UNION OF INDIA AND OTHERSversusS. SRINIVASAN

                          [2012] 6 S.C.R. 34


A                  UNION OF INDIA AND OTHERS
                                    v.
                            S. SRINIVASAN
                   (Civil Appeal No. 3185 of 2005)

                             MAY 21, 2012
B
          [DR. 8.5. CHAUHAN AND DIPAK MISRA, JJ.]

          Foreign Exchange Management Act, 1999 - ss. 21(1}(b},
    2(s), 46 - Appellate Tribunal for Foreign Exchange
C   (Recruitment, Salary and Allowances and other Conditions of
    Service of Chairperson and Members) Rules, 2000) - r. 5 first
    and second proviso -Appointment of part time members to
    the Appellate Tribunal for Foreign Exchange - Held: Part time
    members cannot be appointed to the Appellate Tribunal for
D   Foreign Exchange - If the object and purpose of the Act is to
    confer power on the Appellate Tribunal to deal with the issue
    of economy under the scheme of the Act, it is impossible to
    conceive of the appointment of a part time Member - It is
    manifest from s. 2(s) that there is no conception of a part time
E   member under the Scheme of the Act - First proviso to r. 5
    stipulates that the number of either full time Members or part
    time Members shall not exceed two - The introduction of the
    concept of part time Member, is contrary to the provision
    contained in the enabling Act - Also, s. 46 nowhere envisages
F   about the part time Members - Further, there is no justification
    for the introduction of the second proviso to bring in officers
    from the Indian Legal Service who are qualified to become
    district judges to be part time Members - If the officer satisfies
    the requisite qualification, he can be appointed as a Member,
G   thus, the second proviso has been incorporated to bring in
    only part time Members and once the introduction of part time
    Members is treated to be ultra vires the Act, the rest part of
    the Rule is absolutely redundant - High Court rightly held the
    first and second proviso tor. 5 as ultra vires s. 21(1)(b) and

H                                  34
          UNION OF INDIA v. S. SRINIVASAN                  35

quashed the appointment of part time Members and the             A
appointment of Chairperson who was a part time Member
once - As the appointment of part time Member was quashed,
as a logical corollary, such a person could not be allowed to
be appointed to the post of Chairperson - Disqualified
Member cannot hold the post of a Chairperson as a stop gap       B
arrangement.

     Administrative Law - Rule making powers of a delegating
authority - When ultra vires - Held: If a rule goes beyond the
rule making power conferred by the statute, it has to be
declared ultra vires - If a rule supplants any provision for     C
which power has not been conferred, it becomes ultra vires -
Basic test is to determine and consider the source of power
relatable to the rule - Rule must be in accord with the parent
statute as it cannot travel beyond it.
                                                                 D
    Writ petitions were filed before the High Court
seeking issuance of writ of quo warranto that Rule 5 of
the Appellate Tribunal for Foreign Exchange (Recruitment,
Salary and Allowances and Other Conditions of Service
of Chairperson and Members) Rules, 2000 is ultra vires E
the Foreign Exchange Management Act, 1999; for
quashment of certain notifications issued by the
Government of India, Ministry of Law, Justice and
Company Affairs, appointing part time Members of the
Appellate Tribunal; and to quash the appointment of
                                                          F
respondent No. 3 to act as the Chairperson as he was a
part time Member and also was not eligible to hold the
post. The High Court held the first and second proviso
to Rule 5 of the Rules as ultra vires Section 21(1)(b) of
the Act and quashed the appointments of respondent G
Nos. 3 and 4 who were appointed as part time Members
and further quashed the appointment of respondent No.
3 as the acting Chairperson of the Appellate Tribunal.
Therefore, the appellants filed the instant appeals.

    Disposing of the appeals, the Court                          H
    36     SUPREME COURT REPORTS            [2012] 6 S.C.R.


A      HELD: 1.1 Rule 2(1 )(b) of the Appellate Tribunal for
  Foreign Exchange (Recruitment, Salary and Allowances
  and other Conditions of Service of Chairperson and
  Members) Rules, 2000) is in consonance with the
  provisions contained in the Act inasmuch as Section
B 20(1) confers power on the Central Government to
  constitute the tribunal consisting of one Chairperson and
  such number of Members. The said fixation of the number
  is in accord with the Act. Rule 5 provides that there would
  be one Chairperson and Members not exceeding four. As
C far as the number is concerned, the Act does not provide
  the number of Members and, therefore, the Central
  Government under the Rules has the power to fix the
  number. There cannot be any kind of cavil over the same.
  The High Court perceived difficulty in accepting the
  validity of the two provisos of the said Rule. The first
0
  proviso lays a postulate that the number of full time
  Members or part time M{!mbers shall not exceed two. The
  concept of part time Member has been introduced by the
  rule making authority. The second proviso states that the
  part time Members shall be appointed from amongst
E officers belonging to the Indian Legal Service who fulfil
  the qualifications prescribed under clause (b) of sub-rule
  (1) of Rule 2 of the Rules. [Para 14] [48-F-H; 49-A-B]

       1.2 As regards the rule making powers of a
F delegating authority, if a rule goes beyond the rule
  making power conferred by the statute, the same has to
  be declared ultra vires. If a rule supplants any provision
  for which power has not been conferred, it becomes ultra
  vires. The basic test is to determine and consider the
G source of power which is relatable to the rule. Similarly,
  a rule must be in accord with the parent statute as it
  cannot travel beyond it. [Para 16] [49-G-H]

       General Officer Commanding-in-Chief v. Dr. Subhash
    Chandra Yadav AIR 1988 SC 876: 1988 (3) SCR 6;
H
         UNION OF INDIA v. S. SRINIVASAN                37

Additional District Magistrate (Rev.) Delhi Administration v. A
Shri Ram AIR 2000 SC 2143: 2000 (3) SCR 1019; Sukhdev
Singh v. Bhagat Ram AIR 1975 SC 1331: 1975 (3) SCR 619;
State of Kamataka and another v. H. Ganesh Karnath etc. AIR
1983 SC 550: 1983 (2) SCR 665; Kun} Behari Lal Butail and
Ors. v. State of H.P. and Ors. AIR 2000 SC 1069: 2000 (1) B
SCR 1054; St. Johns Teachers Training Institute v. Regional
Director AIR 2003 SC 1533: 2003 (1) SCR 975; Global
Energy Ltd. and Anr. v. Central Electricity Regulatory
Commission (2009) 15 SCC 570: 2009 (9) SCR 22; State
of T.N. and Anr. v. P. Krishnamurthy and Ors. (2006) 4 SCC   c
517: 2006 (3) SCR 396; Pratap Chandra Mehta v. State Bar
Council of Madhya Pradesh and Ors. (2011) 9 SCC 573:
2011 (11) SCR 965 - referred to.

