# GULLAPALLI NAGESWARA RAO AND OTHERS v. ANDHRA PltADESH STATE ROAD TRANSPORT CORPORATION AND ANOTHER

- **Citation:** [1959] Supp. 1 S.C.R. 319
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Bench:** S. R. Das, N. H. Bhagwati, B. P. Sinha, K. SunnA RAO, K. N. Wanchoo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gullapalli-nageswara-rao-and-others-v-andhra-pltadesh-state-road-transport-1537
- **Pages:** 76

## Headnote

Road Transport-Nationalisation-Scheme proposed by State
Transport Undertaking approved by Government-Procedure, if
violative off undamental rights-Scheme, if ultra vires-State Government~ if must act judicially in approving the scheme-' Colourable
legislation',
Meaning of-Motor Vehicles Act (IV of r939), as
amended by Act zoo of r956, Ch. IV A, ss. 68C, 68D-Constitution
of India, Art. 3r.
With a view to nationalise the road transport services under
Ch. IV A of the Motor Vehicles Act, 1939 (IV of 1939), inserted
into it by the amending Act 100 of 1956, the General Manager of
Andhra State Transport Undertaking published a scheme under
s. 68C of the Act in the Official Gazette and invited objections
thereto. By an order of the Chief Minister the objections
were received and heard by the Secretary to the Home Department, who was in charge of Transport, but were decided by the
Chief Minister. The State Government approved of the scheme
and published it in the Official Gazette. The petitioners, who
were plying their buses on various routes in the Krishna District
as permit-holde~s under the Act, apprehending that their routes
would be taken over by the newly established State Corporation
in implementation of the scheme, applied to this Court for the
protection of their fundamental rights to carry on their business.
It was contended, inter alia, on their behalf, (1) that Ch. IVA of
the Act was a piece of colourable legislation whose real object
was to take over their business, under cover of cancellation of
permits, in contravention of Art. 31 of the Constitution, (2) that
the scheme itself was ultra vires the Act, for the reason, amongst
others, that the State Government whose duty it was to act judicially in approving the scheme, had transgressed certain fpndamental principles of natural justice.
Held (Per curiam), that the question of colourable legislation
was, in substance, really one of legislative competence of the
legislature that enacted it. The legislature could only make laws
within its legislative competence. Its legislative field might be
circumscribed by specific legislative entries or limited by fundamental rights created by the Constitution. The legislature could
not over-step the field of its competency, directly or indirectly.
It would be for the Court to scrutinize if the legislature in purporting to make a law within its sphere, in effect and substance,
November J.
320
SUPREME COURT REPORTS [1959] Snpp.
1958
reachecl beyond it. If, it had in fact the power to make the law,
its moth·e in making it would be irrelevant.
G11llapulli
/\. C. GaJ11pati i\'araya11 Dco v. The Stale of Orissa, [1954]
Nngeswaro Rao
S.C.J~. J, followed.
t111d Others
The State of Bihar v. Maliarajadkiraja Sir Kameshwar Singh
A h v.
h nf Darbhanga, fr952] S.C.R. RSg, ronsidcrecl.
•d '" Pr.idn
S . I
1 .
I I
b
.
Cl
51,11, Rond Tran.~-
o JU< ge<: it cou ( i:iot _e satd that , 1. IV.<\ of the Act \VJ.S
tnrt Corport1tion a colourable piece of leg1s]at1on.
and A11otlter
The po\ver vested in the Regional Transport Authority by
s. 68l' of the Act involved no transfer of business of the existing
permit-holders to the State Transport Undertaking nor could the
latter be said thereunder to ta.ke over any assets of the forn1er.
Section 68G of the .\ct in providing for co111pcnsation for nn~
expired P<'riod of the permit did not imply that Ch.!\'.\ of the
1\t't in,·oJ,·cd any transfer of property or po:;session so as t0
<'ntitle the permit-holder to any compensation under Art. 31(2) of
the Constitution. Chapter IVA of the Act <licl not, therefore, infringe the fundatnental right of the petitioners under 1\rt. 31 of
the Constitution.
Per Das, (. J .. Bhagwati and Subba Rao, JJ.-While the
purpose of s. fiSC of the Act was no doubt to provide a stheme of
road transport service on the lines prescribed by it, the scheme
proposed might affect the rights of individual permit-holders by
excluding them, partially or completely. from the business in any
particnlar ro

## Text

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(1) S.C.R. SUPREME COURT REPORTS
319
GULLAPALLI NAGESWARA RAO
AND OTHERS
v.
ANDHRA PltADESH STATE ROAD TRANSPORT
CORPORATION AND ANOTHER
(S. R. DAS, c. J., N. H. BHAGWATI, B. P. SINHA,
K. SunnA RAO and K. N. WANCHOO, JJ.)
Road Transport-Nationalisation-Scheme proposed by State
Transport Undertaking approved by Government-Procedure, if
violative off undamental rights-Scheme, if ultra vires-State Government~ if must act judicially in approving the scheme-' Colourable
legislation',
Meaning of-Motor Vehicles Act (IV of r939), as
amended by Act zoo of r956, Ch. IV A, ss. 68C, 68D-Constitution
of India, Art. 3r.
