19 February 1964
Supreme Court


Case number: Appeal (civil) 491 of 1963






DATE OF JUDGMENT: 19/02/1964


CITATION:  1964 AIR 1179            1964 SCR  (6) 846  CITATOR INFO :  RF         1971 SC2377  (20)  RF         1974 SC   1  (27)  F          1980 SC   1  (23,28,36,44,47)  R          1984 SC 121  (17,23)

ACT: Equal Protection of Laws-Geographical classification due  to historical  reasons whether valid-If  upheld-Time-limit  for adjustments,  if possible--Differential treatment-Mere  plea not  sufficiet-Constitution of India, Art.  14-Bhopal  State Agricultural Income-tax Act, 1953 (Bhopal Act 11 of 1953).

HEADNOTE: The  respondent, a company incorporated in the former  State of  Bhopal, presented a petition in August 1960  under  Art. 226 of the Constitution in the High Court of Madhya  Pradesh for  a  writ restraining the State of  Madhya  Pradesh  from enforcing  the  Bhopal State  Agricultural  Income-tax  Act, 1953,  claiming  that the Act contravened  the  respondent’s right  under  Art. 14 of the Constitution.   By  the  States Reorganisation  Act,  1956  the territory of  the  State  of Bhopal was  847 incorporated  from  November 1, 1956 into the  newly  formed State  of Madhya Pradesh.  The States Reorganisation Act  by s.  119 continued the operation of the laws in force in  the territories in which they were previously in force until the competent  legislature  or  authority  amended,  altered  or modified these laws.  Shortly after the reorganisation.  the Madhya Pradesh Adaptation of Laws Order, 1956 was issued  so as  to make certain laws applicable uniformly to the  entire State  and  later  the Legislature  by  the  Madhya  Pradesh Extension  of Laws Act, 1958 made other alterations  in  the laws  applicable  to the State.  But Bhopal Act 11  of  1953 remained  unamended  or  unaltered: nor  was  its  operation extended to the other areas or regions in the State with the result  that Agricultural Income-tax was levied  within  the territory of the former State of Bhopal and not in the  rest of  the territory of the State of Madhya Pradesh.  The  High



Court  held  that the provisions of Bhopal Act  11  of  1953 contravened  Art. 14 of the Constitution and  observed  that though  the State had removed diversity in some of the  laws of  the  component regions, no attempt was  made  to  remove discrimination  between the territory of the  former  Bhopal State and the rest of the territories of the State of Madhya Pradesh with respect to this law. Held:     (i)   Where   application  of  unequal   laws   is reasonably justified for historical reasons, a  geographical classification founded on those historical reasons would  be upheld.   The  legislature  has always  the  power  to  make special  laws  to  attain particular objects  and  for  that purpose has authority to select or classify persons, objects or  transactions upon which the law is intended to  operate. Differential  treatment  becomes unlawful only  when  it  is arbitrary  or not supported by a rational relation with  the object of the statute. Bhaiyalal Shukla v. State of Madhya Pradesh, [1962] Supp.  2 S.C.R. 257, The State of Madhya Pradesh v. The Gwalior Sugar Co.,  [1962]  2 S.C.R. 619, Maharaj Kumar  Prithivi  Rai  v. State  of Rajasthan, C.A. Nos. 327-328, dated 2-11-1960  and Anand  Prasad  Lakshminivas  Ganeriwal v.  State  of  Andhra Pradesh, A.I.R. 1953 S.C. 853. relied on. State  of  Rajasthan v. Rao Manohar Singhji,  [1954]  S.C.R. 996, explained. (ii) It  would be impossible to lay down any definite  time- limit   within  which  the  State  had  to  make   necessary adjustments  so as to effectuate the equality clause of  the Constitution.   It  cannot be said that  because  a  certain number  of  years have elapsed or that the  State  has  made other  laws uniform, the State has acted improperly in  con- tinuing  an impost which operates upon a class  of  citizens more harshly than upon others. (iii)     To  make  out  a  case  of  denial  of  the  equal protection  of  laws under Art. 14, a plea  of  differential treatment  is  by  itself  not  sufficient.   An   applicant pleading such denial must make out that not only he 848 had been treated differently from others but he has been  so treated  from  persons similarly circumstanced  without  any reasonable  basis,  and   such  differential  treatment   is Unjustifiably made.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 491 of 1963. Appeal from the judgment and order dated January 17, 1961 of the Madhya Pradesh High Court in Misc.  Petition No. 226  of 1960. B.   Sen and I. N. Shroff, for the appellant. S.    T. Desai, J. B. Dadachanji, O. C. Mathur and  Ravinder 4Narain, for the respondent. February 19, 1964.  The Judgment of the Court was  delivered by SHAH,  J.-Bhopal  Sugar Industries Ltd.  hereinafter  called ’the  Company’-was incorporated under the Companies  Act  of the  former  Indian State of Bhopal.  In 1953 the  State  of Bhopal   which  was  then  a  Part  ’C’  State   under   the Constitution of India enacted "The Bhopal State Agricultural Income-tax  Act,  IX of 1953" providing for  imposition  and levy of tax on agricultural income.  The Act was applied  to the territory of the entire State of Bhopal and was  brought into force on July 15, 1953. By  the  States Reorganisation Act, 1956 (No. 67  of  1956),



