TMI Blog2018 (2) TMI 1326X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 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. It is clear, therefore, that where a matter is not argued at all by the respondent, and the judgment is one of reversal, it would be hazardous to state that the law can be declared on an ex parte appraisal of the facts and the law, as demonstrated before the Court by the appellant s counsel alone. That apart, where there is a detailed judgment of the High Court dealing with several authorities, and it is reversed in a cryptic fashion without dealing with any of them, the per incuriam doctrine kicks in, and the judgment loses binding force, because of the manner in which it deals with the proposition of law in question. Also, the ratio decidendi of a judgment is the principle of law adopted having regard to the line of reasoning of the Judge which alone binds in future cases. Section 21A of the Banking Regulation Act is valid as it is part of an enactment which, in pith and substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surious Loans Act which provided that no farmer could be charged a rate of interest higher than the authorised rate- which at that time was 5.5 per cent, and if charged, the case could be re-opened in court and the entire account re-settled. Moreover, the total amount of interest could not be higher than the original capital. But in 1949, the Banking Regulation Act was passed which made a special provision under Section 21 (A) saying that these will not apply to banking companies including cooperative banks. In view of the plight of farmers due to heavy burden of credits, the Committee recommend that section 21 (A) of the Banking Regulation Act should be scrapped. All out concerted efforts should be made to bring down the rate of interest on Farm Credit to the level of 5.5% simple interest, as it used to be in the early 20th century. In case of cooperatives, transaction cost/margin at each layer must be reduced as the length of chain, from RBI to NABARD to State-District and Cooperative Societies at village level and Regional Rural Banks, is very big. Eventually, the farmer has to take the burden of all these middlemen/lending agencies. The Committee, therefore, recommends to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s interest more than the original capital, irrespective of the fact, whether it is a short term loan or long term loan, from small and marginal farmers. Moreover, the issue of cutting the costs/margin at each layer of cooperative has also not been addressed. The Committee, therefore, reiterates their earlier recommendation to shorten the chain of cooperative loan institutions and directly link the eventual creditor to the borrowers. According to the petitioners, a total number of 2,56,913 farmers have committed suicide in India between the years 1995 to 2010, and this is because, and directly linked to, usurious rates of interest being charged from them by banks, which cannot be interfered with by courts, thanks to Section 21A. 3. Shri Sanjay Parikh, learned counsel appearing on behalf of the writ petitioners, took us through the Usurious Loans Act to show that in British India, even a foreign power was alive to the fact that courts need to interdict excessive rates of interest, and have been given complete freedom to do so, depending on the facts of each case, including taking into account the plight of the farmer debtor. He also referred to and relied upon various State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent would have no binding effect as a precedent. He took us through the aforestated report of the Parliamentary Standing Committee on Agriculture for the year 2006-2007 to show that Parliament was alive to the fact that Section 21A ought to be abolished, as it was a very harsh provision which led to farmer suicides on a mass scale. He also argued that the said provision is violative of Article 14, both in its discriminatory aspect as well as the fact that Section 21A is an arbitrary piece of legislation which needs to be struck down. He also argued that, in any case, as an alternative argument, the said Section should be read down when applied to loans given by banks to the rural agricultural sector. 5. On the other hand, Shri Jayant Bhushan, learned senior counsel appearing on behalf of the Reserve Bank of India, referred us to Article 246 of the Constitution and to several judgments thereunder and stated that Section 21A squarely falls within Entry 45, List I of the Seventh Schedule to the Constitution, which is banking . According to him, even if some part of the Section were to incidentally trench upon Entry 30, List II, having regard to the federal paramountcy princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te and carrying on business only within that State. List II- Provincial Legislative List 27. Trade and commerce within the Province; markets and fairs; money lending and money lenders. xxx xxx xxx Constitution of India List I- Union List 45. Banking. List II- State List 30. Money-lending and money-lenders; relief of agricultural indebtedness. xxx xxx xxx Article 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to enact a law relating to the establishment of