Supreme Court of India
MADRAS BAR ASSOCIATIONversusUNION OF INDIA & ANR.
- Citation
- 2015 INSC 410
- Decided
- 14 May 2015
- Disposal
- Disposed off
- Bench
- H L DATTU
Holding
While the NCLT and NCLAT are constitutionally valid, Sections 409(3)(a), 409(3)(e), 411(3) and 412(2) of the Companies Act, 2013 are unconstitutional as they dilute the qualifications and independence required for tribunal members.
Summary
The Madras Bar Association challenged several provisions of the Companies Act, 2013 relating to the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), alleging that their constitution and the qualifications for members violated the basic structure of the Constitution. The Supreme Court upheld the constitutional validity of the NCLT and NCLAT but struck down specific qualification clauses for technical members in Sections 409(3)(a) and (e) and Section 411(3) as they lowered the standards required for independence of the judiciary. The Court also declared the composition of the Selection Committee under Section 412(2) invalid because it gave a disproportionate voice to the administrative branch and omitted a casting vote for the Chairperson. The Court reiterated that transferring judicial functions to tribunals does not offend the basic structure, provided the tribunals maintain judicial standards. It directed that the defective provisions be amended in line with the 2010 judgment in Union of India v. R. Gandhi. The petition was partly allowed, directing the government to correct the qualifications and selection‑committee provisions and to expedite the functioning of the NCLT and NCLAT.
Issues considered
- The constitutional validity of the constitution of the NCLT and NCLAT under the Companies Act, 2013.
- The constitutionality of the qualification criteria for technical members of the NCLT and NCLAT, specifically Sections 409(3)(a), 409(3)(e) and 411(3).
- The validity of the composition and procedure of the Selection Committee for appointing members of the NCLT and NCLAT under Section 412(2).
- The propriety of the power to punish for contempt under Section 425 and the power to constitute benches (though not ultimately decided).
Legislation cited
- Companies Act, 1956s. 10FD, s. 10FE, s. 10FF, s. 10FL, s. 10FR, s. 10FT
- Companies Act, 2013s. 408, s. 409, s. 410, s. 411, s. 412, s. 413, s. 425, s. 431, s. 434
Subjects
Constitutional validityTribunalisationSeparation of powersQualification of membersSelection CommitteeNCLTNCLATCompanies Act 2013Judicial independence
Judgment
(2015] 6 S.C.R. 638
A MADRAS BAR ASSOCIATION
v.
UNION OF INDIA&ANR.
(Writ Petition (Civil) No.1072 of 2013)
B
MAY 14, 2015
[H.L. DATTU, CJI, A.K. SIKRI, ARUN MISHRA,
ROHINTON FALi NARIMAN AND AMITAVA ROY, JJ.]
c Companies Act, 2013:
ss. 408, 410, 421 and 423 - Constitution of National
Company Law Tribunal-NCL T and National Company Law
Appellate Tribunal-NCLA T - Validity of- Held: Constitutional
D validity of NCLT and NCLAT is upheld - NCLT is the first
forum in the hierarchy of quasi-judicial fora set up in the Act,
2013- Thus, NCL T, would not only deal with question of/aw
in a given case coming before it but would be called upon to
defeat the factual disputes/aspects as well- NCLAT which is
E the first appellate forum provided under the Act, 2013 to
examine the validity of the orders passed by NCL T, would
revisit the factual as well as legal issues.
ss. 409, 411- President and Members of the NCLT
F and Chairman and Members of the NCLAT - Prescription of
qualifications including term of their office and salary
allowances etc. - Challenge to, as regards technical
members of the tribunal and the appellate tribunal - Held:
As pers. 409(3)(a) to (e) ands. 411 prescribing qualifications
G for appointment of technical member of the tribunal and
appellate tribunal respectively, the technical Members should
be selected from amongst only those officers who hold rank
of Secretaries or Additional Secretaries and have technical
H 638
MADRAS BARASSOCIATION v. UNION OF INDIA 639
expertise- This is against the R. Gandhi, President, Madras A
Bar Association's case - Thus, s. 409(3)(a) and (e) ands.
411(3) is held to be invalid - For appointment of technical
Members to the NCLT, directions contained in R. Gandhi,
President, Madras Bar Association's case to be scrupulously
followed and these corrections to be carried out in s. 409(3) B
to set it right.
s. 412 - Selection of members of NCL T and NCLAT -
Structure of the Selection Committee uls. 412-Composition
of five member Committee, three from administrative branch/ C
bureaucracy and two from judiciary - Challenge to - Held:
Provisions of s. 412(2) is not valid - Direction issued to
remove the defect by bringing the provision in accord with R.
Gandhi, President, Madras Bar Association's case wherein it
should be four member Committee-two from administrative D
branch/bureaucracy and two from judiciary.
Disposing of the writ petition, the Court
HELD: 1.1 The creation of Constitution of NCLAT E
was specifically upheld in R. Gandhi, President, Madras
Bar Association's case-2010 judgment. It cannot be
denied that the instant petitioner had specifically
questioned the Constitutional validity of NCLAT in the
earlier writ petition and even advanced the arguments F
on this very issue. The provision pertaining to the
constitution of the Appellate Tribunal i.e. Section 1OFR
of the Companies Act, 1956 was duly taken note of.
Challenge was laid to the establishments of NCLT as well
as NCLAT on the ground that the Parliament had G
resorted to tribunalisation by taking away the powers
from the normal courts which was essentially a judicial
function and this move of the Legislature impinged upon
the impartiality, fairness and reasonableness of the
decision making which was the hallmark of judiciary and H
640 SUPREME COURT REPORTS [2015] 6 S.C.R.
A essentially a judicial function; and that it amounted to
negating the Rule of Law and trampling of the Doctrine
of Separation of Powers which was the basic feature of
the Constitution of India. The petitions spearheaded the
attack on the constitutional validity of both NCLT as well
B as NCLAT on these common grounds. The Court
specifically went into the gamut of all those arguments
and emphatically repelled the same. The Court rejected
the contention that transferring judicial function,
traditionally performed by the Courts, to the Tribunals
C offended the basic structure of the Constitution. [Para
11, 12] [662-G-H; 663-A-E]
1.2 The Constitution Bench categorically dealt with
the constitutional validity of NCLT and NC LAT under the
D caption "whether the constitution of NCLT and NCLAT
under Parts 1B & 1C of Companies Act are valid". The
Court specifically affirmed the decision of the High Court
which held that creation of NCLT and NCLAT was not
unconstitutional. In view of this, it is not open to the
E petitioner even to argue this issue as it clearly operate
as res judicata. The setting up of NC LAT was challenged
on the ground that insofar as this appellate forum is
concerned, there are no reasons given in the said
F judgment and thereafter this aspect was dealt with in
more detail in the NTT judgment wherein formation of
National Tax Tribunal was held to be unconstitutional.
This adventurism on the part of the petitioner is totally
unfounded. In the first instance, the validity of NCLAT
G has already been upheld and this issue cannot be
reopened. Judgment in the 2010 case is of a Constitution
Bench and that judgment of a co-ordinate Bench binds
this Bench as well. [Para 13, 14] [665-A-G]
1.3 Reading of the Constitution Bench judgment in
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 641
the matter of National Tax Tribunal would manifest that A
not only was the 2010 judgment taken note of but
followed as well. The Court spelled out the distinguishing
features between NCLT/NCLAT on one hand and NTT
on other hand in arriving at a different conclusion. [Para
15][665-G-H; 666-A] B
1.4 The NTT was a matter where power of judicial
review hitherto exercised by the High Court in deciding
the pure substantial question of law was sought to be
take.n away to be vested in NTT which was held to be C
impermissible. In the instant case, there is no such
situation. On the contrary, NCLT is the first forum in the
hierarchy of quasi-judicial fora set up in the Companies
Act, 2013. The NCLT, thus, would not only deal with
question of law in a given case coming before it but would D
be called upon to thrash outthe factual disputes/aspects
as well. NCLATwhich is the first appellate forum provided
under the Act, 2013 to examine the validity of the orders
passed by NCLT, will have to revisit the factual as well
as legal issues. Therefore, situation is not akin to NTT. E
Jurisdiction of the Appellate Tribunal is mentioned in
Section 410 itself which stipulates that NCLAT shall be
constituted 'for hearing appeals against the orders of
the Tribunal'. This jurisdiction is not circumscribed by F
any limitations of any nature whatsoever and the
implication thereof is that appeal would lie both on the
questions of facts as well as questions of law. Likewise,
under sub-section (4) of Section 421, which provision
deals with 'appeal from orders of Tribunal', it is provided G
that the NCLAT, after giving reasonable opportunity of
being heard, 'pass such orders thereon as it thinks fit,
forming, modifying or set aside the order appealed
against'. It is thereafter, further appeal is provided from
the order of the NCLAT to the Supreme Court under H
642 SUPREME COURT REPORTS [2015) 6 S.C.R.
A Section 423 of the Act. The scope of the appeal to the
Supreme Court is restricted only 'to question of law
arising out of such order'. [Para 16] [666-B-G]
1.5 It is a common feature/practice to provide one
appellate forum wherever an enactment is a complete
8
Code for providing judicial remedies. Providing one right
to appeal before an appellate forum is a well accepted
norm which is perceived as a healthy tradition. Thus,
there is no merit in the issue. [Para 17, 18] [666-H; 667-A-
C B]
2.1 In the 2010 judgment, the Constitution Bench
took the view that since the NCLT would now be
undertaking the work which is being performed, inter
alia, by High Court, the technical Members of the NCLT/
D NCLAT should be selected from amongst only those
officers who hold rank of Secretaries or Additional
Secretaries and have technical expertise. Parts 1C and
10 of the Act, 1956 as they existed were treated as invalid
and in order to bring t~ese provisions within the realm
E of constitutionality, the f.ourt pointed out the corrections
which were required· to be made to remove those
anamolies. [Para 20, 21] [670-C, D; 673-F]
2.2 The provisions contained in claus.::.s (c) and (d)
F of sub-section (2) and Clause (a) and (b) of sub-section
(3) of Section 10FD which made Joint Secretaries with
certain experience as eligible, were specifically declared
as invalid. Notwithstanding the same, Section 409(3) of
the Act, 2013 again makes Joint Secretary to the
G Government of India or equivalent officer eligible for
appointment, if he has 15 years experience as member
of Indian Corporate Law Service or Indian Legal Service,
out of which at least 3 years experience in the pay scale
of Joint Secretary. This is clearly in the teeth of dicta
H pronounced in 2010 judgment. [Para 22] [677-G-H; 678-
A]
MADRAS BARASSOCIATION v. UNION OF INDIA 643
2.3 In the counter affidavit, the respondents A
endeavored to justify this provision by stating that this .
