Thiru. R. Gandhi President, Madras Bar Association Vs Union of India (UOI)

@JUDGMENTTAG-ORDER

R. Jayasimha Babu, J.@mdashApprehensive that the growing Tribunalisation of Justice in the country accompanied as it is, by the executive

aggrendisement of the powers, inter alia, relating to composition, tenure of the Tribunals'''' members and their selection, the powers of the

President, etc., will result in the gradual erosion of judicial independence in the special areas for which the Tribunals are created, and will ultimately

lead to Trivialisation of Justice, the Madras Bar Association, which is perhaps, the oldest Bar Association in the country, has, in this petition,

questioned the constitutional validity of the amendment effected to the Companies Act by Companies (Second Amendment) Act, 2002 whereby

provision is made for setting up of a National Company Law Tribunal (Tribunal) as also a National Company Law Appellate Tribunal, and to

which Tribunal, the jurisdiction exercised by the High Court for nine decades in relation to, inter alia, amalgamation and reconstruction of

companies, winding up, reduction of share capital, and other matters, are transferred.

2. The jurisdiction of the High Court transferred to the Tribunal are those under Sections 100 to 104, 107, 203, 243, 318(3)(d), 391, 392, 394,

394A, 395, 424, 425, 426, 427, 433, 434(1)(b), 434(1)(c), 439, 440, 441, 443, 444, 446, 448, 450, 451, 453, 454, 455(2)&(3), 456, 457,

458, 458A, 59, 460, 461, 462, 463, 464, 465, 466, 467, 468, 469, 470, 471, 472, 473, 474, 475, 476, 477, 478, 479, 480, 481, 490, 492,

494, 497, 502, 503, 504, 506, 507, 509, 511-A, 512, 515, 517, 518, 519, 531, 531-A, 533, 534, 535, 536, 537, 538, 540, 542, 543, 544,

545, 546, 547, 59, 550, 551, 553, 555, 556, 557, 558, 559, 560, 581, 582, 583, 587, 588, 589, 610, 614, 626, 632, 635 and 635-B of the

Companies Act.

3. The Jurisdiction and powers so transferred, inter alia, relate to reduction of share capital; rights of dissentient shareholders to have variation

cancelled; power to restrain persons from managing companies; compensation for loss of office to the managing/whole time director/manager;

orders relating to compromise or making arrangements with creditors and members; power to enforce compromise and arrangements; provisions

for facilitating reconstruction and amalgamation of companies; power and duty to acquire shares of shareholders dissenting from scheme or

contract approved by majority, making orders regarding the application of Sections 421 to 423 to receivers and managers; ordering winding up of

companies; Determining the liability as contributories of present and past members; enforcement of obligation of directors and managers whose

liability is unlimited; the appointment of a Official liquidator; furnishing of statement of affairs by the concerned authorities to the Court; custody of

company''s property; supervision of the work of the Official liquidator; Constitution, composition and appointment of Committee of inspection; stay

of winding up proceedings; settlement of list of contributories and giving directions regarding application of assets; the power to make calls; power

to exclude creditors not proving in time; adjusting the right of contributories; summoning of persons suspected of having property of company, etc.;

power to order public examination of promoters, directors, etc.; directing dissolution of the company; appointment and fixation of remuneration of

liquidator; filling up the vacancy in the office of the liquidator; appointment of liquidator and Committee of inspection; fixing the liquidator''s

remuneration; appointment and removal of liquidator in voluntary winding up; power to deal with the application of liquidator for public examination

of promoters, directors, etc.; Determining cases of fraudulent preference and avoidance of voluntary transfer; determining the effect of floating

charge; avoidance of transfer after commencement of winding up; dealing with claims for avoidance of certain attachments, executions, etc. in

winding up; dealing with the offences by officers of companies in liquidation; dealing with cases of misfeasance and malfeasance and assessing the

amount payable by persons guilty of such acts; disposal of books and papers of the company in liquidation; enforcement of the duty of liquidator to

make returns; declaring the dissolution of a company void; winding up of unregistered companies, giving direction with regard to the properties of

such companies; enforcement of orders, and protection of employees during investigation by Inspectors or during pendency of proceeding in

certain cases.

4. The powers that will be left with the High Court as and when the amending Act is given effect to are the powers under Sections 81(7), 237(a)

(ii), 581ZN(16), 581ZS(1) and 633(3). The jurisdiction so left with the High Court relate to hearing appeals with regard to the terms and

conditions of conversion of debentures or loans into shares when the lender exercises right given to it u/s 81; ordering investigation of the

company''s affairs, hearing appeals by any member or creditor or employee aggrieved by the transfer of assets, division, amalgamation or merger

of producer companies; reconversion of producer companies to inter-state co-operative societies; and the power to relieve officers of Companies,

acting honestly and reasonably, of liability, in whole or in part, and on such terms as the Court may think fit.

5. It must be noticed here that the power of the High Court in relation to matters concerning, inter alia, rectification of share Registers and

oppression and mismanagement had been transferred to the Company Law Board constituted by the Central Government, after the amendment to

the Companies Act by the Companies (Amendment) Act, 1988. That Company Law Board will stand abolished and it''s jurisdiction will vest in the

new Tribunal after the amending Act of 2002 comes into force.

6. Parts 1B and 1C of the Act dealing with the National Company Law Tribunal and the National Company Law Appellate Tribunal, comprising

of Sections 10FB and 10FQ or 10GF read as under :

PART IB

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.

10FC. Composition of Tribunal.-The Tribunal shall consist of a President 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 service

as a Member of the Indian Legal Service in Grade I of that service).

(3) A person shall not be qualified for appointment as Technical Member unless he-

(a) 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 (Accounts Branch) in Senior Administrative Grade in that service];

or

(b) is, or has been, a Joint Secretary to the Government of India under the Central Staffing Scheme, or held any other post under the Central

Government or a State Government carrying a scale of pay which is not less than that of a Joint Secretary to the Government of India, for at least

five years and has adequate knowledge of, and experience in, dealing with problems relating to company law ; or

(c) is, or has been, for at least fifteen years in practice as a chartered accountant under the Chartered Accountants Act, 1949 (38 of 1949) ; or

(d) is, or has been, for at least fifteen years in practice as a cost accountant under the Costs and Works Accountants Act, 1959 (23 of 1959) ; or

(e) has or has had, 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) ""Judicial Member"" means a Member of the Tribunal appointed as such under sub-section (2) of section 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 reappointment :

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 authority to delegate such of his financial and administrative powers as he may think fit to any

other officer of the Tribunal subject to the condition that such officer shall, while exercising such delegated powers continue to act under the

direction, superintendence and control of the Member Administration.

10FG. Salary, allowances and other terms and conditions of service of President and other Members.-The salary and allowances and other terms

and conditions of service of the President and other Members of the Tribunal shall be such as may be prescribed :

Provided that neither the salary and allowances nor the other terms and conditions of service of the President and other Members shall be varied to

their disadvantage after their appointment.

10FH. Vacancy in Tribunal.-(1) In the event of the occurrence of any vacancy in the office of the President of the Tribunal by reason of his death,

resignation or otherwise, the seniormost Member shall act as the President of the Tribunal until the date on which a new President, appointed in

accordance with the provisions of this Act to fill such vacancy, enters upon his office.

(2) When the President is unable to discharge his functions owing to absence, illness or any other cause, the seniormost Member or, as the case

may be, such one of the Members of the Tribunal, as the Central Government, may, by notification, authorise in this behalf, shall discharge the

functions of the President until the date on which the President resumes his duties.

(3) If, for reason other than temporary absence, any vacancy occurs in the office of the President or a Member, the Central Government shall

appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Tribunal

from the stage at which the vacancy is filled.

10FI. Resignation of President and Member.-The President or a Member of the Tribunal may, by notice in writing under his hand addressed to the

Central Government, resign his office :

Provided that the President or a Member shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold

office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office

or until the expiry of the term of office, whichever is the earliest.

10FJ. Removal and suspension of President or Member.-(1) The Central Government may, in consultation with the Chief Justice of India, remove

from office the President or any Member of the Tribunal, who-

(a) has been adjudged an insolvent ; or

(b) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude ; or

(c) has become physically or mentally incapable of acting as such President or Member of the Tribunal ; or

(d) has acquired such financial or other interest as is likely to affect prejudicially his functions as such President or Member of the Tribunal ; or

(e) has so abused his position as to render his continuance in office prejudicial to public interest :

Provided that no such President or a Member shall be removed on any of the grounds specified in clauses (b) to (e) without giving him reasonable

opportunity of being heard in respect of those charges.

(2) The President or a Member of the Tribunal shall not be removed from his office except by an order made by the Central Government on the

ground of proved misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court in which such President or a Member had

been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges.

(3) The Central Government may suspend from office the President 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.

(4) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of the President or a Member

referred to in sub-section (2).

10FK. Officers and employees of Tribunal.-(1) The Central Government shall provide the Tribunal with such officers and other employees as it

may deem fit.

(2) The officers and other employees of the Tribunal shall discharge their functions under the general superintendence of the Member

Administration.

(3) The salaries and allowances and other terms and conditions of service of the officers and other employees of the Tribunal shall be such as may

be prescribed.

10FL. Benches of Tribunal.-(1) Subject to the provisions of this section, the powers of the Tribunal may be exercised by Benches, constituted by

the President of the Tribunal, out of which one shall be a Judicial Member and another shall be a Technical Member referred to in clauses (a) to (f)

of sub-section (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 under clause (g) or clause (h) of sub-

section (3) of section 10FD :

Provided that in case a Special Bench passes 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 by one or more 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 any reason :

Provided that no transfer of any proceedings shall be made under this sub-section except after recording the reasons for so doing in writing.

10FM. Order of Tribunal.-(1) The Tribunal may, after giving the parties to any proceeding before it, an opportunity of being heard, pass such

orders thereon as it thinks fit.

