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The main thrust of the attack was that the U.P. Legislature lacked legislative competence to enact the impugned Act. There were two distinct limbs of this submission which would be examined separately. The first limb of the submission was that in exercise of legislative power flowing from Entry 52 List I the Parliament made the requisite declaration in s. 2 of the Industries Development and Regulation) Act, 1951 ('IDR Act' for short), and in view of placitum 25 of the first schedule to the IDR Act sugar being a declared industry, that industry goes out pf Entry 24 List II, and hence U. P. State legislature was denuded of all legislative power to legislate in respect of sugar industry and as the impugned legislation is in respect of industrial undertaking in sugar industry, the impugned legislation is void on account of legislative incompetence. The learned Attorney General countered it by saying that the power to acquire property derived from entry 42 in List III is an independent power and the impugned Act being in pith and substance an Act to acquire scheduled undertakings, meaning thereby the properties of the scheduled undertakings, the power of the State legislature to legislate in this behalf is referable to entry 42 and remains intact irrespective of the fact that sugar is a declared industry, control of which is taken over by the Union Government pursuant to the declaration made under s. 42 of the IDR Act. This necessitates an analytical examination of the relevant entries keeping in view legislative perspective and the historical background through which these entries have passed.

The main thrust of the submission was that the power of acquisition under entry 42, List III is not an independent power but it is incidental to the power to legislate in respect of the various topics in various lists and, therefore, when by a declaration made by the parliament enacted in s. 2 of the IDR Act the control over declared industry is assumed by the Union, such control will also comprehend the power to acquire and hence the power of the State legislature to enact legislation for acquisition of property of scheduled undertakings would be denuded as that power as an internal element of control would vest in the Union Government. The focal point of controversy, therefore, is whether the power of acquisition and requisitioning of property under entry 42, List III is an independent power by itself or it is an integral and inseparable element of the power of control over industry.

There is on the contrary a good volume of authority for the proposition that the control assumed by the Union pursuant to declaration to the extent indicated in the statute making the declaration does not comprehend the power of acquisition if it is not so specifically spelt out. In Kannan Devan Hills Produce Company Ltd. v. The State of Kerala & Another,(1) constitutional validity of Kannan Devan Hills (Resumption of Lands) Act, 1971, was challenged on the ground of legislative competence of Kerala State legislature to enact the legislation. It was urged that in view of the declaration made in s. 2 of the Tea Act, 1853, Tea was a controlled industry and, therefore, the State legislature was denuded of any power to deal with the industry. It was further contended that tea plantation required extensive land and that resumption of land by the impugned legislation would directly and adversely affect the control taken over by the Union and, therefore, the State legislature was incompetent to enact the impugned legislation. This contention was repelled holding that the impugned legislation was in pith and substance one under entry 18 of List II read with entry 42, List III. In reaching this conclusion the Court held as under:

"It seems to us clear that the State has legislative competence to legislate on entry 18, List II and entry 42 List III. This power cannot be denied on the ground that it has some effect on an industry controlled under entry 52 List I. Effect is not the same thing as subject-matter. If a State Act, otherwise valid, has effect on a matter in List I it does not cease to be a legislation with respect to an entry in List II or List III. The object of ss. 4 and 5 seems to be to enable the State to acquire all the lands which do not fall within the categories (a), (b) and (c) of s. 4(1). These provisions are really incidental to the exercise of the power of acquisition. The State cannot be denied a power to ascertain what land should be acquired by it in the public interest".