MADRAS BAR ASSOCIATION vs. UNION OF INDIA & ANR.

“ REPORTABLE” IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL/APPELLATE JURISDICTION TRANSFERRED CASE (C) NO. 150 OF 2006

Union of India and another …Respondents WITH CIVIL APPEAL NO. 3850 OF 2006 CIVIL APPEAL NO. 3862 OF 2006 CIVIL APPEAL NO. 3881 OF 2006 CIVIL APPEAL NO. 3882 OF 2006 CIVIL APPEAL NO. 4051 OF 2006 CIVIL APPEAL NO. 4052 OF 2006 WRIT PETITION (C) NO.621 OF 2007 TRANSFERRED CASE (C) NO.116 OF 2006 JUDGMENT TRANSFERRED CASE (C) NO.117 OF 2006 TRANSFERRED CASE (C) NO.118 OF 2006 WRIT PETITION (C) NO.697 OF 2007 J U D G M E N T Jagdish Singh Khehar, J. The Controversy: 1. All the above cases are being disposed of by this common judgment. The issue which arises for consideration before us, in the present bunch of cases, 1 Page 1 pertains to the constitutional validity of the National Tax Tribunal Act, 2005 (hereinafter referred to as, the NTT Act). Simultaneously, the constitutional validity of the Constitution (Forty-second Amendment) Act, 1976 has been

the power of “judicial review” vested in the High Court. In the event of this Court not acceding to the aforementioned prayers, a challenge in the alternative, has been raised to various provisions of the NTT Act, which has led to the constitution of the National Tax Tribunal (hereinafter referred to as, the NTT). The NTT, according to the learned counsel for the petitioners, is styled as a quasi-judicial appellate tribunal. It has been vested with the power of adjudicating appeals arising from orders passed by Appellate Tribunals (constituted under the Income Tax Act, the Customs Act, 1962, and the Central Excise Act, 1944). Hitherto before, the instant jurisdiction was vested with High Courts. The pointed issue canvassed in this behalf is, that High Courts which JUDGMENT discharge judicial functions, cannot be substituted by an extra-judicial body. Additionally, it is maintained that the NTT in the manner of its constitution undermines a process of independence and fairness, which are sine qua non of an adjudicatory authority. The Historical Perspective: The Income Tax Legislation, in India: 2(i). Law relating to income tax dates back to 1860, when legislation pertaining to levy of tax on income, was introduced in India for the first time. The original 2 Page 2 enactment was replaced by subsequent legislations, enacted in 1865, 1886, 1918 and 1922. The Indian Income Tax Act, 1922 (hereinafter referred to as, the 1922 Act) was brought about, as a result of the recommendations of the All India

of the 1922 Act. (ii) After the procedure provided for assessment of tax had run its course, and tax had been assessed, an executive-appellate remedy was provided for, before the Appellate Assistant Commissioner of Income Tax (under Section 30 of the 1922 Act). A further quasi-judicial appellate remedy, from decisions rendered by the first appellate authority, lay before an appellate tribunal (hereinafter referred to as the Appellate Tribunal). Section 33A was inserted by the Indian Income Tax (Amendment) Act, 1941. It provided for a remedy by way of revision before a Commissioner of Income Tax. (iii) The remedy before the Appellate Tribunal (provided under Section 5A of JUDGMENT the 1922 Act, by Section 85 of the Indian Income Tax (Amendment) Act, 1939), was required to be exercised by a bench comprising of one Judicial Member and one Accountant Member. It was permissible for the President of the Appellate Tribunal or any other Member thereof, to dispose of appeals, sitting singly (subject to the condition, that the total income of the assessee, as computed by the assessing officer, did not exceed Rs.15,000/-). It was also open to the President of the Appellate Tribunal to constitute larger benches of three 3 Page 3 Members (subject to the condition, that the larger bench would comprise of at least one Judicial Member and one Accountant Member). (iv) Section 5A of the 1922 Act, laid down the conditions of eligibility for

before a High Court for a period of 10 years, was also eligible. Under the 1922 Act, a person who had practiced in accountancy as a Chartered Accountant (under the Chartered Accountants Act, 1949) for a period of 10 years, or was a Registered Accountant (or partly a Registered Accountant, and partly a Chartered Accountant) for a period of 10 years (under any law formerly enforced), was eligible for appointment as an Accountant Member. Only a Judicial Member could be appointed as the President of the Appellate Tribunal. (v) Section 67 of the 1922 Act, barred suits in civil courts pertaining to income tax related issues. Additionally, any prosecution suit or other proceedings could not be filed, against an officer of the Government, for an act or omission, in JUDGMENT furtherance of anything done in good faith or intended to be done under the 1922 Act. (vi) The 1922 Act, did not provide for an appellate remedy, before the jurisdictional High Court. The only involvement of the jurisdictional High Court, was under Section 66 of the 1922 Act. Under Section 66, either the assessee or the Commissioner of Income Tax, could move an application to the Appellate Tribunal, requiring it to refer a question of law (arising out of an assessment order) to the jurisdictional High Court. In case of refusal to make such a 4 Page 4 reference, the aggrieved assessee or the Commissioner of Income Tax, could assail the refusal by the Appellate Tribunal, before the jurisdictional High Court. A case referred to the High Court under Section 66, was to be heard by a bench

1922 Act, was amended by the Indian Income Tax (Amendment) Act, 1939, whereby the power to make a reference became determinable by the Commissioner of Income Tax (in place of the Appellate Tribunal). (vii) In exercise of the reference jurisdiction, a question of law, which had arisen in an appeal pending before the Appellate Tribunal, had to be determined by the High Court. After the jurisdictional High Court had answered the reference, the Appellate Tribunal would dispose of the pending appeal in consonance with the legal position declared by the High Court. 3(i) The 1922 Act was repealed by the Income Tax Act, 1961 (hereinafter referred to as, the Income Tax Act). As in the repealed enactment, so also under JUDGMENT the Income Tax Act, an order passed by an assessing officer, was assailable through an executive-appellate remedy. The instant appellate remedy, was vested with the Deputy Commissioner (Appeals)/Commissioner (Appeals). The orders appealable before the Deputy Commissioner (Appeals) were distinctly mentioned (in Section 246 of the Income Tax Act). Likewise, the orders appealable before the Commissioner (Appeals) were expressly enumerated (in Section 246A of the Income Tax Act). 5 Page 5 (ii) As against the order passed by the executive-appellate authority, a further appellate remedy was provided before a quasi-judicial appellate tribunal (hereinafter referred to as, the Appellate Tribunal, under Section 252 of the

Vice President or a Vice President of the Appellate Tribunal, as its President. It JUDGMENT is, therefore apparent, that the Appellate Tribunal was to be comprised of a President, Senior Vice President(s), Vice President(s) and Members. (iv) The benches of the Appellate Tribunal, under the Income Tax Act (was similar to the one under the 1922 Act), were to be comprised of at least one Judicial Member and one Accountant Member. The authority to constitute benches of the Appellate Tribunal was vested with the President. The composition of the benches under the Income Tax Act, was similar to that postulated under the 1922 Act. When authorized by the Central Government, it 6 Page 6 was open to the Appellate Tribunal, to dispose of appeals sitting singly (subject to the condition, that the appeal pertained to a dispute, wherein the concerned assessee’s total income was assessed as not exceeding Rs.5 lakhs). The

Judicial Member, and one, an Accountant Member). In case of difference of opinion, the matter was deemed to have been decided in terms of the opinion expressed by the majority. (v) An assessee or the Commissioner, could move an application before the Appellate Tribunal, under Section 256 of the Income Tax Act, requiring it to make a reference to the High Court on a question of law (arising in an appeal pending before the Appellate Tribunal). In case the prayer made in the application was declined by the Appellate Tribunal, the order (declining the prayer) was assailable before the High Court. (vi) Section 257 of the Income Tax Act provided for a reference directly to the JUDGMENT Supreme Court. The instant reference could be made by the Appellate Tribunal, if it was of the opinion, that the question of law which had arisen before it, had been interpreted differently, by two or more jurisdictional High Courts. (vii) Section 260A was inserted in the Income Tax Act by the Finance (No. 2) Act, 1998, with effect from 1.10.1998. Under Section 260A, an appellate remedy was provided for, to raise a challenge to orders passed by the Appellate Tribunal. The instant appellate remedy, would lie before the jurisdictional High Court. In terms of the mandate contained in Section 260B of the Income Tax Act, an 7 Page 7 appeal before the High Court was to be heard by a bench of not less than two judges. The opinion of the majority, would constitute the decision of the High Court. Where there was no majority, on the point(s) of difference, the opinion of

would constitute the decision of the High Court. (viii) A further appellate remedy was available as against a decision rendered by the jurisdictional High Court. The instant appellate remedy was vested with the Supreme Court under Section 261 of the Income Tax Act. The Customs Legislation, in India: 4(i). The Customs Act, 1962 (hereinafter referred to as, the Customs Act) was enacted to consolidate and amend the law relating to customs. The Customs Act vested the power of assessment of customs duty, with the Deputy Collector of Customs or the Collector of Customs. An executive-appellate remedy was JUDGMENT provided under Section 128 of the Customs Act, before a Collector of Customs (where the impugned order had been passed by an officer, lower in rank to the Collector of Customs), and before the Central Board of Excise and Customs (constituted under the Central Boards of Revenue Act, 1963), where the impugned order had been passed by a Collector of Customs. The Board had also been conferred with executive revisional powers (under Section 130 of the Customs Act), to suo moto, or on an application of an aggrieved person, examine the record of any proceeding, pertaining to a decision or order under the provisions of the Customs Act. Revisional powers, besides those expressly 8 Page 8 vested in the Board (under Section 130 of the Customs Act), were also vested with the Central Government (under Section 131 of the Customs Act). (ii) By the Finance (No. 2) Act, 1980, Sections 128 to 131 of the original Act

the Customs Act. On exhaustion of the above remedy, a further quasi-judicial appellate remedy was provided for, under Sections 129 and 129A before the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as, the CEGAT/Appellate Tribunal). CEGAT was also the appellate authority, against orders passed by the Board. With introduction of Service Tax, under Chapter V of the Finance Act, 1994, CEGAT was conferred the jurisdiction to hear appeals in cases pertaining to service tax disputes as well. The Appellate Tribunal is now known as the Customs, Excise and Service Tax Appellate Tribunal – the CESTAT. By Act 22 of 2003, the expression “Gold (Control)” was substituted with “Service Tax” in the definition of the “Appellate Tribunal” (w.e.f. JUDGMENT 14.5.2003). (iii) Section 129 of the Customs Act delineated the constitution of the CEGAT. It was to comprise of as many Judicial and Technical Members, as the Central Government thought fit. The instant provision, also laid down the conditions of eligibility for appointment of Judicial/Technical Members. A Judicial Member could be chosen out of persons, who had held a civil judicial post for at least 10 years, or out of persons who had been in practice as an Advocate for at least 10 years, as also, from out of Members of the Central Legal Service (not below 9 Page 9 Grade-I), who had held such post for at least 3 years. A Technical Member could be appointed out of persons, who had been members of the Indian Customs and Central Excise Service (Group A), subject to the condition, that such persons had

129(3) of the Customs Act, whereby it enabled the Central Government to appoint a person to be the President of the Appellate Tribunal. The Central Government could make such appointment, subject to the condition, that the person concerned had been a judge of the High Court, or was one of the Members of the Appellate Tribunal. Likewise, it was open to the Central Government to appoint one or more Members of the Appellate Tribunal to be its Vice President(s). (iv) Powers and functions of the Appellate Tribunal were to be exercised through benches constituted by its President, from amongst Members of the Appellate Tribunal (in terms of Section 129C of the Customs Act). Each bench JUDGMENT was required to be comprised of at least one Judicial Member and one Technical Member. It was open to the President to constitute a special bench of not less than three Members (comprising of at least one Judicial and one Technical Member). The composition of the bench, was modified by an amendment which provided, that a special bench of the Appellate Tribunal was to consist of not less than two Members (instead of three). It was also open to the President and/or Members (as authorized by the President of the Appellate Tribunal) to dispose of appeals, sitting singly, subject to the condition, that the value of goods 10 Page 10 confiscated, or the difference in duty involved, or duty involved, or the amount of fine or penalty involved, did not exceed Rs.10,000/- -- the limit was first revised to Rs.50,000/-, then to Rs.1 lakh, later to Rs.10 lakhs, and at present, the same is

purposes of assessment is the sole or one of the points in issue, must however be heard by a bench comprising of a Judicial and a Technical Member [Section 129C(4)(b)]. In case of difference of opinion on any point(s), the opinion of the majority was to constitute the decision of the Appellate Tribunal. If Members were equally divided, the appeal was to be referred by the President, for hearing on such point(s), by one or more other Members of the Appellate Tribunal. Whereupon, the majority opinion was to be considered as the decision of the Appellate Tribunal. Sub-sections (7) and (8) of Section 129C provided as under:- “(7) The Appellate Tribunal shall, for the purposes of discharging its functions, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:- JUDGMENT (a) discovery and inspection; (b) enforcing the attendance of any person and examining him on oath; (c) compelling the production of books of account and other documents; and (d) issuing commissions. (8) Any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 and for the purpose of Section 196 of the Indian Penal Code 945 of 1860) and the Appellate Tribunal shall be deemed to be a Civil Court for all the purposes of Section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).” 11 Page 11 It is apparent from the above provision, that by a fiction of law, proceedings before the Appellate Tribunal are treated as judicial proceedings. (v) The Customs and Excise Revenues Appellate Tribunal Act, 1986 came

provided as under:- “28. Proceedings before the Appellate Tribunal to be judicial proceedings – All proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of Sections 193, 219 and 228 of the Indian Penal Code (45 of 1860).” A perusal of the above amendment reveals, that by a fiction of law, the Appellate Tribunal was deemed to be discharging “judicial proceedings”. Therefore, the position prevailing prior to the amendment, was maintained, so far as the instant aspect was concerned. (vi) Just as in the case of the 1922 Act, which did not provide for an appellate remedy, but allowed a reference to be made to a jurisdictional High Court, under JUDGMENT Section 66, likewise, Section 130 of the Customs Act provided for a reference on a question of law, to the High Court. A reference could be made, on an application by the Collector of Customs or the person on whom customs duty has been levied, to the Appellate Tribunal. If the Appellate Tribunal refused to make a reference, the aggrieved party could assail the determination of the Appellate Tribunal, before the jurisdictional High Court. Where a reference on a question of law was entertained, it had to be heard by a bench of not less than two judges of the High Court. In case of difference of opinion on any point(s), the opinion 12 Page 12 expressed by the majority, was to be treated as the decision of the High Court. Where the opinion was equally divided, on the point(s) of difference, the matter was to be heard by one or more other judges of the High Court. Thereupon, the

Court, would then be applied by the Appellate Tribunal, for the disposal of the appeal wherefrom the reference had arisen. (vii) The Appellate Tribunal was also authorized to make a reference directly to the Supreme Court (under Section 130A of the Customs Act). This could be done, in case the Appellate Tribunal was of the view, that there was a conflict of decisions of High Courts in respect of a question of law pending before it for decision. The decision of the Supreme Court, would then be applied by the Appellate Tribunal, for the disposal of the appeal out of which the reference had arisen. (viii) The Finance (No. 32) Act, 2003 introduced a new Section 130. The JUDGMENT remedy of a reference to the jurisdictional High Court, was substituted by a remedy of an appeal to the High Court. The amended Section 130 of the Customs Act provided, that an appeal would lie to the High Court from every order passed by the Appellate Tribunal (on or after 1.7.2003), subject to the condition, that the High Court was satisfied, that the case involved a substantial question of law. In such an eventuality, the High Court would formulate the substantial question(s) of law. It was open to the High Court in exercise of its instant appellate jurisdiction, also to determine any issue which had not been 13 Page 13 decided by the Appellate Tribunal, or had been wrongly decided by the Appellate Tribunal. The appeal preferred before the High Court, could be heard by a bench of not less than two judges.

judgment of the High Court, delivered on an appeal filed under Section 130, or on a reference made under Section 130 by the Appellate Tribunal (before 1.7.2003), or on a reference made under Section 130A. (x) The NTT Act omitted Sections 130, 130A, 130B, 130C and 130D of the Customs Act. The instant enactment provided for an appeal from every order passed by the Appellate Tribunal to the NTT, subject to the condition, that the NTT arrived at the satisfaction, that the case involved a substantial question of law. On admission of an appeal, the NTT would formulate the substantial question of law for hearing the appeal. Section 23 of the NTT Act provided, that on and from the date, to be notified by the Central Government, all matters and JUDGMENT proceedings including appeals and references, pertaining to direct/indirect taxes, pending before the High Court, would stand transferred to the NTT. Section 24 of the NTT Act provides for an appeal from an order passed by the NTT, directly to the Supreme Court. The Central Excise Legislation, in India: 5(i). The Central Excise and Salt Act, 1944 (hereinafter referred to as, the Excise Act) was enacted to consolidate and amend, the law related to central duties on excise, and goods manufactured and produced in India, and to salt. 14 Page 14 Under the said enactment, the power to assess the duty, was vested with the Assistant Collectors of Central Excise, and Collectors of Central Excise. An executive-appellate remedy was provided for under Section 35 before the Commissioner (Appeals).

was additionally vested with the Central Government. In 1972, the Board was empowered under Section 35A of the Excise Act, to exercise the power of revision, from a decision/order/rule made/passed, under the Excise Act, subject to the condition, that no revision would lie under the instant provision, as against an appellate order passed under Section 35 of the Excise Act, by the Commissioner (Appeals). The Central Government was vested with revisional jurisdiction against appellate orders passed by the Commissioner (Appeals) under Section 35. In 1978, the revisional jurisdiction which hitherto before lay with the Board, was vested with the Collector of Central Excise. (iii) On the exhaustion of the first executive-appellate remedy, a further quasi- JUDGMENT judicial appellate remedy was provided for, under Section 35B of the Excise Act, to an Appellate Tribunal. The remedy of appeal before the Appellate Tribunal, could be availed of (a) against a decision or order passed by the Collector of Central Excise as an adjudicating authority, (b) against an order passed by the Collector (Appeals) under Section 35A of the Excise Act (as substituted by the Finance (No. 2) Act, 1980), (c) against an order passed by the Board or the Appellate Collector of Central Excise under Section 35 (as it stood before 15 Page 15 21.8.1980), and (d) against an order passed by the Board or the Collector of Central Excise under Section 35A (as it stood before 21.8.1980). (iv) The Appellate Tribunal was to be comprised of such number of

who had held a judicial office in India for at least 10 years, or who had been practicing as an Advocate for at least 10 years, or who had been a member of the Indian Legal Service (having held a post in Grade I of the said service, or any equivalent or higher post) for at least 3 years. Only such persons could be appointed as Technical Members who had been, members of the Indian Customs and Central Excise Service, Group A, and had held the post of Collector of Customs or Central Excise (or any equivalent or higher post) for at least 3 years. The Central Government had the power to appoint a person, who was or had been a judge of a High Court, or who was one of the Members of the Appellate Tribunal, as the President of the Appellate Tribunal. The functions of JUDGMENT the Appellate Tribunal were to be discharged through benches constituted by its President. The Central Government also had the authority to appoint one or more Members of the Appellate Tribunal as Vice-President(s). Each bench was to consist of at least one Judicial Member and one Technical Member. In case of difference of opinion on any point(s), the opinion of the majority would constitute the decision of the Appellate Tribunal. If the Members of the bench were equally divided, the President was required to refer the disputed opinion for hearing, on the point(s) of difference, by one or more other Members of the Appellate 16 Page 16 Tribunal. The majority opinion after such reference, would be the decision of the Appellate Tribunal. It was also permissible for the President, and the Members (authorized by the President) of the Appellate Tribunal, to hear and dispose of

Rs.10,000/- -- the limit was first revised to Rs.50,000/-, then to Rs.1 lakh, later to Rs.10 lakhs, and at present, the same is Rs.50 lakhs). Similar provision (as in respect of appeals to the Appellate Tribunal under Customs Act) with regard to matters to be heard by a division bench, is enjoined in Section 35D(3)(a) of the Excise Act. (v) The Customs and Excise Revenues Appellate Tribunals Act, 1986, came into force on 23.12.1986. Section 26 of the instant enactment excluded the jurisdiction of courts except the Supreme Court. Section 14, provided for jurisdiction, powers and authority of the Appellate Tribunal. Section 28 provided as under:- JUDGMENT “28. Proceedings before the Appellate Tribunal to be judicial proceedings – All proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of Sections 193, 219 and 228 of the Indian Penal Code (45 of 1860).” A perusal of the above amendment reveals, that by a fiction of law, the Appellate Tribunal was deemed to be discharging “judicial proceedings”. (vi) Section 35G provided for a reference on any question of law, by the Appellate Tribunal, to the High Court. The aforesaid remedy could be availed of by filing an application before the Appellate Tribunal. Such an application could be filed by either the Collector of Central Excise, or the person on whom the 17 Page 17 excise duty was levied. A reference, on a question of law, made by the Appellate Tribunal, to the High Court, would be heard by a bench of not less than two judges. On the Appellate Tribunal’s refusal to refer a question of law, the

acceptance of a reference, would render its decision, on the question of law. In case of difference of opinion, the opinion expressed by the majority would constitute the decision of the High Court. If the opinion by the bench was equally divided, the point(s) of difference were to be heard by one or more other judges of the High Court, whereafter, the opinion expressed by the majority would be treated as the decision of the High Court. The Appellate Tribunal would thereupon, decide the pending appeal, in consonance with the decision rendered by the High Court. (vii) Section 35H of the Excise Act provided for a reference, by the Appellate Tribunal, directly to the Supreme Court. The instant reference by the Appellate JUDGMENT Tribunal, could be made after the Appellate Tribunal had arrived at the conclusion, that the question of law arising for adjudication in an appeal pending before it, was differently interpreted by two or more jurisdictional High Courts. The decision of the Supreme Court, would then be applied by the Appellate Tribunal, to decide the pending appeal. Section 35L provided for appeal to the Supreme Court against the judgment rendered by the High Court (upon a reference made to the High Court by the Appellate Tribunal). The decision of the 18 Page 18 Supreme Court would then be applied by the Appellate Tribunal, in the disposal of the appeal pending before it. (viii) The Finance (No. 32) Act, 2003 substituted Section 35G of the Excise Act

The jurisdictional High Court was to entertain an appeal from an order passed by the Appellate Tribunal, on its being satisfied, that the appeal raised a substantial question of law. In such an eventuality, the High Court would formulate the substantial question(s) of law. It was open to the High Court in exercise of its instant appellate jurisdiction, also to determine any issue which had not been decided by the Appellate Tribunal, or had wrongly been decided by the Appellate Tribunal. The appeal preferred before the High Court, would be heard by a bench of not less than two judges. Section 35L of the Excise Act was also amended. The amended provision provided for an appeal from any judgment of the High Court (in exercise of its appellate jurisdiction under Section 35G of the JUDGMENT Excise Act, or on a reference made under Section 35G by the Appellate Tribunal before 1.7.2003, or on a reference made under Section 35H), to the Supreme Court. (ix) The NTT Act omitted Sections 35G, 35H, 35I and 35J of the Excise Act. The instant enactment provided for an appeal from every order passed by the Appellate Tribunal to the NTT, subject to the condition, that the NTT was satisfied, that the case involved a substantial question of law. On admission of an appeal, the NTT would formulate the substantial question of law, for hearing 19 Page 19 the appeal. Section 23 of the NTT Act provided, that on and from the date to be notified by the Central Government, all matters and proceedings including appeals and references, pertaining to direct/indirect taxes, pending before the

by appellate Commissioners. This recommendation was not accepted. JUDGMENT 7. A Direct Taxes Enquiry Committee was set up by the Government of India in 1970, with Mr. K.N. Wanchoo a retired Chief Justice of the Supreme Court of India, as its Chairman. The Enquiry Committee was assigned the following objectives: (1) to recommend ways to check avoidance of tax, through various legal lacunae; (2) to examine the exemptions allowed by tax laws, and evaluate scope of their reduction; and (3) to suggest methods for better tax assessment, and improvements in tax administration. The Wanchoo Committee recommended creation of a “National Court”, which would be comprised of 20 Page 20 judges with special knowledge of tax laws. The recommendation made by the Wanchoo Committee, was for creation of permanent “Tax Benches” in High Courts, and appointment of retired judges to such benches, under Article 224A of

courts as that, according to the Committee, would involve an amendment to the provisions of the Constitution, besides other statutory and procedural changes. 8. Another Direct Tax Laws Committee was constituted in 1977, under the chairmanship of Mr. N.K. Palkhivala, an eminent jurist. The Committee was later headed by Mr. G.C. Choksi. The Committee was constituted, to examine and suggest legal and administrative measures, for simplification and rationalization of direct tax laws. The Choksi Committee recommended the establishment of a “Central Tax Court” with an all-India jurisdiction. It was suggested, that such a court be constituted under a separate statute. Just like the recommendations of the Wanchoo Committee, the recommendations of the Choksi Committee also JUDGMENT necessitated amendments in the provisions of the Constitution. As an interim measure to the above recommendation, the Choksi Committee suggested, the desirability of constituting “Special Tax Benches” in High Courts, to deal with the large number of pending tax cases, by continuous sitting throughout the year. It was also suggested, that judges who sit on the “Special Tax Benches”, should be selected from those who had special knowledge, to deal with matters relating to direct tax laws. The Choksi Committee recommended, that the judges selected for the “Special Tax Benches” would be transferred to the “Central Tax Court”, as 21 Page 21 and when the same was constituted. It is, therefore apparent, that according to the recommendations of the Choksi Committee, the “Central Tax Court” was to comprise of judges of High Courts, or persons qualified to be appointed as High

issues pertaining to direct tax laws. This was sought to be clarified in paragraph 6.22 of the Choksi Committee’s Report. 9. None of the recommendations referred to hereinabove were implemented, till a similar recommendation was again mooted in the early 1990s. After deliberating on the issue for a few years, the Union of India promulgated the National Tax Tribunal Ordinance, 2003. The Ordinance inter alia provided, for the transfer of appellate jurisdiction (under direct tax laws) vested in High Courts, to the NTT. After the Ordinance lapsed, the National Tax Tribunal Bill, 2004 was introduced. The said Bill was referred to a Select Committee of the Parliament. The Select Committee granted a personal hearing to a variety of stakeholders, JUDGMENT including the representatives of the Madras Bar Association (i.e., the petitioner before this Court in Transferred Case (C) no. 150 of 2006). The Committee presented its report on 2.8.2005. In its report, it suggested serious reservations on the setting up of the NTT. The above Bill was presented before the Lok Sabha in 2005. The Bill expressed four main reasons for setting up the NTT: (1) to reduce pendency of huge arrears, that had mounted in High Courts all over the country, (2) huge tax recovery was statedly held up, in tax litigation before various High Courts, which directly impacted implementation of national 22 Page 22 projects/welfare schemes of the Government of India, (3) to have a uniformity in the interpretation of tax laws. In this behalf it was suggested, that different opinions were expressed by different High Courts on identical tax issues,

