TaxTMI 
TaxTMI 
2018 (2) TMI 1326
X X X X Extracts X X X X
X X X X Extracts X X X X
....918 (10 of 1918), or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive." 2. It will be seen that Section 21A interdicts the reopening by courts of a debt between a banking company and its debtor, on the ground that the rate of interest charged by the banking company, in respect of a loan transaction, is excessive. The section seeks to keep out of harm's way the Usurious Loans Act, 1918 and/or any other State legislation relating to indebtedness, and then declares that no such loan transaction shall be reopened by any court on the ground of charging of excessive rates of interest. The writ petition has been filed by certain public spirited citizens, who rely on the report of the Parliamentary Standing Committee on Agriculture for the year 2006-2007 to say that Section 21A should be abolished, insofar as it applies to rural indebtedness. The Standing Committee's Report reads as follows: "The Committee feels that the worst exploitation of farmers is through th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....care of increase in costs, change in cropping pattern etc. Banks have been advised by RBI that total interest debited to an account should not exceed the principal amount in respect of short term loans advanced to small and marginal farmers. As per the extant RBI instructions, banks are not allowed to compound interest on current dues of crop loans and term loans in respect of direct agricultural advances granted to farmers. If such loans become overdue banks have been advised that where the default is due to genuine reasons, they should extend the period of loan or reschedule the installments under term loans. Once such a relief has been extended the over dues become current dues and hence banks should not compound interest thereon. In case of long duration crops, interest is recovered only annually. COMMENTS OF THE COMMITTEE 1.24 The Committee are dismayed to know that the Department has not paid any heed to the recommendation of the Committee to scrap Section 21 (A) of Banking Regulation Act, 1949 which hinders the provision of Usurious Loans Act, 1918 under which it was, inter alia, provided that the total amount of interest on a loan taken by a farmer could not be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for the first time, not being in the predecessor entry in the Government of India Act, 1935. He also referred to and relied upon a proposed amendment by Shri Shibban Lal Saxena, by which it was sought to place the aforesaid Entry 30 into the Concurrent List, so that Parliament may also have a say in the relief of agricultural indebtedness. However, this was turned down by the Constituent Assembly, so that this subject is exclusively within the domain of the State legislature. 4. He next relied upon a decision of a single Judge of the Andhra Pradesh High Court reported as State Bank of India, In re, AIR 1986 AP 291 and commended its acceptance by us. He then referred to this Court's judgment reported as State Bank of India v. Yasangi Venkateswara Rao (1999) 2 SCC 375. He fairly pointed out that the aforesaid single Judge judgment has been set aside by this Court, but stated that no ratio decidendi was forthcoming from the Supreme Court judgment. This was because paragraph 7 of the aforesaid judgment was both laconic and contained only conclusions without any reasoning. He also argued that the said decision is per incuriam, not having referred to the number of judgments that were....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 6. Ms. Shirin Khajuria, learned counsel who appeared on behalf of the Union of India, painstakingly took us through the provisions of the Banking Regulation Act. According to her, "relief of agricultural indebtedness", that is in the latter part of Entry 30, List II of the Seventh Schedule to the Constitution, should be read along with "money lending and money lenders" which is the first part of the said entry. This being the case, relief of agricultural indebtedness would apply only to money lenders and money lending and not to banks at all. If the subject of relief of agricultural indebtedness were not linked to money lending, it would have found itself in a separate entry in the State List, which is not the case. She also relied upon a number of judgments to buttress her submissions, and read copiously from the two counter affidavits filed by the Union of India to show how the Central Government was fully alive to the plight of poor farmers, and had set up expert groups to report on the same. 7. Having heard learned counsel for both parties, it is necessary to first set out the relevant provisions of the Government of India Act, 1935 and the Constitution. "Gove....