territory  of the Part ’C’ State of Bhopal was  incorporated with  effect  from November 1, 1956, into the  newly  formed State  of  Madhya  Pradesh.   Section  119  of  the   States Reorganisation  Act, 1956, enacted that by the  constitution of  the  reorganized State, no change in the laws  in  force which  immediately  before  November 1,  1956,  extended  or applied  to  any  constituent  regions,  was  effected,  and territorial  references  in the laws to  an  existing  State shall,  until otherwise provided by a competent  Legislature or  other competent authority be construed as  meaning,  the territories within that State immediately before November 1, 1956.   By the Madhya Pradesh Adaptation of Laws (State  and Concurrent Subjects) Order, 1956, promulgated by the  849 Government  of the State, all laws in force in  the  regions which  were  newly incorporated into the  reorganised  State St,,  of Madhya Pradesh were, with certain  adaptations  and modifications specified in the Order, to remain in force  in those areas until altered, repealed or amended, and by  that Order  the  Bhopal  Act  IX  of  1953  continued  to  remain applicable  in the territory of the former Bhopal State,  in the  new State of Madhya Pradesh.  Later the Legislature  of the   Madhya  Pradesh  State  enacted  the  Madhya   Pradesh Extension of Laws Act, 1958, extending several Acts  Central as  well as State-to the entire territory of the State,  but no  alteration  was  made in the  territorial  operation  of Bhopal  Act  IX of 1953.  It is common ground  that  in  the remaining territory of the State of Madhya Pradesh there was no law providing for levy of tax on agricultural income. The Company paid and continued to pay tax assessed under the Bhopal  State Agricultural Income-tax Act, 1953,  till  some time  in  1960.  On August 4,1960, the Company  presented  a petition  under  Art. 226 of the Constitution  in  the  High Court  of  Madhya Pradesh at Jabalpur for a  writ  declaring that Bhopal Act IX of 1953 was unconstitutional and void  as being  discriminatory and for appropriate directions,  writs or  orders  restraining  the State of  Madhya  Pradesh  from giving  effect  to the Act.  It was claimed by  the  Company that  Bhopal  Act IX of 1953 deprived the residents  of  the territory to which it applied, of the protection of Art.  14 of the Constitution.  The High Court upheld the plea of  the Company  and issued a writ restraining the State  of  Madhya Pradesh  from enforcing the provisions of Bhopal Act  IX  of 1953, observing that the Act was "in clear contravention  of the petitioner’s right under Art. 14 of the Constitution and must be declared void". Authority of the Part C State of Bhopal to enact the Act, as it  originally  stood,  is  not  in  dispute,  nor  are  the provisions  of s. 119 of the States Reorganisation  Act  and the Madhya Pradesh Adaptation of Laws (State and  Concurrent Subjects) Order, 1956, challenged as incompetent.  The  plea that there is infringement of Art. 14 of the Constitution is advanced on the sole ground that in the reorganized State of Madhya Pradesh formed under the 134-159 S.C.-54 850 States Reorganisation Act, 1956, agricultural income-tax  is ,,levied within the territory of the former State of  Bhopal and  not in the rest of the territories of  Madhya  Pradesh. Prima  facie,  a differential treatment is accorded  by  the State of Madhya Pradesh to persons carrying on  agricultural operations in the Bhopal region, because the State  subjects them to pay tax on agricultural income, which is not imposed upon  agricultural income earned in the rest of  the  State. But that by itself cannot be a ground for declaring the  Act



