Budget 2012 can make history. Not because of any measures introduced in it that affect the economy. I am incompetent to comment on that. This budget could be historic because thanks to Finance Minister Mr. Pranab Mukherjee an immoral and unprincipled decision has been taken that revives focus on what I believe to be the most fundamental flaw that is destroying our democratic system. The government has retrospectively introduced a clarification to the Income-Tax (I-T) Act, 1961, by which the Vodafone-Hutchison deal, which was ruled not being taxable in India by the Supreme Court, will now become taxable. This amounts to a virtual amendment of the Act. It amounts to legislation with retrospective effect. A review petition by the government on this case is already pending before the Supreme Court. It remains to be seen how the Court reacts to this development. 

How can law with retrospective effect be passed? It makes mockery of all basic principles of justice. The government in order to retrieve tax from Vodafone may have introduced this measure. Has it calculated the enormous damage it will do to our international credibility and its impact on foreign investment in India?  If the principle of retrospective legislation is accepted a government with absolute majority in parliament can become an absolute dictator with power to pass any law with retrospective effect to destroy democratic rights and freedom. The genesis of how retrospective legislation came to be accepted in India needs to be understood. 

The basic question was: Does ultimate power in our democratic system reside in a sovereign parliament or in our written Constitution? Pandit Nehru as a woolly headed Anglophile wrongly interpreted our written Constitution to be synonymous with the British Westminster parliamentary system. Britain has no written constitution. Therefore all decisions by parliament gain the sanctity of law. But India has an explicit and written Constitution. How can members of parliament assume God-like power and violate the basic principles of the Constitution? This debate engaged public attention in the early years. Even sensible leaders like the late Nath Pai were swayed by Nehruvian charisma to wrongly support the absolute power of parliament.  I recall as his dinner guest arguing with him on this issue and found his answers quite unconvincing.  

As it happens retrospective legislation not only violates the basic principles of our Constitution but also of logic. Our democratic system was further distorted by the Supreme Court during the Emergency. As might be recalled the Allahabad High Court found Mrs. Gandhi guilty of corruption and unseated her from parliament. Mrs. Gandhi appealed to the Supreme Court. The Emergency was imposed. While the case was being heard during the Emergency, Parliament passed the Election Laws (Amendments) Act, 1975 with retrospective effect. The Supreme Court accepted the validity of the Act despite its retrospective effect and upheld Mrs. Gandhi’s election. How on earth did the Court justify validating retrospective legislation? 

The Court observed: “Retrospective operation of law in the field of election has been upheld by this Court. Retrospective operation of any law would cause hardship to some persons or other. This is inevitable; but that is no reason to deny to the Legislature the power to enact retrospective law. In the case of a law which has retrospective effect, the theory is that the law was actually in operation in the past and if the provisions of the Acts are general in their operation, there can be no challenge to them on the ground of discrimination or unfairness merely because of their retrospective effect. In other words, if an Act cannot be challenged on the ground that its provisions are discriminatory or unreasonable if it is prospective in operation, those provisions cannot be attacked on these grounds merely because the provisions were given retrospective effect.”

Does any of this gibberish make sense to the reader? The five members Constitution Bench that passed this ruling included the much revered late Justice HR Khanna and Justice Chandrachud who later became the Chief Justice of India. Would the honourable Judges have made the same ruling had the nation not been under the Emergency imposed by a paranoid and dictatorial Prime Minister who during its period arrested over 100,000 innocent people without trial? One thinks not. No wonder Chief Justice Chandrachud after the Emergency had been lifted and Mrs. Indira Gandhi had been removed from office said: 'I wish we had the courage when we needed it.”

After the budget Finance Minister Mr. Mukherjee justified to the media his unprincipled and self-destructive decision to retrospectively alter the Income-Tax Act of 1961 by stating: “We had issued the retrospective legislation because it has been done in the past, there is nothing new about it.” That’s right. If there is nothing new about evil it’s okay to repeat it! Retrospective legislation is against all principles of natural justice. Parliament exercising sovereign power over the basic tenets of natural justice and written Constitution is against all principles of democracy. Unless these flawed traditions are firmly discarded Indian democracy and the Indian nation will continue to sink. Let us see how our eminent jurists react to the government’s newest retrospective legislation.