H. C. Narayanappa And Others vs The State Of Mysore And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Petition No. 2 of 1960

Decision Date: 28 April 1960

Coram: J.C. Shah, Bhuvneshwar P. Sinha, Syed Jaffer Imam, A.K. Sarkar

In the matter titled H. C. Narayanappa and others versus the State of Mysore and others, a decision was rendered on 28 April 1960 by the Supreme Court of India. The judgment was authored by Justice J. C. Shah, and the bench was composed of Justices J. C. Shah, Bhuvneshwar P. Sinha, Syed Jaffer Imam, and A. K. Sarkar. The petitioners, identified as H. C. Narayanappa and other private operators, brought the case against the State of Mysore and additional respondents, seeking relief under Article 32 of the Constitution for the enforcement of their fundamental rights. The citation for the decision is reported as 1960 AIR 1073 and 1960 SCR (3) 742, with subsequent references appearing in later reports such as 1961 SC 82, 1963 SC 1047, and others. The subject matter concerns the Transport Business concerning stage carriages, specifically the exclusion of private operators, the competence of Parliament to create monopolies, and the grant of a monopoly to the State for the transport business, as framed by the State Transport Undertaking. The statutory framework involves the Motor Vehicles Act of 1939, Chapter IVA, sections 68C and 68D(2), and relevant constitutional provisions, including Articles 12, 13(3)(a), 19(1)(g), 19(6), 298, as well as entries in the Seventh Schedule pertaining to List II entry 26 and List III entries 21 and 35. The headnote outlines that the General Manager of the Mysore Government Road Transport Department, exercising powers under section 68C of the Motor Vehicles Act, published a scheme that excluded private operators from certain routes within a specified area and reserved those routes for the State Transport Undertaking. The scheme received approval from the Government under section 68D(2) after the Chief Minister provided the affected operators an opportunity to make representations against it. The petitioners, numbering seven hundred and forty‑three private operators, challenged the scheme’s validity and the government’s action on several grounds: first, they claimed a fundamental right to engage in the business of plying stage carriages and argued that the provisions of Chapter IVA, which grant the State an exclusive right to conduct motor transport business, were unconstitutional; second, they contended that Chapter IVA merely regulated the procedure for State entry into motor transport and, absent explicit legislation by the State, the State lacked authority to exclude private operators; third, they maintained that the scheme violated the equal protection clause because it covered only fourteen of the thirty‑one routes on which stage carriages operated in the designated area. The Court held that the term “commercial and industrial monopolies” in entry 21 of List III of the Seventh Schedule is sufficiently broad to encompass the grant or creation of such monopolies to the State and to citizens, and that Parliament is competent to enact Chapter IVA under entry 21 read with entry 35 of List III. The Court further observed that a scheme made under section 68C may be regarded as a law within the meaning of Article 19(6), even though it excludes private operators from the notified routes, and that this exclusion does not render the scheme vulnerable to attack as an infringement of the fundamental right guaranteed by Article 19(1)(g). Finally, it was noted that the scheme was approved specifically for the fourteen notified routes rather than an entire area, and because a scheme under section 68C can relate to an area, a route, or a portion thereof, it could not be challenged as discriminatory.

It was observed that the Constitution’s reference to “commercial and industrial monopolies” included not only the granting or creation of monopolies for the State and its citizens but also the power to control such monopolies. The Court further held that Parliament possessed the authority to enact Chapter IVA of the Motor Vehicles Act by relying on entry 21 together with entry 35 of List III of the Seventh Schedule. The Court also concluded that a scheme framed under section 68C of the Motor Vehicles Act qualified as “law” for the purposes of Article 19(6) of the Constitution, because it was enacted by the State to exclude private operators from routes or areas that had been notified, and that such a scheme was insulated from attack on the ground that it violated the fundamental right guaranteed by Article 19(1)(g). Moreover, the Court found that a proper reading of the scheme showed that it had been approved with respect to fourteen specific notified routes rather than an entire notified area, and that because a scheme under section 68C may be made in relation to an area, to any route, or to a portion of a route, the scheme could not be characterised as discriminatory.

