the other Members of the National Bench, Regional Benches, State Bench or Area Benches and such point or points shall be decided according to the opinion.”

It was the contention of the petitioners that owing to the majority rule for taking decisions, and the outnumbering of the judicial member by the technical members at all levels, is an attempt to encroach upon the judiciary’s domain, and hence the section be declared ultra vires Articles 13, 14, 19, and 50 of the Constitution and hence void. The petition made reference to the case of Union of India v. R. Gandhi, (2010) 11 SCC 1), where a 5-Judge Bench of the Apex Court held,

“Two member Benches of the Tribunal should always have a Judicial Member. Whenever any larger or special benches are constituted, the number of Technical Members shall not exceed the Judicial Members.”

This was a departure from the constitution of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which, before the introduction of GST, served as an appellate authority in matters relating to indirect taxes. The CESTAT consisted of one judicial and one technical member each. The petitioners also brought to the Court’s notice that over ten months have passed since the implementation of the GST regime but no such Appellate Tribunals had been constituted yet. To this effect, the Court issued a notice to the Union Government, Gujarat Government, and the GST Council. [Pratik Satayanarayan Gattani v. Union of India, 2018 SCC OnLine Guj 922, order dated 05-05-2018]

Hot Off The PressNews

As the Aadhaar Hearing reached Day 16, Senior Advocate P. Chidamabaram concluded his arguments on the issue of Aadhaar Act, 2016 being introduced as a Money Bill before the 5-judge bench of Dipak Misra, CJ and Dr. AK Sikri, AM Khanwilkar, Dr. DY Chandrachud and Ashok Bhushan, JJ. The most important take away from Day 16 hearing was that the Court scrapped the present deadline for linking Aadhaar stand extended till the final disposal of the matter.

Below are the highlights from Day 16 of the Aadhaar Hearing:

P. Chidambaram’s Submissions on Money Bill issue:

  • Speaker’s decision is not final. It is subject to judicial review.
  • (Reads S R Bommai v. Union of India) The satisfaction ofthe President mentioned in clause (1), shall be final and conclusive and shall notbe questioned in any court on any ground.
  • Any bill if passed in the guise of money bill strucks at the basic feature of Constitution i.e. federalism.
  • (Reads Raja Ram Pal v. Speaker) Validity of any proceeding in the Parliament on grounds of irregularity of procedure cannot be looked into by the court. However, illegality can be a ground for the courts to exercise judicial review. If the impugned procedure adopted in Parliament is illegal and unconstitutional, judicial review lies.
  • The question why it was termed as money bill was raised by MP Jairam Ramesh in the discussions. He had moved for amendments in the bill which were adopted in Rajya Sabha, however, these amendments were not considered by the Lok Sabha and it was passed in original.
  • The apparent object of the Aadhaar Bill is to make a law that will fit into Article 110(1)(c) & (g).
  • Chandrachud, J: If we cross the threshold of justiciability, which are the provisions are relatable to Art. 110?
  • Chidambaram: Question should be is there any provision in the Act which doesn’t fall under Ar. 110 (a) to (g). Because money bill can’t have any provision beyond (a) to (g). Provisions such as Section 57, 54, 23 go beyond the scope of Article 110. And hence it is not a money bill but merely a financial bill. It wasn’t a money bill when introduced or certified.
  • Chandrachud, J:  Does the entirety of the bill has to go or the portions can be severed-those provisions which fall under Art. 110?
  • Chidambaram: It will go in entirety. The provisions are not severable.
  • The provisions make it clear that it was not a money bill, then how could it have been passed as a money bill and the scrutiny of Rajya Sabha been bypassed. If this could slip through as a money bill, virtually any bill could slip as a money bill. It sets a very dangerous precedent. Money bill is an extremely narrow subset of financial bill. This bill goes far beyond the intended purpose of delivery of subsidies.

Submissions on issue of Aadhaar being made mandatory for Tatkal Passport:

  • Arvind Datar: Government can’t make Aadhaar mandatory in violation of SC order. (Further asks the court to consider extension of deadlines.)
  • AG KK Venugopal: There are other IDs eg. water bill, electeicity bill which can be taken. Aadhaar is only for expediting the procedure. Says that in case of passport under tatkal scheme, Aadhaar is required for out of turn consideration to expedite the process. (Requests that the extension of deadlines should not affect section 7- the subsidies.)

