1. This is a petition under Article 226 of the Constitution. The petitioner is the occupier of a factory in Saharanpur which is engaged in manufacture of cloth. He was called upon by the Regional Director of the Employees' State Insurance Corporation to pay a sum of Rs. 12,484 as a special contribution payable by an employer under Chap. VA of the Employees' State Insurance Act in respect of a period extending from 1st April 1953 to 31st March, 1955.
The petitioner disputed his liability for payment of this sum or any part of it, and as a consequence of his refusal to pay steps are now being taken against him for recovery of the amount claimed as though it were an arrear of land revenue, and he is threatened with prosecution under Section 85 of the Act. The petitioner contends that the demand is illegal, and the principal relief which he seeks by this petition is the issue of a mandamus directing the respondents not to recover from him any contribution under the provisions oi the Employees' State Insurance Act.
2. The Employees' State Insurance Act became law on the 19th April, 1948. Its purpose as stated in the preamble is to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto. For the purpose of administration of the scheme of Employees' State Insurance the Act established a body corporate known as the Employees' State Insurance Corporation on which are to be representatives inter alia of the. Central Government and the States, of employers and employees and also two members of the medical profession.
A standing Committee and a Medical Benefit Council were also established, the former to administer the affairs of the Corporation subject to its general supervision and the latter to advise the Corporation on matters relating to the administration of medical benefits.
3. The Act also established a Fund known as the Employees' State Insurance Fund which is to be administered by the Corporation for the purposes of the Act, and into which will be paid all contribution-recoverable under the Act and such other monies as are received on behalf of the Corporation.
The scheme is to be financed by contributions from employers and employees for which provision is made in Chapter IV. The scale of contribution is dependent on the rate of wages paid to the employees, the employers' contribution being approximately double that of the employees.
4. Chapter V of the Act specifies the benefits to which insured persons--that is to say, all employees in factories or establishments to which the Act applies--and their dependants will be entitled. The benefits are five, referred to respectively as sickness benefit, maternity benefit, disablement benefit, dependants' benefit and medical benefit. The Act also made provision for the adjudication of disputes and claims and for the constitution of an Employees' Insurance Corporation, but with such provisions we have now no concern.
5. In 1951 the Act was amended by Act 53 of that year. The Amending Act introduced a new chapter in the principal Act--Chapter VA--which enacted that so long as the provisions of that Chapter remain in force every employer shall, notwithstanding anything contained in the Act, pay to the Corporation a special contribution at such rate as the Central Government may fix not exceeding five per cent of his total wages bill.
It further provided that this special contribution in the case of factories or establishments situated in an area in which the provisions of both Chapters IV and V are in force shall be fixed at a rate higher than that in the case of factories or establishments situated in an area in which the provisions, of these Chapters are not in force. The Special contribution is, by Section 73D of the Act, made recoverable as if it were an arrear of land revenue.
6. The Act extends to the whole of India except the State of Jammu and Kashmir (Section 1(2)) and applies in the first instance to all factories other than seasonal factories (Section 1(4)). Sub-section (3) of this section is important: it provides that the Act shall come into force
'on such date or dates as the Central Government, may, by notification in the official Gazette, appoint, and different dates may be appointed for different provisions of this Act and for different States or for different parts thereof.'
By virtue of notifications issued under this subsection Chapters I, II, III and VIII came into force in the provinces of India on the 1st September, 1948. Sections 44 and 45 of Chapter IV (that is to say the sections which made provision for the maintenance of registers by employers and the furnishing by them of returns, and for the appointment of inspectors) and Chapter VII came into force on the 1st April, 1950 in all Part A States & in some other areas.
The chapters and sections of Chapter IV which I have mentioned were then brought into force on the 24th November, 1951, in all Part B States except Jammu and Kashmir and on the same date, the 24th November, 1951 the new Chapter VA was brought into force in the whole of India except Jammu and Kashmir.
Chapter IV (except Sections 44 and 45), Chapter V and Chapter VI were then on the 24th February, 1952, brought into force in Delhi State and the Kanpur area. These Chapters have subsequently been brought into force in 25th other industrial areas in India, but it was only on the 15th January, 1956, that they were brought into force in Saharanpur, Lucknow and Agra. At all material times therefore the provisions of Chapter VA, but not those of Chapters IV and V, were in force in. Saharanpur where the petitioner's factory is situate.
7. The argument has covered a wide field. The first contention of the petitioner is that the special contribution which is payable by him under Chapter VA is illegal as being in contraventioa of Article 31(2) of the Constitution as it stood priorto the coming into force of the Constitution (Fourth Amendment) Act, 1955.
