CENTRE - STATE RELATIONS

Federalism:
• Federalism is the structure of government, where the powers are shared between two kinds of
governments. One is the Central government, and the other is smaller regional governments. It
indicates the agreement between different levels of government to work together while still
maintaining independence in their own spheres.
• In a federation, the national government and the regional government each have their own areas
of authority as outlined in the Constitution.
• In the Indian federal setup, the Constitution divides the legislative, executive, and financial
functions between the Centre and the states. The Constitution established an integrated judicial
system to uphold federal and state laws.
• The Centre-state relations cut across the following three subject matters:
1. Legislative relations
2. Administrative relations
3. Financial relations
 PART XI : RELATIONS BETWEEN THE UNION AND THE STATES

CHAPTER I. LEGISLATIVE RELATIONS

Distribution of Legislative Powers:

245. Extent of laws made by Parliament and by the Legislatures of States.
246. Subject-matter of laws made by Parliament and by the Legislatures of States.
247. Power of Parliament to provide for the establishment of certain additional
courts.
248. Residuary powers of legislation.
249. Power of Parliament to legislate with respect to a matter in the State List in the
national interest.
250. Power of Parliament to legislate with respect to any matter in the State List if a
Proclamation of Emergency is in operation.
251. Inconsistency between laws made by Parliament under articles 249 and 250 and
laws made by the Legislatures of States.
252. Power of Parliament to legislate for two or more States by consent and adoption
of such legislation by any other State.
253. Legislation for giving effect to international agreements.
254. Inconsistency between laws made by Parliament and laws made by the
Legislatures of States.
255. Requirements as to recommendations and previous sanctions to be regarded as
matters of procedure only.
Legislative Relations:

• Part XI of the Constitution deals with the legislative relations between the
Centre and the states in Articles 245 to 255.
• Furthermore, Schedule VII within the Constitution plays a pivotal role by
categorizing subjects into the Union List, State List, and Concurrent List,
providing a structured framework for legislative responsibilities.

• The constitution of India has distributed the law making power between the
two governments in two different ways:
• With respect to Territory (Territorial Jurisdiction)
• With respect to Subject-matter.
• There are four aspects in the Centre-state legislative relations:

1. Territorial extent of central and state legislation.

2. Distribution of legislative subjects.
3. Parliamentary legislation in the state field.
4. Centre’s control over state legislation.
1. Territorial extent of central and state legislation:

• Parliament can make law for the whole or any part of the territory of India
(territory includes union, state & Union Territories).
• State legislature can make laws for the whole or any part of the state. Laws
made by the state are not applicable outside the state, except when there is
sufficient relation between the state and object.
• Parliament can alone make ‘extra-territorial’ legislation.

➢ {Article 245(1) of the Indian Constitution states that Parliament may make
laws for the whole or any part of India, while state legislatures can make laws
only for their respective states.}
➢ {Article 245(2) clarifies that a law made by Parliament shall not be invalid
merely because it has extraterritorial operation.}
Essential Condition for Doctrine of Nexus:
• 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.
Condition:
• Real and Sufficient Nexus: There must be a direct and significant connection
between the state and the object or subject matter outside the state.
• Legitimate Object: The object of the law must be to regulate something within the
state.
• Non-Illusonry Connection: The connection should not be vague, artificial, or
indirect.
• In Wallace v. Income-tax Commissioner, Bombay(1948) 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.

• In the case of A.H. Wadia vs Commissioner Of Income-Tax commissioner,

Bombay(1949), the Supreme court 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.”
State of Bombay vs RMDC(1957):
• The State of Bombay imposed a tax on lotteries and prize competitions under the Bombay Lotteries
and Prize Competitions Control and Tax Act, 1948. R.M.D.C., which conducted prize competitions
through newspapers circulated in Bombay, challenged the tax’s applicability.
• 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(1958):
• 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 Smt. 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.
• In Sondur Gopal vs. Sondur Rajini, the question before the Division Reach of the
Apex Court related to application of The Hindu Marriage Act, to Hindus, residing
out of India but having domicile in India. Court held though the parties, having
domicile of origin in India, they would continue to be governed by the H.M. Act,
1955.
Restrictions on laws of parliament:

