MODULE III

STUDY MATERIAL
CENTRE-STATE RELATIONS

CENTRE STATE LEGISLATIVE RELATIONS

The Constitution of India provides for a federal system.
The Union and the State Governments derive their authority from the Constitution.
The relations between the Centre and the States have been mentioned in Parts XI and XII of
the Constitution under the heads, legislative, administrative and financial relations.
Articles 245 to 255 in Part XI of the Constitution deal with the legislative relations.

Art. 245. Extent of laws made by Parliament and by the Legislatures of States
(1) Subject to the provisions of this Constitution, 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
(2) No law made by Parliament shall be deemed to be invalid on the ground that it would have
extra territorial operation

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.

➢ Doctrine of Territorial Nexus

State of Bombay v. R.M.D. Chamarbaugwala (A.I.R. 1957 S.C. 699)
The Court of Appeal pointed out that when the validity of an Act is called in question, the first
thing for the Court to do is to examine whether the Act is a law with respect to a topic assigned
to the particular Legislature which enacted it. If it is, then the court is next to consider whether,
in the case of an Act passed by the Legislature of a Province (now a State) its operation extends
beyond the boundaries of the Province or the State; for under the provisions conferring
legislative powers on it such Legislature can only make a law for its territories or any part
thereof and its laws cannot, in the absence of a territorial nexus, have any extra-territorial
operation. If the impugned law satisfies both these tests, then finally the court has to ascertain
if there is anything in any other part of the Constitution which places any fetter on the
legislative powers of such Legislature. The impugned law has to pass all these three tests.
State of Bombay v. R.M.D. Chamarbaugwala, (A.I.R. 1957 S.C. 699) State of Bombay had
enacted the Bombay Lotteries and Prize Competition Act, 1948, amended in 1952 which sought
to impose tax on competition’s published in newspapers.
Case was concerned with tax on cross-word competition published by the respondent company
in a newspaper which was printed in Bangalore. The paper has wide circulation in the territory
of Bombay. A large number of people from Bombay had subscribed to the crossword puzzle.
The respondent company opened its collecting booths in Bombay, keeping in mind the large
number of subscribers. So, the Court upheld the tax imposed on the company. The Court held
that there existed a sufficient nexus to enable Bombay State to tax the respondent.
The principles underlying the nexus theory were explained by the Supreme Court in the
following words:-
"The doctrine of territorial nexus is well-established and there is no dispute as to the principles.
As enunciated by learned counsel for the petitioners, if there is a territorial nexus between the
person sought to be charged and the State seeking to tax him the taxing statute may be upheld.
Sufficiency of the territorial connection involves a consideration of two elements, namely, (a)
the connection must be real and (b) the liability sought to be imposed must be pertinent to that
connection. It is conceded that it is of no importance on the question of validity that the liability
imposed is or may be altogether disproportionate to the territorial connection. In other words,
if the connection is sufficient in the sense mentioned above the extent of such connection
affects merely the policy and not the validity of the legislation."
The doctrine of territorial nexus applied in the Chamarbaugwala case which was concerned
with tax on crossword competitions, was extended to sales tax legislation in The Tata Iron &
Steel Co., Ltd. v. The State of Bihar (1958 AIR 452)

In the case of State of Bihar v. Smt. Charusila Dasi (A.I.R. 1959 S.C. 1002)

The case was related to Hindu Religious Trusts-Property relating to Trust situated outside State
of Bihar and the Applicability of Bihar Hindu Religious Trusts Act to such Property.
The Supreme Court once again adopted the same principles and applied the nexus theory to
repel the argument that the law was extra-territorial in operation. The Supreme Court held that
the religious endowment being in Bihar and the trustees functioning there, there was sufficient
territorial nexus to validate the legislation. It would thus be seen that the theory of nexus as a
principle of legislation must now be held to be applicable to all kinds of legislation and the
challenge to the constitutionality of the legislation must be tested by reference to this principle.

In Sondur Gopal v. Sondur Rajni (2013) 7 SCC 426, the question before the Court was
related to the application of The Hindu Marriage Act, 1955 to Hindus residing out of India
but having domicile in India. Holding that the parties having domicile of origin in India, the
Court said that they would be continued to be governed by the provisions of HM Act, 1955.

The Court observed “unless such nexus exists Parliament will have no competence to make the
law.. The provocation for the law must be found within India itself. Such a law may have extra-
territorial operation in order to sub serve the object, and that object must be related to something
in India.”
The Court said that it wold be inconceivable that a law should be made by Parliament in India
which would have no relationship with anything in India.