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The definition did not include other commercial activities which a banking institution may engage in. xxx xxx xxx 36. The legislative entry in List I of the Seventh Schedule is "Banking" and not "Banker" or "Banks". To include within the connotation of the expression "Banking" in Entry 45, List I, power to legislate in respect of all commercial activities which a banker by the custom of bankers or authority of law engages in, would result in re-writing the Constitution. Investment of power to legislate on a designated topic covers all matters incidental to the topic. A legislative entry being expressed in a broad designation indicating the contour of plenary power must receive a meaning conducive to the widest amplitude, subject however to limitations inherent in the federal scheme which distributes legislative power between the Union and the constituent units. The field of "banking" cannot be extended to include trading activities which not being incidental to banking encroach upon the substance of the entry "trade and commerce" in List II." In Union of India v. Delhi High Court Bar Assn., (2002) 4 SCC 275 at 285-286, this Court was faced with th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... stage, it will be important to advert to certain other judgments of this Court dealing with the expression "banking" vis-à-vis other entries in the State List. Thus, in Prafulla Kumar Mukherjee v. Bank of Commerce Ltd., Khulna, AIR 1947 PC 60 at 65, the Privy Council expounded the doctrine of pith and substance, and ultimately found that, on a proper reading of the entries concerned, there would be no clash between the Bengal Money Lenders Act, 1940, which was referable to the State List, and the Federal entries dealing with promissory notes and banking. Thus, the Court held: "35. Moreover, the British Parliament when enacting the Indian Constitution Act had a long experience of the working of the British North America Act and the Australian Commonwealth Act and must have known that it is not in practice possible to ensure that the powers entrusted to the several legislatures will never overlap. As Sir Maurice Gwyer C.J. said in Subramanyan Chettiar v. Muttuswami Goundan, 1940 FCR 188 at 201: "It must inevitably happen from time to time that legislation, though purporting to deal with a subject in one list, touches also on a subject in another list, and th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....? Once that question is determined the Act falls on one or the other side of the line and can be seen as valid or invalid according to its true content. 39. This view places the precedence accorded to the three lists in its proper perspective. No doubt where they come in conflict List I has priority over Lists III and II and List III has priority over List II, but the question still remains, priority in what respect? Does the priority of the Federal legislature prevent the provincial legislature from dealing with any matter which may incidentally affect any item in its list or in each case has one to consider what the substance of an Act is and, whatever its ancillary effect, attribute it to the appropriate list according to its true character? In their Lordships' opinion the latter is the true view. 40. If this be correct it is unnecessary to determine whether the jurisdiction as to promissory notes given to the Federal legislature is or is not confined to negotiability. The Bengal Money Lenders Act is valid because it deals in pith and substance with money lending, not because legislation in respect of promissory notes by the Federal legislatur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ties". 10. We do not think it necessary to refer to the abundance of authority on the question as to how to determine whether a legislation falls under an entry in one list or another entry in another list. Long ago in Prafulla Kumar Mukherjee v. Bank of Commerce Ltd. [74 IA 23] the Privy Council was confronted with the question whether the Bengal Money-Lenders Act fell within Entry 27 in List II of the Seventh Schedule to the Government of India Act, 1935, which was "money-lending", in respect of which the provincial legislature was competent to legislate, or whether it fell within Entries 28 and 38 in List I which were "promissory notes" and "banking" which were within the competence of the Central Legislature. The argument was that the Bengal Money-Lenders Act was beyond the competence of the provincial legislature insofar as it dealt with promissory notes and the business of banking. The Privy Council upheld the vires of the whole of the Act because it dealt, in pith and substance, with money-lending. They observed: "Subjects must still overlap, and where they do the question must be asked what in pith and substance is the effect of the enactment of which comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esiduary power under Entry 97 of List I, the State had none. Entry 30 in List II is "Money lending and moneylenders; relief of agricultural indebtedness". If commonsense and common English are components of constitutional construction, relief against loans by scaling down, discharging, reducing interest and principal, and staying the realisation of debts will, among other things, fall squarely within the topic. And that, in a country of hereditary indebtedness on a colossal scale! It is commonplace to state that legislative heads must receive large and liberal meanings and the sweep of the sense of the rubrics must embrace the widest range. Even incidental and cognate matters come within their purview. The whole gamut of Money lending and debt-liquidation is thus within the State's legislative competence. The reference to the Rajahmundry Electricity case [Rajamundry Electric Supply Corporation v. State of Andhra, AIR 1954 SC 251 : 1954 SCR 779] is of no relevance. Nor is the absence of the expression "relief" in Entry 30, List II, of any moment when relief from moneylenders is eloquently implicit in the topic. Sometimes, arguments have only to be stated to be rejected." (at page 69....