R.M.D.C (Mysore) Pvt. Ltd v. State of Mysore

A CASE STUDY ON

“R.M.D.C (Mysore) private Ltd v. State of

Mysore”

1962 AIR SC 594

Submitted By:

RANDALL WILLIAMS

Contents

1. Abbreviations .............................................................................................. ii

2. Introduction ................................................................................................. 1

3. R.M.D.C (Mysore) pvt. Ltd. v. State of Mysore : A Case Study ............... 2

3.1. The powers of state as per taxation ..................................................... 3

3.2. Effect of Repugnancy .......................................................................... 6

4. The doctrine of colorable legislation: ......................................................... 8

4.1. Application of the doctrine of Colorable legislation to taxation: ........ 8

5. Conclusion ................................................................................................ 10

R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page ii

ABBREVIATIONS

& .................................................................................................................................................. and

A.P ........................................................................................................................... Andhra Pradesh

AC ................................................................................................................................ Appeal Cases

AIR ....................................................................................................................... All India Reporter

All ER ............................................................................................................. All England Reporter

Art .......................................................................................................................................... Article

CWN ............................................................................................................. Calcutta News Weekly

F.C.R .............................................................................................................. Federal Court Reports

F.R .................................................................................................................. Federal Court Reports

FB .................................................................................................................................... Full Bench

i.e .............................................................................................................................................. that is

Kant ................................................................................................................................... Karnataka

Ltd ......................................................................................................................................... Limited

p.................................................................................................................................................. page

para .................................................................................................................................... Paragraph

Pvt .......................................................................................................................................... Private

R.M.D.C ................................................................................................. R. M. D. Chamarbaugwala

SC .............................................................................................................................. Supreme Court

U.P ............................................................................................................................... Uttar Pradesh

R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page iii

u/a .................................................................................................................................. under article

UOI ............................................................................................................................ Union of India

v.............................................................................................................................................. Versus

Viz ....................................................................................................................................... Videlicet

Vol......................................................................................................................................... Volume

ARTICLE REFERRED

Article 249: Power of Parliament to legislate with respect to a matter in the State List in the

national interest

(1) Notwithstanding anything in the foregoing provisions of this Chapter, if the Council of States

has declared by resolution supported by not less than two thirds of the members present and

voting that it is necessary or expedient in national interest that Parliament should make laws with

respect to any matter enumerated in the State List specified in the resolution, it shall be lawful

for Parliament to make laws for the whole or any part of the territory of India with respect to that

matter while the resolution remains in force (2) A resolution passed under clause ( 1 ) shall

remain in force for such period not exceeding one year as may be specified therein: Provided

that, if and so often as a resolution approving the continuance in force of any such resolution is

passed in the manner provided in clause ( 1 ), such resolution shall continue in force for a further

period of one year from the date on which under this clause it would otherwise have ceased to be

in force (3) A law made by Parliament which Parliament would not but for the passing of a

resolution under clause ( 1 ) have been competent to make shall, to the extent of the

incompetency, cease to have effect on the expiration of a period of six months after the

resolution has ceased to be in force, except as respects things done or omitted to be done before

the expiration of the said period

Article 252: Power of Parliament to legislate for two or more States by consent and adoption of

such legislation by any other State

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R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page iv

(1). if it appears to the Legislatures of two or more States to be desirable that any of the matters

with respect to which Parliament has no power to make laws for the States except as provided in

Articles 249 and 250 should be regulated in such States by Parliament by law, and if resolutions

to that effect are passed by all the House of the Legislatures of those States, it shall be lawful for

Parliament to pass an Act for regulating that matter accordingly, and any Act so passed shall

apply to such States and to any other State by which it is adopted afterwards by resolution passed

in that behalf by the House or, where there are two Houses, by each of the Houses of the

Legislature of that State (2). Any Act so passed by Parliament may be amended or repealed by an

Act of Parliament passed or adopted in like manner but shall not, as respects any State to which

it applies, be amended or repealed by an Act of the Legislature of that State

Article 254: Inconsistency between laws made by Parliament and laws made by the Legislatures

of States

(1) If any provision of a law made by the Legislature of a State is repugnant to any provision of a

law made by Parliament which Parliament is competent to enact, or to any provision of an

existing law with respect to one of the matters enumerated in the Concurrent List, then, subject to

the provisions of clause ( 2 ), the law made by Parliament, whether passed before or after the law

made by the Legislature of such State, or, as the case may be, the existing law, shall prevail and

the law made by the Legislature of the State shall, to the extent of the repugnancy, be void (2)

