This article is authored by Shreya Jad. The article is a detailed case analysis of the Supreme Court’s judgement in Khazan Singh and Ors. vs. State of U.P. (1974) which discusses the scope and ambit of the State Government’s power to make laws on inter-state routes under Chapter IV-A of the Motors Vehicles Act, 1939. The decision is a landmark in the extra-territorial applicability of a State Government’s laws if sufficient territorial nexus is established.
Table of Contents
Introduction
The founding father of the Constitution of India added a unique feature to the Indian governance system by making it “quasi-federal” in nature. This means that while the governance structure carries elements of a federal government, it has a strong unitary core which does not make a true federation. Unlike a true federation of States, such as the United States of America, where the states voluntarily elect to unite and form a nation of their own free will, they can also secede from the Union at any time. The states in India are not granted any such authority, and their powers are perpetually subordinated to those of the Union Government.
In order to regulate the distribution of legislative powers between the Union and State Governments, as well as to define the extent of the powers of the State Government vis-a-vis the other states, it is necessary to establish effective laws that are tailored to the unique composition of our nation. These laws are enshrined in Part XI of the Constitution of India which exclusively deals with centre-state relations and defines the extent of the State Government’s powers vis-a-vis the other states. In addition to the Constitutional provisions for the distribution of powers between the centre and state, the Indian judiciary has issued binding rulings that have established legal doctrines through precedent governing centre-state relations. One of these doctrines developed by the Indian judiciary is the doctrine of territorial nexus.
The doctrine of territorial nexus emerges from Article 245 of the Constitution which defines the nature and extent of the powers of the Union Legislature as well as the State Legislature. As per the article, the Union Legislature has the power to make laws with respect to the whole or part of any territory of India, the State Legislature has the power to make laws for the whole or any part of the state. However, the article also legitimises the laws made by the Union Legislature even if they are operative beyond the territorial limits of India. The doctrine of territorial nexus provides such leave to the extension of the State Government’s powers beyond its territorial limits by stating that even a state law of extra-territorial operation shall be valid if a direct and sufficient nexus has been established between the subject matter of the legislation and the law being imposed.
Furthermore, it must be proved that the link between the subject matter and the laws enforced by the state is actual rather than illusory and that the liability sought to be imposed by the state is directly related to that nexus. The Supreme Court has, in several decisions, reiterated this doctrine and used it to validate several laws that were applicable in other states despite the limitation of territorial jurisdiction.
Details of the case
Name of the case: Ch. Khazan Singh and Ors. vs. State of U.P and Ors.
Citation: AIR 1974 SC 669, (1974)1 SCC 295
Nature of case: Civil Appeals Nos. 1737 to 1745 of 1972.
Bench: Justice A.N. Ray (then Chief Justice), Justice H.R. Khanna, Justice K.K. Mathew, Justice A. Alagiriswami and Justice P.N. Bhagwati (judgement authored by Justice H.R. Khanna).
Background of the case
The Supreme Court’s decision in the case of Khazan Singh vs. State of U.P (1974). (“Khazan Singh”) is an important addition to the plethora of judgements examining the territorial nexus of the state’s executive and legislative powers with respect to inter-state subjects. Briefly, the State Government of Uttar Pradesh had passed a notification in 1963 under Section 68-C and Section 68-D of the Motor Vehicles Act, 1939 (hereinafter referred to as MV-Act, 1939), authorising only State Transport Undertakings (“STU”) to ply their vehicles on inter-state routes between Rajasthan and Uttar Pradesh. By way of the same notification, the permits of private transport companies running their buses on these inter-state routes in both Rajasthan and Uttar Pradesh were revoked. Subsequently, some of the private bus owners objected to this and filed writ petitions before the High Courts of Uttar Pradesh and Rajasthan respectively, which were set aside, hence the private bus owners filed a civil appeal before the Supreme Court, challenging the validity of the aforementioned notifications on the grounds that the Government of Uttar Pradesh did not have the authority to pass a law revoking the licence of private bus owners in Rajasthan.
