THE ADMINISTRATIVE AND REGULATORY

STATE

TV SOMANATHAN*

I. INTRODUCTION
AS originally enacted, the Indian Constitution had the standard three-
branches-of-government structure as its conceptual base, with a few
institutions like the Election Commission forming marginal exceptions. The
growth of the so-called ‘regulatory State’ challenges this conception. This
chapter examines how constitutional law in India has dealt with the
administrative and regulatory State as it has developed outside the traditional
branches of government, and how judicial review is exercised over it.
While the ‘administrative’ State is self-explanatory, the term ‘regulatory
State’ is often used to denote institutions operating at arm’s length from the
government, insulated from day-to-day political pressures and using technical
expertise in reaching decisions.1 However, viewed in terms of the economic
functions performed, the ‘regulatory’ State does not necessarily mean
independent regulators. Many aspects of financial, industrial, environmental,
and labour regulation are implemented in India and elsewhere (including
developed countries) through ministries and departments of the executive
without an independent regulator. Indeed, independent regulators are not
necessarily or always ‘better’ than traditional administrative structures. Thus,
the ‘administrative’ State is much wider than the ‘regulatory’ State.

II. THE ADMINISTRATIVE STRUCTURE

Many functions and sectors now falling under ‘independent’ agencies outside
the ‘traditional’ politically controlled executive branch remain
executive/administrative functions in constitutional/legal terms and were
earlier part of the traditional executive. The same functions in other sectors
continue to be part of the ‘traditional’ administrative State. Therefore a brief
overview of constitutional issues relating to the administrative State as it
functions within the executive branch becomes necessary.
The Government of India (‘the Union government’ or the ‘Central
government’) consists of ministries and departments. A ministry may consist
of one or more departments. Ministries are headed by Cabinet Ministers, who
may be assisted by Ministers of States, Deputy Ministers, and Parliamentary
Secretaries, all of whom are part of the political executive and have to be
Members of Parliament. Each department is headed by a Secretary
(equivalent to ‘Permanent Secretary’ in many Commonwealth countries),
who is typically a career civil servant, most often from the Indian
Administrative Service. Coordination between ministries is the role of the
Cabinet Secretary, who is the Secretary to the Union cabinet and head of the
civil service, and his office (known as the Cabinet Secretariat). There is also a
Prime Minister’s Office (PMO) which assists the Prime Minister and which
has a combination of civil servants and political appointees. As of May 2014,
the Government of India had fifty-one ministries and fifty-seven departments.
There were twenty-eight Cabinet Ministers and forty-three Ministers of
State.2 The government can vary the number and sectoral jurisdiction of
ministries and departments by executive order.
India has twenty-nine State Governments and seven Governments of
Union Territories (one of them being the National Capital Territory of Delhi).
State Governments have a similar structure of Cabinet Ministers, though it is
less common for them to have Ministers of State, Deputy Ministers, or
Parliamentary Secretaries. State Governments have multiple departments (not
called ministries) and each department is typically headed by a Minister at the
political level, with a Secretary who is normally a career civil servant (most
often from the Indian Administrative Service). The structure and number of
departments in the State Governments varies from State to State and is not
necessarily aligned with the structure of ministries and departments at the
central level. For example, in May 2014 the Government of Tamil Nadu had
thirty-six departments, while the Government of West Bengal had sixty-one
departments. Union Territories vary in size and structure, but typically have a
similar structure to State Governments, albeit with fewer departments. The
State-level equivalent of the Cabinet Secretary is the Chief Secretary, who is
the Secretary to the State Cabinet and the head of the civil service. There is
usually also a Chief Minister’s Office, which may have both civil servants
and political appointees, though typically far smaller in size than the PMO.
The Indian Administrative Service, the Indian Police Service, and the
Indian Forest Service are ‘All-India Services’, most of whose members are
recruited through rigorous competitive examinations by the independent
Union Public Service Commission (a minority of them are promoted from
State civil services). Members of these services work in both the Union and
State Governments. The Union government and the State governments also
have their own civil services. The Secretary is the administrative head of each
department, who exercises supervision over all staff and financial resources.

Table 22.1 List of Central Regulatory Authorities

* In these cases there are also separate State-level regulators.

Table 22.2 List of Regulatory Tribunals

 III. THE REGULATORY STRUCTURE
In recent years, several new regulatory institutions have been created. The
degree of independence of these institutions varies. Some of them are part of
the traditional executive, some are outside but subject to a high degree of
executive control, and some are independent of direct executive control.
Table 22.1 presents a list of major regulatory bodies that are either explicitly
called ‘regulatory’ or, though not so called, in fact exercise regulatory
functions.
While many of the regulatory bodies listed in Table 22.1 are outside the
traditional executive, there are now a number of tribunals that perform
judicial functions outside the traditional judiciary. Several of these are
specifically linked to the regulatory bodies listed in Table 22.1, while some
hear disputes relating to other administrative matters. Some of these handle
both judicial and quasi-judicial functions. Table 22.2 is a list of the main
tribunals which deal with disputes arising from the decisions of regulatory
bodies and administrative agencies.

