LL.B.

(3 Years) – Ist Semester

Paper V: Constitutional Law
Unit IV– Relations between the Union and the State

1. Introduction
 Definition of Centre-State Relations
 Importance in a federal system
 Brief history of Centre-State Relations in India
2. Constitutional Framework
 Overview of constitutional provisions related to Centre-State Relations
 Distribution of legislative powers between the Centre and States (Union List,
State List, Concurrent List)
 Role of the President and Governors in maintaining Centre-State Relations
3. Administrative Relations
 Mechanisms of administrative coordination between Centre and States
 Role of All India Services
 Appointment of State Governors and their role in Centre-State Relations
4. Financial Relations
 Distribution of financial resources between Centre and States
 Role of the Finance Commission
 GST and its impact on Centre-State financial relations
5. Judicial Pronouncements on Centre-State Relations
 Key Supreme Court judgments affecting Centre-State Relations
 Impact of judicial interventions on the balance of power
6. Issues and Challenges
 Disputes in the implementation of laws under Concurrent List
 Centre's role in State matters: a point of contention
 Financial dependence of States on the Centre
7. Case Studies
 Historical examples of Centre-State conflicts and resolutions
  Analysis of recent issues in Centre-State Relations
8. Role of Inter-State Councils and Zonal Councils
 Purpose and functioning of Inter-State Councils
 Contribution of Zonal Councils in promoting cooperation
9. Comparative Analysis
 Comparison of Centre-State Relations in India with other federal countries
 Learning from global practices
10. Way Forward
 Recommendations for strengthening Centre-State Relations
 Role of cooperative federalism in modern governance
11. Conclusion
 Summary of key points discussed
 Final thoughts on the evolution of Centre-State Relations in India

Introduction
Centre-State Relations, are an essential aspect of India's federal structure. This topic not only
holds constitutional significance but also mirrors the cooperative and sometimes contentious
relationship between the central authority and state governments in India.
This concept encapsulates the distribution of power, responsibilities, and resources between
the central government and the state governments. In a country as diverse as India,
understanding this relationship is crucial for grasping how governance and administration
function at different levels.
Definition and Importance in Federal Systems
Centre-State Relations in the broadest sense, refers to the distribution of power, responsibilities,
and resources between the central government and the various state governments. This
relationship is fundamental in a federal system like India's, where governance is shared
between these two levels.
The concept of federalism in India is unique. Unlike the rigid federal structures of countries
like the USA, India's federalism is often termed as 'quasi-federal,' a term coined by the eminent
constitutional expert K.C. Wheare. This structure provides a mix of strong central governance
and state autonomy, a necessity in a diverse country like India.
Historical Context and Evolution
The historical evolution of Centre-State Relations in India is a fascinating journey. Post-
independence, the Constitution of India was designed to establish a strong central government,
essential for maintaining unity in a nation brimming with diverse cultures, languages, and
traditions. However, as India progressed, this relationship evolved, reflecting the changing
political, economic, and social landscapes. The rise of regional parties and growing demands
for state autonomy have significantly reshaped this dynamic.
The Unique Nature of Indian Federalism
India's federalism is often described as 'quasi-federal,' a term popularized by constitutional
expert K.C. Wheare. This characterization highlights the blend of a strong central authority
with state autonomy, a necessary arrangement for governing such a diverse nation.
Ancient Indian Governance and Dharmic Law
Reflecting on India's ancient governance principles, Dharmic Law offered a unique
perspective. It emphasized Dharma (righteous duty), advocating for a ruler's responsibility to
uphold justice and righteousness. This ancient wisdom, though contextually different, shares
underlying principles with modern federalism, like the balance of power and the duty towards
citizens.

Constitutional Framework of Centre-State Relations

Overview of Constitutional Provisions
The Constitution of India meticulously outlines the distribution of powers and functions
between the Centre and the States. This framework is the bedrock of Centre-State Relations.

Distribution of Legislative Powers

Key to this relationship is the division of legislative powers, categorized into three lists:
 Union List (Article 246, Seventh Schedule): It includes subjects like defense, foreign
affairs, and atomic energy, where only the central government has the exclusive power
to legislate.
 State List: This encompasses areas like public order, health, and agriculture, where
states have the legislative authority.
 Concurrent List: Both the Centre and states can legislate on these subjects, including
education and marriage laws. In case of a conflict, Central law prevails (Article 254).
Principles governing the interpretation of three lists.
The interpretation of the three lists—Union List, State List, and Concurrent List—found in the
Seventh Schedule of the Indian Constitution, is governed by several key principles:
1. Mutual Exclusivity Principle: Generally, the Union and State Lists are mutually
exclusive. The subjects listed under the Union List are for the central government to
legislate upon, while those under the State List are for the state governments. This clear
demarcation helps in maintaining a division of powers.
2. Doctrine of Pith and Substance: This doctrine comes into play when a law enacted by
the Centre or a State seemingly encroaches upon the subject matter of the other's
domain. The courts look at the 'pith and substance', or the true nature and character of
the legislation, to determine the list it falls under. If the law, in its essence, relates to a
subject within the competence of the legislature that enacted it, then it is valid even
though it might incidentally tread into the other's domain.
 State of Bombay v. F.N. Balsara (1951): This case involved the Bombay
Prohibition Act, 1949. The Supreme Court applied the doctrine of pith and
substance to determine that the Act, although encroaching upon the field of
medicine (a Union subject), was essentially a legislation on a State subject
(public health and morality) and therefore valid.
3. Doctrine of Colorable Legislation: This principle is applied to prevent misuse of
legislative powers. It means that a legislature cannot do indirectly what it is not
permitted to do directly. If a law is found to be an attempt to transgress constitutional
boundaries under the guise of something within a legislature’s competence, it may be
declared invalid.
K.C. Gajapati Narayan Deo v. State of Orissa (1953): This case examined
the Orissa Agricultural Income Tax (Amendment) Act, 1950. The court ruled
that the Act, while seemingly a tax law (a state subject), was in substance a law
confiscating estates, thus a colorable legislation and invalid.
4. Occupied Field Principle: When the Union government has legislated
comprehensively on a subject in the Concurrent List, the field is considered to be
occupied. A State cannot legislate on it, unless it obtains the President's assent for its
law, and even then, the State law can only prevail in that state.
Zaverbhai Amaidas v. State of Bombay (1954): In this case, the Supreme
Court held that a Bombay law, which was inconsistent with a Union law on the
same subject in the Concurrent List, was invalid. The Union law occupied the
field, and hence, the state law was inoperative.
5. Harmonious Construction Principle: This principle is used when there is an apparent
conflict between Union and State laws. The courts aim to interpret the Constitution in
a manner that allows both sets of laws to be enforced without encroaching upon each
other's domain, thus maintaining a balance in the federal structure.
M. Karunanidhi v. Union of India (1979): This case involved the
interpretation of the Prevention of Corruption Act, a central law, and a Tamil
Nadu state law. The Supreme Court emphasized the need for harmonious
construction, allowing both laws to operate without encroaching on each other.
6. Doctrine of Repugnancy (Article 254): This applies to laws made on subjects in the
Concurrent List. If there is a conflict between Union and State laws, the Union law
prevails over the State law. If a State law, that is in conflict with a Union law, has
received the President's assent, it can prevail in that state, but the Parliament can
subsequently enact a law to override it.
Deep Chand v. State of Uttar Pradesh (1959): This case dealt with the
repugnancy between a central law and a state law. The Supreme Court held that
the state law, which was inconsistent with the central law on a subject in the
Concurrent List, was void due to repugnancy.
These principles ensure a balanced and nuanced interpretation of the Lists, maintaining the
federal structure and preventing legislative conflicts. The Supreme Court of India plays a
critical role in applying these principles and resolving disputes arising from legislative
conflicts.