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rticle 246 of the Constitution which deals with the subject-matter of the laws to be made by the Parliament and the Legislatures of the States. Clause (3) of the Article provides that subject to clauses (1) and (2) of the Article with which we are not concerned the Legislature of the State has "exclusive power to make laws..... with respect to any of the matters enumerated in List II". Entry 30 of the List specifically states the following matters as being within the competence of the State Legislature,- 30 -Money-lending and money-lenders; relief of agricultural indebtedness. It is therefore quite clear, and is beyond controversy, that the Act which provides for "the relief of indebted agriculturists in the State of Kerala" is within the competence of the State Legislature. Clause (1) of Section 2 of the Act defines an "agriculturist", clause (4) defines a "debt", clause (5) defines a "debtor" and the two Explanations to Section 20 define the expressions "court" and "judgment-debtor" and give an extended meaning to the expression "agriculturist" so as to include a person who would have been an agriculturist but for the sale of his immovable property. The other se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....viding him necessary relief merely because he has lost his immovable property. On the other hand his helpless condition calls for early solution and it is only natural that the State Legislature should think of rehabilitating him by providing the necessary relief under an Act of the nature under consideration in these cases. There is in fact nothing in the wordings of Entry 30 to show that the relief contemplated by it must necessarily relate to any subsisting indebtedness and would not cover the question of relief to those who have lost the means of their livelihood because of the delay in providing them legislative relief. It is well-settled, having been decided by this Court in Navinchandra Mafatla l v . CIT [AIR 1955 SC 58 : (1955) 1 SCR 829 : (1954) 26 ITR 758] , that "in construing words in a constitutional enactment conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude". This has to be so lest a legislative measure may be lost for mere technicality." (at pages 31-32) (Emphasis Supplied) 11. This brings us to the sweep of the Banking Regulation Act, and to whether....
X X X X Extracts X X X X
X X X X Extracts X X X X
....foreign exchange including foreign bank notes; the acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations, securities and investments of all kinds; the purchasing and selling of bonds, scrips or other forms of securities on behalf of constituents or others, the negotiating of loans and advances; the receiving of all kinds of bonds, scrips or valuables on deposit or for safe custody or otherwise; the providing of safe deposit vaults; the collecting and transmitting of money and securities; (b) acting as agents for any Government or local authority or any other person or persons; the carrying on of agency business of any description including the clearing and forwarding of goods, giving of receipts and discharges and otherwise acting as an attorney on behalf of customers, but excluding the business of a Managing Agent or Secretary and Treasurer of a company; (c) contracting for public and private loans and negotiating and issuing the same; (d) the effecting, insuring, guaranteeing, underwriting, participating in Managing and carrying out of any issue, public or private, of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....after provided, no company shall carryon banking business in India unless it holds a licence issued in that behalf by the Reserve Bank and any such licence may be issued subject of such conditions as the Reserve Bank may think fit to impose. xxx xxx xxx 56. Act to apply to co-operative societies subject to modifications.- The provisions of this Act, as in force for the time being, shall apply to, or in relation to, cooperative societies as they apply to, or in relation to banking companies subject to the following modifications, namely: (a) throughout this Act, unless the context otherwise requires,- (i) references to a "banking company" or "the company" or "such company" shall be construed as references to a co-operative bank; (ii) references to "commencement of this Act" shall be construed as references to commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965);" There can be no doubt that the Banking Regulation Act deals with the subject "banking" insofar as it licenses banking companies, as defined, and cooperative banks, and seeks to regulate them. Section 21A, though by way of ame....