      1.3 On a scrutiny of the objects and reasons, the
 purpose and various provisions of the Act, it is D
 graphically clear that the Appellate Tribunal has been
conferred jurisdiction to decide an appeal from the
Appellate Tribunal and it has to deal with matters relating
to foreign exchange. A fixed tenure has been stipulated
for the Chairperson and Members. Section 22 provides E
that the Chairperson and every other Member shall hold
office for a term of five years from the date on which he
enters upon office. A Chairperson can continue upto the
age of 65 years and th~ age of retirement of a Member is
62 years. They are entitled to resign subject to certain F
conditions and they can be removed on proven
misbehaviour or incapacity. If the object and purpose of
the Act is to confer power on the Appellate Board to deal
with the issue of economy under the scheme of the Act,
it is well nigh impossible to conceive of the appointment G
of a part time Member. On the scrutiny of Section 2(s), it
is manifest that there is no conception of a part time .
member under the scheme of the Act. Section 20, the
enabling provision, empowers the Central Government to
fix such number of persons as the Government may deem H
    38       SUPREME COURT REPORTS               (2012] 6 S.C.R.


A   fit. The main part of Rule 5 provides that a tribunal shall
    have one Chairperson and Members not exceeding four.
    To that extent, it is in consonance with the Act and it
    comes within the framework of the provision. [Para 27)
    [54-F-H; 55-A-B]
B
          1.4 The first proviso stipulates that the number of
    either full time Members or part time Members shall not
    ex.ceed two. This proviso introduces the concept of part
    time Member. There can be no trace of doubt that it
    travels beyond the enabling provision and is totally
c   inconsistent with it. The rule does not conform to the
    main enactment. Therefore, the High Court is justified in
    declaring the said provision as ultra vires. The second
    proviso is an innovative one. It provides for qualification
    of a part time Member who can be appointed from
D   amongst officers belonging to the Indian Legal Service
    who fulfil the qualification prescribed under Clause (b) of
    sub-rule (1) of Rule 2 of the Rules. Clause (b) of sub-rule
    (1) of Rule 2 spells out that a person shall not be qualified
    for appointment as a Member unless he is or has been
E   or is qualified to be a district judge. As far as the word
    'is' or 'has been' is concerned, there can be no cavil. The
    core of the controversy is the qualification associated
    with part time Member. [Para 28, 29) [55-8-F]

         Satya Narian Singh v. High· Court of Judicature at
F
    Allahabad and Ors. (1985) 1 SCC 225: 1985 (2) SCR 112;
    Chandra Mohan v.State of Uttar Pradesh (1967) 1 SCR 77;
    Rameshwar Dayal v. State of Punjab and Ors. AIR 1961 SC
    816: 1961 SCR 874; Shri Kumar Padma Prasad v. Union of
    India and Ors. (1992) 2 SCC 428: 1992 (2) SCR 109;
G   Sushma Suri v. Govt. of National Capital Territory of Delhi and
    Anr. (1999) 1 SCC 330: 1998 (2) Suppl. SCR 187; Oma
    Shanker Sharma v. Delhi Administration CWP No. 1961 of
    1987 - referred to.

H        1.5 Rule 2(1)(b) provides the qualification to be a
         UNION OF INDIA v. S. SRINIVASAN                  39

Member. The same is in total accord with the Act. The first     A
proviso to Rule 5 introduces part time Member. The said
proviso, as far as it introduces the concept of part time
Member, is contrary to the provision contained in the
enabling Act. Section 46 of the Act nowhere envisages
about the part time Members. Once it is held that there         B
cannot be a part time Member, a person who is qualified
to be a district judge can be a Member if he meets the
criterion laid down in the pronouncements of this Court.
They are strictly followed. There is no justification for the
introduction of the second proviso to bring in officers         c
from the Indian Legal Service who are qualified to
become district judges to be part time Members. If the
officer satisfies the requisite qualification, he can be
appointed as a Member. Therefore, the second proviso
has been incorporated to bring in only part time Members
                                                                D
and once the introduction of part time Members is treated
to be ultra vires the Act, the rest part of the Rule is
absolutely redundant. If the officer belonging to Indian
Legal Services is qualified to be a district judge, he can
compete and be selected for the post of Member and that
qualification is to be in accord with the pronouncements        E
of law of this Court. [Para 33] [59-F-H; 60-A-C]

    1.6 The High Court quashed the appointment of part
time Members and the appointment of Chairperson who
was a part time Member once. As the appointment of part         F
time Member was quashed, as a logical corollary, such a
person could not be allowed to be appointed to the post
of Chairperson. The disqualified Member cannot hold the
post of a Chairperson as a stop gap arrangement. Thus,
there is no error in that regard in the judgment passed         G
by the High Court. [Para 34] [60-D-E]

    1.7 This Court while issuing notice had granted stay
on the operation of the judgment. It has been apprised
that the Central Government, at present, has been
    40        SUPREME COURT REPORTS             [2012] 6 S.C.R.


A scrupulously following the mandate of the Act and only
  qualified persons are appointed as Members and
  Chairperson. To avoid any confusion, it is clarified that
  the judgments and orders passed by the Appellate
  Tribunal by the Chairperson or Members who were not
B qualified and whose appointments have been quashed
  shall not be treated to be null and void. [Para 35] [60-F-
  H]
          I

       Gokaraju Rangaraju v. State of Andhra Pradesh AIR
C 1981 SC 1473: 1981 (3) SCR 474; M.M. Gupta and Ors. v.
  M. M. Gupta and Ors. vs. State of J. & K. and Ors. AIR 1982
  SC 1579: 1983 (1) SCR 593 - relied on.

