K.c. Gajapati Narayan Deo And Oth V. The State Of Orissa in India
K.c. Gajapati Narayan Deo And Oth V. The State Of Orissa  Insc 49; Air 1953 Sc 375; 1954 Scr 1 (29 May 1953)
Court Judgment Information
- Year: 1953
- Date: 29 May 1953
- Court: Supreme Court of India
- INSC:  INSC 49
Text of the Court Opinion
29/05/1953 MUKHERJEA, B.K.
BHAGWATI, NATWARLAL H.
SASTRI, M. PATANJALI (CJ) DAS, SUDHI RANJAN HASAN, GHULAM
1953 AIR 375 1954 SCR 1
F 1987 SC 579 (7) RF 1991 SC1792 (6)
Orissa Estates Abolition Act, 1952, ss. 23, 26, 27, 37 Orissa Agricultural Income-tax (Amendment) Act, 1950 Validity “Colourable legislation”-Tests of validity-Effect of ulterior motives-Provisions for vesting buildings and private lands in Government-Provision for paying compensation in 30 Years Validity -Provisions introduced in Bill after coming into force of new Constitution-Whether protected by art. 31(4)-Constitution of India, 1950, arts.
31(2), 31(4); Sch.VII, List II entry 46, List III entry 42.
The Bill relating to the Orissa Estates Abolition Act, 1952, was published in the Gazette on the 3rd January, 1950.
It contained a provision that any sum payable for agricultural incomes-Tax for the previous year should be deducted from the gross asset of an estate for the purpose of arriving at its not income on the basis on which compensation was payable to the estate owners. On the 8th January, 1950, a Bill to amend the Orissa Agricultural Income-tax Act of 1947 so as to enhance the highest rate of tax from 3 annas in the rupee to 4 annas and reduce the highest slab from Rs. 30,000 to Rs. 20,000 was published in the Gazette. This Bill was dropped by the next Chief Minister who introduced a revised Bill on the 22nd July, 1950, enhancing the highest rate to 12 annas 6 pies in the rupee and reducing the highest slab to Rs. 15,000 and this was passed into law in August, 1950. It was contended that the Orissa Agricultural Income-tax (Amendment) Act of 1950 was a fraud on the Constitution and as such invalid as it was a colourable legislation to effect a drastic reduction in the compensation payable under the Estates Abolition Act:
Held” (i) that the question whether a law was a colourable legislation and as such void did not depend on the. motive or bona fides of the legislature in passing the law but upon the competency of the legislature to pass that particular law, and what the courts have to determine in such cases is whether though the legislature has purported to act within the limits of its powers, it has in substance and reality transgressed those powers, the transgression being veiled by what appears, on proper,examination, to be a mere pretence or disguise. The whole doctrine of colourable legislation is based upon the maxim that you cannot do indirectly what you cannot do directly.
2 (ii) The impugned Act was in substance and form a law in respect to the “taxing of agricultural income”, as described in entry 46 of List 11 of the Seventh Schedule to the Constitution and, as the State Legislature was competent to legislate on this subject, the Act was not void, and the fact that the object of the legislature was to accomplish another purpose, viz., to reduce the compensation payable under the Estates Abolition Act, cannot render this law a colourable legislation and void as such, as the ulterior object itself was not beyond the competence of the legislature.
(iii) Assuming that in India there is no absolute rule of law that whatever is affixed to or built on the soil becomes a part of it and is subject to the same rights of property as the soil itself, there is nothing in law which prevents the State Legislature from providing as part of an estate abolition scheme that buildings lying within the ambit of an estate and used primarily for the management or administration of the estate should vest in the Government as appurtenances to the estate itself. Such acquisition would come within article 31(2) of the Constitution and if the conditions laid down in clause (4) of that article are complied with, it would be protected by that clause even if the compensation provided for is not just and proper.
(iv) The provisions in the Orissa Estates Abolition Act, 1950, relating to private lands in the possession of temporary tenants are not unconstitutional. Merely because compensation was based on the produce rent payable by the tenants it cannot be said that the landholder was given compensation only for the landholder’s rights and not for the kudivaram (tenant’s) rights also.
(v) The expression “passed by such legislature” in article 31(4) of the Constitution means passed with or without amendments and the fact that the provisions relating to vesting of private lands did not form a part of the Estates Abolition Bill as originally introduced but were added to the Bill after the new Constitution had come into force would not deprive those provisions of the protection of article 31(4) of the Constitution.
