Reportable IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3067 OF 2004

Union of India … Appellant

Vs.

R. Gandhi, President, Madras Bar Association … Respondent

WITH

CIVIL APPEAL NO.3717 OF 2005

Madras Bar Association … Appellant

Vs.

Union of India … Respondent

J U D G M E N T

R.V.RAVEENDRAN, J.

These  appeals  arise  from the order  dated  30.3.2004 of  the  Madras  

High Court  in  WP No.  2198/2003 filed  by  the  President  of  Madras  Bar  

Association  (MBA  for  short)  challenging  the  constitutional  validity  of  

Chapters 1B and 1C of the Companies Act, 1956(‘Act’ for short) inserted by  

Companies (Second Amendment)  Act 2002 (‘Amendment  Act’  for short)

providing for the constitution of National Company Law Tribunal (‘NCLT’  

or ‘Tribunal’) and National Company Law Appellate Tribunal (‘NCLAT’ or  

‘Appellate Tribunal’).  

2. In the said writ petition, Madras Bar Association (‘MBA’) raised the  

following contentions :  

(i) Parliament does not have the legislative competence to vest intrinsic  

judicial functions that have been traditionally performed by the High Courts  

for nearly a century in any Tribunal outside the Judiciary.  

(ii) The  constitution  of  the  National  Company  Law  Tribunal  and  

transferring  the  entire  company  jurisdiction  of  the  High  Court  to  the  

Tribunal which is not under the control of the Judiciary, is violative of the  

doctrine of separation of powers and independence of the Judiciary which  

are parts of the basic structure of the Constitution.  

(iii) Article 323B of the Constitution enables the appropriate Legislature to  

provide  for  adjudication  or  trial  by  Tribunals  of  disputes,  complaints  or  

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

Clause  (2)  enumerate  the  matters  in  regard  to  which  Tribunals  can  be  

constituted. The said list is exhaustive and not illustrative. The list does not  

provide for constitution of Tribunal for insolvency, revival and restructuring  

of the company. In the absence of any amendment to Article 323B providing  

for a National Tribunal for revival of companies and winding up companies,  

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there is no legislative competence to provide for constitution of NCLT and  

NCLAT.  

(iv) The various provisions of Chapters IB and IC of the Act (sections  

10FB, 10FD, 10FE, 10FF, 10FL(2), 10FO, 10FR(3), 10FT  and 10FX) are  

defective and unconstitutional, being in breach of basic principles of Rule of  

Law, Separation of Powers and Independence of the Judiciary.

3. The Union of  India submitted that  it  had constituted a High Level  

Committee  on  Law  relating  to  Insolvency  of  Companies  under  the  

Chairmanship of Justice V. Balakrishna Eradi, a retired Judge of this Court,  

with  other  experts  to  examine  the  existing  laws  relating  to  winding-up  

proceedings of the company in order to remodel it  in line with the latest  

developments  and  innovations  in  corporate  laws  and  governance  and  to  

suggest reforms to the procedures at various stages followed in insolvency  

proceedings of the company in order to avoid unnecessary delay, in tune  

with international practices in the field. The said Committee identified the  

following  areas  which  contributed  to  inordinate  delay  in  finalisation  of  

winding-up/dissolution  of  companies  :  (a)  filing  statement  of  affairs;  (b)  

handing  over  of  updated  books  of  accounts;  (c)  realization  of  debts;  (d)  

taking over possession of the assets of the company and sale of assets; (e)  

non-availability of funds for the Official Liquidator to discharge his duties  

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and functions (f) settlement of the list of creditors; (g) settlement of list of  

contributories  and  payment  of  calls;  (h)  finalisation  of  income-tax  

proceedings; and (i) disposal of misfeasance proceedings. The Committee  

found  that  multiplicity  of  court  proceedings  is  the  main  reason  for  the  

abnormal  delay  in  dissolution  of  companies.  It  also  found  that  different  

agencies  dealt  with  different  areas  relating  to  companies,  that  Board  for  

Industrial & Financial Reconstruction (BIFR) and Appellate Authority for  

Industrial  &  Financial  Reconstruction  (AAIFR)  dealt  with  references  

relating to rehabilitation and revival of companies, High Courts dealt with  

winding-up  of  companies  and  Company  Law  Board  (CLB)  dealt  with  

matters  relating  to  prevention  of  oppression  and  mismanagement  etc.  

Considering  the  laws  on  corporate  insolvency  prevailing  in  industrially  

advanced countries,  the Committee  recommended various amendments  in  

regard to the provisions of Companies Act, 1956 for setting-up of a National  

Company Law Tribunal which will combine the powers of the CLB under  

the  Companies  Act,  1956,   BIFR and  AAIFR under  the  Sick  Industrial  

Companies  (Special  Provisions)  Act,  1985  as  also  the  jurisdiction  and  

powers relating to winding-up presently vested in the High Courts.  

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4. It  is stated that the recommendations of the Eradi Committee  were  

accepted by the Government and Company (Second Amendment) Act, 2002  

was passed providing for establishment of NCLT and NCLAT to take-over  

the functions which are being performed by CLB, BIFR, AAIFR and the  

High Courts. It is submitted that the establishment of NCLT and NCLAT  

will have the following beneficial effects:  (i) reduce the pendency of cases  

and reduce the period of winding-up process from 20 to 25 years to about  

two  years;  (ii)  avoid  multiplicity  of  litigation  before  various  fora  (High  

Courts and quasi-judicial Authorities like CLB, BIFR and AAIFR) as all can  

be heard and decided by NCLT; (iii) the appeals will be streamlined with an  

appeal  provided against  the  order  of  the  NCLT to  an  appellate  Tribunal  

(NCLAT)  exclusively  dedicated  to  matters  arising  from  NCLT,  with  a  

further appeal to the Supreme Court only on points of law, thereby reducing  

the delay in appeals; and (iv) with the pending cases before the Company  

Law Board and all winding-up cases pending before the High Courts being  

transferred to NCLT, the burden on High Courts will be reduced and BIFR  

and AAIFR could be abolished.  

5. It was contended that the power to provide for establishment of NCLT  

and NCLAT was derived from Article 245 read with several entries in List I  

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of the Seventh Schedule and did not originate from Article 323B. It  was  

submitted that various provisions in Parts IB and IC of the Act relating to the  

constitution of NCLT and NCLAT were intended to provide for selection of  

proper  persons  to  be  their  President/Chairperson/members  and  for  their  

proper  functioning.  It  was  submitted  that  similar  provisions  relating  to  

establishment  of  other  alternative  institutional  mechanisms  such  as  

Administrative Tribunals, Debt Recovery Tribunals and Consumer fora, had  

the seal of approval of this Court in S. P. Sampath Kumar vs. Union of India  

– 1987 (1) SCC 124, L. Chandrakumar v. Union of India (1997) 3 SCC 261;  

Union of India v. Delhi High Court Bar Association (2002) 4 SCC 275 and  

State of Karnataka v. Vishwabharathi House Building Co-operative Society  

2003(2) SCC 412.  

6. The Madras High Court by its order dated 30.3.2004 held that creation  

of the NCLT and vesting the powers hitherto exercised by the High Courts  

and CLB in the Tribunal was not unconstitutional. It referred to and listed  

the defects in several provisions (that is mainly sections 10FD(3)(f)(g)(h),  

10FE,  10FF,  10FL(2),  10FR(3),  10FT) in  Parts  IB and IC of  the Act.  It  

therefore declared that until  the provisions of Part  IB and IC of the Act,  

introduced by the Amendment Act which were defective being violative of  

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basic  constitutional  scheme  (of  separation  of  judicial  power  from  the  

Executive  and Legislative  power  and independence  of  judiciary  enabling  

impartial  exercise  of  judicial  power)  are  duly  amended by  removing the  

defects  that  were  pointed  out;  it  will  be  unconstitutional  to  constitute  a  

Tribunal and Appellate Tribunal to exercise the jurisdiction now exercised  

by the High Court or the Company Law Board.  

7. The Union of India has accepted that several of the defects pointed out  

by the High Court in Parts IB and IC of the Act, require to be corrected and  

has  stated  that  those  provisions  will  be  suitably  amended to  remove the  

defects.  It  has not  however accepted the decision of  the High Court  that  

some other provisions of Parts IB and IC are also defective. To narrow down  

the controversy in regard to the appeal by the Union, we note below the  

defects  pointed out  by the High Court  in regard to various provisions in  

Parts IB and IC of the Act and the stand of Union of India in respect of each  

of them.   

