This article has been written by Ziya ur Rahaman Karimi. The case law discussed in this article is related to the principle of repugnancy as provided under Article 254 of the Constitution of India. The primary issue of the case is the point of time when repugnancy arises. Therefore, this article explains the principle of repugnancy and comprehensively discusses the position of law as to the starting point of time when repugnancy arises in light of constitutional provisions and judicial precedents on the topic. Thus, this article covers everything related to the case of the State of Kerala vs. Mar Appraem Kuri Company Ltd. (2012).

This article has been published by Shashwat Kaushik.

Introduction

The case of the State of Kerala & Ors. vs. M/S Mar Appraem Kuri Co. Ltd. & Anr (2012) primarily deals with the principle of repugnancy as provided under Article 254 of the Constitution of India. The principle of repugnancy says that when state legislation is in a direct irreconcilable conflict with central legislation on the same topic, then the state law will be repugnant to the central law. Consequently, the state law will become void.

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The key issue in this case is whether repugnancy may arise immediately after the enactment of the central law before such central enactment is enforced in the respective state. The Apex Court elaborately discussed the different aspects related to the issue and held that as soon as the President gives his assent to a bill which has been duly passed by the legislature, it becomes law for the purpose of Article 254 of the Constitution and its commencement becomes irrelevant for establishing repugnancy. 

Details of the case

  • Name of the case: State of Kerala & Ors. vs M/S Mar Appraem Kuri Co. Ltd. & Anr.
  • Name of the court: The Hon’ble Supreme Court of India
  • Date of the judgement: 8 May 2012
  • Appellant: State of Kerala
  • Respondent: M/s. Mar Appraem Kuri Co. Ltd.
  • Equivalent citations: AIR 2012 SC 2375, 2012 (7) SCC 106
  • Type of the case: Civil Appeal No. 6660 of 2005
  • Important Provision: Article 254 of the Constitution of India
  • Bench: Jagdish Singh Khehar, Ranjana Prakash Desai, D.K. Jain, S. H. Kapadia, JJ.

Facts of the case 

The State Legislature of Kerala enacted the Kerala Chitties Act, 1975 (hereinafter referred to as the ‘Act’) with the objective of providing a regulatory mechanism for dealing with chitties (a short note such as voucher or pass; another name for chit) within the state. Section 4 of the Act provided in detail the prohibition of chits that are not registered or sanctioned under the Act. The problem arose when a number of private chitty firms registered themselves outside Kerala and continued to operate within the state without being subject to the regulatory framework provided under the Kerala Chitties Act, 1975.

The protection of investors in chit funds is crucial, but in the given scenario, the state government was unable to provide enough protection to the investors as the chit funds companies were registered outside the state. To address the lacunae, the Kerala government amended Section 4 of the Kerala Chitties Act, 1975 by Finance Act 7 of 2002. By this Amendment, sub-section (1a) was inserted in Section 4. 

This amendment aimed at bringing chitties registered outside Kerala with a minimum of 20% or more of its subscribers usually residing in Kerala within the purview of the Kerala Chitties Act, 1975. Private chitty firms challenged this amendment, arguing that it was repugnant to the Chit Funds Act, 1982 under Article 254(1) of the Constitution of India. It is also important to note that the Chits Funds Act,1982 which received the assent of the President on August 19 1982 was not enforced in the state of Kerala till the date when the state government enacted the impugned law. 

Issues raised in the case

The questions that arose before the Apex Court are as follows:

  • Whether the mere enactment of the law is enough or its commencement is also relevant to decide the repugnancy.
  • Whether Section 6 of the General Clauses Act, 1897 applies only to express repeals and not to implied repeals.

Arguments of the parties

The counsel for appellants contended that the question of repugnancy arises only after the enforcement or commencement of the Act and in the present case, as the central government has not notified the enforcement of the Chit Funds Act, 1982 in the State of Kerala, the Kerala Chitties Act, 1975 will continue to operate in the state till the enforcement of the Central Act. 

The counsel for respondents on the other hand argued that the commencement or enforcement of the Central Act is irrelevant for applying repugnancy under Article 254. Further, the Parliament by enacting the Chits Funds Act, 1982 intended to cover the entire field of the subject matter, if we hold that the repugnancy is conditional with the commencement of the said Central Act then it will amount to bypassing the will of the Parliament.

