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Filling the posts of judicial members in tribunals with bureaucrats
Slams packing of tribunals with babus
New Delhi: The SC on Tuesday paved the way for the functioning of the National Company Law Tribunal and its appellate tribunal, but slammed the practice of filling the posts of judicial members in tribunals with bureaucrats.
The upholding of the validity of amendments to the Companies Act for the birth of NCLT and NCLAT would now result in the transfer to these quasi-judicial bodies of all company-related cases pending before the Company Law Board, Board for Industrial and Financial Reconstruction and high courts.
A five-judge constitution Bench comprising Chief Justice K G Balakrishnan and Justices R V Raveendran, D K Jain, P Sathasivam and J M Panchal, however, were quite critical of the practice of filling the tribunals with bureaucrats saying adjudication of these matters needed judicial bent of mind.
Justice Raveendran, writing the judgment for the Bench, said that bureaucrats at best could be made technical members of the tribunals and all appointments to the post of presiding officers had to be made in consultation with a committee headed by CJI or his nominee and comprising a judge of the SC or the HC, secretaries in the ministries of company affairs and law and justice. TNN
The Government of India's powers/ role
Executive's role in appointment of tribunal heads eliminated by SC
The Times of India Jan 05 2016
CJ Most Appropriate Person To Name Heads: SC
After quashing the National Judicial Appointments Commission (NJAC) to keep intact its dominance in appointment of judges, the Supreme Court on Monday took another step to eliminate the executive's role in the statuteenvisaged consultation process for appointment of heads of judicial tribunals.
The matter, before a bench headed by Chief Justice T S Thakur, concerned appointing the president and judicial member of the Gujarat State Cooperative Tribunal. The earlier practice was that the chief justice of the high court would send a panel of names of retired judicial officers and the state government would pick two from that list and send it back for the CJ's approval.
But, in a recent judgment, the HC said this practice did not reflect the primacy that the CJ deserved in choosing the president and judicial member of a quasi-judicial tribunal. It ordered that henceforth the CJ would send two names for the two posts and the government must appoint them.It also said that if the government finds something amiss in their names, it could approach the CJ for a fresh name.
Attorney general Mukul Rohatgi, who had recently ended up on the losing side in the pitched legal battle to save NJAC in its constitutional validity test, appeared for the state and argued that the judiciary could not alter the consultation process for appointment of heads of judicial tribunals by citing the approach adopted by the apex court for selection of judges to the SC and HCs on the ground of maintaining the independence of judiciary . “Can the HC say that the CJ will send only one name and that is binding on the government? This is trenching upon the power of the state and the CJ. Where is the question of the CJ giving only one name,“ he argued.
Thakur said for the primacy of the judiciary , the CJ was supremely suitable to determine the suitability of a person to head a tribunal with judicial powers. “Why should the government insist on a panel? This is a judicial forum. If you have problem with a name you can always get back to the CJ for a fresh name. If the CJ is suggesting a name, the government must appoint him,“ he said.
The SC entertained the appeal by the state but asked it to make the tribunal functional by appointing the president and judicial member on the basis of names suggested by the CJ of the HC. “We will decide later whether the process was appropriate,“ it said.
The high court had said: “The Supreme Court has strongly deprecated the practice or rather the method of sending panel names asking the state government to select one from them. This is exactly what has been done in the present case.“ “In such circumstances, it would obviously become primacy of the government and would not remain the primacy of the CJ of the HC, which is the requirement under the law. It is the CJ who would be the most appropriate person to judge the suitability of a retired judge for the purpose of appointing him as the president or judicial member of the tribunal.“
SC strikes down Centre’s rules to regulate appointment in tribunals
The Supreme Court struck down a rule framed by the Centre to regulate appointment of members to tribunals and appellate tribunals, saying the government conferring on itself a dominating and overwhelming voice in appointments is a “negation” of judicial independence.
The court said the searchcum-selection committees, as envisaged in the rules, are against the constitutional scheme as they dilute the involvement of the judiciary in the process of appointment of members of tribunals. This amounts to encroachment by the executive on the judiciary.
The court directed the government to carry out a fresh exercise in accordance with the principles enumerated earlier by the apex court. “The Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017 suffer from various infirmities,” it said.
Conduct judicial impact study of all tribunals: SC
A five-judge Constitution bench of Chief Justice Ranjan Gogoi and Justices N V Ramana, D Y Chandrachud, Deepak Gupta and Sanjiv Khanna held that “these Rules formulated by the Central Government under Section 184 of the Finance Act, 2017, being contrary to the parent enactment and the principles envisaged in the Constitution as interpreted by this court, are hereby struck down in entirety”.