With a view to nationalise the road transport services under
Ch. IV A of the Motor Vehicles Act, 1939 (IV of 1939), inserted
into it by the amending Act 100 of 1956, the General Manager of
Andhra State Transport Undertaking published a scheme under
s. 68C of the Act in the Official Gazette and invited objections
thereto. By an order of the Chief Minister the objections
were received and heard by the Secretary to the Home Department, who was in charge of Transport, but were decided by the
Chief Minister. The State Government approved of the scheme
and published it in the Official Gazette. The petitioners, who
were plying their buses on various routes in the Krishna District
as permit-holde~s under the Act, apprehending that their routes
would be taken over by the newly established State Corporation
in implementation of the scheme, applied to this Court for the
protection of their fundamental rights to carry on their business.
It was contended, inter alia, on their behalf, (1) that Ch. IVA of
the Act was a piece of colourable legislation whose real object
was to take over their business, under cover of cancellation of
permits, in contravention of Art. 31 of the Constitution, (2) that
the scheme itself was ultra vires the Act, for the reason, amongst
others, that the State Government whose duty it was to act judicially in approving the scheme, had transgressed certain fpndamental principles of natural justice.
Held (Per curiam), that the question of colourable legislation
was, in substance, really one of legislative competence of the
legislature that enacted it. The legislature could only make laws
within its legislative competence. Its legislative field might be
circumscribed by specific legislative entries or limited by fundamental rights created by the Constitution. The legislature could
not over-step the field of its competency, directly or indirectly.
It would be for the Court to scrutinize if the legislature in purporting to make a law within its sphere, in effect and substance,
November J.
320
SUPREME COURT REPORTS [1959] Snpp.
1958
reachecl beyond it. If, it had in fact the power to make the law,
its moth·e in making it would be irrelevant.
G11llapulli
/\. C. GaJ11pati i\'araya11 Dco v. The Stale of Orissa, [1954]
Nngeswaro Rao
S.C.J~. J, followed.
t111d Others
The State of Bihar v. Maliarajadkiraja Sir Kameshwar Singh
A h v.
h nf Darbhanga, fr952] S.C.R. RSg, ronsidcrecl.
•d '" Pr.idn
S . I
1 .
I I
b
.
Cl
51,11, Rond Tran.~-
o JU< ge<: it cou ( i:iot _e satd that , 1. IV.<\ of the Act \VJ.S
tnrt Corport1tion a colourable piece of leg1s]at1on.
and A11otlter
The po\ver vested in the Regional Transport Authority by
s. 68l' of the Act involved no transfer of business of the existing
permit-holders to the State Transport Undertaking nor could the
latter be said thereunder to ta.ke over any assets of the forn1er.
Section 68G of the .\ct in providing for co111pcnsation for nn~
expired P<'riod of the permit did not imply that Ch.!\'.\ of the
1\t't in,·oJ,·cd any transfer of property or po:;session so as t0
<'ntitle the permit-holder to any compensation under Art. 31(2) of
the Constitution. Chapter IVA of the Act <licl not, therefore, infringe the fundatnental right of the petitioners under 1\rt. 31 of
the Constitution.
Per Das, (. J .. Bhagwati and Subba Rao, JJ.-While the
purpose of s. fiSC of the Act was no doubt to provide a stheme of
road transport service on the lines prescribed by it, the scheme
proposed might affect the rights of individual permit-holders by
excluding them, partially or completely. from the business in any
particnlar route or routes, and the procedure prescribed bys. 680
ancl Rules 8 and ro framed under the Act, requird that the
Gowrnment should hear both the objectors and the State Transport Undertaking before appro\'ing or modifying the scheme.
There was no doubt, therefore, that the State \\'as deciding a /is
and it was to do so judicially.
Province of Bombay'" K11saldas S. Ad11ani, [1950] S.C.R. 62r,
Nagcllilra Nath Bora v. Commissioner, Hills Division, [r958] S.C.R.
1240 and E.<pms Newspapers Ltd. v. Tile Union of India, [1959]
S.C.R. 12, relied on.
Fra11kli11 v. Mi11ister of Town and Country Planning, [1948]
A. C. 87, held inapplicable.
It was a fundamental principle of natural justice that the
authority empowered to decide a matter must have no bias in it
and another, no Jess fundamental, was that where the Act
prodded for a personal hearing, the authority that heard the
matter must also decide it. .The procedure followed in the instant case whereby the Home Secretary, in charge of Transport,
himself a party to the dispute, heard the objections and the
Chief Minister decided them, violated those principles and the
order of ihe State Government approving the seheme, therefore,
must be quashed.