Sections 10FE and 10FT : Tenure of President/Chairman and Members of  NCLT and NCLAT fixed as three years with eligibility for re-appointment  

7.1) The High Court held that unless the term of office is fixed as at least  

five  years  with  a  provision  for  renewal,  except  in  cases  of  incapacity,  

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misconduct and the like, the constitution of the Tribunal cannot be regarded  

as satisfying the essential requirements of an independent and impartial body  

exercising judicial functions of the state.  

The  Union  Government  has  accepted  the  finding  and  agreed  to  amend  

section 10FE and 10FT of the Act to provide for a five year term for the  

Chairman/President/Members. However, the Government proposes to retain  

the provision for reappointment instead of ‘renewal’, as the reappointments  

would be considered by a Selection Committee which would be headed by  

the Chief Justice of India or his nominee. As the Government proposes to  

have minimum eligibility of 50 years for first appointment as a Member of  

the Tribunal, a Member will have to undergo the process of re-appointment  

only once or twice.  

Section 10FE – second proviso : Enabling the President/Members of NCLT  to  retain  their  lien  with  their  parent  cadre/Ministry/Department  while  holding office

7.2) The High Court held that in so far as  the President is concerned, there  

is  no  question  of  holding  a  lien  and  the  reference  to  President  must  be  

deleted from the second proviso to section 10FE.  

The  Union  Government  has  accepted  the  decision  and  has  stated  that  it  

proposes to amend the proviso and delete the reference to the President in  

the second proviso.    

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7.3) The  High  Court  also  held  that  the  period  of  lien  in  regard  to  the  

members of NCLT should be restricted to only one year instead of the entire  

period of service as a Member of NCLT.  

The Union Government has submitted that in view of the proposed longer  

tenure of five years as against the three years, the government proposes to  

permit  the  members  to  retain  their  lien  with  their  parent  

cadre/Ministry/Department for a period of three years, as one year may be  

too short for the members to decide whether to give up the lien or not.   

Section 10FD(1) : Qualification for appointment as President  

7.4) The High Court has suggested that it would be appropriate to confine  

the choice of persons to those who have held the position of a Judge of a  

High  Court  for  a  minimum  period  of  five  years  instead  of  the  existing  

provision which provides that Central Government shall  appoint a person  

who has been, or is qualified to be, a  Judge of a High Court, for the post of  

President of the Tribunal.   

The  Government  has  agreed  in  part  and  proposes  to  amend the  Act  for  

appointment of a retired or serving High Court Judge alone as the President  

of  the  Tribunal.  It  however  feels  that  minimum  length  of  service  as  

experience,  need  not  be  fixed  in  the  case  of  High  Court  Judges,  as  the  

Selection Committee headed by the Chief Justice of India or his nominee  

would invariably select the most suitable candidate for the post.  

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Section 10FD(3)(f) : Appointment of Technical Member to NCLT  

7.5) The High Court  has held that  appointment  of  a member  under the  

category specified in section 10FD(3)(f),  can have a role only in matters  

concerning revival and rehabilitation of sick industrial companies and not in  

relation to other matters. The High Court has therefore virtually indicated  

that NCLT should have two divisions, that is an Adjudication Division and a  

Rehabilitation Division and persons selected under the category specified in  

clause  (f)  should  only  be  appointed  as  members  of  the  Rehabilitation  

Division.  

The Union Government contends that similar provision exists in section 4(3)  

of the Sick Industrial  Companies (Special  Provisions) Act,  1985; that the  

provision is only an enabling one so that the best talent can be selected by  

the  Selection  Committee  headed  by  the  Chief  Justice  of  India  or  his  

nominee; and that it may not be advisable to have Division or limit or place  

restrictions  on  the  power  of  the  President  of  the  Tribunal  to  constitute  

appropriate benches. It is also pointed out that a Technical Member would  

always sit in a Bench with a Judicial Member.  

Section 10FD(3)(g) :  Qualification for appointment of Technical Member  

7.6) The High Court has observed that in regard to Presiding Officers of  

Labour  Courts  and Industrial  Tribunals  or  National  Industrial  Tribunal,  a  

minimum period of three to five years experience should be prescribed, as  

what is sought to be utilized is their expert knowledge in Labour Laws.  

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The Union Government submits that it may be advisable to leave the choice  

of selection of the most appropriate candidate to the Committee headed by  

the Chief Justice of India or his nominee.  

7.7) The High Court  has  also observed that  as  persons  who satisfy  the  

qualifications prescribed in section 10FD(3)(g) would be persons who fall  

under  section  10FD(2)(a),  it  would  be  more  appropriate  to  include  this  

qualification in section 10FD(2)(a).  It  has  also observed in  section 10FL  

dealing with “Benches of the Tribunal”, a provision should be made that a  

‘Judicial Member’ with this qualification shall be a member of the special  

Bench  referred  to  in  section  10FL(2)  for  cases  relating  to  rehabilitation,  

restructuring or winding up of Companies.   

The Union Government has not accepted these findings and contends that  

the observations of the High Court would amount to judicial legislation.  

Section 10FD(3)(h) :  Qualification of technical member of NCLT

7.8) The High Court has observed that clause (h) referring to the category  

of persons having special knowledge of and experience in matters relating to  

labour, for not less than 15 years is vague and should be suitably amended  

so  as  to  spell  out  with  certainty  the  qualification  which  a  person  to  be  

appointed under clause (h) should possess.  

The  Union  Government  contends  that  in  view  of  the  wide  and  varied  

experience possible in labour matters, it may not be advisable to set out the  

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nature of experience or impose any restrictions in regard to the nature of  

experience. It is submitted that the Selection Committee headed by the Chief  

Justice of India or his nominee would consider each application on its own  

merits.  

7.9) The second observation of the High Court is that the member selected  

under the category mentioned in clause (h) must confine his participation  

only  to  the  Benches  dealing  with  revival  and  rehabilitation  of  sick  

companies  and  should  also  be  excluded  from  functioning  as  a  single  

Member Bench for any matter.   

The Union Government contends that it may not be advisable to fetter the  

prerogative of the President of the Tribunal to constitute benches by making  

use of available members. It is also pointed out that it may not be proper to  

presume that a person well-versed in labour matters will be unsuitable to be  

associated with a Judicial Member in regard to adjudication of winding-up  

matters.  

Section 10FL(2) – Proviso : Winding up proceedings by single Member  

7.10) The High Court has held that it is impermissible to authorize a single  

member Bench to conduct the winding up proceedings after a special three  

Members Bench passes an order of winding up; and if such single member  

happens to be a labour member appointed under section 10FD(3)(f), it would  

be a mockery of a specialist Tribunal.   

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The Union Government has accepted the finding and has agreed to amend  

the proviso to section 10FL(2) to provide that a winding up proceedings will  

be  conducted  by  a  Bench  which  would  necessarily  include  a  judicial  

member.  

Sections 10FF and 10FK(2) :  Power of Central Government to designate  any member to be a Member (Administration)

7.11) The High Court has held that sections 10FF and 10FK(2) should be  

suitably amended to provide that a member may be designated as Member  

(Administration) only in consultation with the President, and further provide  

that the Member (Administration) will discharge his functions in relation to  

finance  and administration  of  the  Tribunal  under  the  overall  control  and  

supervision of the President.   

The Union Government has accepted the decision and has agreed to drop the  

provision for Member Administration. It was stated that the Act would be  

amended to provide that the administration and financial functions would be  

discharged under the overall control and supervision of the President. It was  

stated that the Act would be further amended to provide for creation of the  

posts of Vice-Presidents.  

Section 10 FR(3) : Appointment of  members of the Appellate Tribunal  

7.12) The High Court has observed that section 10FR(3) must be suitably  

amended  to  delete  the  reference  to  all  subjects  other  than  law  and  

accountancy.  It  has  also  stated  that  it  would  be  more  appropriate  to  

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incorporate a provision similar to that in section 5(3) of the SICA which  

provides that a member of the Appellate Authority shall be a person who is  

or has been a Judge of a High Court or who is or has been an officer not  

below the rank of a Secretary to the Government who has been a member of  

the Board for not less than three years.  

