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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL      APPEAL     NO.     684     OF     2004   

State of M.P. …. Appellant

Versus

Rakesh Kohli & Anr.             ….Respondents

WITH

CIVIL      APPEAL     NO.     1270     OF     2004   

JUDGMENT

R.M.     Lodha,     J.      

The only point for consideration here is, whether or not  

the Division Bench of the Madhya Pradesh High Court was justified  

in declaring Clause (d), Article 45 of Schedule 1-A of the Indian  

Stamp Act, 1899 (for short, ‘1899 Act’) which was brought in by the  

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Indian Stamp (Madhya Pradesh Amendment) Act, 2002 (for short,  

‘M.P. 2002 Act’) as unconstitutional being violative of Article 14 of  

the Constitution of India.

2. The above point  arises in this way. Two writ petitions  

came to be filed before the Madhya Pradesh High Court. In both writ  

petitions initially it was prayed that Clauses (f) and (f-1), Article 48,  

Schedule 1-A brought in the 1899 Act by Section 3 of the Indian  

Stamp (Madhya Pradesh Amendment) Act, 1997 (for short, ‘M.P.  

1997 Act’) be declared ultra vires. During the pendency of these  

petitions, the 1899 Act as applicable to Madhya Pradesh was further  

amended by the M.P. 2002 Act. The respondents, referred to as writ  

petitioners, amended their writ petitions and prayed that Clause (d),  

Article 45 of Schedule 1-A of the 1899 Act as substituted by M.P.  

2002 Act be declared ultra vires. The writ petitioners set up the case  

that original Article 48 of the 1899 Act, Schedule 1-A prescribed  

stamp duty payable at Rs. 10/- if attorney was appointed for a single  

transaction. By M.P. 1997 Act, Article 48 Clause (f) was substituted  

by Clauses (f) and (f-1).  Clause (f-1) provided that  where power of  

attorney was executed without consideration in favour of person who  

is not his or her spouse or children or mother or father and  

authorizes  him to sell or transfer any immovable property, the stamp  

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duty would be leviable  as if the transaction is conveyance under  

Article 23. Explanation II inserted by M.P. 1997 Act provided that  

where under Clauses (f) and (f-1), duty had been paid on the power  

of attorney and a conveyance relating to that property was executed  

in pursuance of power of attorney between the executant of the  

power of attorney and the person in whose favour it was executed,  

the duty on conveyance should be the duty calculated on the market  

value of the property reduced by duty paid on the power of attorney.  

By M.P. 2002 Act, stamp duty relating to power of attorney has been  

prescribed in Article 45 of Schedule 1-A. Clause (d) thereof  

prescribes  stamp duty at two per cent on the market value of the  

property which is subject matter of power of attorney when power of  

attorney is given without consideration to a person other than father,  

mother, wife or husband, son or daughter, brother or sister in relation  

to the executant and authorizing such person to sell immovable  

property situated in Madhya Pradesh. The writ petitioners pleaded,  

inter alia, that the distinction between an agent who was a blood  

relation and who was an outsider carved out in Article 45, Clause (d)  

was legally impermissible. The provision violates Article 14 of the  

Constitution as it has sought to create unreasonable classification.    

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3. The State of Madhya Pradesh stoutly defended the  

challenge to the above provisions and stated before the High Court  

that the matter of rate of stamp duty was solely in the domain of  

State Legislature and none of the provisions of the Constitution was  

offended by the above provisions.

4. The Division Bench of the High Court has accepted the  

constitutional challenge to Clause (d), Article 45 of Schedule 1-A  

brought in the 1899 Act by M.P. 2002 Act and held that the said  

provision was violative of Article 14 of the Constitution of India. The  

Division Bench gave the following reasoning:

“11. As far as clauses (d) is concerned, it lays a postulate  that postulate [sic]  that when the power of authority is given  without consideration to a person other than the father,  mother, wife or husband, son or daughter, brother or sister in  relation to the executant and authorizing such person to sell  immovable property, 2% on the market value of the property is  to be collected. Submission of Mr. Agrawal is that this clause  is absolutely unreasonable and smacks of arbitrariness, as  there is no rationale to include the category of persons who  have been included and to leave out to all other persons. Mr.  S.K. Yadav, learned Government Advocate submitted that  near relatives can constitute a class by itself and all others can  fit into a different category and, therefore, the said provision  does not offend the concept of classification, as there is  intelligible differentia. On a first blush the aforesaid submission  of the learned counsel for the State appears to be quite  attractive, but on a deeper probe it is not what it is. In the  guise of the classification something has been stated in the  said provision. One can give certain examples. One may not  have kith or kin and intact [sic] even that case to deprive him  to execute the power of attorney for selling the property,  unless 2% is paid on the market value is arbitrary. The  provisions may pass the test of classification but it would not  

