UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS BAR ASSOCIATION

In Chandra Mohan vs. State of UP-AIR 1966 SC 1987, this Court held: F ''The Indian Constitution, though it does not accept the strict qoctrine of separation of powers, provides for an independent judiciary in the States; it constitutes a High Court for each State, prescribes the institutional conditions of service of the Judges thereof, confers extensive jurisdiction on it to issue writs to keep all tribunals, including G in appropriate cases the Governments, within bounds and gives to it the power of superintendence over all courts and tribunals in the territory over which it has jurisdiction. But the makers of the Constitution also realised that "it is the Subordinate Judiciary in India who are brought most H

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A closely into contact with the people, and it is no less important, perhaps indeed even more important, that their independence should be placed beyond question than in thE~ case of the superior Judges." Presumably to secure thE~ independence of the judiciary from the executive, the B Constitution introduced a group of articles in Ch. VI of Part VI under the heading "Subordinate Courts". But at the time the Constitution was made, in most of the States the magistracy was under the direct control of the executive. Indeed it is common knowledge that in pre-independent c India there was a strong agitation that the judiciary should be separated from the executive and that the agitation was based upon the assumption that unless they were separated, the independence of the judiciary at the lower levels would be a mockery. So article 50 of the Directive Principles of Policy states that the State shall take steps D to separate the judiciary from the executive in the public services of the States. Simply stated, it means that there shall be a separate judicial service free from the executive control."

E (emphasis supplied)

In Indira Nehru Gandhi vs. Raj Narain - 1975 Supp SCC 1, this Court observed that the Indian Constitution recognizes separation of power in a broad sense without however their being any ggid separation of power as under the American Constitution or under the Australian Constitution. This Court held thus:

"It is true that no express mention is made in our Constitution of vesting in the judiciary the judicial power as is to be found in the American Constitution. But a division of the three main functions of Government is recognised in our Constitution. Judicial power in the sense of the judicial power of the State is vested in the Judiciary. Similarly, the Executive and the Legislature are vested with powers in their spheres. Judicial power has lain in the

UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 913 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

hands of the Judiciary prior to the Constitution and also since the Constitution. It is not the intention that the powers of the Judiciary should be passed to or be shared by the Executive or the Legislature or that the powers of the Legislature or the Executive should pass to or be shared by the Judiciary. B

"The Constitution has a basic structure comprising the three organs ofthe Republic: the Executive, the Legislature and the Judiciary. It is through each of these organs that the sovereign will of the people has to operate and manifest itself and not through only one of them. None of C these three separate organs of the Republic can take over the functions assigned to the other. This is the basic strueture or scheme of the system of Government of Republic .......... .. D "But no constitution can survive without a conscious adherence to its fine checks and balances. Just as courts rought "'\·., to enter into problems entwined in the 'political ·thicket", Parliament must also respect the preserve of the court. The principle of separation of powers is a principle E of restraint ......... "

In L. Chandra Kumar, the seven-Judge Bench of this Court referred to the task entrusted to the superior courts in India thus

F 'The Judges of the superior courts have been entrusted with the task of upholding the Constitution and to this end, have been conferred the power to interpret it. It is they who have to ensure that the balance of power envisaged by the Constitution is maintained and that the legislature and G the executive do not, in the discharge of their functions, transgress constitutional limitations. It is equally their duty to oversee that the judicial decisions rendered by those who man the subordinate courts and tribunals do not fall H

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A foul of strict standards of legal correctness and judicial and judicial independence."

(emphasis supplied)

The doctrine of separation of powers has also been always B considered to be a part of the basic structure of the Constitution (See : Keshavananda Bharati vs. State of Kera/a - 1973 (4) SCC 225, Indira Gandhi vs. Raj Narain - 1975 Supp SCC 1, State of Bihar vs. Bal Mukund Shah - 2000 (4) SCC 640 and l.R. Coelho vs. State of Tamil Nadu - 2007 (2) SCC 1). c The argument in favour of Tribunals

18Copy pinpoint18. The argument generally advanced to support tribunalisation is as follows : The courts function under archaic and elaborate procedural laws and highly technical Evidence D Law. To ensure fair play and avoidance of judicial error, the procedural laws provide for appeals, revisions and reviews, and allow parties to file innumerable applications and raise vexatious objections as a result of which the main matters get pushed to the background. All litigation in courts get inevitably delayed which leads to frustration and dissatisfaction among litigants. In view of the huge pendency, courts are not able to bestow attention and give priority to cases arising under special legislations. Therefore, there is a need to transfer some selected areas of litigation dealt with by traditional courts to special Tribunals. As Tribunals are free from the shackles of procedural laws and Evidence Law, they can provide easy access to speedy justice in a 'cost-affordable' and 'user- friendly' manner. Tribunals should have a Judicial Member and a Technical Member. The Judicial Member will act as a bulwark G ·against apprehensions of bias and will ensure compliance with basic principles of natural justice such as fair hearing and reasoned orders. The Judicial Member would also ensure 'impartiality, fairness and reasonableness in consideration. The presence of Technical Member ensures the availability of expertise and experience related to the field of adjudication for

YNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 915 BAR ASSOCIATION [RV RAVEENDRAN, J.]

which the special Tribunal is created, thereby improving the quality of adjudication and decision-making. ', /

19Copy pinpoint19. United Kingdom has a rich experience of functioning of several types of Tribunals as dispute resolution-and- grievance settlement mechanisms in regard to varied social 8 welfare legislations. Several Committees were constituted to study the functioning of the Tribunals, two of which require special mention. The first is the Franks Report which emphasized that Tribunals should be independent, accessible, prompt, expert, informal and cheap. The second is the report of the Committee constituted to undertake the review of delivery C of justice through Tribunals, with Sir Andrew Leggatt as Chairman. The Leggatt Committee submitted its report to the Lord High Chancellor of Great Britain in March, 2001. The ·Committee explained the advantages of Tribunals, provided .they could function independently and coherently, thus: D "Choosing a tribunal to decide disputes should bring two distinctive advantages for users. First, tribunal decisions ar~ often made jointly by a panel of people who pool legal and other expert knowledge, and are the better for that range of skills. Secondly, tribunals' procedures and approach to overseeing the preparation of cases and their hearing can be simpler and more informal than the courts, even after the civil justice reforms. Most users ought therefore to be capable of preparing and presenting their cases to the tribunal themselves, providing they have the right kind of help Enabling that kind of direct participation is an important jurisdiction for establishing tribunals at all. xxxxx

De Smith's Judicial Review, (6th Edn., Page 50 Para G 1.085) sets out the advantages of Tribunals thus :

"In the design of an administrative justice system, a Tribunal may be preferred to an ordinary court because its members have specialized knowledge of the subject- H

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A matter, because it will be more informal in its trappings and procedure, because it may be better at finding facts, applying flexible standards and exercising discretionary powers, and because it may be cheaper, more accessible anti more expeditious than the High Court. Many of the B decisions given to Tribunals concern the merits of cases with relatively little legal content, and in such cases a Tribunal, usually consisting of a legally qualified Tribunal judge and two lay members, may be preferred to a court. Indeed dissatisfaction with the over-technical and allegedly c unsympathetic approach of the courts towards social welfare legislation led to a transfer of functions to special Tribunals; the Workmen's Compensation Acts were administered by the ordinary courts, but the National Insurance (Industrial Injuries) scheme was applied by Tribunals. It is, however, unrealistic to imagine that D technicalities and difficult legal issues can somehow be avoided by entrusting the administration of complex legislation to Tribunals rather than the courts."

(emphasis supplied) E H. W. R. Wade & C. F. Forsyth also refer to the advantage of Tribunals in their 'Administrative Law' (10th Edn., pp.773-774):

"The social legislation of the twentieth century demanded Tribunals for purely administrative reasons: they could offer speedier, cheaper and more accessible justice, essential for the administration of welfare schemes involving large numbers of small claims. The process of the courts of law is elaborate, slow and costly. Its defects are those of its merits, for the object is to provide the highest standard of justice; generally speaking, the public wants the best possible article, and is prepared to pay for it. But in administering social services the aim is different. The object is not the best article at any price but the best article that is consistent with efficient administration. Disputes H must be disposed of quickly and cheaply, for the benefit

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of the public purse as well as for that of the claimant. Thus A when in 1946 workmen's compensation claims were removed from the courts and brought within the Tribunal system much unproductive and expensive litigation, particularly on whether an accident occurred in the course of employment, came to an end. The whole system is B based on compromise, and it is from the dilemma of weighing quality against convenience that many of its problems arise.

