Lachmi Narain v Union of India (1976)

It is the leading case on the exercise of a delegated power of modification, and it decides five distinct points, each of which is examinable on its own. It is also the case that drains the distinction between conditional and delegated legislation of practical consequence.

Section 2 of the 1950 Act empowered the Central Government to extend to any Part C State, "with such restrictions and modifications as it thinks fit, any enactment which was in force in a Part A State at the time of" the notification.

By notification SRO 615 of 28 April 1951 the Central Government extended the Bengal Finance (Sales Tax) Act 1941 to Delhi with modifications, one of which substituted in section 6(2), "for the words "add to the Schedule", the words "add to or omit or otherwise amend the Schedule"". Section 6(2) as extended also required not less than three months' notice before amending the exemption schedule.

Six and a half years later, by a notification of December 1957, the Government purported to replace "not less than three months' notice" with "such previous notice as it considers reasonable", and then withdrew exemptions on fruits, pepper, tamarind, chillies, turmeric, ghee, durries, pure silk, country liquor and other goods.

The 1957 notification was beyond the powers conferred by section 2 of the Laws Act, and the four later notifications withdrawing exemptions without the mandatory three months' notice were "also invalid and ineffective."

Point one: the modification power is subsidiary and exhausts itself. The power under section 2 "is not an unfettered power of delegated legislation but a subsidiary power conferred for the limited purpose of extension and application to a Union territory, an enactment in force in a State", so that "only such modifications are permissible in the exercise of that power which are necessary to adapt and adjust such enactment to local the conditions." As Shri Ashok Sen put it, "it is not a recurring power; it exhausts itself on extension, and in no case this power can be used to change the basic scheme and structure of the enactment or the legislative policy ingrained in it." The single Judge had held the power of modification "is an integral part of the power of extension and "cannot therefore be exercised except for the purpose of the extension"", and the Supreme Court restored his view.

Point two: why the three months' notice was mandatory. From the scheme: tax under the Bengal Act is assessed on the quarterly turnover, and a three-month notice "conforms to that scheme and is intended to ensure that imposition of a new burden or exemption from tax causes least dislocation and inconvenience to the dealer"; the public and purchasers "should have adequate notice of taxable items"; those affected "may get sufficient time and opportunity for making representations, objections or suggestions in respect of the intended amendment"; and dealers need time "to arrange their sales, adjust their affairs and to get themselves registered". From the language: "the use of peremptory language in a negative form is per se indicative of the intent that the provision is to be mandatory", the sub-section commanding "the Government in unambiguous negative terms that the period of the requisite notice must not be less than three months." Hence "The span of notice was thus the essence of the legislative mandate", and the sub-section "cannot therefore be split up into essential and non-essential components, the whole of it being mandatory."

Point three: the excessive-delegation rule doing service as an ultra vires rule. "Section 6(2) embodies a determination of legislative policy and its formulation as an absolute rule of conduct which could be diluted, changed or amended only by the legislature in the exercise of its essential legislative function which could not, as held in Re Delhi Laws Act and Rajnarain Singh case be delegated to the Government."

Point four: two ways of doing indirectly what may not be done directly. The Government did not amend section 6(2); it amended its own 1951 notification, which by then "had exhausted its purpose and had spent its force." Amending a statute "through the medium of a "dead" notification was an exercise in futility", and "an amendment which was not directly permissible could not be indirectly smuggled in through the backdoor." Nor could the Government rely on its own earlier failures to give notice: to allow that "would be violative of the fundamental principle of natural histice, according to which, a party cannot be allowed to take advantage of its own lapse or wrong" (read justice), and "Two wrongs never make a right." The Amendment Act of 1959 did not cure the defect, since it "leaves Section 6(2) untouched".

Point five: section 21 of the General Clauses Act does not enlarge a power. The Government argued that section 21, which makes a power to issue rules include a power to amend or rescind them, supplied the authority. The Court refused: "The source from which the power to amend the Second Schedule, comes from Section 6(2) of the Bengal Act and not from Section 21 of the General Clauses Act." Section 21 "embodies only a rule of construction and the nature and extent of its application must be governed by the relevant statute which confers the power to issue the notification", so the power "had to be exercised within the limits circumscribed by Section 6(2) and for the purpose for which it was conferred."

A delegated power to extend an enactment "with such restrictions and modifications as it thinks fit" is subsidiary to the power of extension, exhausts itself on extension, and cannot be used to alter the legislative policy of the extended Act. Section 21 of the General Clauses Act is a rule of construction and never a source of power.

• On excessive delegation: it is the case that shows the Delhi Laws test operating on a delegate rather than on a statute.
• On mandatory or directory: the negative peremptory language test, and the refusal to split a sub-section into essential and non-essential parts.
• On conditional legislation: the Court said that no useful purpose is served by calling a power conditional legislation instead of delegated legislation, since conditional legislation too has a content of the law-making power and the donee may not exceed the limits circumscribing it.
• On the General Clauses Act: the standard answer to any argument built on section 21.