REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6660 OF 2005
State of Kerala & Ors. … Appellant(s)
versus
M/s. Mar Appraem Kuri Co. Ltd. & Anr. …Respondent(s)
with Civil Appeal Nos. 6661/2005, 6662/2005, 6663/2005, 6664/2005,
6665/2005, 6666/2005, 6667/2005, 6668/2005, 6669/2005, 6670/2005,
6671/2005, 6672/2005, 6673/2005, 6674/2005, 6675/2005, 6676/2005,
6677/2005, 6678/2005, 6679/2005, 6680/2005, 6681/2005, 7204/2008,
7329/2008, 7330/2008, 7333/2008, 7334/2008, SLP(C) Nos. 25822 and
25823/2009, Civil Appeal Nos. 7008/2005, 7009/2005, 7010/2005,
7011/2005, 7012/2005, 7013/2005, 7014/2005, 7164/2005, 7165/2005,
7166/2005, 7167/2005, 7537/2005, 7538/2005, 494/2006, 495/2006,
5031/2006, 7332/2008, 7572/2008 and 5032/2006
J U D G M E N T
S. H. KAPADIA, CJI
Introduction
1. By order dated 18.02.2009 in Civil Appeal No. 6660 of 2005 in
the case of State of Kerala v. M/s. Mar Appraem Kuri Co. Ltd., the
referring Bench of 3-judges of this Court doubted the correctness of
the view taken by a 3-judges Bench of this Court in Pt. Rishikesh and
Another v. Salma Begum (Smt) [(1995) 4 SCC 718]. Accordingly, the
matter has come to the Constitution Bench to decide with certitude the
following core issues of constitutional importance under Article
254(1) of the Constitution.
Scope of the Reference – when does repugnancy arise?
2. In the present case, the question to be answered is - whether
the Kerala Chitties Act 23 of 1975 became repugnant to the Central
Chit Funds Act 40 of 1982 under Article 254(1) upon making of the
Central Chit Funds Act 40 of 1982 (i.e. on 19.08.1982 when the
President gave his assent) or whether the Kerala Chitties Act 23 of
1975 would become repugnant to the Central Chit Funds Act 40 of 1982
as and when notification under Section 1(3) of the Central Chit Funds
Act 40 of 1982 bringing the Central Act into force in the State of
Kerala is issued?
3. The question arose before the Full Bench of the Allahabad High
Court in the case of Smt. Chandra Rani and others v. Vikram Singh and
others [1979 All. L.J. 401] in the following circumstances:- The U.P.
Civil Laws (Reforms and Amendment) Act 57 of 1976 being the State Act
stood enacted on 13.12.1976; it received the assent of the President
on 30.12.1976; it was published in the Gazette on 31.12.1976 and
brought into force w.e.f. 1.01.1977 whereas the Civil Procedure Code
(Amendment) Act 104 of 1976, being the Central Act, was enacted on
9.09.1976; it received the assent of the President on the same day; it
got published in the Central Gazette on 10.09.1976; and brought into
force w.e.f. 1.02.1977 (i.e. after the State Act came into force).
The Full Bench of the Allahabad High Court in Chandra Rani (supra)
held that the U.P. Act No. 57 of 1976 was a later Act than the Central
Act No. 104 of 1976. The crucial date in the case of the said two
enactments would be the dates when they received the assent of the
President, which in the case of the Central Act was 9.09.1976 while in
the case of the U.P. Act was 30.12.1976. This decision of the Full
Bench of the Allahabad High Court in the case of Chandra Rani (supra)
came for consideration before this Court in Pt. Rishikesh (supra).
4. The statement of law laid down in Pt. Rishikesh (supra) was as
under:
“17... As soon as assent is given by the President to the law
passed by the Parliament it becomes law. Commencement of the Act
may be expressed in the Act itself, namely, from the moment the
assent was given by the President and published in the Gazette,
it becomes operative. The operation may be postponed giving
power to the executive or delegated legislation to bring the Act
into force at a particular time unless otherwise provided. The
Central Act came into operation on the date it received the
assent of the president and shall be published in the Gazette
and immediately on the expiration of the day preceding its
commencement it became operative. Therefore, from the mid-night
on the day on which the Central Act was published in the Gazette
of India, it became the law. Admittedly, the Central Act was
assented to by the President on 9-9-1976 and was published in
the Gazette of India on 10-9-1976. This would be clear when we
see the legislative procedure envisaged in Articles 107 to
109 and assent of the President under Article 111 which says
that when a Bill has been passed by the House of the People, it
shall be presented to the President and the President shall
either give his assent to the Bill or withhold his assent
therefrom. The proviso is not material for the purpose of this
case. Once the President gives assent it becomes law and becomes
effective when it is published in the Gazette. The making of the
law is thus complete unless it is amended in accordance with the
procedure prescribed in Articles 107 to 109 of the Constitution.
Equally is the procedure of the State Legislature. Inconsistency
or incompatibility in the law on concurrent subject, by
operation of Article 254, clauses (1) and (2) does not depend
upon the commencement of the respective Acts made by the
Parliament and the State legislature. Therefore, the emphasis on
commencement of the Act and inconsistency in the operation
thereafter does not become relevant when its voidness is
required to be decided on the anvil of Article 254(1). Moreover
the legislative business of making law entailing with valuable
public time and enormous expenditure would not be made to depend
on the volition of the executive to notify the commencement of
the Act. Incompatibility or repugnancy would be apparent when
the effect of the operation is visualised by comparative study.”
5. The above statement of law in Pt. Rishikesh (supra) created a
doubt in the minds of the referring judges and, accordingly, the said
statement of law has come before the Constitution Bench of this Court
for its authoritative decision.
Facts in the present case
6. The lis in the present case arose under the following
circumstances. Many of the private chitty firms remained out of the
regulatory mechanism prescribed in the Kerala Chitties Act, 1975 by
registering themselves outside the State but continued to operate in
Kerala. Because of this, investor protection became difficult.
Consequently, Section 4 of the said 1975 Act was amended vide Finance
Act 7 of 2002. By the said amendment, sub-section (1a) was inserted
in Section 4. This amendment intended to bring in chitties registered
outside the State having 20% or more of its subscribers normally
residing in the State within the ambit of the said 1975 Act. Being
aggrieved by the said Amendment, the private chitty firms challenged
the vires of Section 4(1a) of the 1975 Act as repugnant under Article
254(1) to the Central Chit Funds Act, 1982.
Questions to be answered
7. (i) Whether making of the law or its commencement brings
about repugnancy or inconsistency as envisaged in Article
254(1) of the Constitution?
(ii) The effect in law of a repeal.
Inconsistencies in the provisions of the Kerala Chitties Act, 1975
vis-a-vis the Central Chit Funds Act, 1982
8. The impugned judgment of the Division Bench has accepted the
contention advanced on behalf of the private chitty firms that there
are inconsistencies between the provisions of the two Acts. [see paras
13, 14 and 15 of the impugned judgment]. However, the Single Judge
held that absent notification under Section 1(3) of the Central Chit
Funds Act, 1982 bringing the said 1982 Act into force in the State and
absent framing of the Rules under Section 89 of the said 1982 Act, it
cannot be said that the Kerala Chitties Act, 1975 stood repealed on
the enactment of the said 1982 Act, which is the Central Act; whereas
the Division Bench declared Section 4(1a) of the 1975 Act as extra-
territorial and, consequently, unconstitutional, hence, the State of
Kerala came to this Court by way of appeal.