IV. THE CONSTITUTION AND THE ADMINISTRATIVE AND

REGULATORY STATE
The constitutional position of the administrative and regulatory State draws
partly from the Constitution itself (as amended), but even more from judicial
decisions, especially in the past twenty years, when judicial decisions have
been far-reaching and in some cases have gone to the extent of moving
beyond even express provisions of the Constitution.
Articles 53 and 154 provide that executive authority can be exercised by
officers subordinate to the President (in the case of the Union) and the
Governor (in the case of States).3 These Articles also allow Parliament/State
legislatures to confer functions on authorities other than the
President/Governor, and are thus the basic source allowing the creation of
independent regulatory agencies. Articles 77/166 provide that the
President/Governor shall ‘make rules for the more convenient transaction of
business’ and for allocation of work among Ministers. The rules framed
under this Article are called the ‘Business Rules’ or ‘Rules of Business’.
These rules provide for the allocation of the work of government between
different ministries and departments and they also enable delegation of
authority from the Council of Ministers (cabinet) to individual Ministers and
to officers subordinate to those Ministers. They specify which kinds of
decisions need to come before the cabinet and the procedure in the event of
interdepartmental disagreement. Therefore, while all executive action is taken
in the name of the President/Governor, actual authority to take those
decisions may vest in lower levels of the executive. Under Articles 73 and
162 the executive power of the Union and State Governments, respectively,
are coextensive with their legislative powers. Article 248 allocates legislative
power on all residuary matters (ie, subjects not listed in the State or
Concurrent List) to Parliament, and hence executive power thereon belongs
to the Union government.
The Constitution does not explicitly mention or require ‘separation of
powers’. This is particularly true of the separation between the executive and
legislature, given that it is a parliamentary form of government. On the
contrary, it has chapters on the ‘Legislative Powers of the
President/Governor’, which confer the power to promulgate ordinances on
the executive. It also implicitly allows the executive to exercise, to a limited
extent, judicial powers insofar as the (subordinate) judicial services are part
of the public services of the State; the separation of the subordinate judiciary
is a ‘Directive Principle of State Policy’, and thus non-justiciable. However,
the separation of powers between the judiciary and executive has been held
by the Supreme Court to be part of the (unamendable) ‘basic structure’ of the
Constitution.
Executive power is the residue of all powers that are not legislative or
judicial (and thus inclusive of quasi-judicial powers). Mukherjea CJ stated in
Ram Jawaya Kapur v State of Punjab that:
It may not be possible to frame an exhaustive definition of what executive function means and
implies. Ordinarily the executive function connotes the residue of governmental functions that
remain after legislative and judicial functions are taken away.4

It is sometimes argued that the power of regulatory bodies to make rules (ie,
the power of delegated legislation) is not found in the Constitution and thus is
a grey area and, further, that these regulatory bodies are ‘mini-States’
combining executive, quasi-judicial, and quasi-legislative (ie, subordinate
legislation) powers.5 However, delegated legislation by the President or
Governor is not specified anywhere in the Constitution as a ‘legislative’
function. Therefore the function of delegated legislation is encompassed
within the ‘residual’ functions, which are executive functions. For that reason,
Articles 53 and 154 would cover the function of delegated legislation and
allow the delegation of that (executive) function by the legislature to
authorities other than the President/Governor, such as independent regulators.
Under Articles 75(3)/164(2), Ministers of the Union/State government are
collectively responsible to Parliament/State legislatures for actions of the
executive. The effect of Article 75(3)/164(2) read with Articles 77(2)/166(3)
is that individual Ministers are personally accountable to Parliament/State
legislatures for actions taken within their areas of responsibility, whether
those actions were taken by them or by their subordinates. The conduct of
ministries and departments is often the subject of comment and criticism in
Parliament/State legislatures. The Supreme Court has stated that:
The Cabinet is responsible to the Legislature for every action in any of the ministries … 
Similarly an individual Minister is responsible to the Legislature for every action taken or
omitted to be taken in his ministry.6

This leaves the question of the degree of parliamentary accountability of

Ministers for actions taken by organisations outside the traditional executive.
The constitutional requirement of ministerial responsibility has been the basis
for the control of the administrative ministry over public sector corporations
and undertakings. It has also been the source of a provision (in the special
Acts creating regulatory authorities, public corporations, and boards—
including the Reserve Bank—and in the articles of association of
‘Government companies’),7 enabling the government to issue directions to
such organisations. The principle is that since the Minister (and thus the
ministry) remains accountable to the legislature, a commensurate degree of
authority is necessary. No doubt, Ministers and officers in ministries are
perceived to have often used this authority (without necessarily invoking the
formal power to issue directions) to exercise direct control over public
undertakings to the detriment of efficiency and public good.
The question of the extent of ministerial accountability for the actions of
public undertakings and independent regulators has not yet been tested in
court and remains ambiguous. The laws creating some of the new
‘independent’ regulatory bodies do not incorporate provisions for issuing
directions,8 though some of them do.9 The ministry cannot, in many cases,
supersede the management of these institutions. It would appear that the
Minister cannot have the same degree of parliamentary accountability for the
actions of these bodies. Thus the creation of ‘independent’ regulators does
reduce the extent of democratic (parliamentary) accountability. However,
parliamentary accountability is not totally absent to the extent that the
budgetary appropriations for these bodies do need to be proposed by the
ministry and voted by Parliament. This is unlike the funding for courts, which
is charged expenditure that does not need to be voted. It has been suggested
that there should be a Standing Committee of Parliament on Independent
Regulators.10
A case that has had a major influence on institutional design involved the
Competition Commission of India. As originally legislated, the selection of
the Chairman was to be done by the executive. The procedure was challenged
on the grounds that some of the adjudicatory functions of the Commission
were judicial functions and the appointment of the head of a judicial forum
must necessarily be done through the Chief Justice of India or his nominee.
The original Act had wording explicitly stating the proceedings were
judicial.11 Thus the Commission was clearly intended to perform judicial
functions. A three-judge bench of the Supreme Court did not go into the
substantive issues in detail but did state that ‘it might be appropriate’ to
remove those functions that were of an ‘adjudicatory’ nature and entrust them
to a separate tribunal.12 This decision, albeit from a small bench and not a
binding order, appears to have had a lot of influence on the design of
regulatory bodies. The subsequent amendment, the Competition
(Amendment) Act 2007, removed any reference to the proceedings being
judicial, modified several substantive and procedural provisions, and created
an appellate tribunal headed by a judge; this has become almost a template
for regulatory design.
The various judgments of the Supreme Court contain a number of
inconsistencies, but the following are the key principles that appear to govern
the constitutionality and legality of regulatory bodies:
 1. To the extent that regulation comprises executive functions,
Parliament and the State legislatures may (in their respective areas of
legislative competence) create independent regulators. All
administrative decisions, and thus all decisions of regulators, are subject
to judicial review in the High Courts and Supreme Court through their
writ jurisdiction provided for in the Constitution. Parliament also has the
power to create tribunals under its residuary powers.
2. If a regulatory body or tribunal (set up outside the traditional
executive or traditional judiciary, respectively) involves performance of
judicial functions, it cannot be constituted entirely of, or headed by, non-
judges. In hearing matters having a judicial aspect, the bench must
include a judicial member.
3. Whether a function is judicial is determined by the specific
circumstances, wording, and substance of the legislation.
4. It should be noted that the reference above is to judicial and not to
quasi-judicial functions. Many quasi-judicial functions are in fact
performed by the executive; not all adjudicatory functions are judicial
and not all tribunals are judicial tribunals. No clear tests have been laid
down as to the borderline between quasi-judicial and judicial, but a
function previously discharged by a High Court will almost certainly be
considered judicial.
5. Even if a statute explicitly provides for an appeal from the orders of a
regulator to a tribunal and then to the Supreme Court, the High Courts
will assert (and the Supreme Court will almost certainly uphold) their
writ jurisdiction as being part of the basic structure of the Constitution.
Thus review of decisions of a tribunal (effectively, an appellate
jurisdiction, though not termed as such) by High Courts will always
remain available to aggrieved parties, even if the tribunal itself is headed
by High Court/Supreme Court-level judges.

