UNION OF INDIAversusR. GANDHI, PRESIDENT, MADRAS BAR ASSOCIATION

                    [2010] 6 S.C.R. 857


                      UNION OF INDIA                              A
                               v.
 R. GANDHI, PRESIDENT, MADRAS BAR ASSOCIATION
         (Civil Appeal No. 3067 of 2004 etc.)
                        MAY 11, 2010
                                                                  B
[K.G. BALAKRISHNAN, CJI, R.V. RAVEENDRAN, D. K.
   JAIN, P. SATHASIVAM AND J.M. PANCHAL, JJ.]

      Companies Act, ; 956 - Chapters 1B and 1C - Creation
of National Company ;_aw Tribunal (NCLT) and National. C
Company Law Appellate Tribunal (NCLA T) - For adjudication
of cases which were adjudicated by CLB, BIFR, A.A/FR and
High courl in its company jurisdiction - Validity of - Held:
Creation of NCLT and NCLA T and vesting in them jurisdiction
of High Courl is not unconstitutional - Parliament has the        o
legislative competence to make laws providing for constitution
of tribunals to deal with company matters even though it is
not mentioned in Arlie/es 323A and 3238 - Such legislation
is subject to constitutional limitations - It should not encroach
upon the independence of judiciary and should not be E
voilative of doctrines of rule of law and separation of powers
- Such legislation is subject to judicial review if the courl finds
that the tribunalisation would adversely affect the
independence of judiciary or the standards of judiciary -
Appointment of the Member of Tribunals from civil services F
who continue to be employee of the Government by
maintaining their lien would amount to transfer of judicial
function to executive which goes against the doctrine of
separation of power and independence of judiciary - In case
where jurisdiction is transferred from courts to tribunals for
expeditious disposal and where specialized knowledge is not G
required appointment of Technical Member is not necessary
- In such case, if Technical Member is appointed, it would
amount to encroachment upon the independence of judiciary
and Rule of Law and would be unconstitutional - It is for the
                                857                                 H
    858      SUPREME COURT REPORTS                 [2010] 6 S.C.R.


A legislature to decide whether the tribunal should have only
  Judicial Member or a combination of Judicial of Technical
    Member- When Judges of the High Court are substituted with
    Members of tribunal, the standards should be approximate
    to the standards of mainstream judicial functioning - Chapters
B   1B and 1C presently structured, are unconstitutional as they
    dilute the independence of tribunal and standards of
    qualification of Members of the tribunal - They can be made
    operational on making suitable amendments thereof -
    Corrections suggested to set right the defect in Chapter 1B
c   and 1C- Constitution of India, 1950-Articles 226, 323A and
    3231.3; Seventh Schedule, List I Entries 77, 78, 79 and 40 rlw
    Entry 5, List Ill Entries 11 A rlw Entry 46.

          Constitution of India, 1950:

o        Article 14 - Right to equality - Includes a right to
    adjudication by a forum exercising judicial power in impartial
    and independent manner consistent with the recognized
    principles of adjudication.

        Articles 246, 323A and 3238, Seventh Schedule List I -
E   Power of Parliament to enact law in List I is absolute - The
    power so conferred by Article 246 is not affected or controlled
    by Article 323A and 3238.

          Legislation - Challenge to validity of legislation - Basis
F   for -- Held: Legislation can be declared unconstitutional or
    invalid only on the grounds of legislative competence or for
    violation of fundamental rights or constitutional provisions
    including the provisions which enshrine the principles of Rule
    of Law, separation of power and independence of judiciary -
G   Legislation cannot be held invalid for violating basic structure
    of the Constitution - Constitution of India, 1950.
        Judicial Fora - Courts and Tribunals - Distinction
    between.
          Accepting the recommendations of Eradi Committee,
H
   UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS        859
                  BAR ASSOCIATION

  Government passed Company (Second amendment) Act,              A
  2002 inserting chapters 1B and 1C in Companies Act,
  1956· which provided for establishment of National
' Company Law Tribunal (NCLT) and National Company
  Law Appellate Tribunal (NCLAT) to take over the functions
  which were being performed by Company Law Board                B
  (CLB), Board of Industrial and Financial Reconstruction
  (BIFR), Appellate Authority for Industrial and Financial
  Reconstruction (AAIFR) and the High Court.
       Madras Bar Association challenged the validity of the
  Chapters 1B and 1C. High Court held that creation of the       C
  tribunal and vesting therein the powers exercised by
  High Court and Company Law Board was not
  unconstitutional. However, it held that several provision
  of chapters 1B and 1C i.e. Sections 10-FD(f)(g)(h), 10-FE,
  10-FF, 10-FL(2), 1O-FR(3) and 10-FT were defective and         D
  thus violative of basic constitutional scheme of
  separation of power and independence of judiciary; and
  that unless the provisions were amended by removing
  the defects, it would be unconstitutional to constitute
  NCLT and NCLAT.                                                E
       Pursuant to the judgment of the High Court, Union
  of India agreed to rectify many of the defects pointed out
  by the High Court. It has, however, not accepted the
  defects so far as Sections 1O-FD(3)(f), (g) and (h) and 10-    F
  FX were concerned.
         A three judges Bench of Supreme Court held that the
   judicial pronouncements by the Supreme Court, holding
   that Parliament and the State Legislatures possessed
   legislative competence to effect changes in the original      G
   jurisdiction of the Supreme Court and the High Court,
   had not dealt with the issues i.e. (i) To what extent the
   powers and judiciary of High Court (except judicial review
   under Article 226 I 227) can be transferred to tribunals;
  '(ii) Is there a demarcating line for the Parliament to vest   H
    860      SUPREME COURT REPORTS             [2010] 6 S.C.R.


A   intrinsic judicial functions traditionally performed by
    courts in any tribunal or authority outside the judiciary;
    and (iii) Whether the "wholesale transfer of powers" as
    contemplated by the Companies (Second Amendment)
    Act, 2002 would offend the constitutional scheme of
B   separation of powers and independence of judiciary so
    as to aggrandize one branch over the other. Therefore,
    the three judges Bench directed these appeals to be
    heard by a Constitution Bench.
             Partly allowing the appeals, the Court
c
          HELD:
          Difference between Courts and Tribunals:
       1.1. The term 'Courts' refers to places where justice
o is administered or refers to Judges who exercise judicial
  functions. Courts are established by the State for
  administrMion of justice that is for exercise of the judicial
  power ot'the State to maintain and uphold the rights, to
  punish wrongs and to adjudicate upon disputes.
E Tribunals on the other hand are special alternative
  institutional mechanisms, usually brought into existence
  by or under a statute to decide disputes arising with
  reference to that particular statute, or to determine
  controversies arising out of any administrative law.
F Courts refer to Civil Courts, Criminal Courts and High
  Courts. Tribunals can be either private Tribunals (Arbitral
  Tribunals), or Tribunals constituted under the
  Constitution (Speaker or the Chairman acting under Para
  6(1) of the Tenth Schedule) or Tribunals authorized by the
  Constitution (Administrative Tribunals under Article 323A
G of the Constitution and tribunals for other matters under
  Article 323B) of the constitution or statutory tribunals
  which are created under a statute. [Para 12] [901-E-H;
  902-A]
H         Harinagar Sugar Mills Ltd.     vs. Shyam Sundar
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 861
                BAR ASSOCIATION

Jhunjhunwala - (1962) 2 SCR 339; Jaswant Sugar Mills vs.      A
Lax mi Chand - 1963 Supp (1) SCR 242; Associated
Cement Companies Ltd. vs. P. N. Sharma - (1965) 2 SCR
366; Kihoto Ho/Johan vs. Zachil/hu - 1992 Supp (2) SCC
651; S. P. Sampath Kumar vs. Union of India - (1987) 1 SCC
124, referred to.                                             B
    1.2. Though both courts and tribunals exercise
judicial power and discharge similar functions, there are
certain well-recognised differences between courts and
tribunals. They are: (i) Courts are established by the State
and are entrusted with the State's inherent.judicial power C
for administration of justice in general. Tribunals are
established under a statute to adjudicate upon disputes
arising under the said statute, or disputes of a specified
                                                                I
 nature. Therefore, all courts are tribunals. But all tribunals
 are not courts. (ii) Courts are exclusively manned by D
 Judges. Tribunals can have a Judge as the sole member,
 or can have a combination of a Judicial Member and a
 Technical Member who is an 'expert' in the field to which
 Tribunal relates. Some highly specialized fact finding
 tribunals may have only Technical Members, but they are E
 rare and are exceptions. (iii) While courts are governed
 by detailed statutory procedural rules, in particular the
 CPC and Evidence Act, requiring an elaborate procedure
 in decision making, tribunals generally regulate their own
 procedure applying the provisions of the CPC only where F
 it is required, and without being restricted by the strict
 rules of Evidence Act. [Para 14] [907-8-F]
Independence of Judiciary and Separation of Powers:
     2.1. Impartiality, independence, fairness and             G
reasonableness in decision making are the hallmarks of
Judiciary. If 'Impartiality' is the soul of Judiciary,
'Independence' is the life blood of Judiciary. Without
independence, impartiality cannot thrive. Independence
.is not the freedom for Judges to do what they like. It is     H
    862      SUPREME COURT REPORTS              [2010) 6 S.C.R.


A   the independence of judicial thought. It is the freedom
    from interference and pressures which provides the
    judicial atmosphere where he can work with absolute
    commitment to the cause of justice and constitutional
    values. It is also the discipline in life, habits and outlook
B   that enables a Judge to be impartial. Its existence
    depends however not only on philosophical, ethical or
    moral aspects but also upon several mundane things -
    security in tenure, freedom from ordinary monetary
    worries, freedom from influences and pressures within
c   (from others in the Judiciary) and without (from the
    Executive). Independence of Judiciary has always been
    recognized as a part of the basic structure of the
    Constitution [Para 15 and 16] [907-G-H; 908-A-C; 911-B]
         Union of India vs. Sankalchand Himatlal Sheth 1977 (4)
D   SCC 193; Supreme Court Advocates-on-Record Association
    and Ors. v. Union of India (1993) 4 SCC 441; L. Chandra
    Kumar v. Union of India (1997) 3 SCC 261; State of Bihar
    vs. Bal Mukund Shah 2000 (4) SCC 640; Shri Kumar Padma
    Prasad vs. Union of India 1992 (2) SCC 428; All India Judges
E   Association vs. Union of India 2002 (4) SCC 247, referred
    to.
          'The Framing of India's Constitution' by B. Shiva Rao,
    volume 1-8, Page 196);
F        2.2. The doctrine of separation of powers has also
    been always considered to be a part of the basic structure
    of the Constitution. [Para 17] [914-8]
          Rai Sahib Ram Jawaya Kapur vs. The State of Punjab
  1955 (2) SCR 225; Chandra Mohan vs. State of UP AIR 1966
G SC 1987; Indira Nehru Gandhi vs. Raj Narain 1975 Supp
  SCC 1; L. Chandra Kumar v. Union of India (1997) 3 SCC
  261; Keshavananda Bharati vs. State of Kera/a 1973 (4) SCC
  225, State of Bihar vs. Bal Mukund Shah 2000 (4) SCC 640;
  I. R. Coelho vs. State of Tamil Nadu 2007 (2) SCC 1,
H referred to.
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS       863
                BAR ASSOCIATION

Recommendations for better working of Tribunals:             A

    3.1. Only if continued judicial independence is
assured, tribunals can discharge judicial functions. In
order to make such independence a reality, it is
fundamental that the members of the tribunal shall be
                                                             8
independent persons, not civil servants. They should
resemble courts and not bureaucratic Boards. Even the
dependence of tribunals on the sponsoring or parer:it
department for infrastructural facilities or personnel may
undermine the independence of the tribunal. [Para 20]
[917-F-G]                                                    C

     3.2. In India tribunals have not achieved full
independence. The Secretary of the concerned
'sponsoring department' sits in the Selection Committee
for appointment. When the tribunals are formed, they are     D
mostly dependant on their sponsoring department for
funding, infrastructure and even space for functioning.
The statutes constituting tribunals routinely provide for
members of civil services from the sponsoring
departments becoming members of the tribunal and
                                                             E
continuing their lien with their parent cadre. [Para 23]
[921-0-E]
    L. Chandra Kumar v. Union of India (1997) 3 SCC 261,
followed.
                                                             F
     Judicial Review by De Smith 6th Edn., Page 50;
'Administrative Law' by H. W.R. Wade & C. F. Forsyth (10th
Edn., pp. 773, 774 and 777); Leggatt Committee's Report,
referred to
Extent of power of Government to transfer the judicial       G
functions traditionally performed by courts· to tribunals:
    4.1. The legislative competence of Parliament to
provide for creation of courts and tribunals can be traced
to Entries 77, 78, 79 and Entries 43, 44 read with Entry
                                                             H
     864      SUPREME COURT REPORTS              [2010] 6 S.C.R.


A 95 of List I, Item 11 A r/w Entry 46 of List Ill of the Seventh
  Schedule of the Constitution. Articles 323A and 3238 of
  the Constitution are enabling provisions whi<:h enable the
  setting up of tribunals contemplated therein; and that the
  said Articles, however, cannot be interpreted to mean that
B they prohibited the legislature from establishing tribunals
  not covered by those Articles, as long as there is
  legislative competence under the appropriate Entry in the
  Seventh Schedule. [Para 28] [926-H; 927-A·C]

          Union of India v. Delhi High Court Bar Association 2002
C    (4) SCC 275; State of Kamataka v. Vishwabharathi House
     Building Co-operative Society and Ors. 2003 (2) SCC 412;
     Navinchandra Mafatla/ vs The Commissioner of Income- Tax
     1955 (1) SCR 829; Union of India vs. Harbhajan Singh
     Dhillon 1971 (2) sec 779, relied on
[)
       4.2. The power of Parliament to enact a law which is
  not covered by an entry in Lists II and Ill of Seventh
  Schedule is absolute. The power so conferred by Article
  246 is in no way affected or controlled by Article 323A or
E 3238. Even though revival/rehabilitation/regulation/
  winding up of companies are not matters which are
  mentioned in Article 323A and 3238, the Parliament has
  the legislative competence to make a law providing for
  constitution of tribunals to deal with disputes and matters
F arising out of the Companies Act. [Paras 29 and 31] [928-
  B; 929-D-E]
           Associated Cement Companies Ltd. vs. P. N. Sharma
     (1965) 2 SCR 366, relied on.
      4.3. The Constitution contemplates judicial power
G being exercised by both courts and tribunals. Except the
  powers and jurisdictions vested in superior courts by the
  Constitution, powers and jurisdiction of courts are
  controlled and regulated by Legislative enactments. High
  Courts are vested with the jurisdiction to entertain and
H hear appeals, revisions and references in pursuance of
  UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 865
                 BAR ASSOCIATION

provisions contained in several specific legislative             A
enactments. If jurisdiction of High Courts can be created
by providing for appeals, revisions and references to be
heard by the High Courts, jurisdiction can also be taken
away by deleting the provisions for appeals, revisions or
references. It also follows that the legislature has the         B
power to create tribunals with reference to specific
enactments and confer jurisdiction on them to decide
disputes in regard to matters arising from such special
enactments. Therefore it cannot be said that Legislature
has no power to transfer judicial functions traditionally        c
performed by courts to tribunals. [Para 32] [929-F-H]
      4.4. When a tribunal is constituted under the
 Companies Act, empowered to deal with disputes arising
 under the said Act and the statute substitutes the word
 'Tribunal' in place of 'High Court' necessarily there will be   D
 'whole-sale transfer' of company law matters to the
 tribunals. It is an inevitable consequence of creation of
 tribunal, for such disputes, and will in no way affect the
 validity of the law creating the tribunal. [Para 33] [930-C-
 D]                                                              E
        4.5. When it is said that Legislature has the
   competence to make laws providing which disputes will
   be decided by courts and which disputes will be decided
   by tribunals, it is subject to constitutional limitations,
   without encroaching upon the independence of judiciary        F
   and keeping in view the principles of Rule of Law and
   separation of powers. If tribunals are to be vested with
   judicial power hitherto vested in or exercised by courts,
   such tribunals should possess the independence,
   security and capacity associated with courts. If the          G
   tribunals are intended to serve an area which requires
   specialized knowledge or expertise, no doubt there can
· be Technical Members in addition to Judicial Members.
   Where however jurisdiction to try certain category of
 . cases are transferred from courts to tribunals only to        H
    866      SUPREME COURT REPORTS               [2010] 6 S.C.R.


A   expedite the hearing and disposal or relieve from the
    rigours of the Evidence Act and procedural laws, there
    is obviously no need to have any non-judicial Technical
    Member. In respect of such tribunals, only members of
    the .Judiciary should be the Presiding Officers/members
s   of such tribunals. Therefore, when transferring the
    jurisdiction exercised by courts to tribunals, which does
    not involve any specialized knowledge or expertise in
    any field and expediting the disposal and relaxing the
    procedure is the only object, a provision for Technical
c   Members in addition to or in substitution of judicial
    members would clearly be a case of dilution of and
    encroachment upon the independence of the Judiciary
    and Rule of Law and would be unconstitutional. [Para 35]
    [93"1-E-H; 932-A-C]
D         R. K. Jain vs. Union of India, 1993 (4) SCC 119, relied
    on
         L. Chandra Kumar v. Union of India (1997) 3 SCC 261,
    referred to.
E       4.6. If the Act provides for a tribunal with a Judicial
    Member and a Technical Member, whether there would
    be limitations upon the power of the legislature to
    prnscribe the qualifications for such technical member
    depends upon the nature of jurisdiction that is being
F   transferred from the courts to tribunals. Logically and
    necessarily, depending upon whether the jurisdiction is
    being shifted from High Court, or District Court or a Civil
    Judge, the yardstick will differ. [Para 37] [933-A-C]
       4.7. It is for the court which considers the challenge
G to the qualification, to determine whether the legislative
  power has been exercised in a manner in consonance
  with the constitutional principles and constitutional
  guarantees. While the Legislature can make a law
  providing for constitution of tribunals and prescribing the
H eligibility criteria and qualifications for being appointed
     UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS      867
                    BAR ASSOCIATION

    as members, the superior courts in the country can, in      A
    exercise of the power of judicial review, examine whether
    the qualifications and eligibility criteria provided for
    selection of members is proper and adequate to enable
    them to discharge judicial functions and inspire
    confidence. [Paras 37 and 39) [933-C-D; 934-E-F]            B
        Kesavananda Bharati v. State of Kera/a AIR 1973 SCC
    1461, referred to.
        4.8. Legislative measures are not subjected to basic
    features or basic structure or basic framework. The         C
    Legislation can be declared unconstitutional or invalid
    only on two grounds namely (i) lack of legislative
    competence and (ii) violation of any fundamental rights
    or any provision of the Constitution. [Para 40] [935-G-H;
    936-A]                                                      D
        Indira Gandhi vs. Raj Narain 1975 Supp SCC 1; Ku/dip
    Nayar vs. Union of India 2006 (7) SCC 1; State of Andhra
    Pradesh vs. McDowell and Co. 1996 (3) SCC 709; State of
    Karnataka vs. Union of India 1977 (4) SCC 608, relied on.
                                                                E
         4.9. Rule of Law has several facets, one of which is
    that disputes of citizens will be decided by Judges who
    are independent and impartial; and that disputes as to
    legality of acts of the Government will be decided by
    Judges who are independent of the Executive. Another        F
    facet of Rule of Law is equality before law. The essence
-   of equality is that it must be capable of being enforced
    and adjudicated by an independent judicial forum.
    Judicial independence and separation of judicial power
    from the Executive are part of the common law traditions    G
    implicit in a Constitution like the Constitution of India
    which is based on the Westminster model. [Para 40] [938-
    D-F]
        4.10. The fundamental right to equality before law
    and equal protection of laws guaranteed by Article 14 of    H
    868      SUPREME COURT REPORTS              [2010] 6 S.C.R.

