TaxTMI 
TaxTMI 
2010 (5) TMI 393
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....l Company Law Tribunal ('NCLT' or 'Tribunal') and National Company Law Appellate Tribunal ('NCLAT' or 'Appellate Tribunal'). 2. In the said writ petition, Madras Bar Association ('MBA') raised the following contentions :- (i)Parliament does not have the legislative competence to vest intrinsic judicial functions that have been traditionally performed by the High Courts for nearly a century in any Tribunal outside the Judiciary. (ii)The constitution of the National Company Law Tribunal and transferring the entire company jurisdiction of the High Court to the Tribunal which is not under the control of the Judiciary, is violative of the doctrine of separation of powers and independence of the Judiciary which are parts of the basic structure of the Constitution. (iii)Article 323B of the Constitution enables the appropriate Legislature to provide for adjudication or trial by Tribunals of disputes, complaints or offences with respect to all or any of the matters specified in clause (2). Clause (2) enumerate the matters in regard to which Tribunals can be constituted. The said list is exhaustive and not illustrative. The list does not provide for constitution of Tribunal for i....
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....nsolvency prevailing in industrially advanced countries, the Committee recommended various amendments in regard to the provisions of Companies Act, 1956 for setting-up of a National Company Law Tribunal which will combine the powers of the CLB under the Companies Act, 1956, BIFR and AAIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 as also the jurisdiction and powers relating to winding-up presently vested in the High Courts. 4. It is stated that the recommendations of the Eradi Committee were accepted by the Government and Company (Second Amendment) Act, 2002 was passed providing for establishment of NCLT and NCLAT to take-over the functions which are being performed by CLB, BIFR, AAIFR and the High Courts. It is submitted that the establishment of NCLT and NCLAT will have the following beneficial effects : (i) reduce the pendency of cases and reduce the period of winding-up process from 20 to 25 years to about two years; (ii) avoid multiplicity of litigation before various fora (High Courts and quasi-judicial Authorities like CLB, BIFR and AAIFR) as all can be heard and decided by NCLT; (iii ) the appeals will be streamlined with an appeal provided again....
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....efects pointed out by the High Court in Parts 1B and 1C of the Act, require to be corrected and has stated that those provisions will be suitably amended to remove the defects. It has not however accepted the decision of the High Court that some other provisions of Parts 1B and 1C are also defective. To narrow down the controversy in regard to the appeal by the Union, we note below the defects pointed out by the High Court in regard to various provisions in Parts 1B and 1C of the Act and the stand of Union of India in respect of each of them. Sections 10FE and 10FT : Tenure of President/Chairman and Members of NCLT and NCLAT fixed as three years with eligibility for re-appointment. 7.1 The High Court held that 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, the constitution of the Tribunal cannot be regarded as satisfying the essential requirements of an independent and impartial body exercising judicial functions of the State. The Union Government has accepted the finding and agreed to amend sections 10FE and 10FT of the Act to provide for a five years term for the Chairman/Pre....
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.... Section 10FD(3)(f) : Appointment of Technical Member to NCLT. 7.5 The High Court has held that appointment of a member under the category specified in section 10FD(3)(f), can have a role only in matters concerning revival and rehabilitation of sick industrial companies and not in relation to other matters. The High Court has therefore virtually indicated that NCLT should have two divisions, that is an Adjudication Division and a Rehabilitation Division and persons selected under the category specified in clause (f) should only be appointed as members of the Rehabilitation Division. The Union Government contends that similar provision exists in section 4(3) of the Sick Industrial Companies (Special Provisions) Act, 1985; that the provision is only an enabling one so that the best talent can be selected by the Selection Committee headed by the Chief Justice of India or his nominee; and that it may not be advisable to have Division or limit or place restrictions on the power of the President of the Tribunal to constitute appropriate benches. It is also pointed out that a Technical Member would always sit in a Bench with a Judicial Member. Section 10FD(3)(g) : Qualificatio....
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....e to fetter the prerogative of the President of the Tribunal to constitute benches by making use of available members. It is also pointed out that it may not be proper to presume that a person well-versed in labour matters will be unsuitable to be associated with a Judicial Member in regard to adjudication of winding-up matters. Section 10FL(2) - Proviso : Winding up proceedings by single Member. 7.10 The High Court has held that it is impermissible to authorize a Single Member Bench to conduct the winding up proceedings after a special three Members Bench passes an order of winding up; and if such single member happens to be a labour member appointed under section 10FD(3)(f ), it would be a mockery of a specialist Tribunal. The Union Government has accepted the finding and has agreed to amend the proviso to section 10FL(2) to provide that a winding up proceedings will be conducted by a Bench which would necessarily include a Judicial Member. Sections 10FF and 10FK(2) : Power of Central Government to designate any member to be a Member (Administration). 7.11 The High Court has held that sections 10FF and 10FK(2) should be suitably amended to provide that a member may....