V. THE REGULATORY STATE: A CONCEPTUAL OVERVIEW

Before considering some of the issues that arise from the emerging
constitutional jurisprudence on the regulatory State, it is useful to briefly look
at the conceptual underpinnings of, and justification for, the regulatory State.
The economic arrangements of modern times often require a more complex
approach than the State was traditionally capable of. In particular, good
decisions on many modern regulatory issues may require a degree of
scientific, technical, or economic expertise that may not be found in the
generalist civil servants and generalist judges who typify the traditional
executive and judiciary, respectively. The case for the involvement of
sectoral experts in regulation is thus self-evident. Of course, sectoral
expertise can be brought into the administration by employing or consulting
experts without necessarily changing institutional structure—in a sense, this
objective can be achieved by ‘modernising’ the administrative State. By
itself, the need for expertise does not explain the creation of the regulatory
State.
The primary rationale for independent regulators in India was and still is
the prevalent opinion that some kinds of economic decisions need to be
insulated from the political process.13 This is based on the notion—
particularly among economists—that ‘economic’ decisions should be made
‘rationally’ without being ‘distorted’ by political considerations. Indeed, the
initial push for independent regulators came in India through transplantation
of Anglo-American models by lending agencies like the World Bank and
then was replicated through ‘copying’.14 In theory, such unelected bodies
would play a major role in achieving economic efficiency objectives, with the
political process then stepping in through separate income redistribution to
tackle any normative inequities in the outcomes.15 There is ample evidence in
many sectors that even though optimal (or, at least, more efficient) solutions
are known, those solutions are not implemented for political reasons.16
An additional impetus for the creation of regulatory bodies has been the
higher degree of operational flexibility they have in personnel and other
routine managerial matters vis-à-vis ministries; thus independent regulators
may internally be more efficient than ministerial regulators.17
However, improving the overall level of economic welfare does not
automatically improve the welfare of all participants and a solution that
makes some people better off often makes others worse off. Questions of
distribution of gains and losses essentially are political. Resolving them may
require negotiation and persuasion and the trading of gains and losses, rather
than legalistic adjudication or scientific determination. Thus it is not really
possible to ‘exclude’ politics, as many economists and technocrats might
wish to. As Dubash puts it, much of the clamour for independent regulation
has been ‘based on the somewhat questionable premise that it is feasible to
create an apolitical regulatory sphere simply by legislating one’.18 A
consequence of the push towards independent regulation is not only that the
political aspect is, so to speak, brushed under the carpet, but also that it is
implicitly regarded as illegitimate. On the other hand, it should be noted that
regulatory bodies are often required to follow procedures allowing for the
consultation of the public, or more particularly, those affected by regulation;
this can result in a better articulation of public reason and a better-informed
process of regulation.
In addition to a rational-decision-taking dimension and a political-sharing-
of-gains-and-losses dimension, regulatory decisions often affect the legal
rights and responsibilities of citizens, going beyond voluntary agreements by
contract. In essence, therefore, regulation involves three aspects:

1. a political aspect, relating to trading off benefits and costs to different

parties which in turn may require or benefit from consultation,
negotiation, collaboration and cooperation with and among them;
2. a technical aspect, relating to finding the best technical and economic
solutions to a problem;
3. a legal aspect, relating to protecting legal and constitutional rights of
various parties.

