Article 278 of the Costitution of India with Case law
Article 278 of the Constitution of India
Title: Agreement with States in Part B of the First Schedule with respect to certain financial matters
🔹 Text of Article 278 (as originally enacted):
(1) Notwithstanding anything in this Chapter, the Government of India may, subject to the provisions of article 278A, enter into an agreement with the Government of a State specified in Part B of the First Schedule with respect to—
(a) the levy, collection and distribution of any tax mentioned in that Chapter;
(b) the grant of any financial assistance by the Government of India to the State;
(c) the exercise of any executive function by the Government of India or the State, or both, relating to any matter mentioned in that Chapter.
(2) An agreement entered into under this article shall be binding on the Government of India and the Government of the State concerned, and shall be given effect to notwithstanding any provision of this Constitution relating to the matters specified in the agreement.
📘 Explanation of Article 278:
Article 278 provided a transitional mechanism for the Union Government to enter into agreements with Part B States (former princely states or their successors) on certain financial matters.
It allowed the levy, collection, and sharing of taxes, financial grants, and even the exercise of executive functions to be handled through mutual agreement.
⚠️ Important Note:
🔹 Article 278 is now obsolete and has been largely rendered redundant by:
The reorganization of States, and
The repeal of Part B States from the First Schedule of the Constitution.
🔹 Part B States (e.g., Hyderabad, Mysore, Bhopal, etc.) existed only at the commencement of the Constitution and were merged into other States by the States Reorganisation Act, 1956.
🧾 Purpose (Historical Context):
To allow smooth integration of princely states (Part B States) into the Indian Union.
Provided flexibility for taxation and fiscal coordination between the Centre and newly acceding states.
Addressed unique arrangements in states like Hyderabad, Travancore-Cochin, and Jammu & Kashmir (before Article 370 arrangements took over).
⚖️ Relevant Case Law (Related/Contextual):
Since Article 278 is rarely litigated today, there are no landmark cases directly on Article 278, but some cases relate to Centre–State financial agreements and taxation arrangements:
1. State of Rajasthan v. Union of India (1977 AIR 1361)
Issue: Role of the Union in State affairs and agreements.
Relevance: While not under Article 278, this case analyzed the constitutional limits of Centre–State agreements.
2. Re: Berubari Union Case (1960 AIR 845)
Issue: Whether India can enter into agreements with foreign entities (not states).
Relevance: Emphasized the importance of agreements in constitutional structure, echoing the binding nature mentioned in Article 278(2).
🔄 Relationship with Article 278A:
Article 278A was introduced to allow for specific tax-related agreements with Jammu & Kashmir.
Both Articles 278 and 278A have lost significance after constitutional amendments and reorganization of states, especially the abrogation of Article 370 and integration of J&K.
🧩 Comparison with Modern Articles:
| Article | Subject | Current Relevance |
|---|---|---|
| Article 280 | Finance Commission | Highly relevant – allocates financial resources |
| Article 275 | Grants-in-aid from Union to States | Still in use |
| Article 278 | Agreements with Part B States | Obsolete post-1956 |
| Article 270 | Distribution of tax revenues | Key for GST and tax sharing |
✅ Summary:
| Feature | Details |
|---|---|
| Purpose | To enter into financial agreements with Part B States |
| Allowed | Tax collection, financial aid, executive functions |
| Current Status | Largely obsolete since Part B States were merged |
| Binding Nature | Such agreements were constitutionally binding |
| Related Articles | Article 278A (now repealed), Article 275, Article 280 |
📌 Conclusion:
Article 278 was a transitional provision designed for a specific historical context — to help integrate Part B States into the financial and administrative framework of the Indian Union. While no longer actively used, it represents how the Constitution accommodated diversity and regional complexity at India's independence.
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