TaxTMI 
TaxTMI 
2003 (11) TMI 588
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....1943, the Indian Council of World Affairs was formed by about 50 distinguished eminent public personalities as a non- official, non-political and non-profit organization. On March 31, 1945, the Association was registered as a society under the Societies Registration Act, 1860. The principal object of the Society, as set out in the Memorandum of Association, was to promote the study of Indian and international questions so as to develop a body of informed opinion on world affairs and Indian relation thereto through study, research, discussion, lectures, exchange of ideas and information etc., with other bodies in India and abroad engaged in similar activities. The activities of the Society were housed in a building known as Sapru House. Sapru House has come up on a land of about 2 acres situated at No.1, Barakhamba Road, New Delhi, given on lease by the Government of India some time in the year 1950-51. Sapru House has a library with a collection of books mainly on international affairs, an auditorium for holding seminars and discussions, a conference room and other office accommodation. The Society was receiving grants from the Government of India from 1974 until the year 1987, whe....
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.....3 of 2000, the terms whereof were more or less similar and identical with those of the Ordinance of 1990. The constitutional validity of this Ordinance was challenged by filing C.W.P. No.5174 of 2000 in the High Court of Delhi. A Bill proposing to replace the Ordinance was moved in the Parliament which was passed by the Lok Sabha and was pending in the Rajya Sabha, but the Rajya Sabha was adjourned and, therefore, the Ordinance lapsed on December 31, 2000. On January 5, 2001, Ordinance No.1 of 2001 was promulgated seeking to revive Ordinance No.3 of 2000; however, this Ordinance too lapsed on April 3, 2001. On May 8, 2001, Ordinance No.3 of 2001 was promulgated and replaced by an Act of Parliament, which received the assent of the President of India on September 3, 2001. The facts stated hereinabove are almost undisputed. We say so because the chronology of events is not at all in dispute; there is a minor variation in the manner of narration of the events and the background leading to the promulgation of the Ordinances and the passing of the Act, which are not very material and hence have been overlooked. We may now broadly state the facts which are disputed and which form the....
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....es highlight irregular and incomplete maintenance of accounts, misuse and diversion of funds, and deficits and losses accumulating year by year on account of mismanagement and mal-administration. Photographs have been filed with the counter affidavit showing the state of disrepair of the building and its furniture. Serious irregularities were found to have been committed in the conduct of elections of the Executive Committee, resulting in the complete breakdown of the democratic functioning of the Institution. The electoral roll consisted of members who had discontinued their membership. Fruit and vegetable vendors were enrolled as members of the Indian Council of World Affairs, so as to pack the membership with defunct members only to ensure the continuance in office of a certain set of people. Membership fees of all such multiple members were being deposited by a single cheque. On the affidavit of the Joint Secretary in the Ministry of External Affairs, Government of India, New Delhi, it has been stated that financial assistance was regularly granted to ICWA by the MEA and Deptt. Of Culture (Ministry of Education). Grants have been given after 1986 by organizations like ICSSR. A....
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....ecision of the Punjab and Haryana High Court, the respondents have submitted that the decision of the learned single Judge was incorrect. It was put in issue by filing a letters patent appeal, which appeal was disposed of without any adjudication on merits due to the High Court having formed an opinion that the adjudication of the appeal was rendered academic in view of the Ordinance having lapsed. The respondents could not have pressed for decision of the letters patent appeal on merits nor could they have taken the matter further because the High Court or this Court would not have entered into the examination of an issue which was rendered of academic interest only. The Union of India has vehemently submitted that the Society has not been touched. It continues to survive as before and, therefore, the question of any fundamental right within the meaning of sub-clauses (a) and (c) of clause (1) of Article 19 of the Constitution of India having been breached, does not arise. As the Institution, the Indian Council of World Affairs, is an institution of national importance, the impugned enactment is protected by Entries 62 and 63 of List I of the Seventh Schedule to the Constitution ....
