# VIJAY MILLS C'OMPANY LIMITED ETC. ETC v. STATE OF GUJARAT AND ORS

- **Citation:** [1992] Supp. 3 S.C.R. 324
- **Court:** Supreme Court of India
- **Decided:** 1992-12-04
- **Case number:** Civil Appeal No. 82 of 1985
- **Bench:** P.B. Sawant, N. Venkatachala
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/vijay-mills-c-ompany-limited-etc-etc-v-state-of-gujarat-and-ors-11913
- **Pages:** 27

## Headnote

Bombay Land Revenue Code, 1879-Section 214-Amendment-Eff ect-V alidating provisions retrospectively-Legislative intention-What is.
C
Gujarat Land Revenue Rules, 1972-Rule 8(2)-Rate of assessment of
non-agricultural lands-Enhancement--Opportunities to raise objections--
Principles of natural justice whether ignored.
D
Bombay Land Revenue Code, 1879-Section 48-Land revenue-Assessment-Different rates on the basis of gradations of land-Legality of.
The appellant-Company held a parcel of land admeasuring about 2
lakh square metres. Prior to 1st August, 1976, these lands were assessed
as non-agricultural lands, at the rate of 2 paise per square metre under
Rule 8(2) of the Gujarat Land Revenue Rules, 1972. The Rules were made
under Section 214 of the Bombay Land Revenue Code, 1879, as applicable
E
to the State of Gujarat.
F
The Company paid a total land revenue of Rs. S,823.23 per annum.
It also paid in addition to the land revenue, local fund cess and education
cess each of which was calculated at the rate of SO per cent of the amount
of the land revenue.
On 21st July, 1976, the State Government published draft rules
amending 1972 Rules. The rate of the assessment of the non- agricultural
land was raised to 15 paise per square metre.
G
The State Government invited objections to the draft rules before
30th July, 1976. Since no objections were received, the State Government
made the draft rules final and published them on 31st July, 1976 bringing
them into force w.e.f. 1st August, 1976.
Several writ petitions challenging the Amendment Rules were tiled
H in the High Court.
324
.·•
•
•
VUAYMILLSCO. v. STATEOFGUJARAT
325
One of the contentions in the petitions was that sufficient time was A
not given to raise objections to the draft rules.
During the pendency of the writ petitions, the State Government on
28th June, 1977 withdrew the notification dated 31st July~ 1976 and granted
time of one month from 28th June, 1977 to object to the draft rules
published on 21st July, 1976.
After considering the objections received, the State Government
issued a fresh notification on 24th January, 1978 issuing final rules which
were brought into force with retrospective effect from 1st September, 1976.
Under the 1977 Rules, the rate of assessment was increased from 2
paise to 10 paise per square metre.
On 10th December, 1980, by an ordinance, the State Government
also amended Section 214 of the Code to enable the Government to give
B
c
the rules made thereunder a retrospective effect. The ordinance became an D
Act on 24th February, 1981.
The writ petitions were filed before the High Court challenging the
validity of 1977 Rules.
The High Court held that the Amendment Rules of 1977 were not E
ultra vires of Section 48 and/or Section 45 and/or Section 52 of the Code or
Article 14 of the Constitution. It further held that the attempt to validate
the levy, assessment and collection of the non-agricultural assessment by
the Gujarat Ordinance No. 20 of 1980 or for that matter by the Gujarat
Act No. 2 of 1981 was not to all intent and purposes abortive. But the High
Court struck down Rule 81(2) of the Amendment Rules of 1977.
Against the decision of High Court the present appeals were filed
before this Court.
F
The appellants contended that the 1977 Rules promulgated on 24th
-
January, 1978 and brought into force retrospectively from 1st September, G
1976 were ultra vires and void to the extent that they retrospectively
im110sed a higJ-er rate of land revenue on land used for industrial purpose;
that Section 214 of the Code did not give the State Government power to
frame rules with retrospective effect; that the Bombay Land Revenue
(Gujarat Amendment and Validation) Ordinance (which later became an H
326
SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.
A
Act) amending Section 214 of the Code though gave the State Government
a power to make rules with retrospective effect, Section 214 itself was not
substituted with retrospective effect but only came into force o

## Text

_Characters 0–39,917 of 62,059. This is a partial read: ask again with offset=39917 for what follows._

A
B
VIJAY MILLS C'OMPANY LIMITED ETC. ETC.
v.
STATE OF GUJARAT AND ORS.
DECEMBER 4, 1992
(P.B. SAWANT AND N. VENKATACHALA, JJ.]
Bombay Land Revenue Code, 1879-Section 214-Amendment-Eff ect-V alidating provisions retrospectively-Legislative intention-What is.
C
Gujarat Land Revenue Rules, 1972-Rule 8(2)-Rate of assessment of
non-agricultural lands-Enhancement--Opportunities to raise objections--
Principles of natural justice whether ignored.
