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TMI Blog2004 (3) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, and to which Tribunal, the jurisdiction exercised by the High Court for nine decades in relation to, inter alia, amalgamation and reconstruction of companies, winding up, reduction of share capital, and other matters, are transferred. 2. The jurisdiction of the High Court transferred to the Tribunal are those under sections 100 to 104, 107, 203, 243, 318(3)(d), 391, 392, 394, 394A, 395, 424, 425, 426, 427, 433, 434 (1)(b), 434(1)(c), 439, 440, 441, 443, 444, 446, 448, 450, 453, 454, 455(2) & (3), 456, 457, 458, 458A, 459, 460, 461, 462, 463, 464, 465, 466, 467, 468, 469, 470, 471, 472, 473, 474, 475, 476, 477, 478, 479, 480, 481, 490, 492, 494, 497, 502, 503, 504, 506,507, 509, 511A, 512, 515, 517, 518, 519, 531, 531A, 533, 534, 535, 536, 537, 538, 540, 542, 543, 544, 545, 546, 547, 549, 550, 551, 553, 555, 556, 557, 558, 559, 560, 581, 582, 583, 587, 588, 589, 610, 614, 626, 632, 635 and 635B of the Companies Act. 3. The jurisdiction and powers so transferred, inter alia, relate to reduction of share capital; rights of dissentient shareholders to have variation cancelled; power to restrain persons from managing companies; compensation for loss of office to the managing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders, and protection of employees during investigation by inspectors or during pendency of proceeding in certain cases. 4. The powers that will be left with the High Court, as and when the Amending Act is given effect to are the powers under sections 81(7), 237(a)(ii ), 581 ZN (16), 581ZS(1) and 633(3). The jurisdiction so left with the High Court relate to hearing appeals with regard to the terms and conditions of conversion of debentures or loans into shares when the lender exercises right given to it under section 81; ordering investigation of the company's affairs, hearing appeals by any member or creditor or employee aggrieved by the transfer of assets, division, amalgamation or merger of producer companies; reconversion of producer companies to inter-State co-operative societies; and the power to relieve officers of companies, acting honestly and reasonably, of liability, in whole or in part, and on such terms as the Court may think fit. 5. It must be noticed here that the power of the High Court in relation to matters concerning, inter alia, rectification of share Registers and oppression and mismanagement had been transferred to the Company Law Board constituted by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... least three years of service as a Member of the Indian Company Law Service (Accounts Branch) in Senior Administrative Grade in that service]; or (b)is, or has been, a Joint Secretary to the Government of India under the Central Staffing Scheme, or held any other post under the Central Government or a State Government carrying a scale of pay which is not less than that of a Joint Secretary to the Government of India, for at least five years and has adequate knowledge of, and experience in, dealing with problems relating to company law; or (c)is, or has been, for at least fifteen years in practice as a chartered accountant under the Chartered Accountants Act, 1949 (38 of 1949); or (d)is, or has been, for at least fifteen years in practice as a cost accountant under the Costs and Works Accountants Act, 1959 (23 of 1959); or (e) has or has had, for at least fifteen years working experience as a secretary in whole-time practice as defined in clause (45A) of section 2 of this Act and is a member of the Institute of the Companies Secretaries of India constituted under the Company Secretaries Act, 1980 (56 of 1980); or (f)is a person of ability, integrity and standing having special k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions of service of President and other Members.-The salary and allowances and other terms and conditions of service of the President and other Members of the Tribunal shall be such as may be prescribed: Provided that neither the salary and allowances nor the other terms and conditions of service of the President and other Members shall be varied to their disadvantage after their appointment. 10FH. Vacancy in Tribunal. - (1) In the event of the occurrence of any vacancy in the office of the President of the Tribunal by reason of his death, resignation or otherwise, the seniormost Member shall act as the President of the Tribunal until the date on which a new President, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office. (2) When the President is unable to discharge his functions owing to absence, illness or any other cause, the seniormost Member or, as the case may be, such one of the Members of the Tribunal, as the Central Government, may, by notification, authorise in this behalf, shall discharge the functions of the President until the date on which the President resumes his duties. (3) If, for reason other than temporar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders on receipt of the report of the Judge of the Supreme Court on such reference. (4) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of the President or a Member referred to in sub-section (2). 10FK. Officers and employees of Tribunal.