For a regulatory structure to earn the confidence of the regulated and of the
broader citizenry, it needs to have democratic legitimacy, substantive
competence, and legal legitimacy, respectively. The essential design issue in
regulatory structure is the relative balance between these.
Regulation through the traditional State apparatus gives primacy to the
political aspect since decisions are ultimately taken by, or under the authority
of, the democratically elected political executive with advice from the civil
service. Over the years, the relative importance of the political executive vis-
à-vis the civil service has increased, and indeed political interference
(politicians taking decisions that by law ought to be taken neutrally by civil
servants) is perceived to have increased. In India, such decisions are always
subject to judicial review, and this provides the legal protection. However,
the traditional State is weak in factoring in technical expertise. As already
pointed out, there is no intrinsic reason why this is so, and in theory, a
modernised public administration would be able to bring in expert inputs.
However, current civil service rules and pay structures in India may make
this more difficult to do within the administration than under an independent
regulator.
When independent regulators are created, the technical aspect is accorded
primacy in two ways. First, these structures explicitly provide for and
incorporate the dimension of sectoral expertise. Secondly, and more
importantly, decisions are made independently of the political executive and
are therefore more likely to be economically efficient. In India, legal
protection is also safeguarded either through the inherent power of judicial
review or through the creation of an appellate tribunal. By design, the
political executive—depending on the degree of independence of the
regulator—has only limited influence.
Rose-Ackerman points out that court-like procedures are very good at
protecting individual rights but are poor at resolving policy issues. She adds
that the bureaucracy is best placed to ‘balance conflicting interests … ’,
though ‘not to discover scientific truths or to preserve rights’.19 In most
cases, the task is to ‘strike a balance between the obligation of the
government to make technically competent policy choices … ’ and the need
to ‘respond to the concerns of citizens and organised groups’.20 ‘Politically
expedient choices are not per se illegitimate, but they should be
acknowledged as such’, rather than masked as ‘scientific’ or ‘legal’
necessities.21 Further, as Parker and Braithwaite observe, regulation in
modern times often requires ‘experimentalism’, whereby new arrangements
are tried as needs and technologies change, and this kind of experimentalism
is best done through participatory or democratic processes rather than a
legalistic process. The central task of the new regulatory State is to ‘connect
the private capacity and practice of pluralized regulation to public dialogue
and justice’. Yet, courts ‘mostly reject experimentalism as a threat to the
consistency of justice and scotch most kinds of collaboration as a threat to the
independence of the judiciary’.22
For these reasons, in the United States and most western countries, the
involvement of the courts in the regulatory process is broad but shallow, and
courts will usually not go into the details de novo.23 The position in India is
different, especially but not only in environmental matters. Indian courts’
involvement is broad and deep. In India, over the years, and through judicial
pronouncements, the legal aspect of regulation has come to acquire a very
large influence over the regulatory process, even overshadowing the technical
aspect.
Independent regulators—while free from direct political control—are often
required to follow consultative procedures before making regulatory
decisions. Depending on the specific procedures, this allows all affected
parties to make their views known before decisions are taken. In one sense,
this process allows for a deeper and higher-quality participation in decision
making than the processes of the administration, where the political
representatives (Ministers, MPs, MLAs, or local councillors) are expected to
reflect the views of constituents, and where structured consultation may not
take place. When this happens, independent regulators may be able to achieve
the best of both worlds—better substantive decisions (through the use of
technical expertise and rational decision making), but informed by a deeper
participatory process than the administration. If so, their decisions may not
only be substantively better, but also more ‘legitimate’ and thus have greater
public support.24 This is the optimistic scenario for independent regulation.
However, consultative procedures have disadvantages too. They tend to be
used more by parties who are willing to invest time and resources in
responding to the consultation. The logic of collective action indicates that
the general public—where a large number of people may face a small gain or
loss from a decision—may not participate effectively, while a small number
of people (regulated entities or well-organised interest groups) who have a lot
to gain or lose may invest time and effort to make their case to the regulator.
This can tilt regulatory decisions in favour of well-organised interest groups.
Hochstetler argues that civil society in developing countries is more likely to
be skewed in favour of the interests of relatively well-off groups.25 In
contrast to such processes, Rose-Ackerman points out, the elected political
executive—because of its need to get re-elected from the population as a
whole—acts as a check against the dominance of particular narrow-interest
groups.26 Thus, as Levy and Spiller point out, independent regulators have
both strengths and weaknesses vis-à-vis the regulation by (or operation of
economic entities by) the administrative State, and independent regulators are
only appropriate in some contexts.27
In the Indian constitutional context, the pros and cons of independent
versus administrative regulators on the political, technical, and legal
dimensions are summarised in Table 22.3.
Given that India is a country where political corruption is widespread, it is
sometimes thought that an advantage of independent regulators and judicial
tribunals would be reduced scope for corruption. However, such a conclusion
is difficult to support in the face of the facts that not only the civil services
but even the judiciary are perceived as also suffering from corruption.28

VI. CONCERNS WITH THE REGULATORY STATE

1. Legal Uncertainty
The regulatory State has functioned, and continues to function, under a
considerable degree of legal uncertainty as to the validity of the statutes and
institutional arrangements that have been set up. The primary reason for this
is repeated challenges to legislation in the courts and the frequent invalidation
of various parts of enactments by the courts on grounds of being
unconstitutional. Several new regulators spent between five and ten years in
limbo (while the legality of various sections were being adjudicated), since
the courts declared that they should not function until the issues were sorted
out. Surprisingly, most of the challenges to the laws passed by Parliament
setting up independent regulators have:

• been through public interest litigation and not by aggrieved parties

directly concerned with the subject matter of regulation;
• centred around the issue of who is appointed to the chairmanship and
membership of the bodies, rather than to any substantive regulatory
provisions of the enactments.
 Table 22.3 Advantages and Disadvantages of Independent vs
Administrative Regulators

