16 Relationship between Union and States

Distribution of powers between the Union and the States is an essential feature of federalism. The
whole federal system revolves around the basics of distribution of power. The Constitution has providedi
exhaustive provisions for distribution of powers between the Union and the States. Relationship betuee
Union and States can be categorized into following:

Administrative relations Financial relations

Legislative relations
[Article 245-255] [Article 256-263] [Article 264-293]

Legislative Relations
two-fold from the following point
The distribution of legislative powers between Union and States is
of view:

1. With respect to territory

matteree
2. With respect to subject
Territorial relation
Constitution, Parliament may make laws
Article 245(1) provides that subject to the provisions of this
whole or any part of the country and the Legislature of the State may make laws for thewhole or
for the invalid
no law made by Parliament shall be deemed to be
any part of the State. Article 245(2) provides that
on the ground that it would have extra-territorial operation.
laws only for the State concerned. A
Theory of territorial nexus: The State Legislature can make
afect persons, properties or things within the State and not outside the State.(The State
State law can
connection between the State
Legislature cannot make extra-territorial laws except when there is sufficient
Income Tax.
and the subject matter of legislation[A.H. Wadia v. Commissioner of
has extra territo
The doctrine of territorial nexus is applied to find out whether aparticular State law
rial operation or not. This doctrine signifiesthat the object to which the law applies need not be physically
located within the territorial boundaries of the State. What is necessary is that it should have asufficien
territorial connection within the State. Supreme Court in State of Bombayv. R.M.D. C., AIR 1957 SC
699, held that extra-teritorial legislation can be upheld only when there is a sufficient nexus between the
object sought to be achieved and the State seeking to achieve them. The sufficiency of the territorial connec
tion involves consideration of following two elements
1 The connection must be real and not illusory.
2. The liability sought to be imposed under the Act must be pertinent or relevant to that connection.
 Comstitutiom of India
Courttin State aof
Supreme
5SCC203held that
Andhra Pradesh v. National Themal
generally speaking alegislation Power Corporation Limited,
g Parliament and|not by any State having extrateritorial operation can be
the
arby
Legislation is Legisl atu re. The only exception being one
where
enacted
ofa State sustainable on the
abjectmaatter relation
ground of
extra-territorial nexus. extra-ter itorial
related to the
Arice.246is subject matter of law making power of
are the Parliament and State
Followingpoints important with respect to subject matter Legisla
Parliament has
relation.
exclusive power to make laws with
List List). respect to matters enumerated in the Union

State Legislature has exclusive power to make laws with respect to

matters enumerated in the
State List(List II).
Parliament and State Legislature both have
powers to make laws with-tespect to matters
enumerated in Concurrent List (List II).

Parliament has power to make laws with respect to any matter for any part of the
India not incuded in aState notwithstanding that such matter is a territory. of
matter enumerated in the State
List.
The allocation of subject to the list is not by way of scientific definition but by
way of mere enumera
nofbroadcategories. In Javed v. State of Haryana, (2003) SCC, Supreme Court held that the Con
iution gives autonomy to the Centre and the States within their respective fields. The legislation of one
Sue cannot beheld to be discriminatory against its citizens simply because Parliament or State Legislatures
of other States have not chosen to enact similar laws.
Article 246åprovides for the special provision with respect to goods and service taxes. This provision
las beninserted vide 101" Constitutional Amendment, 2016.
Residuary power: Article 248 provides for residuary powers of legislation. It lays down that subject
bArticdle 2464, Parliament has exclusive power to make law with respect to any matter not enumerated in
the Concurrent List or State List.