An accompanying advantage is that of expertise. Qualified C surveyors sit on the Lands Tribunal and experts in tax law sit as Special Commissioners of Income Tax. Specialized Tribunals can deal both more expertly and more rapidly with special classes of cases, whereas in the High Court counsel may take a day or more to explain to the judge how some statutory scheme is designed to operate. Even D without technical expertise, a specialized Tribunal quickly builds up expertise in its own field. Where there is a continuous flow of claims of a particular class, there is every advantage in a special jurisdiction." E Recommendations for better working of Tribunals

20Copy pinpoint20. Only if continued judicial independence is assured, Tribunals can discharge judicial functions. In order to make such independence a reality, it is fundamental that the members of the Tribunal shalf be independent persons, not civil servants. F They should resemble courts and not bureaucratic Boards. Even the dependence of Tribunals on the sponsoring or parent department for infrastructural facilities or personnel may undermine the independence of the Tribunal (vide : Wade &· Forsyth: 'Administrative Law' - 10th Edn., pp.774 and 777). G

21Copy pinpoint21. The Leggatt Committee's Report explained the task of improving the Tribunals thus :

"There are 70 different administrative tribunals in England H

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A and Wales, leaving aside regulatory bodies. Between them they deal with nearly one million cases a year, and they employ about 3,500 people. But of these 70 tribunals only 20 each hear more than 500 cases a year and many are defunct. Their quality varies from excellent to inadequate. B Our terms of reference require them to be rendered coherent. So they have to be rationalized and modernized; and this Review has as its four main objects: first, to make the 70 tribunals into one Tribunals System that its members can be proud of; secondly, to render the tribunals c independent of their sponsoring departments by having them administered by one Tribunals Service; thirdly, to improve the training of chairmen and members in the interpersonal skills peculiarly required by tribunals; and fourthly, to enable unrepresented users to participate effectively and without apprehension in tribunal D proceedings."

The Leggatt Committee explained what the users of the system expected from an alternative public adjudication system:

E "We do not believe that the current arrangements meet what the modern user needs and expects from an appeal system running in parallel to the courts. First, users need to be sure, as they currently cannot be, that decisions in their cases are being taken by people with no links with the body they are appealing against. Secondly, a more coherent framework for tribunals would create real opportunities for improvement in the quality of services that can be achieved by tribunals acting separately. Thirdly, that framework will enable them to develop a more coherent approach to the services which users must receive if they are to be enabled to prepare and present cases themselves. Fourthly, a user-oriented service needs to be much clearer than it is now in telling users what services they can expect, and what to do if the standards of these services are not met." H

/ UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 919 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

The Leggatt Committee expressed the view that a single A structure for all Tribunals would achieve independence and effective functioning of the Tribunal. It stated :

"There is only one way to achieve independence and coherence: to have all the tribunals supported by a 8 Tribunals Service, that is, a common administrative · service. It would raise their status, while preserving their distinctness from the courts. In the medium term it would yield considerable economies of scale, particularly in relation to the provision of premises for all tribunals, common basic training, and the use of IT. It would also bring greater administrative efficiency, a single point of contact for users, improved geographical distribution of tribunal centres, common standards, an enhanced corporate image, greater prospects of job satisfaction, a better relationship between members and administrative staff, and improved career patterns for both on account of the size and.coherence of the Tribunals Service. It should be committed by Charter to provide a high quality, unified service, to operate independently, to deal openly and honestly with users of tribunals, to seek to maintain public confidence, and to report annually on its performance.

The report expressed the view that the independence of tribunals would best be safeguarded by having their administrative support provided by the Lord Chancellor's F Department as he is uniquely placed to protect the independence of those who sit in tribunals as well as.,..of the judiciary, through a Tribunals Service and a Tribunals System analogous with, but separate from, the Court Service and the courts. Most of the recommendations of the Leggatt Report G were accepted and culminated in the 'Tribunals, Courts & Enforcement Act, 2007'. The Act recognizes that Tribunals do not form part of administration, but are machinery of adjudication. As a result of the said Act, the appointments to Tribunals are on the recommendations of a Judicial H

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A Appointments Commission. The sponsoring Department (that generates the disputes that the Tribunal will have to decide) has no say in the appointments. Neither the infrastructure nor the staff are provided to the Tribunals by the sponsoring Parent Depa11ment. The Tribunals have become full-fledged part of B Judicial system with no connection or link with the 'parent department'. A common Tribunal service has been established as an executing agency in the Ministry of Law & Justice.

22Copy pinpoint22. This Court, in L. Chandra Kumar, made similar suggestions for achieving the independence of Tribunals : c "It has been brought to our notice that one reason why these Tribunals have been functioning inefficiently is because there is no authority charged with supervising and fulfilling their administrative requirements ........ The D situation at present is that different Tribunals constituted under different enactments are administered by different administrative departments of the Central and the State Governments. The problem is compounded by the fact that some Tribunals have been created pursuant to Central E Le£1islations and some others have been created by State Le£1islations. However, even in the case of Tribunals created by Parliamentary legislations, there is no uniformity in administration. We are of the view that, until a wholly ' independent agency for the administration of all such Tribunals can be set-up, it is desirable that all such F Tribunals should be, as far as possible, under a single nodal Ministry which will be in a position to oversee the working of these Tribunals. For a number of reasons that Ministry should appropriately be the Ministry of Law. It would be open for the Ministry, in its turn, to appoint an G independent supervisory body to oversee the working of the Tribunals. This will ensure that if the President or Chairperson of the Tribunal is for some reason unable to take sufficient interest in the working of the Tribunal, the entire! system will not languish and the ultimate consumer H

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of justice will not suffer. The creation of a single umbrella A organisation will, in our view, remove many of the ills of the present system. If the need arises, there can be separate umbrella organisations at the Central and the State levels. Such a supervisory authority must try to ensure that the independence of the members of all such B Tribunals is maintained. To that extent, the procedure for the selection of the members of the Tribunals, the manner in which ·funds arc allocated for the functioning of the Tribunals and all other consequential details will have to be clearly spelt out." c

23Copy pinpoint23. But in India, unfortunately Tribunals have not achieved full independence. The Secretary of the concerned 'sponsoring department' sits in the Selection Committee for appointment. When the Tribunals are formed, they are mostly dependant on their sponsoring department for funding, infrastructure and even space for functioning. The statutes constituting Tribunals routinely provide for members of civil services from the sponsoring departments becoming members of the Tribunal and continuing their lien with their parent cadre. Unless wide ranging reforms as were implemented in United Kingdom and as were suggested by Chandra Kumar are brought about, Tribunals in India will not be considered as independent.

Whether the Government can transfer the judicial functions traditionally performed by courts to Tribunals? F

24Copy pinpoint24. It is well settled that courts perform all judicial functions of the State except those that are excluded by law from their jurisdiction. Section 9 of Code of Civil Procedure, for example, provides that the courts shall have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either G expressly or impliedly barred.

25Copy pinpoint25. Article 32 provides that without prejudice to the powers conferred on the Supreme Court by clauses (1) and (2) of the said Article, Parliament may by law, empower any other court H

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A to exercise within the local limits of its jurisdiction all or any of the powers exercisable by the Supreme Court under clause (2) of Article 32. Article 247 provides that notwithstanding anything contained in Chapter I of Part XI of the Constitution, Parliament may by law provide for the establishment of any additional B courts for the better administration of laws made by Parliament or of any existing laws with respect to a matter enumerated in the Union List. Article 245 provides that subject to the provisions of the Constitution, Parliament may make laws for the whole or any part of the territory of India, and the Legislature c of a State may make laws for the whole or any part of the State. Article 246 deals with the subject matter of laws made by Parliament and by the legislatures of States. The Union List (List I of Seventh Schedule) enumerates the matters with respect to which Parliament has exclusive powers to make laws. Entry 77 of List I refers to Constitution, organization, 0 jurisdiction and powers of the Supreme Court. Entry 78 of List I refers to constitution and organization of the High Courts. Entry 79 of List I refers to extension or exclusion of the jurisdiction of a High Court, to or from any Union Territory. Entry 43 of List I refers to incorporation, regulation and winding up of trading E corporations and Entry 44 of List I refers to incorporation, regulation and winding up of corporations. Entry 95 of List I refers to jurisdiction and powers of all courts, except the Supreme Court, with respect to any of the matters in Union List. The Concurrent List (List Ill of the Seventh Schedule) F enumerates the matters with respect to which a Parliament and legislature of a state will have concurrent power to make laws. Entry 11A of List Ill refers to administration of justice, constitution and organization of all courts except the Supreme Court and the High Courts. Entry 46 of List Ill refers to G jurisdiction and powers of all courts, except the Supreme Court, with respect to any of the matters in List Ill.