9. For the sake of clarity some of the conflicting provisions
indicated in the impugned judgment are set out herein below:
|Kerala Chitties Act, 1975 |The Chit Funds Act, 1982 |
|(State Act) |(Central Act) |
|Section 1 – Short title, extent |Section 1 - Short title, extent |
|and commencement |and commencement |
| | |
| |(1) This Act may be called the |
|(1) This Act may be called the |Chit Funds Act, 1982. |
|Kerala Chitties Act, 1975 |(2) It extends to the whole of |
| |India except the State of Jammu |
|(2) It extends to the whole of |and Kashmir. |
|the State of Kerala. |(3) It shall come into force on |
| |such date as the Central |
| |Government may, by notification in|
|(3) It shall come into force on |the Official Gazette, appoint and |
|such date as the government may,|different dates may be appointed |
|by notification in the Gazette, |for different States. |
|appoint. | |
|Section 2 - Definitions |Section 2 - Definitions |
| | |
|In this Act, unless the context |In this Act, unless the context |
|otherwise requires,— |otherwise requires,— |
|(4) "discount" means the amount |(g) "discount" means the sum of |
|of money or quantity of grain or|money or the quantity of grain |
|other commodity, which a prize |which a prized subscriber is, |
|winner has, under the terms of |under the terms of the chit |
|the variola, to forego for the |agreement required to forego and |
|payment of veethapalisa, |which is set apart under the said |
|foreman's commission or such |agreement to meet the expenses of |
|other expense; as may be |running the chit or for |
|prescribed; |distribution among the subscribers|
| |or for both; |
|Section 3 - Prohibition of |Section 4 - Prohibition of chits |
|chitty not sanctioned or |not sanctioned or registered under|
|registered under this Act |the Act |
| | |
|(1) No chitty shall, after the |(1) No chit shall be commenced or |
|commencement of this Act, be |conducted without obtaining the |
|started and conducted unless the|previous sanction of the State |
|previous sanction of the |Government within whose |
|Government or of such officer as|jurisdiction the chit is to be |
|may be empowered by the |commenced or conducted or of such |
|Government in this behalf is |officer as may be empowered by |
|obtained therefor and unless the|that Government in this behalf, |
|chitty is registered in |and unless the chit is registered |
|accordance with the provisions |in that State in accordance with |
|of this Act: |the provisions of this Act: |
|Provided that the previous |Provided that a sanction obtained |
|sanction under this sub-section |under this sub-section shall lapse|
|shall lapse unless the chitty is|if the chit is not registered |
|registered before the expiry of |within twelve months from the date|
|six months from the date of such|of such sanction or within such |
|sanction: |further period or periods not |
|Provided further that such |exceeding six months in the |
|previous sanction shall not be |aggregate as the State Government |
|necessary for starting and |may, on application made to it in |
|conducting any chitty by— |this behalf, allow. |
|(i) a company owned by the | |
|Government of Kerala; or | |
|(ii) a co-operative society | |
|registered or deemed to be | |
|registered under the | |
|Co-operative Societies Act for | |
|the time being in force; or | |
|(iii) a scheduled bank as | |
|defined in the Reserve Bank of | |
|India Act, 1934 ; or | |
|(iv) a corresponding new bank | |
|constituted under the Banking | |
|Companies (Acquisition and | |
|Transfer of Undertakings) Act, | |
|1970 (Central Act 5 of 1970). | |
| | |
|Section 4 - Prohibition of | |
|invitation for subscription | |
|except under certain conditions | |
| | |
|(1) Where previous sanction is | |
|required by section 3 for | |
|starting and conducting a | |
|chitty, no person shall issue or| |
|publish any notice, circular, | |
|prospectus, proposal or other | |
|document inviting the public to | |
|subscribe for tickets in any | |
|such chitty or containing the | |
|terms and conditions of any such| |
|chitty unless such notice, | |
|circular, prospectus, proposal | |
|or other document contains a | |
|statement that the previous | |
|sanction required by section 3 | |
|has been obtained, together with| |
|the particulars of such | |
|sanction. | |
|(1a)* Where a chitty is | |
|registered outside the State and| |
|twenty per cent more of the | |
|subscribers are persons normally| |
|residing in the State, the | |
|foreman of the chitty shall open| |
|a branch in the State and obtain| |
|sanction and registration under | |
|the provisions of this Act. | |
|(*) As Amended by Finance Act, | |
|2002 | |
|(2) Whoever contravenes the | |
|provisions of sub-section (1) | |
|shall be punishable with | |
|imprisonment for a term which | |
|may extend to six months, or | |
|with fine which may extend to | |
|three hundred rupees, or with | |
|both. | |
|Section 15 - Security to be |Section 20 - Security to be given |
|given by foreman |by foreman |
| | |
|(1) Every foreman shall, before |(1) For the proper conduct of the |
|the first drawing of the |chit, every foreman shall, before |
|chitty,— |applying for a previous sanction |
|(a) execute a bond in favour of |under section 4,- |
|or in trust for the other |(a) deposit in the name of the |
|subscribers for the proper |Registrar, an amount equal to,- |
|conduct of the chitty, charging |(i) fifty per cent, of the chit |
|immovable property sufficient to|amount in cash in an approved |
|the satisfaction of the |bank; and |
|Registrar for the realization of|(ii) fifty per cent, of the chit |
|twice the chitty amount; or |amount in the form of bank |
|(b) deposit in an approved bank |guarantee from an approved bank; |
|an amount equal to the chitty |or |
|amount or invest in Government |(b) transfer Government securities|
|securities of the face value of |of the face value or market value |
|note less than one and a half |(whichever is less) of not less |
|times the chitty amount and |than one and a half times the chit|
|transfer the amount so deposited|amount in favour of the Registrar;|
|or the Government securities in |or |
|favour of the Registrar to be |(c) transfer in favour of the |
|held in trust by him as security|Registrar such other securities, |
|for the due conduct of the |being securities in which a |
|chitty. |trustee may invest money under |
|(2) If any foreman makes default|section 20 of the Indian Trusts |
|in complying with the |Act, 1882 (2 of 1882), of such |
|requirements of sub-section (1),|value, as may be prescribed by the|
|he shall be punishable with fine|State Government from time of |
|which may extend to five hundred|time: |
|rupees. |Provided that the value of the |
|(3) The security given by the |securities referred to in clause |
|foreman under sub-section (1) or|(c) shall not, in any case, be |
|any security substituted under |less than one and a half times the|
|sub-section (6) shall not be |value of the chit amount. |
|liable to be attached in |(2) Where a foreman conducts more |
|execution of a decree or |than one chit, he shall furnish |
|otherwise until the chitty is |security in accordance with the |
|terminated and the claims of all|provisions of sub-section (1) in |
|are fully satisfied. |respect of each chit. |
|(4) The Registrar shall, after |(3) The Registrar may, at any time|
|the termination of a chitty and |during the currency of the chit, |
|after satisfying himself that |permit the substitution of the |
|the claims of all the |security: |
|subscribers have been fully |Provided that the face value or |
|satisfied, order the release of |market value (whichever is less) |
|the security furnished by the |of the substituted security shall |
|foreman under sub-section (1) or|not be less than the value of the |
|the security substituted under |security given by the foreman |
|sub-section (6), as the case may|under sub-section (1). |
|be, and in so doing he shall |(4) The security given by the |
|follow such procedure as may be,|foreman under sub-section (1), or |
|prescribed in that behalf. |any security substituted under |
|(5) The security furnished under|sub-section (3), shall not be |
|sub-section (1) shall, subject |liable to be attached in execution|
|to the provisions of sub-section|of a decree or otherwise until the|
|(6), be kept intact during the |chit is terminated and the claims |
|currency of the chitty and the |of all the subscribers are fully |
|foreman shall not commit any |satisfied. |
|such act with respect thereto as|(5) Where the chit is terminated |
|are calculated to impair |and the Registrar has satisfied |
|materially the nature of the |himself that the claims of all the|
|security or the value thereof. |subscribers have been fully |
|(6) The Registrar may:— |satisfied, he shall order the |
|(a) at any time during the |release of the security furnished |
|currency of the chitty, permit |by the foreman under sub-section |
|the substitution of the |(1), or the security substituted |
|security: |under sub-section (3), as the case|
|Provided that such substituted |may be, and in doing so, he shall |
|security shall not be less than |follow such procedure as may be |
|the security given by the |prescribed. |
|foreman under sub-section (1); |(6) Notwithstanding anything to |
|or |the contrary contained in any |
|(b) on the termination of the |other law for the time being in |
|chitty, release a part of the |force, the security furnished |
|security: |under this section shall not be |
|Provided that the security left |dealt with by the foreman during |
|after release of the part is |the currency of the chit to which |
|sufficient to satisfy the |it relates and any dealing by the |
|outstanding claims of all |foreman with respect thereto by |
|subscribers. |way of transfer or other |
| |encumbrances shall be null and |
| |void.” |
10. Apart from the conflicting provisions mentioned hereinabove, the
impugned judgment has brought out various inconsistencies between the
various provisions of the State Act and the Central Act in the
following terms:
“13. When we scan through the various provisions of both the
legislations it is clear that there is repugnancy between some
of the provisions of those legislations. The expression
"discount" in Section 2(g) of the Chit Funds Act gives a
different definition compared to Sub-section (4) of Section 2 of
the Kerala Chitties Act, 1975. So also Section 4(1) of the Chit
Funds Act deals with registration of chits, commencement and
conduct of chit business. Provisions of the Kerala Chitties Act,
Section 3(1) are also contextually different. Section 6(3) of
the Central Act states that the amount of discount referred to
in Clause (f) of Sub-section (1) shall not exceed thirty per
cent of the chit amount. As per Section 7(3) of the Chit Funds
Act registration of a chit shall lapse if the declaration by the
Foreman under Sub-section (1) of Section 9 is not filed within
three months from the date of such endorsement or within such
further period or periods not exceeding three months in the
aggregate as the Registrar may, on an application made to him in
that behalf. Section 8 of the Chit Funds Act deals with minimum
capital requirement for the commencement etc. of a chit and
creation of a reserve fund by a company and there is no
corresponding provision in the Kerala Chitties Act.
14. Learned Single Judge has also found that once the
requirement of furnishing security is satisfied under Section 20
of the Act, it would be arbitrary for the authorities in Kerala
to insist for another security for the same chitty merely
because 20% or more subscribers are residing in the State.
Learned Single Judge further held that the Registrar in Kerala
is absolutely free to call for details of registration and
security furnished by the Foreman in any other State under
Section 20 of the Central Act and after confirmation with the
Registrar in that State he will record the same and shall not
call for further security being furnished under Section 15 of
the Kerala Act from the same Foreman for the same chitty.
Learned Single Judge also found if a Foreman is registered under
the Central Act in any State outside Kerala and has subscribers
in Kerala, the Central Act applies to the Foreman even in regard
to the business he has in Kerala, no matter the Central Act is
not notified in the State and in such cases the learned Single
Judge opined that the provisions of the State Act will yield to
the extent the same is inconsistent with the Central Act.
Learned Single Judge himself has therefore noticed
inconsistencies between the various provisions of the State Act
and the Central Act.
15. On a comparison of the various provisions in the Chit
Funds Act and the Kerala Chitties Act we have come across
several such inconsistent and hostile provisions which are (sic)
repugnant to each other. Suffice to say that if Sub-section (1a)
(sic) of Section 4 is given effect to, a Foreman who has already
got the registration under the Central Act and governed by the
provisions of that Act would also be subjected to various
provisions of the Kerala Act which are inconsistent and
repugnant to the Central Act. If Section 4(1a) (sic) is
therefore given effect to it would have extra territorial
operation.”
i) Point Of Time For Determination Of Repugnance
11. The key question that arises for determination is as to from
when the repugnancy of the State Act will come into effect? Did
repugnancy arise on the making of the Central 1982 Act or will it
arise as and when the Central Act is brought into force in the State
of Kerala?
12. Before dealing with the respective submissions made by counsel
before us, we need to quote Articles 245(1), 246(1), (2) and (3),
249(1) and (3), 250(1) and (2), 251 and 254 of the Constitution, which
read as follows:
“PART XI
RELATIONS BETWEEN THE UNION AND
THE STATES
CHAPTER I.—LEGISLATIVE RELATIONS
Distribution of Legislative Powers
245. Extent of laws made by Parliament and by the Legislatures
of States - (1) Subject to the provisions of this Constitution,
Parliament may make laws for the whole or any part of the
territory of India, and the Legislature of a State may make laws
for the whole or any part of the State.
246. Subject-matter of laws made by Parliament and by the
Legislatures of States. - (1) Notwithstanding anything in
clauses (2) and (3), Parliament has exclusive power to make laws
with respect to any of the matters enumerated in List I in the
Seventh Schedule (in this Constitution referred to as the “Union
List”).
(2) Notwithstanding anything in clause (3), Parliament, and,
subject to clause (1), the Legislature of any State also, have
power to make laws with respect to any of the matters enumerated
in List III in the Seventh Schedule (in this Constitution
referred to as the “Concurrent List”).
(3) Subject to clauses (1) and (2), the Legislature of any
State has exclusive power to make laws for such State or any
part thereof with respect to any of the matters enumerated in
List II in the Seventh Schedule (in this Constitution referred
to as the “State List”).