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....the legislature is competent to pass a particular law, the motives which impelled it to act are really irrelevant. On the other hand, if the legislature lacks competency, the question of motive does not arise at all. We will, therefore, concentrate on the legislative competence of Parliament to enact the impugned legislation. If the Parliament has the requisite competence to enact the impugned Act, the enquiry into the motive which persuaded the Parliament into passing the Act would be of no use at all. Gist of the impugned Act The Preamble to the Act, that is, the Indian Council of World Affairs Act, 2001 (Act No.29 of 2001) reads - " An Act to declare the Indian Council of World Affairs to be an institution of national importance and to provide for its incorporation and matters connected therewith." Section 2 declares I.C.W.A. as an institution of national importance. Section 4 incorporates a statutory council by the name of the Indian Council of World Affairs as a body corporate, which shall have perpetual succession and a common seal with power to hold property, movable and immovable, and to contract and to sue and be sued in its name. Section 5 transfers all properties and a....
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....mpugned Act if violative of Article 19(1)(a) & (c) Article 19(1)(a) and (c) and clauses (2) and (4) of Article 19, relevant for our purpose, provide as under :- "19. Protection of certain rights regarding freedom of speech, etc. - (1) All citizens shall have the right.- (a) to freedom of speech and expression; (b) xxx xxx (c) to form associations or unions; (d) to (g) xxx xxx (2) Nothing in sub-clause (a) of clause (1) shall affect the operation of any existing law, or prevent the State from making any law, in so far as such law imposes reasonable restrictions on the exercise of the right conferred by the said sub-clause in the interests of the sovereignty and integrity of India, the security of the State, friendly relations with Foreign States, public order, decency or morality or in relation to contempt of court, defamation or incitement to an offence. (3) xxx xxx xxx (4) Nothing in sub-clause (c) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the sovereignty and integrity of India or public order or morality, reasonable restrictions on the exercise of the r....
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....and purport of Article 19(1) the Bench held:- "Even if a right is not specifically named in Article 19(1), it may still be a fundamental right covered by some clause of that Article if it is an integral part of a named fundamental right or partakes of the same basic nature and character as that fundamental right. It is not enough that a right claimed by the petitioner flows or emanates from a named fundamental right or that its existence is necessary in order to make the exercise of the named fundamental right meaningful and effective. Every activity which facilitates the exercise of a named fundamental right is not necessarily comprehended in that fundamental right nor can it be regarded as such merely because it may not be possible otherwise to effectively exercise that fundamental right. What is necessary to be seen is, and that is the test which must be applied is, whether the right claimed by the petitioner is an integral part of a named fundamental right or partakes of the same basic nature and character as the named fundamental right so that the exercise of such right is in reality and substance nothing but an instance of the exercise of the named fundamental right. If thi....
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....ot the fundamental right itself. The associations or unions of citizens cannot further claim as a fundamental right that it must also be able to achieve the purpose for which it has come into existence so that any interference with such achievement by law shall be unconstitutional, unless the same could be justified under Article 19(4) as being a restriction imposed in the interest of public order or morality; (ii) A right to form associations guaranteed under Article 19 (1)(c) does not imply the fulfillment of every object of an association as it would be contradictory to the scheme underlying the text and the frame of the several fundamental rights guaranteed by Part III and particularly by the scheme of the guarantees conferred by sub-clauses (a) to (g) of clause (1) of Article 19; (iii) While right to form an association is to be tested by reference to Article 19(1)(c) and the validity of restriction thereon by reference to Article 19(4), once the individual citizens have formed an association and carry on some activity, the validity of legislation restricting the activities of the association shall have to be judged by reference to Article 19(1)(g) read with 19(6). A restricti....
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....ng or including concomitant rights necessary to achieve the object which might be supposed to underlie the grant of each of those rights." The Constitution Bench further held that the framing and structure of part III of the Constitution by the founding fathers calls for the guarantees embodied in it to be interpreted in a liberal way, so as to subserve the purpose for which the constitution-makers intended them, and not in any pedantic or narrow sense. This, however, does not imply that the Court is at liberty to give an unnatural and artificial meaning to the expressions used based on ideological considerations. A right to form unions guaranteed by Article 19(1)(c) does not carry with it a fundamental right in the union so formed to achieve every object for which it was formed with the legal consequence that any legislation not falling within clause (4) of Article 19 which might in any way hamper the fulfillment of those objects, should be declared unconstitutional and void. Even a very liberal interpretation cannot lead to the conclusion that the trade unions have a guaranteed right to an effective collective bargaining or to strike, either as part of collective bargaining or ....
