Corporation of Calcutta vs Calcutta Tramways Co. Ltd

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

Court: supreme-court

Case Number: Criminal Appeal No. 117 of 1961

Decision Date: 04/10/1963

Coram: K.N. Wanchoo, P.B. Gajendragadkar, J.C. Shah, Raghubar Dayal

In this case the Court recorded that the respondent company obtained its electricity from the Calcutta Electric Supply Company and converted the alternating current to direct current in its transformer house in order to operate its tram‑cars. The appellant Corporation held the view that the use of those premises as a transformer house presented a danger to life, health and property and was likely to create a nuisance; consequently the Corporation demanded that the respondent obtain a licence under section 437(1)(b) of the Calcutta Municipal Act, 1951. The respondent declined to apply for such a licence and was therefore prosecuted under section 537 of the same Act. The trial magistrate ruled in favour of the appellant, convicted the respondent and imposed a fine of one hundred rupees. The respondent then filed a revision petition before the Calcutta High Court. The High Court examined the provision in section 437(1)(b) which declared that the opinion of the Corporation “shall be conclusive and shall not be challenged in any court”. The High Court held that this clause imposed an unreasonable restriction on the fundamental right guaranteed by article 19(1)(g) of the Constitution of India, and because the clause was not severable, the entire section was declared unconstitutional. The appellant appealed this decision to the Supreme Court. Section 437(1)(b) of the Act provided that no person could use any premises for any purpose which, in the opinion of the Corporation, was dangerous to life, health or property or likely to create a nuisance, unless a licence was obtained, and that the Corporation’s opinion was conclusive and not subject to judicial review. The Supreme Court considered that the clause granting the Corporation’s opinion a conclusive and non‑justiciable character operated as a procedural restriction that fell within the meaning of article 19(6) and was therefore unreasonable. The Court observed that by making the Corporation’s opinion binding even if unreasonable, the provision placed trade and business within the municipal limits at the mercy of the Corporation, regardless of whether the Corporation acted in good faith. Consequently, the Court held that the power conferred by the parenthetical clause was an unreasonable restriction on the constitutional right and must be struck down.

The Court observed that the decision in Vellukunnel v. Reserve Bank of India must be limited to the particular circumstances of banking trade and cannot be automatically applied to other matters that contain similar statutory language; each case must be examined on its own facts. The Court therefore held that the precedent set in Joseph Kuruvilla Vellukunnel v. The Reserve Bank of India, [1962] Supp. 3 S.C.R. 632, was not applicable to the present controversy. Applying the principles laid down by this Court, the Court concluded that the parenthetical clause in section 437(1)(b) could be severed from the remainder of the provision, and consequently only that clause, and not the entire section, should be struck down. The Court found that the legislative scheme of the section was not so integrated as to require the whole provision to operate as a single unit. In reaching this conclusion, the Court relied upon the earlier decisions in Dr. N.B. Khare v. State of Delhi, [1950] S.C.R. 519 and R.M.D. Chamarbaugwalla v. Union of India, [1957] S.C.R. 930.

The appeal arose under criminal appellate jurisdiction, identified as Criminal Appeal No. 117 of 1961, and was taken from the judgment and order dated 21 March 1960 of the Calcutta High Court in Criminal Revision No. 376 of 1957. Counsel for the appellant and counsel for the respondent were instructed, and the judgment was delivered on 4 October 1963 by Justice Wanchoo. The respondent, Calcutta Tramways Co. Ltd., operated tramcars within the city of Calcutta and obtained bulk electricity from the Calcutta Electric Supply Company. The electricity was converted from alternating current to direct current at high voltage in a transformer house located at 129/4‑A and 130‑D, Cornwallis Street, for use in electric traction of the tramcars. The appellant, the Corporation, alleged that the transformer house was being used for a purpose dangerous to life, health, or property and likely to create a nuisance. Accordingly, the Corporation ordered the respondent to obtain a licence pursuant to section 437(1)(b) of the Calcutta Municipal Act, No. XXXIII of 1951, and fixed a fee for the licence. The respondent refused to obtain the licence and was consequently prosecuted under section 537 of the Act. In its defence, the respondent raised four points: (i) that the prosecution had not been properly instituted; (ii) that the transformer house was neither a factory, a place of trade, nor a public resort and therefore section 437(1)(b) did not apply; (iii) that the conversion of high‑voltage alternating current to lower‑pressure direct current did not constitute a use dangerous to life, health, or property nor was it likely to create a nuisance; and (iv) that because section 437(1)(b) gave the Corporation absolute authority to form the required opinion, the provision constituted an unreasonable restriction on the freedom of trade guaranteed by Article 19(1)(g) of the Constitution and was thereby unconstitutional.