Hence, Court passed an interim order directing that the order passed on earlier occasion stands extended and that this extension would also cover the issue of passports.

To read the highlights from Senior Advocate Arvind Datar’s submissions, click here and here.

To read the highlights from Senior Advocate Gopal Subramanium’s submissions, click herehere and here.

To read the highlights from Senior Advocate Kapil Sibal’s arguments, click here, here and here.

Looking for the detailed submissions of Senior Advocate Shyam Divan? Read the highlights from Day 1Day 2, Day 3, Day 4 , Day 5, Day 6 and Day 7 of the hearing.


Case BriefsSupreme Court

Supreme Court: Upholding the constitutional validity of Section 21A of the Banking Regulation Act, 1949, the Bench of RF Nariman and Navin Sinha, JJ held that Section 21A of the Banking Regulation Act is valid as it is part of an enactment which, in pith and substance, is relatable to Entry 45, List I of the Seventh Schedule to the Constitution.

The Bench, however, said that where Section 21A of the Banking Regulation Act incidentally trenches upon the State Debt Relief Acts, enacted under Entry 30, List II, so far as relief of agricultural indebtedness is concerned, where there is State legislation on the same subject matter which directly clashes with Section 21A, Section 21A will have to give way to the State Debt Relief Acts insofar as relief from agricultural indebtedness due to banks is concerned.

It said:

“The non-obstante clause in Section 21A cannot override a State Debt Relief Act in this situation, as Parliament cannot give itself supremacy over State legislation where none exists under the Constitution. If this were not the case, the exclusive power of the States to make laws within List II would become illusory, and “Parliamentary paramountcy” would trap many a beneficent State legislation made within its exclusive domain.”

Hence, the bench said that insofar as Section 21A incidentally encroaches upon the field of relief of agricultural indebtedness, set out in Entry 30, List II, it will not operate only in States where there is a State Debt Relief Act which deals with the subject matter of relief of agricultural indebtedness, where the State Debt Relief Act covers debts due to “banks”, as defined in those Acts.

It was further held that in States where the State Debt Relief Act does not apply to banks at all, or applies only to certain specified banks, Section 21A will, in the former situation, apply in such States, and, in the latter situation, apply only in respect of loans made to agriculturists where such loans are given by banks other than the banks specified or covered by the concerned State Debt Relief Act, as the case may be.

The said Section that deals with “Rates of interest charged by banking companies not to be subject to scrutiny by courts”, was introduced into the Banking Regulation Act by the Banking Laws (Amendment) Act of 1983 with effect from 15.2.1984. Section 21A interdicts the reopening by courts of a debt between a banking company and its debtor, on the ground that the rate of interest charged by the banking company, in respect of a loan transaction, is excessive. [Jayant Verma v. Union of India, 2018 SCC OnLine SC 124, decided on 16.02.2018]

Case BriefsSupreme Court

Supreme Court: Noticing that there is a need to reconsider the earlier judgments on the Constitutional validity of Section 497 IPC, regard being had to the social progression, perceptual shift, gender equality and gender sensitivity, the 3-judge bench of Dipak Misra, CJ and AM Khanwilkar and Dr. DY Chandrachud, JJ referred the matter to the Constitution Bench.

The Court took note of the rulings of various judgment of the Supreme Court including Yusuf Abdul Aziz v. State of Bombay, 1954 SCR 930 and Sowmithri Vishnu v. Union of India and Another, (1985) Suppl. SCC 137, wherin it was held that the impugned provision does not violate Articles 14 and 15 of the Constitution as there is a:

“reverse discrimination in ‘favour’ of the woman rather than ‘against’ her.”

The Court, in earlier judgments, had held that Section 497 only punishes the ‘outsider’ who breaks into the matrimonial home and occasions the violation of sanctity of the matrimonial tie by developing an illicit relationship with one of the spouses. It was hence said that Section 497:

“does not arm the two spouses to hit each other with the weapon of criminal law. That is why neither the husband can prosecute the wife and send her to jail nor can the wife prosecute the husband and send him to jail. There is no discrimination based on sex.”

