The Whole and the Part: B.V. Nagarathna's Dissent on Industrial Alcohol and Federal Supremacy

On 23 October 2024 a nine-judge bench overruled <em>Synthetics and Chemicals</em> by 8:1 and restored State competence over industrial alcohol. The single dissenter, B.V. Nagarathna, had been the single dissenter in <em>Mineral Area Development Authority</em> three months earlier and in <em>Vivek Narayan Sharma</em> the year before. A reading of the federalism doctrine her three contemporary dissents articulate together.

In October 2024 the Supreme Court of India sat as a nine-judge bench twice. The two cases were heard by overlapping benches and decided three months apart. Both turned on the boundary between Union and State legislative power. Both went, by eight votes to one, against the Union. In both, the single dissenter was Justice B.V. Nagarathna.

The first was Mineral Area Development Authority v. Steel Authority of India, decided on 25 July 2024, in which the Court overruled India Cement Ltd. v. State of Tamil Nadu (1990) and held that the States can levy taxes on mineral rights despite the Mines and Minerals (Development and Regulation) Act. The second was State of U.P. v. M/s Lalta Prasad Vaish & Sons, decided on 23 October 2024, in which the Court overruled Synthetics and Chemicals Ltd. v. State of Uttar Pradesh (1990) and held that the States can tax and regulate industrial alcohol as “intoxicating liquors” within Entry 8 of the State List. The two judgments together restored to the States legislative ground the Court had taken away in the early 1990s. Nagarathna disagreed in both.

Her Lalta Prasad Vaish dissent runs to 168 paragraphs. The line in which the position crystallises sits at the eighth of nine reasons she gives for retaining the precedent: The principle of federal balance must yield to the doctrine of Parliamentary supremacy in certain areas such as when laws are made under Entry 52 or Entry 54 or Entry 7 – List I such as in the present cases. This is because of the unique manner in which Article 246 of the Constitution is worded and the division of legislative subjects between the Parliament and the State legislatures, having regard to the unique federal structure in India with the balance tipping in favour of the Union in certain niche areas of legislation and governance.¹

That sentence does not stand alone. Read alongside her dissent in Vivek Narayan Sharma v. Union of India (2023), where she alone held the November 2016 demonetisation procedurally unconstitutional under Section 26(2) of the Reserve Bank of India Act, and alongside her dissent in MADA three months earlier, the sentence sketches a position on Indian federalism that does not map onto the conventional Centre-versus-States axis. The position is that federalism in India is a structural arrangement, not a normative preference for State autonomy. In Vivek Narayan Sharma the structure constrained the Union. In MADA and Lalta Prasad Vaish the same structure required the Union’s primacy in fields it had legislated to occupy. The judge who dissented in 2023 to limit Union overreach dissented in 2024 to preserve Union supremacy where the Constitution and Parliament had placed it.

The reference, and the precedent it doubted

The constitutional question in Lalta Prasad Vaish was, on the surface, about words. “Intoxicating liquors” in Entry 8 of the State List: did the phrase reach industrial alcohol — rectified spirit, extra-neutral alcohol, denatured spirit, the alcohols not meant to be drunk but capable, after dilution or alteration, of being drunk?

The seven-judge bench in Synthetics and Chemicals Ltd. v. State of Uttar Pradesh, speaking through Sabyasachi Mukharji J. in 1990, had drawn a line. “Intoxicating liquors” in Entry 8 meant alcoholic liquors meant for human consumption — potable alcohol, the beverages. Industrial alcohol, used as raw material in chemicals, pharmaceuticals, perfumes, paints, and fuel, lay outside Entry 8. The Industries (Development and Regulation) Act, 1951, made under Entry 52 of the Union List, had placed “Fermentation Industries” within Item 26 of its First Schedule under exclusive Union control. The States retained a residual regulatory role under Entry 8 of List II read with Article 47: they could prevent the diversion of industrial alcohol into the potable stream as a public health measure. But they could not tax or regulate industrial alcohol as such.

