Jammu and Kashmir’s new land law amendments – Are they constitutionally valid?

 

On 26^th October, the Ministry of Home Affairs notified the Jammu and Kashmir Reorganization (Adaptation of Central Laws) Third Order, 2020 (‘the Adaptation Order’). This executive order has made wide-ranging amendments to the land laws applicable in Jammu & Kashmir. These amendments are applicable only in the Union Territory of Jammu & Kashmir, and are not applicable in the Union Territory of Ladakh.

After explaining the procedure adopted for amending these land laws, we shall discuss the constitutional validity of the Adaptation Order notified by the Home Ministry.

We shall conclude our discussion by examining how the conversion of the State of Jammu & Kashmir into 2 Union Territories, along with the continued imposition of President’s Rule, has given the Central Government a justification for making legislative policy changes without any prior consultation.

The procedure adopted for notifying the Adaptation Order

Through the Adaptation Order notified by the Union Home Ministry, multiple land laws that were applicable in the erstwhile State of Jammu & Kashmir have either been repealed or amended. 12 land laws have been repealed, while 26 have been amended. After these amendments, outsiders (i.e. those who are not domicile residents of Jammu & Kashmir) can acquire both agricultural as well as non-agricultural land in the Union Territory.

This has led to an uproar, and politicians such as Omar Abdullah have contended that allowing outsiders to purchase land will further disempower the local population, and may alter the demography of Kashmir in the long run. It was also argued that such far-reaching changes to land laws were made without any prior stakeholder consultation.

It is pertinent to note here that in April, a similar ‘Adaptation Order’ was notified, to enact a new domicile policy for Jammu & Kashmir. This was done by amending the Jammu & Kashmir Civil Services (Decentralization and Recruitment) Act, 2010 – which prescribed the conditions that must be satisfied for claiming the status of a ‘domicile resident’ of Jammu & Kashmir. Just like the land law amendments, even the domicile policy was criticized on the ground that it was notified without any prior consultation or discussion.

In both of these Adaptation Orders, it has been stated that the Order derives legal force by virtue of Section 96 of the Jammu and Kashmir Reorganization Act, 2019 (‘the Reorganization Act’).

To recall, the Reorganization Act has bifurcated the erstwhile State of Jammu and Kashmir into two separate Union Territories of Jammu & Kashmir and Ladakh. This statute was introduced simultaneously with the Presidential Order and the Statutory Resolution which amended Article 370 of the Indian Constitution, on 5^th August 2019. To understand the nature and purpose of the Adaptation Order, it is instructive to refer to Section 96 of the Reorganization Act. Section 96 falls under Part XIV of the Reorganization Act, which consists of “Legal and miscellaneous provisions”. It states as follows:

"For the purpose of facilitating the application in relation to the successor Union Territories, of any law made before the appointed day, as detailed in Fifth Schedule, the Central Government may, before the expiration of one year from that day, by order, make such adaptations and modifications of the law, whether by way of repeal or amendment, as may be necessary or expedient, and thereupon every such law shall have effect subject to the adaptations and modifications so made until altered, repealed or amended by a competent Legislature or other competent authority"(emphasis supplied).

The Fifth Schedule referred to above consists of the Central and State Laws that are applicable in the newly formed Union Territories of Jammu & Kashmir and Ladakh. Section 96 confers the Central Government with the power to amend or repeal any Central or State law applicable in the Union Territories, if it considers it to be ‘necessary and expedient’.

This power is available for a period of one year from the appointed date i.e. the date on which the Reorganization Act came into force - which was 31^st October 2019. Hence, the Government can resort to Section 96 only upto 31^st October 2020. Now, such a provision enabling the adaptation and modification of existing laws by the Executive is not unique to this Reorganization Act. A similar provision is also present in Section 101 of the Andhra Pradesh Reorganization Act, 2014, which conferred the government with powers of adaptation and modification – for a period of 2 years.

An important question arises here with respect to the scope and ambit of the power of ‘adaptation and modification’ conferred by Section 96. The question that arises here is whether the power conferred by Section 96 is limited to making ‘adaptations and modifications’ solely for purposes of procedural and administrative efficiency, or whether it also extends to making policy alterations – such as allowing outsiders to purchase land, or enacting a new domicile policy.

The scope and ambit of the power of ‘adaptation and modification’

From a plain reading of Section 96, it is evident that the purpose of this provision is to adapt or modify any law for the purpose of facilitating its application to the successor Union Territories, if the Central Government feels that it is necessary and expedient to do so. This is further qualified by a one-year time limit, which means that adaptations and modifications can be made for a temporary period of one year - from the date on which the Reorganization Act has come into force.