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n respect of any excessive interest; (ii) notwithstanding any agreement, purporting to close previous dealings and to create a new obligation, re-open any account already taken between them and relieve the debtor of all liability in respect of any excessive interest, and if anything has been paid or allowed in account in respect of such liability, order the creditor to repay any sum which it considers to be repayable in respect thereof; (iii) set aside either wholly or in part or revise or alter any security given or agreement made in respect of any loan, and if the creditor has parted with the security, order him to indemnify the debtor in such manner and to such extent as it may deem just: Provided that, in the exercise of these powers, the Court shall not- (i) re-open any agreement purporting to close previous dealings and to create a new obligation which has been entered into by the parties or any persons from whom they claim at a date more than twelve years from the date of the transaction; (ii) do anything which affects any decree of a Court. Explanation.- In the case of a suit brought on a series of transactions the expre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g in this section shall be construed as derogating from the existing powers or jurisdiction of any Court." 13. It can be seen that very wide powers are given to Courts, inter alia, to scale down rates of interest considering a whole host of factors, including the financial condition of the debtor. State Debt Relief Acts, as has been stated hereinabove, go even further and not only relate to scaling down of excessive rates of interest, but also, in certain cases, grant a waiver of the interest, either wholly or partially, and of the principal sum of the loan, either wholly or partially. There can be no doubt whatsoever that, as has been held in Fatehchand (supra) and Pathumma (supra), the State Debt Relief Acts are validly made under Entry 30, List II of the Seventh Schedule to the Constitution. (Ms. Khajuria relied upon State Bank of Travancore v. Mohammed Mohammed Khan, 1982 (1) SCR 338 at 348, for the proposition that banks were excluded from the Kerala Agriculturists' Debt Relief Act of 1970 because, unlike money lenders, they do not exploit needy agriculturists and impose upon them harsh and onerous terms, while granting loans to them. While this may have been the perception....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which arise before us are: i. What is the scope of Entry 45, List I vis-à-vis Entry 30, List II of the Seventh Schedule to the Constitution? ii. Whether Section 21A can be said to prevail over State Debt Reliefs Acts in the event of a clash between the two? In order to answer these questions, we have to consider the arguments of Ms. Shirin Khajuria and Mr. Bhushan. 15. According to Ms. Khajuria, the expression "relief of agricultural indebtedness" must take colour from the expression "money lending and money lenders" preceding it in Entry 30, List II of the Seventh Schedule. We are afraid we cannot agree for several reasons. Firstly, purely grammatically, a semicolon separates the two expressions showing that they are not inextricably connected. Also, we have already adverted to several judgments, including Pathumma (supra), which state that the widest and the most liberal possible meaning must be given to Entry 30, List II of the Seventh Schedule. The latter part of this entry cannot be narrowed down by any rule of noscitur a sociis, or taking colour from the former part of the entry. (In Special Reference No.1 of 2001, (2004) 4 SCC 489, the e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... respect of which parties in judicial proceedings were immediately before the commencement of this Constitution subject to their personal law.) Similarly, Entry 6, List III deals with transfer of property other than agricultural land, separated by a semicolon from registration of deeds and documents. (Entry 6, List III: Transfer of property other than agricultural land; registration of deeds and documents.) Entry 12, List III deals with evidence and is, thus, separated by a semicolon from recognition of laws, public acts and records and judicial proceedings. (Entry 12, List III: Evidence and oaths; recognition of laws, public acts and records, and judicial proceedings.) Obviously, there is no scientific method involved in placing subjects in the various entries in the lists contained in the Seventh Schedule to the Constitution. Ms. Khajuria's alternate plea that "relief of agricultural indebtedness" would otherwise be in a separate entry by itself must also, therefore, be rejected. Also, the object of the relief of agricultural indebtedness is to free the farmer from the bonds of debts incurred, inter alia, due to adverse natural causes, and debt relief would be necessary in the ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....merated in List II must supersede pro tanto the exercise of power of the State legislature. 