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The Bihar High Court’s Prohibition Judgment: Key Constitutional Issues – I: Excessive Delegation and Ultra Vires

In a landmark judgment handed down yesterday (Confederation of Indian Alcoholic Beverage Companies vs State of Bihar, Civil Writ No. 6675/2016), a division bench of the Patna High Court struck down the Bihar government’s notification imposing total prohibition in the state, as well as Section 19(4) of the Bihar Excise Act of 1915, which was the statutory provision under which the notification was passed. Justice Navaniti Prasad Singh wrote a detailed judgment, with which the Chief Justice concurred on all points apart from whether the right to drink alcohol was protected under Article 21 of the Constitution, as a facet of the right to privacy. The case itself threw up a host of fascinating constitutional questions, which merit close scrutiny. In Part I, I will examine the Justice Singh’s reasoning striking down the Act and Notification on grounds of excessive delegation, conflict with policy, and ultra vires. In Part II, I will analyse the disagreement between Justice Singh and the Chief Justice on the question of fundamental rights. Part III will be a guest post on the issue of punishment.

Section 19(4) of the Bihar Excise Act, as it originally stood, read as follows:

“Notwithstanding anything contained in the foregoing Sub-sections, the Local Government may, by notification, prohibit the possession of any person or class of persons, either in the Province of Bihar and Orissa or in any specified local area, of any intoxicant , either absolutely, or subject to such conditions as it may prescribe.”

On 31st March 2016, Section 19(4) was amended to read:

Notwithstanding anything contained in this Act and the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985), the State Government may by notification, absolutely prohibit the manufacture, bottling, distribution, sale, possession or consumption by any manufactory, bottling plant, license holder or any person in the whole State of Bihar or in any specified local area in respect of all or any of the intoxicant s either totally or subject to such conditions as it may prescribe.”

The same day, the Government issued a notification banning distribution, sale, consumption etc. of country liquor. A few days later, it issued another notification [“the impugned notification”], which extended the ban to foreign liquor (and thus made prohibition absolute):

“Notification No. 11/Nai Utpad Niti-01.03/2016-1485, dated 5th April, 2016. – In exercise of the powers conferred under Section 19(4) of the Bihar Excise Act, 1915 (as amended by Bihar Excise (Amendment) Act, 2016), the State Government hereby imposes ban on wholesale or retail trade and consumption of foreign liquor by any license holder or any person in the whole of the State of Bihar with immediate effect.”

The petitioners’ first prong of attack was that the phrase “any person” under Section 19(4) of the Excise Act did not contemplate “all persons“, and that therefore, the Notification was ultra vires. To substantiate this, they relied upon judgments of the pre-Independence Federal Court, which had interpreted the pre-amended Section 19(4) in this manner. This contention was swiftly rejected by Justice Singh, since those judgments had expressly held that because the term “any person” was immediately qualified by “class of persons“, it was not intended to include “all persons” within its ambit. The 2016 amendment to Section 19(4), however, had removed the term “class of persons” altogether. Consequently, it could no longer be held that on a plain reading, “any person” could not include “all persons“. This aspect of the judgment is self-evidently correct, and needs no comment.

This brought Justice Singh to the second argument: that of excessive delegation. He relied extensively upon the classic judgment of the Supreme Court in Hamdard Dawakhana vs Union of India to draw a distinction between conditional legislation (which left the determination of the time, place, and manner of the legislation to become effective upon the delegated authority), and delegated legislation (in which the legislature provided broad policy guidelines, and allowed the delegated authority to fill in the gaps). The key test for the validity of delegated legislation – as observed by the Court in Hamdard Dawakhana – was that it should not amount to abdication of the legislative function. In Dawakhana, the Court had invalidated Section 3(d) of the Drugs and Magical Remedies Act, which used the term “or any other disease or condition which may be specified in rules made under this Act”, on the basis that there was no legislative guidance on how these “diseases” were to be selected. Armed with this, the Justice Singh was then able to find:

“The first thing to be noticed is that except for Section 19 (4) of the Act, there is no legislative enactment in the Act, which would indicate the circumstances and the conditions, whereunder total prohibition could be notified by the State Government as a delegatee. A reading of Section 19 (4) of the Act would show that it authorizes the State Government to issue notification absolutely prohibiting various activities, either in the whole of the State or in specified local areas, in respect of all or any of the intoxicants, either totally or subject to such conditions as may be prescribed. There is no legislative guideline at all discernible from the Act in relation to the aforesaid delegation.” (paragraph 85.11)