(2) The Tribunal may, at any time within two years from the date of the order, with a view to rectifying any mistake apparent from the record,

amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the parties.

(3) The Tribunal shall send a copy of every order passed under this section to all the parties concerned.

10FN. Power to review.-The Tribunal shall have power to review its own orders.

10FO. Delegation of powers.-The Tribunal may, by general or special order, delegate, subject to such conditions and limitations, if any, as may be

specified in the order, to any Member or officer or other employee of the Tribunal or other person authorised by the Tribunal to manage any

industrial company or industrial undertaking or any operating agency, such powers and duties under this Act as it may deem necessary.

(a) take possession of such property, books of account or other documents ; and

(b) cause the same to be entrusted to the Tribunal or the operating agency.

(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate

may take or cause to be taken such steps and use or cause to be used such force as may, in his opinion, be necessary.

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court

or before any authority on any ground whatsoever.

10FP. Power to seek assistance of Chief Metropolitan Magistrate and District Magistrate.-(1) The Tribunal or any operating agency, on being

directed by the Tribunal may, in order to take into custody or under its control all property, effects and actionable claims to which a sick industrial

company is or appears to be entitled, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any

property, books of account or any other document of such sick industrial company, be situate or be found, to take possession thereof, and the

Chief Metropolitan Magistrate or the District Magistrate, as the case may be, shall, on such request being made to him,-

(a) take possession of such property, books of account or other documents ; and

(b) cause the same to be entrusted to the Tribunal or the operating agency.

(2) For the purpose of securing compliance with the provisions of sub-section (1), the Chief Metropolitan Magistrate or the District Magistrate

may take or cause to be taken such steps and use or cause to be used such force as may, in his opinion, be necessary.

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court

or before any authority on any ground whatsoever.

PART IC

APPELLATE TRIBUNAL

10FQ. Appeal from order of Tribunal.-(1) Any person aggrieved by an order or decision of the Tribunal may prefer an appeal to the Appellate

Tribunal.

(2) No appeal shall lie to the Appellate Tribunal from an order or decision made by the Tribunal with the consent of parties.

(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order or decision

made by the Tribunal is received by the appellant and it shall be in such form and accompanied by such fee as may be prescribed :

Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days from the date aforesaid if it is

satisfied that the appellant was prevented by sufficient cause from not filing the appeal in time.

(4) On receipt of an appeal preferred under sub-section (1), the Appellate Tribunal shall, after giving parties to the appeal, an opportunity of being

heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.

(5) The Appellate Tribunal shall send a copy of every order made by it to the Tribunal and parties to the appeal.

(6) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall

be made by it to dispose of the appeal finally within six months from the date of the receipt of the appeal.

10FR. Constitution of Appellate Tribunal.-(1) The Central Government shall, by notification in the Official Gazette, constitute with effect from such

date as may be specified therein, an Appellate Tribunal to be called the ""National Company Law Appellate Tribunal"" consisting of a Chairperson

and not more than two Members, to be appointed by that Government, for hearing appeals against the orders of the Tribunal under this Act.

(2) The Chairperson of the Appellate 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.

10FS. Vacancy in Appellate Tribunal, etc.-(1) In the event of the occurrence of any vacancy in the office of the Chairperson of the Appellate

Tribunal by reason of his death, resignation or otherwise, the seniormost Member of the Appellate Tribunal shall act as the Chairperson of the

Appellate Tribunal until the date on which a new Chairperson appointed in accordance with the provisions of this Act to fill such vacancy enters

upon his office.

(2) When the Chairperson of the Appellate Tribunal is unable to discharge his functions owing to absence, illness or any other cause, the senior-

most Member or, as the case may be, such one of the Member of the Appellate Tribunal, as the Central Government may, by notification,

authorise in this behalf, shall discharge the functions of the Chairperson until the date on which the Chairperson resumes his duties.

(3) If, for reason other than temporary absence, any vacancy occurs in the office of the Chairperson or a Member, the Central Government shall

appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Appellate

Tribunal from the stage at which the vacancy is filled.

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 reappointment 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.

10FU. Resignation of Chairperson and Members.-The Chairperson or a Member of the Appellate Tribunal may, by notice in writing under his

hand addressed to the Central Government, resign his office :

Provided that the Chairperson or a Member of the Appellate Tribunal shall, unless he is permitted by the Central Government to relinquish his

office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his

successor enters upon his office or until the expiry of his term of office, whichever is the earliest.

10FV. Removal and suspension of Chairperson and Members of Appellate Tribunal.-(1) The Central Government may, in consultation with the

Chief Justice of India, remove from office the Chairperson or any Member of the Appellate Tribunal, who-

(a) has been adjudged an insolvent ; or

(b) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude ; or

(c) has become physically or mentally incapable of acting as such Chairperson or Member of the Appellate Tribunal ; or

(d) has acquired such financial or other interest as is likely to affect prejudicially his functions as such Chairperson or Member of the Appellate

Tribunal ; or

(e) has so abused his position as to render his continuance in office prejudicial to public interest.

(2) The Chairperson or a Member of the Appellate Tribunal shall not be removed from his office except by an order made by the Central

Government on the ground of proved misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court in which such

Chairperson or Member had been informed of the charges against him and given a reasonable opportunity of being heard in respect of those

charges.

(3) The Central Government may suspend from office the Chairperson or a Member of the Appellate 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.

(4) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of the Chairperson or a

Member referred to in sub-section (2).

10FW. Salary, allowances and other terms and conditions of service of Chairperson and Members.-(1) The salary and allowances and other

terms and conditions of service of the Chairperson and other Members of the Appellate Tribunal shall be such as may be prescribed.

(2) The salary, allowances and other terms and conditions of service of the Chairperson and other Members of the Appellate Tribunal shall not be

varied to their disadvantage after appointment.

10FX. Selection Committee.-(1) The Chairperson and Members of the Appellate Tribunal and President and Members of 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.

(3) The Central Government shall, within one month from the date of occurrence of any vacancy by reason of death, resignation or removal of the

Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal and six months before the superannuation or end

of tenure of the Chairperson and Members of the Appellate Tribunal and President and Members of the Tribunal, make a reference to the

Selection Committee for filling up of the vacancy.

(4) The Selection Committee shall recommend within one month a panel of three names for every vacancy referred to it.

(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 Tribunal and President and Members of the Tribunal shall be invalidated

merely by reason of any vacancy or any defect in the constitution of the Selection Committee.

10FY. Chairperson, etc., to be public servants.-The Chairperson, Members, officers and other employees of the Appellate Tribunal and the

President, Members, officers and other employees of the Tribunal shall be deemed to be public servants within the meaning of section 21 of the

Indian Penal Code (45 of 1860).

10FZ. Protection of action taken in good faith.-No suit, prosecution or other legal proceedings shall lie against the Appellate Tribunal or its

Chairperson, Member, officer or other employee or against the Tribunal, its President, Member, officer or other employee or operating agency or

liquidator or any other person authorised by the Appellate Tribunal or the Tribunal in the discharge of any function under this Act for any loss or

damage caused or likely to be caused by any act which is in good faith done or intended to be done in pursuance of this Act.

10FZA. Procedure and powers of Tribunal and Appellate Tribunal.-(1) The Tribunal and the Appellate Tribunal shall not be bound by the

procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the

other provisions of this Act and of any rules made by the Central Government, the Tribunal and the Appellate Tribunal shall have power to regulate

their own procedure.

(2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging its functions under this Act, the same powers as are vested

in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit in respect of the following matters, namely :-

(a) summoning and enforcing the attendance of any person and examining him on oath ;

(b) requiring the discovery and production of documents ;

(c) receiving evidence on affidavits ;

(d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), requisitioning any public record or document

or copy of such record or document from any office ;

(e) issuing commissions for the examination of witnesses or documents ;

(f) reviewing its decisions ;

(g) dismissing a representation for default or deciding it ex parte ;

(h) setting aside any order of dismissal of any representation for default or any order passed by it ex parte ; and

(i) any other matter which may be prescribed by the Central Government.

(3) Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal in the same manner as if it were a decree made by

a court in a suit pending therein, and it shall be lawful for the Tribunal or the Appellate Tribunal to send in the case of its inability to execute such

order, to the court within the local limits of whose jurisdiction,-

(a) in the case of an order against a company, the registered office of the company is situate ; or

(b) in the case of an order against any other person, the person concerned voluntarily resides or carries on business or personally works for gain.

(4) All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193

and 228, and for the purposes of section 196 of the Indian Penal Code, 1860 (45 of 1860), and the Tribunal and the Appellate Tribunal shall be

deemed to be a civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).

10G. Power to punish for contempt.-The Appellate Tribunal shall have the same jurisdiction, powers and authority in respect of contempt of itself

as the High Court has and may exercise, for this purpose under the provisions of the Contempt of Courts Act, 1971(70 of 1971), which shall have

the effect subject to modifications that-

(a) the reference therein to a High Court shall be construed as including a reference to the Appellate Tribunal ;

(b) the reference to the Advocate-General in section 15 of the said Act shall be construed as a reference to such law officers as the Central

Government may specify in this behalf.

10GA. Staff of Appellate Tribunal.-(1) The Central Government shall provide the Appellate Tribunal with such officers and other employees as it

may think fit.

(2) The officers and other employees of the Appellate Tribunal shall discharge their functions under the general superintendence of the Chairperson

of the Appellate Tribunal.

(3) The salaries and allowances and other conditions of service of the officers and other employees of the Appellate Tribunal shall be such as may

be prescribed.

10GB. Civil court not to have jurisdiction.-(1) No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter

which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the 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.

10GC. Vacancy in Tribunal or Appellate Tribunal not to invalidate acts or proceedings.-No act or proceeding of the Tribunal or the Appellate

Tribunal shall be questioned or shall be invalid merely on the ground of existence of any vacancy or defect in the establishment of the Tribunal or

the Appellate Tribunal, as the case may be.

