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K.A. Kannappa Chetti Vs. State of Tamil Nadu and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtChennai High Court
Decided On
Reported in(1973)2MLJ212
AppellantK.A. Kannappa Chetti
RespondentState of Tamil Nadu and ors.
Cases ReferredPeriyakulam v. R.T.A.
Excerpt:
- order.in pursuance of the proviso to clause (i) of article 213 of the constitution, the president approves the promulgation, by the governor of tamil nadu of the tamil nadu stage carriages and contract carriages (acquisition) ordinance, 1972.by order and in the name of the president.(sd.) b. shukla.'(deputy secretary to the government of india.)the above is the first stage for the promulgation of the ordinance . it may be seen that the president's assent under the constitution is required in the following cases : (1) article 31 (3) when a law referred to in article 31 (2) has been reserved for consideration of the president; (2) article 31-a first proviso, where a law falling under article 31 -a relating to acquisition of estates is made by the legislature of a state; (3) under article.....
Judgment:
ORDER

.

In pursuance of the proviso to Clause (i) of Article 213 of the Constitution, the President approves the promulgation, by the Governor of Tamil Nadu of the Tamil Nadu Stage Carriages and Contract Carriages (Acquisition) Ordinance, 1972.

By order and in the name of the President.

(Sd.) B. Shukla.

'(Deputy Secretary to the Government of India.)

The above is the first stage for the promulgation of the Ordinance . It may be seen that the President's assent under the Constitution is required in the following cases : (1) Article 31 (3) when a law referred to in Article 31 (2) has been reserved for consideration of the President; (2) Article 31-A first proviso, where a law falling under Article 31 -A relating to acquisition of estates is made by the Legislature of a State; (3) Under Article 254 (2) when there is an inconsistency between the laws made by Parliament and laws made by the Legislature of a State. The instructions under the proviso to Article 213 takes the place of the previous sanction of the Governor-General under Sections 32 and 75 of the Government of India Act, 1935. The Government of India Act, 1935, contains the Instrument of Instructions to the Governor-General and also the Governor. The relevant Articles in this context are Articles 26 and 27 of the Instrument of Instructions to the Governor-General. Article 26 runs as follows : -

In considering whether he shall give his assent to any Provincial Law relating to a matter enumerated in the Concurrent Legislative List, which has been reserved for his consideration on the ground that it contains provisions repugnant to the provisions of a Federal Law, our Governor-General, while giving full consideration to the proposals of the Provincial Legislature, shall have substantially the broad principles of these codes of law through which uniformity of legislation has hitherto been secured.

Similarly, Articles 16 and 17 of the Instrument of Instructions issued to the Governor of Madras, relate to giving his assent or withholding his assent from any Bill passed by the provincial Legislature. Tracing the history of the Constitutional provisions relating to assent, Mr. Chari, contended that the President must consider all relevant matters in giving his assent, and if the State Government had made any representations in the communication sent to him, which are untrue, or omitted to make a representation which they were bound to refer, that would affect the validity of the assent. The further contention of Mr. Chari, is that a misrepresentation will stand in the same footing as a failure to represent the relevant material in the communication from the State Government to the President. According to him, the failure in the letter to refer to the hire-purchase financiers, who are the real owners, whose rights are ignored, and the non-reference to the Hire-Purchase Act, 1972, and the non-reference to the definition of ' Owner ' under Section 2 (19) of the Motor Vehicles Act, 1956, and the failure of the Transport Secretary in not drawing attention of the Home Secretary to 'Article 31 (c) or Article 39 (c) all these vitiate the assent, and therefore, the Ordinance is bad.

46. The learned Counsel in this connection, referred to Kerr on 'Fraud and Mistake ', Sixth Edition, pages 51; and 52, and Craies on ' Statute Law' Seventh Edition, page 41. The next decision referred to was Vedaranyeswara swami Devasthanam v. State of Madras : AIR1964Mad90 , where the constitutional validity of the Madras Inams (Assessment) Act (XL of 1956) was questioned, and particularly the contention therein was that the assent of the President was obtained to a colourable legislation. The Advocate General, who appeared for the State placed all the relevant materials to show the circumstances attending to the President's assent, and Ramachandra Iyer, C. J., and Ananthanarayanan, J., as he then was, were satisfied with the fullest disclosure of all materials placed before the Court. The learned Counsel next referred to Subbachariar and Ors. v. State of Madras (1967) 1 M.L.J. 206 : 80 L.W. 184, to which one of us was a party, where Natesan, J., who delivered the judgment on behalf of the Bench observed at page 216 as follows : -

We agree with learned Counsel that reservation of a Bill for consideration and assent by the President is not a mere matter of form. As we see it, it is an essential and important part of the machinery of law-making set up by the Constitution. Bearing in mind the practice that had been obtaining in Constitutions of the Colonies and-Dominions of the British wealth, including the Constitution under the Government of India Act, 1935, we think it may be safely assumed that when a Bill is reserved by a Governor of a State for consideration of the President, the Bill will be examined by the Law Advisers of the President.

Natesan, J., at page 217, referred to the classic treatise, of Spenser Bower on Actionable Non-disclosure. At page 218, the learned Judge observed as follows : -

There is nothing in the light of the said principle to suggest that the reservation of the Bill for the President's assent and the securing of the President's assent to the Bill is in any manner vitiated, even assuming that Courts could go behind the assent once given by the President. But, as pointed out by Mahajan, J., (as he then was) in Raja Suriya Pal Singh v. The State of Uttar Pradesh 1952 S.C.J. 354 : A.I.R. 1952 S.C. 25, it is the subjective opinion of the President that leads to the assent and it is not justiciable. The learned Judge observes:The difference is that persons whose properties fall within the definition of the expression 'Estate' in Article 31-A are deprived of their remedy, under Article 32 of the Constitution, and the President has been constituted the sole Judge of deciding whether a State law acquiring estates under compulsory-power has, or has not, complied with the provisions of Article 31 (2). The validity of the law in these cases depends on the subjective opinion of the President and is not justiciable. Once the assent is given the law is taken to have complied with the provisions of Article 31 (2).

In our view, though the broad principles on which the assent is intended to be given or withheld from a reserved Bill may be deducible, they are not specifically laid down in the Constitution. That being so, it will not be open to the Courts to question the propriety of the President's action.

47. Mr. V. K. T. Chari then contended that Articles 254 (2) read with the Instrument of Instructions, referred to above, as also Section 107 of the Government of India Act, 1935, show that the object of obtaining the President's assent to an enactment is to have a uniform code throughout the country. Article 44 which also falls under Chapter IV providing that the State shall endeavour to secure for the citizens a uniform civil code throughout the territory of India, was next referred to. Article 254 (4) (2) of the Constitution of India, runs as follows:

Where a law made by the Legislature of a State with respect to one of the matters enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail that State:Provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including' a law adding to, amending, varying or repealing the law so made by the Legislature of the State.

Entry 35 in List III of the Seventh Schedule of the Constitution relates to 'Mechanically propelled vehicles in hiding the principles on which taxes on such vehicles are to be levied', and this entry corresponds to Entry 20 in List III of the Government of India Act, 1935. It is under this legislative head that the Parliament enacted the Motor Vehicles Act and the amending Act in 1956 introducing Chapter IV-A in the main enactment. Under the same legislative head, the impugned Ordinance has been promulgated. We are not on the question of repugnancy between the State enactment and the Parliamentary enactment. Mr. Chari, contended that the President's assent under Article 254 (2) of the Constitution is not a formal matter, and in this context he referred to the speech made by Sir Alladi Krishnaswami Ayyar, when Article 44 was considered by the Constituent Assembly. Sir Alladi Krishnaswami Ayyar, said as extracted from the Memorandum on the Directive Principles of the Indian Constitution at page 108, as follows : -

Thus there could be no real objection to the Article as it ran. A civil code runs into every department of civil relations, to the law of contracts, to the law of property, to the law of succession, to the law of marriage and similar matters. How can there be any objection to the general statement here that the States shall endeavour to secure a uniform code throughout the Territory of India ?

As to the argument that religion was in danger and that communities could not live in amity if there was to be a uniform code the said Article actually aimed at amity. The idea was that differential systems of inheritance and matters were some of the factors which contributed to the difference among the different peoples of India. By the introduction of a common code it was attempted to arrive at a common measure of agreement in regard to those matters. It was not a case of one legal system influencing or being influenced by another legal system. He also said that our ancients did not think of a unified nation to be welded together into a democratic whole and the object of this Article was to help welding together into a single nation.

48. A few decisions and references to some text books were then made on the extent of the Court's power in scrutinising assents. A question arose whether Section 3 (1) of the Madras Essential Articles Control and Requisitioning (Temporary Powers) Act, 1949, is repugnant to Section 22-B of the Indian Electricity Act, J9.10, and Section 49 of the Electricity (Supply) Act, 1948, and whether in case of a conflict between the exclusive and concurrent fields of legislation, the latter, under the scheme of distribution should prevail. In W.P.No. 1420 of 1969 etc., batch, to which one of us was a party this question of the President's assent owing to a repugnancy was raised. It was held therein that there was no such repugnancy, and therefore, the further question of the check of the President's assent did not become necessary to be considered. My Lord, the Chief Justice, who delivered the Judgment on behalf of the Bench, observed as follows:

So, if there is at all, a trenching upon the subject 'Electricity', or overlapping on that subject, the question to be asked is whether the trespass or overlapping is such as to show that the pith and substance of the 1939 Act, deals with 'Electricity'. We have no doubt that from that standpoint, the 1949 Act is not law on Electricity. On that view, the validity of the 1949 Act has to be upheld without any necessity to examine whether the President's assent cures the repugnancy on the assumption that the 1949 Act is a legislation touching the Concurrent field.

49. In this connection, Mr. Chari, referred to page 103 of the ' Limited Government and Judicial Review' by Dr. Durga Das Basu. The passage relied upon ran as follows : -

It has been said thus, that the Courts will not inquire whether the votes were correctly counted-(Keith, Introduction to British Constitutional Law (1931), page 125), or whether the royal assent was obtained erroneously or even fraudulently-Halsbury, 3rd Edition volume 36, para. 560 f.n. (a)-(b). As late as 1941, Viscount Simon, in the Privy Council, had observed : -

It is not open to the Court to go behind what has been enacted by the Legislature, and to inquire how the enactment came to be made, whether it arose out of incorrect information, or, indeed, an actual deception by someone on whom reliance was placed by it.' In view of the foregoing decisions, Hood Phillips goes to the extent of holding that even where there is a statutory requirement that a special majority is required for some legislation, ' Courts would not concern themselves' with the question whether a statute has been passed with that specified majority, once the royal assent has been obtained and endorsed. This may be true so far as England is concerned, but would not be correct in relation to countries having written constitutions which require a special majority for certain purposes, e.g., under Article 368 of the Constitution of India,-in view of the Privy Council decision from Ceylon and the South African cases cited earlier. And, once it is held that the Court can examine whether the Bill was passed by the Special Majority required by the Constitution, a Speaker's Certificate to the effect merely that the Bill was ' passed ', may not preclude the Court from further inquiry whether the passage was by a Special majority, for, according to the Ceylon decision, which was not cited in the case from Sierra Leone, Aka v. A. C. of Sierra Leone (1969)3 All E.R. 384 . passage by an ordinary majority, in such cases, would be a nullity.

