Panel discussion on the recent developments in federalism: Separation of powers, reservation and GST

FEDERALISM is an unstated premise of the Indian Constitution. It is not mentioned in the Constitution, nor is it defined by it. However, many provisions in the Constitution are worded around federalism, in particular, the distribution of power between the State Governments and the Union Government, said advocate Shadan Farasat practising at the Supreme Court, during the discussion on the developments in federalism in India. The topic was a sub-theme of The Courts and The Constitution Conference, organised by the Editorial Team of the Law and Other Things blog in collaboration with its institutional sponsors, the Centre for Constitutional Law, Policy & Good Governance, NALSAR University of Law, and the School for Policy and Governance, Azim Premji University at the NALSAR campus on Saturday.

The other panelists included well-known advocate and columnist, Suhrith Parthasarathy; Pankhuri Agrawal, a Ph.D. candidate from NALSAR; Abhijeet Rawaley, Advocate, High court of Punjab and Haryana; and advocate Dayaar Singla. The discussion was moderated by Alok Prassana Kumar, who is a senior resident fellow at the Vidhi Centre for Legal Policy.

Speaking on federalism, Farasat quoted Dr. Ambedkar who defined federalism as the "division of power by a document no less than the Constitution." Referring to the judgment of the Constitution Bench in S.R. Bommai vs. Union of India, Farasat said this judgment changed the idea of federalism significantly.

In Bommai's judgment, a nine-judge bench held that the decision to impose Presidental Rule in a state under Article 356 was subject to judicial review. Besides, it was held that the test of the majority of the government should be done on the floor of the Assembly and is not subject to the Governor's opinion. Farasat remarked that until Bommai's decision, what used to happen was that the Union Government would dismiss the state governments of opposition parties. He added that subsequent to Bommai's judgment, in many states, High courts or the Supreme Court restored the elected governments.

Farasat restricted his discussion on the conundrum that the Union Territory (UT) of Delhi is facing, as it also has an elected government in place.

Also Read: What is the constitutionality of the Government of National Capital Territory of Delhi (Amendment) Act, 2021?

He referred to the decisions of the Delhi High Court and the Supreme Court that were arrived at, by the litigation initiated by the Delhi Government after it alleged that it was facing hindrances from the part of the Lieutenant Governor of Delhi, in decision making. Referring to the Delhi High Court's 2016 judgment, Farasat said it had no head or tail. The High Court had ruled that the LG is a decision-making authority in respect of Delhi and that the Council of Ministers was merely a recommendatory body. This, Farasat said, turned Article 239AA on its head.

The governance scheme of Delhi under Article 239AA carves a special status for Delhi, and it mandates a legislative assembly for the territory, along with the power to make laws on all subjects in the state list, except for subjects of land, public order and police. He then referred to a five-judge bench decision in 2018 on an appeal by the Delhi High Court. The Constitution bench held that the aid and advice of the Council of Ministers on matters except those related to land, public order and police are binding on the LG, who is a titular head.

Also Read: LG must act upon the 'aid and advice' of the Delhi Cabinet: Supreme Court

In so far as the issue as to who controls the "services", Farasat said, is being currently argued in the Supreme Court.

Farasat also discussed the decision of the Supreme Court in 2021 refusing to quash the summons issued to Facebook India's Managing Director Ajit Mohan by the "Peace and Harmony" committee of the Delhi Legislative Assembly to inquire into the 2020 Delhi riots. He wondered if the Union Government and the office bearers of the Parliamentary Committee, before which Facebook India's MD Mohan was required to appear, supported him.

Also Read: SC refuses to quash summons to FB's India MD by Delhi Legislative Assembly committee probing 2020 Delhi riots

In this case, the Court had ruled that the complexity of communal tensions and their wide-ranging ramifications, was a matter affecting the citizens of Delhi and it could not be said that the Delhi Government must not look into the causal factors in order to formulate appropriate remedial measures. It had, however, clarified that while the Committee would be entitled to receive information and deliberate on the same to examine their bearing on peace and harmony, it could not transgress into the fields reserved for the Union Government in the Seventh Schedule.

Farasat said Facebook was arguing that it was a non-member, that is, not a member of the legislative assembly and hence Delhi Assembly's committee did not have any jurisdiction over it. Besides, it was also the argument of Facebook that the subject matter of riots was an issue of public order, on which Delhi has no jurisdiction.

Farasat described the 2018 and 2021 decisions of the Supreme Court as one of the few success stories in the context of federalism.

"Just like generally it has become more difficult to get outcomes if you are not with the power that be; definitely in the context of federalism also it has become difficult. You really have to pick out little relief from here and there and these are very few success stories.", Farasat said concluding his remarks.

Reservations and social justice

Parthasarthy spoke on federalism in the context of social justice, in particular, the reservations. He said that the state governments have a better awareness of local conditions and can shape policies that can help enhance social equality. He added that after 2014, we have a political party at the centre that doesn't require a coalition, and naturally, the battle between center-state powers has increased.

Speaking on the role of the courts in the context of federalism, Parthasarthy referred to a decision of the Constitution bench in Dr. Jaishri Laxmanrao Patil vs. The Chief Minister & Ors. [also known as the Maratha reservation case] in which it was held by a majority that only the Centre had the power under the 102nd Constitution Amendment to identify and list Socially and Educationally Backward Classes (SEBCs) and not states.

