A) ABSTRACT / HEADNOTE

The Supreme Court of India in Gullapalli Nageswara Rao and Others v. Andhra Pradesh State Road Transport Corporation and Another, [1959] Supp. (1) S.C.R. 319 addressed the constitutional validity and procedural regularity of nationalizing road transport under Chapter IVA of the Motor Vehicles Act, 1939, as amended by Act 100 of 1956. The petitioners challenged the nationalization scheme on grounds of infringement of their fundamental rights under Article 19(1)(g) and Article 31 of the Constitution of India, alleging that it amounted to a colourable legislation and a deprivation of property without adequate compensation. The case critically examined the extent of the State’s authority to regulate and monopolize transport services, the application of principles of natural justice in administrative actions, and the scope of judicial review concerning legislative competence and procedural fairness. The Court’s nuanced judgment distinguished between legislative intent and administrative action, emphasizing the necessity for State authorities to act judicially while deciding objections to the scheme. Ultimately, the Court found procedural violations in how objections were handled, leading to the quashing of the scheme while upholding the constitutional validity of the enabling legislation.

Keywords: Nationalization, Motor Vehicles Act, Colourable Legislation, Natural Justice, Judicial Review, Fundamental Rights, Administrative Law.

B) CASE DETAILS

i) Judgement Cause Title:
Gullapalli Nageswara Rao and Others v. Andhra Pradesh State Road Transport Corporation and Another

ii) Case Number:
Petition No. 100 of 1958

iii) Judgement Date:
5 November 1958

iv) Court:
Supreme Court of India

v) Quorum:
S. R. Das, C.J., N. H. Bhagwati, B. P. Sinha, K. Subba Rao, K. N. Wanchoo, JJ.

vi) Author:
Subba Rao, J. (majority); separate judgments by Sinha, Wanchoo, and others.

vii) Citation:
[1959] Supp. (1) S.C.R. 319

viii) Legal Provisions Involved:

• Motor Vehicles Act, 1939 (as amended by Act 100 of 1956), Sections 68C, 68D, 68F, 68G, 68A(b)

• Constitution of India, Articles 19(1)(g), 31, 32

ix) Judgments Overruled by the Case:
None

x) Case is Related to which Law Subjects:

• Constitutional Law

• Administrative Law

• Motor Vehicles Law

• Public Law

• Natural Justice

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The case arose from the Andhra Pradesh government’s attempt to nationalize road transport under Chapter IVA of the Motor Vehicles Act, 1939 inserted by Act 100 of 1956. The State published a scheme under Section 68C to operate motor transport services, affecting private operators including the petitioners who were permit holders. The State’s decision to approve the scheme after receiving objections was challenged under Article 32 for violating fundamental rights. The core issue was whether nationalization infringed constitutional rights and whether the procedure adopted in hearing objections violated principles of natural justice.

D) FACTS OF THE CASE

The petitioners had been operating bus services in Krishna District under permits issued under the Motor Vehicles Act, 1939. Following the introduction of Chapter IVA, the State Transport Undertaking published a scheme under Section 68C proposing to nationalize transport services on specific routes. The petitioners filed objections as permitted under Section 68D, which were heard by the Secretary to the Home Department (Transport), who later reported to the Chief Minister. The Chief Minister approved the scheme, and it was published officially. Petitioners contended that:

• The Act was colourable legislation circumventing constitutional safeguards under Article 31.

• The scheme violated natural justice since the authority hearing objections was biased and different from the decision-maker.

• Procedural violations invalidated the entire nationalization process.

E) LEGAL ISSUES RAISED

i) Whether Chapter IVA of the Motor Vehicles Act, 1939 constitutes colourable legislation violating Article 31 of the Constitution?

ii) Whether the procedure adopted by the State Government in approving the scheme under Section 68D violated principles of natural justice?

iii) Whether the deprivation of business amounts to unconstitutional acquisition of property?

iv) Whether the State Government acted quasi-judicially or administratively in approving the scheme?

F) PETITIONER/ APPELLANT’S ARGUMENTS

i) The counsels for Petitioners submitted that:

The entire scheme amounted to an indirect expropriation of their business in violation of Article 31. The cancellation of permits without full compensation constituted deprivation of property without adequate consideration, which the Constitution prohibits. They argued that although Section 68G provided compensation for unexpired permits, it did not cover the loss of the business itself.

