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SUPREME COURT OF INDIA
H.L. DATTU, CJI., A.K. SIKRI, ARUN MISHRA, ROHINTON FALI NARIMAN, AMITAVA ROY, JJ.
MADRAS BAR ASSOCIATION – PETITIONERS
VERSUS
UNION OF INDIA & ANR. – RESPONDENTS
WRIT PETITION (C) NO. 1072 OF 2013
Decided On : 14-05-2015
(2010) 11 SCC 1 – Relied upon
(2014) 10 SCC 1 – Referred
(b) Administration of justice – Binding precedent – Decision of a Bench is binding on another co-ordinate Bench. (Para 14)
(c) Companies Act, 2013 – Section 410, 421 and 423 – NCLAT constituted for hearing appeals against the orders of NCLT – In appellate capacity has to decide matters of fact as well law – Under section 421(4) it can ‘pass such orders thereon as it thinks fit, forming, modifying or set aside the order appealed against’ – Section 423 provides for appeal from NCLAT on pure questions of law – Providing one right to appeal before an appellate forum is a well accepted norm – Provision held valid. (Para 18)
(d) Companies Act, 2013 – Section 409(3) and 411(3) – Eligibility qualification for Members of NCLT – Joint Secretary to the Government of India or equivalent officer having 15 years experience as member of Indian Corporate Law Service or Indian Legal Service, out of which at least 3 years experience in the pay scale of Joint Secretary – Section 409(3)(a) and (c) and Section 411(3) held invalid being contrary to the mandate of (2010) 11 SCC 1. (Para 22, 24)
(2010) 11 SCC 1 – Relied upon
(e) Companies Act, 2013 – Section 412 (2) – Constitution of Selection Committee for selecting the Members of NCLT and NCLAT – Qualifications for members of selection committee as provided in section 412(2) – Issue stands concluded by (2010) 11 SCC 1, now a binding precedent – Section 412(2) held invalid – Direction given to bring it in accord with sub-para (viii) of para 120 of (2010) 11 SCC 1. (Para 28)
(2010) 11 SCC 1 – Relied upon
Facts of the case:
In the Indian Companies Act, 2013 which replaces the earlier Act, 1956 substantive provisions have been made with regard to the establishment of NCLT and NCLAT.
The provisions relating to the structure and constitution of NCLT and NCLAT, the provisions relating to qualifications for appointment of President/Chairperson and Members (judicial as well as technical) of both NCLT and NCLAT, and also provisions relating to the constitution of the Selection Committee for selection of the said Members have also been incorporated in the Act, 2013. These are analogous to Section 10FD, 10FE, 10FF, 10FL, 10FR and 10FT which were introduced in the Act, 1956 by Companies (Amendment) Act, 2002.
The cause for filing the present petition by the petitioner is the allegation of the petitioner that notwithstanding various directions given in 2010 judgment, the new provisions in the Act, 2013 are almost on the same lines as were incorporated in the Act, 1956 and, therefore, these provisions suffer from the vice of unconstitutionality as well on the application of the ratio in 2010 judgment. It is, thus, emphasized by the petitioner that these provisions which are contained in Sections 408, 409, 411(3), 412, 413, 425, 431 and 434 of the Act, 2013 are ultra vires the provisions of Article 14 of the Constitution and, therefore, warrant to be struck down as unconstitutional.
Finding of the Court:
Sections 409(3), 411(3) and 412(2) of the Companies Act, 2013 are invalid being contrary to the mandate of (2010) 11 SCC 1.
Result: Writ petition partly allowed.
JUDGMENT
A.K. SIKRI, J.
This writ petition filed by the petitioner, namely, the Madras Bar Association, is sequel to the earlier proceedings which culminated in the judgment rendered by the Constitution Bench of this Court in Union of India v. R. Gandhi, President, Madras Bar Association, (2010) 11 SCC 1 (hereinafter referred to as the 2010 judgment'). In the earlier round of litigation, the petitioner had challenged the constitutional validity of creation of National Company Law Tribunal ('NCLT' for short) and National Company Law Appellate Tribunal ('NCLAT' for short), along with certain other provisions pertaining thereto which were incorporated by the Legislature in Parts 1B and 1C of the Companies Act, 1956 (hereinafter referred to as the 'Act, 1956') by Companies (Second Amendment) Act, 2002.
2) Writ petition, in this behalf, was filed by the petitioner in the High Court of Madras which culminated into the judgment dated 30.03.2004. The High Court held that creation of NCLT and vesting the powers hitherto exercised by the High Court and the Company Law Board ('CLB' for short) in the said Tribunal was not unconstitutional. However, at the same time, the High Court pointed out certain defects in various provisions of Part 1B and Part 1C of the Act, 1956 and, in particular, in Sections 10FD(3)(f)(g)(h), 10FE, 10FF, 10FL(2), 10FR(3), 10FT. Declaring that those provisions as existed offended the basic Constitutional scheme of separation of powers, it was held that unless these provisions are appropriately amended by removing the defects which were also specifically spelled out, it would be unconstitutional to constitute NCLT and NCLAT to exercise the jurisdiction which is being exercised by the High Court or the CLB. The petitioner felt aggrieved by that part of the judgment vide which establishments of NCLT and NCLAT was held to be Constitutional. On the other hand, Union of India felt dissatisfied with the other part of the judgment whereby aforesaid provisions contained in Parts 1B and 1C of the Act, 1956 were perceived as suffering from various legal and Constitutional infirmities. Thus, both Union of India as well as the petitioner filed appeals against that judgment of the Madras High Court. Those appeals were decided by the Constitution Bench, as mentioned above.
3) The Constitution Bench vide the said judgment put its stamp of approval insofar as Constitutional validity of NCLT and NCLAT is concerned. It also undertook the exercise of going through the aforesaid provisions contained in Parts 1B and 1C of the Act, 1956 and in substantial measure agreed with the Madras High Court finding various defects in these provisions. These defects were listed by the Court in para 120 of the judgment which reads as under:
“120. We may tabulate the corrections required to set right the defects in Parts I-B and I-C of the Act:
(i) Only Judges and advocates can be considered for appointment as judicial members of the Tribunal. Only High Court Judges, or Judges who have served in the rank of a District Judge for at least five years or a person who has practiced as a Lawyer for ten years can be considered for appointment as a Judicial Member. Persons who have held a Group A or equivalent post under the Central or State Government with experience in the Indian Company Law Service (Legal Branch) and Indian Legal Service (Grade-1) cannot be considered for appointment as judicial members as provided in sub-section 2(c) and (d) of Section 10FD. The expertise in Company Law service or Indian Legal service will at best enable them to be considered for appointment as technical members.
(ii) As the NCLT takes over the functions of High Court, the members should as nearly as possible have the same position and status as High Court Judges. This can be achieved, not by giving the salary and perks of a High Court Judge to the members, but by
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