9911796707
TMI Blog2016 (2) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... im and does not have the legislative competence to enact the impugned law. If the legislative head is to be traced for the impugned legislation, at the best, the same may be traced in Entry 7 in the Concurrent List for the reason that the impugned legislation and the provisions enacted therein deal with the special kind of contract which would be falling within the said Entry. But then even in this purview the State law fails to co-exist and stands in conflict with the Security Contracts (Regulation) Act. The impugned legislation could be traced for its legislative head at the best, to Entry 7 in List III-the Concurrent List to the Seventh Schedule of the Constitution, as the impugned legislation and the provisions enacted therein deal with the subject-special kind contract falling within that Entry. The impugned legislation, however in its pith and substance is a law in respect of any in connection with the Regulation of Securities and the governing mechanism therefor which are provided for by the aforesaid laws made by the Parliament. The provisions of the impugned legislation are irreconcilable with the Central legislation occupying the field. The impugned law made by the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by it. 2. As all the captioned petitions involve common challenge, similar facts and identical issues as well as the prayers being on the same lines, they were heard together. Accordingly, they are being finally decided simultaneously by this common judgment. 2.1 The discussion hereinafter, for convenient reference, is classified as per following sub-heads and the corresponding paragraphs thereto. Image No. 1 Basic Challenge and the Prayers 3. The challenge, as stated above, is addressed to the constitutionality of Sardar Sarovar Narmada Nigam Limited (Conferment of Powers to Redeem Bonds) Act, 2008 (hereinafter referred to as the impugned Act for the sake of brevity). Legislative competence of Legislature of State is called in question for enacting the said law on the various grounds. 3.1 In each of the petitions, the common prayer is to declare the impugned Act as unconstitutional. In the second place, it is prayed to set aside notice dated 03rd November, 1994 issued to the petitioners- Bond- holders by the Sardar Sarovar Narmada Nigam Limited (SSNNL) respondent No.2 to redeem the Bonds. The third common prayer is to declare all the steps taken by respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive dates. More than seven lakhs Deep Discount Bonds issued to the public as above and they were listed in 10 Stock Exchanges across the country. 3.2.3 On 29th March, 2008, the State of Gujarat promulgated a statute being an Act No. 12 of 2008 being the impugned legislation, whereby, the powers were conferred on the company to redeem the Bonds notwithstanding anything contained in the conditions relating to redemption of Bonds in the Prospectus. The various terms and conditions of the DDBs are set out in detail hereinafter. 3.2.4 It is the case of the petitioners based on the conditions of the Issue that there was only a Put Option , implying thereby that only in case of investors willing to surrender the Bonds for premature redemption, they can do the same at determined rates and on specified dates. There was no Call Option , and it is the contention of the petitioners that respondent No.2-SSNNL could not have redeemed the Bonds premature prior to the date of maturity and expiry period. 3.2.5 In the impugned Act, condition No.3A was inserted on the financial covenants giving right to Sardar Sarovar Narmada Nigam Limited (SSNNL) to redeem the Bonds prior to the end of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividuals who acquired 1 Bond on 30th January, 1995. 3.3.4 The petitioner of Special Civil Application No.15195 of 2008 is India Tourism Development Corporation Limited, Staff Provident Fund Trust who acquired 594 Bonds in the year 2005 at the cost of ₹ 02,91,56,575/- from the secondary market. 3.3.5 The petitioner of Special Civil Application No.15437 of 2008 is Win-Medicare Limited Employees Provident Fund; it is a trust engaged for safeguarding interest of the members who are employees of the associate companies. This the petitioner acquired 916 Bonds between the year 2005 to 2007 at the cost of ₹ 04,93,00,950/- from the secondary market at the competitive rates to secure yield on the date of maturity. 3.3.6 One Kanta Devi is the petitioner of Special Civil Application No.149 of 2009. The said petitioner has been holding 12 Bonds of SSNNL and it is averred that the Bonds are mutated in the name of the petitioner company in the Demate Account. It is further stated that at the end of the maturity period, the petitioner was to get ₹ 13,32,000/-. 3.3.7 Hasting Jute Mill Provident Fund is the petitioner of Special Civil Application No.238 of 2009 who acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 55,42,56,500/- at the premium of ₹ 51,68,70,500/- over the face value of ₹ 03,600/- per Bond with the face value of ₹ 01,11,000/- as on 11th January, 2014. It is the further case of the petitioners that they purchased the said Bonds from the secondary market at such high premium because of the clear and specific assurances given by the respondent Nos.2 and 3 guaranteeing the face value of the Bonds mentioned in the Bond document. 3.3.15 The petitioner of Special Civil Application No.3993 of 2014 is Hotel Janpath Employees Provident Fund, a Trust engaged in safeguarding the interest of its members who are employees at Hotel Janpath. This petitioner purchased the Bonds between the year 2005 and 2007 and that there was no call option available to respondent No.2. The said petitioner is aggrieved by premature redemption of Bonds acted upon under the impugned Act. 3.3.16 The petitioners of Special Civil Application No.3331 of 2014 are (i) Sri. Mohan D. Kulkarni, (ii) Mysore Paper Mills Employees Group Gratuity Trust Fund, (iii) Sri. S. Kempaiah and (iv) Mysore Paper Mills Employees Provident Fund Trust. Petitioner No.2 acquired 100 Bonds aggregating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .3. 3.3.21 The petitioner of Special Civil Application No.16463 of 2014 is a private individual who invested in 50 Bonds. 3.3.22 The petitioner of Special Civil Application No.15435 of 2008 is the Board of Trustees Hindustan Steel Limited Bhailai Steel Project Provident Fund. It is the case of the petitioner that with an intention to reap the benefit of interest in the yield at the end of maturity period of the Bonds, it purchased 5000 DDBs in three different lots in September-October 2005 from the secondary market at total investment of ₹ 27.67 crores at the market price obtained on that date. 3.3.23 The petitioner of Special Civil Application No.15613 of 2008 is the Board of Trustees for Bokaro Steel Employees Provident Fund. The petitioner purchased by a single lot 3218 DDBs from the secondary market investing ₹ 20 crores approximately at a market price at the relevant time. It is the case that because of premature redemption of the Bonds sought to be effected under the impugned Act, the petitioner would suffer huge loss in crores. The petitioner has given details of purchased lot and the investment. 3.3.24 The petitioners of Special Civil Application No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Constitution of India before one High Court i.e. Gujarat High Court. Learned counsel for the parties also agree to pursue their remedy under Article 226 of the Constitution of India before the Gujarat High Court. We, accordingly, allow the concerned petitioners to convert their petitions under Article 32 of the Constitution of India, as petitions filed under Article 226 of the Constitution of India and transfer the writ petitions and all other writ petitions (now listed as transfer case) to Gujarat High Court for decision on merit. Parties are given liberty to file additional affidavit/counter affidavit or amended petition taking additional grounds to challenge the validity of the law before the Gujarat High Court. The Gujarat High Court is expected to decide the writ petitions expeditiously. All the cases before this Court stand closed. 3.4.2 Accordingly the said matters came to be listed, converted into Special Civil Applications and were placed with other similar petitions in which similar issue of constitutional validity of Sardar Sarovar Narmada Nigam Limited (Conferment of Power to Redeem Bonds) Act, 2008 was under challenge. 3.4.3 It appears that all suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In case of withdrawal Deemed Face Value At the end of 7 year Rs.12,500 At the end of 11 years Rs.25,000 At the end of 15 years Rs.50,000 3.5.1 The Bonds were non-convertible. Minimum number of Bond required to be applied was one and there was no maximum limit. The terms of payment were that the full issue price was ₹ 3600/- per Bond to be paid as indicated along with the application one half and rest of one half at the time of allotment. 