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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 ..... l') and National Company Law Appellate Tribunal ('NCLAT' or 'Appellate Tribunal'). 2. In the said writ petition, Madras Bar Association ('MBA') raised the following contentions :- (i)Parliament does not have the legislative competence to vest intrinsic judicial functions that have been traditionally performed by the High Courts for nearly a century in any Tribunal outside the Judiciary. (ii)The constitution of the National Company Law Tribunal and transferring the entire company jurisdiction of the High Court to the Tribunal which is not under the control of the Judiciary, is violative of the doctrine of separation of powers and independence of the Judiciary which are parts of the basic structure of the Constitution. (iii)Article 323B of the Constitution enables the appropriate Legislature to provide for adjudication or trial by Tribunals of disputes, complaints or offences with respect to all or any of the matters specified in clause (2). Clause (2) enumerate the matters in regard to which Tribunals can be constituted. The said list is exhaustive and not illustrative. The list does not provide for constitution of Tribunal for insolvency, revival and restructuring of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the Committee recommended various amendments in regard to the provisions of Companies Act, 1956 for setting-up of a National Company Law Tribunal which will combine the powers of the CLB under the Companies Act, 1956, BIFR and AAIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 as also the jurisdiction and powers relating to winding-up presently vested in the High Courts. 4. It is stated that the recommendations of the Eradi Committee were accepted by the Government and Company (Second Amendment) Act, 2002 was passed providing for establishment of NCLT and NCLAT to take-over the functions which are being performed by CLB, BIFR, AAIFR and the High Courts. It is submitted that the establishment of NCLT and NCLAT will have the following beneficial effects : (i) reduce the pendency of cases and reduce the period of winding-up process from 20 to 25 years to about two years; (ii) avoid multiplicity of litigation before various fora (High Courts and quasi-judicial Authorities like CLB, BIFR and AAIFR) as all can be heard and decided by NCLT; (iii ) the appeals will be streamlined with an appeal provided against the order of the NCLT to an appellate Tribunal (NCLAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, require to be corrected and has stated that those provisions will be suitably amended to remove the defects. It has not however accepted the decision of the High Court that some other provisions of Parts 1B and 1C are also defective. To narrow down the controversy in regard to the appeal by the Union, we note below the defects pointed out by the High Court in regard to various provisions in Parts 1B and 1C of the Act and the stand of Union of India in respect of each of them. Sections 10FE and 10FT : Tenure of President/Chairman and Members of NCLT and NCLAT fixed as three years with eligibility for re-appointment. 7.1 The High Court held that 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, 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. The Union Government has accepted the finding and agreed to amend sections 10FE and 10FT of the Act to provide for a five years term for the Chairman/President/Members. However, the Government proposes to retain the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held that appointment of a member under the category specified in section 10FD(3)(f), can have a role only in matters concerning revival and rehabilitation of sick industrial companies and not in relation to other matters. The High Court has therefore virtually indicated that NCLT should have two divisions, that is an Adjudication Division and a Rehabilitation Division and persons selected under the category specified in clause (f) should only be appointed as members of the Rehabilitation Division. The Union Government contends that similar provision exists in section 4(3) of the Sick Industrial Companies (Special Provisions) Act, 1985; that the provision is only an enabling one so that the best talent can be selected by the Selection Committee headed by the Chief Justice of India or his nominee; and that it may not be advisable to have Division or limit or place restrictions on the power of the President of the Tribunal to constitute appropriate benches. It is also pointed out that a Technical Member would always sit in a Bench with a Judicial Member. Section 10FD(3)(g) : Qualification for appointment of Technical Member. 7.6 The High Court has observed that in regard to Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members. It is also pointed out that it may not be proper to presume that a person well-versed in labour matters will be unsuitable to be associated with a Judicial Member in regard to adjudication of winding-up matters. Section 10FL(2) - Proviso : Winding up proceedings by single Member. 7.10 The High Court has held that it is impermissible to authorize a Single Member Bench to conduct the winding up proceedings after a special three Members Bench passes an order of winding up; and if such single member happens to be a labour member appointed under section 10FD(3)(f ), it would be a mockery of a specialist Tribunal. The Union Government has accepted the finding and has agreed to amend the proviso to section 10FL(2) to provide that a winding up proceedings will be conducted by a Bench which would necessarily include a Judicial Member. Sections 10FF and 10FK(2) : Power of Central Government to designate any member to be a Member (Administration). 