Case: Mst. Jadao Bahuji Vs. Municipal Committee, Khandwa And Another

2. Though the facts necessary to decide the appeal lie within a comparatively narrow compass, the case itself has had a long and somewhat unique history. In July, 1922, the Municipal Committee, Khandwa, resolved to impose a tax on the trade of ginning and pressing cotton by means of steam or mechanical process, and after sundry procedure, a notification was published on November 25, 1922, in the Central Provinces and Berar Gazette, imposing the tax. Certain traders including the appellant affected by the tax, filed suits seeking injunction against the Municipal Committee on the ground that the tax was invalid and illegal. Meanwhile, the Municipal Committee had served notices on the present appellant, and demanded and recovered the tax for 1923-24. The appellant then filed a second suit for refund of the tax paid by her on the ground that the imposition of the tax was illegal and ultra vires. The suits had varying fortunes in the Courts in India, till they reached the Privy Council. The Judicial Committee by its first decision remitted the cases for additional evidence while the appeals were kept pending. The decision of the Judicial Committee is reported in Radhakishan Jaikishan v. Khandwa Municipal Committee, 61 Ind App 125 : (AIR 1934 PC 62  ). After the additional evidence was received, the Judicial Committee pronounced its decision, which is reported in Radhakishan Jaikishan v. Municipal Committee, Khandwa, 64 Ind App 118The Judicial Committee held that the tax was not validly imposed by the Municipal Committee, and reversing the decree of the Judicial Commissioner, decreed the suits3. The Provincial Legislature then passed the Khandwa Ginning and Pressing Cotton Tax Validating Act 8 of 1938, validating the tax. The Act contained only one operative section, which read as follows :2. Notwithstanding anything contained in the Central Provinces Municipal Act, 1903, or the Central Province Municipalities Act, 1922, or any decree or order of a civil court, the tax on the trade of ginning and pressing cotton by means of steam or mechanical process within the limits of the Khandwa municipality which was imposed by Notification No. 2639-1298-VIII, dated the 21st November, 1922, shall be deemed to have been legally imposed from the date of its imposition to the date on which this Act comes into forceExplanation - All decrees or orders of a civil court directing a refund of the tax already recovered by the committee of the said municipality or restraining the committee from recovering the tax shall be deemed to have no legal effectThe appellant had, in the meanwhile, applied for the execution of the decrees, and the Validating Act was pleaded in bar. This plea was upheld by the executing Court, but the High Court at Nagpur, on appeal, rejected it and ordered the executions to proceed. The decision of the High Court is reported in Firm Radhakishan Jaikishan v. Municipal Committee, Khandwa, 1940 Nag LJ 638. The reason given by the High Court was that the Explanation, though not the operative part of the Validating Act, conflicted with O. 45, Rule 15 of theCode of Civil Procedure, and that the assent of the Governor-General had not been obtained, as required by S. 107(2) ofthe Government of India Act, 19354. Meantime, the Provincial Legislature had been dissolved, and the Governor had assumed all the powers of the Provincial Legislature under S. 93 ofthe Government of India Act,. The Governor, with the assent of the Governor-General, enacted the second Validating Act entitled the Khandwa Municipality (Validation of Tax) Act, 1941 (16 of 1941), which received the assent of the Governor-General on June 30, 1941, and was published in the C. P. and Berar Gazette on July 11, 1941. The Act, omitting parts not relevant here, read as follows :2. The tax the imposition of which purported to be sanctioned in the Notification of the Local Government (Ministry of Local Self-Government) No. 2639-1298-VIII, dated the 21st November, 1922, shall be, and shall be deemed always to have been, validity recoverable by the Municipal Committee of Khandwa in respect of the period from the 21st November, 1922, to the 31st March, 1938 (both dates inclusive)3. Where the net sum recovered from any person before the commencement of this Act on account of the said tax is less than the aggregate of the sum recoverable form such person, the balance shall be payable to the said Municipal Committee on demand made at any time after the commencement of this Act and, if not paid within fifteen days from the date of the demand, shall be recoverable by any method available under the Central Provinces Municipalities Act, 1922, for the recovery of a tax imposed thereunder or by such other method as the Provincial Government may by rule prescribe4. For the purposes of S. 3 the net sum recovered from any person means the aggregate sum recovered from such person less any sum refunded to him and less so much of the amount of any decree or order for the payment of money executed by him against the said