Title not extracted — [1985] Supp. 1 S.C.R. 145

impressed before this Court that the same reasoning should apply in view of the similarity of provisions of the Central Act as with A Cardamom Act as it should have been held logically by the High Court that the State Legislature was not competent to extend market· ing provisions to tobacco in the State Act. Tobacco was brought within the network of the Act by virtue of Karnataka Act 17 of 1980. B Two broad principles should be borne in mind in deciding the controversy of this nature. One is whether a particular legislation or enactment is within the competence of particular legislature must be judged after finding out the pith and substance, in other words the true nature and character, of the legislation in question and c secondly the entries in the list should be given liberal and generous construction. All the entries should be construed in harmonious manner so as to avoid conflict. In case of conflict, however, in respect of entries where both the State and the Centre can legislate, the Central legislation would prevail over the State legislation in view of the provisions of Articles 245 to 254 of the Constitution. It D was submitted that the effect of the declaration under section 2 of the Central Act pursuant to Entry 52 of List I is that the Parliament has exclusive competence to legislate upon every aspect or activity pertaining to 'tobacco' including marketing thereof and the State would have no competence to legislate on that topic. As mentioned hereinbefore a declaration under Entry 52 of List I of Vllth Schedule has been made in respect of tobacco. Entry 52 of the said li5t provides 'Industries, the control of which by the Union is declared by Parliament by law to be expedient in the public interest.'

It is well· settled that the cardinal rule of interpretation is that the words should be read in their ordinary natural and grammatical meaning. But words in a constitutional document conferring legislative powers should also be construed most liberally and in their widest amplitude. See Navinchandra Mafatlal v. C. /. T. Bombay(!). On behalf of the appellants reliance was placed on the observations in the case of Baijnath v. Bihar Statee) that once a declaration was made, any legislation by the State after such decla- ration trenching upon the field disclosed in the declaration must necessarily be unconstitutional because that field is abstracted from the legislative competence of the State Legislature. See Konnan H 0) [195511 S.C.R. 829 at paae;836·37. (2) [1970] 2 S.C.R. 100 at 113.

272 SUPREME COURT REPORTS (1985) SUPPL. S.C.R,

Devan Hills Co. v. Kerala( 1) and Ganga Sugar Co. Ltd. v. State of A U.P.e) where dealing with the sugar industry, this Court observed that it was undisputed that sugar industry was a controlled industry, within the meaning of entry 52, List I of 7th Schedule and therefore, the legislative power of Parliament covered enactments with respect to industries having regard to Article 246(1) of the Constitution. ff the im?ugned legislation invaded Entry 52 it must be repulsed by B the Court.

It was urged that in the instant case declaration under section 2 of the Central Act was in respect of the tobacco industry and not any particular type of tobacco as held by the High Court c that it was only virginia tobacco. Therefore, there was no warront for restricting or limiting the width and amplitude of the words "tobacco industry" and confining it to a particular type or kind of tobacco.

Sofas as it was submitteed that the Central Act was not D concerned with virginia tobacco only but covered other tobaccos the High Court was in error. On the construction of the Central Act read with the rules it appears to us that the said Central Act and the declaration made by section 2 of the said Act covers all kinds of tobaccos. E It is well-settled principle that Article 246 recognised the principle of Parliamentary supremacy in the field of legislation in case where both legislatures have competence to legislate (emphasis supplied). The constitutional scheme is that Parliament has full and exclusive power to legislate with respect to matters in Li~t I and has F also power to legislate with respect to matters in List Ill. A State Legislature has exclusive power to legislate with respect to matters in List II, excluding the matters falling in List I or List III and has also concurrent power to legislate with respect to matters falling in List III excluding matters falling in List I. The dominant position of the G Central Legislature with regard to matters in List I and List Ill is established. See in this connection the decision in Subrahmanyam v. Muthuswamy.(S) Justice Suliaman in that case observed that the rigour of that 1itera1 interpretation of section 100 of the Government

H (1) [1973]1 S.C.R. 356 at 369. (2) [1980] 1 S.C.R. 769 at 781. (3) {1940]45 C.W.N. (FC) l=A.I.R. 1941 FC 47 at 57-58.

