# 6 S.C.R. 638 MADRAS BAR ASSOCIATION v. UNION OF INDIA&ANR

- **Citation:** [2015] 6 S.C.R. 638
- **Court:** Supreme Court of India
- **Decided:** 2015-05-14
- **Bench:** H.L. Dattu, A.K. Sikri, Arun Mishra, ROHINTON FALi NARIMAN, Amitava Roy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/6-s-c-r-638-madras-bar-association-v-union-of-india-anr-30774
- **Pages:** 52

## Headnote

Companies Act, 2013:
ss. 408, 410, 421 and 423 - Constitution of National
Company Law Tribunal-NCL T and National Company Law
Appellate T ribunal-NCLA T - Validity of- Held: Constitutional
D validity of NCLT and NCLAT is upheld - NCLT is the first
forum in the hierarchy of quasi-judicial fora set up in the Act,
2013- Thus, NCL T, would not only deal with question of/aw
in a given case coming before it but would be called upon to
defeat the factual disputes/aspects as well- NCLAT which is
E the first appellate forum provided under the Act, 2013 to
examine the validity of the orders passed by NCL T, would
revisit the factual as well as legal issues.
ss. 409, 411- President and Members of the NCLT
F and Chairman and Members of the NCLAT - Prescription of
qualifications including term of their office and salary
allowances etc. -
Challenge to, as regards technical
members of the tribunal and the appellate tribunal - Held:
As pers. 409(3)(a) to (e) ands. 411 prescribing qualifications
G for appointment of technical member of the tribunal and
appellate tribunal respectively, the technical Members should
be selected from amongst only those officers who hold rank
of Secretaries or Additional Secretaries and have technical
H
638
MADRAS BARASSOCIATION v. UNION OF INDIA
639
expertise- This is against the R. Gandhi, President, Madras A
Bar Association's case - Thus, s. 409(3)(a) and (e) ands.
411(3) is held to be invalid - For appointment of technical
Members to the NCLT, directions contained in R. Gandhi,
President, Madras Bar Association's case to be scrupulously
followed and these corrections to be carried out in s. 409(3) B
to set it right.
s. 412 - Selection of members of NCL T and NCLAT -
Structure of the Selection Committee uls. 412-Composition
of five member Committee, three from administrative branch/ C
bureaucracy and two from judiciary - Challenge to - Held:
Provisions of s. 412(2) is not valid - Direction issued to
remove the defect by bringing the provision in accord with R.
Gandhi, President, Madras Bar Association's case wherein it
should be four member Committee-two from administrative D
branch/bureaucracy and two from judiciary.
Disposing of the writ petition, the Court
HELD: 1.1 The creation of Constitution of NCLAT E
was specifically upheld in R. Gandhi, President, Madras
Bar Association's case-2010 judgment. It cannot be
denied that the instant petitioner had specifically
questioned the Constitutional validity of NCLAT in the
earlier writ petition and even advanced the arguments F
on this very issue. The provision pertaining to the
constitution of the Appellate Tribunal i.e. Section 1 OFR
of the Companies Act, 1956 was duly taken note of.
Challenge was laid to the establishments of NCLT as well
as NCLAT on the ground that the Parliament had G
resorted to tribunalisation by taking away the powers
from the normal courts which was essentially a judicial
function and this move of the Legislature impinged upon
the impartiality, fairness and reasonableness of the
decision making which was the hallmark of judiciary and H
640
SUPREME COURT REPORTS
[2015] 6 S.C.R.
A essentially a judicial function; and that it amounted to
negating the Rule of Law and trampling of the Doctrine
of Separation of Powers which was the basic feature of
the Constitution of India. The petitions spearheaded the
attack on the constitutional validity of both NCLT as well
B as NCLAT on these common grounds. The Court
specifically went into the gamut of all those arguments
and emphatically repelled the same. The Court rejected
the contention that transferring judicial function,
traditionally performed by the Courts, to the Tribunals
C offended the basic structure of the Constitution. [Para
11, 12] [662-G-H; 663-A-E]
1.2 The Constitution Bench categorically dealt with
the constitutional validity of NCLT and NC LAT under the
D caption "whether the constitution of NCLT and NCLAT
under Parts 1B & 1C of Companies Act are valid". The
Court specifically affirmed t

## Text

_Characters 0–39,638 of 88,963. This is a partial read: ask again with offset=39638 for what follows._

A
B
c
(2015] 6 S.C.R. 638
MADRAS BAR ASSOCIATION
v.
UNION OF INDIA&ANR.
(Writ Petition (Civil) No.1072 of 2013)
MAY 14, 2015
[H.L. DATTU, CJI, A.K. SIKRI, ARUN MISHRA,
ROHINTON FALi NARIMAN AND AMITAVA ROY, JJ.]