7.11 The High Court has held that sections 10FF and 10FK(2) should be suitably amended to provide that a member may be designated as Member (Administration) only in consultation with the President, and further provide that the Member ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and recast Parts 1B and 1C of the Act amounts to converting judicial review into judicial legislation. However, as Union of India has agreed to rectify several of the defects pointed out by the High Court (set out above), the appeal by the Union Government is now restricted to the findings of the High Court relating to sections 10FD(3)( f), ( g) and (h ) and 10FX. 9. On the other hand, MBA in its appeal contends that the High Court ought not to have upheld the constitutional validity of Parts 1B and 1C of the Act providing for establishment of NCLT and NCLAT; that the High Court ought to have held that constitution of such Tribunals taking away the entire Company Law jurisdiction of the High Court and vesting it in a Tribunal which is not under the control of the Judiciary, is violative of doctrine of separation of powers and the independence of Judiciary which are parts of the basic structure of the Constitution. MBA also contends that the decisions of this Court in Delhi High Court Bar Association's case (supra), with reference to constitutional validity of the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 providing for constitution of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in the Official Gazette. 10FD. Qualifications for appointment of President and Members.-(1) The Central Government shall appoint a person who has been, or is qualified to be, a Judge of a High Court as the President of the Tribunal. (2) A person shall not be qualified for appointment as Judicial Member unless he- (a )has, for at least fifteen years, held a judicial office in the territory of India; or (b)has, for at least ten years been an advocate of a High Court, or has partly held judicial office and has been partly in practice as an advocate for a total period of fifteen years; or (c )has held for at least fifteen years a Group 'A' post or an equivalent post under the Central Government or a State Government including at least three years of service as a Member of the Indian Company Law Service (Legal Branch) in Senior Administrative Grade in that service; or (d )has held for at least fifteen years a Group 'A' post or an equivalent post under the Central Government (including at least three years of service as a Member of the Indian Legal Service in Grade I of that service). (3) A person shall not be qualified for appointment as Technical Member unless he- (a )has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent and Members. - The President and every other Member of the 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 : Provided that no President or other Member shall hold office as such after he has attained,- (a )in the case of the President, the age of sixty-seven years; (b )in the case of any other Member, the age of sixty-five years : Provided further that the President or other Member may retain his lien with his parent cadre or Ministry or Department, as the case may be, while holding office as such. 10FF. Financial and administrative powers of Member Administration. - The Central Government shall designate any Judicial Member or Technical Member as Member Administration who shall exercise such financial and administrative powers as may be vested in him under the rules which may be made by the Central Government : Provided that the Member Administration shall have authority to delegate such of his financial and administrative powers as he may think fit to any other officer of the Tribunal subject to the condition that such officer shall, while exercising such delegated po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, it shall be decided according to the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Tribunal for hearing on such point or points shall be decided according to the other of the other Members of the Tribunal and such point or points shall be decided according to the opinion of the majority of Members of the Tribunal who have heard the case, including those who first heard it. (4) There shall be constituted such number of Benches, as may be notified by the Central Government. (5) In addition to the other Benches, there shall be a Principal Bench at New Delhi presided over by the President of the Tribunal. (6) The Principal Bench of the Tribunal shall have powers of transfer of proceedings from any Bench to another Bench of the Tribunal in the event of inability of any Bench from hearing any such proceedings for any reason : Provided that no transfer of any proceedings shall be made under this sub-section except after recording the reasons for so doing in writing. 10FO. Delegation of powers. - The Tribunal may, by general or special orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )Secretary in the Ministry of Labour Member; (d )Secretary in the Ministry of Law and Justice (Department of Legal Affairs or Legislative Department) Member; (e )Secretary in the Ministry of Finance and Company Affairs (Department of Company Affairs) Member. (2) The Joint Secretary in the Ministry or Department of the Central Government dealing with this Act shall be the Convenor of the Selection Committee. ** ** ** (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 Members of the Appellate Tribunal and President and Members of the Tribunal shall be invalidated merely by reason of any vacancy or any defect in the constitution of the Selection Committee. 10G. Power to punish for contempt. - The Appellate Tribunal shall have the same jurisdiction, powers and authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Government has passed orders on receipt of the report of the Judge of the Supreme Court on such reference. Difference between Courts and Tribunals. 