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....In other words, the freedom guaranteed should be read as extending not merely to the formation of the association as such, but to the effective functioning of the association so as to enable it to achieve its lawful objectives. Unless Article 19(1)(c) were so read, the freedom guaranteed would be illusory and the Court should, in construing a freedom guaranteed to the citizen, give him an effective right. In short, the submission was that the right guaranteed under sub-clause (c) of clause (1) of Article 19 was not merely, as its text would indicate, the right to form an association, but would include the functioning of the association without any restraints not dictated by the need for preserving order or the interests of morality. The Constitution Bench discarded the argument as without force and held - "the restriction imposed by Section 6 of the Act is for the purpose of recognition and no association is compelled to apply to the Government for recognition under that Act. An application for the recognition of the association for the purpose of functioning under the enactment is a voluntary act on the part of the association and if the statute imposes conditions subject to which....
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....tizen to form associations or unions. In D.A.V. College, Jullundur etc., Vs. The State of Punjab and Ors., (1971) 2 SCC 269, the impugned legislation provided for compulsory affiliation of religious or linguistic minority institutions to the University. It was contended that the compulsory affiliation of the petitioners to the University affects their fundamental 'right of freedom of association' as guaranteed under Article 19(1)(c). It was held that the Notification providing for compulsory affiliation of the educational institution with the University did not in any manner interfere or attempt to interfere with the petitioners' right to form an association under Article 19(1)(c). A Full Bench (five-Judges) decision by the Andhra Pradesh High Court in Seethapathi Nageswara Rao & Ors. Vs. The Government of A.P. & Ors., AIR 1978 A.P. 121 (F.B.), is relevant and we are inclined to make a reference to the same. The statutory provision impugned therein was one which provided for merger, amalgamation or liquidation of co-operative societies. The non-viable societies could be merged or amalgamated with the viable societies. It was urged that the forcible dumping of the memb....
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....ade a common draft of restrictions which were permissible to be imposed on the operation of the fundamental rights listed in clause (1), but that has not been done. The common thread that runs throughout sub-clauses (2) to (6) is that the operation of any existing law or the enactment by the State of any law which imposes reasonable restrictions to achieve certain objects, is saved; however, the quality and content of such law would be different by reference to each of the sub-clauses (a) to (g) of clause (1) of Article 19 as can be tabulated hereunder : Article 19 Clause (1) Nature of Right Clauses (2) to (6) Permissible Restrictions By existing law or by law made by State imposing reasonable restrictions, in the interests of (a) Freedom of speech and expression (i) the sovereignty and integrity of India (ii) the security of the State (iii) friendly relations with Foreign States (iv) public order, decency or morality (v) in relation to contempt of court, defamation or incitement to an offence (b) right to assemble peaceably and without arms (i) the sovereignty and integrity of India (ii) public order (c) right of form associations or unions (i) the sovereignty and inte....
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....& Ors. Vs. State of Mysore & Ors., (1960) 3SCR 742). The Court, confronted with a challenge to the constitutional validity of any legislative enactment by reference to Article 19 of the Constitution, shall first ask what is the sweep of the fundamental right guaranteed by the relevant sub-clause out of sub-clauses (a) to (g) of clause (1). If the right canvassed falls within the sweep and expanse of any of the sub-clauses of clause (1), then the next question to be asked would be, whether the impugned law imposes a reasonable restriction falling with the scope of clauses (2) to (6) respectively. However, if the right sought to be canvassed does not fall within the sweep of the fundamental rights but is a mere concomitant or adjunct or expansion or incidence of that right, then the validity thereof is not to be tested by reference to clauses (2) to (6). The test which it would be required to satisfy for its constitutional validity is one of reasonableness, as propounded in the case of V.G. Row (supra) or if it comes into conflict with any other provision of the Constitution. The learned Additional Solicitor General, Shri Raju Ramachandran, placed implicit reliance on the decision ....
