1997 (3) TMI 90 - SC - Income Tax

Clauses in arts.323A(2)(d) and 323B(3)(d) and exclusions under arts.226/227/32 struck down; tribunals must permit constitutional review

SC held that clauses in arts.323A(2)(d) and 323B(3)(d) and statutory provisions excluding High Court and Supreme Court jurisdiction under arts.226/227 and ... Basic structure doctrine - power of judicial review - exclusion of jurisdiction - alternative institutional mechanism - supplemental (not substitutional) role of tribunals - competence of tribunals to test vires of statutes and rules - bar on tribunal deciding vires of its parent statute - interpretation of single-Member Bench provision read with proviso - supervisory jurisdiction of High Courts under articles 226/227 - appellate route via High Court Division Bench prior to Supreme CourtBasic structure doctrine - exclusion of jurisdiction - power of judicial review - Constitutional validity of article 323A(2)(d) and article 323B(3)(d) insofar as they exclude the jurisdiction of the High Courts under articles 226/227 and of the Supreme Court under article 32 - HELD THAT: - The Court held that the power of judicial review vested in the High Courts under article 226/227 and in the Supreme Court under article 32 is an integral and essential feature of the Constitution's basic structure. Consequently, clauses in articles 323A and 323B which purport to wholly exclude that jurisdiction are unconstitutional to the extent of such exclusion. The reasoning draws upon precedents recognising judicial review as fundamental to the constitutional scheme and on the constitutional safeguards afforded to superior courts to ensure their independence. While the Constitution permits conferment of supplemental jurisdiction on other fora, it does not permit complete ouster of the constitutional courts' power to test legislative validity.Clause (2)(d) of article 323A and clause (3)(d) of article 323B are unconstitutional insofar as they exclude the jurisdiction of the High Courts under articles 226/227 and of the Supreme Court under article 32.Competence of tribunals to test vires of statutes and rules - supplemental (not substitutional) role of tribunals - bar on tribunal deciding vires of its parent statute - Whether Tribunals constituted under articles 323A and 323B can test the constitutional validity of statutory provisions and rules, and the limits of that competence - HELD THAT: - The Court held that tribunals created under articles 323A and 323B are competent to examine and decide questions as to the constitutional validity of statutory provisions and subordinate rules when such questions arise in matters within their jurisdiction. However, that competence is supplemental: tribunals cannot function as substitutes for High Courts and the Supreme Court. All tribunal decisions on such questions shall be subject to scrutiny by a Division Bench of the High Court within whose territorial jurisdiction the tribunal falls. An exception was recognised: a tribunal, being a creature of statute, shall not entertain a challenge to the constitutionality of its own parent enactment; such challenges may be directly taken to the High Court.Tribunals may test the vires of statutes and rules in cases before them, but their role is supplemental and their decisions are subject to review by a Division Bench of the appropriate High Court; they cannot adjudicate on the validity of the Act which creates them.Alternative institutional mechanism - supplemental (not substitutional) role of tribunals - appellate route via High Court Division Bench prior to Supreme Court - Whether tribunals as presently functioning are effective substitutes for High Courts in discharging judicial review and consequent modification of appellate/supervisory route - HELD THAT: - On analysis of experience, reports and case-law, the Court concluded that tribunals have not, in practice, been effective substitutes for High Courts. In order to preserve the basic-structure guarantee while maintaining tribunals as first-instance specialist fora, the Court directed that all tribunal decisions (other than challenges to the parent statute) be open to writ jurisdiction before a Division Bench of the relevant High Court. Consequently, direct recourse to the Supreme Court under article 136 from tribunal orders is no longer the normal route; parties must first move the Division Bench of the High Court, and thereafter may seek special leave to the Supreme Court. The new regime is prospective, leaving prior decisions undisturbed.Tribunals are not substitutes for High Courts; their decisions will be subject to review by a Division Bench of the relevant High Court and appeals to the Supreme Court will ordinarily follow from such High Court decisions.Interpretation of single-Member Bench provision read with proviso - competence of tribunals to test vires of statutes and rules - Constitutionality and interpretation of section 5(6) of the Administrative Tribunals Act, 1985 (single-Member Benches) - HELD THAT: - The Court upheld section 5(6) as constitutional when read harmoniously with its proviso and with section 5(2). Where a question involving constitutional validity of a statute or rule arises before a single-Member Bench, the proviso mandates that the Chairman or the Member refer the matter to a Bench of at least two Members, one of whom must be a judicial Member. Thus, constitutional questions will not be decided by a lone Member or by a Bench lacking a judicial Member; this reading removes the constitutional infirmity alleged.Section 5(6) is valid when construed to require referral to a two-Member Bench including a judicial Member whenever questions of vires of a statute or rule arise.Supervisory jurisdiction of High Courts under articles 226/227 - administrative supervision and independence of tribunals - Administrative supervision, composition and institutional arrangements necessary to make