26Copy pinpoint26. Part XIV-A was inserted in the Constitution with effect from 3.1.1977 by the Constitution (Forty-second Amendment) H Act, 1976. The said part contains two Articles. Article 323A ·

UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 923 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

relates to Administrative Tribunals and empowers the A Parliament to make a law, providing for the adjujiication or trial by Administrative Tribunals of disputes and complaints with respect to recruitment and conditions of service of persons appointed to public services and posts in connection with the affairs of the Government or of any State or of ai:iy local or other authority within the territory of India or under the control of the Government of India or of any corporation owned or controlled by the Government. Article 323B empowers the approp~iate Legislature to make a law, providing for the adjudication or trial by Tribunals of any disputes, complaints, or offences with respect to all or any of the following matters specified in clause (2) with respect to which such Legislature has power to make laws: • (a) levy, assessment, collection and enforcement of any tax; D

(b) foreign exchange, import and'export across customs frontiers;

(c) industrial and labour disputes; E

(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; F

(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 G the matters referred to in article 329 and article 329A;

(g) production, procurement, supply and distribution of foodstuffs (including edible oilseeds and oils) and suc.h other goods as the President may, by public notification, declare to be essential goods for the purpose of this article H

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A 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, 8 (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;

0) any matter incidental to any of the matters specified in c sub-clauses (a) to (i)."

ClausE~ (2) of Article 323A and clause (3) of Article 3238 lay down that a law made under sub-clause (1) of the respective Articles may provide for the following : • 0

Article 323A Article 3238 --

E (a) provide ~ for tl'le Provide for the establishment of ~):in establishment of a hierarchy administrative Tribunal for of Tribunals; the Union and a separate administrative Tribunal for each State or for two or more States;

(b) specify the jurisdiction, Specify the jurisdiction, powers (including the powers (including the power power to punish for to punish for contempt) and contempt) and authority authority which may be which may be exerci~d exercised by each of the by each of the said said Tribunals Tribunals; H

" v. R. GANDHI, PRESIDENT, MADRAS 925 UNION OF INDIA BAR ASSOCIATION [RV. RAVEENDRAN, J.]

(c) provide for the procedure provide for the A (including provisions as to procedure(including limitation and rules of provisions as to limitation evidence) to be followed and rules of evidence) to by the said Tribunals; be followed by the said Tribunals; 8

(d) exclude the jurisdiction of exclude the jurisidiction of all courts, except the all courts except the jurisdiction of the jurisdiction of the Supreme Supreme Court under Court under article 136 with c article 136, with respect respect to all or any of the to the disputes or matters falling within the complaints referred to in jurisdiction of the said clause (1 ); Tribunals; D (e) provide for the transfer to provide for the transfer to each such administrative each such Tribunal of any Tribunal of any cases cases pending before any pending before any court court or any other authority or other authority immediately before the immediately before the establishment of such establishment of such Tribunal as would have Tribunal as would have been within the jurisdiction been within the jurisdiction of such Tribunal if the of such Tribunal if the cause of action on which cause of action on which such suits or proceedings such suits or proceedings are based had arisen after are based had arisen after such establishment; such establishment; G (f) repeal or amend any order made by the President under clause (3) of article 371 D; H

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A contain such supplemental, (g) contain such supplemental, incidental incidental and an·d consequential consequential provisions provisions (including (including provisions as to provisions as to fees) as fees) as the appropriate 8 Parliament may deem Legislature may deem necessary for the effective necessary for the effective functioning of, and for the functioning of, and for the speedy disposal of cases speedy disposal of cases by, and the enforcement of c by, and the enforcement of the orders of, such the orders of, such Tribunals. Tribunals.

27Copy pinpoint27. In L. Chandra Kumar v. Union of India (1997 (3) SCC 261], this Court held that clause 2(d) of Article 323A and clause 3(d) of Article ~238, to the extent they empower Parliament and State Legislature to totally exclude the jurisdiction of all courts except thejurisdiction of the Supreme Court under Article 136, E in regard to the disputes and complaints referred to in Article 32:3A(1) and the matters specified in Article 3238(2), offended the basic and essential features of the Constitution and were unconstitutional. This Court also held that "exclusion of jurisdiction" clause enacted in any legislation, under the aegis F of Articles 323A [2(d)] and 3238[3(d)] are also unconstitutional. It was declared that the 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 our Constitution. G

28Copy pinpoint28. The legislative competence of Parliament to provide for creation of courts and Tribunals can be traced to Entries 77, 78, 79 and Entries 43, 44 read with Entry 95 of List I, Item 11A read with Entry 46 of List Ill of the Seventh Schedule. Referring H

UNION OF INDIA v. R. GANDHI, PRESIDENT, MA).ZlRAS 927 BAR ASSOCIATION [R.V. RAVEENDRAN, J.J

to these Articles, this Court in two cases, namely, Union.otlndia . A v. Delhi High Court Bar Association [2002 (4) SCC 275] and State of Karnataka v. Vishwabharathi House Building Cooperative Society & Ors. [2003 (2) SCC 412] held that Articles 323A and 3238 are enabling provisions which enab!e the setting up of Tribunals contemplated therein; and that the B said Articles, however, cannot be interpreted to mean that they prohibited the legislature from establishing Tribunals not covered by those Articles, as long as there is legislative competence under the appropriate Entr{ in the Seventh Schedule. C

29Copy pinpoint29. In Navinchandra Mafatlal vs The Commissioner of Income-Tax - 1955 (1) SCR 829, this Court held:

".. As pointed out by Gwyer C.J. in United Provinces v. D Atiqa Begum - 1940 F.C.R. 110 none of the items in the Lists is to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. It is, therefore, clear-and it is acknowledged by Chief Justice Chagla-that in construing an entry in a List conferring legislative powers the widest possible construction according to their ordinary meaning must be put upon the words used therein. The cardinal rule of interpretation, however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in construing words in a constitutional enactment conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude." G In Union of India vs. Harbhajan Singh Dhillon - 1971 (2) SCC 779, this Court held :

"It seems to us that the function of Article 246(1 ), read with Entries 1 to 96 of List I, is to give positive power to H

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A Parliament to legislate in respect of those entries. Object is not to debar Parliament from legislating on a matter, eiven if other provisions of the Constitution enable it to do so."

The power of Parliament to enact a law which is not 8 covered by an entry in Lists II and Ill is absolute. The power so conferred by Article 246 is in no way affected or controlled by Article 323 A or 323 B. MBA contends that if the power to enact a law to constitute tribunals was already in existence with refemnce to the various fields of legislation enumerated in the C Seventh Schedule, there was no need for enacting ,Articles 323A or 3238 conferring specific power to Legislatures to makei laws for constitution of Tribunals. It is their contention that the very fact that Articles 323A and 3238 have been specifically enacted empowering the concerned legislature to rnake a law constituting tribunals in regard to the matters enumerated therein, demonstrated that tribunals cannot be constituted in respect of matters other than those mentioned in the said Articles 323A and 3238. The contention is not sound. It is evident that Part XIV-A containing Articles 323A and 3238 was inserted in the Constitution so as to provide for establishment of tribunals which can exclude the jurisdiction of all courts including the jurisdiction of High Courts and Supreme Court undeir Articles 226/227 and 32, in respect of disputes and complaints covered by those Articles. It was thought that unless such enabling power was vested in the Legislatures by a constitutional provision, it may not be possible to enact laws excluding the jurisdiction of the High Courts and Supreme Court. However, this is now academic because clause 2(d) of Article 323A and clause 3(d) of Article 323B have been held to be unconstitutional in Chandra Kumar.

30Copy pinpoint30. In ACC (supra), this Court recognized the competence of the State to transfer a part of the judicial power from coups to Tribunal : '

H "Judicial functions and judicial powers are one of the

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considerations of policy, the State transfers its judicial functions and powers mainly to the courts established by the Constitution; but that does not affect the competence of the State, by appropriate measures, to transfer a part of its judicial powers and functions to Tribunals by entrusting to them the task of adjudicating upon special matters and disputes between parties. It is really not possible or even expedient to attempt to describe exhaustively the features which are common to the Tribunals and the courts, and features which are distinct and separate. The basic and the fundamental feature which c 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."