      State of Maharashtra v. Labour Law Practitioners
  Association and Ors. (1998) 2 SCC 688: 1998 (1) SCR 793;
D Union of India and Anr. v. Delhi High Court Bar Association
  and Ors. (2002) 4 SCC 275: 2002 (2) SCR 450 - referred
  to.

                           Case Law Reference:
E        1998 (1) SCR 793         Referred to         Para 3
         2002 (2) SCR 450         Referred to         Para 4
         1988 (3) SCR 6           Referred to         Para 16

F    . 2000 (3) SCR 1019          Referred to         Para 17
         1975 (3) SCR 619         Referred to         Para 18
         1983 (2) SCR 665         Referred to         Para 19
         2000 (1) SCR 1054        Referred to         Para 20
G
         2003 (1) SCR 975         Referred to         Para 21
         2009 (9) SCR 22          Referred to         Para 22
         2006 (3) SCR 396         Referred to         Para 24
H
          UNION OF INDIA v. S. SRINIVASAN                   41


   2011 (11) SCR 965          Referred to           Para 25       A

   1985 (2) SCR 112           Referred to           Para 30
   AIR 1966 SC 1987           Referred to           Para 30
   1961 SCR 874               Referred to           Para 30       B
   1992 (2) SCR 109            Referred to          Para 31
   1998 (2) Suppl. SCR 187Referred to               Para 32

   1981 (3) SCR 474            Relied on            Para 33
                                                                  c
   1983 (1) SCR 593            Relied on            Para 33

    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3185 of 2005 etc.

    From the "Judgment & Order dated 12.04.2004 of the High       D
Court of Delhi at New Delhi in Civil Writ Petition No. 7606 of
2003.
                               WITH
W.P. (C) No. 127 of 2008 & C.A. No. 3186-3190 of 2005.
                                                                  E
    R.P. Bhatt, S. Wasim A. Qadri, Rekha Pandey, Zaid Ali,
Tamim Qadri, R. Bala., Rohitash Nagar, Anil Katiyar, U. Usha
Reddy for the Appellants.

    Mahabir Singh, V. Stideer, Rakesh Dahiya, Gagan Deep          F
Sharma, Ranbir Singh Yadav, Soumyashree Kulkarni, Mathew
J. Nedumparara, K. Lingaraja, S. Usha Reddy, B. Krishna
Prasad for the Respondent.

    The Judgment of the Court was delivered by
                                                                  G
     DIPAK MISRA, J. 1. Calling in question the legal
penetrability of the order dated April 12, 2004 passed by the
Division Bench of the High Court of Judicature of Delhi in Writ
Petition Nos. 7606 of 2003, 1335, 1336, 1337, 1344 and 1345
of 2004 by a common judgment, the present batch of appeals        H
    42         SUPREME COURT REPORTS                [2012] 6 S.C.R.


A   by way of special leave under Article 136 of the Constitution
    has been filed.

          2. Though prayers in different writ petitions were couched
    differently, yet the three basic reliefs which were sought before
    the High Court are - Rule 5 of the Appellate Tribunal for Foreign
B
    Exchange (Recruitment, Salary and Allowances and Other
    Conditions of Service of Chairperson and Members) Rules,
    2000 (hereinafter referred to as 'the Rules') is ultra vires the
    Foreign Exchange Management Act, 1999 (for brevity 'the
    Act); for quashment of certain notifications issued by the
c   Government of India, Ministry of Law, Justice and Company
    Affairs; appointing part time Members of the Appellate Tribunal
    by issue of a writ of quo warranto as they did not satisfy the
    eligibility criteria as stipulated in the Act; and further to quash
    the appointment of respondent No. 3 to act as thE;! Chairperson
D   as he was a part time Member and also was not eligible to hold
    the post.

         3. It was urged before the High Court that the Rule travels
    beyond the scope and ambit of the Act and, in fact, directly runs
E   counter to the provisions in the Act and, therefore, deserves to
    be declared as ultra vires. It was canvassed that when the Act
    did not conceive of part time Members, even a person meeting
    the eligibility criteria could not be appointed as a part time
    Member. It was further propounded before the High Court that
F   a part time Member who was disqualified to hold the post could
    not have been allowed to act as the Chairperson as that would
    destroy the spirit of the Act. To bolster the said submissions,
    the petitioners before the High Court placed reliance on
    Chander Mohan v. State of Uttar Pradesh and others 1, Shri
    Kumar Padma Prasad v. Union of India and others 2 and State
G
    of Maharashtra v. Labour Law Practitioners' Association and
    others3 .
    1.   (1967) 1 SCR 77.
    2.   (1992) 2 sec 428.
H   3.   (1998) 2 sec 688.
            UNION OF INDIA v. S. SRINIVASAN                  43
                   [DIPAK MISRA, J.]

     4. The contentions raised by the petitioners before the writ A
court were resisted by the respondent on the ground that the
Members of Indian Legal Services were only required to hold
the post of part time Member and, therefore, the rule does not
really run counter to the Act in question; that as a stopgap
arrangement, a part time Member could be appointed as the B
Chairperson of the Appellate Tribunal and hence, no facet could
be found fault with such an appointment; and that a writ of quo
warranto could not be issued as the pers.ons, who were meeting
the eligibility criteria had been appointed by a High Level
Committee. Reliance was placed on the decision in Union of         c
India and another v. Delhi High Court Bar Association and
others4 .

     5. The High Court declared the first and second proviso
to Rule 5 of the Rules as ultra vires Section 21(1)(b) of the Act
                                                                  0
and quashed the appointments of respondent Nos. 3 and 4 who
were appointed as part time Members and further quashed the
appointment of respondent No. 3 as the acting Chairperson of
the Appellate Tribunal.

    6. We have heard Mr. R.P. Bhatt, learned senior counsel        E
appearing for the appellants, and Mr. Mahabir Singh, learned
senior counsel appearing for the contesting respondent.

