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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6660 OF 2005

State of Kerala & Ors. …

Appellant(s)

versus

M/s. Mar Appraem Kuri Co. Ltd. & Anr. …

Respondent(s)

with Civil Appeal Nos. 6661/2005, 6662/2005, 6663/2005,

6664/2005, 6665/2005, 6666/2005, 6667/2005, 6668/2005,

6669/2005, 6670/2005, 6671/2005, 6672/2005, 6673/2005,

6674/2005, 6675/2005, 6676/2005, 6677/2005, 6678/2005,

6679/2005, 6680/2005, 6681/2005, 7204/2008, 7329/2008,

7330/2008, 7333/2008, 7334/2008, SLP(C) Nos. 25822 and

25823/2009, Civil Appeal Nos. 7008/2005, 7009/2005,

7010/2005, 7011/2005, 7012/2005, 7013/2005, 7014/2005,

7164/2005, 7165/2005, 7166/2005, 7167/2005, 7537/2005,

7538/2005, 494/2006, 495/2006, 5031/2006, 7332/2008,

7572/2008 and 5032/2006

J U D G M E N T

S. H. KAPADIA, CJI

Introduction

1. By order dated 18.02.2009 in Civil Appeal No. 6660 of

2005 in the case of State of Kerala v. M/s. Mar Appraem Kuri

Co. Ltd., the referring Bench of 3-judges of this Court doubted

the correctness of the view taken by a 3-judges Bench of this

Court in Pt. Rishikesh and Another v. Salma Begum (Smt)

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[(1995) 4 SCC 718]. Accordingly, the matter has come to the

Constitution Bench to decide with certitude the following core

issues of constitutional importance under Article 254(1) of the

Constitution.

Scope of the Reference – when does repugnancy arise?

2. In the present case, the question to be answered is -

whether the Kerala Chitties Act 23 of 1975 became repugnant

to the Central Chit Funds Act 40 of 1982 under Article 254(1)

upon making of the Central Chit Funds Act 40 of 1982 (i.e. on

19.08.1982 when the President gave his assent) or whether the

Kerala Chitties Act 23 of 1975 would become repugnant to the

Central Chit Funds Act 40 of 1982 as and when notification

under Section 1(3) of the Central Chit Funds Act 40 of 1982

bringing the Central Act into force in the State of Kerala is

issued?

3. The question arose before the Full Bench of the

Allahabad High Court in the case of Smt. Chandra Rani and

others v. Vikram Singh and others [1979 All. L.J. 401] in

the following circumstances:- The U.P. Civil Laws (Reforms

and Amendment) Act 57 of 1976 being the State Act stood

enacted on 13.12.1976; it received the assent of the President

on 30.12.1976; it was published in the Gazette on 31.12.1976

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and brought into force w.e.f. 1.01.1977 whereas the Civil

Procedure Code (Amendment) Act 104 of 1976, being the

Central Act, was enacted on 9.09.1976; it received the assent

of the President on the same day; it got published in the

Central Gazette on 10.09.1976; and brought into force w.e.f.

1.02.1977 (i.e. after the State Act came into force). The Full

Bench of the Allahabad High Court in Chandra Rani (supra)

held that the U.P. Act No. 57 of 1976 was a later Act than the

Central Act No. 104 of 1976. The crucial date in the case of

the said two enactments would be the dates when they

received the assent of the President, which in the case of the

Central Act was 9.09.1976 while in the case of the U.P. Act

was 30.12.1976. This decision of the Full Bench of the

Allahabad High Court in the case of Chandra Rani (supra)

came for consideration before this Court in Pt. Rishikesh

(supra).

4.The statement of law laid down in Pt. Rishikesh (supra)

was as under:

“17... As soon as assent is given by the President to the

law passed by the Parliament it becomes law.

Commencement of the Act may be expressed in the Act

itself, namely, from the moment the assent was given by

the President and published in the Gazette, it becomes

operative. The operation may be postponed giving power

to the executive or delegated legislation to bring the Act

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into force at a particular time unless otherwise

provided. The Central Act came into operation on the

date it received the assent of the president and shall be

published in the Gazette and immediately on the

expiration of the day preceding its commencement it

became operative. Therefore, from the mid-night on the

day on which the Central Act was published in the

Gazette of India, it became the law. Admittedly, the

Central Act was assented to by the President on 9-9-

1976 and was published in the Gazette of India on 10-

9-1976. This would be clear when we see the legislative

procedure envisaged in Articles 107 to 109 and assent

of the President under Article 111 which says that when

a Bill has been passed by the House of the People, it

shall be presented to the President and the President

shall either give his assent to the Bill or withhold his

assent therefrom. The proviso is not material for the

purpose of this case. Once the President gives assent it

becomes law and becomes effective when it is published

in the Gazette. The making of the law is thus complete

unless it is amended in accordance with the procedure

prescribed in Articles 107 to 109 of the Constitution.

Equally is the procedure of the State Legislature.

Inconsistency or incompatibility in the law on

concurrent subject, by operation of Article 254, clauses

(1) and (2) does not depend upon the commencement of

the respective Acts made by the Parliament and the

State legislature. Therefore, the emphasis on

commencement of the Act and inconsistency in the

operation thereafter does not become relevant when its

voidness is required to be decided on the anvil of Article

254(1). Moreover the legislative business of making law

entailing with valuable public time and enormous

expenditure would not be made to depend on the

volition of the executive to notify the commencement of

the Act. Incompatibility or repugnancy would be

apparent when the effect of the operation is visualised

by comparative study.”

5.The above statement of law in Pt. Rishikesh (supra)

created a doubt in the minds of the referring judges and,

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accordingly, the said statement of law has come before the

Constitution Bench of this Court for its authoritative decision.

Facts in the present case

6.The lis in the present case arose under the following

circumstances. Many of the private chitty firms remained out

of the regulatory mechanism prescribed in the Kerala Chitties

Act, 1975 by registering themselves outside the State but

continued to operate in Kerala. Because of this, investor

protection became difficult. Consequently, Section 4 of the

said 1975 Act was amended vide Finance Act 7 of 2002. By

the said amendment, sub-section (1a) was inserted in Section

4. This amendment intended to bring in chitties registered

outside the State having 20% or more of its subscribers

normally residing in the State within the ambit of the said

1975 Act. Being aggrieved by the said Amendment, the

private chitty firms challenged the vires of Section 4(1a) of the

1975 Act as repugnant under Article 254(1) to the Central

Chit Funds Act, 1982.

Questions to be answered

7. (i)Whether making of the law or its commencement

brings about repugnancy or inconsistency as

envisaged in Article 254(1) of the Constitution?

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(ii)The effect in law of a repeal.

Inconsistencies in the provisions of the Kerala Chitties

Act, 1975 vis-a-vis the Central Chit Funds Act, 1982

8.The impugned judgment of the Division Bench has

accepted the contention advanced on behalf of the private

chitty firms that there are inconsistencies between the

provisions of the two Acts. [see paras 13, 14 and 15 of the

impugned judgment]. However, the Single Judge held that

absent notification under Section 1(3) of the Central Chit

Funds Act, 1982 bringing the said 1982 Act into force in the

State and absent framing of the Rules under Section 89 of the

said 1982 Act, it cannot be said that the Kerala Chitties Act,

1975 stood repealed on the enactment of the said 1982 Act,

which is the Central Act; whereas the Division Bench declared

Section 4(1a) of the 1975 Act as extra-territorial and,

consequently, unconstitutional, hence, the State of Kerala

came to this Court by way of appeal.

9. For the sake of clarity some of the conflicting provisions

indicated in the impugned judgment are set out herein below:

Kerala Chitties Act, 1975

(State Act)

The Chit Funds Act, 1982

(Central Act)

Section 1 – Short title, extent

and commencement

Section 1 - Short title, extent

and commencement

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(1) This Act may be called the

Kerala Chitties Act, 1975

(2) It extends to the whole of

the State of Kerala.

(3) It shall come into force on

such date as the government

may, by notification in the

Gazette, appoint.

(1) This Act may be called the

Chit Funds Act, 1982.

(2) It extends to the whole of

India except the State of

Jammu and Kashmir.

(3) It shall come into force on

such date as the Central

Government may, by

notification in the Official

Gazette, appoint and different

dates may be appointed for

different States.

Section 2 - Definitions

In this Act, unless the

context otherwise requires,—

(4) "discount" means the

amount of money or quantity

of grain or other commodity,

which a prize winner has,

under the terms of the

variola, to forego for the

payment of veethapalisa,

foreman's commission or

such other expense; as may

be prescribed;

Section 2 - Definitions

In this Act, unless the context

otherwise requires,—

(g) "discount" means the

sum of money or the

quantity of grain which a

prized subscriber is,

under the terms of the

chit agreement required

to forego and which is set

apart under the said

agreement to meet the

expenses of running the

chit or for distribution

among the subscribers or

for both;

Section 3 - Prohibition of

chitty not sanctioned or

registered under this Act

(1) No chitty shall, after the

Section 4 - Prohibition of chits

not sanctioned or registered

under the Act

(1) No chit shall be commenced

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commencement of this Act,

be started and conducted

unless the previous sanction

of the Government or of such

officer as may be empowered

by the Government in this

behalf is obtained therefor

and unless the chitty is

registered in accordance with

the provisions of this Act:

Provided that the

previous sanction

under this sub-section

shall lapse unless the

chitty is registered

before the expiry of six

months from the date of

such sanction:

Provided further that

such previous sanction

shall not be necessary

for starting and

conducting any chitty

by—

(i) a company owned by

the Government of

Kerala; or

(ii) a co-operative

society registered or

deemed to be registered

under the Co-operative

Societies Act for the

time being in force; or

(iii) a scheduled bank

as defined in the

Reserve Bank of India

Act, 1934 ; or

(iv) a corresponding

new bank constituted

or conducted without obtaining

the previous sanction of the

State Government within

whose jurisdiction the chit is to

be commenced or conducted or

of such officer as may be

empowered by that

Government in this behalf, and

unless the chit is registered in

that State in accordance with

the provisions of this Act:

Provided that a sanction

obtained under this sub-

section shall lapse if the

chit is not registered

within twelve months

from the date of such

sanction or within such

further period or periods

not exceeding six months

in the aggregate as the

State Government may,

on application made to it

in this behalf, allow.

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under the Banking

Companies (Acquisition

and Transfer of

Undertakings) Act,

1970 (Central Act 5 of

1970).

