Bidi Supply Co vs The Union Of India And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Petition No. 271 of 1955

Decision Date: 20 March 1956

Coram: DAS C.J., Vivian Bose, Natwarlal H. Bhagwati, B. Jagannadhadas, Bhuvneshwar P. Sinha

In this case, the Supreme Court of India delivered its judgment on 20 March 1956 concerning a petition filed by Bidi Supply Co. against the Union of India and other respondents. The bench that heard the matter comprised Justices Vivian Bose, Natwarlal H. Bhagwati, B. Jagannadhadas and Bhuvneshwar P. Sinha. The petitioner, a registered firm, maintained its head office, accounting books and bank account in Calcutta, and its members were Indian citizens. From its inception the firm had always been assessed for income tax by the Income‑Tax Officer of District III, Calcutta. Assessments for the fiscal years 1948‑49 and 1949‑50 were made by that officer, and notices issued under section 22(2) of the Income‑Tax Act required the firm to file returns for the years 1950‑51, 1951‑52, 1952‑53, 1953‑54 and 1954‑55. The Income‑Tax Officer of District III, Calcutta, entered an assessment for the year 1950‑51 on 18 December 1954, being satisfied that the principal place of business of the petitioner was in Calcutta. On 25 January 1955 the petitioner received a letter from the same officer stating that, in pursuance of orders dated 13 December 1954 made under subsection 7‑A of section 5 of the Income‑Tax Act, its assessment records were being transferred from the Calcutta office to the Income‑Tax Officer of the Special Circle at Ranchi. The order declared that the Central Board of Revenue “hereby transfers the case of” the petitioner and that all future correspondence concerning the assessment would be directed to the Ranchi officer. The petitioner asserted that it had received no prior notice of the intention to transfer the assessment proceedings from Calcutta to Ranchi, nor had it been afforded an opportunity to make any representation against such a decision. When called upon to file its return for the assessment year 1955‑56, the petitioner filed an application under article 32 of the Constitution, contending that subsection 7‑A of section 5 of the Indian Income‑Tax Act and the transfer order were unconstitutional because they infringed the fundamental rights guaranteed to the petitioner under articles 14, 19(1)(g) and 31 of the Constitution. The petition further referred to section 64 of the Indian Income‑Tax Act, which provides the procedure for determining the appropriate place of assessment. Sub‑section 1 of that provision states

The Court set out the rule contained in section 64 of the Income‑Tax Act, explaining that when a taxpayer carries on a business, profession or vocation at a single location, the assessment must be made by the Income‑Tax Officer of the area in which that location is situated. If the same activity is carried on at more than one place, the assessment must be made by the Income‑Tax Officer of the area where the principal place of the business, profession or vocation is situated. In every other situation, subsection (2) of the same section provides that the taxpayer shall be assessed by the Income‑Tax Officer of the area in which the taxpayer resides. The provision further mandates that any question concerning the appropriate place of assessment shall be resolved after the taxpayer has been given an opportunity to present his views to the Commissioner or Commissioners concerned, and, if there is a disagreement between them, to the Board of Revenue. The Court described this section as imperative in its terms and as conferring a valuable right on the taxpayer. The Court then examined the amendment effected by the Income‑Tax (Amendment) Act 1940, identified as Act XL of 1940, which inserted the words “in consequence of any transfer made under subsection (7‑A) of section 5” into clause (b) of subsection (5) of section 64 and introduced subsection (7‑A) into section 5. By this amendment, the benefit that the original subsections (1) and (2) of section 64 afforded to a taxpayer was taken away and was to be deemed never to have existed for any taxpayer to whom a transfer was made under subsection (7‑A) of section 5. The Court held that, under section 22(2) of the Act, a notice and a return must relate to a specific assessment year, and that subsection (7‑A) of section 5 envisions the transfer of a “case”, meaning the assessment case for a particular year. The wording that such a transfer may be made “at any stage of the proceedings” presupposes that proceedings are already pending, with “stage” indicating a point between the commencement and the conclusion of those proceedings. Moreover, the transfer contemplated by the subsection is the movement of a specific pending case from the Income‑Tax Officer of one place to the Income‑Tax Officer of another place. Consequently, the Court concluded that the blanket order dated 13 December 1954, which transferred all of the petitioner’s cases without reference to any particular case and without any temporal limitation, was not within the scope of subsection (7‑A). The order therefore exceeded the authority of the Central Board of Revenue, and the petitioner remained entitled to the protections afforded by subsections (1) and (2) of section 64. The Court further observed that the order was discriminatory against the petitioner and violated the guarantee of equality under article 14 of the Constitution because the tax authorities, by an executive order lacking a legal basis, singled out the petitioner and transferred all of his cases by a sweeping, time‑unlimited order, causing considerable inconvenience and hardship.