The presence of a one-year time limit and the words “for the purpose of facilitating the application in relation to the successor Union Territories, of any law” indicates that such adaptations and modifications made through executive orders can be undertaken only for procedural and administrative matters connected with the bifurcation and the conversion of the erstwhile State into 2 Union Territories.  

This also implies that policy changes made through executive orders which are unconnected to this process of facilitating the application of existing laws shall be beyond the ambit of Section 96. This interpretation is also in line with the Supreme Court’s decision in the landmark In Re: The Delhi Laws Act (1951) case, where it was held that the Legislature cannot delegate matters of essential legislative policy to the Executive.

Keeping in mind the wording of Section 96 and the In Re: Delhi Laws Act decision, it can be argued that Section 96 cannot be used to make any substantive policy changes by amending existing laws; and it is restricted to matters of procedure and administration that are necessary for facilitating the smooth application of existing laws to the newly constituted Union Territories.

The Adaptation Orders referred to above have amended existing laws to permit outsiders to purchase land, and has also framed a new domicile policy for Jammu & Kashmir. These are clearly changes that fall within the realm of legislative policy, and are not simple modifications that have been made for procedural and administrative convenience. As they are substantive policy changes, it can be argued that they do not fall within the ambit of the power conferred by Section 96 – and should hence be struck down for going beyond what is permitted by the Reorganization Act.

There are hence strong grounds to challenge the Adaptation Orders in the Jammu & Kashmir High Court or the Supreme Court. Let us now examine certain constitutional provisions that the Central Government may invoke, in response to a possible legal challenge.

The Central Government’s possible line of defence

As per the Reorganization Act, the Union Territory of Ladakh does not have a Legislature, and is to be administered by a Lieutenant Governor, acting on behalf of the President. On the other hand, the Union Territory of Jammu & Kashmir follows a model similar to Pondicherry and Delhi. Along with a Lieutenant Governor, Jammu & Kashmir is envisaged to have a Legislature and a Council of Ministers headed by the Chief Minister.

Section 58 makes Article 239 and Article 240 of the Constitution applicable to the Union Territory of Ladakh. Article 240 states that for specified Union Territories (such as Pondicherry and now Ladakh), any Regulation made by the President which amends or repeals any applicable law shall have the same force as an Act of Parliament. Hence, with respect to the Union Territory of Ladakh, all executive orders issued by the Central Government shall be equivalent to a parliamentary law. However, the position is significantly different for the Union Territory of Jammu & Kashmir.

Unlike Ladakh, Article 240 has not been made directly applicable to the Union Territory of Jammu & Kashmir. This is by virtue of Section 13 of the Reorganization Act. Section 13 only states that the provisions contained in Article 239A of the Constitution as applicable to Pondicherry shall also be applicable to the Union Territory of J& K.

However, the Government may nevertheless invoke the proviso to Article 240(1) as a defence. The proviso to Article 240(1) states that if a body is created to function as the Legislature for the Union Territories enlisted under Article 239A (which now includes Pondicherry and Jammu & Kashmir), then until the first meeting of the Legislature, the Central Government may make Regulations that amend or repeal the existing laws that are applicable in the Union Territory. Also, as per Article 240(2), all such regulations made before the first meeting of the Legislature shall have the same force as a statute passed by Parliament.

This may be used as a justification by the Central Government in a possible constitutional challenge, as the Union Territory of Jammu and Kashmir is currently under President’s rule, and no Legislative Assembly has been created after the passage of the Reorganization Act. It may contend that even if the Adaptation Order is beyond the ambit of Section 96 of the Reorganization Act, it is saved by Article 239A and Article 240 – as Jammu & Kashmir does not have a Legislature as of now.  

Continued Imposition of President’s rule - A larger constitutional question

Keeping this possible justification aside, there is a larger constitutional question that the Court must address. As the Union Territory of Jammu and Kashmir is envisaged to have a Legislative Assembly, Article 239A read with the proviso to Article 240(1) permits the issuance of executive orders by the Central Government only until the first meeting of the Legislative Assembly, after fresh elections are held. Jammu & Kashmir was under President’s rule prior to its conversion to a Union Territory, and has continued to remain in President’s rule even after 31^st October 2019 (when the Reorganization Act came into force).

Article 356 of the Indian Constitution has continued to hold fort in Jammu & Kashmir since 19^th December 2018, and there is no specific information on any proposal to have fresh elections in the near future. The continued imposition of President’s rule and the conversion of the State into 2 Union Territories has given the Central Government a carte blanche to indiscriminately take advantage of the statutory and constitutional provisions referred to above, and rule by executive decree.