The first contention: That the reasons for setting up the NTT, were fallacious JUDGMENT and non-existent. Since the foundational basis is untrue, the structure erected thereupon, cannot be accepted as valid and justified. And therefore, the same is liable to be struck down. The second contention: It is impermissible for the legislature to abrogate/divest the core judicial appellate functions, specially the functions traditionally vested with the High Court. Furthermore, the transfer of such functions to a quasi- judicial authority, devoid of essential ingredients of the superior court, sought to be replaced was constitutionally impermissible, and was liable to be set aside. Besides the appellate jurisdiction, the power of judicial review vested in High 23 Page 23 Courts under Articles 226 and 227 of the Constitution, has also been negated by the NTT Act. And therefore, the same be set aside. The third contention: Separation of powers, the rule of law, and judicial review,

is violative of the above mentioned components of the basic structure of the Constitution, is liable to be declared ultra vires the Constitution. The fourth contention: A number of provisions including Sections 5, 6, 7, 8 and 13 of the NTT Act, undermine the independence of the adjudicatory process vested in the NTT, and as such, are liable to be set aside in their present format. 11. We shall now narrate each of the above contentions advanced by the learned counsel for the petitioners, in the manner submissions were advanced before us. The first contention: JUDGMENT 12. As regards arrears of tax related cases before High Courts is concerned, it was submitted, that the figures indicated by the Department were incorrect. In this behalf it was asserted, that the stance adopted at the behest of the Revenue, that there were about 80,000 cases pending in different courts, was untrue. It was the emphatic contention of the learned counsel for the petitioners, that as of October, 2003 (when the National Tax Tribunal Ordinance, was promulgated), the arrears were approximately 29,000. Of the total pendency, a substantial number was only before a few High Courts, including the High Court of Bombay and the High Court of Delhi. In the petition filed by the Madras Bar Association, it 24 Page 24 was asserted, that in the Madras High Court, the pending appeals under Section 260A of the Income Tax Act, were less than 2,000. It was also sought to be asserted, that the pendency of similar appeals in most southern States was even

13. In respect of the Revenue’s assertion, that huge tax recovery was held up, in tax litigation, before High Courts, it was submitted, that the figures projected at the behest of the Department were incorrect. It was pointed out, that according to the Revenue, the pending cases in the High Courts involved an amount of approximately Rs.80,000 crores (relatable to direct tax cases). It was submitted, that the figures projected by the Department, included not only the basic tax, but interest and penalty imposed thereon, as well. It was pointed out, that interest could be as high as 40% per annum, under tax statutes, besides penal interest. It was accordingly sought to be canvassed, that if the main appeals were set aside by the High Court, there would hardly be any dues payable to the JUDGMENT Government at all. Additionally, it was sought to be asserted, that many tax appeals pending before the High Courts, were filed by assessees, and accordingly, in the event of the assessees succeeding, the amount could not be considered as having been held up, but may have to be refunded. It was further asserted, that in most cases, the Revenue was able to recover a substantial amount from the assessees, by the time the matter reached the High Court (on account of pre-deposits). It was, therefore sought to be submitted, that the 25 Page 25 figures indicated by the Revenue, with reference to the amount of tax held up in pending cases, before High Courts was wholly flawed and deceptive. 14. It was also the contention of the learned counsel for the petitioners, that

just as in the manner two High Courts could differ with one another, so also, could two tax benches, of the NTT. On the factual front, it was pointed out, that divergence of opinion in High Courts was very rare. It was, as a matter of approximation, suggested, that in most cases (approximately 99%), one High Court would follow the view taken by another High Court. Learned counsel, however pointed out, that in High Courts an age-old mechanism, to resolve conflicts of views, by either placing such matters before larger benches, or before a higher court, was in place. Pointing out illustratively to the ITAT and the CESTAT, it was asserted, that there had been many cases of divergence of opinion, which were resolved by larger benches. It was, therefore sought to be JUDGMENT canvassed, that the instant basis for constituting the NTT, was also not based on a prudent or sensible rationale. 15. On the subject of High Court Judges being not well-versed to determine complicated interpretation of tax-law related issues, it was submitted, that the very mention of the above as a basis, for creating the NTT, was extremely unfortunate. It was submitted, that well before the independence of this country, and even thereafter, High Courts have been interpreting and construing tax related disputes, in a legitimate, tenable and lawful manner. The fairness and 26 Page 26 rationale of tax related issues, according to learned counsel, was apparent from the faith reposed in High Courts both by the Revenue, as well as, by the assessees. Furthermore, the veracity and truthfulness, of the instant assertion,

tax matters, has been minimal. 16. During the course of hearing, our attention was also invited to the fact, that the legislations of the instant nature would have a lopsided effect. In this behalf it was sought to be pointed out, that while jurisdiction vested in High Courts was being excluded, the burden was being transferred to the Supreme Court of India. This assertion was sought to be substantiated by the learned counsel for the petitioners, by inviting our attention to the legislations, wherein the power of judicial review traditionally vested in the High Courts, has been excluded, and a remedy of appeal has been provided from the tribunals constituted directly to the Supreme Court. In this behalf, reference may illustratively be made to the JUDGMENT following provisions:- (i) The Electricity Act, 2003 125. Appeal to Supreme Court - Any person aggrieved by any decision or order of the Appellate Tribunal, may, file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him, on any one or more of the grounds specified in Section 100 of the Code of Civil Procedure, 1908 (5 of 1908): 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. (ii) The National Green Tribunal Act, 2010 27 Page 27

JUDGMENT 28 Page 28 17. It was also pointed out, that the enactment of the NTT Act per se lacks bonafides. In this behalf the contention of the learned counsel for the petitioner was, that there is a Parliamentary convention that if a Select Committee rejects a

Bill in question is appropriately modified. It was submitted, that the bill under reference was presented before the Lok Sabha on 29.11.2005, and the same was passed without making a single amendment. 18. It was, therefore, the vehement contention of the learned counsel for the petitioners, that the foundational facts being incorrect, and the manner in which the bill was passed, being devoid of bonafides, the legislation itself i.e., the NTT Act, deserved to be set aside. The second contention: 19. It was the emphatic contention of the learned counsel for the petitioners, JUDGMENT that it was impermissible for the legislature to abrogate/divest the core judicial appellate functions traditionally vested with the High Court, and to confer/vest the same, with an independent quasi-judicial authority, which did not even have the basic ingredients of a superior Court, like the High Court (whose jurisdiction is sought to be transferred). In conjunction with the instant contention, it was also the submission of the learned counsel, that the jurisdiction vested in the High Courts under Articles 226 and 227 of the Constitution, is not only in respect of the rightful implementation of statutory provisions, but also of supervisory jurisdiction, over courts and tribunals, cannot be curtailed under any circumstances. 29 Page 29 20. In order to supplement the instant contention, learned counsel also placed reliance on Article 225 of the Constitution which is being extracted hereunder:-

Provided that any restriction to which the exercise of original jurisdiction by any of the High Courts with respect to any matter concerning the revenue or concerning any act ordered or done in the collection thereof was subject immediately before the commencement of this Constitution shall no longer apply to the exercise of such jurisdiction.” Inviting the Court’s attention to the proviso to Article 225 of the Constitution it was submitted, that the original jurisdiction of High Courts on matters pertaining to revenue or the collection thereof, even if considered as barred, the said bar was ordered to be expressly done away with, by the proviso to Article 225 of the Constitution. In the present context, learned counsel for the petitioners invited JUDGMENT our attention to Section 226(1) of the Government of India Act, 1935. The said Section is reproduced hereunder:- “226(1) Until otherwise provided by Act of the appropriate Legislature, no High Court shall have any original Jurisdiction in any matter concerning the revenue, or concerning any act ordered or done in the collection thereof according to the usage and practice of the country or the law for the time being in force.” It was submitted, that under the above statutory provision, a High Court could not issue a writ in the nature of mandamus, to call upon a Revenue authority to discharge its statutory obligations, in respect of the assessment of tax. Likewise, 30 Page 30 it was not open to the High Court, to issue a writ in the nature of certiorari or certiorarified mandamus, in order to set aside or modify an order of assessment, passed in violation of or in contravention of any statutory provision(s). It was

Amendment) Act, 1976 (with effect from 1.2.1977). It was, however pointed out, that the Parliament having realized its mistake, restored the proviso to Article 225 of the Constitution, as was originally enacted by the Constitution (Forty-fourth Amendment) Act, 1978 (with effect from 20.6.1979). Thus viewed, according to the learned counsel for the petitioners, under the provisions of the Constitution, prevailing at the present juncture, the original jurisdiction of the High Court (i.e., the jurisdiction under Articles 226 and 227 of the Constitution), as also, the law administered by a High Court at the time of enactment of the Constitution, cannot be restricted. Accordingly, it was asserted, that on matters pertaining to revenue or the collection thereof, the adjudication authority of High Courts, could not be JUDGMENT curtailed. 21. Articles 226 and 227 of the Constitution, on which emphatic reliance has been placed by the learned counsel, are being reproduced hereunder:- “226. Power of High Courts to issue certain writs – (1) Notwithstanding anything in article 32, every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari , or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose. 31 Page 31

JUDGMENT (a) call for returns from such courts; (b) make and issue general rules and prescribe forms for regulating the practice and proceedings of such courts; and (c) prescribe forms in which books, entries and accounts shall be kept by the officers of any such courts. (3) The High Court may also settle tables of fees to be allowed to the sheriff and all clerks and officers of such courts and to attorneys, advocates and pleaders practising therein: Provided that any rules made, forms prescribed or tables settled under clause (2) or clause (3) shall not be inconsistent with the provision of any law for the time being in force, and shall require the previous approval of the Governor. 32 Page 32 (4) Nothing in this article shall be deemed to confer on a High Court powers of superintendence over any court or tribunal constituted by or under any law relating to the Armed Forces.” It was submitted, that the above original jurisdiction vested in the High Court to

enactment of the NTT Act has the clear and explicit effect, of excluding the jurisdiction of the High Courts. This was sought to be explained by indicating, that the jurisdiction to adjudicate appeals, traditionally determined by jurisdictional High Courts, from orders passed by Appellate Tribunals under the Income Tax Act, the Customs Act and the Excise Act (all taxing legislations) have been taken out of the purview of the High Courts, and have been vested with the NTT, by the NTT Act. It was further submitted, that even the jurisdiction vested in High Courts under Articles 226 and 227 of the Constitution, has been practically done away with. In this behalf the explanation was, that by providing for an appellate remedy against an order passed by the NTT, directly to the JUDGMENT Supreme Court, the above original jurisdiction of the High Courts, had practically been frustrated and effectively neutralized. It is pointed out, that the curtailment of the jurisdiction of the High Courts under Articles 226 and 227 of the Constitution, must be viewed as submission, distinct and separate from the one emerging out of the substitution of, the jurisdiction of the High Courts under Section 260A of the Income Tax Act, 1961, Section 130 of the Customs Act, and Section 35G of the Excise Act. Whilst the former contention is based on a clear constitutional right, the submission based on the provisions of the taxing statutes, 33 Page 33 emerges from a well accepted constitutional convention, coupled with the clear intent expressed in the proviso to Article 225 of the Constitution. 22. In order to support the second contention advanced by the petitioners, the

Hinds v. The Queen Director of Public Prosecutions v. Jackson Attorney General of Jamaica (Intervener), 1976 All ER Vol. (1) 353. The factual/legal position which arose for determination in the cited case pertained to the Gun Court Act, 1974, enacted by the Parliament of Jamaica. The aforesaid enactment was made, without following the special procedure prescribed by Section 49 of the Constitution of Jamaica (to alter the provisions of the Constitution of Jamaica). The Gun Court Act, 1974, had the effect of creating a new Court – “the Gun Court”, to sit in three different kinds of divisions: A Resident Magistrate’s Division, a Full Court Division and a Circuit Court Division. One or the other of these divisions, was conferred with the jurisdiction to try, different categories of JUDGMENT offenders of criminal offences. Prior to the passing of the Act, and at the date of coming into force of the Constitution, these offences were cognizable only before a Resident Magistrate’s Court, or before the Circuit Court of the Supreme Court of Jamaica. The Gun Court Act, 1974, also laid down the procedure to be followed (in each of the divisions). For certain specified offences relating to unauthorized possession, acquisition or disposal of firearms and ammunition, “the Gun Court” was required to mandatorily impose a sentence of detention on hard labour. A detenue could only be discharged, at the direction of the 34 Page 34 Governor-General, acting in accordance with the advice of the Review Board. The Review Board was a non-judicial body under the Gun Court Act, 1974. Lord Diplock while recording the majority view in Hinds case (supra),

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The question was dealt with, by opining as under:-

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40 Page 40 established under section 103 should exercise an appellate jurisdiction in all substantial civil cases and in all serious criminal cases; and that the words that follow, viz. ‘which shall have such jurisdiction and powers as may be conferred upon it by this Constitution or any other law,’ do not entitle Parliament by an ordinary law to deprive the Court of Appeal of a significant part of such appellate jurisdiction or to confer it on judges who do not enjoy the security of tenure which the Constitution guarantees to judges of the Court of Appeal. Section 110 (1) of the Constitution which grants to litigants wide rights of appeal to Her Majesty in Council but only from ‘decisions of the Court of Appeal,’ clearly proceeds on this assumption as to the effect of section 103, Section 110 would be rendered nugatory if its wide appellate jurisdiction could be removed from the Court of Appeal by an ordinary law without amendment of the Constitution. Their Lordships see no reason why a similar implication should not be drawn from the corresponding words of section 97. The Court of Appeal of Jamaica was a new court established under the Judicature (Appellate Jurisdiction) Law 1962 , which came into force one day before the Constitution, viz. on 5 August, 1962. The Supreme Court of Jamaica had existed under that title since 1880. In the judges of that court there had been vested all that jurisdiction in Jamaica which in their Lordships' view was characteristic of a court to which in 1962 the description ‘a Supreme Court’ was appropriate in a hierarchy of courts which was to include a separate ‘Court of Appeal.’ The three kinds of jurisdiction that are characteristic of a Supreme Court where appellate jurisdiction is vested in a separate court are: (1) unlimited original jurisdiction in all substantial civil cases; (2) unlimited original jurisdiction in all serious criminal offences; (3) supervisory jurisdiction over the proceedings of inferior courts (viz. of the kind which owes its origin to the prerogative writs of certiorari, mandamus and prohibition). JUDGMENT That section 97 (1) of the Constitution was intended to preserve in Jamaica a Supreme Court exercising this characteristic jurisdiction is, in their Lordships' view, supported by the provision in section 13 (1) of the Jamaica (Constitution) Order in Council 1962 , that ‘the Supreme Court in existence immediately before the commencement of this Order shall be the Supreme Court for the purposes of the Constitution.’ This is made an entrenched provision of the Constitution itself by section 21 (1) of the Order in Council, and confirms that the kind of court referred to in the words ‘There shall be a Supreme Court for Jamaica’ was a court which would exercise in Jamaica the three kinds of jurisdiction characteristic of a Supreme Court that have been indicated above. If, as contended by the Attorney-General, the words italicised above in section 97 (1) entitled Parliament by an ordinary law to strip the Supreme Court of all jurisdiction in civil and criminal cases other than that expressly conferred upon it by section 25 and section 44, what would be left would be a court of such limited jurisdiction that the label ‘Supreme 41 Page 41

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(ii) In the same sequence, learned counsel for the petitioners invited our attention to Liyanage v. Reginam, (1966) 1 All ER 650. It is first necessary to record the factual/legal matrix, in the cited judgment. All the 11 appellants in the matter before the Privy Council, were charged with offences arising out of an abortive coup d’e’tat on 27.1.1962. The factum of the said coup d’e’tat, was set out in a White Paper issued by the Government of Ceylon on 13.2.1962. The White Paper gave the names of 13 alleged conspirators including the appellants. JUDGMENT The White Paper concluded by observing, that a deterrent punishment of a severe character ought to be imposed, on all those who were guilty. On 16.3.1962, the Criminal Law (Special Provisions) Act, No. 1 of 1962 was passed. It was given retrospective effect from 1.1.1962. It was limited in operation to those who were accused of offences against the State, on or around 27.1.1962. The above Act legalized imprisonment of the appellants, while they were awaiting trial. It modified a section of the Penal Code, so as to enact ex post facto, a new offence, to meet the circumstance of the abortive coup. It altered ex post facto, 43 Page 43 the law of evidence, regarding settlements made by an accused, while in custody. It enacted a minimum punishment, accompanied by forfeiture of property, for the offences for which the appellants were tried. Under Section

the above Act, so as to extend the same, to the offences for which the appellants were charged. Under Section 9 of the above Act, the Minister of Justice was empowered to nominate the three judges. In exercise of his powers under Section 9, the Minister of Justice had nominated three judges, to try the appellants without a jury. The Supreme Court upheld the objection raised by the appellants, that Section 9 was ultra vires the Constitution of Ceylon, and that, the nomination was invalid. Thereafter, the Criminal Law Act, No. 31 of 1962 was passed. It repealed Section 9 of the earlier Act. It amended the power of nomination, in that, the power was conferred on the Chief Justice. On appeal by the appellants, against the conviction and sentence from their trial before a Court JUDGMENT of three judges nominated under the Act, it was held, that the Criminal Law (Special Provisions) Act, No. 1 of 1962, as well as, the Criminal Law Act, No. 31 of 1962, were invalid for the two reasons. Firstly, under the Constitution of Ceylon, there was a separation of powers. The power of the judicature, while the Constitution stood, could not be usurped or infringed by the executive or the legislature. Secondly, the Criminal Law (Special Provisions) Act, No. 1 of 1962, as well as, the Criminal Law Act, No. 31 of 1962 were aimed at individuals concerned in an abortive coup, and were not legislation effecting criminal law of 44 Page 44 general application. Although not every enactment ad hominem , and ex post facto , necessarily infringed the judicial power, yet there was such infringement in the present case, by the above two Acts. In addition to the above conclusions, it

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with the provisions of the Constitution of Jamaica. The Court of Appeal accepted JUDGMENT his contention. The sentence of detention, during the Governor-General’s pleasure, was set aside. In its place, he was sentenced to life imprisonment, with the recommendation that, he be not considered for parole till he had served a term of 20 years’ imprisonment. In the controversy which came up for consideration before the Privy Council, there were two main issues. Firstly, whether the sentence of detention during the Governor-General’s pleasure authorized by Section 29(1), was a power exercised by him in his executive capacity. And secondly, whether the power to determine the measure for 48 Page 48 punishment to be inflicted on an offender, is compatible with the Constitution. The Privy Council, while examining the controversy, opined as under:- “Section 29 of the Juveniles Act 1951 [3] Section 3 of the Offences against the Person Act 1864, as amended, provides that every person convicted of capital murder shall be sentenced to death. But special provision has been made for those who commit this crime when aged under 18. Following a number of amendments made pursuant to section 4 of the Jamaica (Constitution) Order in Council 1962 (SI 1962/1500), section 29 of the Juveniles Act 1951 now provides, so far as material to the main issue in this appeal, as follows: "(1) Sentence of death shall not be pronounced on or recorded against a person convicted of an offence if it appears to the court that at the time when the offence was committed he was under the age of 18 years, but in place thereof the court shall sentence him to be detained during Her Majesty's pleasure, and, if so sentenced, he shall, notwithstanding anything in the other provisions of this Law, be liable to be detained in such place (including, save in the case of a child, an adult correctional centre) and under such conditions as the Minister may direct, and while so detained shall be deemed to be in legal custody. (4) The Governor-General may release on licence any person detained under subsection (1) or (3) of this section. Such licence shall be in such form and contain such conditions as the Governor- General may direct, and may at any time be revoked or varied by the Governor-General. Where such licence is revoked the person to whom it relates shall return forthwith to such place as the Governor- General may direct, and if he fails to do so may be arrested by any constable without warrant and taken to such place." [4] Section 29 as originally enacted was amended in 1964 to substitute "Minister" for "Governor" in subsection (1) and "Governor General" for "Governor" in each of the four references originally made to the Governor in subsection (4). In 1975 subsection (1) was further amended to make plain, reversing the effect of Baker v The Queen, [1975] AC 774 , [1975] 3 All ER 55, that the statutory prohibition on pronouncement of the death sentence applied to those appearing to be aged under 18 at the time when they had committed the offence, not at the time of sentence. In 1985, the reference to "an adult correctional centre" was substituted for the previous reference to "a prison". The enacted reference to "Her Majesty's pleasure" has not, however, been amended, no doubt because section 68(2) of the Constitution of Jamaica provides that the executive authority of Jamaica may be exercised on behalf of Her Majesty by the Governor- General. In recognition of this constitutional reality, it appears to be the practice where section 29(1) applies, as was done in this case, to call the JUDGMENT 49 Page 49

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verbal abuse and threatening behaviour on the part of Harry Brandy, while both JUDGMENT were in the employment of the Commission. Thereafter, John Bell issued a notice under Section 24 of the Racial Discrimination Act, 1975. And accordingly, the Commissioner referred the complaint to the Commission. The power of the Commission, to hold an enquiry under the Racial Discrimination Act, 1975 against Harry Brandy, was exercised by the second defendant. The second defendant had been appointed under Section 24 of the Racial Discrimination Act, 1975, which empowered the Minister, to appoint a person to perform and discharge the functions of the Commissioner. The second defendant returned 51 Page 51 his findings under Section 25Z of the Racial Discrimination Act, 1975 on 22.12.1993. The defendant’s complaint was found to be substantiated. In disposing of the controversy, the second defendant required Harry Brandy, the

In order to contest the determination rendered by the second defendant, Harry Brandy raised a challenge to the provisions of the Racial Discrimination Act, 1975. The challenge raised by him came to be formulated in the following words:- JUDGMENT "In consequence of the amendments embodied in the Sex Discrimination and other Legislation Amendment Act 1992 and/or the Law and Justice Legislation Amendment Act 1993 as they affect the Racial Discrimination Act 1975 are any, and if so which, of the provisions of Part III of the Racial Discrimination Act invalid?" While adjudicating upon the matter, the High Court of Australia held as under:- “The plaintiff's challenge to the Act- 15. The plaintiff's challenge to particular provisions of the Act is based upon the proposition that they provide for an exercise of judicial power otherwise than in conformity with Ch.III of the Commonwealth Constitution in that the power is exercised by the Commission which is not a court established pursuant to s.71 and constituted in accordance with s.72 of the Constitution. The plaintiff further argues that the correctness of this 52 Page 52 proposition is not affected by the provisions for review by the Federal Court.