Again at page 105, Basu stated as follows : -

Article 31 (3) and the second proviso to Article 200 require the Governor to reserve certain Bills for the consideration of the President. A breach of this obligation by the Governor would invalidate a State Act which may have been passed with the assent of the Governor-State of Bihar v. Kameswar : [1952]1SCR1020 , State of Madras v. Namasivaya 1965 S.c. 190 : (1965) 2 S.C.J. 563, without the assent of the President ; for, the reservation and the assent of the President, as required by these Articles, are conditions precedent to the validity of such legislation and not matters of procedure only.

' Of course, the Supreme Court has held that when the President has assented to an amending Act under Article 31 (3), his assent to the parent Act may be presumed - Venkatrao v. State of Bombay : [1970]1SCR317 . This decision is, however, to be read with the following caution:

(a) ' In the case before the Supreme Court, the question of lack of reservation or of assent of the President to the parent Act had not been raised before the High Court and there were no materials on this point before the Supreme Court, and that is why the Supreme Court made the obiter. If the assent of the President had been accorded to the amending Act, it would be difficult to hold that the President had never assented to the parent Act, etc.'

(b) ' The decision of the Andhra Pradesh High Court in Inamdars' case, Jnamdars v. Government of Andhra Pradesh A.I.R. 1961 A.P. 526 : (1961) 2 A. W.R.60 having been referred to, but not overruled by the Supreme Court, would lead to the conclusion that the Supreme Court affirmed the view that the requirement in Article 31 (3) was a condition precedent to the validity of the legislation. Hence, if the parent Act is a post-Constitution legislation to which Article 31 (3) was attracted, the subsequent reservation of an amending Act would not cure the invalidity, ab initio of the parent Act, for violation of Article 31 (3).

But a recital of assent by the President may raise a presumption of reservation by the Governor Salubai v. Chanddu A.I.R. 1965 Bom. 194 , We will now refer to a passage in Halsbury's Laws of England, Third Edition, Volume 36, page 378, para. 560, cited by the learned Counsel.

The legislative supremacy of Parliament implies not only the inability of the Courts to question its power to enact any particular statutory provision, but also their duty to give effect as statutes only to enactments answering to that description. It follows that the Courts can become concerned with the question whether a particular document which they are invited to apply has received the consent necessary to constitute it an Act of Parliament. The Courts would not, for example, give effect to a document appearing on its face to have been agreed by the Lords and Commons alone. In statutes passed since the latter part of the Fifteenth Century, the giving of the necessary consent is, however, recited in the enacting formula, and the question of sufficiency of consent has arisen only in relation to earlier documents containing such recital, and must in practice, be taken to be confined to such documents. While the question of sufficiency of consent may be open to the Courts, that of regularity of consent is not. If a Bill has been agreed to by both Houses of Parliament, and has received the royal assent, it cannot be impeached in the Courts on the ground that its introduction, or passage through Parliament, was attended by any irregularity or even on the ground that it was procured by fraud.In this connection,, Mr. Chari, referred to Berridale Keith on ' Responsible Government in the Dominions ', Vol. II, page 1047, dealing with control over dominion legislation, and also to Wynes on ' Legislative, Executive and Judicial Powers in Australia ' (3rd Edn.), page 123. A reference to Tennant v. Union Bank of Canada 1894 A.C. 31 was also made where the Privy Council held that the dominion legislation is paramount in considering Section 109 of the British North America Act.

50. The learned Advocate-General, however, contended that a copy of the draft Ordinance having been sent to the President along with the letter of the Transport Secretary, it is a sufficient compliance.

51. Regarding the instructions from the President required for promulgation of an Ordinance under the proviso to Article 213(1), the learned Advocate-General contended that what the President is required to do is to say whether he assents or does not assent to the promulgation of the Ordinance on a consideration of the materials sent to him by the State Government and that there is no procedure prescribed in regard to the granting or withholding the assent. In this connection, the learned Advocate-General referred to Annexure ' B ' filed along with the reply affidavit of the Petitioner and contended that the requirement of the law has been substantially complied with. He then referred to a few decisions and contended that the grant of assent is not a matter for judicial review. The first case cited by the learned Advocate-General in support of his contention was M.K. Subbachariar and Ors. v. State of Madras 80 L.W. 184 : (1967) 1 M.L.J. 206, already referred, to, to which one of us was a party. Natesan, J., who delivered the judgment on behalf of the Bench referred to Article 212 of the Constitution and dealt with the question as to the regularity of the procedure in obtaining the assent. The passage relied on is at page 193, which runs as follows : -

Article 212 of the Constitution only precludes Courts from enquiring into the validity of any proceedings in the Legislature on the ground only of any alleged irregularity of procedure. The contention of Counsel, as we understand is that the impact of the Bill in its full force would have been obvious to the President from its language and that the possible repercussions of the Bill in regard to compensation and other features must have been brought specifically to the notice of the President. Now, apart from the terms of the Bill, there could have been no assurance as to compensation, and the Bill in its final form was before the President. Learned Counsel said that as the provisions of the Bill were confiscatory in character, the assent should have been given. But, the argument overlooks that the very purpose of reserving the Bill under Article 31-A, for the President's assent is to cure its invalidity. It must be in the consciousness that the Bill would be attacked as void being in contravention of Articles 14, 19 and 31, that the Bill is submitted to the President for his assent under Article 31-A. Assent under Article 31 (3) gives a sanction for some limited inroads on property rights. Assent under Article 31 -A gives greater, even practically full cover, Articles 14, 19 and 31 being taken out of the way. This protective Article proceeds on the basis that the law may be void as inconsistent with or taking away or abridging the rights conferred under Articles 14, 19 and 31. The President, of course, is expected to consider the law and assent, and it has to be presumed that the President has done so. The President may declare either that he assents to the Bill, in which case the Bill becomes law, or that he with holds assent therefrom in which case the Bill falls through, unless the procedure indicated in the proviso to Article 20.1 is followed.

He next referred to W.P. No. 1420 of 1968 etc., batch, already referred to earlier, delivered by one of us, and the following passage was relied upon.

But, we would like to point out that for the 1949 Act, the Governor-General's assent had been obtained as a matter of fact, and for every subsequent Act extending its life, the assent of the President had been obtained, whether it was required or not. It has been suggested to us that the invalidity of the Act with reference to certain aspects had not been placed before the President, and his assent cannot be said to cover these aspects as well. The true view on this matter has been expressed by a Division Bench of this Court, to which one of us was a party, in M.K. Subachariar v. State of Madras 80 L.W. 184 : (1967) 1 M.L.J. 206. It was argued that the true effect of the Act there in question had been kept masked and veiled from the President, and his assent to it was of no effect. In repelling this contention, the Court said:The President may be expected to examine with all the facilities at his disposal the effect and extent of transgression of the constitutional rights guaranteed, when protection is sought for such transgression ....The President must be presumed to have fully acquainted himself with the whole scope of the Bill and its full implications.

The learned Advocate-General further referred to a passage at page 195 in K.C. Gajapathi Narayan Deo and Ors. v. The State of Orissa : [1954]1SCR1 , wherein it was stated that the President's assent is clearly a part of the legislative process and is immune from the scrutiny of the Court on any such ground.

52. The last decision cited in this context was Sankarasana Ramanuja Das v. State of Orissa A.I.R. 1957 Ori 96 where Narasimham, C.J., who delivered the judgment on behalf of the Bench after referring to the judgment of the Supreme Court in Kameswar Singh's case : [1952]1SCR1020 observed as follows:

Their Lordships further pointed out that the only provisions empowering the President to assent to a Bill passed by a State Legislature, is contained in Article 201 of the Constitution and that there can be no question of the President assenting to a piece of State Legislation which has previously been assented to by the Governor or himself. Clauses (3) and (4) of Article 31 and the Proviso to Article 31-A deal with the consequences flowing from the President's giving his assent to a piece of State Legislation which has previously been assented to by the Governor or himself. Clauses (3) and (4) of Article 31 and the Proviso to Article 31-A deal with the consequences flowing from the President's giving his assent to a Bill passed by a State Legislature relating to acquisition of estates. But, these clauses do not by themselves empower the President to give his assent to any Bill. Consequently, there can be no further scrutiny of the assent, already given by the President, to a Bill relating to such acquisition, with a view to find out whether such assent was given either under Clause (3) or Clause (4) of that Article, or under the proviso to Article 31-A.

53. We agree with the observations in Subbachari's case 80 L.W. 184 : (1967) 1 M.L.J. 306 that the assent of the President is not a formal requirement, but an essential and important part of the machinery of law-making, set up by the Constitution and that its object is to secure a uniform civil Code envisaged by Article 44 of the Constitution. However, we are not finally expressing our opinion whether on the facts of this case, the President's assent was, in any way, vitiated by reason of the fact that the impugned Ordinance has been replaced by an Act

54. We shall next take up for consideration the attack on the Ordinance under Article 19 (1) (g) of the Constitution of India. Article 19 (1) (g) confers on a citizen the right to practise any profession or to carry on any occupation, trade or business subject to the restrictions contained in Article 19 (6) of the Constitution of India which was amended by the Constitution (First Amendment) Act, 1951. We may at the outset state that Article 19 (1) (g) confers a right and not an obligation. The right to carry on the business implies a right of the owner of the business to carry on the same in the manner that he likes, including the right to close down when he so chooses, if such business does not yield any profit. There cannot, however, be a trade or business in immoral or criminal activities and such activities can be totally prohibited. If a right is claimed under Article 19, the first requisite is that he must be a citizen who alone can complain of a violation of his right, and if an enactment is challenged as infringing such right, it must be established that he has a legal right and that it is a fundamental right. Reasonable restrictions are imposed on the exercise of that right under Article 19 (6) of the Constitution of India. The question, therefore, to be considered is whether the creation of a monopoly would fall within the meaning of ' reasonable restrictions' on the carrying on of a trade or a business. The question arose for consideration under Article 19 (6) for the first time in the Supreme Court in Saghir Ahmed v. State of Uttar Pradesh : [1955]1SCR707 . The monopoly there impugned was in road transport. The Court held that no material had been placed before them to justify the monopoly. The monopoly imposed was an unreasonable restriction and therefore void and that the first amendment to the Constitution was not retrospective. Mukherjea, J. however, held that the case before him had to be decided on the unamended Article and he added that if the case had to be decided after the first amendment the monopoly could not be impugned as violating Article 19(1)(g).

55. In Akadasi Padhan v. State of Orissa and Ors. 1963 S.C. 104 : (1964) 2 S.C.J. 37 the question arose whether the creation of a monopoly in connection with the provisions of the Orissa Kendu Leaves (Control of Trade) Act, was valid. There, the petitioner owned about 80 acres of land on which he grew Kendu leaves which are used in the manufacture of beedies. Since the Act came into force, the State acquired the monopoly in the trade of Kendu leaves and the petitioner challenged the Act as contravening Article 19 (1) (f) and (g). Three questions were considered by the Supreme Court, viz., (1) what is the effect of the amendment made in Article 19 (6) by inserting sub-Article (2) in Clause (6), (it) what is the nature of the law which is covered by Article 19 (6) (it) ; and (3) whether Article 19 (6) (ii) authorises a State to employ agents other than the Departments of Government. Gajendragadkar, J., (as he then was) in delivering the judgment on behalf of the Court observed as follows in paras. 13 and 14, at pages 1053 and 1054:

In attempting to construe Article 19 (6), it must be borne in mind that a literal construction may not be quite appropriate. The task of construing important Constitutional provisions, like Article 19 (6) cannot always be accomplished by treating the said problem as a mere exercise in grammar. In interpreting such a provision, it is essential to bear in mind the political or the economic philosophy underlying the provisions in question, and that would necessarily involve the adoption, of a liberal, and not a literal and mechanical approach to the problem. With the rise of the philosophy of socialism, the doctrine of State ownership has been often discussed by political and economic thinkers. Broadly speaking, this discussion discloses a difference in approach. To the socialist, nationalisation or State ownership is a matter of principle and its justification is the generalisation of social welfare. To the rationalist, nationalisation or State ownership is a matter of expediency dominated by considerations of economic efficiency and increased output of production. This latter view supported nationalisation, only when it appeared clear that State ownership would be more efficient, more economical and more productive. The former approach was not very much influenced by these considerations, and treated it as a matter of principle that all important and nation-building industries should come under State control. The first approach is doctrinaire, while the second is pragmatic. The first proceeds on the general ground that all national wealth and means of producing it should come under national control, whilst the second supports nationalisation only on grounds of efficiency and increased output.