3.5.2 It provided procedure for withdrawal and transfer of Bonds and it was stated that Bonds were in the nature of Promissory Notes. The relevant clauses are as under, Procedure for withdrawal In order to exercise his option to withdraw the Bond amount before the redemption date at the end of the periods as specified above, the Bondholder should send the Bond certificate(s) duly discharged by signing on the back of the Bond Certificate alongwith a written intimation mentioning his intention to withdraw, to the Company so as to reach them between three (3) and six (6) months pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) Default in payment of monies due in respect of interest and principal owing upon the Bonds. (2) Default in payment of any other monies including costs, charges and expenses incurred by the Trustees. (3) Winding up of the Company (4) If the Company ceases, without the consent of the Trustees, to carry on its business or gives notice of its intention to do so. (5) If it is certified by a Chartered Accountant or a firm of Chartered Accountants appointed by the Trustees that the liabilities of the Company exceed its assets. 3.5.5 It was stated in the Prospectus that applications were made before the Government of Maharashtra, Government of Gujarat, Government of Rajasthan as well as Government of Madhya Pradesh under the relevant provisions of the Public Trust Act applicable in the respective State for declaration to treat the Bond as public security. Rights of Bondholders were mentioned as under. 3.5.6 On the rights of holders of the Bonds, it was provided as under, Rights of Bondholders (i) The Bonds shall not confer upon the holders thereof a right to receive notices or Annual Reports of, or to attend and/or vote, at the General Meetings of the Share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or any of the Bonds, at any time prior to the specified date of redemption and may re-issue the same or may cancel them. Where the Company has redeemed or repurchased any of the Bonds, the Company shall have and shall be deemed always to have had the right to keep such Bonds alive for the purpose of re-issue and in exercising such right the Company shall have and shall be deemed always to have had the power to re-issue such Bonds either by re-issuing the same Bonds or by issuing other Bonds in their place. 3.5.8 The Prospectus stated details about the company-SSNNL. It further stated the details of object of the Issue to be to part finance the Sardar Sarovar Project and to repay bridge finance. The project cost of the Sardar Sarovar, the flow fund statement of the estimated fund, etc., were mentioned. Tripartite Agreement 3.6 The Prospectus of the Issues of the DDBs also mentioned inter alia about a Tripartite Agreement entered into. It appears that on 20th August, 1993, a Tripartite Agreement came to be entered amongst the State Government, SSNNL and the Trustees of the Issue in order to provide adequate comfort to the investors in relation to the Issue of the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r distribution canals. Power generating facilities would be located on the river bed and on the reservoir outlet to the main canal. The River Bed Power House (RBPH) located underground on the right bank, downstream of the main dam, would be quipped with 6 reversible Francis Type Turbine Units, each with a capacity of 200 MW. The Canal Head Power House (CHPH) situated on the right bank, upstream of the main dam, is designed as a conventional surface station with 5 Kaplan type units of 50 MW capacity. The total generating capacity would be 1450 MW. Water supply and distribution facilities would include the construction of a 460 Km long main canal leading to the Gujarat-Rajasthan border. The canal would be concrete lined and have a capacity of 1133 cumecs (40,000 cusecs) at the head and about 71 cumecs (2,500 cusecs) at the tail end. The main canal would be supported by branch canals and minor distribution systems measuring about 75,000 Kms. (3) It is estimated that the Narmada Project would encompass 18,00,000 hectares situate in 3339 villages of 62 Talukas of 12 Districts of the State of Gujarat and these would be irrigated on the completion of the Narmada Project. Further, over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,11,000/- each issued at deep discounted price of ₹ 3,600/- each having stipulated maturity period And (b) 18% Non Convertible (Non Cumulative) Bonds of the face value of ₹ 5000/- each redeemable after the expiry of a specified period commencing from the date of allotment. The Deep Discount Bonds referred to in sub para (a) above are hereinafter called DD Bonds and the 18% Non Convertible (Non-Cumulative) Bonds referred to in sub para (b) above are hereinafter called NC Bonds . The DD Bonds and NC Bonds are wherever the context so admits, collectively referred to as the said Bonds . The aggregate issue proceeds of the said Bonds is ₹ 300 Crores (Rupees three hundred Crores). (8) The instrument in relation to the DD Bond shall be issued in such form as would be setforth in the security and other documentation. The brief particulars of the features of the instrument would be referred to in the Offer Document. It is expected that DD Bonds would be listed on several recognised Stock Exchanges and as such would be governed by the terms to be set out in the Offer Document. (9) The interest on the NC Bonds would be subject to tax including withholdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd shall not affect the construction hereof and in these presents and Schedules hereto, unless there is something in the subject or context inconsistent therewith. The following expressions shall have the meaning hereinafter mentioned, that is to say:- (a) Bonds or the said Bonds shall mean collectively the Deep Discount Bonds (DD Bonds) and the 18% Non-Convertible (non-Cumulative) Bonds (NC Bonds) of the aggregate value (issue proceeds) of ₹ 300 Crores proposed to be issued pursuant to a decision of the Board of Directors of SSNNL dated 18-1-1993 and in terms of the Offer Documents. (b) DD Bonds shall mean the Deep Discount Bonds (Series A ) of the face value of ₹ 1,11,000/- each proposed to be issued in terms of Board Resolution dated 18.1.1993 by SSNL, and in terms of the offer Documents. (c) Designated Account or Designated Accounts shall mean such bank account or accounts specified as designated accounts under clause 3(b) hereof. (d) NC Bonds means the 18% Non-Convertible (noncumulative) Series I Bonds of the face value of ₹ 5,000/- each issued in terms of Board Resolution dated 18.1.1993, and in terms of the offer Documents. (e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior working day shall be the Preview Date . (p) Request (whether or not used in its capitalised form but subject to the context) shall mean the Notice in the form prescribed herein for Additional Funding. (q) Schedule shall mean any Schedule attached to this agreement containing the principal terms and conditions relating to the modalities of Additional Funding. (r) Security shall mean the mortgage, charge or lien or other security interest created/to be created by SSNNL in favour of the Trustees acting as trustees for the Bondholders in accordance with Clause 7(a) hereof. (s) Service Date , Service Dates shall mean any or all dates during the term of the said Bonds on which any payment of principal, interest, premium, redemption amount(s) or any other sum whatsoever falls due for payment by SSNNL to the Bondholders. (t) SSNNL shall mean Sardar Sarovar Narmada Nigam Limited, a company having its registered office at Block No.12, 1st Floor, New Sachivalaya Complex, Gandhinagar, Gujarat. (u) Trustees shall mean the trustees for the Bondholders and shall in the first instance mean ICICI and in the even tof any change or substitution of Trustees shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re inadequate funds in the Designated Account (s) available for payment on the relevant Service Date, or if the Trustees are otherwise satisfied, having regard to the circumstances pertaining to SSNNL that it would be in a position to fully pay and/or discharge obligations on the relevant Service Date, the Trustees and/or SSNNL shall forthwith be entitled to declare that an Event of Eligibility to Call has occurred, and shall forthwith be entitled to communicate the same to the appropriate official of GOG, being the Additional Chief Secretary (FD) Government of Gujarat or failing him or in case of redesignation, to the Chief Secretary, Government of Gujarat. (d) (i) Upon the communication of the Event of Eligibility to Call as aforesaid to GOG by the Trustees and/or SSNNL in the form of a Notice referred to aforesaid, intimating the extent of the Additional Funding required, GOG agrees to promptly make disbursement into the Designated Account/s of requisite funds, to the extent so required by SSNNL and/or the Trustees. GOG further agrees that it shall communicate its decision in relation to the mode and combination of the Additional Funding required, in respect whereof GOG sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssly clarified that neither SSNNL nor the Trustees shall be required or obliged in any manner to inquire into or ascertain whether any internal procedures, resolutions or consents are required to be obtained or complied with by GOG nor to the pendency of such procedure to be an excuse or ground for non-payment of the Additional Funding or any delay in making available the same to SSNNL and/or Trustees as requested therein. They shall presume all such compliance. SSNNL and/or the Trustees shall, upon valid delivery of the Notice or Request as above be entitled to assume and GOG warrants that such Notice has been validly delivered and that all internal compliances, approvals and procedures have been complied with an, in any event there is no material requirement outstanding for compliance in that behalf. (e) The Notice issued by the Trustees upon GOG shall be binding on GOG and the same shall to the extent applicable also be subject to the provisions of the Security and such other arrangements in favour of the Trustees under the provisions of clause 6 hereof. Upon the issuance of such notice for Additional Funding by the Trustees, all further modalities in relation to the obtainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order or direction of any Court or other appropriate authority to the extent that the exercise of any remedies by the Trustees against SSNNL and/or GOG shall be expeditiously undertaken, if necessary by the Trustees under such authority. 