CHAPTER - II

BASIS OF STATE AUTONOMY – DISTRIBUTION OF POWERS

BETWEEN UNION AND STATES

1 INTRODUCTION

The State autonomy occupies a very pivotal position in a federal setup. The
federal system means that there is a distribution of total governmental powers between
the Federal Government and the States Governments. Moreover, Eminent Jurist A.V.
Dicey has elucidated upon the concept of federalism as a “practical contrivance for a
body of States which desire union but not unity and thus, being a concept which unites
separate states into a union without sacrificing their own fundamental integrity” 1 and
the same view has also been upheld by Eminent Indian Jurist Dr. Abhishek Singhvi as
federalism being “ a sense of devolution of power and the sharing of decision making
authority between at least two, if not more, institutions of governance” 2. The pattern of
distribution determines the autonomy of the States. Different federal systems differ
greatly in this respect. In some systems, States may be stronger as in the U.S.A., known
as strong federal system and in some others, the federal government may be stronger as
in India known as weak federal system.

2 LEGISLATIVE RELATIONS

The distribution of powers between the Union and the States is provided in the
Constitution itself in a very detailed manner. The legislative, administrative and
financial powers are distributed under the Constitution. The judicial powers are not
distributed as such since there is a single judiciary in India administering both the Union
and State laws. A brief survey of distribution of powers is carried out here for the

1
Abhishek Singhvi, “Federalism” , Indian Journal Of public Administration Vol. l III , No.4, p .743
(2007)
2
Id. at 742.

27
purpose of study of state autonomy to show the degree of independence or autonomy of
the States.

There is a two-fold division of legislative powers under the Constitution –

Territorial distribution and division according to the subjects or topics of legislation.
Territorial distribution is provided under Article 245 which states that Parliament may
make laws for the whole or any part of the territory of India, and the Legislature of a
State may make laws for the whole or any part of the State. A State law extends only
within the territory of the State and has no extra-territorial jurisdiction. A State law
having operation outside the State is not valid. However, by the doctrine of nexus, a
State law extends beyond the territory provided there is a territorial nexus or connection
between the subject-matter of the Act and the State making the law. But the connection
must be sufficient and real and not illusory. 3

But under clause (2) of Article 245, no law made by Parliament shall be deemed
to be invalid on the ground that it would have extra-territorial operation. Though a
Parliamentary law cannot be challenged on the ground of extra-territoriality, it will be
subject to other provisions of the Constitution relating to territorial jurisdiction. For
example, Article 370 restricts the application of laws made by Parliament to the State of
Jammu and Kashmir.

2.1 Article 246 and VII Schedule

The topics for legislation by the Union Parliament and State Legislatures are
enumerated in VII Schedule to the Constitution under the three lists-List-I (Union List),
List-II (State List) and List-III (Concurrent List). Union Parliament is given exclusive
power to make laws on subjects in the Union List (List-I) which contains entries 1 to
97. The State Legislatures are vested with the exclusive powers to make laws on
subjects in the State List (List-II) which contains entries 1 to 66. Both the Union
Parliament and the States are given concurrent powers to make laws on the subjects in

3
Governor/General V. Raleigh Investment Co. , A.I.R 1944 F.C 51; Wallace Bro. & Co. V. Income Tax
Commissioner A.I.R 1948 P.C 118; State Of Bombay V. Rmdc, A.I.R 1958 S.C 699; Shri Kant Karulkar
V. State Of Gujarat (1994) 5 SCC459; State of Ap V. Ntpc Ltd, A.I.R 2002 S.C 1895.

28
the concurrent List (List-III), which contains entries 1-47. However, the three Lists do
not exhaust all the legislative subjects. There are other provisions in the Constitution
which authorize the appropriate legislature to make laws on those subjects such as
Articles 119, 209, 262 etc. These lists must be read with Article 246 of the Constitution
which in fact authorizes the respective legislature to make laws on the topics in the
Lists.

The language of Article 246 which opens with the words ‘Notwithstanding
anything’ clearly indicates the predominance of the Union power over the State power
to legislate on the topics of the Lists in case of any conflict or overlapping of the
subjects, thus undermining the State autonomy. Then the distribution is highly biased
in favor of the Union whereby all the important heads of legislation including taxation
are allocated to the Union whereas the States are given subjects of minor importance
and of local nature only. This further weakens the federal principle under the
Constitution.

