K C GAJAPATI NARAYAN DEO VS STATE OF ORISSA : CASE SUMMARY
The Supreme Court in K C Gajapati Narayan Deo Vs. State of Orissa (1954) 1 SCR 1 held that the idea conveyed by “colorable legislation” is that although apparently a legislature in passing a statute purported to act within the limits of its powers, yet in substance and in reality, it transgressed these powers, the transgression being veiled by what appears on proper examination, to be a mere pretense or disguise.
FACTS OF THE CASE
Orissa Legislature passed Orissa Estates Abolition Act, 1952, with objective to abolish all zamindary 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 had provision that any sum payable for agricultural income tax for the previous year should be deducted from the gross asset of an estate for the purpose of arriving at its net income on the basis on which compensation was payable to the estate owners. Orissa Agricultural Income Tax Act, 1947 was amended twice to enhance the rate and reduce the highest slab. Amendment to Agricultural Income -Tax Act was challenged on the ground that the same is colourable exercise of power. The real income is to reduce the income of intermediaries so that compensation paid to the are kept at minimum
FINDINGS OF THE SUPREME COURT
The Supreme Court observed that it may be made clear at the outset that the doctrine of colourable legislation does not involve any question of bona fides or mala fides on the part of legislature. The whole doctrine resolved itself into the question of competency of a particular legislature to enact a particular law. If the legislature is competent to pass a particular law, the motives which impelled it to act are really irrelevant. On the other hand, if the legislature lacks competency, the question of motive does not arise at all. Whether a statute is constitutional or not is thus always a question of power. A distinction, however exists between a legislature which is legally omnipotent like the British Parliament and the laws promulgated by which could not be challenged on the ground of incompetency, and a legislature which enjoys only a limited or a qualified jurisdiction. If the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specific legislative entries, or if there are limitations on the legislative authority in the shape of Fundamental Rights, questions do arise as to whether the legislature in a particular case has or has not , in respect to the subject – matter of the statute or in the method of enacting it , transgressed the limits of its constitutional powers. Such transgression may be patent, manifest or direct, but it may also be disguised, covert and indirect and it is to this latter class of cases that the expression “colourable legislation” has been applied in certain judicial pronouncements. The idea conveyed by the expression is that although apparently a legislature in passing a statute purported to act within the limits of its powers, yet in substance and in reality, it transgressed these powers, the transgression being veiled by what appears on proper examination, to be a mere pretence or disguise.
The Supreme Court further observed that in other words, it is the substance of the Act that is material and not merely the form or outward appearance, and if the subject-matter in substance is something which is beyond the powers of that legislature to legislate upon, the form in which the law is clothed would not save it from condemnation. The Legislature cannot violate the constitutional prohibitions by employing an indirect method. In cases like these, the enquiry must always be as to the true nature and character of the challenged legislation and it is the result of such investigation and not the form alone that will determine whether or not it relates to the a subject which is within the power of the legislative authority. For the purpose of this investigation the Court could certainly examine the effect of the legislation and take into consideration its object, purpose or design. But these are only relevant for the purpose of ascertaining the true character and substance of enactment and the class of subjects of legislation to which it really belongs and not for finding out the motives which induced the legislature to exercise its powers. It is said by Lefroy in well known work on Canadian Constitution that even if the legislature avow on the face of an Act that it intends thereby to legislate in reference to a subject over which it has no jurisdiction, yet if the enacting clauses of the Act bring the legislation within its powers, the Act cannot be considered ultra vires.
The Supreme Court noted that the Orissa Agricultural Income Tax (Amendment) Act, 1950 is certainly a legislation on taxing agricultural income as described in Entry 46 of the List II of Seventh Schedule. The State Legislature had undoubted competency to legislate on agricultural income tax and the substance of the amended legislation of 1950 is that it purports to increase the existing rates of agricultural income tax. This may be unjust or inequitable, but that does not affect the competency of the legislature. If a legislature is competent to do a thing directly, then the mere fact that it attempted to do it in an indirect manner, cannot make the Act invalid.
The Supreme Court held that the Orissa Agricultural Income Tax (Amendment) Act, 1950 is not a colourable legislation.
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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.