# MADRAS BAR ASSOCIATION v. UNION OF INDIA AND ANOTHER

- **Citation:** [2014] 10 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 2014-09-25
- **Bench:** R.M. Lodha, Jagdish Singh Khehar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/madras-bar-association-v-union-of-india-and-another-29492
- **Pages:** 354

## Headnote

CHELAMESWAR, A.K. SIKRI AND R.F. NARIMAN, JJ.]
National Tax Tribunal Act, 2005:
A
B
History of promulgation of NTT Act - Discussed.
C
Whether High Courts which discharge judicial functions,
can be substituted by an extra-judicial body such as NTT and
whether the NTT in the manner of its constitution undermines
a process of independence and fairness, which are sine qua
non of an adjudicatory authority - Held: It was impermissible D
for the legislature to abrogate/divest the core judicial appellate
functions traditionally vested with the High Court, and to confer!
vest the same, with an independent quasi-judicial authority,
which did not even have the basic ingredients of a superior
Court, like the High Court (whose jurisdiction is sought to be E
transferred) - Jurisdiction vested in the High Courts u!Articles
226 and 227 of the Constitution, is not only in respect of the
rightful implementation of statutory provisions, but also of
supervisory jurisdiction, over courts and tribunals and cannot
be curtailed under any circumstances.
F
Whether while transferring jurisdiction to a newly created
court/tribunal, it is essential to maintain the standards and the
stature of the court replaced - Held: Parliament was not
precluded from establishing a court under a new name, to
exercise the jurisdiction that was being exercised by members G
of the higher judiciary, at the time when the constitution came
into force - But when that was done, it was critical to ensure,
that the persons appointed to be members of such a court/
tribunal, should be appointed in the same manner, and ,should
1
H
2
SUPREME COURT REPORTS,
[2014] 10 S.C.R.
A be entitled to the same security of tenure, as the holder of the
judicial office, at the time when the constitution came into force
- High Court.
Whether the transfer of adjudicatory functions vested in
the High Court to the NTT violates recognized constitutional
B
conventions - Held: Recognized constitutional conventions
pertaining to the Westminster model, do not debar the
legislating authority from enacting legislation to vest
adjudicatory functions, earlier vested in a superior court, with
an alternative court/tribunal - Exercise of such power by the
C Parliament would per se not violate any constitutional
convention.
s.5 - Validity of- Clause that NTT would ordinarily have
its sittings in the National Capital Territory of Delhi - Role of
the Central Government in determining the sitting of benches
D of the NTT - Held: It is not appropriate to allow the Central
Government to play any role, with reference to the places
where the benches would be set up, the areas over which the
benches would exercise jurisdiction, the composition and the
constitution of the benches, as also, the transfer of the
E
Members from one bench to another - Sub-sections (2), (3),
(4) and (5) of s.5 are unconstitutional.
s. 6 -- Validity of- Clause that a person would be qualified
for appointment as a Member, if he is or has been a Member
of the Income Tax Appellate Tribunal or of the Customs,
F
Excise and Service Tax Appellate Tribunal for at least 5 years
- Held: Only a person possessing professional qualification
in law, with substantial experience in the practice of law, will
be in a position to handle the onerous responsibilities which
a Chairperson and Members of the NTT will have to shoulder
G - Accountant Members and Technical Members cannot said
to have the stature and qualification possessed by judges of
High Courts - s. 7 is declared unconstitutional.
s. 7 - Validity of - Appointment of Chairperson and other
Members by Central Governf'Ylent - Held: NTT has been
H constituted as a replacement of High Courts -
The manner
MADRAS BAR ASSOCIATION v. UNION OF INDIA
3
of appointment of Chairperson/Members to the NTT will have
A
to be by the same procedure (or by a similar procedure) to
that which is prevalent for appointment of judges of High
Courts - s. 7 cannot be considered to be constitutionally valid,
since it involves partici

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[2014] 10 S.C.R. 1
MADRAS BAR ASSOCIATION
v.
UNION OF INDIA AND ANOTHER
(Transferred Case (C) No. 150 of 2006)
SEPTEMBER 25, 2014
[R.M. LODHA, CJI., JAGDISH SINGH KHEHAR, J.
CHELAMESWAR, A.K. SIKRI AND R.F. NARIMAN, JJ.]
National Tax Tribunal Act, 2005:
A
B
History of promulgation of NTT Act - Discussed.
C
Whether High Courts which discharge judicial functions,
can be substituted by an extra-judicial body such as NTT and
whether the NTT in the manner of its constitution undermines
a process of independence and fairness, which are sine qua
non of an adjudicatory authority - Held: It was impermissible D
for the legislature to abrogate/divest the core judicial appellate
functions traditionally vested with the High Court, and to confer!
vest the same, with an independent quasi-judicial authority,
which did not even have the basic ingredients of a superior
Court, like the High Court (whose jurisdiction is sought to be E
transferred) - Jurisdiction vested in the High Courts u!Articles
226 and 227 of the Constitution, is not only in respect of the
rightful implementation of statutory provisions, but also of
supervisory jurisdiction, over courts and tribunals and cannot
be curtailed under any circumstances.