Landmark Cases: In-Depth

S.R. Bommai vs Union of India (1994)
Facts:
S.R. Bommai vs Union of India is one of the most significant cases in the history of Indian
federalism. The case arose in the context of multiple instances where State governments were
dismissed and President's Rule was imposed under Article 356 of the Constitution. The central
issue was whether the power of the President to dismiss State governments was subject to
judicial review.
Core Issues:
 The primary issue was the constitutionality of imposing President's Rule in states and
the extent of the President's discretion in this matter.
 Another critical issue was whether the satisfaction of the President under Article 356
was beyond judicial scrutiny.
 The case also questioned the validity and appropriateness of the grounds on which
several state governments were dismissed during that period.
Final Verdict:
 The Supreme Court, in a landmark judgment, held that the power of the President to
impose President's Rule is not absolute and is subject to judicial review.
 The court declared that the majority claimed by any state government should be tested
on the floor of the Assembly and not subjectively decided by the Governor.
 The Court also laid down guidelines for the imposition of President's Rule to prevent
its misuse. If the court finds the imposition of President's Rule to be mala fide or based
on irrelevant grounds, it can be struck down.
 This judgment significantly curtailed the arbitrary use of Article 356 and upheld the
federal structure of the Constitution.
This case is a cornerstone in Indian constitutional law, reinforcing the principle of federalism
and the balance of power between the Centre and States.
State of Rajasthan vs Union of India (1977)
Facts:
This case arose during a period of political turmoil in India, following the declaration of a
national emergency in 1975. The State of Rajasthan, along with a few other states, challenged
the central government's decision to dissolve the state legislative assemblies and impose
President's Rule.
Core Issues:
 The central issue was the constitutionality of the central government's decision to
dissolve the state assemblies and impose President's Rule.
 The case also revolved around the question of the extent of the Centre's power over
State governments under the Constitution and the limits of such powers.
Final Verdict:
 The Supreme Court upheld the constitutionality of the imposition of President's Rule in
Rajasthan and other states. The Court found that there was no mala fide exercise of
power by the Centre.
 However, the judgment was significant in emphasizing the importance of federal
principles. The Court remarked that although the Constitution conferred certain powers
on the Centre over the States, these needed to be exercised with caution and within the
bounds of constitutionalism.
 The Court recognized the need for cooperation and respect between the Centre and
States, underscoring the essence of federalism.
This judgment played a crucial role in defining the relationship between the central and state
governments, particularly in times of political crisis, and emphasized the importance of
adhering to constitutional norms and federal principles.
Union of India vs Mohit Minerals Pvt. Ltd. (2018)
Facts:
This case involved the interpretation of the Goods and Services Tax (GST) laws, specifically
focusing on the Integrated Goods and Services Tax (IGST) on ocean freight services. Mohit
Minerals Pvt. Ltd. challenged the levy of IGST on ocean freight services as being
unconstitutional.
Core Issues:
 The primary issue was whether the levy of IGST on ocean freight services under the
GST regime was constitutionally valid.
 A key question was whether such a levy resulted in double taxation, as IGST was
already being paid on the import of goods, and the additional levy on ocean freight was
seen as an extra financial burden on the importer.
 The case also delved into the interpretation of the GST laws and their alignment with
constitutional principles, particularly regarding taxation powers.
Final Verdict:
 The Gujarat High Court, in its decision, held that the levy of IGST on ocean freight
services for the transportation of goods in a vessel was unconstitutional.
 The Court observed that such a levy amounted to double taxation, as the cost of freight
was already included in the value of the imported goods on which IGST was being paid.
  The judgment emphasized that the GST regime should avoid double taxation and
adhere to the constitutional framework governing taxation.
This case is significant as it dealt with the interpretation of the newly implemented GST laws,
ensuring that the tax regime remains fair, non-discriminatory, and in line with constitutional
mandates.
State of Bombay v. F.N. Balsara (1951)
Facts:
The case revolved around the Bombay Prohibition Act, 1949, which sought to impose a total
prohibition on the manufacture, sale, and consumption of liquor in the State of Bombay (now
Maharashtra and Gujarat). F.N. Balsara challenged this Act on various grounds, including that
it encroached upon the subjects under the Union List, particularly concerning medicinal and
toilet preparations containing alcohol.
Core Issues:
 The constitutionality of the Bombay Prohibition Act, 1949, particularly whether it
infringed upon the powers of the Central Government under the Union List.
 Whether the Act was overreaching in its provisions, especially in restricting the
possession, use, and consumption of alcohol for medicinal and toilet purposes.
Final Verdict:
 The Supreme Court, applying the doctrine of pith and substance, upheld the validity of
the Act. It was found that the primary objective or substance of the Act was to
implement prohibition, a subject under the State List.
 However, the Court struck down certain sections of the Act that overly restricted the
possession, use, and consumption of alcohol for medicinal and toilet purposes. These
provisions were deemed to be encroaching upon the Union List.
 This case is significant as it demonstrated the application of the doctrine of pith and
substance in resolving conflicts between Union and State legislative powers,
reinforcing federal principles.
This judgment played a pivotal role in delineating the extent to which state legislation could
go, particularly in areas overlapping with the Union List, while respecting the federal structure
of the Indian Constitution.
K.C. Gajapati Narayan Deo v. State of Orissa (1953)
Facts:
This case arose from the Orissa Estates Abolition Act, 1951. The Act aimed at the abolition of
Zamindari and other similar land tenure systems in the State of Orissa. K.C. Gajapati Narayan
Deo, a zamindar affected by the Act, challenged its constitutionality.
Core Issues:
  The primary issue was whether the Orissa Estates Abolition Act, ostensibly passed to
reform land tenure, was a colorable exercise of the state's legislative power.
 The case questioned whether the Act, under the guise of land reform (a state subject),
was actually an attempt to confiscate estates without adequate compensation, thus
violating constitutional rights.
Final Verdict:
 The Supreme Court of India held that the Act was not a colorable legislation. The Court
stated that if the constitutionality of a statute is challenged on the ground that it infringes
fundamental rights, the real question to be decided is whether the law in question is in
pith and substance a law on the subject falling within the competence of the legislature.
 The Court found that the Act genuinely aimed at agrarian reform, a legitimate objective
under the State List, and did not merely seek to confiscate property under the guise of
land reform.
 This case is significant for establishing the doctrine of colorable legislation in Indian
constitutional law, reinforcing the principle that the legislature cannot do indirectly
what it is not permitted to do directly.
The judgment in K.C. Gajapati Narayan Deo v. State of Orissa reinforced the integrity of
legislative powers under the Constitution and ensured that state legislatures could not overstep
their bounds under the pretext of legislative competence.
Zaverbhai Amaidas v. State of Bombay (1954)
Facts:
This case involved a conflict between a law made by the State of Bombay (now Maharashtra
and Gujarat) and a law made by the Parliament of India. The State of Bombay amended the
Essential Supplies (Temporary Powers) Act, 1946, which was a central law. The amendment
made by the state was in conflict with a subsequent law enacted by the Parliament, the Essential
Commodities Act, 1955.
Core Issues:
 The primary issue was whether the amendment made by the State of Bombay was valid
in light of the subsequent law passed by the Parliament.
 The case revolved around the principle of 'occupied field' – whether the Parliament's
legislation on the same subject rendered the state's amendment inoperative.
Final Verdict:
 The Supreme Court held that the state amendment could not prevail as the field was
already 'occupied' by the central law. When the Parliament enacted a law covering the
same subject, the state law became inoperative to the extent of the inconsistency.
 The Court stated that when both Parliament and a State Legislature legislate within their
respective fields of legislation (Union List for Parliament and State List for State
 Legislatures), but the subject matter of the State legislation falls within the ambit of the
Union legislation, the State legislation will be void.
 This judgment is significant for affirming the 'occupied field' principle in the context of
Indian federalism, highlighting the supremacy of Union legislation in areas of
concurrent jurisdiction when there is a direct conflict.
Zaverbhai Amaidas v. State of Bombay serves as a key precedent in Indian constitutional law
for understanding the dynamics of legislative powers between the Centre and the States,
especially in matters of concurrent jurisdiction.
M. Karunanidhi v. Union of India (1979)
Facts:
This case arose in the context of allegations of corruption against M. Karunanidhi, the then
Chief Minister of Tamil Nadu. The central government had enacted the Criminal Law
Amendment Act, 1978, which included provisions for the appointment of Special Courts to try
certain classes of offenses. Karunanidhi challenged the constitutional validity of this Act,
arguing that it infringed upon the powers of State Governments.
Core Issues:
 The primary issue was whether the Criminal Law Amendment Act, 1978, which
provided for the constitution of Special Courts, was constitutionally valid.
 Another significant issue was the question of whether this Act encroached upon the
state's powers under the federal structure of the Constitution.
Final Verdict:
 The Supreme Court upheld the validity of the Criminal Law Amendment Act. The Court
applied the principle of harmonious construction to interpret the provisions of the Act
in a way that did not encroach upon the powers of the State Governments.
 The Court held that the Act was a valid piece of legislation under the Union List,
specifically under entries related to the administration of justice and the establishment
of additional courts.
 The judgment is significant for its application of the harmonious construction principle,
ensuring that both central and state laws can operate without overstepping their
constitutional boundaries.
M. Karunanidhi v. Union of India is an important case in understanding how the judiciary
navigates the complexities of Centre-State relations, especially in matters concerning the
administration of justice and legislative competence.
Deep Chand v. State of Uttar Pradesh (1959)
Facts:
The case of Deep Chand v. State of Uttar Pradesh revolved around the conflict between a
Central law and a State law. The Uttar Pradesh Transport Service (Development) Act, 1955,
nationalized passenger road transport services in certain areas of the state. This state Act was
in conflict with the Road Transport Corporation Act, 1950, a Central law passed earlier.
Core Issues:
 The core issue was whether the UP Act, which sought to nationalize road transport in
certain areas, was valid given the pre-existing Central Act on the same subject.
 The case hinged on the doctrine of repugnancy, as outlined in Article 254 of the
Constitution, which deals with inconsistencies between laws made by Parliament and
laws made by the State Legislatures.
Final Verdict:
 The Supreme Court held that the UP Act was invalid to the extent of repugnancy with
the Central Act. Since the Central Act had already covered the field of road transport,
the State Act could not operate in the same field.
 The Court applied Article 254, concluding that when there is a direct conflict between
a Central and a State law relating to a subject in the Concurrent List, and both laws are
irreconcilable, the Central law prevails over the State law.
 The judgment established a crucial precedent for interpreting and resolving conflicts
between Central and State laws, especially in matters listed in the Concurrent List.
Deep Chand v. State of Uttar Pradesh is a landmark case that underscored the supremacy of
Central legislation in the event of a conflict with State legislation on subjects within the
Concurrent List, emphasizing the principle of federal supremacy within the framework of
cooperative federalism.
Additional Landmark Cases
1. State of West Bengal v. Committee for Protection of Democratic Rights (2010):
This case affirmed the power of the Central Bureau of Investigation (CBI) to investigate
within a state without the state’s consent, as long as the High Court or Supreme Court
orders it. This is significant for Centre-State relations in terms of law and order and
investigation jurisdiction.
Constitutional Provisions related to Centre State Legislative Relations
Articles 245 to 246 of the Indian Constitution play a crucial role in delineating the legislative
powers of the Union and the States. Here's a detailed look at each of these articles:
Article 245: Extent of laws made by Parliament and by the Legislatures of States
 Clause 1: This clause states that Parliament may make laws for the whole or any part
of the territory of India, and the legislature of a state may make laws for the whole or
any part of the state.
 Clause 2: It clarifies that no law made by Parliament shall be deemed to be invalid on
the ground that it would have extraterritorial operation, i.e., it applies outside the
territory of India.
  Significance: Article 245 establishes the territorial jurisdiction of the legislative powers
of Parliament and the state legislatures. It ensures that while Parliament has the
authority to make laws for the entire country or specific parts of it, state legislatures are
confined to their respective states. The article also acknowledges the possibility of
Parliament enacting laws that have implications beyond India's geographical
boundaries.
Article 246: Subject-matter of laws made by Parliament and by the Legislatures of States
 Clause 1: Grants exclusive power to Parliament to make laws with respect to any of
the matters enumerated in the Union List (List I in the Seventh Schedule).
 Clause 2: Empowers the legislatures of states to make laws for such state or any part
thereof with respect to any of the matters enumerated in the State List (List II in the
Seventh Schedule).
 Clause 3: Confirms that both Parliament and the legislatures of states have the power
to make laws with respect to any of the matters enumerated in the Concurrent List (List
III in the Seventh Schedule). However, in case of a conflict, the law made by Parliament
prevails.
 Significance: Article 246 is pivotal in establishing the scheme of distribution of
legislative powers between the Union and the States. It clearly demarcates the areas in
which the Union and States can legislate through the three Lists in the Seventh
Schedule. The Union List contains subjects of national importance (like defense,
foreign affairs, etc.), the State List includes matters of regional and local importance
(like police, public health, etc.), and the Concurrent List comprises subjects where both
the Centre and States can legislate (like education, marriage, etc.).
These articles form the constitutional basis for the federal structure of governance in India,
ensuring a clear division and balance of legislative powers between the Centre and the States.
Article 247: Power of Parliament to provide for the establishment of certain additional
courts
 This article gives Parliament the power to establish additional courts for dealing with
laws made by Parliament or laws in force within any part of the territory of India, not
restricted to federal laws.
 Significance: It allows for the creation of special tribunals or courts to ensure effective
adjudication of disputes or cases under central laws.
Article 248: Residuary powers of legislation
 Clause 1: Confirms that Parliament has exclusive power to make any law with respect
to any matter not enumerated in the Concurrent List or State List.
 Clause 2: States that such power shall include the power of making any law imposing
a tax not mentioned in either of those Lists.
  Significance: Article 248 vests the residuary legislative powers in Parliament, covering
any subject not found in the State List or Concurrent List, including new subjects that
may arise in the future.
Article 249: Power of Parliament to legislate with respect to a matter in the State List in
the national interest
 Allows Parliament to legislate on subjects in the State List if the Rajya Sabha passes a
resolution, supported by not less than two-thirds of the members present and voting,
declaring that it is necessary in the national interest.
 Significance: This provision is an exception to the normal distribution of legislative
powers, enabling the Centre to legislate on state subjects in certain exceptional
circumstances.
Article 250: Power of Parliament to legislate with respect to any matter in the State List
if a Proclamation of Emergency is in operation
 Permits Parliament to legislate on matters in the State List during a Proclamation of
Emergency.
 Significance: This article empowers the Centre with extensive legislative capabilities
during an emergency, overriding the normal distribution of powers.
Article 251: Inconsistency between laws made by Parliament under articles 249 and 250
and laws made by the legislatures of States
 States that any law made by Parliament, which Parliament would not ordinarily have
the power to enact, shall prevail over a state law, in case of inconsistencies.
 Significance: It ensures the supremacy of Union laws made under Articles 249 and 250
during the specific circumstances mentioned therein.
Article 252: Power of Parliament to legislate for two or more States by consent and
adoption of such legislation by any other State
 Allows Parliament to legislate on a state subject if two or more states consent and
request Parliament to do so. Other states may adopt such legislation later.
 Significance: This provision facilitates uniform legislation on certain subjects across
multiple states, fostering cooperative federalism.
Article 253: Legislation for giving effect to international agreements
 Grants Parliament the power to make any law for the whole or any part of the territory
of India for implementing any treaty, agreement, or convention with any other country
or countries.
 Significance: This article overrides the distribution of legislative powers and allows the
central government to fulfill international obligations.
Article 254: Inconsistency between laws made by Parliament and laws made by the
legislatures of States
  Establishes the doctrine of repugnancy, where in case of a conflict between a Union and
a State law, the Union law prevails. If a State law, reserved for the President's
consideration and receiving his assent, conflicts with a subsequent Union law, the State
law will be void to the extent of the conflict.
 Significance: It reinforces the supremacy of Union legislation in case of overlap or
conflict with State laws.
Article 255: Requirements as to recommendations and previous sanctions to be regarded
as matters of procedure only
 Deals with the procedural aspects of legislative bills and states that any requirement for
the President's recommendation or sanction should be considered a matter of procedure
only.
 Significance: This article ensures that certain procedural lapses in the passage of bills
do not necessarily invalidate the law, provided the President subsequently gives assent.
Article 256: Obligation of States and the Union
 Mandates that the executive power of every State shall be so exercised as to ensure
compliance with the laws made by Parliament and any existing laws which apply in
that State.
 Significance: It reinforces the obligation of state governments to ensure the
implementation of Union laws.
Article 257: Control of the Union over States in certain cases
 Clause 1: Empowers the Union to give directions to a State as may appear necessary
for the purpose of enforcing laws made by Parliament or any existing laws which apply
in that state.
 Clause 2-4: Detail specific scenarios and powers related to the Union's control over
states, including matters of construction and maintenance of means of communication
declared to be of national or military importance, protection of railways, and more.
 Significance: These provisions emphasize the Union's overarching role in ensuring that
state governments comply with central laws, especially in matters of national
importance. Article 257 provides the Centre with the authority to direct states in certain
specific scenarios, underlining the central government's role in safeguarding national
interests and maintaining essential services.
To summarize, Articles 245 to 257 of the Indian Constitution establish a comprehensive
framework for the division of legislative and executive powers between the Union and the
States. They balance the need for a strong central government to maintain national integrity
and unity with the need for states to exercise autonomy in their respective jurisdictions. These
articles collectively ensure that the Indian federal system functions effectively, accommodating
both the diversity of the states and the overarching national interests.
This detailed overview of Articles 245 to 257 highlights the intricate nature of Centre-State
relations in India, demonstrating the constitutional mechanisms in place to navigate the
complexities of federal governance.
Role of the President and Governors
The President of India and State Governors play a pivotal role in maintaining the balance
between centre state relations. Governors, appointed by the President, act as a link between the
Centre and States. However, their role, particularly during political crises in states, has often
been a subject of debate and judicial scrutiny.
Here are key aspects of the Governor's role in Centre-State relations:
Constitutional Position and Appointment
 Appointment: Governors are appointed by the President for a term of five years, but
they hold office at the pleasure of the President, which means they can be removed by
the President at any time.
 Article 155 and 156: These articles of the Constitution deal with the appointment and
tenure of Governors.
Legislative Functions
 Bill Assent: The Governor has the power to give assent to bills passed by the State
Legislature, withhold assent, return the bill (if it is not a money bill) with a request for
reconsideration, or reserve the bill for the President's consideration.
 Summoning Legislature: As per Articles 174 and 175, the Governor summons,
prorogues, and dissolves the State Legislature and can address and send messages to
the House or Houses.
Discretionary Powers
 Article 163: States that the Governor can exercise their functions with the aid and
advice of the Council of Ministers with the Chief Minister as the head, except in
situations where they are by or under the Constitution required to exercise their
functions or any of them in their discretion.
 Discretionary Powers: These include matters like the appointment of the Chief
Minister, especially in a hung assembly, and in situations where the majority of a ruling
party or coalition is in question.
Role During President’s Rule
 Article 356: Empowers the Governor to recommend President's Rule in the State if
they perceive that the state government cannot be carried on in accordance with the
provisions of the Constitution.
 Reporting Function: The Governor reports to the Centre on the administration of the
State, and these reports can sometimes form the basis for the imposition of President’s
Rule.
Administrative Role
  Administrative Head: The Governor acts as the administrative head of the State. They
make appointments to state services, and their role becomes crucial in the context of
maintaining law and order and other administrative functions.
Role in Centre-State Relations
 Bridge Between Centre and State: The Governor acts as a vital link in Centre-State
relations, often conveying the concerns of the State to the Centre and vice versa.
 Balancing Act: They are expected to balance the interests of the State Government and
the Union Government, maintaining a neutral position, especially in politically
sensitive situations.
Controversies and Challenges
 The role of Governors has often been a subject of controversy, particularly regarding
their discretionary powers and the decision-making process in appointing Chief
Ministers or recommending President's Rule. There have been instances where the
impartiality of Governors has been questioned, leading to debates on the need for
clearer guidelines and reforms in the functioning of this constitutional office.
In summary, the Governor plays a crucial role in the administration of State affairs, acting as a
crucial cog in the wheel of Centre-State relations. Their role, especially in times of political
uncertainty or crisis in a State, can have significant implications for the balance and functioning
of India's federal structure.
Impact of Constitutional Amendments
Various constitutional amendments have also shaped these relations. The 42nd Amendment
Act of 1976, often called the Mini Constitution, significantly altered the balance, enhancing
the powers of the central government. In contrast, the 73rd and 74th Amendments
empowered local governance, thus indirectly affecting Centre-State relations.
Comparison with Other Countries
It’s interesting to compare India’s approach with other federal systems. For example, in the
United States, the federal structure is more rigid, with a clearer division of powers between the
federal government and the states.