This is because of the policy adopted by the Constituent Assembly, after the
partition of the Country into India and Pakistan, to have a federal set up with a strong
center for maintaining unity of the nation and also for equal development of all regions
of the country.

2.2 Residuary Powers of Legislation (Article 248)

By Article 248 read with entry 97 of List-I the residuary powers of legislation
are assigned to the Union Parliament. So, Parliament has exclusive power to make any
law with respect to any matter not enumerated in the Concurrent List or State List. 4
Such power shall include the power of making any law imposing a tax not mentioned in
either of those lists. 5 The Residuary power is considered an important aspect of a federal
polity since it may tilt the balance of power in favour of the entity to whom this power
is given. The American federation is powerful because of the fact that residuary power
belongs to the States. In India, it was not considered important since Constitution

4
The Constitution Of India, Art.248(1)
5
Id., Art. 248(2).

29
provided for a detailed distribution of topics and hardly anything was left to be
distributed at that time. But with the passage of time new topics have emerged and
therefore, residuary powers have assumed some importance vis-à-vis State autonomy.
Therefore, the States demand that residuary powers should be given to the States.

2.3 Article 249

Article 246(3) confers an exclusive power on the States to make laws with
respect to the matters enumerated in the State list. But this exclusive domain is still
eroded by authorizing Parliament to make laws on those topics in the State List under
Articles 249,250,252,253 of course subject to the special circumstances mentioned in
these provisions.

Under Article 249, Parliament can legislate with respect to a matter in the State
List in the national interest, if the Council of States has declared by resolution supported
by not less than two-thirds of the members present and voting. The resolution can
remain in force for such period not exceeding one year unless it is extended in the like
manner for a further period of one year. It can be renewed as many times as may be
necessary but not exceeding a year at a time. However, the laws made by Parliament
under Article 249 would cease to have effect on the expiration of six months after
resolution has ceased to be in force.

2.4 Articles 250 & 251

This article empowers Parliament to legislate with respect to any matter in the
State List while a Proclamation of Emergency is in operation. Such a law shall cease to
have effect on the expiration of a period of six months after the Proclamation has ceased
to operate, except as respective things done or omitted to be done before the expiration
of the said period.

In Article, 251 further provides that when Parliament makes laws either under
Article 249 or Article 250, the States power is not affected. But in case of inconsistency
between Parliamentary law made under either of the said Articles and law made by the
Legislature of the State, law made by Parliament shall prevail and the law made by the

30
Legislature of the State shall to the extent of the repugnancy, but so long only as the law
made by Parliament continues to have effect, be inoperative.

2.5 Article 252

Article 252(1) makes provision for delegation of powers by two or more States
to Parliament so as to empower it to legislate with respect to a matter in the State List in
relation to such States. Any other State may adopt such a law by passing a resolution to
that effect. Such a Law made by Parliament can be repealed or amended by an Act of
Parliament passed or adopted in like manner and not by the legislature of the State to
which it applies.

A similar provision exists in the Australian Constitution and is very useful. The
Urban Land (Ceiling and Regulation) Act, 1976 was enacted under this Article.

2.6 Implementation of International Agreement (Article 253)

Under Article 253 read with Entry 14 of List-I, Parliament has exclusive power
to make law for implementing any treaty, agreement or convention with any other
country or countries or any decision made at any international conference, association
or other body. Thus, Article 253 enables Parliament to make a law for the above
purpose even for subjects in the State domain. This provision has become very handy
in implementing agreements relating to W.T.O., TRIPS etc.

In view of its wide sweep, doubts are being raised for its suitability in a federal
system since it undermines state autonomy.

2.7 Repugnancy in Concurrent List (Article 254)

Since under the Concurrent List both Union and States can make a law, it
becomes imperative to resolve this inconsistency. Article 254 provides if any provision
of a law made by the Legislature of a State is repugnant to any provision of a law made
by Parliament which Parliament is competent to enact, or to any provision of an existing
law with respect to one of the matters enumerated in the Concurrent List, then subject to
clause (2), the law made by Parliament, whether passed before or after the law made by

31
the Legislature of such State, or as the case may be, the existing law, shall prevail and
the law made by the Legislature of the State shall, to the extent of the repugnancy be
void.

