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PETITIONER: KHAMBALIA  MUNICILPALITY & ANR.

       Vs.

RESPONDENT: STATE OF GUJARAT

DATE OF JUDGMENT: 16/02/1967

BENCH: BACHAWAT, R.S. BENCH: BACHAWAT, R.S. WANCHOO, K.N. SHELAT, J.M.

CITATION:  1967 AIR 1048            1967 SCR  (2) 631

ACT: Gujarat  Panchayats Act, 1961 (Guj.  Act No. 6 of 1962),  s. 9(1)   and   (2)-inquiry,  if   delegated-Applicability   to municipal  district-section  9  if  suffers  from  excessive delegation.

HEADNOTE:  The    respondent-State    authorised    its    Development Commissioner   to   exercise  powers  exercisable   by   the Government under s. 9(1) of the Gujarat Panchayats Act 1961. After making the prescribed inquiry under s. 9(1) of the Act the  Development Commissioner issued a notiftation under  s. 9(1) of the Act decal the whole area of the existing  limits of  the  appellant cipality to be a nagar.   The  appellants field  a  writ petition for- quashing the  notification  and declaring   s.   9   of  the  Act   as   ultra   vires   and unconstitutional, which the High Court dismissed.  In appeal to  this Court, the appellants contended that (i) the  power to  make  enquiry  under s. 9(1) was not  delegated  to  the Development  Commission; (ii) s. 9 of the Act did not  apply to  a municipal district as it was not a local area or  such other  administrative  unit  or  part  thereof;  (iii)   the notification  was issued ’in mala fide exercise of power  as it   was  imbued  after  the  municipality   indicated   its unwillingness  to accept the  of the Government  to  include within  its limits certain vadi areas; and (iv) s. 9 of  the Act  was ultra vires by reasons of excessive  delegation  of legis native power in favour of the State Government. HELD:(per  Full  Court)  (i)  The  power  to  make  the declaration necessarily   carries with it the power to  make the inquiry preliminary to the declaration.  There can be no declaration    without   an   inquiry.    The    Development Commissioner  was  sufficiently  authorised  to  issue   the declaration after making the prescribed inquiry.- [635 G-H] (ii)Section  307  of the Act shows that a  local  area  co- extensive ’with or included within the limits of a municipal district or a municipal borough ma be declared to be a  gram or  nagar  under  s.  9  and  on  such  a  declaration   the Municipality  functioning  within  the local  area  or  part thereof ceases to exist.  On a combined reading of ss. 9 and 307,  it  would  appear  that  a  municipal  borough  is  an

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administrative  unit within the of s. 9(1) and a local  area co-extensive with or included in a municipal borough may  be declared to be a gram or nagar. [636 B-C] (iii) Therewas  no  mala  fide in the  issuance  of  the notification.  Under s.  4(1)(b)     of     the      Gujarat Municipalities Act, 1963, the State Govern has the power  to alter  the funits of the municipal borough after  consulting the  municipality.  The State Government had duty  consulted the municipality.  If the Government wanted to exercise  its powers  under  the  aforesaid s.- 4(1)(b), it  could  do  so without the consent of the municipality.  For the purpose of imposing   its  opinion,  it  was  not  necessary  for   the government  to take recourse to the device of a  declaration under  s. 9(1) of the Gujarat Pandora  Act, 1961.   Nor  was the surrounding vadi area included in the nagar declared  by the notification under s. 9(1). [636 F, G] 6 32 (iv)(Per  Wanchoo and Bachawat, JJ.) Section 9(1) does  not suffer from the vice of excessive delegation.  An  essential legislative  function  consists in the  determination  of  a legislative policy and its formulation as a binding rule  of conduct.   Having  laid  down the  legislative  policy,  the legislature  may  confer  discretion  on  an  administrative agency as to the execution of the policy and leave it to the agency to work out the details within the frame work of  the policy. [637 B-C] It  is  the  policy of the Act  that  panchayats  should  be established within a seasonable time in all local areas with population  not  exceeding  30,000 and  not  included  in  a notified  area  or  a cantonment.  This  policy  guides  and controls  the  discretionary power of the  State  Government under  S. 9(1).  Having regard to the policy of the Act,  it is  plain  that  the discretionary power under  S.  9(2)  is vested   in  the  State  Government  for  the   purpose   of reorganising  the local areas into new units of local  self- Government. [638 C-D] It is not correct to say that even a municipal borough  with a  population  of over 30,000 is at the mercy of  the  State Government  under s. 9(1).  Under S. 9(1) read with s.  307, the  government has no power to declare a municipal  borough with  a population exceeding 30,000 as a gram or nagar.   It will be an abuse of the power under s. 9(1) if by  declaring small  fragments  of such municipal  borough  into  separate grams or nagars, the government seeks to achieve  indirectly what  it  cannot  do  directly.  But  S.  9(1)  at  be  held unconstitutional  because of the possibility that it may  be unfaithfully administered by those who are charged with  its execution. [,638 H-639 B] In re Delhi Laws Act [1951] S.C.R. 747 and Rai Narain  Singh v.  The Chairman, Patna Administration Committee,  [1955]  1 S.C.R. 290, referred to. (Per  Shelat,  J. dissenting) : Section 9 suffers  from  the vice of excessive delegation. Even if a policy is declared by a statute it may be  couched in  such  vague terms that it may not set  down  a  definite standard or criterion for the guidance of the delegate. [644 D-E] In spite of the avowed policy of the Art to set up Panchayat Raj  throughout the State the Government, by virtue  of  the power  to declare being discretionary under S. 9(1), may  or may  not  declare a local area to be nagar or a  gram.   The only  fetter is that where it desires to make a  declaration in  respect of any particular local area it can do so  after making  an inquiry as prescribed.  But neither s. 9 nor  any other  proviSion  in  the Act lays down  that  even  if  the