Also Read: SC strikes down Maharashtra's Maratha reservation law

Taking a critical view of the court's decision, Parthasarthy said that the court did not take into consideration the statement and objects of the 102nd Constitution Amendment which nowhere indicated that the state governments would not have the power to make their respective lists of SEBCs. The court, Parthasarthy said, went by the plain reading of Article 342A.

He said that even with one look at Article 342A, it would be clear that the Parliament was using the term 'Central list' and not just one list and the state still had the power to make their lists. Though Parliament subsequently, through the 105th amendment, clarified that the state's power was not negated, what was telling, Parthasarthy said, is that the Court didn't engage with the principle of federalism principle and the fact that social justice depends on the state autonomy.

Parthasarathy also referred to a decision of the Constitution bench in Chebrolu Leela v. the State of AP, wherein the court held that 100% reservation in ST areas violated Articles 14 & 16 of the Constitution. Criticizing the judgment, Parthasarathy said the judgment failed to mention asymmetric federalism, in which states are accorded certain powers to deal with specific regional or contextual issues.

He said that the State can argue that the only way to enhance the cause of STs in a scheduled area would be to give full reservation and not get limited by the 50 percent rule. He also referred to a decision of yet another Constitution bench in State of Punjab vs. Davindra Singh, wherein it was held that States can sub-classify Scheduled Castes and Scheduled Tribes in the Central List to provide preferential treatment to the "weakest out of the weak".

It was a contrary view to a 2004 judgment delivered by another Coordinate bench of five judges in the E.V. Chinnaiah case. The Chinnaiah judgment had held that allowing States to unilaterally "make a class within a class of members of the Scheduled Castes" would amount to tinkering with the Presidential list.

Interplay of GST 

Pankhuri Agrawal, a Ph.D. candidate from NALSAR, spoke on the Goods and Services Tax (GST) and its interplay with the principles of federalism. She said that the GST is hitting at the backbone of the Indian federal system. She added that as per Schedule VII List II of the Constitution, the public functions allotted to the state and tax allocation are such that the expenditure requirement is 62% of the state and 38% of the Centre, whereas, the revenue requirement of the state is 42%.

She said that without the support of the Central Government, the states cannot do anything in the GST council. Referring to the pandemic years, Agrawal said that after COVID-19, there was a decrease in the revenue and the Centre delayed the payment of compensation. The states, Agrawal said, did not have the revenue to finance their public health measures during the pandemic and hence, relied on the Centre.

Also Read: Is GST and its propulsion of the centre-state relationship into a fiscal war undermining the principles of cooperative federalism?

However, the Centre delayed the compensation. According to her, the GST council is leading to the centralisation of disbursement. She argued that federalism & GST are connected such that the government closest to the people could aim at delivering resources in the best manner. But now the Centre is financing the expenditure of the states, and dissolving accountability.

Domicile in private employment

Advocates Dayaar Singla and Abhijeet Rawaley spoke on the Haryana State Employment Local Candidates Act, 2020. Explaining the Haryana law, Singla said that it mandates private employers to reserve 75% of all jobs, wherein the remuneration is below a certain amount (currently notified as ₹ 30,000) for "local candidates" which has been defined as candidates domiciled in Haryana.

Also Read: Haryana challenges Punjab & Haryana HC stay order on its quota law in SC

He said Haryana is not the first state to come up with this idea, which is why we also believe this issue is important as it has been something that has been observed across multiple states. Referring to the petitions challenging the Haryana law, Singla said it was initially stayed through an interim order by the Punjab and Haryana High Court.   While vacating the stay, the Supreme Court, in its own words, said "No reasons are given by the High Court in support of the impugned order by which a legislation is stayed."

However, the Supreme Court,  while not giving any reasoning as it does not want to get into merits, vacates this stay but simultaneously orders no coercive action, said Singla. He added that as per the state government, the influx of migrants has led to a housing crisis and the proliferation of slums.

He contended that first, it is the state's admission of its failure that regulated jobs above minimum wage are unable to provide adequate housing; and second, this reasoning conflicts with the provisions of its own statute, which allows the employer to restrict employment from any district to 10% of the local candidates or 7.5% of the total employees. To conclude, he says, that in practicality, it will still be individuals who will have to migrate intra-state, under this domicile law.

Rawaley took a critical view of the state law providing domicile reservations. He said federalism offers a way for diverse communities to come together and derive the strength of unity while retaining their identity. But India is not a true coming-together federation like the U.S. It is a federation created by the Constitution.

Also Read: Domicile reservation in the private sector is constitutionally protected

States cannot legislate in a manner that erects pseudo-national borders within India, as is also manifest from the Constituent Assembly debates, he said. In particular, the claim that Indian federalism does not permit reservation on the basis of place of residence (or origin) is strengthened when one reads draft Article 170A, which the Constituent Assembly, at one point, was considering adding to the constitutional text, said Rawaley.

He said that the migration across state borders promotes the cultivation of the very important constitutional value of fraternity, which laws such as those passed by Haryana and Andhra Pradesh stand to endanger.