D
Bombay Land Revenue Code, 1879-Section 48-Land revenue-Assessment-Different rates on the basis of gradations of land-Legality of.
The appellant-Company held a parcel of land admeasuring about 2
lakh square metres. Prior to 1st August, 1976, these lands were assessed
as non-agricultural lands, at the rate of 2 paise per square metre under
Rule 8(2) of the Gujarat Land Revenue Rules, 1972. The Rules were made
under Section 214 of the Bombay Land Revenue Code, 1879, as applicable
E
to the State of Gujarat.
F
The Company paid a total land revenue of Rs. S,823.23 per annum.
It also paid in addition to the land revenue, local fund cess and education
cess each of which was calculated at the rate of SO per cent of the amount
of the land revenue.
On 21st July, 1976, the State Government published draft rules
amending 1972 Rules. The rate of the assessment of the non- agricultural
land was raised to 15 paise per square metre.
G
The State Government invited objections to the draft rules before
30th July, 1976. Since no objections were received, the State Government
made the draft rules final and published them on 31st July, 1976 bringing
them into force w.e.f. 1st August, 1976.
Several writ petitions challenging the Amendment Rules were tiled
H in the High Court.
324
.·•
•
•
VUAYMILLSCO. v. STATEOFGUJARAT
325
One of the contentions in the petitions was that sufficient time was A
not given to raise objections to the draft rules.
During the pendency of the writ petitions, the State Government on
28th June, 1977 withdrew the notification dated 31st July~ 1976 and granted
time of one month from 28th June, 1977 to object to the draft rules
published on 21st July, 1976.
After considering the objections received, the State Government
issued a fresh notification on 24th January, 1978 issuing final rules which
were brought into force with retrospective effect from 1st September, 1976.
Under the 1977 Rules, the rate of assessment was increased from 2
paise to 10 paise per square metre.
On 10th December, 1980, by an ordinance, the State Government
also amended Section 214 of the Code to enable the Government to give
B
c
the rules made thereunder a retrospective effect. The ordinance became an D
Act on 24th February, 1981.
The writ petitions were filed before the High Court challenging the
validity of 1977 Rules.
The High Court held that the Amendment Rules of 1977 were not E
ultra vires of Section 48 and/or Section 45 and/or Section 52 of the Code or
Article 14 of the Constitution. It further held that the attempt to validate
the levy, assessment and collection of the non-agricultural assessment by
the Gujarat Ordinance No. 20 of 1980 or for that matter by the Gujarat
Act No. 2 of 1981 was not to all intent and purposes abortive. But the High
Court struck down Rule 81(2) of the Amendment Rules of 1977.
Against the decision of High Court the present appeals were filed
before this Court.
F
The appellants contended that the 1977 Rules promulgated on 24th
-
January, 1978 and brought into force retrospectively from 1st September, G
1976 were ultra vires and void to the extent that they retrospectively
im110sed a higJ-er rate of land revenue on land used for industrial purpose;
that Section 214 of the Code did not give the State Government power to
frame rules with retrospective effect; that the Bombay Land Revenue
(Gujarat Amendment and Validation) Ordinance (which later became an H
326
SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.
A
Act) amending Section 214 of the Code though gave the State Government
a power to make rules with retrospective effect, Section 214 itself was not
substituted with retrospective effect but only came into force on 24th
February, 1981; that the validation of the Section was ineffective in so far
as it sought to confer power on the State Government to make rules with
B
retrospective effect from a date anterior to 24th February, 1981; that the
retrospective impo~ition of land revenue was arbitrary, unreasonable and
irrational and, therefore, violative of the appellants' fundamental rights
under Articles 14 and 19(1)(g) of the Constitution; that as the rules levied
different rates of land revenue depending upon whether they were situate
in cities, towns and villages with different size of population, they were ultra
· C vires Section 48 of the Code; that .the Amendment Rules were violative of
Article 14 also on the ground that the geographical classification made
therein for the purposes of levying different rates of assessment had no
nexus with land revenue, i.e., user of land as opposed to the value of land;
that the classification had no rational relation with the object of imposing
D the land revenue and, therefore, also the classification was bad in law.
The respondent-State Government submitted that the amendment of
Section 214 of the Code to vest the power in the State Government to make
rules with retrospective effect was valid in law and hence 1977 Rules which
enabled the Government to assess the land with retrospective effect from
E
1st· September, 1976 were valid; that the classification of the land for the
purpose of the assessment was necessary and the assessment could be
made on the return of the fand as well as on the capital value, and the
section did not prohibit such classification; that the retrospectivity of the
operation of the rules was valid; that the present classification was on the
F
basis of population and not on the basis of geography and even a classification on the basis of geography was also valid.
