Unit-3

Legislative Relations of Union

and the States

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Dr. Payal Jain

Assistant Professor, VSLLS (VIPS), Delhi
In India, before the formation of the federation the States were not sovereign entities. As such,
there was no need for safeguards to protect States. On account of the exigencies of the situation,
the Indian federation has acquired characteristics which are quite different from the American
model.
Central State Relation - Legislative, Administrative and Financial.

(i) The residuary powers under the Indian Constitution are assigned to the Union and not to the States.
However, it may be noted that the Canadian Constitution does the same mode of distrib­uting the
powers cannot be considered as eroding the federal nature of the Constitution.

(ii) Though there is a division of powers between the Union and the States, the Indian Constitution
provides the Union with power to exercise control over the legislation as well as the administration of
the States. Legislation by a State can be disallowed by the President, when reserved by the Governor for
his consideration.

The Governor is appointed by the President of the Union and holds office “during his pleasure”. Again
these ideas are found in the Canadian Constitution though not in the Constitution of the U.S.A.

(iii) The Constitution of India lays down the Constitution of the Union as well as the States, and no State,
except Jammu and Kashmir, has a right to determine its own (State) Constitution.
(iv) When considering the amendment of the Constitution we find that except in a few specific
matters affecting the federal structure, the States need not even be consulted in the matter of
amendment of the Constitution. The bulk of the Constitution can be amended by a Bill in the Union
Parliament being passed by a special majority.

(v) In the case of the Indian Constitution, while the Union is indestructible, the States are not. It is
possible for the Union Parliament to reorganise the States or to alter their boundaries by a simple
majority in the ordinary process of legislation.

The ‘consent’ of the State Legislature concerned is not required; the President has only to ‘ascertain’
the views of the Legislatures of the affected States. The ease with which the federal organisation
may be reshaped by an ordinary legislation by the Union Parliament has been demonstrated by the
enactment of the States Reorganisation Act, 1956. A large number of new States have, since, been
formed.

(iv) Under the Indian Constitution, there is no equality of representation of the States in the Council
of States. Hence, the federal safeguard against the interests of the lesser States being overridden by
the interests of the larger or more populated States is absent under our Constitution. Its federal
nature is further affected by having a nominated element of twelve members against 238 repre­
sentatives of the States and Union Territories.
Centre State Relations
The Constitution of India provides a dual polity with a clear division of powers between the
Union and the States, each being supreme within the sphere allotted to it. The Indian
federation is not the result of an agreement between independent units, and the units of
Indian federation cannot leave the federation.

Thus the constitution contains elaborate provisions to regulate the various dimensions of the
relations between the centre and the states.

The relations between centre and state are divides as:

1. Legislative relations
2. Administrative relations
3. Financial relations
1. Centre State Legislative Relations
Articles 245 to 255 in Part XI of the Constitution deal with the legislative relations between the
Centre and the State.

Extent of laws made by Parliament and by the Legislatures of States- 245(1)

The Parliament can make laws for the whole or any part of the territory of India. Territory of India
includes the states, UTs and any other area for the time being included in the territory of India.
Whereas, the state legislature can make laws for whole or any part of state.

(2) The Parliament can alone make ‘extra territorial legislation’ thus the laws of the Parliament are
applicable to the Indian citizens and their property in any part of the world.

246(1) Subject-matter of laws made by Parliament and by the Legislation of States

The Constitution divides legislative authority between the Union and the States in three lists- the
Union List, the State List and the Concurrent List. The Union list consists of 97 items. The Union
Parliament has exclusive authority to frame laws on subjects enumerated in the list. These include
foreign affairs, defence, armed forces, communications, posts and telegraph, foreign trade etc.
The State list consists of 66 subjects on which ordinarily the States alone can make laws. These include public
order, police, administration of justice, prison, local governments, agriculture etc.

The Concurrent list comprises of 47 items including criminal and civil procedure, marriage and divorce,
economic and special planning trade unions, electricity, newspapers, books, education, population control
and family planning etc. Both the Parliament and the State legislatures can make laws on subjects given in th
Concurrent list, but the Centre has a prior and supreme claim to legislate on current subjects. In case of
conflict between the law of the State and Union law on a subject in the Concurrent list, the law of the
Parliament prevails.

Residuary powers of legislation

The constitution also vests the residuary powers (subjects not enumerated in any of the three Lists) with the
Union Parliament. The residuary powers have been granted to the Union contrary to the convention in other
federations of the world, where the residuary powers are given to the States. However, in case of any conflict
whether a particular matter falls under the residuary power or not is to be decided by the court.

Parliament’s Power to Legislate on State List

Though under ordinary circumstances the Central Government does not possess power to legislate on
subjects enumerated in the State List, but under certain special conditions the Union Parliament can make
laws even on these subjects.
The Union State relations in the legislative sphere have been dealt by Articles 245 to 254. The Constitution
clearly provides that the Parliament shall have exclusive jurisdiction to make law for the whole or any part
of the territory of India with regard to subjects mentioned in the Union List. This list contains subjects like
defence, foreign affairs, currency, union duties, communication, etc. On the other hand, the State enjoys
exclusive power over the 66 items enumerated in the State List. This List contains subjects like public
order, health, sanitation, agriculture etc. In addition, there is a Concurrent list containing 47 subjects like
criminal law and procedure, marriage, contracts, trust, social insurance etc. over which both the Union and
the State Governments can legislate.

If the law of the Union Government and the State Government come into clash with each other the former
prevails. However, State law on the Concurrent List shall prevail over the Central law if the same had been
reserved for the consideration of the President and his consent had been received before the enactment
of the Central law on the same subject. This clearly gives some leeway to the States. The constitution also
vests the residuary powers (viz., the enumerated in any of the three Lists) with the Central Government. It
may be noted that in this distribution of powers the Union Government has certainly been given favoured
treatment. It has not only been granted more extensive powers than the States, even the residuary powers
have been granted to it contrary to the convention in other federations of the world, where the residuary
powers are given to the States.
 DOCTRINE OF TERRITORIAL NEXUS

Question is since I am living in Rajasthan but my business was conducted in Bangalore, should I pay tax to Karnataka
Government?
The court has reviewed such cases and established that even I am not living in Bangalore since the business activity was
conducted there; I should pay tax to the Karnataka Government. The court says that if there is sufficient Nexus between
state and the object, then the state Law can operate outside the state also. Here, I am an object and the Karnataka
government is state; and there is a Nexus between object and state because of my business activity in that state despite
not living there or physically present there. This is called the Doctrine of Territorial Nexus.

The court has applied the Doctrine of Territorial connection or Nexus to income-tax legislation, sales tax legislation, and
also to legislation imposing a tax on gambling.

Evolution & The Meaning Of The Doctrine

The concept of extra Territorial operation of Law evolved in India with the Government of India Act, 1935. This Act was
made by the British Parliament with an aim to grant a large measure of autonomy to the provinces of British India. The Act
of 1935 applied to the territories in India for the time being vested in His Majesty the King, Emperor of India. Later after
independence, the concept is discussed in the Constitution of India.

The federalism feature in the Indian Constitution establishes a Dual Polity between the Centre and the State. The basic
principle of federation is that the legislative, executive, and financial authority is divided between the Centre and state not
by any Law passed by the Centre but by Constitution itself. The legislative powers are distributed in two ways which are
provisioned by the constitution.
Distribution of legislative powers in respect of the territory
With respect to the subject matters of the list under 7th schedule
The Territorial Nexus is derived from Article 245 of the Indian Constitution. Article 245 (1) states that:Parliament may make
laws for the whole or any part of the territory of India and
The legislature of a State may make Laws for the whole or any part of the State.
Under Article 245(2) of the Indian constitution, if any Law is made by the parliament regarding the extraTerritorial
operations, no questions can be raised on its validity. Thus the validity of legislation can't be questioned. In this case, a
court is bound to enforce the Laws made with regards to extra-Territorial operations. This legislation cannot be invalidated.

The Territorial case was enunciated in the case of A.H. Wadia vs Commissioner Of Income-Tax it was held that a question of
extraterritoriality of enactment can never be raised against a supreme legislative authority on the grounds of questioning
its validity. The legislation may offend the rules of international Law, may not be recognized by foreign courts, or there may
be practical difficulties in enforcing them but these are questions of policy with which the domestic tribunals are not
concerned.

Territorial Nexus is one such exception that allows the state to make Laws for extraterritorial operations if it shows that
there exists a Nexus between the object and the state. But to bring effect to the Laws introduced by the states for extra
Territorial purpose, the Nexus between the object and the state must be there.

Salient Features Of The Doctrine

It is well-established that the Parliament is empowered to make Laws concerning aspects or causes that occur, arise or
exist, or maybe expected to do so, within the territory of India and also with respect to extra-Territorial aspects or causes
that have an impact or Nexus with India.
In Wallace v. Income-tax Commissioner, Bombay a company that was registered in England was a partner in a firm in India.
The Indian Income-tax Authorities sought to tax the entire income made by the company. The privy council applied the
Doctrine of Territorial Nexus and held the levy tax valid.

The Doctrine of Territorial Nexus has been applied to the States as well. In various cases relating to taxation statutes, the
courts have time and again stated that the sale or purchase doesn't need to take place within the Territorial Limits of the
State.

It signifies that the object to which the Law applies need not be physically located within the territorial boundaries of the
state, but must have a sufficient Territorial connection with the state.

A state may levy a tax on a person, property, object or transaction not only when it is situated within its territorial limits, but
also when it has a sufficient and real Territorial connection with it. Whether there is sufficient connection is a question of fact
and will be determined by courts in each accordingly.