F
Whether while transferring jurisdiction to a newly created
court/tribunal, it is essential to maintain the standards and the
stature of the court replaced - Held: Parliament was not
precluded from establishing a court under a new name, to
exercise the jurisdiction that was being exercised by members G
of the higher judiciary, at the time when the constitution came
into force - But when that was done, it was critical to ensure,
that the persons appointed to be members of such a court/
tribunal, should be appointed in the same manner, and ,should
1
H
2
SUPREME COURT REPORTS,
[2014] 10 S.C.R.
A be entitled to the same security of tenure, as the holder of the
judicial office, at the time when the constitution came into force
- High Court.
Whether the transfer of adjudicatory functions vested in
the High Court to the NTT violates recognized constitutional
B
conventions - Held: Recognized constitutional conventions
pertaining to the Westminster model, do not debar the
legislating authority from enacting legislation to vest
adjudicatory functions, earlier vested in a superior court, with
an alternative court/tribunal - Exercise of such power by the
C Parliament would per se not violate any constitutional
convention.
s.5 - Validity of- Clause that NTT would ordinarily have
its sittings in the National Capital Territory of Delhi - Role of
the Central Government in determining the sitting of benches
D of the NTT - Held: It is not appropriate to allow the Central
Government to play any role, with reference to the places
where the benches would be set up, the areas over which the
benches would exercise jurisdiction, the composition and the
constitution of the benches, as also, the transfer of the
E
Members from one bench to another - Sub-sections (2), (3),
(4) and (5) of s.5 are unconstitutional.
s. 6 -- Validity of- Clause that a person would be qualified
for appointment as a Member, if he is or has been a Member
of the Income Tax Appellate Tribunal or of the Customs,
F
Excise and Service Tax Appellate Tribunal for at least 5 years
- Held: Only a person possessing professional qualification
in law, with substantial experience in the practice of law, will
be in a position to handle the onerous responsibilities which
a Chairperson and Members of the NTT will have to shoulder
G - Accountant Members and Technical Members cannot said
to have the stature and qualification possessed by judges of
High Courts - s. 7 is declared unconstitutional.
s. 7 - Validity of - Appointment of Chairperson and other
Members by Central Governf'Ylent - Held: NTT has been
H constituted as a replacement of High Courts -
The manner
MADRAS BAR ASSOCIATION v. UNION OF INDIA
3
of appointment of Chairperson/Members to the NTT will have
A
to be by the same procedure (or by a similar procedure) to
that which is prevalent for appointment of judges of High
Courts - s. 7 cannot be considered to be constitutionally valid,
since it involves participation of Secretaries of Departments
of the Central Government in the process of selection and s
appointment of the Chairperson and Members of the NTT -
s. 7 is declared as unconstitutional.
s. 8 - Validity of - Appointment of Chairperson/Member
to the NTT, in the first instance, for a duration of 5 years and
reappointment, for a further period of 5 years - Held: A
C
provision for reappointment would itself have the effect of
undermining the independence of the Chairperson/Members
of the NTT - Every Chairperson/Member appointed to the
NTT, would be constrained _to decide matters, in a manner that
would ensure his reappointment in terms of s. 8 of the Act -
o
His decisions may or may not be based on his independent
understanding - s. 8 is declared as unconstitutional.
s.13(1)- Whether s.13(1) insofar as it allows Accountants
to represent a party to an appeal before the NTT is valid -
Held: A perusal of s.13 reveals, that a party to an appeal (other E
than the Revenue) may appear either in person, or may
authorize one or more Chartered Accountants, or legal
practitioners, or any person duly authorized by him, to present
his case before the NTT - The Members of the NTT would
most definitely be confronted with the legal issues emerging
F
out of Family Law, Hindu Law, Mohammedan Law, Company
Law, Law of Partnership, Law related to Territoriality, Law
related to Trusts and Societies, Contract Law, Law relating to
Transfer of Property, Law relating to Intellectual Property,
Interpretation of Statutes, and other Miscellaneous Provisions G
of Law, from time to time - The NTT besides these statutes,
will not only have to interpret the provisions of the three
statutes, out of which appeals will be heard by it, but will also
have to examine a challenge to the vires of statutory
amendments made in the said provisions, from time to time
H
4
SUPREME COURT REPORTS
[2014] 10 S.C.R.
A -
Chartered Accountants at best would be specialist in
understanding and explaining issues pertaining to accounts
- Allowing them to appear on behalf of a pctrty before NTT
would be unacceptable - s. 13 insofar it allows Chartered
Accountant to represent a party to an appeal before the NTT
B is declared unconstitutional.
s. 15 - Whether Company Secretaries should be allowed
to appear before the NTT to represent a party to an appeal
in the same fashion, and on parity with, Accountants - Held:
Keeping in mind the fact, that in terms of s. 15, the NTT would
C hear appeals from the Income Tax Appellate Tribunal and the
Customs, Excise and Service Tax Appellate Tribunal
(CESTAT) only on "substantial questions of /aw': it is difficult
to appreciate the propriety of representation, on behalf of a
party to an appeal, through either Chartered Accountants or
D Company Secretaries, before the NTT -
The determination
at the hands of the NTT is shorn of factual disputes - It has
to decide only "substantial questions of law" - The Company
Secretaries cannot be allowed to represent a party to an
appeal before the NTT - The claim of Company Secretaries,
E
to represent a party before the NTT is rejected.
ss. 5, 6, 7, 8 and 13 - Since these provisions of the NTT
Act have been held to be illegal and unconstitutional, the
remaining provisions have been rendered otiose and
worthless, and as such, the provision$ of the NTT Act, as a
F
whole, are set aside -
Since the said provisions, constitute
the edifice of the NTT Act, and without these provisions the
remaining prov1s1ons are rendered ineffective and
inconsequential, the entire enactment is declared
unconstitutional.