JUDGMENT 53 Page 53 (v) Our attention was then invited to Reference Re Residential Tenancies Act, 123 DLR (3d) 554. The factual matrix, in furtherance of which the above judgment was rendered by the Supreme Court of Canada, is as follows. The

as also, could require landlords and tenants to comply with the obligations imposed under the said Act, were assailed, as offending against the limitation contained in Section 96 of the British North America Act, 1867, and therefore, ultra vires . In recording its conclusions on a similar analogy, as in the judgments noticed above, the Supreme Court of Canada observed as under:- “Under s. 92(14) of the British North America Act, 1867, the provincial Legislatures have the legislative power in relation to the administration of justice in the Province. This is a wide power but subject to subtraction of ss. 96 to 100 in favour of the federal authority. Under s. 96 the Governor General has the sole power to appoint the judges of the Superior, District and County Courts in each Province. Under s. 97 the Judges who are to be appointed to the Superior, District and County Courts are to be selected from the respective bars of each Province. Under s. 100 the Parliament of Canada is obliged to fix and provide for their salaries. Section 92(14) and ss. 96 to 100 represent one of the important compromises of the Fathers of Confederation. It is plain that what was sought to be achieved through this compromise, and the intended effect of s. 96, would be destroyed if a Province could pass legislation creating a tribunal, appoint members thereto, and then confer on the tribunal the jurisdiction of the Superior Courts. What was conceived as a strong constitutional base for national unity, through a unitary judicial system, would be gravely undermined. Section 96 has thus come to be regarded as limiting provincial competence to make appointments to a tribunal exercising s. 96 judicial powers and therefore as implicitly limiting provincial competence to endow a provincial tribunal with such powers. JUDGMENT IV The belief that any function which in 1867 had been vested in a s. 96 Court must forever remain in that Court reached its apogee in the judgment of Lord Atkin in Toronto Corporation v. York Tp. Et. Al., (1938) 1 DLR 593, (1938) AC 415, (1938) 1 WWR 452. Describing s. 96 as one of 54 Page 54

JUDGMENT The same process of liberalization, this time in the context of a transfer of jurisdiction from a Superior Court to an administrative tribunal, was initiated by the Privy Council in Labour Relations Board of Saskatchewan v. John East Iron Works, Limited, (1948) 4 DLR 673, (1949) AC 134, (1948) 2 WWR 1055. Lord Simonds proposed a two-fold test. The first limb of the test is to ask whether the board or tribunal exercises “judicial power”. Lord Simonds did not propose a ‘final’ answer to the definition of “judicial power”, but he suggested at p. 680 DLR, p. 149 AC, that: “…the conception of the judicial function is inseparably bound up with the idea of a suit between parties, whether between Crown and subject or between subject and subject, and that it is the duty of the Court to decide the issue between those parties, with whom alone it rests to initiate or defend or compromise the proceedings.” If the answer to the initial question as to “judicial power” is in the negative, then that concludes the matter in favour of the provincial board. 55 Page 55 If, however, the power is in fact a judicial power, then it becomes necessary to ask a second question: in the exercise of that power, is the tribunal analogous to a Superior, District or County Court? xxx xxx xxx Step two involves consideration of the function within its institutional setting to determine whether the function itself is different when viewed in that setting. In particular, can the function still be considered to be a ‘judicial’ function? In addressing the issue, it is important to keep in mind the further statement by Rand J. in Dupont v. Inglis (at p. 424 DLR, p. 543 SCR) that “…it is the subject-matter rather than the apparatus of adjudication that is determinative”. Thus the question of whether any particular function is ‘judicial’ is not to be determined simply on the basis of procedural trappings. The primary issue is the nature of the question which the tribunal is called upon to decide. Where the tribunal is faced with a private dispute between parties, and is called upon to adjudicate through the application of a recognized body of rules in a manner consistent with fairness and impartiality, then, normally, it is acting in a ‘judicial capacity’. To borrow the terminology of Professor Ronald Dworkin, the judicial task involves questions of ‘principle’, that is, consideration of the competing rights of individuals or groups. This can be contrasted with questions of ‘policy’ involving competing views of the collective good of the community as a whole. (See Dworkin, Taking Rights Seriously (1977) at pp. 82-90 (Duckworth).” A perusal of the conclusions recorded by the Supreme Court of Canada reveals, that the court evolved a three step test to determine the constitutional validity of a provision which vested adjudicatory functions in an administrative tribunal. The JUDGMENT first step was determined in the light of the historical conditions existing in 1867, i.e. before the British North America Act, 1867 was enacted. The first step required a determination whether at the time of Confederation, the power or jurisdiction now vested in an administrative tribunal, was exercised through a judicial court process. If the answer to the first step was in the negative, the constitution of the administrative tribunal would be valid. If historical evidence indicated, that the power, now vested with an administrative tribunal, was identical or analogous to a power exercised under Section 96 Courts at 56 Page 56 Confederation, then the matter needed to be examined further. The second step was to determine, whether the power to be exercised by the administrative tribunal, should be considered as a judicial function. Insofar as the instant aspect

between the parties, which required to be settled through an application of a recognized body of rules, in a manner consistent with fairness and impartiality, then the said power could be classified as judicial power/function. If, however, while applying the second step, the answer was in the negative, it was not necessary to proceed with the matter further, and the vesting of the power with the administrative tribunal should be considered as valid. If the power or jurisdiction is exercised in a judicial manner, then it is imperative to proceed to the third and final step. The third step contemplates analysis and review of the administrative tribunal’s functions as a whole, and to examine the same in its entire institutional context. It contemplated an examination of the inter- JUDGMENT relationship between the administrative tribunal’s judicial powers, and the other powers and jurisdiction conferred by the legislative enactment. If a judicial hearing is a must, whereafter a judgment was required to be rendered, the administrative tribunal would be deemed to be exercising jurisdiction which is ordinarily vested in a Court . It is after recording a finding in the affirmative on all the three steps, that it will be possible to conclude, whether judicial functions have been required to be exercised by the concerned administrative tribunal. Having examined the controversy in Reference Re Residential Tenancies Act 57 Page 57 (supra), the Supreme Court of Canada arrived at the conclusion, that the Residential Tenancy Commission could have been authorized to grant orders for possession to a landlord or to grant orders for specific performance of a tenancy.

Carswell, Thomson Professional Publishing) in order to assert, that even under Constitutions where the separation of power rule has not been explicitly provided for, there would be limitations in delegation of Court functions to tribunals. Relevant text on the subject, from the above treatise is being reproduced hereunder:- “7.3 Implications of Constitution’s judicature sections (a) Separation of powers There is no general “separation of powers” in the Constitution Act, 1867. The Act does not separate the legislative, executive and judicial functions and insist that each branch of government exercise only “its own” function. As between the legislative and executive branches, any separation of powers would make little sense in a system of responsible government; and it is clearly established that the Act does not call for any such separation. As between the judicial and the two political branches, there is likewise no general separation of powers. Either the Parliament or the Legislatures may by appropriate legislation confer non-judicial functions on the courts and (with one important exception, to be discussed) may confer judicial functions on bodies that are not courts. JUDGMENT Each Canadian jurisdiction has conferred non-judicial functions on its courts, by enacting a statute which enables the government to refer a question of law to the courts for an advisory opinion. The rendering of advisory opinions to government is traditionally an “executive” function, performed by the law officers of the government. For that reason, the supreme Court of the United States and the High Court of Australia have refused to render advisory opinions, reasoning that a separation of powers doctrine in their Constitutions confines the courts to the traditional judicial function of adjudicating upon genuine controversies. But in the Reference Appeal (1912), A-G Ont. V.A.-G. Can. (Reference Appeal) (1912) AC 571, the Privy Council refused to read any such limitation into Canada’s Constitution. Their lordships upheld the federal reference statute, 58 Page 58 apparently as a law in relation to the supreme court of Canada (s.101). The provincial reference statutes are also valid as laws in relation to the administration of justice in the province (s.92(14)).

If ss. 96 to 100 of the constitution Act, 1867 were read literally, they could easily be evaded by a province which wanted to assume control of its judicial appointments. The province could increase the jurisdiction of its inferior courts so that they assumed much of the jurisdiction of the higher courts; or the province could best higher-court jurisdiction in a newly- established tribunal, and call that tribunal an inferior court or an administrative tribunal. It is therefore not surprising that the courts have added a gloss to s. 96 and the associated constitutional provisions. What they have said is this: if a province invests a tribunal with a jurisdiction of a kind that ought property to belong to a superior, district or county court, then that tribunal, whatever its official name, is for constitutional purposes a superior, district or county court and must satisfy the requirements of s. 96 and the associated provisions of the constitution Act, 1867. This means that such a tribunal will be invalidly constituted, unless its members (1) are appointed by the federal government in conformity with s. 96, (2) are drawn from the bar of the province in conformity with ss. 97 and 98, and (3) receive salaries that are fixed and provided by the federal parliament in conformity with s. 100. JUDGMENT So far the law is clear, and the policy underlying it is comprehensible. But the difficulty lies in the definition of those functions that ought properly to belong to a superior, district or county court. The courts have attempted to fashion a judicially enforceable rule which would separate “s. 96 functions” from other adjudicatory functions. The attempt has not been successful, and it is difficult to predict with confidence how the courts will characterize particular adjudicatory functions. The uncertainty of the law, with its risk of nullification, could be a serious deterrent to the conferral of new adjudicatory functions on inferior courts or administrative tribunals, and a consequent impediment to much new regulatory or social policy. For the most part, the courts have exercised restraint in reviewing the provincial statutes which create new adjudicatory jurisdictions, so that the difficulty has not been as serious as it could have been. However, in the last two decades, there has been a regrettable resurgence of s. 96 litigation: five challenges to the powers of inferior courts or tribunals based on s. 96 have succeeded in the Supreme Court 59 Page 59

the proposition of law highlighted hereinabove on the basis of the provisions of constitutions of different countries (Jamaica, Ceylon, Australia and Canada) decided either by the Privy Council or the highest courts of the concerned countries, is fully applicable to India as well. In order to demonstrate this, he placed reliance on State of Maharashtra v. Labour Law Practitioners’ Association, (1998) 2 SCC 688. The controversy in the cited case originated with the filing of a writ petition by the respondent Association challenging the appointment of Assistant Commissioners of Labour (i.e., Officers discharging executive functions under the Labour Department). The above appointments JUDGMENT had been made, consequent upon amendments to the provisions of the Bombay Industrial Relations Act, and the Industrial Disputes (Maharashtra Amendment) Act. The submission advanced at the hands of the respondent Association was, that Labour Courts had been constituted in the State of Maharashtra, under the Industrial Disputes Act, the Bombay Industrial Relations Act, as also, the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices, Act. Qualifications of persons to be appointed as a judge of the Labour Court under the Industrial Disputes Act, was stipulated in Section 7, which provided as under:- 60 Page 60

By the Industrial Disputes (Maharashtra Amendment) Act, 1974, Section 7 was amended, and three more sources of recruitment for the post of judge of the Labour Court were added. These were:- “(d-1) he has practiced as an advocate or attorney for not less than seven years in the High Court, or any court, subordinate thereto, or any Industrial Court or Tribunal or Labour Court, constituted under any law for the time being in force; or (d-2) he holds a degree in law of a University established by law in any part of India and is holding or has held an office not lower in rank than that of a Deputy Registrar of any such Industrial Court or Tribunal for not less than five years; or (d-3) he holds a degree in law of University established by law in any part of India and is holding or has held an office not lower in rank than that of Assistant Commissioner of Labour under the State Government for not less than five years.” JUDGMENT Under the Bombay Industrial Relations Act, as it originally stood, Section 9 provided, that only such persons would be eligible for appointment as a judge of the Labour Court, who possessed the qualifications laid down under Article 234 of the Constitution, for being eligible to enter judicial service in the State of Maharashtra. By the Maharashtra Act 47 of 1977, Section 9 of the Bombay Industrial Relations Act was amended by substituting a new sub-section (2), which replaced the original sub-section (2) of Section 9. The amended sub- section (2) was as follows:- 61 Page 61 “9. (2) A person shall not be qualified for appointment as the presiding officer of a Labour Court, unless:

62 Page 62 The other relevant observations recorded in the above cited judgment are reproduced below:-

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25. According to the learned counsel for the petitioners, the judgments and text cited hereinabove, are fully applicable on the subject of administration of 64 Page 64 justice through courts in India. Insofar as the instant aspect of the matter is concerned, learned counsel placed reliance on Article 50 of the Constitution, which is reproduced hereunder:-

Based on Article 50 aforementioned, it was the contention of the learned counsel for the petitioners, that the Constitution itself mandates a separate judicial hierarchy of courts distinct from the executive. 26. Coupled with the above mandate, it was the contention of the learned counsel for the petitioners, that the provisions of the Income Tax Act, the Customs Act, and the Excise Act prior to independence of this country, and even thereafter, vested the High Courts with an exclusive jurisdiction to settle “questions of law” emerging out of tax disputes. It was further contended, that even after the enforcement of the Constitution, with effect from 26.11.1949, the adjudicatory power to decide substantial questions of law, continued to be JUDGMENT vested in the High Courts, inasmuch as, the jurisdictional High Courts continued to exercise appellate jurisdiction. The position has remained unaltered till date. It is, therefore, the contention of the learned counsel for the petitioners, that historically, constitutionally and legally, the appellate jurisdiction in direct/indirect tax matters, has remained with the High Courts, and it is not permissible either by way of an amendment to the Constitution itself, or by enacting a legislation, to transfer the said appellate jurisdiction exercised by the High Courts to a quasi- judicial tribunal. 65 Page 65 The third contention: 27. In the course of the submissions advanced by the learned counsel for the petitioners on the third contention, wherein it was sought to be submitted, that

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Insofar as the aforesaid provision is concerned it was submitted, that Clause (3) of Article 323B clearly violated all the above mentioned ingredients of the “basic JUDGMENT structure” theory. In this behalf it was sought to be asserted, that establishment of a hierarchy of tribunals implicitly led to the inference, that the existing judicial process, where adjudication was before a court of law, was to be substituted in its entirety. Thereby, even the existing appellate process which was vested in High Courts was sought to be substituted by tribunals. It was submitted, that creation of a parallel judicial system, was alien to the provisions of the Constitution, which recognized the judiciary as an independent component, separate from the executive and the legislature. It was accordingly vehemently 67 Page 67 asserted, that the process of justice was being substituted, by tribunalization of justice, which was clearly unacceptable under the Constitution. Sub-clause (d) of Article 323B(3), according to the learned counsel for the petitioners, divested

of High Courts, but also, the power of “judicial review” vested in High Courts under Articles 226 and 227, of the Constitution. It was also the contention of the learned counsel for the petitioners, that despite decisions rendered by this Court, the legislature has repeated and reiterated what had been found to be unsustainable in law. 28. While canvassing the aforesaid contention learned counsel for the petitioners pointed out, that the above mentioned Article 323B was introduced by the Constitution (Forty-second Amendment) Act, 1976, which was part of an overall scheme, to drastically curtail the power of “judicial review” vested with the higher judiciary. It was pointed out, that all other objectionable provisions were JUDGMENT deleted, and powers earlier vested in superior courts were restored. However, Part XIV A of the Constitution, inserting Articles 323A and 323B was allowed to remain. It was submitted that Articles 323A and 323B, enabled the creation of parallel judiciary under executive control. In order to support his aforestated contention, learned counsel invited the Court’s attention to the expressions “adjudication or trial”, “disputes, complaints or offences”, “transfer of suits or proceedings”, etc. which could be fashioned in a manner different from that which presently prevailed. It was pointed out, that the aforestated mandate contained 68 Page 68 in Article 323B of the Constitution, was incompatible with the “basic structure” of the Constitution, which mandates “separation of powers”. 29. In view of the aforementioned submissions, it was the vehement

not find favour with this Court, the alternative prayer of the petitioners was, that Article 323B must be purposefully interpreted, so as to bestow equivalence commensurate to the Court sought to be substituted by the tribunal. It was submitted, that it was imperative to provide for measures to ensure independence in the functioning of tribunals substituting functions carried out by courts. This could be done, according to learned counsel for the petitioners, by extending the conditions of service applicable to judges of the court sought to be substituted. In order to support his aforestated contention, learned counsel for the petitioners placed reliance on judgments rendered by this Court, laying down the limits and parameters within which such tribunals could be created. Despite JUDGMENT the declaration of law by this Court it was submitted, that the NTT Act, has been enacted, which suffers from the same vices, which had already been found to be unconstitutional. For reasons of brevity, it is considered inappropriate, to refer to all the judgments relied upon by the rival parties on the instant issue. Suffice it to state, that the same will be examined, only while recording conclusions. The fourth contention: 30. While advancing the fourth contention, learned counsel for the petitioners referred to various provisions of the NTT Act, which would have the effect of 69 Page 69 compromising the independence of the NTT. We may briefly refer to the provisions of the said Act, highlighted by the learned counsel for the petitioners, during the course of hearing, as under:-

“5. Constitution and jurisdiction of Benches- (1) the jurisdiction of the National Tax Tribunal may be exercised by the Benches thereof to be constituted by the Chairperson. (2) The Benches of the National Tax Tribunal shall ordinarily sit at any place in the National Capital Territory of Delhi or such other places as the Central Government may, in consultation with the Chairperson, notify: Provided that the Chairperson may for adequate reasons permit a Bench to hold its temporary sitting for a period not exceeding fifteen days at a place other than its ordinary place of seat. (3) The Central Government shall notify the areas in relation to which each bench of the National Tax Tribunal may exercise its jurisdiction. (4) The Central Government shall determine the number of Benches and each Bench shall consist of two members. (5) The Central Government may transfer a Member from headquarters of one Bench in one State to the headquarters of another Bench in another State or to the headquarters of any other Bench within a State: Provided that no member shall be transferred without the concurrence of the Chairperson.” JUDGMENT Referring to sub-section (2) of Section 5 it was sought to be asserted, that benches of the NTT are ordinarily to function in the National Capital Territory of Delhi. This, according to the learned counsel for the petitioners, would deprive the litigating assessee, the convenience of approaching the High Court of the State to which he belongs. In this behalf it was sought to be asserted, that in every tax related dispute, there is an asseessee on one side, and the Revenue on the other. Accordingly, if the NTT is mandated to sit ordinarily in the National Capital Territory of Delhi, assessees from far flung States would have to suffer extreme hardship for the redressal of their grievance, especially at the appellate 70 Page 70 stage. Besides the hardships, it was pointed out, that each asseessee would be subjected to unfathomable financial expense. Referring to sub-section (5) of Section 5 of the NTT Act, it was the submission of the learned counsel for the

another bench in another State. It was also open to the Central Government to transfer a Member from one bench to another bench in the same State. It was submitted, that in case of High Courts, such power is exercised exclusively by the Chief Justice, in the best interest of the administration of justice. It was submitted, that the Central Government, which is a stakeholder, could exercise the above power of transfer for harassment and exploitation of sitting Members of the NTT. In other words, an inconvenient Member could be moved away, and replaced by one who would tow the desired line. (ii) Likewise, learned counsel for the petitioners referred to Section 6 of the NTT Act to demonstrate, that the same would also have an undermining effect on JUDGMENT the adjudicatory process. Section 6 of the NTT Act is reproduced hereunder:- “6. Qualifications for appointment of Chairperson and other Members – (1) The Chairperson of the National Tax Tribunal shall be a person who has been a Judge of the Supreme Court or the Chief Justice of a High Court. (2) A person shall not be qualified for appointment as Member unless he- (a) is, or has been, or is eligible to be, a Judge of a High Court; or (b) is, or has been, a Member of the Income-tax Appellate Tribunal or of the Customs, Excise and Service Tax Appellate Tribunal for at least five years.” Learned counsel for the petitioners pointed out, that sub-section (2), aforementioned, laid down the qualifications for appointment as Member of the 71 Page 71 NTT. Referring to clause (a) of sub-section (2) of Section 6 of the NTT Act it was submitted, that a person who is eligible to be a judge of a High Court, is to be treated as eligible as a member of the NTT. Inviting our attention to Article 217

Court, has been treated as eligible for being appointed as a Member of the NTT. Referring to Section 8 of the NTT Act it was pointed out, that a Member of the NTT is provided with a tenure of five years, from the date of his appointment as Member of the NTT. It was pointed out, that in terms of Article 217 of the Constitution, a person would easily become eligible for appointment as a judge at or around the age of 35-40 years, and as such, if he is assured a tenure of only five years, it would not be possible for him to discharge his duties without fear or favour, inasmuch as, he would always have a larking uncertainty in his mind about his future, after the expiry of the prescribed term of five years, in the event of not being granted an extension. Relying on clause (b) of Section 6(2) of the JUDGMENT NTT Act, it was also the submission of the learned counsel for the petitioners, that Members of the Appellate Tribunals constituted under the Income Tax Act, the Customs Act, and the Excise Act, are also eligible for being appointed as Members of the NTT. In this behalf it was sought to be asserted, that there are Accountant Members of the Income Tax Appellate Tribunal, who too would become eligible for appointment as Members of the NTT. It was submitted, that judicial experience on the niceties of law, specially on the different aspects, which need to be dealt with while adjudicating tax matters, would be alien to 72 Page 72 them, inasmuch as they can only be experts on the subject of accountancy. It was pointed out, that the jurisdiction vested in the NTT, is an alternative jurisdiction to that of the High Court, and as such, it is difficult to appreciate how

JUDGMENT A perusal of sub-section (2) of Section 7 reveals the composition of the selection committee for selection of the Chairperson and Members of the NTT. It was sought to be pointed out, that there were two representatives of the executive, out of three member selection committee, and only one member in the selection committee was from the judiciary. Accordingly it was asserted, that the two representatives belonging to the executive would control the outcome of every selection process. Since the NTT was, an alternative to the jurisdiction earlier 73 Page 73 vested with the High Court, it was submitted, that the same process of selection, as was prevalent for appointment of judges of the High Court, should be adopted for selection of Chairperson and Members of the NTT. All that is imperative and

for the petitioners, that a provision similar to Section 7(2) of the NTT Act, had been struck down by this Court, in State of Maharashtra v. Labour Law Practitioners’ Association (supra). (iv) Learned counsel for the petitioners then invited our attention to Section 8 of the NTT Act. Section 8 is being reproduced hereunder:- “8. Terms of office of Chairperson and other Members - The Chairperson and every other Member shall hold office as such for a term of five years from the date on which he enters upon his office but shall be eligible for re-appointment: Provided that no Chairperson or other Member shall hold office as such after he has attained, - (a) in the case of Chairperson, the age of sixty-eight years; and (b) in the case of any other Member, the age of sixty-five years.” JUDGMENT According to learned counsel, a perusal of Section 8 reveals, that a Chairperson and a Member of the NTT would hold office for a term of five years, from the date of his/her appointment to the NTT. It was, however sought to be pointed out, that a person appointed as such, is clearly eligible for reappointment. It was sought to be asserted, that a provision for reappointment, would itself have the effect of undermining the independence of the Members of the NTT. It was sought to be asserted, that each one of the appointees to the NTT would be prompted to appease the Revenue, so as to solicit reappointment contemplated under Section 8 of the NTT Act. In this behalf it was submitted, that the tenure of 74 Page 74 appointment to a tribunal, which is to substitute a High Court, should be akin to that of a judge of High Court. (v) Our attention was then invited to Section 13 of the NTT Act, which is reproduced hereunder:-

counsel for the petitioners, there seemed to be no difficulty in Section 13(1) of the JUDGMENT NTT Act. However, allowing “any person duly authorized” by the assessee to represent him before the NTT, is clearly ununderstandable. It was submitted, that the main function of the NTT would be to settle substantial questions of law on tax issues, and as such, under Section 13(1), it would be open to an assessee to engage an individual to represent him, even though he is totally unqualified in the fields on which the adjudicatory process is to be conducted. Likewise, it is the contention of the learned counsel for the petitioners, besides legal practitioners, the Revenue is allowed to be represented through any of its 75 Page 75 officers. It was sought to be asserted, that an understanding of the text of the provision is one thing, whereas interpreting it in the contemplated context, quite another. As such, it was submitted, that officers of the Revenue, who lack in

before the NTT. Submissions in opposition, by the respondents/interveners: The first contention: 31. In response to the first contention, namely, that the reasons for setting up the NTT were fallacious and non-existent, and as such, the legislative enactment under reference creating the NTT as an independent appellate forum to decide appeals on “substantial questions” of law, from orders passed by the Appellate Tribunals constituted under the Income Tax Act, the Customs Act, and the Excise Act deserves to be set aside; it was the contention of the learned counsel for the JUDGMENT respondents, that the submissions advanced at the hands of the petitioners, were premised on an improper understanding of the factual background. In this behalf, it is sought to be asserted, that the tax receipts are the primary source of revenue in India. The Government of India meets its budgetary requirements from revenue receipts. It is sought to be explained, that tax is collected by an established administrative and legal structure. On the one hand, while fastening of a tax liability would reduce the profits of an assessee, it would enhance the revenue receipts of the Government. On the other hand, exemption from a tax 76 Page 76 liability would increase profits of an assessee, but would reduce the revenue receipts of the Government. In view of the above profit and loss scenario, administration of tax loss, has an inherent tendency to result in disputes and

result, significant amount of time is spent, on long drawn litigation, wherein tax payers and the Government lock horns against one another. Naturally, this impacts revenue earnings as levy of tax of thousands of crores of rupees, remains embroiled in such litigation. It was sought to be pointed out, that as per the Centre for Monitoring Indian Economy Database, Indian companies have a vast amount locked in disputed taxes. As per the above report, during the Financial Year 2011-2012; 30 companies that make up the Bombay Stock Exchange sensex, had money locked in disputed taxes estimated at Rs.42,388 crores. The above disputed tax liability, according to the learned counsel for the respondents, was a 27% increase from the amount of the preceding year, which JUDGMENT was estimated at Rs.33,339 crores. 32. In respect of disputes on direct taxes, it was submitted, that in a written reply submitted by the Minster of State for Finance, the Lok Sabha was informed in April, 2012, that 5,943 tax cases were pending with the Supreme Court, and 30,213 direct tax cases were pending with High Courts. It was submitted that the Lok Sabha was additionally informed, that the disputed amount of tax, at various levels, was estimated at Rs.4,36,741 crores, as on 31.12.2011. It was further sought to be asserted, that in the preceding year, the estimate in respect of the 77 Page 77 disputed amount at various levels, was to the tune of Rs.2,43,603 crores. Accordingly it was sought to be pointed out, that with each succeeding year, not only the tax related litigation was being progressively enhanced, there was also a

indirect taxes, projected a similar unfortunate reflection. In this behalf, it was sought to be pointed out, that as on 31.12.2012, the number of pending customs disputes were approximately 17,800, wherein an amount of approximately Rs.7,400 crores was involved. Insofar as the number of pending central excise cases as on 31.10.2012 is concerned, the figure was approximately 19,800 and the amount involved was approximately Rs.21,450 crores. By adding the figures reflected hereinabove, in respect of the disputes pertaining to indirect taxes, it was suggested that a total of about 37,600 cases were pending, involving an amount of approximately Rs.28,850 crores. Additionally it was submitted, that out of the 17,800 customs cases, approximately 6,300 cases had been pending JUDGMENT for adjudication for periods ranging from one to three years, and approximately 2,800 customs cases had been pending adjudication for over three years. Likewise, out of the 19,800 central excise cases, 1,600 cases were pending for decision for a period between one to three years; and 240 cases had been pending for decision for over three years. 34. It was pointed out at the behest of the respondents, that several reasons contributed to the prolonged continuation of tax disputes. The main reason however was, that there was a lack of clarity in law in tax litigation. It was 78 Page 78 submitted, that the above lack of clarity resulted in multiple interpretations. Added to that, according to the learned counsel for the respondents, existence of multiple appellate levels, and independent jurisdictional High Courts, resulted in

