Page 204

The Constitution distributes the legislative powers between the Parliament and the
State Legislature, and, they are required to act within their respective spheres.
Often the question arises as to whether or not the legislature enacting the law has
transgressed the limits of its constitutional power Such transgression may be
patent, manifest or direct, but it may also be disguised, covert and indirect. The
doctrine of colourable legislation is applied when the transgression is disguised,
covert and indirect. The “colourable legislation” simply means a_legislation which,
while transgressing constitutional limitation, is made to appear as if it were quite
constitutional

If the law enacted by the legislature is found in substance and in reality beyond the
competence of the legislature enacting it, it will be ultra vires and void, even
though it apparently purports to be within the competence of the legislature
enacting it. It is the substance of the Act that is material and not merely the form or
outward appearance. This doctrine is based on the maxim that ‘what one cannot do
directly, that cannot be done indirectly.’ It is also characterized as a fraud on the
Constitution because no legislature can violate the Constitution by employing an
indirect method

(KCG Narayan Deo v state of Orissa AIR 1953 SC 375).

‘Colourability’ is thus bound up with incompetency and not tainted with bad faith
or evil motive. If the legislature has power to make law, mom in making the law is
irrelevant (Nageshwar V ARSRT Corpn. AIR 1959 SC 316). A thing is colourable
which in appearance only and not in reality, What

It purports to be. The court will look into the true nature and character of the
legislation and for that its object, purpose or design to make law On a
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Subject is relevnnt and not its motive (Jalan trading v Mill Mazdoor Sabha AIR
1967 SC 69). The propriety, expediency and necessity of a legislative act for the
determination of the legislative authority and are not for determination by courts (T
Venkaia Reddy v State of AP. AIR 1985 SC 724).

It is not too often that a law is declared bad on the ground of colourable legislation.
Further, if a statute is found to be invalid on the ground of legislative
incompetence, it does not permanently inhibit the legislature from re-enacting the
same if the power to do so is properly traced and established. In such a situation, it
cannot be said that subsequent legislation is merely a colourabIe legislation or a
camouflage to re-enact the Invalidated previous legislation.

in State of Bihar v Kameshwar Singh (AIR 1952 SC 252), the court held that the
Bihar Land Reforms Act, 1950 apparently purported to lay down rule for
detetmination of compensation but in reality it did not lay down such rule and
indirectly sought to deprive the petitioner of his property without any
compensation and hence it was a colourable legislation and Invalid. In this case, a
State law dealing with the abolition of the landlord system, provided for payment
of compensation on the basis of income accruing to the landlord by way of rent.
Arrears of the rent due to the landlord prior to the date of acquisition were to vest
in the State, and half of these arrears were to be given to the landlord as
compensation.

The Entry 42, List III, which provided for ‘principles on which compensation for
property acquired or requisitioned for the purpose of Union/State or for other
public purpose is to be determined was modified as the taking of the whole and
returning a half’ meaning nothing more or less than taking half without any return.
It was held that this is naked confiscation, on no matter in whatever specious form
it may be clothed or

Disguised. The impugned provision, therefore, in reality does not lay down any
principle for determining the compensation to be paid for acquiring the arrears of
rent.

Similarly, in K.T. Moopil Nair v State of Kerala (AIR 1961 SC 252), the
Travancore Cochin Land Tax Act was held to be invalid on the ground that Act
apparently purported to be a Taxing Act but in reality it was not so but was
confiscatory in character.

However, in the below-discussed case, the legislation was upheld by the court:

Page 206

Leading case :- K.C. Gajpati Narayan v State of Orissa AIR1953SC375

The Whole doctrine of colourable legislation ls based upon the maxim that you
cannot do indirectly what you cannot do directly if a legislature is competent to do
a thing directly, then the mere fact it attempted to do it in an indirect or disguised
manner cannot make the Act invalid. The doctrine has reference to the competence
and not to the motives, bonafides or malafides of the 'legislature.

It is the pith and substance of the Act that is material and not merely the form or
outward appearance. The extent of encroachment in the field reserved for the other
legislature is an element for determining whether the impugned Act is a colourable
piece of legislation.

In this case, the appellants’ main contention relates to the validity of the Orissa
Agricultural Income Tax (Amendment) Act, 1950. This Act, it is said, is not a
bonafide taxation statute at all, but is a colourabie 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 in respect to properties
compulsorily acquired [under the Orissa Estates Abolition Act, 1952], might be
kept down to as low a figure as possible. The contention really is that though
apparently it purported to be a taxation statute coming under Entry 46 of List II,
really and in substance it was not so. It Was introduced under the guise of a
taxation statute with a view to accomplish an ulterior purpose, namely, to inflate
the deductions for the purpose 0f valuing an estate so that the compensation
Payable in respect of it might be as small as possible.

The Apex Court observed:

(i) It may be made clear at the outset that the doctrine of colourable legislation
does not involve any question of bona {ides or mala tides on the part of the
legislature. The whole doctrine resolves 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 [Vide Cooley’s Constitutional Limitations, Vol. 1, p. 379].

