MCCULLOCH VS. MARYLAND : CASE SUMMARY
USA is a federation of States. There was lack of clarity is distribution of powers between Federal Legislature and State Legislature and any expansion of power of Federation was being resisted by States. In McCulloch Vs. Maryland, the Supreme Court held that Congress has implied power to create Bank of United States by legislation.
FACTS OF THE CASE
The Congress created first Bank of the United States in 1791 with a 20 years charter which was resisted by several states. Charter expired in 1811 and not renewed. Again, the Congress passed similar legislation to create Second Bank of the United States. Many States were not happy with the creation of Bank as they saw it as centralizing measure. Some States tried to hinder the operation of the Bank while some passed laws to impose tax.
Maryland’s State Legislature passed law to levying $15,000 annual tax on any bank operating in Maryland that were issuing bills and notes that were not properly stamped by Maryland’s Treasury.
James Willimam Mcculloch, an employee of Second Bank of the United States at Baltimore Branch, issued unstamped Bank Note to a resident. A law suit was filed against James William McCulloch. Maryland Court of Appeals held that Constitution does not provide for creation of any Federal Bank as such creation of any such bank was unconstitutional. The matter finally reached to the Supreme Court.
OPINION OF THE COURT
The Supreme Court Considered two questions (i) Whether Congress has power to incorporate a Bank ? and (ii) Whether State of Maryland can tax the branch of Central Bank ?
The Supreme Court repelled the argument that States retain the ultimate sovereignty as they have ratified the Constitution. Powers of Federal Government have been delegated by States. The Supreme Court held that the people of USA are sovereign rather than states.
The Supreme Court noted that the Constitution does not give explicit power to establish Central Bank but that does not mean that the Congress cannot establish Central Bank. Power given to government imply ordinary means of execution also. For example raising revenue is admitted to imply the power of conveying money from place to place. The Government which has a right to act must be given right to select the means.
The Supreme Court invoked necessary and proper clause which permits Congress to seek an objective while it exercised its enumerated powers as long as that objective is not forbidden by the Constitution. The Court held that Congress has implied powers which must be related to the text of the Constitution but do not need to be enumerated within the text.
The Supreme Court observed that necessary and proper clause purports to enlarge and not to diminish the powers vested in the Government. It grants additional power and does not restrict powers already granted.
The Supreme Court held the act of incorporation of Bank Constitutional. The Supreme Court also struck down the tax as an unconstitutional attempt by a state to interfere with a federal institution, in violation of the Supremacy clause.
IMPACT OF THE CASE
The decision of the Supreme Court strengthened Federal Government at expense of the States. It gave Federal Government power to enact laws on subjects which are not explicitly mentioned in the Constitution but are required to give effect to achieve responsibilities under the Constitution.
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Mukesh Kumar Suman is an advocate and legal author based at Delhi. He regularly appears before various Judicial Forums including NCLT, NCLAT, High Courts and the Supreme Court. He can be approached at mukesh_suman@outlook.com or +91 9717864570.