The amendment made by the Legislature in Article 19 (6) shows that according to the Legislature, a law relating to the creation of State monopoly should be presumed to be in the interests of the general public. Article 19 (6) (ii) clearly shows that there is no limit placed on the power of the State in respect of the creation of State monopoly. The width of the power conferred on the State can be easily assessed if we look at the words used in the clause which covers trade, business, industry or service. It is true that the State may, according to the exigencies of the case and consistently with the requirements of any trade, business, industry or service, exclude the citizens, either wholly or partially. In other words, the theory underlying the amendment, in so far as it relates to the concept of State monopoly, does not appear to be based on the pragmatic approach which socialism accepts. That is why we feel no difficulty in rejecting Mr. Pathak's argument that the creation of a State monopoly must be justified by showing that the restrictions imposed by it are reasonable and are in the interests of the general public. In our opinion, the amendment clearly indicates that State monopoly in respect of any trade or business must be presumed to be reasonable and in the interests of the general public, so far as Article 19 (1) (g) is concerned.

The learned Judge observed at page 1054, para. 17 as follows : -

If a law is passed creating a State monopoly, the Court should enquire what are the provisions of the said law which are basically and essentially necessary for creating the State monopoly. It is only these essential and basic provisions which are protected by the latter part of Article. 19 (6). If there are other provisions made by the Act which are subsidiary, incidental or helpful to the operation of the monopoly, they do not fall under the said part and their validity must be judged under the first part of Article 19 (6). In other words, the effect of the amendment made in Article 19 (6) is to protect the law relating to the creation of monopoly, and that means that it is only the provisions of the law which are integrally and essentially connected with the creation of the monopoly that are protected. The rest of the provisions which may be incidental do not fall under the latter part of Article 19 (6) and would inevitably have to satisfy the test of the first part of Article 19 (6).

In paragraph 20, the learned Judge further observed as follows:

Therefore in dealing with the attack against the validity of a law creating State monopoly on the ground that its provisions impinge upon the other fundamental rights guaranteed by Article 19(1), it would be necessary to decide what is the purpose of the Act and its direct effect. If the direct effect of the Act is to impinge upon any other right guaranteed by Article 19 (1), its validity will have to be tested in the light of the corresponding clauses in Article 19.

The learned Judge gave an illustration in paragraph 22 that the State monopoly in respect of road transport or air transport would not normally infringe the citizens' fundamental right under Article 19 (1) (f) and that similarly a State monopoly to manufacture steel, armaments, or transport vehicles, or railway engines and coaches may be provided for by law which would normally not impinge on Article 19 (1) (f). In paragraph 23, the learned Judge observed that the price fixation is not an essential part of monopoly in trade and must stand on its reasonableness test. The Supreme Court answered the first question set out above, on a correct interpretation of Article 19 (6) holding that the requirement of reasonableness applies to the first part and does not apply to Sub-clauses (?) and (ii) of the second part ; on the second question, the Supreme Court held that the words ' the law in relation to a monopoly ' must mean only those parts of the law which are absolutely essential for the creation of a monopoly and that the other provisions in such a law must, however, satisfy the test of the first part of Article J9 (6), and on the last question, the Supreme Court upheld the validity of the section which provided for the appointment of agents.

The amendment to article 19 (6) has been considered in several cases. In Ramachandra v. State of Orissa 1956 S.C. 298 relating to ousting of private stage carriage services and creating a monopoly in favour of the State or a Corporation owned or controlled by the State, the right of the State to carry on trade or business has been recognised under Article 298 of the Constitution and the authority to exclude competitors in the field of such trade or business was derived from Entry 21 of List 3 of the Seventh Schedule and the exercise of that powers was protected under Article 19 (1) (g) or Article 19 (6) (ii).

56. We shall now briefly refer to some of the bus nationalisation cases. In Deepchand v. State of Uttar Pradesh and Ors. A.I.R. 1956 S.C. 648, the Supreme Court upheld the validity of the U.P. Transport Service Development Act, (IX of 1955), having regard to the entire scheme of compensation provided by the Act for the interests acquired within the meaning of Article 3 (2) of the Constitution. We may refer to Section 12 of the impugaed enactment which provided that the State Government, may, if the holder of a permit offers to sell, choose to purchase the motor vehicles covered by the permit upon terms and conditions laid down in Schedule 2, provided that the vehicle is of a type and model notified by the State Government and that the vehicle is in a mechanically sound condition and declared fit by the Transport Commissioner or his nominee. In Parbhani Transport Co-operative Society Ltd. v. The Regional Transport Authority, Aurangabad and Ors. : [1960]3SCR177 , Sarkar, J. in delivering the Judgment on behalf of the Bench,, observed at page 805 as follows : -

It also seems to us that there is nothing in our law to prevent the Government from entering a business in competition with private citizens. Indeed, Article 19 (6) by providing that nothing in Article 19 (1) (g) shall affect the application of any existing law in so far as it relates to, or prevents the State from making any law relating to the carrying on by the State of any trade, business, industry or service whether to the exclusion, complete or partial, of citizens or otherwise would seem to indicate that the State may carry on any business either as a monopoly, complete or partial, or in competition with any citizen and that would not have the effect of infringing any fundamental rights of such citizen.

In Narayanappa and Ors. v. State of Mysore and Ors. : [1960]3SCR742 , Shah, J. as he then was, who delivered the judgment on behalf of the Bench observed at page 1970 as follows : -

If the argument of the petitioners and the intervener that legislation relating monopoly in respect of trade and industry is within the exclusive competence of the State, be accepted, the Union Parliament cannot legislate to create monopolies in the Union Government in respect of any commercial or trading venture even though power to carry on any trade or business under a monopoly is reserved to the Union by the combined operation or Article 298 and the law which is protected from the attack that it infringes the fundamental freedom to carry on business by Article 19 (6). We are, therefore, of the view that Chapter IV-A could competently be enacted by Parliament under Entry No. 21 read with Entry No. 35 of the Concurrent List.

The plea sought to be founded on the phraseology used in Article 19 (6) that the State intending to carry on trade or business must itself enact the law authorising it to carry on trade or business is equally devoid of force. The expression ' the State ' as defined in Article 12 is inclusive of the Government and Parliament of India and the Government and the Legislature of each of the States. Under Entry No. 21 of the Concurrent List, Parliament being competent to legislate for creating commercial or trading monopolies, there is nothing in the Constitution which deprived it of the power to create a commercial or trading monopoly in the constituent States Article 19 (6) is a mere saving provision : Its function is not to create a power, but to immunise from attack the exercise of legislative power falling within its ambit. The right of the State to carry on trade or business to the exclusion of others does not arise by virtue of Article 19 (6). The right of the State to carry on trade or business is recognised by Article 298 ; authority to exclude competitors in the field of such trade or business is conferred on the State by entrusting power to enact laws under Entry 21 of List III Seventh Schedule and the exercise of that power in the context of fundamental rights is secured from attack by Article 19(6).

We shall next refer to the judgment in Gullapalli Nageswara Rao and Ors. v. Andhra Pradesh State Road Transport Corporation and Anr. : AIR1959SC308 , Subba Rao, J. as he then was who delivered the judgment on behalf of the Bench after referring to the Saghir Ahamad's case : [1955]1SCR707 and the Bihar case : [1953]4SCR1069 observed at p. 316 as follows : -

The Legislature can only make laws within its legislative competence. Its legislative entries are limited by Fundamental Rights created by the Constitution. The legislature cannot overstep 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 Judge observed at page 317 as follows : -

Looking at the business not simply from the stand-point of the right to do it or the activity involved in it, but also from the stand-point of its assets, it becomes clear that the assets pertaining to the business of the quandom 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 scheme of nationalisation, he may not be able to make use of his assets in other routes or dispose of them at a great advantage to himself. But, it cannot be said that by cancelling the permit, what is left with him is only the business and the State Transport undertaking has not taken over the same.

The next decision referred to is Kumaon Motor Owners Union Ltd. and Anr. v. State of Uttar Pradesh : [1966]2SCR122 , where Rule 131 (2) (gg) of the Defence of India Rules, 1962, came up for interpretation. There, routes on border areas were taken over for operation by Government buses in the interest of the security under the Defence of India Act by cancelling the permits of private operators under the impugned rules. Its validity was questioned, and Wanchoo, J., as he then was, in delivering the judgment on behalf of the Bench observed as follows at page 790 : -

Then, it is urged that by passing the impugned order, the commercial undertaking of the union is destroyed and that this could not be the intention behind Clause (gg) of Rule 131 (2) of the Rules. We are of opinion, that in this case, there is no destruction of the commercial undertaking of the union, for the simple reason that it is not disputed that this is. not the only route on which the union is plying its vehicles and the impugned order does not touch the other routes on which the appellants may be plying their vehicles. Further, there is nothing in the order which destroys the commercial undertaking even otherwise, for it has neither taken over any of the assets of the commercial undertaking, nor has it in any way interfered with the working of the commercial undertaking ; all that the Order provides is that the Union shall not ply its vehicles on a particular route. This, in our opinion, does not amount to destroying the commercial undertaking which is left untouched by the Order. All that may be said to have resulted from the Order is that the profit-making capacity of the commercial undertaking might have been reduced to a certain extent. That, however, does not, in our opinion, mean that the commercial undertaking was lost due to one line of business being stopped; that would not amount to destruction of the commercial undertaking which could take up other business. So long as the Order under Clause (gg) of Rule 131 (2) comes within the terms of that clause, it will be good even though it may diminish the profit-making capacity of a commercial undertaking or even reduce it to nothing in a particular line of business. We are, therefore, of opinion that the impugned Order is in accordance with the terms of Clause (gg), Sub-rule (2) of Rule 1 and cannot be said to go beyond the powers conferred on the State Government by that clause.

The learned Judge at page 792 further observed that there can be no doubt that the necessary satisfaction of the State Government which is a condition precedent for the issue of an order under the rules was there, before the impugned Order was issued.