Section 4 - Prohibition of

invitation for subscription

except under certain

conditions

(1) Where previous

sanction is required by

section 3 for starting

and conducting a

chitty, no person shall

issue or publish any

notice, circular,

prospectus, proposal or

other document inviting

the public to subscribe

for tickets in any such

chitty or containing the

terms and conditions of

any such chitty unless

such notice, circular,

prospectus, proposal or

other document

contains a statement

that the previous

sanction required by

section 3 has been

obtained, together with

the particulars of such

sanction.

(1a)* Where a chitty is

registered outside the

State and twenty per

cent more of the

subscribers are persons

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normally residing in the

State, the foreman of

the chitty shall open a

branch in the State and

obtain sanction and

registration under the

provisions of this Act.

(*) As Amended by Finance

Act, 2002

(2) Whoever

contravenes the

provisions of sub-

section (1) shall be

punishable with

imprisonment for a

term which may extend

to six months, or with

fine which may extend

to three hundred

rupees, or with both.

Section 15 - Security to be

given by foreman

(1) Every foreman shall,

before the first drawing of

the chitty,—

(a) execute a bond in

favour of or in trust for

the other subscribers

for the proper conduct

of the chitty, charging

immovable property

sufficient to the

satisfaction of the

Registrar for the

realization of twice the

chitty amount; or

Section 20 - Security to be

given by foreman

(1) For the proper conduct

of the chit, every foreman

shall, before applying for

a previous sanction under

section 4,-

(a) deposit in the name

of the Registrar, an

amount equal to,-

(i) fifty per cent, of

the chit amount in

cash in an approved

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(b) deposit in an

approved bank an

amount equal to the

chitty amount or invest

in Government

securities of the face

value of note less than

one and a half times

the chitty amount and

transfer the amount so

deposited or the

Government securities

in favour of the

Registrar to be held in

trust by him as security

for the due conduct of

the chitty.

(2) If any foreman makes

default in complying with the

requirements of sub-section

(1), he shall be punishable

with fine which may extend

to five hundred rupees.

(3) The security given by the

foreman under sub-section

(1) or any security

substituted under sub-

section (6) shall not be liable

to be attached in execution

of a decree or otherwise until

the chitty is terminated and

the claims of all are fully

satisfied.

(4) The Registrar shall, after

the termination of a chitty

and after satisfying himself

that the claims of all the

subscribers have been fully

satisfied, order the release of

the security furnished by the

foreman under sub-section

bank; and

(ii) fifty per cent, of

the chit amount in

the form of bank

guarantee from an

approved bank; or

(b) transfer

Government securities

of the face value or

market value

(whichever is less) of

not less than one and a

half times the chit

amount in favour of

the Registrar; or

(c) transfer in favour of

the Registrar such

other securities, being

securities in which a

trustee may invest

money under section

20 of the Indian Trusts

Act, 1882 (2 of 1882),

of such value, as may

be prescribed by the

State Government from

time of time:

Provided that the

value of the

securities referred to

in clause (c) shall

not, in any case, be

less than one and a

half times the value

of the chit amount.

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(1) or the security

substituted under sub-

section (6), as the case may

be, and in so doing he shall

follow such procedure as

may be, prescribed in that

behalf.

(5) The security furnished

under sub-section (1) shall,

subject to the provisions of

sub-section (6), be kept

intact during the currency of

the chitty and the foreman

shall not commit any such

act with respect thereto as

are calculated to impair

materially the nature of the

security or the value thereof.

(6) The Registrar may:—

(a) at any time during

the currency of the

chitty, permit the

substitution of the

security:

Provided that such

substituted security

shall not be less than

the security given by

the foreman under sub-

section (1); or

(b) on the termination

of the chitty, release a

part of the security:

Provided that the

security left after

release of the part is

sufficient to satisfy the

outstanding claims of

(2) Where a foreman

conducts more than one

chit, he shall furnish

security in accordance

with the provisions of

sub-section (1) in respect

of each chit.

(3) The Registrar may, at

any time during the

currency of the chit,

permit the substitution of

the security:

Provided that the face

value or market value

(whichever is less) of

the substituted

security shall not be

less than the value of

the security given by

the foreman under

sub-section (1).

(4) The security given by

the foreman under sub-

section (1), or any

security substituted

under sub-section (3),

shall not be liable to be

attached in execution of a

decree or otherwise until

the chit is terminated and

the claims of all the

subscribers are fully

satisfied.

(5) Where the chit is

terminated and the

Registrar has satisfied

himself that the claims of

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all subscribers. all the subscribers have

been fully satisfied, he

shall order the release of

the security furnished by

the foreman under sub-

section (1), or the security

substituted under sub-

section (3), as the case

may be, and in doing so,

he shall follow such

procedure as may be

prescribed.

(6) Notwithstanding anything

to the contrary contained in

any other law for the time

being in force, the security

furnished under this section

shall not be dealt with by the

foreman during the currency of

the chit to which it relates and

any dealing by the foreman

with respect thereto by way of

transfer or other

encumbrances shall be null

and void.”

10. Apart from the conflicting provisions mentioned

hereinabove, the impugned judgment has brought out various

inconsistencies between the various provisions of the State Act

and the Central Act in the following terms:

“13. When we scan through the various provisions of

both the legislations it is clear that there is

repugnancy between some of the provisions of those

legislations. The expression "discount" in Section 2(g)

of the Chit Funds Act gives a different definition

compared to Sub-section (4) of Section 2 of the Kerala

Chitties Act, 1975. So also Section 4(1) of the Chit

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Funds Act deals with registration of chits,

commencement and conduct of chit business.

Provisions of the Kerala Chitties Act, Section 3(1) are

also contextually different. Section 6(3) of the Central

Act states that the amount of discount referred to in

Clause (f) of Sub-section (1) shall not exceed thirty per

cent of the chit amount. As per Section 7(3) of the Chit

Funds Act registration of a chit shall lapse if the

declaration by the Foreman under Sub-section (1) of

Section 9 is not filed within three months from the

date of such endorsement or within such further

period or periods not exceeding three months in the

aggregate as the Registrar may, on an application

made to him in that behalf. Section 8 of the Chit

Funds Act deals with minimum capital requirement

for the commencement etc. of a chit and creation of a

reserve fund by a company and there is no

corresponding provision in the Kerala Chitties Act.

14. Learned Single Judge has also found that once

the requirement of furnishing security is satisfied

under Section 20 of the Act, it would be arbitrary for

the authorities in Kerala to insist for another security

for the same chitty merely because 20% or more

subscribers are residing in the State. Learned Single

Judge further held that the Registrar in Kerala is

absolutely free to call for details of registration and

security furnished by the Foreman in any other State

under Section 20 of the Central Act and after

confirmation with the Registrar in that State he will

record the same and shall not call for further security

being furnished under Section 15 of the Kerala Act

from the same Foreman for the same chitty. Learned

Single Judge also found if a Foreman is registered

under the Central Act in any State outside Kerala and

has subscribers in Kerala, the Central Act applies to

the Foreman even in regard to the business he has in

Kerala, no matter the Central Act is not notified in the

State and in such cases the learned Single Judge

opined that the provisions of the State Act will yield to

the extent the same is inconsistent with the Central

Act. Learned Single Judge himself has therefore

noticed inconsistencies between the various provisions

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of the State Act and the Central Act.

15. On a comparison of the various provisions in the

Chit Funds Act and the Kerala Chitties Act we have

come across several such inconsistent and hostile

provisions which are (sic) repugnant to each other.

Suffice to say that if Sub-section (1a) (sic) of Section 4

is given effect to, a Foreman who has already got the

registration under the Central Act and governed by the

provisions of that Act would also be subjected to

various provisions of the Kerala Act which are

inconsistent and repugnant to the Central Act. If

Section 4(1a) (sic) is therefore given effect to it would

have extra territorial operation.”

i)Point Of Time For Determination Of Repugnance

11. The key question that arises for determination is as to

from when the repugnancy of the State Act will come into

effect? Did repugnancy arise on the making of the Central

1982 Act or will it arise as and when the Central Act is

brought into force in the State of Kerala?

12.Before dealing with the respective submissions made by

counsel before us, we need to quote Articles 245(1), 246(1), (2)

and (3), 249(1) and (3), 250(1) and (2), 251 and 254 of the

Constitution, which read as follows:

“PART XI

RELATIONS BETWEEN THE UNION AND

THE STATES

CHAPTER I.—LEGISLATIVE RELATIONS

Distribution of Legislative Powers

245. Extent of laws made by Parliament and by

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the Legislatures of States - (1) Subject to the

provisions of this Constitution, Parliament may

make laws for the whole or any part of the territory

of India, and the Legislature of a State may make

laws for the whole or any part of the State.

246. Subject-matter of laws made by

Parliament and by the Legislatures of States. -

(1) Notwithstanding anything in clauses (2) and

(3), Parliament has exclusive power to make laws

with respect to any of the matters enumerated in

List I in the Seventh Schedule (in this Constitution

referred to as the “Union List”).

(2) Notwithstanding anything in clause (3),

Parliament, and, subject to clause (1), the

Legislature of any State also, have power to make

laws with respect to any of the matters

enumerated in List III in the Seventh Schedule (in

this Constitution referred to as the “Concurrent

List”).

(3) Subject to clauses (1) and (2), the Legislature

of any State has exclusive power to make laws for

such State or any part thereof with respect to any

of the matters enumerated in List II in the Seventh

Schedule (in this Constitution referred to as the

“State List”).

249. Power of Parliament to legislate with

respect to a matter in the State List in the

national interest. - (1) Notwithstanding anything

in the foregoing provisions of this Chapter, if the

Council of States has declared by resolution

supported by not less than two-thirds of the

members present and voting that it is necessary or

expedient in the national interest that Parliament

should make laws with respect to any matter

enumerated in the State List specified in the

resolution, it shall be lawful for Parliament to

make laws for the whole or any part of the territory

of India with respect to that matter while the

resolution remains in force.

(2) xxxxxxxxx

Page 17 17

(3) A law made by Parliament which Parliament

would not but for the passing of a resolution

under clause (1) have been competent to make

shall, to the extent of the incompetency, cease to

have effect on the expiration of a period of six

months after the resolution has ceased to be in

force, except as respects things done or omitted to

be done before the expiration of the said period.

250. Power of Parliament to legislate with

respect to any matter in the State List if a

Proclamation of Emergency is in operation - (1)

Notwithstanding anything in this Chapter,

Parliament shall, while a Proclamation of

Emergency is in operation, have power to make

laws for the whole or any part of the territory of

India with respect to any of the matters

enumerated in the State List.

