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TMI Blog2010 (5) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... s, are not unconstitutional. We declare that Parts 1B and 1C of the Act as presently structured, are unconstitutional for the reasons stated in the preceding para. However, Parts 1B and 1C of the Act, may be made operational by making suitable amendments, as indicated above, in addition to what the Union Government has already agreed in pursuance of the impugned order of the High Court. X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinate delay in finalisation of winding-up/dissolution of companies : (a) filing statement of affairs; ( b ) handing over of updated books of account; (c) realization of debts; ( d ) taking over possession of the assets of the company and sale of assets; (e) non-availability of funds for the Official Liquidator to discharge his duties and functions; (f) settlement of the list of creditors; (g) settlement of list of contributories and payment of calls; (h) finalisation of income-tax proceedings; and (i) disposal of misfeasance proceedings. The Committee found that multiplicity of court proceedings is the main reason for the abnormal delay in dissolution of companies. It also found that different agencies dealt with different areas relating to companies, that Board for Industrial & Financial Reconstruction (BIFR) and Appellate Authority for Industrial & Financial Reconstruction (AAIFR) dealt with references relating to rehabilitation and revival of companies, High Courts dealt with winding-up of companies and Company Law Board (CLB) dealt with matters relating to prevention of oppression and mismanagement etc. Considering the laws on corporate insolvency prevailing in industrially a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61; Union of India v. Delhi High Court Bar Association [2002] 37 SCL 451 (SC) and State of Karnataka v. Vishwabharathi House Building Co-op. Society 2003 (2) SCC 412. 6. The Madras High Court by its order dated 30-3-2004 held that creation of the NCLT and vesting the powers hitherto exercised by the High Courts and CLB in the Tribunal was not unconstitutional. It referred to and listed the defects in several provisions [that is mainly sections 10FD(3)(f ), (g), (h ), 10FE, 10FF, 10FL(2), 10FR(3), 10FT] in Parts 1B and 1C of the Act. It therefore declared that until the provisions of Parts 1B and 1C of the Act, introduced by the Amendment Act which were defective being violative of basic constitutional scheme (of separation of judicial power from the Executive and Legislative power and independence of judiciary enabling impartial exercise of judicial power) are duly amended by removing the defects that were pointed out; it will be unconstitutional to constitute a Tribunal and Appellate Tribunal to exercise the jurisdiction now exercised by the High Court or the Company Law Board. 7. The Union of India has accepted that several of the defects pointed out by the High Court in Parts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the three years, the Government proposes to permit the members to retain their lien with their parent cadre/Ministry/Department for a period of three years, as one year may be too short for the members to decide whether to give up the lien or not. Section 10FD(1) : Qualification for appointment as President. 7.4 The High Court has suggested that it would be appropriate to confine the choice of persons to those who have held the position of a Judge of a High Court for a minimum period of five years instead of the existing provision which provides that Central Government shall appoint a person who has been, or is qualified to be, a Judge of a High Court, for the post of President of the Tribunal. The Government has agreed in part and proposes to amend the Act for appointment of a retired or serving High Court Judge alone as the President of the Tribunal. It however feels that minimum length of service as experience, need not be fixed in the case of High Court Judges, as the Selection Committee headed by the Chief Justice of India or his nominee would invariably select the most suitable candidate for the post. Section 10FD(3)(f) : Appointment of Technical Member to NCLT. 7.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber of NCLT. 7.8 The High Court has observed that clause (h) referring to the category of persons having special knowledge of and experience in matters relating to labour, for not less than 15 years is vague and should be suitably amended so as to spell out with certainty the qualification which a person to be appointed under clause (h) should possess. The Union Government contends that in view of the wide and varied experience possible in labour matters, it may not be advisable to set out the nature of experience or impose any restrictions in regard to the nature of experience. It is submitted that the Selection Committee headed by the Chief Justice of India or his nominee would consider each application on its own merits. 7.9 The second observation of the High Court is that the member selected under the category mentioned in clause (h) must confine his participation only to the Benches dealing with revival and rehabilitation of sick companies and should also be excluded from functioning as a single Member Bench for any matter. The Union Government contends that it may not be advisable to fetter the prerogative of the President of the Tribunal to constitute benches by making u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union Government contends that the provision is only an enabling one; and since the Chairperson of the Appellate Tribunal would be a former Judge of the Supreme Court or former Chief Justice of High Court, it may not be advisable to limit the scope of eligibility criteria for members especially when a Selection Committee headed by the Chief Justice of India or his nominee would make the selection. Section 10FX - Selection Process for President/Chairperson. 