the Debts Recovery Tribunal is Entry 11-A of List III which pertains to administration of justice; constitution and organisation of all courts, except the Supreme Court and the High Courts . In our opinion, Entry 45 of List I would cover the types of legislation now enacted. Entry 45 of List I relates to banking . Banking operations would, inter alia , include accepting of loans and deposits, granting of loans and recovery of the debts due to the bank. There can be little doubt that under Entry 45 of List I, it is Parliament alone which can enact a law with regard to the conduct of business by the banks. Recovery of dues is an essential function of any banking institution. In exercise of its legislative power relating to banking, Parliament can provide the mechanism by which monies due to the banks and financial institutions can be recovered. The Tribunals have been set up in regard to the debts due to the banks. The special machinery of a Tribunal which has been constituted as per the preamble of the Act, for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Judicial Committee, whereby the impugned statute is examined to ascertain its pith and substance or its true nature and character for the purpose of determining whether it is legislation with respect to matters in this list or in that. 36. Their Lordships agree that this passage correctly describes the grounds on which the rule is founded, and that it applies to provincial as well as to Dominion legislation. No doubt experience of past difficulties has made the provisions of the Indian Act more exact in some particulars, and the existence of the Concurrent List has made it easier to distinguish between those matters which are essential in determining to which list particular provisions should be attributed and those which are merely incidental. But the overlapping of subject-matter is not avoided by substituting three lists for two or even by arranging for a hierarchy of jurisdictions. 37. 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 complaint is made and in what list is its true nature and character to be found. If these questions could not be asked, much beneficent legislatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause the case was so argued in the courts in India. 42. But the same considerations apply in the case of banking. Whether it be urged that the Act trenches on the Federal list by making regulations for banking or promissory notes, it is still an answer that neither of those matters is its substance and this view is supported by its provisions exempting scheduled and notified banks from compliance with its requirements. (Emphasis Supplied) In Virendra Pal Singh v. Distt. Asstt. Registrar, Coop. Societies , (1980) 4 SCC 109 at 113-114, the aforesaid judgment was followed and the U.P. Cooperative Societies Act, 1965, insofar as it dealt with Cooperative banks, was held to be within the sphere of the State List. This Court held: 9. It was strenuously contended by the learned Counsel for the petitioners in some of the cases that the U.P. Cooperative Societies Act, 1965, insofar as it was sought to be made applicable to cooperative banks was beyond the competence of the State Legislature. The argument was that while the subject cooperative societies was included in Entry 32 of List II, banking was a distinct entry by itself in List I of the 7th Schedule (Entry 45) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e slightest doubt that in pith and substance the Act deals with cooperative societies . That it trenches upon banking incidentally does not take it beyond the competence of the State Legislature. It is obvious that for the proper financing and effective functioning of cooperative societies there must also be cooperative societies which do banking business to facilitate the working of other cooperative societies. Merely because they do banking business such cooperative societies do not cease to be cooperative societies, when otherwise they are registered under the Cooperative Societies Act and are subject to the duties, liabilities and control of the provisions of the Cooperative Societies Act. We do not think that the question deserves any more consideration and, we, therefore, hold that the U.P. Cooperative Societies Act was within the competence of the State Legislature. This was also the view taken in Nagpur District Central Cooperative Bank Ltd. v. Divisional Joint Registrar, Cooperative Societies [AIR 1971 Bom 365 : 1971 Mah LJ 932] and Sant Sadhu Singh v. State of Punjab [AIR 1970 P H 528]. (Emphasis Supplied) Similarly, in Harish Tara Refractories (P) Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial relief to the agriculturist debtors in order to get back their property and earn their livelihood. This is undoubtedly a laudable object and the Act is a piece of social legislation. As the decree-holder who had purchased the property is fully compensated by being paid the amount for which he had purchased the property, it cannot be said that his right to hold the property has been completely destroyed. The purchaser gets the property at a distress sale and is fully aware of the pitiable conditions under which the debtor was unable to pay the debt. In a Constitution which is