(2) A law made by Parliament which Parliament

would not but for the issue of a Proclamation of

Emergency have been competent to make shall, to

the extent of the incompetency, cease to have

effect on the expiration of a period of six months

after the Proclamation has ceased to operate,

except as respects things done or omitted to be

done before the expiration of the said period.

251. Inconsistency between laws made by

Parliament under Articles 249 and 250 and

laws made by the Legislatures of States. -

Nothing in articles 249 and 250 shall restrict the

power of the Legislature of a State to make any law

which under this Constitution it has power to

make, but if any provision of a law made by the

Legislature of a State is repugnant to any

provision of a law made by Parliament which

Parliament has under either of the said articles

power to make, the law made by Parliament,

whether passed before or after the law made by

the Legislature of the State, shall prevail, and the

law made by the Legislature of the State shall to

the extent of the repugnancy, but so long only as

Page 18 18

the law made by Parliament continues to have

effect, be inoperative.

254. Inconsistency between laws made by

Parliament and laws made by the Legislatures

of States -

(1)If any provision of a law made by the

Legislature of a State is repugnant to any

provision of a law made by Parliament which

Parliament is competent to enact, or to any

provision of an existing law with respect to one of

the matters enumerated in the Concurrent List,

then, subject to the provisions of clause (2), the

law made by Parliament, whether passed before or

after the law made by the Legislature of such

State, or, as the case may be, the existing law,

shall prevail and the law made by the Legislature

of the State shall, to the extent of the repugnancy ,

be void.

(2)Where a law made by the Legislature of a

State with respect to one of the matters

enumerated in the concurrent List contains any

provision repugnant to the provisions of an earlier

law made by Parliament or an existing law with

respect to that matter, then, the law so made by

the Legislature of such State shall, if it has been

reserved for the consideration of the President and

has received his assent, prevail in that State:

Provided that nothing in this clause shall

prevent Parliament from enacting at any time any

law with respect to the same matter including a

law adding to, amending, varying or repealing the

law so made by the Legislature of the State. “

(emphasis supplied)

Submissions

13.Shri K.K. Venugopal, learned senior counsel appearing

for the State of Kerala and Shri V. Shekhar, learned senior

counsel for Union of India submitted thatthe word “made” in

Page 19 19

Article 254 is relevant only to identify the law, i.e., the

Parliamentary law or the State law and has nothing to do with

the point of time for determination of repugnance. According

to the learned counsel, a decision by a Court, on the question

as to whether any State Act is repugnant to a Central Act, can

be made only after both laws have been brought into force for

the simple reason that the very object of determination of

repugnance between two laws, by a Court, is to decide and

declare as to which one of the two laws has to be obeyed or in

the language of Article 254, which of the two laws “shall

prevail”. Therefore, according to the learned counsel, the very

text of Article 254 makes it clear that a declaration of

repugnance by a Court presupposes both laws actually being

in operation. That, though the term employed in Article 254(2)

is “a law made by the Legislature of a State”, it actually refers

to a stage when the law is still a Bill passed by the State

legislature which under Article 200 is given to the Governor for

his assent. According to the learned counsel, the phrase “law

made” would also include a law which is brought in force. In

this connection, it was submitted that if a petition is filed

before a Court to declare a State law void, as being repugnant

to Parliamentary law which has not been brought in force, the

Page 20 20

court would reject the petition as premature as repugnancy

cannot arise when the Parliamentary law has not even been

brought in force. In this connection, learned counsel relied

upon the judgment of this Court in Tika Ramji v. State of

U.P. [1956 SCR 393] in which there is an observation to the

effect that repugnance must exist in fact and not depend on a

mere possibility. According to the learned counsel there is no

merit in the contention advanced on behalf of private chit

firms that upon mere enactment by the Parliament of a law

relating to a subject in List III, all State enactments on that

subject become immediately void, as repugnant. Further,

learned counsel emphasized on the words “to the extent of the

repugnancy” in Article 254(1). He submitted that the said

words have to be given a meaning. Learned counsel submitted

that the said words indicate that the entire State Act is not

rendered void under Article 254(1) merely by enactment of a

Central law. In this connection, it was submitted that the

words “if any provision of a law” and the words “to the extent

of repugnancy” used in Article 254(1) militate against an

interpretation that the entire State Act is rendered void as

repugnant merely upon enactment by Parliament of a law on

the same subject. Lastly, learned counsel submitted that a

Page 21 21

purposive interpretation of Article 254 must be adopted which

does not lead to a legislative vacuum. In this connection

learned counsel submitted that the State law came into force

w.e.f. 25.08.1975 as per notification published in Kerala

Gazette No. 480 whereas the Chit Funds Act, 1982 came into

force w.e.f. 19.08.1982. Under Section 1(3) of that Act, the

Central Government has been empowered to bring the said Act

into force on such date as it may, by notification in the official

gazette, appoint and different dates may be appointed for

different States. Till date, the said 1982 Act has not been

extended to the State of Kerala. According to the learned

counsel, if one was to accept the contention advanced on

behalf of the private chit firms that “when a Central law is

made as envisaged in Article 254 of the Constitution then all

repugnant State laws would immediately stand impliedly

repealed, even without the Central Act being brought into force

by a notification under Section 1(3) of the 1982 Act”; then, in

that event, there would be a total legislative vacuum

particularly when transactions have taken place in the State of

Kerala on and from 19.08.1982 till date and even up to the

date of notification which has not been issued under Section

1(3) till today. According to the learned counsel, keeping in

Page 22 22

view the provisions of Sections 1(3), 4, 89 and 90 of the 1982

Act and absent framing of the Rules by the State Government

in terms of Section 89, making of the central law cannot be the

test for determining repugnancy.

14.On behalf of the private chitty firms, it was submitted by

Shri T.R. Andhyarujina, Shri Shyam Divan, Shri Mathai M.

Paikeday and Shri C.U. Singh, that the bringing into force or

commencement of the Central Act was irrelevant in

considering repugnancy under Article 254(1), and that the

repugnancy arose when the State law came into conflict with

the enactment of the Central law, even when the Central law is

not brought into force in the State of Kerala . That, under

Article 254(1), the repugnancy of the State law to the law

made by the Parliament is to be considered with reference to

the law made. The words “law made” have reference to the

enactment of the law. In this connection, it was pointed out

that the words “law made” have been used at seven places but

there is no mention to the commencement of a law in Article

254. Thus, according to the learned counsel, repugnancy

arose when the Central Chit Funds Act, 1982 received the

assent of the President and on its publication in the Official

Gazette and not on its commencement, which till date is not

Page 23 23

there in the State of Kerala. In consequence, the Kerala

Chitties Act, 1975 became void on 19.08.1982 when the

Central Chit Funds Act, 1982 was made after receiving the

assent of the President. On the question as to whether the

Kerala Chitties Act, 1975 is repugnant to the Central Chit

Funds Act, 1982 and whether Section 4(1a) inserted by

Finance Act No. 7 of 2002 was void, the learned counsel

submitted that the Central Act, 1982 intended to occupy the

entire field of contracts in Entry 7 of the Concurrent List; that,

both the legislations are made under Entry 7 of the

Concurrent List and, therefore, in such a situation there

would be repugnancy between the State legislation existing at

the time of the enactment of the Central Act, 1982. Applying

these tests, it was submitted that the Kerala Chitties Act, 1975

became void under Article 254(1) on the enactment of the

Central Chit Funds Act, 1982. That, in consequence of the

said repugnancy, the Kerala Chitties Act, 1975 became void

under Article 254(1) on 19.08.1982 and the Kerala Chitties

Act, 1975 stood impliedly repealed. However, according to the

learned counsel, the previous operation of the Kerala Chitties

Act, 1975 is not affected nor any right, privilege, obligation or

liability acquired under the Kerala Chitties Act shall stand

Page 24 24

affected in view of Article 367 of the Constitution. By reason

of Article 367, the General Clauses Act, 1897 would apply to

the said repeal. Thus, after 19.08.1982, the Kerala Chitties

Act, 1975 stood repealed except for the limited purposes of

Section 6 of the General Clauses Act, 1897. According to the

learned counsel for the private chitties, to bring the Central

Chit Funds Act, 1982 into operation in any State the Central

Government has to issue a notification in the Official Gazette

under Section 1(3). This has been done for several States but

not for States like Kerala, Gujarat, etc. That, until such

notification neither the Kerala Chitties Act, 1975 prevails in

the State of Kerala as it has become void and stands repealed

under Article 254(1) nor the Central Chit Funds Act, 1982 as

it is not notified. Thus, according to the learned counsel, as

and when the Central Government brings into force the Chit

Funds Act, 1982 by a notification in the State of Kerala under

Section 1(3), Section 90(2) of the 1982 Act will come into play

and thereby the Kerala Chitties Act, 1975 shall continue to

apply only to the chits in operation in Kerala on the date of

commencement of the Central Act, 1982 in the same manner

as the Kerala Chitties Act, 1975 applied to such chits before

such commencement. However, as the Kerala Act, 1975 stood

Page 25 25

repealed on 19.08.1982, on the enactment of the Central Chit

Funds Act, 1982, there could be no Amendment of the Kerala

Act, 1975 by Finance Act No. 7 of 2002. In the circumstances,

it was submitted that Section 4(1a) inserted in Section 4 by

the Kerala Finance Act No. 7 of 2002 was void and inoperative

in law as the President’s assent under Article 254(2) has not

been obtained.

15. According to Shri V. Giri, learned counsel for one of the

private chitty firms, the judgment of this Court in Pt.

Rishikesh (supra) has been correctly decided. In this

connection, it was submitted that the aspect of repugnancy

primarily arises in the mind of the Legislature. That, in the

case of Deep Chand v. State of U.P. (1959 Suppl. (2) SCR

8), three principles were laid down as indicative of repugnancy

between a State law and a Central law, which have to be borne

in mind by the State Legislature whenever it seeks to enact a

law under any entry in the Concurrent List. Thus, where there

is a Central law which intends to override a State law or where

there is a Central law intending to occupy the field hitherto

occupied by the State law or where the Central law collides

with the State law in actual terms, then the State Legislature

would have to take into account the possibility of repugnancy

Page 26 26

within the meaning of Article 254 of the Constitution. In this

connection, it was submitted that tests 1 and 2 enumerated in

Deep Chand (supra) do not require the Central law to be

actually brought into force for repugnancy between two

competing legislations to arise, in the context of Article 254 of

the Constitution. It was submitted that in the present case an

intention to override the State law is clearly manifest in the

Central Law, especially Section 3 of the Central Act which

makes it clear that the provisions of the 1982 Act shall have

effect notwithstanding anything contrary contained in any

other law for the time being in force. Similarly, Section 90 of

the Central Act providing for repeal of State Legislations also

manifests an intention on the part of the Parliament to occupy

the entire field hitherto occupied by the State Legislature.