Dismissing the appeals, this Court
HELD : 1.1. Law
1is an instrument which is forged to regulate the
G affairs of the society. Society can mould it to meet the needs felt from time
to time. Society cannot b~ a slave of the instrument. The device of validating a statute is forged precisely to adapt the law to meet the exigencies of
the situations. The validation, therefore, may be done in the manner
required by the needs of the time. All that is required is that the agency
H which validates the statute must have the power to do it. The manner and
.,.
VIJAY MILLS CO. v. STATE OF GUJARAT
327
method of doing it, is to be left to the authority. If the intentions are clear, A
the validation has to be interpreted according to the intentions. The courts
have in fact upheld such validation regarding it to be an important weapon
in the armoury of legislative devices. [344-C-D)
1.2. The law on the subject makes it clear that to give retrospective
effect to the amended provisions it is enough if the Amending Act states that
the said provisions will always be deemed to have been incorporated in the
original provisions with retrospective effect from a particular date. [344-F)
B
1.3. There are different modes of validating the provisions of the Act
retrospectively, depending upon the intention of the legislature in that C
behalf. [341-E)
1.4. Where the legislature intends that the provisions of the Act themselves should be deemed to have been in existence from a particular date in
the past and thus to validate the actions taken in the past as if the provisions
concerned were in existence from the earlier date, the legislature makes the D
said intention clear by the specific language of the Validating Act. It is Qpen
for the legislature to change the very basis of the provisions retrospectively
and to validate the actions on the changed basis. (341-E-F)
1.5. The effect of the amendment was that the Government acquired
powers to make rules under Section 214 which would have both prospective E
as well as retrospective operation. Secondly, the power to make the rules
whether prospective or retrospective in operation could also be deemed to
have been given to the Government from the date any rules made under
Section 214 were given retrospective operation. In other words, Section 214
as amended would always be deemed to have been in existence from a date F
from which any rule made before the amendment was made retroactively
operational. [334-D-El
1.6. The effect of Sections 2 and 4 of the Amending Aci is not only to
validate with retrospective effect the rules already made but also to amend
the provisions of Section 214 itself to read as if the power to make rules G
with retrospective effect was always available under Section 214 since the
said section stood amended to give such power from the time the retroactive rules were made. The legislature had thus taken care to amend the
provisions of the Act itself both to give the Government the power to make
the rules retrospectively as well as to validate the rules which were already H
328
SUPREME COURT REPORTS [1992) SUPP. 3 S.C.R.
A
made. [341-G-H]
B
Janapada Sabha, Chhindwara etc. v. The Central Provinces Syndicate
Ltd. & Anr. etc., [1970) 3 SCR 745 at 750-51; State of Tamil Nadu v.
Thirnmagal Mills Ltd. etc., [1972) 2 SCR 395 at 397-98; Raj Kumar v. Union
of India & Ors., [1975) 3 SCR 963 at 965-66; Madan Mohan Pathak v. Union
of India & Ors. etc., [1978) 3 SCR 334 and M/s. Lohia Machines Ltd. & Anr.
v. Union of India & Ors., [1985) 2 SCR 686, distinguished.
Mohammadbhai Kltudabux Chhipa & Anr. v. The State of Gujarat &
Anr., [1962) Supp. 3 SCR 875; State of Madhya Pradesh & Ors., v. V.P.
C
Shanna & Ors., [1966) 3 SCR 557; Shri Prithvi Cotton Mills Ltd. & Anr. v.
D
E
F
Broach Borough Municipality & Ors., [1970) 1 SCR 388; Patel Gordhandas
Hargovindas v. Muriicipal Commissioner, Ahmedabad, [1954) 2 SCR 608;
Hari Singh & Ors., v. The Military Estate Officer & Anr., [1973) 1 SCR 515
and Northern India Caterers Pvt. Ltd. &Anr. v. State of Punjab &Anr., [1967)
3 SCR 399, referred to.
2. From 21st July, 1976, the assessees were aware of the fact, that the
rate of assessment was sought to be enhanced. They were also given two
opportunities to raise their objections to the enhanced assessment: After
considering the objections, the rate of assessment was in fact reduced. Even
the rate of assessment was fixed after a long lapse of time during which
incomes, prices of products, levels of profits, rentals of lands, inflation and
the cost of maintenance and of providing services had gone up enormously.
It is, therefore, not possible to accept the contention that eitherthe enhancement in assessment was made without following the principles of natural
justice or that it was arbitrary or unreasonable. [345-E-G]
3.1. Section 48 itself contemplates different rates of assessment
depending upon the different purposes for which the land is used. The
return or the income from the different uses of the land is bound to be
varied and, therefore, under the said section it is per~issible to levy
G
different rates depending upon the income or the return from the use to
which the land is put. [349-F]
3.2. The land revenue is not levied on the income from the use of the
land. That would amount to a tax on income. The assessment is graded on
the basis of the income or the return from the land to the owner thereof.
