UNIT III: CENTRE STATE RELATIONS

(PART XI AND XII ARTICLES FROM 245 TO 293)

(Sourced from Book Indian Constitution by Sanjay Dubey)

OVERVIEW

I. Legislative Relations (Distribution of Legislative Powers)

Articles 245 to 255 Chapter I (Legislative Relations) Part XI of the
Constitution deal with the legislative relations between the union and states.

II. Administrative Relations (Distribution of Administration

Powers) Articles 256-263 Chapter II (Administrative Relations) Part
XI deal with the administrative relations between the union and the states.

III. Financial Relations (Distribution of Financial Powers) Part XII

Chapter I(Finance) Articles 264-291 and Part XII Chapter
II(Borrowing) Articles 292-293 deal with the financial Relations between
the union and the states.

A) LEGISLATIVE RELATIONS

The Territorial Limits of The Legislative Powers

Article 245 defines the territorial limits of the legislative powers vested in the
union and the states or the applicability of the laws made by the Parliament
and by the Legislatures of States.

The Parliament can make laws for the whole or any part of the territory of
India. Likewise, the State Legislature can make laws for the whole or any part
of the territory of the state.

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The territorial jurisdiction of the union extends over all the states, union
territories or any other area for the time being included in the union of India.
Apart that the Parliament has the powers of “extra territorial legislation”
that means it can also make laws on all such Indian citizens and their
properties who reside elsewhere outside India.

Subjects of Legislation for the Parliament and State Legislatures

Article 246 specifies the areas of responsibilities or operational jurisdiction

and VII schedule on the subjects for legislation between the Centre and the
states.

The Constitution of India has made a threefold division of powers known -

Union List, State list and Concurrent list.

1.The subjects of all India importance have been placed in the UNION
LIST which consisted of 97 items/ subjects (Presently 96 Subjects as 1 item
is deleted). The Parliament has exclusive powers to enact laws over the
subjects listed in the Union list. The Parliament has exclusive powers to
legislate on the subjects listed in the State list.

Some notable subjects of the Union List are - defence, foreign affairs, currency
and coinage, banking, foreign trade, inter-state trade and commerce,
railways, communications, navigation, airways, railways, posts and telegraph,
citizenship, census, Atomic Energy, etc.

2.The subjects of local interest but require uniform treatment all over the
country have been placed in STATE LIST. The state legislatures are
competent to make laws on subjects enumerated state list for their respective
territorial jurisdiction of the state.

The states list contains 66 subjects/ items (Presently 59 Subjects as 7 items

are deleted).

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The state legislature has exclusive powers to legislate on the subjects listed
in the State list.

some important subjects in the state list include such as law and order, police,
administration of justice, prison, land, water, agriculture, fisheries, forests,
healthcare, roadways, industries, trade and commerce with the state, state
public services, regulation of mines and mineral development,
local governments, relief etc.

3.The subjects mix of both of local and of national concern have been
listed in the CONCURRENT LIST.

On the subjects mentioned in the concurrent list but the Centre has a prior
and supreme claim to legislate on current subjects. Both the Parliament and
the state Legislatures are empowered to make laws, but in case of conflict
between the union and the state laws, the law of Parliament shall prevail. As
a whole in case or of overlapping of a matter between the three lists
predominance has been given to the union legislature.

The concurrent list included some 47 subjects/ items but presently it

comprises of 52 items.

The concurrent list comprises of civil and criminal law and procedure,
administration of justice, preventive detention, marriage and divorce,
population control and family planning, economic and social planning,
industrial and labour welfare and disputes, factories, trade unions,
adulteration of foodstuffs, drugs, electricity, newspapers, books, education,
etc.

4.RESIDUARY POWERS

(a) The subjects which do not find mention in any of the aforesaid three
lists are the residual matters.

(b) The authority to legislate over such residual matters is vested with the
Union Legislature that is the Parliament.

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(c) This is deviation from the federal principle as in most of the federal
systems, the residuary powers are vested with the States.

On one side, the residuary powers have been vested with the Union and on
the other side, the supremacy of the union law is accorded in concurrent list.
In special circumstances Parliament can even legislate on state subjects.

This clearly shifts the balance of power in favour of the Union and the
Constitution of India here appears more unitary than federal.