Arguments of appellant

The counsel for the appellant made the following submissions while arguing in favour of the State of Kerala:

  • The word “made” used in Article 254 is only for the purpose of identifying the law; the Parliamentary law or the State Legislatures’ law.
  • The language of Article 254 makes the declaration of repugnancy conditional with the operation of law.
  • The question of repugnancy arises only after the enforcement or commencement of the Act.
  • Article 245 applies only in cases where repugnancy exists in fact and does not depend on a mere possibility, as observed by the Apex Court in Tika Ramji vs. the State of UP (1956).
  • If Parliament merely enacts a law on a subject which falls in list III of the Seventh Schedule of the Constitution, it does not mean that all laws of states on that subject become void because of repugnancy.
  • The Kerala Chitties Act 1975 cannot be said to be repugnant to the Chits Funds Act, 1982 as the latter was yet to be enforced by the centre in the State of Kerala.
  • The words “if any provision of law” and “to the extent of the repugnancy” used in Article 254 of the Constitution make it clear that It is not correct to declare the entire state enactment as repugnant to the law made by the Parliament on the same subject.
  • A purposive interpretation of Article 254 should be adopted which does not create a total legislative vacuum as to date the Act of 1982 has not been enforced by the Centre in the State of Kerala. 

Arguments of respondent

The counsel for respondents presented the following arguments:

  • The commencement or enforcement of the Central Act is irrelevant for applying repugnancy under Article 254.
  • The words “law made” refer to the enactment of the law. The same words have been used at seven places but there is no mention of the commencement in Article 254.
  • The repugnancy arose when the president gave assent to the Chits Funds Act, 1982. Therefore, the Kerala Chits Funds Act, 1975 became void when the Chits Funds Act, 1982 received the assent of the president on 19-8-1982.
  • The Parliament by enacting the Chits Funds Act, 1982 intended to cover the entire field of the subject matter, if we hold that the repugnancy is conditional with the commencement of the said Central Act then it will amount to bypassing the will of the Parliament. 
  • It was also submitted that neither the previous operation of Kerala Chitties Act 1975 nor any rights or privileges acquired under this Act shall be affected by the virtue of Article 367.
  • As the Kerala Chits Act, 1975 was impliedly repealed on the passing of the Chits Funds Act, 1982, there cannot be any amendment to the Act of 1975. Hence, Section 4(1)(a) of the Act which was added by the Kerala Finance Act, 2002 is void.

Laws involved in State of Kerala & Ors. vs. M/S Mar Appraem Kuri Company Ltd. & Anr. (2012)

Article 254 of the Constitution

Article 254 of the Constitution of India primarily contains the principle of repugnancy. The article says as follows: 

  1. If a law or any provision of law made by the State Legislature is in conflict with the law or any provision of law made by the Parliament, then the law made by the Parliament will prevail over state law, whether passed before or after the law made by the Legislature of such State. The law made by the State Legislature will become void to the extent of inconsistency.
  2. Where the president gives assent to a state enactment which has been in consideration by the President, then the law made by the State Legislature will prevail in that state.

However, the provision as contained under clause (2) of the Article shall not prevent the Parliament from making any law at any time with respect to the same matter.

In the present case, the primary issue was whether the Chit Funds Act, 1982 will prevail over the Kerala Chitties Act, 1975 in view of Article 254(1) of the Constitution.

Doctrine of Repugnancy

The principle of repugnancy says that if a state law is in conflict with the central law, the former will be void as repugnant to the Parliament enactment. There are three tests to apply this principle. The three-pronged tests were formulated by Professor Nicholas Aroney and these tests were adjusted for the Indian context in Deep Chand vs. State of U.P.(1959) by Justice K Subba Rao:

“Repugnancy between two statutes may thus be ascertained on the basis of the following three principles:

  1. Whether there is a direct conflict between the two provisions;
  2. Whether Parliament intended to lay down an exhaustive code in respect of the subject-matter replacing the Act of the State Legislature; and
  3. Whether the law made by Parliament and the law made by the State Legislature occupy the same field…”

It was also submitted on behalf of this case that the three tests as discussed above do not require the commencement of the Act for repugnancy between two conflicting legislations.

In this case, the Kerala Chitties Act, 1975 was in direct conflict with the Chit Funds Act, 1982, the Parliament intended to cover the entire subject matter by enacting the Chit Funds Act, 1982, furthermore, both the laws occupy the same field. Therefore, the question of repugnancy arose in the present case.