However, this contention was set aside by the Supreme Court, primarily on the basis that Section 68D of the Motor Vehicles Act, 1939, allowed the State Government to publish such a notification revoking the licence of private bus owners only with the prior approval of the Central Government, which had already been obtained by the Government of Uttar Pradesh before the notifications were published in the U.P. Gazette. Therefore, the Government of Uttar Pradesh did not act beyond the scope and ambit of its legislative and executive powers. The facts of the case and the resulting judgement by the Supreme Court are described more fully in the following paragraphs.
Facts of Khazan Singh and Ors. vs. State of Uttar Pradesh and Ors. (AIR 1974 SC 669)
- In 1960, the Government of Uttar Pradesh decided upon a reciprocal arrangement between Uttar Pradesh and Rajasthan, wherein the following inter-state routes would be nationalised for the operation of the STUs on the following routes. However, the Supreme Court took into consideration only 4 of these routes for the purposes of its judgement (the Bharatpur-Mathura route was excluded from the purview of the Supreme Court’s judgement):
1. Bharatpur-Agra
2. Bharatpur-Mathura
3. Alwar-Mathura
4. Mathura-Kama Kosi via Goverdhan;
5. Agra-Dholpur
The Government of Rajasthan consented to this arrangement.
- On 4th December 1961, the Government of Uttar Pradesh published a scheme in its Official Gazette (scheme), under Section 68C of the MV-Act, 1939 which allowed only STUs to provide road transport on the aforesaid inter-state routes.
- This effectively barred all the private transport operators from plying their vehicles on these inter-state routes. Further, the scheme stated that the permits granted to private operators (which included the appellants) for running their buses on these routes shall be cancelled, subject to any objections submitted against the Scheme as per Section 68D of the MV-Act, 1939.
- The Government of Uttar Pradesh invited objections against the Scheme, however, no objections were submitted and thereafter the Scheme was approved under Section 68D(2) of the MV-Act, 1939 by the Joint Judicial Secretary to the Government of Uttar Pradesh.
- Further, the Central Government also granted its approval to the scheme vide its letter dated 20th February, 1963. This approval was a necessary prerequisite for the scheme to become effective as per the proviso to Section 68D(3) of the MV-Act, 1939.
- The Scheme was published in the Official Gazette on 20th February 1963 granting exclusivity to STUs to ply on the inter-state routes and prohibiting private operators from running their buses on the same routes by cancelling their permits.
- A subsequent notification was published on 9th April 1963 through which the permits allotted to various private transport operators (including the appellants) granted by the Regional Transport Authority, Jaipur and countersigned by the Regional Transport Authority (Agra) were cancelled under Section 68F (2) of the MV-Act, 1939.
- The notifications dated 9th April 1963 and 4th December 1961 (notifications) were challenged by the appellants along with several other petitioners challenged the validity of the Scheme through writ petitions filed under Article 226 and Article 227 of the Constitution of India before the High Court of Allahabad as well as the High Court of Rajasthan, however for the purposes of the civil appeals before the Supreme Court, only the proceedings initiated before the High Court of Rajasthan were considered and therefore the decisions of the High Court of Rajasthan on the aforesaid writ petitions shall be examined herein.
Decision of the High Court of Rajasthan
The appellants filed a writ petition under Article 226 in the High Court of Rajasthan seeking that the impugned notifications (as mentioned above) be quashed on the grounds that the Government of Uttar Pradesh acted in excess of its legislative and executive power by cancelling the licences of private bus operators in Rajasthan. The petition was heard by a Single Judge of the High Court and it was held that “a State cannot by unilateral action provide transport services for a territory outside the limits of its own territory”.
The Single Judge further observed that the government of one state (in this case Government of Uttar Pradesh) cannot use its executive power to cancel the transport permits of private operators in another state (in this case Rajasthan). Additionally, the bus operators in Rajasthan had never been notified of this scheme as these Notifications had only been published in the Gazette of Uttar Pradesh. Accordingly, these Notifications were quashed by the Single Judge and the writ petitions filed by the appellants were allowed.