(vi) The provision contained in section 37 of the Orissa Estates Abolition Act, 1950, for payment of compensation by 30 annual instalments is not a piece of colourable legislation. It comes clearly within entry 42 of List III of Schedule VII of the Constitution.
[The question whether the provisions of the Madras Estates Land (Orissa Amendment) Act, 1947, which empowered the Collector to settle and reduce rents were void because they involved an improper delegation of legislative powers to the executive and contravened article 14 of the Constitution was raised, but with the consent of the counsel, their Lordships decided to leave the question open as it did not relate to the validity of the Orissa 3 Estates Abolition Act, which was the subject-matter in dispute in the present case].
State of Bihar v. Maharajah Kameshwar Singh and Others ( S.C.R. 889) distinguished. Surya Pal Singh v. The State of Uttar Pradesh ( S.C.R. 1056) followed.
Attorney-General for Ontario v. Reciprocal Insurers and Others ( A.C. 328), Attorney-General for Alberta v.
Attorney General for Canada ( A.C. 117), Union Colliery Co. of Br. Columbia Ltd. v. Bryden ( A.C.
580), Cunningham v. Tomeyhomma ( A.C. 151), Be Insurance Act of Canada ( A.C. 41), Moran v. Deputy Commissioner for Taxation, New South Wales ( A.C. 838) referred to.
Civil Appelate Jurisdiction
Civil Appeals Nos. 71 to 76 of 1953.
Appeals under article 132(1) of the Constitution of India from the Judgment and Order dated 30th January, 1953, of the Orissa High Court in Original Jurisdiction Cases Nos. 13, 14, 15, 16, 25 and 26 of 1952. The facts of the case appear in the judgment.
B. Somayya (K. B. Krishnamurthi, with him) for the appellant in Civil Appeal No. 71 of 1953.
B. Somayya (D. Narasaraju and N. Y. Ramdas, with him) for the appellant in Civil Appeal No. 72 of 1953.
D. Narasaraju and A. Krishnaswami (N. V. Ramdas, with them) for the appellant in Civil Appeal No. 73 of 1953.
D. Narasaraju (N. V. Ramdas, wit him) :for the appellant in Civil Appeal No. 76 of 1953.
D. V. Narasinga Rao for the appellant in Civil Appeal No.
75 of 1953.
R. Patnaik for the appellant in Civil Appeal No. 74 of 1953.
M. C. Setalvad, Attorney-General for India, and Pitambar Misra, Advocate-General of Orissa (P. A. Mehta, with them) for the respondent.
1953. May 29. The Judgment of the Court was delivered by MUKHERJEA J.
4 MUKHERJEA J.-These six appeals arise out of as many applications, presented to the High Court of Orissa, under article 226 of the Constitution, by the proprietors of certain permanently settled estates within the State of Orissa, challenging the constitutional validity of the legislation known as the Orissa Estates Abolition Act of 1952 (hereinafter called “the Act”) and praying for mandatory writs against the State Government restraining them from enforcing the provisions of the Act so far as the estates owned by the petitioners are concerned.
The impugned Act was introduced in the Orissa State Legislature on the 17th of January, 1950, and was passed by it on the 28th September, 1951. It was reserved by the State Governor for consideration of the President and the President gave his assent on 23rd January, 1952. The Act thus receives the protection of articles 31(4) and 31A of the Constitution though it was not and could not be included in the list of statutes enumerated in the ninth schedule to the Constitution, as referred to in article 31B.
The Act, so far as its main features are concerned, follows the pattern of similar statutes passed by the Bihar, Uttar Pradesh and Madhya Pradesh Legislative Assemblies. The primary purpose of the Act is to abolish all zemindary and other proprietary estates and interests in the State of Orissa and after eliminating all the intermediaries, to bring the ryots or the actual occupants of the lands in direct contact with the State Government. It may be convenient here to refer briefly to some of the provisions of the Act which are material for our present purpose. The object of the legislation is fully set out in the preamble to the Act which discloses the public purpose underlying it.
