Case Analysis: Lachmi Narain v. Union of India, (1976) | Delegated Legislation

The 'Lachmi Narain v. Union of India (1976)' case falls within the domain of administrative law, specifically addressing delegated legislation. It focuses on the scope of authority granted to the Central Government under Section 2 of the Union Territories (Laws) Act, 1950.

Case Title: Lachmi Narain v. Union of India

Court: Supreme Court of India

Citation: 1976 AIR 714; 1976 SCR (2) 785; 1976 SCC (2) 953

Judges: Justice Y.V. Chandrachud, Justice R.S. Sarkaria and Justice A.C. Gupta

Date of Judgment: November 25, 1975

Facts

1. In 1951, the Central Government extended the Bengal Finance (Sales Tax) Act, 1941 (hereinafter as “Bengal Act”) to Delhi with certain modifications through a notification. This included modifications to Section 6 of the Bengal Act regarding exemptions from sales tax.
2. In 1956, the Bengal Finance (Sales Tax) (Delhi Amendment) Act, 1956 (hereinafter as “Finance Act”) was passed which introduced amendments in various provisions of the Bengal Act which were as applicable to Delhi.
3. In 1957, the Central Government issues another notification purporting to amend the 1951 notification by making a further modification to Section 6(2) of the Bengal Act regarding the notice period for amendments to sales tax exemptions.
4. The 1957 notification substituted the words “not less than 3 months’ notice” with “such previous notice as it considers reasonable” in Section 6(2).
5. In 1959, Parliament passed the Bengal (Sales Tax) (Delhi Amendment) Act (hereinafter as “Amendment Act”) amending some provisions of the Bengal Act but left Section 6 untouched.
6. Over the years, the government issued notifications withdrawing sales tax exemptions on certain goods like durries, country liquor, etc. after giving notice less than 3 months.
7. Dealers affected by the withdrawal of exemptions filed writ petitions challenging the validity of the 1957 notification and the subsequent withdrawal notifications.
8. The single judge allowed some of the petitions but the division bench dismissed them on grounds that the 1959 Amendment Act had put a seal of approval on the reduced notice period under Section 6(2).
9. The dealers have now appealed to the Apex Court against the division bench judgment.

Issues

• Whether the 1957 notification substitution of the notice period in Section 6(2) was within the power of “modification” under Section 2 of the Union Territories (Laws) Act, 1950?
• Whether the Parliament cured that invalidity through the 1959 Amendment Act, if the 1957 notification was invalid?
• Whether the respondent can take the defence about the invalidity of notifications granting sales tax exemptions without the 3 months’ notice.

Laws Applied

• Section 2 of Union Territories (Laws) Act, 1950
• Section 6 of the Bengal Finance (Sales Tax) Act, 1941

Arguments Before Court

• The appellants contended that the power of modification under Section 2 of the Union Territories (Laws) Act, 1950 (hereinafter as “1950 Act”) is limited and exists only for the purpose and time of extension of the law. The power bestowed under this provision is of “conditional legislation” and not of “delegated legislation”.
• The 1957 notification was issued over 6 years after the Bengal Act was extended, hence invalid.
• Further, the modification in the 1957 notification changes the essential features of Section 6(2) regarding the mandatory 3-month notice period. It goes beyond the permissible limits of modification power.
• They also argued that the 1959 Amendment Act does not validate the changes made by the 1957 notification as it does not amend or refer to Section 6(2). The mere amendment does not amount to re-enactment.
• The respondent argued that the modification in the 1957 notification does not alter the policy or scheme of the Act. The notice period is only a matter of detail and is only a directory. Its changes were necessitated due to the local conditions of Delhi.
• Also, the power under Section 2 does not exhaust upon the first exercise. Subsequent modifications are permissible to overcome oversights.
• The respondent also contended that by the 1959 Amendment Act, Parliament approved the modified Section 6(2) as it stood as part of the Bengal Act extended to Delhi. Hence, any invalidity stood cured.

Judgment

In the instant matter, regarding the contention of appellants considering the power under Section 2 as 'conditional legislation’, the court noted that the distinction between the delegated powers makes no substantive difference, as the extent of permissible delegation does not change based on what either category is named – both operate under the same central tenant that delegation is allowed solely within legislatively imposed limitations and conditions.

The apex court examined the nature and scope of the power of “modification” conferred by Section 2 of the 1950 Act under which the 1957 notification was issued. It observed that this power of modification is not an independent power but an integral part of the power to extend enactments to the Union Territories.

The fundamental authority given to the Central Government under this provision is to extend the implementation and enforcement of laws already operative in a State to Union Territories as well. This extension invokes the discretionary authority to impose limitations and alterations to the extended legislation.

However, this discretionary power does not constitute a distinct or independent power in itself, rather, the ability to restrict and modify the applied law is an intrinsic part of the predominant power to extend. Thus, the capacity to modify exists only within the context of and connected to the extension mechanism.

It has no separate grounds for exercise beyond facilitating the extension through fitting adaptations. In essence, restricting and modifying is subordinate and contingent, and not free-standing.

Therefore, through this observation, the court held that the power under Section 2 exhausts upon the first exercise and can be exercised only once simultaneously while extending the enactment. It cannot be exercised repeatedly or subsequently.

The modifications must be necessary to bring the extended enactment into operation in the Union Territory. Alterations involving a change in essential features or legislative policy are not permissible. The court also avoided the literal interpretation of “such restrictions and modifications as it thinks fit” as it would be adverse or opposite to the context of the provision if read as a whole.

Applying such principle, the Court found the 1957 notification invalid on two grounds. Firstly, it was issued over 6 years after the Bengal Act was extended and therefore the power under Section 2 of the 1950 Act had exhausted. The Court declined to equate this power with the “Henry VIII clause” in the British laws. It does not continue for one year but exhausts upon extension, unlike a Henry VIII clause.

Secondly, substituting the 3 months notice period in Section 6(2) of the Bengal Act with a reasonable period notice changes the essential scheme and mandate of the provision. The span of notice was the very essence of that legislative mandate, non-compliance which makes the action invalid. The language of the provision is said to be “emphatically prohibitive” as it directs the government in clear negative terms that the period of the requisite notice must not be less than 3 months.

Hence, the 1957 notification modifies material aspects of Section 6(2) which is not permissible under Section 2 of the 1950 Act. The decision of the Single Judge of the High Court regarding this was upheld as the apex court observed Section 6(2) that it involves establishing legislative policy and translating it into a firm code of behaviour that can only be altered or modified by the legislature itself through its fundamental legislative authority, which cannot be delegated to the government.

Dealing with the second issue, the Court held that the Parliament did not validate the changes made by the 1957 notification through the 1959 Amendment Act since it leaves Section 6(2) untouched without any indirect reference. The Court declined to accept the proposition that mere amendment amounts to the re-enactment of the Act. Hence, the invalidity of the 1957 notification was not cured.

The instant Court also rejected the alternative defence presented by the respondent about exemptions earlier granted without notice. It refused to allow the respondent to take advantage of its lapse or wrong in not giving 3 months’ notice while withdrawing exemptions granted without notice.

In the end, the 1957 notification was held to be unconstitutional along with the subsequent withdrawal notifications for non-compliance with the mandatory notice clause in Section 6(2).