Principles of Interpretation of Lists

DUbyect matters enumerated in the lists are not scientifically perfect and there cannot be awater-tight
artmentalization. There has to be certain overlapping. Supreme Court in Federation of Hotel &
airant v. Union of ndia, AIR 1990 SC 1637 held that the ultimate responsibility to interpret the
entries lies with the Supreme Court in the scheme of Indian federal system Therefore, there are certain
principles for interpretation of lists which are to be followed by the Courts while adjudicating upon the
Thatter:
 (1) Plenary power of Legislature: It is the absolute power to enactlawsandit is only subject to
legislative competence and other constitutional limitations. The power ofthelegislaturetoenact.laws with
reference tothe limitationsimposedI by the
matters entrusted to it is unqualified and it is only subjecttothe
Entriesshould notbe
interpretedin
Constitution [J.K. Jute Mills v. State of U.P., AIR 19%1 SC 1534).
ancillary powers or
restrictive sense. Each general word in an entry should be Construedtoincude all Limited y.
Phillips Inda
subsidiary matters [State of West Bengal v. Union of IIndia),In Godfrey
bereadI harmoniously,
State of U.P., (2005) 2SCC 515 Supreme Court held thattcompetingentries must
by that ofthe other. In Jilubhai
that is, to read the entries together and to interpret the language ofone is settledlaw of
held that it
Nanbhai Kachar v. State of Gujarat, AIR 1995SC142.Supreme Court legislation. The legislature
fields of
interpretation that entries in the Seventh Schedule are not powers but respective entriesshoudbe
language of
derives its powers from Article 246 and other related Articles. The government.In Misri Lal
machinery of the
given widestscope of their meaning, fairlycapable to meetthe power to make lawsincludesthe
held that the
Jain v. State of Orissa, AIR 1977 SC 1686.Supreme Court Commissionerof.Income
retrospectively. Further, in
power to giveeffect to it prospectively as well as Court heldthatunless a contrary
SCC1 Supreme
Tax v. Vatika Township Private Limited, (2015)1
intention appears alegislation is presumed to be retrospective. the powerto legislate
legislate on a topic includes
(2) Ancillary orincidental powers: The powerto reasonable included in the powergiven. In R.D.
incidental matter which can be said to be
on an ancillary or
Court held that the entries in the list must begiven wide
2279, Supreme
Joshi v. Ajit Mills,AIR 1977SC held that punitive measures for
enforcing
incidental powers. The court
meaning implying allancillary and State of Maharashtra, (2004) 9SCC438
InHindustan Lever v.
social legislation is ancillarymeasures. entry would necessarily include incidental and
words employed in an
SupremeCourt held that the expres
legislation effective.
ancillary matters so as to make the
Generally, the legislature should keep within its domain as
(3) Doctrine of Pithand Substance: other. Ifthelegislature trespasses into the
the domain reserved to the
signed to it. It should not trespass into upon the field
thelaw pased by one legislature encroaches
field assgned to others then the law is invalid. If substance to determine whether the
apply the doctrine of pith and
assigned to other, then the court will
make it or not. Pith and Substance of legislationmeans true object and scope
legislature was competent to nature
legislation. This rule envisages that the legislation as awhole is to be examined to ascertain its true
of
it relates to. Ifthepith and substance of law
and character in order to determine to what entry in which List
enactment will be held to be intra vires.
relates to the matters within the competence oflegislature then the
that aclear-cut
In Prafulla Kumar v. Bank of Commerce, Khulna, AIR 1947 PC 60, the court held
distinction is not possible between the legislative powers of the Union and the State Legislatures because
they are bound to overlap. In ascertaining the pith and substance of the Act the court must consider
 Constitution of India
object of the Act,
la) The
the Act and
Thescope of
(b)
whole.
Theeffect as the
In Bharat Hydro Power Corporation Limitedv. State of Assam, (2004) 2SCC 553 Supreme
Courtheldtthatif the substance offenactment falls within one list then the incidental encroachment by the