The challenge has usually been related to the issue or perception (almost
always among lawyers practising in High Courts) that some of the functions
of the regulator are actually judicial and therefore that the creation of the
regulator and/or an associated judicial tribunal is a ‘usurpation of judicial
power’, which in turn would be a violation of the basic structure of the
Constitution.
At first glance, an outside observer might conclude that such repeated
challenges must be the result of incompetent drafting, since something as
basic as judicial independence is said to be at stake. In reality, the picture is
more complicated, mainly because judicial dictums have themselves changed
frequently.
Courts test new laws both against the written Constitution and against an
expanding notion of the ‘basic structure’. Mehta has argued persuasively that
the Indian judiciary is usually concerned with expanding its own authority.29
In several cases, judicial decisions are, in substance, acts of legislation.30 In
some cases, courts have directly exercised executive functions in regulatory
matters.31 An increasing variety of issues are now tested against the ‘basic
structure’ doctrine, including seemingly small details. (For instance, in the
case of the National Company Law Tribunal, the appointment of Joint
Secretary-level technical members was considered unconstitutional, while the
appointment of Secretary- or Additional Secretary-level members was ruled
to be constitutional.) This means that several questions may have to be tested
each and every time a new regulator is created. It also means that entities
subject to regulation cannot assume that the law as legislated will in fact be
implemented; they must at all times be prepared for legislation by the court,
the content of which can be unpredictable.
In matters relating to regulatory bodies, the Supreme Court often gives
indications during hearings about its line of thinking and then the executive,
to ‘save’ the regulatory statute from the possibility of being struck down,
makes changes. The Court then does not actually adjudicate the issue but
effectively ensures a change in the legislation. Brahm Dutt v Union of India32
and Delhi Science Forum v Union of India33 are examples where the
government made changes to the structure—in both cases by introducing a
judge-headed tribunal above the regulatory body—while the case was in
progress. Currently, the situation is that there is a presumption in the
executive that if a new regulatory body is created, it must have an appellate
tribunal because it may otherwise not survive challenge in the courts—
though no such principle has explicitly been enunciated. This follows
primarily from the judgments in Brahm Dutt and Delhi Science Forum,
where the court indicated—but did not explicitly rule—that the existence of
judicial review by the High Court and Supreme Court (applicable to all
executive action) was not by itself sufficient (in the specific circumstances of
those matters), and something more was necessary.

2. Excessive Delegation
Early in the life of the Indian Constitution, the Supreme Court departed from
pre-Independence British tradition and introduced the concept of ‘excessive
delegation’, namely, that essential legislative functions could not be
delegated, and that the legislature must provide adequate guidelines for the
exercise of delegated powers to avoid arbitrariness.34 Rules made by
independent regulators violating this doctrine have been struck down (for
instance, when the Central Electricity Regulatory Commission introduced
new disqualifications for the holding of an electricity trading licence not in
consonance with the legislative policy in the statute).35

3. A Turf War?
The overt reason for creating regulators is to secure independence from
politics. The overt reasons for creating special tribunals are twofold: to speed
up decisions (because the court system faces an enormous backlog of cases)
and/or to bring in specialised expertise to assist in reaching better decisions
than could be reached through a generalist judge. In many cases, the overt
reasons are genuine and valid. However, it is widely perceived that in some
cases at least other motivations may also be involved. There is a perception in
the executive and in the legal profession that there has been a ‘turf war’ on
the issue of regulatory bodies and that this is one of the causes of the repeated
challenges on the issue of appointments.
On the one hand, the creation of regulatory bodies is perceived as a means
for civil servants to secure post-retirement employment, and (where posts at
the level of High Court judge are involved) to secure that employment at a
higher status than most civil servants enjoy before retirement. There is
considerable evidence that this has in fact been a motivation for civil servants
involved in the design of such institutions. For instance, the facts that every
one of these bodies specifies an age of mandatory retirement that is several
years higher than the civil service retirement age, and that the overwhelming
majority of those appointed are in fact at or above retirement age are clear
pointers. There seems to be no objective reason that suitably qualified and
competent regulators from the civil service or outside cannot be found until
they reach the age of 60. (Indeed, the ability to confer post-retirement
employment on civil servants is arguably detrimental to civil service
professionalism and ethics.)36
 A second perception among lawyers is that these bodies—this applies
more to tribunals than to the regulators themselves—were created to reduce
the role of the courts and to reduce the extent and quality of judicial review of
executive action. There is clear evidence that, in the 1970s and 1980s, this
was indeed a motivation for creating tribunals, especially the administrative
tribunals. A third perception among lawyers is that allowing selection of
members (particularly judicial members) by a mechanism that is not
completely controlled by the High Courts or Supreme Court could result in
reduced independence. Again, there is indirect evidence from the 1970s and
1980s (though not in recent times) that such a motivation within the political
executive was present.
On the other hand, the counter-view is that the challenges are primarily
motivated by the interests of the legal profession. A reduced role for the
courts could also mean a reduced role for lawyers. Regulators do not require
lawyers to represent parties before them. Some tribunals allow other
professionals to represent applicants (eg, accountants) whereas this would not
be possible in the courts. The tendency of the legal profession to argue that
part of the work of regulators is ‘judicial’ is seen in the same light—as an
attempt to avoid loss of work. Equally importantly, the selection for posts in
tribunals would be controlled by a different process from that used in the
courts, and this disturbs established patterns of advancement in the legal
profession.
Based on this hypothesis, the usual approach has been to create, on top of
each regulatory body, a special tribunal headed by a retired judge and
comprising mainly retired judges. The premise appears to be that the post-
retirement opportunities for civil servants can best be insulated from
challenge by providing similar opportunities for lawyers and judges. This
hypothesis is supported by a scrutiny of age limits for appointment. For
example, in the National Green Tribunal (NGT), there are three different
limits:

• 70 years for the Chairperson/Judicial Member if the person had

previously been a Supreme Court judge (for whom the retirement age is
65)
• 67 if the Chairperson/Judicial Member if the person had previously
been a High Court judge or Chief Justice (for whom the retirement age
 is 62) and
• 65 for non-Judicial Members (civil servants/technical experts, for
whom the retirement age is 60).