To this the State Government's reply is that the provisions of Chapter VA of the Act imposing a special Contribution constitute a tax or are for the promotion of public health within the meaning of Article 31(5)(b)(i) or (ii) and are therefore not affected by the provisions of Article 31(2); alternatively, that the levy of the contribution is not a compulsory acquisition of property such as is contemplated by Clause (2) of that Article.
The second contention is that Section 1(3) of the Act by conferring upon the Government an uncontrolled power to apply such sections of the Act as it thinks fit in such parts of the State as it selects contravenes Article 14 of the Constitution and renders the entire Act invalid; and that discrimination has in fact occurred as Chapter VA but not Chapters IV and V has been brought into force in Saharanpur.
8. It is desirable to consider first the second submission for if that be well founded the entire Act is invalid.
9. Section 1(3) of the Act, which has already been quoted, is in very wide terms. It not only empowers the Central Government to bring the Act into force in different parts of India on different dates but enables it to bring different sections into force in different parts of a State on different dates. The petitioner contends that the Act discloses no legislative policy which would serve as a guide to the Central Government which as a consequence has been vested with a wholly uncontrolled discretion which may result, and indeed has resulted, in an unjustifiable inequality of treatment which is contrary to Article 14.
10. Now in order to attract the operation of this Article it is necessary to show that the power of differentiation does not rest on any reasonable basis having regard to the object which the Legislature had in view. The Orissa Estates Abolition Act, 1892, contained a provision (Section 3(1)) that
'The State Government, may, from time to time by notification, declare that the estate specified in the notification has passed to and become vested in the State free from all encumbrances.'
The Supreme Court in Biswambhar Singh v. State of Orissa : 1SCR842 , held that this provision was not discriminatory as the object and purpose of the Act was clear, namely to abolish the right, title and interest in land of all intermediaries and the discretion vested in the State Government must be exercised in the light of this policy and was not absolute or unfettered. The Court pointed out that from the very nature of things a certain amount of discretionary latitude had to be given to the State Government. 'It would', the Court said,
'have been a colossal task if the state Government had to take over all the estates at one and the same time. It would have broken down the entire administrative machinery. It could not be possible to collect sufficient staff to take over and discharge the responsibilities. It would be difficult to arrange for the requisite finance, all at once. It was, therefore, imperative to confer some discretion on the State Government.'
For similar reasons Section 21(1) of the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952, which provided that
'As soon as may be after the commencement of this Act, the Government may by notification in the Rajasthan Gazette, appoint a date for the resumption of any class of jagir lands and different dates may be appointed for different classes of jagir lands'
was held to be valid: Amar Singhji v. State of Rajasthan : 2SCR374 .
11. Now the purpose of the Act before us as stated in the preamble is
'to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto.'
Although the Central Government has been given a very wide discretion in the matter of bringing the Act into force the Act itself extends (Section 1(2)) to the whole of India except the State of Jammu and Kashmir.' There is nothing to suggest that it is not the intention of the Legislature that in due course the Act should not be brought into force in the whole of the area to which it extends.
Although not expressed in so many words it is, in my opinion, sufficiently clear that the Legislature in enacting this statute intended that the benefits which it provided should, as circumstances rendered it practicable, become available to' the employees in all factories throughout India excluding of course the State of Jammu and Kashmir. If this be, as I hold it is, the object which the Legislature had in view, further difficulty disappears, for the Act is of such a nature that it is reasonable, if not imperative, that a large measure of discretion be conferred on the Central Government with regard to the manner in which it should come into force.
Apart from the setting up of statutory bodies such as the Employees' State Insurance Corporation, the Standing Committee and the Medical Benefit Council the Act envisages the constitution of regional boards, local committees and regional and local benefit councils. The provisions with regard to payment of contributions are detailed and for the proper working of the Act the appointment of qualified inspectors, for which provision is made in Section 45 is necessary. The provisions for the determination of those persons who are entitled to benefits under the Act involve the setting up of a considerable organisation.
Above all the Act cannot be brought fully into force until the Central Government is satisfied that contributions sufficient in amount have been collected in order to ensure that there are funds sufficient to enable the Corporation to fulfill its obligations under the Act. The discretion which is vested in the Central Government under Section 1(3) is undoubtedly very wide, but I am not prepared, taking into account what I conceive to be the policy of the Legislature and the administrative difficulties of operating the Act, to hold that that discretion involves a contravention of the provisions of Article 14.
As was pointed out in Matajog Dobey v H. C. Bhari, : 28ITR941(SC) , it has to be borne in mind that a discretionary power is not necessarily a discriminatory power and that abuse of power is not to be easily assumed where the discretion is vested in the Government and not in a minor official.