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inquiry ends in a particular conclusion the Government  must make the declaration.. What the requisite result of such  an inquiry  for a declaration should be is also not  prescribed ,in the Act and the Government is left to decide its  course of action after such an inquiry. [645 D-F] Sub-section   2  confers  a  discretionary  power   on   the Government  to alter by inclusion or exclusion any  area  or areas from a nagar or a grain panchayat and convert one into the  other,  the only restriction on such  power  being  the necessity to consult the district, the taluka, and the nagar or  the gram panchayat as the case may be.  The  restriction is  consultation  but  not  the  consent  of  the  concerned panchayats.  Sub-section 2 does not require even an  inquiry as sub-s.  1 does at the time of the declara- 633 tion.  Nor does it lay down any principle or criterion as to when  and  in what circumstances the Government  can  launch upon  such  alteration  of  the  local  limits.   Thus   the Government  can  modify at any time the  structure  and  the nature  of a panchayat from a nagar to a gram pancbayat  and vice  versa  by  simply  altering  its  area  after  a  mere consultation  and  even  if  the  panchayats  concerned  are against  such alteration.  Under this power  the  Government can  also transfer a portion or portions of a nagar or  gram panchayat  after  formally  going  through  the  process  of consultation and join it-or them with another panchayat even if  the  people  concemed were to be, unwilling  to  such  a transfer. [645 F-646 B] Rai   Narain   Singh  v.  Chairman,   Patna   Administration Committee, [1955],1 S.C.R. 290, In re Delhi Laws Act  [195]1 S.C.R. 747, V Maganbhal v. State of Bombay, [1961] 1  S.C.R. 341  and  Mamdard  Dawakhands  case,  [1960]  2  S.C.R.-671, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION Civil Appeal No. 1340 of 1966. Appeal from the judgment and order dated April 5 and 6. 1966 of  the Gujarat High Court in Special Civil Application  No. 657 of 1965. Purshottam   Trikamdas,   and  Ravinder  Narain,   for   the appellants. N.S.  Bindra,  K.   L.  Hathi, S. P.  Nayyar  and  R.  H. Dhebar, for the respondents. The  Judgment of WANCHOO and BACHAWAT, JJ. was delivered  by BACHAWAT, J. SHELAT, J. delivered a dissenting Opinion Bachawat,  J. This appeal arises out of a  writ  application challenging   a  notification  issued  on  June  14,   1965, declaring  the area of Khaimbalia municipality  in  Jamnagar district  to  be  a  nagar under  s.  9(1)  of  the  Gujarat Panchayats  Act,  1961 (Gujarat Act No. VI  of  1962).   The Jamnagar  district  was  formerly a part  of  the  State  of Saurashtra  which  merged in the State of  Bombay  in  1956. Before  the  merger,  the State of  Saurashtra  adopted  the Bombay District Municipalities Act 1901 under which the town of  Khambalia was constituted into a municipality.   On  the bifurcation of the State of Bombay, the district of Jamnagar became  a  part  of  the  State  of  Gujarat.   The  Gujarat Panchayats  Act 1961 was passed on February 24,  1962.   The population of Khambalia municipality according to the census of  1961 was 12,249.  By a notification dated Aug 17,  1962, issued  under s. 9 of the Gujarat Panchayats Act  1961,  the local  area within the limits of the Khambalia  municipality was  declared to be a nagar and the municipality  ceased  to

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exist.   On  February 5, 1963, upon the publication  of  the Gujarat    Panchayats   (Suspension   of   Provisions    and reconversion   of   certain  local  areas   into   municipal districts)  Act,  1962 the Khambaha municipality  and  other municipalities   converted   into   nagar   panchayats    by notifications under s. 9(1) of the Nagar Panchayats Act 1961 stood revived.  On February 7, 1963, 634 the  Gujarat  Panchayat  Laws  (Amendment)  Ordinance   1963 repealed  s.  3  of the Gujarat  Panchayats  (suspension  of provisions  and  reconversion of certain  local  areas  into municipal districts) Act 1962 and all the provisions of  the Gujarat  Panchayats  Act 1961 became  again  operative.   In April  1962,  the  State Government converted  some  of  the revived  municipalities into nagar or gram  Panchayats,  but the  Khambalia  municipality.  was not  then  so  converted. Meanwhile, the State Government started proceedings for  the supersession  of the Khambalia municipality under s. 179  of the  Bombay  District.   Municipal Act,  1901  and  in  this connection  there was litigation between the Government  and the  municipality.   On  December  23,  1964,  the   Gujarat Municipalities Act 1963 (Act No. XXXIV of 1964) was  passed, and   the  Khambalia  municipality  became  a   municipality constituted  under  this  Act for  the  Khambalia  municipal borough.   On June 14, 1965,’ the Development  Commissioner, Gujarat  State, issued a notification under s. 9 (1) of  the Gujarat  Panchayats Act, 1961, declaring "the whole area  of the  existing  limits  of  the  Khambalia  municipality   in Jamnagar  district" to be a nagar with effect from the  date of  the  issue of the notification.  This  notification  was issued  by  the Development Commissioner  after  making  the prescribed  enquiry  under  s.  9(1).   The  effect  of  the notification was that the entire local area included  within the limits of the municipal borough for which the  Khambalia municipality  was constituted became a nagar.  On  June  22, 1965, the appellants filed a writ petition in the High Court of  Gujarat, praying for an order quashing the  notification dated  June  14,  1965 and declaring s.  9  of  the  Gujarat Panchayats  Act, 1961 as ultra wires  and  unconstitutional, and  for  other  reliefs.  The  High  Court  dismissed  this application.  The appellants now appeal to this Court  under a certificate granted by the High Court. To appreciate the contentions raised by learned counsel  for the appellants, it is necessary to read s. 9 of the  Gujarat Panchayats Act, 1961.  That section is in these terms:-               "9. (1) After making such inquiries as may  be               prescribed,  the  State  Government  may,   by               notification in the Official Gazette,  declare               any local area, comprising a revenuevillage,               or  a  group of revenue  villages  or  hamlets               formingpart of a revenue village, or  such               other administrative unit or part thereof,-               (a)   to be a nagar, if the population of such               local area "exceeds 10,000 but does not exceed               30,000, and               (b)   to be a gram, if the population of  such               local area does not exceed 10,000.               (2)   After  consultation  with.  the   taluka               panchayat,  the  district  panchayat  and  the               nagar or gram panchayat               concerned  (if already constituted) the  State               Government  may, by like notification, at  any               time-               (a)include  within,  or  exclude  from  any               nagar  or  gram, any local area  or  otherwise