H
In other words, it is graded on the basis of the rental which the land will
VUAYMILLSCO. v. STATEOFGUJARAT[SAWANT,J.)
329
fetch to the land owner. The rental will certainly differ from use to use to A
which the land is put as well as with the location of the land. The land in
city or town like Ahmedabad and available for industrial use is bound to
fetch more rental than the land put to the same use in a village. (350-A-B]
3.3. If irrespective of their locations, the lands are assessed at the
same rate for the purpose of the land revenue, such assessment will fall
foul of Article 14 of the Constitution. The assessment so made has no
relation to the actual rental derived by the land owner. The rentals derived
have relation only to the gradations of the land made and the assessment
levied on the basis of such gradations into low income and high income
B
yielding lands. [350-C]
C
Bomanji Ardesftir Wadia & Ors., v. Secretary of State, AIR 1929 PC 34,
referred to.
CIVIL APPELLATE JURISDICTION
Civil Appeal No. 82 of
1985.
-D
From the Judgment and Order dated 28.10.1983 of the Gujarat High
Court in S.C.A. No. 463/79.
WITH
Civil Appeal Nos. 83-119, 119A of 1985, 3742 of 1988 and 1360/90.
R.F. Nariman, Fazal, P.H. Parekh, Akkad V. Trivedi and Fazlul
Qadir for the Appellant.
E
P.S. Poti, Bimal Rayjad, Ms. Meenakshi Arora, Anip Sachthey and F
M.N. Shroff for the Respondents.
The Judgment of the Court was delivered by
SAWANT, J. The facts leading to the common questions of law which
arise in these appeals may be taken from one of the appeals, viz., Civil G
Appeal No. 82 of 1985. The appellant-Company holds a large parcel of
land admeasuring about 2 lakh square metres comprising 30 different
survey numbers of Asarwa Ward of the Ahmedabad Municipal Corporation. Prior to 1st August, 1976, these lands were assessed as non-agricul-
. tural lands, at the rate of 2 paise per square metre under Rule 8(2} of the H
330
SUPREME COURT REPORTS [1992J SUPP. 3 S.C.R.
A
Gujarat Land Revenue Rules, 1972 [the '1972 Rules'] which was in force
at that time. The said Rules were made under Section 214 of the Bombay
Land Revenue Code, 1879 [the 'Code'] as applicable to the State of
Gujarat. At that rate, the Company paid a total land revenue of Rs.
5,823.23 per annum. It also appears that the Company paid in addition to
B
the land revenue local fund cess and education cess each of which was
calculated at the rate of 50 per cent of the amount of the land revenue.
2. On 21st July, 1976, the State Government published draft rules
amending 1972 Rules. The principal amendID:ent related to the rate of the
assessment of the non-agricultural land whereby the erstwhile rate of 2
C paise was raised to 15 paise per square metre. The amendment also
classified the assessable lands on the basis of their locations, viz., whether
they were in villages, towns and cities, and on the basis of the population
of the area and the non-agricultural user to which the land was being put.
The State Government invited objections to the draft rules before 30th July,
1976. Since no objections were received, the State Government made the
D draft rules final and published them on 31st July, 1976 bringing them into
force w.e.f. 1st August, 1976. Several writ petitions challenging the said
rules were filed in the High Court. One of the contentions in the petitions
was that sufficient time was not given to raise objections to the draft rules.
During the tendency of the writ petitions, the State Government on 28th
E June, 1977 withdrew the notification dated 31st July, 1976 issuing the final
rules, and granted time of one month from 28th June, 1977 to the members
of the public to object to the draft rules published on 21st July, 1977. After
considering tlie objections received, the State Government issued a fresh
notification on 24th January, 1978 issuing final rules which were brought
F
into force with retrospective effect from lst September, 1976 [the '1977
Rules']. Under the 1977 Rules, the rate of assessment was increased from
2 paise to 10 paise per square metre [thus reducing the rate of assessment
to 10 paise from 15 paise per square metre which was fixed under July 1976
Rules].
G
3. On 10th December, 1980, by an ordinance the State Government
also dlllended Section 214 of the Code to enable the Government to give
the rules made thereunder a retrospective effect. The Ordinance became
an Act on 24th February, 1981.
H
4. The writ petitions leading to the present appeals were filed before
V.UAYMILLSCO. v. STATEOFGUJARAT[SAWANT,J.J
331
the High Court chalienging the validity of 1977 Rules on various grounds. A
However, ultimately, only the following issues were pressed before the
High Court:
"(3.) Whether the illlpugned Amendment Rules of 1977
are bad in law and void since they seek to levy revenue
on the land used for non-agricultural purposes retrospectively, that is, with effect from 1st September, 1976 without
the power or authority to enact the rules retrospectively
under section 214 of the Code at all the relevant times.
