RK Garg V.

UOI
1981 AIR 2138 1982 SCR (1) 947 1981 SCALE (3)1601

Bench: Y Chandrachud, A Gupta, A Sen, P Bhagwati, S M Ali

Facts: The Special Bearer Bonds (Immunities and Exemptions) ordinance, 1981 was
promulgated on January 12,1981. It was repealed and replaced by the Special Bearer Bonds
(Immunities and Exemptions) Act, 1981. The Act received the Presidential assent on March
27,1981. Section 1(3) of the Act stated that the Act was deemed to have come into force on
January 12, 1981. The provisions of the ordinance and the Act were similar except section
4(2) of the Act which was worded slightly differently from the corresponding provision of
The ordinance. The Act provided for certain immunities to holders of Special Bearer Bonds,
1981, and for certain exemptions from direct taxes in relation to such Bonds and for matters
connected therewith. The object and purpose for which the Act was passed was to canalise
for productive purposes black money, which had become a serious threat to the national
economy and to provide for certain immunities and exemptions to render it possible for
persons in possession of black money to invest the same in the said Bonds.

In their writ petitions to this Court assailing the constitutional validity of the ordinance and
the Act it was contended on behalf of the petitioners that: (I) since the ordinance had the
effect of amending the tax laws it was outside the competence of the President under Article
123, that the subject matter of the ordinance was in the nature of a Money Bill which could
be introduced only in the House of the People and passed according to the procedure
provided in Articles 109 and 110, the President had no power under Article 123 to issue the
ordinance by passing the special procedure provided in Articles 109 and 110 for the passing
of a Money Bill and (2) that the provisions of the Act were violative of Article 14 of the
Constitution.

Judgement : 2(i). Certain well established principles have been evolved by Courts as rules of guidance in discharge
of their constitutional function of judicial review. The first rule is that there is always a presumption in favour of the
constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression
of the constitutional principles. The presumption of constitutionality is indeed so strong that in order to sustain it, the
Court may take into consideration matters of common knowledge, matters of common report, the history of the times
and may assume every state of facts which can be conceived existing at the time of Legislation.

Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than
laws touching civil rights such as freedom of speech, religion etc. The court should feel more inclined to give judicial
deference to legislative judgment in the field of economic regulation than in other areas where fundamental human
rights are involved. [969 A-G] Morey v. Dond, 354 US 457, referred to.