Facts I: On 12.01.1981, both Houses of Parliament not being in session, the President issued the Special Bearer Bonds (Immunities & Exemptions) Ordinance, 1981) (Ordinance) in exercise of the power conferred upon him under Article 123 of the Constitution. The Ordinance was later replaced by the Bearer Bonds Act, 1981 (Act) which received the assent of the President on 27.03.1981, but which was brought into force with retrospective effect from 12.01.1981, being the date of promulgation of the Ordinance.

Held I: The Act has been brought into force w.e.f. the date of promulgation of the Ordinance and Section 9 of the Act provides that anything done or any action taken under the Ordinance shall be deemed to have been done or taken under the corresponding provisions of the Act and its validity will be judged with reference to the Act, by reason of its retrospective enactment, and not the Ordinance. It is in the circumstances wholly unnecessary to consider the constitutional validity of the Ordinance, because, even if the Ordinance maybe unconstitutional, the validity of anything done or any action taken under the Ordinance could still be justified with reference to the provisions of the Act. Therefore, contentions against the powers of the President are academic.

The legislative power conferred on the President under this article is not a parallel power of legislation but co-extensive with the power of Parliament to make laws. The power to promulgate Ordinance is only exercisable in an emergent situation which cannot wait till the next assembly of the House of Parliament and even then it shall remain in force for a limited duration of time as specified in the Article. It will, therefore be seen that legislative power has been conferred on the executive for a necessary purpose and it is hedged in by limitations and conditions. The President cannot issue an Ordinance which Parliament cannot enact into a law. There is therefore no substance in the contention of the petitioner that the President has no power under Article 123 to issue an Ordinance amending or altering the tax laws and that the Ordinance was, therefore, outside the legislative power of the President under that Article. (Gujarat Pottery Works (P) Ltd. vs. B. P. Sood, Controller of Mining Leases for India (1967) 1 SCR 695, Abdul Majid vs. P. R. Nayak, AIR 1951, State of Rajasthan vs. Union of India (1978) 1 SCR 1 Bom 440)

Fact II: The question raised was whether the classification made under the Bond Bearer Act, 1981 between holders of black money and others is not practical, real, intelligible and not arbitrary and irrational and therefore violative of the equal protection clause in Art. 14. It was argued that if black money was not invested in the Special Bearer Bonds it could have been mopped up from the economy by various other measures like search and seizures.

Held II: The only immunity provided under the Act to the assessee only is that the fact of subscription to or acquisition of Special Bearer Bonds shall be ignored altogether and shall not be relied upon as evidence showing possession of undisclosed money but it is open to Revenue to completely ignore the fact of subscription or acquisition as if  it were non-existent and any inquiry or investigation into concealed income could be carried out and such income detected and unearthed.

Classification made between persons having black money and persons not having such money is a practical and real and this de facto classification is clearly based on intelligible differentia having rational relation with the object of the Act. The Act was enacted with the object of combatting the menacing problem of black money and to unearth black money lying secreted and outside the ordinary trade channels The validity of a classification has to be judged with reference to the object of the legislation and if that is done, there can be no doubt that the classification made by the Act is rational and intelligible and the operation of the provisions of the Act is rightly confined to persons in possession of black money. Accordingly, none of the provisions of the Act is violative of Art. 14 and its constitutional validity must be upheld. ( dt 13-11-1981)