7.13 The High Court has expressed the view that the selection of the President/Chairperson should be by a Committee headed by the Chief Justice of India in consultation with two senior Judges of the Supreme Court. The Union Government has submitted that it would not be advisable to make such a provision in regard to appointment of President/Chairperson of statutory Tribunals. It is pointed out no other legislation constituting Tribunals has such a provision. The challenge in the appeals 8. Union of India contends that the High Court having held that the Parliament has the competence and power to establish NCLT and NCLAT, ought to have dismissed the writ petition. It is submitted that some of the directions given by the High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffend the constitutional scheme of separation of powers and independence of judiciary so as to aggrandize one branch over the other? Therefore the Three Judge Bench, by order dated 13-5-2007 directed the appeals to be heard by a Constitution Bench, observing that as the issues raised are of seminal importance and likely to have serious impact on the very structure and independence of judicial system. 11. We may first refer to the relevant provisions of the Companies Act, 1956 as amended by the Companies (Second Amendment) Act, 2002 relating to the constitution of NCLT and NCLAT :-- Part 1B - National Company Law Tribunal 10FB. Constitution of National Company Law Tribunal. - The Central Government shall, by notification in the Official Gazette, constitute a Tribunal to be known as the National Company Law Tribunal to exercise and discharge such powers and functions as are, or may be, conferred on it by or under this Act or any other law for the time being in force. 10FC. Composition of Tribunal. - The Tribunal shall consist of a President and such number of Judicial and Technical Members not exceeding sixty-two, as the Central Government deems fit, to be appointed by that Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 knowledge of, and professional experience of not less than twenty years in, science, technology, economics, banking, industry, law, matters relating to industrial finance, industrial management, industrial reconstruction, administration, investment, accountancy, marketing or any other matter, the special knowledge of, or professional experience in, which would be in the opinion of the Central Government useful to the Tribunal; or (g )is, or has been, a Presiding Officer of a Labour Court, Tribunal or National Tribunal constituted under the Industrial Disputes Act, 1947 (14 of 1947); or (h)is a person having special knowledge of, and experience of not less than fifteen years in, the matters relating to labour. Explanation.--For the purposes of this Part,-- (i )"Judicial Member" means a Member of the Tribunal appointed as such under sub-section (2) of section 10FD and includes the President of the Tribunal; (ii )"Technical Member" means a Member of the Tribunal appointed as such under sub-section (3) of section 10FD. 10FE. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ass of cases, as the President of the Tribunal may, by general or special order, specify : Provided further that if at any stage of the hearing of any such case or matter, it appears to the Member of the Tribunal that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the President of the Tribunal or, as the case may be, referred to him for transfer to such Bench as the President may deem fit. (2) The President of the Tribunal shall, for the disposal of any case relating to rehabilitation, restructuring or winding up of the companies, constitute one or more Special Benches consisting of three or more Members, each of whom shall necessarily be a Judicial Member, a Technical Member appointed under any of the clauses (a) to (f ) of sub-section (3) of section 10FD, and a Member appointed under clause (g) or clause (h ) of sub-section (3) of section 10FD : Provided that in case a Special Bench passes an order in respect of a company to be wound up, the winding up proceedings of such company may be conducted by a Bench consisting of a single Member. (3) If the Members of a Bench differ in opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, banking, industry, law, matters relating to labour, industrial finance, industrial management, industrial reconstruction, administration, investment, accountancy, marketing or any other matter, the special knowledge of, or professional experience in which, would be in the opinion of the Central Government useful to the Appellate Tribunal. 10FT. Term of office of Chairperson and Members. - The Chairperson or a Member of the Appellate Tribunal shall hold office as such for a term of three years from the date on which he enters upon his office, but shall be eligible for re-appointment for another term of three years : Provided that no Chairperson or other 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. 10FX. Selection Committee. - (1) The Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal shall be appointed by the Central Government on the recommendations of a Selection Committee consisting of :-- (a )Chief Justice of India or his nominee Chairperson; (b )Secretary in the Ministry of Finance and Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law arising out of such decision or order : Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. Section 10FJ relates to removal and suspension of President or members of the NCLT. Section 10FV relates to removal and suspension of Chairman or members of NCLAT. Sub-section (2) of those sections provide that the President/Chairman or a member shall not be removed from his office except by an order made by the Central Government on the ground of proven misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court in which the President/Chairman or member has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges. Sub-section (3) provides that the Central Government may suspend from office, the President/Chairman or Member of the Tribunal in respect of whom a reference has been made to the Judge of the Supreme Court under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed........ When rights are infringed or invaded, the aggrieved party can go and commence a querela before the ordinary Civil Courts. These Courts which are instrumentalities of Government, are invested with the judicial power of the State, and their authority is derived from the Constitution or some Act of Legislature constituting them. Their number is ordinarily fixed and they are ordinarily permanent, and can try any suit or cause within their jurisdiction. Their numbers may be increased or decreased, but they are almost always permanent and go under the compendious name of "Courts of Civil Judicature". There can thus be no doubt that the Central Government does not come within this class. With the growth of civilization and the problems of modern life, a large number of administrative Tribunals have come into existence. These Tribunals have the authority of law to pronounce upon valuable rights; they act in a judicial manner and even on evidence on oath, but they are not part of the ordinary Courts of Civil Judicature. They share the exercise of the judicial power of the State, but they are brought into existence to implement some administrative policy or to determine controve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are included all others, which are not so included". 13.2 In Jaswant Sugar Mills v. Laxmi Chand 1963 Supp. (1) SCR 242, this Court observed that in order to be a Tribunal, a body or authority must, besides being under a duty to act judicially, should be invested with the judicial power of the State. 13.3 In Associated Cement Co. Ltd. v. P.N. Sharma [1965] 2 SCR 366, another Constitution Bench of this Court explained the position of Tribunals thus :-- "The expression "court" in the context denotes a Tribunal constituted by the State as a part of the ordinary hierarchy of courts which are invested with the State's inherent judicial powers. A sovereign State discharges legislative, executive and judicial functions and can legitimately claim corresponding powers which are described as legislative, executive and judicial powers. Under our Constitution, the judicial functions and powers of the State are primarily conferred on the ordinary courts which have been constituted under its relevant provisions. The Constitution recognised a hierarchy of courts and their adjudication are normally entrusted all disputes between citizens and citizens as well as between the citizens and the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As in the case of courts, so in the case of Tribunals, it is the State's inherent judicial power which has been transferred and by virtue of the said power, it is the State's inherent judicial function which they discharge." 13.4 In Kihoto Hollohan v. Zachillhu 1992 Supp. (2) SCC 651, a Constitution Bench reiterated the above position and added the following : "Where there is a lis - an affirmation by one party and denial by another - and the dispute necessarily involves a decision on the rights and obligations of the parties to it and the authority is called upon to decide it, there is an exercise of judicial power. That authority is called a Tribunal, if it does not have all the trappings of a court". In S.P. Sampath Kumar's case (supra), this Court expressed the view that the Parliament can without in any way violating the basic structure doctrine make effective alternative institutional mechanisms or arrangements for judicial review. 14. Though both Courts and Tribunals exercise judicial power and discharge similar functions, there are certain well-recognised differences between courts and Tribunals. They are : (i)Courts are established by the State and are entrusted wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e we have inherited our present system of administration of justice in its broad and essential features, judicial independence is prized as a basic value and so natural and inevitable it has come to be regarded and so ingrained it has become in the life and thought of the people that it is now almost taken for granted and it would be regarded an act of insanity for any one to think otherwise.......... The Constitution makers, therefore, enacted several provisions designed to secure the independence of the superior judiciary by insulating it from executive or legislative control,............... ........even with regard to the Subordinate Judiciary the framers of the Constitution were anxious to secure that it should be insulated from executive interference and once appointment of a Judicial Officer is made, his subsequent career should be under the control of the High Court and he should not be exposed to the possibility of any improper executive pressure." In Supreme Court Advocates-on-Record Association v. Union of India 1993 (4) SCC 441, J.S. Verma, J. (as he then was) speaking for the majority, described the attributes of an independent judge thus : " ...Only those persons s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... large who may have to seek redress in the last resort in courts of law against any illegal acts or the high-handed exercise of power by the executive ... in making the following proposals and suggestions, the paramount importance of securing the fearless functioning of an independent and efficient judiciary has been steadily kept in view." In L. Chandra Kumar, the seven Judge Bench of this Court held : "The Constitution of India while conferring power of judicial review of legislative action upon the higher judiciary, incorporated important safeguards. An analysis of the manner in which the Framers of our Constitution incorporated provisions relating to the judiciary would indicate that they were very greatly concerned with securing the independence of the judiciary." Independence of Judiciary has always been recognized as a part of the basic structure of the Constitution [See : Supreme Court Advocates-on-Record Association's case (supra ), State of Bihar v. Bal Mukund Shah 2000 (4) SCC 640, Shri Kumar Padma Prasad v. Union of India 1992 (2) SCC 428, and All India Judges Association v. Union of India 2002 (4) SCC 247]. Separation of Power 17. In Rai Sahib Ram Jawaya Kapur v. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian Constitution recognizes separation of power in a broad sense without however their being any rigid separation of power as under the American Constitution or under the Australian Constitution. This Court held thus : "It is true that no express mention is made in our Constitution of vesting in the judiciary the judicial power as is to be found in the American Constitution. But a division of the three main functions of Government is recognised in our Constitution. Judicial power in the sense of the judicial power of the State is vested in the Judiciary. Similarly, the Executive and the Legislature are vested with powers in their spheres. Judicial power has lain in the hands of the Judiciary prior to the Constitution and also since the Constitution. It is not the intention that the powers of the Judiciary should be passed to or be shared by the Executive or the Legislature or that the powers of the Legislature or the Executive should pass to or be shared by the Judiciary. The Constitution has a basic structure comprising the three organs of the Republic : the Executive, the Legislature and the Judiciary. It is through each of these organs that the sovereign will of the peo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need to transfer some selected areas of litigation dealt with by traditional courts to special Tribunals. As Tribunals are free from the shackles of procedural laws and Evidence Law, they can provide easy access to speedy justice in a 'cost-affordable' and 'user-friendly' manner. Tribunals should have a Judicial Member and a Technical Member. The Judicial Member will act as a bulwark against apprehensions of bias and will ensure compliance with basic principles of natural justice such as fair hearing and reasoned orders. The Judicial Member would also ensure impartiality, fairness and reasonableness in consideration. The presence of Technical Member ensures the availability of expertise and experience related to the field of adjudication for which the special Tribunal is created, thereby improving the quality of adjudication and decision-making. 19. United Kingdom has a rich experience of functioning of several types of Tribunals as dispute resolution-and-grievance settlement mechanisms in regard to varied social welfare legislations. Several Committees were constituted to study the functioning of the Tribunals, two of which require special mention. The first is the Franks Report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can somehow be avoided by entrusting the administration of complex legislation to Tribunals rather than the courts." H.W.R. Wade & C. F. Forsyth also refer to the advantage of Tribunals in their 'Administrative Law' (10th Edn., pp. 773-774) : "The social legislation of the twentieth century demanded Tribunals for purely administrative reasons : they could offer speedier, cheaper and more accessible justice, essential for the administration of welfare schemes involving large numbers of small claims. The process of the courts of law is elaborate, slow and costly. Its defects are those of its merits, for the object is to provide the highest standard of justice; generally speaking, the public wants the best possible article, and is prepared to pay for it. But in administering social services the aim is different. The object is not the best article at any price but the best article that is consistent with efficient administration. Disputes must be disposed of quickly and cheaply, for the benefit of the public purse as well as for that of the claimant. Thus when in 1946 workmen's compensation claims were removed from the courts and brought within the Tribunal system much unproductive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fourthly, to enable unrepresented users to participate effectively and without apprehension in Tribunal proceedings." The Leggatt Committee explained what the users of the system expected from an alternative public adjudication system : "We do not believe that the current arrangements meet what the modern user needs and expects from an appeal system running in parallel to the courts. First, users need to be sure, as they currently cannot be, that decisions in their cases are being taken by people with no links with the body they are appealing against. Secondly, a more coherent framework for Tribunals would create real opportunities for improvement in the quality of services that can be achieved by Tribunals acting separately. Thirdly, that framework will enable them to develop a more coherent approach to the services which users must receive if they are to be enabled to prepare and present cases themselves. Fourthly, a user-oriented service needs to be much clearer than it is now in telling users what services they can expect, and what to do if the standards of these services are not met." The Leggatt Committee expressed the view that a single structure for all Tribunals would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Kumar, made similar suggestions for achieving the independence of Tribunals : "It has been brought to our notice that one reason why these Tribunals have been functioning inefficiently is because there is no authority charged with supervising and fulfilling their administrative requirements........ The situation at present is that different Tribunals constituted under different enactments are administered by different administrative departments of the Central and the State Governments. The problem is compounded by the fact that some Tribunals have been created pursuant to Central Legislations and some others have been created by State Legislations. However, even in the case of Tribunals created by Parliamentary legislations, there is no uniformity in administration. We are of the view that, until a wholly independent agency for the administration of all such Tribunals can be set-up, it is desirable that all such Tribunals should be, as far as possible, under a single nodal Ministry which will be in a position to oversee the working of these Tribunals. For a number of reasons that Ministry should appropriately be the Ministry of Law. It would be open for the Ministry, in its tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Article 32. Article 247 provides that notwithstanding anything contained in Chapter I of Part XI of the Constitution, Parliament may by law provide for the establishment of any additional courts for the better administration of laws made by Parliament or of any existing laws with respect to a matter enumerated in the Union List. Article 245 provides that subject to the provisions of the Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature of a State may make laws for the whole or any part of the State. Article 246 deals with the subject-matter of laws made by Parliament and by the Legislatures of States. The Union List (List I of Seventh Schedule) enumerates the matters with respect to which Parliament has exclusive powers to make laws. Entry 77 of List I refers to Constitution, organization, jurisdiction and powers of the Supreme Court. Entry 78 of List I refers to constitution and organization of the High Courts. Entry 79 of List I refers to extension or exclusion of the jurisdiction of a High Court, to or from any Union Territory. Entry 43 of List I refers to incorporation, regulation and winding up of trading corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g edible oilseeds and oils) and such other goods as the President may, by public notification, declare to be essential goods for the purpose of this article and control of prices of such goods; (h)rent, its regulation and control and tenancy issues including the rights, title and interest of landlords and tenants; (i )offences against laws with respect to any of the matters specified in sub-clauses (a) to ( h) and fees in respect of any of those matters; (j )any matter incidental to any of the matters specified in sub-clauses (a) to (i)." Clause (2) of Article 323A and clause (3) of Article 323B lay down that a law made under sub-clause (1) of the respective Articles may provide for the following : Article 323A Article 323B (a ) provide for the establishment of an administrative Tribunal for the Union and a separate administrative Tribunal for each State or for two or more States; provide for the establishment of a hierarchy of Tribunals; (b ) specify the jurisdiction, powers (including the power to punish for contempt) and authority which may be exercised by each of the said Tribunals; specify the jurisdiction, powers (including the power to punish for contempt) and au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Article 323A(1) and the matters specified in Article 323B(2), offended the basic and essential features of the Constitution and were unconstitutional. This Court also held that "exclusion of jurisdiction" clause enacted in any legislation, under the aegis of Articles 323A [2(d)] and 323B[3(d)] are also unconstitutional. It was declared that the jurisdiction conferred upon the High Court under Articles 226 and 227 and upon the Supreme Court under Article 32 of the Constitution is a part of the inviolable basic structure of our Constitution. 28. The legislative competence of Parliament to provide for creation of courts and Tribunals can be traced to Entries 77, 78, 79 and Entries 43, 44 read with Entry 95 of List I, Item 11A read with Entry 46 of List III of the Seventh Schedule. Referring to these Articles, this Court in two cases, namely, Delhi High Court Bar Association's case (supra ) and Vishwabharathi House Building Co-operative Societies's case (supra) held that Articles 323A and 323B are enabling provisions which enable the setting up of Tribunals contemplated therein; and that the said Articles, however, cannot be interpreted to mean that they prohibited the Legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3A and 323B. The contention is not sound. It is evident that Part XIV-A containing Articles 323A and 323B was inserted in the Constitution so as to provide for establishment of Tribunals which can exclude the jurisdiction of all courts including the jurisdiction of High Courts and Supreme Court under Articles 226/227 and 32, in respect of disputes and complaints covered by those Articles. It was thought that unless such enabling power was vested in the Legislatures by a constitutional provision, it may not be possible to enact laws excluding the jurisdiction of the High Courts and Supreme Court. However, this is now academic because clause 2(d) of Article 323A and clause 3(d) of Article 323B have been held to be unconstitutional in Chandra Kumar. 