Companies Act, 2013:
ss. 408, 410, 421 and 423 - Constitution of National
Company Law Tribunal-NCL T and National Company Law
Appellate T ribunal-NCLA T - Validity of- Held: Constitutional
D validity of NCLT and NCLAT is upheld - NCLT is the first
forum in the hierarchy of quasi-judicial fora set up in the Act,
2013- Thus, NCL T, would not only deal with question of/aw
in a given case coming before it but would be called upon to
defeat the factual disputes/aspects as well- NCLAT which is
E the first appellate forum provided under the Act, 2013 to
examine the validity of the orders passed by NCL T, would
revisit the factual as well as legal issues.
ss. 409, 411- President and Members of the NCLT
F and Chairman and Members of the NCLAT - Prescription of
qualifications including term of their office and salary
allowances etc. -
Challenge to, as regards technical
members of the tribunal and the appellate tribunal - Held:
As pers. 409(3)(a) to (e) ands. 411 prescribing qualifications
G for appointment of technical member of the tribunal and
appellate tribunal respectively, the technical Members should
be selected from amongst only those officers who hold rank
of Secretaries or Additional Secretaries and have technical
H
638
MADRAS BARASSOCIATION v. UNION OF INDIA
639
expertise- This is against the R. Gandhi, President, Madras A
Bar Association's case - Thus, s. 409(3)(a) and (e) ands.
411(3) is held to be invalid - For appointment of technical
Members to the NCLT, directions contained in R. Gandhi,
President, Madras Bar Association's case to be scrupulously
followed and these corrections to be carried out in s. 409(3) B
to set it right.
s. 412 - Selection of members of NCL T and NCLAT -
Structure of the Selection Committee uls. 412-Composition
of five member Committee, three from administrative branch/ C
bureaucracy and two from judiciary - Challenge to - Held:
Provisions of s. 412(2) is not valid - Direction issued to
remove the defect by bringing the provision in accord with R.
Gandhi, President, Madras Bar Association's case wherein it
should be four member Committee-two from administrative D
branch/bureaucracy and two from judiciary.
Disposing of the writ petition, the Court
HELD: 1.1 The creation of Constitution of NCLAT E
was specifically upheld in R. Gandhi, President, Madras
Bar Association's case-2010 judgment. It cannot be
denied that the instant petitioner had specifically
questioned the Constitutional validity of NCLAT in the
earlier writ petition and even advanced the arguments F
on this very issue. The provision pertaining to the
constitution of the Appellate Tribunal i.e. Section 1 OFR
of the Companies Act, 1956 was duly taken note of.
Challenge was laid to the establishments of NCLT as well
as NCLAT on the ground that the Parliament had G
resorted to tribunalisation by taking away the powers
from the normal courts which was essentially a judicial
function and this move of the Legislature impinged upon
the impartiality, fairness and reasonableness of the
decision making which was the hallmark of judiciary and H
640
SUPREME COURT REPORTS
[2015] 6 S.C.R.
A essentially a judicial function; and that it amounted to
negating the Rule of Law and trampling of the Doctrine
of Separation of Powers which was the basic feature of
the Constitution of India. The petitions spearheaded the
attack on the constitutional validity of both NCLT as well
B as NCLAT on these common grounds. The Court
specifically went into the gamut of all those arguments
and emphatically repelled the same. The Court rejected
the contention that transferring judicial function,
traditionally performed by the Courts, to the Tribunals
C offended the basic structure of the Constitution. [Para
11, 12] [662-G-H; 663-A-E]
1.2 The Constitution Bench categorically dealt with
the constitutional validity of NCLT and NC LAT under the
D caption "whether the constitution of NCLT and NCLAT
under Parts 1B & 1C of Companies Act are valid". The
Court specifically affirmed the decision of the High Court
which held that creation of NCLT and NCLAT was not
unconstitutional. In view of this, it is not open to the
E petitioner even to argue this issue as it clearly operate
as res judicata. The setting up of NC LAT was challenged
on the ground that insofar as this appellate forum is
concerned, there are no reasons given in the said
F judgment and thereafter this aspect was dealt with in
more detail in the NTT judgment wherein formation of
National Tax Tribunal was held to be unconstitutional.
This adventurism on the part of the petitioner is totally
unfounded. In the first instance, the validity of NCLAT
G has already been upheld and this issue cannot be
reopened. Judgment in the 2010 case is of a Constitution
Bench and that judgment of a co-ordinate Bench binds
this Bench as well. [Para 13, 14] [665-A-G]
H
1.3 Reading of the Constitution Bench judgment in
MADRAS BAR ASSOCIATION v. UNION OF INDIA
641
the matter of National Tax Tribunal would manifest that A
not only was the 2010 judgment taken note of but
followed as well. The Court spelled out the distinguishing
features between NCLT/NCLAT on one hand and NTT
on other hand in arriving at a different conclusion. [Para
15][665-G-H; 666-A]
B
1.4 The NTT was a matter where power of judicial
review hitherto exercised by the High Court in deciding
the pure substantial question of law was sought to be
take.n away to be vested in NTT which was held to be C
impermissible. In the instant case, there is no such
situation. On the contrary, NCL T is the first forum in the
hierarchy of quasi-judicial fora set up in the Companies
Act, 2013. The NCLT, thus, would not only deal with
question of law in a given case coming before it but would D
be called upon to thrash outthe factual disputes/aspects
as well. NCLATwhich is the first appellate forum provided
under the Act, 2013 to examine the validity of the orders
passed by NCLT, will have to revisit the factual as well
as legal issues. Therefore, situation is not akin to NTT.