• President can make regulations which has same effect as that of the law made
by parliament for - Andaman and Nicobar islands, Daman and Diu, Dadra
and Nagar Haveli and Lakshadweep.
• Governor is empowered to direct that an act of parliament does not apply to a
scheduled area in the state or apply with specified modifications and
exceptions.
• Governor of Assam can likewise direct that an act of Parliament does not
apply or apply with some modification. The same power is vested in
President in relation to Meghalaya, Tripura and Mizoram.
2. Distribution of legislative subjects:

• Union List - The Union Parliament has exclusive powers to make legislation
on the matters included in the Union List.
• State List - The State Legislatures have exclusive powers to make legislation
on the matters incorporated in the State List.
• Concurrent List - Both the Centre and states can make laws on the subjects
included in the Concurrent list.
• Article 248 - The Residuary powers are given to the Centre, and the Parliament
of India alone can make legislation on the subjects not included in any of the
above three lists.
• Union list, State list, Concurrent list. (LIST I, II, III of Seventh Schedule of
Indian Constitution)

Union list:

• Union list contains 100 subjects (originally 97 items)

• It comprises of subjects with National important and admit of uniform laws
for whole country.
• Includes Defence, Foreign affair, Currency, War and Peace, atomic energy
Railway, Citizenship, Foreign trade, Banking, National Highway etc.
State list:
• Consists 61 subjects (Originally 66)
• It comprises of subject matters those are related to local or state interest hence
it directly falls within the legislative competence of state Legislature.
• Includes local government public order public health and sanitation, hospital
and dispensary library agriculture animal husbandry water supply.
Concurrent list:
• Consists 52 subjects
• Include subjects that give power to both Central and state government.
• Education, Population control, prevention of cruelty to animals, protection of
wildlife animals, forests, etc.
• 42nd amendment act of 1976 transferred five subjects to concurrent list
from State list:
• Education
• Forests
• Weights and measures
• Protection of wild animals and birds
• Administration of justice; constitution and organization of all courts
except the supreme court and the high courts.

• 101 amendment 2016 made a special provision with respect to goods and services
tax. Both state and Central Government can make laws effect to good and service
tax imposed by the union or state. Parliament has exclusive power to make laws in
respect to goods and services tax where the supply of goods services is interstate.
• When two or more topics overlap, the order of predominance is
Union > Concurrent > State

• Repugnancy between two statutes Central and State arises when both the Central law and the
State law happen to be with respect to the same matter in the Concurrent list (Doctrine of
Repugnancy).i.e., In the event of a conflict between Central and state legislation on a topic
listed in the Concurrent List, the Central law takes precedence. (Art 254(1))

Exception:
• However, if state law has been reserved for the President’s consideration and has got his
consent, the state law is valid in that state. However, the Parliament may still have the
authority to overturn such legislation by enacting a new law on the same subject. (Art 254(2))
In M. Karunanidhi v. Union of India [1979]:
• M. Karunanidhi, former Chief Minister of Tamil Nadu, challenged the Tamil Nadu Public Men
(Criminal Misconduct) Act, 1973, arguing it was repugnant to Central laws like the IPC,
Prevention of Corruption Act, and Criminal Law Amendment Act.
• The case arose from allegations against Karunanidhi regarding misuse of official powers in the
procurement of wheat from Punjab. A FIR was lodged on 16 June 1976, followed by an
investigation. Prosecution was initiated under provisions of the IPC, the Prevention of
Corruption Act, and the Tamil Nadu Public Men (Criminal Misconduct) Act. A charge sheet was
filed alleging monetary benefits received by him in exchange for passing favourable orders.
• The petitioner filed an application for discharge, which was rejected by the Special Judge. An
appeal to the HC for quashing the FIR also failed. However, the HC granted a certificate for
leave to appeal to the SC. By the time the matter reached the SC, the TN Public Men (Criminal
Misconduct) Act, 1973 had been repealed in 1977 by Presidential assent. Despite the repeal, the
petitioner contended that the provisions of the repealed act remained repugnant to Central laws.
Justice Fazal Ali, reviewed all its earlier decisions and summarized the test of repugnancy. According
to him a repugnancy would arise between the two statutes in the following situation:
1. It must be shown that there is clear and direct inconsistency between the two enactments (Central
Act and State Act) which is irreconcilable, so that they cannot stand together or operate in the same
field.
2. There can be no repeal by implication unless the inconsistency appears on the face of the two
statutes.
3. Where the two statutes occupy a particular field, but there is room or possibility of both the
statutes operating in the same field without coming into collusion with each other, no repugnancy
results.
4. Where there is no inconsistency but a statute occupying the same field seeks to create distinct and
separate offences, no question of repugnancy arises and both the statutes continue to operate in the
same field.
The above rule of repugnancy is however, subject to the exception provided in clause (2) of
this Article.
Deep Chand v. State of UP(1959):