Administrative Relations between Centre and States

Centre-State administrative relationship
The Centre-State administrative relationship in a federal system like India's is governed by a
variety of provisions, which can be broadly categorized as follows:
1. Division of Powers: The Constitution clearly demarcates the powers and
responsibilities between the Centre and the States. This is done through three lists: the
Union List, State List, and Concurrent List. The Union List details subjects on which
only the central government can make laws, the State List for state governments, and
the Concurrent List for both.
 2. Administrative Relations: Articles 256 to 263 of the Constitution deal with
administrative relations between the Centre and States. These include the obligation of
States to exercise their executive power in compliance with the laws made by
Parliament (Article 256), and the power of the Centre to give directions to a State as
may appear necessary for that purpose (Article 257).
3. All-India Services: The creation of All-India Services like the Indian Administrative
Service (IAS) and Indian Police Service (IPS) fosters an integrated administrative
structure. Officers of these services work under both State and Central governments at
different times in their careers, ensuring a degree of uniformity and coordination in
administration across the country.
4. Emergency Provisions: During a national emergency (Article 352), state autonomy
can be significantly curtailed, and the central government can assume direct control
over the state's governance. Similarly, under President's Rule (Article 356), the state
government can be dismissed, and the Centre can administer the state directly.
5. Financial Relations: These are governed by Articles 268 to 293, detailing how revenue
is generated and distributed between the Centre and States. This includes grants-in-aid
to states (Article 275) and the Finance Commission's role in recommending how taxes
should be distributed.
6. Inter-State Council: Article 263 empowers the President to establish an Inter-State
Council to facilitate coordination between the Centre and States. This body aims to
foster better cooperation in policy and administrative practices.
7. Dispute Resolution: The Constitution provides mechanisms for resolving disputes
between the Centre and States or among States themselves. This includes the
jurisdiction of the Supreme Court and the power of the Centre to refer any dispute to it
for adjudication.
Constitutional Provisions related to Centre State Administrative Relations
1. Article 256 - Obligation of States and the Union: This article stipulates that the
executive power of every State shall be exercised in such a way as to ensure compliance
with the laws made by Parliament. Furthermore, the executive power of the Union
extends to giving directions to a State to ensure such compliance.
2. Article 257 - Control of the Union over States in certain cases: This article provides
the Union government with the authority to direct a State on the construction and
maintenance of means of communication (deemed to be of national or military
importance) and on measures for the protection of railways within the State. It also
outlines the obligations of States with regard to expenses incurred by them for the
purposes of the Union.
3. Article 258 - Power of the Union to confer powers, etc., on States in certain cases:
Under this article, the President can, with the consent of the State Government, entrust
to that government functions in relation to any matter to which the executive power of
the Union extends.
 4. Article 258A - Power of the States to entrust functions to the Union: Similar to
Article 258, this article allows a State to entrust functions to the Union, with the consent
of the Government of India.
5. Article 259 [Repealed]: Originally dealt with armed forces in States in Part B of the
First Schedule, but was repealed by the 7th Constitutional Amendment Act, 1956.
6. Article 260 - Jurisdiction of the Union in relation to territories outside India: This
article states that the Government of India can exercise jurisdiction over territories that
are not part of India through agreements or treaties.
7. Article 261 - Public acts, records and judicial proceedings: This article ensures full
faith and credit throughout the territory of India to public acts, records, and judicial
proceedings of the Union and of every State.
8. Article 262 - Adjudication of disputes relating to waters of inter-state rivers or
river valleys: It empowers Parliament to pass laws for adjudicating disputes related to
waters of inter-state rivers and river valleys. It also provides that neither the Supreme
Court nor any other court shall exercise jurisdiction over such disputes.
9. Article 263 - Provisions with respect to an inter-State Council: It empowers the
President to establish an Inter-State Council to inquire and advise on disputes,
coordinate actions of States, and deliberate on subjects of common interest to the States.
These articles collectively frame the administrative nexus between the Centre and the States,
balancing the distribution of powers and responsibilities to ensure national integrity while
respecting the autonomy of the States.
All India Services
The All-India Services (AIS) play a crucial role in maintaining the administrative uniformity
of the Indian Union. These services are unique to India's federal system, where officers serve
both under the central and state governments during their careers. The key provisions and
aspects related to All-India Services are:
1. Constitutional Basis: The concept of All-India Services is enshrined in Article 312 of
the Indian Constitution. It empowers the Rajya Sabha (Council of States) to create new
All-India Services by a two-thirds majority, if it deems necessary for the national
interest.
2. Existing Services: Currently, there are three All-India Services: the Indian
Administrative Service (IAS), the Indian Police Service (IPS), and the Indian Forest
Service (IFS). These services were created to ensure greater efficiency and uniformity
in administration and to foster a sense of unity among the administrative personnel.
3. Recruitment and Training: Officers of these services are selected through the Union
Public Service Commission (UPSC) examination, a highly competitive and rigorous
process. Initial training takes place at specialized institutions like the Lal Bahadur
Shastri National Academy of Administration for IAS officers.
4. Central and State Deputation: Officers of the All-India Services serve in both central
and state governments. While they may be allotted a specific state cadre, they can also
 be deputed to the central government. This system ensures a balance between national
and regional perspectives in the bureaucracy.
5. Role in Administration: Members of the All-India Services hold key positions in the
state and central governments. They play a vital role in policy formulation,
implementation, law and order maintenance, and general administration.
6. Uniformity and Integration: The AIS fosters an integrated approach to administration,
ensuring a degree of uniformity in governance across the country. It also facilitates
cooperation and coordination between the central and state governments.
7. Accountability and Control: Although they serve in state administrations, officers of
the All-India Services are also accountable to the central government. This dual
accountability ensures a balance in the administrative setup, preventing excessive
regionalism and maintaining national unity.
8. Capacity Building: The All-India Services act as instruments for building
administrative capacity at both the central and state levels. They bring in a wide range
of expertise and experience, which is crucial for effective governance.
The All-India Services, thus, represent a unique feature of the Indian administrative system,
aiming to achieve a fine balance between national integrity and state autonomy, while ensuring
effective and uniform governance throughout the country.
Emergency Provisions
Emergency provisions in the Indian Constitution are designed to safeguard the country's
sovereignty, unity, integrity, and security during extraordinary situations. These provisions,
which allow for central intervention in state affairs and modification of the federal structure,
are primarily contained in Articles 352, 356, and 360.
1. Article 352 - National Emergency:
 Triggered by: A grave threat to the security of India due to war, external
aggression, or armed rebellion.
 Effect: The central government gains the authority to control the governance of
the entire nation. State governments continue to function, but the Union
Government can give executive directions to them.
 Duration: Initially declared for six months, it can be extended indefinitely with
Parliamentary approval every six months.
 Legislative Powers: Parliament gains the power to make laws on subjects in the
State List.
2. Article 356 - President's Rule (State Emergency):
 Triggered by: Failure of constitutional machinery in a state, which can occur for
various reasons like political crises, breakdown of law and order, or inability to
elect a leader.
  Effect: The President can take over the executive functions of the state and can
declare that the powers of the Legislature of the State shall be exercisable by or
under the authority of Parliament.
 Duration: Initially valid for six months, it can be extended for up to three years
with Parliamentary approval every six months, under specific circumstances.
3. Article 360 - Financial Emergency:
 Triggered by: A situation where the financial stability or credit of India or any
part thereof is threatened.
 Effect: The Union Government can give directions to any State to observe such
canons of financial propriety as specified, and it can also require that all Money
Bills or other financial Bills be reserved for the consideration of the President.
 Duration: It can remain in force indefinitely and does not require periodic
Parliamentary approval.
Key Points:
 Protection of Federal Structure: These provisions are meant to be used sparingly,
only under extraordinary circumstances, to protect the federal structure and sovereignty
of the country.
 Parliamentary Approval and Judicial Review: The declaration of Emergency needs
parliamentary approval and is subject to judicial review to prevent misuse.
 Suspension of Fundamental Rights: During a National Emergency, certain
fundamental rights can be suspended, reducing the scope of judicial review and
individual freedoms.
 State Autonomy: While these provisions empower the central government
significantly, their use is intended to be a temporary measure to restore normalcy.
The emergency provisions reflect a balance between the need for a strong central authority in
times of crisis and the protection of state autonomy and individual freedoms. They have been
subject to various amendments and judicial interpretations to ensure they are used judiciously
and responsibly.
Landmark Judgements
Several landmark judgments in India have profoundly influenced the interpretation and
application of emergency provisions under Articles 352, 356, and 360 of the Constitution.
These rulings have helped define the scope and limits of these extraordinary powers:
1. ADM Jabalpur vs Shivkant Shukla (1976):
 Context: During the National Emergency of 1975-77, habeas corpus petitions
were filed challenging detentions under the Maintenance of Internal Security
Act (MISA).
 Ruling: The Supreme Court held that during a National Emergency, the right of
a person to not be unlawfully detained (habeas corpus) can be suspended. This
 meant that during the Emergency, individuals could not seek legal remedy for
wrongful detention.
 Impact: This ruling is often seen as a low point for the Indian judiciary. It was
later overruled, and it is now accepted that the right to life and personal liberty
cannot be suspended during an Emergency.
2. Minerva Mills Ltd. vs Union of India (1980):
 Context: This case challenged the constitutionality of certain amendments made
during the Emergency, which sought to give primacy to the Directive Principles
over the Fundamental Rights.
 Ruling: The Supreme Court declared the amendments unconstitutional,
affirming that Fundamental Rights cannot be abridged or taken away. It
established the "basic structure" doctrine, stating that certain parts of the
Constitution, including fundamental rights, form an inviolable core.
 Impact: This judgment reinforced the limitations on Parliament's power to
amend the Constitution and was a significant step in upholding the balance
between Fundamental Rights and Directive Principles.
These judgments collectively have strengthened the constitutional safeguards against the
misuse of emergency powers and have played a pivotal role in shaping India's democratic and
constitutional framework. They emphasize the importance of balancing state authority with
individual rights and federal principles, even in times of crisis.
Other Landmark Judgements
State of West Bengal v. Union of India (1963)
Context: This case arose in the context of the Union's legislative powers, particularly
concerning laws with extraterritorial aspects. The State of West Bengal challenged the
constitutional validity of certain provisions of the Coal Bearing Areas (Acquisition and
Development) Act, 1957, enacted by the Parliament.
Key Issues:
 The primary issue was whether the Parliament had the power to enact a law that had
operations beyond the territorial limits of India.
 The concept of the doctrine of territorial nexus was at the center of this debate. This
doctrine pertains to the legislative competence of a body to make laws whose operations
extend beyond its territorial limits, provided there is a sufficient connection or nexus
with that territory.
Ruling and Reasoning:
 The Supreme Court of India, in its judgment, upheld the validity of the Act.
 The Court held that the Parliament could legislate for the whole or any part of the
territory of India, and its laws could have extraterritorial operations if there was a
sufficient territorial nexus.
  The Court observed that the Constitution did not prohibit extraterritorial legislation or
the enactment of laws that have extraterritorial aspects or causes.
Impact:
 This judgment was significant in defining the extent and limits of the legislative powers
of the Centre and the States.
 It affirmed the ability of the Indian Parliament to enact laws with extraterritorial aspects,
provided there is a reasonable link or nexus to India.
 This decision provided a framework for understanding how legislative powers can be
exercised in the context of increasingly globalized and interconnected scenarios, where
actions outside territorial borders may have significant domestic implications.
This case set a precedent in interpreting the legislative competencies of the Parliament,
particularly in matters with international or cross-border implications.
Kesavananda Bharati v. State of Kerala (1973)
Context: This case, initiated by Kesavananda Bharati, the head of a religious institution in
Kerala, challenged the Kerala land reform legislation and, more broadly, the extent of
Parliament's power to amend the Constitution. It was in response to a series of constitutional
amendments passed by the Parliament, which Kesavananda Bharati and others argued were
infringing on fundamental rights.
Key Issues:
 The central question was whether the Parliament had unlimited power to amend the
Constitution, including the power to alter its basic structure or framework.
 The petitioners argued that certain amendments, including the 24th, 25th, 26th, and
29th, were unconstitutional as they sought to abridge fundamental rights and alter the
Constitution's essential features.
Ruling and Reasoning:
 In a historic and closely split decision, the Supreme Court of India ruled that while the
Parliament has wide powers to amend the Constitution, it cannot alter its 'basic
structure'.
 This 'basic structure' doctrine implied that certain fundamental features of the
Constitution, like the supremacy of the Constitution, secular and democratic character,
separation of powers, federalism, etc., are inviolable and cannot be amended.
 The Court, however, did not provide an exhaustive list of what constitutes the 'basic
structure', leaving it open to judicial interpretation in future cases.
Impact:
 The judgment was a turning point in Indian constitutional law, significantly limiting the
amending power of the Parliament.
  It ensured that the fundamental ethos and principles of the Constitution, as envisioned
by its framers, remain intact and protected from potential political vagaries and
majoritarian impulses.
 The case set a precedent for a judicial review of constitutional amendments, thus
providing a check on Parliament's powers.
Kesavananda Bharati v. State of Kerala remains one of the most important judgments in Indian
legal history, establishing the doctrine of the basic structure of the Constitution, which has been
pivotal in maintaining the balance of power between the legislature and the judiciary, and
preserving the core values of the Constitution.
State of Rajasthan v. Union of India (1977)
Context: This case arose in the aftermath of the Emergency period in India (1975-1977), a time
marked by significant political turmoil. The State of Rajasthan, along with several other states,
challenged the central government's decision to deploy central armed police forces in the state,
without its consent, to maintain law and order.
Key Issues:
 The primary issue was whether the Union government could unilaterally deploy its
armed forces in a state, without the state government's consent, under the guise of
maintaining law and order.
 The case revolved around the interpretation of Articles 355 and 356 of the Constitution
and the balance of power between the Centre and the States in matters of internal
security and public order.
Ruling and Reasoning:
 The Supreme Court upheld the Union government's action, stating that the central
government has the responsibility to protect every state against internal disturbance and
to ensure that the governance of the state is carried out in accordance with the provisions
of the Constitution (Article 355).
 The Court ruled that the Union can deploy its armed forces in states, even without the
state government's consent, to protect the sovereignty and integrity of India.
 It was emphasized that in situations where the state government is unable to maintain
public order, the Centre has the power to intervene for the larger interest of maintaining
the nation's unity and integrity.
Impact:
 The ruling clarified the extent of the Union's powers to intervene in state matters,
particularly in situations concerning national security or severe public disorder.
 It balanced the need for central intervention in extraordinary circumstances with the
autonomy of state governments in routine matters of law and order.
 The judgment played a crucial role in defining the contours of federalism in India,
particularly in the context of internal security and emergency situations.
State of Rajasthan v. Union of India is an important case in the context of Centre-State relations,
particularly regarding the extent and limits of central intervention in state affairs under the
constitutional framework.
T.M.A. Pai Foundation v. State of Karnataka (2002)
Context: This case arose from a dispute over the regulation of private unaided educational
institutions in India. The T.M.A. Pai Foundation and others challenged the restrictions imposed
by the State of Karnataka on the management and admission policies of private unaided
educational institutions, arguing that these infringed upon their constitutional rights.
Key Issues:
 The primary issue was the extent to which the state could regulate admissions and fix
fees in private unaided educational institutions, including those established by religious
and linguistic minorities.
 The case touched upon the interpretation of Article 30 of the Indian Constitution, which
grants minorities the right to establish and administer educational institutions of their
choice.
Ruling and Reasoning:
 The Supreme Court held that the right to establish and administer educational
institutions is a fundamental right under Article 19(1)(g) of the Constitution (right to
practice any profession, or to carry on any occupation, trade or business) and is also
protected under Article 30 for minorities.
 The Court ruled that while the state can regulate these institutions, the regulation must
be fair and transparent. The regulatory measures must aim to ensure educational
standards and the maintenance of excellence, and they should not be micromanaging
the institutions.
 The Court also held that private unaided institutions have the autonomy to decide on
admissions and to fix a reasonable fee structure.
Impact:
 This landmark judgment played a crucial role in defining the rights of private and
minority educational institutions in India.
 It established the principle that while the state has the right to regulate educational
institutions, this right is not absolute and must be balanced with the institutions'
autonomy.
 The judgment had significant implications for Centre-State relations, particularly in the
context of the regulatory powers of both the Centre and the States over education, a
subject listed in the Concurrent List of the Indian Constitution.
T.M.A. Pai Foundation v. State of Karnataka is a pivotal case in the context of the Indian
education system, balancing the rights of private educational institutions, including minority
institutions, with the state's role in ensuring quality and standard in education.
I.R. Coelho (Dead) By LRs v. State of Tamil Nadu (2007)
Context: This case, often referred to as the "Ninth Schedule case," arose from challenges to
the validity of certain state laws in India that had been placed in the Ninth Schedule of the
Constitution. The Ninth Schedule was created by the Constitution (First Amendment) Act,
1951, to protect certain laws from judicial review, particularly those that aim at agrarian reform
and land ceilings.
Key Issues:
 The key issue was whether laws placed in the Ninth Schedule were immune from
judicial review, even if they violated the 'basic structure' of the Constitution.
 The case tested the balance between the power of the legislature to put laws beyond the
scope of judicial review and the power of the judiciary to protect fundamental rights
and the basic structure of the Constitution.
Ruling and Reasoning:
 The Supreme Court held that laws placed in the Ninth Schedule after April 24, 1973
(the date of the Kesavananda Bharati judgment) are open to judicial review if they
violate the basic structure of the Constitution.
 The Court asserted that while the Constitution gives certain powers to the Parliament,
including the power to amend, these powers are limited by the Constitution's basic
structure.
 It was determined that judicial review is a basic feature of the Constitution, and any law
that abrogates or abridges the rights conferred by Part III (which deals with
Fundamental Rights) and transgresses the basic structure doctrine, could be struck
down.
Impact:
 This judgment safeguarded the fundamental rights of citizens against arbitrary
legislative actions, even if such laws are placed in the Ninth Schedule.
 It reinforced the balance of power between the legislature and the judiciary, affirming
the principle that the power to amend the Constitution is not unlimited.
 The ruling maintained the integrity of the Constitution's basic structure, ensuring that
essential democratic principles and rights cannot be overridden by legislative
enactments.
I.R. Coelho (Dead) By LRs v. State of Tamil Nadu is a landmark judgment that upheld the
supremacy of the Constitution, particularly the fundamental rights and the doctrine of the basic
structure, over legislative attempts to place laws beyond judicial scrutiny.
State of Tamil Nadu v. State of Kerala and Anr. (2014)
Context: This case revolved around the long-standing inter-state dispute between Tamil Nadu
and Kerala regarding the Mullaperiyar Dam. Tamil Nadu challenged the constitutionality of
the Kerala Irrigation and Water Conservation (Amendment) Act, 2006, which aimed to restrict
the water level in the Mullaperiyar Dam citing safety concerns. Tamil Nadu argued that this
legislation was an encroachment on its rights and violated the 1886 lease agreement.
Key Issues:
 The main issue was whether the Kerala state legislature could enact a law that
effectively overruled a decision of the Supreme Court regarding the water level in the
Mullaperiyar Dam.
 The case tested the limits of state legislative power in the context of inter-state river
water disputes and the role of the Supreme Court in resolving such disputes.
Ruling and Reasoning:
 The Supreme Court declared the Kerala Irrigation and Water Conservation
(Amendment) Act, 2006, unconstitutional. It held that the Act was in contravention of
an earlier judgment of the Court and thus violated the doctrine of separation of powers.
 The Court reaffirmed its earlier decision that the Mullaperiyar Dam is safe, and Tamil
Nadu could raise the water level, upholding the rights of Tamil Nadu as per the lease
agreement.
 It emphasized the role of the Supreme Court in settling inter-state disputes, especially
those concerning the use and control of inter-state rivers, underlining the federal
principle enshrined in the Constitution.
Impact:
 The judgment was significant in upholding the principle that state legislatures cannot
enact laws that negate the effect of Supreme Court judgments.
 It highlighted the Supreme Court's role in resolving inter-state disputes, thus
maintaining the federal balance and the rule of law in the country.
 The case underscored the need for cooperative federalism, especially in the
management of inter-state water resources.
State of Tamil Nadu v. State of Kerala and Anr. is a crucial case in the context of Centre-State
and inter-state relations, particularly in the arena of inter-state water disputes. It reinforced the
supremacy of the Supreme Court in resolving such disputes and maintaining the delicate
balance of federalism in India.
Jindal Stainless Ltd v. State of Haryana (2016)
Context: This case addressed the issue of entry tax imposed by various state governments in
India. Jindal Stainless Ltd and others challenged the imposition of entry tax on goods imported
from other states, arguing that it was discriminatory and violated the concept of a single market
within the country, as envisaged by the Constitution.
Key Issues:
 The primary question was whether the imposition of entry tax by states on goods
coming from other states violated the constitutional provisions relating to the freedom
of trade, commerce, and intercourse within the territory of India (Articles 301 to 304).
  The case tested the extent of the states' power to levy taxes on goods entering their
territory from other parts of India, and whether such taxation hindered the creation of a
unified national market.
Ruling and Reasoning:
 The Supreme Court, in a majority decision, upheld the validity of the entry tax imposed
by states.
 The Court ruled that the states have the legislative competence to levy such taxes as
long as they do not discriminate between goods manufactured or produced within the
state and goods coming from other states.
 The judgment emphasized that such taxes are not necessarily in violation of the
principle of free trade and commerce across the country if they meet the criteria of being
reasonable and non-discriminatory.
Impact:
 The ruling was significant in clarifying the fiscal autonomy of states within the federal
structure of India. It allowed states to continue imposing entry taxes, which are a
significant source of revenue for them.
 It balanced the need for a unified national market with the rights of states to raise
revenues for public welfare and development.
 The judgment had implications for the development of fiscal federalism in India,
highlighting the need to balance state-level taxation with the goal of economic
integration across the country.
Jindal Stainless Ltd v. State of Haryana is an important judgment in the context of Indian
federalism, particularly concerning the fiscal powers of state governments and the concept of
a single market within the country. It upheld the principle that while the freedom of trade and
commerce is critical, it must be harmoniously interpreted with the states' power to levy taxes.