A the Constitution clearly includes a right to have the
  person's rights, adjudicated by a forum which exercises
  judicial power in an impartial and independent manner,
  consistent with the recognized principles of adjudication.
  Therefore wherever access to courts to enforce such
B rights is sought to be abridged, altered, modified or
  substituted by directing him to approach an alternative
  forum, such legislative act is open to challenge if it
  violates the right to adjudication by an independent
  forum. Therefore, though the validity of the provisions of
c a legislative act cannot be challenged on the ground it
  violates the basic structure of the constitution it can be
  challenged as violative of constitutional provisions which
  enshrine the principles of Rule of Law, separation of
  power and independence of Judiciary. [Para 41) [938-G-
D H; 939-A-C]
          The State of West Bengal v. Anwar Ali Sarkar AIR 1952
    SC 75, relied on
        "Orderly & Effective Insolvency Procedures - Key Issues"
E   annexed to Eradi Committee Report, referred to.

       4.11. All courts are tribunals. Any tribunal to which
  any existing jurisdiction of courts is transferred should
  also be a Judicial Tribunal. This means that such tribunal
  should have as members, persons of a rank, capacity and
F status as nearly as possible equal to the rank, status and
  capacity of the court which was till then dealing with such
  matters and the members of the tribunal should have the
  independence and security of tenure associated with
  judicial tribunals. [Para 44] [941-B-C]
G
       4.12. The Legislature can re-organize the
  jurisdictions of judicial tribunals. For example, it can
  provide that a specified category of cases tried by a
  higher court can be tried by a lower court or vice versa
  (A standard example is the variation of pecuniary limits
H of courts). Similarly while constituting tribunals, the
  UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 869
                 BAR ASSOCIATION

 Legislature can prescribe the qualifications/eligibility          A
 criteria. The same is however subject to judicial review.
 If the court in exercise of judicial review is of the view that
 such tribunalisation would adversely affect the
 independence of j,1diciary or the standards of judiciary,
 the court may interfere to preserve the independence and          B
 standards 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. [Para 44] [941-G-H; 942-A-B]                       c
 Validity of constitution of NCLT and NCLAT under Parts
 1B and 1C of Companies Act
      5.1. The Legislature has the competence to transfer
 any particular jurisdiction from courts to tribunals              D
 provided it is understood that the tribunals exercise
 judicial power and the persons who are appointed as
 President/Chairperson/ Members are of a standard which
 is reasonably approximate to the standards of main
 stream judicial functioning. On the other hand, if a              E
 tribunal is packed with members who are drawn from the
 civil services and who continue to be employees of
 different Ministries or Government Departments by
 maintaining lien over their respective posts, it would
 amount to transferring judicial functions to the executive        F
 which would go against the doctrine of separation of
 power and independence of judiciary. An independent
 judiciary can exist only when persons with competence,
 ability and independence with impeccable character man
 the judicial institutions. [Paras 45 and 46] [942-D-F; ~;         G
 943-A]
       5.2. When the legislature proposes to substitute a
  tribunal in place of the High Court to exercise the
· jurisdiction which the High Court is exercisi_ng, it goes
  without saying that the standards expected from the              H
    870    SUPREME COURT REPORTS             [2010] 6 S.C.R.

A Judicial Members of the Tribunal and standards applied
  for appointing such members, should be as nearly as
  possible as applicable to High Court Judges, which are
  apart from a basic degree in law, rich experience in the
  practice of law, independent outlook, integrity, character
B and good reputation. It is also implied that only men of
  standing who have special expertise in the field to which
  the tribunal relates, will be eligible for appointment as
  Technical Members. Therefore, only persons with a
  judicial background, that is, those who have been or are
c Judges of the High Court and lawyers with the prescribed
  experience, who are eligible for appointment as High
  Court Judges, can be considered for appointment of
  Judicial Members. [Para 46] [943-A-D]
      5.3. A lifetime of experience in administration may
D make a member of the civil services a good and able
  administrator, but not a necessarily good, able and
  impartial adjudicator with a judicial temperament capable
  of rendering decisions which have to (i) inform the
  parties about the reasons for the decision; (ii)
E demonstrate fairness and correctness of the decision
  and absence of arbitrariness; and (iii) ensure that justice
  is not only done, but also seem to be done. [Para 47]
  [943-E-F]
F       S. P. Sampath Kumar v. Union of India (1987) 1 SCC
    124, referred to
       5.4. 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
G standards or qualifications for appointment will result in
  loss of confidence in the tribunals. It is not competence
  alone but various other factors which make a person
  suitable. Therefore, when the legislature substitutes the
  Judges of the High Court with Members of the tribunal,
H the standards applicable should be as nearly as equal in
UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 871
               BAR ASSOCIATION

the case of High Court Judges. That means only                A
Secretary Level officers (that is those who were
Secretaries or Additional Secretaries) with specialized
knowledge and skills can be appointed as Technical
Members of the tribunal. [Para 48] [944-8-F]
                                                              8
     26. It is a matter of concern that there is gradual
erosion of the independence of the judiciary, and
shrinking of the space occupied by the Judiciary and
gradual increase in the number of persons belonging to
the civil service discharging functions and exercising
jurisdiction which was previously exercised by the High C
Court. There is also a gradual dilution of the standards .
and qualification prescribed for persons to decide cases
which were earlier being decided by the High Courts.
 [Para 49] [944-G-H; 945-A]
                                                                D
      5.5. Such dilution is by insertion of Chapters 18 in
the Companies Act, 1956 with effect from 1.4.2003
 providing for constitution of a NCLT with a President and
 a large number of Judicial and Technical Members (as
 many as 62). There is a further dilution in the E
 qualifications for members of NCLT which is a substitute
 for the High Court, for hearing winding up matters and
 other matters which were earlier heard by High Court. A
 member need not even be a Secretary or Addi. Secretary
 Level Officer. All Joint Secretary level civil servants. (that F
 are working under Government of India or holding a post
 under the Central and State Government carrying a scale
 of pay which is not less than that of the Joint Secretary
 to the Government of India) for a period of five years are
 eligible. Further, any person who has held a Group-A
 post for 15 years with three years' of service as a member G
 of Indian Company Law Service (Account) Branch, or
 who has 'dealt' with any problems relating to Company
 Law can become a Member. This means that the cases
 which were being decided by the Judges of the High
 Court can be decided by two-members of the civil H
    872      SUPREME COURT REPORTS                [2010] 6 S.C.R.


A services - Joint Secretary level officers or officers holding
  Group 'A' posts or equivalent posts for 15 years, can now
  discharge the functions of High Court. This again has
  given room for comment that qualifications prescribed
  are tailor made to provide sinecure for a large number of
B Joint Secretary level officers or officers holding Group 'A'
  posts to serve up to 65 years in tribunals exercising
  judicial functions. Further, the proposed Companies Bill,
  2008 contemplates that any member of Indian Legal
  Service or Indian Company Law Service (Legal Branch)
c with only ten years service, out of which three years
  should be in the pay scale of Joint Secretary, is qualified
  to be appointed as a Judicial Member. The speed at
  which the qualifications for appointment as Members is
  being diluted is, to say the least, a matter of great concern
0 for the independence of the Judiciary. [Para 49] [946-F-
  H; 947-A-H]
        5.6. The fact that senior officers of civil services could
  function as Administrative Members of Administrative
  Tribunals, does not necessarily make them suitable to
E function as Technical Members in Company Law
  Tribunals or other tribunals requiring technical expertise.
  The tribunals cannot become providers of sinecure to
  members of civil services, by appointing them as
  Technical Members, though they may not have technical
F expertise in the field to which the tribunals relate, or
  worse where purely judicial functions are involved. While
  one can understand the presence of the members of the
  civil services being Technical Members in Administrative
  Tribunals, or Military Officers being members of Armed
G Forces Tribunals, or Electrical Engineers being members
  of Electricity Appellate Tribunal, or Telecom Engineers
  being members of TDSAT, there is no logic in members
  of general Civil Services being members of Company
  Law Tribunals. [Para 50] [948-A-E]
H         5.7. There is also dilution of independence. If any
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 873
                BAR ASSOCIATION

member of the Tribunal is permitted to retain his lien over    A
his post with the parent cadre or ministry or department
in the civil service for his entire period of service as
member of the tribunal, he would continue to think, act
and function as a member of the civil services. A litigant
may legitimately think that such a member will not be          B
independent and impartial. Independence, impartiality
and fairness are qualities which have to be nurtured and
developed and cannot be acquired overnight. The
independence of members discharging judicial functions
in a tribunal cannot be diluted. [Para 51] [948-E-H; 949-      C
A]
     The Douglas Letters. Selections from the Private Papers
of William Douglas, edited by Melvin L. Urofsky - 1987,
Edition page 162 referred to.
                                                               D
    5.8. The only reason given by Eradi Committee for
suggesting transfer of the company law jurisdiction from
High Courts to tribunals is delay. Tribunals with only
Judicial Members would have served the purpose sought
to be achieved. It did not suggest that such Tribunals
                                                               E
should have technical members. Nor did it suggest
introduction of officers of civil services to be made
technical members. The jurisdidion relating to company
case which the High Courts are dealing with can be dealt
with by tribunals with Judicial Members alone. [Para 53]
[949-F; 951-C-D]                                               F

    5.9. Parts IC and ID of the Companies Act proposes
to shift the company matters from the courts to tribunals,
where a 'Judicial Member' and a 'Technical Member' will
decide the disputes. If the members are selected as            G
contemplated in Section 1OFD, there is every likelihood
of most of the members, including the so called 'Judicial
Members' not having any judicial experience or company
law experience and such members being required to deal
with and decide complex issues of fact and law. Whether
    874     SUPREME COURT REPORTS              (2010] 6 S.C R


A   the tribunals should have only Judicial Members or a
    combination of judicial and technical members is for the
    Legislature to decide. But· if there should be technical
    members, they should be persons with expertise in
    company law or allied subjects and mere experience in
B   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 1OFD
    have no experience or expertise in deciding company
    matters. [Para 54] [951-E-H; 952-A]
c        5.10. The short term of three years, the provision for
    routine suspension pending enquiry and the lack of any
    kind of immunity, are aspects which required to be
    considered and remedied. [Para 55] [952-E]

0   Corrections to set right the defects in Parts 1B and 1C of
    Companies Act:
       6.1. Only Judges and Advocates can be considered
  for appointment as Judicial Members of the Tribunal. Only
  the High Court Judges, or Judges who have served in the
E rank of a District Judge for at least five years or a person
  who has practiced as a Lawyer for ten years can be
  considered for appointment as a Judicial Member.
  Persons who have held a Group A or equivalent post
  under the Central or State Government with experience
F 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 1OFD. The expertise in
  Company Law service or Indian Legal service will at best
G enable them to be considered for appointment as
  Technical Members. [Para 56] [952-F-H; 953-A]
        6.2. 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
H
      UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS          875
                     BAR ASSOCIATION

     be achieved, not by giving the salary and perks of a High        A
     Court Judge to the members, but by ensuring that
     ,persons who are as nearly equal in rank, experience or
     competence to High Court Judges are appointed as
      members. Therefore, only officers who are holding the
      ranks of Secretaries or Additional Secretaries alone can        B
      be considered for appointment as Technical members of
      the National Company Law Tribunal. Clauses (c) and (d)
      of sub-section (2) and Clauses (a) and (b) of sub-section
      (3) of section 1OFD which provide for persons with 15
      years experience in Group A post or persons holding th£:        c
      post of Joint Secretary or equivalent post in Central or
      State Government, being qualified for appointment as
      Members of tribunal is invalid. [Para 56] [953-8-D]
·•        6.3. A 'Technical Member' presupposes an
      experience in the field to which the tribunal relates. A        D
      member of Indian Company Law Service who has worked
      with Accounts Branch or officers in other departments
      who might have incidentally dealt with some aspect of
      Company Law cannot be considered as 'experts'
      qualified to be appointed as Technical Members.                 E
      Therefore Clauses (a) and (b) of sub-section (3) of
      Section 10 FD are not valid. [Para 56] [953-E-F]
            6.4. The first part of clause (f) of sub-section (3) of
       Section FD providing that any person having special
     . knowledge or professional experience of 15 years in            F
       science, technology, economics, banking, industry could
       be considered to be persons with expertise in company
       law, for being appointed as Technical Members in NCLT,
       is invalid. [Para 56] [953-G]
                                                                      G
          6.5. Persons having ability, integrity, standing and
      special knowledge and professional experience of not
      less than fifteen years in industrial finance, industrial
      management, industrial reconstruction, investment and
      accountancy, may however be considered as persons               H
    876     SUPREME COURT REPORTS                 [2010) 6 S.C.R.

A   having expertise in rehabilitation/revival of companies
    and therefore, eligible for being considered for
    appointment as Technical Members. [Para 56] [953-H; 954-
    A-B]
        6.6. In regard to category of persons referred in
8   clause (g) of sub-section (3) of Section 10 FD at least five
    years experience should be specified. [Para 56] [954-8-
    C]
       6.7. Only Clauses (c), (d), (e), (g), (h), and later part of
c clause (f) in sub-section (3) of section 10FD and officers
  of civil services of the rank of the Secretary or Additional
  Secretary in Indian Company Law Service and Indian
  Legal Service can be considered for purposes of
  appointment as Technical Members of the Tribunal. [Para
D 56] [954-C-D]
       6.8. Instead of a five-member Selection Committee
  with Chief Justice of India (or his nominee) as
  Chairperson and two Secretaries from the Ministry of
  Finance and Company Affairs and the Secretary in the
E Ministry of Labour and Secretary in the Ministry of Law
  and Justice as members mentioned in Section 10FX, the
  Selection Committee should broadly be on the following
  lines: (a)Chief Justice of India or his nominee -
  Chairperson (with a casting vote); (b)A senior Judge of
F the Supreme Court or Chief Justice of High Court -
  Member; (c)Secretary in the Ministry of Finance and
  Company Affairs - Member; and (d) Secretary in the
  Ministry of Law and Justice - Member. [Para 56] [954-E-
  H]
G       6.9. The term of office of three years shall be changed
    to a term of seven or five years subject to eligibility for
    appointment for one more term. This is because
    considerable time is required to achieve expertise in the
    concerned field. A term of three years is very short and
H
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS           877
                BAR ASSOCIATION

by the time the members achieve the required knowledge,          A
expertise and efficiency, one term-will be over. Further the
said term of three years with the retirement age of 65
years is perceived as having been tailor-made for persons
who have retired or shortly to retire and encourages
these tribunals to be treated as post-retirement havens.         B
If these tribunals are to function effectively and efficiently
they should be able to attract younger members who will
have a reasonable period of service. [Para 56] [955-A-C]
    6.10. The second proviso to Section 10FE enabling
the President and members to retain lien with ttieir parent      C
cadre/ministry/department while holding office as
President or Members will not be conducive for the
independence of member. Any person appointed as
member should be prepared to totally disassociate
himself from the Executive. The lien cannot therefore            D
exceed a period of one year. [Para 56] [955-D-E]
    6.11. To maintain independence and security in
service, sub-section (3) of section 10FJ and Section 10FV
should provide that suspension of the President/                 E
Chairman or member of a tribunal can be only with the
concurrence of the Chief Justice of India. 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       F
respective sponsoring or parent Ministries or concerned
Department. [Para 56] [955-F-G]
     6.12. Two-Member Benches of the tribunal should
always have a judicial member. Whenever any larger or
special benches are constituted, the number of Technical         G
Members shall not exceed the Judicial Members. [Para
56] [955-H; 956-A]
Conclusion:
     7.1. The creation of National Company Law Tribunal          H
    878    SUPREME COURT REPORTS             [2010] 6 S.C.R.


A and National Company Law Appellate Tribunal and
  vesting in them, the powers and jurisdiction exercised by
  the High Court in regard to company law matters, are not
  unconstitutional. [Para 57) [956-B-C]
       7.2. Parts 1 B and 1 C of the Act as presently
8
  structured are unconstitutional. However, Parts IB and IC
  of the Act may be made operational by making suitable
  amendments in addition to what the Union Government
  has already agreed in pursuance of the impugned order
C of the High Court. [Para 57) [956-C-D]
      S. P. Sampath Kumar vs. Union of India (1987) 1 SCC
  124; L. Chandra Kumar v. Union of India (1997) 3 SCC 261,
  Union of India v. Delhi Bar Association (2002) 4 SCC 275
  and State of Karnataka v. Vishwa Bharati Housing Building
D Cooperative Societies and Anr (2003) 2 SCC 412, referred
  to.
                       Case Law Reference:
    (1987) 1 sec 124     Referred to.   Para 5, 13.4
E                                       and 47
    2002 (4) sec 215    Referred to.    Para 5 and 10
                        Relied on.      Para 28
    (1997) 3 sec 261    Referred to.    Paras 5, 9, 10,
F                                       16, 17, 22, 27 and 34
    (2003) 2 sec 412    Referred to.    Paras 5 and 10
                        Relied on.      Para 28
    (1962) 2 SCR 339    Referred to.    Para 13
G
    1963 Supp (1)
    SCP 24''2           Referred to.    Para 13.2
    (196b) 2 SCR 366    Referred to.    Para 13.3
H                       Relied on.      Para 30
 UNION OF INDIA v. R. GANDHI. PRESIDENT, MADRAS   879
                BAR ASSOCIATION

1992 Supp (2) SCC 651 Referred to. Para 13.4            A·
1977 (4) sec 193    Referred to.   Para 16
(1993) 4 sec 441    Referred to.   Paras 16 and 17
2000 (4) sec 640    Referred to.   Para 16
                                                        a
1992 (2) sec 428    Referred to.   Para 16
2002 (4) sec 247    Referred to.   Para 16
1955 (2) SCR 225    Referred to.   Para 17
                                                        c
AIR 1966 SC 1987    Referred to.   Para 17
1975 Supp sec 1     Referred to.   Para 17
                    Relied on.     Para 40
1973 (4) sec 225    Referred to.   Para 17              D

2001 (2) sec 1      Referred to.   Para 17
2003 (2) sec 412    Relied on      Para 28
1955 (1) SCR 829    Relied on      Para 28              E
1911 (2) sec 779    Relied on      Para 28
1993 (4) sec 119    Relied on      Para 36
AIR 1973 sec 1461   Referred to.   Para 39
                                                        F
2006 (7) sec 1      Relied on.     Para 40
1996 (3) sec 709    Relied on.     Para 40
1977 (4) sec 608    Relied on.     Para 40
                                                        G
AIR 1952 SC 75      Relied on      Para 42

    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3067 of 2004.

                                                        H
    880       SUPREMC: COURT REPORTS                [2010] 6 S.C.R


A       From the Judgment & Order dated 30.03.2004 of the High
    Court of Madras in W.P. 2198 of 2003.

                                     WITH

B   Civil Appeal No. 3717 of 2005.

       Parag P. Tripathy, ASG, Arvind P. Datar, Amey Nargolkar,
  Arti Gupta, Vismai Rao, Gaurav Agarwal, Kunal Bahri, Varun
  Sarin, Anubha Agarwal, Sushma Suri, Navin Prakash (for P.
  Parmeswaran), Ananth Padmanabhan, Nikhil Nayyar, TVS
C Raghavendra Sreyas, Ambuj Agrawal, Suchindran B.N. for the
  appearing parties.

