TMI Blog2010 (5) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - CIVIL APPEAL NOS. 3067 OF 2004 AND 3717 OF 2005 - - - Dated:- 11-5-2010 - K.G. BALAKRISHNAN, R.V. RAVEENDRAN, D.K. JAIN, P. SATHASIVAM AND J.M. PANCHAL, JJ. Parag P. Tripathy, Arvind P. Datar, Amey Nargolkar, Arti Gupta, Vismai Rao, Gaurav Agarwal, Kunal Bahri, Varun Sarin, Anubha Agarwal, Sushma Suri, Navin Prakash, Ananth Padmanabhan, Nikhil Nayyar, TVS Raghavendra Sreyas, Ambuj Agrawal and Suchindran B. N. for the Appearing Parties. JUDGMENT R.V. Raveendran, J. - These appeals arise from the order dated 30-3-2004 of the Madras High Court in WP No. 2198/2003 filed by the President of Madras Bar Association ( MBA for short) challenging the constitutional validity of Chapters 1B and 1C of the Companies Act, 1956 ( Act ) inserted by Companies (Second Amendment) Act, 2002 ( Amendment Act for short) providing for the constitution of National Company Law Tribunal ( NCLT or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to inordinate 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 insol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC 124, L. Chandrakumar v. Union of India 1997 (3) SCC 261; 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union Government has submitted that in view of the proposed longer tenure of five years as against 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the observations of the High Court would amount to judicial legislation. Section 10FD(3)( h ) : Qualification of Technical Member 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 Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt or who is or has been an officer not below the rank of a Secretary to the Government who has been a member of the Board for not less than three years. The 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 Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns traditionally performed by courts in any Tribunal or authority outside the judiciary? ( iii )Whether the "wholesale transfer of powers" as contemplated by the Companies (Second Amendment) Act, 2002 would offend 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccountants Act, 1959 (23 of 1959); or ( e )is, or has been, for at least fifteen years working experience as a Secretary in whole-time practice as defined in clause (45A) of section 2 of this Act and is a member of the Institute of the Companies Secretaries of India constituted under the Company Secretaries Act, 1980 (56 of 1980); or ( f )is a person of ability, integrity and standing having special 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 )"Judici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (3) of section 10FD : Provided that it shall be competent for the Members authorised in this behalf to function as a Bench consisting of a single Member and exercise the jurisdiction, powers and authority of the Tribunal in respect of such class of cases or such matters pertaining to such class 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late Tribunal shall be a person who has been a Judge of the Supreme Court or the Chief Justice of a High Court. (3) A Member of the Appellate Tribunal shall be a person of ability, integrity and standing having special knowledge of, and professional experience of not less than twenty-five years in, science, technology, economics, 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. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force. 10GF. Appeal to Supreme Court. - Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh all courts are Tribunals". The word "courts" is used to designate those Tribunals which are set up in an organized State for the administration of justice. By administration of justice is meant the exercise of juridical power of the state to maintain and uphold rights and to punish "wrongs". Whenever there is an infringement of a right or an injury, the courts are there to restore the vinculum juris, which is disturbed........ 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 lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters under consideration." That an officer is required to decide matters before him "judicially" in the second sense does not make him a Court or even a Tribunal, because that only establishes that he is following a standard of conduct, and is free from bias or interest. Courts and Tribunals act "judicially" in both senses, and in the term "Court" are included the ordinary and permanent Tribunals and in the term "Tribunal" 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to their jurisdiction. The procedure followed by the courts is regularly prescribed and in discharging their functions and exercising their powers, the courts have to conform to that procedure. The procedure which the Tribunals have to follow may not always be so strictly prescribed, but the approach adopted by both the courts and the Tribunals is substantially the same, and there is no essential difference between the functions that they discharge. 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 K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (from others in the Judiciary) and without (from the Executive). 16. In Union of India v. Sankalchand Himatlal Sheth 1977 (4) SCC 193, a Constitution Bench of this Court explained the importance of Independence of Judiciary thus : "Now the independence of the judiciary is a fighting faith of our Constitution. Fearless justice is a cardinal creed of our founding document. It is indeed a part of our ancient tradition which has produced great judges in the past. In England too, from where 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e public interest and that the necessity for maintaining independence of judiciary is to ensure a fair and effective administration of justice." The framers of the Constitution stated in a Memorandum (" See The Framing of India s Constitution - B. Shiva Rao, volume I-B, Page 196) : "We have assumed that it is recognized on all hands that the independence and integrity of the judiciary in a democratic system of Government is of the highest importance and interest not only to the judges but to the citizens at 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 wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be separated from the executive and that the agitation was based upon the assumption that unless they were separated, the independence of the judiciary at the lower levels would be a mockery. So article 50 of the Directive Principles of Policy states that the State shall take steps to separate the judiciary from the executive in the public services of the States. Simply stated, it means that there shall be a separate judicial service free from the executive control." In Indira Nehru Gandhi v. Raj Narain 1975 Supp. SCC 1, this Court observed that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te procedural laws and highly technical Evidence Law. To ensure fair play and avoidance of judicial error, the procedural laws provide for appeals, revisions and reviews, and allow parties to file innumerable applications and raise vexatious objections as a result of which the main matters get pushed to the background. All litigation in courts get inevitably delayed which leads to frustration and dissatisfaction among litigants. In view of the huge pendency, courts are not able to bestow attention and give priority to cases arising under special legislations. Therefore, there is a 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tively little legal content, and in such cases a Tribunal, usually consisting of a legally qualified Tribunal judge and two lay members, may be preferred to a court. Indeed dissatisfaction with the over-technical and allegedly unsympathetic approach of the courts towards social welfare legislation led to a transfer of functions to special Tribunals; the Workmen s Compensation Acts were administered by the ordinary courts, but the National Insurance (Industrial Injuries) scheme was applied by Tribunals. It is, however, unrealistic to imagine that technicalities and difficult legal issues 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 merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hear more than 500 cases a year and many are defunct. Their quality varies from excellent to inadequate. Our terms of reference require them to be rendered coherent. So they have to be rationalized and modernized; and this Review has as its four main objects : first, to make the 70 Tribunals into one Tribunals System that its members can be proud of; secondly, to render the tribunals independent of their sponsoring departments by having them administered by one Tribunals Service; thirdly, to improve the training of chairmen and members in the interpersonal skills peculiarly required by Tribunals; and 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 fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As a result of the said Act, the appointments to Tribunals are on the recommendations of a Judicial Appointments Commission. The sponsoring Department (that generates the disputes that the Tribunal will have to decide) has no say in the appointments. Neither the infrastructure nor the staff are provided to the Tribunals by the sponsoring Parent Department. The Tribunals have become full-fledged part of Judicial system with no connection or link with the parent department . A common Tribunal service has been established as an executing agency in the Ministry of Law Justice. 22. This Court, in L. Chandra 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al functions of the State except those that are excluded by law from their jurisdiction. Section 9 of Code of Civil Procedure, for example, provides that the courts shall have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred. 25. Article 32 provides that without prejudice to the powers conferred on the Supreme Court by clauses ( 1 ) and ( 2 ) of the said Article, Parliament may by law, empower any other court to exercise within the local limits of its jurisdiction all or any of the powers exercisable by the Supreme Court under clause ( 2 ) of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of any tax; ( b )foreign exchange, import and export across customs frontiers; ( c )industrial and labour disputes; ( d )land reforms by way of acquisition by the State of any estate as defined in article 31A or of any rights therein or the extinguishment or modification of any such rights or by way of ceiling on agricultural land or in any other way; ( e )ceiling on urban property; ( f )elections to either House of Parliament or the House or either House of the Legislature of a State, but excluding the matters referred to in article 329 and article 329A; ( g )production, procurement, supply and distribution of foodstuffs (including 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-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( g ) contain such supplemental, incidental and consequential provisions (including provisions as to fees) as Parliament may deem necessary for the effective functioning of, and for the speedy disposal of cases by, and the enforcement of the orders of, such Tribunals. contain such supplemental, incidental and consequential provisions (including provisions as to fees) as the appropriate Legislature may deem necessary for the effective functioning of, and for the speedy disposal of cases by, and the enforcement of the orders of, such Tribunals. 27. In L. Chandra Kumar s case ( supra ), this Court held that clause 2( d ) of Article 323A and clause 3( d ) of Article 323B, to the extent they empower Parliament and State Legislature to totally exclude the jurisdiction of all courts except the jurisdiction of the Supreme Court under Article 136, in regard to the disputes and complaints referred to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bar Parliament from legislating on a matter, even if other provisions of the Constitution enable it to do so." The power of Parliament to enact a law which is not covered by an entry in Lists II and III is absolute. The power so conferred by Article 246 is in no way affected or controlled by Article 323A or 323B. MBA contends that if the power to enact a law to constitute Tribunals was already in existence with reference to the various fields of legislation enumerated in the Seventh Schedule, there was no need for enacting Articles 323A or 323B conferring specific power to