PARLIAMENT’S POWER TO LEGISLATE ON STATE LIST

Normally the Central government can not interfere or legislate on the

subjects of the State List. But it has powers to legislate on the State
subjects under following special circumstances -

(1) DURING NORMAL CIRCUMSTANCES

(a) By way of the Resolution passed by the Rajya Sabha

(b) By way of the Resolution passed by the legislatures of two or more

states

(c) Legislation by Parliament for giving Effect to Implement Treaties

(2) DURING EMERGENCY CIRCUMSTANCES

(a)Under Proclamation of National Emergency

(b)Under Proclamation of President’s Rule

(c)Under Proclamation of Financial Emergency

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UNION GOVERNMENT’S CONTROL OVER THE STATE

(a)The Governor can reserve a bill passed by state legislature for the
consideration of the President who enjoys absolute veto over them.

(b) The Bills on certain matters of state subject such as- seeking imposition
of tax on water or electricity by regulating or developing any inter-state river,
can only be introduced in the state legislature with the prior assent of the
President.

(c)The proposal of any such legislation of a state intending to imposes

reasonable restrictions on the freedom of trade, commerce or intercourse
within that state will need previous sanction of the President before its
introduction in the state legislature.

B) ADMINISTRATIVE RELATIONS

The administrative jurisdiction of the Union and the State Governments

extends to the subjects in the Union list and State list respectively.

CONTROL OF UNION OVER STATES:

Articles 256 to 263 provide for union control over states even in normal
times through following ways-

(1) Directions to states:

(a)Executive Powers of State be exercised in compliance with Union Laws:

(b)Executive Powers of State not to interfere with Executive Power of Union:

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(c)Maintain means of communication of National or Military importance:

(d)Protection of the Railways:

(e)To ensure government of a State is carried on in accordance with the

provision of the Constitution:

(2) Delegation of Union functions

(3) All India services

(4) Inter-State Council

The constitution authorizes the President to establish Inter-State Council to

give effect to necessary coordination between states, in the public interest
such inter-state council can –

(i) To inquire into and advise upon disputes which arise between states.
(ii) To investigate and discuss subjects in which some or all of the states of
the union or one or more of the states have a common interest.
(iii) To make recommendation if any subject for the better coordination of
the policy and action with respect to that subject.

(5) 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.

(6) National Emergency

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(7) Inter-State Commerce Cooperation

The constitution empowers the Parliament to establish such authority as it

considers for enforcing the provisions of the constitution with regard to Inter-
State Trade and Commerce and confers on it such duties as it thinks fit.

(8) Preservation of records and proceedings High Courts and Supreme

Court and territorial jurisdiction of High Courts:

In the matter of records High Courts and Supreme Court have to preserve it.
Preservation of records and proceedings of HC/SC are to be determined by
the Parliament.

The Parliament is empowered to extend the territorial jurisdiction of any of

the High Court while adding to other state /states and /or union territories.

(9) Appointment of High Dignitaries:

(10) To ensure welfare of Scheduled Tribes in the States:

(11) To secure instruction in the mother-tongue at the primary stage

of education:

(12) To ensure development of the Hindi language:

C)FINANCIAL RELATIONS

It is normal features of federations that there must be complete division

of the judicial resources between the Centre and the federating units.
These resources must be sufficient for the activities of each party. But in
India, it was not possible to make a make a clear-out and absolute

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division of the financial/ resources. In addition to their independent
financial/services, the states depend on contribution and subsidies
from the central Govt.

The financial relations (Distribution of Financial Powers) between the

Union and the States have been dealt in Articles 268 to 293 in Part XII
of the Constitution of India. Besides that, there are some more provisions
also that further elucidate this relationship.

SCHEME OF FINANCIAL RESOURCES DISTRIBUTION IN INDIA

In the Constitutional scheme, powers of taxation are in accordance to the

legislative distribution of the subjects.

Generally, the Union levies the taxes on an inter-state jurisdiction and

the State levy the taxes on its local territorial jurisdiction. Besides
that, the Union and the State do share some taxes and also share
collection of some taxes.

It is notable here that the Goods and Services Act, 2016(GST Act) brought
by the 101st Constitutional Amendment, has created a new unified
system of indirect taxation where the both the Union and the States
have concurrent powers to make laws with respect to the goods and
services.

The intra-state trade now comes under the jurisdiction of both Centre and
states whereas the Goods and Services Tax on supplies in the inter-state trade
and commerce comes under the Union Government which shall be levied and
collected by the Government of India and appropriated between the Union and
the States as provided by the Parliament on the recommendations of the
Goods and Services Council. The excise duty on medicinal preparation has
been omitted from the state list by the amendment of Article 268.