          The Judgment of the Court was delivered by

          R.V.RAVEENDRAN, J. 1. These appeals arise from the
D   order dated 30.3.2004 of the Madras High Court in WP No.
    2198/2003 filed by the President of Madras Bar Association
    (MBA for short) challenging the constitutional validity of
    Chapters 1B and 1C of the Companies Act, 1956('Act' for
    short) inserted by Companies (Second Amendment) Act 2002
E   ('Amendment Act' for short) providing for the constitution of
    National Company Law Tribunal ('NCLT' or 'Tribunal') and
    National Company Law Appellate Tribunal ('NCLA T' or
    'Appellate Tribunal').

F        2. In the said writ petition, Madras Bar Association ('MBA')
    raised the following contentions :

          (i) Parliament does not have the legislative competence
          to vest intrinsic judicial functions that have been
          traditionally performed by the High Courts for nearly a
G         century in any Tribunal outside the Judiciary.

          (ii) The constitution of the National Company Law Tribunal
          and transferring the entire company jurisdiction of the High
          Court to the Tribunal which is not under the control of the
H         Judiciary, is violative of the doctrine of separation of
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 881
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

    powers and independence of the Judiciary which are parts         A
    of the basic structure of the Constitution.

    (iii) Article 3238 of the Constitution enables the appropriate
    Legislature to provide for adjudication or trial by Tribunals
    of disputes, complaints or offences with respect to all or       8
    any of the matters specified in clause (2). Clause (2)
    enumerate the matters in regard to which Tribunals can be
    constituted. The said list is exhaustive and not illustrative.
    The list does not provide for constitution of Tribunal for
    insolvency, revival and restructuring of the company. In the     C
    absence of any amendment to Article 3238 providing for
    a National Tribunal for revival of companies and winding
    up companies, there is no legislative competence to
     provide for constitution of NCLT and NCLAT.

    (iv) The various provisions of Chapters IB and IC of the Act     D
    (sections 10FB, 10FD, 10FE, 10FF, 10FL(2), 10FO,
    10FR(3), 10FT and 10FX) are defective and
    unconstitutional, being in breach of basic principles of Rule
    of Law, Separation of Powers and Independence of the
    Judiciary.                                                       E

      3. The Union of India submitted that it had constituted a
High Level Committee on Law relating to Insolvency of
Companies under the Chairmanship of Justice V. Balakrishna
Eradi, a retired Judge of this Court, with other experts to
                                                                     F
examine the existing laws relating to winding-up proceedings
of the company in order to r~model it in line with the latest
developments and innovation~ in corporate laws and
governance and to suggest reforms to the procedures at
various stages followed in insolvency proceedings of the
company in order to avoid unnecessary delay, in tune with            G
international practices in the field. The said Committee
identified the following areas which contributed to inordinate
delay in finalisation of winding-up/dissolution of companies : (a)
filing statement of affairs; (b) handing over of updated books
of accounts; (c) realization of debts; (d) taking over possession    H
    882     SUPREME COURT REPORTS                   [201 OJ 6 S.C.R.

A   of the assets of the company and sale of assets; (e) non-
    availability of funds for the Official Liquidator to discharge his
    duties and functions (f) settlement of the list of creditors; (g)
    settlement of list of contributories and payment of calls; (h)
    finalisation of income-tax proceedings; and (i) disposal of
B   misfeasance proceedings. The Committee found that
    multiplicity of court proceedings is the main reason for the
    abnormal delay in dissolution of companies. It also found that
    different agencies dealt with different areas relating to
    companies, that Board for Industrial & Financial Reconstruction
c   (BIFR) and Appellate Authority for Industrial & Financial
    Reconstruction (AAIFR) dealt with references relating to
    rehabilitation and revival of companies, High Courts dealt with
    winding-up of companies and Company Law Board (CLB) dealt
    with matters relating to prevention of oppression and
    mismanagement etc. Considering the laws on corporate
0
    insolvency prevailing in industrially advanced countries, the
    Committee recommended various amendments in regard to the
    provisions of Companies Act, 1956 for setting-up of a National
    Company Law Tribunal which will combine the powers of the
E   CLB under the Companies Act, 1956, BIFR and AAlFR under
    the Sick Industrial Companies (Special Provisions) Act, 1985
    as also the jurisdiction and powers relating to windingcup
    presently vested in the High Courts.

         4. It is stated that the recommendations of the Eradi
F   Committee were accepted by the Government and Company
    (Second Amendment) Act, 2002 was passed providing for
    establishment of NCLT and NCLAT to take-over the functiuns
    which are being performed by CLB, BIFR, AAIFR and the High
    Courts. It is submitted that the establishment of NCLT and
G   NCLAT will have the following beneficial effects: (i) reduce the
    pendency of cases and reduce the period of winding-up
    process from 20 to 25 years to about two years; (ii) avoid
    multiplicity of litigation before various fora (High Courts and
    quasi-judicial Authorities like CLB, BIFR and AAIFR) as all can
H   be heard and decided by NCLT; (iii) the appeals will be
  UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS               883
      BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

  streamlined with an appeal provided against the order of the         A
  NCLT to an appellate Tribunal (NCLAT) exclusively dedicated
  to matters arising from NCLT, with a further appeal to the
  ~upreme Court only on points of law, thereby reducing the delay
  in appeals; and (iv) with the pending cases before the
, Company Law Board and all winding-up cases pending before            B
  the High Courts being transferred to NCLT, the burden on High
  Courts will be reduced and BIFR and AAIFR could be
  abolished.

        5. It was contended that the power to provide for
 establishment of NCLT and NCLAT was derived from Article              C
 245 read with several entries in List I of the Seventh Schedule
 and did not originate from Article 3238. It was submitted that
 various provisions in Parts IB and IC of the Act relating to the
  constitution of NCLT and NCLAT were intended to provide for
  selection of proper persons to be their President/Chairperson/       D
  members and for their proper functioning. It was submitted that
  similar provisions relating to establishment of other alternative
  institutional mechanisms such as Administrative Tribunals, Debt
  Recovery Tribunals and Consumer fora, had the seal of
  approval of this Court in S. P. Sampath Kumar vs. Union of           E
· India - 1987 (1) SCC 124, L. Chandrakumar v. Union of India
  (1997) 3 SCC 261; Union of India v. Delhi High Court Bar
  Association (2002) 4 SCC 275 and State of Karnataka v.
  Vishwabharathi House Building Co-operative Society 2003(2)
  sec 412.                                                             F

       6. The Madras High Court by its order dated 30.3.2004
··held that creation of the NCLT and vesting the powers hitherto
  exercised by the High Courts and CLB in the Tribunal was not
  unconstitutional. It referred to and listed the defects in several
  provisions (that is mainly sections 1OFD(3)(f)(g)(h), 1OFE,          G
  10FF, 10FL(2), 10FR(3), 10FT) in Parts IB and IC of the Act. It
  therefore declared that until the provisions of Part IB and IC of
  the Act, introduced by the Amendment Act which were defective
  being violative of basic constitutional scheme (of separation of
                                                                       H
     884      SUPREME COURT REPORTS                     (201 OJ 6 S.C.R.

A    judicial power from the Executive and Legislative power and
     independence of judiciary enabling impartial exercise of judicial
     power) are duly amended by removing the defects that were
     pointed out; it will be unconstitutional to constitute a Tribunal and
     Appellate Tribunal to exercise the jurisdiction now exercised by
B    the Hi~Jh Court or the Company Law Board.

          7. The Union of India has accepted that several of the
     defects pointed out by the High Court in Parts IB and IC of the
     Act, require to be corrected and has stated that those provisions
r-   will be suitably amended to remove the defects. It has not
""   however accepted the decision of the High Court that some
     other provisions of Parts IB and IC are also defective TO narrow
     down the controversy in regard to the appeal by the Union, we
     note below the defects pointed out by the High Court in regard
     to various provisions in Parts IB and IC of the Act and the stand
D    of Union of India in respect of each of them.

     ~ections 10FE and 10FT : Tenure of PresidenUChairman
     i3nd Members of NCLT and NCLAT fixed as three years
     yvith eligibility for re-appointment
E
          (7.1.) The High Court held that unless the term of office is
     fixed as at least five years with a provision for renewal, except
     in cases of incapacity, misconduct and the like, the constitution
     of the Tribunal cannot be regarded as satisfying the essential
F    requirements of an independent and impartial body exercising
     judicial functions of the state.

         The Union Government has accepted the finding and
   agreed to amend section 1OFE and 1OFT of the Act to provide
   for a five year term for the Chairman/President/Members.
,G However, the Government proposes to retain the provision for
1
   reappointment instead of 'renewal', as the reappointments
   would be considered by a Selection Committee which would
   be headed by the Chief Justice of India or his nominee. As the
   Government proposes to have minimum eligibility of 50 years
 H for first appointment as a Member of the Tribunal, a Member
I
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 885
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

will have to undergo the process of re-appointment only once        A
or twice.

Section 10FE - second proviso : Enabling the President/
Members of NCl_T to retain their lien with their parent
cadre/Ministry/D:~partment while holding office                     B

     (7.2) The High Court held that in so far as the President is
concerned, there is no question of holding a lien and the .
reference to President must be deleted from the second
proviso to section 1OFE.
                                                                    c
     The Union Government has accepted the decision and has
stated that it proposes to amend the proviso and delete the
reference to the President in the second proviso.

     (7.3) The High Court also held that the period of lien in
                                                                    0
regard to the members of NCLT should be restricted to only
one year instead of the entire period of service as a Member
of NCLT.

     The Union Government has submitted that in view of the
proposed longer tenure of five years as against the three years,    E
the government proposes to permit the members to retain their
lien with their parent cadre/Ministry/Department for a period of
three years, as one year may be too short for the members to
decide whether to give up the lien or not.
                                                                    F
Section 1 OFD(1) : Qualification for appointment as
President

     (7.4) The High Court has suggested that it would be
appropriate to confine the choice of persons to those who have
held the position of a Judge of a High Court for a minimum          G
period of five years instead of the existing provision which
provides that Central Government shall appoint a person who
has been, or is qualified to be, a Judge of a High Court, for
the post of President of the Tribunal.
                                                                    H
    886     SUPREME COURT REPORTS                  [2010] 6 S.C.R.


       The Government has agreed in part and proposes to
  amend the Act for appointment of a retired or serving High
  Court Judge alone as the President of the Tribunal. It however
  feels that minimum length of service as experience, need not
  be fixed in the case of High Court Judges, as the Selection
B Committee headed by the Chief Justice of India or his nominee
  would invariably select the most suitable candidate for the post.

    Sgction 10FD(3)(f) : Appointment of Technical Member to
    NCLT
    ---
c       (7.5) The High Court has held that appointment of a
  member under the category specified in section 1OFD(3)(f), can
  have a role only in matters concerning revival and rehabilitation
  of sick industrial companies and not in relation to other matters.
  The High Court has therefore virtually indicated that NCLT should
D have two divisions, that is an Adjudication Division and a
  Rehabilitation Division and persons selected under the
  category specified in clause (f) should only be appointed as
  members of the Rehabilitation Division.

E         The Union Government contends that similar provision
    el<ists in section 4(3) of the Sick Industrial Companies (Special
    Provisions) Act, 1985; that the provision is only an enabling one
    so that the best talent can be selected by the Selection
    Committee headed by the Chief Justice of India or his nominee;
    and that it may not be advisable to have Division or limit or
F   place restrictions on the power of the President of the Tribunal
    to constitute appropriate benches. It is also pointed out that a
    Technical Member would always sit in a Bench with a Judicial
    Member.

G Section 1 OFD(3)(g) : Qualification for appointment of
  Technical Member

         (7 .6) The High Court has observed that in regard to
    Presiding Officers of Labour Courts and Industrial Tribunals or
H   National Industrial Tribunal, a minimum period of three to five
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 887
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

years experience should be prescribed, as what is sought to           A
be utilized is their expert knowledge in Labour Laws.    ·

     The Union Government submits that it may be advisable
to leave the choice of selection of the most appropriate
candidate to the Committee headed by the Chief Justice of
                                                                      8
India or his nominee.

     (7.7) The High Court has also observed that as persons
who satisfy the qualifications prescribed in section 1OFD(3)(g)
would be persons who fall under section 1OFD(2)(a), it would
be more appropriate to include this qualification in section C
10FD(2)(a). It has also observed in section 10FL dealing with
"Benches of the Tribunal", a provision should be made that a
'Judicial Member' with this qualification shall be a member of
the special Bench referred to in section 1OFL(2) for cases
relating to rehabilitation, restructuring or winding up of D
Companies.

    The Union Government has not accepted these findings
and contends that the observations of the High Court would
amount to judicial legislation.
                                                                      E
Section 10FD(3)(h) : Qualification of technical member of
NCLT

     (7.8) The High Court has observed that clause (h) referring
to the category of persons having special knowledge of and            F
experience in matters relating to labour, for not less than 15
years is vague and should be suitably amended so as to spell
out with certainty the qualification which a person to be
appointed under clause (h) should possess.

      The Union Government contends that in view of the wide          G
and varied experience possible in labour matters, it may not
be advisable to set out the nature of experience or impose any
restrictions in regard to the nature of experience. It is submitted
that the Selection Committee headed by the Chief Justice of
India or his nominee would consider each application on its own       H
    888       SUPREME COURT REPORTS               [2010) 6 S.C.R.


A   merits.

         (7.9) The second observation of the High Court is that the
    member selected under the category mentioned in clause (h)
    must confine his participation only to the Benches dealing with
B   revival and rehabilitation of sick companies and should also be
    excluded from functioning as a single Member Bench for any
    matter.

       The Union Government contends that it may not be
  advisable to fetter the prerogative of the President of the
C Tribunal to constitute benches by making use of available
  members. It is also pointed out that it may not be proper to
  presume that a person well-versed in labour matters will be
  unsuitable to be associated with a Judicial Member in regard
  to adjudication of winding-up matters.
D
  Section 10FL(2) - Proviso : Winding up proceedings by
  single Member

         (7.10) The High Court has held that it is impermissible to
    authorize a single member Bench to conduct the winding up
E   proceedings after a special three Members Bench passes an
    order of winding up; and if such single member happens to be
    a labour member appointed under section 1OFD(3)(f), it would
    be a mockery of a specialist Tribunal.

F        The Union Government has accepted the finding and has
    agreed to amend the proviso to section 1OFL(2) to provide that
    a winding up proceedings will be conducted by a Bench which
    would necessarily include a judicial member.

  Sections 1OFF and 1 OFK(2) : Power of Central
G Government to designate any member to be a Member
  (Administration)

      (7.11) The High Court has held that sections 1OFF and
  10FK(2) should be suitably amended to provide that a member
H may be designated as Member (Administration) only in
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS                889
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

consultation with the President, and further provide that the          A
Member (Administration) will discharge his functions in relation
to finc>nce and administration of the Tribunal under the overall
control and supervision of the President.

     The Union Government has accepted the decision and has
                                                                       8
agreed to drop the provision for Member Administration. It was
stated that the Act would be amended to provide that the
administration and financial functions would be discharged
under the overall control and supervision of the President. It was
stated that the Act would be further amended to provide for            C
creation of the posts of Vice-Presidents.

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

     (7 .12) The High Court has observed that section 1OFR(3)          0
must be suitably amended to delete the reference to all subjects
other than ·1aw and accountancy. It has also stated that it would
be more appropriate to incorporate a provision similar to that
in section 5(3) of the SICA which provides that a member of
the Appellate Authority shall be a person who is or has been a         E
Judge of a High Court or who is or has been an officer not below
the rank of a Secretary to the Government who has been a
member of the Board for not less than three years.

      The Union Government contends that the provision is only
an enabling one; and since the Chairperson of the Appellate            F
Tribunal would be a former Judge of the Supreme Court or
former Chief Justice of High Court, it may not be advisable to
limit the scope of eligibility criteria for members E1Specially when
a Selection Committee headed by the Chief Justice of India
or his nominee would make the selection.                               G

Section 1 OFX - Selection Process for President/
Chairperson

     (7.13) The High Court has expressed the view that the
                                                                       H
    890      SUPREME COURT REPORTS                  [2010] 6 S.C.R.


A   selection of the President/Chairperson should be by a
    Committee headed by the Chief Justice of India in consultation
    with two senior Judges of the Supreme Court.

         The Union Government has submitted that it would not be
B   advisable to make such a provision in regard to appointment
    of President/Chairperson of statutory Tribunals. It is pointed out
    no other legislation constituting Tribunals has such a provision.

    !he challenge in the appeals

c         8. Union of India contends that the High Court having held
  that the Parliament has the competence and power to establish
  NCLT and NCLAT, ought to have dismissed the writ petition. It
  is submitted that some of the directions given by the High Court
  to reframe and recast Parts IB and IC of the Act amounts to
0 converting judicial review into judicial- legislation. However, as
  Union of India has agreed to rectify several of the defects
  pointed out by the High Court (set out above), the appeal by
  the Union Government is now restricted to the findings of the
  High Court relating to sections 1OFD(3){f), (g) and (h) and
E 10FX.
        9. On the other hand, MBA in its appeal contends that the
   High Court ought not to have upheld the constitutional validity
   of Parts IB and IC of the Act providing for establishment of
   NCLT and NCLAT; that the High Court ought to have held that
F constitution of such Tribunals taking away the entire Company
   Law jurisdiction of the High Court and vesting it in a Tribunal
   which is not under the control of the Judiciary, is violative of
 . doctrine of separation of powers and the independence of
   Judiciary which are parts of the basic structure of the
G Constitution. MBA also contends that the decisions of this Court
   in Union of India vs. Delhi High Court Bar Association - 2002
   (4) sec 275, with reference to constitutional validity of the
   provisions of the Recovery of Debts Due to Banks and
   Financial Institutions Act, 1993 providing for constitution of the
H Debt Recovery Tribunals and State of Karnataka vs.
     UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 891
         BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

    Vishwabharathi House Building Co-op., Society - 2003 (2)                A
    sec   412 in regard to the constitutional validity of Consumer
    Protection Act, 1986 providing for constitution of consumer fora
1
    require reconsideration.

          10. When these civil appeals came up for hearing before B
    a three-Judge Bench of this Court, the Bench was of the view
    that the decisions in L. Chandra Kumar v. Union of India (1997)
    3 SCC 261, Union of India v. Delhi Bar Association (2002) 4
    SCC 275 and State of Karnataka v. Vishwa Bharati Housing
    Building Cooperative Societies & Anr (2003) 2 SCC 412
    holding that Parliament and State legislatures possessed C
    legislative competence to effect changes in the original
    jurisdiction in the Supreme Court and High Court, had not dealt
    with the following issues:

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

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

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

         Therefore the Three Judge Bench, by order dated G
    13.5.2007 directed the appeals to be heard by a Constitution
    Bench, observing that as the issues raised are of seminal
    importance and likely to have serious impact on the very
    structure and independence of judicial system.
                                             '\.

                                                                            H
    892       SUPREME COURT REPORTS                   [2010] 6 S.C.R


A       11. We may first refer to the relevant provisions of the
    Companies Act, 1956 as amended by the Companies
    (Second Amendment) Act, 2002 relating to the constitution of
    NCLT and NCLAT:

B               .Part 18 - National Company Law Tribunal

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

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

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

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

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

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

          (c) has held for at least fifteen years a Group 'A' post or
H         an equivalent post under the Central Government or a
UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 893
    BAR ASSOCIATION [R.V. RAVEENDRAN, J.)