Further, each and every aspect relating to the conduct of a

Chit as sought to be covered by the State Act has been

touched upon by the Central Act. Thus, the Parliament in

enacting the Central law has manifested its intention not only

to override the existing State laws, but also to occupy the

entire field relating to chits, which are special contracts, under

Entry 7 of List III. Thus, the actual bringing into force of the

Central Act is not a relevant circumstance insofar as the

Page 27 27

legislative business of the State Legislature is concerned. That,

when the State of Kerala intended to amend the State Act in

2002 by insertion of Section 4(1a), it was bound to keep in

mind the fact that there is already a Central law governing

chits since 19.08.1982, though not in force in Kerala, whereby

there is a pro tanto repeal of the State Act. Therefore, the State

Legislature ought to have followed the procedure in Article

254(2) by reserving the law for the consideration of the

President and obtained Presidential assent. Therefore,

according to the learned counsel, there is no merit in the

contention of the State that there would be a legislative

vacuum in the State of Kerala if the propositions advanced on

behalf of the private chit firms are to be accepted. According to

the learned counsel, Section 85(a) and Section 90(2) of the

Central Chit Funds Act, 1982 inter alia provide for

continuance of the application of the provisions of the Kerala

Chitties Act, 1975 till the commencement of the Central Act by

issuance of notification under Section 1(3) of the Central Chit

Funds Act, 1982. On commencement of that Act there is a pro

tanto repeal of the State Act by Section 90 of the Central Act.

However, according to the learned counsel, repugnancy arose

between two competing legislations, the moment the

Page 28 28

Legislature took up the Kerala Chitties Act, 1975 for

amendment by Finance Act No. 7 of 2002. Such repugnancy

had to arise in the mind of the legislature and the State

Legislature was bound to take note of the 1982 Central Act. In

this view of the matter, there is no legislative vacuum at any

point of time as urged on behalf of the State of Kerala. To hold

otherwise would mean bypassing the legislative will of the

Parliament expressed by passing the 1982 Act.

Our Answer to Question No. (i ):- Point of time for

determination of repugnance:

16.Article 254 deals with inconsistency between laws made

by Parliament and laws made by the Legislatures of States. It

finds place in Part XI of the Constitution. Part XI deals with

relations between the Union and the States. Part XI consists

of two Chapters. Chapter I deals with Distribution of Legislative

Powers. Articles 245 to 255 find place in Chapter I of Part XI.

Article 245 deals with extent of laws made by Parliament and

by the Legislatures of States. The verb “made”, in past tense,

finds place in the Head Note to Article 245. The verb “make”,

in the present tense, exists in Article 245(1) whereas the verb

“made”, in the past tense, finds place in Article 245 (2). While

the legislative power is derived from Article 245, the entries in

Page 29 29

the Seventh Schedule of the Constitution only demarcate the

legislative fields of the respective Legislatures and do not

confer legislative power as such. While the Parliament has

power to make laws for the whole or any part of the territory of

India, the Legislature of a State can make laws only for the

State or part thereof. Thus, Article 245, inter alia, indicates

the extent of laws made by Parliament and by the State

Legislatures. Article 246 deals with subject-matter of laws

made by Parliament and by the Legislatures of States. The

verb “made” once again finds place in the Head Note to Article

246. This Article deals with distribution of legislative powers

as between the Union and the State Legislatures, with

reference to the different Lists in the Seventh Schedule. In

short, the Parliament has full and exclusive powers to legislate

with respect to matters in List I and has also power to legislate

with respect to matters in List III, whereas the State

Legislatures, on the other hand, have exclusive power to

legislate with respect to matters in List II, minus matters

falling in List I and List III and have concurrent power with

respect to matters in List III. [See: A.L.S.P.P.L.

Subrahmanyan Chettiar v. Muttuswami Goundan – AIR

1941 F.C. 47]. Article 246, thus, provides for distribution, as

Page 30 30

between Union and the States, of the legislative powers which

are conferred by Article 245. Article 245 begins with the

expression “subject to the provisions of this Constitution”.

Therefore, Article 246 must be read as “subject to other

provisions of the Constitution”. For the purposes of this

decision, the point which needs to be emphasized is that

Article 245 deals with conferment of legislative powers

whereas Article 246 provides for distribution of the legislative

powers. Article 245 deals with extent of laws whereas Article

246 deals with distribution of legislative powers. In these

Articles, the Constitution framers have used the word “make”

and not “commencement” which has a specific legal

connotation. [See: Section 2(13) of the General Clauses Act,

1897]. One more aspect needs to be highlighted. Article

246(1) begins with a non-obstante clause “Notwithstanding

anything in clauses (2) and (3)”. These words indicate the

principle of federal supremacy, namely, in case of inevitable

conflict between the Union and State powers, the Union

powers, as enumerated in List I, shall prevail over the State

powers, as enumerated in Lists II and III, and in case of

overlapping between Lists III and II, the former shall prevail.

[See: Indu Bhusan Bose versus Rama Sundari Devi & Anr. –

Page 31 31

(1970) 1 SCR 443 at 454]. However, the principle of federal

supremacy in Article 246(1) cannot be resorted to unless there

is an “irreconcilable” conflict between the entries in Union and

State Lists. The said conflict has to be a “real” conflict. The

non-obstante clause in Article 246(1) operates only if

reconciliation is impossible. As stated, Parliamentary

Legislation has supremacy as provided in Article 246 (1) and

(2). This is of relevance when the field of legislation is in the

Concurrent List. The Union and the State Legislatures have

concurrent power with respect to the subjects enumerated in

List III. [See: Article 246(2)]. Hence, the State Legislature has

full power to legislate regarding subjects in the Concurrent

List, subject to Article 254(2) , i.e., provided the provisions of

the State Act do not come in conflict with those of the Central

Act on the subject. [See: Amalgamated Electricity Co.

(Belgaum) Ltd. versus Municipal Committee, Ajmer –

(1969) 1 SCR 430]. Thus, the expression “subject to” in

clauses (2) and (3) of Article 246 denotes supremacy of

Parliament. Further, in Article 246(1) the expression used is

“with respect to”. There is a distinction between a law “with

respect to”, and a law “affecting”, a subject matter. The

opening words of Article 245 “Subject to the provisions of this

Page 32 32

Constitution” make the legislative power conferred by Article

245 and Article 246, as well as the legislative Lists, “subject to

the provisions of the Constitution”. Consequently, laws made

by a Legislature may be void not only for lack of legislative

powers in respect of the subject-matter, but also for

transgressing constitutional limitations. [See: Para 22.6 of

Vol.3 at Page 2305 of the Constitutional Law of India by H.M.

Seervai, Fourth Edition]. This aspect is important as the word

“void” finds place in Article 254(1) of the Constitution.

Therefore, the Union and State Legislature have concurrent

power with respect to subjects enumerated in List III. Hence,

the State Legislature has full power to legislate regarding the

subjects in List III, subject to the provision in Article 254(2),

i.e., provided the provisions of the State Act do not conflict

with those of the Central Act on the subject. Where the

Parliament has made no law occupying the field in List III, the

State Legislature is competent to legislate in that field. As

stated, the expression “subject to” in clauses (2) and (3) of

Article 246 denotes the supremacy of the Parliament. Thus,

the Parliament and the State Legislature derive the power to

legislate on a subject in List I and List II from Article 246 (1)

and (3) respectively. Both derive their power from Article

Page 33 33

246(2) to legislate upon a matter in List III subject to Article

254 of the Constitution. The respective Lists merely

demarcate the legislative fields or legislative heads. Further,

Article 250 and Article 251 also use the word “make” and not

“commencement”. If one reads the Head Note to Article 250 it

refers to power of the Parliament to legislate with respect to

any matter in the State List if a Proclamation of Emergency is

in operation. The word “made” also finds place in Article

250(2). In other words, the verb “make” or the verb “made” is

equivalent to the expression “to legislate”. Thus, making of

the law is to legislate with respect to any matter in the State

List if Proclamation of Emergency is in operation. The

importance of this discussion is to show that the Constitution

framers have deliberately used the word “made” or “make” in

the above Articles. Our Constitution gives supremacy to the

Parliament in the matter of making of the laws or legislating

with respect to matters delineated in the three Lists. The

principle of supremacy of the Parliament, the distribution of

legislative powers, the principle of exhaustive enumeration of

matters in the three Lists are all to be seen in the context of

making of laws and not in the context of commencement of the

laws.

Page 34 34

17.Under clause (1) of Article 254, a general rule is laid

down to say that the Union law shall prevail where the State

law is repugnant to it. The question of repugnancy arises only

with respect to the subjects enumerated in the Concurrent

List as both the Parliament and the State Legislatures have

concurrent powers to legislate over the subject-matter in that

List. In such cases, at times, conflict arises. Clause (1) of

Article 254 states that if a State law, relating to a concurrent

subject, is “repugnant” to a Union law, relating to that subject,

then, whether the Union law is prior or later in time, the

Union law will prevail and the State law shall, to the extent of

such repugnancy, be void. Thus, Article 254(1) also gives

supremacy to the law made by Parliament, which Parliament

is competent to enact. In case of repugnancy, the State

Legislation would be void only to the extent of repugnancy. If

there is no repugnancy between the two laws, there is no

question of application of Article 254(1) and both the Acts

would prevail. Thus, Article 254 is attracted only when

Legislations covering the same matter in List III made by the

Centre and by the State operate on that subject; both of them

(Parliament and the State Legislatures) being competent to

enact laws with respect to the subject in List III. In the

Page 35 35

present case, Entry 7 of List III in the Seventh Schedule deals

with the subject of “Contracts”. It also covers special

contracts. Chitties are special contracts. Thus, the

Parliament and the State Legislatures are competent to enact

a law with respect to such contracts. The question of

repugnancy between the Parliamentary Legislation and State

Legislation arises in two ways. First, where the Legislations,

though enacted with respect to matters in their allotted

spheres, overlap and conflict. Second, where the two

Legislations are with respect to matters in the Concurrent List

and there is a conflict. In both the situations, the

Parliamentary Legislation will predominate, in the first, by

virtue of non-obstante clause in Article 246(1); in the second,

by reason of Article 254(1). Article 254(2) deals with a

situation where the State Legislation having been reserved and

having obtained President’s assent, prevails in that State; this

again is subject to the proviso that Parliament can again bring

a legislation to override even such State Legislation. In clause

(1) of Article 254 the significant words used are “provision of a

law made by the Legislature of a State”, “any provision of a law

made by Parliament which Parliament is competent to enact ”,

“the law made by Parliament, whether passed before or after

Page 36 36

the law made by the Legislature of such State”, and “the law

made by the Legislature of the State shall, to the extent of

repugnancy, be void”. Again, clause (2) of Article 254 speaks

of “a law made by the Legislature of a State”, “an earlier law

made by Parliament”, and “the law so made by the Legislature

of such State”. Thus, it is noticeable that throughout Article

254 the emphasis is on law-making by the respective

Legislatures. Broadly speaking, law-making is exclusively the

function of the Legislatures (see Articles 79 and 168). The

President and the Governor are a part of the Union or the

Legislatures of the States. As far as the Parliament is

concerned, the legislative process is complete as soon as the

procedure prescribed by Article 107 of the Constitution and

connected provisions are followed and the Bill passed by both

the Houses of Parliament has received the assent of the

President under Article 111. Similarly, a State legislation

becomes an Act as soon as a Bill has been passed by the State

Legislature and it has received the assent of the Governor in

accordance with Article 200. It is only in the situation

contemplated by Article 254(2) that a State Legislation is

required to be reserved for consideration and assent by the

President. Thus, irrespective of the date of enforcement of a

Page 37 37

Parliamentary or State enactment, a Bill becomes an Act and

comes on the Statute Book immediately on receiving the

assent of the President or the Governor, as the case may be,

which assent has got to be published in the official gazette.