That demarcation held for thirty-four years. A three-judge bench doubted it in 2007. A five-judge bench referred the matter to a larger bench in 2010. In October 2024 the nine-judge bench, led by Chief Justice D.Y. Chandrachud, overruled it.

The majority’s reasoning has three movements. The phrase “intoxicating” in Entry 8 is an effect-based qualifier; “alcoholic” in Entry 51 is an ingredient-based one. “Intoxicating liquors” is therefore wider than “alcoholic liquors for human consumption,” covering any liquor capable of producing intoxication on consumption, including alcohols not ordinarily consumed in their raw form. Entry 8 is read as covering not only the final beverage but the entire industrial chain that produces it — raw material to retail. And Parliament’s declaration under Entry 52 of List I cannot encroach on Entry 8 by ancillary trespass: Entry 8 is a specific carve-out from the general field of “industries,” and the specific governs the general.

The consequence was a restoration. Industrial alcohol returned to the States’ legislative competence under Entry 8. The States recovered tax handles and regulatory authority over an industry the Union had governed since 1951.

Nagarathna’s reading of Entry 8

The dissent’s first move is interpretive. “Intoxicating liquors,” for Nagarathna, means liquor that produces intoxication through direct consumption — ingestion, by the act of drinking, as a beverage. Industrial alcohol does not. Industrial alcohol produces intoxication only through indirect routes: through dilution, through reversal of denaturation, through misuse. The fact that misuse is possible does not stretch the phrase to cover the source from which misuse might be drawn.

The reasoning, in paragraph 12.14 of the dissent, is careful. The intoxicating effect is, she accepts, a sine qua non for State competence under Entry 8. The question is what “consumption” covers. Her answer: not all consumption, direct or indirect, but only “ingestion by the act of drinking as a beverage or a drink.” Indirect consumption — alcohol used as a raw material for industrial, medicinal, or toilet preparations — falls outside the entry. The prevention of misuse, which she expressly preserves, is itself within Entry 8 as a public-health regulatory power. The misuse-prone product is not.²

Two doctrinal premises hold the reading in place. The first is that Entry 8 is carved out of Entry 24 of the State List, which covers “industries” generally. The carve-out is specific; the residue (“Fermentation Industries” minus potable alcohol) remains within Entry 24. Entry 24 of List II, by its own terms, is “subject to the provisions of entries 7 and 52 of List I.” When Parliament declares an industry expedient in public interest under Entry 52, the industry passes from Entry 24 to Union control, leaving the State Legislatures with only what Entry 8 specifically reserved: potable alcohol. The second is the standard interpretive rule that the specific entry excludes the general. Read together, the two premises yield the conclusion that the line between potable and industrial alcohol is not a 1990 judicial artefact. It is the line the framers drew.

The 2016 amendment, and the question it answers

The argument is not abstract. In 2016 Parliament amended Item 26 of the First Schedule of the IDRA with retrospective effect from 8 May 1952 — nearly the date of the Act’s commencement. The amendment clarified that “Fermentation Industries” under Item 26 does not include “potable alcohol.” The clarification ratified, in legislative form, the line Synthetics had drawn.

Nagarathna treats the amendment as significant. Parliament, she observes, has had three and a half decades to reconsider Synthetics if it thought the case wrongly decided. What it did instead was codify the case’s central distinction. The States have legislative competence over potable alcohol under Entry 8; the Union has competence over the rest of “Fermentation Industries” under Item 26, read with Entry 52 of List I. The legal universe — Centre, States, distilleries, excise departments — has operated by this line.

The implication, developed across paragraphs 30 and 31, is that overruling Synthetics is not just overruling a case. It is overruling an administrative architecture Parliament has explicitly ratified by amendment. The Court, she suggests, owes that ratification weight.