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....association in exercise of the fundamental right conferred by Article 19(1)(c). That right of that Society remains unimpaired and uninterfered with by the impugned Act and Ordinance. The Court further held that - "There can be no doubt that the Institute has been taken over by the provisions of the Ordinance and the Act. It is true that with the taking over of the Institute, the Society lost its right of management and control of the Institute, but that is the consequence of all acquisitions. When a property is acquired, the owner loses all control, interest and ownership of the property. Similarly the Society, which was the owner of the Institute, has lost all control and ownership of the Institute. It may be equally true that the Institute was the only activity of the Society, but we are concerned with the right of the Society to form an association. So long as there is no interference with the Society, its constitution or composition, it is difficult to say that because of the taking over or acquisition of the Institute, which was the only property or activity of the Society, the fundamental right of the Society to form an association has been infringed." The Court clarified - ....
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....ut of control. The Auroville (Emergency Provisions) Ordinance, 1980, was promulgated followed by an Act, whereby the management of Auroville was taken over, though for a limited period. The constitutional validity of the Act was challenged on the ground that Articles 25, 26, 29 and 30 and also Article 14 were infringed; and that the Parliament had no legislative competence to enact the said Act. Turning down the challenge on all the grounds, the Constitution Bench held, inter alia, that assuming but not holding that the Society or Auroville were a religious denomination, the impugned Act was not hit by Article 25 or 26. It does not curtail the freedom of conscience and the right to freely profess, practise and propagate one's own religion. "The right of management in matters of religion of a religious denomination" under Article 26(b) was not taken away; what was taken away was the right of management of the property of Auroville which was a secular matter. So also the Act did not curtail the right of any section of citizens to conserve its own language, script or culture conferred by Article 29. An activity, secular in nature, though assumed to be of the Society or the organiz....
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....s valid. Sarva Shri P.P. Rao and Ashok Nigam, the learned senior counsel for the petitioners have placed strong reliance on two decisions of this Court, namely, Smt. Damyanti Naranga & Anr. Vs. The Union of India and Ors. & Anr., 1971 (3) SCR 840 and Asom Rashtrabhasha Prachar Samiti, Hedayatpur-Gauhati-3 and Anr. Vs. State of Assam and Ors., 1989 (Supp.) SCR 160. In Smt. Damyanti Naranga's case (Supra) the Constitution Bench ruled that the right to form an association includes not only a right of forming an association to begin with, but also the right to continue to be associated with only those whom they voluntarily admit in the association. Once the citizens have formed any association voluntarily then without any option being given to the members, neither can their membership be taken away nor can they be compelled to associate themselves with members with whom they do not want to associate. The constitutional validity of the Hindi Sahitya Sammelan Act, 1962, was successfully challenged. A perusal of the judgment shows that the impugned legislation created a statutory body called 'The Hindi Sahitya Sammelan'. The existence of the original Sammelan was terminated, ....
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....ovision was, therefore, struck down as violative of Article 19(1)(c) of the Constitution. Asom Rashtrabhasha Prachar Samiti's case (supra) is a three-Judge Bench decision and the only decision referred to therein is the case of Smt. Damyanti Naranga's case (supra). Though Article 14 has not been referred to in the judgment by specifically mentioning it, it is clear from the judgment that this Court has also formed an opinion that the action of the State was arbitrary and unreasonable, and so was liable to be struck down. Both the decisions relied on by the learned senior counsel for the petitioners are distinguishable and do not apply to the present case. It is well-settled that while dealing with a challenge to the constitutional validity of any legislation, the court should prima facie lean in favour of constitutionality and should support the legislation, if it is possible to do so, on any reasonable ground and it is for the party who attacks the validity of the legislation to place all materials before the Court which would make out a case for invalidating the legislation. (see : Charanjit Lal Chowdhury Vs. The Union of India & Ors., 1950 SCR 869 and Ayurvedic and Una....