The Doctrine of Territorial Nexus governs the taxation of non-residents in India.

State of Bombay vs RMDC, AIR 1951 SC
The Respondent was not residing in Bombay but he conducted Competitions with prize money through a newspaper printed
and published from Bangalore having a wide circulation in Bombay. All the essential activities like filling up the forms, entry
fees, etc. for the competition took place in Bombay. The state govt. sought to levy tax the respondent for carrying on
business in the state.

The question for decision before the Supreme Court was if the respondent, the organizer of the competition, who was
outside the state of Bombay, could be validly taxed under the Act.

Decision-It was held that there existed a sufficient Territorial Nexus to enable the Bombay Legislature to tax the respondent
as all the activities which the competitor is ordinarily expected to undertake took place mostly within Bombay.

Tata Iron And Steel Company vs. Bihar State- The state of Bihar passed a Sales Tax Act for levy of sales tax.

Tax Act for levy of sales tax whether the sale was concluded within the state or outside if the goods were produced, found
and manufactured in the state. The court held there was sufficient Territorial Nexus and upheld the Act as valid.

Whether there is sufficient Nexus between the Law and the object sought to be taxed will depend upon the facts and
circumstances of a particular case.
It was pointed out that sufficiency of the Territorial connection involved consideration of two elements:
the connection must be real and not illusory
the liability sought to be imposed must be pertinent to that connection.
The State Of Bihar & Others vs Sm. Charusila Das
Bihar legislature enacted the Bihar Hindu Religious Trusts Act,1950, for the protection and preservation of properties
appertaining to the Hindu religious trusts. The Act applied to all trusts any part of which was situated in the state of Bihar.

The question was whether the Act applies to trust properties that are situated outside the state of Bihar. Can the legislature
of Bihar make a Law concerning such a trust situated in Bihar and other properties appertaining to such trust which is
situated outside Bihar?

It was held that the act passed by the state of Bihar could have the effect over the property situated outside the Territorial
limits of Bihar keeping in mind that the trust must be situated with the limits of the state and there exist the sufficient Nexus.

Shrikant Bhalchandra Karulkar v. the State of Gujarat

In this case, it was dealt with the legislative competence to make Laws having extra Territorial operation in view of the
provisions of Article(s) 245 and 246 of the Constitution of India.

It was held by the court that so long as the Law made by State legislature applies to the persons residing within its territory
and to all things and acts within its territory, it cannot be considered as extra-Territorial.
Critical Analysis Of The Doctrine
After sales tax was introduced in the Provinces under the powers conferred by the Government of India Act 1935, it became
the fashion for many Provinces to levy on the basis of the Territorial Nexus theory, tax on sale not wholly concluded within
the territory of the Provinces.

Thus in the case of a sale where the goods are in one Province, the owner in another, the buyer in a third Province, the
contract is concluded in a fourth Province, the price is paid in the fifth Province and the goods are delivered in a sixth
Province all the Provinces could levy a sales tax.
When the Constitution was enacted, to prevent this evil of multiple taxations it was provided that only the State in which the
goods were delivered for consumption should be allowed to levy a sales tax. This was achieved by article 286(1) (a) and its
explanation thereunder.
Here some of the cons of applying the Doctrine of Territorial Nexus in the cases in India:In the GVK casethe Court observed
that if the power to enact Laws for any territory, including a foreign territory, were to be read into clause (2) of Article 245,
the phrase 'for the whole or any part of the territory of India' in clause (1) of Article 245 would become a mere surplusage. In
jurisprudence, surplusage is a useless statement completely irrelevant to the cause.
A state legislature is not competent enough to make Laws for the extraterritorial operations. It is the job of the parliament
and there will definitely be a conflict of interest between the State and the parliament.
The scope of the Territorial Nexus Doctrine is so wide that it only requires proving a Nexus between the object and the state.
So there are high chances to get succumbed by ulterior motives.
The legislation may offend the rules of international Law, may not be recognized by foreign courts or there may be practical
difficulties in enforcing.
The Doctrine of Territorial Nexus allows the effect of Law outside the Territorial limits of the nation for extra Territorial
purposes if there exists a sufficient connection between the object and the state. So it is basically confiding with International
Law which is decided by a competent/incompetent State.
Conclusion
In this rapidly changing world and globalized era, every written constitution should have efficacy to deal with the matter of
extra-Territorial operation of Law related to matters of trade, commerce & services that occur outside of the country. Article
51 of the Constitution of India contains important positive policy statements for the promotion of international peace and
security, fostering respect for international Law and treaty obligation. Thus the balance between article 51 and 245 of the
Constitution of India is needed in the making of Laws related to the extra-Territorial operation

Federalism is a very complex mechanism though it is the very purpose for which a federal state is formed includes the
distribution of powers between the union and the Centre. Their power is partitioned by the constitution so that they should
their independence over the executive and legislative authority.

Thus, The Doctrine of Territorial Nexus does not debar a State Law from having an extra-Territorial jurisdiction. It simply lays
down that if a State wants to extend its Laws beyond its boundary then it will have to satisfy the Court that there is a
sufficient Nexus between the subject matter concerned and the state making the Law.

Though the legislative power of a State is Territorially limited to that State or part thereof, when it comes to the question of
taxing powers, a State gets competence based on the Doctrine of Territorial Nexus to tax events that have not taken place
fully within its Territorial limits. It is enough even if the Territorial connection is partial if it is real and not illusory and the
taxing liability is relevant to that connection.
Article 246 of Constitution of India "Subject-matter of laws made by Parliament and by the Legislatures of States"

(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").

(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have
power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution
referred to as the "Concurrent List").

(3) Subject to clauses (1) (2) the legislature of the state can make the laws with respect of the such state or part thereof with
respect to any of the matters enumerated in List II in the Seventh Schedule for this Constitution referred to as Concurrent
List.

(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included (in a
State) notwithstanding that such matter is a matter enumerated in the State List.
 
 Doctrine of Pith & Substance
Introduction
It is important to know the true nature of everything before judging it or accepting it. Pith means “true nature” or “essence”
and substance means the essential nature that is cardinal in a situation. The rudimentary objective of this doctrine is to
determine that, to which list (under the Seventh Schedule) a given morsel of legislation, statute, law, subject or enactment
belongs.
Nature of the doctrine
The simple meaning of the doctrine is “true nature of law”. This doctrine comes into picture when there is a conflict
between the different subjects in different lists. There is an interpretation of List 1 and List 2 of the Constitution of India.
There can be a situation when a subject of one list touches the subject of another List. Hence, this doctrine is applied.
Article 246 states the Union, State and Concurrent lists, enumerated in the Seventh Schedule of the Constitution. Taking into
account the federal nature of the Indian Constitution, one of the major features of such a constitution is the distribution of
power between the Union and the State governments and the same has been put forth in the Seventh Schedule which
comprises of:
Union List– Matters over which the Central Government has the power of making laws.
State List– Matters over which the State Government shall have the power of making laws.
Concurrent List– Matters over which both the Central and State Government have the power of making laws.
This doctrine is widely used when deciding whether a state is within its rights to create a statute that involves a subject
mentioned in Union List of the Constitution. The basic idea behind this principle is that an act or a provision created by the
State is valid if the true nature of the act or the provision is regarding a subject that falls in the State list.
It is a “Canadian Doctrine” been established in the Indian Constitution. This doctrine found its origin in the case of Cushing v.
Dupey. In this case the Privy Council established the doctrine, that for deciding whether an impugned legislation was intra
vires, regard must be given to its pith and substance.
Need of the doctrine
The doctrine has been applied in India also to provide a degree of flexibility in the rigid scheme of distribution of powers. The
reason for adoption of this doctrine is that if every legislation were to be declared invalid on the grounds that it trespassed
the powers, the powers of the legislature would eventually be restricted.

Jijubhai Nanbhai Kachar v. State of Gujarat, 1995 Supp. (1) SCC 596
“It is settled law of interpretation that entries in the Seventh Schedule are not powers but fields of legislation. The legislature
derives its power from Article 246 and other related articles of the Constitution. Therefore, the power to make the
Amendment Act is derived not from the respective entries but under Article 246 of the Constitution. The language of the
respective entries should be given the widest scope of their meaning, fairly capable to meet the machinery of the Government
settled by the Constitution. Each general word should extend to all ancillary or subsidiary matters which can fairly and
reasonably be comprehended in it. When the vires of an enactment is impugned, there is an initial presumption of its
constitutionality and if there is any difficulty in ascertaining the limits of the legislative power, the difficulty must be resolved,
as far as possible in favor of the legislature putting the most liberal construction upon the legislative entry so that it may have
the widest amplitude.”
Bondu Ramaswamy & Ors v. Bangalore Development Authority & Others, SLP (C) No. 4318 of 2006