• In Deep Chand v. State of U. P., the validity of U. P. Transport Service Development) Act was
involved.
• By this Act the State Government was authorised to make the Scheme for nationalisation of
Motor Transport in the State.
• The law was necessitated because the Motor Vehicles Act, 1939 did not contain any provision
for the nationalization of Motor Transports Services.
• Later on, in 1956 the parliament with a view to introduce a uniform law amended the Motor
Vehicles Act, 1939, and added a new provision enabling the State Government to frame rules of
nationalisation of Motor Transport.
• The Court held that since both the Union Law and the State Law occupied the same field, the
State Law was void to the extent of repugnancy to the Union Law.
Zaverbhai v. State of Bombay (1954):

• In Zaverbhai v. State of Bombay, Parliament enacted the Essential Supplies Act 1946, for
regulating production, supply and distribution of essential commodities.
• A contravention of any provision of the above Act was punishable with imprisonment upto 3
years or fine or both.
• In 1947, considering the punishment inadequate, the Bombay Legislature passed an Act
enhancing the punishment provided under the Central Law.
• The Bombay Act received the assent of the President and thus prevailed over the Central Law
and become operative in Bombay.
• However, in 1950 Parliament amended its Act of 1946 and enhanced the punishment.
• It was held that as both occupied the same field (enhanced punishment) the State law became
void as being repugnant to the Central law.
Vijay Kumar Sharma & Ors. v. State of Karnataka (1990):
Conflict with the Motor Vehicles Act, 1939 (Central Law)
• The Motor Vehicles Act, 1939, a Central law, governed transport regulations, including
contract carriages (private buses).
• The Karnataka Contract Carriages (Acquisition) Act, 1976 was a State law that aimed to
acquire private contract carriages and establish a State monopoly.
• The petitioners argued that the State law was repugnant to the Central Motor Vehicles Act,
which allowed private operators to function under a licensing system.

Supreme Court’s Analysis of Repugnancy

• The subject of transport regulation falls under Entry 35 of the State List and Entry 8 of the
Union List (in case of inter-state transport).
• The State law did not merely regulate transport but acquired private vehicles, effectively
overriding provisions of the Motor Vehicles Act.
• However, since the State law had received Presidential assent, it was protected under
Article 254(2), allowing it to override the Central law within Karnataka.
Residuary Powers (Article 248):

• Parliament has sole authority to pass legislation on issues not included by any
three lists. Courts decide whether a particular matter falls under the residuary
control or not.
• In USA, only powers concerning the federal government are mentioned in the
constitution and the other powers are left to the states. Similarly in Switzerland
& Australia too which reflects our constitution leaning towards a strong centre.
• This scheme of enumeration of legislative subjects was borrowed from
Government of India act, 1935, except for the provision which vested the
residuary powers in the governor-general.
Principles of Interpretation of lists:

• The power of Centre and States are divided. They cannot make laws outside their allotted
subjects.
• It is practically impossible to define each item in a List in such a way as to make it exclusive of
every other item in that List. Therefore questions constantly arise whether a particular subject
fails in the sphere of one or the other government.
• The Supreme Court has evolved Certain principles of interpretation in order to determine the
respective power of the Union and the States under the three lists.