249. Power of Parliament to legislate with respect to a matter
in the State List in the national interest. - (1)
Notwithstanding anything in the foregoing provisions of this
Chapter, if the Council of States has declared by resolution
supported by not less than two-thirds of the members present and
voting that it is necessary or expedient in the national
interest that Parliament should make laws with respect to any
matter enumerated in the State List specified in the resolution,
it shall be lawful for Parliament to make laws for the whole or
any part of the territory of India with respect to that matter
while the resolution remains in force.
(2) xxx xxx xxx
(3) A law made by Parliament which Parliament would not but for
the passing of a resolution under clause (1) have been competent
to make shall, to the extent of the incompetency, cease to have
effect on the expiration of a period of six months after the
resolution has ceased to be in force, except as respects things
done or omitted to be done before the expiration of the said
period.
250. Power of Parliament to legislate with respect to any matter
in the State List if a Proclamation of Emergency is in operation
- (1) Notwithstanding anything in this Chapter, Parliament
shall, while a Proclamation of Emergency is in operation, have
power to make laws for the whole or any part of the territory of
India with respect to any of the matters enumerated in the State
List.
(2) A law made by Parliament which Parliament would not but for
the issue of a Proclamation of Emergency have been competent to
make shall, to the extent of the incompetency, cease to have
effect on the expiration of a period of six months after the
Proclamation has ceased to operate, except as respects things
done or omitted to be done before the expiration of the said
period.
251. Inconsistency between laws made by Parliament under
Articles 249 and 250 and laws made by the Legislatures of
States. - Nothing in articles 249 and 250 shall restrict the
power of the Legislature of a State to make any law which under
this Constitution it has power to make, but 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 has under
either of the said articles power to make, the law made by
Parliament, whether passed before or after the law made by the
Legislature of the State, shall prevail, and the law made by the
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.
254. Inconsistency between laws made by Parliament and laws made
by the Legislatures of States -
(1) 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 the provisions of clause
(2), the law made by Parliament, whether passed before or after
the law made by 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.
(2) Where a law made by the Legislature of a State with
respect to one of the matters enumerated in the concurrent List
contains any provision repugnant to the provisions of an earlier
law made by Parliament or an existing law with respect to that
matter, then, the law so made by the Legislature of such State
shall, if it has been reserved for the consideration of the
President and has received his assent, prevail in that State:
Provided that nothing in this clause shall prevent
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. “
(emphasis supplied)
Submissions
13. Shri K.K. Venugopal, learned senior counsel appearing for the
State of Kerala and Shri V. Shekhar, learned senior counsel for Union
of India submitted that the word “made” in Article 254 is
relevant only to identify the law, i.e., the Parliamentary law or the
State law and has nothing to do with the point of time for
determination of repugnance. According to the learned counsel, a
decision by a Court, on the question as to whether any State Act is
repugnant to a Central Act, can be made only after both laws have been
brought into force for the simple reason that the very object of
determination of repugnance between two laws, by a Court, is to decide
and declare as to which one of the two laws has to be obeyed or in the
language of Article 254, which of the two laws “shall prevail”.
Therefore, according to the learned counsel, the very text of Article
254 makes it clear that a declaration of repugnance by a Court
presupposes both laws actually being in operation. That, though the
term employed in Article 254(2) is “a law made by the Legislature of a
State”, it actually refers to a stage when the law is still a Bill
passed by the State legislature which under Article 200 is given to
the Governor for his assent. According to the learned counsel, the
phrase “law made” would also include a law which is brought in force.
In this connection, it was submitted that if a petition is filed
before a Court to declare a State law void, as being repugnant to
Parliamentary law which has not been brought in force, the court would
reject the petition as premature as repugnancy cannot arise when the
Parliamentary law has not even been brought in force. In this
connection, learned counsel relied upon the judgment of this Court in
Tika Ramji v. State of U.P. [1956 SCR 393] in which there is an
observation to the effect that repugnance must exist in fact and not
depend on a mere possibility. According to the learned counsel there
is no merit in the contention advanced on behalf of private chit firms
that upon mere enactment by the Parliament of a law relating to a
subject in List III, all State enactments on that subject become
immediately void, as repugnant. Further, learned counsel emphasized
on the words “to the extent of the repugnancy” in Article 254(1). He
submitted that the said words have to be given a meaning. Learned
counsel submitted that the said words indicate that the entire State
Act is not rendered void under Article 254(1) merely by enactment of a
Central law. In this connection, it was submitted that the words “if
any provision of a law” and the words “to the extent of repugnancy”
used in Article 254(1) militate against an interpretation that the
entire State Act is rendered void as repugnant merely upon enactment
by Parliament of a law on the same subject. Lastly, learned counsel
submitted that a purposive interpretation of Article 254 must be
adopted which does not lead to a legislative vacuum. In this
connection learned counsel submitted that the State law came into
force w.e.f. 25.08.1975 as per notification published in Kerala
Gazette No. 480 whereas the Chit Funds Act, 1982 came into force
w.e.f. 19.08.1982. Under Section 1(3) of that Act, the Central
Government has been empowered to bring the said Act into force on such
date as it may, by notification in the official gazette, appoint and
different dates may be appointed for different States. Till date, the
said 1982 Act has not been extended to the State of Kerala. According
to the learned counsel, if one was to accept the contention advanced
on behalf of the private chit firms that “when a Central law is made
as envisaged in Article 254 of the Constitution then all repugnant
State laws would immediately stand impliedly repealed, even without
the Central Act being brought into force by a notification under
Section 1(3) of the 1982 Act”; then, in that event, there would be a
total legislative vacuum particularly when transactions have taken
place in the State of Kerala on and from 19.08.1982 till date and even
up to the date of notification which has not been issued under Section
1(3) till today. According to the learned counsel, keeping in view
the provisions of Sections 1(3), 4, 89 and 90 of the 1982 Act and
absent framing of the Rules by the State Government in terms of
Section 89, making of the central law cannot be the test for
determining repugnancy.
14. On behalf of the private chitty firms, it was submitted by Shri
T.R. Andhyarujina, Shri Shyam Divan, Shri Mathai M. Paikeday and Shri
C.U. Singh, that the bringing into force or commencement of the
Central Act was irrelevant in considering repugnancy under Article
254(1), and that the repugnancy arose when the State law came into
conflict with the enactment of the Central law, even when the Central
law is not brought into force in the State of Kerala. That, under
Article 254(1), the repugnancy of the State law to the law made by the
Parliament is to be considered with reference to the law made. The
words “law made” have reference to the enactment of the law. In this
connection, it was pointed out that the words “law made” have been
used at seven places but there is no mention to the commencement of a
law in Article 254. Thus, according to the learned counsel,
repugnancy arose when the Central Chit Funds Act, 1982 received the
assent of the President and on its publication in the Official Gazette
and not on its commencement, which till date is not there in the State
of Kerala. In consequence, the Kerala Chitties Act, 1975 became void
on 19.08.1982 when the Central Chit Funds Act, 1982 was made after
receiving the assent of the President. On the question as to whether
the Kerala Chitties Act, 1975 is repugnant to the Central Chit Funds
Act, 1982 and whether Section 4(1a) inserted by Finance Act No. 7 of
2002 was void, the learned counsel submitted that the Central Act,
1982 intended to occupy the entire field of contracts in Entry 7 of
the Concurrent List; that, both the legislations are made under Entry
7 of the Concurrent List and, therefore, in such a situation there
would be repugnancy between the State legislation existing at the time
of the enactment of the Central Act, 1982. Applying these tests, it
was submitted that the Kerala Chitties Act, 1975 became void under
Article 254(1) on the enactment of the Central Chit Funds Act, 1982.
That, in consequence of the said repugnancy, the Kerala Chitties Act,
1975 became void under Article 254(1) on 19.08.1982 and the Kerala
Chitties Act, 1975 stood impliedly repealed. However, according to
the learned counsel, the previous operation of the Kerala Chitties
Act, 1975 is not affected nor any right, privilege, obligation or
liability acquired under the Kerala Chitties Act shall stand affected
in view of Article 367 of the Constitution. By reason of Article 367,
the General Clauses Act, 1897 would apply to the said repeal. Thus,
after 19.08.1982, the Kerala Chitties Act, 1975 stood repealed except
for the limited purposes of Section 6 of the General Clauses Act,
1897. According to the learned counsel for the private chitties, to
bring the Central Chit Funds Act, 1982 into operation in any State the
Central Government has to issue a notification in the Official Gazette
under Section 1(3). This has been done for several States but not for
States like Kerala, Gujarat, etc. That, until such notification
neither the Kerala Chitties Act, 1975 prevails in the State of Kerala
as it has become void and stands repealed under Article 254(1) nor the
Central Chit Funds Act, 1982 as it is not notified. Thus, according
to the learned counsel, as and when the Central Government brings into
force the Chit Funds Act, 1982 by a notification in the State of
Kerala under Section 1(3), Section 90(2) of the 1982 Act will come
into play and thereby the Kerala Chitties Act, 1975 shall continue to
apply only to the chits in operation in Kerala on the date of
commencement of the Central Act, 1982 in the same manner as the Kerala
Chitties Act, 1975 applied to such chits before such commencement.
However, as the Kerala Act, 1975 stood repealed on 19.08.1982, on the
enactment of the Central Chit Funds Act, 1982, there could be no
Amendment of the Kerala Act, 1975 by Finance Act No. 7 of 2002. In the
circumstances, it was submitted that Section 4(1a) inserted in Section
4 by the Kerala Finance Act No. 7 of 2002 was void and inoperative in
law as the President’s assent under Article 254(2) has not been
obtained.