The situation relating to Pith and Substance is different with respect to the Concurrent List. If a Law covered by an entry in
the State List made by the State Legislature contains any provision which directly and substantially relates to a matter
specified in the Concurrent List and is repugnant to the provisions of any existing law with respect to that matter in
the Concurrent List, then the repugnant provision in the State List may be void unless it can coexist and operate without
repugnancy in accordance with the provisions of the existing law..
Elements of the doctrine
When to adopt the doctrine– It is applied in the circumstances where subject matter of list seem to be conflicting with the
subject matter of the other list.
Why to adopting the doctrine– The powers of the legislature would be strictly limited if every law is declared invalid on the
ground that it encroaches upon another law.
Essence– The doctrine is to examine the true nature and character of the subject in order to ascertain as to in which list it
really exists.
Flexibility– It takes under consideration the fact as to whether the state has the power to make a law which involves a subject
mentioned in the Union list of the constitution.
Doctrine of Ancillary or Incidental Encroachment (Critical Analysis)
The doctrine of Ancillary and Incidental encroachment is actually an addition to the doctrine of Pith and Substance. The
theory and reason behind this doctrine is that it means that the power to legislate on a subject also includes the power to
legislate on ancillary matters that are reasonably connected to that subject.
The State of Bombay And Another vs F.N. Balsara
This is the first important judgment of the Supreme Court that took recourse to the Doctrine of Pith and Substance. The court
gave out the judgment stating that the act was in its Pith and Substance and justifiably fell under the State list even though
such an act was said to have a bearing on the import of liquor in the state.
The court upheld the Doctrine of Pith and Substance and said that it is important to ascertain the true nature and character
of legislation for the purpose of determining the List under which it falls.
Conclusion
The doctrine of ‘pith and substance’ is an old doctrine used in the constitutional matters in India. The literal meaning of the
doctrine is the true nature and essence of anything. What is worth noting here is that the subject matters given under the
three lists are not to be construed as powers of the legislatures but merely entries on which they could legislate. The power
of the legislature is given by Article 246 of the constitution of India. So, it can be concluded that the Doctrine has tried to
reduce the gap when it comes to determining whether a particular law relates to a particular subject. The doctrine has
The doctrine of ‘pith and substance’ says that where the question is about determining the power of legislature to make a
particular law under the three lists, what the court must look into is the substance of the same. thus, the doctrine is used
when the competence of the legislature is to be determined in relation to a particular enactment and what has to be looked
into is the substance of the enactment.

If it is found that the legislation is in substance on the matter assigned to the legislature then the enactment must be held to
be valid completely. It may so happen that the enactment incidentally encroaches upon the matter beyond the competence
of a particular legislature, but such encroachments do not render the whole enactment to be a nullity. The legislative matters
that are given under different lists are bound to overlap at some point but that does not make the whole enactment null and
void. Thus, it can be concluded that incidental encroachments are permissible while determining the competence of the
legislatures as far as the subject matters in the three lists are concerned.

Australia, there exists only one list and what has to be seen is whether an enactment falls under the categories mentioned in
that list. It is in these situations that the doctrine is used in these two countries. There is no question of encroachment on the
powers of the other level of the legislature in case of Australia. In India the situation is slightly different because of the
existence of three lists, although there are similarities when compared to Canada as both the countries apply the doctrine to
provide flexibility to their very well demarcated subjects in the lists. Whereas there lies a lot of difference when Australia is to
be taken into consideration. For example, India and Australia have very different views when it comes to ascertaining the
interference of an enactment with the trade and commerce of the country. while in Australia, the privy council through Lord
Porter held that the doctrine cannot be applied to enactments which are hit by section 93 of the Constitution of the country,
in India the interpretation is done in different ways.
Firstly, in the case of State of Bombay v. R.M.D Chamarbaugwala10 , the court was of the view that the doctrine might prove
to be useful in assessing the interference of an enactment with the trade and commerce.
Secondly, in cases such as Atiabari tea co. ltd. v. State of Assam, the court was of the view that the doctrine can
only be applied where there is encroachment in the powers to make laws on the subjects provided under the three
lists. If the question is not about the encroachment in the same, the doctrine is useless. Another point of difference
lies in the matters of the concurrent list in India. The major question that arises is that whether the doctrine of
‘pith and substance’ would apply to the matters relating to the concurrent list. The Supreme Court clarified its
stand on the issue through the case of Vijay Kumar Sharma v. State of Karnataka.

In this case the court held that the doctrine would apply even when the Parliament and State legislature legislate in
the concurrent list but with respect to different entries. The court further held that if in case the substance of the
laws made by both the legislatures is same only then Article 254(1) would apply which says that in case of any
repugnancy in the laws made by the parliament and state legislatures in the concurrent list, then the law made by
the parliament would prevail over the state legislature.
If the said legislature does not possess the competence to make laws on a particular subject, there lies no need at all to look
into the substance of the same, as the enactment would still be invalid. Time and again there have been several cases where
the doctrine has been misinterpreted not only in the cases of competence but also in cases of repugnancy. The underlying
rule to the doctrine is that, if the encroachment on the powers is ancillary or incidental, then the enactment would not be
rendered invalid. This rule is known as the rule of ancillary or incidental encroachment.

One of the few big cases in this respect is Subramanyam Chettiar v Muttuswami Goudan.

In this case the state of Madras enacted the Debt Relief Act, 1938 which provided that the court may scale down the debt of
the agriculturists that was owed to moneylenders. This provision was in conflict with Negotiable Instruments Act,1881 which
was a central legislation. The issue before the court was whether the enactment was repugnant and thus be declared invalid.
The court in this case was of the view that when a piece of legislation is enacted, its encroachment on the area of the other is
inevitable because the areas of the legislations may be so closely intertwined that a blind adherence to the lists would render
many enactments void.

Thus, the court held that the enactment was intra vires in nature and cannot be held to be invalid. In my opinion, in this case
since the promissory notes matured much before the enactment came into play, the decision was right but in similar cases
where the maturity date of promissory note might be after the enactment comes into play, the decision might prove be
flawed. This is because the encroachment in my view is substantial since it encroached upon the right of money lenders to
recover their money. Thus, the enactment not only encroached upon a central legislation but also on the rights of the money
lenders.
Prafulla Kumar Mukherjee v. Bank of Commerce. In this case the issue was regarding the validity of the Bengal Money
Lenders Act,1940. The act provided for limiting the amount as well as the interest that a lender could recover on any loan. It
was challenged on the ground of being ultra vires the Bengal legislature. While the High Court of Calcutta held that the act
was intra vires, the federal court on appeal quashed the judgment saying that act was ultra vires. Finally, the case went to the
Privy Council wherein the doctrine of ‘pith and substance’ was applied and it was held that the substance of the act is
‘moneylending’ which is well within the competence of the state legislature and falls under Entry 27 of List II of Government
of India Act,1935. Although the court believed that there was incidental encroachment on Entry 28 of List I which was about
the promissory notes, but again the encroachment was only incidental and was not sufficient the render the whole act void.

In a later case i.e. State of Bombay v. Narottamdas Jethabhai15 J. Patanjali Shastri held that the degree of encroachment is
no factor at all to decide on the validity of the legislation. While applying the doctrine of ‘pith and substance’ he went on to
hold that as long as the substance of the legislation is legitimate and the legislation is valid under the ‘pith and substance’
test, the enactment will be valid even if it encroached fully on the fields of the other legislature. In my opinion, if this is to be
the case then there is no point of demarcating the fields on which the union or the state legislature may legislate in the first
place. Both the legislatures may actually make laws in the other’s area in the name of pith and substance and the whole
purpose of having three lists in the constitution of India would be defeated.

The next on the list is State of Bombay v. F.N Balsara16 . In this case the issue in this case was pertaining to the validity of the
Bombay Prohibition Act, 1949.the issue was whether the enactment was falling under Entry 31 of the State list of
Government of India Act,1935 which was in correspondence to Entry 8 of the State list in the Constitution. The import and
export of liquor was a subject under the union list while the production, sale etc. was the subject of the state list. The court
while following the rule of incidental encroachment and applying the doctrine of ‘pith and substance’ held the enactment to
be valid as it fell under the State list even though it incidentally encroached upon the union list.
State of Bombay Vs. F.N.Balsara AIR 1951 Background:
This case is significant in the field of constitution law because it cleared certain grey areas regarding the doctrine of pith and
substance. The doctrine of pith and substance ‟is applied when the legislative competence of a legislature with regard to a
particular enactment is challenged with reference to the entries in different legislative lists, because a law dealing with a
subject in one list within the competence of the legislature concerned is also touching on a subject in another list not within
the competence of that legislature.”[1] In such a case, what has to be ascertained is the pith and substance of the enactment
—the true character and nature of the legislation.
In this case, the Court had held the Act valid because the pith and substance of the Act fell under Entry 31 of List II, and not
under Entry 19 of List I, even though the Act incidentally encroached upon the Central power of legislation.
Facts Balsara, who was a citizen of India, had presented a petition in the Bombay High Court.
The petitioner prayed for two things:
to allow him to exercise his right to possess, consume and use certain articles, namely, whisky, brandy, wine, beer, medicated
wine, eau-de-cologne, etc, and to import and export across the Customs frontier and to purchase, possess consume and use
any stock of foreign liquor, eau-de-cologne, lavender water, medicated wines and medicinal preparations containing alcohol
(2) to forbear from interfering with his right to possess these articles and to take no steps or proceedings against him, penal
or otherwise, under the Act.
The petitioner also requested for passing of a similar order under the specific relief act. It was impugned that the said Act
was violative of Article 19(1)(g) of the Constitution.
19 (1) (g): to practise any profession, or to carry on any occupation, trade or business
In this case it has been considered as to whether under the Prohibition Act, the keeping of alcohol mixed medicines and
toilet good their selling and buying and using can be prohibited or not. The question was whether that Act fell under Entry 31
of List II of the Government of India Act, 1935 (corresponding Entry 8 of the Constitution), namely, “intoxicating liquors, that
is to say, the production, manufacture, possession, transport, purchase, and sale of intoxicating liquors”, or under Entry 19 of
List I (corresponding Entry 41 of the Constitution), namely, “import and export of liquors across customs frontier”, which is a
Central subject.
he High Court accepted the contention of the petitioner that the definition of “liquor” in the Act was too wide and went
beyond the power vested in the legislature to legislate with regard to intoxicating liquors under item 31 of List II. That is
when the State of Bombay went to the Supreme Court of India in appeal.
The two important questions which the Supreme Court was called upon to decide in these appeals were:
(1) whether there are sufficient grounds for declaring the whole Act to be invalid
(2) to what extent the judgment of the High Court can be upheld with regard to the specific provisions of the Act which have
been declared by it to be void.
Final Judgement
The state legislature has the power to completely prohibit the keeping, selling and using intoxicating wine under the Entry
31 of List II. There is hence, no question of the dispute between the jurisdiction of the state and the centre.
If any act passed by the state legislature, prohibits or controls the export of the things mentioned in Entry 27 and 29 of the
List II, outside the boundaries of the state, then the Act is illegal. But this Act has been passed under Entry 31 of List II, hence
Section 297(1)(a) does not apply to it.
If any act passed by the state legislature, prohibits or controls the export of the things mentioned in Entry 27 and 29 of the
List II, outside the boundaries of the state, then the Act is illegal. But this Act has been passed under Entry 31 of List II, hence
Section 297(1)(a) does not apply to it.
The exemption allowed to the soldiers of Army, the messes of the Land Forces and Water Ships can therefore, not be
declared illegal under Section 37.

