SC and HC Judgments Online at MyNation

Judgments of Supreme Court of India and High Courts

Jayant Verma . vs Union Of India on 16 February, 2018










1. A writ petition, by way of a Public Interest Litigation,

filed under Article 32 of the Constitution of India, assails

the constitutional validity of Section 21A of the Banking

Regulation Act, 1949. The aforesaid section was

introduced into the Banking Regulation Act by the
Signature Not Verified

Digitally signed by
Date: 2018.02.16
15:31:24 IST
Banking Laws (Amendment) Act of 1983 with effect from


15.2.1984. Section 21A of the Banking Regulation Act

reads as under:

“21A. Rates of interest charged by banking
companies not to be subject to scrutiny by
Notwithstanding anything contained in the
Usurious Loans Act, 1918 (10 of 1918), or any
other law relating to indebtedness in force in
any State, a transaction between a banking
company and its debtor shall not be re-
opened by any court on the ground that the
rate of interest charged by the banking
company in respect of such transaction is

2. It will be seen that Section 21A interdicts the

reopening by courts of a debt between a banking

company and its debtor, on the ground that the rate of

interest charged by the banking company, in respect of a

loan transaction, is excessive. The section seeks to keep

out of harm’s way the Usurious Loans Act, 1918 and/or

any other State legislation relating to indebtedness, and

then declares that no such loan transaction shall be

reopened by any court on the ground of charging of

excessive rates of interest. The writ petition has been filed

by certain public spirited citizens, who rely on the report of

the Parliamentary Standing Committee on Agriculture for

the year 2006-2007 to say that Section 21A should be

abolished, insofar as it applies to rural indebtedness. The

Standing Committee’s Report reads as follows:

“The Committee feels that the worst
exploitation of farmers is through the adverse
credit policies of the financial institutions
which compel farmers to starve under the
burden of loans and commit suicides. The
Committee finds that in 1918, the British
passed the Usurious Loans Act which
provided that no farmer could be charged a
rate of interest higher than the authorised
rate- which at that time was 5.5 per cent, and
if charged, the case could be re-opened in
court and the entire account re-settled.
Moreover, the total amount of interest could
not be higher than the original capital. But in
1949, the Banking Regulation Act was passed
which made a special provision under Section
21 (A) saying that these will not apply to
banking companies including cooperative

In view of the plight of farmers due to heavy
burden of credits, the Committee recommend
that section 21 (A) of the Banking Regulation
Act should be scrapped. All out concerted
efforts should be made to bring down the rate
of interest on Farm Credit to the level of 5.5%
simple interest, as it used to be in the early

20th century. In case of cooperatives,
transaction cost/margin at each layer must be
reduced as the length of chain, from RBI to
NABARD to State-District and Cooperative
Societies at village level and Regional Rural
Banks, is very big. Eventually, the farmer has
to take the burden of all these
middlemen/lending agencies. The Committee,
therefore, recommends to shorten this chain,
so that the eventual creditor is directly linked
to the borrower. The Committee further desire
the Government to ensure that in no case, the
interest should be higher than the original
capital and charging of compound rate of
interest should be absolutely prohibited so
that exploitation of farmers by financial
institutions is minimized.

1.23 The Government in their action taken
reply have stated that in order to bring down
rate of interest on farm loans it has been
announced in the Union Budget for the year
2006-07 that effective from Kharif 2006-07,
farmers would receive crop loans upto a
principal amount of Rs. 3 lakh at 7% rate of
interest and the Government of India would
provide necessary interest subvention for this
purpose. Crop loans to farmers are generally
made available through Kisan Credit Cards
(KCC) which are valid for 3 years. As incentive
for good performance, credit limits under KCC
could be enhanced to take care of increase in
costs, change in cropping pattern etc. Banks
have been advised by RBI that total interest
debited to an account should not exceed the
principal amount in respect of short term loans

advanced to small and marginal farmers. As
per the extant RBI instructions, banks are not
allowed to compound interest on current dues
of crop loans and term loans in respect of
direct agricultural advances granted to
farmers. If such loans become overdue banks
have been advised that where the default is
due to genuine reasons, they should extend
the period of loan or reschedule the
installments under term loans. Once such a
relief has been extended the over dues
become current dues and hence banks should
not compound interest thereon. In case of
long duration crops, interest is recovered only

1.24 The Committee are dismayed to know
that the Department has not paid any heed to
the recommendation of the Committee to
scrap Section 21 (A) of Banking Regulation
Act, 1949 which hinders the provision of
Usurious Loans Act, 1918 under which it was,
inter alia, provided that the total amount of
interest on a loan taken by a farmer could not
be higher than the original capital. The
Committee, therefore, reiterate their earlier
recommendation that Section 21 (A) of the
Banking Regulation Act, 1949 should be
deleted so as to ensure that no Bank charges
interest more than the original capital,
irrespective of the fact, whether it is a short
term loan or long term loan, from small and
marginal farmers.

Moreover, the issue of cutting the
costs/margin at each layer of cooperative has

also not been addressed. The Committee,
therefore, reiterates their earlier
recommendation to shorten the chain of
cooperative loan institutions and directly link
the eventual creditor to the borrowers.”

According to the petitioners, a total number of 2,56,913

farmers have committed suicide in India between the

years 1995 to 2010, and this is because, and directly

linked to, usurious rates of interest being charged from

them by banks, which cannot be interfered with by courts,

thanks to Section 21A.

3. Shri Sanjay Parikh, learned counsel appearing on

behalf of the writ petitioners, took us through the Usurious

Loans Act to show that in British India, even a foreign

power was alive to the fact that courts need to interdict

excessive rates of interest, and have been given

complete freedom to do so, depending on the facts of

each case, including taking into account the plight of the

farmer debtor. He also referred to and relied upon various

State Debt Relief Acts, by which every State has

recognized this, and has, thus, provided, by way of

legislation, that loans and interest thereon either be

waived totally or partially or that courts may come to the

rescue of the farmer debtor by lowering the rate of

interest. According to him, many States adopted the rule

of Damdupat so that in no circumstance can interest

charged, for any period whatsoever, exceed the principal

amount of loan. He strongly relied upon this Court’s

judgments in Fatehchand Himmatlal Ors. v. State of

Maharashtra etc., (1977) 2 SCC 670 and Pathumma

and Ors. v. State of Kerala and Ors. (1978) 2 SCC 1, to

show that State Debt Relief Acts have been

unsuccessfully challenged in this Court, and are referable

to Entry 30, List II of the Seventh Schedule to the

Constitution. He referred to the Constituent Assembly

Debates to show that that part of Entry 30, List II, which

speaks of relief of agricultural indebtedness, was

introduced by the Constitution for the first time, not being

in the predecessor entry in the Government of India Act,

1935. He also referred to and relied upon a proposed

amendment by Shri Shibban Lal Saxena, by which it was

sought to place the aforesaid Entry 30 into the Concurrent

List, so that Parliament may also have a say in the relief

of agricultural indebtedness. However, this was turned

down by the Constituent Assembly, so that this subject is

exclusively within the domain of the State legislature.

4. He next relied upon a decision of a single Judge of

the Andhra Pradesh High Court reported as State Bank

of India, In re, AIR 1986 AP 291 and commended its

acceptance by us. He then referred to this Court’s

judgment reported as State Bank of India v. Yasangi

Venkateswara Rao (1999) 2 SCC 375. He fairly pointed

out that the aforesaid single Judge judgment has been set

aside by this Court, but stated that no ratio decidendi was

forthcoming from the Supreme Court judgment. This was

because paragraph 7 of the aforesaid judgment was both

laconic and contained only conclusions without any

reasoning. He also argued that the said decision is per

incuriam, not having referred to the number of judgments

that were relied upon by the learned single Judge. He

also pointed out that arguments were made only by the

appellant, there being no arguments on behalf of the

respondent, and that, therefore, the aforesaid judgment

would have no binding effect as a precedent. He took us

through the aforestated report of the Parliamentary

Standing Committee on Agriculture for the year 2006-

2007 to show that Parliament was alive to the fact that

Section 21A ought to be abolished, as it was a very harsh

provision which led to farmer suicides on a mass scale.

He also argued that the said provision is violative of

Article 14, both in its discriminatory aspect as well as the

fact that Section 21A is an arbitrary piece of legislation

which needs to be struck down. He also argued that, in

any case, as an alternative argument, the said Section

should be read down when applied to loans given by

banks to the rural agricultural sector.


5. On the other hand, Shri Jayant Bhushan, learned

senior counsel appearing on behalf of the Reserve Bank

of India, referred us to Article 246 of the Constitution and

to several judgments thereunder and stated that Section

21A squarely falls within Entry 45, List I of the Seventh

Schedule to the Constitution, which is “banking”.

According to him, even if some part of the Section were to

incidentally trench upon Entry 30, List II, having regard to

the federal paramountcy principle, State legislation under

Entry 30, List II must give way to Section 21A and not the

other way around. He also argued that the best way of

reconciling Entry 30, List II with Entry 45, List I is to say

that “relief of agricultural indebtedness” will not include

indebtedness to banks. He took us through the counter

affidavit of the RBI to show that the RBI was fully alive to

the plight of poor farmers, and had taken several

measures, including issuance of guidelines, to assist

them. While he agreed that this Court’s judgment in

Yasangi Venkateswara Rao (supra) could have been

more elaborate, he argued that paragraph 7 lays down a

clear ratio decidendi, and that this Court ought to follow

the same. Insofar as the plea of Article 14 is concerned,

he argued that there is no pleading in the writ petition

stating how Article 14 had been breached, and this being

the case, there being a presumption of constitutionality of

Section 21A, such presumption had not been rebutted in

this case.

6. Ms. Shirin Khajuria, learned counsel who appeared

on behalf of the Union of India, painstakingly took us

through the provisions of the Banking Regulation Act.

According to her, “relief of agricultural indebtedness”, that

is in the latter part of Entry 30, List II of the Seventh

Schedule to the Constitution, should be read along with

“money lending and money lenders” which is the first part

of the said entry. This being the case, relief of agricultural

indebtedness would apply only to money lenders and

money lending and not to banks at all. If the subject of

relief of agricultural indebtedness were not linked to

money lending, it would have found itself in a separate

entry in the State List, which is not the case. She also

relied upon a number of judgments to buttress her

submissions, and read copiously from the two counter

affidavits filed by the Union of India to show how the

Central Government was fully alive to the plight of poor

farmers, and had set up expert groups to report on the


7. Having heard learned counsel for both parties, it is

necessary to first set out the relevant provisions of the

Government of India Act, 1935 and the Constitution.

“Government of India Act, 1935
List I- Federal Legislative List

38. Banking, that is to say, the conduct of
banking business by corporations other than
corporations owned or controlled by a
Federated State and carrying on business
only within that State.


List II- Provincial Legislative List

27. Trade and commerce within the Province;
markets and fairs; money lending and money

xxx xxx xxx
Constitution of India
List I- Union List

45. Banking.

List II- State List

30. Money-lending and money-lenders; relief
of agricultural indebtedness.

xxx xxx xxx
Article 246. Subject-matter of laws made
by Parliament and by the Legislatures of

(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

(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

(4) Parliament has power to make laws with
respect to any matter for any part of the
territory of India not included in a State
notwithstanding that such matter is a matter
enumerated in the State List.”

8. In order to appreciate the scope of the subject

“banking” in Entry 45, List I, we must see first the judicial

dicta on the subject. In Rustom Cavasjee Cooper

(Banks Nationalisation) v. Union of India, (1970) 1

SCC 248 at 279 and 281, this Court stated:

“31. The expression “banking” is not defined in
any Indian statute except in the Banking
Regulation Act, 1949. It may be recalled that
by Section 5(b) of that Act “banking” means
“the accepting for the purpose of lending or
investment of deposits of money from the
public repayable on demand or otherwise, and
withdrawable by cheque, draft or otherwise”.
The definition did not include other
commercial activities which a banking
institution may engage in.

xxx xxx xxx


36. The legislative entry in List I of the
Seventh Schedule is “Banking” and not
“Banker” or “Banks”. To include within the
connotation of the expression “Banking” in
Entry 45, List I, power to legislate in respect of
all commercial activities which a banker by the
custom of bankers or authority of law engages
in, would result in re-writing the Constitution.
Investment of power to legislate on a
designated topic covers all matters incidental
to the topic. A legislative entry being
expressed in a broad designation indicating
the contour of plenary power must receive a
meaning conducive to the widest amplitude,
subject however to limitations inherent in the
federal scheme which distributes legislative
power between the Union and the constituent
units. The field of “banking” cannot be
extended to include trading activities which
not being incidental to banking encroach upon
the substance of the entry “trade and
commerce” in List II.”