The rationale behind the Central Government wanting this unbridled power can be highlighted by referring to the Supreme Court’s decision in NCT of Delhi v. Union of India. In its decision, the Supreme Court held that although Delhi is a Union Territory and akin to a quasi-State, the actions of an elected government and an elected Legislature shall bind the Lieutenant Governor - for all matters that are within its legislative domain. Although this decision was based on an interpretation of Article 239AA of the Constitution, it applies squarely to Jammu & Kashmir – as akin to Delhi, Jammu & Kashmir is envisaged to have a Legislature despite being a Union Territory.

This implies that for all matters within its legislative domain, the Legislature of the Union Territory of Jammu & Kashmir shall stand supreme, and bind the Lieutenant Governor and the Central Government. Hence, if fresh elections had been held and a Legislative Assembly had been constituted, the Home Ministry could not have indiscriminately taken the benefit of Article 239A, Article 240, and Section 96 of the Reorganization Act - to bring about radical policy changes relating to land and domicile.  

As discussed above, the Adaptation Orders that made land and domicile-related changes were notified without any prior legislative consultation. If there was an elected Legislature in the first place, amendments to land laws, or a new domicile policy could only have been enacted through legislation, after debate and discussions involving members across party lines. The conversion to Union Territories coupled with the imposition of President’s rule has prevented any such discussion from taking place, and has granted the Central Government with unbridled power to make policy prescriptions without any pre-legislative consultation process.

While the Central Government may contend that once there is an elected legislature, the Legislature may further amend or repeal the changes after discussion, this shall only buttress my primary point – that as the presence of a Legislature is envisaged, such legislative policy prescriptions should be left solely within its domain.

This only culminates in one common end – which is the need for a greater legal and judicial conversation on whether it is within the spirit of the constitutional framework to indefinitely impose and repeatedly extend President’s rule under Article 356, and rule virtually by executive decree. Until this status quo remains, there shall only be rule by law in Jammu & Kashmir, and not rule of law.

[An earlier version of this piece was posted on the Indian Constitutional Law and Philosophy Blog in April. It is being reposted here with prior permission, after making changes based on developments that have taken place since April].

The Occupational Safety, Health and Working Conditions Code, 2020 - When exemptions become the norm

In the last Parliament session, three consolidated labor codes were passed by both Houses. The three labor codes that were passed are – (i) The Industrial Relations Code, 2020; (ii) The Social Security Code, 2020; and (iii) The Occupational Safety, Health and Working Conditions Code, 2020. Each of the three labor codes consolidated all labor laws relating to social security, industrial relations, and occupational health and safety of the workers.

In this post, we shall limit our focus to the Occupational Safety, Health and Working Conditions Code, 2020 (‘Occupational Health and Safety Code’). We shall discuss the provisions of this Code which allow the Central and State Governments to exempt an industrial establishment/factory from complying with the provisions of the statute. We shall also discuss on how wide-ranging these powers are, and how they effectively allow the Government to nullify the protections conferred to the workers.

The Occupational Health and Safety Code

The Occupational Health and Safety Code consolidates all existing labor laws that previously governed aspects relating to the health, safety and working conditions of the employees. Some of the pre-existing laws that have been consolidated into this Code are the Factories Act, 1948, the Mines Act, 1952, and the Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service), Act, 1979. The Code mandates various obligations which an industrial establishment or a factory has to fulfill, for protecting the health and well-being of the workers.

Some important provisions which confer rights and protections relating to health, safety and working conditions are as follows:

• Section 6 – it mandates the employer to ensure disposal of hazardous and toxic waste, and provide government-prescribed free tests and annual health examinations to the employees.
• Section 24 – it mandates the employer to adhere to all guidelines prescribed by the government relating to separate bathing places and locker rooms for male, female and transgender employees; periodic medical examinations for employees working in mines; and provision of adequate medical facilities such as first-aid equipment and ambulance rooms.
• Section 25 and 26 – It imposes a mandate on the employer to ensure that no worker works for more than 8 hours in a day, and for more than 6 days in a week.

These provisions are intended to address the power imbalance that exists between the employer and the workers, by conferring the workers with essential rights and protections. These rights aim to safeguard the dignity of the workers – by ensuring that the conditions at the workplace are just and humane. The statute also aims to mitigate the health risks that workers may face in certain hazardous industries, such as chemicals and mining.

While the enactment of the Occupational Health and Safety Code is a step in the right direction, the Code confers the Government with wide-ranging powers to exempt one or more industrial establishments from complying with its provisions.

The power to grant exemptions

Section 127, Section 128 and Section 129 of the Code lay down the conditions under which the Central Government can exempt an industrial establishment/factory/workplace from complying with one or more provisions of the Code. Let us discuss each of these provisions below.