However, under clause (2) State law could prevail over the Parliament law if it
is made after the Parliamentary law and has received President’s assent. But this will
not prevent the Parliament from enacting at any time any law with respect to the same
matter including a law adding to, amending, varying or repealing the law so made by
the Legislature of the State. To determine the repugnancy, the courts apply various
tests. 6 This again undermines the autonomy of the States.

3 ADMINISTRATIVE RELATIONS

As in the case of legislative power, the executive power is also distributed

between the Union and the States. The extent of the Union executive power is laid
down in Article 73 while the extent of the executive power of the States is set out in
Article 162 of the Constitution which makes it co-extensive with the legislative
competence of the respective legislatures. Therefore, subject to the other provisions of
the Constitution, the executive power of the Union extends to matters with respect to
which Parliament can make laws and that of the States to matters with respect to which
State Legislatures can make laws. But the executive power of the Union shall not, save
as expressly provided in the Constitution or by any law made by Parliament, extend in
any State to matters with respect to which the Legislature of a State has also power to
make laws. This means that the executive power with respect to the matters in the
Concurrent List ordinarily remains with the States unless the Constitution or Parliament
by law expressly provides otherwise. The Executive function, ordinarily, connotes the
residue of the governmental functions that remain after legislative and judicial functions
are taken away which comprises both determination of policy as well as carrying it into

6
See V.N. Shukla, Constitution of India 764-768 (ed. M.P. Singh, 2010)

32
execution. 7 It is the whole corpus of authority to govern other than legislative and
judicial functions. 8

3.1 Obligation of States and the Union (Article 256)

This Article lays down that it shall be the duty of the State to exercise its
executive power so as to ensure that due effect is given within the State to every act of
Parliament and to every existing law which apply in that State. The Government of
India is entitled to give directions to the State Government regarding the duty which is
imposed upon the States by Article 256.

3.2 Control of the Union over States in certain cases (Article 257)
Article 257 gives authority to the Union to issue directions to the States in
matters:
a) the manner in which the executive power of the State shall be exercised so as
not to impede or abridge the executive power of the Union;
b) the construction and maintenance of means of communication, declared to be of
national or military importance; and
c) measures to be undertaken for the protection of railways within the States.

This Article subordinates the State executive power to the Union executive
power while Article 256 subordinates the State executive to the Union legislative
power. The additional expenses incurred by the States under Article 257 shall be borne
by the Union.

Effects or consequences of failure to comply with the directions given by the

Union are given in Article 365. In such cases 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 provisions of this Constitution. In other words it can result in
imposition of emergency under Article 356 in a State.

7
Ram Jwaya Kapoor V. State of Punjab, AIR 1955 SC 549.
8
Government of India, Report of the Commission on Centre-State Relation, Part I P. 106-107.

33
 In theory, these provisions are very drastic for State autonomy but in practice
these have not been used by the Union. Therefore, this power must be exercised with
caution and circumspection.

3.3 Delegation of Executive Powers (Article 258, 258 A)

Article 258(1) empowers the President to entrust to State Government functions

relating to any matter falling within the executive power of the Union. The delegation
of function must be with the consent of the State. The clause (2) of Article 258 A
empowers Parliament to confer powers or impose duties upon State or its officers. This
can be done by Parliament without the consent of the State. Article 258 A inserted by
Seventh Amendment Act, 1956 enables the Governor of a State, with the consent of
Government of India to entrust either conditionally, or unconditionally to that
Government or its officers functions in relation to any matter to which the executive
power of the State extends.

These provisions encourage co-operation in executive matters. The governments

can make use of the executive machinery of each other.

4 FINANCIAL RELATIONS BETWEEN THE UNION AND THE STATES

The Distribution of financial powers in Indian federal system is the most

controversial provision from the federal set-up point of view which undermines the
State autonomy to a great extent. In financial matters, the States have been left high and
dry at the whims of the Union. The States have been allotted with minor and
unimportant heads of taxing powers, like, land revenue, agricultural income including
succession and estate duty, taxes on lands and buildings, taxes on mineral rights
subjects to Union’s power, sale tax on goods, tax on vehicles, Tolls, taxes on animal
and boats etc. These taxes do not meet even one-third requirement of the States.

