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SUPREME COURT OF INDIA
L. Nageswara Rao, Hemant Gupta, S. Ravindra Bhat, JJ.
Madras Bar Association – Appellant
VERSUS
Union Of India & Anr. – RESPONDENTS
Writ Petition (Civil) No. 502 of 2021
Decided on : 14-07-2021
Constitution of India,1950 - Articles 14, 21,50, 226, 227, 32, 142, 323-A,323-B, 226 and 227, 50, 123, 194(2), 2(d) of 323A 3(d) of 323B - To reduce the mounting arrears in High Courts and to secure speedy disposal of service matters - Insolvency of companies - Legislative incompetence and violation of doctrines of separation of powers and independence of the judiciary - High Court under Article 226 and Article 227 cannot be barred - It was held by this Court place of a High Court, Parliament can set up an effective alternative institutional mechanism with power of judicial review vested in it, by placing reliance on observation Court was of the firm opinion that tribunals should be a real substitute to High Courts. While scrutinizing Chapter II of Act which dealt with establishment of tribunals – Combining powers of the Company Law Board under the Companies Act, 1956 and AAIFR under Sick Industrial Companies (Special Provisions) Act, 1985 and the jurisdiction and powers relating to winding up vested in High Courts - Government accepted the recommendations and passed the Companies (Second Amendment) Act, 2002 - Multiplicity of litigation before various fora and to reduce pendency of cases - Madras Bar Association filed a writ petition in Madras High Court challenging constitutional validity of said amendment to 1956 Act on the ground of legislative incompetence and violation of the doctrines of separation of powers and independence of judiciary - High Court upheld the validity of the Amendment Act of 2002 but pointed out certain defects in provisions of the Act - High Court declared that NCLT and the National Company Law Appellate Tribunal cannot be constituted without removing defects pointed out in the judgment - Finance Act, 2017 was brought into force to give effect to the financial proposals for the financial Sections 183 to 189 thereof dealt with conditions of service of Chairperson and Members of Tribunals, Appellate Tribunals and other authorities. According to Section 183, provisions of Section 184 applied to the Chairperson, Vice-Chairperson - Chairman, Vice-Chairman, President, Vice-President, Presiding Officer or Member of the Tribunal, Appellate Tribunal and other specified authorities, notwithstanding anything to the contrary contained in the provisions of the statutes listed in Column (3) of the Eighth Schedule - Central Government was empowered by Section 184 to make rules to provide for qualifications, appointment, term of office, salaries and allowances, resignation, removal and other terms and conditions of service of the Chairperson and Vice-Chairperson (and commensurate positions bearing different nomenclature) and other Members – Held, One would only say that this judgment-seventh in the series commencing with hopefully should conclude all controversies. It would be erroneous on anyone’s part to consider that interdiction by this court amounts to conflict with Parliamentary or executive wisdom. Each judgment-when it interprets provisions relating to setting up of tribunals and other arrangements for tribunals, adds to the ongoing discourse between the three branches of governance - Constitution of India envisions a republic, governed by rule of law, and guarantees justice: social, economic and political, as well as equality of status and of opportunity. Acting within their assigned spheres, the legislative, executive and judicial departments strive to further this constitutional vision - When assured rights or principle of equality cannot be secured by citizen or person guaranteed it, she turns to the judicial wing. It is to ensure that this wing has the competence, vitality and fairness, expected of it, that this court intervenes, to ensure that the adjudicatory mechanisms are robust, independent, and are manned by competent and merited personnel - Section 184(1) of Finance Act, 2017, introduced by Section 12 of Tribunals Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 is hereby declared void and inoperative - Declaration of this Court prevail and the term of Chairperson of a Tribunal shall be five years or till she or he attains the age of earlier and the term of Member of a Tribunal shall be five years or till she or he attains age of 67 years, whichever is earlier - Section 12 of the Tribunals (Reforms Rationalisation and Conditions of Service) Ordinance, 2021 is hereby upheld without in any manner affecting the appointments made to the post of Chairperson or members of various Tribunals - Writ petition is allowed to above extent.
JUDGMENT :
L. NAGESWARA RAO, J.
1. The Madras Bar Association has filed this Writ Petition seeking a declaration that Sections 12 and 13 of the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 and Sections 184 and 186 (2) of the Finance Act, 2017 as amended by the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 as ultravires Articles 14, 21 and 50 of the Constitution of India inasmuch as these are violative of the principles of separation of powers and independence of judiciary, apart from being contrary to the principles laid down by this Court in Union of India v. R.Gandhi, President, Madras Bar Association, (2010) 11 SCC 1, Madras Bar Association v. Union of India & Anr., (2014) 10 SCC 1, Rojer Mathew v. South Indian Bank Limited & Ors., (2020) 6 SCC 1 and Madras Bar Association v. Union of India & Anr., (2020) SCC Online SC 962. The Petitioner seeks a further direction to Respondent No.2 for establishment of a separate wing to cater to the requirements of tribunals in India.
2. A brief reference to the historical background of tribunalisation in this country is necessary for a better appreciation of the dispute that falls for adjudication in this Writ Petition. The Statement of objects and reasons for insertion of Articles 323-A and 323-B in the Constitution of India by the Forty-Second Amendment is as follows:
“To reduce the mounting arrears in High Courts and to secure the speedy disposal of service matters, revenue matters and certain matters of special importance in the context of the socio-economic development and progress, it is considered expedient to provide for administrative and other tribunals for dealing with such matters while preserving the jurisdiction of the Supreme Court in regard to such matters under Articles 136 of the Constitution. It is also necessary to make certain modifications in the Writ Jurisdiction of the High Courts under Article 226.”
3. The vires of the Administrative Tribunals Act, 1985, enacted under Article 323-A (1), was challenged in S.P. Sampath Kumar v. Union of India & Ors., (1987) 1 SCC 124 before this Court. The main ground taken in the writ petition was that the jurisdiction of the High Court under Article 226 and Article 227 cannot be barred. It was held by this Court in S.P. Sampath Kumar (supra) that in place of a High Court, the Parliament can set up an effective alternative institutional mechanism with the power of judicial review vested in it, by placing reliance on the observation made in Minerva Mills Ltd. & Ors. v. Union of India & Ors., (1980) 3 SCC 625. However, this Court was of the firm opinion that the tribunals should be a real substitute to High Courts. While scrutinizing Chapter II of the Act which dealt with the establishment of tribunals, this Court expressed its view that a short tenure of Members of tribunals would be a deterrent for competent persons to seek appointment as Members.
4. The correctness of the judgment of this Court in S.P. Sampath Kumar (supra) was considered by a larger bench of this Court in L. Chandra Kumar v. Union of India & Ors., (1997) 3 SCC 261 which found the exclusion of the jurisdiction of the High Courts and the Supreme Court in Articles 323-A and 323-B to be unconstitutional. This Court declared that tribunals shall continue to act like courts of first instance in respect of areas of law for which they have been constituted.
5. A High-Level Committee on law relating to insolvency of companies was constituted by the Union of India under the Chairmanship of Justice V. Balakrishna Eradi, retired Judge of this Court who made certain recommendations for setting up the National Company Law Tribunal (hereinafter referred to as NCLT) combining the powers of the Company Law Board under the Companies Act, 1956 (hereinafter referred to as the 1956 Act), BIFR and AAIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 and the jurisdiction and powers relating to winding up vest
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