12. It is however said that there has in this case been discrimination in fact. The only circumstance relied on in support of this assertion is that although prior to the 15th January, 1956, Chapters IV and V of the Act had been brought into force in a number of industrial areas in India they had not been brought into force in Saharanpur District. The petitioner's real grievance is that Chapter VA is in force in Saharanpur: but it is, and has been since the 24th November, 1951, in force throughout India except in the State of Jammu and Kashmir.
There has been no discrimination shown in the application of that Chapter. The bringing into force in Saharanpur of Chapters IV and V appears to confer no direct benefits on employers, but it would immediately result in a substantialIncrease in the amount of the contribution payable by them. There is nothing to show that the reason for the Central Government not bringing Chapters IV and V into force in Saharanpur was anything but administrative difficulty inseparable from so far-reaching a piece of legislation. In my opinion there has been no discrimination in fact.
13. What then is the nature of the special contribution payable by an employer under Ch VA? In my opinion it is a tax. A tax was defined by Latham, C. J. in the Australian case of Matthews v. Chicory Marketing Board, 60 CLR 263 (D), as
'a compulsory exaction of money by a public authority for public purposes, enforcible by law, and is not a payment for services rendered,'
a definition which the Supreme Court in Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar, 1954 SCR 1005: (AIR 1954 3C 282) (E), considered brought out the essential characteristics 'of a tax as distinguished from other forms of imposition.
The employer's special contribution under the Employees' State Insurance Act is a compulsory exaction, recoverable in the event of non-payment as if it were an arrear of land revenue. It is levied by public authority and being in furtherance of the directive principles declared in Articles 39, Clause (e). 41 and 42 of the Constitution it is clearly for public purposes, and it is not payment for services rendered.
Had the contribution been paid into the Government treasury and formed part of the public Revenue, I do not think it would be doubted that the levy is a tax. Does the fact that the contribution is paid into the Employee's State Insurance Fund, which is administered by the Employees' State Insurance Corporation, make a difference? I do not think it does.
14. I think that the case of Lower Mainland Dairy Products Sales Adjustment Committee v. Crystal Dairy, Ltd., 1933 AC 168 (P), is instructive on this point. The Dairy Products Adjustment Act--an Act of the Province of British Columbia--provided for the appointment of an Adjustment Committee for the purpose of insuring that products of milk received the same return whether the milk was sold in fluid form or in the form of manufactured products.
Under the Act a levy was made on those farmers who sold milk in fluid form, for which higher prices were paid, and the amount so obtained was to be apportioned by the Committee among those farmers who had sold the manufactured product. A second compulsory levy was to be collected from the farmers for the purpose of meeting the expenses of the Committee, and both levies were recoverable as debts.
It is important to observe that the Act provided that both levies were made by the Adjustment committee, and that the proceeds thereof did not form part of the public revenues of the Province cut were wholly at the disposal of the Committee. The Canadian Courts were of opinion that the levies amounted to taxation and that view was upheld by the Privy Council.
The levies were held to be taxes because they were imposed by a statutory body for a public purpose and were enforcible by law; and the fact that the one levy was for the purpose of financing the scheme and that the moneys recovered under the other was distributed as a bonus among the traders in the manufactured products did not, in their Lordships' opinion, affect their character as taxation.
15. This decision was applied by the High Court of Australia in Matthews y. Chicory Marketing Board (D). The Marketing of Primary Products Act authorised the establishment of Marketing Boards and enabled the Boards to acquire products which had been declared to be commodities under the Act. The Boards then were to sell the commodities and pay a share of the total proceeds of the sale of the commodity to the producer after making certain deductions for expenditure. Section 32 of the Act authorised the Boards, with the approval of the Governor in Council, to make levies on producers of commodities and to apply the moneys raised by the levies in payment of expenses, in repayment of advances to the Board, in effecting insurance and in working directed to the improvement of the quality of a commodity. The members of the Court, although they differed on the question whether the levy was an excise duty, were all agreed that it was a tax.
16. In the light of these decisions it does not appear to be an essential ingredient of a tax that the moneys recovered by the levy must form part of the general revenues of the State. It is enough that, affirmatively, the levy be imposed by a statutory body for a public purpose and be enforcible by law and, negatively, that it be not a payment for services rendered.
17. Some doubt about the correctness of this proposition arises however from an observation made by the Supreme Court in : 1SCR1005 . The Court, after quoting with approval the definition of a tax given by Latham, C. J., to which I have referred, expressed the view that that definition brought out the essential characteristics of tax, one of which was that it was an imposition made for a public purpose without reference to any special benefit to be conferred on the payer of the tax. 'This is expressed' said the Court at P. 1040 (of SCR) : (at p. 295 of AIR),
'by saying that the levy of tax is for the purposes of general revenue, which when collected forms part of the public revenues of the State.'