What particularly weighed with Justice Singh was that Section 19(4) belonged to the Bihar Excise Act of 1915, which was primarily about “permitting, facilitating and regulating manufacture, storage and sale of intoxicants and for collection of excise revenue” (paragraph 85.14), and not about imposing prohibition. Indeed, there was a separate Bihar prohibition act of 1937, which had never been used, indicating clearly that prohibition as a subject was meant to be dealt with by a separate law altogether. This allowed the Court to hold that Section 19(4), in its present form, amounted to impermissible delegation, and was therefore void – along with the notification issued under it.

Justice Singh then considered the interaction between Section 19(4), the notification, and the Bihar government’s “New Excise Policy” of 2015. The New Excise Policy, which had been notified on 21.12.2015, had introduced the goal of total prohibition in Bihar, and it was following this that Section 19(4) was amended. The Court’s analysis of the interaction between the three legal instruments is a little curious. After finding that the NEP’s purpose was to achieve prohibition in a phased manner starting with the prohibition only of country liquor, Justice Singh then held that consequently, the notification was ulta vires and arbitrary because it extended the prohibition to foreign liquor as well (paragraph 86.21). In doing so, he followed the judgments of the Supreme Court in State of Bihar vs Suprabhat Steels Ltd and Secretary, Ministry of Chemicals and Fertilisers vs Union of India, both of which had held that a government policy, once approved by the cabinet and notified, acts as a subsequent self-limitation of powers – i.e., it is not open to the government – on the pain of arbitrariness – to entirely disregard an existing policy that it had already committed itself to, via notification.

However, a close reading of both these judgments raises some doubts about their applicability to the present case. The Supreme Court’s judgment in State of Bihar vs Suprabhat Steels is laconic and confusing; however, a perusal of the High Court judgment (which was appealed by the State of Bihar to the SC) reveals that a key issue was never argued. Paragraph 14 of the High Court’s judgment states:

“In course of his submission the learned Advocate General submitted that the Notification of 4th April, 1994 amounted to a change of policy by the Government. This was objected to by the petitioners, and they challenged the State to produce material to show that the Government had consciously changed its policy by incorporating such a condition. However, ultimately the learned Advocate General did not proceed on the basis that the Government had changed its policy, and submitted that the Notification dated 4th April, 1994 was not inconsistent with the policy decision.”

In other words, the entire argument before the High Court and Supreme Court in Suprabhat Steels was conducted on the question of whether the impugned Notification was or was not consistent with prior policy. Similarly, in Cipla, the debate was about whether the placement of certain drugs in the Schedule to the Drug Pricing Order was consistent with the government’s own Drug Pricing policy.

In the present case, however, circumstances were different. After the New Excise Policy of 2015, which planned to introduce prohibition in a phased manner, starting with the banning of country liquor, the Bihar assembly amended Section 19(4) of the Excise Act that – as we saw above – allowed for complete prohibition, and drew no distinction between country and foreign liquor. What stronger evidence could there be for a change in policy? Justice Singh attempted to get around this by holding that the amended Section 19(4) was intended to give effect to the New Excise Policy, and that consequently, Notifications issued under it must also conform to the Policy. That argument, however, is simply belied by the text of 19(4), which is substantially broader than the Policy. And when the text is clear, is it open to the Court to go behind the language and to the intent of the framers, in order to derive an implied limitation upon its language?

However, Justice Singh then also held the notification to be void on the much more straightforward ground of ulta vires. Before we consider the argument, it is important to dispel a confusion that might arise on a reading of paragraphs 87 – 87.08. At various points, Justice Singh seems to switch between holding that the Notification is ultra vires, and that Section 19(4) itself is ultra vires. Particularly confusing is paragraph 87.03, where he observes:

“I may also refer to certain judgments, where Courts have held that a legislation has an object and if it is sought to be extended beyond the object, the legislation would be open to challenge. The first decision, I would refer to is the case of M.C.V.S. Arunachala Nadar and others Vs. State of Madras and others, (AIR 1959 Supreme Court 300), wherein in paragraph 5 of the reports, this is what their Lordships have noted, the relevant part whereof is quoted hereunder: “5. ……..In order to be reasonable, a restriction must have a rational relation to the object, which the legislature seeks to achieve and must not go in excess of that object…….””