-(1) The Central Government shall provide the Tribunal with such officers and other employees as it may deem fit. (2) The officers and other employees of the Tribunal shall discharge their functions under the general superintendence of the Member Administration. (3) The salaries and allowances and other terms and conditions of service of the officers and other employees of the Tribunal shall be such as may be prescribed. 10FL. Benches of Tribunal.-(1) Subject to the provisions of this section, the powers of the Tribunal may be exercised by Benches, constituted by the President of the Tribunal, out of which one shall be a Judicial Member and another shall be a Technical Member referred to in clauses (a) to (f) of sub-section (3) of section 10FD: Provided that it shall be competent for the Members authorised in this behalf to function as a Bench consisting of a Single Member and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter recording the reasons for so doing in writing. 10FM. Order of Tribunal.-(1) The Tribunal may, after giving the parties to any proceeding before it, an opportunity of being heard, pass such orders thereon as it thinks fit. (2) The Tribunal may, at any time within two years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the parties. (3) The Tribunal shall send a copy of every order passed under this section to all the parties concerned. 10FN. Power to review.-The Tribunal shall have power to review its own orders. 10FO. Delegation of powers.-The Tribunal may, by general or special order, delegate, subject to such conditions and limitations, if any, as may be specified in the order, to any Member or Officer or other employee of the Tribunal or other person authorised by the Tribunal to manage any industrial company or industrial undertaking or any operating agency, such powers and duties under this Act as it may deem necessary: (a)take possession of such property, books of account or other documents; and (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companied by such fee as may be prescribed: Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days from the date aforesaid if it is satisfied that the appellant was prevented by sufficient cause from not filing the appeal in time. (4) On receipt of an appeal preferred under sub-section (1), the Appellate Tribunal shall, after giving parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. (5) The Appellate Tribunal shall send a copy of every order made by it to the Tribunal and parties to the appeal. (6) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of the receipt of the appeal. 10FR. Constitution of Appellate Tribunal.-(1) The Central Government shall, by notification in the Official Gazette, constitute with effect from such date as may be specified therein, an Appellate Tribunal to be called the "National Company Law Appellate Tribunal" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Member shall hold office as such after he has attained,- (a)in the case of the Chairperson, the age of seventy years; (b)in the case of any other Member, the age of sixty-seven years. 10FU. Resignation of Chairperson and Members.-The Chairperson or a Member of the Appellate Tribunal may, by notice in writing under his hand addressed to the Central Government, resign his office: Provided that the Chairperson or a Member of the Appellate Tribunal shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest. 10FV. Removal and suspension of Chairperson and Members of Appellate Tribunal.-(1) The Central Government may, in consultation with the Chief Justice of India, remove from office the Chairperson or any Member of the Appellate Tribunal, who - (a)has been adjudged an insolvent; or (b)has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or ( c)has become phys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Secretary in the Ministry or Department of the Central Government dealing with this Act shall be the convenor of the Selection Committee. (3) The Central Government shall, within one month from the date of occurrence of any vacancy by reason of death, resignation or removal of the Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal and six months before the superannuation or end of tenure of the Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal, make a reference to the Selection Committee for filling up of the vacancy. (4) The Selection Committee shall recommend within one month a panel of three names for every vacancy referred to it. (5) Before recommending any person for appointment as the Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal, the Selection Committee shall satisfy itself that such person does not have financial or other interest which is likely to affect prejudicially his functions as such Chairperson or Member of the Appellate Tribunal or President or Member of the Tribunal, as the case may be. (6) No appointment of the Chairperson and M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y representation for default or any order passed by it ex parte; and (i) any other matter which may be prescribed by the Central Government. (3) Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal in the same manner as if it were a decree made by a court in a suit pending therein, and it shall be lawful for the Tribunal or the Appellate Tribunal to send in the case of its inability to execute such order, to the court within the local limits of whose jurisdiction,- ( a)in the case of an order against a company, the registered office of the company is situate; or ( b)in the case of an order against any other person, the person concerned voluntarily resides or carries on business or personally works for gain. (4) All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228, and for the purposes of section 196, of the Indian Penal Code, 1860 (45 of 1860), and the Tribunal and the Appellate Tribunal shall be deemed to be a civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974). 