58. We shall now refer to Rabihari Panda v. State of Orissa : [1969]3SCR374 , which relates to the Government monopoly for the sale of Kendu leaves under the Orissa Kendu Leaves (Control of Trade) Act (XXVIII of 1961). The State Government of Orissa in exercise of the powers conferred by Section 10 of the Act decided to invite offers for advance purchase of Kendu leaves only from persons who purchased these leaves from individual units during the previous year and who acted as purchasers without default and to the satisfaction of Government, and the method of sale by open competition was given up. The Government also turned down an offer made by the petitioner. The question arose whether the action of the Government was violative of Articles 14 and 19. Shah, J., in delivering the judgment on behalf of the Bench held that the action of the Government was not valid in law and the petitioner's fundamental rights were violated. The learned Judge referred to Articles 19 (.1) (f) and 19 (1) (g) and the prior decision of the Supreme Court in Akadasi Padhan v. State of Orissa : AIR1963SC1047 and held:

If the monopoly of purchasing kendu leaves by Section 3 is valid, in so far as it is intended to be administered only for the benefit of the State, the sale or disposal of Kendu leaves by the Government must also be in the public interest and not to serve the private interests of any person or class of persons. It is true that it is for the Government, having regard to all the circumstances, to act as a prudent businessman, and to sell or otherwise dispose of Kendu leaves purchased under the monopoly acquired under Section 3, but the profit resulting from the sale must be for the public benefit and not for private gain. Section 11 which provides that out of the net profits derived by the Government from the trade in Kendu leaves, an amount not less than one half is to be paid to the Samitis and Grama Panchayats emphasises the concept that the machinery of sale or disposal of Kendu leaves must also be geared to serve the public interest. If the scheme of disposal creates a class of middlemen who would purchase from the Government Kendu leaves at concessional rates and would earn large profits disproportionate to the nature of the service rendered or duty performed by them, it cannot claim the protection of Article 19 (6) (ii). Section 10 leaves the method of sale or disposal or Kendu leaves to the Government as they think fit. The action of the Government if conceived and executed in the interest of the general public is not open to judicial scrutiny. But, it is not given to the Government thereby to create a monopoly in favour of third parties from their own monopoly.

59. The next decision referred to was Municipal Committee, Amritsar and Anr. v. The State of Punjab and Ors. : [1969]3SCR447 which related to the validity of the Punjab Cattle Fairs (Regulation) Act (VI of 1968) and the attack was that the provision there violated Articles 13, 14, 19 and 31. Shah, J., as he then was, observed at page 1104, para. 10 as follows : -

A law which vests in the State a monopoly to carry on a certain trade or business, to the extent that it has direct relation to the creation of the monopoly, is not open to challenge on the ground of violation of the freedom guaranteed by Article 19(1)(g).

The learned Judge after referring to the passage at 1054 in Akadasi Padhan v. State of Orissa : AIR1963SC1047 , further observed that the provisions of the Act which seek to monopolise for the State the right to carry on cattle fairs are protected against the challenge that they put an unreasonable restriction upon persons carrying on the occupation of holding cattle fairs, that what is implicit in the grant of a monopoly to the State is expressly enacted in Section 3 (2) that no other person or authority may conduct a cattle fair at any place in the State of Punjab and that the restriction operates only in respect of cattle fairs and not other trades or occupations relating to dealing in cattle. Again, at page 1.105, in paragraph 11 the learned Judge further observed as follows:

It is implicit in the provisions of Sections 3 and 4 of the Act that the monopoly acquired by the State to hold and manage cattle fairs may be held on property belonging to the State and does not extend to the property of local authorities or private owners.

It was further observed that by imposing restrictions upon the right to hold a fair, the citizens are not deprived of their property, and the freedom guaranteed by Article 19 (1) (f) is not infringed. In paragraph 20 the learned Judge observed that section. 23 of the Act which gives provisions of the Act a paramount operation, notwithstanding anything inconsistent therewith contained in any other law for the time being in force will not supersede a constitutional guarantee.

6o. In Vrajlal Manilal and Co. and Anr. v. State of Madhya Pradesh and Ors. : [1970]1SCR400 the constitutional validity of section. 5 of the Madhya Pradesh Tendu Patta (Vyapar Viniyaman) Niyamawali (1965) Rules 4 to 9 came up for consideration, and Shelat, J., as he then was, observed at page 135, para. 10 as follows : -

The long title of the Act recites that the Act was enacted for regulating ' the trade in Tendu leaves' by creating a State monopoly in such trade. Trade in Tendu leaves would consist of dealing in those leaves, i.e., their purchase, and also transport of the leaves once purchased or sold would not prima facie be an organic or integral part of dealing in these leaves. It is something extraneous to dealing in these leaves something which takes place after the purchase of the sale thereof is completed and property in them has passed from the dealer to the purchaser, and therefore, does not form part of the trade in that commodity. That being so, the restrictions on their transport contained in section, 5 cannot be held to be the integral part of the trade monopoly, but as ancillary or incidental thereof, made for its effective enforcement. If that be so, it affects the right of the purchaser under Article 19 (1) (f) to hold and to dispose of the goods he has acquired - a right which is not correlated, as the right under Clause (g), is, with the monopoly which the section seeks to create. If follows, therefore, that such a provision would have to pass the test of reasonableness under Clause (5) and the first part of Clause (6) of Article 19. That would also be the position in respect of Article 304 (b). But, since the requirement of these provisions is the same the yardstick of reasonableness would be common to all these cases. It is well recognised that when an enactment is found to infringe any of the fundamental rights guaranteed under Article 19 (1), it must be held to be invalid unless those who support it can bring it under the protective provisions of Clause (5) or Clause (6) of that Article. To do so, the burden is on those who seek that protection and not on the citizen to show that the restrictive enactment is invalid.

At page 136, in para. 12 the learned Judge observed as follows : -

In our view, a permit system which regulates the movement of leaves purchased by a manufacturer of bidis from the unit where they are purchased to his warehouse, then to the branches and to the sattedars cannot upto that stage be regarded as unreasonable in the light of the object of the Act, the economic conditions prevailing in the State and the mischief which it seeks to cure.

In Ruslom Cowasjee Cooper v. Union of India : [1970]3SCR530 , Shah, J., as he then was, at page 599, para. 70 observed as follows:

In dealing with the validity of a law : creating a State monopoly in Akadasi Padhan v. State of Orissa : AIR1963SC1047 , this Court unanimously held, that the validity of a law creating a State monopoly which ' indirectly impinges on any other right' cannot be challenged on the ground that it imposes restrictions which are not reasonable restrictions in the interests of the general public. But if the law contains other incidental provisions which do not constitute an essential and integral part of the monopoly created by it, the validity of these provisions is liable to be tested under the first part of Article 19 (6). If they directly impair any other fundamental right guaranteed by Article 19 (6), the validity of those provisions will be tested by reference to the corresponding clauses of Article 19.

The Court also observed that the essential attribute of the law creating a monoply will vary with the nature of the trade or business in which the monopoly is created. They will depend upon the nature of the commodity, the nature of trade in which it is involved and other circumstances. In Akadasi Padhan's case : AIR1963SC1047 Gajendragadkar, J., speaking for the Court observed:

A law relating to a State monopoly cannot, in the context, include all the provisions contained in the said law whether they have direct relation with the creation of the monopoly or not. In our opinion, the said expression should be construed to mean the law relating to the monopoly in its absolutely essential features. If a law is passed creating a State monopoly, the Court should enquire what are the provisions of the said law which are basically and essentially necessary for creating the State monopoly. It is only these essential and basic provisions which are protected by the latter part Of Article 19 (6). If there are other provisions made by the Act which are subsidiary, incidental or helpful to the operation of the monopoly, they do not fall under the first part of Article 19 (6).

He also observed at page 705. the amendment (First Amendment) clearly indicates that State monopoly in respect of any trade or business must be presumed to be reasonable and in the interests of general public', so far as Article 19(1)(g) is concerned. This was reiterated in Rashibai Panda v. State of Orissa : [1969]3SCR374 , Vrajlal Manilal and Co. v. State of Madhya Pradesh : [1970]1SCR400 , and Municipal Committee, Amritsar v. State of Punjab : [1969]3SCR447 , The cases dealt with the validity of laws creating State monopolies in the State. Clause (6) is however not restricted to a law creating State monopolies, and the rule enunciated in Akadesi Padhan's case (1963) 2 S.C.R. (Supp.) 691 : (1964) 2 S.C.J. 37 : A.I.R. 1963 S.C. 1047 applies to all laws relating to the carrying on by the State of any trade, business, industry or service. By Article 298 the State is authorised to carry on trade which is competitive, or excludes the citizens from that trade completely or partially from carrying on that trade, or the trade is competitive. Imposition of restrictions which are incidental or subsidiary to the carrying on of trade by the State whether to the exclusion of the citizens or not, must, however, satisfy the test of the main limb.

It is thus seen that the law creating the State monopoly as such does not violate Article 19 (1) (g) because it leaves untouched the right of the citizen, who had hitherto been carrying on his business, to carry on his business in other spheres and the activities of such a citizen are not thereby killed. But in this case when the motor vehicle with which the citizen carries on his business, namely, plying for gain, is itself taken away along with the equipment, spares, tools and also the workshop, leaving no traces of the business which hitherto he had been carrying on, his right to carry on his business is infringed and the legislation which throws him out of the business cannot be protected under Article 19 (6) of the Constitution of India. Further the provisions in the impugned Ordinance relating to the interregnum period contained in Clauses 14 to 17 affect the petitioner's right to transfer the vehicle or deal with it in any manner he likes on notification and the requirement that the vehicle should be sold only to the Government and none else at a price in accordance with the schedule to the Act, all these, in our opinion, result in the imposition of unreasonable restrictions on the permit-holder's right to carry on business and cannot be protected under Article 19 (6) of the Constitution.

61. We shall next consider the attack on the impugned enactment under Article 31. Article 298 confers power on the Executive of the Union and of each State to the carrying on of any trade or business and to the acquisition, holding and disposal of property. The present Article 298 replaced the original Article 298 by the Constitution (Seventh Amendment) Act, 1956. The amendment came into force on 1st November, 1956. The object of the amendment is stated as fellows : -

To make it clear that the Union Government as well as the State Governments, are competent to carry on any commercial or industrial undertaking whether or not it is related to a matter within the legislative competence of the Union, or, as the case may be, of the State. Similarly, the holding, acquisition and disposal of property and the making of contracts by the Union or a State could be for any purpose without constitutional impropriety. At the same time, the revised Article, provides that this extension of the executive power of the Union, and of the State will be subject, in the former case, to legislation by the State and in the latter case, to legislation by Parliament.

In Halsbuiy's Laws of England, Third Edition, Volume 7, at page 192, para. 409, the executive power is denned as follows : -

409. The Executive : Although the legislative, executive, and judicial powers are formally distinct, it is not the case that legislative functions are exclusively performed by the Legislature, executive functions by the executive, or judicial functions by the judiciary. Executive functions are incapable of comprehensive definition, for they are merely the residue of the functions of Government after legislative and judicial functions have been taken away. They include in addition to the execution of the laws, the maintenance of public order, the management of Grown property and nationalised industries and services, the direction of foreign policy, the conduct of military operations, and the provision or supervision of such services as education, public health, transport, and State assistance and insurance. In the performance of these functions, public authorities are bound to issue orders which are not for removed from legislations and to make decisions affecting the personal and proprietary rights of individuals which, while not strictly judicial, are quasi-judicial in character. Discretionary action of both these types must not be considered normal on the part of the executive.

In addition to these quasi-legislative and quasi-judicial functions, the Executive has also been empowered by the State to exercise functions which are strictly legislative and strictly judicial in character; and in certain instances, powers are exercised which appear to partake at the same moment of legislative, executive, and judicial characteristics. In view of the complexity of modern Government and the congestion of Parliamentary business, it is probably necessary that the Executive should exercise powers of subordinate legislation. Whether it should exercise purely judicial powers is more open to question.

The power to carry on trade or business is expressly declared as included 'in executive' power. Questions have arisen as to whether the Government's trading activities authorised under its executive power should be regarded as a commercial or a Governmental function. The only object of Article 298, as extracted above, makes it clear that no legislative authority is required merely to enable the Government to carry on any trade or business ; it does not intend to change the nature of the business and convert it into a Governmental function. The question whether Government would make a profit or not is irrelevant because it has been established that there is nothing to prevent the Government to enter into a trade as a competitor against private traders with the motive of earning profit. The question, therefore for consideration would be whether such function of a State Government can be treated as a Governmental function, for the purposes of Article 289 (3) of the Constitution, in the absence of a declaration of Parliament to that effect.