The 3-judge bench, hence, was of the opinion that the provision seems quite archaic and especially, when there is a societal progress. The Court said that, apart from that there has to be a different kind of focus on the affirmative right conferred on women under Article 15 of the Constitution.

On 08.12.2017, the Court had said that the provision creates a dent on the individual identity of woman as:

“the fulcrum of the offence is destroyed once the consent or the connivance of the husband is established. Viewed from the said scenario, the provision really creates a dent on the individual independent identity of a woman when the emphasis is laid on the connivance or the consent of the husband. This tantamounts to subordination of a woman where the Constitution confers equal status. A time has come when the society must realise that a woman is equal to a man in every field.”

The matter will now be heard by a Constitution Bench. [Joseph Shine v. Union of India, 2018 SCC OnLine SC 2, order dated 05.01.2018]

Case BriefsSupreme Court

Supreme Court: In the case where the competence of Assam Legislature to make the Assam Parliamentary Secretaries (Appointment, Salaries, Allowances and Miscellaneous Provisions) Act, 2004 was in question, the bench of R.K. Agrawal and A.M. Sapre, JJ held that the State Legislature is not authorized to create offices of Parliamentary Secretaries.

Explaining the scope of Article 194 of the Constitution, the bench said that while clause (1) declares that there shall be freedom of speech in the Legislature subject to the limitations enumerated therein, clause (2) provides immunity in favour of the members of the Legislature from any legal proceedings in any court for anything said or any vote given by such members in the Legislature or any Committees etc. Sub-clause (3) deals with the powers, privileges and immunities of a House of the Legislature and its members with respect to matters other than the ones covered under clauses (1) and (2). Hence, it is clear that Article 194 idoes not expressly authorise the State Legislature to create offices such as the one in question.

Taking note of Article 187 of the Constitution, which makes stipulations even with reference to the secretarial staff of the Legislature, the Court said that on the face of such elaborate and explicit constitutional arrangement with respect to the Legislature and the various offices connected with the legislature and matters incidental to them to read the authority to create new offices by legislation would be a wholly irrational way of construing the scope of Article 194(3) and Entry 39 of List II. It was Stating that such construction would be enable the legislature to make a law which has no rational connection with the subject matter of the entry, the Court said that “The powers, privileges and immunities” contemplated by Article 194(3) and Entry 39 are those of the legislators qua legislators. [Bimolangshu Roy v.  State of Assam,  2017 SCC OnLine SC 813, decided on 26.07.2017]

Case BriefsSupreme Court

Supreme Court: Deciding the validity of the Karnataka Determination of Seniority of the Government Servants Promoted on the Basis of Reservation (To the Posts in the Civil Services of the State) Act, 2002 which provides for grant of consequential seniority to the Government servants belonging to Scheduled Castes and the Scheduled Tribes promoted under reservation policy, the bench of A.K. Goel and U.U. Lalit, JJ declared the provisions of the impugned Act to the extent of doing away with the ‘catch up’ rule and providing for consequential seniority under Sections 3 and 4 to persons belonging to SCs and STs on promotion against roster points to be ultra vires Articles 14 and 16 of the Constitution.

In the present case where the Assistant Engineers of SC/ST category recruited in the year 1987 were promoted to the cadre of Assistant Executive Engineers while in general merit,Assistant Engineers recruited in 1976 were considered for promotion to the said cadre, the appellants argued that the SC/ST candidates got promotion early and on account of consequential seniority, percentage of SC/ST candidates was much higher than the permitted percentage and all top positions were likely to be filled up by SC/ST candidates without general merit candidates getting to higher positions. The appellant had also argued that as a consequence of accelerated seniority to the roster point promotee, the roster point promotee would reach the third level by the age of 45 and fourth, fifth and sixth level in next three, two and two years, however, the general merit promotee would reach the third level only at the age of 56 and retire before reaching the fourth level. This would result in reverse discrimination and representation of reserved category would range between 36% to 100%.