It must however be borne in mind that the Court was in this case considering the validity of Section 76 of the Madras Hindu Religious and Charitable Endowments Act, 1951, which required every religious institution to pay to the Government such contribution, not exceeding a stated maximum, as may be prescribed. The Act had been passed by the State Legislature and the question was whether Section 76 was within the latter's legislative competence.
This would not be the case unless the levy was a 'fee', in which event it might come under entry 47 of the concurrent List. The substantial question, therefore, was not whether the levy was a tux but whether it was a fee, for it seems not to have been disputed that if it were not the latter then it must be the former. The Supreme Court held that the levy was not a fee, the argument that It was, being negatived by the fact that the money raised by the levy of the contribution was not earmarked or specified for defraying the expenses that the Government has to incur in performing any services. 'All the collections', the Court pointed out.
'go to the consolidated fund of the State and all the expenses have to be met not out of these collections but out of the general revenues by a proper method of appropriation as is done in case of other Government expenses.'
The fact that the contributions in the case which the Court then had before it was paid into the consolidated fund of the State was material for the purpose of showing that the levy was not a fee, and in my judgment the observation made by their Lordships that a tax when collected forms part of the public revenues must be read in the light of the circumstances of the case then before the Court. I venture to think that the Supreme Court did not intend to lay down that a levy cannot be a tax unless when collected it forms part of the revenue of the State.
18. Learned counsel for the petitioner has contended that the levy cannot be a tax because it is nothing but the expropriation of money from one group for benefit of another, and he relies upon a passage in the judgment of the Supreme Court of the United States in United States v. Butler (1935) 80 Law Ed 477 at p. 486 (G). The question is however, in my opinion, whether the levy In any particular case is for a public purpose, and it was pointed out in another American case that
'......a tax designed to be expended for apublic purpose does not cease to be one levied for that purpose because it has the effect of imposing a burden upon one class of business enterprises in such a way as to benefit another class.': A Magnano Company v. Hamilton, (1934) 78 Law Ed 1109 at p. 1113 (H).'
In the present case there can, in my opinion, be no doubt that the levy is for a public purpose and I think therefore that learned counsel's objection has no force.
19. I do not therefore think that there is any divergence of opinion between the Supreme Court, the Privy Council and the. High Court of Australia, and I hold that the special contribution payable by an employer under Chapter VA of the Employees' State Insurance Act is a tax.
20. There was some doubt at one stage of the argument whether the amending Bill (which subsequently became Act 53 of 1951) was introduced into Parliament on the recommendation of the President as is required by Article 117(1) of the Constitution if it made provision for the imposition of a tax; and the hearing was adjourned for information on this point to be obtained. An affidavit by Sri K.N. Nambiar, Deputy Secretary to the Government of India, Ministry of Labour, has now been filed in which it is stated that such recommendation was made, and this fact is no longer in dispute.
21. In the view I take, it is unnecessary for me to express an opinion on the other questions which were raised during the course of the hearing. In my opinion this appeal fails and should be dismissed with costs which I would fix at Rs. 400/-.
M.L. Chaturvedi, J.
22. This is a petition under Article 226 of the Constitution.
23. The petitioner is the occupier of a cloth mill situate in Soharanour known as 'Lord Krishna Textile Mills', hereinafter called the mills. The complaint of the petitioner is that he is being called upon by the Regional Director, Employees' State insurance Corporation, Kanpur (respondent No. 2) to pay certain sums of money under Chapter V-A of the Employees State Insurance Act of 1948 (hereinafter called the Act). The Act was passed by the Dominion Legislature in 1948 and received the assent of the Governor General on 19th April, of that year.
The Act extended to all the provinces of India and Sub-section (3) of Section 1 provided that it was to come into force on such date or dates as the Central Government may appoint and different dates could be fixed for coming into force of different provisions of the Act in different provinces. By a notification of the Central Government, Chapters I, II, III and VIII of the Act were brought into force throughout India with effect from September 1, 1948. By another notification of April, 1, 1950, the provisions of Sections 44 and 45 of Chapter IV and the whole of Chapter VII were applied to all Part A States and some other areas like Ajmer and Coorg.
On November, 24, 1951 all the provisions, mentioned above were applied to Part B States and new Chapter V-A, added to the Act by Act No. 53 of 1951, was applied to the whole of India except Jammu and Kashmir, On February 24, 1952 the rest of the Chapters, namely, Chapters IV, V and VI were applied only to the State of Delhi and to Kanpur area in Uttar Pradesh. After the above date, the above three Chapters have been applied to seven industrial towns in the Punjab, to Nagpur, the greater Bombay, Coimbatore, Hyderabad, Calcutta City, Howrah district, and to four towns in Madhya Bharat and to seven industrial areas in Andhra and Madras. During the pendency of this writ case, the above three Chapters have been applied in Saharanpur, Lucknow and Agra in Uttar Pradesh. It may be mentioned here that the petitioner's mill is situate in Saharanpur.