As a statement of law, the first sentence is plainly incorrect, since the legislative object is to be derived from the text of the legislation itself. Invalidating one provision of an Act because it goes against the legislative object would be tantamount to invalidating a provision of the original Constitution because it violates the basic structure. Arunachala Nadar does nothing to support Justice Singh’s case, since it was on a different issue entirely – that of the reasonableness of restrictions under Article 19.

Eschewing Paragraph 87.03, however, the core of Justice Singh’s argument was that the Notification was ultra vires because it went beyond the legislative object. Going into the history of the Act, it noted that the purpose of the Act had always been to “for regulating the manufacturing, trade and business of intoxicating liquor and for augmenting State revenue”, and never for imposing prohibition. After surveying case law on the point, he then held that:

“Section 19 (4) of the Bihar Excise Act, 1915, could only be used for furtherance of the object of the said Act and not to abrogate the Act itself. In other words, the power, conferred on the executive under Section 19 (4), cannot be used by the executive to be a self destruct switch to kill the legislation itself.”

The problem with this argument, however, is that if the Notification was valid in terms of the amended Section 19(4), then it clearly could not be held to be ultra vires because, in a broader sense, it went beyond the legislative object. In other words, Justice Singh had to make an argument that despite its clear textual wording – allowing the government to prohibit any person from undertaking “manufacture, bottling, distribution, sale, possession or consumption” of intoxicating substances – the amended Section 19(4) – in light of the Act as a whole – was subject to an implied limitation that did not permit the imposition of absolute prohibition. This he did not do; and none of the cases that he cited endorsed the proposition that, in case of a seeming conflict between overall legislative object and a single section of the legislation, delegated action that conformed to the single section could nonetheless be invalidated on the ground of ultra vires. This is, of course, subject to the assumption that there could be a conflict between legislative provisions. I would submit, rather, that provisions like Section 19(4) are better understood as carving out exceptions to the overall legislative object (excise) for certain, specified substances. If the Excise Act was to be understood in this way, then the argument on ultra vires would no longer hold.

Consequently, and with respect, it is my view that while Justice Singh was correct on his reading of the amended Section 19(4), as well as his holding that the Section suffered from the vice of excessive delegation, he was incorrect in holding the Notification void for conflict with the New Excise Policy, as well as for holding it to be ultra vires. The outcome, of course, remains correct.

(In the next post, we shall discuss the Court’s approach towards fundamental rights.)

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Debating the NJAC – Article 124C, Excessive Delegation, and the Separation of Powers: A Response – III (Guest Post)

(Rounding off our debate about Article 124C of the Constitution, in this second part of their two-part essay, Ritwika Sharma and Faiza Rahman defend its constitutionality.)

In the first part of our defence of Article 124C, we argued that the said provision is neither violative of the principle of separation of powers nor vests a process which was hitherto enumerated under the Constitution within the contours of a law enacted by Parliament. In the second part of our defence, we argue that Article 124C cannot be challenged for suffering from the vice of excessive delegation insofar it delegates the power to frame regulations on the NJAC. The petitioners had, on occasions more than one, challenged Section 12 of the NJAC Act for conferring the NJAC with the power to frame regulations on a wide range of aspects pertaining to the functioning of the NJAC. An extensive discussion on the contours of delegated legislation has already taken place on this blog. Our defence of Article 124C, as well as the NJAC Act, is premised on certain specific aspects, as following:

First, the NJAC does not have unguided power to frame regulations under the scheme of the NJAC Act. It was specifically averred by the petitioners that the NJAC Act empowers the NJAC to formulate regulations in respect of criteria of suitability, other procedure and conditions for selection and appointment of judges to the higher judiciary. It has been rightly contended that one of the underlying principles for valid delegation of legislative power is that the legislature cannot delegate its essential legislative function. An equally important principle with regard to delegation of legislative principle was laid by the Supreme Court in Agricultural Market Committee v. Shalimar Chemical Works Ltd., (1997) 5 SCC 516:

The principle which, therefore, emerges out is that the essential legislative function consists of the determination of the legislative policy and the legislature cannot abdicate essential legislative function in favour of another. Power to make subsidiary legislation may be entrusted by the legislature to another body of its choice but the legislature should, before delegating, enunciate either expressly or by implication, the policy and the principles for the guidance of the delegates…” [para 26]