The matter before the Court was an original jurisdiction petition, numbered 2 of 1960, filed under Article 32 of the Constitution for the enforcement of fundamental rights. Counsel for the petitioners were instructed to represent the applicants, while counsel for the respondents and the intervenor were similarly engaged. The judgment was delivered on 28 April 1960 by Justice Shah. The petitioners sought a writ of certiorari to set aside a scheme that had been approved under section 68D(2) of the Motor Vehicles Act, 1939, by the Government of the State of Mysore, and also requested a writ of prohibition against the State of Mysore, the General Manager of the Mysore Government Road Transport Department, and the Regional Transport Authority in Bangalore, to prevent them from acting pursuant to the scheme. The petitioners were operators of stage‑carriage services on certain routes within the area commonly known as the “Anekal area” in Bangalore District. On 13 January 1959 the General Manager of the Mysore Government Road Transport Department, hereinafter referred to as the second respondent, issued a scheme exercising the powers granted by section 68C of the Motor Vehicles Act, 1939, which excluded private operators from designated routes and reserved those routes for the State transport undertaking in the Anekal area. The Chief Minister of Mysore allowed the affected operators to make oral representations, examined the written objections, considered the oral submissions, and subsequently approved the scheme as formulated by the second respondent. The scheme was published in the Mysore State Government Gazette on 23 April 1959. On 23 June 1959 renewal applications filed by petitioners numbered one to three for permits to ply stage‑carriages on routes covered by the scheme were rejected by the Transport Authority, and permanent permits were granted to the second respondent, effective from 24 June 1959, authorising it to operate buses on those routes. This led to the filing of Writ Petition No. 463 of 1959 challenging the validity of the permanent permits granted to the second respondent.

In the appeal before this Court, the High Court of Mysore was reported to have held that the issuance of permits to the second respondent before the expiry of six weeks from the date of the application was illegal. After that finding, the high court directed that renewal permits, which would remain in force until 31 March 1961, be granted to petitioners numbered one to three together with certain other operators; these renewal permits were to be issued by the third respondent. The second respondent, relying upon the scheme that had been approved on 15 April 1959, subsequently applied for fresh permits to operate stage carriages on the routes that were specified in the scheme. Notices calling for returns were issued to the operators who were likely to be affected, and those notices were required to be returned on or before 5 January 1960.

On 4 January 1960, five petitioners approached this Court invoking article thirty‑two of the Constitution, seeking to have the scheme set aside and to obtain incidental reliefs. The petitioners contended that they possessed a fundamental right to carry on the business of plying stage carriages and that the scheme framed by the second respondent and approved by the State of Mysore unlawfully deprived them of that constitutional right in the Anekal area. Although the writ petition raised a number of different grounds, the counsel for the petitioners confined his oral submissions to four principal points. First, they argued that the scheme violated the equal‑protection clause because it covered only fourteen of the total thirty‑one routes on which stage carriages were operated for public transport in the Anekal area, and even on those fourteen routes two operators were excluded, thereby creating a flagrant discrimination among operators. Second, they maintained that chapter four‑A of the Motor Vehicles Act, 1939 merely regulated the procedure by which a State could enter the motor‑transport business, and that, in the absence of a specific statute enacted by the State of Mysore expressly authorising such exclusion of private operators, the State was incompetent to remove private operators from the market. Third, they alleged that the Chief Minister, who had heard the objections to the scheme, was biased against the petitioners and that the objections raised by the operators were not considered in a judicial manner. Fourth, they contended that the Chief Minister failed to give “genuine consideration” to the objections as required by the conditions prescribed by the Legislature.