62. The acquisition, holding and disposal of property under Article 298 is the same as the acquisition, holding and disposal of property under Article 19 (.1) of the Constitution. The provisions establishing Corporations or Companies have nothing to do with compulsory acquisition.

63. As regards the question whether compulsory acquisition, or requisition falling under Article 31 (2) and acquisition and requisition of property occurring in List III, Entry 42 of the Seventh Schedule should be for a 'public purpose' has been considered in India only in relation to land acquisition. It is contended that for trading purposes there cannot be compulsory acquisition. This is no doubt true and we will discuss this aspect a little later. In the land acquisition cases the question of public purpose now stands as follows : -

The expression 'public purpose' is not capable of a precise definition and has no rigid meaning. The definition of the expression is elastic and takes its colour from the statute in which it occurs, the concept varying with the time and state of society and its needs.

In The State of Bihar v. Kameshwar Singh : [1952]1SCR1020 , it is stated that the point to be determined in each case is whether the acquisition is in the general interests of the community as distinguished from the private interests of an individual. Whatever furthers the general interests of the community as opposed to the particular interests of the individual must be regarded as a ' public purpose and the expression has to be construed according to the spirit of the times in which the particular legislation is enacted. In determining whether a purpose is a public purpose, not only the present demands of the public, but also the future demands as may be fairly anticipated, should be taken into consideration. With the onward march of civilisation our notions as to the scope of the general interests of the community are fast changing and widening with the result that our old and narrower notions as to the sanctity of private interests of the individual can no longer stem the forward flowing tide of time, and must necessarily give way to the broader notions of the general interests of the community. In Somawanti v. State of Punjab (1963) 2 S.C.J. 35 : 1963 S.C 151 Mudholkar, J. delivering the judgment on behalf of the Bench observed at page 163 that public purpose is bound to vary with the times and the prevailing conditions in a given locality, and therefore it would not be a practical proposition' even to attempt a comprehensive definition of it. It is because of this that the Legislature has left it to the Government to say what is a public purpose and also to declare the need of a given land for a public purpose. In Nicholas on ' Eminent Domain' Volume II, page 847, it is stated that if the use for which the land is taken by eminent domain is public, the taking is not invalid merely because an incidental benefit will enure to private individuals. In Gundachar v. State of Madras : AIR1953Mad537 , Rajamannar, C. J., and Venkatarama Ayyar, J., held that the acquisition for digging of an irrigation channel which benefits a single individual is nevertheless a public purpose for which the land could be acquired. In Barkay v. State of Bombay : [1961]1SCR128 , it was stated that it is not essential that the entire community or even any considerable portion thereof should directly enjoy or participate in the improvement, provided, the object of acquisition advances a public purpose. In Arora v. State of Uttar Pradesh and Ors. 1964 S.C. 1230 : (1964)2 S.C.J. 652, relating to land required for a company for the construction of textile machinery parts factory by Lakshmi Ratan Engineering Works Limited, Kanpur, Wanchoo, J., as he then was, observed at page 1240 as follows:

Then it is urged that the acquisition in the present case cannot be said to be for a public purpose inasmuch as the agreement between the company and the Government does not regulate or control the products of the company in the interests of the public. We do not think it is the purpose of the Act that the agreement should provide for regulation or control of the products of a company, which probably means that Government should control the quantum of production and distribution or the price of the produced articles. This, in our opinion, is foreign to the purpose of the Act. All that the Act requires is that before land is transferred to the company by the Government, the agreement should provide that land would be used for purpose for which it was acquired and for no other. The Act has nothing to do with the control or regulation of the products of the company and gives no power to Government in that behalf.

In Agarwala and Ors. v. State of West Bengal : AIR1965SC995 , Shah, J., as he then was., observed at page 1008 as follows:

Acquisition of the appellant's land was undoubtedly for construction of building or work for the Sangha, and the Sangha is engaging itself in work, which is for a public purpose.

64. Mr. Chari next contended that whatever else may come under public purpose authorising acquisition, a trading corporation or a State Trade Organisation, even if a wholly owned Government Company, cannot be authorised to get its plant and machinery or stock-in-trade by compulsory acquisition any more than any other limited company or partnership or individual can be so authorised. He further contended that in trading the State is in the same position as a private individual except for the one factor of obtaining partial or complete monopoly bylaw according to Article 19 (Jo) ; otherwise, the Government could acquire compulsorily the stock-in-trade of any company doing business at a lesser price and sell the same at a higher price.

65. In Cooper v. Union of India 1970 S.C. 564 : (1970) 1 S.C.J. 564, Shah, J., observed that if there is no public purpose to sustain compulsory acquisition the law violates Article 31 (2). If the acquisition is for a public purpose, substantive reasonableness of the restrictions which includes deprivation may unless other wise established, be presumed.

66. In the State of Maharashtra v. Himmatbhai Narbheram Rao and Ors. 1970 S.C. 1157 : (1970) 1 S.C.J. 685, the Supreme Court considered the validity of Section 385 of the Bombay Municipal Corporation Act III of 1888. Shah, J. while holding that the restrictions imposed by the impugned law upon the right of the owner, however would satisfy for the reasons already stated, the test of reasonableness under Article 19(5), and he observed at page 1165 as follows : -

The question still remains whether the impugned law is void because it does not provide for payment of compensation for the loss occasioned to the owner of the carcass resulting from the extinction of his title thereto. Since the Amendment by the Constitution (Fourth Amendment) Act, 1955, Clause's (2) and (2-A) of Article 31 deals with the acquisition or requisitioning of property movable or immovable, for a public purpose. The acquisition or requisitioning of the property for a public purpose, i.e., for using the property for some purpose which would be beneficial to the public. The right guaranteed by Article 31(2) is that property shall not be compulsorily acquired or requisitioned for a public, purpose save by authority of law which provides for compensation for the property so acquired or requisitioned. The expression ' acquired or requisitioned for a public purpose', means acquired or requisitioned for being appropriated to or used for a public purpose. But, the law which provides for extinction of the ownership and creation of an interest in the Corporation for the purpose of disposal of the carcass is not a law for acquisition of property for a public purpose; its primary purpose is of destruction of the carcass in the public interest and not utilisation of the property for a public purpose. The case would not, therefore, fall within the terms of Article 31 (2).

67. Our attention was next drawn to Clause 4 (3) of the Ordinance which runs as follows : -

The stage carriages or contract carriages and other property vesting in the Government under sub-section* (!) and Sub-section (2) shall with effect on and from the notified date, he deemed to have been acquired for a public purpose.

Mr. V.K.T. Chari contended that there can be no acquisition under a 'deeming' provision. His contention is that normally in a Land Acquisition Notification what the public purpose is will be stated in the Notification itself. The existence of a public purpose being a precondition for an Acquisition Law under Schedule 7, List 3, Entry 42, it is not open to the Legislature to create a fiction as to a public purpose, and consequently, the deeming provision that an acquisition is deemed to be for a public purpose cannot be presumed. In that view, the learned Counsel contends that clause 4 (3) is invalid. We have referred to earlier what exactly is the meaning of a ' deeming provision' and the case law on the point. It is unnecessary to refer to them again. We are in agreement with the contention of the learned Counsel.

68. The learned Advocate-General who contended that the acquisition in this case is for public purpose referred to Hamubai Pramjee Patit v. Secretary of State for India in Council I.L.R. 39 Bom. 279, where the Privy Council referred to the definition of a ' public purpose' and approved the extract of the judgment of Batchelor, J. in the judgment under appeal and their Lordship; extracted the said observations:

General definitions are, I think, rather to be avoided where the avoidance is possible, and I make no attempt to define precisely the extent of the phrase public purposes' in the lease ; it is enough to say that, in my opinion, the phrase, whatever else it may mean must include a purpose, that is, an object or aim, in which the general interest of the community, as opposed to the particular interest of individuals is directed and vitally concerned.'

The learned Advocate-General then referred to some passages in the State of Bihar v. Kameshwar Singh : [1952]1SCR1020 , in support of his contention. The passages are in paras. .104,105 and 106, where Das, J, after referring to the passages from Willis, on Constitutional Law, Cooley's on Constitutional Limitations and corpus juris which we shall deal with later, as also the view of Batchelor, J., referred to the above and observed as follows at page 290, para. 106:

From what I have stated so far, it follows that whatever furthers the general interest of the community as opposed to the particular interests of the individual must be regarded as a public purpose. With the onward march of civilisation our notions as to the scope of the general interests of the community are fast changing and widening with the result that our old and narrower notions as to the sanctity of the private interests of the individual can no longer stem the forward flowing tide of time and must necessarily give way to the broader notions of the general interests of the community. The emphasis is unmistakably shifting from the individual to the community. This modern trend in the social and political philosophy is well reflected and given expression to in our Constitution.The learned Advocate General placed considerabale reliance upon the observations of one of us in W.P. No. 784 of 1962, etc., batch. The following passage in the said judgment was relied upon:

It was contended that in determining the ambit for this purpose, the more modern view of the American decisions rendered on the Fifth Amendment of the American Constitution that private property shall not be taken for public use without just compensation, should be kept in view, the modern view being that public use is not to be confined to public enjoyment or actual use by the public, but should be understood as public advantage, convenience or benefit to the public at larger or an appreciable section of the public. Dealing with this contention the Supreme Court observed at page 772 as follows:But we do not think it necessary to examine the American cases, cited before us, because the words in our statute are not in pari materia with the words used in the Fifth Amendment to the American Constitution. Now, so far as the words in the Act are concerned, it is to our mind perfectly obvious that it is the actual use of the work which the Act envisages and not the public benefit that might directly or indirectly arise from the use of the land acquired. This is clear from the words used both in Section 40(1)(b) and the fifth term of the agreement provided in Section 41....These words, therefore, in the Act are clearly referable to the narrower view prevalent in America, which emphasises the use by the public of the actual work constructed. We are therefore of the opinion that the respondents can derive no advantage from the American cases cited on their behalf to show the wider interpretation of the words used in the Fifth Amendment to the American Constitution.

69. It is therefore, obvious that the decision of the Supreme Court was not on the question whether public purpose in Part II of the Land Acquisition Act should or should not be understood in the light of the modern view that public purpose includes a purpose who is beneficial to the community at large or a considerable section, thereof. In fact in Smt. Somawanti and Ors. v. The State of Punjab and Gujarat Petitions Nos. 246 to 248 the Supreme Court referred to the old and the modern views on the concept of public use or public purpose and ruled that the modem view should govern and pointed out : ''Public purpose' as explained by this Court in Babu Barkaya Tkakur's case (1961) 2 S.C.J. 392 : A.I.R. 196O S.C. 1203, means a purpose which is beneficial to the community.

70. His next contention is that the nationalisation of public utility would fall under the law of Eminent Domain and in this context he referred to Nichols on Eminent Domain, Volume 2, III Edition, page 499. It is stated therein that Eminent Domain may be employed in aid of public travel by water as unquestionably as in the case of travel by land, and he sought to support the validity of the impugned Ordinance on the ground of the law of Eminent Domain.