In Union of India v. Delhi High Court Bar Assn., (2002)

4 SCC 275 at 285-286, this Court was faced with the

constitutional validity of the Recovery of Debts Due to

Banks and Financial Institutions Act, 1993. In repelling

the contention that the said Act would not fall under Entry

45, List I, this Court held:


“14. The Delhi High Court and the Guwahati
High Court have held that the source of the
power of Parliament to enact a law relating to
the establishment of the Debts Recovery
Tribunal is Entry 11-A of List III which pertains
to “administration of justice; constitution and
organisation of all courts, except the Supreme
Court and the High Courts”. In our opinion,
Entry 45 of List I would cover the types of
legislation now enacted. Entry 45 of List I
relates to “banking”. Banking operations
would, inter alia, include accepting of loans
and deposits, granting of loans and recovery
of the debts due to the bank. There can be
little doubt that under Entry 45 of List I, it is
Parliament alone which can enact a law with
regard to the conduct of business by the
banks. Recovery of dues is an essential
function of any banking institution. In exercise
of its legislative power relating to banking,
Parliament can provide the mechanism by
which monies due to the banks and financial
institutions can be recovered. The Tribunals
have been set up in regard to the debts due to
the banks. The special machinery of a
Tribunal which has been constituted as per
the preamble of the Act, “for expeditious
adjudication and recovery of debts due to
banks and financial institutions and for
matters connected therewith or incidental
thereto” would squarely fall within the ambit of
Entry 45 of List I. As none of the items in the
lists are to be read in a narrow or restricted
sense, the term “banking” in Entry 45 would
mean legislation regarding all aspects of
banking including ancillary or subsidiary
matters relating to banking. Setting up of an

adjudicatory body like the Banking Tribunal
relating to transactions in which banks and
financial institutions are concerned would
clearly fall under Entry 45 of List I giving
Parliament specific power to legislate in
relation thereto.”

It can, thus, be seen that Entry 45, List I has been

construed widely as including not only banking, but all

aspects incidental or ancillary to banking, so long as the

field of “banking” does not trench upon trading activities

not incidental to banking, which would fall under Entry 26,

List II.

9. At this stage, it will be important to advert to certain

other judgments of this Court dealing with the expression

“banking” vis-à-vis other entries in the State List. Thus, in

Prafulla Kumar Mukherjee v. Bank of Commerce Ltd.,

Khulna, AIR 1947 PC 60 at 65, the Privy Council

expounded the doctrine of pith and substance, and

ultimately found that, on a proper reading of the entries

concerned, there would be no clash between the Bengal

Money Lenders Act, 1940, which was referable to the

State List, and the Federal entries dealing with

promissory notes and banking. Thus, the Court held:

“35. Moreover, the British Parliament when
enacting the Indian Constitution Act had a
long experience of the working of the British
North America Act and the Australian
Commonwealth Act and must have known that
it is not in practice possible to ensure that the
powers entrusted to the several legislatures
will never overlap. As Sir Maurice Gwyer C.J.
said in Subramanyan Chettiar v. Muttuswami
Goundan, 1940 FCR 188 at 201:

“It must inevitably happen from
time to time that legislation,
though purporting to deal with a
subject in one list, touches also on
a subject in another list, and the
different provisions of the
enactment may be so closely
intertwined that blind observance
to a strictly verbal interpretation
would result in a large number of
statutes being declared invalid
because the legislature enacting
them may appear to have
legislated in a forbidden sphere.

Hence the rule which has been
evolved by the Judicial
Committee, whereby the
impugned statute is examined to
ascertain its pith and substance or
its true nature and character for
the purpose of determining
whether it is legislation with

respect to matters in this list or in

36. Their Lordships agree that this passage
correctly describes the grounds on which the
rule is founded, and that it applies to provincial
as well as to Dominion legislation. No doubt
experience of past difficulties has made the
provisions of the Indian Act more exact in
some particulars, and the existence of the
Concurrent List has made it easier to
distinguish between those matters which are
essential in determining to which list particular
provisions should be attributed and those
which are merely incidental. But the
overlapping of subject-matter is not avoided
by substituting three lists for two or even by
arranging for a hierarchy of jurisdictions.

37. Subjects must still overlap and where they
do the question must be asked what in pith
and substance is the effect of the enactment
of which complaint is made and in what list is
its true nature and character to be found. If
these questions could not be asked, much
beneficent legislation would be stifled at birth,
and many of the subjects entrusted to
provincial legislation could never effectively be
dealt with.

38. Thirdly, the extent of the invasion by the
provinces into subjects enumerated in the
Federal List has to be considered. No doubt it
is an important matter, not, as their Lordships
think, because the validity of an Act can be
determined by discriminating between
degrees of invasion, but for the purpose of
determining what is the pith and substance of

the impugned Act. Its provisions may advance
so far into Federal territory as to show that its
true nature is not concerned with provincial
matters, but the question is not, has it
trespassed more or less, but is the trespass,
whatever it be, such as to show that the pith
and substance of the impugned Act is not
money lending but promissory notes or
banking? Once that question is determined
the Act falls on one or the other side of the line
and can be seen as valid or invalid according
to its true content.

39. This view places the precedence accorded
to the three lists in its proper perspective. No
doubt where they come in conflict List I has
priority over Lists III and II and List III has
priority over List II, but the question still
remains, priority in what respect? Does the
priority of the Federal legislature prevent the
provincial legislature from dealing with any
matter which may incidentally affect any item
in its list or in each case has one to consider
what the substance of an Act is and, whatever
its ancillary effect, attribute it to the
appropriate list according to its true character?
In their Lordships’ opinion the latter is the true

40. If this be correct it is unnecessary to
determine whether the jurisdiction as to
promissory notes given to the Federal
legislature is or is not confined to negotiability.
The Bengal Money Lenders Act is valid
because it deals in pith and substance with
money lending, not because legislation in
respect of promissory notes by the Federal
legislature is confined to legislation affecting

their negotiability—a matter as to which their
Lordships express no opinion.

41. It will be observed that in considering the
principles involved their Lordships have dealt
mainly with the alleged invalidity of the Act,
based on its invasion of the Federal entry,
“promissory notes” Item (28) in List I. They
have taken this course, because the case was
so argued in the courts in India.

42. But the same considerations apply in the
case of banking. Whether it be urged that the
Act trenches on the Federal list by making
regulations for banking or promissory notes, it
is still an answer that neither of those matters
is its substance and this view is supported by
its provisions exempting scheduled and
notified banks from compliance with its
(Emphasis Supplied)
In Virendra Pal Singh v. Distt. Asstt. Registrar, Coop.

Societies, (1980) 4 SCC 109 at 113-114, the aforesaid

judgment was followed and the U.P. Cooperative

Societies Act, 1965, insofar as it dealt with Cooperative

banks, was held to be within the sphere of the State List.

This Court held:

“9. It was strenuously contended by the
learned Counsel for the petitioners in some of
the cases that the U.P. Cooperative Societies
Act, 1965, insofar as it was sought to be made

applicable to cooperative banks was beyond
the competence of the State Legislature. The
argument was that while the subject
“cooperative societies” was included in Entry
32 of List II, “banking” was a distinct entry by
itself in List I of the 7th Schedule (Entry 45)
and therefore, the State Legislature was
incompetent to legislate in regard to banking
by “cooperative societies”. There is no
substance whatever in this submission. Entry
43 of List I is “incorporation, regulation and
winding up of trading corporations, including
banking, insurance and financial corporations
but not including cooperative societies”. Entry
44 is “incorporation, regulation and winding up
of corporations whether trading or not, with
objects not confined to one State, but not
including universities”. Entry 45 is “banking”.

Entry 32 of List II is, “incorporation, regulation
and winding up of corporations, other than
those specified in List I, and universities;
unincorporated trading, literary, scientific,
religious and other societies and associations;
cooperative societies”.

10. We do not think it necessary to refer to the
abundance of authority on the question as to
how to determine whether a legislation falls
under an entry in one list or another entry in
another list. Long ago in Prafulla Kumar
Mukherjee v. Bank of Commerce Ltd. [74 IA
23] the Privy Council was confronted with the
question whether the Bengal Money-Lenders
Act fell within Entry 27 in List II of the Seventh
Schedule to the Government of India Act,
1935, which was “money-lending”, in respect
of which the provincial legislature was

competent to legislate, or whether it fell within
Entries 28 and 38 in List I which were
“promissory notes” and “banking” which were
within the competence of the Central
Legislature. The argument was that the
Bengal Money-Lenders Act was beyond the
competence of the provincial legislature
insofar as it dealt with promissory notes and
the business of banking. The Privy Council
upheld the vires of the whole of the Act
because it dealt, in pith and substance, with
money-lending. They observed:

“Subjects must still overlap, and
where they do the question must
be asked what in pith and
substance is the effect of the
enactment of which complaint is
made, and in what list is its true
nature and character to be found.

If these questions could not be
asked, much beneficent legislation
would be stifled at birth, and many
of the subjects entrusted to
provincial legislation could never
effectively be dealt with.”
Examining the provisions of the U.P.
Cooperative Societies Act in the light of the
observations of the Privy Council we do not
have the slightest doubt that in pith and
substance the Act deals with “cooperative
societies”. That it trenches upon banking
incidentally does not take it beyond the
competence of the State Legislature. It is
obvious that for the proper financing and
effective functioning of cooperative societies
there must also be cooperative societies

which do banking business to facilitate the
working of other cooperative societies. Merely
because they do banking business such
cooperative societies do not cease to be
cooperative societies, when otherwise they
are registered under the Cooperative
Societies Act and are subject to the duties,
liabilities and control of the provisions of the
Cooperative Societies Act. We do not think
that the question deserves any more
consideration and, we, therefore, hold that the
U.P. Cooperative Societies Act was within the
competence of the State Legislature. This was
also the view taken in Nagpur District Central
Cooperative Bank Ltd. v. Divisional Joint
Registrar, Cooperative Societies [AIR 1971
Bom 365 : 1971 Mah LJ 932] and Sant Sadhu
Singh v. State of Punjab [AIR 1970 PH 528].”
(Emphasis Supplied)

Similarly, in Harish Tara Refractories (P) Ltd. v.

Certificate Officer, Sader Ranchi, (1994) 5 SCC 324,

this Court held that the Bihar and Orissa Public Demands

Recovery Act, 1914 was referable to Entries 11A and 13

of the Concurrent List and not to Entry 45, List I.

10. We now come to some of the judgments strongly

referred to and relied upon by Shri Parikh. In Fatehchand

(supra), several pleas were taken to invalidate the

Maharashtra Debt Relief Act of 1976. Insofar as

legislative competence was concerned, this Court held:

“54. What then is the incompetence of the
State Legislature? Shri B. Sen urged that the
wiping out of private debts which formed the
capital assets of the moneylenders — one of
the main things done by the Debt Act — was
not in any of the legislative Lists and even if
Parliament had residuary power under Entry
97 of List I, the State had none. Entry 30 in
List II is “Money lending and moneylenders;

relief of agricultural indebtedness”. If
commonsense and common English are
components of constitutional construction,
relief against loans by scaling down,
discharging, reducing interest and principal,
and staying the realisation of debts will,
among other things, fall squarely within the
topic. And that, in a country of hereditary
indebtedness on a colossal scale! It is
commonplace to state that legislative heads
must receive large and liberal meanings and
the sweep of the sense of the rubrics must
embrace the widest range. Even incidental
and cognate matters come within their
purview. The whole gamut of Money lending
and debt-liquidation is thus within the State’s
legislative competence. The reference to
the Rajahmundry Electricity case
[Rajamundry Electric Supply
Corporation v. State of Andhra, AIR 1954 SC
251 : 1954 SCR 779] is of no relevance. Nor
is the absence of the expression “relief” in
Entry 30, List II, of any moment when relief
from moneylenders is eloquently implicit in the

topic. Sometimes, arguments have only to be
stated to be rejected.” (at
page 693)
(Emphasis Supplied)

Similarly, in Pathumma (supra), this Court was concerned

with a challenge to the constitutional validity of Section 20

of the Kerala Debt Agriculturists Relief Act, 1970, which

entitled debtors to recover properties sold to purchasers

in execution of decrees. This Court, after referring to

Fatehchand (supra) in some detail, held:

“36. The avowed object of the Act seems to
give substantial relief to the agriculturist
debtors in order to get back their property and
earn their livelihood. This is undoubtedly a
laudable object and the Act is a piece of social
legislation. As the decree-holder who had
purchased the property is fully compensated
by being paid the amount for which he had
purchased the property, it cannot be said that
his right to hold the property has been
completely destroyed. The purchaser gets the
property at a distress sale and is fully aware of
the pitiable conditions under which the debtor
was unable to pay the debt. In a Constitution
which is wedded to a social pattern of society
the purchaser must be presumed to have the
knowledge that any social legislation for the
good of a particular community or the people
in general can be brought forward by
Parliament at any time. The Act, however,

does not take away the property of the
purchaser without paying him due
compensation. It is true that Section 20(2)(b)
provides for payment of the purchase money
by instalments, but no exception can be taken
to this fact as in view of the poverty of the
debtor it is not possible for him to pay the debt
in a lump sum and as the legislation is for a
particular community the provision for
payment by instalments cannot be said to
work serious injustice to the decree-holder
purchaser. A stranger auction purchaser has
been treated differently because he had
nothing to do with the decree and is enjoined
to return the property to the agriculturist
debtor on payment of entire amount in lump
sum without insisting on instalments. Thus, in
short, the position is that the object of the Act
is to protect the poor distressed agriculturist
debtors from the clutches of greedy creditors
who have grabbed the properties of the
debtors and deprived the debtors of their main
source of sustenance.”
(at page 22)

In dealing with legislative competence, this Court upheld

Section 20 in the following terms:-

“56. It is Article 246 of the Constitution which
deals with the subject-matter of the laws to be
made by the Parliament and the Legislatures
of the States. Clause (3) of the Article
provides that subject to clauses (1) and (2) of
the Article with which we are not concerned
the Legislature of the State has “exclusive
power to make laws….. with respect to any of

the matters enumerated in List II”. Entry 30 of
the List specifically states the following
matters as being within the competence of the
State Legislature,—
30 —Money-lending and money-lenders;

relief of agricultural indebtedness.