Subsequently, the order of the Single Judge was appealed against and the matter was heard by a division bench of the High Court of Rajasthan. In its order where it overturned the decision of the Single Judge, the division bench held that “when an undertaking proposes a scheme and the same is approved by the State Government, the undertaking and the State Government really perform the functions of the Central Government under clause (2) of Article. 258 of the Constitution.” With respect to the cancellation of permits of private bus operators in Rajasthan vide the impugned notifications, the division bench relied upon the notification dated 9th April 1963 which was countersigned by the Regional Transport Authorities based in Jaipur as well as Agra. The division bench further observed that when the Scheme was finalised the transport authorities of Uttar Pradesh cancelled the permits of private bus operators in the state which were countersigned by the transport authorities of Rajasthan and vice-versa. Therefore, the cancellation of permits was a concurrent and valid exercise.
The division bench also set aside the argument that the private bus operators in Rajasthan were unaware of the implementation of such a scheme since notices informing people about the scheme were put up on the notice boards of transport authorities of Uttar Pradesh and Rajasthan. Accordingly, the appeals against the decision of the Single judge were allowed and the decision in the writ petition was overturned.
Aggrieved by the decision of the division bench, the appellants filed the civil appeals under discussion before the Supreme Court, questioning the correctness of the view taken by the division bench in its judgement.
Issues raised
- Whether the power of the State Government to make laws can only operate within the territory of its own state or not?
- Whether the scheme implemented by the State Government of Uttar Pradesh is unconstitutional by virtue of the state implementing a law beyond its territorial limits or not?
- Whether in approving the Scheme, the State Government acted in excess of its executive power which cannot operate in areas beyond the territorial limits of the state or not?
Laws discussed in the case
Constitution of India
Article 13 and Article 245 of the Constitution
Article 13 of the Constitution of India nullifies any law (whether enacted before the Constitution came into force or enacted after the Constitution came into force) that abrogates or takes away any of the rights provided to the citizens in Part III of the Constitution i.e. Fundamental Rights. It also specifies which legislative instruments shall be deemed as “law” which include ordinances, rules, regulations, notifications, customs or usage having the force of law.
The power to make and enact laws has been vested in the Union and State Legislatures, as per Article 245 of the Constitution of India. More specifically, the said article defines the territorial limits where the laws made by each body shall extend. The Parliament has the authority to make laws for the whole or any part of the territory of India (implied authority that it can make laws for a state or union territory as well), whereas the State Legislature can make laws for its respective state only.
It is an established position that the legislature’s power to make laws is co-extensive with its power to repeal laws, therefore, both the Union and State Legislature derive their power to repeal laws also from Article 245. The Union or State Legislature generally repeals a law by way of a repealing act or ordinance, or, in the alternative, by way of superseding legislation that effectively repeals an existing law by replacing it.
In the case of Khazan Singh, the appellant had stated in its arguments that the State Government in approving a scheme in respect of an interstate route has effectively made a law and since the State Government is only confined to making laws which are applicable to its own territorial jurisdiction, the Scheme under discussion in the case is ipso facto unconstitutional. However, the Supreme Court rejected this contention, stating that while the Scheme would fall under the ambit of “law” as per Article 13(3), the embargo put in place by Article 245 would not be applicable to the State Government. Since the State Government derives its authority to approve a scheme for inter-state routes from Parliamentary legislation (MV-Act, 1939), it is well within its rights to approve a scheme for inter-state routes without acting in excess of its territorial limits.
Article 258 of the Constitution
Article 258 of the Constitution essentially deals with the delegation of powers from the Union to the State. The article states that the President of India, with the prior consent of the State Government can entrust to the State Government or any of its officers the legislative powers and executive functions performed by the Union Legislature, as it deems necessary and expedient.