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....h NCLT and NCLAT, ought to have dismissed the writ petition. It is submitted that some of the directions given by the High Court to reframe and recast Parts 1B and 1C of the Act amounts to converting judicial review into judicial legislation. However, as Union of India has agreed to rectify several of the defects pointed out by the High Court (set out above), the appeal by the Union Government is now restricted to the findings of the High Court relating to sections 10FD(3)( f), ( g) and (h ) and 10FX. 9. On the other hand, MBA in its appeal contends that the High Court ought not to have upheld the constitutional validity of Parts 1B and 1C of the Act providing for establishment of NCLT and NCLAT; that the High Court ought to have held that constitution of such Tribunals taking away the entire Company Law jurisdiction of the High Court and vesting it in a Tribunal which is not under the control of the Judiciary, is violative of doctrine of separation of powers and the independence of Judiciary which are parts of the basic structure of the Constitution. MBA also contends that the decisions of this Court in Delhi High Court Bar Association's case (supra), with reference to constitu....
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....and such number of Judicial and Technical Members not exceeding sixty-two, as the Central Government deems fit, to be appointed by that Government, by notification in the Official Gazette. 10FD. Qualifications for appointment of President and Members.-(1) The Central Government shall appoint a person who has been, or is qualified to be, a Judge of a High Court as the President of the Tribunal. (2) A person shall not be qualified for appointment as Judicial Member unless he- (a )has, for at least fifteen years, held a judicial office in the territory of India; or (b)has, for at least ten years been an advocate of a High Court, or has partly held judicial office and has been partly in practice as an advocate for a total period of fifteen years; or (c )has held for at least fifteen years a Group 'A' post or an equivalent post under the Central Government or a State Government including at least three years of service as a Member of the Indian Company Law Service (Legal Branch) in Senior Administrative Grade in that service; or (d )has held for at least fifteen years a Group 'A' post or an equivalent post under the Central Government (including at least three years of....
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....10FD and includes the President of the Tribunal; (ii )"Technical Member" means a Member of the Tribunal appointed as such under sub-section (3) of section 10FD. 10FE. Term of office of President and Members. - The President and every other Member of the 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 : Provided that no President or other Member shall hold office as such after he has attained,- (a )in the case of the President, the age of sixty-seven years; (b )in the case of any other Member, the age of sixty-five years : Provided further that the President or other Member may retain his lien with his parent cadre or Ministry or Department, as the case may be, while holding office as such. 10FF. Financial and administrative powers of Member Administration. - The Central Government shall designate any Judicial Member or Technical Member as Member Administration who shall exercise such financial and administrative powers as may be vested in him under the rules which may be made by the Central Government : Provided that the Member Administration shall have aut....
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....sses an order in respect of a company to be wound up, the winding up proceedings of such company may be conducted by a Bench consisting of a single Member. (3) If the Members of a Bench differ in opinion on any point or points, it shall be decided according to the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Tribunal for hearing on such point or points shall be decided according to the other of the other Members of the Tribunal and such point or points shall be decided according to the opinion of the majority of Members of the Tribunal who have heard the case, including those who first heard it. (4) There shall be constituted such number of Benches, as may be notified by the Central Government. (5) In addition to the other Benches, there shall be a Principal Bench at New Delhi presided over by the President of the Tribunal. (6) The Principal Bench of the Tribunal shall have powers of transfer of proceedings from any Bench to another Bench of the Tribunal in the event of inability of any Bench from hearing any such proceedings for....
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.... the Tribunal shall be appointed by the Central Government on the recommendations of a Selection Committee consisting of :- (a )Chief Justice of India or his nominee Chairperson; (b )Secretary in the Ministry of Finance and Company Affairs Member; (c )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. ** ** ** (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 satisfy itself that such person does not have financial or other interest which is likely to affect prejudicially his functions as such Chairperson or member of the Appellate Tribunal or President or Member of the Tribunal, as the case may be. (6) No appointment of the Chairperson and Members of the Appellate Trib....