·
'
Per Sinha and Wanchoo, J.T.-The sole object of Ch. IVA of
. lhc Act was to' nationalise the road transport sen·iccs and the
ii1quiry envisaged by it was of a limited character. That inquiry
(1) S.C.R. SUPREME COURT REPORTS
321
was meant to find out whether the scheme propounded was in
Gullapulli
public interest as required by s. 68C of the Act, and not to
ad1"udicate rival claim of permit-holder on the one hand and the
f
N ageswa,.4 Reio
State Transport Undertaking on the other; for, on approval o
and Others
the scheme, exclusion of private transport as proposed by the
scheme was bound to follow as a matter· of course. There could, A dis
v.P d h
therefore, be no lis, and the Government in approving or modi- 5 "
n'" d '1°. es
·
C
V
h
f
d h
tale
oa
ransf yrng the scheme under
h. I A and t e Rules rame t eret C
r
under must be held to act in its normal administrative capacity. por d °,;por~ ion
No objections could be taken, in the instant case, to the procedure
an
not er
adopted by the Government in empowering the Secretary to hear
objections while the Chief Minister decided them, and the
Secretary could in no sense be a party to any dispute.
Province of Bombay v. Ku-saldas S. Advani, [1950] S.C.R. 621,
Nagendra Nath Bora v. Commissioner, Hills Division, (1958] S.C.R.
1240 and Express Ne11Jspapers Ltd. v. The Union of India, [1959
S.C.R. 12, referred to.
Frankli1i v. Minister of Town and Country Planning, [1948]
A.C. 87, applied.
Robinson v. lv!inister of Town and Country Planning, [1947] 1
All E. R. 851, referred to.
ORIGINAL JURISDICTION:
Petition No. 100 of 1958.
Petition under Article 32 of the Constitution for
enforcement of fundamental rights.
M. K. Nambyar, K. Mangachari, G. Suryanarayana
and T. V. R. Tatachari, for the petitioners and intervener.
M. 0. Setalvad, Attorney-General for India, R. Ganapathi Iyer, P. R. Rainachandra Rao and T. M. Sen,
for the respondents.
1958. November 5.
Bhagwati and Subba.
Subba Rao, JI Sinha
separate judgitjents.
The Judgment of Das, C. J.,
Rao, JJ., was delivered by
and Wa.nchco, JJ., delivered
SuBBA RAo, J.-This is an application under Art. 32
of the Constitution for the enforcement of the petitioners' fundamental right to carry on the business of
motor transport in Krishna District in Andhra Pradesh,
and for prohibiting the respondents from taking over
the routes on which the petitioners have been plyipg
their stage carriages.
41
Subba Rao].
322
SUPREME COURT REPORTS [1959] Supp.
The petitioners have beeu carrying on motor transGullapalli
port business in Krishna Dfstrict for several yea.rs past
Nageswara Rao by obtaining permits uuder the . Motor Vehicles Act,
and Others
1939 (IV of 1939), as a.mended by Act 100 of 1956,
v.
hereinafter called the Act, in respect of various routes.
Andh.a Pradesh Th
t"
t
h
1
f 1 ·
·
t. ·
h
St I
R
d T
ey es ima e t e va ue o t 101r m vestmen
m t e
a e
oa
1'ans-
.
port c.,p0 ,.1; 0n busmess at a sum of Rs. 20,00,000.
and Anoth"
The amending Act inserted a new Chapter IV-A
in the Act providing for the State Transport UnderSubba Rao f. ta.king running the business to the exclusion, complete or partial, of all other persons doing business in
the State. Chapter IV-A provided for a machinery
called the State Transport Undertaking, defined
under s. 68-A(b) as an undertaking providing road
transport service, to run the transport business in
the State.
In exercise of the powers conferred by
s. 68-C of the Act, one Shri Guru Pershad, styled as
the General Manager of the State Transport Undertaking of the Andhra Pradesh Road Transport, published a. scheme for the purpose of providiug an efficient,
adequate, economical and properly co-ordinated transport service in public interest to operate the transport
service mentioned therein with effect from the date
notified by the State Government. Objections were invited within 30 days from the date of the pu_blication of
the proposal in the Official Gazette, viz., November 14,
1957. 138 objections were received. Individual notices
were issued by the State Government by registered
post to all the objectors. On December 26, 1957,
the Secretary to Government, Home Depart~ent, in
charge of transport, heard the objections. 88 of the
objectors represented their cases through their ad voca.tes ; three of them represented their cases personally
and the rest were not present at the time of hearing.
After considering all the objections and after giving an
opportunity to the objectors, their representatives and
the representatives of the State Transport Undertaking, the State Government found that the objections
to the scheme were devoid of substance. On that finding, the State Government approved of the scheme in
G.O. Ms. 58, Home (Transport IV), dated January 7,
1958, and the approved scheme was published in the
(1) S.C.R. SUPREME COURT REPORTS
323
Andhra Pradesh Gazette dated January 9, 1958. The
r958
scheme was ordered to come into force with effect
Gullapalli
·from January 10, 1958.
The Government of Andhra Nageswara Rao
Pradesh also established a Road Transport Corporation
and Others
under the Road Transport Corporations Act, 1950
v.
(LXIV
f 1950)
II d the Andhra Pradesh Road Andhra Pradesh
0
, ca e
State Road TransTransport Corporation, with effect from January 11, port Corporation
1958, and by its order dated ,Tanuary 11, 1958, the
and Another
said Corporation was empowered to take over the
management of the erstwhile Road Transport DepartSubba Rao J.
ment. The said Transport Corporation is now implementfog the scheme of nationalisation of bus transport
under a phased programme. The petitioners, who
are plying their buses on various routes in Krishna
District, apprehending that their routes would be taken
over by the Corporation pursuant to the aforesaid
scheme, seek the aid of this Court to protect their fundamental right to carry on their business against the
action of the State Corporation on various grounds.