4. In the event of the Additional Funding being in the form of subscription to equity or payment of calls on the Partly Paid Shares, then, it is agreed by GOG, that SSNNL and the Trustees on behalf of SSNNL, subject to the provisions of law and of the Articles of Association of SSNNL, are entitled to make one or more calls of such amount or amounts as they think fit, in respect of Partly Paid Shares, with the condition that shares having the same amount paid up thereon being considered as shares of the same class. The Trustees as agents and attorneys of GOG are also irrevocably authorised on behalf of GOG to agree with SSNNL to credit the amount of Additional Funding or such part thereof as may be decided as being appropriate to a portion of or to a limited number of Partly Paid Shares of the same class with a view to make them fully paid, whilst on the other hand retaining them as Partly Paid Shares of the same class or to reduce the outst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges of a revenue nature failing due on the relevant Service Date and in the third instance to the payment of all amounts of a principal or capital nature falling due on the relevant Service Date. SECURITY AND ADDITIONAL DOCUMENTATION (ii) SSNNL agrees that the said Bonds and Outstandings relating thereto shall be secured by SSNNL in such form and manner as may be agreed by and between themselves and the Trustees. The form and manner of security may interalia include: (a) a mortgage on the said immovable property being a bungalow situate on a sub-plot No.8 admeasuring 2503.002 square meters on plot NO.280, Town Planning Scheme No.14, Near Narmada Colony, Dafnala, Shahibaug, Ahmedabad in the State of Gujarat. (b) a first charge on the Additional Funding and in respect of the rights of and benefits accruing to SSNNL under the provisions of this Agreement. (iii) SSNNL and GOG agree that they shall also enter into and execute such further documentation and arrangement as may be required in relation to the Security and for making provision for various covenants of positive and negative nature and to issue such further confirmation as may be deemed necessary by the Tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds for the time being issued have been paid off or satisfied and upon payment of all costs, charges and expenses incurred by the Trustees (including the remuneration of the Trustees and all interest therein) the Trustees shall, at the request and cost of SSNNL release or reassign to SSNNL or as SSNNL may direct, the Security or such part thereof as may therein subject to such security to be created by SSNNL in favour of the Trustees thereon. (viii) The provisions of this Agreement and the obligations contained thereunder shall be binding upon GOG notwithstanding that SSNNL at any stage ceases to be a wholly owned subsidiary of GOG or, notwithstanding, any reorganisation, amalgamation, or winding up of SSNNL or any other event of similar nature. (ix) This Agreement shall be effective on and from the date first hereinabove written and shall be in force till all the monies in respect of the Bonds have been fully paid and discharged. IN WITNESS WHEREOF the Company has caused its Common Seal to be affixed to this Agreement has caused this Agreement to be executed in triplicate and the other parties hereto have caused to be executed the same by their respective officials/Constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here. 3.7.3 It was thereafter that in the year 2008 the State Legislature enacted the impugned law, thereby premature redemption was permitted by modifying the terms of financial covenants and conditions in the Bond Certificate with retrospective effect by way of statutory provision. A Call option was given to the Company-SSNNL. A notice dated 03rd November, 2008 was issued to the Bond-holders mentioning therein inter alia that if the Deep Discount Bonds were not surrendered for redemption, interest would not be paid beyond 10th January, 2009. Text of Impugned Legislation 3.8 Before proceeding further, the entire text of impugned legislation being Gujarat Act No.12 of 2008 as published in the Government of Gujarat Gazette extraordinary, dated 29th March, 2008 which is divided into three Sections, is reproduced hereunder. GUJARAT ACT. 12 OF 2008 To confer power on the Sardar Sarovar Narmada Nigam Limited to redeem in the public interest, the Deep Discount Bonds issued by it. It is hereby enacted in the Fifty-ninth Year of the Republic of India, as follows:- 10. This Act may be called the Sardar Sarovar Narmada Nigam Limited (Conferment of Power to Redeem B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of this Act and of the Deep Discount Bonds (as amended by this Act) issued by the Company and no injunction shall be granted by any civil court in respect of any action taken or to be taken in pursuance of any financial covenant or condition of the Bonds. 3.8.1 The Statement of Objects and Reasons for the above legislation reads as under, The Sardar Sarovar Narmada Nigam Limited has issued Deep Discount Bonds in the year 1993 having a face value of ₹ 1,11,000 at a discounted price of ₹ 3,600 each with a maturity period of 20 years from the date of allotment i.e. 11th January, 1994 thereby collecting ₹ 257.09 crores for financing the Sardar Sarovar Project. The Bond at the end of 7th, 11th, 15th and 20th year from the date of allotment with a deemed face value of ₹ 12,500/- Rs, 25,000/-, ₹ 50,000/- and ₹ 1,11,000/- respectively. The financial covenants and conditions of the Bonds do not given option to the Nigam to redeem the Bonds comes to about nineteen per cent considering the present trend of declining rates of interest which has stabilized at 10.75 per cent and the enormous liability of the Nigam to make payment of ₹ 7,44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to in detail hereinbelow. Submissions on behalf of the petitioners 4.2 Learned Senior Counsel Mr.Deven Parikh with learned advocate Mr.Kunal Nanavati for the petitioners inter alia canvassed the following main submissions, (i) The State did not have source of power to enact the legislation in question. No Entry either in List II or List III would confer the legislative competence for passing the impugned law. (ii) The Entry 43 in List II of Public Debt of State does not apply. The Public Debt is a special connotation and meaning. It has specific context to the Consolidated Fund. It has restrictive meaning. (iii) Every debt of State is not public debt. The impugned statute does not relate to Public Debt of State . There is a distinction between the public debt and other debt in the context of Entry 43. (iv) Article 292 and 293 deal with the borrowing power of the State. They are to be read with Rule 2(a) and Rule 7 of Gujarat Fiscal Rules, 2006. They cannot be the basis to bring impugned legislation within the legislative entry 'Public Debt of the State'. (v) An Entry in the List in Schedule VII cannot be read in such a wide manner as sought to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement. (c) There was no question of security to the extent of 1.25 times having been got reduced in value; (d) No demand was made in the tripartite agreement till the statute was enacted. (e) The rate of interest of 18.92% cannot be said to be unconscionable when Issue guaranteed it. (f) There was a application of mind in the context of modification of terms by majority of Bond-holders; (g) The petitioners are in position of trust for their workers; (h) A Rating was obtained for the Bonds and they were offered as public security. (i) Subsequently, modification of terms was unreasonable and cannot be justified. (j) The ex-parte redemption under the impugned Act was a fraud on the powers. Further submissions 4.3 The other learned advocates for the different petitioners Mr.Maulin Raval, Mr.B.T. Rao Mr.Tushar Hemani, and Mr.Masoom Shah adopted the above submissions of learned senior counsel and made additional submissions summarized as under, (i) An Entry in any of the Lists in the Seventh Schedule to the Constitution should be construed in its legal meaning and not as per its popular meaning. Giving broad meaning to the Entry does not mean depriving it of its essence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of the Issue of Bonds mentioned that as on 03rd November, 2008, 06,69,371 DDBs were outstanding and out of the said total 01,70,462 DDBs were held by 01,29,841 investors in the State of Gujarat and the remaining 04,98,909 Bonds were held by 02,79,335 investors outside the State of Gujarat. 