LexTHE BULLION AND GRAIN EXCHANGE LTD. AND OTHERS. versus THE STATE OF PUNJAB
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Srptem~er 13.
\
668
SUPREME COURT REPORTS
·
1[1961]
THE BULLION AND GRAIN EXCHANGE
LTD. AND OTHERS
v.
THE STATE OF PUNJAB
(S. K. DAS, M. HIDAYATL'LLAH, K. c. DAS GUP'rA,
J. C. SHAII and N. RAJAOOPALA AYYANOAR, ,JJ.)
For;;•ard Contracts Tax-Validity of maclmtnl · -Legislative
compciencc--Sercrability of rnlid portio'1-· P"njab Forward Con-
tracts Tax Ari, r95r (P11nj. 7 of r95r), .<. 2-Co11slil11lion of India,
Seirnth Sclzcdu/c, List I I. Entry 62.
The appellants, who were carrying on the business of com-
mission agents in forwarrl contracts, filed a petition before the
High Court of Punjab under Art. 226 of the Constitution of
I 11dia challenging the validity of the Punjab Forward Contracts
Tax Act, I<J5I, on the ground that it was ultra vires the powers
conferred upon the State Legislature.
The Art provided for
the levy of a tax on forward contracts which were definer!, by
s. 2, as agreements, oral or written, for sale of goods on a future
date but on the basis of which actual delivery of goods was not
made or taken but only the difference between the price of the
goods agreed upon and that prevailing on the date mentioned
in the agreement or any other date was paid or received by the
parties. The High Court took the view that the Act was one to
tax S("culation in futures and fell within Entry 62 of the State
List as an Act to impose taxes on betting and gambling.
Held, that as the definition of the cxpressio~ "forward
contract" in the Punjab Forward Contracts Tax Act, 1951, does
not set out all the clements which are necessary to render a
contract a wagering contract the lrgislature could not be con-
sidc'.red to have contcmplatrd \\·agering contracts in defining
"forward contracts" in the wa1• it did.
The Act therefore docs
not fall within Entry 62, List fl, Seventh Schedule of the Con-
stitution, and is beyond the legislative competercc of the State
Legislature.
lle/d, further, that even if the definition could .he consider-
ed to be v.:ide enough to include certain contracts \\'hich may he
wagering contracts because of the fact that the parties to the
contract had no intention to deliver the goods, the portion of
the Act which would then be valid is so thin and truncated
that the entire Act should be held invalid.
R. M. D. Chamarba11g;cala v. The U11ion of India, [1957]
S. C. H. 930, relied on.
C1v1L
APPELLATE
JuRISDICTION:
Civil Appeal
No. 123/55
/
)
1 S.C.R. SUPREME COURT REPORTS
669
z960
Appeal by special leave from the judgment and
order dated November 12, 1951, of the Punjab High The Bullion and
Court in Writ Petition No. 116 of 1951.
Grain Exchange
N. C. Chatterjee, S. N. Andley, J.B. Dadachanji and
Ltd., & Others
Rameshwar Nath, for the appellants.
, ..
The Sta-te of
S. M. Sikri, Advocate-General for the State of Punjab,
Punjab
N. S. Bindra and D._Gupta, 'for the respondent.
1960. September 13. The Judgment of the Court
was delivered by
DAS GUPTA J.-This appeal is against the judg-
ment of the High Court of Punjab rfjecting the appel-
lant's application under Art. 226 of the Constitution.
In this application the appellants who had been
carrying on the business of oommission agents in
Forward Contracts at Ludhiana alleged that the Pun-
jab Forward Contracts Tax Act, 1951 (Punjab Act
No. VII of 1951), was ultra vires the powers conferred
upon the State Legislature and prayed for a declara-
tion that the Act and the notification made and the
.rules promulgated thereunder by the respondent,
State of Punjab, were void. There was a further
prayer for directing the State of Punjab by a writ of
mandamus ·or other appropriate writ to allow the
petitioners to carry on the business of Forward Con-
tracts or as commission agents in Forward Contracts
unrestricted by the provisions of the above-mentioned
Act and the rules thereunder and not to enforce the
Act.
The respondent's case as made in para. 5 of its
written-statement was that " the impugned Act is not
ultra vires the State Legislature. It is a law with
respect to the matters enumerated in Entry 62 of the
State List read with Entry No. 7 of the Concurrent
List of the 7th Schedule."
The High Court held that :-
"The impugned Act, is an Act to tax speculation
in futures, at least so far as uealers such as the pre-
sent applicants are cou-cerned, falls within Item 62
of the State List as an Act to impose taxes on betting
and gambling, and to that extent at least is valid."
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