variation was made in view of the lack of available officers
at Additional Secretary level in Indian Companies Law
Service. It is further mentioned that functionally the levels
of Additional Secretary and Joint Secretary are similar. B
These officers have knowledge of specific issues
concerning operations and working of companies and
their expertise in company law which is expected to
benefit NCLT. Such an explanation is not legally
sustainable, having regard to the clear mandate of 2010 C
judgment. For limiting the consideration for such posts
to Secretary and Additional Secretary, there was one
very compelling factor in the mind of the Court viz.
gradual erosion of independence of judiciary, which was
0
perceived as a matter of concern. [Para 23] [678-B-E]
2.4 Having regard to the said clear and categorical
dicta in 2010 judgment, tinkering therewith would
evidently have the potential of compromising with
standards which 2010 judgment sought to achieve, nay, E
so zealously sought to secure. Thus, it is held that
Section 409(3)(a) and (e) are invalid as these provisions
suffer from same vice. Likewise, Section 411(3) as
worded, providing for qualifications of technical F
Members, is also held to be invalid. For appointment of
technical Members to the NCLT, directions containeci in
the para of 2010 judgment would be scrupulously
followed and these corrections are required to be made
in Section 409(3) to set right the defects contained G
therein. [Para 24] [682-F-H; 683-A]
3.1 The provision with regard to Selection
Committee was contained in Section 10FX, validity
thereof was questioned in 2010 judgment. The said H
644 SUPREME COURT REPORTS (2015] 6 S.C.R.
A structure of the Selection Committee was found fault
with by the Constitution Bench in 2010 judgment. The
Court specifically remarked that instead of 5 members
Selection Committee, it should be 4 members Selection
Committee and even the composition of such a Selection
B Committee was mandated in the judgment.
Notwithstanding the above, there is a deviation in the
composition of Selection Committee that is prescribed
under Section 412 (2) of the Act, 2013. Effect of this
composition is to make it a five members Selection
C Committee which was not found to be valid in 2010
judgment. Out of these five Members, three are from the
administrative branch/bureaucracv as against two from
judiciary which would result in predominant say of the
members belonging to the administrative branch, is a
0
situation that was specifically diverted from. [Para 25,
26] [684-C-D; 685-A-F]
3.2 The prime consideration in the mind of the Bench
was that it is the Chairperson, viz. Chief Justice of India,
E or his nominee who is to be given the final say in the
matter of selection with right to have a casting vote. That
is the ratio of the judgment and reasons for providing
such a composition are not far to seek. In the face of the
F all pervading prescript available on this very issue in the
form of a binding precedent, there is no scope for any
relaxation as sought to be achieved through the
impugned provision and it is incompatible with the
mandatory dicta of 201 O judgment. Therefore, the
G provisions of Section 412(2) of the Act, 2013 are not valid
and direction is issued to remove the defect by bringing
this provision in accord with the para of 2010 judgment.
[Para 28] [686-E-G]
4. There is hardly any legal strength in the
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 645
submission that power to punish for contempt as given A
to the NCLT and NCLAT under Section 425 of the Act is
not healthy and should be done away with; and that
power given to the Central Government to constitute the
Benches is again impermissible as such power should
rest with President, NCLT or Chairman, NCLAT. It has to B
be kept in mind that these provisions are contained in a
statute enacted by the Parliament and the petitioner
could not point out as to hpw such provisions are
unconstitutional. [Para 29] [687-A-C]
c
5. The respondents have filed affidavits mentioning
therein the steps that have been taken till date towards
setting up of NCLT and NCLAT. Since, the functioning of
NCLT and NC LAT has not started so far and its high time
that these Tribunals start functioning now, there is a hope D
that the respondents would take remedial measures as
per the directions contained in this judgment at the
earliest, so that the NCLT & NCLAT are adequately
manned and start functioning in near future. [Para 31,
33] [687-D; 688-F] E
Union of India v. R. Gandhi, President, Madras Bar
Association 2010 (6) SCR 857: (2010) 11SCC1 -followed.
Madras Bar Association v. Union oflndia (2014) 10 SCC F
1 - referred to.
Case Law Reference
2010 (6) SCR 857 followed. Para 11,13,14,24,27,28
G
(2014) 10 SCC 1 Referred to. Para 10
CIVIL ORIGINAL JURISDICTION: Writ Petition (Civil) No.
1072of2013
H
[Under Article 32 of the Constitution of India]
646 SUPREME COURT REPORTS [2015] 6 S.C.R.
A Arvind P. Datar, Nikhi: Nayyar, Dhanajay Baijal N. Sai
Vi nod, for the Petitioner.
P. S. Patwalia PinkyAnand,ASG, K. Radhakrishna, Binu
Tamta, Dhruv Tamta, Madhavi Diwan, Rekha Pandey, A. K.
B Srivastava, Sushma Suri, B. V. Bairam Das, Kartik Sachdeva,
Karan Sethi, Prabal Bag hi, Dhruv Sheron, Archit Upadhyay,
Natasha Vinayak, Naina Pachnanda, Rajat Singh, for the
Respondents.
c The Judgment dated 14.05.2015 of the Court was
delivered by
A.K. SIKRI, J. This writ petition filed by the petitioner,
namely, the Madras Bar Assoc1aiion, 1s se4uel to the earlier
proceedings which culminated in the judgment rendered by
D the Constitution Bench of this Court in Union of India v. R.
Gandhi, President, Madras Bar Association' (hereinafter
referred to as the '2010 judgment'). In the earlier round of
litigation, the petitioner had challenged the constitutional validity
E of creation of National Company Law Tribunal ('NCLT' for short)
and National Company Law Appellate Tribunal ('NCLAT' for
short), along with certain other provisions pertaining thereto
which were incorporated by the Legislature in Parts 1B and
1C of the CompaniesAct, 1956 (hereinafter referred to as the
F 'Act, 1956') by Companies (Second Amendment) Act, 2002.
2) Writ petition, in this behalf, was filed by the petitioner in
the High Court of Madras which culminated into the judgment
dated 30.03.2004. The High Court held that creation of NCLT
G and vesting the powers hitherto exercised by the High Court
and the Company Law Board ('CLB' for short) in the said
Tribunal was not unconstitutional. However, at the same time,
the High Court pointed out certain defects in various provisions
of Part 1B and Part 1'.:of the Act, 1956 and, in particular, in
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 647
[A.K. SIKRI, J.]
Sections 1OFD(3)(f)(g)(h), 1OFE, 1OFF, 1OFL(2), 1OFR(3), A
10FT. Declaring that those provisions as existed offended
the basic Constitutional scheme of separation of powers, it
was held that unless these provisions are appropriately
amended by removing the defects which were also specifically
spelled out, it would be unconstitutional to constitute NCLT and B
NCLAT to exercise the jurisdiction which is being exercised
by the High Court or the CLB. The petitioner felt aggrieved by
that part of the judgment vide which establishments of NCLT
and NCLATwas held to be Constitutional. On the other hand,
Union of India felt dissatisfied with the other part of the judgment C
whereby aforesaid provisions contained in Parts 1Fl a11d 1C
of the Act, 1956 were perceived as suffering from various legal
and Constitutional infirmities. Thus, both Union of India as well
as the petitioner filed appeals against that judgment of the D
Madras High Court. Those appeals were decided by the
Constitution Bench, as mentioned above.
3) The Constitution Bench vide the said judgment put its
stamp of approval insofar as Constitutional validity of NCLT
and NCLAT is concerned. It also undertook the exercise of E
going through the aforesaid provisions contained in Parts 1B
and 1C of the Act, 1956 and in substantial measure agreed
with the Madras High Court finding various defects in these
provisions. These defects were listed by the Court in para F
120 of the judgment which reads as under:
"120. We may tabulate the corrections required to set
right the defects in Parts 1-B and 1-C of the Act:
(i) Only Judges and advocates can be considered G
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 practiced as a Lawyer for ten years can
be considered for appointment as a Judicial Member. H
648 SUPREME COURT REPORTS [2015] 6 S.C.R.
A Persons who have held a Group A or equivalent
post under the Central or State Government with
experience in the Indian Company Law Service (Legal
Branch) and Indian Legal Service (Grade-1) cannot be
considered for appointment as judicial members
B as provided in sub-section 2(c) and (d) of Section
1OFD. The expertise in Company Law service or Indian
Legal service will at best enable them to be considered
for appointment as technical members.
c (ii) As the NCLT takes over the functions of High
Court, the members should as nearly as possible have
the same position and status as High Court Judges. This
can be achieved, not by giving the salary and perks of a·
High Court Judge to the members, but by ensuring that
D 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
E Technical members of the National Company Law
Tribunal. Clauses (c) and (d) of sub-section (2) and
Clauses (a) and (b) of sub-section (3) of section 10FD
which provide for persons with 15 years experience in
Group A post or persons holding the post of Joint
F
Secretary or equivalent post in Central or State
Government, being qualified for appointment as
Members of Tribunal is invalid.