35. Based on the factors narrated above, it was the submission of the learned counsel for the respondents, that the burden of high volume of disputes had had the effect of straining the adjudicatory, as well as, the judicial system. It was pointed out, that the judicial system was already heavily burdened by the weight of significant number of unresolved cases. It was submitted, that the addition of cases each year, added not only to the inconvenience of the taxpayer, but also to the revenue earned by the government. It was pointed out, that the instant state of affairs created an uncertain and destabilized business environment, with taxpayers not being able to budget, for tax costs. Importantly such uncertainty, according to the learned counsel, emerged out of the two factors. Firstly, the law JUDGMENT itself was complex, and therefore, uncertain. And secondly, for an interpretation of the law to achieve a degree of certainty at the Supreme Court level, required several rounds of litigation. It was submitted, that in view of the above, the current scenario called for reforms in the dispute resolution mechanism, and the introduction of, conscious practices and procedures, aimed at limiting the initiation, as well as, the prolongation of tax disputes. It is, therefore, the submission of the learned counsel for the respondents, that the assertions made 79 Page 79 at the hands of the petitioners, while projecting the first contention, were wholly misconceived, and as such, are liable to be rejected. The second contention:

vested with the High Court, or that it is impermissible to vest the same with an independent, parallel quasi-judicial hierarchy of tribunals, it was submitted, that the petitioners had not been able to appreciate the matter in its correct perspective. It was pointed out, that the NTT Act is a legislation which creates an appellate forum, in a hierarchy of fora, as a remedy for ventilation of grievances emerging out of taxing statutes. To fully appreciate the purport of the special remedy created by the statute, the nature of the right and/or the liability created by the taxing statutes, and the enforcement for which these remedies have been provided, needed to be understood in the correct perspective. Accordingly, in order to debate the rightful cause, learned counsel drew our attention to the JUDGMENT proposition, in the manner, as was understood by the respondents. The submissions advanced in this behalf are being summarized hereinafter. 37. It was the contention of the learned counsel for the respondents, that the Income Tax Act, the Customs Act, and the Excise Act, as also, other taxing statutes create a statutory liability. The said statutory liability has no existence, de hors the statute itself. The said statutory liability, has no existence in common law. It was further submitted, that it had been long well settled, that where a right to plead liability had no existence in common law, but was the creation of a 80 Page 80 statute, which simultaneously provided for a special and particular remedy for enforcing it, the remedy provided by the statute was bound to be followed. In respect of such statutory liability, it was not competent for the party to proceed,

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38. In addition to the above submissions, it was sought to be asserted that the Income Tax Act expressly barred the jurisdiction of civil courts. Reference in this 82 Page 82 behalf was made to Section 293 of the Income Tax Act, which is being extracted hereunder:

39. It has been further held by this Court following the dictum at Barraclough v. Brown (1897) AC 615, that if a statute confers a right and in the same breath provides for enforcement of such right the remedy provided by such a statute is an exclusive one. Applying this doctrine, in Premier Automobiles v. Kamlekar Shantaram Wadke, (1976) 1 SCC 496 at 513, this Court held as under: “23. To sum up, the principles applicable to the jurisdiction of the Civil Court in relation to an industrial dispute may be stated thus: (1) If the dispute is not an industrial dispute, nor does it relate to enforcement of any other right under the Act the remedy lies only in the civil Court. (2) If the dispute is an industrial dispute arising out of a right or liability under the general or common law and not under the Act, the jurisdiction of the civil Court is alternative, leaving it to the election of the suitor concerned to choose his remedy for the relief which is competent to be granted in a particular remedy. (3) If the industrial dispute relates to the enforcement of a right or an obligation created under the Act, then the only remedy available to the suitor is to get an adjudication under the Act. (4) If the right which is sought to be enforced is a right created under the Act such as Chapter VA then the remedy for its enforcement is either Section 33C or the raising of an industrial dispute, as the case may be .” JUDGMENT In paragraph 12 of the Premier Automobiles case (supra), this Court quoted the words of Lord Watson in Barraclough v. Brown (supra) to the following effect: “the right and the remedy are given uno flatu and the one cannot be disassociated from the other” 83 Page 83 40. It is for this reason, according to learned counsel for the respondents, that civil courts, even the High Court having original jurisdiction, would not entertain suits on matters covered by such special statutes creating rights and providing

H]. “The principle underlying those passages seem to me to be applicable to the present case Section 341 of the Income Tax Act, 1952, confers the right, the right to an adjustment tax liability by reference to loss; that right does not exist independently of the section; the section uno flatu in the breath gives a specific remedy and appoints a specific tribunal for its enforcement, namely the General Commission or Special Commissioners. In those circumstances in my judgment, the taxpayer must resort to that remedy and that tribunal. In due course if dissatisfied with the decision of the commissioners concerned he can appeal to the high court by way Case Stated, but any original jurisdiction of the high court by declaration or otherwise, is, in my judgment, excluded.” The contentions of the petitioners, that substituting Section 260A of the Income Tax Act and divesting the High Court of the appellate remedy and vesting it in the NTT, is unconstitutional as it constitutes an inroad into the principles of the rule of law and independence of judiciary, according to learned counsel, are fallacious. JUDGMENT 41. According to the learned counsel for the respondents, the fallacy in the petitioners’ argument is, that they are overlooking the fact that as far as the NTT Act is concerned, there is no common law remedy which has now been divested. Section 260A of the Income Tax Act and Section 35(g), (h), (i) of the Excise Act were all statutorily vested appeals, in the High Court, and as such, as has been held in the above mentioned cases can be completely divested. According to learned counsel, the NTT Act, was on a surer and sounder footing, than the provisions of the Companies Act, which came up for consideration in Union of 84 Page 84 India v. Madras Bar Association, (2010) 11 SCC 87. Accordingly, as no common law remedy has been substituted under the present Act, it was submitted, that the contentions advanced on behalf of the petitioners had no legs to stand. Even when the Companies Act set up, the Company Law Tribunal and the Company

42. Similarly, statutory provisions providing for a revision to the District Judge, with the finality clauses, have been interpreted to exclude the revisionary powers 85 Page 85 of the High Court under Section 115 of CPC. In this behalf reference was made to, Aundal Ammal v. Sadasivan Pilai, (1987) 1 SCC 183, wherein it was held as under:

JUDGMENT 86 Page 86 Court to which an appeal lay to the High Court was liable to be revised by the High Court under Section 115 of the CPC. In that view of the matter, the Full Bench rejected the view of the division bench of the Kerala High Court in Kurien v. Chacko [1960] KLT 1248. With respect, we are unable to sustain the view of the Full Bench of the High Court on this aspect of the matter. In our opinion, the Full Bench misconstrued the provisions of subsection (5) of Section 18 of the Act. Sub-section (5) of Section18 clearly states that such decision of the appellate authority as mentioned in Section 18 of the Act shall not be liable to be questioned except in the manner under Section 20 of the Act. There was thereby an implied prohibition or exclusion of a second revision under Section 115 of the CPC to the High Court when a revision has been provided under Section 20 of the Act in question. When Section 18(5) of the Act specifically states that "shall not be liable to be called in question in any Court of law" except in the manner provided under Section 20, it cannot be said that the High Court which is a court of law and which is a civil court under the CPC under Section 115 of the CPC could revise again an order once again after revision under Section20 of the Act. That would mean there would be a trial by four courts, that would be repugnant to the scheme manifest in the different sections of the Act in question. Public policy or public interest demands curtailment of law's delay and justice demands finality within quick disposal of case. The language of the provisions of Section 18(5) read with Section 20 inhibits further revision. The courts must so construe.” Likewise, our attention was invited to Jetha Bai and Sons v. Sunderdas Rathenai (1988) 1 SCC 722, and reliance was placed on the following: JUDGMENT “15. Even without any discussion it may be seen from the narrative given above that there is really no conflict between the two decisions because the provisions in the two Acts are materially different. However, to clarify matters further we may point put the differences between the two Acts in greater detail and clarity. Under the Kerala Act, against an order passed by a Rent Control Court presided over by a District Munsif, the aggrieved party is conferred a right of appeal under Section 18 . The Appellate Authority has to be a judicial officer not below the rank of a subordinate Judge. The appellate Authority has been conferred powers co-extensive with those of the Rent Control Court but having over-riding effect. Having these factors in mind, the Legislature has declared that in so far as an order of a Rent Control Court is concerned it shall be final subject only to any modification or revision by an Appellate Authority; and in so far as the Appellate Authority is concerned, its decision shall be final and shall not be liable to be called in question in any Court of law except as provided in Section 20 . As regards Section 20 , a division of the powers of revision 87 Page 87

JUDGMENT 88 Page 88

in Mafatlal Industries v. Union of India (1997) 5 SCC 536, while dealing with the JUDGMENT validity of Section 11B(3) of the Excise Act, held as follows:

89 Page 89

90 Page 90

91 Page 91

It was submitted, that a perusal of the above paragraph shows, that this Court noticed, that against the order of the tribunal an appeal was provided for to this Court. The Court declared, that the tribunal was not a departmental organ and the Supreme Court was a civil court as it was hearing a statutory appeal. More importantly it held, that every ground including violation and infraction of judicial procedure could be urged in these appeals, obviating the necessity of a suit or a writ petition in matters relating to refund. This Court took care to hold, that so far JUDGMENT as the jurisdiction of High Courts under Article 226 or this Court under Article 32 are concerned, they cannot be curtailed. It further held, that it was equally obvious that while exercising the power under Article 226/32 the Court would certainly take note of the legislative intent manifested in the provisions of the Act and would exercise their jurisdiction consistent with the provisions of the enactment. It was accordingly submitted, that in view of the conclusions drawn, in the above judgment, all the contentions urged by the petitioners, needed to be rejected. 92 Page 92 The third contention: 44. Learned counsel for the respondents, vehemently controverted the submissions advanced at the hands of the petitioners, that the NTT Act was ultra

JUDGMENT Based on the aforesaid provision, it was sought to be asserted that the Parliament had the unqualified and absolute jurisdiction, power and authority to enact laws in respect of matters enumerated in Lists I and III of the Constitution. Additionally, placing reliance on Article 246(4), it was asserted, that even on subjects not expressly provided for in the three Lists of the Seventh Schedule to the Constitution, the Parliament still had the absolute and untrammeled right to enact legislation. Insofar as the instant aspect of the matter is concerned, 93 Page 93 learned counsel for the respondents placed reliance on entries 77 to 79, 82 to 84, 95 and 97 of List I. The above entries are being extracted hereunder:

Based on the entries reproduced hereinabove, especially entries 77 to 79, it was submitted, that Parliament had the jurisdiction to enact legislation even in respect JUDGMENT of the Supreme Court and the High Courts. Additionally, it had the power to legislate, and thereby, to extend or exclude the jurisdiction of a High Court. Relying on entries 82 to 84, it was the submission of the learned counsel for the respondents, that on matters of income-tax, customs duty and excise duty, the power to legislate was unequivocally vested with the Parliament. Reliance was placed on entry 95, to contend, that the extent of the jurisdiction of all courts including the High Court, in respect of matters expressed in List I could also be laid down by the Parliament. Referring again to entries 82 to 84 it was submitted, 94 Page 94 that the extension or exclusion of jurisdiction on tax matters, was also within the domain of Parliament. So as to assert, that in case this Court was of the view, that the subject of the legislation contained in the NTT Act did not find mention, in

Referring to the above entries, it was the contention of the learned counsel for JUDGMENT the respondents that Parliament had the authority to enact legislation, in respect of the extent of jurisdiction and powers of courts, including the High Court. It was, however pointed out, that this power extended only to such matters and subjects, that found mention in List III of the Seventh Schedule. It was, therefore, that reliance was placed on entry 11A in List III, to contend that administration of justice, constitution and organization of all courts (except the Supreme Court and the High Courts) would lead to the inevitable conclusion that the NTT Act was promulgated, well within the power vested with the Parliament, under Article 246(2) of the Constitution. 95 Page 95 46. Additionally, reliance was placed by the learned counsel for the respondents, on Article 247 of the Constitution, which is reproduced hereunder:

Referring to the above provision, it was the assertion of the learned counsel for the respondents, that power was expressly vested with the Parliament, to establish additional courts, for better administration of laws. It was submitted, that this was exactly what the Parliament had chosen to do, while enacting the NTT Act. Referring to the objects and reasons, indicating the basis of the enactment of the NTT Act, it was the categoric assertion at the hands of the learned counsel, that the impugned enactment was promulgated with the clear understanding, that the NTT would provide better adjudication of legal issues, arising out of direct/indirect tax laws. 47. Besides Articles 246 and 247 of the Constitution, learned counsel for the JUDGMENT respondents asserted, that Articles 323A and 323B were inserted into the Constitution, by the Constitution (Forty-second Amendment) Act, 1976. The above provisions were included in the newly enacted Part XIV A of the Constitution. It was asserted, that the instant amendment of the Constitution was made for achieving two objectives. Firstly, to exclude the power of judicial review of the High Courts and the Supreme Court, totally. Thus excluding judicial review in its entirety. And secondly, to create independent specialized tribunals, with power of judicial review, which would ease the burden of the High Courts and the 96 Page 96 Supreme Court. It was however acknowledged by learned counsel representing the respondents, that the first of the above mentioned objectives, was interpreted by this Court in L. Chandra Kumar v. Union of India (1997) 3 SCC 261, which

the Constitution, excluded the jurisdiction of the High Courts and the Supreme Court under Articles 226/227 and 32/136 respectively. Insofar as the second objective is concerned, placing reliance in L. Chandra Kumar case (supra), it was the contention of the learned counsel for the respondents, that this Court had clearly concluded, that as long as the power of judicial review continue with the High Courts and the Supreme Court, under the provisions referred to hereinabove, the enactment under reference would be constitutionally valid. Therefore, in response to the submissions advanced at the hands of the learned counsel for the petitioners (as have been noticed hereinabove), it was the contention of the learned counsel for the respondents, that the power to enact JUDGMENT the NTT Act, was clearly vested with the Parliament even under Article 323B of the Constitution. Furthermore, since the impugned enactment did not exclude the jurisdiction of the High Courts under Articles 226 and 227 of the Constitution, and also, did not exclude the jurisdiction of the Supreme Court under Articles 32 and 136 of the Constitution, the challenge to the constitutional validity of the NTT Act was wholly unjustified. 48. Learned counsel for the respondents was at pains to emphasise, that the jurisdictional road of Courts, as final interpreter of the law, was clearly preserved. 97 Page 97 Firstly, because a statutory appeal was provided for under the NTT Act to the Supreme Court. And secondly because, judicial review vested in the High Courts under Articles 226 and 227 of the Constitution, and in the Supreme Court under

in the vesting of appellate jurisdiction from orders passed by Appellate Tribunals (constituted under the Income Tax Act, Customs Act and the Excise Act) with the NTT. 49. While acknowledging the fact, that the jurisdiction vested in the High Courts to hear appeals from the Appellate Tribunals, under the Income Tax Act (vide Section 260A), the Customs Act (vide Section 130), and the Excise Act (vide Section 35G), has been transferred from the jurisdictional High Court to the NTT, it was submitted that appellate jurisdiction vested in a High Court under a statute, could be taken away by an amendment of the statute. Stated simply, the submission at the behest of the respondents was, whatever is vested by a JUDGMENT statutory enactment, can likewise be divested in the same manner. It was therefore sought to be asserted, that the grounds of challenge to the NTT Act raised, at the behest of the petitioners, were misconceived and unacceptable. 50. Besides the submissions noticed hereinabove, it was also contended on behalf of the respondents, that the assertion made by the petitioners, that appellate jurisdiction on “substantial questions of law” could not be vested with the NTT, was fallacious. In this behalf, it was sought to be reiterated, that jurisdiction of civil courts (including the original side of the High Court) was 98 Page 98 barred in respect of tax related issues. It was sought to be explained, that a case could involve questions of fact, as well as, questions of law right from the stage of the initial adjudicatory authority. But, it was pointed out, that only cases

v. Union of India (1997) 5 SCC 536, it was submitted, that the above contention raised by the petitioners had no legs to stand. Furthermore, it was sought to be pointed out, that the phrase “substantial questions of law” has been interpreted by this Court to mean, not only questions of general pubic importance, but also questions which would directly and substantially affect the rights of the parties to the litigation. It was also asserted, that a question of law would also include, a legal issue not previously settled, subject to the condition, that it had a material bearing on the determination of the controversy to be settled, between the parties. It is accordingly contended, that no limited interpretation could be placed on the term “substantial questions of law”. Accordingly, it was submitted, that a JUDGMENT challenge to the constitution of the NTT on the premise that the NTT was vested with the jurisdiction to settle “substantial questions of law” was unsustainable. 51. In order to support his above submission, learned counsel for the respondents placed emphatic reliance on a few judgments rendered by this Court. The same are being noticed hereunder: (i) Reliance was also placed on L. Chandra Kumar v. Union of India, (1997) 3 SCC 261. Learned counsel for the respondents, while relying on the instant judgment, made a reference to various observations recorded therein. We wish 99 Page 99 to incorporate hereunder all the paragraphs on which reliance was placed by the learned counsel:- “80. However, it is important to emphasise that though the subordinate judiciary or Tribunals created under ordinary legislations cannot exercise the power of judicial review of legislative action to the exclusion of the High Courts and the Supreme Court, there is no constitutional prohibition against their performing a supplemental — as opposed to a substitutional — role in this respect. That such a situation is contemplated within the constitutional scheme becomes evident when one analyses clause (3) of Article 32 of the Constitution which reads as under: “32. Remedies for enforcement of rights conferred by this Part. — (1) … … … … … (2) … … … … … (3) Without prejudice to the powers conferred on the Supreme Court by clauses (1) and (2), 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). ” 81. If the power under Article 32 of the Constitution, which has been described as the “heart” and “soul” of the Constitution, can be additionally conferred upon “any other court”, there is no reason why the same situation cannot subsist in respect of the jurisdiction conferred upon the High Courts under Article 226 of the Constitution. So long as the jurisdiction of the High Courts under Articles 226/227 and that of this Court under Article 32 is retained, there is no reason why the power to test the validity of legislations against the provisions of the Constitution cannot be conferred upon Administrative Tribunals created under the Act or upon Tribunals created under Article 323-B of the Constitution. It is to be remembered that, apart from the authorisation that flows from Articles 323- A and 323-B, both Parliament and the State Legislatures possess legislative competence to effect changes in the original jurisdiction of the Supreme Court and the High Courts. This power is available to Parliament under Entries 77, 78, 79 and 95 of List I and to the State Legislatures under Entry 65 of List II; Entry 46 of List III can also be availed of both by Parliament and the State Legislatures for this purpose. 82. There are pressing reasons why we are anxious to preserve the conferment of such a power on these Tribunals. When the Framers of our Constitution bestowed the powers of judicial review of legislative action upon the High Courts and the Supreme Court, they ensured that other constitutional safeguards were created to assist them in effectively discharging this onerous burden. The expectation was that this power would be required to be used only occasionally. However, in the five decades that have ensued since Independence, the quantity of litigation JUDGMENT 100 Page 100 before the High

JUDGMENT Report on Oral Arguments and Written Arguments in the Higher Courts th (1984); Satish Chandra’s Committee Report 1986; LCI, 124 Report on the High Court Arrears – A Fresh Look (1988); Report of the Arrears Committee (1989-90). 101 Page 101 85. An appraisal of the daunting task which confronts the High Courts can be made by referring to the assessment undertaken by the LCI in its 124th Report which was released sometime after the judgment in Sampath Kumar’s case (supra) . The Report was delivered in 1988, nine years ago, and some changes have occurred since, but the broad perspective which emerges is still, by and large, true:

JUDGMENT 102 Page 102

Indian Jurisprudence that the jurisdiction enjoyed by the High Court is a holy cow required a review. It, therefore, recommended the trimming of the jurisdiction of the High Courts by setting up specialist courts/Tribunals while simultaneously eliminating the jurisdiction of the High Courts. 87. It is important to realise that though the theory of alternative institutional mechanisms was propounded in Sampath Kumar’s case (supra) in respect of the Administrative Tribunals, the concept itself — that of creating alternative modes of dispute resolution which would relieve High Courts of their burden while simultaneously providing specialised justice — is not new. In fact, the issue of having a specialised tax court has been discussed for several decades; though the Report of the High Court Arrears Committee (1972) dismissed it as “ill-conceived”, the LCI, in its 115th Report (1986) revived the recommendation of setting up separate Central Tax Courts. Similarly, other Reports of the LCI have suggested the setting up of ‘Gram Nyayalayas’ [LCI, 114th Report (1986)], Industrial/Labour Tribunals [LCI, 122nd Report (1987)] and Education Tribunals [LCI, 123rd Report (1987)]. 88. In R.K. Jain’s case, (1993) AIR SCW 1899, this Court had, in order to understand how the theory of alternative institutional mechanisms had functioned in practice, recommended that the LCI or a similar expert body should conduct a survey of the functioning of these Tribunals. It was hoped that such a study, conducted after gauging the working of the Tribunals over a sizeable period of more than five years would provide an answer to the questions posed by the critics of the theory. Unfortunately, we do not have the benefit of such a study. We may, however, advert to the Report of the Arrears Committee (1989-90), popularly known as the Malimath Committee Report, which has elaborately dealt with the aspect. The observations contained in the Report, to this extent they contain a review of the functioning of the Tribunals over a period of three years or so after their institution, will be useful for our purpose. Chapter VIII of the second volume of the Report, “ Alternative Modes and Forums for Dispute Resolution ”, deals with the issue at length. After forwarding its specific recommendations on the feasibility of setting up ‘Gram Nyayalayas’, Industrial Tribunals and Educational Tribunals, the Committee has dealt with the issue of Tribunals set up under Articles 323-A and 323-B of the JUDGMENT 103 Page 103 Constitution. The relevant observations in this regard, being of considerable significance to our analysis, are extracted in full as under: “ Functioning of Tribunals 8.63 Several tribunals are functioning in the country. Not all of them, however, have inspired confidence in the public mind . The reasons are not far to seek. The foremost is the lack of competence, objectivity and judicial approach. The next is their constitution, the power and method of appointment of personnel thereto, the inferior status and the casual method of working. The last is their actual composition; men of calibre are not willing to be appointed as presiding officers in view of the uncertainty of tenure, unsatisfactory conditions of service, executive subordination in matters of administration and political interference in judicial functioning . For these and other reasons, the quality of justice is stated to have suffered and the cause of expedition is not found to have been served by the establishment of such tribunals. 8.64 Even the experiment of setting up of the Administrative Tribunals under the Administrative Tribunals Act, 1985, has not been widely welcomed. Its members have been selected from all kinds of services including the Indian Police Service. The decision of the State Administrative Tribunals are not appealable except under Article 136 of the Constitution. On account of the heavy cost and remoteness of the forum, there is virtual negation of the right of appeal. This has led to denial of justice in many cases and consequential dissatisfaction. There appears to be a move in some of the States where they have been established for their abolition. Tribunals — Tests for Including High Court’s Jurisdiction 8.65 A Tribunal which substitutes the High Court as an alternative institutional mechanism for judicial review must be no less efficacious than the High Court. Such a tribunal must inspire confidence and public esteem that it is a highly competent and expert mechanism with judicial approach and objectivity. What is needed in a tribunal, which is intended to supplant the High Court, is legal training and experience, and judicial acumen, equipment and approach . When such a tribunal is composed of personnel drawn from the judiciary as well as from services or from amongst experts in the field, any weightage in favour of the service members or expert members and value-discounting the judicial members would render the tribunal less effective and efficacious than the High Court. The Act setting up such a tribunal would itself have to be declared as void under such circumstances. The same would not at all be conducive to judicial independence and may even tend, directly or indirectly, to influence their decision-making process, especially when the Government is a litigant in most of the cases coming before such tribunal. (See S.P. Sampath Kumar ’s case (supra)). JUDGMENT 104 Page 104

JUDGMENT 105 Page 105 90. We may first address the issue of exclusion of the power of judicial review of the High Courts. We have already held that in respect of the power of judicial review, the jurisdiction of the High Courts under Articles 226/227 cannot be excluded. It has been contended before us that the Tribunals should not be allowed to adjudicate upon matters where the vires of legislations is questioned, and that they should restrict themselves to handling matters where constitutional issues are not raised. We cannot bring ourselves to agree to this proposition as that may result in splitting up proceedings and may cause avoidable delay. If such a view were to be adopted, it would be open for litigants to raise constitutional issues, many of which may be quite frivolous, to directly approach the High Courts and thus subvert the jurisdiction of the Tribunals. Moreover, even in these special branches of law, some areas do involve the consideration of constitutional questions on a regular basis; for instance, in service law matters, a large majority of cases involve an interpretation of Articles 14, 15 and 16 of the Constitution. To hold that the Tribunals have no power to handle matters involving constitutional issues would not serve the purpose for which they were constituted. On the other hand, to hold that all such decisions will be subject to the jurisdiction of the High Courts under Articles 226/227 of the Constitution before a Division Bench of the High Court within whose territorial jurisdiction the Tribunal concerned falls will serve two purposes. While saving the power of judicial review of legislative action vested in the High Courts under Articles 226/227 of the Constitution, it will ensure that frivolous claims are filtered out through the process of adjudication in the Tribunal. The High Court will also have the benefit of a reasoned decision on merits which will be of use to it in finally deciding the matter. 91. It has also been contended before us that even in dealing with cases which are properly before the Tribunals, the manner in which justice is dispensed by them leaves much to be desired. Moreover, the remedy provided in the parent statutes, by way of an appeal by special leave under Article 136 of the Constitution, is too costly and inaccessible for it to be real and effective. Furthermore, the result of providing such a remedy is that the docket of the Supreme Court is crowded with decisions of Tribunals that are challenged on relatively trivial grounds and it is forced to perform the role of a first appellate court. We have already emphasised the necessity for ensuring that the High Courts are able to exercise judicial superintendence over the decisions of the Tribunals under Article 227 of the Constitution. In R.K. Jain’s case (supra) , after taking note of these facts, it was suggested that the possibility of an appeal from the Tribunal on questions of law to a Division Bench of a High Court within whose territorial jurisdiction the Tribunal falls, be pursued. It appears that no follow-up action has been taken pursuant to the suggestion. Such a measure would have improved matters considerably. Having regard to both the aforestated contentions, we hold that all decisions of Tribunals, JUDGMENT 106 Page 106 whether created pursuant to Article 323-A or Article 323-B of the Constitution, will be subject to the High Court’s writ jurisdiction under Articles 226/227 of the Constitution, before a Division Bench of the High Court within whose territorial jurisdiction the particular Tribunal falls. 92. We may add here that under the existing system, direct appeals have been provided from the decisions of all Tribunals to the Supreme Court under Article 136 of the Constitution. In view of our above-mentioned observations, this situation will also stand modified. In the view that we have taken, no appeal from the decision of a Tribunal will directly lie before the Supreme Court under Article 136 of the Constitution; but instead, the aggrieved party will be entitled to move the High Court under Articles 226/227 of the Constitution and from the decision of the Division Bench of the High Court the aggrieved party could move this Court under Article 136 of the Constitution. 93. Before moving on to other aspects, we may summarise our conclusions on the jurisdictional powers of these Tribunals. The Tribunals are competent to hear matters where the vires of statutory provisions are questioned. However, in discharging this duty, they cannot act as substitutes for the High Courts and the Supreme Court which have, under our constitutional set-up, been specifically entrusted with such an obligation. Their function in this respect is only supplementary and all such decisions of the Tribunals will be subject to scrutiny before a Division Bench of the respective High Courts. The Tribunals will consequently also have the power to test the vires of subordinate legislations and rules. However, this power of the Tribunals will be subject to one important exception. The Tribunals shall not entertain any question regarding the vires of their parent statutes following the settled principle that a Tribunal which is a creature of an Act cannot declare that very Act to be unconstitutional. In such cases alone, the High Court concerned may be approached directly. All other decisions of these Tribunals, rendered in cases that they are specifically empowered to adjudicate upon by virtue of their parent statutes, will also be subject to scrutiny before a Division Bench of their respective High Courts. We may add that the Tribunals will, however, continue to act as the only courts of first instance in respect of the areas of law for which they have been constituted. By this, we mean that it will not be open for litigants to directly approach the High Courts even in cases where they question the vires of statutory legislations (except, as mentioned, where the legislation which creates the particular Tribunal is challenged) by overlooking the jurisdiction of the concerned Tribunal. 94. The directions issued by us in respect of making the decisions of Tribunals amenable to scrutiny before a Division Bench of the respective High Courts will, however, come into effect prospectively i.e. will apply to decisions rendered hereafter. To maintain the sanctity of judicial JUDGMENT 107 Page 107 proceedings, we have invoked the doctrine of prospective overruling so as not to disturb the procedure in relation to decisions already rendered.” Based on the decisions of this Court referred to above, it was the contention of the learned counsel for the respondents, that the submissions advanced on

Association, (2002) 4 SCC 275. Insofar as the controversy raised in the instant judgment is concerned, it would be relevant to mention, that banks and financial institutions had been experiencing considerable difficulties in recovery of loans, and enforcement of securities. The procedure for recovery of debts due to banks and financial institutions, which was being followed, had resulted in the funds being blocked. To remedy the above situation, Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Act, inter alia , provided for establishment of tribunals and Appellate Tribunals. The said tribunals were given jurisdiction, powers and authority, to entertain and decide, JUDGMENT applications from banks and financial institutions, for recovery of debts, due to banks and financial institutions. The Appellate Tribunal, was vested with the jurisdiction and authority, to entertain appeals. The procedure to be followed by the tribunals, as also, the Appellate Tribunals, was provided for under the above enactment. The legislation also provided for modes of recovery of debts through Recovery Officers (appointed under the Act). The constitutional validity of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was raised on the ground, that the legislation was unreasonable and violative of Article 14 of the Constitution. It was also the claim of those who raised the said challenge, 108 Page 108 that the enactment was beyond the legislative competence of the Parliament. The controversy came to be examined, in the first instance, by the Delhi High Court (in Delhi High Court Bar Association v. Union of India, AIR 1975 Delhi

was within the purview of Articles 323A and 323B of the Constitution, and despite the fact that, the expression “administration of justice” appearing in entry 11A of List III of the Seventh Schedule to the Constitution, would also include tribunals administering justice, yet the impugned Act was unconstitutional, as it had the effect of eroding the independence of the judiciary, besides being irrational, discriminatory, unreasonable and arbitrary. As such it was held, that the provisions of the enactment were violative of the mandate contained in Article 14 of the Constitution. The High Court, in its judgment, also quashed the appointment of Presiding Officers of the tribunal. While adjudicating upon the above controversy in reference to some of the issues that have been raised JUDGMENT before us, our pointed attention was invited to the following observations: “21. ….. Sub-section (20) of Section 19 provides that after giving the applicant and the defendant an opportunity of being heard, the Tribunal may pass such interim or final order as it thinks fit to meet the ends of justice. It is after this order that a certificate is issued by the Presiding Officer to the Recovery Officer for recovery of money. Section 22 of the Act has not been amended. Therefore, reading Sections 19 and 22 of the Act together, it appears that the Tribunal and the Appellate Tribunal are to be guided by the principles of natural justice while trying the matter before them. Section 22(1) of the Act stipulates that the Tribunal and the Appellate Tribunal, while being guided by the principles of natural justice, are to be subjected to the other provisions of the Act and the Rules. Rule 12(7) provides that if a defendant denies his liability to pay the claim made by the applicant, the Tribunal may act upon the affidavit of the applicant 109 Page 109 who is acquainted with the facts of the case. In this Rule, which deals with the consideration of the applicant’s bank application, there is no reference to the examination of witnesses. This sub-rule refers only to the affidavit of the applicant. Rule 12(6), on the other hand, provides that the Tribunal may, at any time, for sufficient reason order a fact to be proved by affidavit or may pass an order that the affidavit of any witness may be read at the hearing. It is in the proviso to this sub-rule that a reference is made to the cross-examination of witnesses. 22. At the outset, we find that Rule 12 is not happily worded. The reason for establishing Banking Tribunals being to expedite the disposal of the claims by the banks, Parliament thought it proper only to require the principles of natural justice to be the guiding factor for the Tribunals in deciding the applications, as is evident from Section 22 of the Act. While the Tribunal has, no doubt, been given the power of summoning and enforcing the attendance of any witness and examining him on oath, but the Act does not contain any provision which makes it mandatory for the witness to be examined, if such a witness could be produced. Rule 12(6) has to be read harmoniously with the other provisions of the Act and the Rules. As we have already noticed, Rule 12(7) gives the Tribunal the power to act upon the affidavit of the applicant where the defendant denies his liability to pay the claims. Rule 12(6), if paraphrased, would read as follows: 1. the Tribunal may, at any time for sufficient reason, order that any particular fact or facts may be proved by affidavit … on such conditions as the Tribunal thinks reasonable; 2. the Tribunal may, at any time for sufficient reason, order … that the affidavit of any witness may be read at the hearing, on such conditions as the Tribunal thinks reasonable. 23. In other words, the Tribunal has the power to require any particular fact to be proved by affidavit, or it may order that the affidavit of any witness may be read at the hearing. While passing such an order, it must record sufficient reasons for the same. The proviso to Rule 12(6) would certainly apply only where the Tribunal chooses to issue a direction on its own, for any particular fact to be proved by affidavit or the affidavit of a witness being read at the hearing. The said proviso refers to the desire of an applicant or a defendant for the production of a witness for cross- examination. In the setting in which the said proviso occurs, it would appear to us that once the parties have filed affidavits in support of their respective cases, it is only thereafter that the desire for a witness to be cross-examined can legitimately JUDGMENT arise. It is at that time, if it appears to the Tribunal, that such a witness can be produced and it is necessary to do so and there is no desire to prolong the case that it shall require the witness to be present for cross-examination and in the event of his not appearing, then the affidavit shall not be taken into evidence. When the High Courts and the Supreme Court in exercise of their jurisdiction under Article 226 110 Page 110 and Article 32 can decide questions of fact as well as law merely on the basis of documents and affidavits filed before them ordinarily, there should be no reason as to why a Tribunal, likewise, should not be able to decide the case merely on the basis of documents and affidavits before it. It is common knowledge that hardly any transaction with the bank would be oral and without proper documentation, whether in the form of letters or formal agreements. In such an event the bona fide need for the oral examination of a witness should rarely arise. There has to be a very good reason to hold that affidavits, in such a case, would not be sufficient. 24. The manner in which a dispute is to be adjudicated upon is decided by the procedural laws which are enacted from time to time. It is because of the enactment of the Code of Civil Procedure that normally all disputes between the parties of a civil nature would be adjudicated upon by the civil courts. There is no absolute right in anyone to demand that his dispute is to be adjudicated upon only by a civil court. The decision of the Delhi High Court proceeds on the assumption that there is such a right. As we have already observed, it is by reason of the provisions of the Code of Civil Procedure that the civil courts had the right, prior to the enactment of the Debts Recovery Act, to decide the suits for recovery filed by the banks and financial institutions. This forum, namely, that of a civil court, now stands replaced by a Banking Tribunal in respect of the debts due to the bank. When in the Constitution Articles 323-A and 323-B contemplate establishment of a Tribunal and that does not erode the independence of the judiciary, there is no reason to presume that the Banking Tribunals and the Appellate Tribunals so constituted would not be independent, or that justice would be denied to the defendants or that the independence of the judiciary would stand eroded. 25. Such Tribunals, whether they pertain to income tax or sales tax or excise or customs or administration, have now become an essential part of the judicial system in this country. Such specialised institutions may not strictly come within the concept of the judiciary, as envisaged by Article 50, but it cannot be presumed that such Tribunals are not an effective part of the justice delivery system, like courts of law. It will be seen that for a person to be appointed as a Presiding Officer of a Tribunal, he should be one who is qualified to be a District Judge and, in case of appointment of the Presiding Officer of the Appellate Tribunal he is, or has been, qualified to be a Judge of a High Court or has been a member of the Indian Legal Service who has held a post in Grade I for at least three years or has held office as the Presiding Officer of a Tribunal for at least three years. Persons who are so appointed as Presiding Officers of the Tribunal or of the Appellate Tribunal would be well versed in law to be able to decide cases independently and judiciously. It has to be borne in mind that the decision of the Appellate Tribunal is not final, in JUDGMENT the sense that the same can be subjected to judicial review by the High Court under Articles 226 and 227 of the Constitution. 111 Page 111 26. With the establishment of the Tribunals, Section 31 provides for the transfer of pending cases from civil courts to the Tribunal. We do not find such a provision being in any way bad in law. Once a Debts Recovery Tribunal has been established, and the jurisdiction of courts barred by Section 18 of the Act, it would be only logical that any matter pending in the civil court should stand transferred to the Tribunal. This is what happened when the Central Administrative Tribunal was established. All cases pending in the High Courts stood transferred. Now that exclusive jurisdiction is vested in the Banking Tribunal, it is only in that forum that bank cases can be tried and, therefore, a provision like Section 31 was enacted. 27. With regard to the observations of the Delhi High Court in relation to the pecuniary jurisdiction of the Tribunals and of the Delhi High Court, the Act has been enacted for the whole of India. In most of the States, the High Courts do not have original jurisdiction. In order to see that the Tribunal is not flooded with cases where the amounts involved are not very large, the Act provides that it is only where the recovery of the money is more than Rs 10 lakhs that the Tribunal will have the jurisdiction to entertain the application under Section 19. With respect to suits for recovery of money less than Rs 10 lakhs, it is the subordinate courts which would continue to try them. In other words, for a claim of Rs 10 lakhs or more, exclusive jurisdiction has been conferred on the Tribunal but for any amount less than Rs 10 lakhs, it is the ordinary civil courts which will have jurisdiction. The bifurcation of original jurisdiction between the Delhi High Court and the subordinate courts is a matter which cannot have any bearing on the validity of the establishment of the Tribunal. It is only in those High Courts which have original jurisdiction that an anomalous situation arises where suits for recovery of money less than Rs 10 lakhs have to be decided by the High Courts while the Tribunals have jurisdiction to decide suits for recovery of more than Rs 10 lakhs. This incongruous situation, which can be remedied by the High Court divesting itself of the original jurisdiction in regard to such claims and vesting the said jurisdiction with the subordinate courts or vice versa, cannot be a ground for holding that the Act is invalid. JUDGMENT xxx xxx xxx 30. By virtue of Section 29 of the Act, the provisions of the Second and Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, have become applicable for the realisation of the dues by the Recovery Officer. Detailed procedure for recovery is contained in these Schedules to the Income Tax Act, including provisions relating to arrest and detention of the defaulter. It cannot, therefore, be said that the Recovery Officer would act in an arbitrary manner. Furthermore, Section 30, after amendment by the Amendment Act, 2000, gives a right to any person aggrieved by an order of the Recovery Officer, to prefer an appeal to the Tribunal. Thus now an 112 Page 112 appellate forum has been provided against any orders of the Recovery Officer which may not be in accordance with law. There is, therefore, sufficient safeguard which has been provided in the event of the Recovery Officer acting in an arbitrary or an unreasonable manner. The provisions of Sections 25 and 28 are, therefore, not bad in law. 31. For the aforesaid reasons, while allowing the appeals of the Union of India and the Banks, we hold that the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 is a valid piece of legislation. As a result thereof, the writ petitions or appeals filed by various parties challenging the validity of the said Act or some of the provisions thereof, are dismissed. It would be open to the parties to raise other contentions on the merits of their cases before the authority constituted under the Act and, only thereafter, should a High Court entertain a petition under Articles 226 and/or 227 of the Constitution. Transferred cases stand disposed of accordingly. Parties to bear their own costs.” (iii) Reliance was next placed on State of Karnataka v. Vishwabharathi House Building Cooperative Society & Ors., (2003) 2 SCC 412. The primary question which arose for consideration was the constitutional validity of the Consumer Protection Act, 1986. The challenge was raised on the ground, that Parliament was not empowered to establish a hierarchy of courts like the District Fora, the State Commission and the National Commission, as this would constitute a parallel hierarchy of courts, in addition to the courts established under the JUDGMENT Constitution, namely, District Courts, High Courts and the Supreme Court. In this behalf the pointed submission was, that Parliament could only establish courts, with power to deal with specific subjects, but not such a court which would run parallel to the civil courts. It was sought to be asserted, that even under Articles 323A and 323B of the Constitution, Parliament could not enact a legislation, by which it could establish tribunals, in substitution of civil courts including the High Court. This, according to those who raised the challenge, would strike at the independence of the judiciary. As against the above assertions, the legislative 113 Page 113 competence of the Parliament and the State Legislatures, to provide for creation of courts and tribunals, reliance was placed on entries 77, 78 and 79 in List I of the Seventh Schedule, as also, entries 11A and 46 contained in List III of the

held as under:- “12. A bare perusal of the aforementioned provisions does not leave any manner of doubt as regard the legislative competence of Parliament to provide for creation of Special Courts and Tribunals. Administration of justice; constitution and organization of all courts, except the Supreme Court and the High Courts is squarely covered by Entry 11-A of List III of the Constitution of India. The said entry was originally a part of Entry 3 of List II. By reason of the Constitution (Forty-second Amendment) Act, 1976 and by Section 57( a )( vi ) thereof, it was inserted into List III as Item 11-A. 13. By virtue of clause (2) of Article 246 of the Constitution, Parliament has the requisite power to make laws with respect of constitution of organization of all courts except the Supreme Court and the High Court. 14. The learned counsel appearing on behalf of the petitioners could not seriously dispute the plenary power of Parliament to make a law as regard constitution of courts but as noticed supra, merely urged that it did not have the competence to create parallel civil courts. 15. The said submission has been made purported to be relying on or on the basis of the following observations made by Shinghal, J. while delivering a partially dissenting judgment in Special Courts Bill, 1978, In re : (1979) 1 SCC 380 (SCC at p. 455, para 152) JUDGMENT “ 152 . The Constitution has thus made ample and effective provision for the establishment of a strong, independent and impartial judicial administration in the country, with the necessary complement of civil and criminal courts. It is not permissible for Parliament or a State Legislature to ignore or bypass that scheme of the Constitution by providing for the establishment of a civil or criminal court parallel to a High Court in a State, or by way of an additional or extra or a second High Court, or a court other than a court subordinate to the High Court. Any such attempt would be unconstitutional and will strike at the independence of the judiciary which has so nobly been enshrined in the Constitution and so carefully nursed over the years.” 16. The argument of the learned counsel is fallacious inasmuch as the provisions of the said Act are in addition to the provisions of any other law 114 Page 114 for the time being in force and not in derogation thereof as is evident from Section 3 thereof. 17. The provisions of the said Act clearly demonstrate that it was enacted keeping in view the long-felt necessity of protecting the common man from wrongs wherefor the ordinary law for all intent and purport had become illusory. In terms of the said Act, a consumer is entitled to participate in the proceedings directly as a result whereof his helplessness against a powerful business house may be taken care of. 18. This Court in a large number of decisions considered the purport and object of the said Act. By reason of the said statute, quasi-judicial authorities have been created at the district, State and Central levels so as to enable a consumer to ventilate his grievances before a forum where justice can be done without any procedural wrangles and hypertechnicalities. 19. One of the objects of the said Act is to provide momentum to the consumer movement. The Central Consumer Protection Council is also to be constituted in terms of Section 4 of the Act to promote and protect the rights of the consumers as noticed hereinbefore. xxx xxx xxx 24. In terms of Section 10, the President of a District Forum shall be a person who is, or has been, or is qualified to be a District Judge and the Forum shall also consist of two other members who are required to be persons of ability, integrity and standing and have adequate knowledge or experience of, or have shown capacity in dealing with, problems relating to economics, law, commerce, accountancy, industry, public affairs or administration and one of them shall be a woman. The tenure of the members of the District Forum is fixed. 25. Section 13 of the said Act lays down a detailed procedure as regards the mode and manner in which the complaints received by the District Forum are required to be dealt with. Section 14 provides for the directions which can be issued by the District Forum on arriving at a satisfaction that the goods complained against suffer from any of the defects specified in the complaint JUDGMENT or that any of the allegations contained in the complaint about the deficiencies in services have been proved. 26 . Section 15 provides for an appeal from the order made by the District Forum to the State Commission. 27. Section 16 provides for composition of the State Commission which reads thus: “ 16 . (1) Each State Commission shall consist of,— ( a ) a person who is or has been a Judge of a High Court, appointed by the State Government, who shall be its President: Provided that no appointment under this clause shall be made except after consultation with the Chief Justice of the High Court; ( b ) two other members, who shall be persons of ability, integrity and standing and have adequate knowledge or experience of, or 115 Page 115 have shown capacity in dealing with, problems relating to economics, law, commerce, accountancy, industry, public affairs or administration, one of whom shall be a woman: Provided that every appointment under this clause shall be made by the State Government on the recommendation of a Selection Committee consisting of the following, namely:

JUDGMENT Supreme Court to be nominated by the Chief Justice of India. The tenure of the office of the National Commission is also fixed by reason of sub-section (3) of Section 20. 29. By reason of the provisions of the said Act, therefore, independent authorities have been created. 30. Sections 15, 19 and 23 provide for the hierarchy of appeals. By reason of sub-sections (4), (5) and (6) of Section 13, the District Forum shall have the same powers as are vested in the civil courts for the purposes mentioned therein. Sub-sections (2) and (2-A) of Section 14 mandate that the proceedings shall be conducted by the President of the District Forum and at least one member thereof sitting together. Only in the event of any difference between them on any point or points, the same is 116 Page 116

This Court then, having placed reliance on Union of India v. Delhi High Court Bar

