Dr.

Ram Manohar Lohiya National Law University Lucknow

2018- 2019

Final Draft On

RESIDUARY POWERS OF LEGISLATION

&

THE INDIAN CONSTITUTION

Submitted to: Submitted by:

Dr. C.M Jariwala Margaret Rose

Assistant Professor (Law) Section- A

RMLNLU Enrollment

number- 150101078

Semester – VIIIth

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 ACKNOWLEDGMENT

Firstly, I would like to thank respected Dr. C.M. Jariwala for giving me such a golden
opportunity to show my skills and capability through this project. This project is the result of the
extensive ultrapure study, hard work and labour, put into to make it worth reading. It is my
pleasure to be indebted to various people, who directly or indirectly contributed in the
development of this work and who influenced my thinking, behaviour, and acts during the course
of study. Lastly, I would like to thank the almighty and my parents for their moral support and
my friends with whom I shared my day-to-day experience and received lots of
suggestions that improved my quality of work.

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 TABLE OF CONTENTS

Introduction…………………………………………………………………….(4)

Residuary power of the legislation…………………………………………….(5)

Sarkaria Commission on Residuary Powers…………………………………(11)

Conclusion…………………………………………………………………….(13)

Bibliography………………………………………………………………….(13)

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 INTRODUCTION

The distribution of powers is an essential feature of federalism. The object for which a federal
state is formed involves a division of authority between the National Government and separate
states. The Constitution of India adopts a threefold distribution of the subjects of legislative
power between the Parliament and State legislature by placing them in any one of the three Lists,
namely, Union List, State List and Concurrent List. With the advancement of society, expanding
horizons of scientific and technical language and probe into the mystery of creation, it is possible
that every imaginable head of legislation with human comprehension and within foreseeable
future could not be within the contemplation of the Constitution-makers and was therefore, not
specifically enumerated in one or the other of the three lists. Complex modern governmental
administration in a federal setup providing for distribution of legislative powers coupled with the
power of judicial review may rise such a situation that a subject of legislation may not squarely
fall in any specific entry in the tree Lists. In such a situation Parliament would have the power to
legislate on the subject in the exercise of residuary powers under Article 248 and under Article
246(1) read with Entry 97 of List I.

Article 248 vests the residuary powers in the parliament. It says that parliament has exclusive
power to make any law with respect to any matter not enumerated in the Concurrent List or the
State List. Entry 97 in the Union List also lay down that Parliament has exclusive power to make
laws with respect to any matter not mentioned in the State List or the Concurrent List including
any tax not mentioned in either of these Lists. Thus the Indian Constitution makes a departure
from the practice prevalent in U.S.A., Switzerland and Australia where residuary powers are
vested in the states. This reflects the leanings of the Constitution-makes towards a strong Centre.

Judiciary (being the interpreter of constitution) has a very important role to play in deciding the
residuary powers. It has been left to the courts to determine finally as to whether a particular
matter falls under the residuary, power or not. It may be noted, however, that since the three lists
attempt an exhaustive enumeration of all possible subjects of legislation, and courts generally
have interpreted the sphere of the powers to be enumerated in a liberal way.

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 Residuary Powers of Legislation

Residuary powers have been vested in the Centre so as to make the Centre strong. As was stated
in the Constituent Assembly by Jawaharlal Nehru, Chairman of the Union Powers Committee:

“We think that residuary powers should remain with the Centre. In view however of the
exhaustive nature of the three lists draw up by us, the residuary subjects could only relate to
matters which, while they may claim recognition in the future, are not at present identifiable and
cannot therefore be included now in the lists.”1

History of Article 248

THE GRANT of the residuary powers in the Indian federation is like a magma reservoir of a
somnolent volcano which erupts occasionally to generate more heat in the academic circles than
in the political ring. The Government of India Act, 1935 provided for division of powers
between the central legislature and the provincial legislatures by enumerating them into three
elaborate lists – the Central, Provincial and Concurrent Lists. The federal legislature and
provincial legislatures were empowered to pass laws on subjects given in their respective lists
while both of them could pass laws on any subject in the Concurrent list. However, if the federal
legislature passed a law on any matter given in the Concurrent list, a provincial legislature could
not make a law on the same subject afterwards. The residuary power, however, were not
allocated either to the Federation or to the Provinces but was under Section 105 of the
Government of India, 1935, reserved to be allocated by the Governor-General in his discretion to
the Federation or to the Provinces.2

In the Constituent Assembly, though the initial proposal was to have federal centre of
enumerated powers with residuary powers to the Provinces and States, after the decision for
partition of India, it was decided to have a strong centre and as one of the steps for that purpose
to allocate residuary powers to the Centre. This decision would have meant that there was no
need to have the Union subjects enumerated in detail in List I. It would have been sufficient if
the exclusive state powers and the concurrent powers were mentioned. The attempts to revise the

1
B. Shiva Rao, The framing of India’s Constitution – Select Documents, Vol. 4, (New Delhi: Universal Law
Publishing Co. Pvt. Ltd., 2006) p. 777.
2
Ali Mehdi, Residuary Legislative Powers in India: Retrospect and Prospects, (New Delhi: Deep & Deep
Publications, 1990) p. 02.

