SC Expunges Reference to Sikkimese Nepalis as Persons of 'Foreign Origin'

A protest rally in Sikkim. 

(Photo:  Facebook/ Sikkim Krantikari Morcha). 

The Supreme Court on Wednesday, 8 February, removed the observations in its judgment on tax exemption in Sikkim, which described Sikkimese Nepalese persons as "people of foreign origin."

What happened? The SC's recent judgment invited sharp criticism and triggered protests in Sikkim over the past week. It was in light of these protests that the Centre, the Sikkim government, and third parties filed applications seeking modifications to the SC's statement.

What did the court do then? "We think it just and proper to correct certain words in paras 10A and 68.8 of my judgment by making the following corrections: In paragraph 10A, the second sentence stands deleted. In paragraph 68.8, 'from the current financial year i.e., 1st April, 2022 onwards 2022' stands deleted. Office to issue a fresh certified copy of the order," Bar and Bench quoted the the SC as saying in its order on Wednesday, 8 February.

And then? The bench further said that the mistake crept in because the original petition had it. It said that although the petition was later amended, the modified petition was not brought to the attention of the court.

Which part of the original judgment led to outrage? The portion in the judgment given on 13 January and authored by Justice Nagarathna, which sparked a debate on identity and led to unrest, read as follows:

"Therefore, there was no difference made out between the original inhabitants of Sikkim, namely the Bhutia-Lepchas and the persons of foreign origin settled in Sikkim like the Nepalis or persons of Indian origin who had settled down in Sikkim generations back."

As per LiveLaw, the bench initially agreed to remove the part "the persons of foreign origin settled in Sikkim like the Nepalis." However, Solicitor General Tushar Mehta requested that the entire sentence be deleted. The bench then agreed to remove the part "namely the Bhutia Lepchas and the persons of foreign origin settled in Sikkim like the Nepalese."

What did the modification application say? The statements in the judgment not only led to protests but also led to the resignation of the state's Advocate General, Sudesh Joshi, after political parties alleged that he did not brief the court properly on the distinction between the "Sikkimese Nepali population and the other old settlers."

As per Bar and Bench, the modification application stated that the Sikkimese Nepali community forms 70 percent of the indigenous Sikkimese population, and terming them as people of foreign origin "cannot be farther from truth."

What was the old settlers' petition about? The old settlers comprise multiple ethnic and religious groups, such as the Marwaris, Biharis, Punjabis, Muslims, and so on.

The Association of Old Settlers of Sikkim had filed a petition demanding exemption of income tax for the old settlers who had settled in Sikkim before its merger with India on 26 April 1975. They also wanted an exemption on their income tax like the original inhabitants of Sikkim.

Sikkim's taxing system: Sikkim was merged into India on the condition that its old laws and special status, as envisaged in Article 371(f) of the Constitution, remained intact.

Thus, the state followed its own Sikkim Income Tax Manual 1948, which governed its tax laws. Under this, no resident needed to pay taxes to the Centre.  

However, when Sikkim's tax laws were repealed in 2008, the Union Budget that year exempted the state's residents from paying taxes by inserting Section 10 (26AAA).

Since an old law was being replaced with the Income Tax Act-1961 of India, a section in the Act protected the special status given to Sikkim and the 'Sikkimese' people. Thus, under 26AAA, the income accrued by Sikkimese individuals in the state, by way of dividends or interest on securities from elsewhere, was exempted.