E
Jurisdiction of the Appellate Tribunal is mentioned in
Section 410 itself which stipulates that NCLAT shall be
constituted 'for hearing appeals against the orders of
the Tribunal'. This jurisdiction is not circumscribed by F
any limitations of any nature whatsoever and the
implication thereof is that appeal would lie both on the
questions of facts as well as questions of law. Likewise,
under sub-section (4) of Section 421, which provision
deals with 'appeal from orders of Tribunal', it is provided G
that the NCLAT, after giving reasonable opportunity of
being heard, 'pass such orders thereon as it thinks fit,
forming, modifying or set aside the order appealed
against'. It is thereafter, further appeal is provided from
the order of the NCLAT to the Supreme Court under H
642
SUPREME COURT REPORTS
[2015) 6 S.C.R.
A Section 423 of the Act. The scope of the appeal to the
Supreme Court is restricted only 'to question of law
arising out of such order'. [Para 16] [666-B-G]
1.5 It is a common feature/practice to provide one
8 appellate forum wherever an enactment is a complete
Code for providing judicial remedies. Providing one right
to appeal before an appellate forum is a well accepted
norm which is perceived as a healthy tradition. Thus,
there is no merit in the issue. [Para 17, 18] [666-H; 667-AC B]
2.1 In the 2010 judgment, the Constitution Bench
took the view that since the NCLT would now be
undertaking the work which is being performed, inter
alia, by High Court, the technical Members of the NCLT/
D NCLAT should be selected from amongst only those
officers who hold rank of Secretaries or Additional
Secretaries and have technical expertise. Parts 1C and
10 of the Act, 1956 as they existed were treated as invalid
and in order to bring t~ese provisions within the realm
E of constitutionality, the f.ourt pointed out the corrections
which were required· to be made to remove those
anamolies. [Para 20, 21] [670-C, D; 673-F]
2.2 The provisions contained in claus.::.s (c) and (d)
F of sub-section (2) and Clause (a) and (b) of sub-section
(3) of Section 10FD which made Joint Secretaries with
certain experience as eligible, were specifically declared
as invalid. Notwithstanding the same, Section 409(3) of
the Act, 2013 again makes Joint Secretary to the
G Government of India or equivalent officer eligible for
appointment, if he has 15 years experience as member
of Indian Corporate Law Service or Indian Legal Service,
out of which at least 3 years experience in the pay scale
of Joint Secretary. This is clearly in the teeth of dicta
H pronounced in 2010 judgment. [Para 22] [677-G-H; 678A]
MADRAS BARASSOCIATION v. UNION OF INDIA
643
2.3 In the counter affidavit, the respondents A
endeavored to justify this provision by stating that this .
variation was made in view of the lack of available officers
at Additional Secretary level in Indian Companies Law
Service. It is further mentioned that functionally the levels
of Additional Secretary and Joint Secretary are similar. B
These officers have knowledge of specific issues
concerning operations and working of companies and
their expertise in company law which is expected to
benefit NCLT. Such an explanation is not legally
sustainable, having regard to the clear mandate of 2010 C
judgment. For limiting the consideration for such posts
to Secretary and Additional Secretary, there was one
very compelling factor in the mind of the Court viz.
gradual erosion of independence of judiciary, which was 0
perceived as a matter of concern. [Para 23] [678-B-E]
2.4 Having regard to the said clear and categorical
dicta in 2010 judgment, tinkering therewith would
evidently have the potential of compromising with
standards which 2010 judgment sought to achieve, nay, E
so zealously sought to secure. Thus, it is held that
Section 409(3)(a) and (e) are invalid as these provisions
suffer from same vice. Likewise, Section 411(3) as
worded, providing for qualifications of technical F
Members, is also held to be invalid. For appointment of
technical Members to the NCLT, directions containeci in
the para of 2010 judgment would be scrupulously
followed and these corrections are required to be made
in Section 409(3) to set right the defects contained G
therein. [Para 24] [682-F-H; 683-A]
3.1 The provision with regard to Selection
Committee was contained in Section 10FX, validity
thereof was questioned in 2010 judgment. The said H
644
SUPREME COURT REPORTS
(2015] 6 S.C.R.
A structure of the Selection Committee was found fault
with by the Constitution Bench in 2010 judgment. The
Court specifically remarked that instead of 5 members
Selection Committee, it should be 4 members Selection
Committee and even the composition of such a Selection
B Committee was mandated in the judgment.