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pass the requirement of the second limb of Article 14 of the  Constitution which ostracises arbitrariness, unreasonable and  irrationality. The State may have a laudable purpose but the  laudable purpose alone cannot sustain the provision. The  matter would been [sic] different had it included a rider that it  is executed in favour of any other for consideration or some  other purposes is not the situation. In view of the same, we  are of the considered opinion, the aforesaid provision is  defiant of Article 14 of the Constitution. Accordingly, we have  no hesitation to declare the same as violative of Article 14 of  the Constitution.”  

5. Ms. Vibha Datta Makhija, learned counsel for the  

appellant —  State of Madhya Pradesh –  submitted  that the High  

Court was in error in declaring Clause (d), Article 45, Schedule 1-A  

as violative of Article 14 of the Constitution of India. She would  

submit that the test of challenge to a legislative provision was  

completely different from that of an administrative action. A  

legislative provision cannot be struck down as being arbitrary,  

irrational or unreasonable. She further submitted that the  

classification made in Clause (d) of Article 45, Schedule 1-A had  

intelligible differentia with a direct nexus to the object of the 1899  

Act. The object of the 1899 Act is to collect proper stamp duty on an  

instrument or conveyance on which such duty is payable. This is to  

protect the State revenue.  The legislative wisdom took into  

consideration that genuine power of attorney documents would be  

executed by the executants without consideration mostly in favour of  

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kith and kin to complete sale transactions on behalf of the  

executants.   The said category attracts lower stamp duty than power  

of attorney executed in favour of third parties/strangers since such  

power of attorney document would be for extraneous reasons.

6. Learned counsel for the State of M.P. also submitted that  

the wisdom of the Legislature in protecting the revenue and carving  

out genuine classes from others had been well recognized. The  

court cannot sit in judgment over their wisdom. She relied upon  

decisions of this Court in Balaji v. Income Tax Officer, Special  

Investigation Circle, Akola and others1; State of A.P. and others v.  

Mcdowell and Co. and others2; Ramesh Chand Bansal and Others v.  

District Magistrate/Collector Ghaziabad and others3; Veena  

Hasmukh Jain and another v. State of Maharashtra and others4;  

Hanuman Vitamin Foods Private Limited and others  v. State of  

Maharashtra and another5; Karnataka Bank Limited v. State of  

1  AIR 1962 SC 123

2  (1996) 3 SCC 709

3  (1999) 5 SCC 62

4  (1999) 5 SCC 725

5  (2000) 6 SCC 345

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Andhra Pradesh and others6; Government of Andhra Pradesh and  

others v. P. Laxmi Devi (Smt.)7; Union of India v. R. Gandhi,  

President; Madras Bar Association8 and Suraj Lamp and Industries  

Private Limited v. State of Haryana and another9.      

7. The respondents despite service have not chosen to  

appear.

8. The definition of ‘conveyance’  is contained in Section  

2(10) of the 1899 Act which reads as under:

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

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

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

follows :

6  (2008) 2 SCC 254

7  (2008) 4 SCC 720

8  (2010) 11 SCC 1

9  (2012) 1 SCC 656

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

10. The 1899 Act has been amended from time to time by  

the Madhya Pradesh State Legislature insofar as its application to  

the State of Madhya Pradesh is concerned.  The stamp duty on  

power of attorney was originally prescribed in Article 48, Schedule  -  

1-A  of the 1899 Act. Clause (f) in original Article 48, Schedule 1-A  

read as under:

“SCHEDULE-1A Stamp Duty on Instruments

(See section 3)

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

           48.Power of Attorney, as defined by            Section 2(21), not being a Proxy            [No. 52].

(f) when giving  for  consideration         The same duty as Conveyance     and authorizing the attorney to (No. 23) for  a  market   value      sell any immovable property;           equal to  the  amount  of  the  

         consideration.”     

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11. Section 3 of the M.P. 1997 Act brought in amendment in  

the 1899 Act, inter alia, as under :

“In Schedule 1-A of the Principal Act, in Article 48,--

(i)For clause (f), the following clauses shall be substituted,  namely:-

(f) when given for  consideration and  authorizing the attorney  to sell or transfer any  immovable property.

