SC demonetisation verdict: What is delegated legislation

Source: The post is based on the article “SC demonetisation verdict: What is delegated legislation” published in Indian Express on 11th January 2023

What is the News?

The Supreme Court has upheld the Government of India’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. The majority ruling upheld the validity of the delegated legislation but the dissenting verdict noted that excessive delegation of power is arbitrary.

What is Delegated Legislation?

Parliament routinely delegates certain functions to authorities established by law since every aspect cannot be dealt with directly by the lawmakers 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 the legislation are classic examples of delegated legislation.

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.

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.

What was the Supreme Court verdict on demonetization?

Click Here to read

Why is excessive delegation power an issue?

In a 1959 landmark ruling in Hamdard Dawakhana v Union of India, the Supreme Court struck down the delegation of powers on the grounds that it was vague. 

In this case, the Constitution Bench considered the validity of certain provisions of the Drug and Magic Remedies (Objectionable Advertisements) Act that prohibited advertisements of certain drugs for the treatment of certain diseases and dealt with the powers of search, seizure and entry.

The Court held that the central government’s power of specifying diseases and conditions as given in the act is ‘uncanalised’, ‘uncontrolled’ and going beyond the permissible boundaries of valid delegation. Hence, the same was deemed unconstitutional.