30. In ACC (supra ), this Court recognized the competence of the State to transfer a part of the judicial power from courts to Tribunal : "Judicial functions and judicial powers are one 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 appropr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id Act and the statute substitutes the word 'Tribunal' in place of 'High Court' necessarily there will be 'whole-sale transfer' of company law matters to the Tribunals. It is an inevitable consequence of creation of Tribunal, for such disputes, and will no way affect the validity of the law creating the Tribunal. 34. We will next consider the question whether provision for a Technical Member along with the Judicial Member making any difference to decide the validity of the provision for constitution of Tribunals. This Question is covered by the decision in L. Chandra Kumar's case (supra), this Court held : "We are also required to address the issue of the competence of those who man the Tribunals and the question of who is to exercise administrative supervision over them. It has been urged that only those who have had judicial experience should be appointed to such Tribunals. In the case of Administrative Tribunals, it has been pointed out that the administrative members who have been appointed have little or no experience in adjudicating such disputes; the Malimath Committee has noted that at times, IPS Officers have been appointed to these Tribunals. It is stated that in the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amples of such special Tribunals are Rent Tribunals, Motor Accident Tribunals and Special Courts under several Enactments. Therefore, when transferring the jurisdiction exercised by Courts to Tribunals, which does not involve any specialized knowledge or expertise in any field and expediting the disposal and relaxing the procedure is the only object, a provision for technical members in addition to or in substitution of judicial members would clearly be a case of dilution of and encroachment upon the independence of the Judiciary and Rule of Law and would be unconstitutional. 36. In R.K. Jain v. Union of India 1993 (4) SCC 119, this Court observed : "The Tribunals set up Cinder Articles 323A and 323B of the Constitution or under an Act of Legislature are creatures of the Statute and in no case claim the status as Judges of the High Court or parity or as substitutes. However, the personnel appointed to hold those offices under the State are called upon to discharge judicial or quasi-judicial powers. So they must have judicial approach and also knowledge and expertise in that particular branch of constitutional, administrative and tax laws. The legal input would undeniably be more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge? Or can the Legislature provide that an Upper Division Clerk having fifteen years experience in the company law department but with a Law Degree is eligible to become a Judicial Member? Or can the Legislature provide that a 'social worker' with ten years experience in social work can become a Technical Member? Will it be beyond scrutiny by way of judicial review? 38. Let us look at it from a different angle. Let us assume that three legislations are made in a State providing for constitution of three types of Tribunals : (i) Contract Tribunals; (ii) Real Estate Tribunals; and (iii ) Compensation Tribunals; and each of those legislations provide that all cases relating to contractual disputes, property disputes and compensation claims hitherto tried by civil courts, will be tried by these Tribunals instead of the civil courts; and that these tribunals will be manned by members appointed from the civil services, with the rank of Section Officers who have expertise in the respective field; or that a businessman in the case of Contract Tribunal, a Real Estate Dealer in regard to Property Tribunal, and any social worker in regard to Compensation Tribunal, having expertise in the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the periphery begin? These are not matters of icy certainty; but, for that reason, I am not persuaded to hold that they do not exist, or that they are too elusive for judicial perception. Most of the things in life that are worth talking about are matters at degree and the great judges are those who are most capable of discerning which of the gradations make genuine difference." 40. MBA contended that constitution of a Tribunal to transfer the entire company law jurisdiction of the High Court was violative of the doctrine of separation of power and independence of judiciary which are parts of basic structure of the Constitution. The Union of India countered it by contending that a Legislation cannot be challenged on the ground it violates the basic structure of the Constitution. It is now well-settled that only constitutional amendments can be subjected to the test of basic features doctrine. Legislative measures are not subjected to basic features or basic structure or basic framework. The Legislation can be declared unconstitutional or invalid only on two grounds namely : (i) lack of legislative competence and (ii) violation of any fundamental rights or any provision of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined above, requires that any limitation on legislative power must be so definitely discernible from the provisions of the Constitution itself that there could be no doubt or mistake that the prohibition is a part of the basic structure imposing a limit on even the power of Constitutional amendment. And, whenever we construe any document, by reading its provisions as a whole, trying to eliminate or resolve its disharmonies, do we not attempt to interpret it in accordance with what we find in its "basic structure" or purposes? The doctrine is neither unique nor new. No doubt, as a set of inferences from a document (i.e., the Constitution), the doctrine of "the basic structure" arose out of and relates to the Constitution only and does not, in