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             alter the limits of any nagar or gram; or               (b)declare that any local area shall  cease               to be a nagar or gram;               and  thereupon  the  local area  shall  be  so               included  or  excluded, or the limits  of  the               nagar  or gram so altered or, as the case  may               be,  the local area shall cease to be a  nagar               or gram."               Rule 2 of the Gujarat Panchayats  (Declaration               of   nagar  or  gram)  Inquiry  Rules,   1962,               prescribes the inquiry to be made by the State               Government under s. 9 (1) it reads:               "2.  Inquiry by’ State Government.-(1)  Before               declaring any local area to be a nagar or gram               under subsection (1) of section 9 of the  Act,               the  State Government shall make inquiries  as               to:-               (1)the  population  and the  ordinary  land               revenue of the revenue village or each of  the               revenue  villages or hamlets,, or as the  case               may be, any other administrative unit or  part               thereof, comprised in the local area,               (2)whether the revenue villages or ham lets               or other administrative units or parts thereof               can  be conveniently grouped so as to  form  a               gram or nagar, as the case may be,               (3)for  the  purpose of sub-rule  (1),  the               District Development Officer or where there is               no such officer the Collector when so required               by  the state Government, shall submit to  the               State  Government  a  statement  in  the  form               appended hereto". Sec.  321 of the Gujarat Panchayats Act empowers  the  State Government  to  authorise by notification  in  the  official gazette any officer of the government to exercise any of the powers  exercisable by the government under the Act.   By  a notification   dated   June  13  1963,  as  amended   by   a notification  dated  May  5,  1964,  the  State:  government authorised  the development commissioner, Gujarat State,  to exercise  the powers exercisable by the government under  s. 9(1)  "declaring  a  local  area to be  a  gram  or  nagar". Counsel contends that the power to make the inquiry under s. 9(1)  was  not. delegated by the.  State government  to  the development  commissioner.   There  is  no  force  in   this contention.  The power to make the 636 -declaration  necessarily carries-with it the power to  make the inquiry Preliminary to the declaration.  There can be no declaration without any inquiry.  The relevant  notification sufficiently  authorised  the  development  commissioner  to issue the declaration after making the prescribed inquiry. The  next contention is that the local area of  a  municipal borough  is  not  "any  local  area,  comprising  a  revenue village,  or a group of revenue villages or hamlets  forming part of a revenue village, or such other administrative unit or  part thereof" within the meaning of s. 9 of the  Gujarat Panchayats Act 1961, and that consequently the local area of the  municipal borough for which the Khambalia  municipality was  constituted  could not be declared to be a  nagar.   We cannot accept this contention.  Section 307 of the Act shows that  a local area co-extensive with or included within  the limits of a municipal district or a municipal borough may be declared  to  be a gram or nagar under s. 9 and  on  such  a declaration,  the municipality functioning within the  local area or part thereof ceases to exist.  On a combined reading

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of  ss. 9 and 307, it would appear that a municipal  borough is an administrative unit within the meaning of s. 9(1)  and a  local area co-extensive with or included in  a  municipal borough may be declared to be a gram or nagar. The  next contention is that the notification under s.  9(1) dated  June  14,  1965,  was made  mala  fide.   Before  the notification  was issued, there was some  correspondence  in course  of which the State Government on the  representation of  Shri  Haribhai  Nakum MLA,  inquired  of  the  Khambalia municipality   whether  it  was  willing  to   include   the surrounding vadi areas within its limits.  It was after  the municipality indicated its unwillingness to include the vadi areas  within its limits that the  Development  Commissioner issued a notification under s. 9(1).  The suggestion is that the  State  government having failed to impose  its  opinion regarding   the  inclusion  of  the  vadi  areas  upon   the municipality, adopted the device of the declaration under s. 9(1) for imposing its opinion at the instance of Shri  Nakum as the ruling Congress party was hostile to the majority  ,- group  in  control  of the  municipality.   The  High  Court rightly rejected this suggestion.  Under s. 4(1) (b) of  the Gujarat  Municipalities Act, 1963, the State government  had the power to alter the limits of the municipal borough after consulting the municipality.  The State government had  duly consulted  the  municipality’ If the  Government  wanted  to exercise  its  powers under the aforesaid s.  4(1)  (b),  it could  do so without the consent of the  municipality.   For the  purpose of imposing its opinion, it was  not  necessary for  the  ,government  total recourse to  the  device  of  a declaration  under  s. 9(1) of the Gujarat  Panchayats  Act, 1961.   Nor  was the surrounding vadi area included  in  the Khambalia nagar declared by the notification under s.  9(1). It  is not shown how Shri Nakum ,or the ruling  party  would stand to gain by this notification.  The  637 allegation  of  mala fides was categorically denied  in  the affidavit filed on behalf of the State government. The  next  contention  is  that  s.  9(1)  of  the   Gujarat Panchayats Act, 1961 is ultra vires and unconstitutional  on the  ground of excessive delegation of legislative power  to the  State government.  It is said that the legislature  has not sufficiently indicated the policy which is to guide  the State  government in declaring a local area to be a gram  or nagar  or in the matter of making an inquiry preliminary  to the declaration and the framing of the rules for the inquiry and has given a naked and arbitrary discretion to the  State government to declare or not to declare a local area to be a gram  or nagar or alter the limits of any nagar or  gram  or declare  that any local area shall cease to be a nagar or  a gram.   We  think that this contention has  no  merit.   The legislature   cannot  delegate  its  essential   legislative functions  to  an administrative agency, see In  re.   Delhi Laws  Act(1)  and Raj Narain Singh v.  The  Chairman,  Patna Administration   Committee(2).   An  essential   legislative function  consists  in the determination  of  a  legislative policy  and  its formulation as a binding rule  of  conduct. Having laid down the legislative policy, the legislature may confer  discretion  on an administrative agency  as  to  the execution  of the policy and leave it to the agency to  work out the details within the frame work of the policy.  Judged by this test, we think that s. 9(1) does not suffer from the vice of excessive delegation. The preamble to the Gujarat Panchayats Act, 1961 shows  that it  is an Act to consolidate and amend the law  relating  to village  panchayats  and district local authorities  in  the