It is therefore quite clear, and is beyond
controversy, that the Act which provides for
“the relief of indebted agriculturists in the
State of Kerala” is within the competence of
the State Legislature. Clause (1) of Section 2
of the Act defines an “agriculturist”, clause (4)
defines a “debt”, clause (5) defines a “debtor”
and the two Explanations to Section 20 define
the expressions “court” and “judgment-debtor”
and give an extended meaning to the
expression “agriculturist” so as to include a
person who would have been an agriculturist
but for the sale of his immovable property. The
other sections provide for the settlement of the
liabilities and payment of the debt (along with
the interest) of an agriculturist, including the
setting aside of the sale in execution of a
decree and the bar of suits. The subject-
matter of the Act is therefore clearly within the
purview of Entry 30 and Counsel for the
appellants have not been able to advance any
argument which could justify a different view.
Reference in this connection may be made to
this Court’s decision in Fatehchand
Himmatlal v. State of Maharashtra [(1977) 2
SCC 670 : (1977) 2 SCR 828]. It has however
been argued that the entry would not permit
the making of a law relating to the debt of an
agriculturist which has already been paid by

sale of his property in execution of a decree
and is not a subsisting debt.

57. It is true that Section 20 of the Act
provides for the setting aside of any sale of
immovable property in which an agriculturist
had an interest, if the property had been sold,
inter alia, in execution of any decree for the
recovery of a debt: (a) on or after November
1, 1956, or (b) before November 1, 1956, but
possession whereof has not actually passed
before November 20, 1957, from the
judgment-debtor to the purchaser, and the
decree-holder is the purchaser, on depositing
one-half of the purchase money together with
the cost of the execution etc. The section
therefore deals with a liability which had
ceased and did not subsist on the date when
the Act came into force. But there is nothing in
Entry 30 of List II to show that it will not be
attracted and would not enable the State
Legislature to make a law simply because the
debt of the agriculturist had been paid off
under a distress sale. The subject-matter of
the entry is “relief of agricultural indebtedness”
and there is no justification for the contention
that it is confined only to subsisting
indebtedness and would not cover the
necessity of providing relief to those
agriculturists who had lost their immovable
property by court sales in execution of the
decree against them and had been rendered
destitute. Their problem was in fact more
acute and serious, for they had lost the
wherewithal of their livelihood and were
reduced to a state of penury. An agriculturist
does not cease to be an agriculturist merely

because he has lost his immovable property,
and it cannot be said that the State is not
interested in providing him necessary relief
merely because he has lost his immovable
property. On the other hand his helpless
condition calls for early solution and it is only
natural that the State Legislature should think
of rehabilitating him by providing the
necessary relief under an Act of the nature
under consideration in these cases. There is
in fact nothing in the wordings of Entry 30 to
show that the relief contemplated by it must
necessarily relate to any subsisting
indebtedness and would not cover the
question of relief to those who have lost the
means of their livelihood because of the delay
in providing them legislative relief. It is well-
settled, having been decided by this Court
in Navinchandra Mafatlal v. CIT [AIR 1955 SC
58 : (1955) 1 SCR 829 : (1954) 26 ITR 758] ,
that “in construing words in a constitutional
enactment conferring legislative power the
most liberal construction should be put upon
the words so that the same may have effect in
their widest amplitude”. This has to be so lest
a legislative measure may be lost for mere
technicality.” (at pages 31-32)
(Emphasis Supplied)

11. This brings us to the sweep of the Banking

Regulation Act, and to whether the said Act, which

includes by way of amendment Section 21A, can be said

to fall within Entry 45, List I of the Seventh Schedule to

the Constitution. The relevant provisions of the Banking

Regulation Act, which are necessary for us to decide the

present writ petition, are as follows:

“3. Act to apply to co-operative societies in
certain cases.-

Nothing in this Act shall apply to.-

(a) a primary agricultural credit society;

(b) a co-operative land mortgage bank; and

(c) any other co-operative society, except in
the manner and to the extent specified in Part

xxx xxx xxx

5. Interpretation
In this Act, unless there is anything repugnant
in the subject or context, –

(b) “banking” means the accepting, for the
purpose of lending or investment, of deposits
of money from the public, repayable on
demand or otherwise, and withdrawal by
cheque, draft, order or otherwise;

(c) “banking company” means any company
which transacts the business of banking in

Explanation.–Any company which is engaged
in the manufacture of goods or carries on any
trade and which accepts deposits of money
from the public merely for the purpose of

financing its business as such manufacturer or
trader shall not be deemed to transact the
business of banking within the meaning of this

(d) “company” means any company as
defined in section 3 of the Companies Act,
1956 (1 of 1956); and includes a foreign
company within the meaning of section 591 of
that Act;

xxx xxx xxx

6. Forms of business in which banking
companies may engage
(1) In addition to the business of banking, a
banking company may engage in any one or
more of the following forms of business,

(a) the borrowing, raising, or taking up of
money; the lending or advancing of money
either upon or without security; the drawing,
making, accepting, discounting, buying,
selling, collecting and dealing in bills of
exchange, hundies, promissory notes,
coupons, drafts, bills of lading, railway
receipts, warrants, debentures, certificates,
scrips and other instruments and securities
whether transferable or negotiable or not; the
granting and issuing of letters of credit,
traveller’s cheques and circular notes; the
buying, selling and dealing in bullion and
specie; the buying and selling of foreign
exchange including foreign bank notes; the
acquiring, holding, issuing on commission,
underwriting and dealing in stock, funds,
shares, debentures, debenture stock, bonds,

obligations, securities and investments of all
kinds; the purchasing and selling of bonds,
scrips or other forms of securities on behalf of
constituents or others, the negotiating of loans
and advances; the receiving of all kinds of
bonds, scrips or valuables on deposit or for
safe custody or otherwise; the providing of
safe deposit vaults; the collecting and
transmitting of money and securities;

(b) acting as agents for any Government or
local authority or any other person or persons;
the carrying on of agency business of any
description including the clearing and
forwarding of goods, giving of receipts and
discharges and otherwise acting as an
attorney on behalf of customers, but excluding
the business of a Managing Agent or
Secretary and Treasurer of a company;

(c) contracting for public and private loans and
negotiating and issuing the same;

(d) the effecting, insuring, guaranteeing,
underwriting, participating in Managing and
carrying out of any issue, public or private, of
State, municipal or other loans or of shares,
stock, debentures, or debenture stock of any
company, corporation or association and the
lending of money for the purpose of any such

(e) carrying on and transacting every kind of
guarantee and indemnity business;

(f) Managing, selling and realising any
property which may come into the possession
of the company in satisfaction or part
satisfaction of any of its claims;


(g) acquiring and holding and generally
dealing with any property or any right, title or
interest in any such property which may form
the security or part of the security for any
loans or advances or which may be connected
with any such security;

(h) undertaking and executing trusts;

(i) undertaking the administration of estates as
executor, trustee or otherwise;

(j) establishing and supporting or aiding in the
establishment and support of associations,
institutions, funds, trusts and conveniences
calculated to benefit employees or ex-
employees of the company or the dependents
or connections of such persons; granting
pensions and allowances and making
payments towards insurance; subscribing to
or guaranteeing moneys for charitable or
benevolent objects or for any exhibition or for
any public, general or useful object;

(k) the acquisition, construction, maintenance
and alteration of any building or works
necessary or convenient for the purposes of
the company;

(l) selling, improving, managing, developing,
exchanging, leasing, mortgaging, disposing of
or turning into account or otherwise dealing
with all or any part of the property and rights
of the company;

(m) acquiring and undertaking the whole or
any part of the business of any person or
company, when such business is of a nature
enumerated or described in this sub-section;


(n) doing all such other things as are
incidental or conducive to the promotion or
advancement of the business of the company;

(o) any other form of business which the
Central Government may, by notification in the
Official Gazette, specify as a form of business
in which it is lawful for a banking company to

(2) No banking company shall engage in any
form of business other than those referred to
in sub-section (1).

xxx xxx xxx

22. Licensing of banking companies
(1) Save as hereinafter provided, no company
shall carryon banking business in India unless
it holds a licence issued in that behalf by the
Reserve Bank and any such licence may be
issued subject of such conditions as the
Reserve Bank may think fit to impose.
xxx xxx xxx

56. Act to apply to co-operative societies
subject to modifications.—
The provisions of this Act, as in force for the
time being, shall apply to, or in relation to, co-
operative societies as they apply to, or in
relation to banking companies subject to the
following modifications, namely:

(a) throughout this Act, unless the context
otherwise requires,-

(i) references to a “banking company” or “the
company” or “such company” shall be

construed as references to a co-operative

(ii) references to “commencement of this Act”
shall be construed as references to
commencement of the Banking Laws
(Application to Co-operative Societies) Act,
1965 (23 of 1965);”

There can be no doubt that the Banking Regulation Act

deals with the subject “banking” insofar as it licenses

banking companies, as defined, and cooperative banks,

and seeks to regulate them. Section 21A, though by way

of amendment, is undoubtedly an integral part of the

aforesaid Act relating to the interdict on the reopening of

loan transactions between a banking company and its

debtor, on the ground that the rate of interest charged is

excessive. There can be no doubt that a law relating to

indebtedness of a debtor to a banking company and the

interdict against a court reopening any such transaction,

on the ground that interest charged by the banking

company is excessive, would relate to the business of

banking. We must not forget that the entries in the Lists to

the Seventh Schedule have to be read in the widest

possible manner, and we have seen from the judgments

quoted by us above that the expression “banking”

contained in Entry 45, List I is to be given a wide

meaning. There can be no doubt that the statute as a

whole and the aforesaid Section does fall within Entry 45,

List I.

12. The effect of the aforesaid Section is to put out of

harm’s way the Usurious Loans Act and all State Debt

Relief Acts. The Usurious Loans Act was enacted in 1918;

its object being to confer on Courts in India an equitable

jurisdiction in cases relating to unconscionable usurious

contracts. Section 2(1) and 2(2) define “interest” and

“loan” respectively in the widest terms as under:

“2. Definitions.

In this Act, unless there is anything repugnant
in the subject or context,-

(1) “interest” means rate of interest and
includes the return to be made over and
above what was actually lent, whether the

same is charged or sought to be recovered
specifically by way of interest or otherwise.
(2) “loan” means a loan whether of money or
in kind and includes any transaction which is,
in the opinion of the Court, in substance a
Section 3, which is the operative Section in the said Act,

reads as follows:-

“3. Reopening of transaction.

Notwithstanding anything in the Usury Laws
Repeal Act, 1855 (28 of 1855), where, in any
suit to which this Act applies, whether heard
ex parte or otherwise, the Court has reason to

(a) that the interest is excessive; and

(b) that the transaction was, as between the
parties thereto substantially unfair, the Court
may exercise all or any of the following
powers, namely may,-

(i) re-open the transaction, take an account
between the parties and relieve the debtor of
all liability in respect of any excessive interest;

(ii) notwithstanding any agreement, purporting
to close previous dealings and to create a new
obligation, re-open any account already taken
between them and relieve the debtor of all
liability in respect of any excessive interest,
and if anything has been paid or allowed in
account in respect of such liability, order the
creditor to repay any sum which it considers to
be repayable in respect thereof;


(iii) set aside either wholly or in part or revise
or alter any security given or agreement made
in respect of any loan, and if the creditor has
parted with the security, order him to
indemnify the debtor in such manner and to
such extent as it may deem just:

Provided that, in the exercise of these powers,
the Court shall not-

(i) re-open any agreement purporting to close
previous dealings and to create a new
obligation which has been entered into by the
parties or any persons from whom they claim
at a date more than twelve years from the date
of the transaction;

(ii) do anything which affects any decree of a

Explanation.- In the case of a suit brought on
a series of transactions the expression “the
transaction” means, for the purposes of
proviso (i), the first of such transactions.
(2) (a) In this section “excessive” means in
excess of that which the Court deems to be
reasonable having regard to the risk incurred
as it appeared, or must be taken to have
appeared, to the creditor at the date of the

(b) In considering whether interest is
excessive under this section, the Court shall
take into account any amounts charged or
paid, whether in money or in kind, for
expenses, inquiries, fines, bonuses, premia,
renewals or any other charges, and if
compound interest is charged, the periods at

which it is calculated, and the total advantage
which may reasonably be taken to have been
expected from the transaction.

