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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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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) xxx xxx xxx

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(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

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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 that the word “made”  in

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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. –

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(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

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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

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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.  

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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

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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

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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

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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

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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

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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

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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).

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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,

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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

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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

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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

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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

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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

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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

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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

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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, 2nd Edition, Page 303.   In the said judgment,  

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

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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

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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.

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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 1st 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

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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

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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

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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

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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,

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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

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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

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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

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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.

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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

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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   

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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.”

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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

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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

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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

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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,

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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

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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.

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…..……………………….......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