Vague licensing disqualifications for electricity trading were struck down as ultra vires and arbitrary under constitutional scrutiny.

Clauses (b) and (f) of Regulation 6A introducing open-ended disqualifications for electricity trading licences were held to exceed the scope of the Electricity Act, 2003, because delegated legislation cannot create substantive disabilities not authorised by the parent statute; the clauses were therefore ultra vires. The same clauses were also found unconstitutional under Articles 14 and 19(1)(g) because they relied on vague, subjective and undefined standards such as "fit and proper person", financial integrity and general fitness, leaving excessive discretion and creating arbitrariness in licensing. The licensing regime had to be reconsidered without applying the struck-down clauses.

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Issues: (i) Whether clauses (b) and (f) of Regulation 6A, inserted under the electricity trading regulations, were within the scope of the enabling provisions of the Electricity Act, 2003 and validly exercised delegated legislative power; (ii) whether those clauses, by introducing subjective disqualifications and an undefined "fit and proper person" standard, violated the constitutional guarantees of equality and freedom to carry on trade under Articles 14 and 19(1)(g) of the Constitution of India.

Issue (i): Whether clauses (b) and (f) of Regulation 6A, inserted under the electricity trading regulations, were within the scope of the enabling provisions of the Electricity Act, 2003 and validly exercised delegated legislative power.

Analysis: The Act permitted regulation of trading licence conditions, but the parent statute itself did not lay down a power to create open-ended disqualifications of the kind introduced by Regulation 6A. Delegated legislation must operate within the four corners of the enabling Act and cannot introduce substantive disabilities or qualifications not contemplated by the statute. The impugned clauses travelled beyond the statutory scheme by creating a separate disqualifying regime, especially where the Act already addressed technical requirement, capital adequacy, and creditworthiness. The provision also lacked a clear mechanism for objective ascertainment of the new disqualifying factors.

Conclusion: The impugned clauses were beyond the scope of the enabling Act and were invalid.

Issue (ii): Whether those clauses, by introducing subjective disqualifications and an undefined "fit and proper person" standard, violated the constitutional guarantees of equality and freedom to carry on trade under Articles 14 and 19(1)(g) of the Constitution of India.

Analysis: A regulatory restriction on entry into trade must be reasonable, definite, and guided by objective criteria. The challenged clauses used vague and subjective expressions, including an undefined and open-ended assessment of financial integrity, competence, reputation, character, efficiency, honesty, and general fitness. Such standards conferred excessive discretion without sufficient legislative guidance and created uncertainty and arbitrariness in the licensing process. A condition that can affect business rights at the threshold must satisfy constitutional scrutiny and cannot rest on uncanalised discretion.

Conclusion: The impugned clauses were unconstitutional as arbitrary and unreasonable restrictions on trade.

Final Conclusion: The validity of the impugned disqualification regime failed both on statutory competence and on constitutional standards, and the licensing matter was required to be reconsidered without applying the struck-down clauses.

Ratio Decidendi: A delegated regulation cannot impose vague, subjective, and substantively new disqualifications for a licence unless the parent statute clearly authorises such a regime and provides objective standards to control discretion; otherwise, the regulation is ultra vires and unconstitutional.

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