Section 2(g) defines an “estate” as meaning any land held by an intermediary and included under one entry in any of the general registers of revenue-paying lands and revenue-free lands prepared and maintained under the law for the time being in force by the Collector of a district. The expression “intermediary” with reference to any estate is then defined and it 5 means a proprietor, sub-proprietor, landlord, landholder …
thikadar, tenure-holder, under-tenure-holder and includes the holder of inam estate, jagir and maufi tenures and all other interests of similar nature between the ryot and the State. Section 3 of the Act empowers the State Government to declare, by notification, that the estate described in the notification has vested in the State free from all encumbrances. Under section 4 it is open to the State Government, at any time before issuing such notification, to invite proposals from “intermediaries” for surrender of their estates and if such proposals are accepted, the surrendered estate shall vest in the Government as soon as the agreement embodying the terms of surrender is executed.
The consequences of vesting either by issue of notification or as a result of surrender are described in detail in section 5 of the Act . It would be sufficient for our present purpose to state that the primary consequence is that all lands comprised in the estate including communal lands, non-ryoti lands, waste lands, trees, orchards, pasture lands, forests, mines and minerals, quarries, rivers and streams, tanks, water channels, fisheries, ferries, hats and bazars, and buildings or structures together with the land on which they stand shall, subject to the other provisions of the Act, vest absolutely in the State Government free from all encumbrances and the intermediary shall cease to have any interest in them. Under section 6, the intermediary is allowed to keep for himself his homestead and buildings and structures used for residential or trading purposes such as golas, factories, mills, etc., but buildings used for office or estate purposes would vest in the Government. Section 7 provides that an intermediary will be entitled to retain all lands used for agricultural or horticultural purposes which are in his kha’s possession at the date of vesting. Private lands of the intermediary, which were held by temporary tenants under him, would however vest in the Government and the temporary tenants would be deemed to be tenants under the Government, except where the intermediary himself holds less than 33 acres of land in any capacity. As 6 regards the compensation to be paid for the compulsory acquisition of the estates, the principle adopted is that the amount of compensation would be calculated at a certain number of years’ purchase of the net annual income of the estate during the previous agricultural year, that is to say, the year immediately preceding that in which the date of vesting falls. First of all, the gross asset is to be ascertained and by gross asset is meant the aggregate of the rents including all cesses payable in respect of the estate.
From the gross asset certain deductions are made in order to arrive at the net income. These deductions include land revenue or rent including cesses payable to the State Government, the agricultural ‘income-tax payable in the previous year, any sum payable as chowkidary or municipal tax in respect of the buildings taken over as office or estate buildings and also costs of management fixed in accordance with a sliding percentage scale with reference to the gross income. Any other sum payable as income-tax in respect of any other kind of income derived from the estate would also be included in the deductions. The amount of compensation thus determined is payable in 30 annual equated instalments commencing from the date of vesting and an option is given to the State Government to make full payment at any time. These in brief are the main features of the Act.
There was a fairly large number of grounds put forward on behalf of the appellants before the High Court in assailing the validity of the Act. It is to be remembered that the question of the constitutional validity of three other similar legislative measures passed, respectively, by the Bihar, Uttar Pradesh and Madhya Pradesh Legislative Assemblies had already come for consideration before this court and this court had pronounced all of them to be valid with the exception of two very minor provisions in the Bihar Act. In spite of all the previous pronouncements there appears to have been no lack of legal ingenuity to support the present attack upon the Orissa legislation, and as a matter of fact, much of the arguments put forward on behalf of the appellants purported to have been based 7 on the majority judgment of this court in the Bihar appeals, where two small provisions of the Bihar Act were held to be unconstitutional.
The arguments advanced on behalf of the appellants before the High Court have been classified by the learned Chief Justice in his judgment under three separate heads. In the first place, there were contentions raised, attacking the validity of the Act as a whole. In the second place, the validity of the Act was challenged as far as it related to certain specified items of property included in an estate, e.g., private lands, buildings, waste lands, etc. Thirdly, the challenge was as to the validity of certain provisions in the Act relating to determination of compensation payable to the intermediary, with reference either to the calculation of the gross assets or the deductions to be made therefrom for the purpose of arriving at the net income.
The learned Chief Justice in a most elaborate judgment discussed all the points raised by the appellants and negatived them all except that the objections with regard to some of the matters were kept open. Mr. Justice Narasimham, the other learned Judge in the Bench, while agreeing with the Chief Justice as to other points, expressed,, in a separate judgment of his own, his suspicion about the bona fides of the Orissa Agricultural Income-tax (Second Amendment) Act, 1950, and he was inclined to hold that though ostensibly it was a taxation measure, it was in substance-nothing else but a colorable device to cut down drastically the income of the intermediaries so as to facilitate further reduction of their net income as provided in clause (b) of section 27(1) of the Act. He, however, did not dissent from the final decision arrived at by the Chief Justice, the ground assigned being that whenever there is any doubt regarding the constitutionality of an enactment, the doubt should always go in favour of the legislature.