State (Nct Of Delhi) v. Brijesh Singh (2017)

Case was filed under MCOCA. It was related to organized crimes. Maharashtra Control of
Organised Crime Act, 1999 (MCOCA) is a law enacted by Maharashtra state in India in 1999
to combat organised crime and terrorism. In 2002 in order to curb the increasing crimes of the
organised gangs this law was extended to the National Capital Territory of Delhi by the Union
Home Ministry. The respondents were discharged by the Special Judge MCOCA. The Special
Court held that the criminal cases of which cognizance was taken by Courts situated outside
Delhi cannot be taken into account for the purpose of satisfying the ingredients of ‘continuing
unlawful activity’ under Section 2(1)(d) of MCOCA.

The charge-sheets were filed against the respondents in the competent Courts in UP.

The points that arose for consideration in this case were:

i) Whether charge sheets filed in competent Courts outside the National Capital Territory of
Delhi can be taken into account for the purpose of constituting a “continuing unlawful activity”,
and the Court held that charge-sheets filed in Courts in other States can be taken into account
for the purpose of constituting continuing unlawful activity. The words ‘competent Court’ in
Section 2(d) of MCOCA is not restricted to Courts in Delhi and charge sheets filed in Courts
in other States can be taken into account for the purpose of constituting continuing unlawful
activity.

The Court observed that in the present case, it is sufficient to examine whether there is a
territorial nexus between the charge sheets filed in competent Courts within the State of Uttar
Pradesh and the State of NCT of Delhi where the Respondents are being prosecuted. The
prosecution of the Respondents under MCOCA cannot be said to be invalid on the ground of
extra territoriality in case the nexus is sufficiently established.

Court referred to the decisions in In State of Bombay v. RMD Chamarbaugwala and The Tata
Iron & Steel Co., Ltd. v. The State of Bihar.

Organised crime which is an offence punishable under Section 3 of MCOCA means a

continuing unlawful activity committed by the use of force or violence for economic gain. One
relevant pre-condition which has to be satisfied before any activity can be considered as a
continuing unlawful activity is that there should be at least two charge sheets filed against the
members of an organised crime syndicate within the previous 10 years and a ‘competent Court’
has taken cognizance of such charge sheets. In the instant case, there are eight charge sheets
filed against the Respondents, six out of which are in the State of Uttar Pradesh.

The words ‘competent Court’ in Section 2(d) of MCOCA is not restricted to Courts in Delhi
and charge sheets filed in Courts in other States can be taken into account for the purpose of
constituting continuing unlawful activity;

Ambaji v. State (2011)

The Court explained the meaning of doctrine of territorial nexus.

Doctrine of Territorial Nexus: It is now well-settled that to determine whether a law is extra-
territorial, the doctrine of territorial nexus must be applied. It must be seen whether the statute
has selected some fact or circumstance which provides some real relation or connection with
the territory in respect of which the Legislature is entitled to legislate and has adopted this as
the ground of its interference.
If the legislation satisfies this test, its validity would not be open to question. Applying this
principle let us examine whether there is any connection between the Act of 1994 and the
territories subject to the jurisdiction of the State Legislature and, whether such connection is
real or illusory. Even the doctrine of territorial nexus which is sought to be relied upon does
not save the situation. It is no doubt true as held by the Supreme Court that a legislation can be
applied outside the territories of the State on the basis of the doctrine of territorial nexus. It
means there must be a nexus between the subject matter that is controlled by a statute and the
State whose statute is being operated. It must be seen whether the statute has selected some
fact or circumstance which provides some real relation or connection with the territory in
respect of which the Legislature is entitled to legislate and has adopted this as the ground of its
interference. If the legislation satisfies this test, its validity would not be open to question. This
doctrine which has commonly come to be known as "nexus theory" has been applied in support
of tax legislation. Of course, the Supreme Court has, in State of Bihar v. Smt.Charusila Dasi,
held that the doctrine of territorial nexus would be applicable to all kinds of legislations and
the challenge to the constitutionality of the legislation must be tested by reference to this
principle. To apply the doctrine of territorial nexus, two conditions must be fulfilled;
-connection must be real and not illusory;
-liability sought to be imposed must be pertinent to that connection.

Article 246 in The Constitution of India 1949

Art. 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 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)
(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.
Art. 246 contains the non-obstante clause.
 ➢ Doctrine of Pith and Substance

Article 246 of the Constitution divides the different matters in three groups i.e. union, state and
concurrent list. These lists explain the different matters on which the union sate and both have
the power to legislate on respectively. Both Union and State legislature should keep within the
domain assigned to it and not trespass into the domain reserved for other.

