1. This reference raises tho question whether aGovernment can be deemed to be a person withinthe meaning of the expression as used in Article 14of the Constitution of India.
2. One Shiv Parashad who owed a certain sum of money to Govt. on account of license fees for the vend of opium and bhang was adjudicated an insolvent on the 5th January 1954, and was or derfed to be discharged under Section 41 of the Provincial Insolvency Act on the 19th October 1954; The order of discharge however declared that the liability of the insolvent in so far as the debts due to Govt. were concerned would remain unaffected as Section 44 of the Insolvency Act provides that an order of dischargeshall not release the insolvent from any debt due to Government.
The insolvent preferred an appeal to the District Judge and challenged the validity of Section 44 on the ground fhat it contravenes the provisions of Article 14 of the Constitution inasmuch as it has the effect of discriminating between different classes of creditors of the insolvent by according preferential treatment to Government over other creditors. The learned Judge is of the opinion that this case involves the decision of an important question of constitutional law and has referred this case to this Court under Section 113 and Order 46 of the Code of Civil Procedure.
3. Mr. H. L. Sarin, who appears for the petitioner, contends that the State must be deemed to bo a person within the meaning of Article 14, for the expression 'person' as defined in the General Clauses Act includes any company or association or body of individuals whether incorporated or not. A State, it is argued, is an artificial person, for it consists of a complete body of free persons united together for the common benefit.
Reliance has been placed on certain authorities in which it has been held that when the State en-gages in business or commerce such as is carried on by a private individual or corporation, it must subject itself to the same obligations as were imposed on, and place itself in the same position as a private individual or corporation except in the manner of taxation, Moti Lal v. Govt. of the State of U. P., AIR 1951 All 257 (FB) (A), Amraoti Electric Supply Co. Ltd. v. N. H. Mujumdar, AIR 1953 Nag 35 (B) and Kesheo Prasad v. State of M. P., (S) AIR 1955 Nag 177 (C).
4. These rulings are, in my opinion, inapplicable to the facts of the present case. The natural and obvious meaning of the expression 'person' is a living human being, a man, woman or child, an individual of the human race. As used in law the word includes natural persons and artificial persons like corporations and joint stock companies, but it does not include a State or Government, for although a State is in the language of Vattel 'a moral person, having an understanding and a will, capable of possessing and acquiring rights and of directing and fulfilling obligations', the State in its political organisation is entirely different and distinct from the' inhabitants who, may happen to reside there.
Similarly a Government cannot fall within the ambit of the expression 'person, for although in common parlance ''Government is synonymous with 'State', in actual fact the State is a country or assemblage of people while tho Government is the political agency through which it acts. It is true that the State is capable of suing and being sued but that is so not because the State is a person, but because Article 300 of the Constitution has made an ' express Provision in that behalf.
It has prescribed the method by which the Indian Exchequer might itself institute proceedings and might he made the subject of proceedings for the purpose of determining the rights between the State and the subjects of the State. A suit against the State cannot be regarded as being against any person or any real body corporate Doya Narain v. Secretary of state for India in council ILR 14 Cal. 256 at p 273 (D). It has been, held repeatedly that the expression 'person' does not include the State(Simla Hills Transport Service v. Punjab State, C. W. No. 545 of 1950 (Funj) (E), and Kapur Textile Finishing Mills J. H. F. Concern v. Province of East Punjab AIR 1954 Funj 49 (F), and that the expression, 'reside' appearing in Section 19 of the Code of Civil Procedure refers only to natural persons and not to legal entities such as limited companies or Governments Govindarajulu Naidu v. Secretary of State for India in Council, ILK 50 Mad 449: (AIR 1947 Mad 689) (G).
Where the State acting as such reserves to it self certain rights which are denied to other persons in similar circumstances the provisions of Article 14 are riot violated: (S) AIR 1955 Nag 177 (C). The liberty guaranteed by the due process clause of the American Constitution is the liberty of natural, not artificial persons: Onev v. Oklahoma City, CCA 10, 120-F (2nd) 861 (H).
5. A sovereign legislature is at liberty to exercise powers of taxation, powers of eminent domain and police powers. The powers of taxation are usually exercised for the purpose of creating revenue; the powers of eminent domain for the purpose of taking private property for a public use and police powers for the purpose of promoting public welfare by restraining and regulating the use of liberty and property. Although the Indian Constitution does not recognise this threefold classification, there can be no doubt that the Provincial Insolvency Act has been enacted by the Provincial Legislature in exercise of powers analogous to police powers. The prerogative of the sovereign to preferential treatment over all other creditors has been recognised from early times for it is a well known maxim of law that where the king's and the subject's title concur, the king's title must be preferred. So far as this country is concerned the priority of taxes in bankruptcy is not predicated upon the prerogative of the Crown, but depends exclusively on statutory provisions. The Legislature has classified debts for the purpose of priority and has accorded a favoured position to debts due to the State. In the hierarchy of debts priority has been accorded to classes of debts rather than to classes of creditors. First in order of priority are debts due to Government, for Section 44 declares that an order of discharge shall not release the insolvent from any debt due to Government. This section is designed to carry out a public purpose: it operates uniformly on all persons in the State when they come within the scope of its authority; it is applicable to all persons in like circumstances; it does not subject individuals to an arbitrary power; it does not discriminate against some and in favour of others; it treats all alike within the sphere of its operation. A statutory provision of this kind cannot be regarded as violative of the constitutional provision relating to equal protection of the laws. The moneys claimed by the State in the present case are moneys which are due from the insolvent in respect of licence fees which were to be paid by the insolvent under the provisions of the appropriate Excise Acts. The power of issuing licences under excise laws is clearly an exercise of police powers. It is impossible to hold that the debt which is sought to be recovered in the present case accrued to the State while it was acting in its capacity as a private juristic person or while it was engaged in commercial activities.
6. For these reasons I am of the opinion that neither a State nor a Government can fall within the ambit of the expression 'person' appearing in Article 14 of the Constitution. Let an appropriate answer be returned to the question which has been referred to us by the learned District Judge.
7. I agree.