For the same post, namely, Chairperson/Judicial Member, there are two
different retirement ages based on previous employment, unconnected to any
objective determination of what would be a suitable maximum age. The only
apparent operating principle seems to be ‘equality of post-retirement
opportunity’ at exactly five years from the normal retirement age.
Thus, if this is a ‘turf war’, then the creation of tribunals—run by judges
and with ample opportunities for lawyers—is seen as the terms of the
ceasefire. A way to end any such war (or perception) would be to amend the
statutes and turn these into career (rather than post-retirement) posts for all
streams—judicial and non-judicial. That way the ‘noise’ arising from the
(credible) belief that tribunals and regulators are created to serve bureaucratic
or political interests can be avoided. It may also stiffen the backbone of
retiring civil servants and increase judicial independence by eliminating the
‘carrot’ of post-retirement appointments.

4. Multiplicity of Channels of Appeal and Lack of Finality

Introducing independent regulators has the positive effect of increasing
subject matter expertise and independence. But to the extent it involves the
creation of a new appellate tribunal, it may increase the number of levels of
appeal before a decision becomes final. This is of considerable importance
because of several features of the Indian legal system:

1. Courts often go into the merits of executive action rather than confine
themselves to the Wednesbury principles or procedural fairness.
Therefore, persons aggrieved by a regulatory order have a chance of
success in challenging it even if it was procedurally correct and fair.
2. Stare decisis often cannot be assumed because, as already mentioned,
the Supreme Court has quite often reversed its earlier decisions. The
presumption of constitutionality of statutes is weakly applied in the case
 of Acts creating regulators. Thus legal uncertainty is high.
3. Most courts have heavy backlogs of cases and final orders can take
years at each level. Courts often grant interim stays of the action of a
regulator, which may be in operation for several years.
4. Higher courts tend to overrule lower courts with a high frequency.
Desai stated in respect of the telecom sector that ‘courts are more likely
to dismiss than confirm the findings of the regulator’.37
5. Though there are no rigorous statistics, it is generally believed that the
proportion of cases appealed is very high. Partly this is because of the
high probability of reversal on appeal, the relative ease of obtaining
interim stays (see 3 above) and relatively low legal costs at the High
Court level.

Figures 22.1–22.3 outline the route that regulatory decisions take in different
situations. Figure 22.1 relates to decisions taken by regulators within the
traditional executive (eg, the Directorate General of Civil Aviation (DGCA)
or the Directorate General of Hydrocarbons (DGH)) and by regulators (like
the Reserve Bank of India) who do not have a special tribunal attached to
them. Here, there is no statutory right of appeal, but the High Court can
review the matter under its writ jurisdiction based on the general principles of
judicial review of administrative action. Appeal to the Supreme Court is by
special leave or if the High Court certifies the case as fit for appeal due to its
legal or constitutional importance. The dotted lines reflect the fact that appeal
is not a matter of right, though in practice High Courts rarely refuse to hear
writs on administrative matters.
Figure 22.2 relates to a regulator with an attached tribunal with a single
bench. The appeal to the Supreme Court may be statutory (ie, leave of the
Court is not needed) or may be subject to special leave.
Figure 22.3 relates to regulators (who may be part of the administration)
for whom a national regulator with multiple benches exists. This is similar to
Figure 22.2, but with the additional possibility of more than one High Court
being involved—this is because a bench of a national tribunal may cover
more than one State. It is not inconceivable that more than one High Court
may have jurisdiction in the same matter.
Yet another variant is the Company Law Tribunals where apart from the
executive, there is a national tribunal and then an appellate tribunal, with
further recourse to the High Court and Supreme Court (these are not yet
functional, as their creation has been stayed by the Supreme Court). Tribunals
may or may not have jurisdiction to hear challenges to delegated rule making
by the regulator, depending on the wording of the relevant statute;38 if
jurisdiction exists, such cases follow a path analogous to that in Figure 22.2.
If the tribunal does not have jurisdiction—as has been held for the Telecom
Disputes Settlement Appellate Tribunal, for example—the rule would have to
be challenged in the High Court in the first instance. The Law Commission,
when examining the issue of environment courts, had expressed the hope that
if a statutory appeal to the Supreme Court were provided, then the High
Courts would not entertain writs under Article 226 on the ground that a
specific alternative remedy is available. However, in practice, the High
Courts have not behaved as the Law Commission expected. For instance, the
Madras High Court entertained a writ petition challenging an order of the
Chennai (Madras) bench of the National Green Tribunal on appeal against a
decision of the environmental regulator in the neighbouring State of
Karnataka (which has a separate High Court but no separate bench of the
tribunal).39 A safe operating principle is that if any court can possibly
exercise jurisdiction on a matter, it will.
FIGURE 22.1 Administrative Decisions: The Route to Finality (Type 1)
FIGURE 22.2 Regulatory Decisions: The Route to Finality (Type 2)