On the other hand, Union power to tax includes, Taxes on Income, customs
duties, duties of excise, corporation tax, terminal taxes, taxes on services etc. and any
other residuary tax not mentioned in Lists II and III. Thus all major heads of income are
allotted to the Union. The idea behind this type of distribution was that Union taxes

34
will be shared between the Union and the States to avoid any disputes or controversies
relating to double taxation if left in the concurrent field as many federal systems
provide. The scheme of Union Taxes is as follows:

There are some minor heads of taxes in the Union List whose net proceeds are
handed over in entirety or partially to the States. These include, stamp duties and such
duties of excise on medicinal and toilet preparations (Art. 268); service tax levied by
Union and collected and appropriated by the Union and the States (Art. 268 A) 9, taxes
on the sale or purchase of goods and taxes on the consignment of goods (Article 269).
For the other taxes the scheme of distribution has been drastically modified by the
Eightieth Amendment Act, 2000 which is based on the recommendations of the 10th
Finance Commission. 10

Before this amendment only Income Tax and Union excise duties were
shareable. After this Amendment Act, except the duties and taxes referred to in Articles
268, 268A and 269, surcharges on taxes and duties referred to in Article 271 and any
cess levied for specific purposes, all taxes and duties referred to in the Union List shall
be levied and collected by the Government of India and shall be distributed between the
Union and the States as prescribed by the President by order after considering the
recommendations of the Finance Commission. 11

This was a long standing demand of all the States to make all Union Taxes
shareable which has been fulfilled to a great extent. But there are still many lacunae in
the implementation of this scheme of distribution. The share of the States has not
enhanced substantially. 12 So, the financial position of the States is not too happy and
practically all States run deficit budgets and indulge in huge borrowings.

9
Inserted by the Constitution (Eighty eight Amendment) Act, 2003, sec. 2 (w.e.f. 19/02/2004).
10
The Constitution (Eightieth Amendment) Act, 2000 has substituted a new Article 270, in place of
earlier Article 270 with retrospective effect from 01/04/1996.
11
The Tenth Finance Commission suggested that the share of the States in the gross receipts of Central
taxes be fixed at 26% and that this ratio be reviewed after 15 years.
12
On November 14, 2007, the Thirteenth Finance Commission was constituted under Article 280(1) of
the Constitution. The 13th Finance Commission headed by Vijay Kelkar submitted its report. Parliament
has accepted it on 25.2.2010. The Union has accepted to give 32% as against 30.5% of its tax revenue to
the States apart from Rs.3.19 lakh crore as grants in the next five years.

35
4.1 Grants-in-aid

Article 275 authorizes the Union to make grants-in-aid to the States which are in
need of assistance and different sums may be fixed for different States. These are need-
based grants. Then, there are compulsory grants for promoting the welfare of the
Scheduled Tribes in a State or raising the level of administration of the Scheduled Areas
therein. There are specific provisions for grants-in-aid for the State of Assam and the
autonomous State under Article 244 A which have to be provided for by Parliament
from the consolidated fund of India.

Under Article 282, the Union or State may make any grants for any public
purpose, notwithstanding that the purpose is not one with respect to which Parliament or
the Legislature of the State, as the case may be, may make laws. These are public
purpose grants. Most of the grants made by the Planning Commission, which is neither
a constitutional nor a statutory body, are made under this innocuous provision of the
Constitution.

5 FINANCE COMMISSION

In order to resolve the financial controversies amicably, the Constitution

provides for a Finance Commission under Article 280.

Article 280 states that the President shall, within two years from the
commencement of this Constitution and thereafter at the expiration of every five year or
at such earlier time as the President considers necessary, by order Constitute a Finance
Commission which shall consists of a Chairman and four other members to be
appointed by the President. Parliament may by law determine the qualifications which
shall be requisite for appointment as members of the Commission and the manner in
which they shall be selected.

Accordingly, the Finance Commission (Miscellaneous Provisions) Act, 1951,

has been enacted by Parliament which requires that the Chairman of the Commission
shall be selected from among persons who have had experience in public affairs and the
four other members shall be selected from among persons who: (i) are, or have been, or

36
are qualified to be appointed as judges of a High Court, or (ii) have special knowledge
of the finance and accounts of governments, or (iii) have had wide experience in
financial matters and in administration or (iv) have special knowledge of economics.
The tenure shall be fixed by the President and shall be eligible for reappointment. The
members shall render whole-time or part-time service as the President may specify.
The Commission shall determine their procedure and in performance of their functions
shall have all the powers of a civil court while trying a suit in respect of summoning and
enforcing the attendance of witnesses, production of any document and requisitioning
any public record from any court or office. The Commission shall also have power to
require any person to furnish information on such points or matter as in the opinion of
the Commission may be useful for, or relevant to, any matter under its consideration.