(emphasis supplied) D

31Copy pinpoint31. Therefore, even though revival/rehabilitation/regulation/ winding up of companies are not matters which are mentioned in Article 323A and 3238, the 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 E Act.

32Copy pinpoint32. The Constitution contemplates judicial power being exercised by both courts and Tribunals. Except the powers and jurisdictions vested in superior courts by the Constitution, powers and jurisdiction of courts are controlled and regulated by Legislative enactments. High Courts are vested with the jurisdiction to entertain and hear appeals, revisions and references in pursuance of provisions contained in several specific legislative enactments. If jurisdiction of High Courts can be created by providing for appeals, revisions and references to be heard by the High Courts, jurisdiction can also be taken away by deleting the provisions for appeals, revisions or references. It also follows that the legislature has the power to create Tribunals with reference to specific enactments and confer jurisdiction on them to decide disputes in regard to H

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A matters arising from such special enactments. Therefore it cannot be said that legislature has no power to transfer judicial functions traditionally performed by courts to Tribunals.

33Copy pinpoint33. The argument that there cannot be 'whole-sale transfer of powers' is misconceived. It is nobody's case that the entire 8 functioning of courts in the country is transferred to Tribunals. The competence of the Parliament to make a law creating Tribunals to deal with disputes arising under or relating to a particular statute or statutes cannot be disputed. When a Tribunal is constituted under the Companies Act, empowered to deal with disputes arising under the said Act and the statute substitutes the word 'Tribunal' in place of 'High Court' necessarily there will be 'whole-sale transfer' of company law matters to the Tribunals. It is an inevitable consequence of creation of Tribunal, for such disputes, and will no way affect the validity of the law creating the Tribunal.

34Copy pinpoint34. We will next consider the question whether provision for a Technical Member along with the Judicial Member making any difference to decide the validity of the provision for constitution of Tribunals. This Question is covered by the decision in L. Chandra Kumar (supra), this Court held :

"We are also required to address the issue of the competence of those who man the Tribunals and the question of who is to exercise administrative supervision over them. It has been urged that only those who have had judicial experience should be appointed to such Tribunals. In the case of Administrative Tribunals, it has been pointed out that the administrative members who have been appointed have little or no experience in adjudicating such disputes; the Malimath Committee has noted that at times, IPS Officers have been appointed to these Tribunals. It is stated that in the short tenures that these Administrative Members are on the Tribunal, they are unable to attain enough experience in adjudication and in cases where they do acquire the ability, it is invariably on the eve of the

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expfry of their tenures. For these reasons, it has been urged that the appointment of Administrative Members to Administrative Tribunals be stopped. We find it difficult to accept such a contention. It must be remembered that the setting-up of these Tribunals is founded on the premise that specialist bodies comprising both trained administrators B • and those with judicial experience wquld, by virtue of their specialised knowledge, be better equipped to dispense speedy and efficient justice. It was expected that a judicious mix ofjudicial members and those with grass- roots experience would best serve this purpose. To hold c that the Tribunal should consist only of judicial members would attack the primary basis of the theory pursuant to which they have been constituted. Since the Selection Committee is now headed by a Judge of the Supreme • • Court, nominated by the Chief Justice of India, we !\ave 0 reason to believe that the Committee would take ca'te to ensure that administrative members are chosen from amongst those who have some background to deal with such cases.

35Copy pinpoint35. But when we s.ay that Legislature has the competence to make laws, providing which disputes will be decided by courts, and which disputes will be decided by Tribunals, it is subject to constitutional limitations, without encroaching upon the independence of judiciary and keeping in view the principles of Rule of Law and separation of powers. If Tribunals are to be vested with judicial power hitherto vested in or exercised by courts, such Tribunals should possess the independence, security and capacity associated with courts. If the Tribunals are intended to serve an area which requires specialized knowledge or expertise, no doubt there can be Technical G Members in addition to Judicial Members. Where however jurisdiction to try certain category of cases are transferred from Courts to Tribunals only to expedite the hearing and disposal or relieve from the rigours of the Evidence Act and procedural laws, there is obviously no need to have any non-judicial H

932 SUPREME COURT REPORTS [2010] 6 S.C.R.

A Technical Member. In respect of such Tribunals, only members of the Judiciary should be the Presiding Officers/members. Typical examples of such special Tribunals are Rent Tribunals, Motor ,A,ccident Tribunals and Special Courts under several Enactments. Therefore, when transferring the jurisdiction B exercised by Courts to Tribunals, which does not involve any specialized knowledge or expertise in any field and expediting the disposal and relaxing the procedure is the only object, a provision for technical members in addition to or in substitution of judicial members would clearly be a case of dilution of and c encroachment upon the independence of the Judiciary and Rule of Law and would be unconstitutional.

36Copy pinpoint36. In R. K. Jain vs. Union of India - 1993 (4) SCC 119, this Court observed :

D ''The Tribunals set up under Articles 323A and 323B of the Constitution or under an Act of legislature are creatures of the Statute and in no case claim the status as Judges of the High Court or parity or as substitutes. However, the personnel appointed to hold those offices under the State E are called upon to discharge judicial or quasi-judicial powers. So they must have judiclal approach and also knowledge and expertise in that particular branch of constitutional, administrative and tax laws. The legal input would undeniably be more important and sacrificing the legal input and not giving it sufficient weightage and teeth would definitely impair the efficacy and effectiveness of the judicial adjudication. It is, therefore, necessary that those who adjudicate upon these matters should have legal expertise, judicial experience and modicum of legal training as on many an occasion different and complex questions of law which baffle the minds of even trained judges in the High Court and Supreme Court would arise for discussion and decision."

37Copy pinpoint37. Having held that Legislation can transfer certain areas of litigation from Courts to Tribunals and recognizing that the

UNION OF INDIA v. R GANDHI, PRESIDENT, MADRAS 933 BAR ASSOCIATION [RV RAVEENDRAN, J.]

legislature can provide for technical members in addition to judicial members in such Tribunals, let us turn our attention to the question as to who can be the members. If the Act provides for a Tribunal with a judicial member and a fechnical member, does it mean that there are no limitations upon the power of the legislature to prescribe the qualifications for such technical member? The question will also be whether any limitations can be read into the competence of the legislature to prescribe the qualification for the judicial member? The answer, of course, depends upon the nature of jurisdiction that is being transferred from the Courts to Tribunals. Logically and necessarily, c depending upon whether the jurisdiction is being shifted from High Court, or District Court or a Civil Judge, the yardstick will differ. It is for the court which considers the challenge to the qualification, to determine whether the legislative power has been exercised in a manner in consonance with the constitutional principles and constitutional guarantees. We may examine this question with reference to the company jurisdiction exercised by the High Court for nearly a century being shifted to a tribunal on the ground that tribunal consisting of a judicial and technical members will be able to dispose of the matters expeditiously and that the availability of expertise of the technical members will facilitate the decision making to be more practical, effective and meaningful. Does this mean that the Legislature can provide for persons not properly qualified to become members? Let us take some examples. Can the legislature provide that a law graduate with a masters' F degree in company law can be a judicial member without any experience as a lawyer or a judge? Or can the legislature provide that an Upper Division Clerk having fifteen years experience in the company law department but with a Law Degree is eligible to become a Judicial Member? Or can the G legislature provide that a 'social worker' with ten years experience. in social ·work can become a technical member? Will it be beyond scrutiny by way of judicial review? '

38Copy pinpoint38. Let us look at it from a different angle. Let us assume H

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A that three legislations are made in a state providing for constitution of three types of Tribunals: (i) Contract Tribunals; (ii) Real Estate Tribunals; and (iii) Compensation Tribunals. Let us further assume that those legislations provide that all cases relatin~J to contractual disputes, property disputes and B compensation claims hitherto tried by civil courts, will be tried by these tribunals instead of the civil courts; and that these tribunals will be manned by members appointed from the civil services, with the rank of Section Officers who have expertise in the respective field; or that a businessman in the case of c Contract Tribunal, a Real Estate Dealer in regard to Property Tribunal, and any social worker in regard to compensation Tribunal, having expertise in the respective field will be the members of the Tribunal. Let us say by these legislations, all cases in civil courts are transferred to Tribunal (as virtually all cases in civil courts will fall under one or the other of the three 0 Tribunals). Merely because the Legislature has the power to constitute tribunals or transfer jurisdiction to tribunals, can that be done?