71. The learned Advocate-General next referred to the various provisions of the impugned enactment and contended that the operators and persons interested are defined in the impugned Ordinance and all rights are worked out on the basis of vesting of the buses on the notified date, similar to the provisions contained in the Zamindari Abolition Act. In the Zamindari Abolition Act, there is no question of any estate having been purchased under the hire-purchase agreement as already stated and, therefore, the concept of the right of a financier under the hire-purchase agreement cannot be invoked in upholding the validity of the impugned Ordinance. In the event of our taking a contrary view on the applicability of Article 39 (6) and (c) the learned Advocate-General sought to uphold the enactment by contending that the acquisition under the Ordinance is for a public purpose and the acquisition being in the interests of the public, the impugned [Ordinance could be saved either under Article 19 (6) or Article 3.1 (2) of the Constitution. The learned Advocate-General in seeking to equate ' public purpose' with the interest of the public, referred to Dosa Satyanarayanamurthy v. The Andhra Pradesh State Road Transport Corporation : [1961]1SCR642 Subba Rao, J., as he then was, at page 87 observed as follows : -

Ordinarily, a State Transport Undertaking, compared with persons or private undertakings, should be in a better position than others to carry on the said services for the benefit of the public; administratively, financially and technically it can be expected to be in a far better position than others. It can provide more well-equipped buses, give better amenities to the travelling public, keep regular timings, repair or replace the buses in emergencies. It may also employ efficient supervisory staff to keep things going at an appreciably high standard.

We shall revert to this question as to how far public purpose could be equated to 'the interests of the public', again after briefly referring to some standard books among others.

72. The learned Advocate-General referred to some of the provisions of the Air Corporation Act (XXVII of 1953), particularly Sections 16, 17 and 35 in support of his contention that there are similar provisions in respect of undertakings of existing air companies. for vesting the same in a corporation, effecting such vesting and for the payment of compensation for such compulsory acquisition of the undertaking. In our view, complications created by purchases under the hire-purchase agreements were not present in those enactments, and therefore, the analogy of the provisions of the Air Corporation Act has nothing to do with the impugned Ordinance.

73. The learned Advocate-General next referred to Willis on Constitutional Law, page 817. The passage relied upon runs as follows : -

In order to have an exercise of the power of Eminent Domain, private property must be taken for a public use. What is a public use? On this question there have been two view points. One may be called the older view point and the other the newer view point. According to the older view point, in order to have a public use, there must be a use by the public....According to the newer view point, there is a public use if the thing taken is useful to the public. This makes public use for Eminent Domain practically synonymous with public purpose for taxation and somewhat like social interest for police power.

The learned Advocate-General next referred to Cooley's Constitutional Limitations, Vol. II, pages 1139-40. The passage runs as follows:

No satisfactory definition of the terms public use has ever been achieved by the Courts. Two different theories are presented by the judicial attempts to describe the subject to which the expression would apply. One theory of public use limits the application to 'employment' -''occupation '. The more liberal and more flexible meaning makes it synonymous with ' public-advantages', public benefit. A little investigation will show that any definition attempted would exclude some subjects -that properly should be included in-and include some subjects that must be excluded from the operation of the words ' public use '. As might be expected, the more limited application of the principle appears in the earlier cases and the more liberal application has been rendered necessary by complex condition due to recent developments of civilisation and the increasing density of population. In the very nature of the case, modern conditions and the increasing inter-dependence of the different human factors in the progressive complexity of a community, make it necessary for the Government to touch upon and limit individual activities at more points then formerly.

The next reference by the learned Advocate-General was to Vol. 20 of Corpus Juris, Article 30 at pages 552 and 553 under the caption 'what is a public use ?'. The passage runs as follows:

No general definition, of what degree of public good will meet the constitutional requirements for a ' public use' can be framed, as it is, in every case, a question of public policy. The meaning of the term is flexible and is not confined to what may constitute a public use at any given time, but in general it may be said to cover a use affecting the public generally, or any number thereof, as distinguished from particular individuals. Some Courts have gone so far in the direction of a liberal construction as to hold that public use is synonymous with ' public benefit', 'public utility' or 'public advantage' and to authorise the exercise of the power of Eminent Domain to promote such public benefit, etc., specifically where the interests involved are of considerable magnitude, and it is sought to use the power in order that the natural resources and advantages of a locality may receive the fullest development in view of the general welfare.

74. In our opinion, the words ' public purpose ' cannot be equated to ' interest, of the public '. If land is acquired under the Land Acquisition Act for a stated purpose, just compensation is payable for the property acquired in terms of the Land Acquisition Act. But, if property is acquired for the purpose falling under Article 39 it is sufficient if the principles of compensation are set out, and the justness of the compensation is not for the Court. In this case, we have held that the acquisition does not fall under Article 39 (b) or (c). Even the framers of the Ordinance realised that the acquisition is not for a public purpose, by their using the words that the acquisition must be, deemed to be for a public purpose. Further, the property acquired is not land, but movable property which can be purchase I in the open market and when such property, which is available for sale in the open a market, is sought to be acquired, in our opinion, the market price of such property (vehicle) acquired should be paid in order to acquire the same. Clause 6 of the Ordinance and the provisions of the First Schedule taken along with other provisions in the impugned Ordinance do not show that the market value is calculated for the property sought to be acquired.

75. We are, therefore, of opinion that under the impugned Ordinance there is no ' public purpose ' to sustain compulsory acquisition, and therefore Article 31 (2) is violated.

76. Mr. Chari then developed this point from a different angle. He referred to Article 300 and drew a distinction between the sovereign and commercial functions of the Government. The distinction was present even long before .1858. It is unnecessary to set out the constitutional provisions in any great detail. In 1765, the East India Company obtained a ' Diwani' from the Moghul Emperor and from that time upto .1858, the company had a dual character, namely, that of a trader as well as of a sovereign, inasmuch as it obtained fiscal and general administration of the country from the Grown. In 1858, the Grown assumed sovereignty over India and took over the administration of India from the hands of the East India Company. Gases commencing from Peninsular and Oriental Steam Navigation Company v. Secretary of State (1861) 5 Bom.H.C.R. Appendix A. have considered these dual functions of the Government. In the State of Rajasthan v. Mst. Vidhyawati and Anr. : AIR1962SC933 relating to the State's vicarious liability for tortious acts committed by Government servants, Sinha, C.J., traced the history of Article 300 and the decision in the P. & O. case referred to above, and the subsequent decision on the point, and held at page 940 as follows : -

The immunity of the Grown in the United Kingdom was based on the old feudalistic notions of justice, namely, that the King was incapable of doing a wrong, and, therefore, of authorising or instigating one, and that he could not be sued in his own Courts. In India, ever since the time of the East India Company, the sovereign has been held liable to be sued in tort or in contract, and the common law immunity never operated in India. Now that we have, by our Constitution established a Republican form of Government, and one of the objectives is to establish a socialistic State with its varied industrial and other activities, employing a large army of servants, there is no justification in principle or in public interest, that the State should not be held liable vicariously for the tortious act of its servant.

In Kasturi Lal Rilia Ram Jain v. The State of Uttar Pradesh : (1966)IILLJ583SC Gajendragadkar, C.J., observed at page 1046 as follows:

Thus it is clear that this case recognises a material distinction between acts committed by the servants employed by the State where such acts are referable to the exercise of sovereign, powers delegated to public servants, and acts committed by public servants which are not referable to the delegation of any sovereign powers. If a tortious act is committed by a public servant, and it gives rise to a claim for damages, the question to ask is : was the tortious act committed by the public servant in discharge of statutory functions which are referable to, and ultimately based on the delegation of the sovereign powers of the State to such public servant If the answer is in the affirmative, the action for damages for loss caused by such tortious act will not lie. On the other hand if the tortious act has been committed by. a public servant in discharge of duties assigned of any sovereign power, an action for damages would lie.

Again in para. 28 at page 1048, the Chief Justice observed as follows:

It is not difficult to realise the significance and importance of making such a distinction particularly at the present time when, in pursuit of their welfare ideal, the Government of India naturally and legitimately enter into many commercial and other undertakings and activities which have no relation with the traditional concept of Governmental activities in which the exercise of sovereign power is involved. It is necessary to limit the area of these affairs of the State in relation to the exercise of sovereign power, so that if acts are committed by Government employees in, relation to other activities which may be conveniently described as non-Governmental or non-sovereign citizens who have a cause of action for damages should not be precluded from making their claim against the State. That is the basis on which the area of the State immunity against such claims must be limited ; and this is exactly what has been done by this Court in its decision in the case of State of Rajasthan (1963) 1 S.C.J. 307 : A.I.R. 1962 S.C. 933.

In State of Madras represented by the Government Transport, Madras v. Employees' State Insurance Corporation, through the Insurance Inspector, : (1968)IILLJ305Mad , Kailasam, J. observed in para. 11, page 384 as follows:

Admittedly, the established rights of the Crown are not affected by holding the Government Transport, which is running a business liable to indemnify the Employees' State Insurance Corporation. So also, the Act cannot be attacked on the ground that it was not made for the preservation of public rights and it would be absurd to exclude the State from the liability as the State is intended for public good. The Employees' State Insurance Act was passed for providing benefits to employees in case of sickness, maternity and employment injury and for making provisions for certain other matters. The State employing itself in the business of read transport, by virtue of Section 43 (4) of the Motor Vehicles Act, cannot be said to be discharging any functions of the State, and there is no reason why the State should not be made liable for an injury for which a third person carrying on the business of road transport would be liable.

In the Andhra Pradesh State Road Transport Corporation, by its Chief Executive Officer, Hyderabad v. The Income-tax Officer, B.I.B. Ward, Hyderabad and Anr. : [1994]52ITR524(SC) in which the question of exemption from liability of the income of the Andhra Pradesh Road Transport Corporation established under the Act from Union taxation came up for consideration, At page 1498, para. 21, Gajendragadkar, C.J., who delivered the judgment on behalf of the Bench, observed as follows:

There is no doubt that the bulk of the capital is contributed by the State Government and a small proportion by the Central Government, and in that sense, the majority of shares, are at present owned by the State Government. There is also no doubt that the Corporation is a State-controlled Corporation in the same sense that at all material stages and in all material particulars, the activity of the Corporation is controlled by the State; but, it is clear that all other citizens may be admitted to the group of shareholders, and from that point of view, the Act contemplates contribution of the capital for the Corporation not only by the Central and the State Governments, but also by the citizens. The main point which we are examining at this stage is : is the income derived by the appellant from its trading activity, income of the State under Article 289 (1) In our opinion, the answer to this question must be in the negative. Far from making any provision which would make the income that of the State, all the relevant provisions emphatically bring out the separate personality of the Corporation and proceed on the basis that the trading activity is run by the Corporation and the profit and loss that would be made as a result of the trading activity would be the profit and loss of the Corporation. There is no provision in the Act which has attempted to lift the veil from the face of the Corporation and thereby enable the shareholders to claim that despite the form which the organisation has taken, it is the shareholders who run the trade and who can claim the income coming from it as their own.

77. It is thus clear that the distinction between the trading activity of the Government and the Sovereign functions of the Government has been maintained. In Doraiswami Goundar v. The State of Madras, by the District Collector, North Arcot at Vellore S.A. No. 77 of 1967 (unreported), we had occasion to consider the above decisions in a suit filed for damages for malicious prosecution against the State and the liability of the State therefor. We followed the decision in State of Rajasthan v. Mst. Vidyawati : AIR1963SC933 and held that the proper test in such cases is whether such a suit, if laid before 1858, against the East India Company would have been maintainable and that if the answer is ' yes ', the suit will lie.