  State Government including at least three years of service       A
  as a Member of the Indian Company Law Service (Legal
  Branch) in Senior Administrative Grade in that service; or

  (d) has held for at least fifteen years a Group 'A' post or
  an equivalent post under the Central Government (including       8
  at least three years of service as a Member of the Indian
  Legal Service in Grade I of that service).

  (3) A person shall not be qualified for appointment as
  Technical Member unless he-
                                                                   c
  (a) has held for at least fifteen years a Group 'A' post or
  an equivalent post under the Central Government or a
  State Government [including at least three years of service
  as a Member of the Indian Company Law Service
  (Accounts Branch) in Senior Administrative Grade in that         o
  Service]; or

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

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

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

  (e) is, or has been, for at least fifteen years working
  experience as a Secretary in whole-time practice as
  defined in clause (45A) of section 2 of this Act and is a
  member of the Institute of the Companies Secretaries of          H
    894        SUPREME COURT REPORTS                   [2010] 6 S.C.R.


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

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

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

          (h) is a person having special knowledge of, and
          experience of not less than fifteen years in, the matters
          relating to labour.
           '
          Explanation.-For the purposes of this Part,-
E
          (i) "Judicial Member" means a Member of the Tribunal
          appointed as such under sub-section (2) of section 1OFD
          and includes the President of the Tribunal;

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

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

          Provided that no President or other Member shall hold
          office as such after he has attained,-
H
UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 895
    BAR ASSOCIATION [RV RAVEENDRAN, J.]

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

  (b) fr,-fhe case of any other Member, the age of sixty-five
  years:

  Provided further that the President or other Member may. 8
  retain his lien with his parent cadre or Ministry or
  Department, as the case may be, while holding office as
  such.

  10FF. Financial and administrative powers of Member C
  Administration: The Central Government shall designate
  any Judicial Member or Technical Member as Member
  Administration who shall exercise such financial and
  administrative powers as may be vested in him under the
  rules which may be made by the Central Government:            o
   Provided that the Member .Administration shall have
   authority to delegate such of his financial and
   administrative powers as he may think fit to any other
   officer of the Tribunal subject to the condition that such
   officer shall, while exercising such delegated powers        E
   continue to act under the direction, superintendence and
   control of the Member Administration.

   1OFK. Officers and employees of Tribunal: (1) T h e
   Central Government shall provide the Tribunal with such      F
   officers and other employees as it may deem fit.

   (2) The officers and other employees of the Tribunal shall
   discharge their functions under the general
   superintendence of the Member Administration.
                                                                G
   (3) The salaries and allowances and other terms and
   conditions of service of the officers and other employees
   of the Tribunal shall be such as may be prescribed.

   10FL. Benches of Tribunal: (1) Subject to the provisions     H
    896      SUPREME COURT REPORTS                   [2010] 6 S.C.R.


A         of ~his section, the powers of the Tribunal may be
          exe~cised by Benches, constituted by the President of the
          Tribunal; out of which one shall be a Judicial Member and
          another shall be a Technical Member referred to in clauses
          {a) to (f) of sub-section (3) of section 1OFD:
B
          Provided that it shall be competent for the Members
          authorised in this behalf to function as a Bench consisting
          of a single Member and exercise the jurisdiction, powers
          and authority of the Tribunal in respect of such class of
          cases or such matters pertaining to such class of cases,        t
c         as the President of the Tribunal may, by general or special
          order, specify:

          Provided further that if at any stage of the hearing of any
          such case or matter, it appears to the Member of the
0         Tribunal that the case or matter is of such a nature that it
          ought to be heard by a Bench consisting of two Members,
          the case or matter may be transferred by the President of
          the Tribunal or, as the case may be, referred to him for
          transfer to such Bench as the President may deem fit.
E
          (2) The President of the Tribunal shall, for the disposal of
          any case relating to rehabilitation, restructuring or winding
          up of the companies, constitute one or more Special
          Benches consisting of three or more Members, each of
          whom shall necessarily be a Judicial Member, a Technical
F
          Member appointed under any of the clauses (a) to (f) of
          sub-section (3) of section 1OFD, and a Member appointed
          under clause (g) or clause (h) of sub-section (3) of section
          10FD:

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

          (3) If the Members of a Bench differ in opinion on any point
H
UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 897
    BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

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

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

  (5) In addition to the other Benches, there shall be a
  Principal Bench atNew Delhi presided over by the
  President of the Tribunal.
                                                                   D
  (6) The Principal Bench of the Tribunal shall have powers
  of transfer of proceedings from any Bench to another
  Bench of the Tribunal in the event of inability of any Bench
  from hearing any such proceedings for any reason:

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

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

             Part IC - APPELALTE TRIBUNAL

  1OFR. Constitution of Appellate Tribunal: (1) The Central
  Government shall, by notification in the Official Gazette,       H
    898      SUPREME COURT REPORTS                    [2010] 6 S.C.R.


A         constitute with effect from such date as may be specified
          therein, an Appellate Tribunal to be called the "National
          Company Law Appellate Tribunal" consisting of a
          Chairperson and not more than two Members, to be
          appointed by that Government, for hearing appeals against
B         the orders of the Tribunal under this Act.

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

c         (3) A Member of the Appellate Tribunal shall be a person
          of ability, integrity and standing having special knowledge
          of, and professional experience of not less than twenty-five
          yearn in, science, technology, economics, banking,
          industry, law, matters relating to labour, industrial finance,
D         industrial management, industrial reconstruction,
          administration, investment, accountancy, marketing or any
          other matter, the special knowledge of, or professional
          experience in which, would be in the opinion of the Central
          Government useful to the Appellate Tribunal.
E
          1OFT. Term of office of Chairperson and Members: The
          Chairperson or a Member of the Appellate Tribunal shall
          hold office as such for a term of three years from the date
          on which he enters upon his office, but shall be eligible for
          re-appointment for another term of three years:
F
          Provided that no Chairperson or other member shall hold
          office as such after he has attained,-

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

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

          10FX. Selection Committee: (1) The Chairperson and
H         Members of the Appellate Tribunal and President and
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS                        899
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

      Members of the Tribunal shall be appointed by the Central              A
·., >"Government on the recommendations of a Selection
    " eommittee consisting of:
        '·    ',   "··
                         1a) Chief Justice of India or his nominee
                         Chairperson;
                                                                             B
                         (b) Secretary in the Ministry of Finance and
                         Company Affairs Member;

                         (c) Secretary in the Ministry of Labour Member;

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

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


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

     (6) No appointment of the Chairperson and Members of
     the Appellate Tribunal and President and Members of the
     Tribunal shall be invalidated merely by reason of any

                                                                             H
    900      SUPREME COURT REPORTS                    [2010] 6 S.C.R.


A         vacancy or any defect in the constitution of the Selection
          Committee.

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

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

          (b) the reference to Advocate-General in section 15 of the
          said Act shall be construed as a reference to such law
          officers as the Central Government may specify in this
          behalf.
D
          1OGB. Civil court not to have jurisdiction: (1) No civil court
          shall have jurisdiction to entertain any suit or proceeding
          in respect of any matter which the Tribunal or the Appellate
          Tribunal is empowered to determine by or under this Act
E         or any other law for the time being in force and no injunction
          shall be granted by any court or other authority in respect
          of any action taken or to be taken in pursuance of any
          power conferred by or under this Act or any other law for
          the time being in force.
F
          10GF. Appeal to Supreme Court: Any person aggrieved
          by any decision or order of the Appellate Tribunal may file
          an appeal to the Supreme Court within sixty days from the
          date of communication of the decision or order of the
          Appellate Tribunal to him on any question of law arising
G
          out of such decision or order:

          Provided that the Supreme Court may, if it is satisfied that
          the appellant was prevented by sufficient cause from filing
          the appeal within the said period, allow it to be filed within
H         a further period not exceeding sixty days.
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 901
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

    Section 1OFJ relates to removal and suspension of A
    President or members of the NCLT. Section 1OFV relates
    to removal and suspension of Chairman or members of
    NCLAT. Sub-section (2) of those sections provide that the
    PresidenUChairman or a member shall not be removed
    from his office except by an order made by the Central B
    Government on the ground of proven misbehaviour or
    incapacity after an inquiry made by a Judge of the
    Supreme Court in which the President/Chairman or
    member has been informed of the charges against him
    and given a reasonable opportunity of being heard in           c
    respect of those charges. Sub-section (3) provides that the
    Central Government may suspend from office, the
    PresidenUChairman or Member of the Tribunal in respect
     of whom a reference has been made to the Judge of the
    Supreme Court under sub-section (2) until the Central
                                                                0
     Government has passed orders on receipt of the report of
     the Judge of the Supreme Court on such reference.

Difference between Courts and Tribunals

      12. The term 'Courts' refers to places where justice is E
administered or refers to Judges who exercise judicial
functions. Courts are established by the state for administration
of justice that is for exercise of the judicial power of the state
to maintain and uphold the rights, to punish wrongs and to
adjudicate upon disputes. Tribunals on the other hand are F
special alternative institutional mechanisms, usually brought into
existence by or under a statute to decide disputes arising with
reference to that particular statute, or to determine controversies
arising out of any administrative law. Courts refer to Civil Courts,
Criminal Courts and High Courts. Tribunals can, be either G
private Tribunals (Arbitral Tribunals), or Tribunals constituted
under the Constitution (Speaker or the Chairman acting under
Para 6(1) of the Tenth Schedule) or Tribunals authorized by the
Constitution (Administrative Tribunals under Article 323A and
Tribunals for other matters under Article 3238) or Statutory
                                                                     H
    902      SUPREME COURT REPORTS                  [2010] 6 S.C.R.


A Tribunals which are created under a statute (Motor Accident
    Claims Tribunal, Debt Recovery Tribunals and consumer fora).
    Some Tribunals are manned exclusively by Judicial Officers
    (Rent Tribunals, Motor Accidents Claims Tribunal, Labour
    Courts and Industrial Tribunals). Other statutory Tribunals have
B   Judicial and Technical Members (Administrative Tribunals,
    TDSAT, Competition Appellate Tribunal, Consumer fora, Cyber
    Appellate Tribunal, etc).

         1.3. This court had attempted to point out the difference
C   between Court and Tribunal in several decisions. We may refer
    a few of them.

         (13.1) In Harinagar Sugar Mills Ltd. vs. Shyam Sundar
    Jhunjhunwala - (1962) 2 SCR 339, Hidayatullah J., succinctly
    explained the difference between Courts and Tribunals, thus:
D
          "All Tribunals are not courts, though all courts are
          Tribunals". The word "courts" is used to designate those
          Tribunals which are set up in an organized state for the
          administration of justice. By administration of justice is
          meant the exercise of juridical power of the state to
E
          maintain and uphold rights and to punish "wrongs".
          Whenever there is an infringement of a right or an injury,
          the courts are there to restore the vinculum juris, which is
          disturbed ...... ..

F         When rights are infringed or invaded, the aggrieved party
          can go and commence a querela before the ordinary Civil
          Courts. These Courts which are instrumentalities of
          Government, are invested with the judicial power of the
          State, and their authority is derived from the Constitution
G         or some Act of Legislature constituting them. Their number
          is ordinarily fixed and they are ordinarily permanent, and
          can try any suit or cause within their jurisdiction. Their
          numbers may be increased or decreased, but they are
          almost always permanent and go under the compendious
H         name of "Courts of Civil Judicature". There can thus be no
UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS               903
    BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

  doubt that the Central Government does not come within             A
  this class.

   With the growth of civilization and the problems of modern
   life, a large number of administrative Tribunals have come
   into existence. These Tribunals have the authority of law
                                                                     8
   to pronounce upon valuable rights; they act in a judicial
   manner and even on evidence on oath, but they are not
   part of the ordinary Courts of Civil Judicature. They share
   the exercise of the judicial power of the State, but they are
   brought into existence to implement some administrative           C
   policy or to determine controversies arising out of some
   administrative law. They are very similar to Courts, but are
   not Courts. When the Constitution speaks of 'Courts' in
   Art.136, 227, or 228 or in Arts. 233 to 237 or in the Lists,
    it contemplates Courts of Civil Judicature but not Tribunals
   other than such Courts. This is the reason for using both         D
   the expressions in Arts. 136 and 227.

   By "Courts" is meant Courts of Civil Judicature and by
   "Tribunals", those bodies of men who are appointed to
   decide controversies arising under certain special laws.          E
   Among the powers of the State is included the power to
   decide such controversies. This is undoubtedly one of the
   attributes of the State, and is aptly called the judicial power
   of the State. In the exercise of this power, a clear division
   is thus noticeable. Broadly speaking, certain special             F
   matters go before Tribunals, and the residue goes before
   the ordinary Courts of Civil Judicature. Their procedures
   may differ, but the functions are not essentially different.
   What distinguishes them has never been successfully
   established."
                                                                     G
   In my opinion, a Court in the strict sense is a Tribunal
   which is a part of the ordinary hierarchy of Courts of Civil
   Judicature maintained by the State under its constitution
   to exercise the judicial power of the State. These Courts
   perform all the judicial functions of the State ~xcept those      H
    904      SUPREME COURT REPORTS                   [2010) 6 S.C.R.


A         that are excluded by law from their jurisdiction. The word
          "judicial'', be it noted, is itself capable of two meanings.
          They were admirably stated by Lopes, L.J. in Royal
          Aquarium and Summer and Winter Garden Society v.
          Parkinson [1892) 1 Q.B. 431, in these words :
B
                 "The word 'judicial' has two meanings. It may refer
                 to the discharge of duties exercisable by a judge
                 or by justices in court, or to administrative duties
                 which need not be performed in court, but in
                 respect of which it is necessary to being to bear a
c                judicial mind - that is, a mind to determine what is
                 fair and just in respect of the matters under
                 consideration."

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

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

                                                (emphasis supplied)
F
       (13.2) In Jaswant Sugar Mills vs. Laxmi Chand - 1963
  Supp (1) SCR 242, this Court observed that in order to be a
  Tribunal, a body or authority must, besides being under a duty
  to act judicially, should be invested with the judicial power of
G the state.

         (13.3) In Associated Cement Companies Ltd. vs. P. N.
    Sharma - (1965) 2 SCR 366, another Constitution Bench of
    this Court explained the position of Tribunals thus:

H         "The expression "court" in the context denotes a Tribunal
UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 905
    BAR ASSOCIATION [RV. RAVEENDRAN, J.]

  constituted by the State as a part of the ordinary hierarchy   A
  of courts which are invested with the State's inherent
  judicial powers. A sovereign State discharges legislative,
  executive and judicial functions and can legitimately claim
  corresponding powers which are described as legislative,
  executive and judicial powers. Under our Constitution, the     B
  judicial functions and powers of the State are primarily
  conferred on the ordinary courts which have been
  constituted under its relevant provisions. The Constitution
  recognised a hierarchy of courts and their adjudication are
   normally entrusted all disputes between citizens and          C
  citizens as well as between the citizens and the State.
  These courts can be described as ordinary courts of civil
  judicature. They are governed by their prescribed rules of
   procedure and they deal with questions of fact ·and law
   raised before them by adopting a process which in
                                                                 0
   described as judicial process. The powers which these
   courts exercise, are judicial powers, the functions they
   discharge are judicial functions and the decisions they
   reach and pronounce are judicial decisions.

  In every State there are administrative bodies or authorities E
  which are required to deal with matters with.in their
  jurisdiction in an administrative manner and their decisions
  are described as administrative decisions. In reaching their
  administrative decisions, administrative bodies can and
  often to take into consideration questions of policy. It is not F
  unlikely that even in this process of reaching administrative
  divisions, the administrative bodies or authorities are
  required to act fairly and objectively and would in many
  cases have to follow the principles of natural justice; but
  the authority to reach decision conferred on such G
  administrative bodies is clearly distinct and separate from
  the judicial power conferred on courts, and the decisions
  pronounced by administrative bodies are similarly distinct
  and separate in character from judicial decision
  pronounced by courts.                                           H
    906       SUPREME COURT REPORTS                   [201 O] 6 S.C.R.


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

                                                 (emphasis supplied)

F       (13.4) In Kihoto Hof/ohan vs. Zachi/lhu - 1992 Supp (2)
    SCC 651, a Constitution Bench reiterated the above position
    and added the following :

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

H   In S.P. Sampath Kumar vs. Union of India - (1987) 1 SCC
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 907
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

124, this Court expressed the view that the Parliament can              A
without in any way_violating the basic structure doctrine make
effective alternative institutional mechanisms or arrangements
for judicial review.

    14. Though both Courts and Tribunals exercise judicial
                                                                        8
power and discharge similar functions, there are certain well-
recognised differences between courts and Tribunals. They are


      (i) Courts are established by the State and are entrusted
with the State's inherent judicial power for administration of C
justice in general. Tribunals are established under a statute to
adjudicate upon disputes arising under the said statute, or
disputes of a specified nature. Therefore, all courts are
Tribunals. But all Tribunals are not courts.
                                                                   D
      (ii) Courts are exclusively manned by Judges. Tribunals
can have a Judge as the sole member, or can have a
combination of a Judicial Member and a Technical Member who
is an 'expert' in the field to which Tribunal relates. Some highly
specialized fact finding Tribunals may have only Technical E
Members, but they are rare and are exceptions.

     (iii) While courts are governed by detailed statutory
procedural rules, in particular the Code of Civil Procedure and
Evidence Act, requiring an elaborate procedure in decision
making, Tribunals generally regulate their owr procedure                F
applying the provisions of the Code of Civil Procerlure only
where it is required, and without being restricted by the strict
rules of Evidence Act.

Re: Independence of judiciary                                           G
      15. Impartiality, independence, fairness and
reasonableness in decision making are the hallmarks of
Judiciary. If 'Impartiality' is the soul of Judiciary, 'Independence'
is the life blood of Judiciary. Without independence, impartiality
cannot thrive. Independence is not the freedom for Judges to            H
    908      SUPREME COURT REPORTS                   [2010] 6 S.C.R.


A   do what they like. It is the independence of judicial thought. It
    is the freedom from interference and pressures which provides
    the judicial atmosphere where he can work with absolute
    commitment to the cause of justice and constitutional values. It
    is also the discipline in life, habits and outlook that enables a
B   Judge to be impartial. Its existence depends however not only
    on philosophical, ethical or moral aspects but also upon several
    mundane things - security in tenure, freedom from ordinary
    monetary worries, freedom from influences and pressures
    within (from others in the Judiciary) and without (from the
c   Executive).

         1Ei. In Union of India vs. Sanka/chand Himatla/ Sheth -
    1977 {4) SCC 193, a Constitution Bench of this Court


D
    explained the importance of 'Independence of Judiciary' thus :

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

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

          ... ... .. even with regard to the Subordinate Judiciary the
          framers of the Constitution were anxious to secure that it
          should be insulated from executive interference and once
H         appointment of a Judicial Officer is made, his subsequent
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS             909
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]
    career should be under the control of the High Court and        A
    he should not be exposed to the possibility of any improper
    executive pressure."