Notwithstanding the above, there is a deviation in the
composition of Selection Committee that is prescribed
under Section 412 (2) of the Act, 2013. Effect of this
composition is to make it a five members Selection
C Committee which was not found to be valid in 2010
judgment. Out of these five Members, three are from the
administrative branch/bureaucracv as against two from
judiciary which would result in predominant say of the
0
members belonging to the administrative branch, is a
situation that was specifically diverted from. [Para 25,
26] [684-C-D; 685-A-F]
3.2 The prime consideration in the mind of the Bench
was that it is the Chairperson, viz. Chief Justice of India,
E or his nominee who is to be given the final say in the
matter of selection with right to have a casting vote. That
is the ratio of the judgment and reasons for providing
such a composition are not far to seek. In the face of the
F all pervading prescript available on this very issue in the
form of a binding precedent, there is no scope for any
relaxation as sought to be achieved through the
impugned provision and it is incompatible with the
mandatory dicta of 201 O judgment. Therefore, the
G provisions of Section 412(2) of the Act, 2013 are not valid
and direction is issued to remove the defect by bringing
this provision in accord with the para of 2010 judgment.
[Para 28] [686-E-G]
H
4. There is hardly any legal strength in the
MADRAS BAR ASSOCIATION v. UNION OF INDIA
645
submission that power to punish for contempt as given A
to the NCLT and NCLAT under Section 425 of the Act is
not healthy and should be done away with; and that
power given to the Central Government to constitute the
Benches is again impermissible as such power should
rest with President, NCLT or Chairman, NCLAT. It has to B
be kept in mind that these provisions are contained in a
statute enacted by the Parliament and the petitioner
could not point out as to hpw such provisions are
unconstitutional. [Para 29] [687-A-C]
c
5. The respondents have filed affidavits mentioning
therein the steps that have been taken till date towards
setting up of NCLT and NCLAT. Since, the functioning of
NCLT and NC LAT has not started so far and its high time
that these Tribunals start functioning now, there is a hope D
that the respondents would take remedial measures as
per the directions contained in this judgment at the
earliest, so that the NCLT & NCLAT are adequately
manned and start functioning in near future. [Para 31,
33] [687-D; 688-F]
E
Union of India v. R. Gandhi, President, Madras Bar
Association 2010 (6) SCR 857: (2010) 11SCC1 -followed.
Madras Bar Association v. Union oflndia (2014) 10 SCC F
1 - referred to.
Case Law Reference
2010 (6) SCR 857
followed.
Para 11,13,14,24,27,28
(2014) 10 SCC 1
Referred to. Para 10
CIVIL ORIGINAL JURISDICTION: Writ Petition (Civil) No.
1072of2013
[Under Article 32 of the Constitution of India]
G
H
646
SUPREME COURT REPORTS
[2015] 6 S.C.R.
A
Arvind P. Datar, Nikhi: Nayyar, Dhanajay Baijal N. Sai
Vi nod, for the Petitioner.
P. S. Patwalia PinkyAnand,ASG, K. Radhakrishna, Binu
Tamta, Dhruv Tamta, Madhavi Diwan, Rekha Pandey, A. K.
B Srivastava, Sushma Suri, B. V. Bairam Das, Kartik Sachdeva,
Karan Sethi, Prabal Bag hi, Dhruv Sheron, Archit Upadhyay,
Natasha Vinayak, Naina Pachnanda, Rajat Singh, for the
Respondents.
c
The Judgment dated 14.05.2015 of the Court was
delivered by
A.K. SIKRI, J. This writ petition filed by the petitioner,
namely, the Madras Bar Assoc1aiion, 1s se4uel to the earlier
proceedings which culminated in the judgment rendered by
D the Constitution Bench of this Court in Union of India v. R.
Gandhi, President, Madras Bar Association' (hereinafter
referred to as the '2010 judgment'). In the earlier round of
litigation, the petitioner had challenged the constitutional validity
E of creation of National Company Law Tribunal ('NCL T' for short)
and National Company Law Appellate Tribunal ('NCLAT' for
short), along with certain other provisions pertaining thereto
which were incorporated by the Legislature in Parts 1 B and
1 C of the CompaniesAct, 1956 (hereinafter referred to as the
F 'Act, 1956') by Companies (Second Amendment) Act, 2002.
2) Writ petition, in this behalf, was filed by the petitioner in
the High Court of Madras which culminated into the judgment
dated 30.03.2004. The High Court held that creation of NCLT
G and vesting the powers hitherto exercised by the High Court
and the Company Law Board ('CLB' for short) in the said
Tribunal was not unconstitutional. However, at the same time,
the High Court pointed out certain defects in various provisions
of Part 1 B and Part 1 '.:of the Act, 1956 and, in particular, in
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA
647
[A.K. SIKRI, J.]
Sections 1 OFD(3)(f)(g)(h), 1 OFE, 1 OFF, 1 OFL(2), 1 OFR(3), A
10FT. Declaring that those provisions as existed offended
the basic Constitutional scheme of separation of powers, it
was held that unless these provisions are appropriately
amended by removing the defects which were also specifically
spelled out, it would be unconstitutional to constitute NCLT and B
NCLAT to exercise the jurisdiction which is being exercised
by the High Court or the CLB. The petitioner felt aggrieved by
that part of the judgment vide which establishments of NCL T
and NCLATwas held to be Constitutional. On the other hand,
Union of India felt dissatisfied with the other part of the judgment C
whereby aforesaid provisions contained in Parts 1 Fl a11d 1 C
of the Act, 1956 were perceived as suffering from various legal
and Constitutional infirmities. Thus, both Union of India as well
as the petitioner filed appeals against that judgment of the D
Madras High Court. Those appeals were decided by the
Constitution Bench, as mentioned above.