G
Constitution (Forty-second Amendment) Act, 1976 -
Constitutional validity of, assailed on the ground that the same
violates the basic structure of the Constitution of India, by
impinging on the power of "judicial review" vested in the High
Court- Discussed - Income Tax Act - Customs Act, 1962 -
H Central Excise Act, 1944.
MADRAS BAR ASSOCIATION v. UNION OF INDIA
5
Constitution of India, 1950:
A
Basic structure - Does the NTT Act violate the "basic
structure" of the Constitution - Held: Jurisdiction transferred
by the NTT Act was with regard to specified subjects under
tax related statutes - That was permissible - However, the
NTT Act has not transferred power vested in courts by the
B
Constitution - The power of 'judicial review" vested in the High
Court u!Articles 226 and 227 of the Constitution, has remained
intact - Since the above jurisdiction of the High Court has not
been ousted, the NTT will be deemed to be discharging a
supplemental role, rather than a substitutional role -
The c
Parliament has the power to enact legislation, and to vest
adjudicatory functions, earlier vested in the High Court, with
an alternative court/tribunal - Exercise of such power by the
Parliament would not per se violate the "basic structure" of the
Constitution - The "basic structure" of the Constitution will o
stand violated, if while enacting legislation pertaining to
transfer of judicial power, Parliament does not ensure, that the
newly created court/tribunal, conforms with the salient
characteristics and standards, of the court sought to be
substituted - National Tax Tribunal Act, 2005.
Arts 129, 131, 132 to 134A, 136, 141, 145, 214, 215, 225,
226, 227, 368 - Powers of High Courts and Supreme Court -
Scope of, discussed.
Art.227 - Scope of - Held: The superintending power of
E
the High Courts under Art. 227 is to keep courts and tribunals
F
within the bounds of the law - Hence, errors of law that are
apparent on the face of the record are liable to be corrected
- In correcting such errors, High Court has necessarily to state
what the law is by deciding questions of law, which bind
subordinate courts and tribunals in future cases - Code of G
Civil Procedure, 1908 - s. 100.
Code of Civil Procedure, 1908: s.100 - Scope of- Held:
The superior courts alone are vested with the power to, decide
questions of law - Hitherto Parliament has entrusted a
superior court of record with decisions on questions of law! H
6
SUPREME COURT REPORTS
[2014] 10 S.C.R.
A
substantial questions of law - It is obvious, that substantial
questions of law which relate to taxation would also involve
many areas of civil and criminal law - It is, therefore, not
correct to say that taxation, being a specialized subject, can
be dealt with by a tribunal - All substantial questions of law
B
have under our constitutional scheme to be decided by the
superior courts and the superior courts alone.
Income Tax Legislation in India - Historical background
- Discussed.
Customs Legislation in India - Historical background -
C Discussed.
Central Excise -
Legislation in India -
Historical
background - Discussed.
Disposing of the matters, the Court
D PER JAGDISH SINGH KHEHAR,J.
HELD: 1. Constitutional validity of the NTT Act -
Does the NTT Act violate the "basic structure" of the
Constitution? [167-A]
The power of "judicial review" ensures, that
E executive functioning confines itself within the
framework of law enacted by the legislature. Accordingly,
the demarcation of powers between the legislature, the
executive and the judiciary, is regarded as the basic
element of the constitutional scheme. When the judicial
F
process is prevented by law, from determining whether
the action taken, was or was not, within the framework
of the legislation enacted, it would amount to the
transgression of the adjudicatoryldeterminatory process
by the legislature. Therefore, the exclusion of the power
G of "judicial review", would strike at the "basic structure"
of the Constitution. Judicial review is a part of the "basic
structure" of the Constitution. The appellate powers
vested in the High Court under different statutory
provisions, can definitely be transferred from the High
H Court to other courts/tribunals, subject to the satisfaction
MADRAS BAR ASSOCIATION v. UNION OF INDIA
7
of norms declared by this Court. Herein the jurisdiction
A
transferred by the NTT Act was with regard to specified
subjects under tax related statutes. That, would be
permissible. However, the NTT Act has not transferred
power vested in courts by the Constitution. The power
of "judicial review" vested in the High Court under
B
Articles 226 and 227 of the Constitution, has remained
intact. It must never be overlooked, that since the power
of "judicial review" exercised by the High Court under
Articles 226 and 227 has remained unaltered, the power
vested
in
High
Courts
to
exercise
judicial
C
superintendence over the benches of the NTT within their
respective jurisdiction, has been consciously preserved.
