# THE SUPREME COURT REPORTS K. C. GAJAPATI NARAYAN DEO AND OTHERS v. THE STATE OF ORISSA

- **Citation:** [1954] 1 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 1954
- **Bench:** Patanjali Sastri C. J, MuKHERJEA, S. R. DAs, Ghulam Hasan, Bhagwati
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-supreme-court-reports-k-c-gajapati-narayan-deo-and-others-v-the-state-of-248
- **Pages:** 30

## Headnote

Orissa Estates Abolition Act, 1952, ss. 23, 26, 27, 37-0rissa
Agric1tlt1tral
Income-tax
(Amendment)
Act, 1950-Validity-
"Golourable
legislation"-Tests of va.lidity-E.ffect of itlterior
inotives-Provisions for vesting buildings and private lands in
Govermnent-Provisimi for paying compe11sation in 30 yearsValidity-Provisions introduced in Bill after coming into force of
new.Constitution-Whether protected by art. 31(4)-Gonstitntion of
India, 1950, arts. 31(2), 31(4); Sch. VII, List II entry 46, List III
entry 42.
The Bill relating to the Orissa Estates Abolition Act, 1952,
was published in the Gazette on the 3rd J an[\ary, 1950. It contained a provision that any sum payable for agricultural incometax for the previous year should be deducted from the gross
asset of an estate for the purpose of arriving at its net income on
the basis on which compensation was payable to the· estate
owners.
On the 8th January, 1950, a Bill to amend the Orissa
Agricultural Income-tax Act of 1947 so as to enhance the highest
rate of tax from 3 annas in the rupee to 4 annas and reduce the
highest slab from Rs. 30,000 to Rs. 20,000 was published in the
Gazette. This Bill was dropped by the next Chief Minister who
introduced a revised Bill on the 22nd July, 1950, enhancing the
highest rate to 12 annas 6 pies in the rupee and reducing the
highest slab to Rs. 15,000 and this was passed into law in August;
1950. It was contended that the Orissa Agricultural Income-tax
(Amendment) Act of 1950 was a fraud on the Constitution and as
such invalid as it was a colourable legislation to effect a drastic
reduction in the compensation payable under the Estates Abolition
Act:
Held, (i) that the question whether ·a law was a colourable
legislation and as such void did not depend on the motive or bona
fides of the legislature in passing the law but upon the competency
of the legislature to pass that particular law, and what the courts
have to determine in such cases is whether though the legislature
has purported to act within the limits of its powers, it has in substance and reality transgressed those powers, the transgression
peing veiled by what appears, on proper examination, to be a mere
pretence or disguise.
The whole doctrine of colourable legislation
is based upon the maxim that you cannot do indirectly what you
cannot do directly.
•
1953
May Z9.
•
2
StJPREME COURT REPORTS
[1954]
(ii) The impngned Act \VB.Sin substance ancl form a la¥.• in
respect to tbe "taxing of agricultural income", as described in
K. 0. Gajapati entry 46 of List II of the Seventh Schedule to the Constitution
flarayan Deo
and, as the State Legislature was con1petent to legislate on this
and Others
subject, the Act was not void, and the fact that the object of the
19,JJ
v.
legislature \Vas to accomplish another purpose, viz., to reduce the
The State 01
compensation payable under the Estates Abolition Act, cannot
Orissa.
render this law a colourablo legislation and void as such. as the
ulterior object itself was not beyond the competence of the
legislature.
(iii) Assuming that in India there is no absolute rule of
law that whatever is affixed to or built on the soil becomes a part
of it and is subject to the same rights of property as the soil
itself, there is nothing in la'i\' which prevents the State Legislature from providing as part of an estate abolition scheme tbat
buildings lying within the ambit of an estate and used primarily
for the tnanagement or administration of the estate should vest in
the Government as appurtenances to the estate itself. Such
acquisition would come within article 31(2) of the Constitution
and if the conditions laid down in clause (4) of that article are
complied with, it would be protected by that clause even if the
compensation provided for is not just and proper.
(iv) The provisions in the Orissa Estates Abolition Act,
1950, relating to private lands in the possession of temporary
tenants are not unconstitutional.
Merely because compensation
was based on th

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I
THE SUPREME COURT REPORTS
K. C. GAJAPATI NARAYAN DEO AND OTHERS
v.
THE STATE OF ORISSA.
[PATANJALI SASTRI C. J., MuKHERJEA, S. R. DAs,
GHULAM HASAN and BHAGWATI JJ.]
Orissa Estates Abolition Act, 1952, ss. 23, 26, 27, 37-0rissa
Agric1tlt1tral
Income-tax
(Amendment)
Act, 1950-Validity-
"Golourable
legislation"-Tests of va.lidity-E.ffect of itlterior
inotives-Provisions for vesting buildings and private lands in
Govermnent-Provisimi for paying compe11sation in 30 yearsValidity-Provisions introduced in Bill after coming into force of
new.Constitution-Whether protected by art. 31(4)-Gonstitntion of
India, 1950, arts. 31(2), 31(4); Sch. VII, List II entry 46, List III
entry 42.
