2009 (5) TMI 904 - SC - Indian Laws

Whether clauses (b) and (f) of Regulation 6A of the Central Electricity Regulatory Commission (Procedure, Terms and Conditions for Grant of Trading License and other related matters) (Amendment), Regulation 2006 (hereinafter referred to and called for the sake of brevity as Amended Regulation ) in constitutionally valid? Whether the delegation having been made for the purpose of carrying out the object, could the limitation be imposed for ascertaining as to whether the applicant is fit and proper person and disregarding his creditworthiness?

Issues Involved:
1. Constitutional validity of clauses (b) and (f) of Regulation 6A of the Central Electricity Regulatory Commission (Amendment), Regulation 2006.
2. Retrospective effect of the Amended Regulation.
3. Delegated legislation and its conformity to the parent Act.
4. Reasonableness and vagueness of disqualification criteria.
5. Legitimate expectation and vested rights of the appellant.

Detailed Analysis:

1. Constitutional Validity of Clauses (b) and (f) of Regulation 6A:
The primary issue was the constitutional validity of clauses (b) and (f) of Regulation 6A. Clause (b) disqualifies an applicant involved in legal proceedings if it may adversely affect the electricity sector or consumers. Clause (f) disqualifies an applicant if they are not considered a "fit and proper person." The court found these provisions to be ultra vires the Constitution of India and the Electricity Act, 2003. The court emphasized that a disqualifying statute must be definite and not ambiguous or vague, and the criteria for determining financial integrity, reputation, character, efficiency, and honesty were not adequately defined.

2. Retrospective Effect of the Amended Regulation:
The court examined whether the Amended Regulation had a retrospective effect on the appellant's application for an inter-state trading license. The appellant's interim license was revoked due to the amendment. The court noted that while amendments to regulations can affect pending proceedings, such amendments should not create substantive rights or obligations that were not contemplated by the original Act.

3. Delegated Legislation and Its Conformity to the Parent Act:
The court scrutinized the regulation-making power under Section 178 of the Electricity Act, 2003. It held that the power to make regulations must be interpreted in the context of the Act and should not create new substantive rights or obligations. The court referenced previous judgments to assert that delegated legislation must conform exactly to the power granted by the parent statute and should not exceed the limits of authority conferred by the enabling Act.

4. Reasonableness and Vagueness of Disqualification Criteria:
The court found that the disqualification criteria under clauses (b) and (f) were vague and lacked clear guidelines. The criteria for determining whether an applicant is a "fit and proper person" were subjective and not exhaustively defined. The court emphasized that essential legislative functions cannot be delegated without adequate guidelines to prevent arbitrariness.

5. Legitimate Expectation and Vested Rights of the Appellant:
The court acknowledged that while the appellant did not have a vested right to the grant of a license, they had a right to be considered based on valid and objective criteria. The appellant had a legitimate expectation that their application would be evaluated according to the statutory requirements in place at the time of application. The court found that the appellant's interim license and subsequent trading activities created a legitimate expectation that the original criteria would be applied.

Conclusion:
The court concluded that clauses (b) and (f) of Regulation 6A were ultra vires the Constitution and the Electricity Act, 2003. It directed the Central Electricity Regulatory Commission to reconsider the appellant's application for an inter-state trading license as if the impugned provisions had not come into force. The appeals were allowed with costs, and the counsel fee was assessed at Rs. 50,000/-.

Epilogue:
The judgment highlighted the importance of transparency, accountability, and reasonableness in delegated legislation. It emphasized that laws and regulations must be clear, objective, and within the scope of the parent statute to ensure fairness and prevent arbitrariness in administrative decision-making.

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