Where a law made by the Legislature of a State with respect to one of the matters enumerated in

the concurrent List contains any provision repugnant to the provisions of an earlier law made by

Parliament or an existing law with respect to that matter, then, the law so made by the

Legislature of such State shall, if it has been reserved for the consideration of the President and

has received his assent, prevail in that State: Provided that nothing in this clause shall prevent

Parliament from enacting at any time any law with respect to the same matter including a law

adding to, amending, varying or repealing the law so made by the Legislature of the State

Article 255: Requirements as to recommendations and previous sanctions to be regarded as

matters of procedure only No Act of Parliament or of the legislature of a State and no provision

in any such Act, shall be invalid by reason only that some recommendation or previous sanction

required by this Constitution was not given, if assent to that Act was given

R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page v

(a) where the recommendation required was that of the Governor, either by the Governor or

by the President; (b) where the recommendation required was that of the Rajpramukh,

either by the Rajpramukh or by the President; (c) where the recommendation or previous

sanction required was that of the President, by the President.

BOOKS REFERRED

1. D.D. Basu, Commentary on the Constitution of India, vol 8,lexisnexis butterworths

wadhwa nagpur, 2011

2. D.D.Basu, The Shorter Constitution Of India,13ed., Wadhwa and company law

publishers, 2004

CASES

Indian Cases

1. Birajananda das v. Competent Authority, AIR 1986 Cal 8

2. Deep Chand v. state of U.P, AIR 1959 SC 648

3. Gajapati v. State of Gujarat, AIR 2002 SC 1130.

4. Hoechst v. State of Bihar, AIR 1983 SC 1019

5. Jagannath baksh Singh v. state of U.p, AIR 1962 SC 1563

6. Krishna Sugar Mills v. Union of India, AIR 1959 SC 1124-

7. Kunnathat v. state of Kerela, AIR 1961 SC 552

8. Megh Raj v. Alla rakhia, (1942) 46 CWN (F.R) 61 (65).

9. R.M.D.C v. State of Mysore 1962 AIR 549

10. Ralla Ram v. Prov. Of East Punjab, (1948) FCR 207

11. Rangayya v. state, AIR 1978 AP 106 (FB)

12. Srikant Lal v. State Of Bihar, AIR 1958 SC 496

13. State of Bihar v. Kameshwar, AIR 1952 SC 252

14. T. Khande Rao v. state of karnataka, AIR 1979 Kant 71

15. Tumati Rangayya v. state of A.P. AIR 1978 AP 106

16. UOI v. Basavaiah, AIR 1972 SC 1415

R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page vi

Foreign Cases

1. A.G v. Antigua Times, (1975) 3 All ER 81 (PC).

2. Att. Gen. for Ontario v. Reciprocal Insurers, (1924) AC 328

Case Study

R.M.D.C (Mysore) pvt. Ltd v. State of Mysore Page 1

INTRODUCTION

In India there have been plethora of cases in which the Supreme Court has

adjudicated on the matter relating to taxation. In India the Constitution

distinguished taxing power from the general legislative power relating to a

subject.1 Taxation is considered as a distinct matter,2 for purposes of

legislative competence. R.M.D.C (Mysore) pvt. Ltd. v. State of Mysore is one

of the cases in which the Supreme Court has cogently discussed the extension

of taxing statute and its colorable use. The doctrine of colorable legislation as

explained by the supreme court in Krishna Sugar Mills v. Union of India3-

“..The whole doctrine of colorable legislation revolves itself into

the question of competency of a particular legislature to enact a

particular law.”

The general doctrine of colorable legislation is that neither the Federal nor a

Provincial or State Legislature can, in the exercise of its own powers, “carry

out an object which is beyond its powers and trespass on the exclusive powers

of the other,”4 that the same limitation should apply with respect to the taxing

powers of Federal and State Legislatures in a Federal system.

Therefore, question in this case is if the state accepts a parliament law u/a

2525, does it then surrender all its powers to the parliament ancillary to that

law.

