SC demonetisation verdict : What is delegated legislation
Context- In upholding the Centre’s 2016 decision on demonetisation, one of the key questions to decide for the Supreme Court was whether Parliament gave excessive powers to the Centre under the law to demonetise currency. While the majority ruling upheld the validity of the delegated legislation, the dissenting verdict noted that excessive delegation of power is arbitrary.
(Credits- TOI)
What is delegated legislation?
Parliament routinely delegates certain functions to authorities established by law since every aspect cannot be dealt with directly by the law makers themselves. This delegation of powers is noted in statutes, which are commonly referred to as delegated legislation
The delegated legislation would specify operational details, giving power to those executing the details. Regulations and by-laws under legislations are classic examples of delegated legislation
What is the issue?
The practice of empowering the Executive to make subordinate legislation within a prescribed sphere has evolved out of practical necessity and pragmatic needs of a modern welfare State. However, The rule against excessive delegation of legislative authority flows from and is a necessary postulate of the sovereignty of the people. (i.e- Law should be made by representatives of the people).
What was the delegation of power in the demonetisation case?
Section 26(2) of the Reserve Bank of India Act, 1934 essentially gives powers to the Centre to notify that a particular denomination of currency ceases to be legal tender.
The provision reads : “On recommendation of the Central Board(of RBI) the Central Government may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender.”
Here, Parliament, which enacted the RBI Act, is essentially delegating the power to alter the nature of legal tender to the central government. The Centre exercised that power by issuing a gazette notification, which is essentially the legislative basis for the demonetisation exercise.
Why was this challenged?
The petitioner’s challenge was this : “In the event that Section 26(2) is held to permit demonetization, does it suffer from excessive delegation of legislative power thereby rendering it ultra vires the Constitution?”
The Constitution gives law-making powers to the Parliament. While operational aspects can be delegated to statutory bodies, essential powers cannot be delegated. Also, the delegation must be with sufficient guidelines on how the power can be used
What did the Court decide?
The majority verdict held that since the delegation of power is to the Centre which is anyway answerable to the Parliament, the delegation power cannot be struck down.
“In case the Executive does not act reasonably while exercising its power of delegated legislation, it is responsible to Parliament who are elected representatives of the citizens for whom there exists a democratic method of bringing to book the elected representatives who act unreasonably in such matters,” the court said
What was the dissenting view?
The dissenting opinion, however, disagreed with this view.
- First, Justice BV Nagarathna held that Centre could not have exercised its delegated powers because Section 26(2) of the RBI only gives powers to the Centre when the recommendation is “initiated” by the RBI Central Board.
- The dissenting view also held that, even if the Centre has the power under Section 26(2) allowing for demonetisation of “any” notes is a vast power that is arbitrary and therefore unconstitutional.
Conclusion – Considering pragmatic difficulties of lack of time and expertise, delegated legislation becomes an important tool of modern welfare states. However, excessive delegation goes against the principle of sovereignty of people and mandate of the constitution.
Source- Indian Express
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Syllabus- GS-2; Functioning of Legislative and Executive