that sense, appertain to the sphere of ordinary statutes or arise for application to them in the same way. But, if, as a result of the doctrine, certain imperatives are inherent in or logically and necessarily flow from the Constitution's 'basic structure', just as though they are its express mandates, they can be and have to be used to test the validity of ordinary laws just as other parts of the Constitution are so used. Thus, it is clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the right to adjudication by an independent forum. Therefore, though the challenge by MBA is on the ground of violation of principles forming part of the basic structure, they are relatable to one or more of the express provisions of the Constitution which gave rise to such principles. Though the validity of the provisions of a legislative act cannot be challenged on the ground it violates the basic structure of the constitution, it can be challenged as violative of constitutional provisions which enshrine the principles of Rule of Law, separation of power and independence of Judiciary. 42. In the State of West Bengal v. Anwar Ali Sarkar AIR 1952 SC 75, Bose J., made a classic exposition regarding Article 14 : "What I am concerned to see is not whether there is absolute equality in any academical sense of the term but whether the collective conscience of a sovereign democratic republic can regard the impugned law, contrasted with the ordinary law of the land, as the sort of substantially equal treatment which men of resolute minds and unbiased views can regard as right and proper in a democracy of the kind we have proclaimed ourselves to be." Such views must take into considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lature can enact a law transferring the jurisdiction exercised by courts in regard to any specified subject (other than those which are vested in courts by express provisions of the Constitution) to any Tribunal. (b)All courts are Tribunals. Any Tribunal to which any existing jurisdiction of courts is transferred should also be a Judicial Tribunal. This means that such Tribunal should have as members, persons of a rank, capacity and status as nearly as possible equal to the rank, status and capacity of the court which was till then dealing with such matters and the members of the Tribunal should have the independence and security of tenure associated with Judicial Tribunals. (c)Whenever there is need for 'Tribunals', there is no presumption that there should be technical members in the Tribunals. When any jurisdiction is shifted from courts to Tribunals, on the ground of pendency and delay in courts, and the jurisdiction so transferred does not involve any technical aspects requiring the assistance of experts, the Tribunals should normally have only Judicial Members. Only where the exercise of jurisdiction involves inquiry and decisions into technical or special aspects, where pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s presumed not to legislate contrary to rule of law and therefore know that where disputes are to be adjudicated by a Judicial Body other than Courts, its standards should approximately be the same as to what is expected of mainstream Judiciary. Rule of law is possible only if there is an independent and impartial judiciary to render justice. An independent judiciary can exist only when persons with competence, ability and independence with impeccable character man the judicial institutions. When the Legislature proposes to substitute a Tribunal in place of the High Court to exercise the jurisdiction which the High Court is exercising, it goes without saying that the standards expected from the Judicial Members of the Tribunal and standards applied for appointing such members, should be as nearly as possible as applicable to High Court Judges, which are apart from a basic degree in law, rich experience in the practice of law, independent outlook, integrity, character and good reputation. It is also implied that only men of standing who have special expertise in the field to which the Tribunal relates, will be eligible for appointment as Technical Members. Therefore, only persons wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... experience, may be more brilliant than Advocates with 10 years' standing. Still, it is not competence alone but various other factors which make a person suitable. Therefore, when the Legislature substitutes the Judges of the High Court with Members of the Tribunal, the standards applicable should be as nearly as equal in the case of High Court Judges. That means only Secretary Level Officers (that is those who were Secretaries or Additional Secretaries) with specialized knowledge and skills can be appointed as Technical Members of the Tribunal. 49. What is a matter of concern is the gradual erosion of the independence of the judiciary, and shrinking of the space occupied by the Judiciary and gradual increase in the number of persons belonging to the civil service discharging functions and exercising jurisdiction which was previously exercised by the High Court. There is also a gradual dilution of the standards and qualification prescribed for persons to decide cases which were earlier being decided by the High Courts. Let us take stock. 49.1 To start with, apart from jurisdiction relating to appeals and revisions in civil, criminal and tax matters (and original civil jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as sinecure for members of the executive to extend their period of service by five years from 60 to 65 at a higher pay applicable to High Court Judges. Quite a few members of the executive thus became members of the "Tribunals exercising judicial functions". 