Regarding the content of the scheme, the Court noted that column one of the scheme identified the geographical area as a part of Bangalore District, specifically Bangalore North, Bangalore South, Anekal and Hosakote Taluks. Column three listed the routes – including their starting points, termini, intermediate stations and total length – on which the State transport undertaking intended to introduce its services to the exclusion of private operators. Those routes were set out in “statement 1” which was appended to the scheme. Statement 1, as referenced, provides the detailed description of the fourteen routes that the State planned to serve under the scheme.

The document enumerates fourteen specific routes, providing for each the intermediate points, the total length of the route, the number of buses that are to be operated, and the maximum number of trips that may be made on that route. In column 4 of the same schedule, the record shows the number of stage‑carriage vehicles that already operate on each of those routes, together with the number of trips each vehicle makes and the names of the operators who own them, as set out in the accompanying Statement 2. Statement 2 lists the names and business locations of fifty‑six private operators, identifies the routes on which each operator runs stage‑carriage services, and indicates the quantity of stage‑carriage vehicles and the number of trips made by each operator on those routes. Within the Anekal region there are thirty‑one routes that are presently served by private stage‑carriage operators, but the scheme that has been approved applies only to fourteen of those routes.

Section 68C, insofar as it is relevant, authorises a State transport undertaking to prepare a scheme whenever it believes, in the public interest, that road‑transport services in a particular area, on a specific route, or on a portion thereof, should be run and operated by the State itself, whether that operation is to be exclusive, wholly or partially, of other persons. The scheme must contain particulars of the nature of the services to be provided, the area or route to be covered, and any other details that may be prescribed. Section 68D(1) requires that objections be invited from persons who may be affected by the scheme. Sub‑section 2 of Section 68D empowers the State Government, after it has considered those objections and given the objectors an opportunity to be heard, either to approve the scheme as submitted or to modify it. Sub‑section 3 provides that once the scheme has been approved or modified and published in the official gazette, it becomes final, is thereafter called the “approved scheme,” and the area or route to which it pertains is referred to as the “notified area” or “notified route.”

Representatives for the petitioners argued that, under Section 68C, a State transport undertaking may devise a scheme that covers an entire area or a group of routes within that area, but it may not devise a scheme that applies only to some of the routes while leaving others in the same area untouched. They contended that it was unnecessary for the Court to decide whether a scheme framed for a notified area could be limited to only certain routes, because a proper reading of the scheme shows that it was expressly approved with respect to fourteen notified routes and not with respect to an entire notified area. The approved scheme conforms to the format prescribed by the rules; in that format, column 1 must set out the area to which the scheme applies. However, a scheme made under Section 68C must relate either to an area or to any route or portion of a route where the transport service is to be undertaken by the State undertaking.

The Court observed that the purpose of the scheme was to have the State transport undertaking provide service to the exclusion of other operators, whether that exclusion was total or partial. It noted that column 1 of the approved scheme clearly identified the geographical area to which the scheme applied, but the mere naming of that area did not, either expressly or by implication, show an intention to exclude the operators of stage carriages from that area either wholly or partially. By contrast, column 3 of the scheme explicitly directed that the State transport undertaking would introduce its service on the specified routes to the exclusion of private operators. Consequently, the Court concluded that the scheme should be understood as applying to the fourteen notified routes rather than to the broader area described in column 1. Counsel for the petitioners relied upon an order dated 22 October 1959 issued by the third respondent, the Regional Transport Authority, which rejected applications for permits on one of the fourteen routes. That order was said to reflect the third respondent’s view that the scheme related to a notified area and not to specific routes. The order contained the statement: “an approved scheme for the exclusive operation in the notified area of Bangalore District” by the second respondent “has come into existence after the notification of the route Bangalore to Nallur, and the major portion of the route applied for lie in the notified area and as such it was not desirable to grant any permit to operators to pass through notified area in the intra‑State route.” The Court held that, although the third respondent may have assumed the scheme concerned a notified area when considering the application, the true construction of the scheme could not be decided on the basis of that assumption. The Court also examined a statement of objections filed by the second respondent on 24 October 1959, which opposed a private operator’s application for stage‑carriage permits on the route Siddalaghatta‑Bangalore via Nallur. In paragraph 4 of that statement it was submitted that “the existing notification dated 15 October 1959 came under the notified area of the department” of the second respondent “and that would overlap certain services of the department.” The Court noted that, although the second respondent referred to the scheme as dealing with “the notified area,” such reference did not inevitably mean that the scheme must be held to relate to that area. The petitioners further argued that among the operators on the fourteen routes, two individuals had been given special treatment, making the scheme discriminatory. The Court found this contention without merit. In paragraph 13 of the petition, it was alleged that two persons—Chikkaveerappa, who operated on the route Chikkathirupathi to Bangalore via Surjapur, Domsandra and Agara, and Krishna Rao, who operated on the route Bangalore to Chikkathirupathi via Agara and Surjapur—were not among those excluded from operating their vehicles on the notified routes. The Court observed that the affidavit filed by the State and the second respondent contended that the plea of