12. The term 'Courts' refers to places where justice is administered or refers to Judges who exercise judicial functions. Courts are established by the State for administration of justice that is for exercise of the judicial power of the State to maintain and uphold the rights, to punish wrongs and to adjudicate upon disputes. Tribunals on the other hand are special alternative institutional mechanisms, usually brought into existence by or under a statute to decide disputes arising with reference to that particular statute, or to determine controversies arising out of any administrative law. Courts refer to Civil Courts, Criminal Courts and High Courts. Tribunals can be either private Tribunals (Arbitral Tribunals), or Tribunals constituted under the Constitution (Speaker or the Chairman acting under Para 6(1) of the Tenth Schedule) or Tribunals authorized by the Constitution (Administrative Tribunals under Article 323A and Tribunals for other matters under Article 323B) or Statutory Tribunals which are created under a statute ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inistrative law. They are very similar to Courts, but are not Courts. When the Constitution speaks of 'Courts' in Article 136, 227, or 228 or in Articles 233 to 237 or in the Lists, it contemplates Courts of Civil Judicature but not Tribunals other than such Courts. This is the reason for using both the expressions in Articles 136 and 227. By "Courts" is meant Courts of Civil Judicature and by "Tribunals", those bodies of men who are appointed to decide controversies arising under certain special laws. Among the powers of the State is included the power to decide such controversies. This is undoubtedly one of the attributes of the State, and is aptly called the judicial power of the State. In the exercise of this power, a clear division is thus noticeable. Broadly speaking, certain special matters go before Tribunals, and the residue goes before the ordinary Courts of Civil Judicature. Their procedures may differ, but the functions are not essentially different. What distinguishes them has never been successfully established." In my opinion, a Court in the strict sense is a Tribunal which is a part of the ordinary hierarchy of Courts of Civil Judicature maintained by the State un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as ordinary courts of civil judicature. They are governed by their prescribed rules of procedure and they deal with questions of fact and law raised before them by adopting a process which in described as judicial process. The powers which these courts exercise, are judicial powers, the functions they discharge are judicial functions and the decisions they reach and pronounce are judicial decisions. In every State there are administrative bodies or authorities which are required to deal with matters within their jurisdiction in an administrative manner and their decisions are described as administrative decisions. In reaching their administrative decisions, administrative bodies can and often to take into consideration questions of policy. It is not unlikely that even in this process of reaching administrative divisions, the administrative bodies or authorities are required to act fairly and objectively and would in many cases have to follow the principles of natural justice; but the authority to reach decision conferred on such administrative bodies is clearly distinct and separate from the judicial power conferred on courts, and the decisions pronounced by administrative bodies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power for administration of justice in general. Tribunals are established under a statute to adjudicate upon disputes arising under the said statute, or disputes of a specified nature. Therefore, all courts are Tribunals. But all Tribunals are not courts. (ii)Courts are exclusively manned by Judges. Tribunals can have a Judge as the sole member, or can have a combination of a Judicial Member and a Technical Member who is an 'expert' in the field to which Tribunal relates. Some highly specialized fact finding Tribunals may have only Technical Members, but they are rare and are exceptions. (iii)While courts are governed by detailed statutory procedural rules, in particular the Code of Civil Procedure and Evidence Act, requiring an elaborate procedure in decision making, Tribunals generally regulate their own procedure applying the provisions of the Code of Civil Procedure only where it is required, and without being restricted by the strict rules of Evidence Act. Re : Independence of judiciary 15. Impartiality, independence, fairness and reasonableness in decision making are the hallmarks of Judiciary. If 'Impartiality' is the soul of Judiciary, 'Independence' is the life blood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointment as Judges of the superior judiciary who combine the attributes essential for making an able, independent and fearless judge. Several attributes together combine to constitute such a personality. Legal expertise, ability to handle cases, proper personal conduct and ethical behaviour, firmness and fearlessness are obvious essential attributes of a person suitable for appointment as a superior Judge.". In his concurring opinion, Pandian J. stated that : "it is the cardinal principle of the Constitution that an independent judiciary is the most essential characteristic of a free society like ours." He further stated : "..that to have an independent judiciary to meet all challenges, unbending before all authorities and to uphold the imperatives of the Constitution at all times, thereby preserving the judicial integrity, the person to be elevated to the judiciary must be possessed with the highest reputation for independence, uncommitted to any prior interest, loyalty and obligation and prepared under all circumstances or eventuality to pay any price, bear any burden and to meet any hardship and always wedded only to the principles of the Constitution and 'Rule of Law'. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this Court explained the doctrine of separation of powers thus : "The Indian Constitution has not indeed recognised the doctrine of separation of powers in its absolute rigidity but the functions of the different parts or branches of the Government have been sufficiently differentiated and consequently it can very well be said that our Constitution does not contemplate assumption, by one organ or part of the State, of functions that essentially belong to another." In Chandra Mohan v. State of UP AIR 1966 SC 1987, this Court held : "The Indian Constitution, though it does not accept the strict doctrine of separation of powers, provides for an independent judiciary in the States; it constitutes a High Court for each State, prescribes the institutional conditions of service of the Judges thereof, confers extensive jurisdiction on it to issue writs to keep all Tribunals, including in appropriate cases the Governments, within bounds and gives to it the power of superintendence over all courts and Tribunals in the territory over which it has jurisdiction. But the makers of the Constitution also realised that "it is the Subordinate Judiciary in India who are brought most closely into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself and not through only one of them. None of these three separate organs of the Republic can take over the functions assigned to the other. This is the basic structure or scheme of the system of Government of Republic............ But no constitution can survive without a conscious adherence to its fine checks and balances. Just as courts ought to enter into problems entwined in the "political thicket", Parliament must also respect the preserve of the court. The principle of separation of powers is a principle of restraint ........." In L. Chandra Kumar, the seven-Judge Bench of this Court referred to the task entrusted to the superior courts in India thus : "The Judges of the superior courts have been entrusted with the task of upholding the Constitution and to this end, have been conferred the power to interpret it. It is they who have to ensure that the balance of power envisaged by the Constitution is maintained and that the Legislature and the executive do not, in the discharge of their functions, transgress constitutional limitations. It is equally their duty to oversee that the judicial decisions rendered by those who man the subordinate courts and Tribunals do not fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s should be independent, accessible, prompt, expert, informal and cheap. The second is the report of the Committee constituted to undertake the review of delivery of justice through Tribunals, with Sir Andrew Leggatt as Chairman. The Leggatt Committee submitted its report to the Lord High Chancellor of Great Britain in March, 2001. The Committee explained the advantages of Tribunals, provided they could function independently and coherently, thus : "Choosing a tribunal to decide disputes should bring two distinctive advantages for users. First, Tribunal decisions are often made jointly by a panel of people who pool legal and other expert knowledge, and are the better for that range of skills. Secondly, Tribunals' procedures and approach to overseeing the preparation of cases and their hearing can be simpler and more informal than the courts, even after the civil justice reforms. Most users ought therefore to be capable of preparing and presenting their cases to the Tribunal themselves, providing they have the right kind of help. Enabling that kind of direct participation is an important jurisdiction for establishing Tribunals at all. . . ." De Smith's Judicial Review, (6th Edn., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cularly on whether an accident occurred in the course of employment, came to an end. The whole system is based on compromise, and it is from the dilemma of weighing quality against convenience that many of its problems arise. An accompanying advantage is that of expertise. Qualified surveyors sit on the Lands Tribunal and experts in tax law sit as Special Commissioners of Income-tax. Specialized Tribunals can deal both more expertly and more rapidly with special classes of cases, whereas in the High Court counsel may take a day or more to explain to the judge how some statutory scheme is designed to operate. Even without technical expertise, a specialized Tribunal quickly builds up expertise in its own field. Where there is a continuous flow of claims of a particular class, there is every advantage in a special jurisdiction." Recommendations for better working of Tribunals 20. Only if continued judicial independence is assured, Tribunals can discharge judicial functions. In order to make such independence a reality, it is fundamental that the members of the Tribunal shall be independent persons, not civil servants. They should resemble courts and not bureaucratic Boards. Even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive functioning of the Tribunal. It stated : "There is only one way to achieve independence and coherence : to have all the Tribunals supported by a Tribunals Service, that is, a common administrative service. It would raise their status, while preserving their distinctness from the courts. In the medium term it would yield considerable economies of scale, particularly in relation to the provision of premises for all Tribunals, common basic training, and the use of IT. It would also bring greater administrative efficiency, a