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drafts on this basis seems to have been given up at the insistence of Dr. Ambedkar, who
maintained that the States, which were about to join the Federation, wanted to know more about
the Federal powers than a vague description that the Federation would have a residuary power.3

So we have in the Constitution a distribution of powers similar to the one in the Government of
India Act with the difference that the residuary powers are now given to the Centre.

Article 248 r/w Entry 97 of Union List

Constitution of India has specifically vested the residuary power as an exclusive head
of power in the Union by entry 97 of List I of the Seventh Schedule and Article 248 of the
Constitution. The ad hoc allocation of residuary power by the Governor – General as in the case
of the Government of India Act, 1935 has therefore been discarded. The residuary power has
been increasingly pressed into service in connection with the resolution of conflicts of power
between the Union and the States. Since the commencement of the Constitution residuary powers
of Parliament have been exercised several times.

The scope of residuary powers is very wide. For example, under entry 3 in List III, Parliament
can legislate with respect to preventive detention in grounds mentioned therein. Further,
Parliament can legislate with respect to preventive detention under entry 9, List I, on ground
mentioned therein. But these two entries do not exhaust the entire field of preventive detention.
Parliament can legislate under its residuary power with respect to preventive detention on any
ground not mentioned in these two entries. Thus, Parliament has enacted the Conservation of
Foreign Exchange and Prevention of Smuggling Act, 1974 [COFEPOSA] providing for
preventive detention in connection with smuggling and foreign exchange racketeering. This Act
can find support from entry 36, List I (foreign exchange) and Parliament’s residuary power.

In the famous I. C. Golaknath v. State of Punjab,4 the Supreme Court had held that the power of
the Parliament to amend the Constitution was derived from Article 248 read with entry 97 of List
I and that Article 368 dealt only with the procedure for amendment. However, in view of the
24thAmendment of the Constitution and the Supreme Court’s pronouncement in Keshavanand

3
Constituent Assembly Debates, Vol. IX, p. 856.
4
AIR 1967 SC 1643.

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Bhartiv. State of Kerala,5 Article 368 should be held to include both the power and procedure for
amendment and there is no case for invoking a residuary power for constitutional amendment.

Parliament’s residuary power is not to be interpreted so expansively as to whittle down the

power of the State Legislatures. “Residuary should not be so interpreted as to destroy or belittle
State autonomy.” It has been emphasized that in a Constitution like ours “where there is a
division of legislative subjects but the residuary power is vested in Parliament, such residuary
power cannot be so expansively interpreted as to whittle down the power of the State
Legislatures”. To do so would be to affect the federal principle adversely. If there is competition
between an entry in List II and the residuary power of the Centre, the former may be given a
broad and plentiful interpretation.

Prior to Dhillon , the judicial view was that recourse to entry 97, Lit I, ought to be had only when
the impugned legislation did not fall in any of the three Lists. The argument was that if the
impugned legislation fell under any entry in List II, residuary power could not be invoked.
Further, if the impugned legislation fell under an entry in List I or List III, there recourse to the
residuary would be unnecessary.

It was said that entry 97, List I, was not the first step in the discussion of such problems, but the
last resort. But Dhillon seems to have changed this position. The Supreme Court has ruled in
this case by majority that once it is found that the subject-matter of the impugned legislation does
not fall under any entry in List II or III then Parliament can take recourse to the residuary power,
or it can be combined with any entry in List I.

In Amratlal Prajivandas, following Dhillon , the Supreme Court has observed that the test to
determine the legislative competence of Parliament is this: whenever the competence of
Parliament to enact a specific statue is questioned one must look to the entries in List II. If the
said statue is not relatable to any of entries in List II, no further inquiry is necessary as
Parliament will be competent to enact the said statue either by virtue of the entries in List I and
List III, or by virtue of the residuary power contained in Article 248 read with entry 97, List I.

5
AIR 1973 SC 1461.

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Residuary Taxing Power

The maximum use of the residuary powers has been made in the field of taxing powers.
Since taxing powers have been specifically mentioned in the Lists such a power cannot be
inferred as ancillary or incidental to any other entry relating to legislation. Again, taxing powers
have been given only in the exclusive fields and there is no taxing power in the concurrent field.
These factors seem to have made the resort to the residuary power for sustaining the validity of
taxing measures. The chief use of residuary power used by Parliament in taxing fields is
discussed below.