(4). Whether the attempt to validate the levy, assessment
and collection of the non-agricultural assessment by the
Gujarat Ordinance No. 20 of 1980 or for that matter by
the Gujarat Act No. 2 of 1981 was to all intent and
purposes abortive.
(5). Whether the impugned Amendment Rules of 1977 are
ultra vires section 48 and/or section 45 and/or section 52
of the code.
(6). Whether the impugned Amendment Rules of 1977 are
violative of Article 14 of the Constitution of India inasmuch as they are arbitrary, unjust and discriminatory.
(7). In any view of the matter proviso to rule 81(2) of the
impugned Amendment Rules of 1977 enjoining the assessment of the land, with effect from 1.8.1979, situate within .
the urban agglomerations to which the urban Land [Ceiling & Regulation] Act, 1976 applies, at double the rates
prescribed in Table "A" for not putting such land to
non-agricultural use for which permission is granted or
deemed to be granted is ultra vires Article 14 of the
Constitution. We will take up for consideration the first
four points simultaneously since they are interconnected."
The High Court answered issues Nos. 3 to 6 against, and issue No.
7 in favour of the appellants and struck down Rule 81(2) of Amendment
Rules of 1977. It is against the said decision that the present appeals are
filed.
B
c
D
E
F
G
H
A
B
c
D
E
F
•G
.
,
332
SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.
5. The following contentions are raised before us by Shri Nariman
on behalf of the appellants :
1. 1977 Rules promulgated on 24th January, 1978 and brought into
force retrospectively from 1st September, 1976 are ultra vires and
void to the extent that they retrospectively impose a higher rate
of land revenue on land used for industrial purpose. Section 214
of the Code did not give the State Government power to frame
rules with retrospective effect. The Bombay Land Revenue
[Gujarat Amendment and Validation] Ordinance [which later
became an Act] amending Section 214 of the Code though gave
the State Government a power to make rules with retrospective
effect, Section 214 itself was not substituted with retrospective
effect but only came into force on 24th February, 1981. Hence,
the validation of the Section is ineffective in so far as it seeks to
confer power on the State Government to make rules with
retrospective effect from a date anterior to 24th Febru.ary, 1981.
2: .Tile r~trospecti:ve impo~itiol:l ofland revenue is arbitrary, un-
. teaso11al1le and. ir,tati.oital and; therefore, violative of the appellants' fundamental rights under Articles 14 and 19(1)(g) of the
Constitution. In so far as the rules levied different rates of land
revenue depending upon whether they were situate in cities,
towns and villages with different size of population, they are ultra
vires Section 48 of the Code.
3. The Amendment Rules are violative of Article 14 also on the
ground that the geographical classification made therein for the
purposes of levying different rates of assessment has no nexus
with land revenue, i.e., user of land as opposed to the value of
land. The classification has no rational relation with the object of
imposing the land revenue and, therefore, also the classification
was bad in law.
6. On behalf of the respondent-State Government, Shri Poti, the
learned counsel defended the validity of 1977 Rules contending that the
amendment of Section 214 of the Code to vest the power in the State
Government to make rules with retrospective effect was valid in law and
hence 1977 Rules which enable the Government to assess the land with
retrospective effect from 1st September, 1976 were valid. He further .coniH tended that the classification of the land for the purpose of the assessment
VUAYMILLSCO. v. STATEOFGUJARAT[SAWANT,J.]
333
was necessary and the assessment can be made on the return of tlie land A
as well as on the capital value. The section does not prohibit such classification. He submitted that the retrospectivity of the operation of the
rules was valid in the present case since revision of the assessment was
undertaken after years. His further contention was that the present classification was on the basis of population and not on the basis of geography.
However, according to him even a classification on the basis of geography B
was also valid.
7. As regards the first contention, Section 214 of the Code before its
amendment in 1981 read as follows:
"214 (1). The State Government may, by notification published in the Official Gazette, make rules not inconsistent
with the provisions and objects thereof and for the
guidance of all persons in matters connected with the
enforcement of this Act or in cases not expressly provided
for therein.
(2). In particular, and without prejudice to the generality
of the foregoing power, such Rules may be made -
(b) regulating the assessment of land to the land revenue
and the alterations and recovery of land revenue .............. .
(3) The power to make Rules under this section shall be
subject to the condition of previous publication".
The section was amended by the Ordinance dated 10th Decemper,.
1980 by inserting clauses (3) and (5), among others, which read as follows·
"3. Amendment of section 214 of Born. V of 1879. In the
principal Act, in section 214, in sub-section (1) for the
words 'make rules' the words 'make; whether prospectively or retrospectively, rules' shall be substituted.