(c) In considering the question of risk, the
Court shall take into account the presence or
absence of security and the value thereof, the
financial condition of the debtor and the result
of any previous transactions of the debtor, by
way of loan, so far as the same were known,
or must be taken to have been known, to the

(d) In considering whether a transaction was
substantially unfair, the Court shall take into
account all circumstances materially affecting
the relations of the parties at the time of the
loan or tending to show that the transaction
was unfair, including the necessities or
supposed necessities of the debtor at the time
of the loan so far as the same were known, or
must be taken to have been known, to the

Explanation.- Interest may of itself be
sufficient evidence that the transaction was
substantially unfair.

(3) This section shall apply to any suit,
whatever its form may be, if such suit is
substantially one for the recovery of a loan or
for the enforcement of any agreement or
security in respect of a loan or for the
redemption of any such security.

(4) Nothing in this section shall affect the
rights of any transferee for value who satisfies
the Court that the transfer to him was bona
fide, and that he had at the time of such

transfer no notice of any fact which would
have entitled the debtor as against the lender
to relief under this section.

For the purposes of this sub-section, the word
“notice” shall have the same meaning as is
ascribed to it in section 4 of the Transfer of
Property Act, 1882 (4 of 1882).

(5) Nothing in this section shall be construed
as derogating from the existing powers or
jurisdiction of any Court.”

13. It can be seen that very wide powers are given to

Courts, inter alia, to scale down rates of interest

considering a whole host of factors, including the financial

condition of the debtor. State Debt Relief Acts, as has

been stated hereinabove, go even further and not only

relate to scaling down of excessive rates of interest, but

also, in certain cases, grant a waiver of the interest, either

wholly or partially, and of the principal sum of the loan,

either wholly or partially. There can be no doubt

whatsoever that, as has been held in Fatehchand (supra)

and Pathumma (supra), the State Debt Relief Acts are

validly made under Entry 30, List II of the Seventh

Schedule to the Constitution.1

14. The questions, therefore, which arise before us are:


Ms. Khajuria relied upon State Bank of Travancore v. Mohammed Mohammed
Khan, 1982 (1) SCR 338 at 348, for the proposition that banks were excluded from
the Kerala Agriculturists’ Debt Relief Act of 1970 because, unlike money lenders, they
do not exploit needy agriculturists and impose upon them harsh and onerous terms,
while granting loans to them. While this may have been the perception in the year
1982, the perception in the years after 1982 has altered as several recent State Debt
Relief Acts include relief against loans granted by banks. For instance, the Kerala
Farmers’ Debt Relief Commission Act, 2006 defines “debt” as including liabilities,
inter alia, due to institutional creditors and cooperative societies, and further defines
“institutional creditors” to include the State Bank of India, its subsidiaries and “any
scheduled bank”. The same is the position in the Telangana State Commission for
Debt Relief (Small Farmers, Agricultural Labourers and Rural Artisans) Act, 2016.
Sections 11 and 12 of both Acts read:

“11. Bar of suits, applications and other proceedings.
No suit for recovery of debt shall be instituted, or application for
execution of a decree in respect of a debt shall be made against
a farmer described in clause (b) of sub-section (1) of section 5
and no appeal, revision petition or application for review against
any decree or order in any such suit or application shall be
presented or made against such a farmer in any Civil Court, or
Tribunal or other authority, and such suits, applications, appeals
and petitions instituted or made against such a farmer before
the date of declaration of a district or part thereof as a distress
affected area and pending on such date shall stand stayed, for
such period as the Commission may recommend in that behalf.”

“12. Payment of debt in instalments
(1) Notwithstanding anything contained in any law or contract
or in any decree or order of any Court or Tribunal, a farmer
described in clause (b) of sub- section (1) of section 5 may
discharge his debts in suitable instalments together with fair
rate of interest as recommended by the Commission on the
principal amount outstanding at the time of each payment, in
the manner as may be directed by the Commission and on
payment of the same in the manner directed by the
Commission, the whole debt shall be deemed to be discharged.

(2) Where any instalment of a debt is not paid on the due date

i. What is the scope of Entry 45, List I vis-à-vis Entry 30,

List II of the Seventh Schedule to the Constitution?

ii. Whether Section 21A can be said to prevail over State

Debt Reliefs Acts in the event of a clash between the


In order to answer these questions, we have to consider

the arguments of Ms. Shirin Khajuria and Mr. Bhushan.

15. According to Ms. Khajuria, the expression “relief of

agricultural indebtedness” must take colour from the

expression “money lending and money lenders”

preceding it in Entry 30, List II of the Seventh Schedule.

We are afraid we cannot agree for several reasons.

Firstly, purely grammatically, a semicolon separates the

two expressions showing that they are not inextricably

connected. Also, we have already adverted to several

judgments, including Pathumma (supra), which state that

as directed by the Commission, the creditor shall be entitled to
recover the same in the manner as may be determined by the

Provided that, before taking decision by the Commission under
this section, the farmer shall be given an opportunity of being

the widest and the most liberal possible meaning must be

given to Entry 30, List II of the Seventh Schedule. The

latter part of this entry cannot be narrowed down by any

rule of noscitur a sociis, or taking colour from the former

part of the entry.2 In fact, various State Acts were already

in existence at the time of the Constitution, which dealt

with the subject of relief of agricultural indebtedness from

the point of view of the money lender. See, for instance,

Sections 8 and 9 of the Assam Money-Lenders Act, 1934,

Sections 9 and 10 of the Central Provinces Money-

Lenders Act, 1934, Sections 11 and 12 of the Bihar

Money-Lenders Act, 1938, Sections 9, 10 and 11 of the

Orissa Money-Lenders Act, 1939, Sections 31 and 36 of

the Bengal Money-Lenders Act, 1940 and Sections 23, 24

and 29 of the Bombay Money-Lenders Act, 1946.

Obviously, the addition of the subject “relief of agricultural
In Special Reference No.1 of 2001, (2004) 4 SCC 489, the expression “gas and
gas works” contained in Entry 25, List II was read in a manner that “gas” must take
colour from the expression “gas works”. It is clear that this was because natural gas
was excluded from the said entry and was, in fact, part of Entry 53, List I, being
within the expression “petroleum”. It would not be possible to extend such an
interpretation to a subject matter which is not directly linked with another subject
matter contained in the same entry.


indebtedness”, for the first time, by the Constitution would

refer to relief of agricultural indebtedness not only from

money lenders, but also from all persons who give loans

including banks. For otherwise, the subject matter “relief

of agricultural indebtedness” would have been subsumed

within “money lending and money lenders” and would

have been wholly unnecessary to add as a subject matter

separate and distinct from “money lending and money

lenders”. That “money lending and money lenders” is

separate and distinct from “relief of agricultural

indebtedness” is also clear from the fact that money

lending is not restricted to the agricultural sector, but

would include, within its scope, money lent to all persons,

including purely commercial transactions. Also, there are

many subjects in the Seventh Schedule which are

contained in one entry, but which deal with divergent

matters. For example Entry 5, List III deals with seven

completely different subjects, all banded together under

Entry 5 and separated by semicolons, making it clear that

each subject matter is separate and distinct from what

follows each semicolon.3 Similarly, Entry 6, List III deals

with transfer of property other than agricultural land,

separated by a semicolon from registration of deeds and

documents.4 Entry 12, List III deals with evidence and is,

thus, separated by a semicolon from recognition of laws,

public acts and records and judicial proceedings. 5

Obviously, there is no scientific method involved in placing

subjects in the various entries in the lists contained in the

Seventh Schedule to the Constitution. Ms. Khajuria’s

alternate plea that “relief of agricultural indebtedness”

would otherwise be in a separate entry by itself must also,

therefore, be rejected. Also, the object of the relief of

agricultural indebtedness is to free the farmer from the

bonds of debts incurred, inter alia, due to adverse natural
Entry 5, List III: Marriage and divorce; infants and minors; adoption; wills, intestacy
and succession; joint family and partition; all matters in respect of which parties in
judicial proceedings were immediately before the commencement of this Constitution
subject to their personal law.


Entry 6, List III: Transfer of property other than agricultural land; registration of
deeds and documents.


Entry 12, List III: Evidence and oaths; recognition of laws, public acts and records,
and judicial proceedings.


causes, and debt relief would be

necessary in the case of adverse natural causes

whatever be the source of the debt availed. If Ms.

Khajuria is right, a farmer would then be protected only

against moneylenders, but not banks, which would

denude the entry of most of its content.

16. The real question that arises is how are Entry 45,

List I and Entry, 30 List II to be harmonized. Shri Bhushan

has relied strongly upon Article 246 of the Constitution

which, according to him, lays down the federal supremacy

principle. According to him, the said principle extends to

edging out State legislation altogether, where

reconciliation is not possible. The scope of Article 246

has been dealt with in many judgments. In Hoechst

Pharmaceuticals Ltd. v. State of Bihar, (1983) 3 SCR

130 at 162-63 and 165-66, this Court laid down the

federal supremacy principle thus:

“It is obvious that Article 246 imposes
limitations on the legislative powers of the

Union and State legislatures and its ultimate
analysis would reveal the following essentials:

1. Parliament has exclusive power to legislate
with respect to any of the matters enumerated
in List I notwithstanding anything contained in
clauses (2) and (3). The non obstante clause
in Article 246(1) provides for predominance or
supremacy of Union legislature. This power is
not encumbered by anything contained in
clauses (2) and (3) for these clauses
themselves are expressly limited and made
subject to the non obstante clause in Article
246 (1). The combined effect of the different
clauses contained in Article 246 is no more
and no less than this: that in respect of any
matter falling within List I, Parliament has
exclusive power of legislation.

2. The State legislature has exclusive power
to make laws for such State or any part
thereof with respect to any of the matters
enumerated in List II of the Seventh Schedule
and it also has the power to make laws with
respect to any matters enumerated in List III.
The exclusive power of the State legislature to
legislate with respect to any of the matters
enumerated in List II has to be exercised
subject to clause (1) i.e. the exclusive power
of Parliament to legislate with respect to
matters enumerated in List I. As a
consequence, if there is a conflict between an
entry in List I and an entry in List II which is
not capable of reconciliation, the power of
Parliament to legislate with respect to a matter
enumerated in List II must supersede pro
tanto the exercise of power of the State


3. Both Parliament and the State legislature
have concurrent powers of legislation with
respect to any of the matters enumerated in
List III.

xxx xxx xxx

The words “notwithstanding anything
contained in clauses (2) and (3)” in Article
246(1) and the words “subject to clauses (1)
and (2)” in Article 246(3) lay down the
principle of federal supremacy viz. that in case
of inevitable conflict between Union and State
powers, the Union power as enumerated in
List I shall prevail over the State power as
enumerated in Lists II and III, and in case of
overlapping between Lists II and III, the former
shall prevail. But the principle of federal
supremacy laid down in Article 246 of the
Constitution cannot be resorted to unless
there is an “irreconcilable” conflict between
the entries in the Union and State Lists. In the
case of a seeming conflict between the entries
in the two Lists, the entries should be read
together without giving a narrow and restricted
sense to either of them. Secondly, an attempt
should be made to see whether the two
entries cannot be reconciled so as to avoid a
conflict of jurisdiction. It should be considered
whether a fair reconciliation can be achieved
by giving to the language of the Union
Legislative List a meaning which, if less wide
than it might in another context bear, is yet
one that can properly be given to it and
equally giving to the language of the State
Legislative List a meaning which it can
properly bear. The non obstante clause in

Article 246(1) must operate only if such
reconciliation should prove impossible.
Thirdly, no question of conflict between the
two Lists will arise if the impugned legislation,
by the application of the doctrine of “pith and
substance” appears to fall exclusively under
one list, and the encroachment upon another
list is only incidental.

xxx xxx xxx
With regard to the interpretation of non
obstante clause in Section 100(1) of the
Government of India Act, 1935 Gwyer, C.J.