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State   of   Gujarat   with  a  view   to   reorganize   the administration pertaining to local government in furtherance of  the object of the democratic decentralisation of  powers in  favour  of  different classes of  panchayats.   The  Act extends  to the whole of the State of Gujarat (S. 1(2).)  It makes  special  provision for the district  of  Dang  having regard to the sparsity of its population and other  peculiar features (ss. 311 to 314).  In other districts the Act seeks to  introduce  a three tier panchayat  organization  in  the State  for  the  purpose of securing a  greater  measure  of participation  by  the  people of the  State  in  local  and governmental functions (ss. 3, 8 and 287).  At the summit of the panchayat organization is the district panchayat.  Below the  district panchayat and subordinate to it is the  taluka panchyat.   For  each district as constituted from  time  to time  under  the  Land Revenue Code,  there  is  a  district panchayat,  and  for each taluka or a mahal  as  constituted from  time to time under the Land Revenue Code, there  is  a taluka  panchayat (ss. 3 and 10).  A district panchayat  and subject to the authority of the district panchayat, a taluka panchayat  has  authority  over the area  for  which  it  is constituted  except that portion of the area which  for  the time (1) [1951] S.C.R. 747. (2) [1955] 1 S.C.R. 290. 638 being  is  within the limits of a  city  municipal  borough, municipal district, notified area or cantonment  constituted under any law for the time being in force.  Below the taluka panchayat and the district panchayat and subordinate to them are the gram and nagar panchayats.  For each gram, there  is a  gram  panchayat  and  for each nagar  there  is  a  nagar panchayat.  Sec. 9(1) provides for the constitution of grams and  nagars.  The State government may declare a local  area comprising a group of revenue villages or a revenue  village or  part of it or such other administrative unit or part  of it to be a gram if the population does not exceed 10,000  or a nagar if the population exceeds 10,000 but does not exceed 30,000.   Before making the declaration it is  necessary  to find  out  whether  the  local  area  can  be   conveniently constituted  into a gram or nagar.  The necessary  inquiries to  be  made  are  prescribed  by  the  Gujarat   Panchayats (declaration  of  nagar or gram) Inquiry Rules,  1962.   Ob- viously  the  State legislature cannot  make  the  necessary inquiry  as to whether a village or a part of it or  two  or more villages grouped together or an administrative unit  or part  of  it  is a viable unit fit to be  constituted  as  a separate  gram  or  nagar: The inquiry and  the  framing  of proper  rules with regard to the inquiry are subordinate  or ancillary   matters   which  were  properly   left   to   an administrative  agency.   It is the policy of the  Act  that panchayats  should be establish within a reasonable time  in all  local areas with populations not exceeding  30,000  and not  included  in  a notified area or  a  cantonment.   This policy  guides and controls the discretionary power  of  the State  government  under  s. 9(1).  Having  regard  to  this policy  s.  9(1) cannot be said to suffer from the  vice  of excessive  delegation  of legislative power  to,  the  State government.  Pursuant to this policy the Gujarat  government has established panchayats in all villages within the State. The  table at p. 4 of the "Panchayat Raj at a glance  as  on March   31,  1966"  published  by  the  Ministry  of   Food, Agriculture,    Community   Development   and    Cooperation (Department  of Community Development) Government of  India, New  Delhi,  shows that in the State of  Gujarat  there  are

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11,785 Panchayats, covering 18,247 villages and that 100 per cent  of the villages and all the rural population  are  now included in the panchayats. Section  9 (1) read with s. 307 shows that a local  area  co extensive with or included within the limits of a  municipal borough  or  a  municipal district  with  a  population  not exceeding  30,000 may be declared to a gram or  nagar.   The democratic  decentra  lisation  committe set  up  under  the government  resolution  dated July 15, 1960  recommended  in paragraph  4  6 of its report that the life  of  towns  with populations over 30, 000 is different from that of  villages They  are better served by municipalities.  For this  reason they are excluded from the purview  of S. 9(1). On  behalf  of the appellant, it is contended  that  even  a municipal  borough with a population over 30,000 is  at  the mercy of the State  639. government  under  s. 9(1).  It is said that out of  such  a municipal  borough,  small fragments with  populations  less than 30,000 may be carved out and may be separately declared to  be  grams and nagars and by adopting  this  method,  the government  may  convert the entire municipal  borough  into several  grams and nagars.  We are not impressed  with  this argument.   Under s. 9(1) read with s. 307,  the  government has  no  power  to  declare  a  municipal  borough  with   a population exceeding 30,000 as a gram or nagar.  It will  be an  abuse of the power under s. 9(1) if by  declaring  small fragments of such a municipal borough into separate grams or nagars,  the government seeks to achieve indirectly what  it cannot  do  directly.  If the government  abuses  the  power vested  in  it by s. 9(1), its action will be  struck  down. But  s. 9(1) cannot be held unconstitutional bemuse  of  the possibility  that  it may be  unfaithfully  administered  by those who are charged with its execution. envisages that gram and nagar panchayats should be ’The  Act envisages   that  gram  and  nagar  panchayats   should   be established  in  all  local  areas  having  population   not exceeding 30,000.  But it appears that on February 12, 1963, the  Gujarat  government  arrived at  the  following  policy decision:                "(a) The Municipalities whose population does               not  exceed 10,000 may be converted into  Gram               Panchaytas.               (b)Those with a population exceeding 10,000               but not exceeding 20,000 may be converted into               Nagar Panchayat.               (c)Municipalities   having   a   population               exceeding 20,000 but not exceeding 25,000  may               be  given  option to be converted  into  Nagar               Panchayats.               (d)There   are  certain  Muncipalities   in               respect  of which disciplinary and such  other               actions  are either pending or is proposed  to               be  initiated.   To enable  such  actions  to’               proceed   legally  uninterrupted,  under   the               relevant Municipal Act it is decided that such               Municipalities should not be converted  either               into Gram or Nagar Panchayats, irrespective of               their population.  The question of  converting               such  Muncipalities  may  be  considered  only               after  the  of  such  disciplinary  ’or  other               proceedings under the Municipal Act." Now  the  classification of municipalities on the  basis  of population between 10,000 and 20,000, 20,000 and 25,000  and 25,000  and 30,000 is not justified by s. 9(1) which  places