Mr. M.K. Nambiar, appearing for the petitioners, contends that the scheme, in pursuance of which the bus
routes operated by the petitioners· are sought to be
taken over by the State Road Transport Corporation,
is ultra vires and illegal on two grounds, viz., (a) that the
provisions of Chapter IV-A of the Act violates the
fundamental rights secured to the citizens by the Constitution and (b) that the scheme framed under the
Act is ultra vires the Act.
The first ground is sought to be supported by the
contention that Chapter IV-A of the Act, in substance
and effect, authorizes the State to acquire the undertakings of citizens without providing for compensation
for the entire undertiikings and therefore it is a fraud
on the Constitution, particularly on Art. 31 thereof.
Shortly stated, his argument is that under Art. 31 of
the Constitution no law shall be made for the transfer
of ownership or right to possession of any property to
the State or to a Corporation without fixing the amount
of compensation or specifying the principles on which
compensation is to be determined and give~r, and that
Chapter IV-A of the Act is a colourable legislation enabling such a transfer of ownership without providing
324
SUPREME COURT REPORTS [1959] Supp.
'958
for compensation for the property transferred, under
the guise of cancellation of a permit,
Gullapalli
Nageswara Rao
To appreciate this argument it would be convenient,
and Others
at this stage, to read the relevant provisions of the
v.
Articles of the Constitution, omitting the words urmecesAndhra Pradesh sary for the purpose of this case.
Stale Road Transport Corporatfon
"Art. 19(1) : All citizens shall have the rightand Another
• . . • •..•••.••.••••••...••...•.••.• , , . , •• , •..• , , , .. , , ... , , .. , , ...
Subba Rao].
(g) to practise any profession, or to carry on any
occupation, trade or business .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) Nothing in sub.clause (g) of the said clause
shall affect the operation of any existing law in.so far
as it imposes, or prevents the State from making any
law imposing, in the interests of the general public,
reasonable restrictions on the exercise of tJie right
conferred by the said sub-clause, and, in particular,
nothing in the said sub-clause, shall affect the operation of any existing law in so far as it relates to, or
prevent the State from ma.king any law relating to,-
.(i) ..................................................... : ..•...•.
(ii) the carrying on by the State, or by a Col'flora.
tion owned or controlled by the State, of any trade,
business, industry or service, whether to the exclusion,
complete or partial, of citizens or otherwise.
Art. 31(1): No person shall be deprived of his
property save by authority of law.
(2) No property shall be compulsorily acquired or
requisitioned save for a public purpose and save by
authority of a law which provides for compensation
for the property so acquired or requisitioned and either
fixes the amount of the compensation or specifies the
prin-Oiples on which, and the manner in which, the
compensation is to be determined and given; and no
such law shall be called in question in any Court on
the ground that the compensation provided by that
law is not adequate.
(2A) Where a law does not provide for the transfer of the ownership or right to possession of any
property to the State or to a Corporation owned or
controlled by the State, it shall not be deemed to
(1) S.C.R. SUPREME COURT REPORTS
325
provide fqr _the compulsory acquisition or requisition1958
ing of pr~erty, notwithstanding that it deprives any
Gullapalli
person of his property."
Nageswa•a Rao
The Constitution (:First) Amendment Act· of 1951,
and Others
which came into force on June 18, 1951, amended cl. (6)
v.
of Art. 19 by adding sub-cl. (ii) to tha.t clause, along Andhra Pr~desh
with other amendments. Clause (2) of Art. 31 has Slate Rcoad Tr~nsd d
d
1 (2A) h
b
.
d b
h
port
orporallon
been amen e , an
c .
as een mserte
y t e
and Another
Constitution (Fourth) Amendment Act, 1955. Clause
(2A) has been inserted with a view to supersede the
Subba Rao J.
majorit.y decisions of this Court in the cases of State of
West Bengal v. Subodh Gopal Bose (1), Dwarkadas Shriniwas of Bombay v. Sholapur Spinning and Weaving
Go. Ltd. (2) and Saghir Ahmed v. State of U.P. (3). In
Subodh Gopal's case, a majority of a Bench of this
Court held:
"Clauses (1) and (2) of Art. 31 a.re thus not mutually exclusive in scope and content, but should in my
view, be read together and understood as dealing with
the same subject., namely, the protection of the right
to property by means of the limitations on the State
power referred to above, the deprivation contemplated
in clause ( 1) being no other than the acquisition or
taking possession of property referred to in clause (2)."
In Dwarkadas's case(~), this Court, while confirming the
aforesaid principle, held that the word 'acquisition'
has quite a wide concept, meaning the procuring of
property or the taking of it permanently or temporarily and need not be confined to the acquisition of
legal title by the State in the property taken possession of. In Saghir Ahmed's case (3) applying the said
principles, this Court held (at p. 728):
" If the effect of prohibition of the trade or business of the appellants (citizens) by the impugned legislation amounts to deprivation of their property or
interest in a commercial undertaking within the meaning of Art. 31 (2) of the Constitution, does not the
legislation offend against the provision of that clause
inasmuch as no provision for compensation has Leen
made in the Act? "
(1) (1954} S.C.R. 587, 608.
