TMI Blog2004 (3) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal, and to which Tribunal, the jurisdiction exercised by the High Court for nine decades in relation to, inter alia, amalgamation and reconstruction of companies, winding up, reduction of share capital, and other matters, are transferred. 2. The jurisdiction of the High Court transferred to the Tribunal are those under sections 100 to 104, 107, 203, 243, 318(3)( d ), 391, 392, 394, 394A, 395, 424, 425, 426, 427, 433, 434 (1)( b ), 434(1)( c ), 439, 440, 441, 443, 444, 446, 448, 450, 453, 454, 455(2) (3), 456, 457, 458, 458A, 459, 460, 461, 462, 463, 464, 465, 466, 467, 468, 469, 470, 471, 472, 473, 474, 475, 476, 477, 478, 479, 480, 481, 490, 492, 494, 497, 502, 503, 504, 506,507, 509, 511A, 512, 515, 517, 518, 519, 531, 531A, 533, 534, 535, 536, 537, 538, 540, 542, 543, 544, 545, 546, 547, 549, 550, 551, 553, 555, 556, 557, 558, 559, 560, 581, 582, 583, 587, 588, 589, 610, 614, 626, 632, 635 and 635B of the Companies Act. 3. The jurisdiction and powers so transferred, inter alia , relate to reduction of share capital; rights of dissentient shareholders to have variation cancelled; power to restrain persons from managing companies; compensation for loss of office t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forcement of orders, and protection of employees during investigation by inspectors or during pendency of proceeding in certain cases. 4. The powers that will be left with the High Court, as and when the Amending Act is given effect to are the powers under sections 81(7), 237( a )( ii ), 581 ZN (16), 581ZS(1) and 633(3). The jurisdiction so left with the High Court relate to hearing appeals with regard to the terms and conditions of conversion of debentures or loans into shares when the lender exercises right given to it under section 81; ordering investigation of the company s affairs, hearing appeals by any member or creditor or employee aggrieved by the transfer of assets, division, amalgamation or merger of producer companies; reconversion of producer companies to inter-State co-operative societies; and the power to relieve officers of companies, acting honestly and reasonably, of liability, in whole or in part, and on such terms as the Court may think fit. 5. It must be noticed here that the power of the High Court in relation to matters concerning, inter alia , rectification of share Registers and oppression and mismanagement had been transferred to the Company Law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Government or a State Government [including at least three years of service as a Member of the Indian Company Law Service (Accounts Branch) in Senior Administrative Grade in that service]; or ( b )is, or has been, a Joint Secretary to the Government of India under the Central Staffing Scheme, or held any other post under the Central Government or a State Government carrying a scale of pay which is not less than that of a Joint Secretary to the Government of India, for at least five years and has adequate knowledge of, and experience in, dealing with problems relating to company law; or ( c )is, or has been, for at least fifteen years in practice as a chartered accountant under the Chartered Accountants Act, 1949 (38 of 1949); or ( d )is, or has been, for at least fifteen years in practice as a cost accountant under the Costs and Works Accountants Act, 1959 (23 of 1959); or ( e ) has or has had, for at least fifteen years working experience as a secretary in whole-time practice as defined in clause ( 45A ) of section 2 of this Act and is a member of the Institute of the Companies Secretaries of India constituted under the Company Secretaries Act, 1980 (56 of 1980 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , superintendence and control of the Member Administration. 10FG. Salary, allowances and other terms and conditions of service of President and other Members. The salary and allowances and other terms and conditions of service of the President and other Members of the Tribunal shall be such as may be prescribed: Provided that neither the salary and allowances nor the other terms and conditions of service of the President and other Members shall be varied to their disadvantage after their appointment. 10FH. Vacancy in Tribunal. - (1) In the event of the occurrence of any vacancy in the office of the President of the Tribunal by reason of his death, resignation or otherwise, the seniormost Member shall act as the President of the Tribunal until the date on which a new President, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office. (2) When the President is unable to discharge his functions owing to absence, illness or any other cause, the seniormost Member or, as the case may be, such one of the Members of the Tribunal, as the Central Government, may, by notification, authorise in this behalf, shall discharge the functions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in respect of whom a reference has been made to the Judge of the Supreme Court under sub-section (2) until the Central Government has passed orders on receipt of the report of the Judge of the Supreme Court on such reference. (4) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of the President or a Member referred to in sub-section (2). 