Section 18G, and the doctrine of occupied field

The second half of the dissent is concerned with Section 18G of the IDRA. Section 18G, inserted in 1953, empowers the Central Government to provide for the regulation of supply, distribution, and pricing of articles related to scheduled industries. The question it raises is whether the mere presence of Section 18G occupies the field of “Fermentation Industries” under Entry 33(a) of List III, the concurrent entry on production, supply, and distribution of products of scheduled industries.

The doctrine of “occupied field” is what the first part of Article 254(1) commits the Constitution to: a State law within List III is void to the extent of any repugnancy with a Union law on the same subject. The complication is that Section 18G of the IDRA is itself made under Entry 52 of List I, not under Entry 33(a) of List III. The question Nagarathna confronts is whether occupation by a Union law made under List I can pre-empt State law made under List III.

Her answer is yes. The reasoning, woven through paragraphs 15 and 30, runs as follows. Article 246 of the Constitution begins clauses (1) and (2) with non-obstante language that gives Parliament supremacy over Lists I and III. Clause (3), which gives States exclusive power over List II, is itself “subject to clauses (1) and (2).” When Parliament enacts a law under Entry 52 of List I, and that law occupies a field that overlaps with a concurrent entry in List III, the State Legislature is denuded of its competence in the overlapping area irrespective of whether a notified order has been issued under the parent law. The intention to occupy the field, on her reading, is supplied by the act of legislative enactment, not by subordinate notification.³

This is contested ground. The leading decision on the question, Tika Ramji v. State of U.P. (1956), is read by some later cases to require a notified order before Section 18G can pre-empt; other cases, including the Synthetics bench itself, read Tika Ramji to require no such notification. Nagarathna adopts the latter reading. The mere insertion of Section 18G, she concludes, evidences the parliamentary intention to occupy the field of articles pertaining to scheduled industries. The States’ power under Entry 33(a) of List III is, to that extent, in abeyance.

The thread of precedent: thirty-four years of doctrinal consistency

Roughly forty paragraphs of the dissent are given to a survey of how the Supreme Court has read “intoxicating liquors” in the decades since Synthetics (7J). The list is long: Synthetics and Chemicals (2J) (1991), Bileshwar Khand Udyog (1992), Modi Distillery (1995), Shree Krishna Gyanoday Sugar (1996), McDowell (1996), Bihar Distillery (1997), Vam Organic I (1997), Haryana Brewery (2002), Industrial Corporation (2003), Vam Organic II (2004). Across all of them, Nagarathna finds what paragraph 11 of her opinion calls “the golden thread of continuity”: industrial alcohol means alcohol not fit for human consumption as a beverage, and Entry 8 is confined to potable alcohol.

The reasoning of Jeevan Reddy J. in Bihar Distillery receives extended treatment. “Intoxicating liquors” in Entry 8, Jeevan Reddy J. had written, signifies “liquor for human consumption.” The absence of the words “for human consumption” in Entry 8 is irrelevant, because “intoxicating” carries the meaning. Jeevan Reddy J. drew a clearance-based demarcation: rectified spirit cleared for industrial use lay with the Union under Entry 52 of List I; rectified spirit cleared for production of potable liquor lay with the States under Entry 8 of List II. Nagarathna treats this as the operative principle around which Centre and State excise administration have organised themselves for three decades.⁴

The point of the survey is not that every decision is binding on a nine-judge bench. The point is that the consistency is institutional. Distilleries with composite licences — manufacturing both potable and industrial alcohol — have known which authority regulated which product. The case held, was applied, was codified by Parliament in 2016, and was operated by the administration. The overruling, on this reading, undoes more than a precedent. It undoes a working settlement.

The Sarkaria passage, and what federalism means in the dissent

The most-quoted passage in the dissent is borrowed. In paragraph 28, Nagarathna reproduces an extended extract from the Sarkaria Commission Report on Centre-State Relations (1988), discussing the role of Parliamentary supremacy in Articles 246 and 254. The Sarkaria Commission was not, in its overall recommendations, a centralising body; its proposals favoured substantial financial and administrative devolution to the States. But on the question of legislative supremacy in matters of national concern, it took an unambiguous position.