Section 127

Under clause (1) of Section 127, the Central Government can issue a notification exempting a single industrial establishment, or a class of such industries from complying with one or more provisions of the Code. This exemption can be given for any period that the Government specifies, and can be made subject to any condition that it may prescribe. Clause (1) confers the Government with a general discretionary power to exempt establishments from complying with one or more provisions of the Code.

But, this general power has an extremely wide ambit, as the Government can, based on its subjective discretion, effectively exempt one or more establishments from complying with the entire Code.

Under clause (2) of Section 127, the State Government can through a notification exempt a new factory or a class of new factories from complying with all or any of the provisions of the Code – if it is satisfied in public interest that it such an exemption is necessary to create more employment opportunities and economic activity. Such an exemption can be granted for any period that the State Government deems fit. Any and every exemption that the State Government grants can easily be justified on the ground that it aims to increase employment and economic activity – as these are among the primary functions of a Government.

Using such broadly worded parameters, the State Government effectively has the power to exempt any new factory from meeting the obligations prescribed by the Code.

Section 128

Section 128 prescribes that during a public emergency, disaster or pandemic, the Central or State Government can issue a notification exempting any workplace or type of work activity from complying with all or any of the provisions of the Code. The term ‘public emergency’ has been defined as a situation where the security of any part of India is under threat – due to war, external aggression or an internal disturbance. While granting an exemption from compliance on the ground of a ‘public emergency’ was also present in the Factories Act, 1948, the other two grounds (disaster and pandemic) have been introduced for the first time by the Code.

During a pandemic, employers should have a greater obligation to protect the health of their workers. Ironically, the prevalence of a pandemic can now be used as a justification to reduce the employers’ obligation to protect the health and safety of the workers. Also, akin to Section 127, even Section 128 can be invoked to nullify compliance with all the obligations prescribed by the Code.

Section 129

Section 129 allows the Central Government to exempt a public institution that is maintained for the purpose of education, training or research from complying with all or any of the provisions of the Code. However, unlike Section 127 and Section 128, this provision has a limited safeguard. An exemption relating to working hours and holidays can only be granted if the Government is satisfied that the institution that receives the exemption has implemented a scheme that has equally beneficial provisions. But, this safeguard shall not be applicable for all other protections conferred by the Code.

If we now read Section 127, 128 and 129 jointly – it is clear that the Government has wide-ranging powers to allow certain industrial establishments to not comply with the entire Code. The Government now effectively has the power to exempt establishments from even the most basic obligations, be it safe disposal of hazardous waste, separate washrooms for male, female and transgender employees, access to safe drinking water, medical facilities etc.

It is likely that Trade Unions may challenge any such exemption notification that the Government may issue in future, if it significantly dilutes the employer’s obligations under the Code. To determine the tests that Courts may use to examine such a challenge, a recent judgment of the Supreme Court in Gujarat Mazdoor Sabha v. State of Gujarat assumes relevance.

The relevance of the Gujarat Mazdoor Sabha decision

In Gujarat Mazdoor Sabha, Justice Chandrachud struck down an exemption notification issued by the Gujarat Government under Section 5 of the Factories Act, 1948 (the Factories Act has now been subsumed into the Occupational Health and Safety Code). This notification exempted all establishments in the State from complying with multiple provisions of the Factories Act. It diluted the protections granted to workers by increasing the working hour limits from 9 to 12 hours, and also reduced the extent of overtime wages that had to be paid.

The Gujarat Government defended this Notification by contending that this was necessary in light of the financial urgency brought about by the Covid-19 pandemic – which was a ‘public emergency’ within the meaning of Section 5 of the Factories Act. Under Section 5, ‘public emergency’ was defined as a situation where the security of any part of India is under threat – due to war, external aggression or an internal disturbance. (This definition is the same as the definition given in Section 128 of the new Occupational Health and Safety Code).

The Court held that the Covid-19 pandemic cannot be considered as an ‘internal disturbance’ within the meaning of the term ‘public emergency’. In light of this, the exemption notification went beyond the ambit of Section 5, and had to be struck down. But, the outcome of a similar litigation under the new Occupational Health and Safety Code may be different, as Section 128 of the Code specifically allows the Government to exempt establishments from complying with its provisions – during a pandemic.

If a similar notification is passed today, the Government can directly contend that it is necessary in light of the pandemic, and need not even refer to the ‘public emergency’ provision. Hence, as long as the pandemic exists, Governments can take benefit of Section 128 to dilute the employers’ obligation to protect the health and well-being of his workers.

At this juncture, it is significant to note that Justice Chandrachud had also observed that the Gujarat Government’s notification was blanket in nature, and applied to all establishments irrespective of the nature of their business. If this observation is taken forward - it implies that the exemption granted should be narrowly tailored in accordance with the doctrine of proportionality. There should be some link between the objective behind the exemption and the establishments who are receiving benefit from the same. Only those establishments that fall within the stated objective of the Government should be entitled to receive the exemption.