3) The Constitution Bench vide the said judgment put its
stamp of approval insofar as Constitutional validity of NCLT
and NCLAT is concerned. It also undertook the exercise of E
going through the aforesaid provisions contained in Parts 1 B
and 1 C of the Act, 1956 and in substantial measure agreed
with the Madras High Court finding various defects in these
provisions. These defects were listed by the Court in para F
120 of the judgment which reads as under:
"120. We may tabulate the corrections required to set
right the defects in Parts 1-B and 1-C of the Act:
(i) Only Judges and advocates can be considered G
for appointment as judicial members of the Tribunal.
Only High Court Judges, or Judges who have served in
the rank of a District Judge for at least five years or a
person who has practiced as a Lawyer for ten years can
be considered for appointment as a Judicial Member.
H
648
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2015] 6 S.C.R.
Persons who have held a Group A or equivalent
post under the Central or State Government with
experience in the Indian Company Law Service (Legal
Branch) and Indian Legal Service (Grade-1) cannot be
considered for appointment as
judicial members
as provided in sub-section 2(c) and (d) of Section
1 OFD. The expertise in Company Law service or Indian
Legal service will at best enable them to be 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 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
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 10FD
which provide for persons with 15 years experience in
Group A post or persons holding the post of Joint
Secretary or equivalent post in
Central or State
Government, being qualified for appointment as
Members of Tribunal is invalid.
(iii) A "technical member" presupposes an experience
in the field to which the Tribunal relates. Amember of the
Indian Company Law Service who has worked with
Accounts Branch or officers in other departments who
might have incidentally dealt with some aspect of
company law cannot be considered as "experts" qualified
MADRAS BAR ASSOCIATION v. UNION OF INDIA
649
[AK SIKRI, J.]
to be appointed as technical members. Therefore A
clauses (a) and (b) of sub-section (3) are not valid."
(iv) A 'Technical
Member'
presupposes
an
experience in the field to which the Tribunal relates.
A member of Indian Company Law Service who has B
worked with Accounts Branch or officers in other
departments who might have incidentally dealt with
some aspect of Company Law cannot be considered
as 'experts: qualified to be appointed as Technical
Members. Therefore Clauses (a) and (b) of sub-section C
(3) are not valid. (v) The first part of clause (f) of subsection (3) providing that any person having special
knowledge or professional experience of 15 years in
science, technology, economics, banking, industry could
be considered to be persons with expertise in company D
law, for being appointed as Technical Members in
Company Law Tribunal, is invalid.
(v) Persons having ability, integrity, standing and special
knowledge and professional experience of not less than
E
fifteen years,in industrial finance, industrial management,
industrial reconstruction, investment and accountancy,
may however be considered as persons having expertise
in rehabilitation/revival of companies ar.d therefore,
eligible for being considered for appointment as technical
F
members.
(vi)
In regard to category of persons referred in clause
(g) of sub-section (3) at least five years experience should
be specified.
G
(vii) Only clauses (c), (d), (e), (g), (h), and latter part of
clause (f) in sue-section (3) of section 10-FD and officers
of civil services of the rank of the Secretary or Additional
Secretary in Indian Company Law Service and Indian H
650
SUPREME COURT REPORTS
(2015] 6 S.C.R.
A
Legal Service can be considered for purposes of
appointment as technical members of the Tribunal.
(viii) Instead of a five-member Selection Committee with
Chief Justice of India (or his nominee) as Chairperson
s
and two Secretaries from the Ministry of Finance and
Company Affairs and the Secretary in the Ministry of
Labour and Secretary in the Ministry of Law and Justice
as members mentioned in section 1 OFX, the Selection
c
D
Committee should broadly be on the following lines:
(a) Chief Justice of India or his nominee - Chairperson
(with a casting vote);
(b)Asenior Judge of the Supreme Court or Chief Justice
of High Court- Member;
(c) Secretary in the Ministry of Finance and Company
Affairs - Member; and
(d) Secretary in the Ministry of Law and Justice -
E
Member.
(ix) The term of office of three years shall be changed to
a term of seven or five years subject to eligibility for
appointment for one more term. This is because
F
considerable time is required to achieve expertise in the
concerned field. A term of three years is very
short and by the time the members achieve the
required knowledge, expertise and efficiency, one term
will be over. Further the said term of three years with the
G
retirement age of 65 years is perceived as having
been tailor-made for persons who have retired or
shortly to retire and encourages these Tribunals to
be treated as post-retirement havens. If these
Tribunals are to function effectively and efficiently
H
they should be able to attract younger members who will
MADRAS BARASSOCIATION v. UNION OF INDIA
651
[AK. SIKRI, J.]
have a reasonable period of service.