The Bill relating to the Orissa Estates Abolition Act, 1952,
was published in the Gazette on the 3rd J an[\ary, 1950. It contained a provision that any sum payable for agricultural incometax for the previous year should be deducted from the gross
asset of an estate for the purpose of arriving at its net income on
the basis on which compensation was payable to the· estate
owners.
On the 8th January, 1950, a Bill to amend the Orissa
Agricultural Income-tax Act of 1947 so as to enhance the highest
rate of tax from 3 annas in the rupee to 4 annas and reduce the
highest slab from Rs. 30,000 to Rs. 20,000 was published in the
Gazette. This Bill was dropped by the next Chief Minister who
introduced a revised Bill on the 22nd July, 1950, enhancing the
highest rate to 12 annas 6 pies in the rupee and reducing the
highest slab to Rs. 15,000 and this was passed into law in August;
1950. It was contended that the Orissa Agricultural Income-tax
(Amendment) Act of 1950 was a fraud on the Constitution and as
such invalid as it was a colourable legislation to effect a drastic
reduction in the compensation payable under the Estates Abolition
Act:
Held, (i) that the question whether ·a law was a colourable
legislation and as such void did not depend on the motive or bona
fides of the legislature in passing the law but upon the competency
of the legislature to pass that particular law, and what the courts
have to determine in such cases is whether though the legislature
has purported to act within the limits of its powers, it has in substance and reality transgressed those powers, the transgression
peing veiled by what appears, on proper examination, to be a mere
pretence or disguise.
The whole doctrine of colourable legislation
is based upon the maxim that you cannot do indirectly what you
cannot do directly.
•
1953
May Z9.
•
2
StJPREME COURT REPORTS
[1954]
(ii) The impngned Act \VB.Sin substance ancl form a la¥.• in
respect to tbe "taxing of agricultural income", as described in
K. 0. Gajapati entry 46 of List II of the Seventh Schedule to the Constitution
flarayan Deo
and, as the State Legislature was con1petent to legislate on this
and Others
subject, the Act was not void, and the fact that the object of the
19,JJ
v.
legislature \Vas to accomplish another purpose, viz., to reduce the
The State 01
compensation payable under the Estates Abolition Act, cannot
Orissa.
render this law a colourablo legislation and void as such. as the
ulterior object itself was not beyond the competence of the
legislature.
(iii) Assuming that in India there is no absolute rule of
law that whatever is affixed to or built on the soil becomes a part
of it and is subject to the same rights of property as the soil
itself, there is nothing in la'i\' which prevents the State Legislature from providing as part of an estate abolition scheme tbat
buildings lying within the ambit of an estate and used primarily
for the tnanagement or administration of the estate should vest in
the Government as appurtenances to the estate itself. Such
acquisition would come within article 31(2) of the Constitution
and if the conditions laid down in clause (4) of that article are
complied with, it would be protected by that clause even if the
compensation provided for is not just and proper.
(iv) The provisions in the Orissa Estates Abolition Act,
1950, relating to private lands in the possession of temporary
tenants are not unconstitutional.
Merely because compensation
was based on the produce rent payable by the tenants it cannot
be said that the landholder was given compensation only for the
landholder's rights and not for the kudivarain (tenant's) rights
also.
(v) Tho expression "passed by such legislature" in article
31(4) of the Constitution means passed with or without amendments and the fact that the provisions relating to vesting of
private lands did not form a part of the Est.tee Abolition Bill as
originally introduced but were added to the Bill after the new
Constitution had come into force would not deprive those proyisions of the protection of article 31(4) of the Constitution.
(vi) The provision contained in section 37 of the Orissa
Estates Abolition A.ct, 1950, for payment of cornpensation by 30
annual instalments is not a piece of colourable legislation. It
comes clearly within entry 42 of List III of Schedule VII of
the Constitution.
[The question whether the provisions of the Madras Estates
Land (Orissa
Amendment) Act, 1947, which empowered the
Collector to settle and reduce rents were void' because they involY·
ed an improper delegation of legislative powers to the executive
and contravened article 14 of the Constitution was raised, hut
with the consent of the counsel, th0ir Lordships decided to leR.ve
the question open as it did not relate \o the validity of the Ori~·~
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S.O.R.
SUPREME COURT REPORTS
1953
Estates Abolition Act, which was the subject-matter in dispute in
the present case].
K. 0. Gajapati
State of Bihcir v. 2'rlahcwajah Kameshwnr Sinyh ctncl Others
Narayan Deo
([1952] S.C.R. 889) distinguished.
Snrya Pal Sinuh v. The State
and Others
of Uttar Praclesh ((1952] S.O.R. 1056) followed.