If the exemption goes beyond its stated objective, the Court can strike it down for violating the doctrine of proportionality. Also, if the exemption significantly dilutes the employers’ obligations relating to the health and safety of the workers, it can also be challenged for violation of the right to health and dignity, under Article 21. There is hence sufficient scope for a legal challenge, if the State were to dilute workers’ rights by using the pandemic as a justification.

 Irrespective of the outcome of future legal challenges, the larger issue here is that the new Occupational Health and Safety Code is a rare example of a legislation which confers the Government with the power to effectively nullify the applicability of all its provisions. This, in a nutshell, has left workers’ health and safety rights at the whims of the Executive.

Breaking down the GST Compensation dispute

Yesterday, Thomas Issac, the Finance Minister of Kerala, stated that a bunch of State Governments were considering whether they should approach the Supreme Court – against the Central Government’s decision to deny them GST Compensation. But, within 24 hours of this development, the Centre agreed to the demand of the State Governments, and stated it would borrow funds from the RBI – to compensate the State Governments for their revenue losses.

In this post, we shall discuss what this controversy is all about. We shall also discuss the constitutional structure of the GST – which shall explain why States such as Kerala had to consider approaching the Supreme Court against the stance that was taken by the Centre.

The constitutional structure of the GST

Since the last week of August, a tussle has been brewing between the Centre and multiple State Governments, regarding the scope and extent of the Centre’s obligation to compensate the State Governments – for the revenue loss suffered by them after the implementation of the GST. Before getting into the specifics of the compensation controversy, it is important to revisit the constitutional structure of the GST, and the change it brought about in India’s indirect taxation framework.

The constitutional framework for the GST was laid down through the 101^st Constitutional Amendment (a.k.a the ‘GST Constitutional Amendment’). This Constitutional Amendment inserted Article 246A – which conferred the Central and State Governments with the power to jointly levy the GST. Prior to the GST Constitutional Amendment, the Centre and the States did not have the power to  levy the same indirect tax. They only had the legislative power to exclusively levy specific indirect taxes. For instance, while the Centre had the exclusive power to levy indirect taxes such as excise duty, the States could levy entry tax, VAT etc.

As the GST is a single tax that replaces all other indirect taxes (like excise duty, entry tax, VAT etc) – it is levied jointly by the Centre and the States, who split the revenue. After the passing of the GST Constitutional Amendment, the Centre and the States have lost the legislative power to independently levy indirect taxes. They now levy the GST jointly, as a common indirect tax.

As the Centre and the States were now going to levy the same tax, a GST Council was set-up under Article 279A of the Constitution – to facilitate collective decision-making between the Centre and the States. The GST Council is headed by the Union Finance Minister, and also consists of the Union Minister of State for Finance, and the Finance Minister of each State Government.

Article 279A of the Constitution confers the GST Council with the power to make decisions on all matters relating to GST implementation. Such decisions are taken through a voting mechanism, where the Centre effectively has a veto over any decision that the GST Council may take. To simplify – even if all State Governments agree to take a specific decision relating to the GST, it shall fail to pass muster if the Centre doesn’t agree, and exercises its veto.

On the other hand, if the Centre wishes to successfully put a proposal before the Council, it shall require the support of 21 State Finance Ministers – who represent their State Government. The decision shall be binding even on those State Governments who vote against the proposal of the Centre. The voting mechanism of the GST Council is hence designed in such a way that tax policies can be imposed even on the dissenting State Governments. Even if the voting mechanism is not resorted to, all the decisions are taken through common consensus.

This leads to a situation where the States have lost the power to independently frame their indirect tax policy, and are bound by the decisions of the GST Council. GST has hence significantly diluted the fiscal autonomy that States previously had – which they could tap in to generate additional sources of revenue. States are now also more dependent on the Centre for their revenue needs - as every decision of the GST Council can go through only with the Centre’s assent.

The obligation to compensate States for revenue shortfall

As the fiscal autonomy of the State Governments has been diluted by the GST, they now have lesser scope for raising additional sources of revenue. The State Governments have always feared that GST shall reduce their overall revenue growth. Hence, while the GST was being discussed and negotiated, the State Governments consistently demanded that the Centre should enact a mechanism to compensate the State Governments for potential revenue losses – that they may suffer after the GST is implemented.

The Centre acceded to this demand while the GST was being negotiated. As Thomas Issac, the Finance Minister of Kerala, pointed out, the State Governments assented to the GST since the Centre had agreed to enact a legal framework to compensate the State Governments for the revenue losses that they may suffer. To this end, Section 18 of the GST Constitutional Amendment states that Parliament shall enact a law to provide for compensation to the State Governments for revenue losses that arise for the first 5 years after the implementation of the GST (i.e. from July 2017 – July 2022).