single point of contact for users, improved geographical distribution of Tribunal centres, common standards, an enhanced corporate image, greater prospects of job satisfaction, a better relationship between members and administrative staff, and improved career patterns for both on account of the size and coherence of the Tribunals Service. It should be committed by Charter to provide a high quality, unified service, to operate independently, to deal openly and honestly with users of Tribunals, to seek to maintain public confidence, and to report annually on its performance." The report expressed the view that the independence of Tribunals would best be safegu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pervisory body to oversee the working of the Tribunals. This will ensure that if the President or Chairperson of the Tribunal is for some reason unable to take sufficient interest in the working of the Tribunal, the entire system will not languish and the ultimate consumer of justice will not suffer. The creation of a single umbrella organisation will, in our view, remove many of the ills of the present system. If the need arises, there can be separate umbrella organisations at the Central and the State levels. Such a supervisory authority must try to ensure that the independence of the members of all such Tribunals is maintained. To that extent, the procedure for the selection of the members of the Tribunals, the manner in which funds are allocated for the functioning of the Tribunals and all other consequential details will have to be clearly spelt out." 23. But in India, unfortunately Tribunals have not achieved full independence. The Secretary of the concerned 'sponsoring department' sits in the Selection Committee for appointment. When the Tribunals are formed, they are mostly dependant on their sponsoring department for funding, infrastructure and even space for functioning. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to incorporation, regulation and winding up of corporations. Entry 95 of List I refers to jurisdiction and powers of all courts, except the Supreme Court, with respect to any of the matters in Union List. The Concurrent List (List III of the Seventh Schedule) enumerates the matters with respect to which a Parliament and Legislature of a State will have concurrent power to make laws. Entry 11A of List III refers to administration of justice, constitution and organization of all courts except the Supreme Court and the High Courts. Entry 46 of List III refers to jurisdiction and powers of all courts, except the Supreme Court, with respect to any of the matters in List III. 26. Part XIV-A was inserted in the Constitution with effect from 3-1-1977 by the Constitution (Forty-second Amendment) Act, 1976. The said part contains two Articles. Article 323A relates to Administrative Tribunals and empowers the Parliament to make a law, providing for the adjudication or trial by Administrative Tribunals of disputes and complaints with respect to recruitment and conditions of service of persons appointed to public services and posts in connection with the affairs of the Government or of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority which may be exercised by each of the said Tribunals; (c ) provide for the procedure (including provisions as to limitation and rules of evidence) to be followed by the said Tribunals; provide for the procedure (including provisions as to limitation and rules of evidence) to be followed by the said Tribunals; (d ) exclude the jurisdiction of all courts, except the jurisdiction of the Supreme Court under article 136, with respect to the disputes or complaints referred to in clause (1); exclude the jurisdiction of all courts except the jurisdiction of the Supreme Court under article 136 with respect to all or any of the matters falling within the jurisdiction of the said Tribunals; (e ) provide for the transfer to each such administrative Tribunal of any cases pending before any court or other authority immediately before the establishment of provide for the transfer to each such Tribunal of any cases pending before any court or any other authority immediately before the establishment of such Tribunal as would have Article 323A Article 323B such Tribunal as would have been within the jurisdiction of such Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, cannot be interpreted to mean that they prohibited the Legislature from establishing Tribunals not covered by those Articles, as long as there is legislative competence under the appropriate Entry in the Seventh Schedule. 29. In Navinchandra Mafatlal v. CIT 1955 (1) SCR 829, this Court held : ".. As pointed out by Gwyer C.J. in United Provinces v. Atiqa Begum 1940 FCR 110 none of the items in the Lists is to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. It is, therefore, clear-and it is acknowledged by Chief Justice Chagla-that in construing an entry in a List conferring legislative powers the widest possible construction according to their ordinary meaning must be put upon the words used therein. The cardinal rule of interpretation, however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in construing words in a constitutional enactment conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitution; 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 basic 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." 