10FK. Officers and employees of Tribunal. (1) The Central Government shall provide the Tribunal with such officers and other employees as it may deem fit. (2) The officers and other employees of the Tribunal shall discharge their functions under the general superintendence of the Member Administration. (3) The salaries and allowances and other terms and conditions of service of the officers and other employees of the Tribunal shall be such as may be prescribed. 10FL. Benches of Tribunal . (1) Subject to the provisions of this section, the powers of the Tribunal may be exercised by Benches, constituted by the President of the Tribunal, out of which one shall be a Judicial Member and another shall be a Technical Member referred to in clauses ( a ) to ( f ) of sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vent 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. 10FM. Order of Tribunal . (1) The Tribunal may, after giving the parties to any proceeding before it, an opportunity of being heard, pass such orders thereon as it thinks fit. (2) The Tribunal may, at any time within two years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the parties. (3) The Tribunal shall send a copy of every order passed under this section to all the parties concerned. 10FN. Power to review . The Tribunal shall have power to review its own orders. 10FO. Delegation of powers. The Tribunal may, by general or special order, delegate, subject to such conditions and limitations, if any, as may be specified in the order, to any Member or Officer or other employee of the Tribunal or other person authorised by the Tribunal to manage any industrial company or industria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order or decision made by the Tribunal is received by the appellant and it shall be in such form and accompanied by such fee as may be prescribed: Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days from the date aforesaid if it is satisfied that the appellant was prevented by sufficient cause from not filing the appeal in time. (4) On receipt of an appeal preferred under sub-section (1), the Appellate Tribunal shall, after giving parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. (5) The Appellate Tribunal shall send a copy of every order made by it to the Tribunal and parties to the appeal. (6) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of the receipt of the appeal. 10FR. Constitution of Appellate Tribunal . (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate 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 reappointment 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. 10FU. Resignation of Chairperson and Members . The Chairperson or a Member of the Appellate Tribunal may, by notice in writing under his hand addressed to the Central Government, resign his office: Provided that the Chairperson or a Member of the Appellate Tribunal shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest. 10FV. Removal and suspension of Chairperson and Members of Appellate Tribunal. (1) The Central Government may, in consultation with the Chief Justice of India, remove from ..... 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. (3) The Central Government shall, within one month from the date of occurrence of any vacancy by reason of death, resignation or removal of the Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal and six months before the superannuation or end of tenure of the Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal, make a reference to the Selection Committee for filling up of the vacancy. (4) The Selection Committee shall recommend within one month a panel of three names for every vacancy referred to it. (5) Before recommending any person for appointment as the Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal, the Selection Committee shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sitioning any public record or document or copy of such record or document from any office; ( e ) issuing commissions for the examination of witnesses or documents; ( f ) reviewing its decisions; ( g ) dismissing a representation for default or deciding it ex parte ; ( h ) setting aside any order of dismissal of any representation for default or any order passed by it ex parte ; and ( i ) any other matter which may be prescribed by the Central Government. (3) Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal in the same manner as if it were a decree made by a court in a suit pending therein, and it shall be lawful for the Tribunal or the Appellate Tribunal to send in the case of its inability to execute such order, to the court within the local limits of whose jurisdiction, ( a )in the case of an order against a company, the registered office of the company is situate; or ( b )in the case of an order against any other person, the person concerned voluntarily resides or carries on business or personally works for gain. (4) All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be judicial procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any officer to present his or its case before the Tribunal or the Appellate Tribunal, as the case may be. Explanation . For the purposes of this section, ( a ) chartered accountant means a chartered accountant as defined in clause ( b ) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act; ( b ) company secretary means a company secretary as defined in clause ( c ) of sub-section (1) of section 2 of the Companies Secretaries Act, 1980 (56 of 1980) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act; ( c ) cost accountant means a cost accountant as defined in clause ( b ) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act; ( d ) legal practitioner means an advocate, a vakil or any attorney of any High Court, and includes a pleader in practice. 