The Union Government contends that the provision is only an enabling one;  

and  since  the  Chairperson  of  the  Appellate  Tribunal  would  be  a  former  

Judge of the Supreme Court or former Chief Justice of High Court, it may  

not  be  advisable  to  limit  the  scope  of  eligibility  criteria  for  members  

especially when a Selection Committee headed by the Chief Justice of India  

or his nominee would make the selection.  

Section 10FX – Selection Process for President/Chairperson

7.13) The  High  Court  has  expressed  the  view  that  the  selection  of  the  

President/Chairperson  should  be  by  a  Committee  headed  by  the  Chief  

Justice   of  India  in  consultation  with  two senior  Judges of  the  Supreme  

Court.  

The Union Government has submitted that it would not be advisable to make  

such  a  provision  in  regard  to  appointment  of  President/Chairperson  of  

statutory  Tribunals.  It  is  pointed  out  no  other  legislation  constituting  

Tribunals has such a provision.  

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The challenge in the appeals

8. Union of  India  contends  that  the  High Court  having  held  that  the  

Parliament has the competence and power to establish NCLT and NCLAT,  

ought to have dismissed the writ petition. It is submitted that some of the  

directions given by the High Court to reframe and recast Parts IB and IC of  

the  Act  amounts  to  converting  judicial  review  into  judicial  legislation.  

However,  as  Union of  India  has  agreed  to  rectify  several  of  the  defects  

pointed out  by the High Court  (set  out  above),  the appeal  by the Union  

Government is now restricted to the findings of the High Court relating to  

sections 10FD(3)(f), (g) and (h) and 10FX.  

9. On the other hand, MBA in its appeal contends that the High Court  

ought not to have upheld the constitutional validity of Parts IB and IC of the  

Act providing for establishment of NCLT and NCLAT; that the High Court  

ought to have held that constitution of such Tribunals taking  away the entire  

Company Law jurisdiction of the High Court and vesting it in a Tribunal  

which is not under the control of the Judiciary, is violative of doctrine of  

separation of powers and the independence of Judiciary which are parts of  

the basic structure of the Constitution. MBA also contends that the decisions  

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of this Court in Union of India vs. Delhi High Court Bar Association – 2002  

(4) SCC 275, with reference to constitutional validity of the provisions of  

the Recovery of Debts Due to Banks and Financial Institutions Act, 1993  

providing  for  constitution  of  the  Debt  Recovery  Tribunals  and  State  of   

Karnataka vs.  Vishwabharathi House Building Co-op., Society  – 2003 (2)  

SCC 412 in regard to the constitutional validity of Consumer Protection Act,  

1986 providing for constitution of consumer fora require reconsideration.  

10. When these civil appeals came up for hearing before a three-Judge  

Bench of this Court,  the Bench was of  the view that  the decisions in  L.  

Chandra Kumar v. Union of India  (1997) 3 SCC 261,   Union of India v.   

Delhi Bar Association (2002) 4 SCC 275 and State of Karnataka v. Vishwa  

Bharati Housing Building Cooperative Societies & Anr  (2003) 2 SCC 412  

holding  that  Parliament  and  State  legislatures  possessed  legislative  

competence to  effect  changes  in  the  original  jurisdiction  in  the  Supreme  

Court and High Court, had not dealt with the following issues:  

(i) To what extent  the powers and judiciary of High Court  (excepting  judicial  review  under  Article  226/227)  can  be  transferred  to  Tribunals?  

(ii) Is there a demarcating line for the Parliament to vest intrinsic judicial  functions  traditionally  performed  by  courts  in  any  Tribunal  or  authority outside the judiciary?

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(iii) Whether the “wholesale transfer of powers” as contemplated by the  Companies  (Second  Amendment)  Act,  2002  would  offend  the  constitutional  scheme of separation of powers and independence of  judiciary so as to aggrandize one branch over the other?

Therefore  the  Three  Judge Bench,  by  order  dated  13.5.2007 directed  the  

appeals to be heard by a Constitution Bench, observing that as the issues  

raised are of seminal importance and likely to have serious impact on the  

very structure and independence of judicial system.

11. We may first refer to the relevant provisions of the Companies Act,  

1956  as  amended  by  the  Companies  (Second  Amendment)  Act,  2002  

relating to the constitution of  NCLT and NCLAT :   

Part IB – National Company Law Tribunal

10FB. Constitution of National Company Law Tribunal:  The Central  Government  shall,  by  notification  in  the  Official  Gazette,  constitute  a  Tribunal to be known as the National Company Law Tribunal to exercise  and discharge such powers and functions as are, or may be, conferred on it  by or under this Act or any other law for the time being in force.

10FC.  Composition  of  Tribunal:  The  Tribunal  shall  consist  of  a  President  and  such  number  of  Judicial  and  Technical  Members  not  exceeding sixty-two, as the Central Government deems fit, to be appointed  by that Government, by notification in the Official Gazette.

10FD. Qualifications for appointment of President and Members: (1)  The  Central  Government  shall  appoint  a  person  who  has  been,  or  is  qualified to be, a Judge of a High Court as the President of the Tribunal.

(2) A  person  shall  not  be  qualified  for  appointment as Judicial Member unless he-

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(a) has, for at least fifteen years,  held a judicial  office in the territory of India; or

(b) has, for at least ten years been an advocate of  a  High Court,  or  has partly held judicial  office and has been partly in  practice as an advocate for a total period of fifteen years; or

(c) has held for at least fifteen years a Group 'A'  post  or  an  equivalent  post  under  the  Central  Government  or  a  State  Government including at least three years of service as a Member of the  Indian Company Law Service  (Legal  Branch)  in  Senior  Administrative  Grade in that service; or

(d) has held for at least fifteen years a Group 'A'  post  or an equivalent  post  under  the Central  Government  (including at  least three years of service as a Member of the Indian Legal Service in  Grade I of that service).

(3) A  person  shall  not  be  qualified  for  appointment as Technical Member unless he-

(a) has held for at least fifteen years a Group 'A'  post  or  an  equivalent  post  under  the  Central  Government  or  a  State  Government [including at least three years of service as a Member of the  Indian Company Law Service (Accounts Branch) in Senior Administrative  Grade in that Service]; or

(b)  is,  or  has  been,  a  Joint  Secretary  to  the  Government of India under the Central Staffing Scheme, or any other post  under the Central Government or a State Government carrying a scale of  pay which is not less than that of a Joint Secretary to the Government of  India  for  at  least  five  years  and  has  adequate  knowledge  of,  and  experience in, dealing with problems relating to company law; or

(c) is,  or  has  been,  for  at  least  fifteen  years  in  practice as a chartered accountant under the Chartered Accountants Act,  1949 (38 of 1949); or

(d) is,  or  has  been,  for  at  least  fifteen  years  in  practice as a cost accountant under ,  the Costs and Works Accountants  Act, 1959 (23 of 1959); or

(e) is,  or  has  been,  for  at  least  fifteen  years  working experience as a Secretary in whole-time practice as defined in  clause (45A) of section 2 of this Act and is a member of the Institute of the  

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Companies Secretaries of India constituted under the Company Secretaries  Act, 1980 (56 of 1980); or

(f) is  a  person of ability,  integrity  and standing  having special knowledge of, and professional experience of not less than  twenty years in, science, technology, economics, banking, industry, law,  matters  relating  to  industrial  finance,  industrial  management,  industrial  reconstruction, administration, investment, accountancy, marketing or any  other  matter,  the  special  knowledge  of,  or  professional  experience  in,  which would be in the opinion of the Central Government useful to the  Tribunal; or

(g) is, or has been, a Presiding Officer of a Labour  Court,  Tribunal  or  National  Tribunal  constituted  under  the  Industrial  Disputes Act, 1947 (14 of 1947); or

(h) is a person having special knowledge of, and  experience of not less than fifteen years in, the matters relating to labour. Explanation.-For the purposes of this Part,- (i) "Judicial  Member"  means  a  Member  of  the  Tribunal  appointed as  such under  sub-section  (2)  of  section 10FD and  includes  the  President  of  the  Tribunal;

(ii) "Technical Member" means a Member of the  Tribunal appointed as such under sub-section (3) of section 10FD.

10FE. Term of office of President and Members:  The President and  every other Member of the Tribunal shall hold office as such for a term of  three years from the date on which he enters upon his office but shall be  eligible for re-appointment:

Provided that no President or other Member shall hold office as such after  he has attained,-

(a) in the case of the President, the age of sixty-seven years;

(b) in the case of any other Member, the age of sixty-five years: Provided further that the President or other Member may retain his lien  with his parent cadre or Ministry or Department, as the case may be, while  holding office as such.