15. According to Shri V. Giri, learned counsel for one of the
private chitty firms, the judgment of this Court in Pt. Rishikesh
(supra) has been correctly decided. In this connection, it was
submitted that the aspect of repugnancy primarily arises in the mind
of the Legislature. That, in the case of Deep Chand v. State of
U.P. (1959 Suppl. (2) SCR 8), three principles were laid down as
indicative of repugnancy between a State law and a Central law, which
have to be borne in mind by the State Legislature whenever it seeks to
enact a law under any entry in the Concurrent List. Thus, where there
is a Central law which intends to override a State law or where there
is a Central law intending to occupy the field hitherto occupied by
the State law or where the Central law collides with the State law in
actual terms, then the State Legislature would have to take into
account the possibility of repugnancy within the meaning of Article
254 of the Constitution. In this connection, it was submitted that
tests 1 and 2 enumerated in Deep Chand (supra) do not require the
Central law to be actually brought into force for repugnancy between
two competing legislations to arise, in the context of Article 254 of
the Constitution. It was submitted that in the present case an
intention to override the State law is clearly manifest in the Central
Law, especially Section 3 of the Central Act which makes it clear that
the provisions of the 1982 Act shall have effect notwithstanding
anything contrary contained in any other law for the time being in
force. Similarly, Section 90 of the Central Act providing for repeal
of State Legislations also manifests an intention on the part of the
Parliament to occupy the entire field hitherto occupied by the State
Legislature. Further, each and every aspect relating to the conduct of
a Chit as sought to be covered by the State Act has been touched upon
by the Central Act. Thus, the Parliament in enacting the Central law
has manifested its intention not only to override the existing State
laws, but also to occupy the entire field relating to chits, which are
special contracts, under Entry 7 of List III. Thus, the actual
bringing into force of the Central Act is not a relevant circumstance
insofar as the legislative business of the State Legislature is
concerned. That, when the State of Kerala intended to amend the State
Act in 2002 by insertion of Section 4(1a), it was bound to keep in
mind the fact that there is already a Central law governing chits
since 19.08.1982, though not in force in Kerala, whereby there is a
pro tanto repeal of the State Act. Therefore, the State Legislature
ought to have followed the procedure in Article 254(2) by reserving
the law for the consideration of the President and obtained
Presidential assent. Therefore, according to the learned counsel,
there is no merit in the contention of the State that there would be a
legislative vacuum in the State of Kerala if the propositions advanced
on behalf of the private chit firms are to be accepted. According to
the learned counsel, Section 85(a) and Section 90(2) of the Central
Chit Funds Act, 1982 inter alia provide for continuance of the
application of the provisions of the Kerala Chitties Act, 1975 till
the commencement of the Central Act by issuance of notification under
Section 1(3) of the Central Chit Funds Act, 1982. On commencement of
that Act there is a pro tanto repeal of the State Act by Section 90 of
the Central Act. However, according to the learned counsel,
repugnancy arose between two competing legislations, the moment the
Legislature took up the Kerala Chitties Act, 1975 for amendment by
Finance Act No. 7 of 2002. Such repugnancy had to arise in the mind of
the legislature and the State Legislature was bound to take note of
the 1982 Central Act. In this view of the matter, there is no
legislative vacuum at any point of time as urged on behalf of the
State of Kerala. To hold otherwise would mean bypassing the
legislative will of the Parliament expressed by passing the 1982 Act.
Our Answer to Question No. (i):- Point of time for determination of
repugnance:
16. Article 254 deals with inconsistency between laws made by
Parliament and laws made by the Legislatures of States. It finds
place in Part XI of the Constitution. Part XI deals with relations
between the Union and the States. Part XI consists of two Chapters.
Chapter I deals with Distribution of Legislative Powers. Articles 245
to 255 find place in Chapter I of Part XI. Article 245 deals with
extent of laws made by Parliament and by the Legislatures of States.
The verb “made”, in past tense, finds place in the Head Note to
Article 245. The verb “make”, in the present tense, exists in Article
245(1) whereas the verb “made”, in the past tense, finds place in
Article 245 (2). While the legislative power is derived from Article
245, the entries in the Seventh Schedule of the Constitution only
demarcate the legislative fields of the respective Legislatures and do
not confer legislative power as such. While the Parliament has power
to make laws for the whole or any part of the territory of India, the
Legislature of a State can make laws only for the State or part
thereof. Thus, Article 245, inter alia, indicates the extent of laws
made by Parliament and by the State Legislatures. Article 246 deals
with subject-matter of laws made by Parliament and by the Legislatures
of States. The verb “made” once again finds place in the Head Note to
Article 246. This Article deals with distribution of legislative
powers as between the Union and the State Legislatures, with reference
to the different Lists in the Seventh Schedule. In short, the
Parliament has full and exclusive powers to legislate with respect to
matters in List I and has also power to legislate with respect to
matters in List III, whereas the State Legislatures, on the other
hand, have exclusive power to legislate with respect to matters in
List II, minus matters falling in List I and List III and have
concurrent power with respect to matters in List III. [See:
A.L.S.P.P.L. Subrahmanyan Chettiar v. Muttuswami Goundan – AIR 1941
F.C. 47]. Article 246, thus, provides for distribution, as between
Union and the States, of the legislative powers which are conferred by
Article 245. Article 245 begins with the expression “subject to the
provisions of this Constitution”. Therefore, Article 246 must be read
as “subject to other provisions of the Constitution”. For the
purposes of this decision, the point which needs to be emphasized is
that Article 245 deals with conferment of legislative powers whereas
Article 246 provides for distribution of the legislative powers.
Article 245 deals with extent of laws whereas Article 246 deals with
distribution of legislative powers. In these Articles, the
Constitution framers have used the word “make” and not “commencement”
which has a specific legal connotation. [See: Section 2(13) of the
General Clauses Act, 1897]. One more aspect needs to be highlighted.
Article 246(1) begins with a non-obstante clause “Notwithstanding
anything in clauses (2) and (3)”. These words indicate the principle
of federal supremacy, namely, in case of inevitable conflict between
the Union and State powers, the Union powers, as enumerated in List I,
shall prevail over the State powers, as enumerated in Lists II and
III, and in case of overlapping between Lists III and II, the former
shall prevail. [See: Indu Bhusan Bose versus Rama Sundari Devi & Anr.
– (1970) 1 SCR 443 at 454]. However, the principle of federal
supremacy in Article 246(1) cannot be resorted to unless there is an
“irreconcilable” conflict between the entries in Union and State
Lists. The said conflict has to be a “real” conflict. The non-
obstante clause in Article 246(1) operates only if reconciliation is
impossible. As stated, Parliamentary Legislation has supremacy as
provided in Article 246 (1) and (2). This is of relevance when the
field of legislation is in the Concurrent List. The Union and the
State Legislatures have concurrent power with respect to the subjects
enumerated in List III. [See: Article 246(2)]. Hence, the State
Legislature has full power to legislate regarding subjects in the
Concurrent List, subject to Article 254(2), i.e., provided the
provisions of the State Act do not come in conflict with those of the
Central Act on the subject. [See: Amalgamated Electricity Co.
(Belgaum) Ltd. versus Municipal Committee, Ajmer – (1969) 1 SCR 430].
Thus, the expression “subject to” in clauses (2) and (3) of Article
246 denotes supremacy of Parliament. Further, in Article 246(1) the
expression used is “with respect to”. There is a distinction between
a law “with respect to”, and a law “affecting”, a subject matter. The
opening words of Article 245 “Subject to the provisions of this
Constitution” make the legislative power conferred by Article 245 and
Article 246, as well as the legislative Lists, “subject to the
provisions of the Constitution”. Consequently, laws made by a
Legislature may be void not only for lack of legislative powers in
respect of the subject-matter, but also for transgressing
constitutional limitations. [See: Para 22.6 of Vol.3 at Page 2305 of
the Constitutional Law of India by H.M. Seervai, Fourth Edition].
This aspect is important as the word “void” finds place in Article
254(1) of the Constitution. Therefore, the Union and State
Legislature have concurrent power with respect to subjects enumerated
in List III. Hence, the State Legislature has full power to legislate
regarding the subjects in List III, subject to the provision in
Article 254(2), i.e., provided the provisions of the State Act do not
conflict with those of the Central Act on the subject. Where the
Parliament has made no law occupying the field in List III, the State
Legislature is competent to legislate in that field. As stated, the
expression “subject to” in clauses (2) and (3) of Article 246 denotes
the supremacy of the Parliament. Thus, the Parliament and the State
Legislature derive the power to legislate on a subject in List I and
List II from Article 246 (1) and (3) respectively. Both derive their
power from Article 246(2) to legislate upon a matter in List III
subject to Article 254 of the Constitution. The respective Lists
merely demarcate the legislative fields or legislative heads.
Further, Article 250 and Article 251 also use the word “make” and not
“commencement”. If one reads the Head Note to Article 250 it refers
to power of the Parliament to legislate with respect to any matter in
the State List if a Proclamation of Emergency is in operation. The
word “made” also finds place in Article 250(2). In other words, the
verb “make” or the verb “made” is equivalent to the expression “to
legislate”. Thus, making of the law is to legislate with respect to
any matter in the State List if Proclamation of Emergency is in
operation. The importance of this discussion is to show that the
Constitution framers have deliberately used the word “made” or “make”
in the above Articles. Our Constitution gives supremacy to the
Parliament in the matter of making of the laws or legislating with
respect to matters delineated in the three Lists. The principle of
supremacy of the Parliament, the distribution of legislative powers,
the principle of exhaustive enumeration of matters in the three Lists
are all to be seen in the context of making of laws and not in the
context of commencement of the laws.
17. Under clause (1) of Article 254, a general rule is laid down to
say that the Union law shall prevail where the State law is repugnant
to it. The question of repugnancy arises only with respect to the
subjects enumerated in the Concurrent List as both the Parliament and
the State Legislatures have concurrent powers to legislate over the
subject-matter in that List. In such cases, at times, conflict
arises. Clause (1) of Article 254 states that if a State law,
relating to a concurrent subject, is “repugnant” to a Union law,
relating to that subject, then, whether the Union law is prior or
later in time, the Union law will prevail and the State law shall, to
the extent of such repugnancy, be void. Thus, Article 254(1) also
gives supremacy to the law made by Parliament, which Parliament is
competent to enact. In case of repugnancy, the State Legislation
would be void only to the extent of repugnancy. If there is no
repugnancy between the two laws, there is no question of application
of Article 254(1) and both the Acts would prevail. Thus, Article 254
is attracted only when Legislations covering the same matter in List
III made by the Centre and by the State operate on that subject; both
of them (Parliament and the State Legislatures) being competent to
enact laws with respect to the subject in List III. In the present
case, Entry 7 of List III in the Seventh Schedule deals with the
subject of “Contracts”. It also covers special contracts. Chitties
are special contracts. Thus, the Parliament and the State
Legislatures are competent to enact a law with respect to such
contracts. The question of repugnancy between the Parliamentary
Legislation and State Legislation arises in two ways. First, where
the Legislations, though enacted with respect to matters in their
allotted spheres, overlap and conflict. Second, where the two
Legislations are with respect to matters in the Concurrent List and
there is a conflict. In both the situations, the Parliamentary
Legislation will predominate, in the first, by virtue of non-obstante
clause in Article 246(1); in the second, by reason of Article 254(1).