The Court observed that the petitioner had suffered inconvenience and harassment as a result of the order of transfer. Justice Bose held that Section 5(7‑A) of the Indian Income‑Tax Act was beyond the power of the legislature because it contravened Article 14 of the Constitution, and that Section 64(5)(b) was likewise invalid insofar as it authorised an order under Section 5(7‑A) in its present form. The Court explained that a power to transfer assessment files may be conferred only if it is limited by reasonable restrictions, and that the presence or absence of such restrictions is ultimately a matter for judicial determination. Moreover, the Court stressed that the exercise of any transfer power must comply with the principles of natural justice; consequently, persons who are affected must be given an opportunity to be heard wherever this is reasonably feasible, and the reasons for the order must be recorded in writing, even if briefly, so that the public can see that the quasi‑judicial authority is acting fairly and lawfully. The Court referred to a series of authorities to support this view, namely Chiranjit Lal Chowdhury v. The Union of India ([1950] S.C.R. 860), Budhan Chowdhry and others v. The State of Bihar ([1955] 1 S.C.R. 1045), Dayaldas Kushiram v. Commissioner of Income‑Tax Central (I.L.R. [1940] Bom. 650; [1940] 8 I.T.R. 139), Eshugbai Eleko’s case (L.R. [1931] A.C. 662), The State of West Bengal v. Anwar Ali Sarkar ([1952] S.C.R. 284), Ram Prasad Narayan Sahi and another v. The State of Bihar and others ([1953] S.C.R. 1129), Bowman’s case ([1917] A.C. 406), the Coal Control case ([1954] S.C.R. 803), State of Madras v. V. G. Bow ([1952] S.C.R. 597), and Liversidge v. Sir John Anderson ([1942] A.C. 206). The judgment was rendered in the original jurisdiction of the Supreme Court in Petition No. 271 of 1955, filed under Article 32 of the Constitution for the enforcement of fundamental rights. Counsel for the petitioner was S.C. Isaacs assisted by D. N. Mukerji, while the respondents were represented by M. C. Setalvad, the Attorney‑General of India, assisted by B. Sen and R. H. Dhebar. The order dated 20 March 1956, delivered by Chief Justice Das, entertained an application under Article 32 praying for a writ restraining the Income‑Tax Officer, Special Circle, Ranchi (respondent No. 3) from proceeding with the assessment of the petitioner and from taking any ancillary steps. The factual backdrop was that the petitioner was a firm engaged in manufacturing and selling bidi. The firm had been registered in 1948 under the Indian Partnership Act, maintained its head office, accounting records and bank account in Calcutta, and operated factories near Chakradharpur in Bihar without a separate bank account there. All members of the firm were Indian citizens. Since its formation the firm had consistently been assessed for income tax by the Income‑Tax Officer, District III, Calcutta, with assessments made for the years 1948‑49 and 1949‑50 by the same officer. Notices issued under Section 22(2) of the Income‑Tax Act were sent to the petitioner on various dates by the District III officer, calling upon the petitioner to comply with the statutory requirements.

In the present case the petitioner was required to file income‑tax returns for the assessment years 1950‑51, 1951‑52, 1952‑53, 1953‑54 and 1954‑55, the notice concerning the last of those years being dated 23 August 1954. The petitioner complied with each notice and duly forwarded the returns for the respective years to the Income‑tax Officer of District III, Calcutta. During the assessment of the year 1950‑51 a question arose as to where the petitioner’s principal place of business was situated. After consideration, the income‑tax authorities became satisfied that the principal place of business lay in Calcutta, and consequently, on 18 December 1954, the Income‑tax Officer, District III, Calcutta issued the assessment for the year 1950‑51. Subsequently, on 25 January 1955 the petitioner received a letter from the same officer stating that, in execution of orders made under section 5(7‑A) of the Income‑tax Act, the petitioner’s assessment records were being transferred from that office to the Income‑tax Officer, Special Circle, Ranchi, and that future correspondence regarding the assessment proceedings should be directed to the Ranchi officer. The letter referred to an order numbered 55(70)IT/54, issued by the Central Board of Revenue in New Delhi on 13 December 1954. That order, titled Order No. 87, declared that under sub‑section (7‑A) of section 5 of the Indian Income‑tax Act, 1922, the Central Board of Revenue was transferring the case of Bidi Supply Company, located at 3/1 Madan Street, Calcutta, from the Income‑tax Officer, District III, Calcutta to the Income‑tax Officer, Special Circle, Ranchi. The order was signed by K. B. Deb, Under‑Secretary, Central Board of Revenue. The respondent admitted, without denying, that the petitioner had not received any prior notice of the intention to transfer the assessment proceedings from Calcutta to Ranchi and had not been given an opportunity to make any representation against that decision. Thereafter, on 2 May 1955, the Income‑tax Officer, Special Circle, Ranchi issued a demand for the petitioner to file its return for the assessment year 1955‑56. In response to these developments, the petitioner filed a petition under article 32 of the Constitution, challenging the validity of the transfer order dated 13 December 1954 and the statutory authority on which it was based. The petition contended that sub‑section (7‑A) of section 5 of the Indian Income‑tax Act, 1922, together with the transfer order, were unconstitutional because they violated the fundamental rights guaranteed to the petitioner by articles 14, 19(1)(g) and 31 of the Constitution. Article 14 mandates that the State shall not deny any person equality before the law or equal protection of the laws throughout the territories of India. The term “the State” in Part III of the Constitution, which enumerates fundamental rights, is understood, unless the context indicates otherwise, to include the Government and Parliament of India, the governments and legislatures of the States, and all local or other authorities within the territory of India or under the control of the Government of India. The scope of article 14, as it applies to protection against discriminatory or hostile legislation, was thus a central point of argument in the petition.