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all local areas with population between 10,000 and 30,000 on the same footing.  Counsel for the respondent was unable  to justify  the classification.  The policy decision in so  far as it makes this classification is not lawful and is  liable to be struck down.  From the statement filed by counsel  for the State of Gujarat before us it appears that 640 the State government has so far not converted into grams  or nagars  eight  municipalities  in  Saurashtra  and  thirteen municipalities in Gujarat, having populations between 20,000 and  30,000.  If and in so far this non-conversion is  based solely on the policy decision, it cannot be justified and it will  be  the  duty of the  State  government  to  establish panchayats in those municipalities as soon as possible.  The appellant particularly complained in the writ petition  that the  State had not converted the municipalities  of  Bagasra and  Wadhawan into nagar panchayats.  Counsel for the  State conceded that their non-conversion could not be supported on the  ground  that  their population was  between  20000  and 30,000.  It appears, however, that on July 12, 1965,  during the  pendency  of the writ petition, the  Bagasra  area  was declared   to   be  a  nagar.  With   regard   to   Wadhawan municipality, counsel for the State stated that the question of  its  amalgamation with Surendra nagar  municipality  was under consideration by the State government and that is  the reason  why  the  Wadhawan  municipality  was  not  so   far converted  into  a nagar panchayat.  We have  no  reason  to doubt  that  appropriate steps will be taken  by  the  State government  with regard to the Wadhawan area.  But the  non- conversion  of  any  of  these  municipalities  into   nagar panchayats  does  not vitiate the notification of  June  14, 1965.   This notification is lawful and is justified  by  s. 9(1).  Khambalia has a population of 12,249 and was  rightly declared to be a nagar.  Having regard to the policy of  the Act,  it was the duty of the State government to declare  it to be a nagar and the government has carried out its duty. Counsel  for  the  appellant contended  that  s.  9(2)  also suffers  from  the  vice of excessive  delegation.   We  are unable  to  accept  this contention.   For  the  purpose  of reorganizing the local areas, it may be necessary to include within  or exclude from any nagar or gram any local area  or otherwise  alter  the  limits of any nagar  or  gram  or  to declare  that  any local area shall cease to be a  nagar  or gram,  and this is provided by s. 9(2) of the  Act.   Action under s. 9(2) can be taken only after consultation with  the taluka  panchayat, the district panchayat and the  nagar  or gram panchayat concerned (if already constituted).  The  Act makes  incidental  provisions  for  the  establishment   and reconstitution  of  the panchayats  consequential  upon  the alteration  of the area of a gram or nagar (ss.  298,  299), for amalgamation or division of grams consequential upon  an area  ceasing to be a gram (ss. 309, 310), and  for  special cases where an area excluded from a gram or nagar ceasing to be  a  gram or nagar is not merged in an area  having  local self-government (ss. 300, 301).  Having regard to the policy of  the Act, it is plain that the discretionary power  under s. 9(2) is vested in the State government for the purpose of reorganizing  the local areas into new units of local  self- government.  For such purposes, it may be necessary 641 to  establish new panchayats, reconstitute  old  panchayats, amalgamate  or  divide  existing  grams  and  pending   such reorganization  it may sometimes be even necessary  that  an area  should cease to be a gram or nagar.  It is  impossible to visualise all the contingencies when action under s. 9(2)

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should  be taken and the necessary discretion  was  properly left to the State government.  We are satisfied that s. 9(2) cannot  be held unconstitutional on the ground of  excessive delegation.   We  may  add that no  action  has  been  taken against the appellant under s. 9(2). In the result the appeal is dismissed without cost. Shelat,  J.  The appellant municipality of Khambalia  is  in Jamnagar  District  which prior to 1956 formed part  of  the then State of Saurashtra.  The State had adopted the  Bombay District Municipal Act, 1901 and had thereunder  constituted the  appellant  municipality.  On the merger  of  Saurashtra with  the State of Bombay in 1956, Jamnagar District  became part  of the then Bombay State.  But on bifurcation  of  the Bombay State the District of Jamnagar became part of the new State of Gujarat. The  Gujarat Panchayats Act,1961 was enacted on November  24 1962.    At   that  time  the   population   of   Khambaliam municipality according to the census report of 1961 stood at 12,249.   By  a notification dated August  17,  1962  issued under  section  9 of the Panchayats Act  the  Government  of Gujarat  declared  the  local area  comprised  in  Khambalia municipality   as  a  nagar.   Consequently  the   appellant municipality  ceased to exist and a Nagar Panchayat was  set up  in its stead.  On account of emergency declared  by  the President   the   State  Legislature  passed   the   Gujarat Panchayats  (Suspension  of Provisions and  Reconversion  of certain  local  areas into municipal districts)  Act,  1962, which was published on February 5, 1963.  The effect of this Act  was that the appellant municipality and  certain  other municipalities  which were converted into  nagar  Panchayats stood revived.  This result was however short lived  because on.   February 7, 1963 the State Government promulgated  the Gujarat Panchayat Laws (Amendment) Ordinance, 1963 repealing s.  3 of the Suspension Act.  In April 1963  the  Government once again converted some of ’the municipalities into  nagar or  gram panchayats.  Not so the appellant, municipality  as the  Government, it is said, desired to supersede  it  under section 179 of the Bombay District Municipal Act, 1901.   As soon  as  the  Government took action  under  that  Act  the appellant municipality filed a suit challenging that action. On  December 23, 1964 the Gujarat Municipalities  Act,  1963 (Act XXXIV of 1964) was enacted and under its provisions the appellant  municipality  was  deemed to  be  a  municipality constituted  thereunder.  On June 14, 1965  the  Development Commissioner 642 -under  powers  delegated  to  him under  sec.  321  of  the Panchayats  Act issued the impugned notification under  sec. 9(1)  thereof declaring the area comprised in the  appellant municipality  to be a nagar.  Counsel for  the  Municipality challenged  the  legality of this  notification  under  five heads, viz., (1)that  sec.  9 of the Panchayats Act did not  apply  to  a municipal  district as it is not a local area or such  other administrative unit or part thereof,: (2)that  the  notification was invalid as  no  inquiry  as prescribed by Rule 2 of the Gujarat Panchayats  (declaration of nagar or gram) Inquiry Rules, 1962 was in fact made : (3)that  the inquiry, if any, could be held by  the  State Government  and not by the Development Commissioner  because though the Government’s power under sec. 9 was delegated the obligation to hold such an inquiry was not and could not  be delegated; (4)  that the notification was issued in mala fide  exercise of power; and