The result was that with the exception of the few matters that were kept open, all the petitions were dismissed. The proprietors have now come before us on appeal on the strength of certificates granted by the High Court under articles 132 and 133 8 of the Constitution as well as under section 110 of the Code of Civil Procedure.
No contention has been pressed before us on behalf of the appellants attacking the constitutional validity of the Act as a whole. The arguments that have been advanced by the learned counsel for the appellants can be conveniently divided under three heads: In the first place, there has been an attack on the validity of the provisions of two other statutes, namely, the Orissa Agricultural Income-tax (Amendment) Act, 1950, and the Madras Estates Land (Amendment) Act, 1947, in so far as they affect the calculation of the net income of an estate for the purpose of determining the compensation payable under the Act. In the second place, the provisions of the Act have been challenged as unconstitutional to the extent that they are applicable to private lands and buildings of the proprietors, both of which vest as parts of the estate, under section 5 of the Act. Lastly, the manner of payment of compensation money, as laid down in section 37 of the Act, has been challenged as invalid and unconstitutional.
Under the first head the appellants’ main contention relates to the validity of the Orissa Agricultural Income-tax (Amendment) Act of 1950. This Act, it is said, is not a bona fide taxation statute at all, but is a colorable piece of legislation, the real object of which is to reduce, by artificial means, the net income of the intermediaries, so that the compensation payable to them under the Act might be kept down to as low a figure as possible. To appreciate this contention of the appellants, it would be necessary to narrate a few relevant facts. Under section 27 (1)(b) of the Act, any sum payable in respect of an estate as agricultural income-tax, for the previous agricultural year, constitutes an item of deduction which has to be deducted from the gross asset of an estate for the purpose of arriving at its net income, on the basis of which the amount of compensation is to be determined. The Estates Abolition Bill was published in the local gazette on 3rd January 1950, As has been said 9 already, it was introduced in the Orissa Legislative Assembly on the 17th of January following and it was passed on the 28th September, 1951. There was an Agricultural Income-tax Act in force in the State of Orissa from the year 1947 which provided a progressive scale of taxation on agricultural income, the highest rate of tax being 3 annas in the rupee on a slab of over Rs. 30,000 received as agricultural income. On 8th January, 1950, that is to say, five days after the publication of the Abolition Bill, an amended agricultural income-tax bill was published in the official gazette. At that time Mr. H. K. Mahtab was the Chief Minister of Orissa and this bill was sponsored by him.
The changes proposed by this Amendment Act were not very material. The highest rate was enhanced from 3 annas to 4 annas in the rupee and the highest slab was reduced from Rs.
30,000 to Rs. 20,000. For some reason or other, however, this bill was dropped and a revised bill was_ published in the local gazette on 22nd July, 1950, and it passed into law on 10th of August following. This new Act admittedly made changes of a very drastic character regarding agricultural income-tax. The rate of taxation was greatly enhanced for slabs of agricultural income above Rs. 15,000 and for the highest slab the rate prescribed was as much as 12 annas 6 pies in the rupee. It was stated in the statement of objects and reasons that the enhanced agricultural income was necessary for financing various development schemes in the State. This, it is said, was wholly untrue for it could not be disputed that almost all the persons who came within the higher income group and were primarily affected by the enhanced rates were intermediaries under the Estates Abolition Bill which was at that time before the Select Committee and was expected to become law very soon, and as the legislature had already definitely decided to extinguish this class of intermediaries, it was absurd to say that an increased taxation upon them was necessary for the development schemes. The object of this amended legislation, according to the appellants, was totally different from what it ostensibly purported 2 10 to be and the object was nothing else but to use it as a means of effecting a drastic reduction in the income of the intermediaries, so that the compensation payable to them may be reduced almost to nothing. This change in the provisions of the Agricultural Income-tax Bill, it is further pointed out, synchronized with a change in the Ministry of the Orissa State. The original amended bill was introduced by the then Chief Minister, Mr. H. K. Mahtab, who was in favour of allowing suitable compensation to expropriated zemin.
dars; but his successor, who introduced the revised bill, was said to be a champion of the abolition of zemindary rights with little or no compensation to the proprietors.
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K.c. Gajapati Narayan Deo And Oth V. The State Of Orissa (3)