10FF.  Financial  and  administrative  powers  of  Member  Administration:  The  Central  Government  shall  designate  any  Judicial  Member  or  Technical  Member  as  Member  Administration  who  shall  exercise such financial and administrative powers as may be vested in him  under the rules which may be made by the Central Government:

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Provided that the Member Administration shall have authority to delegate  such of his financial and administrative powers as he may think fit to any  other officer of the Tribunal subject to the condition that such officer shall,  while  exercising  such  delegated  powers  continue  to  act  under  the  direction, superintendence and control of the Member Administration.

10FK. Officers and employees of Tribunal: (1) The  Central  Government  shall  provide  the  Tribunal  with  such  officers  and  other  employees as it may deem fit.

(2) The  officers  and  other  employees  of  the  Tribunal shall discharge their functions under the general superintendence  of the Member Administration.

(3) The salaries  and allowances and other terms  and  conditions  of  service  of  the  officers  and  other  employees  of  the  Tribunal shall be such as may be prescribed.

10FL. Benches of Tribunal: (1) Subject to the provisions of this section,  the powers of the Tribunal may be exercised by Benches, constituted by  the President of the Tribunal; out of which one shall be a Judicial Member  and another shall be a Technical Member referred to in clauses (a) to (f) of  sub-section (3) of section 10FD:

Provided that  it  shall  be competent  for the Members  authorised in this  behalf to function as a Bench consisting of a single Member and exercise  the jurisdiction, powers and authority of the Tribunal in respect of such  class of cases  or such matters  pertaining to such class  of cases,  as the  President  of  the  Tribunal  may,  by  general  or  special  order,  specify:

Provided further that if at any stage of the hearing of any such case or  matter, it appears to the Member of the Tribunal that the case or matter is  of such a nature that it ought to be heard by a Bench consisting of two  Members, the case or matter may be transferred by the President of the  Tribunal or, as the case may be, referred to him for transfer to such Bench  as the President may deem fit.

(2) The  President  of  the  Tribunal  shall,  for  the  disposal of any case relating to rehabilitation, restructuring or winding up  of the companies, constitute one or more Special Benches consisting of  three  or  more  Members,  each of  whom shall  necessarily  be a  Judicial  Member, a Technical Member appointed under any of the clauses (a) to (f)  of sub-section (3) of section 10FD, and a Member appointed under clause  (g) or clause (h) of sub-section (3) of section 10FD :

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Provided that  in  case  a  Special  Bench passes  an order  in  respect  of  a  company to be wound up, the winding up proceedings of such company  may be conducted by a Bench consisting of a single Member.

(3) If the Members of a Bench differ in opinion  on any point or points, it  shall be decided according to the majority,  if  there is a majority, but if the Members are equally divided, they shall state  the point or points on which they differ, and the case shall be referred by  the President of the Tribunal for hearing on such point or points shall be  decided according to the other of the other Members of the Tribunal and  such  point  or  points  shall  be  decided  according  to  the  opinion  of  the  majority of Members of the Tribunal who have heard the case, including  those who first heard it.

(4) There  shall  be  constituted  such  number  of  Benches, as may be notified by the Central Government.

(5) In addition to the other Benches, there shall be  a  Principal  Bench at  New Delhi  presided over  by the President  of  the  Tribunal.

(6) The Principal Bench of the Tribunal shall have  powers of transfer of proceedings from any Bench to another Bench of the  Tribunal  in the event of inability of any Bench from hearing any such  proceedings for any reason:

Provided that no transfer of any proceedings shall be made under this sub- section except after recording the reasons for so doing in writing.

10FO. Delegation of powers:  The Tribunal may,  by general or special  order, delegate, subject to such conditions and limitations, if any, as may  be specified in the order, to any Member or officer or other employee of  the Tribunal or other person authorized by the Tribunal to manage any  industrial  company  or  industrial  undertaking  or  any  operating  agency,  such powers and duties under this Act as it may deem necessary.

Part IC - APPELALTE TRIBUNAL

10FR. Constitution of Appellate Tribunal: (1) The Central Government  shall, by notification in the Official Gazette, constitute with effect from  such date as may be specified therein, an Appellate Tribunal to be called  the  "National  Company  Law  Appellate  Tribunal"  consisting  of  a  

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Chairperson and not  more than two Members,  to  be appointed by that  Government, for hearing appeals against the orders of the Tribunal under  this Act.

(2) The  Chairperson  of  the  Appellate  Tribunal  shall be a person who has been a Judge of the Supreme Court or the Chief  Justice of a High Court.

(3) A Member of the Appellate Tribunal shall be  a person of ability,  integrity and standing having special knowledge of,  and professional experience of not less than twenty-five years in, science,  technology, economics, banking, industry, law, matters relating to labour,  industrial  finance,  industrial  management,  industrial  reconstruction,  administration, investment,  accountancy,  marketing or any other matter,  the special knowledge of, or professional experience in which, would be in  the opinion of the Central Government useful to the Appellate Tribunal.

10FT. Term of office of Chairperson and Members:  The Chairperson  or a Member of the Appellate Tribunal shall hold office as such for a term  of three years from the date on which he enters upon his office, but shall  be eligible for re-appointment for another term of three years:

Provided that no Chairperson or other member shall hold office as such  after he has attained,-

(a)  in  the  case  of  the  Chairperson,  the  age  of  seventy  years;

(b) in the case of any other Member, the age of sixty-seven years.

10FX. Selection Committee:  (1) The Chairperson and Members of the  Appellate Tribunal and President and Members of the Tribunal shall be  appointed  by  the  Central  Government  on  the  recommendations  of  a  Selection Committee consisting of:

(a) Chief Justice of India or his nominee Chairperson;

(b) Secretary  in  the  Ministry  of  Finance  and  Company  Affairs  Member;

(c) Secretary  in  the  Ministry of Labour Member;

(d) Secretary  in  the  Ministry  of  Law  and  Justice  (Department  of  Legal  Affairs  or  Legislative Department) Member;

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(e) Secretary  in  the  Ministry  of  Finance  and  Company  Affairs  (Department  of  Company Affairs) Member.

(2) The  Joint  Secretary  in  the  Ministry  or  Department of the Central Government dealing with this Act shall be the  Convenor of the Selection Committee.

xxx  xxx xxx

(5) Before  recommending  any  person  for  appointment as the Chairperson and Members of the Appellate Tribunal  and President and Members of the Tribunal, the Selection Committee shall  satisfy itself  that  such  person  does  not  have  financial  or  other  interest  which is likely to affect prejudicially his functions as such Chairperson or  member of the Appellate Tribunal or President or Member of the Tribunal,  as the case may be.

(6) No  appointment  of  the  Chairperson  and  Members of the Appellate  Tribunal  and President  and Members of the  Tribunal  shall  be  invalidated  merely  by reason of  any vacancy or  any  defect in the constitution of the Selection Committee.

10G. Power  to  punish  for  contempt:  The  Appellate Tribunal shall have the same jurisdiction, powers and authority  in respect of contempt of itself as the High Court has and may exercise,  for this purpose under the provisions of the Contempt of Courts Act, 1971  (70 of 1971), shall have the effect subject to modifications that-

(a) the reference therein to a High Court shall be  construed as including a reference to the Appellate Tribunal;

(b) the reference to Advocate-General in section  15 of the said Act shall be construed as a reference to such law officers as  the Central Government may specify in this behalf.

10GB. Civil court not to have jurisdiction:  (1) No civil court shall have  jurisdiction to entertain any suit or proceeding in respect of any matter which  the  Tribunal  or  the Appellate  Tribunal  is  empowered to determine  by or  under this Act or any other law for the time being in force and no injunction  shall be granted by any court or other authority in respect of any action taken  or to be taken in pursuance of any power conferred by or under this Act or  any other law for the time being in force.

10GF. Appeal to Supreme Court: Any person aggrieved by any decision or  order of the Appellate Tribunal may file an appeal to the Supreme Court  

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within sixty days from the date of communication of the decision or order of  the Appellate Tribunal to him on any question of law arising out of such  decision or order:

Provided that the Supreme Court may, if it is satisfied that the appellant was  prevented by sufficient cause from filing the appeal within the said period,  allow it to be filed within a further period not exceeding sixty days.