In this case the Court observed that the protection given by article 14 of the Constitution against discriminatory and hostile legislation has been examined in a series of decisions beginning with Chiranjit Lal Chowdhury v. The Union of India and concluding with Budhan Chowdhry and others v. The State of Bihar. In the later case a Full Bench of this Court summarized the earlier rulings, explaining that article 14 forbids class legislation but does not forbid reasonable classification for legislative purposes. The Court explained that for a classification to be permissible two conditions must be satisfied. First, the classification must rest on an intelligible differentia which distinguishes the persons or things placed in the group from those left out. Second, that differentia must have a rational relation to the object sought to be achieved by the statute. The Court added that the basis of classification may be geographical, occupational or any other relevant factor, provided there is a nexus between the basis of classification and the purpose of the Act. It further reiterated that article 14 condemns discrimination not only by substantive law but also by procedural law. Accordingly the Court said that these principles must be kept in mind while addressing the matter before it, to the extent they are applicable to the facts of the present case. Turning to the Indian Income‑Tax Act 1922, the Court noted that section 64 deals with the determination of the place of assessment. Under sub‑section (1) an assessee who carries on a business, profession or vocation at any place shall be assessed by the Income‑Tax Officer of the area in which that place is situated, or where the business, profession or vocation is carried on at more than one place, by the Officer of the area in which the principal place of business, profession or vocation is situated. In all other cases, according to sub‑section (2), an assessee shall be assessed by the Officer of the area in which he resides. If any question arises as to the place of assessment, sub‑section (3) provides that the question shall be decided after giving the assessee an opportunity to present his views to the Commissioner or Commissioners concerned, or, in case of disagreement between them, to the Board of Revenue. The Court observed that these provisions clearly indicate that the Legislature regarded the question of the place of assessment as important to the assessee. The Court further mentioned that the provisions of section 64 had earlier been discussed before the Bombay High Court in the case of Dayaldas Kushiram v. Commissioner of Income‑Tax, Central.

In the judgment, the Court referred to the observations recorded at pages 657‑658, where the Chief Justice stated that section 64 was intended to secure a local assessment for the assessee wherever practicable, and that the jurisdiction of an Income‑tax Officer should, as far as the requirements of tax collection permit, have a reasonable connection with the place where the assessee conducts business or resides. The Chief Justice noted that no evidence demonstrated any difficulty in limiting the area of appointment of the Income‑tax Officer, Section II (Central), to a region considerably smaller than the Bombay Presidency, Sind and Baluchistan. Consequently, the Chief Justice concluded that the Income‑tax Officer, Section II (Central), was not the officer for the area where the applicant’s place of business was situated, and that the appropriate officer for assessment was the Officer of Ward C, Section II, who alone possessed the authority to assess the assessee. The Court then quoted the observations of Justice Kania, recorded at pages 660‑661, who asserted that a plain reading of the provision makes its requirement imperative and grants the assessee a valuable right. According to Justice Kania, the assessee is entitled to inform the taxing authorities that he should not be summoned to attend proceedings at multiple locations that could disrupt his business. These passages illustrate that the learned judges interpreted the provisions of section 64 primarily as conferring a right upon the assessee rather than merely providing a matter of convenience. The decision prompted a legislative amendment to the Indian Income‑tax Act, 1922, effected by the Indian Income‑tax (Amendment) Act, 1940 (Act XL of 1940). The amendment inserted into clause (b) of sub‑section (5) of section 64 the words “in consequence of any transfer made under sub‑section (7‑A) of section 5” and added sub‑section (7‑A) to section 5. The amended portion of sub‑section (5) of section 64 now reads: “(5) The provisions of sub‑section (1) and sub‑section (2) shall not apply and shall be deemed never at any time to have applied to any assessee (a) ………………………….: …………………………. (b) where by any direction given or any distribution or allocation of work made by the Commissioner of Income‑tax under sub‑section (5) of section 5, or in consequence of any transfer made under sub‑section (7‑A) of section 5, a particular Income‑tax Officer has been charged with the function of assessing that assessee, or (c) …………………………. ” This amendment makes it clear that the benefits provided by sub‑sections (1) and (2) are removed and are to be considered never to have existed for any assessee who is the subject of a transfer order under sub‑section (7‑A) of section 5. However, the Court emphasized that to deprive a specific assessee of the advantages of sub‑sections (1) and (2) of section 64, there must first be a valid order made under section 5.