10GD. Right to legal representation.-The applicant or the appellant may either appear in person or authorise one or more chartered accountants or

company secretaries or cost accountants or legal practitioners or any officer to present his or its case before the Tribunal or the Appellate Tribunal,

as the case may be.

Explanation.- For the purposes of this section,-

(a) ""chartered accountant"" means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act,

1949 (38 of 1949) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act ;

(b) ""company secretary"" means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Companies Secretaries Act,

1980 (56 of 1980) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act ;

(c) ""cost accountant"" means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act,

1959 (23 of 1959) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act ;

(d) ""legal practitioner"" means an advocate, a vakil or any attorney of any High Court, and includes a pleader in practice.

10GE. Limitation.-The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to an appeal made to the Appellate

Tribunal.

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.''.

6. Tribunals which are largely a twentieth century phenomenon, existed in this country even before the Constitution was framed. The oldest and

best known Tribunal is the Income Tax Appellate Tribunal which had been functioning from the year 1941. Industrial Tribunals had also been

established prior to 1950. Articles 136 and 227 of the Constitution refer to Tribunals, and makes their orders subject to judicial review by the High

court, and with leave, to the appellate jurisdiction of the Supreme Court. Numerous Tribunals have been created subsequent to 1950 by

Parliamentary as well as State Legislation. Their exact number however is not easily ascertainable. The Law Commission of India in it''s 162nd

Report submitted in 1998 reviewed the working of the major tribunals in the country - the Income Tax Appellate Tribunal, Customs, Central

Excise and Gold (Control) Appellate Tribunal and the Administrative Tribunals, and suggested certain changes to improve their functioning.

7. The object of constituting Tribunals is to provide a simpler, speedier and more accessible justice than ordinary Courts are able to provide, as

stated in Wade on ''Administrative Law''. Yet another object of constituting Tribunals is to create specialist Tribunals which would include

specialists in the field, to adjudicate more efficiently and speedily the matters requiring adjudication in that field, and thus command the confidence

of all concerned in the quality and reliability of the result of such adjudication.

8. The first breach of the accepted principle that adjudication should be made by the Courts created by the State was made, as noted by Wade, in

the field of collection of revenue, the oldest such Tribunal in England having been established in 1660. In India also the first major Tribunal

established was in the area of collection of tax, namely the Income Tax Appellate Tribunal. The Tribunals have gradually proliferated not only in

India, but in many other jurisdictions as well, including UK and Australia.

9. ""The delivery of Justice through Tribunals other than ordinary courts of law ...."" in UK, was reviewed recently by Sir Andrew Leggatt, a former

Judge of the UK Court of Appeal, who submitted his report in March 2001. It is noted in that report that, in UK though there are 70 different

administrative Tribunals which decide about one million cases a year, only 20 of the Tribunals each decide more than 500 cases a year. The

Tribunals, it was found, were not independent of the departments that sponsor them. The object of the review was, therefore, to recommend a

system that is ""independent, coherent, professional, cost effective and user friendly"".

10. The Leggatt report regards ''independence'' of the Tribunal as it''s most important requirement. The Report also emphasises the need to satisfy

users needs:

It should never be forgotten that the Tribunals exist for users and not the other way around."" Tribunals would be wholly ineffective, if users did not

feel that the tribunals are ''genuinely and demonstrably'' independent''. The Leggatt Report observes, ""Tribunals are an alternative to Court, not

administrative processes. They will keep the confidence of users only in so afar as they are seen to demonstrate similar qualities of independence

and impartiality to the courts.

Demonstrating those qualities to the individual user in a tribunal case will require establishing that those who are to decide the case adopt a

properly impartial approach to it, and have no improper links to any of the parties; that they have not been selected to decide the case because

they will be more likely to come to any particular conclusion; and that they will not feel beholden to the person who appointed or selected them, or

fear adverse consequences, from the result of the case.

11. Dependence of Tribunals on their sponsoring Department was found to be ''indefensible''. The Leggatt Report recommended the creation of a

Tribunals Board as an adjunct to the Lord Chancellor''s Department to advise on ""...""qualifications for chairmen and members, monitoring the

appointment and re-appointment of members, co-ordinating their training, investigating complaints against members, and recommending changes to

the rules of procedure governing all divisions.

12. The observations extracted from the Leggatt Report are relevant and valid in the Indian context as well, though there is no statute in India

comparable to the one in United Kingdom - Tribunals and Inquiries Act, 1992 which replaced the Act of 1971 which in turn had replaced the Act

of 1958.

13. Tribunals, like courts, discharge the State''s inherent judicial function. A Constitution Bench of the Supreme Court in the case of Associated

Cement Companies Ltd. Vs. P.N. Sharma and Another, , speaking through Gajendragadkar, CJ, while holding that the appellate authority under

the Punjab Welfare Officers Recruitment and Conditions of Service Rules, 1952, is a Tribunal, observed:

.....special matters and questions are entrusted to them for their decision and in that sense, they share with the Courts one common characteristic;

both the Courts and the Tribunals are ""constituted by the State and are invested with judicial as distinguished from purely administrative or

executive functions...."" They are both adjudicating bodies and they deal with and finally determine disputes between parties which are entrusted to

the jurisdiction. ... 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. 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 basis 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 a sovereign state"".

14. In the book on Administrative Law by M.P.Jain, an attempt has been made to enumerate the features which distinguish Courts from Tribunals,

the relevant passage at page 215 reads thus :-

In what respects do the Tribunals contrast with Courts? Some of the basic characteristics of the Courts are: they are bound by the prescribed

rules of procedure and evidence; their proceedings are conducted in public; lawyers are entitled to appear before them; they are bodies of general

jurisdiction; the Judge sitting in a Court himself hears and decides a case and gives reasons for his decision; and above all, they are independent of

the executive as Judges have a tenure independent of the executive will. As against this, the Tribunals are not generally governed by the provisions

of the procedural and the evidence laws; their proceedings are not generally required to be conducted in public; they have a specialised

jurisdiction; there may be statutory prohibition on the lawyers to appear before them (though very often it is not so).

The material difference between a Court and a Tribunal, however, lies in the manner of appointment of their members, and control over them. .....

15. That freedom from Control and potential domination of the executive, are necessary preconditions for the independence and impartiality of

Judges was pointed out by the US Supreme Court in the case of Northern Pipeline Construction Co., vs. Marathon Pipeline Com.Et.Al, 458 US

50, wherein the Court quoted with approval what had been said by the Court in United States vs. Will, 449 US 200, ""A Judiciary free from

control by the Executive and Legislature is essential if there is a right to have claims decided by Judges who are free from potential domination by

other branches of government"". The Federalist No.79 page 491 was also quoted in that judgment, ""Next to permanency in office, nothing can

contribute more to the independence of the Judges than a fixed provision for their support... In the general course of human nature, a power over a

man''s subsistence amounts to a power over his will.

16. In that case Justice Brennan speaking for himself and three of his colleagues, also made the following observations with regard to the creation

of specialised Tribunals:-

The potential for encroachment upon powers reserved to the Judicial Branch through the device of ""specialised"" legislative Courts is dramatically

evidenced in the jurisdiction granted to the Courts created by the Act before us. The broad range of questions that can be brought into a

Bankruptcy Court because they are ""related to cases under Title 11,"" 28 U.S. C. 1471 (b) at 54, is the clearest proof that even when Congress

acts through a ""specialised"" Court, and pursuant to only one of its many Art.I powers, appellants'' analysis fails to provide any real protection

against the erosion of Article III jurisdiction by the unilateral action of the political Branches. In short, to accept appellants'' reasoning, would

require that we replace the principles delineated in our precedents, rooted in history and the Constitution, with a rule of broad legislative discretion

that could effectively eviscerate the constitutional guarantee of an independent Judicial Branch of the Federal Government"".

17. Article I of the US Constitution vests all legislative powers in the Congress. Article III provides that : The Judicial power of the United States

shall vest in one Supreme Court, and in such inferior Courts as Congress may from time to time ordain and establish. The Judges, both of Supreme

Court and inferior Courts, shall hold their offices during good behaviour, and shall at stated times, receive for their services, a compensation, which

shall not be diminished, during their continuance in office.

18. In the same decision, it was observed by the Court that, ""Private-rights disputes, on the other hand, lie at the core of the historically recognised

judicial power.

19. Creation of new Bankruptcy Courts with Judges appointed for 14 year terms and with no protection against salary dimunition, to deal with

bankruptcy matters that were earlier part of the jurisdiction of the US Federal District Courts, was thus held by the US Supreme Court to infringe

the constitutional guarantee of an ''independent'' judicial branch.

20. Article 323-A of our Constitution provides for creation by Parliament, by law, of Administrative Tribunals. Article 323-B enables the

appropriate legislature by law to provides for the adjudication or trial by Tribunals of any disputes, complaints, or offences with respect to all or

any of the matters specified in clause (2) thereof with respect to which, the Legislature has power to make laws. The matters specified in clause (2)

of Article 323-B are :

a) levy, assessment collection and enforcement 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 329-A;

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-clauses (a) to (i).

Clause (h) regarding rent, its regulation and control, etc. was introduced into that Article by the Constitution (Seventy-fifth Amendment) Act, 1993

with effect from 15.5.1994.

21. Both Articles 323-A and Article 323-B provide for the law to be made by Parliament or other appropriate legislature, excluding the

jurisdiction of all Courts, except the jurisdiction of the Supreme Court under Article 136, with respect to the subject matter of the law enacted

under those Articles. A seven Judge Bench of the Supreme Court in the case of L. Chandra Kumar Vs. Union of India and others, , has held that

the High Court''s powers under Article 226 and 227 cannot be so excluded.