Relevant judgements referred to in the case

Pt. Rishikesh and another vs. Salma Begum (Smt) (1995)

In the case of Pt. Rishikesh and Another vs. Salma Begum (Smt), the Supreme Court held that as soon as the President gives his assent to the enactment of the Parliament, it will be considered as the law made by Parliament in view of Article 254 of the Constitution. The commencement of the Act may be provided either in the Act itself or the Legislature can delegate this power to the Executive. Where no such provision is made in the Act then the Act will commence from the date of the assent of the President as provided under Section 5 of the General Clauses Act, 1897. However, the question of the commencement of the Act is totally irrelevant when it comes to deciding the validity of the Act on the basis of repugnancy in the view of Article 254. Therefore, if a law made by the State Legislature is repugnant to an existing central legislation, then the state legislation will be void by virtue of Article 254 irrespective of the fact that the central legislation is still not enforced in that state.

The court further observed that the legislative function of making laws involves a lot of valuable public time and huge expenditure, it cannot be made dependent solely upon the volition of the executive to notify the commencement of the Act.

T. Barai vs. Henry Ah Hoe and another (1982)

In T. Barai vs. Henry Ah Hoe and Anr., the Supreme Court discussed the principles laid down in Article 254 of the Constitution of India. The court observed that when there is a direct conflict between the law made by the State Legislature and the law made by the Parliament the latter will prevail. Apart from conflict between the laws, repugnancy may also arise when the law made by the Parliament is intended to cover the entire field of the subject, for example, both laws provide for the punishment for the same offence but the prescribed punishment differs in nature of degree, in such a case also the enactment of the Parliament will prevail.

I.T.C. Ltd. Etc vs. State of Karnataka & ors (1985)

In I.T.C. Ltd. Etc vs. State of Karnataka, the Supreme Court discussed two situations where state law becomes void due to repugnancy. First, where the central and state enactments are on the same subject then the former will prevail. Second, where both the laws collide and there is no possibility of harmonious construction, then also the central legislation shall prevail.

M. Karunanidhi vs. Union of India (1979)

In M. Karunanidhi vs. Union of India, the Hon’ble Supreme Court laid down the test for determining the repugnancy. The court after quoting Article 254 of the Constitution observed that the scheme of the Constitution is the equitable distribution of legislative powers between Parliament and State Legislature. First, Parliament has exclusive power to make laws on the matters contained under List I of the Seventh Schedule of the Constitution. Secondly, state legislatures are alone and competent in making laws on the matters in List II. Thirdly, it is the Concurrent List where disputes arise more commonly as the Parliament and the State Legislatures both are competent to make laws on matters in List III.

The power to make laws on the Concurrent List is subject to the provisions of Article 254 of the Constitution which talks about the principle of repugnancy. The repugnancy in such matters may arise from the following circumstances:

1.   Where centre and state enacted the law on a matter in Concurrent List and both the laws are absolutely inconsistent and irreconcilable. In such a case, the central law will prevail and the state legislation will become void because of repugnancy.

2.   Where the State Legislature has enacted a law following the procedure as provided under Article 254(2) of the Constitution then the state legislation will prevail in that state despite being inconsistent with an existing central law. However, Parliament can make a law at any time to amend or repeal the state legislation made under Article 254(2) of the Constitution.

3.  Where an enactment of the State Legislature which substantially falls within the scope of State List incidentally touches upon the matters of Union List then the state legislation will be upheld as constitutional by the virtue of the Doctrine of Pith and Substances. Provided the encroachment must be inconsequential and ancillary.

The court further observed that it is a well-settled rule that the presumption is always in favour of the constitutionality of a statute duly passed by the competent legislature. The onus is on the person assailing the legislation to prove it as unconstitutional. The court also laid down certain conditions for repugnancy in the present case, they are as follows.

Conditions for repugnancy

The following conditions must be fulfilled to prove the repugnancy:

  1. Direct inconsistency between central and state enactments.
  2. The inconsistency is absolutely irreconcilable.
  3. The inconsistency is of such a nature that results in direct collision with each other which leads towards a situation where a person has to disobey one enactment to obey the other.