The SC asked the Centre to re-formulate the rules according to principles delineated by the apex court and said the new rules shall ensure non-discriminatory and uniform conditions of service, including assured tenure, keeping in mind that the chairperson and members appointed after retirement and those inducted from the Bar or from other specialised professions/services constitute two separate and distinct homogeneous classes.
The bench also said the Centre should conduct a judicial impact assessment of all the tribunals referable to the Finance Act, 2017, so as to analyse ramifications of changes in their framework and asked the ministry of law and justice to carry out such an exercise and submit findings before the competent legislative authority. It also allowed the Centre to carry out an exercise for amalgamation of existing tribunals and thereafter constitute adequate number of benches commensurate with the existing and anticipated volume of work.
The bench noted that the Centre had conferred upon itself a “dominating” voice in deciding appointments as “search-cum-selection committee for all 17 tribunals specified in the schedule is constituted either entirely from personnel within or nominated by the central government or comprises a majority of personnel from the government”. Justice Chandrachud and Gupta wrote separate but concurrent judgments and agreed with the opinion of the CJI.
The court also recommended setting up of an independent statutory body “National Tribunals Commission” to oversee the selection process of members, fixing criteria for appointment, salary, allowances and for removal of chairpersons and members of tribunals.
The government conferring on itself a dominating and overwhelming voice in appointments (of tribunal members) is a negation of judicial independence
– Supreme Court
The Tribunals Reforms Act 2021
The issues, as in 2021
The judiciary wants the tribunals to complement the country’s high courts and not supplant them.
One of the biggest threat the Supreme Court discerns to the independence of the tribunals is how their heads and members are appointed.
There are a few tribunals which are a part of the judiciary, like the ones involving motor-accident claims and rent control – which means their members/chairperson are serving judicial officers. However, a majority of tribunals are statutory – which means they are based on a specific law, like the income tax, debt recovery or Insolvency and Bankruptcy Code. Appointments to these tribunals were essentially done by recommendations of a high-ranking official, usually a secretary-rank officer, of the same ministry. Cases heard by these tribunals arise from decisions taken by officials from that very department and the tribunals are directly dependent on ‘their parent ministry/department’ for every requirement for any facility/infrastructure/expenditure. The Supreme Court sees this as a straight conflict of interest. For instance, the head of Income Tax Appellate Tribunal is appointed by the secretary, finance ministry. Now, if the tribunal were to be hearing a case which involves a plea against the finance ministry, can the tribunal be free and fair?
The government, for obvious reasons does not want to give up this privilege, which allows it to control the tribunals. The judiciary feels this is also the government’s way of undercutting its jurisdiction and create a parallel judicial system.
While the passing of the Tribunals Reforms Act in Parliament is the latest flashpoint, the government and the judiciary have been ranged against each other on this matter for quite some time now. And we all have been impacted by this fight, which has crippled the tribunals’ functioning, leading to mounting pendency of cases. To give you some idea, between just two tribunals – the National Company Law Tribunal and the Central Administrative Tribunal – there are close to 60,000 pending cases.
In the latest salvo fired in this fight, the Supreme Court on September 15 accused the government of “cherry picking” from the names it had recommended for appointment to the tribunals. A bench of Chief Justice N V Ramana and Justices D Y Chandrachud and L N Rao expressed unhappiness at how several tribunals have been left headless.
But before we get into the latest in the battle, let’s look at a little bit of history.
How it all started
Tribunals have existed since 1941, the Income Tax Appellate Tribunal being the first. But the real boost for tribunals came in 1976 with the 42nd Constitutional amendment under the prime ministership of the late Indira Gandhi. With this amendment, Articles 323A for establishing administrative tribunals and 323B for establishing other tribunals were inserted in the Constitution. Though most of the amendments brought about by the 42nd amendment were undone by the 44th amendment under the prime ministership of the late Morarji Desai, the challenge to Articles 323A and 323B failed in Parliament.
Ever since, the independence of the tribunals has been a bone of contention between the legal fraternity and the judiciary on the one side and the government on the other. There have been a series of judgments starting from 1986, right up to July 2021, setting up framework for independent functioning of the tribunals. These judgments have either been ignored or defied by successive governments.