It shall be the duty of the Commission to make recommendations to the

President as to – (a) the distribution between the Union and the States of the net
proceeds of taxes which are to be, or may be, divided between them and the allocation
between the States of the respective shares of such proceeds; (b) the principles which
should govern the grants-in-aid of the revenues of the States out of the Consolidated
Fund of India.

The Constitution 73rd and 74th Amendment Acts, 1992 have further enlarged the
powers of the Commission.

Under Article 281, the President shall cause every recommendation made by the
Finance Commission together with an explanatory memorandum as to the action taken
thereon to be laid before each House of Parliament.

6 PLANNING COMMISSION

The Constitution has created a very weak body in the form of Finance
Commission which is only a part-time body established every five years and whose
recommendations are not binding on the government. In the absence of a strong,
permanent Constitutional Finance Commission, there are always chances of
arbitrariness in the distribution of finances among different States. This is further

37
accentuated by strong regional parties in most of the States which demand for finance
for its autonomy. Over and above the Union Government has created an extra-
constitutional body in the form of a Planning Commission to finance the Five Year
Plans. This is purely an executive body under the Prime Minister and functions more
on political considerations, thus further undermining the autonomy of the States. The
funds flowing to the States through the Planning Commission are more massive than the
grants being given to the States through the Finance Commission.13

7. DEMOLITION OF AUTONOMY OF THE STATES-EMERGENCY

PROVISIONS

The Constitution provides for three types of emergencies which make the
Constitution unitary in character thus demolishing the State autonomy. These are
discussed below.

7.1 Threat to National Security- Proclamation of Emergency under Article 352

If the President is satisfied that a grave emergency exists whereby the security of
India is threatened whether by war or external aggression or armed rebellion, he may by
proclamation make a declaration to that effect. The expression ‘armed rebellion’ was
introduced by 44th amendment replacing ‘internal disturbances’ which was considered a
vague expression and liable to be abused by the executive. Many more procedural
safeguards have been introduced by the 44th amendment.

Duration- A proclamation of Emergency may be revoked at any time by a

subsequent proclamation. It is to be laid before both Houses of Parliament and shall
cease to operate at the expiration of one month unless before the expiration of that
period it has been approved by resolutions of both the Houses of Parliament. Where
both the Houses approve the proclamation, it can continue for six months from the date
of such resolution and may be extended by passing similar resolutions at the expiry of
every six months till revoked by the President. On a simple resolution of the House of
the People disapproving the proclamation, a resolution approving the Proclamation

13
M.P. Jain, Indian Constitutional Law 789 (Revised by J. Ruma Pal et.al., 2012).

38
must be passed by the either House of Parliament by a special majority, i.e., total
membership of that House and by a majority of not less than two-thirds of the members
of that House present and voting.

Consequences- Various consequences follow on the issuing of a Proclamation

of Emergency. First, the executive authority of the Union will extend to the giving of
directions to any state as to the manner in which the executive power vested in it is to be
exercised, thus bringing the State executive at the mercy of the Union.

Second, when Proclamation is made, the Union legislative power is extended

under Article 250 even on matters in the State List. Thus Parliament becomes
omnipotent in legislative matters and State autonomy is undermined considerably.
States can continue to make laws but subject to the Union laws.

Third, while a Proclamation of Emergency is in operation, the President may by

order under Article 354 alter the financial arrangements between the States and the
/union as laid down in Articles 268 to 279 so that all taxes are brought under the control
of the Union Government.

Thus the entire distribution of powers, legislation executive or financial

collapses and gets concentrated in the Union government making it a unitary system.

7.2 Failure of Constitutional Machinery in a State (Article 356)

Article 355 imposes two obligations on the Union. First, it shall be the duty of
the Union to protect every State from external aggression and internal disturbance.
Second, it shall be the duty of the Union to ensure that the government of every State is
carried on in accordance with the provisions of the Constitution. The justification for
these two obligations are that first since the States have no power to keep armed forces
except for maintenance of public order and not for protection against external
aggression, it has been made a duty of the Union to protect the States. The second
obligation is provided as justification for Article 356 to impose what is called
President’s rule in a State. When leaders from the States in the Constituent Assembly

39
resented the provisions relating to President’s rule in the States, provision of Article 355
were brought in as justification.