Municipal Committee as represents an amount previously paid by him on account of the said tax5. Nothing in this Act shall preclude the execution against the said Municipal Committee of any decree or order for the payment of money arising out of a payment on account of the said tax but upon the execution of such decree or order so much of the amount thereof as represents a sum previously paid on account of the said tax shall be payable to and recoverable by the said Municipal Committee in accordance with S. 36. The Khandwa Ginning and Pressing Cotton Tax Validating Act, 1938, is hereby repealedThe Provincial Government framed a rule, which, shortly stated, provided for the recovery of the amount by way of execution application made to the very Court, which executed the decree5. The Municipal Committee deposited the decretal amount in Courts, which was withdrawn by the appellant on furnishing security. On August 7, 1947, the Municipal Committee filed its application under the rule for execution of the decree. Objections were issued by the appellant, but were disallowed, and the Municipal Committee realised the amount of the tax from the surety. The appellant had raised many objection, but we are concerned with one only, viz., that the Act was ultra vires the Provincial Legislature and consequently the Governor, being repugnant to S. 142-A, which was introduced inthe Government of India Act,, and which imposed a limit of R. 50/- on taxes on professions, trades and callings after March 31, 19396. On November 16, 1949, an appeal was taken by the present appellant to the High Court at Nagpur. The appeal was heard by Sinha, C. J., and Mudholkar, J. (as they then were). Mudholkar, J., held that by the second Validating Act which was passed after March 31, 1939, the limit of Rs. 50/- per annum imposed by the second sub-section of S. 142-A was exceeded, and that the Act was thus ultra vires the Governor. Sinha, C. J., was of the contrary opinion. The case was then laid before Deo, J., who agreed with Sinha, C. J., and the appeal was dismissed. The appellant then obtained the certificate, and filed this appeal.

Court's reasoning:
10. Retrospective legislation being thus open to the Provincial Legislatures, the Act of the Governor had the same force. Retrospective laws, it has been held, can validate an Act, which contains some defect in its enactment. Examples of Validating Acts which rendered inoperative, decrees or orders of the Court or alternatively made them valid and effective, are many. In Atiqa Begums case, 1940 FCR 110 : (AIR 1941 FC 16) the power of validating defective laws was held to be ancillary and subsidiary to the powers conferred by the Entries and to be included in those powers.Later, the Federal Court in Piare Dusadh v. Emperor, 1943 F LJ 187 : (AIR 1944 FC 1) considered the matter fully, and held that the powers of the Governor-General which were conterminous with those of the Central Legislature included the power of validation. The same can be said of the Provincial Legislatures and also of the Governor acting as a Legislature15. There can be no doubt that if a law was passed after the amendment and sought to impose taxes on professions, etc., for any period after March 31, 1939, it had to conform to the limit prescribed by S. 142A (2).The prohibition in the second sub-section operated to circumscribe the legislative power by putting a date-line after which a tax in excess of Rs. 50/- per annum per person for a period after the date-line could not be collected unless it came within the proviso. But neither sub-sec. (2) nor the proviso speaks of a period prior to March 31, 1939.The sub-section speaks only of the total amount payable ............. after the thirty-first day of March, nineteen hundred and thirty-nine. These words are important. They create a limit on the amount leviable as tax for a period after that date. But if a law was passed validating another which imposed a tax for a period prior to the date indicated, it would be taxing professions, etc., in excess of Rs. 50/- not after March, 1939, but before it. Neither the Entry nor the section either directly or indirectly prohibited this, nor did they create any limit for the prior period. The Validating Act, though passed in 1941, can read only as affecting a period for which there was no limit. If the sub-section said that tax shall not be payable in excess of Rs. 50/- without indicating the period or date, the argument would have some support, but it puts in a date, and the operation of the prohibition is confined to a period after that date16. The Validating Act, being thus completely within the powers of the Governor, could remove retrospectively the defect in the earlier Act. Though it reimposed the tax from the date of the earlier Act, it took care to impose the tax for a period ending with March 31, 1938. The impugned Act did not need the support of the proviso, because it did not fall within the ban of the second sub-section. In our opinion, the Validating Act of 1941 was within the powers of the Governor, and was a valid piece of legislation.