1 A.G v. Antigua Times, (1975) 3 All ER 81 (PC). 2 Hoechst v. State of Bihar, AIR 1983 SC 1019 para.76 3 AIR 1959 SC 1124 4 Att. Gen. for Ontario v. Reciprocal Insurers, (1924) AC 328. 5 ARTICLE 252: Power of Parliament to legislate for two or more States by consent and

adoption of such legislation by any other State

(1) If it appears to the Legislatures of two or more States to be desirable that any of the

matters with respect to which Parliament has no power to make laws for the States except as


Case Study


R.M.D.C (Mysore) pvt. Ltd. v. State of Mysore: A Case Study

The applicants had been conducting “prize competitions” since the month

of august 1948, in the state of Mysore. An act called Mysore Lotteries &

Prize Competitions Control & Tax act, 1951 was passed on June 21st,

1951. A similar act called the Bombay Lotteries and Prize Competitions

Control and Tax Act, 1948, which was amended in November by the

Bombay Act, 1952. A petition was filled in the Bombay High Court under

article 226 of the Constitution of India, challenging the constitutionality

of the act. The High Court held that though prize competitions could be

controlled by states within their respective borders, their ramifications

beyond those borders could only be dealt with by action under Article

252(1) of the Constitution.

Therefore, the states of Andhra Pradesh, Bombay Madras, U.P,

Hyderabad, Madhya Bharat, Pepsu and Saurashtra passed resolutions u/a

252(1) authorizing parliament to legislate for the control and regulation of

prize competitions.

On February 24, 1956 the Mysore legislation also accepted the act. On

April 7, 1956 the appellants filled a petition u/a 32 in the Supreme Court

challenging the constitutional validity of the central act, which was

dismissed. Meanwhile, an appeal against the Bombay High Court -

Footnote no 5 conti..

provided in Articles 249 and 250 should be regulated in such States by Parliament by law,

and if resolutions to that effect are passed by all the House of the Legislatures of those States,

it shall be lawful for Parliament to pass an Act for regulating that matter accordingly, and any

Act so passed shall apply to such States and to any other State by which it is adopted

afterwards by resolution passed in that behalf by the House or, where there are two Houses,

by each of the Houses of the Legislature of that State

(2) Any Act so passed by Parliament may be amended or repealed by an Act of Parliament

passed or adopted in like manner but shall not, as respects any State to which it applies, be

amended or repealed by an Act of the Legislature of that State


Case Study


judgment was brought before the Supreme Court and was allowed. During

the pendency of the petition before the Supreme Court, the applicants

applied for stay of the operation of the Central Act on April 16, 1956,

which was granted. The Supreme Court gave its judgment on April 9.

1957 on the Bombay case.

On August 31st, 1957 the Mysore Lotteries & prize Competitions Control

& Tax (Amendment) ordinance was issued. A provision under section 15

was added of the Mysore Lotteries & Prize Competitions Control & Tax

Act, i.e. all prize competitions conducted from March 31st, 1956 to

August 31, 1957 were brought within the preview of the amendment act.

Because of the provision the business carried out by the appellants had

become taxable under the Mysore act. The Mysore act was challenged in

the High Court u/a 226, which was dismissed on November 20, 1958 and

against that judgment and order this appeal has been brought pursuant to a

certificate of the High Court under Article 132(1)6 of the constitution.

The Powers of State as Per Taxation:

In the present case the argued point was that if a resolution had been

passed under article 252(1) of the constitution of India then the state

legislature had further no power to amend any law.

The quest then here arises do the resolutions as passed and particularly the

words “control and regulation of prize puzzle competitions and all other

matters ancillary thereto” surrender the whole subject of prize

competitions to the central government, i.e. every matter connected to it

including the power to tax. The argument raised was that the language of

6 ARTICLE132: Appellate jurisdiction of Supreme Court in appeals from High Courts in

certain cases ( 1 ) An appeal shall lie to the Supreme Court from any judgment, decree or

final order of a High Court in the territory of India, whether in a civil, criminal or other

proceeding, if the High Court certifies under Article 134A that the case involves a substantial

question of law as t the interpretation of this Constitution

Case Study


the resolutions was wide enough to comprise the legislative power under

the entries 34 and 62 of List II of the Constitution of India.

Under entries 34 and 62 of List II- ‘betting and gambling’ are included;

the power to impose taxes on betting and gambling is included in Entry

62. They are two separate powers, so that by surrounding its power to

regulate prize competitions, under Art.252 (1), a State legislature does not

lose its power to impose a tax on such competitions.7 Hence, when

parliament passes a law under this article, it cannot be contended that it is

a colorable exercise of power.