1) Predominance of the Union List

2) Doctrine of Harmonious Construction (each Entry to be interpreted broadly)
3) Doctrine of Pith and Substance
4) Doctrine of Colorable Legislation
1. Predominance of the Union List:

• The opening words of Article 246(1) “notwithstanding anything in clauses

(2) and (3)” and the opening words of clause (3) “subject to clauses (1) and
(2)” expressly secure the predominance of the Union List over the State List
and the Concurrent List and that of concurrent List over the State list.
• Thus in case of overlapping between the Union and the Concurrent List, it is
again the Union List Which will prevail.
• In case of conflict between the concurrent List and state List, it is the
Concurrent List that shall prevail.
246. 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 1 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) and (2), the Legislature of any State has exclusive power to make laws
for such State or any part thereof with respect to any of the matters enumerated in List II in the
Seventh Schedule (in this Constitution referred to as the ‘State 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.
2. Doctrine of Harmonious Construction (each Entry to be interpreted broadly):

• Subject to the overriding predominance of the Union List, entry in the various lists should be
interpreted broadly.
• The Doctrine of Harmonious Construction is an essential rule for interpreting statutes. This
doctrine states that when there’s a conflict between two or more statutes or between different
parts or provisions of a statute, we should interpret them in a way that harmonises them. This
means that when there are inconsistencies, we should try to reconcile the conflicting parts so
that one part doesn’t contradict with another.
• If it’s impossible to harmoniously interpret or reconcile the different parts or provisions, then
it’s the responsibility of the judiciary to make the final decision and give its judgment. Courts
aim to interpret the law in a way that resolves conflicts between the provisions, making the
statute consistent as a whole and ensuring it’s understood accordingly.
Calcutta Gas Ltd. v. State of West Bengal [1962]:

• In this case the SC held that the “widest possible” and “most liberal” interpretation should be
given to the language of each entry.
• A general word used in an entry must be construed to the extent to all ancillary or subsidiary
matters which can fairly and reasonably be held to be included in it.
• The Court should try, as far as possible, to reconcile entries and to bring harmony between
them.
• When this is not possible only then the overriding power of the Union Legislature - the non
obstante clause applies and the federal power prevails.
International Tourism Corporation v. State of Haryana [1981]:

• “Thus, it is settled principle of interpretation that legislative entries are required to be

interpreted broadly & widely so as to give power to the legislature to enact law with respect to
matters enumerated in the legislative entries.
• Substantive power of the legislature to enact law is under Article 246 of the Constitution and
legislative Entries in the respective Lists of the 7 th Schedule are of enabling character,
designed to define and delimit the respective areas of legislative competence of the respective
legislature.
3. Pith and substance:

• Within their respective spheres, the Union and the State Legislatures are made
supreme and they should not encroach into the sphere reserved to the other. If a
law passed by one encroaches upon the field assigned to the other the Court will
apply the doctrine of pith and substance to determine whether the Legislature
concerned was competent to make it.
• “Pith” refers to the true nature or essence of something, while “substance”
refers to its most important or essential part.
• The principle of pith and substance is used to determine the true nature and
essential character of a legislation, especially when there is a conflict regarding
legislative competencies between the Union and State legislatures.
Profulla Kumar Mukerjee vs. Bank of Khulna(1947):
• The dispute centered on the Bengal Money Lenders Act, 1940, enacted by the Bengal Provincial
Legislature to regulate money lending practices in Bengal. The Act aimed to protect borrowers
from exploitation by capping the amount recoverable by money lenders, including principal and
interest. The legislation was challenged on the grounds that it interfered with promissory notes, a
subject listed under the Federal Legislative List in the Government of India Act, 1935.

• Judgement:
• The Privy Council delivered a landmark judgement in this case upholding the validity of the
Bengal Money Lenders Act, 1940. The court held that the Act, in its pith and substance, dealt
with money lending a subject under the Provincial Legislative List. The impact on promissory
notes was merely incidental and did not render the Act invalid.
• The court ruled that incidental effects on federal subjects, such as promissory notes, were
immaterial if the primary objective of the law aligned with a provincial subject.
• Acknowledging the inherent overlaps in legislative powers, the court emphasised that the validity
of a law should be determined by its true nature and objective.
State of Bombay vs. F. N. Balsara(1951):