In Supreme Court Advocates-on-Record.Association & Ors.
v. Union of India (1993) 4sec  441, J.S. Verma; J. (as he then      8
was) speaking for the majority, described the attributes of an
independent judge thus :

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

                                           (emphasis supplied}

In his concurring opinion, Pandian J. stated that "it is the
cardinal principle of the Constitution that an independent          E
judiciary is the most essential characteristic of a free society
like ours." He further stated :

      " .. that to have an independent judiciary to meet all
      challenges, unbending before all authorities and to uphold    F
     the imperatives of the Constitution at all times, thereby
     preserving the judicial integrity, the person to be elevated
     to the judiciary must be possessed with the highest
      reputation for independence, uncommitted to any prior
      interest, loyalty and obligation and prepared under all       G
      circumstances or eventuality to pay any price, bea,r any
      burden and to meet any hardship and always wedded only
      to the principles of the Constitution and 'Rule of Law'. If
      the selectee bears a particular stamp for the purpose of
    . changing the cause of decisions bowing to the diktat of       H

                                    l
    910      SUPREME COURT REPORTS                   [2010) 6 S.C.R.


A         his appointing authority, then the independence of judiciary
          cannot be secured notwithstanding the guaranteed tenure
          of office, rights and privileges, safeguards, conditions of
          service and immunity. Though it is illogical to spin out a
          new principle that the keynote is not the judge but the
s         judiciary especially when it is accepted in the same breath
          that an erroneous appointment of an unsuitable person is
          bound to produce irreparable damage to the faith of the
          community in the administration of justice and to inflict
          serious injury to the public interest and that the necessity
c         for maintaining independence of judiciary is to ensure a
          fair and effective administration of justice."

    The framers of the Constitution stated in a Memorandum ("See
    The Framing of India's Constitution - a.Shiva Rao, volume 1-
    8, Page 196) :
D
          "We have assumed that it is recognized on all hands that
          the independence and integrity of the judiciary in a
          democratic system of government is of the highest
          importance and interest not only to the judges but to the
E         citizens at large who may have to seek redress in the last
          resort in courts of law against any illegal acts or the high-
          handed exercise of power by the executive ... in making
          the following proposals and suggestions, the paramount
          importance of securing the fearless functioning of an
F         independent and efficient judiciary has been steadily kept
          in view."

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

G         "The Constitution of India while conferring power of judicial
          review of legislative action upon the higher judiciary,
          incorporated important safeguards. An analysis of the
          manner in which the Framers of our Constitution
          incorporated provisions relating to the judiciary would
H
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 911
   . BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

    indicate that they were very greatly concerned with securing     A
    the independence of the judiciary."         .               '

Independence of Judiciary has always been recognized as a
part cf the basic structure of the Constitution (See : Supreme
Court Advocates-on-Record Association vs. Union of India -
                                                               8
1993 (4) SCC 441, State of Bihar vs. Bal Mukund Shah -
2000 (4) SCC 640, Shri Kumar Padma Prasad vs. Union of
India - 1992 (2) SCC 428, and All India Judges Association
vs. Union of India - 2002 (4) SCC 247).

Separation of Power.                                                 c
     17. In Rai Sahib Ram Jawaya Kapur vs. The State of
Punjab - 1955 (2) SCR 225, this Court explained the doctrine
of separation of powers thus :

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

In Chandra Mohan vs. State of UP-AIR 1966 SC 1987, this
Court held:
                                                                      F
    ''The Indian Constitution, though it does not accept the strict
    qoctrine of separation of powers, provides for an
    independent judiciary in the States; it constitutes a High
    Court for each State, prescribes the institutional conditions
    of service of the Judges thereof, confers extensive
    jurisdiction on it to issue writs to keep all tribunals, including G
    in appropriate cases the Governments, within bounds and
    gives to it the power of superintendence over all courts and
    tribunals in the territory over which it has jurisdiction. But
    the makers of the Constitution also realised that "it is the
    Subordinate Judiciary in India who are brought most H
    912       SUPREME COURT REPORTS                   [2010] 6 S.C.R.


A         closely into contact with the people, and it is no less
          important, perhaps indeed even more important, that their
          independence should be placed beyond question than in
          thE~ case of the superior Judges." Presumably to secure
          thE~ independence of the judiciary from the executive, the
B         Constitution introduced a group of articles in Ch. VI of Part
          VI under the heading "Subordinate Courts". But at the time
          the Constitution was made, in most of the States the
          magistracy was under the direct control of the executive.
          Indeed it is common knowledge that in pre-independent
c         India there was a strong agitation that the judiciary should
          be separated from the executive and that the agitation was
          based upon the assumption that unless they were
          separated, the independence of the judiciary at the lower
          levels would be a mockery. So article 50 of the Directive
          Principles of Policy states that the State shall take steps
D
          to separate the judiciary from the executive in the public
          services of the States. Simply stated, it means that there
          shall be a separate judicial service free from the
          executive control."

E                                                (emphasis supplied)

    In Indira Nehru Gandhi vs. Raj Narain - 1975 Supp SCC 1,
    this Court observed that the Indian Constitution recognizes
    separation of power in a broad sense without however their
F   being any ggid separation of power as under the American
    Constitution or under the Australian Constitution. This Court
    held thus:

          "It is true that no express mention is made in our
          Constitution of vesting in the judiciary the judicial power as
G         is to be found in the American Constitution. But a division
          of the three main functions of Government is recognised
          in our Constitution. Judicial power in the sense of the
          judicial power of the State is vested in the Judiciary.
          Similarly, the Executive and the Legislature are vested with
H         powers in their spheres. Judicial power has lain in the
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 913
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

    hands of the Judiciary prior to the Constitution and also         A
    since the Constitution. It is not the intention that the powers
    of the Judiciary should be passed to or be shared by the
    Executive or the Legislature or that the powers of the
    Legislature or the Executive should pass to or be shared
    by the Judiciary.                                                 B

     "The Constitution has a basic structure comprising the
     three organs ofthe Republic: the Executive, the Legislature
     and the Judiciary. It is through each of these organs that
     the sovereign will of the people has to operate and
      manifest itself and not through only one of them. None of C
     these three separate organs of the Republic can take over
      the functions assigned to the other. This is the basic
      strueture or scheme of the system of Government of
      Republic .......... ..
                                                                  D
      "But no constitution can survive without a conscious
      adherence to its fine checks and balances. Just as courts
   rought
   "'\·.,
             to enter into problems entwined in the 'political
    ·thicket", Parliament must also respect the preserve of the
      court. The principle of separation of powers is a principle E
      of restraint ......... "

In L. Chandra Kumar, the seven-Judge Bench of this Court
referred to the task entrusted to the superior courts in India thus

                                                                      F
    'The Judges of the superior courts have been entrusted
    with the task of upholding the Constitution and to this end,
    have been conferred the power to interpret it. It is they who
    have to ensure that the balance of power envisaged by
    the Constitution is maintained and that the legislature and G
    the executive do not, in the discharge of their functions,
    transgress constitutional limitations. It is equally their duty
    to oversee that the judicial decisions rendered by those
    who man the subordinate courts and tribunals do not fall
                                                                      H
    9·14       SUPREME COURT REPORTS                   [2010] 6 S.C.R.


A          foul of strict standards of legal correctness and judicial and
           judicial independence."

                                                  (emphasis supplied)

    The doctrine of separation of powers has also been always
B   considered to be a part of the basic structure of the Constitution
    (See : Keshavananda Bharati vs. State of Kera/a - 1973 (4)
    SCC 225, Indira Gandhi vs. Raj Narain - 1975 Supp SCC 1,
    State of Bihar vs. Bal Mukund Shah - 2000 (4) SCC 640 and
    l.R. Coelho vs. State of Tamil Nadu - 2007 (2) SCC 1).
c
    The argument in favour of Tribunals

          18. The argument generally advanced to support
    tribunalisation is as follows : The courts function under archaic
    and elaborate procedural laws and highly technical Evidence
D Law. To ensure fair play and avoidance of judicial error, the
    procedural laws provide for appeals, revisions and reviews, and
    allow parties to file innumerable applications and raise
    vexatious objections as a result of which the main matters get
    pushed to the background. All litigation in courts get inevitably
E delayed which leads to frustration and dissatisfaction among
    litigants. In view of the huge pendency, courts are not able to
    bestow attention and give priority to cases arising under special
    legislations. Therefore, there is a need to transfer some
    selected areas of litigation dealt with by traditional courts to
F special Tribunals. As Tribunals are free from the shackles of
    procedural laws and Evidence Law, they can provide easy
    access to speedy justice in a 'cost-affordable' and 'user-
    friendly' manner. Tribunals should have a Judicial Member and
    a Technical Member. The Judicial Member will act as a bulwark
G ·against apprehensions of bias and will ensure compliance with
    basic principles of natural justice such as fair hearing and
    reasoned orders. The Judicial Member would also ensure
   'impartiality, fairness and reasonableness in consideration. The
    presence of Technical Member ensures the availability of
H expertise and experience related to the field of adjudication for
  YNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 915
      BAR ASSOCIATION [RV RAVEENDRAN, J.]

which the special Tribunal is created, thereby improving the          A
quality of adjudication and decision-making. ',
                                                                      /

       19. United Kingdom has a rich experience of functioning
  of several types of Tribunals as dispute resolution-and-
  grievance settlement mechanisms in regard to varied social
                                                                   8
  welfare legislations. Several Committees were constituted to
  study the functioning of the Tribunals, two of which require
  special mention. The first is the Franks Report which
  emphasized that Tribunals should be independent, accessible,
  prompt, expert, informal and cheap. The second is the report
  of the Committee constituted to undertake the review of delivery C
  of justice through Tribunals, with Sir Andrew Leggatt as
  Chairman. The Leggatt Committee submitted its report to the
  Lord High Chancellor of Great Britain in March, 2001. The
·Committee explained the advantages of Tribunals, provided
 .they could function independently and coherently, thus:          D
     "Choosing a tribunal to decide disputes should bring two
     distinctive advantages for users. First, tribunal decisions
     ar~ often made jointly by a panel of people who pool legal
     and other expert knowledge, and are the better for that E
     range of skills. Secondly, tribunals' procedures and
     approach to overseeing the preparation of cases and their
     hearing can be simpler and more informal than the courts,
     even after the civil justice reforms. Most users ought
     therefore to be capable of preparing and presenting their F
     cases to the tribunal themselves, providing they have the
     right kind of help Enabling that kind of direct participation
     is an important jurisdiction for establishing tribunals at all.
     xxxxx

     De Smith's Judicial Review, (6th Edn., Page 50 Para G
 1.085) sets out the advantages of Tribunals thus :

     "In the design of an administrative justice system, a Tribunal
     may be preferred to an ordinary court because its
     members have specialized knowledge of the subject-               H
    916       SUPREME COURT REPORTS                     [2010] 6 S.C.R.


A         matter, because it will be more informal in its trappings and
          procedure, because it may be better at finding facts,
          applying flexible standards and exercising discretionary
          powers, and because it may be cheaper, more accessible
          anti more expeditious than the High Court. Many of the
B         decisions given to Tribunals concern the merits of cases
          with relatively little legal content, and in such cases a
          Tribunal, usually consisting of a legally qualified Tribunal
          judge and two lay members, may be preferred to a court.
          Indeed dissatisfaction with the over-technical and allegedly
c         unsympathetic approach of the courts towards social
          welfare legislation led to a transfer of functions to special
          Tribunals; the Workmen's Compensation Acts were
          administered by the ordinary courts, but the National
          Insurance (Industrial Injuries) scheme was applied by
          Tribunals. It is, however, unrealistic to imagine that
D
          technicalities and difficult legal issues can somehow be
          avoided by entrusting the administration of complex
          legislation to Tribunals rather than the courts."

                                                   (emphasis supplied)
E
    H. W. R. Wade & C. F. Forsyth also refer to the advantage of
    Tribunals in their 'Administrative Law' (10th Edn., pp.773-774):

          "The social legislation of the twentieth century demanded
           Tribunals for purely administrative reasons: they could offer
F          speedier, cheaper and more accessible justice, essential
          for the administration of welfare schemes involving large
           numbers of small claims. The process of the courts of law
           is elaborate, slow and costly. Its defects are those of its
           merits, for the object is to provide the highest standard of
G         justice; generally speaking, the public wants the best
          possible article, and is prepared to pay for it. But in
           administering social services the aim is different. The
           object is not the best article at any price but the best article
           that is consistent with efficient administration. Disputes
H          must be disposed of quickly and cheaply, for the benefit
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS                917
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

    of the public purse as well as for that of the claimant. Thus     A
    when in 1946 workmen's compensation claims were
    removed from the courts and brought within the Tribunal
    system much unproductive and expensive litigation,
    particularly on whether an accident occurred in the course
    of employment, came to an end. The whole system is                B
    based on compromise, and it is from the dilemma of
    weighing quality against convenience that many of its
    problems arise.

    An accompanying advantage is that of expertise. Qualified         C
    surveyors sit on the Lands Tribunal and experts in tax law
    sit as Special Commissioners of Income Tax. Specialized
    Tribunals can deal both more expertly and more rapidly with
    special classes of cases, whereas in the High Court
    counsel may take a day or more to explain to the judge
    how some statutory scheme is designed to operate. Even            D
    without technical expertise, a specialized Tribunal quickly
    builds up expertise in its own field. Where there is a
    continuous flow of claims of a particular class, there is every
    advantage in a special jurisdiction."
                                                                      E
Recommendations for better working of Tribunals

     20. Only if continued judicial independence is assured,
Tribunals can discharge judicial functions. In order to make such
independence a reality, it is fundamental that the members of
the Tribunal shalf be independent persons, not civil servants.
                                                                  F
They should resemble courts and not bureaucratic Boards.
Even the dependence of Tribunals on the sponsoring or parent
department for infrastructural facilities or personnel may
undermine the independence of the Tribunal (vide : Wade &·
Forsyth: 'Administrative Law' - 10th Edn., pp.774 and 777).       G

     21. The Leggatt Committee's Report explained the task
of improving the Tribunals thus :

    "There are 70 different administrative tribunals in England
                                                                      H
    918      SUPREME COURT REPORTS                   [2010] 6 S.C.R.


A         and Wales, leaving aside regulatory bodies. Between them
          they deal with nearly one million cases a year, and they
          employ about 3,500 people. But of these 70 tribunals only
          20 each hear more than 500 cases a year and many are
          defunct. Their quality varies from excellent to inadequate.
B         Our terms of reference require them to be rendered
          coherent. So they have to be rationalized and modernized;
          and this Review has as its four main objects: first, to make
          the 70 tribunals into one Tribunals System that its
          members can be proud of; secondly, to render the tribunals
c         independent of their sponsoring departments by having
          them administered by one Tribunals Service; thirdly, to
          improve the training of chairmen and members in the
          interpersonal skills peculiarly required by tribunals; and
          fourthly, to enable unrepresented users to participate
          effectively and without apprehension in tribunal
D
          proceedings."

         The Leggatt Committee explained what the users of the
    system expected from an alternative public adjudication system:

E         "We do not believe that the current arrangements meet what
          the modern user needs and expects from an appeal system
          running in parallel to the courts. First, users need to be
          sure, as they currently cannot be, that decisions in their
          cases are being taken by people with no links with the
F         body they are appealing against. Secondly, a more
          coherent framework for tribunals would create real
          opportunities for improvement in the quality of services that
          can be achieved by tribunals acting separately. Thirdly, that
          framework will enable them to develop a more coherent
          approach to the services which users must receive if they
G
          are to be enabled to prepare and present cases
          themselves. Fourthly, a user-oriented service needs to be
          much clearer than it is now in telling users what services
          they can expect, and what to do if the standards of these
          services are not met."
H
                                        /
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 919
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

     The Leggatt Committee expressed the view that a single      A
structure for all Tribunals would achieve independence and
effective functioning of the Tribunal. It stated :

     "There is only one way to achieve independence and
     coherence: to have all the tribunals supported by a 8
     Tribunals Service, that is, a common administrative
   · service. It would raise their status, while preserving their
     distinctness from the courts. In the medium term it would
     yield considerable economies of scale, particularly in
     relation to the provision of premises for all tribunals, C
     common basic training, and the use of IT. It would also
     bring greater administrative efficiency, a single point of
     contact for users, improved geographical distribution of
     tribunal centres, common standards, an enhanced
     corporate image, greater prospects of job satisfaction, a
     better relationship between members and administrative D
     staff, and improved career patterns for both on account of
     the size and.coherence of the Tribunals Service. It should
     be committed by Charter to provide a high quality, unified
     service, to operate independently, to deal openly and
     honestly with users of tribunals, to seek to maintain public E
     confidence, and to report annually on its performance.

     The report expressed the view that the independence of
tribunals would best be safeguarded by having their
administrative support provided by the Lord Chancellor's F
Department as he is uniquely placed to protect the
independence of those who sit in tribunals as well as.,..of the
judiciary, through a Tribunals Service and a Tribunals System
analogous with, but separate from, the Court Service and the
courts. Most of the recommendations of the Leggatt Report G
were accepted and culminated in the 'Tribunals, Courts &
Enforcement Act, 2007'. The Act recognizes that Tribunals do
not form part of administration, but are machinery of
adjudication. As a result of the said Act, the appointments to
Tribunals are on the recommendations of a Judicial
                                                                H
    920      SUPREME COURT REPORTS                  ·[2010) 6 S.C.R.

A   Appointments Commission. The sponsoring Department (that
    generates the disputes that the Tribunal will have to decide) has
    no say in the appointments. Neither the infrastructure nor the
    staff are provided to the Tribunals by the sponsoring Parent
    Depa11ment. The Tribunals have become full-fledged part of
B   Judicial system with no connection or link with the 'parent
    department'. A common Tribunal service has been established
    as an executing agency in the Ministry of Law & Justice.

        22. This Court, in L. Chandra Kumar, made similar
    suggestions for achieving the independence of Tribunals :
c
          "It has been brought to our notice that one reason why
          these Tribunals have been functioning inefficiently is
          because there is no authority charged with supervising and
          fulfilling their administrative requirements ........ The
D         situation at present is that different Tribunals constituted
          under different enactments are administered by different
          administrative departments of the Central and the State
          Governments. The problem is compounded by the fact that
          some Tribunals have been created pursuant to Central
E         Le£1islations and some others have been created by State
          Le£1islations. However, even in the case of Tribunals
          created by Parliamentary legislations, there is no uniformity
          in administration. We are of the view that, until a wholly      '
          independent agency for the administration of all such
          Tribunals can be set-up, it is desirable that all such
F
          Tribunals should be, as far as possible, under a single
          nodal Ministry which will be in a position to oversee the
          working of these Tribunals. For a number of reasons that
           Ministry should appropriately be the Ministry of Law. It
          would be open for the Ministry, in its turn, to appoint an
G
           independent supervisory body to oversee the working of
          the Tribunals. This will ensure that if the President or
           Chairperson of the Tribunal is for some reason unable to
           take sufficient interest in the working of the Tribunal, the
           entire! system will not languish and the ultimate consumer
H
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS                   921
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

     of justice will not suffer. The creation of a single umbrella        A
     organisation will, in our view, remove many of the ills of
     the present system. If the need arises, there can be
     separate umbrella organisations at the Central and the
     State levels. Such a supervisory authority must try to
     ensure that the independence of the members of all such              B
     Tribunals is maintained. To that extent, the procedure for
     the selection of the members of the Tribunals, the manner
     in which ·funds arc allocated for the functioning of the
     Tribunals and all other consequential details will have to
     be clearly spelt out."                                               c
       23. But in India, unfortunately Tribunals have not achieved
full independence. The Secretary of the concerned 'sponsoring
department' sits in the Selection Committee for appointment.
When the Tribunals are formed, they are mostly dependant on
their sponsoring department for funding, infrastructure and even          D
space for functioning. The statutes constituting Tribunals
routinely provide for members of civil services from the
sponsoring departments becoming members of the Tribunal
and continuing their lien with their parent cadre. Unless wide
ranging reforms as were implemented in United Kingdom and                 E
as were suggested by Chandra Kumar are brought about,
Tribunals in India will not be considered as independent.