Since the above jurisdiction of the High Court has not
been ousted, the NTT will be deemed to be discharging
a supplemental role, rather than a substitutional role. In
0
the above view of the matter, the submission that the NTT
Act violates the "basic structure" of the Constitution,
cannot be acquiesced to. An amendment to the
provisions of the Constitution, would not be sustainable
if it violated the "basic structure" of the Constitution, even
though the amendment had been carried out, by
E
following the procedure contemplated under "Part XI" of
the Constitution. This leads to the determination, that the
"basic structure" is inviolable. [paras 53 63(i), 64, 65] [259E, F; 270-E-H; 271-A-B; 272-F]
F
Kesavananda Bharati v. State of Kera/a (1973) 4 SCC
225:1973 (0) Suppl. SCR 1; Smt. Indira Nehru Gandhi v.
Shri Raj Narain 1975 Supp. SCC 1 :1976 SCR 347; Minerva
Mills Ltd. & Ors. v. Union of India & Ors. (1980) 2 SCC 591:
1981 (1) SCR 206; Minerva Mills Ltd. & Ors. v. Union of India
& Ors. (1980) 3 SCC 625: 1981 (1) SCR 206; S.P. Gupta v.
G
Union of India 1981 (Supp.) SCC 87: 1982 SCR 365; S.P.
Sampath Kumar v.Union of India (1987) 1 SCC 124: 1987 (1)
SCR 435; L. Chandra Kumar v. Union of India (1995j 1 SCG
400: 1994 (6) Suppl. SCR 261 - relied on.
H
8
SUPREME COURT REPORTS
[2014] 10 S.C.R.
A
Barraclough v. Brown (1897) AC 615; Argosam Finance
Co. Ltd. v. Oxby (1964) 1 All E.R. 791 at 796-H; Finance Co.
- Ltd. v. Oxby (1964) 1 All E.R; Hinds v. The Queen Director of
Public Prosecutions v. Jackson Attorney General of Jamaica
(Intervener}, 1976 All ER Vol. (1) 353; Liyanage v. Reginam,
B (1966) 1 All ER 650; Director of Public Prosecutions of
Jamaica v. Mollison, (2003) 2 AC 411; Harry Brandy v.
Human Rights and Equal Opportunity Commission, (1995)
183 CLR 245; Re Residential Tenancies Act, 123 DLR (3d)
554 - referred to.
c Whether the transfer of adjudicatory functions vested in
the High Court to the NTT violates recognized
constitutional conventions?
Whether while transferring jurisdiction to a newly created
court/tribunal, it is essential to maintain the standards and
D the stature of the court replaced?
2.1. A perusal of the historical perspective reveals
that as against the initial assessment of tax/duty liability,
the first forum for challenge has traditionally been with
an executive appellate adjudicatory authority. Legislative
E details reveal that for some time there was a power of
reference, exercisable on "questions of law". The
. adj.udication thereof rested with the jurisdictional High
~ Courts. The second appellate remedy has always been
before a quasi-judicial appellate authority, styled as an
F Appellate Tribunal. The proceedings before the Appellate
Tribunal have been legislatively described as "judicial
proceedings". The questions of law were originally left to
be adjudicated by the jurisdictional High Courts. The
reference jurisdiction, was substituted in all the
G enactments, and converted into appellate jurisdiction.
The instant appellate jurisdiction was vested with the
jurisdictional High Court. Under the Income Tax Act, 1961,
Section 260A, provided an appellate remedy from an
order passed by the Appellate Tribunal, to the
H jurisdictional High Court. Similarly Section 129A of the
MADRAS BAR ASSOCIATION v. UNION OF INDIA
9
Customs Act, 1962, and Section 35G of the Central
A
Excise Act, 1944, provided for an appellate remedy from
the concerned Appellate Tribunal to the High Court. The
jurisdictional High Court would hear appeals on ·
questions of law, against orders passed by the Appellate
Tribunals. [Para 67] [273-F-H; 27 4-A-C]
B
State of Maharashtra v. Labour Law Practitioners'
Association (1998) 2 SCC 688: 1998 (1) SCR 793;
Dhulabhai v. State of M.P. (1968) 3 SCR 662; Premier
Automobiles v. Kamlekar Shantaram Wadke, (1976) 1 SCC
496; Union of India v. Madras Bar Association (2010) 11 SCC
C
87; Aundal Ammal v. Sadasivan Pilai (1987) 1 SCC 183:
1987 (1) SCR 485; Jetha Bai and Sons v. Sunderdas
Rathenai (1988) 1 SCC 722; Mafatlal Industries v. Union of
India (1997) 5 SCC 536: 1988 (2) SCR 871; L. Chandra
Kumar v. Union of India (1997) 3 SCC 261: 1997 (2)
D
SCR 1186; Union of India v. Delhi High Court Bar Association
(2002) 4 SCC 275: 2002 (2) SCR 450; State of Kamataka
v. Vishwabharathi House Building Cooperative Society & Ors.
(2003) 2 SCC 412: 2003 (1) SCR 397; Navinchandra
Mafatlal, Bombay v. The Commissioner of Income Tax,
E
Bombay City AIR 1955 SC 58: 1955 SCR 829; Union of India
v. Harbhajan Singh Dhillon (1971) 2 SCC 779:1972 (2)
SCR 33 - referred to.