78. We are of opinion that the acquisition in the present case being to enable the Government to carry on the trade of running buses and such business not being for a Government purpose, the acquisition is not for a public purpose and the restrictions on the carrying on of a business imposed on the petitioners cannot be said to be reasonable. While Chapter IV-A of the Motor Vehicles Act in so far as it allows the Government or any Corporation created by them to carry on trade and allows the permits to lapse on the expiry of the period without granting renewals leaving the vehicles intact with the owner, has been held to be reasonable, the impugned enactment, in so far as it seeks to acquire the vehicles themselves, cannot be upheld, as they are not reasonable restrictions imposed in the interests of the general public. We have earlier dealt with the question as to how the various provisions in the impugned Ordinance are unreasonable when dealing with each of the provisions of the impugned Ordinance.

79. Mr. V.K.T. Chari then contended that the cases arising under the Land Acquisition Act and relating to-the abolition of Zamindaries, all of which relate to land, cannot afford any basis to the acquisition of movable property like motor vehicles. The contention is that immovable property is limited geographically, while movable property is available in the market for purchase, and therefore, compulsory acquisition of movable property cannot be resorted to in acquiring such property. The learned Counsel further referred to the provisions of the Essential Commodities Act, 1955 and the Industrial Development Act and Regulation, 1951, and contended that fixation of price was permitted under the various enactments and that after the 25th Amendment, this question has assumed very great importance.

80. In Rajahmundry Electric Supply Corporation, Ltd. v. The State of Andhra Pradesh 1954 S.C.J. 320 : 1954 S.C.R. 779 : A.I.R 54 S.C. 251 the question which arose was as to the validity of an order in writing, dated 2nd September, 1950, made by the Government of Madras declaring that the undertaking of the appellant company should vest in the Government on a specified date under the Madras Electricity Supply Undertakings (Acquisition) Act (XLIII of 1949). The validity of that order was questioned. It was contended that the Act was beyond the legislative competence of the Madras Legislature. The High Court rejected the petitioner's contention and held that the law was, in pith and substance, a law with respect to electricity and was, therefore, within the legislative competency of the Provincial Legislature. The contention before the Supreme Court was that the Act was ultra vires, because the acquisition of the electrical undertaking Was not a legislative item in any of the three Lists in the Seventh Schedule to the Government of India Act, 1935. The Supreme Court upheld the contention, and Das, J. who delivered the judgment on behalf of the Bench observed as follows at page 253:

It is, therefore, clear that although Parliament expressly entrusted the Provincial Legislature with power to make a law with respect to compulsory acquisition of land, it did not straightaway grant any power, either to the Federal Legislature or the Provincial Legislature, to make a law with respect to compulsory acquisition of a commercial or industrial undertaking, but left it to the discretion of the Governor-General to empower either of the Legislatures to enact such a law. There is no suggestion that the Governor-General, had, in exercise of his discretionary powers under Section 104, authorised the Madras Legislature to enact the impugned Act and, therefore, the Act was prima facie, beyond the legislative competency of the Madras Legislature.

81. In West Ramnad Electricity Distribution Co., Ltd. v. The State of Madras and Anr. : [1963]2SCR747 the validity of the Madras Electricity Supply Undertakings (Acquisition) Act (XXIX of 1954) and the notification issued thereunder came up for consideration and the attack was regarding the vires of the acts done under the earlier Act of 1949 under the saving provision. Gajendragadkar, J. as he then was, who delivered the judgment on behalf of the Bench, upheld the validity of the Act and the notification issued under the prior Act.

82. Mr. Chari in dealing with the provisions dealing with compulsory sales to the Government referred to a series of decisions wherein the validity of compulsory contracts as contravening Article 19 (1) (f) and (g) came up for consideration and his contention was that such sales were in effect no sales at all.

83. In New India Sugar Mills Ltd. v. Commissioner of Sales Tax, Bihar : [1963]3SCR312 , Shah, J. as he then was, expressing the majority view stated that the requirements for entering into a valid sale were not present in the case in question when no offer to purchase sugar and no acceptance of any offer by the manufacturer, that the manufacturer was, under the Control Order, left with no volition, that he could not decline to carry out the Order, that if he did so, he was liable to be punished for breach of the Order and his goods were liable to be forfeited and that, therefore, no sale was concluded. A similar question came to be considered in Kirkness v. John Hudson and Co., Ltd. (1955) 2 All E.R. 345 wherein Viscount Simonds observed at page 349 as follows : -

There are aspects of a so called compulsory sale which clearly distinguish it from a sale stricto sensu, and I am not satisfied that without some context to aid it the word 'sale' in an Act of Parliament should be held to include a transaction which is more accurately, and, I think now, more commonly, described as a compulsory acquisition. But, however, this may be, the operation of the Transport Act, 1947, is widely different from that of the Acts to which I have referred. It has not those elements which, in some degree, assimilate a compulsory sale to a sale simpliciter, and make the name, if a misnomer, at least a convenient misnomer. It was easy to describe it as a purchase or sale with the qualifying adjective 'compilsory', a transaction in which the parties were placed in a position to negotiate, and, apart from the power of compulsion in the background, were not unlike an ordinary vendor and purchaser. These elements, as I say, are wholly lacking in the transaction under view, and it is, in my opinion, an illegitimate use of language to say that, because an acquisition under the procedure of the Lands Clauses Acts is spoken of as a compulsory sale, therefore this transaction is a sale.

In Andhra Sugars Ltd. and Ors. v. Slate of Andhra Pradesh and Ors. : [1968]1SCR705 , relating to the validity of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act, (XIV of 1961), Bachawat, J., who delivered the judgment on behalf of the Bench distinguished Kirkness v. John Hudson & C. Ltd.(1955)2 All E.R. 345 and held that a valid contract was formed between the parties and that the State legislature was competent to tax the purchases made under such a contract. The above decisions relate to compulsory contracts entered into between the parties. We are of opinion that there is considerable force, in the contention of the learned Counsel.

84. The next ground of attack by Mr. Chari is that the provisions of the Ordinance are hit at by Article 14. The contention is that in respect of a matter falling under the Concurrent List. (List III of Seventh Schedule), the State has now made a law on a matter where the Centre has already made a law, and that the State Law in providing various restrictions is discriminatory. According to him, the test to be applied in such cases is whether the impugned State Law, if it had been made by the Centre for the purposes of the State, would be discriminatory. In other words, the contention is that there is discriminatory legislation between bus operators operating in the particular State where such legislation is sought to be introduced and operators outside that State and consequently, Article 14 is infringed. There is considerable force in this contention. Obviously, if such law is made by the Centre, the restrictions imposed by such law on bus operators in the State to which the law purports to apply will be discriminatory. The learned Advocate-General sought to meet this point by contending that bus operators in Tamil Nadu are a class by themselves, and there is no discrimination? among the bus operators in Tamil Nadu and that consequently, there is no discrimination. We are unable to agree with the contention of the learned Advocate-General and we are of opinion that Article 14 is contravened.

85. The learned Advocate-General further contended that every law is subject to Article 13 and in dealing with the validity of a law as contravening Article 14, he referred to two decisions one in the State of Madhya Pradesh v. G.C. Mandawar : (1954)IILLJ673SC and the other in Pursholtam Govindji Halai v. Shree B.M. Desai, Additional Collector of Bombay and Ors. : 1956CriLJ129 dealing with the question whether the scale of dearness allowance recommended by the Central Pay Commission and sanctioned by the Central Government, being different from the dearness allowance sanctioned by the State Government, is hit at by Article 14. The Supreme Court held that the sources of authority for the two statutes being different, Article 14 can have no application. We are of opinion that the above decision is distinguishable. Similarly, in Purshottam Gouindji Havai v. Shree B.M. Desai, Additional Collector of Bombay and Ors. : 1956CriLJ129 where different Land Revenue Recovery Acts were prevalent in different States, the provisions of the one being stricter than the provisions in the other, the question arose whether Article 14 is contravened and the Supreme Court repelled the contention. We are of opinion that this decision is also distinguishable from the facts of the present case. Further, we are of opinion that even regarding the choice as to, in which order, the Districts are to be notified, we do not find sufficient nexus between the districts where smaller number of motor vehicles are run and the object sought to be achieved under the Act. During the five year period, operators of one district are sought to be discriminated against operators in another district.

86. We shall next refer to the other contentions of the learned Advocate-General. His contention is that road transport is a public utility concern similar to shipping, air transport, railway transport, electricity, etc. and except road transport, all other modes of transport have been nationalised. The learned Advocate-General referred to Halsbury's Laws of England, Volume 33, Third Edition, page 393, para. 658, which runs as follows : -

In 1947 the British Transport Commission was set up and charged with a general duty of providing, or securing or promoting the provision of, an efficient, adequate, economical and properly integrated system of public inland transport for passengers and goods. It was empowered to carry goods and passengers by road, and its many ancillary powers included that of acquiring by agreement any road transport undertaking and any securities of any body corporate carrying on or about to carry on a road transport undertaking.

His contention is that nationalisation is the order of the day, and he referred to the provisions of Chapter IV-A and the Madras enactments, viz., Madras Act XVI of 1971 providing a ceiling of 10 permits and Act XXXVII of 1971, dealing with the operators owning more than 50 permits, etc. The learned Advocate-General contended that the Tamil Nadu State is the first State in the country, where buses have been acquired and that the acquisition of buses is perfectly valid.

87. The learned Advocate-General next contended that the impugned Ordinance did not deal with ownership of property, and in that connection referred to Salmond on Jurisprudence, Twelfth Edition at page 412 in regard to the meaning of the term ' property '. The term 'property' has several meanings. In its widest sense,-Property includes all a person's legal rights, of whatever description. In a second and narrower sense, Salmond says that property includes not all a person's rights but only his proprietary, as opposed to his personal rights. In a third application, it is stated that the term includes not even all proprietary rights, but only those which are both proprietary and in rent and finally, in the narrowest use of the term, it includes nothing more than corporeal property, that is to say, the right of ownership in a material object, or that object itself. The contention of the learned Advocate-General is that the word 'property' should not always be confined as including all a person's legal rights, of whatever description and that it could be construed in a narrower sense, as pointed out by Salmond. We are unable to accept his contention, as the rights of the financier-owner are sought to be taken away without reference to the owner and the rights of the permit-holder unreasonably and not for a public purpose.

88. The learned Advocate-General next laid considerable stress on Article 358 of the Constitution and contended that while a Proclamation of Emergency is in operation, nothing in Article 19 shall restrict the power of the State to make any law or to take any executive action during the pendency of the proclamation of Emergency. This question has come up for consideration a number of times and the Supreme Court has refrained from expressing a final opinion on this question. In Makhan Singh Tarsikka v. The State of Punjab : 1964CriLJ217 , the difference between Article 358 and Article 359 was pointed out. The validity of the Gujarat Agricultural Produce Markets Act, 1964, was sought to be sustained under Article 358, and their Lordships had not finally expressed any opinion on the question. A similar question, came up for consideration in the State of Maharashtra and Ors. v. Lok Chikshan Sanstha and Ors. A.I.R. 1973 S.C. 558, and this question again was raised. Vaidialingam, J., observed at page 595 as follows:

Therefore, it will be seen that during the period when a Proclamation of Emergency is in operation, Article 19 will not operate as a bar in respect of any law or any executive action coming within the terms of Article 358. We will be showing in the latter part of the judgment that Clauses (1) and (2) of Rule 3 read with the various instructions issued by the State cannot be considered to be vague or ambiguous as erroneously held by the High Court. These instructions, in so far as they go, are perfectly valid, and the State Government was competent to issue these executive instructions for the guidance of the educational authorities dealing with applications for grant of permission to start schools. If so, it follows that the view of the High Court that Article 358 does not save Clauses (1) and (2) of Rule 3 is erroneous. In this view, Article 19 could not have been invoked by the writ-petitioners during the period when the Proclamation of Emergency was admittedly in operation. As Article 19 is thus out of the picture, the question whether Clauses (1) and (2) of Rule 3 imposed reasonable restrictions and are thus saved, does not arise for consideration.