31. Therefore, even though revival/rehabilitation/regulation/winding up of companies are not matters which are mentioned in Articles 323A and 323B, the Parliament has the legislative competence to make a law providing for constitution of Tribunals to deal with disputes and matters arising out of the Companies Act. 32. The Constitution contemplates judicial power being exercised by both courts and Tribunals. Except the powers and jurisdictions vested in superior courts by the Constitution, powers and jurisdiction of courts are controlled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officers have been appointed to these Tribunals. It is stated that in the short tenures that these Administrative Members are on the Tribunal, they are unable to attain enough experience in adjudication and in cases where they do acquire the ability, it is invariably on the eve of the expiry of their tenures. For these reasons, it has been urged that the appointment of Administrative Members to Administrative Tribunals be stopped. We find it difficult to accept such a contention. 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 specialised knowledge, be better equipped to dispense speedy and efficient justice. It was expected that a judicious mix of judicial members and those with grass-roots experience would best serve this purpose. To hold that the Tribunal should consist only of judicial members would attack the primary basis of the theory pursuant to which they have been constituted. Since the Selection Committee is now headed by a Judge of the Supreme Court, nominated by the Chief Justice of India, we have reason to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional, administrative and tax laws. The legal input would undeniably be more important and sacrificing the legal input and not giving it sufficient weightage and teeth would definitely impair the efficacy and effectiveness of the judicial adjudication. It is, therefore, necessary that those who adjudicate upon these matters should have legal expertise, judicial experience and modicum of legal training as on many an occasion different and complex questions of law which baffle the minds of even trained judges in the High Court and Supreme Court would arise for discussion and decision." 37. Having held that Legislation can transfer certain areas of litigation from Courts to Tribunals and recognizing that the Legislature can provide for Technical Members in addition to Judicial Members in such Tribunals, let us turn our attention to the question as to who can be the members. If the Act provides for a Tribunal with a Judicial Member and a Technical Member, does it mean that there are no limitations upon the power of the Legislature to prescribe the qualifications for such technical member? The question will also be whether any limitations can be read into the competence of the Legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... social worker in regard to Compensation Tribunal, having expertise in the respective field will be the members of the Tribunal. Let us say by these legislations, all cases in civil courts are transferred to Tribunal (as virtually all cases in civil courts will fall under one or the other of the three Tribunals). Merely because the Legislature has the power to constitute Tribunals or transfer jurisdiction to Tribunals, can that be done? 39. The question is whether a line can be drawn, and who can decide the validity or correctness of such action. The obvious answer is that while the Legislature can make a law providing for constitution of Tribunals and prescribing the eligibility criteria and qualifications for being appointed as members, the superior courts in the country can, in exercise of the power of judicial review, examine whether the qualifications and eligibility criteria provided for selection of members is proper and adequate to enable them to discharge judicial functions and inspire confidence. This issue was also considered in Sampath Kumar's case (supra) and it was held that where the prescription of qualification was found by the court, to be not proper and conducive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etence and (ii) violation of any fundamental rights or any provision of the Constitution [See : Indira Nehru Gandhi's case (supra); Kuldip Nayar v. Union of India 2006 (7) SCC 1; and State of Andhra Pradesh v. McDowell & Co. 1996 (3) SCC 709]. The reason for this was given by Chandrachud, J., in Indira Gandhi, thus : ""Basic structure", by the majority judgment [in Keshavananda Bharati v. State of Kerala 1973 (4) SCC 225], is not a part of the fundamental rights nor indeed a provision of the Constitution. The theory of basic structure is woven out of the conspectus of the Constitution and the amending power is subjected to it because it is a constituent power. 'The power to amend the fundamental instrument cannot carry with it the power to destroy its essential features' - this, in brief, is the arch of the theory of basic structure. It is wholly out of place in matters relating to the validity of ordinary laws made under the Constitution....... There is no paradox, because certain limitations operate upon the higher power for the reason that it is a higher power. A constitutional amendment has to be passed by a special majority and certain such amendments have to be ratified by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aws just as other parts of the Constitution are so used. Thus, it is clear that whenever the doctrine of the basic structure has been expounded or applied it is only as a doctrine of interpretation of the Constitution as it actually exists and not of a Constitution which could exist only subjectively in the minds of different individuals as mere theories about what the Constitution is. The doctrine did not add to the contents of the Constitution. It did not, in theory, deduct anything from what was there. It only purported to bring out and explain the meaning of what was already there. It was, in fact, used by all the judges for only this purpose with differing results simply because their assessments or inferences as to what was part of the basic structure in our Constitution differed. This, I think is the