Excessive Delegation

Section 40B of the SECP Act under which the Respondent No. 1 has passed the
Impugned Directives excessively delegates legislative powers and states:

“40B. Power of the Commission to issue directives, circulars, guidelines, etc.

– the Commission shall have the power to issue such directives, codes, guidelines,
circulars or notifications as are necessary to carry out the purposes of this Act, the
rule and regulations made thereunder and all laws administered by us.”

In Khawaja Ahmad Hassan vs. Government of Punjab, 2005 SCMR 186 the Supreme
Court of Pakistan has laid down the principles that must be applied when analyzing
excessive delegation. It states:

“The Legislature must retain in its own hands the essential legislative functions
which consist in declaring the legislative policy and laying down the standard
which is to be enacted into a rule of law, and what can be delegated is the task of
subordinate delegation which by its very nature is ancillary to the statute which
delegates the power to make it.” (Emphases added)

The real question in case of analyzing excessive delegation was identified in 1) District
Magistrate, Lahore and 2) Commissioner, Lahore vs Syed Raza Kazim, PLD 1961
Supreme Court 178 as whether the legislature was competent to make the legislation
concerned and not thereby creating a subordinate legislature or abdicating its powers.

It is evident that the Legislature has not laid down any guidelines for the exercise of the
SECP’s power under Section 40B of the SECP Act. If it was the Legislature’s intent to
allow the regulator i.e. Respondent No. 1 the authority to issue a directive confiscating
property and expropriating funds (which was the effect of the Impugned Directive) it
should have specifically laid down certain guidelines detailing the conditions to be met
before such a directive could be issued. In the absence of any guidelines, Section 40B has
the effect of creating a subordinate legislature or amounts to the Legislature’s abdication
of its powers.

The above Section 40B of the SECP Act should be declared unconstitutional and an
excessive delegation of legislative powers.