Section 10FJ relates to removal and suspension of President or members of  

the NCLT. Section 10FV relates to removal and suspension of Chairman or  

members  of  NCLAT.  Sub-section  (2)  of  those  sections  provide  that  the  

President/Chairman  or  a  member  shall  not  be  removed  from  his  office  

except  by  an  order  made  by  the  Central  Government  on  the  ground  of  

proven misbehaviour or incapacity after an inquiry made by a Judge of the  

Supreme  Court  in  which  the  President/Chairman  or  member  has  been  

informed of the charges against him and given a reasonable opportunity of  

being heard in respect of those charges. Sub-section (3) provides that the  

Central  Government may suspend from office,  the President/Chairman or  

Member of the Tribunal in respect of whom a reference has been made to  

the  Judge  of  the  Supreme Court  under  sub-section  (2)  until  the  Central  

Government has passed orders on receipt of the report of the Judge of the  

Supreme Court on such reference.  

Difference between Courts and Tribunals  

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12. The term ‘Courts’  refers to places where justice  is  administered or  

refers to Judges who exercise judicial functions. Courts are established by  

the state for administration of justice that is for exercise of the judicial power  

of  the  state  to  maintain  and uphold  the  rights,  to  punish  wrongs  and to  

adjudicate upon disputes. Tribunals on the other hand are special alternative  

institutional  mechanisms,  usually  brought  into  existence  by  or  under  a  

statute to decide disputes arising with reference to that particular statute, or  

to determine controversies arising out of any administrative law. Courts refer  

to Civil Courts, Criminal Courts and High Courts. Tribunals can be either  

private  Tribunals  (Arbitral  Tribunals),  or  Tribunals  constituted  under  the  

Constitution (Speaker or the Chairman acting under Para 6(1) of the Tenth  

Schedule)  or  Tribunals  authorized  by  the  Constitution  (Administrative  

Tribunals under Article 323A and Tribunals for other matters under Article  

323B)  or  Statutory  Tribunals  which  are  created  under  a  statute  (Motor  

Accident  Claims Tribunal,  Debt  Recovery  Tribunals  and consumer  fora).  

Some  Tribunals  are  manned  exclusively  by  Judicial  Officers  (Rent  

Tribunals, Motor Accidents Claims Tribunal, Labour Courts and Industrial  

Tribunals). Other statutory Tribunals have Judicial and Technical Members  

(Administrative  Tribunals,  TDSAT,  Competition  Appellate  Tribunal,  

Consumer fora, Cyber Appellate Tribunal, etc).   

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13. This court had attempted to point out the difference between Court  

and Tribunal in several decisions. We may refer a few of them.  

13.1) In  Harinagar  Sugar  Mills  Ltd.  vs.  Shyam Sundar  Jhunjhunwala –  

(1962)  2  SCR  339,  Hidayatullah  J.,  succinctly  explained  the  difference  

between Courts and Tribunals, thus:

“All Tribunals are not courts, though all courts are Tribunals”. The word  “courts”  is  used  to  designate  those  Tribunals  which  are  set  up  in  an  organized  state  for  the  administration  of  justice.  By  administration  of  justice is meant the exercise of juridical power of the state to maintain and  uphold rights and to punish “wrongs”. Whenever there is an infringement  of a right or an injury, the courts are there to restore the vinculum juris,  which is disturbed……..

When  rights  are  infringed  or  invaded,  the  aggrieved  party  can go  and  commence a querela before the ordinary Civil Courts. These Courts which  are instrumentalities of Government, are invested with the judicial power  of the State, and their authority is derived from the Constitution or some  Act of Legislature constituting them. Their number is ordinarily fixed and  they are ordinarily permanent, and can try any suit or cause within their  jurisdiction. Their numbers may be increased or decreased, but they are  almost always permanent and go under the compendious name of "Courts  of  Civil  Judicature".  There  can  thus  be  no  doubt  that  the  Central  Government does not come within this class.  

With the growth of civilization and the problems of modern life, a large  number  of  administrative  Tribunals  have  come  into  existence.  These  Tribunals have the authority of law to pronounce upon valuable rights;  they act in a judicial manner and even on evidence on oath, but they are  not part of the ordinary Courts of Civil Judicature. They share the exercise  of the judicial power of the State, but they are brought into existence to  implement  some  administrative  policy  or  to  determine  controversies  arising out of some administrative law. They are very similar to Courts,  but are not Courts. When the Constitution speaks of 'Courts' in Art.136,  227, or 228 or in Arts. 233 to 237 or in the Lists, it contemplates Courts of  

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Civil  Judicature  but  not  Tribunals  other  than  such  Courts.  This  is  the  reason for using both the expressions in Arts. 136 and 227.  

By "Courts" is meant Courts of Civil Judicature and by "Tribunals", those  bodies of men who are appointed to decide controversies arising under  certain special laws. Among the powers of the State is included the power  to decide such controversies. This is undoubtedly one of the attributes of  the State, and is aptly called the judicial power of the State. In the exercise  of  this  power,  a  clear  division  is  thus  noticeable.  Broadly  speaking,   certain special matters go before Tribunals, and the residue goes before  the ordinary Courts of Civil Judicature. Their procedures may differ, but   the functions are  not essentially different. What distinguishes them has  never been successfully established.”  

In my opinion, a Court in the strict sense is a Tribunal which is a part of  the  ordinary hierarchy of  Courts  of  Civil  Judicature  maintained  by the  State  under  its  constitution to  exercise  the judicial  power  of  the  State.  These Courts perform all the judicial functions of the State except those   that are excluded by law from their jurisdiction. The word "judicial", be it  noted, is itself capable of two meanings. They were admirably stated by  Lopes, L.J. in Royal Aquarium and Summer and Winter Garden Society v.  Parkinson [1892] 1 Q.B. 431, in these words :  

"The word 'judicial' has two meanings. It may refer to the  discharge of duties exercisable by a judge or by justices in  court,  or  to  administrative  duties  which  need  not  be  performed in court, but in respect of which it is necessary  to  being  to  bear  a  judicial  mind  -  that  is,  a  mind  to  determine  what  is  fair  and just  in  respect  of  the matters  under consideration."  

That an officer is required to decide matters before him "judicially" in the  second sense does not make him a Court or even a Tribunal, because that   only establishes that he is following a standard of conduct, and is free   from bias or interest.

Courts  and Tribunals  act  "judicially"  in  both  senses,  and  in  the  term   "Court" are included the ordinary and permanent Tribunals and in the   term "Tribunal" are included all others, which are not so included”.

(emphasis supplied)

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13.2) In Jaswant Sugar Mills vs. Laxmi Chand – 1963 Supp (1) SCR 242,  

this Court observed that in order to be a Tribunal, a body or authority must,  

besides  being under a duty to act  judicially,  should be invested with the  

judicial power of the state.     

13.3) In  Associated Cement Companies Ltd. vs. P. N. Sharma – (1965) 2  

SCR 366, another Constitution Bench of this Court explained the position of  

Tribunals thus:  

“The expression "court" in the context denotes a Tribunal constituted by  the State as a part of the ordinary hierarchy of courts which are invested  with  the  State's  inherent  judicial  powers.  A sovereign State  discharges  legislative,  executive  and  judicial  functions  and can  legitimately  claim  corresponding powers which are described as legislative,  executive and  judicial powers. Under our Constitution, the judicial functions and powers  of the State are primarily  conferred on the ordinary courts which have  been constituted under its relevant provisions. The Constitution recognised  a  hierarchy  of  courts  and  their  adjudication  are  normally  entrusted  all  disputes between citizens and citizens as well as between the citizens and  the  State.  These  courts  can  be  described  as  ordinary  courts  of  civil  judicature. They are governed by their prescribed rules of procedure and  they deal with questions of fact and law raised before them by adopting a  process which in described as judicial process. The powers which these  courts  exercise,  are  judicial  powers,  the  functions  they  discharge  are  judicial functions and the decisions they reach and pronounce are judicial  decisions.  

In  every  State  there  are  administrative  bodies  or  authorities  which  are  required to deal with matters within their jurisdiction in an administrative  manner and their decisions are described as administrative decisions. In  reaching  their  administrative  decisions,  administrative  bodies  can  and  often to take into consideration questions of policy. It is not unlikely that  even  in  this  process  of  reaching  administrative  divisions,  the  administrative  bodies  or  authorities  are  required  to  act  fairly  and  objectively  and  would  in  many  cases  have  to  follow the  principles  of  natural  justice;  but  the  authority  to  reach  decision  conferred  on  such  administrative  bodies  is  clearly  distinct  and  separate  from the  judicial  power  conferred  on  courts,  and  the  decisions  pronounced  by  

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administrative bodies are similarly distinct and separate in character from  judicial decision pronounced by courts.