10G. Power to punish fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act; (b)'company secretary' means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Companies Secretaries Act, 1980 (56 of 1980) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act; (c)'cost accountant' means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act; (d)'legal practitioner' means an advocate, a vakil or any attorney of any High Court, and includes a pleader in practice. 10GE. Limitation.-The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to an appeal made to the Appellate Tribunal. 10GF. Appeal to Supreme Court.-Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .' in UK, was reviewed recently by Sir Andrew Leggatt, a former judge of the UK Court of Appeal, who submitted his report in March 2001. It is noted in that report that, in UK though there are 70 different administrative Tribunals which decide about the one million cases a year, only 20 of the Tribunals each decide more than 500 cases a year. The Tribunals, it was found, were not independent of the departments that sponsor them. The object of the review was, therefore, to recommend a system that is 'independent, coherent, professional, cost effective and user friendly'. 10. The Leggatt report regards 'independence' of the Tribunal as its most important requirement. The Report also emphasizes the need to satisfy users needs: "It should never be forgotten that the Tribunals exist for users and not the other way around'. Tribunals would be wholly ineffective, if users did not feel that the Tribunals are 'genuinely and demonstrably independent'. The Leggatt Report observes, 'Tribunals are an alternative to court, not administrative processes. They will keep the confidence of users only in so far as they are seen to demonstrate similar qualities of independence and impartiality to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the essential attributes of a sovereign State, and on considerations of policy, the State transfers its judicial functions and powers mainly to the Courts established by the Constitution; but that does not affect the competence of the State, by appropriate measures, to transfer a part of its judicial powers and functions to Tribunals by entrusting to them the task of adjudicating upon special matters and disputes between parties. It is really not possible or even expedient to attempt to describe exhaustively the features which are common to the Tribunals and the Courts, and features which are distinct and separate. The basis and the fundamental feature which is common to both the Courts and the Tribunals is that they discharge judicial functions and exercise judicial powers which inherently vest in a sovereign State." 14. In the book on Administrative Law by M.P. Jain, an attempt has been made to enumerate the features which distinguish Courts from Tribunals, the relevant passage at page 215 reads thus : "In what respects do the Tribunals contrast with Courts? Some of the basic characteristics of the Courts are : they are bound by the prescribed rules of procedure and eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its many Article I powers, appellants' analysis fails to provide any real protection against the erosion of Article III jurisdiction by the unilateral action of the political Branches. In short, to accept appellants' reasoning, would require that we replace the principles delineated in our precedents, rooted in history and the Constitution, with a rule of broad legislative discretion that could effectively eviscerate the constitutional guarantee of an independent Judicial Branch of the Federal Government." 17. Article I of the US Constitution vests all legislative powers in the Congress. Article III provides that : "The Judicial power of the United States shall vest in one Supreme Court, and in such inferior Courts as Congress may from time to time ordain and establish. The Judges, both of Supreme Court and inferior Courts, shall hold their offices during good behaviour, and shall at stated times, receive for their services, a compensation, which shall not be diminished, during their continuance in office". 18. In the same decision, it was observed by the Court that, "Private rights disputes, on the other hand, lie at the core of the historical recognised judicial power." 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the Supreme Court under Article 136, with respect to the subject-matter of the law enacted under those Articles. A seven-Judge Bench of the Supreme Court in the case of L. Chandra Kumar v. Union of India (1997) 3 SCC 261, has held that the High Court's powers under Articles 226 and 227 cannot be so excluded. 22. In the case of L. Chandra Kumar (supra) it was also held that, "It is to be remembered that, apart from the authorisation that flows from Articles 323A and 323B, both Parliament and the State Legislatures possess legislative competence to effect changes in the original jurisdiction of the Supreme Court and the High Courts." 