Article 258(2) authorises Parliament to enact a law that confers powers and imposes duties upon the state or its officers and authorities, despite the fact that such authority pertains to a matter over which the State Legislature lacks the authority to enact laws. Therefore, it refers to a scenario in which the Union Government grants powers and responsibilities to the State Government to enact laws over subject matters which would normally fall outside the scope of the State Government’s authority.
While quashing the decision of the Learned Single Judge of the High Court of Rajasthan, the Division Bench also relied upon Article 258(2) and stated: “When an undertaking proposes a scheme and the same is approved by the State Government, the undertaking and the State Government really perform the functions of the Central Government under clause (2) of article 258 of the Constitution…”
Furthermore, while the appeal against this decision was being heard before the Supreme Court, the Supreme Court observed that the approval of the Scheme by the Government of Uttar Pradesh under Section 68D(3) did not signify encroachment in the sphere of executive function of the Government of Rajasthan. The approval was given in order to create a state monopoly in inter-state transport in accordance with the MV-Act, 1939 a Central Act. Further, since the actions of both the State Governments were in concurrence with each other it can hardly be said that there was any encroachment of executive powers of the State Government of Rajasthan. Therefore, the Supreme Court did not find the need to examine if the approval of the Scheme granted by the Government of Uttar Pradesh would be valid as per Article 258(2) of the Constitution.
Article 298 of the Constitution
Article 298 defines the executive powers of the Union and State Legislatures which respectively allow them to carry on any trade or business, hold and acquire property and also enter into contracts independently. In areas of trade/business/commerce where the Union is not permitted to establish laws, due to such areas being part of List II of the Seventh Schedule the Union’s executive power shall be subject to the laws of the State Government. Conversely, the executive power of a State Government over trade/business/commerce in areas where the Union has a right to legislate, as per List I and List III of the Seventh Schedule, shall be subject to the prevailing Union Legislation.
One of the arguments made by the appellants in this case was that the State Government, in approving the Scheme under Section 68D(3) of the MV-Act,1939 exercised its executive powers beyond the territorial limits of the state. However, while examining the nature and extent of the executive power granted to the State and Union Governments, the Court relied on Article 298 and held that such executive power exercised by the State Government under Article 298 can extend beyond the territorial limit of the state. The sole limitation on the executive power of the State Government is laid down in clause (b) of the proviso to Article 298 which stipulates that the executive power of a State Government is subject to the legislation passed by Parliament if it pertains to a trade or business that the State Government is unable to legislate over.
Under Entry 21 in List III of the Seventh Schedule, the Parliament has the right to make laws for commercial and industrial monopolies, and Entry 35 of List III of the Seventh Schedule, relates to making laws regulating mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied. While examining the creation of a state monopoly in transport services as per Chapter IVA of the MV-Act, 1939 in H.C. Narayanappa and others vs. State of Mysore and others (1960), the Supreme Court held that the extent of the Union Government’s authority with respect to commercial or industrial monopolies for states as per Entry 21 of List III, consists of the creation of commercial or industrial monopolies in states as well as controlling these monopolies.
As already held by the Supreme Court in the judgement of H.C. Narayanappa, Chapter IV-A of the MV-Act, 1939 was correctly enforced by the Parliament to achieve the objective of creating a state monopoly on mechanically propelled vehicles (transportation) as laid down in Entry 35 and Entry 21 of List III in the Seventh Schedule. In the context of Khazan Singh, the action taken by the Government of Uttar Pradesh in approving the Scheme was in accordance with the provisions of Chapter- IVA of the MV-Act, 1939 and creating a monopoly in the favour of STUs on the interstate routes under discussion. Thus, it cannot be said that the Government of Uttar Pradesh was acting in excess of its executive power or encroaching upon the executive functions of the Government of Rajasthan.