10GE. Limitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch Tribunal in England having been established in 1660. In India also the first major Tribunal established was in the area of collection of tax, namely the Income Tax Appellate Tribunal. The Tribunals have gradually proliferated not only in India, but in many other jurisdictions as well, including UK and Australia. 9. The delivery of Justice through Tribunals other than ordinary courts of law in UK, was reviewed recently by Sir Andrew Leggatt, a former judge of the UK Court of Appeal, who submitted his report in March 2001. It is noted in that report that, in UK though there are 70 different administrative Tribunals which decide about the one million cases a year, only 20 of the Tribunals each decide more than 500 cases a year. The Tribunals, it was found, were not independent of the departments that sponsor them. The object of the review was, therefore, to recommend a system that is independent, coherent, professional, cost effective and user friendly . 10. The Leggatt report regards independence of the Tribunal as its most important requirement. The Report also emphasizes the need to satisfy users needs: "It should never be forgotten that the Tribunals exist for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They are both adjudicating bodies and they deal with and finally determine disputes between parties which are entrusted to the jurisdiction. . . . 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. 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 appropriate measures, to transfer a part of its judicial powers and functions to Tribunals by entrusting to them the task of adjudicating upon special matters and disputes between parties. It is really not possible or even expedient to attempt to describe exhaustively the features which are common to the Tribunals and the Courts, and features which are distinct and separate. The basis and the fundamental feature which is common to both the Courts and the Tribunals is that they discharge judicial functions and exercise judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reserved to the Judicial Branch through the device of specialised legislative Court is dramatically evidenced in the jurisdiction granted to the Courts created by the Act before us. The broad range of questions that can be brought into a Bankruptcy Court because they are related to cases under title 11 , 28 U.S. C. 1471 ( b ) at 54, is the clearest proof that even when Congress acts through a specialised Court, and pursuant to only one of its many Article I powers, appellants analysis fails to provide any real protection against the erosion of Article III jurisdiction by the unilateral action of the political Branches. In short, to accept appellants reasoning, would require that we replace the principles delineated in our precedents, rooted in history and the Constitution, with a rule of broad legislative discretion that could effectively eviscerate the constitutional guarantee of an independent Judicial Branch of the Federal Government." 17. Article I of the US Constitution vests all legislative powers in the Congress. Article III provides that : "The Judicial power of the United States shall vest in one Supreme Court, and in such inferior Courts as Congress may from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ( h ) regarding rent, its regulation and control, etc. was introduced into that Article by the Constitution (Seventy-fifth Amendment) Act, 1993 with effect from 15-5-1994. 21. Both Articles 323A and 323B provide for the law to be made by Parliament or other appropriate Legislature, excluding the jurisdiction of all Courts, except the jurisdiction of the Supreme Court under Article 136, with respect to the subject-matter of the law enacted under those Articles. A seven-Judge Bench of the Supreme Court in the case of L. Chandra Kumar v. Union of India (1997) 3 SCC 261, has held that the High Court s powers under Articles 226 and 227 cannot be so excluded. 22. In the case of L. Chandra Kumar ( supra ) it was also held that, "It is to be remembered that, apart from the authorisation that flows from Articles 323A and 323B, both Parliament and the State Legislatures possess legislative competence to effect changes in the original jurisdiction of the Supreme Court and the High Courts." 