The Court observed that the petitioners’ assertion that the two individuals who operated stage carriages on the specified routes were not among those to be excluded was incorrect. It further recorded that the Secretary of the third respondent had formally notified those two individuals that they were “likely to be affected on giving effect to the approved scheme.” The Court noted that route‑item number two in statement one of the scheme is described as “Bangalore to Surjapur or any portion thereof,” a route that runs through Agara and Domsandra. However, the records do not show that the two named operators were entitled, by virtue of their stage‑carriage licences, to ply on that particular route with the authority to stop at the named places for the purpose of picking up passengers. The petition did not make clear whether the routes actually used by the two operators were identical to the notified route. Even assuming that the operators’ routes overlapped the notified route, the Court held that, in the absence of any evidence establishing that the operators possessed the right to pick up passengers along the notified stretch, the allegation of discrimination could not be sustained.

Regarding the constitutional aspects, the Court turned to Re. 2 and explained that Article 298 of the Constitution, as amended by the Constitution (Seventh Amendment) Act, 1956, recognises the executive power of both the Union and each State to engage in any trade or business. This Union power is subject, to the extent that the trade or business is not within Parliament’s exclusive legislative competence, to State legislation, and conversely the power of each State, to the extent that the trade or business is not within the State Legislature’s exclusive competence, is subject to Parliament’s legislation. The Court likened the position of the Union and State governments to that of ordinary citizens, stating that both may carry on any trade or business but are bound by any restrictions that may be imposed by the legislatures competent to legislate in respect of the particular trade or business. The Court then referred to Article 19(6) of the Constitution, as amended by the First Amendment Act, 1951, which provides that nothing in sub‑clause (g) of clause (1) of Article 19 shall affect the operation of any existing law insofar as it relates to, or prevents the State from making, any law governing the carrying on by the State or by a corporation owned or controlled by the State of any industry or business, whether the law excludes citizens wholly or partially. Consequently, the State may lawfully engage in any trade or business, and legislation concerning the State’s conduct of trade or business cannot be questioned on the ground that it infringes the fundamental freedom guaranteed under Article 19(1)(g). Finally, the Court noted that the Motor Vehicles Act, 1939, was enacted by the Central Legislative Assembly exercising its power under the Government of India Act, 1935, to legislate concerning mechanically propelled vehicles, and that Chapter IVA, containing sections 68A to 68I, was incorporated into that Act.