Gift Tax

The competence of the Parliament to enact the Gift Tax Act, 1958 (18 of 1958) for levying a tax
on gifts of agricultural land was sustained by the Kerala6 and Madras7 High Courts, on the basis
of the residuary powers. Both these High Courts held that the power to impose a tax on gift of
agricultural land could not be held to be incidental to the power to legislate with respect to land
under entry 18 of List II. Nor could that power be comprehended within entry 47 of List II
relating to duties in respect of succession to agricultural land. In Shyam Sunder v. Gift Tax
Officer on a similar reasoning, the Allahabad High Court held that a tax on land and buildings
was distinctly different from a tax on gift of land, and that legislation in respect of a tax on gift of
land and buildings would not fall under entry 49 of List II, namely, tax on land and buildings.
The Gift Tax Act was validly passed by Parliament under article 248 read with entry 97 of List I.

These decisions of the High Courts were approved by the Supreme Court in Second Gift Tax
Officer, Mangalore v. D. H. Nazareth. The Supreme Court had held that the Gift Tax Act was
enacted by Parliament and no Entry in the Union List and State List mentions such a tax.
Therefore, Parliament purported to use its powers derived from Entry 97 of the Union List read
with Article 248 of the Constitution. There being no other entry which covers the gift tax, the
residuary powers of Parliament were exercised to enact the law.

6
M. T. Joseph v. Gift Tax Officer, AIR 1962 Ker 97.
7
Dandapani v. Additional Gift Tax Officer, AIR 1963 Mad 419.

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Sugarcane Cess

The residuary powers have been pressed into service even for sustaining, though indirectly, the
irregular exercise of taxing power by the States. In Diamond Sugar Mills Limited v. State of
U.P.8, the Supreme Court held that the premise of a factory was not a “local area” within the
meaning of entry 52 of List II. The Uttar Pradesh Sugarcane Cess Act, 1956 which had levied
cess on the entry of cane into the premises of a factory for use, consumption or sale therein on
the basis that the premises of a factory was a ‘local area’ was therefore struck down. On the basis
of this decision, the Madhya Pradesh High Court struck down the Madhya Pradesh Sugarcane
Regulation of Supply and Purchase Act, 1958 (No.1 of 1959) which had levied a similar cess.
The Central Act, the Sugarcane Cess (Validation Act) 1961 (No.38 of 1961) was passed which
by section 3 validated levy of a cess on sugarcane under 10 Acts in 7 States including the one
under the Madhya Pradesh Act.

In Jaora Sugar Mills v. State of M.P.9, the validity of the central legislation was questioned.
Gajendragadker C. J., delivering the judgment of the Supreme Court held that section 3 of the
Central Act did not merely validate the invalid State Acts, because it would not have been
competent for Parliament to confer jurisdiction on State Legislatures in that way, but had
included all the States and Notifications in the Central Act at all material times by virtue of
section 3. Parliament had the power to levy the cess as had been levied in the invalid State Acts,
under Article 248 read with entry 97 of the List I.

This case shows that the Union can always, if it is so disposed, go to the rescue of the State to
sustain invalid State legislation by invoking the residuary powers. this really adds a new
dimension to co-operative federalism.

Expenditure Tax

The Andhra Pradesh High Court upheld the validity of Expenditure Tax Act, 1957 as
expenditure tax which was not specifically provided for in any of the entries in List II or List III,
was within the ambit or scope of entry 97 of List I.10 So long as it was a tax on expenditure, the

8
AIR 1960 SC 652.
9
AIR 1966 SC 416.
10
Azam Jah v. Expenditure Tax Officer, AIR 1970 AP 86.

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mere fact that in furtherance of the legislative intent and object, the expenditure on which the tax
was sought to be levied was not necessarily confined to the expenditure actually incurred by the
assesses himself (in this case it had included the expenditure of his wife) did not render it other
than an expenditure tax. On appeal, the Supreme Court upheld the validity of the Expenditure
Tax Act, 1957 on the ground that it did not fall within entry 62 List II, but under the residuary
powers.11

Wealth Tax

There was a conflict of decisions in various High Courts regarding the validity of the Wealth Tax
Act, 1957. In UOI v. H. S. Dhillon12, a Bench of seven Judges of the Supreme Court decided
questions of far-reaching importance as to the taxing powers of Parliament and the State
Legislatures. The question for determination was, whether Section 24 of the Finance Act, 1969
which amended the provisions of the Wealth Tax Act, 1957, so as to include the capital value of
agricultural land for computing the net wealth, was within the legislative competence of
Parliament. By a majority of 4 to 3 it was held that Parliament was competent to enact Section
24.