24. Chapter I of the Act deals with preliminary matters, chapter II deals with the establishment of a corporation known as 'Employees State Insurance Corporation' which has been made a body corporate. This is the corporation which is put in charge of the working of the Act and which realises the contributions from the employers and employees and has been made responsible for the disbursement of the money thus obtained. Certain Standing Committees are also to be constituted, whose functions have been separately defined.
Chapter III deals with finance and audit and it provides for the creation of a fund known as 'Employees' State Insurance Fund' and lays down the purposes for which the fund is to be expended: Chapter IV deals with contributions by the employers and the employees; Chapter V deals with the benefits which the employees, who are injured under the Act, are to receive and certain general matters; Chapter VI deals with adjudication of disputes and claims, Chapter VII with penalties and Chapter VIII with other miscellaneous matters.
25. Act No. 53 of 1951 amended certain provisions of the main Act and added a new Chapter, Chapter V-A, which, as already stated, was applied to the whole of the Union of India by means of a notification dated November 24, 1951. Under this Chapter the occupiers of all the factories situate in the Union have to pay a special contribution at the rate fixed by the Central Government, which was not to exceed 5 per cent, of the total wage, bill of the employer.
The actual amount fixed by the Central Government under Section 73 A of this Chapter is 3/4 per cent, of the total wage bill. This amount is being levied from 1st April, 1953 on the occupiers of all the factories situate in the Union of India; though Chapter V, which provides for the conferment of benefits on the employees was made applicable for the first time along with Chapters IV & VI to the State of Delhi and to Kanpur area in Uttar Pradesh on 24th February, 1952 and has since been applied to a number of other areas at different times.
26. On the date the present petition was filed Chapters IV, V and VI were not applicable to Saharanpur, but the petitioner was asked to pay under Chapter V-A a total sum of Rs. 12484/- for the period, 1st April, 1953 to 31st March, 1955 on account of different quarterly assessments.
The petitioner did not pay any of the demands and the Regional Directors has sent a requisition to the Collector of Saharanpur to recover the money as arrears of land revenue. He further threatened the petitioner with prosecution under Section 85 of the Act. It is accordingly prayed that writs of mandamus be issued to the respondents directing them not to recover any contribution, from the petitioner under the provisions of the Act, nor toprosecute him under Section 85 of the Act. The issue of a writ of certiorari has also been prayed for calling for the record of the proceedings from the Collector and quashing the proceedings.
I think that the prayer for the issue of a writ of certiorari cannot be granted, as the Collector or his subordinates are not taking any judicial or quasi-judicial proceeding. The prayer for the issue of a writ of mandamus is the only prayer that may be considered in this petition.
27. The learned counsel for the petitioner has challenged the constitutionality of the provisions of Section 1(3) and the whole of Chapter V-A of the Act. His contention is that the provisions of Section 1(3) are inconsistent with the provisions of Article 14 of the Constitution inasmuch as Sub-section (3) of Section 1 gives uncontrolled and unfettered discretion to the Central Government to apply the different provisions of the Act to different provinces or States (or even parts of different provinces or States) whenever it chooses to do so.
This might result in the Act not being applied to some portions of the Union of India at all and the Central Government has thus been put in a position to discriminate between the occupiers of the factories in the different areas. As regards Chapter V-A his submission is that the provisions of this Chapter are inconsistent with the provisions of Article 31(2) of the Constitution, inasmuch as the Government or the Employee's State Insurance Corporation have been given the right to deprive the factory owners of a sum equivalent to 3/4 per cent, of the total wage bill of their factories Without payment of any compensation and without there being any public purpose to support the levy.
28. Mr. Jagdish Swarup, learned counsel for the respondents has controverted both the above propositions and has further urged that, assuming that Chapter V-A is a measure of expropriation falling under Article 31(1) & (2), it is exempted from the application of the above clauses by Clause (5) of Art. 31, as it is a measure of taxation and also as It is a measure for the maintenance of public health.
He has further contended that Article 31(2), as amended by the Fourth Amendment Act of 1955, should be applied to the facts of the case, and the amended Article does not apply to a case of mere deprivation of property unless there is a corresponding acquisition of the property by the State or a Corporation owned or controlled by the State which, he says, is not the case here, as the amount is paid to the Corporation and the Corporation disburses it in providing for benefits for the employees of factories.