4.3.3 Learned advocates for the petitioners in addition to above submitted that when the Issue was floated throughout the country and the same was listed in different stock markets, the impugned legislation affected the rights of the Bond-holders who are outside the State and who purchased the Bonds outside the State; in other words, the impugned legislation has extra-territorial operation and such law could not have been enacted by the State. It was submitted that the legislative powers of the State could not extent beyond the territory and the rights of the Bondholders outside the State could not have been adversely affected and they could not have been deprived of the benefits flowing from the Issue including earning the interest at the prescribed rate. Learned advocates assailed the constitutionality of the legislation on the aforesaid ground of it having an extra-territorial opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ah Sharma Vs Union of India [(2001) 5 SCC 212, Para 18] was relied on for canvassing the principle of excessive delegation and to contend that the impugned legislation suffers from the said vice. (2) Decisions in M.C. Mehta Vs Union of India [AIR 1987 SC 1086(1), para 29], Shrikant Vs Vasantrao [(2006) 2 SCC 682, para 19 28 and 30], Pradeep Kumar Biswas Vs Indian Institute of chemical Biology [(2002) 5 SCC 111, para 20] and Dr. S.L. Agarwal Vs the General Manager, Hindustan Steel Ltd. [AIR 1970 SC 1150, para 8, 9 and 10] were relied on to submit that even though respondent No.2 may be a State for the purpose of Article 12 of the Constitution, it nevertheless cannot be equated with State Government. (3) Decision in Jogendra Lal Saha Vs State of Bihar [AIR 1991 SC 1148] was pressed into service for the purpose of the following proposition contained therein. 7. The contract in question is in fact contrary to the scheme of this Act. It tries to take away the right of the contractor to be paid excess money earned on subsequent sale, though Section 83(3) of the Act authorises the contractor to claim the excess amount within the time stipulated. Some of the other terms under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed into service. (ii) The impugned legislation clearly falls under Entry 43 List II namely Public Debt of the State . This Entry read with Entry 20 List III namely Economic and Social Planning applies. The pith and substance of the legislation has to be seen. (iii) The public debt is borrowing by the State and its instrumentality. Furthermore, the facts of the legislation had a link with budgetary source. (iv) The impugned legislation properly derives its legislative field as per the entry above and the state is competent to enact the said statute. There is no conflict between the impugned legislation and any other law made by the Parliament. (v) The doctrine of incidental encroachment was emphasized to submit and contend that there is no encroachment over the field of the Parliament by virtue of the impugned enactment. (vi) Because of tripartite agreement dated 20th August, 1993 the State Government entered the shoe of SSNNL, the debt of SSNNL become State debt which was not segragable from the State liability, it became public debt of the State. (ix) It was not compulsory for SSNNL to redeem the Bonds and the provisions in the impugned enactment were in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the pace of the Project. Learned Advocate General by referring to the averments and narration of facts on this aspects, wanted to contend that the impugned law was in relation to social and economic planning in the context of multipurpose Sardar Sarovar Project. He wanted to submit that that Government of Gujarat had borrowed money for the Project which was through respondent No.2-SSNNL and for the said borrowing, Government of Gujarat had issued guarantees in public interest. His attempt was to also indicate thereby that it was a public debt of the State which was being discharged through means of the impugned law. Decisions relied on behalf the State Government 4.7 Following decisions were relied on by learned Advocate General in support of his above submissions, (1) G.N. Venkataswamy Vs Tamil Nadu Small Industries Development Corporation Ltd. [AIR 1981 Madras 318, paragraphs 1,2,10,16, 19, 26, 58]. Thereby interpretation of expression public debt was highlighted that the expression public debt has a meaning of its own as reflected in the Public Debt Act, 1944. The expression connotes only borrowing by the Government from the public and does not take in any amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raphs 1,2, 9 to 14 , 22, 23] were referred to on the aspect of legislative competency and the parameters for determining the same. 4.7.2 A Division Bench decision of this court in Jayantilal Ravishankar Bhatt Vs State of Gujarat [1970 GLR 844] was relied on in which the constitutional validity of Gujarat Industrial Development Act was challenged on the ground that the subject matter falls under Entry 48 of List I in the Seventh Schedule of the Constitution, When a law is impugned on the ground that it is ultra vires the powers of the legislature which enacted it, what has to be ascertained is the true character of the legislation, its pith and substance. If on examination, it is found that the legislation is in substance on a topic within the competence of the legislature, it should be held to have valid in its entirety, even though incidentally it might trench on matters beyond its competence. The extent of the encroachment on matters beyond its competence may be an element in determining whether the legislation is colourable, that is, whether in the guise of making a law on the mater within its competence, the legislature is, in truth, making a law on a subject beyond its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also in course of social and economic planning, for, the whole subject matter relates to Narmada Project. (iv) In the project the entire interest burden is to be discharged by the State of Gujarat and the total debt is divided into three stages. (v) There was no inviolable right for the investors. A withdrawal option was available. (vi) The objects and reasons of the impugned Act are quite relevant, it was submitted by learned counsel and he highlighted the same. (vii) Intention of the Legislature was not to legislate on the Bond but basically and for all purposes to reduce the public debt for managing and pursing economic and social planning. (ix) The budgetary allocation, the tripartite agreement, the nature of project, the assets generated, etc., are the strong aspects which link the entire exercise of passing the impugned legislation in relation to the debt of the State. Therefore the subject was public debt of the State and Entry 43 in List II read with Entry 20 in List III would apply. (x) In pith and substance, the concept of public debt was acted upon. It was submitted that referring to any other Entry in List I would be on the contrary a colourable exerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w made by the State Legislature has entrenched the law made by the Union Legislature. Here more pertinent question would be the extent of entrenchment or encroachment. It would be the moot question whether the encroachment is marginal or substantial. He submitted that the incidental encroachment of law by the State Legislature in the area of law made by the Parliament would not render the State law invalid once the legislative field was available to the State Legislature under an Entry for enacting its law. He submitted that merely because of law of the State Legislature is in apparent disharmony, it would not get automatically invalidated and further inquiry would be necessary whether it sands in real conflict with the Central legislation. There is indeed no dispute to the aforesaid principle stated by learned senior counsel. The question to be addressed while considering the constitutionality of legislation enacted by the State Legislature when pitted against the law made by the Central Legislature, would be whether both the laws having regard to the legislative Entry to which they claim their competence and existence, can stand together duly reconciled. Decisions Relied on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether having regard to the doctrine of occupied field, the impugned legislation stands valid or it is unconstitutional because of its inrod into the subject matter field occupied by the Central legislation; (e) For the purpose of (c) and (d) above, what is the scope and operational ambit of the laws enacted by the Union Legislature, namely (i) the Securities Interest (Regulation) Act, 1956; (ii) Securities and Exchange Board of India Act, 1992; (iii) the Indian Companies Act, 1956; (iv) the Negotiable Instruments Act, 1882 and (v) Indian Contract Act, 1872 for their concerning provisions compared to the impugned legislation; (f) The nature, scope, ambit and effect of the impugned law made by the State Legislature; (g) The encroachment into, conflict with and trenching upon by the impugned legislation vis- vis the aforesaid laws made by the Parliament; the vires and the constitutionality of the impugned law; (h) The question of consequential relief. Constitutional Provisions 6. It is in the setting of the interpretational effect and operational scope and ambit of the provisions of Article 246 read with Article 254, further to be read with the relevant Entries, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in the State: Provided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State. 