Motors Vehicles Act, 1939
Chapter IVA was inserted in the MV-Act by the Motor Vehicles (Amendment) Act, 1956 The said chapter enacted Sections 68A to 68I of the MV-Act, 1939 which dealt with provisions related to STUs.
Section 68B of Motor Vehicles Act
Section 68B of the MV-Act, 1939 is an overriding clause which states that the provisions of Chapter IVA and the rules and orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in Chapter IV of this Act or in any other law for the time being in force or in any instrument having effect by virtue of any such law.
Section 68C of Motor Vehicles Act
Section 68C of the MV-Act, 1939 enables an STU, as defined in Section 68A of the Act, to prepare a scheme for the nationalisation of transport services, with the particulars mentioned in the section, if the STU believes that it is in the public interest to do so. The STU can decide that the overall road transport services in a particular state or a part of the route thereof be run and operated by an STU. In creating such a monopoly, the STU has the right to partially or completely exclude private bus operators from such transport services. In order to make this effective, the STU shall formulate a scheme consisting of the particulars of the nature of the services rendered, the area/route which shall be covered and any other details, which shall be subsequently published in the Official Gazette and/or any other manner which the State Government deems fit.
Section 68D of Motor Vehicles Act
Section 68D of the MV-Act,1939 allows individuals who are impacted by the scheme to submit objections to the State Government within thirty days of the proposed scheme’s publication in the Official Gazette. Subsequently, as per sub-section(2) of Section 68D, of the MV-Act, 1939, the State Government is required to evaluate the objections after providing the person objecting to the scheme or his representatives and the representatives of the STU with an opportunity to be heard. The State Government is granted the authority to either sanction or modify the scheme. The scheme is subsequently published in the Official Gazette by the State Government after it has been approved or modified, and then it is considered definitive. The scheme that has been approved will then be implemented for the designated location or route, as per sub-section (3) of Section 68D. However, the proviso to Section 68D(3) states that a scheme pertaining to an inter-state route shall not be considered an approved scheme unless it has been published in the Official Gazette with the prior sanction of the Central Government.
Judgement in Khazan Singh and Ors. vs. State of Uttar Pradesh and Ors. (AIR 1974 SC 669)
The Supreme Court took into account the decision of the Division Bench of the High Court of Rajasthan and the arguments put forth by the appellants and dismissed the civil appeals filed on the following grounds:
Authority of State Government to make laws on inter-state routes
In response to the arguments put forth by the appellant that a State Government cannot approve the Scheme under Section 68D of the MV-Act, 1939 since it cannot make laws beyond its own territory, the Supreme Court held that this argument is contrary to the proviso to Section 68-D(3) which clearly states that a scheme for an inter-state route shall only be deemed official after obtaining the approval of the Central Government. Thus, the Proviso expressly gives the State Government authority to approve schemes for inter-state routes as per the provisions of Chapter IV-A of the MV-Act, 1939 provided it has taken the prior approval of such a scheme from the Central Government. In the present case, the State Government of Uttar Pradesh had obtained the approval of the Central Government for the Scheme vide the letter dated 19th February 1963. The Supreme Court went on to define an inter-state route as one in which one terminus falls in one State and the other in another State. Therefore, in light of the proviso to Section 68-D(3) of the MV-Act, 1939 the contention that the Government of Uttar Pradesh lacked the competence to approve the Scheme was set aside.
Power of State Government to approve schemes for the entire inter-state route
The appellants had further contended that a State Government had the authority to approve of a scheme only relating to the portion of the inter-state route falling within its own territory and not for the entire inter-state route, part of which would fall within the jurisdiction of another State Government. This argument was set aside by the Supreme Court on the ground that if the Act imposed such an embargo on the State Government, there would have been no requirement for prior approval of the scheme from the Central Government. However, for approving a scheme for the nationalisation of an inter-state route outside the territorial limits of its state prior approval of the Central Government is required, because the scheme envisages nationalisation of transport service not only for the part of the inter-state route within the territorial limits of the State Government but also for the remaining part of the route which is outside the said territorial limits. Because of the same, the appellant’s contention of the State Government’s authority to make laws only with respect to the part of the route falling within Uttar Pradesh was not found tenable.