Attorney-General for Ontario v. Reciprocal Insurers ancl
Others ([1924] A.O. 328), Attorney-General for Alberta v. AttorneyGeneral for Ccinncla ([1939] A.O. 117), Union Colliery Co. of Br.
Colnmbia Ltd. v. Bryden ([1899] A.O. 580), C1mninahnrn v. Tomeyhomma C1903] A.O. 151), Be Inwrancl Act of Canada ([1932] A.O.
4 l), Moran v. Depnty Commissioner for Taxation, New So1ith Wales
([1940] A.O. 838) referred to.
CIVIL
APPELLA'rE JURISDICTION:
Civil
Appeals
Nos. 71 to 76 of 1953.
Appeals under article 132(1) of the Constitution of
India from the Judgment and Order dated 30th January, 1953, of the Orissa High Court in Original Jurisdiction Oases Nos. 13, 14, 15, 16, 25 and 26 of 1952.
The facts of the case appear in the judgment.
B. Somayya ( K. B. Krishnamurthi, with him) for
the appellant in Civil Appeal No. 71 of 1953 ..
B; Somayya (D. Narasaraju and N. V. Ramdas,
with him) for the appellant in Civil Appeal No. 72
of 1953.
D. Narasaraju and A. Krishnaswami (N. V. Ramdas, with them) for the appellant in Civil Appeal
. No. 73 of 1953.
D. Narasaraju (N. V. Rtimdas, with him) for the
appellant in Civil Appea) No. 76of1953.
D. V. Narasinga Rao for the appellant in Civil
Appeal No. 75 of 1953.
R. Patnaik for the appellant in Civil Appeal
No. 7 4 of 1953.
M. G. Setalvad, Attorney-General for India, and
Pitumbar Misra, Advowte-General of Orissa (P. A.
Mehta, with them) for the respondent.
1953. May 29. The Judgment of the Court wac;
delivered by MUKHERJEA J.
v.
The State of
Orissa.
•
•
1963
~· G. Gajapati
Narayan Deo
and Others
v.
The State of
Orissa.
M ukherjea J,
'1
SUPREME COURT REPORTS.
[1954]
MUI>:HERJEA J.-These six appeals arise out of as
many applications, presented to the High Court of
Orissa, under article 226 of the Constitution, by the
proprietors of certain permanently settled estates within the State of Orissa, challenging the constitutional
validity of the legislation known as the Orissa Estates
Abolition Act of 1952 (hereinafter called "the Act")
and praying for mandatory writs against the State
Government restraining them from enforcing the provisions of the Act so far as the estates owned by the
petitioners are concerned.
The impugned Act was introduced in the Orissa
State Legislature on the 17th of January, 1950, and
was passed by it on the 28th September, 1951. It was
reserved by the State Governor for consideration of
the President and the President gave his assent on
23rd January, 1952. The Act thus receives the protection of articles 31(4) ··and 31A of the Constitution
though it was not and could not be included in the list
of statutes enumerated in the ninth schedule to the
Constitution, as referred to in article 31B.
The Act, so far as its main features are concerned,
follows the pattern of similar statutes passed by the
Bihar, Uttar Pradesh and Madhya Pradesh Legislative
Assemblies.
The primary purpose of the Act is to
abolish all zemindary and other proprietary estates and
interests in the State of Orissa and after eliminating
all the intermediaries, to bring the ryots or the actual
occupants of the lands in direct contact with the State
Government.
It may be convenient here to refer
briefly to some of the provisions of the Act which are
·material for our present purpose.
The object of the
legislation is fully set out in the preamble to the Act
which discloses the public purpose underlying it.. Section 2(g) defines an "estate" as meaning any land held
by an intermediary and included under one entry in
any of the general registers of revenue-paying lands
and revenue-free lands prepared and maintained under
the law for the time being in force by the Collector of
a
district.
The expression "intermediary" with
reference to any estate
is then defined and it
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S.C.R.
SUPREME COURT REPORTS
5
means a proprietor, sub-proprietor,
landlord,
landholder .... thikadar,
tenure-holder,
under-tenure-holder
and
includes
the
holder
of
inam
estate,
jagir
and maufi tenures and all other interests of similar
nature
between
the
ryot
and
the
State.
Section 3 of the Act empowers the State Government
to declare, by notification, that the estate described in
the notification has vested in the State free from all
incumbrances.
Under section 4 it is open to the State
Government, at any time before issuing such notification, to invite
proposals
from
"intermediaries"
for
surrender of their estates and if such proposals
are
accepted, the
surrendered
estate shall vest in the
Government as soon as the agreement embodying the
terms of surrender is executed.
The consequences of
vesting either by issue of notification or as a result of
surrender are described in detail in section 5 of the
Act. It would be sufficient for our present purpose to
state that the primary consequence is that all lands
comprised
in
the estate including communal lands,
non-ryoti la:nds, waste lands, trees, orchards, pasture
lands, forests, mines and minerals, quarries, rivers and
streams, tanks, water channels, fisheries, ferries,
hats
and bazars, and buildings or structures together with
the land on whi.ch they stand shall, subject to the
other provisions of the Act, vest absolutely in the
State Government free from all incumbrances and the
intermediary shall cease to have any interest in them.