“It is a fundamental assumption that the
legislative powers of the Centre and Provinces
could not have been intended to be in conflict
with one another and, therefore, we must read
them together, and interpret or modify the
language in which one is expressed by the
language of the other.”
“In all cases of this kind the question before
the Court”, according to the learned Chief
Justice is not “how the two legislative powers
are theoretically capable of being construed,
but how they are to be construed here and

(Emphasis Supplied)

To similar effect is the judgment cited by Shri Bhushan,

Sudhir Chandra Nawn v. WTO, (1969) 1 SCR 108 at

113, where the Court held:


“Exclusive power to legislate conferred upon
Parliament is exercisable, notwithstanding
anything contained in clauses (2) (3), that is
made more emphatic by providing in clause
(3) that the Legislature of any State has
exclusive power to make laws for such State
or any part thereof with respect to any of the
matters enumerated in List II in the Seventh
Schedule, but subject to clauses (1) and (2).
Exclusive power of the State Legislature has
therefore to be exercised subject to clause (1)
i.e. the exclusive power which the Parliament
has in respect of the matters enumerated in
List I. Assuming that there is a conflict
between Entry 86 List I and Entry 49 List II,
which is not capable of reconciliation, the
power of Parliament to legislate in respect of a
matter which is exclusively entrusted to it must
supersede pro tanto the exercise of power of
the State Legislature.”
(Emphasis Supplied)
It can, thus, be seen that Article 246 only states that

where two entries in the Union List and the State List,

respectively, have a head-on collision and are

irreconcilable, then, as a last resort, the entry in the State

List is to give way to the entry in the Union List. But, this

is only as a last resort. First, it is incumbent upon the

Court to harmonise the entries, if possible, by giving effect

to both and not rendering any one of them otiose. Thus, in

Calcutta Gas Co. (Proprietary) Ltd. v. State of W.B.,

1962 Supp (3) SCR 1 at 13, 17-19, the Court, held:

“The power to legislate is given to the
appropriate legislatures by Article 246 of the
Constitution. The entries in the three Lists are
only legislative heads or fields of legislation:
they demarcate the area over which the
appropriate legislatures can operate. It is also
well settled that widest amplitude should be
given to the language of the entries. But some
of the entries in the different Lists or in the
same List may overlap and sometimes may
also appear to be in direct conflict with each
other. It is then the duty of this Court to
reconcile the entries and bring about harmony
between them.

xxx xxx xxx
Entry 24 in List II in its widest amplitude takes
in all industries, including that of gas and gas-
works. So too, Entry 25 of the said List
comprehends gas industry. There is,
therefore, an apparent conflict between the
two entries and they overlap each other. In
such a contingency the doctrine of
harmonious construction must be invoked.
Both the learned counsel accept this principle.
While the learned Attorney-General seeks to
harmonize both the entries by giving the
widest meaning to the word “industry” so as to
include the industrial aspect of gas and gas-

works and leaving the other aspects to be
covered by Entry 25, learned counsel for the
contesting respondents seeks to reconcile
them by carving out gas and gas-works in all

its aspects from Entry 24. If industry in Entry
24 is interpreted to include gas and gas-
works, Entry 25 may become redundant, and
in the context of the succeeding entries,
namely, Entry 26, dealing with trade and
commerce, and Entry 27, dealing with
production, supply and distribution of goods it
will be deprived of all its contents and reduced
to “useless lumber”. If industrial, trade,
production and supply aspects are taken out
of Entry 25, the substratum of the said entry
would disappear: in that event we would be
attributing to the authors of the Constitution
ineptitude, want of precision and tautology. On
the other hand, the alternative contention
enables Entries 24 and 25 to operate fully in
their respective fields: while Entry 24 covers a
very wide field, that is, the field of the entire
industry in the State, Entry 25, dealing with
gas and gas-works, can be confined to a
specific industry, that is, the gas industry.
There may be many good reasons for the
authors of the Constitution giving separate
treatment to gas and gas-works. If one can
surmise, it may be that, as the industry of gas
and gas-works was confined to one or two
States and was not of all-India importance, it
was carved out of Entry 24 and given a
separate entry, as otherwise if a declaration
by law was made by Parliament within the
meaning of Entry 7 or Entry 52 of List I, it
would be taken out of the legislative power of
States. Be it as it may, the express intention of
the Constitution is to treat it, in normal times,
as a state subject and it is not in the province
of this Court to ascertain and scrutinize the
reasons for doing so. It is suggested that this

interpretation would prevent Parliament to
make law in respect of gas and gas-works
during war or other national emergency. Apart
from the relevancy of such a consideration,
the apprehension has no justification, for
under Article 249 Parliament is enabled to
take up for legislation any matter which is
specifically enumerated in List II whenever the
Council of States resolves by two-thirds
majority that such a legislation is necessary or
expedient in the national interest. So too,
under Article 250 Parliament can make laws
with respect to any of the matters enumerated
in the State List, if a proclamation of
emergency is in operation. Article 252
authorizes the Parliament to legislate for two
or more States, if the Houses of the
legislatures of those States give their consent
to the said course. Subject to such emergency
or extraordinary powers, the entire industry of
gas and gas-works is within the exclusive
legislative competence of a State. It is,
therefore, clear that the scheme of
harmonious construction suggested on behalf
of the State gives full and effective scope of
operation for both the entries in their
respective fields, while that suggested by
learned counsel for the appellant deprives
Entry 25 of all its content and even makes it
redundant. The former interpretation must,
therefore, be accepted in preference to the
latter. In this view, gas and gas-works are
within the exclusive field allotted to the States.
On this interpretation the argument of the
learned Attorney-General that, under Article
246 of the Constitution, the legislative power
of State is subject to that of Parliament ceases

to have any force, for the gas industry is
outside the legislative field of Parliament and
is within the exclusive field of the legislature of
the State. We, therefore, hold that the
impugned Act was within the legislative
competence of the West Bengal Legislature
and was, therefore, validly made.”
(Emphasis Supplied)

17. At this stage, it is important to advert to a judgment

of this Court in Central Bank of India v. Ravindra,

(2002) 1 SCC 367 at 402. This judgment states:

“55. During the course of hearing it was
brought to our notice that in view of several
usury laws and debt relief laws in force in
several States private moneylending has
almost come to an end and needy borrowers
by and large depend on banking institutions
for financial facilities. Several unhealthy
practices having slowly penetrated into
prevalence were pointed out. Banking is an
organised institution and most of the banks
press into service long-running documents
wherein the borrowers fill in the blanks, at
times without caring to read what has been
provided therein, and bind themselves by the
stipulations articulated by the best of legal
brains. Borrowers other than those belonging
to the corporate sector, find themselves
having unwittingly fallen into a trap and
rendered themselves liable and obliged to pay
interest the quantum whereof may at the end
prove to be ruinous. At times the interest
charged and capitalised is manifold than the

amount actually advanced. Rule of damdupat
does not apply. Penal interest, service
charges and other overheads are debited in
the account of the borrower and capitalised of
which debits the borrower may not even be
aware. If the practice of charging interest on
quarterly rests is upheld and given a judicial
recognition, unscrupulous banks may resort to
charging interest even on monthly rests and
capitalising the same. Statements of accounts
supplied by banks to borrowers many a times
do not contain particulars or details of debit
entries and when written in hand are worse
than medical prescriptions putting to test the
eyes and wits of the borrowers. Instances of
unscrupulous, unfair and unhealthy dealings
can be multiplied though they cannot be
generalised. Suffice it to observe that such
issues shall have to be left open to be
adjudicated upon in appropriate cases as and
when actually arising for decision and we
cannot venture into laying down law on such
issues as do not arise for determination before
us. However, we propose to place on record a
few incidental observations, without which, we
feel, our answer will not be complete and that
we do as under:

xxx xxx xxx
(6) Agricultural borrowings are to be treated
on a pedestal different from others. Charging
and capitalisation of interest on agricultural
loans cannot be permitted in India except on
annual or six-monthly rests depending on the
rotation of crops in the area to which the
agriculturist borrowers belong.”
(Emphasis Supplied)

Given the fact that, at present, agricultural loans are

predominantly given by cooperative and other banks to

farmers, the method suggested by Shri Bhushan, which is

to exclude banks from the entry “relief of agricultural

indebtedness”, would rob the aforesaid entry of most of its

force and render it largely otiose.

18. Another method of reconciling conflicting entries

was discussed in Waverly Jute Mills Co. Ltd. v.

Raymon Co. (India) (P) Ltd., (1963) 3 SCR 209 at

219-220 as follows:

“The rule of construction is undoubtedly well
established that the entries in the Lists should
be construed broadly and not in a narrow or
pedantic sense. But there is no need for the
appellants to call this rule in aid of their
contention, as trade and commerce would, in
their ordinary and accepted sense, include
forward contracts. That was the view which
was adopted in Bhuwalka Brothers Ltd.

case [AIR (1952) Cal 740] and which
commended itself to this Court in Duni Chand
Rateria case [(1955) 1 SCR 1071] . Therefore,
if the question were simply whether a law on
Forward Contracts would be a law with
respect to Trade and commerce, there should

be no difficulty in answering it in the
affirmative. But the point which we have got to
decide is as to the scope of the entry “Trade
and commerce” read in juxtaposition with
Entry 48 of List I. As the two entries relate to
the powers mutually exclusive of two different
legislatures, the question is how these two are
to be reconciled. Now it is a rule of
construction as well established as that on
which the appellants rely, that the entries in
the Lists should be so construed as to give
effect to all of them and that a construction
which will result in any of them being rendered
futile or otiose must be avoided. It follows from
this that where there are two entries, one
general in its character and the other specific,
the former must be construed as excluding the
latter. This is only an application of the general
maxim that Generalia specialibus non
derogant. It is obvious that if Entry 26 is to be
construed as comprehending Forward
Contracts, then “Futures Markets” in Entry 48
will be rendered useless. We are therefore of
opinion that legislation on Forward Contracts
must be held to fall within the exclusive
competence of the Union under Entry 48 in
List I.”
(Emphasis Supplied)

19. Qua the general entry “banking” under Entry 45, List

I, which deals with banks of all kinds and the lending by

banks as well as recovery of debts by banks generally,

Entry 30, List II, which deals with relief of agricultural

indebtedness, is special, for the reason that indebtedness

itself is only one species of banking and agricultural

indebtedness is a sub-species thereof. The species of

indebtedness is within Entry 45, List I, whereas the sub-

species of agricultural indebtedness is within Entry 18,

List II. It is only relief of agricultural indebtedness, which

is a sub-sub-species of indebtedness, which is relatable

to Entry 30, List II. Also, we must at this juncture keep in

mind the amendment sought to be moved by Shri

Shibban Lal Saxena in the Constituent Assembly to move

Draft Entry 34 (i.e. Entry 30), List II to the Concurrent List.

This was done as follows:

“Entry 34

Prof.Shibban Lal Saksena: Sir, I beg to

“That entry 34 of List II be transferred to List

This is an important amendment. I would like
the House to realise the magnitude of the
problem. We all want to wipe out rural
indebtedness. Sir, in this connection I would
like to read an extract from the People’s Plan

for Economic Development of India, which
runs as follows:

“The other problem that will have to be
tackled, along with this problem of the
outmoded land tenure system, will be the
problem of rural indebtedness. The total rural
indebtedness was estimated by the Central
Banking Inquiry Committee, in the year 1929,
at about 900 crores of rupees. Subsequent
estimates have however, put the figure at a
much higher level. The estimate according to
the report of the Agricultural Credit
Department of the Reserve Bank of India in
the year 1937 is about 1800 crores of rupees.
It is not possible that this might have reduced
to any significant extent since the year 1937,
nor can the so-called agricultural boom at
present be said to have produced very
substantial reductions. The money-lender in
the country dominates more in that strata of
the agricultural population which is relatively
worse off.”

“The boom can hardly be said to have
benefited that strata. On the other hand, the
debt represents accumulations of decades.
The debt legislation in the various provinces
has not, admittedly, been able to touch even
the fringe of the problem. We feel it
necessary, therefore, that the debt should be
compulsorily scaled down and then taken over
by the State. Experiments made in this
direction in the Province of Madras, for
example, serve as a useful pointer. Under the
working of the Madras Agriculturist’ Relief Act
of 1938, debts were scaled down by about 47

per cent and the provisions of the Act can, by
no logic be characterized as drastic. In the
Punjab, under the operations of the Debt
Conciliation Boards, debts amounting to 40
lakhs were settled for about 14 lakhs. It
should, therefore, be possible and just be
considered as necessary to scale down the
present debts to about 25 per cent before they
are taken over by the State. Assuming the
present indebtedness to amount to about Rs.
1,000 crores the debt to be taken over by the
State will come to about Rs. 250 crores.”

The compensation to be paid to the rent-
receivers as well as to the usurers will thus
amount to Rs. 1985 crores. This should be
paid in the form of self-liquidating bonds
issued by the State. These should be for a
period of 40 years at the rate of interest of 3
per cent and should be compulsorily retained
by the State in its possession. The annual
payments to be made by the State for these
bonds will come to about Rs. 60 crores.

On the carrying out of these initial measures
will depend the success of the planned
economy for raising the productivity of
agriculture in the interests of the cultivators.
Unless the status quo is changed in this
manner there can be no hope of improving the
standard of living of the vast bulk of our
peasantry, and therefore, no hope of building
up an industrial structure in the country on
sound, stable and secure foundations. We are
aware of the difficulties in the way of carrying
out the above measures but we are

unnamable to see any alternative to them

It is thus obvious that if we really want to
remove agricultural indebtedness, the problem
cannot be solved merely by action taken by
individual States. Only a comprehensive plan
and its bold execution with the fullest co-
operation of the Union Government with the
Government of the states can solve these
problems. It is therefore that I have suggested
that this entry should be transferred to List III.

Sir, I have tabled my amendment only with
this purpose in view. I feel and I am quite
convinced that we cannot change the face of
our country and we cannot realise the ‘India’
of our dreams unless we adopt a
comprehensive plan and have powers to
coordinate the activities of the Centre and the
Provinces. I therefore commend my
amendment for the earnest consideration of
the House.

Mr. President: The question is:

“That entry 34 of List II be transferred to List

The amendment was negatived.

Mr. President: The question is:

“That entry No. 34 stand part of List II.”

The motion was adopted.

Entry 34, was added to the State List.”