Limitation on the power of State Government to make laws outside its territorial limits
While objecting to the implementation of the Scheme as approved by the Government of Uttar Pradesh, the appellants had argued that the State Government’s approval of the Scheme amounts to enacting a “law” under Article 13, and since as per Article 245, the State Government can only enact laws within its territory, the Scheme was unconstitutional. In response to this, the Supreme Court held that while the Scheme would be construed as “law” under Article 13, the limitation on the power of the State Legislature under Article 245 shall not apply. The restriction on the power of the State Legislature to make laws outside its territorial limits cannot be invoked to restrict the power conferred upon the State Government by a Central Act to approve the scheme for an inter-state route.
Further, the appellants had also contended that in approving the Scheme the State Government acted in excess of its executive power. In response to this, the Supreme Court stated that the State Government in approving a scheme with respect to an inter-state route exercises its statutory power vested in it by the Union Government under Section 68-D(3) of the MV-Act, 1939. The said authority extends to the creation and management of a monopoly in trade and commerce by a State Government, without any territorial limitations on its power. The State Government derives its executive power from Article 298 of the Constitution, which does not restrict the State Government’s executive power of creating and managing a monopoly to its territorial limits. Therefore, the Government of Uttar Pradesh acted in concurrence with the Government of Rajasthan to approve the Scheme to create a monopoly in favour of STUs and in doing so, the Government of Uttar Pradesh did not act in excess of its executive powers.
Rationale behind this judgement
The Supreme Court in its decision upheld the validity of the scheme approved by the Government of Uttar Pradesh with respect to inter-state routes, under Section 68C and Section 68D of the MV-Act, 1939 primarily based on a three-pronged reasoning:
- The scheme had been granted the prior approval of the Central Government and thus its applicability extended to the portion of the inter-state route in the State of Rajasthan as well. Given the prior approval of the Central Government to the Scheme the embargo on the territorial applicability of the State Government’s powers would not apply here;
- The Government of Uttar Pradesh, while revoking the permits of private bus operators and implementing the Scheme acted in concurrence with the Government of Rajasthan, therefore there was no question of there being an encroachment of the executive power of the State Government of Rajasthan;
- In order to create a monopoly in trade/commerce in a particular state, the executive power of the State Government can also extend beyond the territory of its own state. This was supported by Article 298 which allows both Union and State Governments to carry out trade and commerce in the exercise of their executive powers. By virtue of this article, the State Government not only has the power to control a monopoly but also create one with the force of a Central Act and in doing so, the State Government is not acting in excess of its executive powers.
Relevant judgements referred in the case
H.C. Narayanappa and others vs. State of Mysore and others (1960)
The Supreme Court relied on its decision on this case to elucidate on “commercial and industrial monopolies”, and more particularly on the creation of State monopolies in the transport service to support its decision in Khazan Singh. While dealing with the issue of the Union Government creating monopolies for the State Government, the Supreme Court had observed in H.C. Narayanappa and others vs. the State of Mysore and others. that “the amplitude of powers under the entry in the concurrent list expressly dealing with commercial and industrial monopolies cannot be presumed to be restricted by the generality of the expression trade and commerce in the State list“. The Supreme Court had further observed in this case that if they were to accept that the exclusive right of creating monopolies in trade and commerce rests only with a particular State Government then the Union Legislature would be incapable of making any laws for the creation of monopolies for any commercial/trading venture despite having the express authority to do so by Article 298 and the fundamental freedom to carry out any business granted under Article 19(6) of the Constitution.
The appellants had also relied on the following judgements to support their arguments which were individually distinguished by the Supreme Court based on the fact that the question of law involved in each of these judgements was materially different.