The legislative power conferred by Article 248, read with entry 97 of List I has been relied upon
by the Courts to uphold the validity of following laws made by the Parliament: –

A tax on building contracts, even though no ‘sale’ involved therein,

A tax on loan,

Consumer Protection Act, 1986,

Emblems and Names (Prevention of Improper Use) Act, 1950,

Armed Forces (Special Powers) Act, 1958, etc.

11
Azam Jah v. Expenditure Tax Officer, AIR 1972 SC 2319.
12
AIR 1972 SC 1061.

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Residuary Power & Colorable Legislation

The presence of residuary power has sometimes refuted arguments based on colorable
legislation. Thus it was held that Parliament had under the residuary powers the power to
legislate in respect of compulsory deposits , to order opinion poll in Goa, levy a sugarcane cess
and thereby to validate the irregular levy by the State. An argument that Parliament tried to do
indirectly what it could not do directly was not accepted as the competence of the Parliament was
sustainable under the residuary power.

Residuary Power around the Globe

The distribution of legislative powers between the Union and the States is one of the
fundamental characteristics of a Federal Constitution. The federation under the American
Constitution has got only enumerated powers, while the residue is vested in the States. The Tenth
Amendment provides – “The powers not delegated to the United States by the Constitution, nor
prohibited by it to the States, are reserved to the States respectively or to the people.” Australia
adopted the American plan of vesting the residuary power in the State legislature under Section
107 of the Australian Constitution.

The genesis of residual provisions in Canada may be traced back to the British North
America Act, 1867, which gave the residuary powers to the Dominion Parliament. Section 91 of
that Act provides that it shall be lawful for the Parliament of Canada to make laws “in relation to
all Matters not coming within the Classes of Subjects of this Act assigned exclusively to the
Legislatures of the Provinces”.

Sarkaria Commission on Residuary Powers

In past, several states have demanded that the residuary powers, including those of taxation,
should be vested in the States. In defence of its decision to transfer the residuary powers to the
Concurrent List rather than to the States List, the Centre pointed to the strong unitary bias of the
country’s federal structure.

The Sarkaria Commission on Centre-State Relations, which submitted its report in 1988, had
also rejected the suggestion that the residuary powers should be vested in the States, even though
it endorsed the Supreme Court’s interpretation that these powers cannot be so expansively

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interpreted as to whittle down the power of the State legislatures. The Commission, however,
backed the suggestion to transfer Entry 97 from the Union List to the Concurrent List.

The Sarkaria Commission recommended that the residuary power of legislation in regard to
taxation remain with Parliament because, it said, the Constitution-makers did not include any
entry relating to taxation in the Concurrent List so as to avoid Union-State frictions, double
taxation and frustrating litigation. The Commission said that the power to tax might be used not
only to raise resources but also to regulate economic activity, and warned that there might be
situations in which a State, in the garb of introducing a new subject of taxation, may legislate in a
manner prejudicial to national interest. But it justified the transfer of other residuary powers to
the Concurrent List because, it felt, the exercise of such power by the States would be subject to
the rules of Union supremacy that have been built into the scheme of the Constitution,
particularly Articles 246 and 254.

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 Conclusion
The residuary powers which were supposed to have very limited scope in view of the elaborate
enumeration of the topics of legislation in the three Legislative Lists in the Constitution have
turned out to be not so limited. Particularly, in the field of taxation, the resort to residuary powers
to justify wealth, gift, expenditure, etc. taxes shows that it has added a new dimension to the
Union power. Since the important decision of the Supreme Court in UOI v. H. S. Dhillon, a new
approach in the constitutional interpretation of the legislative entries has been opened.

Hereafter there is no need to justify the exercise of Union power on the basis of one or more
entries in the Union List, all that is enough is to show that the power in question does not belong
to the State. This logical way of approach to the entries has really rendered superfluous the
detailed enumeration of powers in List I though it may still serve some purpose in showing the
scope of Union’s residuary powers and for determination of the scope of the specifically
enumerated powers in the state and concurrent fields.

Bibliography

Books

 Basu, D.D. Introduction to the Constitution of India, 21st edition. LexisNexis

Butterworth.

 Jain, M.P. Indian Constitutional Law. 7th ed. 2014.

 Rao, B. Shiva. The Framing of India’s Constitution, Vol. II.

 Shukla, V.N. Constitution of India. Revised by Mahendra P. Singh; 10th Edition, Eastern
Book Company.

Websites
 www.legalservicesindia.com

 www.indiankanoon.com

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