(iii) A "technical member" presupposes an experience
G in the field to which the Tribunal relates. Amember 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
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 649
[AK SIKRI, J.]
to be appointed as technical members. Therefore A
clauses (a) and (b) of sub-section (3) are not valid."
(iv) A 'Technical Member' presupposes an
experience in the field to which the Tribunal relates.
A member of Indian Company Law Service who has B
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 C
(3) are not valid. (v) The first part of clause (f) of sub-
section (3) providing that any person having special
knowledge or professional experience of 15 years in
science, technology, economics, banking, industry could
be considered to be persons with expertise in company D
law, for being appointed as Technical Members in
Company Law Tribunal, is invalid.
(v) Persons having ability, integrity, standing and special
knowledge and professional experience of not less than E
fifteen years,in industrial finance, industrial management,
industrial reconstruction, investment and accountancy,
may however be considered as persons having expertise
in rehabilitation/revival of companies ar.d therefore,
eligible for being considered for appointment as technical F
members.
(vi) In regard to category of persons referred in clause
(g) of sub-section (3) at least five years experience should
be specified. G
(vii) Only clauses (c), (d), (e), (g), (h), and latter part of
clause (f) in sue-section (3) of section 10-FD and officers
of civil services of the rank of the Secretary or Additional
Secretary in Indian Company Law Service and Indian H
650 SUPREME COURT REPORTS (2015] 6 S.C.R.
A Legal Service can be considered for purposes of
appointment as technical members of the Tribunal.
(viii) Instead of a five-member Selection Committee with
Chief Justice of India (or his nominee) as Chairperson
s and two Secretaries from the Ministry of Finance and
Company Affairs and the Secretary in the Ministry of
Labour and Secretary in the Ministry of Law and Justice
as members mentioned in section 1OFX, the Selection
Committee should broadly be on the following lines:
c
(a) Chief Justice of India or his nominee - Chairperson
(with a casting vote);
(b)Asenior Judge of the Supreme Court or Chief Justice
of High Court- Member;
D
(c) Secretary in the Ministry of Finance and Company
Affairs - Member; and
(d) Secretary in the Ministry of Law and Justice -
E 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
F considerable time is required to achieve expertise in the
concerned field. A term of three years is very
short and by the time the members achieve the
required knowledge, expertise and efficiency, one term
will be over. Further the said term of three years with the
G 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
H they should be able to attract younger members who will
MADRAS BARASSOCIATION v. UNION OF INDIA 651
[AK. SIKRI, J.]
have a reasonable period of service. A
(x) The second proviso to Section 1OFE enabling
the President and members to retain lien with
their parent cadre/ministry/department while holding
office as President or Members will not be B
conducive for the independence of members. Any
person appointed as members should be prepared
to totally disassociate himself from the Executive. The
lien cannot therefore exceed a period of on_e year.
c
(xi) To maintain independence and security in service,
sub-section (3) of section 1OFJ and Section 1OFV
should provide that suspension of the PresidenU
Chairman or member of a Tribunal can be only
with the concurrence of the Chief Justice of India. o
(xii) The administrative support for aii Tribunals
should be from the Ministry of Law &Justice. Neither
the Tribunals nor its members shall seek or be provided
with facilities from the respective sponsoring or E
parent Ministries or concerned Department.
(xiii) Two-Member Benches of the Tribunal should always
have a judicial member. Whenever any larger or
special benches are constituted, the number of
Technical Members shall not exceed the Judicial F
Members."
4) On the basis of the aforesaid, partly allowing the
appeals, the same were disposed of in the following terms:
G
"57. We therefore dispose of these appeals, partly
allowing them, as follows:
(i) We uphold the decision of the High Court that the
creation of National Company Law Tribunal and National H
652 SUPREME COURT REPORTS (2015) 6 S.C.R.
A Company Law Appellate Tribunal and vesting in them,
the powers and jurisdiction exercised by the High Court
in regard to company law matters, are not
unconstitutional.
B -
(ii) We declare that Parts 1B and 1C of the Act as
presently structured, are unconst•t• 1tional for the reasons
stated in the preceding para. However, Parts IB and IC
of the Act, may be made operational by making
suitable amendments, as indicated above, in addition
C to what the Union Government has already agreed in
pursuance of the impugned order of the High Court."
5) Though the verdict came in the year 2010, upholding
the creation of NCLTand NCLAT, these two bodies could not
o be created and made functional immediately thereafter and
the matter got stuck in imbroglio of one kind or the other. It is
not necessary to trace out those factors as some of those are
the subject matter of Writ Petition No.267/2012 which writ
petition is also filed by this very petitioner and is pending
E consideration. Said writ petition was listed before this Bench
along with the present writ petition and arguments to some
extent were heard in petition as well. However, since the issues
raised in the said petition necessitate further response from
the Union of India, with the consent of the parties, it was deemed
F proper to defer the hearing in that petition, awaiting the
response. Insofar as the present writ petition is concerned,
though somewhat connected with writ petition No.267/2012,
prayers made in this writ petition are entirely different and tt-i:;~c
was no handicap or obstruction in proceeding with the hearing
G of the instant writ petition. Forth is reason, the arguments were
finally heard in this case.
6) Adverting to the present writ petition, it so happened
that the Parliament has passed new company law in the form
H of Indian Companies Act, 2013 (hereinafter referred to.as the
MADRAS BARASSOCIATION v. UNION OF INDIA 653
[A.K. SIKRI, J.]
'Act, 2013') which replaces the earlier Act, 1956. In this Act; A
again substantive provisions have been made with regard to
the establishment of NCLT and NCLAT. It is obvious that with
the constitution of NCLT and NCLAT, the provisions relating to
the structure and constitution of NCLT and NCLAT, the
provisions relating to qualifications for appointment of B
President/Chairperson and Members Uudicial as well as
technical) of both NCLT and NCLAT, and also provisions relating
to the constitution of the Selection Committee for selection of
the said Members have also been incorporated in the Act,
2013. These are analogous to Section 1OFD, 1OFE, 1OFF, C
10FL, 10FR and 10FTwhich were introduced in the Act, 1956
by Companies (Amendment) Act, 2002. The cause for filing
the present petition by the petitioner is the allegation of the
petitioner that notwithstanding various directions given in 2010 D
judgment, the new provisions in the Act, 2013 are almost on
the same lines as were incorporated in the Act, 1956 and,
therefore, these provisions suffer from the vice of
unconstitutionality as well on the application of the ratio in 2010
judgment. It is, thus, emphasized by the petitioner that these E
provisions which are contained in Sections 408, 409, 411(3),
412, 413, 425, 431and434 of the Act, 2013 are ultra vires
the provisions of Article 14 of the Constitution and, therefore,
warrant to be struck down as unconstitutional. The precise
prayer contained in the writ petition reads as under: F
"(i) a WRIT, ORDER OR DIRECTION more particularly in
the nature of WRIT OF DECLARATION declaring that the
provisions of Chapter XXVll of the Companies Act, 2013, more
particularly Sections408, 409, 411(3), 412, 413, 425, 431 and G
434 of the Act as ultra vires the provisions of Article 14 of the
Constitution and accordingly striking down the said provisions
as unconstitutional;
{ii) Pass any order or such further order or orders as may H
654 SUPREME COURT REPORTS [2015) 6 S.C.R.
A be deemed fit and proper in the facts and circumstances of
the present case."
7) Before we proceed further, we would like to set down
the aforesaid provisions of the Act, 2013 along with Section
B 2(4), Section 2(90) and Section 407 which contained certain
definitions that are relevant in the context ;:if controversy raised
in the present petition:
"2(4) "Appellate Tribunal" means the National Company
c Law Appellate Tribunal constituted under section 41 O;
"2(90) "T~ibunal" means the National Company Law
Tribunal constituted under section 408;
407. In this Chapter, unless the context otherwise
D requires,-
(a) "Chairperson" means the Chairperson of the
Appellate Tribunal;
(b) "Judicial Member" means a member of the Tribunal
E
or the Appellate Tribunal appointed as such and includes
the President or the Chairperson, as the case may be;
(c) "Member" means a member, whether Judicial or
Technical of the Tribunal or the Appellate Tribunal and
F
includes the President or the Chairperson, as the case
maybe;
(d) "President" means the President of the TritJunal;
G (e) "Technical Member'' means a member of the Tribunal
or the Appellate Tribunal appointed as such.
408. Constitution of National Company Law Tribunal
The Central Government shall, by notification, constitute,
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 655
[A.K. SIKRI, J.]
with effect from such date as may be specified therein, a A
Tribunal to be known as the National Company Law Tribunal
consisting of a President and such number of Judicial and
Technical members, as the Central Government may deem
necessary, to be appointed by it by notification, to exercise
and discharge such powers and functions as are, or may be, B
conferred on it by or under this Act or any other law for the time
being in force.
409. Qualification of President and Members of
Tribunal c
(1) The President shall be a person who is or has been a
Judge of a High Court for five years.
(2) A person shall not be qualified for appointment as a
0
Judicial Member unless he-
(a) is, or has been, a judge of a High Court; or
(b) is, or has been, a District Judge for at least five years;
or E
(c) has, for at least ten years been an advocate of a court.