Emperor vs. Sibnath Banerji (1945)
In this case, an appeal was filed before the High Court of Bombay against orders issued by the Federal Court in a writ of habeas corpus on behalf of nine individuals arrested under a preventive detention order issued under Rule 26 of the Defence of India Rules, 1939, directing the release of the nine detainees. Rule 26 of the Defence of India Act of 1939 authorised the Central or Provincial Governments to issue a preventative detention order against an individual who they considered was endangering public safety or interest. This rule was later declared ultra vires by the Federal Court because it exceeded the Central Government’s rule-making authority under the Defence of India Act, 1939. As a result, the Governor-General issued an Ordinance broadening the Central Government’s rule-making authority to include the terms of Rule 26 as well as making the Ordinance retrospectively applicable by prohibiting any challenge to preventive detention orders issued prior to the passage of this Ordinance on the grounds that the Central Government acted beyond its authority in issuing those orders. The Federal Court, which heard the writ of habeas corpus, ruled that Rule 26 exceeded the rule-making authority granted by the legislature to the Central Government and thus is unlawful. The Federal Court had supported its decision by relying on Section 49(2) of the Government of India Act, 1935 stating that the section limited the Provincial Legislature’s authority to make laws, and making laws on the defence of India did not fall within those powers.
The High Court of Bombay set aside such a narrow reading of the section and relied on Section 124(4) of the Government of India Act, 1935 which provides that where an Act of the Federal Government confers powers and imposes duties upon a Province or officers and authorities thereof in relation to a matter with respect to which a Provincial Legislature has no power to make laws, the Federation is to pay to the Province for additional costs incurred by the Provincial Administration’s while carrying out the functions delegated by the Federal Government. The High Court interpreted Section 49(2) of the Government of India Act, 1935 as establishing an extendable limit to the powers of the Provincial Legislature rather than a maximum limit, and the provisions of sub-section (2) of Section 124 as providing a means for such extension.
Since the material question involved here is with respect to the delegation of executive power from Central Government to State Government, and not the applicability of one state’s authority to legislate over other State’s matters, the decision was not relied upon.
In Re the Delhi Laws Act, 1912, the Ajmer-Merwara (Extension) vs. The Part C States (Laws) Act, 1950 (1951)
In this case, the Supreme Court extensively dealt with the issue of determining the extent to which the legislature can delegate its legislative power and the distinction between delegated legislation and conditional legislation. The Supreme Court further observed that the legislature is typically required to fulfil its primary legislative function directly, rather than through others. However, it has the ability to delegate, and this power is essential for the full and effective exercise of its legislative authority. Furthermore, the legislature is prohibited from relinquishing its legislative responsibilities and assuming the role of a parallel legislature.
Again, the material question of law here is with respect to the delegation of power from the Central Government to the State Government through delegated legislation and conditional legislation and not the applicability of one state’s authority to legislate over other state’s matters. Thus this judgement was also not relied upon.
Gullapalli Nageswara Rao and others vs. Andhra Pradesh State Road Transport Corporation and another (1959)
This case dealt with a writ petition filed before the Supreme Court under Article 32 of the Constitution of India for the enforcement of the petitioners’ fundamental right to carry on the business of motor transport in Krishna District in Andhra Pradesh, and for prohibiting the respondents from taking over the routes on which the petitioners have been plying their stage carriages.
The petitioners were private bus operators plying their buses in the Krishna District, however subsequent to the insertion of Chapter IV-A of the MV-Act, 1939 a scheme nationalising the bus transport services in the State was passed and approved by the Government of Andhra Pradesh and published in the official gazette. The petitioners fearing the implications of the scheme on their business approached the Supreme Court challenging the provisions of Chapter IV-A of the MV-Act, 1939 as violative of the fundamental rights granted under the Constitution. The petitioners argued that Chapter IV-A of the Act, in substance and effect, authorises the State to acquire the transport undertakings of citizens without providing compensation for the same, therefore it is violative of Article 31, as Article 31 specifies that no law shall be made for the transfer of ownership or right to possession of any property to the State or to a Corporation without fixing the amount of compensation or specifying the principles on which compensation is to be determined and given. They also contended that Chapter IV-A of the Act is a colourable legislation that enables such a transfer of ownership without providing compensation for the property transferred, under the guise of cancellation of a permit.