JUDGMENT 117 Page 117 bring about a qualitative change in the attitude of the service provider. Assignment of reasons excludes or at any rate minimizes the chances of arbitrariness and the higher forums created under the Act can test the correctness thereof. 40. The District Forum, the State Commission and the National Commission are not manned by lay persons. The President would be a person having judicial background and other members are required to have the expertise in the subjects such as economics, law, commerce, accountancy, industry, public affairs, administration etc. It may be true that by reason of sub-section (2-A) of Section 14 of the Act, in a case of difference of opinion between two members, the matter has to be referred to a third member and, in rare cases, the majority opinion of the members may prevail over the President. But, such eventuality alone is insufficient for striking down the Act as unconstitutional, particularly, when provisions have been made therein for appeal thereagainst to a higher forum. 41. By reason of the provisions of the said Act, the power of judicial review of the High Court, which is a basic feature of the Constitution, has not been nor could be taken away. xxx xxx xxx 49. The question as regards the applicability or otherwise of Articles 323-A and 323-B of the Constitution in the matter of constitution of such Tribunals came up for consideration before this Court in L. Chandra Kumar v. Union of India, (1997) 3 SCC 261 . This Court therein clearly held that the constitutional provisions vest Parliament and the State Legislatures, as the case may be, with powers to divest the traditional courts of a considerable portion of their judicial work. It was observed that the Parliament and the State Legislatures possess legislative competence to effect changes in the original jurisdiction of the Supreme Court and High Court apart from the authorisation that flows from Articles 323-A and 323-B in terms of Entries 77, 78, 79 and 95 of List I so far as the Parliament is concerned, and in terms of Entry 65 of List II and Entry 46 of List III so far as the State Legislatures are concerned. It was further held that power of judicial review being the basic structure of the Constitution cannot be taken away. 50. We, therefore, are clearly of the opinion that the said Act cannot be said to be unconstitutional.” JUDGMENT The fourth contention: 52(i) In response to the fourth contention, namely, the challenge raised by the learned counsel for the petitioners, to the various provisions of the NTT Act, it was the submission of the learned counsel for the respondents, that in view of 118 Page 118 the submissions advanced in respect of the third contention, it is apparent that the Parliament had the legislative competence to enact the NTT Act. It was submitted, that the NTT Act was enacted keeping in mind the parameters laid

power of judicial review vested in this Court under Articles 32 and 136 of the Constitution. It is, therefore, submitted that the final word in respect of the instant adjudicatory process, stands preserved with courts of law. And therefore, the submissions advanced at the hands of the learned counsel for the petitioners on the individual provisions of the NTT Act, pertaining to the independence of the adjudicatory process, were being exaggerated out of proportion. (ii) Despite having made the above submissions, the Attorney General for India, was fair and candid in stating, that if this Court felt that there was need to make certain changes in the provisions referred to by the petitioners, he had the instructions to state, that any suggestion made by this Court will be viewed JUDGMENT positively, and necessary amendments in the NTT Act would be carried out. The debate, and the consideration: I. Constitutional validity of the NTT Act – Does the NTT Act violate the “basic structure” of the Constitution? 53. The principal contention advanced at the hands of the learned counsel for the petitioners was premised on the submission, that Article 323B, inserted by the Constitution (Forty-second Amendment) Act 1976, to the extent that it violated the principles of, “separation of powers”, “rule of law”, and “judicial 119 Page 119 review”, was liable to be struck down. This striking down was founded on an alleged violation of the “basic structure” doctrine. Similarly, various provisions of the NTT Act, were sought to be assailed. The provisions of the NTT Act were

aside as unconstitutional. 54. In the context of the foregoing submissions advanced at the hands of the learned counsel for the petitioners, it is essential for us to examine the exact contours of “judicial review”, in the framework and scheme, of the concepts of “rule of law” and “separation of powers”, which have been held to constitute the “basic structure” of the Constitution. And also, the essential ingredients, of an independent adjudicatory process. It is, therefore, that we would travel the ladder of history and law, to determine the exact scope of the “judicial review”, which constitutes the “basic structure” of the Constitution. This would lead us to unravel the salient ingredients of an independent adjudicatory process. Based JUDGMENT thereon, we will record our conclusions. The analysis: 55. Reference must first of all be made to the decision rendered by this Court in Kesavananda Bharati v. State of Kerala, (1973) 4 SCC 225. In the above cited case, this Court was engaged with the validity of the Constitution (Twenty- fourth Amendment) Act, 1971, as also, the Constitution (Twenty-fifth Amendment) Act, 1971. The former Act related to the amendments of Articles 13 and 368 of the Constitution, whereas the latter, pertained to the amendment of Article 31 of the Constitution. The instant judgment was rendered by a 120 Page 120 constitution bench of 13 Judges. Seven of the Judges expressed the majority view. The observations recorded by this Court recognising “judicial review” as a component of the “basic structure” of the Constitution, were made by four

CJ.: “292. The learned Attorney-General said that every provision of the Constitution is essential; otherwise it would not have been put in the Constitution. This is true. But this does not place every provision of the Constitution in the same position. The true position is that every provision of the Constitution can be amended provided in the result the basic foundation and structure of the constitution remains the same. The basic structure may be said to consist of the following features: ( 1 ) Supremacy of the Constitution; ( 2 ) Republican and Democratic form of Government; ( 3 ) Secular character of the Constitution; ( 4 ) Separation of powers between the legislature, the executive and the judiciary; ( 5 ) Federal character of the Constitution. 293. The above structure is built on the basic foundation i.e. the dignity and freedom of the individual. This is of supreme importance. This cannot by any form of amendment be destroyed.” It is also imperative to refer to the view expressed by J.M. Shelat and A.N. JUDGMENT Grover, JJ., who delivered a common judgment: “487. .....The Rule of Law has been ensured by providing for judicial review.”. xxx xxx xxx 577. ….. Judicial review is undertaken by the courts “not out of any desire to tilt at legislative authority in a crusader’s spirit, but in discharge of a duty plainly laid down upon them by the Constitution”. The respondents have also contended that to let the court have judicial review over constitutional amendments would mean involving the court in political questions. To this the answer may be given in the words of Lord Porter in Commonwealth of Australia v. Bank of New South Wales, 1950 AC 235 at 310,: “The problem to be solved will often be not so much legal as political, social or economic, yet it must be solved by a Court of law. For where the dispute is, as here, not only between Commonwealth and citizen but between Commonwealth and intervening States on the one hand 121 Page 121

rigid amendatory process which authorizes amendment by means of 2/3 majority and the additional requirement of ratification. JUDGMENT xxx xxx xxx 582. The basic structure of the Constitution is not a vague concept and the apprehensions expressed on behalf of the respondents that neither the citizen nor the Parliament would be able to understand it are unfounded. If the historical background, the preamble, the entire scheme of the Constitution, relevant provisions thereof including Article 368 are kept in mind there can be no difficulty in discerning that the following can be regarded as the basic elements of the constitutional structure. (These cannot be catalogued but can only be illustrated): (1) The supremacy of the Constitution. (2) Republican and Democratic form of government and sovereignty of the country. (3) Secular and federal character of the Constitution. 122 Page 122 (4) Demarcation of power between the Legislature, the executive and the judiciary. (5) The dignity of the individual secured by the various freedoms and basic rights in Part III and the mandate to build a welfare State contained in Part IV. (6) The unity and the integrity of the Nation.”

Jaganmohan Reddy, J., who observed as under:-

JUDGMENT Some of the observations of H.R. Khanna, J., are also relevant to the issue in hand. The same are placed hereunder: “1529. …..The power of judicial review is, however, confined not merely to deciding whether in making the impugned laws the Central or State Legislatures have acted within the four corners of the legislative lists earmarked for them; the courts also deal with the question as to whether the laws are made in conformity with and not in violation of the other provisions of the Constitution. Our Constitution-makers have provided for fundamental rights in Part III and made them justiciable. As long as some fundamental rights exist and are a part of the Constitution, the power of judicial review has also to be exercised with a view to see that the guarantees afforded by those rights are not contravened. Dealing with draft Article 25 (corresponding to present Article 32 of the Constitution) by which a right is given to move the 123 Page 123 Supreme Court for enforcement of the fundamental rights, Dr Ambedkar speaking in the Constituent Assembly on December 9, 1948 observed: “ If I was asked to name any particular article in this Constitution as the most important an article without which this Constitution would be a nullity — I could not refer to any other article except this one It is the very soul of the Constitution and the very heart of it and I am glad that the House has realised its importance” (Constituent Assembly Debates, Vol VII, p. 953). Judicial review has thus become an integral part of our constitutional system and a power has been vested in the High Courts and the Supreme Court to decide about the constitutional validity of provisions of statutes. Our Constitution postulates rule of law in the sense of supremacy of the Constitution and the laws as opposed to arbitrariness. The vesting of power of exclusion of judicial review in a legislature, including State Legislature, contemplated by Article 31-C, in my opinion, strikes at the basic structure of the Constitution. The second part of Article 31-C thus goes beyond the permissible limit of what constitutes amendment under Article 368. xxx xxx xxx 1533. The position as it emerges is that it is open to the authority amending the Constitution to exclude judicial review regarding the validity of an existing statute. It is likewise open to the said authority to exclude judicial review regarding the validity of a statute which might be enacted by the legislature in future in respect of a specified subject. In such an event, judicial review is not excluded for finding whether the statute has been enacted in respect of the specified subject. Both the above types of constitutional amendments are permissible under Article 368. What is not permissible, however, is a third type of constitutional amendment, according to which the amending authority not merely excludes judicial review regarding the validity of a statute which might be enacted by the legislature in future in respect of a specified subject but also excludes judicial review for finding whether the statute enacted by the legislature is in respect of the subject for which judicial review has been excluded. JUDGMENT xxx xxx xxx 1537. I may now sum up my conclusions relating to power of amendment under Article 368 of the Constitution as it existed before the amendment made by the Constitution (Twenty-fourth Amendment) Act as well as about the validity of the Constitution (Twenty-fourth Amendment) Act, the Constitution (Twenty-fifth Amendment) Act and the Constitution (Twenty-ninth Amendment) Act: (i) Article 368 contains not only the procedure for the amendment of the Constitution but also confers the power of amending the Constitution. (ii) Entry 97 in List I of the Seventh Schedule of the Constitution does not cover the subject of amendment of the Constitution. (iii) The word “law” in Article 13(2) does not include amendment of the Constitution. It has reference to ordinary piece of legislation. It would also 124 Page 124 in view of the definition contained in clause (a) of Article 13(3) include an ordinance, order, bye-law, rule, regulation, notification, custom or usage having in the territory of India the force of law. xxx xxx xxx (vii) The power of amendment under Article 368 does not include the power to abrogate the Constitution nor does it include the power to alter the basic structure or framework of the Constitution. Subject to the retention of the basic structure or framework of the Constitution, the power of amendment is plenary and includes within itself the power to amend the various articles of the Constitution, including those relating to fundamental rights as well as those which may be said to relate to essential features. No part of a fundamental right can claim immunity from amendatory process by being described as the essence, or core of that right. The power of amendment would also include within itself the power to add, alter or repeal the various articles. xxx xxx xxx (xiv) The second part of Article 31-C contains the seed of national disintegration and is invalid on the following two grounds: (1) It gives a carte blanche to the legislature to make any law violative of Articles 14, 19 and 31 and make it immune from attack by inserting the requisite declaration. Article 31-C taken along with its second part gives in effect the power to the legislature including a State Legislature, to amend the Constitution in important respects. (2) The legislature has been made the final authority to decide as to whether the law made by it is for the objects mentioned in Article 31-C. The vice of second part of Article 31-C lies in the fact that even if the law enacted is not for the object mentioned in Article 31-C, the declaration made by the legislature precludes a party from showing that the law is not for that object and prevents a court from going into the question as to whether the law enacted is really for that object. The exclusion by the legislature, including a State Legislature, of even that limited judicial review strikes at the basic structure of the Constitution. The second part of Article 31-C goes beyond the permissible limit of what constitutes amendment under Article 368. JUDGMENT The second part of Article 31-C can be severed from the remaining part of Article 31-C and its invalidity would not affect the validity of the remaining part. I would, therefore, strike down the following words in Article 31-C -- “ and no law containing a declaration that it is for giving effect to such policy shall be called in question in any court on the ground that it does not give effect to such policy”.” 56(i) The next judgment having a bearing on the subject is Smt. Indira Nehru Gandhi v. Shri Raj Narain, 1975 Supp. SCC 1. In the instant judgment, this 125 Page 125 Court examined the constitutional validity of the Constitution (Thirty-ninth Amendment) Act, 1975. The issue under reference included the insertion of Article 329A (and more particularly, the second clause thereof), which had the

Speaker, or had come to be appointed/chosen as the Prime Minister or the Speaker, after such election. Insofar as the instant aspect of the matter is concerned, it would be relevant to mention, that the election of the appellant from the Rae Bareli constituency in the General Parliamentary Elections of 1971, was set aside by the High Court of Judicature at Allahabad (hereinafter referred to as, the High Court), on 12.6.1975. The appellant had assailed the order passed by the High Court before this Court. During the pendency of the above appeal, on 10.8.1975, the Constitution (Thirty-ninth Amendment) Act was passed, which introduced two new Articles, namely, Articles 71 and 329A of the Constitution. The controversy arising out of the above referred appeal, therefore, virtually JUDGMENT came to be rendered infructuous. It was, by way of a cross-appeal, that the constitutional validity of the amended provisions was assailed. (ii) In the above cross-appeal, it was asserted at the hands of the respondent, that “judicial review” was an essential feature of the “basic structure” of the Constitution. This assertion was under the doctrine of “separation of powers”. The pointed submission at the hands of the learned counsel for the respondent was, that “judicial review”, in matters of election was imperative. The issue canvassed was, that “judicial review” would ensure free, fair and pure elections. 126 Page 126 It was sought to be asserted, that the power of “judicial review” in the context referred to hereinabove, was available both under the American Constitution, as also, the Australian Constitution. And therefore, even though there was no

activity (by compartmentalising them into separate parts and chapters), the charge and onus of “judicial review” fell within the sphere of activity of the judiciary. It was sought to be asserted, that under Article 136 of the Constitution, all tribunals and courts are amenable to the jurisdiction of this Court. The corollary sought to be drawn was, that if under clause 4 of Article 329A of the Constitution, the power of “judicial review” was taken away, it would amount to a destruction of the “basic structure” of the Constitution. The relevant observations made in the instant judgment rendered by a constitution bench of 5 Judges of this Court are being extracted hereunder. First and foremost reference may be made to the following observations of A.N. Ray, CJ:- JUDGMENT “16. It should be stated here that the hearing has proceeded on the assumption that it is not necessary to challenge the majority view in Kesavananda Bharati’s case, (1973) 4 SCC 225. The contentions of the respondent are these: First, under Article 368 only general principles governing the organs of the State and the basic principles can be laid down. An amendment of the Constitution does not contemplate any decision in respect of individual cases. Clause (4) of Article 329-A is said to be exercise of a purely judicial power which is not included in the constituent power conferred by Article 368. xxx xxx xxx 20. Fifth, clause (4) destroys not only judicial review but also separation of power. The order of the High Court declaring the election to be void is declared valid (lie void). The cancellation of the judgment is denial of political justice which is the basic structure of the Constitution. xxx xxx xxx 127 Page 127

xxx xxx xxx 153. The contentions of the respondent that the Amendment Acts of 1974 and 1975 are subject to basic features or basic structure or basic framework fails on two grounds. First, legislative measures are not subject to the theory of basic features or basic structure or basic framework. Second, the majority view in Kesavananda Bharati’s case (supra) is that the Twenty-ninth Amendment which put the two statutes in the Ninth Schedule and Article 31-B is not open to challenge on the ground of either damage to or destruction of basic features, basic structure or basic framework or on the ground of violation of fundamental rights.” The views expressed by H.R. Khanna, J. are now being reproduced below:- “175. The prop osition that the power of amendment under Article 368 does not enable Parliament to alter the basic structure of framework of the Constitution was laid down by this Court by a majority of 7 to 6 in the case of His Holiness Kesavananda Bharati v. State of Kerala, (1973) 4 SCC 225. Apart from other reasons which were given in some of the judgments of the learned Judges who constituted the majority, the majority dealt with the connotation of the word “amendment”. It was held that the words “amendment of the Constitution” in Article 368 could not have the effect of destroying or abrogating the basic structure of the Constitution. Some of us who were parties to that case took a different view and came to the conclusion that the words “amendment of the Constitution” in Article 368 did not admit of any limitation. Those of us who were in the minority in Kesavananda Bharati’s case (supra) may still hold the same view as was given expression to in that case. For the purpose of the present case, we shall have to proceed in accordance with the law as laid down by the majority in that case. 176. Before dealing with the question as to whether the impugned amendment affects the basic structure of the Constitution, I may make it clear that this Court is not concerned with the wisdom behind or the propriety of the impugned constitutional amendment. These are matters essentially for those who are vested with the authority to make the constitutional amendment. All that this Court is concerned with is the constitutional validity of the impugned amendment. JUDGMENT 128 Page 128

JUDGMENT case is, however, of an altogether different nature. Its avowed object is to confer validity on the election of the appellant to the Lok Sabha in 1971 after that election had been declared to be void by the High Court and an appeal against the judgment of the High Court was pending in this Court. In spite of our query, we were not referred to any precedent of a similar amendment of any Constitution of the world. The uniqueness of the impugned constitutional amendment would not, however, affect its validity. If the constituent authority in its wisdom has chosen the validity of a disputed election as the subject-matter of a constitutional amendment, this Court cannot go behind that wisdom. All that this Court is concerned with is the validity of the amendment. I need not go into the question as to whether such a matter, in view of the normal concept of 129 Page 129 constitutional law, can strictly be the subject of a constitutional amendment. I shall for the purpose of this case assume that such a matter can validly be the subject-matter of a constitutional amendment. The question to be decided is that if the impugned amendment of the Constitution violates a principle which is part of the basic structure of the Constitution, can it enjoy immunity from an attack on its validity because of the fact that for the future, the basic structure of the Constitution remains unaffected. The answer to the above question, in my opinion, should be in the negative. What has to be seen in such a matter is whether the amendment contravenes or runs counter to an imperative rule or postulate which is an integral part of the basic structure of the Constitution. If so, it would be an impermissible amendment and it would make no difference whether it relates to one case or a large number of cases. If an amendment striking at the basic structure of the Constitution is not permissible, it would not acquire validity by being related only to one case. To accede to the argument advanced in support of the validity of the amendment would be tantamount to holding that even though it is not permissible to change the basic structure of the Constitution, whenever the authority concerned deems it proper to make such an amendment, it can do so and circumvent the bar to the making of such an amendment by confining it to one case. What is prohibited cannot become permissible because of its being confined to one matter.” On the issue in hand, K.K. Mathew, J.’s views were as under:- “318. The major problem of human society is to combine that degree of liberty without which law is tyranny with that degree of law without which liberty becomes licence; and, the difficulty has been to discover the practical means of achieving this grand objective and to find the opportunity for applying these means in the ever-shifting tangle of human affairs. A large part of the effort of man over centuries has been expended in seeking a solution of this great problem. A region of law, in contrast to the tyranny of power, can be achieved only through separating appropriately the several powers of the Government. If the lawmakers should also be the constant administrators and dispensers of law and justice, then, the people would be left without a remedy in case of injustice since no appeal can lie under the fiat against such a supremacy. And, in this age-old search of political philosophers for the secret of sound Government, combined with individual liberty, it was Montesquieu who first saw the light. He was the first among the political philosophers who saw the necessity of separating judicial power from the executive and legislative branches of Government. Montesquieu was the first to conceive of the three functions of Government as exercised by three organs, each juxtaposed against others. JUDGMENT He realised that the efficient operation of Government involved a certain degree of overlapping and that the theory of checks and balances required each organ to impede too great an aggrandizement of authority by the other two powers. As Holdsworth says, Montesquieu convinced the world that he had discovered a new constitutional 130 Page 130 principle which was universally valid. The doctrine of separation of governmental powers is not a mere theoretical, philosophical concept. It is a practical, work-a-day principle. The division of Government into three branches does not imply, as its critics would have us think, three watertight compartments. Thus, legislative impeachment of executive officers or judges, executive veto over legislation, judicial review of administrative or legislative actions are treated as partial exceptions which need explanation. (See generally: “the Doctrine of Separation of Powers and its present day significance” by T. Vanderbilt.) xxx xxx xxx 343. I think clause (4) is bad for the reasons which I have already summarised. Clauses (1) to (3) of Article 329-A are severable but I express no opinion on their validity as it is not necessary for deciding this case. xxx xxx xxx 361. I therefore hold that these Acts are not liable to be challenged on any of the grounds argued by Counsel.” 57. Insofar as the third judgment in the series of judgments is concerned, reference may be made to Minerva Mills Ltd. & Ors. v. Union of India & Ors., (1980) 2 SCC 591, as also, Minerva Mills Ltd. & Ors. v. Union of India & Ors., (1980) 3 SCC 625. Insofar as the former of the above two judgments is concerned, the same delineates the pointed controversy dealt with by a constitution bench of 5 Judges of this Court. The issue adjudicated upon, JUDGMENT pertained to the constitutional validity of the Constitution (Forty-second Amendment) Act, 1976, and more particularly, Sections 4 and 55 thereof, whereby Articles 31C and 368 of the Constitution, came to be amended. The majority view was expressed in the ratio of 4:1, P.N. Bhagwati, J. (as he then was) having rendered the dissent. The majority arrived at the conclusion, that Section 4 of the Constitution (Forty-second Amendment) Act, 1976 was beyond the amending power of the Parliament and was void, as it had the effect of violating the basic or essential features of the Constitution and destroying the 131 Page 131 “basic structure” of the Constitution, by a total exclusion of a challenge to any law, even on the ground that it was inconsistent with, or had taken away, or had abridged any of the rights, conferred by Articles 14 or 19 of the Constitution.

the Parliament. Relevant observations recorded in the instant judgment pertaining to the issue in hand, are being extracted hereunder. The opinion expressed by Y.V. Chandrachud, CJ, A.C. Gupta, N.L. Untawalia and P.S. Kailasam, JJ. on the subject in hand, was to the following effect:- “68. We must … mention, what is perhaps not fully realised, that Article 31- C speaks of laws giving effect to the “policy of the State”, “towards securing all or any of the principles laid down in Part IV”. In the very nature of things it is difficult for a court to determine whether a particular law gives effect to a particular policy. Whether a law is adequate enough to give effect to the policy of the State towards securing a directive principle is always a debatable question and the courts cannot set aside the law as invalid merely because, in their opinion, the law is not adequate enough to give effect to a certain policy. In fact, though the clear intendment of Article 31-C is to shut out all judicial review, the argument of the learned Additional Solicitor-General calls for a doubly or trebly extensive judicial review than is even normally permissible to the courts. Be it remembered that the power to enquire into the question whether there is a direct and reasonable nexus between the provisions of a law and a directive principle cannot confer upon the courts the power to sit in judgment over the policy itself of the State. At the highest, courts can, under Article 31-C, satisfy themselves as to the identity of the law in the sense whether it bears direct and reasonable nexus with a directive principle. If the court is satisfied as to the existence of such nexus, the inevitable consequence provided for by Article 31-C must follow. Indeed, if there is one topic on which all the 13 Judges in Kesavananda Bharati, (1973) 4 SCC 225, were agreed, it is this: that the only question open to judicial review under the unamended Article 31-C was whether there is a direct and reasonable nexus between the impugned law and the provisions of Article 39(b) and (c) Reasonableness is evidently regarding the nexus and not regarding the law. It is therefore impossible to accept the contention that it is open to the courts to undertake the kind of enquiry suggested by the Additional Solicitor General. JUDGMENT 132 Page 132 The attempt therefore to drape Article 31-C into a democratic outfit under which an extensive judicial review would be permissible must fail. xxx xxx xxx 73. It was finally urged by the learned Attorney General that if we uphold the challenge to the validity of Article 31-C, the validity of clauses (2) to (6) of Article 19 will be gravely imperilled because those clauses will also then be liable to be struck down as abrogating the rights conferred by Article 19(1) which are an essential feature of the Constitution. We are unable to accept this contention. Under clauses (2) to (6) of Article 19, restrictions can be imposed only if they are reasonable and then again, they can be imposed in the interest of a stated class of subjects only. It is for the courts to decide whether restrictions are reasonable and whether they are in the interest of the particular subject. Apart from other basic dissimilarities, Article 31-C takes away the power of judicial review to an extent which destroys even the semblance of a comparison between its provisions and those of clauses (2) to (6) of Article 19. Human ingenuity, limitless though it may be, has yet not devised a system by which the liberty of the people can be protected except through the intervention of courts of law. xxx xxx xxx 75. These then are our reasons for the Order (See Minerva Mills Ltd. vs. Union of India, (1980) 2 SCC 591) which we passed on May 9, 1980 to the following effect: (SCC pp. 592-593, paras 1 & 2) “Section 4 of the Constitution (Forty-second Amendment) Act is beyond the amending power of the Parliament and is void since it damages the basic or essential features of the Constitution and destroys its basic structure by a total exclusion of challenge to any law on the ground that it is inconsistent with, or takes away or abridges any of the rights conferred by Article 14 or Article 19 of the Constitution, if the law is for giving effect to the policy of the State towards securing all or any of the principles laid down in Part IV of the Constitution. Section 55 of the Constitution (Forty-second Amendment) Act is beyond the amending power of the Parliament and is void since it removes all limitations on the power of the Parliament to amend the Constitution and confers power upon it to amend the Constitution so as to damage or destroy its basic or essential features or its basic structure.” JUDGMENT In order to appreciate the minority view on the issue, reference may be made to the following observations of P.N. Bhagwati, J.:- “87. It is a fundamental principle of our constitutional scheme, and I have pointed this out in the preceding paragraph, that every organ of the State, every authority under the Constitution, derives its power from the Constitution and has to act within the limits of such power. But then the question arises as 133 Page 133

