On 14.05.2015, the constitution bench of the Supreme Court of India concluded another (second) round of litigation regarding the constitutional Validity of National Company Law Tribunal (NCLT) & National Company Law Appellate Tribunal (NCLAT). In Madras Bar Association Versus Union of India & Anr.(WP (C.) 1072/2013), the Supreme Court was testing the validity of provisions relating to the new Companies Act, 2013. Back in 2010, the constitution bench of the Supreme Court in Union of India v. R. Gandhi, President, Madras Bar Association had already upheld the Constitutional Validity of NCLT & NCLAT in principle, though it had struck down several parts (provisions) of the relevant amendments to the old Companies Act, 1956 which were its genesis, with exhaustive suggestions w.r.t. the required amendments to the Government (practically to the legislature). The suggestions were to a large extent incorporated in the new Company law by the legislature, but that did not stop it from being dragged before the Constitution Bench of Supreme Court once again, since it was taking away a very large chunk of company cases at present pending before the High Courts & Company Law Board.
The Court was clearly reluctant to go into the issues
afresh and liberally quoted from the 2010 judgment, also pronouncing at one
point that some issues would not be reopened as 2010 judgment was in principle
binding on this co-ordinate bench. What was upheld is not needed to be
discussed, however I will only point out two issues where the Companies Act,
2013 partially suffered from the vice of unconstitutionality.
Eligibility of Certain Joint Secretaries as members of
Tribunals Invalidated: The 2010
judgment had clearly elaborated as to what could/ should be the Qualifications
of the members of the tribunals. As a consequence of the partial dilution of
2010 judgment by legislative enactment w.r.t. the qualifications of the
technical members; Sections 409 (3) for NCLT & 411 (3) for NCLAT of
Companies Act, 2013 were struck down by the Hon’ble Court.
It was pointed out that in the 2010 judgment, the
Constitution Bench took the view that since the NCLT would now be undertaking
the work which is being performed, inter alia, by High Court, the technical
Members of the NCLT/NCLAT should be selected from amongst only those officers
who hold rank of Secretaries or Additional Secretaries and have technical
expertise.
The eligibility of Joint Secretaries were specifically
invalidated in 2010 Judgment itself, however this did not stop the Parliament
from re-enacting the same provision as a part of the new law again. The Court
pointed out that apart from giving other reasons for limiting the consideration
for such posts to Secretary and Additional Secretary, there was one very
compelling factor in the mind of the Court viz. gradual erosion of independence of
judiciary, which was perceived as a matter of concern. This aspect was
demonstrated with specific examples in certain enactments depicting gradual
dilution of the standards and qualifications prescribed for persons to decide
cases which were earlier being decided by the High Court.
Constitution of the Selection Committee for selecting the
members of the Tribunals: The Supreme
Court invalidated Section 412(2) of the Act, on grounds similar to above i.e.
deviating from the 2010 Judgment’s specific suggestion/ direction w.r.t the
composition of the Selection Committee.
The Court had specifically remarked that instead of 5
members Selection Committee, it should be 4 members Selection Committee (2 from
judiciary & 2 from executive) and even the composition of such a Selection
Committee was mandated in Directions given in 2010 Judgment. However, the
effect of presently legislated composition was to make it five members
Selection Committee which was not found to be valid in 2010 judgment. Reason
was simple, out of these five Members, three are from the administrative
branch/bureaucracy as against two from judiciary which resulted in predominant
say of the members belonging to the administrative branch. This situation was
specifically diverted from. The prime consideration in the mind of the Bench
was that it is the Chairperson, viz. Chief Justice of India, or his nominee who
is to be given the final say in the matter of selection with right to have a casting
vote.
Dangerous Undercurrent: The Supreme Court strangely issued directions while
invalidating the above provisions, like- “….to
remove the defect by bringing this provision in accord with sub-para (viii) of
para 120 of 2010 judgment.”
The Supreme Court stood on the borders of Judicial Decorum
while pronouncing specific suggestions in 2010 Judgment (to be incorporated in
future legislation). However to term those suggestions as binding directions,
is clearly outside the realm of Judiciary’s power, competence or constitutional
duty. The Constitution of India being a voluminous document may have left a lot
of scope for interpretation, including separation of powers, but where it
leaves no doubt is that- the Executive and Judiciary have no say in Legislative
activities (President & Governor clearly excluded). In this case the
judicial organ of state i.e. Supreme Court has taken a rather callous attitude
in issuing direction ‘to take specific remedial steps’. Lackadaisical attitude
of the Respondent i.e. Union of India is also to blame for taking the
directions hands down. The Parliament has also taken the matter lightly since
the 2010 Judgment itself. There may have been compelling reasons for Executive
& Legislature as well, but shirking the constitutional decorum is an
unacceptable excuse. And these kinds of precedent only blemish our
constitutional mechanism. These are small instances where the Attorney General
is expected to put his foot down in the Court and set the record straight.
I am not sure what the Hon’ble Supreme Court had thought in
its enormous wisdom to direct the executive to take remedial steps for the
mistakes committed (in legislation); in other words, for executive to make
Legislature dance to the tunes of judiciary, and actively so.
Montesquieu !!! Dude… turn in your grave, please.
Link of the Case -
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