The exercise for determining ‘inadequacy of representation’, ‘backwardness’ and ‘overall efficiency’, is a must for exercise of power under Article 16(4A) of the Constitution. Mere fact that there is no proportionate representation in promotional posts for the population of SCs and STs is not by itself enough to grant consequential seniority to promotees who are otherwise junior and thereby denying seniority to those who are given promotion later on account of reservation policy. If the State wishes to exercise its discretion under Article 16(4A), it is to collect quantifiable data showing backwardness of the class and inadequacy of representation of that class in public employment in addition to compliance with Article 335. Even if the State has compelling reasons, the State will have to see that its reservation provision does not lead to excessiveness so as to breach the ceiling limit of 50% or obliterate the creamy layer or extend the reservation indefinitely. The Court said that the plea that persons promoted at the same time were allowed to retain their seniority in the lower cadre is untenable and ignores the fact that a senior person may be promoted later and not at same time on account of roster point reservation. Depriving him of his seniority affects his further chances of promotion.

The Court, however, clarified that the judgment will not affect those who have already retired and will not affect financial benefits already taken. Consequential promotions granted to serving employees, based on consequential seniority benefit, will be treated as ad hoc and liable to be reviewed. Seniority list may be now revised in the light of this judgment within three months. [B.K. Pavitra v. Union of India, 2017 SCC OnLine SC 109, decided on 09.02.2017]


Case BriefsSupreme Court

Supreme Court: Stating that sections 305, 306 and 387 of the Madhya Pradesh Municipal Corporation Act, 1956 are quite reasonable, the Court said that reasonable compensation is payable by the Corporation for building or part thereof excluding the land under proviso to section 305(1) and compensation for inclusion of land in public street is payable under section 306(3) of the Act. Rejecting the contention that no time period was prescribed for payment of compensation, the Court said that law envisages speedy action without unreasonable delay and that is what is expected of the concerned authorities, in respect of the obligation imposed on them to be discharged. Due to this, the provision cannot be struck down as arbitrary nor can it be said to be confiscatory in nature. The Court was hearing the matter relating to ‘Bus Rapid Transit System Corridor’ where the land was being acquired for widening of roads.

The Court further explained that after the abolition of ‘the right to property’ as a fundamental right, the provisions are quite consistent with Article 300A of the Constitution and reasonable compensation is paid under sections 305 and 306 which if not acceptable, the remedy of arbitration and approaching the District Court under section 387 is available to seek the compensation which has to be on the basis of procedure prescribed in the Land Acquisition Act. Article 300A of the Constitution enables the State to put restrictions on the right by law but the same should not be arbitrary or excessive or beyond what is required in public interest. The imposition of restriction must not be disproportionate to a situation or statute. Legislation providing for deprivation of property under Article 300A must be just, fair and reasonable. Thus, it cannot be said that illusory compensation is provided under section 306 read with section 387 of the Act.

The bench of Jagdish Singh Khehar and Arun Mishra, JJ said that there is restriction put on the ownership rights and in the area no construction can be raised derogatory to the development plan/master plan. When the property vests is clearly culled out in section 305, however the property is held by owner once a development plan is prepared, subject to that use and it is not necessary to acquire the land for the purposes mentioned under section 305. Section 305 is otherwise also a reasonable method of acquisition of the property and it follows a detailed procedure for preparation of development plan/master plan or a town improvement scheme, as the case may be, which involves adjudicatory process and once action is taken under section 305, reasonable compensation follows, special procedure as prescribed, is a complete Code in itself and even if a person is not satisfied, he can claim adjudication under section 387 of the Act where the procedure of the Land Acquisition Act, 1894 is applicable.

The Court also said that development plan itself is binding and has to be implemented by the Corporation not only under the provisions of section 292 but also under the provisions of section 66(1)(y) of the Act of 1956 which mandates a duty upon the Corporation for fulfilling any obligation imposed by the Act or under any other law for the time being in force. [Ravindra Ramchandra Waghmare v. Indore Municipal Corporation, 2016 SCC OnLine SC 1405, decided on 29.11.2016]

Case BriefsSupreme Court

Supreme Court: In the petition dealing with the legality of the Vidhayak Nidhi Scheme in the State of Uttar Pradesh which provides for annual budgetary grants to Members of the Legislative Assembly and Legislative Council for facilitating development work in their constituencies, the Court said that the Scheme does not per se violate Article 243ZD or the U P Planning and Developmental Act, 1999 as the elected representatives have a vital role in democracy.