Sarkari Commission
The Sarkaria Commission, officially known as the Commission on Centre-State Relations, was
set up in 1983 by the Government of India. It was chaired by Justice R.S. Sarkaria, a retired
judge of the Supreme Court of India. The commission was established in the context of growing
tensions and debates regarding the balance of power between the Centre and the States in India.
This was a period marked by increasing demands for state autonomy, especially from regional
parties in various states.
Background:
1. Political Context: During the late 1970s and early 1980s, there was a rise in regional
parties and a growing sentiment of regionalism. States governed by parties other than
the one at the Centre often accused the central government of misusing powers,
particularly Article 356 (President's Rule).
 2. Constitutional Concerns: The Indian Constitution, while federal in structure, also
contains several unitary features. There were concerns that the central government was
overstepping its constitutional bounds, undermining the autonomy of the states.
3. Need for Review: The growing disputes and dissatisfaction among states regarding the
Centre's approach to federalism led to calls for a comprehensive review of Centre-State
relations.
Recommendations of the Sarkaria Commission:
The commission submitted its report in 1988, making 247 recommendations. Some of the key
recommendations include:
1. Use of Article 356: The Commission recommended that Article 356 (President's Rule)
should be used very sparingly, in extreme cases, as a measure of last resort when all
available options fail.
2. Governor's Role: It suggested that the Governor's office should remain impartial, and
the persons appointed to this position should not be connected with the local politics of
the state. The Governor should be a detached figure without intense political links or
should not have participated in politics in the recent past.
3. Financial Relations: The Commission recommended that the financial relations
between the Centre and the States be enhanced for greater fiscal autonomy of the states.
It suggested changes in the approach to grants-in-aid and sharing of financial resources.
4. Inter-State Council: It emphasized the establishment of an Inter-State Council as a
forum for discussing and resolving disputes between states and the Centre.
5. All India Services: The report suggested that the services like IAS and IPS should be
trained to be more responsive to the needs of the state governments, respecting the
federal structure.
6. Resource Sharing: On the sharing of resources, particularly river water and energy
resources, the Commission suggested that an integrated approach be adopted, taking
into account the interests of different states.
7. Economic and Social Planning: It recommended a greater role for states in economic
and social planning, acknowledging the regional diversity of India.
8. Law and Order: The commission suggested that the law and order should primarily
be the responsibility of states, with the Centre intervening only in cases of national
concern.
Impact:
 While many recommendations of the Sarkaria Commission were appreciated for their
potential to strengthen federalism in India, the actual implementation was limited.
 The report served as a comprehensive review of Centre-State relations and provided a
framework for subsequent debates and reforms in this area.
  Some of its recommendations, particularly regarding the use of Article 356 and the role
of the Governor, influenced later judgments of the Supreme Court and subsequent
commissions like the Punchhi Commission.
The Sarkaria Commission's work remains a cornerstone in the study and understanding of
Indian federalism, highlighting the complexities and dynamics of Centre-State relations in a
diverse and vast country like India.

Punchhi Commission
The Punchhi Commission, formally known as the Commission on Centre-State Relations, was
established by the Government of India in April 2007. It was chaired by Justice Madan Mohan
Punchhi, a former Chief Justice of India. The commission was constituted to take a fresh look
at the relative roles and responsibilities of the various levels of government and to review the
working of the existing arrangements between the Centre and the States.
Background:
1. Evolving Federal Dynamics: The Punchhi Commission was set up in the context of
evolving federal dynamics in India, marked by the rise of coalition politics at the Centre
and increasing assertiveness of state governments.
2. Changes Since Sarkaria Commission: Since the recommendations of the Sarkaria
Commission in the 1980s, there had been significant political, economic, and legal
developments, necessitating a re-examination of Centre-State relations.
3. Need for Updating: The growing complexities of governance and the need to address
contemporary challenges in a globalizing world required an updated framework for
Centre-State relations.
Recommendations of the Punchhi Commission:
The Punchhi Commission submitted its report in 2010, making recommendations across a wide
range of issues concerning Centre-State relations. Key recommendations include:
1. Role of the Governor: The commission recommended that the selection of Governors
should be done from a panel prepared by the Vice-President, Prime Minister, Speaker
of the Lok Sabha, and Chief Minister of the concerned state. It also suggested fixed
five-year terms for Governors.
2. Use of Article 356: The commission suggested that Article 356 (President's Rule)
should be used only as a last resort and with greater caution. It recommended that before
taking such action, a warning should be issued to the state government to rectify its
actions.
3. Financial Autonomy: It emphasized strengthening the financial autonomy of states,
suggesting measures to improve the fiscal relationship between the Centre and States,
including rationalization of centrally sponsored schemes.
4. Police Reforms: The commission recommended separating the investigation and law
and order functions of the police. It also advocated for setting up a State Security
 Commission to ensure that the state government does not exercise unwarranted
influence or pressure on the police.
5. Inter-State Relations: The commission suggested the establishment of an Inter-State
Trade and Commerce Commission to deal with issues arising from the movement of
goods and services across states.
6. Resource Sharing and Distribution: It called for an equitable approach to the
distribution of resources like water, recommending the creation of an institutional
framework to manage inter-state rivers effectively.
7. Emergency Provisions: The commission proposed that clear guidelines should be laid
out for the proclamation of both national and financial emergencies.
8. Legislative Relations: It suggested clearer demarcation of subjects in the Union, State,
and Concurrent Lists to minimize overlapping jurisdiction.
Impact:
 The Punchhi Commission’s recommendations provided a detailed roadmap for
redefining Centre-State relations in India, reflecting the realities of 21st-century
governance.
 While the recommendations were comprehensive, their implementation has been
gradual and selective.
 The report has served as a reference point for subsequent debates and discussions on
federalism in India, influencing policy and legal discourse.
The Punchhi Commission, like the earlier Sarkaria Commission, played a pivotal role in
examining and suggesting improvements in the complex tapestry of Centre-State relations in
India, a key aspect of its federal structure.

Rajamannar Committee
The Rajamannar Committee, formally known as the Dr. P.V. Rajamannar Committee, was
appointed by the Government of Tamil Nadu in 1969. It was one of the first major efforts by a
state government to systematically examine and propose changes to the Centre-State relations
in India. The committee was chaired by Dr. P.V. Rajamannar, a former Chief Justice of Madras
High Court.
Background:
 Rising Regional Aspirations: The committee was constituted in the context of
increasing demands from various states, especially the southern states, for greater
autonomy and a redefinition of Centre-State relations.
 Political Context: The appointment of the committee was also a response to the
perceived over-centralization of powers by the Union government and the need to
protect the rights and powers of the states.
Key Recommendations of the Rajamannar Committee:
 1. Restructuring of Legislative Powers: The committee recommended a re-examination
and redistribution of legislative powers between the Centre and the States. It suggested
that the residuary powers of legislation should be vested with the States instead of the
Centre.
2. Financial Autonomy for States: The committee emphasized the need for greater
financial autonomy for states. It proposed that states should have exclusive taxing
powers without any interference from the Centre.
3. Role of the Governor: The committee suggested that the role of the Governor should
be purely ceremonial and that the Governor should act on the advice of the state's
Council of Ministers.
4. Planning and Economic Development: The committee recommended that states
should have a greater say in planning and economic development. It proposed that the
Planning Commission should only concern itself with formulating broad outlines and
principles of planning.
5. Abolition of All-India Services: In a radical recommendation, the committee
suggested the abolition of All-India Services like the Indian Administrative Service
(IAS) and the Indian Police Service (IPS), arguing that they were instruments of central
control over the states.
6. Education and Culture: It recommended that education and culture should be entirely
within the state's domain, emphasizing the need for preserving cultural and linguistic
diversity.
7. Inter-State Council: The committee proposed the establishment of an Inter-State
Council under the Constitution to act as a federal body for discussing and resolving
disputes between states and the Centre.
Impact:
 The recommendations of the Rajamannar Committee were significant in voicing the
concerns of the states regarding their autonomy and rights in the federal structure of
India.
 While many recommendations were not implemented, they contributed to the ongoing
discourse on federalism in India.
 The committee's report became a reference point for subsequent discussions and
commissions on Centre-State relations, highlighting the need for a more balanced
federal structure in India.
The Rajamannar Committee played a crucial role in articulating the aspirations of state
governments for greater autonomy and a more equitable distribution of power in India's federal
system.
NCRWC
The National Commission to Review the Working of the Constitution (NCRWC), also known
as the Justice Venkatachaliah Commission, was established by the Government of India in
February 2000. Chaired by former Chief Justice of India, M.N. Venkatachaliah, the commission
was tasked with examining the working of the Constitution of India and suggesting possible
amendments to improve its efficiency and effectiveness.
Background:
 A Changing Nation: The commission was constituted against the backdrop of
significant changes in India's socio-economic and political landscape. India had
undergone considerable transformation since the adoption of the Constitution in 1950,
and there was a need to evaluate its provisions in the light of contemporary realities.
 Diverse Issues: The commission was expected to address a range of issues, including
the demands for greater federal autonomy by states, challenges in governance, human
rights, judicial reforms, and the need to adapt to international norms.
Recommendations Regarding Centre-State Relations:
The NCRWC made several recommendations to improve and streamline the relationship
between the Centre and the States:
1. Role and Appointment of Governors: The commission suggested that Governors
should be appointed in consultation with the Chief Minister of the concerned State. It
recommended that the Governor should normally be from outside the State and should
not have participated in active politics at least for some time before his appointment.
2. Use of Article 356 (President’s Rule): The commission recommended that Article 356
(which deals with President's Rule in States) should be amended to provide for a pre-
warning to the concerned state as a remedial measure before the Centre takes any drastic
step under this provision.
3. Fiscal Federalism: The commission suggested modifications to strengthen fiscal
federalism, including giving the States a greater say in the financial arrangements and
resource distribution.
4. Inter-State Council: The commission proposed that the Inter-State Council should be
constitutionalized and made an integral part of the cooperative federal structure. It
recommended that the Council meet at least thrice in a year.
5. Sharing of Resources: Recommendations were made regarding the sharing of
resources between the Centre and the States, including a more rational approach to the
distribution of revenues.
6. Legislative Relations: The commission proposed clearer demarcation and
rationalization of subjects in the Union, State, and Concurrent Lists of the Constitution
to minimize overlapping jurisdictions.
7. Decentralization and Local Governance: Emphasis was placed on further
decentralization and strengthening of Panchayati Raj Institutions and Urban Local
Bodies, enhancing the role of local governance in the federal structure.
Impact:
  The recommendations of the NCRWC contributed to the ongoing discourse on
federalism and governance in India.
 While not all recommendations were implemented, they provided a comprehensive
perspective on the necessary reforms to adapt India's Constitution to the contemporary
needs and challenges of the nation.
 The commission's work highlighted the importance of balancing the need for a strong
central government with the autonomy of states, reflecting the diverse and pluralistic
nature of Indian society.
The NCRWC played an important role in reviewing and suggesting reforms for India's
constitutional and governance framework, especially in the context of Centre-State relations in
a rapidly evolving socio-political environment.