In the present matter, the Court explained that the loss of any benefit could occur only to the extent that such right was withdrawn by a valid order issued under sub‑section (7‑A) of section 5. The Court then reproduced the text of the newly inserted sub‑section (7‑A) of section 5, which provided that the Commissioner of Income‑tax could transfer any case from one Income‑tax Officer subordinate to him to another, and that the Central Board of Revenue could likewise transfer any case from one Income‑tax Officer to another. The provision further stated that such a transfer might be effected at any stage of the proceedings and that it would not be necessary to re‑issue any notice that had already been served by the Officer from whom the case was transferred. The Court observed that the language of the sub‑section dealt specifically with the transfer of a “case”. Under the Indian Income‑tax Act of 1922, a case commenced when an Income‑tax Officer issued a notice under section 22(2), demanding that the assessee file a return of total income and worldwide income for the preceding year, after which the assessee filed the return in the prescribed form. The Court noted that the notice and the return were expressly limited to a particular assessment year, and therefore the sub‑section contemplated the transfer of the assessment case for that specific year only. By allowing transfer “at any stage of the proceedings”, the provision clearly referred to proceedings that were already pending, with “stage” signifying an intermediate point between the initiation and conclusion of those proceedings. Moreover, the clause that no re‑issuance of the already‑served notice was required demonstrated that the transfer contemplated by the sub‑section involved moving a pending case from the jurisdiction of one Income‑tax Officer to that of another Officer in a different location.

The Court further pointed out that, in the facts before it, the Special Circle Income‑tax Officer in Ranchi had issued a fresh notice under section 22(2), which indicated that the Officer did not recognise any pending case of the assessee as having been transferred to him. The Officer appeared to have assumed that the entire assessment of the petitioner’s income, in a general sense, had been transferred, and consequently he believed it proper to commence new assessment proceedings for a particular year. The Court held that such an omnibus, wholesale order of transfer was not envisaged by sub‑section (7‑A). Implicit in the sub‑section, the Court said, was the requirement that before issuing a transfer order, the Commissioner of Income‑tax or the Central Board of Revenue must consider, in their mind, the necessity or desirability of transferring that specific case. The Court emphasized that the necessity or desirability of transferring the assessment of a particular assessee for one assessment year did not automatically imply that it was equally necessary or desirable to transfer the assessment of the same assessee for any other assessment year. Thus, the authority was required to limit any transfer order to the particular case and year that justified such a transfer, rather than issuing a blanket order covering all assessments of the assessee.