     7. The Parliament enacted the Foreign Exchange
Management Act, 1999 repealing the Foreign Exchange                F
Regulation Act, 1973 as a result of which the Appellate Board
constituted under Section 52 of the 1973 Act stood dissolved.
Thereafter, the new Appellate Board was to be constituted and,
accordingly, it was constituted. Regard being had to the
principal issue whether the Rule runs contrary to the main
provision, it is condign to refer to Section 20 of the Act which   G
deals with the composition of the Appellate Tribunal. It reads
as under: -


4.   (2002) 4 sec 275.                                             H
    44          SUPREME COURT REPORTS               (2012] 6 S.C.R.


A        "20. Composition of Appellate Tribuna/.-(1) The Appellate
         Tribunal shall consist of a Chairperson and such number
         of Members as the Central Government may deem fit.

         (2) Subject to the provisions of this Act, -
B         (a)    the jurisdiction of the Appellate Tribunal may be
                 exercised by Benches thereof;

          (b)    a Bench may be constituted by the Chairperson
                 with one or more Members as the Chairperson may
c                deem fit;

          (c)    the Benches of the Appellate Tribunal shall ordinarily
                 sit at New Delhi and at such other places as the
                 Central Government may, in consultation with the
                 Chairperson, notify;
D
          (d)    the Central Government shall notify the areas in
                 relation to which each Bench of the Appellate
                 Tribunal may exercise jurisdiction.

E        (3) Notwithstanding anything contained in sub-section (2),
         the Chairperson may transfer a Member from one Bench
         to another Bench.

         (4) If at any stage of the hearing of any case or matter it
         appears to the Chairperson or a Member that the case or
F        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 Chairperson or, as the case may be,
         referred to him for transfer, to such Bench as the
         Chairperson may deem fit."
G
    On a perusal of the aforesaid provision, it is quite clear that the
    Appellate Tribunal shall consist of Chairperson and such
    number or Members as the Central Government may deem fit.

         8. Section 2(s) defines a Member as follows: -
H
            UNION OF INDIA v. S. SRINIVASAN                      45
                   [DIPAK MISRA, J.]

    " "Member" means a Member of the Appellate Tribunal                A
    and includes the Chairperson thereof;"

On a studied scrutiny of the aforesaid provision, it is manifest
that there is no conception of a part time Member under the
scheme of the Act.                                                     B
    9. At this juncture, it is profitable to refe·r to Section 21 of
the Act that provides for qualification for appointment of
Chairperson, M.ember and Special Director (Appeals). Regard
being had to the,~ontroversy, it is apt to reproduce the
provision in entirety: :.                                              C

     "21. Qualifications for appointment of Chairperson,
     Member and Special Director (Appeals). - (1) A person
     shall not be qualified for appointment as the Chairperson
     or a Member unless he -                                           D

      (a)    in the case of Chairperson, is or has been, or is
             qualified to be, a Judge of a High Court; and

      (b)    in the case of a Member, is or has been, or is
             qualified to be, a District Judge.                        E

     (2) A person shall not be qualified for appointment as a
     Special Director (Appeals) unless he -

      (a}    has been a member of the Indian Legal Service and
             has held a post in Grade I of that Service; or            F

      (b}    has been a member of the Indian Revenue Service
             and has held a post equivalent to a Joint Secretary
             to the Government of India."
                                                                       G
     10. On a scanning of the aforesaid provision, it is quite
clear that a person, in order to be qualified for appointment as
the Chairperson, is required to be or has been qualified to be
a Judge of the High Court and a person to be a Member is
required to be or has been qualified to be a district judge and
                                                                       H
    46        SUPREME COURT REPORTS                [:2012] 6 S.C.R.


A   to be appointed as a Special Director (Appeal), he has to be
    a member of the Indian Legal Service and is required to have
    held a post of Grade I or that service or a member of the Indian
    Revenue Service as a post equivalent to Joint Secretary to the
    Government of India. Thus, a member of the Indian Legal
B   Service who is qualified as per Section 21 (2) (a) is entitled to
    be appointed as a Special Director (Appeal).

          11. Section 16 of the Act provides for appointment of the
    Adjudicating Authority. Section 17 provides for appeal to the
    Special Director (Appeals). Section 18 provides for
C   establishment of the Appellate Tribunal to hear the appeals
    against the order of the Adjudicating Authorities and the
    Special Director (Appeals) under the Act. Section 19 provides
    for appeal to the Appellate Tribunal and lays down the
    postulates as to what categories of appeals can be preferred.
D   From the aforesaid provisions, it is quite clear that there are
    three distinctive forums for adjudication and there is a
    hierarchical system. We have already referred to Section 20
    which deals with the composition of the Appellate Tribunal. As
    is indicated hereinabove, Section 21 (1) clearly lays a postulate
E   as to what is the qualification for a Chairperson and that of a
    Member. Sub-section (2) of Section 21 provides for the
    qualification of a Special Director (Appeals). At this juncture,
    we may refer to Section 46 which provides for the rule making
    power. It stipulates that the Central Government by notification
F   makes rules to carry out the provisions of the Act. Section 46(2)
    states the nature of the rules to be framed by the Central
    Government. We think it appropriate to reproduce Section 46
    of the Act as under: -

         "46. Power to make rules. - (1) The Central Government
G
         may, by notification, make rules to carry out the provisions
         of this Act.

         (2) Without prejudice to the generality of the foregoing
         power, such rules may provide for, --
H
            UNION OF INDIA v. S. SRINIVASAN                   47
                   [DIPAK MISRA, J.]
      (a}    the imposition of reasonable restrictions on current A
             account transactions under section 5;

      (b)    the manner in which the contravention may be
             compounded under sub-section (1) of section 15;

      (c)    the manner of holding an inquiry by the Adjudicating   B
             Authorities under sub-section (1) of section 16;

      (d)    the form of appeal and fee for filing such appeal
             under sections 17 and 19;

      (e)    the salary and allowances payable to and the other
                                                                    c
             terms and conditions of service of the Chairperson
             and other Members of the Appellate Tribunal and
             the Special Director (Appeals) under section 23;

      (f)    the salaries and allowances and other conditions       D
             of service of the officers and employees of the
             Appellate Tribunal and the office of the Special
             Director (Appeals) under sub-section (3) of section
             27;
                                                                    E
      (g)    the additional matters in respect of which the
             Appellate Tribunal and the Special Director
             (Appeals) may exercise the powers of a civil court
             under clause (i) of sub-section (2) of section 28;

      (h)    the authority or person and the manner in which any    F
             document may be authenticated under clause (ii) of
             section 39; and

      (i)    any other matter which is required to be, or may be,
             prescribed."                                           G
      12. Emphasis has been laid on the rule making power by
Mr. Bhatt, learned senior counsel, to build an edifice that there
lies the source for framing the rules which has been erroneously
declared by the High Court to be ultra vires.
                                                                    H
    48       SUPREME COURT REPORTS                  [2012] 6 S.C.R.