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(5)  that  sec.  9 of the Act is ultra vires  by  reason  of excessive  delegation of legislative power in favour of  the State Government. I  have had the advantage of perusing the judgment  prepared by  my  brother Bachawat J. and while I am  prepared  to  go along with him so far as his conclusions on contentions 1 to 4  are  concerned,  I  regret  I  cannot  concur  with   his conclusion as regards the fifth contention which  challenges the validity of sec. 9 and the notification. To  appreciate  the challenge to sec. 9 it is  necessary  to recite that section.  The section reads as follows:-               "(9) (1) After making such inquiries as may be               prescribed,   the  State  Government  may   by               notification in the Official Gazette,  declare               any local area, comprising a revenue  village,               or  a  group of revenue  villages  or  hamlets               forming  part  of a revenue village,  or  such               other administrative unit or part thereof,-               (a)   to be a nagar, if the population of such               local  area-exceeds10,000 but does not  exceed               30,000 and               (b)   to be a gram, if the population of  such               local area does not exceed 10,000.               (2)After   consultation  with  the   taluka               panchayat,  the  district  panchayat  and  the               nagar or gram panchayat ,concerned (if already               constituted) the State Government may, by like               notification, at any time-                                    643               (a)include  within,  or exclude  from,  any               nagar  or  gram, any local area  or  otherwise               alter the limits of any nagar or gram; or               (b)declare that any local area shall  cease               to be a nagar or gram;               and  thereupon  the  local area  shall  be  so               included  or  excluded or the  limits  of  the               nagar  or gram so altered or as the  case  may               be,  the local area shall cease to be a  nagar               or gram."               The inquiries to be made under the section are               dealt  with  by Rule 2 of the  Inquiry  Rules,               1962.  Rule 2 is as follows:-               "2.   Inquiry by State Government.-(1)  Before               declaring  any  local area to be a  nagar   or               gram under sub-sec. (1) of sec. 9 of the  Act,               the  State Government shall make inquiries  as               to-               (1)the  population  and the  ordinary  land               revenue of the revenue village or each of  the               revenue  villages or hamlets, or as  the  case               may be, any other administrative unit or  part               thereof, comprised in the local area.               (2)whether the revenue villages or  hamlets               or other administrative units or parts thereof               can  be conveniently grouped so as to  form  a               gram or nagar, as the case may be." Thus the inquiry involves consideration of two factors only; (1) population and the ordinary land revenue and (2) whether the  revenue  villages or hamlets or other  units  or  parts thereof can be conveniently grouped together to form a  gram or a nagar. Now it is clear from the preamble of the Act that the object of  the  Act is to. set up a Panchayat  Raj  throughout  the State  of Gujarat with a three-tiered’ Organisation  ranging from  the ’Village to the district level.  To  achieve  this

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the Act provides for a gram or a nagar panchayat, a taluk  a panchayat and a district panchayat in each of the districts. It  is  also clear from several provisions of the  Act  that though the policy was to set up such a Panchayat Raj it  was considered that a panchayat would not be suitable for  local areas with populations exceeding 30,000 and that such  areas would  be best served by municialities.  Therefore  the  Act leaves  out  certain urban areas  and  their  municipalities untouched.  Indeed it was because the legislature knew  that such  urban areas, should be left out from the scope of  the Act  that  it passed a comprehensive  statute,  the  Gujarat Municipalities  Act, 1963, which governs all  municipalities including  the  existing ones constituted either  under  the Bombay District Municipal Act 1901 or the Bombay M2Sup.   C. 1/67-12 644 Municipal Boroughs Act, 1925.  Though the policy was that it is only local areas with, populations exceeding 30,000 which should  be left out from the purview of the Act and all  the areas with populations below 30,000 should be brought  under the  panchayat system, the Gujarat Municipalities Act,  1963 curiously  enough does not lay down any minimum limit as  to population for a municipality to be set up.  Prima facie the State Government under that Act can constitute or permit  an existing municipality to continue even if its population  is less  than  30,000.  The effect of this gap  in  the  imple- mentation of the avowed legislative policy in the Panchayats Act will be easily perceived hereafter. A  declaration under sec. 9(1) that a local area shall be  a nagar  or  a gram is a legislative function.  As  stated  on several  occasions  by this Court an  essential  legislative function  consists in the determination of  the  legislative policy  and  its formulation as a binding rule  of  conduct. (Cf.   Raj  Narain Singh v. Chairman,  Patna  Administration Committee(1)  and Delhi Laws Act case.(2)). Such a  function cannot  be  surrendered or delegated in  favour  of  another authority  or  agency  for  the  Constitution  entrusts  the legislative  function to the legislatures.  In view  however of the diverse activities of a modern state it is recognised that  a legislature cannot be expected to work out  all  the details of a complex statute such as the instant Act.  It is therefore  competent  for  a  legislature  to  delegate   in suitable  cases some of its ancillary legislative powers  to the  executive  or  any other authority  to  work  out  such details.    But  there  is  an  inherent  danger   in   such delegation.  As observed in Vasantlal Maganbhai v. State  of Bombay(3)-               "  although  the  power  of  delegation  is  a               constituent element of the legislative  power,               it is well settled that the legislature cannot               delegate  its essential legislative  functions               in  any  case and before it can  delegate  any               subsidiary  or ancillary power, to a  delegate               of  its  choice, it must lay down  the  legis-               lative  policy and principles so as to  afford               the  delegate proper guidance in  implementing               the same." If,  therefore,  a statute is challenged on  the  ground  of excessive  delegation  it  has to be  established  that  the legislature has delegated its essential legislative power or function  and  that  it  has not laid  down  its  policy  or principle  for  the  guidance of its delegate.   Even  if  a policy is declared it may, however, be couched in such vague terms  that  it  may not set down  a  definite  standard  or criterion for the guidance of the delegate.  The consequence

