Supreme Court on Pre-Legislative Consultation

This blog has previously carried commentary on pre-legislative scrutiny on several occasions: see here, here, here and here.

A few weeks ago, on May 11, 2016, the Supreme Court delivered a judgment in the case of Cellular Operators Association of India v. TRAI, popularly known as the 'call drops' case. The case has important implications for pre-legislative scrutiny, especially pertaining to sub-ordinate legislations. The impugned sub-ordinate legislation was the Telecom Consumers Protection (Ninth Amendment) Regulations, 2015, which required that telecom service providers compensate consumers for call drops. The constitutionality of the regulation was challenged before the Supreme Court (on appeal from the Delhi High Court) on various grounds.

One of the grounds on which the challenge succeeded was the violation the requirement under Section 11(4) of the Telecom Regulatory Authority of India Act, 1997 (TRAI Act), the principal legislation. Section 11(4) states: “The Authority [TRAI] shall ensure transparency while exercising its powers and discharging its functions”.

It is important to note that the Court at the outset states that ordinarily, a legislation (principal or sub-ordinate) is not subject to the rules of natural justice. However, if the parent statute explicitly provides for it, the sub-ordinate legislation must follow such rules of natural justice. In this instance, since the parent statute provides for a ‘transparency’ requirement, it was held by the Court that the ordinary rule was not applicable.

The term transparency, however, has not been defined under the TRAI Act. Thus the Court refers to other statutes and a number of case laws to determine the scope of the ‘transparency’ requirement:

• The Court refers to Section 13(4) of the Airports Economic Regulatory Authority Act, 2008, which provides for three requirements under the ambit of transparency: holding due consultations with all stakeholders, allowing stakeholders to make their submissions, and fully documenting and explaining decisions. The English Court of Appeal case of R v. North and East Devon Health Authority is then cited, in order to determine the scope of the term ‘consultation’. The case holds that even the product of the consultation must be “conscientiously taken into account when the ultimate decision is taken”.
• Thereafter the Court calls attention to the RTI Act, 2005 (including Section 4(1) where every public authority is to publish the procedure followed in its decision making processes) and connected judgments to emphasize the aspect of openness in governance (in the context of transparency).
• Crucially, the Court also cites Section 553 of the US Administrative Procedure Act, which provides that notice of rules must be served beforehand and that after hearing comments a “concise general statement” of the basis and purpose of the rules shall be published. Next, the Corpus Juris Secundum is cited in order to discuss the requirements under the Administrative Procedure Act. The Corpus Juris Secundum explains that the general statement, in a reasoned manner, is expected to respond to and resolve significant problems raised by comments received. The Court rules that TRAI was expected to follow such procedure to fulfil the ‘transparency’ requirement under the TRAI Act.

Since TRAI did not reasonably respond to comments, such as those that pointed out that consumers themselves were at fault for call drops, the regulation was struck down as ultra vires. What about those sub-ordinate legislations that have no such ‘transparency’ requirements under parent statutes? The Supreme Court recommends that the Parliament enact a legislation on the lines of the US Administrative Procedure Act, binding all subordinate legislation.

It appears that the Pre-Legislative Consultation Policy (PLCP) adopted by the Committee of Secretaries in January 2014 escaped the attention of the Court. As per the policy, all legislation, principal or sub-ordinate, must be subject to pre-legislative scrutiny. Specifically, the policy requires prior publication of the legislation, publication of an explanatory note and receipt of comments on the draft legislation. The summary of comments and the response to the comments is to be placed before the Cabinet and the relevant Parliament Standing Committee. The policy also states that all new principal legislation must provide for prior publication of sub-ordinate legislation. What is especially important is that the policy applies to all principal and sub-ordinate legislation. In other words, the PLCP applies (a) irrespective of whether the principal legislation provides for prior publication of sub-ordinate legislation and (b) even though ordinarily (as the Supreme Court holds in the above case) legislation is not subject to rules of natural justice. This progressive piece of policy ought to have been taken notice of by the Supreme Court.

- Vasujith Ram