Explanation.-For the purposes of clause (c), in
computing the period during which a person has been F
an advocate of a court, there shall be included any period
during which the person has held judicial office or the
office of a member of a tribunal or any post, under the
Union or a State, rGquiring special knowledge of law after
he become an advocate. G
(3) A person shall not be qualified for appointment as a
Technical Member unless he -
(a) has, for at least fifteen years been a member of the
Indian Corporate Law Service or Indian Legal Service H
656 SUPREME COURT REPORTS [2015) 6 S.C.R.
A out of which at least three years shall be in the pay scale
of Joint Secretary to the Government of India or equivalent
or above in that service; or
(b) is, or has been, in practice as a chartered accountant
B for at least fifteen years; or
(c) is, or has been, in practice as a cost accountant for at
least fifteen years; or
(d) is, or has been, in practice as a company secretary
c for at least fifteen years; or
(e) is a person of proven ability, integrity and standing
having special knowledge and experience, of not less
than fifteen years, in law, industrial finance, industrial
D management or administration, industrial reconstruction,
investment, accountancy, labour matters, or such other
disciplines related to management, conduct of affairs,
revival, rehabilitation and winding up of companies; or
E (f) is, or has been, for at least five years, a presiding
,,..
officer of a Labour Court, Tribunal or National Tribunal
constituted under the Industrial DisputesAct, 1947.
410. Constitution of Appellate Tribunal
F
The Central Government shall, by notification, constitute,
with effect from such date as may be specified therein,
an Appellate Tribunal to be known as the National
Company Law Appellate Tribunal consisting of a
chairperson and such number of Judicial and Technical
G
Members, not exceeding eleven, as the Central
Government may deem fit, to be appointed by it by
notification, for hearing appeals against the orders of the
Tribunal.
H
411. Qualifications of chairperson and Members of
MADRAS BARASSOCIATION v. UNION OF INDIA 657
[A.K. SIKRI, J.]
Appellate Tribunal A
(1) The chairperson shall be a person who is or has been
a Judge of the Supreme Court or the Chief Justice of a
High Court.
B
(2) A Judicial Member shall be a person who is or has
been a Judge of a High Court or is a Judicial Member of
the Tribunal for five years.
(3)ATechnical Member shall be a person of proven ability,
integrity and standing having special knowledge and C
experience, of not less than twenty-five years, in law,
industrial finance, industrial management or
administration, industrial reconstruction, investment,
accountancy, labour matters, or such other disciplines
0
related to management, conduct of affairs, revival,
rehabilitation and winding up of companies.
412. Selection of Members of Tribunal and
Appellate Tribunal
E
(1) The President of the Tribunal and the chairperson and
Judicial Members of the Appellate Tribunal, shall be·
appointed after consultation with the Chief Justice of India.
(2) The Members of the Tribunal and the Technical F
Members of the Appellate Tribunal shall be appointed
on the recommendation of a Selection Committee
consisting of-
(a) Chief Justice of India or his nominee-Chairperson; G
(b) a senior Judge of the Supreme Court or a Chief
Justice of High Court-Member;
(c) Secretary in the Ministry of Corporate Affairs-
Member; H
658 SUPREME COURT REPORTS [2015] 6 S.C.R.
A (d) Secretary in the Ministry of Law and Justice-
Member; and
(e) Secretary in the Department of Financial Services in
the Ministry of Finance-Member.
B
(3) The Secretary, Ministry of Corporate Affairs shall be
the Convener of the Selection Committee.
(4) The Selection Committee shall determine its
procedure for recommending persons under sub-section
c (2).
(5) No appointment of the Members of the Tribunal or
the Appellate Tribunal shall be invalid merely by reason
of any vacancy or any defect in the constitution of the
D Selection Committee.
413. Term of office of President, chairperson and
other Members
(1) The President and every other Member of the Tribunal
E
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 for another term of five years.
(2) A Member of the Tribunal shall hold office as such
F
until he attains,-
(a) in the case of the President, the age of sixty-seven
years;
G (b) in the case of any other Member, the age of sixty-five
years:
Provided that a person who has not completed fifty years
of age shall not be eligible for appointment as Member:
H
Provided further that the Member may retain his lien with
MADRAS BARASSOCIATION v. UNION OF INDIA 659
[A.K. SIKRI, J.]
his parent cadre or Ministry or Department, as the case A
may be, while holding office as such for a period not
exceeding one year.
(3) The chairperson or a Member of the Appellate Tribunal
shall hold office as such for a term of five years from the B
date on which he enters upon his office, but shall be
eligible for re-appointment for anonther term of five years.
(4) A Member of the Appellate Tribunal shall hold office
as such until he attains,- c
(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: D
Provided that a person who has not completed fifty years
of age shall not be eligible for appointment as Member:
Provided further that the Member may retain his lien with E
his parent cadre or Ministry or Department, as the case
may be, while holding office as such for a period not
exceeding one year.
414. Salary, allowances and other terms and F
conditions of service of Members
The salary, allowances and other terms and conditions
of service of the Members of the Tribunal and the
Appellate Tribunal shall be such as may be prescribed:
G
Provided that neither the salary and allowances nor the
other terms and conditions of service of the Members
shall be varied to their disadvantage after their
appointment.
H
660 SUPREME COURT REPORTS [2015) 6 S.C.R.
A 425. Power to punish for contempt
The Tribunal and the Appellate Tribunal shall have the
same jurisdiction, powers and authority in respect of
contempt of themselves as the High Court has and may
B exercise, for this purpose, the powers under the
provisions of the Contempt of Courts Act, 1971, which
shall have the effect subject to modifications that-
(a) the reference therein to ? High Court shall be
c construed as including a reference to the Tribunal and
the Appellate Tribunal; and
(b) the reference to Advocate-General ir. section 15 of
the said Act shall be co11stru~ci a5 a reference to such
Law Officers as the Central Government may, specify in
D
this behalf."
8) In the prayer clause, constitutional validity of Sections
415, 418, 424, 426, 431and434 have also been questioned.
At the time of hearing, no arguments were addressed by Mr.
E Datar, learned senior counsel for the petitioner on the aforesaid
provisions. Therefore, in respect of these provisions, we are
eschewing our discussion.
9) On the reading of the aforesaid provisions and having
F regard to the arguments advanced at the Bar, we can
conveniently categorise the challenge in three compartments,
as under:
(i) Challenge to the validity of the constitution of NCT and
G NCLAT;
(ii) Challenge to the prescription of qualifications
including term of their office and salary allowances etc. of
President and MelT'hers of the NCLT and as well as Chainnan
H andMembersoftheNGLAT;
MADRAS BARASSOCIATION v. UNION OF INDIA 661
[A.K. SIKRI, J.]
(iii) Challenge to the structure of the Selection Committee A
for appointment of PresidenUMembers of the NCLT and
Chairperson/ Members of the NCLAT.
Incidental issues pertaining to the power given to these
bodies to punish for contempt as mentioned in Section 425 B
and giving power to Central Government to constitute the
Benches are also raised by the petitioner.
As would be discussed hereinafter, all these issues stand
covered by Madras Bar Association (supra) and answer to c
these questions is available therein. In fact, after detailed
discussion on each issue, the Court pronounced the verdict.
Therefore, while doing a diagnostic of sorts of the issues
raised, we shall be administering the treatment that is
prescribed in that judgment. D
ISSUE N0.1
Re.: Constitutional validity of NCT and NC LAT
Section 408 of the Act, 2013 deals with the constitution of E
NCLT. By virtue of this Section, Central Government is
empowered to issue notification for constituting a Tribunal to
be known as 'National Company Law Tribunal'. This Tribunal
would consist of President and such number of Judicial and
Technical members, as the Central Government may deem F
necessary, to be appointed by it. By Notification dated
12.09.2013, the Central Government has constituted the NCLT.
Likewise, Section 410 of the Act, 2013 arms the Central
Government with power to constitute NC LAT by notification.
This NC LAT is also to consist of a Chairman and such number G
of Judicial and Technical Members, not exceeding eleven, as
the Central Government may deem fit, to be appointed by it by
notification. By the aforesaid Notification dated 12.09.2013,
NC LAT has also been constituted by the Central Government. H
662 SUPREME COURT REPORTS [2015] 6 S.C.R.
A 10) It is pertinent to point out that in the prayer clause,
though challenge is laid to the vires of Section 408, it
conspicuously omits Section 41 Oand, thus, in essence, there
is no challenge to the constitution of NCLAT insofar as relief
claimed is concerned. Moreover, as pointed out above, the
B entire writ petition takes umbrage under the Constitution Bench
judgment in 201 Ojudgment. However, at the time of arguments,
Mr. Datar primarily challenged the Constitutional validity of
NCLAT without making any serious efforts to challenge the
constitution of NCLT. As far as NCLT is concerned, he almost
C conceded that validity thereof stands upheld in 2010 judgment
and there is not much to argue. In respect of NC LAT, though
he conceded that validity thereof is also upheld in the aforesaid
judgment, his endeavour was le> rlernnn<:!~3te that there is no
discussion in the entire judgment insofar as NCLAT is
0
concerned and, therefore, conclusion which is mentioned in
the said judgment atthe end, should not be treated as binding
or to be taken as having decided this issue. His submission
was that in view of the subsequent Constitution Bench judgment
E of this Court in Madras Bar Association v. Union of lndia2,
wherein establishment of National Tax Tribunal has been held
to be unconstitutional, Section 410 should also be meted out
the same treatment for the reasons recorded in the said
judgment pertaining to National Tax Tribunal. It is difficult to
F digest this argument for various reasons, which we record in
the discussion hereafter.
11) First of all the creation of Constitution of NC LAT has
been specifically upheld in 201 Ojudgment. It cannot be denied
G that this very petitioner had specifically questioned the
Constitutional validity of NC LAT in the earlier writ petition and
even advanced the arguments on this very issue. This fact is
specifically noted in the said judgment. The provision
pertaining to the constitution of the Appellate Tribunal i.e.