23. In the case of Union of India v . Delhi High Court Bar Association [2002] 4 SCC 275, a two-Judge Bench of the Court held that the Debt Recovery Tribunals though it may not strictly fall within the concept of judiciary as envisaged by Article 50, it is nevertheless an effective part of the justice delivery system. It was also held therein that the creation of such Tribunals in the place of a Civil Court to decide civil disputes relating to Debt Recovery matters does not interfere with the independency of judiciary. The Court held that nobo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal or of the Appellate Tribunal would be well versed in law to be able to decide cases independently and judiciously. It has to be borne in mind that the decision of the Appellate Tribunal is not final, in the sense that the same can be subjected to judicial review by the High Court under Articles 226 and 227 of the Constitution." (p. 293) 25. The Supreme Court in the case of State of Karnataka v . Vishwabharathi House Building Co-operative Society Ltd. [2003] 2 SCC 412 has observed, inter alia, that: "[T]. The legislative competence of Parliament and the State Legislatures respectively to provide for creation of Courts and Tribunals as envisaged in different Lists contained in the Seventh Schedule of the Constitution of India are as under : Item 77 of List I of the Seventh Schedule 'Constitution, organization, jurisdiction and powers of the Supreme Court (including contempt of such Court), and the fees taken therein; persons entitled to practice before the Supreme Court.' Item 78 of List I of the Seventh Schedule: 'Constitution and organization (including vacations) of the High Courts except provisions as to officers and servants of High Courts; persons entitled to prac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. The inexorable logic of this is that the Courts can be denuded of the jurisdiction now vested in them, by creating separate or joint Tribunals with respect to each of the matters in the three lists. An example of this is the Debt Recovery Tribunal constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. A parallel Tribunal to deal with matters which are within the jurisdiction of the courts may also be set up as has been done in the case of Consumer Disputes Redressal Forums constituted under the Consumer Protection Act, 1986 and the Lok Adalats under the Amended Legal Services Authority Act. 29. With regard to Courts, the Constitution specifically provides for high status to the superior Courts - the Supreme Court, and the High Courts, and makes adequate provisions to ensure their independence. The Constitution has also specifically provided for 'Subordinate Courts' in Chapter VI of Part VI in Articles 233 to 237. Appointment to the 'Judicial Service' whose members man the subordinate Courts, is to be made only after consultation with the High Courts or in accordance with Rules made after consultation with the High Court. The control over sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein the Privy Council considered the constitutional validity of the Gun. Court Act, 1974, which had been enacted by the Jamaican Parliament. Lord Diplock, who spoke for the majority, after referring to the Constitutions of Jamaica, Ceylon, Canada and Australia, inferred that there was a common drafting practice, which led by a necessary implication, to the establishment of a Government structure, which made provision for a legislative, executive and a judicial branch, and that it was taken for granted that the basic principle of separation of powers would apply to the exercise of the respective functions of those three organs of Government. All those Constitutions were compendiously referred to as following a Westminster model of draftsmanship, and in that model the chapter dealing with the judiciary invariably contained provisions dealing with the method of appointment, and security of tenure of the members of the judiciary, which were designed to assure to them a degree of independence from the other branches of the Government. 34. It was observed by the learned Judge : "What, however, is implicit in the very structure of the Constitution of the Westminster model is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h some different name was attached, and to provide that persons holding the new judicial offices should not be appointed in the manner and on the terms prescribed under Chapter VII for the appointment of the members of the Judicature." And observed: 'If this were the case, there would be nothing to prevent the Parliament from transferring the whole of the Judicial power of Jamaica (with two minor exceptions referred to below) to bodies composed of persons who not being members of "the judicature", could not be entitled to the protection of Chapter VII at all.' 38. That even the label 'Supreme Court', could be rendered a false description, if such broad legislative power was to be recognised, was pointed out: "If as contended by the Attorney General, the words italicized in section 97(1) entitle Parliament by an ordinary law to strip the Supreme Court of all jurisdiction in civil and criminal cases other than that expressly conferred on it by section 25 and section 366 and section 44, what would be left would be a Court of such limited jurisdiction that the label "Supreme Court" would be a false description; so too if all its jurisdiction (with those two exceptions) were exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution Bench in the case of Minerva Mills Ltd. v. Union of India AIR 1986 SC 2030, have held, inter alia, that an independent judiciary and it's power of judicial review are among the basic features of the Constitution. 