Issues and Challenges in Centre-State Relations

Disputes in Implementation of Concurrent List Laws
One of the primary challenges in Centre-State Relations arises from the implementation of laws
under the Concurrent List. Disputes often occur when states contest the Centre's legislation,
arguing that it encroaches upon their autonomy. For example, the introduction of national-level
education policies has sometimes been met with resistance from states, leading to debates over
federalism and state rights.
Centre's Role in State Matters
Another contentious issue is the extent of the Centre's involvement in state matters. While
necessary for national integration and uniform policy implementation, excessive central
intervention can be perceived as undermining state autonomy. This has been particularly
evident in areas like law and order and public health, where states demand more freedom to
tailor policies to their local needs.
Financial Dependence of States on the Centre
Financial relations also pose a challenge. Many states in India heavily rely on financial transfers
from the Centre, which can lead to a dependency relationship. This dependency sometimes
results in political bargaining, impacting the smooth functioning of federalism.
Case Studies: Historical and Contemporary Examples
Historical and contemporary case studies highlight these challenges. For instance, the
imposition of President's Rule in various states has often been a point of controversy,
questioning the balance of power between the Centre and States. Similarly, recent disputes over
GST compensation to states during the COVID-19 pandemic exemplified the complexities of
financial relations.
Comparative Analysis with Other Countries
Comparatively, countries like Canada and Australia, with their own versions of federalism, face
similar challenges. However, the degree and nature of these challenges can vary based on their
constitutional frameworks and political culture.
Way Forward
Addressing these challenges requires a nuanced approach that respects the federal structure
while ensuring national cohesion. Enhanced dialogue, cooperative federalism, and adherence
to constitutional principles are key to navigating these complex dynamics.
Role of Inter-State Councils and Zonal Councils
Purpose and Functioning of Inter-State Councils
 Established under Article 263 of the Constitution, the Inter-State Council plays a vital
role in fostering cooperation between the Centre and States. Its primary purpose is to
create a forum for discussing and coordinating policies and practices that impact
multiple states or the country as a whole.
 This council, chaired by the Prime Minister, includes chief ministers, union ministers,
and governors as members. It addresses issues like resource sharing, environmental
policies, and economic planning that require collaborative effort.
Contribution of Zonal Councils in Promoting Cooperation
 Zonal Councils, established by the States Reorganisation Act of 1956, are another
significant mechanism for promoting cooperation among states. India is divided into
five zones, and each zone has a council comprising the states in that region.
 These councils provide a platform for resolving disputes and discussing matters of
common interest, like drug trafficking, border disputes, and infrastructure development.
They play a crucial role in regional development and in addressing issues that do not
require national-level intervention but are beyond the scope of a single state.
Challenges and Effectiveness
 Despite their potential, these councils sometimes face challenges like infrequent
meetings and varying levels of engagement from member states. Enhancing their
effectiveness requires more regular interactions and a commitment to collaborative
problem-solving.
Comparative Analysis
 Comparatively, similar mechanisms exist in other federal countries. For instance, in
Australia, the Council of Australian Governments (COAG) serves a similar purpose,
facilitating policy coordination and cooperation among the Commonwealth, state, and
territory governments.
Impact on Centre-State Relations
 The effective functioning of Inter-State and Zonal Councils can significantly enhance
Centre-State and inter-state relations. By providing platforms for dialogue and dispute
resolution, these bodies help maintain the federal balance and foster a spirit of
cooperative federalism.
Legal Disputes Relating to Centre State Relations
Legal disputes relating to federalism in India often arise from the complex interplay of powers
and responsibilities shared between the Centre and the States. These disputes are primarily
adjudicated by the judiciary, particularly the Supreme Court, which interprets the Constitution
and resolves issues arising from its application. Here are several key areas where legal disputes
commonly emerge in the context of federalism:
Legislative Competence
 Disputes over Union vs State Powers: Cases often arise when there is a perceived
overreach by either the Centre or the States into each other's constitutionally
demarcated domains of legislation, especially regarding the Union, State, and
Concurrent Lists in the Seventh Schedule of the Constitution.
 Doctrine of Repugnancy: Legal disputes also occur in cases of conflicting laws where
both the Centre and a State have legislated on a subject in the Concurrent List. The
doctrine of repugnancy (Article 254) and its interpretation become crucial in such
situations.
Inter-State Relations
 Border Disputes: Boundary disputes between States sometimes require legal
resolution. The Supreme Court plays a critical role in adjudicating such disputes.
 Disputes on State Reorganization: Issues arising from the reorganization of States
(like the formation of Telangana from Andhra Pradesh) often lead to legal challenges,
particularly regarding resource distribution and administrative control.
Recent Trends and Issues
 New Policy Implementation: Legal disputes have arisen over the implementation of
new policies and laws by the Centre, which are sometimes perceived as infringing upon
the autonomy of States. For example, the implementation of the National Education
Policy (NEP) and the Citizenship Amendment Act (CAA) faced challenges in some
States.
 Central Agencies vs State Authorities: The role and jurisdiction of central agencies
like the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED)
in States have also been a subject of legal disputes, particularly in cases where States
have withdrawn general consent for these agencies to operate.
In summary, legal disputes in federalism in India reflect the ongoing process of defining and
redefining the balance of power and responsibilities between the Centre and the States. The
judiciary, especially the Supreme Court, plays a critical role in mediating these disputes and
ensuring that the federal structure, as envisioned in the Constitution, is maintained and
respected.

