ISSUE-III

WHETHER § 3-C AND § 3-D OF THE FOSTERS PRADESH SUGAR UNDERTAKING

(ACQUISITION) AMENDMENT ACT, 2009 WAS REPUGNANT TO THE
PROVISIONS OF INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951
AND HENCE CONSTITUTIONALLY INVALID?

It is submitted before the Hon’ble Court that the State Legislature has legislative competence to
enact the Fosters Pradesh (Acquisition) Amendment Act, 2009 (Hereinafter, Amendment Act). It
is further stated that Amendment Act, 2009 does not entrench on the legislative field of
Parliament under Entry 52 List I and that Amendment Act, 2009 does not violate any of the
provisions of The Industries (Development and Regulation) Act, 1951 (hereinafter, IDR Act).

Article 246(1) of the Constitution of India states that- “(1) Notwithstanding anything in clauses
(2) and (3), Parliament has exclusive power to make laws with respect to any of the matters
enumerated in List I in the Seventh Schedule (in this Constitution referred to as the Union List).”

[III.1] THAT THE ENTRIES IN THE LISTS OF THE SEVENTH SCHEDULE SHOULD
BE GIVEN A BROAD INTERPRETATION AND WIDEST SCOPE TO ASCERTAIN
THE MEANING OF THE LISTS

That the legislative power of Parliament in certain areas is paramount under the Constitution is
not in dispute. What is in dispute is the limits of those areas as judicially defined. Broadly
speaking, Parliamentary paramountcy is provided for under Articles 246 and 254 of the
Constitution. The first three clauses of Article 246 of the Constitution relate to the demarcation
of legislative powers between the Parliament and the State Legislatures. Under Clause (1),
notwithstanding anything contained in Clauses (2) and (3), Parliament has been given the
exclusive power to make laws with respect to any of the matters enumerated in List I or the
Union List in the Seventh Schedule. Clause (2) empowers the Parliament, and State Legislatures
‘subject’ to the power of Parliament under Sub-clause (1), to make laws with respect to any of
the matters enumerated in List III in the Seventh Schedule described in the Constitution as the
'Concurrent List' notwithstanding anything contained in sub clause (3).

Entries in the Lists of the Seventh Schedule have been liberally interpreted, nevertheless Courts
have been wary of upsetting this balance by a process of interpretation so as to deprive any entry
of its content and reduce it to 'useless lumber'. The entries mentioned under these lists are not
powers of legislation but fields of legislation. They are mere legislative heads demarcating the
area over which the appropriate legislatures are empowered to enact law.1
Also, the use of the word 'exclusive' in Clause (3) denotes that within the legislative fields
contained in List II, the State Legislatures exercise authority as plenary and ample as Parliament.
The fact that under the scheme of our Constitution, greater power is conferred upon the center
vis-a-vis the States does not mean that States are mere appendages of the center. Within the
sphere allotted to them, States are supreme. The center cannot tamper with their powers. More

1
T.M.A Pai Foundation v. State of Karnataka, (2002) 8 SCC 481
particularly, the courts should not adopt an approach, an interpretation, which has the effect of or
tends to have the effect of whittling down the powers reserved to the States".2
Taking into consideration the broader meaning of the lists as prescribed by this Hon’ble Court in
ITC Limited, it can be effectively deduced that State Legislature has not completely encroached
upon the powers of the Union by enacting the Amendment Act and in no way contravenes with
the supremacy of the Union conferred upon by the Constitution of India. It is further submitted
that State Legislature has exercised its power under the ambit of Entry 33 of List III which gives
the State Government the power of acquisition and requisitioning of properties. The
entrenchment in this case was ‘incidental’ and striking down the entire provision for a mere
incidental encroachment would be unjust and unfair.

Although Parliament cannot legislate on any of the entries in the State List, it may do so
incidentally while essentially legislating within the entries under the Union List. Conversely, the
State Legislatures may encroach on the Union List, when such an encroachment is merely
ancillary to an exercise of power intrinsically under the State List. The fact of encroachment does
not affect the vires of the law even as regards the area of encroachment. This principle is
commonly known as the doctrine of ‘pith and substance.’ In the case of India Cement Ltd., this
Hon’ble Court held that the courts will have to examine the true nature, character and object of
the enactment to determine its true field of legislation.3
A similar principle was reiterated again in the case of Bharat Hydro Power Corp Ltd., where it
was held that while examining the legislative competence when a legislation impinges upon
legislative field of another legislature, application of doctrine of ‘pith and substance’ has to be
done and the main object behind the act is to be paid attention to.4

It is submitted that the decision to enact such an amendment came after continuous efforts of the
State Government to revive sick sugar mills and it is only after these mills started incurring huge
losses, that the State Government thought it to be expedient in public interest to divest them.
Hence, in pith and substance the object of the Act was rational enough and did not conflict or
overlap with any of the powers of the Union.