A       13. At this juncture, we may refer with profit to Rule 2(1 )(b)
    which reads as follows: -

         "2. Qualification for recruitment - (1) A person shall not be
         qualified for appointment as Chairperson or a member
         unless he: -
B
         a) xx xx xx

         b) in the case of a Member, is or has been or is qualified
         to be a District Judge."

C   Rule 5 of the Rules reads as follows:-

         "Composition - The Appellate Tribunal shall have one
         Chairperson and Members not exceeding four:

D        Provided that the number of either full time Members or
         part time Members shall not exceed two;

         Provided further that the part time Members shall be
         appointed from amongst officers belonging to the Indian
         Legal Service who fulfil the qualifications prescribed under
E        clause (b) of sub-rule (1) of Rule 2 of these rules."

         14. As far as Rule 2(1)(b) is concerned, there can be no
   trace of doubt that it is in consonance with the provisions
 . contained in the Act inasmuch as Section 20 (1) confers power
F on the Central Government to constitute the tribunal consisting
   of one Chairperson and such number of Members. The said
   fixation of the number is in accord with the Act. Rule 5 provides
   that there would be one Chairperson and Members not
   exceeding four. As far as the number is concerned, the Act
G does not provide the number of Members and, therefore, as
   we have stated above, the Central Government under the Rules
   has the power to fix the number. There cannot be any kind of
   cavil over the same. The High Court has perceived, as we have
   seen from the impugned judgment, difficulty in accepting the
H validity of the two provisos of the said Rule. The first proviso
          UNION OF INDIA v. S. SRINIVASAN                     49
                 [DIPAK MISRA, J.]

lays a postulate that the number of full time Members or part       A
time Members shall not exceed two. The concept of part time
Member has been introduced by the rule making authority. The
second proviso states that the part time Members shall be
appointed from amongst officers belonging to the Indian Legal
Service who fulfil the qualifications prescribed under clause (b)   B
of sub-rule (1) of Rule 2 of these Rules. The submission of Mr.
Bhatt, learned senior counsel, is that when Rule 2(1)(b) clearly
lays down that a Member is or has been qualified to be a district
judge and that has been referred to in the second proviso for
the part time Members, the same could not have been declared        c
as ultra vires by the High Court. The learned senior counsel
would further submit that the term 'Membe( would include a part
time Member and for the sake of convenience, the Central
Government has framed the Rules to carry out the purposes
of the Act.
                                                                    D
      15. In oppugnation, Mr. Mahabir Singh, learned senior
counsel for the respondent, would contend that when the
specific meaning has been given to the term 'Member' by the
Act and the existence of a part time Member is conceptually
absent under the scheme of the Act, the introduction by the rule    E
is totally impermissible. Mr. Singh would further submit that a
member of Indian Legal Service can only be appointed as a
Special Director (Appeals) and, therefore, the rule providing
that a member of Indian Legal Service can be appointed a
Member runs counter to the provisions in the Act.                   F
     16. At this stage, it is apposite to state about the rule
 making powers of a delegating authority. If a rule goes beyond
the rule making power conferred by the statute, the same has
to be declared ultra vires. If a rule supplants any provision for G
which power has not been conferred, it becomes ultra vires.
The basic test is to determine and consider the source of
power which is relatable to the rule. Similarly, a rule must be
in accord with the parent statute as it cannot travel beyond it. ·
In this context, we may refer with profit to the decision in
                                                                    H
    50          SUPREME COURT REPORTS                  [2012] 6 S.C.R.


A   General Officer Commanding-in-Chief v. Dr. Subhash
    Chandra Yadav5, wherein it has been held as follows:-

          " ...... Before a rule can have the effect of a statutory
          provision, two conditions must be fulfilled, namely (1) it must
          conform to the provisions of the statute under which it is
B
          framed; and (2) it must also come within the scope and
          purview of the rule making power of the authority framing
          the rule. If either of these two conditions is not fulfilled, the
          rule so framed would be void."

C      17. In Additional District Magistrate (Rev.) Delhi
    Administration v. Shri R am6, it has been ruled that it is a well
    recognised principle that the conferment of rule making power
    by an Act does not enable the rule making authority to make a
    rule which travels beyond the scope of the enabling Act or which
D   is inconsistent therewith or repugnant thereto.

          18. In Sukhdev Singh v. Bhagat Ram 7, the Constitution
    Bench has held that the statutory bodies cannot use the power
    to make rules and regulations to enlarge the powers beyond
E   the scope intended by the legislature. Rules and regulations
    made by reason of the specific power conferred by the statute
    to make rules and regulations establish the pattern of conduct
    to be followed.

          19. In State of Karnataka and another v. H. Ganesh
F   Karnath etc. 8, it has been stated that it is a well settled principle
    of interpretation of statutes that the conferment of rule making
    power by an Act does not enable the rule-making authority to
    make a rule which travels beyond the scope of the enabling Act
    or which is inconsistent therewith or repugnant thereto.
G
        20. In Kunj Behari Lal Butail and others v. State of H.P.
    and others9, it has been ruled thus:-
    7.   AIR 1975 SC 1331.
    8.   AIR 1983 SC 550.
H   9.   AIR 2000 SC 1069.
            UNION OF INDIA v. S. SRINIVASAN                        51
                   [DIPAK MISRA, J.]