The 3-judge bench of T.S. Thakur, CJ and A.M. Khanwilkar and Dr. D.Y. Chandrachud, JJ, however, said that certain safeguards which form a part of the Members of Parliament Local Area Development (MPLAD) Scheme should be duly considered so as to ensure that the role which is ascribed to the district planning authorities and institutions of local self-governance is not denuded. The following guidelines were issued by the Court:

  • the role of the elected representatives would be to recommend the work of a developmental nature in their constituencies within the budget allotted under the Scheme;
  • the feasibility of the work, estimate of funds, selection of the implementing agency and supervision of work must be independently determined by a nominated authority or body of the State government;
  • panchayati raj institutions in rural areas and municipal bodies in urban areas may be considered as preferred implementing agencies having regard to the entrustment of responsibilities under Parts IX and IXA of the Constitution;
  • the plans prepared by the District Planning Committees under Article 243ZD read with the U P District Planning Committee Act, 1999 may be made available by every district Collector to elected representatives to enable them to decide whether any developmental work which has already been identified in the above plan should be executed in pursuance of the funds made available under the Vidhayak Nidhi Scheme; and
  • sufficient safeguards should be provided to ensure against conflicts of interest such as the allocation of funds to institutions controlled by an elected representative or a member of his or her family; and
  • The scheme must include sufficient safeguards to ensure financial transparency, such as proper supervision of work, monitoring quality and timely completion besides procedures to ensure proper audit and utilization of funds.

The Court was of the view that the guidelines which have been formulated by the State Government should be revisited and the directions set out above should be complied with so as to ensure that the guidelines are in conformity with the spirit and underlying purpose of Parts IX and IXA of the Constitution in terms as held by the Constitution Bench of this Court in Bhim Singh v. Union of India, (2010) 5 SCC 538. It was directed that the revised guidelines should apply to all projects to be undertaken hereafter under the Vidhayak Nidhi Scheme not later than a period of two months. [Lok Prahari v. State of U.P., 2016 SCC OnLine SC 1290,  decided on 21.11.2016]


Case BriefsSupreme Court

Supreme Court: Writing down a long judgment of 883 pages, the 9-judge bench, by a 7:2 majority, upheld the validity of the entry tax imposed by the States on goods imported from other States. It was held that taxes simpliciter are not within the contemplation of Part XIII of the Constitution of India and that the word ‘Free’ used in Article 301 does not mean “free from taxation”.

T.S. Thakur, CJ and Dr.  A.K. Sikri, S.A. Bobde, Shiva Kirti Singh, N.V. Ramana, R. Banumathi and A.M. Khanwilkar, JJ, giving the majority view said that States are well within their right to design their fiscal legislations to ensure that the tax burden on goods imported from other States and goods produced within the State fall equally. Such measures if taken would not contravene Article 304(a) of the Constitution. Only such taxes as are discriminatory in nature are prohibited by Article 304(a). It follows that levy of a non-discriminatory tax would not constitute an infraction of Article 301. A tax on entry of goods into a local area for use, sale or consumption therein is permissible although similar goods are not produced within the taxing state.

It was further explained that Clauses (a) and (b) of Article 304 have to be read disjunctively. A levy that violates 304(a) cannot be saved even if the procedure under Article 304(b) or the proviso there under is satisfied. It was held that Article 304 (a) frowns upon discrimination of a hostile nature in the protectionist sense and not on mere differentiation. Therefore, incentives, set-offs etc. granted to a specified class of dealers for a limited period of time in a non-hostile fashion with a view to developing economically backward areas would not violate Article 304(a). [Jindal Stainless Ltd v. State of Haryana, 2016 SCC Online SC 1260, decided on 11.11.2016]