Whether the Government can transfer the judicial
functions traditionally performed by courts to Tribunals?                 F

      24. It is well settled that courts perform all judicial functions
of the State except those that are excluded by law from their
jurisdiction. Section 9 of Code of Civil Procedure, for example,
provides that the courts shall have jurisdiction to try all suits of
a civil nature excepting suits of which their cognizance is either        G
expressly or impliedly barred.

     25. Article 32 provides that without prejudice to the powers
conferred on the Supreme Court by clauses (1) and (2) of the
said Article, Parliament may by law, empower any other court              H
    922      SUPREME COURT REPORTS                  [2010] 6 S.C.R.


A to exercise within the local limits of its jurisdiction all or any of
  the powers exercisable by the Supreme Court under clause (2)
  of Article 32. Article 247 provides that notwithstanding anything
  contained in Chapter I of Part XI of the Constitution, Parliament
  may by law provide for the establishment of any additional
B courts for the better administration of laws made by Parliament
  or of any existing laws with respect to a matter enumerated in
  the Union List. Article 245 provides that subject to the
  provisions of the Constitution, Parliament may make laws for
  the whole or any part of the territory of India, and the Legislature
c of a State may make laws for the whole or any part of the State.
   Article 246 deals with the subject matter of laws made by
   Parliament and by the legislatures of States. The Union List
   (List I of Seventh Schedule) enumerates the matters with
   respect to which Parliament has exclusive powers to make
   laws. Entry 77 of List I refers to Constitution, organization,
0
   jurisdiction and powers of the Supreme Court. Entry 78 of List
   I refers to constitution and organization of the High Courts. Entry
   79 of List I refers to extension or exclusion of the jurisdiction of
   a High Court, to or from any Union Territory. Entry 43 of List I
   refers to incorporation, regulation and winding up of trading
E corporations and Entry 44 of List I refers to incorporation,
    regulation and winding up of corporations. Entry 95 of List I
    refers to jurisdiction and powers of all courts, except the
   Supreme Court, with respect to any of the matters in Union List.
   The Concurrent List (List Ill of the Seventh Schedule)
F enumerates the matters with respect to which a Parliament and
    legislature of a state will have concurrent power to make laws.
    Entry 11A of List Ill refers to administration of justice,
    constitution and organization of all courts except the Supreme
    Court and the High Courts. Entry 46 of List Ill refers to
G jurisdiction and powers of all courts, except the Supreme Court,
    with respect to any of the matters in List Ill.

         26. Part XIV-A was inserted in the Constitution with effect
    from 3.1.1977 by the Constitution (Forty-second Amendment)
H   Act, 1976. The said part contains two Articles. Article 323A ·
     UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 923
         BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

    relates to Administrative Tribunals and empowers the A
    Parliament to make a law, providing for the adjujiication or trial
    by Administrative Tribunals of disputes and complaints with
    respect to recruitment and conditions of service of persons
    appointed to public services and posts in connection with the
    affairs of the Government or of any State or of ai:iy local or other B
    authority within the territory of India or under the control of the
    Government of India or of any corporation owned or controlled
    by the Government. Article 323B empowers the approp~iate
    Legislature to make a law, providing for the adjudication or trial C
    by Tribunals of any disputes, complaints, or offences with
    respect to all or any of the following matters specified in clause
    (2) with respect to which such Legislature has power to make
    laws:
•
        (a) levy, assessment, collection and enforcement of any tax;    D

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

        (c) industrial and labour disputes;                             E

        (d) land reforms by way of acquisition by the State of any
        estate as defined in article 31A or of any rights therein or
        the extinguishment or modification of any such rights or by
        way of ceiling on agricultural land or in any other way;        F

        (e) ceiling on urban property;

        (f) elections to either House of Parliament or the House
        or either House of the Legislature of a State, but excluding    G
        the matters referred to in article 329 and article 329A;

        (g) production, procurement, supply and distribution of
        foodstuffs (including edible oilseeds and oils) and suc.h
        other goods as the President may, by public notification,
        declare to be essential goods for the purpose of this article   H
    924      SUPREME COURT REPORTS                   [2010] 6 S.C.R.


A         and control of prices of such goods;

          (h) rent, its regulation and control and tenancy issues
          including the rights, title and interest of landlords and
          tenants,
8
          (i) offences against laws with respect to any of the matters
          specified in sub-clauses (a) to (h) and fees in respect of
          any of those matters;

          0) any matter incidental to any of the matters specified in
c         sub-clauses (a) to (i)."

    ClausE~ (2) of Article 323A and clause (3) of Article 3238 lay
    down that a law made under sub-clause (1) of the respective
    Articles may provide for the following :                             •
0


           Article 323A                          Article 3238
                                  --


E   (a)    provide ~ for         tl'le Provide       for   the
           establishment of ~):in establishment of a hierarchy
           administrative Tribunal for of Tribunals;
           the Union and a separate
           administrative Tribunal for
F          each State or for two or
           more States;

    (b)    specify the jurisdiction,    Specify the jurisdiction,
           powers (including the        powers (including the power
G          power to punish for          to punish for contempt) and
           contempt) and authority      authority which may be
           which may be exerci~d        exercised by each of the
           by each of the said          said Tribunals
           Tribunals;
H
           " v. R. GANDHI, PRESIDENT, MADRAS 925
UNION OF INDIA
    BAR ASSOCIATION [RV. RAVEENDRAN, J.]

(c)   provide for the procedure      provide       for      the     A
      (including provisions as to    procedure(including
      limitation and rules of        provisions as to limitation
      evidence) to be followed       and rules of evidence) to
      by the said Tribunals;         be followed by the said
                                     Tribunals;                     8

(d)   exclude the jurisdiction of    exclude the jurisidiction of
      all courts, except the         all courts except the
      jurisdiction     of    the     jurisdiction of the Supreme
      Supreme Court under            Court under article 136 with   c
      article 136, with respect      respect to all or any of the
      to the disputes or              matters falling within the
      complaints referred to in      jurisdiction of the said
      clause (1 );                   Tribunals;
                                                                    D
(e)   provide for the transfer to    provide for the transfer to
      each such administrative       each such Tribunal of any
      Tribunal of any cases          cases pending before any
      pending before any court       court or any other authority
      or    other      authority     immediately before the         E
      immediately before the         establishment of such
      establishment of such          Tribunal as would have
      Tribunal as would have         been within the jurisdiction
      been within the jurisdiction   of such Tribunal if the
      of such Tribunal if the        cause of action on which
                                                                    F
      cause of action on which       such suits or proceedings
      such suits or proceedings      are based had arisen after
      are based had arisen after     such establishment;
      such establishment;
                                                                    G
(f)   repeal or amend any
      order made by the
      President under clause
      (3) of article 371 D;
                                                                    H
    926      SUPREME COURT REPORTS                   [2010] 6 S.C.R.


A                                        contain such supplemental,
     (g)   contain               such
           supplemental, incidental      incidental             and
           an·d       consequential      consequential provisions
           provisions (including         (including provisions as to
           provisions as to fees) as     fees) as the appropriate
8
           Parliament may deem           Legislature may deem
           necessary for the effective   necessary for the effective
           functioning of, and for the   functioning of, and for the
           speedy disposal of cases      speedy disposal of cases
                                         by, and the enforcement of
c          by, and the enforcement
           of the orders of, such        the orders of, such
           Tribunals.                    Tribunals.



D         27. In L. Chandra Kumar v. Union of India (1997 (3) SCC
    261], this Court held that clause 2(d) of Article 323A and clause
    3(d) of Article ~238, to the extent they empower Parliament and
    State Legislature to totally exclude the jurisdiction of all courts
    except thejurisdiction of the Supreme Court under Article 136,
E   in regard to the disputes and complaints referred to in Article
    32:3A(1) and the matters specified in Article 3238(2), offended
    the basic and essential features of the Constitution and were
    unconstitutional. This Court also held that "exclusion of
    jurisdiction" clause enacted in any legislation, under the aegis
F   of Articles 323A [2(d)] and 3238[3(d)] are also unconstitutional.
    It was declared that the jurisdiction conferred upon the High
    Court under Articles 226 and 227 and upon the Supreme Court
    under Article 32 of the Constitution is a part of the inviolable
    basic structure of our Constitution.
G
         28. The legislative competence of Parliament to provide
    for creation of courts and Tribunals can be traced to Entries 77,
    78, 79 and Entries 43, 44 read with Entry 95 of List I, Item 11A
    read with Entry 46 of List Ill of the Seventh Schedule. Referring
H
UNION OF INDIA v. R. GANDHI, PRESIDENT, MA).ZlRAS              927
    BAR ASSOCIATION [R.V. RAVEENDRAN, J.J

to these Articles, this Court in two cases, namely, Union.otlndia . A
v. Delhi High Court Bar Association [2002 (4) SCC 275] and
State of Karnataka v. Vishwabharathi House Building
Cooperative Society & Ors. [2003 (2) SCC 412] held that
Articles 323A and 3238 are enabling provisions which enab!e
the setting up of Tribunals contemplated therein; and that the B
said Articles, however, cannot be interpreted to mean that they
prohibited the legislature from establishing Tribunals not
covered by those Articles, as long as there is legislative
competence under the appropriate Entr{ in the Seventh
Schedule.                                                           C

    29. In Navinchandra Mafatlal vs The Commissioner of
Income-Tax - 1955 (1) SCR 829, this Court held:

     ".. As pointed out by Gwyer C.J. in United Provinces v.           D
     Atiqa Begum - 1940 F.C.R. 110 none of the items in the
     Lists is to be read in a narrow or restricted sense and that
     each general word should be held to extend to all ancillary
     or subsidiary matters which can fairly and reasonably be
     said to be comprehended in it. It is, therefore, clear-and it     E
     is acknowledged by Chief Justice Chagla-that in
     construing an entry in a List conferring legislative powers
     the widest possible construction according to their ordinary
     meaning must be put upon the words used therein. The
     cardinal rule of interpretation, however, is that words should
     be read in their ordinary, natural and grammatical meaning        F
     subject to this rider that in construing words in a
     constitutional enactment conferring legislative power the
     most liberal construction should be put upon the words so
     that the same may have effect in their widest amplitude."
                                                                       G
   In Union of India vs. Harbhajan Singh Dhillon - 1971 (2)
SCC 779, this Court held :

     "It seems to us that the function of Article 246(1 ), read with
     Entries 1 to 96 of List I, is to give positive power to           H
    928          SUPREME COURT REPORTS               [2010] 6 S.C.R


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

       The power of Parliament to enact a law which is not
8
  covered by an entry in Lists II and Ill is absolute. The power so
  conferred by Article 246 is in no way affected or controlled by
  Article 323 A or 323 B. MBA contends that if the power to enact
  a law to constitute tribunals was already in existence with
  refemnce to the various fields of legislation enumerated in the
C Seventh Schedule, there was no need for enacting ,Articles
  323A or 3238 conferring specific power to Legislatures to
  makei laws for constitution of Tribunals. It is their contention that
  the very fact that Articles 323A and 3238 have been specifically
  enacted empowering the concerned legislature to rnake a law
D constituting tribunals in regard to the matters enumerated
  therein, demonstrated that tribunals cannot be constituted in
  respect of matters other than those mentioned in the said
  Articles 323A and 3238. The contention is not sound. It is
  evident that Part XIV-A containing Articles 323A and 3238 was
E inserted in the Constitution so as to provide for establishment
  of tribunals which can exclude the jurisdiction of all courts
  including the jurisdiction of High Courts and Supreme Court
  undeir Articles 226/227 and 32, in respect of disputes and
  complaints covered by those Articles. It was thought that unless
F such enabling power was vested in the Legislatures by a
  constitutional provision, it may not be possible to enact laws
  excluding the jurisdiction of the High Courts and Supreme Court.
  However, this is now academic because clause 2(d) of Article
  323A and clause 3(d) of Article 323B have been held to be
G unconstitutional in Chandra Kumar.

         30. In ACC (supra), this Court recognized the competence
    of the State to transfer a part of the judicial power from coups
    to Tribunal :                                                '

H         "Judicial functions and judicial powers are one of the
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 929
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

    considerations of policy, the State transfers its judicial        A
    functions and powers mainly to the courts established by
    the Constitution; but that does not affect the competence
    of the State, by appropriate measures, to transfer a part
    of its judicial powers and functions to Tribunals by
    entrusting to them the task of adjudicating upon special          B
    matters and disputes between parties. It is really not
    possible or even expedient to attempt to describe
    exhaustively the features which are common to the
    Tribunals and the courts, and features which are distinct
    and separate. The basic and the fundamental feature which         c
    is common to both the courts and the Tribunals is that they
    discharge judicial functions and exercise judicial powers
    which inherently vest in a sovereign State."

                                            (emphasis supplied)
                                                                      D
     31. Therefore, even though revival/rehabilitation/regulation/
winding up of companies are not matters which are mentioned
in Article 323A and 3238, the Parliament has the legislative
competence to make a law providing for constitution of Tribunals
to deal with disputes and matters arising out of the Companies        E
Act.

     32. The Constitution contemplates judicial power being
exercised by both courts and Tribunals. Except the powers and
jurisdictions vested in superior courts by the Constitution,
powers and jurisdiction of courts are controlled and regulated
                                                                      F
by Legislative enactments. High Courts are vested with the
jurisdiction to entertain and hear appeals, revisions and
references in pursuance of provisions contained in several
specific legislative enactments. If jurisdiction of High Courts can
be created by providing for appeals, revisions and references         G
to be heard by the High Courts, jurisdiction can also be taken
away by deleting the provisions for appeals, revisions or
references. It also follows that the legislature has the power to
create Tribunals with reference to specific enactments and
confer jurisdiction on them to decide disputes in regard to           H
    930       SUPREME COURT REPORTS                    [2010] 6 S.C R


A   matters arising from such special enactments. Therefore it
    cannot be said that legislature has no power to transfer judicial
    functions traditionally performed by courts to Tribunals.

       33. The argument that there cannot be 'whole-sale transfer
  of powers' is misconceived. It is nobody's case that the entire
8
  functioning of courts in the country is transferred to Tribunals.
  The competence of the Parliament to make a law creating
  Tribunals to deal with disputes arising under or relating to a
  particular statute or statutes cannot be disputed. When a
  Tribunal is constituted under the Companies Act, empowered
C to deal with disputes arising under the said Act and the statute
  substitutes the word 'Tribunal' in place of 'High Court'
  necessarily there will be 'whole-sale transfer' of company law
  matters to the Tribunals. It is an inevitable consequence of
  creation of Tribunal, for such disputes, and will no way affect
D the validity of the law creating the Tribunal.

       34. We will next consider the question whether provision
  for a Technical Member along with the Judicial Member making
  any difference to decide the validity of the provision for
E constitution of Tribunals. This Question is covered by the
  decision in L. Chandra Kumar (supra), this Court held :

          "We are also required to address the issue of the
          competence of those who man the Tribunals and the
          question of who is to exercise administrative supervision
F         over them. It has been urged that only those who have had
          judicial experience should be appointed to such Tribunals.
          In the case of Administrative Tribunals, it has been pointed
          out that the administrative members who have been
          appointed have little or no experience in adjudicating such
G         disputes; the Malimath Committee has noted that at times,
          IPS Officers have been appointed to these Tribunals. It is
          stated that in the short tenures that these Administrative
           Members are on the Tribunal, they are unable to attain
          enough experience in adjudication and in cases where
H         they do acquire the ability, it is invariably on the eve of the
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS               931
     BAR ASSOCIATION [RV RAVEENDRAN, J.]

     expfry of their tenures. For these reasons, it has been A
     urged that the appointment of Administrative Members to
     Administrative Tribunals be stopped. We find it difficult to
     accept such a contention. It must be remembered that the
     setting-up of these Tribunals is founded on the premise that
     specialist bodies comprising both trained administrators B •
     and those with judicial experience wquld, by virtue of their
     specialised knowledge, be better equipped to dispense
     speedy and efficient justice. It was expected that a
     judicious mix ofjudicial members and those with grass-
     roots experience would best serve this purpose. To hold         c
     that the Tribunal should consist only of judicial members
     would attack the primary basis of the theory pursuant to
     which they have been constituted. Since the Selection
     Committee is now headed by a Judge of the Supreme •
                                                                  •
     Court, nominated by the Chief Justice of India, we !\ave
                                                                    0
     reason to believe that the Committee would take ca'te to
     ensure that administrative members are chosen from
     amongst those who have some background to deal with
     such cases.

       35. But when we s.ay that Legislature has the competence      E
 to make laws, providing which disputes will be decided by
 courts, and which disputes will be decided by Tribunals, it is
 subject to constitutional limitations, without encroaching upon
 the independence of judiciary and keeping in view the principles
of Rule of Law and separation of powers. If Tribunals are to be      F
vested with judicial power hitherto vested in or exercised by
courts, such Tribunals should possess the independence,
security and capacity associated with courts. If the Tribunals are
intended to serve an area which requires specialized
knowledge or expertise, no doubt there can be Technical              G
Members in addition to Judicial Members. Where however
jurisdiction to try certain category of cases are transferred from
Courts to Tribunals only to expedite the hearing and disposal
or relieve from the rigours of the Evidence Act and procedural
laws, there is obviously no need to have any non-judicial            H
                                                                           J
    932      SUPREME COURT REPORTS                   [2010] 6 S.C.R.


A Technical Member. In respect of such Tribunals, only members
  of the Judiciary should be the Presiding Officers/members.
  Typical examples of such special Tribunals are Rent Tribunals,
  Motor ,A,ccident Tribunals and Special Courts under several
  Enactments. Therefore, when transferring the jurisdiction
B exercised by Courts to Tribunals, which does not involve any
  specialized knowledge or expertise in any field and expediting
  the disposal and relaxing the procedure is the only object, a
  provision for technical members in addition to or in substitution
  of judicial members would clearly be a case of dilution of and
c encroachment upon the independence of the Judiciary and
  Rule of Law and would be unconstitutional.

