Tribunal law on bank debt recovery upheld for competence but struck down for arbitrariness, executive control, and weak judicial independence.

Parliament's competence to create specialised tribunals for bank debt recovery was upheld, as Articles 323A and 323B were not treated as exhaustive and the power to administer justice in the Seventh Schedule was read broadly. The Act was nevertheless held unconstitutional because it gave banks a one-sided recovery process, denied debtors set-off and counter-claim, excluded ordinary civil court jurisdiction, and placed the tribunal under executive control, thereby undermining judicial independence and Article 14. The appointment of the Presiding Officer was also invalid because the prescribed District Judge qualification was not shown to be satisfied, and the tribunal notification was quashed with pending matters transferred to the High Court.

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Issues: (i) Whether Parliament had legislative competence to enact the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and to constitute debt recovery tribunals outside Articles 323A and 323B of the Constitution; (ii) Whether the Act was unconstitutional for eroding judicial independence and violating Article 14 by creating an arbitrary and discriminatory recovery mechanism without provision for set-off or counter-claim; (iii) Whether the appointment of the third respondent as Presiding Officer of the Tribunal was valid.

Issue (i): Whether Parliament had legislative competence to enact the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and to constitute debt recovery tribunals outside Articles 323A and 323B of the Constitution.

Analysis: The constitutional scheme was examined with reference to the legislative entries and Part XIV-A. It was held that Articles 323A and 323B were not exhaustive or exclusionary of all tribunal legislation, and that the expression "administration of justice" in Entry 11-A of List III was wide enough to include tribunals. Parliament could therefore create a tribunal for a special field such as recovery of bank debts even though the Act did not fall within Article 323B.

Conclusion: The challenge to legislative competence failed; Parliament could constitute such a tribunal.

Issue (ii): Whether the Act was unconstitutional for eroding judicial independence and violating Article 14 by creating an arbitrary and discriminatory recovery mechanism without provision for set-off or counter-claim.

Analysis: The Act was found to confer a drastic and one-sided recovery procedure in favour of banks and financial institutions, while denying the debtor comparable procedural rights such as set-off and counter-claim before the Tribunal. The Tribunal was also placed under the executive's control in matters of appointment and administration, and the ordinary civil courts' jurisdiction was ousted. The Court held that this structure undermined the independence of the judiciary and created an irrational and discriminatory classification lacking adequate safeguards.

Conclusion: The Act was held to be unconstitutional as being arbitrary, unreasonable and violative of Article 14, and as eroding judicial independence.

Issue (iii): Whether the appointment of the third respondent as Presiding Officer of the Tribunal was valid.

Analysis: The prescribed qualification required that the appointee be, or have been, or be qualified to be, a District Judge. On the material before the Court, the third respondent was not shown to satisfy the Delhi qualification for appointment as a District Judge, and the appointment was therefore unsustainable.

Conclusion: The appointment of the third respondent was invalid and was set aside.

Final Conclusion: The Act was struck down, the impugned tribunal notification was quashed, and the matters pending before the Tribunal were directed to stand transferred to the original side of the High Court.

Ratio Decidendi: A tribunal statute that confers a unilateral recovery procedure, excludes ordinary civil court jurisdiction, and places adjudicatory machinery under executive control so as to impair judicial independence and create arbitrary inequality is unconstitutional, even if Parliament otherwise has competence to create tribunals for specialised subjects.

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