43. The Constitution Bench in the case of S.P. Sampath Kumar v. Union of India [1987] 1 SCC 124, speaking through Bhagwathi, CJ., has held that: "It can no longer be disputed that total insulation of the judiciary from all forms of interference from the co-ordinate branches of the Government is a basic essential feature of the constitution, the same independence from possibility of Executive pressure on influence must also be ensured to the Chairman, vice Chairman and Members of the Administrative Tribunals.......the Constitution makers have made anxious provision to secure total independence of the judiciary from executive pressure or influence." 44. A Seven Judge Bench in the case L. Chandra Kumar (supra), has laid down that the 'power of Judicial review over legislative action vested in the High Courts under Article 226, and in this Court under Article 32 of the Constitution is an integral and essential feature of the Constitution constituting a part of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent that legislation even if found to be arbitrary cannot be struck down on that ground. Our attention was invited to the decision of the Supreme Court in the case of State of Bihar v. Bihar Distillery Ltd. (1997) 2 SCC 453, wherein it was inter alia observed that, 'the general averment that the Act is arbitrary is too vague to merit any acceptance, apart from the fact that an act of Legislature cannot be struck down merely saying it is arbitrary.' 50. The Court in that case reiterated the law that had been laid down in the case of State of U.P. v. McDowell & Co. [1996] 3 SCC 709 by a three Judge Bench. In that it was observed: "The power of Parliament or for that matter, the State Legislatures is restricted in two ways. A law made by Parliament or the legislature can be struck down by courts on two grounds and two grounds alone, viz., (1) lack of legislative competence, and (2) violation of any of the fundamental rights guaranteed in Part III of the Constitution or of any other constitutional provision. There is no third ground. ... It is enough for us to say that by whatever name it is characterised, the ground of invalidation must fall within the four corners of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich may be made by those subject to its provisions and provide against such distortions and abuses.'....... 'The court must, therefore, adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities or abuse of any of its provisions. If any crudities, inequities or by the possibilities of abuse come to light, the Legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the Legislature in dealing with complex economic issues.' 54. We are here concerned with statutory provisions which are allegedly violative of the basic constitutional guarantee of free and independent judiciary and, therefore, beyond the legislative competence of Parliament. 55. We shall now examine the petitioner's challenge to the constitutional validity of the impugned provisions of the Companies Act. 56. The Parliament's power to create National Company Law Tribunal and National Company Law Appellate Tribunal is clearly traceable to Entries 43 and 44 of List-I, which read as under : "43. Incorporation, regulation and winding up of tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. Considering the manner in which business in India functions, the likelihood of attempts being made to being pressure and influence through political and executive branches on the Member is very real. The real possibility of their not being reappointed after such a short tenure, will disable them from functioning as truly independent and impartial adjudicators. The quality of justice rendered by such Members will not inspire much confidence among those who come before them. It is not only necessary that they function as truly independent and impartial adjudicators, but also should be perceived as such. 61. This short tenure will also prove disincentive for well qualified and able persons possessing the necessary qualifications, from offering themselves for consideration for appointment to the Tribunal, as professionals who have built up a good practice after several years of hard work cannot, in the normal course be expected to give up their profession/practice for an appointment of extremely limited duration with no assurance of a career. Constituting a Tribunal in a manner which would keep able persons out is hardly the proper way of setting up an adjudicatory forum ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Institutions Act, 1993 the term of office is five years. The appointees are or were District Judges. Similar terms of five years is provided for persons appointed as Members of the Consumer Forums under the Consumer Protection Act, 1986. 