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What is the validity of the rules that are passed from time to time
by the government by way of notifications under specific enactments?
Notifications and rules (Rules) issued by the government under specific
enactments are a form of subordinate/delegated legislation. It is
settled law that subordinate/delegated legislation have constitutional
and statutory sanction, and Rules issued under statutes have the
effect of the statute. In terms of Article 13(3)(a) of the Constitution
of India, the expression "law" includes rules and notifications
having the force of law in India.
Rules have constitutional and statutory sanction
provided they are introduced by the government strictly within the
rule-making authority conferred by the enabling statute. Rules are
subject to judicial review and may be challenged if they are substantive
ultra vires, i.e., beyond the scope prescribed by the enabling statute
or if they violate the provisions of the Constitution or existing
laws, for example, where the Rules seek retrospective effect while
the enabling statute has not conferred such powers on the government.
Rules may also be challenged to be procedural ultra vires, i.e.,
where they fail to comply with procedural requirements prescribed
by the enabling statute or general law, for example, where the Rules
are required to be drafted in consultation with the public and/or
an expert committee constituted under the enabling statute and the
Rules are not so drafted.
In addition, Rules should be published in the
Official Gazette and any other publication (like local newspaper)
as prescribed by the enabling statute. Therefore, Rules passed by
the government in compliance with prescribed conditions have the
sanction and binding force of law from the date specified in the
publication. The government, however, can withdraw its previous
Rules in public interest.
We provided a bank guarantee to a Central
Government department and though the purpose and period for which
the guarantee was provided has expired, the department concerned
has not returned the original guarantee as yet. Consequently, our
bank is not returning the margin money to us, as according to it,
as long as the original guarantee is not returned to it, it must
keep the guarantee alive in its books as a liability. Please advise.
It is the practice of banks to keep the guarantee
amount alive in their books as a liability until the bank's liability
under the guarantee is "discharged" on return/surrender
of the original guarantee. However, with respect to a guarantee
given in favour of the government, even if the guarantee is returned,
the government's rights to sue under the guarantee would, in terms
of the Limitation Act, 1963, subsist for 30 years from (i) when
the breach of contract of guarantee occurred, or (ii) where there
are successive breaches, when the breach in respect of which the
suit is instituted occurred, or (iii) where the breach is continuing,
when it ceases, unless the government has expressly discharged the
bank from its guarantee liability.
Most guarantees usually state the date or event
on which the bank stands "discharged from all liabilities under
the guarantee", whether or not the guarantee is returned to
the bank by the beneficiary. If your bank's guarantee contains such
a provision discharging the bank from liability, your bank should
not keep the guarantee amount alive in its books. You may bring
such provision to the notice of the bank and explain that in your
case, the government has discharged the bank from all liabilities
with effect from the relevant date or event. Consequently, the government
cannot attach any liability to the bank on the basis of the guarantee,
even if it sues the bank.
In case the guarantee does not discharge the
bank from liability, the bank may not return your margin money unless
you obtain an unconditional written discharge from liability for
your bank from the government.
The views expressed here should not be construed
as legal opinion and is for reference only. Business Today and/or
the author will not be responsible for any decision taken by readers
on the basis of these views. Please send in your queries to Legal.bt@intoday.com
or Going By the Book, c/o Business Today, F-26, Connaught Place,
New Delhi-110001.
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