Similarly, the Supreme Court held in K.T. Plantation Pvt. Ltd. v. State of Karnataka, (2011) 9 SCC 1:

Law is settled that the court shall not invalidate a legislation on the ground of delegation of essential legislative functions or on the ground of conferring unguided, uncontrolled and vague powers upon the delegate without taking into account the Preamble of the Act as also other provisions of the statute in the event they provide good means of finding out the meaning of the offending statute. The question whether any particular legislation suffered from excessive delegation, has to be determined by the court having regard to the subject-matter, the scheme, the provisions of the statute including its Preamble and the facts and circumstances and the background on which the statute is enacted. See Bhatnagars & Co. Ltd. v. Union of India [AIR 1957 SC 478] and Mohmedalli v. Union of India [AIR 1964 SC 980]” [para 60]

Thus, the lack of guidance to the NJAC to frame regulations is a pertinent factor while addressing the contention on excessive delegation. It is firmly argued that the NJAC’s power to frame regulations under Section 12 of the NJAC Act is not unguided or arbitrary. Under sub-clause (c) of the newly inserted Article 124B of the Constitution, the NJAC is under a duty to “ensure that the person recommended is of ability and integrity”. Under Section 5(2), the NJAC shall recommend a candidate for appointment as a Judge of the Supreme Court on the basis of “ability, merit and any other criteria”. Sections 6(1) and 6(3) of the NJAC Act prescribe similar guidance for appointment of the Chief Justice and other judges of the High Courts. Correspondingly, Sections 12(2)(a) and (c) of the NJAC Act empower the NJAC to frame regulations for the criteria of suitability with respect to appointments, and other procedure and conditions for selection and appointment of Judges of the Supreme Court and High Courts. Under Section 12(2)(a) and (c), the NJAC can frame regulations with respect to criteria of suitability with respect to appointment of a Judge of the Supreme Court, and the High Court, respectively. In light of the principle of ejusdem generis, it can be safely argued that the power of the NJAC to frame regulations with regard to criteria of suitability is not unguided or unfettered. The Supreme Court in Kavalappara Kottarathil Kochuni v. State of Madras, AIR 1960 SC 1080 explained the principle of ejusdem generis in the following words:

…The rule is that when general words follow particular and specific words of the same nature, the general words must be confined to the things of the same kind as those specified…” [para 52]

The criteria of ability and merit, which find mention in Sections 5(2), and Sections 6(1) and 6(3) belong to a genus and are indicative of qualities that are essential for performing the task of a judge. The NJAC is to draw guidance from these words and specify “any other criteria” of a nature akin to the criteria specified by Parliament. Upon application of the rule of ejusdem generis, the phrase “any other criteria” would take colour from “ability” and “merit”. This would act as a safeguard against the NJAC laying down arbitrary criteria for appointment of judges. By virtue of the application of the principle of ejusdem generis, it is argued that Section 5(2), Sections 6(1) and 6(3) and Sections 12(2)(a) and (c) of the NJAC Act do not suffer from the vice of excessive delegation. Section 12 of the NJAC Act is not an instance of the Parliament having abdicated its essential legislative function to the NJAC. Parliament has laid down its policy with sufficient clarity, on the basis of which the NJAC is expected to operate.

Secondly, the approach adopted by the NJAC Act is in line with international best practice with regard to appointment of judges. Even the Constitutional Reform Act, 2005 (CRA 2005) of the United Kingdom, does not lay down any detailed suitability criteria for appointment of judges to the Supreme Court. Quite like the originally enacted Article 124, Section 25 of the CRA 2005 lays down eligibility criteria for appointment of a person as a judge of the Supreme Court (which includes criteria such as having held a judicial office for a period of at least 2 years, been a qualified practitioner for a period of at least 15 years, etc.). The selection process for appointments finds enunciation under Section 27 of the CRA 2005 which, in its sub-section (5), mandates that “Selection must be made on merit.” Evidently, CRA 2005 has only enumerated eligibility criteria for appointment of judges of the Supreme Court and it leaves wide discretion to the selection commission to assess the merit of a candidate by not enumerating the indicators of merit. In fact, the Supreme Court selection commission had by itself devised an “Information Pack” which enumerated the criteria for appointment of judges. In Part I of our defence of Article 124C, we had presented a similar position with regard to the original Article 124 which only laid down eligibility criteria for appointment of judges while leaving the assessment of suitability largely to the Memoranda of Procedure.