Taxes within Exclusive Jurisdiction the Union

The Parliament is empowered to levy taxes on all the subjects contained into
the Union List and also on the subjects under its residuary powers, if any.

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Taxes within Exclusive Jurisdiction the States

The State legislature is empowered to levy taxes on all the subjects contained
in the State List.

Taxes within the Jurisdiction the Union and the States

Both - the Parliament and the State legislature are entitled to levy taxes on
the subjects mentioned in the Concurrent List.

(1) TAXES LEVIED BY THE UNION

The Union List contains 12 items of taxation which fall under five categories
as following-

(a) Taxes Levied by the Union but Collected and appropriated by the
States:

(b) Service Tax Levied by the Centre but Collected and Appropriated by the
Centre and the States:

(c) Taxes Levied and Collected by the Union but Assigned to the States:

(d) Taxes Levied and Collected by the Union and Distributed between
Union and the States:

(e) Surcharge on certain duties and taxes for purposes of the Union:

(2) TAXES LEVIED BY THE STATES

There are 19 items of revenue in the State List on which every State
enjoys the exclusive jurisdiction to levy, collect and appropriate these taxes,
are: viz land revenue, liquor and opium excise duty, stamp duty, agriculture
income, sales and purchase taxes, taxes on land and buildings, terminal taxes
on passenger and goods, taxes on consumption and sale of electricity, taxes
on profession and traders, taxes on vehicles, animals and books,

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amusements, batting and gambling profession, taxes on lands and buildings,
taxes on the entry of goods into local areas etc.

OTHER PROVISIONS REGULATING FINANCIAL RELATIONS

(3) BORROWING POWERS OF THE UNION AND THE STATES

(4) UNION’S GRANT- IN- AID TO THE STATES

(a) Statutory Grants:

(b) Discretionary Grants:

(5) CONTROL BY THE CONTROLLER AND AUDITOR GENERAL OF INDIA

(6) CONTROL BY THE FINANCE COMMISSION

(7) CENTRE-STATE FINANCIAL RELATIONS DURING EMERGENCY

(a) During proclamation of National Emergency

(b) During proclamation of President Rule

(c) During the proclamation of Financial Emergency

(8) IMMUNITY FROM MUTUAL TAXATION

CONCLUSION

It is apparent that states in India (i) are not in position to operate financially
autonomous (ii) are not in possession of sufficient financial resources and (ii)
are subordinate to the Union Government for financial assistance to a great
extent.

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In the federal system of India, the Union Government is in a position of
superiority over the states in financial spheres especially during the time of
emergency proclamations India gets transformed into a unitary system.

The states are financially dependent and their dependence is seemingly

increasing upon the Union Government.

RELEVANT DOCTRINES
(Sourced from wikipedia and materials on civil services examinations
available on internet)

INTRODUCTION: JUDICIAL DOCTRINE

A doctrine is a principle, that is usually applied and upheld by courts of law.

In Indian Constitutional law, there are different judicial doctrines that has
been developed over time as per the interpretation given by the judiciary.

These doctrines have been proposed by the Indian Judicial System by

exercising the power of judicial review time to time while discussing over to
federal Structure-

▪ Demarcation of legislative powers between the Centre and the state

▪ Legislative Competence or Powers
▪ Related to Centre and the state relations
▪ Related to Constitutional Provisions verses Judicial Interpretation
(through Judicial Review)

OBJECTIVE STATEMENT OF EACH OF THE SELECT DOCTRINES AT

A GLANCE

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 1) Territorial Nexus-

Objective:

Legitimate application of Article 245 and 246 in EXTRA TERRITORIAL

OPERATIONS
Inter-Section or Nexus and connection of object and objective vs state
relationship.

2) Harmonious Constitution

Objective:

To construct harmony for preventing repugnancy and discrepancy

To construct to fill up gaps and to harmonize contractionary provisions by

viewing the statute in totality as a whole against in isolation as part. It
attempts to assails specific laws over general law as far as possible.

3) Pith and Substance

Objective:

To prevent encroachment or intrusion of one legislative organ into the

domain of another.

4) Doctrine of Repugnancy

To remove repugnancy or inconsistencies as resolution.