Landmark Judgements
1.State of Karnataka v. Union of India (1977)
Context: This case arose during the national emergency declared in 1975, involving the
dismissal of the State Government of Karnataka.
Core Issues: The core issue was the extent of the President's power under Article 356 to dismiss
a state government and whether such a dismissal was subject to judicial review.
Verdict: While the case did not lead to a conclusive judgment on the specific issue of
Karnataka's government's dismissal, it set the stage for later judgments, particularly S.R.
Bommai v. Union of India, in understanding and limiting the use of Article 356.
2.Mullaperiyar Environmental Protection Forum v. Union of India (2006)
Context: This case revolved around a long-standing dispute between Kerala and Tamil Nadu
over the safety and water level of the Mullaperiyar Dam.
Core Issues: The dispute was over the rights of Tamil Nadu to increase the water level in the
dam and the concerns of Kerala regarding the dam's safety.
Verdict: The Supreme Court ruled in favour of Tamil Nadu, allowing the state to raise the water
level of the dam. The Court held that the dam was safe and that Tamil Nadu had the right to
increase the water level for its benefits, under the lease agreement.
3.Justice K.S. Puttaswamy (Retd.) v. Union of India (2017)
Context: This landmark case challenged the constitutional validity of the Aadhaar scheme,
India’s biometric identity program.
Core Issues: The main issues were the right to privacy concerns surrounding Aadhaar and
whether making Aadhaar mandatory for various services was constitutional.
Verdict: The Supreme Court upheld the constitutionality of Aadhaar but struck down some of
its applications. It declared that the right to privacy is a fundamental right under the
Constitution. The Court ruled that while Aadhaar could be mandatory for filing income taxes
and for the allocation of PAN, it couldn't be made mandatory for opening bank accounts, getting
mobile connections, or for school admissions, ensuring a balance between privacy rights and
the government's developmental objectives.
Judicial Pronouncements
The judiciary has also played a role in defining and interpreting these financial relations. Cases
like Union of India vs Mohit Minerals Pvt. Ltd. (2018) have clarified aspects of the GST,
ensuring its alignment with constitutional principles.
Government of Andhra Pradesh v. J.B. Educational Society (2005): This case pertained to
the regulatory powers of the state over private unaided educational institutions and dealt with
fee structures and admissions, further building upon the T.M.A. Pai Foundation judgment.
Union of India v. H.S. Dhillon (1972): This case dealt with the extent of Parliament's power
to tax, especially in relation to state-owned properties, affecting financial relations between the
Centre and the States.
Union of India v H S Dhillon
The case of Union of India v. H.S. Dhillon, decided in 1971, is a significant decision in the
context of the legislative powers of the Union and States in India. This case primarily dealt
with the issue of residuary powers of legislation under the Indian Constitution.
Background of the Case:
The case arose out of a challenge to the validity of the Wealth Tax Act, 1957, which was
amended in 1969 to include capital value tax on agricultural lands in its ambit. H.S. Dhillon, a
taxpayer, challenged this amendment on the ground that it was beyond the legislative
competence of the Parliament. He argued that "taxes on agricultural income" fell within the
State List (List II of the Seventh Schedule of the Constitution), and therefore, only state
legislatures had the exclusive power to legislate on this matter.
Legal Issue:
The crux of the dispute was whether Parliament had the power to levy taxes on the capital value
of agricultural land, which was traditionally seen as a state subject. The case hinged on
interpreting Articles 246 and 248 of the Constitution and the respective legislative powers of
the Union and States as demarcated in the Union, State, and Concurrent Lists.
Article 246 and 248:
 Article 246 deals with the subject matter of laws made by Parliament and the
legislatures of States.
 Article 248 states that Parliament has exclusive power to make any law with respect to
any matter not enumerated in the Concurrent List or State List. This is known as the
residuary power of legislation.
Supreme Court's Decision:
The Supreme Court, in this case, held that:
1. Residuary Powers: The power to legislate on matters not enumerated in the State List
or Concurrent List lies exclusively with Parliament, as provided under Article 248. The
court clarified that this residuary power includes the power to tax.
2. Interpretation of Lists: The Court emphasized a harmonious interpretation of the Lists
in the Seventh Schedule. If a matter is not explicitly covered by the State List, then it
falls under the ambit of Parliament's power to legislate.
3. Validity of the Wealth Tax Act Amendment: The amendment to the Wealth Tax Act
was held to be constitutionally valid. The Supreme Court ruled that a tax on the capital
value of agricultural land was not a tax on agricultural income (which is a State subject)
but rather a tax on wealth which falls under the Union List.
Significance:
The ruling in Union of India v. H.S. Dhillon is significant for several reasons:
 It affirmed the broad scope of Parliament's residuary powers under Article 248.
 The decision marked a pivotal moment in the federal structure of India, emphasizing
the supremacy of Parliament in legislative matters, especially in areas not explicitly
covered by the State List.
 It provided clarity on the interpretation of legislative entries in the Union, State, and
Concurrent Lists, underscoring the importance of a harmonious and expansive reading.
This case remains a landmark in the jurisprudence of India's federal structure, often cited in
matters pertaining to the legislative powers and the distribution of powers between the Centre
and the States.
Role of Union Public Service Commission (UPSC) and State Public Service Commissions
 The UPSC and State PSCs, though primarily involved in recruitment, also play a role
in resolving disputes related to services under the Union and the States. They ensure a
standardized and equitable approach to public service recruitment and management
across the country.
Finance Commission and Resource Distribution
 The Finance Commission, established under Article 280, plays a pivotal role in the
financial management of Centre-State relations. It recommends how the Union should
share taxes with the States and other financial relations between them. The
Commission's role is crucial in ensuring a fair and equitable distribution of financial
resources, which is a significant aspect of administrative coordination.
Goods and Services Tax (GST) Council
 The GST Council, as per Article 279A, exemplifies cooperative federalism. This
constitutional body decides on all matters related to GST and has representation from
both the Central and State governments. Its decisions require a three-fourths majority,
ensuring that both the Centre and the States have a significant say in GST-related
matters.
National Development Council (NDC)
 The NDC, a non-constitutional body, includes the Prime Minister, Chief Ministers of
all States, and members of the Planning Commission. It plays a crucial role in shaping
and implementing development policies and plans, ensuring that state interests are
considered in national development plans.
Central Administrative Tribunal (CAT) and State Administrative Tribunals
 These tribunals, while primarily focusing on service-related matters, also act as a bridge
in resolving Centre-State administrative disputes, especially those concerning the
implementation of central laws and policies by state employees.
Judicial Interpretations and Interventions
 The judiciary, particularly the Supreme Court, has often played a role in clarifying and
interpreting the extent and limits of administrative powers of the Centre and the States.
This includes adjudicating disputes between states, or between states and the Centre,
ensuring that the constitutional balance of power is maintained.
Case Studies: Centre-State Coordination
Examining real-world instances of Centre-State coordination offers valuable insights into how
constitutional provisions and administrative mechanisms translate into practical governance.
These case studies highlight both the successes and challenges in maintaining a harmonious
Centre-State relationship.
Successful Collaborations
1. COVID-19 Pandemic Response
 A prime example of effective Centre-State coordination was seen in the
management of the COVID-19 pandemic. The Central government, along with
State governments, implemented nationwide lockdowns, vaccination drives,
and health protocols. This cooperation was crucial in handling the health crisis,
demonstrating the strength of India's federal structure in times of emergency.
2. Disaster Management
 The collaboration in disaster management, especially during cyclones and
floods, showcases effective Centre-State coordination. The National Disaster
Response Force (NDRF), a central agency, works closely with state
governments to provide relief and rehabilitation. This partnership has been vital
in minimizing damage and saving lives during natural disasters.
Challenges and Disputes
1. Cauvery Water Dispute
 The long-standing dispute between Karnataka and Tamil Nadu over the Cauvery
river water allocation illustrates the complexities of Centre-State relations.
Despite the Supreme Court's intervention and the formation of the Cauvery
Water Management Authority, disagreements persist, highlighting challenges in
resource sharing.
2. GST Implementation Issues
 While the GST Council is a model of cooperative federalism, the
implementation of GST saw several disagreements between the Centre and
States, particularly regarding compensation for revenue loss. This situation
underscores the challenges in economic coordination in a federal structure.
International Comparisons
 Looking internationally, the European Union (EU) offers an interesting parallel. While
not a country, the EU's management of policy across member states, particularly in
crisis situations like the Eurozone crisis, reflects similar coordination challenges and
successes.
Judicial Interventions
 The Indian judiciary has often played a crucial role in resolving Centre-State disputes.
For example, in the Cauvery water dispute, the Supreme Court's directives were
instrumental in forming a resolution mechanism, demonstrating how judicial
intervention can aid in administrative coordination.
Reflection of Dharmic Principles
  These instances reflect the Dharmic principles of collective responsibility and harmony.
Even in the face of challenges, the underlying effort is towards achieving a balance and
ensuring the welfare of the people, resonating with ancient Indian governance ideals.
These case studies of Centre-State coordination illustrate the dynamic, sometimes challenging,
but ultimately resilient nature of India's federal structure. They show how constitutional
mechanisms, judicial interventions, and cooperative efforts come together to manage the
diverse needs of a vast nation.
Next, we will discuss the various issues and challenges in Centre-State relations, along with
contemporary controversies and their implications. Let me know when you're ready to
continue.
Issues and Challenges in Centre-State Relations
While the Centre-State relationship in India is a cornerstone of its federal structure, it is not
without its challenges and issues. These complexities often arise from the overlapping
jurisdictions, differing political landscapes, and the continuous evolution of governance needs.
Conflicts in Jurisdiction and Responsibilities
1. Overlapping Jurisdictions: Often, there are areas where the legislative and
administrative powers of the Centre and States overlap. This can lead to conflicts,
especially when different political parties govern at the central and state levels. Issues
like environmental regulations and education policies often see such overlaps and
resulting disputes.
2. Resource Allocation: Disagreements over the distribution of financial resources,
particularly in the allocation of funds from the Centre to States, are a recurring issue.
The criteria and methodology for this allocation can become contentious, impacting
state development agendas.
Recent Controversies and Implications
1. National Education Policy (NEP): The introduction of the NEP has sparked debates
over the extent of the Centre's role in shaping education policy, traditionally a state
subject. This has raised questions about federal autonomy and the Centre's influence in
areas primarily managed by states.
2. Farm Laws and Agricultural Reforms: The recent controversy over the central
government's farm laws highlights the tension in Centre-State relations. Agriculture
being a state subject, the introduction of these laws by the Centre was met with
resistance from various states, leading to widespread protests and subsequent repeal of
the laws.
Judicial Interventions
The judiciary often becomes a mediator in Centre-State conflicts. For example, the Supreme
Court’s intervention in disputes related to environmental regulations, where both Centre and
States have jurisdiction, showcases its role in maintaining the federal balance.
Comparative International Perspective
Internationally, such disputes are not unique to India. In the United States, for instance, there
have been notable conflicts between the federal and state governments over issues like
healthcare and immigration policies.
Future Outlook for Centre-State Administrative Relationships
As we conclude our exploration of Centre-State Administrative Relationships in India, let's
reflect on the key aspects of this dynamic and elaborate on the future outlook of this essential
component of Indian governance.
Summary of Key Points
 Constitutional Framework: The Constitution of India lays a robust foundation for
Centre-State relations, balancing federal unity with regional autonomy. Key
constitutional provisions from Articles 256 to 263 set the groundwork for
administrative and legislative interactions.
 Historical Evolution: Since independence, these relationships have evolved through
constitutional amendments, landmark judicial interventions, and shifting political
landscapes, reflecting the changing needs and challenges of governance.
 Administrative Coordination: Various bodies like the Inter-State Council, GST
Council, and the Finance Commission play pivotal roles in facilitating cooperation and
resolving disputes, showcasing the mechanisms of cooperative federalism.
 Challenges and Reforms: Issues like overlapping jurisdictions and resource allocation
highlight ongoing challenges. Reforms suggested by commissions like Sarkaria and
Punchhi, along with judicial interventions, indicate a continuous process of refinement
and adjustment.
 International Context: Comparisons with other federal structures like those in the
United States, Germany, and Canada provide a global perspective on managing Centre-
State relations.
 Dharmic Influence: The principles of ancient Indian governance, emphasizing duty,
harmony, and collective welfare, subtly inform the ethos of these relationships,
blending traditional wisdom with modern administrative practices.
Future Outlook
Looking ahead, Centre-State relations in India are poised to become even more complex and
vital. With increasing globalization, technological advancements, and evolving political
dynamics, the interplay between the Centre and the States will need to adapt continually.
 Technological Integration: Advances in technology can facilitate better coordination
and transparency between the Centre and States, aiding in efficient governance.
 Economic Challenges: Managing economic disparities and ensuring equitable
development across states will remain a critical aspect of these relationships.
 Environmental and Health Governance: Collaborative efforts will be crucial in
addressing pan-India challenges like climate change and public health crises.
  Cultural and Regional Dynamics: Respecting cultural diversity while maintaining
national cohesion will continue to be a delicate balance in Centre-State interactions.
In conclusion, Centre-State relationships in India, rooted in the Constitution and influenced by
a rich heritage of governance principles, represent a complex yet resilient structure. As India
marches forward, these relationships will play a crucial role in shaping its democratic and
developmental trajectory, reflecting both the challenges and the potential of its federal system.
State of Rajasthan v Union of India
The case of "State of Rajasthan v. Union of India" (1977) is a significant judgment in the
context of Centre-State relations in India, particularly concerning the powers of the Central
Government to intervene in State matters.
Background of the Case
This case arose in the context of the Central Government's decision to deploy Central Armed
Police Forces in the state of Rajasthan during a period of internal disturbance without the State
Government's consent. The State of Rajasthan challenged this deployment, arguing that it
infringed upon the State's autonomy and rights under the Constitution.
Legal Issues Addressed
The primary legal issue in this case was whether the Central Government had the authority to
deploy its armed forces in a State without the State Government's consent, especially in a
situation that was not declared an Emergency under Article 356 of the Constitution.
Judgment and Analysis
The Supreme Court of India delivered a nuanced judgment in this case. The Court held that
under the Constitution, the Union Government has an overriding authority to protect the
country against internal disturbances and external aggression and for this purpose, can deploy
its armed forces in any part of the territory of India, even without the consent of the State
Government.
The Court's reasoning was based on the interpretation of various constitutional provisions,
including:
 Article 355: This article obligates the Union to protect every State against external
aggression and internal disturbance and to ensure that the Government of every State is
carried on in accordance with the provisions of the Constitution.
 Article 356: While this article provides for President's Rule in a State in case of failure
of the constitutional machinery, the Court noted that Article 355 is distinct and does not
require the proclamation of an Emergency under Article 356.
The Court emphasized that the integrity of the nation was paramount and that the Centre's
responsibility under Article 355 is a duty to be performed to maintain national integration. It
was held that the Centre's power to deploy its armed forces in a State is an aspect of the Centre's
duty to ensure that the Government of every State is carried on in accordance with the
Constitution.
Implications of the Judgment
This judgment is significant for several reasons:
1. Balancing Federal Structure: It underscored the balancing act between State
autonomy and the Centre's overriding responsibility for national security and integrity.
2. Centre's Powers in Internal Security: The case established the precedent that the
Centre has broad powers to intervene in a State's affairs for the purposes of internal
security, even without declaring a State Emergency.
3. Interpretation of Constitutional Provisions: It offered a detailed interpretation of
Articles 355 and 356, clarifying the Centre’s responsibilities and powers in maintaining
law and order.
4. Precedent for Future Cases: This judgment has been referred to in subsequent cases
dealing with the issue of Central intervention in State matters.
In summary, the "State of Rajasthan v. Union of India" case is a landmark in Indian
constitutional law, highlighting the delicate balance between federalism and the need to
maintain national unity and integrity. It illustrates how the Indian judiciary navigates complex
Centre-State relations while upholding the Constitution's provisions and the larger interest of
national security.
Following the "State of Rajasthan v. Union of India" case, there are several other landmark
cases that have shaped the understanding of Centre-State relationships in India. These cases
further elucidate the complex dynamics of federalism in the Indian context, balancing state
autonomy with the central government's responsibility for national integrity and welfare.
Key Cases and Their Implications
State of Tamil Nadu v State of Kerala
The "State of Tamil Nadu v. State of Kerala" case, decided by the Supreme Court of India in
2014, is a significant judgment in the context of inter-state water disputes in India. This case
revolved around the long-standing conflict between the States of Tamil Nadu and Kerala over
the Mullaperiyar Dam.
Background of the Case
The Mullaperiyar Dam is located in Kerala but is operated by the State of Tamil Nadu based
on a lease agreement made during the pre-independence period. The dispute primarily
concerned the safety and water storage level of the dam. Kerala raised concerns about the dam's
safety, especially in the context of seismic activity in the region, and sought to construct a new
dam, while Tamil Nadu insisted on raising the water level in the existing dam for irrigation and
other purposes.
Key Legal Issues
The core legal issues in this dispute were:
1. Safety of the Mullaperiyar Dam: Concerns raised by Kerala about the potential
dangers posed by the dam, especially considering the possibility of earthquakes in the
region.
 2. Water Level in the Dam: Disagreement over the maximum water level that should be
allowed in the dam. Kerala wanted to lower it citing safety concerns, while Tamil Nadu
wanted to increase it to meet its water needs.
3. Rights and Obligations of the States: Interpretation of the rights and obligations of
both states concerning the operation and maintenance of the dam.
Judgment and Analysis
The Supreme Court's judgment in this case was pivotal:
 Safety of the Dam: The Court concluded that the dam was safe and that its water level
could be raised. The Court relied on various expert committees' findings, including
those of the Central Water Commission, which had ascertained the dam's safety.
 Constitutional and Legal Framework: The judgment underscored the importance of
adhering to the constitutional and legal framework governing inter-state relations and
water sharing.
 Permanent Supervisory Committee: The Supreme Court ordered the establishment
of a three-member Supervisory Committee to ensure the safety of the dam and to deal
with any emergent issues effectively.
Implications of the Judgment
 Inter-State Water Disputes Resolution: This case set a precedent for resolving inter-
state water disputes in India, emphasizing the role of expert opinions and technical
assessments.
 Federalism and Cooperative Governance: The judgment highlighted the need for
cooperative governance in managing shared natural resources, respecting both the
rights and concerns of the involved states.
 Environmental and Safety Considerations: The case also brought to the forefront the
importance of environmental and safety considerations in the management of aging
infrastructure.
In summary, the "State of Tamil Nadu v. State of Kerala" case is a landmark in the domain of
inter-state water disputes in India. It exemplifies the complex interplay between environmental
safety, resource management, and federal governance, offering insights into how such
multifaceted disputes can be addressed through legal and technical means within the
framework of India's federal structure.
Jindal Stainless Ltd v. State of Haryana
The "Jindal Stainless Ltd v. State of Haryana" case, decided by the Supreme Court of India in
2016, is a significant judgment in the context of Indian federalism, particularly regarding the
authority of state governments to levy taxes. This case dealt with the validity of entry taxes
imposed by states, a matter that has important implications for trade and commerce within the
country.
Background of the Case
Jindal Stainless Ltd, along with other companies, challenged the levy of entry tax by various
state governments. The primary contention was that such taxes were discriminatory and
impeded the free flow of trade and commerce across state boundaries, a concept protected
under Article 301 of the Indian Constitution.
Key Legal Issues
The core legal issues involved were:
1. Validity of Entry Taxes by States: The challenge was whether state governments could
impose entry taxes on goods coming from other states, and if so, under what conditions.
2. Freedom of Trade and Commerce: The case hinged on interpreting Article 301
(Freedom of Trade, Commerce, and Intercourse) and Article 304 (Restrictions on Trade,
Commerce, and Intercourse among States) of the Constitution.
3. Discrimination in Taxation: The petitioners argued that such taxes were
discriminatory and favored local goods over those coming from other states, thereby
violating the principle of equality.
Judgment and Analysis
The Supreme Court's judgment was complex and addressed various facets of federalism and
taxation:
 Upheld the Levy of Entry Tax: The Court upheld the constitutional validity of the
entry tax imposed by the states. It was decided that states have the authority to levy
such taxes, provided they do not discriminate between goods manufactured or produced
within the state and goods coming from other states.
 Non-Discriminatory and Compensatory Tax: The Court clarified that such taxes
should be compensatory in nature and should not discriminate against goods imported
from other states. The tax should be used to facilitate trade and not impede it.
 Balancing Federal Powers: This judgment balanced the powers of state governments
to raise revenues through taxation with the need to maintain the free flow of trade and
commerce across state boundaries.
Implications of the Judgment
 Impact on State Revenues and Fiscal Autonomy: The judgment was significant for
state governments, affirming their authority to levy entry taxes, which are a substantial
source of revenue.
 Guidance on Taxation Policies: The ruling provided clarity on the conditions under
which states can impose taxes on goods entering their territory, ensuring that such taxes
are not discriminatory and are in line with constitutional provisions.
 Federal Balance and Commerce: The case underscored the delicate balance between
state autonomy in fiscal matters and the overarching principle of free trade across state
lines.
In summary, the "Jindal Stainless Ltd v. State of Haryana" case represents an important decision
in the realm of Indian constitutional law, particularly concerning the taxation powers of state
governments and the principles governing inter-state trade and commerce. The Supreme
Court's ruling in this matter provided crucial guidelines for ensuring that state-level taxation
respects the federal structure and the constitutional mandate of free and fair trade across India.
Centre-State Financial Relations
Centre-State financial relations in India play a crucial role in the federal structure of the country,
ensuring the financial stability and development of both the central and state governments.
These relations are governed by the Indian Constitution, which lays out the framework for the
distribution of financial resources.
1. Revenue Sharing: The Constitution provides for the division of tax revenues between
the Centre and the states. Taxes like income tax and corporation tax are shared between
the Centre and states as per the recommendations of the Finance Commission.
2. Grants-in-Aid: The Centre provides grants to states, especially those that are
financially weaker, to help them meet their financial requirements. This includes special
grants for states facing natural calamities, or for those needing funds for specific
projects.
3. Finance Commission: Constituted every five years, the Finance Commission
recommends how the central taxes should be distributed between the Centre and states,
and among the states themselves. It also assesses the financial needs of the states and
recommends grants-in-aid.
4. Planning Commission and NITI Aayog: Previously, the Planning Commission and
now the NITI Aayog play a significant role in allocating funds to states for various
developmental projects.
5. Borrowings: While the Centre has the power to borrow both from internal and external
sources, states can borrow only from internal sources and that too with the consent of
the Centre.
6. Goods and Services Tax (GST): Introduced in 2017, GST is a comprehensive indirect
tax on the manufacture, sale, and consumption of goods and services throughout India,
replacing multiple cascading taxes levied by the central and state governments. It is
administered through a GST Council, which is a joint forum of the Centre and states.
7. Fiscal Federalism: Fiscal federalism in India implies a strong central government
providing financial assistance and guidance to states to ensure uniform economic
growth across the country.
These financial relations are dynamic and are often adjusted to meet the evolving economic
and political contexts within the country. They play a vital role in maintaining the balance of
power between the Centre and states, promoting cooperative federalism, and ensuring
economic unity and integrity of the nation.