ultra  vires.  The State is undoubtedly enjoined by Art.  14 of  the  Constitution  not  to  deny  to  any  person  equal protection  of the laws within the territory, but  a  proper classification bearing a reasonable and just relation to the object sought to be achieved by the statute does not on that account become impermissible.  All persons who are similarly circumstanced  as regards a subject matter are  entitled  to equal  protection  of  the laws, but it  is  not  predicated thereby  that  every  law must  have  universal  application irrespective of dissimilarity of objects or transactions  to which  it  applies, or of the nature or attainments  of  the persons to whom it relates.  The Legislature has always  the power to make special laws to attain particular objects  and for  that  purpose  has  authority  to  select  or  classify persons,  objects  or  transactions upon which  the  law  is intended   to  operate.   Differential   treatment   becomes unlawful  only  when it is arbitrary or not supported  by  a rational  relation  with the object of  the  statute.   This Court  has held in several cases, that where application  of unequal laws is reasonably justified for historical reasons, a  geographical classification founded on  those  historical reasons would be upheld: Bhaiyalal Shukla v. State of Madhya Pradesh(1): The State of Madhya Pradesh v. The Gwalior Sugar Co.  Ltd.  and  others(2): Maharaj  Kumar  Prithvi  Rai  and another v. The State of Rajasthan and others ( 3 ) and Anand Prasad Lakshminiwas Ganeriwal v. State of Andhra Pradesh(4). The decision of this Court in The State of Rajasthan v.  Rao Manohar Singhji(5) does not lay down (1)  [1962] Suppl. 2 S. C. R. 257. (2)  [1962] 2 S. C. R. 619. (3)  C.A. Nos. 327-328 of 1956 decided on Nov. 2, 1960. (4)  AIR 1963 S. C. 853. (5)  [1954] S. C. R. 996.  851 any  contrary  principle.  In that case the  Court  accepted that  historical reasons may justify differential  treatment of  separate  geographical  regions  provided  it  bears   a reasonable  and  just relation to the matter in  respect  of which  it is proposed, but the differentiation in that  case was regarded as infringing the equal protection of the  laws because  members of the same class were treated in a  manner ex  facie  discriminatory, and no attempt was  made  by  the State  to justify the treatment as founded upon  a  rational basis having a just relation to the impugned statute. It  is necessary to bear in mind that the  various  adminis- trative units which existed in British India were the result of  acquisition of territory by the East India Company  from time  to  time.   The merger of  Indian  States  since  1947 brought  into  the  Dominion of  India  numerous  Unions  or States,  based upon arrangements ad hoc, and  the  constitu- tional set up in 1950 did not attempt, on account of diverse reasons mainly political, to make any rational rearrangement of   administrative  units.   Under  the   Constitution   as originally  promulgated  there existed three  categories  of States,  beside  the  centrally administered  units  of  the Andaman  and  Nicobar  islands.  Part ’A’  States  were  the former Governors’ Provinces, with which were merged  certain territories   of   the   former  Indian   States   to   make geographically  homogeneous units : Part ’B’  States  repre- sented  groups  formed out of 275 bigger  Indian  States  by mutual  arrangement into Unions : Part ’C’ States  were  the former  Chief  Commissioners’ Provinces.  These  units  were continued   under  the  Constitution  merely  because   they formerly  existed.   Later  an attempt was  made  under  the States  Reorganisation  Act to rationalize  the  pattern  of