enactmenton the other list would not make it invalid. The doctrine of pith and substance saves
the inciden-
encroachmentifonly the lawin pith and substance falls within an entry within the legislative field of
the
al legislaturewhich has enacted it.
particular
InStateoffBombayv. FN. Balsara, AIR 1951 SC 318, the court held the Bombay Prohibition Act,
asvalid| becausethe pithand substance of the Act fellin State List even though it incidentally encroached
uponthe Union List. Court held that the validity of the Act is not affected if it incidentally trenches on
mattersoutsidethe authorized field if the Act substantially falls within the powers expressly conferred upon.
(4) Doctrine of Colourablee Legislation: It means that though apparently the legislature passing
thestatute purported to act within the limits of the powers yet in substance it transgressed these powers.
transgressionis covert orindirect K.C.G. Narayana Deo v. State of Orissa, AIR 1953 SC 375]. It
The
is based on the maxim 'what cannot be done directly, cannot also be done indirectly'. This doctrine is
applicable when the legislature seeks to do something in an indirect manner. In respect to 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 or may be disguised, covert or indirect.
la the latter cdass of cases the doctrine of colourable legislation applies. In R.S. Joshi v. Ajit Mills,
Ahmedabad, AIR 1977 SC 2279 Supreme Court held that if the legislature is competent to pass the
particular law, the motives which impel it to pass the law are irrelevant. If alegislation apparently enacted
under oneentryinthelist, falls in plain truth and fact within the content of another entry then it can be struck
down as unconstitutional even if the motives were most commendable. State of Biharv. Kamesh war
Singh, AIR 1952 SC 252, is the only case where the law has been declared invalid on the ground of
colourable legislation.
Repugnancy between Centre and State law
Artcle 254(1) provides that if any provision of alaw made by the Legislature of the State is repugnant
aly provision of a law made by Parliament with respect to one of the matters of the Concurrent List
then the law made by Parliament
shall prevail. This provision is subject to Article 254(2).
Article 254(1) isapplied
ap when there is inconsistency between State law and the Union law with respect
to the
Concurrent
It provides that if
t List. Article 254(2) envisages asituation where the State law will prevail over Union law.
the State law is repugnant to any law made by Parliament on the Concurrent List but the
State law has
been reserved for the
assent of the President and has received the assent of the President then
 the State law will prevail over the law made by the Parliament. However, Parliament can stilll override such
same matter.
law by subsequently making alaw on the
between two pieces of legislation means that the conflicting results are produced_t
Repugnancy
both the laws are applied to same set of facts. Repugnancy arises when the provisions oftwo laws are fully
inconsistent and absolutely irreconcilable. It is impossible to obey one without disobeying the other. If both
the laws can co-exist without being inconsistent with each other then there is no repugnancy. In Deep
repugnancy betwenr
Chand v., State of Uttar Pradesh, AIR 1959 SC 648 Supreme Court held that
are inconsistent and irreconcil,kt.
Central and State statutes arise if there is a direct conflict i.e. there laws
Later in M. Karunanidh:
and if the laws made by the Parliament and State Legislature occupy the same field.
occupy a particular field but
v. Union of India, AIR 1979 SC 898 Supreme Court held that if two statutes
then there is no repugnancy
there is apossibility of both operating in the same field without any conflict
Supreme Court in Zaverbhai v. State of Bombay, AIR 1954 SC 752 emphasized on the phrase with
with reference to
respect to that matter in Article 254(2). The Court held that important thing to consider
with
this provision is whether the legislation is 'in respect of the same matter'. If thelater legislation deals not
of a
the matters which formed the subject of the earlier legislation but other and distinct matters though
cognate and allied character, the Article 254(2) has no application. In M.P. Shikshak Congress v. RPF
Commissioner, Jabalpur, AIR 1999 SC 443 Supreme Court held that Article 254(2) becomes applicable
only when the State law is repugnant to an earlier law enacted by the Parliament. When a State Act becomes
repugnant to a Parliamentary law enacted thereafter, Article 254(2) does not apply. In such a situation
Parliamentary law would prevail over the State law.
Under the proviso to Article 254(2), Parliament isnot prevented 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 State legislature, which relates to the matter in the Concurrent List. The proviso enlarges the power
of the Parliament. The Parliament can enact aprovision repugnant to the earlier State law. Therefore, it can
be said that the Presidential assent to the State law gives protection to it against the Central law only so long
as the Parliament does not thereafter legislate again with respect to that matter making the provision con
flicting with the State law.
Parliament's power to legislate on the State subject
In the following circumstances the Parliament gets the authority to legislate on the matters enumerated
in the State List

