Dr Dhananjaya Y Chandrachud , CJI
1 The present reference to a three Judge Bench has been occasioned in a referring
judgment of a two Judge bench in Lisie Medical Institutions Vs State of
Kerala1. The two judge Bench has doubted the correctness of certain
observations contained in an earlier decision of two Judges in SH Medical Centre
Hospital vs State of Kerala2.
2 We have heard Mr R Basant, senior counsel appearing on behalf of the appellant
and Mr V Giri, senior counsel appearing on behalf of the respondents.
3 The issue turns on the interpretation of the provision for exemptions contained in
Section 3(1) of the Kerala Building Tax Act, 1975, which is extracted below:
“3. Exemptions – (1) Nothing in this Act shall apply to
(a) buildings owned by the Government of Kerala or the GULSHAN KUMAR ARORA 1 (2017) 14 SCC 533 2 (2014) 11 SCC 381
(b) buildings used principally for religious charitable or
educational purposes or as factories or workshops.
Explanation.– For the purpose of this sub-section, “Charitable
purpose” includes relief of the poor and free medical relief.”
4 Clause (b) of sub-Section (1) of Section 3 of the Kerala Building Tax Act 1975
stipulates that nothing in the enactment shall apply to buildings used “principally
for ... Charitable ... purposes”. The Explanation [now Explanation (1)] indicates
that for the purpose of the sub-section ‘charitable purpose’ includes “relief of the
poor and free medical relief”. Clearly, therefore, the Explanation indicates that
the meaning of the expression ‘charitable purpose’ is not confined to relief of the
poor and free medical relief as is evidenced by the use of the expression
‘includes’. When a statute uses the expression ‘includes’, it is a well settled
principle of interpretation that the elucidation is not intended to be exhaustive.
5 However, while construing the provisions of Section 3(1)(b) of the Kerala Building
Tax Act 1975, the two Judge Bench in SH Medical Centre Hospital (supra), has
incorporated the following observations in Paragraph 17 of the Judgment:
“The High Court has correctly interpreted the “Explanation”
clause to Section 3(1) of the Act to hold that “charitable
purpose” means “relief of the poor and free medical relief”.
(Emphasis Supplied)
6 The observation which is extracted above suggests that the two-Judge Bench
construed the Explanation to Section 3(1) to mean that a ‘charitable purpose’ is
confined only to relief of the poor and free medical relief. This observation of the
two-Judge Bench in SH Medical Centre Hospital (supra) does not accord with
the plain meaning of the Explanation to Section 3(1). It was this aspect which was
noted in the referring judgment by A K Sikri, J in the following observations:
“16. … With due respect to the Bench which rendered the
judgment in S.H. Medical Centre Hospital Vs State of Kerala,
(2014) 11 SCC 381, it appears that an error in interpreting
Explanation I to Clause 1 of Section 3 of the Act has occurred in
not noticing that it contains the word “includes” and not “means”.
This error led to holding that “charitable purpose” meant only
“relief of the poor and free medical relief”. Relief to the poor and
free medical relief is only one of the facets to charitable purpose
and Explanation simply clarifies that too to be a charitable
purpose. However, the inclusive definition points out that relief to
poor and free medical relief is not exhaustive as to what
charitable purpose would mean. Thus, in order to find out the true
scope of charitable purpose, one will have to look into the
judgments of this Court, even if this very expression is examined
in the context of the Income Tax Act.”
7 The two judge bench in SH Medical Centre Hospital (supra) conflated the use
of the word ‘include’ with ‘means’. The Explanation to Section 3(1)(a) uses the
expression ‘includes’. The plain intendment is that relief of the poor and free
medical relief are not exhaustive of the content of charitable purpose.
8 At this stage, it would be material to note the submission of the respondents,
urged by Mr V Giri, senior counsel, to the effect that apart from the
interpretational issue which is addressed in the decision of the two-Judge Bench in
SH Medical Centre Hospital (supra), the Court has dwelt on other aspects of
Section 3(1). Mr. Giri adverted to the expression “buildings used principally for …
charitable … purposes” in Section 3(1)(b) and urges that the interpretation of that
phrase in the decision in SH Medical Centre Hospital is correct.