The same duty as a  conveyance under  Article 23 on the market  value of the property

(f-1) when given without  consideration in favour of  persons who are not his  or her spouse or  Children, or mother or  father and authorizing  the attorney to sell or  transfer any immovable  property

The same duty as a  conveyance under  Article 23 on the market  value of the property

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

“Explanation II:--Where under clause (f) and (f-1) duty has been paid  on the power of attorney and a conveyance relating to that property  is executed in pursuance of power of attorney between the  executant of power of attorney and the person in whose favour it is  executed, the duty on conveyance shall be the duty calculated on  the market value of the property reduced by duty paid on the power  of attorney”.

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The Objects and Reasons for the above amendment were to check  

the tendency to execute power of attorney authorising the attorney to  

sell or transfer immovable property in place of a conveyance deed  

and to increase the revenue of the Government in the State of  

Madhya Pradesh.  

12. Article 48 in the 1899 Act as amended by M.P. 1997 Act  

was substituted by M.P. 2002 Act. The new provision, Article 45 in  

respect of power of attorney in Schedule 1-A which was brought in  

by M.P. 2002 Act reads as follows :

“SCHEDULE-1A Stamp Duty on Instruments

(See section 3)

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

 45.  Power of attorney [as defined by  

section   2(21)] not being a proxy:-

(a)when authorizing one person or  more to act in single transaction,  including a power of attorney  executed for procuring the  registration of one or more  documents in relation to a single  transaction or for admitting  execution of one or more such  documents;  

  Fifty rupees.

(b)when authorizing one person to  act in more than one transaction or  

One hundred rupees.

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generally; or not more than ten  persons to act jointly or severally in  more than one transaction or  generally;

(c)when given for consideration  and authorizing the agent to sell  any immovable property.  

The same duty as a conveyance (No. 22) on the  

(d)when given without  consideration to a person other  than the father, mother, wife or  husband, son or daughter, brother  or sister in relation to the executant  and authorizing such person to sell  immovable property situated in  Madhya Pradesh.

Two percent on the market value of the property which

(e)In any other case; Fifty rupees for each person authorized  

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

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

                                                                                                13. In our opinion, the High Court was clearly in error in  

declaring Clause (d), Article 45 of Schedule 1-A of the 1899 Act  

which as brought in  by the M.P. 2002 Act as violative of Article 14 of  

the Constitution of India. It is very difficult to approve the reasoning  

of the High Court that the provision may pass the test of  

classification but it would not pass the requirement of the second  

limb of Article 14 of the Constitution which ostracises arbitrariness,  11

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unreasonable and irrationality.  The High Court failed to keep in mind  

the well defined limitations in consideration of the constitutional  

validity of a statute enacted by  Parliament or a State Legislature.  

The statute enacted by Parliament or a State Legislature cannot be  

declared unconstitutional lightly.  The  court must be able to hold  

beyond any iota of doubt that the violation of the constitutional  

provisions  was so glaring that the legislative provision under  

challenge cannot stand. Sans flagrant violation of the constitutional  

provisions,  the law made by  Parliament or a State  Legislature is  

not declared bad.   

14. This Court has repeatedly stated that legislative  

enactment can be struck down by Court only on two grounds,  

namely (i),  that the appropriate Legislature does not have  

competency to make the law and (ii), that it does not take away or  

abridge any of the fundamental rights enumerated in Part – III of the  

Constitution or  any other constitutional provisions.  

15. In Mcdowell and Co.2 while dealing with the challenge to  

an enactment based on Article 14, this Court stated in paragraph 43  

(at pg. 737)  of the Report as follows :  

“……..A law made by Parliament or the legislature can be  struck down by courts on two grounds and two grounds alone,  viz., (1) lack of legislative competence and (2) violation of any  

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of the fundamental rights guaranteed in Part III of the  Constitution or of any other constitutional provision. There is  no third ground………. …….. if an enactment is challenged as violative of Article 14, it  can be struck down only if it is found that it is violative of the  equality clause/equal protection clause enshrined therein.  Similarly, if an enactment is challenged as violative of any of  the fundamental rights guaranteed by clauses (a) to (g) of  Article 19(1), it can be struck down only if it is found not saved  by any of the clauses (2) to (6) of Article 19 and so on. No  enactment     can     be     struck     down     by     just     saying     that     it     is    arbitrary     or     unreasonable  . Some or other constitutional  infirmity has to be found before invalidating an Act. An  enactment cannot be struck down on the ground that court  thinks it unjustified. Parliament and the legislatures, composed  as they are of the representatives of the people, are supposed  to know and be aware of the needs of the people and what is  good and bad for them. The court cannot sit in judgment over  their wisdom…….”

