R.K. Garg & Ors. v. Union of India & Ors. (1981) 4 SCC 675

R.K. GARG AND ORS. V. UNION OF INDIA AND ORS

To what extent Article 14 of the Constitution of India renders the Ordinance and the Act to be extra vires?
Whether the President’s promulgation of the Ordinance go beyond his authority granted by Article 123 of the Constitution of India?
Whether the classification made under the Bond Bearer Act, 1981 between the 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 Article 14 of the Constitution of India?

The right to equality is enshrined in Article 14 of the Constitution of India. By its terms, discrimination of any kind is forbidden by law, and all people are treated equally.
Article 123 of the Constitution of India mentions the Ordinance-making power of the President. He can promulgate Ordinances either when both the houses or either of the Houses is not in session.

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

The Hon’ble Supreme Court of India held that both the Act and the Ordinance are constitutional since they are in line with Article 14 of the Constitution of India.
The Supreme Court established a presumption in favour of the constitutionality of a statute, which is especially important when it comes to laws regulating the economy because courts cannot substitute their social and economic beliefs for the judgment of legislative bodies and, more often than not, a greater wiggle room has to be allowed to the legislature because of the complexity, uncertainty, and liability associated with economic regulation.
The Court reasoned that the classification’s legality should be evaluated in light of the law’s stated purpose.
The Supreme Court also held that the President’s power to promulgate an ordinance under Article 123 of the Constitution of India is co-extensive with the power of the Parliament to make laws, and thus no limitation could be read into his power to alter or amend tax laws.