H Section 1OFR of the Corr;:ianies Act, 1956 was duly takt-;·,
MADRAS BARASSOCIATION v. UNION OF INDIA 663
[A.K. SIKRI, J.]
note of. Challenge was laid to the establishments of NCLT as A
well as NC LAT on the ground that the Parliament had resorted
to tribunalisation by taking away the powers from the normal
courts which was essentially a judicial function and this move
of the Legislature impinged upon the impartiality, fairness and
reasonableness of the decision making which was the hallmark B
of judiciary and essentially a judicial function. Argument went
to the extent that it amounted to negating the Rule of Law and
trampling of the Doctrine of Separation of Powers which was
the basic feature of the Constitution of India. What we are
emphasising is that the petitions spearheaded the attack on C
the constitutional validity of both NCLT as well as ~!~LAT on
these common grounds. The Court specifically went into the
gamut of all those arguments raised and emphatically repelled
the same.
D
12) The Court specifically rejected the contention that
transferring judicial function, traditionally performed by the
Courts, to the Tribunals offended the basic structure of the
Constitution and summarised the position in this behalf as
under: E
"We may summarize the position as follows:
(a) A legislature can enact a law transferring the
jurisdiction exercised by courts in regard to any specified F
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 G
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 H
664 SUPREME COURT REPORTS [2015] 6 S.C.R.
A 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
B the Tribunals. When any jurisdiction is shifted from courts
to Tribunals, on the ground of pendency and delay in
courts, and the jurisdiction so transferred does not
involve any technical aspects requiring the assistance
of experts, the Tribunals should normally have only
c 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
D members in all Tribunals will dilute and adversely affect
the independence of the Judiciary.
(d) The Legislature can re-organize the jurisdictions of
Judicial Tribunals. For example, it can provide that a
E specified category of cases tried by a higher court can
be tried by a lower court or vice versa (A standard
example is the variation of pecuniary limits of courts).
Similarly while constituting Tribunals, the Legislature can
prescribe the qualifications/ eligibility criteria. The same
F is however subject to Judicial Review. If the court in
exercise of judicial review is of the view that such
tribunalisation would adversely affect the independence
of judiciary or the standards of judiciary, the court may
interfere to preserve the independence and standards
G of 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."
H
MADRAS BARASSOCIATION v. UNION OF INDIA 665
[A.K. SIKRI, J.]
13) Thereafter, the Constitution Bench categorically dealt A
with the Constitutional validity of NCLT and NC LAT under the
caption "Whether the constitution of NCLT and NCLAT under
Parts 1B & 1C of Companies Act are valid", and embarked
upon the detailed discussion on this topic. It becomes manifest
from the above that the question of validity of NCLAT was B
directly and squarely in issue. Various facets of the challenge
laid to the validity of these two fora were thoroughly thrashed
out. No doubt, most of the discussion contained in paras 107
to 119 refers to NCLT. However, on an insight into the said
discussion contained in these paragraphs, would eloquently C
bear it out that it is inclusive of NC LAT as well. In para 121 of
the judgment, which is already extracted above, the Court
specifically affirmed the decision of the High Court which held
that creation of NCLT and NC LAT was not unconstitutional. In
D
view of this, it is not open to the petitioner even to argue this
issue as it clearly operate as res judicata.
14) Frankly, Mr. Datar was conscious of the aforesaid
limitation. He still ventured to attack the setting up of NCLAT
on the ground that insofar as this appellate forum is concerned, E
there are no reasons given in the said judgment and thereafter
this aspect has been dealt with in more details in the NTT
judgment wherein formation of National Tax Tribunal has been
held to be unconstitutional. This adventurism on the part of the F
petitioner is totally unfounded. In the first instance, as mentioned
above, insofar as NC LAT is concerned, its validity has already
been upheld and this issue cannot be reopened. Judgment in
the case of2010 judgment is of a Constitution Bench and that
judgment of a co-ordinate Bench binds this Bench as well. G
15) Secondly, reading of the Constitution Bench judgment
in the matter of National Tax Tribunal would manifest that not
only 2010 judgment was taken note of but followed as well.
The Court spelled out the distinguishing features between H
666 SUPREME COURT REPORTS [2015] 6 S.C.R.
A NCLT/NCLAT on the one hand and NTT on the other hand in
arriving at a different conclusion.
16) Thirdly, the NTTwas a matter where power of judicial
review hitherto exercised by the High Court in deciding the
B pure substantial question of law was sought to be taken away
to be vested in NTT which was held to be impermissible. In
the instant case, there is no such situation. On the contrary,
NCLT is the first forum in the hierarchy of quasi-judicial fora
set up in the Act, 2013. The NCLT, thus, would not only deal
C a
with question of law in given case coming before it but would
be called upon to thrash out the factual disputes/aspects as
well. In this scenario, NCLATwhich is the first appellate forum
provided under the Act, 2013 to examine the validity of the
orders passed by NCLT, will have to revisit the factual as well
D as legal issues. Therefore, situation is not akin to NTT.
Jurisdiction of the Appellate Tribunal is mentioned in Section
410 itself which stipulates that NC LAT shall be constituted 'for
hearing appeals against the orders of the Tribunal'. This
jurisdiction is not circumscribed by any limitations of any nature
E whatsoever and the implication thereof is that appeal would
lie both on the questions of facts as well as questions of law.
Likewise, under sub-section (4) of Section 421, which
provision deals with 'appeal from orders of Tribunal', it is
F provided that the NCLAT, after giving reasonable opportunity
of being heard, 'pass such orders thereon as it thinks fit,
forming, modifying or set aside the order appealed against'.
It is thereafter further appeal is provided from the order of the
NC LAT to the Supreme Court under Section 423 of the Act,
G 2013. Here, the scope of the appeal to the Supreme Court is
restricted only 'to question of law arising out of such order'.
17) Fourthly, it is not unknown rather a common feature/
practice to provide one appellate forum wherever an enactment
H is a complete Code for providing judicial remedies. Providing
MADRAS BARASSOCIATION v. UNION OF INDIA 667
[A.K. SIKRI, J.]
one right to appeal before an appellate forum is a well accepted A
norm which is perceived as a healthy tradition.
18) For all these reasons, we hold that there is no merit in
this issue.
B
ISSUE N0.2
19) Qualifications of President and Members of NCLT are
mentioned in Section 409 of the Act, 2013 and that of
Chairperson and Members of NC LAT are stipulated in Section
411 of the Act, 2013. The petitioner has no quarrel about the C
qualifications mentioned for the President and Judicial
Members of the Tribunal as well as Chairperson and Judicial
Members of the Appellate Tribunal. However, it is argued that
insofar as technical Members of NCLT/NCLAT are concerned, D
the provision is almost the same which was inserted by way of
an amendment in the Act, 1956 and challenge to those
provisions was specifically upheld finding fault therewith. In
order to appreciate this argument, we show the comparative
provisions contained in Act, 1956 as well as in the Act, 2013: E
ACT 1956 ACT 3>13
(1) 10.fD (3) (a) (b) (c) and (d) (1) Section 4W (3)
(3) A pa-son shall not re qualified (3) A person st-all not be qualifi~ F
fer appoirtment as Technical for ai:poirtmerit as a Technical
Mernl:er unless he- lllember unless he-
(a) has l"eld for at least fifteen (a) has, for at least fifteen years
yeas a Gro..ip 'A' post or an teen a member of tl"e Indian
equivaert post 1.11der the Caitral Corporate Laiv Service er Indian G
Gc:werrment or a State Governmert Legal Service out of IM"lich ct least
[indudirg at least three years ct three years shall re in the pay
service as a Merrber of tl"e Indian scale ct Joint Secretary to tl"e
Ccmpmy Law Service (Accourts Gm.emment ct Inda er eqL.ivalent
Branch) in Sericr Admiristrative er al:Jm.e in that service; or H
Grade in that Service]; er
668 SUPREME COURT REPORTS (2015] 6 S.C.R.
A (b) is, or has reen, a ..birt (b) is, er has been, in practire as a
Secretary to the G01.emrrert cf chartera::J aocountant fer ct least
ln::lia Ulda- the Caltral Staffing fifteen ~ars; or
Scha-ne, or any otha- pest un::ler
the Central Govemrrent er a State
Gc:wemrrent caryi rg a scale cf pay
B wlich is not less than that cf a Joirt
Secretary to the Go1.emrrert cf
In::lia for at least f1Ve years
and has ad3qwte knoWetj;Je
of, and eiq:erience in, dealing with
prollars relating to company law,
c or
(c) is, or has reen, for ct least (c) is, or has been, in pra::tice as a
fifteen years in practice as a cost aocourtant for at least fifteen
chartere:t aocountant un::ler the ~ars; or
D Chartered .A=urtants Pd, 1949
(38 cf 1949); or
(d) is, er has been, for ct least (d) is, er has been, in practire as a
E fifteen years in p-actice as a comparlf secretary for ct least
cost aocountant under, the Costs fifteen ~ars; or
and W:rks .A.c:cruntarts /ld., 1959
(23 cf 1959); or
F (e) is a person cf p-oven al:ilfty,
integrity and standing havirg
specia kmwetj;Je and eiq:erience,
cf not less than fifteen yecrs, in
law, industrial finanre, i~11o;tria
management or adrrinistrction,
G industrial reconstruction,
investrrert, aocountancy, labrur
mctters or such otha- dscipires
related to rnanaga-nert, cond.Jct of
affcirs, revival, rehabiritation an::l
wn::lirg up of companies; or
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 669
[A.K. SIKRI, J.]
(f) is, or has been, for at least five A
years, a presiding dfioer of a
Labour Court, Triblilal or Naiona
Triblilal oonstituted lilder tte
lndustria Disp.Jtes M, 1947.