Introduction to Centre-State Financial Relations

Defining Centre-State Financial Relations
Centre-State Financial Relations are the cornerstone of any federal system. These relations
define how financial resources are allocated, managed, and utilized across different tiers of
government. In countries like India, this involves a delicate balance, ensuring national priorities
align with the diverse needs of the states.
Importance in a Federal System
In a federal structure, these financial dynamics are not just about economics; they are about
maintaining a balance of power, ensuring equitable development, and upholding the principles
of fiscal federalism. How these funds are distributed and used plays a key role in the overall
stability and growth of the nation.
Overview of Constitutional Provisions
The Indian Constitution meticulously outlines the framework for these relations. From Articles
268 to 293, we find a detailed description of the distribution of financial powers and
responsibilities. This legal foundation ensures a systematic and fair approach to fiscal
management, vital for the country's economic integrity.
Historical Perspective
Looking back at ancient India, the concepts of fiscal management were deeply rooted in
Dharmic Law. Texts like Manusmriti and Arthashastra not only advocated for fair taxation but
also emphasized the ruler's duty towards the economic welfare of the populace. These ancient
philosophies have subtly influenced contemporary fiscal policies, reminding us of the timeless
principles of ethical governance.
Global Context
Internationally, the fiscal federalism model varies. The United States, Australia, and Canada,
for example, present distinct approaches to Centre-State financial dynamics. Each model, with
its unique characteristics, aims to balance national cohesion with regional autonomy,
illustrating the diverse applications of fiscal federalism across the globe.
Constitutional Framework
In this section, we explore the constitutional underpinnings of Centre-State financial relations
in India, which are foundational to understanding the current fiscal landscape.
Article 268 to 293: Key Provisions
The Indian Constitution, through Articles 268 to 293, lays out a comprehensive framework for
financial relations. Key provisions include Article 270, which deals with the distribution of
taxes between the Centre and the States, and Article 275, which provides for grants-in-aid to
the states by the Centre. These articles represent a complex but well-structured approach to
managing the country's fiscal policies.
Role of Finance Commission
The Finance Commission, established under Article 280, plays a pivotal role in determining
the distribution of tax revenues between the Centre and the States. Every five years, the
Commission makes recommendations on the sharing of union taxes, grants-in-aid, and other
fiscal matters. The Commission's role is not just advisory; its recommendations have shaped
the fiscal landscape of India significantly.
Grants-in-aid: Article 275
Article 275 authorizes the Centre to make grants to the states. These grants are crucial for states
that may not have adequate financial resources, ensuring that all regions, regardless of their
revenue-generating capacity, can meet developmental needs. This mechanism also reflects the
Centre's commitment to reducing regional disparities.
Landmark Judgments and Case Laws
In the realm of Centre-State financial relations, several landmark judgments have clarified and
defined the scope of constitutional provisions. For instance, the Supreme Court's rulings in
cases like the 'S.R. Bommai vs Union of India' have implications for financial autonomy and
federal balance. These judgments often underscore the need for maintaining a harmonious
fiscal relationship between the Centre and the States.
International Comparisons
Internationally, countries like Germany and Brazil also have detailed constitutional provisions
governing federal financial relations. These countries' experiences offer valuable lessons in
balancing national priorities with state-specific needs.
Revenue Sources
Now, let's delve into the diverse sources of revenue for the Centre and States, a crucial aspect
of Centre-State financial relations. This understanding is essential to appreciate how financial
resources are generated and allocated.
Division of Revenue Sources: Union, State, and Concurrent Lists
The Indian Constitution categorizes revenue sources under the Union, State, and Concurrent
Lists. The Union List includes taxes levied by the Central government, such as income tax and
customs duties. The State List encompasses taxes collected by the States, like sales tax (now
subsumed under GST) and state excise duties. The Concurrent List includes those taxes levied
by both, though such instances are rare.
Tax Sharing Between Centre and States
One of the most critical aspects of Centre-State financial relations is the sharing of tax revenues.
The Constitution provides for the distribution of certain central taxes to states, ensuring a fair
share of resources. This mechanism is vital for states to meet their financial requirements
without overly depending on central grants.
Non-tax Revenues
Beyond taxes, both the Centre and States have other sources of revenue. These include profits
from public sector enterprises, fees, and other charges for services provided by the government.
Non-tax revenues are significant for states as they provide a degree of fiscal autonomy.
Contemporary Examples and Case Studies
Recent trends in revenue sources show a shift towards GST, which has redefined the fiscal
landscape. For instance, the introduction of GST has led to a significant change in the way
states generate revenue, with a greater reliance on the Centre for compensations.
International Perspective
Comparatively, in countries like Canada and the United States, revenue sources are also divided
between federal and state/provincial governments. However, the nature and extent of this
division vary, reflecting different approaches to fiscal federalism.
The understanding of revenue sources is fundamental in grasping the complexities of Centre-
State financial relations. It highlights the diverse means through which governments finance
their operations and undertake development projects, ensuring the economic well-being of the
nation.
Financial Transfers
Moving forward, we will discuss the mechanisms of financial transfers between the Centre and
the States. These transfers are key to understanding how resources are redistributed to achieve
economic balance and development across the nation.
Types of Transfers: Statutory and Discretionary
Financial transfers from the Centre to the States are of two main types: statutory and
discretionary. Statutory transfers are mandated by the Constitution or legislation, like the
sharing of tax revenues based on the Finance Commission's recommendations. Discretionary
transfers, on the other hand, are made at the Centre's discretion, often in the form of specific-
purpose grants or loans.
Finance Commission Grants
The Finance Commission, through its recommendations, plays a critical role in determining
the quantum of statutory transfers. These grants are essential for maintaining fiscal equilibrium
among states, especially for those with lesser revenue-generating capacity. The Commission's
recommendations aim at ensuring that every state has enough resources to provide basic
services to its citizens.
Planning Commission Grants
Prior to its dissolution in 2014, the Planning Commission of India also played a significant role
in financial transfers, particularly in the form of plan grants. These grants were aimed at
supporting specific development projects and programs in the states.
Impact of Recent Reforms
In recent years, financial transfers have undergone significant changes, especially with the
implementation of GST. The need for a compensation mechanism for states that lost revenue
due to GST has added a new dimension to Centre-State financial transfers.
International Examples and Comparisons
Globally, countries like Australia and Spain also have mechanisms for financial transfers
between different levels of government. These transfers are crucial for managing disparities
and ensuring balanced regional development.
The system of financial transfers is a testament to the cooperative aspect of fiscal federalism in
India. It illustrates the Centre's role in promoting equitable development and the States' reliance
on these transfers for financial stability and growth.
Goods and Services Tax (GST)
Let's now turn our attention to the Goods and Services Tax (GST), a landmark reform in India's
tax system that significantly impacted Centre-State financial relations.
GST Council: Composition and Functions
The GST Council, constituted under Article 279A of the Indian Constitution, is a unique body
that exemplifies cooperative federalism. Comprising the Union Finance Minister, the Union
Minister of State for Revenue or Finance, and the Finance Ministers of all States, the Council
is responsible for making recommendations on various aspects of GST, including rates,
exemptions, and the model law.
Impact of GST on Centre-State Financial Relations
GST has transformed the tax landscape in India. It subsumed a plethora of central and state
taxes into a single tax, aiming to create a unified market and reduce tax-on-tax (cascading
effect). However, this also meant that states gave up their autonomy over some key tax
revenues, relying more on the Centre for their share of the GST revenue. This shift has brought
both challenges and opportunities in the fiscal dynamics between the Centre and States.
Case Studies: GST Implementation and Challenges
Since its implementation, GST has faced various challenges. Issues like the determination of
revenue-neutral rates, the mechanism for compensating states for potential revenue losses, and
administrative challenges have been at the forefront. For instance, the initial years post-GST
saw states grappling with revenue shortfalls, necessitating a compensation mechanism from
the Centre.
International Perspective
Internationally, countries like Canada and Australia also have a GST or VAT (Value Added Tax)
system. However, their models of distribution and management of GST/VAT revenues differ,
offering valuable insights into alternative approaches to indirect taxation in a federal structure.
Reflection on Ancient Indian Fiscal Practices
In contrast, ancient Indian fiscal practices, as outlined in texts like Arthashastra, advocated for
a centralized collection and decentralized distribution of revenue, ensuring efficiency and local
autonomy. While the contexts are vastly different, these ancient principles continue to resonate
in modern tax reforms, emphasizing the need for balance and fairness.
GST represents a significant shift in India's fiscal federalism, reflecting a move towards greater
uniformity in taxation while posing new challenges in maintaining the fiscal autonomy of
states.
Fiscal Federalism in Practice
In this section, we explore how fiscal federalism operates in real terms, considering the
autonomy of states, the impact of legislative acts like the FRBM Act, and recent reforms in the
context of India's Centre-State financial dynamics.
Fiscal Autonomy of States
Fiscal autonomy refers to the degree of financial independence enjoyed by the states in a federal
setup. In India, states have significant autonomy over certain revenue sources like state excise
duty, property tax, and professional tax. However, with the advent of GST, there has been a
perceptible shift, with states now more dependent on shared taxes and central transfers.
Balancing this dependence with autonomy remains a critical challenge.
Fiscal Responsibility and Budget Management (FRBM) Act
The FRBM Act, enacted in 2003, marked a significant step towards fiscal discipline at both
central and state levels. The Act sets targets for reducing fiscal deficits, thereby promoting
prudent financial management. While it limits the borrowing capacity of states, it also
encourages them to be fiscally responsible, ensuring long-term economic stability.
Recent Reforms and Challenges
Recent reforms in Indian fiscal federalism include the abolition of the Planning Commission
and its replacement with the NITI Aayog, signifying a shift from centralized planning to a more
collaborative approach. Additionally, the Ujwal DISCOM Assurance Yojana (UDAY) for the
revival of electricity distribution companies in states illustrates the Centre's role in addressing
state-specific financial challenges.
Comparative International Perspective
Looking globally, countries like Germany exhibit a different model of fiscal federalism. The
German system allows for more significant fiscal autonomy at the state level, with a complex
equalization system to balance disparities. Such international examples provide valuable
insights into alternative approaches to managing Centre-State financial dynamics.
Historical and Contemporary Anecdotes
Reflecting on history, the principles of fiscal federalism have been evident in various forms.
For instance, during the Mauryan Empire in ancient India, there was a clear demarcation of
financial responsibilities and revenue sharing between different administrative levels, an early
form of fiscal federalism.
The practice of fiscal federalism in India is a constantly evolving process, adapting to changing
economic realities and political priorities. It underscores the need for a fine balance between
central oversight and state autonomy, ensuring national cohesion while promoting regional
development.
Case Studies
In this segment, we delve into specific case studies that shed light on the practical aspects of
Centre-State financial relations in India, focusing on recent Finance Commission
recommendations and state-specific scenarios.
Analysis of Recent Finance Commission Recommendations
The recommendations of the 15th Finance Commission, for instance, have been pivotal. It
suggested a significant increase in the vertical devolution of central taxes to states, from 42%
to 45%. This shift reflects an effort to enhance the fiscal autonomy of states, allowing them
greater flexibility in addressing local needs. The Commission also recommended performance-
based incentives for states, tying financial grants to outcomes in sectors like health, education,
and sanitation.
State-Specific Case Studies
Examining state-specific case studies offers insights into the diverse fiscal challenges and
innovations across India. For example, Kerala's approach to mobilizing resources through
KIIFB (Kerala Infrastructure Investment Fund Board) showcases innovative financing
mechanisms at the state level. On the other hand, states like Bihar and Odisha, which have
historically depended more on central transfers, illustrate the challenges faced by less
economically developed states.
International Comparisons
Internationally, we can look at examples like the Australian Commonwealth Grants
Commission, which uses a formula-based approach to redistribute revenues among states,
ensuring fiscal equity. Such international models provide a comparative perspective on
managing fiscal disparities within a federal structure.
Current Issues and Debates
As we near the conclusion of our discussion on Centre-State Financial Relations, it is important
to address the current issues and debates that are shaping this dynamic field in India and
beyond.
Centre-State Disputes in Financial Matters
Contemporary India has witnessed several disputes between the Centre and States over
financial matters. These disputes often revolve around the distribution of revenues, particularly
post-GST implementation, and the criteria for grants and loans. Such conflicts highlight the
ongoing struggle to balance national economic policies with regional needs and aspirations.
Impact of Economic Reforms on Fiscal Federalism
Economic reforms, especially those initiated since the 1990s, have significantly impacted fiscal
federalism. Liberalization, privatization, and globalization have not only expanded the
economic base but also altered the revenue-sharing dynamics between the Centre and States.
States are now increasingly competing for foreign investment, leading to a shift in how they
approach fiscal management.
Role of Centre in State Debts and Liabilities
The central government's role in managing state debts and liabilities is another area of debate.
With the FRBM Act imposing fiscal discipline, states have limited avenues for borrowing. This
has led to discussions on the Centre's responsibility in aiding states during financial crises or
for major development projects.
Comparative International Perspective
Internationally, fiscal federalism faces similar challenges. For example, in the European Union,
member states grapple with the tension between national fiscal policies and EU-wide economic
directives. The management of debts and deficits within the EU framework offers valuable
lessons for similar challenges in India.
Summary of Key Points
We began by defining Centre-State Financial Relations and understanding their importance in
a federal system like India's. We then examined the constitutional framework that governs these
relations, including the key provisions and the role of the Finance Commission. The discussion
on revenue sources highlighted the division of financial powers between the Centre and States,
and the impact of GST brought to light the significant shifts in fiscal dynamics. We also looked
at practical aspects of fiscal federalism, including the challenges and innovations at both the
central and state levels.
Future Outlook
Looking ahead, Centre-State Financial Relations in India are poised for further evolution. The
ongoing implementation of GST, the recommendations of successive Finance Commissions,
and the changing global economic landscape will continue to shape these relations. The balance
between central oversight and state autonomy, equitable resource distribution, and fiscal
responsibility remains at the core of future developments.
Final Thoughts
Centre-State Financial Relations are not just about economics; they are about the ethos of a
nation, its governance, and its commitment to equitable development. As we move forward,
the challenge will be to maintain a system that is robust, fair, and adaptable to the needs of a
diverse and rapidly changing nation.

Articles 301-307: Freedom of Trade, Commerce, and Intercourse

Articles 301 to 307 of the Indian Constitution form a vital part of its Part XIII, dealing with the
freedom of trade, commerce, and intercourse within the territory of India. These articles aim to
establish a unified and integrated market within the country, ensuring the free flow of goods
and services across state boundaries. Let's delve into each of these articles in detail.
Article 301 - Freedom of Trade and Commerce
Article 301 declares that trade, commerce, and intercourse throughout the territory of India
shall be free. It is a fundamental provision aiming to remove barriers, whether physical or
fiscal, that hinder the free movement of goods and services across the nation. This article lays
the foundation for an integrated national market, essential for economic unity.
Article 302 - Power of Parliament to Impose Restrictions
Despite the guarantee of freedom under Article 301, Article 302 empowers the Parliament to
impose restrictions on trade, commerce, and intercourse among states in the public interest.
This provision ensures that the central government can intervene to maintain fairness, prevent
discrimination, or address specific national concerns.
Article 303 - Restrictions on the Legislative Powers of the Union and of the States with
Regard to Trade and Commerce
Article 303(1) prohibits the Parliament and state legislatures from giving preference to one
state over another or discriminating against any state by law. However, Article 303(2) provides
an exception, allowing the Parliament to discriminate or give preference if it is necessary for
dealing with a situation arising during a scarcity of goods in any part of India.
Article 304 - Restrictions on Trade, Commerce, and Intercourse Among States
This article allows states to impose reasonable restrictions on the freedom of trade, commerce,
or intercourse with other states or within the state itself, as long as these are in the public interest
and do not discriminate against goods from other states. Additionally, it permits states to
impose taxes on goods imported from other states, provided they do not discriminate between
imported and locally-produced goods.
Article 305 - Saving of Existing Laws and Laws Providing for State Monopolies
Article 305 saves existing laws and laws providing for state monopolies from being invalidated
by Articles 301 and 303. This means that any pre-existing state monopoly or law will not be
considered as violating the principles of free trade set out in the Constitution.
Article 306 - [Repealed]
Originally, this article provided for the continuation of existing agreements on trade,
commerce, and intercourse. However, it was repealed by the 7th Constitutional Amendment
Act, 1956.
Article 307 - Appointment of Authority for Carrying Out the Purposes of Articles 301 to
304
Finally, Article 307 empowers the Parliament to appoint an authority for ensuring the
provisions of Articles 301 to 304 are adhered to, and resolving any related disputes or issues.
In conclusion, Articles 301-307 are crucial for maintaining the economic unity of India,
balancing the free movement of goods and services with the need for reasonable restrictions in
the public interest and for addressing specific state concerns.