5) Colourable Legislation

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 The objective/ aim and effect/outcome of any law should not be
contradictory.

1.THE DOCTRINE OF TERRITORIAL NEXUS (Article 245)

It says that laws made by a State Legislature are not applicable outside
the state, except when there is a sufficient nexus between the state
and the object.

The doctrine derives its power from Article 245 of the Indian
Constitution which provides that no law made by the Parliament would be
invalid on the ground that it would have extra-territorial operation i.e.
takes effect outside the territory of India.

ARTICLE 246 OF INDIAN CONSTITUTION (Legislative Competence)

The law-making powers of the Parliament and by the Legislatures of States

Have been defined as following: –

For the subjects listed in the UNION LIST in addition to the Residuary
Subjects the Parliament has explicit legislative jurisdiction (list I of the 7th
schedule)

For the subjects listed in the STATE LIST, the state has the authority to enact
legislation (list II of the 7th schedule)

For the subject areas mentioned in the CONCURRENT LIST, respectively the
state & federal (union) governments have the authority to enact legislation
(list III of the 7th schedule).

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Parliament has the competence to create laws for extraterritorial activities or
legislation for the whole or any part of the country. The state legislature has
the jurisdiction to make laws for the whole or any part of the state. BOTH
THE UNION AND THE STATE HAVE GEOGRAPHICAL CONTROL OVER
THE MAKING OF LAWS.

ARTICLE 245 OF INDIAN CONSTITUTION (Legislative Application)

The territorial nexus doctrine’s authority is derived from Article 246 of the
Constitution of India which states that the Parliament has jurisdiction to
make laws for extraterritorial operations or laws for the whole or any
part of the country. Article 245 (2) states that no law enacted by the
Parliament is invalid because it has extra-territorial application, i.e. it
has an effect outside of India’s borders. If the Indian parliament passes
a law concerning extra-territorial operations, is not subject to
challenge vide Article 245(2) of the Indian constitution.

This means Parliament has the power to make laws for the PEOPLE and
PROPERTY situated within India and outside the territory of India.

It allows the Parliament to make laws for extraterritorial operations if there

exists a nexus between the SUBJECT and OBJECT and the STATE.
Territorial nexus is a term that refers to the intersection of two or
more.

It means, the constitutionality of such legislations can’t be disputed

and the Judiciary is obligated to uphold the law of the extra-territorial
operation enacted. This legislation cannot be ruled unconstitutional.

Extra-Territorial Operations

It implies that legislation enacted by Parliament is subject to examination by

the Judiciary -

i. That the Parliament’s competence to enact such law and its territorial
extension is beyond the territory of India.

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 ii. That reasonable, legitimate and adequate nexus or connection between
the state, the subject and the object, if it is located outside the territorial
limits of India.

Parliament has the authority to enact legislation both within its territorial
and extra-territorial jurisdiction with a legitimate and legal linkage
with India. The legitimacy of these statutes cannot be challenged.

If such law violates the territorial nexus, then that law may be declared
unconstitutional. Any law enacted by the parliament that has no nexus with
India will be declared extra vires.

2.DOCTRINE OF HARMONIOUS CONSTRUCTION

The term harmonious construction refers to such construction by which

harmony or oneness amongst various provisions of an enactment is arrived at.

When the words of statutory provision bear more than one meaning and there
is a doubt as to which meaning should prevail, their interpretation should be
in a way that each has a separate effect and neither is redundant or nullified.

For instance, when the statutory provisions are conflicting with each other
they should be interpreted harmoniously and separately to avoid repugnancy
(inconsistency or incompatibility). According to this doctrine, the courts must
avoid a clash on contradicting provisions to harmonize them.

When it is impossible to completely reconcile the differences in contradictory

provisions, the courts must interpret them in such a way so that effect is given
to both the provisions as much as possible.

According to the doctrine of harmonious construction, a provision of the

statute should not be interpreted or construed in isolation but as a whole, so
as to remove any inconsistency or repugnancy. The purpose of this doctrine
is to construe the harmony between the various matters.

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The Scope and objective of the doctrine of harmonious construction:

a) to avoid any self-contradiction, discrepancy or aberration arises

between two or more statutes or different provisions, clauses or sections
of a statute for avoidance.

b) to construct by interpretation to fill the legal gaps with an intend

to harmonious contradicting provisos.

c) to view the law every statute in totality as a whole and not in

isolation or separation

d) to prevent confusion or incompatibility between the different

sections or parts of the statute

e) To understand the principle of reconciliation and uniformity.

