TaxTMI 
TaxTMI 
TaxTMI 
2009 (5) TMI 904
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....ation 2004 (for short, "the Regulation") Indisputably, in terms of the provisions of the said Act as also the Regulations, inter alia, license is required to be taken by a person who is desirous of dealing in inter-state trading, which in terms of Regulation 2(g) means "transfer of electricity from the territory of one State to the territory of another State by an electricity dealer". 4. Appellant No. 1 is a Public Limited Company incorporated and registered under the Indian Companies Act. 5. Pursuant to or in furtherance of the said Act and the Regulations, the appellant No. 1 herein filed an application for grant of inter-State Trading License under Category `A' before CERC on 23.3.2004. CERC published a notice as regards the said application filed by the appellant No. 1 for grant of inter-state Trading License in all editions of `Indian Express', Financial Express' and a vernacular daily `Jansatta'. Appellant No. 1 also filed an interlocutory application seeking permission to trade in the electricity pending final disposal of its petition for grant of inter-state trading license as it had been engaged in inter-state trading of electricity prior to the commencem....
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....h Court must be held to have committed a serious error insofar as it held that the Amended Regulations would apply to the appellant No. 1's application. ii. It was also contended that sufficient guidelines having been laid down as regards disqualification of persons applying for grant of licence, the impugned Regulations must be held to be ultra vires Article 14 of the Constitution of India. iii. In any event, keeping in view the facts and circumstances of this case, the provisions should be read down. 10. Mr. Parag Tripathi, learned Additional Solicitor General appearing on behalf of the respondent, would, however, support the impugned judgment. THE ACT 11. The said Act was enacted to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalization of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulato....
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....adequacy requirement and creditworthiness for being an electricity trader. Section 66 mandates that the Appropriate Commission shall endeavour to promote the development of a market (including trading) in power in such manner as may be specified and shall be guided by the National Electricity Policy referred to in Section 3 of the Act. Section 76 provides for constitution of a Central Commission. Functions of the Central Commission are laid down in Section 79 thereof; clauses (e) and (j) of Sub-Section (1) whereof reads as under: "(e) to issue licenses to persons to function as transmission licensee and electricity trader with respect to their inter-State operations; xxx xxx xxx (j) to fix the trading margin in the inter-State trading of electricity, if considered, necessary. Section 178 of the Act provides for a regulations making power. Sub- Section (1) thereof empowers the Commission to make regulations consistent with the Act and the rules generally to carry out the provisions of the Act. Sub-Section (2) of Section 178, inter alia, prescribes that such regulations may provide, inter alia, for (a) period to be specified under the first proviso to Section 14; (b) the form ....
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....e Act. Thus read, Regulation 6A should be construed in terms of the requirements contained in Section 52 of the Act, namely, technical requirement, capital adequacy, requirement and creditworthiness for being an electricity trader. It affects the creditworthiness of the applicant. It also affects the credit effectiveness, namely, (1) financial integrity of the applicant; (2) his competence; (3) his reputation and character; and (4) his efficiency and honesty. It affects a pending proceeding. Because of the said amendment, an interim licence granted in favour of the appellant stood revoked. This, however, would not mean that an amendment made in a regulation would under no circumstance, affect pending proceeding. 18. It is now a well settled principle of law that the rule making power "for carrying out the purpose of the Act" is a general delegation. Such a general delegation may not be held to be laying down any guidelines. Thus, by reason of such a provision alone, the regulation making power cannot be exercised so as to bring into existence substantive rights or obligations or disabilities which are not contemplated in terms of the provisions of the said Act. We may, in this....
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....e power of the company, the shareholders, the creditors and the general public for whose benefit, the power is to be exercised. This decision, therefore, itself may be considered to be an authority for the proposition that where the Parliament thought it fit and proper to confer such a power upon an authority exercising quasi judicial power, the same is specifically conferred by the provisions of the Act itself and not by a subordinate legislation. Paragraph 19 of the said decision clearly shows that for the purpose of arriving at a satisfaction that a person was fit and proper to be re-appointed as managing agent, all past conduct and actings were required to be taken into consideration. Regulation 6A is a disqualifying statute. The statute, however, does not provide for any machinery to collect independent material for being placed before the proper authority as regards evaluation of credit effectiveness and creditworthiness of the applicant. CONSTITUTIONALITY ISSUE 21. For deciding the question involved herein, we must notice the purport and object for which such disqualifications have been brought into the statute book. In terms of Section 52 of the Act, the creditworthiness....
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....8) 5 SCC 257], this Court held: "26. It is now a well-settled principle of interpretation of statutes that the court must give effect to the purport and object of the Act. Rule of purposive construction should, subject of course to the applicability of the other principles of interpretation, be made applicable in a case of this nature." When a disqualification is provided, it is to operate at the threshold in respect of the players in the field of trading in electricity. When, however, a regulatory statute is sought to be enforced, the power of the authority to impose restrictions and conditions must be construed having regard to the purpose and object it seeks to achieve. Dealing in any manner with generation, distribution and supply and trading in electrical energy is vital for the economy of the country. The private players who are permitted or who are granted licence in this behalf may have to satisfy the conditions imposed. No doubt, such conditions must be reasonable. Concededly, the doctrine of proportionality may have to be invoked. The Superior Court would ensure that the subordinate legislation has been framed within the four corners of the Act and is otherwise valid.....