5. Validation of certain rules - Any rule made retrospectively under Section 214 of the principal Act, before the
c
D
E
F
G
commencement of this Ordinance shall be and shall be
HI
A
B
c
SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.
deemed always to have been validly made in accordance
with law, as if the principal Act had been in force as
amended by this Ordinance at all material times• when
such rule was made and any such rules or anything done
or action or proceeding taken or purported to have been
done or taken under such rule, shall not be called in
question in any court or before any officer or authority
whatsoever merely on the ground that such rule was made
retrospectively without power to do so or that such thing
was done or action or pro'ceeding was taken or purported
to have been done or taken under such rule."
8. The Ordinance was followed by Act No. 2 of 1981 which was
placed on the statute book w.e.f. 24th February, 1981 and Sections 2 and
4 thereof correspond to clauses (3) and (5) of the Ordinance.
The effect of the amendment was that the Government acquired
D powers to make rules under Section 214 which would have both prospective
as well as retrospective operation. Secondly, the power to make the rules
whether prospective or retrospective in operation could also be deemed to
have been given to the Government from the date any rules made under
Section 214 were given retrospective operation. In other words, Section 214
E
as amended would always be deemed to have been in existence from a date
from which any rule made before the amendment was niade retroactively
operational.
9. However, the argument on behalf of the appellant is that Section
214 itself was not substituted with retrospective effect but came into force
F
as amended only on 24th February, 1981. Hence, it is contended that the
validation of the rules is ineffective in so far as it seeks to confer power on
the State Government to make rules with retmspective effect from a date
anterior to 24th February, 1981. In support of this contention, Shri Nariman
appearing for the appellant relied upon Janapada Sabha, Chhindwara etc.
G v. The Central Provinces Syndicate Ltd. & Anr. etc., [1970] 3 SCR 745 at
750-51, S(ate of Tamil Nadu v. Thirnniagal Mills Ltd. etc., (1972] 2 SCR 395
at 397-98 and Raj Kumar v. Union of India & Ors., [1975] 3 SCR 963 at
965-66. Before we deal with the said decisions, it will be helpful to recapitulate the law on validation genera,lly.
H
10. In. Mohammadbhai Kl1udabux Chhipa & Anr. v. 11te State of
VIJAYMILLSCO. v. STATEOFGUJARAT[SAWANT,J.]
335
Gujarat & Anr., [1962) Supp. 3 SCR 875, one of the grounds on which the A
Validation Ordinance was challenged was that inasmuch as Sections 11 ancJ
5 A of the Act and the rules impugned were not retrospectively amended
by the Ordinance, the purpose of the Validating Ordinance was not
achieved and it was, therefore, not effective. Repelling this contention, this
Court, speaking through Wanchoo, J. ruled in paragraph 12 of the judgB
ment as under :
"(12) The contention on behalf of the petitioners is that
these provisions are insufficient to valiqate the defects
which were noticed in the earlier judgment of this Court
inasmuch as the relevant provisions of the Act and the
Rules have not been retrospectively amended. We see no
force in this argument for the provisions as they stand
certainly validate the defects pointed out in the earlier
judgment of this court. It is true that the relevant sections
and the Rules have not been retrospectively amended by
the Ordinance, but this in our opinion was unnecessary.
Retrospective amendment may be necessary when it is
desired to change the law; but it seems that so far as S.11
is concerned the legislature did not intend that the control
of the State Government over levy of fees should be done
away with for the future also. Therefore, all that was
necessary in that respect was to validate the past actions
and this is specifically provided for by sub-sec. (2) and (3)
of S.29-B. As for the establishment of market committees
an amendment has been made in S. 5-AA of the Act
deleting the provision by which a market could be established only if so required by the State Government. This
amendment is prospective. It could have been made
retrospective also and in that case sub-s.(1) of S.29-B may
not have been necessary. The legislature, however,
adopted the method of amending S.5-AA prospectively
and making a separate provision for validating the establishment of markets in sub-s.(1) of S.29-B. We see no
reason why it should be held that the validation made by
sub-s.(1) is not sufficient because the legislature has
adopted one method rather than the other for carrying
out its purpose. We are, therefore, of opinion that S.29-B
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is sufficient to cure the defects pointed out in the earlier
judgment of the court and to validate actions taken and
things done before the promulgation of the Ordinance
which would otherwise have been invalid in view of the
earlier. judgment of this Court. The contention on this
head must also be rejected."
11. In State of Madhya Pradesh & Ors. v. V.P. Shanna & Ors., (1966)
3 SCR 557, the contentions were that {1) by seeking to validate past
. transactions of a kind which had been declared invalid by this Court
without retrospectively changing the substantive law under which the past
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transactions had been effected the legislature was encroaching over the
domain of the judicial power vested by the Constitution in the judiciary
exclusively; (2) the Validating Act did not revive the notification under s.4
which had become exhausted after the first declaration under s.6 and no
acquisition following thereafter could be made without a fresh notification
under s.4.
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12. Repelling these challenges, the Constitution Bench by majority
held as follows:
"(i) The American doctrine of well defined separation of
legislative and judicial powers has no application to India
and it cannot be said that an Indian Statute which seeks
to validate invalid actions is bad if the invalidity has
already been pronounced upon by a court of law.