(Emphasis supplied)  

Then dealing with the decision of this Court in State of T.N. and  

others v. Ananthi Ammal and others10, a three-Judge Bench in  

Mcdowell and Co.2  observed in paragraphs  43 and 44 [at pg. 739)  

of the Report as under :

“……Now, coming to the decision in Ananthi Ammal, we are  of the opinion that it does not lay down a different proposition.  It was an appeal from the decision of the Madras High Court  striking down the Tamil Nadu Acquisition of Land for Harijan  Welfare Schemes Act, 1978 as violative of Articles 14, 19 and  300-A of the Constitution. On a review of the provisions of the  Act, this Court found that it provided a procedure which was  substantially unfair to the owners of the land as compared to  the procedure prescribed by the Land Acquisition Act, 1894,  insofar as Section 11 of the Act provided for payment of  

10  (1995) 1 SCC 519

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compensation in instalments if it exceeded rupees two  thousand. After noticing the several features of the Act  including the one mentioned above, this Court observed:  (SCC p. 526, para 7)

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

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

16. The High Court has not given any reason as to why the  

provision contained in clause (d) was arbitrary, unreasonable or  

irrational. The basis of such conclusion is not discernible from the  

judgment. The High Court has not held that the provision was  

discriminatory. When the provision enacted by the State Legislature  

has not been found to be discriminatory, we are afraid that such  

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enactment could not have been struck down on the ground that it  

was arbitrary  or irrational.   

17. That stamp duty is a tax and hardship is not relevant in  

interpreting fiscal statutes are well known principles. In Bengal  

Immunity Co. Ltd.  v. State of Bihar and others11, a seven-Judge  

Bench speaking through majority in paragraph 43 (at pg. 685) of the  

Report  while dealing with  hardship in the statutes stated as follows :

“……….If there is any real hardship of the kind referred to,  there is Parliament which is expressly invested with the power  of lifting the ban under cl. (2) either wholly or to the extent it  thinks fit to do. Why should the Court be called upon to  discard the cardinal rule of interpretation for mitigating a  hardship, which after all may be entirely fanciful, when the  Constitution itself has expressly provided for another authority  more competent to evaluate the correct position to do the  needful?”

18. In Commissioner of Income Tax, Madras v. R.SV. Sr.  

Arunachalam Chettiar12, a three-Judge Bench of  this Court, inter  

alia, observed in paragraph 13 (at pgs. 1220-21) of the Report,  

“equity is out of place  in tax law;  a particular income is either  

exigible to tax under the taxing statute or it is not.”

11  AIR 1955 SC 661

12  AIR 1965 SC 1216

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19. In the Income Tax Officer, Tuticorin v. T.S. Devinatha  

Nadar etc.13, this Court in paragraph 30 (at pg. 635) of the Report  

observed as follows :

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

The court  highlighted that the court could not concern itself with the  

intention of the Legislature when the language expressing such  

intention was plain and unambiguous.

20 . In P. Laxmi Devi (Smt.)7, a two-Judge Bench of this Court  

was concerned with a judgment of the Andhra Pradesh High Court.  

The High Court had declared Section 47-A of the 1899 Act as  

amended by A.P. Act 8 of 1998 that required a party to deposit 50%  

deficit stamp duty as a condition precedent for a reference to a  

13  AIR 1968 SC 623

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Collector under Section 47-A unconstitutional. The Court said in P.  

Laxmi Devi (Smt.)7 as follows :   

“19. It is well settled that stamp duty is a tax, and hardship is  not relevant in construing taxing statutes which are to be  construed strictly. As often said, there is no equity in a tax vide  CIT v. V.MR.P. Firm Muar. If the words used in a taxing statute  are clear, one cannot try to find out the intention and the object  of the statute. Hence the High Court fell in error in trying to go  by the supposed object and intendment of the Stamp Act, and  by seeking to find out the hardship which will be caused to a  party by the impugned amendment of 1998.

20. xxx xxx xxx

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

While dealing with the aspect as to how and when the power of the  

court to declare the statute unconstitutional can be exercised, this  

Court  referred to the earlier decision of this Court in Rt. Rev. Msgr.  