correct interpretation of the doctrine of the basic structure of the Constitution. It should only be applied if it is clear, beyond the region of doubt, that what is put forward as a restriction upon otherwise clear and plenary legislative power is there as a Constitutional imperative." Independent judicial Tribunals for determination of the rights of citizens, and for adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kind we have proclaimed ourselves to be." Such views must take into consideration the practical necessities of Government, the right to alter the laws and many other facts, but in the forefront must remain the freedom of the individual from unjust and unequal treatment, unequal in the broad sense in which a democracy would view it. In my opinion, 'law' as used in article 14 does not mean the "legal precepts which are actually recognised and applied in Tribunals of a given time and place" but "the more general body of doctrine and tradition from which those precepts are chiefly drawn, and by which we criticise, them." (Dean Pound in 34 Harvard Law Review 449 at 452). "However much the real ground of decision may be hidden behind a screen of words like 'reasonable', 'substantial', 'rational' and 'arbitrary' the fact would remain that judges are substituting their own judgment of what is right and proper and reasonable and just for that of the legislature; and up to a point that, I think, is inevitable when a judge is called upon to crystallise a vague generality like article 14 into a concrete concept." 43. The MBA relied upon the following extract from Chapter 2 of "Orderly & Effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on involves inquiry and decisions into technical or special aspects, where presence of Technical Members will be useful and necessary, Tribunals should have Technical Members. Indiscriminate appointment of Technical Members in all Tribunals will dilute and adversely affect the independence of the Judiciary. (d)The Legislature can re-organize the jurisdictions of Judicial Tribunals. For example, it can provide that a specified category of cases tried by a higher court can be tried by a lower court or vice versa (A standard example is the variation of pecuniary limits of courts). Similarly while constituting Tribunals, the Legislature can prescribe the qualifications/eligibility criteria. The same is however subject to Judicial Review. If the court in exercise of judicial review is of the view that such tribunalisation would adversely affect the independence of judiciary or the standards of judiciary, the court may interfere to preserve the independence and standards of judiciary. Such an exercise will be part of the checks and balances measures to maintain the separation of powers and to prevent any encroachment, intentional or unintentional, by either the Legislature or by the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be eligible for appointment as Technical Members. Therefore, only persons with a judicial background, that is, those who have been or are Judges of the High Court and lawyers with the prescribed experience, who are eligible for appointment as High Court Judges, can be considered for appointment of Judicial Members. 47. A lifetime of experience in administration may make a member of the civil services a good and able administrator, but not a necessarily good, able and impartial adjudicator with a judicial temperament capable of rendering decisions which have to (i) inform the parties about the reasons for the decision; (ii) demonstrate fairness and correctness of the decision and absence of arbitrariness; and (iii) ensure that justice is not only done, but also seem to be done. We may refer to the following words of Bhagwati CJ., in Sampath Kumar (supra) : "We cannot afford to forget that it is the High Court which is being supplanted by the Administrative Tribunal and it must be so manned as to inspire confidence in the public mind that it is a highly competent and expert mechanism with judicial approach and objectivity. Of course, I must make it clear that when I say this, I do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d revisions in civil, criminal and tax matters (and original civil jurisdiction in some High Courts). The High Courts were exercising original jurisdiction in two important areas; one was writ jurisdiction under articles 226 and 227 (including original jurisdiction in service matters) and the other was in respect to company matters. 49.2 After constitution of Administrative Tribunals under the Administrative Tribunals Act, 1985 the jurisdiction in regard to original jurisdiction relating to service matters was shifted from High Courts to Administrative Tribunals. Section 6 of the said Act deals with qualifications for appointment as Chairman, and it is evident therefrom that the Chairman has to be a High Court Judge either a sitting or a former Judge. For Judicial Member the qualification was that he should be a judge of a High Court or is qualified to be a Judge of the High Court (i.e., an advocate of the High Court with ten years practice or a holder of a judicial office for ten years) or a person who held the post of Secretary, Government of India in the Department of Legal Affairs or in the Legislative Department or Member Secretary, Law Commission of India for a period of two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Technical Members (as many as 62). There is a further dilution in the qualifications for members of National Company Law Tribunal which is a substitute for the High Court, for hearing winding up matters and other matters which were earlier heard by High Court. A member need not even be a Secretary or Addl. Secretary Level Officer. All Joint Secretary level civil servants (that are working under Government of India or holding a post under the Central and State Governments carrying a scale of pay which is not less than that of the Joint Secretary to the Government of India) for a period of five years are eligible. Further, any person who has held a Group-A post for 15 years (which means anyone belonging to Indian P&T Accounts & Finance Service, Indian Audit and Accounts Service, Indian Customs & Central Excise Service, Indian Defence Accounts Service, Indian Revenue Service, Indian Ordnances Factories Service, Indian Postal Service, Indian Civil Accounts Service, Indian Railway Traffic Service, Indian Railway Accounts Service, Indian Railway Personal Service, Indian Defence Estates Service, Indian Information Service, Indian Trade Services, or other Central or State Service) wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services being members of Company Law Tribunals. 