Article 356 of the Constitution empowers the President to issue a proclamation

on receipt of a report from the Governor of a State, or otherwise too, if he is satisfied
that the government of the State cannot be carried on in accordance with the provisions
of the Constitution. Though satisfaction of President is subjective satisfaction, now it
can be subjected to judicial review on the ground of abuse of power or whether it was
issued on irrelevant or extraneous grounds or in a malafide exercise of power and the
court can examine the grounds to be furnished by the President. In S.R. Bommai V.
Union of India 14 the Supreme Court has laid down certain pre-requisites for the
application of Article 356(1) which are as follows:

1) Presidential proclamation dissolving a State legislative Assembly is subject to

judicial review.
2) If the President’s rule is imposed only on political considerations, the court can
even restore the assembly.
3) Imposition of president rule and dissolution of the state government cannot be
done together.
4) State Assembly can be dissolved only after parliament approves central rule.
5) The power of the president under Article 356 is constitutional power, it is not an
absolute power and existence of a pre-condition is sine-qua-non for the
imposition of the President Rule.
The Supreme Court has thus relied on Justice Sarkaria Commission’s Report on
Centre-State Relations (1988).
The Commission in its report has broadly classified the instances of failure of
Constitutional machinery into:
(a) Political crisis where it is not possible to form a government.,
(b) internal subversion where, e.g., a government is deliberately acting against the
Constitution and the law or is fomenting a violent revolt or revolution,

14
AIR 1994 SC 1918.

40
 (c) Physical breakdown where the government willfully refuses to discharge its
constitutional obligations endangering the security of the state, and
(d) Non-compliance with constitutional directions of the Union Government, e.g.,
under Article 256, 257, 339(2) or 353.

The report also illustrated improper exercise of power under Article 356 such as:

(i) Maladministration in a state

(ii) Non-exploration of the possibility of installing an alternative government in
case of resignation or dismissal of a government in a state
(iii) Removal of a government which has not been defeated at the floor of the
House and has not been given an opportunity to prove its majority,
(iv) Massive defeat of a political party in Lok Sabha elections such as in 1977
and 1980
(v) Internal disturbances not amounting to internal subversion or physical
breakdown,
(vi) Exercise of the power without prior warning except in case of extreme
urgency leading to disastrous consequences,
(vii) To sort out internal disturbances or intra-party problems of the ruling party,
(viii) Stringent financial exigencies of a State,
(ix) Allegation of corruption against a ministry, and
(x) Exercise of power for a purpose extraneous or irrelevant to the one for which
it has been conferred by the Constitution.

The Commission also recommended that Article 356 should be used very
sparingly, in extreme cases, as a measure of last resort, when all available alternatives
failed to prevent or rectify a breakdown of Constitutional machinery in a State.
Appropriate warning must be given to the erring State and the Governor should explore
all possibilities of installing a government enjoying majority support in the Assembly.
The Governor should not recommend dissolution of State Assembly and installation of
a caretaker government unless all efforts to install a government fail. It also
recommended a suitable amendment of Article 356 to ensure that State Legislative

41
Assembly is not dissolved before the proclamation has been laid before Parliament and
considered by it and safeguard similar to those under clauses (7) & (8) of Article 352
should also be incorporated in Article 356 providing for the review of the continuance
of proclamation.

Following justice Sarkaria Commission Report and the Bommai case, the
President asked the Union Cabinet to reconsider its decisions recommending action
under Article 356 in U.P. in 1997 and in Bihar in 1998. In Rameshwar Prasad (vi) v.
Union of India 15 when President notified the dissolution of the suspended Assembly the
Supreme Court by 3:2 invalidated the dissolution. On the question of revival the Court
said, it would be wholly irrational for a Constitutional authority to deny the claim made
by a majority to form government only on the ground that the majority has been
obtained by offering allurement and bribes, which deals have taken place in the cover of
darkness, but his undisclosed sources have confirmed such deals. It further held that
Governor cannot refuse formation of the Government and override the majority claim
because of his subjective assessment that the majority was collected by illegal and
unethical means.

These recommendations and decisions have shown salutary effects on the

prevention of abuse of this power.