The Supreme Court declared illegal those provisions of the Bombay Prohibition Act which were regarding keeping alcohol-
mixed medicines and toilet goods, selling and buying them and also using them etc as violative of Article 19(1)(g) of the
Constitution and the rest of the provisions, legal. It was also decided that an Act, by declaring certain provisions thereof as
illegal, cannot be wholly declared as illegal.

It was stated that under Article 277 of the Constitution, any taxes , duties, cesses or fees which immediately before the
commencement of the Constitution, were being lawfully levied by the Govt. of any State or municipality or other local
authority or body for the purpose of the State, municipality, district or other local area may, notwithstanding that these
taxes, duties, cesses or fee are mentioned in the Union list continue to be levied and to be applied for: the same purpose
until provisions to the contrary are made by Parliament by law.

The principle of law laid down is that if the State government has enacted an Act on the subject on which it is constitutionally
empowered to do so, the Act is legal.
Overruling

This case no longer holds true in the present context because it has overruled in the case of Synthetics and Chemicals Ltd.
And Others v. State Of U.P. And Ors.
It is stated that this decision had proceeded on the basis that there could not be a complete prohibition in regard to
medicinal preparations containing alcohol. Hence, it was submitted that so far as alcohol not fit for human consumption is
concerned, it cannot be held that trade in such an article cannot be considered to be a noxious trade. It will be a noxious
trade only where it is produced or manufactured for purposes of human consumption.

State Legislature will have to levy taxes on possession of alcoholic liquors fit for human consumption because these are
luxuries. But alcohol not fit for human consumption are not luxuries and as such the State Legislatures, according to learned
Attorney General, will have no power to levy taxes on such alcohol. Parliament will have power to levy on all alcohol taxes not
covered by any other entries in lists I and II. See list 1 entry 97.
[246A. Special provision with respect to goods and services tax.—
(1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the Legislature of
every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State.
(2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of
services, or both takes place in the course of inter-State trade or commerce. Explanation.—The provisions of this article,
shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended
by the Goods and Services Tax Council.]

247. Power of Parliament to provide for the establishment of certain additional courts.— Notwithstanding anything in this
Chapter, Parliament may by law provide for the establishment of any additional courts for the better administration of laws
made by Parliament or of any existing laws with respect to a matter enumerated in the Union List.

248. Residuary powers of legislation.—(1) [Subject to article 246A, Parliament] has exclusive power to make any law with
respect to any matter not enumerated in the Concurrent List or State List.
(2) Such power shall include the power of making any law imposing a tax not mentioned in either of those Lists.

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 the national interest that Parliament
should make laws with respect to [goods and services tax provided under article 246A or] 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.

250. Power of Parliament to legislate with respect to any matter in the State List if a Proclamation of Emergency is in
operation.—

(1) Notwithstanding anything in this Chapter, Parliament shall, while a Proclamation of Emergency is in operation, have
power to make laws for the whole or any part of the territory of India with respect to 2 [goods and services tax provided
under article 246A or] any of the matters enumerated in the State List.

(2) A law made by Parliament which Parliament would not but for the issue of a Proclamation of Emergency 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 Proclamation has ceased to operate, except as respects things done or omitted to be done before the expiration of
the said period.
251. Inconsistency between laws made by Parliament under articles 249 and 250 and laws made by the Legislatures of
States.—Nothing in articles 249 and 250 shall restrict the power of the Legislature of a State to make any law which under
this Constitution it has power to make, but 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 has under either of the said articles power to make, the law made
by Parliament, whether passed before or after the law made by the Legislature of the State, shall prevail, and the law made
by the Legislature of the State shall to the extent of the repugnancy, but so long only as the law made by Parliament
continues to have effect, be inoperative.

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 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 Houses 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.

253. Legislation for giving effect to international agreements.—Notwithstanding anything in the foregoing provisions of this
Chapter, Parliament has power to make any law for the whole or any part of the territory of India for implementing any
treaty, agreement or convention with any other country or countries or any decision made at any international conference,
association or other body.
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.
Doctrine of colorable legislation.

This doctrine is a tool to decide cases majorly relating to legislative competence. The doctrine highlights the fact that ‘what
cannot be done directly, cannot be done indirectly’. “The idea conveyed by the expression is that although a legislature in
passing a statute purports to act within the limits of its power, yet in substance and in reality, it transgresses those powers,
the transgression being veiled by what appears on proper examination to be a mere pretense or disguise.” Thus, the
doctrine is very closely related to the doctrine of ‘pith and substance’. The doctrine finds its roots in the maxim “Quando
aliquid prohibetur ex directo, prohibetur et per obliquum”. The doctrine is used in the cases of Article 246 which
demarcates subjects on which the parliament can make laws as List I, in which the state legislatures can make laws as List II
and in which both can make laws as List III. It is used to determine if the legislature has the power to make laws on a
particular subject matter.

The doctrine is very well explained in the case of K.C. Gajapati Narayan Deo and Ors. V. State of Orissa. The court in this
held that, when the subjects are well demarcated on which the legislatures can make laws, questions do arise regarding
whether the legislature in a case even has the competence to make laws with respect to a particular subject matter. The
transgression may sometimes be indirect in nature and it to such cases that the doctrine of ‘colorable legislation’ is applied.
And thereafter defining the doctrine quoted the case of Ashok Kumar v. Union of India. In the case of Dwarkadas Shrinivas
v. Sholapur Spg. & wvg. co. ltd. 24. In this case the Supreme Court held that in cases where the prohibition is constitutional
in nature and binds the legislature, the legislature cannot use indirect methods to disobey such restrictions. Therefore, in
such cases, what has to be looked into is the true character and nature of the legislation (‘pith and substance’)
Colorable legislation theory says, "Whatever the government is unable to do directly, it can not do indirectly." The fate of the
impugned law is determined by applying this theory. This was provided by Article 246, which demarcated parliamentary and
state assemblies legislative authority by specifying the various subjects in List I for the Union, List II for the State and List III
for both, as set out in the seventh schedule to the Constitution of India.
COLOURABLE  LEGISLATION IN INDIAN CONTEXT
 
In India ' colorable legislation theory ' implies only a restriction of the legislature's law-making power. While the government
purports to act within its authority, it appears to realize but in fact, it has transgressed certain powers. So, the doctrine
becomes valid whenever a statute tries to do what it can not do specifically in an indirect manner. In India parliamentary and
state legislatures, legislative powers are delegated by Article 246 and allocated in the Seventh Schedule of the Indian
Constitution by lists I, II, and III. Parliament has the power to legislate on any of the List II matters, and Parliament and the
State Legislatures both have the power to make laws on any of the List III matters, and the residual power of regulation is
vested on Parliament by way of Article 248 and Article 97, List I. It is a matter of how legislative power must be exercised
between the Center and the States, or it relies only on the relationships between them, to create some legislation or the
legitimacy of that rule. The main point is that the government with punitive authority can not invade the field of competency.
It's called the "constitution scam."
 this doctrine was given in the case of K.C. Gajapati Narayana Deo And Other v. The State Of Orissa
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.
If the rule is resolved that no malafides could be applied to the Government, the first respondent does not argue that the
provision was enacted only to prosecute the first respondent. It is not necessary to accuse the government as an individual
of having passed a law for a foreign reason. Therefore, the legislation could not be attributed to any malafides. A legislature
does not operate on outside thought. But a legislative action based on mala fide can not be struck down for lack of legal
integrity or for being unreasonable.
 