The magistrate first found that the complaint had been filed in accordance with the procedural requirements. He then concluded that the transformer house at issue was being used for the trade in which the respondent was engaged, and therefore fell within the scope of section 437 (1) (b) of the Calcutta Municipal Act. The magistrate further held that the Corporation had properly formed an opinion that the operation of the transformer house was likely to endanger life, health or property and was also likely to create a nuisance. Although section 437 (1) (b) declares the Corporation’s opinion to be conclusive and final, the magistrate expressed that there was no doubt that the use of the transformer house indeed posed such dangers and nuisances. On that basis, the magistrate upheld the validity of the provision and pronounced the respondent guilty, imposing a fine of one hundred rupees.

The respondent subsequently filed a revision petition before the High Court, primarily contending that the provisions of section 437 (1) (b) were unconstitutional. The High Court agreed with this contention, observing that because the statute makes the Corporation’s opinion conclusive and immune from judicial review, it creates an unreasonable restriction on the fundamental right to carry on trade, commerce or business guaranteed by Article 19 (1) (g) of the Constitution. The High Court further ruled that the clause rendering the Corporation’s opinion non‑justiciable is so integrated into section 437 (1) (b) that it cannot be severed from the rest of the provision; consequently, the entire subsection was struck down as unconstitutional. The respondent had also raised the argument that the licence fee of five hundred rupees amounted to a tax which neither the State Legislature nor the Corporation of Calcutta was authorized to levy. The High Court declined to address this issue, holding it subsidiary to the decisive determination on the constitutionality of the subsection.

The present appeal was brought before this Court on a certificate of appeal issued by the High Court. Two principal questions arise for determination: first, whether the provision in section 437 (1) (b) that makes the Corporation’s opinion conclusive and non‑justiciable constitutes an unreasonable restriction on the right to carry on trade, commerce or business under Article 19 (1) (g); and second, assuming that such a restriction exists, whether the clause concerning conclusiveness and non‑justiciability is severable from the remainder of the subsection. Section 437 (1) (b) reads: “No person shall use or permit or suffer to be used any premises for any of the following purposes without or otherwise than in conformity with the terms of a licence granted by the Commissioner in this behalf, namely … (b) any purpose which is, in the opinion of the Corporation (which opinion shall be conclusive and shall not be challenged in any court) dangerous to life, health or property, or likely to create a nuisance.”

In this matter the appellant contended that although the opinion of the Corporation was declared conclusive and beyond judicial review, the restriction on trade that followed from levying a licence‑fee on the basis of such conclusiveness and non‑justiciability constituted a reasonable limitation pursued in the interest of the general public. The respondent, by contrast, argued that by rendering the Corporation’s opinion conclusive and non‑justiciable, the statute allowed any corporate view—no matter how capricious or unreasonable—to prevail, thereby imposing an unreasonable restriction on the constitutional right to carry on any trade, business, or profession guaranteed by Article 19(1)(g). To support its position, the respondent relied on the Supreme Court’s decision in Joseph Kuruvilla Vellukunnel v. Reserve Bank of India. It was submitted that the mere fact that the Corporation’s opinion is made conclusive and non‑justiciable does not, by itself, render the provision unreasonable with respect to the right to carry on trade. The decision cited involved Section 38(1) of the Banking Companies Act, which provided that, notwithstanding any provision of the Companies Act 1956, the High Court must order the winding‑up of a banking company when the Reserve Bank of India makes an application under Section 37 or under Section 38(1) itself. In that case the provision was challenged on the ground that it amounted to an unreasonable restriction on the right to engage in banking, because the procedure denied the principles of natural justice, chiefly by depriving the affected company of access to the courts. Traditionally, a court would first be required to be satisfied, after a fair trial, that winding‑up was justified; the company would be given an opportunity to show cause and would retain a right of appeal. By a majority, the Court held that, given the historical role of the Reserve Bank as the central bank of India, its position as a banker’s bank, its control over banking companies, its authority to issue and cancel banking licences, and its numerous other powers, the provision could not be struck down as unreasonable. The Court observed that the Reserve Bank would seek winding‑up only when it was convinced that a banking company was unsafe or “tottering,” and that such action was taken in the interest of depositors. The Court further expressed the view that the reasoning in that case was confined to the very special circumstances of the banking trade, which is a highly sensitive credit institution, and to the unique position occupied by the Reserve Bank in India’s banking system. Consequently, that decision should not be extended automatically to other statutes that make opinions conclusive and non‑justiciable, and each such provision must be examined on its own facts to determine whether the restriction it creates is reasonable in the circumstances of the case.