The Court expressed the view that the order of transfer which had been challenged was framed in very general terms, did not refer to any specific case and contained no limitation of time, and therefore exceeded the authority of the Central Board of Revenue. The Court noted that it did not perceive any argument from the Attorney‑General that this interpretation of the sub‑section was incorrect. The Court further stated that it was not necessary, for the resolution of the present dispute, to examine whether sub‑section (7‑A) of section 5 could be upheld on the basis of any reasonable classification jurisprudence laid down by this Court, nor to determine whether the statute provides a guiding principle for the exercise of discretion by the Commissioner or the Board of Revenue, nor to decide whether the sub‑section grants an unfettered and arbitrary power to those authorities to select individual assessees and place them at a disadvantage compared with other assessees. For the purposes of the case, the Court found it sufficient to observe that the omnibus transfer order issued in this matter is neither contemplated nor sanctioned by sub‑section (7‑A). Consequently, the petitioner remains entitled to the advantages granted by sub‑sections (1) and (2) of section 64. The Court clarified that all assessees are entitled to those benefits except where a particular case or a set of cases of a specific assessee for a particular year or years has been transferred under sub‑section (7‑A) of section 5, assuming that provision to be valid. Even if a particular case or cases is transferred, the assessee’s right under section 64 continues to apply to his other case or cases. The Court quoted Lord Atkin’s observation in Eshugbai Eleko’s case, noting that the executive may act only in accordance with powers conferred by law and may not interfere with an individual’s liberty, property or rights unless it can justify the legality of its action before the Court. The Court held that no order of transfer falling within the scope of sub‑section (7‑A) of section 5 had been made, and therefore the petitioner, like all other bidi merchants conducting business in Calcutta, retained the right to have his assessment proceedings before the income‑tax officer of the jurisdiction where his place of business is situated. The Court described how the income‑tax authorities, by means of an executive order lacking statutory support, singled out the petitioner and transferred all his cases through an unrestricted omnibus order. This order was intended to cause substantial inconvenience and harassment to the petitioner. It would require the petitioner’s books of account to be produced before the Income‑Tax Officer, Special Circle, Ranchi, a location hundreds of miles from Calcutta, the place of the petitioner’s business. Moreover, the petitioner’s partners or principal officers would be compelled to remain away from the head office for an extended period, thereby neglecting the core operations of the firm.

It was observed that there was no suitable place where the petitioner's personnel could be accommodated during the period of transfer. The petitioner would inevitably incur additional expenditures in the form of railway fares, freight charges and hotel costs. Consequently, the existence of discrimination could not be denied. In the circumstances, the Court held that a substantial discrimination had been inflicted upon the petitioner by an executive fiat that lacked any legal foundation, and that no question of reasonable classification for legislative purposes could arise.

The Court further noted that “the State,” which includes the Income‑tax Department, by means of an illegal order had denied the petitioner, unlike other Bidi merchants situated in the same manner, equality before the law and the equal protection of the laws. Accordingly, the petitioner was entitled to complain of an infringement of his fundamental right guaranteed under article 14 of the Constitution. It was also pointed out that the order indirectly affected the petitioner's fundamental rights under article 19(1)(f) and article 31. The Court could not deny the fact that the order purporting to transfer the petitioner’s cases also deprived him of the right conferred by section 64, a right to which he would otherwise have been entitled.

The order of transfer was described as being calculated to cause considerable inconvenience and harassment to the petitioner, as earlier stated. However, the Court explained that, based on its construction of sub‑section (7‑A) of section 5 and the petitioner’s rights under article 14, it was unnecessary on this occasion to express any opinion on whether the inconvenience and harassment amounted to an unwarranted restriction on the petitioner’s rights under article 19(1)(g) or a violation of his rights under article 31.

For the reasons set out above, the Court concluded that the petition must be allowed. Accordingly, the impugned order was set aside and an injunction was granted in accordance with prayer (c) of the petition. The petitioner was also awarded the costs of the application.

Justice Bose expressed agreement with the Chief Justice that the petition should be allowed, though for different reasons. He opined that sections 5(7‑A) and 64(5)(b) of the Indian Income‑Tax Act were themselves ultra vires article 14 of the Constitution, and that the issue was not merely the order of the Central Board of Revenue but the constitutionality of the statutory provisions themselves. The only question, he said, was whether these sections contravened article 14.

Justice Bose further observed that, despite judges’ continual efforts to define the limits of the law, he could not discern any clear principle from the repeatedly applied classification formula. He reiterated a view expressed in another case: even learned judges who formulate and apply the theory of classification are forced to admit that classification alone is insufficient, because any object can be classified and every discriminatory action will inevitably fall within some classification. Classification is merely the act of separating one group from another; unless a real difference or distinction is shown in a given case, no question under article 14 can arise.