(Emphasis Supplied)
The amendment was obviously rejected in keeping with

the fact that agriculture and aspects of agriculture are

exclusively given to the States. This will be clear from

Entries 14, 18, 45 to 48 of List II, apart from Entry 30, List

II, which read as under:

“14. Agriculture, including agricultural
education and research, protection against
pests and prevention of plant diseases.

18. Land, that is to say, rights in or over land,
land tenures including the relation of landlord
and tenant, and the collection of rents;
transfer and alienation of agricultural land;
land improvement and agricultural loans;

45. Land revenue, including the assessment
and collection of revenue, the maintenance of
land records, survey for revenue purposes
and records of rights, and alienation of

46. Taxes on agricultural income.

47. Duties in respect of succession to
agricultural land.

48. Estate duty in respect of agricultural land.”

Entries 82, 86, 87 and 88, List I and Entries 6 and 7, List

III also specifically exclude agriculture as follows:


“82. Taxes on income other than agricultural

86. Taxes on the capital value of the assets,
exclusive of agricultural land, of individuals
and companies; taxes on the capital of

87. Estate duty in respect of property other
than agricultural land.

88. Duties in respect of succession to property
other than agricultural land.

xxx xxx xxx

6. Transfer of property other than agricultural
land; registration of deeds and documents.

7. Contracts including partnership, agency,
contracts of carriage, and other special forms
of contracts, but not including contracts
relating to agricultural land.”
To complete the picture, it is also important to advert to

Entry 41, List III, which states as follows:-

“41. Custody, management and disposal of
property (including agricultural land) declared
by law to be evacuee property.”

The constitutional scheme, insofar as agriculture is

concerned, is that it is an exclusive State subject to one

exception – that the custody, management and disposal

of property, declared by law to be evacuee property

includes agricultural land, and makes it a concurrent


20. This being the case, the two entries are best

harmonised by giving effect to both. This can only be

done if the relief of agricultural indebtedness is to include

banks, both cooperative and otherwise. As mentioned

earlier, Entry 18, List II gives the States exclusive power

to legislate on “land improvement and agricultural loans.”

Entry 45, List I will remain intact and will have carved out

of it the relief of agricultural indebtedness, which, as we

have already seen, is a sub-sub-species of indebtedness,

which itself is one of many aspects of banking.

21. We now come to the doctrine of pith and substance

and incidental trenching. Having thus delineated the

respective spheres of “banking” in Entry 45, List I and

“relief of agricultural indebtedness” in Entry 30, List II, we

have to view the pith and substance of the Banking

Regulation Act as a whole, inclusive of Section 21A.


22. It has already been held by us that, in pith and

substance, the Banking Regulation Act does fall within

Entry 45, List I, but given our interpretation of Entry 45,

List I and Entry 30, List II of the Seventh Schedule, it is

clear that, insofar as relief of agricultural indebtedness is

concerned, Section 21A certainly trenches upon Entry 30,

List II, read in the manner indicated above. As is well

settled, the doctrine of pith and substance is only to view

a legislation as a whole and see whether, as a whole, it

falls within one or other entry of List I or List II of the

Seventh Schedule. While thus falling as a whole within

one List, certain provisions in a particular Act enacted by

one legislature may incidentally trench upon a forbidden

field exclusively given to another legislature. What is the

position in law with respect to such incidental trenching?

23. In Subrahmanyan Chettiar v. Muttuswami

Goundan, AIR 1941 FC 47, the Federal Court was faced

with the constitutional validity of the Madras Agriculturists

Relief Act, 1938. Gwyer, CJ, speaking for the majority,

found that the Madras Act is an attempt to deal, in a very

drastic manner, with the problem of rural indebtedness

“which has vexed legislators since the days of Solon”.

The precise question that arose before the Federal Court

was whether the Madras Act trespassed into the federal

field covered by Entry 28, List I, where the Federal

legislature has an exclusive power to legislate with

respect, inter alia, to promissory notes. Section 79 of the

Negotiable Instruments Act, 1881, expressly clashed with

the Madras Act in that, in a promissory note where

interest at a specified rate is expressly made payable,

interest is to be calculated at that rate until payment or

until such date after the institution of a suit to recover the

amount, as the Court directs. Inasmuch as the Madras

Act scales down such interest, a direct clash between the

provisions of Madras Act and the Negotiable Instruments

Act became inevitable.


24. The majority answered the question by upholding

the Madras Act in its entirety as it was an Act, in pith and

substance, relatable to “money lending and money

lenders” inasmuch as the Madras Act operated not on the

promissory note, but on a decree in which the promissory

note had merged, and had, thus, become a judgment-

debt. It was held that the Act neither affected nor

purported to affect any liability on a promissory note.

25. Having held this, the majority, however, speaking

through Gwyer, C.J., said:

“But though, as I have said, I reserve my
opinion upon all of them, I do not wish it to be
assumed that I accept in its entirety the view
of the Madras High Court that the impugned
Act does not really affect the principles
embodied in the Negotiable Instruments Act,
for, that proposition seems to me much too
broadly stated. I doubt whether any provincial
Act could, in the form of a debtors’ relief Act,
fundamentally affect the principle of
negotiability, or the rights of a bonafide
transferee for value. Perhaps the position is
different where the promissory note has never
changed hands and is sued upon by the
original payee; and it may be (though I do not
decide the question) that an Act such as the

Court is now considering can operate upon
the original debt in such cases, even though
the creditor has taken a promissory note in
respect of his debt. If it were otherwise, the
power of Provincial Legislatures to enact
remedial legislation in a field peculiarly their
own would be very greatly hampered; so
much so, indeed, that the Central Legislature
might well find itself compelled to review the
situation. But it would perhaps be inadvisable
that I should say more on this occasion.”
(at page 52)
(Emphasis Supplied)

Sulaiman, J., however, dissented, and held that as there

was a clash between the Madras Act and the Negotiable

Instruments Act, the latter would prevail. Despite the fact

that the law thus laid down cannot be said to be of

persuasive value, being in a dissenting judgment, yet, the

learned Judge dealt with the doctrine of incidental

trenching in great detail, and followed Canadian cases,

summarised by Lord Tomlin in Attorney General for

Canada v. Attorney General for British Columbia

(1930 A.C. 111 at 118) in four neat propositions on the

subject, as follows:


“The doctrine which has been evolved with
regard to the Canadian cases is that if the
encroachment is merely incidental, then there
is no defect so long as the trespass is upon an
unoccupied field. Engrafted upon the doctrine
of incidental encroachment there is the further
doctrine of unoccupied field.

xxx xxx xxx

In Jai Gobind Singh v. Lachmi Narain Ram
(1940) 3 F.L.J. 46 p. 51, where the amount
due on an earlier promissory note had formed
part of the mortgage money, I distinguished
the case by pointing out that the suit being on
a mortgage the field was apparently clear,
and, therefore, the question of interfering with
the interest due on the promissory note did
not directly arise. No Canadian case has been
cited before us in which although the subject
of legislation was substantially within S. 92, it
not only incidentally encroached upon a
subject mentioned in S. 91, but at the same
time actually clashed with an existing
Dominion legislation.6 The principles laid down
by their Lordships have gone only so far as to
permit an incidental encroachment, provided
the Dominion field is unoccupied. In no case
so far decided have their Lordships tolerated a
trespass as well as a clash. If a clash with the
Dominion legislation were also allowed, then a
Provincial Legislature would be in a position,

Lord Tomlin’s fourth proposition, in Attorney General for Canada (supra), namely,

“There can be a domain in which provincial and Dominion legislation may overlap, in
which case neither legislation will be ultra vires if the field is clear, but if the field is
not clear and the two legislations meet the Dominion legislation must prevail”, must
be read subject to this caveat.


though indirectly, to nullify the Dominion
legislation, even inside the field exclusively
open to the Dominion, which would make the
position intolerable.

xxx xxx xxx

The scheme of S. 100 of the Act is to exclude
completely from the authority of the Provincial
Legislature the power to legislate with respect
to subjects in List I. If in consequence of
certain difficulties that Provincial Legislatures
would experience by a rigid enforcement of
such an exclusion we must in interpreting the
words “with respect to” import the Canadian
doctrine of permissibility of incidental
encroachment, we must then at the same time
import the other allied doctrine also that such
an encroachment is permissible only when the
field is actually unoccupied. It is only in this
way that actual clash between the Centre and
the Provinces can be avoided, which I think
we must. This will also explain the apparent
gap in S. 107(1) of the Act, that gap being
filled in by the provisions of S. 100.”
(at pages 62-64)
(Emphasis Supplied)

26. However, Shri Bhushan sought to impress upon us

that certain observations in Fatehchand (supra) make it

clear that the doctrine of incidental trenching and

unoccupied field is a one way street, as was held in the

dissenting judgment of Sulaiman, J. in Subrahmanyan

Chettiar (supra), i.e. that all State legislations have to

give way to a Central legislation, even if a Central

legislation incidentally trenches upon a State subject,

covered by State legislation. He relied upon paragraph

56 in Fatehchand (supra) in particular. Paragraph 56 is

part of a long discussion, beginning from paragraph 55

and ending with paragraph 67, which deals with an

argument made that that part of the Maharashtra Debt

Relief Act, which deals with gold loans, is void because

Parliament has occupied the field. This question was

answered by referring to Entry 52, List I and Entry 24, List

II. It was held that the Industrial Development and

Regulation Act, 1951 has occupied the field of the gold

industry under Entry 52, List I, as has the Gold Control

Act, 1968, and that, therefore, Entry 24, List II, being

subject to Entry 52, List I, has become inoperative. This

does not however mean that Entry 30, List II, which deals

with money lending, has been rendered inoperative and,

therefore, the Maharashtra Debt Relief Act, made under

Entry 30, List II, would remain intact. The learned Judge

also went on to refer to Entries 6 and 7 of List III and to

Article 254(2) of the Constitution stating that if it were to

be held that the Debt Relief Act related to contracts, then,

having received Presidential assent, it would prevail over

the aforesaid Central enactments in the State of

Maharashtra in light of Article 254(2). It is in this context

that the general observation as to Parliamentary

paramountcy, in paragraph 56 of the judgment, is made.

Obviously where an entry in List II is itself subject to the

corresponding entry in List I and, by the requisite

declaration, Parliament occupies the field, the State

legislatures are denuded of legislative competence only

because the particular entry, namely Entry 24, List II, is

expressly subject to Entry 52, List I. This is not the case

insofar as Entry 45, List I and Entry 30, List II is



27. Shri Bhushan then relied upon a concurring

judgment of Ranganathan, J. in Federation of Hotels

and Restaurants v. Union of India, (1989) 3 SCC 634.

In paragraph 74, the learned Judge, while upholding the

Hotel Receipts Tax Act, 1980 held that, in pith and

substance, it was referable to Entry 82, List I, being, in

substance, a tax on income. In particular, Shri Bhushan

relied upon the statement of the law that since Parliament

had exclusive power, under Article 246(1) and (3) of the

Constitution, to make laws with respect to any of the

matters enumerated in List I, if an Act of Parliament is

squarely covered by an entry in the Union List, no

restriction can be read into the power of Parliament to

make laws in regard thereto. This was made in the

context of a taxation entry, which as the aforesaid

paragraph 74 itself states, refers to the Constitutional

scheme which neatly divides the subject matters of tax

between the Union and the States, so that there can be

said to be no overlapping. There is no discussion in this

paragraph of Parliamentary paramountcy in the context of

incidental trenching and unoccupied field. This judgment,

therefore, does not take the matter very much further.

28. Insofar as Article 246 is concerned, we have already

seen how the said Article refers to federal supremacy

insofar as the whittling down of a State List entry is

concerned, when compared with a Union List entry. Once

the spheres of both the entries have been delineated, the

doctrine of pith and substance comes in to test whether a

particular legislation is referable, as a whole, to an entry

in List I or to the competing entry in List II. Once it is

found that the legislation as a whole is referable to an

entry in List I, but it incidentally encroaches upon an entry

in List II, there is no reason for the doctrine of unoccupied

field not to apply to federal legislation. The expression

“with respect to” appears in all the sub-articles of Article

246, which expression, so far as sub-articles (1) to (3) are

concerned, imports the twin doctrines of incidental

trenching and unoccupied field, which applies, therefore,

to legislation made under sub-articles (1) to (3) of Article

246, thus making it clear that incidental encroachment by

Parliament cannot be tolerated when the exclusive field

allotted to the State legislature is not unoccupied.

29. The paramountcy principle contained in Article 246,

as we have seen, is only taken as a last resort after

harmonious construction fails, and, that too, qua entries in

competing lists. Once legislation is referable to one list or

the other, the doctrine of incidental trenching and

unoccupied field would apply equally to both

Parliamentary and State legislations. In the very first

judgment of the Federal Court, In Re CP Berar Sales

of Motor Spirit Lubricants Taxation Act, 1938 AIR

1939 FC 1 at 31, Jayakar, J. set out principles that were

evolved on a reading of the British North America Act by

the Privy Council, which would prove to be a useful guide

to the construction of Section 100 of the Government of

India Act, 1935, which was the precursor of Article 246 of

the Constitution. These principles were set out as follows:

“(1) That the provisions of an Act like the
Government of India Act, 1935, should not be
cut down by a narrow and technical
construction, but, considering the magnitude
of the subjects with which it purports to deal in
very few words, should be given a large and
liberal interpretation, so that the Central
Government, to a great extent, but within
certain fixed limits, may be mistress in her
own house, as the Provinces, to a great-
extent, but again within certain fixed limits, are
mistresses in theirs. See Henrietta Muir
Edwards v. Attorney-General for Canada
(1930 AC 124 at 136 and 137).