administration  by reducing the four classes of  units  into two-States,  and Union territories-and by making a  majority of  the  States homogeneous linguistic units.   But  in  the States so reorganized were incorporated regions governed  by distinct  laws,  and by the mere process  of  bringing  into existence  reorganized administrative units,  uniformity  of laws  could  not  immediately  be  secured.   Administrative reorganization evidently could not await adaptation of laws, so as to make them uniform, and 852 immediate abolition of laws which gave distinctive character to  the regions brought into the new units  was  politically inexpedient  even if theoretically possible.  An attempt  to secure uniformity of laws before reorganisation of the units would  also  have  considerably  retarded  the  process   of reorganisation.   With  the object of effectuating  a  swift transition,  the  States Reorganisation Act made  a  blanket provision in s. 119 continuing the operation of the laws  in force  in the territories in which they were  previously  in force  notwithstanding the territorial  reorganisation  into different   administrative   units   until   the   competent Legislature or authority amended, altered or modified  those laws. The  reorganized  State  of Madhya  Pradesh  was  formed  by combining  territories of four different  regions.   Shortly after  reorganisation, the Governor of the State issued  the Madhya  Pradesh  Adaptation of Laws  (State  and  Concurrent Subjects) Order, 1956, so as to make certain laws applicable uniformly  to the entire State and later the Legislature  by the  Madhya Pradesh Extension of Laws Act, 1958, made  other alterations in the laws applicable to the State.  But Bhopal Act  IX of 1953 remained unamended and unaltered :  nor  was its  operation  extended to other areas or  regions  in  the State.  Continuance of the laws of the old region after  the reorganisation  by s. 119 of the States  Reorganisation  Act was by itself not discriminatory even though it resulted  in differential treatment of persons, objects and  transactions in  the new State, because it was intended to serve  a  dual purpose-facilitating  the  early  formation  of  homogeneous units  in the larger interest of the Union, and  maintaining even  while merging its political identity in the new  unit, the distinctive character of each region, till uniformity of laws was secured in those branches in which it was expedient after full enquiry to do so.  The laws of the regions merged in the new units had therefore to be continued on grounds of necessity  and  expediency.   Section  119  of  the   States Reorganisation  Act  was intended to  serve  this  temporary purpose,  viz.,  to  enable the new units  to  consider  the special circumstances of the diverse units, before launching upon  a  process of adaptation of laws so as  to  make  them reasonably uniform, keeping in view the special needs 853 of  the  component regions  and  administrative  efficiency. Differential treatment arising out of the application of the laws  so continued in different regions of the same  reorga- nised  State,  did  not therefore  immediately  attract  the clause of the Constitution prohibiting discrimination.   But by  the  passage of time, considerations  of  necessity  and expediency  would  be  obliterated, and  the  grounds  which justified   classification  of  geographical   regions   for historical  reasons  may  cease  to  be  valid.   A   purely temporary  provision  which  because  of  compelling  forces justified differential treatment when the Reorganisation Act was   enacted  cannot  obviously  be  permitted  to   assume permanency,  so  as to perpetuate that treatment  without  a