In the Motor Vehicles Act, the Parliament incorporated special provisions concerning the operation of transport undertakings owned or controlled by the State through Act 100 of 1956. Section 68A defined the term “State transport undertaking” to include, among others, any undertaking that provided transport services on behalf of the Central Government, a State Government or any Road Transport Corporation created under Act 44 of 1950. Section 68B stipulated that the provisions of Chapter IVA and the rules and orders made under it would prevail over Chapter IV and any other existing law. Under Section 68C the State transport undertaking was empowered to prepare and publish a scheme of road‑transport services for the State. Section 68D prescribed the procedure for lodging objections to the proposed scheme, for considering those objections, and for publishing the final scheme after it had been approved or modified by the State Government. Section 68F dealt with the issuance of permits to State transport undertakings for a notified area or route, directing that the Regional Transport Authority must grant such permits notwithstanding any provision of Chapter IV. The same section also authorised the Regional Transport Authority, in order to implement the approved scheme, to refuse to consider any application for renewal of another permit, to cancel any existing permit, to alter the terms of a permit so that it became ineffective after a specified date, to reduce the number of vehicles authorised under the permit, and to restrict the area or route covered by the permit. Section 68G laid down the principles and method for determining compensation to persons whose existing permits were cancelled. Consequently, Chapter IVA provided that a State transport undertaking, whether a departmental agency or a corporation owned or controlled by the State, upon approval of a scheme, was entitled, in accordance with that scheme, to an exclusive right to carry on motor‑transport business. The Regional Transport Authority was bound to issue permits for the routes covered by the scheme to the State transport undertaking if the undertaking applied for them, and was also required, in giving effect to the approved scheme, to modify the terms of existing permits and to refuse to consider renewal applications from private operators. Thus Chapter IVA was not merely a set of procedural regulations for State road‑transport activities; it enabled the State transport undertaking, subject to the scheme, to exclude private operators and to obtain a partial or complete monopoly over transport services in a notified area or on notified routes. The Court observed that the Parliament’s authority to enact legislation granting such monopolies to the State Government in the field of road transport was not open to serious challenge. Entry No 21 of List III of the Seventh Schedule authorised the Union Parliament and

In this matter, the Court explained that entry No 21 of List III of the Seventh Schedule authorises both the Parliament and the State Legislatures to enact laws concerning commercial and industrial monopolies, combinations and trusts. The petitioners contended that the power under entry No 21 is limited to legislation that controls monopolies and does not extend to the creation or grant of such monopolies. The Court found this contention to be of little substance because the expression “commercial and industrial monopolies” is sufficiently wide to encompass the power to grant monopolies to the State or to private citizens as well as the power to regulate or control existing monopolies. The Court further observed that language used in a constitutional provision conferring legislative authority must not be interpreted narrowly; rather, it must be read in a broad manner that gives the widest possible amplitude to the power conferred. The Court relied on the principles articulated in Navinchandra Mafatlal v. The Commissioner of Income‑tax, Bombay City(1) and The United Provinces v. Atiqa Begum(2) to support this view.

The Court then turned to entry No 26 of List II, which gives the States exclusive authority to legislate on trade and commerce within the State, subject to entry No 33 of List III. The Court held that this State competence does not diminish the concurrent power under entry No 21 of List III that allows both Parliament and State Legislatures to create commercial or industrial monopolies by law. The breadth of the power under the concurrent entry dealing specifically with monopolies cannot be presumed to be limited by the general nature of the expression “trade and commerce” in the State List. The Court noted that if the petitioners’ and interveners’ argument—that legislation relating to monopoly in trade and industry falls exclusively within State jurisdiction—were accepted, then Parliament would be barred from legislating to create monopolies for the Union Government in any commercial or trading venture. This, the Court observed, would stand even though the power to conduct any trade or business under a monopoly is reserved to the Union by the combined operation of Article 298, and such legislation is protected from challenge under Article 19(6) on the ground that it infringes the fundamental freedom to carry on business.

Consequently, the Court concluded that Chapter IVA could duly be enacted by Parliament under entry No 21 read with entry No 35 of the Concurrent List. The Court rejected the plea that Article 19(6) requires the State, intending to carry on trade or business, to enact the law authorising such activity, describing that argument as likewise without force. The Court clarified that the term “the State” as defined in Article 12 includes the Government and Parliament of India as well as the Government and Legislature of each State. Accordingly, under entry No 21 of the Concurrent List, Parliament possesses the competence to legislate for the creation of commercial or trading monopolies, and there is nothing in the Constitution that deprives it of the authority to establish such monopolies in the constituent States. The Court characterised Article 19(6) as a mere saving provision, not a source of power to create monopolies.