Legislatures to make laws for constitution of Tribunals. It is their contention that the very fact that Articles 323A and 323B have been specifically enacted empowering the concerned Legislature to make a law constituting Tribunals in regard to the matters enumerated therein, demonstrated that Tribunals cannot be constituted in respect of matters other than those mentioned in the said Articles 323A 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 jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing for appeals, revisions and references to be heard by the High Courts, jurisdiction can also be taken away by deleting the provisions for appeals, revisions or references. It also follows that the Legislature has the power to create Tribunals with reference to specific enactments and confer jurisdiction on them to decide disputes in regard to matters arising from such special enactments. Therefore it cannot be said that Legislature has no power to transfer judicial functions traditionally performed by courts to Tribunals. 33. The argument that there cannot be whole-sale transfer of powers is misconceived. It is nobody s case that the entire functioning of courts in the country is transferred to Tribunals. The competence of the Parliament to make a law creating Tribunals to deal with disputes arising under or relating to a particular statute or statutes cannot be disputed. When a Tribunal is constituted under the Companies Act, empowered to deal with disputes arising under the said 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 consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided by courts and which disputes will be decided by Tribunals, it is subject to constitutional limitations, without encroaching upon the independence of judiciary and keeping in view the principles of rule of Law and separation of powers. If Tribunals are to be vested with judicial power hitherto vested in or exercised by courts, such Tribunals should possess the independence, security and capacity associated with courts. If the Tribunals are intended to serve an area which requires specialized knowledge or expertise, no doubt there can be Technical Members in addition to Judicial Members. Where however jurisdiction to try certain category of cases are transferred from Courts to Tribunals only to expedite the hearing and disposal or relieve from the rigours of the Evidence Act and procedural laws, there is obviously no need to have any non-judicial Technical Member. In respect of such Tribunals, only members of the Judiciary should be the Presiding Officers/members of such Tribunals. Typical examples of such special Tribunals are Rent Tribunals, Motor Accident Tribunals and Special Courts under several Enactments. Therefore, when transferring the jurisdiction exercised by Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g shifted from High Court, or District Court or a Civil Judge, the yardstick will differ. It is for the court which considers the challenge to the qualification, to determine whether the legislative power has been exercised in a manner in consonance with the constitutional principles and constitutional guarantees. We may examine this question with reference to the company jurisdiction exercised by the High Court for nearly a century being shifted to a Tribunal on the ground that Tribunal consisting of a Judicial and Technical Members will be able to dispose of the matters expeditiously and that the availability of expertise of the Technical Members will facilitate the decision making to be more practical, effective and meaningful. Does this mean that the Legislature can provide for persons not properly qualified to become members? Let us take some examples. Can the Legislature provide that a law graduate with a masters degree in company law can be a Judicial Member without any experience as a lawyer or a judge? 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 Judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers of the Tribunal are able to discharge judicial functions, the said provisions cannot pass the scrutiny of the higher Judiciary. We may in this context recall the words of Mathew, J in Kesavananda Bharati Sripadagalavaru s case ( supra ) in a different context: "I am not dismayed by the suggestion that no yardstick is furnished to the Court except the trained judicial perception for finding the core or essence of a right, or the essential features of the Constitution. Consider for instance, the test for determining citizenship in the United States that the alien shall be a person of "good moral character" the test of a crime involving "moral turpitude", the test by which you determine the familiar concept of the "core of a contract", the "pith and substance" of a legislation or the "essential legislative function" in the doctrine of delegation. Few Constitutional issues can be presented in black and white terms. What are essential features and non-essential features of the Constitution ? Where does the core of a right end and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te in different fields and are therefore subject to different limitations." The view was also reiterated and explained by Beg. CJ in his leading judgment of a seven-Judge Bench in the State of Karnataka v. Union of India 1977 (4) SCC 608. He held that in every case where reliance is placed upon the doctrine of basic structure, in the course of an attack upon legislation, whether ordinary or constituent (in the sense that it is an amendment to the Constitution) what is put forward as part of a basic structure must be justified by reference to the express provision of the Constitution. He further held : "The one principle, however, which is deducible in all the applications of the basic structure doctrine, which has been used by this Court to limit even the power of Constitutional amendment, is that whatever is put forward as a basic limitation upon legislative power must be correlated to one or more of the express provisions of the Constitution from which the limitation should naturally and necessarily spring forth. The doctrine of basic structure, as explained above, requires that any limitation on legislative power must be so definitely discernible from the provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Judges who are independent and impartial; and that disputes as to legality of acts of the Government will be decided by Judges who are independent of the Executive. Another facet of Rule of Law is equality before law. The essence of equality is that it must be capable of being enforced and adjudicated by an independent judicial forum. Judicial independence and separation of judicial power from the Executive are part of the common law traditions implicit in a Constitution like ours which is based on the Westminster model. 