22. In the case of Chandra Kumar, it was also held that,

It is to be remembered that, apart from the authorisation that flows from Articles 323-A and 323-B, both Parliament and the State Legislatures

possess legislative competence to effect changes in the original jurisdiction of the Supreme Court and the High Courts.

23. �In the case of Union of India and Another Vs. Delhi High Court Bar Association and Others, , a two Judge Bench of the Court held that

the Debt Recovery Tribunals though it may not strictly fall within the concept of judiciary as envisaged by Article 50, it is nevertheless an effective

part of the justice delivery system.�� It was also held therein that the creation of such Tribunals in the place of a Civil court to decide civil

disputes relating to Debt Recovery matters does not interfere with the independency of judiciary.�� The Court held that nobody has an

absolute right to demand� that the disputes be adjudicated upon only by a civil court under the code of civil procedure.

24. The Court observed at paragraphs 24 and 25 of that judgment:

The manner in which a dispute is to be adjudicated upon is decided by the procedural laws which are enacted from time to time. It is because of

the enactment of the CPC that normally all disputes between the parties of a civil nature would be adjudicated upon by the civil courts. There is no

absolute right in anyone to demand that his dispute is to be adjudicated upon only by a civil court. The decision of the Delhi High Court proceeds

on the assumption that there is such a right. As we have already observed, it is by reason of the provisions of the CPC that the civil courts had the

right, prior to the enactment of the Debts Recovery Act, to decide the suits for recovery filed by the banks and financial institutions. This forum,

namely, that of a civil court, now stands replaced by a Banking Tribunal in respect of the debts due to the bank. When in the Constitution Articles

323-A and 323-B contemplate establishment of a Tribunal and that does not erode the independence of the judiciary, there is no reason to

presume that the Banking Tribunals and the Appellate Tribunals so constituted would not be independent, or that justice would be denied to the

defendants or that the independence of the judiciary would stand eroded.

Such Tribunals, whether they pertain to income tax or sales tax or excise or customs or administration, have now become an essential part of the

judicial system in this country. Such specialised institutions may not strictly come within the concept of the judiciary, as envisaged by Article 50, but

it cannot be presumed that such Tribunals are not an effective part of the justice delivery system, like courts of law. It will be seen that for a person

to be appointed as a Presiding Officer of a Tribunal, he should be one who is qualified to be a District Judge and, in case of appointment of the

Presiding Officer of the Appellate Tribunal he is, or has been, qualified to be a Judge of a High Court or has been a member of the Indian Legal

Service who has held a post in Grade I for at least three years or has held office as the Presiding Officer of a Tribunal for at least three years.

Persons who are so appointed as Presiding Officers of the Tribunal or of the Appellate Tribunal would be well versed in law to be able to decide

cases independently and judiciously. It has to be borne in mind that the decision of the Appellate Tribunal is not final, in the sense that the same can

be subjected to judicial review by the High Court under Articles 226 and 227 of the Constitution.

25. The Supreme Court in the case of State of Karnataka Vs. Vishwabarathi House Building Coop. Society and Others, has observed, inter alia,

that, ""the legislative competence of Parliament and the State Legislatures respectively to provide for creation of Courts and Tribunals as envisaged

in different Lists contained in the Seventh schedule of the Constitution of India are as under :

Item 77 of List I of the Seventh Schedule

Constitution, organization, jurisdiction and powers of the Supreme Court (including contempt of such Court), and the fees taken therein; persons

entitled to practice before the Supreme Court.

Item 78 of List I of the Seventh Schedule:

Constitution and organization (including vacations) of the High Courts except provisions as to officers and servants of High Courts; persons

entitled to practise before the High Courts.;

Item 79 of List I of the Seventh Schedule:

Extension of the jurisdiction of a High Court to, and exclusion of the jurisdiction of a High Court from, any Union Territory.

Item 95 of List I of the Seventh Schedule:

Jurisdiction and powers of all Courts, except the Supreme Court, with respect to any of the matters in this List; admiralty jurisdiction"".

Item 65 of List II of the Seventh Schedule :

Jurisdiction and powers of all Courts except the Supreme Court with respect to any of the matters in this list.

Item 11-A of List III of the Seventh Schedule:

Administration of justice; constitution and organisation of all Courts, except the Supreme Court and High Courts.

Item 46 of List III of the Seventh Schedule:

Jurisdiction and powers of all Courts, except the Supreme Court, with respect to any of the matters in this List"".

A bare perusal of the aforementioned provisions does not leave any manner of doubt as regard the legislative competence of Parliament to

provide for creation of Special Courts and Tribunals. Administration of justice; constitution and organisation of all Courts, except the Supreme

Court and the High Courts is squarely covered by Entry 11-A of List III of the Constitution of India. The said entry was originally a part of Entry 3

of List II. By reason of the Constitution (Forty-second Amendment) Act, 1976 and by Section 57(a)(vi) thereof, it was inserted into List III as

Item 11-A"".

26. The Three Judge Bench while upholding the constitutionality of the Consumer Forums constituted under the Consumer Protection Act, held

that as such Forums were only supplemental to the Courts and their decisions were subject to judicial review by the High Court, the presence of

laymen on the Forums did not have the effect of eroding the independence of judiciary.

27. One has therefore necessarily to look at Schedule VII to the Constitution to ascertain the matters with reference to which the Tribunals may be

set up. Parliament would be competent to set up Tribunals with regard to subjects enumerated in List I, while State legislatures would be

competent to set up Tribunals with regard to matters enumerated in List II. With regard to matters enumerated in List III, Parliament would have

the power, and in case it has chosen not to exercise that power, the appropriate legislature would have the power to establish Tribunals.

28. The inexorable logic of this is that the Courts can be denuded of the jurisdiction now vested in them, by creating separate or joint Tribunals

with respect to each of the matters in the three lists. An example of this is the Debt Recovery Tribunal constituted under the Recovery of Debts

Due to Banks and Financial Institutions Act, 1993. A parallel Tribunal to deal with matters which are within the jurisdiction of the courts may also

be set up as has been done in the case of Consumer Disputes Redressal Forums constituted under the Consumer Protection Act, 1986 and the

Lok Adalats under the amended Legal Services Authority Act.

29. With regard to Courts, the Constitution specifically provides for high status to the superior Courts - the Supreme Court, and the High Courts,

and makes adequate provisions to ensure their independence. The Constitution has also specifically provided for ''Subordinate Courts'' in Chapter

VI of Part VI in Articles 233 to 237. Appointment to the ''Judicial Service'' whose members man the subordinate Courts, is to be made only after

consultation with the High Courts or in accordance with Rules made after consultation with the High Court. The control over subordinate courts

vests exclusively in the High Court as provided in Article 235:

Article 235: Control over subordinate courts :

The control over district courts and courts subordinate thereto including the posting and promotion of, and the grant of leave to persons belonging

to the judicial service of a State and holding any post inferior to the post of district judge shall be vested in the High court, but nothing in this article

shall be construed as taking away from any such person any right of appeal which he may have under the law regulating the conditions of his

service or as authorising the High Court to deal with him otherwise than in accordance with the conditions of his service prescribed under such law.

30. In contrast, there is no provision in the constitution specifically dealing with the Tribunals (except Articles 136 and 227 which only provide for

appeal to the Supreme Court with leave, and judicial review of the Tribunal''s orders by the High Courts) and there are no provisions dealing with

the qualifications, tenure, control, and measures to ensure the competence, suitability, independence, and impartiality of the Chairperson/President

and Members of the Tribunals, even though such Tribunals are entrusted with jurisdiction as substitutes to the Courts, or as supplemental to that of

the Courts.

31. The constitutional guarantee of an independent judiciary and separation of the judiciary from legislative and executive functions can amount to

very little (subject only to Articles 32, 226 and 227), if Parliament, the legislatures, and the Executive whose powers - subject to the Constitution

and enacted legislation, is co-terminus with the legislative power - were to be regarded as having absolute discretion to decide upon the

constitution, qualifications, selection, appointment, tenure, compensation, control and other matters pertaining to the Tribunals.

32. The power of the Parliament and the legislature to create Tribunals does not in our view, extend to rendering such new forums an extension of

the legislative or executive branches of the Government, or as forums controlled, or designed to be dominated, or potentially dominated by the

legislative or executive wing of the State.

33. It is worth noticing in this context, the decision of the Privy Council in the case of Hinds & Ors. Vs. The Queen, Director of Public

Prosecutions Vs. Jackson 1976 (1) All ER 353, wherein the Privy Council considered the constitutional validity of The Gun Court Act, 1974,

which had been enacted by the Jamaican Parliament. Lord Diplock, who spoke for the majority, after referring to the Constitutions of Jamaica,

Ceylon, Canada and Australia, inferred that there was a common drafting practice, which led by a necessary implication, to the establishment of a

Government structure, which made provision for a legislative, executive and a judicial branch, and that it was taken for granted that the basic

principle of separation of powers would apply to the exercise of the respective functions of those three organs of Government. All those

Constitutions were compendiously referred to as following a Westminster model of draftsmanship, and in that model the chapter dealing with the

Judiciary invariably contained provisions dealing with the method of appointment, and security of tenure of the members of the judiciary, which

were designed to assure to them a degree of independence from the other branches of the Government.

34. It was observed by the learned Judge:

What, however, is implicit in the very structure of the Constitution of the Westminster model is that the judicial power, however be it distributed

from time to time between various courts, has to continue, to be vested in the persons appointed to hold judicial office in the manner and on the

terms laid down in the chapter dealing with the judiciary, even though this is not expressly stated in the Constitution"".

35. It was further observed that where a Constitution of Westminster model speaks of a particular ''court'' already in existence when the

Constitution came into force, it uses this expression as collective description of those individual Judges who, whether sitting alone or with other

Judges or with jury, are entitled to exercise the jurisdiction exercised by that court before that Constitution came into force and, further, in that

case, the provision in the Constitution for the appointment or security of tenure of Judges of that court, will apply to all individual Judges

subsequently appointed to exercise the analogous jurisdiction, whatever other name may be given to the court in which they sit. The Privy Council

in that context referred to the case of Attorney General for Ontario Vs. Attorney General for Canada, 1925 AC 750.