49.3 We may next refer to Information Technology Act, 2000 which provided for establishment of Cyber Appellate Tribunal with a single member. Section 50 of that Act provided that a person who is, or has been, or is qualified to be, a Judge of a High Court, or a person who is, or has been, a member of the India Legal Service and is holding or has held a post in Grade I of that service for at least three years could be appointed as the Presiding Officer. That is, the requirement of even a Secretary level officer is gone. Any member of Indian Legal Service holding a Grade I Post for three years can be a substitute for a High Court Judge. 49.4 The next dilution is by insertion of Chapter 1B in the Companies Act, 1956 with effect from 1-4-2003 providing for constitution of a National Company Law Tribunal with a President and a large number of Judicial and Technical Members (as many as 62). There is a further dilution in the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resence of members of civil services as Technical (Administrative) Members was considered necessary, as they were well versed in the functioning of Government departments and the rules and procedures applicable to Government servants. But the fact that senior officers of civil services could function as Administrative Members of Administrative Tribunals, does not necessarily make them suitable to function as Technical Members in Company Law Tribunals or other Tribunals requiring technical expertise. The Tribunals cannot become providers of sinecure to members of civil services, by appointing them as Technical Members, though they may not have technical expertise in the field to which the Tribunals relate, or worse where purely judicial functions are involved. While one can understand the presence of the members of the civil services being Technical Members in Administrative Tribunals, or Military Officers being Members of Armed Forces Tribunals, or Electrical Engineers being Members of Electricity Appellate Tribunal, or Telecom Engineers being members of TDSAT, we find no logic in members of general Civil Services being members of Company Law Tribunals. 51. Let us now refer to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Affairs, non-production of books of account and assets as also realization of debts and misfeasance proceedings. Similarly, the settlement of list of creditors and contributories take a long time. Disposal of suits or claims filed by the company or against the company in which OL is always a party, take a very long time. 25. Normally, there is a company court with one Company Judge in each High Court and it is not possible for the court to cope with the work relating to companies under liquidation. Apart from company matters, the court also attends to other cases in the High Court. The orders passed by Company Judge are appealable under section 483. Normal delays and adjournments sought in court proceedings further aggravate the problem and unless all the pending cases are not finally disposed of. OL cannot move the court for dissolution of a company. 26. Under section 457, OL can exercise the powers with the sanction and subject to the control of the court. Any creditor or contributory may apply to the Court with respect to the exercise of any such power. Elaborate procedure has been prescribed under the Companies (Court) Rules, 1959 relating to Statement of Affairs (Rules 124- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch members being required to deal with and decide complex issues of fact and law. Whether the Tribunals should have only Judicial Members or a combination of Judicial and Technical Members is for the Legislature to decide. But if there should be Technical Members, they should be persons with expertise in company law or allied subjects and mere experience in civil service cannot be treated as Technical Expertise in company law. The candidates falling under sub-sections 2(c) and (d ) and sub-sections 3(a) and (b ) of section 10FD have no experience or expertise in deciding company matters. 55. There is an erroneous assumption that company law matters require certain specialized skills which are lacking in Judges. There is also an equally erroneous assumption that members of the civil services, (either a Group-A officer or Joint Secretary level civil servant who had never handled any company disputes) will have the judicial experience or expertise in company law to be appointed either as Judicial Member or Technical Member. Nor can persons having experience of fifteen years in science, technology, medicines, banking, industry can be termed as experts in Company Law for being appoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o might have incidentally dealt with some aspect of Company Law cannot be considered as 'experts' qualified to be appointed as Technical Members. Therefore clauses (a) and (b) of sub-section (3) are not valid. (v)The first part of clause (f) of sub-section (3) providing that any person having special knowledge or professional experience of 15 years in science, technology, economics, banking, industry could be considered to be persons with expertise in company law, for being appointed as Technical Members in Company Law Tribunal, is invalid. (vi)Persons having ability, integrity, standing and special knowledge and professional experience of not less than fifteen years in industrial finance, industrial management, industrial reconstruction, investment and accountancy, may however be considered as persons having expertise in rehabilitation/revival of companies and therefore, eligible for being considered for appointment as Technical Members. (vii)In regard to category of persons referred in clause (g) of sub-section (3) at least five years experience should be specified. (viii)Only clauses (c), (d ), (e), (g ), (h ), and later part of clause (f ) in sub-section (3) of section 10FD ..... 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