rational  basis to support it after the  initial  expediency and necessity have disappeared. The  High  Court  observed that even though  the  State  had enacted the Madhya Pradesh Extension of Laws Act, 1958,  and had  removed diversity in some of the laws of the  component regions,  no  attempt  was  made  to  remove  discrimination between  the  territory of the former Bhopal State  and  the rest  of the territories of the State of Madhya  Pradesh  in the matter of levy of agricultural income-tax.  This in  the view  of the High Court was unlawful because the  State  had since  the  enactment  of  the  States  Reorganisation   Act sufficient  time  and  opportunity  to  decide  whether  the continuance  of the Bhopal State Agricultural Incometax  Act in the Bhopal region would be consistent with Art. 14 of the Constitution.   We are unable to agree with the view of  the High Court so expressed.  It would be impossible to lay down any  definite time-limit within which the State had to  make necessary  adjustments  so  as to  effectuate  the  equality clause  of  the Constitution.  That initially there  was  a’ valid  geographical  classification of regions in  the  same State justifying unequal laws when the State was formed must be accepted.  But whether the continuance of unequal laws by itself sustained the plea of unlawful discrimination in view of  changed circumstances could only be ascertained after  a full  and  thorough  enquiry into  the  continuance  of  the grounds on which the inequality could rationally be founded, and  the change of circumstances, if any. which  obliterated the compulsion of expediency 854 and necessity existing at the time when the.  Reorganisation Act was enacted. Unfortunately  there was no clear perception by the  parties of what has to be pleaded and proved to establish a plea  of denial of equal protection of the laws.  The Company  merely assumed  that  the existence of a law relating  to  taxation which imposed agricultural income-tax in the Bhopal  region, there being no similar levy in the rest of the State, was in law discriminatory.  That is clear from the petition of  the Company  which  merely asserted that the  Act  discriminated between  the Company and other owners of sugarcane farms  in the  State  of Madhya Pradesh, because it  singled  out  the Company  and other agriculturists in the Bhopal region  from other agriculturists and sugarcane farm owners in the  State of  Madhya Pradesh and subjected them to  liability  without any  reasonable  basis  for  classification.   The   Company therefore  baldly submitted that after the incorporation  of the  Bhopal  region in the reorganised State, the  State  of Madhya Pradesh ought to have suitably modified the Act so as to make it applicable to all residents alike and by allowing the  Act to operate without any modification, the State  had violated the fundamental right of the Company under Art.  14 of  the Constitution.  The State of Madhya Pradesh  did  not file any affidavit in reply before the High Court, and chose to defend the petition as if its decision depended on a pure question  of law, that if for historical reasons the Act  in operation in a -region incorporated in the new State was not discriminatory  at  the date when  the  reorganisation  took place,  it can never become discriminatory thereafter.   The assumptions made by both the parties appear to be erroneous. The  High  Court  was of the view that  after  expiry  of  a reasonable period during which the State has the opportunity of  making  necessary  adaptations ,so as to  make  the  Act applicable  to the entirety of the new State, if  the  State fails  to  adapt the law,  historical  considerations  which initially  justified  the classification must be  deemed  to