3. Both Parliament and the State legislature have concurrent powers of legislation with respect to any of the matters enumerated in List III. xxx xxx xxx The words "notwithstanding anything contained in clauses (2) and (3)" in Article 246(1) and the words "subject to clauses (1) and (2)" in Article 246(3) lay down the principle of federal supremacy viz. that in case of inevitable conflict between Union and State powers, the Union power as enumerated in List I shall prevail over the State power as enumerated in Lists II and III, and in case of overlapping between Lists II and III, the former shall prevail. But the principle of federal supremacy laid down in Article 246 of the Constitution cannot be resorted to unless there is an "irreconcilable" conflict between the entries in the Union and State Lists. In the case of a seeming conflict between the entries in the two Lists, the entries should be read together without giving a narrow and restricted sense to either of them. Secondly, an attempt should be made to see whether the two entries cannot be reconciled so as t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....respect of a matter which is exclusively entrusted to it must supersede pro tanto the exercise of power of the State Legislature." (Emphasis Supplied) It can, thus, be seen that Article 246 only states that where two entries in the Union List and the State List, respectively, have a head-on collision and are irreconcilable, then, as a last resort, the entry in the State List is to give way to the entry in the Union List. But, this is only as a last resort. First, it is incumbent upon the Court to harmonise the entries, if possible, by giving effect to both and not rendering any one of them otiose. Thus, in Calcutta Gas Co. (Proprietary) Ltd. v. State of W.B., 1962 Supp (3) SCR 1 at 13, 17-19, the Court, held: "The power to legislate is given to the appropriate legislatures by Article 246 of the Constitution. The entries in the three Lists are only legislative heads or fields of legislation: they demarcate the area over which the appropriate legislatures can operate. It is also well settled that widest amplitude should be given to the language of the entries. But some of the entries in the different Lists or in the same List may overlap and sometimes ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess intention of the Constitution is to treat it, in normal times, as a state subject and it is not in the province of this Court to ascertain and scrutinize the reasons for doing so. It is suggested that this interpretation would prevent Parliament to make law in respect of gas and gas-works during war or other national emergency. Apart from the relevancy of such a consideration, the apprehension has no justification, for under Article 249 Parliament is enabled to take up for legislation any matter which is specifically enumerated in List II whenever the Council of States resolves by two-thirds majority that such a legislation is necessary or expedient in the national interest. So too, under Article 250 Parliament can make laws with respect to any of the matters enumerated in the State List, if a proclamation of emergency is in operation. Article 252 authorizes the Parliament to legislate for two or more States, if the Houses of the legislatures of those States give their consent to the said course. Subject to such emergency or extraordinary powers, the entire industry of gas and gas-works is within the exclusive legislative competence of a State. It is, therefore, clear that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a judicial recognition, unscrupulous banks may resort to charging interest even on monthly rests and capitalising the same. Statements of accounts supplied by banks to borrowers many a times do not contain particulars or details of debit entries and when written in hand are worse than medical prescriptions putting to test the eyes and wits of the borrowers. Instances of unscrupulous, unfair and unhealthy dealings can be multiplied though they cannot be generalised. Suffice it to observe that such issues shall have to be left open to be adjudicated upon in appropriate cases as and when actually arising for decision and we cannot venture into laying down law on such issues as do not arise for determination before us. However, we propose to place on record a few incidental observations, without which, we feel, our answer will not be complete and that we do as under: xxx xxx xxx (6) Agricultural borrowings are to be treated on a pedestal different from others. Charging and capitalisation of interest on agricultural loans cannot be permitted in India except on annual or six-monthly rests depending on the rotation of crops in the area to which the agriculturist borrower....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed) 19. Qua the general entry "banking" under Entry 45, List I, which deals with banks of all kinds and the lending by banks as well as recovery of debts by banks generally, Entry 30, List II, which deals with relief of agricultural indebtedness, is special, for the reason that indebtedness itself is only one species of banking and agricultural indebtedness is a sub-species thereof. The species of indebtedness is within Entry 45, List I, whereas the sub-species of agricultural indebtedness is within Entry 18, List II. It is only relief of agricultural indebtedness, which is a sub-sub-species of indebtedness, which is relatable to Entry 30, List II. Also, we must at this juncture keep in mind the amendment sought to be moved by Shri Shibban Lal Saxena in the Constituent Assembly to move Draft Entry 34 (i.e. Entry 30), List II to the Concurrent List. This was done as follows: "Entry 34 Prof.Shibban Lal Saksena: Sir, I beg to move: "That entry 34 of List II be transferred to List III." This is an important amendment. I would like the House to realise the magnitude of the problem. We all want to wipe out rural indebtedness. Sir, in this connect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by the State in its possession. The annual payments to be made by the State for these bonds will come to about Rs. 