wedded to a social pattern of society the purchaser must be presumed to have the knowledge that any social legislation for the good of a particular community or the people in general can be brought forward by Parliament at any time. The Act, however, does not take away the property of the purchaser without paying him due compensation. It is true that Section 20(2)( b ) provides for payment of the purchase money by instalments, but no exception can be taken to this fact as in view of the poverty of the debtor it is not possible for him to pay the debt in a lump sum and as the legislation is for a partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this Court s decision in Fatehchand Himmatlal v. State of Maharashtra [(1977) 2 SCC 670 : (1977) 2 SCR 828]. It has however been argued that the entry would not permit the making of a law relating to the debt of an agriculturist which has already been paid by sale of his property in execution of a decree and is not a subsisting debt. 57. It is true that Section 20 of the Act provides for the setting aside of any sale of immovable property in which an agriculturist had an interest, if the property had been sold, inter alia, in execution of any decree for the recovery of a debt: ( a ) on or after November 1, 1956, or ( b ) before November 1, 1956, but possession whereof has not actually passed before November 20, 1957, from the judgment-debtor to the purchaser, and the decree-holder is the purchaser, on depositing one-half of the purchase money together with the cost of the execution etc. The section therefore deals with a liability which had ceased and did not subsist on the date when the Act came into force. But there is nothing in Entry 30 of List II to show that it will not be attracted and would not enable the State Legislature to make a law simply because the debt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land mortgage bank; and (c) any other co-operative society, except in the manner and to the extent specified in Part V. xxx xxx xxx 5. Interpretation In this Act, unless there is anything repugnant in the subject or context, - (b) banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise; (c) banking company means any company which transacts the business of banking in India; Explanation.--Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause; (d) company means any company as defined in section 3 of the Companies Act, 1956 (1 of 1956); and includes a foreign company within the meaning of section 591 of that Act; xxx xxx xxx 6. Forms of business in which banking companies may engage (1) In addition to the business of banking, a banking company may engage in any one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form the security or part of the security for any loans or advances or which may be connected with any such security; (h) undertaking and executing trusts; (i) undertaking the administration of estates as executor, trustee or otherwise; (j) establishing and supporting or aiding in the establishment and support of associations, institutions, funds, trusts and conveniences calculated to benefit employees or exemployees of the company or the dependents or connections of such persons; granting pensions and allowances and making payments towards insurance; subscribing to or guaranteeing moneys for charitable or benevolent objects or for any exhibition or for any public, general or useful object; (k) the acquisition, construction, maintenance and alteration of any building or works necessary or convenient for the purposes of the company; (l) selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing of or turning into account or otherwise dealing with all or any part of the property and rights of the company; (m) acquiring and undertaking the whole or any part of the business of any person or company, when such business is of a nature enumerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpression banking contained in Entry 45, List I is to be given a wide meaning. There can be no doubt that the statute as a whole and the aforesaid Section does fall within Entry 45, List I. 12. The effect of the aforesaid Section is to put out of harm s way the Usurious Loans Act and all State Debt Relief Acts. The Usurious Loans Act was enacted in 1918; its object being to confer on Courts in India an equitable jurisdiction in cases relating to unconscionable usurious contracts. Section 2(1) and 2(2) define interest and loan respectively in the widest terms as under: 2. Definitions. In this Act, unless there is anything repugnant in the subject or context,- (1) interest means rate of interest and includes the return to be made over and above what was actually lent, whether the same is charged or sought to be recovered specifically by way of interest or otherwise. (2) loan means a loan whether of money or in kind and includes any transaction which is, in the opinion of the Court, in substance a loan. Section 3, which is the operative Section in the said Act, reads as follows:- 3. Reopening of transaction . Notwithstanding anything in the Usur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of risk, the Court shall take into account the presence or absence of security and the value thereof, the financial condition of the debtor and the result of any previous transactions of the debtor, by way of loan, so far as the same were known, or must be taken to have been known, to the creditor. (d) In considering whether a transaction was substantially unfair, the Court shall take into account all circumstances materially affecting the relations of the parties at the time of the loan or tending to show that the transaction was unfair, including the necessities or supposed necessities of the debtor at the time of the loan so far as the same were known, or must be taken to have been known, to the creditor. Explanation.