29. The contention of the learned counsel for the petitioner concerning the unconstitutionally of Sub-section (3) of Section 1 has been dealt with in the Judgment of the Hon'ble the Chief Justice and I respectfully agree with him in the conclusions arrived at by him and also the reasons given therefor. I do not think I can usefully add anything to the judgment. For the reasons given in his judgment I hold that the provisions of Sub-section (3) of Section 1 are not inconsistent with Article 14 of the Constitution.
30. Coming now to the constitutionality of Chapter V-A, the challenge is on the ground that it is inconsistent with the provisions of Article 31(2) of the Constitution. The learned Counsel for the respondents argued inter alia that the Article applicable to the case is the Article as amended by the Fourth Constitution Amendment Act, which came into force on the 27th April, 1955.
I agree with the contention so far that the amended Article has now made it clear that mere deprivation of property would not amount to acquisition within the meaning of the word as used in Article 31(2) unless the deprivation is accompanied or followed by acquisition of the property by the State. But I do not propose to go into this question further because, in my opinion, the case is to be governed by the unamended Article. The amount which is now being demanded from the petitioner is for a period before the Fourth Constitution Amendment Act came into force, the last demand being for the quarter ending March 31, 1955.
It is true that in the case of Bhikaji Narain Dhakras v. State of Madhya Pradesh : 2SCR589 , it has been held that even if an enactment is inconsistent with the provisions of part III of the Constitution, it is void only against the citizen and to the extent of its inconsistency, with the result that the enactment is not to be taken to be wiped out of the Statute book it remains during the period of inconsistency as if it were under an eclipse.
When the shadow is removed, the Act again becomes valid and enforceable. But the contention of the learned counsel for the respondents that the Act should be held to be valid even against the citizen during the period of eclipse does not find any support from the above decision. During the period that the Act is inconsistent with the Constitution it cannot be enforced against the citizen unless the unconstitutionality is removed from a back date.
It is conceded by the learned counsel that the Fourth Constitution Amendment Act has not been given retrospective operation and, that being the position, the right of the parties for the period before the amendment would be governed by the unamended Article 31(2) of the Constitution. It is, therefore, not necessary to consider the effect of the amendment of Article 31(2) in this case.
31. I may here dispose of two other short points raised by the learned counsel for the respondents. These points are that this enactment, assuming that it falls under Article 31(2), is excepted from its operation by Article 31(5) inasmuch as it is a measure of taxation and also a measure to promote public health.
32. The learned Chief Justice has held that the contribution levied upon the factory owners under Chapter V-A of the Act is a Tax, and I agree with him. I may however add a ground in support of the same view. In Article 366(28) of the Constitution the words 'taxation' and 'tax' have been denned as
' 'taxation' includes the imposition of any tax or impost, whether general or local or special, and 'tax' shall be construed accordingly.'
According to this definition the word 'tax' would include any impost whether general, local or special, and I do not think there can be much doubt that the contribution made payable under, the Act is an impost of one or more of the three kinds mentioned in the definition given above. It is a compulsory levy and is clearly an impost on the owners of factories. It is therefore covered by the definition of the word 'tax' mentioned above.
33. In the case of : 1SCR1005 , their Lordships while considering the distinction between a 'tax' and a 'fee' observed at pp. 1039-40 (of SCR): (at p. 295 of AIR)
'It is not clear, however, whether the word 'tax' as used in Article 265 has not been used in the wider sense as including all other impositions like cesses and fees; and that at least seems to be the implication of Clause (28) of Article 366 which defined taxation as including the imposition of any to or impost, whether general, local or special.'
34. The definitions given in Article 366 are generally to be taken to be the meaning of the words defined unless the context otherwise requires.There are a number of places, specially in the entries, where the word 'tax' has not been given thiswide meaning as the Constitution has used separately the words 'duty', 'fee' and other such words.In those places the context may require thatthe word 'tax' is not to be understood in the senseof the definition given in Article 366(28). But whiletrying to interpret the word in Article 31(5)(b)(i) Ido not think that it can be said that the contextrequires the word 'tax' to be read in a restrictedsense. On the other hand, the context in whichthe word is used suggests that the word has beenused in the wider sense because there would be nopoint in levying a fee, a duty or a contribution ifcompensation has to be paid to the person who isrequired to pay the duty, the fee or the contribution.
35. The fact that the enactment falls within Article 31(5)(b)(i) does not necessarily mean that it falls within Article 31(2) also. It appears that some enactments may fall under both the provisions and some may not. There may be an enactment which so substantially encroaches upon the rights of the employer in an industrial undertaking that it may fall under Article 31(2) of the Constitution.
If the levy is a tax under Article 31(5)(b)(i) it would be exempt from the applicability of Article 31(2). But if the enactment takes away an insignificant right or amount of money, it may fall under Article 31(5)(b)(i) though not under Article 31(2). The impugned Act is one concerning which I have come to the conclusion that it does not fall under Article 31(2) at all, I shall deal with that point a little later.