36. After holding that there was nothing in the Constitution of Jamaica to prohibit Parliament by enactment of an ordinary law to create a Court

under a new name, such as the Revenue Court, to exercise part of the jurisdiction that was being exercised by members of higher judiciary or by

members of the lower judiciary at the time the Constitution came into force, it was held that by so doing, only the label was being changed, but that

the duty to ensure that any person appointed to be a member of the new court ""should be appointed in the same manner and entitled to the same

security of tenure as the holder of the judicial office named in Chapter 7 of the Constitution which entitled him to exercise the jurisdiction at the time

when the Constitution came into force, was a duty which the Parliament had to scrupulously observe"".

37. The Privy Council quoted with approval the words used by Viscount Simonds in Attorney General of Australia Vs. R & Boilermakers''

Society of Australia, 1957 (2) All ER 52 that, ""it would make a mockery of the Constitution if Parliament could transfer the jurisdiction previously

exercisable by holders of the judicial office named in Chapter VII of the Constitution, to holders of new judicial offices to which some different

name was attached, and to provide that persons holding the new judicial offices should not be appointed in the manner and on the terms prescribed

under Chapter VII for the appointment of the members of the judicature"", and observed, ""If this were the case, there would be nothing to prevent

the Parliament from transferring the whole of the judicial power of Jamaica (with two minor exceptions referred to below) to bodies composed of

persons who not being members of ""the judicature"", would not be entitled to the protection of Chapter VII at all.

38. That even the label ""Supreme Court"", could be rendered a false description, if such broad legislative power was to be recognised, was pointed

out: ""If as contended by the Attorney General, the words italicised in Section 97(1) entitle Parliament by an ordinary law to strip the Supreme

Court of all jurisdiction in civil and criminal cases other than that expressly conferred on it by Section 25 and Section 366 and Section 44, what

would be left would be a court of such limited jurisdiction that the label ''Supreme Court'' would be a false description; so too if all its jurisdiction

(with those two exceptions) were exercisable concurrently by other courts composed of members of the lower judiciary.

39. The most significant reason for imposing a check on the legislative power to create new adjudicatory forums, and man them with persons who

do not enjoy the independence assured to the Judges, was stated by Lord Diplock, in these words : ""But more important, for this is the substance

of the matter, the individual citizen could be deprived of the safeguard, which the makers of the Constitution regarded as necessary, of having

important questions affecting his civil or criminal responsibilities determined by a court, however named, composed of Judges whose independence

from all local pressure by Parliament or by the executive was guaranteed by a security of tenure more absolute than that provided by the

Constitution for Judges of inferior courts.

40. In the United States of America which has the oldest live written constitution, in which are entrenched provisions separating the legislative,

executive and judicial powers, the constitution was viewed by the US Supreme Court, as the result of the framers regarding the ""checks and

balances that they had built into the tripartite Federal Government as a self-executing safeguard against the encroachment or aggrandizement of one

branch at the expense of the other, Buckly Vs. Valeo, 424 US 1."" The object of ensuring these checks and balances was stated by the court in the

Marathon case, 458 U.S. 50, was ""to guarantee that the process of adjudication itself be made impartial"". The court quoted Hamilton in the

Federalist No.78 wherein was stated ""periodical appointment however regulated or by whomsoever made, would in someway or the other be fatal

to the courts'' necessary independence. If the power of making them was committed either to the executive or Legislature, there would be danger

of an improper complaisance to the branch, which possessed it ........

41. Despite the differences in the written constitutions of India and USA, and the unwritten constitution of UK, a common cherished constitutional

value in all these countries whose legal systems are rooted in the common law, is the independence and impartiality of those entrusted with the

exercise of the State''s inherent judicial power.

42. The decisions of the larger Bench of the Supreme Court in the cases of His Holiness Kesavananda Bharati Sripadagalvaru Vs. State of Kerala,

and the Constitution Bench in the case of Minerva Mills Ltd. and Others Vs. Union of India (UOI) and Others, , have held, inter alia, that an

independent judiciary and it''s power of judicial review are among the basic features of the Constitution.

43. The Constitution Bench in the case of S.P. Sampath Kumar and Others Vs. Union of India (UOI) and Others, , speaking through Bhagwathi,

CJ, has held that, ""It can no longer be disputed that total insulation of the judiciary from all forms of interference from the co-ordinate branches of

the Government is a basic essential feature of the Constitution, the same independence from possibility of Executive pressure or influence must also

be ensured to the Chairman, vice Chairman and Members of the Administrative Tribunals.....The Constitution makers have made anxious provision

to secure total independence of the judiciary from executive pressure or influence.

44. A seven Judge Bench in the case L. Chandra Kumar Vs. Union of India and others, , has laid down that the ""Power of Judicial review over

legislative action vested in the High Courts under Article 226, and in this Court under Article 32 of the Constitution is an integral and essential

feature of the Constitution constituting a part of the basic structure ......"" and that ""... the power vested in the High Courts to exercise judicial

superintendence over the decisions of all Courts and Tribunals within their respective jurisdictions is also part of the basic structure of the

constitution. This is because a situation where the High Courts are divested of all other judicial functions apart from constitutional interpretation is

equally to be avoided.

45. The Constitutional guarantee of a free and independent judiciary, and the constitutional scheme of separation of powers can be easily and

seriously undermined, if the legislatures were to divest the regular Courts of their jurisdiction in all matters, entrust the same to newly created

Tribunals which can appropriately be labelled, borrowing the language of the US Supreme Court, as ''Legislative Courts'', and assert that such

forums not being regular Courts and their Members not being Members of the ''Judicial service'' of the State, they are not entitled to protection

similar to the constitutional protection afforded to the Courts.

46. If the Constitutional Scheme and intent are to be preserved, it must be held that the ''total insulation of the judiciary'' referred to in the case of

Sampath Kumar is not just for the ''judiciary '' comprising of Judges appointed to the regular Courts. The ''judiciary'' in this context must be

understood as taking within it''s fold, all courts and Tribunals and other adjudicatory bodies, whatever be the label assigned to them. The

independence and impartiality which are essential for the proper exercise of the judicial power, are to be secured not only for the Courts but also

for Tribunals and their members, who, though they do not belong to the ''Judicial Service''; are entrusted with judicial powers.

47. Any other view, in the evocative language of Justice Brennen, would ""effectively eviscerate the constitutional guarantee of an independent

Judicial Branch.

48. Safeguards which ensure independence and impartiality are not for promoting personal prestige of the functionary but for preserving and

protecting the rights of the citizens and others who are subject to the jurisdiction of the Tribunal, and for ensuring that such Tribunals will be able to

command the confidence of the public. As said by Lord Denning, ''Justice is rooted in confidence''.

49. Before proceeding further we must notice the submission made on behalf of the respondent that legislation even if found to be arbitrary cannot

be struck down on that ground. Our attention was invited to the decision of the Supreme Court in the case of State of Bihar vs. Bihar Distillery

Ltd., (1997) 3 SCC 453, wherein it was inter alia observed that, ""The general averment that the Act is arbitrary is too vague to merit any

acceptance, apart from the fact that an act of legislature cannot be struck down merely saying it is arbitrary..

50. The Court in that case reiterated the law that had been laid down in the case of State of Andhra Pradesh and others, etc. Vs. McDowell and

Co. and others, etc., by a three Judge Bench. In that it was observed, ""The power of Parliament or for that matter, the State Legislatures is

restricted in two ways. A law made by Parliament or the legislature can be struck down by courts on two grounds and two grounds alone, viz., (1)

lack of legislative competence, and (2) violation of any of the fundamental rights guaranteed in Part III of the Constitution or of any other

constitutional provision. There is no third ground."" .....

It is enough for us to say that by whatever name it is characterised, the ground of invalidation must fall within the four corners of the two grounds

mentioned above. In other words, say, if an enactment is challenged as violative of the equality clause/equal protection clause enshrined therein,

Similarly, if an enactment is challenged as violative of any of the fundamental rights guaranteed by clauses (a) to (g) of Article 19(1), it can be

struck down only if it is found not saved by any of the clauses (2) to (6) of Article 19 and so on. No enactment can be struck down by just saying

that is is arbitrary or unreasonable. Some or other constitutional infirmity has to be found before invalidating an Act.

51. In the foot note in that judgment referring to the expression ''arbitrary'', it is stated thus -

An expression used widely and rather indiscriminately - an expression of inherently imprecise import. The extensive use of this expression in India

reminds one of what Frankfurther, J., said in Hattie Mae Tiller v. Atlantic Coast Line Railroad Co., 87 L Ed 610 : 318 US 54 (1943). ""The phrase

begins life as a literary expression; its felicity leads to its lazy repetition and repetition soon establishes it as a legal formula, undiscriminatingly used

to express different and sometimes contradictory ideas"", said the learned Judge.

52. In the case of Public Services Tribunal Bar Association Vs. State of U.P. and Another, a two Judge Bench reiterated what had been said in

the case of State of Bihar.

53. The following passage from the case of R.K. Garg and Others Vs. Union of India (UOI) and Others, was quoted with approval in the case of

Attorney General for India and Others Vs. Amratlal Prajivandas and Others, , as setting out ""principles relevant in judging the validity and relevant

in the matter of interpreting the provisions of such economic measures.."" The economic measures that was being considered in the case of Attorney

General of India was validity of SAFEMA. In the case of Garg, Bhagwati, J., observed, ""There may be crudities and inequities in complicated

experimental economic legislation but on that account alone it cannot be struck down as invalid.