The Court observed that the earlier decision concerning the Reserve Bank could not be applied automatically to every situation where statutes contain similar clauses excluding judicial jurisdiction. In each such case, the Court must examine the merits to determine whether the restriction created by a clause that makes a decision conclusive and non‑justiciable is a reasonable limitation in the circumstances of that particular case. Accordingly, the Court examined whether, in the present matter, the restriction contained in the parenthetical clause of section 437(1)(b), which renders the opinion of the municipal Corporation conclusive and non‑justiciable, constituted a reasonable restriction on the right to carry on trade guaranteed by Article 19(1)(g) of the Constitution. The Court referred to the decision in Dr N.B. Khare v. State of Delhi, where it was held that a law imposing reasonable restrictions on the rights conferred by Article 19 may contain both substantive and procedural provisions, and that the reasonableness of each part must be assessed. The parenthetical clause in question was characterised as a procedural provision, and the Court considered whether such a procedural provision was reasonable in the public interest. It rejected the submission that the Corporation, being an elected body, would necessarily exercise the power under section 437(1)(b) reasonably, noting that this argument did not answer the fundamental question of reasonableness. While the Court acknowledged that a malicious (malafide) exercise of the power would be struck down, it observed that malice is difficult to prove and that the Corporation could act reasonably or, knowing that its opinion was conclusive and non‑justiciable, could act arbitrarily or capriciously without any malicious intent. The defect in the provision, the Court explained, was that it rendered the Corporation’s opinion final and beyond judicial review, irrespective of whether the opinion was capricious, arbitrary, or unreasonable on its face. Granting such power to a municipal body, thereby imposing restrictions on the carrying on of trade, could not be regarded as a reasonable restriction within the meaning of Article 19(6). This arrangement placed the right to conduct trade for persons residing within the municipal limits entirely at the mercy of the Corporation, which could exercise the power arbitrarily or unreasonably, even if not maliciously. Consequently, the Court agreed with the High Court that the parenthetical clause in section 437(1)(b) amounted to an unreasonable restriction on the constitutional right to trade.

The Court held that the provision in question must be considered an unreasonable restriction on the right to carry on trade. The next issue was whether the parenthetical clause could be severed from the remainder of the provision. The Court observed that, under the Calcutta Municipal Act of 1923 – which the present Act had repealed – the comparable provision was found in section 386 and it did not contain any term making the Corporation’s opinion conclusive and non‑justiciable. Likewise, other statutes do not contain a clause that renders the Corporation’s opinion conclusive and beyond judicial review. For example, the Madras City Municipal Act, No IV of 1919, in section 287 read with Schedule VI, authorized licences for any place used for any purpose in any area where, in the Commissioner’s opinion, the use was likely to endanger human life or to create a nuisance. In a similar vein, the Delhi Municipal Corporation Act, No 66 of 1957, in section 417(1), provides that no person shall use or permit the use of premises for any purpose which, in the Commissioner’s opinion, is dangerous to life, health or property or is likely to create a nuisance. By citing these statutes and the earlier Calcutta Municipal Act, the Court demonstrated that it is feasible to operate a provision of this kind without rendering the Corporation’s opinion conclusive and non‑justiciable. Consequently, the Court turned to the question of whether the clause contained in the parenthetical part of section 437(1)(b) could be severed from the rest of the provision. To resolve this, the Court referred to the principles of severability laid down in R.M.D. Chamarbaugwalla v. Union of India, where seven principles were articulated, three of which were pertinent. The first principle states that, in determining whether the valid portions of a statute are separable from the invalid portions, the legislature’s intention is the decisive factor, and the test is whether the legislature would have enacted the valid portion had it known that the remaining part was invalid. The second principle explains that if the valid and invalid provisions are so intertwined that they cannot be separated, the invalidity of the portion leads to the invalidity of the entire Act; however, if they are distinct and separate such that, after striking out the invalid part, the remainder constitutes a complete and independent code, then the remainder may survive. The third principle adds that even when the valid provisions are distinct from the invalid ones, if they form part of a single scheme intended to operate as a whole, the invalidity of one part may still cause the whole scheme to fail. The Court therefore set out these principles as the framework for assessing the severability of the parenthetical clause in section 437(1)(b).