Tribunals which fall under the purview of Article 136(1) occupy a special  position  of  their  own  under  the  scheme  of  our  Constitution.  Special  matters and questions are entrusted to them for their decision and in that  sense,  they  share  with  the  court  one  common  characteristic;  both  the  courts and the Tribunals are constituted by the state and are invested with  judicial as distinguished from purely administrative or executive functions  (vide Durga Shankar Mehta v. Raghuraj Singh - 1955 (1) SCR 267). They  are  both  adjudicating  bodies  and  they  deal  with  and  finally  determine  disputes  between  parties  which  are  entrusted  to  their  jurisdiction.  The  procedure  followed  by  the  courts  is  regularly  prescribed  and  in  discharging their functions and exercising their powers, the courts have to  conform to that procedure.  The procedure which the Tribunals have to  follow may not always be so strictly prescribed, but the approach adopted   by both the courts and the Tribunals is substantially the same, and there is   no essential difference between the functions that they discharge. As in the   case of courts, so in the case of Tribunals, it is the State's inherent judicial   power which has been transferred and by virtue of the said power, it is the   State's inherent judicial function which they discharge.”

(emphasis supplied)

13.4) In  Kihoto  Hollohan  vs.  Zachillhu –  1992  Supp  (2)  SCC  651,  a  

Constitution Bench reiterated the above position and added the following :  

Where there is a lis – an affirmation by one party and denial by another –  and  the  dispute  necessarily  involves  a  decision  on  the  rights  and  obligations of the parties to it and the authority is called upon to decide it,  there is an exercise of judicial power. That authority is called a Tribunal, if  it does not have all the trappings of a court”.  

In S.P. Sampath Kumar vs. Union of India – (1987) 1 SCC 124, this Court  

expressed the view that the Parliament can without in any way violating the  

basic structure doctrine make effective alternative institutional mechanisms  

or arrangements for judicial review.  

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14. Though  both  Courts  and  Tribunals  exercise  judicial  power  and  

discharge  similar  functions,  there  are  certain  well-recognised  differences  

between courts and Tribunals. They are :

(i) Courts are established by the State and are entrusted with the State’s  

inherent judicial power for administration of justice in general. Tribunals are  

established under a statute to adjudicate upon disputes arising under the said  

statute, or disputes of a specified nature. Therefore, all courts are Tribunals.  

But all Tribunals are not courts.   

(ii) Courts are exclusively manned by Judges. Tribunals can have a Judge  

as the sole member, or can have a combination of a Judicial Member and a  

Technical Member who is an ‘expert’ in the field to which Tribunal relates.  

Some highly specialized  fact  finding Tribunals  may have only Technical  

Members, but they are rare and are exceptions.   

(iii) While courts are governed by detailed statutory procedural rules, in  

particular  the  Code  of  Civil  Procedure  and  Evidence  Act,  requiring  an  

elaborate procedure in decision making, Tribunals generally regulate their  

own procedure applying the provisions of the Code of Civil Procedure only  

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where  it  is  required,  and  without  being  restricted  by  the  strict  rules  of  

Evidence Act.

Re: Independence of judiciary  

15. Impartiality,  independence,  fairness  and  reasonableness  in  decision  

making  are  the  hallmarks  of  Judiciary.  If  ‘Impartiality’  is  the  soul  of  

Judiciary,  ‘Independence’  is  the  life  blood  of  Judiciary.  Without  

independence, impartiality cannot thrive. Independence is not the freedom  

for Judges to do what they like. It is the independence of judicial thought. It  

is the freedom from interference and pressures which provides the judicial  

atmosphere where he can work with absolute commitment to the cause of  

justice and constitutional values.  It is also the discipline in life, habits and  

outlook that enables a Judge to be impartial. Its existence depends however  

not  only on philosophical,  ethical  or  moral  aspects  but  also upon several  

mundane  things  –  security  in  tenure,  freedom  from  ordinary  monetary  

worries, freedom from influences and pressures within (from others in the  

Judiciary) and without (from the Executive).   

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16. In  Union of India vs. Sankalchand Himatlal Sheth – 1977 (4) SCC  

193,  a  Constitution  Bench  of  this  Court   explained  the  importance  of  

‘Independence  of Judiciary’ thus :  

“Now  the  independence  of  the  judiciary  is  a  fighting  faith  of  our  Constitution.  Fearless  justice  is  a  cardinal  creed  of  our  founding  document. It is indeed a part of our ancient tradition which has produced  great judges in the past. In England too, from where we have inherited our  present  system  of  administration  of  justice  in  its  broad  and  essential  features, judicial independence is prized as a basic value and so natural  and inevitable it has come to be regarded and so ingrained it has become  in the life and thought of the people that it is now almost taken for granted  and  it  would  be  regarded  an  act  of  insanity  for  any  one  to  think  otherwise……….

The Constitution makers, therefore, enacted several provisions designed to  secure the independence of the superior judiciary by insulating it  from  executive or legislative control,……………  

……..even with regard to the Subordinate Judiciary the framers  of the  Constitution  were  anxious  to  secure  that  it  should  be  insulated  from  executive interference and once appointment of a Judicial Officer is made,  his subsequent career should be under the control of the High Court and he  should  not  be  exposed  to  the  possibility  of  any  improper  executive  pressure.”

In  Supreme Court  Advocates-on-Record  Association  & Ors.  v.  Union  of   

India (1993) 4 SCC 441, J.S. Verma, J. (as he then was) speaking for the  

majority, described the attributes of an independent judge thus :

“ …Only those persons should be considered fit for appointment as Judges  of the superior judiciary who combine the attributes essential for making  an  able,  independent  and  fearless  judge.  Several  attributes  together   combine to constitute such a personality. Legal expertise, ability to handle  cases,  proper  personal  conduct  and  ethical  behaviour,  firmness  and   fearlessness  are  obvious  essential  attributes  of  a  person  suitable  for   appointment as a superior Judge.”.

(emphasis supplied)

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In his concurring opinion, Pandian J. stated that “it is the cardinal principle  

of  the  Constitution  that  an  independent  judiciary  is  the  most  essential  

characteristic of a free society like ours.” He further stated :  

“..that to have an independent judiciary to meet all challenges, unbending  before all authorities and to uphold the imperatives of the Constitution at  all  times,  thereby  preserving  the  judicial  integrity,  the  person  to  be  elevated to the judiciary must be possessed with the highest reputation for  independence,  uncommitted to any prior interest,  loyalty and obligation  and prepared under all circumstances or eventuality to pay any price, bear  any  burden and to  meet  any hardship  and always wedded  only  to  the  principles of the Constitution and ‘Rule of Law’. If the selectee bears a  particular  stamp  for  the  purpose  of  changing  the  cause  of  decisions  bowing to the diktat of his appointing authority, then the independence of  judiciary  cannot  be  secured  notwithstanding  the  guaranteed  tenure  of  office,  rights  and  privileges,  safeguards,  conditions  of  service  and  immunity.  Though  it  is  illogical  to  spin  out  a  new  principle  that  the  keynote is not the judge but the judiciary especially when it is accepted in  the same breath that an erroneous appointment of an unsuitable person is  bound to produce irreparable damage to the faith of the community in the  administration of justice and to inflict serious injury to the public interest  and  that  the  necessity  for  maintaining  independence  of  judiciary  is  to  ensure a fair and effective administration of justice.”

The  framers  of  the  Constitution  stated  in  a  Memorandum  (“See  The  

Framing of India’s Constitution – B.Shiva Rao, volume I-B, Page 196) :   

“We have assumed that it is recognized on all hands that the independence  and integrity of the judiciary in a democratic system of government is of  the  highest  importance  and  interest  not  only  to  the  judges  but  to  the  citizens at large who may have to seek redress in the last resort in courts of  law against any illegal acts or the high-handed exercise of power by the  executive  …  in  making  the  following  proposals  and  suggestions,  the  paramount  importance  of  securing  the  fearless  functioning  of  an  independent and efficient judiciary has been steadily kept in view.”