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would  be  to confer an arbitrary or  uncanalised  power  to change  or modify the declared policy without  reserving  to itself  any control over the subordinate legislation.   Such an effacement or abdication of power in favour (1) [1955] 1 S.C.R. 290. (2)   [1951] S.C.R. 747. (3)  [1961] 1 S.C.R. 341 at 346 645 of  another agency either in whole or in part is beyond  the permissible  limits of delegation.  In  Hamdard  Dawakhana’s case,(1)  clause  (d)  of  sec. 3 of  the  Drugs  and  Magic Remedies (Objectionable Advertisements) Act, 1954 which gave power  to  the  Central Government to add  to  the  diseases falling within the mischief of sec. 3 was struck down on the ground  of its conferring such uncanalised power to  include any disease it thought fit. Let  me  now  examine  the  provisions  of  sec.  9  in  the background of these principles.  As aforesaid, the object of the  Act  is to set up the Panchayat system  throughout  the State  except  of  course in those local  areas  ’where  the population  exceeds 30,000.  It is to implement this  object that  the Act provides a three-tier Organisation  consisting of  a  gram  or nagar panchayat, a taluka  panchayat  and  a district panchayat in each district.  What section 9(1) does is to delegate to the government the power to declare, after making such inquiries as may be prescribed, a local area  or a part there-of to be a nagar, if its population is  between 10,000  to 30,000 or a gram, if its population is less  than 10,000.   Sub-section  2  authorises  the  government  after consultation with the taluka, the district and the nagar  or gram panchayat concerned to alter the limits of any nagar or gram  by including or excluding any area or declare that any local area shall cease to be a nagar or a gram and thereupon the  local area shall be so included or excluded  etc.   The Government thus is empowered (1) to declare a local area  to be  a  nagar or a gram depending upon  its  population;  (2) after such a nagar or gram has been constituted to alter its area either by including other area or areas or excluding an area  or areas therefrom; (3) by doing so to convert a  gram into  a nagar and vice versa and (4) or to declare any  such local  area  as having ceased to be a nagar or a  gram.   It will  at once be noticed that the word "or" between  clauses (a)  and  (b)  in sub-sec. 2 indicates  that  the  power  to declare that a local area has ceased to be a nagar or a gram can be exercised either after such inclusion or exclusion or even  without  such  inclusion  or  exclusion.   It  follows therefore  that  even where a nagar or a gram  panchayat  is constituted, the government can declare at any time that  it shall  cease to be a nagar or a gram either as a  result  of the alteration of its local area or without such alteration. It  will also be noticed that sub-section (1) by the use  of the  word  ’may’ therein confers an absolute  discretion  to make the declaration thereunder or not.  Indeed, Counsel for the  State insisted that the word ’may’ there does not  mean ’shall’  and therefore that provision is not mandatory.   It follows therefore that in spite of the avowed policy of  the Act  to  set  up  Panchayat Raj  throughout  the  State  the Government   by  virtue  of  the  power  to  declare   being discretionary under sub-section (1), may or may not  declare a local area to be a nagar or a gram. (1)  [1960]2 S.C.R. 671. 646 The  only  fetter  is  that  where  it  desires  to  make  a declaration  in respect of any particular local area it  can do  so after making an inquiry as prescribed.   But  neither

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sec.  9  nor any other provision in the Act lays  down  that even  if  the inquiry ends in a  particular  conclusion  the Government  must make the declaration.  What  the  requisite result  of  such an inquiry for a declaration should  be  is also not prescribed in the Act and the government is left to decide its course of action after such an inquiry. Similarly  sub-sec. 2 confers a discretionary power  on  the government  to alter by inclusion or exclusion any  area  or areas from a nagar or a gram panchayat and convert one  from the  other.   The  only restriction on  such  power  is  the necessity to consult the district, the taluka, and the nagar or the gram panchayats as the case may be.  The  restriction is  consultation  but  not  the  consent  of  the  concerned panchayats.  Sub-sec. 2 does not require even an inquiry  as sub-section I does at the time of the declaration.  Nor does it  lay down any principle or criterion as to when  and  in, what  circumstances  the  Government can  launch  upon  such alteration  of  the local limits.  Thus the  Government  can modify  at  any  time  the structure and  the  nature  of  a panchayat from a nagar to a gram panchayat and vice versa by simply altering its area after a mere consultation and  even if  the  panchayats concerned are against  such  alteration. Under this power the Government can also transfer a  portion or  portions  of a nagar or gram  panchayat  after  formally going  through  the process of consultation and join  it  or them  with  another panchayat even if the  people  concerned were to be unwilling to such a transfer. It  is true that sec. 9(1) contains one criterion, viz.,  of population, that is, if the population is between 10,000  to 30,000  the  local area would be a nagar and if it  is  less than  10,000 it would be a gram.  Even so, by reason of  the absolute discretion left with the government it is not as if it  is incumbent on the government to make  the  declaration under section 9(1) even if the local area has the  necessary population  and  revenue  to make it  a  viable  unit.   The government,  even  in  such a case, may decline  to  make  a declaration in the absence of any provision requiring it  to do so or under sub-section 2 divide, the area and join  such divided portions with other panchayats. The  inquiry under sub-section I is not regulated under  the Act but under Rules made by the government.  Neither the Act nor  the Rules provide that the government has to act  under sec.  9(1) if the inquiry ends in a particular  result.   In other words there is no provision that the government has to act   in   a   particular  way  after   such   an   inquiry. Consequently, it is not necessary for the government to make a  declaration  even  if  it is  satisfied  as  regards  the population   or  the  land  revenue  of  the   local   area. Furthermore, the section does not lay down any principles to guide the Government 647 as to when a single revenue village should be constituted  a gram panchayat or when it should be grouped with other  such villages to constitute a gram or a nagar panchayat.  Neither section  9  nor ’Rule 2 provides as to  what  should  follow after an inquiry is held.  Thus neither sec. 9 nor the Rules provide any principle or criterion on the basis of which the power  of declaration and alteration under sub-section I  or sub-section  2 of sec. 9 is to be exercised and it  is  left entirely  to  the  sweet will of the  government  whether  a particular  area is to be declared a gram or a nagar or  not and  to  alter its area by adding or  subtracting  therefrom part  or  parts  so  that it may be reduced  to  a  gram  or augmented into a nagar regardless of the willingness  either of the people or the panchayat concerned.