Article 254(2) deals with a situation where the State Legislation
having been reserved and having obtained President’s assent, prevails
in that State; this again is subject to the proviso that Parliament
can again bring a legislation to override even such State Legislation.
In clause (1) of Article 254 the significant words used are
“provision of a law made by the Legislature of a State”, “any
provision of a law made by Parliament which Parliament is competent to
enact”, “the law made by Parliament, whether passed before or after
the law made by the Legislature of such State”, and “the law made by
the Legislature of the State shall, to the extent of repugnancy, be
void”. Again, clause (2) of Article 254 speaks of “a law made by the
Legislature of a State”, “an earlier law made by Parliament”, and “the
law so made by the Legislature of such State”. Thus, it is noticeable
that throughout Article 254 the emphasis is on law-making by the
respective Legislatures. Broadly speaking, law-making is exclusively
the function of the Legislatures (see Articles 79 and 168). The
President and the Governor are a part of the Union or the Legislatures
of the States. As far as the Parliament is concerned, the legislative
process is complete as soon as the procedure prescribed by Article 107
of the Constitution and connected provisions are followed and the Bill
passed by both the Houses of Parliament has received the assent of the
President under Article 111. Similarly, a State legislation becomes
an Act as soon as a Bill has been passed by the State Legislature and
it has received the assent of the Governor in accordance with Article
200. It is only in the situation contemplated by Article 254(2) that
a State Legislation is required to be reserved for consideration and
assent by the President. Thus, irrespective of the date of
enforcement of a Parliamentary or State enactment, a Bill becomes an
Act and comes on the Statute Book immediately on receiving the assent
of the President or the Governor, as the case may be, which assent has
got to be published in the official gazette. The Legislature, in
exercise of its legislative power, may either enforce an Act, which
has been passed and which has received the assent of the President or
the Governor, as the case may be, from a specified date or leave it to
some designated authority to fix a date for its enforcement. Such
legislations are conditional legislations as in such cases no part of
the legislative function is left unexercised. In such legislations,
merely because the Legislature has postponed the enforcement of the
Act, it does not mean that the law has not been made. In the present
case, the Central Chit Funds Act, 1982 is a law-made. The Chit Funds
Bill was passed by both Houses of Parliament and received the assent
of the President on 19.08.1982. It came on the Statute Book as the
Chit Funds Act, 1982 (40 of 1982). Section 1(2) of the said Act
states that the Act extends to the whole of India, except the State of
Jammu and Kashmir whereas Section 1(3) states that it shall come into
force on such date as the Central Government may, by notification in
the Official Gazette, appoint and different dates may be appointed for
different States. The point to be noted is that the law-making
process ended on 19.08.1982. Section 1(3) is a piece of conditional
legislation. As stated, in legislations of such character, merely
because the legislation has postponed the enforcement of the Act, it
does not mean that the law has not been made. In the present case,
after enactment of the Chit Funds Act, 1982 on 19.08.1982, the said
Act has been applied to 17 States by notifications issued from time to
time under Section 1(3). How could Section 1(3) operate and make the
said Act applicable to 17 States between 2.04.1984 and 15.09.2008 and/
or postpone the commencement of the Act for certain other States
including State of Kerala, Gujarat, Haryana, etc. unless that Section
itself is in force? To put the matter in another way, if the entire
Act including Section 1(3) was not in operation on 19.08.1982, how
could the Central Government issue any notification under that very
Section in respect of 17 States? There must be a law authorizing the
Government to bring the Act into force. Thus, Section 1(3) came into
force immediately on passing of the Act (see A. Thangal Kunju Musaliar
v. M. Venkatachalam Potti AIR 1956 SC 246). Thus, the material dates,
in our opinion, are the dates when the two enactments received the
assent of the President which in the case of Central Act is 19.08.1982
while in the case of the Kerala Chitties Act, 1975, it is 18.07.1975.
There is one more way in which this problem can be approached. Both
the courts below have proceeded on the basis that there are
conflicting provisions in the Central Act, 1982 vis-à-vis the State
Act, 1975 (see paragraphs 13, 14 & 15 of the impugned judgment). In
our view, the intention of the Parliament was clearly to occupy the
entire field falling in Entry 7 of List III. The 1982 Act was enacted
as a Central Legislation to “ensure uniformity in the provisions
applicable to chit fund institutions throughout the country as such a
Central Legislation would prevent such institutions from taking
advantage either of the absence of any law governing chit funds in a
State or exploit the benefit of any lacuna or relaxation in any State
law by extending their activities in such States”. The background of
the enactment of the Central Chit Funds Act, which refers to the
Report of the Banking Commission has been exhaustively dealt with in
the case of Shriram Chits and Investment (P) Ltd. v. Union of India
[(1993) Supp 4 SCC 226] as also in the Statement of Objects and
Reasons of the 1982 Act. The clear intention of enacting the Central
1982 Act, therefore, was to make the Central Act a complete code with
regard to the business of conducting chit funds and to occupy the
legislative field relating to such chit funds. Moreover, the
intention to override the State laws is clearly manifested in the
Central Act, especially Section 3 which makes it clear that the
provisions of the Central Act shall have effect notwithstanding
anything to the contrary contained in any other law for the time being
in force. Similarly, Section 90 of the Central Act providing for the
repeal of State legislations also manifests the intention on the part
of the Parliament to occupy the field hitherto occupied by State
Legislation. Each and every aspect relating to the conduct of the
chits as is covered by the State Act has been touched upon by the
Central Act in a more comprehensive manner. Thus, on 19.08.1982, the
Parliament in enacting the Central law has manifested its intention
not only to override the existing State Laws, but to occupy the entire
field relating to Chits, which is a special contract, coming under
Entry 7 of List III. Consequently, the State Legislature was divested
of its legislative power/ authority to enact Section 4(1a) vide
Finance Act No. 7 of 2002 on 29.07.2002, save and except under Article
254(2) of the Constitution. Thus, Section 4(1a) became void for want
of assent of the President under Article 254(2). Let us assume for
the sake of argument that the State of Kerala were to obtain the
assent of the President under Article 254(2) of the Constitution in
respect of the insertion of Section 4(1a) by Finance Act No. 7 of
2002. Now, Article 254(2) deals with the situation where State
Legislation is reserved and having obtained the President’s assent,
prevails in the State over the Central Law. However, in view of the
proviso to Article 254(2), the Parliament could have brought a
legislation even to override such assented to State Finance Act No. 7
of 2002 without waiting for the Finance Act No. 7 of 2002 to be
brought into force as the said proviso states that nothing in Article
254(2) shall prevent 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 State Legislature)
[emphasis supplied]. Thus, Parliament in the matter of enacting such
an overriding law need not wait for the earlier State Finance Act No.
7 of 2002 to be brought into force. In other words, Parliament has
the power under the said proviso to override the Finance Act No. 7 of
2002 even before it is brought into force. Therefore, we see no
justification for construing Article 254(2) read with the proviso in a
manner which inhibits the Parliament from repealing, amending, or
varying a State Legislation which has received the President’s assent
under Article 254(2), till that State Legislation is brought into
force. We have to read the word “made” in the proviso to Article
254(2) in a consistent manner. The entire above discussion on
Articles 245, 246, 250, 251 is only to indicate that the word “made”
has to be read in the context of law-making process and, if so read,
it is clear that to test repugnancy one has to go by the making of law
and not by its commencement.
Case Law
18(i) In T. Barai v. Henry Ah Hoe reported in (1983) 1 SCC 177, this
Court has laid down the following principles on repugnancy.
“15. There is no doubt or difficulty as to the law applicable.
Article 254 of the Constitution makes provision firstly, as to
what would happen in the case of conflict between a Central and
State law with regard to the subjects enumerated in the
Concurrent List, and secondly, for resolving such conflict.
Article 254(1) enunciates the normal rule that in the event of a
conflict between a Union and a State law in the concurrent
field, the former prevails over the latter. Clause (1) lays down
that if a State law relating to a concurrent subject is
“repugnant” to a Union law relating to that subject, then,
whether the Union law is prior or later in time, the Union law
will prevail and the State law shall, to the extent of such
repugnancy, be void. To the general rule laid down in Clause
(1), Clause (2) engrafts an exception viz. that if the President
assents to a State law which has been reserved for his
consideration, it will prevail notwithstanding its repugnancy to
an earlier law of the Union, both laws dealing with a concurrent
subject. In such a case, the Central Act will give way to the
State Act only to the extent of inconsistency between the two,
and no more. In short, the result of obtaining the assent of the
President to a State Act which is inconsistent with a previous
Union law relating to a concurrent subject would be that the
State Act will prevail in that State and override the provisions
of the Central Act in their applicability to that State only.
The predominance of the State law may however be taken away if
Parliament legislates under the proviso to Clause (2). The
proviso to Article 254(2) empowers the Union Parliament to
repeal or amend a repugnant State law even though it has become
valid by virtue of the President's assent. Parliament may repeal
or amend the repugnant State law, either directly, or by itself
enacting a law repugnant to the State law with respect to the
“same matter”. Even though the subsequent law made by Parliament
does not expressly repeal a State law, even then, the State law
will become void as soon as the subsequent law of Parliament
creating repugnancy is made. A State law would be repugnant to
the Union law when there is direct conflict between the two
laws. Such repugnancy may also arise where both laws operate in
the same field and the two cannot possibly stand together, e.g.,
where both prescribe punishment for the same offence but the
punishment differs in degree or kind or in the procedure
prescribed. In all such cases, the law made by Parliament shall
prevail over the State law under Article 254(1).”
(ii) In I.T.C. Limited v. State of Karnataka reported in 1985 Supp.
SCC 476, this Court vide para 18 stated as under.
“18. Thus, in my opinion, the five principles have to be read
and construed together and not in isolation — where however, the
Central and the State legislation cover the same field then the
Central legislation would prevail. It is also well settled that
where two Acts, one passed by the Parliament and the other by a
State Legislature, collide and there is no question of
harmonising them, then the Central legislation must prevail.”
(iii) In the case of M. Karunanidhi v. Union of India (1979) 3 SCC
431, the test for determining repugnancy has been laid down by the
Supreme Court as under.