6.1.2 Article 246 gives supremacy to the Parliament in respect of enacting laws and vests exclusive power in the Parliament to make laws in respect of any of the matters enumerated in List I in the VIIth Schedule. List I known as Union List sets out the different heads the subject matter in respect of which the Parliament is conferred an exclusive power for making laws. List II in the VIIth Schedule which is the State List, enumerates the subjects on which the State has the power to make laws. List III the Concurrent List envisages the subjects in respect of which the Parliament as well as the State Legislatures may enact laws. The power of the State Legislatures to make law in respect of matters e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out scope, applicability and working of Article 254, the Apex Court in Vijay Kumar Sharma Vs State of Karnataka [(1990) 2 SCC 562] explained as under which may be pertinently extracted. The Court has to examine in each case whether both the legislations or the relevant provisions therein occupy the same field with respect to one of the matters enumerated in the Concurrent List and whether there exists repugnance between the two laws. The emphasis laid by Art. 254 is with respect to that matter . Clause (1) of Art. 254 posits as a rule that in case of repugnancy or inconsistency between the State law and the Union law relating to the same matter in the Concurrent List occupying the same field, the Union law shall prevail and the State law will fail to the extent of the repugnancy or inconsistency whether the Union law is prior or later in point of time to the State law. To this general rule, an exception has been engrafted in cl. (2) thereof, viz., provided the State law is reserved for consideration of the President and it has received his assent, and then it will prevail in that State notwithstanding its repugnancy or inconsistency with the Union law. This exception again is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Concurrent List namely Economic and Social Planning come into play. The legislative competency of the State to enact the impugned legislation is derived from the said two entries read and taken together. Interpretative Principles for Legislative Entries 8. In order to appreciate the submissions as to under which legislative head, the impugned legislation would fall, it is quite necessary to bear in mind, therefore to discuss, the parameters informing the interpretation of the legislative Entries in the three Lists to the Seventh Schedule. It is the principle well understood that the legislative Entries earmark the respective fields for the two Legislatures. They are not the source of power to legislate; the fountain-source of power is Article 246 of the Constitution with other applicable Constitutional provisions. The functions which the three Lists in the Seventh Schedule and the Entries contained therein, discharge is to only demarcate the legislative fields between the Parliament and the State Legislature. 8.1 The Supreme Court has observed that each general word employed in the Entries has been held to carry an extended meaning so as to comprehend all ancilliar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld, that the provision of Madras General Sales Tax (Amendment) Act, 1947 defining a sale to include a works contract was ultra vires and void. 8.3.1 Though the actual effect of Gannon Dunkerley s case ceased to operate because of the Parliament enacted the Constitution (46th Amendment) Act, 1982 by inserting Clause 29(A) in Article 366 of the Constitution to define the phrase Tax on Sale or Purchase of Goods and enlarge the meaning of sale. By the said legislative act, the Parliament unbounded the meaning of sale of goods , given by the Supreme Court while interpreting Entry 48 List II for those words it contained. In other words by enacting amended definition as above, the interpretational scope for enlargement of meaning of the said Entry was indirectly widened. 8.3.2 The constitutional doyen-scholar H.M. Seervai in his Constitution of India-A Critical Commentary (4th Edition 2011, Volume 3) after discussing the Gannon Dunkerley s case on the above aspect and the post-decision developments viewed to opine that following observations in Gannon Dunkerley s case were the law accurately stated, To sum up from the expression sale of goods in Entry 48 is a nomen juris, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovered as arrears of land revenue. The Supreme Court decision in Gannon Dunkerley Co. (supra) was quoted. Thereafter, the Madras High Court held, when an expression like land revenue has acquired a definite and well understood meaning before the promulgation of the Constitution and it is in that meaning the said expression has been used in the Constitution, it is not open to the State Legislature by a fiction to treat something which is not land revenue as land revenue and make a law with respect to the same. (Para 49) 8.5.1 The submission of learned Advocate General of Stat of Tamil Nadu was that the Act could fall under Entry 43 of List II was negatived and it was observed that the expression public debt has a meaning of its own as reflected in the Public Debt Act, 1944; the expression connotes only borrowing by the Government from the public, therefore was not to come to support to the State Legislature to be competent to enact Section 52A. 8.6 The Entries in the three Lists obviously cover a very wide range of topics and the subjects, as wide as the areas and activities in which the State would have to unfold itself and for that purpose need to legislate on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislative field and impugned law 9. The case of the respondents being that the impugned law is referable to Entry 43 in List I, that is, Public Debt of the State , contentions were canvassed in detail by learned advocates on the concept of public debt of the state and it was sought to explain that the impugned law belongs to the said field. Their contentions may be summarized appropriately at this stage. 9.1 It was contended that because of the tripartite agreement, the debt of the state government was treated in the realm of public debt of the state. Article 293 was relied on to submit that it conferred the borrowing power and that the executive power of the state extends to borrowing within the territory of India. On the basis of Article 293(3) was further relied on to submit that such borrowing would include the loan which has been made to the state by the government of India or in respect of which a guarantee has been given. The definition of debt in sub clause (8) of Article 366 was pressed into service. 9.2 It was submitted that the interpretation to Public Debt of the State is required to be given in the context of debt as a charge from the Consolidated Fund. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which came to be revised to ₹ 20,000 crore only by virtue of the Gujarat State Guarantees (Amendment) Act, 2001. Pertinently, the guarantee extended by the State Government under Tripartite agreement dated 20.08.1993, was within the prescribed limit. Thus, the actions on the part of the respondent State in the present case, to stand as a guarantor in the matter of redemption of Deep Discount Bonds, as provided under the said Tripartite Agreement dated 20.08.1993 and to arrange for appropriation of monies from the Consolidated Fund of the State, to discharge its liability towards the Public Debt of the State in the matter of redemption of the said bonds, are very much covered within the provisions contained in Articles 292 and 293 of the Constitution. 9.4 Submissions were made to contend that the impugned legislation is for the purpose of economic and social planning as the State wanted to manage its financial liability in respect of Sardar Sarovar Narmada Project. It was submitted that Entry 20 in the Concurrent List would attract to provide the legislative field to the law concerned. Learned counsel for the Nigam relied on decision in R.K. Garg Vs Union of India [(1981) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise in the cases where the impugned legislation, by applying the doctrine of Pith and Substance, would fall exclusively or would be predominantly referable to Entry of the subject in the State List. The encroachment to the Union List in such case would be only incidental. In other words, in Pith and Substance, the law would be a permissible legislative exercise by the State Legislature which would be acting within its powers and the area. On the other hand, if in pith and substance the law made by the State Legislature falls within the legislative realm of Parliament, it would produce a reverse result and the State law would not be able to stand valid. 