A five-judge bench in 1986 in a case, known as S P Sampath Kumar vs Union of India and Others, upheld the validity of the Administrative Tribunals Act, 1985 as well as the exclusion of high courts’ jurisdiction under Article 226 of the Constitution. The court, however, clearly stated the need for an independent mechanism of making appointments to tribunals, such as a high-powered selection committee, or by approval of the Chief Justice of India. The bench upholding the exclusion of high courts’ jurisdiction essentially meant that a tribunal’s order could not be challenged in a high court. However, this was overturned by a seven-judge bench in 1997 in a case known as L Chandra Kumar vs Union of India and Others. The bench declared that “judicial review was a part of the basic structure of the Constitution". This judgment also recommended creation of an independent agency to oversee appointments and administration of tribunals. Till such mechanism was set up, it recommended that all tribunals be brought under the ministry of law and justice.
The judgment of November 2020 also directed the government to set up a five-member search-cum-selection committee (SCSC) headed by the Chief Justice of India or his nominee for all appointments to tribunals. This judgment also recommended setting up of a National Tribunals Commission.
While the government agreed to the setting up of the SCSC, it has often not acted on its recommendations.
The new Act is an attempt to erase all this
The new Act passed by the Lok Sabha in August attempts to erase all these questions raised by the Supreme Court and places the tribunals firmly in the government’s control. In fact, it includes those very provisions which were struck down from the Tribunal Reforms Ordinance by the Supreme Court just a month before the new law was brought in.
These provisions are:
1. A person below the age of 50 is ineligible for appointment as chairperson or member
Supreme Court’s view: The SC had observed that the age criterion can't be different from what it is for appointment of a high court judge - which is experience of 10 continuous years as a practicing lawyer. The SC in its July 2021 judgment observed: “Security of tenure and conditions of service are recognised as core components of independence of the judiciary. Independence of the judiciary can be sustained only when the incumbents are assured of fair and reasonable conditions of service, which include adequate remuneration and security of tenure.”
2.The selection committee shall recommend a panel of two names for appointment and the central government shall take a decision preferably within three months
Supreme Court’s view: The SC had directed that only one name be recommended and one name be kept in the waiting list, in case the Intelligence Bureau report on the selected candidate is not satisfactory.
3. Term of office of chairperson and members will be fixed as four years
Supreme Court’s view: The term, originally, was only three years, when the SC in 2010 observed that three years was very short and by the time the members achieved the required knowledge, expertise and efficiency, the term would be over. It was further observed that the tribunals would function effectively and efficiently only when they are able to attract younger members who have a reasonable period of service and a short period of service of three years was anti-merit as it would have the effect of discouraging meritorious candidates to accept the posts of judicial members in the tribunals. The court was also convinced that the short tenure of members increases interference by the executive, jeopardising the independence of the judiciary.
4. Allowances paid to the chairperson will be the same as a central government officer carrying the same pay as the chairperson
Supreme Court’s view: Since a majority of the tribunals are located in Delhi, it was observed that lack of housing in Delhi was one of the reasons for retired judges of the high courts and the Supreme Court to not accept appointments to tribunals. “The only way to find a solution to this problem is to direct the Government of India to make serious efforts to provide suitable housing to the chairperson and the members of the tribunals and in case providing housing is not possible, to enhance the house rent allowance to Rs 1,25,000 for members of tribunals and Rs.1,50,000 for the chairperson/president/vice-chairperson/vice-president,” the SC had observed.
This battle can get ugly At a September 6 hearing before the Supreme Court bench of Chief Justice N V Ramana sitting with Justices D Y Chandrachud and L N Rao, the Supreme Court made its displeasure with the new Act clear. Here’s what the judges said:
CJI N V Ramana: They [the government] are bent upon not respecting the judgment of the court. This much is very clear. We have only three options left now – one is staying the legislation or whatever the Act that you have made and directing you to go ahead with the appointments; or close down the tribunals and give the powers to the high court to take up the matters; and third is we ourselves will appoint the people. We could consider initiating proceedings for contempt of court.
Justice D Y Chandrachud: A lot of IBC [Insolvency and Bankruptcy Code] and cases come before me. These tribunals are critical to the economy. They are the cornerstone of the government's policy for reconstruction and rehabilitation of the corporate sector. Because of the vacancies, NCLT [National Company Law Tribunal] and NCLAT [National Company Law Appellate Tribunal] cannot dispose of matters or adhere to timelines. There is an outer limit of 330 days for completing the corporate insolvency resolution process. There is a judgment of our court saying that except in exceptional circumstances, this is a mandatory period and companies have to go into liquidation. With the NCLT and NCLAT not being manned, a very critical situation has arisen.
Justice L N Rao: The recommendations which we had made one-and-a-half years back, based on the law as it was then, in respect of which the government could not have had any objections, as regards the conditions of service, panel of persons and all, why were appointments not made? Some tribunals are on the verge of closing down. They are functioning with just one member, they are on the verge of extinction.