23. In the case of Union of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It will be seen that for a person to be appointed as a Presiding Officer of a Tribunal, he should be one who is qualified to be a District Judge and, in case of appointment of the Presiding Officer of the Appellate Tribunal he is, or has been, qualified to be a judge of a High Court or has been a member of the Indian Legal service who has held a post in Grade I for at least three years or has held office as the Presiding Officer of a Tribunal for at least three years. Persons who are so appointed as Presiding Officers of the Tribunal or of the Appellate Tribunal would be well versed in law to be able to decide cases independently and judiciously. It has to be borne in mind that the decision of the Appellate Tribunal is not final, in the sense that the same can be subjected to judicial review by the High Court under Articles 226 and 227 of the Constitution." (p. 293) 25. The Supreme Court in the case of State of Karnataka v . Vishwabharathi House Building Co-operative Society Ltd. [2003] 2 SCC 412 has observed, inter alia , that: "[T]. The legislative competence of Parliament and the State Legislatures respectively to provide for creation of Courts and Tribunals as envisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore necessarily to look at Schedule VII to the Constitution to ascertain the matters with reference to which the Tribunals may be set up. Parliament would be competent to set up Tribunals with regard to subjects enumerated in List I, while State Legislatures would be competent to set up Tribunals with regard to matters enumerated in List II. With regard to matters enumerated in List III, Parliament would have the power, and in case it has chosen not to exercise that power, the appropriate Legislature would have the power to establish Tribunals. 28. The inexorable logic of this is that the Courts can be denuded of the jurisdiction now vested in them, by creating separate or joint Tribunals with respect to each of the matters in the three lists. An example of this is the Debt Recovery Tribunal constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. A parallel Tribunal to deal with matters which are within the jurisdiction of the courts may also be set up as has been done in the case of Consumer Disputes Redressal Forums constituted under the Consumer Protection Act, 1986 and the Lok Adalats under the Amended Legal Services Authority Act. 29. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, control and other matters pertaining to the Tribunals. 32. The power of the Parliament and the Legislature to create Tribunals does not in our view, extend to rendering such new forums an extension of the legislative or executive branches of the Government, or as forums controlled, or designed to be dominated, or potentially dominated by the legislative or executive wing of the State. 33. It is worth noticing in this context, the decision of the Privy Council in the case of Hinds v. Queen/Director of Public Prosecutions v. Jackson [1976] 1 All ER 353, wherein the Privy Council considered the constitutional validity of the Gun. Court Act, 1974, which had been enacted by the Jamaican Parliament. Lord Diplock, who spoke for the majority, after referring to the Constitutions of Jamaica, Ceylon, Canada and Australia, inferred that there was a common drafting practice, which led by a necessary implication, to the establishment of a Government structure, which made provision for a legislative, executive and a judicial branch, and that it was taken for granted that the basic principle of separation of powers would apply to the exercise of the respective functions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the Constitution which entitled him to exercise the jurisdiction at the time when the Constitution came into force, was a duty which the Parliament had to scrupulously observe . 37. The Privy Council quoted with approval the words used by Viscount Simonds in Attorney General of Australia v. R Boilermakers Society of Australia [1957] 2 ALL ER 52 that: "It would make a mockery of the Constitution if Parliament could transfer the jurisdiction previously exercisable by holders of the judicial office named in Chapter VII of the Constitution, to holders of new judicial offices to which some different name was attached, and to provide that persons holding the new judicial offices should not be appointed in the manner and on the terms prescribed under Chapter VII for the appointment of the members of the Judicature." And observed: If this were the case, there would be nothing to prevent the Parliament from transferring the whole of the Judicial power of Jamaica (with two minor exceptions referred to below) to bodies composed of persons who not being members of "the judicature", could not be entitled to the protection of Chapter VII at all. 38. That even the lab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted either to the executive or Legislature, there would be danger of an improper complaisance to the branch, which possessed it . 41. Despite the differences in the written Constitutions of India and USA, and the unwritten constitution of UK, a common cherished constitutional value in all these countries whose legal systems are rooted in the common law, is the independence and impartiality of those entrusted with the exercise of the State s inherent judicial power. 42. The decisions of the larger Bench of the Supreme Court in the cases of Keshavananda Bharati v. State of Kerala AIR 1973 SC 1461 and the Constitution Bench in the case of Minerva Mills Ltd. v . Union of India AIR 1986 SC 2030, have held, inter alia , that an independent judiciary and it s power of judicial review are among the basic features of the Constitution. 