(1) National Interest [Article 249] : Article 249 provides that if the Rajya Sabha passes a resolution
supported by 2/3 of the members present and voting that it is necessary and expedient in the national
interest that the Parliament should make laws with respect to goods and service tax or any other entry in
State List then it shall be lawful for the Parliament to make laws for whole or any part of the country so
long as the resolution remains in force.
 Constitution of India
resolution passed by the Rajya Sabha
Such
time
remains valid for a year but it can be
putnotexceedingone year each The law made by renewed multiple time
e

monthsafter resolution ceases to operate.

Parliament shall cease to have effect after
six
of
expiration
During proclamation of emergency [Article 250]: Article 250
(2) provides that while the procla-
ofemergency isin operation the Parliament shall have the power to
mation make laws for the whole or any
thecountry with respect to goods and service tax and other matters
of
part
to have effect after expiry of six
specified in the State List. Such
cease
will months from the date when
ly
Consent of
emergency ceases to operate.
(3)
States Article 252] : Article 252 provides that if the Legislatures of two or
more
passaresolution to the effect that it is desirable to have alaw
Sates passed by the Parliament on any matter
inthe.State Listthen it shall be lawful for the Parliament to make laws on that subject matter. Any law so
enactedbythe Parliament can apply to any other State by which it is adopted afterwards by a resolution
passedtothateffecttin its legislature.
(4) To give effect to Treaties and International agreements [Article 253|: Article 253 empowers
the Parliament to make law for the whole or any part of India for implementing treaties and international
agreements and conventions.

(5) Failure of Constitutional machinery in State [Article 256]: Article 256 provides that Parlia
mentisempowered to make laws with respect to all matters in the State List in case of State emergency.

Administrative relations
Administrative relationship between Union and States is of great value in modern times. Administra
tion plays a key role in the enforcement of law and order and promoting socio-economic welfare of the
people. Therefore, it is essential to have asound administrative relationship between the federal units. Con
stitution of India provides for elaborative scheme of administrative relationship.
Article 256 provides that the executive power of every State shall be so exercised as to ensure compli
ance with the laws made by the Parliament and any existing laws which apply in that State and the executive
power of the Union shall extend to giving of such directions to aState as may appear to the Government
of India to be necessary for that purpose.
Article 261 provides that full faithand credit shall be given throughout the territory of India to public
acts, records and judicial proceedings of the Union and of every State. Final judgments or orders delivered
or passed by civil courts in any part of the territory of India shall be capable of execution anywhere within
that territory according to law.
Adjudication of water disputes: Article 262(1) provides that Parliament may by law provide for the
Ujudication of any dispute or complaint with respect to the use, distribution or control of the waters of, or
 n, any inter-State river OT TÍVEL Yalley, Parliament may by law provide that neither Supeme nt hr ay
other court shall exercise jurisdiction in respectofany interate watet dispute ot complaint hrticle 2622
Parlíament has enacted Inter-State Water Disputes Act, 19561 under Article 262.
nis toeos
Inter-State Council: Article 263 provides for the esstablishment of an Inter State
acocd
coordination betwecn the StatesLAnd betwecn Centre and1States The President an establssh sch
if at any time it be served byits establishment He can define
appearssto him that the publicinterest would
263
the nature of duties to be performed by such acouncil and its organization and proedure hrtice
specifies the duties that can be assigned to it in the following manner:
(a) Inquiring into and advising upon disputes which may arise between States,
Investigating and discussing subjects in which the sates or the Centre and the tates have acoon
D)
interest; and
upon any such subject and partícularly for the better co-ordination of
() Making recommendations
policy and action on it.
(1983-87) made a strong case for the establish
The Sarkaria Commission on Centre-State Relations
permanent Inter-State Council under Article 263 of the Constítutíon. In pursuance of the above
ment of a
Inter-State Council in 1990. It
recommendations of theSarkaria Commission, Government established the
consists of the following members:
Prime Minister as the Chairman