(ii) The absence of a provision in the amending Act to
give retrospective operation to s.3 of the Act does not
affect the validity of s.4. It was open to Parliament to adopt
either course e.g., (a) to provide
expressly for the
retrospective operation of s.3, or, (b) to lay down that no
acquisition purporting to have been made and no action
taken before the Land Acquisition [Amendment and
Validation] Ordinance, 1967, shall be deemed to be invalid
or even to have become invalid because, inter alia, of the
making of more than one declaration under s.6 of the
Land Acquisition Act, notwithstanding any judgment
decree or order to the contrary. Parliament was competent to validate such actions and transactions, its power
VUAYMILLS CO. v. STATEOFGUJARAT[SAWANT,J.)
in that behalf being only circumscribed by appropriate
entries in the Lists of the Seventh Schedule and the
fundamental rights set forth in Part III of the Constitution.
Section 4 of the Amending Act being within the legislative
competence of Parliament, the provisions thereof are
binding on all courts of law notwithstanding judgments,
orders or decrees to the contrary rendered or made in the
past."
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13. In Shri Prithvi Cotton Mills Ltd. & Anr. v. Broach Borough
Municipality & Ors., [1970] 1 SCR 388 a somewhat similar situation, as
obtaining in the present case, arose. Broach Borough Municipality conC
stituted under the provisions of the Bombay Municipal Boroughs Act, 1925
purporting to act under Section 73 of the said Act and the Rules made
thereunder, imposed rate on land and buildings belonging to Prithvi Cotton
Mills at a certain percentage of the capital value in the assessment years
1961-62 to 1963-64. Section 73 of the Boroughs Act allowed the D
Municipality to levy a rate on buildings over lands or both situate within a
Municipal Borough. The assessment lists were published and the tax was
imposed according to the rates calculated on the basis of the capital value
of the property of the Mill-company, and the bills raising demand were
served on the company which moved the Him Court for appropriate writs,
orders and directions to quash and set aside the assessment under Art. 226 E
of the Constitution. During the pendency of the writ petition, the Gujarat
Legislature passed the Gujarat Imposition of Taxes by Municipalities
(Validation) Act, 1963 with the result that the company amended the writ
petition questioning the Validation Act which was also challenged by the
company by a separate substantive application. Both the writ petitions were F
dismissed by the High Court though a certificate of fitness was granted for
appeal to this Court.
Section 3 of the Validation Act provided that notwithstanding anything contained in any judgment, decree or order of a Court or Tribunal
or any other authority, no tax or rate assessed by a Municipality on the G
basis of the capital value of a building or land, or on the basis of a
percentage of such capital value, and imposed, collected or recovered by
the Municipality before the commencement of the Act shall be deemed to
have been invalidly assessed, imposed, collected or recovered by the reason
of assessment being made on the basis of the capital value or percentage »
338
SUPREME COURT REPORTS {1992) SUPP. 3 S.C.R.
A
thereof and not being based on annual letting value, and the imposition;
collection and recovery of such tax or rate shall be valid and shall be
deemed always to have been valid and shall not be called in question
merely on the ground that the assessment is on the. basis of the capital
value, and the Municipality shall be entitled to collect or recover any tax
B or rate so assessed before the commencement of the Act in accordance
with t4e relevant municipal law and the rules made thereunder. It sh9uld,
therefore; be noted that the Validation Act, without amending the em- •
powering Section 73 of the Corporation Act and Rule 350-A of the Rules
providing for the rate of the levy, sought to validz.te the assessment,
imposition, collection and recovery. It is in this context that the Validation
C Act was challenged. The observations of this Court, speaking through
Hidayatullah ~J. about the features of the validating statutes in general
are instructive. They read as under:
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"4. Before we examine section 3 to find out whether it is
effective in its purpose or not we may say a few words
about validating statutes in general. When a legislature
sets out to validate a tax declared by a Court to be legally
collected. under 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 1 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 decision could not have been
given in the altered circumstances.
Ordinarily, a Court holds a tax to be invalidly imposed
because the power to tax is wanting or the statute or the
rules or both are invalid or do not sufficiently create the
jurisdiction. Validation of a tax so declared illegal may be
done only if the grounds of illegality or invalidity are
VIJAYMILLSCO. v. STA1EOFGUJARAT[SAWANT,J.]