60 crores. On the carrying out of these initial measures will depend the success of the planned economy for raising the productivity of agriculture in the interests of the cultivators. Unless the status quo is changed in this manner there can be no hope of improving the standard of living of the vast bulk of our peasantry, and therefore, no hope of building up an industrial structure in the country on sound, stable and secure foundations. We are aware of the difficulties in the way of carrying out the above measures but we are unnamable to see any alternative to them whatsoever." It is thus obvious that if we really want to remove agricultural indebtedness, the problem cannot be solved merely by action taken by individual States. Only a comprehensive plan and its bold execution with the fullest cooperation of the Union Government with the Government of the states can solve these problems. It is therefore that I have suggested that this entry should be transferred to List III. Sir, I have tabled my amendment only with this purpose i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... forms of contracts, but not including contracts relating to agricultural land." To complete the picture, it is also important to advert to Entry 41, List III, which states as follows:- "41. Custody, management and disposal of property (including agricultural land) declared by law to be evacuee property." The constitutional scheme, insofar as agriculture is concerned, is that it is an exclusive State subject to one exception - that the custody, management and disposal of property, declared by law to be evacuee property includes agricultural land, and makes it a concurrent subject. 20. This being the case, the two entries are best harmonised by giving effect to both. This can only be done if the relief of agricultural indebtedness is to include banks, both cooperative and otherwise. As mentioned earlier, Entry 18, List II gives the States exclusive power to legislate on "land improvement and agricultural loans." Entry 45, List I will remain intact and will have carved out of it the relief of agricultural indebtedness, which, as we have already seen, is a sub-sub-species of indebtedness, which itself is one of many aspects of banking. 21. We now come to the do....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntirety as it was an Act, in pith and substance, relatable to "money lending and money lenders" inasmuch as the Madras Act operated not on the promissory note, but on a decree in which the promissory note had merged, and had, thus, become a judgment-debt. It was held that the Act neither affected nor purported to affect any liability on a promissory note. 25. Having held this, the majority, however, speaking through Gwyer, C.J., said: "But though, as I have said, I reserve my opinion upon all of them, I do not wish it to be assumed that I accept in its entirety the view of the Madras High Court that the impugned Act does not really affect the principles embodied in the Negotiable Instruments Act, for, that proposition seems to me much too broadly stated. I doubt whether any provincial Act could, in the form of a debtors' relief Act, fundamentally affect the principle of negotiability, or the rights of a bonafide transferee for value. Perhaps the position is different where the promissory note has never changed hands and is sued upon by the original payee; and it may be (though I do not decide the question) that an Act such as the Court is now considering can operate upo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ail", must be read subject to this caveat.) The principles laid down by their Lordships have gone only so far as to permit an incidental encroachment, provided the Dominion field is unoccupied. In no case so far decided have their Lordships tolerated a trespass as well as a clash. If a clash with the Dominion legislation were also allowed, then a Provincial Legislature would be in a position, though indirectly, to nullify the Dominion legislation, even inside the field exclusively open to the Dominion, which would make the position intolerable. xxx xxx xxx The scheme of S. 100 of the Act is to exclude completely from the authority of the Provincial Legislature the power to legislate with respect to subjects in List I. If in consequence of certain difficulties that Provincial Legislatures would experience by a rigid enforcement of such an exclusion we must in interpreting the words "with respect to" import the Canadian doctrine of permissibility of incidental encroachment, we must then at the same time import the other allied doctrine also that such an encroachment is permissible only when the field is actually unoccupied. It is only in this way that actual clash b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntry 52, List I. This is not the case insofar as Entry 45, List I and Entry 30, List II is concerned. 