Tribunal independence and executive control in company law were tested, with the tribunal scheme found constitutionally defective as framed.

Parliament had competence to create company law tribunals, but the tribunal scheme was held unconstitutional because its design did not secure real independence from executive control. The short tenure, retention of lien with parent service, executive-dominated selection, vague qualification criteria, and central control over finance and administration were said to compromise impartiality and judicial character, including in winding-up matters. The transfer of mainly administrative powers to the Central Government was upheld because it did not intrude on the core judicial function. The constitutional defect was confined to the tribunal provisions as framed, which required suitable amendment before valid exercise of the transferred jurisdiction.

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Issues: (i) Whether the provisions introduced in Parts IB and IC of the Companies Act providing for constitution, composition, tenure, qualifications, selection, administration and functioning of the National Company Law Tribunal and the National Company Law Appellate Tribunal were constitutionally valid; (ii) Whether transfer of certain mainly administrative powers to the Central Government under the amending law was invalid.

Issue (i): Whether the provisions introduced in Parts IB and IC of the Companies Act providing for constitution, composition, tenure, qualifications, selection, administration and functioning of the National Company Law Tribunal and the National Company Law Appellate Tribunal were constitutionally valid.

Analysis: Parliament had competence to create tribunals for company law matters, but the impugned scheme conferred adjudicatory power on bodies whose composition and control remained too closely tied to the executive. The very short tenure, retention of lien with parent service, executive-dominated selection process, broad and ill-defined qualification clauses, and the placement of financial and administrative control in a Member Administration chosen by the Central Government undermined the independence and impartiality expected of a judicial forum. Certain provisions also permitted persons without sufficient company-law expertise to exercise decisive judicial functions, including winding-up matters, thereby compromising the specialist character of the tribunal.

Conclusion: The impugned provisions in Parts IB and IC were held unconstitutional to the extent they permitted constitution of the Tribunal and Appellate Tribunal in their then form; they were required to be suitably amended before such bodies could validly exercise the transferred jurisdiction.

Issue (ii): Whether transfer of certain mainly administrative powers to the Central Government under the amending law was invalid.

Analysis: The powers challenged under this head were found to be largely administrative or only tangentially judicial. Their transfer did not trench upon the core judicial function in the manner complained of in relation to the tribunal provisions.

Conclusion: The transfer of those powers to the Central Government was upheld.

Final Conclusion: The challenge succeeded in substance against the tribunal scheme as framed, but not against the transfer of the more administrative powers. The result was a partial success for the petitioner with constitutional invalidity confined to the defective tribunal provisions until they were cured by amendment.

Ratio Decidendi: A tribunal entrusted with the exercise of judicial power must be structured so as to secure real independence, impartiality and institutional insulation from executive control; provisions that materially undermine those guarantees offend the constitutional scheme even where Parliament has legislative competence to create the tribunal.

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