The Apex Court quoted Colin Howard’s Australian Federal Constitutional Law, 2nd Edn, the author of this book described the nature of inconsistency between two legislations as follows:

“An obvious inconsistency arises when the two enactments produce different legal results when applied to the same facts”

Therefore, where there is no inconsistency between the two legislations on the same subject, as they seek to separate and distinct offences then both the legislations will continue to operate and no question of repugnancy will arise in such cases.

Ch. Tika Ramji & Others, Etc vs. the state of Uttar Pradesh and others (1956)

The facts in Ch. Tika Ramji & Others, Etc vs. the state Of Uttar Pradesh are that the State Legislature enacted the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953. The Act was aimed to empower the state government to regulate the supply and purchase of sugarcane within the State.

The issue arose that the state enactment was in conflict with The Industries (Development and Regulation) Act, 1951 which is a central legislation. Section 18G of the Act of 1951 empowers the Central Government to regulate the distribution of the finished articles manufactured by the scheduled industries at fair prices. The question before the court was whether “Sugarcane” is covered under the Act of 1951.

The court held that the basic object of the Central Act of 1951 was to regulate the distribution of finished/manufactured articles, not the raw material and sugarcane being a raw material is not covered under the central legislation. Therefore, there was no repugnancy.

The court further observed that even assuming that sugarcane can was an article relatable to the sugarcane industry as a final product comes within the scope of Section 18G of the central legislation, it is important to note that no such order was issued by the central government and in absence of such notification, the question of repugnancy could not be raised because repugnancy must exist in fact and must not be a mere possibility. 

State Of Orissa vs. M. A. Tulloch and Co. (1963)

The facts of the State of Orissa vs. M. A. Tulloch and Co. are that the state legislature of Orissa enacted the Orissa Mining Areas Development Fund Act, 1952. This Act empowered the state government to impose a fee for the development of “mining areas” within the state. The constitutionality of the Act was challenged on the ground that the Act was in conflict with the Mines and Minerals (Regulation and Development) Act, 1957, which is a central legislation.

The State of Orissa argued that the purpose of the state legislation is different from that of the central legislation, but this contention was rejected by the court. The court observed that in order to declare a state legislation as repugnant to a central law it is not necessary that the rules be made and enforced under the Act. If the intention of the Parliament was to cover the whole area of the subject matter, then it is sufficient ground to declare state legislation as repugnant to the central law.

In the present case, the Apex Court held that it is apparent from Section 18(1) of the Mines and Minerals (Regulation and Development) Act, 1957 that the intention of the Parliament was to cover the entire field related to the development and regulation of mines. Therefore, the court held the state legislation as repugnant to the central law, even though no rules were framed or enforced.

State of Punjab vs. Mohar Singh (1954)

In the case of the State of Punjab vs. Mohar Singh (1954), the prosecution was started against Mohar Singh under Section 7 of the East Punjab Refugees (Registration of Land Claims) Act, 1948. In the year 1948, when the offence was committed, the Act of 1948 was not enforced, at that time, the East Punjab Refugees (Registration of Land Claims) Ordinance of 1948 was in operation. The Ordinance was for a temporary period and it was substituted by this Act. It is important to note that the Ordinance was a temporary law which was repealed before the expiry of the term of the Ordinance.

In the above circumstances, the court interpreted Section 6 of the General Clauses Act, 1897. The court held as follows:

“We cannot agree with the proposition that Section 6 of the General Clauses Act, 1897 is not applicable in cases where an enactment is repealed and replaced by fresh legislation. The correct position is that Section 6 remains applicable in these cases unless the new enactment manifestly indicates a contrary intention or shows incompatibility. Such incompatibility must be ascertained by considering all relevant provisions of the new legislation and the mere absence of a saving clause by itself is not material.

Judgement in State of Kerala & Ors. vs. M/S Mar Appraem Kuri Company Ltd. & Anr. (2012)

Determination of the point of time when repugnancy arises

The Supreme Court held that repugnancy arises in the making and not at the commencement of the law. Thus, the Kerala Chitties Act, 1975 became repugnant to the Chit Funds Act, 1982 on 19.08.1982 when it received the assent of the President.

The rationale behind this judgement was that the expression “law made” used in Article 254 does not refer to the commencement of the Act, it only denotes the enactment of the law by the legislature. Commencement is immaterial in the view of Article 254 of the Constitution. The court mainly relied on the judgement of the Apex Court in  Pt. Rishikesh and Another vs. Salma Begum (Smt) (1995).