Under section 6, the intermediary is allowed to keep
for himself his homestead and buildings and structures
used for residential or trading purposes such as golas,
factories, mills, etc.; but buildings used for office or
estate purposes would vest in the Government.
Section 7 provides that an intermediary will be entitled to
retain all lands used for agricultural or horticultural
purposes which are in his khas possession at the date
of vesting.
Private lands of the intermediary, which
were held by temporary tenants under him, would
however vest in the Government and the temporary
tenants would be deemed to be tenants
under tl1e
Government, except
where
the intermediary himself
holds less than 33 acres of land in any capacity.
As
1953
r. C. Gajapati
NaraJa• Deo
•nd Others
v,
Th< Stat< ef
Orissa.
M.k/ie1ojeo ].
1953
K. C. Gajapati
NarayanDeo
and Others
. v.
The State of
Orissa.
6
SUPREME COURT REPORTS
[1954]
regards the compensation to be paid for the compulsory acquisition of the estates, the principle adopted
is
that
the
amount
of
compensation
would
be
calculated at a certain number of years' purchase of
the net annual income of the estate during the previous
agricultural year, that is to say, the year immediately
preceding that in which
the date of vesting falls.
First of all, the gross asset is to be ascertained and by
gross asset is meant the aggregate of the rents including all cesses payable in respect of the estate.
From
the gross asset certain deductions are made in order to
arrive at the net income.
These deductions include
land revenue or rent including cesses payable to the
State
Government,
the
agricultural
income-tax payable in the previous year, any sum payable as chowkidary or municipal tax in respect of the buildings taken
over as office or estate buildings and also costs of
management fixed in accordance with a sliding percentage scale with reference to the gross income. Any
other sum payable as income-tax in respect of any
other kind of income derived from the estate would
also be included in the deductions. The amount of
compensation thus determined is payable in 30 annual
equated instalments commencing from
the date of
vesting and an option is given to the State Government
to m'ake full payment at any time. These in brief are
the main features of the Act.
There was a fairly large number of grounds put forward on behalf of the appellants before the High
Court in assailing the validity of the Act. It is to be
remembered that the question of the constitutional
validity
of
three
other similar legislative
measures
passed, respectively, by
the Bihar, Uttar Pradesh and
Madhya Pradesh
Legislative
Assemblies
had
already
come for consideration before this court and this court
had pronounced all of them to be valid with the exception of two very minor provisions in the Bihar Act.
In
spite of all the previous pronouncements there appears
to have been no lack of legal ingenuity to support the
present attack upon the Orissa legislation, and as a
matter of fact, much of the arguments put forward on
behalf of the appellants purported to have been based
•
S.C.R.
SUPREME COURT REPORTS
7
on the majority judgment of this court in the Bihar
appeals, where two small provisions of the Bihar Act
were held to be unconstitutional.
The arguments advanced on behalf of the appellants
before the High Court have been classified by the
learned Chief fustice in his judgment under three separate heads.
In the first place, there were contentions
raised, attacking the validity of the Act as a whole. In
the second place, the validity of the Act was challenged
as far as it related to certain specified items of property included in an estate, e.g., private lands, buildings,
waste lands, etc.
Thirdly, the challenge was as to the
validity of certain provisions in the Act relating to
determination of compensation payable to the intermediary, with reference either to the calculation of the
gross assets or the deductions to be made therefrom
for the purpose of arriving at the net income.
The learned Chief Justice in a most elaborate judgment discussed all the points raised by the appellants
and negatived them all except that the objections with
regard
to
some
of
the. matters were
kept open.
Mr. fustice Narasimham, the other learned fudge in
the Bench, while agreeing with the Chief Justice as to
other points, expressed, in a separate judgment of his
own, his suspicion about the bona fides of the Orissa
Agricultural
Income-tax
(Second
Amendment)
Act,
1950, and he was inclined to hold that though ostensibly
it was a taxation measure, it was in substance nothing
else but a colourable device to cut down drastically the
income of the intermediaries so as to facilitate further
reduction of their net income as provided in clause (b)
of section 27 ( 1) of the Act.
He, however, did not dissent from the final decision arrived at by the Chief
justice,
the
ground
assigned
being
that
whenever
lhere is any doubt regarding the constitutionality of an
enactment, the doubt should always go in favour of
lhe legislature.
The result was that with the exceplion of the few matters that were kept open, all the
petitions were dismissed.
The proprietors have now
·come before us on appeal on the strength of certificates
·granted by the High Court under articles 132 and 133
1953
K. C. Gajapali
Narayan Deo
and Othm
v.
The State ef
01issa.
Mukhetiea J.