I.T.C. P. KARNATA'K!A ($. Mukharjl, J.) 273

of India Act, 1935 with which Federal Court was concerned in that decision was relaxed by the use of the words ''with respect to which only signify pith and substance" and do not forbid a mere incidental encroachment. This is also the position that emerges from Article 246(1) of the Constitution.

It was submitted on behalf of the appellants that the power of the State Legislature with respect to matters in List II was made subject to the power of Parliament to legislate with respect to matters in List I and therefore followed that if any entry in List I and List II appeared to overlap, if these appeared partly to cover the same field, the field of legislation covered by the entry in List I must be considered to be taken out of the scope of the entry in List II and c reserved to be only dealt with the Parliament. In other words, to that extent the power of the State Legislature must be considered to be curtailed and the field must be held to have been occupied by the Centre.

In the present case the Central Act, it was urged, fell within D entry 52 of List I. To the extent that Karnataka State Act, by amending tue Schedule brought tobacco within the provisions of the State Act, it was urged that it was beyond the competence of the State Legislature and it had encroached upon the Union List. E It was. further, submitted that in any event that the compe· tence of the Parliament to legislate in respect of a matter which is exclusively entrusted to it must supersede pro-tanto the exercise of power of the State Legislature. Reliance was placed on Sudhir Chand v. Wealth Tax Officer, Calcutta(!). But in resolving the rights F of -:omponent units of federal or quasi-federal set up (to which category, however, Indian Constitutional set up belongs-no Con- stitutional pundit has yet been able to say) earne~t endeavour should be made to avoid a conflict between two competing enteries, as to too liberal an interpretation given to both of them might create a clash. Therefore it was urged that the competence of the Karnataka G State Legislature with regard to marketing of tobacco and levy of 'market fee thereon under entry 28 read with entry 66 of List II which is "markets and fairs" stood pro-tanto superseded by the exercise of the Parliamentary power under entry 52 read with entry 96 of Lbt I. H

(1) [1969] S.C.R. 108 at 113.

274 SUPREME COURT REPORTS (1985) SUPPL. S,C.R.

It was urged that in the case of Ch. Tika Ramji & Others Etc. A v. The State of Uttar Pradesh & Others(1), this Court rejected the contentions that all sugarcane legislation linked to sugar industry was sugar legislation. Furthermore, on the facts of the case, the Court came to the conclusion that the impugned Act did not concern itself at all with the controlling or licensing of B sugar industry or with the production or manufacture of sugar or with trade and commerce in sugar and therefore, there was no trenching upon the Union List by the impugned State Act. Reliance was placed on the observations at pages 422·23 of the said decision, mentioned hereinbefore. Reliance was also placed at pages 783·84 in the case of Ganga Sugar Co. Ltd. v. State of U.P. c (supra).

It was submitted on behalf of the appellants that the State Legislature lost its competence because the field was occupied by Parliament in view of the declaration under section 2 of the Central Act. It was evident, it was urged, that the intention to cover the D whole field has been expressed by the Central Act and as intended, the Central Act is complete and exhaustive Code in respect of tobacco. Consequently, the enactment of the subsequent State Legislation was overborne on the ground of repugnancy. Reliance was placed on the decision in the case of State of Orissa v. M.A. E Tulloch & Co.(2).

The following submissions were placed before us on the ground of repugnancy : (I) There may be inconsistency in the actual terms of the competing statutes. (See R.V. Brishbane Licensing Court, [1920] 28 C.L.R. 23.

(2) There may be no direct conflict and the State law may be inoperative because the Commonwealth law or the award of the Commonwealth Court was intended to be a complete exhuastive code (Clyde Engineering Co. Ltd. v. Cowburn [1926] 37 C.L.R 466).

(3) Even in the absence of intention, a conflict may arise when both State Legislature and Commonwealth

(I) [1956] S.C.R. 393. (2) [1964l4 S.C.~. 461 at 477,

I.T.C. V. KARNATAKA (S. Mukharji, J.) 275

seek to exercise their powers on the same subject Victoria v. Commonwealth, [1937] 58 C.L.R. 618; A Wenn Attorney General (Viet.) [1948] 77 C.L.R. 84) Nicholas, Australian Constitution 2nd Edn. at p. 303. Tikar(Jmji [1956} SCR 393 at 424-425. Deep Chand v. State of U.P. [1959] Suppl. 2 SCR p. 8 at

43. Ex-Parte Mclean [1930] 43 C.L.R. 472 at 483 B and the observations of Justic B.N. Rau in the Calcutta decision of G.P. Stewart v. B.K. Roy Choudhury (AIR 1939 Cal. 628 at 634). As Sir B.N. Rau mentioned in Stewart v. Brogendra Kishore- the principles deducible from these cases seem to be-if the dominant law bas expressly or impliedly evinced its intention, an intention to cover the whole field, then a subordinate law in the same field is repugnant and, therefore, inoperative, whether and to what extent in a given case the dominant law evinces such an intention must necessarily depend on the language of the particular law.