- Interest may of itself be sufficient evidence that the transaction was substantially unfair. (3) This section shall apply to any suit, whatever its form may be, if such suit is substantially one for the recovery of a loan or for the enforcement of any agreement or security in respect of a loan or for the redemption of any such security. (4) Nothing in this section shall affect the rights of any transferee for value who satisfies the Court that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of a debt shall be made against a farmer described in clause (b) of sub-section (1) of section 5 and no appeal, revision petition or application for review against any decree or order in any such suit or application shall be presented or made against such a farmer in any Civil Court, or Tribunal or other authority, and such suits, applications, appeals and petitions instituted or made against such a farmer before the date of declaration of a district or part thereof as a distress affected area and pending on such date shall stand stayed, for such period as the Commission may recommend in that behalf. 12. Payment of debt in instalments (1) Notwithstanding anything contained in any law or contract or in any decree or order of any Court or Tribunal, a farmer described in clause (b) of sub- section (1) of section 5 may discharge his debts in suitable instalments together with fair rate of interest as recommended by the Commission on the principal amount outstanding at the time of each payment, in the manner as may be directed by the Commission and on payment of the same in the manner directed by the Commission, the whole debt shall be deemed to be discharged. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bihar Money-Lenders Act, 1938, Sections 9, 10 and 11 of the Orissa Money-Lenders Act, 1939, Sections 31 and 36 of the Bengal Money-Lenders Act, 1940 and Sections 23, 24 and 29 of the Bombay Money-Lenders Act, 1946. Obviously, the addition of the subject relief of agricultural indebtedness , for the first time, by the Constitution would refer to relief of agricultural indebtedness not only from money lenders, but also from all persons who give loans including banks. For otherwise, the subject matter relief of agricultural indebtedness would have been subsumed within money lending and money lenders and would have been wholly unnecessary to add as a subject matter separate and distinct from money lending and money lenders . That money lending and money lenders is separate and distinct from relief of agricultural indebtedness is also clear from the fact that money lending is not restricted to the agricultural sector, but would include, within its scope, money lent to all persons, including purely commercial transactions. Also, there are many subjects in the Seventh Schedule which are contained in one entry, but which deal with divergent matters. For example Entry 5, L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obvious that Article 246 imposes limitations on the legislative powers of the Union and State legislatures and its ultimate analysis would reveal the following essentials: 1. Parliament has exclusive power to legislate with respect to any of the matters enumerated in List I notwithstanding anything contained in clauses (2) and (3). The non obstante clause in Article 246(1) provides for predominance or supremacy of Union legislature. This power is not encumbered by anything contained in clauses (2) and (3) for these clauses themselves are expressly limited and made subject to the non obstante clause in Article 246 (1). The combined effect of the different clauses contained in Article 246 is no more and no less than this: that in respect of any matter falling within List I, Parliament has exclusive power of legislation. 2. The State legislature has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II of the Seventh Schedule and it also has the power to make laws with respect to any matters enumerated in List III. The exclusive power of the State legislature to legislate with respect to any of the matters enu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Act, 1935 Gwyer, C.J. observed: It is a fundamental assumption that the legislative powers of the Centre and Provinces could not have been intended to be in conflict with one another and, therefore, we must read them together, and interpret or modify the language in which one is expressed by the language of the other. In all cases of this kind the question before the Court , according to the learned Chief Justice is not how the two legislative powers are theoretically capable of being construed, but how they are to be construed