A
(x) The second proviso to Section 1 OFE enabling
the President and members to retain lien with
their parent cadre/ministry/department while holding
office as
President or Members will
not be
B
conducive for the independence of members. Any
person appointed as members should be prepared
to totally disassociate himself from the Executive. The
lien cannot therefore exceed a period of on_e year.
(xi) To maintain independence and security in service,
sub-section (3) of section 1 OFJ and Section 1 OFV
should provide that suspension of the PresidenU
Chairman or member of a Tribunal can be only
c
with the concurrence of the Chief Justice of India.
o
(xii) The administrative support for aii Tribunals
should be from the Ministry of Law & Justice. Neither
the Tribunals nor its members shall seek or be provided
with facilities from the respective sponsoring or E
parent Ministries or concerned Department.
(xiii) Two-Member Benches of the Tribunal should always
have a judicial member. Whenever any larger or
special benches are constituted, the number of
Technical Members shall not exceed the Judicial F
Members."
4) On the basis of the aforesaid, partly allowing the
appeals, the same were disposed of in the following terms:
"57. We therefore dispose of these appeals, partly
allowing them, as follows:
G
(i) We uphold the decision of the High Court that the
creation of National Company Law Tribunal and National H
652
SUPREME COURT REPORTS
(2015) 6 S.C.R.
A
Company Law Appellate Tribunal and vesting in them,
the powers and jurisdiction exercised by the High Court
in regard to company law matters, are not
unconstitutional.
-
B
(ii) We declare that Parts 1 B and 1 C of the Act as
presently structured, are unconst•t• 1tional for the reasons
stated in the preceding para. However, Parts IB and IC
of the Act, may be made operational by making
suitable amendments, as indicated above, in addition
C
to what the Union Government has already agreed in
pursuance of the impugned order of the High Court."
5) Though the verdict came in the year 2010, upholding
the creation of NCLTand NCLAT, these two bodies could not
o be created and made functional immediately thereafter and
the matter got stuck in imbroglio of one kind or the other. It is
not necessary to trace out those factors as some of those are
the subject matter of Writ Petition No.267/2012 which writ
petition is also filed by this very petitioner and is pending
E consideration. Said writ petition was listed before this Bench
along with the present writ petition and arguments to some
extent were heard in petition as well. However, since the issues
raised in the said petition necessitate further response from
the Union of India, with the consent of the parties, it was deemed
F proper to defer the hearing in that petition, awaiting the
response. Insofar as the present writ petition is concerned,
though somewhat connected with writ petition No.267 /2012,
prayers made in this writ petition are entirely different and tt-i:;~ c
was no handicap or obstruction in proceeding with the hearing
G of the instant writ petition. Forth is reason, the arguments were
finally heard in this case.
6) Adverting to the present writ petition, it so happened
that the Parliament has passed new company law in the form
H of Indian Companies Act, 2013 (hereinafter referred to.as the
MADRAS BARASSOCIATION v. UNION OF INDIA
653
[A.K. SIKRI, J.]
'Act, 2013') which replaces the earlier Act, 1956. In this Act; A
again substantive provisions have been made with regard to
the establishment of NCL T and NCLA T. It is obvious that with
the constitution of NCLT and NCLAT, the provisions relating to
the structure and constitution of NCLT and NCLAT, the
provisions relating to qualifications for appointment of B
President/Chairperson and Members Uudicial as well as
technical) of both NCLT and NCLAT, and also provisions relating
to the constitution of the Selection Committee for selection of
the said Members have also been incorporated in the Act,
2013. These are analogous to Section 1 OFD, 1 OFE, 1 OFF,
C
10FL, 10FR and 10FTwhich were introduced in the Act, 1956
by Companies (Amendment) Act, 2002. The cause for filing
the present petition by the petitioner is the allegation of the
petitioner that notwithstanding various directions given in 2010 D
judgment, the new provisions in the Act, 2013 are almost on
the same lines as were incorporated in the Act, 1956 and,
therefore, these provisions suffer from the vice of
unconstitutionality as well on the application of the ratio in 2010
judgment. It is, thus, emphasized by the petitioner that these E
provisions which are contained in Sections 408, 409, 411(3),
412, 413, 425, 431and434 of the Act, 2013 are ultra vires
the provisions of Article 14 of the Constitution and, therefore,
warrant to be struck down as unconstitutional. The precise
prayer contained in the writ petition reads as under:
F
"(i) a WRIT, ORDER OR DIRECTION more particularly in
the nature of WRIT OF DECLARATION declaring that the
provisions of Chapter XXVll of the Companies Act, 2013, more
particularly Sections408, 409, 411(3), 412, 413, 425, 431 and G
434 of the Act as ultra vires the provisions of Article 14 of the
Constitution and accordingly striking down the said provisions
as unconstitutional;
{ii) Pass any order or such further order or orders as may H
654
SUPREME COURT REPORTS
[2015) 6 S.C.R.
A
be deemed fit and proper in the facts and circumstances of
the present case."