tribunals conform to founding objectives - HELD THAT: - The Court observed deficiencies in tribunal functioning (appointments, tenure, administration, funds) and refused to make High Courts the administrative supervisors. Instead it recommended placing tribunals under a single nodal Ministry (preferably the Ministry of Law) or an independent supervisory agency to oversee administration, ensure selection standards, protect independence and uniformity, and implement remedial measures. It also noted the Selection Committee now includes a Supreme Court judge nominated by the Chief Justice of India, which should improve appointments. The Court left detailed implementation to executive and expert bodies.Tribunal administration and appointment arrangements must be reformed; tribunals should be brought under a single nodal administrative agency to secure independence and efficacy rather than placed under High Court supervision.Remand for consideration by Division Bench - Application of the Court's principles to individual matters in the batch - HELD THAT: - The Court directed that the individual matters making up the batch be listed before appropriate Division Benches so that the general principles stated in this judgment can be applied to the specific facts of each case. This step is procedural: the larger Bench's conclusions are to guide the Division Benches in disposal of the pending cases.All individual cases are to be listed before Division Benches for decision in accordance with the principles laid down in this judgment (remand for application to individual facts).Final Conclusion: The writ and supervisory jurisdiction of the High Courts under articles 226/227 and the Supreme Court under article 32 form part of the Constitution's basic structure and cannot be wholly ousted by articles 323A/323B or by statutes made thereunder; tribunals under those articles may test the vires of statutes and rules (but not their own parent enactment), yet act only in a supplemental capacity with their decisions subject to review by a Division Bench of the appropriate High Court; section 5(6) of the Administrative Tribunals Act is constitutional when read to require referral to a two-Member Bench including a judicial Member for questions of vires; administrative and selection reforms for tribunals are directed and individual cases are to be listed before Division Benches for disposal under these principles. Issues Involved:1. Exclusion of High Courts' jurisdiction under Articles 226/227 and Supreme Court under Article 32 by Articles 323A(2)(d) and 323B(3)(d).2. Competence of Tribunals to test the constitutional validity of statutory provisions/rules.3. Effectiveness of Tribunals as substitutes for High Courts in judicial review.Detailed Analysis:Issue 1: Exclusion of High Courts' JurisdictionThe primary issue was whether the exclusion of the jurisdiction of High Courts under Articles 226/227 and the Supreme Court under Article 32 by Articles 323A(2)(d) and 323B(3)(d) of the Constitution is constitutional. The judgment held that the power of judicial review vested in the High Courts and the Supreme Court is an integral and essential feature of the Constitution, constituting part of its basic structure. It was concluded that the jurisdiction of the High Courts under Articles 226/227 and the Supreme Court under Article 32 cannot be wholly excluded. The judgment emphasized that while the Tribunals can perform a supplemental role in judicial review, they cannot act as substitutes for the High Courts and the Supreme Court. Consequently, Articles 323A(2)(d) and 323B(3)(d) were declared unconstitutional to the extent they exclude the jurisdiction of the High Courts and the Supreme Court.Issue 2: Competence of Tribunals to Test Constitutional ValidityThe judgment affirmed that Tribunals created under Articles 323A and 323B possess the competence to test the constitutional validity of statutory provisions and rules. However, their decisions are subject to scrutiny by a Division Bench of the High Court within whose jurisdiction the Tribunal falls. The judgment clarified that Tribunals cannot entertain questions regarding the vires of their parent statutes, which should be directly addressed by the High Courts. The Tribunals will continue to act as courts of first instance for the areas of law for which they have been constituted, but their decisions will be subject to High Court review.Issue 3: Effectiveness of Tribunals as Substitutes for High CourtsThe judgment acknowledged that the Tribunals, as they are functioning, have not been effective substitutes for the High Courts in discharging the power of judicial review. It was noted that the Tribunals have faced issues such as lack of competence, objectivity, judicial approach, and administrative supervision. The judgment recommended measures to improve the functioning of the Tribunals, including ensuring that they are manned by members with judicial experience and placing them under a single nodal Ministry, preferably the Ministry of Law, for better administrative supervision. The judgment also suggested that the decisions of the Tribunals be subject to review by a Division Bench of the High Court to ensure judicial oversight and maintain the sanctity of judicial proceedings.Conclusion:The judgment concluded that Articles 323A(2)(d) and 323B(3)(d) are unconstitutional to the extent they exclude the jurisdiction of the High Courts and the Supreme Court. The Tribunals have the competence to test the constitutional validity of statutory provisions and rules, but their decisions are subject to scrutiny by the High Courts. The Tribunals must function as effective supplemental bodies to the High Courts, and measures should be taken to improve their functioning and ensure judicial oversight. The judgment emphasized the importance of maintaining the power of judicial review as an integral part of the basic structure of the Constitution.