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After the decision in the Re Delhi case, the main controversy in every case involving delegation has been the question of determination of what is essential legislative function.
There is no agreed formula with reference to which one can decide the permissible limits of delegation or that when the law will be bad on account of “excessive delegation”, thus every case is decided in its special setting.
The cases have been discussed from the point of view of the nature of the power conferred under the following broadheads:
Skeleton Legislation and Judicial Deference
The concept of "skeleton legislation" involves the delegation of broad legislative powers to the executive or administrative authorities, allowing them to fill in the necessary details to implement a law. This practice has been upheld in several landmark cases, where the courts have demonstrated significant deference to the legislature's intent in delegating such powers.
In Bagla v. State of M.P. (AIR 1954 SC 465), the Essential Supplies Act, 1946, under Section 3, empowered the government to regulate the production and supply of essential commodities as it deemed necessary to maintain or increase supplies or ensure equitable distribution.
The court held that Section 3 provided clear and sufficient guidance, enabling the government to fill in the details required for effective regulation. The court also interpreted Section 6 of the Act, which stated that any order made under Section 3 would override any inconsistent legislation, as a legislative act of Parliament itself, not as an overreach by the executive. This case stands as a high watermark of judicial deference to legislative delegation.
Similarly, in Garewal v. State of Punjab (AIR 1959 SC 512), the court upheld the validity of Section 3 of the All India Services Act, 1951, which authorized the government to make rules regulating the conditions of service for All India Services.
The court recognized that the broad delegation of power was valid, as it was accompanied by sufficient policy guidance within the statute.
In Sri Ram Narain v. State of Bombay (AIR 1959 SC 459), the court upheld the validity of a broad statement of policy, such as "public interest," in relation to varying the ceiling area of landholdings.
The court found this statement sufficient to justify the delegation of power, emphasizing that such broad terms were necessary for the flexibility required in legislative functioning.
Another significant case is Bhatnagar & Co. v. Union of India (AIR 1957 SC 478), where the Import and Export (Control) Act, 1947, under Section 3, empowered the government to prohibit or restrict the import or export of goods.
The statute provided only a skeletal framework, offering no specific guidelines on the considerations or policies that the government should follow. The court upheld the delegation, recognizing that the subject of import/export control is so variable that it is impractical for Parliament to lay down detailed norms that would be valid for all times.
Power of Inclusion and Exclusion
Statutes often confer power on the executive to include or exclude certain individuals, bodies, or commodities from the scope of the law. The judiciary has upheld such powers when the underlying policy is apparent from the statute.
In Edward Mills Co. Ltd. v. State of Ajmer (AIR 1955 SC 25), the Act authorized an administrative agency to set minimum wages for industries specified in a schedule and empowered the agency to add other industries to the list. The court held that the policy of avoiding exploitation in industries with low wages was evident on the face of the Act, thus justifying the delegation of power to vary the schedule.
In State of T.N. v. Hind Stone (AIR 1981 SC 711), a provision under a rule-making power effectively created a state monopoly in quarrying black granite by excluding private persons. The petitioners argued that this involved a major policy change, which should be a legislative function.
However, the court held that a state monopoly could be established through subordinate legislation, and it was within the subordinate legislative body's power to create such a monopoly, even in the absence of explicit parliamentary legislation on the matter.
Power of Modification of Statutes
The power of modifying statutes is a significant and sometimes controversial delegation of legislative authority to the executive branch.
This power allows the executive to alter or adjust legislative provisions to adapt to changing circumstances or to address unforeseen issues in the implementation of laws. While this can be seen as making the executive supreme over the legislature, it is often necessary to ensure flexibility and responsiveness in governance.
One of the most common instances where the power to modify statutes is delegated is in the context of extending and applying laws to new areas or circumstances. In Raj Narain v. Chairman, Patna Administration Committee (AIR 1954 SC 569), the Bihar and Orissa Municipal Act, 1922 allowed the government to extend any section of the Act to a particular area with modifications as deemed necessary.
The government issued a notification applying one section of the Act, relating to the levy of taxes, to Patna town with certain modifications.
The Supreme Court held this delegation to be ultra vires, reasoning that selecting a specific section and modifying it for application amounted to changing the policy of the Act, which is an essential legislative function and cannot be delegated.
The court found that while the power conferred was valid, the manner in which it was exercised—effecting a radical change in the policy of the Act—was invalid.
The power to modify statutes often includes the authority to "remove difficulties," which can be quite broad and sometimes contentious. This type of provision is often referred to as a "Henry VIII clause," named after the English monarch who was known for his sweeping powers.
In Jalan Trading Co. v. Mill Mazdoor Union (AIR 1967 SC 691), the Supreme Court examined the validity of Section 37(1) of the Payment of Bonus Act, 1965, which empowered the government to make provisions for the removal of doubts or difficulties in giving effect to the Act.