“8. It would be seen that so far as clause (1) of Article 254 is
concerned it clearly lays down that where there is a direct
collision between a provision of a law made by the State and
that made by Parliament with respect to one of the matters
enumerated in the Concurrent List, then, subject to the
provisions of clause (2), the State law would be void to the
extent of the repugnancy. This naturally means that where both
the State and Parliament occupy the field contemplated by the
Concurrent List then the Act passed by Parliament being prior in
point of time will prevail and consequently the State Act will
have to yield to the Central Act. In fact, the scheme of the
Constitution is a scientific and equitable distribution of
legislative powers between Parliament and the State
Legislatures. First, regarding the matters contained in List I,
i.e. the Union List to the Seventh Schedule, Parliament alone is
empowered to legislate and the State Legislatures have no
authority to make any law in respect of the Entries contained in
List I. Secondly, so far as the Concurrent List is concerned,
both Parliament and the State Legislatures are entitled to
legislate in regard to any of the Entries appearing therein, but
that is subject to the condition laid down by Article 254(1)
discussed above. Thirdly, so far as the matters in List II, i.e.
the State List are concerned, the State Legislatures alone are
competent to legislate on them and only under certain conditions
Parliament can do so. It is, therefore, obvious that in such
matters repugnancy may result from the following circumstances:
1. Where the provisions of a Central Act and a State Act
in the Concurrent List are fully inconsistent and are
absolutely irreconcilable, the Central Act will prevail and
the State Act will become void in view of the repugnancy.
2. Where however a law passed by the State comes into
collision with a law passed by Parliament on an Entry in
the Concurrent List, the State Act shall prevail to the
extent of the repugnancy and the provisions of the Central
Act would become void provided the State Act has been
passed in accordance with clause (2) of Article 254.
3. Where a law passed by the State Legislature while
being substantially within the scope of the entries in the
State List entrenches upon any of the Entries in the
Central List the constitutionality of the law may be upheld
by invoking the doctrine of pith and substance if on an
analysis of the provisions of the Act it appears that by
and large the law falls within the four corners of the
State List and entrenchment, if any, is purely incidental
or inconsequential.
4. Where, however, a law made by the State Legislature
on a subject covered by the Concurrent List is inconsistent
with and repugnant to a previous law made by Parliament,
then such a law can be protected by obtaining the assent of
the President under Article 254(2) of the Constitution. The
result of obtaining the assent of the President would be
that so far as the State Act is concerned, it will prevail
in the State and overrule the provisions of the Central Act
in their applicability to the State only. Such a state of
affairs will exist only until Parliament may at any time
make a law adding to, or amending, varying or repealing the
law made by the State Legislature under the proviso to
Article 254.
So far as the present State Act is concerned we are called upon
to consider the various shades of the constitutional validity of
the same under Article 254(2) of the Constitution.
*** *** ***
24. It is well settled that the presumption is always in favour
of the constitutionality of a statute and the onus lies on the
person assailing the Act to prove that it is unconstitutional.
Prima facie, there does not appear to us to be any inconsistency
between the State Act and the Central Acts. Before any
repugnancy can arise, the following conditions must be
satisfied:
1. That there is a clear and direct inconsistency
between the Central Act and the State Act.
2. That such an inconsistency is absolutely
irreconcilable.
3. That the inconsistency between the provisions of the
two Acts is of such nature as to bring the two Acts into
direct collision with each other and a situation is reached
where it is impossible to obey the one without disobeying
the other.
25. In Colin Howard's Australian Federal Constitutional Law, 2nd
Edn. the author while describing the nature of inconsistency
between the two enactments observed as follows:
“An obvious inconsistency arises when the two enactments
produce different legal results when applied to the same
facts.”
*** *** ***
35. On a careful consideration, therefore, of the authorities
referred to above, the following propositions emerge:
1. That in order to decide the question of repugnancy it must
be shown that the two enactments contain inconsistent and
irreconcilable provisions, so that they cannot stand together or
operate in the same field.
2. That there can be no repeal by implication unless the
inconsistency appears on the face of the two statutes.
3. That where the two statutes occupy a particular field, but
there is room or possibility of both the statutes operating in
the same field without coming into collision with each other, no
repugnancy results.
4. That where there is no inconsistency but a statute
occupying the same field seeks to create distinct and separate
offences, no question of repugnancy arises and both the statutes
continue to operate in the same field.”
Applying the above tests to the facts of the present case, on
the enactment of the Central Chit Funds Act 1982 on 19.08.1982,
intending to occupy the entire field of Chits under Entry 7 of List
III, the State Legislature was denuded of its power to enact the
Finance Act No. 7 of 2002. However, as held in numerous decisions of
this Court, a law enacted by the State legislature on a topic in the
Concurrent List which is inconsistent with and repugnant to the law
made by the Parliament can be protected by obtaining the assent of the
President under Article 254(2) and that the said assent would enable
the State law to prevail in the State and override the provisions of
the Central Act in its applicability to that State only. Thus, when
the State of Kerala intended to amend the State Act in 2002, it was
bound to keep in mind the fact that there is already a Central law on
the same subject, made by Parliament in 1982, though not in force in
Kerala, whereunder there is a pro tanto repeal of the State Act.
Therefore, the State legislature ought to have followed the procedure
in Article 254(2) and ought to have obtained the assent of the
President.
(iv) In Tika Ramji (supra), the facts were as follows:- The State
Legislature enacted the U.P. Sugarcane (Regulation of Supply and
Purchase) Act, 1953 which empowered the State Government to issue
notifications, which were in fact issued on 27.09.1954 and 9.11.1955
regulating supply and purchase of sugarcane. It was inter alia
contended that the U.P. Sugarcane (Regulation of Supply and Purchase)
Act, 1953, being the State Act was repugnant to Act LXV of 1951
enacted by the Parliament which empowered the Central Government vide
Section 18G to issue an order regulating distribution of finished
articles at fair prices relatable to the scheduled industry. The
question that arose for determination was whether “sugar” was an item
covered by the Central Act No. LXV of 1951 and, if so, whether the
State Act was void being repugnant to the Central Law. This Court
held that the whole object of the Central Act (LXV of 1951) was to
regulate distribution of manufactured/finished articles at fair prices
and not to legislate in regard to the raw material (sugarcane). This
Court further held that Section 18G of the Central Act No. LXV of 1951
did not cover “sugarcane”; Section 18G of the Central Act No. LXV of
1951 only dealt with the finished products manufactured by scheduled
industries, and, hence, there was no repugnancy. In the said
judgment, this Court also referred to three tests of inconsistency or
repugnancy enumerated by Nicholas in his commentary on Australian
Constitution, 2nd Edition, Page 303. In the said judgment, this
Court also relied upon the ratio of the judgment in the case of Clyde
Engineering Co. Ltd. v. Cowburn [1926] 37 C.L.R. 466, in which Isaacs,
J. laid down one test of inconsistency as conclusive: “If, a competent
legislature expressly or implicitly evinces its intention to cover the
whole field, that is a conclusive test of inconsistency where another
Legislature assumes to enter to any extent upon the same field.”
Applying these tests, this Court held that there was no repugnancy as
“sugarcane” was dealt with by the impugned State Act whereas the
Central Act dealt with supply and distribution of manufactured
articles at fair prices and, therefore, there was no question of any
inconsistency in the actual terms of the Acts enacted by Parliament
and the State. The only question that arose was whether Parliament
and the State Legislature sought to exercise their powers over the
same subject matter or whether the laws enacted by Parliament were
intended to be a complete exhaustive code or whether such Acts evinced
an intention to cover the whole field. This Court held that as
“sugarcane” was not the subject-matter of the Central Act, there was
no intention to cover the whole field and, consequently, both the Acts
could co-exist without repugnancy. Having come to the conclusion that
there was no repugnancy, the Court observed that, “Even assuming that
sugarcane was an article relatable to the sugar industry as a final
product within the meaning of Section 18G of Central Act No. LXV of
1951, it is to be noted that no order was issued by the Central
Government in exercise of the powers vested in it under that Section
and no question of repugnancy could arise because repugnancy must
exist in fact and not depend merely on a possibility. The possibility
of an order under Section 18G being issued by the Central Government
would not be enough. The existence of such an order was an essential
pre-requisite before repugnancy could arise.” This sentence has been
relied upon by learned counsel for the State of Kerala in the present
case in support of his submission that repugnancy must exist in fact
and not depend on a mere possibility. According to the learned
counsel, in the present case, applying the ratio of the judgment in
the case of Tika Ramji (supra), it is clear that the repugnancy has
not arisen in the present case before us for the simple reason that
the Central Chit Funds Act, 1982 has not come into force in the State
of Kerala. That, a mere possibility of the Central Act coming into
force in future in the State of Kerala would not give rise to
repugnancy.
(v) In the case of State of Orissa v. M.A. Tulloch and Co. reported
in (1964) 4 SCR 461, the facts were as follows:- On a lease being
granted by State of Orissa under Mines and Minerals (Development and
Regulation) Act 1948 (Central Act), Tulloch and Company started
working a manganese mine. The State of Orissa passed Orissa Mining
Areas Development Fund Act, 1952 under which the State Government was
authorized to levy a fee for development of “mining areas” in the
State. After bringing these provisions into operation, State of
Orissa demanded from Tulloch and Company on August 1, 1960 fees for
the period July, 1957 to March, 1958. Tulloch and Company challenged
the legality of the demand before the High Court under Article 226 of
the Constitution. The writ petition was allowed on the ground that on
the coming into force of the Mines and Minerals (Regulation and
Development) Act of 1957, hereinafter called the “Central Act of
1957”, which was brought into force from 1st June, 1953 the Orissa
Mining Areas Development Fund Act 1952 should be deemed to be non-
existent. This was the controversy which came before this Court. One
of the points which arose for determination was that of repugnancy.
It was urged that the object and purpose of Orissa Mining Areas
Development Fund Act, 1952 was distinct and different from the object
and purpose of the Central Act of 1957, with the result that both the
enactments could validly co-exist since they did not cover the same
field. This argument was rejected by this Court. It was held that
having regard to the terms of Section 18(1) the intention of
Parliament was to cover the entire field. That, by reason of
declaration by Parliament under the said Section the entire subject
matter of conservation and development of minerals was taken over for
being dealt with by Parliament thus depriving the State of the power
hitherto possessed. Relying on the judgment of the Constitution Bench
of this Court in the case of Hingir-Rampur Coal Co. v. State of Orissa
(1961) 2 SCR 537, it was held in Tulloch’s case that for the
declaration to be effective it is not necessary that the rules should
be made or enforced; all that was required was a declaration by
Parliament to the effect that in public interest regulation and
development of the mines should come under the control of the Union.