The Legislature, in exercise of its legislative power, may either

enforce an Act, which has been passed and which has received

the assent of the President or the Governor, as the case may

be, from a specified date or leave it to some designated

authority to fix a date for its enforcement. Such legislations

are conditional legislations as in such cases no part of the

legislative function is left unexercised. In such legislations,

merely because the Legislature has postponed the enforcement

of the Act, it does not mean that the law has not been made.

In the present case, the Central Chit Funds Act, 1982 is a law-

made. The Chit Funds Bill was passed by both Houses of

Parliament and received the assent of the President on

19.08.1982. It came on the Statute Book as the Chit Funds

Act, 1982 (40 of 1982). Section 1(2) of the said Act states that

the Act extends to the whole of India, except the State of

Jammu and Kashmir whereas Section 1(3) states that it shall

come into force on such date as the Central Government may,

by notification in the Official Gazette, appoint and different

Page 38 38

dates may be appointed for different States. The point to be

noted is that the law-making process ended on 19.08.1982.

Section 1(3) is a piece of conditional legislation. As stated, in

legislations of such character, merely because the legislation

has postponed the enforcement of the Act, it does not mean

that the law has not been made. In the present case, after

enactment of the Chit Funds Act, 1982 on 19.08.1982, the

said Act has been applied to 17 States by notifications issued

from time to time under Section 1(3). How could Section 1(3)

operate and make the said Act applicable to 17 States between

2.04.1984 and 15.09.2008 and/ or postpone the

commencement of the Act for certain other States including

State of Kerala, Gujarat, Haryana, etc. unless that Section

itself is in force? To put the matter in another way, if the

entire Act including Section 1(3) was not in operation on

19.08.1982, how could the Central Government issue any

notification under that very Section in respect of 17 States?

There must be a law authorizing the Government to bring the

Act into force. Thus, Section 1(3) came into force immediately

on passing of the Act (see A. Thangal Kunju Musaliar v. M.

Venkatachalam Potti AIR 1956 SC 246). Thus, the material

dates, in our opinion, are the dates when the two enactments

Page 39 39

received the assent of the President which in the case of

Central Act is 19.08.1982 while in the case of the Kerala

Chitties Act, 1975, it is 18.07.1975. There is one more way in

which this problem can be approached. Both the courts below

have proceeded on the basis that there are conflicting

provisions in the Central Act, 1982 vis-à-vis the State Act,

1975 (see paragraphs 13, 14 & 15 of the impugned judgment).

In our view, the intention of the Parliament was clearly to

occupy the entire field falling in Entry 7 of List III. The 1982

Act was enacted as a Central Legislation to “ensure uniformity

in the provisions applicable to chit fund institutions throughout

the country as such a Central Legislation would prevent such

institutions from taking advantage either of the absence of any

law governing chit funds in a State or exploit the benefit of any

lacuna or relaxation in any State law by extending their

activities in such States”. The background of the enactment of

the Central Chit Funds Act, which refers to the Report of the

Banking Commission has been exhaustively dealt with in the

case of Shriram Chits and Investment (P) Ltd. v. Union of

India [(1993) Supp 4 SCC 226] as also in the Statement of

Objects and Reasons of the 1982 Act. The clear intention of

enacting the Central 1982 Act, therefore, was to make the

Page 40 40

Central Act a complete code with regard to the business of

conducting chit funds and to occupy the legislative field

relating to such chit funds. Moreover, the intention to

override the State laws is clearly manifested in the Central Act,

especially Section 3 which makes it clear that the provisions of

the Central Act shall have effect notwithstanding anything to

the contrary contained in any other law for the time being in

force. Similarly, Section 90 of the Central Act providing for the

repeal of State legislations also manifests the intention on the

part of the Parliament to occupy the field hitherto occupied by

State Legislation. Each and every aspect relating to the

conduct of the chits as is covered by the State Act has been

touched upon by the Central Act in a more comprehensive

manner. Thus, on 19.08.1982, the Parliament in enacting the

Central law has manifested its intention not only to override

the existing State Laws, but to occupy the entire field relating

to Chits, which is a special contract, coming under Entry 7 of

List III. Consequently, the State Legislature was divested of its

legislative power/ authority to enact Section 4(1a) vide Finance

Act No. 7 of 2002 on 29.07.2002, save and except under

Article 254(2) of the Constitution. Thus, Section 4(1a) became

void for want of assent of the President under Article 254(2).

Page 41 41

Let us assume for the sake of argument that the State of

Kerala were to obtain the assent of the President under Article

254(2) of the Constitution in respect of the insertion of Section

4(1a) by Finance Act No. 7 of 2002. Now, Article 254(2) deals

with the situation where State Legislation is reserved and

having obtained the President’s assent, prevails in the State

over the Central Law. However, in view of the proviso to

Article 254(2), the Parliament could have brought a legislation

even to override such assented to State Finance Act No. 7 of

2002 without waiting for the Finance Act No. 7 of 2002 to be

brought into force as the said proviso states that nothing in

Article 254(2) shall prevent Parliament from enacting at any

time, any law with respect to the same matter including a law

adding to, amending, varying or repealing the law so made by

the State Legislature) [emphasis supplied]. Thus, Parliament in

the matter of enacting such an overriding law need not wait for

the earlier State Finance Act No. 7 of 2002 to be brought into

force. In other words, Parliament has the power under the

said proviso to override the Finance Act No. 7 of 2002 even

before it is brought into force. Therefore, we see no

justification for construing Article 254(2) read with the proviso

in a manner which inhibits the Parliament from repealing,

Page 42 42

amending, or varying a State Legislation which has received

the President’s assent under Article 254(2), till that State

Legislation is brought into force. We have to read the word

“made” in the proviso to Article 254(2) in a consistent manner.

The entire above discussion on Articles 245, 246, 250, 251 is

only to indicate that the word “made” has to be read in the

context of law-making process and, if so read, it is clear that

to test repugnancy one has to go by the making of law and not

by its commencement.

Case Law

18(i)In T. Barai v. Henry Ah Hoe reported in (1983) 1 SCC

177, this Court has laid down the following principles on

repugnancy.

“15. There is no doubt or difficulty as to the law

applicable. Article 254 of the Constitution makes

provision firstly, as to what would happen in the

case of conflict between a Central and State law

with regard to the subjects enumerated in the

Concurrent List, and secondly, for resolving such

conflict. Article 254(1) enunciates the normal rule

that in the event of a conflict between a Union and

a State law in the concurrent field, the former

prevails over the latter. Clause (1) lays down that if

a State law relating to a concurrent subject is

“repugnant” to a Union law relating to that

subject, then, whether the Union law is prior or

later in time, the Union law will prevail and the

State law shall, to the extent of such repugnancy,

be void . To the general rule laid down in Clause

(1), Clause (2) engrafts an exception viz. that if the

Page 43 43

President assents to a State law which has been

reserved for his consideration, it will prevail

notwithstanding its repugnancy to an earlier law of

the Union, both laws dealing with a concurrent

subject. In such a case, the Central Act will give

way to the State Act only to the extent of

inconsistency between the two, and no more. In

short, the result of obtaining the assent of the

President to a State Act which is inconsistent with

a previous Union law relating to a concurrent

subject would be that the State Act will prevail in

that State and override the provisions of the

Central Act in their applicability to that State only.

The predominance of the State law may however be

taken away if Parliament legislates under the

proviso to Clause (2). The proviso to Article 254(2)

empowers the Union Parliament to repeal or amend

a repugnant State law even though it has become

valid by virtue of the President's assent. Parliament

may repeal or amend the repugnant State law,

either directly, or by itself enacting a law repugnant

to the State law with respect to the “same matter”.

Even though the subsequent law made by

Parliament does not expressly repeal a State law,

even then, the State law will become void as soon

as the subsequent law of Parliament creating

repugnancy is made . A State law would be

repugnant to the Union law when there is direct

conflict between the two laws. Such repugnancy

may also arise where both laws operate in the

same field and the two cannot possibly stand

together, e.g., where both prescribe punishment for

the same offence but the punishment differs in

degree or kind or in the procedure prescribed. In all

such cases, the law made by Parliament shall

prevail over the State law under Article 254(1).”

(ii)In I.T.C. Limited v. State of Karnataka reported in

1985 Supp. SCC 476, this Court vide para 18 stated as under.

“18. Thus, in my opinion, the five principles have

to be read and construed together and not in

Page 44 44

isolation — where however, the Central and the

State legislation cover the same field then the

Central legislation would prevail. It is also well

settled that where two Acts, one passed by the

Parliament and the other by a State Legislature,

collide and there is no question of harmonising

them, then the Central legislation must prevail.”

(iii)In the case of M. Karunanidhi v. Union of India (1979)

3 SCC 431, the test for determining repugnancy has been laid

down by the Supreme Court as under.

“8. It would be seen that so far as clause (1) of

Article 254 is concerned it clearly lays down that

where there is a direct collision between a

provision of a law made by the State and that

made by Parliament with respect to one of the

matters enumerated in the Concurrent List, then,

subject to the provisions of clause (2), the State

law would be void to the extent of the repugnancy.