1953
K. C. Gajapati
NarayanDeo
and 0th.rs
••
Tm State of
Orissa.
Mukherjea J.
8
SUPREME COURT REPORTS
[1954]
of the Constitution as well as under section 110 of the
Code of Civil Procedure.
No contention has been pressed before us on behalf
of the appellants attacking the constitutional validity
of the Act as a whole.
The arguments that have been
advanced by the learned counsel for the appellants can
be conveniently divided under three heads :
In the
first place, there has been an attack on the validity of
the provisions of two other statutes, namely, the Orissa
Agricultural Income-tax (Amendment) Act, 1950, and
the Madras Estates Land (Amendment) Act, 1947, in
so far as they affect the calculation of the net income
of an estate for the purpose of determining the compensation
payable
under
the
Act.
In
the
second
place, the provisions of the Act have been challenged
as unconstitutional to the extent that they are applicable to private lands and buildings of the proprietors,
both of which vest as parts of the estate, undersection 5 of the Act. Lastly, the manner of payment
of compensation money, as laid down in section 37 of
the Act, has been challenged as invalid and unconstitutional.
Under the first head the appellants' main contention·
relates
to
the
validity
of
the
Orissa
Agricultural
Income-tax (Amendment) Act of 1950. This Act, it is
said, is not a bona fide taxation statute at all, but is a
colourable piece of legislation, the real object of which
is to reduce, by artificial means, the net income of the
intermediaries, so that the
compensation
payable
to·
them under the Act might be kept down to as low a
figure as possible.
To appreciate
this contention
of
the appellants, it would be necessary to narrate a few·
relevant facts.
Under section 27 ( 1) (b) of the Act,
any sum payable in respect of an estate as agricultural
income-tax, for the previous agricultural year, consti--
tutes an item of deduction which has to be deducted'
from the gross asset of an estate for the purpose of
arriving at its net income, on the basis of which the·
amount of compensation is to be determined.
The·
Estates Abolition Bill
was
published
in
the
local
gazette on
3rd
January,
1950.
As
has
been
saidi
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•
S.C.R.
SUPREME COURT REPORTS
9
already, it was introduced in the Orissa Legislative
Assembly on the 17th of January following and it was
passed on the 28th September, 1951.
There was an
Agricultural Income-tax Act in force in the State of
Orissa from the year 194 7 which provided a progressive
scale of taxation on agricultural income, the highest
rate of tax being 3 annas in the rupee on a slab of over
Rs. 30,000 received as agricultural income.
On 8th
January, 1950, that is to say, five days after the publication of the Abolition Bill, an amended agricultural
income-tax bill was published in the official gazette.
At that time Mr. H. K. Mahtab was the Chief Minister
of Orissa and this bill was sponsored by him. The
changes proposed by this Amendment Act were not
very material. . The highest rate was enhanced from
3 annas to 4 annas in the rupee and the highest slab
was reduced from Rs. 30,000 to Rs. 20,000.
For some
reason or other, however, this bill was dropped and a
revised bill was published in the local gazette on 22nd
July, 1950, and it passed into law on 10th of August
following.
This new Act admittedly made changes of
a very drastic character regarding agricultural incometax. The rate of taxation was greatly enhanced for
slabs of agricultural income above Rs. 15,000 and for
the highest slab the rate prescribed was as much as
12 annas 6 pies in the rupee. It was stated in the
statement of objects and reasons that the enhanced
agricultural income was necessary for financing various
development schemes in the State. This, it is said,
was wholly untrue for it could not be disputed that
almost all the persons who came within the higher
income group and were primarily affected by the
enhanced rates were intermediaries under the Estates
Abolition Bill which was at that time before the Select
Committee and was expected to become law very soon,
and as the legislature had already definitely decided to
extinguish this class of intermediaries, it was absurd
to say that an increased taxation upon them was
necessary for the development schemes. The object of
this amended legislation, according to the appellants,
was totally different from what it ostensibly purported
1953
K. 0. Gajapati
JV arayan Dea
and Others
v.
The State of
Orissa.
Mukherjea J.
•
•
10
SUPREME COURT REPORTS
[1954]
1953
1(. C. GaJapa.ti
Narayan Deo
and Others
to be and the object was nothing else but to use it as a
means of effecting a drastic reduction in the income
of the intermediaries, so that the compensation payable
to them may be reduced almost to nothing. This
change in the provisions of the Agriculturallncome-tax
Bill, it is further pointed out, synchronized with a
change in the Ministry of the Orissa State.