27. Shri Bhushan then relied upon a concurring judgment of Ranganathan, J. in Federation of Hotels and Restaurants v. Union of India, (1989) 3 SCC 634. In paragraph 74, the learned Judge, while upholding the Hotel Receipts Tax Act, 1980 held that, in pith and substance, it was referable to Entry 82, List I, being, in substance, a tax on income. In particular, Shri Bhushan relied upon the statement of the law that since Parliament had exclusive power, under Article 246(1) and (3) of the Constitution, to make laws with respect to any of the matters enumerated in List I, if an Act of Parliament is squarely covered by an entry in the Union List, no restriction can be read into the power of Parliament to make laws in regard thereto. This was made in the context of a taxation entry, which as the aforesaid paragraph 74 itself states, refers to the Constitutional scheme which neatly divides the subject matters of tax between the Union and the States, so that there can be said to be no overlapping. There is no discussion in this paragraph of Parliamentary paramountcy in the context of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rpretation, so that the Central Government, to a great extent, but within certain fixed limits, may be mistress in her own house, as the Provinces, to a greatextent, but again within certain fixed limits, are mistresses in theirs. See Henrietta Muir Edwards v. Attorney-General for Canada (1930 AC 124 at 136 and 137). (2) In an enquiry like the one before us in this Reference, the Court must ascertain the true nature and character of the challenged enactment, its pith and substance; and not the form alone which it may have assumed under the hand of the draftsman. See Attorney-General for Ontario v. Reciprocal Insurers (1924 AC 328 at 337). (3) Where there is an absolute jurisdiction vested in a Legislature, the laws promulgated by it must take effect according to the proper construction of the language in which they are expressed. But where the law-making authority is of a limited or qualified character, obviously it may be necessary to examine, with some strictness, the substance of the legislation, for the purpose of determining what it is that the Legislature is really doing. See Attorney-General for Ontario v. Reciprocal Insurers (1924 AC 328 at 337). ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cally under the State List. The fact of encroachment does not affect the vires of the law even as regards the area of encroachment. [A.S. Krishna v. State of Madras [A.S. Krishna v. State of Madras, AIR 1957 SC 297 : 1957 Cri LJ 409]; Chaturbhai M. Patel v. Union of India [Chaturbhai M. Patel v. Union of India, (1960) 2 SCR 362 : AIR 1960 SC 424]; State of Rajasthan v. G. Chawla [State of Rajasthan v. G. Chawla, AIR 1959 SC 544 : 1959 Cri LJ 660] and Ishwari Khetan Sugar Mills (P) Ltd. v. State of U.P. [Ishwari Khetan Sugar Mills (P) Ltd. v. State of U.P., (1980) 4 SCC 136] This principle commonly known as the doctrine of pith and substance, does not amount to an extension of the legislative fields. Therefore, such incidental encroachment in either event does not deprive the State Legislature in the first case or Parliament in the second, of their exclusive powers under the entry so encroached upon. In the event the incidental encroachment conflicts with legislation actually enacted by the dominant power, the dominant legislation will prevail." (Emphasis Supplied) 14. The aforesaid view in the concurring judgment of Ruma Pal, J. in ITC Ltd. v. Agricultural Produce....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... judgment, that Entry 25, List II would not be reduced to "useless lumber" as feared by the States, because natural gas was never intended to be covered by that entry, which is given full effect by including gas manufactured and used in gas works.) Shri Bhushan strongly relied upon paragraph 15 of this judgment. It is clear that the entire discussion begins from paragraph 13, which makes it clear that an entry in one list cannot be so interpreted as to cancel or obliterate another entry made in another list and in the case of an apparent conflict, it is the primary duty of the Court to harmonise the two entries. It is only when there is an irreconcilable conflict between two legislations that the Central legislation shall prevail. It is after noticing this statement of the law contained in paragraph 15 of the Constitution Bench judgment in Special Reference No.1 (supra), that the discussion on incidental encroachment in paragraphs 13 and 14, referred to hereinabove, is then laid down by the Court in UCO Bank (supra). Shri Bhushan's reliance on the latter part of paragraph 15 in Special Reference No.1 (supra), to negate what has been stated in paragraphs 13 and 14 of UCO Bank (supra....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Water, that is to say, water supplies, irrigation and canals, drainage and embankments, water storage and water power subject to the provisions of Entry 56 of List I. 22. Courts of wards subject to the provisions of Entry 34 of List I; encumbered and attached estates. 23. Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union. 24. Industries subject to the provisions of Entries 7 and 52 of List I. 26. Trade and commerce within the State subject to the provisions of Entry 33 of List III. 27. Production, supply and distribution of goods subject to the provisions of Entry 33 of List III. 33. Theatres and dramatic performances; cinemas subject to the provisions of Entry 60 of List I; sports, entertainments and amusements. 37. Elections to the Legislature of the State subject to the provisions of any law made by Parliament. 50. Taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development. 57. Taxes on vehicles, whether mechanically propelled or not, suitable....