have  disappeared.  That assumption without further  enquiry may not be accepted as correct.        It was necessary  for the  High Court to investigate whether at the date when  the petition was filed, special treatment of the 855 Bhopal region in the matter of levy of agricultural  income- tax had a rational basis.  That necessitated an enquiry into the  structure of tax burden imposed directly or  indirectly on  or in respect of agricultural land or income from it  in the  different  regions  constituting  the  State.   If  for instance,  on  account of disparity in the  impost  of  land revenue  and related taxes on land and income from  land  in other regions, the ultimate burden on persons in the  Bhopal region  who  were subjected to agricultural  income-tax  and agricultural  land owners in the rest of the State  did  not disclose a pattern of wide variations, the mere existence of agricultural  income  impost in one region, and  absence  of such impost in another region may not necessarily justify an inference  of  unlawful discrimination.   It  was  therefore necessary  to  ascertain the difference in the  overall  tax liability between persons similarly situated in the State of Madhya  Pradesh in the matter of levy of  agricultural  tax. For that purpose an investigation was necessary whether  the incidence of total burden on agriculturists was so desparate that an inference of unlawful discrimination may  reasonably be  made.   The High Court had to ascertain  the  impact  of diverse land taxes imposed on agricultural land in the  four regions of the State, and whether the burden between persons similarly  circumstanced was substantially  dissimilar.  and whether continuance of dissimilar levies was justified.   If upon a thorough examination of the pattern of land taxes  in different  regions  of the State, it appeared to  the  Court that  an  unreasonably  larger  burden  was  sought  to   be continued   upon   this  region,  without   any   apparently justifiable  ground,  an  inference  of  discrimination  may arise. In  adjudging  reasonableness  of  classification  for   the purpose of taxation, the Courts recognise greater freedom in the  Legislature and if the statute discloses a  permissible policy  of taxation, the Courts will uphold it.  The  Courts undoubtedly  lean more readily in favour of the  presumption of constitutionality of a taxing statute, but that is not to say  that  they  will not strike down a  statute  unless  it appears  that  the  tax was imposed  deliberately  with  the object   of   differentiating  between   persons   similarly circumstanced.   We may state that the observations  to  the contrary that it 856 matters of taxation a statute may not be struck down "unless the  Court  finds  that" the tax "has been  imposed  with  a deliberate  intention of differentiating between  individual and  individual"  in  The State of  Madhya  Pradesh  v.  The Gwalior  Sugar  Co.  Ltd. and another(1)  was  not  strictly necessary  for deciding that case, and was not  intended  to lay  down any special test applicable to taxing statutes  in their relation to Art. 14 of the Constitution. To  arrive  at  a conclusion adverse to  the  State  it  was therefore  necessary to decide whether  the  differentiation arising   from   the  continuation  of  the  levy   of   the agricultural  income-tax was unfair and not supported  by  a reasonable  standard,  and the State  having  the  requisite information  and opportunity to make the imposts  reasonably uniform,  had failed or neglected to do so.  No set  formula can be devised for solving a problem of this character.   It cannot  be said that because a certain number of years  have



elapsed  or that the State has made other laws uniform,  the State  has  acted improperly in continuing an  impost  which operates  upon  a class of citizens more harshly  than  upon others. The  petition filed by the Company was singularly  deficient in  furnishing particulars which would justify the  plea  of infringement  of Art. 14 of the Constitution.  It cannot  be too strongly emphasized that to make out a case of denial of the  equal  protection  of the laws under  Art.  14  of  the Constitution, a plea of differential treatment is by  itself not sufficient.  An applicant pleading that equal protection of  the laws has been denied to him must make out  that  not only he had been treated differently from others but he  has been so treated from persons similarly circumstanced without any  reasonable  basis, and such differential  treatment  is unjustifiably made.  A mere plea that the Company and  other agriculturists within the region of the former Bhopal  State had   to  pay  the  agricultural  income-tax,  whereas   the agriculturists  elsewhere  had not to pay such tax,  is  not sufficient to make out a case of infringement of the  funda- mental right under Art. 14 of the Constitution. The State also did not place evidence before the High Court, which would in the very nature of things be in its (1)  [1962] 2 S.C.R. 619.  857 possession, showing a rational relation between the  differ- ential  treatment  and the classification and has  also  not placed  any material before the Court throwing light on  the question whether the continuance of the tax was justified  : it  merely chose to plead its case as on a  demurrer.   Both the State and the Company have by inadequate appreciation of the true position in law contributed to the manner in  which the  trial of the petition has proceeded.  We would  in  the circumstances not be justified in dismissing the petition on a technical view of the burden of proof.  We think that this is  a  case  in  which  the  parties  should  be  given   an opportunity  to plead their respective cases adequately  and to  go  to trial after the requisite evidence  which  has  a bearing is brought before the Court. We  accordingly  allow the appeal, set aside the  order  and remand  the  case for retrial to the High Court.   The  High Court, will, if the Company so desires, give opportunity  to the Company to amend its petition so as to adequately  plead its  case of infringement of the fundamental right to  equal protection  of the laws supported by necessary  particulars. The  High Court will also give opportunity to the  State  to file its affidavit in reply and to place all such  materials as  it may rely upon the plea set up by the Company.   After the  pleadings are completed and the evidence is brought  on the  record, the High Court will proceed to decide the  case according to law.  Costs in this Court will be the costs  in the petition before the High Court. Appeal allowed.