            "13. It is very common for the legislature to provide        A
     for a general rule making power to carry out the purpose
     of the Act. When such a power is given, it may be
     permissible to find out the object of the enactment and
     then see if the rules framed satisfy the test of having been
     so framed as to fall within the scope of such general               B
     power confirmed. If the rule making power is not expressed
     in such a usual general form then it shall have to be seen
     if the rules made are protected by the limits prescribed
     by the parent act..."

     21. In St. Johns Teachers Training Institute v. Regional
                                                                         c
Director10, it has been observed that a regulation is a rule or
order prescribed by a superior for the management of some
business and implies a rule for general course of action. Rules
and Regulations are all comprised in delegated legislation. The
power to make subordinate legislation is derived from the                0
enabling Act and it is fundamental that the delegate on whom
such a power is conferred has to act within the limit of authority
conferred by the Act. Rules cannot be made to supplant the
provisions of the enabling Act but to supplement it. What is
permitted is the delegation of ancillary or subordinate                  E
legislative functions, or, what is fictionally called, a power to fill
up details.

     22. 1.n Global Energy Ltd. and another v. Central
Electricity Regulatory Commission 11 , this Court was dealing            F
with the validity of clauses (b) and (f) of Regulation 6-A of the
Central Electricity Regulatory Commission (Procedure, Terms
and Conditions for Grant of Trading Licence and other Related
Matters) Regulations, 2004. In that context, this Court
expressed thus:-                                                         G

     "It is now a well-settled principle of law that the rule-making
     power "for carrying out the purpose of the Act" is a general

10. AIR 2003 SC 1533.
11. (2009) 15 sec 570.                                                   H
    52        SUPREME COURT REPORTS                 [2012] 6 S.C.R.


A        delegation. Such a general delegation may not be held to
         be laying down any guidelines. Thus, by reason of such a
         provision alone, the regulation-making power cannot be
         exercised so as to bring into existence substantive rights
         or obligations or disabilities which are not contemplated
s        in terms of the provisions of the said Act."

         23. In the said case, while discussing further about the
    discretionary power, delegated legislation and the requirement
    of law, the Bench observed thus:-

c        "The image of law which flows from this framework is its
         neutrality and objectivity: the ability of law to put sphere of
         general decision-making outside the discretionary power
         of those wielding governmental power. Law has to provide
         a basic level of "legal security" by assuring that law is
D        knowable, dependable and shielded from excessive
         manipulation'. In the contest of rule-making, delegated
         legislation should establish the structural conditions within
         which those processes can function effectively. The
         question which needs to be asked is whether delegated
E        legislation promotes rational and accountable policy
         implementation. While we say so, we are not oblivious of
         the contours of the judicial review of the legislative Acts.
         But, we have made all endeavours to keep ourselves
         confined within the well-known parameters."
F       24. In this context, it would be apposite to refer to a
    passage from State of TN. and another v. P. Krishnamurthy
    and others 12 wherein it has been held thus:-
         "16. The court considering the validity of a subordinate
G        legislation, will have to consider the nature, object and
         scheme of the enabling Act, and also the area over which
         power has been delegated under the Act and then decide
         whether the subordinate legislation conforms to the parent
         statute. Where a rule is directly inconsistent with a
H   12. (2006) 4 sec 517.
           UNION OF INDIA v. S. SRINIVASAN                      53
                  [DIPAK MISRA, J.]
     mandatory provision of the statute, then, of course, the task    A
     of the court is simple and easy. But where the contention
     is that the inconsistency or non-conformity of the rule is not
     with reference to any specific provision of the enabling Act,
     but with the object and scheme of the parent Act, the court
     should proceed with caution before declaring invalidity."        B

     25. In Pratap Chandra Mehta v. State Bar Council of
Madhya Pradesh and others 13 , while discussing about the
conferment of extensive meaning, it has been opined that the
Court would be justified in giving the provision a purposive          C
construction to perpetuate the object of the Act while ensuring
that such rules framed are within the field circumscribed by the
parent Act. It is also clear that it may not always be absolutely
necessa!Y to spell out guidelines for delegated legislation when
discretion is vested in such delegated bodies. In such cases,
the language of the rule framed as well as the purpose sought         D
to be achieved would be the relevant factors to be considered
by the Court.

      26. Keeping in view the aforesaid enunciation of law, we
think it appropriate to consider the nature, object and scheme        E
of the enabling Act, the power conferred under the rule, the
concept of purposive construction and the discretion vested in
the delegated .bodies. Before bringing the legislation in the year
1994, a task force was constituted to have an overall look on
the subjects relating to foreign exchange and foreign trade to        F
suggest the required changes. Considering the significant
developments, namely, substantial increase in the foreign
exchange reserve, growth in foreign trade, rationalization of
tariffs, current account convertibility, liberalization of Indian
investments abroad, increased access to external commercial           G
borrowings by Indian Corporates and participation of foreign
institutional investors in our stock markets and the spectrum of
world economy, the Act was brought into force to consolidate
and amend the law relating to foreign exchange with the
13. (2011) 9 sec 573.                                                 H
    54       SUPREME COURT REPORTS                 [2012] 6 S.C.R.


A objective of facilitating external trade and payments and for
  promoting the orderly development and maintenance of the
  foreign exchange market in India. To have a balance in the field
  of economic growth, the Parliament provided the hierarchical
  system under the Act itself. Section 20 deals with the
B composition of the Appellate Tribunal, the highest tribunal under
  the Act. Section 21 deals with the qualification for appointment
  of Chairperson, Member and Special Director (Appeals).
  Section 22 provides that the Chairperson and every other
  Member shall hold office for a term of five years from the date
c on which he enters upon office. Section 25 deals with
  resignation and removal. The removal can only take place by
  order of the Central Government on the ground of proved
  misbehaviour or incapacity after an inquiry made by such
  person as the President may appoint for this purpose in which
  the Chairperson or a Member concerned has been informed
0
  of the charges against him and given a reasonable opportunity
  of being heard in respect of such charges. Section 26 provides
  the Member to act as a Chairperson in certain circumstances. ·
  The senior most Member has been empowered to act as
E Chairperson until the date on which a new Chairperson is
  appointed in accordance with the provisions of the Act.