Section 37(2) made the government’s order final, effectively allowing the government to determine for itself what the purposes of the Act were. The court declared Section 37 ultra vires, holding that it conferred legislative power on the executive, which is a non-delegable function.
The situation in Jalan Trading Co. differed from that in cases like Raj Narain and the Re Delhi case, where the power of modification was intended to remove difficulties only to the extent necessary for extending the law to new areas, not to alter the original Act itself.
However, in Jalan Trading Co., the power conferred was much broader, allowing for potential modification of the legislation itself.
In contrast, the Supreme Court upheld a similar provision in Gammon India Ltd. v. Union of India (AIR 1974 SC 960). Here, Section 34 of the Contract Labour Act, 1970, empowered the government to make provisions, not inconsistent with the Act, as necessary for removing difficulties.
The court found that Section 34 did not contemplate any alteration of the Act, but merely the removal of practical difficulties in its implementation, and thus upheld its validity.
Abdication Test
The "abdication test" was proposed by Justice K.K. Mathew in Gwalior Rayon Mills v. Assistant Commissioner of Sales Tax (AIR 1974 SC 1660) as a criterion for determining the constitutionality of delegated legislation.
According to this test, as long as the legislature retains the power to repeal the enabling Act, it does not abdicate its legislative function, and the delegation must be considered valid, no matter how broad or general the delegation may be.
However, the majority of the Supreme Court, led by Justice Khanna, did not agree with this "abdication test" and instead reaffirmed the established test of "policy and guidelines" as the basis for determining the constitutionality of delegated legislation. Despite this, Justice Mathew applied his own test in the N.K. Papiah case (AIR 1975 SC 1007).
In Registrar, Co-operative Societies v. K. Kunjabmu (AIR 1980 SC 350), the court upheld the "policy and guideline" test but hinted that this test could be reconsidered in the future. The case involved a clause that allowed the State Government to exempt any registered society from any provision of the Act or apply provisions with modifications. This was seen as a "near Henry VIII" clause, but the court upheld it, recognizing the need for flexibility in modern governance.
In Brij Sunder v. First Addl. District Judge (1989) 1 SCC 561, the court allowed the extension of future laws from another state to which the adopting state legislature had not had the opportunity to apply its mind.
Section 3 of the Cantonments (Extension of Rent Control Laws) Act permitted the Central Government to extend any enactment related to rent control to cantonment areas by notification, even allowing for future amendments to apply automatically.
The court upheld this delegation, reasoning that once Parliament's policy was clear, it was valid for future amendments to be applied to the cantonment areas as well.
Retrospective operation of delegated legislation
An administrative authority can make its rules and regulations with retrospective effect if the parent statute authorised it either expressly or by necessary implication.
However, after B.S. Yadav v State of Haryana (AIR 1981 SC 561) it is not enough that the statute should authorise retrospective operation of delegated legislation, the authority must also show that there was sufficient reasonable and rational justification for applying the rules retrospectively.
In this case the Governor of Punjab acting under Article 309 of the Constitution amended the seniority rules and gave them retrospective operation. The effect of the amendment was that the “date of confirmation” which was the basis to determine seniority in judicial services was replaced by the “length of continuous service in a post” criteria.
This amendment when given retrospective operation disturbed the seniority of many persons. The Supreme Court struck down the retrospective operation of the rule on the ground that there was no nexus or rational relationship between the rule and its retrospectivity
The Committee on Subordinate Legislation has recommended that such power should be used only in unavoidable circumstances and should in each case be accompanied by an explanatory note affirming that no one was likely to be affected adversely as a result of the retrospective effect
Power to impose Tax
In a democratic government, the power to impose taxes is traditionally viewed as the exclusive prerogative of the legislature. This power serves as a significant tool for the legislature to exercise control over the executive.
However, modern governance has seen a shift in this principle, with the taxing power being delegated to the executive by the legislature to a significant extent. This delegation has been subject to judicial scrutiny, and courts have laid down principles governing the extent and validity of such delegation.
In Orient Weaving Mills v. Union of India (AIR 1963 SC 98), the Supreme Court upheld the delegation of power to the government to exempt certain excisable items from duty. The Court recognized that while the power to impose taxes is primarily a legislative function, the delegation of certain aspects, such as exemptions, can be valid when proper guidelines are provided within the enabling statute.
Similarly, in Banarasi Das v. State of M.P. (AIR 1958 SC 909), the Court upheld the delegation of power to the government to bring certain sale transactions under the ambit of the Sales Tax Act.
This delegation was deemed valid as it allowed the executive to adapt the tax regime to changing circumstances while operating within the framework established by the legislature.
In Devi Das v. State of Punjab (AIR 1967 SC 1895), the Court addressed the issue of delegating the power to the executive to determine the rate of tax within a range specified by the legislature.