(It is interesting to note here that although Section 18 is part of a Constitutional Amendment Act, it does not amend or insert any provision into the Constitution.)

In furtherance of this mandate, Parliament enacted the GST (Compensation to States) Act, 2017 (‘Compensation Act’) – which laid down a framework for compensating the States. Under the Compensation Act, if the annual revenue growth of a State is less than 14%, it shall be compensated for the shortfall in revenue. For instance, if the annual revenue growth of Maharashtra is 10%, it shall be compensated for the balance 4% - which is the shortfall. The statute also levies a GST Compensation Cess. The funds collected through this Cess are transferred to a specified fund named the GST Compensation Fund.

The proceeds of the GST Compensation Fund are then utilized for compensating the State Governments, based on their annual revenue shortfall.

The GST compensation controversy

Now, as GST collections significantly fell during the lockdown, the amount present in the GST Compensation Fund is insufficient to meet the total revenue shortfall of the State Governments. In the end of August, the Central Government contended that the Covid-19 pandemic was an ‘Act of God’, and that as the amount present in the GST Compensation Fund was insufficient, it would not be able to fully compensate the State Governments for their revenue loss. The Centre also contended that under the GST compensation framework, it had no obligation to tap funds from other resources to compensate the States – in case there was a shortfall in the GST Compensation Fund.

The Centre stated that it would not borrow any further sum of money to compensate the States – and presented the States with two options through which they could borrow the money themselves. States such as Kerala and Punjab rejected this proposal. They stated that the Centre was in a better position to borrow funds to compensate the State Governments, and the mandate to provide compensation cannot be sidestepped. After negotiations that took place in meetings of the GST Council, 21 States have accepted the terms of the Centre, and had agreed to borrow funds for financing their revenue shortfall.

But, other States such as Kerala, Punjab, West Bengal and Telangana had refused to accede to the Centre’s terms. They continued to hold the view that the Centre is breaching its legal obligation by refusing to fully compensate the States. As the Centre had repeatedly refused to accept the demands made by these States, Thomas Issac (Finance Minister of Kerala) had stated that some of these State Governments may petition the Supreme Court for a resolution of this dispute.

Within 24 hours from this announcement, the Central Government completely changed its stance. The Centre has agreed to borrow the money required to compensate the States from the RBI. The amount borrowed from the RBI will be transferred to the States in the form of back-to-back loans. Hence, the Centre shall now directly fund the States for their revenue shortfall, and the States shall not have to borrow the money from the RBI, or the open market.

The State of Kerala has already stated that it welcomes the Centre’s decision to borrow directly from the RBI. Other States are also likely to follow suit, as the Centre’s decision to borrow the money themselves is in tune with what the States had demanded. This is likely to resolve the stalemate, and State Governments may now refrain from taking this issue to the Supreme Court. A resolution of this stalemate is significant – as the promise of full compensation for revenue losses until July 2022 was one of the founding assurances which convinced State Governments to give assent to the GST Constitutional Amendment.

Multiple pitfalls

At the same time, this compensation controversy has highlighted multiple pitfalls of the GST constitutional framework, some of which are as follows:

• The GST has significantly reduced the ability of State Governments to independently raise financial resources. The States are now even more dependent on the Centre for funds, as GST has not resulted in any significant increase in revenue.

• The decision-making process of the GST Council, where the Centre has a veto power, has led to a situation where the fiscal needs of the State Governments are met only if the Centre gives its blessings. This has significantly reduced the leeway and the autonomy that States previously had in framing their own tax policies. State Governments are left helpless - if the Centre refuses to honor its obligations. For precisely this reason - States such as Kerala were considering whether to move the Supreme Court, as they were left with no tangible remedy when the Centre was refusing to honor its legal commitment.

In this situation where States have lost their fiscal autonomy and are unable to independently raise revenue - the GST scarcely looks like the landmark indirect taxation reform that it was touted to be.

Domicile Reservation in national law schools - Finding a middle ground | Guest Post by Rohit Sharma

This is a guest post by Rohit Sharma. Rohit is a graduate from NUJS, Kolkata (batch of 2020).

Last week, Karnataka High Court Division bench of Justices BV Nagarathna and Ravi V Hosmani struck down the NLSIU Amendment Act. This Act aimed to bring 25% domicile reservation in NLSIU Bangalore. The Court held that the amendment was contrary to the parent Act, and also failed to satisfy the twin tests of Art 14. The reason domicile was put to the question is because representation was being provided primarily from Bangalore students with elite socio-economic background – who were able to benefit from this policy because of the advantage they had in terms of access to education and other facilities.

