Article 265 : Genesis, Caselaw Interpretations & Assembly Debates.
Taxes not to be imposed save by authority of law
No tax will be levied or collected except by authority of law . It is thus explicit that not only the levy, but also the collection of a tax must be under the authority of some law. The authority of law refers to a valid law which in turn would mean that the tax proposed to be levied must be within the legislative competence of the legislature imposing the tax and the law must be validly enacted. It must also not contravene the specific provisions of the Constitution of India and the tax in question must be authorised by such valid law. The expression levy and collection’ is used in the article of the Constitution of India dealing with taxes not to be imposed save by authority of law in a comprehensive sense and is intended to include the entire process of taxation commencing from taxing statute to the taking away of the money from the citizen. What the aforesaid article enjoins is that every stage in this entire process must be authorised by the law .
The essential characteristics of a tax are that (1) it is imposed under statutory power without the taxpayer’s consent and the payment is enforced by law; (2) it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax; and (3) it is part of the common burden, the quantum of imposition upon the tax payer depends generally upon his capacity to pay. The tax paid by the person availing the service at a government hospital may not be treated as consideration or charge for the service rendered at the said hospital and such service though rendered free of charge does not cease to be so because the person availing the service happens to be a tax payer . The authority under the statute to levy a tax must be express. This power may not be derived from the delegation of mere regulatory power, even though the tax is within competence of the legislature which makes the delegation as the power to tax is not incidental or ancillary to the power to legislate on a matter . The Constitution of India does not prevent the same person or property being subject to both state and municipal legislation .
Tax paid in excess duly computed on the basis of return furnished and the rates applicable will be refunded to the assessee as the retention may offend the Constitution of India . Under the doctrine of unjust enrichment’ tax levied illegally must be refunded . The tax paid under mistake of law may be refunded by the order of writ court .
Rule Of Law
Rule of law seeks to lessen the discretionary element in the conferment and exercise of power by the administration because discretionary power brings in the subjective -element of the person exercising the power, and it is extremely difficult to control such an element and thus, there is a chance of the power being abused or misused . The courts in India have used the concept of rule of law as a hedge against arbitrary administrative power .
Administration does not have any inherent power of its own so as to adversely affected any individual right by its own fiat or decree. The administration enjoys such powers only as emanate, or are derived, from law. Bureaucracy has to keep itself within the confines of law and it can exercise no power which is not sanctioned by law. This is the cardinal principle operating in common law countries which leads to judicial control of administrative action through the application of the doctrine of ultra vires. This seeks to ensure that the administration does not exceed its legal powers .
This principle ensures that no one can be deprived of his right, liberty or property without the authority of law. It also ensures judicial review of administrative action as the courts seek to ensure that the administration does not exceed its legal powers. While the rule of law does not, as such, outlaw discretionary power, it does outlaw arbitrary power which means that any discretionary power should not be too wide and unrestrained so as to become arbitrary. While complete absence of discretionary power may not be possible in the present-day context, it ought not to be too wide and unrestrained, and that it must be subject to a proper control mechanism against its abuse or misuse, so as not to become arbitrary as to pose a danger to the person and property of the citizens.
Administrative law promotes rule of law insofar as it seeks to draw a balance between public power and private interests by providing a redressal mechanism so that the individual who gets hurt by undue administrative action gets proper relief and redressal against the administration. This ensures that administrative power be exercised in a lawful manner. A significant derivative of rule of law is judicial review. Judicial review is an essential element of rule of law. Judicial review involves determination of the legal validity of administrative action. The actions of the bureaucracy as well as other public authorities are all subject to judicial review. They are, thus, all accountable to the courts for the legality of their actions. It is for the courts to ensure that the administrative authorities do not indulge in arbitrary and unreasonable actions. In India, so much importance is given to judicial review that it has been declared to be the basic feature of the Constitution which cannot be done away with, even by the exercise of the constituent power .
Equal protection of the laws According to the expression equal protection of the laws, equal law is supposed to be applied to all in a similar situation without any discrimination. The rule of law that has been embodied in the Constitution of India is considered as the basic feature of the Indian Constitution, and hence it may not be destroyed even by the amendment of the Constitution as per the article of the Constitution of India dealing with power of Parliament to amend the Constitution and procedure therefore. Thus, the concept of equality before law is guaranteed to all without discrimination based on race, colour, or nationality.
The concept of equal protection of laws implies equality of treatment in equal circumstances. This concept must be taken to mean that all persons in similar circumstances will be treated alike both in privileges conferred, and liabilities imposed. Its major objective being to protect persons similarly placed against discriminatory treatment.
The concept of the equal protection of laws is found in the Fourteenth Amendment Acts 1 of the Constitution of the United States of America, according to which ‘no State will deny to any person within its jurisdiction the equal protection of the laws’. It has been taken to mean subjection to equal laws, applying to all in similar circumstances.