F
2.2. All Appellate Tribunals relevant for the present
controversy were essentially comprised of Judicial
Members, besides Accountant or Technical Members. To
qualify for appointment as a Judicial Member, it was
essential that the incumbent had held a judicial office in
India for a period of 10 years, or had practiced as an
Advocate for a similar period. This qualification enabled
G
the enactments to provide, by a fiction of law, that all the
said Appellate Tribunals were discharging "judicial
proceedings". The next stage of appellate determination,
has been traditionally vested with the High Courts. The
income-tax legislation, the customs legislation, as well as,
H
10
SUPREME COURT REPORTS
[2014] 10 S.C.R.
A the central excise legislation uniformly provided, that in
exercise of its appellate jurisdiction, the jurisdictional High
Court would adjudicate appeals arising out of orders
passed by the respective Appellate Tribunals. The said
appeals were by a legislative determination, to be heard
B by benches comprising of at least two judges of the High
Court. Adjudication at the hands of a bench consisting
of at least two judges, by itself is indicative of the legal
complications, insofar as the appellate adjudicatory rolP.,
of the jurisdictional High Court was concerned. [para 68]
c [274-H; 275-A-D]
Whether the adjudication of the disputes arising out of
the provisions under reference, must remain within the
realm of the jurisdictional High Courts? [Para 69] [275-G]
Whether constitutional interpretation in the manner
D accepted the world over, would be a constitutional
mandate for appellate jurisdiction on tax matters, to
remain with the jurisdictional High Court. [Para 69] [275H; 276-A]
3. In every new constitution, which makes separate
E provisions for the legislature, the executive and the
judiciary, it is taken as acknowledged/conceded, that the
basic principle of "separation of powers" would apply.
And that, the three wings of governance would operate
in their assigned domain/province. The power of
F discharging judicial functions, which was exercised by
members of the higher judiciary, at the time when the
constitution came into force, should ordinarily remain
with the court, which exercised the said jurisdiction, at
the time of promulgation of the new constitution. But the
G judicial power could be allowed to be exercised by an
analogous/similar court/tribunal, with a different name.
However, by virtue of the constitutional convention, while
constituting the analogous courUtribunal, it will have to
be ensured, that the appointment and security of tenure
H of judges of that court would be the same, as of the court
MADRAS BAR ASSOCIATION v. UNION OF INDIA
11
sought to be substituted. This was the express
A
conclusion drawn in Hinds case. [Para 71] [277-C-F]
Whether Company Secretaries should be allowed to
appear before the NTT to represent a party to an appeal
in the same fashion, and on parity with, Accountants?
[Para 73] [280-B]
B
Whether Section 13(1) of the NTT Act insofar as it allows
Accountants to represent a party to an appeal before the
NTT is valid? [Para 73] [280-C]
4. A perusal of Section 13 of the NTT Act, reveals,
C
that a party to an appeal (other than the Revenue) may
appear either in person, or may authorize one or more
Chartered Accountants, or legal practitioners, or any
person duly authorized by him, to present his case before
the NTT. The Members of the NTT would be confronted
with the legal issues emerging out of Family Law, Hindu
Law, Mohammedan Law, Company Law, Law of
Partnership, Law related to Territoriality, Law related to
Trusts and Societies, Contract Law, Law relating to
Transfer of Property, Law relating to Intellectual Property,
Interpretation of Statutes, and other Miscellaneous
Provisions of Law, from time to time. The NTT besides
these statutes, will not only have to interpret the
provisions of the three statutes, out of which appeals will
be heard by it, but will also have to examine a challenge
to the vires of statutory amendments made in the said
provisions, from time to time. They will also have to
determine in some cases, whether the provisions relied
upon had a prospective or retrospective applicability.
Keeping in mind the fact, that in terms of Section 15 of
D
E
F
the NTT Act, the NTT would hear appeals from the Income
G
Tax Appellate Tribunal and the Customs, Excise and
Service Tax Appellate Tribunal (CESTAT) only on
"substantial questions of law", it is difficult to appreciate
the propriety of representation, on behalf of a party to an
appeal, through either Chartered Accountants or
H
12
SUPREME COURT REPORTS
[2014] 10 S.C.R.
A Company Secretaries, before the NIT. The determination
at the hands of the NTT is shorn of factual disputes. It has
to decide only "substantial questions of law". Chartered
Accountants and Company Secretaries would at best be
specialists in understanding and explaining issues
B pertaining to accounts. These issues would, fall purely
within the realm of facts. The Company Secretaries
cannot be allowed to represent a party to an appeal
before the NTT. Even insofar as the Chartered
Accountants are concerned, allowing them to appear on
c behalf of a party before the NTT, would be unacceptable
in law. The claim of Company Secretaries, to represent a
party before the NTT is rejected. Section 13(1), insofar as
it allows Chartered Accountants to represent a party to
an appeal before the NTT, as unconstitutional and
0 unsustainable in law. [Paras 75, 77, 78] [280-G, H; 307-EH; 308-A-E]
Delhi Pradesh Registered Medical Practitioners v.