(2) [1954] S.C.R. 674.
(3) [1955] 1 S.C.R. 707, 728.
326
SUPREME COURT REPORTS (1959] Supp.
'958
It may be noted that though the said decision was
given after the Constitution (First) Amendment Act,
Gullapalli
19
g (
d l
Nag'>war• Rao
51, amending Art. l
6), it ea t with a. matter that
and Olhm
arose before the said amendment ca.me into force.
v.
In the aforesaid decisions, this Court by a. majority
Andhta Pradesh broadly· laid down the two principles: (a) that both
Staie !load Tr'.""-cls. (1) and (2) of Art. 31 dealt with the doctrine of
port Corpornlwn '
•
t d
• ' th
d It
'th th t
•
f
and Another
em1nen
o~a..1~ ;
ey
ea
WI
e op1c o
'<?Ompulsory acqms1t10n of property'; and (b) that the word
Subba Rao;.
'acquisition' does not necessarily imply acquisition of
legal title by tbe State in the property taken possession
of, but may comprehend cases where the citizen has
been 'substantially dispossessed' of the right to enjoy
the property, with the result that the right to enjoy
property has been 'seriously' impaired or the value of
the property has been 'materially' reduced by the
impugned State legislation.
The Constitution (Fourth) Amendment- Act, 1955,
amended cl. (2) of Art. 31 and inserted cl. (2A) in that
Article. The amendments, in so far as they are relevant to the present purpose, substitute in place of the
words 'taken.possession of or acquired' the words 'compulsorily acquired or requisitioned' and provide an
explanation of the words 'acquired and requisitioned'
in cl. (2A). The result is that unless the law depriving
any person of his property provides for the transfer of
the ownership or right to the possession of any property to the State, the law does. not relate to 'acquisition or requisition' of property and therefore the limitations placed upon the legislature under cl. (2) will
not apply to such law. While realising this legal
posit.ion brought about by the amendment to the Constitution, the learned counsel contends that the right
to do business is property as held in Saghir Ahmad's
case (1) and that Chapter IV-A of the Act in effect
transfers ownership of that business to the Corporation,
owned or controlled by the State, though not directly
but by the dual process of preventing the citizen from
doing the business and enabling the Corporation to do
the same business in his place and that that result is
effected by a device with a view to avoid payment of
(I) [1955) I S.C.R. 707, 728.
•
(1) S.C.R. SUPREME COURT REPORTS
327
compensation for the entire business so transferred.
r95B
The colourable nature of the legislation, the argument
Gullapalli
proceeds, lies in its device or contrivance to evade Nageswara Rao
limitations imposed under Art. 31 (2).
To solve the
and Others
problem presented, it is necessary to have a correct
v.
appreciation of the phrase 'oolourable legislation'. This Andhra Pradesh
C
"d
d h"
·
· Th St t
,I B 'h
State Road Transou rt cons1 ere t is question m
e
a e oJ
i ar v. P 1 c P
1.
M h
' dh.
. S. K
h
S. h ,I D bh
(1)
ot
or ora ion
a ara3a ira3a ir ames wqir ing OJ
ar anga .
and Another
In that case the constitutional validity of the Bihar
·
Land Reforms Act, 1950 (Bihar 30 of 1950), was
subba Rao J.
questioned. In the context of the Bihar Land Reforms Act, 1950 (Biha1· 30 of 1950), it was contended
that the impugned Act was a fraud on the Constitution and therefore void. . It was stated that the Act,
while pretending to comply with the Constitutional
provisions when it provided for the payment of compensation, in effect produced a scheme for non-payment
of compensation by shift or contrivance. Mahajan, J.,
as he then was, in rejecting the argument observed at
p. 947, thus:
"All these principles are well-settled. But the
question is whether they have any application to the
present case. It is by no means easy to impute a
dishonest motive to the legislature of a State and hold
that it acted ma.la fide and maliciously in passing the
Bihar Land Reforms Act or that it perpetrated a fraud
on the Constitution by enacting this law. It may be
that some of the provisions of the Act may operate
harshly on certain persons or a few of the zamindars
and may be bad if they a.re in excess of the legislative
power of the Bihar Legislature but from that circumstance it does not follow that the whole enactment is
a. fraud on the Constitution. From the premises that
the estates of half-a-dozen zamindars may be expropriated without payment of compensation, one cannot
jump to the conclusion that the whole of the enactment
is a fraud on the Constitution or that all the provisions
as to payment of compensation are illusory."
The aforesaid observations lend support to the argument that the doctrine of coloura.ble legislation
imputes dishonest motive or mala fol.es to the State
(1) [1952) S.C.R. 889-
328
SUPREME COURT REPORTS [1959] Supp.
making the law.