In this passage the Court explained that the problem of applying article 14 of the Constitution is essentially a question of framing a set of rules. It observed that it is obvious that no two things are exactly alike, yet many things share common features. Once the lines of demarcation are fixed, the resulting groups can be determined objectively; however, the fixing of those lines is necessarily arbitrary. The Court warned that to say governments and legislatures may classify is to give them a bare and arbitrary power to discriminate at will. Confronted with the logical consequence of that position, the Court noted that judges who apply this test are forced to surround it with conditions that, in the Court’s view, add nothing to the clarity of the law. The Court chose to set aside the various limitations that have been placed on the classification test – namely that it must be “reasonable”, not “discriminatory” or “arbitrary”, not “hostile”, and must avoid “substantial discrimination” – and instead turned to a rule that is intended to settle the matter. That rule, taken from American decisions and stated in The State of West Bengal v. Anwar Ali Sarkar (1) [1952] S.C.R. 284, 334, requires that (1) the classification be founded on an intelligible differentia that distinguishes those placed in the same group from others, and (2) that the differentia have a rational relation to the object sought to be achieved by the Act. The Court quoted Mukherjea, J. as saying at page 321 of the same report that classification should never be arbitrary, artificial or evasive; it must rest on a real and substantial distinction bearing a reasonable and just relation to the subject of the classification, and classifications without a reasonable basis should be regarded as invalid. In another case, Ram Prasad Narayan Sahi and Another v. The State of Bihar and Others (2) [1953] S.C.R. 1129, the same learned judge again emphasized at page 1139 that any selection or differentiation must not be arbitrary and must rest on a rational basis, taking into account the object the legislature has in view. The Court also cited Ivor Jennings’s formulation that “among equals the law shall be equal and shall be equally administered and that like shall be treated alike”. With utmost respect, the Court observed that a precise analysis seems to undermine even this principle, because even among equals a large discretion remains with judges in matters of punishment, with police and the State in deciding whether to prosecute, and with officials in granting or withholding permits or licences. Ultimately, after extensive discussion, the Court returned to the simple wording of article 14: “The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India”. The Court concluded that this is the essential truth.

It was observed that attaining exact precision is impossible because the subject matter concerns intangibles; even though the outcomes are evident, the underlying thought cannot be confined to a precise analysis. The Court explained that Article 14, in its view, expresses an attitude of mind and a way of life rather than a narrowly defined rule of law. It reflects a widespread awareness among the people of a reality that is palpable yet cannot be fixed to a strict factual analysis, except to state that in a particular case a matter lies on one side of the line or the other. Consequently, decisions on the same issue will differ as circumstances change, producing one conclusion in one region of the country and another elsewhere, one ruling today and a different one tomorrow when the foundations of society have shifted and the prevailing social mindset has altered. The Court emphasized that the law itself does not change; instead, the changing conditions of the times affect the application, and Article 14 ultimately reduces to a question of fact that must be resolved by the highest judges whenever a case arises. The Court referred to Lord Sumner’s reasoning in Bowman’s case for support. It further noted that each case typically involves a clash of competing claims and that the essential function of the judiciary is to achieve a balanced accommodation between those competing interests.

The Court remarked that a question can be decided easily only when a single principle is at issue, as noted in the cited authority. However, it pointed out that almost every matter before the courts involves more than one so‑called principle, making resolution difficult. Quoting Judge Leonard Hand of the United States Court of Appeals, the Court observed that the words a judge must interpret are “empty vessels into which he can pour anything he will.” The Court held that such rules serve as useful guides in certain instances but do not reach the core of the problem, and it was not alone in this view, although its approach was described as more direct and fundamental than usual. Citing Chief Justice Patanjali Sastri’s observation in The State of West Bengal v. Anwar Ali Sarkar, the Court stated that reported decisions underline the futility of elaborate formulations and so‑called “tests” in resolving concrete disputes. Referring to its own judgment in Anwar Ali Sarkar’s case, the Court explained that classifications may satisfy all formal rules—being made in good faith, scientific, rational, and directly related to the intended objective—yet still be defective if the underlying objective itself violates Article 14. In such circumstances, the Court held that the offending objective must be struck down, not merely the classification, because the classification is merely the means to achieve the pursued end.

In this matter the Court referred to the observation made by Justice Fazl Ali in the case of Anwar Ali Sarkar, reported at pages 309‑310. The judgment there noted that it had been suggested that because the statute in question was framed in general terms and applied to every person and to every offence, it could not be said to discriminate in favour of or against any particular class or individual. The suggestion further asserted that any allegation of discrimination could be directed only at the executive authority if the statute were misused. The Court found that such reasoning did not resolve the difficulty presented. Accepting that line of argument would permit a situation where, even if discrimination were clearly apparent, the statute could not be challenged merely because it employed general language, and the executive acting under the statute could escape criticism by claiming it was merely following the law. The Court concluded that embracing this argument would render Article 14 of the Constitution ineffective. The Court identified the flaw in the argument as its failure to recognise that the “insidious discrimination” complained of was embedded within the statute itself, because the wording of the Act was such that any discriminatory result could ultimately be traced back to the Act.

The Court also observed that it has not shied away in the past from striking down a statute or an order when the provision confers an unrestricted power, as was the case in the Coal Control matter. In that case the order was annulled, not merely the executive actions taken under the broad authority the law granted. The judgment on page 813 explained that the order placed the entire discretion to grant, withhold or cancel licences in the hands of a single individual, without any mechanism to ensure proper execution of that power or to check against possible injustice arising from its misuse. A similar approach was taken in the decision of State of Madras v. V. G. Row, where, although the case concerned Article 19 rather than Article 14, the principle that an unfettered power must be struck down was applied.

