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4. Federal set up is always understood in contradistinction to unitary State. Federalism, whether understood as pragmatic or quasi in the Indian context in view of the division of powers between the Union and States, is accepted to be the basic structure of the Constitution. A comparative study of the Constitutions of Federal set up of the World do throw clear light on the division of powers between the Centre and the States. Local Government or local bodies have been never treated to have division of powers so as to be a tier in the Federal system. It is clear from the very functioning of the Federal Systems of the World. In Kesavananda Bharathi v. State of Kerala, , the Apex Court no doubt held that Federalism is the basic structure of the Constitution. In Smt.Indira Nehru Gandhi v. Shri Raj Narain, , at Para 688 it was held by the Apex Court:

Article 243G and Article 246(3) of the Constitution are enabling provisions and definitely both are to be interpreted harmoniously. No doubt, the petitioners provided a chart at Page 95 showing the overlapping subjects of Eleventh Schedule vis-a-vis State List and Concurrent List. The distribution of powers between Centre and States in the light of our Constitutional scheme do definitely negate the stand of the petitioners that these Institutions should be given such a Constitutional status so as to touch the Federal set up and the basic structure concept. In Union of India v. Deokinandan Aggarwal, AIR 1992 SC 96, at Para 14, it was observed:

23. The concept of Basic structure and Federalism cannot be stretched too far so as to include these Panchayat Raj Institutions also as part of Federal concept in distribution of powers or allocation of powers. A directive in the form envisaged by Article 243 G cannot be equated with an enforceable legal right flowing from a Constitutional mandate. Autonomy to these Institutions is only limited autonomy, be it fiscal or otherwise, and the Constitutional directive envisaged under Article 243 G has to be interpreted as only a discretionary directive and nothing more.

24. Article 40 of the Constitution no doubt contemplates the State taking steps to organize Village Panchayats and endow them with such powers and authority as may be necessary to enable them to function as units of self-Government. An argument was advanced that in the light of Article 40, if Article 243G is not mandatory, there is no necessity of introducing this Article in Part IX inasmuch as if it is to be interpreted as directory or discretionary, the position would have been the same even prior to the introduction of Part IX. This contention cannot be accepted for the reason that a provision of the Constitution normally may have to be read as it stands and cannot be interpreted as it ought to have been worded. This is neither the province of the Court nor the power of judicial review can be stretched that far so as to engulf a situation of this kind. In State of Bihar v. Bihar Distillery Ltd., , it was held that an Act of the Legislature represents the Will of the people and hence cannot be declared as unconstitutional lightly. The limitations of powers of Parliament and State Legislatures in relation to legislative powers were well discussed by the Apex Court in State of Bihar v. Charusila Dasi, , Tata Iron and Steel Co. v. State of Bihar, , Tirath Ram v. State of U.P., , Government of A.P. v. H.M.T., Misrilal v. State of Orissa, , Wadhwa v. State of Bihar, . A careful scrutiny and analysis of the Constitutional scheme would go to show that the power to legislate relating to entries in XI Schedule cannot be put on par with power of the State Legislature to legislate in relation to the entries in the VII Schedule since the former would not fall under basic structure concept whereas the latter would fall under the said concept in the light of distribution of powers. The Panchayat Raj Institutions cannot be elevated to such a status in view of our Constitutional scheme. At any rate, out of 29 subjects in Schedule XI of the Constitution, Government had issued orders in respect of 17 subjects specified in para 19 of the counter- affidavit of the 1st respondent and monitoring and review functions in relation to these programmes have been devolved on Panchayat Raj Institutions.