In such a case the test must be whether the legislative declaration
covers the field or not. Applying the said test, in Tulloch’s case,
the Constitution Bench held that the Central Act of 1957 intended to
cover the entire field dealing with regulation and development of
mines being under the control of the Central Government. In Tulloch’s
case, reliance was placed on the above underlined portion in Tika
Ramji’s case (supra) which, as stated above, was on the assumption
that sugarcane was an article relatable to sugar industry within
Section 18G of the Central Act No. LXV of 1951. It was urged on
behalf of the State of Orissa in Tulloch’s case that Section 18(1) of
the Central Act of 1957 merely imposes a duty on the Central
Government to take steps for ensuring conservation and development of
mineral resources. That, since the Central Government had not framed
Rules under the Act for development of mining areas till such Rules
were framed, the Central Act of 1957 did not cover the entire field,
and, thus, the Orissa Mining Areas Development Fund Act, 1952
continued to operate in full force till the Central Government enacted
Rules under Section 18 of the 1957 Act. The said contention of the
State of Orissa was rejected by the Constitution Bench of this Court
in Tulloch’s case by placing reliance on the judgment of this Court in
Hingir-Rampur’s case (supra) in following words:
“We consider that this submission in relation to the Act
before us is without force besides being based on a
misapprehension of the true legal position. In the first place
the point is concluded by the earlier decision of this court in
Hingir Rampur Coal Co. Ltd. v. State of Orissa where this court
said:
“In order that the declaration should be effective it is
not necessary that rules should be made or enforced. All
that this required is a declaration by Parliament that it
was expedient in the public interest to take the regulation
of development of mines under the control of the Union. In
such a case the test must be whether the legislative
declaration covers the field or not.”
But even if the matter was res integra, the argument cannot
be accepted. Repugnancy arises when two enactments both within
the competence of the two Legislatures collide and when the
Constitution expressly or by necessary implication provides that
the enactment of one legislature has superiority over the other
then to the extent of the repugnancy the one supersedes the
other. But two enactments may be repugnant to each other even
though obedience to each of them is possible without disobeying
the other. The test of two legislations containing contradictory
provisions is not, however, the only criterion of repugnancy,
for if a competent legislature with a superior efficacy
expressly or impliedly evinces by its legislation an intention
to cover the whole field, the enactments of the other
legislature whether passed before or after would be overborne on
the ground of repugnance. Where such is the position, the
inconsistency is demonstrated not by a detailed comparison of
provisions of the two statutes but by the mere existence of the
two pieces of legislation. In the present case, having regard to
the terms of Section 18(1) it appears clear to us that the
intention of Parliament was to cover the entire field and thus
to leave no scope for the argument that until rules were framed,
there was no inconsistency and no supersession, of the State
Act.”
19. To sum up, Articles 246(1), (2) and 254(1) provide that to the
extent to which a State law is in conflict with or repugnant to the
Central law, which Parliament is competent to make, the Central law
shall prevail and the State law shall be void to the extent of its
repugnancy. This general rule of repugnancy is subject to Article
254(2) which inter alia provides that if a law made by a State
legislature in respect of matters in the Concurrent List is reserved
for consideration by the President and receives his/ her assent, then
the State law shall prevail in that State over an existing law or a
law made by the Parliament, notwithstanding its repugnancy. The
proviso to Article 254(2) provides that a law made by the State with
the President’s assent shall not prevent Parliament from making 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 a State
legislature. Thus, Parliament need not wait for the law made by the
State with the President’s assent to be brought into force as it can
repeal, amend, vary or add to the assented State law no sooner it is
made or enacted. We see no justification for inhibiting Parliament
from repealing, amending or varying any State Legislation, which has
received the President’s assent, overriding within the State’s
territory, an earlier Parliamentary enactment in the concurrent
sphere, before it is brought into force. Parliament can repeal,
amend, or vary such State law no sooner it is assented to by the
President and that it need not wait till such assented to State law is
brought into force. This view finds support in the judgment of this
Court in Tulloch (supra). Lastly, the definition of the expressions
“laws in force” in Article 13(3)(b) and Article 372(3), Explanation I
and “existing law” in Article 366(10) show that the laws in force
include laws passed or made by a legislature before the commencement
of the Constitution and not repealed, notwithstanding that any such
law may not be in operation at all. Thus, the definition of the
expression “laws in force” in Article 13(3)(b) and Article 372(3),
Explanation I and the definition of the expression “existing law” in
Article 366(10) demolish the argument of the State of Kerala that a
law has not been made for the purposes of Article 254, unless it is
enforced. The expression “existing law” finds place in Article 254.
In Edward Mills Co. Ltd., Beawar v. State of Ajmer [AIR 1955 SC 25],
this Court has held that there is no difference between an “existing
law” and a “law in force”. Applying the tests enumerated hereinabove,
we hold that the Kerala Chitties Act, 1975 became void on the making
of the Chit Funds Act, 1982 on 19.08.1982, [when it received the
assent of the President and got published in the Official Gazette] as
the Central 1982 Act intended to cover the entire field with regard to
the conduct of the Chits and further that the State Finance Act No. 7
of 2002, introducing Section 4(1a) into the State 1975 Act, was void
as the State legislature was denuded of its authority to enact the
said Finance Act No. 7 of 2002, except under Article 254(2), after the
Central Chit Funds Act, 1982 occupied the entire field as envisaged in
Article 254(1) of the Constitution. Thus, repugnancy arises on the
making and not commencement of the Central Chit Funds Act, 1982. On
19.08.1982, the Kerala Chitties Act, 1975 ceased to operate except to
the extent of Section 6 of the General Clauses Act, 1897.
ii) Our Answer to Question No. (ii) :- The Effect in Law of a Repeal
20. In State of Orissa v. M.A. Tulloch & Co. (supra), this Court
came to the conclusion that by reason of the declaration by Parliament
the entire subject matter of “conservation and development of
minerals” stood taken over, for being dealt with by Parliament, thus,
denying the State of the power within it hitherto possessed and
consequently the Central Act superseded the State law, thus effecting
a repeal. After coming to the conclusion that the State law stood
repealed, this Court was required to consider a submission advanced on
behalf of Tulloch & Co. It was submitted that Section 6 of the
General Clauses Act, 1897 applied only to express repeals and not to
repeals consequent upon the supersession of the State Act by a law
having the constitutional superior efficacy. It was submitted that a
mere disappearance or supersession of the State Act under Article
254(1) was at the highest a case of implied repeal and not an express
repeal. That, Section 6 of the General Clauses Act applied only to
express repeals and not to implied repeals. This contention was
rejected in the following terms :
“The entire theory underlying implied repeals is that there is
no need for the later enactment to state in express terms that
an earlier enactment has been repealed by using any particular
set of words or form of drafting but that if the legislative
intent to supersede the earlier law is manifested by the
enactment of provisions as to effect such supersession, then
there is in law a repeal notwithstanding the absence of the word
‘repeal' in the later statute. Now, if the legislative intent to
supersede the earlier law is the basis upon which the doctrine
of implied repeal is founded could there be any incongruity in
attributing to the later legislation the same intent which
Section 6 presumes where the word ‘repeal' is expressly used. So
far as statutory construction is concerned, it is one of the
cardinal principles of the law that there is no distinction or
difference between an express provision and a provision which is
necessarily implied, for it is only the form that differs in the
two cases and there is no difference in intention or in
substance. A repeal may be brought about by repugnant
legislation, without even any reference to the Act intended to
be repealed, for once legislative competence to effect a repeal
is posited, it matters little whether this is done expressly or
inferentially or by the enactment of repugnant legislation. If
such is the basis upon which repeals and implied repeals are
brought about it appears to us to be both logical as well as in
accordance with the principles upon which the rule as to implied
repeal rests to attribute to that legislature which effects a
repeal by necessary implication the same intention as that which
would attend the case of an express repeal. Where an intention
to effect a repeal is attributed to a legislature then the same
would, in our opinion, attract the incident of the saving found
in Section 6 for the rules of construction embodied in the
General Clauses Act are, so to speak, the basic assumptions on
which statutes are drafted.”
21. In A. Thangal Kunju Mussaliar v. M. Venkitachalam Potti and Anr.
[1955] 2 SCR 1196, the Travancore State Legislature enacted Act No.
XIV of 1124 on 7.03.1949 to provide for investigation of tax evasion
cases. The Act was to come into force by Section 1(3) on the date
appointed by the State Government. The States of Travancore and
Cochin merged on 1.07.1949. By Ordinance 1 of 1124, all existing laws
were to continue in force in the United State of Travancore and
Cochin. After action was taken under Act No. XIV of 1124, a
controversy was raised that as the said Act No. XIV of 1124 was not a
law in force when the United State of Travancore and Cochin was
formed, all proceedings under the Travancore Act No. XIV of 1124 had
lapsed. This contention was dismissed by this Court in following
terms:
“The general rule of English law, as to the date of the
commencement of a statute, since 1797, has been and is that when
no other date is fixed by it for its coming into operation it is
in force from the date when it receives the royal assent (33
Geo. 3, c. 13). The same rule has been adopted in Section 5 of
our General Clauses Act, 1897. We have not been referred to any
Travancore law which provides otherwise. If, therefore, the same
principle prevailed in that State, Travancore Act 14 of 1124
would have come into force on 7-3-1949 when it was passed by the
Travancore Legislature. What prevented that result? The answer
obviously points to Section 1(3) which authorises the Government
to bring the Act into force on a later date by issuing a
notification. How could Section 1(3) operate to postpone the
commencement of the Act unless that section itself was in force?