But, Mukherjea, J., as he then was,
Gullapalli
clarified the legal position in ](, 0. Gajapati Narayan
N<1g,,warn Rao Deo v. The State of Orissa (1). It was contended in
aud Othm
that case that the Orissa Estates Abolition Act, 1952,
Andhrav~rad"h ~as a cohlourable legislatMionkahnd. as sJuch vohid. hAdvertState Road Trans- mg to t at argument,
u
eriea, ., as e t en was,
port Corporation says at p. 10 thus:
and Another
" It may be madey clear at the outset that the
doctrine of colourable legislation does not involve any
St<bba· Rao J.
question of bona Ji.des or ma/.a Ji.des on the part of the
legislature. The whole doctrine resolves itself into the
question of competency of a particular legislature t.o
enact a particular Jaw. If the legislature is competent
to pass a particular law, the motives which impelled it
to act are really irrelevant. On the other hand, if the
legislature lacks competency, the question of motive
does not arise at all.· Whether a statute is constitutional or not is thus always a question of power .........
.. . .. . If the Constitution of a State distributes the legislative powers amongst different bodies, which have to
a.ct within their respective spheres marked out by
specific legislative entries, or if there are limitations
on the legislative authority in the shape of fundamental rights, questions do arise as to whether the legislature in a particular case' has or has not, in respect
· to the subject matter of the statute or in the me.thod
of enacting it, transgressed the limits of its constitutional powers.
Such transgression may be patent,
manifest or direct, but it may also be disguised, covert
and indirect and it is to this latter class of cases that
the expression 'colourable legislation' has been applied
in certain judicial pronouncements. The idea conveyed by the expression is that although apparently ·a
legislature in passing a statute purported to act within
the limits of its powers, yet in substance and in reality.
it transgressed these powers, the transgression being
veiled by what appears on proper examination, to be a.
mere pretence or disguise.
As was said by Duff, J., in
Attorney-General for Ontario v. Reciprocal Insurers
(1924 A. C. 3'28 at p. 337):
"Where the law making authority is of a. limited or
qualified character it may be necessary to examine
(1) (1954] S.C.R. 1.
(1) S.C.R. SUPREME COURT REPORTS
329
with some strictness the substance of the .legislation
r9s8
for the purpose of determining what is that the legisGullapalli
lature is really doing.'
Nageswara 1!<10
In other words, it is the substance of the Act that
and Others
is material and not merely the form or outward
v.
appearance, and if the subject-matter in substance is Andhra Pradesh
h.
h" h · b
d h
·
f
h t 1 ·
State Road Tran>-
somet mg w IC
IS eyon
t e powers o t a
eg1s- P 1 c P
1.
•
•
or
or ora ion
lature to legislate upon, the form Ill whrnh the law is
and Another
clothed would not save it from condemnation. The
legislature cannot violate the constitutional prohibiSubba Rao J.
tions by employing an indirect method.''
We have quoted the observations in extenso as they
neatly summarise the law on the subject. The legal
position may be briefly stated thus: The legislature
can only make laws within it legislative competence.
Its legislative field may be circumscribed by specific
"legislative entries or limited by fundamental rights
created by the Constitution. The legislature cannot.
over-step the field of its competency, directly or indirectly. The Court will scrutinize the law to ascertain whether the legislature by device purports to .
make a law which, though in form appears to be within its sphere, in effect and substance, reaches beyond
it. If, in fact, it has power to make the law, its
motives in making the law are irrelevant.
The learned counsel for the petitioners can only
succeed if he can establish that the provisions of
Chapter IV-A constitute colourable legislation within
the meaning of the aforesaid definition. To test the
validity of the argument, it may be summarised thus :
Business is ' property ' within the meaning of Art.
19(1) (g) of the Constitution. Chapter lV-A of the Act
transfors the business to the Corporation controlled by
the State Government.
Such a law should have
provided for payment of compensation for the business
transferred to the State Corporation ; instead, it adopted the device of cancelling the permit of the citizen
and giving it to the Corporation and providing compensation to the citizen only for the unexpired period
of the permit.
42
330
SUPREME COURT REPORTS [1959] Supp.
r95B
We shall now proceed to ascertain whether any of
the aforesaid ingredients of device or contrivance are
Gulla pal Ii
b
Nogesw•ra Rao esta lished in this case. Does Chapter IV-A, in effect
and others
and substance, authorize, in law or foct, the transfer
v.
of the business of the citizens to the State or a CorpoA•dhra Pradesh ration, owned or controlled by the State? Under Art.
Stat• Road Tra••· 19(1) of the Constitution every citizen has a fundaport CorportJtton
l
.
•
b .
.
and Another
menta right to carry on any
usmess subject to
reasonable restrictions imposed by the State under
Subba Rao J.
cl. (6) of Art. 19 in the interest of the general public.
The Constitution (first) Amendment Act, 1951, reserved to the State the right to make law for carrying on
by the State or by a Corporation, owned or controlled
by the State, any business to the exclusion, complete
or partial, of the citizens or otherwise. The Constitution, therefore, enables the State to make a law
placing reasonable restrictions on the right of a citizen
to do business or to create a monopoly or to make a
law empowering the State to carry on business to the
exclusion of a citizen. The right to carry on business
in transport vehicles on public. pathways is certainly
one of the fundamental rights recognized under Art. 19
of the Constitution. The Motor Vehicles Act, 1939
(IV of 1939), regulates the right of a citizen to carry
on the said business for prot.ecting the rights of the
pulilic generally. 'Permit' is defined under cl. (20) of·
s. 2 of the Act to mean the document issued by the
Commission or a State or Regional Transport Authority authorising the use of a transport vehicle as a
contract carriage or stage carriage, or authorising the
owner as a private carrier or public carrier to use such
vehicle. Section 57 of the Act prescribes the procedure
for applying for and granting permits to carry on the
business in transport vehicles on public highways.