39Copy pinpoint39. The question is whether a line can be drawn, and who can decide the validity or correctness of such action. The obvious answer is that while the Legislature can make a law providing for constitution of Tribunals and prescribing the eligibility criteria and qualifications for being appointed as members, the superior courts in the country can, in exercise of the power of judicial review, examine whether the qualifications and eligibility criteria provided for selection of members is proper and adequate to enable them to discharge judicial functions and inspire confidence. This issue was also considered in Sampath Kumar (supra) and it was held that where the prescription of qualification was found by the court, to be not proper and conducive for the proper functioning of the Tribunal, it will result in invalidation of the relevant provisions relating to the constitution of the Tribunal. If the qualifications/ eligibility criteria for appointment fail to ensure that the members of the Tribunal are able to discharge judicial functions, the said provisions cannot pass the scrutiny of the

UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 935 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

higher Judiciary. We may in this context recall the words of A Mathew Jin Kesavananda Bharati v. State of Kera/a [AIR 1973 sec 1461] in a different context: "I am not dismayed by the suggestion that no yardstick is furnished to the Court except the trained judicial perception for finding the core or essence of a right, or the essential B features of the Constitution. Consider for instance, the test for determining citizenship in the United States that the alien shall be a person of "good moral character" the test of a crime involving "moral turpitude", the test by which you determine the familiar concept of the "core of a contract", C '- the "pith and substance" of a legislation or the "essential legislative function" in the doctrine of delegation. Few Constitutional issues can be presented in black and white terms. What are essential features and non essential features of the Constitution ? Where does the core of a D right end and the periphery begin? These are not matters of icy certainty; but, for that reason, I am not persuaded to - hold that they do not exist, or that they are too elusive for judicial perception. Most of the things in life that are worth talking about are matters at degree and the great judges E are those who are most capable of discerning which of the gradations make genuine difference".

40Copy pinpoint40. MBA contended that constitution of a Tribunal to transfer the entire company law jurisdiction of the High Court F was violative of the doctrine of separation of power and independence of judiciary which are parts of basic structure of the Constitution. The Union of India countered it by contending that a Legislation cannot be challenged on the ground it violates the basic structure of the Constitution. It is now well settled that only constitutional amendments can be subjected to the test of G basic features doctrine. Legislative measures are not subjected to basic features or basic structure or basic framework. The.. Legislation can be declared unconstitutional or invalid only on two grounds namely (i) lack of legislative competence and (ii} H

936 SUPREME COURT REPORTS [2010] 6 S.C.R.

A violation of any fundamental rights or any provision of the Constitution [See : Indira Gandhi vs. Raj Narain - 1975 Supp SCC 1; Ku/dip Nayar vs. Union of India - 2006 (7) SCC 1; and State of Andhra Pradesh vs. McDowell & Co. - 1996 (3) SCC 709]. The reason for this was given by Chandrachud J., B in Indira Gandhi, thus:

"Basic structure", by the majority judgment [in Keshavanda Bharati vs. State of Kera/a - 1973 (4) SCC 225], is not a part of the fundamental rights nor indeed a provision of the Constitution. The theory of basic structure is woven out of c the conspectus of the Constitution and the amending power is subjected to it because it is a constituent power. 'The power to amend the fundamental instrument cannot carry with it the power to destroy its essential features' - this, in brief, is the arch of the theory of basic structure. lt is wholly out of place in matters relating to the validity of ordinary laws made under the Constitution .......

There is no paradox, because certain limitations operate upon the higher power for the reason that it is a higher power. A constitutional amendment has to be passed by a special majority and certain such amendments have to be ratified by the legislatures of not less than one-half of the States as provided by Article 368(2). An ordinary legislation can be passed by a simple majority. The two powers, though species of the same genus, operate in different fields and are therefore subject to different limitations."

The view was also reiterated and explained by Beg. CJ in his leading judgment of a seven-Judge Bench in the State of G Kamataka vs. Union of India - 1977 (4) SCC 608. He held that in every case where reliance is placed upon the doctrine of basic structure, in the course of an attack upon legislation, whether ordinary or constituent (in the sense that it is an amendment to the Constitution) what is put forward as part of H

UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 937 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

a basic structure must be justified by reference to the express A provision of the Constitution. He further held:

'The one principle, however, which is deducible in all the applications of the basic structure doctrine, which has been used by this Court to limit even the power of B Constitutional amendment, is that whatever is put forward as a basic limitation upon legislative power must be correlated to one or more of the express provisions of the Constitution from .which the limitation should naturally and necessarily spring forth. The doctrine of basic structure, as explained above, requires that any limitation on legislative power must be so definitely discernible from the provisions of the Constitution itself that there could be no doubt or mistake that the prohibition is a part of the basic structure imposing a limit on even the power of Constitutional amendment. And, whenever we construe any document, by reading its provisions as a whole, trying to eliminate or resolve its disharmonies, do we not attempt to interpret it in accordance with what we find in its "basic structure" or purposes ? The doctrine is neither unique nor new. E No doubt, as a set of inferences from a document (i.e. the Constitution), the doctrine of "the basic structure" arose out of and relates to the Constitution only and does not, in that sense, appertain to the sphere of ordinary statutes or arise for application to them in the same way. But, if, as a result of the doctrine, certain imperatives are inherent in or logically and necessarily flow from the Constitution's 'basic structure", just as though they are its express mandates, they can be and have to be used to test the validity of ordinary laws just as other parts of the Constitution are so used.

Thus, it is clear that whenever the doctrine of the basic structure has been expounded or applied it is only as a doctrine of interpretation of the Constitution as It actually e,xists and not of a Constitution which could exist only H

938 SUPREME COURT REPORTS [201 O] 6 S.C.R.

A subjectively in the minds of different individuals as mere theories about what the Constitution is. The doctrine did not add to the contents of the Constitution. It did not, in theory, deduct anything from what was there. It only purported to bring out and explain the meaning of what was B already there. It was, in fact, used by all the judges for only this purpose with differing results simply because their assessments or inferences as to what was part of the basic structure in our Constitution differed. This, I think is the correct interpretation of the doctrine of the basic structure c of the Constitution. It should only be applied if it is clear, beyond the region of doubt, that what is put forward as a restriction upon otherwise clear and plenary legislative power is there as a Constitutional imperative."

Independent judicial tribunals for determination of the rights D of citizens, and for adjudication of the disputes and complaints of the citizens, is a necessary concomitant of the Rule of Law. Rule of Law has several facets, one of which is that disputes of citizens will be decided by Judges who are independent and impartial; and that disputes as to legality of acts of the E Government will be decided by Judges who are independent of the Executive. Another facet of Rule of Law is equality before law. The essence of equality is that it must be capable of being enforced and adjudicated by an independent judicial forum. Judicial independence and separation of judicial power from the Executive are part of the common law traditions implicit in a Constitution like ours which is based on the Westminster model.

41Copy pinpoint41. The fundamental right to equality before law and equal protection of laws guaranteed by Article 14 of the Constitution, clearly includes a right to have the person's rights, adjudicated by a forum which exercises judicial power in an impartial and independent manner, consistent with the recognized principles of adjudication. Therefore wherever access to courts to enforce such rights is sought to be abridged, altered, modified or H

UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 939 BAR ASSOCIATION [R.V. RAVEENDRAN, J.] ___, substituted by directing him to approach an alternative forum, such legislative act is open to challenge if it violates the right to adjudication by an independent forum. Therefore, though the challenge by MBA is on the ground of violation of principles forming part of the basic structure, they are relatable to one or more of the express provisions of the Constitution which gave rise to such principles. 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 c independence of Judiciary.

42Copy pinpoint42. In The State of West Bengal v. Anwar Ali Sarkar [AIR .. 1952 SC 75], Bose J., made a classic exposition regarding Article 14 : D "What I am concerned to see is not whether there is absolute equality in any academical sense of the term but whether the collective conscience of a sovereign democratic republic can regard the impugned law, contrasted with the ordinary law of the land, as the sort of substantially equal treatment which men of resolute minds and unbiased views can regard as right and proper in a democracy of the kind we have proclaimed ourselves to be." Such views must take into consideration the practical necessities of government, the right to alter the laws and many other facts, but in the forefront must remain the freedom of the individual from unjust and unequal treatment, unequal in the broad sense in which a democracy would view it. In my opinion, 'law' as used in article 14 does not mean the "legal precepts which are actually recognised and applied in tribunals of a given time and place" but "the more general body of doctrine and tradition from which those precepts are chiefly drawn, and by which we criticise, them." (Dean Pound in 34 Harvard Law Review 449 at 452). H

940 SUPREME COURT REPORTS [2010] 6 S.C.R.

A "However much the real ground of decision may be hidden behind a screen of words like 'reasonable', 'substantial', 'rational' and 'arbitrary' the fact would remain that judges are substituting their own judgment of what is right and proper and reasonable and just for that of the legislature; B and up to a point that, I think, is inevitable when a judge is called upon to crystallise a vague generality like article 14 into a concrete concept."