The Doctrine of Pith and Substance is applied when the legislature made by one of the
legislatures encroaches or trespasses upon the field assigned to another. The Doctrine of Pith
and Substance is applied legislative competence of a legislature with regard to a particular
enactment is challenged with reference to the entries in different legislative list because a law
dealing with a subject in one list encroaches or trespasses upon the subject in another list.
Doctrine of Pith and Substance says that where the question arises of determining whether a
particular law relates to a particular subject the court looks to the substance of the matter. Thus,
if the substance falls within one list, then the incidental encroachment by the law on another
list does not make it invalid.

In the case of Profulla Kumar Mukherjee v. Bank of Commerce ((1947) 49 BOMLR 568), the
validity of Bengal Money Lenders Act, 1946 was challenged which limited the amount and the
rate of interest recoverable by a money lender on any loan. It was argued that promissory notes
was a Central subject and not a state subject. It was held by the Privy Council that the act was
in pith and substance a law in respect of ‘money lending and money lenders’ was a state subject
and was valid even if it incidentally trenched upon ‘Promissory note’ i.e. a central subject.

In the case of State of Mumbai v. F. N. Balsara (AIR 1951 SC 318), the Bombay Prohibition
Act, which prohibited sale and possession of liquor in the state, was challenged on the ground
that it incidentally encroached upon import and export of liquors across borders, which was a
central subject. The act was held valid by the court as it was felt that the act was in its pith and
substance fell under the State List even though such an act may impact in the import of liquor.

➢ Doctrine of Colourable Legislation

The doctrine of colourable legislation is based on the maxim that what cannot be done directly
cannot also be done indirectly. The doctrine becomes applicable when a legislature seeks to do
something in an indirect manner when it cannot do it directly. Thus, it refers to the competency
of the legislature to enact a particular law. If the impugned legislation falls within the
competence of the legislature, the question of doing something indirectly which cannot be done
directly does not arise.

The Supreme Court has explained the meaning and scope of doctrine of colourable legislation
in the case of K.C. Gajapati Narayan Deo v. State Of Orissa (AIR 1953 Ori 185) as follows:

“ If the constitution of a State distributes the legislative powers amongst different bodies, which
have to act within their respective spheres marked out by the constitution in specific legislative
entries, or if there are limitations on the legislative authority in the shape of Fundamental rights,
the question arises as to whether the Legislature in a particular case has or has not, in respect
to subject-matter of the statute or in the method of enacting it, transgressed the limits of its
constitutional powers. Such transgressions may be patent, manifest or direct, but it may also be
disguised, covert or indirect, or and it is to this latter class of cases that the expression
colourable legislation has been applied in judicial pronouncements.”

Further the Supreme court in this case went to opine that “the idea conveyed by the expression
is that although apparently a legislature in passing a statute purported to act within the limits
of its powers, yet in substance and in reality it transgressed these powers, the transgression
being veiled by what appears, on proper examination, to be mere pretence or disguise.”

In SS Bola v. B.D. Sardana (AIR 1997 SC 3127), Supreme Court said that colourable
legislation had reference only to the legislative competence and not to the power as such.
Explaining this rule, the Court observed that colourable legislation would emerge only when a
legislature had no power to legislate on an item either because the matter was not under the list
assigned to it under the respective entries in the seventh schedule or on account of limitations
imposed either under part III or any other power under the Constitution. When the legislature
had travelled beyond its competence, it would be called colourable legislation.

Learned Justice K. Ramaswamy further distinguished between the doctrines of “fraud on

power” and “fraud on Constitution’. While the former meant that the Legislature had the power
but did not exercise it, the latter meant that when the legislature had no power and still made a
Constitutional enactment in pretence of its power. The Constitution distributes legislative
powers between the State Legislatures and Parliament, and each has to act within its sphere. In
respect of a particular legislation, the question may arise whether the legislature has
transgressed the limits imposed on it by the constitution. Such transgression may be patent,
manifest or direct, but it may also be disguised, covert or indirect. It is to this latter class of
cases that the expression colourable legislation. The underlying idea is that although
apparently, a legislature in passing a statute purported to act within the limits of its powers, yet
in substance and in reality it transgressed these powers, the transgression being veiled by what
appears, on proper examination, to be mere pretence or disguise. If that is so, the legislation in
question is invalid.