Section 47 lays down the matters to be considered by
the Regional Transport Authority in the disposal of
applications for such transport carriers. Section 59
gives the conditions of every permit and also prohibits
the transfer of permit from one person to another
except with the permission of the Transport Authority.
Under s. 60, the Transport Authority which granted
permit may cancel the permit or may suspend it for
(1) S.C.R. SUPREME OOURT REPORTS
331
such period as it thinks fit for any of the reasons
z95'
mentioned therein. Section 61 provides for cases where
l
h
G .. llapalli
a permit-holder dies. That section enab est e succesNagcswrm• Roo
sor to use the permit for a period of three months and
and others
to get the permit transferred to him subject to the
v.
conditions laid down therein. Section 68-F authorises Andhra Pradesll
the Regional Transport Authority, for the purpose of51"1e Road Tr~,.s-
. ·
ff
·
ed
h
·
t f
port Corpcralt.t)fl
g1vmg e ect to an a.pprov
sc eme m respec o a.
""d Another
notified area or notified route, to refuse to enterta.i,O
any application for the renewal of any other permit, to s .. bba Rao J,
cancel any existing permit, to modify the terms of any
existing permit so as to render the permit ineffective
beyond a specified date, and to reduce the number of
vehicles authorised to be used under the permit. It is
manifest from the aforesaid provisions that the Regional Transport Authority can, in exertiise of its regulatory power conferred on it in the interest of the
public, issue a permit to a person in regard to a.
stage carriage authorising him to use the same in
a particular route for a particular period subject
to the conditions laid down in the permit, s.uspend
or cancel the same under specified conditions, and
renew or refuse to renew the same after the expiry
of the period subject to the conditions laid down in
the Act. Under Ch. IV-A, if a scheme has been
promulgated empowering the State Transport Undertaking to take on hand the transport service in
relation to any area, route or portion thereof to the
exclusion of any person, who has been carrying on the
business in that route, the Transport Authority is empowered to cancel the existing permit and issue a
permit to the State Transport Undertaking. It cannot be said that if the Transport Authority cancels
the permit of a. person carrying on his transport business in a route and gives it to another, the process involves a transfer of business or undertaking of the
quondam permit-holder to the new entrant. Indeed
the process does not involve even a transfer of the
permit from one to another. The true position is that
one permit comes to an end and another permit comes
into being. The power of cancellation of a. permit in
favour. of one and issuing a. new permit to another are
Gullapulli
332
SUPREME COURT REPORTS [1959] Supp.
necessary steps in the regulatory jurisdiction entrusted
to the Regional Transport Authority. The business of
one has nothing to do with the business of another,·
1Vageswara Rao
and othm
they are two independent businesses carried on under
v.
two different licences. If .that be the true legal position
A ndl"a Pradesh in the case of issue of permits before ·Chapter IV-A
51"" Road T•ans- was inserted in the Act, we cannot see that the power
port Corporation
f
JJ t"
f
. t"
.
d .
.
and Another
0 CallCe a lOll 0 an eXIS 1ng permit an
ISSUJDg one
to the State Transport Undertaking should involve a
Subba Rao J.
transfer of the previous permit-holder's business to the
State Transport Undertaking. The argument that the
process contemplated by s. 68-F of the Act involves
two integrated steps, viz., cancelling the existing permit and preventing the previous permit-holder from
doing the business and then issuing a permit to a
nominee of the State to enable it to do the same business and thereby, in effect and substance, transferring
the business of the existing permit-holder to the State
or its nominee, appears to be atkactive, but, in our
view, it is fallacious. It may be that by the said process
the existing permit-holder is precluded from doing his
business and it may also be that the State Transport
Undertaking carries on a similar business; but by no
stretch of language or extension oflegal fiction can it be
said that the State Transport Undertaki(1g is doing the
same business. which the previous permit-holder was doing. If there is no transfer in the case of cancellation
of a permit in favour of one and issue of a new permit
to another, equally there cannot be any such transfer in
the case of issue of a permit to the State Transport
Undertaking. Looking at the business not simply from
the standpoint of the right to do it or the activity
involved in it., but also from the standpoint of its
assets, it becomes clear that no assets pertaining to
the business of the quondam permit-holder are transferred to the State Transport Undertaking. Though
the cancellation of the permit has the effect of crippling his business, none of the assets of the business is
taken over by the State Transport Undertaking; he is
left in the possession of the entire assets of the business. It 'is no doubt true that in the context of the
~cheme of nationalisation he may not be able to make
(1) S.U.H. SUPH.EME COURT REPORTS
333
use of his assets in other routes or dispose of them at a
r95B
great advantage to himself; but, it cannot be said that
GullapaHi
by cancelling the permit, what is left with him is only Nageswara Rrro
the 'husk'. In fact the entire assets of the buHiness
and 01hers
are left with him and the State Transport Undertaking
v.
has not taken over the same.