The provision under discussion does not create a new power; rather, it shields the exercise of legislative power that falls within its scope from being challenged. The State’s authority to carry on trade or business to the exclusion of others does not arise because of Article 19(6). Instead, the State’s right to engage in trade or business is recognized by Article 298, and the power to exclude competitors in such trade is granted to the State by allowing it to make laws under entry 21 of List III of the Seventh Schedule. The exercise of that legislative power, when it touches fundamental rights, is protected from attack by Article 19(6). Moreover, the term “law” as defined in Article 13(3)(a) comprises any ordinance, order, bye‑law, rule, regulation, notification, custom, or similar instrument. Accordingly, the scheme framed under Section 68C qualifies as “law” within the meaning of Article 19(6). That scheme, made by the State, excludes private operators from notified routes or areas and is thereby insulated from the allegation that it infringes the fundamental right guaranteed by Article 19(1)(g).

Regarding the allegation that the Chief Minister who approved the scheme under Section 68D was biased, the Court found no merit in that claim. Section 68D of the Motor Vehicles Act imposes a duty on the State Government to act judicially when considering objections and when approving or modifying a scheme proposed by a transport undertaking, as affirmed in Gullapalli Nageswara Rao v. Andhra Pradesh State Road Transport Corporation and another. Although the Government is substantially a party to the dispute, the Court held that if the Government or the authority to which the power has been delegated acts judicially in approving or modifying the scheme, such approval cannot be challenged on a presumption of bias. A minister or any government officer exercising the delegated power does so in an official capacity, and unless reliable evidence shows personal bias, his decision will not be invalid merely because he is a part of the Government.

The Chief Minister submitted an affidavit stating that the petitioners’ contention that he was biased in favour of the scheme was groundless. He affirmed that he had heard all objections and representations presented before him and that he gave each objector a full opportunity to submit objections individually. The Chief Minister also provided detailed reasons for approving the scheme and addressed the objections he said were raised before him. In the final paragraph of his reasons, he noted that the Government had heard all arguments advanced on behalf of the operators, gave full consideration to them, and consequently concluded that the scheme was necessary in the public interest. This conclusion was recorded in the Supreme Court Reporter citation (1959) Supp. 1 S.C.R. 319.

The Court observed that the conclusion reached by the Chief Minister was that the scheme was necessary in the public interest and, therefore, it was approved subject to the modification that it would become effective on 1 May 1959. In the absence of any evidence contradicting these statements, the allegation of bias could not be sustained. The Court rejected the contention that the Chief Minister had failed to give genuine consideration to the objections raised by the operators in light of the prescribed conditions. It noted that the order issued by the Chief Minister addressed both questions of law and questions of fact. Although the order did not refer specifically to certain objections mentioned in the reply filed by the objectors, the Court held that this omission did not demonstrate a lack of consideration of those objections. The Court further explained that section 68D of the Motor Vehicles Act provides a guarantee to persons likely to be affected by the proposed scheme by affording them an opportunity to present their objections and to make representations to the State Government against the acceptance of the scheme. Such an opportunity is meaningful only if the objections are examined with a judicial approach. However, the Legislature does not envisage an appeal to this Court against the order of the State Government that approves or modifies the scheme. The Court stated that, provided the authority empowered to consider objections gives the objectors a chance to be heard and deals with those objections in relation to the purpose of the scheme, the final order of that authority is not subject to challenge on the basis that a different view might have been adopted or that detailed reasons were not provided for upholding or rejecting the contentions raised. Consequently, the Court found that the petitioners’ contentions failed, dismissed the petition with costs, and entered a final order of dismissal.