Director of Health, Delhi Administration Services (1997) 11
SCC 687: 1997 (4) Suppl. SCR 514; State of Rajasthan v.
E Lata Arun (2002) 6 SCC 252; J.B. Chopra v. Union of India
(1987) 1 SCC 422; MB. Majumdar v. Union of India (1990)
4 SCC 501: 1990 (3) SCR 946; Amulya Chandra Kalita v.
Union of India (1991) 1SCC181; R.K. Jain v. Union of India
(1993) 4 SCC 119: 1993 (3) SCR 802; Dr. Mahabal Ram v.
F Indian Council of Agricultural Research (1994) 2 SCC 410;
-·union of India v. Madras Bar Association (2010) 11 SCC
1: 2010 (6) SCR 857; Madras Bar Association v. Union of
India (2010) 11 SCC 67: 2010 (6) SCR 957; Subhash
Sharma v. Union of India (1991) Suppl. 1 SCC 574:1990 (2)
Suppl. SCR 433; Supreme Court Advocates on Record
G Association v. Union of India, (1993) 4 SCC 441 - referred
·to.
The constitutional validity of Sections 5, 6, 7, 8 and 13 of
the NTT Act:
H
5.1. Validity of Section 5 of the NTT Act. Section 5(2)
MADRAS BAR ASSOCIATION v. UNION OF INDIA
13
of the NTT Act mandates, that the NTT would ordinarily
A
have its sittings in the National Capital Territory of Delhi.
It is open to the Parliament to substitute the appellate
jurisdiction vested in the jurisdictional High Courts and
constitute courts/tribunals to exercise the said
jurisdiction, however, while vesting jurisdiction in an
8
alternative court/tribunal, it is imperative for the legislature
to ensure, that redress should be available, with the same
convenience and expediency, as it was prior to the
introduction of the newly created court/tribunal. Thus
viewed, the mandate incorporated in Section 5(2) of the
C
NTT Act to the effect that the sittings of the NTT would
ordinarily be conducted in the National Capital Territory
of Delhi, would render the remedy inefficacious, and thus
unacceptable in law. [para 80] [308-E-F, H; 309-8-F]
5.2. Role of the Central Government in determining
D
the sitting of benches of the NTT. The Central
Government has been authorized to notify the area in
relation to which each bench would exercise jurisdiction,
to determine the constitution of the benches, and finally,
to exercise the power of transfer of Members of one
bench to another bench. One cannot lose sight of the fact,
that the Central Government will be a stakeholder in each
and every appeal/case, which would be filed before the
NTT. It cannot, therefore, be appropriate to allow the
Central Government to play any role, with reference to the
places where the benches would be set up, the areas
over which the benches would exercise jurisdiction, the
composition and the constitution of the benches, as also,
the transfer of the Members from one bench to another.
E
F
In the jurisdictional High Courts, such power is exercised
exclusively by the Chief Justice, in the best interest of the
G
administration of justice. Allowing the Central
Government to participate in
the aforestated
administrative functioning of the NTT would impinge
upon the independence and fairness of the Members of
the NTT. For the NTT Act to be valid, the Chairperson and
H
14
SUPREME COURT REPORTS
[2014] 10 S.C.R.
A Members of the NTT should be possessed of the same
independence and security, as the judges of the
jurisdictional High Courts (which the NTT is mandated to
substitute). Sub-sections (2), (3), (4) and (5) of Section 5
of the NTT Act are unconstitutional. [Para 81] [310-8-F;
B 311-C]
5.3. Validity of Section 6 of the NTT Act. A perusal of
Section 6 reveals that a person would be qualified for
appointment as a Member, if he is or has been a Member
of the Income Tax Appellate Tribunal or of the Customs,
c Excise and Service Tax Appellate Tribunal for at least 5
years. Under the Income Tax Act, a person who has
practiced in accountancy as a Chartered Accountant for
a period of 10 years, or has been a Registered Accountant
for a period of 10 years, is eligible to be appointed as an
0 Accountant Member. Under the Customs Act and the
Excise Act, a person who has been a member of the
Indian Customs and Central Excise Service (Group A),
subject to the condition, that such person has held the
post of Collector of Customs or Central Excise (Level I),
E or equivalent or higher post, for at least 3 years, is eligible
to be appointed as a Technical Member. Persons with the
above qualifications, who were appointed as Accountant
Members or Technical Members in the respective
Appellate Tribunals, are also eligible for appointment as
Members of the NTT, subject to their having rendered
F specified years' service as such. It is difficult to
appreciate how Accountant Members and Technical
Members would handle complicated questions of law
relating to tax matters, and also questions of law on a
variety of subjects (unconnected to tax), in exercise of the
G jurisdiction vested with the NTT. Since the Chairperson/
Members of the NTT will be required to determine
"substantial questions of law", arising out of decisions
of the Appellate Tribunals, it is difficult to appreciate how
an individual, well-versed only in accounts, would be able
··.• \ .. '•,
, 14
!.t."'