here and now . (Emphasis Supplied) To similar effect is the judgment cited by Shri Bhushan, Sudhir Chandra Nawn v. WTO , (1969) 1 SCR 108 at 113, where the Court held: Exclusive power to legislate conferred upon Parliament is exercisable, notwithstanding anything contained in clauses (2) (3), that is made more emphatic by providing in clause (3) that 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, but subject to clauses (1) and (2). Exclusive power of the State Legislature has therefore to be exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Entry 24. If industry in Entry 24 is interpreted to include gas and gasworks, Entry 25 may become redundant, and in the context of the succeeding entries, namely, Entry 26, dealing with trade and commerce, and Entry 27, dealing with production, supply and distribution of goods it will be deprived of all its contents and reduced to useless lumber . If industrial, trade, production and supply aspects are taken out of Entry 25, the substratum of the said entry would disappear: in that event we would be attributing to the authors of the Constitution ineptitude, want of precision and tautology. On the other hand, the alternative contention enables Entries 24 and 25 to operate fully in their respective fields: while Entry 24 covers a very wide field, that is, the field of the entire industry in the State, Entry 25, dealing with gas and gas-works, can be confined to a specific industry, that is, the gas industry. There may be many good reasons for the authors of the Constitution giving separate treatment to gas and gas-works. If one can surmise, it may be that, as the industry of gas and gas-works was confined to one or two States and was not of all-India importance, it was carved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied) 17. At this stage, it is important to advert to a judgment of this Court in Central Bank of India v. Ravindra, (2002) 1 SCC 367 at 402. This judgment states: 55. During the course of hearing it was brought to our notice that in view of several usury laws and debt relief laws in force in several States private moneylending has almost come to an end and needy borrowers by and large depend on banking institutions for financial facilities. Several unhealthy practices having slowly penetrated into prevalence were pointed out. Banking is an organised institution and most of the banks press into service long-running documents wherein the borrowers fill in the blanks, at times without caring to read what has been provided therein, and bind themselves by the stipulations articulated by the best of legal brains. Borrowers other than those belonging to the corporate sector, find themselves having unwittingly fallen into a trap and rendered themselves liable and obliged to pay interest the quantum whereof may at the end prove to be ruinous. At times the interest charged and capitalised is manifold than the amount actually advanced. Rule of damdupat does not apply. Penal interest, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f to this Court in Duni Chand Rateria case [(1955) 1 SCR 1071] . Therefore, if the question were simply whether a law on Forward Contracts would be a law with respect to Trade and commerce, there should be no difficulty in answering it in the affirmative. But the point which we have got to decide is as to the scope of the entry Trade and commerce read in juxtaposition with Entry 48 of List I. As the two entries relate to the powers mutually exclusive of two different legislatures, the question is how these two are to be reconciled. Now it is a rule of construction as well established as that on which the appellants rely, that the entries in the Lists should be so construed as to give effect to all of them and that a construction which will result in any of them being rendered futile or otiose must be avoided. It follows from this that where there are two entries, one general in its character and the other specific, the former must be construed as excluding the latter. This is only an application of the general maxim that Generalia specialibus non derogant . It is obvious that if Entry 26 is to be construed as comprehending Forward Contracts, then Futures Markets in Entry 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited that strata. On the other hand, the debt represents accumulations of decades. The debt legislation in the various provinces has not, admittedly, been able to touch even the fringe of the problem. We feel it necessary, therefore, that the debt should be compulsorily scaled down and then taken over by the State. Experiments made in this direction in the Province of Madras, for example, serve as a useful pointer. Under the working of the Madras Agriculturist' Relief Act of 1938, debts were scaled down by about 47 per cent and the provisions of the Act can, by no logic be characterized as drastic. In the Punjab, under the operations of the Debt Conciliation Boards, debts amounting to 40 lakhs were settled for about 14 lakhs. It should, therefore, be possible and just be considered as necessary to scale down the present debts to about 25 per cent before they are taken over by the State. Assuming the present indebtedness to amount to about ₹ 1,000 crores the debt to be taken over by the State will come to about ₹ 250 crores. The compensation to be paid to the rent-receivers as well as to the usurers will thus amount to ₹ 1985 crores. This should be paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; land improvement and agricultural loans; colonization. 45. Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenues. 46. Taxes on agricultural income. 47. Duties in respect of succession to agricultural land. 48. Estate duty in respect of agricultural land. Entries 82, 86, 87 and 88, List I and Entries 6 and 7, List III also specifically exclude agriculture as follows: 82. Taxes on income other than agricultural income. 86. Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies. 87. Estate duty in respect of property other than agricultural land. 88. Duties in respect of succession to property other than agricultural land. xxx xxx xxx 6. Transfer of property other than agricultural land; registration of deeds and documents. 7. Contracts including partnership, agency, contracts of carriag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Subrahmanyan Chettiar v. Muttuswami Goundan , AIR 1941 FC 47, the Federal Court was faced with the constitutional validity of the Madras Agriculturists Relief Act, 1938. Gwyer, CJ, speaking for the majority, found that the Madras Act is an attempt to deal, in a very drastic manner, with the problem of rural indebtedness which has vexed legislators since the days of Solon . The precise question that arose before the Federal Court was whether the Madras Act trespassed into the federal field covered by Entry 28, List I, where the Federal legislature has an exclusive power to legislate with respect, inter alia, to promissory notes. Section 79 of the Negotiable Instruments Act, 1881, expressly clashed with the Madras Act in that, in a promissory note where interest at a specified rate is expressly made payable, interest is to be calculated at that rate until payment or until such date after the institution of a suit to recover the amount, as the Court directs. Inasmuch as the Madras Act scales down such interest, a direct clash between the provisions of Madras Act and the Negotiable Instruments Act became inevitable. 24. The majority answered the question by upholding the Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no defect so long as the trespass is upon an unoccupied field. Engrafted upon the doctrine of incidental encroachment there is the further doctrine of unoccupied field. xxx xxx xxx In Jai Gobind Singh v. Lachmi Narain Ram (1940) 3 F.L.J. 46 p. 51, where the amount due on an earlier promissory note had formed part of the mortgage money, I distinguished the case by pointing out that the suit being on a mortgage the field was apparently clear, and, therefore, the question of interfering with the interest due on the promissory note did not directly arise. No Canadian case has been cited before us in which although the subject of legislation was substantially within S. 92, it not only incidentally encroached upon a subject mentioned in S. 91, but at the same time actually clashed with an existing Dominion legislation . (Lord Tomlin s fourth proposition, in Attorney General for Canada (supra), namely, There can be a domain in which provincial and Dominion legislation may overlap, in which case neither legislation will be ultra vires if the field is clear, but if the field is not clear and the two legislations meet the Dominion legislation must prevail , must be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gold industry under Entry 52, List I, as has the Gold Control Act, 1968, and that, therefore, Entry 24, List II, being subject to Entry 52, List I, has become inoperative. This does not however mean that Entry 30, List II, which deals with money lending, has been rendered inoperative and, therefore, the Maharashtra Debt Relief Act, made under Entry 30, List II, would remain intact. The learned Judge also went on to refer to Entries 6 and 7 of List III and to Article 254(2) of the Constitution stating that if it were to be held that the Debt Relief Act related to contracts, then, having received Presidential assent, it would prevail over the aforesaid Central enactments in the State of Maharashtra in light of Article 254(2). It is in this context that the general observation as to Parliamentary paramountcy, in paragraph 56 of the judgment, is made. Obviously where an entry in List II is itself subject to the corresponding entry in List I and, by the requisite declaration, Parliament occupies the field, the State legislatures are denuded of legislative competence only because the particular entry, namely Entry 24, List II, is expressly subject to Entry 52, List I. This is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the State legislature is not unoccupied. 