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....unity of being heard in respect of those charges. Sub-section (3) provides that the Central Government may suspend from office, the President/Chairman or Member of the Tribunal 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. Difference between Courts and Tribunals. 12. The term 'Courts' refers to places where justice is administered or refers to Judges who exercise judicial functions. Courts are established by the State for administration of justice that is for exercise of the judicial power of the State to maintain and uphold the rights, to punish wrongs and to adjudicate upon disputes. Tribunals on the other hand are special alternative institutional mechanisms, usually brought into existence by or under a statute to decide disputes arising with reference to that particular statute, or to determine controversies arising out of any administrative law. Courts refer to Civil Courts, Criminal Courts and High Courts. Tribunals can be either private Tribunals (Arbitral Tribunals), or Tribunals constituted....
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.... a judicial manner and even on evidence on oath, but they are not part of the ordinary Courts of Civil Judicature. They share the exercise of the judicial power of the State, but they are brought into existence to implement some administrative policy or to determine controversies arising out of some administrative law. They are very similar to Courts, but are not Courts. When the Constitution speaks of 'Courts' in Article 136, 227, or 228 or in Articles 233 to 237 or in the Lists, it contemplates Courts of Civil Judicature but not Tribunals other than such Courts. This is the reason for using both the expressions in Articles 136 and 227. By "Courts" is meant Courts of Civil Judicature and by "Tribunals", those bodies of men who are appointed to decide controversies arising under certain special laws. Among the powers of the State is included the power to decide such controversies. This is undoubtedly one of the attributes of the State, and is aptly called the judicial power of the State. In the exercise of this power, a clear division is thus noticeable. Broadly speaking, certain special matters go before Tribunals, and the residue goes before the ordinary Courts of Civil Judica....
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....re primarily conferred on the ordinary courts which have been constituted under its relevant provisions. The Constitution recognised a hierarchy of courts and their adjudication are normally entrusted all disputes between citizens and citizens as well as between the citizens and the State. These courts can be described as ordinary courts of civil judicature. They are governed by their prescribed rules of procedure and they deal with questions of fact and law raised before them by adopting a process which in described as judicial process. The powers which these courts exercise, are judicial powers, the functions they discharge are judicial functions and the decisions they reach and pronounce are judicial decisions. In every State there are administrative bodies or authorities which are required to deal with matters within their jurisdiction in an administrative manner and their decisions are described as administrative decisions. In reaching their administrative decisions, administrative bodies can and often to take into consideration questions of policy. It is not unlikely that even in this process of reaching administrative divisions, the administrative bodies or authorities ar....
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....utional mechanisms or arrangements for judicial review. 14. Though both Courts and Tribunals exercise judicial power and discharge similar functions, there are certain well-recognised differences between courts and Tribunals. They are : (i)Courts are established by the State and are entrusted with the State's inherent judicial power for administration of justice in general. Tribunals are established under a statute to adjudicate upon disputes arising under the said statute, or disputes of a specified nature. Therefore, all courts are Tribunals. But all Tribunals are not courts. (ii)Courts are exclusively manned by Judges. Tribunals can have a Judge as the sole member, or can have a combination of a Judicial Member and a Technical Member who is an 'expert' in the field to which Tribunal relates. Some highly specialized fact finding Tribunals may have only Technical Members, but they are rare and are exceptions. (iii)While courts are governed by detailed statutory procedural rules, in particular the Code of Civil Procedure and Evidence Act, requiring an elaborate procedure in decision making, Tribunals generally regulate their own procedure applying the provisions of the ....
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.... Court and he should not be exposed to the possibility of any improper executive pressure." In Supreme Court Advocates-on-Record Association v. Union of India 1993 (4) SCC 441, J.S. Verma, J. (as he then was) speaking for the majority, described the attributes of an independent judge thus : " ...Only those persons should be considered fit for appointment as Judges of the superior judiciary who combine the attributes essential for making an able, independent and fearless judge. Several attributes together combine to constitute such a personality. Legal expertise, ability to handle cases, proper personal conduct and ethical behaviour, firmness and fearlessness are obvious essential attributes of a person suitable for appointment as a superior Judge.". In his concurring opinion, Pandian J. stated that : "it is the cardinal principle of the Constitution that an independent judiciary is the most essential characteristic of a free society like ours." He further stated : "..that to have an independent judiciary to meet all challenges, unbending before all authorities and to uphold the imperatives of the Constitution at all times, thereby preserving the judicial integrity....