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

D         ''The Tribunals set up under Articles 323A and 323B of the
          Constitution or under an Act of legislature are creatures
          of the Statute and in no case claim the status as Judges
          of the High Court or parity or as substitutes. However, the
           personnel appointed to hold those offices under the State
E         are called upon to discharge judicial or quasi-judicial
           powers. So they must have judiclal approach and also
           knowledge and expertise in that particular branch of
           constitutional, administrative and tax laws. The legal input
           would undeniably be more important and sacrificing the
           legal input and not giving it sufficient weightage and teeth
F
           would definitely impair the efficacy and effectiveness of the
           judicial adjudication. It is, therefore, necessary that those
           who adjudicate upon these matters should have legal
           expertise, judicial experience and modicum of legal
           training as on many an occasion different and complex
G          questions of law which baffle the minds of even trained
           judges in the High Court and Supreme Court would arise
            for discussion and decision."
         37. Having held that Legislation can transfer certain areas
H of litigation from Courts to Tribunals and recognizing that the
 UNION OF INDIA v. R GANDHI, PRESIDENT, MADRAS               933
     BAR ASSOCIATION [RV RAVEENDRAN, J.]

legislature can provide for technical members in addition to A
judicial members in such Tribunals, let us turn our attention to
the question as to who can be the members. If the Act provides
for a Tribunal with a judicial member and a fechnical member,
does it mean that there are no limitations upon the power of
the legislature to prescribe the qualifications for such technical B
 member? The question will also be whether any limitations can
 be read into the competence of the legislature to prescribe the
 qualification for the judicial member? The answer, of course,
 depends upon the nature of jurisdiction that is being transferred
 from the Courts to Tribunals. Logically and necessarily,          c
 depending upon whether the jurisdiction is being shifted from
 High Court, or District Court or a Civil Judge, the yardstick will
 differ. It is for the court which considers the challenge to the
 qualification, to determine whether the legislative power has
 been exercised in a manner in consonance with the
                                                                     D
 constitutional principles and constitutional guarantees. We may
 examine this question with reference to the company
 jurisdiction exercised by the High Court for nearly a century
  being shifted to a tribunal on the ground that tribunal consisting
  of a judicial and technical members will be able to dispose of
  the matters expeditiously and that the availability of expertise E
  of the technical members will facilitate the decision making to
  be more practical, effective and meaningful. Does this mean
  that the Legislature can provide for persons not properly
  qualified to become members? Let us take some examples.
  Can the legislature provide that a law graduate with a masters' F
  degree in company law can be a judicial member without any
  experience as a lawyer or a judge? Or can the legislature
  provide that an Upper Division Clerk having fifteen years
  experience in the company law department but with a Law
  Degree is eligible to become a Judicial Member? Or can the G
  legislature provide that a 'social worker' with ten years
  experience. in social ·work can become a technical member?
  Will it be beyond scrutiny by way of judicial review?
                '
     38. Let us look at it from a different angle. Let us assume
                                                                    H
    934      SUPREME COURT REPORTS                    [2010] 6 S.C.R.


A that three legislations are made in a state providing for
  constitution of three types of Tribunals: (i) Contract Tribunals;
  (ii) Real Estate Tribunals; and (iii) Compensation Tribunals. Let
  us further assume that those legislations provide that all cases
  relatin~J to contractual disputes, property disputes and
B compensation claims hitherto tried by civil courts, will be tried
  by these tribunals instead of the civil courts; and that these
  tribunals will be manned by members appointed from the civil
  services, with the rank of Section Officers who have expertise
  in the respective field; or that a businessman in the case of
c Contract Tribunal, a Real Estate Dealer in regard to Property
  Tribunal, and any social worker in regard to compensation
  Tribunal, having expertise in the respective field will be the
  members of the Tribunal. Let us say by these legislations, all
  cases in civil courts are transferred to Tribunal (as virtually all
  cases in civil courts will fall under one or the other of the three
0
  Tribunals). Merely because the Legislature has the power to
  constitute tribunals or transfer jurisdiction to tribunals, can that
  be done?
          39. The question is whether a line can be drawn, and who
E   can decide the validity or correctness of such action. The
    obvious answer is that while the Legislature can make a law
    providing for constitution of Tribunals and prescribing the
    eligibility criteria and qualifications for being appointed as
    members, the superior courts in the country can, in exercise of
F   the power of judicial review, examine whether the qualifications
    and eligibility criteria provided for selection of members is
    proper and adequate to enable them to discharge judicial
    functions and inspire confidence. This issue was also
    considered in Sampath Kumar (supra) and it was held that
    where the prescription of qualification was found by the court,
G   to be not proper and conducive for the proper functioning of the
    Tribunal, it will result in invalidation of the relevant provisions
    relating to the constitution of the Tribunal. If the qualifications/
    eligibility criteria for appointment fail to ensure that the
    members of the Tribunal are able to discharge judicial
H   functions, the said provisions cannot pass the scrutiny of the
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS               935
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

higher Judiciary. We may in this context recall the words of          A
Mathew Jin Kesavananda Bharati v. State of Kera/a [AIR 1973
sec 1461] in a different context:
     "I am not dismayed by the suggestion that no yardstick is
     furnished to the Court except the trained judicial perception
     for finding the core or essence of a right, or the essential
                                                                      B
     features of the Constitution. Consider for instance, the test
     for determining citizenship in the United States that the
     alien shall be a person of "good moral character" the test
     of a crime involving "moral turpitude", the test by which you
     determine the familiar concept of the "core of a contract",      C
'-
     the "pith and substance" of a legislation or the "essential
     legislative function" in the doctrine of delegation. Few
     Constitutional issues can be presented in black and white
     terms. What are essential features and non essential
     features of the Constitution ? Where does the core of a          D
     right end and the periphery begin? These are not matters
     of icy certainty; but, for that reason, I am not persuaded to
   - hold that they do not exist, or that they are too elusive for
     judicial perception. Most of the things in life that are worth
     talking about are matters at degree and the great judges         E
     are those who are most capable of discerning which of the
     gradations make genuine difference".

     40. MBA contended that constitution of a Tribunal to
transfer the entire company law jurisdiction of the High Court
                                                                     F
was violative of the doctrine of separation of power and
independence of judiciary which are parts of basic structure of
the Constitution. The Union of India countered it by contending
that a Legislation cannot be challenged on the ground it violates
the basic structure of the Constitution. It is now well settled that
only constitutional amendments can be subjected to the test of G
basic features doctrine. Legislative measures are not subjected
to basic features or basic structure or basic framework. The..
Legislation can be declared unconstitutional or invalid only on
two grounds namely (i) lack of legislative competence and (ii}
                                                                     H
    936       SUPREME COURT REPORTS                    [2010] 6 S.C.R.


A violation of any fundamental rights or any provision of the
  Constitution [See : Indira Gandhi vs. Raj Narain - 1975 Supp
  SCC 1; Ku/dip Nayar vs. Union of India - 2006 (7) SCC 1;
  and State of Andhra Pradesh vs. McDowell & Co. - 1996 (3)
  SCC 709]. The reason for this was given by Chandrachud J.,
B in Indira Gandhi, thus:

          "Basic structure", by the majority judgment [in Keshavanda
          Bharati vs. State of Kera/a - 1973 (4) SCC 225], is not a
          part of the fundamental rights nor indeed a provision of the
          Constitution. The theory of basic structure is woven out of
c         the conspectus of the Constitution and the amending
          power is subjected to it because it is a constituent power.
          'The power to amend the fundamental instrument cannot
          carry with it the power to destroy its essential features' -
          this, in brief, is the arch of the theory of basic structure. lt
D         is wholly out of place in matters relating to the validity of
          ordinary laws made under the Constitution .......

          There is no paradox, because certain limitations operate
          upon the higher power for the reason that it is a higher
E         power. A constitutional amendment has to be passed by
          a special majority and certain such amendments have to
          be ratified by the legislatures of not less than one-half of
          the States as provided by Article 368(2). An ordinary
          legislation can be passed by a simple majority. The two
          powers, though species of the same genus, operate in
F
          different fields and are therefore subject to different
          limitations."

  The view was also reiterated and explained by Beg. CJ in his
  leading judgment of a seven-Judge Bench in the State of
G Kamataka vs. Union of India - 1977 (4) SCC 608. He held
  that in every case where reliance is placed upon the doctrine
  of basic structure, in the course of an attack upon legislation,
  whether ordinary or constituent (in the sense that it is an
  amendment to the Constitution) what is put forward as part of
H
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS              937
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

a basic structure must be justified by reference to the express      A
provision of the Constitution. He further held:

    'The one principle, however, which is deducible in all the
    applications of the basic structure doctrine, which has
    been used by this Court to limit even the power of               B
    Constitutional amendment, is that whatever is put forward
    as a basic limitation upon legislative power must be
    correlated to one or more of the express provisions of the
    Constitution from .which the limitation should naturally and
    necessarily spring forth. The doctrine of basic structure, as    C
    explained above, requires that any limitation on legislative
    power must be so definitely discernible from the provisions
    of the Constitution itself that there could be no doubt or
     mistake that the prohibition is a part of the basic structure
     imposing a limit on even the power of Constitutional
     amendment. And, whenever we construe any document,              D
     by reading its provisions as a whole, trying to eliminate or
     resolve its disharmonies, do we not attempt to interpret it
     in accordance with what we find in its "basic structure" or
     purposes ? The doctrine is neither unique nor new.
                                                                     E
    No doubt, as a set of inferences from a document (i.e. the
    Constitution), the doctrine of "the basic structure" arose out
    of and relates to the Constitution only and does not, in that
    sense, appertain to the sphere of ordinary statutes or arise
    for application to them in the same way. But, if, as a result    F
    of the doctrine, certain imperatives are inherent in or
    logically and necessarily flow from the Constitution's 'basic
    structure", just as though they are its express mandates,
    they can be and have to be used to test the validity of
    ordinary laws just as other parts of the Constitution are so     G
    used.

    Thus, it is clear that whenever the doctrine of the basic
    structure has been expounded or applied it is only as a
    doctrine of interpretation of the Constitution as It actually
    e,xists and not of a Constitution which could exist only         H
    938       SUPREME COURT REPORTS                    [201 O] 6 S.C.R.


A         subjectively in the minds of different individuals as mere
          theories about what the Constitution is. The doctrine did
          not add to the contents of the Constitution. It did not, in
          theory, deduct anything from what was there. It only
          purported to bring out and explain the meaning of what was
B         already there. It was, in fact, used by all the judges for only
          this purpose with differing results simply because their
          assessments or inferences as to what was part of the basic
          structure in our Constitution differed. This, I think is the
          correct interpretation of the doctrine of the basic structure
c         of the Constitution. It should only be applied if it is clear,
          beyond the region of doubt, that what is put forward as a
          restriction upon otherwise clear and plenary legislative
          power is there as a Constitutional imperative."

        Independent judicial tribunals for determination of the rights
D of citizens, and for adjudication of the disputes and complaints
  of the citizens, is a necessary concomitant of the Rule of Law.
  Rule of Law has several facets, one of which is that disputes
  of citizens will be decided by Judges who are independent and
  impartial; and that disputes as to legality of acts of the
E Government will be decided by Judges who are independent
  of the Executive. Another facet of Rule of Law is equality before
  law. The essence of equality is that it must be capable of being
  enforced and adjudicated by an independent judicial forum.
  Judicial independence and separation of judicial power from
F the Executive are part of the common law traditions implicit in
  a Constitution like ours which is based on the Westminster
  model.

       41. The fundamental right to equality before law and equal
G protection of laws guaranteed by Article 14 of the Constitution,
  clearly includes a right to have the person's rights, adjudicated
  by a forum which exercises judicial power in an impartial and
  independent manner, consistent with the recognized principles
  of adjudication. Therefore wherever access to courts to enforce
  such rights is sought to be abridged, altered, modified or
H
      UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS                939
          BAR ASSOCIATION [R.V. RAVEENDRAN, J.]
      ___,
     substituted by directing him to approach an alternative forum,         A
     such legislative act is open to challenge if it violates the right
     to adjudication by an independent forum. Therefore, though the
     challenge by MBA is on the ground of violation of principles
     forming part of the basic structure, they are relatable to one or
     more of the express provisions of the Constitution which gave          B
     rise to such principles. Though the validity of the provisions of
     a legislative act cannot be challenged on the ground it violates
     the basic structure of the constitution, it can be challenged as
     violative of constitutional provisions which enshrine the
     principles of Rule of Law, separation of power and                     c
     independence of Judiciary.

          42. In The State of West Bengal v. Anwar Ali Sarkar [AIR
..   1952 SC 75], Bose J., made a classic exposition regarding
     Article 14 :
                                                                            D
             "What I am concerned to see is not whether there is
             absolute equality in any academical sense of the term but
             whether the collective conscience of a sovereign
             democratic republic can regard the impugned law,
             contrasted with the ordinary law of the land, as the sort of   E
             substantially equal treatment which men of resolute minds
             and unbiased views can regard as right and proper in a
             democracy of the kind we have proclaimed ourselves to
             be." Such views must take into consideration the practical
             necessities of government, the right to alter the laws and     F
             many other facts, but in the forefront must remain the
             freedom of the individual from unjust and unequal
             treatment, unequal in the broad sense in which a
             democracy would view it. In my opinion, 'law' as used in
             article 14 does not mean the "legal precepts which are         G
             actually recognised and applied in tribunals of a given time
             and place" but "the more general body of doctrine and
             tradition from which those precepts are chiefly drawn, and
             by which we criticise, them." (Dean Pound in 34 Harvard
             Law Review 449 at 452).
                                                                            H
    940       SUPREME COURT REPORTS                    [2010] 6 S.C.R.


A         "However much the real ground of decision may be hidden
          behind a screen of words like 'reasonable', 'substantial',
          'rational' and 'arbitrary' the fact would remain that judges
          are substituting their own judgment of what is right and
          proper and reasonable and just for that of the legislature;
B         and up to a point that, I think, is inevitable when a judge is
          called upon to crystallise a vague generality like article 14
          into a concrete concept."

          43. MBA relied upon the following extract from Chapter 2
    of "Orderly & Effective Insolvency Procedures - Key Issues"
C   annexed to Eradi Committee Report in support of its contention
    that the adjudication of disputes relating to insolvency should
    be conducted by Judges :

          "An insolvency law will need to provide for an institutional      ,..
D         framework for its implementation. Since the adjudication
          of disputes is a judicial function, insolvency proceedings
          should be conducted under the authority of a court of law
          where judges will, at a minimum, be required to adjudicate
          disputes between the parties on factual issues and, on
E         occasion, render interpretations of the law. The judiciary
          will only be able to fulfil this function if it is made up of
          independent judges with particularly high ethical and
          professional standards."

  Learned counsel for MBA also referred to certain decisions of
F foreign Courts which may not be relevant in the Indian
  constitutional context. In particular, the decisions of US court·s
  may not be relevant as Indian Constitution does not envisage
  a strict separation of powers which require judicial power to be
  exclusively vested in courts. In India, certain amount of
G overlapping exists and the Executive has been discharging
  judicial functions in several identified areas.

          44. We may summarize the position as follows:

          (a) A legislature can enact a law transferring the jurisdiction
H
UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 941
    BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

  exercised by courts in regard to any specified subject          A
  (other than those which are vested in courts by express
  provisions of the Constitution) to any tribunal.

  (b) /\II courts are tribunals. Any tribunal to which any existing
  jurisdiction of courts is transferred should also be a
                                                                    8
  Judicial Tribunal. This means that such Tribunal should have
  as members, persons of a rank, capacity and status as
  nearly as possible equal to the rank, status and capacity
  of the court which was till then dealing with such matters.
   and the members of the Tribunal should have the
  independence and security of tenure associated with C
   Judicial Tribunals.

  (c) Whenever there is need for 'Tribunals', there is no
  presumption that there should be technical members in the
  Tribunals. When any jurisdiction is shifted from courts to D
  Tribunals, on the ground of pendency and delay in courts,
  and the jurisdiction so transferred does not involve any
  technical aspects requiring the assistance of experts, the
  Tribunals should normally have only judicial members. Only
  where the exercise of jurisdiction involves inquiry and E
  decisions into technical or special aspects, where
  presence of technical members will be useful and
  necessary, Tribunals should have technical members.
  Indiscriminate appointment of technical members in all
  Tribunals will dilute and adversely affect the independence F
  of the Judiciary.

   (d) The Legislature can re-organize the jurisdictions of
   Judicial Tribunals. For example, it can provide that a
   specified category of cases tried by a higher court can be
   iried by a lower court or vice versa (A standard example G
   is the variation of pecuniary limits of courts). Similarly while
   constituting Tribunals, the Legislature can prescribe the
   qualifications/eligibility criteria. The same is however
   subject to Judicial Review. If the court in exercise of judicial
   review is of the view that such tribunalisation would H
    942       SUPREME COURT REPORTS                 [2010] 6 S.C.R.


A         adversely affect the independence of judiciary or the
          standards of judiciary, the court may interfere to preserve
          the independence and standards of judiciary. Such an
          exercise will be part of the checks and balances measures
          to maintain the separation of powers and to prevent any
B         encroachment, intentional or unintentional, by either the
          legislature or by the executive.

    Whether the constitution of NCLT and NCLAT under
    Parts 18 & 1C of Companies Act are valid

C       45. We may now attempt to examine the validity of Part
   1B and 1C of the Act by applying the aforesaid principles. The
   issue is not whether judicial functions can be transferred from
   courts to Tribunals. The issue is whether judicial functions can
   be transferred to Tribunals manned by persons who are not
D suitable or qualified or competent to discharge such judicial
   powers or whose independence is suspect. We have already
   held that the Legislature has the competence to transfer any
   particular jurisdiction from courts to Tribunals provided it is
   understood that the Tribunals exercise judicial power and the
E persons who are appointed as President/Chairperson/
   Members are of a standard which is reasonably approximate
  to the standards of main stream Judicial functioning. On the
  other hand, if a Tribunal is packed with members who are drawn
  from the civil services and who continue to be employees of
F different Ministries or Government Departments by maintaining
  lien over their respective posts, it would amount to transferring
  judicial functions to the executive which would go against the
  doctrine of separation of power and independence of judiciary.

    · 46. Legislature is presumed not to legislate contrary to rule
G of law and therefore know that where disputes are to be
  adjudicated by a Judicial Body other than Courts, its standards
  should approximately be the same as to what is expected of
  main stream Judiciary. Rule of law can be meaning fut only if
  there is an independent and impartial judiciary to render justice.
H An independent judiciary can exist only when persons with
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 943
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

competence, ability and independence with impeccable A
character man the judicial institutions. When the legislature
proposes to substitute a Tribunal in place of the High Court to
exercise the jurisdiction which the High Court is exercising, it
goes without saying that the standards expected from the
Judicial Members of the Tribunal and standards applied for B
appointing such members, should be as nearly as possible as
applicable to High Court Judges, which are apart from a basic
degree in law, rich experience in the practice of law,
independent outlook, integrity, character and good reputation.
It is also implied that only men of standing who have special         c
expertise in the field to which 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 appointment as High Court D
Judges, can be considered for appointment of Judicial
Members.

      47. A lifetime of experience in administration may make
a member of the civil services a good and able administrator,
but not a necessarily good, able and impartial adjudicator with       E
a judicial temperament capable of rendering decisions which
have to (i) inform the parties about the reasons for the decision;
(ii) demonstrate fairness and correctness of the decision and
absence of arbitrariness; and (iii) ensure that justice is not only
done, but also seem to be done. We may refer to the following         F
words of Bhagwati CJ., in Sampath Kumar (supra) :

     "We cannot afford to forget that it is the High Court which
     is being supplanted by the Administrative Tribunal and it
     must be so manned as to inspire confidence in the public G
     mind that it is a highly competent and expert mechanism
     with judicial approach and objectivity. Of course, I must
     make it clear that when I say this, I do not wish to cast any
     reflection on the members of the Civil Services because
     fortunately we have, in our country, brilliant civil servants H
    944      SUPREME COURT REPORTS                  [2010] 6 S.C.R.


A         who possess tremendous sincerity, drive and initiative and
          who have remarkable capacity to resolve and overcome
          adrriinistrative problems of great complexity. But what is
          needed in a judicial tribunal which is intended to supplant
          the High Court is legal training and experience."
B
       48. As far as the Technical Members are concerned, the
  officer should be of at least Secretary Level officer with known
  competence and integrity. Reducing the standards, or
  qualifications for appointment will result in loss of confidence
  in the Tribunals. We hasten to add that our intention is not to
C say that the persons of Joint Secretary level are not competent.
   Even persons of Under Secretary level may be competent to
  discharge the functions. There may be brilliant and competent
  people even working as Section Officers or Upper Division
  Clerks but that does not mean that they can be appointed as
D Members. Competence is different from experience, maturity
  and status required for the post. As, for example, for the post
  of a Judge of the High Court, 10 years' practice as an Advocate
  is prescribed. There may be Advocates who even with 4 or 5
  years' experience, rnay be more brilliant than Advocates with
E 10 years' standing. Still, it is not competence alone but various
  other factors which make a person suitable. Therefore, when
  the legislature substitutes the Judges of tile High Court with
  Members of the Tribunal, the standards applicable should be
  as nearly as equal in the case of High Court Judges. That
F means only Secretary Level officers (that is those who were
  Secretaries or Additional Secretaries) with specialized
  knowledge and skills can be appointed as Technical Members
  of the Tribunal.