CASE LAWS
 
In the case of Shri Prithvi Cotton Mills v. Broach Borough Municipality, the CJ granted legislative competence and stated
that it is not sufficient to merely declare that the court’s decision will not bind as it is equivalent to reversing the decision in
the usage of judicial power which the legislature does not possess. A court’s decision should always bind in all situations
unless the conditions are fundamentally altered. Therefore, it is accepted that when the premise of the decision is genuinely
changed by the legislature then there is no case of exercise of judicial power by the legislature.
 STATE OF BIHAR Vs. KAMESHWAR SINGH is the only case where a statute based on colorable legislation has been declared
invalid. In this case, the Bihar Land Reforms Act, 1950 was held unconstitutional on the ground that although it ostensibly
purported to lay down the principle of compensation, it did not lay down any such principle and therefore implicitly
attempted to deprive the petitioner of any compensation.
In conclusion, when the legislature had the power to legislate on any issue, it had all the ancillary and incidental power to
make the law efficient. So, the colorable legislation is needed to fix the legislative accountability with references to some
modifications in legislative functions. 
When the issue of validity was taken to the Supreme Court in Janapada Sabha Chhindwara v. Central Provinces Syndicate
Ltd., it was held that it was not for the court to supply the omission and the legislature just overruled the decision of the
court without changing the premise of the decision. It was pointed out that article 141 which made the Supreme court
judgment binding on all the courts in India, the legislature could not say that declaration of law by the court was imprecise,
invalid or ineffective either as a precedent or between the parties.
In the case of the State of Tamil Nadu v. M. Rayappa Gounder, the Madras Government attempted to reassess certain
theatre owners concerning escaped entertainment tax. It was held by the Madras High Court that the Madras Entertainment
Tax Act 1939 did not authorize a reassessment. This act having been struck down by the High Court then the matter was
taken in appeal to the SC by the state of Tamil Nadu. It was observed that the effect of this provision was to overrule the
decision of Madras High Court and not to change the law retrospectively.
 LIMITATION OF COLOURABLE LEGISLATION
The doctrine does not extend to Subordinate Legislation, either.
Colorable law theory does not require any doubt on the part of the legislature about bona fides or mala fides. The whole
theory transforms itself into a single legislature's, question of ability to pass a particular law.
If a Legislature has the power to make legislation on a particular subject, it also has the power to make the law successful.
The doctrine has no effect where any Constitutional restriction does not fetter the powers of a legislature.
When discussed above, the Legislature's transgression of constitutional power may be proprietary, manifest or actual, but
   
DOCTRINE FROM THE EYES OF THE SUPREME COURT
Laws can be called colorable when a body that has no power to legislate constructs laws that mask it in such a manner that it
seems to fall within its remit. The point is that the legislature can not implicitly overstep the domain of its competence. Such
an example is a simple procedural crime. In other words, it is the content of the statute that is substantive and not just the
structure or outward appearance, and it is difficult to save it from criticism if the subject matter, in essence, is beyond the
authority of the legislature to legislate on how the legislation is garbed. By using indirect methods the government can not
infringe the legislative prohibitions.
This theory is also called "Fraud on the Constitution" Failure to meet a substantive requirement for the exercise of legislative
power may be explicit or concealed. When it's overt, we say the law is terrible for non-compliance with the Constitution's
provisions, that is, the statute is ultra vires. However, when the non-compliance is hidden, we claim it's a' judicial scam,' the
fraud allegations that the Senate pretends to operate within its jurisdiction while in fact, it's not. Therefore, the charge of
‘fraud on the Constitution’ is, on ultimate analysis, nothing but a picturesque and epigrammatic way of expressing the idea of
non-compliance with the terms of the Constitution.
CONCLUSIONThe humorous bill has raised a question about the legislature's ability to pass a specific law. Yet there is a need
for such vibrant law in a country like India, and is the legislature legally bound to be responsible for it? It was never meant for
this by the framers in the Indian constitution, but whereas now the legislature runs out of its duties for a few days and makes
some unnecessarily unethical action. So we need to change the legislative system. India will hold an effective, corruption-free
legislative system. Past changes should be made side by side to provide for public oversight and to strengthen the State
Auditor General's authority. Finally, it is noted that a tendency to create legislative responsibility may be the ideology of
colorful legislation. There is a lack of provision in the constitution of federal countries such as Canada for parliamentary
responsibility, but thereafter different enactments are made as legislative accountability problems arise. Therefore, to
address legislative transparency for some improvements in the legislative system, colorable legislation is required.
   
DOCTRINE OF RUPGENENCY

Repugnancy means the conflict between two pieces of legislation which when applied to the same facts produce different
results. Repugnancy arises when the provisions of two laws are so inconsistent and irreconcilable that it is impossible to do
one without disobeying the other.

In the Indian context, if such a conflict arises between a central and a state legislation, then the central law will prevail. This
has been stated in Article 254 of the Indian Constitution and has also been further clarified by the Supreme Court in various
cases like I.T.C Ltd. V. Agricultural Produce Market Committee.

In M. Karunanidhi v. Union of India, the Supreme Court held that, where the provisions of a Central Act and a State Act in
the Concurrent list are fully inconsistent and absolutely irreconcilable, the Central Act will prevail and the State Act will
become void in view of the repugnancy.

In most federal constitutions and democracies across the world, the doctrine of repugnancy is embedded to resolve the
conflict between a law made by the center and a conflicting law made by the state. In most case, the decision is in favor of
the central law. In the United States of America, if a federal law conflicts with a state law, then the federal law pre-empts the
state law. In Australia, until 1986, the law for the territories was considered repugnant to the Commonwealth law, which was
the supreme law.

The Constitution under Schedule VII sets out the various subjects on which the Parliament and State may legislate, under List
I and List II respectively. Under List III, also known as the Concurrent List, both the Parliament and the states have the power
to make laws.
It is under Article 254 that the Constitution provides that in case both the Parliament and the state make a law upon a matter
in the Concurrent List and the laws are such that they are irreconcilable, then the law made by the Parliament shall prevail
and the law made by the state shall be deemed to be repugnant to the extent of its repugnancy with the Central law.

DOCTRINE OF REPUGNANCY IN THE INDIAN CONSTITUTION

Article 254 of the Indian Constitution talks about the doctrine of repugnancy. It involves solving questions of repugnancy
between the Central and the State law.

According to Article 254(1), if any provision of a state law is repugnant to a provision in a law made by the Parliament, which
the Parliament is competent to enact, or with any existing law regarding any matter in the Concurrent List, then the
Parliamentary law would prevail over the State law. It will be of no importance whether the Parliamentary law was enacted
before or after the State law. To the extent of repugnancy, the State law will be void.
It is due to this Article that the power of the Parliament to legislate upon matters contained in List III i.e., the Concurrent List
is supreme. The Article gives an overriding effect to any statue which the Parliament is competent to enact and which has
been enacted by it.

The application of this provision most commonly arises when there is a direct conflict between statues enacted by both the
Center and the State on matters in the Concurrent List, and there is repugnancy between them. Repugnancy arises between
two statues when they occupy the same field and are completely inconsistent with each other and have absolutely
irreconcilable provisions, as stated in the case of Deep Chand v. State of Uttar Pradesh.
   
It is due to this Article that the power of the Parliament to legislate upon matters contained in List III i.e., the Concurrent List
is supreme. The Article gives an overriding effect to any statue which the Parliament is competent to enact and which has
been enacted by it.

The application of this provision most commonly arises when there is a direct conflict between statues enacted by both the
Center and the State on matters in the Concurrent List, and there is repugnancy between them. Repugnancy arises between
two statues when they occupy the same field and are completely inconsistent with each other and have absolutely
irreconcilable provisions, as stated in the case of Deep Chand v. State of Uttar Pradesh.

The Supreme Court held in the case of Bharat Hydro Power Corpn. Ltd. v. State of Assam, as well as in the case of Central
Bank of India v. State of Kerala[4], that every effort should be made to reconcile the two enactments and construe them
both, in such a way, so as to avoid them being repugnant to each other. If the two enactments operate in different fields
without encroaching upon each other, then there will be no repugnancy.

It is essential that the repugnancy should exist in fact. It should also be clearly and sufficiently shown that the Central and
State laws are repugnant to each other. It was held in the case of State of Maharasthra v. Bharat Shanti Lal Shah[5], that
there was no such repugnancy between Ss. 13 to 16 of the Maharashtra Control of Organised Crime Act, 1999 which is a
State Act and Section 5(2) of the Telegraph Act, 1885, which is a Central Act.
   
 should be noted that, based on the rule of pith and substance, if the Center made a law upon a subject in the Central or
Concurrent List and the State made a law on a matter in the State List, then the question of repugnancy would not arise. As
seen in Krishna v. State of Madras, and in State of Madras v. Dunkerley, a State law would not be rendered invalid, on its
incidental encroachment in the Concurrent List, if it is enacted with respect to a matter in the State List. It would be void if it
is enacted with respect to a matter in the Union List.
Article 254(2) provides a manoeuvre to save a State law which is repugnant to the Central law on matters provided for in the
Concurrent List. As such, it relaxes the rule of repugnancy contained in Article 254(1).

Under ordinary circumstances, the Central law reigns supreme over a State law, rendering the State law void. However, there
may arise some extraordinary circumstances in a State, under which special provisions made by the state will be more
desirable than a uniform central law. As such Article 254(2) was incorporated in the Constitution to maintain an element of
flexibility and to make it possible to have a State law suitable to local circumstances against a contrary Central law on a
matter.

The Article states that if a state law has been enacted on a subject in the concurrent list and it contains provisions repugnant
to the provisions of a central law, then with respect to that particular matter, the state law will prevail in the concerned state.
The law should have been reserved for the consideration of the president and it should have received his assent. The result
of this assent will be that, the state law would continue to operate in that particular state and would overrule the application
of the central act in that state only. It is essential that both the laws deal with a subject on the concurrent list.

Explaining the effect of Article 254(2), the Supreme Court said in the case of Hoechst Pharm Ltd. v. State of Bihar, that the
result of obtaining the assent of the president in respect to a state act which was inconsistent with a previous union law
relating to a concurrent subject would be that, the state law would prevail in that state and it would override the provisions
   
  However, the final say rests with the centre which would eventually decide whether the central law would give way to the
state law or not. The state law so assented to, would prevail only to the extent of its inconsistency with the central law. It
would not override the whole of the central law, as held by the court in Ukha Kolhe v. State of Maharsthra.
The Supreme Court observed in Zaverbhai Amaidas v. State of Bombay[9], the words with respect to that matter are of
great importance in the Article 254(2). It stated that the important thing to consider was whether the legislation was in
respect to the same matter. If the later legislation deals with a matter which is distinct from the subject of the earlier
legislation but is of a cognate and allied character, then Article 254(2) will have no application.