There may even be possibilities of abuse but that too cannot of itself be a ground for invalidating the legislation because it is not possible for any

legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its

provisions and provide against such distortions and abuses."" .... ""The court must therefore adjudge the constitutionality of such legislation by the

generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or

by the possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of

pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues.

54. We are here concerned with statutory provisions which are allegedly violative of the basic constitutional guarantee of free and independent

judiciary and therefore beyond the legislative competence of Parliament.

55. We shall now examine the petitioner''s challenge to the constitutional validity of the impugned provisions of the Companies Act.

56. The Parliament''s power to create National Company Law Tribunal and National Company Law Appellate Tribunal is clearly traceable to

Entries 43 and 44 of List I, which read as under :

43. Incorporation, regulation and winding up of trading Corporations including banking, insurance and financial corporations but not including co-

operative societies.

44. Incorporation, regulation and winding up of corporations, whether trading or not, with objects not confined to one State, but not including

universities"".

57. Parliament is thus competent to enact law with regard to the incorporation, regulation and winding up of Companies. The power of regulation

would include the power to set up an adjudicatory machinery for resolving the matters litigated upon, and which concern the working of the

companies in all their facets. The Law Commission, as noted by the Supreme Court in the case of Chandra Kumar, had also recommended the

creation of specialist Tribunals in places of generalist Courts. Creation of National Company Law Tribunals and Appellate Tribunals and vesting in

those Tribunals the powers exercised by the High Court with regard to company matters cannot be said to be unconstitutional.

58. However several of the provisions in Parts 1B and 1C of the Companies Act which deal with these Tribunals are inconsistent with the basic

feature of the Constitution regarding separation of the judicial power from that of legislative and executive powers, as also with the independent

and impartial exercise of the judicial power.

59. Sections 10FE and 10FT prescribe the tenure of the office of the President and Members of the Tribunal and the Appellate Authority, as three

years with eligibility for reappointment. At the end of that term of three years there is no provision for automatic reappointment subject to their not

having incurred any disqualification or being found guilty of any misconduct. All that is provided for is that they would be eligible for reappointment

which would only mean that they are not disqualified from being considered again without any assurance that they would be once again selected for

appointment.

60. The short tenure of the Members undermines their independent functioning, as such persons will have to depend upon the executive

government and the selection committee in which four out of five members are serving officers of the Government, for their continuance in office.

The scope for influencing their functioning is large. Sensitive matters involving ownership, control and functioning of Corporations involving heavy

stakes will come up for adjudication before the Tribunal. Considering the manner in which business in India functions, the likelihood of attempts

being made to bring pressure and influence through political and executive branches on the Member is very real. The real possibility of their not

being reappointed after such a short tenure, will disable them from functioning as truly independent and impartial adjudicators. The quality of justice

rendered by such Members will not inspire much confidence among those who come before them. It is not only necessary that they function as

truly independent and impartial adjudicators, but also should be perceived as such.

61. This short tenure will also prove a disincentive for well qualified and able persons possessing the necessary qualifications, from offering

themselves for consideration for appointment to the Tribunal, as professionals who have built up a good practice after several years of hard work

cannot, in the normal course be expected to give up their profession/practice for an appointment of extremely limited duration with no assurance of

a career. Constituting a Tribunal in a manner which would keep able persons out is hardly the proper way of setting up an adjudicatory forum

entrusted with the responsibilities of determining the very valuable rights of persons who come before it.

62. This also makes room for persons within the Executive branch to secure appointment as Members specially in the light of the proviso to section

10FE which provides that they will continue to retain their lien on their substantive post.

63. Such officers though given the nomenclature of the Member of the Tribunal but who have no commitment to a career as a Member of the

Tribunal and regard it merely as an opportunity to do a different kind of work, with the knowledge that they would come back to their substantive

post and look for career advancement in their respective substantive cadres, would be even more susceptible to executive and ministerial influence

which they would find difficult to resist. A Tribunal composed of such persons cannot be regarded as one which is independent and impartial, and

which can discharge State''s inherent judicial powers in the manner in which it should be discharged.

64. Even a term of five years was regarded by the Supreme Court in the case of Sampath Kumar, as a ""disincentive for well qualified people to

accept the offer to join the Tribunal"". The Court in that case further observed, ""There may be competent people belonging to younger age groups

who would have more than five years to reach the prevailing age of retirement. The fact that such people would be required to go out on

completing the five year period but long before the superannuation age is reached is bound to operate as a deterrent. ........A five year period is not

a long one. Ordinarily some time would be taken for most of the members to get used to the service jurisprudence and when the period is only five

years, many would have to go out by the time they are fully acquainted with the law and have good grip over the job. To require retirement at the

end of five years is thus neither convenient to the person selected for the job nor expedient to the scheme. ........membership in other high-powered

Tribunals like the Income Tax Appellate Tribunal or the Tribunal under the Customs Act can be referred to.

65. In those two Tribunals, namely Income Tax Appellate Tribunal and the Customs and Excise Appellate Tribunal, the appointment once made is

upto the age of retirement.

66. In the Tribunal constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 the term of office is five years. The

appointees are or were District Judges. Similar terms of five years is provided for persons appointed as Members of the Consumer Forums under

the Consumer Protection Act, 1986.

67. It is only in the Companies (Amendment) Act, 2002 and in the Competition Act, both enactments being of the year 2002, the term of office is

specified as three years, even after the seven Judge Bench of the Supreme Court had indicated in 1997 in the case of Sampath Kumar that even a

five year term was not sufficient, as some time would be taken by most of the members to get used to the jurisprudence of the branch for which the

Tribunal is constituted, and many would have to come out by the time they are fully acquainted with that branch of law.

68. The Law Commission in it''s 162nd Report has recommended that in the cases of Members of Administrative Tribunals their initial term should

be ten years and renewable for a further period of five years. In UK the Leggatt Report which reviewed the functioning of the Tribunals in UK, the

recommendation was that the term of Members of the Tribunal be atleast seven years, with provision for automatic renewal subject to the person

not having been found guilty of misconduct or the like.

69. Limiting the term of office to a period of three years lends support to the apprehension of the petitioner that the executive is gradually trying to

make deeper and deeper inroads into the independence of the judiciary. The executive appears to have entertained an opinion, that the Supreme

Court not having interfered with and not having invalidated the provisions of the Administrative Tribunals Act, and other Acts by which other

Tribunals have been constituted, in which a five year tenure is provided, it would be open to the Executive and the Parliament to reduce that period

of five years to any other number of years of its choice.

70. At this rate Parliament could enact a law setting up a new Tribunal and/or modify existing law concerning presently functioning Tribunals limiting

the term of office of the members to two years, or one year or even less, thereby placing appointees perennially at the mercy of the Executive, and

making them implicitly carry out the wishes of Executive, and allow a great deal of room for executive domination over the manner in which they

perform their functions.

71. This is a danger, which the Court must recognise and guard against. If the limits are not properly set at this stage, the executive would find the

temptation much too great to resist, to take more and more out of the area reserved for the judiciary, which area has been carved out for the

judiciary by the makers of the Constitution solely with a view to ensure the independent and impartial functioning of the persons with appropriate

qualifications and charged with the exercise of judicial functions.

72. Limiting the tenure of the Members of this Tribunal to three years would be detrimental to competence, independence, and impartiality of the

new Tribunals.

73. The provision for retaining the lien is a provision which undermines the independence of the Tribunal. It would be reasonable to provide some

time for the officer who chooses to come to the Tribunal within which he would make up his mind, as to whether he would like to remain in the

Tribunal or go back to his service. Equally it is desirable for the appointing authority to watch the performance of the newly appointed Member for

a reasonable period of time. Allowing the Member to retain the lien for an indefinite period is clearly a provision which cannot be regarded as

constitutional, having regard to the functions which the Tribunal is required to perform.

74. Unless the term of office is fixed as atleast five years with a provision for renewal, except in cases of incapacity, misconduct and the like, and

the period for which lien may be retained is fixed at not more than one year, 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.

75. Section 10FD deals with the qualifications, appointment of President and Members of the National Company Law Tribunal, while Sections

10FR deals with qualification for appointment as Chairperson and Members of the National Company Law Appellate Tribunal.

76. Section 10FD(1) provides that the President shall be a person who has been or is qualified to be a Judge of a High Court. This excludes sitting

Judges of the High court.

77. Under Article 217(2) the qualification for appointment as a Judge of a High Court is that the person be a citizen of India, and has at least for

ten years either held a judicial office in India or has been an advocate of a High Court or of two or more such Courts in succession.

78. In contrast to Section 10FD(1) Section 10FR(2) which deals with Chair person of the Appellate Tribunal requires that the Chairperson be a

person who has been a Judge of the Supreme Court or a Chief Justice of a High Court.

79. The Supreme Court, in the case of Sampath Kumar had held that for appointment to the post of vice Chairman of the Administrative Tribunals

a person qualified to be appointed as a Judge of a High Court could also be considered. What was said there has inappropriately been extended

here to the post of a President who heads the entire Tribunal which consists of the President and 62 other members. It is in the fitness of things that

the person who heads this important Tribunal be a person who has considerable experience in discharging high judicial functions as a Judge of a

High Court. A wider vision, the ability to see things in context and in the proper perspective, the ability to be innovate wherever necessary, and

other similar qualities are almost as important as expertise in the subject.

80. Even as, for the position of a chairperson of the Appellate Tribunal it is only persons who have actually held the office either as a Judge of the

Supreme Court, or as Chief Justice of a High Court who can be considered, so also for the post of a President of the Tribunal it would be

appropriate to confine the choice to persons who had held the position of a Judge of a High Court for a minimum period of five years.

