The Parliament enacted Electricity Act, 2003. In exercise of its jurisdiction conferred by Section 178 of the said Act, the Central Electricity Regulatory Commission (for short, "CERC") made Central Electricity Regulatory Commission (Procedure,Terms and Conditions for Grant of Trading License and other related matters), Regulation 2004 . After analyzing the Act and Regulations in detail, the Supreme Court in Global Energy Ltd. v. Central Electricity Regulatory Commission (civil appeal no 3457- 3458 of 2009) decided on 11th may 2005, declared Clauses (b) and (f) of Regulation 6A ultra vires the Constitution of India as also the Act. The Supreme Court tested the propriety and constitutionality of generic decision-making process encapsulated under the impugned legislation.
The Supreme Court observed that: “The law sometimes can be written in such subjective manner that it affects efficiency and transparent function of the government. If the statute provides for point-less discretion to agency, it is in essence demolishing the accountability strand within the administrative process as the agency is not under obligation from an objective norm, which can enforce accountability in decision-making process. All law making, be it in the context of delegated legislation or primary legislation, have to conform to the fundamental tenets of transparency and openness on one hand and responsiveness and accountability on the other. These are fundamental tenets flowing from Due Process requirement under Article 21, Equal Protection clause embodied in Article 14 and Fundamental Freedoms clause ingrained under Article 19. A modern deliberative democracy can not function without these attributes.
The constitutive understanding of aforementioned guarantees under the Fundamental Rights chapter in the Constitution does not give rise to a mere rhetoric and symbolic value inhered by the polity but has to be reflected in minute functioning of all the three wings of state - executive, legislature and judiciary. When we talk of state action, devil lies in the detail. The approach to writing of laws, rules, notifications etc. has to showcase these concerns.
The image of law which flows from this framework is its neutrality and objectivity: the ability of law to put sphere of general decision-making outside the discretionary power of those wielding governmental power. Law has to provide a basic level of "legal security" by assuring that law is knowable, dependable and shielded from excessive manipulation. In the context of rule making, delegated legislation should establish the structural conditions within which those processes can function effectively. The question which needs to be asked is whether delegated legislation promotes rational and accountable policy implementation.
A subjectively worded normative device also enables the agency to acquire rents. It determines the degree of accountability and responsiveness of officials and of political and judicial control of the bureaucracy. However, when the provision inherently perpetuates injustice in the award of licenses and brings uncertainty and arbitrariness it would be best to stop the government in the tracks. Since the vires of the regulation is under challenge, we took the opportunity to consider the propriety and constitutionality of generic decision-making process encapsulated under the impugned legislation. Amongst others, in this context, we strike down the impugned clause.”
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