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....tructure of the Constitution [See : Supreme Court Advocates-on-Record Association's case (supra ), State of Bihar v. Bal Mukund Shah 2000 (4) SCC 640, Shri Kumar Padma Prasad v. Union of India 1992 (2) SCC 428, and All India Judges Association v. Union of India 2002 (4) SCC 247]. Separation of Power 17. In Rai Sahib Ram Jawaya Kapur v. State of Punjab 1955 (2) SCR 225, this Court explained the doctrine of separation of powers thus : "The Indian Constitution has not indeed recognised the doctrine of separation of powers in its absolute rigidity but the functions of the different parts or branches of the Government have been sufficiently differentiated and consequently it can very well be said that our Constitution does not contemplate assumption, by one organ or part of the State, of functions that essentially belong to another." In Chandra Mohan v. State of UP AIR 1966 SC 1987, this Court held : "The Indian Constitution, though it does not accept the strict doctrine of separation of powers, provides for an independent judiciary in the States; it constitutes a High Court for each State, prescribes the institutional conditions of service of the Judges thereof, confers ....
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....or be shared by the Executive or the Legislature or that the powers of the Legislature or the Executive should pass to or be shared by the Judiciary. The Constitution has a basic structure comprising the three organs of the Republic : the Executive, the Legislature and the Judiciary. It is through each of these organs that the sovereign will of the people has to operate and manifest itself and not through only one of them. None of these three separate organs of the Republic can take over the functions assigned to the other. This is the basic structure or scheme of the system of Government of Republic............ But no constitution can survive without a conscious adherence to its fine checks and balances. Just as courts ought to enter into problems entwined in the "political thicket", Parliament must also respect the preserve of the court. The principle of separation of powers is a principle of restraint ........." In L. Chandra Kumar, the seven-Judge Bench of this Court referred to the task entrusted to the superior courts in India thus : "The Judges of the superior courts have been entrusted with the task of upholding the Constitution and to this end, have been confer....
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....cation and decision-making. 19. United Kingdom has a rich experience of functioning of several types of Tribunals as dispute resolution-and-grievance settlement mechanisms in regard to varied social welfare legislations. Several Committees were constituted to study the functioning of the Tribunals, two of which require special mention. The first is the Franks Report which emphasized that Tribunals should be independent, accessible, prompt, expert, informal and cheap. The second is the report of the Committee constituted to undertake the review of delivery of justice through Tribunals, with Sir Andrew Leggatt as Chairman. The Leggatt Committee submitted its report to the Lord High Chancellor of Great Britain in March, 2001. The Committee explained the advantages of Tribunals, provided they could function independently and coherently, thus : "Choosing a tribunal to decide disputes should bring two distinctive advantages for users. First, Tribunal decisions are often made jointly by a panel of people who pool legal and other expert knowledge, and are the better for that range of skills. Secondly, Tribunals' procedures and approach to overseeing the preparation of cases and their....
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....ent. The object is not the best article at any price but the best article that is consistent with efficient administration. Disputes must be disposed of quickly and cheaply, for the benefit of the public purse as well as for that of the claimant. Thus when in 1946 workmen's compensation claims were removed from the courts and brought within the Tribunal system much unproductive and expensive litigation, particularly on whether an accident occurred in the course of employment, came to an end. The whole system is based on compromise, and it is from the dilemma of weighing quality against convenience that many of its problems arise. An accompanying advantage is that of expertise. Qualified surveyors sit on the Lands Tribunal and experts in tax law sit as Special Commissioners of Income-tax. Specialized Tribunals can deal both more expertly and more rapidly with special classes of cases, whereas in the High Court counsel may take a day or more to explain to the judge how some statutory scheme is designed to operate. Even without technical expertise, a specialized Tribunal quickly builds up expertise in its own field. Where there is a continuous flow of claims of a particular class, ....
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....t approach to the services which users must receive if they are to be enabled to prepare and present cases themselves. Fourthly, a user-oriented service needs to be much clearer than it is now in telling users what services they can expect, and what to do if the standards of these services are not met." The Leggatt Committee expressed the view that a single structure for all Tribunals would achieve independence and effective functioning of the Tribunal. It stated : "There is only one way to achieve independence and coherence : to have all the Tribunals supported by a Tribunals Service, that is, a common administrative service. It would raise their status, while preserving their distinctness from the courts. In the medium term it would yield considerable economies of scale, particularly in relation to the provision of premises for all Tribunals, common basic training, and the use of IT. It would also bring greater administrative efficiency, a single point of contact for users, improved geographical distribution of Tribunal centres, common standards, an enhanced corporate image, greater prospects of job satisfaction, a better relationship between members and administrative staf....
