1958 (11) TMI 28 - SC - Indian Laws

Court upholds Motor Vehicles Act scheme but faults State approval process for lack of natural justice

The Court held that Chapter IV-A of the Motor Vehicles Act, 1939 did not violate the petitioners' fundamental rights under the Constitution. The scheme ... Fundamental right to carry on trade or business - compulsory acquisition and compensation under Article 31 - colourable legislation - State Transport Undertaking scheme - statutory procedure under ss. 68 C and 68 D - quasi judicial v. administrative character of executive action - principles of natural justice - impartial hearing and bias - successor liability and transfer of departmental assets to statutory corporationFundamental right to carry on trade or business - compulsory acquisition and compensation under Article 31 - colourable legislation - Validity of Chapter IV A of the Motor Vehicles Act (nationalisation scheme) vis a vis Articles 19 and 31 of the Constitution - HELD THAT: - The Court examined whether Chapter IV A effects a transfer of ownership or right to possession of an assessee's business such as to attract the protections of Art. 31(2) and thereby require compensation; and whether the Chapter is a colourable device to evade the constitutional requirement of compensation. It held that cancellation of a permit and issuance of a new permit to a State Transport Undertaking are regulatory acts creating distinct licences rather than a transfer of business assets or ownership to the State. No assets or proprietary incidents of the permit holder were taken over by the Undertaking; s. 68 G's provision for compensation for the unexpired period of a permit mitigates hardship but does not prove that the legislature regarded the process as a compulsory acquisition requiring Art. 31(2) compensation. Applying the test for colourable legislation, the Court found no substance to the contention that Chapter IV A, in form or substance, effectuates a transfer of ownership to the State or a State controlled corporation so as to violate Art. 31.Chapter IV A does not infringe Articles 19 or 31; it does not amount to compulsory acquisition of the permit holder's property or to colourable legislation.State Transport Undertaking scheme - statutory procedure under ss. 68 C and 68 D - quasi judicial v. administrative character of executive action - Nature of the State Government's function under s. 68 D(2) and validity of the approval procedure adopted for the Andhra Pradesh scheme - HELD THAT: - The Court analysed the statutory scheme under ss. 68 C and 68 D and the Rules framed thereunder to ascertain whether the State Government was required to act judicially when considering objections to a published scheme. The majority (Subba Rao, J., with whom the majority concluded) held that the provisions create a lis like situation - a proposal by the State Transport Undertaking and objections by affected persons - and that the statute imposes a duty to hear and decide in a manner approximating judicial procedure. Consequently, the approval of the scheme by the State Government was a quasi judicial act requiring compliance with the principles of fair hearing. (Two other members of the Bench expressed the view that the exercise was administrative in character; but the operative result follows the majority's finding on procedural requirements.)The State Government's consideration under s. 68 D(2) is judicial/quasi judicial in character and must conform to the principles of judicial procedure.Principles of natural justice - impartial hearing and bias - State Transport Undertaking scheme - statutory procedure under ss. 68 C and 68 D - Whether the statutory hearing and decision making in this case complied with principles of natural justice - HELD THAT: - Applying the majority's view that the Government was required to decide objections judicially, the Court examined the manner in which objections were dealt with: the Secretary in charge of the Transport Department (who was head of the departmental limb that had prepared the scheme and thus had an institutional connection to one side of the dispute) conducted the hearings and recorded notes, and the Chief Minister thereafter passed the formal order. The Court held that (i) an officer so directly connected with the departmental proponent giving the hearing offended the requirement that the tribunal be impartial, and (ii) bifurcating the functions so that one person hears and another decides undermines the efficacy of a 'personal hearing' and the safeguards of quasi judicial process. Public statements by senior officials were considered but were not sufficient by themselves to prove pre determination; nonetheless, the combination of hearing by an interested departmental head and decision by another political authority vitiated the procedure followed.The approval of the scheme was vitiated for non compliance with principles of natural justice; the approved scheme was quashed on that ground.State Transport Undertaking scheme - statutory procedure under ss. 68 C and 68 D - successor liability and transfer of departmental assets to statutory corporation - Whether the Road Transport Department of Andhra Pradesh qualified as a State Transport Undertaking, whether the General Manager who published the scheme had authority, and whether the newly constituted Road Transport Corporation could implement the approved scheme - HELD THAT: - The Court found that the Road Transport Department (including the former Hyderabad departmental unit now part of Andhra Pradesh) fell within the statutory definition of State Transport Undertaking and that the General Manager who signed and published the proposal