MADRAS BAR ASSOCIATION v. UNION OF INDIA
15
to discharge such functions. The NTT would be
confronted with disputes arising out of Family Law,
Hindu Law, Mohemmedan Law, Company Law, Law of
Partnership, Law relating to Territoriality, Law relating to
Trusts and Societies, Contract Law, Law relating to
Transfer of Property, Law relating to Intellectual Property,
Interpretation of Statutes/Rules, and other Miscellaneous
Provisions of L<Jw. Besides the above, the Members of
the NTT will regularly have to interpret the provisions of
A
B
the Income Tax Act, the Customs Act and the Excise Act.
Only a person possessing professional qualification in
C
law, with substantial experience in the practice of law, will
be in a position to handle the onerous responsibilities
which a Chairperson and Members of the NTT will have
to shoulder. [Paras 82 to 84] [311-D-H; 312-A, E-G; 313A-C]
5.4. The Members of a court/tribunal to which
adjudicatory functions are transferred, must be manned
by judges/members whose stature and qualifications are
commensurate to the court from which the adjudicatory
process has been transferred. This position is
recognized the world over. It is not possible to accept,
that Accountant Members and Technical Members have
the stature and qualification possessed by judges of
High Courts. It was not disputed, that the NTT has been
created to handle matters which were earlier within the
appellate purview of the jurisdictional High Courts. The
appointment of Accountant Members and Technical
Members of the Appellate Tribunals to the NIT, would be
D
E
F
in clear violation of the constitutional conventions
recognized by courts, the world over. References on
questions of law (under the three legislative enactments
G
in question), were by a legislative mandate, required to
be adjudicated by a bench of at least two judges of the
jurisdictional High Court. When the remedy of reference
(before the High Court) was converted into an appellate
remedy (under the three legislative enactments in' H
16
SUPREME COURT REPORTS
[2014] 10 S.C.R.
A question), again by a legislative mandate, the appeal was
to be heard by a bench of at least two judges, of the
jurisdictional High Court. One cannot lose sight of the
fact, that hitherto before, the issues which will vest in the
jurisdiction of the NTT, were being decided by a bench
B of at least two judges of the High Court. The onerous and
complicated nature of the adjudicatory process is clear.
The power of "judicial review" vested in the High Courts
under Articles 226 and 227 of the Constitution has not
been expressly taken away by the NTT Act. The power
C of "judicial review" vested in the High Courts under
Articles 226 and 227 of the Constitution stood denuded,
on account of the fact that, Section 24 of the NTT Act
vested with an aggrieved party, a remedy of appeal
against an order passed by the NTT, directly to the
0 Supreme Court. In view of the aforestated appellate
remedy, from an order passed by the NTT directly to the
Supreme Court, there would hardly be any occasion, to
raise a challenge on a tax matter, arising out of the
provisions of the Income Tax Act, the Customs Act and
the Excise Act, before a jurisdictional High Court. A
E perusal of Section 6 of the NTT Act leaves no room for
any doubt, that none of the above parameters is satisfied
insofar as the appointment of Chairperson and other
Members of the NTT is concerned. In the view of the
matter, Section 6(2)(b) of the NTT Act is liable to be
F declared unconstitutional. [Paras 85, 86] [313-D-H; 314A-G; 315-C, E]
5.5. Section 7 talks about appointment of
Chairperson and other Members by Central Government.
If the jurisdiction of the High Courts is being transferred
G to the NTT, the stature of the Members of the tribunal had
to be akin to that of the judges of High Courts. So also
the conditions of service of its Chairperson/Members.
And the manner of their appointment and removal,
including transfers including, the tenure of their
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA
17
appointments. Section 7 cannot even otherwise, be
considered to be constitutionally valid, since it includes
in the process of selection and appointment of the
Chairperson and Members of the NTT, Secretaries of
Departments of the Central Government. The interests of
the Central Government would be represented on one
side, in every litigation before the NTT. It is not possible
to accept a party to a litigation, can participate in the
selection process, W-hereby the Chairperson and
Members of the adjudicatory body are selected. This
would also be violative of the recognized constitutional
convention recorded in Hinds case, namely, that it would
make a mockery of the constitution, if the legislature
could transfer the jurisdiction previously exercisable by
holders of judicial offices, to holders of a new court/
tribunal (to which some different name was attached) and
to provide that persons holding the new judicial offices,
should not be appointed in the manner and on the terms
prescribed for appointment of Members of the judicature.
Section 7 is declared as unconstitutional. [Paras 87, 88]
[319-F-H; 320-A-D]
5.6. Validity of Section 8 of the NTT Act. Section 8
states that a Chairperson/Member is appointed to the NTT,
in the first instance, for a duration of 5 years. Such
Chairperson/Member is eligible for reappointment, for a
further period of 5 years. A provision for reappointment
would itself have the effect of undermining the
· independence of the Chairperson/Members of the NTT.
Every Chairperson/Member appointed to the NTT, would
A
B
c
D
E
F
be constrained to decide matters, in a manner that would
ensure his reappointment in terms of Section 8 of the NTT
G
Act. His decisions may or may not be based on his
independent understanding. Since the NTT has been
vested with jurisdiction which earlier lay with the High
Courts, in all matters of appointment, and extension of
tenure, must be shielded from executive involvement.
H
18
SUPREME COURT REPORTS
(2014] 10 S.C.R.