Addressing the present issue, the Court noted that the statute under consideration designates a specific venue for assessment in section 64, which represents the ordinary legal rule for such matters. The language of subsections (1) and (2) is mandatory, stating that the assessment “shall be” made at that venue. The Court explained that when there is doubt or dispute regarding the appropriate venue, such a question can be resolved only after the concerned party has been heard. Following that, the statute provides for the possibility of transfer. The Court opined that it is necessary to have transfer powers, and that merely conferring such powers does not, by itself, violate Article 14, provided the powers are not absolute. At the very least, the Court emphasized that the existence of a transfer mechanism, when properly limited, is permissible.

The Court noted that it is unusual that comparable powers granted to the High Courts and even to this Court under statutes such as the Code of Criminal Procedure are circumscribed by explicit limitations. In contrast, the same statutory framework imposes no comparable restrictions on a Commissioner of Income‑tax or on the Central Board of Revenue. Section 526 of the Criminal Procedure Code provides only limited powers of transfer to the High Court judicial. Article 136 empowers this Court to intervene whenever the High Court exceeds those powers and the situation threatens hardship, injustice, or miscarriage of justice. Furthermore, this Court may exercise a right of transfer under Section 527 only when such a transfer is expedient in the interests of justice. Section 24 of the Civil Procedure Code authorises a broader scope of transfer, but that provision predates the Constitution and remains subject to review by this Court. If a High Court were to act without proper basis, for example by ordering a transfer without recording reasons or hearing the parties when a hearing is possible, this Court could set the matter right. The Court stressed that there is a substantial distinction between granting such powers to a judicial authority and to non‑judicial bodies. Judges must follow recognized procedures and the principles of natural justice unless the statute expressly indicates otherwise in any case. The Court then asked what the position was in the present circumstances, noting that no hearing had been conducted and no reasons had been recorded. Only peremptory orders had transferred the case from one place to another without any warning in the manner observed by the Court. The power conferred by the Act allowed transfer from one end of India to the other, and the Court observed that this power was not idle. In the case before this Court, a transfer had been ordered from Calcutta in West Bengal to Ambala in Punjab. The Court then reflected on the purpose of the Constitution, asking for whose benefit it was enacted and questioning the relevance of fundamental rights discussions. It declared that the Constitution was not intended solely for governments, states, lawyers, politicians, officials, or the highly placed. It also meant to protect ordinary citizens, the poor, the humble, and business owners such as butchers, bakers, and candlestick makers. The judgment stated that the Constitution laid down a rule of law for the land as understood in free democracies worldwide. It affirmed that India was constituted as a sovereign democratic republic and that every page of the Constitution guaranteed individual rights and freedoms while allowing the State to act for the common good. Finally, the Court said it made no apology for drawing inspiration from older democracies, even though Indian law is an amalgam of many sources.

In this case, the Court observed that the nation’s legal system, although drawn from many different sources, rests most firmly on the freedoms that have been recognised in other democratic lands. The Court noted that, while England does not have a codified catalogue of fundamental rights and its Parliament is supreme, the liberty of each subject is guarded there with great vigilance, even alongside parliamentary supremacy. The Court stressed that the essence of a democracy lies in the judicial process, which requires judges who are independent, courageous, and free from executive control, and who have been educated and trained within a tradition of judicial thinking and practice. According to the Court, the principal safeguards of liberty and freedom are located in such an independent judiciary, and it is clear that powers of discrimination that seriously affect the lives and property of individuals must not be placed in the hands of executive or quasi‑executive bodies, even when those bodies perform quasi‑judicial functions, because doing so would grant them an authority that Parliament itself does not possess.

The Court further explained that, under the Constitution, statutes passed by Parliament are subject to judicial review, especially where they are alleged to infringe fundamental rights. Consequently, because Parliament does not enjoy unlimited freedom of action under the Constitution, it cannot lawfully confer such unfettered power on subordinate authorities. The Court illustrated this point by stating that, had the legislature itself enacted a provision identical to the order issued by the Central Board of Revenue—namely, an order transferring the petitioner’s case from one State to another, chosen from among similar cases, without stating any purpose or providing any reason—it would, in the Court’s judgment, be unlawful. The Court expressed inability to see any improvement in the situation simply because the Central Board of Revenue, rather than Parliament, made the order.