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....view that, until a wholly independent agency for the administration of all such Tribunals can be set-up, it is desirable that all such Tribunals should be, as far as possible, under a single nodal Ministry which will be in a position to oversee the working of these Tribunals. For a number of reasons that Ministry should appropriately be the Ministry of Law. It would be open for the Ministry, in its turn, to appoint an independent supervisory body to oversee the working of the Tribunals. This will ensure that if the President or Chairperson of the Tribunal is for some reason unable to take sufficient interest in the working of the Tribunal, the entire system will not languish and the ultimate consumer of justice will not suffer. The creation of a single umbrella organisation will, in our view, remove many of the ills of the present system. If the need arises, there can be separate umbrella organisations at the Central and the State levels. Such a supervisory authority must try to ensure that the independence of the members of all such Tribunals is maintained. To that extent, the procedure for the selection of the members of the Tribunals, the manner in which funds are allocated for ....
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....powers to make laws. Entry 77 of List I refers to Constitution, organization, jurisdiction and powers of the Supreme Court. Entry 78 of List I refers to constitution and organization of the High Courts. Entry 79 of List I refers to extension or exclusion of the jurisdiction of a High Court, to or from any Union Territory. Entry 43 of List I refers to incorporation, regulation and winding up of trading corporations and Entry 44 of List I refers to incorporation, regulation and winding up of corporations. Entry 95 of List I refers to jurisdiction and powers of all courts, except the Supreme Court, with respect to any of the matters in Union List. The Concurrent List (List III of the Seventh Schedule) enumerates the matters with respect to which a Parliament and Legislature of a State will have concurrent power to make laws. Entry 11A of List III refers to administration of justice, constitution and organization of all courts except the Supreme Court and the High Courts. Entry 46 of List III refers to jurisdiction and powers of all courts, except the Supreme Court, with respect to any of the matters in List III. 26. Part XIV-A was inserted in the Constitution with effect from 3-1-1....
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.... (a ) provide for the establishment of an administrative Tribunal for the Union and a separate administrative Tribunal for each State or for two or more States; provide for the establishment of a hierarchy of Tribunals; (b ) specify the jurisdiction, powers (including the power to punish for contempt) and authority which may be exercised by each of the said Tribunals; specify the jurisdiction, powers (including the power to punish for contempt) and authority which may be exercised by each of the said Tribunals; (c ) provide for the procedure (including provisions as to limitation and rules of evidence) to be followed by the said Tribunals; provide for the procedure (including provisions as to limitation and rules of evidence) to be followed by the said Tribunals; (d ) exclude the jurisdiction of all courts, except the jurisdiction of the Supreme Court under article 136, with respect to the disputes or complaints referred to in clause (1); exclude the jurisdiction of all courts except the jurisdiction of the Supreme Court under article 136 with respect to all or any of the matters falling within the jurisdicti....
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....mpetence of Parliament to provide for creation of courts and Tribunals can be traced to Entries 77, 78, 79 and Entries 43, 44 read with Entry 95 of List I, Item 11A read with Entry 46 of List III of the Seventh Schedule. Referring to these Articles, this Court in two cases, namely, Delhi High Court Bar Association's case (supra ) and Vishwabharathi House Building Co-operative Societies's case (supra) held that Articles 323A and 323B are enabling provisions which enable the setting up of Tribunals contemplated therein; and that the said Articles, however, cannot be interpreted to mean that they prohibited the Legislature from establishing Tribunals not covered by those Articles, as long as there is legislative competence under the appropriate Entry in the Seventh Schedule. 29. In Navinchandra Mafatlal v. CIT 1955 (1) SCR 829, this Court held : ".. As pointed out by Gwyer C.J. in United Provinces v. Atiqa Begum 1940 FCR 110 none of the items in the Lists is to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. It is, therefore, clear-....
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....on of the High Courts and Supreme Court. However, this is now academic because clause 2(d) of Article 323A and clause 3(d) of Article 323B have been held to be unconstitutional in Chandra Kumar. 30. In ACC (supra ), this Court recognized the competence of the State to transfer a part of the judicial power from courts to Tribunal : "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 basic and the fundamental feature which is common to both the courts and the Tribunals is that they discharge judicial functions and exercise judicial powers which inherently vest in ....