The contention of the applicants was rejected on the ground that colorable

legislation was a cover for lack of legislative power. When the state

legislature has power to pass law under List II, it can also pass a

resolution, on the basis of which Parliament can pass a law on that topic.8

Conflict between Central Act passed under Article 252 and State Act

Through, Art. 255 may not be attracted, in terms, to a law made by

parliament under Art. 252, it has been held that the same principle should

apply, by reason of the words “and any such Acts passed shall apply to

such State”. In case of conflict between a law made by parliament under

Art. 252 and the Legislature of any state to which such Central act

applies, the latter shall prevail.9

Thus, by passing a resolution, the topic goes out of State list. Hence, the

court has held that any act of State Legislature will be subject to the rule

of repugnancy, even though in terms Art. 254 will not apply. Further, if

7 R.M.D.C v. State of Mysore 1962 AIR 549; D.D.Basu, The Shorter Constitution Of

India,13ed., Wadhwa and company law publishers, 2004,pg.3481. 8R.M.D.C v. State of Mysore 1962 AIR 549; D.D. Basu, Commentary on the Constitution of

India, vol 8,lexisnexis butterworths wadhwa nagpur, 2011,8689. 9 Rangayya v. state, AIR 1978 AP 106 (FB)

Case Study


any state, relating to the same manner occupying the same field, as the

law made by the parliament under cl. (1) of Art. 252 is found to be

repugnant, it will be rendered inoperative to the extent of repugnancy.10

But in case of ‘repugnancy’, the doctrine of severability shall apply and

not only shall that portion of the state law give way, which is repugnant.

A taxing statute is not protected if it is a colorable exercise of legislative

power or is a fraud on the constitution and is confiscatory.11

It has already been noticed that even as regards matters included in the

exclusive state list (II) , the constitution itself provides for national

legislation, if it appears that the federal legislation is necessary in order to

meet the national magnitude of the problem, by resorting to the procedure

under Art. 249, or, when the States or some of them voluntary consent to

legislation by the Union Legislature on that State subject, so far as the

consenting state legislates desire, in accordance with the procedure laid

down in Art. 252.12

INDIA- As pointed out by the Supreme Court13, the question is ultimately

one of legislative power. Thus, if a legislature is competent to regulate a

subject as well as to impose tax upon it, it is immaterial whether a tax is

imposed upon it for the purpose of regulation because motive of the

Legislature is irrelevant upon the question of its competency. If, on the

other hand, it has no power to regulate a subject, it cannot exercise its

taxing power to regulate that subject, because that would be exercise of

‘colorable legislation’.

10 Tumati Rangayya v. state of A.P. AIR 1978 AP 106; T. Khande Rao v. state of karnataka,

AIR 1979 Kant 71; Birajananda das v. Competent Authority, AIR 1986 Cal 8; R.M.D.C

(Mysore) Private Ltd. v. state of Mysore, AIR 1962 SC 594. 11 Jagannath baksh Singh v. state of U.p., AIR 1962 SC 1563; AIR 1962 SC 594. 12 UOI v. Basavaiah, AIR 1972 SC 1415; R.M.D.C (Mysore) Private Ltd. v. state of Mysore,

AIR 1962 SC 594. 13 R.M.D.C (Mysore) pvt. Ltd v. State of Mysore, AIR 1962 SC 594.

Case Study


Effect of Repugnancy

The Patna high court14 has interpreted the word ‘void’ in the sense of

inoperative. This interpretation rests on the view that Art. 254(1) does not

take away the power of the state legislature to legislate with respect to a

subject in the concurrent list, but simply invalidates the law insofar as it is

‘repugnant’ to a Central law relating to the same subject. Hence, when the

repugnancy arises, the state law remains in abeyance but if at any

subsequent time, the repugnancy is removed for any reason, the state law

is revived.

‘To the Extent of the repugnancy’-

when a state act is repugnant to central law within the meaning of this

clause, what becomes void is not the entire act but only insofar as it is

repugnant to the central act.15 Thus in case where they occupy the same

field, the identity of the field may relate to the pith and substance of the

subject-matter and also the period of its operation. When both coincide,

the repugnancy is complete and the whole Act becomes void.16 On the

other hand, the operation of the Union law may be entirely prospective

leaving the state law to be effective in regard ‘to things already done’.

Any existing state law relating to the subject matter of the resolution

becomes void to the extent of its repugnancy of the act of parliament

made in pursuance of the resolution.