10.2 Under the doctrine of Pith and Substance, true character of legislation is ascertained. It is also emphasized that name given by the Legislature to the legislation is not material. In applying the doctrine of Pith and Substance, (i) the enactment as a whole, (ii) the main object and purpose of the enactment and (iii) the scope and effect of the provisions, are relevant considerations. The nature of the provisions of the enactment in respect of which the encroachment to the field of matter in the Union List is considered, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term gasworks is well understood in the sense of the place where the gas is manufactured. So it is difficult to accept the proposition that gas in Entry 25 List II includes natural gas, which is fundamentally different from manufactured gas in gasworks. Therefore, Entry 25 of List II could only cover manufactured gas and does not cover natural gas within its ambit. This will negative the argument of States that only they have exclusive powers to make laws dealing with natural gas and liquefied natural gas. Entry 25 of List II only covers manufactured gas. This is the clear intention of framers of the Constitution. (Para 43) 10.3.2 The principle stated in paragraph 13 of the aforesaid judgment was that an Entry in one List cannot be so interpreted as to make it cancel or obliterate another Entry or make another Entry meaningless. Entry 25 in List II was not interpreted which would have have an effect of obliterating Entry 53 in the Union List. 10.3.3 The above observations on the interpretation of the words in Entry stand in support of the proposition which were canvassed by learned advocates for the petitioners that the Entry Public Debt of the State in List II is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acter of the legislation. If on such an examination it is found that the legislation is in substance one on a matter assigned to the legis- lature then it must be held to be valid in its entirety even though it might incidentally trench on matters which are beyond its competence. In order to examine the true character of the enactment, the entire Act, its object, scope and effect, is required to be gone into. The question of invasion into the territory of another legislation is to be determined not by degree but by substance. The doctrine of pith and substance has to be applied not only in cases of conflict between the powers of two legislatures but in any case where the question arises whether a legislation is covered by particular legislative power in exercise of which it is purported to be made. (Para 7) 10.6 The principle mentioned by the Supreme Court in A.K. Krishna Vs Madras State [AIR 1957 SC 297], may be recollected that while considering the pith and substance of the impugned legislation and its true character as well as the subject matter of legislative field, that it is not competent either for the Center or a State under the guise of pretence or in the form of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competence, the objects of the enactment cannot be the solitary yardstick, ....If the objects stated in the enactment were the sole criteria for judging the true nature of the enactment then the impugned enactment satisfies the requirement on application of the doctrine of pith and substance to establish the State's legislative competence, but that is not the sole criteria. As noted above, the Court will have to examine not only the object of the Act as stated in the statute but also its scope and effect to find out whether the enactment in question is genuinely referable to the field of legislation allotted to the State. (Para 31) (emphasis supplied) 10.7.2 The Supreme Court held on the said law that the primary object of the said impugned enactment was to create groups of sub-castes in the List of Schedule Castes applicable to the State and apportionment of reservation is only secondary and consequential. Whatever may be the object of this classification and apportionment of reservation, the State cannot claim to legislative power to make such law tracing its legislative competence to Entry 41 of List II or Entry 25 of List III. A beckoning principle is laid do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milarly, the submission that Entry 20 in List III is attracted, namely the field of economic and social planning, is also misconceived because when the kind, nature and the essentials of the provisions of the impugned Act are considers, it cannot be said that the law in pith and substance it relates to economic and social planning. .. Thus, the rule of pith and substance is applied to determine whether the impugned legislation is within that competence under Arts. 246(1) and 246(3) of the Constitution, and to resolve the conflict of jurisdiction. If the Act in its pith and substance falls in one List it must be deemed not to fall in another List, despite incidental encroachment and its validity should be determined accordingly. The pith and substance rule, thereby, solves the problem of overlapping of any two entries of two different Lists vis a vis the Act on the basis of an inquiry into the true nature and character of is the legislation. The Court examines the legislation as a whole and tries to find whether the impugned law is substantially within the competence of the Legislature which enacted it, even if it incidentally trespssses into the legislative field of another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted by the Central Legislature operate in relation to the subject dealt with. Therefore if the legislative field is to be traced for the impugned law, it can be traced in its pith and substance only in the realm where parliamentary law have been operating. This is elaborated hereinafter. It may be that since the Issue of Bonds was in the realm of contract created which has give rise to contractual obligation and thereafter by the impugned law those contractual obligations have been varied or set-at-naught, one may view the subject-matter of the impugned legislation referable to Entry 7 of the Concurrent List which is Contracts including partnership, agency, contract of carriage and other special forms of contracts, but not including contracts relating to agricultural land . The impugned law may be viewed as creating special contract by nullifying the previous contract. Repugnancy and its Aspects 11. When repugnancy arises, the repugnant state law stands voided and rendered unconstitutional against the law made by the Parliament. The repugnancy is a constitutional concept with reference to the power of the legislature of the state and the central legislature to legislate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso speaks that the Parliament is not prevented from enacting any law or adding or amending or varying or repealing by an enactment on the said matter and in case of conflict, such enactment will prevail over the State Legislation. Article 254 professes the doctrine of federal supremacy. 11.3 The above broadly highlighted aspects of repugnancy for a State law against the Central law may be comprehended with more clarity by delving into the decisions of the Apex Court. 11.4 In Deep Chand Vs State of U.P.[AIR 1959 SC 648], the Supreme Court explained the concept of repugnancy by pointing out the triple tests, (1) Whether there is direct conflict between the two provisions; (2) Whether Parliament intended to lay down an exhaustive code in respect of the subject matter replacing the Act of the State Legislature; and (3) Whether the law made by Parliament and the law made by the State Legislature occupy the same field. 11.4.1 The Supreme Court highlighted the parameters by observing further, 29. Nicholas in his Australian Constitution, 2nd Edition, page 303, refers to three tests of inconsistency or repugnancy:- (1) There may be inconsistency in the actual terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssent of the President would be that so far as the State Act is concerned, it will prevail in the State and overrule the provisions of the Central Act in their applicability to the State only. Such a state of affairs will exist only until Parliament may at any time make a law adding to, or amending, varying or repealing the law made by the State Legislature under the proviso to Article 254. (Para 8) 11.6 In J. B Educational Society (supra), the Supreme Court observed as under, Thus, the question of repugnancy between the Parliamentary legislation and the State legislation can arise in two ways. First, where the legislations, though enacted with respect to matters in their allotted sphere, overlap and conflict. Second, where the two legislations are with respect to matters in Concurrent List and there is a conflict. In both the situations, Parliamentary legislation will predominate, in the first, by virtue of the non-obstante clause in Article 246(1), in the second, by reason of Article 245(1). Clause (2) of Article 245 deals with a situation where the State legislation having been reserved and having obtained President's ascent prevails in