36. But I do not think that the Act falls under Article 31(5)(b)(ii). Section 46 of the Act enumerates the benefits which are to be granted to the employees and only some of these can be said to be for the promotion of health of the employees. The other benefits are periodical payments to an employee in case of sickness, periodical payments in case of a confinement to an insured woman, periodical payments to an insured person suffering from disablement and periodical payments to dependants of an insured person who died as a result of employment injury.
It is really a measure of insurance providing for relief to the employees at times when they are not able to earn their wages due to sickness, disability or other reasons, though medical treatment is also to be provided to injured persons and the relief might be extended to the family also of an insured person. I do not think this Act can be said to be a measure providing for public health within the meaning of the expression as used in Article 31(5)(b)(ii) of the Constitution.
37. I now come to the point whether Chapter 5-A of the Act contravenes Article 31(2) of the Constitution. The learned counsel for the petitioner argued the case as if the provisions of this Chapter were to be considered by themselves as a separate piece of legislation, but I do not think that that would be correct approach to the question.
The Chapter has been added by the Amendment Act of 1951, but it has been made a part of the Act and the entire Act, including this Chapter, should be considered in order to determine whether it comes within the purview of Article 31(2) of the Constitution. The Article, as it stood before the amendment, was held to apply even to a care of mere deprivation of property without corresponding acquisition by the State. See State of West Bengal v. Subodh Gopal Bose : 1SCR587 and Dwarkadas Srinivas of Bombay v. Skelapur Spinning and Weaving Co. Ltd., 1954 SCR 674: (AIR 1954 SO 119) (K) (known as the second Sholapur case).
So even if it were a case of deprivation of property, as contemplated by Article 31(1) and (2), it would fall within the ambit of that Article. But I think that a measure like this completely falls outside the purview of the Article, because an enactment has to be read as a whole in order to determine whether it is a confiscatory piece of legislation or not.
The different provisions have to be read in order to determine the main object of the measure and also to see what it actually does. As has been said, it is the pith and substance of an enactment which determines its nature, if the question had arisen under which entry of the legislative lists the Act falls, I would have had no difficulty in saying, that it falls under entry No. 47 of the Union list (Insurance) and entry No. 24 of the Concurrent List and not under entry No. 33 of the Union list or entry No. 36 of the State list or No. 42 of the concurrent list, which deal with acquisition and the principles of the payment of compensation.
38. If every enactment which results in the deprivation of the least amount of money or the slightest right in other property were held to fall under Article 31(2) of the Constitution all measures, fixing minimum wage limits, providing for construction of rest houses by the employers for the employees and for other such amenities , as well for the curtailments of rights of land-holders and the conferment of those rights on the tenants should be held to be inconsistent with Article 31(2) of the Constitution, unless they provide for payment of compensation to the employer or landlord, which would defeat the very object of the enactment.
39. It is now well-settled that the above types of enactments do not fall under Article 31(2), but the learned counsel for the petitioner has sought to distinguish the instant case on the ground that Chapter V-A of the Act does not ensure that the amount taken from an employer would be spent In the benefit of his own employees and, during the period which is in question in the instant case, the petitioner's employees were not to be benefited at all, because Chapter V of the Act had not been made applicable to the area where the petitioner's factory is situate.
This is certainly a distinction between this case and the others but the question is whether it makes any real difference in the decision of the point under consideration. The distinction would have been real if an enactment, regulating the relationship between the landlord and his tenant and the employer and his employee, had been excepted from the operation of Article 31(2) of the Constitution. But the different clauses of Article 31 do not make any such exception for the above types of legislation, though exceptions have been made in respect of certain other matters.
The Constitution, not having made any such exception, I do not think the Courts could have thought of themselves grafting it on Article 31. As I understand the decisions of the Supreme Court, I think the position is that these regulatory pieces of legislation have been held to fall outside the purview of Article 31(2) altogether. I may mention here cases of tenancy legislation in which this question was raised.
40. Mention may first be made of the well known case of Jagannath Bux Singh v. United Provinces. . Th. Jagannath BUX Singh, who was a taluqdar of Oudh filed a suit for a declaration that the U. P. Tenancy Act of 1939 was void, and one of the contentions raised by Mm was that certain provisions of it werp inconsistent with Section 299(2) of the Government ofIndia Act, 1935, which section corresponded to Article 31(2) of the Constitution. While rejecting this contention their Lordships said :
'The answer to this is that a law which regulates the relations of landlord and tenant and thereby diminishes the rights which the landlord has hitherto exercised in connection with his land does not authorise the compulsory acquisition of the land for public or any other purpose; and therefore the question of compensation does not arise.'