X X X X Extracts X X X X
X X X X Extracts X X X X
....utional scheme, in that all the entries of List II would then be subject to Parliamentary law, which is of national importance. Also, Entry 30, List II cannot be read to refer to relief of agricultural indebtedness other than what is specified in List I, as that would be reading into Entry 30 words that are conspicuous by their absence, but which are found in Entries 32 and 63, List II. All this would go to show that where the States have exclusive legislative competence under certain entries of List II, legislation made thereunder cannot be effaced by legislation made under List I, which incidentally trenches upon State legislation made under an exclusive power. 37. We have already seen how agriculture as a subject matter is entirely and exclusively left to the States in all its aspects, save and except evacuee property under Entry 41, List III, which is also left to the States, but concurrently with Parliament, specifically including agricultural land therein. Also, we must not forget that the amendment suggested by Shri Shri Shibban Lal Saxena to make draft Entry 34 (Entry 30 of List II), a concurrent subject, was turned down. Any argument that has the effect of making relief....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the A.P. Agriculturists Relief Act, and, therefore, the spheres of the two provisions were completely different. Coming to legislative competence, the learned Judge went into great detail in considering several judgments of the Federal Court, High Courts and this Court, and ultimately held that Section 21A is not a law referable to Entry 45, List I. The learned Judge also went on to hold that Section 21A was arbitrary and violative of Article 14 of the Constitution. 41. By a short judgment in Yasangi Venkateswara Rao (supra), this Court upset the elaborate judgment of the High Court thus: "7. We are unable to understand as to how the High Court could come to the conclusion that Parliament had no jurisdiction to enact Section 21-A. There can be no doubt that Section 21- A deals with the question of the rate of interest which can be charged by a banking company. Entry 45 of List I of the Seventh Schedule clearly empowers Parliament to legislate with regard to banking. The enactment of Section 21-A was clearly within the domain of Parliament. The said section applies to all types of loans which are granted by a banking company, whether to an agricul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s themselves and their privies, ingredient (iii) is the material element in the decision for it determines finally their rights and liabilities in relation to the subject-matter of the action. It is the judgment that estops the parties from reopening the dispute. However, for the purpose of the doctrine of precedents, ingredient (ii) is the vital element in the decision. This indeed is the ratio decidendi. [R.J. Walker & M.G. Walker: The English Legal System. Butterworths, 1972, 3rd Edn., pp. 123-24] It is not everything said by a judge when giving judgment that constitutes a precedent. The only thing in a judge's decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. In the leading case of Qualcast (Wolverhampton) Ltd. v. Haynes [LR 1959 AC 7 43 : (1959) 2 All ER 38] it was laid down that the ratio decidendi may be defined as a statement of law applied to the legal problems raised by the facts as found, upon which the decision is based. The other two elements in the decision are not precedents. The judgment is not binding (except directly on the pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., without reference to the relevant provisions of the Act conferring express power on the Municipal Corporation to direct removal of encroachments from any public place like pavements or public streets, and without any citation of authority. Accordingly, we do not propose to uphold the decision of the High Court because, it seems to us that it is wrong in principle and cannot be justified by the terms of the relevant provisions. A decision should be treated as given per incuriam when it is given in ignorance of the terms of a statute or of a rule having the force of a statute. So far as the order shows, no argument was addressed to the court on the question whether or not any direction could properly be made compelling the Municipal Corporation to construct a stall at the pitching site of a pavement squatter." (Emphasis Supplied) Further, in State of M.P. v. Narmada Bachao Andolan, (2011) 7 SCC 639 at 679-680, it was stated: "65. "Incuria" literally means "carelessness". In practice per incuriam is taken to mean per ignoratium. The courts have developed this principle in relaxation of the rule of stare decisis. Thus, the "quotable in law" is avoided an....