Article 254(2) does not operate when the two Acts operate in different fields. An illustration of this is the case of Official
Assignee, Madras v. Inspector General of Registration[10], where the Central Act concerned Insolvency under entry 9 of List
III and the State Act related to Stamp duties under entry 44 of List III. It was held that no stamp fees would be payable on the
sale deed executed by the Official Assignee.
Article 254(2) was implemented with the view of saving those state laws falling under the Concurrent List from being
superseded by central laws due to the doctrine of repugnancy.

The sub-clause operates when two conditions are present. These conditions are:
· There must be a valid central law on the same subject matter and in the same field in the concurrent list to which the
central law relates.
· The state law must be repugnant to the central law
The Article will cease to operate if both the central and the state law have not been enacted on the same subject matter in
the concurrent list. In such a situation, the state law would prevail proprio vigore.
In Pt. Rishikesh v. Salma Begum, the Supreme Court held that if an enacted Parliamentary law is brought into effect after
enactment of a State law which had received the assent of the President, then the State law would prevail because the
parliamentary law was the earlier law.

The President’s assent is not a mere formality and is limited only to that specific purpose for which it was sought and
given. The state law will be void with respect to the central law, unless the conflict between the two acts was specifically
brought to the notice of the President while obtaining his assent. The President’s assent therefore, does not confer
irrevocable immunity upon the State law from the operation of the rule of repugnancy, as stated by the Supreme Court in the
case of Grand Kakatiya Sheraton Hotel and Towers Employees & Workers Union v. Srinivasa Resorts Ltd.

The proviso to Article 254(2) enables the Parliament to enact at any time, any law on any subject matter, including a law
adding to, amending, varying or repealing the State law on the same matter in the Concurrent List. The proviso thus,
increases the power of the Parliament by providing it the power to enact a law, repugnant to the earlier state law. The state
law is only protected by Presidential assent, in so far as the Parliament does not enact another law on the same matter which
is repugnant to the State law. If the Parliament does so, then those provisions of the state law which is repugnant to the
central law will be void. It is of essence that both the earlier state law and the later central law are enacted on the same
subject. This provision also provides the Parliament to expressly declare the earlier state law as repealed. Even if it is not
expressly repealed, the state law will become void as soon as the subsequent central law is enacted on that subject.
This principle was illustrated in the case of Zaverbhai v. State of Bombay, where a central law was enacted to regulate the
supply, production and distribution of essential commodities in 1946. The law also prescribed punishments for those who
acted in contravention of the act. The Bombay legislature did not consider these punishments adequate and enacted another
law in 1947, increasing the amount of punishment. This subsequent state law received the assent of the president and
continued to operate, until 1950, when the parliament itself amended the original law and increased the punishments. The
Supreme Court held that the state law would become void as it was repugnant to the central law and both the laws had been
Judicial Interpretation
A straightforward reading of the Article will suggest that the Article has been phased in such a way that it applies
to all cases of repugnancy between a Central and State law. It does not specifically say that the conflicting State
and Central laws should belong to the Concurrent List only. The words in the Concurrent List appear only to
state that the existing law, indicating a law made by the Parliament, already in existence, in relation to a matter i
the Concurrent List, would prevail over a State law in that same area in case of repugnancy. Regarding laws post
the enactment of the Constitution, the words which the Parliament is competent to enact is used. This is a
broad term and would comprise of the laws made by the Parliament on subjects in both the Central as well as
the Concurrent List.

However, this is not how the judiciary has interpreted Article 254(1). Judicial decisions in the cases of State of
Jammu and Kashmir v. M.S.Farooqi, of Bar Council of Uttar Pradesh v. State of Uttar Pradesh and in the case
of K.S.E. Board v. Indian Aluminium Co. have consistently stated that repugnancy arises and Article 254(1)
would apply only when both the Central and the State laws have been enacted on a subject in the Concurrent
List and not otherwise.

Explaining the purport of Article 254(1), the Supreme Court stated in Hoechst Pharm Ltd v. State of Bihar that
Clause (1) laid down that if a State law relating to subject in the Concurrent List was repugnant to Union Law
relating to the same subject, whether the Union Law was prior or later in time, the Union Law would prevail and
the State law, to the extent of repugnancy, would be void.

Issues regarding Article 254(1) is not whether a statue falls under one or the other of the entries of the Lists but
whether the State law comes into conflict with the Central law or not. On this issue, the Supreme Court has
clarified, in Kanaka Gruha Nirmana Sahakara Sangha v. Narayanamma, that for the application of this
To ascertain repugnancy, it will be taken into consideration whether the Parliament intended to lay down an exhaustive code
regarding the subject, which would replace the State Law. If the Parliament did not intend to lay down an exhaustive and
unqualified code, then there can be no inconsistency and any qualification or restriction introduced by another law cannot be
said to be repugnant to the Central law. The Supreme Court further stated that before coming to this conclusion, the Court must
fully satisfy itself that the two laws are so inconsistent that they cannot stand together, and thereby must be repealed by
implication.

In T.Barai v. Henry & Hoe the court held that, Article 254(2) is an exception to the general rule laid down in Article 254(1).

In Krishna Dist. Co-op. Marketing Soc. Ltd. v. N.V.P.Rao, the state law which had been enacted after the central law and which
had received the assent of the president would continue to operate over the central law, if there was a repugnancy between the
two. If there was no such repugnancy, then the two laws would continue to co-exist.

The Supreme Court further interpreted Article 254(2) in the case of M.P. Shikshak Congress v. R.P.F. Commissioner, Jabalpur, by
holding that the sub clause would be applicable only in those cases where the Central law was enacted before the state law. Even
if the state act receives the assent of the president, it would be of no avail because the repugnancy was with the central act whic
was enacted by the parliament after the enactment of the state law. The sub clause would not apply if the state act became
repugnant to a parliamentary law enacted after the state law. This was additionally retreated in S.M.C. Students, Parents Ass. v.
Union of India.
There are certain conditions operating on which the Parliament may repeal a state law, by enacting a subsequent legislation.
These conditions are that; there must already be central law on a matter in the concurrent list, the state law then enacted a
subsequent legislation on the same matter which was inconsistent with the central law and the state law then received the assen
of the Parliament. This was stated by the Supreme Court in the case of Tika Ramji v. State of Uttar Pradesh[22], where it
interpreted the proviso to Article 254(2).

In this case, the parliament enacted a law subsequent to a state law in Uttar Pradesh, regulating the supply and purchase of
sugarcane. The Supreme Court held that the Parliament could not repeal a state law if it was not repugnant to an earlier central
law or if there was no parliamentary law already in existence prior to the enactment of the parliamentary law on that matter.
However, in the case of repugnancy, the parliamentary law would prevail to the extent of repugnancy. It was also pointed out tha
the power to repeal a state law could not be delegated by the Parliament to any executive authority.

The constitution of India has been called quasi-federal in nature by the distinguished jurist K.C.Wheare. This is due to the fact tha
the constitution has several unitary as well as federal features. However, the founders of our constitution defined it as a federal
one.
Article 254 is a classic example of how both unitary and federal features exist in the Indian constitution. The Article provides that
in case of a conflict between a central and a state law on the same subject, the provisions of the central law will prevail over the
conflicting provisions of the same law. It even provides the parliament with the power to expressly repeal an earlier state law by
enacting a subsequent legislation.
Conversely, protection has also been afforded to the laws made by the state. If a state law is conflicting with a central law, it may
still continue to operate if the state law has received the assent of the president. The Supreme Court’s judgement in Tika
Ramji v. State of Uttar Pradesh interpreted the Article in way which was considered to be a significant pronouncement in the fiel
of Indian federalism. It stated that, the Parliament could not repeal any state law in the concurrent list, if it was not repugnant to
the central law. An earlier central law should exist prior to the state legislation for the parliament to enact a subsequent law
repealing the earlier state law.

We can hence conclude that, Article 254 is a tremendously important one especially when looked at from the lens of centre-state
relations. It plays a deciding role in determining the roles to be played by the laws made by the centre and the state and as such,
is noteworthy in showcasing the federal side of the Indian constitution.
Rule of Harmonious Construction

When there is a conflict between two or more statues or two or more parts of a statute then the rule of harmonious
construction needs to be adopted. The rule follows a very simple premise that every statute has a purpose and intent as
per law and should be read as a whole. The interpretation consistent of all the provisions of the statute should be
adopted. In the case in which it shall be impossible to harmonize both the provisions, the court’s decision regarding the
provision shall prevail.

The rule of harmonious construction is the thumb rule to interpretation of any statute. An interpretation which makes
the enactment a consistent whole, should be the aim of the Courts and a construction which avoids inconsistency or
repugnancy between the various sections or parts of the statute should be adopted. The Courts should avoid “a head on
clash”, in the words of the Apex Court, between the different parts of an enactment and conflict between the various
provisions should be sought to be harmonized. The normal presumption should be consistency and it should not be
assumed that what is given with one hand by the legislature is sought to be taken away by the other. The rule of
harmonious construction has been tersely explained by the Supreme Court thus, “When there are, in an enactment two
provisions which cannot be reconciled with each other, they should be so interpreted, that if possible, effect should be
given to both”. A construction which makes one portion of the enactment a dead letter should be avoided since
harmonization is not equivalent to destruction.

Harmonious Construction should be applied to statutory rules and courts should avoid absurd or unintended results. It
should be resorted to making the provision meaningful in the context. It should be in consonance with the intention of
Rule makers. Rule of Harmonious construction is applicable to subordinate legislature also.
The Supreme Court laid down five principles of rule of Harmonious Construction in the landmark case of CIT v Hindustan Bulk
Carriers:
1. The courts must avoid a head on clash of seemingly contradicting provisions and they must construe the contradictory
provisions so as to harmonize them.