A Section 8 of the NTT Act is unconstitutional. Sections 5,
6, 7, 8 and 13 o/ the NTT Act have been held to be illegal
and unconstitutional on the basis of the parameters laid
down by deci~ons of constitutional benches of this Court
and on the basis of recognized constitutional conventions
B referable to constitutions framed on the Westminster
model. In the absence of the said provisions which have
been held to be unconstitutional, the remaining provisions
have been rendered otiose and worthless, and as such,
the provisions of the NTT Act, as a whole, are set aside.
C [Paras 89, 90] [317-D-H; 318-A-B]
PER R.F.NARIMAN. J. (concurring in the result)
1. It has been recognized that unlike the U.S.
Constitution, the Constitution of India does not have a
0
rigid separation of powers. Despite that, the Constitution
contains several separate chapters devoted to each of
the three branches of Government. Chapter IV of part V
deals exclusively with the Union judiciary and Chapter V
of part VI deals with the High Courts in the States. Art.129
states that the Supreme Court shall be a court of record
E and shall have all the powers of such a court including
the power to punish for contempt of itself. Art.131 vests
the Supreme Court with original jurisdiction in disputes
arising between the Government of India and the States.
Art. 132 to 134A vest an appellate jurisdiction in civil and
F criminal cases from the High Courts. Art. 136 vests the
Supreme Court with an extraordinary discretionary
jurisdiction to grant special leave to appeal from any
judgment, decree, determination, sentence or order in
any cause or matter passed or made by any court or
G tribunal in the territory of India. Under Art. 137, the
Supreme Court is given power to review any judgment
or order made by it. By Article 141, the law declared by
the Supreme Court shall be binding on all courts within
the territory of India. And by virtue of Art. 145(3)
H substantial questions as to the interpretation of the
MADRAS BAR ASSOCIATION v. UNION OF INDIA
19
Constitution of India are vested exclusively in a bench of A
at least 5 Hon'ble Judges. Similarly, under Art. 214 High
Courts for each State are established and under Art. 215
like the Supreme Court, High Caurts shall be <r>urts of
record and shall have all the powers of such courts
including the power to punish for co(ltempt. Under Art.
225, the jurisdiction of, and the law administered in any
existing High Courts, is preserved. Art. 226 vests the High
Court with power to issue various writs for the protection
of fundamental rights and for any other purpose to any
person or authority. Under Art. 228 questions involving
interpretation of the constitution are to be decided by the
High Court alone when a court subordinate to it f, seized
of such question. Further, the importance of these
provisions is further highlighted by Art. 368 proViso which
allows an amendment of all these Articles only if such
amendment is also ratified by the legislatures of not less
than one half of the States. The Code of Civil Procedure
also contains provisions which vest the High Court with
the power to decide certain questions of law under
Section 113 and, when they relate to jurisdictional errors,
Section 115. Art. 227 is of ancient vintage. It has its
origins in Section 107 of the Government of India Act
1915. Section 224 of the Government of India Act 1935
more or less adopted Section 107 of the Act of 1915 with
a few changes. Art. 227 adds the words "and tribunals"
and contains no requirement that the superintendence
over subordinate courts and tribunals should be subject
to its appellate jurisdiction. (Paras 6, 8 to 13) (323-F, H;
324-A-G; 325-D; 326-G]
B
c
D
E
F
2. It is axiomatic that the superintending power of the
High Courts under Art. 227 is to keep courts and
G
tribunals within the bounds of the law. Hence, errors of
law that are apparent on the face of the record are liable
to be corrected. In correcting such errors, the High Col!rt
has necessarily to state what the law is by dec!1:fir·,~:
questions of law, which bind subordinate ccun::. _, .. ;
20
SUPREME COURT REPORTS
[2014] 10 S.C.R.
A tribunals in future cases. The decision by superior courts
of record of questions of law and the binding effect of
such decisions are implicit in the constitutional scheme
of things. It is emphatically the province of the superior
judiciary to answer substantial questions of law not only
B for the case at hand but also in order to guide.
subordinate courts and tribunals in future. Therefore, the
decision of a substantial question of law is a matter of
great moment. It must be a question of law which is of
general public importance or is not free from difficulty
c and/or calls for a discussion of alternative views. It is
clear, therefore, that a judicially trained mind with the
experience of deciding questions of law is a sine qua non
in order that such questions be decided correctly.
Whether one looks at the old Section 100, CPC or Section
0
100 as substituted in 1976, the result is that the superior
courts alone are vested with the power to decide
questions of law. Hitherto Parliament has entrusted a
superior court of record with decisions on questions of
law/substantial questions of law. [Paras 15, 16, 18 to 20]
E [327-D-E; 328-E; 329-B, C; 331-B-C; 332-D-E]
Mafatlal Industries v. Union of India (1997) 5 SCC 536:
1996 (10) Suppl. SCR 585 - Distinguished.
3. Art. 3238 was part of the constitution 42nd
Amendment Act which was, as is well known, an
F amendment which was rushed through during the 1975
emergency. Many of its features were undone by the
constitution 44th Amendment Act passed a couple of
years later. One of the interesting features that was
undone was the amendment to Art. 227.