29. The paramountcy principle contained in Article 246, as we have seen, is only taken as a last resort after harmonious construction fails, and, that too, qua entries in competing lists. Once legislation is referable to one list or the other, the doctrine of incidental trenching and unoccupied field would apply equally to both Parliamentary and State legislations. In the very first judgment of the Federal Court, In Re CP Berar Sales of Motor Spirit Lubricants Taxation Act, 1938 AIR 1939 FC 1 at 31, Jayakar, J. set out principles that were evolved on a reading of the British North America Act by the Privy Council, which would prove to be a useful guide to the construction of Section 100 of the Government of India Act, 1935, which was the precursor of Article 246 of the Constitution. These principles were set out as follows: (1) That the provisions of an Act like the Government of India Act, 1935, should not be cut down by a narrow and technical construction, but, considering the magnitude of the subjects with which it purports to deal in very few words, should be given a large and liberal interpretation, so that the Central Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India [ S.R. Bommai v. Union of India , (1994) 3 SCC 1], the learned Judge has gone to observe as follows: ( ITC Ltd. case [ ITC Ltd. v. Agricultural Produce Market Committee , (2002) 9 SCC 232], SCC p. 282, paras 93-94) 93 . 276 . The fact that under the scheme of our Constitution, greater power is conferred upon the Centre vis- -vis the States does not mean that States are mere appendages of the Centre. Within the sphere allotted to them, States are supreme. The Centre cannot tamper with their powers. More particularly, the courts should not adopt an approach, an interpretation, which has the effect of or tends to have the effect of whittling down the powers reserved to the States. ( S.R. Bommai case [ S.R. Bommai v. Union of India , (1994) 3 SCC 1], SCC pp. 216-17, para 276) 94 . Although Parliament cannot legislate on any of the entries in the State List, it may do so incidentally while essentially legislating within the entries under the Union List. Conversely, the State Legislatures may encroach on the Union List, when such an encroachment is merely ancillary to an exercise of power intrinsically under the State List. The fact of encroachmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly with activities relating to sale of secured assets by banks, Section 187 of the Tripura Act, to the extent it is inconsistent with the SARFAESI Act, must give way. 31. It is also important to notice that paragraph 12 of the aforesaid judgment sets out paragraphs 13 to 15 of the Constitution Bench judgment in Special Reference No.1 of 2001, (2004) 4 SCC 489. ( In this case, a Constitution Bench of this Court had to decide on whether a Gujarat statute, which defined gas as being predominantly methane gas, was ultra vires the State legislature. The competing entries were Entry 53, List I and Entry 25, List II. Entry 53, List I dealt, inter alia, with petroleum, whereas Entry 25, List II dealt with gas and gas works. The Constitution Bench went into great detail in considering various Acts, judgments and other authorities, including dictionaries, and held that natural gas fell within the definition of petroleum , and further that Entry 25, List II referred only to manufactured gas, as is evident from the expression gas works , which is defined as a plant for manufacture of artificial gas . The Constitution Bench was careful to indicate, in paragraph 43 of the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot give itself supremacy over State legislation where none exists under the Constitution. If this were not the case, the exclusive power of the States to make laws within List II would become illusory, and Parliamentary paramountcy would trap many a beneficent State legislation made within its exclusive domain, contrary to the statement of law laid down by the Privy Council in Prafulla Kumar (supra), and contrary to principle (4) laid down by Jayakar, J. in In Re CP Berar Sales (supra), both of which have been consistently followed by several judgments of this Court. 33. In fact, a reading of the entries in List II would demonstrate that certain entries in List II are subject to entries in Lists I and III. These are set out hereinbelow:- 2. Police (including railway and village police) subject to the provisions of Entry 2-A of List I. 13. Communications, that is to say, roads, bridges, ferries, and other means of communication not specified in List I; municipal tramways; ropeways; inland waterways and traffic thereon subject to the provisions of List I and List III with regard to such waterways; vehicles other than mechanically propelled vehicles. 17. Water, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty. (Entry 32, List II is to be read with Entries 43 and 44 of List I; and Entry 63, List II is to be read with Entry 91, List I.) 36. All the other entries of the State List give exclusive power to the States to legislate on the subject matters mentioned therein. If Shri Jayant Bhushan s submission is to be accepted, this threefold scheme contained within List II itself would be violated. If Parliamentary legislation were to invade an exclusive sphere of the State, and were to prevail over State legislation made within the States exclusive powers, all the entries of List II would be subjected to entries of List I, which is not the constitutional scheme. Further, only one entry, namely, Entry 12 of List II, specifically excepts ancient and historical monuments and records, if Parliament declares them, by law, to be of national importance. The argument, therefore, that Section 21A is made by Parliament at the national level and is of national importance and must, therefore, prevail over State legislation made within the exclusive subject matters of List II, would again fall foul of the constitutional scheme, in that all the entries of List II would then be subject to Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccept his submission, Parliament would be denuded of legislative competence altogether to deal with the subject matter of relief against debts due to banks from the agricultural sector. 