Page 207

(2) A distinction, however, exists between a legislature which is legally

omnipotent like the British Parliament and the laws promulgated by it which could
not be challenged on the ground of incompetence, 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.

(3). 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. 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. As was said by Duff, J. in
Attorney-General for Ontario v Reciprocal Insurers [1924 AC 328 at 337]: “Where
the law making authority is of a limited or qualified character it may be necessary
to examine with some strictness the substance of the legislation for the purpose of
determining what is that the legislature is really doing.”

(4). 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

Page -208

For the purpose of this investigation the com could certainly examine the effect of
the legislation and take into consideration its object. purpose or destgn BI
thesemonlyrelevnnt forthcpmposeofascemm the tn» character and substance of the
cum Inddteclauofeubjecuoflegislatioutowhnh mllybelongemdnotforlindingwthem
which induced the legislature to exercise its pom ukmwmmmmmmmc‘m
Constitution dnteven ifthe legislauuemmtk faceofanActmuithtendsmaebyblegislmi
refetmcetoesubjeaoverwhichhhamjm yet if the enacting clause: of the Act bring III:
legislation within its powers, the Act cannot be considered uitre vim [See Lefroy
on Canada. Cormimtton, page 15}.

(vi) The OrisseAgrioulttnl lnoomeTax (Amendmede.

Page-209

income tax is certainly a relevant item of deduction in the computation of the net
income of an estate and is not unrelated to it.

(vii) Under Entry 42 of List [11 which is a mere head of legislative power the
legislature can adopt any principle of compensation in respect to properties
compulsorily acquired. Whether the deduction: are large or small, inflated or
deflated they do not affect the constitutionality of a legislation under this entry.

(viii) As we have already stated, the question of motive does not really arise in
such cases. It may appear on scrutiny that the real purpose of a legislation is
different from what appears on the face of it, but it would be a colourable
legislation only if it is shown that the real object is not attainable to it by reason of
any constitutional limitation or that it lies within the exclusive field of another
legislature

The Court held: The result is that in our opinion the Orissa Agricultural Income
Tax (Amendment) Act, 1950 could not be held to be a piece of colourable
legislation, and as such invalid.]

In State of M.P. v Mahalaxmi Fabric Mills Ltd (AIR 1995 SC 2213). the Central
Government was vested with the power under Sec. 9(3) of the Mines and Minerals
(Regulation and Development) Act, 1957 to increase the rates of royalty to any
higher amount once during every three years. In 1982, several coal producing
States imposed coal development cess and started receiving revenue for effecting
development of their mining areas. However, the cess was held to be invalid and
beyond the legislative competence of the State Legislatures. The State concerned
approached the Central Government. The Parliament passed the Cess and other
Taxes on Minemls Validating Ordinance, 1992 for validating the oess paid by the
coal consumers. Subsequently, a notification was issued by the Central
Government increasing the royalty rates ti'om 400 per cent to 2000 per cent

It was contended that the Notification was a colourable device and it Was issued
not for the development of minerals but for a collateral purpose 01' compensating
the State Governments. The Supreme Court upheld the Validity of the Notification
and held that it could not be said to be a colourable device. The minerals belonged
to the States, and if the Central Government had taken into consideration the fact
that State revenues were

Page 210

required to be re-compensatcd on account of the loss suffered by them in their

abortive effort to escalate the royalty, it could not he considered to be an irrelevant
consideration.

In S.S Bola v B.D. Sardana (AIR I997 SC 3127), the apex court held Colourable
legislation is one where the legislature has no power to legislate on an item either
because of its non-inclusion in the lists in Seventh schedule, or on account of
limits In view of the fundamental rights or any Other constitutional power or in
violation of principle of basic structucture of the Constitution. If on an
examination of the Act, the court finds that legislature has travelled beyond its
power or competence or transgresses the limits imposed by the Constitution itself,
such an enactment is called “colourable legislation”.
In other words, it has a reference to the legislative incompetence hot to the power
of the legislature as such. If the legislature enact: the in the pretext of the exercise
of the legislative power though actually it does not possess such power, the
legislation to that extent either is void or becomes voidable on a declaration to that
etTect by a constitutional (Supreme Court and High Court). It would, therefore, be
said that the legislature enacts the law in purported colourable exercise of its
power.

In Naga People’s Movement for Human Rights v Union of India (AIR 1998 SC
431), the Supreme Court rejecting the argument that the Armed Forces (Special
Powers) Act, 1958, enacted by Parliament is a colourable piece of legislation. has
observed: “Ultimately the issue boils down to the question Whether the legislature
has the competence to enact the legislation became if the impugned legislation falls
within the competence of the legislation the question of doing something indirectly
which cannot be done directly does not arise. The real purpose of legislation may
be different from what appears on its face, but it would be colourable legislation
only if the real object is mt attainable by the legislature because it lies beyond its
ambit.” The impugned Act has been held to relate to Entry 2, List I as well as the
residuary power of parliament under Art. 248 read with Entry 97, List I.