Applying these tests, it would be apparent, it was submitted by the appellants that the State Act was repugnant to the Central Act. E It was final1y submitted that in any event without prejudice to other submissions that so far as tobacco was concerned, no service had in fact been rendered by the market committees nor could they in law be rendered because of legal constraints imposed by the pro- visions of the Central Act and, in particular, section 12 and rule 35 of the Tobacco Board Rules, 1976. By virtue of section 12, the F Market Committees could not auction or deal in tobacco at all unless these were registered with the Board in accordance with the Central Act.

It was evident from the letters dated 15.9.1983 and 23.9.1983 at pages 462 and 466 of the Paper Book that the market committees had not been and even today registered under the Central Act and were therefore incapable of rendering any service at all. For this reason there was complete failure of quid-pro-quo and therefore H there cannot qe any char~e of fees by enacting State le~islation on tobacco~

276 SUPREME COURT REPORTS (1985] SUPI>L. S.C.R.

It appears that the principles of repugnancy in Indian Consti- A tution are well-settled. These are as follow :

(1) A legislation, which in its pith and substance, falls within any of the entries of List I of the Seventh Schedule to the Constitution, would be exclusively within the competence of the Parliament. B (2) A legislation falling exclusively, in its pith and sub- stance, within any of the entries in List II of the Seventh Schedule, would be within the exclusive competence of the State Legislature. c (3) A Central law which in its pith and substance, falls within any entry in List I would be valid even though it might contain incidental provisions in List II which may contain ancilliary provisions which might touch on an entry of List I incidentally. D (4) A State law, which in its pith and substance, within any entry in List II would be valid even though it might incidentally touch upon a subject falling within List I. E (5) A Central law, which in its pith and substance, dealt with a subject falling within List II would be bad and ultra vires the Constitution. Similarly, a State law which in its pith and · substance dealt with a matter falling within List I would be invalid and F ultra vires the Constitution.

(6) The concept of repugnancy arises only with regard to laws dealing with subjects covered by the entries falling in List III in respect of which both Parlia- ment and State Legislature _are competent to legisl· G late. Under Article 254 of the Constitution, a State law passed in respect of a subject matter comprised in List III would be invalid if its provisions were repugnant to a law passed on the same subject by H Parliament. The repugnancy arose only if both the laws could not exist together. Repugnancy does not arise simply because Parliament and the States {lass law on the same subject. There cannot be any

I•T.C. Y, KARNATAKA (S. Mukharji, ),)

repugnancy in respect of State laws passed in respect of matter falling pith and substance in List II or in A respect of Central laws passed on subject falling in List I. Parliament cannot legislate on a State subject and State cannot legistate on a Central subject. If either trenches upon the field of the other, law will be ultra vires~ See in this connection 8 M/s Hoechst Pharmaceuticals Ltd. & Others Etc. v. State of Bihar and Others (1) etc., Ramesh Chandra Etc. v. State of U.P, Etc. (supra) at page 135 and The Calcutta Gas Company (Proprietary) Ltd. v. The State of West Bengal and Othe;s.(2) Like entry 25 of List 11-Gas and Gas Works-without any limitation G entry 28 in List 11-io respect of any legislation which is in substance and true nature deals with 'markets and fairs' read v. ith entry 66 of the said List has complete as.::endency and there cannot be any intrusion of that filed by another entry-See in this connection the discussion on "Union & State D Relation under the Indian Constitution"-M.C. Setalvad-p. 48, 49. In Calcutta Gas Company's case (supra) by comparison of entry 7 and enty 52 of List I with entry 25 of List II, this Court upheld State legislation of take over the Gas industry in E spite of declaration under entry 52.