67. It is only in the Companies (Amendment) Act, 2002 and in the Competition Act, both enactments being of the year 2002, the term of office is specified as three years, even after the seven Judge Bench of the Supreme Court had indicated in 1997 in the case of S. P. Sampath Kumar (supra)that even a five year term was not sufficient, as some time would be taken by most of the members to get used to the jurisprudence of the branch for which the Tribunal is constituted, and many would have to come out by the time they are fully acquainted with that branch of law. 68. The Law Commission in it's 162nd Report has recommended that in the cases of Members of Administrative Tribunals their initial term should be ten years and renewable for a further period of five years. In UK the Leggatt Report which reviewed the functioning of the Tribunals in UK, the recommendation was that the term of Members of the Tribunal be at least seven years, with pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n indefinite period is clearly a provision which cannot be regarded as constitutional, having regard to the Functions which the Tribunal is required to perform. 74. Unless the term of office is fixed as at least five years with a provision for renewal, except in cases of incapacity, misconduct and the like, and the period for which lien may be retained is fixed at not more than one year, the constitution of the Tribunal cannot be regarded as satisfying the essential requirements of an independent and impartial body exercising judicial functions of the State. 75. Section 10FD deals with the qualifications, appointment of President and Members of the National Company Law Tribunal, while section 10FR deals with qualification for appointment as Chairpersons and Members of the National Company Law Appellate Tribunal. 76. Section 10FD(1) provides that the President shall be a person who has been or is qualified to be a Judge of a High Court. This excludes sitting Judges of the High Court. 77. Under Article 217(2) the qualification for appointment as a Judge of a High Court is that the person be a citizen of India, and has at least for ten years either held a judicial office in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of his having been an advocate for ten years or more prior to his joining the service. The reference to President must be deleted from the proviso in section 10FE. For Members, as already held, the lien should be limited to one year. 82. The qualifications prescribed for a Judicial Member in section 10FD(2) in sub-clauses (a) to ( d) are qualifications to which no serious objection can be taken. The qualifications required are: holding judicial office for 15 years; or practice as an advocate of a High Court for ten years; or at least three years of service in the Senior Administrative Grade of the Indian Company Law Service (Legal Branch), or three years of Service in Grade- I of the Indian Legal Service. 83. In the case of L. Chandra Kumar (supra), it was observed by the Constitution Bench: "It must be remembered that the setting up of these Tribunals is founded on the premise that specialist bodies comprising both trained administrators and those with judicial experience would by virtue of their specialized knowledge, be better equipped to dispense speedy and efficient justice. It was expected that a judicious mix of judicial member and those with grass root experience wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons who may be specialised in unrelated branches of knowledge, and vest precious judicial power in them in an area in which they are not competent. 89. So far as Law and Accountancy are concerned, they are relevant in this specialist Tribunal but for which provision has already been made in section 10FD(2) and section 10FD(3)(c) and (d). 90. The justification offered by the State is that a similar provision existed in the Sick Industrial Companies (Special Provisions) Act, 1985 and since the work relating to revival and rehabilitation of sick industries is entrusted to this new Tribunal under the new Part VIA of the Companies Act comprising sections 424A to 424L, and titled "Revival and Rehabilitation of Sick Industrial Companies" a Member possessing the qualification provided for in that Act, is required to be appointed to this new Tribunal. 91. Section 4(3) of the Sick Industries Special Provision Act reads thus: "The Chairman and other members of the Board shall be persons who are or have been or are qualified to be High Court Judges, or persons of ability, integrity and standing, who have special knowledge of, and professional experience of not less than 15 years in Sci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of disputes. If their expert knowledge of Labour Law is what is sought to be utilised, a minimum period of three to five years experience as such Presiding Officer should be prescribed. Persons who satisfy the qualifications prescribed in section 10FD(f) would be persons who would also satisfy the qualifications prescribed under section 10F(2)(a). It would be more appropriate to include this qualification in section 10FD(2) and in the later provisions dealing with 'Bench of the Tribunal' in section 10FL, provide that 'Judicial Member' with this qualification shall be a member of the Special Bench referred to in section 10FL(2) for cases relating to rehabilitation, restructuring or winding up of companies. 98. Section 10FD(3)(h) reads as under: ... 