Citing State of West Bengal v. Subodh Gopal Bose [1954] S.C.R. 587, they emphasized that deprivation extends beyond title transfer to substantial loss of rights.

The petitioners further contended that the hearing process under Section 68D was vitiated. The Secretary to the Home Department, who was in charge of transport, heard objections but the Chief Minister decided on the approval. This separation violated the maxim qui audi alteram partem, meaning that the person who hears must decide.

They cited Province of Bombay v. Khushaldas S. Advani [1950] S.C.R. 621, stressing that even administrative bodies must adhere to natural justice when deciding disputes affecting rights.

The petitioners also alleged that the Secretary being a departmental head involved in nationalization lacked neutrality, violating the rule against bias (nemo iudex in causa sua).

G) RESPONDENT’S ARGUMENTS

i) The counsels for Respondents submitted that:

The Attorney General argued that Chapter IVA was enacted under the State’s legislative competence pursuant to Article 19(6)(ii), which permits State monopolies. Nationalization was lawful and aimed at ensuring efficient public transport in public interest. The State was empowered to restrict private trade in public interest, and any loss of business was incidental to lawful regulation.

Citing K. C. Gajapati Narayan Deo v. State of Orissa [1954] S.C.R. 1, they contended that the Court cannot question the legislature’s motives if the law is within its competence.

Further, it was argued that cancellation of permits under Section 68F did not involve transfer of ownership or property to the State, thus falling outside the scope of Article 31(2) after its amendment by the Constitution (Fourth Amendment) Act, 1955.

Regarding procedure, they argued that the Secretary merely conducted a fact-finding inquiry and placed his report before the Chief Minister, who made the final decision. Thus, there was no procedural irregularity.

They relied on Franklin v. Minister of Town and Country Planning [1948] A.C. 87, asserting that administrative procedures allow division of functions between inquiry officers and decision-makers.

H) RELATED LEGAL PROVISIONS

i) Motor Vehicles Act, 1939 (as amended by Act 100 of 1956)

• Section 68C – Power of State Undertaking to propose nationalization schemes.

• Section 68D – Procedure for objections and approval.

• Section 68F – Power to cancel existing permits.

• Section 68G – Compensation for unexpired permits.

ii) Constitution of India

• Article 19(1)(g) – Right to practice any profession, trade or business.

• Article 19(6)(ii) – Permits State monopolies in public interest.

• Article 31 (Pre-1978) – Protection against deprivation of property.

• Article 32 – Right to constitutional remedies.

I) JUDGEMENT

a. RATIO DECIDENDI

The Supreme Court rejected the petitioners’ argument that Chapter IVA was colourable legislation. It held that the legislature acted within its competence under Entry 35, List III (Concurrent List) and Article 19(6)(ii), which permits State monopolies in public interest.

The Court stated: “The legislature can only make laws within its legislative competence. Its legislative field may be circumscribed by specific entries or limited by fundamental rights created by the Constitution”.

The Court emphasized that cancellation of permits and issue of new permits to the State Undertaking did not amount to acquisition or transfer of property under Article 31(2). The State merely regulated trade and business as authorized by law.

However, on the procedural issue, the Court found a violation of natural justice. Since the Secretary to the Transport Department was part of the department proposing the scheme, he was an interested party. Moreover, the person who heard objections was not the one who decided them. This bifurcation offended the principles of audi alteram partem and nemo judex in causa sua.

Thus, while upholding the constitutionality of Chapter IVA, the Court quashed the specific scheme for violating principles of natural justice.

b. OBITER DICTA 

Justice Subba Rao observed that while legislative motive is irrelevant in determining competence, courts may inquire into legislative competence where colourable legislation is alleged. This principle serves as a crucial safeguard against indirect infringement of constitutional limitations.

c. GUIDELINES 

• Legislative competence is paramount; motive is irrelevant if the law falls within competence.

• Cancellation of permits under Chapter IVA does not constitute acquisition of property.

• Administrative procedures involving individual rights require strict adherence to natural justice.

• The person who hears objections must also decide them to maintain fairness.

J) REFERENCES

a. Important Cases Referred

1. K. C. Gajapati Narayan Deo v. State of Orissa, [1954] S.C.R. 1.

2. State of West Bengal v. Subodh Gopal Bose, [1954] S.C.R. 587.

3. Dwarkadas Srinivas of Bombay v. Sholapur Spinning & Weaving Co., [1954] S.C.R. 674.

4. Saghir Ahmed v. State of U.P., [1955] 1 S.C.R. 707.