In L. Chandra Kumar, the seven Judge Bench of this Court held :  

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“The Constitution of India while conferring power of judicial review of  legislative  action  upon  the  higher  judiciary,  incorporated  important  safeguards.  An  analysis  of  the  manner  in  which  the  Framers  of  our  Constitution  incorporated  provisions  relating  to  the  judiciary  would  indicate  that  they  were  very  greatly  concerned  with  securing  the  independence of the judiciary.”  

Independence of Judiciary has always been recognized as a part of the basic  

structure  of  the  Constitution  (See  :  Supreme Court  Advocates-on-Record  

Association vs. Union of India – 1993 (4) SCC 441, State of Bihar vs. Bal   

Mukund Shah – 2000 (4) SCC 640, Shri Kumar Padma Prasad vs. Union of   

India – 1992 (2) SCC 428, and  All India Judges Association vs. Union of   

India – 2002 (4) SCC 247).

Separation of Power

17. In Rai Sahib Ram Jawaya Kapur vs. The State of Punjab – 1955 (2)  

SCR 225, this Court explained the doctrine of separation of powers thus :   

“The  Indian  Constitution  has  not  indeed  recognised  the  doctrine  of  separation  of  powers  in  its  absolute  rigidity  but  the  functions  of  the  different  parts  or  branches  of  the  Government  have  been  sufficiently  differentiated  and  consequently  it  can  very  well  be  said  that  our  Constitution does not contemplate assumption, by one organ or part of the  State, of functions that essentially belong to another.”

In Chandra Mohan vs. State of UP – AIR 1966 SC 1987, this Court held :

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“The Indian Constitution, though it does not accept the strict doctrine 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 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  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  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 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  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.”

(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 rigid 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  

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lain in the 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.

“The Constitution has a basic structure comprising the three organs of the  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 these three  separate organs of the Republic can take over the functions assigned to the  other. This is the basic structure or scheme of the system of Government  of Republic…………

“But no constitution can survive without a conscious adherence to its fine  checks and balances. Just as courts ought 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 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 :  

“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   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  foul  of  strict  standards  of  legal  correctness  and  judicial and judicial independence.”  

(emphasis supplied)

The doctrine of separation of powers has also been always considered to be a  

part of the basic structure of the Constitution (See : Keshavananda Bharati   

vs. State of Kerala – 1973 (4) SCC 225,  Indira Gandhi vs. Raj Narain –  

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1975 Supp    SCC 1, State of Bihar vs. Bal Mukund Shah – 2000 (4) SCC  

640 and I.R. Coelho vs. State of Tamil Nadu – 2007 (2) SCC 1).  

The argument in favour of Tribunals

18. The  argument  generally  advanced  to  support  tribunalisation  is  as  

follows : The courts function under archaic and elaborate procedural laws  

and highly technical Evidence 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  

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bulwark 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 which the  

special  Tribunal is  created,  thereby improving the quality of adjudication  

and decision-making.  

19. 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  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 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 :  

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“Choosing  a  tribunal  to  decide  disputes  should  bring  two  distinctive  advantages for users. First, tribunal decisions are 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.    x x x x x

De Smith’s  Judicial  Review,  (6th Edn.,  Page  50  Para  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-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 and more expeditious than the  High Court. Many of the 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 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 technicalities and  difficult  legal  issues  can  somehow  be  avoided  by  entrusting  the   administration of complex legislation to Tribunals rather than the courts.”

(emphasis supplied)

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  

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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 must be disposed of quickly and cheaply, for the  benefit of the public purse as well as for that of the claimant. Thus 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 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 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  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.”

Recommendations for better working of Tribunals

20. 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  shall  be  independent  

persons, not civil servants. 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).  

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21. The Leggatt Committee’s Report explained the task of improving the  

Tribunals thus :  

“There  are 70 different  administrative  tribunals  in  England 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. 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  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 proceedings.”

The Leggatt  Committee  explained what the users of the system expected  

from an alternative public adjudication system:  

“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.”  

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The Leggatt  Committee  expressed the view that a single 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  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  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 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  

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adjudication. As a result of the said Act, the appointments to Tribunals are  

on  the  recommendations  of  a  Judicial  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 Department.  

The  Tribunals  have  become full-fledged  part  of  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.  

22. This  Court,  in  L. Chandra  Kumar, made  similar  suggestions  for  

achieving the independence of Tribunals  :

“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  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  Legislations and some others have been created by  State  Legislations.  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 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  independent  supervisory body to oversee the working of the Tribunals.  This will ensure that if the President or Chairperson of the Tribunal is for  

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some  reason  unable  to  take  sufficient  interest  in  the  working  of  the  Tribunal, the entire system will not languish and the ultimate consumer of  justice will not suffer. The creation of a single umbrella 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 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.”

23. 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?  

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24. 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 expressly or impliedly barred.  

25. 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 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  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 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  

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with  respect  to  which  Parliament  has  exclusive  powers  to  make  laws.  

Entry  77  of  List  I  refers  to  Constitution,  organization,  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 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 III of the Seventh Schedule)  

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 III refers  

to administration of justice, constitution and organization of all courts except  

the  Supreme  Court  and  the  High  Courts.  Entry  46  of  List  III  refers  to  

jurisdiction and powers of all courts, except the Supreme Court, with respect  

to any of the matters in List III.

26. Part XIV-A was inserted in the Constitution with effect from 3.1.1977  

by the  Constitution  (Forty-second Amendment)  Act,  1976.  The said  part  

contains two Articles. Article 323A relates to Administrative Tribunals and  

empowers the Parliament to make a law, providing for the adjudication or  

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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  any 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  appropriate  

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;

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

(c) industrial and labour disputes;

(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;

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

(g) production,  procurement,  supply and distribution  of  foodstuffs  (including  edible  oilseeds  and  oils)  and  such  other  goods  as  the  

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President  may,  by  public  notification,  declare  to  be  essential  goods  for  the  purpose of this article 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,

(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;

(j) any matter incidental to any of the matters specified  in sub-clauses (a)         to (i).”

Clause (2) of Article 323A and clause (3) of Article 323B lay down that a  

law made under sub-clause (1) of the respective Articles may provide for the  

following :

Article 323A Article 323B

(a) provide  for  the  establishment  of  an  administrative Tribunal for the Union and a  separate  administrative  Tribunal  for  each  State or for two or more States;

Provide for the establishment of a hierarchy  of Tribunals;  

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

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

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

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

(d) exclude the jurisdiction of all courts, except  the jurisdiction of the Supreme Court under  article 136, with respect to the disputes or  complaints referred to in clause (1);

exclude the  jurisdiction  of  all  courts  except  the jurisdiction of the Supreme Court under  article 136 with respect to all  or any of the  matters  falling within the jurisdiction of the  said Tribunals;

(e) provide  for  the  transfer  to  each  such  administrative  Tribunal  of  any  cases  pending before any court or other authority  immediately  before  the  establishment  of  such Tribunal  as  would have  been  within  the jurisdiction of such Tribunal if the cause  of  action  on  which  such  suits  or  

provide for the transfer to each such Tribunal  of any cases pending before any court or any  other  authority  immediately  before  the  establishment of such Tribunal as would have  been within the jurisdiction of such Tribunal  if the cause of action on which such suits or  proceedings are  based had arisen after  such  

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proceedings are based had arisen after such  establishment;

establishment;

(f) repeal  or  amend  any  order  made  by  the  President under clause (3) of article 371D;

---

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

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

27. 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 323B,  

to  the  extent  they  empower  Parliament  and  State  Legislature  to  totally  

exclude the jurisdiction of all courts except the jurisdiction of the Supreme  

Court under Article 136, in regard to the disputes and complaints referred to  

in Article 323A(1) and the matters specified in Article 323B(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 of Articles 323A [2(d)]  and 323B[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.  

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28. 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 III of the  

Seventh  Schedule.  Referring  to  these  Articles,  this  Court  in  two  cases,  

namely, Union of India 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 323B are  

enabling provisions which enable the setting up of Tribunals contemplated  

therein; and that the 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 Entry in the Seventh Schedule.  

29. 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. 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  

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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."

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

The power of Parliament to enact a law which is not covered by an entry in  

Lists II and III 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  

reference  to  the  various  fields  of  legislation  enumerated  in  the  Seventh  

Schedule, there was no need for enacting Articles 323A or 323B conferring  

specific power to Legislatures to make laws for constitution of Tribunals. It  

is their contention that the very fact that Articles 323A and 323B have been  

specifically enacted empowering the concerned legislature to make 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 323B. The contention is  

not sound. It is evident that Part XIV-A containing Articles 323A and 323B  

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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  under  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.