(2) In an enquiry like the one before us in this
Reference, the Court must ascertain the true
nature and character of the challenged
enactment, its pith and substance; and not the
form alone which it may have assumed under
the hand of the draftsman. See Attorney-

General for Ontario v. Reciprocal
Insurers (1924 AC 328 at 337).

(3) Where there is an absolute jurisdiction
vested in a Legislature, the laws promulgated
by it must take effect according to the proper
construction of the language in which they are
expressed. But where the law-making
authority is of a limited or qualified character,
obviously it may be necessary to examine,
with some strictness, the substance of the
legislation, for the purpose of determining
what it is that the Legislature is really doing.


See Attorney-General for Ontario v.

Reciprocal Insurers (1924 AC 328 at 337).
(4) Even where there has been an endeavour
to give pre-eminence to the Central
Legislature in cases of a conflict of powers, it
is obvious that, in some cases where this
apparent conflict exists, the Legislature could
not have intended that powers exclusively
assigned to the Provincial Legislature should
be absorbed in those given to the Central
(Emphasis Supplied)
Principle 4 is of particular relevance in these cases.

30. Indeed, in a recent judgment of this Court, this has,

in fact, been held. In UCO Bank v. Dipak Debbarma,

(2017) 2 SCC 585 at 596, this Court held:

“13. The federal structure under the
constitutional scheme can also work to nullify
an incidental encroachment made by the
parliamentary legislation on a subject of a
State legislation where the dominant
legislation is the State legislation. An attempt
to keep the aforesaid constitutional balance
intact and give a limited operation to the
doctrine of federal supremacy can be
discerned in the concurring judgment of Ruma
Pal, J. in ITC Ltd. v. Agricultural Produce
Market Committee [ITC Ltd. v. Agricultural
Produce Market Committee, (2002) 9 SCC
232], wherein after quoting the observations of
this Court in S.R. Bommai v. Union of

India [S.R. Bommai v. Union of India, (1994) 3
SCC 1], the learned Judge has gone to
observe as follows: (ITC Ltd. case [ITC
Ltd. v. Agricultural Produce Market
Committee, (2002) 9 SCC 232], SCC p. 282,
paras 93-94)

“93. … ‘276. The fact that under the scheme
of our Constitution, greater power is conferred
upon the Centre vis-à-vis the States does not
mean that States are mere appendages of the
Centre. Within the sphere allotted to them,
States are supreme. The Centre cannot
tamper with their powers. More particularly,
the courts should not adopt an approach, an
interpretation, which has the effect of or tends
to have the effect of whittling down the powers
reserved to the States.’ (S.R. Bommai
case [S.R. Bommai v. Union of India, (1994) 3
SCC 1], SCC pp. 216-17, para 276)

94. Although Parliament cannot legislate on
any of the entries in the State List, it may do
so incidentally while essentially legislating
within the entries under the Union List.
Conversely, the State Legislatures may
encroach on the Union List, when such an
encroachment is merely ancillary to an
exercise of power intrinsically under the State
List. The fact of encroachment does not affect
the vires of the law even as regards the area
of encroachment. [A.S. Krishna v. State of
Madras [A.S. Krishna v. State of Madras, AIR
1957 SC 297 : 1957 Cri LJ 409]; Chaturbhai
M. Patel v. Union of India [Chaturbhai M.
Patel v. Union of India, (1960) 2 SCR 362 :
AIR 1960 SC 424]; State of Rajasthan v. G.
Chawla [State of Rajasthan v. G. Chawla, AIR

1959 SC 544 : 1959 Cri LJ 660] and Ishwari
Khetan Sugar Mills (P) Ltd. v. State of
U.P. [Ishwari Khetan Sugar Mills (P)
Ltd. v. State of U.P., (1980) 4 SCC 136] This
principle commonly known as the doctrine of
pith and substance, does not amount to an
extension of the legislative fields. Therefore,
such incidental encroachment in either event
does not deprive the State Legislature in the
first case or Parliament in the second, of their
exclusive powers under the entry so
encroached upon. In the event the incidental
encroachment conflicts with legislation
actually enacted by the dominant power, the
dominant legislation will prevail.”
(Emphasis Supplied)

14. The aforesaid view in the concurring
judgment of Ruma Pal, J. in ITC
Ltd. v. Agricultural Produce Market
Committee [ITC Ltd. v. Agricultural Produce
Market Committee, (2002) 9 SCC 232], seems
to have been echoed in a recent
pronouncement of this Court in Vishal N.

Kalsaria v. Bank of India [Vishal N.

Kalsariav. Bank of India, (2016) 3 SCC 762 :
(2016) 2 SCC (Civ) 452], wherein this Court
had held that the provisions of the 2002 Act
will not have an overriding effect on the
provisions of the State Rent Control Acts.”

This Court then went on to hold that between the

Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 (SARFAESI),

which was enacted under Entry 45, List I, and the Tripura

Land Revenue and Reforms Act, 1960, referable to Entry

18 of List II, SARFAESI would prevail since Section 187 of

the Tripura Act (which prohibited banks from transferring

property which has been mortgaged by a member of a

Scheduled Tribe to any person other than a member of a

Scheduled Tribe), is a provision which is outside Entry 18,

List II and, therefore, incidentally trenches upon Entry 45,

List I. On the facts of the case, therefore, it was found

that since legislation had been made by Parliament under

Entry 45, List I and the SARFAESI Act dealt exclusively

with activities relating to sale of secured assets by banks,

Section 187 of the Tripura Act, to the extent it is

inconsistent with the SARFAESI Act, must give way.

31. It is also important to notice that paragraph 12 of the

aforesaid judgment sets out paragraphs 13 to 15 of the

Constitution Bench judgment in Special Reference No.1

of 2001, (2004) 4 SCC 489.7 Shri Bhushan strongly

relied upon paragraph 15 of this judgment. It is clear that

the entire discussion begins from paragraph 13, which

makes it clear that an entry in one list cannot be so

interpreted as to cancel or obliterate another entry made

in another list and in the case of an apparent conflict, it is

the primary duty of the Court to harmonise the two

entries. It is only when there is an irreconcilable conflict

between two legislations that the Central legislation shall

prevail. It is after noticing this statement of the law

contained in paragraph 15 of the Constitution Bench

judgment in Special Reference No.1 (supra), that the

discussion on incidental encroachment in paragraphs 13

and 14, referred to hereinabove, is then laid down by the
In this case, a Constitution Bench of this Court had to decide on whether a Gujarat
statute, which defined “gas” as being predominantly methane gas, was ultra vires
the State legislature. The competing entries were Entry 53, List I and Entry 25, List II.
Entry 53, List I dealt, inter alia, with petroleum, whereas Entry 25, List II dealt with
gas and gas works. The Constitution Bench went into great detail in considering
various Acts, judgments and other authorities, including dictionaries, and held that
natural gas fell within the definition of “petroleum”, and further that Entry 25, List II
referred only to manufactured gas, as is evident from the expression “gas works”,
which is defined as “a plant for manufacture of artificial gas”. The Constitution Bench
was careful to indicate, in paragraph 43 of the judgment, that Entry 25, List II would
not be reduced to “useless lumber” as feared by the States, because natural gas was
never intended to be covered by that entry, which is given full effect by including gas
manufactured and used in gas works.


Court in UCO Bank (supra). Shri Bhushan’s reliance on

the latter part of paragraph 15 in Special Reference No.1

(supra), to negate what has been stated in paragraphs 13

and 14 of UCO Bank (supra), therefore, holds no water.

32. It is clear from a reading of this judgment that, from

the point of view of a State Debt Relief Act, as the

legislation is referable to the special entry “relief of

agricultural indebtedness” under Entry 30, List II, as

opposed to the Banking Regulation Act, under the general

entry of “banking” in Entry 45, List I, any incidental

encroachment by the Parliamentary statute on Entry 30,

List II, read with the State Debt Relief Acts made

thereunder, would make Section 21A yield to the State

Debt Relief Acts, to the extent that they cover relief of

agriculturists from debts due to banks. It is clear that

where Section 21A of the Banking Regulation Act

incidentally trenches upon the State Debt Relief Acts,

enacted under Entry 30, List II, so far as relief of

agricultural indebtedness is concerned, where there is

State legislation on the same subject matter which directly

clashes with Section 21A, Section 21A will have to give

way to the State Debt Relief Acts insofar as relief from

agricultural indebtedness due to banks is concerned. The

non-obstante clause in Section 21A cannot override a

State Debt Relief Act in this situation, as Parliament

cannot give itself supremacy over State legislation where

none exists under the Constitution. If this were not the

case, the exclusive power of the States to make laws

within List II would become illusory, and “Parliamentary

paramountcy” would trap many a beneficent State

legislation made within its exclusive domain, contrary to

the statement of law laid down by the Privy Council in

Prafulla Kumar (supra), and contrary to principle (4) laid

down by Jayakar, J. in In Re CP Berar Sales (supra),

both of which have been consistently followed by several

judgments of this Court.


33. In fact, a reading of the entries in List II would

demonstrate that certain entries in List II are subject to

entries in Lists I and III. These are set out hereinbelow:-

“2. Police (including railway and village police)
subject to the provisions of Entry 2-A of List I.

13. Communications, that is to say, roads,
bridges, ferries, and other means of
communication not specified in List I;
municipal tramways; ropeways; inland
waterways and traffic thereon subject to the
provisions of List I and List III with regard to
such waterways; vehicles other than
mechanically propelled vehicles.

17. Water, that is to say, water supplies,
irrigation and canals, drainage and
embankments, water storage and water power
subject to the provisions of Entry 56 of List I.

22. Courts of wards subject to the provisions
of Entry 34 of List I; encumbered and attached

23. Regulation of mines and mineral
development subject to the provisions of List I
with respect to regulation and development
under the control of the Union.

24. Industries subject to the provisions of
Entries 7 and 52 of List I.

26. Trade and commerce within the State
subject to the provisions of Entry 33 of List III.


27. Production, supply and distribution of
goods subject to the provisions of Entry 33 of
List III.

33. Theatres and dramatic performances;
cinemas subject to the provisions of Entry 60
of List I; sports, entertainments and

37. Elections to the Legislature of the State
subject to the provisions of any law made by

50. Taxes on mineral rights subject to any
limitations imposed by Parliament by law
relating to mineral development.

57. Taxes on vehicles, whether mechanically
propelled or not, suitable for use on roads,
including tramcars subject to the provisions of
Entry 35 of List III.”

34. Numerically, this would amount to a little over one-

fifth of the total number of entries in List II – 12 out of 66.

35. Certain entries such as Entry 12 exclude from the

State List ancient, historical monuments and records

declared by law made by Parliament to be of national

importance. Entry 12 of List II reads as under:-

“12. Libraries, museums and other similar
institutions controlled or financed by the State;

ancient and historical monuments and records

other than those declared by or under law
made by Parliament to be of national
Yet another delineation of the legislative power of the

States is made by Entries 32 and 63 of List II, which

speak of a particular subject and then give a residuary

power qua the same subject over matters not specified in

List I.

“32. Incorporation, regulation and winding up
of corporations, other than those specified in
List I, and universities; unincorporated trading,
literary, scientific, religious and other societies
and associations; co-operative societies.

63. Rates of stamp duty in respect of
documents other than those specified in the
provisions of List I with regard to rates of
stamp duty.”8

36. All the other entries of the State List give exclusive

power to the States to legislate on the subject matters

mentioned therein. If Shri Jayant Bhushan’s submission

is to be accepted, this threefold scheme contained within

List II itself would be violated. If Parliamentary legislation

Entry 32, List II is to be read with Entries 43 and 44 of List I; and Entry 63, List II is
to be read with Entry 91, List I.


were to invade an exclusive sphere of the State, and were

to prevail over State legislation made within the States’

exclusive powers, all the entries of List II would be

subjected to entries of List I, which is not the

constitutional scheme. Further, only one entry, namely,

Entry 12 of List II, specifically excepts ancient and

historical monuments and records, if Parliament declares

them, by law, to be of national importance. The argument,

therefore, that Section 21A is made by Parliament at the

national level and is of national importance and must,

therefore, prevail over State legislation made within the

exclusive subject matters of List II, would again fall foul of

the constitutional scheme, in that all the entries of List II

would then be subject to Parliamentary law, which is of

national importance. Also, Entry 30, List II cannot be read

to refer to relief of agricultural indebtedness other than

what is specified in List I, as that would be reading into

Entry 30 words that are conspicuous by their absence,

but which are found in Entries 32 and 63, List II. All this

would go to show that where the States have exclusive

legislative competence under certain entries of List II,

legislation made thereunder cannot be effaced by

legislation made under List I, which incidentally trenches

upon State legislation made under an exclusive power.