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Another result ensuing from the government’s power to  alter the limits which can be easily visualised is that even where a  local  area has a population exceeding 30,000 and  has  a duly  constituted  municipality, if the government  for  one reason  or  the  other  desires  to  do  away  with  such  a municipality it has simply to reduce its limits which it can do since a municipal area is a local area within the meaning of sec. 9(1) and convert it into a gram or a nagar depending upon  how much of its area is carved out.  Since under  sub- sec. 2 such a power can be exercised even without an inquiry or consent of the municipality concerned every  municipality would  be  entirely at the mercy of the government  for  its continuance.  The consequences flowing from such a power are far more far reaching than even those from exercise of power of   supersession  of  a  municipality  under  the   Gujarat Municipalities   Act.   If  the  government   supersedes   a municipality it does not become extinct.  Only the  existing body of the members would be superseded but a fresh election has to take place and a new body of members would constitute the municipality.  Where government acts under this Act  and so alters the local area constituting the municipality as to reduce  its  population below 30,000 the government  can  on such   ’alteration  bring  about  the  extinction  of   the’ municipality  and  convert it into a nagar or  even  a  gram panchayat.  It is easy to perceive in the provisions of Sec. 9 an uncanalised power to do all these things     any principle  or  criterion  laid down  therein  to  govern  or control the actions  of the government. The, fact that sub-section (1), is not mandatory and confers dicretionary power has also other significance.  Inspite  of the  ,provision in it that where the ’population of a  local area  is  between  10,000 to 30,000 it  should  be  a  nagar panchayat  the State Government made a policy  decision  ’on Feb. 12, 1963.  That decision was:-               "(a) The Municipalities whose population  does               not  exceed 10,000 may be converted into  gram               panchayats.               648               (b)Those with a population exceeding 10,000               but not exceeding 20,000 may be converted into               Nagar Panchayats.               (c)Municipalities   having   a   population               exceeding 20,000 but not exceeding-25,000  may               be  given  option to be converted  into  Nagar               Panchayats. The  effect of the decision is that municipalities having  a population  between 20,000 to 30,000 are left out  from  the purview  of  sec.  9(1).   Municipalities  with  populations between  20,000  to 25,000 are given an  option  whether  to convert  themselves  into nagar  panchayats;  municipalities with  populations  between 25,000 to 30,000 are  not  to  be converted  into  nagar panchayats.  It is obvious  that  the policy  decision is defective of the object of the Act.   It is also obvious that the government could make such a policy decision only because sec. 9 confers an absolute  discretion where  under ’it leaves it to the government to  declare  or not  to declare local areas as grams or nagars as  the  case may be. The  fact that such a policy decision could be made  demons- trates  that the legislature did not reserve to  itself  any power to control the implementation by the government of its objective.   It is therefore clear that sec. 9 delegates  to the Government an uncontrolled power under sub-sec. (1)  and sub-sec.  2  both as regards declaration and  alteration  of local  areas without laying down any criterion which  should

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govern  and  guide  the government in the  exercise  of  its power.  Such a power leaves every panchayat whether it be  a nagar  or a gram panchayat or a local area where there is  a municipality duly constituted at the mercy of the government for its continuance as such panchayat or municipality. The  complaint of the appellant-municipality is that  it  is because  of such an arbitrary power that the government  has been able to declare the appellant municipality to be  nagar while  allow’ing at least two municipalities of Bagasra  and Wadhawan   though   similarly  situated   to   continue   as municipalities.    It   was  only   after   the   appellant- municipality filed its writ petition in the High Court  that the  government declared Bagasra a nagar.  Wadhawan  Munici- pality  however  is still allowed to continue.   During  the course  of the hearing of this appeal, we asked Counsel  for the  State  if  the  government  was  agreeable  to  convert Wadhawan  into  a  nagar.   He  asked  for  time  to  obtain instructions  and subsequently filed a statement.  The  only reason  given in the statement is that there is  a  proposal before the government to amalgamate Wadhawan with the nearby Surendera  nagar and to have one municipality for both.   It is  strange  that  even after nearly four  years  since  the passing  of the Act the government has yet not been able  to make up its mind and 649 the  alleged proposal for amalgamation is still said  to  be under  its  consideration.  But these are not the  only  two municipalities  to  which the government did not  apply  the Act.   In  answer  to  the  said  statement  the   appellant municipality  has drawn our attention to the fact  that  the Act  has  not  been  applied  to  eight  municipalities   in Saurashtra  and  thirteen municipalities in  Gujarat  having populations  between  20,000 and 30,000  presumably  acting, under  the said policy decision.  The above figures are  not disputable as they are taken from a government  publication. No  doubt  the appellant municipality has  a  population  of 12,000 and odd and is therefore liable to be converted  into a   nagar.    But   so  also  the   aforesaid   twenty   one municipalities,  under the very same provisions of the  Act. The only reason why these other municipalities have not been converted  into  nagars is the decision  of  the  government based perhaps on a consideration that areas with populations between  twenty and thirty thousand are urban,  areas  which would  be better served by municipalities.  That can be  the only  explanation  for the said policy  decision.   But  the decision  is contrary to the legislative decision  contained in  s.  9(1) that such areas are fit to  be  converted  into nagar  panchayats.  Such a decision became possible  because the legislature left an uncontrolled power in the government enabling it to modify and even defeat the legislative policy without   reserving   to  itself  any   control   over   the implementation   of  the  Act  by  its  delegate.   Such   a delegation  amounts to an effacement and is not  within  the permissible limits of delegation. Realising  this difficulty, Counsel for the  State  conceded that the policy decision was illegal.  But such a concession by  Counsel  cannot  be of any assistance,  for  the  simple reason  that as Sec. 9 1) stands the power delegated to  the government is discretionary and the government can therefore decide  whether a particular local area or a class of  local areas  should be declared as. nagars or grams or not and  it is  in exercise of that power. that the policy decision  was made  and implemented, contrary though it is to the aim  and object  of the Act to set up panchayats in all  local  areas except those having populations over 30,000.

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Section  9 in my view suffers from excessive delegation  and therefore  is  invalid.  The  impugned  notification  issued there-under must fall along with it. I would, therefore, allow the appeal with costs.                            ORDER In  accordance with- the opinion of the majority the  appeal is dismissed without costs. Y.P. 650