➢ Doctrine of Incidental and Ancillary Powers

It means is that the power to legislate on a subject also includes the power to legislate on
ancillary matters that are reasonably connected to that subject. For example, the power to
impose tax would include the power to search and seizure to prevent the evasion of that tax.
However, power relating to banking cannot be extended to include power relating to non-
banking entities. However, if a subject is explicitly mentioned in a State or Union list, it
cannot be said to be an ancillary matter. For example, the power to tax is mentioned in
specific entries in the lists and so the power to tax cannot be claimed as ancillary to the power
relating to any other entry of the lists.

As held in the case of State of Rajasthan vs G Chawla (AIR 1959), the power to legislate on
a topic includes the power to legislate on an ancillary matter which can be said to be
reasonably included in the topic.

However, this does not mean that the scope of the power can be extended to any
unreasonable extent. Supreme Court has consistently cautioned against such extended
construction. For example, in R M D Charbaugwala vs State of Mysore, (AIR 1962), SC
held that betting and gambling is a state subject as mentioned in Entry 34 of State list but it
does not include power to impose taxes on betting and gambling because it exists as a
separate item as Entry 62 in the same list.
Art. 248. Residuary powers of legislation
(1) 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

Parliament Legislation on State Field

Following are the extra-ordinary circumstances in which the Parliament can make laws in State
field.
a) In the National Interest (Art.249)
If the Rajya Sabha declares by a resolution supported by not less than 2/3 of its 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 (Art.249). After such
a resolution is passed, Parliament can make laws for the whole or any part of the territory of
India. Such a resolution remains in force for a period of 1 year and can be further extended by
one year by means of a subsequent resolution.
b) Under Proclamation of National Emergency (Art.250)
Parliament can legislate on the subjects mentioned in the State List when the Proclamation of
National Emergency is in operation. However, the laws made by the Parliament under this
provision shall 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 expiry of the said period.
c) By Agreement between States (Art. 252)
The Parliament can also legislate on a State subject if the legislatures of two or more states
resolve that it is lawful of Parliament to make laws with respect to any matter enumerated in
the State List relating to those State. Thereafter, any act passed by the Parliament shall apply
to such states and to any other state which passes such a resolution. The Parliament also
reserves the right to amend or repeal any such act.
d) To Implement Treaties (Art. 253)
The Parliament can make law for the whole or any part of the territory of India for
implementing any treaty, international 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.
e) Under Proclamation of President’s Rule (Art.356)
The President can also authorize the Parliament to exercise the powers of the State legislature
during the Proclamation of President’s Rule 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 President’s Rule comes to an end.

CENTRE-STATE ADMINISTRATIVE RELATIONS

Inter-governmental Delegation- Delegation of Union functions.

Article 258 of Constitution of India "Power of the Union to confer powers, etc., on States
in certain cases"

(1) Notwithstanding anything in this Constitution, the President may, with the consent of the
Governor of a State, entrust either conditionally or unconditionally to that Government or to
its officers functions in relation to any matter to which the executive power of the Union
extends.

(2) A law made by Parliament which applies in any State may, notwithstanding that it relates
to a matter with respect to which the Legislature of the State has no power to make laws, confer
powers and impose duties, or authorise the conferring of powers and the imposition of duties,
upon the State or officers and authorities thereof.

(3) Where by virtue of this article powers and duties have been conferred or imposed upon a
State or officers or authorities thereof, there shall be paid by the Government of India to the
State such sum as may be agreed, or, in default of agreement, as may be determined by an
arbitrator appointed by the Chief Justice of India, in respect of any extra costs of administration
incurred by the State in connection with the exercise of those powers and duties.

Article 258A of Constitution of India "Power of the States to entrust functions to the
Union"
Notwithstanding anything in this Constitution, the Governor of a State may, with the consent
of the Governor of India, entrust either conditionally or unconditionally to that Government or
to its officers functions in relation to any matter to which the executive power of the State
extends.

Art. 258-A was added by the Constitution 7th Amendment Act, 1956 with the object to remove
any practical difficulties in the in connection with the execution of certain development projects
in the State.

The Constitution has enabled the union and the state governments to exchange their respective
administrative functions. For example, the President with the consent of the State government
may entrust any executive function of the union to the states (Art. 258) while legislating on a
Union Subject, Parliament may delegate powers to the state governments and their officers in
so far as the statue is applicable in respective states. Conversely, a State government may, with
the consent of the Government of India, confer administrative functions upon the latter relating
to State Subjects

Disputes relating to Water (Art 262)

Subject of ‘water’ is a matter at Entry 17 of List –II, i.e. State List. This Entry is subject to the
provisions of Entry 56 of List –I, the Union List. The specific provisions in this regard are as
under:

List - I Union List

56. Regulation and development of inter-State rivers and river valleys to the extent to which
such regulation and development under the control of the Union is declared by Parliament by
law to be expedient in the public interest."
List - II State List
17. Water that is to say, water supplies, irrigation and canals, drainage and embankments, water
storage and water power subject to the provisions of Entry 56 of List - I.