39. The next important question is as to whether the judgment of this Court in Yasangi Venkateswara Rao (supra) is binding on this Bench having been delivered by another earlier 2-Judge Bench of this Court. 40. In order to appreciate the answer to this question, it is necessary to indicate what was held by the judgment of the learned Single Judge of the Andhra Pradesh High Court in State Bank of India, In re , (supra). After setting out the Banking Regulation Act and the scope of Section 21A, Section 21A was contrasted with the A.P. Agriculturists Relief Act, 1938, and it was held that the purpose, operation and effect of Section 21A of the Banking Regulation Act is not even remotely connected with the purpose, operation and effect of the A.P. Agriculturists Relief Act, which was held to be a special law enacted to relieve agriculturist debtors. It was further held that charging excessive interest was no longer part of the A.P. Agriculturists Relief Act, and, therefore, the spheres of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thoritative works and judgments of this Court. In Precedent in English Law by Cross and Harris (4th edn.), ratio decidendi is described as follows: The ratio decidendi of a case is any rule of law expressly or impliedly treated by the judge as a necessary step in reaching his conclusion, having regard to the line of reasoning adopted by him, or a necessary part of his direction to the jury. (at page 72) 43. In Dalbir Singh v. State of Punjab (1979) 3 SCR 1059 at 1073-1074, a dissenting judgment of A.P. Sen, J. sets out what is the ratio decidendi of a judgment: According to the well-settled theory of precedents every decision contains three basic ingredients: ( i ) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct or perceptible facts; ( ii ) statements of the principles of law applicable to the legal problems disclosed by the facts; and ( iii ) judgment based on the combined effect of ( i ) and ( ii ) above. For the purposes of the parties themselves and their privies, ingredient ( iii ) is the material element in the decision for it determines finally thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, in the province of Art. 311 and it is clear that a body may be State under Part III but not under Part XIV. Ray, C.J., rejected the argument that merely because the Prime Minister was the President or that the other members were appointed and removed by Government did not make the Society a State . With great respect, we agree that in the absence of the other features elaborated in Airport Authority case (1979) 3 SCC 489, the composition of the Governing Body alone may not be decisive. The laconic discussion and the limited ratio in Tewary (supra) hardly help either side here. Also, in Municipal Corpn. of Delhi v. Gurnam Kaur , (1989) 1 SCC 101 at 110, this Court stated: 11. Pronouncements of law, which are not part of the ratio decidendi are classed as obiter dicta and are not authoritative. With all respect to the learned Judge who passed the order in Jamna Das case [Writ Petitions Nos. 981-82 of 1984] and to the learned Judge who agreed with him, we cannot concede that this Court is bound to follow it. It was delivered without argument, without reference to the relevant provisions of the Act conferring express power on the Municipal Corporation to direct rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re cases. Such principle can only be laid down after a discussion of the relevant provisions and the case law on the subject. If only one side is heard and a judgment is reversed, without any line of reasoning, and certain conclusions alone are arrived at, without any reference to any case law, it would be difficult to hold that such a judgment would be binding upon us and that we would have to follow it. In the circumstances, we are of the opinion that the judgment in Yasangi Venkateswara Rao (supra) cannot deter us in our task of laying down the law on the subject. 44. In view of what has been held by us, it is not necessary for us to go into the arguments relating to Article 14, more so in view of the fact that counsel appearing for the Union of India and the Reserve Bank of India are correct in stating that there is no pleading worth the name which would rebut, on facts, the presumption of constitutionality that attaches to Section 21A of the Banking Regulation Act. References to RBI circulars and the counter affidavits filed in the present writ petition again do not take us much further, as what has to be decided is a pure question of legislative competence. Concl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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