Centre-State Relations (Legislative, Administrative, Financial) notes — Unit 4

Article 1 describes India as a 'Union of States'. It deliberately avoids the word 'Federation'. This is because the Indian federation is not the result of an agreement among independent states (like the USA), and states have no right to secede from it.

⇒1.1 The Jurisprudential Debate

Is India truly federal?

• K.C. Wheare: Calls India a 'Quasi-Federal' state (a unitary state with subsidiary federal features, rather than a federal state with subsidiary unitary features).
• Granville Austin: Calls it 'Cooperative Federalism', where neither the Centre nor the States are entirely supreme, but they cooperate for national development.
• S.R. Bommai v. UOI (1994): The Supreme Court definitively settled the debate, declaring that Federalism is a part of the Basic Structure of the Constitution.

The Constitution divides legislative power between the Centre and the States based on two criteria: Territory and Subject Matter.

⇒2.1 Territorial Extent (Article 245)

• Parliament: Can make laws for the whole or any part of the territory of India. It also has extra-territorial jurisdiction (its laws apply to Indian citizens and their property anywhere in the world).
• State Legislature: Can make laws only for the whole or any part of the State. It has no extra-territorial power.

⇒2.2 Subject Matter (Article 246 & 7th Schedule)

The Seventh Schedule divides subject matters into three lists:

• List I (Union List): 97 subjects of national importance (Defense, Foreign Affairs, Currency). Only Parliament can legislate.
• List II (State List): 66 subjects of local importance (Police, Public Health, Agriculture). Only the State legislature can legislate (in normal times).
• List III (Concurrent List): 47 subjects (Criminal law, Education, Forests). Both can legislate. If there's a conflict, the Central law prevails.

Since the lists are vast, conflicts inevitably arise where a State law seems to encroach upon a Union subject, or vice versa. The courts use specific doctrines to resolve these disputes.

⇒1. Doctrine of Pith and Substance

If an enactment substantially falls within the powers expressly conferred upon the legislature which enacted it, it cannot be held invalid merely because it incidentally encroaches on matters assigned to another legislature.

• Pith and Substance means: The true nature and character of the legislation.
• Case: State of Bombay v. F.N. Balsara (1951): The Bombay Prohibition Act (State List) banned the sale of liquor. The petitioner argued it incidentally prevented the import of liquor across customs frontiers, which is a Union List subject. The SC upheld the law, stating its 'pith and substance' was public health and intoxicating liquors (State List), and the encroachment on imports was merely incidental.

⇒2. Doctrine of Colorable Legislation

This doctrine is based on the maxim: 'What you cannot do directly, you cannot do indirectly.'

• If the Constitution restricts a legislature from making a law on a particular subject, the legislature cannot bypass that restriction by dressing up the law to look like it belongs to a different subject.
• It tests the competency of the legislature, not its motives.
• Case: K.C. Gajapati Narayan Deo v. State of Orissa: The court explained that if a legislature ostensibly passes a law under its own list, but in reality, the substance of the law belongs to a forbidden list, the law is 'colorable' and void.

⇒3. Doctrine of Repugnancy (Article 254)

This applies specifically to the Concurrent List. If a State makes a law on a Concurrent subject, and Parliament makes a law on the exact same subject, and the two laws contradict (are repugnant to) each other:

• General Rule: The Parliamentary law prevails, and the State law is void to the extent of the repugnancy.
• The Big Exception [Art 254(2)]: If the State law was reserved for the President's consideration and received his assent, the State law will prevail in that specific state, despite the repugnancy.

In the administrative sphere, the Indian Constitution is heavily tilted towards the Centre. The Centre has the power to issue binding directions to the States.

⇒5.1 Centre's Power to Direct States

• Article 256: Every State must exercise its executive power so as to ensure compliance with the laws made by Parliament. The Centre can issue directions to the State for this purpose.
• Article 257: States must not impede or prejudice the executive power of the Union. The Centre can give directions regarding:
  - The construction and maintenance of means of communication (National Highways).
  - The protection of railways within the State.

⇒5.2 The Sanction: Article 365

What happens if a State simply ignores the Centre's directions under Art 256 or 257?

Article 365 provides a terrifying sanction. It states that if a State fails to comply with any direction given by the Centre, it shall be lawful for the President to hold that a situation has arisen in which the government of the State cannot be carried on in accordance with the Constitution.

This immediately triggers Article 356 (President's Rule), allowing the Centre to dismiss the State government.

No federal structure can survive without a clear division of financial resources. The Constitution aims to prevent the States from starving, while keeping the major revenue sources with the Centre.

⇒6.1 Allocation of Taxing Powers

• Union List taxes: Income tax (non-agricultural), corporate tax, customs duties, excise duties.
• State List taxes: Land revenue, agricultural income tax, excise on alcohol, state GST.

⇒6.2 Distribution of Revenues

• Taxes levied and collected by Centre but entirely assigned to States: Taxes on sale of goods in interstate trade.
• Taxes levied and collected by Centre but shared with States: Income Tax and Central GST. The percentage shared is determined by the Finance Commission.

⇒6.3 The Finance Commission (Article 280)

A quasi-judicial body constituted by the President every 5 years. It recommends the distribution of net tax proceeds between the Union and the States, and the principles governing grants-in-aid to the States.

⇒Summary of Master Concepts

• Federalism: India is Quasi-Federal (Wheare), but Federalism is a basic structure (S.R. Bommai).
• Pith and Substance: Looks at the true nature of the law. Ignores incidental encroachments (F.N. Balsara).
• Colorable Legislation: You cannot do indirectly what you cannot do directly.
• Repugnancy (Art 254): Central law prevails in Concurrent list, unless the State law got Presidential assent.
• Administrative Control: Centre can issue directions (Art 256/257). Non-compliance triggers President's Rule (Art 365).

⇒University Exam Tips for this Unit (Premium Advice)

• The Doctrines: Examiners frequently ask to differentiate 'Pith and Substance' from 'Colorable Legislation'. Remember: Pith and Substance is used to save a law by excusing minor encroachments. Colorable Legislation is used to destroy a law by exposing a fraud on the constitution.
• The Article 365 Trap: If an exam asks 'On what grounds can President's Rule be imposed?', most students only write Article 356. Top-tier students will write: 'It can be imposed under Art 356 directly, OR via the punitive mechanism of Art 365 (failure to follow Central directions).' This shows mastery of Administrative Relations.