51. Let us now refer to the dilution of independence. If any member of the Tribunal is permitted to retain his lien over his post with the parent cadre or Ministry or department in the civil service for his entire period of service as member of the Tribunal, he would continue to think, act and function as a member of the civil services. A litigant may legitimately think that such a member will not be independent and impartial. We reiterate that our observations are not intended to cast any doubt about the honesty and integrity or capacity and capability of the officers of civil services in particular those who are of the rank of Joint Secretary or for that matter even junior officers. What we are referring to is the perception of the litigants and the public about the independence or conduct of the Members of the Tribunal. Independence, impartiality and fairness are qualities which have to be nurtured and developed and cannot be acquired overnight. The independence of members discharging judicial functions in a Tribunal cannot be diluted. 52. The need for vigilance in jealously guarding the independence of Courts and Tribunals aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies (Court) Rules, 1959 relating to Statement of Affairs (Rules 124-134), Preliminary Report (Rules 135-139), Settlement of list of creditors (Rules 147-149), Settlement of list of contributories and payment of calls (Rules 180-196, 232-242), examination under section 477/478 (Rule 234-259), Misfeasance proceedings under sections 542 and 543 (Rules 260-262), Disclaimer of property under section 535 (Rules 263-269), Compromise and abandonment of claims (Rules 270-271), Sale of assets (Rules 272-274), Declaration of dividend (payment to creditors) and turn of capital to contributories (Rules 275-280), dissolution (Rules 281-285), Maintenance of Registers and books by OL (Rules 286-292), Investment of surplus funds (Rules 293-297), Half-yearly and yearly Accounts and Audit (Rules 298-311), Unclaimed dividend and undistributed assets (Rules 335-338). 27. It is significant to note that under the Act and the aforesaid Companies (Courts) Rules made by Hon'ble Supreme Court, after consulting the High Courts under section 643, OL has to seek sanction of the Court at each and every stage during the course of winding up proceedings. For the purpose, OL has to submit reports from time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking, industry can be termed as experts in Company Law for being appointed as Technical Members. The practice of having experts as Technical Members is suited to areas which require the assistance of professional experts, qualified in medicine, engineering, and architecture etc. Lastly, we may refer to the lack of security of tenure. The short term of three years, the provision for routine suspension pending enquiry and the lack of any kind of immunity, are aspects which require to be considered and remedied. 56. We may now tabulate the defects in Parts 1B and 1C of the Act :- (i)Only Judges and Advocates can be considered for appointment as Judicial Members of the Tribunal. Only the High Court Judges, or Judges who have served in the rank of a District Judge for at least five years or a person who has practiced as a Lawyer for ten years can be considered for appointment as a Judicial Member. Persons who have held a Group A or equivalent post under the Central or State Government with experience in the Indian Company Law Service (Legal Branch) and Indian Legal Service (Grade-1) cannot be considered for appointment as Judicial Members as provided in sub-section 2(c) and ( d) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), (h ), and later part of clause (f ) in sub-section (3) of section 10FD and officers of civil services of the rank of the Secretary or Additional Secretary in Indian Company Law Service and Indian Legal Service can be considered for purposes of appointment as Technical Members of the Tribunal. (ix)Instead of a five-member Selection Committee with Chief Justice of India (or his nominee) as Chairperson and two Secretaries from the Ministry of Finance and Company Affairs and the Secretary in the Ministry of Labour and Secretary in the Ministry of Law and Justice as members mentioned in section 10FX, the Selection Committee should broadly be on the following lines :- (a)Chief Justice of India or his nominee - Chairperson (with a casting vote); (b)A senior Judge of the Supreme Court or Chief Justice of High Court - Member; (c)Secretary in the Ministry of Finance and Company Affairs - Member; and (d)Secretary in the Ministry of Law and Justice - Member. (x)The term of office of three years shall be changed to a term of seven or five years subject to eligibility for appointment for one more term. This is because considerable time is required to achieve expertise in the concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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