The definition of the expression “laws in force” in Article 13(3)(b) and Article 372(3), Explanation I, as well as “existing law” in Article 366(10), indicate that laws passed by a legislature before the commencement of the Constitution of India and repealed are regarded as “law in force”, notwithstanding that any such law may not be in operation at all. These definitions negate the argument that a law is not considered “made” for the purpose of Article 254 unless it is enforced. The expression “existing law” finds its place in Article 254.

Further, the Central government with the enactment of the Chits Funds Act, 1982 intended to cover the entire field relating to or with respect to Chits under entry 7 of List III of the Constitution, and in existence of a Central Legislation on the same subject matter, the State Legislature was denuded of its authority to enact State Finance Act No. 7 of 2002, inserting Section 4(1a) into the Kerala Chitties Act, 1975, particularly on the failure of the State to follow the procedure as provided under Article 254 of the Constitution.

Hence, on both counts; firstly, the existence of irreconcilable inconsistencies and secondly, the intention of the Parliament to cover the entire field, the two Acts cannot stand together and therefore, the Kerala Chitties Act, 1975 was held to be repugnant to the Chit Funds Act, 1982. 

Effect of repeal on the operation of Kerala Chitties Act, 1975

The Apex Court held that the Central Chit Funds Act, 1982, though has not come into force yet in the State of Kerala, is a valid and existing law. Accordingly, by virtue of Article 367 of the Constitution,  Section 6 of the General Clauses Act, 1897 will be applicable in the present case. Consequently, the previous operation of the Kerala Chitties Act, 1975 is not affected nor any right, privilege, obligation or liability acquired or incurred under the repealed Kerala Chitties Act, 1975. 

If and when the Central government decides to enforce the Central Chit Funds Act, 1982 in Kerala by a notification under Section 1(3) of the Act, the state law will be repealed by virtue of Section 90(1) of the central legislation and Section 90(2) of the Act will come into play. This Section ensures that the Kerala Chitties Act, 1975, shall continue to apply to those chits only that were already in operation before the commencement of the Central Chit Funds Act, 1982. This means that the rules of the Kerala Chitties Act, 1975 will be applicable for those existing chits in the same manner as they were before the Central Act was enforced.

Analysis of the case

The case State of Kerala & Ors vs. M/S. Mar Appraem Kuri Co. Ltd. & Anr (2012) addresses a crucial question related to the principle of repugnancy as enshrined under Article 254(1) of the Indian Constitution.

In this case, the key issue was the determination of the exact point of time when repugnancy arose, whether the state legislation would be repugnant to the central legislation immediately after the Central Act received Presidential assent or whether repugnancy would depend upon the commencement of the enactment.

The unanimous decision of the Supreme Court in this case made it clear that it is the time of the assent of the President which is relevant while deciding the repugnancy. The court emphasised that the repugnancy arises from the enactment itself and the commencement of the Act is irrelevant in this regard.

The decision in this case directly impacts the chit-fund companies, investors, and state regulatory bodies. As the impugned Section 4(1)(a) of the state legislation which was challenged in this case was aimed to provide protection to investors from the fraud of the private chitty firms operating in Kerala but operating in Kerala. Therefore, this decision was welcomed by the chit-fund companies.

The judgement has been criticised as it created a legislative vacuum by declaring the State Act repealed while the central legislation regarding the same was yet to be enforced by the State. But, according to Sections 85(a) and 90(2) of the Chit Funds Act, 1982, though the Kerala Chitties Act, 1975 is repealed, it will continue to apply within the State till the commencement of the Central Chit Funds Act, 1982 and in the meanwhile, if State Legislature intends to make law on the same topic, then the State can do so by following the procedure as provided under Article 254(2) of the Constitution. Hence, there would be no legislative vacuum. 

Conclusion 

The decision of the Apex Court in this case is a landmark judgement on the topic of repugnancy. The judgement is pivotal in determining the point of time at which repugnancy arises. The comprehensive analysis of this case made it clear that mere enactment of central legislation can render a state law repugnant regardless of the commencement of the central law in that particular state. Therefore, in the present case, the court considered the Kerala Chitties Act, 1975 repugnant to the Central Chit Funds Act, 1982 immediately after the enactment of the central legislation regardless of the fact that the central enactment was not enforced in the State of Kerala.

References

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