The point to note is that if the creation of an independent regulatory body

also involves the creation of a tribunal (as it often does, either for genuine
substantive reasons or for reasons of expediency), then while there may be
substantive benefits to the quality of regulation, the procedural effect is to
increase the number of levels of appeal and in some cases to create multiple
channels of appeal (ie, more than one route of appeal at a given stage). In
1987 the Supreme Court explicitly recognised the adverse effect of the
additional layer of appeal if the High Courts were given jurisdiction, but
reversed itself ten years later;40 therefore such tribunals are effectively courts
of first instance, even if their composition is akin to that of the High Court.
The tribunals themselves may be quicker in disposing of cases, but if these
decisions are again challenged in High Courts, the overall time taken
increases. Thus the regulator-cum-tribunal structure may delay the attainment
of finality of regulatory decisions and increase risks and uncertainty for the
parties involved. The total time taken is generally long. For instance, a
Competition Commission case was initiated in 2010, decided by the
Commission (regulator) in August 2011, the appeal was decided by the
Tribunal in May 2014 and then reached the Supreme Court on statutory
appeal. (In this case, the parties—based in Delhi which is the seat of the
Supreme Court—did not choose to take the matter to the High Court.)41
FIGURE 22.3 Regulatory Decisions: The Route to Finality (Type 3)

The long route to finality does have effects on economic growth to the
extent that it increases uncertainty in regulated sectors of the economy.
Entities in those sectors must be prepared for this. One implication for
regulated entities is that they need to try as far as possible to secure an initial
order that is acceptable by making sure their point of view is adequately put
forward. When deciding to appeal a decision, they need to weigh the
expected benefits of changing the regulator’s decision against the probability
of success, the time and costs of the appellate process, and the financial
consequences of the continuing uncertainty. They may sometimes be better
off by not challenging a suboptimal decision of a regulator because of the
uncertainties and costs of the appeal process. Of course, this cannot prevent a
challenge by another party.

VII. CONCLUSION
In an important statement of modern regulation, Rubin has suggested that the
‘essentially administrative character of the modern state is irreversible’42 and
that the ‘three branches of government exist only in our minds’.43 He argues
that the three-branch structure is a problematic and outdated metaphor that
inadequately captures the reality of the modern State and which has been
retained because of ‘social nostalgia’.44 Alternative metaphors must, he
posits, be imagined, like that of a network of interconnected institutions. The
evolution of Indian constitutional law lends strong support to Rubin’s
contention and reflects an attempt to deal with the emerging contours of the
modern regulatory State.
Although some general principles have begun to emerge, as discussed
above, the constitutional issues relating to the regulatory State are still
relatively fluid. In the years to come, there are several possibilities on how
this may evolve. Some of the possible scenarios are the following:

1. The current pattern—where the government continues to create new

regulators and (partly to reduce the chance of the regulatory statute
being struck down) tribunals—may continue. The issue of commonality
of administration of the tribunals themselves and the volume of work
relating to appointments to them may require some form of
centralisation of the tribunal administration. The Supreme Court in
various cases has expressed itself in favour of all tribunals being
administered by the Law Ministry. While this may work well for
tribunals constituted entirely of judicial members, it has serious
disadvantages when it comes to mixed tribunals involving the selection
of non-judicial members and staff.
2. The current move to independent regulators may continue but the
special tribunals may be supplanted by making provisions in the
regulatory statutes for appeals to the High Court. This may also be
accompanied—over time—by a creation of specialised divisions in the
High Courts as is common in England and as advocated by the
Malimath Committee.45 This reversal of tribunalisation will greatly
reduce the adverse perceptions of the legal profession and possibly
eliminate challenges to the composition and membership of the
regulators themselves.
3. The current pattern may continue but with the age of retirement for all
members reduced to the normal age of retirement of their parent service
so that the option of post-retirement employment is removed. This may
reduce the incentive to create regulators without adequate justification to
serve bureaucratic interests, and reduce adverse perceptions and
apprehensions that have been generated in the minds of the courts and
lawyers.
4. The government and other stakeholders may, considering the delaying
effect of the additional layer of appeal, slow down the move to
‘independent’ regulators and stick to traditional administrative
arrangements and regulators like the DGCA or DGH, whose status is
(say) that of Secretaries/Additional Secretaries to Government rather
than that of High Court judges. Expert opinion and input could be
brought into the administrative procedures and supplemented by
mandatory requirements to consult affected stakeholders and the public
(eg, in the manner prescribed in the Administrative Procedures Act in
the USA). This may produce outcomes that will be qualitatively—
 except for the presence of political influence which is not always a bad
thing—as good as those with independent regulators. Judicial review
will remain available through the traditional mode of writ jurisdiction.

* The views expressed in this chapter are strictly personal.

1 Navroz K Dubash and Bronwen Morgan, ‘Understanding the Regulatory State of the South’
(2012) 6(3) Regulation & Governance 261.
2 In recent years, Deputy Ministers and Parliamentary Secretaries have not been appointed in the
Union government.
4 AIR 1955 SC 549 [12].
6 A Sanjeevi Naidu v State of Madras (1970) 1 SCC 443 [10].
3 All references to ‘Articles’ are to Articles of the Constitution of India. When a figure in
parentheses follows the numbered Article, it denotes a clause of that Article, eg Article 77(3) means
clause 3 of Article 77.
5 KP Krishnan, Remarks at the Conference to discuss draft chapters of this Handbook, 18 July
2014, New Delhi.
7 Broadly, companies where the Central and/or State Government(s) hold a majority of the shares or
otherwise control the composition of the Board of Directors.
8 Eg, Central and State Electricity Regulatory Commissions where the Commission is only
mandated to follow the policy laid down by the government.
9 Eg, the Competition Commission.
10 KP Krishnan, Remarks at the Conference to discuss Draft Chapters of this Handbook, 18 July
2014, New Delhi.
11 Competition Act 2002, s 36(3):

Every proceeding before the Commission shall be deemed to be a judicial proceeding

within the meaning of sections 193 and 228 and for the purposes of section 196 of the
Indian Penal Code (45 of 1860) and the Commission shall be deemed to be a civil court
for the purposes of section 195 (2 of 1974) and Chapter XXVI of the Code of Criminal
Procedure, 1973.