One must, therefore, concede that Section 1(3) came into
operation immediately the Act was passed, for otherwise it could
not postpone the coming into operation of the Act. To put the
same argument in another way, if the entire Act including
Section 1(3) was not in operation at the date of its passing,
how could the Government issue any notification under that very
section? There must be some law authorising the Government to
bring the Act into force. Where is that law to be found unless
it were in Section 1(3)? In answer, Shri Nambiyar referred us to
the principle embodied in Section 37 of the English
Interpretation Act which corresponds to Section 22 of our
General Clauses Act. That section does not help the petitioner
at all. All that it does is to authorise the making of rules or
bye-laws and the issuing of orders between the passing and the
commencement of the enactment but the last sentence of the
section clearly says that “rules, bye-laws or orders so made or
issued shall not take effect till the commencement of the Act or
Regulation”. Suppose Shri Nambiyar is right in saying that the
Government could issue a notification under Section 1(3) by
virtue of the principle embodied in Section 22 of the General
Clauses Act, it will not take his argument an inch forward, for
that notification, by reason of the last sentence of Section 22
quoted above, will not take effect till the commencement of the
Act. It will bring about a stalemate. It is, therefore, clear
that a notification bringing an Act into force is not
contemplated by Section 22 of the General Clauses Act. Seeing,
therefore, that it is Section 1(3) which operates to prevent the
commencement of the Act until a notification is issued
thereunder by the Government and that it is Section 1(3) which
operates to authorise the Government to issue a notification
thereunder, it must be conceded that that Section 1(3) came into
force immediately on the passing of the Act. There is,
therefore, no getting away from the fact that the Act was an
“existing law” from the date of its passing right up to 1-7-1949
and was, consequently, continued by Ordinance 1 of 1124. This
being the position, the validity of the notification issued on
26-7-1949 under Section 1(3), the reference of the case of the
petitioner, the appointment of Respondent 1 as the authorised
official and all proceedings under the Travancore Act 14 of 1124
cannot be questioned on the ground that the Act lapsed and was
not continued by Ordinance 1 of 1124.”
22. In T.S. Baliah v. T.S. Rengachari [1969] 3 SCR 65, the
underlying principle of Section 6 of the General Clauses Act, 1897 is
explained as under :-
“The question is not whether the new Act expressly keeps alive
old rights and liabilities but whether it manifests an intention
to destroy them. Section 6 of the General Clauses Act therefore
will be applicable whenever there is a repeal of an enactment.
In such cases consequences laid down in Section 6 will follow,
unless, as the Section itself says, a different intention
appears in the repealing statute.”
23. In State of Punjab vs. Mohar Singh [1955] 1 SCR 893 prosecution
was commenced against Mohar Singh under Section 7 of the East Punjab
Refugees (Registration of Land Claims) Act, 1948. The offence was
committed at a time when the said Act was not in force. The offence
was committed when East Punjab Refugees (Registration of Land Claims)
Ordinance of 1948 was in force. That Ordinance was for a temporary
period. It was substituted by the Act. It is important to note that
the Ordinance was a temporary law and the same was repealed before it
expired by efflux of time. In the above circumstances, Section 6 of
General Clauses Act, 1897 came for interpretation before this Court.
It was held :
“We cannot subscribe to the broad proposition that Section 6 is
ruled out when there is repeal of an enactment followed by a
fresh legislation. Section 6 would be applicable in such cases
unless the new legislation manifests a contrary intention or
incompatibility. Such incompatibility has to be ascertained
from a consideration of all relevant provisions of the new law
and mere absence of a saving clause by itself is not material.”
24. Applying the tests laid down in the above judgments of this
Court, when a State law is repealed expressly or by implication by a
Union law, Section 6 of the General Clauses Act 1897 applies as to
things done under the State law which are so repealed, so that
transactions under the State law before the repeal are saved as also
any rights and liabilities arising under the State Act, prior to the
enactment of the Central Act. Repeal of an enactment is a matter of
substance. It depends on the intention of the Legislature. If by
reason of the subsequent enactment, the Legislature intended to
abrogate or wipe off the former enactment, wholly or in part, then, it
would be a case of pro tanto repeal.
25. In the present case, repugnancy is established by both the
tests. As can be seen from the impugned judgment (vide paras 13-15)
on comparison of the provisions of the Kerala Chitties Act, 1975,
being the State Act, and the Chit Funds Act, 1982, being the Central
Act, inconsistencies actually exist directly. Further, as stated
above, the intention of the Parliament in enacting the Central Act is
to cover the entire field relating to or with respect to Chits.
Hence, on both counts the two Acts cannot stand together. In
consequence of this repugnancy the Kerala Chitties Act, 1975 became
void under Article 254(1) on the enactment of the Central Chit Funds
Act, 1982 on 19.08.1982 and the Kerala Chitties Act, 1975 thus stood
impliedly repealed. By reason of Article 367 of the Constitution, the
General Clauses Act, however, applies to the said repeal. Under
Sections 6(b) and (c) of the General Clauses Act the previous
operation of the Kerala Chitties Act, 1975 is not affected nor any
right, privilege, obligation or liability acquired or incurred under
the said Kerala repealed Act. This is the Constitutional position
which would prevail if Section 90(1) of the Central Chit Funds Act,
1982 would not have been there. In other words, Section 90(1) of the
Central Chit Funds Act, 1982 is stated out of abundant caution. Thus,
after 19.08.1982 the Kerala Chitties Act, 1975 stood repealed except
for the limited purposes of Section 6 of the General Clauses Act.
Likewise, the other existing six State laws on Chits, referred to in
Section 90 of the Chit Funds Act, 1982, existing on 19.08.1982 also
stood repealed subject to the saving under Section 6 of the General
Clauses Act.
26. To bring the Central Chit Funds Act, 1982 into operation in any
State the Central Government has to issue a notification in the
Official Gazette under Section 1(3). This has been done for some
States but it has not been done for others like Kerala. It is for the
Central Government to issue a notification bringing into force the
Chit Funds Act, 1982 in Kerala when it deems appropriate as it has
done in some States. Until such notification is issued neither the
Kerala Chitties Act, 1975 prevails in the State of Kerala as it has
become void and has been repealed under Article 254(1), nor the
Central Chit Funds Act, 1982 as it is not notified till date. If and
when the Central Government brings into force the Chit Funds Act, 1982
by a notification in the State of Kerala, under Section 1(3), Section
90(2) will come into play and thereby the Kerala Chitties Act, 1975
shall continue to apply only to chits in operation in State of Kerala
on the date of the commencement of the Central Chit Funds Act, 1982 in
the same manner as the Kerala Chitties Act, 1975 applied to such chits
before such commencement. Moreover, Sections 85(a) and 90(2) of the
Central Chit Funds Act, 1982 provide for continuance of the
application of the provisions of the Kerala Chitties Act, 1975 till
the commencement of the Central Chit Funds Act, 1982. Such
commencement is dependent upon notification under Section 1(3). Thus,
on such commencement of the Central Chit Funds Act, 1982, the
transactions (chits) between 19.08.1982 and the date of commencement
of the Central Act will stand protected under Section 90(2). Hence,
there would be no legislative vacuum.
27. Before concluding, one aspect needs to be highlighted. Section
4(1a) was inserted into Section 4(1) vide State Finance Act No. 7 of
2002. Under Section 4(1a), in cases where a chitty is registered
outside the State, say in Jammu & Kashmir, but having 20% or more of
the subscribers normally residing in State of Kerala, the Foreman (who
has got registration outside the State of Kerala) has to open a branch
in the State of Kerala and obtain registration under the Kerala
Chitties Act, 1975. This sub-section was inserted to plug a loophole.
In many cases, chitties were registered outside the State of Kerala
even when large number of subscribers were residing in State of
Kerala. It is true that on the making of the Central Chit Funds Act,
1982, the State legislature could not have enacted the Finance Act No.
7 of 2002 inserting Section 4(1a) into the State Act as the entire
field stood occupied by the Central Chit Funds Act, 1982 without the
assent of the President as envisaged under Article 254(2), however, we
find that Section 4(1) of the Central Chit Funds Act, 1982 is much
wider and more stringent than Section 4(1a) of the Kerala Chitties
Act, 1975, as amended by Finance Act No. 7 of 2002, inasmuch as under
Section 4(1) of the Central Chit Funds Act, 1982, no chit shall be
commenced or conducted without obtaining sanction of the State
Government within whose jurisdiction the chit is to be commenced or
conducted and unless such chit is registered in that State in
accordance with the provisions of the Central Chit Funds Act 1982.
Conclusions
28. To sum up, our conclusions are as follows :-
i) On timing, we hold that, repugnancy arises on the making and
not commencement of the law, as correctly held in the judgment of this
Court in Pt. Rishikesh and Another v. Salma Begum (Smt) [(1995) 4 SCC
718].
ii) Applying the above test, we hold that, on the enactment of the
Central Chit Funds Act, 1982, on 19.08.1982, which covered the entire
field of “chits” under entry 7 of List III of the Constitution, the
Kerala Chitties Act, 1975, on account of repugnancy as enshrined in
Article 254(1), became void and stood impliedly repealed. That, on
the occupation of the entire field of “chits”, the Kerala Legislature
could not have enacted the State Finance Act No. 7 of 2002, inserting
Section 4(1a) into the Kerala Chitties Act, 1975, particularly on the
failure of the State in obtaining Presidential assent under Article
254(2).
iii) That, the Central Chit Funds Act, 1982 though not brought in
force in the State of Kerala is still a law made, which is alive as an
existing law. By reason of Article 367 of the Constitution, the
General Clauses Act, 1897 applies to the repeal. Section 6 of the
General Clauses Act, 1897 is, therefore, relevant, particularly
Sections 6(b) and 6(c) and consequently, the previous operation of the
Kerala Chitties Act, 1975 is not affected nor any right, privilege,
obligation or liability acquired or incurred under that repealed State
Act of 1975. Thus, after 19.08.1982, the Kerala Chitties Act, 1975
stands repealed except for the limited purposes of Section 6 of
General Clauses Act, 1897. If and when the Central Government brings
into force the Chit Funds Act, 1982 by a notification in State of
Kerala, under Section 1(3), Section 90(2) will come into play and
thereby the Kerala Chitties Act, 1975 shall continue to apply only to
chits in operation on the date of commencement of the Central Chit
Funds Act, 1982 in the same manner as the Kerala Chitties Act, 1975
applied to chits before such commencement.
29. The reference is answered accordingly.
…..……………………….......CJI
(S. H. Kapadia)
.........…………………………..J.
(D.K. Jain)
.........…………………………..J.
(Surinder Singh Nijjar)
.........…………………………..J.
(Ranjana Prakash Desai)
.........…………………………..J.
(Jagdish Singh Khehar)
New Delhi;
May 08, 2012