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.... well say that the legislature never intended to give authority to make such rules) 16. The court considering the validity of a subordinate legislation, will have to consider the nature, object and scheme of the enabling Act, and also the area over which power has been delegated under the Act and then decide whether the subordinate legislation conforms to the parent statute. Where a rule is directly inconsistent with a mandatory provision of the statute, then, of course, the task of the court is simple and easy. But where the contention is that the inconsistency or non- conformity of the rule is not with reference to any specific provision of the enabling Act, but with the object and scheme of the parent Act, the court should proceed with caution before declaring invalidity." 26. A legislative policy providing for qualification or disqualification of a person for obtaining a trading licence should not be vague or uncertain. Parameters must be laid down therefor for determining the financial integrity, reputation, character, efficiency and honesty of the applicant. An explanation appended to clause (f) of Regulation 6A points out various aspects that may be considered while determ....
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.... In State of Rajasthan & ors. vs. Basant Nahata [(2005) 12 SCC 77] Section 22-A of the Registration Act, 1908 which was inserted by Rajasthan Amendment Act 16 of 1976 was struck down, holding:-(1) The executive while making a subordinate legislation should not be permitted to open new heads of public policy, (2) the doctrine of public policy itself being uncertain cannot be a guideline for anything or cannot be said to be providing sufficient framework for the executive to work under it, (3) Essential functions of the legislature cannot be delegated and it must be judged on the touchstone of Article 14 and Article 246 of the Constitution, and (4) only the ancillary and procedural powers can be delegated and not the essential legislative point. 29. Our attention has been drawn to some other legislations wherein the concept of `fit and proper person' had been applied, namely, Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004. 30. We have not been shown as to how the purpose and object of the said Regulations can be said to be in pari materia with the Regulations in question. It must also be borne in mind that an elaborate public heari....
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....lifications. Although by the said provisions, it cannot be said that the legislature has exhausted itself but the same should also be taken into consideration for the purpose of determining the effect of the Regulations. As Section 52 does not empower the Regulation making authority to provide for qualification or disqualification, the delegated legislation or a subordinate legislation as is well known must conform exactly to the power granted. In Supreme Court Employees' Welfare Association vs. Union of India & Anr. [(1989) 4 SCC 187], this Court has held:- "62. Thus as delegated legislation or a subordinate legislation must conform exactly to the power granted. So far as the question of grant of approval by the President of India under the proviso to Article 146 (2) is concerned, no such conditions have been laid down to be fulfilled before the President of India grants or refuses to grant approval. By virtue of Article 74(1) of the Constitution, the President of India shall, in exercise of his functions, act in accordance with the advice of the Council of Ministers. In other words, it is the particular department in the Ministry that considers the question of approval unde....
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....ch can be imposed by the State for the purpose of parting with its right of exclusive privilege more or less have been exhaustively dealt with in the illustrations in sub-section (2) of Section 29 of the Act. There cannot be any doubt whatsoever that the general power to make rules is contained in sub-section (1) of Section 29. The provisions contained in sub-section (2) are illustrative in nture. But, the factors enumerated in sub-section (2) of Section 29 are indicative of the heads under which the statutory framework should ordinarily be worked out." 34. We have seen that clause (b) of Regulation 6A provides for a disqualification only on the ground of involvement of the applicant or any of its promoters, partners, directors, associates etc. in any legal proceeding. The same may or may not by itself be sufficient to disqualify a person, but the Commission must be satisfied that grant of licence in the circumstance may adversely affect the interest of the electricity sector or of the consumers. Such legal proceedings are, apart from the judgment of convictions of an offence involving moral turpitude or any economic offence on the part of the applicant or his partner, or promoter....
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....tatutory provision the right of an agent to carry on his business is affected, he may, in our considered opinion, in his own right maintain an action." [See also Calcutta Gas Company (Proprietary) Ltd. vs. State of West Bengal & ors. (AIR 1962 SC 1044)] 37. Strong reliance has been placed by Mr. Tripathi as also by the High Court on State of Tamil Nadu vs. M/s Hind Stone & ors. [(1981) 2 SCC 205]. One of the issues involved therein was renewal of existing mining lease where applicants had filed applications before the coming into force of the new mining policy. Merely an application was filed and no further action had been taken. In the aforementioned fact situation, this Court while opining that applications for grant of mining lease should be dealt with within a reasonable time but on that account the applicant would not be clothed with a right for disposal thereof, stating: "...No one has a vested right to the grant or renewal of a lease and none can claim a vested right to have an application for the grant or renewal of a lease dealt with in a particular way, by applying particular provisions. In the absence of any vested rights in anyone, an application for a lease has nece....
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....iling a mere application cannot be said to have derived a vested right but we are of the opinion that he has a right to be considered. It will bear repetition to state that such consideration must be made not only on the basis of a valid statute but also rationale and objective criteria should be applied therefor. EPILOGUE 43. The law sometimes can be written in such subjective manner that it affects efficiency and transparent function of the government. If the statute provides for point-less discretion to agency, it is in essence demolishing the accountability strand within the administrative process as the agency is not under obligation from an objective norm, which can enforce accountability in decision-making process. All law making, be it in the context of delegated legislation or primary legislation, have to conform to the fundamental tenets of transparency and openness on one hand and responsiveness and accountability on the other. These are fundamental tenets flowing from Due Process requirement under Article 21, Equal Protection clause embodied in Article 14 and Fundamental Freedoms clause ingrained under Article 19. A modern deliberative democracy can not function withou....