Section 299(1) is practically the same as Article 31(1) of the Constitution but Section 299(2) prohibited the acquisition of land only without payment of compensation. The learned Judges appear to have considered only Section 299(2) ; and were probably not required to consider the effect of Section 299(1).
41. Th. Jagannath Bux Singh then filed an appeal in the Privy Council and the Privy Council while dealing with the point observed:
'But in the present case there is no question of confiscatory legislation. To regulate the relations of landlord and tenant and thereby diminish rights, hitherto exercised by the landlord in connection with his land, is different from compulsory acquisition of the land.'
Vide Jagannath Bux Singh v. United Provinces . The above observations show that in the opinion, of their Lordships the legislation was not of a confiscatory nature at all and fell outside the purview of Section 299 of the Government of India Act.
42. In the case of : 1SCR587 the question was of the validity of a tenancy legislation and, though the Supreme Court held by a majority that mere deprivation of property also fell under Article 31(2) so that the law permitting it must provide for the payment of compensation or lay down the principles therefor, the particular piece of legislation challenged before it was held not to be inconsistent with Article 31(2) of the Constitution, in spite of the fact that the effect of it was to reduce the rights of the landlords. Hon'ble Patanjali Sastri C. J., who delivered the majority judgment, after observing that the expression taken possession of or acquired' as used in Article 31(2) must be read along with the word 'deprived' as used in Clause (1) and understood as having reference to such 'substantial abridgement' of the rights of ownership as would amount to deprivation of the owner of his property, held :
'No cut and dried test can be formulated as to whether in a given case the owner is deprived of his property within the meaning of Article 31; each case must be decided as it arises on its own facts. Broadly speaking it may be said that an abridgment would be so substantial as to amount to a deprivation within the meaning of Article 31 if, in effect, it withheld the property from the possession and enjoyment of the owner, or seriously impaired its use and enjoyment by him, or materially reduced its value.'
His Lordship then considered the effect of the enactment and said that it was in line with the traditional tenancy legislation in this country affording relief to tenants whenever the tenancy laws were found to operate harshly on the tenantry and the result of it was not such a substantial abridgment of the rights as to amount to deprivation of property within the meaning of Article 31(1) and (2).
43. This case again, in my opinion, does not purport to engraft an exception on Article 31(1) and (2) but it lays down that such a legislation falls completely outside the purview of Article 31(1) and (2). In order to determine whether a particular piece of legislation falls under Article 31(1) and (2), it has to be seen whether the result of the measure is to substantially deprive the owner of his rights in the property. Applying this test to the instant case, I do not think that it has the effect of so substantially reducing the rights as to bring it within the purview of Article 31(1) and (2).
What Chapter V-A says is that an employer shall pay to the Corporation a sum not exceeding 5 per cent, of his total wage bill, with the result that the wage bill is only slightly increased. We have to consider the situation as a whole and have not to consider separately the case of every rupee that has been taken from the employer or the landlord as the case may be. In trying to determine the validity of Chapter V-A the provisions of the entire Act have to be considered, and the question has not to be determined with reference only to the additional amount, equivalent to a small percentage of the wage bill, which the employer would have to pay.
His wage bill having been increased only by a small amount, it cannot be said that Chapter V-A or Chapter IV cause such an abridgement In the rights, of the proprietor in his factory as to fall under Article 31(1) and (2). For the above reasons, I think that the whole Act, including Chapter V-A, falls outside the purview of Article 31 and cannot be said to be inconsistent with the Article.
44. It was also urged on behalf of the petitioner that there was no public purpose behind Chapter V-A, but I do not think that the submission deserves any serious consideration. This enactment is a measure intended to provide for certain benefits to the employees of the factories situate in the Union of India. The number of citizens involved is substantially large. There cannot be any doubt that the purpose of the enactment is to help this fluctuating class which deserves every consideration.
Ours is a socialistic welfare State and the measure is one which furthers the State policy. Article 43 of the Constitution, contained in the Chapter dealing with directive principles of the State policy, says that the State is to endeavour to secure, by suitable legislation, to all workers, agricultural, industrial or otherwise, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities. Reference may be made to Article 42 also. The benefits which the Corporation is intended to provide to the employees are of a nature which would be difficult for any individual factory owner to provide for his own employees, and the legislation attempts to confer these benefits on an All-India basis after taking contributions from all the employers. It is an insurance legislation and the scheme on an All-India basis is likely to be much more beneficial than any scheme directing every individual employer to help his own employees.
45. For the above reasons, I think that this legislation is not inconsistent with any provision of the Constitution and in my opinion, this petition should fail.
BY THE COURT
46. The petition is dismissed with costs, which we fix at Rs. 400/-.