In the present case the Karnataka Marketing Act deals with the subject of market in entry 28 read with entry 66 of List II. Such Acts are covered by entry 28 of List II exclusively unlike entries 23, 24, 26 and 27. It is important to bear in mind that entry 28 is not subject to withdrawal into List I by Parliament as under entries 52 and 54 of List I and entry 33 of List III. The State Act is not on a subject in List III- nor is the Central Act a law relating to any subject in List III. Therefore, there cannot be any question of repugnancy. Section 31 of the Central Act makes it clear that it does not derogate G from any law but enacts something in addition.

In the High Court, counter-affidavits were filed to establish the quld·pro·quo and rendering of the services to the traders including H

(1) [1983] 4 s.c.c. 45. (2} {1962]3 Supp. S.C.R. _1.

278 SUPREME COURT REPORTS (1985) SUPPL. S.C.:R.

tobacco merchants by the respective six market committees. In fact A before the High Court, no contention, as it appears from the judgment impugned, was at all aqvanced on the question of services to tobacco trade in the markets concerned. In fact they are entitled to the same services as other traders as provided by the Act. The provisions of the Marketing Act and Tobacco Board Act and the Rules are not inconsistent. ·B It is therefore necessary to note the true nature ·and character of the Acts namely the Karnataka Agricultural Produce Marketing Act, 1966 and the Central Act. The Marketing Act is an Act as the preamble states, for the better regulating of buying and selling of c agricultural produce and establishment and a administration of markets for agricultural produce and whereas it was th0ught cxpedi· ent to provide for the better regulation of buying and selling agricul- ture produce and establishment of markets for agricultural produce and matters connected therewith that the State Act was passed. I have noted some of the salient features of the Act. The Act y,as to .D regulate the sale and purchase of agricultural produce and 'tobacco' was introduced by Act 17 of 1980 as one of the agricultural produces and thereby it was sought to be brought within its purview. The Act constituted different market committees. It laid down the functions, duties of the market committees and matters incidental E thereto. It imposed obligations to impose fees for better maintence of markets, in oth<:"r words for better administration of markets. The Central Act was an Act to provide for the control of the union of tobacco industry. How better to control the industry of tobacco was the object of the Central Act. For this purpose I have noted the salient features of the Act, the functions and duties of Tobacco F Board, the regulation of production and disposal of virginia tobacco.

Clause (cc) of sub-section (2) of section 8 of the Central Act authorised the Board to establish auction platforms with the approval of the Central Government for sale of tobacco and for the function- G ing ofthe Board as an auctioneer and that the platforms established by or registered with the Board subject to such conditions as may be specified by the Central Government. Section 12 of the Central Act provides that no person shall export tobacco or any tobacco products or function as a packer, auctioneer of, or dealer in, tobacco unless he registers himself with the Board in accordance with the Rules made under the Act. Section 13 of the Central Act states that no registered grower or curer shall sell or cause to be sold virginia

t.T.C. Jl. KARNATAKA (S. Mukherji, J.) tobacco elsewhere than at an auction platform registered with the Board in accordance with the rules made under this Act or estab- A lished by the Board under this Act. Section 31 of the Central Act specifically mentions that the same is in addition to, and not in derogation of, the provisions of any other law for the time being in force. Tobacco was brought within the Marketing Act in 1980 and section l 3 of the Tobacco Board Act, 1975 was made applicable in the State of Karnataka only on 31st August, 1984 by the notification B refened to hereinbefore. Therefore essentially the Central Act was for the development of the industry of tobacco and, incidentally, certain provisions for better sale of tobacco through certain acution platforms had been made. There is nothing in the Act or in the Rules which indicate that it is incosistent with or cannot be operated c along with the marketing regulations. It is true that for this purpose certain sanction under the Act is required.

Rule 35 of the Tobacco Board Rules provides for registration as exporter, or packer or auctioneer of or dealer in tobacco and lays down certain provisions. By virtue of section 12 of the Central Act, D the market committees cannot auction or deal with tobacco at all unless they are registered with the Board in accordance with the Act.