This naturally means that where both the State

and Parliament occupy the field contemplated by

the Concurrent List then the Act passed by

Parliament being prior in point of time will prevail

and consequently the State Act will have to yield to

the Central Act. In fact, the scheme of the

Constitution is a scientific and equitable

distribution of legislative powers between

Parliament and the State Legislatures. First,

regarding the matters contained in List I, i.e. the

Union List to the Seventh Schedule, Parliament

alone is empowered to legislate and the State

Legislatures have no authority to make any law in

respect of the Entries contained in List I. Secondly,

so far as the Concurrent List is concerned, both

Parliament and the State Legislatures are entitled

to legislate in regard to any of the Entries

appearing therein, but that is subject to the

condition laid down by Article 254(1) discussed

above. Thirdly, so far as the matters in List II, i.e.

the State List are concerned, the State Legislatures

Page 45 45

alone are competent to legislate on them and only

under certain conditions Parliament can do so. It

is, therefore, obvious that in such matters

repugnancy may result from the following

circumstances:

1. Where the provisions of a Central Act

and a State Act in the Concurrent List are

fully inconsistent and are absolutely

irreconcilable, the Central Act will prevail and

the State Act will become void in view of the

repugnancy.

2. Where however a law passed by the

State comes into collision with a law passed

by Parliament on an Entry in the Concurrent

List, the State Act shall prevail to the extent

of the repugnancy and the provisions of the

Central Act would become void provided the

State Act has been passed in accordance with

clause (2) of Article 254.

3. Where a law passed by the State

Legislature while being substantially within

the scope of the entries in the State List

entrenches upon any of the Entries in the

Central List the constitutionality of the law

may be upheld by invoking the doctrine of

pith and substance if on an analysis of the

provisions of the Act it appears that by and

large the law falls within the four corners of

the State List and entrenchment, if any, is

purely incidental or inconsequential.

4. Where, however, a law made by the

State Legislature on a subject covered by the

Concurrent List is inconsistent with and

repugnant to a previous law made by

Parliament, then such a law can be protected

by obtaining the assent of the President

under Article 254(2) of the Constitution. The

result of obtaining the assent of the President

Page 46 46

would be that so far as the State Act is

concerned, it will prevail in the State and

overrule the provisions of the Central Act in

their applicability to the State only. Such a

state of affairs will exist only until Parliament

may at any time make a law adding to, or

amending, varying or repealing the law made

by the State Legislature under the proviso to

Article 254.

So far as the present State Act is concerned we are

called upon to consider the various shades of the

constitutional validity of the same under Article

254(2) of the Constitution.

*** *** ***

24. It is well settled that the presumption is

always in favour of the constitutionality of a

statute and the onus lies on the person assailing

the Act to prove that it is unconstitutional. Prima

facie, there does not appear to us to be any

inconsistency between the State Act and the

Central Acts. Before any repugnancy can arise, the

following conditions must be satisfied:

1. That there is a clear and direct

inconsistency between the Central Act and

the State Act.

2. That such an inconsistency is

absolutely irreconcilable.

3. That the inconsistency between the

provisions of the two Acts is of such nature

as to bring the two Acts into direct collision

with each other and a situation is reached

where it is impossible to obey the one without

disobeying the other.

25. In Colin Howard's Australian Federal

Constitutional Law, 2nd Edn. the author while

Page 47 47

describing the nature of inconsistency between the

two enactments observed as follows:

“An obvious inconsistency arises when the

two enactments produce different legal

results when applied to the same facts.”

*** *** ***

35. On a careful consideration, therefore, of the

authorities referred to above, the following

propositions emerge:

1. That in order to decide the question of

repugnancy it must be shown that the two

enactments contain inconsistent and

irreconcilable provisions, so that they cannot

stand together or operate in the same field.

2. That there can be no repeal by implication

unless the inconsistency appears on the face of the

two statutes.

3. That where the two statutes occupy a

particular field , but there is room or possibility of

both the statutes operating in the same field

without coming into collision with each other, no

repugnancy results.

4. That where there is no inconsistency but a

statute occupying the same field seeks to create

distinct and separate offences, no question of

repugnancy arises and both the statutes continue

to operate in the same field.”

Applying the above tests to the facts of the present case,

on the enactment of the Central Chit Funds Act 1982 on

19.08.1982, intending to occupy the entire field of Chits under

Page 48 48

Entry 7 of List III, the State Legislature was denuded of its

power to enact the Finance Act No. 7 of 2002. However, as

held in numerous decisions of this Court, a law enacted by the

State legislature on a topic in the Concurrent List which is

inconsistent with and repugnant to the law made by the

Parliament can be protected by obtaining the assent of the

President under Article 254(2) and that the said assent would

enable the State law to prevail in the State and override the

provisions of the Central Act in its applicability to that State

only. Thus, when the State of Kerala intended to amend the

State Act in 2002, it was bound to keep in mind the fact that

there is already a Central law on the same subject, made by

Parliament in 1982, though not in force in Kerala, whereunder

there is a pro tanto repeal of the State Act. Therefore, the

State legislature ought to have followed the procedure in

Article 254(2) and ought to have obtained the assent of the

President.

(iv)In Tika Ramji (supra), the facts were as follows:- The

State Legislature enacted the U.P. Sugarcane (Regulation of

Supply and Purchase) Act, 1953 which empowered the State

Government to issue notifications, which were in fact issued

on 27.09.1954 and 9.11.1955 regulating supply and purchase

Page 49 49

of sugarcane. It was inter alia contended that the U.P.

Sugarcane (Regulation of Supply and Purchase) Act, 1953,

being the State Act was repugnant to Act LXV of 1951 enacted

by the Parliament which empowered the Central Government

vide Section 18G to issue an order regulating distribution of

finished articles at fair prices relatable to the scheduled

industry. The question that arose for determination was

whether “sugar” was an item covered by the Central Act No.

LXV of 1951 and, if so, whether the State Act was void being

repugnant to the Central Law. This Court held that the whole

object of the Central Act (LXV of 1951) was to regulate

distribution of manufactured/finished articles at fair prices

and not to legislate in regard to the raw material (sugarcane).

This Court further held that Section 18G of the Central Act

No. LXV of 1951 did not cover “sugarcane”; Section 18G of the

Central Act No. LXV of 1951 only dealt with the finished

products manufactured by scheduled industries, and, hence,

there was no repugnancy. In the said judgment, this Court

also referred to three tests of inconsistency or repugnancy

enumerated by Nicholas in his commentary on Australian

Constitution, 2

nd

Edition, Page 303. In the said judgment,

this Court also relied upon the ratio of the judgment in the

Page 50 50

case of Clyde Engineering Co. Ltd. v. Cowburn [1926] 37

C.L.R. 466, in which Isaacs, J. laid down one test of

inconsistency as conclusive: “If, a competent legislature

expressly or implicitly evinces its intention to cover the whole

field, that is a conclusive test of inconsistency where another

Legislature assumes to enter to any extent upon the same

field.” Applying these tests, this Court held that there was no

repugnancy as “sugarcane” was dealt with by the impugned

State Act whereas the Central Act dealt with supply and

distribution of manufactured articles at fair prices and,

therefore, there was no question of any inconsistency in the

actual terms of the Acts enacted by Parliament and the State.

The only question that arose was whether Parliament and the

State Legislature sought to exercise their powers over the

same subject matter or whether the laws enacted by

Parliament were intended to be a complete exhaustive code or

whether such Acts evinced an intention to cover the whole

field. This Court held that as “sugarcane” was not the subject-

matter of the Central Act, there was no intention to cover the

whole field and, consequently, both the Acts could co-exist

without repugnancy. Having come to the conclusion that

there was no repugnancy, the Court observed that, “Even

Page 51 51

assuming that sugarcane was an article relatable to the sugar

industry as a final product within the meaning of Section 18G

of Central Act No. LXV of 1951, it is to be noted that no order

was issued by the Central Government in exercise of the

powers vested in it under that Section and no question of

repugnancy could arise because repugnancy must exist in fact

and not depend merely on a possibility. The possibility of an

order under Section 18G being issued by the Central

Government would not be enough. The existence of such an

order was an essential pre-requisite before repugnancy could

arise.” This sentence has been relied upon by learned counsel

for the State of Kerala in the present case in support of his

submission that repugnancy must exist in fact and not depend

on a mere possibility. According to the learned counsel, in the

present case, applying the ratio of the judgment in the case of

Tika Ramji (supra), it is clear that the repugnancy has not

arisen in the present case before us for the simple reason that

the Central Chit Funds Act, 1982 has not come into force in

the State of Kerala. That, a mere possibility of the Central Act

coming into force in future in the State of Kerala would not

give rise to repugnancy.

(v)In the case of State of Orissa v. M.A. Tulloch and Co.

Page 52 52

reported in (1964) 4 SCR 461, the facts were as follows:- On a

lease being granted by State of Orissa under Mines and

Minerals (Development and Regulation) Act 1948 (Central Act),

Tulloch and Company started working a manganese mine.

The State of Orissa passed Orissa Mining Areas Development

Fund Act, 1952 under which the State Government was

authorized to levy a fee for development of “mining areas” in

the State. After bringing these provisions into operation,

State of Orissa demanded from Tulloch and Company on

August 1, 1960 fees for the period July, 1957 to March, 1958.

Tulloch and Company challenged the legality of the demand

before the High Court under Article 226 of the Constitution.

The writ petition was allowed on the ground that on the

coming into force of the Mines and Minerals (Regulation and

Development) Act of 1957, hereinafter called the “Central Act

of 1957”, which was brought into force from 1

st

June, 1953 the

Orissa Mining Areas Development Fund Act 1952 should be

deemed to be non-existent. This was the controversy which

came before this Court. One of the points which arose for

determination was that of repugnancy. It was urged that the

object and purpose of Orissa Mining Areas Development Fund

Act, 1952 was distinct and different from the object and

Page 53 53

purpose of the Central Act of 1957, with the result that both

the enactments could validly co-exist since they did not cover

the same field. This argument was rejected by this Court. It

was held that having regard to the terms of Section 18(1) the

intention of Parliament was to cover the entire field. That, by

reason of declaration by Parliament under the said Section the

entire subject matter of conservation and development of

minerals was taken over for being dealt with by Parliament

thus depriving the State of the power hitherto possessed.