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....e decision in L. Chandra Kumar's case (supra), this Court held : "We are also required to address the issue of the competence of those who man the Tribunals and the question of who is to exercise administrative supervision over them. It has been urged that only those who have had judicial experience should be appointed to such Tribunals. In the case of Administrative Tribunals, it has been pointed out that the administrative members who have been appointed have little or no experience in adjudicating such disputes; the Malimath Committee has noted that at times, IPS Officers have been appointed to these Tribunals. It is stated that in the short tenures that these Administrative Members are on the Tribunal, they are unable to attain enough experience in adjudication and in cases where they do acquire the ability, it is invariably on the eve of the expiry of their tenures. For these reasons, it has been urged that the appointment of Administrative Members to Administrative Tribunals be stopped. We find it difficult to accept such a contention. It must be remembered that the setting-up of these Tribunals is founded on the premise that specialist bodies comprising both trained admin....
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....f Law and would be unconstitutional. 36. In R.K. Jain v. Union of India 1993 (4) SCC 119, this Court observed : "The Tribunals set up Cinder Articles 323A and 323B of the Constitution or under an Act of Legislature are creatures of the Statute and in no case claim the status as Judges of the High Court or parity or as substitutes. However, the personnel appointed to hold those offices under the State are called upon to discharge judicial or quasi-judicial powers. So they must have judicial approach and also knowledge and expertise in that particular branch of constitutional, administrative and tax laws. The legal input would undeniably be more important and sacrificing the legal input and not giving it sufficient weightage and teeth would definitely impair the efficacy and effectiveness of the judicial adjudication. It is, therefore, necessary that those who adjudicate upon these matters should have legal expertise, judicial experience and modicum of legal training as on many an occasion different and complex questions of law which baffle the minds of even trained judges in the High Court and Supreme Court would arise for discussion and decision." 37. Having held that Legi....
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....tract Tribunals; (ii) Real Estate Tribunals; and (iii ) Compensation Tribunals; and each of those legislations provide that all cases relating to contractual disputes, property disputes and compensation claims hitherto tried by civil courts, will be tried by these Tribunals instead of the civil courts; and that these tribunals will be manned by members appointed from the civil services, with the rank of Section Officers who have expertise in the respective field; or that a businessman in the case of Contract Tribunal, a Real Estate Dealer in regard to Property Tribunal, and any social worker in regard to Compensation Tribunal, having expertise in the respective field will be the members of the Tribunal. Let us say by these legislations, all cases in civil courts are transferred to Tribunal (as virtually all cases in civil courts will fall under one or the other of the three Tribunals). Merely because the Legislature has the power to constitute Tribunals or transfer jurisdiction to Tribunals, can that be done? 39. The question is whether a line can be drawn, and who can decide the validity or correctness of such action. The obvious answer is that while the Legislature can make a ....
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....of separation of power and independence of judiciary which are parts of basic structure of the Constitution. The Union of India countered it by contending that a Legislation cannot be challenged on the ground it violates the basic structure of the Constitution. It is now well-settled that only constitutional amendments can be subjected to the test of basic features doctrine. Legislative measures are not subjected to basic features or basic structure or basic framework. The Legislation can be declared unconstitutional or invalid only on two grounds namely : (i) lack of legislative competence and (ii) violation of any fundamental rights or any provision of the Constitution [See : Indira Nehru Gandhi's case (supra); Kuldip Nayar v. Union of India 2006 (7) SCC 1; and State of Andhra Pradesh v. McDowell & Co. 1996 (3) SCC 709]. The reason for this was given by Chandrachud, J., in Indira Gandhi, thus : ""Basic structure", by the majority judgment [in Keshavananda Bharati v. State of Kerala 1973 (4) SCC 225], is not a part of the fundamental rights nor indeed a provision of the Constitution. The theory of basic structure is woven out of the conspectus of the Constitution and the amendi....
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....rposes? The doctrine is neither unique nor new. No doubt, as a set of inferences from a document (i.e., the Constitution), the doctrine of "the basic structure" arose out of and relates to the Constitution only and does not, in that sense, appertain to the sphere of ordinary statutes or arise for application to them in the same way. But, if, as a result of the doctrine, certain imperatives are inherent in or logically and necessarily flow from the Constitution's 'basic structure', just as though they are its express mandates, they can be and have to be used to test the validity of ordinary laws just as other parts of the Constitution are so used. Thus, it is clear that whenever the doctrine of the basic structure has been expounded or applied it is only as a doctrine of interpretation of the Constitution as it actually exists and not of a Constitution which could exist only subjectively in the minds of different individuals as mere theories about what the Constitution is. The doctrine did not add to the contents of the Constitution. It did not, in theory, deduct anything from what was there. It only purported to bring out and explain the meaning of what was already there. It ....