43Copy pinpoint43. MBA relied upon the following extract from Chapter 2 of "Orderly & Effective Insolvency Procedures - Key Issues" C annexed to Eradi Committee Report in support of its contention that the adjudication of disputes relating to insolvency should be conducted by Judges :

"An insolvency law will need to provide for an institutional ,.. D framework for its implementation. Since the adjudication of disputes is a judicial function, insolvency proceedings should be conducted under the authority of a court of law where judges will, at a minimum, be required to adjudicate disputes between the parties on factual issues and, on occasion, render interpretations of the law. The judiciary will only be able to fulfil this function if it is made up of independent judges with particularly high ethical and professional standards."

Learned counsel for MBA also referred to certain decisions of foreign Courts which may not be relevant in the Indian constitutional context. In particular, the decisions of US court·s may not be relevant as Indian Constitution does not envisage a strict separation of powers which require judicial power to be exclusively vested in courts. In India, certain amount of overlapping exists and the Executive has been discharging judicial functions in several identified areas.

44Copy pinpoint44. We may summarize the position as follows:

(a) A legislature can enact a law transferring the jurisdiction H

UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 941 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

exercised by courts in regard to any specified subject A (other than those which are vested in courts by express provisions of the Constitution) to any tribunal.

(b) /\II courts are tribunals. Any tribunal to which any existing jurisdiction of courts is transferred should also be a 8 Judicial Tribunal. This means that such Tribunal should have as members, persons of a rank, capacity and status as nearly as possible equal to the rank, status and capacity of the court which was till then dealing with such matters. and the members of the Tribunal should have the independence and security of tenure associated with C Judicial Tribunals.

(c) Whenever there is need for 'Tribunals', there is no presumption that there should be technical members in the Tribunals. When any jurisdiction is shifted from courts to D Tribunals, on the ground of pendency and delay in courts, and the jurisdiction so transferred does not involve any technical aspects requiring the assistance of experts, the Tribunals should normally have only judicial members. Only where the exercise of jurisdiction involves inquiry and decisions into technical or special aspects, where presence of technical members will be useful and necessary, Tribunals should have technical members. Indiscriminate appointment of technical members in all Tribunals will dilute and adversely affect the independence of the Judiciary.

(d) The Legislature can re-organize the jurisdictions of Judicial Tribunals. For example, it can provide that a specified category of cases tried by a higher court can be iried by a lower court or vice versa (A standard example is the variation of pecuniary limits of courts). Similarly while constituting Tribunals, the Legislature can prescribe the qualifications/eligibility criteria. The same is however subject to Judicial Review. If the court in exercise of judicial review is of the view that such tribunalisation would H

942 SUPREME COURT REPORTS [2010] 6 S.C.R.

A adversely affect the independence of judiciary or the standards of judiciary, the court may interfere to preserve the independence and standards of judiciary. Such an exercise will be part of the checks and balances measures to maintain the separation of powers and to prevent any B encroachment, intentional or unintentional, by either the legislature or by the executive.

Whether the constitution of NCLT and NCLAT under Parts 18 & 1C of Companies Act are valid

45Copy pinpoint45. We may now attempt to examine the validity of Part 1B and 1C of the Act by applying the aforesaid principles. The issue is not whether judicial functions can be transferred from courts to Tribunals. The issue is whether judicial functions can be transferred to Tribunals manned by persons who are not suitable or qualified or competent to discharge such judicial powers or whose independence is suspect. We have already held that the Legislature has the competence to transfer any particular jurisdiction from courts to Tribunals provided it is understood that the Tribunals exercise judicial power and the persons who are appointed as President/Chairperson/ Members are of a standard which is reasonably approximate to the standards of main stream Judicial functioning. On the other hand, if a Tribunal is packed with members who are drawn from the civil services and who continue to be employees of different Ministries or Government Departments by maintaining lien over their respective posts, it would amount to transferring judicial functions to the executive which would go against the doctrine of separation of power and independence of judiciary.

· 46. Legislature is presumed not to legislate contrary to rule of law and therefore know that where disputes are to be adjudicated by a Judicial Body other than Courts, its standards should approximately be the same as to what is expected of main stream Judiciary. Rule of law can be meaning fut only if there is an independent and impartial judiciary to render justice. H An independent judiciary can exist only when persons with

UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 943 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

competence, ability and independence with impeccable character man the judicial institutions. When the legislature proposes to substitute a Tribunal in place of the High Court to exercise the jurisdiction which the High Court is exercising, it goes without saying that the standards expected from the Judicial Members of the Tribunal and standards applied for appointing such members, should be as nearly as possible as applicable to High Court Judges, which are apart from a basic degree in law, rich experience in the practice of law, independent outlook, integrity, character and good reputation. It is also implied that only men of standing who have special c expertise in the field to which the Tribunal relates, will be eligible for appointment as Technical members. Therefore, only persons with a judicial background, that is, those who have been or are Judges of the High Court and lawyers with the prescribed experience, who are eligible for appointment as High Court D Judges, can be considered for appointment of Judicial Members.

47Copy pinpoint47. A lifetime of experience in administration may make a member of the civil services a good and able administrator, but not a necessarily good, able and impartial adjudicator with E a judicial temperament capable of rendering decisions which have to (i) inform the parties about the reasons for the decision; (ii) demonstrate fairness and correctness of the decision and absence of arbitrariness; and (iii) ensure that justice is not only done, but also seem to be done. We may refer to the following words of Bhagwati CJ., in Sampath Kumar (supra) :

"We cannot afford to forget that it is the High Court which is being supplanted by the Administrative Tribunal and it must be so manned as to inspire confidence in the public mind that it is a highly competent and expert mechanism with judicial approach and objectivity. Of course, I must make it clear that when I say this, I do not wish to cast any reflection on the members of the Civil Services because fortunately we have, in our country, brilliant civil servants H

944 SUPREME COURT REPORTS [2010] 6 S.C.R.

A who possess tremendous sincerity, drive and initiative and who have remarkable capacity to resolve and overcome adrriinistrative problems of great complexity. But what is needed in a judicial tribunal which is intended to supplant the High Court is legal training and experience." B

48Copy pinpoint48. As far as the Technical Members are concerned, the officer should be of at least Secretary Level officer with known competence and integrity. Reducing the standards, or qualifications for appointment will result in loss of confidence in the Tribunals. We hasten to add that our intention is not to C say that the persons of Joint Secretary level are not competent. Even persons of Under Secretary level may be competent to discharge the functions. There may be brilliant and competent people even working as Section Officers or Upper Division Clerks but that does not mean that they can be appointed as D Members. Competence is different from experience, maturity and status required for the post. As, for example, for the post of a Judge of the High Court, 10 years' practice as an Advocate is prescribed. There may be Advocates who even with 4 or 5 years' experience, rnay be more brilliant than Advocates with E 10 years' standing. Still, it is not competence alone but various other factors which make a person suitable. Therefore, when the legislature substitutes the Judges of tile High Court with Members of the Tribunal, the standards applicable should be as nearly as equal in the case of High Court Judges. That F means only Secretary Level officers (that is those who were Secretaries or Additional Secretaries) with specialized knowledge and skills can be appointed as Technical Members of the Tribunal.

49Copy pinpoint49. What is a matter of concern is the gradual erosion of G the independence of the judiciary, and shrinking of the space occupied by the Judiciary and gradual increase in the number of persons belonging to the civil service discharging functions and exercising jurisdiction which was previously exercised by the High Court. There is also a gradual dilution of the standards H

UNION OF INDIA v. R. GANDHI, PRESIDENT, MA.ORAS 945 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

and qualification prescribed for persons to decide cases which were earlier being decided by the High Courts. Let us take stock.