81. In the second proviso to Section 10FE it is provided that a person appointed as a President as also a Member, ""....may retain lien with his

parent cadre or Ministry or Department while holding office as such"". This is surprising and raises doubts as to whether reference to a person

qualified to be a Judge of a High court is, for the purpose of enabling persons in the Indian Legal Service or the Indian Company Law Service

(Legal Branch) who had been advocates for ten years before joining such service, to be considered as being eligible to be appointed as President

of the Tribunal. This is a disturbing provision. Even the high office of the President of the Tribunal is being allowed to be held by a person from the

executive branch by regarding him as being qualified for appointment for the post of a Judge of a High Court on account of his having been an

advocate for ten years or more prior to his joining the service. The reference to President must be deleted from the proviso in Section 10FE. For

Members, as already held, the lien should be limited to one year.

82. The qualifications prescribed for a Judicial Member in Section 10FD(2) in sub-clauses (a) to (d) are qualifications to which no serious

objection can be taken. The qualifications required are : holding judicial office for 15 years; or practice as an advocate of a High Court for ten

years; or atleast three years of service in the Senior Administrative Grade of the Indian Company Law Service (Legal Branch), or three years of

Service in Grade I of the Indian Legal Service.

83. In the case of Chandra Kumar vs. UOI, it was observed by the Constitution Bench:

It must be remembered that the setting up of these Tribunals is founded on the premise that specialist bodies comprising both trained

administrators and those with judicial experience would by virtue of their specialised knowledge, be better equipped to dispense speedy and

efficient justice. It was expected that a judicious mix of judicial member and those with grassroot experience would best serve this purpose. To

hold that the Tribunal should consist only of judicial members would attack the primary basis of the theory pursuant to which they have been

constituted.

84. Presence of persons without judicial background on the Tribunal was thus found to be permissible, if such persons possess specialised

knowledge which was relevant to the specialised nature of the Tribunal. The grass root experience in the field was regarded as a positive

qualification for a non judicial member.

85. Section 10FD(3) which sets out the qualifications required for Technical Members, refers in sub-clauses (a), (b), (c), (d), and (e) respectively,

to persons who are in the Indian Company Law Service (Accounts Branch) in the Senior Administrative Grade; persons who had held the rank of

a Joint Secretary to the Government of India and have adequate knowledge and experience in dealing with problems relating to company law;

those with 15 years of practice as Charted Accountant; with 15 years of practice as Cost Accountants; and to persons with 15 years working

experience as Company Secretary in wholetime practice. No serious exception can be taken to the qualifications so prescribed for a Technical

Member in sub clauses (a) to (3) of 10FD(3).

86. 10FD(3)(f) is a matter of serious concern. It reads as under :

10FD(3) A person shall not be qualified for appointment as Technical Member unless he-

(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

87. It is difficult to see how knowledge of science, technology or industry can make for expertise in the specialised branch of company law. It is

equally difficult to see the link between qualifications and expertise in Economics, Banking, Industrial finance, Industrial Management, Industrial

Reconstruction, administration, and investment, and marketing with expertise in company law.

88. The object of creating specialist Tribunals is not to provide a sinecure to persons who may be specialised in unrelated branches of knowledge,

and vest precious judicial power in them in an area in which they are not competent.

89. So far as Law and Accountancy are concerned, they are relevant in this specialist Tribunal but for which provision has already been made in

Section 10FD(2) and Sections 10FD(3)(c) and (d).

90. The justification offered by the State is that a similar provision existed in the Sick Industrial Companies (Special Provisions) Act, 1985 and

since the work relating to revival and rehabilitation of sick industries is entrusted to this new Tribunal, under the new Part VIA of the Companies

Act comprising sections 424A to 424L, and titled ""Revival and Rehabilitation of Sick Industrial Companies"" a Member possessing the qualification

provided for in that Act, is required to be appointed to this new Tribunal.

91. Section 4(2) of the Sick Industries Special Provision Act reads thus: ""The Chairman and other members of the Board shall be persons who are

or have been or are qualified to be High Court Judges or persons of ability, integrity and standing, who have special knowledge and professional

experience of not less than 15 years in Science, Technology, economics, Banking industry, Law, Labour matters, Industrial Finance, Industrial

Management, Industrial Reconstruction, Administration, Investment, Accountancy, Marketing or any other matter, the special knowledge of or

professional experience in which in the opinion of the Central Government be useful to the Board.

92. Sections 5(2) and (3) of that Act which deal with the Chairman and Members of the Tribunal read thus :

S.5(2) The Chairman shall be a person who is or has been a Judge of the Supreme Court or who is or has been a Judge of a High Court for not

less than five years;

S.5(3) a member of the Appellate Authority shall be a person who is or has been a Judge of a High Court or has been an officer not below the

rank of a Secretary to the Government of India, or who is or has been a Member of the Board for not less than three years.

93. Section 10FD(3)(f) is practically a reproduction of Section 4(3) of the Sick Industrial Companies (Special Provisions) Act, 1985, except that

the period of experience in the specified field is twenty years instead of fifteen years.

94. It is evident that the Legislative draftsperson has not paid attention to the Scheme of Section 10FD when he/she decided to bodily lift Section

4(3) from the Sick Industries Act, make a minor modification therein and incorporate the same as sub-clause (f) of Section 10FD(3).

95. Knowledge of/and experience in Science, Technology, Industry, etc., does not equip one to deal with questions of company law with regard to

matters like oppression and mismanagement, matters relating to allotment of shares, amalgamation and restructuring of companies, or the priorities

in the distribution of assets in the course of winding up, and such matters.

96. Any appointee u/s 10FD(3)(f) therefore can have a role only in matters concerning revival and rehabilitation of sick industrial companies and

not in relation to any other matters.

97. Section 10FD(3)(g) is incongruous. The qualifications prescribed therein for appointment as a Technical Member is the holding or having held

the office of Presiding Officer of a Labour Court, Tribunal or National Tribunal constituted under the Industrial Disputes Act. Persons who hold

such posts are District Judges and for the National Tribunal, former Judges of the High Court, Their training and expertise is in law and in

adjudication of disputes. If their expert knowledge of Labour law is what is sought to be utilised, a minimum period of three to five years

experience as such Presiding Officer should be prescribed. Persons who satisfy the qualifications prescribed in Section 10FD(f) would be persons

who would also satisfy the qualifications prescribed under Sections 10F(2)(a). It would be more appropriate to include this qualification in Section

10FD(2) and in the later provisions dealing with ''Benches of the Tribunal'' in Section 10FL, provide that ''Judicial Member'' with this qualification

shall be a member of the special Bench referred to in Section 10FL(2) for cases relating to rehabilitation, restructuring or winding up of companies.

98. Section 10FD(3)(h) reads as under: ...""is a person having special knowledge of and experience of not less than fifteen years in the matters

relating to labour."" This provision not only suffers from vagueness in so far as it merely mentions ''matters relating to labour'', without specifying

what those matters are, and the capacity in which the persons must have dealt with those matters, this provision would enable a person who has

some knowledge of labour as an academic, or as an official in the Ministry of Labour or as a Trade Union Leader or as Labour Welfare Officer or

as Manager in the Human Resources Department of a Company, to become a Technical Member of the Company Law Tribunal. As a Technical

Member such a person would be eligible to sit on all Benches of the Tribunal and adjudicate matters arising for decision relating to management,

amalgamation, winding up of Companies, about which he is likely to know nothing.

99. The Proviso to Section 10FL(2) is quite startling. It reads thus: ""Provided that in case a Special Bench passes 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.

100. The Special Bench referred to therein comprises of a Judicial Member, a Technical Member appointed u/s 10FD(3)(a) to (f), and a

Technical Member appointed under class (g) or (h). Such Special Bench/es is/are to be constituted by the President of the Tribunal for the disposal

of any case relating to rehabilitation, restructuring, or winding up of the Companies.

101. That Single Member though not referred to as one who had sat on the Special Bench that passed the winding up order, can very well be a

Labour Member appointed as a Technical Member u/s 10FD(3)(h). This is making a mockery of a specialist tribunal by entrusting to a person

who is wholly ignorant of company law the power to decide complicated questions of law, as also questions of fact after assessing the evidence

without knowing legal principles to be applied for assessing the evidence.

102. A Constitution Bench of the Supreme Court in the case of National Textile Workers'' Union and Others Vs. P.R. Ramakrishnan and Others,

`, by a majority, held that workers of the Company winding up of which is sought, are entitled to appear at the hearing of the winding up petition,

whether to support or oppose it, so long as no winding up order was made by the Court. The Court did not hold that right of the workmen to be

heard extended beyond and after the winding up order had been made. By reason of10FD(3)(h) and 10FL proviso a trade unionist is now a

potential Judge for deciding as to whether Company should be wound up, and in case a winding up order is made, be the sole Judge of all further

proceedings in winding up.

103. The State''s justification is that clause (h) only sets out as an independent provision a qualification which was required of a member of BIFR

and that such Member''s presence in the Tribunal is required as the Tribunal now has to deal with revival and rehabilitation of sick industrial

companies.

104. It is only stating the obvious that the Company is the most important form of business organisation not only in India but all over the world and

that questions relating to the formation, management, control, changes in management, allotment of shares, acquisition of controlling interests,

question of mismanagement and oppression, amalgamation and restructuring of companies, etc., are matters which have large economic

consequences for those directly concerned and many a time on the working of the markets and the economy as a whole. Such decisions cannot be

left to a person who has little or no knowledge of company law and entrusting these vital functions to such persons cannot be permitted.

105. Section 10FD(3)(h) as also sections 10FL(2) proviso must therefore be suitably amended so as to spell out with certainty the qualification

which the person to be appointed under clause (h) should possess and confine his/her participation only to the Bench dealing with revival and

rehabilitation of sick companies and exclude his functioning as a single Member Bench for any matter.