Harmonizing two contradicting provisions means not to destroy any statutory

provision or to render it ineffective.

The judiciary and the courts in India are using the principle of harmonious
construction, the Indian Judiciary has tried to explain the intention or objective
of the framers of the Constitution for framing the different statutes. The rule
of harmonious construction brings consistency between different
conflicting provisions so that none of them is rendered powerless or
dead-letter as there has been considerable thought by the legislature
in making them.

The Latin maxim means that the general rule to be followed in case of a conflict
between two statutes if the latter retracts the previous one. One cannot hold
to get special legislation indirectly repealed or altered.

3.THE DOCTRINE OF PITH AND SUBSTANCE

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The phrase “Pith and Substance” means “true nature and character” and
Substance” which means ‘the most important or essential part of
something’.

The main objective of the doctrine of pith and substance was to prevent
encroachment or intrusion of one legislative organ into the domain of another.

To deal with this conflict, the courts in India have evolved a few doctrines and
the age-old doctrine of pith (essence of) and substance (essential of) is
one among them. The doctrine of Pith and Substance evolves to find out the
true nature of any legislation if conflict arises.

The Doctrine of Pith and Substance signifies that if the substance of legislation
falls within the legitimate power of a Legislature, the legislation does not
become invalid merely because it incidentally affects a matter outside its
authorised sphere. Under it, the Court ascertains whether the alleged
encroachment is merely incidental or substantial. Thus, the doctrine of
‘pith and substance’ postulates that the impugned law is substantially within
the legislative competence of the legislature that made it, but only incidentally
encroaches upon the legislative field of another legislature.

The doctrine is employed in such cases to resolve the inconsistency between

laws made by the Centre and the State Legislature and both the parliament
and the state legislature shall confine themselves to their respective spheres.

4.DOCTRINE OF REPUGNANCY (ARTICLE 254)

The repugnancy as inconsistency or contradiction between two or more parts

of a legal instrument. If the law made by the Parliament and that made by the
State legislature occupies the same field. Direct conflict is said to exist when
two laws cannot be effectuated at the same time and inconsistency is bound
to happen. The Doctrine of Repugnancy was introduced in the Constitution to
resolve such situations.

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Repugnancy means any contradiction or inconsistency between two
or more parts of a legal instrument when applied in the concurrent field.

The doctrine of repugnancy, in accordance to Article 254, states that if any

part of State law is repugnant or conflicting to any part of a Central law
which the Parliament is competent to enact, or to any part of a law of the
matter of List III, then the Central law made by the Parliament shall prevail
and the law made by the State legislature shall become void, to the extent of
its repugnancy. While considering this doctrine, whether the central
law is passed before or after the State law is immaterial. Hence, this
is a principle to ascertain that when a state law becomes repugnant
to the Central law.

For the application of the doctrine of repugnancy, two enactments must

contain provisions that are so inconsistent that they cannot stand together in
the same field.

5.DOCTRINE OF COLOURABLE LEGISLATION

This Doctrine is also called “Fraud on the Constitution”. The Doctrine of

Colourable Legislation comes into play when a Legislature does not possess
the power to make law upon a particular subject but nonetheless indirectly
makes one.

Colourable legislation suggests an encroachment on the legislative

power by doing indirect things when it is not allowed to do so directly. This
means that it has transgressed its powers and has indirectly done something
which could not have been done directly. This is called colourable exercise of
legislative power or indirectly making laws when prohibited from doing so
directly. It prevents overstepping or transgression by doing of
something indirectly which could not have been done directly. The
doctrine of colourable legislation was created to prevent legislatures from
abusing their powers.

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Colourable legislation suggests an encroachment on the legislative
power. The doctrine of colourable legislation strictly prohibits doing indirect
things when it is not allowed to do so directly. It tests whether the legislature
has enacted a law as per its authorised competency or not. Any law is made
out of any guise, then the colourable exercise would be imposed on legislative
authority.

This Doctrine traces its origin to a Latin Maxim which implies: “Whatever
legislature cannot do directly it cannot do indirectly”. Colourable
legislation means which is not its true colour. In other words, the court
has observed that the object and effect of any law should not be contradictory.

SEPARATION OF POWERS and CHECKS AND BALANCES is the purpose

behind the colourable legislation.

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