(49.1) To start with, apart from jurisdiction relating to appeals and revisions in civil, criminal and tax matters (and original civil jurisdiction in some High Courts). The High Courts were exercising original jurisdiction in two important areas; one was writ jurisdiction under Articles 226 and 227 (including original jurisdiction in service matters) and the other was in respect to company matters. c (49.2) After constitution of Administrative Tribunals under the Administrative Tribunals Act, 1985 the jurisdiction in regard to original jurisdiction relating to service matters was shifted from High Courts to Administrative Tribunals. Section 6 of the said Act deals with qualifications for appointment as Chairman, D and it is evident therefrom that the Chairman has to be a High Court Judge either a sitting or a former Judge. For judicial member the qualification was that he should be a judge of a High Court or is qualified to be a Judge of the High Court (i.e. an advocate of the High Court with ten years practice or a holder E of a judicial office for ten years) or a person who held the post of Secretary, Govt. of India in the Department of Legal Affairs or in the Legislative Department or Member Secretary, Law Commission of India for a period of two years; or an Additional Secretary to Government of India in the Department of Legal F Affairs or Legislative Department for a period of five years. For being appointed as Administrative Member, the qualification was that the candidate should have served as Secretary to the Government of India or any other post of the Central or State Government carrying the scale of pay which is not less than as G of a Secretary of Government of India for atleast two years, or should have held the post of Additional Secretary to the Government of India o'r any other post of Central or State Government carrying the scale of pay which is not less than that of an Additional Secretary to the Government of India at least H

946 SUPREME COURT REPORTS [2010] 6 S.G.R.

A for a period of five years. In other words, matters that were decided by the High Courts could be decided by a Tribunal whose members could be two Secretary level officers with two years experience or even two Additional Secretary level officers with five years experience. This was the first dilution. The B members were provided a term of office of five years and could hold office till 65 years and the salary and other perquisites of these members were made the same as that of High Court Judges. This itself gave room for a comment that these posts were virtually created as sinecure for members of the executive c to extend their period of service by five years from 60 to 65 at a higheir pay applicable to High Court Judges. Quite a few members of the executive thus became members of the "Tribunals exercising judicial functions".

(49.3) We may next refer to Information Technology Act, D 2000 which provided for establishment of Cyber Appellate Tribunal with a single member. Section 50 of that Act provided that a person who is, or has been, or is qualified to be, a Judge of a High Court, or a person who is, or has been, a member of the India Legal Service and is holding or has held a post in E Gradei I of that service for at least three years could be appointed as the Presiding Officer. That is, the requirement of even a Secretary level officer is gone. Any member of Indian Legal Service holding a Grade-I Post for three years can be a substitute for a High Court Judge. F (49.4) The next dilution is by insertion of Chapters 1B in the Companies Act, 1956 with effect from 1.4.2003 providing for constitution of a National Company Law Tribunal with a President and a large number of Judicial and Technical Members (as many as 62). There is a further dilution in the G qualifications for members of National Company Law Tribunal whiQh is a substitute for the High Court, for hearing winding up matters and other matters which were earlier heard by High Court. A member need not even be a Secretary or Addi. Secretary Level Officer. All Joint Secretary level civil servants H

UNION.OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 947 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

(that are working under Government of India or holding a post A under the Central and State Government carrying a scale of pay which is not less than that of the Joint Secretary to the Government of India) for a period of five years are eligible. Further, any person who has held a Group-A post for 15 years (which means anyone belonging to Indian P&T Accounts & B Finance Service, Indian Audit and Accounts Service, Indian Customs & Central Excise Service, Indian Defence Accounts Service, Indian Revenue Service, Indian Ordnances Factories Service, Indian Postal Service, Indian Civil Accounts Service, Indian Railway Traffic Service, Indian Railway Accounts Service, c Indian Railway Personal Service, Indian Defence Estates Service, Indian Information Service, Indian Trade Services, or other Central or State Service) with·three years' of service as a member of Indian Company Law Service (Account) Branch, or who has 'dealt' with any problems relating to Company Law 0 can become a Member. This means that the cases which were being decided by the Judges of the High Court can be decided by two-members of the civil services - Joint Secretary level officers or officers holding Group 'A' posts or equivalent posts for 15 years, can now discharge the functions of High Court. This again has given room for comment that qualifications E prescribed are tailor made to provide sinecure for a large number of Joint Secretary level officers or officers holding Group 'A' posts to serve up to 65 years in Tribunals exercising judicial functions. F (49.5) The dilution of standards may not end here. The proposed Companies Bill, 2008 contemplates that any member of Indian Legal Service or Indian Company Law Service (Legal Branch) with only ten years service, out of which three years should be in the pay scale of Joint Secretary, is qualified to be G appointed as a Judicial Member. The speed at which the qualifications for appointment as Members is being diluted is, to say the least, a matter of great concern for the independence of the Judiciary. H

948 SUPREME COURT REPORTS (2010] 6 S.C.R.

50Copy pinpoint50. When Administrative Tribunals were constituted, the presence of members of civil services as Technical (Administrative) Members was considered necessary, as they were well versed in the functioning of government departments and the rules and procedures applicable to Government B servants. But the fact that senior officers of civil services could function as Administrative Members of Administrative Tribunals, does not necessarily make them suitable to function as Technical Members in Company Law Tribunals or other Tribunals requiring technical expertise. The Tribunals cannot c become providers of sinecure to members of civil services, by appointing them as Technical Members, though they may not have technical expertise in the field to which the Tribunals relate, or worse where purely judicial functions are involved. While one can understand the presence of the members of the civil services being Technical Members in Administrative 0 Tribunals, or Military Officers being members of Armed Forces Tribunals, or Electrical Engineers being members of Electricity Appellate Tribunal, or Telecom Engineers being members of TDSAT, we find no logic in members of general Civil Services being members of Company Law Tribunals. E

51Copy pinpoint51. Let us now refer to the dilution of independence. If any member of the Tribunal is permitted to retain his lien over his post with the parent cadre or ministry or department in the civil service for his entire period of service as member of the F Tribunal, he would continue to think, act and function as a member of the civil services. A litigant may legitimately think that such a member will not be independent and impartial. We reiterate that our observations are not intended to cast any doubt about the honesty and integrity or capacity and capability G of the officers of civil services in particular those who are of the rank of Joint Secretary or for that matter even junior officers. What we are referring to is the perception of the litigants and the public about the independence or conduct of the Members of the Tribunal. Independence, impartiality and fairness are qualities which have to be nurtured and developed and cannot H

UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 949 BAR ASSOCIATION [R.V..,RAVEENDRAN, J.]

be acquired overnight. The independence of members A discharging judicial functions in a Tribunal cannot be diluted.

52Copy pinpoint52. The need for vigilance in jealously guarding the independence of courts and Tribunals against dilution and encroachment, finds an echo in an advice given by Justice William 0. Dougl<~s to young lawyers (The Douglas Letters: B Selections from the Private Papers of William Douglas, edited by Melvin L. Urofsky - 1987 Edition, page 162 - Adler and Adler.) : " ... The Constitution and the Bill of Rights were designed to get Government off the backs of people - all the people. Those great documents did not give us the welfare state. Instead, they guarantee to us all the rights to personal and spiritual self-fulfillment.

But that guarantee is not self-executing. As nightfall does not come all at once, neither does oppression. In both instances, there is a twilight when everything remains seemingly unchanged. And it is in such twilight that we all must be most aware of change in the air - however slight - lest we become unwitting victims of the darkness." E (emphasis supplied)

53Copy pinpoint53. The only reason given by Eradi Committee for suggesting transfer of the company law jurisdiction from High Courts to Tribunals is delay, as is evident from the following : F "Long drawn court proceedings

24. Multiplicity of court proceedings is the main reason for abnormal delay in dissolution of companies. The proceedings are filed by OL under sections 446,454,468 and 542/543 for non-submission of Statement of Affairs, G non production of books of account and assets as also realization of debts and misfeasance proceedings. Similarly, the settlement of list of creditors and contributories take a long time. Disposal of suits or claims H

950 SUPREME COURT REPORTS [2010] 6 S.C.R.

A filed by the company or against the company in which OL is always a party, take a very long time.

:25. Normally, there is a company court with one Company .Judge in each High Court and it is not possible for the court to cope with the work relating to companies under B liquidation. Apart from company matters, the court also attends to other cases in the High Court. The orders passed by Company Judge are appealable under section

483. Normal delays and adjournments sought in court proceedings further aggravate the problem and unless all c the pending cases are not finally disposed of. OL cannot move the court for dissolution of a company.

