APPLICABILITY : Theory of policy and guidelines recognizes the reality that legislative functions cannot be always performed by legislature and the fact it has to be delegated.
WHAT IT SAYS? This where the theory of ‘policy’ and ‘guidelines’ comes into play because it postulates that, while delegation,
Legislature cannot delegate delegate uncanalised and uncontrolled power.
the legislature must set the limits of the power delegated by declaring the policy of the law and by laying down standards for guidance of those on whom the power to execute the law is conferred
Thus the delegation is valid only when the legislative policy and guidelines to implement it are adequately laid down and the delegate is only empowered to carry out the policy within the guidelines laid down by the legislature.
Similar observation was made in Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. v. CST (Gwalior Rayon), wherein the SC referred to Corpus Juris Secundum Vol. 73, page 324 – wherein it traced the doctrine and observed that,
Legislature while delegating powers to administrative body – must - prescribe a policy, standard, or rule for their guidance – otherwise -such arbitrary & uncontrolled discretion will lead to invalidation of the law.
PURPOSE OF THIS THEORY : This theory helps to find whether there is
surrender of legislative functions or
One can understand this theory is to prevent arbitrary exercise of power under the delegated legislation by an Administrative Authority. Now the Question is whether is applicable for an Quasi-Judicial Authority.
APPLICABILITY TO QUASI-JUDICIAL AUTHORITY : However, it should be noted, this theory is not applicable for Quasi-judicial authority.
In Workmen v. Meenakshi Mills Ltd., (1992) 3 SCC 336 , where the supreme court clarified that why the ‘Policy and Guideline Theory' presupposes delivery of justice by quasi-judicial authority. It observed that
“Principles or guidelines are insisted with a view to control the exercise of discretion conferred by the statute.
There is need for such principles or guidelines when the discretionary power is purely administrative in character to be exercised on the subjective opinion of the authority.
The same is, however, not true when the power is required to be exercised on objective considerations by a speaking order after affording the parties on opportunity to put forward their respective point of view”
CONCLUSION : Recently in Rojar Mathew v. South Indian Bank Ltd (Civil Appeal no 8588 of 2019), the supreme court applied this doctrine in relation to Section 187 of Finance Act, 2017.
"The Policy and Guideline Theory' presupposes delivery of justice by quasi-judicial authority." Elaborate it. 15 marks. UPSC LAW OPTIONAL 2016.
Kishan Prakash Sharma and Others vs. Union of India and Others [(2001) 5 SCC 212]. This view was further affirmed in Registrar of Cooperative Societies v. K. Kunjabmu (Registrar, Coop. Societies).  Mahe Beach Trading Co. v. UT of Pondicherry.