Article 262 of the Constitution deals with adjudication of water disputes. The provisions in
this regard are: Article 262 authorises the Parliament to provide by law for adjudication of any
dispute or complaint with respect to the uses, distribution or control of the waters of any Inter-
State rivers and River Valleys under clause (2) of this Article. Parliament may by law provide
that neither the Supreme Court nor any other court shall have any jurisdiction in respect of such
disputes and complaints relating to water of Inter-State rivers and River Valleys. Under the
Article 262, Parliament passed Inter-State Water Disputes Act, 1956. This Water Disputes Act
empowers the Central government to set up a Tribunal for the adjudication of such disputes.
The decision of the Tribunal shall be final and binding on the parties to the disputes. Neither
Supreme Court nor any other court shall have jurisdiction in respect of any water dispute which
may be referred to such a Tribunal under that Act.

Inter-State Water Disputes Tribunals-Krishna WDT, Godavari Water Disputes Tribunal,

Narmada WDT, Ravi and Beas WDT, Cauvery WDT, Krishna WDT-II, Vasandhara WDT,
Mahadayi WDT.

SYL (Sutlej-Yamuna) Dispute

What is SYL Project?

It is a proposed 214 km long heavy freight canal to connect the Sutlej and Yamuna rivers for
sharing Sutlej and Beas water between Punjab, Haryana and Rajasthan after the reorganisation
of states in 1966 when Haryana was carved out of composite Punjab.

A tripartite agreement was signed under Indira Award 1981. The participants were Punjab,
Haryana and Rajasthan governments.

When was the project started?

Land acquisition in Punjab started by 1978 itself. Almost 90% of the work is complete in the
Haryana part of the canal.

Then what is the issue?

Punjab is against the project as according to the Punjab government they do not have sufficient
water to be shared with Haryana.

What is the History of the dispute?

1981: Indira Award -> SYL Canal project cleared -> Both Haryana and Punjab agreed.
2004: Punjab assembly passed “Punjab Termination of Agreement Act 2004” which
unilaterally declared all the earlier agreements in this respect null and void.
The matter reached Supreme court the same year in 2004. The court has after 12 years
entertained the matter.
How did the matter reach Supreme Court?
Punjab Assembly in July 2004 passed the “Punjab Termination of Agreements Act” which
unilaterally cancelled all the agreements of Punjab with neighbouring states in sharing of
Sutlej, Ravi and Beas rivers, thus making the construction of Sutlej-Yamuna Link (SYL)
infructuous. The bill was sent to the Governor of Punjab for ratification but he referred it to the
President. The president referred it to the Supreme Court under Article 143 of the constitution.
The supreme court has recently taken it up.

Why is the issue again in news? What is the current status?

14th March 2016: Punjab Sutlej-Yamuna Link Canal Land (Transfer of Propriety Rights) Bill,
2016 was passed in order to pre-empt any adverse verdict by the Supreme Court on presidential
reference on the 2004 act. The new act talks about returning of the 5,376 acres of land acquired
for the incomplete SYL canal to the land owners thus ruling out any further construction of the
canal.
Why is this canal important?
1. Important for agrarian states Haryana and Punjab. It is also crucial for Rajasthan which
is also already dry.
2. About 90 per cent of the 212 kilometres long canal is lying complete which has cost
over Rs 700 crore of public money.
3. In the long term, SYL will allow shipping from India’s east coast to the west coast,
drastically shortening shipping distances and creating important commercial links for
north-central India’s large population.

Inter-State Council (Art. 263)

The President of India is empowered to establish Inter-state Council, if at any time it appears
to him that the public interests would be severed thereby. The duty of Inter-State Council is to
inquire and advise upon disputes which may have arisen between states. It also investigates
and discusses subjects of common interest between the union and states or between two or
more states, for instance, research in such matters as agriculture and forestry.

All India Services (Art. 312)

There are certain services common to the union and the states called ‘All India Services’, of
which the Indian Administrative Service and the Indian Police Service are the existing
examples. "The constitution also gives the power to create additional All India Services, if the
Council of States declares by a resolution supported by not less than two-thirds of the members
present and voting that is necessary or expedient in the national interests”