41. The fundamental right to equality before law and equal protection of laws guaranteed by Article 14 of the Constitution, clearly includes a right to have the person s rights, adjudicated by a forum which exercises judicial power in an impartial and independent manner, consistent with the recognized principles of adjudication. Therefore wherever access to courts to enforce such rights is sought to be abridged, altered, modified or substituted by directing him to approach an alternative forum, such legislative act is open to challenge if it violates the right to adjudication by an independent forum. Therefore, though the challenge by MBA is on the ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted by Judges : "An insolvency law will need to provide for an institutional framework for its implementation. Since the adjudication of disputes is a judicial function, insolvency proceedings should be conducted under the authority of a court of law where judges will, at a minimum, be required to adjudicate disputes between the parties on factual issues and, on occasion, render interpretations of the law. The judiciary will only be able to fulfil this function if it is made up of independent judges with particularly high ethical and professional standards." Learned counsel for MBA also referred to certain decisions of foreign Courts which may not be relevant in the Indian constitutional context. In particular, the decisions of US courts may not be relevant as Indian Constitution does not envisage a strict separation of powers which require judicial power to be exclusively vested in courts. In India, certain amount of overlapping exists and the Executive has been discharging judicial functions in several identified areas. 44. We may summarize the position as follows : ( a )A Legislature can enact a law transferring the jurisdiction exercised by courts in regard to any sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 1B and 1C of the Act by applying the aforesaid principles. The issue is not whether judicial functions can be transferred from courts to Tribunals. The issue is whether judicial functions can be transferred to Tribunals manned by persons who are not suitable or qualified or competent to discharge such judicial powers or whose independence is suspect. We have already held that the Legislature has the competence to transfer any particular jurisdiction from courts to Tribunals provided it is understood that the Tribunals exercise judicial power and the persons who are appointed as President/Chairperson/Members are of a standard which is reasonably approximate to the standards of main stream Judicial functioning. On the other hand, if a Tribunal is packed with members who are drawn from the civil services and who continue to be employees of different Ministries or Government Departments by maintaining lien over their respective posts, it would amount to transferring judicial functions to the executive which would go against the doctrine of separation of power and independence of judiciary. 46. Legislature is presumed not to legislate contrary to rule of law and therefore know tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who possess tremendous sincerity, drive and initiative and who have remarkable capacity to resolve and overcome administrative problems of great complexity. But what is needed in a judicial Tribunal which is intended to supplant the High Court is legal training and experience." 48. As far as the Technical Members are concerned, the officer should be of at least Secretary Level Officer with known competence and integrity. Reducing the standards, or qualifications for appointment will result in loss of confidence in the Tribunals. We hasten to add that our intention is not to say that the persons of Joint Secretary level are not competent. Even persons of Under Secretary level may be competent to discharge the functions. There may be brilliant and competent people even working as Section Officers or Upper Division Clerks but that does not mean that they can be appointed as Members. Competence is different from experience, maturity and status required for the post. As, for example, for the post of a Judge of the High Court, 10 years practice as an Advocate is prescribed. There may be Advocates who even with 4 or 5 years experience, may be more brilliant than Advocates with 10 y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of five years. For being appointed as Administrative Member, the qualification was that the candidate should have served as Secretary to the Government of India or any other post of the Central or State Government carrying the scale of pay which is not less than as of a Secretary of Government of India for at least two years, or should have held the post of Additional Secretary to the Government of India or any other post of Central or State Government carrying the scale of pay which is not less than that of an Additional Secretary to the Government of India at least for a period of five years. In other words, matters that were decided by the High Courts could be decided by a Tribunal whose members could be two Secretary level officers with two years experience or even two Additional Secretary level officers with five years experience. This was the first dilution. The members were provided a term of office of five years and could hold office till 65 years and the salary and other perquisites of these members were made the same as that of High Court Judges. This itself gave room for a comment that these posts were virtually created as sinecure for members of the executive to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oblems relating to Company Law can become a Member. This means that the cases which were being decided by the Judges of the High Court can be decided by two-members of the civil services - Joint Secretary level officers or officers holding Group A posts or equivalent posts for 15 years, can now discharge the functions of High Court. This again has given room for comment that qualifications prescribed are tailor made to provide sinecure for a large number of Joint Secretary level officers or officers holding Group A posts to serve up to 65 years in Tribunals exercising judicial functions. 