Case BriefsSupreme Court

Supreme Court: On a request made by President of India for an advisory opinion to this Court under Article 143 (1) of the Constitution of India, in relation to enactment of the Punjab Termination of Agreement Act, 2004, the Constitution bench of Anil R. Dave, Pinaki Chandra Ghose, Shiva Kirti Singh, Adarsh Kumar Goel and Amitava Roy, JJ held that one State, which is a party to the litigation or an Agreement, cannot unilaterally terminate the Agreement or nullify the decree of the highest Court of the country, the State of Punjab cannot discharge itself from its obligation which arises from the judgment and decree dated 15th January, 2002 and the judgment and order dated 4th January, 2004 and terminate the Agreement dated 31.12.1981 which deals with sharing of waters of Ravi and Beas rivers and all other Agreements relating to sharing of waters of rivers Ravi and Beas.

It was held that the Punjab Act cannot be considered to be legal and valid and the State of Punjab cannot absolve itself from its duties/liabilities arising out of the Agreement in question. There is a legal sanction to the said arrangement and once a binding decree has been passed by a Court of law, a party to the litigation cannot unilaterally act in a manner which would nullify the effect of the decree. Instead of approaching the appropriate authority, namely, the Tribunal for appropriate relief, the State of Punjab exercised its legislative power by enacting the Punjab Act so as to nullify the effect of the Decree.

The Court also said that if a legislation is found to have breached the established constitutional limitation such as separation of powers, it has to go and cannot be allowed to remain. The said Agreement could not have been unilaterally terminated by one of the parties to the Agreement by exercising its legislative power and if any party or any State does so, such unilateral action of a particular State has to be declared contrary to the Constitution of India as well as the provisions of the Inter State Water Disputes Act, 1956.

The President is authorized to refer to this Court a question of law or fact, which in his/her opinion is of such a nature and of such a public importance that it is expedient to obtain the opinion of the Supreme Court upon it. [IN RE: THE PUNJAB TERMINATION OF AGREEMENT ACT, 2004, 2016 SCC OnLine SC 1252, decided on 10.11.2016]


Case BriefsSupreme Court

Supreme Court: Expressing serious concern over the issue pertaining to government bungalows occupied by former Chief Ministers of the State of Uttar Pradesh, the 3-judge bench of A.R. Dave, N.V. Ramana and R. Banumathi, JJ held that such an act is bad in law and the concerned respondents shall hand over possession of the bungalows occupied by them within two months from the date of this order  and the State Government shall also recover appropriate rent from the occupants of the said bungalows for the period during which they were in unauthorized occupation of the said bungalows.

Examining the question that whether the provisions of Ex-Chief Ministers Residence Allotment Rules, 1997 are valid or contrary to the provisions of the Uttar Pradesh Ministers (Salaries, Allowances and Miscellaneous Provisions) Act, 1981, the Court held that the position of the Chief Minister and the Cabinet Ministers of the State cannot stand on a separate footing after they demit their office. Moreover, no other dignitary, holding constitutional post is given such a facility. For the afore-stated reasons, the 1997 Rules are not fair, and more so, when the subject of “salary and allowances” of the ministers, is governed by Section 4 (1) (a) of the 1981 Act. Stating that the 1997 Rules are not statutory but only executive instructions, it was held that when the 1981 Act enables the Chief Minister to have residential accommodation only during his tenure and for 15 days after completion of his tenure, the 1997 Rules providing for an accommodation for life to the Chief Minister cannot be said to be legal and valid as If there is any variance in statutory provision and executive instruction, the statutory provision would always prevail.

It was further held that public property cannot be disposed of in favour of any one without adequate consideration. Allotment of government property to someone without adequate market rent, in absence of any special statutory provision, would also be bad in law because the State has no right to fritter away government property in favour of private persons or bodies without adequate consideration and therefore, all such allotments, which have been made in absence of any statutory provision cannot be upheld. If any allotment was not made in accordance with a statutory provision at the relevant time, it must be discontinued and must be treated as cancelled and the State shall take possession of such premises as soon as possible and at the same time, the State should also recover appropriate rent in respect of such premises which had been allotted without any statutory provision. [Lok Prahari v. State of U.P., 2016 SCC OnLine SC 750, decided on 01.08.2016]