In every Constitutional system having two levels of government with demarcated jurisdiction, contents respecting power are inevitable… The rule of Federal Supremacy is a technique to avoid such absurdity, resolve conflicts and ensure harmony between the Union and State laws. This principle, therefore, is indispensable for the successful functioning of any federal or quasi-federal Constitution… If the principles of Union Supremacy are excluded from Articles 246 and 254, it is not difficult to imagine its deleterious results. There will be every possibility of our two-tier political system being stultified by internecine strife, legal chaos and confusion caused by a host of conflicting laws.Sarkaria Commission Report on Centre-State Relations (1988), paras 2.5.21–2.5.22, reproduced by Nagarathna J. at para 28 of the dissent

Nagarathna deploys the passage to defend a specific proposition: that the structure of Article 246 — with its non-obstante clauses preserving Parliamentary primacy in Lists I and III, and clause (3) on the State List subject to clauses (1) and (2) — is itself a federal arrangement. The arrangement is what she calls in paragraph 29 “a federal structure with a unitary spirit.” Federalism, in this reading, is not a normative tilt toward State autonomy. It is the architecture the framers chose, including the parts of that architecture that tilt toward the Union.

This is also where the second of her dissent’s memorable lines earns its place. “There is something in a Constitution that is even more primordial than the structure and the features. These are the ideals on which the founding parents, in their wisdom and sagacity, built the entire edifice of the Constitution itself. It is all important that this edifice is not dislodged while attempting to dynamically interpret the Constitution.” The sentence, in paragraph 29, articulates the dissent’s philosophical commitment. The Court’s task in reading Articles 246 and 254 is not to update them with reference to current political economy. It is to read them as they were drafted.

The fault line

The disagreement between Nagarathna and the eight has three pressure points, each of which produces incompatible outcomes for industrial alcohol regulation.

The first is the meaning of “intoxicating liquors.” The majority’s reading is effect-based and capacious: any liquor capable of intoxicating effect on consumption falls within Entry 8, including alcohols that intoxicate only after dilution or denaturation reversal. Nagarathna’s reading is consumption-based and narrow: only liquor consumed directly, as a beverage. Both readings can find textual support. The majority leans on “intoxicating” as the distinguishing qualifier in Entry 8; the dissent leans on the consumption-oriented meaning of the phrase in the legislative and parliamentary record of the early twentieth century and in the language of Article 47.

The second is the relationship between Entry 8 and Entry 24. The majority reads Entry 8 as an independent industry-and-product entry that cannot be reached by Parliament’s power under Entry 52 of List I. Nagarathna reads Entry 8 as a specific carve-out from Entry 24, with the residue of “Fermentation Industries” remaining within Entry 24 and therefore within the Union’s reach through Entry 52. The disagreement is about what the “subject to” clause in Entry 24 does. On the majority’s reading it limits Entry 24 but does not retroactively shrink Entry 8. On Nagarathna’s, it confirms that everything within “Fermentation Industries” except the specifically carved-out “intoxicating liquors” lies within Union competence when Parliament so declares.

The third is the operation of Section 18G under the first part of Article 254(1). The majority’s position is that occupied-field pre-emption requires a clear notification or some other demonstration of Parliament’s intent to occupy the field. Nagarathna’s position is that the insertion of Section 18G is itself the evidence; nothing further is required. The disagreement has stakes: on the majority’s view the States can legislate on industrial alcohol under Entry 33(a) where the Centre has not issued a specific notified order; on Nagarathna’s view they cannot, irrespective of notification.

On none of these three points are the two readings reconcilable. Industrial alcohol is either within Entry 8 or outside it; Entry 24’s residue is either reached by Entry 52 or not; Section 18G either pre-empts notification or requires it. The Court has chosen, eight to one. The choice is in force.