         49. What is a matter of concern is the gradual erosion of
G   the independence of the judiciary, and shrinking of the space
    occupied by the Judiciary and gradual increase in the number
    of persons belonging to the civil service discharging functions
    and exercising jurisdiction which was previously exercised by
    the High Court. There is also a gradual dilution of the standards
H
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MA.ORAS 945
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

and qualification prescribed for persons to decide cases which       A
were earlier being decided by the High Courts. Let us take
stock.

     (49.1) To start with, apart from jurisdiction relating to
appeals and revisions in civil, criminal and tax matters (and        B
original civil jurisdiction in some High Courts). The High Courts
were exercising original jurisdiction in two important areas; one
was writ jurisdiction under Articles 226 and 227 (including
original jurisdiction in service matters) and the other was in
respect to company matters.
                                                                     c
      (49.2) After constitution of Administrative Tribunals under
the Administrative Tribunals Act, 1985 the jurisdiction in regard
to original jurisdiction relating to service matters was shifted
from High Courts to Administrative Tribunals. Section 6 of the
said Act deals with qualifications for appointment as Chairman,      D
and it is evident therefrom that the Chairman has to be a High
Court Judge either a sitting or a former Judge. For judicial
member the qualification was that he should be a judge of a
High Court or is qualified to be a Judge of the High Court (i.e.
an advocate of the High Court with ten years practice or a holder    E
of a judicial office for ten years) or a person who held the post
 of Secretary, Govt. of India in the Department of Legal Affairs
 or in the Legislative Department or Member Secretary, Law
 Commission of India for a period of two years; or an Additional
 Secretary to Government of India in the Department of Legal         F
 Affairs or Legislative Department for a period of five years. For
 being appointed as Administrative Member, the qualification
 was that the candidate should have served as Secretary to the
 Government of India or any other post of the Central or State
 Government carrying the scale of pay which is not less than as      G
 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 o'r any other post of Central or State
 Government carrying the scale of pay which is not less than that
 of an Additional Secretary to the Government of India at least      H
    946     SUPREME COURT REPORTS                 [2010] 6 S.G.R.


A for a period of five years. In other words, matters that were
  decided by the High Courts could be decided by a Tribunal
  whose members could be two Secretary level officers with two
  years experience or even two Additional Secretary level officers
  with five years experience. This was the first dilution. The
B members were provided a term of office of five years and could
  hold office till 65 years and the salary and other perquisites of
  these members were made the same as that of High Court
  Judges. This itself gave room for a comment that these posts
  were virtually created as sinecure for members of the executive
c to extend their period of service by five years from 60 to 65 at
  a higheir pay applicable to High Court Judges. Quite a few
  members of the executive thus became members of the
  "Tribunals exercising judicial functions".

       (49.3) We may next refer to Information Technology Act,
D 2000 which provided for establishment of Cyber Appellate
  Tribunal with a single member. Section 50 of that Act provided
  that a person who is, or has been, or is qualified to be, a Judge
  of a High Court, or a person who is, or has been, a member of
  the India Legal Service and is holding or has held a post in
E Gradei I of that service for at least three years could be
  appointed as the Presiding Officer. That is, the requirement of
  even a Secretary level officer is gone. Any member of Indian
  Legal Service holding a Grade-I Post for three years can be a
  substitute for a High Court Judge.
F
       (49.4) The next dilution is by insertion of Chapters 1B in
  the Companies Act, 1956 with effect from 1.4.2003 providing
  for constitution of a National Company Law Tribunal with a
  President and a large number of Judicial and Technical
  Members (as many as 62). There is a further dilution in the
G qualifications for members of National Company Law Tribunal
  whiQh is a substitute for the High Court, for hearing winding up
  matters and other matters which were earlier heard by High
  Court. A member need not even be a Secretary or Addi.
  Secretary Level Officer. All Joint Secretary level civil servants
H
 UNION.OF INDIA v. R. GANDHI, PRESIDENT, MADRAS             947
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

(that are working under Government of India or holding a post       A
under the Central and State Government carrying a scale of pay
which is not less than that of the Joint Secretary to the
Government of India) for a period of five years are eligible.
Further, any person who has held a Group-A post for 15 years
(which means anyone belonging to Indian P&T Accounts &              B
Finance Service, Indian Audit and Accounts Service, Indian
Customs & Central Excise Service, Indian Defence Accounts
Service, Indian Revenue Service, Indian Ordnances Factories
Service, Indian Postal Service, Indian Civil Accounts Service,
Indian Railway Traffic Service, Indian Railway Accounts Service,    c
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 Law Service (Account) Branch,
or who has 'dealt' with any problems relating to Company Law
                                                                    0
 can become a Member. This means that the cases which were
being decided by the Judges of the High Court can be decided
 by two-members of the civil services - Joint Secretary level
 officers or officers holding Group 'A' posts or equivalent posts
 for 15 years, can now discharge the functions of High Court.
 This again has given room for comment that qualifications          E
 prescribed are tailor made to provide sinecure for a large
 number of Joint Secretary level officers or officers holding
 Group 'A' posts to serve up to 65 years in Tribunals exercising
 judicial functions.
                                                                    F
     (49.5) The dilution of standards may not end here. The
proposed Companies Bill, 2008 contemplates that any member
of Indian Legal Service or Indian Company Law Service (Legal
Branch) with only ten years service, out of which three years
should be in the pay scale of Joint Secretary, is qualified to be   G
appointed as a Judicial Member. The speed at which the
qualifications for appointment as Members is being diluted is,
to say the least, a matter of great concern for the independence
of the Judiciary.
                                                                    H
    948      SUPREME COURT REPORTS                   (2010] 6 S.C.R.


A         50. When Administrative Tribunals were constituted, the
  presence of members of civil services as Technical
  (Administrative) Members was considered necessary, as they
  were well versed in the functioning of government departments
  and the rules and procedures applicable to Government
B servants. But the fact that senior officers of civil services could
  function as Administrative Members of Administrative Tribunals,
  does not necessarily make them suitable to function as
  Technical Members in Company Law Tribunals or other
  Tribunals requiring technical expertise. The Tribunals cannot
c become providers of sinecure to members of civil services, by
  appointing them as Technical Members, though they may not
  have technical expertise in the field to which the Tribunals
  relate, or worse where purely judicial functions are involved.
  While one can understand the presence of the members of the
  civil services being Technical Members in Administrative
0
  Tribunals, or Military Officers being members of Armed Forces
  Tribunals, or Electrical Engineers being members of Electricity
  Appellate Tribunal, or Telecom Engineers being members of
  TDSAT, we find no logic in members of general Civil Services
  being members of Company Law Tribunals.
E
          51. Let us now refer to the dilution of independence. If any
  member of the Tribunal is permitted to retain his lien over his
  post with the parent cadre or ministry or department in the civil
  service for his entire period of service as member of the
F Tribunal, he would continue to think, act and function as a
  member of the civil services. A litigant may legitimately think
  that such a member will not be independent and impartial. We
  reiterate that our observations are not intended to cast any
  doubt about the honesty and integrity or capacity and capability
G of the officers of civil services in particular those who are of the
  rank of Joint Secretary or for that matter even junior officers.
  What we are referring to is the perception of the litigants and
  the public about the independence or conduct of the Members
  of the Tribunal. Independence, impartiality and fairness are
  qualities which have to be nurtured and developed and cannot
H
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 949
     BAR ASSOCIATION [R.V..,RAVEENDRAN, J.]

be acquired overnight. The independence of members                  A
discharging judicial functions in a Tribunal cannot be diluted.

     52. The need for vigilance in jealously guarding the
independence of courts and Tribunals against dilution and
encroachment, finds an echo in an advice given by Justice
William 0. Dougl<~s to young lawyers (The Douglas Letters:          B
Selections from the Private Papers of William Douglas,
edited by Melvin L. Urofsky - 1987 Edition, page 162 - Adler
and Adler.) :
     " ... The Constitution and the Bill of Rights were designed    C
     to get Government off the backs of people - all the people.
     Those great documents did not give us the welfare state.
     Instead, they guarantee to us all the rights to personal and
     spiritual self-fulfillment.

     But that guarantee is not self-executing. As nightfall does    D
     not come all at once, neither does oppression. In both
     instances, there is a twilight when everything remains
     seemingly unchanged. And it is in such twilight that we
     all must be most aware of change in the air - however
     slight - lest we become unwitting victims of the darkness."    E
                                           (emphasis supplied)
    53. The only reason given by Eradi Committee for
suggesting transfer of the company law jurisdiction from High
Courts to Tribunals is delay, as is evident from the following :
                                                                    F
     "Long drawn court proceedings
     24. Multiplicity of court proceedings is the main reason for
     abnormal delay in dissolution of companies. The
     proceedings are filed by OL under sections 446,454,468
     and 542/543 for non-submission of Statement of Affairs,        G
     non production of books of account and assets as also
     realization of debts and misfeasance proceedings.
     Similarly, the settlement of list of creditors and
     contributories take a long time. Disposal of suits or claims
                                                                    H
    950       SUPREME COURT REPORTS                   [2010] 6 S.C.R.


A         filed by the company or against the company in which OL
          is always a party, take a very long time.

          :25. Normally, there is a company court with one Company
          .Judge in each High Court and it is not possible for the court
          to cope with the work relating to companies under
B         liquidation. Apart from company matters, the court also
          attends to other cases in the High Court. The orders
          passed by Company Judge are appealable under section
          483. Normal delays and adjournments sought in court
          proceedings further aggravate the problem and unless all
c         the pending cases are not finally disposed of. OL cannot
          move the court for dissolution of a company.
          26. Under section 457, OL can exercise the powers with
          the sanction and subject to the control of the court. Any
          creditor or contributory may apply to the Court with respect
D         to the exercise of any such power. Elaborate procedure
          has been prescribed under the Companies (Court) Rules,
          1959 relating to Statement of Affairs (Rules 124-134),
          Preliminary Report (Rules 135-139), Settlement of list of
          creditors (Rules 147-149), Settlement of list of
E         contributories and payment of calls (Rules 180-196,232-
          242), examination under section 477/478 (Rule 234-259),
          Misfeasance proceedings under sections 542 and 543
          (Rules 260-262), Disclaimer of property under section 535(
          (Rules 263~269), Compromise and abandonment of
F         claims (Rules 270-271), Sale of assets (Rules 272-274),
          Declaration of dividend (payment to creditors) and turn of
          capital to contributories (Rules 275-280), dissolution (rules
          281-285), Maintenance of Registers and books by OL
          (Rules 286-292), Investment of surplus funds (Rules 293-
G         297), Half yearly and yearly Accounts and audit (Rules
          298-311), Unclaimed dividend and undistributed assets
          (Rules 335-338).
          27. It is significant to note that under the Act and the
          aforesaid Companies (Courts) Rules made by Hon'ble
H
 UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS             951
     BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

    Supreme Court, after consulting the High Courts under A .
    section 643, OL has to seek sanction of the Court at each
    and every stage during the course of winding up
    proceedings. For the purpose, OL has to submit reports
    from time to time for consideration of the Company Judge
    on the administrative as well as judicial side. This entails B
    delays due to normal court proceedings. In contract, by and
    large, there is hardly any interference by the court in case
    of companies under voluntary winding up."

Eradi Committee merely recommended setting up separate C
Tribunals to exclusively deal with company matters and transfer
of company law jurisdiction from High Court to such Tribunals.
Tribunals with only Judicial Members would have served the
purpose sought to be achieved. It did not suggest that such
Tribunals should have 'Technical Members'. Nor did it suggest
introduction of officers of civil services· to be made technical D
members. The jurisdiction relating to company case which the
High Courts are dealing with can be dealt with by Tribunals with
Judicial Members alone. Be that as it may.

      54. Parts IC and ID of the Companies Act proposes to shift E
the company matters from the courts to Tribunals, where a
'Judicial Member' and a 'Technical Member' will decide the
disputes. If the members are selected as contemplated in
section 10FD, there is every likelihood of most of the members,
including the so called 'Judicial Members' not having any judicial F
experience or company law experience and such members
being required to deal with and decide complex issues of fact
and law. Whether the Tribunals should have only judicial
members or a combination of judicial and technical members
is for the Legislature to decide. But if there should be technical G
members, they should be persons with expertise in company
law or allied subjects and mere experience in civil service
cannot be treated as Technical Expertise in company law. The
candidates falling under sub-section 2(c) and (d) and sub-
    952      SUPREME COURT REPORTS                 [2010) 6 S.C.R.


A   sections 3(a) and (b) of section 10FD have no experience or
    expertise in deciding company matters.

       55. There is an erroneous assumption that company law
  matters require certain specialized skills which are lacking in
  Judges. There is also an equally erroneous assumption that
8
  members of the civil services, (either a Group-A officer or Joint
  Secretary level civil servant who had never handled any
  company disputes) will have the judicial experience or
  expertise in company law to be appointed either as Judicial
  Member or Technical Member. Nor can persons having
C experience of fifteen years in science, technology, medicines,
  banking, industry can be termed as experts in Company Law
  for being appointed as Technical Members. The practice of
  having experts as Technical Members is suited to areas which
  require the assistance of professional experts, qualified in
D 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
E   aspects which require to be considered and remedied.

         56. We may tabulate the corrections required to set right
    the defects in Parts IB and IC of the Act :

          (i) Only Judges and Advocates can be considered for
F         appointment as Judicial Members of the Tribunal. Only the
          High Court Judges, or Judges who have served in the rank
          of a District Judge for at least five years or a person who
          has practiced as a Lawyer for ten years can be considered
          for appointment as a Judicial Member. Persons who have
G         held a Group A or equivalent post under the Central or
          State Government with experience in the Indian Company
          Law Service (Legal Branch) and Indian Legal Service
          (Grade-1) cannot be considered for appointment as
          judicial members as provided in sub-section 2(c) and (d)
H         of Section 1OFD. The expertise in Company Law service
UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 953
    BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

  or Indian Legal service will at best enable them to be          A
  considered for appointment as technical members.

  (ii) As the NCLT takes over the functions of High Court,
  the members should as nearly as possible have the same
  position and status as High Court Judges. This can be           8
  achieved, not by giving the salary and perks of a High
  Court Judge to the members, but by ensuring that persons
  who are as nearly equal in rank, experience or
  competence to High Court Judges are appointed as
  members. Therefore, only officers who are holding the
  ranks of Secretaries or Additional Secretaries alone can        C
  be considered for appointment as Technical members of
  the National Company Law Tribunal. Clauses (c) and (d)
  of sub-section (2) and Clauses (a) and (b) of sub-section
  (3) of section 1OFD which provide for persons with 15
  years experience in Group A post or persons holding the         D
  post of Joint Secretary or equivalent post in Central or
  State Government, being qualified for appointment as
  Members of Tribunal is invalid.

  (iv) A 'Technical Member' presupposes an experience in          E
  the field to which the Tribunal relates. A member of Indian
  Company Law Service who has worked with Accounts
  Branch or officers in other departments who might have
  incidentally dealt with some aspect of Company Law
  cannot be considered as 'experts' qualified to be               F
  appointed as Technical Members. Therefore Clauses (a)
  and (b) of sub-section (3) are not valid.

  (v) The first part of clause (f) of sub-section (3) providing
  that any person having special knowledge or professional
  experience of 15 years in science, technology, economics,       G
  banking, industry could be considered to be persons with
  expertise in company law, for being appointed as Technical
  Members in Company Law Tribunal, is invalid.

  (vi) Persons having ability, integrity, standing and special    H
     954      SUPREME COURT REPORTS                   [201 OJ 6 S.C.R.

A          knowledge and professional experience of not less than
           fifteen years in industrial finance, industrial management,
           industrial reconstruction, investment and accountancy, may
           however be considered as persons having expertise in
           rehabilitation/revival of companies and therefore, eligible
B          for being considered for appointment as Technical
           Members.

           (vii) In regard to category of persons referred in clause (g)
           of sub-section (3) at least five years experience should be
           specified.
c
           (viii) 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 Indian
D.         Legal Service can be considered for purposes of
           .appointment as Technical Members of the Tribunal.

           (ix) Instead of a five-member Selection Committee with
           Chief Justice of India (or his nominee) as Chairperson and
           two Secretaries from the Ministry of Finance and Company
E
           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:

F           (a)   C~ief Justice of India or his nominee - Chairperson
                  (with a casting vote);

            (b)   A senior Judge of the Supreme Court or Chief
                  Justice of High Court - Member;
G           (c)   Secretary in the Ministry of Finance and Company
                  Affairs - Member; and

            (d)    Secretary in the Ministry of Law and Justice -
                   Member.
H
UNION OF INDIA v. R. GANDHI, PRESIDENT, MADRAS 955
    BAR ASSOCIATION [R.V. RAVEENDRAN, J.]

  (x) The term of office of three years shall be changed to a A
  term of seven or five years subject to eligibility for
  appointment for one more term. This is because
  considerable time is required to achieve expertise in the
  concerned field. A term of three years is very short and by
  the time the members achieve the required knowledge, B
  expertise and efficiency, one term will be over. Further the
  said term of three years with the retirement age of 65 years
  is perceived as having been tailor~made for persons who
  have retired or shortly to retire and encourages these
  Tribunals to be treated as post-retirement havens. If these     c
  Tribunals are to function effectively and efficiently they
  should be able to attract younger members who will have
  a reasonable period of service.

   (xi) The second proviso to Section 1OFE enabling the
   President and members to retain lien with their parent D
   cadre/ministry/department while holding office as
   President or Members will not be conducive for the
   independence of members. Any person appointed as
   members should be prepared to totally disassociate
   himself from the Executive. The lien cannot therefore E
   exceed a period of one year.

   (xii) To maintain independence and security in service, sub-
   section (3) of section 10FJ and Section 10FV should
   provide that suspension of the PresidenUChairman or            F
   member of a Tribunal can be only with the concurrence of
   the Chief Justice of India.

   (xiii) The administrative support for all Tribunals should be
   from the Ministry of Law & Justice. Neither the Tribunals
   nor its members shall seek or be provided with facilities G
   from the respective sponsoring or parent Ministries or
   concerned Department.

   (xiv) Two-Member Benches of the Tribunal should always
   have a judicial member. Whenever any larger or special         H
    956      SUPREME COURT REPORTS                 [201 OJ 6 S.CR.

A         benches are constituted, the number of Technical Members
          shall not exceed the Judicial Members.

         57. We therefore dispose of these appeals, partly allowing
    theim, as follows:

B         (i) We uphold the decision of the High Court that the
          creation of National Company Law Tribunal and National
          Company Law Appellate Tribunal and vesting in them, the
          powers and jurisdiction exercised by the High Court in
          regard to company law matters, are not unconstitutional.
c
          (ii) We declare that Parts 1 B and 1C of the Act as
          presently structured, are unconstitutional for the reasons
          stated in the preceding para. However, Parts 18 and IC of
          the Act, may be made operational by making suitable
                                                                       •
D         amendments, as indicated above, in addition to what the
          Union Government has already agreed in pursuance of the
          impugned order of the High Court.

    K.K.T.                                 Appeals partly allowed.