B
(2) 1().fR (2) Section 411(3)
10FR C.onstitution d AJ:pellate 411 (3) A Tfillnical f\/13mber shall •
Trio.ma: (1) The Caitral te a person of pro1en al::ilfty,
Gcwerrrrent shal, by notificaion integity and standing having C
in the aficial <?azette, constitute Sp:lcia knJvlletj;ie and e)(p:lrience,
with effect from sl.dl date as may d nd less than twerty-five years,
be ~cified therein, an AJ:pellate in laiv, industrial finance, irdustria
Trib.ina to be called tte "Natioral management or adrrinistraion,
Canµ;my Law App:lllate Triblilar' indLStrial reoonstrudion, D
consisting of a Chairperscn aid investrrert, aooollltancy, labo.Jr
not m:re than tv..o ll/lerTiJers, to raters, or sudl other dscipines
be app:iirted 1:1{ that Go1oemrrent, related to managernert, conduct of
ftr hearing appeals against the afars, revival, rehabilitation ard
orders d tte Triblilal urder this wrdi ng up of corrpanies.
M. E
(2) The Chairp:lrson of the
Appellcte Trib.ina shall be a person
wl"o has been a Ju:lge d the
Supreme Court or the Chief Justice F
of a Hgh Court. -
(3) A Member of the AJ:pellate
Tri run a shall be a person d
abilfty, irtegrity and standing G
ha\.ing special mowectie of, and
prdessioral experience of nd less
than tv.enty-five years in, science,
tEmnology, eoonarics, banjqng,
industry, law, rratters relaing to
labour, industrial firance, indu&rial H
670 SUPREME COURT REPORTS (2015] 6 S.C.R.
A reC01struction, a:tnilistraticn.
irnestrnen~ a=llltarcy, marketing cr
any other mctter, the special
knOJVle::lge of, or prdessional
eiq::erience in wlich, woud t:e in the
B op nion of the c.ertra Gm.ernment
usefu to the ft.wellate Triruna.
20) It was pointed out that in the 2010 judgment, the
Constitution Bench took the view that since the NCLT would
now be undertaking the work which is being performed, inter
C a/ia, by High Court, the technical Members of the NCLT/NCLAT
should be selected from amongst only those officers who hold
rank of Secretaries or Additional Secretaries and have
technical expertise. These aspects are discussed by the Court
in the following paragraphs:
D
"108. The legislature is presumed not to legislate
contrary to the rule of law and therefore know that where
disputes are to be adjudicated by a Judicial Body other
than Courts, its standards should approximately be the
E same as to what is expected of main stream Judiciary.
Rule of law can be meaningful only if there is an
independent and impartial judiciary to render justice.
An independent judiciary can exist only when persons
with competence, ability and independence with
F impeccable character man the judicial institutions.
When the legislature proposes to substitute a Tribunal in
place of the High Court to exercise the jurisdiction which
the High Court is exercising, it goes without "9yi11g thc:1t
the standards expected from the Judicial Members of
G the Tribunal and standards applied for appointing such
members, should be as nearly as possible as applicable
to High Court Judges, which are apart from a basic
degree in law, rich experience in the practice of
law, independent outlook, integrity, character and good
H
reputation. It is also implied that only men of standing
MADRAS BARASSOCIATION v. UNION OF INDIA 671
[A.K. SIKRI, J.]
who have special expertise in the field to which A
the Tribunal relates, will be eligible for appointment
as Technical members. Therefore, only persons with a
judicial background, that is, those who have been or
are Judges of the High Court and lawyers with
the prescribed experience, who are eligible for B
appointment as High Court Judges, can be considered
for appointment of Judicial Members.
109. A lifetime of experience in administration may
make a member of the civil services a good and able C
administrator, but not a necessarily good, able and
impartial adjudicator with a judicial temperament capable
of rendering decisions which have to (i) inform the
parties about the reasons for the decision; (ii)
demonstrate fairness and correctness of the D
decision and absence of arbitrariness; and (iii)
ensure that justice is not only done, but also seem
to be done.
xx xx xx E
111. As far as the technical members are concerned,
the officer should be of at least Secretary Level
officer with known competence and integrity.
Reducing the standards, or qualifications for appointment F
will result in loss of confidence in the Tribunals. We hasten
to add that our intention is not to say that the persons of
Joint Secretary level are not competent. Even persons
of Under Secretary level may be competent to discharge
the functions. There may be brilliant and competent G
people even working as Section Officers or Upper
Division Clerks but that does not mean that they can be
appointed as Members. Competence is different
from experience, maturity and status required for the
post. As, for example, for the post of a Judge of the High H
672 SUPREME COURT REPORTS (2015] 6 S.C.R.
A Court, 10 years' practice as an Advocate is
prescribed. There may be Advocates who even with
4 or 5 years' experience, may be more brilliant than
Advocates with 10 years' standing. Still, it is not
competence alone but various other factors which
B make a person suitable. Therefore, when the
legislature substitutes the Judges of the High
Court with Members of the Tribunal, the standards
applicable should be as nearly as equal in the case of
High Court Judges. That means only Secretary Level
c officers (that is those who were Secretaries or Additional
Secretaries) with specialized knowledge and skills can
be appointed as Technical Members of the tribunal.
xx xx xx
D
118. Parts IC and ID of the Companies Act proposes to
shift the company matters from the courts to
Tribunals, where a 'Judicial Member' and a
'Technical Member' will decide the disputes. If the
E members are selected as contemplated in section
10FD, there is every likelihood of most of the
members, including the so called 'Judicial Members' not
having any judicial experience or company law
experience and such members being required to deal
F with and decide complex issues of fact and law. Whether
the Tribunals should have only judicial members or
a combination of judicial and technical members is
for the Legislature to decide. But if there should
be technical members, they should be persons with
G expertise in company law or allied subjects and mere
experience in civil service cannot be treated as
Technical Expertise in company law. The candidates
falling under sub-section 2(c) and (d) and sub-sections
3(a) and (b) of section 10FD have no experience or
H
expertise in deciding company matters.
MADRAS BAR ASSOCIATION v. UNION OF INDIA 673
[A.K. SIKRI, J.]
119. There is an erroneous assumption thatcompany A
law matters require certain specialized skills which
are lacking in Judges. There is also an equally
erroneous assumption that members of the civil
services, (either a Group-A officer or Joint Secretary
level civil servant who had never handled any company B
disputes) will have the judicial experience or
expertise in company law to be appointed either
as Judicial Member or Technical Member. Nor can
persons having experience of fifteen years in
science, technology, medicines, banking, industry C
can be termed as experts in Company Law for
being appointed as Technical Members. The practice
of having experts as Technical Members is suited
to areas which require the assistance of professional
0
experts, qualified in medicine, engineering, and
architecture etc. Lastly, we may refer to the lack of
security of tenure. The short term of three years, the
provision for routine suspension pending enquiry and the
lack of any kind of immunity, are aspects which E
require to be considered and remedied."
21) On the basis of the aforesaid discussions, parts 1C
and 10 of the Act, 1956 as they existed were treated as invalid
and in order to bring these provisions within the realm of F
Constitutionality, the Court pointed out the corrections which
were required to be made to remove those anamolies. Para
120 of the judgment is most relevant to answer the issue at
hand and, therefore, we reproduce the said para in its entirety:
"120. We may tabulate the corrections required to set G
rightthe defects in Parts 18 and IC of the Act:
(i) Only Judges and Advocates can be considered
for appointment as Judicial Members of the Tribunal.
Onlythe HighCourtJudges, orJudgeswhohaveserved H
674 SUPREME COURT REPORTS [2015] 6 S.C.R.
A in the rank of a District Judge for at least five years or a
person who has practiced as a Lawyer for ten years can
be considered for appointment as a Judicial Member.
Persons who have held a Group A or equivalent
post under the Central or State Government with
B experience in the Indian Company Law Service (Legal
Branch) and Indian Legal Service (Grade-1) cannot be
considered for appointment as judicial members
as provided in sub-section 2(c) and (d) of Section
10FD. The expertise in Company Law service or
c Indian Legal service will at best enable them to be
considered for appointment as technical members.
(ii) As NCLT takes over the functions of High
Court, the members should as nearly as possible have
D 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
E 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
F
Clauses (a) and (b) of sub-section (3) of section 10FD
which provide for persons with 15 years experience in
Group A post or persons holding the post of Joint
Secretary or equivalent post in Central or State
G Government, being qualified for appointment as
Members of Tribunal is invalid.
(iii) A 'Technical Member' presupposes an
experience in the field to which the Tribunal relates.
A member of Indian Company Law Service who has
H
worked with Accounts Branch or officers in other
MADRAS BAR ASSOCIATION v. UNION OF INDIA 675
[A.K. SIKRI, J.]
departments who might have incidentally dealt with A
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.
B
(iv) The first part of clause (f) of sub-section (3) providing
that any person having special knowledge or professional
experience of 20 years in science, technology,
economics, banking, industry could be considered to be
persons with expertise in company law, for being C
appointed as Technical Members in Company Law
Tribunal, is invalid.
(v) Persons having ability, integrity, standing and special
knowledge and professional experience of not less o
than fifteen years in industrial finance, industrial
management, industrial reconstruction, investment and
accountancy, may however be considered as
persons having expertise in rehabilitation/ revival of
companies and therefore, eligible for being E
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. F
(vii) Only Clauses (c), (d), (e), (g), (h), and later part of
clause (f) in sub-section (3) of section 1OFD and officers
of civil services of the rank of the Secretary or Additional
Secretary in Indian Company Law Service and G
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 H
Chief Justice of India (or his nominee) as Chairperson
676 SUPREME COURT REPORTS [2015] 6 S.C.R.
A and two Secretaries from the Ministry of Finance and
Company Affairs and the Secretary in the Ministry of
Labour and Secretary in the Ministry of Law and Justice
as members mentioned in section 1OFX, the Selection
Committee should broadly be on the following lines:
B
(a) Chief Justice of India or his nominee - Chairperson
(with a casting vote);
(b) A senior Judge of the Supreme Court or Chief Justice
c 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.
D
(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
E concerned field. A term of three years is very
short and by the time the members achieve the
required knowledge, expertise and efficiency, one term
will be over. Further the said term of three years with the
retirement age of 65 years is perceived as having
F 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
G have a reasonable period of service.