37. We have already seen how agriculture as a subject

matter is entirely and exclusively left to the States in all its

aspects, save and except evacuee property under Entry

41, List III, which is also left to the States, but

concurrently with Parliament, specifically including

agricultural land therein. Also, we must not forget that the

amendment suggested by Shri Shri Shibban Lal Saxena

to make draft Entry 34 (Entry 30 of List II), a concurrent

subject, was turned down. Any argument that has the

effect of making relief of agricultural indebtedness a

concurrent subject by which Parliamentary legislation

ousts State legislation must, therefore, also be rejected.


38. This is not to say that Parliament is helpless insofar

as relief from agricultural indebtedness to banks is

concerned. Article 249 of the Constitution enables

Parliament to legislate on the aforesaid subject in the

national interest if the Rajya Sabha declares, by a

resolution supported by not less than 2/3 rd of the

members present and voting, that it is necessary or

expedient in national interest that Parliament should do

so. Equally, under Article 252 of the Constitution, if the

legislatures of two or more States deem it desirable that

Parliament should pass an Act for regulating a matter

exclusively in the State List, this can be done by

resolutions to that effect passed by the legislatures of

such States. Also, to implement a treaty, agreement or

convention with other countries, Parliament, under Article

253 of the Constitution, has the power to legislate on an

exclusive State subject. In an emergency, Parliament

can, under Article 250, legislate on matters exclusively

reserved for the States under List II. This being the case,

we need not be unduly weighed down by Shri Bhushan’s

argument that, unless we accept his submission,

Parliament would be denuded of legislative competence

altogether to deal with the subject matter of relief against

debts due to banks from the agricultural sector.

39. The next important question is as to whether the

judgment of this Court in Yasangi Venkateswara Rao

(supra) is binding on this Bench having been delivered by

another earlier 2-Judge Bench of this Court.

40. In order to appreciate the answer to this question, it

is necessary to indicate what was held by the judgment of

the learned Single Judge of the Andhra Pradesh High

Court in State Bank of India, In re, (supra). After setting

out the Banking Regulation Act and the scope of Section

21A, Section 21A was contrasted with the A.P.

Agriculturists Relief Act, 1938, and it was held that the

purpose, operation and effect of Section 21A of the

Banking Regulation Act is not even remotely connected

with the purpose, operation and effect of the A.P.

Agriculturists Relief Act, which was held to be a special

law enacted to relieve agriculturist debtors. It was further

held that charging excessive interest was no longer part

of the A.P. Agriculturists Relief Act, and, therefore, the

spheres of the two provisions were completely different.

Coming to legislative competence, the learned Judge

went into great detail in considering several judgments of

the Federal Court, High Courts and this Court, and

ultimately held that Section 21A is not a law referable to

Entry 45, List I. The learned Judge also went on to hold

that Section 21A was arbitrary and violative of Article 14

of the Constitution.

41. By a short judgment in Yasangi Venkateswara Rao

(supra), this Court upset the elaborate judgment of the

High Court thus:

“7. We are unable to understand as to how the
High Court could come to the conclusion that
Parliament had no jurisdiction to enact Section
21-A. There can be no doubt that Section 21-


A deals with the question of the rate of interest
which can be charged by a banking company.
Entry 45 of List I of the Seventh Schedule
clearly empowers Parliament to legislate with
regard to banking. The enactment of Section
21-A was clearly within the domain of
Parliament. The said section applies to all
types of loans which are granted by a banking
company, whether to an agriculturist or a non-
agriculturist, and, therefore, reference by the
High Court to Entry 30 of List II was of no
consequence. In our opinion, the said Section
21-A had been validly enacted.”
(at page 377)

At first blush, it appears that, though cryptic, the said

paragraph does contain reasons for upsetting the High

Court judgment. But, on a closer look, it becomes clear

that there is no reasoning worth the name for so doing.

Paragraph 7 is a series of conclusions put together

without any clear reasoning in support. This is probably

because only the learned Additional Solicitor General for

the appellant appeared before the Court and argued the

case on behalf of the appellant. The respondent, though

probably served, did not appear and consequently was

not heard. It will also be noticed that, despite the fact that

the judgment of the single Judge referred to a very large

number of High Court, Federal Court, Privy Council and

Supreme Court judgments, not a single judgment is

adverted to in the cryptic paragraph 7 set out

hereinabove. Can it be said that this judgment is a

declaration of the law under Article 141 of the

Constitution, which as a matter of practice we cannot

differ from being a bench of coordinate strength?

42. This question is answered by referring to

authoritative works and judgments of this Court. In

Precedent in English Law by Cross and Harris (4th edn.),

‘ratio decidendi’ is described as follows:

“The ratio decidendi of a case is any rule of
law expressly or impliedly treated by the judge
as a necessary step in reaching his
conclusion, having regard to the line of
reasoning adopted by him, or a necessary
part of his direction to the jury.”
(at page 72)


43. In Dalbir Singh v. State of Punjab (1979) 3 SCR

1059 at 1073-1074, a dissenting judgment of A.P. Sen, J.

sets out what is the ratio decidendi of a judgment:

“According to the well-settled theory of
precedents every decision contains three
basic ingredients:

(i) findings of material facts, direct and
inferential. An inferential finding of facts is the
inference which the Judge draws from the
direct or perceptible facts;

(ii) statements of the principles of law
applicable to the legal problems disclosed by
the facts; and

(iii) judgment based on the combined effect of

(i) and (ii) above.

For the purposes of the parties themselves
and their privies, ingredient (iii) is the material
element in the decision for it determines finally
their rights and liabilities in relation to the
subject-matter of the action. It is the judgment
that estops the parties from reopening the
dispute. However, for the purpose of the
doctrine of precedents, ingredient (ii) is the
vital element in the decision. This indeed is
the ratio decidendi. [R.J. Walker M.G.

Walker: The English Legal System.

Butterworths, 1972, 3rd Edn., pp. 123-24] It is
not everything said by a judge when giving
judgment that constitutes a precedent. The

only thing in a judge’s decision binding a party
is the principle upon which the case is decided
and for this reason it is important to analyse a
decision and isolate from it the ratio decidendi.

In the leading case of Qualcast
(Wolverhampton) Ltd. v. Haynes [LR 1959 AC
7 43 : (1959) 2 All ER 38] it was laid down that
the ratio decidendi may be defined as a
statement of law applied to the legal problems
raised by the facts as found, upon which the
decision is based. The other two elements in
the decision are not precedents. The
judgment is not binding (except directly on the
parties themselves), nor are the findings of
facts. This means that even where the direct
facts of an earlier case appear to be identical
to those of the case before the court, the
judge is not bound to draw the same inference
as drawn in the earlier case.”

Similarly, this Court in Som Prakash Rekhi v. Union of

India (1981) 2 SCR 111 at 139 referred to the “laconic

discussion and limited ratio” in Subhajit Tewary v. Union

of India (1975) 3 SCR 616, a judgment of a Constitution

Bench of this Court, and was not bound by it. Krishna

Iyer, J. put it thus:

“We may first deal with Subhajit Tewary v.

Union of India (1975) 3 SCR 616, where the
question mooted was as to whether the
C.S.I.R. (Council of Scientific and Industrial
Research) was ‘State’ under Art. 12. The

C.S.I.R. is a registered society with official and
non-official members appointed by
Government and subject to some measure of
control by Government in the Ministry of
Science and Technology. The court held it was
not ‘State’ as defined in Art. 12. It is significant
that the court implicitly assented to the
proposition that if the society were really an
agency of the Government it would be ‘State’.
But on the facts and features present there
the character of agency of Government was
negatived. The rulings relied on are,
unfortunately, in the province of Art. 311 and it
is clear that a body may be ‘State’ under Part
III but not under Part XIV. Ray, C.J., rejected
the argument that merely because the Prime
Minister was the President or that the other
members were appointed and removed by
Government did not make the Society a
‘State’. With great respect, we agree that in
the absence of the other features elaborated
in Airport Authority case (1979) 3 SCC 489,
the composition of the Governing Body alone
may not be decisive. The laconic discussion
and the limited ratio in Tewary (supra) hardly
help either side here.”
Also, in Municipal Corpn. of Delhi v. Gurnam Kaur,

(1989) 1 SCC 101 at 110, this Court stated:

“11. Pronouncements of law, which are not
part of the ratio decidendi are classed as
obiter dicta and are not authoritative. With all
respect to the learned Judge who passed the
order in Jamna Das case [Writ Petitions Nos.

981-82 of 1984] and to the learned Judge who

agreed with him, we cannot concede that this
Court is bound to follow it. It was delivered
without argument, without reference to the
relevant provisions of the Act conferring
express power on the Municipal Corporation
to direct removal of encroachments from any
public place like pavements or public streets,
and without any citation of authority.
Accordingly, we do not propose to uphold the
decision of the High Court because, it seems
to us that it is wrong in principle and cannot be
justified by the terms of the relevant
provisions. A decision should be treated as
given per incuriam when it is given in
ignorance of the terms of a statute or of a rule
having the force of a statute. So far as the
order shows, no argument was addressed to
the court on the question whether or not any
direction could properly be made compelling
the Municipal Corporation to construct a stall
at the pitching site of a pavement squatter.”
(Emphasis Supplied)
Further, in State of M.P. v. Narmada Bachao Andolan,

(2011) 7 SCC 639 at 679-680, it was stated:

“65. “Incuria” literally means “carelessness”. In
practice per incuriam is taken to mean per
ignoratium. The courts have developed this
principle in relaxation of the rule of stare
decisis. Thus, the “quotable in law” is avoided
and ignored if it is rendered in ignorance of a
statute or other binding authority.
xxx xxx xxx


67. Thus, “per incuriam” are those decisions
given in ignorance or forgetfulness of some
statutory provision or authority binding on the
court concerned, or a statement of law caused
by inadvertence or conclusion that has been
arrived at without application of mind or
proceeded without any reason so that in such
a case some part of the decision or some step
in the reasoning on which it is based, is found,
on that account to be demonstrably wrong.”
It is clear, therefore, that where a matter is not argued at

all by the respondent, and the judgment is one of

reversal, it would be hazardous to state that the law can

be declared on an ex parte appraisal of the facts and the

law, as demonstrated before the Court by the appellant’s

counsel alone. That apart, where there is a detailed

judgment of the High Court dealing with several

authorities, and it is reversed in a cryptic fashion without

dealing with any of them, the per incuriam doctrine kicks

in, and the judgment loses binding force, because of the

manner in which it deals with the proposition of law in

question. Also, the ratio decidendi of a judgment is the

principle of law adopted having regard to the line of

reasoning of the Judge which alone binds in future cases.

Such principle can only be laid down after a discussion of

the relevant provisions and the case law on the subject. If

only one side is heard and a judgment is reversed,

without any line of reasoning, and certain conclusions

alone are arrived at, without any reference to any case

law, it would be difficult to hold that such a judgment

would be binding upon us and that we would have to

follow it. In the circumstances, we are of the opinion that

the judgment in Yasangi Venkateswara Rao (supra)

cannot deter us in our task of laying down the law on the


44. In view of what has been held by us, it is not

necessary for us to go into the arguments relating to

Article 14, more so in view of the fact that counsel

appearing for the Union of India and the Reserve Bank of

India are correct in stating that there is no pleading worth

the name which would rebut, on facts, the presumption of

constitutionality that attaches to Section 21A of the

Banking Regulation Act. References to RBI circulars and

the counter affidavits filed in the present writ petition again

do not take us much further, as what has to be decided is

a pure question of legislative competence.


45. We declare Section 21A of the Banking Regulation

Act to be valid as it is part of an enactment which, in pith

and substance, is relatable to Entry 45, List I of the

Seventh Schedule to the Constitution. However, insofar

as Section 21A incidentally encroaches upon the field of

relief of agricultural indebtedness, set out in Entry 30, List

II, it will not operate only in States where there is a State

Debt Relief Act which deals with the subject matter of

relief of agricultural indebtedness, where the State Debt

Relief Act covers debts due to “banks”, as defined in

those Acts. In States where the State Debt Relief Act

does not apply to banks at all, or applies only to certain

specified banks, Section 21A will, in the former situation,

apply in such States, and, in the latter situation, apply

only in respect of loans made to agriculturists where such

loans are given by banks other than the banks specified

or covered by the concerned State Debt Relief Act, as the

case may be.


(R.F. Nariman)


(Navin Sinha)
New Delhi;

February 16, 2018.


Leave a Reply

Your email address will not be published.

Copyright © 2022 SC and HC Judgments Online at MyNation

Free Legal Help, Just WhatsApp Away

MyNation HELP line

We are Not Lawyers, but No Lawyer will give you Advice like We do

Please read Group Rules – CLICK HERE, If You agree then Please Register CLICK HERE and after registration  JOIN WELCOME GROUP HERE

We handle Women Centric biased laws like False Sectioin 498A IPC, Domestic Violence(DV ACT), Divorce, Maintenance, Alimony, Child Custody, HMA 24, 125 CrPc, 307, 312, 313, 323, 354, 376, 377, 406, 420, 497, 506, 509; TEP, RTI and many more…

MyNation FoundationMyNation FoundationMyNation Foundation