The
original amended bill was introduced by the then Chief
Minister, Mr. H. K. Mahtab, who was in favour of
allowing suitable compensation to expropriated zemindars; but his successor, who introduced the revised
bill, was said to be a champion of the abolition of
zemindary rights with little or no compensation to the
proprietors. In these circumstances, the argument of
the learned counsel is that the agricultural income-tax
legislation being really not a taxation statute but a
mere device for serving another collateral purpose
constitutes a fraud on the Constitution and as such is
invalid, either in its entirety, or at any rate to the
extent that it affects the estate abolition scheme. We
have been referred to a number of decisions on this
point where the doctrine of colourable legislation came
up for discussion before courts of law; and stress is laid
primarily upon the pronouncement of the majority of
this court in the case of The State of Bihar v. Maha raj a
Karneshwar
Singh and Others (1 ) which held two
provisions of the Bihar Land Reforms Act, namely,
sections 4(b) and 23 (f) to be unconstitutional on the
ground, among others, that these provisions ·constituted a fraud on the Constitution. The fact that the
provisions in the amended Agricultural Income-tax
Act were embodied in a separate statute and not
expressly made a part of the Abolition Act itself should
not, it is argued, make any difference in principle. As
the question is of some importance and is likely to be
debated in similar cases in future, it would be necessary
to examine the precise scope and meaning of what is
known ordinarily as the doctrine of "colourable legislation".
v.
~'lie Stale of
Orissa,
It may be made clear at the outset that the doctrine
of colourable legislation does not involve any question
(1) (1952] s.c.R. ss9.
v
>--
•
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)
S.C.R.
SUPREME COURT REPORTS
11
of bona fides or mala fides on the part of the legislature. The whole doctrine resolves itself into the
question of competency of a particular legislature to
enact a particular law. 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(').
A distinction, however, exists
between a legislature which is legally omnipotent like
the British Parliament and the laws promulgated by
which could not be challenged on the ground of incompetency, and a legislature which enjoys only a limited
or a qualified jurisdiction. If the Constitution of a
State distributes the legislative powers amongst
different bodies, which have to act 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 method of enacting it, transgressed the limits
of its constitutional powers.
Such transgression may
he 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 and Others( 2 ),
"Where the law making authority is of a limited
or qualified character it may be necessary to examine
with some strictness the substance of the legislation
(r) Vide Oooley'5 Oon5titutiona! Limitation5 Vol, 11 p. 379·
~
(2) [1924] A.C. 328 at 337.
·)
lll53
[(. C. Gajapati
Narayan Deo
and Ot.hers
v.
The State of
Orissa.
Mukherjea J.
•
1953
K- {}, Gajap«,ti
Narayan Deo
and Others
v.
The State of
Orissa.
MukherJea J.
12
SUPREME COURT REPORTS
[1954]
for the purpose of determining what is that the legislature is really doing."
In other words, it is the substance of the Act that is
material and not merely the form or outward appearance, and if the subject-matter in substance is something which is beyond the powers of that legislature
to legislate upon, the form in which the law is clothed
'would not save it from condemnation. The legislature
cannot violate the constitutional prohibitions by
. employing an indirect method. In cases like these,
the enquiry must always be as to the true nature and
character of the challenged legislation and it is the
result of such investigation and not the form alone
that will determine as to whether or not it relates to a
subject which is within the power of the legislative
authority('). For the purpose of this investigation the
court could certainly examine the effect of the legislation and take into consideration its object, purpose or
design('). But these are only relevant for the purpose
of ascertaining the true character and substance of the
enactment and the class of subjects of legislation to
which it really belongs and not for finding out the
motives which induced the legislature to exercise its
powers. It is said by Lefroy in his well known work
on Canadian Constitution that even if the legislature
avow on the face of an Act that it intends thereby to
legislate in reference to a subject over which it has no
jurisdiction, yet if the enacting clauses of the Act
bring the legislation within its powers, the Act cannot
be considered ultra vires(3).
In support of his contention that the Orissa Agricultural Income-tax (Amendment) Act of 1950 isa colourable piece of legisfation and hence ultra vires the
Constitution, the learned counsel for the appellants, as
said above, placed considerable reliance upon the
majority decision of this court in the case of The State
of Bihar v. Sir Kameshwar Singh('), where two clauses
(I) Vide AUorney-Genera.l for Ontario v. Reciprocal Insurer«1 and Othr.rs,
(1924] A.G. 328 at 337.
(2) Vide Attorney-General for Alberta v. Attorney-General for Canada.,
[1939) A.C. 117 at 130.
(3) See Lefroy on Canadian Constitution, page 75.
(4) [1952] S.C.R. 889.
. ..
I
)
S.C.R.
SUPREME COURT REPORTS
13
of the Bihar Land Reform Act were held to be unconstitutional as being colourable exercise oflegislative
power under entry 42 of List III of Schedule VII of
the Constitution. The learned counsel has also referred us, in this connection, to a number of cases, mostly
of the Judicial Committee of the Privy Council, where
the doctrine of colourablelegislation came up for consideration in relation to certain enactments of the
Canadian and Australian legislatures.
The principles
laid down in these decisions do appear to us to be
fairly well settled, but we do not think that the appellants in these appeals could derive much assistanc.e
from them.