(x) The second proviso to Section 1OFE enabling
the President and members to retain lien with their
parent cadre/ ministry/department while holding office
H as President or Members will not be conducive
MADRAS BAR ASSOCIATION v. UNION OF INDIA 677
[AK. SIKRI, J]
for the independence of members. Any person A
appointed as members should be prepared to totally
disassociate himselffrom the Executive. The lien cannot
therefore exceed a period of one year.
(xi) To maintain independence and security in service, B
sub-section (3) of section 1OF J and Section 1OFV
should provide that suspension of the President/
Chairman or member of a Tribunal can be only
with the concurrence of the Chief Justice of India.
c
(xii) The administrative support for all Tribunals
should be from the Ministry of Law &Justice. Neither
the Tribunals nor its members shall seek or be provided
with facilities from the respective sponsoring or
parent Ministries or concerned Department. D
(xiii) Two-Member Benches of the Tribunal should always
have a judicial member. Whenever any larger or
- special benches are constituted, the number of
Technical Members shall not exceed the Judicial E
Members."
22) What gets revealed from the reading of para 120,
particularly, sub-para (ii) thereof that only officers who are
holding the ranks of Secretaries or Additional Secretaries F
alone art:l to be considered for appointment as technical
Members of NCLT. Provisions contained in clauses (cl ?rid
(d) of sub-section (2) and Clause (a) and (b) of sub-section (3)
of Section 1OFD which made Joint Secretaries with certain
experience as eligible, were specifically declared as invalid. G
Notwithstanding the same, Section 409(3) of the Act, 2013
again makes Joint Secretary to the Government of India or
equivalent officer eligible for appointment, if he has 15 years
experience as member of Indian Corporate Law Service or
Indian Legal Service, out of which at least 3 years experience H
678 SUPREME COURT REPORTS (2015] 6 S.C.R.
A in the pay scale of Joint Secretary. This is clearly in the teeth
of dicta pronounced in 2010 judgment.
23) In the counter affidavit, the respondents have
endeavored to justify this provision by stating that this variation
B was made in view of the lack of available officers at Additional
Secretary level in Indian Companies Law Service. It is further
mentioned that functionally the levels of Additional Secretary
and Joint Secretary are similar. These officers have knowledge
of specific issues concerning operations and working of
C companies and their expertise in company law which is
expected to benefit NCLT. Such an explanation is not legally
sustainable, having regard to the clear mandate of 2010
judgment.
D We would like to point out that apart from giving other
reasons for limiting the consideration for such posts to
Secretary and Additional Secretary, there was one very
compelling factor in the mind of the Court viz. gradual erosion
of independence of judiciary, which was perceived as a matter
E of concern. This aspect was demonstrated with specific
examples in certain enactments depicting gradual dilution of
the standards and qualifications prescribed for persons to
decide cases which were earlier being decided by the High
Court. We, thus, deem it apposite to reproduce that
F discussion which provides a complete answer to the aforesaid
argument taken by the respondents. The said discussion,
contained in para 112, with its sub-paras, reads as under:
"112. What is a matter of concern is the gradual erosion
G of the independence of the judiciary, and shrinking of
the space occupied by the Judiciary and gradual
increase in the number of persons belonging to
the civil service discharging functions and exercising
jurisdiction wrir.h was previously exercised by the
H High C0urt. There is also a gradual dilution of me
MADRAS BAR ASSOCIATION v. UNION CF 11\1.JIA 679
[A.K. SIKRI, J.)
standards and qualification prescribed for.persons to A
decide cases which were earlier being decided by the
High Courts. Let us take stock.
112.1 To start with, apart from jurisdiction relating to
appeals and revisions in civil, criminal and tax s
matters (and original civil jurisdiction in some High
Courts). The High Courts were exercising original
jurisdiction in two important areas; one was writ
jurisdiction under Articles 226 and 227 (including
original jurisdiction in service matters) and the C
other was in respect to company matters.
112.2 After constitution of Administrative Tribunals under
theAdministrative Tribunals Act, 1985 the jurisdiction
in regard to original jurisdiction relating to service D
matters was shifted from High Courts to
Administrative Tribunals. Section 6 of the said Act deals
with qualifications for appointment as Chairman, and it
is evident therefrom that the Chairman has to be a High
Court Judge either a sitting or a former Judge. For judicial E
member the qualification was that he should be a judge
of a High Court or is qualified to be a Judge of the High
Court (i.e. an advocate of the High Court with ten years
practice or a holder of a judicial office for ten
years) or a person who held the post of Secretary, F
Govt. of India in the Department of Legal Affairs or in the
Legislative Department or Member Secretary, Law
Commission of India for a period of two years; or an
Additional Secretary to Government of India in the
Department of Legal Affairs or Legislative G
Department for a period of five years.
112.3 For being appointed as Administrative Member,
the qualification was that the candidate should
have served as Secretary to the Government of H
680 SUPREME COURT REPORTS [2015] 6 S.C.R.
A India or any other post of the Central or State
Government carrying the scale of pay which is not less
than as of a Secretary of Government of India for atleast
two years, or should have held the post of Additional
Secretary to the Government of India or any other
B post of Central or State Government carrying the scale
of pay which is not less than that of an Additional
Secretary to the Government of India at least for a period
of five years. In other words, matters that were decided
by the High Courts could be decided by a Tribunal whose
c members could be two Secretary level officers with
two years experience or even two Additional Secretary
level officers with five years experience. This was
the first dilution.
D 112.4 The members were provided a term of
office of five years and could hold office till 65 years
and the salary and other perquisites of these members
were made the same as that of High Court Judges. This
itself gave room for a comment that these posts were
E virtually created as sinecure for members of the
executive to extend their period of service by five
years from 60 to 65 at a higher pay applicable to High
Court Judges. Quite a few members of the executive
thus became members of the "Tribunals exercising
F
judicial functions".
112.5 We may next refer to Information Technology
Act, 2000 which provided for establishment of Cyber
Appellate Tribunal with a single member. Section 50
G of that Act provided that a person who is, or has been, or
is qualified to be, a Judge of a High Court, or a
person who is, or has been, a member of the India Legal
Service and is holding or has held a post in Grade I of
that service for at least three years could be appointed
H
MADRAS BARASSOCIATION v. UNION OF INDIA 681
[A.K. SIKRI, J.]
as the Presiding Officer. That is, the requirement of even A
a Secretary level officer is gone. Any member of
Indian Legal Service holding a Grade-I Post for
three years can be a substitute for a High Court Judge.
B
112.6 The next dilution is by insertion of Chapters
1B in the Companies Act, 1956 with effect from
1.4.2003 providing for constitution of a National Company
Law Tribunal with a President and a large number of C
Judicial and Technical Members (as many as 62).
There is a further dilution in the qualifications for
members of National Company Law Tribunal which is a
substitute for the High Court, for hearing winding
up matters and other matters which were earlier heard D
by High Court. A member need not even be a Secretary
or Addi. Secretary Level Officer. All Joint Secretary
level civil servants (that are working under Government
of India or holding a post under the Central and State
Government carrying a scale of pay which is not less than E
that of the Joint Secretary to the Government of India) for
a period of five years are eligible. Further, any person
who has held a Group-A post for 15 years (which
means anyone belonging to Indian P&T Accounts
& Finance Service, Indian Audit and Accounts F
Service, Indian Customs & Central Excise Service,
Indian Defence Accounts Service, Indian Revenue
Service, Indian Ordnances Factories Service, Indian
Postal Service, Indian Civil Accounts Service, Indian
Railway Traffic Service, Indian Railway Accounts G
Service, Indian Railway Personal Service, Indian Defence
Estates Service, Indian Information Service, Indian Trade
Services, or other Central or State Service) with three
years' of service as a member of Indian Company H
Law Service (Account) Branch, or who has 'dealt'
682 SUPREME COURT REPORTS [2015] 6 S.C.R.
A with any problems relating to Company Law can become
a Member. This means that the cases which were being
decided by the Judges of the High Court can be decided
by two-members of the civil services - Joint Secretary
level officers or officers holding Group 'A' posts or
B equivalent posts for 15 years, can now discharge
the functions of High Court. This again has given room
for comment that qualifications prescribed are tailor
made to provide sinecure for a large number of Joint
Secretary level officers or officers holding Group 'Pi posts
c to serve up to 65 years in Tribunals exercising judicial
functions.
112.7 The dilution of standards may not end here. The
proposed Companies Bill, 2008 contemplates that any
D member of Indian Legal Service or Indian Company Law
Service (Legal Branch) with only ten years service,
out of which three years should be in the pay scale of
Joint Secretary, is qualified to be appointed as a Judicial
Member. The speed at which the qualifications for
E appointment as Members is being diluted is, to say the
least, a matter of great concern for the independence of
the Judiciary."
24) Having regard to the aforesaid clear and categorical
F dicta in 2010 judgment, tinkering therewith would evidently have
the potential of compromising with standards which 2010
judgment sought to achieve, nay, so zealously sought to secure.
Thus, we hold that Section 409(3)(a) and (c) are invalid as
these provisions suffer from same vice. Likewise, Section
G 411 (3) as worded, providing for qualifications of technical
Members, is also held to be invalid. For appointment of
technical Members to the NCLT. directions contained in sub-
para (ii), (iii)" (iv), (v) of para 120 of 2010 judgment will have to
H be scrupulously followed and these corrections are required
MADRAS BAR ASSOCIATION v. UNION OF INDIA 683
[A.K. SIKRI, J.]
to be made in Section 409(3) to set right the defects contained A
therein. We order accordingly, while disposing of issue No.2.
ISSUE N0.3
25) This issue pertains to the constitution of Selection
8
Committee for selecting the Members of NCLT and NCLAT.