The bench also opined that the Pradeep Jain case, which marked one of the earliest instance of allowing domicile reservation - was based on regional backwardness. While observing this, the bench also held that the entire state of Karnataka cannot be called as backward so as to provide reservation for every student of Karnataka.

This was followed by the Calcutta high court which issued an interim stay in the writ petition challenging the state government's 30% domicile reservation at NUJS Kolkata. In this piece, without going into legality of the reservation, I shall be proposing a domicile model for National Law Universities - which will allow representation of backward areas of a state without diluting the ‘national character’ of the law universities.

For the purpose of illustration of this model, I have taken WBNUJS as a model law school with an assumption of 30% domicile reservation being allowed in the law school. The CLAT consortium released their first list for all the national law universities today. As per the first list, out of 103 seats at least 47 seats are occupied by West Bengal candidates. The allotment below suggests how these seats ought to be allotted.

For the year 2020-21, WBNUJS provided the following seat allotment as per the notification for this year:

All India Category	Number of Seats
General	44*
EWS	6
Scheduled Caste (S.C.)	10
Scheduled Tribe (S.T.)	5
Foreign Nationals	4
NRI	18
J&K	2
PWD	3

Table 1: Seats Allotted towards All India Category in NUJS as per academic year 20-21

West Bengal Category	Number of Seats
General	22
EWS	4
Scheduled Caste (S.C.)	8
Scheduled Tribe (S.T.)	2
OBC-A	1
OBC-B	1
PWD	2

Table 2: Seats Allotted towards Domicile in NUJS as per academic year 2020-21

For the purpose of discussing Domicile Model, we will only analyse 36 seats of the categories highlighted in Table 1 and Table 2 i.e. General (22), EWS (4), SC (8), ST (2).

 

Category	City Name	Population/ Percentage in state total population of 2,16,29,016 Individuals
1st category (Top city in terms of population in the state)	Kolkata- Kolkata, North 24 Parganas South 24 Parganas, Nadia, Howrah, Hooghly	1, 41, 12,536(65.25%)
2nd category (Cities with a  population share in the state from 2%-6%)	Asansol, Siliguri, Durgapur-	25, 25,906(11.68%)
3rd Category (Cities with a  population share in the state from 1-2%)	Bardhaman, English Bazar, Baharampur, Habra, Kharagpur, Shantipur, Dankuni, Dhulian, Ranaghat	25, 88,328(11.97%)
4th Category (Cities with a  population share in the state less than 1%)	Haldia, Raiganj, Krishnanagar, Nabadwip, Medinipur, Jalpaiguri, Balurghat, Basirhat Bankura, Chakdaha, Darjeeling, Alipurduar, Purulia, Jangipur, Bangaon ,Cooch Behar	24, 02,246(11.10%)

Table 3: Categorisation of the cities based on Urban Agglomerations, Census 2011

The categorisation of the cities has been done based on the Urban Agglomerations/Cities having population 1 lakh and above based on Census 2011. Kolkata has been made a separate category for it has largest proportion of people in West Bengal. The categories have been divided based on a numerical distinction which can differ in each state. Census of 2011 can be taken into account till the time Census 2021 is out. Every state can create this categorisation which shall be functional for the 10 Years Model of domicile reservation. Currently, NUJS has the domicile requirement as follows:

Candidates residing in the State of West Bengal continuously at least for last ten years or those not residing in the State of West Bengal but whose parents is / are permanent resident of West Bengal having their permanent home address within the State. For avoiding candidates misusing the domicile reservation, it can mandated that they need to finish their Class 10^th or 12^th or both (State’s discretion) for getting the benefit of this domicile.

For the purpose of this model, I have referred to number of CLAT applicants from West Bengal as per the year 2017 that was - 2,041.

For the seats of General, the income ceilings should be same as creamy layer of OBC i.e. whose gross annual income is over Rs. 8 lakh cannot avail of domicile reservations in their respective categories. This will make sure that people from higher economic backgrounds don’t use domicile as an upper hand which ought to be catered to students with non-privileged background.

Situation 1- Same number of CLAT applicants as the share in population. In this example, total number of

Number of applicants and Category of their city (Total Number of applicants being assumed as 2041)	Category and Number of Seats allotted as per representation in State Population
1st Category of Cities - 1332 - (65.25% of total applicants)	14 seats General (Maximum),5 SC, 2 EWS, 1 ST
2nd Category of Cities - 238- (11.68% of total applicants)	3 seats General, 1 SC
3rd Category of Cities - 244 (11.97% of total applicants)	3 seats General, 1 SC
4th Category of Cities - - 227 (11.10% of total applicants)	2 seats, 1 SC

 

In this situation, we divided 36 seats according to population representation of categories of cities.