In its decision, the Supreme Court determined that the Constitution permits the state to enact a law that imposes reasonable limitations on the right of a citizen to engage in business, establish a monopoly, or empower the State to conduct business at the expense of a citizen. According to the MV-Act of 1939, the Regional Transport Authority is authorised to revoke the current permit and issue a new permit to the STU if a scheme has been published that allows the STU to provide transport services in a specific area, route, or portion of the same to the exclusion of any individual who has been conducting business in that area. The process of the transport authority cancelling the permit of an individual conducting transport business on a route and transferring it to another individual does not constitute a transfer of business, nor does it even involve the transfer of the permit from one individual to another. The Regional Transport Authority is entrusted with the regulatory jurisdiction to cancel a permit in favour of one entity and issue a new permit to another. Consequently, Chapter IV-A was not held to be a colourable legislation that was enacted to infringe upon the fundamental rights that the Supreme Court had granted under the Constitution.
While the decision, in this case, dealt with similar provisions of Chapter IV-A of the MV-Act,1939 it only challenged the vires of Chapter IV-A and did not contemplate the authority of State Government to legislature on subjects related to another State Government’s functions, hence it was not relied upon the Supreme Court in Khazan Singh.
Analysis of the case
The Supreme Court’s judgement in Khazan Singh is relevant since it brought forth one of the few known exceptions to the doctrine of territorial nexus. This doctrine restricts the applicability of a government’s laws to its territorial limits and while this position is widely practised in the Indian federal system, there are few exceptions to this doctrine.
In its decision in Khazan Singh, the Supreme Court relied on the language and intent of various Sections of Chapter IVA of the MV-Act, 1939 to decipher that the said chapter fully envisioned the extension of a State Government’s power to nationalise an inter-state route. Unlike other areas where the powers of the State and Union continue to be exercised in different spheres, here the Union Government intends to give the State Government authority to extend the ambit of its executive powers beyond the scope of its territory as long as it holds the assent of the Central Government itself.
Another important aspect brought to light by this judgement was the creation of a monopoly in favour of state-owned undertakings in various areas of trade and commerce. This monopoly-creation is another aspect where the Union Government does not limit the State Government’s powers (with the exception of subjects mentioned in List I and List III of the Seventh Schedule) rather it allows it to extend the same beyond its territorial jurisdiction as long as the procedure laid down in Chapter IV-A of the MV-Act, 1939 is being followed.
In both aspects- the applicability of a state-enacted law beyond its territorial limits, and the creation of a monopoly in favour of STUs within and beyond its own State, the Supreme Court sought to legitimise it on the basis of the approval accorded by the Union Legislature to the Scheme which carved out an exception to the doctrine of severability.
Conclusion
The doctrine of territorial nexus is imposed by Article 245 of the Constitution which delineates the applicability of the Union and State Government’s power and also allows the Union Government to make legislation which has extraterritorial applicability. While this is generally not applicable to State Governments, the laws formed by the State Government can also have extraterritorial applicability, as long as there is sufficient nexus between the law and subject matter.
In the case of Khazan Singh, the Scheme approved by the Government of Uttar Pradesh had a direct relation to the objective of nationalisation of the inter-state routes as envisaged by Chapter IVA of the MV-Act, 1939. Thus the territorial nexus was established in the matter and also supported by the approval of the Scheme by the Central Government. Additionally, the Supreme Court also relied on Article 298 to establish an exception to the general restriction on extraterritorial applicability of State Government’s laws, since the article itself does not impose a territorial limit on activities of trade and commerce carried out by the State Government.
Therefore, the decision in Khazan Singh is a significant precedent highlighting the applicability of the doctrine of territorial nexus in different scenarios.
References