acted on behalf of that Undertaking. The State Government lawfully transferred the management and assets of the Road Transport Department to the Andhra Pradesh Road Transport Corporation under its powers; consequently, the Corporation was the lawful successor and, in principle, capable of implementing a validly approved scheme. These factual and legal determinations were upheld notwithstanding the procedural invalidity later found in the approval process.The Road Transport Department was a State Transport Undertaking; the General Manager was empowered to publish the scheme on its behalf; and the Road Transport Corporation became the successor entitled to implement an approved scheme.Final Conclusion: The Court upheld the constitutional validity of Chapter IV A and rejected the contention that it effects a compulsory acquisition requiring Article 31(2) compensation. However, on the majority view the State Government's approval of the Andhra Pradesh scheme was quashed because the statutory hearing was not conducted in conformity with the requisite principles of impartial adjudication and fair hearing; the Road Transport Corporation, while a lawful successor to the Department, is restrained from implementing the impugned approved scheme until the State Government re conducts the statutory enquiry and decides objections in accordance with law. Parties to bear their own costs. Issues Involved:1. Constitutionality of Chapter IV-A of the Motor Vehicles Act, 1939.2. Validity of the scheme framed under Chapter IV-A.3. Authority of the General Manager to publish the scheme.4. Compliance with the procedural requirements of Sections 68-C and 68-D of the Act.5. Nature of the hearing by the State Government under Section 68-D(2).6. Alleged bias and prejudgment by the State Government.7. Implementation of the scheme by the Road Transport Corporation.Issue-Wise Detailed Analysis:1. Constitutionality of Chapter IV-A of the Motor Vehicles Act, 1939:The petitioners contended that Chapter IV-A of the Act violated their fundamental rights under the Constitution, particularly Article 31. They argued that it authorized the State to acquire undertakings without providing compensation, thus constituting a fraud on the Constitution. The Court held that Chapter IV-A did not infringe the fundamental rights of the petitioners under Article 31. It was determined that the provisions did not involve a transfer of ownership or right to possession of any property to the State or a Corporation, and therefore, no compensation was required under Article 31(2).2. Validity of the scheme framed under Chapter IV-A:The petitioners argued that the scheme was ultra vires the Act, as it did not comply with Sections 68-C and 68-D. The Court found that the scheme was published by the General Manager of the State Transport Undertaking, and the procedural requirements were followed. However, the approval of the scheme by the State Government was found to be vitiated due to non-compliance with principles of natural justice.3. Authority of the General Manager to publish the scheme:The petitioners questioned the authority of Shri Guru Pershad, the General Manager, to publish the scheme. The Court held that Guru Pershad was the General Manager of the Road Transport Department of the erstwhile Hyderabad State and continued to function as such in Andhra Pradesh. Therefore, he had the legal authority to represent the State Transport Undertaking and publish the scheme.4. Compliance with the procedural requirements of Sections 68-C and 68-D of the Act:The petitioners contended that the scheme did not disclose that the State Transport Undertaking was of the opinion that it was necessary in the public interest. The Court found that the scheme's preamble indicated that it was proposed for providing an efficient, adequate, economical, and properly coordinated road transport service in public interest. Thus, it was inferred that the necessary opinion was formed before publishing the scheme.5. Nature of the hearing by the State Government under Section 68-D(2):The petitioners argued that the State Government was discharging a quasi-judicial function and should have given a personal hearing to the objectors. The Court held that the State Government's order under Section 68-D was a judicial act. However, the hearing given by the Secretary, Transport Department, who was also in charge of the Transport Department, violated the principles of natural justice, as he was an interested party.6. Alleged bias and prejudgment by the State Government:The petitioners alleged that the Government had prejudged the case before holding the enquiry, as indicated by the Chief Secretary's statement to the press. The Court found that the statement referred to the proposed scheme and did not indicate a prejudgment of the objections. However, the hearing was vitiated due to the Secretary's involvement, who was part of the Transport Department.7. Implementation of the scheme by the Road Transport Corporation:The petitioners argued that the Road Transport Corporation could not implement the scheme proposed by the defunct State Transport Undertaking. The Court held that the Road Transport Corporation, established under the Road Transport Corporations Act, 1950, was the successor to the State Transport Undertaking and had the authority to implement the scheme.Conclusion:The Court quashed the order approving the scheme due to the violation of principles of natural justice in the approval process. The State Government was directed to conduct a fresh enquiry in accordance with the law, allowing the petitioners to file additional objections. The parties were directed to bear their own costs.