30. In ACC (supra), this Court recognized the competence of the State to  

transfer a part of the judicial power from courts to Tribunal :

“Judicial functions and judicial powers are one of the essential attributes  of a sovereign State, and on 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 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)

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31. Therefore, even though revival/rehabilitation/regulation/winding up of  

companies are not matters which are mentioned in Article 323A and 323B,  

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 Act.  

32. 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 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.

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33. The argument that there cannot be ‘whole-sale transfer of powers’ is  

misconceived. It is nobody’s case that the entire 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.   

34. 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  

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in cases where they do acquire the ability, it is invariably on the eve of the  expiry  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 and  those  with  judicial  experience  would,  by  virtue  of  their  specialised  knowledge, be better equipped to dispense speedy and efficient justice. It  was expected that  a judicious  mix of judicial  members  and those with  grass-roots  experience  would  best  serve this  purpose.  To hold  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 have reason to believe that the  Committee  would  take  care  to  ensure  that  administrative  members  are  chosen from amongst those who have some background to deal with such  cases.  

35. But when we say 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  

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  

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Act and procedural laws, there is obviously no need to have any non-judicial  

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 Accident Tribunals and  

Special Courts under several Enactments. Therefore, when transferring the  

jurisdiction 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 encroachment upon the independence of the  

Judiciary and Rule of Law and would be unconstitutional.      

36. In  R.  K.  Jain  vs.  Union of  India –  1993 (4)  SCC 119,  this  Court  

observed :  

“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 are  called upon to discharge judicial or quasi-judicial powers. So they must  have judicial 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.”

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37. Having held that  Legislation can transfer  certain areas of litigation  

from Courts to Tribunals and recognizing that the 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 technical 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,  

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  

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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’  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  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?  

38. Let  us  look at  it  from a  different  angle.  Let  us  assume 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 relating to contractual disputes, property disputes and  

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  

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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 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 Tribunals). Merely because the Legislature has the power to constitute  

tribunals or transfer jurisdiction to tribunals, can that be done?  

39. 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  

5

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  higher  

Judiciary.  We  may  in  this  context  recall  the  words  of  Mathew  J  in  

Kesavananda Bharati v. State of Kerala [AIR 1973 SCC 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  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",  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 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 are those who are most capable  of discerning which of the gradations make genuine difference”.

40. MBA contended that constitution of a Tribunal to transfer the entire  

company law jurisdiction of the High Court 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  

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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  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) violation of any fundamental rights or any  

provision of the Constitution [See :  Indira Gandhi vs. Raj Narain  - 1975  

Supp SCC 1; Kuldip 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., in Indira Gandhi, thus:  

“"Basic structure", by the majority judgment [in Keshavanda Bharati vs.   State of Kerala – 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  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. It 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.”

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The  view  was  also  reiterated  and  explained  by  Beg.  CJ  in  his  leading  

judgment of a seven-Judge Bench in the  State of Karnataka 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  a  basic  

structure  must  be  justified  by  reference  to  the  express  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  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.

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.  

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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 exists and not of a Constitution which could  exist  only  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 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 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 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  

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.

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41. 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 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  

independence of Judiciary.  

42. In The State of West Bengal v. Anwar Ali Sarkar [AIR 1952 SC 75],  

Bose J., made a classic exposition regarding Article 14 :    

“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  

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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).

“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; 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.”

43. MBA relied upon the following extract from Chapter 2 of “Orderly &  

Effective Insolvency Procedures – Key Issues” 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 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  

6

particular,  the  decisions  of  US  courts  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.  

44. We may summarize the position as follows:   

(a) A legislature can enact a law transferring the jurisdiction exercised by  

courts in regard to any specified subject (other than those which are vested  

in courts by express provisions of the Constitution) to any tribunal.

(b) All  courts  are  tribunals.  Any  tribunal  to  which  any  existing  

jurisdiction of courts is transferred should also be a 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 Judicial Tribunals.  

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(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 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 tried 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 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  

6

exercise will be part of the checks and balances measures to maintain the  

separation  of  powers  and  to  prevent  any  encroachment,  intentional  or  

unintentional, by either the legislature or by the executive.   

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

45. 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  

6

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 meaningful  only if  

there  is  an  independent  and  impartial  judiciary  to  render  justice.  An  

independent judiciary can exist only when persons with 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  expertise  in  the  field  to  which  the  

Tribunal  relates,  will  be  eligible  for  appointment  as  Technical  members.  

6

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 Judges, can be  

considered for appointment of Judicial Members.

47. 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 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 who possess tremendous sincerity, drive  and initiative and who have remarkable capacity to resolve and overcome  administrative  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.”

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48. 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  

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  

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, may be more brilliant  

than Advocates with 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 the High Court with Members of the  

Tribunal, the standards applicable should be as nearly as equal in the case of  

High Court Judges. That 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.   

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49. What is a matter of concern is the gradual erosion of 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  

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.  

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, and it is evident therefrom that the Chairman  

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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 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  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 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 or 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  

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  

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dilution. The 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 to extend their  period of service by five years  

from 60 to 65 at a higher 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,  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 Grade 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.  

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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  

qualifications for members of National Company Law Tribunal which 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 Addl. Secretary Level Officer. All Joint Secretary level  

civil servants (that are working under Government of India or holding a post  

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 &  

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, 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  

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Company  Law  Service  (Account)  Branch,  or  who  has  ‘dealt’  with  any  

problems relating to Company Law 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 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.   

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 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.  

50. When  Administrative  Tribunals  were  constituted,  the  presence  of  

members  of  civil  services  as  Technical  (Administrative)  Members  was  

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considered  necessary,  as  they  were  well  versed  in  the  functioning  of  

government  departments  and  the  rules  and  procedures  applicable  to  

Government 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  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  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.

51. 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  

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member of the 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  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  be  acquired  overnight.  The  

independence  of  members  discharging  judicial  functions  in  a  Tribunal  

cannot be diluted.   

52. 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 O. Douglas to young lawyers (The Douglas  

Letters: 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  

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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.”

(emphasis supplied)

53. 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 :  

“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, 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  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 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 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  

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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 293-297), 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  Supreme  Court,  after  consulting the High Courts under 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  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  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.   

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54. 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-sections 3(a) and (b) of section 10FD have no  

experience or expertise in deciding company matters.  

55. 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 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  

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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.  

56. We may  now 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)  of  Section  10FD.  The  expertise  in  

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Company Law service or Indian Legal service will at best enable them to be  

considered for appointment as technical members.  

(ii) As the NCLT takes over the functions of High Court, the members  

should as nearly as possible have the same position and status as High Court  

Judges. This can be achieved, not by giving the salary and perks of a High  

Court Judge to the members, but by 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 10FD 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 20 years in science,  

technology, economics, banking, industry could be considered to be persons  

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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 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  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.  

(viii) Only Clauses (c), (d), (e), (g), (h), and later part of clause (f) in sub-

section (3) of section 10FD and officers of civil services of the rank of the  

Secretary  or  Additional  Secretary  in  Indian  Company  Law  Service  and  

Indian  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 Affairs and the Secretary in the Ministry of Labour  

and Secretary in the Ministry of Law and Justice as members mentioned in  

section 10FX, the Selection Committee should broadly be on the following  

lines:  

(a) Chief 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; (c) Secretary in the Ministry of Finance and Company Affairs – Member; and  

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

(x) The term of office of three years shall be changed to 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, 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  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  10FE  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  

President/Chairman  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  

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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  benches  are  constituted,  the  

number of Technical Members shall not exceed the Judicial Members.

57. We  therefore  dispose  of  these  appeals,  partly  allowing  them,  as  

follows:

(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.  

(ii) We declare that Parts 1B and 1C of the Act as presently structured, are  

unconstitutional for the reasons stated in the preceding para. However, Parts  

IB  and  IC  of  the  Act,  may  be  made  operational  by  making  suitable  

amendments, as indicated above, in addition to what the Union Government  

has already agreed in pursuance of the impugned order of the High Court.  

………………………..CJI (K G Balakrishnan)

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………………………..J. (R V Raveendran)

………………………..J. (D K Jain)

……………………….J.    (P Sathasivam)  

……………………….J.    (J M Panchal)  

New Delhi; May 11, 2010

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