2. The provision of one section cannot be used to defeat the provision contained in another unless the court, despite all its effort
is unable to find a way to reconcile their differences. When it is impossible to completely reconcile the differences in
contradictory provisions, the courts must interpret them in such as way so that effect is given to both the provisions as much as
possible.

3. Courts must also keep in mind that interpretation that reduces one provision to a useless number or dead is not harmonious
construction.

To harmonize is not to destroy any statutory provision or to render it fruitless.

Cases on Harmonious Construction
1. Venkataramana Devaru v. State of Mysore
In this case the Supreme Court applied the rule of harmonious construction in resolving a conflict between Articles 25(2)(b) and
26(b) of the Constitution and it was held that the right of every religious denomination or any section thereof to manage its own
affairs in matters of religion [Article 26(b)] is subject to a law made by a State providing for social welfare and reform or throwing
open of Hindu religious institutions of a public character to all classes and sections of Hindus [Article 25(2)(b)].
Calcutta Gas Company Pvt. Limited v State of West Bengal
The Legislative Assembly of WB passed the Oriental Gas Company Act in 1960. The respondent sought to take over the
management of the Gas Company under this Act. The appellant challenged the validity of this act by holding that the state
Legislative Assembly had no power to pass such an under Entries 24 and 25 of the State List because the Parliament had already
enacted the Industries (Development and Regulation) Act, 1951 under Entry 52 of the Central List dealing with industries. It was
observed by the Supreme Court that there are so many subjects in three lists in the Constitution that there is bound to be some
overlapping and it is the duty of the courts in such situation is to yet to harmonise them, if possible, so the effect can be given to
each of them. Entry 24 of the State List covers entire Industries in the State. Entry 25 is only limited to the Gas industry. Therefore
Entry 24 covers every industry barring the Gas Industries because it has been specifically covered under Entry 25. Corresponding
to Entry 24 of the State List, there is Entry 52 in the Union List. Therefore, by harmonious construction it became clear that gas
industry was exclusively covered by Entry 25 of the State List over which the state has full control. Therefore, the state was fully
competent to make laws in this regard.
3. Commissioner of Sales Tax, MP v Radha Krishna
Under section 46 (1) c of the Madhya Pradesh General Sales Tax Act, 1958, criminal prosecution of the respondent partners was
sanctioned in this case by the Commissioner when even after repeated demands the assesse did not pay the sales tax. The
respondent challenged this provision on the ground that there were two separate provisions under the Act, namely, section 22 (4
– A) and section 46 (1) c under which two different procedures were prescribed to realize the amount due but there was no
provision of law which could tell that which provision should be applied in which case. According to the Supreme Court, the
provision prescribed u/s 46 (1) c was more drastic. It was held that by harmonious construction of these two provisions, the
conclusion drawn is that the Commissioner had a judicial discretion to decide as to which procedure to be followed in which case
Whenever the Commissioner will fail to act judicially, the court will have the right to intervene. However, in this case, the
Commissioner had correctly decided that the more drastic procedure under section 46 (1) c deserved to be followed because of
the failure of the assesse firm in paying sales tax despite the repeated demands by the sales tax officer.
4. Sirsilk Ltd. v Govt. of Andhra Pradesh
An interesting question relating to a conflict between two equally mandatory provisions, viz., ss 17(1) and 18(1) of the
Industrial Disputes Act, 1947, is a good illustration of the importance of the principle that every effort should be made to
give effect to all the provisions of an act by harmonizing any apparent conflict between two or more of its provisions.
Section 17(1) of the Act requires the government to publish every award of a Labour Tribunal within thirty days of its
receipt and by sub – section (2) of section 17 the award on its publication becomes final. Section 18(1) of the Act provides
that a settlement between employer and workmen shall be binding on the parties to the agreement. In a case where a
settlement was arrived at after the receipt of the award of a Labour Tribunal by the Government but before its publication,
the question was whether the Government was still required u/s 17(1) to publish the award. In construing these two
equally mandatory provisions, the Supreme Court held that the only way to resolve the conflict was to hold that by the
settlement, which becomes effective from the date of signing, the industrial dispute comes to an end and the award
becomes infructuous and the Government cannot publish it.
Venkatarama Iyer, J., “The rule of construction is well settled that when an enactment there are in an enactment two provisions
which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. This is
what is known as the rule of harmonious construction.”– Venkataramana Devaru v. State of Mysore, AIR 1958 895.
The doctrine is associated with two Latin maxims:
Generalia specialibus non derogant:  The general rule to be followed in case of conflict between two statutes is that the later
repeals the earlier one. In other words, a prior special law would yield to a later general law, if either of the two following
conditions is satisfied :
The two are inconsistent with each other.
There is some express reference in the later to the earlier enactment.
If either of these two conditions is fulfilled, the later law, even though general, would prevail.
Generalibus specialia derogant: The OSBORN’S Law Dictionary defines this maxim as, “Special things derogate from general
things.”
The explanation of the same can be given from the case of State of Rajasthan v. Gopi Kishan Sen, in which the Supreme Court
observed that “the rule of harmonious construction of apparently conflicting statutory provisions is well established for upholding
and giving effect to all the provisions as far as it may be possible, and for avoiding the interpretation which may render any of
them ineffective”.
In the instant case, Rule 29 of the Rajasthan Services Rules, 1951 dealing with the payment of increment is in general terms while
the schedule in the Rajasthan Civil Services (New Pay Scales) Rules, 1969 makes a special provision governing the untrained
teachers, attracting the maxim ‘Generalibus specialia derogant’ i.e., if a special provision is made on a certain subject, that
subject is excluded from the general provision.
Procedure to give effect to the doctrine:
The principle of harmonious construction requires the following four steps to have an effect:
1 That both the provisions which are conflicting must be read as a whole with reference to the entire enactment in
question.
Give full effect to both of them and then reduce the conflict.
Out of the two conflicting provisions choose wider and narrower scope of these two separately and,
From the wider provision, subtract the narrow and see the consequence. If the consequence is as reasonable as to
harmonize both the provisions and it gives their full effect separately, no further scrutiny is required.

According to this doctrine the courts must try to avoid conflicts between the provisions of the statutes. Statutes are
drafted by the legislature and there is anticipation of situations of ambiguity, conflicts, repugnancy, redundancy etc. In
such situations, the rules of interpretation of statutes come into role and the provisions are construed so as to give
maximum effect to them and to render justice to the situation at hand. The principle of harmonious construction plays
a very important role in interpreting statutes and is used in many cases. It helps in simplifying complex issues and
makes delivering judgment as much easier.
Therefore, like the many rules of interpretation of statutes, the importance of the rule of harmonious construction is
also understood and felt by the judiciary. Thus the provisions must be so interpreted that the conflict between the two
is avoided and each of them is given effect and, for that purpose the scope and meaning of one may be restricted to
the extent as to give meaning to the other too.
Center's control over State Legislation
The Constitution empowers the centre to exercise control over the state’s legislature in
following ways:
1. The governor can reserve certain types of bills passed by the state legislature for the consideration of
the President. The President enjoys absolute veto over them.
2. Bills on certain matters enumerated in the State List can be introduced in the state legislature only
with the previous sanction of the President as imposing restrictions on freedom of trade and
commerce.
3. The President can direct the states to reserve money bills and other financial bills passed by the state
legislature for his consideration during a financial emergency.
2. Centre State Administrative Relations
The administrative jurisdiction of the Union and the State Governments extends to the subjects in the
Union list and State list respectively. The Constitution thus defines the clauses that deal with the
administrative relations between Centre and States.
Centre State Relations During Normal Ties
1. Executive Powers of State be exercised in compliance with Union Laws: Article 256 lays down that the
executive power of every State shall be so exercised as to ensure compliance with the laws made by
Parliament and any existing laws which apply in that State, and the executive power of the Union shall
extend to the giving of such directions to a state as may appear to the Government of India to be
necessary for that purpose.

2. Executive Powers of State not to interfere with Executive Power of Union: Article 257 of the Constitution
provides that the executive power of every state shall be so exercised as not to impede or prejudice the
exercise of the executive power of the Union, and the executive power of the Union shall extend to giving
of such directions to a state as may appear to the Government of India to be necessary for that purpose.
In short, the Union Government can issue directions to the state Government even with regard to the
subjects enumerated in the state list.

3. Maintain means of communication of National or Military importance: The Union Government can give
directions to the state with regard to construction and maintenance of the means of communication
declared to be of national or military importance.

4. Protection of the Railways: Union can issue State Governments necessary directions regarding the
measures to be taken for the protection of the railways within the jurisdiction of the State. It may be noted
that the expenses incurred by the State Governments for the discharge of these functions have to be
reimbursed by the Union Government.
To ensure welfare of Scheduled Tribes in the States: Union can direct the State Governments to ensure
execution of schemes essential for the welfare of the Scheduled Tribes in the States.

6. To secure instruction in the mother-tongue at the primary stage of education: Union can direct the State
Governments to secure the provision of adequate facilities for instruction in the mother-tongue at the
primary stage of education to children belonging to linguistic minority groups.

7. To ensure development of the Hindi language: Union can direct the State Governments to ensure the
development of the Hindi language.

8. To ensure government of a State is carried on in accordance with the provision of the Constitution: Union
can direct the State Governments to ensure that the government of a State is carried on in accordance with
the provision of the Constitution. If any State failed to comply with any directions given by the Union in
exercise of its executive power, then President may hold that, a situation has arisen in which the Government
of the State cannot be carried on in accordance with the provisions of the Constitution. Thus he may proclaim
President’s Rule in that State.