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.... (since repealed) though not on all the fours with the facts of this case. Board of Trustees, Ayurvedic and Unani Tibia College, Delhi Vs. State of Delhi (Now Delhi Administration) & Anr., 1962 Supp.(1) SCR 156, projects principles which would be relevant for our purpose. An individual founded a pharmaceutical institute known as 'Hindustani Dawakhana'. He also established a medical college known as 'The Tibbia College'. He then formed a society with a few members along with himself and registered the same under the Societies Registration Act, 1860. The Society was known as the Board of Trustees, Ayurvedic and Unani Tibbia College, Delhi, ('the Board' for short). The Board was operating the Tibbia College, an attached hostel and a pharmaceutical institute. Disputes arose within the trustees which led to filing of civil suits. The Court appointed receivers who took possession of the Dawakhana and the College. The Delhi State Legislature passed an Act called 'The Tibbia College Act, 1952' which came into force on October 10, 1952. The old Board stood dissolved and all property, movable and immovable, and all rights, powers and privileges of the Board ca....
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....ion does not relate to nor does it provide for compulsory acquisition of property for a public purpose. The impugned legislation provides for the transfer of the management of the Ayurvedic and Unani Tibbia College, Delhi, from the old Board to a new Board, and for that purpose the old Board was dissolved and a new Board was created with certain rights, powers and privileges to be applied for the exercise of powers and the performance of duties as laid down in the Act. Such legislation could not be tested under Article 31(2) or the tests emerging therefrom. Dealing with the submission made by reference to the repealed Article 19(1)(f), the fundamental right to acquire, hold and dispose of property, the Court held that "During the subsistence of the society, the right of the members was to ensure that the property was utilized for the charitable objects set out in the memorandum and these did not include any beneficial enjoyment. Nor did the members of the society acquire any beneficial interest on the dissolution of the society; for Section 14 of the Act, quoted earlier, expressly negatived the right of the members to any distribution of the assets of the dissolved body. In such a....
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....ion of Article 300A in the dimension in which it was sought to be canvassed is not taken up in the writ petition. The Union of India has taken over the institution by enacting a law which we have held to be within the legislative competence of the Parliament. Thirdly and lastly, the petition in that regard raises disputed questions of facts. The Union of India do not admit title of the petitioner either in the land or in the building or in any other property claimed to be owned by the petitioners. There is not one document of title produced by the petitioners in support of their claim to the property. Such highly disputed questions of fact which cannot be determined except on evidence are not fit to be taken up for adjudication in the exercise of writ jurisdiction. The exercise of testing the vires of the impugned legislation by reference to Article 300A of the Constitution is uncalled for in the present petition. Is the impugned Act arbitrary and violative of Article 14? Article 14 of the Constitution prohibits class legislation and not reasonable classification for the purpose of legislation. The requirements of the validity of legislation by reference to Article 14 of the Const....
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....nditions prevailing in Auroville and the Society can be ameliorated not by resorting to the provisions of the Societies Registration Act but by a special enactment, that is an area of the exercise of the discretion of the Government and not of the Court." The Constitution Bench also observed that assuming the facts brought to the notice of the legislature were wrong, it will not be open to the Court to hold the Act to be bad on that account. It was then submitted that the institution ICWA was singled out and though there were several other institutions run by societies or other organizations which were in the grip of more serious mismanagement and mal-administration, they were not even touched and the Parliament chose to legislate as to one institution only. This submission too holds no merit. Firstly, no other institution is named or particularized so as to be comparable with ICWA. Secondly, there can be a legislation in respect of a single institution as is clear from the language itself of Entries 62 and 63 of List I. A single institution is capable of being treated as a class by itself for the purpose of legislation if there are special circumstances or reasons which are appli....
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....ant for upholding validity of enactments. In Shri Prithvi Cotton Mills Ltd. & Anr. Vs. Broach Borough Municipality & Ors., (1969) 2 SCC 283, the imposition of a tax was held to be invalid because the power to tax was wanting. A validation Act was passed and its constitutionality was put in issue once again. The Constitution Bench spoke a few words about validating statutes in general, as under:- "When a Legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition, of course, is that the Legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal. Granted legislative competence, it is not sufficient to declare merely that the decision of the Court shall not bind for that is tantamount to reversing the decision in exercise of judicial power which the Legislature does not possess or exercise. A court's decision must always bind unless the conditions on which it is based are so fundamentally altered that the d....