JUDGMENT the judiciary by Articles 32 and 226 of the Constitution. Speaking about draft Article 25, corresponding to present Article 32 of the Constitution, Dr Ambedkar, the principal architect of our Constitution, said in the Constituent Assembly on December 9, 1948: “If I was asked to name any particular Article in this Constitution as the most important — an Article without which this Constitution would be a nullity — I could not refer to any other Article except this one. It is the very soul of the Constitution and the very heart of it and I am glad that the House has realised its importance. (CAD, Vol. 7, p.953)” It is a cardinal principle of our Constitution that no one howsoever highly placed and no authority however lofty can claim to be the sole judge of its 134 Page 134 power under the Constitution or whether its action is within the confines of such power laid down by the Constitution. The judiciary is the interpreter of the Constitution and to the judiciary is assigned the delicate task to determine what is the power conferred on each branch of government, whether it is limited, and if so, what are the limits and whether any action of that branch transgresses such limits. It is for the judiciary to uphold the constitutional values and to enforce the constitutional limitations. That is the essence of the rule of law, which inter alia requires that “the exercise of powers by the government whether it be the legislature or the executive or any other authority, be conditioned by the Constitution and the law”. The power of judicial review is an integral part of our constitutional system and without it, there will be no government of laws and the rule of law would become a teasing illusion and a promise of unreality. I am of the view that if there is one feature of our Constitution which, more than any other, is basic and fundamental to the maintenance of democracy and the rule of law, it is the power of judicial review and it is unquestionably, to my mind, part of the basic structure of the Constitution. Of course, when I say this I should not be taken to suggest that effective alternative institutional mechanisms or arrangements for judicial review cannot be made by Parliament. But what I wish to emphasise is that judicial review is a vital principle of our Constitution and it cannot be abrogated without affecting the basic structure of the Constitution. If by a constitutional amendment, the power of judicial review is taken away and it is provided that the validity of any law made by the legislature shall not be liable to be called in question on any ground, even if it is outside the legislative competence of the legislature or is violative of any fundamental rights, it would be nothing short of subversion of the Constitution, for it would make a mockery of the distribution of legislative powers between the Union and the States and render the fundamental rights meaningless and futile. So also if a constitutional amendment is made which has the effect of taking away the power of judicial review and providing that no amendment made in the Constitution shall be liable to be questioned on any ground, even if such amendment is violative of the basic structure and, therefore, outside the amendatory power of Parliament, it would be making Parliament sole judge of the constitutional validity of what it has done and that would, in effect and substance, nullify the limitation on the amending power of Parliament and affect the basic structure of the Constitution. The conclusion must therefore inevitably follow that clause (4) of Article 368 is unconstitutional and void as damaging the basic structure of the Constitution. 88. That takes us to clause (5) of Article 368. This clause opens with the words “for the removal of doubts” and proceeds to declare that there shall be no limitation whatever on the amending power of Parliament under JUDGMENT Article 368. It is difficult to appreciate the meaning of the opening words “for the removal of doubts” because the majority decision in Kesavananda Bharati case (supra) clearly laid down and left no doubt that the basic structure of the Constitution was outside the competence of the amendatory power of 135 Page 135 Parliament and in Indira Gandhi case (supra), all the judges unanimously accepted theory of the basic structure as a theory by which the validity of the amendment impugned before them, namely, Article 329-A(4) was to be judged. Therefore, after the decisions in Kesavananda Bharati case (supra) and Indira Gandhi case (supra), there was no doubt at all that the amendatory power of Parliament was limited and it was not competent to Parliament to alter the basic structure of the Constitution and clause (5) could not remove the doubt which did not exist. What clause (5) really sought to do was to remove the limitation on the amending power of Parliament and convert it from a limited power into an unlimited one. This was clearly and indubitably a futile exercise on the part of Parliament. I fail to see how Parliament which has only a limited power of amendment and which cannot alter the basic structure of the Constitution can expand its power of amendment so as to confer upon itself the power of repeal or abrogate the Constitution or to damage or destroy its basic structure. That would clearly be in excess of the limited amending power possessed by Parliament. The Constitution has conferred only a limited amending power on Parliament so that it cannot damage or destroy the basic structure of the Constitution and Parliament cannot by exercise of that limited amending power convert that very power into an absolute and unlimited power. If it were permissible to Parliament to enlarge the limited amending power conferred upon it into an absolute power of amendment, then it was meaningless to place a limitation on the original power of amendment. It is difficult to appreciate how Parliament having a limited power of amendment can get rid of the limitation by exercising that very power and convert it into an absolute power. Clause (5) of Article 368 which sought to remove the limitation on the amending power of Parliament by making it absolute must therefore be held to be outside the amending power of Parliament. There is also another ground on which the validity of this clause can be successfully assailed. This clause seeks to convert a controlled Constitution into an uncontrolled one by removing the limitation on the amending power of Parliament which, as pointed out above, is itself an essential feature of the Constitution and it is therefore violative of the basic structure. I would in the circumstances hold clause (5) of Article 368 to be unconstitutional and void.” JUDGMENT 58. Reference may now be made to another decision of this Court rendered by a bench of 7 Judges, namely, S.P. Gupta v. Union of India, 1981 (Supp.) SCC 87. P.N. Bhagwati, J. (as he then was) opined as under:- “Concept of Independence of the Judiciary 27. Having disposed of the preliminary objection in regard to locus standi of the petitioners, we may now proceed to consider the questions which arise 136 Page 136 for determination in these writ petitions. The questions are of great constitutional significance affecting the principle of independence of the judiciary which is a basic feature of the Constitution and we would therefore prefer to begin the discussion by making a few prefatory remarks highlighting what the true function of the judiciary should be in a country like India which is marching along the road to social justice with the banner of democracy and the rule of law, for the principle of independence of the judiciary is not an abstract conception but it is a living faith which must derive its inspiration from the constitutional charter and its nourishment and sustenance from the constitutional values. It is necessary for every Judge to remember constantly and continually that our Constitution is not a non-aligned national charter. It is a document of social revolution which casts an obligation on every instrumentality including the judiciary, which is a separate but equal branch of the State, to transform the status quo ante into a new human order in which justice, social, economic and political will inform all institutions of national life and there will be equality of status and opportunity for all. …..Now this approach to the judicial function may be alright for a stable and static society but not for a society pulsating with urges of gender justice, worker justice, minorities justice, dalit justice and equal justice, between chronic unequals. Where the contest is between those who are socially or economically unequal, the judicial process may prove disastrous from the point of view of social justice, if the Judge adopts a merely passive or negative role and does not adopt a positive and creative approach. The judiciary cannot remain a mere bystander or spectator but it must become an active participant in the judicial process ready to use law in the service of social justice through a pro- active goal-oriented approach. But this cannot be achieved unless we have judicial cadres who share the fighting faith of the Constitution and who are imbued with the constitutional values. The necessity of a judiciary which is in tune with the social philosophy of the Constitution has nowhere been better emphasised than in the words of Justice Krishna Iyer which we quote: JUDGMENT “Appointment of Judges is a serious process where judicial expertise, legal learning, life’s experience and high integrity are components, but above all are two indispensables — social philosophy in active unison with the socialistic articles of the Constitution, and second, but equally important, built-in resistance to pushes and pressures by class interests, private prejudices, government threats and blandishments, party loyalties and contrary economic and politicial ideologies projecting into pronouncements. (Mainstream, November 22, 1980)” Justice Krishna Iyer goes on to say in his inimitable style: “Justice Cardozo approvingly quoted President Theodore Roosevelt’s stress on the social philosophy of the Judges, which shakes and shapes the course of a nation and, therefore, the choice of Judges for the higher Courts which makes and declares the law of the land, must be in tune with the social philosophy of the Constitution. Not mastery of the law alone, but social vision and creative craftsmanship are 137 Page 137 important inputs in successful justicing. (Mainstream, November 22, 1980)” What is necessary is to have Judges who are prepared to fashion new tools, forge new methods, innovate new strategies and evolve a new jurisprudence, who are judicial statesmen with a social vision and a creative faculty and

JUDGMENT “Independence of the Judiciary is not genuflexion; nor is it opposition to every proposition of Government. It is neither Judiciary made to 138 Page 138 Opposition measure nor Government’s pleasure. (Mainstream, November 22, 1980) The tycoon, the communalist, the parochialist, the faddist, the extremist and radical reactionary lying coiled up and subconsciously

JUDGMENT (1) a popular element in the matter of administration of justice, (2) linking with judicial system the dynamic goals of a progressive society by subjecting the principles of governance to be guided by the Directive Principles of State Policy, (3) in order to make the judiciary an effective and powerful machinery, the Constitution contains a most onerous and complicated system by which Judges can be removed under Article 124(4), which in practice is almost an impossibility, (4) in order to create and subserve democratic processes the power of appointment of the judiciary in the executive has been so vested that the 139 Page 139 head of the executive which functions through the Council of Ministers, which is a purely elected body, is made accountable to the people.

(1) that Article 222 expressly excludes ‘consent’ and it is not possible to read the word ‘consent’ into Article 222 and thereby whittle down the power conferred on the President under this Article, (2) that the transfer of a Judge or a C.J. of a High Court under Article 222 must be made in public interest or national interest, (3) that non-consensual transfer does not amount to punishment or involve any stigma, (4) that in suitable cases where mala fide is writ large on the face of it, an order of transfer made by the President would be subject to judicial review, (5) that the transfer of a Judge from one High Court to another does not amount to a first or fresh appointment in any sense of the term, (6) that a transfer made under Article 222 after complying with the conditions and circumstances mentioned above does not mar or erode the independence of judiciary. xxx xxx xxx 402. It has been vehemently argued by Mr. Seervai as also by Mr. Sorabjee who followed him that their main concern is that independence of judiciary should be maintained at all costs. Indeed, if they are really concerned that we should build up an independent judiciary then it is absolutely essential that new talents from outside should be imported in every High Court either to man it or to head it so that they may generate much greater confidence in the people than the local Judges. The position of a C.J. is indeed a very high constitutional position and our Constitution contains sufficient safeguards to protect both his decision-making process and his tenure. It is a well-known saying that power corrupts and absolute power corrupts absolutely. As man is not infallible, so is a Chief Justice, though a person holding a high judicial post is likely to be incorruptible because of the quality of sobriety and restraint that the judicial method contains. Even so, if a C.J. is from outside the State, the chances of his misusing his powers are reduced to the absolute minimum. We have pointed out that the power to formulate or evolve this policy clearly lies within the four-corners of Article 222 itself which contains a very wide power conditioned only by consultation with JUDGMENT 140 Page 140 C.J.I. who is the highest judicial authority in the country. It is always open to the President, which in practice means the Central Government, to lay down a policy, norms and guidelines according to which the presidential powers are to be exercised and once these norms are followed, the powers of the President would be beyond judicial review.”

obligation or commitment on the part of the appointing authority to make the offer of permanent Judgeship to him. It is difficult to accept either of these contentions of the learned Attorney General. It was not disputed before us that constitutional conventions and practices have importance under unwritten as well as written Constitutions and the position that conventions have a role to play in interpreting articles of a Constitution is clear from several decided cases. In U.N.R. Rao v. Indira Gandhi, (1971) 2 SCC 63, Chief Justice Sikri observed thus: (SCC p. 64, para 3) JUDGMENT “It was said that we must interpret Article 75(3) according to its own terms regardless of the conventions that prevail in the United Kingdom. If the words of an Article are clear, notwithstanding any relevant convention, effect will no doubt be given to the words. But it must be remembered that we are interpreting a Constitution and not an Act of Parliament, a Constitution which establishes a Parliamentary system of Government with a Cabinet. In trying to understand one may well keep in mind the conventions prevalent at the time the Constitution was framed.” In State of Rajasthan v. Union of India, (1977) 3 SCC 592, also the importance of a constitutional convention or practice by way of crystallising the otherwise vague and loose content of a power to be found in certain article has been emphasised. In the State of W.B. v. Nripendra Nath Bagchi, 141 Page 141

to safeguard one of the basic features which is the cardinal faith underlying our Constitution, namely, independence of the judiciary. In other words a limitation on the otherwise absolute power and discretion contained in Article 224(1) is required to be read into it because of the clear implication arising from the said cardinal faith which forms a fundamental pillar supporting the basic structure of the Constitution, as otherwise the exercise of the power in the absolute manner as suggested will be destructive of the same. That it is not sound approach to embark upon ‘a strict literal reach’ of any constitutional provision in order to determine its true ambit and effect is strikingly illustrated in the case of Article 368 which came up for consideration before this Court in Kesavananda Bharati case, (1973) 4 SCC 225, where this Court held that the basic or essential features of the Constitution do act as fetters or limitations on the otherwise wide amending power contained in that article. In Australia limitations on the law-making powers of the Parliament of the Federal Commonwealth over the States were read into the concerned provisions of the Constitution because of implications arising from the very federal nature of the Constitution: (vide Lord Mayor Councillors and Citizens of the City of Melbourne v. Commonwealth, 74 Commonwealth LR 31, and the State of Victoria v. Commonwealth of Australia, 122 Commonwealth LR 353). As regards the undertakings of the types mentioned above, it is true that strictly and legally speaking these undertakings only create a binding obligation on the concerned Member of the Bar and not on the appointing authority but it JUDGMENT 142 Page 142

The observations of D.A. Desai, J. are expressed hereunder:- “696. It may be briefly mentioned here that Writ Petition No. 274 of 1981 filed in this Court and Transferred Cases Nos. 2, 6 and 24 of 1981 were listed to be heard along with the present batch of cases with a view to avoiding the repetition of the arguments on points common to both sets of cases. In the first group of cases the question of construction of Articles 217, 224 and other connected articles prominently figured in the context of circular of the Law Minister dated March 18, 1981, seeking consent of Additional Judges for being appointed as permanent Judges in other High Courts and the short- term extensions given to Shri O.N. Vohra, Shri S.N. Kumar and Shri S.B. Wad, Additional Judges of Delhi High Court and the final non-appointment of Shri O.N. Vohra and Shri S.N. Kumar. The submission was that the circular of the Law Minister manifests a covert attempt to transfer Additional Judges from one High Court to other High Court without consulting the Chief Justice of India as required by Article 222(1) and thereby circumventing the majority decision in Union of India v. Sankalchand Himatlal Sheth, (1977) 4 SCC 193. The central theme was the scope, ambit and content of consultation which the President must have with the three constitutional functionaries set out in Article 217(1). In the second group of cases, the question arose in the context of transfer of Shri K.B.N. Singh, Chief Justice of Patna High Court as Chief Justice of Madras High Court consequent upon the transfer of Shri M.M. Ismail, Chief Justice of Madras High Court as Chief Justice of Kerala High Court by Presidential Notification dated January 19, 1981, in exercise of the JUDGMENT 143 Page 143

feature of the Constitution which has its genesis in the power of judicial review which enables the court to declare executive and legislative actions ultra vires the Constitution. In this connection we are not starting on a clean slate as the contention in this very form and for an avowed object was widely canvassed in Sankalchand Himatlal Sheth v. Union of India, (1976) 17 Guj LR 1017 (FB), and in Union of India v. Sankalchand Himatlal Sheth (supra). Some additional dimensions were added to this basic concept of independence of judiciary while both the parties vied with each other as in the past (see statement of Shri S.V. Gupte, then Attorney-General in Sheth case (supra), on proclaiming their commitment to independence of judiciary though in its scope and content and approach there was a marked divergence. JUDGMENT xxx xxx xxx 771. Now, power is conferred on the President to make appointment of Judge of Supreme Court after consultation with such of the Judges of the Supreme Court and of the High Courts in the States as the President may deem necessary. The submission is that the expression ‘may deem necessary’ qualifies the expression ‘consultation’ and that if he deems otherwise the President can proceed to make appointment of the Chief Justice of India without consultation with any of the Judges of the Supreme 144 Page 144

deem necessary’ qualifies the number of Judges of the Supreme Court and High Courts to be consulted. What is optional is selection of number of Judges to be consulted and not the consultation because the expression ‘shall be appointed after consultation’ would mandate consultation. An extreme submission that the President may consult High Court Judges for appointment of the Chief Justice of India omitting altogether Supreme Court Judges does not commend to us, because the consultation with ‘such of the Judges of the Supreme Court and of the High Courts’ would clearly indicate that the consultation has to be with some Judges of the Supreme Court and some Judges of the High Courts. The conjunction ‘and’ is clearly indicative of the intendment of the framers of the Constitution. If there was disjunctive ‘or’ between Supreme Court and High Courts in sub-article (2) of Article 124 there could have been some force in the submission that the President may appoint Chief Justice of India ignoring the Supreme Court and after consulting some High Court Judges. Undoubtedly, sub-article (2) does not cast an obligation to consult all Judges of the Supreme Court and all Judges of the High Courts but in practical working the President in order to discharge his function of selecting the best suitable person to be the Chief Justice of India must choose such fair sprinkling of Supreme Court and High Court Judges as would enable him to gather enough and relevant material which would help him in decision-making process. Mr Seervai submitted that this Court must avoid such construction of Article 124 which would enable the President to appoint Chief Justice of India without consultation with any judicial functionaries. That is certainly correct. But then he proceeded to suggest a construction where, by a constitutional convention, any necessity of consultation would be obviated and yet the executive power to be choosy and selective in appointment of Chief Justice of India can be controlled or thwarted. He said that a constitutional convention must be read that the seniormost amongst the puisne Judges of the Supreme Court should as a rule be appointed as Chief Justice of India except when he is physically unfit to shoulder the responsibilities. This constitutional JUDGMENT 145 Page 145

personal bias would be disqualified from being consulted. There is no warrant for such an extreme position and the reflection on the Judges of the Supreme Court is equally unwarranted. On the construction as indicated above there will be positive limitation on the power of the President while making appointment of Chief Justice of India and it is not necessary to read any limitation on the power of the President under Article 126 while making appointment of a Judge of the Supreme Court as acting Chief Justice of India. But the observation is incidental to the submission and may be examined in an appropriate case. And the question of construction is kept open. xxx xxx xxx 775. It was also stated that the expression ‘obtain’ in the circular has the element of coercion and a consent ceases to be consent if it is obtained under coercion. It was said that consent and coercion go ill together because forced assent would not be consent in the eye of law. It was said that the threat implicit in the circular becomes evident because the Chief Minister, the strong arm of the executive is being asked to obtain consent. If every little thing is looked upon with suspicion and as an attack on the independence of judiciary, it becomes absolutely misleading. Law Minister, if he writes directly to the Chief Justice or the Judge concerned, propriety of the action may be open to question. Chandrachud, J., has warned in Sheth case (supra) that the executive cannot and ought not to establish rapport with Judges (SCR p. 456 CD : SCC p. 230, para 43). Taking this direction in its letter and spirit, the Law Minister wrote to the Chief Ministers. The Chief Minister in turn was bound to approach the Chief Justice. This is also known to be a proper communication channel with Judges of High Court. In this context the expression ‘obtain’ would only mean request the Judge to give consent if he so desires. If he gives the consent, well and good, and if does not give, no evil consequences are likely to ensue. I am not impressed by the submission of the learned Attorney-General that one who gives consent may have some advantage over the one who does not. I do not see any remote advantage and if any such advantage is given and if charge of victimisation is made out by the Judge not JUDGMENT 146 Page 146 giving consent, the arm of judicial review is strong enough to rectify the executive error.

Last of all, reference may be made to the observations of E.S. Venkataramiah, J., (as he then was) who held as under:- “1245. The question of policy is a matter entirely for the President to decide. Even though the Chief Justice of India is consulted in that behalf by the President since the policy relates to the High Courts, his opinion is not binding on the President. It is open to the President to adopt any policy which is subject only to the judicial review by the Court. Under Article 222 of the Constitution the Chief Justice of India has to be consulted on the question whether a particular Judge should be transferred and where he should be transferred while implementing the said policy. If the Government requests the Chief Justice of India to give his opinion on a transfer to implement the said policy which is really in the public interest he cannot decline to do so. Even though the Chief Justice was opposed to the ‘wholesale transfers’ of Judges there is no bar for the Government treating the recommendation for transfers made by the Chief Justice of India as a JUDGMENT part of the implementation of its policy. That the transfer of Shri K.B.N. Singh was on account of the policy of the Government can be gathered from the following statements in the affidavits filed before this Court: In para 8 of the affidavit dated September 16, 1981 of Shri K.B.N. Singh it is stated: “When the deponent wanted to know why he might be transferred to Madras, the Hon’ble Chief Justice of India merely said that it was the Government policy, but gave no clue as to what necessitated his transfer from Patna to Madras.” In para 2(g) of the affidavit of the Chief Justice of India he has stated: “I deny that when Shri K.B.N. Singh 147 Page 147 wanted to know over the telephone on January 5, 1981, I stated merely that it was the ‘Government policy’....”. In paragraph 8 of the rejoinder-affidavit dated October 16, 1981 of Shri K.B.N. Singh, it is stated “at one point he also said that it was Government policy to effect transfer in batches of two or three”.

expressed by a bench of 5 Hon’ble Judges of this Court in the above case, was in respect of a controversy quite similar to the one in hand. In the instant judgment, the constitutional vires of the Administrative Tribunals Act, 1985 was under challenge. The above Act was framed under Article 323A of the Constitution. Article 323A was introduced in the Constitution by the Constitution (Forty-second Amendment) Act, 1976. The main judgment was delivered by Ranganath Misra, J. (as he then was) on behalf of himself and V. Khalid, G.L. Oza and M.M. Dutt, JJ. Insofar as the concurring view rendered by P.N. Bhagwati, CJ is concerned, the conclusion recorded in the following paragraphs has a bearing on the present controversy. JUDGMENT “3. It is now well settled as a result of the decision of this Court in Minerva Mills Ltd. v. Union of India, (1980) 3 SCC 625, that judicial review is a basic and essential feature of the Constitution and no law passed by Parliament in exercise of its constituent power can abrogate it or take it away. If the power of judicial review is abrogated or taken away the Constitution will cease to be what it is. It is a fundamental principle of our constitutional scheme that every organ of the State, every authority under the Constitution, derives its power from the Constitution and has to act within the limits of such power. It is a limited government which we have under the Constitution and both the executive and the legislature have to act within the limits of the power conferred upon them under the Constitution. Now a question may arise as to what are the powers of the executive and whether the executive has acted within the scope of its power. Such a question obviously cannot be left to the executive to decide and for two very good reasons. First the decision of the question would depend upon the interpretation of the Constitution and the 148 Page 148

JUDGMENT “I am of the view that if there is one feature of our Constitution which, more than any other, is basic and fundamental to the maintenance of democracy and the rule of law, it is the power of judicial review and it is unquestionably, to my mind, part of the basic structure of the Constitution. Of course, when I say this I should not be taken to suggest that effective alternative institutional mechanisms or arrangements for judicial review cannot be made by Parliament. But what I wish to emphasise is that judicial review is a vital principle of our Constitution and it cannot be abrogated without affecting the basic structure of the Constitution. If by a constitutional amendment, the power of judicial review is taken away and it is provided that the validity of any law made by the legislature shall not be liable to be called in question on any ground, even if it is outside the legislative competence of the legislature or is violative of any fundamental rights, it would be 149 Page 149