106. Section 10FF empowers the Central government, acting on it''s own to designate any Judicial or Technical Member to be Member

Administration in whom are to be vested financial and administrative powers, and which powers he may in turn confer to any other officer of the

Tribunal. Section 10FK(2) provides that, ""the officers and other employees of the Tribunal shall discharge their functions under the general

superintendence of Member Administration. This is an innovation aimed at and in fact undermining the authority and control of the head of a

Judicial Tribunal and asserting the executive''s control over the staff and other officials of the Tribunal, bypassing the President. These are

pernicious provisions designed to make the President subservient to the executive. The President would have to depend upon the sweet will of the

Member Administration, the chosen one of the Executive, in all matters concerning finance and administration, which are vital for the effective and

orderly functioning of the Tribunal. Even for minor matters like secretarial assistance, transport and the like, the President is required to submit to

the dictates of Member Administration through whom the executive control over finance and administration is being asserted through these

provisions.

107. The choice of the Member Administration is not even to be made with the prior consent of the President or Chair Person. It is left to the

sweet will of the Central Government to pick and choose among the 62 Members that it is empowered to appoint u/s 10FC. The working of the

Tribunal will run to rough weather in case of conflict in the view point of the President and the Member Administration. This power which has been

given to the Central Government is wholly pernicious and will undermine the authority of the head of the Tribunal to ensure the effective and

smooth functioning of the affairs of a Judicial Tribunal.

108. Section 10FF and 10FK(2) should therefore be suitably amended to provide that a Member may be designated as Member Administration

only in consultation with the President, and further provide that the Member Administration will discharge his functions in relation to finance and

administration of the Tribunal under the overall control and supervision of the President.

109. There are also other inconsistencies in the manner in which several provisions concerning the Tribunal have been provided. Section 10FD(2)

(a) as also 10FD (2)(b) specifies a period of fifteen years as the period for which one must have held judicial office while Section 10FD(2)(b)

refers to requirement of only ten years as an advocate of a High Court. It seems to place the ten years as an advocate of a High Court on a higher

footing than a person who has held judicial office for a term of 15 years. It is difficult to appreciate the reasons that prompted the draftsman to

make a distinction of this nature. This clearly is a matter which requires attention.

110. Section 10FR provides for the Constitution of an Appellate Tribunal. Sub-section (1) provides that the Tribunal shall consist of a chairperson

and not more than two members. While 10FR(2) which provides that the chairperson shall be a person who has been a Judge of the Supreme

Court or Chief Justice of a High Court is unobjectionable, sub-section (3) which deals with the appointment of a Member, uses the same language

as in Section 10FD(3)(f) except that the length of experience required is twenty five years. What has been observed by us in relation to Section

10FD(3)(f) is equally applicable to Section 10FR(3). Subjects other than law and accountancy mentioned in that provision cannot be regarded as

enabling persons with knowledge and experience in those fields, to be regarded as specialists in company law competent to deal with, in appeal,

decisions rendered by the Tribunal in relation to company law matters; such persons may only sit in on cases concerning revival or rehabilitation of

sick companies.

111. Even under the Sick Industrial Companies (Special Provisions) Act, 1985, the Appellate Authority for Industrial and Financial Reconstruction

did not have as it''s Member persons, from the subject areas mentioned in Section 10FR(3). Only one, who is or has been a Judge of the High

Court; or who has been a Secretary to the Government of India, or been a Member of the BIFR was eligible for appointment as Member. The

legislative draftsperson has without any rationale, incorporated in Section 10FR(3) a provision which had been made for the BIFR.

112. Section 10FR(3) must therefore be suitably amended to delete the reference to all subjects other than law and accountancy. Incorporating a

provision similar to that in Section 5(3) of the SICA would also be in order.

113. The impression that one is left with after examining the provisions concerning the National Company Law Tribunal and the Appellate Tribunal

is that these provisions have been drafted in haste and have not received the kind of attention that they should have. If they are the result of careful

deliberation it only makes matters worse. The creation of a new substitute judicial forum which is to carry out the work which is now being carried

out by 21 different High Courts in the country which work has been done in the High Court for over nine decades, is to be done with great care so

that the new Tribunal will be efficient and effective alternate institutional forum to the High Courts and the Company Law Board.

114. Added to this is the haste with which the appointments to the posts has have been attempted. We have been told that the salaries payable to

the President, the Chair Person and other Members has not been fixed by the Rules till date. Nevertheless the selection process has been set in

motion with the candidates being in dark as to what kind of compensation they will receive if they were to be appointed to these posts. This is

designed to deter the most suitable candidates from offering themselves for appointment and is a step which ought not to have been taken.

115. According to the petitioner, the salaries proposed to be paid to the Members is not to be uniform, but dependent upon the substantive rank if

any held by the appointee in the post over which he has a lien in Government service. This allegation is not denied. On the other hand justification is

sought to be offered by asserting that Membership of Tribunal for purpose of salary has to be equated to the substantive post over which the

appointee holds a lien. This ''executive'' approach is impossible to justify in a judicial Tribunal. No Member of the Tribunal, when all Members

possess equal powers and have to shoulder equal responsibilities, may look down upon his colleague as belonging to a lower cadre and drawing a

lower salary. This attitude of the executive is further evidence of the attempt to ''executise'' the judicial tribunal, and lends further support to the

petitioner''s apprehensions.

116. The selection process, we are told, has been initiated without advertising the posts in the newspaper and giving wide publicity even though the

field of selection as set out in the several provisions of 10FD and 10FR(3) is very wide. We have been informed by the learned Additional

Solicitor General that letters had been sent to Bar Council by the Ministry with a request to put up the details on their Notice Boards. Counsel for

the Bar Council at our instance, after ascertaining the facts, has informed us that that is exactly what the Bar Council did - putting it up on the

Notice Board in the Bar Council''s office, and that they have not in turn sent any communication to the Advocates/Bar Associations in the State.

Petitioner''s learned senior counsel stated at the Bar, that in other States also the Advocates'' Associations had not been informed, and that most of

the Advocates are unaware that the Government was filling up the posts in the Tribunal for which they were eligible to apply.

117. Government sought to justify it''s action by claiming that the steps they have taken are the steps which they had been advised to take. No

reliable record has been produced before us to show the nature of alleged advice. The record said to have been made by an officer of the

Government regarding the advice given must be based on a misunderstanding, as we do not find it possible to accept that there could have been

any directive not to advertise these posts, when vacancies in the Income Tax Appellate Tribunal whose status and powers are no less than that of

this Tribunal are regularly advertised.

118. The importance of advertising the posts of Members is obvious. A new specialist Tribunal is being created for the first time. That Tribunal is

now being entrusted with the judicial work which is now being carried out by the High Court. It is imperative that those who are eligible be made

aware of the creation of these posts so that if they so choose, they can offer themselves as candidates. It would be extremely short sighted for the

recruiting agency to withhold information regarding the availability of vacancies from the knowledge from those who are able, interested, qualified

and are eligible, and make available the information only to a handful of persons.

119. The posts of chairperson of the Appellate Tribunal which is to be filled by a former Judge of the Supreme Court or a former Chief Justice of a

High Court, as also the post of President which we have held to be a post to be filled only by a former Judge of a High Court with at least five

years of experience as such Judge, however need not be advertised. Selection to those posts shall be made by the Chief Justice of India in

consultation with the two senior most Judges of the Supreme Court, as selection so made will be consistent with the dignity and importance of

these offices and their judicial character.

120. The constitution of the National Company Law Tribunal and the Appellate Tribunal in the manner now provided, when considered along with

the provisions concerning the Competition Commission under the Competition Act 2002, seems to indicate a pattern of an aggressive executive

seeking to take over gradually the judicial power traditionally exercised by the Courts under safeguards which ensure the competence,

independence and impartiality of the Judges, and replacing them by persons who have neither a judicial background nor specialised knowledge of

the subject for which the Tribunal is created, and by persons now serving the executive who will continue to retain their lien and loyalty to the

executive branch, and be amenable to the influence of executive superiors and their political masters.

121. If these attempts being made by the executive were to go unchecked, the situation which the Privy council visualised in the Jamaican Gun

Court case, of even a Supreme Court being divested of jurisdiction to such an extent as to leave the Court ''Supreme'' only in name, can come

about. It was indeed submitted before us by the learned Additional Solicitor General that the only power of the Courts which the Parliament cannot

touch is the power of the High Court under Articles 226 and 227 of the Constitution and that of the Supreme Court under Article 32 of the

Constitution. It is imperative that the Courts in India, even as the U.S Supreme Court and the Privy Council did, draw a clear line demarcating the

judicial functions from executive and legislative functions, and immunise the performance of judicial function and the exercise of the State''s judicial

power by the Courts, as also by the Tribunals - whether such Tribunals are substitutes, or are supplemental to the Courts - from all executive

influence at all stages.

122. It is, therefore, necessary that the Court draw the line which the executive may not cross in their misguided desire to take over bit by bit the

judicial functions and powers of the State exercised by the duly constituted Courts.

123. In the light of foregoing discussions it is declared that until the provisions in parts 1B and 1C of the Companies Act introduced by the

Companies (Amendment) Act, 2002, which have been found to be defective in as much as they are in breach of the basic constitutional scheme of

separation of powers and independence of the judicial function, are duly amended, by removing the defects that have been pointed out, it would be

unconstitutional to constitute a Tribunal and Appellate Tribunal to exercise the jurisdiction now excercised by the High courts or the Company Law

Board.

124. Petitioners have also challenged the validity of certain provisions of the Companies (Amendment) Act, 2002, whereby certain powers

currently exercised by the Company Law Board, some of which were earlier exercised by the Court, were transferred to the Central Government.

Most of those powers are only tangentially judicial and are primarily administrative. There is no illegality in such transfer.

125. We place on record our appreciation to Mr.Arvind Datar, learned Senior Counsel for the petitioner, whose research and cogent presentation

has helped to clarify and bring out the significance of the issues involved, and to Mr.V.T.Gopalan, learned Additional Solicitor General who, with

his usual fairness presented the case for the respondent with great vigour, and also placed before the Court all the relevant materials.