Relying on the judgment of the Constitution Bench of this

Court in the case of Hingir-Rampur Coal Co. v. State of

Orissa (1961) 2 SCR 537, it was held in Tulloch’s case that

for the declaration to be effective it is not necessary that the

rules should be made or enforced; all that was required was a

declaration by Parliament to the effect that in public interest

regulation and development of the mines should come under

the control of the Union. In such a case the test must be

whether the legislative declaration covers the field or not.

Applying the said test, in Tulloch’s case, the Constitution

Bench held that the Central Act of 1957 intended to cover the

entire field dealing with regulation and development of mines

being under the control of the Central Government. In

Page 54 54

Tulloch’s case, reliance was placed on the above underlined

portion in Tika Ramji’s case (supra) which, as stated above,

was on the assumption that sugarcane was an article relatable

to sugar industry within Section 18G of the Central Act No.

LXV of 1951. It was urged on behalf of the State of Orissa in

Tulloch’s case that Section 18(1) of the Central Act of 1957

merely imposes a duty on the Central Government to take

steps for ensuring conservation and development of mineral

resources. That, since the Central Government had not

framed Rules under the Act for development of mining areas

till such Rules were framed, the Central Act of 1957 did not

cover the entire field, and, thus, the Orissa Mining Areas

Development Fund Act, 1952 continued to operate in full force

till the Central Government enacted Rules under Section 18 of

the 1957 Act. The said contention of the State of Orissa was

rejected by the Constitution Bench of this Court in Tulloch’s

case by placing reliance on the judgment of this Court in

Hingir-Rampur’s case (supra) in following words:

“We consider that this submission in relation

to the Act before us is without force besides being

based on a misapprehension of the true legal

position. In the first place the point is concluded

by the earlier decision of this court in Hingir

Rampur Coal Co. Ltd. v. State of Orissa where this

Page 55 55

court said:

“In order that the declaration should be

effective it is not necessary that rules should

be made or enforced . All that this required is

a declaration by Parliament that it was

expedient in the public interest to take the

regulation of development of mines under the

control of the Union. In such a case the test

must be whether the legislative declaration

covers the field or not. ”

But even if the matter was res integra, the

argument cannot be accepted. Repugnancy arises

when two enactments both within the competence

of the two Legislatures collide and when the

Constitution expressly or by necessary implication

provides that the enactment of one legislature has

superiority over the other then to the extent of the

repugnancy the one supersedes the other. But two

enactments may be repugnant to each other even

though obedience to each of them is possible

without disobeying the other. The test of two

legislations containing contradictory provisions is

not, however, the only criterion of repugnancy, for

if a competent legislature with a superior efficacy

expressly or impliedly evinces by its legislation an

intention to cover the whole field, the enactments

of the other legislature whether passed before or

after would be overborne on the ground of

repugnance. Where such is the position, the

inconsistency is demonstrated not by a detailed

comparison of provisions of the two statutes but

by the mere existence of the two pieces of

legislation. In the present case, having regard to

the terms of Section 18(1) it appears clear to us

that the intention of Parliament was to cover the

entire field and thus to leave no scope for the

argument that until rules were framed , there was

no inconsistency and no supersession, of the State

Act.”

19. To sum up , Articles 246(1), (2) and 254(1) provide that to

Page 56 56

the extent to which a State law is in conflict with or repugnant

to the Central law, which Parliament is competent to make,

the Central law shall prevail and the State law shall be void to

the extent of its repugnancy. This general rule of repugnancy

is subject to Article 254(2) which inter alia provides that if a

law made by a State legislature in respect of matters in the

Concurrent List is reserved for consideration by the President

and receives his/ her assent, then the State law shall prevail

in that State over an existing law or a law made by the

Parliament, notwithstanding its repugnancy . The proviso to

Article 254(2) provides that a law made by the State with the

President’s assent shall not prevent Parliament from making at

any time any law with respect to the same matter including a

law adding to, amending, varying or repealing the law so made

by a State legislature. Thus, Parliament need not wait for the

law made by the State with the President’s assent to be

brought into force as it can repeal, amend, vary or add to the

assented State law no sooner it is made or enacted. We see no

justification for inhibiting Parliament from repealing,

amending or varying any State Legislation, which has received

the President’s assent, overriding within the State’s territory,

an earlier Parliamentary enactment in the concurrent sphere,

Page 57 57

before it is brought into force . Parliament can repeal, amend,

or vary such State law no sooner it is assented to by the

President and that it need not wait till such assented to State

law is brought into force. This view finds support in the

judgment of this Court in Tulloch (supra). Lastly, the

definition of the expressions “laws in force” in Article 13(3)(b)

and Article 372(3), Explanation I and “existing law” in Article

366(10) show that the laws in force include laws passed or

made by a legislature before the commencement of the

Constitution and not repealed, notwithstanding that any such

law may not be in operation at all. Thus, the definition of the

expression “laws in force” in Article 13(3)(b) and Article 372(3),

Explanation I and the definition of the expression “existing

law” in Article 366(10) demolish the argument of the State of

Kerala that a law has not been made for the purposes of

Article 254, unless it is enforced. The expression “existing

law” finds place in Article 254. In Edward Mills Co. Ltd.,

Beawar v. State of Ajmer [AIR 1955 SC 25], this Court has

held that there is no difference between an “existing law” and a

“law in force”. Applying the tests enumerated hereinabove, we

hold that the Kerala Chitties Act, 1975 became void on the

making of the Chit Funds Act, 1982 on 19.08.1982, [when it

Page 58 58

received the assent of the President and got published in the

Official Gazette] as the Central 1982 Act intended to cover the

entire field with regard to the conduct of the Chits and further

that the State Finance Act No. 7 of 2002, introducing Section

4(1a) into the State 1975 Act, was void as the State legislature

was denuded of its authority to enact the said Finance Act No.

7 of 2002, except under Article 254(2), after the Central Chit

Funds Act, 1982 occupied the entire field as envisaged in

Article 254(1) of the Constitution. Thus, repugnancy arises on

the making and not commencement of the Central Chit Funds

Act, 1982. On 19.08.1982, the Kerala Chitties Act, 1975

ceased to operate except to the extent of Section 6 of the

General Clauses Act, 1897.

ii)Our Answer to Question No. (ii) :- The Effect in Law of a

Repeal

20.In State of Orissa v. M.A. Tulloch & Co. (supra), this

Court came to the conclusion that by reason of the declaration

by Parliament the entire subject matter of “conservation and

development of minerals” stood taken over, for being dealt with

by Parliament, thus, denying the State of the power within it

hitherto possessed and consequently the Central Act

superseded the State law, thus effecting a repeal. After coming

Page 59 59

to the conclusion that the State law stood repealed, this Court

was required to consider a submission advanced on behalf of

Tulloch & Co. It was submitted that Section 6 of the General

Clauses Act, 1897 applied only to express repeals and not to

repeals consequent upon the supersession of the State Act by

a law having the constitutional superior efficacy. It was

submitted that a mere disappearance or supersession of the

State Act under Article 254(1) was at the highest a case of

implied repeal and not an express repeal. That, Section 6 of

the General Clauses Act applied only to express repeals and

not to implied repeals. This contention was rejected in the

following terms :

“The entire theory underlying implied repeals is

that there is no need for the later enactment to

state in express terms that an earlier enactment

has been repealed by using any particular set of

words or form of drafting but that if the legislative

intent to supersede the earlier law is manifested by

the enactment of provisions as to effect such

supersession, then there is in law a repeal

notwithstanding the absence of the word ‘repeal' in

the later statute. Now, if the legislative intent to

supersede the earlier law is the basis upon which

the doctrine of implied repeal is founded could

there be any incongruity in attributing to the later

legislation the same intent which Section 6

presumes where the word ‘repeal' is expressly

used. So far as statutory construction is

concerned, it is one of the cardinal principles of

the law that there is no distinction or difference

between an express provision and a provision

Page 60 60

which is necessarily implied, for it is only the form

that differs in the two cases and there is no

difference in intention or in substance. A repeal

may be brought about by repugnant legislation,

without even any reference to the Act intended to

be repealed , for once legislative competence to

effect a repeal is posited, it matters little whether

this is done expressly or inferentially or by the

enactment of repugnant legislation. If such is the

basis upon which repeals and implied repeals are

brought about it appears to us to be both logical

as well as in accordance with the principles upon

which the rule as to implied repeal rests to

attribute to that legislature which effects a repeal

by necessary implication the same intention as

that which would attend the case of an express

repeal. Where an intention to effect a repeal is

attributed to a legislature then the same would , in

our opinion, attract the incident of the saving

found in Section 6 for the rules of construction

embodied in the General Clauses Act are, so to

speak, the basic assumptions on which statutes

are drafted.”

21.In A. Thangal Kunju Mussaliar v. M. Venkitachalam

Potti and Anr. [1955] 2 SCR 1196, the Travancore State

Legislature enacted Act No. XIV of 1124 on 7.03.1949 to

provide for investigation of tax evasion cases. The Act was to

come into force by Section 1(3) on the date appointed by the

State Government. The States of Travancore and Cochin

merged on 1.07.1949. By Ordinance 1 of 1124, all existing

laws were to continue in force in the United State of

Travancore and Cochin. After action was taken under Act No.

XIV of 1124, a controversy was raised that as the said Act No.

Page 61 61

XIV of 1124 was not a law in force when the United State of

Travancore and Cochin was formed, all proceedings under the

Travancore Act No. XIV of 1124 had lapsed. This contention

was dismissed by this Court in following terms:

“The general rule of English law, as to the date

of the commencement of a statute, since 1797, has

been and is that when no other date is fixed by it

for its coming into operation it is in force from the

date when it receives the royal assent (33 Geo. 3,

c. 13). The same rule has been adopted in Section

5 of our General Clauses Act, 1897 . We have not

been referred to any Travancore law which

provides otherwise. If, therefore, the same

principle prevailed in that State, Travancore Act 14

of 1124 would have come into force on 7-3-1949

when it was passed by the Travancore Legislature.