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....e principles of Rule of Law, separation of power and independence of Judiciary. 42. In the State of West Bengal v. Anwar Ali Sarkar AIR 1952 SC 75, Bose J., made a classic exposition regarding Article 14 : "What I am concerned to see is not whether there is absolute equality in any academical sense of the term but whether the collective conscience of a sovereign democratic republic can regard the impugned law, contrasted with the ordinary law of the land, as the sort of substantially equal treatment which men of resolute minds and unbiased views can regard as right and proper in a democracy of the kind we have proclaimed ourselves to be." Such views must take into consideration the practical necessities of Government, the right to alter the laws and many other facts, but in the forefront must remain the freedom of the individual from unjust and unequal treatment, unequal in the broad sense in which a democracy would view it. In my opinion, 'law' as used in article 14 does not mean the "legal precepts which are actually recognised and applied in Tribunals of a given time and place" but "the more general body of doctrine and tradition from which those precepts are chiefly drawn....
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....apacity of the court which was till then dealing with such matters and the members of the Tribunal should have the independence and security of tenure associated with Judicial Tribunals. (c)Whenever there is need for 'Tribunals', there is no presumption that there should be technical members in the Tribunals. When any jurisdiction is shifted from courts to Tribunals, on the ground of pendency and delay in courts, and the jurisdiction so transferred does not involve any technical aspects requiring the assistance of experts, the Tribunals should normally have only Judicial Members. Only where the exercise of jurisdiction involves inquiry and decisions into technical or special aspects, where presence of Technical Members will be useful and necessary, Tribunals should have Technical Members. Indiscriminate appointment of Technical Members in all Tribunals will dilute and adversely affect the independence of the Judiciary. (d)The Legislature can re-organize the jurisdictions of Judicial Tribunals. For example, it can provide that a specified category of cases tried by a higher court can be tried by a lower court or vice versa (A standard example is the variation of pecuniary limi....
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....tutions. When the Legislature proposes to substitute a Tribunal in place of the High Court to exercise the jurisdiction which the High Court is exercising, it goes without saying that the standards expected from the Judicial Members of the Tribunal and standards applied for appointing such members, should be as nearly as possible as applicable to High Court Judges, which are apart from a basic degree in law, rich experience in the practice of law, independent outlook, integrity, character and good reputation. It is also implied that only men of standing who have special expertise in the field to which the Tribunal relates, will be eligible for appointment as Technical Members. Therefore, only persons with a judicial background, that is, those who have been or are Judges of the High Court and lawyers with the prescribed experience, who are eligible for appointment as High Court Judges, can be considered for appointment of Judicial Members. 47. A lifetime of experience in administration may make a member of the civil services a good and able administrator, but not a necessarily good, able and impartial adjudicator with a judicial temperament capable of rendering decisions which ha....
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....edge and skills can be appointed as Technical Members of the Tribunal. 49. What is a matter of concern is the gradual erosion of the independence of the judiciary, and shrinking of the space occupied by the Judiciary and gradual increase in the number of persons belonging to the civil service discharging functions and exercising jurisdiction which was previously exercised by the High Court. There is also a gradual dilution of the standards and qualification prescribed for persons to decide cases which were earlier being decided by the High Courts. Let us take stock. 49.1 To start with, apart from jurisdiction relating to appeals and revisions in civil, criminal and tax matters (and original civil jurisdiction in some High Courts). The High Courts were exercising original jurisdiction in two important areas; one was writ jurisdiction under articles 226 and 227 (including original jurisdiction in service matters) and the other was in respect to company matters. 49.2 After constitution of Administrative Tribunals under the Administrative Tribunals Act, 1985 the jurisdiction in regard to original jurisdiction relating to service matters was shifted from High Courts to Administ....