Similar has been the experience in the Republic of South Africa which also envisages a commission for the selection of Chief Justice of its Constitutional Court and the President and Deputy President of its Supreme Court of Appeal (the appointing body is called the Judicial Service Commission). This Commission also nominates the names of individuals who are considered for appointment as other judges of the Constitutional Court. Article 178(6) of the Constitution of the Republic of South Africa states:

The Judicial Service Commission may determine its own procedure, but decisions of the Commission must be supported by a majority of its members.

Evidently, the Constitution of the Republic of South Africa, like the CRA 2005 does not lay down any specific criteria pertaining to assessment of the suitability of a candidate for appointment and the Judicial Service Commission is given wide discretion in formulating its procedure vis-a-vis the appointment and selection process adopted by them. The illustrative experiences of the UK and South Africa clearly indicate that wide discretion is given to their appointment commissions as regards the criteria for suitability for appointment of judges. Hence, the authority to determine the suitability criteria which has been given to the NJAC under Sections 5, 6 and 12 of the NJAC Act lies in sync with international best practices pertaining to judicial appointment commissions.

Lastly, Article 124C only confers such regulation-making power on the NJAC as is necessary to carry out its procedure. The delegation of power to formulate rules/regulations prescribing procedural matters has been well-recognised. For instance, in Maharashtra State Board of Secondary and Higher Education v. Paritosh Bhupesh Kumar Sheth (1984) 4 SCC 27, the Supreme Court held:

So long as the body entrusted with the task of framing the rules or regulations acts within the scope of the authority conferred on it, in the sense that the rules or regulations made by it have a rational acts within the object and purpose of the Statute, the court should not concern itself with the wisdom or efficaciousness of such rules or regulations. It is exclusively within the province of the legislature and its delegate to determine, as a matter of policy, how the provisions of the Statute can best be implemented and what measures, substantive as well as procedural would have to be incorporated in the rules or regulations for the efficacious achievement of the objects and purposes of the Act….” [para 14]

In this regard, one of the provisions that the petitioners specifically challenged the validity of was Section 10(2) of the NJAC Act which lays down that the NJAC shall observe such rules of procedure, including the quorum at its meeting, as it may specify by regulations (under Section 12(2)(i)). The contentious issue was whether the NJAC can determine its own quorum by means of regulations. Quite unsurprisingly, the NJAC Act is not the only statute which comprises such a provision. Section 10(1) of the Insurance Regulatory and Development Authority, 1999, Section 8(1) of the Telecom Regulatory Authority of India Act, 1997 and Section 7(1) of the Securities and Exchange Board of India Act, 1992 are just some of the various statutes that envisage the body being constituted by these Acts as also the entity which lays down the quorum. Yet again, the NJAC Act does not create a legislative innovation in this regard.

It also deserves mention that laying down of voting requirements lies within the province of specifying procedure and the even the Parliament is well within its authority to lay down specifications with regard to the same by means of Parliamentary law. In any event, it is well-recognised that the requirement with regard to voting majorities is procedural, as evident from Kihoto Hollohon v. Zachilhu, 1992 Supp (2) SCC 651:

The amending power under Article 368 is subject to the substantive limitation in that the basic structure cannot be altered or the basic features of the Constitution destroyed. The limitation requiring a special majority is a procedural one…..” [para 65]

Thus, a provision such as Section 6(6), or the second proviso to Section 5(2), which lay down the voting requirements to be followed in the NJAC, are perfectly within the competence of the Parliament and cannot be challenged as an instance of excessive delegation.

Conclusion

The policy with regard to the NJAC Act is abundantly clear. The Statement of Objects and Reasons of the NJAC Act explicitly contemplates “a broad based National Judicial Appointments Commission should be established for making recommendations for appointments of Judges of the Supreme Court and High Courts. The said Commission would provide a meaningful role for the judiciary, the executive and eminent persons to present their view points and make the participants accountable, while also introducing transparency in the selection process.” With the policy in place, the NJAC by means of regulations would only fill in relevant details with regard to the procedure to be followed by it. By no stretch of imagination can such regulation-making be challenged for being an excessive delegation of power. Hence, a challenge to Article 124C insofar it delegates the regulation making on the NJAC is misplaced.

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