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.... Union of India & Anr. Vs. Raghubir Singh (Dead) by Lrs. etc., (1989) 2 SCC 754, observed that the range of judicial review recognized in the superior judiciary of India is perhaps the widest and the most extensive known to the world of law and then cautioned "With the impressive expanse of judicial power vested in them it is only right that the superior courts in India should be conscious of their enormous responsibility". The Constitution Bench summed up the effect of declaring an Act of legislation in the case before us an Ordinance on the revival of such Act, by stating that where a statute is declared invalid in India it cannot be reinstated unless constitutional sanction is obtained therefor by a constitutional amendment or an appropriately modified version of the statute is enacted which accords with constitutional prescription. A two Judges Bench of this Court in Indian Aluminium Co. & Ors. Vs. State of Kerala & Ors., (1996) 7 SCC 637, made an exhaustive review of the available judicial opinion and summed up the essence thereof in nine points, three of which are relevant for our purpose, which we set out as under:- (1) In order that rule of law permeates to fulfil constitu....
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....e exercise by the legislature of what is purely and indubitably a judicial function. In our cooperative federalism there is no rigid distribution of powers; what is provided is a system of salutary checks and balances". With advantage, we may quote Justice Aharon Barak, President of the Supreme Court of Israel. In the context of a new statute having been enacted on the previous one having been annulled, the learned Chief Justice says "Review of a new statute should focus not on the fact that it changes the previous ruling of the court, but on the fact that it undermines democracy. Moreover, everything is a question of degree. If the interpretation of a statute is met with an immediate and hasty response from the legislature in the form of new legislation, uncertainty about the law will result, and the public will lose confidence in the legislative branch. This is not the case, however, when the change in legislation after a judicial ruling reflects a thorough and deliberate examination of the ruling and an objective expression of the will of the legislature". (A Judge on Judging : The Role of a Supreme Court in Democracy President Aharon Barak, Harvard Law Review, Vol.116, No.1, N....
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....them before it was taken away, and also did not consider the affect of repeal of Article 19(1)(f) and 31 of the Constitution after which repeal the right to property had ceased to be a fundamental right and the newly engrafted Article 300A of the Constitution requires only authority of law for depriving any person or his property. That decision of the learned Single Judge was not left unchallenged. In fact, the correctness of the judgment of the learned single-Judge was put in issue by the Union of India by filing an intra- court appeal. Filing of an appeal destroys the finality of the judgment under appeal. The issues determined by the learned Single Judge were open for consideration before the Division Bench. However, the Division Bench was denied the opportunity of hearing and the aggrieved party could also not press for decision of the appeal on merits, as before the appeal could be heard it was rendered infructuous on account of the Ordinance itself having ceased to operate. The Union of India, howsoever it may have felt aggrieved by the pronouncement of the learned single-Judge, had no remedy left available to it to pursue. The judgment of the Division Bench refusing to dwel....
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....is clearly covered by Entries 62 and 63 of List I Schedule 7. Initially at one time, the institution was receiving financial aid from the Government of India. The institution ICWA has been declared to be an 'institution of national importance' by the Act of Parliament. There is no challenge to the validity of such declaration nor do we find any grounds to take a view different from the one taken in the declaration made by the Government of India. Once an institution is declared to be of national importance, the Parliament is competent to make any law governing the management, administration and affairs of such an institution. It is not the case of the petitioners that though the institution is declared and held to be of national importance, yet in enacting other provisions of the impugned Act, the Parliament has encroached upon any field of legislation not available to it. The provisions of the Act fall within the field of legislation meant for the Union of India. The various Entries in the three Lists of the Seventh Schedule are legislative heads defining the fields of legislation and should be liberally and widely interpreted. Not only the main matter but also any incide....