() Chíef Ministers of all the States

(H) Chief Ministers of Union Territories having Legislatíve Assemblies
(iv) Administrators of Union Territories not having Legislatíve Assemblíes
(v) Governors of States under President's rule
(vi) Six Central Cabinet Ministers, includíng the Home minister, to be nomínated by the Prime Minister.
(vi) Five Ministers ofCabinet rank / Minister ofState (independent charge) nominated by the Chair
man of the Council (ie., Prime Minister) are permanent invites to the Council.
Financial relations

Financial relationship between Union and States is an essential element offederal polity. For effective
working of governmentsat all levelsit is essential that they must have the power to raise financial resources
of its own. It is important to strike a balance between financial resources allocated to the Union and the
States. Constitution of India incorporates elaborate provisions for financial distribution of resources. As a
general rule Article265 provides that no tax shall be levied or collected except by the authority of law.
 Constitution of India
ConsolidatedFund of Inndia and of the State
provides for Consolidated Fund of
Article266 India and of States and
provisions shallbe subject to public account of India and
State.These
of
Article
ass1gnmentofthe whole or part ofthe: net
267
(Contingency Fund) and tothe provisions
othe proceeds. Following shall form the relating
India Consolidated Fund of
1. Allrevenue received| by the Govern ment of India;
Allloans raised bythe Government of India by issue of
2.
treasury bills;
Loans or ways and means advances;
3.

4 All money received by the Government in repayment of loans.

Consolidated Fund of the State: Following shall form the
Consolidated Fund of the State:
All revenue received by the Government of the State;
All loans raised by the Government of the State by issue of
treasury bills:
3. Loans or ways and means or advances;
All money received by the Government in repayment of loans.
Allother public moneys received by or on behalf of the
Government of India or the Govern ment of
the State shall be credited | to the public account of India or the public account of the State.
Contingency Fund of India and of the States
Article 267(1) provides for the Contingency Fund of India and Article 267(2)
provides for the Contin
prncY Fund of the State. Article 267(1) provides that the Parliament may by law
establish a Contingency
Eund of India and such sums shall be paid into it as may be determined by such law.
Such fund shall be
nlaced at the disposal of the President to enable advances to be made by him out of
such Fund for the
purpose of meeting unforeseen expenditure pending anthorization of such expenditure by the Parliament
by law under Article 115 or 116. On the similar lines Contingency Fund of the
Stateshall be established by
the State Government by law.
Goods and Service Tax

Provisions related to Goods and Service Tax has been introduced by 101" Constitutional
Amendment
Act, 2016. Article 269A provides that Goods and Service tax on supplies in the course of
inter-State trade
or commerce shall be levied and collected by the Government of India. Such tax
shall be appropriated
between the Union and the States in the manner as may be provided by
Parliament by law on the recom
mendation Goods and Service Tax Council.
of
Goods and Service Tax (GST) Council: Article 279A (inserted by 101st
Constitutional Amend
ent, 2016) provides for establishment of Goods and Service Tax Council, (GST Council). It
provides
 Leehe
that CST Council shall be constituted by the President within sixty days from the
the commencement of
101st Constitutional Amendment, 2016.,
Composition: Article 279A(2) provides that the Goods
Goods and Service Tax Council
shall consist of the
following members
(a) The Union Finance Minister (Chairperson)
b) The Union Minister of State in charge of Revenue or Finance (Member)
( The Minister in charge of Finance or Taxation or any other Minister nominated by each Stas
Government (Members)
The Members of the Goods and Services Tax Council referred to in sub-clause (c) of clause (2) shall
as soon as may be, choose one amongst themselves to be the Vice-Chairperson of the Council for such
period as they may decide.
Quorum: One-half of the total number of Members of the Goods and Services Tax Council shall
constitute the quorum at its meetings.