[III. 2] THAT THE PRINCIPLE OF FEDERAL SUPREMACY IN ARTICLE 246(1) OF

THE CONSTITUTION IS APPLICABLE ONLY IN CASES OF ‘IRRECONCILABLE’
CONFLICTS.

In the case of Mar Appraem Kuri Co. Ltd., it was held that the principle of federal supremacy in
Article 246 (1) cannot be resorted to unless there exists an ‘irreconcilable’ conflict between the
entries of Union and State Lists. The non obstante clause in Article 246 (1) stands to operate only
if reconciliation is impossible. State Legislatures are thus, fully competent to legislate regarding
subjects in the Concurrent List.5

2
I.T.C. Limited v The Agricultural Produce Market Committee and Ors. AIR 2002 SC 852.
3
India Cement Ltd. v. State of Tamil Nadu, (1990) 1 SCC 12; PK Mukherjee v. Bank of Commerce Ltd AIR 1947
PC 60.
4
Bharat Hydro Power Corp. Ltd. v. State of Assam (2004) 2 SCC 553.
5
State of Kerela v. Mar Appraem Kuri Co. Ltd., (2012) 7 SCC 106
As stated earlier, the entrenchment by the State Legislature in enacting the Amendment Act was
purely incidental and not absolutely irreconcilable. Entry 43 of List III gives the State
Legislature the power to legislate on the matter of property acquisition. Constitutional validity of
the Parent Act i.e. 1971 Act having been upheld in Ishwari Khetan Sugar Mills case6, the
amendment Act 2009 is also within the legislative competence of the State Legislature. It is
further submitted that the State is not denuded of its power to legislate under Entry 24 List II
since the field is not occupied by 1951 Act. All sugar undertakings vest under Section 3 of 1971
Act in the Sugar Corporation Ltd. and the U.P. State Sugar Corporation Ltd. has every right to
sell it. The right to acquire the property itself contains the right to transfer. Hence there exists no
apparent ‘irreconcilable’ conflict to make way for the application of Article 246 (1).

In the case of Rajiv Sarin, similar reasoning as to that of Mar Appraem Kuri was established. It
was held that the question of repugnancy under Article 254 of the Constitution arises when the
provisions of both the laws are completely inconsistent or absolutely irreconcilable and only in
cases of a direct conflict.7 It is further submitted before the honorable court no provision of the
Amendment Act is absolutely irreconcilable with the IDR Act. In fact the IDR Act, generally
speaking, does not deal with the ownership of industrial undertakings in declared industries. The
Act is primarily concerned with development and regulation of the declared industries. Even
after the incidental entrenchment took place, the Central Government still has power under §
18A and § 18AA of the IDR Act to assume direct management or control of industrial
undertakings in certain cases and even after acquisition of scheduled undertakings under the
impugned legislation the power of the Central Government under Sections 18A and 18AA would
remain intact. Even § 18FA provides for taking over management or control of a company which
is being wound up with the permission of the High Court and in such a situation the authorized
person appointed by the Central Government would then look after all the major affairs of the
company. All these regulatory provisions clearly prove the supremacy of the Parliament as
mentioned under Article 246 (1). It is clearly evident that even after the State Legislature
legislates on the impugned subject under Entry 43 List III, the legislation is no way is
‘inconsistent’ to or in absolute ‘irreconciliation’ with the provisions of List I.

It is therefore humbly contended before the Hon’ble Court that since there is no way that it can
be shown that the enactment done by the State Legislature in furtherance of the provisions of
Entry 43 of List III was completely inconsistent or in direct conflict with the powers of the
Union, the impugned legislation not be struck down on the ground of legislative incompetence
when the pre requisites of it are not met.

6
Ishwari Khetan Sugar Mills (P) Ltd. and Ors. v. State of Uttar Pradesh and Ors AIR 1980 SC 1955
7
Rajiv Sarin v. State of Uttarakhand, (2011) 8 SCC 708