There are certain exceptions to the rule of law in the Constitution of India which are as follows:
(1) as given under the Constitution of India , the President or the Governor or Rajpramukh of a state is not answerable to any court for the exercise and performance of the powers and duties of his office, or any act done or purported to be done by him in the exercise and performance of those powers and duties, provided that the conduct of the President may be brought under review by any court, tribunal or body appointed or designed by either House of Parliament for the investigation of a charge under the article of the Constitution of India dealing with procedure for impeachment of the President. This is further subject to the fact that this will not limit the right of any person to bring appropriate proceedings against the government of a state ;
(2) no criminal proceedings whatsoever will be instituted or continued against the President of India or the Governor of a state in any court during his term of office ;
(3) no process for the arrest or imprisonment of the President of India or the Governor of a state will issue from any court during his term of office ;
(4) no civil proceedings in which relief is claimed against the President of India or the Governor of a state will be instituted during his term of office in any court in respect of any act done or purporting to be done by him in his personal capacity, whether before or after he entered upon his office as President or as Governor of such state, until the expiration of two months, next after notice in writing has been delivered to the President or the Governor, as the case may be, or left at his office stating the nature of the proceedings, the cause of action therefor, the name, description and place of residence of the party by whom such proceedings are to be instituted, and the relief which he claims ;
(5)ministers enjoy wide discretionary powers provided to them under various statutes. They have the power to act as they think fit, and if they are satisfied according to the law. It is also seen that most of the legislations are passed in the form of delegated legislation , that is, rules, orders or statutory instruments made by ministers and other bodies, and not directly by the Parliament;
(6) foreign sovereigns and diplomats are also allowed immunity from the jurisdiction of the courts in India; and
(7) the judges have also been allowed some special privileges and protection under the Constitution of India.
Lastly, the rule equality before law does not offer equal powers to all citizens, some public officials are conferred special powers to carry out their public duties.
FAIR HEARING
The components of fair hearing are not fixed but are flexible and variable and their scope and applicability differs from case to case, contracting into a brief, even post decisional opportunity or expanding into trial type trappings . However, natural justice is not an unruly horse . The concept of natural justice is of variable content and imposes variable procedural norms from case to case. Natural justice depends on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject matter that is being dealt with and so forth .
Whether the requirements of natural justice have been complied with or not is for the courts to decide, in the context of the facts and circumstances of a particular case. The objective is to ensure a fair hearing to the person whose rights are going to be affected. The courts are to be satisfied that the person against whom an action has been taken has had a fair chance of presenting his side of the case before the concerned authority and of persuading it that the grounds on which the action was proposed to be taken against him were either non existent or, if they ever existed, they did not justify the action proposed.
A flexible formulation of fair hearing enables the courts to modulate the hearing procedure to suit the practical needs of the specific body in question. Thus, procedure does not become a straight jacket and administrative process is not unduly hampered .
Adjudicatory bodies enjoy substantial freedom in ordering their hearing procedures subject, however, to the over all condition that the party affected gets a reasonable opportunity of presenting his case. Thus, the hearing procedure varies from tribunal to tribunal and from body to body. In some cases, more formal procedures may be insisted upon than in other cases, as for example, in disciplinary proceedings .
The statute, under which an adjudicatory body function, may itself lay down the procedure that such body is required to follow. However, usually, statutes are either completely silent as to the procedure or may merely ordain that the parties must be heard before an action is taken or may lay down some skeletal procedural norms . In such situations, courts imply norms of natural justice or fairness in the interstices of the statutory provisions . If the statutory provisions have gaps as regards the procedure to be followed, the same may have to be supplemented by bringing in relevant norms of natural justice .
NOTICE IN NI ACT.
For initiating criminal proceedings in respect of a dishonoured cheque, it is mandatory that a demand for the payment of the amount for which the cheque is drawn be made by issuing a notice in writing to the drawer within 15 days of the intimation of dishonour . The cause of action for the initiation of criminal proceedings arises only when a demand to pay the cheque amount is made by way of issuing a notice . The notice must be in writing .
It is essential that the notice of demand be made within 15 days of receipt of intimation of dishonour of the cheque. It is not necessary that the notice be served within 15 days of such knowledge . The factum of the issue of the notice of demand is distinct from the factum of the service of such notice . If a drawer refuses service and the holder makes further attempts to serve the same notice, it is not equivalent to the service of a new notice . Wilful evasion of the notice by the drawer will amount to constructive notice .
The notice must make a demand for the payment of amount of the dishonoured cheque. There is no obligation that the complainant refer to the legal provisions under which it is sent . It is also not necessary that the notice prescribe a period of 15 days for the payment of the cheque amount . A notice will not be rendered defective if it is not signed by an advocate , or if it contains an inadvertent mistake in writing the number of the dishonoured cheque .