JUDGMENT 150 Page 150

the test of constitutionality as being within the ambit and coverage of clause (2)(d) of Article 323-A, only if it can be shown that the Administrative Tribunal set up under the impugned Act is equally efficacious as the High Court, so far as the power of judicial review over service matters is concerned. We must, therefore, address ourselves to the question whether the Administrative Tribunal established under the impugned Act can be regarded as equally effective and efficacious in exercising the power of judicial review as the High Court acting under Articles 226 and 227 of the Constitution.” JUDGMENT Extracts from the judgment rendered by Ranganath Misra, J. (as he then was) are first of all being reproduced hereunder:- “10. In the writ applications as presented, the main challenge was to the abolition of the jurisdiction of this Court under Article 32 in respect of specified service disputes. Challenge was also raised against the taking away of the jurisdiction of the High Court under Articles 226 and 227. It was further canvassed that establishment of Benches of the Tribunal at Allahabad, Bangalore, Bombay, Calcutta, Gauhati, Madras and Nagpur with the principal seat at Delhi would still prejudice the parties whose cases were already pending before the respective High Courts located at places other than these places and unless at the seat of every High Court facilities for presentation of applications and for hearing thereof were provided the parties and their lawyers would be adversely affected. The interim order made on October 31, 1985, made provision to meet the working difficulties. Learned Attorney- 151 Page 151 General on behalf of the Central Government assured the court that early steps would be taken to amend the law so as to save the jurisdiction under Article 32, remove other minor anomalies and set up a Bench of the Tribunal at the seat of every High Court. By the Administrative Tribunals (Amendment) Ordinance, 1986, these amendments were brought about and by now an appropriate Act of Parliament has replaced the Ordinance. Most of the original grounds of attack thus do not survive and the contentions that were canvassed at the hearing by the counsel appearing for different parties are these: (1) Judicial review is a fundamental aspect of the basic structure of our Constitution and bar of the jurisdiction of the High Court under Articles 226 and 227 as contained in Section 28 of the Act cannot be sustained; (2) Even if the bar of jurisdiction is upheld, the Tribunal being a substitute of the High Court, its constitution and set up should be such that it would in fact function as such substitute and become an institution in which the parties could repose faith and trust; (3) Benches of the Tribunal should not only be established at the seat of every High Court but should be available at every place where the High Courts have permanent Benches; (4) So far as Tribunals set up or to be set up by the Central or the State Governments are concerned, they should have no jurisdiction in respect of employees of the Supreme Court or members of the subordinate judiciary and employees working in such establishments inasmuch as exercise of jurisdiction of the Tribunal would interfere with the control absolutely vested in the respective High Courts in regard to the judicial and other subordinate officers under Article 235 of the Constitution. 11. After oral arguments were over, learned Attorney-General, after obtaining instructions from the Central Government filed a memorandum to the effect that Section 2(q) of the Act would be suitably amended so as to exclude officers and servants in the employment of the Supreme Court and members and staff of the subordinate judiciary from the purview of the Act. In the same memorandum it has also been said that Government would arrange for sittings of the Benches of the Tribunal at the seat or seats of each High Court on the basis that ‘sittings’ will include ‘circuit sittings’ and the details thereof would be worked out by the Chairman or the Vice-Chairman concerned. 12. With these concessions made by the learned Attorney-General, only two aspects remain to be dealt with by us, namely, those covered by the first and the second contentions. 13. Strong reliance was placed on the judgment of Bhagwati, J. (one of us — presently the learned Chief Justice) in Minerva Mills Ltd. v. Union of India, (1980) 3 SCC 625, where it was said: (SCC p. 678, para 87) JUDGMENT “The power of judicial review is an integral part of our constitutional system and without it, there will be no government of laws and the rule of law would become a teasing illusion and a promise of unreality. I am 152 Page 152 of the view that if there is one feature of our Constitution which, more than any other, is basic and fundamental to the maintenance of democracy and the rule of law, it is the power of judicial review and it is unquestionably, to my mind, part of the basic structure of the Constitution. Of course, when I say this I should not be taken to suggest that effective alternative institutional mechanisms or arrangements for judicial review cannot be made by Parliament. But what I wish to emphasise is that judicial review is a vital principle of our Constitution and it cannot be abrogated without affecting the basic structure of the Constitution. If by a constitutional amendment, the power of judicial review is taken away and it is provided that the validity of any law made by the legislature shall not be liable to be called in question on any ground, even if it is outside the legislative competence of the legislature or is violative of any fundamental rights, it would be nothing short of subversion of the Constitution, for it would make a mockery of the distribution of legislative powers between the Union and the States and render the fundamental rights meaningless and futile. So also if a constitutional amendment is made which has the effect of taking away the power of judicial review…” 14. Article 32 was described by Dr Ambedkar in course of the debate in the Constituent Assembly as the ‘soul’ and ‘heart’ of the Constitution and it is in recognition of this position that though Article 323-A(2)(d) authorised exclusion of jurisdiction under Article 32 and the original Act had in Section 28 provided for it, by amendment jurisdiction under Article 32 has been left untouched. The Act thus saves jurisdiction of this Court both under Article 32 in respect of original proceedings as also under Article 136 for entertaining appeals against decisions of the Tribunal on grant of special leave. Judicial review by the Apex Court has thus been left intact. 15. The question that arises, however, for consideration is whether bar of jurisdiction under Articles 226 and 227 affects the provision for judicial review. The right to move the High Court in its writ jurisdiction — unlike the one under Article 32 — is not a fundamental right. Yet, the High Courts, as the working experience of three-and-a-half decades shows have in exercise of the power of judicial review played a definite and positive role in the matter of preservation of fundamental and other rights and in keeping administrative action under reasonable control. In these thirty-six years following the enforcement of the Constitution, not only has India’s population been more than doubled but also the number of litigations before the courts including the High Courts has greatly increased. As the pendency in the High Courts increased and soon became the pressing problem of backlog, the nation’s attention came to be bestowed on this aspect. Ways and means to relieve the High Courts of the load began to engage the attention of the government at the Centre as also in the various States. As early as 1969, a Committee was set up by the Central Government under the chairmanship of Mr Justice Shah of this Court to make recommendations suggesting ways and means for JUDGMENT 153 Page 153

Constitution bringing in Article 323-A which authorized Parliament to provide by law “for the adjudication or trial by Administrative Tribunals of disputes and complaints with respect to recruitment and conditions of service of persons appointed to public services and posts in connection with the affairs of the Union 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”. As already stated this article envisaged exclusion of 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). Though the Constitution now contained the enabling power, no immediate steps were taken to set up any Tribunal as contemplated by Article 323-A. A Constitution Bench of this Court in K.K. Dutta v. Union of India, (1980) 4 SCC 38, observed: [SCC p. 39, para 1 : SCC (L & S) p. 486] “There are few other litigative areas than disputes between members of various services inter se, where the principle that public policy requires that all litigation must have an end can apply with greater force. Public servants ought not to be driven or required to dissipate their time and energy in courtroom battles. Thereby their attention is diverted from public to private affairs and their inter se disputes affect their sense of oneness without which no institution can function effectively. The constitution of Service Tribunals by State Governments with an apex Tribunal at the Centre, which, in the generality of cases, should be the final arbiter of controversies relating to conditions of service, including the vexed question of seniority, may save the courts from the avalanche of writ petitions and appeals in service matters. The proceedings of such Tribunals can have the merit of informality and if they will not be tied down to strict rules of evidence, they might be able to produce solutions which will satisfy many…” In the meantime the problem of the backlog of cases in the High Courts became more acute and pressing and came to be further discussed in Parliament and in conferences and seminars. Ultimately in January 1985, JUDGMENT 154 Page 154

155 Page 155

60. Reference may also be made to the decision rendered by this Court in L. Chandra Kumar v. Union of India, (1997) 3 SCC 261. The instant decision was rendered by a constitution bench of 7 Judges. The question which arose for determination in the instant judgment was, whether the power conferred upon the Parliament and the State legislatures vide Articles 323A(2)(d) and 323B(3)(d) totally excluding the jurisdiction of “all courts” except the Supreme Court, under JUDGMENT Article 136 of the Constitution, violated the “basic structure” of the Constitution. In other words, the question was, whether annulling/retracting the power of “judicial review” conferred on High Courts (under Articles 226 and 227 of the Constitution) and on the Supreme Court (under Articles 32 of the Constitution), was violative of the “basic structure” of the Constitution. Furthermore, whether the tribunals constituted under Articles 323A and 323B of the Constitution, possess the competence to test the constitutional validity of statutory provisions/rules? And also, whether Tribunals constituted under Articles 323A 156 Page 156 and 323B of the Constitution could be said to be effective substitutes of the jurisdiction vested in the High Courts? And if not, what changes were required? The above controversy came to be referred to the constitution bench in

cases (supra), namely, J.B. Chopra v. Union of India, (1987) 1 SCC 422, M.B. Majumdar v. Union of India, (1990) 4 SCC 501, Amulya Chandra Kalita v. Union of India, (1991) 1 SCC 181, R.K. Jain v. Union of India, (1993) 4 SCC 119, and Dr. Mahabal Ram v. Indian Council of Agricultural Research, (1994) 2 SCC 410. On the issues which are relevant to the present controversy, this Court observed as under:- “76. To express our opinion on the issue whether the power of judicial review vested in the High Courts and in the Supreme Court under Articles 226/227 and 32 is part of the basic structure of the Constitution, we must first attempt to understand what constitutes the basic structure of the Constitution. The doctrine of basic structure was evolved in Kesavananda Bharati case, (1973 ) 4 SCC 225. However, as already mentioned, that case did not lay down that the specific and particular features mentioned in that judgment alone would constitute the basic structure of our Constitution. Indeed, in the judgments of Shelat and Grover, JJ., Hegde and Mukherjea, JJ. and Jaganmohan Reddy, J., there are specific observations to the effect that their list of essential features comprising the basic structure of the Constitution are illustrative and are not intended to be exhaustive. In Indira Gandhi case , 1975 Supp. SCC 1, Chandrachud, J. held that the proper approach for a Judge who is confronted with the question whether a particular facet of the Constitution is part of the basic structure, is to examine, in each individual case, the place of the particular feature in the scheme of our Constitution, its object and purpose, and the consequences of its denial on the integrity of our Constitution as a fundamental instrument for the governance of the country. ( supra at pp. 751-752). This approach was specifically adopted by Bhagwati, J. in Minerva Mills case, (1980) 3 SCC 625, (at pp. 671-672) and is not regarded as the definitive test in this field of Constitutional Law. JUDGMENT 157 Page 157 77. We find that the various factors mentioned in the test evolved by Chandrachud, J. have already been considered by decisions of various Benches of this Court that have been referred to in the course of our analysis. From their conclusions, many of which have been extracted by us in toto, it appears that this Court has always considered the power of judicial review vested in the High Courts and in this Court under Articles 226 and 32 respectively, enabling legislative action to be subjected to the scrutiny of superior courts, to be integral to our constitutional scheme. While several judgments have made specific references to this aspect [Gajendragadkar, C.J. in Keshav Singh case , AIR 1965 SC 745, Beg, J. and Khanna, J. in Kesavananda Bharati case (supra), Chandrachud, C.J. and Bhagwati, J. in Minerva Mills (supra), Chandrachud, C.J. in Fertilizer Kamgar , (1981) 1 SCC 568, K.N. Singh, J. in Delhi Judicial Service Assn. , (1991) 4 SCC 406] the rest have made general observations highlighting the significance of this feature. 78. The legitimacy of the power of courts within constitutional democracies to review legislative action has been questioned since the time it was first conceived. The Constitution of India, being alive to such criticism, has, while conferring such power 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. These attempts were directed at ensuring that the judiciary would be capable of effectively discharging its wide powers of judicial review. While the Constitution confers the power to strike down laws upon the High Courts and the Supreme Court, it also contains elaborate provisions dealing with the tenure, salaries, allowances, retirement age of Judges as well as the mechanism for selecting Judges to the superior courts. The inclusion of such elaborate provisions appears to have been occasioned by the belief that, armed by such provisions, the superior courts would be insulated from any executive or legislative attempts to interfere with the making of their decisions. 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 independence. The constitutional safeguards which ensure the independence of the Judges of the superior judiciary, are not available to the Judges of the subordinate judiciary or to those who man tribunals created by ordinary legislations. Consequently, Judges of the latter category can never be considered full and effective substitutes for the superior judiciary in discharging the JUDGMENT 158 Page 158 function of constitutional interpretation. We, therefore, hold that the power of judicial review over legislative action vested in the High Courts under Article 226 and in this Court under Article 32 of the Constitution is an integral and essential feature of the Constitution, constituting part of its basic structure. Ordinarily, therefore, the power of High Courts and the Supreme Court to test the constitutional validity of legislations can never be ousted or excluded. 79. We also hold that the power vested in the High Courts to exercise judicial superintendence over the decisions of all courts and tribunals within their respective jurisdictions is also part of the basic structure of the Constitution. This is because a situation where the High Courts are divested of all other judicial functions apart from that of constitutional interpretation, is equally to be avoided. xxx xxx xxx 96. 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. To this end, it is suggested that the Tribunals be made subject to the supervisory jurisdiction of the High Courts within whose territorial jurisdiction they fall. We are, however, of the view that this may not be the best way of solving the problem. We do not think that our constitutional scheme requires that all adjudicatory bodies which fall within the territorial jurisdiction of the High Courts should be subject to their supervisory jurisdiction. If the idea is to divest the High Courts of their onerous burdens, then adding to their supervisory functions cannot, in any manner, be of assistance to them. 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 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 JUDGMENT 159 Page 159 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 are allocated for the functioning of the Tribunals and all other consequential details will have to be clearly spelt out. 97. The suggestions that we have made in respect of appointments to Tribunals and the supervision of their administrative function need to be considered in detail by those entrusted with the duty of formulating the policy in this respect. That body will also have to take into consideration the comments of expert bodies like the LCI and the Malimath Committee in this regard. We, therefore, recommend that the Union of India initiate action in this behalf and after consulting all concerned, place all these Tribunals under one single nodal department, preferably the Legal Department. 98. Since we have analysed the issue of the constitutional validity of Section 5(6) of the Act at length, we may now pronounce our opinion on this aspect. Though the vires of the provision was not in question in Dr Mahabal Ram case , (1994) 2 SCC 401, we believe that the approach adopted in that case, the relevant portion of which has been extracted in the first part of this judgment, is correct since it harmoniously resolves the manner in which Sections 5(2) and 5(6) can operate together. We wish to make it clear that where a question involving the interpretation of a statutory provision or rule in relation to the Constitution arises for the consideration of a Single Member Bench of the Administrative Tribunal, the proviso to Section 5(6) will automatically apply and the Chairman or the Member concerned shall refer the matter to a Bench consisting of at least two Members, one of whom must be a Judicial Member. This will ensure that questions involving the vires of a statutory provision or rule will never arise for adjudication before a Single Member Bench or a Bench which does not consist of a Judicial Member. So construed, Section 5(6) will no longer be susceptible to charges of unconstitutionality. 99. In view of the reasoning adopted by us, we hold that clause 2( ) of d Article 323-A and clause 3( ) of Article 323-B, to the extent they exclude d the jurisdiction of the High Courts and the Supreme Court under Articles 226/227 and 32 of the Constitution, are unconstitutional. Section 28 of the Act and the “exclusion of jurisdiction” clauses in all other legislations enacted under the aegis of Articles 323-A and 323-B would, to the same extent, be unconstitutional. The jurisdiction conferred upon the High Courts under Articles 226/227 and upon the Supreme Court under Article 32 of the Constitution is a part of the inviolable basic structure of our Constitution. While this jurisdiction cannot be ousted, other courts and Tribunals may perform a supplemental role in discharging the powers conferred by Articles 226/227 and 32 of the Constitution. The Tribunals created under Article 323-A and Article 323-B of the Constitution are possessed of the competence to test the constitutional validity of statutory JUDGMENT 160 Page 160 provisions and rules. All decisions of these Tribunals will, however, be subject to scrutiny before a Division Bench of the High Court within whose jurisdiction the Tribunal concerned falls. The Tribunals will, nevertheless, continue to act like courts of first instance in respect of the areas of law for which they have been constituted. It will not, therefore, be open for litigants to directly approach the High Courts even in cases where they question the vires of statutory legislations (except where the legislation which creates the particular Tribunal is challenged) by overlooking the jurisdiction of the Tribunal concerned. Section 5(6) of the Act is valid and constitutional and is to be interpreted in the manner we have indicated.” 61. Reference was then made to Union of India v. Madras Bar Association, (2010) 11 SCC 1. The instant decision was rendered by a constitution bench of 5 Judges. The controversy adjudicated upon in this case related to a challenge to the constitutional validity of Parts 1B and 1C of the Companies Act, 1956. These parts were inserted into the Companies Act, by the Companies (Second Amendment) Act, 2002. Thereby, provision was made for the constitution of the National Company Law Tribunal and the National Company Law Appellate Tribunal. The relevant questions raised in the present controversy, are being noticed. Firstly, whether Parliament does not have the jurisdiction/legislative JUDGMENT competence, to vest intrinsic judicial functions, that have been traditionally performed by High Courts, in any tribunal outside the judiciary? Secondly, whether transferring of the entire company law jurisdiction, hitherto before vested in High Courts, to the National Company Law Tribunal, which was not under the control of the judiciary, was violative of the principles of “separation of powers” and “independence of judiciary”? Thirdly, whether Sections 10-FB, 10-FD, 10- FE, 10-FF, 10-FL(2), 10-FO, 10-FR(3), 10-FT, 10-FX contained in Parts I-B and I-C of the Companies Act, by virtue of the above amendment, were unconstitutional being in breach of the principles of the “rule of law”, “separation 161 Page 161 of powers” and “independence of judiciary”? The relevant narration and conclusions recorded by this Court are being reproduced hereunder:-

appropriate benches. It is also pointed out that a technical member would always sit in a Bench with a judicial member. Section 10-FD(3)(g): Qualification for appointment of Technical Member 18. The High Court has observed that in regard to the Presiding Officers of the Labour Courts and the Industrial Tribunals or the National Industrial Tribunal, a minimum period of three to five years’ experience should be prescribed, as what is sought to be utilised is their expert knowledge in labour laws. 19. 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. 20. The High Court has also observed that as persons who satisfy the qualifications prescribed in Section 10-FD(3)(g) would be persons who fall under Section 10-FD(2)(a), it would be more appropriate to include this qualification in Section 10-FD(2)(a). It has also observed in Section 10-FL 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 10-FL(2) for cases relating to rehabilitation, restructuring or winding up of companies. 21. The Union Government has not accepted these findings and contends that the observations of the High Court would amount to judicial legislation. Section 10-FD(3)(h): Qualification of Technical Member of NCLT 22. 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 JUDGMENT 162 Page 162

xxx xxx xxx Section 10-FX: Selection process for President/Chairperson 31. 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. 32. The Union Government has submitted that it would not be advisable to make such a provision in regard to appointment of the President/Chairperson of statutory tribunals. It is pointed out that no other legislation constituting tribunals has such a provision.” JUDGMENT In order to assail the challenge to the provisions extracted hereinabove, the Union of India asserted, that the Madras High Court (the judgment whereof was, also under challenge) having held that the Parliament had the competence and the power to establish the National Company Law Tribunal and the National Company Law Appellate Tribunal, ought to have dismissed the writ petition. The assertion at the hands of the Union of India was, that some of the directions contained in the judgment rendered by the Madras High Court, reframed and recast Parts 1B and 1C introduced by the Amendment Act and amounted to 163 Page 163 converting “judicial review” into judicial legislation. It was, however noticed, that the Union of India having agreed to rectify several of the defects pointed out by the High Court, the appeal of the Union of India was restricted to the findings of

it is relevant to extract some of the provisions of the Companies Act, 1956 as amended by the Companies (Second Amendment) Act, 2002, relating to the constitution of the National Company Law Tribunal and the National Company Law Appellate Tribunal). The same are reproduced hereunder:- “PART I-B NATIONAL COMPANY LAW TRIBUNAL 10-FB. 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. 10-FC. 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. 10-FD. 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— JUDGMENT ( 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 164 Page 164 ( 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—

JUDGMENT ( i ) ‘judicial member’ means a Member of the Tribunal appointed as such under sub-section (2) of Section 10-FD 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 10-FD. 165 Page 165 10-FE. 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 reappointment: Provided that no President or other Member shall hold office as such after he has attained,—

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). * 10-FK. 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. 10-FL. 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 10-FD: JUDGMENT 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 166 Page 166

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 by one or more 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: JUDGMENT Provided that no transfer of any proceedings shall be made under this sub-section except after recording the reasons for so doing in writing. * 10-FO. 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 I-C APPELLATE TRIBUNAL * 10-FR. 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 167 Page 167

* 10-FT. 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 reappointment 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. * 10-FX. 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 JUDGMENT 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; ( 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. * (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 168 Page 168 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.

( 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. * 10-GB. 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. * 10-GF. Appeal to Supreme Court .—Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the Supreme Court 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: JUDGMENT 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.” Having noticed the relevant statutory provisions, this Court made detailed observations relating to “difference between Courts and Tribunals”, “Re: independence of judiciary”, “separation of powers”, and “whether the Government can transfer judicial functions traditionally performed by Courts, to Tribunals”, as under:- 169 Page 169 “70. But in India, unfortunately tribunals have not achieved full independence. The Secretary of the “sponsoring department” concerned sits in the Selection Committee for appointment. When the tribunals are formed, they are mostly dependent 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 L. Chandra Kumar vs. Union of India, (1997) 3 SCC 261, 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? 71. 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 the 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. 72. 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. 73. 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. 74. Article 246 deals with the subject-matter of laws made by Parliament and by the legislatures of States. The Union List (List I of the Seventh Schedule) enumerates the matters with respect to which Parliament has exclusive powers to make laws. Entry 77 of List I refers to constitution, organisation, jurisdiction and powers of the Supreme Court. Entry 78 of List I refers to constitution and organisation 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 the Union List. 75. The Concurrent List (List III of the Seventh Schedule) enumerates the matters with respect to which Parliament and the Legislature of a State JUDGMENT 170 Page 170

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. xxx xxx xxx 80. 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, Entry 11-A 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 Assn., (2002) 4 SCC 75, and State of Karnataka v. Vishwabharathi House Building Coop. Society, (2003) 2 SCC 412, held that Articles 323-A and 323-B 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. xxx xxx xxx 90. But when we say that the 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 the judiciary and keeping in view the principles of the 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 specialised 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 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 JUDGMENT 171 Page 171 Tribunals, Motor Accidents Claims Tribunals and Special Courts under several enactments. Therefore, when transferring the jurisdiction exercised by courts to tribunals, which does not involve any specialised 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 the rule of law and would be unconstitutional. 91 In R.K. Jain v. Union of India , (1993) 4 SCC 119, this Court observed: (SCC pp. 169-70, para 67) “ 67 . The tribunals set up under Articles 323-A and 323-B 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.” 92. Having held that legislation can transfer certain areas of litigation from courts to tribunals and recognising 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. 93. 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 a High Court, or a 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. JUDGMENT xxx xxx xxx 172 Page 172 101. 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. The rule of law has several facets, one of which is that disputes of citizens will be decided by Judges who are

xxx xxx xxx 106. We may summarise the position as follows: JUDGMENT ( 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. ( 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 173 Page 173 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 reorganise 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 the 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 the judiciary or the standards of the judiciary, the court may interfere to preserve the independence and standards of the judiciary. Such an 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. xxx xxx xxx 113. When the Administrative Tribunals were constituted, the presence of members of civil services as Technical (Administrative) Members was considered necessary, as they were well versed in the functioning of government departments and the rules and procedures applicable to government servants. But the fact that senior officers of civil services could function as Administrative Members of the Administrative Tribunals, does not necessarily make them suitable to function as technical members in the 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 the Armed Forces Tribunals, or electrical engineers being members of the Electricity Appellate Tribunal, or telecom engineers being members of TDSAT, we find no logic in members of the general civil services being members of the Company Law Tribunals. 114. Let us now refer to the dilution of independence. If any member of the tribunal is permitted to retain his lien over his post with the parent cadre or ministry or department in the civil service for his entire period of service as member of the 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 JUDGMENT 174 Page 174 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. xxx xxx xxx 120 . We may tabulate the corrections required to set right the defects in Parts I-B and I-C of the Act: ( i ) Only Judges and advocates can be considered for appointment as judicial members of the Tribunal. Only High Court Judges, or Judges who have served in the rank of a District Judge for at least five years or a person who has practised 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 the Indian Legal Service (Grade I) cannot be considered for appointment as judicial members as provided in sub-sections (2)( c ) and ( d ) of Section 10-FD. The expertise in Company Law Service or the Indian Legal Service will at best enable them to be considered for appointment as technical members. ( ii ) As NCLT takes over the functions of the 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 10-FD which provide for persons with 15 years experience in Group A post or persons holding the post of Joint Secretary or equivalent post in the Central or the State Government, being qualified for appointment as Members of Tribunal, are invalid. ( iii ) A “technical member” presupposes an experience in the field to which the Tribunal relates. A member of the 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. JUDGMENT 175 Page 175

rehabilitation/revival of companies and therefore, eligible for being considered for appointment as technical members. ( vi ) In regard to category of persons referred in clause ( g ) of sub- section (3) at least five years’ experience should be specified. ( vii ) Only clauses ( c ), ( d ), ( e ), ( g ), ( h ), and the latter part of clause ( f ) in sub-section (3) of Section 10-FD and officers of civil services of the rank of the Secretary or Additional Secretary in the Indian Company Law Service and the Indian Legal Service can be considered for purposes of appointment as technical members of the Tribunal. ( viii ) Instead of a five-member Selection Committee with the 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 the Secretary in the Ministry of Law and Justice as members mentioned in Section 10-FX, 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 ( d ) Secretary in the Ministry of Law and Justice—Member. ( ix ) 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 field concerned. 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. JUDGMENT 176 Page 176