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....r is qualified to be, a Judge of a High Court, or a person who is, or has been, a member of the India Legal Service and is holding or has held a post in Grade I of that service for at least three years could be appointed as the Presiding Officer. That is, the requirement of even a Secretary level officer is gone. Any member of Indian Legal Service holding a Grade I Post for three years can be a substitute for a High Court Judge. 49.4 The next dilution is by insertion of Chapter 1B in the Companies Act, 1956 with effect from 1-4-2003 providing for constitution of a National Company Law Tribunal with a President and a large number of Judicial and Technical Members (as many as 62). There is a further dilution in the qualifications for members of National Company Law Tribunal which is a substitute for the High Court, for hearing winding up matters and other matters which were earlier heard by High Court. A member need not even be a Secretary or Addl. Secretary Level Officer. All Joint Secretary level civil servants (that are working under Government of India or holding a post under the Central and State Governments carrying a scale of pay which is not less than that of the Joint Sec....
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....unals requiring technical expertise. The Tribunals cannot become providers of sinecure to members of civil services, by appointing them as Technical Members, though they may not have technical expertise in the field to which the Tribunals relate, or worse where purely judicial functions are involved. While one can understand the presence of the members of the civil services being Technical Members in Administrative Tribunals, or Military Officers being Members of Armed Forces Tribunals, or Electrical Engineers being Members of Electricity Appellate Tribunal, or Telecom Engineers being members of TDSAT, we find no logic in members of general Civil Services being members of Company Law Tribunals. 51. Let us now refer to the dilution of independence. If any member of the Tribunal is permitted to retain his lien over his post with the parent cadre or Ministry or department in the civil service for his entire period of service as member of the Tribunal, he would continue to think, act and function as a member of the civil services. A litigant may legitimately think that such a member will not be independent and impartial. We reiterate that our observations are not intended to cast....
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.... the work relating to companies under liquidation. Apart from company matters, the court also attends to other cases in the High Court. The orders passed by Company Judge are appealable under section 483. Normal delays and adjournments sought in court proceedings further aggravate the problem and unless all the pending cases are not finally disposed of. OL cannot move the court for dissolution of a company. 26. Under section 457, OL can exercise the powers with the sanction and subject to the control of the court. Any creditor or contributory may apply to the Court with respect to the exercise of any such power. Elaborate procedure has been prescribed under the Companies (Court) Rules, 1959 relating to Statement of Affairs (Rules 124-134), Preliminary Report (Rules 135-139), Settlement of list of creditors (Rules 147-149), Settlement of list of contributories and payment of calls (Rules 180-196, 232-242), examination under section 477/478 (Rule 234-259), Misfeasance proceedings under sections 542 and 543 (Rules 260-262), Disclaimer of property under section 535 (Rules 263-269), Compromise and abandonment of claims (Rules 270-271), Sale of assets (Rules 272-274), Declaration o....
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....es falling under sub-sections 2(c) and (d ) and sub-sections 3(a) and (b ) of section 10FD have no experience or expertise in deciding company matters. 55. There is an erroneous assumption that company law matters require certain specialized skills which are lacking in Judges. There is also an equally erroneous assumption that members of the civil services, (either a Group-A officer or Joint Secretary level civil servant who had never handled any company disputes) will have the judicial experience or expertise in company law to be appointed either as Judicial Member or Technical Member. Nor can persons having experience of fifteen years in science, technology, medicines, banking, industry can be termed as experts in Company Law for being appointed as Technical Members. The practice of having experts as Technical Members is suited to areas which require the assistance of professional experts, qualified in medicine, engineering, and architecture etc. Lastly, we may refer to the lack of security of tenure. The short term of three years, the provision for routine suspension pending enquiry and the lack of any kind of immunity, are aspects which require to be considered and remedi....
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....e persons with expertise in company law, for being appointed as Technical Members in Company Law Tribunal, is invalid. (vi)Persons having ability, integrity, standing and special knowledge and professional experience of not less than fifteen years in industrial finance, industrial management, industrial reconstruction, investment and accountancy, may however be considered as persons having expertise in rehabilitation/revival of companies and therefore, eligible for being considered for appointment as Technical Members. (vii)In regard to category of persons referred in clause (g) of sub-section (3) at least five years experience should be specified. (viii)Only clauses (c), (d ), (e), (g ), (h ), and later part of clause (f ) in sub-section (3) of section 10FD and officers of civil services of the rank of the Secretary or Additional Secretary in Indian Company Law Service and Indian Legal Service can be considered for purposes of appointment as Technical Members of the Tribunal. (ix)Instead of a five-member Selection Committee with Chief Justice of India (or his nominee) as Chairperson and two Secretaries from the Ministry of Finance and Company Affairs and the Secretary ....