To support this view, the Court quoted the learned judge Mukherjea in a judgment that, although not directly on point, contained language apt to the present circumstance. The quotation from Ram Prasad Narayan Sahi v. State of Bihar (1) stated: “It is impossible to conceive of a worse form of discrimination than the one which differentiates a particular individual from all his fellow subjects and visits him with a disability which is not imposed upon anybody else and against which even the right of complaint is taken away.” The passage continued: “It is true that the presumption is in favour of the constitutionality of a legislative enactment and it has to be presumed that a Legislature understands and correctly appreciates the needs of its own People. But when on the face of a statute there is no classification at all, and no attempt has been made to select any individual or group with reference to any differentiating attribute peculiar to that individual or group and not possessed by others, this presumption is of little or no assistance.” The Court also referred to the decision in Liversidge v. Sir John Anderson (1), noting that the learned Law Lords examined whether the British Parliament had, in effect, left the matter to the subjective satisfaction of a Secretary of State, an act that, although permissible under British constitutional arrangements, raised serious concerns about the encroachment on personal liberty.

In the British case that the Court examined, the matter was left to the subjective satisfaction of a Secretary of State. The Court observed that Parliament could lawfully enact such a provision because, under the British system, Parliament is supreme and not bound by a written constitution. However, the Court noted that the resulting encroachment on individual liberty was so serious that the House of Lords was hesitant to endorse the conclusion reached by the majority, as recorded in the leading judgments (1) [1953] S.C.R. 1129, 1143 and (2) [1942] A.C. 206. One of the Law Lords, Lord Atkin, delivered a powerful dissent. In his dissent, cited at page 226, he criticised the order of detention on the grounds that it was “made by an executive minister and not by any kind of judicial officer; it is not made after any inquiry as to facts to which the subject is party, it cannot be reversed on any appeal… It is an absolute power which, so far as I know, has never been given before to the executive.” The Court agreed that this observation illustrated the central issue. It explained that in England a power of this nature may be conferred, but because it profoundly affects personal liberty, English judges vigorously resist any interpretation that would permit such a power, and they only accept it when compelled by overwhelming necessity. The Court then turned to the Indian context, stating that the fundamental freedoms guaranteed by the Constitution are protected with equal intensity. It emphasized that the purpose of the Chapter on Fundamental Rights is precisely to prevent the kinds of liberties‑infringing actions that English judges oppose. In England, judges are tasked with determining whether Parliament has granted wide powers; in India, the judiciary must ascertain whether the Constitution itself has authorized such powers. The Court pointed out that in England a concession of power is recognised only when Parliament employs clear, express and unambiguous language. By contrast, the Indian Constitution contains no such explicit wording; rather, its overall pattern suggests the opposite. Consequently, the Court concluded that if an executive authority, a quasi‑judicial body, or even Parliament were allowed to decide matters based on its own subjective satisfaction, the very purpose of the fundamental rights would be nullified because the courts would be unable to intervene and assess any infringement. The Chapter’s true aim, the Court said, is to limit the powers of all these entities, including Parliament, except when Parliament acts in its constituent capacity. Therefore, any power that depends on the subjective satisfaction of an authority must be ruled out; instead, satisfaction must be objective as described by Lord Atkin, so that the exercise of the power remains subject to judicial review. Finally, the Court expressed the view that a power of transfer may be constitutionally valid only if it is surrounded by reasonable restrictions, the presence or absence of which can ultimately be decided by the courts.

The Court observed that any power exercised by a quasi‑judicial body must be subject to judicial review by the courts. The Court further required that the exercise of such power conform to the fundamental principles of natural justice. Accordingly, the Court stated that the parties whose rights are likely to be affected must be given an opportunity to be heard, whenever such an opportunity can be provided in a reasonable manner. The Court also mandated that the reasons for any order must be recorded in writing, even if the written statement is brief. This requirement ensures that the public can understand that the authority is exercising its powers fairly and properly. The Court emphasized that in a democratic system governed by the rule of law, it is insufficient merely to achieve a substantive just result; the process must also be visible and must generate public confidence. Justice must appear to be done, and the public must feel a sense of security rather than a vague uneasiness that resembles the operation of a Star Chamber. The Court reflected on the nation’s rich and varied heritage, describing it as a treasure that can be preserved only through constant and vigilant protection. The Court warned that any complacency threatens the loss of that heritage, noting that without ongoing vigilance the loss becomes a real possibility. The Court quoted the expression “It can happen here.” The Court then concluded that, for the reasons set out above and because of the observation of Justice Fazl Ali cited earlier, Section 5(7‑A) of the statute exceeds the limits imposed by Article 14 of the Constitution. The Court also held that Section 64(5)(b) is invalid to the extent that it validates an order made under the present version of Section 5(7‑A). Consequently, the Court granted the relief sought by allowing the petition.