In the cases from Canada, the question invariably
has been whether the Dominion Parliament has, under
colour of general legislation, attempted to deal with
what are merely provincial matters, or conversely
whether the Provincial legislatures under the pretence
of legislating on any of the matters enumerated in
section 92 of the British North America Act really
legislated on a matter assigned to the Dominion Parliament. In the case of Union Colliery Company of
British Columbia Ltd. v. Bryden( ), the question raised
was whether section 4 of the British Columbian Coal
Mines Regulation Act, 1890, which prohibited Chinamen of full age from employment in under-ground coal
working, was, in that respect, ultra vires of the Provincial legislature. The question was answered in the
affirmative. It was held that if it was regarded merely
as a coal working regulation, it could certainly come
within section 92, sub-section (10) or (13), of the British North America Act; but its exclusive application
to Chinamen, who were aliens or naturalised subjects,
would be a statutory prohibition which was within the
exclusive authority of the Dominion Parliament, conferred by section 91, sub-section (25), of the Act.
As
the Judicial Committee themselves explained in a later
case(2 ), the regulations in the British Columbian Act
"were not really aimed at the regulation of coal mines
at all, but were in truth a device to deprive the Chinese,
(1) [1899) A.C. 580.
(2) Vide Cunningham v. Tomeyhomma [1903] A.C. 151 at 157·
1953
K. 0. Gajapati
Narayan Deo
and Others
v.
The State of
Oris.sa.
Mukherjea J.
•
1963
K. G. Gajapati
Narayan Deo
and Others
v.
The State of
Oris13a,
Mukherjea J.
14
SUPREME COURT REPORTS
[1954]
naturalised or not, of the ordinary rights of the inhabitants of British Columbia and in effect to prohibit their
continued residence in that province since it prohibited
their earning their living in that province."
On the other hand, in Re Insurance Act of Canada('),
the Privy Council had to deal with the constitutionality of sections 11 and 12 of the Insurance Act of
Canada passed by the Dominion Parliament under
which it was declared to be unlawful for any Canadian
company or an alien, whether a natural person or a
foreign company, to carry on insurance business except
under a licence from the Minister, granted pursuant to
the provisions of the Act. The question was whether
a foreign or British insurer licensed under the Quebec
Insurance Act was entitled to carry on business within
that Province without taking out a licence under the
Dominion Act? It was held that sections 11 and 12
of the Canadian Insurance Act, which, required the
foreign insurers to be licensed, were ultra vires, since
in the guise of legislation as to aliens and immigration
-matters admittedly within the Domin,ion authoritythe Dominion legi"slature was seeking to intermeddle
with the conduct of insurance business which was a
subject exclusively within the provincial authority.
The whole law on this point was thus summed up by
Lord Maugham in Attorney-General for Alberta v. Attorney-General for Canada(') :
"It is not competent either for the Dominion or a
Province under the guise, or the pretence, or in the
form of an exercise of its own powers to carry out an
object which is beyond its powers and a trespass on the
exclusive power of the other."
The same principle has been applied where the question was not of one legislature encroaching upon the
exclusive field of another but of itself violating any
constitutional guarantee or prohibition.
As an illustration of this type of cases we may refer to the
Australian case of Moran v. The Deputy Commissioner
of Taxation for New South Wales(').
What happened
(1) [1932) A.C. 41.
(3) [1940] A.C. 838.
(2) [1939] A.C. 117 at 130.
•
•
.. r
•
.}
-<
...
S.C.R.
SUPREME COURT REPORTS
15
in that case was that in pursuance of a joint Commonwealth and States scheme to ensure to wheat growers
in all the Australian States "a payable price for their
produce" a number of Acts were passed by the
Commonwealth Parliament imposing taxes on flour
sold in Australia for home consumption, so as to
provide a fund available for payment of moneys to
wheat growers. Besides a number of taxing statutes,
which imposed tax on flour, the Wheat Industry Assistance Act No. 53of1938 provided for a fund into which
the taxes were to be paid and of which certain payments were to be made to the wheat growers in accordance with State legislation. In the case of Tasmania
where the quantity of wheat grown was relatively small
but the taxes were imposed as in the other States, it
was agreed as a part of the scheme and was provided
by section 14 of the Wheat Industry Assistance Act
that a special grant should be made fo Tasmania, not
subject to any federal statutory conditions but intended to be applied by the Government of Tasmania, in
paying back to Tasmanian millers, nearly the whole of
the flour tax paid by them and provision to give effect
t~ that purpose was made by the Flour Tax Relief Act
No. 40of1938 of the State of Tasmania. !J.'he contention raised was that these Acts were a part of a scheme
of taxation operating and intended to operate by way of
discriminating between States or parts of States and
as such were contrary to the provisions of section 5l(ii)
of the Commonwealth Australian Constitution Act .