Provision in this respect is contained in Section 412 of the
Act, 2013. Sub-section (2) thereof provides for the Selection
Committee consisting of:
(a) Chief Justice of India or his nominee-Chairperson; c
(b) a senior Judge of the Supreme Court or a Chief Justice
of High Court-Member;
(c) Secretary in the Ministry of Corporate Affairs-Mernhe;; o
(d) Secretary in the Ministry of Law and Justice-Member;
and (e) Secretary in the Department of Financial
Services in the Ministry of Finance-Member.
Provision in this behalf which was contained in Section E
1OFX, validity thereof was questioned in 2010 judgment, was
to the following effect:
"10FX. Selection Committee: (1) The Chairperson
and Members of the Appellate Tribunal and F
President and Members of the Tribunal shall be
appointed by the Central Government on the
recommendations of a Selection Committee consisting
of:
G
(a) Chief Justice of India or his nominee Chairperson;
(b) Secretary in the Ministry of Finance and
Member; Company Affairs
H
(c) Secretary in the Ministry of Labour Member;
684 SUPREME COURT REPORTS [2015] 6 S.C.R.
A (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
B 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."
c 26) The aforesaid structure of the Selection Committee
was found fault with by the Constitution Bench in 201 Ojudgment.
The Court specifically remarked that instead of 5 members
Selection Committee, it should be 4 members Selection
D Committee and even the composition of such a Selection
Committee was mandated in Direction No.(viii) of para 120
and this sub-para we reproduce once again hereinbelow:
"(viii) Instead of a five-member Selection Committee with
Chief Justice of India (or his nominee) as Chairperson
E and two Secretaries from the Ministry of Finance and
Company Affairs ::irid the Secretary in the Ministry of
Labour and Secretary in the Ministry of Law and Justice
as members mentioned in section 1OFX, the Selection
Committee should broadly be on the following lines:
F
(a) Chief Justice of India or his nominee - Chairperson
(with a casting vote);
(b)Asenior Judge of the Supreme Court or Chief Justice
G 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 -
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 685
[A.K. SIKRI, J ]
Member." A
27) Notwithstanding the above, there is a deviation in the
composition of Selection Committee that is prescribed under
Section 412 (2) of the Act, 2013. The deviations are as under:
B
(i) Though the Chief Justice of India or his nominee is
to act as Chairperson, he is not given the power of a casting
vote. It is because of the reason that instead of four member
Committee, the composition of Committee in the impugned
provision is that of five members. c
(ii) This Court had suggested one Member who could
be either Secretary in the Ministry of Finance or in Company
Affairs (we may point out that the word "and" contained in
Clause (c) of sub-para (viii) of para 120 seems to bP. LJ
typographical mistake and has to be read as "or", as otherwise
it won't make any sense).
(iii) Now, from both the Ministries, namely from the
Ministry of Corporate Affairs as well as Ministry of Finance,
one Member each is included. Effect of this composition is to E
make it a five members Selection Committee which was not
found to be valid in 2010 judgment. Reason is simple, out of
these five Members, three are from the administrative branch/
bureaucracy as against two from judiciary which will result in F
predominant say of the members belonging to the
administrative branch, is situation that was specifically diverted
from.
The composition of Selection Committee contained in
Section 412(2) of the Act, 2013 is sought to be justified by the G
respondents by arguing that the recommended composition
in the 2010 judgment was in broad terms. It is argued that in
view of subsuming of BIFR and AAIFR which are in the
administrative jurisdiction of Department of Financial Services, H
Secretary DFS has been included. No casting vote has been
686 SUPREME COURT REPORTS [2015] 6 S.C.R.
A provided for the Chairman as over the period of time the
selection processes in such committees have crystallized in a
mannerthatthe recommendations have been unanimous and
there is no instance of voting in such committees in Ministry of
Corporate Affairs. Moreover other similar statutory bodies/
B tribunals also do not provide for 'casting vote' to Chairperson
of Selection Committee. Further, the Committee will be
deciding its own modalities as provided in the Act. The
following argument is also raised to justify this provision: (i)
Robust and healthy practices have evolved in deliberations of
C Selection Committees. Till now there is no known case of any
material disagreement in such committees. (ii) The intention
is to man the Selection Committee with persons of relevant
experience and knowledge.
D 28) We are of the opinion that this again does not constitute
any valid or legal justification having regard to the fact that this
very issue stands concluded by the 2010 judgment which is
now a binding precedent and, thus, binds the respondent
equally. The prime consideration in the mind of the Bench
E was that it is the Chairperson, viz. Chief Justice of India, or his
nominee who is to be aiven the final say in the matter of
selection with rightto have a casting vote. That is the ratio of
the judgment and reasons for providing such a composition
F are not far to seek. In the face of the all pervading prescript
available on this very issue in the form of a binding precedent,
there is no scope for any relaxation as .:;ought to be achieved
through the impugned provision and we find it to be
incompatible with the mandatory dicta of 2010 judgment.
G Therefore, we hold that provisions of Section 412(2) of the
Act, 2013 are not valid and direction is issued to remove the
defect by bringing this provision in accord with sub-para (viii)
of para 120 of 2010 judgment.
29) We now deal with some other issues raised in the
H
MADRAS BARASSOCIATION v. UNION OF INDIA 687
[A.K. SIKRI, J.]
petition. It was feebly argued by Mr. Datarthat power to punish A
for contempt as given to the NCLT and NCLAT under Section
425 of the Act is not healthy and should be done away with. It
was also argued that power given to the Central Government
to constitute the Benches is again impermissible as such
power should rest with President, NCLT or Chairman, NC LAT. B
However, we hardly find any legal strength in these arguments.
We have to keep in mind that these provisions are contained
in a statute enacted by the Parliament and the petitioner could
not point out as to how such provisions are unconstitutional.
c
30) The upshot of the aforesaid discussion is to allow this
writ petition partly, in the manner mentioned above.
31) Before we part, we must mention that the affidavit
dated 07.05.2015 is filed on behalf of the respondents D
mentioning therein the steps that have been taken till date
towards setting up of NCLT and NC LAT. It is pointed out that
the approval for creation of one post of Chairperson and five
posts of Members of NC LAT as well as one post of President
and 62 posts of Members of NCLT and two posts of Registrar E
one each for NCLT and NCLAT and one post of Secretary,
NCLTwas obtained and the approval was also obtained for
creation of 246 posts of supporting staff of NCLTand NCLAT.
It is also mentioned that following draft Rules have already been
prepared in consultation with the Legislative Department, F
Ministry of Law: (i) NCLAT (Salaries, Allowances and other
terms and conditions of service of the Chairperson and other
Members) Rules, 2014, (ii) NCLT (Salary, Allowances and other
Terms and Conditions of Service of President and other
Members) Rules, 2013. Draft Recruitment Rules for the G
supporting staff were also prepared in consultation with
Legislative Department, Ministry of Law. It is further mentioned
that draft Rules with regard to manner of functioning of NCLT/
NC LAT etc. were prepared in order to place them before the H
Chairperson/President of NCLAT/NCLT on their appointment
688 SUPREME COURT REPORTS [2015] 6 S.C.R.
A for finalization as per the provisions of the Companies Act,
2013. These Rules cover provisions with regard to manner of
functioning of NCLT/NCLAT; manner in which applications for
various approvals shall be made by applicants and approved;
and specific procedural requirements with regard to
B applications/matters relating to compromises/arrangements/
amalgamations; prevention of oppression and
mismanagement; revival and rehabilitation of sick companies;
winding up and other miscellaneous requirements. Space for
Principal Bench and other Benches of NCLT, including a
C special Bench at Delhi to deal with transferred cases of BIFR
and AAIFR had also been identified. Process initiated for
renting space in some locations, which was discontinued in
view of the pending petition, can be restarted at a short notice.
Budget heads have been created for meeting the expenditure
0
for NCLT and NCLAT. Allocated funds for 2014-2015 had to
be surrendered in view of the delay in settling up the Tribunals.
32) From the aforesaid, it seems the only step which is
left to make NCLT and NCLAT functional is to appoint
E President and Members of NCLT and Chairperson and
Members of NCLAT.
33) Since, the functioning of NCLT and NCLAT has not
started so far and its high time that these Tribunals start
F functioning now, we hope that the respondents shall take
remedial measures as per the directions contained in this
judgment at the earliest, so that the NCLT & NCLAT are
adequately manned and start functioning in near future.
G 34) Writ petition stands disposed of in the aforesaid
manner.
NidhiJain Writ Petitions disposed of.
H
(2015] 6 S.C.R. 689
MADRAS BAR ASSOCIATION A
v.
UNION OF INDIA&ANR.
Writ Petition (Civil) No.1072 of 2013
B
MAY20, 2015
[A.K. SIKRI AND UDAY UMESH LAUT, JJ.]
Companies Act, 2013 - s. 409 - Clericalltypographica/
error in judgment dated 14. 5. 2015 in Writ Petition (Civil) C
No. 1072 of 2013 -Correction carried out.
CIVIL ORIGINAL JURISDICTION: Writ Petition (Civil) No.
1072of2013.
D
[Under Article 32 of the Constitution of India]
P. S. Patwalia, Nikhil Nayyarfor the Petition.
The Order of the Court was delivered
E
ORDER
Mr. P.S. Patwalia, learned senior counsel has brought to
our notice the clerical/typographical error which has occurred
in the judgment dated 14.5.2015 pronounced by the F
Constitution Bench in the WP(C)No. 1072/2013 authored by
one of us (A.K.Sikri,J.). It is pointed out that in para 24 of the
said judgment where this Court has held Section 409 (3)(a)
and (c) are invalid, clause (c) has been wrongly typed instead
of clause (e) of Section 409 (3). Submission of Mr Patwalia G
appears to be correct, as clause (c) was not even the subject
matter of challenge. The correction is carried out accordingly.
Nidhi Jain Correction made in earlier Judgment.
689 H
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