49.5 The dilution of standards may not end here. The proposed Companies Bill, 2008 contemplates that any member of Indian Legal Service or Indian Company Law Service (Legal Branch) with only ten years service, out of which three years should be in the pay scale of Joint Secretary, is qualified to be appointed as a Judicial Member. The speed at which the qualifications for appointment as Members is being diluted is, to say the least, a matter of great concern for the independence of the Judiciary. 50. When Administrative Tribunals were constituted, the presence of members of civil servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lawyers (The Douglas Letters : Selections from the Private Papers of William Douglas, edited by Melvin L. Urofsky - 1987 - Adler and Adler.) : "... The Constitution and the Bill of Rights were designed to get Government off the backs of people - all the people. Those great documents did not give us the welfare State. Instead, they guarantee to us all the rights to personal and spiritual self-fulfilment. But that guarantee is not self-executing. As nightfall does not come all at once, neither does oppression. In both instances, there is a twilight when everything remains seemingly unchanged. And it is in such twilight that we all must be most aware of change in the air - however slight lest we become unwitting victims of the darkness." 53. The only reason given by Eradi Committee for suggesting transfer of the company law jurisdiction from High Courts to Tribunals is delay, as is evident from the following : "24. Long drawn court proceedings. Multiplicity of court proceedings is the main reason for abnormal delay in dissolution of companies. The proceedings are filed by OL under sections 446, 454, 468 and 542/543 for non-submission of Statement of Affairs, non-producti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. This entails delays due to normal court proceedings. In contract, by and large, there is hardly any interference by the court in case of companies under voluntary winding up." Eradi Committee merely recommended setting up separate Tribunals to exclusively deal with company matters and transfer of company law jurisdiction from High Court to such Tribunals. Tribunals with only Judicial Members would have served the purpose sought to be achieved. It did not suggest that such Tribunals should have Technical Members . Nor did it suggest introduction of officers of civil services to be made Technical Members. The jurisdiction relating to company case which the High Courts are dealing with can be dealt with by Tribunals with Judicial Members alone. Be that as it may. 54. Parts 1C and 1D of the Companies Act proposes to shift the company matters from the courts to Tribunals, where a Judicial Member and a Technical Member will decide the disputes. If the members are selected as contemplated in section 10FD, there is every likelihood of most of the members, including the so called Judicial Members not having any judicial experience or company law experience and such members b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal service will at best enable them to be considered for appointment as Technical Members. ( ii )As the NCLT takes over the functions of High Court, the members should as nearly as possible have the same position and status as High Court Judges. This can be achieved, not by giving the salary and perks of a High Court Judge to the members, but by ensuring that persons who are as nearly equal in rank, experience or competence to High Court Judges are appointed as members. Therefore, only officers who are holding the ranks of Secretaries or Additional Secretaries alone can be considered for appointment as Technical Members of the National Company Law Tribunal. ( iii )Clauses ( c ) and ( d ) of sub-section (2) and clauses ( a ) and ( b ) of sub-section (3) of section 10FD which provide for persons with 15 years experience in Group A post or persons holding the post of Joint Secretary or equivalent post in Central or State Government, being qualified for appointment as Members of Tribunal is invalid. ( iv )A Technical Member presupposes an experience in the field to which the Tribunal relates. A member of Indian Company Law Service who has worked with Accounts Branch or offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned field. A term of three years is very short and by the time the members achieve the required knowledge, expertise and efficiency, one term will be over. Further the said term of three years with the retirement age of 65 years is perceived as having been tailor-made for persons who have retired or shortly to retire and encourages these Tribunals to be treated as post-retirement havens. If these Tribunals are to function effectively and efficiently they should be able to attract younger members who will have a reasonable period of service. ( xi )The second proviso to section 10FE enabling the President and members to retain lien with their parent cadre/Ministry/department while holding office as President or Members will not be conducive for the independence of members. Any person appointed as members should be prepared to totally disassociate himself from the Executive. The lien cannot therefore exceed a period of one year. ( xii )To maintain independence and security in service, sub-section (3) of section 10FJ and section 10FV should provide that suspension of the President/Chairman or Member of a Tribunal can be only with the concurrence of the Chief Justice of India. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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