       27. On a scrutiny of the objects and reasons, the purpose
  and various provisions of the Act, it is graphically clear that the
  Appellate Tribunal has been conferred jurisdiction to decide an
F appeal from the Appellate Tribunal and it has to deal with
  matters relating to foreign exchange. A fixed tenure has been
  stipulated for the Chairperson and Members. A Chairperson
  can continue upto the age of 65 years and the age of retirement
  of a Member is 62 years. They are entitled to resign subject to
G certain conditions and they can be removed on proven
  misbehaviour or incapacity. Thus, if the object and purpose of
  the Act is to confer power on the Appellate Board to deal with
  the issue of economy under the scheme of the Act, it is well
  nigh impossible to conceive of the appointment of a part time
H Member. Section 20, the enabling provision, empowers the
          UNION OF INDIA v. S. SRINIVASAN                      55
                 [DIPAK MISRA, J.]

Central Government to fix such number of persons as the              A
Government may deem fit. The main part of Rule 5 provides
that a tribunal shall have one Chairperson and Members not
exceeding four. To that extent, it is in consonance with the Act
and it comes within the framework of the provision.
                                                                      B
      28. The first proviso stipulates that the number of either full
time Members or part time Members shall not exceed two. This
proviso introduces the concept of part time Member. There can
be no trace of doubt that it travels beyond the enabling provision
and is totally inconsistent with it. The rule does not conform to C
the main enactment Therefore, in our opinion, the High Court
is justified in declaring the said provision as ultra vires.

     29. The second proviso, if we allow ourselve~ to say so,
is an innovative one. It provides for qualification of a part time
Member who can be appointed from amongst officers                    D
belonging to the Indian Legal Service who fulfil the qualification
prescribed under Clause (b) of sub-rule (1) of Rule 2 of the
Rules. Clause (b) of sub-rule (1) of Rule 2 spells out that a
person shall not be qualified for appointment as a Member
unless he is or has been or is qualified to be a district judge.     E
As far as the word 'is' or 'has been' is concerned, there can be
no cavil. The core of the controversy is the qualification
associated with part time Member. Article 233 of the
Constitution deals with the appointment of district judges. It
provides for the qualification to be a district judge. It reads as   F .
follows:-

     "233. Appointment of district judges

    (1) Appointments of persons to be, and the posting and
    promotion of, district judges in any State shall be made         G
    by the Governor of the State in consultation with the High
    Court exercising jurisdiction in relation to such State

    (2) A person not already in the service of the Union or of
    the State shall only be eligible to be appointed a district      H
    56        SUPREME COURT REPORTS               [2012] 6 S.C.R.


A        judge if he has been for not less than seven years an
         advocate or a pleader and is recommended by the High
         Court for appointment."

       30. To understand the real purport of the said Article in the
B present context, it is appropriate to refer to the decision in
  Satya Narian Singh v. High Court of Judicature at Allahabad
  and Others. 14 In the said case, a contention was advanced
  before a three-Judge Bench that there was no constitutional
  inhibition against members of any Subordinate Judicial Service
  seeking to be appointed as district judges by direct recruitment
C provided that they had completed 7 years' practice at the bar.
  It was also urged that if a construction is placed on Article 233
  of the Constitution which would render a member of
  Subordinate Judicial Service ineligible for appointment to the
  Higher Judicial Service because of the additional experience
D gained by him as a Judicial Officer, the same would be both
  unjust and paradoxical. Their Lordships referred to Article 233
  and came to hold that the first clause of Article 233 deals with
  "appointment of persons to be, and the posting and promotion
  of, district judges in any State" while the second clause is
E confined in its application to persons "not already in the service
  of the Union or of the State". The Bench opined that the service
  of the Union or of the State has been interpreted to mean
  "Judicial Service". It was further stated therein in the case of
  candidates who are not members of Judicial Service that they
F must be advocates and pleaders for not less than 7 years and
  they have to recommended by the High Court before they may
  be appointed as district judges, while in the case of candidates
  who are members of Judicial Service, the seven years' rule has
  no application but there has to be consultation with the High
G Court. Thereafter, the Bench referred to the decisions in
  Chandra Mohan v. State of Uttar Pradesh 15 and Rameshwar
  Dayal v. State of Punjab 16 and eventually held as follows:-
    14. (1985) 1 sec .
    15. AIR 1966 SC 1987.
H   16. AIR 1961 SC 816.
          UNION OF INDIA v. S. SRINIVASAN                    57
                 [DIPAK MISRA, J.]
     5. Posing the question whether the expression "the service    A
     of the Union or of the State" meant any service of the
     Union or of the State or whether it meant the judicial
     Service of the Union or of the State, the learned Chief
     Justice emphatically held that the expression "the service"
     in Article 233(2)could only mean the Judicial Service. But    B
     he did not mean by the above statement that persons who'
     are already in the service, on the recommendation by the
     High Court can be appointed as District Judges,
     overlooking the claims of all other Seniors in the
     Subordinate Judiciary contrary to Article 14and Article 16    c
     of the Constitution."

     31. In Shri Kumar Padma Prasad v. Union of India and
Others 17, a three-Judge Bench adverted to the concept of
Judicial Service and observed as follows:-
                                                                    D
    "Article 236(b) defines 'judicial service' to mean District
    Judges and Judges subordinate thereto. Under Article 234
    the Governor of the State makes appointments of persons
     other than District Judges to the judicial service in
     accordance with the Rules made by him in consultation with E
    the High Court. Article 235 vests control over district courts
    and courts subordinate thereto in the High Court. The
    judicial service whether at the level of district courts or
    courts subordinate thereto is under the control of the High
    Court in all respects. The subordinate judiciary which F
    means the courts subordinate to the district courts consists
    of judicial officers who are recruited in consultation with the
    High Court. The district judges are recruited from amongst
    the members of the bar and by promotion from the
    subordinate judiciary. The judicial service in a State is G
    distinct and separate from the other services under the
    executive. The members of the judicial service perform
    exclusively judicial functions and are responsible for the
    administration of justice in the State.
11. (1992) 2 sec 428.                                              H
    58         SUPREME COURT REPORTS                [2012] 6 S.C.R.