What links the three dissents

The doctrinal interest of Lalta Prasad Vaish, read alongside MADA and Vivek Narayan Sharma, is that the three dissents articulate a single position from different directions.

In Vivek Narayan Sharma, the Court considered the 2016 demonetisation. Five judges upheld the Union’s exercise of power under Section 26(2) of the Reserve Bank of India Act. Nagarathna, alone, held that the procedure adopted was unconstitutional. Her dissent was about the limits of Union power: the proposal to demonetise all banknotes of a particular denomination required, on her reading, legislation by Parliament rather than executive notification under a provision drafted for narrower contingencies. The dissent was a constraint on the Union.

In MADA, the Court considered the States’ power to tax mineral rights. Eight judges held that royalty is not a tax and that the Mines and Minerals (Development and Regulation) Act does not pre-empt State power under Entry 49 of List II. Nagarathna dissented, holding that the MMDRA, as a Union law made under Entry 54 of List I, occupies the field and that State taxes on mineral rights stand pre-empted. Her dissent was a defence of Union supremacy in a declared scheduled subject.

In Lalta Prasad Vaish, the issue is whether industrial alcohol falls within Entry 8 of List II or remains within Union control through Item 26 of the IDRA and Section 18G. Nagarathna dissents on the side of the Union, on the same structural reasoning. The IDRA is made under Entry 52 of List I. Once Parliament has declared an industry expedient in public interest, the field is occupied; State legislative competence over articles of that industry is denuded.

The three positions are not in tension. The Constitution, on Nagarathna’s reading, allocates legislative subjects between Centre and States; the allocation is what it is; the Court’s job is to enforce the allocation in both directions. Where the Constitution and Parliament have committed a subject to the Union — demonetisation as a banknote question (her reading would have placed it more squarely in Parliament; the majority placed it in the Union executive); minerals as a scheduled subject under the MMDRA; fermentation industries as a scheduled industry under the IDRA — the States cannot reclaim it through expansive readings of List II entries. Where the Constitution has reserved a subject to Parliament alone, the executive cannot exercise it by notification.

The thread is structural. It runs from procedure (the demonetisation dissent) through subject-matter pre-emption (the mineral-tax and industrial-alcohol dissents) to a single proposition about constitutional allocation. The proposition holds that federal balance is a feature of the structure, not a presumption applied to it.

How the dissent reads three months on

The majority’s judgment is the law. State Legislatures have, as of November 2024, the competence to tax and regulate industrial alcohol within Entry 8 of List II. The revenue implications are substantial. The administrative implications — the renegotiation of long-standing compositions between distilleries and State excise departments, the revisiting of licensing regimes under State excise statutes — are in progress.

The dissent will be cited. By parties seeking to limit the spread of Lalta Prasad Vaish to other scheduled industries beyond fermentation; by commentators evaluating the doctrinal cost of overruling a thirty-four-year-old precedent; and by future benches addressing the operation of the first part of Article 254(1) under Union laws made beyond List III. The Sarkaria passage on Union supremacy has already begun to recur in academic commentary on the case.

What the dissent does not do is propose an alternative reading of the Indian federal architecture. It defends the reading already at work — the reading the Court adopted in 1990, the reading Parliament codified by amendment in 2016, the reading State and Union administrations have operated by since. The position is conservative in the older sense of the word: a defence of an existing settlement against revision. The Court has revised. The settlement is what was.

One of the recurring features of constitutional adjudication is that overruling a long-settled precedent rarely settles the question for long. Synthetics stood for thirty-four years; whether Lalta Prasad Vaish will stand for as long depends on what happens to the categories it relies on. The categories — industrial alcohol, potable alcohol, the line between consumption as a beverage and consumption as a raw material — do not move. Parliament, which has the last word on whether “Fermentation Industries” includes potable alcohol, has already used it.⁵ The dissent observes, in passing, that the 2016 amendment did not require Synthetics to remain good law in order to be effective. It will remain effective regardless of what the nine-judge bench has done with the 1990 case.