The matter came up for consideration before a full
court of the High Court of Australia and the majority
of the Judges came to the conclusion that such legislation was protected by Section 96 of the Constitution,
which empowered the Parliament of the Commonwealth
to grant financial assistance to any State on such terms
and conditions as the Parliament thought fit. Evatt J.
in a separate judgment dissented from the view and
held that under the guise of executing the powers
under section 96 of the Constitution, the legislature had
really violated the constitutional prohibition laid down
in section 5l{ii) of the Constitution. There was an
appeal taken to the Privy Council. The Privy Council
1953
K. C. Gajapati
Narayan Deo
and Others
v.
The State of
Orissa
Mukherjea J.
•
•
1953
K. 0. Gajapati
Narayan Deo
and Others
v.
'1.'he State of
Orissa.
Mukherjea J.
16
SUPREME COURT REPORTS
[1954]
affirmed the judgment of the majority but pointed out
that " cases may be imagined in which a purported
exercise of the power to grant financial assistance
under section 96 would be merely colourable. Under
the guise and pretence of assisting a State with money,
the real substance and purpose of the Act might simply
be to effect discrimination in regard to taxation. Such
an Act might well be ?tltra vires the Commonwealth
Parliament."
We will now come to the decision of the majority of
this court regarding two clauses in the Bihar Land
Reforms Act which seems to be the sheet anchor of
the appellants' case(').
In that case the provisions of
sections 23(f) and 4(b) of the Bihar Land Reforms Act
were held to be invalid by the majority of this court
not on the ground that, in legislating on these topics,
the State legislature had encroached upon the exclusive
field of the Central legislature, but that the subjectmatter of legislation did not at all come within the
ambit of item No. 42 of List III, Schedule VII of the
Constitution under which it purported to have been
enacted. As these sections did not come within entry
42, the consequence was that half of the arrears of rent
as well as 12t% of the gross assets of an estate were
taken away, otherwise than by authority of law and
therefore there was a violation of fundamental rights
guaranteed by article 31(1) of the Constitution. This
was a form of colourable legislation which made these
provisions ultra vires the Constitution.
It may be stated here that section 23 of the Bihar
Land Reforms Act lays down the method of computing
the net income of an estate or a tenure which is the
subject-matter of acquisition under tho Act. In arriving at the not income certain deductions are to be
made from the gross asset and the deductions include,
among others, revenue, cess and agricultural income
tax payable in respect of the properties and also the
costs of management. Section 23 (f) provided another
item of deduction under which a sum representing 4 to
12J,% of the gross asset of an estate was to be
....
(I) 'Tide The State of Bihar v, Sir Kaineshwar Singh, [1952] S.C.R. 889.
5
,~
-(
)
S.C.R.
SUPREME COURT REPORTS
17
deducted as" costs of works for benefit to the raiyat".
The other provision contained in section 4 (b) provides
that all arrears of rent which had already accrued due
to the landlord prior to the date of vesting shall vest
in the State and the latter would pay only 50% of
these arrears to the landlord.
Both these provisions
purported to have been enacted under entry 42 of List
III Schedule VII of the Constitution and that entry
speaks of "principles on which compensation for property acquired is to be determined and the form and
manner in which that compensation is to be given."
It was held in the Bi)1ar case(
1
) by the majority of this
court that the item of deduction provided for in section
23(f) was a fictitious item wholly unrelated to facts.
There was no definable pre-existing liability on the
part of the landlord to execute works of any kind for
the benefit of the raiyat. What was attempted to be
done, therefore, was to bring within the scope of the
legislation something which not being existent at all
could not have conceivable relation to any principle of
compensation.
This was, therefore, held to be a
colourable piece of legiRlation which though purporting
to have been made under entry 42 could not factually
0ome within its scope.
The same principle was held applicable in regard to
acquisition of arrears of rent which had become due to
the landlord prior to the date of vesting.
The net
result of this provision was that the State Government
was given the power to appropriate to itself half of the
arrears of rent due to the landlord without giving him
any compensation whatsoever.
Taking the whole and
returning the half meant nothing more or less than taking the half without any return and this, it was held,
could not be regarded as a principle of compensation
in any sense of the word. It was held definitely by
one of the learned Judges, who constituted the majority,
that item 42 of List III was nothing but the description of a legislative head and in deciding the competency of the legislation under this entry, the court is
not concerned with the justice or propriety of the
-4..._
(r) [1952] S.C.R. RSq.
-l
3
1963
K. 0. Gajapati
Narayan Deo
and Others
v.
The State of
Orissa.
Mukherjea J.
•
1953
K. G. Gajapati
l:\7 arayan Deo
and Others
v.
The Slate of
Orissa.
M ukherjea J.
18
SUPREME COURT REPORTS
[1954]
principles upon which the assessment of compensation
is directed to be made ; but it must be a principle of
compensation, no matter whether it was just or unjust
and there could be no principle of compensation based
upon something which was unrelated to facts. It may
be mentioned here that two of the three learned Judges
who formed the majority did base their decision regarding the invalidity of the provision, relating to arrears
of rent, mainly on the ground that there was no public
purpose behind such acquisition.