7) Before we proceed further, we would like to set down
the aforesaid provisions of the Act, 2013 along with Section
B 2(4), Section 2(90) and Section 407 which contained certain
definitions that are relevant in the context ;:if controversy raised
in the present petition:
"2(4) "Appellate Tribunal" means the National Company
c
Law Appellate Tribunal constituted under section 41 O;
"2(90) "T~ibunal" means the National Company Law
Tribunal constituted under section 408;
407. In this Chapter, unless the context otherwise
D
requires,-
E
F
(a) "Chairperson" means the Chairperson of the
Appellate Tribunal;
(b) "Judicial Member" means a member of the Tribunal
or the Appellate Tribunal appointed as such and includes
the President or the Chairperson, as the case may be;
(c) "Member" means a member, whether Judicial or
Technical of the Tribunal or the Appellate Tribunal and
includes the President or the Chairperson, as the case
maybe;
(d) "President" means the President of the TritJunal;
G
(e) "Technical Member'' means a member of the Tribunal
H
or the Appellate Tribunal appointed as such.
408. Constitution of National Company Law Tribunal
The Central Government shall, by notification, constitute,
MADRAS BAR ASSOCIATION v. UNION OF INDIA
655
[A.K. SIKRI, J.]
with effect from such date as may be specified therein, a A
Tribunal to be known as the National Company Law Tribunal
consisting of a President and such number of Judicial and
Technical members, as the Central Government may deem
necessary, to be appointed by it by notification, to exercise
and discharge such powers and functions as are, or may be,
B
conferred on it by or under this Act or any other law for the time
being in force.
409. Qualification of President and Members of
Tribunal
(1) The President shall be a person who is or has been a
Judge of a High Court for five years.
c
(2) A person shall not be qualified for appointment as a 0
Judicial Member unless he-
(a) is, or has been, a judge of a High Court; or
(b) is, or has been, a District Judge for at least five years;
or
(c) has, for at least ten years been an advocate of a court.
E
Explanation.-For the purposes of clause (c), in
computing the period during which a person has been
F
an advocate of a court, there shall be included any period
during which the person has held judicial office or the
office of a member of a tribunal or any post, under the
Union or a State, rGquiring special knowledge of law after
he become an advocate.
(3) A person shall not be qualified for appointment as a
Technical Member unless he -
G
(a) has, for at least fifteen years been a member of the
Indian Corporate Law Service or Indian Legal Service
H
656
SUPREME COURT REPORTS
[2015) 6 S.C.R.
A
out of which at least three years shall be in the pay scale
of Joint Secretary to the Government of India or equivalent
or above in that service; or
(b) is, or has been, in practice as a chartered accountant
B
for at least fifteen years; or
c
D
E
F
G
H
(c) is, or has been, in practice as a cost accountant for at
least fifteen years; or
(d) is, or has been, in practice as a company secretary
for at least fifteen years; or
(e) is a person of proven ability, integrity and standing
having special knowledge and experience, of not less
than fifteen years, in law, industrial finance, industrial
management or administration, industrial reconstruction,
investment, accountancy, labour matters, or such other
disciplines related to management, conduct of affairs,
revival, rehabilitation and winding up of companies; or
(f) is, or has been, for at least five years, a presiding
officer of a Labour Court, Tribunal or National Tribunal
,,..
constituted under the Industrial DisputesAct, 1947.
410. Constitution of Appellate Tribunal
The Central Government shall, by notification, constitute,
with effect from such date as may be specified therein,
an Appellate Tribunal to be known as the National
Company Law Appellate Tribunal consisting of a
chairperson and such number of Judicial and Technical
Members, not exceeding eleven, as the Central
Government may deem fit, to be appointed by it by
notification, for hearing appeals against the orders of the
Tribunal.
411. Qualifications of chairperson and Members of
MADRAS BARASSOCIATION v. UNION OF INDIA
657
[A.K. SIKRI, J.]
Appellate Tribunal
A
( 1) The chairperson shall be a person who is or has been
a Judge of the Supreme Court or the Chief Justice of a
High Court.
B
(2) A Judicial Member shall be a person who is or has
been a Judge of a High Court or is a Judicial Member of
the Tribunal for five years.
(3)ATechnical Member shall be a person of proven ability,
integrity and standing having special knowledge and C
experience, of not less than twenty-five years, in law,
industrial finance, industrial management or
administration, industrial reconstruction, investment,
accountancy, labour matters, or such other disciplines 0
related to management, conduct of affairs, revival,
rehabilitation and winding up of companies.
412. Selection of Members of Tribunal and
Appellate Tribunal
( 1) The President of the Tribunal and the chairperson and
Judicial Members of the Appellate Tribunal, shall be·
appointed after consultation with the Chief Justice of India.
E
(2) The Members of the Tribunal and the Technical F
Members of the Appellate Tribunal shall be appointed
on the recommendation of a Selection Committee
consisting of-
(a) Chief Justice of India or his nominee-Chairperson; G
(b) a senior Judge of the Supreme Court or a Chief
Justice of High Court-Member;
(c) Secretary in the Ministry of Corporate AffairsMember;
H
658
SUPREME COURT REPORTS
[2015] 6 S.C.R.
A
(d) Secretary in the Ministry of Law and JusticeMember; and
B
c
D
E
F
(e) Secretary in the Department of Financial Services in
the Ministry of Finance-Member.