A   Thereafter, their Lordships referred to Articles 233, 235, 236
    and further referred in extenso to the Constitution Bench
    Judgment in Chandra Mohan (supra) and ultimately proceeded
    to state thus:-

         "This court has thus authoritatively laid down that the
B
         appointment of district judges under Article 233 (2) can
         only be from the judicial service of the State as defined
         under Article 236 (b) of the Constitution."

         32. In Sushma Suri v. Govt. of National Capital Territory
C   of Delhi and Another18, a three-Judge Bench was dealing with
    the issue about the eligibility of a person who is on the roll of
    any bar council and engaged either by the employer or
    otherwise of the Union or the State to be considered for the
    post of district judge as provided under Article 233 (2) of the
D   Constitution. The Bench referred to the Rules framed by the
    High Court, the decisions in Chandra Mohan (supra) and Satya
    Narain Singh (supra). Section 2 (a) of the Advocates' Act and
    Rule 49 of the Rules framed by the Bar Council and posed the
    issue as follows:-
E
         "If a person on being enrolled as an advocate ceases to
         practise law and takes up an employment, such a person
         can by no stretch of imagination be termed as an
         advocate. However, if a person who is on the rolls of any
         Bar Council is engaged either by employment or otherwise
F        of the Union or the State or any corporate bodY. or person
         practises before a court as an advocate for and on behalf
         of such Government, corporation or authority or person, the
         question is whether such a person also answers the
         description of an advocate under the Act. That is the
G        precise question arising for our consideration in this case."

        Eventually, the Bench did not accept the view taken by the
    Delhi High Court in Oma Shanker Sharma v. Delhi

H   1s. (1999) 1 sec 330.
         UNION OF INDIA v. S. SRINIVASAN                    59
                [DIPAK MISRA, J.]
Administration in CWP No. 1961 of 1987 and affirmed by this       A
Court in SLP (C) 3088 of 1988 decided on 13.1.1988 and ruled
thus:-

    "An advocate employed by the Government or a body
    corporate as its law officer even on terms of payment of 8
    salary would not cease to be an advocate in terms of Rule
    49 if the condition is that such advocate is required to act
    or plead in courts on behalf of the employer. The test,
    therefore, is not whether such person is engaged on terms
    of salary or by payment of remuneration, but whether he
    is engaged to act or plead on its behalf in a court of law C
    as an advocate. In that event the terms of engagement will
    not matter at all. What is of essence is as to what such
    law officer engaged by the Government does - whether he
    acts or pleads in court on behalf of his employer or
    otherwise. If he is not acting or pleading on behalf of his D
    employer, then he ceases to be an advocate. "

Thereafter, their Lordships opined that the expression used
"from the bar" would only mean from the class or group of
advocates practising in the courts of law. It does not have any   E
other attribute.

      33. We have referred to the aforesaid pronouncements to
highlight who could be a person to be qualified to be a district
judge. Rule 2 (1) (b) provides the qualification to be a Member. F
Needless to say, the same is in total accord with the Act. The
first proviso to Rule 5 introduces part time Member. We have
held that the said proviso, as far as it introduces the concept
of part time Member, is contrary to the provision contained in
the enabling Act. Section 46 of the Act nowhere envisages
about the part time Members. The second proviso, we have G
already mentioned, is an innovative one. Thereafter, we have
at length referred to the qualifications for a person to be a
Member who is eligible to be a district judge. Once we have
held that there cannot be a part time Member, a person who is
qualified to be a district judge can be a Member if he meets H
    60        SUPREME COURT REPORTS                  [2012] 6 S.C.R.


A   the criterion laid down in the pronouncements of this Court. They
    are strictly followed. We really perceive no justification for the
    introduction of the second proviso to bring in officers from the
    Indian Legal Service who are qualified to become district
    judges to be part time Members. If the officer satisfies the
B   requisite qualification, he can be appointed as a Member.
    Therefore, in our consideration, the second proviso has been
    incorporated to bring in only part time Members and once the
    introduction of part time Members is treated to be ultra vires
    the Act, the rest part of the Rule is absolutely redundant. To
c   repeat at the cost of repetition, if the officer belonging to Indian
    Legal Services is qualified to be a district judge, he can
    compete and be selected for the post of Member and that
    qualification is to be in accord with the pronouncements of law
    of this Court.

D        34. The High Court, as we find, had quashed t~e
    appointment of part time Members and the appointment of
    Chairperson who was a part time Member once. As the
    appointment of part time Member was quashed, as a logical
    corollary, such a person could not be allowed to be appointed
E   to the post of Chairperson. To elaborate; the disqualified
    Member cannot hold the post of a Chairperson as a stop gap
    arrangement. Thus, we do not find any error in that regard in
    the judgment passed by the High Court.

F         35. At this juncture, we are obliged to clarify the position
    further. This Court while issuing notice had granted stay on the
    operation of the judgment. We have been apprised by Mr. ~hatt
    that the Central Government, at present, has been scrupulously
    following the mandate of the Act and only qualified persons are
    appointed as Members and Chairperson. To avoid any
G   confusion, we clarify that the judgments and orders passed by
    the Appellate Tribunal by the Chairperson or Members who
    were not qualified and whose appointments have been quashed
    shall not be treated to be null and void. In this regard we may
    refer with profit the decisions in Gokaraju Rangaraju v. State
H
           UNION OF INDIA v. S. SRINIVASAN                61·
                  [DIPAK MISRA, J.]

of Andhra Pradesh 19 and M.M. Gupta and others v. State of A
J. & K. and others 20 wherein this Court, while quashing the
appointments of the respondents, had clarified that the orders
and judgments delivered by them during the period they had
continued to function as district judges on the basis of invalid
appointments could not be rendered as legally invalid and void. B
In the larger interest of justice, they are treated as valid and
binding. Relying on the said dictum, we clarify the position
accordingly.

     36. The appeals stand disposed of without any order as C
to costs.

N.J.                                   Appeals disposed of.




19. AIR 1981 SC 1473.
20. AIR 1982 SC 1579.