Key Legal Judgements

Atiabari Tea Co. Ltd. vs The State of Assam (1961)
Background of the Case: Atiabari Tea Co. Ltd. challenged the validity of the Assam Taxation
(on Goods Carried by Roads or Inland Waterways) Act, 1954. This Act imposed a tax on tea
transported by road or inland waterways. The company argued that this tax was a direct
infringement on the right to free trade and commerce as guaranteed by Article 301 of the Indian
Constitution.
Key Issues: The primary issue was whether the tax imposed by the Assam Act hindered the
freedom of trade and commerce across state borders, thus violating Article 301.
Supreme Court's Judgment: The Supreme Court, in a landmark judgment, held that the
Assam Act did indeed infringe upon the freedom of trade and commerce under Article 301.
The Court observed that any tax that directly and immediately restricts or hampers the flow of
trade is unconstitutional. However, it also recognized that certain restrictions, which are
regulatory or compensatory in nature, could be permissible under Articles 302 to 304, provided
they are in the public interest.
Significance of the Judgment: This case set a crucial precedent in interpreting Article 301. It
established that while the Constitution allows for free trade and commerce throughout India,
this right is not absolute. Taxes and restrictions that directly impede trade are not permissible,
but regulatory or compensatory measures in the public interest can be justified. This distinction
between restrictive and regulatory measures became a guiding principle for future cases
involving Centre-State trade and commerce.
This case laid the foundational understanding of the freedom of trade under Article 301 and the
extent to which state legislations can impose restrictions under the subsequent articles.
Automobile Transport (Rajasthan) Ltd. vs The State of Rajasthan & Ors (1962)
Background of the Case: This case revolved around the Rajasthan Motor Vehicles Taxation
Act, 1951, which imposed a tax on motor vehicles. Automobile Transport (Rajasthan) Ltd.
challenged the Act, claiming that it violated the freedom of trade and commerce as enshrined
in Article 301 of the Constitution.
Key Issues: The central issue was whether the tax imposed by the Rajasthan Act constituted a
restriction on the freedom of trade, commerce, and intercourse among states, thereby infringing
Article 301. Another aspect was understanding the scope of permissible restrictions under
Article 304(b).
Supreme Court's Judgment: The Supreme Court's judgment in this case further refined the
understanding of Article 301. The Court held that not all taxes would automatically infringe on
the freedom of trade. For a tax to violate Article 301, it must directly and immediately restrict
trade. In this case, the tax on motor vehicles was seen as a compensatory tax for the use of
roads, which did not directly impede the free flow of trade and commerce.
The Court also elaborated on Article 304(b), stating that states could impose reasonable
restrictions on trade and commerce in the public interest, but these restrictions must not be
discriminatory. It established a test for reasonableness: the restriction should have a direct and
close nexus with the public interest it aims to protect.
Significance of the Judgment: This case is significant for its interpretation of Article 304(b).
It clarified that states have the power to regulate trade and commerce within their territories if
such regulation is reasonable and in the public interest. The judgment also reinforced the
concept of compensatory taxes, distinguishing them from restrictive taxes that hinder trade.
The Automobile Transport case further defined the boundaries of state power in imposing taxes
and restrictions, balancing the need for state autonomy with the constitutional mandate for free
trade and commerce across India.
State of Karnataka vs Dr. Praveen Bhai Thogadia (2004)
Background of the Case: This case did not directly involve the interpretation of Articles 301-
307, but rather dealt with the implications of the freedom of speech and expression, and the
right to assemble peacefully. Dr. Praveen Bhai Thogadia, a leader of the Vishwa Hindu Parishad
(VHP), was restricted from entering certain parts of Karnataka due to apprehensions of
disturbing public order. He challenged this restriction, asserting his constitutional rights.
Key Issues: The key issue was balancing the right to freedom of speech and expression and to
assemble peacefully (under Article 19 of the Constitution) against the state's power to impose
reasonable restrictions on these rights for maintaining public order.
Supreme Court's Judgment: The Supreme Court upheld the restrictions imposed by the State
of Karnataka. The Court recognized that the state government's primary concern was
maintaining public order. In this context, the Court noted that while fundamental rights are
critical, they are not absolute and can be reasonably restricted to ensure public order.
Significance of the Judgment: Although this case didn’t directly address the issue of Centre-
State relations in the context of trade and commerce under Articles 301-307, it is significant in
the broader discourse of state powers and constitutional rights. It demonstrates the delicate
balance between individual rights and the state's authority to impose restrictions for the greater
public good.
The judgment underscores that while the Constitution guarantees fundamental rights, these
rights are subject to reasonable limitations, especially when public order or the collective
interest of the community is at stake.
This case, though more focused on Articles 19 and public order, indirectly touches upon the
broader theme of state autonomy and the limits of constitutional rights in the face of public
interest.
I.T.C. Limited vs Agricultural Produce Market Committee and Ors (2002)
Background of the Case: This case involved I.T.C. Limited challenging the imposition of
market fees on agricultural produce brought into market areas by various State Agricultural
Produce Market Committee Laws. I.T.C. argued that these fees were a violation of Article 301
as they hindered the free movement of goods.
Key Issues: The primary issue was whether the imposition of market fees by State Agricultural
Produce Market Committees on agricultural produce constituted a restriction on the freedom
of trade, commerce, and intercourse, as guaranteed under Article 301 of the Indian Constitution.
Supreme Court's Judgment: The Supreme Court held that the imposition of market fees on
the agricultural produce brought into the market areas did not violate Article 301. The Court
observed that such fees were not in the nature of a tax but a fee levied for the services provided
in the market area, like maintenance of the market, provision of facilities for persons visiting
the market, etc. Since these fees were compensatory in nature, they did not impede the free
flow of trade and commerce.
Significance of the Judgment: This judgment is significant in understanding the distinction
between a tax and a fee in the context of Article 301. The Supreme Court clarified that fees
levied for specific services provided are not considered as restrictions on free trade. The case
underscored the principle that compensatory charges for using certain facilities or services
provided by the state do not infringe upon the freedom of trade.
The I.T.C. Limited vs Agricultural Produce Market Committee case thus contributes to the
jurisprudence on what constitutes a reasonable and permissible restriction on trade and
commerce under the constitutional framework.
Kerala State Electricity Board vs Indian Aluminium Company (1975)
Background of the Case: The case involved the Indian Aluminium Company (IAC) which
had entered into an agreement with the Kerala State Electricity Board (KSEB) for the supply
of electricity at a concessional rate. However, KSEB later increased the rate, and IAC
challenged this hike, arguing it was discriminatory and violated Article 301 of the Indian
Constitution.
Key Issues: The central issue was whether the increase in electricity tariff by KSEB was
discriminatory and constituted a violation of the freedom of trade and commerce guaranteed
by Article 301. Additionally, the case also touched upon the interpretation of Article 303, which
prohibits discrimination in favor of one state over another.
Supreme Court's Judgment: The Supreme Court held that the increased tariff did not violate
Article 301. The Court stated that the hike in electricity rates by KSEB was not discriminatory
as it applied equally to all consumers of a particular category and was not specifically targeted
at IAC. Furthermore, the Court observed that the increase in the tariff was a general regulatory
measure and not a restriction on the freedom of trade and commerce.
Significance of the Judgment: This judgment is important as it addressed the issue of whether
general regulatory measures, like the revision of electricity tariffs, could be seen as impeding
the freedom of trade and commerce under Article 301. The Court’s decision in this case
reaffirmed that not all regulatory measures that might indirectly affect trade and commerce are
violations of Article 301. It established that if a regulatory measure is general and non-
discriminatory, it does not infringe upon the freedom of interstate trade and commerce.
The Kerala State Electricity Board vs Indian Aluminium Company case thus helped clarify the
scope of permissible state regulatory measures under the Constitution's provisions for trade,
commerce, and intercourse.
This concludes our discussion of the landmark cases related to Articles 301-307. Let me know
if there are any other aspects of these articles or related cases you would like to explore further.
Additional Landmark Cases
State of West Bengal vs Kesoram Industries Ltd (2004): This case dealt with the
interpretation of various constitutional provisions, including Article 304, and discussed the
imposition of entry tax.
Godfrey Philips India Ltd vs State of U.P. (2005): This case further delved into issues
surrounding Article 301 and the imposition of taxes on goods, contributing to the jurisprudence
on freedom of trade and commerce.
Vodafone International Holdings B.V. vs Union of India (2012): While this case primarily
dealt with tax jurisdiction and the retrospective taxation issue, it's useful for understanding the
broader context of taxation and legal principles that can impact trade and commerce.
L&T vs State of Karnataka (2013):
Background: This case involved a challenge to the imposition of entry tax by the State of
Karnataka.
Key Issues: The question was whether the entry tax violated the principles of free trade under
Article 301 and whether it was protected under Article 304(a).
Judgment: The Supreme Court held that the entry tax in question did not violate Article 301
as it was compensatory in nature.
Significance: This case is important for understanding the principles under which states can
impose taxes on goods coming from other states without violating Article 301.
State of Tamil Nadu vs K. Shyam Sunder (2011):
Background: This case dealt with the challenge to the levy of taxes on consumption or sale of
electricity.
Key Issues: The main issue was whether such a tax violated Article 301.
Judgment: The Court held that the levy of tax on the consumption or sale of electricity within
the state does not infringe on the freedom of trade.
Significance: This case contributes to the understanding of state-level taxation and its interplay
with the principles of free trade and commerce.

Comparative Analysis
Introduction to Comparative Federalism
As we explore Centre-State legislative relations in a global context, it's insightful to compare
India's federal structure with those of other federal countries. This comparative analysis helps
us understand the diversity in federal models and the unique challenges and successes they
present.
United States: A Model of Dual Federalism
 Nature of Federalism: The United States represents a model of dual federalism where
the powers of the federal government and the states are clearly delineated. The Tenth
Amendment reserves for states all powers not delegated to the federal government.
 Case Study: One landmark case is McCulloch v. Maryland (1819), which established
the supremacy of federal law over state law, a principle that significantly shapes
American federalism.
 Current Challenges: Issues like healthcare, environmental regulations, and
immigration policy often bring the federal government into conflict with state policies,
reflecting the dynamic nature of federal-state relations.
Australia: Centralized Federalism
 Federal Dynamics: In Australia, the federal government (Commonwealth) has
gradually gained more power, overshadowing the states. The Constitution grants the
Commonwealth powers in certain areas, with residual powers lying with the states.
  Key Aspects: The High Court of Australia plays a crucial role in interpreting the
Constitution and has often favored the expansion of Commonwealth powers.
 Contemporary Scenario: Fiscal federalism is a key issue, with the Commonwealth
controlling a significant portion of tax revenues, which are then redistributed to the
states.
Canada: Cooperative and Asymmetrical Federalism
 Federal Structure: Canada's federalism is characterized by a high degree of
cooperation between the federal government and provinces. It's also asymmetrical, with
some provinces like Quebec having distinct powers.
 Legal Framework: The Supreme Court of Canada plays a significant role in mediating
federal-provincial disputes.
 Example of Cooperation: The Canada Health Act is an example where federal and
provincial governments work together to provide universal healthcare, balancing
national standards with provincial administration.
India: Quasi-Federal System with Unitary Features
 Unique Blend: India’s federal system is unique with its blend of federal and unitary
features. While the states have significant powers, the Centre has overarching authority
in many aspects, especially during emergencies and for matters of national importance.
 Judicial Role: The Indian judiciary, particularly the Supreme Court, plays a crucial role
in maintaining the federal balance, as seen in landmark judgments like Kesavananda
Bharati v. State of Kerala.
Learning from Global Practices
 Decentralization and Autonomy: Countries like Canada show how decentralization
can lead to effective governance, especially in culturally diverse societies.
 Cooperative Federalism: The European Union's model of cooperative federalism,
despite being a supranational entity, offers insights into how diverse units can work
together while maintaining their distinct identities.
Unique Aspects of Indian Federalism
 India’s approach to federalism is tailored to its unique challenges - vast cultural
diversity, linguistic plurality, and socio-economic disparities.
 The use of Union, State, and Concurrent lists is a distinctive feature, providing a clear
yet flexible allocation of responsibilities.
Influence of Ancient Indian Governance
 Ancient Indian governance systems, such as those seen in the Maurya and Gupta
Empires, displayed characteristics of federalism with decentralized administration
while maintaining a strong central authority. This historical context influences
contemporary Indian federalism, blending ancient concepts with modern democratic
principles.
Way Forward and Conclusion
Recommendations for Strengthening Centre-State Relations
To strengthen Centre-State Relations in India, several approaches can be considered:
 Enhancing Cooperative Federalism: Encouraging genuine dialogue and
collaboration in platforms like the GST Council and the Inter-State Council can lead to
more effective policy-making and conflict resolution.
 Balancing Autonomy and Integration: It’s crucial to find a balance between
respecting state autonomy and maintaining national integrity. This can be achieved
through fair and transparent mechanisms in resource distribution and legislative
powers.
 Institutional Reforms: Strengthening institutions like the Finance Commission and
ensuring the non-partisan appointment of Governors can help build trust and efficiency
in Centre-State interactions.
 Learning from International Practices: Adopting successful elements from other
federal systems, like the decentralized governance model of Canada or the cooperative
federalism of the European Union, can be beneficial.
Final Thoughts on the Evolution of Centre-State Relations in India
 Centre-State Relations in India have evolved from a period of centralized control to a
more cooperative and dynamic federal structure.
 This evolution reflects India's democratic maturity and its ability to adapt to changing
political, economic, and social landscapes.
 The wisdom of ancient Indian governance, emphasizing balance and justice, continues
to resonate in modern federal principles.
The Way Forward
Introduction to Future Prospects
As we conclude our exploration of Centre-State legislative relations, it's important to look
ahead. The way forward involves adapting our federal system to contemporary challenges
while preserving the delicate balance of power that characterizes Indian federalism.
Strengthening Cooperative Federalism
 Enhanced Collaboration: The future should see enhanced collaboration between the
Centre and States, especially in areas like healthcare, education, and environmental
protection. This can be achieved through regular consultations and joint decision-
making bodies like the GST Council.
 Respecting Autonomy: While cooperation is key, respecting the autonomy of States in
their domains is crucial. This balance will ensure that local needs are met without
compromising national interests.
Fiscal Federalism: A Key Area of Focus
  Equitable Distribution: The distribution of financial resources is a critical area.
Ensuring an equitable distribution of revenues between the Centre and States, possibly
through a more empowered Finance Commission, is vital.
 Addressing GST Challenges: Resolving the ongoing challenges with GST, including
the compensation to States and simplification of the tax structure, will be essential.
Judicial Interventions and Reforms
 Role of Judiciary: The judiciary should continue its role as the arbitrator in Centre-
State disputes, ensuring that constitutional provisions are upheld.
 Legal Reforms: Legal reforms, especially in interpreting the federal structure, can
provide more clarity and predictability in Centre-State relations.
Learning from Global Best Practices
 International Lessons: India can learn from other federal countries, adopting best
practices in areas like health, education, and environmental governance.
 Customized Approaches: Any adaptation should, however, be customized to India's
unique socio-political context.
Empowering Local Governance
 Decentralization: True federalism involves empowering not just the States but also
local governance bodies like panchayats and municipalities. This would be in line with
the ancient Dharmic principles of decentralized governance.
Concluding Thoughts
 Evolving Federalism: Indian federalism is an evolving landscape, and the future lies
in adapting to changing times while upholding the core values of our Constitution.
 Collaborative Spirit: A spirit of collaboration, respect for diversity, and a commitment
to the common good will be key drivers in shaping a robust and dynamic Centre-State
relationship.
Dr. Pragya Mishra,
Assistant Professor, Department of Law
University of Allahabad, Prayagraj