(3) The Secretary, Ministry of Corporate Affairs shall be
the Convener of the Selection Committee.
(4) The Selection Committee shall determine its
procedure for recommending persons under sub-section
(2).
(5) No appointment of the Members of the Tribunal or
the Appellate Tribunal shall be invalid merely by reason
of any vacancy or any defect in the constitution of the
Selection Committee.
413. Term of office of President, chairperson and
other Members
( 1) The President and every other Member of the Tribunal
shall hold office as such for a term of five years from the
date on which he enters upon his office, but shall be
eligible for re-appointment for another term of five years.
(2) A Member of the Tribunal shall hold office as such
until he attains,-
(a) in the case of the President, the age of sixty-seven
years;
G
(b) in the case of any other Member, the age of sixty-five
years:
H
Provided that a person who has not completed fifty years
of age shall not be eligible for appointment as Member:
Provided further that the Member may retain his lien with
MADRAS BARASSOCIATION v. UNION OF INDIA
659
[A.K. SIKRI, J.]
his parent cadre or Ministry or Department, as the case A
may be, while holding office as such for a period not
exceeding one year.
(3) The chairperson or a Member of the Appellate Tribunal
shall hold office as such for a term of five years from the B
date on which he enters upon his office, but shall be
eligible for re-appointment for anonther term of five years.
(4) A Member of the Appellate Tribunal shall hold office
as such until he attains,-
c
(a) in the case of the Chairperson, the age of seventy
years;
(b) in the case of any other Member, the age of sixtyseven years:
Provided that a person who has not completed fifty years
of age shall not be eligible for appointment as Member:
D
Provided further that the Member may retain his lien with
E
his parent cadre or Ministry or Department, as the case
may be, while holding office as such for a period not
exceeding one year.
414. Salary, allowances and other terms and
F
conditions of service of Members
The salary, allowances and other terms and conditions
of service of the Members of the Tribunal and the
Appellate Tribunal shall be such as may be prescribed:
Provided that neither the salary and allowances nor the
other terms and conditions of service of the Members
shall be varied to their disadvantage after their
appointment.
G
H
660
A
B
c
D
SUPREME COURT REPORTS
[2015) 6 S.C.R.
425. Power to punish for contempt
The Tribunal and the Appellate Tribunal shall have the
same jurisdiction, powers and authority in respect of
contempt of themselves as the High Court has and may
exercise, for this purpose, the powers under the
provisions of the Contempt of Courts Act, 1971, which
shall have the effect subject to modifications that-
( a) the reference therein to ? High Court shall be
construed as including a reference to the Tribunal and
the Appellate Tribunal; and
(b) the reference to Advocate-General ir. section 15 of
the said Act shall be co11stru~ci a5 a reference to such
Law Officers as the Central Government may, specify in
this behalf."
8) In the prayer clause, constitutional validity of Sections
415, 418, 424, 426, 431and434 have also been questioned.
At the time of hearing, no arguments were addressed by Mr.
E
Datar, learned senior counsel for the petitioner on the aforesaid
provisions. Therefore, in respect of these provisions, we are
eschewing our discussion.
9) On the reading of the aforesaid provisions and having
F
regard to the arguments advanced at the Bar, we can
conveniently categorise the challenge in three compartments,
as under:
(i) Challenge to the validity of the constitution of NCT and
G NCLAT;
(ii) Challenge to the prescription of qualifications
including term of their office and salary allowances etc. of
President and MelT'hers of the NCL T and as well as Chainnan
H andMembersoftheNGLAT;
MADRAS BARASSOCIATION v. UNION OF INDIA
661
[A.K. SIKRI, J.]
(iii) Challenge to the structure of the Selection Committee A
for appointment of PresidenUMembers of the NCL T and
Chairperson/ Members of the NCLAT.
Incidental issues pertaining to the power given to these
bodies to punish for contempt as mentioned in Section 425 B
and giving power to Central Government to constitute the
Benches are also raised by the petitioner.
As would be discussed hereinafter, all these issues stand
covered by Madras Bar Association (supra) and answer to c
these questions is available therein. In fact, after detailed
discussion on each issue, the Court pronounced the verdict.
Therefore, while doing a diagnostic of sorts of the issues
raised, we shall be administering the treatment that is
prescribed in that judgment.
D
ISSUE N0.1
Re.: Constitutional validity of NCT and NC LAT
Section 408 of the Act, 2013 deals with the constitution of E
NCLT.
By virtue of this Section, Central Government is
empowered to issue notification for constituting a Tribunal to
be known as 'National Company Law Tribunal'. This Tribunal
would consist of President and such number of Judicial and
Technical members, as the Central Government may deem
F
necessary, to be appointed by it.
By Notification dated
12.09.2013, the Central Government has constituted the NCL T.
Likewise, Section 410 of the Act, 2013 arms the Central
Government with power to constitute NC LAT by notification.
This NC LAT is also to consist of a Chairman and such number G
of Judicial and Technical Members, not exceeding eleven, as
the Central Government may deem fit, to be appointed by it by
notification.