State of Kerala & Ors. vs. M/S. Mar Appraem Kuri Co. Ltd. & Anr., AIR 2012 SC 2375; (2012) 7 SCC 106

State of Kerala & Ors. vs. M/S. Mar Appraem Kuri Co. Ltd. & Anr., AIR 2012 SC 2375; (2012) 7 SCC 106

Bench:

• Chief Justice S.H. Kapadia
• Justice D.K. Jain
• Justice Jagdish Singh Khehar
• Justice Ranjana Prakash Desai

Facts:

The respondents, M/S. Mar Appraem Kuri Co. Ltd. and others, were engaged in the business of conducting kuries (a form of chit fund) in Kerala. They challenged the constitutional validity of certain provisions of the Kerala Chitties Act, 1975, which regulated the conduct of chitties in the state. The respondents contended that the subject of ‘chit funds’ fell under Entry 7 of List III (Concurrent List) of the Seventh Schedule of the Constitution, and since Parliament had already enacted the Chit Funds Act, 1982, the state legislation was repugnant to the central law and, therefore, void.

Issues:

1. Whether the Kerala Chitties Act, 1975, was repugnant to the Chit Funds Act, 1982, enacted by Parliament.
2. Whether the state legislation was constitutionally valid under the relevant entries of the Seventh Schedule.

Arguments:

Petitioners (State of Kerala):

• The Kerala Chitties Act, 1975, was enacted under Entry 32 of List II (State List), which pertains to incorporation, regulation, and winding up of corporations other than those specified in List I.
• The subject of ‘chit funds’ falls under the state’s legislative competence, and there is no repugnancy with the central legislation.

Respondents (M/S. Mar Appraem Kuri Co. Ltd. & Anr.):

• The subject of ‘chit funds’ falls under Entry 7 of List III (Concurrent List), and with the enactment of the Chit Funds Act, 1982, by Parliament, the state legislation becomes repugnant and void under Article 254 of the Constitution.

Ratio Decidendi:

The Supreme Court held that the subject matter of ‘chit funds’ falls under Entry 7 of List III (Concurrent List), which pertains to contracts, including partnership, agency, contracts of carriage, and other special forms of contracts. Therefore, both Parliament and the State Legislature have concurrent powers to legislate on this subject. However, in cases of repugnancy between a state law and a central law on a subject in the Concurrent List, the central law prevails unless the state law has received the President’s assent under Article 254(2) of the Constitution. In this case, the Kerala Chitties Act, 1975, had not received the President’s assent, and therefore, to the extent of repugnancy, the state law would be void.

Decision:

The Supreme Court held that the Kerala Chitties Act, 1975, was repugnant to the Chit Funds Act, 1982, enacted by Parliament, and therefore, the state legislation was void to the extent of repugnancy. The Court emphasized that in matters listed in the Concurrent List, the central legislation would prevail over state legislation in cases of conflict, unless the state law has received the President’s assent.

Important Terms:

• Repugnancy: A situation where a state law is inconsistent with a central law on the same subject matter, leading to the central law prevailing over the state law under Article 254 of the Constitution.
• Concurrent List: List III of the Seventh Schedule of the Indian Constitution, which enumerates subjects on which both Parliament and State Legislatures can legislate.
• Article 254: A provision in the Indian Constitution that deals with inconsistencies between laws made by Parliament and laws made by State Legislatures on subjects enumerated in the Concurrent List.