But by passing such resolution a state legislature shall be deemed to

surrender its legislative power only with respect to the particular matter

which is the subject of the resolution. Thus, where the resolution enables

parliament to make a law for the “control and regulation of prize

14 Srikant Lal v. State Of Bihar, AIR 1958 SC 496. 15 Deep Chand v. state of U.P., AIR 1959 SC 648 16Infra

Case Study


competitions” the power that is surrendered is one under Entry 34 of list II

dealing with “betting and gambling”. It does not constitute a surrender of

a separate power, viz., to impose a tax on “betting and gambling” which is

included in a separate entry, i.e., Entry 62 of list II.

Thus, in R.M.D.C(Mysore) Pvt. Ltd v. State of Mysore, the court held that

the surrender by the state legislature of their power to legislate on betting

and gambling does not involve a surrender of right to levy a tax in respect

of it, since power to tax is a distinct and separate power.

Case Study


The Doctrine of Colorable Legislation:

The doctrine of colorable legislation has been applied under the

Government of India Act, 1935,17 as well as under the Constitution.18

This doctrine means that though a legislature is not fettered in the exercise

of its exclusive powers, by any consideration of the possible effects of the

exercise of such powers upon the powers allotted to some other

Legislature, it cannot-

“Under the guise, or the pretence; or in the form of an exercise of its own

powers, carry out an object which is beyond its powers and a trespass on

the exclusive powers of the other.”19

The doctrine of colorable legislation is based on the principle the no

legislation can violate constitutional prohibitions by employing an

impermissible method. In other words, a constitutional power cannot be

exercised to attain an unconstitutional goal. Legislation cannot be allowed

to do which it cannot do directly.20

Application of The Doctrine Of Colorable Legislation To Taxation:

The doctrine is equally applicable to taxing legislation as in the case of other

legislation. Thus, in Ralla Ram v. Prov. Of East Punjab,21our Federal Court

observed-

17 Megh Raj v. Alla rakhia, (1942) 46 CWN (F.R) 61 (65). 18 State of Bihar v. Kameshwar, AIR 1952 SC 252; Gajapati v. State of Gujarat, AIR 2002

SC 1130. 19 A.G.Alberta v. A.G. for Canada, AIR 1939 PC 53. 20 D.D. Basu, Commentary on the Constitution of India, vol 8,lexisnexis butterworths

wadhwa nagpur, 2011, p. 8683. 21 (1948) FCR 207.

Case Study


“it is true that we must look not to the mere form but to the substance of the

levy, and the tax must be hold to be invalid, if in the guise of a property tax is

really a tax on income.”22

Similarly, though the validity of a taxing statute cannot be challenged merely

on the ground that it imposes an unreasonable heavy burden,23 it can be

challenged on the ground that it constitutes a colorable exercise of or a fraud

upon, the legislative power, e.g., that it is a mere cloak to confiscate24 the

property of the citizen taxed,25 or to control and regulate and not to raise

revenue.26

Hence, the Supreme Court held that the Mysore Legislature had the power of

taxation, and it had not surrendered the same to the Parliament, and so it

cannot be said that the imposition of the tax is a piece of colorable legislation

and is on that ground unconstitutional.

22 Jagannath v. state of U.P., AIR 1962 SC 1563 23 D.D. Basu, Commentary on the Constitution of India, vol 8, LexisNexis butterworths

wadhwa Nagpur, 2011, p. 8689. 24 Jagannath v. state of U.P., AIR 1962 SC 1563 25 Kunnathat v. state of Kerela, AIR 1961 SC 552.. 26 R.M.D.C (Mysore) pvt. Ltd v. State of Mysore, AIR 1962 SC 594.

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CONCLUSION

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A Comprehensive reading of the articles 252 & 254 clearly states that the

languages of these two sections are of no two interpretations. When a state

surrenders its powers in particular to a legislation to the parliament, it is only

to be considered till the extent to where the resolution of such surrender was

brought.

The court in the present case held that the state legislature had the power to

impose tax and it was not surrendered to the parliament. The extent of the new

law made by the parliament was only to the extent of ‘betting and gambling’.

The Supreme Courts findings can be summed up as follows:

1. By passing the resolutions as to control and regulation the power to tax

had not been surrendered to parliament.

2. The amending Act was not a new method of controlling prize

competitions nor was it a piece of colorable legislation.

3. There was no amending of an act which stood repealed nor was the

retroactive operation of the Amending Act affected by article 254(1)

of the Constitution.

Thus, the Mysore legislature was fully competent to impose tax and it was not

a piece of colorable legislation.

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R.M.D.C (Mysore) Pvt. Ltd v. State of Mysore

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