26. Under section 457, OL can exercise the powers with the sanction and subject to the control of the court. Any creditor or contributory may apply to the Court with respect to the exercise of any such power. Elaborate procedure has been prescribed under the Companies (Court) Rules, 1959 relating to Statement of Affairs (Rules 124-134), Preliminary Report (Rules 135-139), Settlement of list of creditors (Rules 147-149), Settlement of list of contributories and payment of calls (Rules 180-196,232- 242), examination under section 477/478 (Rule 234-259), Misfeasance proceedings under sections 542 and 543 (Rules 260-262), Disclaimer of property under section 535( (Rules 263~269), Compromise and abandonment of claims (Rules 270-271), Sale of assets (Rules 272-274), Declaration of dividend (payment to creditors) and turn of capital to contributories (Rules 275-280), dissolution (rules 281-285), Maintenance of Registers and books by OL (Rules 286-292), Investment of surplus funds (Rules 293- G 297), Half yearly and yearly Accounts and audit (Rules 298-311), Unclaimed dividend and undistributed assets (Rules 335-338).

27. It is significant to note that under the Act and the aforesaid Companies (Courts) Rules made by Hon'ble H

UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 951 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

Supreme Court, after consulting the High Courts under A . section 643, OL has to seek sanction of the Court at each and every stage during the course of winding up proceedings. For the purpose, OL has to submit reports from time to time for consideration of the Company Judge on the administrative as well as judicial side. This entails B delays due to normal court proceedings. In contract, by and large, there is hardly any interference by the court in case of companies under voluntary winding up."

Eradi Committee merely recommended setting up separate C Tribunals to exclusively deal with company matters and transfer of company law jurisdiction from High Court to such Tribunals. Tribunals with only Judicial Members would have served the purpose sought to be achieved. It did not suggest that such Tribunals should have 'Technical Members'. Nor did it suggest introduction of officers of civil services· to be made technical members. The jurisdiction relating to company case which the High Courts are dealing with can be dealt with by Tribunals with Judicial Members alone. Be that as it may.

54Copy pinpoint54. Parts IC and ID of the Companies Act proposes to shift the company matters from the courts to Tribunals, where a 'Judicial Member' and a 'Technical Member' will decide the disputes. If the members are selected as contemplated in section 10FD, there is every likelihood of most of the members, including the so called 'Judicial Members' not having any judicial experience or company law experience and such members being required to deal with and decide complex issues of fact and law. Whether the Tribunals should have only judicial members or a combination of judicial and technical members is for the Legislature to decide. But if there should be technical members, they should be persons with expertise in company law or allied subjects and mere experience in civil service cannot be treated as Technical Expertise in company law. The candidates falling under sub-section 2(c) and (d) and sub-

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A sections 3(a) and (b) of section 10FD have no experience or expertise in deciding company matters.

55Copy pinpoint55. There is an erroneous assumption that company law matters require certain specialized skills which are lacking in Judges. There is also an equally erroneous assumption that 8 members of the civil services, (either a Group-A officer or Joint Secretary level civil servant who had never handled any company disputes) will have the judicial experience or expertise in company law to be appointed either as Judicial Member or Technical Member. Nor can persons having experience of fifteen years in science, technology, medicines, banking, industry can be termed as experts in Company Law for being appointed as Technical Members. The practice of having experts as Technical Members is suited to areas which require the assistance of professional experts, qualified in medicine, engineering, and architecture etc.

Lastly, we may refer to the lack of security of tenure. The short term of three years, the provision for routine suspension pending enquiry and the lack of any kind of immunity, are aspects which require to be considered and remedied.

56Copy pinpoint56. We may tabulate the corrections required to set right the defects in Parts IB and IC of the Act :

(i) Only Judges and Advocates can be considered for appointment as Judicial Members of the Tribunal. Only the 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) H of Section 1OFD. The expertise in Company Law service

UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 953 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

or Indian Legal service will at best enable them to be A 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 8 achieved, not by giving the salary and perks of a High Court Judge to the members, but by ensuring that persons who are as nearly equal in rank, experience or competence to High Court Judges are appointed as members. Therefore, only officers who are holding the ranks of Secretaries or Additional Secretaries alone can be considered for appointment as Technical members of the National Company Law Tribunal. Clauses (c) and (d) of sub-section (2) and Clauses (a) and (b) of sub-section (3) of section 1OFD which provide for persons with 15 years experience in Group A post or persons holding the post of Joint Secretary or equivalent post in Central or State Government, being qualified for appointment as Members of Tribunal is invalid.

(iv) A 'Technical Member' presupposes an experience in the field to which the Tribunal relates. A member of Indian Company Law Service who has worked with Accounts Branch or officers in other departments who might have incidentally dealt with some aspect of Company Law cannot be considered as 'experts' qualified to be appointed as Technical Members. Therefore Clauses (a) and (b) of sub-section (3) are not valid.

(v) The first part of clause (f) of sub-section (3) providing that any person having special knowledge or professional experience of 15 years in science, technology, economics, banking, industry could be considered to be persons with expertise in company law, for being appointed as Technical Members in Company Law Tribunal, is invalid.

(vi) Persons having ability, integrity, standing and special H

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A knowledge and professional experience of not less than fifteen years in industrial finance, industrial management, industrial reconstruction, investment and accountancy, may however be considered as persons having expertise in rehabilitation/revival of companies and therefore, eligible B for being considered for appointment as Technical Members.

(vii) In regard to category of persons referred in clause (g) of sub-section (3) at least five years experience should be specified. c (viii) Only Clauses (c), (d), (e), (g), (h), and later part of clause (f) in sub-section (3) of section 1OFD and officers of civil services of the rank of the Secretary or Additional Secretary in Indian Company Law Service and Indian D. Legal Service can be considered for purposes of .appointment as Technical Members of the Tribunal.

(ix) Instead of a five-member Selection Committee with Chief Justice of India (or his nominee) as Chairperson and two Secretaries from the Ministry of Finance and Company E Affairs and the Secretary in the Ministry of Labour and Secretary in the Ministry of Law and Justice as members mentioned in section 1OFX, the Selection Committee should broadly be on the following lines:

F (a) C~ief Justice of India or his nominee - Chairperson (with a casting vote);

(b) A senior Judge of the Supreme Court or Chief Justice of High Court - Member; G (c) Secretary in the Ministry of Finance and Company Affairs - Member; and

(d) Secretary in the Ministry of Law and Justice - Member. H

UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 955 BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

(x) The term of office of three years shall be changed to a A term of seven or five years subject to eligibility for appointment for one more term. This is because considerable time is required to achieve expertise in the concerned field. A term of three years is very short and by the time the members achieve the required knowledge, B expertise and efficiency, one term will be over. Further the said term of three years with the retirement age of 65 years is perceived as having been tailor~made for persons who have retired or shortly to retire and encourages these Tribunals to be treated as post-retirement havens. If these c Tribunals are to function effectively and efficiently they should be able to attract younger members who will have a reasonable period of service.

(xi) The second proviso to Section 1OFE enabling the President and members to retain lien with their parent cadre/ministry/department while holding office as President or Members will not be conducive for the independence of members. Any person appointed as members should be prepared to totally disassociate himself from the Executive. The lien cannot therefore exceed a period of one year.

(xii) To maintain independence and security in service, sub- section (3) of section 10FJ and Section 10FV should provide that suspension of the PresidenUChairman or member of a Tribunal can be only with the concurrence of the Chief Justice of India.

(xiii) The administrative support for all Tribunals should be from the Ministry of Law & Justice. Neither the Tribunals nor its members shall seek or be provided with facilities from the respective sponsoring or parent Ministries or concerned Department.

(xiv) Two-Member Benches of the Tribunal should always have a judicial member. Whenever any larger or special H

956 SUPREME COURT REPORTS [201 OJ 6 S.CR.

A benches are constituted, the number of Technical Members shall not exceed the Judicial Members.

57Copy pinpoint57. We therefore dispose of these appeals, partly allowing theim, as follows:

B (i) We uphold the decision of the High Court that the creation of National Company Law Tribunal and National Company Law Appellate Tribunal and vesting in them, the powers and jurisdiction exercised by the High Court in regard to company law matters, are not unconstitutional. c (ii) We declare that Parts 1 B and 1C of the Act as presently structured, are unconstitutional for the reasons stated in the preceding para. However, Parts 18 and IC of the Act, may be made operational by making suitable • D amendments, as indicated above, in addition to what the Union Government has already agreed in pursuance of the impugned order of the High Court.

K.K.T. Appeals partly allowed.