'is a person having special knowledge of and, experience of not less than fifteen years in the matters relating to labour'. This provision not only suffers from vagueness insofar as it merely mentions 'matters relating to labour', without specifying that those matters are, and the capacity in which the persons must have dealt with those matters, this provision would enable a person who has some knowledge of labour as an academic, or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is that clause (h) only sets out as an independent provision a qualification which was required of a member of BIFR and that such Member's presence in the Tribunal is required as the Tribunal now has to deal with revival and rehabilitation of sick industrial companies. 104. It is only stating the obvious that the company is the most important form of business organisation not only in India but all over the world and that questions relating to the formation, management, control, changes in management, allotment of shares, acquisition of controlling interests, question of mismanagement and oppression, amalgamation and restructuring of companies, etc., are matters which have large economic consequences for those directly concerned and many a time on the working of the markets and the economy as a whole. Such decisions cannot be left to a person who has little or no knowledge of company law and entrusting these vital functions to such persons cannot be permitted. 105. Section 10FD3(h) as also section 10FL(2) proviso must, therefore, be suitably amended so as to spell out with certainty the qualification which the person to be appointed under clause (h) should possess and confine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Tribunal under the overall control and supervision of the President. 109. There are also other inconsistencies in the manner in which several provisions concerning the Tribunal have been provided. Section 10FD(2)(a) as also 10FD(2)(b) specifies a period of fifteen years as the period for which one must have held judicial office while section 10FD(2)(b) refers to requirement of only ten years as an advocate of a High Court. It seems to place the ten years as an advocate of a High Court on a higher footing than a person who has held judicial office for a term of 15 years. It is difficult to appreciate the reasons that prompted the draftsman to make a distinction of this nature. This clearly is a matter which requires attention. 110. Section 10FR provides for the Constitution of an Appellate Tribunal. Sub-section (1) provides that the Tribunal shall consist of a chairperson and not more than two members. While section 10FR(2) which provides that the chairperson shall be a person who has been a Judge of the Supreme Court or Chief Justice of a High Court is unobjectionable, sub-section (3) which deals the appointment of a Member, uses the same language as in section 10FD(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to what kind of compensation they will receive if they were to be appointed to these posts. This is designed to deter the most suitable candidates from offering themselves for appointment and is a step which ought not to have been taken. 115. According to the petitioner, the salaries proposed to be paid to the Members is not to be uniform, but dependent upon the substantive rank if any held by the appointee in the post over which he has a lien in Government service. This allegation is not denied. On the other hand justification is sought to be offered by asserting that Membership of Tribunal for purpose of salary has to be equated to the substantive post over which the appointee holds a lien. This executive approach is impossible to justify in a Judicial Tribunal. No Member of the Tribunal, when all Members possess equal powers and have to shoulder equal responsibilities, may look down upon his colleague as belonging to a lower cadre and drawing a lower salary. This attitude of the executive is further evidence of the attempt to 'executise' the judicial Tribunal, and lends further support to the petitioner's apprehensions. 116. The selection process, we are told, has been initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the post of President which we have held to be a post to be filled only by a former Judge of a High Court with at least five years of experience as such Judge, however, need not be advertised. Selection to those posts shall be made by the Chief Justice of India in consultation with the two senior most Judges of the Supreme Court, as selection so made will be consistent with the dignity and importance of these offices and their judicial character. 120. The constitution of the National Company Law Tribunal and the Appellate Tribunal in the manner now provided, when considered along with the provisions concerning the Competition Commission under the Competition Act, 2002, seems to indicate run of an aggressive executive seeking to take over gradually the judicial power traditionally exercised by the Courts under safeguards which ensure the competence, indepen- dence and impartiality of the Judges, and replacing them by persons who have neither a judicial background nor specialised knowledge of the subject for which the Tribunal is created, and by persons now serving the executive who will continue to retain their lien and loyalty to the executive branch, and be amenable to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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