New Delhi, Sept. 11: The licence raj has returned to haunt Manmohan Singh.

Allahabad High Court has ruled that the entire process of delicensing through the 1990sthat saw most industries being opened up through executive orders is illegal.

A two-judge bench said delicensing has to be cleared by Parliament through a law repealing the Industries (development & regulation) Act of 1951 that introduced licensing.

“Power of delicensing, if any, is an exclusive policy matter and within the domain of essential legislative competence,” the unpublicised judgment delivered on August 24 says.

Justices Amitava Lala and Sanjay Mishra passed the judgment on a petition by Monnet Sugar Ltd of Uttar Pradesh, challenging the Union of India and the state government’s orders delicensing sugar in September 1998.

Justice Lala is no stranger to controversy. Two years ago, he had banned rallies in Calcutta on weekdays between 8 am and 8 pm.

His latest verdict has sent the Centre into a tizzy.

“No condition is attached to the law nor any power of delegation has been given by Parliament by law to the executives to delicense industry,” said the judges.

The industries act covers most manufacturing sectors. Before liberalisation, the law required licences to be taken not only for setting up industry but also for expansion.

Virtually every industry ranging from bicycles to automobiles, consumer goods, textiles, petrochemicals, electronics and iron and steel came within its purview. Some 38 industry groups, with a huge number of sub-groups, were covered by the 1951 law, the centrepiece of what came to be called the licence raj.

With liberalisation in 1991, most industries were delicensed at various points of time through notifications issued by the industry ministry and not through acts of Parliament.

After the high court judgment, the Centre and the Uttar Pradesh government have filed a writ before the Supreme Court seeking its quashing. They have argued that sub-clause 29(B)(1) in the act allows the Centre to “regulate industries, including sugar industry, in terms of the 1951 act by way of industrial policy resolutions, notifications and guidelines or by way of press notes”.

However, the high court ruling dismisses this contention. The case comes up for hearing as a special leave petition in the Supreme Court tomorrow.

The problem for the government is that the principle the high court judgment is emphasising has been upheld by the Supreme Court which had ruled that public sector units nationalised by an act of Parliament could not be privatised by executive action but only through another act of Parliament.

Petroleum minister Ram Naik in the Vajpayee government used the judgment to stop privatisation of Bharat Petroleum and Hindustan Petroleum.

If the Supreme Court supports the high court judgment, the Centre will have to bring an ordinance to amend the act and seek Parliament’s nod.

Official sources said: “The judgment is a body blow, as it means the government would have to try to garner political support from all quarters to get an act of repeal or amendment to the ID Act through.”