The Court upheld the delegation of power to set a terminal tax rate between 1% and 2%, emphasizing that it is permissible to confer a reasonable area of discretion on the government through fiscal statutes.
However, the Court cautioned that if the discretion is too broad, allowing the government to set arbitrary rates, such delegation may be struck down as excessive.
The case of Delhi Municipal Corporation v. Birla Cotton Mills (AIR 1968 SC 1232) further explored the boundaries of delegation. Here, the Court upheld the power delegated to a municipal corporation to impose an electricity tax without a prescribed maximum limit.
The Court reasoned that since the corporation is a representative and responsive body, it provides an inherent safeguard against the misuse of taxing power.
Similarly, in Corporation of Calcutta v. Liberty Cinema (AIR 1965 SC 1107), the Court upheld the delegation of power to levy a license fee on cinemas at a rate prescribed by the corporation, recognizing that such bodies are expected to act in a manner that reflects the interests of the public they represent.
However, in the Devi Das case, the Supreme Court took a different stance regarding the delegation of power to levy sales tax "at such rates as the government deemed fit."
The Court struck down this delegation, holding that it amounted to excessive delegation because it failed to provide adequate guidelines, leaving too much discretion to the executive.
In Avinder Singh v. State of Punjab (AIR 1979 SC 321), the State of Punjab, under the Municipal Corporation Act, 1976, required various municipalities to impose a tax on foreign liquor. When the municipalities failed to do so, the government imposed the tax itself.
This imposition was challenged on the grounds of excessive delegation. The Supreme Court upheld the delegation, noting that the expression "for the purposes of the Act" provided sufficient guidelines for the imposition of taxes by municipalities.
The Court reasoned that in the case of a municipality, which has limited functions and resources, such a guideline was adequate to prevent misuse of the delegated power.
From these cases, several general principles regarding the delegation of taxing power can be drawn:
Delegation of Taxing Power is Permissible: Taxing power, while traditionally a legislative function, is not an essential legislative power that cannot be delegated. However, the delegation must be accompanied by clear policy guidelines set by the legislature.
Sufficient Guidelines Must be Provided: The legislature must lay down a clear policy that provides sufficient guidelines for the imposition of taxes. Broad expressions like "for the purpose of the Act" have been upheld as sufficient guidelines, particularly when the delegation is made to a responsive and representative authority, such as a municipal corporation.
Limitations on Discretionary Power: The delegation of power to determine tax rates is permissible when the legislature prescribes minimum and maximum limits. However, if the delegation provides too wide a discretion, such as allowing the executive to set arbitrary rates without clear limits, it may be deemed excessive and struck down.
Delegation to Representative Bodies: The delegation of taxing power to representative bodies, such as municipal corporations, has generally been upheld by the courts, as these bodies are expected to act in the public interest and are considered to provide an inherent check against misuse.
Rational Justification for Differential Tax Rates: The delegation of power to select different tax rates for different commodities is permissible if it is based on rational justification and is within the framework established by the legislature.
These principles underscore the balance that must be maintained between legislative authority and the practical needs of modern governance, allowing for flexibility in tax administration while ensuring that essential legislative functions are not abdicated.
Policy and Guideline Theory
The case of Kerala Samsthana Chethu Thozhilali Union v. State of Kerala is significant in the context of determining the validity of delegated legislation, particularly when assessing whether the rules made under an enabling statute are in line with the policy and purpose of the Act.
The Supreme Court in this case emphasized the necessity of a clear nexus between the rules and the objectives of the enabling Act. This nexus is the key determinant in deciding whether the rules fall within the scope of the delegated legislative power.
In this case, the State of Kerala had enacted rules under the Kerala Abkari Act, which aimed to prohibit the grant of excise licenses related to the trade in arrack. As part of its social policy, the State sought to rehabilitate workers who had lost their jobs due to the ban on arrack.
Rule 4(2) of these rules mandated "compulsory employment" of these displaced workers by certain employers, which was challenged as being ultra vires the enabling Act and the Constitution.
The Supreme Court found that the rule compelling employers to hire displaced workers did not have a reasonable nexus with the primary purpose of the Kerala Abkari Act, which was to regulate the trade in excise goods, not to manage employment issues arising from the State’s prohibition policies.
The Court held that while the State's objective of rehabilitating affected workers was socially desirable, it could not impose such obligations on private employers through delegated legislation unless explicitly authorized by the enabling statute.
The Court further restated the principles of delegation of legislative power, clarifying that:
Nexus with Enabling Act: The rules made under delegated powers must have a clear and reasonable nexus with the policy and purpose of the enabling Act. If the connection between the rule and the Act’s purpose is tenuous or nonexistent, the rule is ultra vires and invalid.
Limitations on Delegated Power: Delegated legislation cannot extend beyond the scope of authority granted by the enabling Act. In this case, the Kerala Abkari Act did not authorize the State to impose employment conditions on private employers, and therefore, the rule was ultra vires.
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