Duration-The duration of a proclamation issued under Article 356 is two

months. If after two months the proclamation is to be continued it has to be approved
by Parliament.

Consequences- During the Presidents’ rule in a State under Article 356(1); the
Legislative Assembly may either be dissolved or suspended. Under Article 357(i)
Parliament is empowered to confer powers on President for making laws for the State
and allow him to delegate it further, allow the President imposing duties upon the Union
or its officers and authorities and to authorize expenditure from the Consolidated Fund
of the State. By that Proclamation, President can assume to himself all or any of the
functions of the Government of the State and all or any of the powers vested in or
15
(2006) 2 SCC 1.

42
exercisable by the Governor or anybody or authority in the State and declare that the
powers of legislature of that State shall vest in Parliament. He cannot, however assume
to himself any of the powers vested in or exercisable by a High Court or to suspend
either in whole or in part, the operation of any provision of the Constitution relating to
High Court.
Article 356 has been the most lethal device in the Constitution which has been
abused more than 100 times till the S.R. Bommai case, for political purposes thus
demolishing the principle of State Autonomy. The States demand its abolition all
together. While its abolition may prove disastrous for integrity and unity of the country,
its abuse must be prevented by making suitable changes in Article 356 as suggested by
Sarkaria Commission.

7.3 Financial Emergency (Article 360)

If the President is satisfied that a situation has arisen whereby the financial
stability or credit of India, or of any part thereof is threatened, he may by a
proclamation make a declaration to that effect. During the period when any such
proclamation is in operation, the executive authority of the Union shall extend to the
giving of directions to any State to observe such canons of financial propriety as may be
specified in the directions, and be deemed necessary for maintaining financial stability
and credit of the State.

Under such directives, any State may be required to reduce salaries and
allowances of all or any class of persons serving in connection with the affairs of that
State and reserve all Money Bills or other Bills to which the provisions of Article 207
apply for the consideration of the President of India after they are passed by the
Legislature of that State. Moreover, it shall be competent for the President during such
financial emergency to issue directions for the reduction of salaries and allowances of
all or any class of persons serving in connection with the affairs of the Union including
the Judges of the Supreme Court and the High Courts. A Proclamation of financial
emergency shall cease to operate in two months from the date of issue unless it is
approved by both the Houses of Parliament. Article 360 has never been invoked so far.

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Though the Proclamation of financial emergency increases the supervision of the Centre
on the State’s financial matters and thus, encroaches upon the autonomy of the States
yet it was adopted by the Constituent Assembly of India after learning from the
experiences of other federations when the federal governments of the world found
themselves handicapped in taking effective steps against the economic depression of
1930. Thus, the Constitution of India is unique to the extent that it contains a complete
scheme for speedy readjustment of the peace-time governmental machinery in moment
of national peril. 16

8 ROLE OF INTER-STATE COUNCIL (ARTICLE 263)

Article 263 provides that the President may by order appoint an Inter-State
Council if it appears to him that public interest would be served by its establishment.
The President may define the organization, procedure and duties of the Council. The
Council may be charged with the duty of:

(a) inquiring into and advising upon disputes which may have arisen between
States;
(b) investigating and discussing subjects in which some or all of the States, or
the Union and one or more of the States, have a common interest; or
(c) making recommendations upon any such subject and, in particular,
recommendations for the better co-ordination of policy and action with
respect to that subject.

This Article was incorporated in the Constitution to provide a mechanism for

resolving disputes by collective thinking, intergovernmental persuasion and discussion
through a high level coordinating forum so that vertical (Centre-State) and horizontal
(Inter-State) intergovernmental cooperation and co-ordination can be maintained. An
Inter-State Council was established in 1990 but it met for the first time in 1996. 17 Not
much use has been made of Inter-State Council so far and there is a need that the Union

16
Supra note 6 at 775.
17
Government of India, Report of NCRWC (2002).

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as well as States should effectively utilize this forum for smooth functioning of Indian
federal system.

9 CONCLUSION

Indian Constitution has made conscious efforts to incorporate and strengthen the
co-operate federalism. But the functioning of Indian Federal system in last six decades
manifested the dominance of Center. As a result, many times the center has made
inroads into the State’s rights which has given rise to demand for state autonomy. It is
imperative that there should be effective efforts to reduce the tension areas between
Center and States so that co-operative federalism becomes a living reality of Indian
federal polity.

*****

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