Mark Netto v. State of Kerala and others14 and held in para 46 (at  

pg. 740) of the Report as under :

“46. In our opinion, there is one and only one ground for  declaring an Act of the legislature (or a provision in the Act) to  be invalid, and that is if it clearly violates some provision of the  Constitution in so evident a manner as to leave no manner of  doubt. This violation can, of course, be in different ways e.g. if  

14  (1979) 1 SCC 23

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

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

“56. In our opinion adjudication must be done within the  system of historically validated restraints and conscious  minimisation of the judges' personal preferences. The court  must not invalidate a statute lightly, for, as observed above,  invalidation of a statute made by the legislature elected by the  people is a grave step. As observed by this Court in State of  Bihar v. Kameshwar Singh: (AIR p. 274, para 52)

“52. … The legislature is the best judge of what is good  for the community, by whose suffrage it comes into  existence.…”

57. In our opinion, the court should, therefore, ordinarily defer  to the wisdom of the legislature unless it enacts a law about  which there can be no manner of doubt about its  unconstitutionality.”

21. The Constitution Bench of this Court in Mohd. Hanif  

Quareshi and others v. State of Bihar15, while dealing with the  15 18

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meaning, scope and effect of Article 14, reiterated what was already  

explained in earlier decisions that to pass the test of permissible  

classification, two conditions must be fulfilled, namely, (i) the  

classification must be founded on an intelligible differentia which  

distinguishes persons or things that are grouped together from  

others left out of the group and (ii) such differentia must have rational  

relation to  the object sought to be achieved by the statute in  

question. The Court further stated that classification might be  

founded on different basis, namely, geographical, or according to  

objects or occupations or the like and what is necessary is that there  

must be a nexus between the  basis of classification and the object  

of the Act under consideration.

22. In Mohd. Hanif Quareshi15, the Constitution Bench further  

observed that there was always a presumption in favour of  

constitutionality of an enactment and the burden is upon him, who  

attacks it, to show that there has been a clear violation of the  

constitutional principles. It stated in paragraph 15 (at pgs. 740-741)  

of the Report as under :

“……..The courts, it is accepted, must presume that the  legislature understands and correctly appreciates the needs of  its own people, that its laws are directed to problems made  

AIR 1958 SC 731

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manifest by experience and that its discriminations are based  on adequate grounds. It must be borne in mind that the  legislature is free to recognise degrees of harm and may  confine its restrictions to those cases where the need is  deemed to be the clearest and finally that in order to sustain  the presumption of constitutionality the Court may take into  consideration matters of common knowledge, matters of  common report, the history of the times and may assume  every state of facts which can be conceived existing at the  time of legislation………”

23. The above legal position has been  reiterated by a  

Constitution Bench of this Court in Mahant Moti Das v. S.P. Sahi16.

24. In Hamdard Dawakhana and another v. The Union of  

India and others17, inter alia, while referring to the earlier two  

decisions, namely, Bengal Immunity Company Ltd.11 and Mahant  

Moti Das16 , it was observed in paragraph 8 (at pg. 559) of the  

Report as follows:

“8. Therefore, when the constitutionality of an enactment is  challenged on the ground of violation of any of the articles in  Part III of the Constitution, the ascertainment of its true nature  and character becomes necessary i.e. its subject-matter, the  area in which it is intended to operate, its purport and intent  have to be determined. In order to do so it is legitimate to take  into consideration all the factors such as history of the  legislation, the purpose thereof, the surrounding  circumstances and conditions, the mischief which it intended  to suppress, the remedy for the disease which the legislature  resolved to cure and the true reason for the remedy.”

16  AIR 1959 SC 942

17  AIR 1960 SC 554

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25. In Hamdard Dawakhana17, the Court also followed the  

statement of law in  Mahant Moti Das16 and the two earlier decisions,  

namely, Charanjit Lal Chowdhury v. Union of India and others18 and  

The State of Bombay  and another v. F.N. Balsara19 and reiterated  

the principle that presumption was always in favour of  

constitutionality of an enactment.

26. In one of the recent cases in Karnataka Bank Limited6,  

while referring to some of the above decisions, in para 19 (at pgs.  