12 Brahm Dutt v Union of India (2005) 2 SCC 431 [6].

13 Kathryn Hochstetler, ‘Civil Society and the Regulatory South: A Commentary’ (2012) 6(3)
Regulation & Governance 362, 362.
14 Dubash and Morgan (n 1) 264.
15 Dubash and Morgan (n 1) 265.
16 OP Agarwal and TV Somanathan, ‘Public Policy-making in India: Issues and Remedies’ (2005)
Centre for Policy Research Working Paper, August 2005.
 17 KP Krishnan, Remarks at the Conference to discuss Draft Chapters of this Handbook, 18 July
2014, New Delhi.
18 Navroz K Dubash, ‘Independent Regulatory Agencies: A Theoretical Review with Reference to
Electricity and Water in India’ (2008) 43(40) Economic and Political Weekly 43, 46.
19 Susan Rose-Ackerman, ‘Law and Regulation’ in Keith E Whittington, R Daniel Kelemen, and
Gregory A Kaldeira (eds) The Oxford Handbook of Law and Politics (Oxford University Press 2008)
582.
20 Rose-Ackerman (n 19) 584.
21 Rose-Ackerman (n 19) 582.
22 Christine Parker and John Braithwaite, ‘Regulation’ in Mark Tushnet and Peter Cane (eds) The
Oxford Handbook of Legal Studies (Oxford University Press 2005).
23 Arun K Thiruvengadam and Piyush Joshi, ‘Judiciaries as Crucial Actors in Southern Regulatory
Systems: A Case Study of Telecom Regulation’ (2012) 6(3) Regulation & Governance 327, 328.
24 Dubash (n 18) 51.
25 Hochstetler (n 13) 362.
26 Rose-Ackerman (n 19) 588.
27 Brian Levy and Pablo T Spiller, ‘The Institutional Foundations of Regulatory Commitment: A
Comparative Analysis of Telecommunication Regulation’ (1994) 10(2) Journal of Law, Economics,
and Organization 201.
28 See eg, Ministry of Personnel, Public Grievances and Pensions, ‘Civil Services Day, April 21,
2012: Background Papers for Panel Discussions’
<http://darpg.nic.in/darpgwebsite_cms/Document/file/BG_Papers_CSD_2012.pdf>, accessed October
2015; ‘RS impeaches Justice Soumitro Sen for “misappropriating” funds’ The Indian Express (New
Delhi, 18 August 2011) <http://archive.indianexpress.com/news/rs-impeaches-justice-soumitro-sen-for-
misappropriating-funds/833874/>, accessed October 2015; Krishnadas Rajagopal, ‘President to look
into complaint against ex-CJI Balakrishnan’ The Indian Express (New Delhi, 10 May 2012)
<http://archive.indianexpress.com/news/sc-directs-centre-to-probe-graft-charges-against-excji-
balakrishnan/947658/>, accessed October 2015; Dhananjay Mahapatra, ‘Eight Chief Justices were
corrupt: Ex-law minister’ The Times of India (New Delhi, 17 September 2010)
<http://timesofindia.indiatimes.com/india/Eight-chief-justices-were-corrupt-Ex-law-
minister/articleshow/6568723.cms>, accessed October 2015.
29 Pratap Bhanu Mehta, ‘India’s Judiciary: The Promise of Uncertainty’ in Devesh Kapur and
Pratap Bhanu Mehta (eds) Public Institutions in India: Performance and Design (Oxford University
Press 2005).
30 For instance, the Supreme Court’s decision giving itself the power of appointment of judges has
been described by legal scholars as ‘audacious’ and ‘hard to justify in the face of evidence that both the
text of the Constitution and the expressed intention of the framers went against its reasoning and final
outcome: Thiruvengadam and Joshi (n 23) 331.
31 See eg, Swasthya Adhikar Manch v Union of India, Writ Petition (Civil) No 33/2012, Supreme
Court of India, order dated 21 October 2013.
32 (2005) 2 SCC 431.
 33 (1996) 2 SCC 405.
34 See eg, Rajnarain Singh v Chairman, Patna Administration Committee AIR 1954 SC 569; Devi
Dass Gopal Krishnan v State of Punjab AIR 1967 SC 1895.
35 Global Energy Ltd v Central Electricity Regulatory Commission (2009) 15 SCC 570.
36 KP Krishnan and TV Somanathan, The Civil Service (forthcoming).
37 Ashok V Desai, India’s Telecommunications Industry: History, Analysis, Diagnosis (Sage
Publications 2006) cited in Thiruvengadam and Joshi (n 23) 339.
38 See L Chandra Kumar v Union of India (1997) 3 SCC 261 [93]; Bharat Sanchar Nigam Ltd v
Telecom Regulatory Authority of India (2014) 3 SCC 222 [108], [124]–[126].
39 Vijayalakshmi Shanmugam v Secretary, Ministry of Environment and Forests (2014) 2 MLJ 316.
40 See SP Sampath Kumar v Union of India (1987) 1 SCC 124; L Chandra Kumar (n 38).
41 DLF Ltd v Competition Commission of India Appeal No 20/2011 (Competition Appellate
Tribunal).
42 Edward L Rubin, Beyond Camelot, Rethinking Politics and Law for the Modern State (Princeton
University Press 2005) 19.
43 Rubin (n 42) 15.
44 Rubin (n 42) 15.
45 Government of India, ‘Report of the Arrears Committee’ (1990).