A prosecution is not permissible in the absence of proof of service of the demand notice . A postal acknowledgment due containing a signature is proper proof of service . When a notice is returned with the endorsement addressee not found, there can be no service of it . The notice for demand of payment has to be read as a whole. The demand has to be made for the amount of money specified in the cheque .
INTERPRETATION OF STATUTE
In Reserve Bank of India Vs. Peerless Co. reported at 1987(1) SCC 424. the Apex Court has made the following observations regarding the interpretation of the statute:
Interpretation must depend on the text and the context. These are the basis of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words may taken colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses, we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place.
FEMA AIMS AS PER THE ACT
As part of the on-going process of economic liberalisation relating to foreign investments and foreign trade a review of the Foreign Exchange Regulation Act, 1973 was made in the year 1993 and several amendments were enacted. Subsequently it was felt that the Foreign Exchange Regulation Act, 1973 must be repealed. A Task Force was constituted to have an overall look on the subject and suggest the required changes. The Task Force submitted its report in 1994.
On the recommendations of the Task Force and keeping in view the significant developments that had taken place since 1993 the Foreign Exchange Management Bill was introduced in the Parliament.
STATEMENT OF OBJECTS AND REASONS
The Foreign Exchange Regulation Act, 1973 was reviewed in 1993 and several amendments were enacted as part of the on-going process of economic liberalisation relating to foreign investments and foreign trade for closer interaction with the world economy. At that stage, the Central Government decided that a further review of the Foreign Exchange Regulation Act would be undertaken in the light of subsequent developments and experience in relation to foreign trade and investment. It was subsequently felt that a better course would be to repeal the existing Foreign Exchange Regulation Act and enact a new legislation. The Reserve Bank of India was accordingly asked to undertake fresh exercise and suggest a new legislation. A Task Force constituted for this purpose, submitted its report in 1994 recommending substantial changes in the existing Act.
Significant developments have taken place since 1993 such as substantial increase in our foreign exchange reserves, growth in foreign trade, rationalisation of tariffs, current account convertibility, liberalisation of Indian Investments abroad, increased access to external commercial borrowings by Indian corporates and participation of foreign institutional investors in our stock markets.
Keeping in view the changed environment, the Central Government has decided to introduce the Foreign Exchange Management Bill and repeal the Foreign Exchange Regulation Act, 1973 . The provisions of the Bill aim at consolidating and amending the law relating to Foreign Exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange markets in India.
DETERMINATION OF POLICY AND ISSUE OF DIRECTIONS by RBI
The Reserve Bank may generally determine the policy and give directions to banking companies in relation to certain specified matters, if it considers it necessary or expedient to do so and such considerations include the public interest, the regulation of the financial system of the country to its advantage, the prevention of the affairs of any non-banking financial company from being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interest of the company itself. On one or more of these considerations, if the bank is satisfied about its need to act, it may determine the policy and give directions to all or any of the non-banking financial companies relating to such matters as income recognition, accounting standards, the making of proper provision for bad and doubtful debts, capital adequacy based on risk weights for assets and credit conversion factors for off-balance sheet items, and also relating to the deployment of funds by a given company or a class of such companies, or non-banking financial companies generally. Such companies are then bound to follow the bank’s policy so determined and the directions so issued .
Likewise, the bank may also give directions in particular as to the purpose for which advances or other fund based or non-fund based accommodation may not be made, and the maximum amount of advances or other financial accommodation or investment in shares and other securities, which, having regard to the paid-up capital, reserves, and deposits of the non-banking financial company and other relevant considerations, may be made by that non-banking financial company to any person or to a company or to a group of companies . The Reserve Bank of India, as a Central Bank and as a brooding omnipresence in the banking system, is invested with a general discretionary power to give directions . On broad considerations of the public interest or banking policy, or to prevent any banking company’s affairs from being conducted to the detriment of the depositors, or to the prejudice of the company itself, or to secure proper management, the bank may act under the aforementioned provision and where the bank is so satisfied it may issue appropriate directions to banking companies generally or to a banking company in particular and the company or companies are bound to comply with such directions . However, on representation made to it, or of its own accord, the bank may modify or cancel any direction but also attach conditions thereto . The term “banking policy” has been defined to mean any policy which is specified from time to time by the Reserve Bank in the interests of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, the volume of deposits and other resources of the bank and the need for equitable allocation and the efficient use of these deposits and resources . This definition and that of banking are not mutually exclusive but coordinating subjects and both are covered within the supervisory powers of the bank . The expression “having due regard to” in the definition of “banking policy” would indicate that in specifying its policy the bank must take into account the factors specifically enumerated in the definition together with all other factors relevant for exercise of that power .