43. The Constitution Bench in the case of S.P. Sampath Kumar v. Union of India [1987] 1 SCC 124, speaking through Bhagwathi, CJ., has held that: "It can no longer be disputed that total insulation of the judiciary from all forms of interference from the co-ordinate branches of the Government is a basic essential feature of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judicial powers. 47. Any other view, in the evocative language of Justice Brenner would effectively eviscerate the constitutional guarantee of an independent Judicial Branch. 48. Safeguards which ensure independence and impartiality are not for promoting personal prestige of the functionary but for preserving and protecting the rights of the citizens and others who are subject to the jurisdiction of the Tribunal, and for ensuring that such Tribunals will be able to command the confidence of the public. As said by Lord Denning. Justice is rooted in confidence . 49. Before proceeding further we must notice the submission made on behalf of the respondent that legislation even if found to be arbitrary cannot be struck down on that ground. Our attention was invited to the decision of the Supreme Court in the case of State of Bihar v. Bihar Distillery Ltd. (1997) 2 SCC 453, wherein it was inter alia observed that, the general averment that the Act is arbitrary is too vague to merit any acceptance, apart from the fact that an act of Legislature cannot be struck down merely saying it is arbitrary. 50. The Court in that case reiterated the law that had been laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t principles relevant in judging the validity and relevant in the matter of interpreting the provisions of such economic measures. The economic measures that was being considered in the case of Attorney General of India was validity of SAFEMA. In the case of Garg, Bhagwati, J, observed, There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. . There may even be possibilities of abuse but that too cannot of itself be a ground for invalidating the legislation because it is not possible for any Legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and provide against such distortions and abuses. . The court must, therefore, adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities or abuse of any of its provisions. If any crudities, inequities or by the possibilities of abuse come to light, the Legislature can always step in and enact suitable amendatory legislation. That is the essence of pragma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conduct. All that is provided for is that they would be eligible for reappointment which would only mean that they are not disqualified from being considered again without any assurance that they would be once again selected for appointment. 60. The short tenure of the Members undermines their independent functioning, as such persons will have to depend upon the executive Government and the selection committee in which four out of five members are serving officers of the Government, for their continuance in office. The scope for influencing their functioning is large. Sensitive matters involving ownership, control and functioning of Corporations involving heavy stakes will come up for adjudication before the Tribunal. Considering the manner in which business in India functions, the likelihood of attempts being made to being pressure and influence through political and executive branches on the Member is very real. The real possibility of their not being reappointed after such a short tenure, will disable them from functioning as truly independent and impartial adjudicators. The quality of justice rendered by such Members will not inspire much confidence among those who come bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the members to get used to the service jurisprudence and when the period is only five years, many would have to go out by the time they are fully acquainted with the law and have good grip over the job. To require retirement at the end of five years is thus neither convenient to the person selected for the job nor expedient to the scheme membership in other high-powered Tribunals like the Income-tax Appellate Tribunal or the Tribunal under the Customs Act can be referred to . 65. In those two Tribunals namely Income-tax Appellate Tribunal and the Customs and Excise Appellate Tribunal, the appointment once made is upto the age of retirement. 66. In the Tribunal constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 the term of office is five years. The appointees are or were District Judges. Similar terms of five years is provided for persons appointed as Members of the Consumer Forums under the Consumer Protection Act, 1986. 67. It is only in the Companies (Amendment) Act, 2002 and in the Competition Act, both enactments being of the year 2002, the term of office is specified as three years, even after the seven Judge Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with appropriate qualifications and charged with the exercise of judicial functions. 