9 Undoubtedly, Section 3(1)(b) provides that nothing in the Act shall apply to
buildings which are used ‘principally’ for specific purposes, including among them,
‘charitable purposes’. The expression “principally” conveys the meaning of that
which is the dominant purpose. The interpretation placed by the two-Judge Bench
on the expression “principally used for charitable purposes” does not call for
interference in view of the statutory language used in Section 3(1). Principal use
refers to the dominant substantive use as distinguished from an ancillary use. 10 The Explanation goes to indicate that ‘charitable purposes’ includes and is,
therefore, not confined to the relief of the poor and free medical relief.
Consequently, the decision in SH Medical Centre Hospital (supra) to the extent
of the interpretation which is placed on the Explanation to Section 3(1)(b) of the
Kerala Building Tax Act 1975 does not correctly reflect the position in law which is
clarified above. The decision in SH Medical Centre Hospital is, therefore,
overruled to the above extent.
11 In the present case, the Division Bench of the Kerala High Court, while disposing
of the Writ Appeal, has relied only on the decision of the two Judge Bench of this
Court in SH Medical Centre Hospital (supra). The impugned judgment of the
Division Bench is extracted below :
“The issue raised in this writ appeal concerning the claim of
the appellant for exemption from Building Tax levied under
the Kerala Building Tax Act, 1975 is fully covered against it
by the judgment of the Apex Court in S.H.Medical Centre
Hospital v. State of Kerala [2014 (1) KHC 222]. This being
the factual position, we do not see any merit in this appeal.
Appeal fails and it is dismissed accordingly.”
12 Since the position in regard to the interpretation of the provisions of the
Explanation to Section 3(1) of the Kerala Building Tax Act 1975 has been clarified
above, we are of the considered view that the impugned judgment of the High
Court dated 18 July 2016 should be set aside and the Writ Appeal be restored to
the file of the High Court for a decision after keeping open the factual analysis
based on the interpretation of Section 3(1).
13 Writ Appeal No 1386 of 2016 in Writ Petition (Civil) No 20448 of 2016 is
accordingly restored to the file of the Kerala High Court for disposal in view of the
above interpretation. 14 The reference is answered in the above terms. The appeal is accordingly
disposed of.
15 Pending applications, if any, stand disposed of.
[Dr Dhananjaya Y Chandrachud]
[Pamidighantam Sri Narasimha]
[J B Pardiwala] New Delhi; February 9, 2023. -GKAITEM NO.102 COURT NO.1 SECTION XI-A
Civil Appeal No(s). 6799/2017
M/S LISIE MEDICAL INSTITUTIONS Appellant(s)
VERSUS
THE STATE OF KERALA . & ORS. Respondent(s)
([TO GO BEFORE THREE HONBLE JUDGES][ RETAIN ITS POSITION ] ( IA No. 198197/2022 - INTERVENTION APPLICATION IA No. 98067/2019 PERMISSION TO APPEAR AND ARGUE IN PERSON)
Date : 09-02-2023 These matters were called on for hearing today.
For Appellant(s) Mr. R. Basant, Sr. Adv.
Mr. K.V. Mohan, Adv.
Mr. Jijo Paul Kallookkaran, Adv.
Mr. K.v. Balakrishnan, Adv.
Mr. Rahul Kumar Sharma, Adv.
Mr. Vishnu. P, Adv.
Mr. K. V. Mohan, AOR
For Respondent(s) Mr. V Giri, Sr. Adv.
Mr. C. K. Sasi, AOR
Mr. Abdulla Naseeh V T, Adv.
Ms. Meena K Poulose, Adv.
Mr. Ramesh Babu M. R., AOR
UPON hearing the counsel the Court made the following
O R D E R
1 The reference is answered in terms of the signed reportable judgment. The
appeal is disposed of.
2 Pending applications, if any, stand disposed of.
(Signed reportable judgment is placed on the file)