Learned counsel for the appellant argued that the parenthetical clause contained in section 437 (1) (b) could be severed on the basis of the first two principles previously set out. In contrast, learned counsel for the respondent contended that, because of the third principle, the parenthetical phrase dealing with conclusiveness and non‑justiciability could not be separated from the remainder of the provision. The High Court had additionally held that, even if the parenthetical phrase were distinct from the rest of the subsection, the entire provision of section 437 (1) (b) formed a single scheme meant to operate as a whole; consequently, the High Court concluded that the whole subsection should be struck down. The Court finds the High Court’s view to be erroneous. It notes that the earlier Act governing this Corporation did not contain such a provision, and no party had argued that the earlier law was ineffective without it. The pivotal question, therefore, is whether the legislature, when enacting section 437 (1) (b), would have legislated the remaining portion had it known that the parenthetical clause was invalid. The Court answers in the affirmative. In view of the analogous provision in the Calcutta Municipal Act, 1923, it cannot be accepted that the legislature would have omitted licensing powers for premises deemed dangerous to life, health or property, or likely to cause a nuisance, merely because the Corporation’s opinion was to be made conclusive and non‑justiciable. The earlier law contained a similar licensing provision without the non‑justiciable opinion clause, demonstrating that such a licensing power is a reasonable measure for the public interest. Accordingly, the first proposition among the three set out earlier unquestionably applies, and the legislature would have enacted the remainder of section 437 (1) (b) absent the parenthetical phrase.

The Court also holds that the second principle is satisfied. The valid and invalid parts of section 437 (1) (b) are not inseparably intertwined; rather, they are distinct and can be separated. If the parenthetical clause on conclusiveness and non‑justiciability is removed, the residual language constitutes a complete and functional code for its specific purpose, independent of the invalid portion. Hence, the remaining portion of section 437 (1) (b) is capable of standing on its own and should be upheld despite the invalidity of the parenthetical clause. The Court further concludes that the third proposition does not apply in these facts, as the valid and invalid provisions, although part of the same subsection, do not together form a single, indivisible scheme intended to operate as a whole. The requirement that the Corporation’s opinion be conclusive and beyond judicial review is a separate matter and does not embed itself within the broader licensing scheme to such an extent that severability would be impossible.

In this matter, the Court concluded that the substantive provision contained in section 437(1)(b) may be maintained despite the invalidity of the parenthetical phrase that declares the corporation’s opinion to be conclusive and non‑justiciable. The Court further expressed the view that the third doctrinal proposition, which deals with situations where valid and invalid provisions together form a single, indivisible scheme, does not apply to the present facts. That third proposition is relevant only when both the lawful and the unlawful clauses, even if distinct, are intended to operate as an integrated whole; if such integration truly existed, the entire scheme would have to be invalidated and severability could not be entertained. The Court observed, however, that making a particular opinion conclusive and beyond judicial review is a matter distinct from the licensing scheme embodied in section 437(1)(b) and is not so woven into the provision that it becomes an essential component of the licensing framework. Reading section 437(1)(b) as a whole, the Court could not discern a single, unified scheme that the legislature intended to function in its entirety. This observation reflects another aspect of the first proposition concerning legislative intent, leading the Court to determine that the legislature did not design the provision as a monolithic scheme requiring collective operation. Consequently, the Court found no difficulty in holding that the parenthetical clause does not belong to any indivisible scheme that would demand the survival of the whole provision or its total nullification. Accordingly, the Court held that the words “which opinion shall be conclusive and shall not be challenged in any court” constitute a severable element that may be struck down while leaving the remainder of section 437(1)(b) intact. The Court noted that the respondent did not rely on any of the additional principles articulated in R.M.D. Chamarbaugwalla’s case, reported in 1957 S.C.R. 930. As a result, the Court directed that the High Court’s order, which had annulled the entire section 437(1)(b), must be set aside and that only the parenthetical portion rendering the corporation’s opinion conclusive and non‑justiciable should be declared unconstitutional as an unreasonable restriction on the right to carry on trade guaranteed under Article 19(1)(g). In the view adopted by the Court, the judgment of the High Court therefore required reversal. The respondent further contended that, because the magistrate had considered the matter of alleged looting, the corporation’s opinion should have been given an opportunity before the magistrate to demonstrate that the corporation’s view—that the use of the premises was dangerous to life, health, or property or likely to cause a nuisance—was erroneous. It is also urged that the point whether the

In the matter before the Court, the question arose as to whether the levy described as an impost in the present case should be characterised as a fee that was properly so named or as a tax that had been taken before the High Court. The Court observed that this issue was still open and that the respondent ought to be afforded an opportunity to raise this point before the Magistrate. Accordingly, on the basis of this contention, the Court set aside the order previously made by the Magistrate. The case was then remanded to the same Magistrate for a fresh determination to be made in accordance with law, and the Magistrate was instructed to consider the two points that had been identified, namely the nature of the impost and the related procedural implications. The Court further directed that each party would be at liberty to produce any relevant evidence that they deemed appropriate for the purpose of establishing their respective positions on these matters. The remand order was thus issued, directing that the case return to the Magistrate for adjudication after the parties had the chance to adduce the evidence they considered necessary. The judgment concluded by formally remanding the case for further consideration.