72. Limiting the tenure of the members of this Tribunal to three years would be detrimental to competence, independence, and impartiality of the new Tribunals. 73. The provision for retaining the lien is a provision which undermines the independence of the Tribunal. It would be reasonable to provide some time for the officer who chooses to come to the Tribunal within which he would make up his mind, as to whether he would like to remain in the Tribunal or go back to his service. Equally it is desirable for the appointing authority to watch the performance of the newly appointed member for a reasonable period of time. Allowing the Member to retain the lien for an indefinite period is clearly a provision which cannot be regarded as constitutional, having regard to the Functions which the Tribunal is required to perform. 74. Unless the term of office is fixed as at least five years with a provision for renewal, except in cases of incapacity, misconduct and the like, and the period for which lien may be retained is fixed at not more than one year, the constitution of the Tribunal cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided that a person appointed as a President as also a Member, may retain lien with his parent cadre or Ministry or Department while holding office as such . This is surprising and raises doubts as to whether reference to a person qualified to be a Judge of a High Court is, for the purpose of enabling persons in the Indian Legal Service or the Indian Company Law Service (Legal Branch) who had been advocates for ten years before joining such service, to be considered as being eligible to be appointed as President of the Tribunal. This is a disturbing provision. Even the high office of the President of the Tribunal is being allowed to be held by a person from the executive branch by regarding him as being qualified for appointment for the post of a Judge of a High Court on account of his having been an advocate for ten years or more prior to his joining the service. The reference to President must be deleted from the proviso in section 10FE. For Members, as already held, the lien should be limited to one year. 82. The qualifications prescribed for a Judicial Member in section 10FD(2) in sub-clauses ( a ) to ( d ) are qualifications to which no serious objection can be taken. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 87. It is difficult to see how knowledge of science, technology or industry can make for expertise in the specialised branch of company law. It is equally difficult to see the link, between qualifications and expertise in Economics, Banking, Industrial finance, Industrial Management, Industrial Reconstruction, administration, and investment, and marketing with expertise in company law. 88. The object of creating specialist Tribunals is not to provide a sinecure to persons who may be specialised in unrelated branches of knowledge, and vest precious judicial power in them in an area in which they are not competent. 89. So far as Law and Accountancy are concerned, they are relevant in this specialist Tribunal but for which provision has already been made in section 10FD(2) and section 10FD(3)( c ) and ( d ). 90. The ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to matters like oppression and mismanagement, matters relating to allotment of shares, amalgamation and restructuring of companies, or the priorities in the distribution of assets in the course of winding up, and such matters. 96. Any appointee under section 10FD(3)( f ), therefore, can have a role only in matters concerning revival and rehabilitation of sick industrial companies and not in relation to any other matters. 97. Section 10FD(3)( g ) is incongruous. The qualifications prescribed therein for appointment as a Technical Member is the holding or having held the office of Presiding Officer of a Labour Court, Tribunal or National Tribunal constituted under the Industrial Disputes Act. Persons who hold such posts are District Judges and for the National Tribunal, former Judges of the High Court, their training and expertise is in law and in adjudication of disputes. If their expert knowledge of Labour Law is what is sought to be utilised, a minimum period of three to five years experience as such Presiding Officer should be prescribed. Persons who satisfy the qualifications prescribed in section 10FD( f ) would be persons who would also satisfy the qualifications presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of fact after assessing the evidence without knowing legal principles to be applied for assessing the evidence. 102. A Constitution Bench of the Supreme Court in the case of National Textile Workers Union v. P. R. Ramakrishnan [1983] 53 Comp. Cas. 184/AIR 1983 SC 75, by a Majority, held that workers of the Company winding up of which is sought, are entitled to appear at the hearing of the winding up petition, whether to support or oppose it, so long as no winding up order was made by the Court. The Court did not hold that right of the workmen to be heard extended beyond and after the winding up order had been made. By reason of sections 10FD(3)( h ) and 10FL proviso a trade unionist is now a potential Judge for deciding as to whether company should be wound up, and in case a winding up order is made, be the sole Judge of all further proceedings in winding up. 103. The State s justification is that clause ( h ) only sets out as an independent provision a qualification which was required of a member of BIFR and that such Member s presence in the Tribunal is required as the Tribunal now has to deal with revival and rehabilitation of sick industrial companies. 104. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The choice of the Member Administration is not even to be made with the prior consent of the President or Chair Person. It is left to the sweet will of the Central Government to pick and choose among the 62 Members that it is empowered to appoint under section 10FC. The working of the Tribunal will run to rough weather in case of conflict in the view point of the President and the Member Administration. This power which has been given to the Central Government is wholly pernicious and will undermine the authority of the head of the Tribunal to ensure the effective and smooth functioning of the affairs of a Judicial Tribunal. 108. Sections 10FF and 10FK(2) should, therefore, 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 administration will discharge his functions in relation to finance and administration of the Tribunal under the overall control and supervision of the President. 109. There are also other inconsistencies in the manner in which several provisions concerning the Tribunal have been provided. Section 10FD(2)( a ) as also 10FD(2)( b ) specifies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the National Company Law Tribunal and the Appellate Tribunal is that these provisions have been drafted in haste and have not received the kind of attention that they should have. If they are the result of careful deliberation it only makes matters worse. The creation of a new substitute judicial forum which is to carry out the work which is now being carried out by 21 different High Courts in the country which work has been done in the High Court for over nine decades, is to be done with great care so that the new Tribunal will be efficient and effective alternate institutional forum to the High Courts and the Company Law Board. 114. Added to this is the haste with which the appointments to the posts has have been attempted. We have been told that the salaries payable to the President, the Chairperson and other Members has not been fixed by the Rules till date. Even the selection process has been set in motion with the candidates being in dark as to what kind of compensation they will receive if they were to be appointed to these posts. This is designed to deter the most suitable candidates from offering themselves for appointment and is a step which ought not to have been tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vacancies in the Income Tax Appellate Tribunal whose status and powers are no less than that of this Tribunal are regularly advertised. 118. The importance of advertising the posts of Members is obvious. A new specialist Tribunal is being created for the first time. That Tribunal is now being entrusted with the Judicial work which is now being carried out by the High Court. It is imperative that those who are eligible be made aware of the creation of these posts so that if they so choose, they can offer themselves as candidates. It would be extremely short sighted for the recruiting agency to withhold information regarding the availability of vacancies from the knowledge from those who are able, interested, qualified and are eligible, and make available the information only to a handful of persons. 119. The posts of chairperson of the Appellate Tribunal which is to be filled by a former judge of the Supreme Court or a former Chief Justice of a High Court, as also the post of President which we have held to be a post to be filled only by a former Judge of a High Court with at least five years of experience as such Judge, however, need not be advertised. Selection to those po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions in parts 1B and 1C of the Companies Act introduced by the Companies (Amendment) Act, 2002, which have been found to be defective inasmuch as they are in breach of the basic constitutional scheme of separation of powers and independence of the judicial function, are duly amended, by removing the defects that have been pointed out, it would be unconstitutional to constitute a Tribunal and Appellate Tribunal to exercise the jurisdiction now exercised by the High Courts or the Company Law Board. 124. Petitioners have also challenged the validity of certain provisions of the Companies (Amendment) Act, 2002, whereby certain powers currently exercised by the Company Law Board, some of which were earlier exercised by the Court, were transferred to the Central Government. Most of those powers are only tangentially judicial and are primarily administrative. There is no illegality in such transfer. 125. We place on record our appreciation to Mr. Arvind Datar, learned Senior Counsel for the Petitioner, whose research and cogent presentation has helped to clarify and bring out the significance of the issues involved, and to Mr. V.T. Gopalan, learned Additional Solicitor Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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