This means 22 seats of General have been divided as 14 seats(65%) from category 1 cities, 3 seats(14%) from category 2 and category 3 cities each while 2 seats(9%) from category 4 cities. Similar division has been done for other categories of SC and EWS as well. With respect to ST seats, top ranker ST from category 2-4^th shall get the seat. With respect to 2 state EWS seats, top rankers from category 2-4^th shall get the seat.

Once the number of seats is reached from a particular category, the applicant from those categories of cities won’t be eligible to benefit from domicile reservation. This can be illustrated by example of X who ranks 16 in category 1 cities and if 14 seats of category 1 cities are already filled at NUJS, they won’t be eligible to qualify for this reservation.

Situation 2-

Category 1 and Category 2 Cities have substantially higher number of CLAT applicants compared to their share in population

Number of applicants and Category of their city (Total Number of applicants being assumed as 2041)	Category and Number of Seats allotted as per representation in State Population
1st Category of Cities - 1500 - (73.49% of total applicants)	14 seats General (Maximum),5 SC, 2 EWS, 1 ST
2nd Category of Cities - 300 - (14.70% of total applicants)	3 seats General, 1 SC
3rd Category of Cities - 150 - (7.35% of total applicants)	3 seats General, 1 SC
4th Category of Cities – 91 - (4.46% of total applicants)	2 seats, 1 SC

As we can witness that in this situation, the number of applicants in category 1 and category 2 cities is substantially higher when compared to category 3 and category 4 cities. Even in this case the same seat allotment shall follow to ensure adequate representation from all areas of West Bengal as it is allotted in the table.

With respect to ST seats, top ranker ST from category 2-4^th shall get the seat. With respect to 2 state EWS seats, top rankers from category 2-4^th shall get the seat. 

If the number of applicants is less than 3 or 2 in the category 3rd or 4^th respectively then that additional seat will apply to the category immediately above i.e. category 2^nd or 3^rd.

Interplay with All India Seats

Now, the purpose of the domicile quota is to make sure that the local communities and the representation of number of people coming from a particular State is ensured. This also has to be done to make sure that it does not act as a peril to the other students coming from other parts of the country to maintain the national character as well.

Let’s take an example of all-India seats of NUJS where our model can come into being and make sure that both concerns are addressed i.e. adequate representation of students from West Bengal in NUJS alongside maintaining the National character and creating more opportunities for all kind of students coming across the country.

Illustration 1: If within 44 seats of All India General, 7 seats belong to Category 1 students while 2 seats belong to category 2-4 students. Then, in that case, these seats should be counted against Domicile General seats i.e only 7 seats should be left for Category 1 students and 6 seats should be left for Category 2-4 students.

This will make sure that all the areas of West Bengal get representation without diluting the National character and not costing the seats for students from other parts of the countries. If in the same illustration, 22 seats are directly given for Category 1-4 students, then that will mean that total West Bengal students in 66 General seats would be 22+9 = 31 students i.e. around 47% - which is the reason for the criticism against domicile reservation, on the ground that the domicile reservation will not only dilute the national character but also serve only the privileged few of the state.

Another question which arises in this illustration is that - what if any of these 7 or 2 students have more than 8 Lacs of Income. In such case also, they shall be considered to occupy the seats allotted to each category as the purpose of domicile is to ensure the representation is reached for the States. This condition can also be given at behest of the NLU if they want to exclude these students who have more than 8 Lacs of income from overall count, they can do so to ensure people from middle level income utilise domicile seats from these categories.

Benefits of this Model:

1. ·         This will make sure that every year NUJS gets 30% reservation in all the categories without peril to any other group.
2. ·         It will not dilute the ‘national character’ significantly while appreciating the importance of students from the home state of an NLU.
3. ·         A categorisation of the districts based on population will make sure that tier 1 cities in the State doesn’t get domicile reservation on a platter - and the benefits reach down to all regions of a particular state.
4. ·         The income bar to the general seats will act as filtering out the students of West Bengal who had access to top private expensive schools and will be helpful for the economically impoverished sections of the state.
5. ·         This will ensure that the most of the stigmas of being a domicile candidate are done away with - since most of the arguments voiced against domicile stems from top tier city misusing the reservation and getting an upper hand in terms of admission into the college.

This model can be modified according to various factors to be established by NLUs and their respective state governments in order to provide catered reforms to students facing regional backwardness owing to geographical disadvantage.

Since most of the law schools are facing the issue of ever increasing domicile reservation which often have political intentions as it backing, an advent of this type of model shall ensure adequate State representation, without diluting the pan-Indian reach that a law school must maintain.

For any feedback/criticism/suggestions with respect to the arguments made in this piece, please do reach out to Rohit at – rohitsharma@nujs.edu .