that State; this again is subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct made by the Parliament and by a State Legislature on the same matter must relate to the Concurrent List III of Seventh Schedule to the Constitution must occupy the same field and must be repugnant to each other; (b) In considering repugnance under Article 254 the question of legislative competence of a State Legislature does not arise since the Parliament and the Legislature of a State have undoubted power and jurisdiction to make law on a subject, i.e. in respect of that matter. In other words, same matter enumerated in the Concurrent List has occupied the field. (c) If both the pieces of legislation deal with separate and distinct matters though of cognate and allied character repugnancy does not arise. (d) It matters little whether the Act/Provision or Provisions in an Act fall under one or other entry or entries in the Concurrent List. The substance of the same matter occupying the same field by both the pieces of the legislation is material and not the form. The words that matter connotes identity of the matter and not their proximity. The circumstances or motive to make the Act/ Provision or Provisions in both the pieces of legislation are irrelevant. (e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peration etc. and conflicting results would ensue when both the laws are applied to a given same set of facts or cannot stand together or one law says do and other law says do not so. In other words, the Central law declares an act or omission lawful while the State law says them unlawful or prescribes irreconcilable penalties/ punishments of different kind, degree or variation in procedure etc. The inconsistency must appear on the face of the impugned statutes / provision/ provisions therein; (ix) If both the pieces of provisions occupying the same field do not deal with the same matter but distinct, though cognate or allied character, there is no repeal by implication, (x) The Court should endeavour to give effect to both the pieces of legislation as the Parliament and the legislature of a State are empowered by the Constitution to make laws on any subject or subjects enumerated in the Concurrent List 111 of Seventh Schedule to the Constitution. Only when it finds the incompatibility or irreconcilability of both Acts/ provision or provisions, or the two laws cannot stand together, the Court is entitled to declare the State law to be void or repealed by implication; and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Legislature of a State and the other enacted by Parliament when cannot stand together without disobeying one for obeying the other, is a sure test to apply to judge the state of repugnancy, yet another cannon, important and surer, emanates from the observations in the above discussed decisions. This test is one of dominant law by the Union, more precisely stated, the principle of occupied field. 12.1 In Rajiv Sarin (supra) the Supreme Court observed that whether on account of exhaustive code doctrine or whether on account of irreconcilable conflict concept, the real test is that would there be a room or possibility for both the Acts to apply. The Supreme Court further stated that the only other area where repugnancy can arise is where the superior legislature, namely, Parliament has evinced an intention to create a complete code. 12.2 In State of Orissa Vs Tulloch and Co. [AIR 1964 SC 1284], the Apex Court explained the doctrine of occupied field stating, But even if the matter was res integra, the argument cannot be accepted. Repugnancy arises when two enactments both within the competence of the two Legislatures collide and when the Constitution expressly or by nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object and purpose of Orissa Mining Areas Development Fund Act, 1952 was distinct and different from the object and purpose of the Central Act of 1957, with the result that both the enactments could validly coexist since they did not cover the same field. The argument was rejected by the Supreme Court. It was held that having regard to the terms of Section 18(1) the intention of Parliament was to cover the entire field. That, by reason of declaration by Parliament under the said Section the entire subject matter of conservation and development of minerals was taken over for being dealt with by Parliament thus depriving the State of the power hitherto possessed. 12.2.3 Relying on the judgment of the Constitution Bench of the Supreme Court in the case of Hingir-Rampur Coal Co. Vs State of Orissa (1961) 2 SCR 537, it was held in Tulloch s case that for the declaration to be effective it is not necessary that the rules should be made or enforced; all that was required was a declaration by Parliament to the effect that in public interest regulation and development of the mines should come under the control of the Union. In such a case the test must be whether the legislative declarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions in Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 which provided for levy and collection of market fee from the sellers of tobacco, the same to be repugnant to the Central Act and was held to be unconstitutional. It was observed that once the Center takes over an industry under Entry 52 of List I and passes an Act to regulate the subject matter in the field of legislation, the State Legislature ceases to have any jurisdiction to legislate in that field. And if it does so, the legislation would be ultra vires the powers of the State Legislature. 12.4 The Supreme Court in Animal Welfare Board of India Vs A. Naga Raja [(2014) 7 SCC 547] stated the principle in following words. Instances are many, where the State law may be inconsistent with the Central law, where there may be express inconsistency in actual terms of the two legislations so that one cannot be obeyed without disobeying the other. Further, if the Parliamentary legislation, if intended to be a complete and exhaustive code, then though there is no direct conflict, the State law may be inoperative. Repugnancy will also arise between two enactments even though obedience to each of them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revent such institutions from taking advantage either of the absence of any law governing chit funds in a State or exploit the benefit of any lacuna or relaxation in any State law by extending their activities in such States . (Para 55) 12.6.2 On what may be the criteria to consider the existing Central law a complete code, it was stated, The background of the enactment of the Central Chit Funds Act, which refers to the Report of the Banking Commission has been exhaustively dealt with in the case of Shriram Chits and Investment (P) Limited [(1993) Supp 4 SCC 226] as also in the Statement of Objects and Reasons of the 1982 Act. The clear intention of enacting the Central 1982 Act, therefore, was to make the Central Act a complete code with regard to the business of conducting chit funds and to occupy the legislative field relating to such chit funds. (Para 56) Each and every aspect relating to the conduct of the chits as is covered by the State Act has been touched upon by the Central Act in a more comprehensive manner. Thus, on 19.08.1982, the Parliament in enacting the Central law has manifested its intention not only to override the existing State Laws, but to occupy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons in securities entered into after the commencement of this Act shall be illegal. (2) Any option in securities which has been entered into before such commencement and which remains to be performed, whether wholly or in part, after such commencement, shall, to that extent, become void. 21. Power to compel listing of securities by public companies.-Notwithstanding anything contained in any other law for the time being in force, if the Securities and Exchange Board of India] is of opinion, having regard to the nature of the securities issued by any public company as defined in the Companies Act, 1956 (1 of 1956), or to the dealings in them, that it is necessary or expedient in the interest of the trade or in the public interest so to do, it may require the company, after giving it an opportunity of being heard in the matter, to comply with such requirements as may be prescribed with respect to the listing of its securities on any recognised stock exchange. 13.1.1 The Listing Agreement covered under the Securities Contract Act has a statutory character for itself, the procedures and prohibitions prescribed under the Act in relation to the securities and dealing thereof are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterests of investors in securities. The Act seeks to promote development of and further to regulate the securities market and it regulates all matters connected therewith or incidental thereto. The statement of objects and reasons at the said central legislation inter alia mentioned that capital market has witness tremendous growth in recent times and there is an increasing participation of the public. It viewed that confidence of the investors in the capital market can be sustained by ensuring investors protection. With this object, the Government decided to vest SEBI the statutory powers to deal with and regulate the matters relating to capital market and the affairs and transactions which take place in the capital market. 