IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

TRANSFERRED CASE (CIVIL) NO. 150 OF 2006

Madras Bar Association … Petitioner  

Vs.

Union of India … Respondent

With

TC No.116/2006, 117/2006, 118/2006 and WP No. 697/2007

O R D E R  

In all these petitions, the constitutional validity of the National Tax  

Tribunal  Act,  2005  (‘Act’  for  short)  is  challenged.  In  TC  No.150/2006,  

additionally there is a challenge to section 46 of the Constitution (Forty-

second Amendment) Act, 1976 and Article 323B of Constitution of India. It  

is contended that section 46 of the Constitution (Forty-second Amendment)  

Act,  is  ultra  vires  the  basic  structure  of  the  Constitution  as  it  enables  

proliferation  of  Tribunal  system  and  makes  serious  inroads  into  the

independence  of  the  judiciary  by  providing  a  parallel  system  of  

administration  of  justice,  in  which  the  executive  has  retained  extensive  

control over matters such as appointment, jurisdiction, procedure etc. It is  

contended that Article 323B violates the basic structure of the Constitution  

as it  completely takes away the jurisdiction of the High Courts and vests  

them  in  the  National  Tax  Tribunal,  including  trial  of  offences  and  

adjudication  of  pure  questions  of  law,  which  have  always  been  in  the  

exclusive domain of the judiciary.  

2. When these matters came up on 9.1.2007 before a three Judge Bench,  

the challenge to various sections of the Act was noticed.  

2.1) The first challenge was to section 13 which permitted “any person”  

duly authorized to appear before the National Tax Tribunal. Union of India  

submitted that the appropriate amendment will be made in the Act to ensure  

that  only  lawyers,  Chartered  Accountants  and  parties  in  person  will  be  

permitted to appear before the National Tax Tribunal.  

2.2) The second challenge was to section 5(5) of the Act which provided  

that  the  Central  Government  may,  in  consultation  with  the  Chairperson,  

transfers  a  Member  from headquarters  of  one Bench in  one State  to  the  

headquarters of another Bench in another State or to the headquarters of any  

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other Bench within a State. Union of India submitted that having regard to  

the  nature  of  the  functions  to  be  performed  by  the  Tribunal  and  the  

constitutional  scheme  of  separation  of  powers  and  independence  of  

judiciary, the expression “consultation with the Chairperson” occurring in  

section 5(5) of the Act should be read and construed as “concurrence of the  

Chairperson”.  

2.3) The third challenge was to Section 7 which provided for a Selection  

Committee  comprising  of  the  Chief  Justice  of  India  or  a  Judge  of  the  

Supreme Court nominated by him, (b) Secretary in the Ministry of Law &  

Justice, and (c) Secretary in the Ministry of Finance. It was contended by the  

petitioners that two of the Members who are Secretaries to the Government  

forming the majority may override the opinion of the Chief Justice or his  

nominee which was improper. It was stated on behalf of the Union of India  

that there was no question of two Secretaries overriding the opinion of the  

Chief Justice of India or his nominee since primacy of the Chairperson was  

inbuilt in the system and this aspect will be duly clarified.  

2.4) In  regard  to  certain  other  defects  in  the  Act,  pointed  out  by  the  

petitioners, it was submitted that the Union Government will examine them  

and wherever necessary suitable amendments will be made.

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In  view  of  these  submissions,  on  9.1.2007,  this  Court  made  an  order  

reserving liberty to the Union Government to mention the matter for listing  

after the appropriate amendments were made in the Act.   

3. On 21.1.2009, when arguments in CA No. 3067 of 2004 and CA No.  

3717/2005, which related to the challenge to Parts 1B and 1C of Companies  

Act, 1956 were in progress before the Constitution Bench, it was submitted  

that  these matters  involved a similar  issue and they could be tagged and  

disposed  of  in  terms  of  the  decision  in  those  appeals.  Therefore  the  

Constitution Bench directed these cases to be listed with those appeals, even  

though there is no order of reference in these matters.  

4. CA No. 3067 of 2004 and CA No. 3717 of 2005 were subsequently  

heard at length and were reserved for judgment. These matters which were  

tagged were also reserved for judgment.

5. We have disposed of CA No.3067/2004 and CA No. 3717/2005 today  

by a separate order. In so far as these cases are concerned, we find that TC  

(Civil)  No.  150/2006  involves  the  challenge  to  Article  323B  of  the  

Constitution. The said Article enables appropriate legislatures to provide by  

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law, for adjudication or  trial  by tribunals  or  any disputes,  complaints,  or  

offences  with  respect  to all  or  any of  the  matters  specified in clause (2)  

thereof. Sub-clause (i) of Clause 2 of Article 323B enables such tribunals to  

try  offences  against  laws with  respect  to  any of  the  matters  specified  in  

clauses (a) to (h) of clause (2) of the said Article.   

6. One of the contentions urged in support of the challenge to Article  

323B relate  to  the  fact  that  Tribunals  do not  follow the  normal  rules  of  

evidence  contained  in  Evidence  Act.  In  criminal  trials,  an  accused  is  

presumed to be innocent  till  proved guilty  beyond reasonable  doubt,  and  

Evidence  Act  plays  an  important  role,  as  appreciation  of  evidence  and  

consequential  findings  of  facts  are  crucial.  The  trial  would  require  

experience and expertise in criminal law, which means that the Judge or the  

adjudicator to be legally trained. Tribunals which follow their own summary  

procedure, are not bound by the strict rules of evidence and the members  

will not be legally trained. Therefore it may lead to convictions of persons  

on evidence which is not sufficient  in probative value or on the basis of  

inadmissible evidence. It is submitted that it would thus be a retrograde step  

for separation of executive from the judiciary.  

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7. Appeals  on issues on law are traditionally  heard by courts.  Article  

323B enable constitution of Tribunals which will be hearing appeals on pure  

questions of law which is the function of courts. In L.  Chandra Kumar v.  

Union of India (1997) 3 SCC 261, this court considered the validity of only  

Clause  3(d)  of  Article  323B  but  did  not  consider  the  validity  of  other  

provisions of Article 323B.

8. The appeals relating to constitutional validity of National Company  

Law  Tribunals  under  the  Companies  Act,  1956  did  not  involve  the  

consideration of Article 323B. The constitutional issues raised in TC (Civil)  

No.  150/2006  were  not  touched  as  the  power  to  establish  Company  

Tribunals was not traceable to Article 323B but to several entries of Lists I  

and III of Seventh Schedule and consequently there was no challenge to this  

Article.

9. The basis of attack in regard to Part 1B and 1C of Companies Act and  

the provisions of NTT Act are completely different. The challenge to Part IB  

& IC of Companies Act, 1956 seeks to derive support from Article 323B by  

contending that Article  323B is a bar for constitution of any Tribunal in  

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respect of matters not enumerated therein. On the other hand the challenge to  

NTT Act is based on the challenge to Article 323B itself.  

10. We therefore find that these petitions relating to the validity of the  

NTT Act and the challenge to Article 323B raises issues which did not arise  

in the two civil  appeals.  Therefore these cases can not be disposed of in  

terms of the decision in the civil appeals but requires to be heard separately.  

We accordingly direct that these matters be delinked and listed separately for  

hearing.  

 ………………………..CJI

(K G Balakrishnan)

………………………..J. (R V Raveendran)

………………………..J. (D K Jain)

……………………….J.    (P Sathasivam)  

……………………….J.    (J M Panchal)  

New Delhi; May 11, 2010

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