• In State of Bombay v. F. N. Balsara, the Bombay Prohibition Act, which prohibited sale and
possession of liquors in the State, was challenged on the ground tisat it incidentally encroached
upon import and export of liquors across custom frontier which is a Central subject.
• It was contended that the prohibition, purchase, use, possession and sale of liquor will effect its
import.
• The Court held that Act valid because the pith and substance of the Act fell under the State List
and not under Union List even though the Act incidentally encroached upon the Union Powers
of Legislation.
4) Doctrine of Colorable Legislation:

• The doctrine of colourable legislation addresses situations where the

legislature, within the constraints of the Constitution, attempts to do indirectly
what it cannot do directly.
• This principle of constitutional interpretation is based on the Latin maxim
“Quando aliquid prohibetur ex directo, prohibetur et per obliquum,” meaning
that “what cannot be done directly, cannot be done indirectly”.
• Any legislation is said to be colourable when the legislature passes legislation
that is outside of their competence or the powers granted by the constitution
by camouflaging it to look to be within their competency to legislate the laws.
KC Gajapati Narayan Dev vs. State of Orissa (1953):

The Supreme Court in this case laid down important principles regarding colourable legislation.
The key takeaways from this judgment are:

A. Doctrine of Colourable Legislation:

• The question of whether a law is colourable does not depend on the motive or bona fides of
the legislature.
• It is determined by examining whether the legislature exceeded its constitutional powers under
the Seventh Schedule.
• If a legislature enacts a law that appears to be within its powers but, in substance, achieves
something beyond its competence, then it is considered colourable legislation.
B. Application to the Orissa Agricultural Income-tax (Amendment) Act, 1950:

• The petitioners argued that the Act was a fraud on the Constitution, as it was designed to
reduce compensation payable under the Estates Abolition Act.
• The Court held that as long as the subject matter of the law fell within the legislative
competence of the State, the law would remain valid.
• Since the impugned Act dealt with taxation of agricultural income, which falls under Entry
46 of List II (State List), the State Legislature had the competence to pass the law.
• The Court emphasized that an ulterior motive does not render a law void if it is within
legislative competence.
State of Bihar v. Kameshwar Singh [1952]:

Key Facts of the Case:

• The Bihar Land Reforms Act, 1950, aimed at abolishing zamindari
(landlordism) and acquiring land from zamindars.
• It appeared to lay down principles for compensation for the acquired land.
• However, in reality, it denied compensation entirely to certain categories of
landlords.
Supreme Court’s Ruling:
• Colourable Legislation Doctrine Applied: The Act pretended to be a law determining
compensation but, in substance, sought to deny compensation altogether.
• Since the Constitution mandates payment of compensation for property acquisition, the law
was a disguised attempt to bypass this requirement.

Violation of Constitutional Provisions:

• Article 31(2) (Right to Property, as it then existed) required that compensation be determined
by a principle.
• Since the Act did not genuinely lay down any principle, it violated this provision and was held
unconstitutional.

Significance of the Case:

• This case reinforced the doctrine of colourable legislation by confirming that you cannot do
indirectly what you cannot do directly.
3. Parliamentary power to Legislate on the State subjects:

1) Article 249 - If the Rajya Sabha passes a resolution by a majority of two-thirds of its members
requesting Parliament to make law on a subject of State List.
2) Article 250 - Parliament to make laws on any State List subjects during a national emergency.
However, the Parliament’s laws under this provision will cease to operate on the expiration of
six months of the emergency.
3) Article 252 - If two or more States legislatures request Union Parliament through a resolution
to make a law on a particular subject mentioned in the State List.
4) Article 253 - Parliament to make law for the whole or any part of India’s territory for
implementing any treaty, international agreement or convention with any other country.
5) Article 356 - During the proclamation of President’s Rule in a State, the Union Parliament
makes the laws over the subjects included in the State List.
4. Centre’s Control Over State Legislation:

• Constitution has empowered the centre to exercise control over the state’s
legislative matters in the following ways:
• Governor can reserve certain types of bills passed by state legislature for the
consideration of the president. The president enjoys absolute veto over them
• Bills on certain matters enumerated in the state list can be introduced in the
state legislature only with prior recommendation of the President. Ex: Inter-
state trade and commerce
• During a financial emergency, president can call upon a state to reserve money
bills and other financial bills for his consideration