262-263) of the Report, this Court held as under :

“19. The rules that guide the constitutional courts in  discharging their solemn duty to declare laws passed by a  legislature unconstitutional are well known. There is always a  presumption in favour of constitutionality, and a law will not be  declared unconstitutional unless the case is so clear as to be  free from doubt; “to doubt the constitutionality of a law is to  resolve it in favour of its validity”. Where the validity of a  statute is questioned and there are two interpretations, one of  which would make the law valid and the other void, the former  must be preferred and the validity of law upheld. In  pronouncing on the constitutional validity of a statute, the court  is not concerned with the wisdom or unwisdom, the justice or  injustice of the law. If that which is passed into law is within the  scope of the power conferred on a legislature and violates no  restrictions on that power, the law must be upheld whatever a  court may think of it. (See State of Bombay v. F.N. Balsara.)”

18  AIR 1951 SC 41

19  AIR 1951 SC 318

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27. A well-known principle that in the field of taxation, the  

Legislature enjoys a greater latitude for classification, has been  

noted by this Court in long line of cases. Some of these decisions  

are : M/s. Steelworth Limited v. State of Assam20; Gopal Narain v.  

State of Uttar Pradesh and another.21; Ganga Sugar Corporation  

Limited v. State of Uttar Pradesh and others22; R.K. Garg v. Union of  

India and others23 and State of W.B. and another v. E.I.T.A. India  

Limited and others24.

28. In R.K. Garg23, the Constitution Bench of this Court  

stated that laws relating to economic activities should be viewed  

with greater latitude than laws touching civil rights such as freedom  

of speech, religion, etc.

29. While dealing with constitutional validity  of a taxation  

law enacted by Parliament or State Legislature, the court must have  

regard to the following principles: (i), there is always presumption in  

20  1962 Supp (2) SCR 589

21  AIR 1964 SC 370

22  (1980) 1 SCC 223

23  (1981) 4 SCC 675

24  (2003) 5 SCC 239

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favour of constitutionality of a law made by Parliament or a State  

Legislature (ii), no enactment can be struck down by just saying that  

it is arbitrary or unreasonable or irrational but some constitutional  

infirmity has to be found (iii), the court is not concerned with the  

wisdom or unwisdom, the justice or injustice of the law as the  

Parliament and State Legislatures are supposed to be alive to the  

needs of the people whom they represent and they are the best  

judge of the community by whose suffrage they come into existence  

(iv), hardship is not relevant in pronouncing on the constitutional  

validity of a fiscal statute or economic law and (v),  in the field of  

taxation, the Legislature enjoys greater latitude for classification.  

30. Had the High Court kept in view the above well-known  

and important principles in law, it would not have declared Clause  

(d), Article 45 of Schedule 1-A as violative of Article 14 of the  

Constitution being arbitrary, unreasonable and irrational while  

holding that the provision may pass test of classification. By creating  

two categories, namely, an agent who is a blood relation, i.e. father,  

mother,  wife or husband, son or daughter, brother or sister and an  

agent other than the kith and kin, without consideration, the  

Legislature has sought to curb inappropriate mode of transfer of  

immovable properties. Ordinarily, where executant himself is  23

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unable, for any reason, to execute the document, he would appoint  

his kith and kin as his power of attorney to complete the transaction  

on his behalf. If one does not have any kith or kin who he can  

appoint as power of attorney, he may execute the conveyance  

himself.  The legislative idea behind  Clause (d), Article 45 of  

Schedule 1-A is to curb  tendency  of transferring  immovable  

properties  through power of attorney and inappropriate  

documentation.  By making a provision like this, the State  

Government has sought to collect stamp duty on such indirect and  

inappropriate mode of transfer by providing that power of attorney  

given to a person other than kith or kin,  without consideration,  

authorizing such person to sell immovable property situated in  

Madhya Pradesh will attract stamp duty at two per cent on the  

market value of the property which is subject matter of power of  

attorney.  In effect, by  bringing in this law, the Madhya Pradesh  

State Legislature has sought to levy stamp duty on such ostensible  

document, the real intention of which is  the transfer of immovable  

property. The classification, thus, cannot be said to be without any  

rationale.  It has a direct nexus to the object of the 1899 Act.  The  

conclusion of the High Court, therefore, that the impugned provision  

is arbitrary, unreasonable and irrational is unsustainable.

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31. Consequently, these appeals are allowed and the  

judgment of the Madhya Pradesh High Court passed on September  

15, 2003 is set aside. Writ petitions filed by the present respondents  

before the High Court stand dismissed. No order as to costs.  

…………………….J.            (R.M. Lodha)

…………………….J.       (H.L. Gokhale)

NEW DELHI. MAY  11, 2012.  

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