Andhra Pradesh
1 . .
"d h
68 G f h A
} . h
S/a/e Huad Trans-
. Last?' it lS Sal t at s.
.
o. t e
ct w llC proport Corj>oration
v1cks for piiyment of compensation to the holder of
,wd Another
the permit, indicates that the legislature proceeded on
the basis that the cancellation of a permit involved a
S11bba Uao J.
' transfer of property' from the previous permit-holder
to the State. In our view, no such irresistible conclusion flows from the said provision ; as the permit is
cancelled before the expiry of the term fixed therein,
the legiRlature thought it fit and proper to give some
compensation to the permit-holder who is prevented
from doing his business for the unexpired period of
the permit. Whether it is enacted by way of abundant
caution, as the learned Attorney General says, or the
provision is made by the legislature to mitigate the
hardship that is caused to the permit-holder by the
premature cancellation of the permit, we find it
difficult to draw the inference from the said provision
that the legislature assumed that a transfer of the
bw;iness is involved in the process laid down in
Chapter IV-A. We therefore hold that Chapter IV-A
of the Act does not provide for the transfer of ownership or the right to possession of any property to the
State or to a Corporation, owned or controlled by the
State. Under Art. 31 of the Constitution unless there
is such a transfer, the law shall be deemed not to
provide for compulsory acquisition or requisition of
property; and therefore, in such a case, no compensation need be provided for under Art. 31(2) of the
Constitution. We therefore hold that Chapter IV-A of
the Act does not infringe the fundamental right of the
petitioners under Art. 31 of the Constitution of India.
The next argument of the learned counsel for the
petitioners is that even if Chapter IV-A of the Act is
constitutionally
valid,
the
petitioners
could
be
deprived of their rights only in a<~cordance with the
law enacted for the purpose and in the manner provided
334
SUPREME COURT REPORTS [1959] Supp.
'958
therein, and that in the present case, the scheme
Gnllapalli
was promulgated in derogation of the provision of the
Nageswam Rao said Chapter. The learned counsel contends that the
a"d Others , provisions of ss. 68-C and 68-D have not been comv.
plied with in framing the scheme.
The learned
S AndhRm Pdra7dcsh counsel's contentions in this regard fall under different
·-
m
md
.
pa•t co,porntfon su~-h~ads, and we shall procee
to consider them
and Another
Ser1at1m.
The first contention is that no State Transport
Subba Rao JUndertaking is constituted under the Central Act and
therefore the scheme initiated by the said Transport
Undertaking constituted under the Motor Vehicles
(Hyderabad Amendment) Act, 1956, was bad. To
appreciate this argument some of the facts may be
stated. Before the State of Andhra Pradesh was
formed in November 1956, eight districts, popularly
called the Telengana, which are now in the Andhra.
Pradesh State, were formerly part of the Hyderabad
State. On September 29, 1956, the Motor Vehicles
(Hyderabad Amendment) Act, 1956, became law,
whereunder Chapter IV-A was inserted in the Central
Act in its application to the State of Hyderabad.
Under s. 68-A of Chapter IV-A of that Act, the State
Transport Undertaking was defined to μ:iean the Road
Transport Department of the State providing road service. Under that Act, therefore, the Road Transport
Department of the Hyderabad State was functioning
as a statutory authority. After the States Reorganisation Act came into force, the said eight districts of the
Hyderabad State became part of the State of Andhra
Pradesh; with the result that the Road Transport
Department of the Hyderabad State became the Road
Transport Department of the State of Andhra
Pradesh, though it was exercising its powers only in
respect of that part of the Andhra Pradesh State,
popularly known as Tclengana.· After the Andhra
Pradesh State was formed, Sri Guru Pershad, styled
as the General Manager of the An'dhra Pradesh Road
Transport Undertaking, published the scheme under
s. 68-C of the Act. The argument is that the State
Transport Authority constituted under Chapter IV-A
of the Hyderabad (Amendment) Act was not legally
(1) S.C.R.
SUPREME COURT REPORTS
335
constituted as the State Transport Undertaking under
r95B
the Central Act and, therefore, the initiation of the
Gullapalli
scheme by the Hyderabad State Transport UnderNageswllra Rao
taking, which has no legal status under the Central Act
and Others
was bad. It is also pointed out that the State Transv.
port Authority under the Hyderabad Act differs from Andhra Pradesh
that under the Central Act in the following three State Road Transrespects: (1) statutory parentage; :(2) character and port Corporation
t't t'
d (3) t
"t . 1 . . d' t"
d
and Another
cons i u 10n;
an
ern ona
JUrIS IC ion; an
__
therefore the authority constituted under the Hyderasubba Rao J.
bad Act cannot function under the Central Act.
This
argument has no relevancy to the facts of the present
case.
We are not concerned in this case with a
statutory authority created under one Act and pressed
into service for the purpose of another Act, when the
latter has adopted the said statutory authority as one
constituted under that Act. Here there is the Andhra
Pradesh Road Transport Department providing road
transport service in Telengana, which is a part of that
State; and that Department, when it was a part of
the Hyderabad State was functioning as part of the
Hyderabad State Secretariat.