14.1.2 Section 2(i) of the Act defines security and states that it has the meaning assign to it in Section 2 of the Securities Contracts (Regulation) Act, 1956. Sub-section (2) of Section 2 says that words and expression used and not defined in this Act but defined in the Securities Contracts (Regulation) Act, 1956 or the Depositories Act, 1996 shall have the meanings respectively assigned to them in that Act. The law contains various provisions for est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f shares, securities and other market traded securities, the eligibility requirements; they deal with area of pricing in public issue, restriction on transferability, minimum requirements, the question of disclosure in respect of different kind of issues and all such connected and incidental matters and aspects. The Regulations are regulatory as well as prohibitory in nature. 14.1.6 Regulation 24 of the aforesaid Regulations may be reproduced as it bears a striking relevance. 24. Alteration of rights of holders of specified securities.-No issuer shall alter the terms (including the terms of issue) of specified securities which may adversely affect the interests of the holders of that specified securities, except with the consent in writing of the holders of not less than three-fourths of the specified securities of that class or with the sanction of a special resolution passed at a meeting of the holders of the specified securities of that class. 14.1.7 Chapter III of the Regulations contains detailed provisions regarding public issue, the eligibility requirement thereof, the conditions to be observed, etc. In other words, the Securities Act and the Regulations framed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by this section; and (b) specify any documents required by this section to be endorsed on or attached to the copy so delivered, or refer to statements included in the prospectus which specify those documents. (3) The Registrar shall not register a prospectus unless the requirements of section 55, 56, 57 and 58 and subsection (1) and (2) of this section have been complied with and the prospectus is accompanied by the consent in writing of the person, if any, named therein as the auditor, legal adviser, attorney, solicitor, banker or broker of the company or intended company, to act in that capacity. (4) No prospectus shall be issued more than ninety days after the date on which a copy thereof (5) If a prospectus is issued without a copy thereof being delivered under this section to the Registrar or without the copy so delivered having endorsed thereon or attached thereto the required consent or documents, the company, and every person who is knowingly a party to the issue of the prospectus, shall be punishable with fine which may extend to fifty thousand rupees. 61. Terms of contract mentioned in prospectus or statement in lieu of prospectus, not to be varied A co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital Issues, on a consideration of the special resolution adopted in the Extraordinary General Meeting of the shareholders of the company on August 28, 1989 cannot be varied, changed or modified both as regards the reduction of the amount of debentures as well as the purposes for which the fund will be utilised contrary to what has been embodied in the prospectus and approved by the Controller of Capital Issues on the basis of the special resolution adopted at the general meeting of the shareholders of the company. Sub-section (6) of Section 3 of the Capital Issues (Control) Act, 1947 states that: 3.(6) The Central Government may by order at any time - (a) revoke the consent or recognition accorded under any of the provisions of this section; or (b) where such consent or recognition has been qualified with any conditions, vary all or any of those conditions: Provided that before an order under this sub-section is made, the company shall be given a reasonable opportunity of showing cause why such order shall not be made. Nature of the impugned legislation 16. It is seen hereinabove that the impugned legislation read as a whole for the content and consequences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -bearing results not only considering that the impugned law is inconsistent and in conflict with the said Central law, but also that because of this, the contention of the State and the respondents that the impugned legislation attracts for its legislative field the Public Debt of the State can be said to be loosing its teeth, if at all there was any. Taking all these provisions of the Securities Contracts (Regulation) Act together as above, they operate to displace the legislative competence for the impugned Act. 16.3 The conditions of the Prospectus of the Issue gives to the Bonds the status of promissory note. They are sought to be prematurely redeemed in breach of conditions. In that way, it also entrench into the field of the provisions of the Negotiable Instruments Act. furthermore, it would be seen that Section 3A of the Act reduces the face value and gives power to the Nigam which is not only an excessive delegation but it is irrational because it leaves for the Nigam to take decision as to make saving and the extent of saving to be made for the State. Learned advocates for the petitioners were right in submitting that it was giving of uncontrolled discretion and power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the legislative field earmarked for it, but while enacting such competent law, the same to some extent encroaches upon the law made by the Union Legislature and if such encroachment is incidental or negligible in its extent allowing both the provisions to stand together, the State law would not be repugnant. If the extent of encroachment or erosion effected by the State Legislature is of such nature that it gives rise to a clear conflict between two provisions, then the law made by the State Legislature cannot stand valid vis-a-vis law made by the Parliament. The clear and direct conflict would in such case give rise to repugnancy. The term repugnant is ordinarily used with reference to the law enacted on the subject falling in the Concurrent List but since the repugnancy is a concept suggesting inconsistency and conflict between the State law and the Central law, it may arise in more than one ways and may often become traceable to the realm other than the Concurrent List. The repugnancy is a state and status of law made by the State Legislature vis-a-vis the law made by the Central Legislature, therefore its connotation may have other facets and folds which in terms of const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious contentions, since the Court has found the impugned legislation to be constitutionally invalid for want of legislative competence on the above delineated clear grounds, no need arose for dealing with all and other contentions. Accordingly we have not dealt with all the contentions. 20.1 Various decisions were relied on by learned advocates for both the sides, of which the Court has referred to which are relevant after considering all the judgments cited. Conclusion 21. In view of all the aforesaid reasons and discussion, it has to be held that the impugned Sardar Sarovar Narmada Nigam Limited (Conferment of Power to Redeem Bonds) Act, 2008 does not fall within the legislative head or legislative field either under Entry 43 in the State List being Public Debt of the State or under Entry 20 in the Concurrent List being Economic and Social Planning , to the Seventh Schedule of the Constitution nor it traces legislative field even by reading the said two Entries together. It is held that the impugned legislation is constitutionally invalid, for, the impugned legislation and the provisions thereof operate in the legislative field already occupied by the competent Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of evidence and such prayer cannot be granted in writ jurisdiction. This is for the simple reason that the loss claimed to have been sustained, whether suffered or not and if suffered, the exact nature thereof cannot be considered unless the aspects of benefits realized or possible to be realized but for the premature redemption of the Bonds and due to early encashment effected which the Bond-holder has either accepted or accepted under protest, are gone into in their necessary details. This exercise pre-supposes going into facts. This fact-finding inquiry has to be upon evidence to be led in that regard. It is only when such claim is established upon such process, the question of consequential relief pursuant to the invalidation of the legislation concerned could be considered. The aspect of breach of terms and conditions in relation to the Deep Discount Bonds would have to be gone into in the Suit in light of the factual details attendant to a particular individual case. However the bar provided under the impugned legislation under the Civil Court s jurisdiction and therefore institution of the Suit in relation to the Bonds, stands lifted as the Act is held unconstitutional. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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