2010 Supreme(SC) 459

2010 (4) Supreme 193
SUPREME COURT OF INDIA
CJI, K G Balakrishnan, R V Raveendran, D K Jain, P Sathasivam and J M Panchal, JJ.
Union of India — Appellant
versus
R. Gandhi, President, Madras Bar Association — Respondent
Civil Appeal No.3067 of 2004
with
Madras Bar Association — Appellant
versus
Union of India — Respondent
Civil Appeal No.3717 of 2005
Decided on : 11-5-2010

IMPORTANT POINT
Parts 1B and 1C of the Act as presently structured are unconstitutional.

Headnote:(a) Words and phrases – Courts and Tribunals – The term ‘Courts’ refers to places where justice is administered or refers to Judges who exercise judicial functions which are established by the state for administration of justice – Tribunals on the other hand are special alternative institutional mechanisms, usually brought into existence by or under a statute to decide disputes arising with reference to that particular statute, or to determine controversies arising out of any administrative law – Tribunals can be either private Tribunals or Tribunals constituted under the Constitution or Statutory Tribunals created under a statute – Some Tribunals are manned exclusively by Judicial Officers and other statutory Tribunals have Judicial and Technical Members. (Paras 12 to 14)

       (1987) 1 SCC 124; (1962) 2 SCR 339; 1963 Supp (1) SCR 242; (1965) 2 SCR 366; 1992 Supp (2) SCC 651 – Relied upon

       (b) Constitution of India – Independence of judiciary – Impartiality, independence, fairness and reasonableness in decision making are the hallmarks of Judiciary – The independence of judiciary means the independence of judicial thought and needs freedom from interference and pressures to work with absolute commitment to the cause of justice and constitutional values. (Para 15)

       (1977) 4 SCC 193; (1993) 4 SCC 441; (2000) 4 SCC 640; (1992) 2 SCC 428; (2002) 4 SCC 247; (1997) 3 SCC 261 – Relied upon

       (c) Constitution of India – Doctrine of separation of powers – Indian Constitution recognizes separation of power in a broad sense without however their being any rigid separation of power as under the American Constitution or under the Australian Constitution – However, Constitution does not contemplate assumption, by one organ or part of the State, of functions that essentially belong to another – It provides for an independent judiciary in the States – It has always been considered basic structure of the Constitution. (Para 17)

       (1955) 2 SCR 225; AIR 1966 SC 1987; 1975 Supp SCC 1; (1997) 3 SCC 261; (1973) 4 SCC 225; (2000) 4 SCC 640; (2007) 2 SCC 1 – Relied upon

       (d) Tribunals in India – Need and scope for improvement – Independence – Tribunals have many advantages in practice al terms over the courts – Their functioning can be vastly improved by ensuring their independence. (Para 23)

       (1997) 3 SCC 261 – Relied upon

       (e) Code of Civil Procedure, 1908 – Section 9 r/w Articles 32, 246 and 247 – Jurisdiction conferred upon the High Court under Articles 226 and 227 and upon the Supreme Court under Article 32 of the Constitution is a part of the inviolable basic structure of the Constitution – However, The power of Parliament to enact a law which is not covered by an entry in Lists II and III is absolute – State is competent to transfer a part of the judicial power from courts to Tribunals – Even wholesale transfer of powers of High Courts to Tribunals is not invalid. (Paras 28, 29, 32 and 33)

       (1997) 3 SCC 261; (2002) 4 SCC 275; (2003) 2 SCC 412; 1955 (1) SCR 829; (1971) 2 SCC 779; (1965) 2 SCR 366 – Relied upon

       (f) Companies Act, 1956 – Section 10FD – Provision for a Technical Member along with the Judicial Member – If the Tribunals are intended to serve an area requiring specialized knowledge or expertise, there can be Technical Members in addition to Judicial Members – Where however Tribunals are required only to expedite the hearing and disposal or relieve from the rigours of the Evidence Act and procedural laws, there is no need to have any non-judicial Technical Member – In that event, provision for technical members in addition to or in substitution of judicial members would clearly be a case of dilution of and encroachment upon the independence of the Judiciary and Rule of Law and would be unconstitutional. (Para 35)

       (1997) 3 SCC 261; (1993) 4 SCC 119 – Relied upon

       (g) Companies Act, 1956 – Part 1B and 1C – Members – Eligibility – Prescription of qualification and eligibility criteria would be open to judicial review by the Superior Courts. (Para 39)

       Sampath Kumar; AIR 1973 SCC 1461 – Relied upon

       (h) Constitutional validity of statute – A legislation can be declared unconstitutional or invalid only on two grounds namely (i) lack of legislative competence and (ii) violation of any fundamental rights or any provision of the Constitution – Any legislation, if it violates the right to adjudication by an independent forum, is open to challenge – Though the validity of the provisions of a legislative act cannot be challenged on the ground it violates the basic structure of the constitution, it can be challenged as violative of constitutional provisions which enshrine the principles of Rule of Law, separation of power and independence of Judiciary. (Paras 40, 41 and 44)

       1975 Supp SCC 1; (2006) 7 SCC 1; (1996) 3 SCC 709; (1977) 4 SCC 608; AIR 1952 SC 75 – Relied upon

       (i) Companies Act, 1956 – Part 1B and 1C – Validity – Parts 1B and 1C of the Act as presently structured are unconstitutional – However, these provisions may be made operational by making suitable amendments as indicated, in addition to what the Union Government has already agreed. (Paras 45 to 57)

       (1987) 1 SCC 124 – Relied upon

       Facts of the case:

       The constitutional validity of Chapters 1B and 1C of the Companies Act, 1956 inserted by Companies (Second Amendment) Act 2002 providing for the constitution of National Company Law Tribunal and National Company Law Appellate Tribunal has been challenged in these appeals.

       Finding of the Court:

       Parliament has the legislative competence to make a law providing for constitution of Tribunals to deal with disputes and matters arising out of the Companies Act.

       Parts 1B and 1C of the Act as presently structured are unconstitutional.