9. Delegation of Union’s function to State: The President of India can entrust to the officers of the State
certain functions of the Union Government. However, before doing so the President has to take the consent
of the state Government. But the Parliament can enact law authorizing the Central Government to delegate
its function to the State Governments or its officers irrespective of the consent of such State Government. On
the other hand, a State may confer administrative functions upon the Union, with the consent of the Union
only.
10. Appointment of High Dignitaries: Union has major say in appointment and removal of Governor and
appointment of Judges of High Court and Members of State Public Service Commission.

11. All India Services: The presence of the All India Services - the Indian Administrative Services, Indian police
Services - further accords a predominant position to the Union Government. The members of these services
are recruited and appointment by the Union Public Service Commission. The members of these services are
posted on key posts in the states, but remain loyal to the Union Government.

12. Union to adjudicate Inter-State River Water Dispute: The Parliament has been vested with power to
adjudicate any dispute or complaint with respect to the use, distribution or control of the waters of, or in
any inter-state river or river-valley. In this regard, the Parliament also reserves the right to exclude such
disputes from the jurisdiction of the Supreme Court or other Courts.
Centre State Relations During Emergencies
1. Under President’s Rule: The State Governments cannot ignore the directions of the Union
Government, otherwise the President can take the action against the Government of the State stating
that the administration cannot be carried on the accordance with the provisions of the Constitution
and thus can impose President's rule on the State. In such an eventuality the President shall assume
to himself all or any of the functions of the state Government.

2. Under Proclamation of National Emergency: During a Proclamation of National Emergency, the

power of the Union to give directions extends to the giving of directions as to the manner in with the
executive power of the State is to be exercised relating to any matter.

3. Under Proclamation of Financial Emergency: During a Proclamation of Financial Emergency, Union

can direct the State Governments to observe certain canons of financial propriety and to reduce the
salaries and allowances of all or any class of person serving in connection with the affairs of the
Union including the Judges of the Supreme Court and High Courts. Union also requires all Money Bills
or Financial Bills to be reserved for the consideration of the President after they are passed by the
Legislature of the State.

It is thus, evident that in the administrative sphere the States cannot act in complete isolation and
have to work under the directions and in cooperation with the Center.
Though under ordinary circumstances the Central Government does not possess the power to legislation on
subjects enumerated in the State List, under certain special conditions the Union parliament can make laws
even on these subjects, in the following cases, Union Parliament can legislate on the subject listed in the
State List-
•If the Rajya Sabha declares by a resolution supported by not less than two-thirds of the members present
and voting that it is necessary or expedient in the national interest that the Parliament should make laws
with respect to any matter, enumerated in the State List, specified in the resolution. After such a resolution is
passed it is lawful for the 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. Such a resolution remains in force for a period
of one year and can be further extended by one year by means of a subsequent resolution. It may be
observed that this provision has been used only in very few cases and has not added to the powers of the
parliament.

•The parliament can legislate on the subjects mentioned in the State List when the
Proclamation of Emergency has been made by the President on grounds of internal
disturbances or external aggression. However, the laws thus made by the Parliament
shall cease to have an effect on the expiration of a period of six months after the
Proclamation has ceased to operate, except as respects things done or omitted to be
done before the expiry of the said period. Thus during an emergency, the Parliament can
legislate on subjects in all the three lists and the Federal Constitution gets converted
into unitary one.
3. Centre State Financial Relations:
Indian Constitution has made elaborate provisions, relating to the distribution of the taxes as well as non-
tax revenues and the power of borrowing, supplemented by provisions for grants-in-aid by the Union to
the States.

Article 268 to 293 deals with the provisions of financial relations between Centre and States.

The Constitution divides the taxing powers between the Centre and the states as follows:

The Parliament has exclusive power to levy taxes on subjects enumerated in the Union List, the state
legislature has exclusive power to levy taxes on subjects enumerated in the State List, both can levy taxes
on the subjects enumerated in Concurrent List whereas residuary power of taxation lies with Parliament
only.
•The President can also authorise the Parliament to exercise the powers of the State
legislature during the Proclamation of Emergency due to breakdown of constitutional
machinery in a state. But all such laws passed by the Parliament cease to operate six
months after the Proclamation of Emergency comes to an end.
•The Parliament can also be authorised to legislate on a state subject if the legislatures
of two or more states feel it desirable that any of the matters with respect to which the
Parliament has no power to make laws for the states should be regulated in such
states by Parliament by law and if resolutions to that effect are passed by legislatures
of those states. Thereafter any act passed by the Parliament shall apply to such
states and to any other state by which it is adopted afterwards by a resolution passed
in that behalf by the house, or, where there are two houses, by each house of the
the legislature of that state. The Parliament also reserves the right to amend or repeal
any such act.
•The Parliament can make law for the whole or any part of the territory of India for
implementing any treaty, agreement or convention with any other country or countries
or any decision made at any international conference, association or other body. Any
law passed by the Parliament for this purpose cannot be invalidated on the ground
that it relates to the subject mentioned in the state list.
•Certain bills passed by the state legislature have to be reserved by the Governor of
the state for the consideration of the President. These bills become law only after the
President gives his assent. The bills which the Governor must reserve for the
consideration of the President relate to compulsory acquisition of property or those
which adversely affected the powers of the high court.
Distribution of the tax-revenue
1. Duties Levied by the Union but Collected and Appropriated by the States: Stamp duties on bills of
Exchange, etc., and Excise duties on medical and toilet preparations containing alcohol. These taxes don’t
form the part of the Consolidated Fund of India, but are assigned to that state only.

2. Service Tax are Levied by the Centre but Collected and Appropriated by the Centre and the States.

3. Taxes Levied as Well as Collected by the Union, but Assigned to the States: These include taxes on the
sale and purchase of goods in the course of inter-state trade or commerce or the taxes on the
consignment of goods in the course of inter-state trade or commerce.

4. Taxes Levied and Collected by the Union and Distributed between Union and the States: Certain taxes
shall be levied as well as collected by the Union, but their proceeds shall be divided between the Union
and the States in a certain proportion, in order to effect on equitable division of the financial resources.
This category includes all taxes referred in Union List except the duties and taxes referred to in Article 268,
268-A and 269; surcharge on taxes and duties mentioned in Article 271 or any Cess levied for specific
purposes.

5. Surcharge on certain duties and taxes for purposes of the Union: Parliament may at any time increase
any of the duties or taxes referred in those articles by a surcharge for purposes of the Union and the
whole proceeds of any such surcharge shall form part the Consolidated Fund of India.
Grants-in-Aid
Besides sharing of taxes between the Center and the States, the Constitution provides for Grants-in-aid to
the States from the Central resources.

There are two types of grants:-

1. Statutory Grants: These grants are given by the Parliament out of the Consolidated Fund of India to such
States which are in need of assistance. Different States may be granted different sums. Specific grants are
also given to promote the welfare of scheduled tribes in a state or to raise the level of administration of the
Scheduled areas therein (Art.275).
2. Discretionary Grants: Center provides certain grants to the states on the recommendations of the
Planning Commission which are at the discretion of the Union Government. These are given to help the
state financially to fulfill plan targets (Art.282).
Effects of Emergency on Center-State Financial Relations:-
1. During National Emergency: The President by order can direct that all provisions regarding division of
taxes between Union and States and grants-in-aids remain suspended. However, such suspension shall not
go beyond the expiration of the financial year in which the Proclamation ceases to operate.

2. During Financial Emergency: Union can give directions to the States:-

1. To observe such canons of financial propriety as specified in the direction.

2. To reduce the salaries and allowances of all people serving in connection with the affairs of the State,
including High Courts judges.
Finance Commission
Although the Constitution has made an effort to allocate every possible source of revenue either to the
Union or the States, but this allocation is quite broad based. For the purpose of allocation of certain
sources of revenue, between the Union and the State Governments, the Constitution provides for the
establishment of a Finance Commission under Article 280. According to the Constitution, the President of
India is authorized to set up a Finance Commission every five years to make recommendation regarding
distribution of financial resources between the Union and the States.

Constitution
Finance Commission is to be constituted by the President every 5 years. The Chairman must be a
person having ‘experience in public affairs’. Other four members must be appointed from amongst
the following:-
1. A High Court Judge or one qualified to be appointed as High Court Judge;

2. A person having knowledge of the finances and accounts of the Government;

3. A person having work experience in financial matters and administration;

4. A person having special knowledge of economics.

Functions
The Finance Commission recommends to the President as to:-
1. The distribution between the Union and the States of the net proceeds of taxes to be divided between
them and the allocation between the States of respective shares of such proceeds;

2. The principles which should govern the grants-in-aid of the revenue of the States out of the Consolidated
Fund of India;

3. The measures needed to augment the Consolidated Fund of a State to supplement the resources of the
Panchayats and Municipalities in the State;

4. Any other matter referred to the Commission by the President in the interest of sound finance
Conclusion:
In India, the Centre-States relations constitute the core elements of the federalism. The Central Government
and State Government cooperate for the well-being and safety of the citizens of India. The work together in
the field of environmental protection, terror control, family control and socio-economic planning.
The Indian constitution aim at reconciling the national unity while giving the power to maintain state to the
State governments. It is true that the union has been assigned larger powers than the state governments,
but this is a question of degree and not quality, since all the essential features of a federation are present in
the Indian constitution. It is often defined to be quasi-federal in nature. Thus, it can be safely said that
Indian Constitution is primarily federal in nature even though it has unique features that enable it to
assume unitary features upon the time of need. Federal but its spirit is unitary.