In Raval and Co. v. Ramachandran and Ors. : AIR1967Mad57 , which related to the constitutional validity of the Madras Buildings (Lease and Rent Control) Act (XVIII of 1960), Anantanarayanan, Offg. C.J., delivering the judgment on behalf of the Full Bench referred to the judgment in Makhan Singh v. State of Punjab : 1964CriLJ217 , and Jan Mahomed Noor Mohamed v. State of Gujarat : [1966]1SCR505 . The learned Judge referred to the passage in A.I.R. 1966 S.C. 385 which ran as follows : -. the President of India having declared in the month of December, 1962 a state of Emergency in exercise of the powers reserved under the Constitution the right to enforce the fundamental rights guaranteed under Article 19 of the Constitution remains suspended by virtue of Article 358 for the duration of the period of the Emergency.

There, the contention was that Article 358 will not preclude the landlord from seeking to establish that the impugned Act infringed Article 19 in certain respects and that it must be struck down to that extent. That contention was upheld.

89. The defence of India and every part thereof including preparation for defence and all such acts as may be conducive in times of war to its prosecution and after its termination to effective demobilisation, is Entry I, List I of the Seventh Schedule. In the Supreme Court decision referred to above, the Supreme Court went into the merits of the case and the scope of Article 358 was not finally decided. Article 358 proceeds on the principle that during an Emergency, the power of the State to control persons and property has to be greater than in ordinary times. This consideration would apply only to : firstly Government control in the region of public law ; and secondly to legislation enacted by reason of the Emergency. The contention of Mr. Chari is that Emergency can have no impact on legislation as to matters of private law -example List II, Entry 18, List III, Entry 5, etc. On a construction of Article 358, it was contended that it would apply to a law occasioned by the particular Emergency referred to in the Proclamation under Article 352 and that a final acquisition like that provided in the impugned Ordinance would not fall within Article 358 at all.

90. Our attention was also drawn to the article written by Mr. V.K.T. Chari, on Pandurang Dhandi v. Maruti Hari Jadhav : [1966]1SCR102 , where the scope of Article 358 has been fully examined. We derived considerable assistance from the said article and in our view, the contention of Mr. Chari, has to be accepted. Whatever may be the position, we heard arguments on all the contentions put forward, and we have dealt with them on merits also.

91. Mr. K. Parasaran, the Standing Counsel for the Central Government who followed the learned Advocate-General incidentally contended that the provisions or the Ordinance really fall under Article 39 (b) and (c) of the Constitution. His contention was that the term ' material resources' is of wider import than 'natural resources' and therefore, the acquisition of motor vehicles is justified. But, the fallacy in the reasoning adopted by the learned Counsel is that such material resources must be owned by the community and in order to subserve the common good, such resources of the community have to be pooled and distributed. It cannot be said that the! motor vehicles running in the State belong to the community, and therefore the wider import that is sought to be, given by the learned Standing Counsel cannot be accepted.

92. The learned Counsel next referred to the question that the assent of the President having been given, it is not open to judicial review. The complaint of Mr. Chari, in this behalf was that the common counter-affidavit filed in the batch of writ petitions on behalf of the Central Government is very laconic, and the deponent of the affidavit, instead of stating as to what materials were placed before the President before obtaining the assent contented himself by stating that the required instructions were sought for and given properly and validly-

93. Mr. Chari referred to the allegations in the counter filed on behalf of the Union Government and contended that when a specific allegation is made of fraud and misrepresentation in securing the President's assent, the deponent of the affidavit, instead of specifically stating what materials were placed before the President for securing his assent, made a blanket statement without giving details and calling upon the petitioners to strictly prove the allegations. In our view, the counter-affidavit could have been more specific, especially as the President's assent not being a formality, as stated by us already, is required to be given after scrutiny of the provisions of the Ordinance sent to him with reference to the existing law and after satisfying himself as to the validity of the impugned provisions.

94. In our view, this question does not assume great prominence, as the impugned Ordinance has been replaced by the Act.

95. We heard the writ petitions and reserved the judgment on 6th March, 1973. Even during the hearing of the Writ Petitions, the Tamil Nadu Stage Carriages and Contract Carriages (Acquisition) Bill, 1973 was under discussion in the Legislature. Mr. V. K. T. Chari, appearing for the petitioners made a statement that in case judgment is not delivered before 14th March, 1973 on which date, the Ordinance will lapse and in case, the Ordinance is replaced by an enactment, his argument on the Ordinance may be treated as arguments questioning the enactment itself. He accordingly filed a petition seeking to amend the prayer in the writ petition already filed in the following terms:

The petitioner herein prays that this Hon'ble Court may be pleased to issue a writ of mandamus or any other appropriate writ, order or direction, forbearing the State of Tamil Nadu from in any manner, applying or enforcing any of the provisions of the Tamil Nadu Ordinance of 1973 or the Tamil Nadu Stage Carriages and Contract Carriages (Acquisition) Act, 1973, that is to say, from enforcing Sections 14, 15, 16 and 17 of the said Ordinance or Act or issuing any Notification under Section 1(4)(b) or Section 4 etc.

We are ordering the applications filed in |each of the writ petitions.

96. We may observe that there is not any material difference between the impugned Act and the Ordinance, sought to be replaced. We may, however, point out that in a batch of writ petitions Raheem Roadways, Periyakulam v. R.T.A., Madurai W.P. Nos. 493 of 1973, 295 of 1973 etc. dated 8th February, 1973 decided by the Chief Justice and Raghavan, J., seeking to maintain the status quo filed by the State Carriage Operators permitting them to continue to operate on the routes on the temporary permits under Section 16 of the Ordinance, we considered the scope of Section 16, and observed as follows:

We have carefully considered the language employed by Section 16 independently of and in conjunction with the rest of the provisions of the Ordinance which we have noticed in the earlier part of this judgment. The opening words of Section 16 mean that, for the purpose of entitlement thereunder, neither the provisions in the Ordinance except Section 16 itself, nor the provisions in the Motor Vehicles Act, can be looked into. In considering' whether an operator will be entitled to a temporary permit under the Motor Vehicles Act, the Ordinance and the Motor Vehicles Act will have to be put aside. The right to a temporary permit, therefore, entirely arises in terms of Section 16. No doubt, Section 16 says that such temporary permit will be under the Motor Vehicles Act. This is what is strongly relied on by the learned Advocate-General. But, then, his argument overlooks the opening words of the section, namely, 'notwithstanding anything contained in the Ordinance or in the Motor Vehicles Act.' Their effect is that Section 16 is a law unto itself, irrespective of what is contained in the Ordinance or in the Motor Vehicles Act. It follows, that, for the purpose of grant of temporary permits the only provision that can be looked into is Section 16 itself and, once an operator is entitled to a temporary permit, it will be granted to him under the provisions of the Motor Vehicles Act. It is only for such a limited purpose that the Motor Vehicles Act, will come in and not for any other consideration. Also, we notice that, in order to get the entitlement, three factors have got to be satisfied. They are : (1) The claimant must be a stage carriage operator or contract carriage operator; (2) He must be running a stage carriage or a contract carriage in the State; (3) The stage carriage, in respect of which a temporary permit is claimed, must be one liable to be acquired under the Ordinance. It is not stated in section J6 that the stage carriage for which a temporary permit can be given, should be one which is running. Not running any stage carriage is in respect of the operator who claims a temporary permit and not in respect of a stage carriage. Provided the three requirements are satisfied, a stage carriage, whether it is running or not, will be entitled to a temporary permit.

After this Order was pronounced on 8th February, 1973, the proviso to Section 16 was introduced in the following terms : -

Provided that nothing contained in this section shall entitle any stage carriage operator or contract carriage operator to obtain any temporary permit in respect of any area or route or portion thereof specified in a scheme published at any time (whether before, on or after the 14th January, 1973) under Section 68-C of the Motor Vehicles Act.

This is the only substantial difference between the impugned Ordinance and the Bill which subsequently became law. In our view, the proviso now added in the Act and the main part of Clause 16 when read together cannot affect the view expressed by us in the batch of writ petitions referred to above.

97. We have considered the attack both by the operator and the financier on the several provisions of the impugned Ordinance. The subject of the attack is on almost all the provisions and we sustained the attack on the provisions both from the point of view of the financier, as also that of the operator. In dealing with the attack by die financier we have held that the financier under the hire-purchase agreement, who is a real owner, has been totally ignored, that his right to seize the vehicle, on default of payment of instalments by the hirer and sell the same to realise his dues, has been seriously curtailed and that under the provisions relating to compensation the financier does not get the money advanced by him in terms of the hire-purchase agreement. In dealing with the attack of the operator we held that the interim provisions substantially curtail his rights and the vehicle is sought to be acquired by the State for a sum fixed by them without his having any say in the matter. In effect, we have struck down most of the provisions, and the remaining provisions, are dependent upon the provisions which we have held to be unconstitutional and which are so inextricably connected with the provisions struck down. We are opinion that no part of the enactment could be saved.

98. We shall now summarise our conclusions on the several questions raised:

(1) Clause 4 of the Ordinance in so far as it vests in the Government the vehicles on notification free of all encumbrances inclusive of the hire-purchase agreements is void for the reason that the real owner under the hire-purchase agreement has been totally ignored.

(2) In enacting the impugned Ordinance the position of the financier or the hirer has not been properly envisaged.

(3) The interim provisions viz., Clauses 14 to 17, as to the rights of the financier under the hire purchase agreement to seize the vehicle covered by the agreement for default in payment of future instalments and for preventing the financier from bringing the vehicle to sale and compelling the financier to sell the vehicle only to the Government in accordance with the provisions contained in Schedule I, are void.

(4) From the point of view of the operator the interim provisions precluding him from selling the vehicle to any one of his choice at a competitive price are invalid.

(5) Further the other provisions relating to the issue of temporary permits and other interim arrangements also curtail his rights.

(6) The provisions relating to payment of compensation affect both the operator and the financier seriously.

(7) Clause 31 in seeking to override the provisions of the Central enactments, namely, the Motor Vehicles Act, the Hire Purchase Act, etc., is void.

(8) The declaration made under Clause (2) of the Ordinance is open to scrutiny by Courts as to whether the Articles referred to are attracted.

(9) The motor vehicles, its accessories, the workshop etc., sought to be acquired under the Ordinance do not fall under the description 'material resources' of the community contained in Article 39 (b) and further Article 39 (c) invoked on behalf of the Government is equally inapplicable.

(10) On the question whether the assent is valid or vitiated it is unnecessary to give a finding, as the Ordinance has been replaced by an Act.

(11) The provisions of the Ordinance are discriminatory and contravene Article 14.

(12) The provisions of the Ordinance impose unreasonable restrictions upon the operator's right to carry on a trade or business and are not saved under Article 19 (6).

(13) There is no public purpose justifying compulsory acquisition of the motor vehicles.

(14) The provisions of the Ordinance contravene Article 31 (2).

(15) The State cannot rely upon Article 350 of the Constitution of India as the impugned enactment does not relate to a matter falling under Entry I of List I of Schedule VII of the Constitution.

99. The result is : we strike down the provisions of Ordinance I of 1973 and Madras Act XII of 1973 which replaced the Ordinance as being unconstitutional. The writ petitions are accordingly allowed with costs of Rs. 200 in each of the writ petitions forming part of this batch payable by the 1st Respondent.


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