What prevented that result? The answer obviously

points to Section 1(3) which authorises the

Government to bring the Act into force on a later

date by issuing a notification. How could Section

1(3) operate to postpone the commencement of the

Act unless that section itself was in force? One

must, therefore, concede that Section 1(3) came

into operation immediately the Act was passed, for

otherwise it could not postpone the coming into

operation of the Act . To put the same argument in

another way, if the entire Act including Section

1(3) was not in operation at the date of its passing,

how could the Government issue any notification

under that very section? There must be some law

authorising the Government to bring the Act into

force. Where is that law to be found unless it were

in Section 1(3)? In answer, Shri Nambiyar referred

us to the principle embodied in Section 37 of the

English Interpretation Act which corresponds to

Section 22 of our General Clauses Act. That

section does not help the petitioner at all. All that

it does is to authorise the making of rules or bye-

laws and the issuing of orders between the passing

Page 62 62

and the commencement of the enactment but the

last sentence of the section clearly says that

“rules, bye-laws or orders so made or issued shall

not take effect till the commencement of the Act or

Regulation”. Suppose Shri Nambiyar is right in

saying that the Government could issue a

notification under Section 1(3) by virtue of the

principle embodied in Section 22 of the General

Clauses Act, it will not take his argument an inch

forward, for that notification, by reason of the last

sentence of Section 22 quoted above, will not take

effect till the commencement of the Act. It will

bring about a stalemate. It is, therefore, clear that

a notification bringing an Act into force is not

contemplated by Section 22 of the General Clauses

Act. Seeing, therefore, that it is Section 1(3) which

operates to prevent the commencement of the Act

until a notification is issued thereunder by the

Government and that it is Section 1(3) which

operates to authorise the Government to issue a

notification thereunder, it must be conceded that

that Section 1(3) came into force immediately on

the passing of the Act . There is, therefore, no

getting away from the fact that the Act was an

“ existing law ” from the date of its passing right up

to 1-7-1949 and was, consequently, continued by

Ordinance 1 of 1124 . This being the position, the

validity of the notification issued on 26-7-1949

under Section 1(3), the reference of the case of the

petitioner, the appointment of Respondent 1 as the

authorised official and all proceedings under the

Travancore Act 14 of 1124 cannot be questioned

on the ground that the Act lapsed and was not

continued by Ordinance 1 of 1124.”

22.In T.S. Baliah v. T.S. Rengachari [1969] 3 SCR 65, the

underlying principle of Section 6 of the General Clauses Act,

1897 is explained as under :-

“The question is not whether the new Act expressly

keeps alive old rights and liabilities but whether it

Page 63 63

manifests an intention to destroy them . Section 6

of the General Clauses Act therefore will be

applicable whenever there is a repeal of an

enactment. In such cases consequences laid down

in Section 6 will follow, unless, as the Section itself

says, a different intention appears in the repealing

statute.”

23.In State of Punjab vs. Mohar Singh [1955] 1 SCR 893

prosecution was commenced against Mohar Singh under

Section 7 of the East Punjab Refugees (Registration of Land

Claims) Act, 1948. The offence was committed at a time when

the said Act was not in force. The offence was committed

when East Punjab Refugees (Registration of Land Claims)

Ordinance of 1948 was in force. That Ordinance was for a

temporary period. It was substituted by the Act. It is

important to note that the Ordinance was a temporary law and

the same was repealed before it expired by efflux of time. In

the above circumstances, Section 6 of General Clauses Act,

1897 came for interpretation before this Court. It was held :

“We cannot subscribe to the broad proposition

that Section 6 is ruled out when there is repeal of

an enactment followed by a fresh legislation.

Section 6 would be applicable in such cases

unless the new legislation manifests a contrary

intention or incompatibility. Such incompatibility

has to be ascertained from a consideration of all

relevant provisions of the new law and mere

absence of a saving clause by itself is not

material.”

Page 64 64

24.Applying the tests laid down in the above judgments of

this Court, when a State law is repealed expressly or by

implication by a Union law, Section 6 of the General Clauses

Act 1897 applies as to things done under the State law which

are so repealed, so that transactions under the State law

before the repeal are saved as also any rights and liabilities

arising under the State Act, prior to the enactment of the

Central Act. Repeal of an enactment is a matter of substance.

It depends on the intention of the Legislature. If by reason of

the subsequent enactment, the Legislature intended to

abrogate or wipe off the former enactment, wholly or in part,

then, it would be a case of pro tanto repeal.

25.In the present case, repugnancy is established by both

the tests. As can be seen from the impugned judgment (vide

paras 13-15) on comparison of the provisions of the Kerala

Chitties Act, 1975, being the State Act, and the Chit Funds

Act, 1982, being the Central Act, inconsistencies actually exist

directly. Further, as stated above, the intention of the

Parliament in enacting the Central Act is to cover the entire

field relating to or with respect to Chits. Hence, on both

counts the two Acts cannot stand together. In consequence of

this repugnancy the Kerala Chitties Act, 1975 became void

Page 65 65

under Article 254(1) on the enactment of the Central Chit

Funds Act, 1982 on 19.08.1982 and the Kerala Chitties Act,

1975 thus stood impliedly repealed. By reason of Article 367

of the Constitution, the General Clauses Act, however, applies

to the said repeal. Under Sections 6(b) and (c) of the General

Clauses Act the previous operation of the Kerala Chitties Act,

1975 is not affected nor any right, privilege, obligation or

liability acquired or incurred under the said Kerala repealed

Act. This is the Constitutional position which would prevail if

Section 90(1) of the Central Chit Funds Act, 1982 would not

have been there. In other words, Section 90(1) of the Central

Chit Funds Act, 1982 is stated out of abundant caution.

Thus, after 19.08.1982 the Kerala Chitties Act, 1975 stood

repealed except for the limited purposes of Section 6 of the

General Clauses Act. Likewise, the other existing six State

laws on Chits, referred to in Section 90 of the Chit Funds Act,

1982, existing on 19.08.1982 also stood repealed subject to

the saving under Section 6 of the General Clauses Act.

26.To bring the Central Chit Funds Act, 1982 into operation

in any State the Central Government has to issue a

notification in the Official Gazette under Section 1(3). This has

been done for some States but it has not been done for others

Page 66 66

like Kerala. It is for the Central Government to issue a

notification bringing into force the Chit Funds Act, 1982 in

Kerala when it deems appropriate as it has done in some

States. Until such notification is issued neither the Kerala

Chitties Act, 1975 prevails in the State of Kerala as it has

become void and has been repealed under Article 254(1), nor

the Central Chit Funds Act, 1982 as it is not notified till date.

If and when the Central Government brings into force the Chit

Funds Act, 1982 by a notification in the State of Kerala, under

Section 1(3), Section 90(2) will come into play and thereby the

Kerala Chitties Act, 1975 shall continue to apply only to chits

in operation in State of Kerala on the date of the

commencement of the Central Chit Funds Act, 1982 in the

same manner as the Kerala Chitties Act, 1975 applied to such

chits before such commencement. Moreover, Sections 85(a)

and 90(2) of the Central Chit Funds Act, 1982 provide for

continuance of the application of the provisions of the Kerala

Chitties Act, 1975 till the commencement of the Central Chit

Funds Act, 1982. Such commencement is dependent upon

notification under Section 1(3). Thus, on such

commencement of the Central Chit Funds Act, 1982, the

transactions (chits) between 19.08.1982 and the date of

Page 67 67

commencement of the Central Act will stand protected under

Section 90(2). Hence, there would be no legislative vacuum.

27.Before concluding , one aspect needs to be highlighted.

Section 4(1a) was inserted into Section 4(1) vide State Finance

Act No. 7 of 2002. Under Section 4(1a), in cases where a

chitty is registered outside the State, say in Jammu &

Kashmir, but having 20% or more of the subscribers normally

residing in State of Kerala, the Foreman (who has got

registration outside the State of Kerala) has to open a branch

in the State of Kerala and obtain registration under the Kerala

Chitties Act, 1975. This sub-section was inserted to plug a

loophole. In many cases, chitties were registered outside the

State of Kerala even when large number of subscribers were

residing in State of Kerala. It is true that on the making of the

Central Chit Funds Act, 1982, the State legislature could not

have enacted the Finance Act No. 7 of 2002 inserting Section

4(1a) into the State Act as the entire field stood occupied by

the Central Chit Funds Act, 1982 without the assent of the

President as envisaged under Article 254(2), however, we find

that Section 4(1) of the Central Chit Funds Act, 1982 is much

wider and more stringent than Section 4(1a) of the Kerala

Chitties Act, 1975, as amended by Finance Act No. 7 of 2002,

Page 68 68

inasmuch as under Section 4(1) of the Central Chit Funds Act,

1982, no chit shall be commenced or conducted without

obtaining sanction of the State Government within whose

jurisdiction the chit is to be commenced or conducted and

unless such chit is registered in that State in accordance with

the provisions of the Central Chit Funds Act 1982.

Conclusions

28.To sum up, our conclusions are as follows :-

i)On timing, we hold that, repugnancy arises on the

making and not commencement of the law, as correctly held in

the judgment of this Court in Pt. Rishikesh and Another v.

Salma Begum (Smt) [(1995) 4 SCC 718].

ii)Applying the above test, we hold that, on the enactment

of the Central Chit Funds Act, 1982, on 19.08.1982, which

covered the entire field of “chits” under entry 7 of List III of the

Constitution, the Kerala Chitties Act, 1975, on account of

repugnancy as enshrined in Article 254(1), became void and

stood impliedly repealed. That, on the occupation of the entire

field of “chits”, the Kerala Legislature could not have enacted

the State Finance Act No. 7 of 2002, inserting Section 4(1a)

into the Kerala Chitties Act, 1975, particularly on the failure

of the State in obtaining Presidential assent under Article

Page 69 69

254(2).

iii)That, the Central Chit Funds Act, 1982 though not

brought in force in the State of Kerala is still a law made,

which is alive as an existing law. By reason of Article 367 of

the Constitution, the General Clauses Act, 1897 applies to the

repeal. Section 6 of the General Clauses Act, 1897 is,

therefore, relevant, particularly Sections 6(b) and 6(c) and

consequently, the previous operation of the Kerala Chitties

Act, 1975 is not affected nor any right, privilege, obligation or

liability acquired or incurred under that repealed State Act of

1975. Thus, after 19.08.1982, the Kerala Chitties Act, 1975

stands repealed except for the limited purposes of Section 6 of

General Clauses Act, 1897. If and when the Central

Government brings into force the Chit Funds Act, 1982 by a

notification in State of Kerala, under Section 1(3), Section

90(2) will come into play and thereby the Kerala Chitties Act,

1975 shall continue to apply only to chits in operation on the

date of commencement of the Central Chit Funds Act, 1982 in

the same manner as the Kerala Chitties Act, 1975 applied to

chits before such commencement.

29.The reference is answered accordingly.

Page 70 70

…..……………………… .......CJI

(S. H. Kapadia)

.........………………………… ..J.

(D.K. Jain)

.........………………………… ..J.

(Surinder Singh Nijjar)

.........………………………… ..J.

(Ranjana Prakash Desai)

.........………………………… ..J.

(Jagdish Singh Khehar)

New Delhi;

May 08, 2012