In a letter written on 15.9.1983 in respect of an application E made by the Marketing Committee, Honsur, State of Karnataka, the Tobacco Board refused the application on certain grounds mentioned in that letter. That indicated that it was thought tbat the Market Committees should apply to the Tobacco Board for registration, yet on 13th of October, 1983, Tobacco Board applied to the Market committee for the grant of licence to it. The position is not clear- F but it is fully manifest that both Acts can operate in their respective fields and there is no repugnancy if both the Acts are considered in the light of their respective true nature and character. While giving due weight to Centre's supremacy in the matters of legislation, the States' legitimate sphere of legislation should not be unnecessarily G whittled down-because that would be unwarranted by the spirit and basic purpose of the constitutional division of powers-not merely allocation of power by the Constitution but invasion by Parlia- mentary legislations. If in spite of declaration under entries 7 and 54 of List I in respect of Gas, the State Legislature can still legis- H lata for the nationalisation of Gas industry as was held in Calcutta Co. (P;op.) Ltd. v. State of West Bengal (supra) because entry 25 of

280 SUPREME COURT REPORTS [1985] SUPPL. S.C.'R,

List II, it cannot be said that no legislation regulating the market A can be done by the State of Karnataka in spite of entry 28 read with entry 66 of List II because of declaration under entry 52 of List I in respect of tobacco industry. That would be inconsistent and illogical See also P.D. Shamdaswami v. Central Bank of India.(!)

B While it is true that in the spheres very carefully delineated the Parliament has supremacy over Slate Legislatures, supremacy in the the sense that in those fields, Parliamentary legislation would hold the field ands not the State legislation-but to denude the State Legislature of its power to legislate where the legislation in question in pith and substance i.e. in its true nature and character, belongs to a the State field, one should be chary to denude the State of its powers to legislate and mobilise resources-because that would be destructive of the spirit and purpose (lf India being a Union of States. States must have power to raise and mobilise resources in their exclusive fields. In the instant case by complying with the State Act, the Central Act can function to serve the purpose and object of the D Central Act, but if only the Central Act was to prevail, the State Act of marketing for coffee would become non est-wholly unnecessary and undesirable result. The Marketing Act is essentially an Act to regulate the marketing of agricultural produce, control of coffee industry would not be defeated if the marketing of coffee is done within the provisions of the Marketing Act. lt must therefore be held that the State Act should prevail. One should avoid corroding the State•s ambit of powers of legislations which will ultimately lead to erosion of India being a Union of States.

The contentions on behalf of the appellants therefore, on this 1 point have to be rejected. As to who should obtain licence or as to who would have to be registered, the Market Committee or the Tobacco Board is ::J. question which should be settled by proper adjudiction.

Some argument has been built upon the fact that though more or less identical in nature, in respect of the Cardamom Act, 1965, it was held that the State Legislature was not competent to tnact the Cardamom Act, 1965 in view of the declaration under entry 52 of List I of the Seventh Schedule. It was therefore suggested that it would not be correct to take inconsistent views in respect of this Act

(1) [1952) S.C.R, 391 at 394.

t.t.c. l'. KAllNATAII.A (S. Mukharji, J.) 28i

as against the Tobacco Board Act. As noticed before, the contention of validity of the Cardamom Act on the ground of entry 28 of A List II of the Seventh Schedule was not canvassed. Furthermore, it was held that the rules under the C rdamom Act which were framed were in variance with the present Act. The Government had accepted the findings of the High Court so far as Cardamom Act is concerned. Had it been otherwise and had it been examined by this Court for the reasons which are noted herein, what would have been B the result it is.difficult to state. In any event, in this background that cannot be any reason far less a compelling reason to hold that Tobacco Board Act was within the competence of the State Legis- lature for the reasons indicated in this judgment. Therefore that cannot be any argument for consideration at all. c In so far as the High Court directed the refund as indicated before, the appeals by the Government are allowed to that extent and the orders of the High Court are set aside. The other appeals by the parties, are, for the reasons mentioned hereinbefore, dismissed. Parties will bear and pay their own costs throughout. D

In view of the majority decision, all the civil appeals, special leave petitions and writ petition except civil appeal No. 629 of 1983 (Karnataka Market Fee matters) are dismissed without any order as to costs. E Civil appeal No. 629 of 1983 (I.T.C.) however is allowed and the judgment of the High Court is set aside. There will, however be no order as to costs in this case and any fee realised will not be refunded. F M.L.A. Appeals and Petitiol'ls dismissed.