339
capable of being removed and are in fact removed and
the tax thus made legal. Sometimes thiS is done by providing for jurisdiction where jurisdiction had not been
properly invested before. Sometimes this is done by reenacting retrospectively a valid and legal taxing provision
and then by fiction making the tax already collected to
stand under the re-enacted law. Sometimes the legislature
gives its own meaning and interpretation of the law under
which the tax was collected and by legislative fiat makes
the new meaning binding upon Courts. The legislature
may follow any one method or all of them and while it
does so it may neutralise the effect of the earlier decision
of the Court which becomes ineffective after the change
of the law. Whichever method is adopted it must be within
the competence of the legislature and legal and adequate
to attain the object of validation. If the legislature has the
power over the subject matter and competence to make
a valid law, it can at any time make such a valid law and
make it retrospectively so long as to bind even past transactions. The validity of a validating 'law, therefore,
depends upon whether the legislature possesses the competence which it claims over the subject matter and
whether in making the validation it removes the defect
which the Courts had found in existing law and makes
adequate prmisions in the validating law for a valid imposition of the tax".
After setting out generally the features of validating statutes, this
Court examined as to whether the Legislature had the power to impose
taX. It found that unde£ Section 99 of the Boroughs Act, the Municipality
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was empowered to impose a tax on buildings situate Within the municipal
borough on the basis of annual letting value or capital value or percentage G
on capital value thereof. The Court also noted that Section 99 was within
the State legislative competence in view of entry 49 of List II of the Seven.th
Schedule to the Constitution providing for taxes on lands and buildings
which included a tax on lands or buildings on the basis of capital value.
The Court thereafter noted that Section 73 of the Borough Act bad
authorised the levy of a rate only and not a tax on lands and buildings on H
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SUPREME COURT REPORTS (1992) SUPP. 3 S.C.R.
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the baSis of capital value~ The Court also referred to its earlier decision in
Patel Gordhandas Hargovandas's case [supra] ·that the Municipality under
the Boroughs Act had no power to fix a rate on the basis of capital value
since the word . "rate" had acquired a special meaning in the legislative
practice. The Court thereafter observed as under:
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"6 ...• Faced with this situation the legislature exercised its
undoubted powers of redefining 'rate' so ·as to equate it
to a tax on capital value and convert the tax purported to
be collected as a 'rate' into a tax on lands and buildings.
The legislature in· the Val~dation Act, therefore, provided
for the following matters. First, it stated that no tax or rate
by whic_hever nanie ·called and laid on the capital value of
lands and buildings must be deemed to be invalidly assessed, imposed, collected or recovered simply on the:
. ground that a rate is based on the annual letting ·value.
Next it provided that the tax must be deemed to be validly
assessed, imposed, collected or recovered and the imposition must be deemed to be always so authorised. The
legislature by this enactment retrospectively imposed the
. tax on _lands and buildings based on their capital value and
as the· tax was already imposed, levied and collected on
that basis, made the imposition, levy, collection and
recovery of the taX valid; notwithstanding the declaration
by the Court that as 'rate' the levy was incompetent, The ·
legislature not only equated the tax collected to a tax on
lands and buildings, which it had the power to levy, but
also to a rate giving a new me~ing to the expression 'rate'
and while doing so it put out of action. the effect of the
decisions of the Courts to the contrary. The exercise_ of
power by the legislature was valid because the legislature
does not possess the power to levy a tax on· lands and
buildings based on capital value thereof and in validating
the levy on that basis, the implication of the use of the
word 'rate' . could be . effectively removed and the tax on
lands and buildings imposed instead. The t~ therefore;.
can no· longer be questioned on the ground that section
73 spoke of a rate and the imposition was not a rate as
properly understood but a tax on capital value .... "
VUAYMILLSCO. v. STATEOFGUJARAT[SAWANT,J.)
:.;4'i
14. In Hari Singh & Ors., v. The Military Estate Officer & Anr., [1973] A
1 SCR 515, it was held by majority that (a) in Northern India Caterers Pvt.
Ltd. & Anr. v. State of Punjab & Anr., [1967} 3 SCR 399, this Court held
that s.5 of the Punjab Premises and Land [Eviction a_nd Rent Recovery]
Act, 1959, was violative of Article 14 of Constitution oit the ground that
the. section left it to the unguided discretion of the Collector to take action
either under the ordinary law or follow the drastic procedure provided by
the section. Assuming that 1958 Act is unconstitutional on the same ground
it could not be contended that 1971 Act could not validate anything done
under 1958 Act, because 1971 Act is effective from 16th September, 1958,
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and provides that the actiOn taken under 1958 Act is deemed to be taken
under 1971 Act. It is. not a case of the later Act ·validating action taken C
under the earlier Act, but' a case where by a deeming provision, acts or
things done under an .earlier Act were deemed to be done under the later
Validating Act. (b) The Legisiature had competence to enact 1971 Act and
provide a speedy procedure only available and thus remove the vice of
discrimination found in Northern India Caterers case (supra). (c) The D
Legislature can put out of action retrospectively one of the procedures
leaving one procedure only available and thus remove the vice of discrimination found in Northern India Caterers case (supra).
15. From the apove, it is clear that there are different modes ot
validating the provisions of the Act retrospectively, depending upon the
intention of the legislature in that.behalf.